Common use of SUBSEQUENT PLANTS Clause in Contracts

SUBSEQUENT PLANTS. The construction of Subsequent Plants shall be governed by this Section 7.5. #325596.v2 51 (a) Decision to Construct Plant 2. (i) If: (A) the Initial Plant has achieved an 18% Threshold Return; and (B) either: (1) The Members are in agreement that an adequate market exists for Products to be produced from the Initial Plant and Plant 2; or (2) the Members have received and each Member has approved (in its reasonable discretion) a marketing study prepared by a reputable third party acceptable to the Members that demonstrates adequate markets with adequate reasonably projected market prices for Products in the quantities to be produced from the Initial Plant and Plant 2, to sustain Net Operating Income from the Initial Plant and Plant 2 at levels not less than those necessary to achieve the 18% Threshold Return pursuant to "(i)(A)"; (ii) then the Members, or either of them, may elect to proceed with the construction of Plant 2 by forming LLC-2 as provided in Section 7.5(d), subject to the right of either Member to elect not to participate in such construction. (iii) If MCNIC and Crown elect to proceed, Crown shall elect to obtain an initial sharing ratio in LLC-2 of no less than 10% and no greater than 50% (inclusive of the Crown Base Sharing Ratio - LLC-2) and Crown shall make a like share of all capital contributions to LLC-2, after first giving effect to the capital account Crown receives as the transferee of the membership interest Crown receives from the Company pursuant to Section 7.5(d)(i)(B). Crown's ownership interest may be different with respect to each of LLC-2 and LLC-3. (iv) If Crown does not elect to proceed: (A) Its only interest in LLC-2 shall be #325596.v2 52 the membership interest Crown receives from the Company pursuant to Section 7.5(d)(i)(B) and the Crown Base Sharing Ratio - LLC-2, and Crown shall have the Back-in Option; and (B) MCNIC shall have the option, exercisable until the 60th day after the Members agree that the 30% Threshold Return has been achieved, to elect to purchase and pay for Crown's interest in LLC-2 (including Crown's increased interests after Plant 2 Payout under "(v)" below but subject to Crown's Back-in Option) for an amount equal to the Plant 2 Properties' Value. If MCNIC exercises this option, for purposes of determining 200% Payout with respect to the Back-in Option retained by Crown in this circumstance, "Plant Costs" shall be deemed to include the Plant 2 Properties' Value. (v) Whether or not Crown elects to proceed, upon the occurrence of Plant 2 Payout, Crown's initial sharing ratio in LLC-2 shall be increased by ten percentage points and MCNIC's sharing ratio in LLC-2 shall be decreased by ten percentage points #325596.v2 53 (b) Decision to Construct Plant 3. (i) If: (A) Plant 2 has achieved an 18% Threshold Return; and (B) either: (1) the Members are in agreement that an adequate market exists for Products to be produced from the Initial Plant, Plant 2 and Plant 3; or (2) the Members have received and each Member has approved (in its reasonable discretion) a marketing study prepared by a reputable third party acceptable to the Members that demonstrates adequate markets with adequate reasonably projected market prices for Products in the quantities to be produced from the Initial Plant, Plant 2 and Plant 3, to sustain Net Operating Income from the Initial Plant, Plant 2 and Plant 3 at levels not less than those necessary to achieve the 18% Threshold Return pursuant to "(i)(A)"; (ii) then the Members, or either of them, may elect to proceed with the construction of Plant 3 by forming LLC-3 as provided in Section 7.5(d), subject to the right of either Member to elect not to participate in such construction. (iii) If MCNIC and Crown elect to proceed, Crown shall elect to obtain an initial sharing ratio in LLC-3 of no less than 10% and no greater than 50% (inclusive of the Crown Base Sharing Ratio LLC-3 and Crown shall make a like share of all capital contributions to LLC- 3, after first giving effect to the capital account Crown receives as the transferee of the membership interest Crown receives from the Company pursuant to Section 7.5(d)(ii)(B). Crown's ownership interest may be different with respect to each of LLC-2 and LLC-3. (iv) If Crown does not elect to proceed: #325596.v2 54 (A) Its only interest in LLC-3 shall be the membership interest Crown receives from the Company pursuant to Section 7.5(d)(ii)(B) and the Crown Base Sharing Ratio - LLC-3, and Crown shall have the Back-in Option; and (B) MCNIC shall have the option, exercisable until the 