EXHIBIT 3.10
AGREEMENT OF LIMITED PARTNERSHIP
OF
NORTHEAST ENERGY, LP
a Delaware limited partnership
TABLE OF CONTENTS
Page
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Article I . . . . . . . . . . . . . . 1
Article II.
Formation and Name; Office; Purpose; Term. . . . . 9
2.1 Formation and Continuation. . . . . . . . . . . . . . 9
2.2 Name of the Partnership . . . . . . . . . . . . . . . 9
2.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Term. . . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Registered Office . . . . . . . . . . . . . . . . . . 9
2.6 Partners. . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Qualification in Other Jurisdictions. . . . . . . . . 10
2.8 Agent for Service of Process. . . . . . . . . . . . . 10
Article III.
Partners' Capital; Capital Accounts. . . . . . . . 10
3.1 Capital Contributions; Capital Account Balances . . . 10
3.2 No Additional Contributions Required. . . . . . . . . 10
3.3 No Interest on Contributions. . . . . . . . . . . . . 10
3.4 Return of Contributions . . . . . . . . . . . . . . . 10
3.5 Capital Accounts. . . . . . . . . . . . . . . . . . . 10
3.6 Loans and Other Business Transactions . . . . . . . . 11
Article IV.
Profit, Loss and Distributions . . . . . . . . . . 11
4.1 Payment of Certain Funds. . . . . . . . . . . . . . . 11
4.2 Distribution of Cash Flow . . . . . . . . . . . . . . 13
4.3 Allocation of Profit or Loss. . . . . . . . . . . . . 13
4.4 Regulatory Allocations. . . . . . . . . . . . . . . . 13
4.5 Liquidation and Dissolution . . . . . . . . . . . . . 15
4.6 General . . . . . . . . . . . . . . . . . . . . . . . 16
4.7 Restricted Distributions. . . . . . . . . . . . . . . 16
Article V . . . . . . . . . . . . . . 16
5.1 Management Committee; Meetings; Minutes . . . . . . . 16
5.2 Duties of General Partners. . . . . . . . . . . . . . 19
5.3 Compensation. . . . . . . . . . . . . . . . . . . . . 20
5.4 Provision of Services . . . . . . . . . . . . . . . . 21
5.5 Indemnification of General Partners . . . . . . . . . 21
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5.6 Sharing of Information. . . . . . . . . . . . . . . . 22
5.7 Rule 144A Financing . . . . . . . . . . . . . . . . . 22
5.8 Authorization of Project Documents. . . . . . . . . . 22
Article VI.
Limited Partners; General Partner Meetings . . . . 22
6.1 No Liability of or Control by Limited Partners. . . . 22
Article VII.
Transfer of Partner Interests and Withdrawals
of Partners . . . . . . . . . . . . . . . . . . 23
7.1 Transfers. . . . . .. . . . . . . . . . . . . . . . . 23
7.2 Voluntary Withdrawal. . . . . . . . . . . . . . . . . 26
7.3 Special Rules With Respect to General Partners. . . . 26
Article VIII.
Dispute Resolutions; Arbitration . . . . . . . . . 26
8.1 Dispute Resolution. . . . . . . . . . . . . . . . . . 26
8.2 Arbitration . . . . . . . . . . . . . . . . . . . . . 27
Article IX.
Dissolution, Liquidation, and Termination of the
Partnership. . . . . . . . . . . . . . . . . . . 28
9.1 Right to Cause Dissolution; Events of Dissolution . . 28
9.2 Procedure for Winding Up and Dissolution. . . . . . . 28
9.3 Filing of Certificate of Cancellation . . . . . . . . 28
Article X.
Books, Records, Accounting, and Tax Elections. . . 28
10.1 Bank Accounts . . . . . . . . . . . . . . . . . . . . 28
10.2 Maintenance of Books and Records. . . . . . . . . . . 29
10.3 Financial Statements and Reports. . . . . . . . . . . 29
10.4 Right to Inspect Books and Records; Receive
Information . . . . . . . . . . . . . . . . . . . . 29
10.5 Annual Accounting Period. . . . . . . . . . . . . . . 29
10.6 Tax Matters . . . . . . . . . . . . . . . . . . . . . 29
10.7 GAAP Allocations. . . . . . . . . . . . . . . . . . . 30
Article XI.
Representations and Warranties . . . . . . . . . . 30
11.1 Representations and Warranties of the Partners. . . . 30
11.2 Representations and Warranties of ESI Partners. . . . 30
Article XII.
True-Up of Stream of Benefits. . . . . . . . . . . 30
12.1 True-Up . . . . . . . . . . . . . . . . . . . . . . . 30
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Article XIII.
General Provisions . . . . . .. . . . . . . . . . 32
13.1 Assurances.. . . . . . . . . . . . . . . . . . . . . 33
13.2 Notifications. . . . . . . . . . . . . . . . . . . . 33
13.3 Specific Performance.. . . . . . . . . . . . . . . . 33
13.4 Complete Agreement.. . . . . . . . . . . . . . . . . 34
13.5 Applicable Law.. . . . . . . . . . . . . . . . . . . 34
13.6 Section Titles.. . . . . . . . . . . . . . . . . . . 34
13.7 Binding Provisions.. . . . . . . . . . . . . . . . . 34
13.8 Terms. . . . . . . . . . . . . . . . . . . . . . . . 34
13.9 Separability of Provisions.. . . . . . . . . . . . . 34
13.10 Counterparts.. . . . . . . . . . . . . . . . . . . . 34
13.11 Estoppel Certificate.. . . . . . . . . . . . . . . . 34
13.12 Non-Disclosure.. . . . . . . . . . . . . . . . . . . 34
13.13 Waiver.. . . . . . . . . . . . . . . . . . . . . . . 35
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AGREEMENT OF LIMITED PARTNERSHIP
OF
NORTHEAST ENERGY, LP,
a Delaware limited partnership
This Agreement of Limited Partnership (the "Agreement") of NORTHEAST
ENERGY, LP, a Delaware limited partnership (the "Partnership"), is entered into
as of November 21, 1997, by and among ESI NORTHEAST ENERGY GP, INC., a Florida
corporation ("ESI GP") as a general partner, ESI NORTHEAST ENERGY LP, INC., a
Florida corporation ("ESI Sub") as a limited partner, TRACTEBEL NORTHEAST
GENERATION GP, INC., a Delaware corporation ("Tractebel GP") as a general
partner, and TRACTE BEL ASSOCIATES NORTHEAST LP, INC., a Delaware corporation,
("Tractebel Sub") as a limited partner.
In consideration of the agreements and obligations set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, ESI GP, ESI Sub, Tractebel GP and Tractebel Sub hereby
agree as follows:
Article I.
Defined Terms
The following capitalized terms shall have the respective meanings
specified in this Article I. Capitalized terms not defined in this Agreement
shall have the meaning specified in the Act.
"Acquisition" means the acquisitions by the Partnership and NE, LLC of all
of the interests of the Original Partners in and to the Project Partnerships,
pursuant to the Purchase Agreement.
"Acquisition Date" means January 2, 1998 or, if the closing of the
Acquisition shall not have occurred on such date, such later date on which such
closing occurs.
"Act" means the Revised Uniform Limited Partnership Act of the State of
Delaware, as amended from time to time, or any corresponding provision or
provisions of any succeeding or successor law of the State of Delaware.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in the Partner's Capital Account as of the end of the
relevant taxable year, after giving effect to the following adjustments:
(a) the deficit shall be decreased by the amounts which the Partner is
obligated to restore or is deemed obligated to restore pursuant to Regulation
Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) the deficit shall be increased by the items described in Regulation
Sections 1.704-1(b)(2)(ii)(d)(4),(5), and (6).
This definition is intended to comply with the provisions of Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.
"Additional Required Capital" means aggregate capital contributions equal
to all amounts payable by the Buyers (excluding the Initial Required Capital) in
connection with the Acquisition and the Rule 144A Financing, including fees and
expenses.
"Administrative Services Agreement" means the Administrative Service
Agreement by and between the Partnership and ESI GP, dated November 21, 1997, as
amended from time to time, and any replacement administrative services agreement
entered into upon termination thereof and which the General Partners specify as
the "Administrative Services Agreement" for purposes hereof.
"Affected Party" shall have the meaning ascribed thereto in Section 13.12.
"Affiliate" of any person, entity or group means any person, entity or
group (presently existing or hereafter created or acquired) controlling,
controlled by or under common control with, the specified person, entity or
group, and "control" of a person, entity or group (including, with correlative
meaning, the terms "controlled by" and "under common control with") means the
power to direct or cause the direction of the management, policies or affairs
of the controlled person or entity, whether through ownership of securities or
partnership or other ownership interests, directly or indirectly, by contract
or otherwise.
"Agreement" means this Agreement of Limited Partnership of the Partnership,
including all schedules, exhibits and appendices hereto, as originally executed
and as amended or restated in writing from time to time, as the context
requires.
"Arbitration Rules" shall have the meaning set forth in Section 8.1.
"Back-up Letter of Credit" shall have the meaning specified in the Trust
Indenture.
"Bankruptcy" or "Bankrupt" means, with respect to any Person, such Person's
becoming subject to any bankruptcy, insolvency, reorganization or similar
proceeding, or admitting in writing its inability to pay its debts as they
mature, or making an assignment for the benefit of creditors.
"Budget" means the combined operating and capital budget of the
Partnership, NE, LLC and the Project Partnerships, to be prepared by the Manager
and approved by the Management Committee, as such budget is amended from time to
time with the approval of the Management Committee. The Budget shall be prepared
by the Manager in accordance with the guidelines set forth in the Administrative
Services Agreement.
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"Buyers" shall have the meaning ascribed thereto in the Purchase Agreement.
"Capital Account" means the account to be maintained by the Partnership for
each Partner in accordance with the following provisions:
(a) a Partner's Capital Account shall be credited with the amount of money
and the fair market value of any property contributed to the Partnership (net of
liabilities secured by such property that the Partnership either assumes or to
which such property is subject), the amount of any Partnership unsecured
liabilities assumed by the Partner and the Partner's distributive share of
Profit and any item in the nature of income or gain allocated to the Partner
pursuant to the provisions of Section 4.4 (oth er than Section 4.4.3); and
(b) a Partner's Capital Account shall be debited with the amount of money
and the fair market value of any Partnership property (valued in the manner set
forth in Section 4.6.1) distributed to the Partner (net of liabilities secured
by such distributed property that the Partner either assumes or to which such
property is subject), the amount of any unsecured liabilities of the Partner
assumed by the Partnership, and the Partner's distributive share of Loss and any
item in the nature of expenses or los ses allocated to the Partner pursuant to
the provisions of Section 4.4 (other than Section 4.4.3).
When Partnership property is distributed in kind (whether in connection
with liquidation and dissolution or otherwise), the Capital Accounts of the
Partners shall first be adjusted to reflect the manner in which the unrealized
income, gain, loss and deduction inherent in such property (that has not been
reflected in the Capital Account previously) would be allocated among the
Partners if there were a taxable disposition of such property for the fair
market value of such property (taking into account s ection 7701(g) of the Code)
on the date of distribution.
If any Interest is transferred pursuant to the terms of this Agreement, the
transferee shall succeed to the Capital Account of the transferor to the extent
the Capital Account is attributable to the transferred Interest. If the book
value of Partnership property is adjusted pursuant to Section 4.4.3, the Capital
Account of each Partner shall be adjusted to reflect the aggregate adjustment in
the same manner as if the Partnership had recognized gain or loss equal to the
amount of such aggregate adjust ment. It is intended that the Capital Accounts
of all Partners shall be maintained in compliance with the provisions of
Regulation Section 1.704-1(b), and all provisions of this Agreement relating to
the maintenance of Capital Accounts shall be interpreted and applied in a manner
consistent with that Regulation.
