EXECUTION COPY
SALE AND PURCHASE AGREEMENT
BY AND AMONG
CH ORMESA, INC.,
CH ORMESA LP, INC.,
AS SELLERS,
AND
ORNI 8 LLC,
ORMAT FUNDING CORP.,
AS PURCHASERS,
DATED AS OF
APRIL 4, 2002
PERTAINING TO CERTAIN
GEOTHERMAL POWER FACILITIES
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS..................................................1
1.1 Definitions..................................................1
1.2 Construction of Certain Terms and Phrases....................9
ARTICLE 2 SALE AND PURCHASE OF PURCHASED INTERESTS AND CLOSING........10
2.1 The Sale....................................................10
2.2 Purchase Price and Payoff of Liability......................10
2.3 Escrow and Closing..........................................10
2.4 Adjustment of Payment Amounts...............................10
2.5 Allocation of Payment Amounts...............................10
2.6 Further Assurances..........................................10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLERS...............11
3.1 Representations and Warranties of the Sellers...............11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS............15
4.1 Corporate Existence.........................................15
4.2 Authority...................................................15
4.3 No Conflicts................................................15
4.4 Governmental Approvals and Filings..........................16
4.5 Legal Proceedings...........................................16
4.6 Brokers and Investment......................................16
4.7 Absence of Regulation.......................................16
4.8 Purchase for Investment.....................................16
4.9 Financing...................................................16
4.10 Knowledgeable Purchasers....................................16
ARTICLE 5 COVENANTS OF THE SELLERS....................................17
5.1 Access of the Purchasers....................................17
5.2 Performance Until Closing...................................17
5.3 Certain Restrictions........................................17
5.4 Financial Statements........................................19
5.5 Permits.....................................................19
5.6 Books and Records...........................................19
5.7 Operation in the Ordinary Course of Business................19
5.8 No Negotiations.............................................19
5.9 Notice......................................................20
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ARTICLE 6 COVENANTS OF THE PURCHASERS.................................20
6.1 Use of Certain Names........................................20
6.2 Contract Security...........................................20
6.3 Books and Records...........................................20
ARTICLE 7 DELIVERIES OF THE SELLERS...................................20
7.1 Sale and Purchase Agreement.................................21
7.2 Escrow Closing Agreement....................................21
7.3 Officers' Certificates......................................21
7.4 Transfer Instruments........................................21
7.5 Release.....................................................21
7.6 Good Standing...............................................21
7.7 MMS Audit Letter............................................21
7.8 IID Letter..................................................21
7.9 Transition Operations.......................................21
7.10 Irrevocable Bank Instructions...............................21
7.11 Royalty Termination Agreement...............................21
7.12 O&M Termination Agreement...................................21
7.13 Account Distribution Agreement..............................21
7.14 SCE Letter..................................................21
7.15 Ormat Technologies Letter...................................21
7.16 Loan Cancellation Agreement.................................21
ARTICLE 8 DELIVERIES OF THE PURCHASERS................................22
8.1 Sale and Purchase Agreement.................................22
8.2 Escrow Closing Agreement....................................22
8.3 Officers' Certificates......................................22
8.4 Good Standing...............................................22
8.5 MMS Audit Letter............................................22
8.6 IID Letter..................................................22
8.7 Transition Operations.......................................22
8.8 Irrevocable Bank Instructions...............................22
8.9 SCE Letter..................................................22
8.10 No Broker Fees Letter.......................................22
8.11 Ormat Technologies Letter...................................22
8.12 Transfer Instruments........................................22
ARTICLE 9 TAX MATTERS.................................................22
9.1 Representations, Warranties and Covenants...................22
9.2 Tax Matters.................................................23
ARTICLE 10 SURVIVAL....................................................25
10.1 Survival of Representations, Warranties, Covenants and
Agreements..................................................25
10.2 No Other Representations....................................25
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ARTICLE 11 INDEMNIFICATION.............................................25
11.1 Indemnification.............................................25
11.2 Method of Asserting Claims..................................27
11.3 Exclusivity.................................................29
11.4 Tax Treatment of Indemnification............................29
ARTICLE 12 DISPUTE RESOLUTION..........................................29
ARTICLE 13 EFFECTIVENESS...............................................29
13.1 Effectiveness...............................................29
ARTICLE 14 MISCELLANEOUS...............................................29
14.1 Notices.....................................................29
14.2 Entire Agreement............................................31
14.3 Expenses....................................................31
14.4 Public Announcements........................................31
14.5 Confidentiality.............................................31
14.6 Waiver......................................................32
14.7 Amendment...................................................32
14.8 No Third Party Beneficiary..................................32
14.9 No Assignment; Binding Effect...............................32
14.10 Headings....................................................32
14.11 Invalid Provisions..........................................33
14.12 Governing Law...............................................33
14.13 Jurisdiction and Venue......................................33
14.14 Waiver of Trial by Jury.....................................33
14.15 Attorneys' Fees.............................................34
14.16 Time is of the Essence......................................34
14.17 Waiver of Consequential Damages.............................34
14.18 Interest on Past Due Payments...............................34
14.19 Counterparts................................................34
14.20 Further Assurances..........................................34
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EXHIBIT I Excluded Records
EXHIBIT II Material Contracts
EXHIBIT III Form of Transfer Instrument
EXHIBIT IV Contract Security
SCHEDULE I Purchased Interests
SCHEDULE II Description of Ormesa II Facility
SCHEDULE III Sellers Disclosure Schedule
SCHEDULE IV Adjustment of Payment Amounts
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SALE AND PURCHASE AGREEMENT
This SALE AND PURCHASE AGREEMENT dated as of April 4, 2002, is
made and entered into by and among CH Ormesa, Inc., a Florida corporation and CH
Ormesa LP, Inc., a Florida corporation, (each of the foregoing entities,
individually, a "Seller" and collectively, the "Sellers") and ORNI 8 LLC, a
Delaware limited liability company, and Ormat Funding Corp., a Delaware
corporation (each a "Purchaser" and collectively the "Purchasers").
WHEREAS, each Seller is the registered holder and beneficial
owner of limited partnership interests in ACME Ormesa II Partners, L.P., a
California limited partnership ("ACME"), as set forth opposite such Seller's
name on Schedule I hereto (the "Purchased Interests");
WHEREAS, ACME is the registered holder and beneficial owner of
50% of the general partnership interests in Ormesa Geothermal II ("OGII"), a
California general partnership, and is the registered holder and beneficial
owner of 50% of the general partnership interest in East Mesa Partners ("EMP"),
a California general partnership (EMP, collectively with OGII, the "Purchased
Entities");
WHEREAS, OGII and EMP have certain interests and rights with
respect to an approximately 19.95 gross MW geothermal power facility located in
the East Mesa Known Geothermal Resource Area in Imperial County, California, at
3300 Evan Hewes Highway, Holtville, California 92250, generally known as the
Ormesa II project (as more fully described in Schedule II hereto, the "Ormesa II
Facility"); and
WHEREAS, each Seller desires, severally and not jointly with
any other Seller, to sell to the Purchasers and the Purchasers desire to
purchase from the Sellers all of the Purchased Interests on the terms and
subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth in this Agreement, upon the terms
and subject to the conditions hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following
terms have the meanings indicated below:
"ACME" has the meaning given to it in the recitals to this
Agreement.
"Account Distribution Agreement" means the Account
Distribution Agreement dated as of the date hereof, by and between FPLE and
Superior Group, Inc. LFC/OESI, governing the application and use of funds in
certain accounts held by certain Affiliates of such parties, under the terms and
conditions set forth therein, of which the Purchasers are third party
beneficiaries with respect to certain provisions, all as set forth therein.
"Affiliate" means any Person that directly, or indirectly
through one or more intermediaries, controls or is controlled by or is under
common control with the Person specified. For purposes of this definition,
control of a Person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such Person whether by Contract or
otherwise, provided that the direct or indirect ownership of fifty percent (50%)
or more of the voting securities of another Person shall be deemed to constitute
control of such other Person.
"Agreement" means this Sale and Purchase Agreement and all
Schedules and Exhibits hereto, as the same shall be amended in a writing signed
by all Sellers and Purchasers from time to time in accordance with Section 14.7.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible and wherever situated),
operated, owned or leased by such Person.
"Books and Records" of any Person means all files, documents,
instruments, papers, books and records (including records and files stored on
computer disks or tapes or any other storage medium) relating to the business,
operations, condition of (financial or other), results of operations and Assets
and Properties of such Person, including financial statements, Tax Returns and
related work papers and letters from accountants, budgets, ledgers, journals,
deeds, title policies, minute books, stock certificates or other evidence of
equity or membership interests and registration books, stock transfer ledgers,
Contracts, Licenses, Environmental Permits, operating data and plans and
environmental studies and plans.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of Nevada, the State of Florida, or the
city of New York, are authorized or obligated to close.
"Caithness" means Caithness Energy, L.L.C., a Delaware limited
liability company.
"Claim Notice" means written notification pursuant to Section
11.2(a) of a Third Party Claim as to which indemnity under Section 11.1 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
and specifying the nature of and basis for such Third Party Claim and for the
Indemnified Party's claim against the Indemnifying Party under Section 11.1,
together with the amount or, if not then reasonably ascertainable, the estimated
amount, determined in good faith, of such Third Party Claim.
"Closing" means the release from escrow of this Agreement and
all other documents, certificates or instruments delivered under Articles 7 and
8, and the release from escrow of the funds covering the Purchase Price, all in
the manner and subject to the terms and provisions of this Agreement and the
Escrow Closing Agreement.
"Closing Date" means April 15, 2002, or such other date as the
Purchasers and the Sellers may mutually determine in writing.
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"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor Federal tax code. Any statutory provision of
the Code shall be deemed to be a reference to any successor provision or
provisions.
"Contract" means any written agreement, lease, license,
option, guaranty, warranty, right of way, evidence of indebtedness, mortgage,
indenture, security agreement or other written contract, commitment or
undertaking of any kind relating to the Ormesa II Facility or binding upon one
of the Purchased Entities.
"Dispute Period" means the period ending ninety (90) days
following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Dollars" and "$" refers to lawful money of the United States.
"EMP" has the meaning given to it in the recitals to this
Agreement.
"Environmental Law" means any Law or Order relating to the
regulation or protection of human health and safety or to the regulation,
protection and preservation of the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the environment
(including, without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes.
"Environmental Permits" means all material licenses, permits,
certificates of authority, authorizations, approvals, registrations, franchises
and similar consents granted by any Governmental or Regulatory Authority which
are required for the ownership, operation and maintenance of the Ormesa II
Facility under applicable Environmental Law.
"Equity Interests" has the meaning given to it in Section
5.3(a)(i).
"Escrow Account" means the interest bearing account
established by the Escrow Agent at Citibank N.A. for purposes of the Escrow
Closing Agreement.
"Escrow Agent" means Chadbourne & Parke LLP, solely in its
capacity as Escrow Agent under the Escrow Closing Agreement.
"Escrow Closing Agreement" means the Escrow Closing Agreement
by and among Ormat Technologies, FPLE, Caithness, and certain Affiliates of each
of the foregoing, and Chadbourne & Parke LLP, solely in its capacity as Escrow
Agent thereunder, dated the date hereof.
"Excluded Records" shall mean any and all of the Books and
Records belonging or relating to any Purchased Entity or the Ormesa II Facility
that are listed specifically or by category in Exhibit I hereto.
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"Facility Lease" means the Lease agreement between OGII and
Ormesa Geothermal II Trust with respect to the Ormesa II Facility.
"Financial Statements" has the meaning given to them in
Section 3.1(j).
"Financing Documents" means that certain Participation
Agreement, dated as of July 15, 1987, as amended, among Ormesa Geothermal II,
East Mesa Partners, CD Ormesageo II-A, Inc., CD Ormesageo II-B, Inc., CD
Ormesageo II-C, Inc., Bell Atlantic TriCon Leasing Corporation, CIG & Co. (as
nominee for Connecticut General Life Insurance Company), CIG & Co. (as nominee
for Cigna Property and Casualty Insurance Company (formerly known as Aetna
Insurance Company)), Canada Life Insurance Company of America, Canada Life
Insurance Company of New York, Pan-American Life Insurance Company, MBL Life
Assurance Corp., Aegon USA, U.S. Bank Trust National Association (as successor
to The Bank of California, National Association) as Owner-Trustee, U.S. Bank
Trust National Association (as successor to Bank of America National Trust and
Savings Association) as Security Trustee and BNY Western Trust Company (as
successor to First Interstate Bank of California) as Fiscal Agent, together with
each of the other transaction documents entered into pursuant to such
Participation Agreement.
