EXHIBIT 3.24
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
ELMORE, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
MARCH 14, 1988
TABLE OF CONTENTS
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Page
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ARTICLE I ORGANIZATIONAL MATTERS.......................... 2
1.1. Continuation........................................... 2
1.2. Name .............................................. 2
1.3. Business Purpose....................................... 2
1.4. Place of Business...................................... 3
1.5. Certificate of Limited Partnership..................... 3
1.6. Agent for Service of Process........................... 3
1.7. Term .............................................. 3
ARTICLE II DEFINED TERMS................................. 3
ARTICLE III PARTNERS AND CAPITAL.......................... 13
3.1. General Partners....................................... 13
3.2. Original Limited Partners.............................. 13
3.3. Partnership Capital.................................... 13
3.4 Scheduled Capital Contributions........................ 13
3.5. Additional Funding..................................... 14
3.6. Debt to Equity Ratio................................... 15
3.7. Liability of Partners.................................. 16
3.8. Default in Capital Contributions....................... 17
ARTICLE IV DISTRIBUTIONS OF CASH......................... 17
4.1. Special Distributions.................................. 17
4.2. Distributions of Distributable Cash.................... 17
4.3. Distributions of Sale or Financing Proceeds............ 18
ARTICLE V ALLOCATIONS OF TAXABLE INCOME AND TAX LOSS.... 18
5.1. In General............................................. 18
5.2. Taxable Income and Tax Loss............................ 18
5.3. Special Allocations.................................... 19
5.4. Gain and Loss Upon Liquidation......................... 21
5.5 Additional Allocation Provisions....................... 22
ARTICLE VI RIGHTS, POWERS AND DUTIES OF THE GENERAL
PARTNERS...................................... 25
6.1. Management of the Partnership; Managing
General Partner........................................ 25
6.2. Authority of the Management Committee.................. 26
6.3. Authority of General Partners to Deal with
Partnership.......................................... 29
6.4. Authority to Pay Certain Fees and Expenses............. 30
6.5. Restrictions on Authority of General
Partners............................................. 30
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6.6. Certain Duties and Obligations of
General Partners..................................... 31
6.7. Other Business of Partners............................. 32
6.8. Limitation of Liability of General Partners;
Indemnification...................................... 33
6.9 Rights of Niguel....................................... 34
6.10. Construction of Operating Agreements to
Which Red Hill and/or Its Affiliates
Are Parties.......................................... 34
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF RED HILL.... 35
7.1. Representations and Warranties......................... 35
7.2. Reciprocal Representations and Warranties.............. 38
7.3. Representation and Warranties of Niguel................ 39
7.4. Affiliate Status....................................... 39
ARTICLE VIII TRANSFERS BY GENERAL PARTNERS AND ADMISSION
OF SUCCESSOR AND ADDITIONAL GENERAL PARTNERS;
WITHDRAWAL OF GENERAL PARTNERS................ 40
8.1. Transfers by General Partners and Admission
of Successor or Additional General Partners.......... 40
8.2. Incapacity of General Partners......................... 41
8.3. Conversion of General Partners' Interest............... 42
8.4. Liability of a Withdrawn General Partner............... 42
ARTICLE IX TRANSFERS OF PARTNERS' INTERESTS; ADMISSION
OF SUBSTITUTED LIMITED PARTNER................ 43
9.1. Restrictions on Transfers of Interests................. 43
9.2. Right of First Refusal................................. 44
9.3. Assignees and Substituted Partners..................... 45
9.4. Section 754 Elections.................................. 47
ARTICLE X DISSOLUTION AND LIQUIDATION OF
THE PARTNERSHIP............................... 47
10.1. Events Causing Dissolution............................. 47
10.2. Effect of Dissolution.................................. 47
10.3. Capital Contribution upon Liquidation of the
Partnership or General Partner's Interest............ 47
10.4. Liquidation............................................ 48
ARTICLE XI BOOKS AND RECORDS, ACCOUNTING, REPORTS,
TAX ELECTIONS, ETC............................ 49
11.1. Books and Records...................................... 49
11.2. Accounting and Fiscal Year............................. 49
11.3. Bank Accounts and Investments.......................... 49
11.4. Reports................................................ 50
11.5. Depreciation and Elections............................. 50
11.6. Designation of Tax Matters Partner..................... 51
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ARTICLE XII MEETINGS AND VOTING RIGHTS OF
LIMITED PARTNERS.............................. 51
12.1. Meetings............................................... 51
12.2. Voting Rights of Limited Partners...................... 52
ARTICLE XIII MATTERS AFFECTING STATUS AS A QUALIFYING
FACILITY...................................... 53
ARTICLE XIV OTHER PROVISIONS.............................. 54
14.1. Appointment of General Partners as
Attorneys-in-Fact.................................... 54
14.2 Amendments............................................. 55
14.3 Security Interest and Right of Set-Off................. 56
14.4 Binding Provisions..................................... 57
14.5. Applicable Law......................................... 57
14.6. Counterparts........................................... 57
14.7. Separability of Provisions and Savings
Provision............................................ 57
14.8. Article and Section Titles............................. 57
ARTICLE XV DISPUTES AND ARBITRATION...................... 57
15.1. Preliminary Dispute Resolution......................... 57
15.2. Arbitration............................................ 58
15.3. Niguel Request......................................... 59
15.4. Exceptions............................................. 59
15.5. Attorneys' Fees........................................ 60
15.6. Arbitrators' Fees...................................... 60
15.7. Discovery.............................................. 60
15.8. Expedited Procedure.................................... 60
15.9. Enforcement............................................ 61
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TABLE OF EXHIBITS
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Section
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Exhibit "A" Original Limited Partners Preamble
Exhibit "B" Partner's Names, Addresses, Units,
and Initial Capital Contributions 2.2.31
Exhibit "C" Aggregate of Scheduled Capital
Contributions 3.4.1
Exhibit "D" Contribution of Intangible
Drilling Costs 3.4.2
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TABLE OF SCHEDULES
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Section
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Schedule "Z" Schedule of Defined Terms 2.1
v
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
ELMORE, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
PREAMBLE
This Amended and Restated Limited Partnership Agreement (the "Limited
Partnership Agreement") of ELMORE, LTD., A CALIFORNIA LIMITED PARTNERSHIP (the
"Partnership"), is made and entered into as of March 14, 1988, by and between
RED HILL GEOTHERMAL, INC., a Delaware corporation ("Red Hill"), and NIGUEL
ENERGY COMPANY, a California corporation ("Niguel"), individually as the
"General Partner," and collectively as the "General Partners," and the Persons
listed on Exhibit "A" to this Limited Partnership Agreement as the Original
Limited Partners, and such other Limited Partners as may be substituted
pursuant to the terms hereof, for the purpose of amending and restating that
certain limited partnership agreement of the Partnership under which the
affairs of the Partnership have been conducted to this date, and for the
purpose of continuing the affairs of the Partnership under the Revised Limited
Partnership Act of the State of California.
RECITALS
A. The Partnership is a duly formed and validly existing limited
partnership which was formed and operated under the California Revised Limited
Partnership Act (Title 2, Chapter 3, of the California Corporations Code), by
virtue of a Certificate of Limited Partnership dated February 3, 1988, filed
with the Secretary of State of the State of California on February 5, 1988,
and recorded February 9, 1988 as Document No. 88-02089 in the Office of the
County Recorder of the County of Imperial and recorded February 9, 1988 as
Document No. 88-060436 in the Office, of the County Recorder of the County of
San Diego, and certain other documents which were not recorded including,
without limitation, a Limited Partnership Agreement of the Partnership dated
February 5, 1988 (the "Original Limited Partnership Agreement").
B. The Partnership was formed and is being continued for the purpose of
acquiring a partially constructed geothermal electrical generating facility in
the Salton Sea Known Geothermal Resource Area of Imperial County, California.
The Partnership intends to complete the Development of the Elmore Facility
under a Construction Management and Asset Transfer Agreement by and
between the Partnership and Magma Power Company ("Magma"), pursuant to which
Magma will provide certain construction management services to the
Partnership.
C. The Partnership intends upon completion of the Elmore Facility to
operate the Elmore Facility under the following operating agreements: (i) an
Operating and Maintenance Agreement by and between the Partnership and Red
Hill, pursuant to which Red Hill will operate the Elmore Facility on behalf of
the Partnership; (ii) an Administrative Services Agreement by and between the
Partnership and Red Hill, pursuant to which Red Hill will provide certain
administrative services in connection with the development and operation of
the Elmore Facility; (iii) a Technology Transfer Agreement by and between the
Partnership and Magma, pursuant to which Magma will provide the Partnership
with the nonexclusive right to use certain "Technology" and "Know-How" in
connection with the operation of the Elmore Facility; (iv) a Ground Lease by
and between the Partnership, as lessee, and Magma, as lessor, pursuant to
which Magma will lease to the Partnership the real property upon which the
Elmore Facility is located; (v) an Easement Grant Deed and Agreement Regarding
Rights for Geothermal Development by and between the Partnership and Magma
pursuant to which Magma will convey to the Partnership the right to extract
Geothermal Brine and use geothermal brine- derived steam which is necessary to
operate the Elmore Facility; and (vi) a Power Purchase Contract by and between
Magma (which has, as of March 14, 1988, assigned its rights under the Power
Purchase Contract to the Partnership) and Southern California Edison Company,
an Affiliate of Niguel.
D. The parties now wish to amend and restate, in its entirety, the
Original Limited Partnership Agreement for various reasons affecting the
business and affairs of the Partnership including, without limitation, the
admission of Niguel as a general partner and the admission of Niguel as a
limited partner together with Magma to be referenced hereinafter as the
"Original Limited Partners."
ARTICLE I
ORGANIZATIONAL MATTERS
1.1. Continuation. The parties hereby agree to continue the Partnership
as a limited partnership under the Revised Limited Partnership Act of the
State of California. The rights and liabilities of the Partners shall be as
provided in the Act, except as otherwise expressly provided herein.
1.2. Name. The name of the Partnership shall be "Elmore, Ltd., a
California limited partnership," or such other name as the General Partners
may hereafter designate by Notice in writing to the Limited Partners.
1.3. Business Purpose. The business of the Partnership shall be to invest
in, acquire, finance, develop,
2
improve, operate, maintain and hold the Elmore Facility and other Property (as
that term is defined in Section 2.2.24 hereof) for the production and sale of
electricity from geothermal resources, to sell or otherwise dispose of the
Elmore Facility and other Property, and to engage in any other activities
related or incidental thereto.
1.4. Place of Business. The principal place of business of the
Partnership shall be 480 West Sinclair Road, Calipatria, California 92233, or
such other place as the General Partners may hereafter designate by Notice in
writing to the Limited Partners. The Partnership may maintain such other
offices and places of business as the General Partners may deem advisable.
1.5. Certificate of Limited Partnership. Red Hill has heretofore executed
a Certificate of Limited Partnership on Form LP-1 and filed it in the office
of the California Secretary of State as required by Section 15621 of the Act.
Red Hill has heretofore recorded certified copies of the Certificate of
Limited Partnership in the official records of each county in which the
Partnership has a place of business or owns real property. The Managing
General Partner shall cause an amendment to the Certificate of Limited
Partnership to be filed with the Secretary of State of the State of California
and recorded in the official records of each county within 30 days of the date
hereof so as to reflect the addition of Niguel as a general partner and any
other matters required to be stated therein.
1.6. Agent for Service of Process. The Partnership shall continuously
maintain in the State of California an agent for service of process on the
Partnership.
1.7. Term. The Partnership commenced on the date on which the Certificate
of Limited Partnership was filed with the California Secretary of State, and
shall continue until the date which is thirty-three (33) years thereafter,
unless sooner terminated pursuant to this Limited Partnership Agreement.
ARTICLE II
DEFINED TERMS
2.1. Unless the context shall otherwise require, capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
assigned thereto in Schedule Z hereto, which shall be incorporated by
reference herein.
2.2. In addition to the terms defined pursuant to Section 2.1 hereof, the
following definitions shall apply for purposes of this Limited Partnership
Agreement:
2.2.1. "Accountants" means Coopers & Lybrand, independent certified
public accountants, or, subject to the provisions of this Limited Partnership
Agreement, such other firm
3
of independent certified public accountants as may be engaged from time to
time by the General Partners for the Partnership.
2.2.2. "Act" means the Revised Limited Partnership Act of the State
of California.
2.2.3. "Capital Account" as to any Partner, means an account
maintained on the Partnership's books reflecting the excess (deficit) of (a)
the sum of (i) such Partner's Capital Contributions, (ii) such Partner's share
of Taxable Income and (iii) such Partner's share of tax-exempt income of the
Partnership over (b) the sum of (1) such Partner's share of Tax Loss, (2) such
Partner's share of other Partnership expenditures (including "section
705(a)(2)(B) expenditures" within the meaning of Treasury Regulation Section
1.704-1(b)(2)(iv)(i)) that are not deductible for Federal income tax purposes
(not including payments on indebtedness or expenditures to the extent included
in the basis of any Partnership asset) and (3) any distributions to such
Partner of Distributable Cash or Sale or Financing Proceeds.
2.2.3.1. Notwithstanding any other provision in this Section
2.2.3 or elsewhere in this Limited Partnership Agreement, each Partner's
Capital Account shall be maintained and adjusted in accordance with the Code
and the Treasury Regulations thereunder, including Treasury Regulation Section
1.704- 1(b)(2)(iv) and appropriate adjustments to capital accounts permitted
in the case of a Partner who receives the benefit or detriment of any special
basis adjustment under Sections 734, 743 and 754 of the Code. It is intended
that appropriate adjustments shall thereby be made to Capital Accounts to give
effect to any income, gain, loss or deduction (or items thereof) that is
specially allocated pursuant to this Limited Partnership Agreement. Subject to
Section 2.2.3.5, each Partner's Capital Account shall include that of any
predecessor holders of the Interest of such Partner. A Partner who has more
than one interest in the Partnership shall have a single Capital Account that
reflects all such interests regardless of the class of interests owned by such
Partner and regardless of the time or manner in which such interests were
acquired.
2.2.3.2. The General Partners, in their discretion, may
increase or decrease the Capital Accounts of the Partners to reflect a
revaluation of Partnership property on the Partnership's books and records. No
adjustment to Capital Accounts shall, however, be made unless all of the
following conditions are satisfied:
(a) The adjustments are based on the fair market value of
Partnership property (taking Section 7701(g) of the Code into account) on
the date of adjustment;
(b) The adjustments reflect the manner in which the unrealized
income, gain, loss or deduction inherent in such
4
property (that has not been reflected in Capital Accounts previously)
would be allocated among the Partners under Article V of this
Limited Partnership Agreement if there were a taxable disposition of
such property for such fair market value on such date;
(c) Capital Accounts shall be adjusted in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g) for allocations to the
Partners of depreciation, depletion, amortization, and gain or loss, as
computed for book purposes, with respect to such property;
(d) The Partners' shares of depreciation, depletion,
amortization, and gain or loss, as computed for tax purposes, with
respect to such property shall be determined so as to take account of the
variation of the adjusted tax basis and book value of such property in
the same manner as under Section 704(c) of the Code and the Treasury
Regulations thereunder; and
(e) The adjustments are made principally for a substantial
non-tax business purpose (i) in connection with a contribution of money
or other property (other than an insignificant amount) to the Partnership
by a Partner as consideration for an interest in the Partnership, (ii) in
connection with the liquidation of the Partnership or a distribution of
money or other property (other than an insignificant amount) by the
Partnership to a retiring or continuing Partner as consideration for an
interest in the Partnership or (iii) under generally accepted industry
accounting practices, provided that substantially all of the
Partnership's property (excluding money) consists of stock, securities,
commodities, options, warrants, futures or similar instruments that are
readily tradable on an established securities market.
Capital Accounts shall also be adjusted, (1) as required under Section
48(q)(6) of the Code and Treasury Regulation Section 1.704-1(b)(2)(iv)(j), in
regard to investment credits allowed with respect to property of the
Partnership and (2) as required under Treasury Regulation Section
1.704-1(b)(2)(iv)(k), for depletion and gain or loss with respect to oil or
gas properties of the Partnership.
2.2.3.3. In the event that property is contributed to the
Partnership with a basis to the Partnership different from such property's
fair market value at the time of its contribution, Capital Accounts shall be
adjusted, in accordance with Treasury Regulation Sections
1.704-1(b)(2)(iv)(d)(3) and 1.704-1(b)(2)(iv)(g), for allocations to the
Partners of depreciation, depletion, amortization, and gain and loss, as
computed for book purposes, with respect to such contributed property. Book
depreciation, depletion and amortization with respect to such contributed
Partnership
5
property shall be computed in accordance with a reasonable method selected by
the General Partners; under such method, (i) if the book value of such
contributed Partnership property exceeds the adjusted tax basis thereof, the
depreciation, depletion or amortization, as computed for book purposes, shall
be no less than the depreciation, depletion or amortization, as computed for
tax purposes, (ii) if the adjusted tax basis of such contributed Partnership
property exceeds the book value thereof, the depreciation, depletion or
amortization, as computed for book purposes, shall be no greater than the
depreciation, depletion or amortization, as computed for tax purposes, and
(iii) if the book value of such contributed Partnership property equals the
adjusted tax basis thereof, the depreciation, depletion or amortization, as
computed for book purposes, shall equal the depreciation, depletion or
amortization, as computed for tax purposes.
2.2.3.4. A Partner's Capital Account shall be reduced by the
fair market value (determined without regard to Section 7701(g) of the Code)
of any property distributed by the Partnership to such Partner, whether in
connection with a liquidation of the Partnership or of such Partner's Interest
or otherwise. Accordingly, Capital Accounts shall first be adjusted to reflect
the manner in which the unrealized income, gain, loss and deduction inherent
in such property (that has not been previously reflected in Capital Accounts)
would be allocated, pursuant to Article V of this Limited Partnership
Agreement, among the partners if there were a taxable disposition of such
property for its fair market value (taking Section 7701(g) of the Code into
account) on the date of distribution.
2.2.3.5. Upon the transfer of all or any part of an Interest,
the transferor's Capital Account that is attributable to the transferred
interest shall carry over to the transferee Partner. If the transfer of any
interest in the Partnership causes a termination of the Partnership under
Section 708(b)(1)(B) of the Code, the Capital Account that carries over to the
transferee Partner shall be adjusted in accordance with Section 2.2.3.4 of
this Limited Partnership Agreement and Treasury Regulation Section
1.704-1(b)(2)(iv)(e) in connection with the constructive liquidation of the
Partnership under Treasury Regulation Section 1.708-1(b)(1)(iv). The
constructive reformation of the Partnership shall be treated as the formation
of a new partnership, and the capital accounts of the partners of such new
partnership shall be determined and maintained accordingly.
2.2.3.6. Adjustments to Capital Accounts in respect to
Partnership income, gain, loss, deduction and non-deductible expenditures (or
item thereof) shall be made with reference to the Federal tax treatment of
such items (and in the case of book items, with reference to the Federal tax
treatment of the corresponding tax items) at the Partnership level, without
6
regard to any requisite or elective tax treatment of such items at the Partner
level.
2.2.3.7. If the foregoing rules fail to provide guidance on how
adjustments to Capital Accounts should be made to reflect particular
adjustments to Partnership capital on the books of the Partnership,
adjustments to Capital Accounts shall be made in a manner that (i) maintains
equality between the aggregate Capital Accounts of the Partners and the amount
of Partnership capital reflected on the Partnership's balance sheet, as
computed for book purposes, (ii) is consistent with the underlying economic
arrangement of the Partners and (iii) is based, wherever practicable, on
Federal tax accounting principles.
2.2.3.8. A separate accounting shall be made of any item
allocated for state or local income tax purposes in a manner different from
how the corresponding item under the Code is allocated for Federal income tax
purposes. Reference herein to Capital Accounts shall, to the extent
appropriate and as necessary for state or local income tax purposes, be deemed
to include the effects of such separate accounting.
2.2.4. "Capital Contribution" means the total amount of money and
the fair market value (determined consistent with Section 752(c) of the Code
and without regard to Section 7701(g) of the Code) of any property contributed
to the Partnership by any Partner (or the predecessor holders of the Interest
of any Partner).
2.2.5. "Capital Contribution Installment Dates" has the meaning set
forth in Section 3.4.1 hereof.
2.2.6. "Distributable Cash" means, with respect to any period
between Distribution Dates, the amount of cash or property delivered by Red
Hill in its capacity as Operator under the Operating and Maintenance
Agreement, to the Partnership pursuant to Section 12.2(xv) of the Operating
and Maintenance Agreement (other than amounts representing Capital
Contributions and the proceeds of the Project Lender's Loan) less any other
reimbursements or fees payable hereunder including, without limitation,
amounts reimbursed to Red Hill as "Tax Matter Partner" pursuant to the
provisions of Section 11.6 hereof.
2.2.7. "Distribution Dates" means each March 31 and September 30
occurring during the term of the Partnership.
2.2.8. "Easement Consideration" means the consideration to be paid
to Magma by the Partnership pursuant to the Easement Agreement.
2.2.9. "Financing" means any financing, refinancing or borrowing,
whether or not secured by any Property, but excluding any loan made by the
Partnership.
