The Board of Directors (the Board) of U.S. Geothermal Inc.
(U.S. Geothermal) has unanimously approved a merger agreement (the merger
agreement) providing for U.S. Geothermal to be acquired by Ormat Nevada Inc., a
wholly owned subsidiary of Ormat Technologies, Inc. (Ormat). You are cordially
invited to attend a special meeting of U.S. Geothermal stockholders to be held
at 10:00 a.m., MDT, on April 19, 2018, at the corporate offices of U.S.
Geothermal at 390 E Parkcenter Blvd, Suite 250, Boise, Idaho 83706.
If the merger contemplated by the merger agreement is
completed, the holders of U.S. Geothermals common stock (common stock), other
than (i) shares owned by Ormat, OGP Holding or U.S. Geothermal (as treasury
stock or otherwise) or any of their respective direct or indirect wholly owned
subsidiaries and (ii) any shares held by a holder who does not vote in favor of
the merger and who is entitled to demand and properly demands appraisal for such
shares (the shares in clauses (i) and (ii) collectively being referred to as
excluded shares), will receive $5.45 in cash, without interest and less
applicable withholding tax, for each share of U.S. Geothermals common stock
that they own immediately prior to the effective time of the merger, unless they
exercise and perfect their appraisal rights under the Delaware General
Corporation Law.
After careful consideration, the Board approved and adopted the
merger agreement, the merger and the other transactions contemplated by the
merger agreement, and unanimously declared that the merger agreement, the merger
and the other transactions contemplated by the merger agreement are advisable,
fair to and in the best interests of the stockholders of U.S. Geothermal.
THE
BOARD OF U.S. GEOTHERMAL UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
THE ADOPTION AND APPROVAL OF THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
FOR
THE PROPOSAL TO ADJOURN OR POSTPONE THE SPECIAL MEETING, IF NECESSARY OR
APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES AND
FOR
THE
NON-BINDING ADVISORY PROPOSAL TO APPROVE COMPENSATION THAT WILL OR MAY BECOME
PAYABLE TO U.S. GEOTHERMALS NAMED EXECUTIVE OFFICERS IN CONNECTION WITH THE
MERGER.
The proxy statement attached to this letter provides you with
information about the proposed merger and the transactions contemplated by the
merger agreement, and the special meeting of U.S. Geothermals stockholders.
U.S. Geothermal encourages you to read the entire proxy statement carefully,
including the annexes and documents incorporated by reference.
You may also
obtain more information about U.S. Geothermal from documents U.S. Geothermal has
filed with the Securities and Exchange Commission.
Voting by proxy will not prevent you from voting your shares in
person if you subsequently choose to attend the special meeting.
If you hold your shares in street name, you should instruct
your bank, broker or other nominee how to vote your shares in accordance with
the voting instruction form you will receive from your bank, broker or other
nominee. Your bank, broker or other nominee cannot vote on any of the proposals,
including the proposal to adopt and approve the merger agreement, without your
instructions.
If you have any questions or need assistance voting your
shares, please contact our proxy solicitor:
To the Stockholders of U.S. Geothermal Inc.:
A special meeting of stockholders of U.S. Geothermal Inc., a
Delaware corporation (U.S. Geothermal), will be held at 10:00 a.m., MDT, on
April 19, 2018, at the offices of U.S. Geothermal at 390 E Parkcenter Blvd,
Suite 250, Boise, Idaho 83706 for the following purposes:
Only stockholders of record at the close of business on March
1, 2018 are entitled to notice of and to vote at the special meeting and at any
adjournment or postponement of the special meeting. All stockholders of record
are cordially invited to attend the special meeting in person. To ensure your
representation at the meeting in case you cannot attend, you are urged to vote
your shares by completing, signing, dating and returning the enclosed proxy card
as promptly as possible in the postage prepaid envelope enclosed for that
purpose or submitting your proxy by telephone or through the Internet. Any
stockholder attending the special meeting may vote in person even if he or she
has returned or otherwise submitted a proxy card.
Stockholders of U.S. Geothermal who do not vote in favor of
adopting and approving the merger agreement and the transactions contemplated by
the merger agreement will have the right to seek appraisal of the fair value of
their shares if the merger is completed, but only if they submit a written
demand for appraisal to U.S. Geothermal prior to the time the vote is taken on
the merger agreement and the transactions contemplated by the merger agreement
and comply with all other requirements of the Delaware General Corporation Law
(DGCL). A copy of the applicable DGCL statutory provisions is included as
Annex D to the accompanying proxy statement, and a summary of these provisions
can be found under Appraisal Rights in the accompanying proxy statement.
The adoption and approval of the merger agreement and the
transactions contemplated by the merger agreement, requires the affirmative vote
of the holders of a majority of the outstanding shares of U.S. Geothermals
common stock (common stock). For the adjournment proposal and the non-binding
advisory vote on merger-related compensation of named executive officers to be
approved, a quorum must be present and the proposal must receive the affirmative
vote of a majority of votes cast, represented in person or by proxy. The failure
to vote on the first proposal will have the same effect as a vote against the
adoption and approval of the merger agreement and the transactions contemplated
by the merger agreement.
Even if you plan to attend the special meeting in
person, please complete, sign, date and return the enclosed proxy or vote over
the telephone or the Internet as instructed in these materials as promptly as
possible to ensure that your shares will be represented at the special meeting
if you are unable to attend.
If you do attend the special meeting and wish
to vote in person, you may withdraw your proxy and vote in person. If you sign,
date and mail your proxy card without indicating how you wish to vote, your vote
will be counted as a vote
FOR
the adoption and approval of the merger
agreement and the transactions contemplated by the merger agreement,
FOR
adjourning or postponing the special meeting, if necessary or appropriate, to
solicit additional proxies and
FOR
approving the compensation that will
or may become payable to U.S. Geothermals named executive officers in
connection with the merger. If you fail to return your proxy card, the effect
will be that your shares will not be counted for purposes of determining whether
a quorum is present at the special meeting and if a quorum is present will have
the same effect as a vote against adoption and approval of the merger agreement
and the transactions contemplated by the merger agreement, but will not
affect the adjournment proposal or the non-binding advisory vote on
merger-related compensation.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN
PERSON, U.S. GEOTHERMAL ENCOURAGES YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS
POSSIBLE (1) BY TELEPHONE, (2) THROUGH THE INTERNET OR (3) BY SIGNING AND DATING
THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED.
You may revoke your proxy or change your vote at any time before it is voted at
the special meeting.
If you hold your shares in street name, you should instruct
your bank, broker or other nominee how to vote your shares in accordance with
the voting instruction form that you will receive from your bank, broker or
other nominee. Your bank, broker or other nominee cannot vote on any of the
proposals, including the proposal to adopt and approve the merger agreement and
the transactions contemplated by the merger agreement, without your
instructions.
If you are a stockholder of record, voting in person by ballot
at the special meeting will revoke any proxy that you previously submitted. If
you hold your shares through a bank, broker or other nominee, you must obtain a
legal proxy in order to vote in person at the special meeting.
If you fail to (1) return your proxy card, (2) grant your proxy
electronically over the Internet or by telephone or (3) attend the special
meeting in person, your shares will not be counted for purposes of determining
whether a quorum is present at the special meeting and, if a quorum is present,
will have the same effect as a vote AGAINST the proposal to adopt and approve
the merger agreement and the transactions contemplated by the merger agreement,
but will have no effect on the other two proposals.
U.S. Geothermal encourages you to read the accompanying proxy
statement and its annexes, including all documents incorporated by reference
into the accompanying proxy statement, carefully and in their entirety. If you
have any questions concerning the merger agreement or the transactions
contemplated by the merger agreement, the special meeting or the accompanying
proxy statement, would like additional copies of the accompanying proxy
statement or need help voting your shares of common stock, please contact U.S.
Geothermals proxy solicitor:
The Board formed a special committee of independent directors
to, among other things, review and evaluate the merger agreement, and consider
and evaluate alternatives available to the Company. No member of the special
committee or the Board had a conflict of interest with Ormat. The Board, upon
the unanimous recommendation of the special committee and after careful
consideration, by unanimous vote, has determined that it is advisable and in the
best interests of U.S. Geothermal and its stockholders to enter into the merger
agreement and to consummate the merger and the other transactions contemplated
by the merger agreement, and unanimously recommends that stockholders vote
FOR
the proposal to adopt and approve the merger agreement and the
transactions contemplated by the merger agreement,
FOR
the proposal to
adjourn or postpone the special meeting, if necessary or appropriate, to solicit
additional proxies and
FOR
the proposal to approve, on an advisory
(non-binding) basis, the compensation that may be paid or become payable to U.S.
Geothermals named executive officers in connection with the merger, and the
agreements and understandings pursuant to which such compensation may be paid or
become payable.
The special committee and the Board considered a number of
factors in making its determination that the merger and the other transactions
contemplated by the merger agreement are advisable and in the best interests of
U.S. Geothermal and its stockholders, including the following:
The special committee and the Board also identified and
considered a number of countervailing factors and risks to U.S. Geothermal and
its stockholders relating to the merger and the merger agreement, including the
following:
After taking into account all of the factors set forth above,
as well as others, including the recommendation of the special committee, our
Board concluded that the risks, uncertainties, restrictions and potentially
negative factors associated with the merger were outweighed by the potential
benefits of the merger to the stockholders.
The foregoing discussion of factors considered by the Board is
not intended to be exhaustive, but summarizes the material factors considered.
In light of the variety of factors considered in connection with its evaluation
of the merger, the Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination and recommendation. Moreover, each member of our
Board applied his own personal business judgment to the process and may have
given different weight to different factors. The Board did not undertake to make
any specific determination as to whether any factor, or any particular aspect of
any factor, supported or did not support its ultimate determination. Rather, the
Board based its recommendation on the totality of the information presented,
including thorough discussions with, and questioning of, our executive
management, financial advisor and legal counsel. It should be noted that this
explanation of the reasoning of our Board and certain information presented in
this section is forward-looking in nature and should be read in light of the
factors set forth under Cautionary Statement Concerning Forward-Looking
Information on page 14.
In connection with the merger, ROTH rendered to U.S.
Geothermals special committee its oral opinion, subsequently confirmed in
writing, that as of January 23, 2018, and based on and subject to the
assumptions made, procedures followed, matters considered and qualifications and
limitations on the scope of review undertaken by ROTH as set forth in the
written opinion, the consideration to be received by the holders of shares of
U.S. Geothermals common stock (other than excluded shares) pursuant to the
merger agreement was fair from a financial point of view to such holders.
References to common stock in this description of ROTHs opinion refer to U.S.
Geothermals common stock.
If the merger agreement is not approved by our stockholders or
if the merger is not consummated for any other reason, our stockholders will not
receive any payment for their shares of our common stock. Instead, U.S.
Geothermal will remain a public company, its common stock will continue to be
listed and traded on the NYSE American exchange (the NYSE American) and
registered under the Securities Exchange Act of 1934, as amended (the Exchange
Act). In addition, if the merger is not completed, we expect that management
will operate the business in a manner similar to that in which it is being
operated today and that our stockholders will continue to be subject to the same
risks and opportunities as they currently are, including, among other things,
general industry, economic and market conditions. If the merger agreement is not
approved by our stockholders or if the merger is not completed for any other
reason, there can be no assurance that any other transaction acceptable to us
will be offered or that our business prospects or results of operations will not
be adversely impacted. See The MergerU.S. Geothermal Without the Merger on
page 29.
In general, the merger will be a taxable transaction for
holders of shares of U.S. Geothermals common stock. For U.S. federal income tax
purposes, you will generally recognize a gain or loss measured by the
difference, if any, between the cash you receive (before reduction for any
applicable withholding tax) in the merger and your tax basis in the shares
exchanged in the merger. Gain or loss will be determined separately for each
block of your shares (i.e., shares acquired at the same cost in a single
transaction). You should consult your own tax advisor about the tax consequences
to you of the merger.
If certain criteria are satisfied, the DGCL provides you with
the right to seek an appraisal of your shares,
provided
that you perfect
those rights in the manner provided for in the DGCL. This means that if you are
not satisfied with the amount of merger consideration you are receiving in the
merger, you may be entitled to have the value of your shares determined by a
Delaware court and to receive payment based on that valuation. The amount you
ultimately receive as a dissenting stockholder in an appraisal proceeding may be
more, the same as or less than the amount you would be entitled to receive under
the terms of the merger agreement.
Shares of U.S. Geothermals common stock are listed on the NYSE
American under the trading symbol HTM. On January 23, 2018, which was the last
trading day before the announcement of the merger, U.S. Geothermals common
stock closed at $4.24 per share. On March 15, 2018, which was the last
practicable trading day before this proxy statement was printed, U.S.
Geothermals common stock closed at $5.34 per share.
Under the terms of the merger agreement, U.S. Geothermal is
generally prohibited from paying dividends on its common stock or repurchasing
shares of its common stock during the pendency of the merger.
The merger agreement contains restrictions on U.S. Geothermals
ability to solicit or engage in discussions or negotiations with, or provide
information to, any third party regarding a proposal to acquire a significant
interest in U.S. Geothermal. Notwithstanding these restrictions, under certain
limited circumstances, the Board may respond to an unsolicited competing
proposal, and terminate the merger agreement to enter into an alternative
acquisition agreement with respect to a superior proposal (as defined in the
section entitled The Merger AgreementNo Solicitation; Changes in
Recommendations) upon payment to Ormat by U.S. Geothermal of a termination fee
of approximately $3.2 million, an amount equal to 3% of the merger consideration
(the U.S. Geothermal termination fee). U.S. Geothermal is entitled to receive
from Ormat a reverse break fee of the same amount equal to 3% of the merger
consideration (the Ormat termination fee) if the merger agreement is
terminated by U.S. Geothermal due to Ormat breaching the merger agreement under
certain circumstances.
Subject to the exceptions set forth in the following paragraph,
U.S. Geothermal and Ormat have each agreed to use their commercially reasonable
efforts to take all actions necessary, proper or advisable to consummate the
transactions contemplated by the merger agreement as promptly as practicable,
including efforts needed to prepare for, obtain and maintain all necessary
regulatory and governmental approvals. This includes:
Notwithstanding anything to the contrary in the immediately
preceding paragraph, none of Ormat, merger sub or U.S. Geothermal shall be
required in order to resolve any objections asserted under antitrust laws by any
governmental authority with respect to the merger transaction to divest any of
its businesses, product lines or assets, or to take or agree to take any other
action or to agree to any limitation or restriction of any kind on its business,
operations, properties or assets.
On March 8, 2018, a purported shareholder filed a filed a
complaint and demand for jury trial related to the merger against the Company
and its directors. On March 12, 2018, a purported shareholder filed a putative
class action lawsuit related to the merger against the Companys directors. The
Company believes the claims in these complaints are without merit. Other
potential plaintiffs may file additional lawsuits challenging the proposed
transaction.
The merger agreement provides that the merger is subject to the
adoption and approval by the sole stockholder of merger sub, Ormat, of the
merger agreement and the transactions contemplated by the merger agreement.
Each partys obligation to complete the merger is subject to
the satisfaction or waiver of certain conditions, including the following:
Ormats and merger subs obligations to complete the merger are
subject to the satisfaction or waiver of additional conditions, including:
U.S. Geothermals obligations to complete the merger are
subject to additional conditions, including:
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time:
U.S. Geothermal has agreed to pay Ormat the U.S. Geothermal
termination fee if the merger agreement is terminated:
Ormat has agreed to pay U.S. Geothermal the Ormat termination
fee if the merger agreement is terminated:
Subject to certain rights to specific performance and other
equitable relief prior to the valid termination of the merger agreement, U.S.
Geothermals right to terminate the merger agreement and receive payment of the
Ormat termination fee pursuant to the terms of the merger agreement shall
constitute the sole and exclusive remedy of U.S. Geothermal and any other
related party specifically referenced in the applicable section of the merger
agreement. Similarly, subject to certain rights to specific performance and
other equitable relief prior to the valid termination of the merger agreement,
Ormats and merger subs right to terminate the merger agreement and receive
payment of the U.S. Geothermal termination fee pursuant to the terms of the
merger agreement shall constitute the sole and exclusive remedy of Ormat, merger
sub and any other related party specifically referenced in the applicable
section of the merger agreement.
The payment of any termination fees are deemed to be liquidated
damages for the efforts and resources expended and opportunities forgone while
negotiating the merger agreement and in reliance on the merger agreement and on
the expectation of the consummation of the merger.
For more information on the limitations on remedies in
connection with the merger, see The Merger Agreement Limitations on Remedies
on page 72.
Prior to any valid termination of the merger agreement, each of
the parties shall be entitled to an injunction or injunctions or any other
appropriate form of specific performance or equitable relief to prevent breaches
or threatened breaches of the merger agreement or to enforce specifically the
performance of the terms and provisions of the merger agreement in the Delaware
courts.
At or immediately prior to the effective time, each outstanding
and unexercised U.S. Geothermal stock option, whether vested or unvested, will
be canceled with the holder becoming entitled to receive from U.S. Geothermal
(as the surviving corporation in the merger and a wholly owned subsidiary of
Ormat) payment of cash, without interest and less applicable withholding tax, equal to: (a) $5.45
minus
the per-share exercise price of such stock option
multiplied
by
(b) the total number of shares subject to such stock option. For example,
if immediately prior to the effective time, you hold an outstanding and
unexercised U.S. Geothermal stock option representing the right to purchase
1,000 shares of U.S. Geothermal common stock with an exercise price of $4.00 per
share, you will be entitled to receive $1,450 (which is equal to (($5.45 -
$4.00) x 1,000)), less applicable tax withholding, as a result of the conversion
of such option in the merger. Certain option holders will be required to sign an
acknowledgement prior to and as a pre-condition to receiving payment for their
options.
You should be aware that U.S. Geothermals directors and
executive officers are subject to agreements or arrangements that may provide
them with interests in the merger that are different from, or are in addition
to, the interests of U.S. Geothermals stockholders generally. These interests
relate to change of control severance arrangements covering U.S. Geothermals
executive officers, payments to non-employee directors and indemnification of
U.S. Geothermals directors and officers by the surviving corporation following
the merger.
U.S. Geothermals directors and executive officers, who
collectively beneficially owned approximately 16.9% of U.S. Geothermals
outstanding shares as of December 31, 2017 (excluding any shares underlying
outstanding options), have each entered into an agreement to vote the shares
beneficially owned by them as of the record date in favor of the merger
agreement and the transactions contemplated thereby, subject to the terms and
conditions of such voting agreement.
As of the close of business on December 31, 2017, the directors
and executive officers of U.S. Geothermal were deemed to beneficially own
4,060,809 shares of U.S. Geothermals common stock, which represented 20.1% of
the shares of U.S. Geothermals common stock outstanding on that date.
Prior to the effective time, Ormat will appoint a paying agent
for the payment of the applicable merger consideration in exchange for shares of
common stock following the merger. If you own shares of our common stock that
are held in street name by your broker, bank or other nominee you will receive
instructions from your broker, bank or other nominee as to how to surrender your
street name shares and receive cash for those shares. If you hold certificated
shares, the paying agent will send you written instructions for surrendering
your certificates and obtaining the applicable merger consideration within three
business days after the effective time. Do not send in your stock certificates
now.
If you have additional questions about the merger or other
matters discussed in this proxy statement after reading this proxy statement,
you should contact U.S. Geothermals proxy solicitation agent:
Below are brief answers to some of the key questions that we
anticipate you might have. These questions do not address all of the material
topics covered by this proxy statement, nor do the answers include all of the
material information provided by this proxy statement. Please refer to the
complete proxy statement for additional information and before you vote.
For each of the adjournment proposal and the compensation
proposal to be approved, a quorum must be present and each proposal must receive
the affirmative vote of a majority of votes cast, represented in person or by
proxy.
You should be aware that some of U.S. Geothermals directors
and executive officers are subject to agreements or arrangements that may
provide them with interests in the merger that are different from, or are in
addition to, the interests of U.S. Geothermals stockholders generally. These
interests relate to change of control severance and retention arrangements
covering U.S. Geothermals executive officers, payments to non-employee
directors and indemnification of U.S. Geothermals directors and officers by the
surviving corporation following the merger. See the section entitled The
MergerInterests of the Companys Directors and Executive Officers in the
Merger.
If your shares of common stock are held in street name by
your broker, bank or other nominee, you should have received a proxy card and
voting instructions with these proxy materials from that organization rather
than from the Company. Your broker, bank or other nominee will vote your shares
only if you provide instructions to your broker, bank or other nominee on how to
vote. You should instruct your broker to vote your shares following the
procedures provided by your broker. Without such instructions, your shares will
not be voted, which will have the same effect as voting against the merger
agreement proposal. See The Special Meeting of the Companys Stockholders
Voting by Proxy on page 17.
The Company provides Internet proxy voting to allow you to vote
your shares online, with procedures designed to ensure the authenticity and
correctness of your proxy vote instructions. However, please be aware that you
must bear any costs associated with your Internet access, such as usage charges
from Internet access providers and telephone companies.
If you are the beneficial owner of shares of our common stock,
you are invited to attend the special meeting. However, if you are not the
stockholder of record, you may not vote these shares in person at the special
meeting, unless you obtain a legal proxy from your broker, bank or nominee
giving you the right to vote the shares at the special meeting.
If you own shares of our common stock that are held in street
name by your broker, bank or other nominee, you will receive instructions from
your broker, bank or other nominee as to how to surrender your street name
shares and receive cash for those shares following the completion of the merger.
You may also wish to consult your legal, tax and/or financial
advisors with respect to any aspect of the merger, the merger agreement or other
matters discussed in this proxy statement.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement contains forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve a number of risks and uncertainties. We
caution readers that any forward-looking statement is not a guarantee of future
performance and that actual results could differ materially from those contained
in the forward-looking statement. These statements are based on current
expectations of future events. You can find many of these statements by looking
for words like believes, expects, anticipates, intend, estimates,
may, should, will, could, plan, predict, potential, or similar
expressions in this proxy statement or in documents incorporated by reference in
this proxy statement.
Examples of these forward-looking statements include, but are
not limited to:
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the material in this proxy statement under the
following headings:
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Company Financial Projections
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Opinion of U.S. Geothermals Financial
AdvisorPresent Value of Cash Flow Analysis
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The MergerU.S. Geothermal Without the Merger
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The MergerBackground of the Merger
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managements expectations related to our
pending acquisition by Ormat;
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our business and growth strategies;
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our future results of operations;
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anticipated trends in our business;
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the capacity and utilization of our geothermal
resources;
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our ability to successfully and economically
explore for and develop geothermal resources;
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our exploration and development prospects,
projects and programs, including timing and cost of construction of new
projects and expansion of existing projects;
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the fulfillment of the respective parties
rights and obligations under our joint ventures, leases, permits and all
other agreements;
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availability and costs of drilling rigs and
field services;
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our liquidity and ability to finance our
exploration and development activities;
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our working capital requirements and
availability;
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the continued availability of tax incentive
programs for development of geothermal projects;
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our illustrative plant economics;
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our illustrative growth goals and development
and acquisition projections;
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market conditions in the geothermal energy
industry; and
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the impact of environmental and other
governmental regulation.
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These forward-looking statements are based on the current
beliefs and expectations of our management and are subject to significant risks
and uncertainties. If underlying assumptions prove inaccurate or unknown risks
or uncertainties materialize, actual results may differ materially from current
expectations and projections. The following factors, among others, could cause actual results to
differ from those set forth in the forward-looking statements:
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the significant costs associated with the merger and the
amount of management resources devoted to completing it could disrupt our
business operations;
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the possibility that the merger may not be completed and
the potential adverse impact that could have on us;
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the limitations on the conduct of our business prior to
completion of the merger under covenants in the merger agreement;
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the failure to obtain required governmental approvals;
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the failure to obtain stockholder approval of the
merger;
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the failure to obtain sufficient capital resources to
fund our operations;
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unsuccessful construction and expansion activities,
including delays or cancellations;
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incorrect estimates of required capital expenditures;
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increases in the cost of drilling and completion, or
other costs of production and operations;
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ability to obtain a power purchase agreement for a new
project;
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the enforceability of the power purchase agreements for
our projects;
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impact of environmental and other governmental
regulation, including delays in obtaining approvals or permits, or ongoing
impacts of the sequester;
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hazardous and risky operations relating to the
development of geothermal energy;
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the failure of the geothermal resource to support the
anticipated power capacity;
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our dependence on key personnel;
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changes in applicable laws, rules or regulations,
including tax incentive programs for the development of geothermal
projects;
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the potential for claims arising from geothermal plant
operations;
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general competitive conditions within the geothermal
energy industry; and
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financial market conditions.
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All subsequent written or oral forward-looking statements
attributable to us or any person acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. We do not undertake any obligation to release publicly any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this document or to reflect the occurrence of unanticipated events,
except as may be required under applicable U.S. securities law. If we do update
one or more forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other forward-looking
statements.
We refer you to our filings with the Securities and Exchange
Commission (SEC), and specifically to Item 1A-Risk Factors, of our latest
Annual Report on Form 10-K, for a discussion of certain risks that could affect
our business, financial results and results of operations. See the section
entitled Where You Can Find More Information. These risk factors could cause
our actual results and conditions to differ materially from our historical
performance or those projected in our forward-looking statements. The risks
highlighted therein are not the only ones that we face. There may be additional
risks that are not presently material or known. If any of the risks actually
occur, our business, financial condition or results of operations could be
negatively affected.
15
THE PARTIES TO THE MERGER
U.S. Geothermal Inc. (referred to in this proxy statement as
the Company, we or us or words of similar import) is in the renewable
green energy business. We were originally incorporated on March 10, 2000 in
the State of Delaware. Through our subsidiary, U.S. Geothermal Inc., an Idaho
corporation incorporated in February 2002 (Geo-Idaho, although our references
to the Company include and refer to our operations through Geo-Idaho), we are
engaged in the acquisition, development and utilization of geothermal resources
in the Western United States and the Republic of Guatemala. Geothermal energy is
the natural heat energy stored within the earths crust. In some areas of the
earth, economic concentrations of heat energy result from a combination of
geological conditions that allow water to penetrate into hot rocks at depth,
become heated, and then circulate to a near surface environment. In these
settings, commercially viable extraction of the geothermal energy and its
conversion to electricity become possible and a geothermal resource is
present. The Company constructs, manages and operates power plants that utilize
geothermal resources to produce electricity.
Our business strategy is to identify, evaluate, acquire,
develop and operate geothermal assets and resources economically, safely and
efficiently. Our management evaluates our operating projects based on revenues
and expenses and our projects under development, based on costs attributable to
each project. We examine different factors when assessing projects at different
stages of development or potential acquisitions, such as the internal rate of
return of the investment, technical and geological matters and other relevant
business considerations.
U.S. Geothermals executive offices are located at 390 E
Parkcenter Blvd, Suite 250, Boise, Idaho 83706. U.S. Geothermals telephone
number is (208) 424-1027.
Ormat Nevada Inc. (referred to in this proxy statement as
Ormat), a Delaware corporation incorporated on November 12, 1991, is a wholly
owned subsidiary of Ormat Technologies, Inc., also a Delaware corporation,
incorporated on September 15, 1994. Ormat Technologies, Inc., based in Reno,
Nevada, is a leading vertically integrated company that is currently primarily
engaged in the geothermal and recovered energy power business. Ormat
Technologies, Inc. designs, develops, builds, sells, owns, and operates clean,
environmentally friendly geothermal and recovered energy-based power plants,
usually using equipment that is designed and manufactured in-house. Ormat Nevada
Inc. operates and maintains geothermal power plants and recovered energy-based
power plants in the United States. It also recently entered the energy storage,
demand response and energy management markets following its 2017 acquisition of
Viridity Energy Inc.
Ormats executive offices are located at 6225 Neil Road, Reno,
Nevada 89511. Ormats telephone number is (775) 356-9029.
OGP Holding Corp. (referred to in this proxy statement as
merger sub) is wholly owned subsidiary of Ormat, whose principal executive
offices are located at 6225 Neil Road, Reno, Nevada 89511. Merger subs
telephone number is (775) 356-9029. Merger sub was formed solely for the purpose
of facilitating Ormats acquisition of U.S. Geothermal.
THE SPECIAL MEETING OF THE COMPANYS STOCKHOLDERS
Time, Place
and Purpose of the Special Meeting
The special meeting will be held at 10:00 a.m., MDT on April
19, 2018, at the offices of U.S. Geothermal, at 390 E Parkcenter Blvd, Suite
250, Boise, Idaho 83706. The purpose of the special meeting is to consider and
vote on the proposal to adopt and approve the merger agreement and the
transactions contemplated by the merger agreement, and the other proposals
described in this proxy statement.