"FPLE" means FPL Energy, LLC, an Affiliate of the Sellers.
"GAAP" means generally accepted accounting principles in the
United States, consistently applied throughout the specified period.
"Governmental or Regulatory Authority" means any federal,
state, or local, government, any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United States, or any
state, county, city or other political subdivision within the United States or
any Native American tribal council or similar governing entity.
"IID" means the Imperial Irrigation District.
"IID Letter" means the letter from the Sellers, addressed to
the Purchasers, regarding liabilities of one or more of the Purchased Entities
to IID.
"Indemnified Party" means any Person claiming indemnification
under any provision of Article 11.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article 11.
"Indemnity Notice" means written notification pursuant to
Section 11.2(b) of a claim for indemnity under Article 11 by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"Irrevocable Bank Instructions" means, individually and
collectively, the irrevocable letter of instructions from the relevant Purchased
Entity, addressed to the relevant bank or banks, dated the date hereof and
instructing such bank or banks, effective upon the
4
Closing Date, to release to the Sellers or their nominees all funds held in
accounts to be identified in such letter of instructions and to thereafter close
each such account.
"IRS" means the United States Internal Revenue Service.
"Knowledge" or similar phrases in this Agreement means, and
shall be limited to, the actual knowledge, after making reasonable
investigation, of:
(i) as to the FPLE Sellers, Michael L. Leighton, Pamela
L. Sonnelitter, Thomas L. Hartman, or Derrel A. Grant, Jr.;
(ii) as to the Purchasers, Ran Raviv or Hezy Ram.
"Laws" means all constitutions, treaties, laws, statutes,
rules, regulations, ordinances and other pronouncements having the effect of law
of the United States or any state, county, city or other political subdivision
or of any Governmental or Regulatory Authority.
"Lease Documents" means the Financing Documents and any other
Contracts, certificates and related documents entered into and delivered in
connection with the financing structure for the Ormesa II Facility.
"Letter of Intent" means that certain Letter of Intent signed
by Ormat Nevada, FPLE, and Caithness, on September 28, 2001.
"Licenses" means all material licenses, permits, certificates
of authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority, other
than Environmental Permits.
"Liens" means any charge, claim, "adverse claim" (as defined
in Section 8-102(a)(1) of the New York Uniform Commercial Code), community
property interest, easement, encumbrance, option, lien, pledge, hypothecation,
assignment, deposit arrangement, security interest (preference, priority or
other security agreement or preferential arrangement of any kind), mortgage,
deed of trust, retention of title agreement, right of first refusal, right of
first offer, preemptive right, or other restriction or granting of any rights of
any kind (including any restriction on, or right granted with respect to, the
use, voting, transfer, receipt of income or exercise of any other attribute of
ownership).
"Loan Cancellation Agreement" means that certain Loan
Assignment and Contribution Agreement, dated as of April 3, 2002, between CH
Ormesa, Inc. and ACME, together with any and all evidence of the cancellation of
the CH Loans (as defined therein).
"Loss" means any and all direct damages, assessments, fines,
penalties, deficiencies, losses, judgments, amounts paid in settlement, costs
and expenses (including, without limitation, interest, court costs, reasonable
fees and expenses of attorneys, accountants and other experts or other
reasonable expenses incurred in investigating, preparing, defending against or
prosecuting any litigation or claim, action, suit, proceeding or demand), less
the proceeds of any insurance received by the Person suffering such Loss
incident thereto.
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"Material Adverse Effect" means (a) when used in connection
with ACME or any Purchased Entity, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that, individually or in the aggregate with any such other changes or
effects, is materially adverse to the business, Assets and Properties, financial
condition, or results of operations of ACME or such Purchased Entity; (b) when
used in connection with any Seller, any change or effect (or any development
that, insofar as can reasonably be foreseen, is likely to result in any change
or effect) that, individually or in the aggregate with any other such changes or
effects, (i) is materially adverse to the business, Assets and Properties,
financial condition, or results of operations of ACME or any Purchased Entity,
(ii) is materially adverse to the ability of the Sellers to perform their
obligations under this Agreement or (iii) is reasonably likely to materially
delay or prevent consummation of the transactions contemplated hereby; and (c)
when used in connection with the Purchasers, any change or effect (or any
development that insofar as can reasonably be foreseen, is likely to result in
any change or effect) that, individually or in the aggregate with any such other
changes or effects, (i) is materially adverse to the ability of the Purchasers
to perform their obligations under this Agreement or (ii) is reasonably likely
to materially delay or prevent consummation of the transactions contemplated
hereby. In no event shall the failure of one or more of any Purchased Entity's
employees to accept employment with the Purchasers, or their affiliate, be
considered a Material Adverse Effect.
"Material Contracts" means each of the geothermal or other
leases set forth on Exhibit II hereto.
"MMS" means the Minerals Management Service, a bureau in the
United States Department of the Interior.
"MMS Audit Letter" means that certain letter from FPLE
addressed to the Purchasers and the Purchased Entities and dated the date
hereof, regarding certain undertakings by the Sellers with respect to
liabilities of certain Purchased Entities to MMS for periods prior to the
Closing.
"O&M Termination Agreement" means that certain Termination of
O&M Agreement, dated as of the date hereof, between OGII, Ormesa Operators, a
California general partnership, and FPL Energy Operating Services, Inc., a
Florida corporation.
"OGII" has the meaning given to it in the recitals to this
Agreement.
"Order" means any award, writ, judgment, decision, decree,
stipulation, injunction, ruling or similar order of any Governmental or
Regulatory Authority (in each such case whether preliminary or final).
"Ormat Nevada" means Ormat Nevada Inc., a Delaware
corporation.
"Ormat Technologies" means Ormat Technologies Inc., a Delaware
corporation.
"Ormat Technologies Letter" means the Letter from Ormat
Technologies to the Sellers and certain of their Affiliates, regarding limited
indemnification undertakings by Ormat Technologies in favor of the Sellers for
claims against Bond No. CA0327 held by Bureau of
6
Land Management, a bureau in the United States Department of the Interior, and
the other security listed on Exhibit IV, for any liabilities arising on or after
the Closing Date and during the periods set forth in such letter.
"Ormesa II Facility" has the meaning given to it in the
recitals to this Agreement.
"Ormesa Entities" means and includes each of the Purchased
Entities, Ormesa Geothermal, a California general partnership, Star Group IE
Geothermal Partners, a California general partnership, Ormesa Geothermal IH
Trust, a California trust, ESI Ormesa IE Resources LLC, a Delaware limited
liability company, ESI Ormesa IH Resources LLC, a Delaware limited liability
company, GEM Resources LLC, a Delaware limited liability company, and East Mesa
Geothermal LLC, a Delaware limited liability company.
"Overlap Period Taxes" means any and all Taxes attributable to
the period beginning before the date hereof and ending after the Closing Date.
"Parties" means, collectively, the Sellers and the Purchasers.
"PPA" means the Power Purchase Contract for the sale of
electricity from the Ormesa II Facility dated June 13, 1984, between SCE and
OGII, as assignee of OESI (formerly, Ormat Energy Systems Inc.) which in turn
was the assignee of Ormat, Inc.
"Permitted Lien" means (i) any Lien for Taxes not yet due or
delinquent or being contested in good faith by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP; (ii) any
statutory Lien arising in the ordinary course of business by operation of Law
with respect to a liability that is not yet due or delinquent or which is being
contested in good faith by any Seller, ACME, or any Purchased Entity; (iii)
zoning, entitlement, conservation restriction and other land use and
environmental regulations by any Governmental or Regulatory Authority; (iv) any
minor imperfection of title or similar Lien which individually or in the
aggregate with other matters could not reasonably be expected to create a
Material Adverse Effect; and (v) any Lien created by or granted in connection
with the Lease Documents.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Pre-Closing Taxes" means any and all Taxes relating to any
taxable period ending on or prior to the Closing Date.
"Prime Rate" means the rate published in The Wall Street
Journal as the "Prime Rate" from time to time (or, if more than one rate is
published, the arithmetic mean of such rates), in either case determined as of
the date the obligation to pay interest arises (or the most recent publication
date prior thereto), but in no event shall any interest under this Agreement
exceed the maximum amount permitted by applicable Law.
"Purchase Price" has the meaning given to it in Section
2.2(a).
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"Purchased Entities" has the meaning given to it in the
recitals to this Agreement.
"Purchased Interests" has the meaning given to it in the
recitals to this Agreement.
"Purchaser(s)" has the meaning given to it in the recitals to
this Agreement.
"Purchasers Indemnified Parties" has the meaning given to it
in Section 11.1(a).
"Release" means an instrument in form and substance reasonably
satisfactory to the Purchasers and their counsel, releasing any and all claims
(including, without limitation, for any royalty payments) the Sellers and their
Affiliates may have against or with respect to any Purchased Entity, except for
such claims arising pursuant to this Agreement.
"Representatives" means, for any Person, any director,
officer, manager, employee, counsel, accountant, financial advisor, consultant
or authorized agent of such Person.
"Resolution Period" means the period ending thirty (30) days
following receipt by an Indemnified Party of a written notice from an
Indemnifying Party stating that it disputes all or any portion of a claim set
forth in a Claim Notice or an Indemnity Notice.
"Royalty Termination Agreement" means that certain Royalty
Assignment and Contribution Agreement, dated as of April 3, 2002, between Acme
Ormesa II Partners, L.P., a California limited partnership and East Mesa
Partners, a California general partnership, together with any and all evidence
of the termination of the Royalty Agreement (as defined therein).
"SCE" means Southern California Edison Company, a California
company.
"SCE Letter" means that certain letter agreement, dated as of
the date hereof, between the Sellers, the Purchasers and certain of their
Affiliates, regarding the SCE Payment (as such term is defined therein).
"Seller(s)" has the meaning given to it in the recitals to
this Agreement.
"Sellers Consents" has the meaning given to it in Section
3.1(c)(ii).
"Sellers Disclosure Schedule" means the disclosure schedule
set forth as Schedule III hereto delivered by the applicable Sellers as therein
indicated to the Purchasers concurrently with the execution and delivery of this
Agreement.
"Sellers Indemnified Parties" has the meaning given to it in
Section 11.1(c).
"Subsidiary" of any Person means any corporation, limited
liability company, partnership, joint venture, trust, company or other entity
(i) the majority of the voting stock, partnership interests or other similar
ownership interests of which is owned, directly or indirectly, by such Person
and (ii) which is controlled by such Person. For purposes of this definition, a
corporation, limited liability company, partnership, joint venture, trust or
other entity is "controlled by" another Person if such other Person possesses,
directly or indirectly, the power to vote 50% or more of the securities
(including partnership interests or other ownership
8
interests) having ordinary voting power for the election of directors (or
Persons performing similar functions) of such corporation, limited liability
company, partnership, joint venture, trust or other entity or to direct or cause
the direction of the day-to-day management and policies of such corporation,
limited liability company, partnership, joint venture, trust or other entity,
whether through voting rights, by contract or otherwise.
"Tangible Personal Property" means all machinery, equipment,
spare parts, vehicles, furniture and other personal property owned or leased by
a Purchased Entity which is the owner or operator (in its capacity as lessee or
otherwise) of the Ormesa II Facility, or supplied under any Contract for use by
or incorporation into, the Ormesa II Facility.
"Tax Returns" means any return, report, information return or
other document (including any related or supporting information) required to be
supplied to any taxing authority with respect to any taxes, including, but not
limited to, any income taxes.
"Taxes" means all taxes, charges, duties, fees, levies or
other assessments imposed by any United States federal, state or local or
foreign taxing authority, including but not limited to, excise, property, sales,
use, value added, transfer, franchise, payroll, withholding, social security,
unemployment, business license, occupation, stamp, environmental, workers
compensation, Pension Benefit Guaranty Corporation premiums or other taxes,
including any interest, penalties or additions attributable thereto, excluding
Federal and state income, franchise, ad valorem and profits taxes.
"Third Party Claim" has the meaning given to it in Section
11.2(a).