60th day after Crown has elected not to participate in Plant 3 pursuant to Section 7.5(d)(ii), to elect to purchase and pay for Crown's interest in LLC-3 (including Crown's increased interests after Plant 3 Payout under "(v)" below but subject to Crown's Back-in Option) for an amount equal to the Plant 3 Properties' Value. If MCNIC exercises this option, for purposes of determining 200% Payout with respect to the Back-in Option retained by Crown in this circumstance, "Plant Costs" shall be deemed to include the Plant 3 Properties' Value. (v) Whether or not Crown elects to proceed, upon the occurrence of Plant 3 Payout, Crown's initial sharing ratio in LLC-3 shall be increased by ten percentage points and MCNIC's sharing ratio in LLC-3 shall be decreased by ten percentage points (c) Review of Marketing Study. If a Member does not approve the marketing study under Section 7.5(a)(i)(B)(2) or Section 7.5(b)(i)(B)(2), the other Member shall have the right to have the reasonableness of the non- approving Member's determination reviewed by arbitration pursuant to Article XVI and if the non-approving Member's determination not to approve the marketing study is determined not to have been reasonable, the approving Member shall have the right to elect to proceed as provided in Section 7.5(d) and the non-approving Member shall have no obligation to proceed. (d) Election to Proceed with Formation of LLC-2 and LLC-3 and Construction of Plant 2 and Plant 3. (i) If a Member has the right to and elects to proceed with Plant 2 pursuant to Section 7.5(a), it shall notify the Company and the other Member and the other Member shall notify the Company and the electing Member of its election to participate or not to participate in Plant 2 within 90 days after receipt of such notice. If either Member elects to proceed with the construction of Plant 2, such Member(s) and the Company shall form a new limited liability company ("LLC-2"), to construct and own Plant 2 pursuant to an operating agreement in form and substance substantially the same as this Agreement with such changes as are necessary or appropriate to reflect the terms and conditions applicable to Plant 2 and LLC-2 as contemplated in this Agreement. In connection and simultaneously with the execution of the operating agreement for LLC-2, the Company shall: #325596.v2 55 (A) Convey and assign to LLC-2 that portion of the Properties and Water Rights that the Members agree shall be transferred to LLC- 2 to permit the construction and operation of Plant 2 in accordance with the applicable projections and market study (the "Plant 2 Properties") which agreement shall take into account the following factors: (1) the Company shall have first priority to all tar sands in the Properties and water required for the Initial Plant to operate up to full capacity; and (2) as between Plant 2 and Plant 3, if constructed, any Subsequent Plant that both Members have an ownership interest in shall have priority over any Subsequent Plant that only one Member has an ownership interest in, and equal priority with any Subsequent Plant that both Members have an ownership interest in, in each case with respect to any tar sands not required by the Initial Plant to operate up to full capacity. Subject to (1) and (2) the Company shall convey and assign to LLC-2 adequate Properties and Water Rights for Plant 2 to operate up to full capacity for the projected 20-year economic life of Plant 2. If the Members are unable to agree as to what Properties and Water Rights are to be transferred from the Company to LLC-2 within 30 days after the expiration of the 90-day period described in "(i)," the Members shall submit the dispute to arbitration pursuant to Article XVI and shall be bound by the arbitrators' determination of which Properties and Water Rights are to be transferred to LLC-2 in accordance with the factors set forth in (1) and (2) above. (B) In exchange for the contribution of the Plant 2 Properties to LLC-2, the Company shall be credited with a capital contribution to LLC-2 equal to the Plant 2 Properties' Value and the sharing ratio associated with such membership interest shall be a fraction whose numerator is the Plant 2 Properties' Value and whose denominator is the aggregate capital contribution of all members, as determined from time to time (the "Crown Base Sharing Ratio - LLC- 2"). Immediately following the Company's receipt of such membership interest it shall distribute all of such interest to Crown. The Members shall treat the foregoing in the manner provided in Section 12.7 for tax and financial reporting purposes. Crown shall also have such