"Cash Flow" means all cash or other funds received by the Partnership with
respect to a calendar month and distributable to the Partners (including
interest received on, and release of, reserves and the proceeds of the Rule 144A
Financing, but excluding the releases of cash contemplated by Section 4.1
hereof) without reduction for any non-cash charges, but less (i) cash used to
pay, with respect to such calendar month, current operating expenses (including
fees payable by the Partnership under the Adm inistrative Services Agreement and
the O&M Agreement) and (ii) cash used to pay or establish reasonable reserves
for future expenses and debt payments as determined by the Management Committee.
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"Certificate of Limited Partnership" means the Certificate of Limited
Partnership for the Partnership filed with the Office of the Secretary of State
of Delaware, as amended from time to time.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
corresponding provision of any succeeding law.
"Confidential Information" means any information, technical data, or
know-how of a Partner or any Affiliate thereof relating to the Projects,
including but not limited to, information relating to such Partner's or its
Affiliate's services, development, marketing or finances, which shall be
disclosed by such Partner or Affiliate in writing or otherwise. The term
"Confidential Information" does not include information, technical data, or
know-how which at the time such information, technical data, or k now-how is
disclosed to the receiving Partner or its Affiliates (the "Recipient") by
another party hereto or an Affiliate thereof (i) is available to the Recipient
from a source other than a party hereto or its Affiliates if the Recipient has
no knowledge that such source, by disclosing such information, would be in
violation of any confidentiality agreement to which it is a party; (ii) is or
becomes published or otherwise available in the public domain without violation
of this Agreement; or (iii) is appr oved for release by written authorization of
the Partners hereto or their Affiliates from which such information, technical
data or know-how originated. The term "Confidential Information" includes the
terms of this Agreement.
"Consent" means the prior written consent of the Person at issue, which
consent may be withheld by such Person in its sole discretion.
"Contribution" means any money, property or other binding obligation to
contribute money or property, as permitted in this Agreement or by law, which a
Partner contributes to the Partnership as capital in that Partner's capacity as
a Partner pursuant to this Agreement.
"Debt Service Reserve Fund" shall have the meaning specified in the Trust
Indenture.
"Effective Date" means the Acquisition Date.
"ESI GP" shall have the meaning ascribed to it in the opening paragraph of
this Agreement.
"ESI Partners" means, collectively, ESI GP and ESI Sub.
"ESI Release Percentage" means a percentage (expressed as a decimal)
calculated on the Acquisition Date equal to one minus the Tractebel Release
Percentage.
"ESI Sub" shall have the meaning ascribed to it in the opening paragraph of
this Agreement.
"Fuel Management Agreements" means (i) the fuel management agreement dated
November 21, 1997 between ESI Northeast Fuel Management, Inc. and the
Partnership, which agreement
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shall be assigned by the Partnership to NEA on the Acquisition Date and (ii) the
fuel management agreement dated November 21, 1997 between ESI Northeast Fuel
Management, Inc. and the Partnership, which agreement shall be assigned by the
Partnership to NJEA on the Acquisition Date.
"GAAP" means generally accepted accounting principles in the United States
applied on a consistent basis.
"General Partner" means ESI GP or Tractebel GP or any Person who, at the
time of the reference thereto, has been admitted to the Partnership as a
successor to the duties or interest of ESI GP or Tractebel GP or as a
replacement general partner as provided herein, in any such Person's capacity as
a general partner, in any case, so long as such Person has not ceased to be a
General Partner hereunder.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining to, any
government.
"Initial Required Capital" means aggregate capital contributions equal to
(i) the Initial Payment (as defined in the Purchase Agreement), plus interest
thereon as provided in the Purchase Agreement, plus all costs and expenses of
Buyers to the Acquisition Date in connection with the Acquisition.
"Interest" means, in the context of a "Partner's Interest," the entire
legal and equitable ownership interest of a Partner in the Partnership at any
particular time, including any right to vote or, with respect to a general
partner, to participate in management, and any right to information concerning
the business and affairs of the Partnership. When used in the context of a
General Partner, "Interest" means the Interest held by the Partner in its
capacity as a General Partner. When used in the cont ext of a Limited Partner,
"Interest" means the Interest held by the Partner in its capacity as a Limited
Partner. "Interest" includes, without limitation the right of such Partner to
participate in Partnership Profits and Losses, Cash Flow, and any and all
benefits to which a Partner may be entitled as provided in this Agreement and
the Act, together with the obligations of such Partner to comply with all the
terms and provisions of this Agreement.
"Letter of Credit Facility" shall have the meaning specified in the Trust
Indenture.
"Limited Partner" means Tractebel Sub, ESI Sub and/or any Person who has
been admitted to the Partnership as a limited partner in accordance with the
terms of this Agreement, at the time of reference thereto, in such Person's
capacity as a limited partner for so long as such Person has not ceased to be a
Limited Partner hereunder.
"Management Committee" shall have the meaning ascribed to it in Section
5.1.1 hereof.
"Manager" shall have the meaning set forth in the Administrative Services
Agreement.
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"Negative Capital Account" means a Capital Account with a balance of less
than zero.
"Nonrecourse Deductions" has the meaning set forth in Regulation Section
1.704-2(b)(1). The amount of Nonrecourse Deductions for a taxable year of the
Partnership equals the net increase, if any, in the amount of Partnership
Minimum Gain during that taxable year, determined according to the provisions of
Regulation Section 1.704-2(c).
"NE, LLC" means Northeast Energy, LLC, a Delaware limited liability company
having the Partnership as its sole member.
"NEA" means Northeast Energy Associates, a Limited Partnership, a
Massachusetts limited partnership.
"NEA Facility" means the 300 megawatt gas-fired combined cycle cogeneration
plant located in Bellingham, Massachusetts.
"NJEA" means North Jersey Energy Associates, a Limited Partnership, a New
Jersey limited partnership.
"NJEA Facility" means the 300 megawatt gas-fired combined cycle
cogeneration plant, located in Sayreville, New Jersey.
"Nonrecourse Liability" has the meaning set forth in Regulation Section
1.704-2(b)(3).
"Non-Reimbursable Expenses" has the meaning set forth in the Administrative
Services Agreement.
"Notice" means a notice in writing delivered in accordance with the
provisions of Section 13.2.
"O&M Agreements" means (i) the Operation and Maintenance Agreement, dated
as of November 21, 1997, by and between the Partnership and ESI Operating
Services, Inc. for the NEA Facility, which agreement shall be assigned by the
Partnership to NEA on the Operating Period Commencement Date, as defined in such
Agreement and (ii) the Operation and Maintenance Agreement, dated as of November
21, 1997, by and between the Partnership and ESI Operating Services, Inc. for
the NJEA Facility, which agreement shall be assigned by the Partnership to NJEA
on the Operating Period Commencement Date, as defined in such agreement.
"Original Effective Date" means March 31, 1986.
"Original Partners" means, collectively, the partners named in the
partnership agreement for each of the Project Partnerships and their successors
or assigns immediately prior to the date hereof.
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"Parent Guaranty" shall mean any corporate guaranty of an Affiliate of any
of the Partners that is permitted under the terms of the Trust Indenture (as
amended from time to time) to be provided in substitution for a Back-up Letter
of Credit.
"Partner" means any General Partner or any Limited Partner.
"Partner Loan Nonrecourse Deductions" means any Partnership deductions that
would be Nonrecourse Deductions if they were not attributable to a loan as to
which a Partner bears the economic risk of loss within the meaning of Regulation
Section 1.704-2(i).
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Regulation Section 1.704-2(i)(3).
"Partnership Minimum Gain" has the meaning set forth in Regulation Section
1.704-2(d). Partnership Minimum Gain shall be computed separately for each
Partner in a manner consistent with the Regulations under Code Section 704(b).
"Percentage" means 1% in the case of each of ESI GP and Tractebel GP and
49% in the case of each of ESI Sub and Tractebel Sub.
"Permitted Investments" shall have the meaning ascribed to it in the Trust
Indenture.
"Person" means any individual, any partnership, any corporation, any
limited liability company, any business trust, any joint stock company, any
trust, any unincorporated association, any joint venture, any Governmental
Authority or any other entity of whatever nature.
"Profit" or "Loss" means, for each taxable year of the Partnership (or
other period for which Profit or Loss must be computed), the Partnership's
taxable income or loss determined in accordance with Code Section 703(a), with
the following adjustments:
(a) all items of income, gain, loss, deduction, or credit required to be
stated separately pursuant to Code Section 703(a)(1) shall be included in
computing taxable income or loss;
(b) any tax-exempt income of the Partnership, not otherwise taken into
account in computing Profit or Loss, shall be included in computing taxable
income or loss;
(c) any expenditures of the Partnership described in Code Section
705(a)(2)(B) (or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit
or Loss, shall be subtracted from taxable income or loss;
(d) gain or loss resulting from any taxable disposition of Partnership
property shall be computed by reference to the book value as adjusted under
Regulation Section 1.704-1(b) ("adjusted book value") of the property disposed
of, notwithstanding the fact that the adjusted book value differs from the
adjusted basis of the property for federal income tax purposes;
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(e) in lieu of the depreciation, amortization or cost recovery deductions
allowable in computing taxable income or loss, there shall be taken into account
the depreciation computed based upon the adjusted book value of the asset; and
(f) notwithstanding any other provision of this definition, any items that
are allocated pursuant to Section 4.4 shall not be taken into account in
computing Profit or Loss.
"Project Documents" means the documents listed in Part A of Schedule 1 to
the Trust Indenture other than any of such documents that have been terminated
or that expired on or prior to the date hereof.
"Project Partnerships" means NEA and NJEA.
"Project Partnership Agreements" mean the Amended and Restated Agreement of
Limited Partnership of Northeast Energy Associates, a Limited Partnership, a
Massachusetts limited partnership, dated as of November 21, 1997 and the Amended
and Restated Agreement of Limited Partnership of North Jersey Energy Associates,
a Limited Partnership, a New Jersey limited partnership, dated as of November
21, 1997.
"Purchase Agreement" means the Purchase Agreement, dated as of November 21,
1997 by and among the Partnership, NE, LLC and the Original Partners.
"PURPA" has the meaning set forth in Section 12.1.1 hereof.
"Regulation" means the income tax regulations, including any temporary
regulations, from time to time promulgated under the Code.
"Rule 144A Financing" means the offering and sale of bonds by ESI Tractebel
Acquisition Corp., as agent and nominee for the Partnership.
"Secretary of State" means the Secretary of State of Delaware.
"Substitute Letter of Credit" shall have the meaning specified in the Trust
Indenture.
"Tractebel GP" shall have the meaning ascribed to it in the opening
paragraph of this Agreement.
"Tractebel Partners" means, collectively, Tractebel GP and Tractebel Sub.
"Tractebel Release Percentage" means a percentage (expressed as a decimal)
calculated on the Acquisition Date equal to (i) 50% of the funds deposited to
the Debt Service Reserve Fund that are the property of NJEA (which 50% is
projected to be $6,903,500 as of the Acquisition Date), divided by (ii) the sum
of the amounts available to be released from the Debt Service Reserve Fund
(projected to be $33,270,000 as of the Acquisition Date).
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"Tractebel Sub" shall have the meaning ascribed to it in the opening
paragraph of this Agreement.
"Transfer" means the transfer, assignment, pledge or grant of a security
interest by a Partner or its Affiliate of all or any part of its direct or
indirect (i) Partner's Interest or (ii) any other interest or rights in or
granted by this Agreement.
"Transferor" means the Partner making a Transfer pursuant to Section 7.1.
"Trust Indenture" means the Trust Indenture, dated as of November 15, 1994,
among IEC Funding Corp., each of the Project Partnerships, and State Street Bank
and Trust Company, as trustee, as amended and supplemented from time to time in
accordance with the terms thereof.
"Voluntary Withdrawal" means a Partner's disassociation from the
Partnership.
