Exhibit 10.16(a)
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A.1.e.(12)
SECOND AMENDED AND RESTATED SAGEBRUSH
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GENERAL CO-OWNERSHIP PARTNERSHIP AGREEMENT
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THIS SECOND AMENDED AND RESTATED SAGEBRUSH GENERAL CO-OWNERSHIP
PARTNERSHIP AGREEMENT ("Amended Agreement") is made and entered into as of
September 1, 1989 by and among ALPHA MARIAH, INC., a California corporation
("Alpha Mariah" or "AM"), BETA MARIAH, INC., a California corporation ("Beta
Mariah" or "BM"), GAMMA MARIAH, INC., a California corporation ("Gamma Mariah"
or "GM"), DELTA MARIAH, INC., a California corporation ("Delta Mariah" or "DM"),
ALPHA WILLOW, INC., a California corporation ("Alpha Willow" or "AW"), BETA
JOSHUA, INC., a California corporation ("Beta Joshua" or "BJ"), ALPHA JOSHUA,
INC., a California corporation ("Alpha Joshua" or "AJ"), ALPHA JOSHUA (PRIME),
INC., a California corporation ("Alpha Joshua (Prime)" or "AJ-1"), BETA WILLOW,
INC., a California corporation ("Beta Willow" or "BW"), BETA WILLOW (PRIME),
INC., a California corporation ("Beta Willow (Prime)" or "BW-1"), SAGEBRUSH
PARTNER ELEVEN, INC., a California corporation ("SP11"), SAGEBRUSH PARTNER
TWELVE, INC., a California corporation ("SP12"), SAGEBRUSH PARTNER THIRTEEN,
INC., a California corporation ("SP13"), SAGEBRUSH PARTNER FOURTEEN, INC., a
California corporation ("SP14"), SAGEBRUSH PARTNER FIFTEEN, INC., a California
corporation ("SP15"), SAGEBRUSH PARTNER SIXTEEN, INC., a California corporation
("SP16"), SAGEBRUSH PARTNER SEVENTEEN, INC., a California corporation ("SP17"),
SAGEBRUSH PARTNER EIGHTEEN, INC., a California corporation ("SP18"), SAGEBRUSH
PARTNER NINETEEN, INC., a California corporation ("SP19"), SAGEBRUSH PARTNER
TWENTY, INC., a California corporation ("SP20"), and SAGEBRUSH PARTNER
TWENTY-ONE, INC., a California corporation ("SP21") (collectively, the
"Partners").
WITNESSETH
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WHEREAS, each of the Partners, or their respective Partner Affiliate, intends to
develop, or sell its interest in the Partnership to a party who will develop,
wind energy or other renewable energy projects ("Projects") near the town of
Mojave in Kern County, California and said Projects will be Qualifying
Facilities, as that term is defined in the Regulations of the Federal Energy
Regulatory Commission ("FERC"), 18 CFR Part 292, adopted to implement certain
provisions of the Public Utility Regulatory Policies Act of 1978 ("PURPA");
WHEREAS, all of the electrical power generated by the Projects of the Partners
or of Partner Affiliates will be sold to Southern California Edison Company
("SCE") pursuant to power purchase contracts ("Power Purchase Contracts") that
each of the Partners, or their respective Partner Affiliate, will have with SCE;
WHEREAS, the Partners desire, for reasons of economic efficiency, to develop,
build, own and operate jointly an electrical power transmission line from the
locale of their or their Partner Affiliates' Projects near Mojave, California to
SCE's Substation at Vincent, California and have acquired all of the partnership
interests of the Partnership for that purpose; and,
WHEREAS, the Partners wish to amend and to restate their partnership agreement
to reflect their understanding of how they intend to develop, build, own and
operate jointly said electrical power transmission line;
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
Partners do hereby reform this general partnership pursuant to the California
Uniform Partnership Act and in accordance with the terms and conditions of this
Amended Agreement (as so reformed, the "Partnership").
1. Definitions.
1.1. Active Partner shall be a Partner satisfying the prerequisites
for an Active Partner set forth in Section 8.1.
1.2. Adjusted Basis shall mean, at any time relevant herein, the
Partnership's adjusted basis in any Partnership asset, as determined for Federal
income tax purposes pursuant to Section 1011 of the Code.
1.3. Affiliate shall mean with respect to a Partner any other person
that directly or indirectly controls or is controlled by or is under common
control with the person in question or who holds or beneficially owns 25% or
more of the equity or beneficial interest in the specified person or 25% or more
of any class of voting securities of the specified person. For purposes of this
definition, the term "control" (including the correlative meanings of the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
1.4. Agreed Value shall mean the fair market value of Contributed
Property as of the time of contribution, as determined by the Partnership and
the Partner making the contribution, such property contributed by those Partners
other than Beta Joshua, Alpha Joshua, Alpha Joshua (Prime), Beta Willow, and
Beta Willow (Prime), having the fair market value set forth in Section 6.1.
1.5. Bankruptcy shall mean, with respect to any Partner, when such
Partner makes an assignment for the benefit of creditors, files a petition in
bankruptcy, voluntarily, takes advantage of any bankruptcy or insolvency laws or
is adjudicated a bankrupt or judicially insolvent or, if a petition or an answer
is filed proposing the adjudication of such Partner as a bankruptcy, when such
Partner shall consent to the filing thereof or sixty (60) days after the filing
thereof unless the same shall have been discharged, opposed, or denied prior
thereto.
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1.6. Capital Contribution shall mean any Cash Contribution and the
Agreed Value of any Contributed Property which a Partner (or predecessor in
interest) contributes to the Partnership.
1.7. Capital Proceeds shall mean the aggregate net proceeds from (i)
the sale or other disposition of all or a material portion of the Partnership's
assets other than in the ordinary course of business, (ii) title or fire and
extended casualty coverage insurance, and (iii) a taking of all or a portion of
the Transmission Line by condemnation or other right of eminent domain.
1.8. Carrying Value shall mean as of the time of determination, (i)
with respect to Contributed Property, the Agreed Value of such property reduced
(but not below zero) by the depreciation deductions, or amortization deductions
charged to the capital accounts pursuant to Section 7.1 with respect to such
property, and (ii) with respect to any other property, the Adjusted Basis of
such property, in either case subject to book adjustments as set forth in
Treasury Regulations Section 1.704-1(b)(2)(iv)(f) and (g).
1.9. Cash Contribution shall mean the amount of cash which a Partner
(or predecessor in interest) contributes to the Partnership.
1.10. Cash Flow shall mean the amount during any calendar year equal
to gross receipts, if any, from the business of the Partnership.
1.11. Code shall mean the Internal Revenue Code of 1986, as amended
from time to time.
1.12. Contributed Property shall mean any property or other
consideration (other than cash) contributed by a Partner (or predecessor in
interest) to the Partnership.
1.13. Development Agreement shall mean the Amended and Restated.
Development Agreement dated as of September 1, 1989 by and among ToyoWest II, a
California general partnership, the Partnership, and the Partners.
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1.14. Fee Agreement shall mean a separate fee agreements agreement
between each Partner and the Manager pursuant to the terms and conditions of the
Management and Maintenance Agreement.
1.15. Gain or Loss an Disposition shall mean the taxable gain or loss
arising, for Federal income tax purposes, from the sale, exchange or other
taxable disposition of all or a material portion off the Transmission Line as
adjusted pursuant to Section 7.1.
1.16. Inactive Partner shall mean a Partner who is not an Active
Partner.
1.17. Majority in Interest of Active Partners shall mean Active
Partners owning a majority of the Percentage Interests of all Active Partners.
1.18. Management and Maintenance Agreement shall mean the Sagebrush
Management and Maintenance Agreement, dated as of September 1, 1989, among the
Partnership, the Partners and the Manager, and any subsequent management and
maintenance agreement entered into upon termination thereof,
1.19. Manager shall mean the person (which shall not be a Partner)
engaged by the Partnership pursuant to the Management and Maintenance Agreement
to manage the day-to-day operations of the Partnership and to maintain, service
and repair the Transmission Line.
1.20. Mojave Equity shall mean one or more of CIBC Inc., EDS Financial
Corporation and ESI Energy, Inc. as the context requires.
1.21. Mojave Lease or Mojave Leases shall mean all or one of those
Project Leases between a Mojave owner and a lessee of the Project owned by said
Mojave owner.
1.22. Mojave Owner or Mojave Owners shall mean all or any one of (1)
U.S. Trust Company of California, N.A., not in its individual capacity but
solely as Owner Trustee under a Trust Agreement, dated as of September 1, 1989,
with CIBC Inc., (2) Bankers Trust Company of California, N.A. not in its
individual capacity but solely as Owner Trustee under an Owner Trust Agreement,
dated as of October 1, 1989 with EDS Financial Corporation, and (3) Bankers
Trust Company of California, N.A. not in its individual capacity but solely as
Owner Trustee under an Owner Trust Agreement dated as of October 1, 1989 with
ESI Energy, Inc. or any of their respective successors and assigns.
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1.23. MWs shall mean megawatts.
1.24. Net Agreed Value shall mean (i) in the case of cash, the amount
thereof, (ii) in the case of any Contributed Property, the Agreed Value of such
Contributed Property reduced by any indebtedness either assumed by the
Partnership upon such contribution or to which such Contributed Property is
subject when contributed (provided, that property contributed by the Partners
other than Beta Joshua, Alpha Joshua, Alpha Joshua (Prime), Beta Willow, and
Beta Willow (Prime) shall have the Net Agreed Value set forth in Section 6.1
hereto), and (iii) in the case of any property (other than cash) distributed to
a Partner, the fair market value (as determined by an appraiser selected by a
Majority in Interest of Active Partners) of such property at the time of such
distribution reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution.
1.25. Option Agreement shall mean the First Amended and Restated
Option and Second Circuit Agreement, dated as of September 1, 1989, between the
Sagebrush Partnership and Toyo West II and each of the partners of the Sagebrush
Partnership.
1.26. Partner Affiliate shall mean, with respect to a Partner that is
a corporation, the sole shareholder of said Partner.
1.27. Partnership Interest shall mean the interest acquired by a
Partner in the Partnership including, without limitation, such Partner's right:
(a) to its allocable share of the Taxable Income or Loss, Gain or Loss on
Disposition and credits of the Partnership, (b) to its use of the Transmission
Line in accordance with its Percentage Interest, (c) to a distributive share of
the assets of the Partnership, (d) to vote on those matters described in this
Amended Agreement, and (e) to participate in the management and operation of the
Partnership as provided in this Amended Agreement.
1.28. Percentage Interest shall mean a percentage determined by
dividing the number of MWs that is set forth opposite such Partner's name on
Exhibit A to this Amended Agreement, as such Exhibit may be amended from time to
time in accordance with this Amended Agreement, by the Transmission Line Load
Capacity.