7
2.2.10. "Incapacity" means the entry of any order for relief in
bankruptcy, of incompetence or of insanity, or the death, dissolution or
termination (other than by merger or consolidation), of any Person.
2.2.11. "Interest" means the entire ownership interest of a Partner
in the Partnership at any particular time, including the right of such Partner
to any and all benefits to which a Partner may be entitled as provided in this
Limited Partnership Agreement, together with the obligations of such Partner
to comply with all of the terms and provisions of this Limited Partnership
Agreement.
2.2.12. "Limited Partner" means, solely for purposes of this Limited
Partnership Agreement, any Person admitted to the Partnership as a limited
partner, whether as an Original Limited Partner or a Substituted Limited
Partner.
2.2.13. "Limited Partnership Agreement" means this Amended and
Restated Limited Partnership Agreement, as amended from time to time.
2.2.14. "Majority of the Limited Partners" means the holders of more
than 50% of the outstanding Units held by all of the Limited Partners.
2.2.15. "Management Committee" has the meaning set forth in Section
6.2 hereof.
2.2.16. "Managing General Partner" means Red Hill.
2.2.17. "Notice" means a writing, containing the information
required by this Limited Partnership Agreement to be communicated to any
Person, sent by registered, certified, first-class mail, telex or telecopy to
such Person at the last known mailing address of such Person; provided,
however, that any communication containing such information sent to such
Person and actually received by such Person shall constitute Notice for all
purposes of this Limited Partnership Agreement.
2.2.18. "Operating Cash Expenses" means the amount of cash disbursed
by or on behalf of the Partnership in the ordinary course of business
including, without limitation, all cash expenses, such as property management,
insurance premiums, taxes, utilities, repair, maintenance, legal, accounting,
bookkeeping, computing, equipment use, travel on Partnership business,
telephone expenses and salaries, and direct expenses of Partnership employees
(if any) and agents and consultants while engaged in Partnership business.
Operating Cash Expenses shall include fees or other amounts paid by the
Partnership to any General Partner, Limited Partner or any Affiliate thereof
permitted by this Limited Partnership Agreement
8
including, but not limited to the Administration Fee, Guaranteed Capacity
Payment, Technology Fee, Construction Management Fee, Easement Consideration,
rent under the Ground Lease, Reimbursement Charges and any other amounts due
and owing, as reimbursement or otherwise, under this Limited Partnership
Agreement and/or any of the Operating Agreements, transmission line charges
pursuant to the IID Agreements, contributions to the Debt Service Reserve
Account, the Major Capital Expenditure Reserve Account, the Decommissioning
Reserve Account and such other Reserves as the General Partners, in their sole
discretion, shall deem necessary or desirable to the business of the
Partnership, including, without limitation, reserves or working capital, and
the cost of goods, labor, materials and administrative services used for or by
the Partnership, whether incurred by any General Partner, any Affiliate
thereof or any non-Affiliate in performing functions set forth in this Limited
Partnership Agreement reasonably requiring the use of such goods, labor,
materials or administrative services. Operating Cash Expenses shall not
include expenditures paid from Reserves or expenditures attributable to
obtaining Sale or Financing Proceeds.
2.2.19. "Original Limited Partners" means the Persons listed on
Exhibit "A" to this Limited Partnership Agreement.
2.2.20. "Partner" means any Limited Partner or General Partner.
2.2.21. "Partnership" means the limited partnership being continued
under this Limited Partnership Agreement.
2.2.22. "Partnership Holding Account" means that certain segregated
interest bearing account in the Partnership's name referenced in Section 3.3
hereof into which the General Partners shall deposit all Capital Contributions
hereunder and all proceeds of draws under the Credit Facility.
2.2.23. "Project Costs" means, subject to any other provision of
this Limited Partnership Agreement, all expenditures or commitments for
expenditures with respect to the design, financing, engineering, construction,
and start-up of the Elmore Facility, whether already incurred or to be
incurred, or whether originally treated as capital or expense, which, subject
to any other provision of this Limited Partnership Agreement, (i) are within
the scope of the construction, development and start-up of the Elmore
Facility, and (ii) may properly be treated as capital costs.
As used herein, "Project Costs" shall include, without limitation or
duplication but subject to the restrictions contained in the foregoing clauses
(i) and (ii), expenditures or commitments for expenditures incurred in the
following:
9
2.2.23.1. The Development of the Elmore Facility.
2.2.23.2. The acquisition or lease of real property and rights
of way to be held in the name of the Partnership and all cost incurred, if
any, in connection with any amendments to the Geothermal Leases including,
without limitation, all consideration paid to the lessors in connection with
such amendments. Prior to the Conversion Date, lease payments made by the
Partnership shall be treated as Project Costs.
2.2.23.3. The obtaining of permits and approvals for the
development, construction and start-up of the Elmore Facility, including the
geothermal exploratory, production and injection wells, and the acquisition,
construction and putting into operation of the Elmore Facility.
2.2.23.4. The acquisition of title reports and all expenses
incurred in connection therewith, including, without limitation, legal fees
and Title Consultant fees, and, where required, title insurance with respect
to real property, leases, including, without limitation, the Geothermal
Leases, and rights of way.
2.2.23.5. The acquisition of materials, supplies, machinery,
equipment or apparatus used (including rental charges for machinery, equipment
or apparatus hired) in connection with the acquisition, construction or the
start-up of the Elmore Facility, whether or not such materials, supplies,
machinery, equipment or apparatus are to be installed as part of the Elmore
Facility.
2.2.23.6. For costs of any financings relating to the Elmore
Facility, including the Credit Facility and fees or other charges allocable to
the Development of the Elmore Facility in connection with that certain
$75,000,000 Credit Agreement dated as of September 1, 1987 between Magma and
Morgan Guaranty Trust Company of New York ("Morgan"), including interest
during construction.
2.2.23.7. For costs in connection with the financing,
acquisition, construction or start-up of the Elmore Facility, including,
without limitation, allowances or charges for taxes, licenses, excises,
assessments, engineering, accounting and legal expenses, superintendence,
casualties, surety bond and insurance premiums and interest and commitment
fees paid or payable with respect to indebtedness.
2.2.23.8. The Partnership's share of the costs of the
electrical transmission facilities to be built by the IID as provided in the
IID Agreements, and the electrical
10
interconnection with IID and SCE, together with all costs and expenses
associated with the financing thereof.
2.2.23.9. For advance payments or deposits on account of the
cost of personal property acquired or to be acquired or services performed or
rendered or to be performed or rendered in connection with the acquisition or
the construction or the start-up of the Elmore Facility including, without
limitation, the invoiced cost of such personal property or services
notwithstanding that payment therefor is made with the capital stock or other
property of the payor.
2.2.23.10. All fees or charges paid to Morgan in connection
with the financing of the Partnership and the Elmore Facility.
2.2.24. "Property" means the Elmore Property together with all
interest in and rights to use the Geothermal Brine as provided in the Easement
Agreement, all improvements now or hereafter constructed on the Elmore
Property including, but not limited to, the Elmore Facility, and all personal
property used in connection therewith, including any interest of the
Partnership therein.
2.2.25. "Reserves" means funds set aside or amounts allocated during
such period to reserves which shall be maintained in amounts deemed sufficient
by the General Partners for working capital, to pay taxes, insurance, debt
service, repairs, replacements or renewals, Decommissioning, and for other
costs or expenses incident to the ownership or operation of the Property
including, but not limited to, the Debt Service Reserve, the Major Capital
Expenditure Reserve and the Decommissioning Reserve.
2.2.26. "Sale" means any Partnership transaction (other than the
receipt of Capital Contributions) not in the ordinary course of its business,
including, without limitation, sales, exchanges or other dispositions of real
or personal property, condemnations, recoveries of damage awards and insurance
proceeds (other than business or rental interruption insurance proceeds), and
principal payments with respect to loans made by the Partnership pursuant to
this Limited Partnership Agreement, but excluding any Financing.
2.2.27. "Sale of Financing Proceeds" means the net cash receipts of
or on behalf of the Partnership arising from a Sale or Financing (other than
the receipt of Capital Contributions and the proceeds of the Project Lender's
Loan), less the following:
2.2.27.1. The amount necessary for the payment of all debts and
obligations secured by any Property sold or otherwise related to the
particular Sale or Financing.
11
2.2.27.2. The amount of cash paid or to be paid in connection
with such Sale or Financing (which shall include, with regard to damage
recoveries or insurance or condemnation proceeds, cash paid or to be paid in
connection with repairs, replacements or renewals, in the discretion of the
General Partners, relating to damage to or partial condemnation of the
affected Property).
2.2.27.3. The amount considered appropriate by the General
Partners to pay taxes, insurance, debt service, repairs, replacements or
renewals, or other costs or expenses of the Partnership (including costs of
improvements or additions in connection with any Property) or to provide for
the purchase of land or other interests in connection with any Property, or to
provide Reserves therefor, other than the Debt Service Reserve and the Major
Capital Expenditure Reserve.
2.2.27.4. The amount necessary to repay any debt under the
Credit Facility as a result of the effect of Section 2.09(d) of such Credit
Facility.
2.2.28. "Scheduled Capital Contributions" has the meaning set forth
in Section 3.4.1 hereof.
2.2.29. "Substituted Limited Partner" means any Person admitted to
the Partnership as a Limited Partner pursuant to Section 9.3 of this Limited
Partnership Agreement.
2.2.30. "Taxable Income" or "Tax Loss" means the income or loss of
the Partnership for each fiscal year as determined for Federal, state or local
income tax purposes, including without limitation related tax items such as
capital gain or loss, tax preferences, credits, depreciation, depletion,
deductions and investment credit recapture.
2.2.31. "Units" means the respective Interests of the Partners
expressed in terms of the number of units held by them as set forth in Exhibit
"B" attached hereto, as amended from time to time.
2.3. Additional Defined Terms. For the convenience of the parties, in
addition to the defined terms set forth in Schedule Z hereto and this Article
II, certain other terms are defined throughout this Limited Partnership
Agreement.
12
ARTICLE III
PARTNERS AND CAPITAL
3.1. General Partners. The names, addresses, Capital Contributions, and
Units of the General Partners are set forth in Exhibit "B" attached hereto.
3.2. Original Limited Partners. The names, addresses, Capital
Contributions, and Units of the Original Limited Partners are set forth in
Exhibit "B" attached hereto.
3.3. Partnership Capital. The Partners shall make Capital Contributions
in accordance with the provisions of Sections 3.4 and 3.5 hereof. The General
Partners shall deposit the proceeds of all Capital Contributions and all draws
under the Credit Facility in the Partnership Holding Account promptly upon the
General Partners' receipt thereof. The amounts held in the Partnership Holding
Account shall be used by the Partnership in a manner consistent with this
Limited Partnership Agreement including, without limitation, for such purposes
as may be contemplated by the Construction Management Agreement. Subject to
the provisions of Section 3.6 hereof, any amounts held in the Partnership
Holding Account, including any interest earned thereon, in excess of the
amounts necessary to fulfill the Partnership's obligations under the
Construction Management Agreement, shall be delivered to Red Hill, in its
capacity as Operator pursuant to the operating and Maintenance Agreement, to
be placed in the Operating Account. The Partnership shall not redeem or
repurchase any Interest, and no Partner shall have the right to withdraw, or
receive any return of, its Capital Contribution or Capital Account, except as
specifically provided herein.
3.4. Scheduled Capital Contributions.
3.4.1. Each Partner shall make Capital Contributions in the
aggregate amount set forth opposite its name on Exhibit "C" attached hereto
("Scheduled Capital Contributions"). Except as expressly provided to the
contrary in Section 3.4.2 hereof, all Capital Contributions shall be made in
cash. Scheduled Capital Contributions of the General Partners shall be made in
monthly installments with the first of such installments to be made on the
date hereof, and the remainder of such installments to be made on the
twentieth day of each month commencing April 20, 1988 through and including
the twentieth day of the month in which the Conversion Date occurs (the
"Capital Contribution Installment Dates"). The amount of each General
Partner's scheduled Capital Contributions to be made on each of the Capital
Contribution Installment Dates shall be an amount which, in the discretion of
the General Partners, is sufficient both to maintain the ratio set forth in
Section 3.6 hereof and to accomplish the purposes of the partnership, subject
to such aggregate limitations described above. Each of the Limited
13
Partners shall make its entire Scheduled Capital Contribution on the date of
this Limited Partnership Agreement.
3.4.2. The Partners acknowledge that Magma has incurred certain
intangible drilling and development costs in connection with its drilling and
development of the wells to be used by the Elmore Facility, and that pursuant
to the terms and conditions of the Construction Management Agreement the
Partnership shall pay Magma for the transfer of such wells to the Partnership
in an amount equal to the total cost to Magma of such wells less the amount of
such intangible drilling and development costs incurred by Magma. The Partners
hereby agree that a portion of the amount of such intangible drilling and
development costs incurred by Magma shall be deemed to be contributed to the
capital of the Partnership as the entire Scheduled Capital Contribution to be
made by Magma pursuant to the terms of Section 3.4.1 hereof and, in this
regard, such amount shall be credited against the amount set forth in Exhibit
"C" hereto as being payable by Magma on the date hereof. The Partners further
agree that the remaining portion of the amount of such intangible drilling and
development costs incurred by Magma shall be deemed to be contributed to the
capital of the Partnership as all or a portion, as the case may be, of the
Scheduled Capital Contributions to be made by Red Hill pursuant to the terms
of Section 3.4.1 hereof and, in this regard, such amount shall be credited
against the amount set forth in Exhibit "C" hereto as being payable by Red
Hill on the first Capital Contribution Installment Date (and on the earliest
subsequent Capital Contribution Installment Dates to the extent of any excess
over the amount payable by Red Hill to the Partnership on the first Capital
Contribution Installment Date). The amount to be credited to Magma and Red
Hill by reason of the foregoing contribution and form of conveyance by Magma
and Red Hill of such intangible drilling and development costs is set forth on
Exhibit "D" attached hereto, subject to the adjustment of such amount by Magma
and Red Hill within 30 days of the date hereof to reflect the actual amount of
intangible drilling and development costs incurred by Magma. All such amounts
and costs shall be subject to subsequent audit by Niguel at its expense and
Magma shall refund to the Partnership within 30 days after the completion of
such audit any excess amount credited therefor.
3.5. Additional Funding.
3.5.1. If the General Partners agree, in the exercise of their
respective sole discretion at any time after the Partnership has borrowed
$71,000,000 under the Credit Facility and the Magma Undertaking and prior to
the Conversion Date, to contribute additional funds to carry out the purposes
of the Partnership for profit, Niguel, in its capacity as a general partner,
shall contribute to the Partnership in cash as an additional Capital
Contribution 57.5% of such funds and Red Hill agrees to contribute to the
Partnership in cash as an additional Capital Contribution 42.5% of the funds,
up to an aggregate
14
additional amount from both General Partners of $11,153,846 ("Priority Tax
Capital Contributions"). After all contributions of such additional amounts or
the Conversion Date, whichever first occurs, or if for any reason such
borrowed funds are not available and the General Partners agree, in their
respective sole discretion, to make such contributions, such additional
Capital Contributions shall be made 50% by Niguel and 50% by Red Hill
("Priority Capital Contributions"). The Priority Tax Capital Contributions and
Priority Capital Contributions, where appropriate, shall hereinafter be
collectively referred to as "Additional Capital Contributions." Subject to
Section 8.1.1 of this Limited Partnership Agreement, each of the General
Partners may elect to use borrowed funds to supply all or any portion of their
respective shares of any additional Capital Contributions to the Partnership;
provided, however, that neither of the General Partners may use borrowed funds
for such purposes if the use of borrowed funds would result directly or
indirectly in the breach of any covenant, condition or representation or
warranty contained in, or an Event of Default under, the Credit Facility or
any agreement, instrument or document related thereto. The provisions of this
Section 3.5.1 in respect of additional funding of the Partnership are intended
to be, and shall be, solely for the benefit of the Red Hill and Niguel and not
the Partnership or the Limited Partners. In addition to the Scheduled Capital
Contributions provided in this Article III, the Partnership on the date hereof
has entered into the Credit Facility and the Magma Undertaking for financing
of up to $71,000,000 for the development of the Elmore Facility.
3.5.2. In the event the General Partners are required to make
Additional Capital Contributions pursuant to Section 3.5.1 of this Limited
Partnership Agreement, a separate memorandum account (a "Priority Equity
Account") shall be established for each of the General Partners. Each General
Partner's Priority Equity Account shall be adjusted only in the following
manner:
(a) Increased by the amount of such General Partner's Additional
Capital Contributions; and
(b) Decreased, but in no event to an amount less than zero, by the
amount of all distributions to such General Partner pursuant to Sections
4.2.1 and 4.3.1.1 of this Limited Partnership Agreement.
3.6. Debt to Equity Ratio. At all times prior to the Conversion Date,
the Partnership shall maintain the Partnership's ratio of "Tranche A
Loans" (as that term is defined in the Credit Facility) to Scheduled Capital
Contributions, at a level no greater than 1.85714:1. Notwithstanding anything
contained herein to the contrary, in the event that the ratio of Tranche A
Loans to Scheduled Capital Contributions of the Partnership is less than
1.85714:1 as of the Conversion Date, the Partnership shall refund to each
Partner on the first anniversary of the
15
Conversion Date (or as soon thereafter as is reasonably practicable) that
portion of such Partner's Capital Contribution (a "Refunded Capital
Contribution") with such interest thereon as may have accrued on such Refunded
Capital Contribution while in the Partnership Holding Account and/or the
Operating Account, as the case may be, which, together with all other Refunded
Capital Contributions made to the Partners, both (a) is in excess of the costs
incurred in the Development of the Elmore Facility during such one-year
period, and (b) reduces the ratio of the Partnership's Tranche A Loans
outstanding as of the Conversion Date to Capital Contributions ratio to a
level as close as possible to, but not less than 1.85714:1. The amount of each
Partner's Refunded Capital Contribution, if any, shall equal that portion of
the total Refunded Capital Contributions made by the Partnership which
represents such Partner's pro rata share of the Partnership's capital.
3.7. Liability of Partners.
3.7.1. No Limited Partner shall be liable for the debts,
liabilities, contracts or any other obligations of the Partnership. A Limited
Partner shall be liable only to make its Capital Contributions on the date
hereof in the amounts provided in Exhibits "B" and "C" attached hereto. A
Limited Partner shall not be required to lend any funds to the Partnership or,
after its Capital Contributions have been paid in accordance with the terms
hereof, to make any further Capital Contribution to the Partnership.
3.7.2. In accordance with California law, a Limited Partner may,
under certain circumstances, be required to return to the Partnership, for the
benefit of Partnership creditors, amounts previously distributed to it as a
return of capital. It is the intent of the Partners that no distribution to
any Limited Partner of Distributable Cash or of Sale or Financing Proceeds
shall be deemed a return or withdrawal of capital for purposes of this Limited
Partnership Agreement, even if such distribution represents, for Federal
income tax purposes or otherwise (in whole or in part), a return of capital,
and that no Limited Partner shall be obligated to pay any such amount to or
for the account of the Partnership or any creditor of the Partnership.
However, if any court of competent jurisdiction holds that, notwithstanding
the provisions of this Limited Partnership Agreement, any Limited Partner is
obligated to make any such payment, such obligation shall be the obligation of
such Limited Partner and not of the General Partners.
3.7.3. The General Partners shall have no personal liability for
repayment to the Limited Partners of their Capital Contributions, or for
repayment to the Partnership of the negative amounts of such Limited Partners'
Capital Accounts, if any.
16
3.8. Default in Capital Contributions. In the event that a General Partner
("Defaulting Partner") does not make a timely Capital Contribution as required
by this Article III, 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 shall be deemed to be a
Capital Contribution from the Defaulting Partner to the Partnership.
Notwithstanding the provisions of Article IV of this Limited Partnership
Agreement, in the event that a Non- Defaulting Partner makes a Non-Defaulting
Partner Payment, the Partnership shall not make any distributions 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 such
unfunded Capital Contribution plus an amount equal to the maximum lawful rate
of interest on the unpaid balance (the "additional amount") or (ii) the
Non-Defaulting Partner notifies the Partnership that it has received a payment
from the Non-Defaulting Partner equal to the amount of the unfunded Capital
Contribution 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 such unfunded contribution,
including, without limitation, any additional tax liabilities and interest.
ARTICLE IV
DISTRIBUTIONS OF CASH
4.1. Special Distributions. On a monthly basis an amount equal to 2.667%
of Energy Revenues shall be distributed to Red Hill.
4.2. Distributions of Distributable Cash. All Distributable Cash, subject
to limitations under the Credit Facility, shall be distributed to the Partners,
on the Distribution Dates, to the extent available:
4.2.1. First, to the General Partners to the extent of and in
proportion to the positive balance, if any, of their Priority Equity Accounts.
4.2.2. Second, to the Partners in proportion to their Units in the
Partnership.
17
4.3. Distributions of Sale or Financing Proceeds.
4.3.1. Subject to Section 4.3.2 of this Limited Partnership
Agreement, except in the event of the liquidation of the Partnership and
distribution of proceeds pursuant to Article X of this Limited Partnership
Agreement, and subject to the limitations under the Credit Facility, all Sale
or Financing Proceeds shall be distributed to the Partners on the Distribution
Dates, to the extent available:
4.3.1.1. First, to the General Partners to the extent of and in
proportion to the positive balance, if any, of their Priority Equity Accounts.