The Board, by unanimous vote, has
determined that it is advisable and in the best interests of U.S. Geothermal and
its stockholders to enter into the merger agreement and to consummate the merger
and the other transactions contemplated by the merger agreement,
and unanimously recommends that stockholders vote
FOR
the proposal to adopt and approve the merger agreement
and the transactions contemplated by the merger agreement,
FOR
the proposal to adjourn or postpone the special
meeting, if necessary or appropriate, to solicit additional proxies and
FOR
the proposal to approve, on an advisory (non-binding)
basis, the compensation that may be paid or become payable to U.S. Geothermals
named executive officers in connection with the merger, and the agreements and
understandings pursuant to which such compensation may be paid or become
payable.
16
Who Can Vote at the Special Meeting
Only holders of record of U.S. Geothermals common stock, as of
the close of business on March 1, 2018, which is the record date for the special
meeting, are entitled to receive notice of and to vote at the special meeting.
If you own shares that are registered in the name of someone else, such as a
broker, you need to direct that person to vote those shares or obtain an
authorization from them and vote the shares yourself at the meeting. On the
record date, there were 19,494,566 shares of common stock outstanding.
Quorum; Vote Required
For purposes of transacting business at the special meeting,
one-third of the voting power represented in person or by proxy of the
outstanding shares of common stock will constitute a quorum. Once a share is
represented at the special meeting, it will be counted for the purpose of
determining a quorum and any adjournment of the special meeting, unless the
holder is present solely to object to the special meeting. Votes FOR and AGAINST
and abstentions will be counted for purposes of determining the presence of a
quorum. However, if a new record date is set for an adjourned meeting, a new
quorum will have to be established.
The adoption and approval of the merger agreement and the
transactions contemplated by the merger agreement requires U.S. Geothermal to
obtain the U.S. Geothermal stockholder approval. The U.S. Geothermal stockholder
approval requires the affirmative vote of a majority of the outstanding shares
of common stock. Because the required votes of U.S. Geothermals stockholders
are based on the number of outstanding shares of common stock with respect to
the U.S. Geothermal stockholder approval, and not based on the number of shares
represented in person or by proxy at the special meeting, failure to submit a
proxy or to vote in person will have the same effect as a vote AGAINST the
merger agreement proposal, but, assuming a quorum is present, will have no
effect on the adjournment proposal or on the compensation proposal. A vote to
abstain or a broker non-vote will have the same effect as voting against the
merger agreement proposal, but will have no effect on the adjournment proposal
or the compensation proposal.
Approval of the adjournment proposal and the compensation
proposal will each require the affirmative vote of holders of a majority of the
votes cast, represented in person or by proxy.
If your shares of common stock are held in street name by
your broker, bank, or other nominee, you should instruct your broker, bank or
other nominee how to vote your shares using the instructions provided by your
broker, bank or other nominee. Under applicable regulations, brokers, banks or
other nominees who hold shares in street name for customers may not exercise
their voting discretion with respect to non-routine matters such as the approval
of the merger agreement proposal. As a result, if you do not instruct your
broker, bank, or other nominee to vote your shares of common stock, your shares
will not be voted, which will have the same effect as voting against the merger
agreement proposal.
Voting by Proxy
This proxy statement is being sent to you on behalf of the
Board for the purpose of requesting that you allow your shares of our common
stock to be represented at the special meeting by the persons named in the
enclosed proxy card. All shares of our common stock represented at the special
meeting by properly executed proxy cards, voted over the telephone or voted over
the Internet will be voted in accordance with the instructions indicated on
those proxies. If you sign and return a proxy card without giving voting
instructions, your shares will be voted as recommended by the Board.
The
Board recommends a vote
FOR
adoption and approval of the
merger agreement and the transactions contemplated by the merger agreement,
FOR
the proposal to adjourn or postpone the special
meeting, if necessary or appropriate, to solicit additional proxies and
FOR
the proposal to approve, on an advisory (non-binding)
basis, the compensation that may be paid or become payable to U.S.
Geothermals named executive officers in connection with the
merger, and the agreements and understandings pursuant to which such
compensation may be paid or become payable.
17
You may revoke your proxy at any time before the vote is taken
at the special meeting. To revoke your proxy, you must either advise U.S.
Geothermals Corporate Secretary in writing, deliver a proxy dated after the
date of the proxy you wish to revoke or attend the special meeting and vote your
shares in person. Attendance at the special meeting will not by itself
constitute revocation of a proxy. If you have instructed your broker, bank, or
other nominee to vote your shares, you must follow the directions provided by
your broker, bank or other nominee to change those instructions.
Householding
The SEC has adopted rules that permit companies and
intermediaries such as brokers to satisfy delivery requirements for proxy
statements with respect to two or more stockholders sharing the same address by
delivering a single proxy statement addressed to those stockholders. This
process, which is commonly referred to as householding, potentially provides
extra convenience for stockholders and cost savings for companies. Although we
do not household for our registered stockholders, some brokers household U.S.
Geothermal Inc. proxy materials, delivering a single proxy statement to multiple
stockholders sharing an address unless contrary instructions have been received
from the affected stockholders. Once you have received notice from your broker
that they will be householding materials to your address, householding will
continue until you are notified otherwise or until you revoke your consent. If,
at any time, you no longer wish to participate in householding and would prefer
to receive a separate proxy statement, or if you are receiving multiple copies
and wish to receive only one, please notify your broker. We will deliver
promptly upon written or oral request a separate copy of our annual report to a
stockholder at a shared address to which a single copy was delivered. For copies
of the proxy statement, stockholders should write to U.S. Geothermal Inc., 390 E
Parkcenter Blvd, Suite 250, Boise, Idaho 83706, or call (208) 424-1027.
Solicitation of Proxies
U.S. Geothermal will pay all of the costs of this proxy
solicitation. In addition to soliciting proxies by mail, directors, officers and
employees of U.S. Geothermal may solicit proxies personally and by telephone,
email or otherwise. None of these persons will receive additional or special
compensation for soliciting proxies. U.S. Geothermal will, upon request,
reimburse brokers, banks and other nominees for their expenses in sending proxy
materials to their customers who are beneficial owners and obtaining their
voting instructions.
U.S. Geothermal has engaged Georgeson Inc. (Georgeson) to
assist in the solicitation of proxies for the special meeting and will pay
Georgeson a fee of approximately $10,000, plus reimbursement of out-of-pocket
expenses. The address of Georgeson is 1290 Avenue of the Americas, 9th Floor,
New York, NY 10104, Shareholders, Banks and Brokers. You can call Georgeson
toll-free at 800-248-3170.
18
THE MERGER
The discussion of the merger in this proxy statement is
qualified by reference to the merger agreement, which is attached to this proxy
statement as Annex A. You should read the merger agreement carefully in its
entirety.
Background of the Merger
To maximize value for its stockholders, U.S. Geothermal
regularly and in the ordinary course of its business evaluates strategic
alternatives, including opportunities for potential strategic transactions. In
connection with its evaluation of potential strategic transactions, U.S.
Geothermal has met from time to time with other companies in its sector, to
evaluate potentially complementary acquisitions and other strategic investments
and alternatives.
U.S. Geothermal also explores, from time to time at the
direction of its Board, larger and more transformative strategic alternatives.
For example, in July 2015, U.S. Geothermal was approached by Ormat with an
unsolicited expression of interest in the company and the parties entered into a
nondisclosure agreement for the purpose of exploring a potential transaction.
The parties were unable to agree upon terms for a transaction, but Ormat
remained subject to a standstill until April 15, 2016 which provided that they
could not attempt to acquire or take control of U.S. Geothermal without consent
of the Board. Following the conclusion of the negotiations with Ormat, in August
2015 U.S. Geothermal established a special committee and worked with a financial
advisor to review its strategic alternatives, including a potential sale of the
company. During this process, the special committee and the Board, with input
from advisors, reviewed the potential transaction structures and pricing, tax
implications and complexity of the potential structures and ultimate value that
would be received by stockholders. Following a lengthy process, the company
formally concluded this process in March 2016. Upon the recommendation of the
special committee in that process, the Board had determined that continuing to
execute the companys strategic growth plan was the best path to maximizing long
term stockholder value.
Commencement of the Process and Establishment of the Special
Committee
In July 2016, U.S. Geothermal was approached by Party A, a
foreign strategic party, regarding a potential investment in U.S. Geothermal.
The inquiry from Party A was unsolicited. U.S. Geothermal entered into a
nondisclosure agreement with Party A in the fall of 2016. Representatives of
Party A visited the Neal project site during the Fall of 2016. During the weeks
following Party As due diligence site visits, members of management had
multiple calls with representatives of Party A regarding due diligence matters.
In late November 2016, U.S. Geothermal received from Party A a proposal letter
which included a nonbinding indication of interest to purchase the outstanding
shares of the companys common stock within a range of $5.30 to $5.93 per share.
On November 22, 2016, the date of the proposal letter, the closing price for the
companys common stock was $4.11.
While the Board had ended the prior process earlier in 2016,
given the unsolicited proposal from Party A, the Board met on December 1, 2016
and concluded that it would be in the best interests of U.S. Geothermal and its
stockholders to reevaluate potential transactions. The Board reviewed the offer
from Party A, discussed potential interested parties based on the prior process
and the establishment of a special committee for the new process. The special
committee was formed of three independent directors consisting of Paul Larkin,
James Pappas and Randy Hill. Mr. Hedayat, another independent director, joined
the special committee following his appointment to the Board in February
2017.
In late November and early December 2016, Mr. Gilles, U.S.
Geothermals CEO at the time, made contact with four public and private
geothermal companies and one private equity fund. These parties had each
expressed a similar unsolicited interest in a potential transaction but, unlike
Party A, had not provided any indication of price.
On December 5, 2016, the special committee met to discuss the
proposal from Party A, the role of the special committee in the negotiations, as
well as the retention of a financial advisor. Dorsey & Whitney, counsel to
the company, presented information to the special committee regarding duties and
process with respect to potential strategic transactions. Since Party A was a
foreign entity, the special committee discussed the impact of both
Hart-Scott-Rodino and CFIUS on any transaction timing, as well as potential
concerns relating to currency control regulations. While the special committee
did not conduct a formal valuation process, the members of the special committee
were informed by the prior process earlier in the year as well as its views of
U.S. Geothermals operations and prospects. Finally, the special committee
concluded that the range suggested by Party A was low.
19
The special committee members discussed a roster of potential
financial advisors and determined there were two preferred choices based on
their credentials, reputation and the needs of the special committee. Prior to
the next meeting of the special committee and at the request of the special
committee, Mr. Pappas interviewed both as potential financial advisors.
On December 13, 2016, Messrs. Larkin, Gilles and Glaspey met
with representatives of Party A to discuss the process the Board had undertaken,
and Party A requested access to the data site for commencement of due diligence.
Mr. Larkin indicated to Party A that an offer in the range of $6.00 to $6.50
would be more compelling to the special committee.
On December 15, 2016, the special committee met and determined to engage ROTH Capital Partners (“ROTH”) as its financial advisor. The special committee noted ROTH’s experience working with independent power producers, helping to sell public companies, transactions with foreign buyers of US based companies, and ROTH’s familiarity with the Company from providing some minor general financial advisory services to the Company in 2016. With input from Dorsey & Whitney, the special committee evaluated any potential conflicts of interest that ROTH might have, and discussed the terms of the ROTH engagement letter and fee structure, as well as the role the special committee desired for ROTH. The special committee also discussed the formal process in which U.S. Geothermal had engaged less than a year earlier to identify potential bidders.
The special committee negotiated the terms of the engagement with ROTH over the next two weeks. On January 9, 2017, the Board met to discuss, among other things, the status of discussions with potential parties, the authority of the special committee and approval of its charter, as well as the special committee’s choice of ROTH as its financial advisor. Following the meeting, ROTH was engaged as the financial advisor to the special committee on January 9, 2017.
On January 13, 2017, the company received a written,
non-binding proposal from Party B, a foreign strategic party, for the purchase
of certain of the companys subsidiaries. Later that day, the special committee
met with its legal and financial advisors to discuss the terms of the proposal
letter from Party B and potential advantages and disadvantages of different
types of transaction structures and potential regulatory challenges. Following
the special committee meeting, the company received a written, non-binding
proposal from Party C, a foreign fund, by which Party C would purchase the
companys shares at a non-binding price of $6.50 per share. The closing price
for the companys common stock on January 13, 2017 was $4.65 per share.
On January 16, 2017, the special committee met to discuss, with
input from legal and financial advisors, the terms of the proposal from Party C,
the potential interested parties, the process and a course of future
communications with the bidders to elicit additional information or updated bids
for further consideration by the special committee.
On January 17, 2017, Mr. Pappas spoke with a representative of
Party B to determine whether it would modify its proposal to become a cash
purchase for all of the company shares. While considering the request to modify
its proposal, Party B sought more information regarding managements view of the
prospect for PPAs for the development assets.
On January 18, 2017, members of the special committee spoke
with representatives of Party A and Party C, and in each call, indicated that
the special committee considered the current bids to be inadequate. Party C was
unwilling to consider increasing its current bid price until it met with company
management.
On January 23, 2017, the special committee, along with its
legal and financial advisors, met to discuss updates regarding, and feedback
from, potential interested parties.
On January 27, 2017, the special committee met, along with Mr.
Hedayat, a nominee to the Board and Dorsey & Whitney, to discuss the
background of the prior sale process that ended in March 2016 as well as the
current process and interested parties. The special committee discussed the
plans for the company, its projects and company leadership in light of the
different proposals.
During the week of January 30th, Party C executed a
nondisclosure agreement, and representatives of Party C met with members of
management to conduct due diligence.
20
On February 15, 2017, the special committee, with Mr. Hedayat
and a representative from Dorsey & Whitney and ROTH also in attendance,
discussed the status of the various bidders, including Party C who continued to
conduct due diligence. Mr. Pappas noted that Party D wanted a meeting. There was
an extended conversation of the different parties, whether any particular
structures had been considered with respect to some of the parties, and the pace
of the process. Dorsey & Whitney advised the special committee concerning
the fiduciary duties of directors in the context of a sale of the company and
noted the importance of independent director oversight, particularly for
transactions in which members of the companys management may be employed by the
acquirer. As part of its discussions of its fiduciary duties, the special
committee discussed and concluded that it did not consider the sale of the
company inevitable at this time.
On March 2, 2017, representatives of ROTH met with Party Ds
financial advisors to discuss their potential bid.
On March 3, 2017, the special committee was informed by Party A
that while its prior proposal remained in place, it would not be increasing its
bid as requested by the special committee.
On March 6, 2017, the special committee, with Mr. Hedayat and
representatives from Dorsey & Whitney and ROTH also in attendance, met to
discuss the current status of the potential bidders, including Party D who was
expected to submit a proposal, and Party C who indicated that it was not
interested in moving forward.
On March 15, 2017, Party D submitted a proposal for a share
exchange transaction using an equity valuation of the company of $120 million
(approximately $5.66 per share). This proposal from Party D was later replaced
with a joint proposal with Party E.
On March 16, 2017, Mr. Larkin had a call with a representative
of Ormat to discuss Ormats potential interest in U.S. Geothermal. The
representative from Ormat indicated that Ormat would need to conduct additional
due diligence before formalizing any offer and would require an exclusivity
agreement, but that their current indicative range for the whole company was $90
to $95 million (approximately $4.25 to $4.48 per share).
In mid-April, Party B informed Mr. Pappas that it was
withdrawing its proposal.
During April and May, members of the special committee held
discussions with various parties who expressed an interest in a potential
transaction with U.S. Geothermal.
On May 9, 2017, Messrs. Larkin, Pappas and Hedayat met with
representatives of Ormat (Isaac Angel, Doron Blachar and Rinat Gazit) to discuss
terms on which Ormat might be willing to acquire the company. Ormat agreed to
provide a proposal by the end of May, 2017. Following that meeting, various
representatives of Ormat and the company engaged in telephonic and electronic
communications concerning possible terms for that proposal.
In mid-May, 2017, Mr. Gilles was contacted by the
representatives for Party A, who informed him that the prior bid may not be the
final offer.
In late May, Mr. Pappas discussed a potential bid with Party F,
and Mr. Hedayat had further conversations with Ormat and joint bidder Party D/E.
On May 23, 2017, the special committee met, along with its
legal advisor, to discuss the status of discussions with the various parties as
well as potential transaction structures.
During late May and early June, Mr. Hedayat held discussions
with representatives from Ormat on the potential price range with Ormat, the
factors impacting the price range and how Ormat valued the development projects.
On June 1, 2017, there was a video conference call during which
representatives of Ormat (Doron Blachar and Rinat Gazit) presented Ormats
analysis and some preliminary terms for the proposed acquisition to members of
the special committee. No agreement on valuation or price was reached during
that call. The Ormat representatives informed the special committee that Ormat
would need access to non-public information and further due diligence to
determine what, if any, price Ormat might pay for U.S. Geothermal as well as a
board approval for any transaction.
In early June, the special committee
requested that the remaining active parties, including Party A and Party D/E,
submit their final proposals by mid-June.
21
On June 8, 2017, the Board met for an update from the special
committee. Mr. Hedayat updated the Board on his discussions with Ormat and
representatives for Party A as well as the potential proposal from Party D/E.
Mr. Glaspey provided an update on another party, but did not know if any
proposal would be received. Mr. Pappas provided an update on his call with Party
F, but was uncertain if a proposal would be received.
On June 9, 2017, a representative of Party G contacted Mr.
Larkin regarding its potential interest. In mid-June, Mr. Hedayat continued to
meet with Ormat regarding price, the ability to undertake certain projects under
consideration and the length of the exclusivity period being requested.
On June 9, 2017 representatives of U.S. Geothermal sent Ormat
proposed terms for a letter of intent for the acquisition of the company by
Ormat. Ormat, U.S. Geothermal and their respective counsel began negotiating the
terms and conditions for a letter of intent and nondisclosure agreement.
On June 14, 2017, the special committee received a joint
proposal from Party D/E for an acquisition of assets for cash consideration of
$90 million plus the assumption of outstanding debt. The special committee
informed Party D/E that it considered the consideration to be inadequate. The
next day, the special committee received a revised offer which increased the
cash consideration to $120 million. The special committee noted that this
proposal lacked the required financial information to support its consummation,
but determined to pursue discussions with D/E for the purpose of increasing
shareholder value.
On June 16, 2017, Ormat submitted a proposal to purchase the
companys shares at a range of $5.11 to $5.80 per share. The closing price for
the companys common stock on June 15, 2017 was $4.06. Counsel for the parties
continued negotiating a nondisclosure agreement.
Following receipt of the updated proposal from Party D/E, the
special committee worked with management and its advisors to analyze the
ultimate benefit to stockholders resulting from the asset purchase proposal from
Party D/E. In addition, the special committee conducted analysis on where in the
range the potential final bids might lie based on the special committees views
on the contingencies in the proposals, as well as what the impact would be to
shareholders if the assets were sold resulting in a microcap public company
holding limited exploration assets and cash. Mr. Hedayat spoke to
representatives of Party D/E to encourage them to present a proposal to acquire
the shares of U.S. Geothermal, rather than its assets. On June 20, 2017, Party
D/E submitted a revised proposal to acquire the shares of U.S. Geothermal at a
proposed price of $6.00 per share. The closing price for the companys common
stock on July 20, 2017 was $4.51.
Party A did not submit a revised proposal to the special
committee by mid-June, but the prior proposal with a range of $5.30 to $5.93 per
share had not been withdrawn. Members of the special committee regarded the
probability of completion of a transaction with Party A to be lower compared to
Ormat or Party D/E.
On June 20, 2017, the Board met for an update from the special
committee regarding the status of discussions with Ormat, Party D/E, and Party G
and the current proposals received by the special committee. ROTH discussed
their analysis of the offers received from Party D/E and Ormat. On a per share
basis, the proposal from Ormat included a range of $5.11 to $5.80 as compared to
the offer from Party D/E which included a proposed price of $6.00 per share. The
ROTH analysis also included the asset acquisition by Party D/E, but this
structure was not favored by the Board or the special committee. The Board
discussed the transaction process and its fiduciary duties, with input from
Dorsey & Whitney.
During June 20-22, 2017, members of the special committee held
discussions with each of Ormat, Party D/E and Party G.
On June 22, 2017, the Board met for a further update on
discussions with Ormat, Party D/E and Party G. Following the Board meeting,
Party D/E submitted a revised proposal with a proposed price of $6.25 per share.
The closing price for the companys common stock on June 21, 2017 was $3.90.
On June 24, 2017, the special committee and the Board met to
discuss the proposal from Party D/E, with input from Dorsey & Whitney and
ROTH. The special committee unanimously recommended, and the Board approved,
moving forward with a sale process with Party D/E and negotiating and entering
into an exclusivity agreement.
22
On June 25, 2017, Mr. Hedayat spoke with Ormat concerning price
and other terms of its proposal. Ormat proposed revising the bid to eliminate
the price range in favor of a $5.80 per share price, but did not change other
terms proposed by Mr. Hedayat. The closing price for the companys common stock
on June 23, 2017 was $3.97. Mr. Hedayat informed Ormat that U.S. Geothermal
planned to continue discussions with another preferred bidder.
In late June, the terms of the exclusivity agreement with Party
D/E were being discussed between the parties as well as clarifications to the
proposal letter. Mr. Larkin was continuing discussions with Party G.
On July 3, 2017, the special committee received a proposal from
Party G with a base price of $6.75 per share and the potential for an additional
$0.25 under certain circumstances. The special committee met that day to discuss
the proposal. Representatives from management, Dorsey & Whitney and ROTH
attended. Mr. Larkin led a discussion of the offer letter terms, including
issues relating to CFIUS, the restricted cash balance requirements in the offer
letter, and reserve/resource requirements for the various projects. The special
committee also discussed the ongoing communications with Party D/E. Later than
day, Messrs. Pappas and Truelock, a representative of ROTH, contacted Party D/E
to explain that the fiduciary duties of the directors required their
consideration of a new offer, but that the special committee was willing to
receive additional offers from Party D/E. Mr. Larkin sought additional financial
information from Party G due to concerns regarding currency controls and Mr.
Gilles provided additional detailed information to Party G regarding the
resource levels at each project. Counsel to Party G and U.S. Geothermal began
negotiating the exclusivity agreement.
On July 5, 2017, Party G submitted a revised proposal
reflecting slightly modified provisions for the potential increase to the
purchase price per share of $0.25 per share. Mr. Hedayat spoke with Party D/E to
discuss the receipt of a higher competing bid in order to give Party D/E the
opportunity to increase the pricing of their bid. The special committee received
additional information from Party G regarding its ability to finance the
transaction.
On July 5, 2017, the special committee met with representatives
of Dorsey and ROTH to discuss Mr. Hedayats meeting with Party D/E. The special
committee discussed Party D/E and Party G and Party Gs ability to finance a
potential transaction.
Exclusivity with Party G
On July 6, 2017, the special committee, along with its legal
and financial advisors, and the Board held meetings regarding the Proposal from
Party G. Following recommendation by the special committee and approval by the
Board, the company entered into the exclusivity agreement with Party G.
On July 14, 2017, Party G informed Mr. Larkin that additional
foreign regulatory approvals would be required prior to closing a potential
transaction.
On July 16, 2017, members of the special committee, along with
its legal and financial advisors, discussed the terms of a draft merger
agreement as well as the new information from Party G and its impact on the
risks associated with completion of the transaction. Later that day, Messrs.
Larkin and Hill spoke with a representative of Party G to request that a reverse
break fee be escrowed as a result of the additional regulatory approvals. Party
G refused the request for a reverse break fee and postponed further due
diligence. Party G later agreed to meet on July 18
th
to discuss
commercial terms, but postponed the site visits.
On July 17, 2017, the special committee had a meeting with
representatives of Dorsey & Whitney and ROTH to discuss the recent
developments with Party G.
On July 18, 2017, representatives from Party G and members of
the special committee and management met in Boise, Idaho to discuss the
commercial terms of the transaction.
On July 24, 2017, Dorsey & Whitney distributed an initial
draft of the merger agreement to counsel for Party G.
In late July, representatives from Party G resumed their due
diligence and conducted site visits.
On August 3, 2017, Party G informed Mr. Larkin of their
withdrawal from the process because, in Party Gs view, the companys
development assets were not what Party G desired. Party G indicated that it had
concerns regarding San Emidio 2, Geysers and El Ceibillo. Later that day, the
special committee met to discuss the withdrawal of Party G. The special committee directed Messrs. Hedayat and Pappas to
contact Party F and Party D/E to determine whether those parties had any
continued interest in the company. Those contacts were made following the
meeting. Party Gs counsel confirmed to Dorsey & Whitney that the
exclusivity agreement was terminated. Due to the lack of information from Party
F regarding its source of financing or partner in a potential transaction, the
special committee had significant concerns relating to the probability of
completion of a transaction with Party F and did not pursue discussions further.
23
Exclusivity with Party D/E
On August 7, 2017, the special committee recommended, and the
Board approved, entering into an exclusivity agreement with Party D/E for a
period of 30 days. The exclusivity agreement was entered into and due diligence
commenced.
On August 9, 2017, Mr. Hedayat met with the representatives of
Party E to discuss valuation of U.S. Geothermal projects, the relationship
between Party D and Party E and other matters.
On September 5, 2017, the exclusivity period was extended for
an additional 7 days until September 13, 2017. On September 13, 2017, the
special committee was informed that Party D/E may be unable to confirm the
initially proposed price of $6.25 based on their view of the tax
equity/financing and pricing assumptions at San Emidio 2 and Geysers. The
special committee sent a notice regarding the termination of the exclusivity
period.
On September 21, 2017, the special committee was informed that
Party D and Party E had ended their partnership relating to the joint proposal.
During discussions with Party E throughout the process, Party Es interest in
U.S. Geothermal related to its operating assets and it expressed no interest in
acquiring the entire company absent a partner such as Party D. The special
committee had previously determined that a sale of only a portion of the assets
of U.S. Geothermal was not the preferred structure or most beneficial to
stockholders. For this reason, the special committee did not pursue a separate
sale of the operating assets to Party E.
Exclusivity with Ormat
On September 22, 2017, Party D submitted a proposal without
Party E which contained a proposed price per share of $5.40 which could be
increased by an additional $0.85 per share assuming specified speculative
milestones were met prior to closing. The closing price for the companys common
stock on September 22, 2017 was $3.94.
In mid-September 2017, Mr. Hedayat communicated with Ormat to
discuss whether it had interest in renewing its proposal.
On September 25, 2017, the special committee, along with its
legal and financial advisors, met to discuss the proposal received from Party D
and determined that it was inadequate, no longer had the support of a strong
financial partner in Party E and was unlikely to trigger an increase in price
per share.
On September 28, 2017, the special committee and the Board each
met, with representatives of Dorsey & Whitney and ROTH in attendance, to
discuss the outstanding bids with Ormat and Party D. The special committee
determined to go back to Party D to give them another opportunity to put
together an offer that had no financing contingency and a higher price. The
special committee discussed the terms of an exclusivity agreement with Ormat.
The special committee recommended to the Board, and the Board authorized, that
the Company pursue a transaction with Ormat as outlined in their initial
proposal with a 45 day exclusivity agreement.
In late September, members of the special committee believed
that the process might be winding down and discussed U.S. Geothermals
operations and future as a stand-alone company. Mr. Hedayat reviewed operations
and cash flows for U.S. Geothermal assuming it remained a stand-alone company,
the development projects remained undeveloped (although it included a
liquidation value of $10 million for the development portfolio in aggregate) as
well as a number of other assumptions regarding costs and anticipated cash flow.
This review, which was discussed with the members of the executive committee of
the Board, placed a potential value (not trading price) of the outstanding
shares at the end of 2018 of approximately $5.85 per share. The executive
committee consists of Mr. Glaspey (the Interim CEO), as well as Messrs. Hill,
Pappas and Hedayat (three of the four members of the special committee).
24
From late September through late October, Dorsey & Whitney
and Norton Rose Fulbright negotiated the terms of the nondisclosure agreement
and exclusivity agreement between Ormat and U.S. Geothermal.
On October 3, 2017, the special committee received (i) a
written proposal from Ormat to acquire the company at an indicative price of
$5.75 per share of common stock and (ii) written confirmation from Party D of
its September 22 proposal ($5.40 which could be increased by an additional $0.85
per share assuming specified speculative milestones were met prior to closing)
without any price increase. The closing price for the companys common stock on
October 3, 2017 was $4.06.
On October 4, 2017, the special committee met to discuss the
two proposals with input from Dorsey & Whitney.
The Board continued to consider the companys alternatives and
its strategy to best build stockholder value should the company not proceed with
a sale transaction. As a result, during October 10-11, members of the executive
committee of the Board met in Boise for meetings regarding the companys
strategy going forward as a stand-alone company. A focus of the executive
committee was the pricing strategy used by U.S. Geothermal when bidding for
PPAs. During mid-October, U.S. Geothermal adopted a revised, more aggressive
pricing strategy when submitting bids.