1.29. Project shall mean a Partner's or Partner Affiliate's Qualifying
Facility that uses or will use the Transmission Line to deliver its generated
electricity to SCE, or its undivided interest in such Qualifying Facility.
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1.30. Qualifying Facility shall mean a Qualifying Facility as defined
in Title 18, Code of Federal Regulations, Section 292.201 through 292.207, and
any successor thereto.
1.31. Recapture Income shall mean any gain recognized by the
Partnership upon the disposition of any asset of the Partnership which is
characterized as ordinary income due to the recapture (under Section 1245 or
1250 of the Code or otherwise) of deductions previously taken for Federal income
tax purposes with respect to such asset.
1.32. SCE shall mean Southern California Edison Company, a public
utility organized under the laws of the State of California.
1.33. SCE Substations shall mean those certain Substations owned by
SCE and located in Antelope, California and in Vincent, California.
1.34. Tax Assumptions shall be as set forth in Exhibit B hereto.
1.35. Tax Assumption opinion shall mean, with respect to any Tax
Assumption, the receipt by the Manager of a written opinion of independent tax
counsel selected by the Tax Matters Partner and reasonably acceptable to Toyo
Menka, if any Affiliate of Toyo Menka or SeaWest Industries, Inc. is a lessee
pursuant to any of the Mojave Leases and the Partner is or will be seeking
indemnity under a Tax Indemnity Agreement, or if no such Affiliate is a lessee
or if no Partner is or will be seeking indemnity under a Tax Indemnity
Agreement, then the Active Partner with the largest Percentage Interest (or its
lessee, if any, or its Partner Affiliate's Lessee, if any), that there does not
exist a basis in law or in fact, as set forth in ABA Formal Opinion 85-352, to
support filing the Partnership's tax return in a manner consistent with such Tax
Assumption.
1.36. Taxable income or Loss shall mean the income or loss of the
Partnership as determined for Federal income tax purposes (but excluding Gain or
Loss on Disposition) as adjusted pursuant to Section 7.1.
1.37. Tax Indemnity Agreement shall mean a tax indemnity agreement by
and between a Mojave Equity and the original lessee under a Mojave Lease.
1.38. Tax Matters Partner shall initially be Alpha Joshua, and if
Alpha Joshua is unable or unwilling to continue to serve as Tax Matters Partner
or is no longer an Affiliate of a Mojave Equity, then Beta Willow shall be Tax
Matters Partner, and if Beta Willow is unable to unwilling to continue to serve
as Tax Matters Partner or is no longer an Affiliate of a Mojave Equity, then
Alpha Joshua (Prime) shall serve as Tax Matters Partner, and if Alpha Joshua
(Prime) is unable or unwilling to serve as Tax Matters Partner or is no longer
an Affiliate of a Mojave Equity, then Beta Willow (Prime) shall serve as Tax
Matters Partner, and if Beta Willow (Prime) is unable to unwilling to serve as
Tax Matters Partner or is no longer an Affiliate of a Mojave Equity, then Beta
Joshua shall be Tax Matters Partner and if Beta Joshua is unwilling or unable to
continue to serve as Tax Matters Partner or is no longer an Affiliate of a
Mojave Equity, then a Partner shall be selected by a Majority in Interest of the
Active Partners to serve as Tax Matters Partner.
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1.39. Technical Use Agreement shall mean those separate agreements to
be entered into by each Partner, or its Partner Affiliate, and the Partnership
for the benefit of the Partnership and each Partner for the purpose of assuring
the safe interconnection of each Partner's, or its Partner Affiliate's, Project
with the Transmission Line and to establish rules and regulations designed to
permit the safe and continuous use of the Transmission Line by the Partners.
1.40. Temporary Period shall have the meaning specified in Section
8.1.2 of this Amended Agreement.
1.41. Toyo Menka shall mean Toyo Menka Kaisha, Ltd., a Japanese
corporation.
1.42. Transmission Line shall mean that certain transmission line
known as the Mojave-Vincent 230 kv Transmission Line, which shall consist of
easements, franchises, licenses or other rights to use real property, electrical
wires, power poles, cabling, switches, transformers, meters, safety equipment,
and fences, the purpose and capacity of which shall be to transmit and deliver
electrical power from the Partners', or Partner Affiliates' Projects located
near the town of Mojave in Kern County, California to the SCE Substations,
initially the one at Antelope and ultimately the one at Vincent, as more
completely described in the Development Agreement.
1.43. Transmission Line Load Capacity shall mean 420 MWs.
1.44. Unrealized Gain shall mean as of any date of determination, the
excess, if any, of the fair market value (as determined by an appraiser selected
by a Majority in Interest of Active Partners) of an item of Partnership property
as of such date over the Carrying Value of such property as of such date of
determination.
1.45. Unrealized Loss shall mean as of any date of determination, the
excess, if any, of the Carrying Value of an item of Partnership property as of
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such date over the fair market value (as determined by an appraiser selected by
a Majority in Interest of Active Partners) of such property as of such date of
determination.
1.46. Unreturned Capital Amount shall mean, with respect to each
Partner, the amount of all Capital Contributions made by such Partner to the
Partnership, decreased by distributions of cash and property to such Partner
pursuant to Section 7.1.3(a).
2. Name.
The name of the Partnership shall be Sagebrush.
3. Purpose.
The sole purpose of the Partnership shall be to obtain fee interests
in real property, easements, franchises, licenses or other rights-of-way for,
and to develop, construct, own, operate and maintain, the Transmission Line for
the benefit of the Partners and to engage in any and all other activities
necessary to, in connection with, or incidental to, the accomplishment of the
foregoing purpose of the Partnership. The Partnership shall have no other
business or purpose. Active Partners, or their respective Partner Affiliates, or
their respective lessees in accordance with Section 10 hereof, shall be entitled
to use the Transmission Line without charge, and not other person shall be
permitted to use the Transmission Line and no person shall be charged for the
transmission of electricity thereon.
4. Term.
The term of the partnership shall end on December 31, 2021, unless
sooner terminated by operation of law or in accordance with the provisions
hereof.
5. Principal Place of Business.
The principal executive office of the Partnership shall be located at
6737 Oak Creek Road, Mojave, CA 93501 or such other place or places as the
Partners may agree upon from time to time.
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6. Capital Contributions/Sharing of Expenses.
6.1. Capital Contributions (a) The Partners shall make Capital
Contributions to the Partnership in the following amounts:
BJ $ 1,974,000
AJ $ 1,232,400
BW $ 1,232,400
AJ-1 $ 1,137,600
BW-1 $ 1,137,600
AM $ 1,974,000
BM $ 1,974,000
GM $ 1,185,000
DM $ 790,000
AW $ 277,000
SB11 $ 2,141,000
SB12 $ 736,000
SB13 $ 398,000
SB14 $ 1,149,000
SB15 $ 6,081,000
SB16 $ 1,743,000
SB17 $ 1,137,000
SB18 $ 1,706,000
SB19 $ 142,000
SB20 $ 1,592,000
SB21 $ 411,000
(b) The Capital Contributions shall be payable in two installments, on
the Initial Closing Date and on the Final Closing Date (each as defined in the
Development Agreement).
(c) On the Initial Closing Date, the Partners shall contribute to the
Partnership cash and the Contributed Property described in Section 6.1(f) below,
all in the amounts indicated in the table which follows:
Contributed
Partner Cash Property
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BJ $ 1,125,999
AJ $ 702,979
BW $ 702,979
AJ-1 $ 648,904
BW-1 $ 648,904
AM $ 1,125,999
BM $ 1,125,999
GM $ 675,942
DM $ 450,628
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AW $ 158,005
SB11 $ 1,221,259
SB12 $ 419,825
SB13 $ 227,025
SB14 $ 655,407
SB15 $ 3,468,694
SB16 $ 994,233
SB17 $ 648,562
SB18 $ 973,128
SB19 $ 80,999
SB20 $ 908,101
SB21 $ 234,441
(d) On the Final Closing Date, the Partners shall contribute to the
Partnership cash and the Contributed Property described in Section 6.1(f) below,
all in the amounts indicated in the table which follows:
Contributed
Partner Cash Property
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BJ $ 848,001
AJ $ 529,421
BW $ 529,421
AJ-1 $ 488,696
BW-1 $ 488,696
AM $ 848,001
BM $ 848,001
GM $ 509,058
DM $ 339,372
AW $ 118,995
SB11 $ 919,741
SB12 $ 316,175
SB13 $ 170,975
SB14 $ 493,593
SB15 $ 2,612,306
SB16 $ 748,767
SB17 $ 488,438
SB18 $ 732,872
SB19 $ 61,001
SB20 $ 683,899
SB21 $ 176,559
(e) The Partnership shall use the Capital Contribution made in cash
under Section 6.1(c) and 6.1(d) above to make payments due to ToyoWest II under
the Development Agreement.
(f) With respect to the Capital Contributions made by contribution of
Contributed Property under Sections 6.1(c) and 6.1(d) above, the Partnership and
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the Partners acknowledge that (i) such Contributed Property consists of the
rights of ToyoWest II to be paid under the Development Agreement amounts
equivalent to the Contributed Property; (ii) ToyoWest II contributed such rights
to payment to its wholly-owned subsidiaries which are Partners; and (iii) the
Agreed Value of such Contributed Property is as set forth alongside the name of
each Partner contributing Contributed Property.
(g) Without the consent of each Partner, no other Contributed Property
shall be contributed to the Partnership.
6.2. Except as otherwise provided herein (including without limitation
Section 17.11), any and all expenses of the Partnership shall be shared and
allocated ratably to each Partner in accordance with its Percentage Interest.
The Manager, subject to the exceptions and exclusions set forth in Section 8
hereof and in the Management and Maintenance Agreement, as the same may be
amended from time to time, shall be responsible for the payment of any and all
expenses of the Partnership. No amounts paid to the Manager by a Partner
pursuant to the Management and Maintenance Agreement or its Fee Agreement shall
be treated as a Capital Contribution by such Partner to the Partnership, nor
shall such expenses be reflected as Partnership expenses on the books of the
Partnership. The obligations of the Partners to the Manager or to any other
party with respect to the expenses of the Partnership shall be several
obligations and shall not be joint obligations or joint and several obligations.
6.3. No interest shall be paid on a Capital Contribution.
7. Partnership Not For Profit; Capital Accounts; Cash Distribution and
Allocations.
The Partnership is not organized with the intention or expectation of
making a cash profit from the operation of the Partnership but merely as an
ownership form through which the Partners can accomplish the Partnership purpose
of jointly developing, building, owning, operating and making available for the
use of the Partners and Partner Affiliates in proportion to each Partner's
Percentage interest the Transmission Line. The provisions of this Section 7 are
included on the expectation that the Partnership will be treated as a
partnership under the Code. At no time shall the Transmission Line be used by
any person other than a Partner or Partner Affiliate (except for a lessee as
permitted pursuant to Section 10) and at no time shall there be a fee or charge
for the use of the Transmission Line. Other than from the possible sale or other
disposition of Partnership assets, the Partnership does not expect to receive
any material amount of revenues.