4.3.1.2. Second, to the Partners in proportion to their Units
in the Partnership.
4.3.2. No Sale or Financing Proceeds shall be distributed to
any Limited Partner under Section 4.3.1.2 of this Limited Partnership
Agreement so as to create or increase any deficit balance in such Limited
Partner's Capital Account after adjustment for the allocation of any income,
gain, loss or deduction, pursuant to the provisions of Article V of this
Limited Partnership Agreement, resulting from the Sale or Financing giving
rise to such Sale or Financing Proceeds. Sale or Financing Proceeds that would
have been distributable to a Limited Partner but for the application of the
preceding sentence shall be distributed instead to the General Partners in
proportion to their Units in the Partnership.
ARTICLE V
ALLOCATIONS OF TAXABLE INCOME AND TAX LOSS
5.1. In General. Taxable Income and Tax Loss of the Partnership shall
be determined and allocated with respect to each fiscal year of the Partnership
as of the end of such year. Subject to the other provisions of this Article V,
an allocation to a Partner of a share of Taxable Income or Tax Loss shall be
treated as an allocation of the same share of each item of income, gain, loss
and deduction that is taken into account in computing Taxable Income or
Tax Loss.
5.2. Taxable Income and Tax Loss. Except as provided in Sections 5.3,
5.4 and 5.5 of this Limited Partnership Agreement:
5.2.1. Gross income shall be allocated to Red Hill in an amount
equal to distributions, if any, to Red Hill for such fiscal year under Section
4.1 of this Limited Partnership Agreement.
5.2.2. All remaining items of Taxable Income for a fiscal year shall
be allocated to the Partners in proportion to their Units in the Partnership.
18
5.2.3. All remaining items of Tax Loss for a fiscal year shall be
allocated to the Partners in proportion to their Units in the Partnership.
5.3. Special Allocations.
5.3.1. Intangible drilling cost deductions allowed under Section
263(c) of the Code and under corresponding provisions of state and local
income tax laws shall be allocated as follows:
5.3.1.1. Subject to Section 5.3.2 hereof, such deductions shall
be allocated 100% to Niguel through and including the Conversion Date.
5.3.1.2. In the event both (a) Project Costs exceed $93,846,154
and (b) intangible drilling costs exceed $9,850,000, then deductions for such
intangible drilling costs shall be allocated as follows:
(a) If Project Costs are not in excess of $103,846,154 then
deductions for the portion of intangible drilling costs between
$9,850,000 and the actual amount of such costs (an "IDC Overrun") shall
be allocated 50% to Niguel, 40% to Red Hill and 10% to Magma;
(b) If Project Costs are in excess of $103,846,154 but not in
excess of $115,000,000, then the IDC Overrun shall be allocated to Niguel
in an amount which equals the sum of (i) 50% of the IDC Overrun times a
fraction the numerator of which shall be 10,000,000 and the denominator
of which shall be a number equal to the Project Costs less 93,846,154,
plus (ii) 57.5% of the IDC Overrun times a fraction the numerator of
which shall be a number equal to the Project Costs less 103,846,154 and
the denominator of which shall be the Project Costs less 93,846,154; the
remainder of the IDC Overrun shall be allocated 80% to Red Hill and 20%
to Magma; and
(c) If Project Costs are in excess of $115,000,000, then the
IDC Overrun shall be allocated to Niguel in an amount which equals the
sum of (i) 50% of the IDC Overrun times a fraction the numerator of which
shall be 10,000,000 and the denominator of which shall be a number equal
to Project Costs less 93,846,154, plus (ii) 57.5% of the IDC Overrun
times a fraction the numerator of which shall be 11,153,846 and the
denominator of which shall be a number equal to Project Costs less
93,846,154, plus (iii) 50% of the IDC overrun times a fraction the
numerator of which shall be a number equal to Project Costs less
115,000,000 and the denominator of which shall be Project Costs less
93,846,154; the remainder of the IDC overrun shall be allocated 80% to
Red Hill and 20% to Magma.
19
5.3.2. Federal depreciation, amortization and other cost recovery
deductions under Sections 167 and 168 of the code shall be allocated as
follows:
(a) Such deductions attributable to Project Costs not to exceed
$93,846,154 shall be allocated (i) 100% to Niguel through and including
December 31, 1990 and (ii) commencing January 1, 1991 through and
including December 31, 1992, 90% to Niguel, 8% to Red Hill and 2% to
Magma and (iii) thereafter, to the Partners in proportion to their Units
in the Partnership.
(b) Such deductions attributable to Project Costs in excess of
$103,846,154 and less than $115,000,000 resulting from Priority Tax
Capital Contributions made pursuant to the terms of Section 3.5 of this
Limited Partnership Agreement shall be allocated 57.5% to Niguel, 34% to
Red Hill and 8.5% to Magma.
(c) Such deductions attributable to Project Costs in an aggregate
amount between $93,846,154 and $103,846,154 and to Project Costs in
excess of $115,000,000 resulting from Priority Capital Contributions made
pursuant to Section 3.5 of this Limited Partnership Agreement shall be
allocated 50% to Niguel, 40% to Red Hill and 10% to Magma.
5.3.3. State and local tax deductions, if any, corresponding to
Section 167 or 168 of the Code shall not be specially allocated under this
Section 5.3, but rather shall be allocated pursuant to Section 5.2.2 of this
Limited Partnership Agreement.
5.3.4. In the event that the Federal Energy Regulatory Commission
("FERC") has failed to act to certify that the Elmore Facility is a qualifying
facility within the meaning of 18 C.F.R. Section 292.203 ("Qualifying
Facility"), or has not certified that the Elmore Facility is a Qualifying
Facility on the grounds that the ownership criteria of 18 C.F.R. Section
292.206 ("Ownership Criteria") are not satisfied because of Niguel's ownership
interest in the Elmore Facility, on or before the close of business on August
15, 1988 or the day 15 days prior to the date (the "Power Sale Date") on which
power is then scheduled to be both produced and delivered for sale from the
Elmore Facility, whichever occurs first (the "QF Determination Date"), then,
notwithstanding anything in this Section 5.3 to the contrary, all allocations
of tax attributes of greater than 50% to Niguel set forth in this Article V
shall not apply and all such items shall be allocated as provided in Sections
5.2.2 and 5.2.3. If at any time following any reallocation on the QF
Determination Date the FERC issues an order certifying that the Elmore
Facility is a Qualifying Facility in a manner permitting all or certain of
such special allocations to Niguel set forth in this Article V, the provisions
of the preceding sentence shall no
20
longer apply and such special allocations shall be reinstated to the extent
permitted in accord with such FERC certification.
5.3.5. In the event that FERC has failed to act to certify that the
Elmore Facility is a Qualifying Facility, or has not certified that the Elmore
Facility is a Qualifying Facility on the grounds that the Ownership Criteria
are not satisfied because of Niguel's ownership interest in the Elmore
Facility on or before the QF Determination Date, Niguel shall deliver to the
Agent with sufficient copies for the Banks, an opinion of the general counsel
to Niguel reaffirming such counsel's opinion to the Agent and the Banks dated
March 14, 1988 delivered pursuant to the Secured Credit Agreement (the
"Original Opinion"), as of the QF Determination Date, after giving effect to
the provisions of Section 5.3.4 and taking into consideration any discussions
that such counsel has had with FERC (or any other discussions of
representatives of Niguel or the Partnership of which such counsel is aware)
concerning the certification of the Elmore Facility as a Qualifying Facility
and any other information known to such counsel to be relevant thereto. In the
event that the general counsel to Niguel is unable to reaffirm the Original
Opinion as of the QF Determination Date after giving effect to the provisions
of Section 5.3.4 solely because of Niguel's Ownership Interest in the Elmore
Facility, Niguel shall within fifteen (15) days after the QF Determination
Date (but not less than seven (7) days prior to the Power Sale Date), complete
the transfers contemplated in Section 13.2 (including conversion of part of
its Interest as a General Partner, if necessary) to the extent necessary to
enable the general counsel to Niguel to reaffirm the Original Opinion.
5.4. Gain and Loss Upon Liquidation.
5.4.1. Subject to Section 5.5 of this Limited Partnership Agreement,
any gain realized upon liquidation of the Partnership shall be allocated:
(a) First, to each of the Partners to the extent of and in
proportion to the deficit balance, if any, in their Capital Accounts.
(b) Second, to each of the Partners in proportion to and to the
extent of the minimum amount required to equalize the capital accounts of
such Partners in proportion to their Units in the Partnership.
(c) Third, the balance to the Partners in proportion to their Units
in the Partnership.
5.4.2. Subject to Section 5.5 of this Limited Partnership Agreement,
any loss realized upon liquidation of the Partnership shall be allocated to
the Partners in proportion to their Units in the Partnership.
21
5.5. Additional Allocation Provisions.
Notwithstanding the foregoing provisions of this Article V:
5.5.1. No Tax Loss shall be allocated to any Limited Partner whose
Capital Account has been reduced to zero until the Capital Accounts of all
Partners have been reduced to zero. If any Limited Partner's Capital Account
has been reduced to zero at any time when any other Partner's Capital Account
has a positive balance, then any such Tax Loss shall be allocated as follows:
(a) First, to the Partner or Partners with positive Capital Account
balances, in the proportion that such positive balances bear to each
other; and
(b) Second, after the Capital Accounts of all Partners have been
reduced to zero, the balance of any such Tax Loss shall be allocated as
otherwise provided in this Article V.
5.5.2. Notwithstanding the provisions of Section 5.5.1, beginning in
the Partnership's first taxable year in which there are "nonrecourse
deductions" (within the meaning of Treasury Regulation Section
1.704-1(b)(4)(iv)) and for all subsequent taxable years, if there is a net
decrease in the Partnership's "partnership minimum gain" (within the meaning
of Treasury Regulation Section 1.704-1(b)(4)(iv)(c)), there shall be allocated
to all Partners with a deficit balance in their Capital Accounts ((i) reduced
for the items described in Section 5.5.9 (a), (b) and (c) of this Limited
Partnership Agreement, (ii) excluding from each Partner's Capital Account the
amount, if any, such Partner is obligated to contribute to the Partnership
under Section 10.3 of this Limited Partnership Agreement and (iii) as
otherwise adjusted as required under Treasury Regulation Section
1.704-1(b)(4)(iv)(e)), before any other allocation is made under this Article
V, gross income and gain for such year (and, if necessary, subsequent years)
in the amounts and in the proportions needed to eliminate such deficit
balances as quickly as possible. Such allocations shall be made first from
gains realized upon disposition of Partnership properties subject to one or
more nonrecourse liabilities to the extent of the decrease in "partnership
minimum gain" attributable to the disposition of such properties; the
remainder of such allocations, if any, shall be composed of a pro rata portion
of the Partnership's other items of gross income and gain. It is intended that
this Section 5.5.2 qualify and be construed as a "minimum gain chargeback"
within the meaning of Treasury Regulation Section 1.704-1(b)(4)(iv).
5.5.3. (This Section is intentionally omitted.]
5.5.4. In the event that any amount claimed by the Partnership to
constitute a deductible expense in any fiscal year is treated for Federal
income tax purposes as a distribution
22
made to a Partner in its capacity as a member of the Partnership and not a
guaranteed payment as defined in Section 707(c) of the Code or a payment to a
Partner not acting in his capacity as a partner under Section 707(a) of the
Code, then the Partner who is deemed to have received such distribution shall
first be allocated an amount of Partnership gross income equal to such
payment, its Capital Account shall be reduced to reflect the distribution, and
for purposes of this Article V, Taxable Income and Tax Loss shall be
determined after making the allocation required by this Section 5.5.4.
5.5.5. For any fiscal year during which a Unit is assigned by a
Partner (or by an assignee or successor in interest to a Partner), the portion
of the Taxable Income and Tax Loss of the Partnership that is allocable in
respect of such Unit shall be apportioned between the assignor and the
assignee of the Unit on the basis of the number of days during such fiscal
year that each is the owner thereof, without regard to (a) the results of
Partnership operations before or after such assignment or (b) any payments or
distributions made to the Partners before or after such assignment, except as
otherwise provided in and required by Section 706(d)(2) of the Code.
5.5.6. In the event that the admission of any Partner causes a
reduction in cost recovery deductions allowed with respect to any Property
under Section 168(h)(6) of the Code, then the General Partners may, in their
sole discretion, separately allocate cost recovery deductions so that (a) the
reduction in cost recovery deductions resulting from the application of
Section 168(h)(6) will be allocated to the Partner whose ownership of Units
caused Section 168(h)(6) to apply and (b) the cost recovery deductions of the
remaining Partners will, to the extent possible, not be diminished.
5.5.7. Notwithstanding the foregoing provisions of this Article V,
the General Partners' interests in each item of Partnership income, gain,
loss, deduction or credit shall equal at least one percent (1%) of each of
those items at all times during the existence of the Partnership. In
determining the General Partners' interest in those items, any Limited
Partner's Interest owned by either of the General Partners shall not be taken
into account.
5.5.8. Notwithstanding the foregoing provisions of this Article V,
income, gain, loss and deduction with respect to property contributed to the
Partnership by a Partner shall be shared among the Partners, pursuant to
Treasury 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 contribution.
5.5.9. Notwithstanding the foregoing provisions of this Article V,
no allocation of income, gain, loss or
23
deduction shall be made to any Limited Partner so as to cause a deficit
balance in such Limited Partner's Capital Account as of the end of the
Partnership taxable year to which such allocation relates. Solely for purposes
of determining the extent to which the previous sentence is satisfied, a
Limited Partner's Capital Account shall be increased by such Limited Partner's
share, if any, of the Partnership's "partnership minimum gain" (within the
meaning of Treasury Regulation Section 1.704-1(b)(4)(iv)(c)) and reduced for:
(a) Adjustments that, as of the end of such year, reasonably are
expected to be made to such Limited Partner's Capital Account under
Treasury Regulation Section 1.704-1(b)(2)(iv)(k) for depletion allowances
with respect to oil and gas properties of the Partnership;
(b) Allocations of loss and deduction that, as of the end of such
year, reasonably are expected to be made to such Limited Partner pursuant
to Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation
Section 1.751-1(b)(2)(iii); and
(c) Distributions that, as of the end of such year, reasonably are
expected to be made to such Limited Partner to the extent they exceed
offsetting increases to such Limited Partner's Capital Account that
reasonably are expected to occur during (or prior to) the Partnership
taxable years in which such distributions reasonably are expected to be
made (other than increases made pursuant to the minimum gain chargeback
provisions of Section 5.5.2 of this Limited Partnership Agreement). For
such purposes, the adjusted tax basis of Partnership property (or, if
Partnership property is properly reflected on the books of the
Partnership at a book value that differs from its adjusted tax basis, the
book value of such property) will be deemed to be the fair market value
of such property.
Any Limited Partner who unexpectedly receives an adjustment, allocation or
distribution described in subparagraph (a), (b) or (c) of this Section 5.5.9
shall be allocated items of gross income and gain in an amount and manner
sufficient to eliminate the deficit balance in such Limited Partner's Capital
Account as quickly as possible. The provisions of this Section 5.5.9 shall be
implemented by the General Partners in a reasonable and equitable manner. It
is intended that this Section 5.5.9 qualify and be construed as a "qualified
income offset" within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(d).
5.5.10. In the event that the Code or any Treasury Regulations
promulgated thereunder or any applicable state or local income tax laws or
regulations require allocations
24
of items of income, gain, loss, deduction or credit different from those set
forth in this Limited Partnership Agreement, upon the advice of the
Partnership's Accountants, the General Partners are hereby authorized to make
new allocations in reliance upon the Code, the Treasury Regulations, such
applicable state and local income tax laws and regulations and such advice of
the Partnership's Accountants, such new allocations shall be deemed to be made
pursuant to the fiduciary obligations of the General Partners to the
Partnership and the Limited Partners, and no such new allocation shall give
rise to any claim or cause of action by any Limited Partner.
ARTICLE VI
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNERS
6.1. Management of the Partnership; Managing General Partner.
6.1.1. Subject to the consent of the Limited Partners where required
by this Limited Partnership Agreement, the General Partners shall have the
powers and authority to manage the affairs of the Partnership. The General
Partners, within the authority granted to them under this Limited Partnership
Agreement, have determined to and hereby agree to manage the business of the
Partnership: (1) through a Management Committee with respect to those matters
set forth in Section 6.2 hereof or otherwise reserved to the General Partners
under other provisions of this Limited Partnership Agreement and (2) with
respect to the development, improvement, operation, and maintenance of the
Elmore Facility and other Property for the production and sale of electricity
from geothermal resources, through the Managing General Partner.
6.1.2. The General Partners hereby appoint Red Hill as the Managing
General Partner. In addition to its other powers and responsibilities
hereunder, the Managing General Partner shall have the authority and
responsibility, on behalf of the Partnership, to manage the day to day affairs
of the Partnership including administration of the Loans under the Credit
Facility and to carry out the decisions, policies and directives of the
Management Committee.
6.1.3. Any person dealing with the Partnership may rely upon the
signature of the Managing General Partner or the General Partners as to its
authority to make any undertaking on behalf of the Partnership, and shall not
be required to determine any facts or circumstances bearing upon the existence
of such authority.
6.1.4. No Limited Partner (except one who is also a General Partner,
and then only in its capacity as General Partner within the scope of its
authority hereunder) shall participate in control of, or have any control over
the Partnership business or any authority or right to act for or bind
25
the Partnership. The Limited Partners hereby consent to the exercise by the
General Partners and the Managing General Partner of the respective powers
conferred on them by this Limited Partnership Agreement.
6.2. Authority of the Management Committee. The General Partners
acting jointly through their respective representatives on the Management
Committee created hereby shall possess the powers and rights of the General
Partners under the Act and this Limited Partnership Agreement. The management
committee shall be comprised of four (4) members, two (2) of which shall be
designated by Red Hill and two (2) of which shall be designated by Niguel (the
"Management Committee"). Each of Niguel or Red Hill upon appointing a member
to the Management Committee shall notify the other General Partner of the name
of such member. A General Partner may remove such member by giving notice to
the other General Partner. Niguel and Red Hill will each take such action as
is internally required within that Partner to provide each of its members on
the Management Committee sufficient authorization to bind and legally act on
behalf of that Partner so long as his or her appointment remains in effect.
The Management Committee shall have regular meetings no less frequently than
quarterly and at such times as the Management Committee may fix. A majority of
the members may call special meetings on at least two days' advance written
notice. The Management Committee shall establish its rules of procedure
subject to the terms hereof. The presence of a representative of each General
Partner shall be necessary to constitute a quorum for the conduct of any
meeting. The Management Committee will cause minutes of each meeting to be
prepared and submitted to the members for approval.
The following actions or decisions by, on behalf of or with respect
to the Partnership or the General Partners shall require the prior approval of
both General Partners as evidenced by the vote of all members of the
Management Committee present at a meeting or, if action is taken by written
consent, by all of the authorized members of the Management Committee.
6.2.1. Approval of the annual operating and maintenance budgets and
capital improvements and parts replacement budgets for the Elmore Facility,
which budgets shall be prepared by Red Hill as Operator under the Operating
and Maintenance Agreement.
6.2.2. Approval of capital expenditures not covered in the operating
and maintenance budgets or the capital improvements budgets described in
Section 6.2.1 hereof, in amounts in excess of $50,000 per expenditure and
$500,000 per fiscal year in the aggregate, except in the case of an emergency
in which event the Managing General Partner shall have the right to take any
and all actions reasonably required in response to the emergency event.
26
6.2.3. Adoption of significant Partnership policies.
6.2.4. Amendment of this Limited Partnership Agreement, so as to
affect the substantive rights or obligations of any party hereto.
6.2.5. Approval of any significant agreements, documents,
instruments or arrangements between or involving the Partnership and a General
Partner or an Affiliate of a General Partner (apart from the Operating
Agreements, which are hereby deemed approved), and any amendment, consent, or
waiver with respect to any such agreements, documents, instruments or
arrangements.
6.2.6. Approval of the sale, transfer, lease or other disposition of
any material item of Property or any other material asset of the Partnership,
or the creation of a "Lien" with respect to any such property or asset (as
used in this Section 6.2, "Lien" means any mortgage, lien, pledge, charge,
security interest or encumbrance), other than Liens created in connection with
the Credit Facility, and Liens incurred in the ordinary course of the
Partnership's business including, without limitation, Liens incurred in the
ordinary course of the Development of the Elmore Facility, or, thereafter, in
the ordinary course of the Partnership's business, which are immaterial in
amount and significance.
6.2.7. Dissolution of the Partnership, otherwise than as provided in
this Limited Partnership Agreement.
6.2.8. Approval of distributions of any cash property other than
Distributable Cash, Sale or Financing Proceeds or amounts to be distributed
under Section 4.1 hereof or any decision not to distribute Distributable Cash
or Sale or Financing Proceeds.
6.2.9. Approval of the prepayment in whole or in material part of
any Partnership debt or other obligation, or any material change (including
any extension, consolidation, modification, refinancing or renewal) in the
terms of any such obligations or any Lien on any Property or material asset of
the Partnership (except to the extent contemplated by an approved budget).