Article II.
Formation and Name; Office; Purpose; Term
2.1 Formation and Continuation. The Partnership was formed as a Delaware
limited partnership by filing the Certificate of Limited Partnership in the
Office of the Secretary of State on November 21, 1997. Each of ESI GP and
Tractebel GP shall be the initial General Partners and each of ESI Sub and
Tractebel Sub shall be the initial Limited Partners of the Partnership. The
rights and liabilities of the Partners shall be determined pursuant to the Act
and this Agreement, and to the extent that the ri ghts or obligations of any
Partner are different by reason of any provision of this Agreement than they
would be in the absence of such provision, this Agreement shall, to the extent
permitted by the Act, control.
2.2 Name of the Partnership. The name of the Partnership is Northeast
Energy, LP.
2.3 Purpose. The sole purpose of the Partnership is to acquire, hold,
protect, manage, encumber, exchange, finance, refinance and dispose of interests
in NE, LLC and the Project Partnerships, and to engage in any and all activities
necessary, advisable or incidental thereto.
2.4 Term. The term of this Agreement commenced on the Original Effective
Date and shall continue until December 31, 2048, unless sooner dissolved as
provided by this Agreement or the Act. The existence of the Partnership as a
separate legal entity shall continue until the cancellation of the Certificate
of Limited Partnership of the Partnership in the manner required by the Act.
2.5 Registered Office. The Partnership shall continuously maintain a
registered office and registered agent in the State of Delaware. The principal
office of the Partnership shall be determined by the Management Committee. The
registered agent in Delaware shall be as stated in the Certificate of Limited
Partnership or as otherwise determined by the Management Committee.
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2.6 Partners. The name, present mailing address and taxpayer identification
number of each Partner shall be kept with the records of the Partnership
maintained in accordance with Section 10.2.
2.7 Qualification in Other Jurisdictions. The Management Committee shall
cause the Partnership to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Partnership transacts business. The Management Committee shall have the power to
execute, deliver and file any certificates (and any amendments and/or
restatements thereof) necessary for the Partnership to qualify to do business in
a jurisdiction in which the Partnership may wis to conduct business.
2.8 Agent for Service of Process. The agent for service of process on the
Partnership in Delaware shall be such eligible individual resident or
corporation qualified to act as an agent for service of process as the
Management Committee shall designate.
Article III.
Partners' Capital; Capital Accounts
3.1 Capital Contributions; Capital Account Balances. On the Effective Date,
ESI GP, ESI Sub, Tractebel GP and Tractebel Sub shall make cash contributions to
the Partnership, pro rata according to their respective Percentages, in an
aggregate amount equal to the Initial Required Capital, which amounts shall be
credited to the Partners' respective Capital Accounts. In addition, ESI GP, ESI
Sub, Tractebel GP and Tractebel Sub shall make additional cash contributions to
the Partnership, pro rata accordi ng to their respective Percentages, in an
aggregate amount equal to the Additional Required Capital, which capital
contributions shall be made at such times as may be determined by the Management
Committee, with such amounts to be credited to the Partners' respective Capital
Accounts. Simultaneously with the execution of this Agreement, ESI Energy, Inc.,
a Florida corporation, and Tractebel Power, Inc., a Delaware corporation, shall
deliver to the Partnership and each of the Partners, a guaranty of the ob
ligations of their respective Affiliates to contribute the Initial Required
Capital and the Additional Required Capital.
3.2 No Additional Contributions Required. No Partner shall be required to
make any Contributions to the Partnership other than as set forth in Section
3.1.
3.3 No Interest on Contributions. No Partners shall be paid interest with
respect to Contributions.
3.4 Return of Contributions. No Partner shall have the right to receive the
return of any Contribution from the Partnership.
3.5 Capital Accounts. A separate Capital Account shall be maintained for
each Partner.
3.6 Loans and Other Business Transactions. A Partner may make a loan to the
Partnership only with the consent of the Management Committee and then in such
amount and on
10
those terms upon which the Management Committee and the Partner agree. Partners
may also transact other business with the Partnership with the approval of the
Management Committee and, in doing so, they shall have the same rights and be
subject to the same obligations arising out of any such business transaction as
would be enjoyed b y and imposed upon any Person, not a Partner, engaged in a
similar business transaction with the Partnership. Any business transacted by a
Partner or its Affiliate with the Partnership shall be on terms no less
favorable to the Partnership than would be available from third parties in an
arms-length transaction. The Partners acknowledge that all documents executed by
the Partnership with a Partner or with any Affiliate of a Partner prior to or
contemporaneously with the execution of this Agreement confor m to the
requirements of the preceding sentence.
Article IV.
Profit, Loss and Distributions
4.1 Payment of Certain Funds.
4.1.1 On the Acquisition Date or such other date as may be specified by
the Management Committee and to the extent permitted under the Trust Indenture
and the Letter of Credit Facility, the ESI Partners shall provide a Back-up
Letter of Credit or Parent Guaranty for the cash and Permitted Investments
backing the Letters of Credit (as defined in the Trust Indenture), and the ESI
Partners shall receive the corresponding amount of cash released as a special
payment under this Agreement (with any interest earned on such cash from the
date the Back-up Letters of Credit or Parent Guaranty are provided to the date
the amounts are released to the Project Partnerships, as contemplated by this
Section 4.1.1, being also distributed to the ESI Partners), with the payment
made to the ESI Partners to be split between ESI GP and ESI Sub in accordance
with the ratio of each of their Percentages to the sum of their Percentages
(with the cash being paid pursuant to this sentence being treated as though (a)
it had been received by the applicable Project Partnership; (b) the Project
Partnerships had distributed this cash to NE, LLC and the Partnership in
accordance with their respective percentage interests in the Project
Partnerships; (c) NE, LLC had distributed the cash it had received in accordance
with the foregoing to the Partnership; and (d) the Partnership made the payments
to the ESI Partners that are provided for in this sentence).
4.1.2 On the Acquisition Date or such other date as may be specified by
the Management Committee, (i) the ESI Partners shall provide a Substitute Letter
of Credit for the ESI Release Percentage times the amount in the Debt Service
Reserve Fund, (ii) the Tractebel Partners shall provide a Substitute Letter of
Credit for the Tractebel Release Percentage times the amount in the Debt Service
Reserve Fund, and (iii) the ESI Partners and the Tractebel Partners shall each
receive the corresponding amount of cash released from the Debt Service Reserve
Fund as a special payment under this Agreement (with any interest earned on such
cash from the date the Substitute Letters of Credit are provided to the date the
amounts are released to the Project Partnerships, as contemplated by this
Section 4.1.2, being also distributed to the ESI Partners and the Tractebel
Partners in accordance with the ESI Release Percentage and the Tractebel Release
Percentage, respectively), with the payment made to the ESI Partners to be split
between ESI GP
11
and ESI Sub in accordance with the ratio of each of their Percentages to the sum
of their Percentages and with the payment to the Tractebel Partners to be split
between Tractebel GP and Tractebel Sub in accordance with the ratio of each of
their Percentages to the sum of their Percentages (with the cash being paid
pursuant to this sentence being treated as though (a) it had been received by
the applicable Project Partnership; (b) the applicable Project Partnership had
distributed this cash to NE, LLC and the Partnership in accordance with their
respective percentage interests in the applicable Project Partnership; (c) NE,
LLC had distributed the cash it had received in accordance with the foregoing to
the Partnership; and (d) the Partnership made payment to the Tractebel Partners
of 50% of the Debt Service Reserve Fund that is the property of NJEA and to the
ESI Partners of 50% of the Debt Service Reserve Fund that is the property of
NJEA and 100% of the Debt Service Reserve Fund that is the property of NEA. Each
such Substitute Letter of Credit will provide, among other things, that draws
must be made simultaneously, with the total under both drawn in the ratio of the
ESI Release Percentage to the Tractebel Release Percentage.
4.1.3 At any time that the balance required to be maintained in the
Debt Service Reserve Fund is increased to an amount greater than $33.270
million, the ESI Partners and the Tractebel Partners shall each provide a
Substitute Letter of Credit for 50% of the amount of the excess above $33.270
million and shall each receive the corresponding amount of cash released from
the Debt Service Reserve Fund as a special payment under this Agreement, with
the payment made to the ESI Partners to be split between ESI GP and ESI Sub in
accordance the ratio of each of their Percentages to the sum of their
Percentages and with the payment to the Tractebel Partners to be split between
Tractebel GP and Tractebel Sub in accordance with the ratio of each of their
Percentages to the sum of their Percentages (with the cash being paid pursuant
to this sentence being treated as though (a) it had been received by the
applicable Project Partnership; (b) the applicable Project Partnership had
distributed this cash to NE, LLC and the Partnership in accordance with their
respective percentage interests in the applicable Project Partnership; (c) NE,
LLC had distributed the cash it had received in accordance with the foregoing to
the Partnership; and (d) as though the Partnership made the payments to the ESI
Partners that are provided for in this sentence. Each such Substitute Letter of
Credit will provide, among other things, that draws must be made simultaneously,
with the total under both drawn in a fifty-fifty ratio, and draws u nder either
Substitute Letter of Credit may be made only after complete drawdown of the
Substitute Letters of Credit described in subsection 4.1.2 above.
4.1.4 If at any time funds are drawn by the Trustee (as defined in the
Trust Indenture) under the Substitute Letters of Credit, thereafter as
sufficient funds are deposited to the Debt Service Reserve Fund so as to permit
the substitution of one or more Substitute Letters of Credit, as to the first
$33.270 million the ESI Partners and Tractebel Partners shall provide Substitute
Letters of Credit as provided in subsection 4.1.2 above and each shall receive
the corresponding amount of cash released from the Debt Service Reserve Fund as
a special payment under this Agreement, and as to any replenishment of the Debt
Service Reserve Fund in excess of $33.270 million, the ESI Partners and the
Tractebel Partners shall provide Substitute Letters of Credit as provided in
subsection 4.1.3 above and each shall receive the corresponding amount of cash
released from the Debt Service Reserve Fund as a special payment under this
Agreement, with any payments to the ESI Partners pursuant to this Section 4.1.4
to be split between ESI GP
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and ESI Sub in accordance with the ratio of each of their Percentages to the sum
of their Percentages and with any payments to the Tractebel Partners pursuant to
this Section 4.1.4 to be split between Tractebel GP and Tractebel Sub in
accordance with the ratio of each of their Percentages to the sum of their
Percentages (with the cash being paid pursuant to this sentence being treated as
though (a) it had been received by the applicable Project Partnership; (b) the
applicable Project Part nership had distributed this cash to NE, LLC and the
Partnership in accordance with their respective percentage interests in the
applicable Project Partnership; (c) NE, LLC had distributed the cash it had
received in accordance with the foregoing to the Partnership; and (d) the
Partnership made the payments to the ESI Partners and Tractebel Partners that
are provided for in this sentence).
4.1.5 If at any time or from time to time the Indenture permits a
reduction in the amounts available under the Substitute Letters of Credit, the
reduction shall be made simultaneously under each Substitute Letter of Credit
provided in accordance with Section 4.1.3, with the total reduction under both
in a fifty-fifty ratio, until such substitute Letters of Credit are reduced to
zero, and thereafter the reduction shall be made simultaneously under each
Substitute Letter of Credit provided in accordance with Section 4.1.2, with the
total reduction under both in the ratio of the ESI Release Percentage to the
Tractebel Release Percentage.
4.1.6 On or as soon as practicable following the closing of the Rule
144A Financing and at any time thereafter when there are funds in the debt
service reserve fund in connection with such financing, each of ESI GP and
Tractebel GP shall provide a letter of credit or corporate guaranty for 50% of
the amount in such debt service reserve fund, and each shall receive the
corresponding amount of cash released from the debt service reserve fund as a
special distribution under this Agreement, with the payme nt made to the ESI
Partners to be split between ESI GP and ESI Sub in accordance the ratio of each
of their Percentages to the sum of their Percentages and with the payment to the
Tractebel Partners to be split between Tractebel GP and Tractebel Sub in
accordance with the ratio of each of their Percentages to the sum of their
Percentages. Each such letter of credit will provide, among other things, that
draws must be made simultaneously, with the total under both drawn in a
fifty-fifty ratio.