"Transfer Taxes" has the meaning given to it in Section
9.2(a).
"Transition O&M Agreement" means the agreement between Ormat
Nevada and FPL Energy Operating Services, Inc., an Affiliate of the Sellers,
regarding transition of the operation of the Ormesa II Facility after the
Closing.
1.2 Construction of Certain Terms and Phrases. Unless the
context of this Agreement otherwise requires, (i) words of any gender include
each other gender; (ii) words using the singular or plural number also include
the plural or singular number, respectively; (iii) the terms "hereof," "herein,"
"hereby" and derivative or similar words refer to this entire Agreement; (iv)
the terms "Article" or "Section" refer to the specified Article or Section of
this Agreement; and (v) "include" or "including" means including without
limiting the generality of any description preceding such term. Whenever this
Agreement refers to a number of days, such number shall refer to calendar days
unless Business Days are specified. All accounting terms used herein and not
expressly defined herein shall have the meanings given to them under GAAP. Any
representation or warranty contained herein as to the enforceability of a
Contract shall be subject to the effect of any bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and to general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at Law).
9
ARTICLE 2
SALE AND PURCHASE OF PURCHASED INTERESTS AND CLOSING
2.1 The Sale. On the basis of the representations,
warranties and undertakings set forth in this Agreement, and on the terms and
subject to the conditions set forth in this Agreement and in the Escrow Closing
Agreement, on the date hereof each Seller severally, and not jointly and
severally with any other Seller, agrees to sell to the Purchasers, free and
clear of all Liens (other than liens described in clause (v) of the definition
of Permitted Liens), and the Purchasers agree to purchase and pay for, the
Purchased Interests set forth opposite such Seller's name on Schedule I hereto.
2.2 Purchase Price and Payoff of Liability. As consideration
for the Purchased Interests, on the terms and subject to the conditions set
forth in this Agreement and the Escrow Closing Agreement, on the date hereof the
Purchasers shall pay and transfer to the Escrow Agent by wire transfer of
immediately available United States funds the following amounts (collectively,
the "Purchase Price"):
(i) An amount of fifty thousand Dollars ($50,000.00) in
consideration for the Purchased Interests being sold by CH Ormesa, Inc.; and
(ii) An amount of fifty thousand Dollars ($50,000.00) in
consideration for the Purchased Interests being sold by CH Ormesa L.P., Inc.
2.3 Escrow and Closing. On the date hereof the Parties will
execute and deliver to the Escrow Agent, at its offices at 1200 New Hampshire
Avenue, N.W. Washington, D.C., 20036 at 10:00 a.m., to hold in escrow in
accordance with the provisions of the Escrow Closing Agreement, this Agreement
and the certificates and other contracts, documents and instruments required to
be delivered by the Parties under Articles 7 and 8. The transfer and delivery of
the Purchased Interests to the Purchasers, and transfer of the Purchase Price to
the Sellers will take place on the Closing Date in accordance with the
provisions of the Escrow Closing Agreement.
2.4 Adjustment of Payment Amounts. The amounts paid by the
Purchasers under Section 2.2 will be adjusted in accordance with the procedure
and adjustment provisions set forth in Schedule IV hereto.
2.5 Allocation of Payment Amounts. The Purchasers and the
Sellers agree to report the allocation of the Purchase Price among the Purchased
Interests in accordance with Section 2.2.
2.6 Further Assurances. At any time and from time to time
after the Closing Date, at the reasonable and timely request of the Purchasers,
and without further consideration, each of the Sellers will execute and deliver
such other instruments of sale, transfer, conveyance, assignment and
confirmation as may be reasonably requested in order to more effectively
transfer, convey and assign to the Purchasers and to confirm the Purchasers'
title (solely as and to the extent acquired in accordance with this Agreement)
to the Purchased Interests.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
3.1 Representations and Warranties of the Sellers. As an
inducement to the Purchasers to enter into this Agreement and to consummate the
transactions contemplated hereby, each Seller, severally, and not jointly and
severally with any other Seller, represents and warrants with respect only to
itself, ACME, and the Purchased Entities, as applicable and except as otherwise
expressly set forth herein, that as of the date hereof:
(a) Organization, Standing and Power. Such Seller is a
corporation or limited liability company duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation or
formation, as applicable.
(b) Authority. Such Seller has all requisite power and
authority to enter into, execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby,
including without limitation to sell and transfer the Purchased Interests owned
by it. The execution and delivery by such Seller of this Agreement, and the
performance by such Seller of its obligations hereunder, have been duly and
validly authorized by all necessary action on its behalf. This Agreement has
been duly and validly executed and delivered by such Seller and constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
its terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other similar Laws relating to or
affecting the rights of creditors generally, or by general equitable principles.
(c) No Conflicts. The execution and delivery by such Seller of
this Agreement does not and the performance by such Seller of its obligations
under this Agreement and the consummation of the transactions contemplated
hereby will not:
(i) conflict with or result in a violation or breach of
any of the terms, conditions or provisions of its certificate of incorporation
and by-laws, or agreement of limited liability company and certificate of
formation, as the case may be, or any resolution adopted by its board of
directors; or
(ii) assuming that the consents, approvals and waivers
listed in Section 3.1(c) of the Sellers Disclosure Schedule (the "Sellers
Consents") have been obtained and that the conditions set forth in Article 7 and
Article 8 have been satisfied, be in violation of or result in a default (or
give rise to any right of purchase, termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, agreement or other instrument or obligation to which a
Purchased Entity is a party or by which it or any of the Purchased Interests
owned by it may be bound, or result in the creation of a Lien on such Purchased
Interests; or
(iii) assuming that the Sellers Consents have been
obtained, conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to it or any of its Assets and
Properties;
(d) Governmental Approvals; Filings. Except as set forth in
Section 3.1(d) of the Sellers Disclosure Schedule, no consent, approval or
action of, filing with or notice to any
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Governmental or Regulatory Authority on the part of such Seller or any Purchased
Entity is required in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby.
(e) Purchased Interests. Such Seller is the holder and
beneficial owner of the Purchased Interests set forth opposite its name on
Schedule I, free and clear of all Liens except as set forth in Section 3.1(e) of
the Sellers Disclosure Schedule. ACME is the holder and beneficial owner of a
50% general partnership interest in EMP and a 50% general partnership interest
in OGII, free and clear of all Liens except as set forth in section 3.1(e) of
the Sellers Disclosure Schedule.
(f) Legal Proceedings.
(i) Except as set forth in Section 3.1(f)(i) of the
Sellers Disclosure Schedule, to the Knowledge of such Seller, there are no
actions or proceedings pending against such Seller or threatened against it,
ACME, or any Purchased Entity which could reasonably be expected (A) to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal, materially delaying or preventing the consummation of, or
awarding damages as a result of, any of the transactions contemplated by this
Agreement, or (B) individually or in the aggregate, to create a Purchased Entity
Material Adverse Effect; and
(ii) Except as set forth in Section 3.1(f)(ii) of the
Sellers Disclosure Schedule, to the Knowledge of such Seller, there are no
Orders issued since December 31, 2001 with respect to the Sellers, December 31,
1994 with respect to ACME or December 31, 2001 with respect to any Purchased
Entity outstanding against such Seller, ACME, or any Purchased Entity which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
(g) Brokers. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by such Seller
directly with the Purchasers without the intervention of any Person on behalf of
such Seller in such manner as to give rise to any valid claim by any Person
against the Purchasers for a finder's fee, brokerage commission or similar
payment.
(h) Solvency. Such Seller (i) is not entering into this
Agreement with actual intent to hinder, delay or defraud creditors, (ii) is not
insolvent, (iii) will not become insolvent as a result of the transfers
contemplated by this Agreement, (iv) is capable of paying its debts as they
mature, (v) will remain capable of paying its debts as they mature after
effecting such transfers and (vi) is receiving a reasonably equivalent value in
exchange for the Purchased Interests and the transactions contemplated by this
Agreement. The transfer of the Purchased Interests is not wrongful or fraudulent
with respect to such Seller's creditors, and no creditor shall be entitled to
bring any claim under any Law against such Seller or the Purchasers with respect
to such transfer.
(i) Compliance with Laws and Orders. Except as set forth in
Section 3.1(i) of the Sellers Disclosure Schedule, since December 31, 1994 with
respect to ACME and December 31, 2001 with respect to any Purchased Entity, to
the Knowledge of such Seller,
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neither such Seller ACME, nor any Purchased Entity have received any written
notice or other written communication from any Governmental or Regulatory
Authority or any other Person regarding (i) any actual, alleged, possible or
potential violation of, or failure to comply with, any Law or Order, or any
intention to conduct an investigation or review regarding any of the foregoing
or (ii) any actual, alleged, possible or potential obligation on the part of any
Purchased Entity to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature, which could reasonably be expected to create or
result in a Purchased Entity Material Adverse Effect.
(j) Financial Statements. Such Seller has previously furnished
to the Purchasers a copy of the audited financial statements (including balance
sheet, statement of income and statement of cash flows) as of December 31, 1994
with respect to ACME and as of December 31, 2000 with respect to the Purchased
Entities (collectively, the "Financial Statements").
(k) Absence of Certain Changes. Since December 31, 1994 with
respect to ACME and December 31, 2001 with respect to any Purchased Entity,
except as disclosed in Section 3.1(k) of the Sellers Disclosure Schedule, to the
Knowledge of such FPLE Seller, neither ACME nor any Purchased Entity has:
(i) incurred, permitted or allowed any of its Assets and
Properties to be subjected to any Lien, other than Liens existing on the date
hereof or Permitted Liens;
(ii) incurred or created any indebtedness or obligation,
or assumed or guaranteed (whether by way of guarantee, endorsement, indemnity,
warranty or otherwise) any indebtedness or obligation of any other Person;
(iii) sold, transferred, leased, or otherwise disposed of
any Assets and Properties, except in the ordinary course of business consistent
with past practice;
(iv) incurred any material liabilities or obligations
which would be required by GAAP to be shown on its balance sheet or the
footnotes thereto;
(v) suffered any damage, destruction or casualty loss
(whether or not covered by insurance) in excess of $50,000.00;
(vi) entered into any transaction outside the ordinary
course of its business;
(vii) renegotiated, amended, waived in writing or
terminated (partially or completely) any Material Contract to which it is a
party, or any Environmental Permit or License related to the ownership and
operations of the Ormesa II Facility;
(viii) made any payment, loan or advance to, or entered
into any agreement, arrangement or transaction with, any of its partners or
their Affiliates, or any business or entity in which any of its partners or
their Affiliates, or any directors, officers, members, managers or employees of
any of the foregoing have either a direct or indirect interest that will
continue in effect beyond the Closing other than in the ordinary course of
business;
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(ix) changed its organizational documents;
(x) reached any understanding or entered into any Contract
or commitment (contingent or otherwise) to do or engage in, or which could
result in any of the foregoing.
(l) Regulatory Status. On July 14, 1986, the Ormesa II
Facility was certified as a "qualifying small power production facility"
pursuant to the Public Utility Regulatory Policies Act of 1978 and the related
implementing regulations (a "QF"). To the Knowledge of such Seller, neither it
nor ACME nor any Purchased Entity have received any written notice from any
Governmental or Regulatory Authority of any claim, action, proceeding or
investigation denying, challenging or otherwise questioning the status of the
Ormesa II Facility as a QF.
(m) Real Property. Section 3.1(m) of the Sellers Disclosure
Schedule sets forth all of the geothermal leases pursuant to which real property
is leased by any Purchased Entity and used or held for use in connection with
its business. Except as set forth in Section 3.1(m) of the Sellers Disclosure
Schedule, to the Knowledge of such Seller, since December 31, 2001 no Purchased
Entity has been in material default under any of the leases listed thereon.
(n) Tangible Personal Property. The list of personal property
set forth in Section 3.1(n) of the Sellers Disclosure Schedule includes all
Tangible Personal Property with a value exceeding $10,000.00 that is included
in, or used in the operation of, the Ormesa II Facility.
(o) Material and other Contracts.
(i) Except as set forth in Section 3.1(o)(i) of the
Sellers Disclosure Schedule, to the Knowledge of such Seller, neither it nor
ACME nor any Purchased Entity has received written notice from any other party
to a Material Contract to the effect that any Purchased Entity is in violation
or breach of or default under any Material Contract to which such Purchased
Entity is a party (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Material Contract).