6.2.10. Approval of long range financing plans other than the Credit
Facility and the Magma Undertaking (except to the extent contemplated by an
approved budget).
6.2.11. Approval of any borrowing of money, or entering into any
loan agreement, deferred purchase agreement, lease or other financing
arrangement, issuance of any evidence of indebtedness, or provision of any
other commitment of the credit of the Partnership, other than with respect to
trade payables and
27
immaterial short-term equipment leases in the ordinary course of the
Partnership's business, not expressly authorized in this Limited Partnership
Agreement or in an approved budget.
6.2.12. Subject to the Operating and Maintenance Agreement or the
Administrative Services Agreement, removal of Red Hill under the Operating and
Maintenance Agreement or the Administrative Services Agreement, or both.
6.2.13. A change in the selection of lawyers or accountants of the
Partnership, the retention of other consultants to the Partnership or the
employment of any employees by the Partnership.
6.2.14. Approval of loans, guarantees or other extensions of credit
(other than normal payment terms under the Elmore Power Purchase Contract) by
the Partnership to or for the benefit of the Partners or any of their
respective Affiliates.
6.2.15. Approval of the minutes of meetings of the Partnership and
actions of the Partnership taken without meetings.
6.2.16. Approval of the engagement in any business on behalf of the
Partnership other than the ownership and operation of the Elmore Facility.
6.2.17. Approval of the provision by Red Hill under the
Administrative Services Agreement of Extraordinary Services costing the
Partnership in excess of (a) $25,000 per service or related group of services,
or (b) $100,000 in the aggregate per fiscal year. Extraordinary Services that
are not in excess of these limits shall not require the approval of the
Management Committee.
6.2.18. Any decision to revalue the Partnership's property, or
determination of the fair market value of assets where required under this
Limited Partnership Agreement.
6.2.19. Payment, extension, renewal, modification, adjustment,
submission to arbitration, prosecution, defense, settlement or compromise of
any debt, obligation, suit, liability, cause of action or claim, including
taxes, either in favor of or against the Partnership, and involving a
potential liability or recovery in excess of $450,000.
6.2.20. Any material change in the accounting methods used by the
Partnership.
6.2.21. Making or revoking any of the elections referred to in
Sections 48, 167, 168, 195, 263(c), 709, 732, 754 or 1017 of the Code, or any
similar provisions enacted in lieu thereof; provided, however, that if such
approval is not
28
achieved, then all such elections and other tax decisions shall be made in
such a way as to reduce Partnership taxable income to the maximum extent
possible and take deductions in the earliest taxable year possible.
6.2.22. Approval of the establishment and maintenance of Reserves
(except to the extent contemplated in an approved budget, in which case the
Managing General Partner shall establish and maintain the budgeted Reserves
and fixed nondiscretionary Reserves expressly required by the Operating
Agreements or the Credit Facility).
6.2.23. Approval of the replacement of or addition of any geothermal
well except as may be required on an emergency basis in the event of damage
to, destruction of, or other casualty to, any geothermal well.
6.2.24. Determination of the amount and times at which Additional
Capital Contributions will be required under Section 3.5.1 or acceptance of
any in-kind Capital Contribution under such section.
6.2.25. Decisions regarding allocations under Sections 5.5.6 or
5.5.10 of this Limited Partnership Agreement.
Each Management Committee member's approval of any matter will not
be withheld without a reasonable basis. Any member of the Management Committee
may submit proposals for action to the committee. The Management Committee
shall not be involved in the day-to-day operations of the Elmore Facility or
the implementation of day-to-day operating practices and decisions.
6.3. Authority of General Partners to Deal with Partnership. The
Partnership may deal with and enter into agreements with any General Partner
or Affiliate subject to the provisions hereof.
6.3.1. Any agreement, arrangement or transaction between the
Partnership and any General Partner or any of its Affiliates permitted by this
Limited Partnership Agreement shall be subject to the following conditions:
(a) Any such agreement, arrangement or transaction shall be embodied
in a written contract which precisely describes the subject matter
thereof and all compensation to be paid therefor;
(b) No rebates or "give-ups" may be received by any General Partner
or any such Affiliate, nor may the General Partner or any such Affiliate
participate in any reciprocal business arrangement which would have the
effect of circumventing any of the provisions of this Limited Partnership
Agreement; provided, however,
29
that any refund or payment required by the terms of the Elmore Power
Purchase Contract shall not be deemed such a prohibited payment;
(c) Such agreements or arrangements shall be fully disclosed to all
Partners in one of the reports provided for in Article XI of this Limited
Partnership Agreement; and
(d) The agreement, arrangement or transaction shall be entered into
principally for the benefit of the Partnership in the ordinary course of
Partnership business and on terms no less favorable to the Partnership
than available from unaffiliated third persons.
6.4. Authority to Pay Certain Fees and Expenses. To the extent not
covered by and assumed under the provisions of the Operating Agreements, the
Partnership shall pay all other fees and expenses of the Partnership
including, without limitation, the fees and expenses related to (i)
Partnership operations, (ii) Partnership accounting, (iii) communications with
Partners, (iv) Partnership legal services, (v) Partnership tax services, (vi)
Partnership audit services, (vii) Partnership appraisal services, (viii)
Partnership commercial banking services, (ix) Partnership investment advisor
services, (x) Partnership computer services, (xi) Partnership organization
expenses, (xii) Partnership mileage and travel expenses and (xiii) such other
related operational and administrative expenses as are necessary for the
prudent organization and operation of the Partnership.
6.5. Restrictions on Authority of General Partners. Without the consent
of a Majority of the Limited Partners and the other General Partner, neither
of the General Partners shall have any authority to:
(a) Do any act in contravention of this Limited Partnership
Agreement which affects the rights or obligations of the Partners;
(b) Do any act which would make it impossible to carry on the
ordinary business of the Partnership;
(c) Possess Partnership property, or assign its rights in specific
Partnership property, for other than a Partnership purpose;
(d) Admit a Person as a General Partner, except as provided in this
Limited Partnership Agreement; or
(e) Knowingly perform any act that will subject any Limited Partner
to liability as a general partner in any jurisdiction.
30
6.6. Certain Duties and Obligations of General Partners.
6.6.1. The Managing General Partner shall take all actions which may
be necessary or appropriate (a) for the continuation of the Partnership's
existence as a limited partnership under the laws of the State of California
(and under the laws of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Limited Partners or to
enable the Partnership to conduct the business in which it is engaged or
proposes to be engaged) and (b) for the acquisition, development, maintenance,
preservation and operation of the Property in accordance with the provisions
of this Limited Partnership Agreement and applicable laws and regulations it
being understood and agreed, however, that the provision of day-to-day
property management services for the Property is not an obligation of the
Managing General Partner as such, but rather such day-to-day services shall be
provided by Red Hill as Operator pursuant to the Operating and Maintenance
Agreement.
6.6.2. The General Partners shall devote to the Partnership such
time as may be necessary for the proper performance of their respective duties
hereunder, but the officers and directors of the General Partners shall not be
required to devote their full time to the performance of such duties.
6.6.3. The Managing General Partner shall use its best efforts to
maintain its net worth at all times at a level sufficient to meet all
requirements of the Code and currently applicable regulations, rulings and
revenue procedures of the Internal Revenue Service, and to meet any future
requirements set by Congress, the Internal Revenue Service, any agency of the
Federal government or the courts, to assure that the Partnership will be
classified for Federal income tax purposes as a partnership and not as an
association taxable as a corporation.
6.6.4. The General Partners shall use their best efforts to preclude
the classification of the Partnership as a "publicly traded partnership" to
which Section 7704(a) of the Code applies.
6.6.5. The Managing General Partner shall take such action as may be
necessary or appropriate in order to form or qualify the Partnership under the
laws of any jurisdiction in which the Partnership does business or in which
such formation or qualification is necessary in order to protect the limited
liability of the Limited Partners or in order to continue in effect such
formation or qualification. The Managing General Partner shall file or cause
to be filed for recordation in the office of the appropriate authorities of
the State of California, and in each other jurisdiction in which the
Partnership is formed or qualified, such certificates (including limited
partnership
31
and fictitious name certificates) and other documents as are required by the
statutes, rules or regulations of such jurisdictions.
6.6.6. The General Partners shall at all times conduct their
respective affairs and the affairs of the Partnership and all of their
Affiliates in such a manner that neither the Partnership nor any Partner nor
any Affiliate of any Partner will have any personal liability under any
mortgage on any Property.
6.6.7. The Managing General Partner shall prepare or cause to be
prepared and shall file on or before the due date (or any extension thereof)
any Federal, state and local tax returns required to be filed by the
Partnership. The Partnership shall pay any taxes payable by the Partnership.
6.6.8. So long as the Credit Facility remains a valid and binding
obligation of the Partnership, the Managing General Partner shall procure and
maintain, or cause to be procured and maintained, at the sole expense of the
Partnership, such policies of insurance, in such amounts, as are necessary to
comply with the Insurance Requirements and shall cause the Partnership to
comply with the other terms and conditions of the Credit Facility. After such
time as the Credit Facility ceases to be a valid and binding obligation of the
Partnership or otherwise terminates in accordance with its terms, the Managing
General Partner shall procure and maintain, or cause to be procured and
maintained, at the sole expense of the Partnership, for the remainder of the
term of the Partnership, such policies of insurance, in such amounts, as the
Managing General Partner deems necessary or appropriate.
6.6.9. Each of the General Partners shall be under a fiduciary duty
to conduct the affairs of the Partnership in the best interests of the
Partnership and the Limited Partners, including the safekeeping and use of all
Partnership funds and assets and the use thereof for the exclusive benefit of
the Partnership.
6.6.10. The General Partners shall not in their capacity as General
Partners or as the Managing General Partner receive any salary, fees,
commissions, profits, distributions or allocations, except fees, commissions,
profits, distributions and allocations to which it may be entitled as
expressly permitted by this Limited Partnership Agreement.
6.7. Other Business of Partners. Any Partner or its Affiliates may
engage independently or with others in other business ventures of every nature
and description, including without limitation the ownership of other
properties and the making or management of other investments. Nothing in this
Limited Partnership Agreement shall be deemed to prohibit any Partner or any
Affiliate of any Partner from dealing, or
32
otherwise engaging in business, with Persons transacting business with the
Partnership, or from providing services related to the purchase, sale,
financing, management, development or operation of real or personal property
including, without limitation, geothermal or other competitive electrical
generating or other power plants, and receiving compensation therefor, not
involving any rebate or reciprocal arrangement which would have the effect of
circumventing any restriction set forth herein upon dealings with the General
Partners or any Affiliate of the General Partners. Without limiting the
generality of the foregoing, the General Partners will not be obligated to
present to the Partnership any particular investment opportunity which comes
to either of their attention, even if such opportunity is of a character which
might be suitable for investment by the Partnership. Neither the Partnership
nor any Partner shall have any right by virtue of this Limited Partnership
Agreement or the Partnership relationship created hereby in or to such other
ventures or activities or to the income or proceeds derived therefrom, and the
pursuit of such ventures, even if competitive with the business of the
Partnership, shall not be deemed wrongful or improper. Under no circumstances
shall any Partner engage in any activity or activities which would result in
Elmore Facility's inability to satisfy the criteria required to be satisfied
in order to be a "qualifying facility" as provided in 18 C.F.R. ss. 292.203,
as the same may be amended from time to time. In the event any Partner engages
in any activity prohibited by the immediately preceding sentence, such Partner
shall be required to sell or otherwise transfer its Interest as provided in
Article XIII of this Limited Partnership Agreement; provided, however, that
any transfer of a Partner's Interest that would result in the Partnership's
failure to satisfy the criteria set forth in 18 C.F.R. ss. 292.203 shall be
void and of no force or effect.
6.8. Limitation on Liability of General Partners; Indemnification.
The General Partners shall not be liable, responsible or accountable in
damages or otherwise to any of the Partners for any act or omission performed
or omitted by either of them in good faith pursuant to the authority granted
to them by this Limited Partnership Agreement in a manner reasonably believed
by the General Partner acting or omitting to so act to be within the scope of
the authority granted to it by this Limited Partnership Agreement and not
opposed to the best interests of the Partnership or the Limited Partners;
provided, however, that the General Partners shall not be relieved of
liability with respect to any claim, issue or matter as to which they or any
Affiliate shall have been adjudged to be liable for gross negligence, fraud or
bad faith in the performance of their respective fiduciary duties to the
Limited Partners. Except in the case of any such judgment of liability, the
Partnership shall indemnify the General Partners, their employees, agents and
assigns against any loss or damage incurred by them, and against expenses
(including attorneys' fees) actually and reasonably incurred by them in
connection with the defense or settlement of
33
any threatened, pending or completed action or suit by any Person in
connection with any such act or omission. The satisfaction of any obligation
to indemnify and hold the General Partners, their employees, agents and
assigns harmless shall be from and limited to Partnership assets, and no
Partner shall have any personal liability on account thereof.
6.9. Rights of Niguel. Niguel, at its own expense, shall have the
right to reasonably audit the books and records of Magma and/or its Affiliates
(other than DCC) with respect to services furnished to the Partnership other
than on a fixed cost basis.
6.10. Construction of Operating Agreements to Which Red Hill and/or
Its Affiliates Are Parties.
6.10.1. Under the Operating Agreements pursuant to which Red Hill
and/or its Affiliates are parties required to provide services, labor or
materials to the Partnership, the Partners hereby agree for purposes of this
Limited Partnership Agreement and such Operating Agreements that any reference
to "good faith" efforts herein or therein shall be construed so as not to
permit repeated instances of negligent conduct.
6.10.2. Under the Operating Agreements pursuant to which Red Hill
and/or its Affiliates are parties required to provide services, labor or
materials to the Partnership, the Partners hereby agree for purposes of this
Limited Partnership Agreement and such Operating Agreements that any
provisions contained therein which enable Red Hill or such Affiliates to
receive a reasonable profit for services, labor or materials provided
thereunder shall mean a profit that is typical for the kind of service or
labor rendered or material provided and the cost to the Partnership of such
services shall not exceed that which is available in a competitive marketplace
from unaffiliated third parties.
6.10.3. The Partners acknowledge that certain services to be
provided under the Administrative Services Agreement are similar in nature to
Services to be performed under the Operating and Maintenance Agreement. By way
of illustration only, certain accounting and bookkeeping services under the
Administrative Services Agreement are similar in nature to the accounting and
bookkeeping services under the Operating and Maintenance Agreement. As such,
only those of such costs and expenses incurred by Red Hill at the Elmore
Facility or at the Red Hill administrative facility in Imperial County,
California, in rendering the same shall be reimbursable to Red Hill as
Reimbursement Charges.
34
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF RED HILL
7.1. Representations and Warranties. Red Hill represents and
warrants to Niguel as of the date hereof, after giving effect to the execution
and delivery of the Operating Agreements (to the extent not heretofore
executed and delivered), as follows:
7.1.1. The Partnership is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of California, and
has all powers under the Limited Partnership Agreement and the laws of the
State of California and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and
proposed to be conducted. The Partnership has not conducted any business or
incurred or assumed any material liabilities or obligations (whether fixed or
contingent) prior to the date of this Limited Partnership Agreement.
7.1.2. The execution, delivery and performance by the Partnership of
the Credit Facility and the related Notes, Security Agreement and Deed of
Trust and the Project Agreements (as defined in the Credit Facility) in effect
as of the date hereof are within the powers of the Partnership, have been duly
authorized by all necessary actions on the part of the Partnership, Red Hill
and its Affiliates, require no action by any of such entities by or in respect
of, or filing with, any governmental body, agency or official other than such
actions as have already been taken, and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of this
Limited Partnership Agreement or of any agreement, judgment, injunction,
order, decree or other instrument (including any Geothermal Leases) binding
upon the Partnership, or, with respect to any Geothermal Leases, upon Magma or
result in the creation or imposition of any Lien, other than the Security
Interests (as those terms are defined in the Credit Facility), on any asset of
the Partnership or, with respect to any Geothermal Leases, upon Magma.
7.1.3. There is no action, suit or proceeding pending against, or to
the knowledge of Red Hill, threatened against or affecting the Partnership, or
any of its rights or assets before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the business,
financial position or results of operations of the Partnership or which in any
manner draws into question the validity of any of the Project Agreements in
effect as of the date hereof.
7.1.4. Each of Red Hill and Magma has fulfilled its obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all
35
material respects with the presently applicable provisions of ERISA and the
Code, and has not incurred any liability to the PBGC or a Plan under Title IV
of ERISA other than a liability to the PBGC for premiums under Section 4007 of
ERISA (as those terms are defined in the Credit Facility).
7.1.5. The charges, accruals and reserves on the books of the
Partnership in respect of taxes or other governmental charges are, in the
opinion of Red Hill, adequate to cover the Partnership's liability with
respect to such taxes and charges.
7.1.6. To the best of Red Hill's knowledge after inquiry and
physical inspection, the Elmore Property does not contain any hazardous
wastes, hazardous substances, hazardous materials, toxic wastes, toxic
substances or toxic pollutants, as those terms are used in the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Hazardous Materials Transportation Act,
the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the
California Hazardous Waste Control Act, the California Hazardous Substance
Act, the Porter-Cologne Water Quality Control Act, in any regulations
promulgated pursuant thereto, or in any other applicable law, ordinance, rule
or regulation, or any other substance, waste or material considered toxic or
hazardous under any applicable federal, state or local law, ordinance, rule or
regulation.
7.1.7. The Elmore Facility is not subject to the jurisdiction of the
CEC on the date of this Limited Partnership Agreement, and no CEC Event has
occurred (as those terms are defined in the Credit Facility).
7.1.8. The Partnership and the Elmore Facility are in compliance in
all material respects with all applicable laws, ordinances, rules, regulations
and requirements of governmental authorities (including, without limitation,
the Geothermal Steam Act of 1970, those laws identified in Section 7.1.6 above
and any other laws relating to the protection of the environment, ERISA, all
relevant California state and local laws, rules and regulations promulgated
thereunder). The Partnership has obtained (or has applied for as necessary to
timely obtain) all material permits and authorizations of any governmental
body, agency or official necessary for the Development of the Elmore Facility,
operation of the Elmore Facility or required for the Partnership to sell
electricity to SCE under the Elmore Power Purchase Contract and all of such
permits and authorizations obtained by the Partnership remain in full force
and effect.
7.1.9. (a) Subject to the exceptions identified in the Elmore
Property Preliminary Title Report and the Geothermal Lease Rights Properties
Preliminary Title Report, all properties and rights and all contractual
arrangements (including, without limitation, rights and title to land and
36
geothermal properties, electricity transmission and interconnection
facilities, rights to use patents and other proprietary processes, designs and
information, and contracts for process design, engineering and construction
services) necessary in connection with the Development of the Elmore Facility,
the operation of the Elmore Facility on the Elmore Property and the sale of
electricity to SCE under the Elmore Power Purchase Contract (i) if properties
or rights have been obtained and are held by the Partnership subject to no
Liens (as defined in the Credit Facility) (other than the Liens created by the
Security Agreement and the Deed of Trust) and no adverse claims that might, if
proven to be correct, individually or in the aggregate, have a material
negative impact on the feasibility of the Elmore Facility or the business
prospects of the Partnership and (ii) if contractual arrangements, are in full
force and effect with the relevant benefits thereunder accruing to the
Partnership, and constitute valid and binding agreements of the parties
thereto.
(b) The budget set forth on Schedule I to the Construction
Management Agreement for Elmore Projected Project Costs and schedule for
completion of the Elmore Facility previously delivered to the Agent (as
defined in the Credit Facility) and Niguel are correct and complete based on
all available information and represent Red Hill's present best estimates of
Elmore Projected Project Costs and the schedule for completion of the Elmore
Facility, and the budget for Elmore Projected Project Costs includes a
reasonable amount for Project Contingency Costs and includes all costs to the
Partnership associated with the properties and rights and the contractual
arrangements referred to in subsection (a) above.
(c) There are no services, materials or rights required for the
construction or operation of the Elmore Facility other than those that can
reasonably be expected to be commercially available at the site of the Elmore
Facility or are granted to the Partnership under the Ground Lease or Easement
Agreement.
7.1.10. The representations and warranties of the Partnership
contained in the Security Agreement and the Deed of Trust and in Section 4.16
of the Credit Facility, are true and correct in all material respects.
7.1.11. Since September 30, 1987 there has been no material adverse
change in the business, financial position, results of operations or prospects
of Magma and its Consolidated Subsidiaries considered as a whole, of Red Hill
or of the Partnership.
7.1.12. Neither Red Hill, the Partnership, any Affiliate of Red Hill
nor any agent or other Person acting on behalf of any of such entities,
directly or indirectly, offered any of the Interests or any similar security
of the Partnership for sale to or solicited offers to buy any thereof from, or
37
otherwise approached or negotiated with respect thereto with, any person in a
manner that would subject the offering of the Interests to the registration
requirements of the Securities Act of 1933, as amended, it being understood
that, insofar as such representation relates to the activities of Morgan
Guaranty Trust Company of New York in its capacity as sales agent for the
Partnership in connection with the offering and sale of the Interests, such
representation is based on the accuracy of information with respect to such
activities furnished by such sales agent to the Partnership.