4.2 Distribution of Cash Flow. Subject to Section 4.5 hereof, Cash Flow for
each taxable year of the Partnership shall be distributed to the Partners in
proportion to their Percentages at such times as determined by the Management
Committee.
4.3 Allocation of Profit or Loss. After giving effect to the allocations
set forth in Section 4.4, for any taxable year of the Partnership, Profit and
Loss shall be allocated to the Partners in proportion to their Percentages;
provided, however, that on a liquidation of the Partnership, Profits or Loss
shall be allocated in such proportions and in such amounts so as to cause the
Partner's Capital Account balances to be in the ratio of the Partners'
Percentages and provided further, that the amount of any depreciation recapture
included within the Profit or Loss otherwise allocated to a Partner pursuant to
the terms of this Agreement shall be determined in accordance with Treasury
Regulations ss. 1.1245-1(e)(2) and (3).
13
4.4 Regulatory Allocations.
4.4.1 Impermissible Deficits and Qualified Income Offset. No Partner
shall be allocated Losses or deductions if the allocation causes the Partner to
have an Adjusted Capital Account Deficit; instead, such items shall be allocated
to the other Partners. If a Partner for any reason has an Adjusted Capital
Account Deficit at the end of any taxable year, all items of income and gain of
the Partnership for that taxable year (consisting of a pro rata portion of each
item of Partnership income, including g ross income and gain) shall be allocated
to that Partner in the amount required to eliminate the excess as quickly as
possible, provided, however, that an allocation pursuant to this sentence shall
be made if and only to the extent that such Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this
Agreement had been tentatively made as if this sentence were not contained in
the Agreement. This Section 4.4.1 is intended to comply with, and shall be
interpreted consistently with, the "alternate test for economic effect" and
"qualified income offset" provisions of the regulations promulgated under Code
Section 704(b).
4.4.2 Minimum Gain Chargebacks. In order to comply with the "minimum
gain chargeback" requirements of Regulation Sections 1.704-2(f)(1) and
1.704-2(i)(4), and notwithstanding any other provision of this Agreement to the
contrary, in the event there is a net decrease in a Partner's share of
Partnership Minimum Gain and/or Partner Nonrecourse Debt Minimum Gain during a
Partnership taxable year, such Partner shall be allocated items of income and
gain for that year (and if necessary, other years) as requ ired by and in
accordance with Regulation Sections 1.704-2(f)(1) and 1.704-2(i)(4) before any
other allocation is made. It is the intent of the parties hereto that any
allocation pursuant to this Section 4.4.2 shall constitute a "minimum gain
chargeback" under Regulation Section 1.704-2(f) and 1.704-2(i)(4).
4.4.3 Contributed Property and Book-Ups. In accordance with Code
Section 704(c) and the Regulations thereunder, including Regulation Section
1.704-l(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any
property contributed (or deemed contributed) to the Partnership shall, solely
for tax purposes, be allocated among the Partners so as to take account of any
variation between the adjusted basis of the property to the Partnership for
Federal income tax purposes and its fair market valu e at the date of
Contribution (or deemed Contribution). If the adjusted book value of any
Partnership asset is adjusted under Regulation Section 1.704-1(b)(2)(iv)(f),
subsequent allocations of income, gain, loss, and deduction with respect to the
asset shall take into account any variation between the adjusted basis of the
asset for federal income tax purposes and its adjusted book value in the manner
required under Code Section 704(c) and the regulations thereunder. The parties
hereto agree to use the c urative method, as described in Regulation Section
1.704-3, for making Code Section 704(c) allocations. Except as required by
Sections 704(b) and 704(c) of the Code and the regulations thereunder, the
Partnership shall allocate items for tax purposes in the same manner that it
allocates items for book (as defined in Section 704(c)) purposes.
4.4.4 Tax Elections. At the direction of the Management Committee, ESI
GP, as Tax Matters Partner, shall make an election pursuant to Section 754 of
the Code, to adjust the basis of the Partnership's property as permitted by
Sections 734 and 743 of the Code and shall make or refrain from making any other
tax elections available to the Partnership.
14
4.4.5 Nonrecourse Deductions. Nonrecourse Deductions for a taxable year
or other period shall be allocated among the Partners in proportion to their
Percentages.
4.4.6 Recourse Deductions and Partner Loan Nonrecourse Deductions. Any
Partner Loan Nonrecourse Deductions for any taxable year or other period shall
be allocated to the Partner who bears the economic risk of loss with respect to
the loan to which the Partner Loan Nonrecourse Deductions are attributable in
accordance with Regulation Section 1.704-2(i). Items of deduction and loss
attributable to any recourse liabilities of the Partnership, within the meaning
of Treasury Regulation ss.1.752-2, shall e allocated among the Partners in the
ratio in which the Partners share the economic risk of loss for such liabilities
(in accordance with Revenue Ruling 97-38).
4.4.7 Guaranteed Payments. To the extent any compensation paid to any
Partner by the Partnership is determined by the Internal Revenue Service not to
be a guaranteed payment under Code Section 707(c) or is not paid to the Partner
other than in the Person's capacity as a "partner" within the meaning of Code
Section 707(a), the Partner shall be allocated gross income in an amount equal
to the amount of that compensation prior to making any allocations under Section
4.4.
4.4.8 Loans. Subject to the other provisions of this Section 4.4, if
and to the extent that any Partner is deemed to recognize income as a result of
any loans pursuant to Section 1272, 1273, 1274, 7872 or 482 of the Code or any
similar provision of law, any corresponding resulting deduction of the
Partnership shall be allocated to the Partner who is charged with the income.
Subject to the other provisions of this Section 4.4, if and to the extent that
the Partnership is deemed to recognize income a a result of any loans pursuant
to Section 1272, 1273, 1274, 7872 or 482 of the Code or any similar provision of
law, such income shall be allocated to the Partner who is deemed to have paid
such income to the Partnership.
4.4.9 Withholding. All amounts required to be withheld pursuant to Code
Section 1446 or any other provision of federal, state, local or foreign tax law
shall be treated as amounts actually distributed to the affected Partners for
all purposes under this Agreement.
4.5 Liquidation and Dissolution.
4.5.1 Upon liquidation of the Partnership, the assets of the
Partnership shall be distributed to the Partners in accordance with their
positive balances in their respective Capital Accounts, after giving effect to
all contributions, distributions, and allocations for all periods. Distributions
to the Partners pursuant to this Section 4.5.1 shall be made in accordance with
Regulation Section 1.704-1(b)(2)(ii)(b)(2).
4.5.2 No Limited Partner shall ever be obligated to restore a Negative
Capital Account. Similarly, except as required by applicable law, no General
Partner shall ever be obligated to restore a Negative Capital Account.
15
4.6 General.
4.6.1 Except as otherwise provided for in this Agreement, the timing
and amount of all distributions shall be determined by the Management Committee.
If any assets of the Partnership are distributed in kind to the Partners, those
assets shall be valued on the basis of their fair market value, and any Partner
entitled to any interest in those assets shall receive that interest as a
tenant-in-common with all other Partners so entitled. Unless the Management
Committee otherwise determines, the fair mar ket value of the assets shall be
determined by an independent appraiser who shall be selected by the Management
Committee. The Profit or Loss for each unsold asset shall be determined as if
the asset had been sold at its fair market value, and the Profit or Loss shall
be allocated as provided in Section 4.3 and shall be properly credited or
charged to the Capital Accounts of the Partners prior to the distribution of the
assets in liquidation pursuant to Section 4.5.
4.6.2 In connection with any Transfer of an Interest, the Management
Committee may adopt such conventions as it deems appropriate or advisable for
allocating Profit and Loss between the transferor and transferee of the
Interest.
4.6.3 Solely for purposes of determining a Partner's proportionate
share of "excess nonrecourse liabilities" of the Partnership within the meaning
of Regulation Section 1.752-3(a)(3), the Partners' interest in Partnership
profits shall be based on their respective Percentages.
4.6.4 The Partners are aware of the income tax consequences of this
Article IV and agree to be bound by these provisions in reporting their shares
of Profit, Losses, and other items for Federal and State income tax purposes.
4.7 Restricted Distributions. Notwithstanding any provision to the contrary
contained in this Agreement, the Partnership, and the Management Committee on
behalf of the Partnership, shall not be required to make a distribution to any
Partner on account of its interest in the Partnership if such distribution would
violate the provisions of the Act or other applicable law.
Article V.
Management and General Partner Obligations
5.1 Management Committee; Meetings; Minutes.
5.1.1 General. The management of the Partnership shall be directed and
controlled by the management committee of the Partnership (the "Management
Committee") which, except as otherwise expressly provided in this Agreement,
shall have all rights, powers and authority permitted a general partner under
Section 17-403 of the Act with respect to such direction and control. Except as
authorized in writing by the Management Committee or as set forth in this
Agreement or in the Budget, no Partner shall have any right or authority to take
any
16
action on behalf of the Partnership or to bind or commit the Partnership with
respect to third parties.
5.1.2 Membership. The Management Committee shall consist of four
representatives, two appointed by each of the General Partners. Each General
Partner may remove or replace its representatives on the Management Committee,
with or without cause, by Notice to the other General Partner, and in the
absence of a General Partner's representative such General Partner may designate
by Notice to the other General Partner an alternate to act for the absent
representative. Vacancies on the Management Committee shall be filled by the
General Partner who appointed the Management Committee representative previously
holding the position that is vacant. Each General Partner hereby represents and
warrants that its representatives on the Management Committee are and shall be
fully authorized to provide any consent or approval that may be required of such
General Partner or of the Management Committee hereunder.
5.1.3 Regular and Special Meetings. The Management Committee will hold
regular quarterly meetings. Special meetings may be called at any time by any
representative on the Management Committee upon reasonable prior notice to the
other representative. Minutes of each meeting will be kept and distributed to
each member of the Management Committee.
5.1.4 Telephonic Meetings. Any meeting of the Management Committee may
be held by conference telephone call or through similar communications equipment
by means of which the representatives of the General Partners on the Management
Committee participating in the meeting can hear each other. Participation in a
telephonic meeting held pursuant to this Section 5.1.4 shall constitute presence
in person at such meeting.
5.1.5 Approval Requirements. The unanimous affirmative vote of the
representatives on the Management Committee shall be required for any act or
decision of the Management Committee. Any action required or permitted to be
taken by the Management Committee may be taken without a meeting, if the
representatives consent in writing to such action. With respect to those actions
requiring approval by the Management Committee, the Management Committee shall
use all reasonable efforts to indicate its approv al or disapproval of such
action within ten (10) business days after receiving a written request therefor
from either of the General Partners. If one representative of a General Partner
on the Management Committee is absent, but the other representative of such
General Partner is present, then the present representative shall have the power
to vote (at a meeting or by written consent) on behalf of both of the
representatives of such General Partner.
17
5.1.6 Annual Budget. The Manager shall cause an annual Budget to be
prepared each year in accordance with the terms of the Administrative Services
Agreement.