During the first two weeks of October, 2017, Messrs. Pappas and
Hedayat held multiple discussions with Ormat regarding its assumptions in the
proposal letter and Ormats desire for a termination fee and to be reimbursed
for expenses during the due diligence period if certain events occurred. On
October 13, 2017, Mr. Hedayat sent Ormat proposed forms of a proposal letter and
exclusivity agreement that had been prepared by Dorsey & Whitney.
On October 20, 2017, Party D submitted a revised proposal which
contained an indicative bid of $5.60 per share with potential to increase the
per share price to $6.25 based on the occurrence of specified speculative events
prior to close. The closing price for the companys common stock on October 20,
2017 was $3.91. On October 20 and 21, 2017, the special committee received a
revised proposal and draft of the exclusivity agreement for Ormat from Norton
Rose Fulbright.
On October 20, 2017, the special committee discussed the
receipt and terms of the revised bid from Party D. Dorsey & Whitney reviewed
the fiduciary duties of directors in the context of a sale of the company. In
determining to proceed with Ormat, the special committee noted that the firm
price in the Party D proposal was less than the Ormat proposal. The special
committee discussed the events that would trigger the contingent price increase
from $5.60 to $6.25 in the Party D offer and determined those events were highly
speculative. Ultimately, the special committee concluded that Party Ds bid was
economically inferior and less credible than the Ormat offer due to concerns
over Party Ds ability to finance payment of the purchase price and Party Ds
need to complete due diligence. The special committee also discussed the initial
bid received in November 2016 from Party A with a price range of $5.30 to $5.93,
as that proposal remained outstanding. The proposal from Party A would have been
subject to increased U.S. regulatory requirements to complete the transaction,
such as CFIUS, and could have also been subject to foreign currency control
regulations. In addition, the midpoint of Party As price range was less than
Ormats offer. As a result, and due to the special committees confidence in
Ormats ability to complete the transaction, the special committee concluded
that the Ormat offer remained superior to the offer from Party A.
On October 20, 2017, management informed the special committee
that the required capital expenditures for certain expansion projects were
increasing. This information, as well as recent maintenance issues, caused the
members of the special committee to place less value on the expansion projects
and its pricing expectations in any potential offer.
On October 22, 2017, the special committee met to discuss the
revised proposal and exclusivity agreement sent by Ormat, with input from its
legal advisor. The special committee concluded that aspects of the proposal
needed clarity and that the exclusivity agreement was far too restrictive for an
agreement of this nature. The special committee requested input from management
regarding the terms of the exclusivity agreement.
Over several days in late October, Dorsey & Whitney and
Norton Rose Fulbright discussed the language in the proposal letter and
negotiated the terms of the exclusivity agreement, particularly with respect to
the limited expense reimbursement provisions.
25
On October 27, 2017, Dorsey & Whitney received an
unsolicited inquiry from counsel to a private equity fund. Following discussions
among special committee members, the special committee determined not to engage
with a new party due to the current status of discussions with Ormat and the
highly preliminary nature of the inquiry. Later that day, copies of the Ormat
proposal and exclusivity agreement were distributed to the Board.
On October 30, 2017, Ormat submitted its revised non-binding
proposal to acquire U.S. Geothermal at a price per share of $5.75, and Ormat and
U.S. Geothermal entered into a nondisclosure agreement and an exclusivity
agreement. The exclusivity period was for 40 days, with two automatic extensions
for 10 days each under certain circumstances. Following the execution of the
nondisclosure and exclusivity agreement, Ormat and its accounting, legal and tax
advisors were given access to an electronic document data site and commenced due
diligence efforts. Counsel for Ormat and U.S. Geothermal discussed the structure
of the transaction, timing and the required regulatory approvals.
Negotiations with Ormat
On November 2, 2017, Dorsey & Whitney provided Norton Rose
Fulbright a draft of the merger agreement.
In early November 2017, Mr. Hedayat had discussed with Ormat
the commercial terms for the transaction and potential timing of a definitive
agreement.
During November 13-16, 2017, representatives of Ormat met in
Boise, Idaho with members of the special committee and management of U.S.
Geothermal to discuss personnel issues, among other items, to participate in
management presentations concerning various financial, operational other matters
and to conduct site visits as part of Ormats due diligence process.
On November 14, 2017, U.S. Geothermal was notified that a
recent PPA bid it had submitted for a PPA relating to Geysers, one of its
development projects, was not accepted. For this particular RFP, geothermal and
biomass projects were excluded because they were not zero emission resources.
Due to the inability to enter into a PPA relating to Geysers, development at
Geysers would likely be delayed which would result in increased costs related to
that development. This delay, combined with increased capital costs at an
expansion project and potentially increased transmission costs at San Emidio
Phase II, also caused members of the special committee to lower the value it
placed on U.S. Geothermals expansion and development projects.
On November 29, 2017, the special committee met and with input
from Dorsey & Whitney discussed the previously proposed schedule for
retention payments for certain non-executive level employees and determined that
it would be in the best interests of U.S. Geothermal to establish a retention
bonus pool of approximately $0.8 million in order to retain employees during any
merger process.
On December 11, 2017, Norton Rose Fulbright distributed a draft
of the merger agreement. The members of the special committee and management
discussed the terms of the merger agreement among themselves prior to the
meetings in New York planned for later that week.
On December 13, 2017, Messrs. Larkin, Pappas and Hedayat met
with Mr. Blachar and Ms. Gazit from Ormat for dinner during which they discussed
issues relating to pricing. The next day, the parties met again with their
respective counsel. The discussion focused on high level commercial terms. Given
the recent decline in U.S. Geothermals stock price, Ormat was concerned over
the level of the premium. The closing price for the companys common stock on
December 12, 2017 was $3.44. In addition to the level of the premium, Ormat
raised concerns with a number of working capital items and operational issues
that impacted the proposed price per share that Ormat would be willing to pay.
Ormat outlined potential pricing adjustments for working capital items
(including transaction costs, change of control payments, retention payments and
D&O insurance) and operational issues (asset retirement obligations, the
value placed on Geysers, environmental concerns, tax equity matters) resulting
in a revised range of $4.82 to $5.20. Following further discussion, Mr. Hedayat
proposed $5.45 per share plus a special dividend of $0.10 per share under
specified circumstances. Both parties agreed to discuss the potential price
adjustments with their respective boards. Ormat requested a break fee of 4% plus
expenses which was reduced to 3% of the merger consideration following further
discussion. Ormats comments to the draft merger agreement also included a
provision that would not permit U.S. Geothermal to seek specific performance in
the event of breach by Ormat, which was rejected by U.S. Geothermal.
26
Over the weekend of December 15-16, 2017, Mr. Pappas had
further conversations with Mr. Blachar and Isaac Angel, the CEO of Ormat,
regarding the size of the premium and the other issues raised by Ormat that
impacted pricing. During these calls, Ormat first offered $5.40 in cash with a
potential special dividend of up to $0.15 and later offered $5.45 per share.
On December 18, 2017, Messrs. Larkin, Pappas and Hedayat
provided the Board with an update of the prior weeks discussions. The Board
discussed pricing at length, including the specific issues raised by Ormat.
There was a discussion of the trading history of the Companys stock and its
impact on the premium. The members of the special committee disregarded the
concerns over the premium as the special committee did not regard the premium as
relevant to the discussions regarding price. Dorsey & Whitney again reviewed
for the Board its fiduciary duties in the context of a sale of the company. The
Board discussed whether to abandon the merger process at this time and focus on
the acquisition of additional assets and the long-term growth strategy for the
company. At a continuation of the Board meeting later that day, Mr. Truelock of
ROTH provided an update on the fairness opinion review and the impact of the
expansion projects on the fairness review. Following a discussion on pricing,
the Board instructed the special committee to seek a price per share in the
range of $5.50 - $5.55.
On December 19, 2017, Messrs. Hedayat and Pappas spoke with
Ormat regarding pricing and were informed that Ormats Board refused to increase
its indicative bid above $5.45 per share.
On December 19, 2017, both the special committee and the Board
held meetings to discuss pricing. The special committee recommended to the
Board, and the Board approved, the extension of the exclusivity period to
January 2, 2018, and the continuation of the merger negotiations with Ormat. The
parties executed an extension of the exclusivity period until January 2, 2018.
Between December 22, 2017 and January 5, 2018, counsel to the
parties negotiated the merger agreement. Among the points under discussion were
the representations and warranties, covenants relating to treatment of
employees, as well as the closing conditions in order to decrease the completion
risk of the transaction. On December 27, 2017, the exclusivity period was
further extended until January 15, 2018.
On January 5, 2018, Party D indicated to Mr. Glaspey that its
prior offer revised on October 20 was still valid. Mr. Glaspey provided this
information to the special committee. On January 8, 2017, the special committee
met with Mr. Glaspey and representatives of Dorsey & Whitney and ROTH.
Dorsey & Whitney reminded the special committee of its fiduciary duties in
the context of a sale of the company. The special committee reviewed the current
status of its negotiations with Ormat, and the increased risk associated with a
transaction with Party D as a result of its incomplete due diligence and need to
obtain financing. Based on input from Dorsey & Whitney and ROTH, the special
committee felt that the 2.75% difference in price between the two offers was not
significant enough to overcome the uncertainties of closing a transaction with
Party D, as a result of the additional requirements to obtain financing. The
special committee discussed seeking a higher price from Ormat in response to the
reconfirmation of the offer from Party D. However, based on prior input from
Ormat that its board had approved the price of $5.45 per share and would not pay
more, the special committee determined that seeking an increased price from
Ormat at this stage would be rejected and could put the transaction at risk. The
special committee recommended to the Board that the company should continue to
work with Ormat and that the credibility of the bid from Ormat and greater
certainty of closing offset the slightly higher bid from Party D.
On January 9, 2018, the Board met to receive an update from the
special committee. Mr. Larkin reviewed for the Board members the major legal and
business issues outstanding with the merger agreement as well as the
reconfirmation by Party D of its prior offer revised on October 20. Following a
discussion by the Board of Party Ds offer, the concerns of the special
committee relating to the higher risk of completion of a transaction with Party
D, and the open issues relating to the merger agreement, the Board agreed with
the special committees recommendation to continue to work toward the completion
of a potential transaction with Ormat. The Board approved an extension of the
exclusivity period until 5 p.m. MT on January 22, 2018.
Messrs. Larkin and Hill requested a meeting with Ormat to
discuss the D&O indemnification and insurance issues and the conduct of the
company between signing and closing. Those matters were instead discussed during
telephone calls and electronic communications with representatives of Ormat.
27
Between January 10th and 14th, counsel for the parties
negotiated the merger agreement and revised the disclosure schedules.
In mid-January, the company updated its internal cash
projections and 2018 budget. Following questions from Ormat regarding the
updated 2018 budget, Mr. Hedayat discussed with Ms. Gazit, Head of Mergers and
Acquisitions at Ormat, the reason for the changes in the budget. Ms. Gazit
indicated that the impact of the updated budget may result in a reduced price
per share in the merger. Mr. Hedayat rejected any reduction in the price.
On January 16, 2018, the special committee met, along with its
legal counsel, to discuss the impact of the new budget on the negotiations with
Ormat.
From January 17 through January 23, 2018, U.S. Geothermal and
its advisors continued to negotiate open points on the draft merger agreement
and disclosure schedules with Ormat and its advisors. The primary issues under
discussion and review were representations and warranties relating to relating
to leases and water rights, definitions relating to takeover proposals, closing
conditions, the D&O insurance and indemnification provisions as well as the
covenant regarding conduct of the company post-signing. The Board was provided
with copies of the merger agreement and disclosure schedules over this
period.
On January 18, 2018, the special committee met, along with Mr.
Glaspey, Dorsey & Whitney and ROTH, to discuss the revisions to the merger
agreement received from Norton Rose Fulbright and the open issues remaining.
Among the issues discussed were the revisions to the definition of a Takeover
Proposal. The special committee reviewed the revisions in detail to ensure that
it would not adversely impact the ability of the Board to accept a superior
proposal.
On January 19, 2018, counsel for the parties and a member of
the special committee had a conference call to discuss open items in the merger
agreement.
On January 23, 2018, upon being informed that the Ormat parent
under the merger agreement would be Ormat Nevada, and not Ormat Technologies,
the special committee requested and received financial information about Ormat
Nevada in order to satisfy itself regarding Ormat Nevadas ability to finance
the transaction and the merger consideration.
On the evening of January 23, 2018, the special committee and
the Board met with management, Dorsey & Whitney and ROTH to consider
approval of the merger and the merger agreement. Dorsey & Whitney reminded
the Board of its fiduciary duties which had been previously discussed with the
Board at prior meetings. ROTH confirmed that it had no conflict of interest with
respect to Ormat. Representatives of Dorsey & Whitney then reviewed terms of
the draft merger agreement, including among other things, the conditions to
closing, regulatory approvals, termination, termination fee, non-solicitation,
superior proposal and specific performance provisions. Representatives of ROTH
reviewed and discussed its financial analyses of the proposed merger.
Thereafter, at the request of the special committee, representatives of ROTH
rendered its oral opinion (which was subsequently confirmed in writing by
delivery of ROTHs written opinion addressed to the special committee dated as
of the same date) that, as of January 23, 2018 and based upon and subject to the
assumptions made, procedures followed, matters considered and qualifications and
limitations on the scope of review undertaken by ROTH as set forth in the
written opinion, the consideration to be received by the holders of shares of
U.S. Geothermals common stock pursuant to the merger agreement was fair from a
financial point of view to such holders. The directors discussed the proposed
terms and conditions of the merger agreement, the relative advantages and
disadvantages of the merger from the point of view of U.S. Geothermals
shareholders, compared to other available options, including continuing to
operate U.S. Geothermal as a stand-alone, publicly-held entity, the likelihood
of obtaining more favorable offers in light of the extensive sale process that
had already been conducted and the various factors summarized under the heading
Reasons for the Merger on page 29. Following further discussion among the
directors, the special committee unanimously recommended to the Board that it
approve the merger agreement. The Board accepted the special committees
recommendation and unanimously voted to approve and adopt the merger
agreement.
The following morning, prior to the opening of the U.S. stock
markets, Ormat approved and executed the merger agreement, the parties exchanged
signature pages and each issued a press release announcing the transaction.
28
Upon execution of the merger agreement and the announcement of
the transaction, any standstill provisions contained in the nondisclosure
agreements entered into with the various parties, as described in this section,
automatically terminated.
On February 23, 2018, ROTH became aware that its present value
of cash flow analysis inadvertently omitted certain components of the Companys
cash flow projections, as more fully described in the section entitled
Opinion of U.S. Geothermals Financial Advisor on page 37 and Annex C. The
recalculated present value of cash flow analysis resulted in a lower range of
equity values for the Company of $3.56 to $4.25 per share as opposed to a range
of $4.28 to $5.01 per share in the prior analysis. On February 28, 2018, the
special committee and the Board met with Dorsey & Whitney and ROTH. At this
meeting ROTH presented the results of its recalculated present value of cash
flow analysis as of January 23, 2018, the date of its opinion, and reviewed the
differences in ROTHs prior analysis that resulted from the computational error.
Notwithstanding the computational error, ROTH confirmed to the special committee
that, based on the information available to ROTH (other than with respect to the
computational error noted above) and the facts and circumstances as they existed
as of January 23, 2018, and subject to the assumptions made, procedures
followed, matters considered and qualifications and limitations set forth in
ROTHs opinion, dated January 23, 2018, ROTHs recalculated present value of
cash flow analysis did not change ROTHs opinion that the merger consideration
of $5.45 in cash per share to be received by the holders of Company Shares was
fair, from a financial point of view, to such holders. Following receipt of
ROTHs confirmation, the special committee and Board members present at the
February 28, 2018 meeting unanimously confirmed their view that the merger
agreement was in the best interests of the Company and its stockholders.
U.S. Geothermal Without the Merger
If the merger agreement is not approved by our stockholders or
if the merger is not consummated for any other reason, our stockholders will not
receive any payment for their shares of our common stock. Instead, U.S.
Geothermal will remain a public company, our common stock will continue to be
listed and traded on the NYSE American and registered under the Exchange Act and
we will continue to file periodic reports with the SEC. In addition, if the
merger is not completed, we expect that management will operate the business in
a manner similar to that in which it is being operated today and that our
stockholders will continue to be subject to the same risks and opportunities as
they currently are, including, among other things, general industry, economic
and market conditions. If the merger is not consummated, there can be no
assurance as to the effect of these risks and opportunities on the future value
of your shares of our common stock. From time to time, if the merger is not
consummated, the Board will evaluate and review our business operations,
properties, capitalization and, among other things, make such changes as are
deemed appropriate and continue to seek to identify strategic alternatives to
maximize stockholder value. If the merger agreement is not approved by our
stockholders or if the merger is not consummated for any other reason, there can
be no assurance that any other transaction acceptable to us will be offered or
that our business, prospects or results of operations will not be adversely
impacted.
If the merger agreement is terminated, under specified
circumstances, we may receive from or be required to pay Ormat a termination
fee, as described under The Merger AgreementTermination Fees and Expenses on
page 71.
The Recommendation of U.S. Geothermals Board and U.S.
Geothermals Reasons for the Merger
Following the unanimous recommendation of
the special committee, U.S. Geothermals Board, by unanimous vote, has
determined that it is advisable and in the best interests of U.S. Geothermal and
its stockholders to consummate the merger and the other transactions
contemplated by the merger agreement, and unanimously recommends that U.S.
Geothermals stockholders vote
FOR
the proposal to adopt
and approve the merger agreement and the transactions contemplated by the merger
agreement. When you consider the Boards recommendation, you should be aware
that U.S. Geothermals directors may have interests in the merger that may be
different from, or in addition to, your interests. These interests are described
in Interests of the Companys Directors and Executive Officers in the Merger
on page 31.
In determining that the merger and the other transactions
contemplated by the merger agreement are advisable and in the best interests of
U.S. Geothermal and its stockholders, the Board consulted with management and
its financial and legal advisors and considered a number of factors, including
the following:
29
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Merger Consideration
. The Board concluded that the
merger consideration of $5.45 per share in cash to U.S. Geothermals
common stockholders represented an attractive valuation for U.S.
Geothermal. This price represents a premium of: (i) approximately 28.5% to
the closing price of $4.24 on January 23, 2018, the last full trading day
prior to the Boards decision to enter into the merger agreement; (ii) 39%
and 54%, respectively, to the average closing prices of U.S. Geothermals
common stock over the one week prior and one month prior periods ended
January 23, 2018 and (iii) 14.5% to the highest closing price per share of
U.S. Geothermals common stock for the 12 months prior to and as of
January 23, 2018. This price also represents a 5.4x Enterprise Value/2018E
Revenue multiple. The Board believed that the $5.45 per share price
offered by U.S. Geothermal and the other terms offered by Ormat
represented the highest value with the greatest certainty of achievement
among available alternatives. The Board also considered the fact that the
merger consideration is all cash, which provides certainty of value to
U.S. Geothermals common stockholders compared to the uncertain value that
might be available to the stockholders of U.S. Geothermal if U.S.
Geothermal were to remain a stand-alone company.
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Review of Prospects in Remaining Independent
. The
Board considered U.S. Geothermals financial condition, results of
operations and business and earnings prospects if it were to remain
independent in light of various factors, including the macroeconomic
environment, U.S. Geothermals recent and anticipated operating results
and the competitive dynamics of the diversified utilities industry in
which U.S. Geothermal operates. In this context, the Board determined that
Ormats all-cash proposal represented near- term, substantially higher
value and certainty to U.S. Geothermals stockholders relative to U.S.
Geothermals prospects as a stand-alone company.
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Sale and Negotiation Process
. The Board reviewed
the sale process that U.S. Geothermal and its advisors had conducted prior
to the signing of the merger agreement, over a period of approximately one
and a half years, which involved contacts with multiple additional parties
that the Board believed might have an interest in acquiring U.S.
Geothermal. The Board also considered the negotiation process with Ormat
and that the consideration reflected in the merger agreement was the
highest value that was available to U.S. Geothermal at the time that had
the highest likelihood of being completed, and that there was no assurance
that a more favorable opportunity would arise later.
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Opinion of U.S. Geothermals Financial Advisor
.
U.S. Geothermals Board received an oral opinion from its financial
advisor, ROTH, subsequently confirmed in writing, that, as of January 23,
2018, and based upon and subject to the assumptions made, procedures
followed, matters considered and qualifications and limitations on the
scope of review undertaken by ROTH as set forth in the written opinion,
the consideration to be received by the holders of shares of U.S.
Geothermals common stock (other than excluded shares) pursuant to the
merger agreement was fair, from a financial point of view, to such
holders. The full text of the written opinion is attached to this proxy
statement as Annex C and is incorporated by reference in this proxy
statement in its entirety. The opinion of ROTH is more fully described
below in the subsection entitled Opinion of U.S. Geothermals Financial
Advisor on page 37 and Annex C.
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Terms of the Merger Agreement
. The Board
considered the terms of the merger agreement, including the parties
respective representations, warranties and covenants, the conditions to
their respective obligations to complete the merger and their ability to
terminate the merger agreement. The Board also noted that the merger
agreement permits U.S. Geothermal and the Board to respond to a competing
proposal that the Board has determined, in its good faith judgment, after
consultation with its financial advisor and outside legal counsel, is or
could reasonably be expected to lead to a superior proposal, subject to
certain restrictions imposed by the merger agreement and the requirement
that U.S. Geothermal pay Ormat a termination fee of approximately $3.2
million in the event that U.S. Geothermal terminates the merger agreement
to accept a superior proposal, and allows the Board to make an adverse
recommendation change in accordance with the Boards fiduciary duties,
subject to certain restrictions imposed by the merger agreement and the
requirement that U.S. Geothermal pay Ormat a termination fee of
approximately $3.2 million in the event that Ormat terminates the merger
agreement in connection with such adverse recommendation change. The Board
noted that the termination fee and related provisions of the merger
agreement are customary for transactions of this size and type and would
not preclude a superior proposal. The Board considered that the $3.2
million termination fee, which amounts to 3% of the merger consideration,
was reasonable, both in amount and in the context of the other provisions
of the merger agreement, and the process conducted by the Board with the
assistance of U.S. Geothermal management and its advisors, leading to signing
the merger agreement.
|
30
|
|
Likelihood of Closing
. The Board considered the
relatively limited nature of the closing conditions included in the merger
agreement, including the absence of any financing-related closing
condition and the likelihood that the merger will be approved by the
requisite regulatory authorities and U.S. Geothermals stockholders. The
Board also considered Ormats and its affiliates track record of
successfully completing a number of significant all-cash acquisitions.
|
The Board also identified and considered a number of
countervailing factors and risks to U.S. Geothermal and its stockholders
relating to the merger and the merger agreement, including the following:
|
|
Potential Inability to Complete the Merger
. The
Board considered the possibility that the merger may not be completed and
the potential adverse consequences to U.S. Geothermal if the merger is not
completed, including the potential loss of customers, vendors, suppliers
and employees, reduction of value offered by others to U.S. Geothermal in
a future business combination and erosion of customer, vendor, supplier
and employee confidence in U.S. Geothermal.
|
|
|
|
|
|
No Participation in Future Growth
. The Board
considered the fact that, because U.S. Geothermals stockholders will be
receiving a fixed amount of cash for their stock, they will not be
compensated for any increase in the value of U.S. Geothermal or Ormat
during the pre-closing period or following the closing.
|
|
|
|
|
|
Limitation of Ormats Liability
. The Board
considered the fact that U.S. Geothermals legal remedy in the event of
breach of the merger agreement (whether willfully, intentionally,
unintentionally or otherwise) by Ormat or its merger sub is limited to
receipt of the Ormat termination fee, and U.S. Geothermal may not be
entitled to the Ormat termination fee at all in certain circumstances.
|
|
|
|
|
|
Closing Conditions
. The Board considered the fact
that, while the merger is expected to be completed, there are no
assurances that all conditions to the parties obligations to complete the
merger will be satisfied or waived.
|
|
|
|
|
|
Interim Operating Covenants
. The Board considered
the limitations imposed in the merger agreement on the conduct of U.S.
Geothermals business during the pre-closing period, its ability to
solicit and respond to competing proposals and the ability of the Board to
change or withdraw its recommendation of the merger.
|
|
|
|
|
|
Taxability
. The Board considered that the merger
will be a taxable transaction to U.S. Geothermals stockholders.
|
|
|
|
|
|
Interests of U.S. Geothermals Directors and Executive
Officers
. The Board considered the interests of U.S. Geothermals
directors and executive officers that are different from, or are in
addition to, the interests of U.S. Geothermals stockholders generally, as
described in the section entitled Interests of the Companys Directors
and Executive Officers in the Merger on page 31.
|
The foregoing discussion of the information and factors
considered by the Board is not intended to be exhaustive but includes the
material factors considered by the Board. In view of the complexity and wide
variety of factors considered, the Board did not find it useful to and did not
attempt to quantify, rank or otherwise assign weights to these factors. In
addition, the Board did not undertake to make any specific determination as to
whether any particular factor, or any aspect of any particular factor, was
favorable or unfavorable to its ultimate determination, but rather the Board
conducted an overall analysis of the factors described above, including
discussions with U.S. Geothermals management and its financial and legal
advisors. In considering the factors described above, individual members of the
Board may have given different weights to different factors.
Interests of the Companys Directors and Executive Officers
in the Merger
Stockholders should be aware that U.S. Geothermals executive
officers and directors are subject to agreements or arrangements that may
provide them with interests that differ from, or are in addition to, those of
stockholders generally. In particular, as further described below, U.S.
Geothermals executive officers are entitled to certain benefits if they are involuntarily terminated without cause or
for good reason within certain periods before or following the consummation of
the merger.
31
The Board was aware of these agreements and arrangements during
its deliberations of the merits of the merger agreement and in determining the
recommendation set forth herein.
Executive Officers and Directors
U.S. Geothermals executive officers and directors as of the
date hereof are:
Name
|
Position
|
Douglas J. Glaspey
|
Interim Chief
Executive Officer,
President, Chief Operating
Officer, Director
|
Kerry D. Hawkley
|
Chief Financial Officer
|
Ali Hedayat
|
Director
|
Randolph J. Hill
|
Director
|
Paul A. Larkin
|
Director
|
Leland L. Mink
|
Director
|
James C. Pappas
|
Director
|
John H. Walker
|
Director (Chairman of the Board)
|
Jonathan Zurkoff
|
Executive VP-
Finance
|
For purposes of determining Golden Parachute Compensation, our
named executive officers are:
Name
|
Position
|
Douglas J. Glaspey
|
Interim Chief
Executive Officer,
President, Chief Operating
Officer, Director
|
Kerry D. Hawkley
|
Chief Financial
Officer
|
Jonathan Zurkoff
|
Executive VP-
Finance
|
Dennis J. Gilles
|
Former Chief
Executive Officer
|
Consideration Payable for Shares Held Pursuant to the
Merger Agreement
The executive officers and directors of U.S. Geothermal who
hold shares at the closing of the merger will be eligible to receive the same
merger consideration as the other U.S. Geothermal stockholders with respect to
each outstanding share held. The executive officers and directors U.S.
Geothermal held, in the aggregate, 3,290,869 shares of U.S. Geothermal common
stock (or approximately 16.9% of all outstanding shares) as of December 31,
2017, excluding shares issuable upon exercise of options to purchase shares.
The table below sets forth the number of shares held by the
executive officers and directors of U.S. Geothermal as of the end of the 2017
fiscal year (December 31, 2017), excluding shares issuable upon exercise of
options to purchase shares, and the value (at $5.45 per share) they would
receive for those shares upon consummation of the merger.
Name
|
|
Number of Shares
|
|
|
Consideration
|
|
Douglas J. Glaspey
|
|
131,614
|
|
$
|
717,296.30
|
|
Kerry D. Hawkley
|
|
35,329
|
|
$
|
192,543.05
|
|
Ali Hedayat
|
|
130,000
|
|
$
|
708,500.00
|
|
Randolph J. Hill
|
|
0
|
|
$
|
0
|
|
Paul A. Larkin
|
|
67,470
|
|
$
|
367,711.50
|
|
Leland L. Mink
|
|
24,729
|
|
$
|
134,773.05
|
|
James C. Pappas
|
|
2,854,948
|
|
$
|
15,559,466.60
|
|
John H. Walker
|
|
17,275
|
|
$
|
94,148.75
|
|
Jonathan Zurkoff
|
|
29,504
|
|
$
|
160,796.80
|
|
All Officers & Directors
|
|
3,290,869
|
|
$
|
17,935,236.05
|
|
32
The above table does not reflect acquisitions and dispositions
of shares by executive officers or directors subsequent to December 31, 2017,
including any shares issued upon exercise of options to purchase shares, which
are discussed below.