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7.1. Capital Accounts and Cash Distributions.
(a) A separate capital account shall be maintained for each Partner in
accordance with the rules of Treasury Regulation ss. 1.704-1(b)(2)(iv). The
capital account of each Partner shall be:
(x) credited with the sum of (i) the Cash Contributions and the
Net Agreed Value of any Contributed Property contributed to the
Partnership by such Partner and (ii) all Taxable Income and Gain on
Disposition allocated to the Partner pursuant to Section 7.2 (but
without regard to Section 7.2.1(d)) and
(y) debited with the sum of (i) all Taxable Loss and Loss on
Disposition allocated to the Partner pursuant to Section 7.2 (but
without regard to Section 7.2.1(d)) and (ii) all cash and the Net
Agreed value of any property distributed by the Partnership to such
Partner.
Notwithstanding anything to the contrary contained herein, the capital account
of a Partner shall be determined in all events in accordance with the rules set
forth in Treasury Regulation ss. 1.704-1(b)(2)(iv), as the same may be
amended or revised hereafter. To the extent that any provision of this Agreement
is inconsistent with the requirements of Treasury Regulation ss. 1.704-1(b)(2)
(iv), such Treasury Regulation shall control. Any references in this Agreement
to the capital account of a Partner shall be deemed to refer to such capital
account as the same may be credited or debited from time to time as set forth
above. No interest shall be paid on the capital account of any Partner and the
Taxable Income or Loss of the Partnership shall be allocated, each year, prior
to the allocation of the Partnership's Gain or Loss on Disposition for such
year.
(b) For purposes of computing the amount of any item of Taxable Income
or Loss or Gain or Loss on Disposition to be reflected in capital accounts of
the Partners, the determination, recognition and classification of each such
item shall be the same as its determination, recognition and classification for
Federal income tax purposes, except that:
(i) any depreciation, amortization or other cost recovery
deductions attributable to property owned by the Partnership and
any reduction in basis as required by sections 48(q) and 49(d) of
the Code shall be determined based on the Carrying Value of such
Partnership asset as of such date. Depreciation, amortization and
cost recovery deductions for any asset shall mean for any fiscal
year or other period an amount that bears the same ratio to the
Carrying Value of that asset at the beginning of such fiscal year
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or other period as the Federal income tax depreciation,
amortization, or other cost recovery deduction allowable for that
asset for such year or other period bears to the adjusted tax
basis of that asset at the beginning of such year or other
period. If the federal income tax depreciation, amortization or
other cost recovery deduction allowable for any asset for such
year or other period is zero, then depreciation or amortization
deductions for that asset shall be determined with reference to
such beginning Carrying Value using any method selected by the
unanimous consent of the Partners;
(ii) any income, gain or loss attributable to the taxable
disposition of any Partnership asset shall he determined by the
Partnership as if the Adjusted Basis of such Partnership asset on
the date of disposition was equal to the Carrying Value of such
Partnership asset as of such date;
(iii) in accordance with Treasury Regulation ss. 1.704-1(b)
(2)(iv)(j) if the Partnership's Adjusted Basis in any "section
38" property is reduced pursuant to Section 48 (q) of the Code,
the amount of such reduction (computed a set forth in (i) above)
shall be treated as an additional depreciation deduction for the
year in which such reduction occurs and shall be allocated to
those Partners whose allocable share of basis in Partnership
assets is reduced pursuant to Section 48(q) and/or 49(d) of the
Code in proportion to the amounts of any such reduction; and any
restoration of any such reduction in Adjusted Basis (computed as
set forth in (i) above) shall be allocated to the Partners in the
same proportions as the investment tax credit recapture with
respect to such "section 38" property is borne by the Partners;
(iv) in the event that the Partnership determines to make
any distribution to a Partner other than in cash (such
determination to be made with the consent of all Partners), the
capital accounts of the Partners, immediately prior to such
distribution, shall be adjusted upwards or downwards to reflect
any Unrealized Gain or Unrealized Loss attributable to the
distributed property (as if such Unrealized Gain or Unrealized
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Loss had been recognized by the Partnership upon an actual sale
of the property immediately prior to its distribution);
(v) the computation of all items of income, gain, loss and
deduction shall be made (a) without regard to any election under
Section 754 of the Code which may be made by the Partnership
(except to the extent required by Treasury Regulation ss. 1.704-l
(b)(2)(iv)(m)(3)) and, (b) by taking into account those items
described in Section 705 (a)(1)(B) or Section 705 (a)(2)(B)
of the Code (or which are treated as Section 705(a)(2)(B)
expenditures under Treasury Regulation ss. 1.704-1(b)(2)(iv)
(i)) without regard to the fact that such items are not includable
in gross income or are neither currently deductible nor
capitalizable for Federal income tax purposes.
(c) Generally, a transferee of a Partnership interest shall succeed to
the capital account attributable to the interest transferred, and there shall be
no adjustment to the capital accounts as a result of such transfer. However, if
the transfer causes a termination of the Partnership under Section 708(b)(1)(B)
of the Code, Partnership property shall be deemed to have been distributed in
liquidation of the Partnership to the Partners existing immediately subsequent
to the transfer, and recontributed by such Partner in reconstitution of the
Partnership. Upon such recontribution, the Partnership properties shall be
treated as Contributed Property and the capital accounts of the Partners in the
reconstituted Partnership shall be maintained in accordance with the principles
of Sections 7.1 and 7.2.
(d) Consistent with the provisions of Treasury Regulation Section
1.704-1(b)(2)(iv)(f), on the Partnership's grant of a Partnership Interest to
any person in exchange for a contribution of cash or Contributed Property to the
Partnership or the distribution of cash or property by the Partnership to a
Partner as consideration for a Partnership Interest, the capital accounts of all
Partners and the Carrying Value of each Partnership property immediately prior
to such grant shall be adjusted upward or downward to reflect any Unrealized
Gain or Unrealized Loss attributable to such Partnership property, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property immediately prior to such grant or distribution and had been
allocated to the partners at such time pursuant to Section 7.2 hereof.
7.1.1. Negative Capital Accounts. On a Liquidation of the
Partnership as defined in Section 13.6 (or of a Partner's Partnership Interest
pursuant to Section 15 hereof), each Partner or such Withdrawing Partner shall
be required to pay to the Partnership any deficit amount in its capital account
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(such account to be determined after taking into account the allocation of tax
items provided for in Sections 7.1 and 7.2) by the end of the Partnership's
taxable year during which such liquidation occurs (or, if later, within 90 days
following such liquidation).
7.1.2. Distributions of Cash Flow. The Manager shall distribute
the Cash Flow of the Partnership to each Partner at the close of each fiscal
quarter in proportion to its then Percentage Interest in the Partnership; less
(i) any amounts owed by such Partner pursuant to the Management and Maintenance
Agreement and the Fee Agreement and (ii) any amount owed by such Partner to
other Partners pursuant to Section 17.11 of this Amended Agreement.
7.1.3. Distribution of Capital Proceeds. Except as provided in
Section 13.6, the Manager shall distribute the Capital Proceeds of the
Partnership to each Partner (after deducting (i) any amounts owed by such
Partner pursuant to the Management and Maintenance Agreement and the Fee
Agreement and (ii) any amount owed by such Partner to other Partners pursuant to
Section 17.11 of this Amended Agreement):
(a) First, to each Partner with an Unreturned Capital Amount in
proportion to the outstanding balance of each Partner's Unreturned Capital
Amount, until the outstanding balance of each Partner's Unreturned Capital
Amount is eliminated; and
(b) Second, to each Partner in proportion to its then Percentage
Interest.
7.2. Allocations.
7.2.1. Allocations.
(a) Except as otherwise provided herein, Taxable Income and Loss and
"qualified investment" in Section 38 property (within the meaning of Section
46(c) of the Code) shall be allocated to the Partners each period, for Federal
income tax purposes, in proportion to the Partners' then respective Percentage
Interests. Notwithstanding the foregoing, to the extent any expenses are paid by
the Partnership, or are deemed to be paid by the Partnership, with Capital
Contributions of a Partner or deemed Capital Contributions of a Partner, such
expenses shall be allocated to such Partner.
(b) Gain on Disposition shall be allocated first, to the Partners in
proportion to and to the extent of any deficit balances in their respective
capital accounts until all such capital accounts shall have been restored to
zero; second, to each of the Partners, with a positive Unreturned Capital Amount
in excess of its capital account (a "Capital Shortage" ), in proportion to such
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Capital Shortages, until all Capital Shortages are eliminated; next, to the
Partners until their Capital Excess Amounts (as defined below), if any, are in
the ratio of their Percentage Interests or as close thereto as possible (the
term "Capital Excess Amount" shall mean the amount, if any, by which a Partner's
---------------------
positive capital account balance exceeds its Unreturned Capital Amount balance);
and thereafter, to the Partners in proportion to their then Percentage
Interests.
(c) Loss on Disposition shall be allocated first, to each of the
Partners, with a Capital Excess Amount, in proportion to such Capital Excess
Amounts, until all capital Excess Amounts are eliminated; next, in the event
that any Partner has a Capital Shortage, to the Partners in the minimum amount
necessary to cause the Partners' positive capital account balances to be in the
ratio of their outstanding balances of Unreturned Capital Amounts (or as close
thereto as possible), and then to the Partners in proportion to their Unreturned
Capital Amounts until no Partner has a positive capital account balance; and
thereafter in proportion to their then Percentage Interests.
(d) In case of Contributed Property, items of income, gain, loss or
deduction attributable thereto (including depreciation) shall be allocated, for
Federal income tax purposes, first, among the Partners in a manner that takes
into account the variation between the Agreed Value of such property and its
Adjusted Basis at the time of contribution (in accordance with Section 704(c) of
the Code) and second, any such remaining items shall be allocated in accordance
with Section 7.2.1(a), (b) or (c), as appropriate.
(e) To the extent of any Recapture Income resulting from the sale or
other taxable disposition of a Partnership asset, the amount of any gain from
such disposition allocated to (or recognized by) each of the Partners pursuant
to the above provisions shall be deemed to be Recapture Income to the extent
such Partner (or a predecessor in interest) has been allocated or has claimed
any deduction, or has been allocated a reduction in basis pursuant to Section
48(q) of the Code, directly or indirectly giving rise to the treatment of such
gains Recapture Income.
(f) In the case of any transfer of a Partner's Partnership Interest in
the middle of a taxable year all Taxable Income and Loss shall be allocated on a
pro rata basis, based on the number of days that each person was a Partner of
the Partnership and the Partnership Interests held by such person during each of
such days, without any interim closing of the books.