5.1.7 Enumerated Management Committee Powers. Without limiting the
power and authority of the Management Committee to control the Partnership, the
following shall require the prior approval of the Management Committee:
5.1.7.1 the adoption or amendment of the Budget;
5.1.7.2 the admission to the Partnership of a new Partner (other
than pursuant to Section 7.1.5), the Transfer by a Partner of all or any portion
of its Interest (unless the consent of the Management Committee is not required
with respect to the Transfer under Article VII hereof) or the transfer of any
interest in NE, LLC or any of the Project Partnerships;
5.1.7.3 except as set forth in or contemplated by the annual
Budget, including any amendment thereto, the taking of any of the following
actions with respect to the Partnership:
5.1.7.3.1 entering into, executing, acknowledging,
delivering, modifying or amending any contract, agreement or other instrument to
which the Partnership is a party which individually or in the aggregate could
involve amounts to be paid to or by the Partnership in excess of $250,000 per
annum;
5.1.7.3.2 mortgaging, pledging or otherwise encumbering
any assets of the Partnership or disposing of any assets of the Partnership;
5.1.7.3.3 commencing, settling, compromising or
abandoning any claim, action or proceeding of the Partnership that is in excess
of $100,000;
5.1.7.3.4 allowing any Person other than the General
Partners and their Affiliates to possess any assets of the Partnership;
5.1.7.3.5 engaging in any business activities other than
as contemplated by Section 2.3;
5.1.7.3.6 approval of any plan of liquidation of the
Partnership;
5.1.7.3.7 waiving any condition to closing under the
Purchase Agreement;
5.1.7.3.8 permitting the sale by the Project Partnerships
of any power on a merchant basis; and
5.1.7.3.9 entering into any contract or agreement with an
Affiliate of a Partner (except as provided in Section 5.8).
18
5.1.7.3.10 taking any action in its capacity as member or
manager of NEA LLC or as general partner of the Project Partnerships, except for
such actions which the Manager is expressly authorized to take on behalf of the
Partnership in the Administrative Services Agreement.
5.1.7.3.11 the failure of ESI GP or its Affiliates to
object to any proposed contract under Section 4(j)(vii) of the Purchase
Agreement.
5.1.7.3.12 the taking of any action by ESI GP or its
Affiliates under Section 5(b) or (8(c) of the Purchase Agreement (except, in the
case of Section 8(c), for any release or announcement that may be required by
law or the rules or regulations of any securities exchange).
5.1.8 Sole General Partner. If there remains only one General Partner
of the Partnership with a representative on the Management Committee because all
of the other General Partners have ceased to be General Partners pursuant to
Section 7.3.2 (other than pursuant to a permitted Transfer which permits the
transferee to appoint a replacement member of the Management Committee), then
the responsibilities and duties of the Management Committee under this Agreement
shall be assumed by such remaining Genera l Partner and the Management Committee
shall cease to exist.
5.2 Duties of General Partners.
5.2.1 Each representative of a General Partner on the Management
Committee shall devote such time to the business and affairs of the Partnership
as is reasonably necessary to carry out the duties of the Management Committee
as set forth in this Agreement.
5.2.2 [Intentionally omitted]
5.2.3 Nothing in this Agreement shall be deemed to restrict in any way
the rights of any Partner, or of any other person or entity whether or not an
Affiliate of any Partner, to conduct any other business or activity whatsoever,
and no Partner or Affiliate thereof shall be accountable to the Partnership or
to any other Partner with respect to that business or activity even if the
business or activity owns and/or operates property within the same or any other
geographic area or competes with the Partne rship's business. The organization
of the Partnership shall be without prejudice to the Partners' respective rights
(or the rights of any other person or entity whether or not an Affiliate of any
Partner) to maintain, expand or diversify such other interests and activities
and to receive and enjoy profits or compensation therefrom. Each Partner waives
any rights the Partner might otherwise have to share or participate in such
other interests, activities, assets or profits of any other Partner or of any o
ther person or entity in any way affiliated with any Partner, whether or not an
Affiliate of any Partner.
5.2.4 To the fullest extent permitted by Section 17-403 of the Act, the
only fiduciary duties a General Partner owes to the Partnership and the other
Partners are the duty of loyalty and the duty of care set forth in subdivisions
5.2.4.1, 5.2.4.2 and 5.2.4.3 below. It is the
19
intent of the Partners hereby to restrict the duties (including fiduciary
duties) of the General Partners and the Management Committee to the extent
permitted by the Act.
5.2.4.1 The Management Committee and the General Partners owe a
duty of loyalty to the Partnership and to the other Partners with respect to the
business of the Partnership.
5.2.4.2 The Management Committee, the General Partners must act
in a commercially reasonable manner whenever any of them or their Affiliates
provides, or has provided by any other Person, services to the Partnership.
5.2.4.3 The Management Committee's duty of care to the
Partnership in each case is to exercise its reasonable business judgment with
regard to all decisions it makes on the behalf of the Partnership.
5.2.5 Subject to the direction and control of the Management Committee,
the Manager shall be responsible for (i) the management of the day-to-day
affairs of the Partnership and (ii) such other matters as are set forth in the
Administrative Services Agreement, in accordance with the terms thereof. If ESI
GP transfers its General Partner Interest in the Partnership (other than to an
Affiliate) in compliance with Section 7.1.2 hereof or otherwise in compliance
with this Agreement then, if the Tractebel GP so elects, Tractebel GP or its
Affiliate shall have the right to become the Manager (and ESI GP shall cause the
Manager to transfer to Tractebel GP all of its right, title and interest in and
to the Administrative Services Agreement) in place of the Manager.
5.2.6 Subject to the direction and control of the Management Committee,
if an ESI Partner or an Affiliate thereof, or a Tractebel Partner or an
Affiliate thereof (the "Partner Affiliate"), provides or proposes to provide
goods or services to the Partnership, NE, LLC or either or both of the Project
Partnerships pursuant to a contract or other agreement (a "Partner Affiliate
Agreement"), the other Partner (the "Non-Affiliate Partner") shall be
responsible for representing the Partnership, NE, LLC or th e applicable Project
Partnership, as the case may be, in connection with the negotiation of the terms
of such Partner Affiliate Agreement. Subject to the direction and control of the
Management Committee, upon the execution of any Partner Affiliate Agreement
(which shall be subject to the approval of the Management Committee except as
provided in Section 5.8), the Manager shall be responsible for representing the
Partnership with respect to the management of the day-to-day affairs thereunder
in accordance with the terms of the Administrative Services Agreement. In the
event of any dispute, breach or alleged breach of a Partner Affiliate Agreement,
the Non-Affiliate Partner shall have the right to represent the Partnership with
respect to such dispute, breach or alleged breach (including any litigation
relating thereto); provided, that the Non-Affiliate Partner may not terminate
the Partner Affiliate Agreement without the approval of the Management Committee
or incur expenditures on behalf of the Partnersh ip with respect to any such
dispute, breach or alleged breach in excess of $100,000 without the approval of
the Management Committee.
20
5.3 Compensation.
5.3.1 [Intentionally omitted].
5.3.2 The Partnership shall reimburse all General Partners for all
ordinary and necessary out-of-pocket expenses incurred by the General Partners
on behalf of the Partnership in accordance with, and upon the schedule set forth
in, the Budget (but excluding Non- Reimbursable Expenses). Such reimbursement
shall be treated as an expense of the Partnership that shall be deducted in
computing the Cash Flow and shall not be deemed to constitute a distributive
share of Profits or a distribution or return of capital to the General Partners.
Any expenditures, by any Partner, that are not provided for in the Budget or
approved by the Management Committee and for which reasonably detailed
documentation is not submitted to the Partnership are not subject to
reimbursement, except as provided in Section 5.2.5.
5.3.3 If a Partner or an Affiliate of a Partner provides services to
the Partnership pursuant to a separate written agreement, such Partner or
Affiliate shall be reimbursed for such services in accordance with such written
agreement.
5.3.4 The Partners acknowledge that ESI GP and Tractebel GP have
incurred and will incur certain due diligence and other related costs in
connection with the transactions associated with the Acquisition and the Rule
144A Financing. Subject to the submission of reasonably detailed documentation,
the Management Committee shall cause ESI GP and Tractebel GP to be reimbursed
for such costs at the time of the Rule 144A Financing or out of the initial
funds that would otherwise be available for distribution by the Project
Partnerships (excluding, however, the payments described in Sections 4.1.1 and
4.1.2), whichever first occurs.
5.4 Provision of Services. No General Partner shall be required to perform
services for the Partnership solely by virtue of being a General Partner. Except
as set forth in Section 5.3 or pursuant to a contract with the Partnership, or
approved by the Management Committee in the Budget or otherwise, no General
Partner shall be entitled to compensation for services performed for the
Partnership, reimbursement for expenses incurred, or advances of funds made.
5.5 Indemnification of General Partners.
5.5.1 None of the General Partners or members of the Management
Committee shall be liable, responsible, or accountable, in damages or otherwise,
to any other Partner or to the Partnership for any act performed by such General
Partner or member of the Management Committee with respect to Partnership
matters, and within the standard of care specified in Section 5.2.4.3 unless
such act constitutes grossly negligent or reckless conduct, intentional
misconduct, a knowing violation of law, or the breach of any representation or
warranty or covenant contained in this Agreement. Each General Partner shall, to
the maximum extent permitted by law, indemnify and hold harmless the
Partnership, the other Partners and their Affiliates from or against any direct
or indirect liability, damage, loss, cost or expense (including without
limitation reasonable attorneys' fees and disbursements) suffered or incurred by
the indemnified Person arising out of or related to the breach of any
representation or warranty or coven ant contained in this Agreement.
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5.5.2 The Partnership shall indemnify each General Partner and each
member of the Management Committee for any act performed by the General Partner
or a member of the Management Committee with respect to Partnership matters, and
within the standard of care specified in Section 5.2.4.3 unless such act
constitutes grossly negligent or reckless conduct, intentional misconduct, the
knowing violation of law or the breach of any representation or warranty or
covenant contained in this Agreement.
5.5.3 Nothing contained in this Section 5.5 shall be deemed to
supersede the indemnification provisions contained in any agreement between the
Partnership and a Partner or an Affiliate of a Partner, and any such
indemnification provisions shall exclusively govern any such agreement. The
agreements contained in this Section 5.5 shall survive the withdrawal of any
Partner or any termination or dissolution of the Partnership.
5.6 Sharing of Information. If either of Tractebel GP or ESI GP at any time
receives information that such General Partner believes may be material to the
prospects of the business of the Partnership and which such General Partner
believes is not known to the other Partners, then such General Partner will
promptly disclose such information to the other Partners.
5.7 Rule 144A Financing. The Partners agree that they will use their
commercially reasonable best efforts to effect the Rule 144A Financing as soon
as possible following the Acquisition Date.
5.8 Authorization of Project Documents. The Partnership is hereby
authorized and directed to enter into the Administrative Services Agreement, the
O&M Agreements and the Fuel Management Agreements; provided, that such
agreements shall be held in escrow until execution and delivery of the Purchase
Agreement.
5.9 Delivery of No Knowledge Agreement. The Partners agree to enter an
agreement in the form attached hereto as Exhibit A immediately prior to the
closing of the Acquisition.
Article VI.
Limited Partners; General Partner Meetings
6.1 No Liability of or Control by Limited Partners.
6.1.1 No Limited Partner shall be liable for any debts, liabilities,
contracts or obligations of the Partnership in excess of the amount of such
Limited Partner's unpaid contribution or except as expressly required by the
Act. No Limited Partner shall be liable for any debts, liabilities, contracts or
obligations of any other Partner.
6.1.2 No Limited Partner shall (i) have the authority or power to
participate in the management or control of the Partnership's business, (ii)
have the authority or power in its capacity as a Limited Partner to act as agent
for or on behalf of the Partnership or any other Partner, to do any act which
would be binding on the Partnership or any other Partner, or to incur any
expenditures on behalf of or with respect to the Partnership, (iii) have any
right to demand or
22
receive property other than money upon distribution from the Partnership, or
(iv) be compelled to accept a distribution of any asset in kind from the
Partnership in lieu of a proportionate distribution of money being made to other
Partners.
6.1.3 The Limited Partners shall have no voting or consent rights,
including with respect to actions to be taken by the Management Committee or the
General Partners.
Article VII.