(ii) Section 3.1(o)(ii) of the Sellers Disclosure Schedule
contains a list of all Contracts (excluding, for the avoidance of doubt,
Environmental Permits and other Licenses) with a value or consideration in
excess of $50,000.00 to which any Purchased Entity, to such Seller's Knowledge,
is a party, or has been a party since December 31, 2001, and by which ACME or
any Purchased Entity or any of its assets may be bound or affected as of the
date hereof. To the Knowledge of such Seller, no Contract (excluding, for the
avoidance of doubt, Environmental Permits and other Licenses) required to be set
forth thereon has been amended or assigned except as set forth in Section 3.1(o)
of the Sellers Disclosure Schedule. To the Knowledge of such Seller, no
Purchased Entity is a party to any series of related Contracts (excluding, for
the avoidance of doubt, Environmental Permits and other Licenses) in effect as
of the date hereof that in the aggregate have a value or consideration in excess
of $150,000.00 which are not listed on Section 3.1(o) of the Sellers Disclosure
Schedule.
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(p) Insurance. Except as set forth in Section 3.1(p) of the
Sellers Disclosure Schedule, to the Knowledge of such Seller, there are no
outstanding claims under or in respect of any insurance policy to which ACME or
any Purchased Entity is a party or which provides coverage to or for the benefit
of or with respect to any ACME or Purchased Entity or the Ormesa II Facility.
(q) Disclosure. The copies of written materials concerning
ACME and any Purchased Entity and the Ormesa II Facility that such Seller has
made available for inspection and reproduction by the Purchasers or their
Representatives constitute accurate copies of the originals thereof, and to the
Knowledge of such Seller, the files and records that such Seller has made
available for inspection and reproduction by the Purchasers or their
Representatives constitute all documents (other than Excluded Records) that
contain material factual information in the possession of such Seller concerning
the Ormesa II Facility.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally, and not jointly and severally,
represents and warrants with respect only to itself, to the Sellers that as of
the date hereof:
4.1 Corporate Existence. Each Purchaser is a limited
liability company, duly organized, validly existing and in good standing under
the Laws of the State of Delaware.
4.2 Authority. The execution and delivery by each Purchaser
of this Agreement and the performance by each Purchaser of its obligations
hereunder have been duly and validly authorized by all necessary action on its
behalf. This Agreement has been duly and validly executed and delivered by each
Purchaser and constitutes the legal, valid and binding obligation of each
Purchaser enforceable against it in accordance with its terms except as the same
may be limited by bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar Laws relating to or affecting the rights of
creditors generally, or by general equitable principles.
4.3 No Conflicts. The execution and delivery by each
Purchaser of this Agreement, the performance by each Purchaser of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the organizational documents of each
Purchaser or any resolution adopted by its board of directors;
(b) be in violation of or result in a default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which each Purchaser is a party
or by which any of its respective Assets and Properties may be bound; or
(c) conflict with or result in a violation or breach of any
term or provision of any Law or Order applicable to each Purchaser or any of its
Assets and Properties.
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4.4 Governmental Approvals and Filings. No consent, approval
or action of, filing with or notice to any Governmental or Regulatory Authority
on the part of each Purchaser is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.5 Legal Proceedings. There are no actions or proceedings
pending or, to the Knowledge of each Purchaser, threatened against it or any of
its Assets and Properties which could reasonably be expected to result in the
issuance of an Order restraining, enjoining or otherwise prohibiting or making
illegal the consummation of any of the transactions contemplated by this
Agreement.
4.6 Brokers and Investment. All negotiations relative to
this Agreement and the transactions contemplated hereby have been carried out by
each Purchaser, or an Affiliate thereof, directly with the Sellers without the
intervention of any other Person on behalf of each Purchaser in such manner as
to give rise to any valid claim by any Person (including, for the avoidance of
doubt, any Affiliate of each Purchaser) against the Sellers for a finder's fee,
brokerage commission or similar payment.
4.7 Absence of Regulation. None of the Purchasers is subject
to regulation as an "electric utility company," "public utility company" or
"holding company" under the Public Utility Holding Company Act of 1935, as
amended. None of the Purchasers is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or an "investment advisor" within the meaning
of the Investment Company Act of 1940, as amended.
4.8 Purchase for Investment. The Purchasers are acquiring
the Purchased Interests for investment for their own account, and not with a
view to resell or distribute any part thereof; neither Purchaser has a present
intention to sell, grant a participation in or otherwise distribute the
Purchased Interests; provided, however, that the right to dispose of the
Purchased Interests shall be entirely within the sole discretion of the
Purchasers. The Purchasers understand and acknowledge that the Purchased
Interests have not been registered under the Securities Act of 1933, as amended,
or under any applicable blue sky or state securities law, and agree that any
sale by the Purchasers of such interests may only be made in compliance
therewith.
4.9 Financing. The Purchasers have sufficient cash and/or
access to sufficient cash through their Affiliates to make the payments required
under Section 2.2 of this Agreement.
4.10 Knowledgeable Purchasers. The Purchasers (i) are
represented by competent legal, tax and financial counsel in connection with the
negotiation, execution and delivery of this Agreement, (ii) together with their
Affiliates, have sufficient knowledge and experience in owning, managing and
operating power generating facilities to enable them to evaluate the Purchased
Entities, the Ormesa II Facility and the business of the Purchased Entities, and
the technical, commercial, financial, legal, regulatory and other risks
associated with owning the Purchased Interests, and (iii) acknowledge that
pursuant to this Agreement they will have, prior to the date hereof, performed
and requested all due diligence that they have deemed necessary to perform in
order to evaluate and close the transactions contemplated
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hereby, and that in making the decision to enter into this Agreement and to
consummate the transactions contemplated hereby and thereby, they have relied on
their own independent investigation, analysis and evaluation of the Purchased
Entities, the Facilities, the assets, the properties, business, financial
condition and prospects of the Purchased Entities and upon the express
representations, warranties and covenants in this Agreement and in any
certificate delivered at the Closing.
ARTICLE 5
COVENANTS OF THE SELLERS
The Sellers covenant and agree with the Purchasers that, from
the date hereof (or, with respect to the covenants and agreements contained in
Section 5.3, until fully performed), the Sellers will comply with all covenants
and provisions of this Article 5, except to the extent the Purchasers may
otherwise consent in writing.
5.1 Access of the Purchasers. The Sellers will provide or
cause to be provided to the Purchasers and their Representatives, at their sole
cost and expense, reasonable access, upon reasonable prior notice and during
normal business hours, to the officers and agents of the Sellers and Purchased
Entities who have any responsibility for the Purchased Entities or the Ormesa II
Facility, and to the Sellers' and Purchased Entities' accountants, and shall
provide the Purchasers and their Representatives with access to the Ormesa II
Facility and the Books and Records of ACME and the Purchased Entities (other
than Excluded Records); provided that no investigation pursuant to this Section
by the Purchasers will affect, or limit liability for, any representation or
warranty of the Sellers contained in Article 3 and Article 5 of this Agreement.
5.2 Performance Until Closing. Until the Closing Date, the
Sellers shall be responsible for all amounts payable under the Contracts and for
the timely and full performance of all obligations of ACME and each Purchased
Entity thereunder, and the enforcement of all provisions thereof.
5.3 Certain Restrictions. Except as the Purchasers may
specifically authorize in writing, and except for any undertakings by the
Sellers to satisfy or settle the claims of MMS or BLM with respect to the MMS
Royalty Payment Liabilities (as such terms are defined in the MMS Audit Letter),
and except for any undertaking by the Sellers to satisfy or settle the Disputed
Payment (as such term is defined in the IID Letter), the Sellers will cause each
of ACME and each Purchased Entity not to:
(a) (i) declare, set aside for payment or make any
distributions with respect to any of its partnership interests, as the case may
be ("Equity Interests"); (ii) redeem, purchase or otherwise acquire any of its
Equity Interests or any rights, warrants or options for, or securities
convertible into, Equity Interests; or (iii) split, combine or reclassify any of
its Equity Interests or issue or authorize the issuance of, or grant any
registration rights with respect to, any Equity Interests in lieu of or in
substitution for any of its Equity Interests;
(b) issue, deliver, sell, pledge, dispose of or otherwise
subject to any Lien any of its Equity Interests, any other voting securities or
equity equivalent or any securities
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convertible into, or any rights, warrants or options to acquire, any such Equity
Interests, voting securities or convertible securities or equity equivalent;
(c) incur, permit or allow any Lien on any of its Assets and
Properties, other than Liens existing on the date hereof and Permitted Liens;
(d) incur or create any indebtedness or obligation, or assume
or guarantee (whether by way of guarantee, endorsement, indemnity, warranty or
otherwise) any indebtedness or obligation of any other Person;
(e) sell, convey, transfer, lease or otherwise dispose of any
Assets and Properties, except in the ordinary course of business consistent with
past practice;
(f) incur any material liabilities or obligations which would
be required by GAAP to be shown on its balance sheet or the footnotes thereto;
(g) acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of or equity in, or
acquiring by any other manner, any business or any corporation, partnership,
association or other Person;
(h) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its legal nature or ownership;
(i) change its incorporation, formation, partnership agreement
or any other organizational documents;
(j) change its accounting methods or practices (including any
change in depreciation or amortization policies, or rates thereof);
(k) revalue any of its assets, make any Tax election, change
any annual Tax accounting period, amend any Tax Return, enter into any closing
agreement, settle any Tax claim or assessment, surrender any right to claim a
Tax refund or fail to make the payments or consent to an extension or waiver of
the limitations period applicable to any Tax claim or assessment; provided,
however, for avoidance of doubt, that a Tax claim shall not include any claim
related to MMS;
(l) pay, discharge or satisfy any obligation or liability
other than the payment, discharge or satisfaction in the ordinary course of
business consistent with past practice of obligations or liabilities reflected
or reserved against in, or contemplated by, the Financial Statements (or notes
thereto) or incurred in the ordinary course of business consistent with past
practice;
(m) enter into, amend or modify in any material way, terminate
(partially or completely), grant any waiver of any material term under, or give
any material consent with respect to any Material Contract, Environmental Permit
or License related to the ownership and operation of the Ormesa II Facility or
any other aspect of the business of a Purchased Entity or any other Contract, if
any of such actions with respect to such other Contracts would result in a
Material Adverse Effect; or
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(n) enter into any understanding or any Contract to do or
engage in, or which could result in, any of the foregoing. Notwithstanding any
other term or provisions of this Agreement to the contrary, the Sellers shall be
authorized and entitled to use cash available to any of the Purchased Entities
on or prior to the Closing (including any cash presently held by any third party
in a deposit account or otherwise that will be released as of the Closing to any
of the Purchased Entities and that has not been included in the Estimated
Adjustment Statement for purposes of making the adjustment to the Purchase Price
pursuant to Section 2.4 hereof) for any of the following purposes: (i) to make
any payments or distributions with respect to any of the Equity Interests held
by any of the Sellers or any other holder of any Equity Interest in any of the
Purchased Entities prior to Closing; or (ii) to pay, discharge or satisfy any
obligation or liability of any Purchased Entity to any Ormesa Entity, to any
Seller or to any Affiliate of any Seller, including any Intercompany Obligation.
5.4 Financial Statements. On or before May 5, 2002, the
Sellers will furnish to the Purchasers a copy of the audited financial
statements (including balance sheet, statement of income and statement of cash
flows) as of December 31, 2001 and the unaudited financial statements (including
balance sheet, statement of income and statement of cash flows) for the period
ending March 31, 2002 for each of the Purchased Entities. The unaudited
financial statements will be prepared from and in accordance with the Books and
Records of such Purchased Entity and, to the Knowledge of each Seller, in
conformity with GAAP.
5.5 Permits. The Sellers will use commercially reasonable
efforts to cause each Purchased Entity (a) to maintain in effect all its
existing Licenses and Environmental Permits and (b) to obtain any additional
Licenses and Environmental Permits not already issued, that are required in
connection with the normal course of business as conducted by such Purchased
Entity as of the date hereof.
