EXHIBIT 10.25
AMENDED AND RESTATED
CONSTRUCTION, OPERATING AND ACCOUNTING AGREEMENT
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BY AND BETWEEN
VULCAN POWER COMPANY,
a Nevada corporation
AND
VULCAN/BN GEOTHERMAL POWER COMPANY
a Nevada general partnership
TABLE OF CONTENTS
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Page
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1. Definitions.......................................................2
2. Operator's Services...............................................2
3. Standard of Services..............................................4
4. Personnel.........................................................5
5. Inspection........................................................5
6. Change in Duties; Notification....................................5
7. Responsibilities of Owner.........................................6
8. Facilities Revenue Fund...........................................6
9. Reimbursement Charges.............................................6
10. Subcontracting....................................................7
11. Term and Termination..............................................7
12. Indemnification...................................................7
13. Non-Waiver of Breach..............................................8
14. Arbitration.......................................................8
15. Attorneys' Fees...................................................9
16. Force Majeure.....................................................9
17. Invalid Provision................................................10
18. Assignment.......................................................10
19. Governing Law....................................................10
20. Entire Agreement - Amendments....................................10
21. Communications...................................................11
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22. Counterparts.....................................................11
23. Exhibits.........................................................11
24. Third Party Beneficiaries........................................11
25. Headings.........................................................12
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AMENDED AND RESTATED
CONSTRUCTION, OPERATING AND ACCOUNTING AGREEMENT
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PREAMBLE
THIS AMENDED AND RESTATED CONSTRUCTION, OPERATING AND ACCOUNTING
AGREEMENT (the "Agreement") is made as of June 17, 1996, by and between VULCAN
POWER COMPANY, a Nevada corporation ("Operator"), and VULCAN/BN GOETHERMAL
POWER COMPANY, a Nevada general partnership ("Owner").
RECITALS
A. Owner owns the Vulcan Facility located in the Salton Sea Known
Geothermal Resource Area ("SSKGRA").
B. Owner intends to operate the Vulcan Facility under the following
operating agreements: (i) an Administrative Services Agreement by and between
Owner and CalEnergy Operating Company, a Delaware corporation ("CEOC"),
pursuant to which CEOC will provide certain administrative services to Owner
for the operation of the Vulcan Facility; (ii) an Easement Grant Deed and
Agreement Regarding Rights for Geothermal Development by and between Operator
and Magma pursuant to which Magma will supply Owner with the right to extract
Geothermal Brine and use geothermal brine-derived steam which is necessary to
operate the Del Ranch Facility; and (iii) a Power Purchase Contract by and
between Owner and Southern California Edison Company.
C. Owner desires to exploit Operator's personnel resources, and to that
end Owner desires to employ, hire or otherwise retain Operator for purposes of
performing the day-to-day operations at the Vulcan Facility.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants and agreements set forth herein, the parties hereto agree as follow:
AGREEMENT
1. Definitions.
1. Unless the context shall otherwise require, capitalized terms used
and not otherwise defined herein shall have the respective meanings assigned
thereto in Schedule Z hereto both of which shall be incorporated by reference
herein.
2. Operator's Services. In consideration of the payment by Owner to
Operator of the Reimbursement Charges, Operator agrees to perform during the
term of this Agreement the following services (the "Services"):
(a) Operator shall operate, maintain, and repair (or cause to be
operated, maintained, and repaired) the equipment associated with the
Vulcan Facility, including all work normally considered part of the
operational and maintenance activities for facilities similar to the
Vulcan Facility, and shall engage, supervise, and be responsible for any
and all personnel and Subcontractors necessary for the continuous
operation of the Vulcan Facility. Notwithstanding the provisions of
Section 2(f) hereof, when specialized maintenance and repairs to the
Vulcan Facility are required which cannot reasonably be performed by
Operator, Operator will subcontract with original equipment manufacturers
or similarly qualified personnel acceptable to Owner. Said operations,
maintenance, and repairs will be provided in accordance with the
requirements determined by Owner during the term of this Agreement. Owner
may modify, delete or supplement said requirements from time to time as
Owner, in its sole discretion, deems appropriate. Notice of any changes or
modifications in service requirements which may occur shall be provided by
Owner to Operator in writing. If Operator, in the exercise of good faith,
believes that an emergency exists and that certain changes or
modifications in service requirements are required to avoid or mitigate
serious damage to the Vulcan Facility or injury to its personnel or
others, Operator may make such changes or modifications, to the extent so
necessary and required.