(g) Notwithstanding the provisions of this Section 7.2.1. in the event
income is recognized by the Partnership because of and at the time of the
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contributions of Contributed Property by a Partner on the Initial Closing Date
or Final Closing Date, then all such income shall be allocated to the Partner
that contributed such Contributed Property, prior to the allocations pursuant to
Sections 7.2.1(a)-(f) above.
Any adjustment made pursuant to the foregoing sentence that is
required by Treasury Regulation Section 1.704-1(b) (2) (iv) to be reflected in a
Partner's capital account shall immediately be offset by a negative adjustment
to the Net Agreed Value of Contributed Property contributed by such Partner so
that such Partner's capital account immediately subsequent to both of the
adjustments provided in this Section 7.2.1(g) shall equal the Net Agreed Value
of such Contributed Property immediately prior to the adjustment provided in
this Section.
7.2.2. Upholding of Tax Benefits.
(a) It is intended that the allocations under this Section shall
effect allocations for Federal income tax purposes in a manner consistent with
Sections 704(b) and 704(c) of the Code and comply with any limitations or
restrictions therein.
(b) For federal income tax purposes, every item of income gain, loss,
and deduction shall be allocated among the Partners in accordance with the
allocations under Section 7.2 of this Amended Agreement.
7.2.3 Tax Elections. The Manager may determine whether to make
or to revoke, or to seek the revocation of any election available for Federal,
state or local income tax purposes (including, without limitation, the elections
provided for in Sections 167, 168 and 754 of the Code); provided, however, that
the Manager shall make the election under Section 754 of the Code at the request
of any Partner (but such Partner, and its successor in interest, shall
thereafter bear any increased accounting or similar cost entailed by the making
of such election); and provided that the Manager shall take no action that is
inconsistent with the Tax Assumptions.
8. Management.
8.1. Active and Inactive Partners.
8.1.1. The Partners of the Partnership shall be either Active
Partners or Inactive Partners. All Partners who are not Active Partners are
Inactive Partners. Active Partners are Partners that are currently entitled to
make use of the Transmission Line for transmitting electricity from said
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Partner's (or its Partner Affiliate's) Project to SCE; for this purpose, a
Partner (or its Partner Affiliate) shall be treated as so entitled
notwithstanding the lease or license of use of the Transmission Line to a Lessee
pursuant to Section 10. All Partners, both Active and Inactive Partners, are
required to execute and comply with the Management Maintenance Agreement and
separate Fee Agreement with the Manager. To be an Active Partner a Partner must,
in addition, meet and continue to fulfill the following qualifications: (i) the
Partner, or its Partner Affiliate, must own a Project, and (ii) the Partner or
its Partner Affiliate must have executed and be in full compliance with the
Technical Use Agreement with the Partnership. Partners who meet the foregoing
qualifications shall be Active Partners, and Active Partners, or their Partner
Affiliates, shall be entitled to make use of the Transmission Line for
transmitting electricity from said Partner's, or from said Partner Affiliate's,
Project to SCE and shall be entitled to participate more fully in the management
of the Partnership than Inactive Partners. The Manager shall maintain a list of
the Partners who are Active Partners. A Partner who has once become an Active
Partner shall cease to be an Active Partner, shall be an Inactive Partner, and
shall lose the privilege of being able to make use of the Transmission Line, if,
and for the period of time that: (a) the Project of said Partner or its Partner
Affiliate is not a Qualifying Facility or, even though it is a Qualifying
Facility, the Project is of a size or operated in a manner which would deny the
exemption set forth in 18 CFR 292.601 and 18 CFR 292.602 to any other Partner or
Partner Affiliate or any similar exceptions arising under state law or (b) said
Partner or its Partner Affiliate is in material breach of the Management and
Maintenance Agreement, its Fee Agreement, the Technical Use Agreement, or this
Amended Agreement, provided that the Partner has received written notice of said
material breach from the Manager and, for a period of at least thirty (30) days,
said Partner fails to cure said breach.
8.1.2. Alpha Joshua, Alpha Joshua (Prime), Beta Willow and Beta
Willow (Prime) shall each be deemed to be Active Partners, notwithstanding the
non-fulfillment of the condition specified in Section 8.1.1(i) above, for a
temporary period ending on the earlier of March 31, 1990 or the date of transfer
of all of the beneficial interest in the stock of such Partner (the "Temporary
Period"), and shall be entitled to use, or to license the proposed lessee of
its Partner Affiliate to use, the Transmission Line in accordance with the terms
of this Amended Agreement for the purpose off completion of construction and
performance testing of a Project being developed for and to be acquired by such
Partner or Partner Affiliate. Upon the conclusion of the Temporary Period, each
of the above-named Partners shall cease to be Active Partners (and the temporary
use of the Transmission Line permitted pursuant to this Section shall
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terminate). The above provisions shall not apply and the Temporary Period shall
terminate once such Partner shall have satisfied all of the conditions to
becoming an Active Partner set forth in Section 8.1.1 above.
8.2. Overall Management. All Partners shall be entitled to participate
in the management of the Partnership, although Active Partners shall have more
management rights than Inactive Partners. Any act or action requiring a decision
of the Partnership shall be made by the vote of all of the Partners or of just
the Active partners or of just a Majority in Interest of the Active Partners, as
is provided in Section 8.6 below.
8.3. Day-to-Day Management and Transmission Line Service, Maintenance
and Repair. The day-to-day management of the Partnership and the service,
maintenance and repair of the Transmission Line shall be contracted to the
Manager, which shall be a third person and not a Partner, pursuant to the
Management and Maintenance Agreement approved by the Partners. Pursuant to said
Management and Maintenance Agreement, the Manager shall be responsible for
managing the day-to-day operations of the Partnership and the Transmission Line,
for providing for the service, maintenance and repair of the Transmission Line,
for maintaining the Partnership's books and records, and for managing the
Partnership's funds and assets, all pursuant to such direction and control of
the Partners as is set forth in said Management and Maintenance Agreement.
8.4. Tax Matters Partner. The Tax Matters Partner shall have those
duties ascribed to a "tax matters partner" pursuant to Sections 6221 through
6232 of the Code. The Tax Matters Partner shall contest, at the request of a
Mojave Owner or its indemnitor, any proposed adjustment by the Internal Revenue
Service or any state or local taxing authority to the extent and subject to the
conditions, including the payment of all fees and expenses, set forth in any of
the Tax Indemnity Agreements, as the same may be amended from time to time. The
Tax Matters Partners shall also contest any proposed adjustment by the Internal
Revenue Service or any state or local taxing authority if and when requested by
a Majority in Interest of the Active Partners and in such event all of the fees
and expenses of any such contest shall be shared among the Partners in
proportion to their respective Percentage Interest.
8.5. Tax Returns. The Manager shall timely prepare and file, or cause
to be timely prepared and filed, for the Partnership all required federal, state
and local tax returns with the appropriate authorities, copies of which shall be
distributed to each Partner no later than sixty (60) days after the end of the
tax year and at least thirty (30) days prior to the filing thereof. The federal
income tax returns shall be prepared and filed in a manner consistent with the
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Tax Assumptions unless contrary to a Tax Assumption Opinion. In the event that
the Management and Maintenance Agreement is not in effect, then the cost or
preparing such tax returns, if any, shall be an expense of the Partnership. Each
Partner shall have the right to examine all of the Partnership's completed tax
returns at any time.
8.6. Actions Requiring Consent of the Partners.
8.6.1. Unanimous Consent of All Partners. Notwithstanding any
other provisions of this Amended Agreement or of the Management and Maintenance
Agreement, each of the following actions or omissions by the Partnership or any
Partner shall require the prior unanimous written consent of all the Partners:
(a) Any act or omission in contravention of this Amended Agreement;
(b) Possession of property of the Partnership for other than the
purpose of the Partnership as set forth in Section 3, or engagement by the
Partnership in any business other than that contemplated by such Section 3, or
any sale, acquisition, disposition or hypothecation of any asset of the
Partnership which would materially impair or change the business of the
Partnership or the capacity utility, value, or economic life of the Transmission
Line;
(c) Any release, assignment, transfer, mortgage or hypothecation of a
Partnership claim, security, commodity, or any other asset belonging to the
Partnership, other than in the ordinary course of business or in connection with
a matter contemplated by Section 8.6.2(i);
(d) Commingling of funds of the Partnership with funds of any other
person or entity; or,
(e) Any amendment of this Amended Agreement or of the Development
Agreement, or waiver of any provision thereof;
(f) The admission of a new Partner other than as a permitted
transferee under this Amended Agreement; or
(g) Any action or omission which would jeopardize operations of the
Partnership or of the Transmission Line, or the income tax benefits that would
otherwise be realized by any Partner with respect to the Transmission Line or
any Project or the status of the Transmission Line or any Project as a
Qualifying Facility; provided, however, that no consent of a Defaulting Partner
(as defined in the Management and Maintenance Agreement) shall be required
pursuant to this paragraph(g).
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8.6.2. Unanimous Consent of Active Partners Only. Except as
provided in Section 8.6.1 and notwithstanding any other provision of this
Amended Agreement or of the Management and Maintenance Agreement, each of the
following actions or omissions by the Partnership or any Partner shall require
the prior unanimous written consent of all the Active Partners, but not of any
Inactive Partner:
(a) Confession of a judgment against the Partnership;
(b) Except as expressly set forth, in Sections 5.1.5 and 5.3.3 of the
Management and Maintenance Agreement, a pledge of the credit of the Partnership
in any way except in the ordinary course of the Partnership's business;
(c) An assignment for the benefit of the Partnership's creditors;
(d) The borrowing of any money in the name of the Partnership or the
lending of any money belonging to the Partnership;
(e) The voluntary prepayment or extension of debt incurred by the
Partnership;
(f) The approval of all material contracts and agreements to which the
Partnership is or may from time to time become a party including, without
limitation, the Option Agreement, the Management and Maintenance Agreement and
any Technical Use Agreement, but excluding this Amended Agreement and the
Development Agreement, and all amendments, modifications, waivers, consents and
determinations to be made by the Partnership in connection with any such
contract or agreement (but excluding any amendment or waiver of this Amended
Agreement or the Development Agreement requiring consent of all Partners
pursuant to Section 8.6.1(e); provided that the Partnership may, with the
approval of a Majority in Interest of the Active Partners, enter into, and
consent to amendments, modifications, waivers and consents in connection with,
any contract or agreement other than this Amended Agreement, the Management and
Maintenance Agreement, the Option Agreement, the Technical Use Agreement and the
Development Agreement, if such contract, amendment, modification, waiver or
consent shall not adversely affect the capacity, utility, value or economic life
of the Transmission Line;
(g) The selection, removal, and changes in authority and
responsibility of the Manager;
(h) Adoption of and material changes to Partnership accounting
practices and/or treatments; or
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(i) The commencement of litigation or arbitration on behalf of the
Partnership, or the settlement of any litigation or arbitration.