Transfer of Partner Interests and Withdrawals of Partners
7.1 Transfers.
7.1.1 General Prohibition on Transfers. Except as set forth in Sections
7.1.2 and 7.1.3 below, no Partner may Transfer all or any part of its Interest
to any other Person without the consent of the Management Committee, such
approval to be given or withheld in the Management Committee's sole discretion.
Each Partner hereby acknowledges the reasonableness of this prohibition in view
of the purposes of the Partnership and the relationship of the Partners. For the
purposes of this Section, a Transfer of a Partner Interest shall be deemed to
include a sale, transfer or assignment (other than as collateral) of the stock,
partnership interest or other equity ownership of the entity or entities (an
"Upper Tier Entity") that directly or through one or more intervening
subsidiaries own or have ownership interests in a Partner such that, after
giving effect to such sale, transfer or assignment ESI Energy, Inc. or Tractebel
Power, Inc., as the case may be (or a permitted transferee of their respective
Partner Interests under Section 7.1.2, 7.1.3.1 or 7.1.3.2), or their respective
Affiliates, fail to own 100% of the equity ownership in such Upper Tier Entities
and to have voting and control rights in such Upper Tier Entities commensurate
with such ownership. The attempted Transfer by a Partner of any portion or all
of its Interest in violation of the prohibition contained in this Section 7.1.1
shall be deemed invalid, null and void, and of no force or effect, except any
Transfer mandated by operation of law and then only to the extent necessary to
give effect to such Transfer by operation of law.
7.1.2 Transfers of Interests. Subject to compliance with Section 7.1.4,
the ESI Partners and Tractebel Partners may Transfer all (but not less than all)
of their respective Interests in the Partnership (both as a General Partner and
as a Limited Partner) to a bona fide third party (the "Potential Purchaser")
without the consent of the Management Committee, provided however that, prior to
making any such Transfer, Tractebel Partners or the ESI Partners desiring to
Transfer their Interests, as the case may be (the "Transferring Partners"),
shall notify the ESI Partners or Tractebel Partners, as the case may be (the
"Remaining Partners"), of the material terms and conditions on which the
Potential Purchaser has agreed to purchase all the Interests of the Transferring
Partners (and shall provide the Remaining Partners with such documentation
relating to its agreement with the Potential Purchaser as reasonably requested
by the Remaining Partners) and, within sixty days of such notification, the
Remaining P artners shall give Notice to the Transferring Partners that it or
they intend to purchase the Interests of the Transferring Partners on the same
terms and conditions (including price) as agreed to by the Potential Purchaser;
provided, however, that any Remaining Partner that has been a Partner for a
longer
23
period of time than any other Remaining Partner shall have the right and option,
but not the obligation, prior and senior to the right or option of each such
other Remaining Partner, to purchase 100%, or less than 100%, at such senior
Remaining Partners' sole and absolute discretion, of the Interests of the
Transferring Partners. Remaining Partners equal in seniority shall be entitled
to purchase Interests of the Transferring Partners in the ratio of such
Remaining Partners' Interests immediately prior to such purchase (subject to the
right granted above to the Senior Remaining Partners), provided, that if any
such Remaining Partner purchases less than its proportionate share of Interests
of the Transfer ring Partners, the resulting excess portion of Interests shall
be allocated equally to the other Remaining Partners that are equal in right of
seniority. If all of the Remaining Partners shall fail to give such Notice
within such sixty day period or if the Interests which the Remaining Partners
indicate they wish to purchase is less than 100% of the Interests of the
Transferring Partners, the Transferring Partners shall thereafter be free for a
180-day period, subject to compliance with Section 7.1.4, to Transfer their
entire Interests to the Potential Purchaser on the same terms and conditions
that had been agreed to by the Potential Purchaser. If any Remaining Partners
give timely Notice of their intent to purchase the Interests of the Transferring
Partners, then the Transferring Partners shall be obligated to consummate such
purchase within the longer of 90 days or such time as the Potential Purchaser
shall have had to consummate such purchase. Any Transfer to Remaining Partners
pursuant to this Secti on 7.1.2 shall only be permitted if the Transferring
Partners (i) represent and warrant to the Remaining Partners that they are
transferring their Interests free and clear of any encumbrance, security
interest, mortgage, lien, pledge, charge, easement, reservation, guarantee,
option, restriction, or similar right of any third party, and (ii) delivers any
agreements, certificates, opinions or any other documents, and takes such
further actions as shall be reasonably necessary, in the Remaining Partners' sol
e and absolute discretion, to consummate the Transfer.
7.1.3 Permitted Transfers. Notwithstanding Section 7.1.1 above (but
subject to Section 7.1.4), a General Partner may Transfer:
7.1.3.1 All, or any portion of, such Partner's Interest to any
Affiliate, in which case such Affiliate will become a General Partner in place
of the transferring Partner without any further action on the part of the
Partnership or any other Partner and, except as expressly provided otherwise in
this Agreement, shall be entitled to all of the rights previously held by the
General Partner (including the right to appoint representatives to the
Management Committee); provided, that, such Affiliate assumes all of the
liabilities and obligations of such transferring Partner arising from this
Agreement;
7.1.3.2 All, or any portion of, such Partner's Interest to any
Person with the unanimous approval of all of the General Partners, such approval
to be given or withheld in each General Partner's sole discretion; and
7.1.3.3 All, or any portion of, such Partner's Interest in the
form of a collateral assignment of such Interest, but only if and to the extent
approved by the Management Committee and required in connection with the Rule
144A Financing for security purposes.
24
7.1.4 Conditions on Transfer. Any Transfer described and permitted in
this Section 7.1 shall only be permitted if:
7.1.4.1 such Transfer is accomplished in compliance with all
applicable securities laws and regulations;
7.1.4.2 the effect of the Transfer will not be to terminate the
Partnership pursuant to Code Section 708(b) or any similar successor provision
of the Code, or otherwise to adversely affect the Partnership or any other
Partner under the Code, or any other laws of any taxing jurisdiction to which
the Partnership is subject, or result in the imposition of a transfer tax on the
Partnership or any other Partner, in each case, unless indemnified against by
the Transferor or its transferee in a manner reason ably acceptable to each
affected Partner;
7.1.4.3 the Transfer does not result in a default under, breach
of any material obligation contained in, or cause the failure of a material
condition contained in, any material agreement (including any Financing
Document) to which the Partnership is a party or, if it does so result, a
consent to or waiver of such default, breach or failure has been obtained from
the other party to such agreement;
7.1.4.4 the Transferor and/or the transferee bears all reasonable
costs of the Partnership and of the other Partners in connection with the
Transfer, including costs incurred in amending this Agreement;
7.1.4.5 the Partnership has received the written opinion,
prepared and delivered to the Partnership at the Transferor's expense prior to
the effectiveness of the Transfer, of counsel selected by the Transferor that
the conditions specified in clauses 7.1.4.1 and 7.1.4.2 above and 7.1.4.9 below
are satisfied (such counsel and opinion to be reasonably acceptable to the
Management Committee); provided, that, the opinion with respect to the matters
described in Sections 7.1.4.2 and 7.1.4.9 need only be ba sed on the knowledge
of such counsel and need not address any indemnification provided and provided
further, no opinion need be provided in connection with a Transfer for security
purposes of any portion of an Interest to a lender;
7.1.4.6 the Transfer does not result in the Partnership being
treated as an association taxable as a corporation, or as a publicly traded
partnership taxable as provided in Code Section 7704, or otherwise as an entity
not taxable as a partnership for U.S. federal income tax purposes or for the
purposes of any other laws of any taxing jurisdiction to which the Partnership
is subject;
7.1.4.7 if the Transfer is to an Affiliate of the Transferor
pursuant to Section 7.1.3.1 above (a) the Transferor has given thirty (30) days'
prior written notice to the other Partners identifying such Affiliate, and (b)
the Transferor remains liable to the other Partners for the performance of the
Transferor's obligations under this Agreement and any related agreement or
contract to which the Transferor is a party;
25
7.1.4.8 the transferee executes an agreement agreeing to be bound
by the terms and conditions of this Agreement and any other relevant document,
which agreement shall contain representations and warranties of the transferee
in substantially the same form as contained in Article XI; provided, that, the
condition set forth in this subsection 7.1.4.8 shall not apply to the Transfer
of any portion of a Partner's Interest but shall apply to an Assignee becoming a
substitute Limited Partner;
7.1.4.9 such Transfer shall not adversely affect the
classification of each Project as a "Qualifying Facility" under PURPA, or the
regulations of the Federal Energy Regulatory Commission thereunder, or adversely
affect the Partnership's entitlement to the exemptions contained in 18 C.F.R.
ss.ss. 292.601(c) and 292.607.
7.1.5 Corresponding Changes to Agreement. If, pursuant to the
provisions of this Section 7.1, a Partner Transfers, in whole or in part, any of
its Partner Interest in a permitted manner, then the Partners and the transferee
shall, at the reasonable request of any Partner, amend this Agreement to reflect
such event. If an Interest shall be transferred in a permitted manner, the
transferee shall be admitted into the Partnership as a substitute partner.
7.2 Voluntary Withdrawal. No Partner shall have the right or power to
Voluntarily Withdraw from the Partnership.
7.3 Special Rules With Respect to General Partners.
7.3.1 Events of Cessation. A General Partner shall cease to be a
general partner of the Partnership upon the earliest to happen of the following
events:
7.3.1.1 [Intentionally omitted]
7.3.1.2 the Transfer of all of the General Partner's Interest as
a general partner in the Partnership;
7.3.1.3 the Bankruptcy of a General Partner or any other event
which causes a General Partner to cease to be a general partner; provided, that
if a General Partner ceases to be a general partner in the Partnership pursuant
to this Section 7.3.2.2, the General Partner Interest of such General Partner
shall be converted to a Limited Partner Interest, such that such Partner shall
be deemed admitted solely as a Limited Partner in the Partnership with all of
the rights and subject to all of the limitations of a Limited Partner hereunder,
retaining its Capital Account and its Interest.
Article VIII.
Dispute Resolutions; Arbitration
8.1 Dispute Resolution. If a dispute arises among the Partners, or between
any of them, regarding the conduct of the business of the Partnership or the
interpretation of any provision of
26
this Agreement or any other matter with respect to the Partnership or its
operations, an aggrieved Partner shall give a Notice of such dispute (a "Dispute
Notice") to the other Partners. Within fifteen (15) days after such Dispute
Notice, the President or an Executive Vice President of each of the companies
which owns a controlling interest in each General Partner shall confer with each
other to seek with diligence and in good faith to resolve such dispute. If such
officers are unable to resolve such dispute within forty-five days after such
Dispute Notice, then the parties shall be bound to arbitrate such dispute in
accordance with Section 8.2.
8.2 Arbitration. To the fullest extent permitted by law, any dispute
between the Partners regarding the business of the Partnership, the
interpretation of any provision of this Agreement or any other matter with
respect to the partnership and its operations, if not resolved by negotiation by
the Partners within 45 days after the Dispute Notice, shall be resolved
exclusively by binding arbitration between the Partners pursuant to the Rules of
the American Arbitration Association for Commercial Dispute s (the "Arbitration
Rules"). Arbitration shall be administered by the American Arbitration
Association. Any Partner may institute arbitration proceedings at any time by
delivering written Notice demanding arbitration to the other Partners in the
manner described in Section 13.2.
8.2.1 Within 20 days after receipt of a written demand for arbitration,
the General Partners shall each appoint one arbitrator. Within 15 days of the
expiration of that 20 day period, the two arbitrators so appointed shall appoint
a third arbitrator. If any Partner shall fail to appoint an arbitrator, or if
the two arbitrators shall fail to appoint a third arbitrator, the American
Arbitration Association shall make that selection within 10 days of a Partner's
request. The arbitrators shall meet th qualifications and abide by the Code of
Ethics for arbitrators in commercial disputes of the American Arbitration
Association. The arbitrators shall have knowledge of and experience in the power
generation and project financing business.