(b) Consistent with good engineering and operations practices,
Operator shall provide its Services so as to optimize both the
profitability of the Vulcan Facility and the useful life of the equipment
as well as minimize downtime for repairs. Subject to the provisions of
this Agreement, Operator shall provide all labor, material, and equipment
necessary for such purposes.
(c) Operator shall develop and implement a preventive maintenance
program based upon, among other things, information and procedures provided
to Operator by Owner, which shall include on-going
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operational maintenance. This preventive maintenance program shall be
implemented and carried out by Operator in accordance with the
specifications provided by Owner.
(d) Operator shall implement and maintain a Vulcan Facility safety
and loss prevention program. Operator shall take all reasonable
precautions for the safety of its employees and shall comply with all
applicable provisions of federal, state and municipal laws, building codes
and insurance policies to prevent accidents or injuries to persons or
damage to property within or about the Vulcan Facility.
(e) Operator shall maintain, inventory, and procure replacement
Spare Parts and specialized tools in order to maximize the continuous
operation of the Vulcan Facility, and procure, inventory, and maintain
chemicals, consumables and working supplies necessary to carry out the
Services. Owner will provide a location for storage of Spare Parts,
chemicals, consumables and supplies.
(f) Subject to Owner's prior approval, Operator may subcontract to
qualified Subcontractors, including, without limitation, Affiliates of
Operator, such routine or non-routine work as is necessary to perform
scheduled or unscheduled maintenance and repairs, annual inspections, and
equipment overhauls; Operator shall supervise all work subcontracted. The
subcontracting of any work to outside Subcontractors shall in no way
relieve or excuse Operator from any of its obligations under this
Agreement with respect to said work. Subcontracts with Affiliates of
Operator shall be on a competitive and arms-length basis. All charges
associated with work subcontracted by Operator shall be billed to Owner in
accordance with Section 9 hereof.
(g) Operator shall arrange for scheduled testing and recalibration
to assure accuracy of scales, metering units (geothermal and electric) and
associated recording devices.
(h) Operator shall be responsible for providing security for the
Vulcan Facility.
(i) Subject to shutdowns for scheduled maintenance, Operator shall
to the maximum extent achievable under the law and pursuant to the terms
of the Vulcan Power Purchase Contract, use its best efforts to maintain
the Vulcan Facility in operation, producing energy at its full rated
capacity, twenty-four (24) hours per day, seven (7) days per week
throughout the entire year, including legal and other holidays, unless
otherwise directed by Owner.
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(j) At the request of Owner, Operator shall assist Owner in
obtaining any franchises, permits, licenses, easements, or rights-of-way
necessary for continued operation of the Vulcan Facility.
(k) Operator shall employ such staff as is reasonably necessary to
perform routine, ministerial record keeping and administrative functions
of the Del Ranch Facility as reasonably required by Owner for its use in
billings, accounting for receipts and payments, complying with
governmental laws and regulations, with generally acceptable accounting
principles and with reporting requirements of any Vulcan Facility finance
agreement or other agreement of Owner.
(l) Operator shall pursue warranty claims on behalf of Owner.
(m) Operator shall establish and maintain such bank accounts in the
name and on behalf of Owner as may be necessary or desirable for the
performance of its obligations hereunder. All such accounts and all
amounts from time to time deposited therein shall be and remain the
property of Owner and shall be subject to withdrawal by Owner from time to
time in its discretion.
(n) Operator shall operate the Vulcan Facility in compliance with
all permit conditions and applicable laws.