8.6.3. Consent of A Majority In Interest of Active Partners Only.
Any other actions or omissions by the Partnership or any Partner that are not
provided for above and that require an approval of the Partnership or of the
Partners shall require the prior written consent of a Majority in Interest of
the Active Partners.
8.6.4. Consent of Affiliates and Contracting Parties. The consent
of any Partner that is, or is an Affiliate of, (a) a party (other than in its
capacity as a Partner) to an existing or proposed agreement with the
Partnership, (b) Manager or (c) a party adverse to the Partnership in any
existing or proposed litigation or arbitration shall not be required, and such
Partner shall be disregarded for the purpose of determining unanimity of the
Partners or the Active Partners or a Majority in Interest of the Active
Partners, as appropriate, for the purposes of (w) Section 8.6.1(e) with respect
to the Development Agreement only or 8.6.2(f) with respect to any such
agreement; (x) Section 8.6.2(g) with respect, to matters concerning the Manager;
(y) 8.6.2(i) with respect to any such litigation or arbitration, or (z) 8.6.3 of
this Amended Agreement with respect to any such matters.
8.7. Expenditure of Funds. The prior approval of a Majority in
Interest of the Active Partners shall be required for any expenditure on behalf
of the Partnership in excess of $50,000.
9. Development and Building of the Transmission Line.
The Partnership shall cause the Transmission Line to be developed and
built in accordance with and pursuant to the Development Agreement.
10. Lease of Partner's Project.
Any Partner or Partner Affiliate may lease its interest in a Project
under a lease and related documents (collectively, a "Lease") pursuant to which
such Partner's or such Partner Affiliate's lessee agrees, among other things, to
operate the Project (or interest therein) in a manner such that the Project will
retain its character as a Qualifying Facility, and to assume and discharge all
of the Partner's monetary obligations under this Amended Agreement. Such
Partner, or such Partner Affiliate, shall, and shall be entitled to, grant to
the lessee pursuant to such Lease a license to utilize such Partner's interest
in the Transmission Line for the Project (or interest therein) subject to the
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Lease and to assign its obligations under the Management and Maintenance
Agreement, its Fee Agreement and its Technical Use Agreement, for a term
coextensive with the term of the Lease. During the term of any such Lease, the
other Partners and the Partnership shall look to the lessee for the payment and
discharge of such Partner's monetary obligations which have been assumed by such
lessee. A Partner shall give prompt written notice to the Partnership and the
Manager of the and expiration or earlier termination of any Lease. The
Partnership shall give prompt written notice to the affected Partner if any
lessee defaults in the payment and discharge of any assumed obligation, and such
Partner shall not be considered in default of such obligations hereunder if such
default is cured within sixty (60) days of receipt of such notice from the
Partnership. No such lease, or any license granted or assumption of obligations
contained therein, shall constitute a transfer of any interest in the
Partnership, not of any right, title or interest of the Partner in any assets of
the Partnership or under this Amended Agreement, other than the license to the
use of the Transmission Line referred to above.
11. Allocation of Percentage Interest.
The allocation of Percentage Interests among the Partners is set forth
on Exhibit A attached hereto. Each Active Partner or its Partner Affiliate or a
lessee described in Section 10 is entitled to use, without charge or fee, the
Transmission Line to the extent of such Active Partner's Percentage Interest.
Each Inactive Partner is entitled to become an Active Partner upon compliance
with the provisions of Section 8.1 of this Amended Agreement. Following any
permitted transfer pursuant to Section 12 hereof, the Manager shall revise and
update Exhibit A and distribute a copy thereof to each Partner.
12. Transfer of Partnership Interest.
12.1. Restrictions on Transfer. In no event shall a Partner Affiliate
transfer less than all of the shares of its Partner. In addition, except as
provided in this Section 12 no Partner shall transfer all or any portion of its
Partnership Interest and no Partner Affiliate shall transfer the shares of its
Partner (collectively "transfer" with the recipient of such Partnership Interest
or such shares being a "transferee"), whether voluntarily, by operation of law,
at judicial sale or otherwise, to any person or entity. Any purported transfer
not made in accordance with this Section 12 shall be null and void.
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12.2. Qualifications of Transferee and Procedures for Transfer. The
Partnership and the Partners shall not be bound by an otherwise valid transfer,
and no transferee shall be entitled to use any portion of the Transmission Line,
unless the transferee meets the following qualifications and the transfer is
accomplished in accordance with the following procedures:
(i) The transferee shall demonstrate to the reasonable
satisfaction of the Manager and the Partnership's counsel that
such transferee or its Partner Affiliate is or will be an owner
of a Qualifying Facility (or interest therein) including its
interest in the Transmission Line;
(ii) The transferee's or its Partner Affiliate's Project
will use the Transmission Line solely to deliver to SCE
electrical energy generated by said Project;
(iii) If the transfer is of a Partnership Interest, the
transferee has entered into a Fee Agreement with the Manager to
pay for its share of the Manager's fees and its pro rata share of
reimbursable expenses that is satisfactory to the Manager, and
has become a party to and is in compliance with all the
provisions of the Management and Maintenance Agreement, and, if
the transferee is to become an Active Partner immediately, has
entered into a Technical Use Agreement with the Partnership, and
provides the Partnership with evidence of such satisfactory
arrangements;
(iv) The Percentage Interest related to the Partnership
Interest to be transferred to the transferee equals or exceeds,
in Mws, the product of 1.1 times the Nameplate Capacity Rating of
the transferee's or its Partner Affiliate's, Project, and if the
transfer is of a Partnership Interest, the transferor's retained
Percentage Interest, if any, equals or exceeds, in Mws, the
product of 1.1 times the Nameplate Capacity Rating of the
transferor's retained Project, if any;
(v) A counterpart of the instrument of transfer, executed
and acknowledged by the parties thereto, is delivered to the
Manager and to all of the Partners, and satisfactory evidence is
included with the same that the proposed transferee fulfills all
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of the transferee's qualifications pursuant to this subsection
12.2;
(vi) Any and all necessary third party consents to such
transfer are obtained; and,
(vii) In the opinion of Partnership counsel, reasonably
acceptable to the Active Partners, (a) the transfer will not
cause a termination of the Partnership under Section 708(b) (1)
(B) of the Code, and (b) the transfer will not cause the
Transmission Line or the Project of any Partner or Partner
Affiliate to lose its status as a Qualifying Facility and, (c) if
the Project of any Partner or Partner Affiliate is a Qualifying
Facility that enjoys any or all of the exemptions set forth in 18
C.F.R. 292.601 and 18 C.F.R. 292-602 or any successor thereto or
any similar exemptions arising under state law, that such Project
or Projects will not lose any of such exemptions.
Any proposed transfer that is not objected to within thirty (30) days
of receipt by the Manager and other Partners of the instrument reflecting the
transfer, and which on its face complies with the requirements of this
subsection 12.2, shall be deemed in compliance with Section 12.2. The Manager
shall advise the Partners when the transfer has taken place and shall provide
the Partners with a revised Exhibit A listing all of the Partners and their
respective Percentage Interests.
12.3. Expenses. All reasonable expenses, including attorneys' fees,
incurred by the Partnership or the other Partners in connection with the
proposed transfer of a Partner's Partnership Interest shall be paid by the
transferring Partner or by the transferee to the Manager, for the account of the
Partnership, upon request therefor.
12.4. Assignment For Security Purposes. Notwithstanding anything to
the contrary in this Section 12, any Partner may assign, its Partnership
Interest, or a Partner Affiliate may pledge the shares of a Partner, as security
for a loan that is secured by both its Partnership Interest (or pledged shares)
and by its or its Partner Affiliate's Project or rights to develop a Project
that makes use, or will make use, of the Transmission Line; provided, however,
that said assignment recognizes that any person succeeding to said Partnership
Interest or pledged shares by foreclosure or transfer must comply with all of
the conditions of this Section 12.
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12.5. Exceptions.
(a) BJ or its Partner Affiliate (a Mojave Owner), AJ and BW or their
Partner Affiliate (a Mojave Owner), and AJ-1 and BW-1 or their Partner
Affiliate (a Mojave Owner) has acquired or intends to acquire a Project or
interest in a Project known either as Mojave Project 16, Mojave Project 17, or
Mojave Project 18 (a "Mojave Project") leased or to be leased to a lessee
pursuant to a Mojave Lease as permitted pursuant to Section 10 of this Amended
Agreement (a "Mojave Transferee"). Such Partner (or Partners) or its or their
Partner Affiliate, will be permitted to transfer its or their Partnership
Interest, or all stock of such Partner or Partners, as appropriate, to a Mojave
Transferee during the Temporary Period or in connection with exercise of rights
of such Partner or Partners or its or their Partner Affiliate following the
occurrence of an event of loss or event of default under the terms of the Mojave
Lease with such Mojave Transferee, without being required to comply with Section
12 (except as provided in this Section 12.5) and such transfer shall be a valid
transfer binding on the Partnership and the Partners; provided that such
transfer shall be in connection with a transfer of all rights of such Partner or
Partners and its or their Partner Affiliate in a Mojave Project to such Mojave
Transferee, other than an interest as a secured creditor of such Mojave
Transferee. Such Mojave Transferee shall be liable for all losses, liabilities,
claims and damages of any Partner or the Partnership resulting from such
transfer not being in compliance with Section 12 and shall be deemed to have
assumed all obligations of the transferring Partner or Partners or Partner
Affiliate hereunder, and under the Management and Maintenance Agreement and its
or their Fee Agreements and Technical Use Agreements. Such Mojave Transferee
shall, subsequent to such transfer, take, or in the case of acquisition by such
Mojave Transferee of stock of a Partner or Partners, cause such Partner or
Partners to take, all action necessary to cause such transfer to comply with
Section 12. If upon any such transfer to a Mojave Transferee, all of the terms
and conditions of Section 12 have not been complied with by said Mojave
Transferee, then the relevant Partner shall immediately become an Inactive
Partner, and the relevant Project shall be immediately disconnected from the
Transmission Line, until such time as all of the terms and conditions of Section
12 have been complied with by the Mojave Transferee.
(b) If the Partner, or Partner Affiliate, is an owner trust, then the
trustee of the owner trust (without limitation of its rights in Section 12.5(a))
may assign and delegate its right, title, interest, duties and obligations as
trustee of said owner trust to a successor trustee, or to its beneficiary,
without the necessity of complying with Section 12; provided that such transfer
will not cause the Transmission Line or the Project of any Partner or Partner
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Affiliate to lose its status as a Qualifying Facility and, if the Project of any
Partner or Partner Affiliate is a Qualifying Facility that enjoys all of the
exemptions set forth in 18 C.F.R. 292.601 and 18 C.F.R. 292.602 or any successor
thereto or any similar exemptions arising under state law, that any of such
Project or Projects will not lose any of such exemptions.