5.6 Books and Records. On or before the Closing Date, the
Sellers will cause all Books and Records (other than the Excluded Records)
belonging or relating to ACME and the Purchased Entities that are required for
the day-to-day operations of the Purchased Entities to be in the possession of
ACME or the Purchased Entities, and the Sellers will make such Books and Records
(other than the Excluded Records) available to such Persons as the Purchasers
shall instruct. No later than thirty (30) days after the Closing Date, the
Sellers will cause all remaining Books and Records (other than the Excluded
Records) belonging to or relating to ACME or the Purchased Entities to be in the
possession of ACME or such Purchased Entities and the Sellers will make such
Books and Records (other than the Excluded Records) available to such Persons as
the Purchasers shall instruct.
5.7 Operation in the Ordinary Course of Business. The
Sellers will cause ACME and each Purchased Entity to operate only in accordance
with the Material Contracts, and any other Contract (except to the extent
failure to so operate would not result in a Material Adverse Effect) to which it
is a party, as set forth in Section 3.1(o) of the Sellers Disclosure Schedule,
and the Sellers will comply with all terms of such Contracts with respect to the
Ormesa II Facility and the Purchased Entities.
5.8 No Negotiations. Neither the Sellers nor any of their
affiliates, advisors or agents shall, directly or indirectly, initiate
discussions with, engage in negotiations with, or
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provide any information to any corporation, partnership, person or other entity
or group involving the possible sale, directly or indirectly, transfer or joint
venture of ACME or any Purchased Entity, its business or assets, or the
Purchased Interests to any person other than the Purchasers.
5.9 Notice. Each Seller will promptly notify the Purchasers
of the occurrence of any breach of any covenant of such Seller in this
Article 5.
ARTICLE 6
COVENANTS OF THE PURCHASERS
The Purchasers covenant and agree with the Sellers that they
will comply with all covenants and provisions of this Article 6, except to the
extent the Sellers may otherwise consent in writing.
6.1 Use of Certain Names. As soon as practicable, and in all
events within ninety (90) days after the Closing, the Purchasers shall cause
ACME and each Purchased Entity to eliminate any reference to the Sellers or
their Affiliates or any word or expression constituting an abbreviation of the
Sellers' or their Affiliates' names from the names under which ACME and such
Purchased Entity conducts business, and all of the foregoing words, expressions
and abbreviations shall be removed from the property, stationery and literature
of ACME and such Purchased Entity, and thereafter, the Purchasers, ACME and such
Purchased Entity shall not use any logos, trademarks or tradenames, belonging to
the Sellers or any Affiliate thereof; provided, however, that the provisions of
this Section 6.2(a) shall not apply to the use by the Purchasers or their
Affiliates of the word "Ormesa" on its own or in any other combination, in
logos, trademarks, tradenames or otherwise.
6.2 Contract Security. Promptly, but in no event later than
ten (10) Business Days following the Closing, the Purchasers will, or will cause
the relevant Purchased Entity to, deliver substitute bonds, guarantees, letters
of credit or other security sufficient to cause the beneficiaries of the bonds,
guarantees, letters of credit or other security described on Exhibit IV hereto
to release their interest therein and, to the extent any funds are delivered to
the Purchasers or any Purchased Entity following any such release of any bonds,
guarantees, letters of credit or other security described on Exhibit IV hereto
following the Closing, the Purchasers will, or will cause such Purchased Entity
to, promptly pay such funds to the Sellers.
6.3 Books and Records. Upon prior written request from the
Sellers, the Purchasers shall use reasonable efforts to grant, and cause the
Purchased Entities to grant, the Sellers access during regular business hours to
such Books and Records that the Sellers may reasonably require in connection
with ongoing settlement negotiations with MMS or IID relating to matters
addressed in the MMS Audit Letter or the IID Letter, as the case may be, or in
connection with future matters addressed in the SCE Letter.
ARTICLE 7
DELIVERIES OF THE SELLERS
On or prior to the date hereof, each and all of the Sellers
shall irrevocably deliver to the Escrow Agent original executed or otherwise
certified copies of the following documents
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(all or any of which may be waived in whole or in part by the Purchasers in
their sole discretion by notice to the Sellers and the Escrow Agent):
7.1 Sale and Purchase Agreement. This Sale and Purchase
Agreement.
7.2 Escrow Closing Agreement. The Escrow Closing Agreement.
7.3 Officers' Certificates. A certificate, dated the date
hereof and executed by an officer of the respective Seller, reasonably
satisfactory in form and substance to the Purchasers, as to the matters set
forth in Article 3, and a certificate, dated the date hereof and executed by the
Secretary or any Assistant Secretary of each Seller, reasonably satisfactory in
form and substance to the Purchasers.
7.4 Transfer Instruments. A transfer instrument, dated as of
the Closing Date, in the form attached hereto as Exhibit III, with respect to
each Purchased Interest held by each Seller.
7.5 Release. A Release dated the date hereof, together with
evidence, which may be in the form of a certificate from an authorized officer
of such Seller, that each Seller and its Affiliates have repaid to each
Purchased Entity all outstanding indebtedness that such Seller and its
Affiliates may owe such Purchased Entity.
7.6 Good Standing. Certificates, dated as of a date no more
than ten (10) days prior to the date hereof, duly issued by the appropriate
authorities, showing that the Sellers and ACME are in good standing in their
respective jurisdiction of formation and the Purchased Entities are in good
standing and authorized to do business in the jurisdiction of their formation
and any other jurisdiction in which they are conducting business.
7.7 MMS Audit Letter. The MMS Audit Letter.
7.8 IID Letter. The IID Letter.
7.9 Transition Operations. The Transition O&M Agreement.
7.10 Irrevocable Bank Instructions. The Irrevocable Bank
Instructions.
7.11 Royalty Termination Agreement. The Royalty Termination
Agreement.
7.12 O&M Termination Agreement. The O&M Termination
Agreement.
7.13 Account Distribution Agreement. The Account
Distribution Agreement.
7.14 SCE Letter. The SCE Letter.
7.15 Ormat Technologies Letter. The Ormat Technologies
Letter.
7.16 Loan Cancellation Agreement. The Loan Cancellation
Agreement.
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ARTICLE 8
DELIVERIES OF THE PURCHASERS
On or prior to the date hereof, each and all of the Purchasers
shall irrevocably deliver to the Escrow Agent the following documents (all or
any of which may be waived in whole or in part by the Sellers in their sole
discretion by notice to the Purchasers and the Escrow Agent):
8.1 Sale and Purchase Agreement. This Sale and Purchase
Agreement.
8.2 Escrow Closing Agreement. The Escrow Closing Agreement.
8.3 Officers' Certificates. A certificate, dated the date
hereof and executed by an officer of each Purchaser, reasonably satisfactory in
form and substance to the Sellers, as to the matters set forth in Article 4, and
a certificate, dated the date hereof and executed by the Secretary or any
Assistant Secretary of each Purchaser, reasonably satisfactory in form and
substance to the Sellers.
8.4 Good Standing. Certificates, dated as of a date no more
than ten (10) days prior to the date hereof, duly issued by the appropriate
authorities, showing that the Purchasers are in good standing and authorized to
do business.
8.5 MMS Audit Letter. The MMS Audit Letter.
8.6 IID Letter. The IID Letter.
8.7 Transition Operations. The Transition O&M Agreement.
8.8 Irrevocable Bank Instructions. The Irrevocable Bank
Instructions.
8.9 SCE Letter. The SCE Letter.
8.10 No Broker Fees Letter. Letter from the Purchasers,
addressed to the Sellers, regarding certain matters addressed in Section 4.6 (no
broker fees).
8.11 Ormat Technologies Letter. The Ormat Technologies
Letter.
8.12 Transfer Instruments. A transfer instrument, dated as of
the Closing Date, in the form attached hereto as Exhibit III, with respect to
each Purchased Interest held by each Seller.
ARTICLE 9
TAX MATTERS
9.1 Representations, Warranties and Covenants. Each Seller
and ACME, severally, and not jointly with any other Seller or ACME, represents,
warrants and covenants
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with respect to itself and each Purchased Entity that as of the date of this
Agreement and, except as otherwise expressly provided, as of the Closing Date:
(a) (i) ACME and each Purchased Entity has filed when due all
Tax Returns that are required to be filed by it on or before the Closing Date;
(ii) such returns were prepared in the manner required by applicable Laws and
are true, correct, and complete in all material respects; and (iii) ACME and
each Purchased Entity has timely paid all Taxes imposed on or incurred by it as
shown on such Tax Returns as being owed. Neither the Sellers nor ACME nor the
Purchased Entities have been notified of any claim or potential claim by any tax
authority for unpaid Taxes relating to events or periods before the Closing
Date. No waiver of any statute of limitations is in effect with respect to any
Tax Returns. ACME and each Purchased Party is a partnership or disregarded as an
entity separate from its owner for federal and California state and local income
tax purposes, and neither the Sellers, nor ACME, nor any Purchased Entity have
taken a position on any Tax Returns that is inconsistent with this treatment.
The Facility Lease is a true lease for federal and California state and local
income tax purposes. There have not been any tax audits with respect to the
Ormesa II Facility or related transactions, and no claims have been made by the
Sellers, ACME, or the Purchased Entities under any tax indemnities in the
Facility Lease. As of the Closing Date, neither ACME nor a Purchased Entity will
be a party to any Tax sharing or Tax indemnity agreement, other than any tax
indemnities in its favor in connection with the Facility Lease, and neither ACME
nor a Purchased Entity has, or will have as of the Closing Date, any obligations
or liabilities under any Tax sharing or Tax indemnity arrangements previously in
effect. The Sellers are not foreign persons within the meaning of Section 1445
of the Code. All monies required to be withheld by ACME and each Purchased
Entity for income Taxes and social security and other payroll Taxes have been
collected or withheld with respect to employees, and either paid to the
respective taxing authorities or set aside in accounts for such purpose.
(b) No "check-the-box" elections have been filed pursuant to
Treasury Regulations ss. 301.7701-3 for ACME or any Purchased Entity within the
60-month period ending on the Closing date.
(c) True and complete copies of all Tax Returns and all
schedules thereto filed by, or on behalf of, ACME and each Purchased Entity for
all prior taxable years have been (or will be upon request) made available to
the Purchasers for inspection.
9.2 Tax Matters.
(a) Transfer Taxes. The Sellers, on the one hand, and the
Purchasers, on the other, shall bear in equal portions and pay all sales, use,
transfer, recording, gains, stock transfer and other similar taxes and fees
("Transfer Taxes") if any, arising out of or in connection with the sale of the
Purchased Interests pursuant to this Agreement.
(b) Pre-Closing Taxes and Overlap Period Taxes. The Sellers
shall be responsible for 50% of any Pre-Closing Taxes and for Overlap Period
Taxes to the extent they relate to events or periods through 12:00 a.m.
(California time) on the Closing Date. Purchasers shall bear all supplemental or
other state and local real and personal property taxes which arise out of a
change in ownership of the Purchased Entities. The Sellers shall prepare and
file, or
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cause to be filed, Tax Returns for Pre-Closing Taxes. The Purchasers shall
prepare and file Tax Returns for Overlap Period Taxes, and will supply the
Sellers with a draft of any such returns and a written request for payment of
the Sellers' share of such Taxes. The Purchasers' preparation of any such Tax
Returns shall be subject to the Sellers' approval, which shall not be
unreasonably withheld or delayed. Payments of the Sellers' share must be made to
the Purchasers by wire transfer within thirty (30) business days after such
request. Fifty percent of the liability for Overlap Period Taxes will be
allocated between the Sellers and the Purchasers (i) in the case of Taxes based
on gross receipts or income, on a closing of the books method and (ii) in the
case of Taxes not based on gross receipts or income (e.g., property taxes) a
fraction, the denominator of which is the total number of days in the Tax period
and the numerator of which for the Seller is the number of days in the Tax
period ending on the Closing Date and for the Purchaser is the number of days in
the Tax period after the Closing Date. The parties agree to cooperate with one
another with respect to preparing and filing Tax Returns.
(c) Refunds. Fifty percent (50%) of any refund or credit of
Pre-Closing Taxes or Overlap Period Taxes paid by the Sellers shall be for the
benefit of the Sellers. The Purchasers shall pay fifty percent (50%) of any such
refund to the Sellers within thirty (30) days after the Purchasers or any
Purchased Entity receive such refund or actually realize the benefit of such
credit.