additional interests which it elects to receive pursuant to Section 7.5(a)(iii). (ii) If a Member has the right to and elects to proceed with Plant 3 pursuant to Section 7.5(b), it shall notify the Company and the other Member and the other Member shall notify the Company and the electing Member of its election to participate or not to participate in Plant 3 within 90 days after receipt of such notice. If either Member elects to proceed with the construction of Plant 3 such Member and the Company shall form a new limited liability company ("LLC-3"), to construct and own Plant 3 pursuant to an operating agreement in form and substance substantially the same as this Agreement with such changes as are necessary or appropriate to reflect the terms and #325596.v2 56 conditions applicable to Plant 3 and LLC-3 as contemplated in this Agreement. In connection and simultaneously with the execution of the operating agreement for LLC-3, the Company shall: (A) Convey and assign to LLC-3 that portion of the Properties and Water Rights that the Members agree shall be transferred to LLC- 3 to permit the construction and operation of Plant 3 in accordance with the applicable projections and market study (the "Plant 3 Properties") which agreement shall take into account the following factors: (1) the Company shall have first priority to all tar sands in the Properties and water required for the Initial Plant to operate up to full capacity; and (2) as between Plant 2 and Plant 3, if constructed, any Subsequent Plant that both Members have an ownership interest in shall have priority over any Subsequent Plant that only one Member has an ownership interest in, and equal priority with any Subsequent Plant that both Members have an ownership interest in, in each case with respect to any tar sands not required by the Initial Plant to operate up to full capacity. Subject to (1) and (2) the Company shall convey and assign to LLC-3 adequate Properties and Water Rights for Plant 3 to operate up to full capacity for the projected 20-year economic life of Plant 3. If the Members are unable to agree as to what Properties and Water Rights are to be transferred from the Company to LLC-3 within 30 days after the expiration of the 90-day period described in "(ii)," the Members shall submit the dispute to arbitration pursuant to Article XVI and shall be bound by the arbitrators' determination of which Properties and Water Rights are to be transferred to LLC-3 in accordance with the factors set forth in (1) and (2) above. (B) In exchange for the contribution of the Plant 3 Properties to LLC-3, the Company shall be credited with a capital contribution to LLC-3 equal to the Plant 3 Properties' Value and the sharing ratio associated with such membership interest shall be a fraction whose numerator is the Plant 3 Properties' Value and whose denominator is the aggregate capital contribution of all members, as determined from time to time (the "Crown Base Sharing Ratio - LLC- 3"). Immediately following the Company's receipt of such membership interest it shall distribute all of such interest to Crown. The Members shall treat the foregoing in the manner provided in Section 12.7 for tax and financial reporting purposes. Crown shall also have such additional interests which it elects to receive pursuant to Section 7.5(b)(iii). (iii) If MCNIC elects to proceed with construction of the Initial Plant for its own account pursuant to Section 7.4(b)(iii), or MCNIC or Crown elects to construct Plant 2 or Plant 3 for its own account pursuant to Section 7.5(a) or 7.5(b) without the other Member's participation: #325596.v2 57 (A) in the case of the Initial Plant, MCNIC shall have a 100% Sharing Ratio in the Company and Crown shall have a 0% Sharing Ratio; and (B) in the case of the Subsequent Plants, the Members shall form LLC-2 or LLC-3, respectively, and (1) if Crown is the Member electing to participate, MCNIC shall have a 0% sharing ratio in LLC-2 or LLC-3, as the case may be, and Crown shall have a 100% sharing ratio in LLC-2 or LLC-3, as the case may be, and (2) if MCNIC is the Member electing to participate, Crown shall have the Crown Base Sharing Ratio - LLC-2 or the Crown Base Sharing Ratio - Plant 3, as the case may be, and MCNIC shall have a sharing ratio equal to 100% less Crown's sharing ratio. In connection with the execution of the operating agreement for such limited liability company and the satisfaction of the conditions precedent to capital contributions by MCNIC and Crown set forth herein or therein, the Company shall perform its obligations under Section 7.5(d) with respect to the Company, LLC-2 and LLC-3, respectively.