Consideration Payable for Equity Awards Pursuant to the
Merger Agreement
As described below under The Merger AgreementTreatment of
Options on page 56, the merger agreement provides that, at the effective time,
each of U.S. Geothermals options, whether or not vested, will be cashed out for
an amount equal to the excess, if any, of the merger consideration over the per
share exercise price of such option.
The table below sets forth the number U.S.
Geothermal stock options held by each executive officer and director as of
December 31, 2017, and the corresponding payment to which the holder will be
entitled, assuming each such option remains outstanding at or immediately prior
to the effective time of the merger.
|
|
Options
|
|
|
Consideration
|
|
Name
|
|
($)
|
|
|
($)
|
|
Douglas J. Glaspey
|
|
205,695
|
|
|
380,201.97
|
|
Kerry D. Hawkley
|
|
134,394
|
|
|
238,919.58
|
|
Ali Hedayat
|
|
16,666
|
|
|
17,165.98
|
|
Randolph J. Hill
|
|
24,666
|
|
|
29,792.58
|
|
Paul A. Larkin
|
|
80,553
|
|
|
147,356.13
|
|
Leland L. Mink
|
|
73,887
|
|
|
134,024.13
|
|
James C. Pappas
|
|
24,666
|
|
|
29,792.58
|
|
John H. Walker
|
|
80,553
|
|
|
147,356.13
|
|
Jonathan Zurkoff
|
|
128,860
|
|
|
227,337.20
|
|
All Officers & Directors
|
|
769,940
|
|
|
1,351,946.28
|
|
Consideration Payable to Non-Employee Directors Upon a
Change of Control
Pursuant to the Companys policy regarding payments made to
directors who are not employees of the Company, as adopted by the Board in July
2017, the following table sets forth the estimated payments to which each such
independent director shall be entitled upon the closing of the merger
transaction.
|
|
Estimated Payment
(1)
|
|
Name
|
|
($)
|
|
Leland L. Mink
|
|
39,500
|
|
Paul A. Larkin
|
|
75,362
|
|
John H. Walker
|
|
43,700
|
|
Ali Hedeyat
(2)
|
|
48,550
|
|
James C. Pappas
(2)
|
|
50,025
|
|
Randolph J. Hill
|
|
59,325
|
|
Total Non-Employee Directors
|
|
316,463
|
|
(1) Each director in the table would receive a cash payment
upon resigning from the Board at the time of the change of control. The amount
of the payment to a director would equal the fees paid to that director for
services as a director during the 12 months prior to the date of resignation.
(2) To the extent that the cost of the tail officers and directors
liability policy (as further described in The MergerIndemnification and
Insurance on page 36) is greater than 250% of the current aggregate annual
premium up to the maximum premium (300%), Mr. Heydayat and Mr. Pappas
have agreed to forfeit up to $40,000 each of the directors fees to which they
would otherwise be entitled.
33
Change in Control Severance Benefits for Executive
Officers
Pursuant to certain provisions in their employment agreements
with the Company, the executive officers of U.S. Geothermal will receive
severance benefits upon qualified terminations of employment within 12 months
following a change of control of U.S. Geothermal, such as the consummation of
the proposed merger. Accordingly, if a U.S. Geothermal executive officer is
terminated without cause, or resigns for good reason, within 12 months
following the merger, the executive officer will be entitled to the following
benefits:
|
|
in the case of the former Chief Executive Officer,
severance payments equal to three times the sum of such executive
officers second year base salary plus annual target bonus, such
payment(s) to be made within 60 days after the merger (approximately $
1,250,000 of this amount is payable whether or not the change of control
occurs due to the termination of his employment agreement in July 2017);
|
|
|
|
|
|
in the case of the Interim Chief Executive Officer, a
cash lump sum payment in an amount equal to 24 monthly installments of
such executive officers base annual salary, such payment to be made on
the 30
th
day following the date of termination;
|
|
|
|
|
|
in the case of the Chief Financial Officer, a cash lump
sum payment in an amount equal to 18 monthly installments of such
executive officers base annual salary, such payment to be made on the
30
th
day following the date of termination; and
|
|
|
|
|
|
in the case of the Executive Vice President of Finance, a
cash lump sum payment in an amount equal to 18 monthly installments of
such executive officers base annual salary, such payment to be made on
the 60
th
day following the date of termination.
|
Under each executive officer employment agreement, cause
means:
|
|
willful misconduct in the performance of such executive
officers duties which is materially injurious to the Company;
|
|
|
|
|
|
refusal, without proper reason, to perform his duties
after being provided notice within 60 days of any alleged refusal and an
opportunity to cure same;
|
|
|
|
|
|
committing an act of fraud, embezzlement, or willful
breach of a fiduciary duty to the Company, or a material breach of the
employment agreement (including the unauthorized disclosure of
confidential or proprietary material information of the Company);
|
|
|
|
|
|
being convicted of (or pleading no contest to) a crime
involving fraud, dishonesty, or moral turpitude or any felony; or
|
|
|
|
|
|
being convicted of (or pleading no contest to) any
violation of U.S. or foreign securities laws or entering into a cease and
desist order with the SEC alleging violation of U.S. or foreign securities
laws. No act, or failure to act, on such executive officers part shall be
considered willful unless done, or omitted to be done, by him other than
in good faith and without reasonable belief that his action or omission
was in the best interests of the Company.
|
Under each executive officer employment agreement, good
reason means the occurrence of any of the following conditions set forth below,
provided
, that the executive officer must provide notice to the Company
within 60 days of the existence of such condition and the Company will have 30
days from receipt of such notice to remedy the condition, and the termination of
employment occurs no later than two years following the initial existence of
such condition. If the condition is not remedied within such 30 day period, the
following conditions will constitute good reason:
|
|
a material diminution in the executive
officers base compensation;
|
34
|
|
a material diminution in the executive
officers authority, duties, or responsibilities;
|
|
|
|
|
|
a material diminution in the authority, duties,
or responsibilities of the supervisor to whom the executive officer is
required to report;
|
|
|
|
|
|
a material diminution in the budget over which
the executive officer retains authority;
|
|
|
|
|
|
a material change in the geographic
location at which the executive officer must perform the services; or
|
|
|
|
|
|
any other action that constitutes a material
breach by the Company of the employment agreement.
|
Compensation Proposal
The following table sets forth the golden parachute
compensation potentially payable to or realizable by the named executive
officers in connection with the merger based on compensation and benefits in
effect as of March 1, 2018 and assuming the triggering event occurred on March
1, 2018. The benefits in the following table reflect the double-trigger benefits
that will apply if the termination events described above under Change in
Control Severance Benefits for Executive Officers on page 34 apply. Payments
will be made by U.S. Geothermal, as the surviving corporation.
Golden Parachute
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Equity
|
|
|
Benefits
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
(5)
|
|
|
($)
(6)
|
|
|
($)
|
|
Dennis J. Gilles
|
|
1,230,000
|
(1)
|
|
0
|
|
|
9,988
|
|
|
1,239,988
|
|
Douglas J. Glaspey
|
|
568,360
|
(2)
|
|
746
|
|
|
22,519
|
|
|
591,625
|
|
Kerry D. Hawkley
|
|
274,443
|
(3)
|
|
487
|
|
|
28,712
|
|
|
303,642
|
|
Jonathan Zurkoff
|
|
293,760
|
(4)
|
|
443
|
|
|
26,193
|
|
|
320,396
|
|
(1) Mr. Gilless employment agreement was terminated in July
2017. He is entitled to one lump sum payment in the amount equal to 1.5 times
the sum of his second year base salary ($410,000) plus annual target bonus (100%
of the annual base salary), due to the termination of his employment agreement.
In the event of a change of control within 12 months following such termination,
he will be entitled to an additional lump sum payment as described in the table
above.
(2) Pursuant to Mr. Glaspeys employment agreement, in the event of a
qualified termination within 12 months following a change of control of U.S.
Geothermal, he will receive a cash lump sum payment in an amount equal to 24
monthly installments of his base annual salary ($284,180).
(3) Pursuant to
Mr. Hawkleys employment agreement, in the event of a qualified termination
within 12 months following a change of control of U.S. Geothermal, he will
receive a cash lump sum payment in an amount equal to 18 monthly installments of
his base annual salary ($182,962).
(4) Pursuant to Mr. Zurkoffs employment
agreement, in the event of a qualified termination within 12 months following a
change of control of U.S. Geothermal, he will receive a cash lump sum payment in
an amount equal to 18 monthly installments of his base annual salary ($195,840).
(5) The aggregate dollar value of in-the-money option awards for which
vesting will be accelerated in connection with the merger.
(6) In the event
of a qualified termination within 12 months following a change of control of
U.S. Geothermal (a) Mr. Gilles employment agreement entitles him to a lump sum
cash payment equal to the Companys contribution to the monthly cost of the
health care benefits to which he was entitled while employed
multiplied
by 36 (a portion of which will be payable whether or not the merger is completed
due to the termination of his employment in July 2017), and (b) Messrs. Glaspey,
Hawkley and Zurkoffs employment agreements entitle each of them to the
Companys contribution to the cost of health care continuation coverage for the
number of months to which they are entitled of compensation upon a termination
and change of control, as described under Change in Control Severance Benefits
for Executive Officers on page 34, with the amounts listed in the table
following each of their names representing the aggregate of the Companys
contribution to the estimated health care insurance premiums for the applicable
duration.
35
The specific circumstances that trigger each of these payments
and the manner in which they will be made is summarized in the footnotes above.
The payments will be made, if at all, by the company, as the surviving
corporation of the merger, except that a portion of the payments to Mr. Gilles
will be made by the company without regard to whether the merger occurs as noted
in the footnote above. Except for the triggering events summarized in the
footnotes above, there are no material conditions or obligations applicable to
the receipt of those payments or benefits. The agreements contain provisions
relating to non-solicitation for 12 months, non-competition for 12 months and
confidentiality, except that Mr. Zurkoffs agreement does not contain a
non-solicitation provision. The company may seek damages or other relief for
breach of these provisions. A qualified termination consists of a termination
of the individual by the company without cause or resignation by the
individual for good reason, which is described in more detail under Change
of Control Severance Benefits for Executive Officers on page 34.
U.S. Geothermal Board of Directors Following the Merger
Following the merger, and pursuant to the terms of the merger
agreement, the members of the Board will be replaced by the Board of merger sub.
Indemnification and Insurance
The merger agreement provides that for a period of six years
after the effective time of the merger, Ormat will cause U.S. Geothermal, as the
surviving corporation, to indemnify and hold harmless U.S. Geothermals (and its
subsidiaries) present and former officers, directors, employees and agents
(indemnitees) with respect to acts or omissions occurring at or prior to the
effective time of the merger, to the same extent such indemnitees are entitled
to indemnification as of the date of the merger agreement by U.S. Geothermal or
any of its subsidiaries pursuant to applicable law, U.S. Geothermals charter
documents, the organizational documents of any applicable subsidiaries or any
indemnification agreements in existence on the date of the merger agreement.
In addition, for six years after the effective time of the
merger:
|
|
Ormat will cause to be maintained in effect provisions in
U.S. Geothermals certificate of incorporation and bylaws regarding
elimination of liability of directors, indemnification of officers,
directors and employees and advancement of expenses that are no less
advantageous to the intended beneficiaries than the corresponding
provisions in existence on the date of the merger agreement; and
|
|
|
|
|
|
Ormat will, and will cause the surviving corporation to,
advance any expenses (including the fees and expenses of legal counsel) of
any indemnitee as incurred to the same extent such indemnitees are
entitled to advancement of expenses as of the date of the merger agreement
by U.S. Geothermal or any of its subsidiaries pursuant to applicable law,
U.S. Geothermal charter documents, the organizational documents of such
subsidiaries or any indemnification agreements in existence on the date of
the merger agreement and made available to Ormat,
provided
,
however
, that the individual to whom expenses are advanced
provides, if requested by Ormat, an undertaking to repay such advances if
it is determined that such individual is not entitled to be indemnified.
|
The merger agreement further provides that, prior to the
effective time, U.S. Geothermal may purchase, for an aggregate amount not to
exceed 300% of the current aggregate annual premium (the maximum premium), a
six-year tail officers and directors liability insurance policy providing
coverage for the indemnitees on terms and conditions providing substantially
equivalent benefits as the current policies of directors and officers
liability insurance maintained by U.S. Geothermal and its subsidiaries with
respect to matters existing or occurring prior to the effective time, covering
without limitation the transactions contemplated in the merger agreement;
provided
,
however
, that if the premium for such tail policy shall
exceed the maximum premium, U.S. Geothermal shall provide or cause to be
provided a tail policy for the applicable individuals with the best coverage as
shall then be available at an annual premium equal to the maximum premium. After
the effective time, U.S. Geothermal, as the surviving corporation, shall cause
such policy to be maintained in full force and effect, for its full term, and to
honor all of its obligations thereunder and neither Ormat nor U.S. Geothermal,
as the surviving corporation, shall have any further obligations pursuant to the
applicable provisions in the merger agreement.
36
Opinion of U.S. Geothermals Financial Advisor
Pursuant to an engagement letter, dated December 27, 2016, the
special committee of the Board retained ROTH to act as its financial advisor in
connection with the merger and, at the special committees request, to render an
opinion to the special committee as to the fairness, from a financial point of
view, of the consideration to be received in the merger by the U.S. Geothermal
stockholders.
On January 23, 2018, ROTH rendered its oral opinion,
subsequently confirmed in writing, to the special committee that, as of such
date, and based upon and subject to the various assumptions made, procedures
followed, matters considered and qualifications and limitations set forth in the
opinion, the merger consideration of $5.45 in cash per share to be received by
the holders of shares of U.S. Geothermals common stock was fair, from a
financial point of view, to such holders.
The full text of ROTHs written opinion, dated January 23,
2018, is attached to this proxy statement as Annex C and is incorporated by
reference herein. Stockholders of the Company are urged to read the entire
opinion carefully and in its entirety to learn about the assumptions made,
procedures followed, matters considered and limitations on the scope of the
review undertaken by ROTH in rendering its opinion. The analysis performed by
ROTH should be viewed in its entirety; none of the methods of analysis should be
viewed in isolation when reaching a conclusion on whether the consideration was
fair. The opinion addresses only the fairness of the merger consideration, from
a financial point of view, to holders of shares of U.S. Geothermals common
stock, as of the date of the opinion, and does not address the merits of the
Companys underlying business decision to proceed with or effect the merger or
the likelihood of consummation of the merger. ROTH expressed no opinion or
recommendation to the special committee whether the Company should proceed with
the merger. ROTHs opinion was directed to the special committee in connection
with its consideration of the merger and was not intended to be, and does not
constitute, a recommendation to any stockholder as to how such stockholder
should vote with respect to the merger or any other matter.
In arriving at its opinion, ROTH:
|
|
reviewed the draft merger agreement provided to ROTH on
January 23, 2018;
|
|
|
reviewed certain information, including financial
forecasts, relating to the business, earnings, cash flow, assets,
liabilities and prospects of the Company that was furnished to ROTH by
management of the Company;
|
|
|
conducted discussions with members of senior management
of the Company concerning the matters described in the immediately
preceding bullet point;
|
|
|
reviewed publicly available information relating to the
Company;
|
|
|
reviewed the financial terms, to the extent publicly
available, of certain acquisitions that ROTH deemed relevant;
|
|
|
reviewed the financial terms, to the extent publicly
available, of certain public companies that ROTH deemed relevant; and
|
|
|
performed such other analyses, including financial
modeling, and considered such other factors as ROTH deemed appropriate for
the purpose of rendering its opinion.
|
For purposes of rendering its opinion, ROTH relied upon and
assumed, without assuming liability or responsibility for independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished, or otherwise made available, to ROTH or discussed
with or reviewed by or for ROTH. ROTH further assumed that the financial
information provided by the Company was prepared on a reasonable basis in
accordance with industry practice, and that management of the Company was not
aware of any information or facts that would make any information provided to
ROTH incomplete or misleading. Without limiting the generality of the foregoing,
for the purpose of its opinion, ROTH assumed that with respect to financial
forecasts, estimates and other forward-looking information reviewed by it, that
such information was reasonably prepared based on assumptions reflecting the
best currently available estimates and judgments of the management of the
Company as to the expected future results of operations and financial condition
of the Company. ROTH did not express any opinion as to any such financial
forecasts, estimates or forward-looking information or the assumptions on which
they were based. In addition, with respect to such financial forecasts provided
to and examined by ROTH, ROTH noted that projecting future results of any
company, partnership, venture or asset is inherently subject to uncertainty.
37
In connection with its opinion, ROTH assumed and relied upon,
without independent verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other information provided to,
discussed with or reviewed by ROTH. ROTHs opinion did not address any legal,
regulatory, tax or accounting issues. In arriving at its opinion, ROTH assumed
that the executed merger agreement would be in all material respects identical
to the draft merger agreement reviewed by ROTH. ROTH relied upon and assumed,
without independent verification, that (i) the representations and warranties of
all parties set forth in the merger agreement and all related documents and
instruments that were referred to therein were true and correct, (ii) each party
to the merger agreement would fully and timely perform all of the covenants and
agreements required to be performed by such party, (iii) the merger would be
consummated pursuant to the terms of the merger agreement without amendments
thereto, and (iv) all conditions to the consummation of the merger would be
satisfied without waiver by any party of any conditions or obligations
thereunder. Additionally, ROTH assumed that all the necessary regulatory
approvals and consents required for the merger would be obtained in a manner
that would not adversely affect the Company or the contemplated benefits of the
merger.
In arriving at its opinion, ROTH did not perform any appraisals
or valuations of any specific assets or liabilities (fixed, contingent or other)
of the Company and was not furnished or provided with any such appraisals or
valuations. Without limiting the generality of the foregoing, ROTH undertook no
independent analysis of any pending or threatened litigation, regulatory action,
possible unasserted claims or other contingent liabilities to which the Company
was a party or may be subject, and at the direction of the special committee and
with its consent, ROTHs opinion made no assumption concerning, and therefore
did not consider, the possible assertion of claims, outcomes or damages arising
out of any such matters (other than to the extent set forth in the merger
agreement or the financial information provided to ROTH by or on behalf of the
Company).
ROTHs opinion was based upon the information available to it
and facts and circumstances as they existed and were subject to evaluation on
the date thereof; events occurring after the date thereof could materially
affect the assumptions used in preparing ROTHs opinion. ROTH did not express
any opinion as to the price at which the Companys shares may trade following
announcement of the merger or at any future time. ROTH did not undertake to
reaffirm or revise its opinion or otherwise comment upon any events occurring
after the date thereof and expressly disclaimed any such obligation to update,
revise or reaffirm its opinion subsequent to the date thereof.
ROTHs opinion addressed only the fairness, from a financial
point of view and as of the date thereof, of the merger consideration of $5.45
in cash per share to be received by the holders of the Companys common stock in
the merger. ROTHs opinion did not express any view on any other aspect of the
merger, including, without limitation, the fairness of the merger to the holders
of any other class of securities, creditors or other constituencies of the
Company. In addition, ROTH did not express an opinion about the fairness of the
amount or nature of any compensation payable or to be paid to any of the
officers, directors or employees of the Company, whether or not relative to the
merger. The issuance of ROTHs opinion was approved by a fairness opinion
committee of ROTH.
On February 23, 2018, ROTH became aware that its present value
of cash flow analysis inadvertently omitted certain components of the Companys
cash flow projections. Specifically, ROTHs analysis omitted the Companys
projections for (i) debt and interest payments of Idaho USG Holdings and (ii)
the release of restricted cash for Neil Hot Springs in 2035, which resulted in a
computational error in its analysis. At the special committees request, ROTH
recalculated its present value of cash flow analysis to correct such
computational error. On February 28, 2018, ROTH presented to the special
committee the results of its recalculated present value of cash flow analysis as
of January 23, 2018, the date of its opinion, and reviewed the differences in
ROTHs prior analysis that resulted from the computational error. ROTH noted
that its recalculated present value of cash flow analysis resulted in a lower
range of equity values for the Company of $3.56 to $4.25 per share as opposed to
a range of $4.28 to $5.01 per share in its prior analysis. Notwithstanding the
computational error, ROTH confirmed to the special committee that, based on the
information available to ROTH (other than with respect to the computational
error noted above) and the facts and circumstances as they existed as of January
23, 2018, and subject to the assumptions made, procedures followed, matters
considered and qualifications and limitations set forth in ROTHs opinion, dated
January 23, 2018, ROTHs recalculated present value of cash flow analysis did
not change ROTHs opinion that the merger consideration of $5.45 in cash per
share to be received by the holders of Company Shares was fair, from a financial
point of view, to such holders. The summary set forth below under Present Value
of Cash Flow Analysis includes ROTHs analysis of the present value of cash flows as
recalculated and presented to the special committee on February 28, 2018. The
computational error did not affect any other part of ROTHs financial
analysis.
38
Summary of Material Financial Analysis
The following is a summary of the material financial analyses
performed by ROTH and reviewed by the special committee in connection with
ROTHs opinion relating to the merger and does not purport to be a complete
description of the financial analyses performed by ROTH. The rendering of an
opinion is a complex analytic process involving various determinations as to the
most appropriate and relevant methods of financial analysis and the application
of those methods to the particular circumstances. Therefore, this summary does
not purport to be a complete description of the analyses performed by ROTH or of
its presentation to the special committee on January 23, 2018 or February 28,
2018. The order of analyses described below does not represent the relative
importance or weight given to those analyses by ROTH. Some of the summaries of
the financial analyses include information presented in tabular format. In order
to fully understand ROTHs financial analyses, the tables must be read together
with the text of each summary, as the tables alone do not constitute a complete
description of the financial analyses. Considering the data below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of ROTHs financial analyses.
In performing its analyses, ROTH made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company or any other
parties to the merger agreement. ROTH does not assume any responsibility if
future results are materially different from those discussed. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than as set forth below.
Selected Publicly Traded Comparable Companies Analysis.
In order to assess how the public market values shares of publicly traded
companies similar to the Company, ROTH reviewed and compared certain financial
information relating to the Company with selected companies, which, in the
exercise of its professional judgment and based on its knowledge of the
industry, ROTH deemed similar to the Company. Although none of the selected
companies is identical to the Company, ROTH selected these companies because
they had publicly traded equity securities and were deemed to be similar to the
Company in one or more respects, including the nature of their business, size,
financial performance, geographic concentration and listing jurisdiction. The
selected comparable companies are:
Company
|
Ticker
|
Etrion
|
TSX:ETX
|
Sky Solar
|
SKYS
|
Alerion Clean
|
BIT:ARN
|
Alterra Power
|
TSX:AXY
|
Azure Power
|
AZRE
|
Polaris Infrastructure
|
TSX:PIF
|
Scatec Solar
|
OB:SSO
|
Terna Energy Societe
|
ATSE:TENERGY
|
Ormat Technologies
|
ORA
|
Calpine
|
CPN
|
For the Company and each of the selected companies, ROTH
calculated and compared various financial multiples and ratios of the Company
and the selected comparable companies based on each respective companys public
filings for historical information and third-party research estimates for
forecasted information.
In its review of the selected companies, ROTH considered, among
other things, (i) market capitalizations (computed using closing share prices as
of January 23, 2018), (ii) enterprise values (EV), (iii) EV as a multiple of
reported earnings before interest, tax, depreciation and amortization (EBITDA)
for the latest twelve-month period (LTM) as of September 30, 2017 and
estimated EBITDA for calendar years 2017 and 2018, (iv) price to LTM and
estimated calendar year 2017 and 2018 earnings, (v) projected growth rates for
calendar years 2015 to 2016 and 2016 to 2017, and (vi) LTM gross margins, EBITDA margins and
net income margins. This information and the results of these analyses are
summarized in the following table:
39
Notes to the table:
1.
|
Source: Capital IQ. Projected financials based on median
analyst estimates.
|
2.
|
EV = Market Cap + Debt - Cash.
|
3.
|
All EV/EBITDA multiples less than 0 or greater than 50
are considered not meaningful ("NM").
|
4.
|
All P/E multiples less than 0 or greater than 100 are
considered "NM."
|
ROTH noted that, although the selected companies were used for
comparison purposes, no business of any selected company was either identical or
directly comparable to the Companys business. Accordingly, ROTHs comparison of
selected companies to the Company and analyses of the results of such
comparisons was not purely mathematical, but instead necessarily involved
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the relative
values of the selected companies and the Company.
ROTH noted that the resulting multiples for the Company at the
merger consideration of $5.45 per share was either at or above the high end of
the various selected publicly traded comparable company multiples.
Selected Precedent Transaction Analysis.
ROTH reviewed
and compared the purchase prices and financial multiples paid in selected other
transactions, primarily in the geothermal electricity project management and
generation space, from January 1, 2014 to January 22, 2018 that had publicly
available data and that ROTH, in the exercise of its professional judgment,
determined to be relevant. For each of the selected transactions, ROTH
calculated and compared the resulting enterprise value in the transaction as a
multiple of LTM EBITDA. Such multiples for the selected transactions were based
on publicly available information at the time of the relevant transaction. The
selected transactions analyzed are set out in the following table:
40
ROTH noted that, although the selected transactions were used
for comparison purposes, no business of any selected company was either
identical or directly comparable to the Companys business. Accordingly, ROTHs
comparison of selected companies to the Company and analyses of the results of
such comparisons was not purely mathematical, but instead necessarily involved
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the relative
values of the selected companies and the Company.
ROTH noted that the EV to LTM EBITDA multiple for the merger at
the merger consideration of $5.45 per share was above the high end of the EV to
LTM EBITDA multiples for the comparable transactions.
41
Premium Paid Analysis
. ROTH reviewed the premia paid or
offered in public acquisitions in the utilities, mining and industrials space
from January 1, 2017 to January 22, 2018, excluding acquisitions under $10
million in transaction value. The selected transactions analyzed are set out in
the following table.