(o) Operator shall dispose of all Geothermal Brine Scale and all
Partially Spent Geothermal Brine from the operation of the Vulcan Facility
(unless utilized by Magma pursuant to Section 2.3.3 of the Easement
Agreement) and all Totally Spent Geothermal Brine to the extent Owner is
required to dispose thereof pursuant to the Easement Agreement.
(p) Operator shall be responsible for discharging all duties and
obligations, and protecting all rights, of Owner under the Credit
Facility, the Limited Partnership Agreement, the Vulcan Power Purchase
Contract and the other Operating Agreements.
3. Standard of Services. Operator agrees to use good faith efforts to
perform all Services in accordance with the reasonable, good, and prudent
business practices applicable to the geothermal electrical generating
production industry and in a manner no less favorable than practices employed
by operators of other power production geothermal electrical generating
facilities, including, without limitation, Magma. Operator shall exercise its
good faith efforts to ensure that:
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(a) the Vulcan Facility shall at all times be kept in as near "as
new" condition, ordinary wear and tear and Owner's operating requirements
considered, as can reasonably be achieved;
(b) the Services shall be rendered in accordance with manufacturers'
and systems designers' specifications as delivered to Operator by Owner;
(c) the Vulcan Facility shall at all times be operated and the
Services shall at all times be provided in accordance with all of the
terms of the Operating Agreements and all applicable codes, governmental
requirements or court orders (including, without limitation, all zoning,
environmental protection, pollution, sanitary, and safety laws) except to
the extent compliance with such requirements has been excused or exempted
by the applicable governmental or judicial authority;
(d) the Vulcan Facility shall be operated in a manner required such
that the Vulcan Facility is a "qualifying facility" as provided in
18-C.F.R. [section]-292.203, as the same may be amended from time to time;
and
(e) the Vulcan Facility shall be operated at all times in such a
manner that it shall comply with all safety and other requirements of
insurance policies in effect at said times with respect to the Vulcan
Facility or any part thereof and with the reasonable request of insurers
and that all warranties with respect to the Vulcan Facility or any part
thereof shall be kept in full force and effect.
4. Personnel. Operator shall provide and employ qualified plant
management, operations and maintenance personnel in sufficient numbers to
accomplish its Services hereunder and to comply with sound engineering and
operations practices. During the term of this Agreement, a duly authorized
on-site manager shall represent Operator at all times. All personnel shall
meet minimum job qualifications associated with their positions as determined
mutually by Owner and by Operator. Operator's personnel shall possess
experience and training equal to standards generally set within the industry
to operate and maintain substantially similar equipment. Operator will use its
best efforts to hire competent and experienced personnel at competitive
compensation.
5. Inspection. Operator shall ensure that the Vulcan Facility and all
records of the Vulcan Facility will at all times be open to Owner for
inspection and review of operations and maintenance practices.
6. Change in Duties; Notification. Owner shall notify Operator of the
execution or amendment of each Operating Agreement and the Limited Partnership
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Agreement which affects the Vulcan Facility or the operation thereof and which
directly relates to the performance of Operator's duties under this Agreement.
Owner shall furnish to Operator a description of the provisions of such
agreement or amendment which directly relates to the performance of Operator's
duties under this Agreement in sufficient detail to enable Operator to
satisfactorily perform its duties hereunder.
7. Responsibilities of Owner. Owner will bear responsibility for, among
other things, reviewing and approving all required plans, budgets and
schedules in a timely fashion.
8. Facilities Revenue Fund. Subject to the provisions of the Credit
Facility and related loan documents regarding accounts:
1. Operator shall deposit all revenues received by Owner in connection
with the operation of the Facilities into the Revenue Fund (as defined in the
Credit Facility and related loan documents).
2. Operator is authorized to withdraw monies from the Revenue Fund to
pay costs of performing its obligations only to the extent that the funds are
then available in the Revenue Fund and such payments are authorized pursuant
to the terms of this Agreement and the Credit Facility and related loan
documents.