(d) Contests. The Purchasers agree that, in the event the
Purchasers or any Purchased Entity receive notice in writing of any examination,
claim, settlement, proposed adjustment, administrative or judicial proceeding,
or other matter related to any Pre-Closing Taxes or Overlap Period Taxes for
which the Sellers may be liable under Section 9.2(b), the Purchasers will notify
the Sellers in writing promptly after receipt of such notice. The Purchasers
will be entitled to control any Tax contest, except to the extent that
responsibility for the disputed Tax liability falls solely on the Sellers, in
which case the Sellers will be entitled to control the Tax contest; provided,
however, that if responsibility for the disputed Tax liability falls solely on
the Sellers but the contest involves issues that may recur on a later Tax Return
of a Purchased Entity or the Purchasers with respect to a Purchased Entity, the
Sellers will not settle such Tax contest without the prior written consent of
the Purchasers, such consent not to be unreasonably withheld. The Sellers shall
notify the Purchasers in writing within thirty (30) business days following
receipt of the notice from the Purchasers described in this paragraph 9.2(d)
that the Sellers assume control over the contest if so entitled. Each party will
bear its own expenses, and the controlling party will keep the other party
informed of developments in the case. The noncontrolling party or parties shall
have the opportunity to attend meetings with tax officials and to comment on any
written submissions before they are submitted. Suggestions by the noncontrolling
party or parties about the conduct of the contest will be considered in good
faith by the controlling party, but the controlling party will make the ultimate
decision on whether, how long and in what manner to contest.
(e) Information. In connection with preparing any Tax Return
or preparing for any audit or other examination by any taxing authority or any
judicial or administrative proceedings relating to liability for Taxes, the
Sellers, the Purchasers and the Purchased Entities will provide information,
records or documents relating to Taxes as may be reasonably requested in writing
by another party to this Agreement or any Affiliate thereof. The Sellers will
not destroy any records related to any Purchased Entity for Tax periods
commencing before the
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Closing Date for a period of seven (7) years following the date thereof without
first giving notice to and obtaining the written consent of the Purchasers
(whose consent shall not be unreasonably withheld).
ARTICLE 10
SURVIVAL
10.1 Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements of the
Sellers and the Purchasers contained in this Agreement (other than (i) the
covenants and agreements contained in Articles 10, 11 and 12, which covenants
and agreements shall survive in accordance with their terms, (ii) the covenants
and agreements in Section 14.5, which covenants and agreements shall survive for
a period of five (5) years after the Closing, (iii) the representations and
warranties contained in Sections 3.1(a), (b), (c), (e) and (g); 4.1; 4.2; 4.3
and 4.6; which covenants, representations and warranties shall survive
indefinitely after the Closing, (iv) the covenants and agreements contained in
Article 9, which covenants and agreements shall survive for the applicable
statute of limitations, and (v) the representation contained in Section 3.1(q)
which shall not survive beyond the date hereof) shall survive for a period of
one (1) year after the Closing and thereafter shall be time-barred; provided,
however, that claims first asserted in writing within the applicable period
(whether or not the amount of any such claim has become ascertainable within
such period) shall not thereafter be time barred.
10.2 No Other Representations. Notwithstanding anything to
the contrary contained in this Agreement, each party agrees that the Sellers are
making no representation or warranty whatsoever, express or implied, except
those representations and warranties contained in Section 3.1 and 3.2 and in any
certificate delivered pursuant to Article 7. In particular, the Sellers make no
representation or warranty to the Purchasers with respect to (i) the operating
condition or the cost of operating the Ormesa II Facility or the revenues to be
derived therefrom; (ii) the amount, quality or availability of the geothermal
resource, (iii) the creditworthiness of any counterparty to any Contract or
Material Contract, (iv) the accuracy of any forecast, study or projection
relating to the business or condition of ACME or any Purchased Entity; (v)
whether the Ormesa II Facility can be financed; (vi) the ultimate feasibility or
economic worth of Ormesa II Facility; or (vii) the effect on the business or
condition of ACME or any Purchased Entity of the sale of the Purchased Interests
to the Purchasers. With respect to any projection or forecast delivered by or on
behalf of the Sellers to the Purchasers, the Purchasers acknowledge that (i)
there are uncertainties inherent in attempting to make such projections, studies
and forecasts, (ii) they are familiar with such uncertainties and (iii) they are
taking full responsibility for making their own evaluation of the adequacy and
accuracy of all such projections, studies and forecasts furnished to them.
ARTICLE 11
INDEMNIFICATION
11.1 Indemnification. (a) The Sellers shall, jointly and
severally, to the fullest extent permitted by Law, indemnify, defend and hold
harmless, the Purchasers and their Affiliates and the respective officers,
directors, employees and shareholders of the foregoing, and their successors and
assigns (the "Purchasers Indemnified Parties") from, against and with
25
respect to any claim, liability, obligation or Loss, of any kind or character,
suffered, incurred or sustained by the Purchasers or any of the foregoing or to
which it or they become subject, arising out of or in any manner incident,
relating or attributable to:
(i) any inaccuracy in any representation or breach of
warranty of any Seller contained in this Agreement or in any certificate,
instrument of transfer or other document or agreement executed by any Seller in
connection with this Agreement; and
(ii) any failure by any Seller to perform or observe, or
to have performed or observed, in full, any covenant, agreement or condition to
be performed or observed by any Seller under this Agreement or under any
certificates or other documents or agreements executed by any Seller in
connection with this Agreement.
(b) The Purchasers shall, to the fullest extent permitted by
Law, jointly and severally, indemnify, defend and hold harmless, the Sellers and
their Affiliates and the respective partners, officers, directors, employees and
shareholders of the foregoing, and their successors and assigns (the "Sellers
Indemnified Parties") from, against and with respect to any claim, liability,
obligation judgment or Loss, of any kind or character, suffered, incurred or
sustained by the Sellers or any of the foregoing or to which they become
subject, arising out of or in any manner incident, relating or attributable to:
(i) any inaccuracy in any representation or breach of
warranty of the Purchasers contained in this Agreement or in any certificate,
instrument of transfer or other document or agreement executed by the Purchasers
in connection with this Agreement;
(ii) any failure by the Purchasers to perform or observe,
or to have performed or observed, in full, any covenant, agreement or condition
to be performed or observed by it under this Agreement or under any certificates
or other documents or agreements executed by the Purchasers in connection with
this Agreement; and
(iii) any events, occurrences or conditions relating to
the Purchased Entities, the Ormesa II Facility, the Assets and Properties of any
Purchased Entities or the Contracts of the Purchased Entities in respect of all
periods after the Closing.
(c) Notwithstanding anything herein to the contrary, no
indemnification shall be available to the Purchasers Indemnified Parties under
Section 11.1 (a) hereof or to the Sellers Indemnified Parties under Section
11.1(b) hereof:
(i) unless, with respect to any individual claim, the Loss
involves an amount in excess of $25,000.00; and
(ii) unless the aggregate amount of the Loss that would
otherwise be subject to indemnification with respect to such claim and all prior
claims exceeds $500,000.00 (such amount, the "Threshold Amount"), in which case
the party(ies) entitled to such indemnification shall be entitled to receive all
amounts of Loss in excess of the Threshold Amount.
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(d) Notwithstanding anything herein to the contrary, no Seller
shall have any obligation to indemnify any Purchasers Indemnified Party for any
Loss pursuant to Section 11.1(a) hereof, and no Purchasers shall have any
obligation to indemnify any Seller Indemnified Party for any Loss pursuant to
Section 11.1(b) hereof, in each case to the extent such Loss arises from the
willful misconduct or gross negligence of any Purchaser or any Seller or its
Representatives, as applicable.
(e) Notwithstanding anything herein to the contrary, the
maximum aggregate liability of the Sellers to the Purchasers Indemnified Parties
under this Agreement shall not exceed an amount equal to ten thousand Dollars
($10,000.00); provided that the limitation contained in this clause shall not
apply to Damages arising from a breach of the representations in Sections
3.1(a), 3.1(b), and 3.1(e).
11.2 Method of Asserting Claims. All claims for
indemnification by any Indemnified Party under this Section 11.2 will be
asserted and resolved as follows:
(a) In the event any claim or demand in respect of which an
Indemnified Party might seek indemnity under Section 11.1 is asserted against or
sought to be collected from such Indemnified Party by a Person other than the
Sellers, the Purchasers or any Affiliate of the Sellers or the Purchasers (a
"Third Party Claim"), the Indemnified Party shall deliver a Claim Notice with
reasonable promptness to the Indemnifying Party.
(i) If the Indemnifying Party notifies the Indemnified
Party within the Dispute Period that the Indemnifying Party desires to defend
the Indemnified Party with respect to the Third Party Claim pursuant to this
Section 11.2(a), and such Indemnifying Party confirms its liability with respect
thereto, then the Indemnifying Party will have the right to defend, at the sole
cost and expense of the Indemnifying Party, such Third Party Claim by all
appropriate proceedings, which proceedings will be vigorously and diligently
prosecuted by the Indemnifying Party, with counsel reasonably acceptable to the
Indemnified Party, to a final conclusion or will be settled at the discretion of
the Indemnifying Party (subject to the limitations set forth below). From and
after the Indemnifying Party's delivery of the notice referred to in the first
sentence of this Section 11.2(a)(i), the Indemnifying Party will have full
control of such defense and proceedings, including any settlement thereof;
provided, that the Indemnifying Party may not settle or compromise any Third
Party Claim in any manner that results in any continuing liability or obligation
for the Indemnified Party or any admission of liability or wrongdoing by the
Indemnified Party, without, in any such case, the prior written consent of the
Indemnified Party, which will not be unreasonably withheld. If requested by the
Indemnifying Party, the Indemnified Party will, at the sole cost and expense of
the Indemnifying Party, cooperate with the Indemnifying Party and its counsel in
contesting any Third Party Claim that the Indemnifying Party elects to contest,
or, if appropriate and related to the Third Party Claim in question, in making
any counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnified Party or any of
its Affiliates). Notwithstanding the foregoing, the Indemnified Party may take
over the control of the defense or settlement of a Third Party Claim at any time
if it irrevocably waives its right to indemnity under Section 11.1 with respect
to such Third Party Claim. Should the Indemnifying Party have interests that
diverge materially from those of the Indemnified Party, the Indemnified Party
shall
27
have the right to request separate counsel from that representing the
Indemnifying Party, the expenses of such separate representation to be paid by
the Indemnifying Party.
(ii) If the Indemnifying Party fails to notify the
Indemnified Party within the Dispute Period that the Indemnifying Party desires
to defend the Third Party Claim pursuant to Section 11.2(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously and
diligently or settle the Third Party Claim, then the Indemnified Party will have
the right to defend, at the sole cost and expense of the Indemnifying Party, the
Third Party Claim by all appropriate proceedings, which proceedings will be
vigorously and diligently prosecuted by the Indemnified Party to a final
conclusion or will be settled at the discretion of the Indemnified Party (with
the consent of the Indemnifying Party, which consent will not be unreasonably
withheld). The Indemnified Party will have full control of such defense and
proceedings, including (except as provided in the immediately preceding
sentence) any settlement thereof; provided, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the
Indemnifying Party, cooperate with the Indemnified Party and its counsel in
contesting any Third Party Claim which the Indemnified Party is contesting, or,
if appropriate and related to the Third Party Claim in question, in making any
counterclaim against the Person asserting the Third Party Claim, or any
cross-complaint against any Person (other than the Indemnified Party or any of
its Affiliates).
(iii) If the Indemnifying Party notifies the Indemnified
Party that it does not dispute its liability to the Indemnified Party with
respect to the Third Party Claim under Section 11.1 or fails to notify the
Indemnified Party within the Dispute Period whether the Indemnifying Party
disputes its liability to the Indemnified Party with respect to such Third Party
Claim, the Loss arising from such Third Party Claim will be conclusively deemed
a liability subject to the limits of the Indemnifying Party under Section 11.1,
and the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand following the final determination thereof. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through negotiations
within the Resolution Period, the Indemnified Party shall be entitled to seek
such remedies against the Indemnifying Party as may then be available to it
under this Agreement and applicable Laws.