13. Dissolution of Partnership,
13.1. Exclusivity. No act, thing, occurrence, event or circumstance
shall cause or result in the dissolution of the Partnership, except the matters
specified in 13.2.
13.2. Dissolution Events and Other Matters. The happening of any one
of the following events or other matters shall work an immediate dissolution of
the Partnership:
(1) The Bankruptcy of any Partner; provided, however, that following
such Bankruptcy, the Partnership shall be immediately reconstituted by all
Partners unless a Majority in Interest of the Active Partners elect not to do
so;
(2) The sale of all or substantially all of the assets of the
Partnership (except that if at least a portion of the purchase price of such
sale is evidenced by a promissory note, the Partnership will not be dissolved by
reason of such sale as long as the Partnership is the holder of such promissory
note);
(3) The unanimous agreement in writing of all of the Partners to
dissolve the Partnership; or
(4) The termination of the term of the Partnership pursuant to Section
4 hereof.
Without limitation on the other provisions hereof, the admission of a
new Partner shall not work a dissolution of the Partnership. Except as provided
in Section 12 and in Section 15, each Partner agrees that, without the consent
of the other Partners, a Partner may not withdraw from the Partnership;
provided, however, that this sentence shall not prevent the voluntary
dissolution of a Partner,
13.3. Right to Continue Partnership Business. In the event of the
dissolution of the Partnership for any permitted reason, and in addition to the
reconstitution of the Partnership following the Bankruptcy of a Partner pursuant
to Section 13.2(1), the Partners shall have the option, upon the consent of all
of them (other than any Partner which may have become bankrupt, resigned,
dissolved or been expelled from the Partnership), to form a new (or reform the
existing) partnership, on such terms and conditions as may be agreed upon, for
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the purpose of continuing the Partnership business. The Partnership Interest of
any Partner that may have become bankrupt, resigned, dissolved or been expelled
from the Partnership shall be liquidated pursuant to Section 13.6. Unless the
Partners so agree (other than any Partner which may have become bankrupt,
resigned, dissolved or been expelled from the Partnership), the Partnership
shall be liquidated and shall immediately commence, to wind-up its affairs as
provided in Section 13.4 hereof.
13.4. Post-Dissolution Matters. Upon the occurrence of any of the
events specified in Section 13.2 (other than in Section 13.2(1), a Majority
in Interest of Active Partners (which would not include any Partner which may
have become bankrupt, dissolved, resigned or been expelled from the Partnership)
shall commence to wind up the affairs of the Partnership and to liquidate its
investments; provided, however, that pursuant to Section 13.3, all of the
Partners (other than any Partners which may have been bankrupt, resigned,
dissolved or been expelled from the Partnership) may agree to form a new (or
reform the existing) Partnership) may agree to form a new (or reform the
existing) Partnership. The Partners and their successors and permitted assignees
shall continue to share Taxable Income or Loss, and Gain or Loss on Disposition
during the period of such liquidation in the same manner and proportion as
immediately before the dissolution (other than any Partners which may have been
bankrupt, resigned, dissolved or been expelled from the Partnership). Following
the payment of all debts and liabilities of the Partnership and all expenses of
liquidation and subject to the right of a Partnership majority to set up such
cash reserves as and for so long as it or they may deem reasonably necessary,
the proceeds of liquidation and any other funds of the Partnership shall be
distributed to the Partners (after deducting from a Partner's distributive share
of such proceeds any sum such Partner owes (i) the Partnership, (ii) another
Partner under 17.11 hereof, or (iii) pursuant to the Management and Maintenance
Agreement or such Partner's Fee Agreement) in accordance with Section 13.6
hereof.
13.5. Termination and Right to Distributions. No Partner shall have
any right to demand or receive property other than cash with respect to any
distribution by the Partnership, including any distribution by the Partnership,
including any distribution upon dissolution and termination of the Partnership
unless such Partner or its Partner Affiliate still owns a Project in which case
the Partner shall have a right to demand a distribution of an undivided interest
in the assets of the Partnership corresponding to its Percentage Interest. Upon
the completion of the liquidation of the Partnership and the distribution of all
Partnership funds, the Partnership shall terminate and the Partners shall
execute any and all documents required in its or their judgment to effectuate
the dissolution and termination of the Partnership. Except as provided in
-28-
Section 7.1.1, each Partner shall look solely to the assets of the Partnership
for all distributions with respect to the Partnership and its capital
contribution thereto and its share of Taxable Income or Loss and Gain or Loss on
Disposition thereof.
13.6. Specified Liquidation. Notwithstanding anything to the contrary
in this Agreement, upon Liquidation (as defined below) of the Partnership, the
proceeds of such Liquidation shall be distributed in accordance with the
positive capital account balances of the Partners, and upon Liquidation of any
Partner's Partnership Interest the proceeds of such Liquidation shall be
distributed in accordance with the positive capital account balance of such
Partner, in each case as determined after taking into account all capital
account adjustments for the Partnership taxable year during which such
Liquidation occurs by the end of such taxable year (or, if later, within 90 days
after the date of such Liquidation). "Liquidation" shall mean (i) when used with
reference to the Partnership, the earlier of (x) the date upon which the
Partnership is terminated under Section 708(b) (1) of the Code or (y) the date
upon which the Partnership ceases to be a going concern, and (ii) when used with
reference to any Partner, the earlier of (x) the date upon which there is a
Liquidation of the Partnership or (y) the date upon which such Partner's entire
Interest. in the Partnership is terminated other than by transfer, assignment or
other disposition to a person other than the Partnership. The Liquidation of a
Partner's entire interest shall be accomplished in accordance with Section 15.
14. Bankruptcy of a Partner.
In the event of a reconstitution of the Partnership following the
Bankruptcy of a Partner, the Partner in Bankruptcy may transfer its Partnership
Interest in accordance with the provisions of Section 12. In the event the
Partner in Bankruptcy chooses not to, or, for any reason whatsoever, is unable
to, transfer its Partnership Interest pursuant to Section 12, then the trustee
or successor-in-interest of the Partner in Bankruptcy shall withdraw from the
Partnership in accordance with the provisions of Section 15; provided, however,
that a Partner in Bankruptcy under Chapter 11 of the United States Bankruptcy
Code may remain a Partner as long as it meets and fulfills all of its duties and
obligations as a Partner pursuant to this Amended Agreement.
15. Withdrawal of a Partner.
15.1. Mandatory Withdrawal. A Partner shall immediately become an
Inactive Partner and its Project or the Project of its Partner Affiliate shall
be immediately disconnected from the Transmission Line if the Project owned or
-29-
operated by such Partner or its Partner Affiliate that utilizes the Transmission
Line shall cease to be a Qualifying Facility (a "Non-Qualifying Facility"). In
addition, the Partner (or its Partner Affiliate) owning or operating such
Non-Qualifying Facility shall be required to withdraw immediately from the
Partnership, and its Percentage Interest shall be re-allocated among the
remaining Partners, unless, within sixty (60) days thereafter, such Partner
obtains an order or no-action letter from FERC, or an opinion of counsel
reasonably acceptable to the Partnership, to the effect that the continued
ownership of the Partnership Interest by such Partner, or the continued
ownership of the disconnected Non-Qualifying Facility by such Partner or its
Partner Affiliate, does not adversely affect (A) the benefit to the other
Partners of the order of FERC set forth at 44 FERC ss. 61,442, as the same may
have been extended or modified by further FERC orders or (B) the Qualifying
Facility status of the Projects owned and operated or leased by the other
Partners or their respective Partner Affiliates or the status of the
Transmission Line as a part of one or more Qualifying Facilities. In the
alternative, if the reasons for Non-Qualifying Facility status relate to the
ownership of the Partnership Interest or the affected Project, the Partner may
elect, within such sixty (60) days, to transfer its Partnership Interest in
accordance with Section 12 hereof, or to transfer the ownership of the Project,
so that the Partner's or the Partner Affiliate's Project shall be a Qualifying
Facility (except as for otherwise permitted by Section 12.5). A Partner
withdrawing from the Partnership pursuant to this Section 15.1 shall promptly
comply with clauses (ii), (iii), and (iv) of Section 15.2.
15.2. Restrictions. Except as provided in Section 15.1, a Partner may
withdraw from the Partnership only as permitted by the provisions of this
Section 15.2. A Partner may not withdraw from the Partnership unless the
withdrawal is accomplished in accordance with all of the following procedures
and requirements:
(i) The withdrawing Partner has given thirty (30) days'
written notice to the Manager and to all other Partners of its
intent to withdraw.
(ii) The withdrawing Partner relinquishes all of its
Partnership Interest subject to the interest of its secured
lenders, to the Partnership, subject to the right of the
withdrawing Partner to receive its capital account as provided
below;
(iii) The withdrawing Partner provides, in a manner
satisfactory to the remaining Partners, for the funding of its
-30-
proportionate share of any unfunded fixed or contingent
liabilities of the Partnership; and,
(iv) The withdrawing Partner repays any indebtedness owed by
it to (x) the Partnership, (y) to another Partner under Section
17.11 hereof, or (z) pursuant to the Management and Maintenance
Agreement or such Partner's Fee Agreement.
Once a Partner has surrendered its Partnership Interest to the
Partnership as set forth above in Section 15.1 or in this Section 15.2, the
withdrawing Partner shall be relieved of all further duties and obligations with
respect to the Partnership, and shall not be entitled to any further benefits
thereof, and the Manager shall allocate among the remaining Partners, in
proportion to their respective Percentage Interests, the Percentage Interest of
the withdrawinq Partner. Upon withdrawal from the Partnership, the withdrawing
Partner's capital account shall be fixed at an amount certain, which amount
certain shall be paid to the withdrawing Partner upon Liquidation of the
Partnership.
15.3. The withdrawal of a Partner pursuant to Section 15.1 or Section
15.2 shall not result in a dissolution of the Partnership.
16. [This Section Intentionally Left Blank]
17. Miscellaneous Provisions.
17.1. Addresses and Notices. The address of each party hereto for all
purposes hereof shall be the address set forth below or such other address of
which all other parties hereto have received written notice. All communications
or notices provided for or permitted hereunder shall be in writing, and may be
personally delivered (including delivery by private courier services), or sent
by telex, telecopy or other direct written electronic means, charges prepaid, or
by overnight express mail charges prepaid, to the party entitled thereto. Any
communication or notice so personally delivered shall be deemed to have been
validly and effectively given on the date of such delivery. Any communication or
notice so transmitted by telex, telecopy or other direct written electronic
means shall be deemed to have been validly and effectively given on the date on
which it is transmitted so long as it is received during normal business hours
and otherwise on the next succeeding business day. Any communication sent by
overnight express mail shall be deemed to have been validly and effectively
given on the business day following the day of which it was deposited in the
United States mail.