7.1.13. The Partnership is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and neither the
Partnership, Red Hill, nor any Affiliate of Red Hill is subject to the
Federal, Power Act or Public Utility Holding Company Act of 1935.
7.1.14. Neither the Partnership, Red Hill, nor any Affiliate of Red
Hill will, as a result of the construction, ownership, leasing or operation of
the Elmore Facility, the sale of electricity therefrom or the entering into
any Project Agreement or any transaction contemplated hereby or thereby, be
subject to regulation under the Federal Power Act or the Public Utility
Holding Company Act of 1935 or under state laws and regulations respecting the
rates or the financial or organizational regulation of electric utilities.
7.1.15. The private placement memorandum dated January 1988
delivered to representatives of Niguel in connection with Red Hill, Magma, the
Partnership and the transactions contemplated hereby is true and complete in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make any statement therein
not misleading.
7.2. Reciprocal Representations and Warranties. Each of the parties
represents and warrants to the other parties hereto as follows:
7.2.1. Its execution, delivery and performance of this Agreement has
been duly authorized by all necessary actions on its part, and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of this Limited Partnership Agreement or of any material
agreement, lease, judgment, injunction, order, decree or other instrument
binding upon it or any of its Affiliates or result in the creation or
imposition of any Lien, other than the Security Interests (as those terms are
defined in the Credit Facility), on any of its assets or assets of any of its
Affiliates.
7.2.2. There is no action, suit or proceeding pending against, or to
its knowledge threatened against or affecting, it or any of its Affiliates or
any of its or their rights or assets before any court or arbitrator or any
38
governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, financial position or results of operations of the Partnership or
which in any manner draws into question the validity of any of the Project
Agreements.
7.2.3. This Limited Partnership Agreement represents its legally
valid and binding agreement.
7.3. Representation and Warranties of Niguel.
7.3.1. Neither Niguel, any Affiliate of Niguel nor any other Person
engaged to act on behalf of any of such entities, directly or indirectly,
offered any of the Interests or any similar security of the Partnership for
sale to or solicited offers to buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any person in a manner that would
subject the offering of the Interests to the registration requirements of the
Securities Act of 1933, as amended, it being understood that Niguel makes no
representation with respect to any activities of Morgan Guaranty Trust Company
of New York or the Partnership in connection with the offering and sale of the
Interests.
7.3.2. Subject to the matters described in Section 5.3.4 and in
Article XIII hereof, to the best of its knowledge neither the construction,
ownership, leasing or operation of the Elmore Facility, the sale of
electricity therefrom nor the entering into of any Project Agreement or any
transaction contemplated hereby or thereby, will be subject to regulation
under the Federal Power Act, the Public Utility Holding Company Act of 1935,
or under state law and regulations, respecting in each case the rates or the
financial or organizational regulation of electric utilities, solely as a
result of the acquisition of the interests in the Partnership by Niguel as
contemplated hereby.
7.4. Affiliate Status. For purposes of this Article VII, Niguel and
each of its parent companies shall be deemed to be not an Affiliate of the
Partnership, Red Hill or any person controlling, controlled by or under common
control with Red Hill, or any officer, director or shareholder thereof or
relative of any thereof.
39
ARTICLE VIII
TRANSFERS BY GENERAL PARTNERS AND
ADMISSION OF SUCCESSOR AND
ADDITIONAL GENERAL PARTNERS; WITHDRAWAL
OF GENERAL PARTNERS
8.1. Transfers By General Partners and Admission of Successor or
Additional General Partners.
8.1.1. Subject to the right of the General Partners to convert their
respective General Partner Interests into Limited Partner Interests as
provided in Section 8.3 of this Limited Partnership Agreement, without the
consent of both (a) such number of the Limited Partners as are then required
under the Act to consent to or ratify the admission of a General Partner, but
in no event with the consent of less than a Majority of the Limited Partners,
and (b) except as provided in Section 8.1.2, the other General Partner, whose
consent may be withheld for any reason so long as the Credit Facility remains
a valid and binding obligation of the Partnership (but thereafter whose
consent may not be unreasonably withheld), neither of the General Partners may
sell, transfer, pledge, encumber or otherwise assign its interest or designate
a Person to be its successor or, without the written consent of the other
General Partner, to be an additional General Partner. Any permitted designee
shall become a successor or additional General Partner only upon satisfying
the additional conditions of Section 9.3.1 of this Limited Partnership
Agreement. Notwithstanding anything contained in this Limited Partnership
Agreement that may be construed to the contrary, no General Partner may,
without the consent of the other General Partner, (a) sell, transfer, pledge,
encumber, assign or otherwise hypothecate its Interest if such act would
result in a change of control of the Partnership or (b) to the extent within
its control permit a change in control of such General Partner (other than in
the course of a reorganization, merger or consolidation involving creation of
a holding company or a transaction described in Section 8.1.2), as such
control existed as of the date of this Limited Partnership Agreement, except
as otherwise permitted by Section 8.1.2.
8.1.2. Except in connection with a transfer to a successor or
additional General Partner pursuant to Section 8.1.1 of this Limited
Partnership Agreement, the Managing General Partner shall not have any right
to retire or withdraw voluntarily from the Partnership, except that any
Partner may cause to be admitted to the Partnership as an additional Partner
or Partners of the same class, or substitute in its stead as the General
Partner, any entity which has, by merger, consolidation or otherwise, acquired
substantially all of such General Partner's assets or stock and continued its
business, provided that the Interests of the other Partners shall not be
affected thereby. Niguel shall have a right to withdraw without violating this
Limited Partnership Agreement but subject to the provisions of Section
15662(b) of the Act and Section 8.4 hereof and in
40
connection therewith or otherwise to convert all or part of its General
Partner Interest as provided in Section 8.3. No Limited Partner shall have the
right to withdraw. Each such successor or additional General Partner shall be
admitted as such to the Partnership upon satisfying the additional conditions
of Section 9.3.1 of this Limited Partnership Agreement.
8.1.3. By execution of this Limited Partnership Agreement, each of
the Limited Partners hereby consents to the admission of any Person as a
successor or additional General Partner pursuant to Sections 8.1.1 or 8.1.2 of
this Limited Partnership Agreement where at the time the express consent of
such number (if any) of the Limited Partners as are then required under the
Act to consent to or ratify the admission of a General Partner has been
obtained. In each such case, such admission shall, without any further consent
or approval of the Limited Partners, be an act of all the Limited Partners.
8.1.4. Any voluntary withdrawal or resignation by a General Partner
from the Partnership if there is no surviving General Partner shall be
effective only upon the admission in accordance with Sections 8.1.1 or 8.1.2
of this Limited Partnership Agreement of a successor General Partner.
8.2. Incapacity of General Partners.
8.2.1. In the event of the retirement (including the withdrawal of
Niguel under Section 8.1 or a conversion of its interest under Section 8.3 of
this Limited Partnership Agreement) or Incapacity of either of the General
Partners, the business of the Partnership shall be continued by any remaining
General Partner or Partners (pursuant to the right to do so which is hereby
granted to them) with Partnership property if the retiring General Partner or
the General Partner to which the Incapacity relates is not then the sole
General Partner, or upon the vote of all of the Limited Partners within 60
days after the date of such retirement or Incapacity to continue the business
of the Partnership and to admit one or more successor General Partners.
8.2.2. Upon the Incapacity of a General Partner, such General
Partner shall immediately cease to be a General Partner and its Interest in
the Partnership shall terminate; provided, however, that such termination
shall not affect any rights or liabilities of such General Partner which
matured prior to such Incapacity, or the value, if any, at the time of such
Incapacity of the Interest of such General Partner.
8.2.3. If, at the time of the Incapacity of a General Partner, such
General Partner is not the sole General Partner, then the remaining Managing
General Partner shall, or other General Partner or General Partners may,
continue the business of the Partnership and shall (a) give Notice to the
Limited Partners of such event and, if applicable, such election
41
and (b) make such amendments to this Limited Partnership Agreement and execute
and file for recordation such amendments and other documents as are necessary
to reflect the termination of the Interest of the General Partner to which
such Incapacity relates and such General Partner's having ceased to be a
General Partner.
8.3. Conversion of General Partners' Interest. Red Hill may at any
time convert all but 1% of, and Niguel may at any time convert all or any part
of, their General Partner Interests to Limited Partner Interests upon five (5)
days' prior written notice to the other. The portion of the .General Partner
Interest so converted, if any, shall become a Limited Partner Interest
hereunder and shall be subject to all of the terms and conditions imposed upon
Limited Partner Interests by this Limited Partnership Agreement, except as
otherwise provided in Article XIII. Any conversion of a General Partner's
Interest shall be on a Unit-by-Unit basis; provided that, that portion of the
Interest of a General Partner representing Additional Capital Contributions
shall be separate from the rights of holders of Units and shall remain with
the General Partner. If Niguel shall withdraw as a General Partner in
accordance with the provisions hereof, such Interest shall retain its rights
hereunder and priority as to distributions notwithstanding the termination of
its status as a General Partner. The converted Limited Partner Interest shall
represent the same share of income, gain, loss, deduction or credit as applied
to the General Partner Interest prior to conversion. The holder of any such
converted Limited Partnership Interest shall remain liable under Section 10.3
of this Limited Partnership Agreement to the extent of any deficit in the
Capital Account relating to such Units as of the date of conversion.
Notwithstanding any such conversion, the General Partners shall remain
responsible for their respective Scheduled Capital Contributions set forth in
Exhibit "C."
8.4. Liability of a Withdrawn General Partner. Any General Partner
who voluntarily or involuntarily for any reason (including Incapacity)
withdraws from the Partnership, or sells, transfers or assigns all of its
Interest, shall be and remain liable for all obligations and liabilities
incurred by it as a General Partner prior to the time that such withdrawal,
sale, transfer or assignment becomes effective as provided in Section 8.1 of
this Limited Partnership Agreement, but it shall be free of any obligation or
liability as a General Partner incurred on account of the activities of the
Partnership from and after the time that such withdrawal, sale, transfer or
conversion becomes effective.
42
ARTICLE IX
TRANSFERS OF PARTNERS' INTERESTS;
ADMISSION OF SUBSTITUTED LIMITED PARTNER
9.1. Restrictions on Transfers of Interests.
9.1.1. Except as provided in Article XIII of this Limited
Partnership Agreement, a Limited Partner may not sell, transfer, pledge,
encumber or otherwise assign all or any portion of its Interest in the
Partnership without the prior written consent of both of the General Partners,
which consent may not be unreasonably withheld if the General Partner(s) (or
any designate) do not elect to exercise any of their rights under Section 9.2.
Any such consent shall be deemed to be a waiver of any rights under Section
9.2.
In no event may any Partner effect any sale, transfer, pledge,
encumbrance or assignment if, in the opinion of counsel for the Partnership
specializing in such matters, (a) such an assignment, when considered with all
other assignments of Units or Interests in the Partnership within the previous
12 months, would result in the Partnership's being considered to have been
terminated within the meaning of Section 708 of the Code or (b) such an
assignment would violate any applicable federal or state securities laws
(including any investor suitability standards) or (c) such an assignment would
result in the Elmore Facility's inability to satisfy the criteria required to
be satisfied in order to be a "qualifying facility" as provided in 18 C.F.R.
ss. 292.203, as the same may be amended from time to time. Any attempted sale,
transfer, pledge, encumbrance or other assignment in contravention of the
provisions of this Article IX shall be void and ineffectual and shall not be
recognized by the Partnership.
9.1.2. The Partners acknowledge their intent that the Partnership
not be classified as a "publicly traded partnership" within the meaning of
Section 7704(b) of the Code, and, accordingly, that it is necessary to
restrict the transferability of Interests. Each Limited Partner covenants and
agrees, for itself and its successors and assigns, that it will undertake no
action to assign, transfer, sell, exchange, pledge or encumber its Interest in
the Partnership or to facilitate trading in Interests if such action, when
considered in the context of all relevant facts and circumstances, might
fairly result in the classification of the Partnership as a "publicly traded
partnership" within the meaning of Section 7704(b) of the Code. The parties
further acknowledge that legal remedies are likely to be inadequate in the
event of a breach of the covenants under this Section 9.1.2 and, therefore,
that equitable remedies (including mandatory injunctive relief) shall be
available to the Partnership or any Partner in the event of any actual or
threatened breach.
43
9.2. Right of First Refusal.
9.2.1. Except for sales, transfers or other assignments of Limited
Partner Interests under Article XIII hereof (in which case the Interest so
sold, transferred or otherwise assigned also shall not be subject to this
Section 9.2), if any Partner proposes to sell, transfer or otherwise assign
(other than as security) all or any portion of its Interest in the Partnership
for consideration, it shall give Notice thereof to the General Partners or, in
the case of a General Partner so desiring to sell, transfer or otherwise
assign its Interest, to the other General Partner. The Notice shall include
the name and identity of the prospective assignee, the date upon which such
assignment is to be consummated, which shall not be more than 180 days after
the date of the Notice, and a written copy of the offer upon which such
prospective assignee proposes to acquire such Interest specifying the price
and terms on which the Partner proposes to assign its Interest. For a period
of 30 days following their receipt of the Notice, the General Partners or the
other General Partner, as the case may be, shall have an option to purchase
the entire Interest offered at the price and on the terms set forth in the
Notice or, as to Niguel, to designate, if necessary, another entity to so
acquire such interest. Each General Partner or designate, as the case may be,
shall be entitled to purchase an equal percentage of the entire Interest so
offered in the case of an Interest of a Limited Partner. If a General Partner
does not exercise its option to acquire its ratable share of such Interest of
a Limited Partner, the other General Partner (or, if necessary, as to Niguel a
designate) shall be entitled to purchase an equal percentage of the portion of
such Interest so available. The failure of the General Partners or designate,
as the case may be (or the other General Partner in the case of an Interest of
a General Partner), to exercise their option to acquire the entire Interest
offered shall constitute a waiver thereof by the General Partners (or the
other General Partner in the case of an Interest of a General Partner) with
respect to the transaction described in the Notice. Should the option be
exercised, the sale to the General Partners (or the other General Partner in
the case of an Interest of a General Partner) or designate, as the case may
be, shall be consummated on or before the later of (a) thirty (30) days after
the date on which the option was exercised or (b) the date specified in the
Notice as the date upon which the proposed assignment was to be consummated,
for the price and on the terms set forth in the Notice, and the Partners shall
execute and deliver all documents necessary to effectuate the assignment of
the Interest to the acquiring Person(s). Should the option not be so exercised
by the General Partners, then the Partner may assign the Interest so offered,
on or before the date specified in the Notice, for the price, on substantially
the terms and to the assignee specified in the Notice. Should such an
assignment not be timely consummated as aforesaid, then the Interest shall
again become subject to the foregoing option.
44
9.2.2. If the option described in Section 9.2.1 of this Limited
Partnership Agreement is exercised by the General Partners (or the other
General Partner in the case of an Interest of a General Partner) or designate,
as the case may be, then the costs of the transaction, including without
limitation recording fees, escrow costs and attorneys' fees reasonably
incurred by the Partnership in connection with the assignment, shall be shared
equally by the acquiring General Partner (or the other General Partner in the
case of an Interest of a General Partner) and the assigning Partner. If the
assigning Partner conveys its Interest to an outside purchaser, all costs of
the transaction shall be borne by the assigning Partner. The assigning Partner
shall deliver all appropriate documents of assignment, which shall be in form
and content reasonably satisfactory to the General Partners (or the other
General Partner in the case of an Interest of a General Partner).
9.2.3. The General Partners' (or the other General Partner in the
case of an Interest of a General Partner) option described in this Section 9.2
is (a) in addition to, and is not a limitation upon, their right to consent or
withhold consent to a proposed assignment pursuant to Section 9.1.1 of this
Limited Partnership Agreement (except as provided therein) and (b) except as
provided in Section 13.3 (including converted interests), shall remain in full
force and effect with respect to successive assignees of Interests hereunder
to the same extent and in the same manner as it was applicable to any
predecessor Partner.
9.3. Assignees and Substituted Partners.
9.3.1. The Partnership need not recognize for any purpose any
assignment of all or any portion of the Interest of a Partner unless (a) there
shall have been filed with the Partnership a duly executed and acknowledged
counterpart of the instrument making such assignment, which (except as
provided in Article V or XIII) has been consented to by the General Partners
and (b) such instrument (i) evidences the written acceptance by the assignee
of all of the terms and provisions of this Limited Partnership Agreement
(including the special power of attorney in Section 14.1 of this Limited
Partnership Agreement), (ii) represents that the assignment was made in
accordance with all applicable laws and regulations (including any investor
suitability standards) and (iii) except as provided in Article V or XIII in
all other respects is reasonably satisfactory in form and content to the
General Partners. Except as provided in Section 5.4.5 of this Limited
Partnership Agreement, assignees of Interests shall recognized as such on the
first day of the calendar month following the month in which the Partnership
receives the instrument of assignment provided for herein.
9.3.2. If a Limited Partner dies, its executor, administrator or
trustee, or, if it is adjudicated incompetent or insane, its committee,
guardian or conservator, or, if it becomes
45
bankrupt, the trustee or receiver of its estate, shall have all of the rights
of a Limited Partner for the purpose of settling or managing its estate, and
such power as the decedent or incompetent possessed to assign all or any part
of its Units and to join with the assignee thereof in satisfying the
conditions precedent to such assignee's becoming a Substituted Limited
Partner. The Incapacity of a Limited Partner shall not dissolve the
Partnership.
9.3.3. Any Limited Partner who assigns all of its Interest in the
Partnership shall cease to be a Limited Partner of the Partnership, except
that until a Substituted Limited Partner is admitted in its stead, such
assigning Limited Partner shall retain the statutory rights of an assignor of
a limited partnership interest under the Act. The rights of an assignee of an
Interest who does not become a Substituted Limited Partner shall be limited to
the receipt of its share of Distributable Cash, Sale or Financing Proceeds,
Taxable Income and Tax Loss as determined under this Limited Partnership
Agreement.
9.3.4. An assignee of a Limited Partner's Interest may become a
Substituted Limited Partner only upon compliance with the following
conditions:
(a) The instrument of assignment must state the intent of the
assignor that the assignee succeed to the assignor's Interest as a
Substituted Limited Partner;
(b) The assignee shall have fulfilled the requirements of Section
9.3.1 of this Limited Partnership Agreement regarding the execution,
acknowledgment and delivery to the General Partners of the instrument
described therein;
(c) The assignee or assignor shall have paid all reasonable legal
fees and filing costs incurred by the Partnership in connection with its
substitution as a Limited Partner;
(d) Except as provided in Article V or XIII the General Partners
shall have consented to such substitution, which consent may not be
unreasonably withheld; and
(e) This Limited Partnership Agreement shall be amended to recognize
the admission of the Substituted Limited Partner.
9.3.5. An assignee of Interests who does not become a Substituted
Limited Partner and who desires to make a further assignment of all or any
portion of an Interest in the Partnership shall be subject to all of the
provisions of this Article IX to the same extent and in the same manner as any
predecessor Limited Partner desiring to make an assignment of its Interests.
46
9.4. Section 754 Elections. In the event of a transfer of all or any
part of the Interest of a Limited Partner, the General Partners, in their sole
discretion, may make an election to adjust the basis of the Partnership's
assets pursuant to Section 754 of the Code.
ARTICLE X
DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP
10.1. Events Causing Dissolution. The Partnership shall dissolve upon
the happening of any one of the following events:
10.1.1. The retirement or Incapacity of a sole General Partner,
unless the business of the Partnership is continued as provided in Section 8.2
of this Limited Partnership Agreement.
10.1.2. The sale or other disposition of all of the interests in and
loans secured by the Elmore Property (including purchase money security
interests) of the Partnership.
10.1.3. The election by the Management Committee to dissolve the
Partnership.
10.1.4. The expiration of the term of the Partnership.
10.1.5. The happening of any other event causing the dissolution of
the Partnership under the laws of the State of California.
10.2. Effect of Dissolution. The dissolution of the Partnership shall
be effective on the day on which the event occurs giving rise to the
dissolution, but the Partnership shall not terminate until this Limited
Partnership Agreement has been canceled and the assets of the Partnership
shall have been distributed as provided in Section 10.4 of this Limited
Partnership Agreement. Notwithstanding the dissolution of the Partnership,
prior to the termination of the Partnership, the business of the Partnership
and the affairs of the Partners, as such, shall continue to be governed by
this Limited Partnership Agreement.
10.3. Capital Contribution upon Liquidation of the Partnership or
General Partner's Interest. Each Partner shall look solely to the assets of
the Partnership for all distributions with respect to the Partnership, for
return of its Capital Contribution thereto and its Capital Account and for its
share of Taxable Income or Tax Loss, and shall have no recourse therefor (upon
dissolution or otherwise) against the General Partners or any Limited Partner;
provided, however, that upon the complete liquidation of a General Partner's
Interest, upon the
47
dissolution and termination of the Partnership or otherwise, the General
Partner whose Interest is liquidated shall contribute to the Partnership an
amount equal to the deficit balance in its Capital Account. Such contribution
shall be made within ten (10) days of Notice by the General Partners but in no
event later than the end of the Partnership's taxable year (determined without
regard to Section 706(c)(2)(A) of the Code) during which the liquidation of
the General Partners' Interests occurs (or, if later, ninety (90) days after
the date of such liquidation). Any amount so contributed by the General
Partners shall be distributed first to any creditors of the Partnership
entitled thereto, and the balance to the other Partners in proportion to the
then positive balances in their Capital Accounts.
