EXHIBIT 10.39
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------
BY AND BETWEEN
CALENERGY OPERATING COMPANY,
a Delaware corporation
AND
DEL RANCH, L.P.,
a California limited partnership
TABLE OF CONTENTS
PAGE
----
1. Definitions.............................................2
2. Ordinary Services.......................................3
3. Extraordinary Services..................................3
4. Subcontracting..........................................3
5. Administration Fee......................................3
6. Reimbursement and Other Compensation for
Extraordinary Services..................................4
7. Term and Termination....................................5
8. Disclaimer of CEOC's Liability..........................6
9. Non-Waiver of Breach....................................6
10. Arbitration.............................................6
11. Attorneys' Fees.........................................7
12. Force Majeure...........................................7
13. Invalid Provision.......................................8
14. Assignment..............................................8
15. Governing Law...........................................8
16. Entire Agreement - Amendments...........................9
17. Communications..........................................9
18. Counterparts............................................9
19. Exhibits................................................9
20. Third Party Beneficiaries...............................10
21. Headings................................................10
TABLE OF SCHEDULES
Section
Schedule "Z" Schedule of Defined Terms 1.1
AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT
PREAMBLE
THIS AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT
(the "Agreement") is made as of June 17, 1996, by and between CALENERGY
OPERATING COMPANY, a Delaware corporation ("CEOC"), and DEL RANCH, L.P., a
California limited partnership ("Owner").
RECITALS
A. Owner owns the Del Ranch Facility located in the Salton
Sea Known Geothermal Resource Area ("SSKGRA").
B. Owner intends to operate the Del Ranch Facility under the
following operating agreements: (i) an Operating and Maintenance Agreement by
and between Owner and CEOC pursuant to which CEOC will operate the Del Ranch
Facility on behalf of Owner; (ii) a Technology Transfer Agreement by and
between Owner and Magma Power Company, a Nevada corporation ("Magma") pursuant
to which Magma will provide Owner with the nonexclusive right to use certain
"Technology" and "Know-How" in connection with the operation of the Del Ranch
Facility; (iii) a Ground Lease by and between Owner, as lessee, and Magma, as
lessor, pursuant to which Magma will lease to Owner the real property upon
which the Del Ranch Facility is located; (iv) an Easement Grant Deed and
Agreement Regarding Rights for Geothermal Development by and between Owner 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 (v) a Power Purchase Contract by and
between Owner and Southern California Edison Company.
C. Owner desires to exploit CEOC's administrative and
management resources, and to that end Owner desires to employ, hire or
otherwise retain the administrative and management services of CEOC, in
addition to the Services provided pursuant to the Operating and Maintenance
Agreement, for purposes of administering the functions of the Del Ranch
Facility.
D. Owner and CEOC desire to enter into this Agreement
pursuant to which CEOC, for a fee and in addition to the Services provided
pursuant to the Operating and Maintenance Agreement, will provide day-to-day
administrative and management services as more fully described herein, which
administrative and management services shall include normal day-to-day
administrative and management services and shall not include services which,
although occurring in the
ordinary course of Owner's business, are not of a nature ordinarily occurring on
a day-to-day basis. In consideration for services not of a day-to-day nature
provided by CEOC hereunder, Owner shall compensate CEOC for, among other things,
all costs and expenses actually incurred by CEOC in providing such services, as
more particularly described herein.
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.
1.1 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, which shall be
incorporated by reference herein.
1.2 In addition to the terms defined pursuant
to Section 1.1 hereof, the following definitions shall apply
for purposes of this Agreement:
"CPI" means the Consumer Price Index of
the Bureau of Labor Statistics of the Department of Labor for All Urban
Consumers, All Items, for the Los Angeles-Anaheim-Riverside Metropolitan Area.
In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall
be discontinued, then the index most nearly the same as the CPI shall be
deemed to be the CPI for purposes of this Agreement. In the event that Owner
and CEOC cannot agree on such alternative index, then the matter shall be
submitted for decision by an arbitrator or arbitrators in accordance with
Section 10 hereof.
"CPI Adjustment" means an amount equal
to $800,000 multiplied by a fraction, the numerator of which shall be the CPI
for August of the year for which the calculation is to be made, and the
denominator of which shall be the CPI for August of 1988, but in no event
shall such CPI Adjustment be less than $800,000.
"Floor" means the minimum annual
Administration Fee which, for the years indicated below, shall be an amount
calculated as follows:
Year Calculation
---- -----------
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1989 $66,667 multiplied by the number
of months in 1989 following and
including the month on which that
certain Construction Management and
Asset Transfer Agreement dated as
of March 14, 1988, as amended,
between Magma and Owner terminated
in accordance with its terms.