8.2.2 To the fullest extent permitted by law, the arbitration shall be
conducted in accordance with the procedures set forth in the Arbitration Rules.
In determining any question, matter or dispute before them, the arbitrators
shall apply the provisions of this Agreement without varying therefrom in any
respect. They shall not have the power to add to, modify or change any of the
provisions of this Agreement. The Partners shall exercise all commercially
reasonable efforts in good faith to cause a h earing to be held within 90 days
after the date upon which the last arbitrator is appointed and to conclude all
hearings within 30 days after the first hearing date. The arbitrators shall only
grant a Partner's request for postponement of the hearing upon a showing of good
cause as determined by the arbitrators. Within 30 days of the last hearing date,
the arbitrators shall issue a written decision setting forth their analysis and
ruling. The arbitrators shall determine in what proportion the Partners s hall
bear the fees and expenses of the arbitrators. Each Partner shall bear the fees
and expenses of its own counsel and other consultants. All arbitration
proceedings shall be subject to the choice of law provisions set forth in
Section 13.5, and shall be held at a location agreed to by the parties, or if
the parties cannot agree, then in Atlanta, Georgia.
27
8.2.3 The Partners acknowledge and agree that any arbitral award shall
be final, binding and conclusive upon the Partners and may be confirmed or
embodied in any order of any court having jurisdiction.
8.2.4 To the fullest extent permitted by law, service of any matters
referenced in this Article VIII shall be given in the manner described in
Section 13.2 or as permitted by the rules of the American Arbitration
Association.
8.2.5 Notwithstanding anything to the contrary contained in this
Article VIII, if, due to a breach or threatened breach or default or threatened
default, a Partner is suffering irreparable harm for which monetary damages are
inadequate, such Partner may petition a court of competent jurisdiction for
injunctive relief, specific performance or other equitable relief.
Article IX.
Dissolution, Liquidation, and Termination of the Partnership
9.1 Right to Cause Dissolution; Events of Dissolution.
9.1.1 Notwithstanding any agreement herein to the contrary, no Partner
shall have the right, and each Partner hereby agrees not, to cause the winding
up of, or to dissolve, terminate or liquidate the Partnership, or to petition a
court for the winding up, dissolution, termination or liquidation of the
Partnership. The Partnership shall not be dissolved by the admission of
additional Partners or substitute Partners in accordance with the terms of this
Agreement.
9.1.2 The Partnership shall be dissolved automatically and its affairs
wound up, without further act, upon the happening of the first to occur of the
following: (a) December 31, 2048, (b) the written consent of all of the Partners
or (c) the entry of a decree of judicial dissolution under the Act.
9.2 Procedure for Winding Up and Dissolution. If the Partnership is
dissolved, the Management Committee shall wind up its affairs. On winding up of
the Partnership, the assets of the Partnership shall be distributed, first to
creditors of the Partnership, including Partners who are creditors, in
satisfaction of the liabilities of the Partnership (whether by payment or the
making of reasonable provision for payment thereof and including the
satisfaction of all contingent, conditional and unmatured l abilities of the
Partnership), and then to the Partners in accordance with Section 4.6 of this
Agreement.
9.3 Filing of Certificate of Cancellation. Upon completion of winding up
the affairs of the Partnership, the Management Committee shall promptly cause to
be filed the Certificate of Cancellation of Certificate of Limited Partnership
with the Secretary of State.
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Article X.
Books, Records, Accounting, and Tax Elections
10.1 Bank Accounts. All funds of the Partnership shall be deposited in a
bank account or accounts opened in the Partnership's name. The bank accounts
will be maintained in Florida, or elsewhere as determined by the Management
Committee from time to time. The Management Committee shall determine the
financial institution or institutions at which the accounts will be opened and
maintained, the types of accounts, and the Persons who will have authority with
respect to the accounts and the funds therein.
10.2 Maintenance of Books and Records.
10.2.1 The Manager shall maintain such books and records as required
under the Administrative Services Agreement.
10.3 Financial Statements and Reports. The Manager shall provide such
financial statements and reports to the Partners as required under the
Administrative Services Agreement.
10.4 Right to Inspect Books and Records; Receive Information.
10.4.1 Upon the request of a General Partner, the Partnership shall
promptly deliver to the requesting Partner at the expense of the Partnership a
copy of this Agreement, as well as the information required to be maintained by
the Manager under the Administrative Services Agreement.
10.4.2 Each Partner has the right upon not less than 24 hours prior
notice, and for purposes reasonably related to the interest of that Partner or
the Partnership, to do the following:
10.4.2.1 to inspect and copy, or cause its agents or
representatives to inspect and copy, during normal business hours any of the
records required to be maintained by the Manager under the Administrative
Services Agreement; and
10.4.2.2 to obtain from the Partnership promptly after becoming
available, a copy of the Partnership's federal, state, and local income tax or
information returns for each year.
10.4.3 Unless otherwise expressly provided in this Agreement, the
inspecting or requesting Partner shall reimburse the Partnership for all
reasonable costs and expenses incurred by the Partnership in connection with
such inspection and copying of the Partnership's books and records and the
production and delivery of any other books or records.
10.5 Annual Accounting Period. The annual accounting period of the
Partnership shall be its taxable year. The Partnership's taxable year shall be
the calendar year.
29
10.6 Tax Matters. ESI GP shall be the "Tax Matters Partner" for the
purposes of Code Section 6231. Unless otherwise agreed to by the Management
Committee, the Tax Matters Partner shall not elect for the Partnership to be
treated as other than a partnership for tax purposes; shall treat NE, LLC and
the Project Partnerships as non-entities for Federal income tax purposes (unless
and until NE, LLC and/or the Project Partnerships shall have more than one
equity owner for such purposes); and shall treat the Acquisition as the
acquisition by the Partnership of all of the assets of the Project Partnerships
(rather than an acquisition by the Partnership and NE, LLC of interests in the
Project Partnerships). Except as provided in the preceding sentence, the Tax
Matters Partner shall not make any material decisions or take any material
actions in its capacity as such without the prior consent of the Management
Committee.
10.7 GAAP Allocations. All items of income and expense calculated and
reported in accordance with GAAP shall be allocated to each Partner based on
each Partner's Percentage.
Article XI.
Representations and Warranties
11.1 Representations and Warranties of the Partners. Each Partner hereby
represents and warrants as of the Effective Date that:
11.1.1 It is duly formed, validly existing and in good standing under
the jurisdiction of its formation, with full power and authority to enter into
and perform its obligations under this Agreement and has duly authorized the
execution, delivery and performance of this Agreement;
11.1.2 It has validly executed this Agreement, and upon delivery this
Agreement shall be a binding obligation of such party, enforceable against such
party in accordance with its terms except insofar as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by general equitable principles;
11.1.3 Its entry into this Agreement and the performance of its
obligations hereunder will not require the approval of any governmental body or
regulatory authority and will not violate, conflict with, or cause a default
under any of its organizational documents, any contractual covenant or
restriction by which such party is bound, or any applicable law, regulation,
rule, ordinance, order, judgment or decree; and
11.1.4 It has acted in full compliance with all laws, statutes,
ordinances, rules and regulations in connection with the execution hereof.
11.2 Representations and Warranties of ESI Partners. The ESI Partners
hereby represent and warrant that, as of the Effective Date, to the best of
their knowledge the stream of benefits analysis attached hereto as Schedule 11.2
is true, accurate and complete, and has been prepared in accordance with the
guidance provided in applicable FERC proceedings and decisions.
30
Article XII.
True-Up of Stream of Benefits
12.1 True-Up.
12.1.1 Dissolution. Not later than ninety (90) days after the
dissolution of the Partnership pursuant to Article IX, ESI GP shall calculate,
as of the date of the dissolution of the Partnership, (a) the sum of (i) the
present value of the proposed distribution or allocation to the ESI Partners in
connection with the proposed dissolution plus (ii) the present value of all
prior benefits which have been distributed or allocated to the ESI Partners (the
"Utility Affiliate Share of Benefits"); and (b) t he sum of (i) the present
value of the proposed distributions or allocations to all the Partners in
connection with the dissolution; plus (ii) all prior benefits which have been
distributed or allocated to all the Partners (including predecessors in
interest) pursuant to this Agreement and any prior agreement of the Partnership
(without duplication thereof) (the "Total Benefits"), excluding from each
calculation in (i) and (ii) all distributions or allocations in an amount equal
to the capital contribution s made by the Partners. If the calculation
demonstrates that the Utility Affiliate Share of Benefits exceeds fifty (50)
percent of the Total Benefits, then the ESI Partners shall promptly make a
payment to the other Partners in an amount necessary to reduce the Utility
Affiliate Share of Benefits to fifty (50) percent of the Total Benefits. As used
herein, the "Utility Affiliate Share of Benefits" and "Total Benefits" shall be
limited to the stream of benefits indicated under FERC restrictions for determ
ining whether the Project is or has been a qualifying facility under the Public
Utility Regulatory Policy Act of 1978, as amended ("PURPA"). Notwithstanding
anything set forth above to the contrary, as used herein, the "Utility Affiliate
Share of Benefits" and "Total Benefits" shall be calculated in conformance with
guidance in FERC Qualifying Facility decisions issued through the date of
calculation, including but not limited to guidance concerning appropriate
discount rates and the types of benefits to be included in the stream of
benefits (it being agreed that the Total Benefits shall include benefits
received by the prior owners of the Project Partnerships unless the FERC or a
federal court has issued an order or ruling finding that such benefits received
by the prior owners should not be included in such calculation or the FERC has
issued an order or ruling or a federal court has rendered a decision, in either
case making a similar finding with respect to a facility other than the Projects
based on facts pertaining to the FERC's qualifying facility ownership criteria
under PURPA ("Ownership Criteria") that are similar to those presented by the
ownership of the Project Partnerships from the Original Effective Date).
12.1.2 Transfer of Interests. Not later than ninety (90) days after the
sale or other transfer of any interest in the Partnership which is owned by an
ESI Partner, ESI GP shall calculate, as of the date of the sale or other
transfer of the Partnership, (a) the present value of the benefit to the ESI
Partners from the sale or transfer of such interest and all prior benefits which
have been distributed or allocated to the ESI Partners (the "Utility Affiliate
Share of Benefits") and (b) the present val ue of the retained interests in the
Partnership, if any, as of the transfer date and all prior benefits which have
been distributed or allocated to all the Partners (including predecessors in
interest) pursuant to this Agreement and any prior agreement of the Partnership
(without duplication thereof) (the "Total Benefits"), excluding from each
calculation in (a) and (b) all distributions or allocations in an amount equal
to the capital contributions made by the Partners. If the calculation
demonstrates that the Utility Affiliate Share of Benefits exceeds fifty
31
(50) percent of the Total Benefits, then the ESI Partners shall promptly make a
payment to the other Partners in an amount necessary to reduce the Utility
Affiliate Share of Benefits to fifty (50) percent of the Total Benefits. As used
herein, the "Utility Affiliate Share of Benefits" and "Benefits" shall be
limited to the stream of benefits indicated under FERC restrictions for
determining whether the Project is or has been a qualifying facility un der
PURPA. Notwithstanding anything set forth above to the contrary, as used herein,
the "Utility Affiliate Share of Benefits" and "Total Benefits" shall be
calculated in conformance with guidance in FERC Qualifying Facility decisions
issued through the date of calculation, including but not limited to guidance
concerning appropriate discount rates and the types of benefits to be included
in the stream of benefits (it being agreed that the Total Benefits shall include
benefits received by the prior owners of the Project Partnerships unless the
FERC or a federal court has issued an order or ruling finding that such benefits
received by the prior owners should not be included in such calculation or the
FERC has issued an order or ruling or a federal court has rendered a decision,
in either case making a similar finding with respect to a facility other than
the Projects based on facts pertaining to the Ownership Criteria that are
similar to those presented by the ownership of the Project Partnerships from the
Original Effective Date).