Closed Date
|
Target
|
Buyer
|
% Acquired
|
Transaction
Value
($M)
|
Premium 1-Day
|
Premium
1-Week
|
Premium
4-Weeks
|
12/28/17
|
TerraForm
|
Brookfield
|
100.0
|
$768.5
|
56.9
|
51.3
|
80.2
|
12/21/17
|
Arc Logistics
|
Zenith Energy
|
73.2
|
$236.0
|
15.2
|
16.7
|
5.9
|
12/15/17
|
Tesco Corp
|
Nabors Industries Ltd
|
100.0
|
$216.2
|
18.6
|
5.1
|
0.5
|
12/07/17
|
Numerex Corp
|
Sierra Wireless Inc
|
100.0
|
$104.3
|
11.2
|
6.5
|
8.0
|
11/17/17
|
The Advisory Board Co
|
Optum Inc
|
100.0
|
$2,155.0
|
5.6
|
1.9
|
(4.8)
|
11/17/17
|
Brocade Communications Systems
Inc
|
Broadcom Ltd
|
100.0
|
$5,535.8
|
13.4
|
44.9
|
34.2
|
11/13/17
|
Rice Energy Inc
|
EQT Corp
|
100.0
|
$6,576.4
|
10.4
|
6.2
|
1.5
|
10/30/17
|
Western Refining Logistics LP
|
Tesoro Logistics LP
|
100.0
|
$1,542.7
|
1.9
|
1.7
|
1.7
|
10/19/17
|
Landauer Inc
|
Fortive Corp
|
100.0
|
$648.2
|
9.6
|
8.6
|
10.0
|
10/16/17
|
TerraForm Power Inc
|
Brookfield Asset Mgmt Inc
|
88.0
|
$786.8
|
(21.8)
|
(22.8)
|
(26.3)
|
10/10/17
|
West Corp
|
Apollo Global Management LLC
|
100.0
|
$1,988.2
|
(7.1)
|
(5.4)
|
(3.3)
|
10/06/17
|
Atwood Oceanics Inc
|
Ensco PLC
|
100.0
|
$863.2
|
32.7
|
20.5
|
49.3
|
10/05/17
|
Forestar Group Inc
|
DR Horton Inc
|
75.0
|
$558.3
|
26.3
|
25.9
|
36.5
|
10/02/17
|
Neff Corp
|
United Rentals Inc
|
100.0
|
$606.6
|
26.9
|
31.2
|
47.1
|
09/29/17
|
PAREXEL International Corp
|
Pamplona Capital Management
|
100.0
|
$4,629.2
|
27.9
|
36.4
|
43.7
|
09/28/17
|
Sevcon Inc
|
BorgWarner Inc
|
100.0
|
$125.7
|
60.8
|
59.7
|
38.4
|
09/20/17
|
Delta Natural Gas Co Inc
|
Peoples Natural Gas Co
|
100.0
|
$217.4
|
16.6
|
17.4
|
13.1
|
09/13/17
|
CDI Corp
|
AE Industrial Partners LLC
|
100.0
|
$155.0
|
33.1
|
32.0
|
38.7
|
09/10/17
|
Swift Transportation Co
|
Knight Transportation Inc
|
100.0
|
$2,959.1
|
10.2
|
8.2
|
6.3
|
08/31/17
|
EI du Pont de Nemours & Co
{DuPont}
|
The Dow Chemical Co
|
100.0
|
$62,141.1
|
5.7
|
4.7
|
5.1
|
08/04/17
|
Gas Natural Inc
|
First Reserve Corp
|
100.0
|
$137.8
|
70.6
|
73.7
|
72.8
|
07/28/17
|
Rightside Group Ltd
|
Donuts Inc
|
100.0
|
$205.9
|
8.7
|
9.3
|
18.0
|
07/19/17
|
Sajan Inc
|
AMPLEXOR International SA
|
100.0
|
$28.0
|
46.1
|
61.1
|
53.8
|
06/30/17
|
ONEOK Partners LP
|
ONEOK Inc
|
60.0
|
$9,309.2
|
25.8
|
22.2
|
22.3
|
06/30/17
|
Alon USA Energy Inc
|
Delek US Holdings Inc
|
52.9
|
$459.8
|
(3.8)
|
(1.0)
|
(2.9)
|
06/27/17
|
LMI Aerospace Inc
|
Sonaca SA
|
100.0
|
$190.9
|
51.4
|
57.1
|
55.5
|
06/22/17
|
MOCON Inc
|
AMETEK Inc
|
100.0
|
$187.4
|
38.6
|
33.9
|
36.1
|
06/21/17
|
TRC Cos Inc
|
New Mountain Partners IV LP
|
100.0
|
$554.5
|
46.9
|
61.8
|
63.3
|
06/06/17
|
Multi Packaging Solutions
International Ltd
|
WestRock Co
|
100.0
|
$1,398.5
|
25.1
|
26.9
|
23.6
|
06/01/17
|
Western Refining Inc
|
Tesoro Corp
|
100.0
|
$4,044.3
|
22.3
|
33.3
|
29.7
|
06/01/17
|
Valspar Corp
|
Sherwin-Williams Co
|
100.0
|
$9,308.7
|
34.8
|
38.1
|
46.7
|
05/26/17
|
Ultratech Inc
|
Veeco Instruments Inc
|
100.0
|
$769.5
|
(16.2)
|
(16.4)
|
(10.4)
|
05/18/17
|
American DG Energy Inc
|
Tecogen Inc
|
100.0
|
$18.8
|
23.7
|
48.4
|
54.6
|
05/04/17
|
Stillwater Mining Co
|
Sibanye Gold Ltd
|
100.0
|
$2,179.6
|
22.6
|
18.7
|
21.4
|
04/28/17
|
Energy Transfer Partners LP
|
Sunoco Logistics Partners LP
|
100.0
|
$21,318.7
|
(0.2)
|
1.6
|
6.6
|
04/27/17
|
Midcoast Energy Partners LP
|
Enbridge Energy Co Inc
|
94.1
|
$170.2
|
(8.6)
|
(1.8)
|
13.5
|
04/24/17
|
Clayton Williams Energy Inc
|
Noble Energy Inc
|
100.0
|
$2,908.1
|
33.7
|
27.8
|
20.9
|
04/21/17
|
Air Methods Corp
|
American Securities LLC
|
100.0
|
$1,568.1
|
20.5
|
18.5
|
23.2
|
04/21/17
|
Chemtura Corp
|
Lanxess AG
|
100.0
|
$2,109.7
|
18.9
|
23.0
|
12.8
|
04/13/17
|
B/E Aerospace Inc
|
Rockwell Collins Inc
|
100.0
|
$8,200.8
|
(30.3)
|
(27.7)
|
(27.7)
|
04/05/17
|
CEB Inc
|
Gartner Inc
|
100.0
|
$2,492.4
|
24.8
|
27.2
|
30.2
|
04/05/17
|
Joy Global Inc
|
Komatsu America Corp
|
100.0
|
$2,777.6
|
20.2
|
21.0
|
24.3
|
03/21/17
|
G&K Services Inc
|
Cintas Corp
|
100.0
|
$1,960.2
|
18.7
|
21.8
|
23.7
|
03/10/17
|
Linear Technology Corp
|
Analog Devices Inc
|
100.0
|
$14,375.6
|
23.9
|
24.2
|
33.3
|
03/08/17
|
JP Energy Partners LP
|
American Midstream Partners LP
|
100.0
|
$160.0
|
14.5
|
13.7
|
15.1
|
03/06/17
|
Eco-Stim Energy Solutions Inc
|
Fir Tree Partners LP
|
67.2
|
$41.4
|
56.6
|
35.9
|
19.7
|
02/27/17
|
Spectra Energy Corp
|
Enbridge Inc
|
100.0
|
$28,286.5
|
11.5
|
12.8
|
11.2
|
02/17/17
|
Columbia Pipeline Partners LP
|
Columbia Pipeline Group Inc
|
100.0
|
$915.3
|
11.1
|
15.0
|
26.1
|
02/06/17
|
Team Health Holdings Inc
|
Blackstone Group LP
|
100.0
|
$3,312.9
|
32.6
|
36.8
|
25.4
|
01/20/17
|
AEP Industries Inc
|
Berry Plastics Grp Inc
|
100.0
|
$566.5
|
42.9
|
41.4
|
31.5
|
01/01/17
|
Empire District Electric Co
|
Liberty Utilities Co
|
100.0
|
$1,488.8
|
21.3
|
14.2
|
22.5
|
|
|
|
|
|
|
|
|
|
|
|
MIN
|
$18.8
|
(30.3)
|
(27.7)
|
(27.7)
|
|
|
|
25th %
|
$216.8
|
10.3
|
7.4
|
7.3
|
|
|
|
MEDIAN
|
$915.3
|
20.5
|
21.0
|
22.5
|
|
|
|
75th %
|
$2,933.6
|
32.6
|
34.9
|
36.3
|
|
|
|
MAX
|
$62,141.1
|
70.6
|
73.7
|
80.2
|
|
|
|
|
|
|
|
|
|
|
|
USG
|
$193.6
|
28.5
|
39.0
|
54.0
|
For each transaction above, ROTH calculated the premium per
share paid or offered in the transaction by comparing the announced transaction
value per share to the target companys closing share price one day prior to the
announcement of the transaction, one week prior to the announcement of the
transaction and four weeks prior to the announcement of the transaction.
ROTH noted that the Companys premium based on the merger
consideration of $5.45 per share was above the median for the premium to the one
day closing price and at the high end of the range of the selected premia to the
one week and four week closing prices.
52-Week High and Low.
ROTH reviewed the trading prices
of the Companys shares over the 52-week period prior to the announcement of the
merger. The following is the Companys 52-week share price and volume chart:
42
In ROTHs professional opinion, the 52-week high and low share
price are more relevant to investors decisions than prior periods. ROTH noted
that the merger consideration of $5.45 per share was above the highest closing
price of the Companys shares over the prior 52 weeks.
Present Value of Cash Flow Analysis
. ROTH performed an
analysis of the net present value of cash flows of the Company by calculating
ranges of the estimated net present value of the unlevered, after-tax free cash
flows attributable to stockholders of the Company that the Company forecasted to
generate from January 1, 2018 through fiscal year 2047. All of the information
used in ROTHs analysis was based on publicly available sources and the
financial projections provided by the Companys management, which internal
financial projections can be found under the caption Company Financial
Projections on page 45. The following tables set forth the free cash flows and
calculations used in ROTHs analysis:
43
44
In performing its net present value of cash flow analysis, ROTH
calculated ranges of the estimated present values of the Companys unlevered,
after-tax free cash flows attributable to stockholders of the Company that the
Company forecasted to generate from January 1, 2018 through fiscal year 2047 by
applying discount rates ranging from 8.0% to 10.0% for the Companys operating
and expansion projects and 14.0% to 16.0% for the Companys development
projects, reflecting ROTHs estimates of the Companys cost of capital for such
projects. The tables above are based on the midpoint of the discount ranges.
ROTH then deducted outstanding debt and added outstanding cash
and cash equivalents from the Companys balance sheet as of December 31, 2017 to
determine a range of implied equity values of the Company. The net present value
of cash flow analysis implied a range of equity values for the Company of $3.56
per share to $4.25 per share.
ROTH noted that the merger consideration of $5.45 per share was
above the high end of the range of the implied equity value per share of the
Company based on the net present value cash flow analysis.
General.
The summary set forth above does not contain a complete
description of the analyses performed by ROTH, but does summarize the material
analyses performed by ROTH in rendering its opinion. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. ROTH believes that its analyses and the
summary set forth above must be considered as a whole and that selecting
portions of its analyses or of the summary, without considering the analyses as
a whole or all of the factors included in its analyses, would create an
incomplete view of the processes underlying the analyses set forth in the ROTH
opinion. In arriving at its opinion, ROTH considered the results of all of its
analyses and did not attribute any particular weight to any factor or analysis.
Instead, ROTH made its determination as to fairness on the basis of its
experience and financial judgment after considering the results of all of its
analyses. The fact that any specific analysis has been referred to in the
summary above is not meant to indicate that this analysis was given greater
weight than any other analysis. In addition, the ranges of valuations resulting
from any particular analysis described above should not be taken to be ROTHs
view of the actual value of the Company.
As described above, ROTHs opinion was only one of many factors
considered by the special committee and the Board in making its determination to
approve the merger. ROTH was not requested to and did not solicit any
expressions of interest from any other parties with respect to any business
combination with the Company.
ROTH is a full service securities firm engaged in securities
trading and brokerage activities, as well as providing investment banking and
other financial services. In the past two years, no material relationship
existed between the Company and/or its affiliates and ROTH and/or its affiliates
pursuant to which compensation, other than a $75,000 fee for general financial
advisory services, was received by ROTH or its affiliates as a result of such
relationship. In the ordinary course of business, ROTH and its affiliates may
acquire, hold or sell, for it and its affiliates own accounts and for the
accounts of customers, equity, debt and other securities and financial
instruments (including bank loans and other obligations) of the Company and the
other parties to the merger, and, accordingly, may at any time hold a long or a
short position in such securities. In addition, ROTH and its affiliates may in
the future provide investment banking and other financial services to the
parties of the merger for which ROTH would expect to receive compensation.
ROTH is acting as financial advisor to the special committee of
the Companys Board in connection with the merger. Pursuant to its engagement
letter with ROTH, the Company has agreed to pay ROTH (i) a fixed fee upon the
initial delivery of its fairness opinion to the special committee of $350,000,
(ii) an additional fee of $100,000 if, at the Companys request, ROTH delivers a
bring down fairness opinion, as well as (iii) a cash advisory fee of $500,000
upon the closing of the merger, which shall be reduced by the fees paid to ROTH
for the initial fairness opinion and any bring down fairness opinion. The fees
paid for the initial fairness opinion and any bring down fairness opinion are
not contingent upon the merger closing. These fees were determined by ROTH and
proposed to the special committee. In addition, the Company has agreed to
indemnify ROTH for certain liabilities that may arise out of its engagement by
the special committee and the rendering of ROTHs opinion.
45
Company Financial Projections
Although U.S. Geothermal periodically may issue limited
financial guidance, it does not, as a matter of course, develop or publicly
disclose long-term projections or internal projections of our future financial
performance, revenues, earnings, financial condition or other results due to,
among other reasons, the uncertainty of the underlying assumptions and
estimates. However, in connection with the evaluation of the merger by the
special committee and the Board, the special committee and the Board considered
certain non-public unaudited prospective financial information provided by our
management relating to U.S. Geothermal for the fiscal years ending 2018 through
2047. These projections were also provided to ROTH for its use and reliance in
connection with its financial analyses and opinion summarized under The
MergerOpinion of U.S. Geothermals Financial Advisor
on page 37.
Projected Cash Flows by Project San Emidio
SE
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
Revenues
|
$
|
7,401,486
|
|
$
|
7,962,364
|
|
$
|
8,059,123
|
|
$
|
8,075,929
|
|
$
|
8,093,506
|
|
$
|
8,017,233
|
|
$
|
8,088,785
|
|
O&M
Expenses
|
|
(3,547,741
|
)
|
|
(2,924,190
|
)
|
|
(2,932,128
|
)
|
|
(2,977,233
|
)
|
|
(3,153,316
|
)
|
|
(3,250,900
|
)
|
|
(3,214,094
|
)
|
Debt Service
|
|
(2,496,547
|
)
|
|
(2,564,322
|
)
|
|
(2,626,839
|
)
|
|
(2,925,694
|
)
|
|
(2,936,535
|
)
|
|
(2,579,577
|
)
|
|
(2,357,653
|
)
|
Other
(1)
|
|
95,634
|
|
|
(54,055
|
)
|
|
(286,560
|
)
|
|
(183,871
|
)
|
|
(116,006
|
)
|
|
(398,562
|
)
|
|
(340,804
|
)
|
Net Cash Flows from
SE
|
|
1,452,831
|
|
|
2,419,798
|
|
|
2,213,597
|
|
|
1,989,131
|
|
|
1,887,650
|
|
|
1,788,194
|
|
|
2,176,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SE
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
Revenues
|
$
|
8,023,101
|
|
$
|
7,966,869
|
|
$
|
7,898,388
|
|
$
|
7,841,758
|
|
$
|
8,511,768
|
|
$
|
8,550,896
|
|
$
|
8,580,742
|
|
O&M Expenses
|
|
(3,282,846
|
)
|
|
(3,543,076
|
)
|
|
(3,495,682
|
)
|
|
(3,415,310
|
)
|
|
(3,743,756
|
)
|
|
(3,441,121
|
)
|
|
(3,555,364
|
)
|
Debt Service
|
|
(2,653,811
|
)
|
|
(2,750,814
|
)
|
|
(2,538,767
|
)
|
|
(2,333,766
|
)
|
|
(2,443,977
|
)
|
|
(2,919,668
|
)
|
|
(2,738,125
|
)
|
Other
(1)
|
|
(62,890
|
)
|
|
(150,174
|
)
|
|
37,842
|
|
|
(112,604
|
)
|
|
(251,179
|
)
|
|
(136,154
|
)
|
|
(451,846
|
)
|
Net Cash Flows from
SE
|
|
2,023,553
|
|
|
1,522,805
|
|
|
1,901,782
|
|
|
1,980,079
|
|
|
2,072,857
|
|
|
2,053,954
|
|
|
1,835,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SE
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
|
2038
|
|
Revenues
|
$
|
8,627,281
|
|
$
|
8,538,015
|
|
$
|
8,620,646
|
|
$
|
8,621,416
|
|
$
|
8,643,748
|
|
$
|
8,610,703
|
|
$
|
8,522,504
|
|
O&M Expenses
|
|
(3,865,954
|
)
|
|
(3,848,788
|
)
|
|
(4,123,229
|
)
|
|
(4,157,225
|
)
|
|
(3,817,084
|
)
|
|
(4,050,713
|
)
|
|
(4,186,133
|
)
|
Debt Service
|
|
(2,626,216
|
)
|
|
(2,212,051
|
)
|
|
(2,618,189
|
)
|
|
(2,526,219
|
)
|
|
(2,431,947
|
)
|
|
(2,364,951
|
)
|
|
|
|
Other
(1)
|
|
(144,005
|
)
|
|
96,711
|
|
|
354,267
|
|
|
132,544
|
|
|
6,442
|
|
|
167,918
|
|
|
1,178,036
|
|
Net Cash Flows from
SE
|
|
1,991,106
|
|
|
2,573,887
|
|
|
2,233,495
|
|
|
2,070,517
|
|
|
2,401,159
|
|
|
2,362,957
|
|
|
5,514,406
|
|
Raft River Energy 1
RR1
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
Revenues
|
$
|
6,738,037
|
|
$
|
6,836,289
|
|
$
|
6,954,938
|
|
$
|
6,807,153
|
|
$
|
6,941,756
|
|
$
|
6,944,213
|
|
$
|
6,961,055
|
|
O&M Expenses
|
|
(4,556,408
|
)
|
|
(4,075,580
|
)
|
|
(4,823,531
|
)
|
|
(4,688,557
|
)
|
|
(4,454,589
|
)
|
|
(4,918,510
|
)
|
|
(4,698,680
|
)
|
Other
(1)
|
|
(757,848
|
)
|
|
(266,910
|
)
|
|
(43,550
|
)
|
|
(56,457
|
)
|
|
(40,316
|
)
|
|
(10,128
|
)
|
|
(3,796
|
)
|
Net Cash Flows from RR1
|
|
1,423,781
|
|
|
2,493,798
|
|
|
2,087,857
|
|
|
2,062,138
|
|
|
2,446,852
|
|
|
2,015,575
|
|
|
2,258,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RR1
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
Revenues
|
$
|
6,926,462
|
|
$
|
6,912,219
|
|
$
|
6,896,950
|
|
$
|
6,770,955
|
|
$
|
6,863,154
|
|
$
|
6,845,600
|
|
$
|
6,826,976
|
|
O&M Expenses
|
|
(4,899,020
|
)
|
|
(5,277,720
|
)
|
|
(5,282,177
|
)
|
|
(5,037,138
|
)
|
|
(5,532,509
|
)
|
|
(5,440,492
|
)
|
|
(5,416,389
|
)
|
Other
(1)
|
|
(549
|
)
|
|
1,034
|
|
|
2,494
|
|
|
769
|
|
|
8,773
|
|
|
6,571
|
|
|
8,135
|
|
Net Cash Flows from RR1
|
|
2,026,893
|
|
|
1,635,533
|
|
|
1,617,267
|
|
|
1,734,586
|
|
|
1,339,418
|
|
|
1,411,679
|
|
|
1,418,722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RR1
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
|
2038
|
|
Revenues
|
$
|
6,827,651
|
|
$
|
7,611,024
|
|
$
|
8,203,979
|
|
$
|
8,076,479
|
|
$
|
8,385,565
|
|
$
|
8,438,123
|
|
$
|
8,515,592
|
|
O&M Expenses
|
|
(5,754,852
|
)
|
|
(5,734,825
|
)
|
|
(5,753,160
|
)
|
|
(6,172,000
|
)
|
|
(6,066,100
|
)
|
|
(6,004,716
|
)
|
|
(6,498,336
|
)
|
Other
(1)
|
|
10,423
|
|
|
(222,617
|
)
|
|
(19,315
|
)
|
|
(39,733
|
)
|
|
(25,289
|
)
|
|
(31,789
|
)
|
|
934,405
|
|
Net Cash Flows from RR1
|
|
1,083,222
|
|
|
1,653,582
|
|
|
2,431,503
|
|
|
1,864,746
|
|
|
2,294,175
|
|
|
2,401,618
|
|
|
2,951,661
|
|
46
Neal Hot Springs
NHS
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
Revenues
|
$
|
12,209,310
|
|
$
|
12,456,329
|
|
$
|
12,694,456
|
|
$
|
12,852,267
|
|
$
|
13,061,442
|
|
$
|
13,232,387
|
|
O&M Expenses
|
|
(3,598,366
|
)
|
|
(3,663,970
|
)
|
|
(3,538,782
|
)
|
|
(3,782,594
|
)
|
|
(3,853,662
|
)
|
|
(3,641,345
|
)
|
Debt
Service
|
|
(2,729,991
|
)
|
|
(2,685,365
|
)
|
|
(2,630,036
|
)
|
|
(2,583,336
|
)
|
|
(2,534,496
|
)
|
|
(2,485,656
|
)
|
Other
(1)
|
|
1,559,198
|
|
|
(113,567
|
)
|
|
(92,957
|
)
|
|
(93,002
|
)
|
|
(63,490
|
)
|
|
(160,887
|
)
|
Net Cash Flows
from
NHS
|
|
7,480,152
|
|
|
5,993,426
|
|
|
6,432,681
|
|
|
6,393,334
|
|
|
6,609,794
|
|
|
6,944,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NHS
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
Revenues
|
$
|
13,454,189
|
|
$
|
13,587,813
|
|
$
|
13,769,236
|
|
$
|
13,951,139
|
|
$
|
14,109,998
|
|
$
|
14,162,707
|
|
O&M
Expenses
|
|
(4,050,272
|
)
|
|
(4,220,541
|
)
|
|
(4,185,189
|
)
|
|
(4,172,033
|
)
|
|
(3,967,533
|
)
|
|
(4,010,260
|
)
|
Debt
Service
|
|
(2,441,366
|
)
|
|
(2,386,504
|
)
|
|
(2,337,865
|
)
|
|
(2,290,296
|
)
|
|
(2,242,393
|
)
|
|
(2,192,750
|
)
|
Other
(1)
|
|
11,763
|
|
|
(80,130
|
)
|
|
(80,249
|
)
|
|
(67,802
|
)
|
|
(141,467
|
)
|
|
(151,388
|
)
|
Net Cash Flows
from
NHS
|
|
6,974,315
|
|
|
6,900,638
|
|
|
7,165,934
|
|
|
7,421,008
|
|
|
7,758,605
|
|
|
7,808,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NHS
|
|
2030
|
|
|
2031
|
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
Revenues
|
$
|
14,251,372
|
|
$
|
14,323,092
|
|
$
|
14,423,841
|
|
$
|
14,399,752
|
|
$
|
14,397,235
|
|
$
|
14,363,240
|
|
O&M
Expenses
|
|
(4,601,573
|
)
|
|
(4,915,240
|
)
|
|
(4,519,529
|
)
|
|
(4,254,867
|
)
|
|
(4,334,685
|
)
|
|
(4,529,030
|
)
|
Debt
Service
|
|
(2,145,181
|
)
|
|
(2,094,267
|
)
|
|
(1,920,715
|
)
|
|
(1,867,908
|
)
|
|
(1,822,470
|
)
|
|
(894,366
|
)
|
Other
(1)
|
|
194,735
|
|
|
42,482
|
|
|
1,334
|
|
|
(134,377
|
)
|
|
(111,828
|
)
|
|
3,546,486
|
|
Net Cash Flows
from
NHS
|
|
7,699,353
|
|
|
7,356,067
|
|
|
7,984,932
|
|
|
8,142,600
|
|
|
8,128,252
|
|
|
12,486,329
|
|
Neal Hot Springs
Hybrid Cooling
NHS
Hybrid
Cooling
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
Revenues
|
$
|
|
|
$
|
712,648
|
|
$
|
768,054
|
|
$
|
781,407
|
|
$
|
795,110
|
|
$
|
806,365
|
|
$
|
817,812
|
|
O&M
|
|
|
|
|
(83,056
|
)
|
|
(96,820
|
)
|
|
(98,756
|
)
|
|
(100,731
|
)
|
|
(102,746
|
)
|
|
(104,801
|
)
|
Cap-Ex/Reserve Funds
|
|
(2,648,625
|
)
|
|
(329,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from NHS
Hybrid Cooling
|
|
(2,648,625
|
)
|
|
300,417
|
|
|
671,235
|
|
|
682,651
|
|
|
694,379
|
|
|
703,619
|
|
|
713,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NHS
Hybrid
Cooling
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
Revenues
|
$
|
829,511
|
|
$
|
841,400
|
|
$
|
853,582
|
|
$
|
861,826
|
|
$
|
870,184
|
|
$
|
878,652
|
|
$
|
887,227
|
|
O&M
|
|
(106,897
|
)
|
|
(109,035
|
)
|
|
(111,215
|
)
|
|
(113,440
|
)
|
|
(115,708
|
)
|
|
(118,023
|
)
|
|
(120,383
|
)
|
Cap-Ex/Reserve Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from NHS
Hybrid Cooling
|
|
722,614
|
|
|
732,365
|
|
|
742,367
|
|
|
748,386
|
|
|
754,475
|
|
|
760,630
|
|
|
766,844
|
|
NHS
Hybrid Cooling
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
Revenues
|
$
|
895,936
|
|
$
|
904,735
|
|
$
|
913,668
|
|
$
|
922,727
|
|
$
|
931,889
|
|
$
|
948,896
|
|
O&M
|
|
(122,791
|
)
|
|
(125,247
|
)
|
|
(127,751
|
)
|
|
(130,306
|
)
|
|
(132,913
|
)
|
|
(135,571
|
)
|
Cap-Ex/Reserve Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(900,000
|
)
|
Net
Cash Flows
from
NHS
Hybrid
Cooling
|
|
773,145
|
|
|
779,489
|
|
|
785,917
|
|
|
792,420
|
|
|
798,977
|
|
|
(86,675
|
)
|
Raft River Energy 1
RRG4
RR1
RRG4
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
Revenues
|
$
|
217,852
|
|
$
|
561,828
|
|
$
|
567,874
|
|
$
|
552,087
|
|
$
|
557,427
|
|
$
|
567,477
|
|
$
|
570,519
|
|
O&M Expenses
|
|
(75,761
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
Cap-Ex/Reserve Funds
|
|
(125,069
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from RR1 -
RRG4
|
|
17,022
|
|
|
448,186
|
|
|
454,232
|
|
|
438,445
|
|
|
443,785
|
|
|
453,835
|
|
|
456,877
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RR1 RRG4
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
Revenues
|
$
|
573,561
|
|
$
|
576,675
|
|
$
|
579,790
|
|
$
|
582,904
|
|
$
|
586,018
|
|
$
|
589,205
|
|
$
|
592,391
|
|
O&M Expenses
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
Cap-Ex/Reserve Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Flows from RR1
RRG4
|
|
459,919
|
|
|
463,033
|
|
|
466,148
|
|
|
469,262
|
|
|
472,376
|
|
|
475,563
|
|
|
478,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RR1 RRG4
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
|
2038
|
|
Revenues
|
$
|
595,578
|
|
$
|
598,765
|
|
$
|
602,024
|
|
$
|
605,283
|
|
$
|
608,542
|
|
$
|
611,801
|
|
$
|
615,133
|
|
O&M Expenses
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
|
(113,642
|
)
|
Cap-Ex/Reserve Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Flows from RR1
RRG4
|
|
481,936
|
|
|
485,123
|
|
|
488,382
|
|
|
491,641
|
|
|
494,900
|
|
|
498,159
|
|
|
501,491
|
|
Idaho USG Holdings
Idaho USG Holdings
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
O&M Expenses
|
|
(65,000
|
)
|
|
(65,000
|
)
|
|
(65,000
|
)
|
|
(65,000
|
)
|
|
(65,000
|
)
|
|
(65,000
|
)
|
Debt Service
|
|
(1,500,755
|
)
|
|
(1,688,205
|
)
|
|
(1,822,907
|
)
|
|
(1,747,782
|
)
|
|
(1,710,327
|
)
|
|
(16,473,771
|
)
|
Net Cash Flows from
Idaho
USG Holdings
|
|
(1,565,755
|
)
|
|
(1,753,205
|
)
|
|
(1,887,907
|
)
|
|
(1,812,782
|
)
|
|
(1,775,327
|
)
|
|
(16,538,771
|
)
|
Services
Services
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
Revenues
|
$
|
627,338
|
|
$
|
632,525
|
|
$
|
638,018
|
|
$
|
643,154
|
|
$
|
644,072
|
|
$
|
657,537
|
|
$
|
671,349
|
|
O&M Expenses
|
|
(37,702
|
)
|
|
(38,456
|
)
|
|
(39,225
|
)
|
|
(40,009
|
)
|
|
(40,810
|
)
|
|
(40,415
|
)
|
|
(42,582
|
)
|
Net Cash Flows from
Services
|
|
589,636
|
|
|
594,069
|
|
|
598,794
|
|
|
603,145
|
|
|
603,262
|
|
|
617,122
|
|
|
628,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
Revenues
|
$
|
685,517
|
|
$
|
700,050
|
|
$
|
714,959
|
|
$
|
730,253
|
|
$
|
745,943
|
|
$
|
762,040
|
|
$
|
778,553
|
|
O&M
Expenses
|
|
(43,511
|
)
|
|
(43,096
|
)
|
|
(45,400
|
)
|
|
(44,971
|
)
|
|
(47,371
|
)
|
|
(46,928
|
)
|
|
(50,933
|
)
|
Net Cash Flows from
Services
|
|
642,006
|
|
|
656,954
|
|
|
669,559
|
|
|
685,282
|
|
|
698,572
|
|
|
715,112
|
|
|
727,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
|
2038
|
|
Revenues
|
$
|
795,495
|
|
$
|
812,877
|
|
$
|
830,711
|
|
$
|
849,009
|
|
$
|
867,783
|
|
$
|
887,047
|
|
$
|
495,822
|
|
O&M
Expenses
|
|
(52,069
|
)
|
|
(51,756
|
)
|
|
(51,256
|
)
|
|
(54,005
|
)
|
|
(55,182
|
)
|
|
(54,656
|
)
|
|
(57,578
|
)
|
Net Cash Flows from
Services
|
|
743,426
|
|
|
761,121
|
|
|
779,455
|
|
|
795,004
|
|
|
812,601
|
|
|
832,391
|
|
|
438,243
|
|
Delaware and Idaho Corporate Overhead
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
|
|
|
2027
|
|
Delaware Corporate Overhead
|
|
($2.8
|
)
|
|
($2.4
|
)
|
|
($2.4
|
)
|
|
($2.5
|
)
|
|
($2.5
|
)
|
|
($2.6
|
)
|
|
($2.6
|
)
|
|
($2.6
|
)
|
|
($2.7
|
)
|
|
($2.7
|
)
|
Idaho Corporate Overhead
|
|
($2.5
|
)
|
|
($2.4
|
)
|
|
($2.5
|
)
|
|
($2.6
|
)
|
|
($2.7
|
)
|
|
($2.8
|
)
|
|
($2.9
|
)
|
|
($3.0
|
)
|
|
($3.1
|
)
|
|
($3.2
|
)
|
Total Corporate Overhead
|
|
($5.3
|
)
|
|
($4.8
|
)
|
|
($5.0
|
)
|
|
($5.1
|
)
|
|
($5.2
|
)
|
|
($5.3
|
)
|
|
($5.5
|
)
|
|
($5.6
|
)
|
|
($5.8
|
)
|
|
($5.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
Delaware Corporate Overhead
|
|
($2.7
|
)
|
|
($2.8
|
)
|
|
($2.8
|
)
|
|
($2.9
|
)
|
|
($2.9
|
)
|
|
($3.0
|
)
|
|
($3.0
|
)
|
|
($3.0
|
)
|
|
($0.7
|
)
|
$
|
0.0
|
|
Idaho Corporate Overhead
|
|
($3.3
|
)
|
|
($3.5
|
)
|
|
($3.6
|
)
|
|
($3.7
|
)
|
|
($3.9
|
)
|
|
($4.0
|
)
|
|
($4.2
|
)
|
|
($4.3
|
)
|
$
|
0.0
|
|
$
|
0.0
|
|
Total Corporate Overhead
|
|
($6.1
|
)
|
|
($6.3
|
)
|
|
($6.4
|
)
|
|
($6.6
|
)
|
|
($6.8
|
)
|
|
($7.0
|
)
|
|
($7.2
|
)
|
|
($7.4
|
)
|
|
($0.7
|
)
|
$
|
0.0
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2038
|
|
|
2039
|
|
|
2040
|
|
|
2041
|
|
|
2042
|
|
|
2043
|
|
|
2044
|
|
|
2045
|
|
|
2046
|
|
|
2047
|
|
Delaware Corporate Overhead
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
Idaho Corporate Overhead
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
Total Corporate
Overhead
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
$
|
0.0
|
|
Geysers with O&M
Geysers with
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O&M
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
Revenues
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
9,619,495
|
|
$
|
23,006,127
|
|
$
|
22,775,111
|
|
$
|
22,544,094
|
|
O&M Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,209,423
|
)
|
|
(5,354,775
|
)
|
|
(5,283,384
|
)
|
|
(5,460,584
|
)
|
Debt Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109,222,681
|
|
|
(9,602,455
|
)
|
|
(9,038,938
|
)
|
|
(9,044,155
|
)
|
Other
(1)
|
|
|
|
|
|
|
|
942,063
|
|
|
1,410,476
|
|
|
(144,162,256
|
)
|
|
(2,635,669
|
)
|
|
(3,309,080
|
)
|
|
(2,880,554
|
)
|
Net Cash Flows
from
NHS
|
|
|
|
|
|
|
|
942,063
|
|
|
1,410,476
|
|
|
(28,529,503
|
)
|
|
5,413,228
|
|
|
5,143,709
|
|
|
5,158,802
|
|
Geysers with