-31-
If to AM: Alpha Mariah, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attention: President
If to BM: Beta Mariah, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attention: President
If to GM Gamma Mariah, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attention: President
If to DM: Delta Mariah, Inc.
1455 Frazee Road
San Diego, CA 92108-1336
Attention: President
If to AW: Alpha Willow, Inc.
1455 Frazee Road
San Diego, CA 92108-1336
Attention: President
If to BJ: U.S. Trust of California, N.A.
555 South Flower Street
Los Angeles, CA 90071
Attention: Corporate Trust Department
With a copy to:
CIBC Leasing, Inc.
425 Lexington Avenue
New York, New York 10017
Attention: Mr. Peter Lofquist
If to AJ or
to BW: c/o Bankers Trust Company of California,
N.A.
50 Fremont Street
San Francisco, California 94015
Attention: Corporation Trust and Agency
Group
With copies to:
-32-
EDS Financial Corporation
1925 W. John Carpenter Frwy., 5-B
Irving, Texas 75063
Attention: Mr. Sam M. Ray
If to AJ-1
or to
BW-1: c/o Bankers Trust Company of California,
N.A.
50 Fremont Street
San Francisco, California 94105
Attention: Corporation Trust and Agency
Group
With copies to:
ESI Energy, Inc.
100 Australian Avenue, #304
West Palm Beach, Florida 33406
Attention: Kenneth W. Oberg, Vice
President
and
Dewey, Ballatine, Bushby,
Palmer & Wood
140 Broadway
New York, New York 10005
Attention: Thomas C. Mazza, Esq.
-33-
If to SP11: Sagebrush Partner Eleven, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP12: Sagebrush Partner Twelve, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP13: Sagebrush Partner Thirteen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP14: Sagebrush Partner Fourteen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP15: Sagebrush Partner Fifteen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP16: Sagebrush Partner Sixteen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP17: Sagebrush Partner Seventeen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP18: Sagebrush Partner Eighteen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP19: Sagebrush Partner Nineteen, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP20: Sagebrush Partner Twenty, Inc.
-34-
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
If to SP21: Sagebrush Partner Twenty-One, Inc.
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Attn: President
17.2. Successors and Assigns. This Amended Agreement shall be binding
upon and shall inure to the benefit of the successors and assigns of the
Partners. No party may assign or transfer this Amended Agreement, in whole or in
part, except as provided by Sections 12.1 through 12.5 hereof.
17.3. Waiver. Unless otherwise expressly provided herein, no delay or
omission by the parties hereto in exercising any right or remedy provided for
herein shall constitute a waiver of such rights or remedy and shall not be
construed as a bar to or a waiver of any such right or remedy on any future
occasion.
17.4. GOVERNING LAW. THIS AMENDED AGREEMENT SHALL BE GOVERNED BY,
INTERPRETED UNDER, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED WHOLLY
WITHIN THE STATE OF CALIFORNIA.
17.5. Jurisdiction and Venue. The parties hereto agree that any and
all disputes with respect to this Partnership Agreement, or the Management and
Maintenance Agreement, or any Fee Agreement, or the Technical Use Agreement,
shall be resolved by the federal or state courts located in Los Angeles County,
California, and all parties hereto do hereby consent to the jurisdiction and
venue of said courts and hereby waive any and all objections to such
jurisdiction and venue.
17.6 Effect of Section Headings. Section headings appearing in this
Amended Agreement are inserted for convenience or reference only, and shall in
no way be construed to be interpretations of text.
17.7 Amendments. This Amended Agreement may only be modified or
amended by an instrument in writing duly executed and delivered by all of the
parties hereto or their duly authorized representatives.
17.8 Entire Agreement. The terms and conditions set forth herein
constitute the complete and exclusive statement of the agreement between the
-35-
Partners relating to the subject matter of this Amended Agreement, superseding
all previous negotiations and understandings.
17.9 Further Assurances. The parties agree to do such further acts and
things and to execute and deliver such additional agreements and instruments as
the other parties may reasonably require to consummate, evidence or confirm the
agreements, contained herein in the manner contemplated hereby.
17.10 Partial Invalidity. If any provision of this Amended Agreement
is found to be invalid by any court, the invalidity of such provision shall not
affect the validity of the remaining provisions hereof.
17.11 Cross-Indemnity. Each Partner (each, an "Indemnitor"), for and
on behalf of itself and its agents, successors and assigns, shall defend,
indemnify and hold harmless each other Partner, and each other Partner's Partner
Affiliate, and their respective agents, successors and assigns (each, an
"Indemnitee"), from and against any and all losses, liabilities, claims and
damages incurred by or asserted against an Indemnitee as a result of the
negligence or willful misconduct of such Indemnitor or such Indemnitors breach
of any of its duties or obligations under this Amended Agreement. All of the
obligations of the Partners under this Amended Agreement shall be several
obligations, and shall not be joint obligations or joint and several
obligations.
17.12 Date of Agreement. Although this Amended Agreement is dated as
of the date first above written for convenience, the actual dates of execution
hereof by the parties hereto are respectively the dates set forth under the
signatures hereto, and this Amended Agreement shall be effective on the date
provided below.
-36-
IN WITNESS WHEREOF, the parties hereto have executed this Amended
Agreement on October _____, 1989 with effect as of the date first above written.
ALPHA JOSHUA, INC., BETA WILLOW, INC.,
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
ALPHA JOSHUA (PRIME), INC., BETA WILLOW (PRIME),
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
BETA JOSHUA, INC., ALPHA WILLOW, INC.,
a California corporation a California corporation
By: /s/ By: /s/ Robert L. Eisen
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
ALPHA MARIAH, INC., BETA MARIAH, INC.,
a California corporation a California corporation
By: /s/ Robert L. Eisen By: /s/ Robert L. Eisen
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
GAMMA MARIAH, INC., DELTA MARIAH, INC.,
a California corporation a California corporation
By: /s/ Robert L. Eisen By: /s/ Robert L. Eisen
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
SAGEBRUSH PARTNER ELEVEN, INC., SAGEBRUSH PARTNER TWELVE, INC.,
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
SAGEBRUSH PARTNER THIRTEEN, INC., SAGEBRUSH PARTNER FOURTEEN, INC.,
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
SAGEBRUSH PARTNER FIFTEEN, INC., SAGEBRUSH PARTNER SIXTEEN, INC.,
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
SAGEBRUSH PARTNER SEVENTEEN, INC., SAGEBRUSH PARTNER EIGHTEEN, INC.,
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
SAGEBRUSH PARTNER NINETEEN, INC., SAGEBRUSH PARTNER TWENTY, INC.,
a California corporation a California corporation
By: /s/ By: /s/
---------------------------- ---------------------------------
Its: Its:
--------------------------- --------------------------------
Date: Date:
-------------------------- -------------------------------
SAGEBRUSH PARTNER TWENTY-ONE, INC.,
a California corporation
By: /s/
----------------------------
Its:
---------------------------
Date:
--------------------------
EXHIBIT A
---------
Percentage Interests
Project Percentage Allocated Capital
Partner MW Interests MW Contribution
- --------- ----------- ------------ ----------- --------------
BJ 25.000 MW 6.55 % 27.500 MW 1,974,000
AJ 15.600 MW 4.09 % 17.160 MW 1,232,400
AJ PRIME 14.400 MW 3.77 % 15.840 MW 1,137,600
BW 15.600 MW 4.09 % 17.160 MW 1,232,400
BW PRIME 14.400 MW 3.77 % 15.840 MW 1,137,600
AM 25.000 MW 6.55 % 27.500 MW 1,974,000
BM 25.000 MW 6.55 % 27.500 MW 1,974,,000
GM 15.000 MW 3.93 % 16.500 MW 1,185,000
DM 10.000 MW 2.62 % 11.000 MW 790,000
AW 3.500 MW 0.92 % 3.850 MW 277,000
SP11 27.110 MW 7.10 % 29.821 MW 2,141,000
SP12 9.300 MW 2.44 % 10.230 MW 736,000
SP13 5.030 MW 1.32 % 5.533 MW 398,000
SP14 14.560 MW 3.81 % 16.016 MW 1,149,000
SP15 77.000 MW 20.17 % 84.700 MW 6,081,000
SP16 22.050 MW 5.78 % 24.255 MW 1,743,000
SP17 14.400 MW 3.77 % 15.840 MW 1,137,000
SP18 21.600 MW 5.66 % 23.760 MW 1,706,,000
SP19 1.800 MW 0.47 % 1.9680 MW 142,000
-40-
SP20 20.150 MW 5.25 % 22.165 MW 1,592,000
SP21 5.318 MW 1.36 % 5.850 MW 411,000
Total: 381.818 MW 100.00% 420.000 MW $30,150,000
-41-
EXHIBIT B
Tax Assumptions
The Tax Assumptions set forth below are assumptions to be used solely for the
purpose of preparing and filing the Partnership's Federal tax return and shall
in no way affect any Partner's rights under any other document. These
assumptions shall not be construed as a representation, warranty or covenant as
to any tax consequence.
(1) The Partnership will constitute a partnership as defined in
Section 7701(a) (2) of the Code; each Partner will be treated as a
partner in the Partnership; and each Partner, as a partner in the
Partnership, will be entitled and required to take into account in
computing its Federal taxable income and tax liability its allocable
share of all items of income, gain, deduction and loss of the
Partnership and its share of "qualified investment" in "section 38
property" (within the meaning of Section 46(c) of the Code) of the
Partnership.
(2) The Partnership shall use (a) the calendar year as its
taxable year and (b) the accrual method of accounting.
(3) Each taxable year of the Partnership will consist of a full
twelve-month period except for the Partnership's 1989 taxable year
ending December 31, 1989 (the "1989 Taxable Year").
(4) The 1989 Taxable Year will be a short first taxable year,
within the meaning of Section 168(f)(5) of the Internal Revenue Code
of 1986, as in effect immediately prior to the enactment of the Tax
Reform Act of 1986 (the "1986 Act") (the "Old Code"), and a "short
period" within the meaning of Section 443 of the Code that will
commence by October 31, 1989, and for purposes of determining the
allocation of depreciation deductions allowable under Section 168 of
the Old Code, the Partnership's 1989 Taxable Year will commence on the
date that the Transmission Line (or a portion thereof) is placed in
service by the Partnership.
(5) Prior to the execution and delivery of this Amended Agreement
by the parties thereto, (a) the Transmission Line had not been placed
in service by any person and (b) the Transmission Line was not used by
any person in a manner which would preclude the "original use" thereof
(within the meaning of Section 48(b) of the Code) from commencing with
the Partnership on or after the execution of this Amended Agreement,
-42-
and, at the time the Transmission Line (or a portion thereof) is
placed in service, the Partnership will be the sole owner thereof.