9. Reimbursement Charges.
1. In consideration of the provision by Operator to Owner of the
Services, within ten (10) days after Owner has received an invoice from
Operator specifying the Services rendered to Owner by Operator and the amount
of actual costs and expenses incurred by Operator in rendering such Services,
Owner shall pay to Operator such specified amount. As used in this Section 9,
"actual costs and expenses incurred by Operator" includes, without limitation,
(a) the actual cost to Operator of goods and materials used by Operator in
rendering Services, (b) the pro rata cost to Operator of personnel providing
labor or services in the course of Operator's provision of Services, (c) the
portion of the cost of invested capital incurred by Operator for the purchase
of machinery and equipment used by Operator in connection with the provision
of Services fairly allocable to the use of such machinery and equipment for
performing the Services hereunder, taking into consideration factors including
the extent to which Operator can reasonably expect to earn a return on its
invested capital by utilizing such machinery and equipment for providing
services other than to the Vulcan Facility and (d) the actual cost to
Operator, without any mark-up by Operator whatsoever, of retaining a
Subcontractor, whether an Affiliate of Operator or otherwise, in connection
with the provision of Services.
2. With respect to any calculation of actual costs and expenses or any
allocation of costs contemplated by Section 9.1 hereof, Owner shall be bound
by Operator's determination thereof unless the same is clearly erroneous.
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10. Subcontracting. Without limiting the generality of any provision
contained herein concerning the same subject matter as this Section 10, in the
event Operator determines it to be reasonably necessary to render the Services
required hereunder through a Subcontractor, Operator may subcontract with
Affiliates of Operator, and Owner hereby consents to such subcontracting for
all purposes of this Agreement. For purposes of this Agreement, any Services
performed by such Affiliates shall be deemed to have been performed by
Operator.
11. Term and Termination.
1. Unless terminated as provided in Section 17 hereof, by written
agreement between Owner and Operator as provided in Section 20 hereof, or as
hereinafter provided in this Section 11, this Agreement shall remain in effect
until, and shall terminate on March 14, 2020.
2. In the event of a material default by either party in the
performance of its duties, obligations or undertakings under this Agreement,
the other party shall have the right to give written notice to the defaulting
party advising such party of the specific default involved and, if within
thirty (30) days after such notice the defaulting party shall not have remedied
or commenced diligently to remedy the default, the other party shall have the
right, in addition to any other rights and remedies it may have, to terminate
this Agreement upon ten (10) days' written notice to the defaulting party.
3. Notwithstanding any other provision of this Agreement, and in
addition to any other right it may have, Operator shall have the right to
terminate this Agreement, effective immediately, if, at any time, Owner is
adjudged bankrupt or insolvent, or files a petition in bankruptcy or an answer
admitting the material facts recited in such a petition filed by another, or
is put or decides to go into dissolution or liquidation (other than in
connection with a merger, consolidation or amalgamation), or otherwise
discontinues business, makes an assignment for the benefit of its creditors or
any other general arrangement with its creditors, becomes insolvent or unable
to meet its current payments, or has a receiver or other custodian of any kind
appointed to administer any substantial amount of its property, or otherwise
seeks to take advantage of any bankruptcy or insolvency statute now or
hereafter in effect.
4. If this Agreement is terminated prior to the expiration of its
terms, Owner shall, in addition to any other rights, remedies and obligations
they may have, pay Operator all amounts due and payable to Operator under
Section 9 hereof as of the date the Agreement is effectively terminated.
12. Indemnification.
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1. Owner shall defend, indemnify and hold Operator and its agent and
employees harmless from and against any and all other liabilities, claims,
damages, losses and expenses, including attorneys' fees and costs and expenses
of litigation or arbitration, of every kind and nature arising out of the
course of performance of this Agreement by Owner or Operator and shall, upon
request of Operator, defend all suits arising out of or resulting from the
performance of this Agreement by Owner or Operator, provided that such
liability, claim, damage, loss or expense is not attributable to the gross
negligence or willful misconduct of Operator.
