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Administrative Services Agreement

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EXHIBIT 10.39


AMENDED AND RESTATED
ADMINISTRATIVE SERVICES AGREEMENT
---------------------------------


BY AND BETWEEN


CALENERGY OPERATING COMPANY,
a Delaware corporation


AND


DEL RANCH, L.P.,
a California limited partnership


TABLE OF CONTENTS


PAGE
----


1. Definitions.............................................2


2. Ordinary Services.......................................3


3. Extraordinary Services..................................3


4. Subcontracting..........................................3


5. Administration Fee......................................3


6. Reimbursement and Other Compensation for
Extraordinary Services..................................4


7. Term and Termination....................................5


8. Disclaimer of CEOC's Liability..........................6


9. Non-Waiver of Breach....................................6


10. Arbitration.............................................6


11. Attorneys' Fees.........................................7


12. Force Majeure...........................................7


13. Invalid Provision.......................................8


14. Assignment..............................................8


15. Governing Law...........................................8


16. Entire Agreement - Amendments...........................9


17. Communications..........................................9


18. Counterparts............................................9


19. Exhibits................................................9


20. Third Party Beneficiaries...............................10


21. Headings................................................10


TABLE OF SCHEDULES


Section


Schedule "Z" Schedule of Defined Terms 1.1


AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT


PREAMBLE


THIS AMENDED AND RESTATED ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is made as of June 17, 1996, by and between CALENERGY OPERATING COMPANY, a Delaware corporation ("CEOC"), and DEL RANCH, L.P., a California limited partnership ("Owner").


RECITALS


A. Owner owns the Del Ranch Facility located in the Salton Sea Known Geothermal Resource Area ("SSKGRA").


B. Owner intends to operate the Del Ranch Facility under the following operating agreements: (i) an Operating and Maintenance Agreement by and between Owner and CEOC pursuant to which CEOC will operate the Del Ranch Facility on behalf of Owner; (ii) a Technology Transfer Agreement by and between Owner and Magma Power Company, a Nevada corporation ("Magma") pursuant to which Magma will provide Owner with the nonexclusive right to use certain "Technology" and "Know-How" in connection with the operation of the Del Ranch Facility; (iii) a Ground Lease by and between Owner, as lessee, and Magma, as lessor, pursuant to which Magma will lease to Owner the real property upon which the Del Ranch Facility is located; (iv) an Easement Grant Deed and Agreement Regarding Rights for Geothermal Development by and between Owner and Magma pursuant to which Magma will supply Owner with the right to extract Geothermal Brine and use geothermal brine-derived steam which is necessary to operate the Del Ranch Facility; and (v) a Power Purchase Contract by and between Owner and Southern California Edison Company.


C. Owner desires to exploit CEOC's administrative and management resources, and to that end Owner desires to employ, hire or otherwise retain the administrative and management services of CEOC, in addition to the Services provided pursuant to the Operating and Maintenance Agreement, for purposes of administering the functions of the Del Ranch Facility.


D. Owner and CEOC desire to enter into this Agreement pursuant to which CEOC, for a fee and in addition to the Services provided pursuant to the Operating and Maintenance Agreement, will provide day-to-day administrative and management services as more fully described herein, which administrative and management services shall include normal day-to-day administrative and management services and shall not include services which, although occurring in the



ordinary course of Owner's business, are not of a nature ordinarily occurring on a day-to-day basis. In consideration for services not of a day-to-day nature provided by CEOC hereunder, Owner shall compensate CEOC for, among other things, all costs and expenses actually incurred by CEOC in providing such services, as more particularly described herein.


NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants and agreements set forth herein, the parties hereto agree as follow:


AGREEMENT


1. Definitions.


1.1 Unless the context shall otherwise require, capitalized terms used and not otherwise defined herein shall have the respective meanings assigned thereto in Schedule Z hereto, which shall be incorporated by reference herein.


1.2 In addition to the terms defined pursuant to Section 1.1 hereof, the following definitions shall apply for purposes of this Agreement:


"CPI" means the Consumer Price Index of the Bureau of Labor Statistics of the Department of Labor for All Urban Consumers, All Items, for the Los Angeles-Anaheim-Riverside Metropolitan Area. In the event the compilation and/or publication of the CPI shall be transferred to any other governmental department or bureau or agency or shall be discontinued, then the index most nearly the same as the CPI shall be deemed to be the CPI for purposes of this Agreement. In the event that Owner and CEOC cannot agree on such alternative index, then the matter shall be submitted for decision by an arbitrator or arbitrators in accordance with Section 10 hereof.


"CPI Adjustment" means an amount equal to $800,000 multiplied by a fraction, the numerator of which shall be the CPI for August of the year for which the calculation is to be made, and the denominator of which shall be the CPI for August of 1988, but in no event shall such CPI Adjustment be less than $800,000.


"Floor" means the minimum annual Administration Fee which, for the years indicated below, shall be an amount calculated as follows:


Year Calculation
---- -----------


2


1989 $66,667 multiplied by the number
of months in 1989 following and
including the month on which that
certain Construction Management and
Asset Transfer Agreement dated as
of March 14, 1988, as amended,
between Magma and Owner terminated
in accordance with its terms.


3


For each of The greater of (a) the Floor for
1990 the year immediately preceding the
through the year for which the calculation is
end of the being made and (b) the CDI
term of this Adjustment for the year in which the
Agreement. calculation is being made.


2. Ordinary Services. In consideration of the payment by Owner to CEOC of the Administration Fee as provided in Section 5 hereof, CEOC agrees to perform during the term of this Agreement those functions normally considered part of the day-to-day administrative and management activities for facilities similar to the Del Ranch Facility as determined by Owner which are not within the scope of Services to be provided by CEOC to Owner pursuant to the Operating and Maintenance Agreement. The Ordinary Services to be provided hereunder include, without limitation, (i) general bookkeeping and financial accounting, (ii) general legal services (but not legal services of an extraordinary nature including, without limitation, legal services in connection with litigation or administrative proceedings), (iii) personnel administration and payroll services, (iv) cash management services, (v) energy production oversight and the determination of output levels; (vi) consulting services with respect to geothermal electrical energy production and (vii) assisting Owner in obtaining any franchises, permits, licenses, easements or rights-of-way necessary for continued operation of the Del Ranch Facility.


3. Extraordinary Services. In consideration of the compensation of CEOC by Owner as provided in Section 7 hereof, CEOC agrees to perform during the term of this Agreement, as Extraordinary Services, any administrative and management services that may be needed in connection with the operation of the Del Ranch Facility and (a) which are not included in the scope of the services delineated in Section 2 hereof or (b) which are not included in the scope of the Services delineated in the Operating and Maintenance Agreement.


4. Subcontracting. In connection with CEOC's providing of the Ordinary Services and Extraordinary Services contemplated by this Agreement, CEOC may subcontract with or otherwise retain the services of other Persons including, but not limited to, Magma and other Affiliates of CEOC, and Ow
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