12.1.3 FERC Action. If at any time the FERC or a federal court issues
an order or ruling ("Order") (i) finding that the ESI Partners' equity interest
in the Partnership exceeds a level that is permitted under the Ownership
Criteria, or (ii) making a similar finding with respect to a facility other than
the Project based on facts pertaining to the Ownership Criteria that are similar
to those presented by this Agreement inclusive of the terms hereof from the
Original Effective Date and, as a result, an y Partner requests the Partnership
to obtain from the law firm of Reid & Priest (or if such firm is no longer in
existence, from other nationally recognized FERC counsel) ("FERC Counsel") an
unqualified opinion dated, as of a then current date, to the same effect as the
opinion dated November 22, 1997 from Reid & Priest but such FERC Counsel is
unwilling to provide such opinion, then, in either such case, not later than
ninety (90) days after the issuance of the Order, the ESI Partners shall take
such acti on as is necessary to cause the FERC to rescind the Order or otherwise
to comply with the Ownership Criteria (including, without limitation, reducing
the Percentages of the ESI Partners, paying to the Tractebel Partners an amount
necessary to reduce the Utility Affiliate Share of Total Benefits received by
the prior owners to fifty percent (50%) of the Total Benefits calculated in
accordance with Section 12.1.2 hereof, transferring all or a portion of the
Partnership Interests of the ESI Partners to the Tr actebel Partners or to some
third party, or any combination of such actions) to meet the Ownership Criteria.
12.1.4 Change in Regulation. The foregoing requirements contained in
this Article 12 shall no longer apply or be effective in the event that (1) such
provisions are no longer required in order to comply with the ownership criteria
applicable to qualifying facilities under PURPA, and the rules, regulations and
orders issued thereunder by the FERC; and (2) the Partnership is no longer
required to maintain its status as a qualifying facility (i) under the express
terms of any agreement to which the Partnership or either of the Project
Partnerships is a party; (ii) in order to avoid any material adverse effect
under any agreement to which the Partnership or Project Partnerships is a party;
and (iii) in order to be eligible for exemption from the Public Utility Holding
Company Act of 1935, as amended, and from the financial, organizational or rate
32
regulations imposed upon electric utilities, public utilities or similar
entities by any governmental authority.
Article XIII.
General Provisions
13.1 Assurances. Each Partner shall execute all certificates and other
documents and shall do all such filing, recording, publishing, and other acts as
the Partners deem appropriate to comply with the requirements of law for the
formation and operation of the Partnership and to comply with any laws, rules,
and regulations relating to the acquisition, operation, or holding of the
property of the Partnership.
13.2 Notifications. Any notice, demand, consent, election, offer, approval,
request, or other communication (collectively a "Notice") required or permitted
under this Agreement must be in writing and shall be deemed to have been
received only upon actual receipt thereof.
To Tractebel GP: c/o Tractebel Power, Inc.
1177 West Loop South
Suite 900
Houston, Texas 77027
Attention: General Counsel
Telecopier: (713) 552-2364
To Tractebel Sub: c/o Tractebel Power, Inc.
1177 West Loop South
Suite 900
Houston, Texas 77027
Attention: General Counsel
Telecopier: (713) 552-2364
To ESI GP: c/o ESI Energy, Inc.
11760 US Highway One
Suite 600
North Palm Beach, Florida 33408
Attention: President
Telecopier: (561) 691-3615
33
To ESI Sub: c/o ESI Energy, Inc.
11760 US Highway One
Suite 600
North Palm Beach, Florida 33408
Attention: President
Telecopier: (561) 691-3615
13.3 Specific Performance. The parties recognize that irreparable injury
will result from a breach of any provision of this agreement and that money
damages will be inadequate to fully remedy the injury. Accordingly, in the event
of a breach or threatened breach of one or more of the provisions of this
agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
13.4 Complete Agreement. This Agreement constitutes the complete and
exclusive statement of the agreement among the Partners. It supersedes all prior
written and oral agreements and statements, and any prior representation,
statement, condition, or warranty. Except as expressly provided otherwise
herein, this Agreement may not be amended without the written consent of all of
the Partners.
13.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Delaware without regard to
principles of conflicts of laws.
13.6 Section Titles. The headings herein are inserted as a matter of
convenience only and do not define, limit, or describe the scope of this
Agreement or the intent of the provisions hereof.
13.7 Binding Provisions. This Agreement is binding upon, and to the limited
extent specifically provided herein, inures to the benefit of, the parties
hereto and their respective heirs, executors, administrators, personal and legal
representatives, successors, and assigns.
13.8 Terms. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the Person
may in the context require.
13.9 Separability of Provisions. Each provision of this Agreement shall be
considered separable; and if, for any reason, any provision or provisions herein
are determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
13.10 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which,
when taken together, constitute one and the same document. The signature of any
party to any counterpart shall be deemed a signature to, and may be appended to,
any other counterpart.
34
13.11 Estoppel Certificate. Each Partner shall, within ten (10) days after
written request by any Partner, deliver to the requesting Person a certificate
stating, to the Partner's knowledge, that: (a) this Agreement is in full force
and effect; (b) this Agreement has not been modified except by any instrument or
instruments identified in the certificate; and (c) there is no default hereunder
by the requesting Person, or if there is a default, the nature or extent
thereof.
13.12 Non-Disclosure. Each Partner hereto agrees that it will, and will
cause its officers, other personnel and authorized representatives to, hold in
strict confidence all Confidential Information disclosed by the other Partners
and will ensure that such other persons do not, disclose such information to
others without the prior written consent of the Partners hereto to which such
Confidential Information relates (the "Affected Party"); provided, that each
Partner hereto may provide such data and in formation (i) to its outside
lenders, consultants, accountants, investors and advisers; provided, that, such
parties remain legally obligated (by contract or otherwise) to maintain the
confidentiality of such information, and (ii) in response to legal process or
applicable government regulations, but only that portion of the data and
information which, in the written opinion of counsel for such Partner, is
legally required to be furnished and further provided that such Party notifies
the Affected Party to protect the confidentiality of such data and information
pursuant to applicable law. Notwithstanding the foregoing, each Party hereto may
disclose the terms of this Agreement in connection with any Transfer provided
that the potential purchaser executes appropriate confidentiality agreements.
13.13 Waiver. No failure on the part of any Partner to exercise, and no
delay in exercising, and no course of dealing with respect to, any right, power
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. Any waiver to be effective shall be in writing
signed by the waiving Partner.
35
IN WITNESS WHEREOF, the parties have executed, or caused this Agreement to
be executed, as of the Effective Date.
ESI NORTHEAST ENERGY GP, INC.,
a Florida corporation
By: /s/ Glenn E. Smith
--------------------------
Name: Glenn E. Smith
Title: Vice President
ESI NORTHEAST ENERGY LP, INC.,
a Florida corporation
By: /s/ Glenn E. Smith
--------------------------
Name: Glenn E. Smith
Title: Vice President
TRACTEBEL NORTHEAST GENERATION GP, INC.
a Delaware corporation
By: /s/ Timothy R. Dunne
--------------------------
Name: Timothy R. Dunne
Title: Vice President
TRACTEBEL ASSOCIATES NORTHEAST LP, INC.
a Delaware corporation
By: /s/ Charles Vetters
--------------------------
Name: Charles Vetters
Title: Vice President
[Signature Page to Agreement of Limited Partnership]
Exhibit A
NO KNOWLEDGE AGREEMENT
This AGREEMENT is dated as of [The Acquisition Date] among ESI NORTHEAST
ENERGY GP, INC., a Florida corporation, and ESI NORTHEAST ENERGY LP, INC., a
Florida corporation (the "ESI Partners"); and TRACTEBEL NORTHEAST GENERATION GP,
INC., a Delaware corporation and TRACTEBEL ASSOCIATES NORTHEAST LP, INC., a
Delaware corporation (collectively, the "Tractebel Partners").
The ESI Partners and the Tractebel Partners are the partners of Northeast
Energy, LP (the "Partnership") under the Agreement of Limited Partnership of
Northeast Energy, LP, a Delaware limited partnership (the "Partnership
Agreement"). All capitalized terms used herein shall have the meaning set forth
in the Partnership Agreement unless otherwise herein defined.
The ESI Partners and the Tractebel Partners hereby agree as follows:
1. ESI Partners Knowledge. Except as set forth in Schedule 1 hereto,
the ESI Partners have no knowledge of any breach by any "Seller" (as
defined in the Purchase Agreement) of any representations or warranties
made by such Seller in the Purchase Agreement.
2. Tractebel Partners Knowledge. Except as set forth in Schedule 2
hereto, the Tractebel Partners have no knowledge of any breach by any
Seller of any representations or warranties made by such Seller in the
Purchase Agreement.
3. ESI Indemnity. The ESI Partners hereby agree to indemnify and hold
harmless the Tractebel Partners from and against fifty percent (50%) of any
loss, damage, cost or expense suffered or incurred by the Partnership as a
result of the Partnership's inability to recover against the Sellers under
Section 11 of the Purchase Agreement for breach of representation or
warranty by the Sellers, to the extent such inability is a result of the
successful assertion by the Sellers of the defense that such recover y is
barred because the ESI Partners had knowledge of such breach at the time of
Closing (as defined in the Purchase Agreement).
4. Tractebel Indemnity. The Tractebel Partners hereby agree to
indemnify and hold harmless the ESI Partners from and against fifty percent
(50%) of any loss, damage, cost or expense suffered or incurred by the
Partnership as a result of the Partnership's inability to recover under
Section 11 of the Purchase Agreement for breach of representation or
warranty by the Sellers, to the extent such inability is a result of the
successful assertion by the Sellers of the defense that such recovery is
barred be cause the Tractebel Partners had knowledge of such breach at the
time of Closing.
5. Waiver. No failure or delay by the Partners or the Partnership to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof nor shall
any single or partial exercise of such right, power or privilege preclude
any further exercise thereof or of any other right, power or privilege.
6. Amendments. This Agreement may be amended but only by an instrument
in writing signed by the Partners.
7. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York.
8. Notices. Any notice hereunder shall be in writing and shall be
personally delivered or delivered by an internationally recognized courier
service such as DHL or Federal Express, addressed to the party receiving
such notice at the following address:
If to the ESI Partners to:
ESI Energy, Inc.
11760 US Highway One
Suite 600
North Palm Beach, Florida 33408
Attn:President
If to the Tractebel Partners to:
Tractebel Power, Inc.
1177 West Loop South
Suite 900
Houston, Texas 77027
Attn: General Counsel
or at such other address as a party may by notice specify to the other
party. Notices shall be deemed effective upon confirmed receipt of
delivery.
9. Severability. If any term contained in this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable law,
the remaining terms hereof shall not in any way be affected or impaired.
10. Continuing Obligations. The obligations of the Partners hereunder
shall continue in full force and effect until all of such obligations have
been fully paid or performed.
11. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract.IN WITNESS WHEREOF, the Partners have
executed, or caused this Agreement to be executed, as of the Acquisition
Date.
A-2
IN WITNESS WHEREOF, the Partners have executed, or caused this Agreement to
be executed, as of the Acquisition Date.
ESI NORTHEAST ENERGY GP, INC.,
a Florida corporation
By:
-----------------------------
Name:
Title:
ESI NORTHEAST ENERGY LP, INC.,
a Florida corporation
By:
-----------------------------
Name:
Title:
TRACTEBEL NORTHEAST GENERATION GP, INC.,
a Delaware corporation
By:
-----------------------------
Name:
Title:
TRACTEBEL ASSOCIATES NORTHEAST LP, INC.,
a Delaware corporation
By:
-----------------------------
Name:
Title:
A-3