2. Operator shall defend, indemnify and hold Owner and its agents and
employees harmless from and against any and all liabilities, claims, damages,
losses and expenses, including attorneys' fees and costs and expenses of
litigation or arbitration, of every kind and nature arising out of Operator's
gross negligence or willful misconduct in the course of Operator's performance
of this Agreement and shall, upon request of Owner, defend all suits arising
out or resulting from Operator's gross negligence or willful misconduct in the
performance of this Agreement.
13. Non-Waiver of Breach. Either party hereto may specifically waive any
breach of this Agreement by the other party, but no such waiver shall be
deemed to have been given unless such waiver is in writing, signed by the
waiving party and specifically designates the breach waived, nor shall any
such waiver constitute a continuing waiver of similar or other breaches.
14. Arbitration. All disputes arising under this Agreement shall be
settled by arbitration. The party desiring such arbitration shall give written
notice to that effect to the other party 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 party shall, by written
notice to the originating party, appoint a second person similarly qualified
as the second arbitrator. 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:
(a) if the second arbitrator shall not have been appointed as
aforesaid, the first arbitrator shall determine such matter; and
(b) if the two arbitrators appointed by the party shall be unable to
agree upon the appointment of a 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
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written notice to the other party may apply for such appointment to the
Federal District Court or District Court in Omaha, Nebraska.
The arbitrator or arbitrators shall only interpret and apply the terms
and provisions of this Agreement 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.
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 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 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. Attorneys' Fees. If either party hereto commences litigation or
arbitration for the judicial or other interpretation, enforcement,
termination, cancellation or rescission hereof, or for damages for the breach
hereof, the prevailing party in any such action, trial, arbitration or appeal
thereon shall be entitled to its reasonable attorneys' fees and court,
arbitration and other costs incurred, to be paid by the losing party as fixed
by the court or arbitrator in the same or a separate suit, and whether or not
such action is pursued to decision or judgment.
16. Force Majeure.
1. Neither Owner nor Operator shall be liable in damages to the other
for any act, omission or circumstance ("Event of Force Majeure") occasioned by
or in consequence of any acts of God, acts of the public enemy, wars,
blockades, insurrections, riots, epidemics, landslides, lightning, earthquakes,
fires, storms, floods, civil disturbances, explosions, sabotage, the binding
order of any court or governmental authority which has been resisted in good
faith by all reasonable legal means, Federal, State or local laws, or other
event or circumstance not within the control of such party preventing such
party from performing its obligations hereunder, whether caused or occasioned
by, or happening on account of, the act or omission of one of the parties, not
within the control of the party claiming suspension and which by the exercise
of due diligence such party is unable to prevent or overcome.
2. Such Events of Force Majeure shall not relieve Owner or Operator of
liability in the event of either party's concurring negligence or in the event
of either party's failure to use due diligence to remedy the situation and to
remove the cause in an adequate manner and with all reasonable dispatch, nor
shall such Events of Force Majeure relieve either party of liability unless
such party shall give notice and full particulars of the same in writing to
the other party within ten (10) days of the
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occurrence relied on. In no event, however, shall an Event of Force
Majeure relieve Owner from the obligation of making payments due under this
Agreement at the time of such occurrence. The parties agree that should any
Event of Force Majeure remain in existence for a period of six (6) months,
this Agreement may be terminated by the party not claiming suspensionof the
Agreement under such Event of Force Majeure upon the giving of written notice
by such party to the other; provided, however, that such six (6) month period
shall be extended for a reasonable time so long as throughout such six (6)
month period the party claiming suspension of this Agreement under the Event
of Force Majeure has diligently proceeded to terminate the Event of Force
Majeure and continues to do so throughout such extension.