10.4. Liquidation.
10.4.1. Upon dissolution of the Partnership, the General Partners
shall liquidate the assets of the Partnership, and after allocating (pursuant
to Article V of this Limited Partnership Agreement) all income, gain, loss and
deductions resulting therefrom, shall apply and distribute the proceeds
thereof (a) first, as contemplated by the definition herein of the term "Sale
or Financing Proceeds," to the payment of the obligations of the Partnership
to third parties, to the expenses of liquidation, and to the setting up of any
Reserves for contingencies which the General Partners may consider necessary,
and (b) then, to the Partners in proportion to the positive balances in the
Partners' respective Capital Accounts.
10.4.2. Notwithstanding Section 10.4.l of this Limited Partnership
Agreement, in the event that the General Partners determine that an immediate
sale of all or any portion of the Partnership's assets would cause undue loss
to the Partners, the General Partners, in order to avoid such loss, may after
giving Notice to all of the Limited Partners, to the extent not then
prohibited by the Act, either defer liquidation of and withhold from
distribution for a reasonable time any assets of the Partnership except those
necessary to satisfy the Partnership's debts and obligations, or distribute
the assets to the Partners in kind.
10.4.3. If any assets of the Partnership are to be distributed in
kind, such assets shall be distributed on the basis of the fair market value
thereof, and any Partner entitled to any interest in such assets shall receive
an interest therein as a tenant-in-common with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser to be selected by the General Partners. Pursuant to Section 2.2.3.4
of this Limited Partnership Agreement, the Capital Accounts of all Partners
shall be adjusted as of the date of distribution in kind as if the assets were
sold on such date for their fair market value (taking Section 7701(g) of the
Code into account) and Taxable Income or Tax Loss arising
48
from the sale were allocated in accordance with this Limited Partnership
Agreement.
10.4.4. The Managing General Partner or surviving General Partner
shall cause the cancellation of this Limited Partnership Agreement following
the liquidation and distribution of all of the Partnership's assets.
ARTICLE XI
BOOKS AND RECORDS, ACCOUNTING,
REPORTS, TAX ELECTIONS, ETC.
11.1. Books and Records.
11.1.1. The books and records of the Partnership shall be maintained
in accordance with generally accepted accounting principles at the principal
office of the Partnership and shall be available for examination there by any
Partner or its duly authorized representatives at any and all reasonable times
upon prior Notice to the General Partners. To the extent permitted by law, the
General Partners will permit Limited Partners and their assignees, at the
expense of such Limited Partners and assignees, to inspect and copy such books
and records. The Partnership shall maintain such books and records and provide
such financial or other statements as the Managing General Partner reasonably
deems advisable, subject to the requirements of this Limited Partnership
Agreement.
11.1.2. After the end of each fiscal year, the Accountants shall
review or prepare all tax returns of the Partnership, which shall be executed
by the General Partners.
11.2. Accounting and Fiscal Year. Subject to Section 448 of the Code,
the books of the Partnership shall be kept on such method of accounting
for tax and financial reporting purposes as may be determined by the General
Partners. The fiscal year of the Partnership shall end on December 31 of each
year, or on such other date permitted under the Code as the General Partners
shall determine.
11.3. Bank Accounts and Investments. The bank accounts of the
Partnership shall be maintained at such banking institutions as the Managing
General Partner shall determine, and withdrawals shall be made only in the
regular course of Partnership business on such signature or signatures as the
Managing General Partner shall determine. All deposits and other funds not
needed in the operation of the business or not yet invested may be invested by
the Managing General Partner only in Permitted Investments or such investments
as the General Partners may (consistent with the terms of any agreements of
the Partners) expressly authorize. The Managing General Partner may rely on
the advice of independent investment advisors. The funds of the Partnership
shall not be commingled with the funds of any other Person.
49
11.4. Reports.
11.4.1. Within 75 days after the end of each calendar year, the
Managing General Partner shall send to each Partner or assignee at any time
during the fiscal year ending during such calendar year such tax information
as shall be necessary for the preparation by such Limited Partner or assignee
of its Federal income tax return, and required state income and other tax
returns with regard to jurisdictions in which the Partnership is formed or
qualified or owns Property.
11.4.2. As soon as possible and in any event within 105 days after
the end of each fiscal year of the Partnership, the Managing General Partner
shall send to each Person who was a Partner or assignee at any time during the
fiscal year then ended (a) a balance sheet as of the end of such fiscal year,
and statements of income, Partners' equity and changes in financial position
for such fiscal year, all of which shall be prepared in accordance with
general accepted accounting principles and accompanied by an auditor's report
containing an opinion of the Accountants setting forth in each case in
comparative form the figures for the previous fiscal year, all reported on as
to the fairness of the presentation, generally accepted accounting principles
and consistency, (b) a cash flow statement, (c) a report summarizing the fees
and other remuneration and reimbursed expenses for such fiscal year from the
Partnership to the General Partners or any Affiliate of the General Partners
and (d) a statement showing the Distributable Cash and Sale or Financing
Proceeds distributed to each Person who was a Partner or assignee at any time
during such fiscal year with respect to such year.
11.4.3. As soon as possible and in any event within 55 days after
the end of each of its first three quarters of each fiscal year of the
Partnership, the Managing General Partner shall send to each General Partner a
balance sheet of the Partnership as of the end of such quarter and related
statements of operations, and cash flow for such quarters and for a portion of
the Partnership's fiscal year ended at the end of such quarter, setting forth
in each case in comparative form the figures for the corresponding quarter and
the corresponding portion of the Partnership's previous fiscal year, all
certified (subject to normal year-end adjustments) as to the fairness of
presentation, generally accepted accounting principles and consistency in
presentation with prior statements by the chief financial officer or the chief
accounting officer of the Managing General Partner.
11.5. Depreciation and Elections. With respect to any depreciable
assets of the Partnership, the Partnership may elect to use, so far as
permitted by the provisions of the Code, any depreciation method which is
appropriate in the opinion of the General Partners. The Partnership may, in
the discretion of the
50
General Partners, make or elect not to make, and may revoke or elect not to
revoke, any election permitted or required to be made by the Partnership for
Federal income or state tax purposes.
11.6. Designation of Tax Matters Partner. Red Hill is hereby designated
as the "Tax Matters Partner" of the Partnership under Section 6231(a)(7)
of the Code, to manage administrative tax proceedings conducted at the
Partnership level by the Internal Revenue Service with respect to Partnership
matters. Any Partner or assignee may participate in such administrative
proceedings relating to the determination of Partnership items at the
Partnership level, to the extent permitted by the Code. Expenses of such
administrative proceedings undertaken by the Tax Matters Partner shall be paid
from Partnership assets. Each Limited Partner or assignee who elects to
participate in such proceedings shall be responsible for its own expenses
incurred in connection with such participation. The cost of any adjustments to
a Limited Partner or assignee, and the cost of any resulting audits or
adjustments of a Limited Partner's or assignee's tax return, will be borne
solely by the affected Limited Partner or assignee.
ARTICLE XII
MEETINGS AND VOTING RIGHTS OF LIMITED PARTNERS
12.1. Meetings.
12.1.1. Meetings of the Partners for any matter on which the Limited
Partners may vote may be called by any General Partner, and shall be called by
the Managing General Partner upon receipt of a request in writing signed by
the holders of more than 10% of the outstanding Units of the Limited Partners.
Notice of any such meeting shall be sent by the General Partners to the
Limited Partners within 10 days after their receipt of such a request. Such a
request shall state the purpose of the proposed meeting and the matters
proposed to be acted upon thereat. The requested meeting shall be held at the
principal office of the Partnership. In addition, the General Partners may
submit any matter (upon which the Limited Partners are entitled to act) to the
Limited Partners for a vote by written consent without a meeting, or upon
receipt of a request in writing signed by the holders of more than 10% of the
outstanding Units of the Limited Partners, shall submit any such matter (upon
which the Limited Partners are entitled to act) to the Limited Partners for a
vote by written consent without a meeting.
12.1.2. Notice of any meeting shall be given either personally or by
mail, not less than 15 days nor more than 60 days before the date of the
meeting, to each Limited Partner at its record mailing address. Such Notice
shall be in writing, shall state the place, date, hour and purpose of the
meeting, and shall indicate that it is being issued at the direction of the
Partner or Partners calling the meeting. If a meeting is
51
adjourned to another time or place, and if any announcement of the adjournment
of time and place is made at the meeting, it shall not be necessary to give
Notice of the adjourned meeting. If the adjournment is for more than 45 days
or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of adjourned meeting shall be given to each Partner of
record entitled to vote at the meeting. The presence in person or by proxy of
the holders of a majority of the outstanding Units of the Limited Partners
shall constitute a quorum at all meetings of the Limited Partners; provided,
however, that if there be no such quorum, the holders of a majority in
interest of such Units who are present or represented by proxy may adjourn the
meeting from time to time without further Notice, until a quorum shall have
been obtained. No Notice of the time, place or purpose of any meeting of the
Limited Partners need be given to any Limited Partner who attends in person or
is represented by proxy (except for a Limited Partner who attends a meeting
for the express purpose of objecting at the beginning of the meeting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened), or to any Limited Partner entitled to such Notice who, in
a writing executed and filed with the records of the meeting, either before or
after the time thereof, waives such Notice.
12.1.3. For the purpose of determining the Limited Partners entitled
to vote at any meeting of the Partnership or any adjournment thereof, the
General Partners or the Limited Partners requesting such meeting may fix, in
advance, a date as the record date for any such determination. The
determination date shall be not more than 50 days nor less than 10 days before
any such meeting.
12.1.4. Each Limited Partner may authorize any Person to act for it
by proxy in all matters in which a Limited Partner is entitled to participate,
whether by waiving Notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or its
attorney-in-fact. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it.
12.1.5. At each meeting of the Limited Partners, the General
Partners shall appoint such officers and adopt such rules for the conduct of
such meeting as the General Partners shall deem appropriate.
12.2. Voting Rights of Limited Partners. The Limited Partners shall
have the right to vote only on:
12.2.1. Those matters specified in Sections 6.5, 8.2.1 and 14.2.2 of
this Limited Partnership Agreement or the last paragraph of Section 15636 of
the Act incorporating the
52
provisions specified in subparagraphs (H) and (I) of paragraph (5) of
subdivision (b) of Section 15632 of the Act.
12.2.2. Amendments to this Limited Partnership Agreement which
affect in a substantive way the rights, powers or duties of the Limited
Partners, subject to the provisions hereof, provided that such amendments (a)
shall not allow the Limited Partners to take part in the management or control
of the Partnership's business, and (b) shall not, without the consent of the
General Partners, alter the rights, powers or duties of the General Partners
as set forth herein.
ARTICLE XIII
MATTERS AFFECTING STATUS AS A QUALIFYING FACILITY
13.1. Within three weeks after the execution of this Limited
Partnership Agreement, Niguel on behalf of the Partnership will file with FERC
an application for FERC certification that the Elmore Facility is a qualifying
facility within the meaning of 18 C.F.R. Section 292.203.
13.2. If FERC declines to certify the Elmore Facility on the grounds
that the Ownership Criteria are not satisfied because of Niguel's Ownership
Interest in the Elmore Facility in light of the special allocations set forth
in Sections 5.3.1 and 5.3.2 or otherwise, then Niguel may transfer a portion
of its Limited Partnership Interest to satisfy the Ownership Criteria or to
enable it to receive the benefits of such allocations. If transfer of a
Limited Partner Interest greater than that then held by Niguel is required to
achieve such result, Niguel may convert a portion of its Interest as a General
Partner into a Limited Partner's Interest and so transfer that Interest. Any
transferee shall become a Substituted Limited Partner without consent of the
General Partner or General Partners.
13.3. Any transfers under this Article XIII or subsequent transfers
of Interests so transferred shall not be subject to Section 9.2, nor require
the consent of either General Partner under Section 8.1.
13.4. If FERC or any other person or entity commences a proceeding
to revoke the status of the Elmore Facility as a Qualifying Facility because
of Niguel's ownership interest in the Elmore Facility, in light of the special
allocations set forth in Sections 5.3.1 and 5.3.2 or otherwise, Niguel may
undertake the transfers contemplated in Section 13.2. If a FERC order to
revoke the status of the Elmore Facility as a Qualifying Facility because of
Niguel's ownership interest in the Elmore Facility in light of the special
allocations set forth in Sections 5.3.1 and 5.3.2 or otherwise, has been
issued or is imminent, Niguel shall, to the extent necessary, do either or
both of the following: (i) undertake the transfers contemplated in Section
13.2 (including conversion of part of its Interest as a General Partner, if
necessary) or (ii) apply the provisions of Section 5.3.4 in the
53
same manner as would apply in the event that FERC fails to initially act or
certify the Elmore Facility in the manner set forth in Section 5.3.4.
13.5. In no event may any Partner assign, convey, mortgage, pledge,
sell, transfer or otherwise dispose of all or any part of its Interest in the
Partnership or interest in this Limited Partnership Agreement to any person
whose ownership of an interest in the Partnership or in this Limited
Partnership Agreement would cause the Elmore Facility not to be a qualifying
facility.
ARTICLE XIV
OTHER PROVISIONS
14.1. Appointment of General Partners as Attorneys-in-Fact.
14.1.1. Each Limited Partner, including each Substituted Limited
Partner, by its execution of this Limited Partnership Agreement, irrevocably
constitutes and appoints the General Partners and each of them as its true and
lawful attorneys-in-fact with full power and authority in its name, place and
stead to execute, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents as may be necessary or appropriate
to carry out the provisions of this Limited Partnership Agreement, including
but not limited to:
(a) All certificates and other instruments (including counterparts
of this Limited Partnership Agreement), and all amendments thereto, which
the General Partners deem appropriate to form, qualify or continue the
Partnership as a limited partnership (or a partnership in which the
Limited Partners will have limited liability comparable to that provided
in the Act), in the jurisdictions in which the Partnership may conduct
business or in which such formation, qualification or continuation is, in
the opinion of either of the General Partners, necessary or desirable to
protect the limited liability of the Limited Partners;
(b) All amendments to this Limited Partnership Agreement adopted in
accordance with the terms hereof, and all instruments which the General
Partners deem appropriate to reflect a change or modification of the
Partnership in accordance with the terms of this Limited Partnership
Agreement; and
(c) All conveyances of Property, and other instruments which either
of the General Partners reasonably deem necessary in order to complete a
dissolution and termination of the Partnership pursuant to this Limited
Partnership Agreement.
54
14.1.2. The appointment by all Limited Partners of the General
Partners as attorneys-in-fact shall be deemed to be a power coupled with an
interest, in recognition of the fact that each of the Partners under this
Limited Partnership Agreement will be relying upon the power of the General
Partners to act as contemplated by this Limited Partnership Agreement in any
filing and other action by it on behalf of the Partnership, shall survive the
bankruptcy, death, adjudication of incompetence or insanity, other Incapacity
or dissolution of any Person hereby giving such power, and the transfer or
assignment of all or any portion of the Units of such Person, and shall not be
affected by the subsequent incapacity of the principal; provided, however,
that in the event of the assignment by a Limited Partner of all of its Units,
the foregoing power of attorney of an assignor Limited Partner shall survive
such assignment only until such time as the assignee shall have been admitted
to the Partnership as a Substituted Limited Partner and all required documents
and instruments shall have been duly executed, filed and recorded to effect
such substitution.
14.2. Amendments.
14.2.1. Each Substituted Limited Partner, additional General Partner
and successor General Partner shall become a signatory hereto by signing such
number of counterpart signature pages to this Limited Partnership Agreement, a
power of attorney to the General Partners, and such other instruments, in such
manner, as the General Partners shall determine. By so signing, each
Substituted Limited Partner, additional General Partner or successor General
Partner, as the case may be, shall be deemed to have adopted and to have
agreed to be bound by all of the provisions of this Limited Partnership
Agreement.
14.2.2. In addition to other amendments authorized herein,
amendments may be made to this Limited Partnership Agreement from time to time
by the General Partners; provided, however, that (i) without the consent of
the Partners to be adversely affected by an amendment, this Limited
Partnership Agreement may not be amended so as to (a) convert a Limited
Partner's Interest into a general partner's interest, (b) modify the limited
liability of a Limited Partner or (c) alter the interest of a Partner in
Taxable Income, Tax Loss, Distributable Cash or Sale or Financing Proceeds;
(ii) without the consent of the Management Committee, this Limited Partnership
Agreement may not be amended so as to affect the substantive rights or
obligations of any Partner; and (iii) without the approval of a Majority of
the Limited Partners, this Limited Partnership Agreement may not be amended so
as to affect any other rights, powers or duties of the Limited Partners.
14.2.3. In addition to other amendments authorized herein,
amendments may be made to this Limited Partnership Agreement from time to time
by the General Partners, without the consent of any of the Limited Partners
but only with
55
the consent of the Management Committee, (a) to cure any ambiguity, to correct
or supplement any provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Limited Partnership Agreement that are not
inconsistent with the provisions of this Limited Partnership Agreement; (b) to
delete or add any provision of this Limited Partnership Agreement required to
be so deleted or added by any Federal or state official, which addition or
deletion is deemed by such official to be for the benefit or protection of the
Limited Partners; and (c) to take such actions as may be necessary (if any) to
insure that the Partnership will be treated as a partnership, and that each
Limited Partner will be treated as a limited partner, for Federal income tax
purposes; provided, however, that no amendment shall be adopted pursuant to
this Section 14.2.3 unless the adoption thereof (i) is for the benefit of or
not adverse to the interests of the Limited Partners, (ii) does not affect the
distribution of Distributable Cash or Sale or Financing Proceeds or the
allocation of Taxable Income or Tax Loss among the Partners or between the
Limited Partners as a class and the General Partners as a class and (iii) does
not affect the limited liability of the Limited Partners or the status of the
Partnership as a partnership for Federal income tax purposes.
14.2.4. If this Limited Partnership Agreement is amended as a result
of substituting a Limited Partner or increasing the investment of a Limited
Partner, the amendment to this Limited Partnership Agreement shall be
sufficient when it is signed by the General Partners and by the Person to be
substituted or who is increasing its investment in the Partnership, and, if a
Limited Partner is to be substituted, by the assigning Limited Partner. If
this Limited Partnership Agreement is amended to reflect the designation of an
additional General Partner, the amendment to this Limited Partnership
Agreement shall be sufficient when it is signed by the other General Partner
or General Partners and by the additional General Partner. If this Limited
Partnership Agreement is amended to reflect the withdrawal of a General
Partner and if the business of the Partnership is to be continued, the
amendment to this Limited Partnership Agreement shall be sufficient when it is
signed by the withdrawing General Partner (and such General Partner hereby so
agrees) and by the remaining or successor General Partner or General Partners.
14.2.5. In making any amendments, there shall be prepared and filed
by the General Partners such documents and certificates as may be required
under the Act and under the laws of any other jurisdiction applicable to the
Partnership.
14.3. Security Interest and Right of Set-Off. As Security for any
withholding tax or other liability or obligation to which the Partnership may
be subject as a result of any act or status of any Limited Partner, or to
which the Partnership may
56
become subject with respect to the interest of any Limited Partner, the
Partnership shall have (and each Limited Partner hereby grants to the
Partnership) a security interest in all Distributable Cash and Sale or
Financing Proceeds distributable to such Limited Partner to the extent of the
amount of such withholding tax or other liability or obligation. The
Partnership shall have a right of set-off against such distributions of
Distributable Cash or Sale or Financing Proceeds, in the amount of such
withholding tax or other liability or obligation.
14.4. Binding Provisions. The covenants and agreements contained herein
shall be binding upon, and inure to the benefit of, the heirs, executors,
administrators, personal representatives, successors and assigns of the
respective parties hereto.
14.5. Applicable Law. This Limited Partnership Agreement shall be
construed and enforced in accordance with the laws of the State of California.
14.6. Counterparts. This Limited Partnership Agreement may be executed
in several counterparts, all of which together shall constitute one agreement
binding on all parties hereto, notwithstanding that all of the parties have
not signed the same counterpart.
14.7. Separability of Provisions and Savings Provision. Each provision
of this Limited Partnership Agreement shall be considered separable, and
if for any reason any provision or provisions hereof are determined to be
invalid and contrary to any existing or future law, such invalidity shall not
impair the operation of or effect those portions of this Limited Partnership
Agreement which are valid. Notwithstanding any other provision hereof, if the
grant or exercise of rights under Section 3.8, 5.5.10, 8.2.3 or 9.2.1 would
result in the Partnership's failure to satisfy the ownership criteria, because
of Niguel's interest in the Partnership such rights shall be reduced to the
extent necessary to remedy such condition.
14.8. Article and Section Titles. Article and Section titles are for
descriptive purposes only and shall not control or alter the meaning of this
Limited Partnership Agreement as set forth in the text.