SUBSEQUENT PLANTS. The construction of Subsequent Plants shall be governed by this Section 7.5. #325596.v2 51. (a) Decision to Construct Plant 2. (i) If: (A) the Initial Plant has achieved an 18% Threshold Return; and (B) either: (1) The Members are in agreement that an adequate market exists for Products to be produced from the Initial Plant and Plant 2; or (2) the Members have received and each Member has approved (in its reasonable discretion) a marketing study prepared by a reputable third party acceptable to the Members that demonstrates adequate markets with adequate reasonably projected market prices for Products in the quantities to be produced from the Initial Plant and Plant 2, to sustain Net Operating Income from the Initial Plant and Plant 2 at levels not less than those necessary to achieve the 18% 18 Threshold Return pursuant to "(i)(A)"; (ii) then the Members, or either of them, may elect to proceed with the construction of Plant 2 by forming LLC-2 as provided in Section 7.5(d), subject to the right of either Member to elect not to participate in such construction. (iii) If MCNIC and Crown elect to proceed, Crown shall elect to obtain an initial sharing ratio in LLC-2 of no less than 10% and no greater than 50% (inclusive of the Crown Base Sharing Ratio - LLC-2) and Crown shall make a like share of all capital contributions to LLC-2, after first giving effect to the capital account Crown receives as the transferee of the membership interest Crown receives from the Company pursuant to Section 7.5(d)(i)(B). Crown's ownership interest may be different with respect to each of LLC-2 and LLC-3. (iv) If Crown does not elect to proceed: (A) Its only interest in LLC-2 shall be #325596.v2 52 the membership interest Crown receives from the Company pursuant to Section 7.5(d)(i)(B) and the Crown Base Sharing Ratio - LLC-2, and Crown shall have the Back-in Option; and (B) MCNIC shall have the option, exercisable until the 60th day after the Members agree that the 30% Threshold Return has been achieved, to elect to purchase and pay for Crown's interest in LLC-2 (including Crown's increased interests after Plant 2 Payout under "(v)" below but subject to Crown's Back-in Option) for an amount equal to the Plant 2 Properties' Value. If MCNIC exercises this option, for purposes of determining 200% Payout with respect to the Back-in Option retained by Crown in this circumstance, "Plant Costs" shall be deemed to include the Plant 2 Properties' Value. (v) Whether or not Crown elects to proceed, upon the occurrence of Plant 2 Payout, Crown's initial sharing ratio in LLC-2 shall be increased by ten percentage points and MCNIC's sharing ratio in LLC-2 shall be decreased by ten percentage points #325596.v2 53points. (b) Decision to Construct Plant 3. (i) If: (A) Plant 2 has achieved an 18% Threshold Return; and (B) either: (1) the Members are in agreement that an adequate market exists for Products to be produced from the Initial Plant, Plant 2 and Plant 3; or (2) the Members have received and each Member has approved (in its reasonable discretion) a marketing study prepared by a reputable third party acceptable to the Members that demonstrates adequate markets with adequate reasonably projected market prices for Products in the quantities to be produced from the Initial Plant, Plant 2 and Plant 3, to sustain Net Operating Income from the Initial Plant, Plant 2 and Plant 3 at levels not less than those necessary to achieve the 18% Threshold Return pursuant to "(i)(A)"; (ii) then the Members, or either of them, may elect to proceed with the construction of Plant 3 by forming LLC-3 as provided in Section 7.5(d), subject to the right of either Member to elect not to participate in such construction. (iii) If MCNIC and Crown elect to proceed, Crown shall elect to obtain an initial sharing ratio in LLC-3 of no less than 10% and no greater than 50% (inclusive of the Crown Base Sharing Ratio LLC-3 and Crown shall make a like share of all capital contributions to LLC- 3LLC-3, after first giving effect to the capital account Crown receives as the transferee of the membership interest Crown receives from the Company pursuant to Section 7.5(d)(ii)(B). Crown's ownership interest may be different with respect to each of LLC-2 and LLC-3. (iv) If Crown does not elect to proceed: #325596.v2 54: (A) Its only interest in LLC-3 shall be the membership interest Crown receives from the Company pursuant to Section 7.5(d)(ii)(B) and the Crown Base Sharing Ratio - LLC-3, and Crown shall have the Back-in Option; and (B) MCNIC shall have the option, exercisable until the 60th day after