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
O&M
|
|
2026
|
|
|
2027
|
|
|
2028
|
|
|
2029
|
|
|
2030
|
|
|
2031
|
|
|
2032
|
|
|
2033
|
|
Revenues
|
$
|
22,376,815
|
|
$
|
22,082,061
|
|
$
|
21,946,576
|
|
$
|
21,946,576 $
|
|
|
22,009,649
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
O&M Expenses
|
|
(6,174,029
|
)
|
|
(7,072,013
|
)
|
|
(7,739,148
|
)
|
|
(8,348,916
|
)
|
|
(7,579,170
|
)
|
|
(7,696,962
|
)
|
|
(8,731,406
|
)
|
|
(8,325,258
|
)
|
Debt Service
|
|
(8,690,581
|
)
|
|
(8,792,961
|
)
|
|
(9,175,817
|
)
|
|
(7,585,721
|
)
|
|
(8,484,358
|
)
|
|
(8,766,063
|
)
|
|
(7,418,501
|
)
|
|
(8,579,722
|
)
|
Other
(1)
|
|
(2,517,455
|
)
|
|
(1,158,158
|
)
|
|
231,996
|
|
|
(1,529,867
|
)
|
|
(1,000,946
|
)
|
|
(383,464
|
)
|
|
(1,356,022
|
)
|
|
(5,710
|
)
|
Net Cash
Flows
from
NHS
|
|
4,994,750
|
|
|
5,058,929
|
|
|
5,263,606
|
|
|
4,482,072
|
|
|
4,945,175
|
|
|
5,100,087
|
|
|
4,440,647
|
|
|
5,035,885
|
|
Geysers with O&M
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
|
2038
|
|
|
2039
|
|
|
2040
|
|
Revenues
|
$
|
22,009,649
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
$
|
22,009,649
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
O&M Expenses
|
|
(8,756,921
|
)
|
|
(9,301,297
|
)
|
|
(8,322,987
|
)
|
|
(9,465,354
|
)
|
|
(8,756,360
|
)
|
|
(9,662,061
|
)
|
|
(9,335,490
|
)
|
Debt Service
|
|
(7,945,215
|
)
|
|
(7,370,054
|
)
|
|
(8,175,513
|
)
|
|
(7,605,469
|
)
|
|
(9,144,088
|
)
|
|
(7,676,690
|
)
|
|
(8,227,605
|
)
|
Other
(1)
|
|
(573,960
|
)
|
|
(814,033
|
)
|
|
(568,632
|
)
|
|
(265,497
|
)
|
|
1,286,514
|
|
|
70,666
|
|
|
587,270
|
|
Net Cash
Flows from NHS
|
|
4,733,553
|
|
|
4,461,191
|
|
|
4,879,444
|
|
|
4,610,255
|
|
|
5,395,715
|
|
|
4,678,490
|
|
|
4,970,750
|
|
Geysers with O&M
|
|
2041
|
|
|
2042
|
|
|
2043
|
|
|
2044
|
|
|
2045
|
|
|
2046
|
|
|
2047
|
|
Revenues
|
$
|
21,946,576
|
|
$
|
22,009,649
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
$
|
21,946,576
|
|
$
|
22,009,649
|
|
$
|
10,908,111
|
|
O&M Expenses
|
|
(9,343,214
|
)
|
|
(10,276,942
|
)
|
|
(9,782,375
|
)
|
|
(10,309,087
|
)
|
|
(9,621,789
|
)
|
|
(9,781,146
|
)
|
|
(7,432,290
|
)
|
Debt Service
|
|
(8,495,080
|
)
|
|
(8,051,671
|
)
|
|
(8,583,013
|
)
|
|
(5,938,581
|
)
|
|
(7,999,680
|
)
|
|
(9,194,041
|
|
|
(390,582
|
)
|
Other
(1)
|
|
1,013,346
|
|
|
1,236,368
|
|
|
1,387,362
|
|
|
(3,971,999
|
)
|
|
(1,757,022
|
)
|
|
80,814
|
|
|
10,036,560
|
|
Net Cash
Flows from NHS
|
|
5,121,627
|
|
|
4,917,404
|
|
|
4,968,550
|
|
|
1,726,909
|
|
|
2,568,084
|
|
|
3,115,276
|
|
|
13,121,799
|
|
San Emidio II with O&M
SEII with O&M
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
Revenues
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
22,915,355
|
|
$
|
23,144,509
|
|
$
|
23,445,197
|
|
$
|
23,609,714
|
|
49
O&M Expenses
|
|
(4,769,068
|
)
|
|
(8,109,463
|
)
|
|
(8,281,123
|
)
|
|
(9,297,249
|
)
|
|
(9,991,046
|
)
|
|
(9,494,450
|
)
|
|
(8,691,944
|
)
|
Debt Service
|
|
(12,698,440
|
)
|
|
(8,688,874
|
)
|
|
(10,352,847
|
)
|
|
(10,660,388
|
)
|
|
(9,877,960
|
)
|
|
(10,252,215
|
)
|
|
(10,923,837
|
)
|
Other
(1)
|
|
551,564
|
|
|
(4,008,296
|
)
|
|
(2,355,616
|
)
|
|
(297,719
|
)
|
|
(1,070,069
|
)
|
|
(1,329,369
|
|
|
(1,561,916
|
)
|
Net Cash Flows from SEII
|
|
6,929,867
|
|
|
3,277,637
|
|
|
3,407,580
|
|
|
4,313,007
|
|
|
3,874,971
|
|
|
3,986,154
|
|
|
4,210,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEII with O&M
|
|
2032
|
|
|
2033
|
|
|
2034
|
|
|
2035
|
|
|
2036
|
|
|
2037
|
|
|
2038
|
|
Revenues
|
$
|
25,565,937
|
|
$
|
25,821,596
|
|
$
|
26,079,812
|
|
$
|
26,418,635
|
|
$
|
26,604,016
|
|
$
|
26,870,057
|
|
$
|
27,138,757
|
|
O&M Expenses
|
|
(9,692,217
|
)
|
|
(9,701,223
|
)
|
|
(9,113,172
|
)
|
|
(9,606,249
|
)
|
|
(10,116,970
|
)
|
|
(10,237,429
|
)
|
|
(9,185,582
|
)
|
Debt Service
|
|
(10,552,215
|
)
|
|
(10,396,801
|
)
|
|
(10,308,018
|
)
|
|
(11,422,445
|
)
|
|
(11,273,107
|
)
|
|
(9,882,871
|
)
|
|
(10,910,898
|
)
|
Other
(1)
|
|
(1,152,552
|
)
|
|
(1,732,394
|
)
|
|
(2,938,899
|
)
|
|
(1,118,024
|
)
|
|
(1,016,235
|
)
|
|
(3,361,714
|
|
|
(3,464,166
|
)
|
Net Cash
Flows from SEII
|
|
4,168,952
|
|
|
3,991,179
|
|
|
3,719,723
|
|
|
4,271,917
|
|
|
4,197,704
|
|
|
3,388,042
|
|
|
3,578,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SEII with O&M
|
|
2039
|
|
|
2040
|
|
|
2041
|
|
|
2042
|
|
|
2043
|
|
|
2044
|
|
|
2045
|
|
Revenues
|
$
|
27,491,337
|
|
$
|
27,684,246
|
|
$
|
27,961,089
|
|
$
|
28,240,699
|
|
$
|
28,607,596
|
|
$
|
28,808,337
|
|
$
|
29,096,421
|
|
O&M Expenses
|
|
(10,238,117
|
)
|
|
(12,016,597
|
)
|
|
(10,703,329
|
)
|
|
(9,563,971
|
)
|
|
(9,924,309
|
)
|
|
(11,534,294
|
)
|
|
(11,900,728
|
)
|
Debt Service
|
|
(11,610,040
|
)
|
|
(11,957,854
|
)
|
|
(11,281,813
|
)
|
|
(10,934,602
|
)
|
|
(12,441,415
|
)
|
|
(10,924,677
|
)
|
|
|
|
Other
(1)
|
|
(1,632,855
|
)
|
|
664,465
|
|
|
(2,502,347
|
)
|
|
(4,900,580
|
)
|
|
(2,726,558
|
)
|
|
(1,264,255
|
|
|
3,401,881
|
|
Net Cash
Flows from SEII
|
|
4,010,325
|
|
|
4,374,260
|
|
|
3,473,600
|
|
|
2,841,547
|
|
|
3,515,314
|
|
|
5,085,111
|
|
|
20,597,573
|
|
(1)
|
Other includes flows (into)/from project reserves, CapX,
change in working capital, and for development projects; O&M fees, and
corporate support
|
Limitations on the Projections
The projections were not prepared with a view to public
disclosure, but are included in this proxy statement because such information
was made available to our special committee, the Board and ROTH, and were used
in the evaluation process leading to the execution of the merger agreement. The
projections were not prepared with a view to compliance with generally accepted
accounting principles as applied in the United States (which we refer to as
GAAP), the published guidelines of the SEC regarding projections and
forward-looking statements and the use of non-GAAP measures or the guidelines
established by the American Institute of Certified Public Accountants for
preparation and presentation of prospective financial information. Furthermore,
our independent auditors have not examined, reviewed, compiled or otherwise
applied procedures to the projections and, accordingly, assume no responsibility
for, and express no opinion on, them.
The projections include certain non-GAAP financial measures.
Non-GAAP financial measures should not be considered in isolation from, or as a
substitute for, financial information presented in compliance with GAAP, and
non-GAAP financial measures as used by U.S. Geothermal may not be comparable to
similarly titled amounts used by other companies. The footnote to the tables
above provides certain supplemental information with respect to the projections.
Since the projections cover multiple years, the information by
its nature becomes less predictive with each successive year.
Although a summary of our projections is presented with
numerical specificity, this information is not fact and should not be relied
upon as being necessarily predictive of actual future results. These projections
are forward-looking statements. Important factors that may affect actual results
and cause our projections not to be achieved include general economic
conditions, accuracy of certain financial assumptions, changes in performance of
our power plants, changes in our future financial performance (including actual
or projected cash flows and actual or projected expenses), competitive
pressures, changes in tax laws, and the other factors described under
Cautionary Statement Concerning Forward-Looking Information on page 14. In
addition, the projections do not take into account any circumstances or events
occurring after the date that they were prepared, which was in November 2017. We
can give no assurance that, had our projections been prepared either as of the
date of the merger agreement or as of the date of this proxy statement, similar
estimates and assumptions would be used. The projections also do not give effect
to the transactions contemplated by the merger agreement, including the merger
or the post-closing operations of U.S. Geothermal and its subsidiaries. As a
result, there can be no assurance that the projections will be realized, and
actual results may be materially better or worse than those contained in our
projections. The inclusion of this information should not be regarded as an indication
that the special committee, the Board, the special committees financial advisor
or Ormat considered, or now considers, our projections to be material
information of U.S. Geothermal or necessarily predictive of actual future
results nor should it be construed as financial guidance, and it should not be
relied upon as such. The summary of our projections is not included in this
proxy statement in order to induce any stockholder to vote in favor of the
merger proposal or other proposals to be voted on at the special meeting or to
influence any stockholder to make any investment decision with respect to the
merger, including whether or not to seek dissenters rights with respect to
shares of our common stock.
50
These projections should be evaluated, if at all, in
conjunction with the historical financial statements and other information
regarding U.S. Geothermal contained in our public filings with the SEC. In
particular, since these projections were prepared, we released our annual report
on Form 10-K, for our fiscal year ended December 31 2017, which is available as
set forth in the section of this proxy statement entitled Where You Can Find
More Information on page 87.
Except to the extent required by applicable federal securities
laws, we do not intend, and expressly disclaim any responsibility, to update or
otherwise revise our projections to reflect circumstances existing after the
date when we prepared our projections or to reflect the occurrence of future
events or changes in general economic or industry conditions, even in the event
that any of the assumptions underlying our projections are shown to be in error.
We can give no assurance that, had our projections been prepared either as of
the date of the merger agreement or as of the date of this proxy statement,
similar estimates and assumptions would be used. Neither U.S. Geothermal nor any
of its affiliates, directors, officers, advisors or other representatives has
made or makes any representation to any of our stockholders regarding the
ultimate performance of U.S. Geothermal compared to the information contained in
these projections or that these projections will be achieved.
In light of the foregoing factors and the uncertainties
inherent in our projections and considering that the special meeting may be held
several months after these projections were prepared, stockholders are cautioned
not to place undue, if any, reliance on these projections.
Certain Underlying Assumptions
In preparing these projections, management used what they
considered to be reasonable assumptions at the time made. These included
assumptions regarding future geothermal reservoir performance were based on
engineering modeling of future performance by outside consulting reservoir
engineers that use the accumulation of historic reservoir data on temperature,
pressure, and flowrate. Over the period of the projections, brine flow rates,
reservoir pressure, and temperature may experience declines, which parameters
are included in the reservoir models. Assumptions regarding power plant
performance, including availability, efficiency, and major maintenance/capital
expenditure requirements were based on historical performance as adjusted to
reflect expected future performance. Availability is assumed to be in a range
consistent with past performance and maintenance schedules are consistent with
established cycles. Plant efficiency is expected to slowly decline over the
period of the projections. Operating and overhead expense projections were based
on expectations of future cost escalation. In addition to the above, development
projects included assumptions on timing and price levels for new power purchase
agreements, construction costs and timing, the availability of various types of
financing, and capital structure.
Voting Agreement with the Companys Directors and Executive
Officers
Each of U.S. Geothermals directors and executive officers, who
collectively beneficially owned approximately 16.9% of U.S. Geothermals
outstanding shares as of December 31, 2017 (excluding any shares underlying
outstanding options), have entered into an agreement to vote the shares
beneficially owned by them as of the record date in favor of the merger
agreement and the transactions contemplated thereby, subject to the terms and
conditions of such voting agreement. See Voting Agreement on page Annex B-1.
Material U.S. Federal Income Tax Consequences of the Merger
The following are the material U.S. federal income tax
consequences of the merger to U.S. holders (as defined below) of U.S. Geothermal
common stock. This discussion applies only to U.S. holders that hold their U.S.
Geothermal common stock as capital assets within the meaning of Section 1221 of
the Internal Revenue Code (Code). This discussion does not address the
consequences of the merger to holders who receive cash pursuant to the exercise of appraisal rights. This discussion does not
describe all of the tax consequences that may be relevant to a holder in light
of the holders particular circumstances or to holders subject to special rules,
such as:
51
|
|
dealers or traders subject to a mark-to-market
method of tax accounting with respect to U.S. Geothermal common stock;
|
|
|
|
|
|
persons holding U.S. Geothermal common stock as
part of a straddle, hedging transaction, conversion transaction,
integrated transaction or constructive sale transaction;
|
|
|
|
|
|
persons whose functional currency is not the
U.S. dollar;
|
|
|
|
|
|
partnerships or other entities classified as
partnerships for U.S. federal income tax purposes;
|
|
|
|
|
|
persons who acquired U.S. Geothermal common
stock through the exercise of employee stock options or otherwise as
compensation;
|
|
|
|
|
|
certain financial institutions;
|
|
|
|
|
|
regulated investment companies;
|
|
|
|
|
|
real estate investment trusts;
|
|
|
|
|
|
tax-exempt entities, including an individual
retirement account or Roth IRA; or
|
|
|
|
|
|
persons subject to the United States
alternative minimum tax.
|
If an entity that is classified as a partnership for U.S.
federal income tax purposes holds U.S. Geothermal common stock, the U.S. federal
income tax treatment of a partner will generally depend on the status of the
partner and the activities of the partnership. Partnerships holding U.S.
Geothermal common stock and partners in such partnerships should consult their
tax advisers as to the particular U.S. federal income tax consequences of the
merger to them.
This discussion is based on the Code, administrative
pronouncements, judicial decisions and final and temporary Treasury regulations,
all as of the date hereof, any of which is subject to change, possibly with
retroactive effect. Tax considerations under state, local and foreign laws are
not addressed.
For purposes of this discussion, the term U.S. holder means a
beneficial owner of U.S. Geothermal common stock that is:
|
|
a citizen or individual resident of the United States;
|
|
|
|
|
|
a corporation, or other entity classified as a
corporation for U.S. federal income tax purposes, created or organized in
or under the laws of the United States, any state thereof or the District
of Columbia; or
|
|
|
|
|
|
an estate or trust the income of which is subject to U.S.
federal income taxation regardless of its source.
|
The exchange of U.S. Geothermal common stock for cash in the
merger will be a taxable transaction for U.S. federal income tax purposes. In
general, a U.S. holder whose shares of U.S. Geothermal common stock are
converted into the right to receive cash in the merger will recognize capital
gain or loss for U.S. federal income tax purposes in an amount equal to the
difference, if any, between the amount of cash received with respect to such
shares and the U.S. holders tax basis in such shares. Gain or loss will be
determined separately for each block of shares of U.S. Geothermal common stock
(i.e., shares of U.S. Geothermal common stock acquired at the same cost in a
single transaction). Such gain or loss generally will be treated as long-term
capital gain or loss if the U.S. holders holding period in the shares of U.S.
Geothermal common stock exceeds one year at the time of the completion of the
merger. Long-term capital gains of non-corporate U.S. holders generally are
subject to U.S. federal income tax at preferential rates. The deductibility of
capital losses is subject to limitations. Capital gains recognized by
individuals, trusts and estates also may be subject to a 3.8% federal Medicare
contribution tax.
52
Payments made in exchange for shares of U.S. Geothermal common
stock generally will be subject to information reporting unless the holder is an
exempt recipient and may also be subject to backup withholding at a rate of
24%. To avoid backup withholding, U.S. holders that do not otherwise establish
an exemption should complete and return Internal Revenue Service Form W-9,
certifying that such U.S. holder is a U.S. person, the taxpayer identification
number provided is correct and such U.S. holder is not subject to backup
withholding. Amounts withheld under the backup withholding rules are not
additional taxes and may be refunded or credited against a holders U.S. federal
income tax liability,
provided
the relevant information is timely
furnished to the Internal Revenue Service.
You are urged to consult your tax adviser with respect to
the application of U.S. federal income tax laws to your particular circumstances
as well as any tax consequences arising under the U.S. federal estate or gift
tax rules, or under any state, local or foreign tax laws.
Required Regulatory Approvals
Antitrust Approvals
Under the HSR Act and the rules promulgated thereunder, Ormat
and U.S. Geothermal cannot complete the merger until they notify and furnish
information to the Federal Trade Commission and the Antitrust Division of the
U.S. Department of Justice, and specified waiting period requirements are
satisfied. Ormat and U.S. Geothermal filed the notification and report forms
under the HSR Act with the U.S. Federal Trade Commission and the Antitrust
Division on February 9, 2018. Ormat and U.S. Geothermal have each requested
early termination of the waiting period with respect to the merger under the HSR
Act. The waiting period expired on March 12, 2018.
To effect the merger, the merger agreement also requires Ormat
and U.S. Geothermal to use commercially reasonable efforts to avoid or eliminate
all impediments and obtain all consents, approvals and expirations or
terminations of waiting periods under any other antitrust laws that may be
required by any foreign or U.S. federal, state or local governmental
authority.
Federal Energy Regulatory Commission and U.S. Department of
Energy Approval
Under the merger agreement, the parties have each agreed to use
their commercially reasonable efforts to assist each other with obtaining the
consent of (a) the Federal Energy Regulatory Commission by making the required
filings under Section 203 of the Federal Power Act and (b) the DoE, as required
by one of U.S. Geothermals financing arrangements, in order to complete the
merger.
Other Approvals
In addition to the regulatory approvals described above, the
transactions contemplated by the merger agreement may require the approval of
other governmental authorities under applicable law, including foreign
regulatory laws. Other than as described above, neither U.S. Geothermal nor
Ormat is currently aware of any material governmental approvals or actions that
are required for completion of the transactions contemplated by the merger
agreement. It is currently contemplated that if any such additional material
governmental approvals or actions are required, those approvals or actions will
be sought.
While U.S. Geothermal has no reason to believe it will not be
possible to obtain these regulatory approvals in a timely manner, there is no
certainty that these approvals will be obtained within the period of time
contemplated by the merger agreement. For example, at any time before or after
completion of the merger, the Federal Trade Commission or the Antitrust Division
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the consummation
of the merger or seeking divestiture of substantial assets of Ormat or U.S.
Geothermal. Private parties may also bring actions under the antitrust laws
under certain circumstances.
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Under the merger agreement, both U.S. Geothermal and Ormat have
each agreed to use their commercially reasonable efforts to take or cause to be
taken all actions to obtain all regulatory and governmental approvals necessary,
proper or advisable to complete the merger. This includes obtaining required
approvals, consents or other authorizations in connection with the merger.
Notwithstanding the foregoing, neither Ormat nor merger sub is obligatedand
U.S. Geothermal is not permitted in order to resolve any objections asserted
under antitrust laws by any governmental authority with respect to the merger, to
agree with a governmental authority to divest any of its businesses, product
lines or assets, or to take or agree to take any other action or to agree to any
limitation or restriction of any kind on its business, operations, properties or
assets.
54
Litigation Relating to the Merger
On March 8, 2018, a purported shareholder filed a filed a
complaint and demand for jury trial, in the United States District Court for the
District of Delaware, captioned
Joseph A. Weinstock v. U.S. Geothermal, Inc.,
et al.
, No. 1:18-cv-00371 (D. Del.). The complaint names the Company and the
directors of the Company as defendants. The complaint asserts claims under
Sections 14(a) and 20(a) of the Exchange Act in connection with the disclosures
contained in the March 2, 2018 preliminary proxy statement issued by the
Company. The complaint seeks a variety of equitable and injunctive relief
including, among other things, enjoining the consummation of the merger, and
awarding the plaintiffs damages and costs and attorneys fees.
On March 12, 2018, a Kenneth Riche, a purported shareholder of
the Company filed an action on behalf of a putative class of Company
shareholders in the Court of Chancery in the State of Delaware, captioned,
Riche v. Pappas, et al.
, No. 2018-0177- (Del. Ch.). The complaint
alleges, among other things, that the directors of the Company violated their
fiduciary duties by failing to maximize shareholder value and that the
preliminary proxy statement filed in connection with the special meeting was
materially incomplete and misleading. The complaint seeks preliminary and
permanent injunctions related to the merger, rescissory damages, costs and
attorneys fees.
The Company believes the claims in these complaints are without
merit. However, at this time it is not possible to predict the outcome of these
matters or their effects on the Company or the merger. A preliminary injunction
could delay or jeopardize the completion of the merger, and an adverse judgment
granting permanent injunctive relief could indefinitely enjoin completion of the
merger. An adverse judgment for monetary damages could have an adverse effect on
the Company.
Deregistration and Delisting of Shares
Upon completion of the merger, the U.S. Geothermal common stock
currently listed on the NYSE American will cease to be listed on the NYSE
American and will be deregistered under the Exchange Act.
55
THE MERGER AGREEMENT
The following discussion sets forth the principal terms of
the merger agreement, a copy of which is attached as Annex A to this proxy
statement and is incorporated by reference herein. The rights and obligations of
the parties to the merger agreement are governed by the express terms and
conditions of the merger agreement, and not by this summary. This summary is not
complete and is qualified in its entirety by reference to the complete text of
the merger agreement. Forward-looking statements contained in this summary
describe events prescribed by the merger agreement, each of which may be subject
to various conditions and exceptions; therefore, such statements do not
necessarily constitute a prediction that such events will actually occur. U.S.
Geothermal urges you to read the merger agreement and this proxy statement
carefully in their entireties before making any decisions regarding the merger.
The Merger
Subject to the terms and conditions of the merger agreement,
and in accordance with the DGCL, merger sub, a Delaware corporation and wholly
owned subsidiary of Ormat, will merge with and into U.S. Geothermal, and U.S.
Geothermal will survive the merger as a wholly owned subsidiary of Ormat.
Closing and Effective Time of the Merger
The closing of the merger will occur as soon as possible, but
no later than three business days after the date the conditions to the parties
respective obligations to consummate the merger have been satisfied or waived,
unless otherwise agreed to by U.S. Geothermal and Ormat. The merger will become
effective at such time as the parties file a certificate of merger with the
Secretary of State of the State of Delaware (or at such later time as is agreed
to by U.S. Geothermal and Ormat and specified in the certificate of merger) (the
actual time of effectiveness of the merger, the effective time).
Treatment of Common Stock in the Merger
At the effective time, except as summarized in the subsequent
paragraphs of this subsection, each share of common stock outstanding
immediately prior to the effective time will be converted into the right to
receive $5.45 in cash, without interest and less applicable withholding tax (the
merger consideration). As a result of this conversion, from and after the
effective time, our stockholders will have only the right to receive the merger
consideration in respect of the shares of common stock that were so converted,
and will no longer have any other rights (including voting rights) in respect of
such shares.