(b) In the event any Indemnified Party should have a claim
under Section 11.1 against any Indemnifying Party that does not involve a Third
Party Claim, the Indemnified Party shall deliver an "Indemnity Notice" with
reasonable promptness to the Indemnifying Party. If the Indemnifying Party
notifies the Indemnified Party that it does not dispute the claim or the amount
of Loss therefrom described in such Indemnity Notice or fails to notify the
Indemnified Party within the Dispute Period that it disputes the claim described
in the Indemnity Notice, the Loss in the amount specified in the Indemnity
Notice will be conclusively deemed a liability of the Indemnifying Party under
Section 11.1, subject to the limits set forth in Sections 11.1(c) and 11.1(d)
hereof, and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has disputed its
liability with or the amount of the Loss therefrom respect to such claim, such
dispute shall be resolved in accordance with the provisions of Article 12
hereof.
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11.3 Exclusivity. After the Closing, to the extent permitted
by applicable Laws, and except in the case of fraud, gross negligence or willful
misconduct, the indemnities set forth in this Article 11 shall be the exclusive
remedies of the Purchasers and the Sellers and their respective officers,
directors, employees, agents and Affiliates due to misrepresentation, breach of
warranty, nonfulfillment or failure to be performed of any covenant or agreement
contained in this Agreement or any events, occurrences or conditions relating to
the Facilities in respect of all periods on or after the date hereof for the
Sellers, and the parties shall not be entitled to a rescission of this Agreement
or to any further indemnification rights or claims of any nature whatsoever in
respect thereof, all of which the parties hereto hereby waive; provided,
however, that the foregoing provision shall not limit or restrict the
availability of specific performance or other injunctive or equitable relief
(other than rescission) to the extent that specific performance or such other
relief would otherwise be available to a party under this Agreement.
11.4 Tax Treatment of Indemnification. The Seller and the
Purchasers agree to treat (and shall cause each of their respective affiliates
to treat) any indemnity payment under this Agreement as an adjustment to the
Purchase Price unless a final determination (which shall include execution of an
IRS Form 870-AD or successor form) provides otherwise.
ARTICLE 12
DISPUTE RESOLUTION
In the event an action, dispute, claim, counterclaim or
controversy ("Dispute") arises between the parties arising out of or relating to
this Agreement, the aggrieved party shall promptly notify the other party of the
Dispute within ten (10) Business Days after such Dispute arises. If the parties
have failed to resolve the Dispute within ten Business Days after delivery of
such notice, each party shall, within five (5) Business Days thereafter,
nominate a senior officer of its management to meet to attempt to resolve the
Dispute. The senior officers shall meet within twenty (20) Business Days after
their nomination. If the matter has not been resolved within fourteen (14) days
after the meeting of the senior executives, either party may pursue any and all
available legal remedies, unless the parties mutually agree to an alternative
dispute resolution procedure.
ARTICLE 13
EFFECTIVENESS
13.1 Effectiveness. This Agreement shall become effective
upon delivery by the Parties of those documents specified in Article 7 and
Article 8 to the Escrow Agent and the execution by the Escrow Agent of the
Escrow Closing Agreement in accordance with the terms thereof.
ARTICLE 14
MISCELLANEOUS
14.1 Notices. Unless this Agreement specifically requires
otherwise, any notice, demand or request provided for in this Agreement, or
served, given or made in connection with it, including without limitation, any
Claim Notice or Indemnity Notice pursuant to Article 11.2 hereof, shall be in
writing and shall be deemed properly served, given or made if
29
delivered in person or sent by fax or sent by registered or certified mail,
postage prepaid, or by an internationally recognized overnight courier service
that provides a receipt of delivery, in each case, to the parties at the
addresses specified below:
If to the Purchasers, to:
ORNI 8 LLC
980 Greg Street
Sparks, Nevada 89431-6039
Attn.: President
Tel: (775) 356-9029
Fax: (775) 356-9039
and
Ormat Funding Corp.
980 Greg Street
Sparks, Nevada 89431-6039
Attn.: President
Tel: (775) 356-9029
Fax: (775) 356-9039
with a copy to:
Ormat Industries, Ltd.
Industrial Area, P.O.B. 68
Yavne 81000, Israel
Attn.: President
Fax: (972) 8 943 9901
Tel: (972) 8 943 3777
If to any Seller, to:
Such Seller
c/o FPL Energy, LLC
700 Universe Blvd.
Juno Beach, FL 33408
Attn.: Senior Vice President--Business Management
Fax: (561) 691-7309
Tel: (561) 625-7411
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with a copy to:
Steel Hector & Davis LLP
1900 Phillips Point West
777 South Flagler Drive
West Palm Beach, FL 33401
Attn.: Thomas R. Woolsey
Fax: (561) 655-1509
Tel: (561) 650-7200
Notice given by personal delivery, mail or overnight courier
pursuant to this Section 14.1 shall be effective upon physical receipt. Notice
given by fax pursuant to this Section 14.1 shall be effective as of (i) the date
of confirmed delivery if delivered before 5:00 p.m. EST on any Business Day, or
(ii) the next succeeding Business Day if confirmed delivery is after 5:00 p.m.
EST on any Business Day or during any non-Business Day.
14.2 Entire Agreement. This Agreement supersedes all prior
discussions and agreements (including the Letter of Intent) between the parties
with respect to the subject matter hereof and contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
14.3 Expenses. Except as otherwise expressly provided in this
Agreement (including as provided in Section 13.2), whether or not the
transactions contemplated hereby are consummated, each party will pay its own
costs and expenses incurred in connection with the negotiation, execution and
closing of this Agreement and the transactions contemplated hereby.
14.4 Public Announcements. No press releases or similar
public announcements concerning this Agreement and the transactions contemplated
hereby will be issued by any party without the prior consent of the other
parties, except as such release or public announcement may be required by Law
(including, for the avoidance of doubt, rules and regulations of any stock
exchange), in which case the party required to make the release or public
announcement will, to the extent practicable, consult with the other parties
regarding such release or announcement in advance thereof.
14.5 Confidentiality. Each party hereto will hold, and will
use commercially reasonable efforts to cause its Affiliates and their respective
Representatives to hold, in strict confidence from any Person (other than any
such Affiliate or Representative), unless (i) compelled to disclose by judicial
or administrative process (including in connection with obtaining the necessary
approvals of this Agreement and the transactions contemplated hereby of
Governmental or Regulatory Authorities) or by other requirements of Law
(including exchange rules) or (ii) disclosed in an action or proceeding brought
by a party hereto in pursuit of its rights or in the exercise of its remedies
hereunder, all documents and information concerning the other party or any of
its Affiliates furnished to it by the other party or such other party's
Representatives in connection with this Agreement or the transactions
contemplated hereby, except to the extent that such documents or information can
be shown to have been (a) previously known by the party receiving such documents
or information, (b) in the public domain (either prior to or after the
furnishing of such documents or information hereunder)
31
through no fault of such receiving party or (c) later acquired by the receiving
party from another source if the receiving party is not aware that such source
is under an obligation to another party hereto to keep such documents and
information confidential. In the event the transactions contemplated hereby are
not consummated, upon the request of the other party, each party hereto shall,
and shall cause its Affiliates and their respective Representatives to, promptly
(and in no event later than five (5) Business Days after such request) redeliver
or cause to be redelivered all copies of confidential documents and information
furnished by the other party in connection with this Agreement or the
transactions contemplated hereby and destroy or cause to be destroyed all notes,
memoranda, summaries, analyses, compilations and other writings related thereto
or based thereon prepared by the party furnished such documents and information
or its Representatives. The obligations contained in this Section 14.5 shall
survive for two (2) years following the termination or abandonment of this
Agreement or the Closing, as the case may be. The provisions of this Section
14.5 supersede that certain Confidentiality Agreement dated as of August 1,
2000,between Ormat Nevada Inc. and FPLE in its entirety.
14.6 Waiver. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
14.7 Amendment. This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each
party hereto.
14.8 No Third Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and it is not the intention of
the parties to confer third-party beneficiary rights upon any other Person
except for such shareholders, officers, directors, employees, and Affiliates
referenced in Section 11.1.
14.9 No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other party hereto and any
attempt to do so will be void, except for (a) assignments and transfers by
operation of Law, (b) assignments and transfers by the Purchasers of their
rights, interests or obligations hereunder, in whole or in part, to an Affiliate
with the consent of FPLE, which shall not be unreasonably withheld or delayed,
and (c) that the Purchasers may assign any or all of their rights, interests and
obligations hereunder to any financial institution providing purchase money or
other financing to the Purchasers from time to time as collateral security for
such financing, but no such assignment referred to in clauses (b) or (c) shall
relieve the assigning party of its obligations hereunder. Subject to the
preceding sentence, this Agreement is binding upon, inures to the benefit of and
is enforceable by each party hereto and its respective successors and assigns.
14.10 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
32
14.11 Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
14.12 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof other than Section 5-1401 and Section
5-1402 of the General Obligations Law of the State of New York.
14.13 Jurisdiction and Venue. Each of the parties hereto
hereby irrevocably and unconditionally consents and agrees that any actions,
suits or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby may be brought in the United States District
Court for the Southern District of New York or in any state court having subject
matter jurisdiction located in the Borough of Manhattan, New York, New York,
and, by execution and delivery of this Agreement and any other documents
executed in connection herewith, each such party hereby (i) accepts the
non-exclusive jurisdiction of the aforesaid courts, (ii) irrevocably agrees to
be bound by any final judgment (after any and all appeals) of any such court
with respect to such documents, (iii) irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceedings with respect to such documents
brought in any such court, and further irrevocably waives, to the fullest extent
permitted by law, any claim that any such action, or proceeding brought in any
such court has been brought in any inconvenient forum, (iv) agrees that service
of any process, summons, notice or document in any such action may be effected
by mailing a copy thereof by U.S. registered or certified mail, postage prepaid,
to such party at its address set forth in Section 14.5, or at such other address
of which the other parties hereto shall have been notified will be effective
service for any action, suit or proceeding brought against it in any such court
and (v) agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or limit the right to bring any
suit, action or proceeding in any other jurisdiction.
14.14 Waiver of Trial by Jury. EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING
INTO THIS AGREEMENT.
33
14.15 Attorneys' Fees. In the event of any suit or other
proceeding between the parties with respect to any of the transactions
contemplated hereby or subject matter hereof, the prevailing party shall, in
addition to such other relief as the court or arbitrator may award, be entitled
to recover reasonable attorneys' fees and costs (including at the trial and
appellate levels) and expenses of investigation.
14.16 Time is of the Essence. With regard to all dates and
time periods set forth or referred to in this Agreement, time is of the essence.
14.17 Waiver of Consequential Damages. NOTWITHSTANDING ANY
PROVISION IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY OR ITS
AFFILIATES, OR ITS RESPECTIVE PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES OR
REPRESENTATIVES, BE LIABLE HEREUNDER AT ANY TIME FOR PUNITIVE, CONSEQUENTIAL,
SPECIAL OR INDIRECT LOSS OR DAMAGE OF ANY OTHER PARTY OR ANY OF SUCH PARTY'S
AFFILIATES, INCLUDING LOSS OF PROFIT, LOSS OF REVENUE OR ANY OTHER SPECIAL OR
INCIDENTAL DAMAGES, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT
LIABILITY OR OTHERWISE, AND EACH PARTY HEREBY EXPRESSLY RELEASES THE OTHER
PARTIES, THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES
AND REPRESENTATIVES THEREFROM.
14.18 Interest on Past Due Payments. If a payment is due to
be made by a party pursuant to this Agreement and such payment is not made
within thirty (30) days following receipt by such party of written demand for
such payment from the party entitled to receive such payment, then the party
obligated to make such payment agrees to pay interest on the amount due and
unpaid at a variable rate equal to the Prime Rate then in effect. Such interest
shall begin to accrue on the first day following the end of such thirty (30) day
period and shall continue to accrue on the unpaid amount until the past due
amount has been paid in full.
14.19 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
14.20 Further Assurances. The Sellers and the Purchasers each
agree, upon the request of the other party from time to time before and after
the Closing Date, to do, execute, acknowledge and deliver such other acts,
consents, instruments, documents and other assurances as may be reasonably
necessary to carry out and perform the transactions contemplated by this
Agreement.
[The rest of this page is intentionally left blank.
The next page is the signature page]
34
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officer of each party as of the date first
above written.
CH ORMESA, INC.
By: /s/ Michael L. Leighton
--------------------------------------------
Name: Michael L. Leighton
------------------------------------------
Title: Vice President
-----------------------------------------
CH ORMESA LP., INC.