Crown has elected not to participate in Plant 3 pursuant to Section 7.5(d)(ii), to elect to purchase and pay for Crown's interest in LLC-3 (including Crown's increased interests after Plant 3 Payout under "(v)" below but subject to Crown's Back-in Option) for an amount equal to the Plant 3 Properties' Value. If MCNIC exercises this option, for purposes of determining 200% Payout with respect to the Back-in Option retained by Crown in this circumstance, "Plant Costs" shall be deemed to include the Plant 3 Properties' Value. (v) Whether or not Crown elects to proceed, upon the occurrence of Plant 3 Payout, Crown's initial sharing ratio in LLC-3 shall be increased by ten percentage points and MCNIC's sharing ratio in LLC-3 shall be decreased by ten percentage points (c) Review of Marketing Study. If a Member does not approve the marketing study under Section 7.5(a)(i)(B)(2) or Section 7.5(b)(i)(B)(2), the other Member shall have the right to have the reasonableness of the non- approving Member's determination reviewed by arbitration pursuant to Article XVI and if the non-approving Member's determination not to approve the marketing study is determined not to have been reasonable, the approving Member shall have the right to elect to proceed as provided in Section 7.5(d) and the non-approving Member shall have no obligation to proceed. (d) Election to Proceed with Formation of LLC-2 and LLC-3 and Construction of Plant 2 and Plant 3. (i) If a Member has the right to and elects to proceed with Plant 2 pursuant to Section 7.5(a), it shall notify the Company and the other Member and the other Member shall notify the Company and the electing Member of its election to participate or not to participate in Plant 2 within 90 days after receipt of such notice. If either Member elects to proceed with the construction of Plant 2, such Member(s) and the Company shall form a new limited liability company ("LLC-2"), to construct and own Plant 2 pursuant to an operating agreement in form and substance substantially the same as this Agreement with such changes as are necessary or appropriate to reflect the terms and conditions applicable to Plant 2 and LLC-2 as contemplated in this Agreement. In connection and simultaneously with the execution of the operating agreement for LLC-2, the Company shall: #325596.v2 55 (A) Convey and assign to LLC-2 that portion of the Properties and Water Rights that the Members agree shall be transferred to LLC- 2 to permit the construction and operation of Plant 2 in accordance with the applicable projections and market study (the "Plant 2 Properties") which agreement shall take into account the following factors: (1) the Company shall have first priority to all tar sands in the Properties and water required for the Initial Plant to operate up to full capacity; and (2) as between Plant 2 and Plant 3, if constructed, any Subsequent Plant that both Members have an ownership interest in shall have priority over any Subsequent Plant that only one Member has an ownership interest in, and equal priority with any Subsequent Plant that both Members have an ownership interest in, in each case with respect to any tar sands not required by the Initial Plant to operate up to full capacity. Subject to (1) and (2) the Company shall convey and assign to LLC-2 adequate Properties and Water Rights for Plant 2 to operate up to full capacity for the projected 20-year economic life of Plant 2. If the Members are unable to agree as to what Properties and Water Rights are to be transferred from the Company to LLC-2 within 30 days after the expiration of the 90-day period described in "(i)," the Members shall submit the dispute to arbitration pursuant to Article XVI and shall be bound by the arbitrators' determination of which Properties and Water Rights are to be transferred to LLC-2 in accordance with the factors set forth in (1) and (2) above. (B) In exchange for the contribution of the Plant 2 Properties to LLC-2, the Company shall be credited with a capital contribution to LLC-2 equal to the Plant 2 Properties' Value and the sharing ratio associated with such membership interest shall be a fraction whose numerator is the Plant 2 Properties' Value and whose denominator is the aggregate capital contribution of all members, as determined from time to time (the "Crown Base Sharing Ratio - LLC- 2"). Immediately following the Company's receipt of such membership interest it shall distribute all of such interest to Crown. The Members shall treat the foregoing in the manner provided in Section 12.7 for tax and financial reporting purposes. Crown shall also have such additional interests