Any shares of common stock that, immediately prior to the
effective time, are outstanding and: (a) held by U.S. Geothermal or any of its
direct or indirect subsidiaries; (b) owned by Ormat or any of its direct or
indirect subsidiaries or (c) owned by U.S. Geothermal stockholders who have
properly exercised and perfected appraisal rights under Section 262 of the DGCL
(as described in the following paragraph) will not be converted into the merger
consideration at the effective time. Shares of common stock that, immediately
prior to the effective time, are outstanding and held by U.S. Geothermal, Ormat
or any of their respective direct or indirect subsidiaries will be canceled
without consideration at the effective time.
Any shares of common stock held immediately prior to the
effective time by a stockholder who did not vote in favor of the merger (or
consent thereto in writing) and who is entitled to demand and properly demands
appraisal for such shares in accordance with, and who complies in all respects
with, Section 262 of the DGCL (which is included with this proxy statement as
Annex D) will not be converted into the right to receive the merger
consideration at the effective time. Those shares will instead be automatically
canceled and cease to exist at the effective time, and such holder shall cease
to have any rights thereto except the right to receive only the payment of the
appraised value of such shares under Section 262 of the DGCL. If, after the
effective time, any such holder fails to perfect, effectively withdraws or
otherwise loses such right to appraisal, such holders shares of common stock
will be treated as if they had been converted as of the effective time into the
right to receive the merger consideration.
Additionally, any merger consideration that would otherwise be
payable in respect of shares of common stock that, immediately prior to the
effective time, are outstanding and subject to vesting or forfeiture, will be
subject to the arrangement summarized below under Treatment of Options in the
Merger on page 56.
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Procedure for Receiving Merger Consideration in Respect of
Common Stock
Prior to the effective time, Ormat will appoint a U.S. bank or
trust company reasonably satisfactory to U.S. Geothermal to act as a paying
agent (the paying agent) for the payment of the applicable merger
consideration in exchange for shares of common stock. Prior to or at the
effective time, Ormat will deposit or cause to be deposited with the paying
agent an amount sufficient to pay the aggregate merger consideration to which
holders of shares of common stock will become entitled as a result of the
conversion of such shares into the right to receive merger consideration. No
later than three business days after the effective time, the paying agent will
mail to each holder of record of common stock a letter of transmittal and
instructions for effecting the surrender of stock certificates or book-entry
shares in exchange for the payment of any merger consideration to which the
holder of such certificates or book-entry shares is entitled. Following
surrender of a stock certificate representing shares of common stock that were
converted into the right to receive merger consideration in the merger to the
paying agent (together with a properly completed letter of transmittal and such
other customary documents as the paying agent may reasonably require), or, in
the case of book-entry shares, receipt of an agents message by the paying
agent evidencing such shares (or such other evidence, if any, of transfer as the
paying agent may reasonably request), the paying agent will pay or cause to be
paid the merger consideration with respect to such shares to such holder. In the
event that any funds are made available to the paying agent to pay for shares of
common stock for which appraisal rights have been properly demanded, such funds
shall be returned to Ormat upon demand.
Any funds made available to the paying agent (and any interest
or other income earned thereon) that remain unclaimed by the holders of shares
of common stock nine months after the effective time will be returned to Ormat
upon demand, and any such holder who has not exchanged stock certificates or an
agents message evidencing their shares of common stock for the applicable
merger consideration prior to that time may thereafter look only to Ormat
(subject to abandoned property, escheat or other similar laws) as general
creditors for payment of the merger consideration in respect of such shares. No
interest will accrue on any such unpaid merger consideration. Notwithstanding
the foregoing, Ormat will not be liable to any holder of shares of common stock
for any amounts paid to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Stockholders should not return their stock certificates with
the enclosed proxy card and should not forward stock certificates or any
agents message to the paying agent prior to the merger. When forwarding any
stock certificates or any agents message to the paying agent after the
merger, stockholders should include a properly completed letter of transmittal,
which stockholders of record should receive after the merger as described above.
Treatment of Options in the Merger
The merger agreement provides for the treatment in the merger
of outstanding stock options that have been granted by U.S. Geothermal and
remain outstanding immediately prior to the effective time, as summarized below.
At or prior to the effective time, U.S. Geothermal will take
all actions necessary to terminate its stock plan and will cause each
outstanding option to purchase U.S. Geothermal shares granted under the stock
plan (each, an option) that is outstanding and unexercised (without regard to
the exercise price of such option) as of immediately prior to the effective
time, whether vested or unvested, to become fully vested and exercisable
immediately prior to and contingent on the closing of the merger. At the
effective time, each such option (in each case, without the creation of
additional liability to U.S. Geothermal or any of its subsidiaries) will be
canceled, subject to the payment, if any, to which the holder of such option is
entitled.
The payment to which each holder of an option that is
outstanding and unexercised as of immediately prior to the effective time, and
has an exercise price per share that is less than the per share merger
consideration, shall be entitled to receive from U.S. Geothermal (as the
surviving corporation in the merger and a wholly owned subsidiary of Ormat)
shall be equal to: (a) $5.45
minus
the per-share exercise price of such
option
multiplied by
(b) the total number of shares subject to such
option. For example, if immediately prior to the effective time, you hold an
outstanding and unexercised option representing the right to purchase 1000
shares of U.S. Geothermal common stock with an exercise price of $4.00 per
share, you will be entitled to receive $1,450 (which is equal to (($5.45 -
$4.00) x 1000)), less applicable tax withholding, as a result of the conversion
of such option in the merger. Certain option holders will be required to sign an
acknowledgement prior to and as a pre-condition to receiving payment for their options. Payment to holders of options shall be made as
soon as reasonably practicable after the effective time, without interest and
less applicable withholding tax.
57
Representations and Warranties
The merger agreement contains representations and warranties
made by U.S. Geothermal to Ormat and merger sub and representations and
warranties made by Ormat and merger sub to U.S. Geothermal. The assertions
embodied in those representations and warranties were made solely for purposes
of the merger agreement, were made only as of specific dates and may be subject
to important qualifications and limitations agreed to by the parties in
connection with negotiating the terms of the merger agreement. The assertions
embodied in each partys representations and warranties are qualified by
information contained in confidential disclosure schedules that each party
provided to the other in connection with the merger agreement, were made for the
purpose of allocating contractual risk between the parties instead of
establishing matters of facts and may be subject to standards of materiality
applicable to the contracting parties that differ from those applicable to
investors or security holders. Accordingly, U.S. Geothermal stockholders and
other investors should not rely on representations and warranties as
characterizations of the actual state of facts or circumstances. Moreover,
information concerning the subject matter of such representations and warranties
may change after the date of the merger agreement, which subsequent information
may or may not be reflected in U.S. Geothermals public disclosures. For the
foregoing reasons, you should not rely on the representations and warranties
contained in the merger agreement as statements of factual information. This
description of the representations and warranties is included to provide U.S.
Geothermals stockholders with information regarding the terms of the merger
agreement. The representations and warranties in the merger agreement and the
description of them in this proxy statement should be read in conjunction with
the other information contained in the reports, statements and filings that U.S.
Geothermal publicly files with the SEC. See the section entitled Where You Can
Find More Information.
In the merger agreement, U.S. Geothermal, on the one hand, and
Ormat and merger sub, on the other hand, made a number of representations and
warranties to each other. The parties reciprocal representations and warranties
relate to, among other things:
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due incorporation or organization, valid existence and
(in the case of U.S. Geothermal and merger sub) good standing of the
applicable party under the laws of its applicable jurisdiction of
organization;
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corporate or other organizational power of the applicable
party to enter into the merger agreement and consummate the transactions
contemplated thereby, subject, in the case of U.S. Geothermal, to
obtaining the U.S. Geothermal stockholder approval and, in the case of
Ormat, to the adoption of the merger agreement by Ormat as the sole
stockholder of merger sub, and any required approval of applicable
regulatory authorities;
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the stockholder approval of the applicable party required
to consummate the merger;
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regulatory filings, consent and approval of governmental
entities in connection with the execution and delivery of the merger
agreement and the consummation of the transactions contemplated thereby by
the applicable party;
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the absence of any violation of or conflict with the
applicable partys organizational documents, contracts or applicable laws
as a result of entering into the merger agreement and consummating the
merger;
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the absence of undisclosed litigation and legal
proceedings against the applicable party; and
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the absence of undisclosed finders fees payable by the
applicable party.
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In addition to the foregoing, the merger agreement contains
representations and warranties made by U.S. Geothermal to Ormat and merger sub,
including with respect to, among other things:
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the recommendation of U.S. Geothermals Board
to adopt the merger agreement and approve the merger;
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the compliance of this proxy statement with
the Exchange Act, and the accuracy and completeness of material facts
stated herein;
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U.S. Geothermals capitalization and capital structure;
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the good standing, corporate power and authority and
capital structure of U.S. Geothermals subsidiaries;
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documents filed by U.S. Geothermal with the SEC since
October 1, 2015, the accuracy of information contained in those documents
and U.S. Geothermals compliance, since October 1, 2015, with the
applicable requirements of the Securities Act of 1933, as amended (the
Securities Act), the Exchange Act, the Sarbanes-Oxley Act of 2002, as
amended, and the applicable listing and corporate governance rules and
regulations of the NYSE American;
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U.S. Geothermals financial statements and internal
controls;
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the absence of certain changes or events, and the absence
of changes or events that would reasonably be expected to have,
individually or in the aggregate, a material adverse effect on U.S.
Geothermal, in each case since September 30, 2017;
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the absence of material undisclosed liabilities;
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compliance with applicable laws and possession of
permits, licenses and authorizations of governmental authorities used in
the operation of the business;
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matters related to real property, personal property and
assets;
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matters related to material project documents;
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filing of tax returns, payment of taxes and other tax
matters;
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matters related to employee benefit plans;
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labor and employment matters;
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compliance with environmental laws and regulations and
other environmental matters;
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matters with respect to U.S. Geothermals material
contracts;
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insurance matters;
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receipt by U.S. Geothermal of a financial opinion from
ROTH; and
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various industry regulatory statutes.
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The merger agreement also contains representations and
warranties made by Ormat and merger sub to U.S. Geothermal, including regarding:
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Ormats ownership of merger sub;
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the accuracy and completeness of material facts stated in
this proxy statement based upon information supplied by Ormat;
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the availability at the closing of the merger of
sufficient funds to consummate the transactions contemplated by the merger
agreement;
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Ormat and its affiliates not being an interested
stockholder (as defined in Section 203 of the DGCL) of U.S. Geothermal;
and
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matters related to solvency (subject to specified
assumptions) of U.S. Geothermal (as the surviving corporation in the
merger and wholly owned subsidiary of Ormat) immediately after giving
effect to all of the transactions contemplated by the merger agreement.
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Conduct of Business Pending the Merger
Subject to certain exceptions set forth in the merger agreement
or disclosure schedules thereto, from the date of the merger agreement until the
earlier of the effective time or the termination of the merger agreement, U.S.
Geothermal has agreed to, and has agreed to cause each of its subsidiaries to,
conduct its business in the ordinary course consistent with past practice and
use commercially reasonable efforts to preserve its and each of its
subsidiaries business organizations intact and maintain existing relations with
material customers, suppliers, distributors, employees and other persons with
whom U.S. Geothermal or its subsidiaries have business relationships, to allow
reasonable access to U.S. Geothermals representatives, properties, offices, and
other facilities and to all books, records and assets of U.S. Geothermal.
In addition, subject to certain exceptions set forth in the
merger agreement, U.S. Geothermal has agreed not to, and not to permit any of
its subsidiaries to, among other things:
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(i) issue, sell, grant, pledge, transfer, dispose of or
otherwise subject to a lien any equity securities of U.S. Geothermal or
any of its subsidiaries,
provided
that U.S. Geothermal may issue
common stock as required to be issued upon exercise or settlement of
options or other equity rights or obligations under the U.S. Geothermal
stock plan outstanding on the date of the merger agreement in accordance
with the terms of the stock plan in effect on the date of the merger
agreement and such options; (ii) redeem, purchase or otherwise acquire any
equity securities of U.S. Geothermal or any of its subsidiaries, except in
connection with withholding to satisfy tax obligations with respect to
options acquisitions in connection with the forfeiture of equity awards,
or acquisitions in connection with the net exercise of options; (iii)
establish a record date for, declare, authorize, set aside for payment or
pay any dividend on, or make any other distribution in respect of, any
equity securities of U.S. Geothermal or any of its subsidiaries (other
than dividends or distributions paid in cash to U.S. Geothermal or a
wholly owned subsidiary from a direct or indirect wholly owned subsidiary)
or (iv) split, combine, subdivide or reclassify any equity securities of
U.S. Geothermal or any of its subsidiaries;
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enter into, amend or extend any collective bargaining
contract or other contract or memorandum of understanding with a labor
union, works council or other employee representative body;
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(i) incur, issue, modify, renew, syndicate, refinance,
guarantee, assume or otherwise become liable for any indebtedness
(excluding (A) indebtedness in the ordinary course of business incurred
under U.S. Geothermals existing operating line and (B) the extension or
refinancing of any existing letters of credit required under any tolling,
sales, distribution, offtake or power purchase agreement (PPA), in the
case of clauses (A) and (B) above, up to an aggregate cap of $100,000) or
announce or authorize the announcement of any of the foregoing, (ii) enter
into any swap or hedging transaction or other derivative agreements other
than in the ordinary course of business consistent with past practice or
(iii) make any loans, capital contributions or advances to, or investments
in, any person (other than U.S. Geothermal and any majority- owned
subsidiary of U.S. Geothermal or to any employee as advances for ordinary
and necessary business expenses incurred in the ordinary course of
business consistent with past practice);
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sell, lease, license, subject to a lien (other than a
lien permitted under the merger agreement) or otherwise dispose of, in a
single transaction or series of related transactions, any of its
properties or assets whose value or purchase price, individually or in the
aggregate, exceeds $100,000, except (i) dispositions of obsolete or
worthless assets in the ordinary course of business consistent with past
practice, (ii) transfers among U.S. Geothermal and its subsidiaries or
(iii) liens on after-acquired property solely (A) that secure permitted
indebtedness and (B) that are attached and perfected as of the date of the
merger agreement;
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make or authorize capital expenditures, except (i)
certain capital expenditures set forth in the disclosure schedules to the
merger agreement or (ii) capital expenditures that do not exceed $250,000
in the aggregate;
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make any acquisition of (i) the equity securities of any
other person, (ii) a material portion of the assets of any other person or
(iii) any other properties or assets of any other person (other than U.S.
Geothermal or any of its subsidiaries) for a purchase price that,
individually or in the aggregate, exceeds $250,000, except, in each case,
for the acquisition of supplies, parts, fuel, materials and other
inventory in the ordinary course of business consistent with past practices or any capital
expenditures made in accordance with certain provisions set forth in the merger
agreement;
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(i) increase the compensation or benefits in respect of
any of its or its subsidiaries current or former directors or executive
officers, other than as required by the terms of any applicable agreement
or benefit plan in existence on the date of execution of the merger
agreement and set forth in the disclosure schedules, (ii) provide
increases in salaries, wages, benefits or other compensation of current or
former employees or independent contractors who are not executive officers
or directors of U.S. Geothermal other than (A) as required by the terms of
any U.S. Geothermal plan in existence as of the date of the merger
agreement or (B) in the ordinary course of business consistent with past
practice, (iii) enter into any severance, change- in-control, or retention
agreement with any employee, director or independent contractor, (iv)
establish, adopt, terminate or amend any U.S. Geothermal plan or any plan,
program, arrangement, practice or agreement that would be a U.S.
Geothermal plan if it were in existence on the date of the merger
agreement or (v) hire or commit to hire any employee, or engage or commit
to engage any independent contractor, in either case with an annual
compensation in excess of $100,000 or with aggregate annual compensation
of all such employees and independent contractors in excess of $250,000;
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make any changes in financial accounting methods,
principles or practices (or change an annual accounting or period), except
insofar as may be required by applicable law or a change in GAAP;
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(i) modify, amend, renew, extend or terminate, or waive
or release any rights under, in a manner that is adverse to U.S.
Geothermal, any material contract, (ii) enter into any contract, which, if
entered into prior to the date of the merger agreement would have been a
material contract or (iii) enter into any new contract that contains a
change in control provision in favor of the other party or parties thereto
or would otherwise require a payment to or give rise to any rights to such
other party or parties in connection with the merger;
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grant any refunds, credits, rebates or other allowances
by U.S. Geothermal or its subsidiaries to any supplier, vendor or
distributor in excess of $100,000 per supplier, vendor or distributor, or
$250,000 in the aggregate;
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amend the U.S. Geothermal charter documents or
organizational documents of any subsidiary;
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adopt a plan or agreement of complete or partial
liquidation or dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of U.S. Geothermal or any of its
subsidiaries, or enter into a letter of intent or agreement in principle
with respect thereto, other than the merger;
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fail to maintain, terminate or cancel any insurance
coverage maintained by U.S. Geothermal or any of its subsidiaries with
respect to any material assets or risk without replacing such coverage
with insurance coverage in comparable amounts and scope;
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pay, discharge, settle, compromise, waive or release any
pending or threatened legal action which (i) requires payment to or by
U.S. Geothermal or any subsidiary of U.S. Geothermal (exclusive of
attorneys fees) in excess of $150,000 in any single instance or in excess
of $250,000 in the aggregate, (ii) involves injunctive or equitable relief
or restrictions on the business activities of, or criminal sanctions on,
U.S. Geothermal or any of its subsidiaries, (iii) involves the issuance of
equity securities of U.S. Geothermal or any of its subsidiaries or (iv)
relates to the merger;
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(i) make any change (or file a request to make any such
change) in any method of tax accounting or any annual tax accounting
period that would materially prejudice U.S. Geothermal or any subsidiary
for a period after the closing as compared to periods prior to the
closing; (ii) make, change or rescind any tax election; (iii) settle or
compromise any tax liability, audit claim, refund or assessment in excess
of $100,000 in any single instance or in excess of $250,000 in the
aggregate; (iv) surrender any right to claim for a tax refund in excess of
$10,000; (v) file any tax return that is prepared on a basis that is
materially inconsistent with the elections, accounting methods,
conventions and principles of taxation used for the most recent taxable
periods for which comparable tax returns involving similar tax items have
been filed by U.S. Geothermal; or (vi) amend any federal income tax return
with respect to an amount of taxes that is material to U.S. Geothermal and
its subsidiaries, taken as a whole, unless otherwise required by law;
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permit any of its subsidiaries or its or their respective
representatives or independent contractors to promise, authorize or make
any payment to, or otherwise contribute any item of value to, directly or
indirectly, any non-U.S. official, in each case, in violation of the US
Foreign Corrupt Practices Act of 1977, as amended, or other
anti-corruption laws;
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enter into any transaction, or series of related
transactions, agreement, arrangement or understanding that would be
required to be disclosed under Item 404 of Regulation S-K promulgated
under the Securities Act;
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negotiate or enter into any interconnection or
transmission contract, PPA or other contract for the sale of capacity,
energy and/or environmental attributes from or to any project, expansion
project or development project;
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enter into any new line of business outside the existing
businesses of U.S. Geothermal and its subsidiaries;
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adopt any rights agreement, poison pill or similar
contract or plan; or
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authorize any of, commit or agree or adopt resolutions,
in writing or otherwise, to take any of, the foregoing actions.
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In the merger agreement, U.S. Geothermal and Ormat also agree
that they will not take actions, or agree or commit to take actions, that would
reasonably be expected to prevent or materially delay or impede consummation of
the merger and related transactions.
No Solicitation; Changes in Recommendations
In the merger agreement, U.S. Geothermal has agreed that the
Board will recommend that U.S. Geothermals stockholders adopt and approve the
merger agreement, and that neither U.S. Geothermal nor its subsidiaries will,
nor will it authorize or permit any of their respective representatives to:
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conduct or engage in any discussions or negotiations
with, disclose any non-public information relating to U.S. Geothermal or
any of its subsidiaries to, afford access to the business, properties,
assets, books, or records of U.S. Geothermal or any of its subsidiaries
to, or knowingly assist, participate in, facilitate, or encourage any
effort by, any person in connection with or in response to, or that could
reasonably be expected to lead to, any takeover proposal (as defined
below);
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except where the U.S. Geothermal Board determines that
the failure to do so would be inconsistent with its fiduciary duties, (i)
amend or grant any waiver or release under any standstill or similar
agreement with respect to any class of equity securities of U.S.
Geothermal or any of its subsidiaries or (ii) approve any transaction
under, or any person becoming an interested stockholder under, Section
203 of the DGCL (other than the merger, the transactions contemplated by
the merger, Ormat and merger sub); or
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adopt, approve or enter into any alternative acquisition
agreement (as defined below).
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U.S. Geothermal was also required to, and to cause its
subsidiaries and its and their respective representatives to, cease immediately
and cause to be terminated any and all existing activities, discussions,
negotiations or solicitations, if any, with any third party with respect to any
takeover proposal and to use its commercially reasonable efforts to cause any
such third party and its representatives in possession of non-public information
in respect of U.S. Geothermal or any of its subsidiaries that was furnished by
or on behalf of U.S. Geothermal and its subsidiaries to return or destroy (and
confirm destruction of) all such information and terminate the access of such
third party and its representatives to any electronic data room maintained by or
on behalf of U.S. Geothermal or any of its subsidiaries.
If U.S. Geothermal or its representatives receive a written
takeover proposal from any person that was obtained not in violation of the
merger agreement prior to the receipt of the U.S. Geothermal stockholder
approval, the Board may: (a) contact the person who made such bona fide written
unsolicited takeover proposal for the purpose of clarifying such takeover
proposal and the material terms and conditions and likelihood of consummation
thereof in order to determine whether such takeover proposal constitutes or
would reasonably be expected to result in a superior proposal (as defined below)
and (b) if the U.S. Geothermal Board determines in good faith, after consultation with its outside legal and financial advisors,
that such takeover proposal constitutes or would reasonably be expected to
result in a superior proposal, thereafter (i) furnish to such person non-public
information relating to U.S. Geothermal or any of its subsidiaries pursuant to
an executed confidentiality agreement that constitutes an acceptable
confidentiality agreement (as defined below); (ii) make an adverse
recommendation change (as defined below) and (iii) take any action that any
court of competent jurisdiction orders U.S. Geothermal to take (which order
remains unstayed);
provided
that prior to taking any of such actions the
Board has determined, in its good faith judgment, after consultation with its
financial advisor and outside legal counsel, that failure to take such action
would be inconsistent with its fiduciary duties under applicable law.
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Prior to taking any of the actions referred to in the foregoing
paragraph, the Board must deliver to Ormat at least five business days prior
written notice advising Ormat that it intends to take such action and stating
the factors taken into account by the Board in determining that any such
takeover proposal constitutes or would reasonably be expected to result in a
superior proposal. U.S. Geothermal must also notify Ormat no later than 24 hours
after knowledge of U.S. Geothermals (or any of its subsidiaries or
representatives) receipt of any takeover proposal, any inquiry or request that
could reasonably be expected to lead to a takeover proposal, any request for
non-public information relating to U.S. Geothermal or any of its subsidiaries or
for access to the business, properties, assets, books, or records of U.S.
Geothermal or any of its subsidiaries by any third party. In such notice, U.S.
Geothermal shall identify the person making, and details of the material terms
and conditions of, any such takeover proposal, indication or request.
In addition, U.S. Geothermal:
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will keep Ormat reasonably informed, on a prompt basis,
of the status and material terms of any such takeover proposal, indication
or request, including any material amendments or proposed amendments as to
price and other material terms thereof;
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will promptly provide Ormat with a list of any non-public
information concerning U.S. Geothermals and any of its subsidiarys
business, present or future performance, financial condition or results of
operations provided to any person, and, to the extent such information has
not been previously provided to parent, copies of such information;
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will not, and will not cause or permit any subsidiary of
U.S. Geothermal to, enter into any contract with any person, or otherwise
take any action, that would prohibit or restrict in any way U.S.
Geothermal or such subsidiary from providing any of such information to
Ormat.
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In addition, subject to the paragraph below, the Board may not
(a) make an adverse recommendation change (as defined below) or (b) authorize,
cause or permit U.S. Geothermal or any of its subsidiaries or representatives to
execute or enter into any alternative acquisition agreement (as defined below).
However, subject to the following paragraph, at any time prior
to obtaining the U.S. Geothermal stockholder approval, if (a) an intervening
event (as defined below) has occurred or (b) U.S. Geothermal receives a
bona
fide
written takeover proposal that was not obtained in violation of the
merger agreement that the Board has determined, in its good faith judgment,
after consultation with its financial advisor and outside legal counsel
constitutes a superior proposal, then the Board may (i) in the case of either
(a) or (b), make an adverse recommendation change if the Board has determined,
in its good faith judgment, after consultation with its financial advisor and
outside legal counsel, that failure to take such action would be inconsistent
with the directors fiduciary duties under the DGCL, or (ii) in the case of (b),
cause U.S. Geothermal to terminate the merger agreement to enter into an
alternative acquisition agreement with respect to a superior proposal pursuant
to the termination provisions of the merger agreement.
The Board will not be permitted to make an adverse
recommendation change or cause U.S. Geothermal to terminate the merger agreement
to enter into an alternative acquisition agreement with respect to a superior
proposal unless prior to taking such action:
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U.S. Geothermal has complied in all respects
with its obligations under the provisions of the merger agreement
described in this section;
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U.S. Geothermal has provided prior written notice to
Ormat, at least five business days in advance of making such adverse
recommendation change or entering into an alternative acquisition
agreement (such period, the negotiation period), (i) advising Ormat of
its intention to effect an adverse recommendation change, which notice
shall state expressly that the Company has received a takeover proposal,
that the Board intends to declare a superior proposal and that the Board
intends to effect an adverse recommendation change and/or the Company
intends to enter into (or permit any subsidiary to enter into) an
alternative acquisition agreement and (ii) attaching the most current
version of the proposed agreement (which version shall be updated promptly
after material amendment thereto) and the identity of the person making
such superior proposal;
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during the negotiation period, U.S. Geothermal has, and
has caused its representatives to, negotiate with Ormat in good faith to
make such adjustments in the terms and conditions of the merger agreement
so that such takeover proposal ceases to constitute a superior proposal if
Ormat, in its discretion, proposes to make such adjustments (it being
agreed that in the event that, after commencement of the negotiations
period, there is any material revision to the terms of a superior
proposal, the negotiation period shall be extended to ensure that at least
five business days remain in the negotiation period subsequent to the time
U.S. Geothermal notifies Ormat of any such material revision);
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in the case of an intervening event, U.S. Geothermal has
provided prior written notice (commencing the negotiation period) which
includes a reasonably detailed description of the underlying facts giving
rise to, and the reasons for taking such action, and during the
negotiation period, U.S. Geothermal has, and has caused its
representatives to, negotiate with Ormat in good faith to make such
adjustments to the merger agreement so that the underlying facts giving
rise to, and the reasons for taking such action, ceases to constitute an
intervening event if Ormat, in its discretion, proposes to make such
adjustments (it being agreed that in the event that, after commencement of
the negotiations period, there is any material development in an
intervening event, the negotiation period shall be extended to ensure that
at least five business days remain in the negotiation period subsequent to
the time U.S. Geothermal notifies Ormat of any such material development);
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after so negotiating with Ormat during the negotiation
period, the Board has considered in good faith any and all changes to the
merger agreement and the transactions contemplated by the merger agreement
offered by Ormat (or other proposals made by Ormat), and has determined,
in its good faith judgment, after consultation with its financial advisor
and outside legal counsel, (i) (A) if the determination by the Board is in
response to a superior proposal, that such superior proposal would
continue to constitute a superior proposal even if such changes or other
proposals were to be given effect or (B) if the determination by the Board
is in response to an intervening event, that such changes would not
obviate the need for an adverse recommendation change in response to such
intervening event and (ii) that the failure to make an adverse
recommendation change and/or enter into an alternative acquisition
agreement would be inconsistent with its fiduciary duties under applicable
law; and
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if the merger agreement is terminated to enter into an
alternative acquisition agreement with respect to a superior proposal,
U.S. Geothermal has validly terminated the merger agreement pursuant to
and in accordance with the provisions relating to such a termination
described under Termination of the Merger Agreement below (including
paying the applicable termination fee to Ormat prior to such termination).
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An acceptable confidentiality agreement means any customary
confidentiality and standstill agreement that (a) does not contain any provision
prohibiting U.S. Geothermal or any of its subsidiaries from making any of the
disclosures required to be made to Ormat pursuant to the merger agreement and
(b) contains confidentiality and standstill provisions that are no less
favorable to U.S. Geothermal than those contained in the confidentiality
agreement with Ormat.