(6) In the hands of the Partnership, the Transmission Line
qualifies and will continue to qualify as property to which the
amendments made by Section 201 of the 1986 Act do not apply and which
(to the extent such property qualifies as "section 38 property" within
the meaning of Section 48(a) of the Code) is "transition property"
within the meaning of Section 49(e)(1) of the Code.
(7) The "unadjusted basis" of the Transmission Line in the hands
of the Partnership is equal to $30,150,000 (the "Total Line Basis").
Of the Total Line Basis, an amount equal to $17,198,024 is
attributable to the portion of the Transmission Line that extends to
the SCE substation at Antelope, California (the "Phase I Property"),
and an amount equal to $12,951,976 is attributable to the portion of
the Transmission Line that extends from Antelope to the SCE substation
at Vincent, California (the "Phase 2 Property").
(8) The Total Line Basis consists of: (a) property that qualifies
as "new section 38 property" within the meaning of Section 48(b) of
the Code and "5-year property" within the meaning of Section 168 (b)
(2) (B) of the Old Code in an amount equal to 56.5% of such basis (the
"ACRS Property"); (b) real property interests that are amortizable on
a straight-line basis over a period of 84 years in an amount equal to
31.4% of such basis (the "Real Property"); (c) interconnection
facilities owned and financed by the Partnership that are amortizable
on a straight-line basis over the 30-year term of the Desert Winds I
Power Purchase Agreement and the Desert Winds III Power Purchase
Agreement in an amount equal to 10.1% of such basis (the "PPA-Related
Property"); and real property interests that are not depreciable or
amortizable equal to 2.0% of the basis.
(9) The Phase 1 Property of the Transmission Line will be placed
in service by October 31, 1989 and the Phase 2 Property will be placed
in service prior to January 1, 1990.
(10) Each Partner that is a Partner on the date that the Phase I
Property is placed in service will be entitled to take into account
separately its share of the Partnership's qualified investment in
-43-
section 38 property equal to such Partner's Percentage Interest of the
portion of the Phase 1 Property that constitutes ACRS Property, and
each such Partner will be entitled to an investment tax credit
pursuant to Section 38 of the Code (the "Investment Credit") equal to
(x) such Partner's Percentage Interest on the date that the Phase 1
Property is placed in service multiplied by (y) 6.5 percent of the
unadjusted basis of the Phase 1 Property that constitutes ACRS
Property in the taxable year of such Partner that includes or ends
with the end of the Partnership's 1989 Taxable Year, all in accordance
with Treasury Regulations Sections l.46-3(f)(2)(i) and 1.704-1
(b)(4)(ii).
(11) Each Partner that is a Partner on the date that the Phase 2
Property is placed in service will be entitled to take into account
separately its share of the Partnership's qualified investment in
Section 38 property equal to such Partner's Percentage Interest of the
portion of the Phase 2 Property that constitutes ACRS Property, and
each such Partner will be entitled to an Investment Credit equal to
(x) such Partner's Percentage interest on the date that the Phase 2
Property is placed in service multiplied by (y) 6.5 percent of the
unadjusted basis of the Phase 2 Property that constitutes ACRS
Property in the taxable year of such Partner that includes or ends
with the end of the Partnership's 1989 Taxable Year, all in accordance
with Treasury Regulations Sections 1.46-3(f)(2)(i) and
1.704-l(b)(4)(ii).
(12) The Partnership will be entitled to deductions, and each
Partner will be entitled to its allocable share of deductions, under
the accelerated cost recovery system of Section 168 of the Old Code
with respect to the "unadjusted basis" (as such term is used in
Section 168(d)(1) of the Old Code) of the portion of the Total Line
Basis that constitutes ACRS Property equal to 93.5% of the unadjusted
basis of such property multiplied by the following percentages in the
taxable year of the Partnership indicated:
-44-
YEAR PERCENTAGE
---- ----------
1989 (X/121 x 15)%
1990 22.00%
1991 21.00%
1992 21.00%
1993 21.00%
1994 (12-X/12 X 15)%
(13) The Partnership will be entitled to amortization deductions,
and each Partner will be entitled to its allocable share of
amortization deductions, with respect to the portions of the cost of
the Phase 1 Property and the Phase 2 Property that constitute Real
Property equal to the unadjusted basis of each such property amortized
on a straight-line basis over a period of 84 years from the date that
each such property is placed in service.
(14) The Partnership will be entitled to amortization deductions,
and each Partner will be entitled to its allocable share of
amortization deductions, with respect to the portions of the cost of
the Phase 1 Property and the Phase 2 Property that constitute
PPA-Related Property equal to the unadjusted basis of each such
property amortized on a straight-line basis over a period of 30 years
from the date that each such property is placed in service.
(15) Each Partner's allocable share of Partnership depreciation
and amortization deductions, shall be proportionate to such Partner's
respective Percentage Interest.
(16) The allocations set forth in the Partnership Agreement have
substantial economic affect, within the meaning of Section 704(b) of
the Code, or, in the case of qualified investment in section 38
property giving rise to Investment Credit, are deemed to be in
accordance with each Partner's Percentage Interest in the Partnership.
(17) No Partner shall be allocated any item of income, gain,
loss, or deduction, or any share of qualified investment in section 38
property except as set forth in (i) these Tax Assumptions and (ii)
- ---------------
1. For purposes of this Tax Assumption x equals the number of months (or part
months) in the Partnership's 1989 Taxable Year.
-45-
Section 7.2.1.(g) of this Amended Agreement, as in effect on the
date of execution and delivery of such Agreement.
(18) The Tax Matters Partner will elect to deduct the
Partnership's start-up expenditures and expenses, if any, incurred in
re-organizing the Partnership ratably over a sixty-month period as
provided in Sections 195 and 709 of the Code.
(19) For New York state income tax purposes, the Transmission
Line shall be treated as new property that is depreciable over a
30-year depreciation period, utilizing the 200% declining balance
method switching to sum-of-the-year's digits method in the optimum
year, and utilizing a net salvage value of 10% after taking into
account the 10% salvage basis allowance reduction permitted under
Section 167(f) of the Code and the application of the half-year
convention.
Draft: October 23, 1989
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
IN CONNECTION WITH
PURCHASE OF SHARES
ToyoWest II
1455 Frazee Road, Suite 300
San Diego, CA 92108-1336
Re: Purchase of Shares (the "Shares") of , a
------------------
California corporation (the "Corporation")
---------------------------------------------------------
In connection with the purchase by the undersigned of the Shares of the
Corporation, which Corporation is a partner in Sagebrush, a California general
partnership ("Sagebrush"), the undersigned represents and warrants as follows:
1. Purchaser has the necessary business and financial experience to
evaluate the merits and risks of purchasing the Shares and to protect its
interests in connection therewith.
2. Purchaser is acquiring the shares in good faith for its own account and
for the purpose of investment in the Corporation and not with a view to or for
sale in connection with any distribution of such Shares or any interest therein.
3. Purchaser and Purchaser's advisors have been given the opportunity to
investigate the proposed purchase of Shares and to ask questions and request
additional information from ToyoWest II or the Corporation in connection with
this purchase of the Shares and regarding Sagebrush. All questions asked have
been adequately answered and any additional information requested has been
supplied.
4. Purchaser understands and acknowledges that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Act"), nor under
the securities laws of any state, and that the Shares shall have the status of
securities acquired under Section 4(2) of the Act, as not involving any public
offering, and, as such, the Shares will be subject to substantial restrictions
on transferability and will bear a legend to similar effect. The Shares will be
subject to additional restrictions on transferability by virtue of the terms and
conditions of Section 12 of the Sagebrush Partnership Agreement.
Date: , 19
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By:
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Name:
Title:
EXHIBIT C
CONVEYANCE OF SHARES
FOR VALUABLE CONSIDERATION, and pursuant to the terms and conditions of
that certain Confidential Option Agreement to Purchase Shares with respect to
Sagebrush Transmission Line dated as of November , 1989 by and between Zond
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Systems, Inc., a California corporation ("Zond"), and ToyoWest II, a California
general partnership ("ToyoWest II"), the undersigned, ToyoWest II, (i) hereby
transfers and conveys to ("Purchaser") all of its right,
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title, and interest in and to the ( ) Shares (the "Shares")
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of , a California corporation (the "Corporation"), which Shares
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it hereby represents and warrants constitute 100% of the outstanding and issued
shares of the Corporation, (ii) hereby agrees to cooperate fully with Purchaser
in completing the transfer of the Shares and effecting the change of registered
ownership of the Shares on the books of the Corporation, and (iii) hereby
delivers to Purchaser the Corporate Minute Book and corporate seal for the
Corporation whose Shares are being transferred hereby.
Dated: , 19 ToyoWest II
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By: Seawest Industries, Inc.,
a California Corporation,
General Partner
By:
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Name:
Title:
By: Toyo Construction Company
a California Corporation,
General Partner
By:
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Name:
Title:
Sagebrush Partner Twenty, Inc.
Pro - Forma
Balance Sheet as of 2/22/90
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Cash $ 100
Investment in Sagebrush
Partnership (20) 1,592,000
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Total Assets $1,592,100
Common Stock $ 100
Additional Paid-In Capital 1,592,000
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Total Equity $1,592,100
Sagebrush Partner Nineteen, Inc.
Pro - Forma
Balance Sheet as of 2/22/90
- --------------------------------------------------------------------------------
Cash $ 100
Investment in Sagebrush
Partnership (19) 142,000
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Total Assets $142,100
Common Stock $ 100
Additional Paid-In Capital 142,000
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Total Equity $142,100
Sagebrush Partner Eighteen, Inc.
Pro - Forma
Balance Sheet as of 2/22/90
- --------------------------------------------------------------------------------
Cash $ 100
Investment in Sagebrush
Partnership (18) 1,706,000
----------
Total Assets $1,706,100
Common Stock $ 100
Additional Paid-In Capital 1,706,000
----------
Total Equity $1,706,100
Sagebrush Partner Seventeen, Inc.
Pro - Forma
Balance Sheet as of 2/22/90
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Cash $ 100
Investment in Sagebrush
Partnership (17) 1,137,000
----------
Total Assets $1,137,100
Common Stock $ 100
Additional Paid-In Capital 1,137,000
----------
Total Equity $1,137,100
Sagebrush Partner Sixteen, Inc.
Pro - Forma
Balance Sheet as of 2/22/90
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Cash $ 100
Investment in Sagebrush
Partnership (16) 1,743,000
----------
Total Assets $1,743,100
Common Stock $ 100
Additional Paid-In Capital 1,743,000
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Total Equity $1,743,100