which it elects to receive pursuant to Section 7.5(a)(iii). (ii) If a Member has the right to and elects to proceed with Plant 3 pursuant to Section 7.5(b), it shall notify the Company and the other Member and the other Member shall notify the Company and the electing Member of its election to participate or not to participate in Plant 3 within 90 days after receipt of such notice. If either Member elects to proceed with the construction of Plant 3 such Member and the Company shall form a new limited liability company ("LLC-3"), to construct and own Plant 3 pursuant to an operating agreement in form and substance substantially the same as this Agreement with such changes as are necessary or appropriate to reflect the terms and #325596.v2 56 conditions applicable to Plant 3 and LLC-3 as contemplated in this Agreement. In connection and simultaneously with the execution of the operating agreement for LLC-3, the Company shall: (A) Convey and assign to LLC-3 that portion of the Properties and Water Rights that the Members agree shall be transferred to LLC- 3 to permit the construction and operation of Plant 3 in accordance with the applicable projections and market study (the "Plant 3 Properties") which agreement shall take into account the following factors: (1) the Company shall have first priority to all tar sands in the Properties and water required for the Initial Plant to operate up to full capacity; and (2) as between Plant 2 and Plant 3, if constructed, any Subsequent Plant that both Members have an ownership interest in shall have priority over any Subsequent Plant that only one Member has an ownership interest in, and equal priority with any Subsequent Plant that both Members have an ownership interest in, in each case with respect to any tar sands not required by the Initial Plant to operate up to full capacity. Subject to (1) and (2) the Company shall convey and assign to LLC-3 adequate Properties and Water Rights for Plant 3 to operate up to full capacity for the projected 20-year economic life of Plant 3. If the Members are unable to agree as to what Properties and Water Rights are to be transferred from the Company to LLC-3 within 30 days after the expiration of the 90-day period described in "(ii)," the Members shall submit the dispute to arbitration pursuant to Article XVI and shall be bound by the arbitrators' determination of which Properties and Water Rights are to be transferred to LLC-3 in accordance with the factors set forth in (1) and (2) above. (B) In exchange for the contribution of the Plant 3 Properties to LLC-3, the Company shall be credited with a capital contribution to LLC-3 equal to the Plant 3 Properties' Value and the sharing ratio associated with such membership interest shall be a fraction whose numerator is the Plant 3 Properties' Value and whose denominator is the aggregate capital contribution of all members, as determined from time to time (the "Crown Base Sharing Ratio - LLC- 3"). Immediately following the Company's receipt of such membership interest it shall distribute all of such interest to Crown. The Members shall treat the foregoing in the manner provided in Section 12.7 for tax and financial reporting purposes. Crown shall also have such additional interests which it elects to receive pursuant to Section 7.5(b)(iii). (iii) If MCNIC elects to proceed with construction of the Initial Plant for its own account pursuant to Section 7.4(b)(iii), or MCNIC or Crown elects to construct Plant 2 or Plant 3 for its own account pursuant to Section 7.5(a) or 7.5(b) without the other Member's participation: #325596.v2 57 (A) in the case of the Initial Plant, MCNIC shall have a 100% Sharing Ratio in the Company and Crown shall have a 0% Sharing Ratio; and (B) in the case of the Subsequent Plants, the Members shall form LLC-2 or LLC-3, respectively, and (1) if Crown is the Member electing to participate, MCNIC shall have a 0% sharing ratio in LLC-2 or LLC-3, as the case may be, and Crown shall have a 100% sharing ratio in LLC-2 or LLC-3, as the case may be, and (2) if MCNIC is the Member electing to participate, Crown shall have the Crown Base Sharing Ratio - LLC-2 or the Crown Base Sharing Ratio - Plant 3, as the case may be, and MCNIC shall have a sharing ratio equal to 100% less Crown's sharing ratio. In connection with the execution of the operating agreement for such limited liability company and the satisfaction of the conditions precedent to capital contributions by MCNIC and Crown set forth herein or therein, the Company shall perform its obligations under Section 7.5(d) with respect to the Company, LLC-2 and LLC-3, respectively.