By: /s/ Michael L. Leighton
--------------------------------------------
Name: Michael L. Leighton
------------------------------------------
Title: Vice President
-----------------------------------------
ORNI 8 LLC
By: Ormat Funding Corp., Manager of ORNI 8 LLC
By: /s/ Connie Stechman
--------------------------------------------
Name: Connie Stechman
Title: Director, Chief Financial Officer, and
Assistant Secretary
ORMAT FUNDING CORP.
By: /s/ Connie Stechman
--------------------------------------------
Name: Connie Stechman
Title: Director, Chief Financial Officer, and
Assistant Secretary
Signature Page for Sale and Purchae Agreement
EXHIBIT I
EXCLUDED RECORDS
Each Purchased Entity's, ACME's and each Seller's income Tax Returns and
workpapers, internal memos and correspondence with taxing authorities relating
to such Purchased Entity's, ACME's and each Seller's income Tax Returns.
Documents relating to the Sellers that contain more than just ACME or Purchased
Entity level information and that are not principally related to the business,
condition or results of ACME or operations of any Purchased Entity.
Presentations to internal management committees and boards of FPLE and its
Affiliates that contain more than just ACME or Purchased Entity level
information and that are not principally related to the business, condition or
results of operations of ACME or any Purchased Entity.
Budgets of FPLE and its Affiliates other than budgets of ACME or any Purchased
Entity and other than budgets prepared by FPL Energy Operating Services, Inc.
relating solely to any Purchased Entity or the Ormesa II Facility.
Files of employees of FPLE and its Affiliates (other those that are currently
employed at the East Mesa Facilities) that have performed business management
and other administrative services for Sellers as managing general partner or
administrative partner of any Purchased Entity (including electronic files and
spreadsheets).
EXHIBIT II
MATERIAL CONTRACTS
Interest in each of the following BLM Leases ("Lease"), Site
Licenses ("SL"), and Rights of Way ("ROW"), identified as Lease No.:
CACA 6218 (Lease)
CACA 20172 (SL)
CACA 20267 (ROW)
CACA 26346 (ROW)
EXHIBIT III
FORM OF TRANSFER INSTRUMENT
TRANSFER INSTRUMENT, dated as of ____________ __, 2002
("Transfer Instrument") between [INSERT NAME OF SELLER] a [INSERT ENTITY TYPE
AND JURISDICTION OF FORMATION] ("Assignor") and [ORNI 8 LLC, a Delaware limited
liability company] [Ormat Funding Corp., a Delaware corporation] ("Assignee").
Whereas, Assignor and Assignee are parties to that certain
Sale and Purchase Agreement dated as of April 4, 2002 (the "Sale and Purchase
Agreement");
Whereas, the Sale and Purchase Agreement provides for, among
other things, the execution and delivery of a transfer instrument in the form
hereof to effect the sale by Assignor of all of its Purchased Interests (as
defined in the Sale and Purchase Agreement) to Assignee;
NOW, THEREFORE, for the good and valuable consideration under
the Sale and Purchase Agreement, the receipt and sufficiency of which are hereby
acknowledges, Assignor and Assignee hereby agree as follows:
1. DEFINITIONS. Capitalized terms uses herein without definition shall
have the meanings set forth in the Sale and Purchase Agreement.
2. TRANSFER. Assignor does hereby sell, transfer, convey, assign and
deliver unto Assignee all of Assignor's right, title and interest in and to the
Purchased Interests, free and clear of all Liens (other than Liens created by or
granted in connection with the Lease Documents).
3. ASSUMPTION. Assignee hereby assumes all of the duties and
obligations of Assignor with respect to the Purchased Interests arising or
accruing on or after the date hereof.
4. GOVERNING LAW. This Transfer Instrument shall be governed by and
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof other than Section 5-1401 and Section
5-1402 of the General Obligations Law of the State of New York.
5. COUNTERPARTS. This Transfer Instrument may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, Assignor and Assignee have caused this
Transfer Instrument to be duly executed and delivered by their respective duly
authorized representatives as of the day and year first above written.
___________________________________, as Assignor
By:
Name:
Title:
__________________________________, as Assignee
By:
Name:
Title:
DC1 - 157191.13
EXHIBIT IV
CONTRACT SECURITY
Fifty percent (50%) of the following bond:
- ----------------------------------------------------------------------------------------------------------------------
Plant Type BLM No. Bond No. Amount Surety
- ----------------------------------------------------------------------------------------------------------------------
OGII Site License CACA20172 N/A $100,000 Cash bond at East Mesa
BLM Partners
- ----------------------------------------------------------------------------------------------------------------------
SCHEDULE I
Purchased Interests
- --------------------------------------------------------------------------------
SELLER PURCHASED INTEREST
- --------------------------------------------------------------------------------
CH Ormesa, Inc. 2% general partnership interest in ACME
Ormesa II Partners, L.P.
- --------------------------------------------------------------------------------
CH Ormesa LP, Inc. 98% limited partnership interest in ACME
Ormesa II Partners, L.P.
- --------------------------------------------------------------------------------
SCHEDULE II
DESCRIPTION OF ORMESA II FACILITY
Geothermal small power facility located in the East Mesa Known
Geothermal Resource Area in Imperial County, California, commonly known as the
Ormesa II Facility. The Ormesa II Facility is a geothermal power plant which
includes 20 Ormat energy converters, comprised of preheater, vaporizer, turbine,
generator, condenser, and 600v/13.8kv transformer rated at 1.25 MW each. In
addition, the station power electrical system includes 13.8kV/480V auxiliary
power transformers, and the main electric power system includes two 13.8kV/92kV
step-up transformers with switchgear and control equipment. The Ormesa II
Facility also includes a cooling tower, a fire protection system, an isopentane
system, air compressors, an emergency generator and a control room, maintenance
building and office. The Ormesa II Facility is supplied with geothermal fluids
from a well field which was developed by East Mesa Partners under a site lease
from the BLM. The Ormesa II Facility's gross operating capacity is approximately
19.95 MW. The Station uses approximately 3.4 MW of the electricity generated by
the Ormesa II Facility. Thus, the net power production of the facility is
approximately 16.55 MW.
SCHEDULE III
SELLERS DISCLOSURE SCHEDULE
Capitalized terms used in this Sellers Disclosure Schedule and not
otherwise defined shall have the same meanings when used herein as in the Sale
and Purchase Agreement to which this Schedule is attached.
[PROVIDED SEPARATELY]
SCHEDULE IV
ADJUSTMENT OF PAYMENT AMOUNTS
(1) Estimated Adjustment Statement.
(a) On the date hereof, the Sellers shall prepare and deliver
to the Purchasers a statement (the "Estimated Adjustment Statement") that sets
forth as of the close of business on the day prior to the date hereof (the
"Adjustment Date"): (i) a good faith estimate of the accrued liabilities of each
Purchased Entity that will remain unpaid following the Adjustment Date
("Liabilities"), excluding any and all liabilities under the Financing Documents
other than (x) accrued and unpaid interest on the indebtedness of Ormesa
Geothermal II Trust issued and outstanding pursuant to the Financing Documents
to the date hereof and (y) aggregate fees owed under the Financing Documents
outstanding on the date hereof, excluding any fees owed in connection with the
unwinding of the financing structure; (ii) a good faith estimate of the accrued
gross revenues of each Purchased Entity that will not have been received prior
to the Adjustment Date ("Accounts Receivable"); and (iii) the expenses of each
Purchased Entity that have been paid in advance (including property taxes) as
prorated for the period following the Adjustment Date ("Prepaid Expenses"). The
Estimated Adjustment Statement will be prepared in conformity with GAAP, applied
on a basis consistent with the financial statements delivered to the Purchasers
under Section 3.1(j) of the Agreement. For the avoidance of doubt, Liabilities
shall not include any liabilities of any Purchased Entity to any Seller or any
Affiliate of a Seller that will be released or otherwise satisfied at or prior
to the date hereof.
(b) If the Liabilities as set forth on the Estimated
Adjustment Statement for all of the Purchased Entities in the aggregate exceed
the sum of the Sellers' Credits (as defined below), the amount paid by the
Purchasers under Section 2.2 of the Agreement will be reduced (pro-rata to each
Seller) by an amount equal to the excess. If the Sellers' Credits exceed the
Liabilities for all of the Purchased Entities in the aggregate as set forth
thereon, the amount paid by the Purchasers under Section 2.2 of the Agreement
will be increased (pro-rata to each Seller) by an amount equal to the excess.
For purposes hereof, the "Sellers' Credits" mean all Accounts Receivable, plus
the Prepaid Expenses, in each case for all of the Purchased Entities in the
aggregate as set forth on the Estimated Adjustment Statement.
(c) Notwithstanding anything in this Schedule IV to the
contrary, the Parties agree that, for purposes of making the adjustments
contemplated by this Schedule IV, (1) Intercompany Obligations shall not be
included in either Liabilities or Accounts Receivable; (2) Liabilities that have
been assumed by the Sellers or any of them pursuant to the MMS Audit Letter, and
any related credits in favor of any of the Ormesa Entities described in such MMS
Audit Letter that will inure to the benefit of the Sellers, shall be governed by
the MMS Audit Letter and shall not be included in Liabilities or the Sellers'
Credits; and (3) Liabilities that have been assumed by the Sellers or any of
them pursuant to the IID Letter, and any related credits in favor of any of the
Ormesa Entities described in such IID Letter that will inure to the benefit of
the Sellers, shall be governed by the IID Letter and shall not be included in
Liabilities or the Sellers' Credits.
(2) Adjustment Statement.
(a) Within forty-five (45) days following the Closing Date,
the Purchasers shall prepare and deliver to the Sellers a final statement (the
"Final Adjustment Statement") that sets forth the same information as included
in the Estimated Adjustment Statement provided pursuant to Section 1(a) above,
adjusted to take into account the final figures as of 11:59 p.m. on the Closing
Date determined in accordance with the standard set forth in said Section 1(a).
The Sellers shall provide copies of all invoices or other billing information
actually received or sent by the Sellers during this 45 days period to allow the
Purchasers to prepare the Final Adjustment Statement in accordance with this
Section. The Final Adjustment Statement shall be accompanied by such backup
information and schedules as is reasonably required in order for the Sellers to
understand the computation of the amount(s) set forth therein.
(b) The Parties shall attempt to agree upon the Final
Adjustment Statement within thirty (30) days following the delivery thereof to
the Sellers. If the Sellers dispute any item set forth on the Final Adjustment
Statement, the Sellers shall give the Purchasers written notice thereof within
thirty (30) days following the delivery to the Sellers of the Final Adjustment
Statement, setting forth in reasonable detail the disputed item or items. If the
Sellers have not delivered such notice to the Purchasers within such thirty (30)
day period, the Final Adjustment Statement shall be deemed to be final and, to
the extent the Final Adjustment Statement reflects an adjustment to the amounts
paid by the Purchasers under Section 2.2(a) of the Agreement that is different
from the adjustment made on the Closing Date, the party that benefited from the
variance in the adjustment made on the Closing Date shall pay to the other party
the variance amount within five (5) days following the expiration of such thirty
(30) day period. If the Sellers have delivered a notice of a dispute to the
Purchasers, the undisputed portion of the variance amount, if any, shall be paid
to the party entitled to receive the same within five (5) days following the
delivery of the notice by the Sellers to the Purchasers and the parties shall
jointly engage PricewaterhouseCoopers (or, if such firm is unable or unwilling
to act in such capacity, such other Big-5 accounting firm, excluding Arthur
Andersen, as may be agreed by the parties) (hereinafter, the "Auditors") and
shall direct the Auditors to make a final, binding determination of all such
disputes within forty-five (45) days of presentation to the Auditors by the
parties of the information that each such party believes supports its position
with respect to each disputed item. Such information shall be presented by each
party to the Auditors within ten (10) days following the selection thereof. The
parties will further direct the Auditors to deliver a written notice to the
Purchasers and the Sellers setting forth its determination with respect to each
disputed item. The results of such determination will be final and binding, and
the balance of the variance amount, if any, resulting from such determination
will be paid to the party entitled to receive the same within ten (10) days of
the independent accountant's notice of its determination. The parties agree that
the fees and expenses of the Auditors shall be borne in equal parts by the
Purchasers on the one hand, and the Sellers, on the other, and further agree
that in connection with the engagement of the Auditors, each of the Purchasers
and the Sellers will, if requested by the Auditors, execute a reasonable
engagement letter including customary indemnities.
2