ARTICLE XV
DISPUTES AND ARBITRATION
15.1. Preliminary Dispute Resolution. Each of the General Partners
shall appoint an official liaison (an "Official Liaison") who shall be the
chief executive officer of the Partner or, in the event the Partner is not a
corporation, a person of similar rank. In the event that a dispute or a
problem shall arise among the General Partners concerning this Limited
57
Partnership Agreement, such dispute or problem shall be submitted to the
Official Liaisons for their review and resolution. Each party shall set forth
in writing its respective position on the dispute or problem and a copy of
such written position shall be delivered to each of the Official Liaisons and
the other party. The Official Liaisons may hold such meetings and may review
such documents as they may consider necessary. Any resolution of the dispute
or problem agreed to by all of the Official Liaisons shall be set forth in
writing and initialed by all of the Official Liaisons and to the extent
permitted by law shall be final and binding on the parties. In the event that
the Official Liaisons are unable to agree on a resolution of the dispute or
problem within 30 days of submission to them, either Official Liaison may
submit the matter to binding arbitration.
15.2. Arbitration. Except as set forth in Section 15.1, all disputes,
controversies or unresolved questions (whether related to legal, contractual,
business, management, financial, technical, operational or other issues) that
arise under or with respect to this Agreement shall be settled by arbitration
under this Article XV. The Official Liaison desiring arbitration shall give
written notice to that effect to the other official Liaison and in such notice
shall appoint as an arbitrator a disinterested person of recognized competence
in the area at issue. Within fifteen (15) days thereafter, the other Official
Liaison shall, by written notice to the originating party, appoint a second
person similarly qualified as the second arbitrator. Within fifteen (15) days
thereafter, the arbitrators thus appointed shall appoint a third person
similarly qualified as the third arbitrator, and such three arbitrators shall
as promptly as possible determine such matter with the parties, each being
entitled to present evidence and argument to the arbitrators; provided,
however, that:
(i) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(ii) if the two arbitrators appointed by the parties shall be unable
to agree upon the appointment of the third arbitrator within fifteen (15)
days after the appointment of the second arbitrator, they shall give
written notice of such failure to agree to the parties, and, if the
parties fail to agree upon the selection of such third arbitrator within
fifteen (15) days thereafter, then within ten (10) days thereafter,
either of the parties upon written notice to the other party may apply
for such appointment to the Federal District Court or County Superior
Court in San Diego, California.
All selections of an arbitrator shall be subject to the consent of the
Project Lender, but only if the Project Lender notifies the parties that it
desires to approve the selection of
58
an arbitrator, and such consent shall not be unreasonably withheld.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement (and any other agreement at issue pursuant to
Section 15.2) and shall not change any such terms or provisions or deprive
either party of any right or remedy expressly or impliedly provided for in
this Agreement or such other agreement.
The determination of the majority of the arbitrators or the sole
arbitrator, as the case may be, shall, to the extent permitted by law, be
conclusive and binding upon the parties. The arbitrator or arbitrators shall
give written notice to the parties stating their determination, and shall
furnish to each a copy of such determination signed by them. In the event of
the failure, refusal or inability of any arbitrator to act, a new arbitrator
shall be appointed in his or her stead, which appointment shall be made in the
same manner as hereinbefore provided for the appointment of the arbitrator so
failing, refusing or unable to act.
15.3. Niguel Request. If (a) the Official Liaison of Niguel requests
arbitration under Section 15.2 and (b) the requested relief includes the
initiation by the Partnership of arbitration proceedings under one or more
Operating Agreements or other agreements between the Partnership and Red Hill
or any of its Affiliates, and (c) the arbitrators agree that such arbitration
pursuant to the underlying agreement is appropriate, the arbitrators appointed
under this Agreement shall also resolve the issues presented under such other
agreement. Magma, by its signature to this Agreement as a Limited Partner,
expressly consents and agrees to the implementation of this provision in its
capacity as a party to any existing and future separate agreements with the
Partnership.
15.4. Exceptions. The requirement that all disputes between the parties
be resolved by arbitration shall not apply to a dispute in which:
(a) a party, having given the other party at least ten (10) days'
notice of the other party's alleged breach, in good faith seeks immediate
equitable relief from a court of competent jurisdiction to enable the
instituting party to prevent irreparable harm (alleged to arise from the
alleged breach) pending arbitral relief; or
(b) any claim by one party against the other party arises out of the
subject matter of any court litigation or proceeding commenced by any
third party against one party in which the other party is an
indispensable party or third party defendant; or
59
(c) any claim is asserted with respect to which a third party, which
is not bound and will not, upon request of either party, agree to
arbitrate subject to the arbitration rules provided by this Article XV,
is an indispensable or necessary party.
15.5. Attorneys' Fees. Each party shall bear its own expenses, including
attorneys' fees, in connection with any dispute, resolution or arbitration
proceedings hereunder. Neither party in any such action, trial, arbitration or
appeal thereon shall be entitled to attorneys' fees or court, arbitration and
other costs incurred, unless otherwise decreed by the court or arbitrators in
the same or a separate suit.
15.6. Arbitrators' Fees. Subject to Section 15.5, each party will
compensate the arbitrator selected by it, and the third arbitrator and
expenses of the proceeding will be shared equally by the General Partners.
15.7. Discovery. Upon request of either party, the arbitrators will order
such discovery (including third-party discovery) as the arbitrators determine
to be reasonable under the circumstances. The arbitrators, shall, however,
impose reasonable schedules and deadlines to ensure that discovery is
conducted and concluded on a timely basis and shall impose sanctions on either
party for abuse or delay of discovery. Rules of evidence may be applied, in
the discretion of the arbitrators.
15.8. Expedited Procedure. Either party to the arbitration may elect, by
notice to the other party, to have the arbitration be conducted on an
expedited basis. Thereafter, the arbitrators shall be empowered to expedite
the proceedings by all reasonable means consistent with a fair hearing of the
dispute. Such means may include the imposition of accelerated discovery and
hearing schedules, requiring submissions within abbreviated time periods and
imposing limits on numbers of witnesses and the length of hearings.
60
15.9. Enforcement. Judgment upon the decision of the arbitrators may be
entered in any court having jurisdiction over the party against which
enforcement is sought.
IN WITNESS WHEREOF, the undersigned have executed this Limited
Partnership Agreement as of the date first written above.
GENERAL PARTNERS:
RED HILL GEOTHERMAL, INC., a
Delaware corporation
By:/s/ Russ L. Tenney
-----------------------------
Its: President
-------------------------
By:/s/ Charles C. Bowles
-----------------------------
Its: Assistant Secretary
-------------------------
NIGUEL ENERGY COMPANY,
a California corporation
By:/s/ Gregory C. Hoppe
-----------------------------
Its: Vice President
-------------------------
By:/s/ Alan N. Fenning
-----------------------------
Its: Secretary
-------------------------
ORIGINAL LIMITED PARTNERS:
MAGMA POWER COMPANY,
a Nevada corporation
By:/s/ Arnold L. Johnson
-----------------------------
Its: President
-------------------------
By:/s/ Jon R. Peele
-----------------------------
Its: Secretary
-------------------------
61
NIGUEL ENERGY COMPANY,
a California corporation
By:/s/ Gregory C. Hoppe
-----------------------------
Its: Vice President
-------------------------
By:/s/ Alan N. Fenning
-----------------------------
Its: Secretary
-------------------------
62
Exhibit "A"
Original Limited Partners
Name and Address
Magma Power Company,
a Nevada corporation
11770 Bernardo Plaza Court
Suite 366
San Diego, California 92128
Niguel Energy Company,
a California corporation
18872 MacArthur Boulevard
Suite 400
Irvine, California 92715
Exhibit "B"
Partners' Names, Addresses, Units,
and Initial Capital Contributions
Cash
Capital Fair Market
Name and Address Contribution Value Units
---------------- ------------ ----- -----
General Partners:
- ----------------
Hill Geothermal, Inc. $1,335,000 $830,787 40
West Sinclair Road
__ipatria, California 92233
_____ Energy Company $5,507,598 40
72 MacArthur Boulevard
Suite 400
____, California
Limited Partners:
Magma Power $1,876,829 10
70 Bernardo Plaza Court
Suite 366
Diego, California 92128
Fuel Energy Company $4,692,402 10
72 MacArthur Boulevard
Suite 400
_____, California 92715
Exhibit "D"
Contribution of
Intangible Drilling Costs
(Attached)
Exhibit "C"
Aggregate of
Scheduled Capital Contributions
-------------------------------
Name Amount
- ---- ------
General Partners:
- ----------------
Red Hill Geothermal, Inc. $ 7,507,317
Niguel Energy Company $18,769,606
Limited Partners:
- ----------------
Magma Power Company $1,876,829
Niguel Energy Company $4,692,402
Elmore
ASSIGNMENT AS CAPITAL CONTRIBUTION
THIS ASSIGNMENT AS CAPITAL CONTRIBUTION (the "Assignment") is made
as of the 14th day of March, 1988, by and between MAGMA POWER COMPANY, a
Nevada corporation ("Assignor"), and ELMORE, LTD., a California limited
partnership ("Assignee").
Recitals
A. Assigned Property. Assignor is currently developing a power
production geothermal electrical generating facility in the Salton Sea Known
Geothermal Resource Area in Imperial County, California (the "Elmore
Facility"). In connection with Assignor's development of the Elmore Facility,
Assignor has incurred certain tangible and intangible drilling and development
costs with respect to developing the geothermal production and injection wells
that will service the Elmore Facility (the "Geothermal Wells"). As of the date
hereof, in exchange for cash, Assignor is selling to Assignee certain of
Assignor's right, title and interest in and to the Elmore Facility, including
so much of the Geothermal Wells as is represented by tangible drilling and
development costs incurred to date. In addition, Assignor is acquiring a
limited partnership interest in Assignee pursuant to that certain Amended and
Restated Limited Partnership Agreement of Assignee dated as of March 14, 1988
(the "Agreement"). As its total "Capital Contribution" (as defined in the
Agreement) Assignor is contributing to Assignee Assignor's right, title and
interest in and to those portions of the Geothermal Wells as have been
developed through the incurrence of costs which are deductible by Assignor for
Federal income tax purposes pursuant to Section 263(c) of the Internal Revenue
Code of 1986, as amended, up to a total amount of such costs of $1,876,829
(the "Assigned Property").
B. Purpose. Assignor now desires to assign to Assignee all of its
rights, title and interest in and to the Assigned Property. Assignee desires
to accept such rights, title and interest.
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Assignment. Assignor hereby assigns and transfers all of its
right, title and interest in and to the Assigned Property to Assignee.
2. Acceptance and Assumption. Assignee hereby accepts the foregoing
assignment as a Capital Contribution pursuant to Section 3.4 of the Agreement.
3. Miscellaneous. This Assignment shall be binding upon and shall
inure to the benefit of the respective heirs, successors and assigns of the
parties hereto. Each party agrees to execute any and all other documents
reasonably necessary or appropriate in order to effect the assignment to
Assignee of the Assigned Property and any rights thereto in accordance with
the terms of this Assignment. This Assignment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The headings used
herein are inserted for purposes of reference and are not intended to be part
of or to effect the meaning or interpretation of this Assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
to be duly executed on their respective behalf, by their respective officers,
thereunto duly authorized, all as of the day and year first above written.
ASSIGNOR:
MAGMA POWER COMPANY, a Nevada Corporation
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ASSIGNEE:
ELMORE, LTD., a California limited
partnership
By: RED HILL GEOTHERMAL, INC., a Delaware
corporation, its General Partner
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Its:
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2
By: NIGUEL ENERGY COMPANY, a California
corporation, its General Partner
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Its:
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Its:
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By: MAGMA POWER COMPANY, a Nevada
corporation, its Limited Partner
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Its:
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Its:
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By: NIGUEL ENERGY COMPANY, a California
corporation, its Limited Partner
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Its:
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3
Elmore
ASSIGNMENT AS CAPITAL CONTRIBUTION
THIS ASSIGNMENT AS CAPITAL CONTRIBUTION (the "Assignment") is made
as of the 14th day of March, 1988, by and between RED HILL GEOTHERMAL, INC., a
Delaware corporation ("Assignor"), and ELMORE, LTD., a California limited
partnership ("Assignee").
Recitals
A. Assigned Property. Assignor is a wholly owned subsidiary of Magma
Power Company, a Nevada corporation ("Magma"). Magma is currently developing a
power production geothermal electrical generating facility in the Salton Sea
Known Geothermal Resource Area in Imperial County, California (the "Elmore
Facility"). In connection with Magma's development of the Elmore Facility,
Magma has incurred certain tangible and intangible drilling and development
costs with respect to developing the geothermal production and injection wells
that will service the Elmore Facility (the "Geothermal Wells"). Pursuant to
that certain Assignment as Capital Contribution of even date herewith, by and
between Magma and Assignee, Magma assigned to Assignor its right, title and
interest in and to a portion of the Geothermal Wells represented by a portion
of the total amount of such intangible drilling and development costs incurred
by Magma to date. As of even date herewith, Assignor is acquiring a general
partner interest in Assignee pursuant to that certain Amended and Restated
Limited Partnership Agreement of Assignee dated as of March 14, 1988 (the
"Agreement"). As a portion of its total "Scheduled Capital Contribution" (as
defined in the Agreement) Assignor is contributing to Assignee Assignor's
right, title and interest in and to those portions of the Geothermal Wells so
assigned to Assignee which have been developed through the incurrence of costs
which are deductible by Assignor for Federal income tax purposes pursuant to
Section 263(c) of the Internal Revenue Code of 1986, as amended, which costs
are equal to $830,787 (the "Assigned Property"), subject to adjustment as
provided in Section 3.4.2 of the Agreement. The other portion of such
Geothermal Wells as is represented by such deductible costs is being
contributed to Assignee by Magma on the date hereof.
B. Purpose. Assignor now desires to assign to Assignee all of its
rights, title and interest in and to the Assigned Property. Assignee desires
to accept such rights, title and interest.
Agreement
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Assignment. Assignor hereby assigns and transfers all of its
right, title and interest in and to the Assigned Property to Assignee.
2. Acceptance and Assumption. Assignee hereby accepts the foregoing
assignment as a Scheduled Capital Contribution pursuant to Section 3.4 of the
Agreement.
3. Miscellaneous. This Assignment shall be binding upon and shall
inure to the benefit of the respective heirs, successors and assigns of the
parties hereto. Each party agrees to execute any and all other documents
reasonably necessary or appropriate in order to effect the assignment to
Assignee of the Assigned Property and any rights thereto in accordance with
the terms of this Assignment. This Assignment may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. The headings used
herein are inserted for purposes of reference and are not intended to be part
of or to effect the meaning or interpretation of this Assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
to be duly executed on their respective behalf, by their respective officers,
thereunto duly authorized, all as of the day and year first above written.
ASSIGNOR:
RED HILL GEOTHERMAL, INC.,
a Delaware corporation
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2
ASSIGNEE:
ELMORE, LTD., a California limited
partnership
By: RED HILL GEOTHERMAL, INC.,
a Delaware corporation, its
General Partner
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Its:
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Its:
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By: NIGUEL ENERGY COMPANY, a
California Corporation, its
General Partner
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Its:
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Its:
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By: MAGMA POWER COMPANY, a
Nevada corporation, its
Limited Partner
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Its:
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Its:
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3
By: NIGUEL ENERGY COMPANY, a
California corporation, its
Limited Partner
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Its:
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Its:
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4
SCHEDULE "Z"
"Additional Power Production Facilities" means power production
geothermal electrical generating facilities developed in the SSKGRA which
Process Reserved Geothermal Brine to produce electrical energy.
"Administration Fee" means the payments to be made to Red Hill
provided for in Section 6 of the Administrative Services Agreement.
"Administrative Services Agreement" means that certain
Administrative Services Agreement dated as of March 14, 1988, as the same may
be amended from time to time, by and between Red Hill and Elmore, Ltd.,
pursuant to which Red Hill will provide certain administrative and management
services to Elmore, Ltd. in connection with the operation of the Elmore
Facility.
"Affiliate" means, when used with reference to a specified Person,
(a) any Person who directly or indirectly controls, is controlled by or is
under common control with the specified Person, (b) any Person who is an
officer, partner or trustee of, or serves in a similar capacity with respect
to, the specified Person, or for which the specified Person is an officer,
partner or trustee or serves in a similar capacity, (c) any Person who,
directly or indirectly, is the beneficial owner of 10% or more of any class of
equity securities of the specified Person, or of which the specified Person,
directly or indirectly, is the owner of 10% or more of any class of equity
securities, and (d) any relative of the specified Person.
"Average Annual Energy Price" means an amount equal to the sum of
(i) 2/3 multiplied by the average of the quarterly Time Period Weighted
Average Proposed Avoided Cost Energy Winter Prices released by SCE for the
calendar year in which the calculation is being made, plus (ii) 1/3 multiplied
by the average of the quarterly Time Period Weighted Average Proposed Avoided
Cost Energy Summer Prices released by SCE for the calendar year in which the
calculation is being made. In the event that the Time Period Weighted Average
Proposed Avoided Cost Energy Winter Prices and the Time Period Weighted
Average Proposed Avoided Cost Energy Summer Prices are abandoned or changed
materially or otherwise cease to be released by SCE on a quarterly basis, the
parties shall select a substitute index to the end that the Average Annual
Energy Price will reflect SCE's average annual avoided cost energy prices. In
the event the parties fail to agree on a substitute index as provided in the
immediately preceding sentence, the matter shall be submitted to an arbitrator
in accordance with Section 21 of the Operating and Maintenance Agreement and
the arbitrator shall select the substitute index to be used.
"Brine Minerals" means all mineral resources found in the Geothermal
Brine, including, without limitation, mineral resources found in the
Geothermal Brine Scale.
"BTU Energy" means the heat value in British Thermal Units which can
be extracted from Geothermal Brine.
"Capacity" shall have the same meaning as that term has in the
Elmore Power Purchase Contract.
"Capital Contribution" has the same meaning as that term has in the
Limited Partnership Agreement.
"Code" means the Internal Revenue Code of 1986, as amended (or any
corresponding provision or provisions of succeeding law).
"Construction Management Agreement" means that certain Construction
Management and Asset Transfer Agreement dated as of March 14, 1988, as the
same may be amended from time to time, by and between Magma and Elmore, Ltd.,
pursuant to which Magma will act as Elmore, Ltd.'s construction manager for
the construction of the Elmore Facility.
"Construction Management Fee" means the payments to be made to Magma
provided for in Section 9 of the Construction Management Agreement.
"Construction Manager" means Magma for purposes of the Construction
Management Agreement.
"Contract Capacity" shall have the same meaning as that term has in
the Elmore Power Purchase Contract.
"Conversion Date" shall have the same meaning as that term has in
the Credit Facility.
"Credit Facility" means that certain Secured Credit Agreement dated
as of March 14, 1988, as the same may be amended from time to time, among
Elmore, Ltd., the Banks listed on the signature pages thereto and Morgan
Guaranty Trust Company of New York, as Agent.
"Critical Parts and Equipment" means those certain equipment and
parts delineated on Exhibit "A" to the Operating and Maintenance Agreement and
such additional equipment and parts which the parties thereto agree, from time
to time, should be added to the Critical Parts and Equipment listed on said
Exhibit "A" to the Operating and Maintenance Agreement.
"DCC" means The Dow Chemical Company, a Delaware corporation.
2
"DEC" means Dow Engineering Company, a Delaware corporation.
"Debt Service Reserve" means the reserve established pursuant to
Section 11.1 of the Operating and Maintenance Agreement.
"Debt Service Reserve Account" means the segregated bank account
established pursuant to Section 11.1 of the Operating and Maintenance
Agreement.
"Decommission," "Decommissioned" or "Decommissioning" means the
obligations on the part of Elmore, Ltd., among other things, to remove all or
a portion of the Elmore Facility and, with respect to production and injection
wells and only to the extent allowed by applicable law, to cap such wells in
lieu of removal from the Elmore Property and the Geothermal Lease Rights
Properties in the event Magma elects to require such removal pursuant to
Sections 8.11 and 8.13 of the Ground Lease and/or Section 3.1.4 of the
Easement Agreement.
"Decommissioning Reserve" means the reserve established pursuant to
Section 11.3 of the Operating and Maintenance Agreement.
"Decommissioning Reserve Account" means the segregated bank account
established pursuant to Section 11.3 of the Operating and Maintenance
Agreement.
"Development of the Elmore Facility" means the design, engineering,
construction, testing and start-up of the Elmore Facility.
"Distribution Dates" means each March 31 and September 30.
"Dow Services Agreement" means that certain Financial and Technical
Services Agreement dated March 27, 1987 by and between Magma and DCC, a copy
of which is attached as Exhibit "A" to the Administrative Services Agreement.
"Easement Agreement" means that certain Easement Grant Deed and
Agreement Regarding Rights for Geothermal Development dated as of March 14,
1988, as the same may be amended from time to time, by and between Magma and
Elmore, Ltd., pursuant to which the parties have provided for an "Easement to
Develop Geothermal Rights" and related rights and obligations as described
therein.
"Elmore Facility" means that certain power production geothermal
electrical generating facility being constructed pursuant to the Plans and
Specifications and any "as-built" plans on the Elmore Property which, when
completed, will have the capacity to convert BTU Energy from Geothermal Brine
into electrical energy, together with the Supporting Equipment.
3
"Elmore Facility Brine Requirement" means that amount of Geothermal
Brine which, when Processed by the Elmore Facility, will yield the amount of
BTU Energy reasonably required to generate 332,880,000 kilowatt hours per year
of "Energy" as that term is defined in the Elmore Power Purchase Contract.