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For each of The greater of (a) the Floor for
1990 the year immediately preceding the
through the year for which the calculation is
end of the being made and (b) the CDI
term of this Adjustment for the year in which the
Agreement. calculation is being made.
2. Ordinary Services. In consideration of the payment by
Owner to CEOC of the Administration Fee as provided in Section 5 hereof, CEOC
agrees to perform during the term of this Agreement those functions normally
considered part of the day-to-day administrative and management activities for
facilities similar to the Del Ranch Facility as determined by Owner which are
not within the scope of Services to be provided by CEOC to Owner pursuant to
the Operating and Maintenance Agreement. The Ordinary Services to be provided
hereunder include, without limitation, (i) general bookkeeping and financial
accounting, (ii) general legal services (but not legal services of an
extraordinary nature including, without limitation, legal services in
connection with litigation or administrative proceedings), (iii) personnel
administration and payroll services, (iv) cash management services, (v) energy
production oversight and the determination of output levels; (vi) consulting
services with respect to geothermal electrical energy production and (vii)
assisting Owner in obtaining any franchises, permits, licenses, easements or
rights-of-way necessary for continued operation of the Del Ranch Facility.
3. Extraordinary Services. In consideration of the
compensation of CEOC by Owner as provided in Section 7 hereof, CEOC agrees to
perform during the term of this Agreement, as Extraordinary Services, any
administrative and management services that may be needed in connection with
the operation of the Del Ranch Facility and (a) which are not included in the
scope of the services delineated in Section 2 hereof or (b) which are not
included in the scope of the Services delineated in the Operating and
Maintenance Agreement.
4. Subcontracting. In connection with CEOC's providing of
the Ordinary Services and Extraordinary Services contemplated by this
Agreement, CEOC may subcontract with or otherwise retain the services of other
Persons including, but not limited to, Magma and other Affiliates of CEOC, and
Owner hereby consents to such subcontracting for purposes of Section 14
hereof. For purposes of this Agreement, any Ordinary Services or Extraordinary
Services performed by such Persons shall be deemed to have been performed by
CEOC.
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5. Administration Fee. In consideration of the provision
of Ordinary Services by CEOC as contemplated by Section 2 hereof, Owner shall
pay CEOC the Administration Fee. The Administration Fee shall be payable in
the manner and in the amount calculated as follows:
(i) For each year, the Administration Fee shall be
3% of the Total Electricity Revenues earned by Owner in such year,
but in no event shall such Administration Fee be less than the Floor
for such year. The Administration Fee in each such year shall be paid
monthly in arrears on the last day of each month in an amount equal
to one-twelfth (1/12) of the Floor for the preceding year; provided,
however, that on December 31 of each year (or as soon thereafter as
is practicable, but in no event later than March 31 of the next
succeeding year), in addition to the amounts otherwise payable to
CEOC under this Section 5(i), Owner shall pay to CEOC the greater of
(a) the amount by which 3% of the Total Electricity Revenues earned
by Owner in such year exceeds the Floor for the preceding year or (b)
the amount by which the CPI Adjustment for the year in which the
calculation is being made exceeds the Floor for the preceding year.
In the event this Agreement terminates other than on December 31 of
the calendar year in which it terminates, the Administration Fee for
such year shall be prorated as provided in Section 7.4(i) hereof.
Notwithstanding anything contained herein that may be construed to
the contrary, and solely for purposes of making the calculations in
this Section 5(i), the Floor for the year preceding 1990 shall be
deemed to equal $800,000.
6. Reimbursement and Other Compensation for Extraordinary
Services.
1. In consideration of the provision by CEOC to
Owner of the Extraordinary Services contemplated by Section 3 hereof, within
thirty (30) days after Owner has received an invoice from CEOC specifying the
Extraordinary Services rendered to Owner by CEOC and the amount to be paid to
CEOC therefor, Owner shall pay to CEOC such specified amount. In charging
Owner for Extraordinary Services under this Section 6, CEOC shall have the
right to charge Owner an amount which shall enable CEOC to (a) recoup the
actual costs and expenses incurred by CEOC in rendering the Extraordinary
Services plus (b) earn a reasonable profit for the Extraordinary Services so
rendered including, without limitation, a reasonable rate of return on CEOC's
invested capital used in connection with the provision by CEOC of the
Extraordinary Services, taking into consideration factors
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including the extent to which CEOC can reasonably expect to earn a return on
its invested capital by utilizing CEOC's equipment and materials for providing
services other than to the Del Ranch Facility. As used in this Section 6.1,
"actual costs and expenses incurred by CEOC" includes, without limitation,
(a) the actual cost to CEOC of goods and materials used by CEOC in rendering
Extraordinary Services, (b) the pro rata cost to CEOC of personnel providing
labor or services in the course of CEOC's provision of Extraordinary Services
and (c) the actual cost to CEOC of retaining another Person, whether Magma or
another Affiliate of CEOC or otherwise, in connection with the provision of
Extraordinary Services. In the event CEOC subcontracts with any Person,
including, without limitation, Magma or another Affiliate as provided in
Section 4 hereof, any payment to CEOC under this Section 6.1 on account
of the Extraordinary Services so subcontracted shall be made to CEOC only to
the extent of the amount charged CEOC by such Person and shall not include any
amounts representing a mark-up by CEOC over the amount so charged.