17. Invalid Provision.
1. The invalidity or unenforceability of any particular provision of
this Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted; provided, however, that if any of the provisions of
Sections 9, or 10 hereof are held invalid or unenforceable by any court or
other relevant authority, Owner and Operator shall hold consultations over a
period of ninety (90) days, commencing immediately, in an effort to work out
satisfactory terms for continuation of this Agreement. If Owner and Operator
do not reach agreement within this period, Operator shall have the right to
terminate this Agreement, effective immediately.
2. In the event that any provision, term, condition or object of this
Agreement may be in conflict with any law, measure, ruling, court judgment (by
consent or otherwise), or regulation of the government of the United States of
America, and the legal counsel of either party shall advise that in their
considered opinion such conflict, or a reasonable possibility of such
conflict, exists, then either party may propose to the other appropriate
modifications of this Agreement to avoid such conflict. In such case, if an
agreement of modification is not reached within ninety (90) days from such
proposal, the party making such proposal, after sixty (60) days' written
notice to the other party, may terminate the agreement in its entirety as of a
date subsequent to such sixty (60) days, and which shall be specified in such
notice.
18. Assignment. Subject to Section 10 hereof, neither Owner nor Operator
shall grant, assign or otherwise convey any of their respective rights or
delegate any of their respective obligations under this Agreement without the
prior written consent of the other party which shall not be unreasonably
withheld.
19. Governing Law. The existence, validity, construction, operation and
effect of this Agreement shall be determined in accordance with and governed
by the laws of the State of California. This Agreement shall be construed
equally as against the parties hereto, and shall not be construed against the
party responsible for its drafting.
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20. Entire Agreement - Amendments. This Agreement constitutes the entire
agreement of the parties and the provisions hereof shall supersede any and all
prior agreements or understandings relating to the same subject matter.
Without limiting the generality of the foregoing, from and after the date
hereof, the terms of the Construction, Operating and Accounting Agreement
dated as of August 30, 1985 (the "Original Construction, Operating and
Accounting Agreement") between Owner and Operator shall be amended to read in
their entirety as set forth in this Agreement and the terms of this Agreement
shall govern and control the rights and obligations of the parties in and with
respect to the matters herein set forth, notwithstanding any conflict between
the terms of this Agreement and the terms of the Original Construction
Operating and Accounting Agreement. This Agreement may be amended only by a
writing signed by a duly authorized representative of both parties.
21. Communications. All notices, requests, offers and other
communications required or permitted to be made under this Agreement shall be
in writing and shall be deemed to have been duly given and received,
regardless of when and whether received, either: (a) on the day of delivery,
if delivered:
To Operator at:
Vulcan Power Company
302 South 36th Street, Suite 400-E
Omaha, Nebraska 68131
Attention: General Counsel
To Owner at:
Vulcan/BN Geothermal Power Company
302 South 36th Street, Suite 400-E
Omaha, Nebraska 68131
Attention: General Counsel
or at such other address as either party most recently may have designated in
writing to the other party for such purpose; or (b) on the day sent, when sent
by prepaid telex, telegram, cable or radiogram, and confirmed the same day by
prepaid first-class registered airmail, addressed to Operator or Owner, as the
case may be, at their respective addresses aforesaid.
22. Counterparts. This Agreement may be executed in counterparts and any
number of counterparts signed in the aggregate by the parties hereto shall
constitute a single original instrument.
23. Exhibits. All exhibits and schedules attached hereto are hereby
incorporated herein by this reference.
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24. Third Party Beneficiaries. The covenants contained herein are made
solely for the benefit of the properties, parties and successors and assigns
of such parties as specified herein, and shall not be construed as having been
intended to benefit any third party not a party to this Agreement.
25. Headings. The headings herein are for reference only and shall not
affect the construction of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
OWNER:
VULCAN/BN GEOTHERMAL POWER COMPANY,
a Nevada general partnership
By: VULCAN POWER COMPANY,
a Nevada corporation,
as General Partner
By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President
OPERATOR:
VULCAN POWER COMPANY,
a Nevada corporation
By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President
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TABLE OF SCHEDULES
Section
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Schedule "Z" Schedule of Defined Terms 1.1
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