"Elmore Facility Projected Project Cost" means the total projected
cost of construction and development of the Elmore Facility as reflected on
Exhibit "I" to the Construction Management Agreement.
"Elmore Geothermal Lease Unit" means that certain John J. Elmore
Unit No. 1 established pursuant to that certain Designation and Declaration of
Unit dated as of February 1, 1964, as amended by that certain First
Restatement and Partial Restructuring of Unit dated as of January 19, 1988,
which evidences Magma's Geothermal Lease Rights in and to the Geothermal Lease
Rights Properties.
"Elmore, Ltd." means Elmore, Ltd., a California limited partnership,
a limited partnership organized under the laws of the State of California, the
general partners of which are Red Hill and Niguel Energy Company, a California
corporation.
"Elmore Power Purchase Contract" means that certain Power Purchase
Contract dated June 15, 1984, as amended, and as the same may be amended from
time to time, by and between Magma Electric Company, a Nevada corporation and
SCE.
"Elmore Property" means the parcel of real property more
particularly described on Exhibit "A" to the Ground Lease, as that description
may be modified from time to time pursuant to Section 3.3 of the Ground Lease.
"Elmore Property Preliminary Title Report" means that certain
Preliminary Title Report No. 105141-A dated February 17, 1988 a copy of which
is attached as Exhibit L to the Construction Management Agreement.
"Energy Revenues" means all payments received by Elmore, Ltd. for
the sale of electricity which payments represent the "Energy" (as that term is
defined in the Elmore Power Purchase Contract) component of the payments
received including, without limitation, (i) payments received by Elmore, Ltd.
from SCE pursuant to the Elmore Power Purchase Contract (without deduction for
payments made pursuant to the IID Transmission Line Agreement), (ii) all
payments for Energy delivered both before and after the Firm Operation Date
and below, at and above the "Contract Capacity" level (as that term is defined
in the Elmore Power Purchase Contract) and (iii) all payments received by
Elmore, Ltd. in lieu of payments that would have been received for the Energy
component of electricity that would have been produced but for the in lieu
payments.
4
"Engineer" means R.W. Beck and Associates, or their successors in
the capacity of engineers and consultants with respect to the Development of
the Elmore Facility and the operation of the Elmore Facility.
"Excess Extracted Geothermal Brine" means Geothermal Brine extracted
by Elmore, Ltd. in connection with the operation of the Elmore Facility which
is in excess of the amount of Geothermal Brine needed to meet the Elmore
Facility Brine Requirement.
"Excess Unextracted Geothermal Brine" means all Geothermal Brine
which is not needed for the operation of the Elmore Facility.
"Extraordinary Services" means all of the services, materials,
equipment and supplies to be performed or provided by Red Hill pursuant to
Section 3 of the Administrative Services Agreement.
"Firm Operation Date" means the first day on which Firm Operation
(as that term is defined in the Elmore Power Purchase Contract) occurs under
the Elmore Power Purchase Contract.
"Firm Operation Month" means the first month during which Firm
Operation (as that term is defined in the Elmore Power Purchase Contract)
occurs under the Elmore Power Purchase Contract.
"Geothermal Brine" means the geothermal brine contained in the
Elmore Geothermal Lease Unit.
"Geothermal Brine Scale" means all deposits and residue including,
without limitation, silica slurry, silica cake and sludge deposits on or in
vessels or equipment in which Geothermal Brine is transported to or from, or
Processed or stored in, the Elmore Facility.
"Geothermal Lease Rights" means the rights in the Geothermal Lease
Rights Properties held by Magma pursuant to the Geothermal Leases including,
without limitation, certain rights of Magma to (i) that portion of the
Geothermal Lease Rights Properties existing below the surface of the land
including, without limitation, the right to extract and take Geothermal Brine
therefrom and (ii) the Surface Properties including, without limitation, the
right to enter upon certain portions of the Surface Properties for the
purposes of (1) drilling exploratory, production and injection wells; (2)
installing pipelines for the extraction of Geothermal Brine; (3) extracting
Geothermal Brine; and (4) constructing facilities designed to convert the heat
energy in the Geothermal Brine to electrical energy for sale to public
utilities.
5
"Geothermal Lease Rights Properties" means the real property located
within the SSKGRA, as more particularly described in Exhibit "A" to the
Easement Agreement.
"Geothermal Lease Rights Properties Preliminary Title Report" means,
collectively, those certain Preliminary Title Reports Nos. 105143 dated
February 16, 1988 (McCoy), 105142 dated February 16, 1988 (L. Baretta), and
105141-B dated February 17, 1988 (J. Elmore), copies of which are attached as
Exhibit "C" to the Easement Agreement.
"Geothermal Leases" means those certain geothermal leases delineated
on Exhibit "B" to the Easement Agreement.
"Geothermal Lessors" means the parties identified as the "lessors,"
or their successors in interest, in each of the Geothermal Leases.
"Grantee" means Elmore, Ltd. for purposes of the Easement Agreement.
"Grantor" means Magma for purposes of the Easement Agreement.
"Ground Lease" means that certain Ground Lease dated as of March 14,
1988, as the same may be amended from time to time, by and between Magma and
Elmore, Ltd., pursuant to which Magma leases to Elmore, Ltd. the Elmore
Property.
"Guaranteed Capacity Payment" means the payments to be made to Red
Hill provided for in Section 13 of the Operating and Maintenance Agreement.
"IID" means the Imperial Irrigation District, organized under the
Water Code of the State of California.
"IID Agreements" mean, collectively, (i) that certain Funding and
Construction Agreement dated June 29, 1987, by and among the Imperial
Irrigation District ("IID"), and certain "Participants" (as that term is
defined in said Funding and Construction Agreement) including Magma, (ii) that
certain Joint Funding Agreement dated June 29, 1987, by and among the
"Participants" (as that term is defined in said Joint Funding Agreement)
including Magma and (iii) any "IID Transmission Service Agreement For
Alternative Resources" which may be entered into between IID and Elmore, Ltd.,
copies of which are attached as Exhibit "G" to the Construction Management
Agreement.
"Insurance Requirements" means policies of insurance, maintained by
or on behalf of Elmore, Ltd. with insurance companies rated at least B+ by
A.M. Best Company or such other insurance companies as may be acceptable to
the agent for the Project Lender, of the following type, in the following
amounts, and on the following terms:
6
(i) at all times after completion of construction of the
Elmore Facility, insurance on the Elmore Facility against all
risks of physical loss or damage, including flood, earthquake
(to the extent possible) and collapse and all other risks and
perils normally covered in "all-risk" policies, for the full
cost of repair or replacement (excluding the costs of the
transmission lines, wells and Geothermal Brine pipelines);
(ii) as soon as possible in the course of construction of
the Elmore Facility and at all times after completion of
construction of the Elmore Facility, boiler and machinery
insurance written on a comprehensive form for the full repair
and replacement value of the equipment at and of the Elmore
Facility;
(iii) at all times, comprehensive general liability
insurance with a limit of no less than $1,000,000, combined
single limit, bodily injury and property damage, for each
occurrence;
(iv) at all times, excess public liability insurance in
the form of an umbrella policy which umbrella policy shall
afford coverage of not less than $10,000,000 per occurrence
over and above the coverage provided by the policies described
above and the policy described in Exhibit "N" to the
Construction Management Agreement;
(v) on and after the Firm Operation Date, business
interruption insurance covering, for an annual term, only
amounts due (including, without limitation, interest, principal
repayment and any other fees and expenses) on the Project
Lender's Loan; and
(vi) as soon as practicable after the agent for the
Project Lender shall request, such other insurance with respect
to the Elmore Facility in such amounts equal to the greater of
such amount, and against such insurable hazards, (x) as Magma
maintains with respect to other facilities similar to the
Elmore Facility, which Magma owns or operates, (y) as is
usually carried by corporations of established reputation
operating similar properties and (z) as the agent for the
Project Lender may from time to time reasonably request.
Each insurance policy set forth above (a) shall (except for the
liability insurance referred to in clause (iii) above, which shall name the
Project Lender as an additional insured) insure the Project Lender's interests
under the Project Lender's Lien and shall provide that all insurance proceeds
payable under such policy shall, until notice from the agent for the Project
7
Lender to the contrary, be paid over directly to such agent for the benefit of
the Project Lender, (b) shall provide that it cannot be canceled or terminated
without thirty days' prior written notice to such agent, (c) shall include
waivers by the insurer of all claims for the payments by the Project Lender
and such agent of insurance premiums, (d) shall (except for the liability
insurance referred to in clause (iii) above) provide for losses to be payable
to the Project Lender notwithstanding (i) any act or failure to act by the
insured or violation by the insured of warranties, declarations or conditions
contained in the policy, (ii) any foreclosure or sale or other proceeding
relating to the Elmore Facility or construction work in progress or (iii) any
change in the title to or ownership of the Elmore Facility or construction
work in progress, (e) shall (except for the liability insurance referred to in
clause (iv) above, which shall have no deductible) provide for deductibles for
(i) "all risk" coverage of no greater than $500,000 per occurrence, and (ii)
business interruption coverage of no greater than sixty (60) days, and (f)
shall be in all other respects satisfactory to the agent for the Project
Lender.
"Licensee" means Elmore, Ltd. for purposes of the Technology
Transfer Agreement.
"Licensor" means Magma for purposes of the Technology Transfer
Agreement.
"Limited Partner" means any of the Original Limited Partners and
Substituted Limited Partners as defined in the Limited Partnership Agreement.
"Limited Partnership Agreement" means that certain Amended and
Restated Limited Partnership Agreement of Elmore, Ltd., dated as of March 14,
1988, as the same may be amended from time to time.
"Magma" means Magma Power Company, a Nevada corporation.
"Magma Overrun Loan" means any loan made by Magma pursuant to the
Magma Undertaking.
"Magma Undertaking" means the undertaking of Magma, substantially in
the form of Exhibit "K" to the Construction Management Agreement.
"Major Capital Expenditure Reserve" means the reserve established
pursuant to Section 11.2 of the Operating and Maintenance Agreement.
"Major Capital Expenditure Reserve Account" means the segregated
bank account established pursuant to Section 11.2 of the Operating and
Maintenance Agreement.
8
"Operating Agreements" means the Easement Agreement, the
Administrative Services Agreement, the Construction Management Agreement, the
Elmore Power Purchase Contract, the Ground Lease, the Operating and
Maintenance Agreement, the Technology Transfer Agreement and the IID
Agreements.
"Operating and Maintenance Agreement" means that certain Operating
and Maintenance Agreement dated as of March 14, 1988, as the same may be
amended from time to time, by and between Elmore, Ltd. and Red Hill, pursuant
to which Red Hill will provide day-to-day operational and maintenance services
for Elmore, Ltd. in connection with the operation of the Elmore Facility.
"Operator" means Red Hill for purposes of the Operating and
Maintenance Agreement.
"Ordinary Services" means all of the services, materials, equipment
and supplies to be performed or provided by Red Hill on a normal day-to-day
basis pursuant to Section 2 of the Administrative Services Agreement.
"Owner" means Elmore, Ltd. for purposes of the Administrative
Services Agreement, the Construction Management Agreement and the Operating
and Maintenance Agreement.
"Partially Spent Geothermal Brine" means the Geothermal Brine in an
amount not exceeding the Elmore Facility Brine Requirement which has been
extracted and Processed by Elmore, Ltd. for the purpose of generating
electrical energy in connection with the operation of the Elmore Facility.
"Partnership Holding Account" has the same meaning as that term has
in the Limited Partnership Agreement.
"Permitted Investment" means any investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated in the highest grade by a nationally recognized credit rating agency or
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any state thereof and the
certificates of deposit of which are rated in one of the two highest grades by
a nationally recognized credit rating agency, provided in each case that such
investment matures within one year from the date of acquisition thereof by
Elmore, Ltd.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
9
"Plans and Specifications" means those certain plans and
specifications for the construction of the Elmore Facility, as more
particularly described on Exhibit "H" to the Construction Management
Agreement.
"Principal Repayment Date" means the date on which a portion of the
principal of the Project Lender's Loan is scheduled to be repaid pursuant to
the Credit Facility.
"Process," "Processed" or "Processing" means the process by which
BTU Energy is extracted from the Geothermal Brine.
"Project Lender" means collectively the lender(s) advancing all or a
portion of the Project Lender's Loan, or the agent for such lenders.
"Project Lender's Lien" means the security interest or lien
evidenced by a first deed of trust granted by Elmore, Ltd. in Elmore, Ltd.'s
leasehold estate in the Elmore Property to the Project Lender to secure
repayment of any indebtedness and/or performance of any obligation created by
the Project Lender's Loans.
"Project Lender's Loan" means the financing provided by the Project
Lender for the Development of the Elmore Facility or the operation of the
Elmore Facility, the repayment of which is secured by the Project Lender's
Lien.
"Project Lender's Loan Documents" means all instruments, agreements
and other documents including, without limitation, the Credit Facility,
evidencing or related to the Project Lender's Loan and the security therefor
including, without limitation, the Project Lender's Lien.
"Red Hill" means Red Hill Geothermal, Inc. , a Delaware corporation,
a general partner of Elmore, Ltd. Red Hill is a wholly owned subsidiary of
Magma.
"Refunded Capital Contribution" shall have the same meaning as that
term has in Section 3.6 of the Limited Partnership Agreement.
"Reimbursement Charges" means the payments to Red Hill provided for
in Section 14 of the Operating and Maintenance Agreement.
"Reserved Geothermal Brine" means the combination of partially Spent
Geothermal Brine, Excess Extracted Geothermal Brine and Excess Unextracted
Geothermal Brine.
"SCE" means Southern California Edison Company.
10
"SSKGRA" means Salton Sea Known Geothermal Resource Area.
"Schedule of Projected Remaining Cost of Construction" means the
projected cost of completing construction and development of the Elmore
Facility as of the date of the Construction Management Agreement, as reflected
on Exhibit "J" to the Construction Management Agreement.
"Services" means the services to be provided by Red Hill pursuant to
Section 2 of the Operating and Maintenance Agreement.
"Spare Parts" means all spare parts necessary for the reliable,
continuous operation of the Elmore Facility, other than the Critical Parts and
Equipment.
"Subcontractor" means a person or entity who performs any duties for
or supplies any equipment or material to Red Hill, directly or indirectly, in
the performance of the Services.
"Substantial Completion Month" means the month in which the
Construction Management Agreement terminates in accordance with its terms.
"Supporting Equipment" means all items described in Section 2.2.2 of
the Easement Agreement, including all such items located on the Elmore
Property, and any real property interest associated therewith.
"Surface Properties" means that portion of the geothermal Lease
Rights Properties existing above and upon the surface of the land.
"Technology Fee" means the payments to be made to Magma provided for
in Section 3 of the Technology Transfer Agreement.
"Technology Transfer Agreement" means that certain Technology
Transfer Agreement dated as of March 14, 1988, as the same may be amended from
time to time, by and between Magma and Elmore, Ltd., pursuant to which Magma
grants to Elmore, Ltd. the nonexclusive right to use certain "Technology" and
"Know-How" which will be utilized by Elmore, Ltd. only in connection with the
operation of the Elmore Facility.
"Total Electricity Revenues" means all payments received by Elmore,
Ltd. for the sale of electricity including, without limitation, payments
received by Elmore, Ltd. from SCE pursuant to the Elmore Power Purchase
Contract (without deduction for payments made pursuant to the IID Agreements)
including, without limitation, (i) all payments for "Energy," "capacity" and
"Capacity Bonus Payments" delivered both before and after the Firm Operation
Date and below, at and above the "Contract Capacity" level (as those terms are
defined in the Elmore Power
11
Purchase Contract) and (ii) all payments received by Elmore, Ltd. in lieu of
payments that would have been received for electricity that would have been
produced but for the in lieu payments.
"Totally Spent Geothermal Brine" means Partially Spent Geothermal
Brine which (i) has been Processed by Magma, or a licensee of Magma, for use
in connection with the operation of Additional Power Production Facilities;
(ii) has been used by Magma, or a licensee of Magma, to extract Brine
Minerals; or (iii) has been used by Magma, or a licensee of Magma, for any
other use including, without limitation, the production of steam or heat for
sale to users of steam or heat.
"Working Capital" shall have the same meaning as that term has in
the Credit Facility.
"Working Capital Requirement" shall have the same meaning as that
term has in the Credit Facility.
Additional Defined Terms. For the convenience of the parties, in
addition to the defined terms set forth in this Schedule Z, certain other
terms are defined throughout the Operating Agreements.
12
FIRST AMENDMENT TO THE
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
ELMORE, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
PREAMBLE
This First Amendment (the "Amendment") to the Amended and Restated
Limited Partnership Agreement (the "Limited Partnership Agreement") of Elmore,
Ltd., a California Limited Partnership (the "Partnership"), is made and
entered into as of April 14, 1989, by and among Red Hill Geothermal, Inc., a
Delaware corporation ("Red Hill"), Magma Power Company, a Nevada corporation
("Magma"), and Niguel Energy Company, a California corporation ("Niguel"), for
the purpose of amending the Limited Partnership Agreement of the Partnership
under which the affairs of the Partnership have been conducted to this date.
RECITALS
A. Red Hill, Magma and Niguel are all of the parties to the Limited
Partnership Agreement and all of the partners of the Partnership as of the
date hereof.
B. Red Hill, Magma and Niguel desire to amend the Limited
Partnership Agreement as provided herein. The parties acknowledge that such
amendments are not attributable to the influx of new capital into the
Partnership but rather are intended to more accurately reflect the parties'
agreements.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
AGREEMENT
1. Name Change. Section 1.2 of the Limited Partnership Agreement is
amended to provide that the name of the Partnership shall hereafter be
"Elmore, L.P." or such other name as may hereafter be designated in accordance
with Section 1.2 of the Limited Partnership Agreement.
2. Testing Date. The following definition is added to Article II of
the Limited Partnership Agreement:
"2.2.32. 'Testing Date' means that date on which the Elmore Facility
is synchronized with and into the SCE grid and the Partnership begins
delivering electricity to SCE."
3. IID Costs. Section 2.2.23.8 of the Limited Partnership Agreement
is amended to read as follows:
"2.2.23.8. The Partnership's share of the costs of the electrical
transmission facilities to be built by the IID as provided in the IID
Agreements, and the electrical interconnection with IID and SCE, together with
all costs and expenses associated with the financing thereof (collectively,
'IID Costs')."
4. Special Allocations. Section 5.3.2 of the Limited Partnership
Agreement is amended to read as follows:
"5.3.2. Federal depreciation and other cost recovery
deductions, and amortization deductions for financing commitment fees
and other similar costs, start-up expenditures and organizational
expenditures, in each case with respect to Project Costs, but
excluding all IID Costs, shall be allocated as follows:
"(a) All such deductions for taxable periods
beginning before the Testing Date shall be allocated as
follows: (i) those deductions allocable to and attributable
to the complete calendar months in the period commencing
March 1, 1988 and ending on the Testing Date shall be
allocated 50% to Niguel, 40% to Red Hill and 10% to Magma;
and (ii) the remainder of such deductions shall be allocated
100% to Niguel.
"(b) Such deductions for taxable periods commencing
on or after the Testing Date and attributable to Project
Costs not to exceed $93,846,154 (less all IID Costs), shall
be allocated (i) 100% to Niguel through and including
December 31, 1990 and (ii) commencing January 1, 1991
through and including December 31, 1992, 90% to Niguel, 8%
to Red Hill and 2% to Magma and (iii) thereafter, to the
Partners in proportion to their Units in the Partnership.
"(c) Such deductions for taxable periods commencing
on or after the Testing Date and attributable to Project
Costs in excess of $103,846,154 (less all IID Costs) and
less than $115,000,000 (less all IID Costs) resulting from
Priority Tax Capital Contributions made pursuant to the
terms of Section 3.5 of this Limited Partnership Agreement
shall be allocated 57.5% to Niguel, 34% to Red Hill and 8.5%
to Magma.
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"(d) Such deductions for taxable periods commencing
on or after the Testing Date and attributable to Project
Costs in an aggregate amount between $93,846,154 (less all
IID Costs) and $103,846,154 (less all IID Costs) and to
Project Costs in excess of $115,000,000 (less all IID Costs)
resulting from Priority Capital Contributions made pursuant
to Section 3.5 of this Limited Partnership Agreement shall be
allocated50% to Niguel, 40% to Red Hill and 10% to Magma."
5. Continued Effectiveness. Except as specifically provided in this
Amendment, the Limited Partnership Agreement shall remain in full force and
effect in accordance with its original terms and conditions, except that the
term "Limited Partnership Agreement" as used in the Limited Partnership
Agreement shall hereafter mean the Limited Partnership Agreement as amended
hereby.
6. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single original instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be signed by their duly authorized officers as of the day and year first above
written.
RED HILL GEOTHERMAL, INC.,
a Delaware corporation, a General
Partner
By:
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Its:
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By:
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Its:
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MAGMA POWER COMPANY, a Nevada
corporation, a Limited Partner
By:
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Its:
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By:
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Its:
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NIGUEL ENERGY COMPANY, a California
corporation, a General Partner and
a Limited Partner
By:
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Its:
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By:
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Its:
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