2. With respect to any calculation of actual costs
and expenses or any allocation of costs contemplated by Section 6.1 hereof,
Owner shall be bound by CEOC's determination thereof unless the same is clearly
erroneous.
7. Term and Termination.
1. Unless terminated as provided in Section 13
hereof, by written agreement between Owner and CEOC as provided in Section 16
hereof, or as hereinafter provided in this Section 7, 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, CEOC 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
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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 as provided in Section 7.1 hereof, Owner and CEOC
shall have the following rights, remedies and obligations in addition to any
other rights, remedies and obligations they may have:
(i) Owner shall pay CEOC, immediately upon
termination, the entire Administration Fee for the year in which the
Agreement is effectively terminated, prorated for the number of
months in such year prior to and including the month in which the
Agreement is effectively terminated, less the amount of the
Administration Fee which is theretofore paid during such year.
(ii) Owner shall pay CEOC all amounts due and
payable to CEOC under Section 6 hereof as of the date the Agreement
is effectively terminated.
8. Disclaimer of CEOC's Liability. CEOC, in providing the
Ordinary Services and the Extraordinary Services provided for herein, shall
use its good faith efforts in providing such services, but CEOC shall not be
liable to Owner for damages arising out of or resulting from the provision of
such Ordinary Services and Extraordinary Services, except to the extent that
such damages arise out of or result from the gross negligence or willful
misconduct or CEOC, nor shall CEOC be liable to Owner for consequential
damages under any circumstances. CEOC shall have no responsibility for the
ability of Owner to effectively operate the Del Ranch Facility or the claims
of third parties arising with respect to the Del Ranch Facility. Owner shall
indemnify and hold harmless CEOC against all liability or responsibility to
Owner or to others for any failure in production, operation or otherwise of
the Del Ranch Facility. CEOC does not warrant and shall not be responsible for
the quality of services or any design, specification, drawing, blueprint,
reproduced tracing, formula, production process or other data or information
furnished by it to Owner in the course of fulfilling its obligations under
this Agreement, but shall furnish such in good faith to the best of CEOC's
knowledge and ability.
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9. 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.
10. 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:
(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 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 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
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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.
11. 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.
12. Force Majeure.
1. Neither Owner nor CEOC 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 CEOC 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 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 suspension of the Agreement under such
Event of Force Majeure upon the giving of written notice by such party to the
9
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.
13. 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 2, 3, 5, 6, or 7 hereof are held invalid
or unenforceable by any court or other relevant authority, Owner and CEOC
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 CEOC do not reach agreement within this period,
CEOC 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.
14. Assignment. Subject to Section 4 hereof, neither Owner
nor CEOC 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 consent shall not
be unreasonably withheld.
15. 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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16. 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 Administrative Services Agreement
dated as of March 14, 1988 (the "Original Administrative Services Agreement")
between Owner and CEOC 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 Administrative Services Agreement.
This Agreement may be amended only by a writing signed by a duly authorized
representative of both parties.
17. 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 CEOC at:
CalEnergy Operating Company
302 South 36th Street
Suite 400-C
Omaha, Nebraska 68131
Attention: General Counsel
To Owner at:
Del Ranch, L.P.
302 South 36th Street, Suite 400-C
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 CEOC or Owner, as the
case may be, at their respective addresses aforesaid.
18. 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.
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19. Exhibits. All exhibits and schedules attached hereto
are hereby incorporated herein by this reference.
20. 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.
21. Headings. The headings herein are for reference only
and shall not affect the construction of this Agreement.
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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.
CEOC:
CALENERGY OPERATING COMPANY,
a Delaware corporation
By: /s/ John G. Sylvia
______________________________
Name: John G. Sylvia
______________________________
Title: Senior Vice President
______________________________
OWNER:
DEL RANCH, L.P., a California limited
partnership
By: CALENERGY OPERATING COMPANY,
a Delaware corporation, as General Partner
By: /s/ John G. Sylvia
______________________________
Name: John G. Sylvia
______________________________
Title: Senior Vice President
______________________________