An adverse recommendation change means the U.S. Geothermal
Board: (a) fails to make, withdraws, amends, modifies, or materially qualifies,
in a manner adverse to Ormat, its recommendation in favor of the merger, or
publicly proposes to do any of the foregoing; (b) fails to include its
recommendation of the merger with Ormat in this proxy statement; (c) recommends,
adopts, approves or endorses or publicly proposes to recommend, adopt, approve
or endorse a takeover proposal; (d) fails to recommend against acceptance of any
tender offer or exchange offer for the U.S. Geothermal shares of common stock within ten
business days after the commencement of such offer; (e) fails to reaffirm
(publicly, if so requested by Ormat) its recommendation in favor of the merger
within ten business days after the date any takeover proposal (or material
modification thereto) is first publicly disclosed by U.S. Geothermal or the
person making such takeover proposal; (f) makes any public statement
inconsistent with the its recommendation in favor of the merger or (g) resolves
or agrees to take any of the foregoing actions.
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The term alternative acquisition agreement means any
agreement in principle, letter of intent, term sheet, memorandum of
understanding, acquisition agreement, merger agreement, option agreement, joint
venture agreement, partnership agreement or other contract providing for or
relating to any takeover proposal.
The term intervening event means any event, circumstance,
change, effect, development or condition occurring or arising after the date of
the merger agreement that affects or would be reasonably likely to affect the
business, assets, properties, liabilities, results of operations or condition
(financial or otherwise) of U.S. Geothermal and its subsidiaries, taken as a
whole and that (a) was neither known to, nor reasonably foreseeable by, any
member of the U.S. Geothermal Board as of the date of the merger agreement, (b)
is not (i) a change or development in the national, foreign, regional, state or
local wholesale or retail markets or prices for electric power, capacity,
emissions allowances, fuel, water or steam or the transportation of any of the
foregoing or (ii) a change in the rates that U.S. Geothermal or any of its
subsidiaries may charge for electricity, energy, capacity and/or ancillary
services or any other product or service subject to regulation by FERC and (c)
does not relate to any takeover proposal;
provided
,
however
, that
in no event shall any of the following events constitute an intervening event:
(x) compliance with or performance under merger agreement or the transactions
contemplated thereby or (y) changes in the price or trading volume of U.S.
Geothermals common stock (except that the underlying causes giving rise to or
contributing to any such change may be taken into account in determining whether
an intervening event has occurred).
The term superior proposal means a bona fide written takeover
proposal (replacing any reference to 20% with 50%) that the U.S. Geothermal
Board determines in good faith, after consultation with its outside legal and
financial advisors, (a) that is reasonably likely to be consummated in
accordance with its terms, taking into account factors that it considers
relevant, but in any event includes legal, financial (including the availability
of committed financing), regulatory, timing and other aspects (including
certainty of closing) of such takeover proposal, the person or group (as defined
in Section 13(d) of the Exchange Act) making the proposal and any revisions to
the terms of the merger agreement and the merger proposed by Ormat during the
negotiation period and (b) that would result in a transaction that, if
consummated, would be more favorable to the U.S. Geothermal stockholders than
the merger from a financial perspective.
The term takeover proposal means any bona fide inquiry,
proposal, or offer from, or indication of interest in making a proposal or offer
by, any third party relating to any transaction or series of related
transactions, involving any: (a) direct or indirect acquisition of assets of
U.S. Geothermal or its subsidiaries (including any equity securities of
subsidiaries, but excluding sales of assets in the ordinary course of business)
equal to 20% or more of the fair market value of U.S. Geothermals consolidated
assets or to which 20% or more of U.S. Geothermals net revenues or net income
on a consolidated basis are attributable; (b) direct or indirect acquisition of
20% or more of any equity securities of U.S. Geothermal; (c) tender offer or
exchange offer that if consummated would result in any person or group (as
defined in Section 13(d) of the Exchange Act) beneficially owning (within the
meaning of Section 13(d) of the Exchange Act) 20% or more of the voting power of
U.S. Geothermal; (d) merger, consolidation, other business combination, or
similar transaction involving U.S. Geothermal or any of its subsidiaries,
pursuant to which such person or group (as defined in Section 13(d) of the
Exchange Act) would own 20% or more of the fair market value of U.S.
Geothermals consolidated assets or 20% or more of the net revenues or net
income of U.S. Geothermal and its subsidiaries, taken as a whole; (e)
liquidation, dissolution (or the adoption of a plan of liquidation or
dissolution), or recapitalization or other significant corporate reorganization
of U.S. Geothermals or one or more of its subsidiaries which, individually or
in the aggregate, generate or constitute 20% or more of the fair market value of
U.S. Geothermals consolidated assets or 20% or more of the net revenues or net
income of U.S. Geothermal and its subsidiaries, taken as a whole; or (f) any
combination of the foregoing. For purposes of this definition, fair market
value means the value resulting from discounting the operating cash flows of
U.S. Geothermal and its subsidiaries using a discount rate of 7.0% per annum,
and taking into account the following factors and assumptions:
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(1)
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Revenues, operations and maintenance costs and capital
expenditures expected for U.S. Geothermals projects and expansion
projects.
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(2)
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Any operating cash flows projected for any period which
occurs after the expiration of the PPA of an operating project will be
based on the last years operating cash flows assuming 2% escalation until
the end of the 50 year period.
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Indemnification and Insurance
The merger agreement provides that for a period of six years
after the effective time of the merger, Ormat will cause U.S. Geothermal, as the
surviving corporation, to indemnify and hold harmless U.S. Geothermals (and its
subsidiaries) present and former officers, directors, employees and agents
(indemnitees) with respect to acts or omissions occurring at or prior to the
effective time of the merger, to the same extent such indemnitees are entitled
to indemnification as of the date of the merger agreement by U.S. Geothermal or
any of its subsidiaries pursuant to applicable law, U.S. Geothermals charter
documents, the organizational documents of any applicable subsidiaries or any
indemnification agreements in existence on the date of the merger agreement.
In addition, for six years after the effective time of the
merger:
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Ormat will cause to be maintained in effect provisions in
U.S. Geothermals certificate of incorporation and bylaws regarding
elimination of liability of directors, indemnification of officers,
directors and employees and advancement of expenses that are no less
advantageous to the intended beneficiaries than the corresponding
provisions in existence on the date of the merger agreement; and
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Ormat will, and will cause the surviving corporation to,
advance any expenses (including the fees and expenses of legal counsel) of
any indemnitee as incurred to the same extent such indemnitees are
entitled to advancement of expenses as of the date of the merger agreement
by U.S. Geothermal or any of its subsidiaries pursuant to applicable law,
U.S. Geothermal charter documents, the organizational documents of such
subsidiaries or any indemnification agreements in existence on the date of
the merger agreement and made available to Ormat,
provided
,
however
, that the individual to whom expenses are advanced
provides, if requested by Ormat, an undertaking to repay such advances if
it shall be determined that such individual is not entitled to be
indemnified.
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The merger agreement further provides that, prior to the
effective time, U.S. Geothermal may purchase, for an aggregate amount not to
exceed 300% of the current aggregate annual premium (the maximum premium), a
six-year tail officers and directors liability insurance policy providing
coverage for the indemnitees on terms and conditions providing substantially
equivalent benefits as the current policies of directors and officers
liability insurance maintained by U.S. Geothermal and its subsidiaries with
respect to matters existing or occurring prior to the effective time, covering
without limitation the transactions contemplated in the merger agreement;
provided
,
however
, that if the premium for such tail policy shall
exceed the maximum premium, U.S. Geothermal shall provide or cause to be
provided a tail policy for the applicable individuals with the best coverage as
shall then be available at an annual premium equal to the maximum premium. After
the effective time, U.S. Geothermal, as the surviving corporation, shall cause
such policy to be maintained in full force and effect, for its full term, and to
honor all of its obligations thereunder and neither Ormat nor U.S. Geothermal,
as the surviving corporation, shall have any further obligations pursuant to the
applicable provisions in the merger agreement.
Employee Matters
The merger agreement provides that no later than 45 days prior
to the date of the special meeting of the U.S. Geothermal stockholders, Ormat
(or its designee) shall offer employment to such employees of U.S. Geothermal or
its subsidiaries as Ormat may determine in its sole discretion and such offers
of employment shall be conditioned on the closing of the merger. Ormat shall
provide, or shall cause to be provided, to each such employee who accepts an
offer of employment (the continuing employees) compensation and benefits that,
taken as a whole, are at a level substantially similar to the compensation and
benefits (other than severance benefits and equity securities) provided by U.S.
Geothermal or its subsidiaries to such continuing employees immediately prior to
the effective time;
provided
,
however
, that nothing in the merger
agreement shall create any right to continued employment in any continuing
employee or prohibit the surviving corporation from terminating the employment
of any continuing employee or from amending, modifying or terminating any U.S.
Geothermal plan (a company plan).
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For purposes of vesting, eligibility to participate and levels
of benefits (but not accrual) under the employee benefit plans of Ormat and its
subsidiaries providing benefits to any continuing employee after the effective
time (including the Company plans), Ormat will use commercially reasonable
efforts to provide that each continuing employee will be credited with his or
her years of service with U.S. Geothermal and its subsidiaries and their
respective predecessors before the effective time, to the same extent as such
continuing employee was entitled, before the effective time, to credit for such
service under any similar company plan in which such continuing employee
participated or was eligible to participate immediately prior to the effective
time.
In addition, Ormat will use its commercially reasonable efforts
to cause (a) any applicable waiting period under any employee benefit plan of
Ormat and its subsidiaries providing benefits to any continuing employee after
the effective time to be waived with respect to each such continuing employee to
the extent coverage under such plan is replacing comparable coverage under a
company plan in which such continuing employee participated immediately before
the effective time and (b) for purposes of each such plan providing medical,
dental, pharmaceutical and/or vision benefits to any continuing employee, all
pre-existing condition exclusions and actively-at-work requirements of such plan
to be waived for such continuing employee and his or her covered dependents, to
the extent such conditions were inapplicable or waived under the comparable
company plan of U.S. Geothermal or its subsidiaries in which such continuing
employee participated immediately prior to the effective time. Ormat will make
commercially reasonable efforts to cause any eligible expenses incurred by any
continuing employee and his or her covered dependents during the portion of the
plan year of the applicable company plan ending on the date such continuing
employees participation in the corresponding employee benefit plan of Ormat and
its subsidiaries begins to be taken into account under such plan for purposes of
satisfying all deductible, coinsurance and maximum out-of-pocket requirements
applicable to such continuing employee and his or her covered dependents for the
applicable plan year as if such amounts had been paid in accordance with such
plan.
Notwithstanding the provisions of the merger agreement
summarized in this section, the merger agreement provides that such provisions
are solely for the benefit of the parties to the merger agreement. No covered
employee (including any beneficiary or dependent thereof) or any other person
will be regarded for any purpose as a third-party beneficiary of the merger
agreement.
Change of Control Payments and Service Bonuses
The merger agreement provides that Ormat will assume and honor
all change of control payment obligations under the terms of certain specified
employment agreements. Additionally, U.S. Geothermal, or U.S. Geothermal as the
surviving corporation, as applicable, will pay certain specified amounts (each,
a service bonus) to certain persons set forth on the merger agreement
disclosure schedules (service bonus recipients), such amounts to be reduced by
any amounts to be withheld under applicable laws. None of the service bonus
recipients are directors or named executive officers of U.S. Geothermal who
receive the payments referred to under the heading The Merger Interests of the
Companys Directors and Executive Officers in the Merger on page 31.
The obligation of U.S. Geothermal, or U.S. Geothermal as the
surviving corporation, as applicable, to pay, and the right of any service bonus
recipient to receive, will be subject to satisfaction certain conditions set
forth in the merger agreement, including specified timing requirements and the
execution of a general release. Service bonuses will be paid in cash through the
normal payroll payment mechanism of U.S. Geothermal, or U.S. Geothermal as the
surviving corporation, as applicable. Nothing in the merger agreement creates
any right to continued employment for any service bonus recipient. The aggregate
amount of all service bonuses, assuming all are paid, is $1,101,805.
Commercially Reasonable Efforts; Other Agreements
Required Regulatory Approvals
Subject to the exceptions set forth in the following paragraph,
U.S. Geothermal and Ormat have each agreed to use their commercially reasonable
efforts to take all actions necessary, proper or advisable to consummate the
transactions contemplated by the merger agreement as promptly as practicable,
including efforts needed to prepare for, obtain and maintain all necessary
regulatory and governmental approvals. This includes:
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obtaining required U.S. and foreign antitrust approvals,
consents or other authorizations and requesting early termination of the
waiting period with respect to the merger transaction under the HSR Act;
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making filings required under and in compliance with the
requirements of the Exchange Act and the rules of the NYSE American; and
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obtaining the consent of FERC under Section 203 of the
FPA.
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Notwithstanding anything to the contrary in the immediately
preceding paragraph, none of Ormat, merger sub or U.S. Geothermal will be
required in order to resolve any objections asserted under antitrust laws by any
governmental authority with respect to the merger transaction to divest any of
its businesses, product lines or assets, or to take or agree to take any other
action or to agree to any limitation or restriction of any kind on its business,
operations, properties or assets.
Proxy Statement
U.S. Geothermal agreed to prepare and file with the SEC this
proxy statement and cause this proxy statement to be distributed to the U.S.
Geothermal stockholders as soon as reasonably practicable after the date of the
merger agreement. Ormat and merger sub agreed to furnish certain information and
otherwise cooperate and assist with the preparation of this proxy statement
pursuant to the terms of the merger agreement.
Other Agreements
The merger agreement contains certain other agreements,
including agreements relating to notifications of certain events, actions that
could implicate state anti-takeover laws, public announcements and
confidentiality.
Merger Sub Sole Stockholder Approval
The merger agreement provides that the merger is subject to the
adoption and approval by the sole stockholder of merger sub, Ormat, of the
merger agreement and the transactions contemplated by the merger agreement.
Conditions to Completion of the Merger
The obligations of U.S. Geothermal, Ormat and merger sub to
consummate the merger are subject to the satisfaction or waiver of certain
customary conditions on or prior to the effective time, including the following:
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the receipt of the U.S. Geothermal stockholder approval;
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the expiration or termination of any waiting period
applicable to the consummation of the merger and the receipt all required
approvals under the HSR Act and any other applicable antitrust laws;
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the absence of any restraining order, preliminary or
permanent injunction or other legal restraint or prohibition preventing
the consummation of the merger; and
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the receipt the required FERC approvals and all other
required consents or approvals.
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Ormats and merger subs obligations to consummate the merger
are subject to the satisfaction or waiver of additional conditions, which
include the following:
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the accuracy (disregarding all materiality qualifiers
contained therein) of U.S. Geothermals representations and warranties in
the merger agreement as of the date of the merger agreement and as of the
effective time (or, with respect to representations and warranties that by
their terms are made as of another specified time, the accuracy
(disregarding all materiality qualifiers contained therein) as of such
time), except where the inaccuracy, individually or in the aggregate, has
not had and would not reasonably be expected to have a material adverse
effect on U.S. Geothermal;
provided
that:
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(i)
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in the case of certain designated capitalization matters
U.S. Geothermals representations and warranties must be true and correct
when made and as of immediately prior to the effective time, as if made at
and as of such time (except those representations and warranties that
address matters only as of a particular date, which shall be true
and correct as of that date) except in case for such inaccuracies
that are de minimus individually and in the aggregate;
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(ii)
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those representations and warranties relating to U.S.
Geothermals capitalization other than those certain designated
capitalization matters must be true and correct when made and as of
immediately prior to the effective time, as if made at and as of such time
(except those representations and warranties that address matters only as
of a particular date, which must be true and correct as of that date)
except in case for such inaccuracies that would not reasonably be expected
to result in additional merger consideration or other additional
obligations or liabilities set forth more specifically in the merger
agreement of more than $250,000; and
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(iii)
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the representations and warranties relating to matters
including organization, standing, authorization, non-contravention,
absence of certain changes and brokers must be true and correct in all
respects when made and as of immediately prior to the effective time, as
if made at and as of such time (except those representations and
warranties that address matters only as of a particular date, which must
be true and correct in all respects as of that
date);
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U.S. Geothermals performance in all material respects of
its obligations under the merger agreement required to be performed at or
prior to the effective time;
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there has not occurred any event, change, effect or
development that, individually or in the aggregate, has had or would
reasonably be expected to have a material adverse effect on U.S.
Geothermal since the date of the merger agreement;
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the delivery to Ormat of an officers certificate from
U.S. Geothermal confirming that the conditions described in the
immediately preceding three bullet points have been satisfied; and
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the delivery to Ormat of a list, dated as of the closing
date, of all expenses incurred by U.S. Geothermal or any of its
subsidiaries prior to the closing date or expected by be incurred by U.S.
Geothermal or any of its subsidiaries on or after the closing date.
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U.S. Geothermals obligations to complete the merger are
subject to the satisfaction or waiver of additional conditions, which include
the following:
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the accuracy (disregarding all materiality qualifiers
contained therein) of Ormats and merger subs representations and
warranties in the merger agreement as of the date of the merger agreement
and as of the effective time (or, with respect to representations and
warranties that by their terms are made as of another specified time, the
accuracy as of such time), except where the failure of such
representations and warranties to be so true and correct would not
reasonably be expected to have, individually or in the aggregate, a
material adverse effect on Ormats and merger subs ability to consummate
the merger transaction;
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Ormats and merger subs performance in all material
respects of their obligations under the merger agreement required to be
performed at or prior to the effective time; and
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the delivery to U.S. Geothermal of an officers
certificate from Ormat confirming that the conditions described in the
immediately preceding two bullet points have been satisfied.
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For purposes of the merger agreement, a material adverse
effect with respect to U.S. Geothermal means any effect, change, event, state
of fact, development, circumstance or occurrence (whether or not constituting
any breach of a representation, warranty, covenant or agreement set forth in the
merger agreement) that, individually or in the aggregate with all other effects,
changes, events, circumstances, states of fact or developments, would or would
reasonably be expected to (a) have a material adverse effect on the business,
results of operations, assets, liabilities or financial condition of (i) any
significant subsidiary of U.S. Geothermal (as such term is defined in Rule
1-02(w) under Regulation S-X) or (ii) U.S. Geothermal and its subsidiaries taken
as a whole, or (b) prevent or materially impair or delay the consummation of the merger transactions,
except that none of the following matters will be deemed to be or constitute a
material adverse effect or will be taken into account when determining whether a
material adverse effect has occurred or exists. Such matters will include any
effect, change, event, state of fact, development, circumstance or occurrence:
69
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generally affecting (i) any of the industries in which
U.S. Geothermal and its subsidiaries operate or (ii) the economy, credit
or financial or capital markets in the United States or elsewhere in the
world, including changes in interest or exchange rates, or
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to the extent arising out of, resulting from or
attributable to (i) changes in law (or in the interpretation thereof) or
GAAP (or in the interpretation thereof) after the date of the merger
agreement, (ii) the announcement, pendency or performance of the merger
agreement or the consummation of the merger transactions (other than for
purposes of certain representations and warranties set forth in the merger
agreement, (iii) acts of war, sabotage or terrorism occurring, or any
escalation or worsening of any such acts of war, sabotage or terrorism,
(iv) earthquakes, hurricanes, tornados or other natural disasters, (v) any
action taken by U.S. Geothermal or its subsidiaries that is expressly
required by the merger agreement or with Ormats written consent or at
Ormats written request, (vi) any decline in the market price, or change
in trading volume, of the capital stock of U.S. Geothermal, (vii) any
failure to meet any internal or public projections, forecasts or estimates
of revenue or earnings in and of itself (provided that the exceptions in
clauses (vi) and (vii) shall not prevent or otherwise affect a
determination that the underlying cause of any such decline or failure is
a material adverse effect) or (viii) any change in, or loss of, the
relationship of U.S. Geothermals or its subsidiaries customers,
suppliers, vendors, lenders or employees as a result of the execution,
pendency or performance of the merger agreement or the consummation of the
merger transactions (other than for purposes of certain representations
and warranties set forth in the merger agreement.
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The effects, changes, events, circumstances or occurrences
described in the two bullet points immediately above will only be excluded from
a determination of whether a material adverse effect has occurred or would
reasonably be expected to occur if and to the extent that they do not have,
individually or in the aggregate, a materially disproportionate effect on the
Company and its subsidiaries, taken as a whole, relative to other participants
in the industries in which such party and its subsidiaries operate.
For purposes of the merger agreement, a material adverse
effect with respect to Ormat means any effect, change, event, state of fact,
development, circumstance or occurrence that would reasonably be expected to
prevent, materially impede or materially delay the consummation by Ormat of the
merger or any of the transactions contemplated by the merger agreement or the
ability of Ormat to perform its obligations under the merger agreement.
Termination of the Merger Agreement
The merger agreement may be terminated and the merger may be
abandoned at any time prior to the effective time:
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by mutual written agreement of Ormat and U.S.
Geothermal;
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by either Ormat or U.S. Geothermal, if:
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the merger has not been consummated on or before May 24,
2018 (as such date may be extended pursuant to the following proviso, the
end date);
provided, however
, that the right to terminate the
merger agreement shall not be available to any party whose breach of any
representation, warranty, covenant, or agreement set forth in the merger
agreement has been the cause of, or resulted in, the failure of the merger
to be consummated on or before the end date;
provided further
, that
the end date may be amended by mutual agreement of the parties in
accordance with the applicable provisions in the merger agreement;
provided further
, that the right to terminate the merger agreement
shall not be available to any party during the pendency of a legal
proceeding by any party for specific performance;
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there is in effect an order, injunction, judgment or law
preventing the consummation of the merger that has become final and
non-appealable; or
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70
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the U.S. Geothermal stockholder approval has
not been obtained at the special meeting of U.S. Geothermals
stockholders;
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an adverse recommendation change has occurred;
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U.S. Geothermal breaches any of its representations or
warranties or fails to perform any covenant or agreement in the merger
agreement, and such breach (i) would cause the failure of the applicable
conditions to Ormats and merger subs obligations to complete the merger
and (ii) cannot be cured by the end date or, if curable, is not cured
within 30 days of U.S. Geothermals receipt of written notice of such
breach or failure (or, if the end date is less than 30 days from the date
of receipt of such notice, by the end date); or
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(i) all of the mutual conditions precedent to the merger
and the conditions to U.S. Geothermals obligations to effect the merger
(other than those conditions that by their nature are to be satisfied at
the closing) have been satisfied; (ii) Ormat irrevocably confirms in
writing that all of the conditions to its obligations to consummate the
merger have been satisfied or waived and that it is ready, willing and
able to consummate the closing and (iii) U.S. Geothermal willfully refuses
to consummate the merger within three business days following the later to
occur of the date of the closing, as scheduled pursuant to the merger
agreement, or the delivery of Ormats written notice of confirmation;
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by U.S. Geothermal, if:
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prior to receipt of the U.S. Geothermal stockholder
approval, the Board authorizes U.S. Geothermal to enter into an
alternative acquisition agreement with respect to a superior proposal;
provided
that U.S. Geothermal (i) complies in all respects with the
requirements of the merger agreement summarized under The Merger
AgreementNo Solicitation; Changes in Recommendations; (ii) pays to Ormat
the U.S. Geothermal termination fee and (iii) enters into an alternative
acquisition agreement with respect to a superior proposal substantially
concurrently with the termination of the merger agreement;
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Ormat or merger sub breaches any of its representations
or warranties or fails to perform any covenant or agreement in the merger
agreement, and such breach (i) would cause the failure of the applicable
conditions to U.S. Geothermals obligations to complete the merger and
(ii) cannot be cured by the end date or, if curable, is not cured within
30 days of Ormats or merger subs receipt of written notice of such
breach or failure (or, if the end date is less than 30 days from the date
of receipt of such notice, by the end date); or
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(i) all of the mutual conditions precedent to the merger
and the conditions to Ormats and merger subs obligations to effect the
merger (other than those conditions that by their nature are to be
satisfied at the closing) have been satisfied; (ii) U.S. Geothermal
irrevocably confirms in writing that all of the conditions to its
obligations to consummate the merger have been satisfied or waived and
that it is ready, willing and able to consummate the closing and (iii)
Ormat and merger sub willfully refuse to consummate the merger within
three business days following the later to occur of the date of the
closing, as scheduled pursuant to the merger agreement, or the delivery of
U.S. Geothermals written notice of confirmation.
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Effect of Termination
If the merger agreement is terminated as described in
Termination of the Merger Agreement on page 70, the merger agreement will
become void and of no effect without liability of any party, except that:
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certain provisions of the merger agreement, including the
provisions relating to the effect of termination of the merger agreement,
the confidentiality agreement between U.S. Geothermal and Ormat, the
allocation of fees and expenses (including, if applicable, the termination
fees described below) will survive termination; and
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71
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each party will remain liable for its knowing,
intentional breach of any provision of the merger agreement, subject to
the provisions described under Limitation of Remedies below.
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Amendment and Waivers
Any provision of the merger agreement may be amended,
supplemented or waived prior to the effective time, but only if such amendment,
supplement or waiver is in writing and is signed, in the case of an amendment or
supplement, by each party to the merger agreement or, in the case of a waiver,
by each party against whom the waiver is to be effective.
At any time prior to the effective time, any party may, with
prior written notice to the other party or parties and subject to applicable
law, waive certain provisions of the merger agreement or extend the time for
performance of any obligation thereunder.
Termination Fees and Expenses
U.S. Geothermal has agreed to pay Ormat the U.S. Geothermal
termination fee if the merger agreement is terminated:
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by Ormat, if the Board makes an adverse recommendation
change;
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by Ormat, if there is a knowing, intentional breach by
U.S. Geothermal of any representation, warranty or covenant as set forth
in the merger agreement such that the conditions to Ormats obligation to
close would not be satisfied and such breach is incapable of being cured
or, if curable, is not cured by U.S. Geothermal on or before the earlier
of (i) the end date and (ii) 30 days following receipt by U.S. Geothermal
of written notice of the breach from Ormat;
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by Ormat if (i) all of the mutual conditions precedent to
the merger and the conditions to U.S. Geothermals obligations to effect
the merger (other than those conditions that by their nature are to be
satisfied at the closing) have been satisfied; (ii) Ormat irrevocably
confirms in writing that all of the conditions to its obligations to
consummate the merger have been satisfied or waived and that it is ready,
willing and able to consummate the closing and (iii) U.S. Geothermal
willfully refuses to consummate the merger within three business days
following the later to occur of the date of the closing, as scheduled
pursuant to the merger agreement, or the delivery of Ormats written
notice of confirmation; or
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by U.S. Geothermal, subject to compliance with certain
covenants, if the Board authorizes U.S. Geothermal to enter into an
alternative acquisition agreement with respect to a superior proposal and
U.S. Geothermal, substantially concurrently with such termination, enters
into an alternative acquisition agreement with respect to a superior
proposal.
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Ormat has agreed to pay U.S. Geothermal the Ormat termination
fee if the merger agreement is terminated:
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by U.S. Geothermal, if there is a knowing, intentional
breach by Ormat or merger sub of any representation, warranty or covenant
as set forth in the merger agreement such that the conditions to U.S.
Geothermals obligation to close would not be satisfied and such breach is
incapable of being cured or, if curable, is not cured by Ormat or merger
sub on or before the earlier of (i) the end date and (ii) 30 days
following receipt by Ormat or merger sub, as applicable, of written notice
of the breach from Ormat; or
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by U.S. Geothermal if (i) all of the mutual conditions
precedent to the merger and the conditions to Ormats and merger subs
obligations to effect the merger (other than those conditions that by
their nature are to be satisfied at the closing) have been satisfied; (ii)
U.S. Geothermal irrevocably confirms in writing that all of the conditions
to its obligations to consummate the merger have been satisfied or waived
and that it is ready, willing and able to consummate the closing and (iii)
Ormat and merger sub willfully refuse to consummate the merger within
three business days following the later to occur of the date of the
closing, as scheduled pursuant to the merger agreement, or the delivery of
U.S. Geothermals written notice of confirmation.
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72
Governing Law
The merger agreement is governed by and will be construed in
accordance with the laws of the State of Delaware.
Limitation of Remedies
U.S. Geothermals right to terminate the merger agreement and
receive payment of the Ormat termination fee pursuant to the terms of the merger
agreement shall constitute the sole and exclusive remedy of U.S. Geothermal and
any other related party specifically referenced in the applicable section of the
merger agreement. Ormats and merger subs right to terminate the merger
agreement and receive payment of the U.S. Geothermal termination fee pursuant to
the terms of the merger agreement shall constitute the sole and exclusive remedy
of Ormat, merger sub and any other related party specifically referenced in the
applicable section of the merger agreement.
The payment of any termination fees are deemed to be liquidated
damages for the efforts and resources expended and opportunities forgone while
negotiating the merger agreement and in reliance on the merger agreement and on
the expectation of the consummation of the merger.
Specific
Performance
Prior to any valid termination of the merger agreement, each of
the parties shall be entitled to an injunction or injunctions or any other
appropriate form of specific performance or equitable relief to prevent breaches
or threatened breaches of the merger agreement or to enforce specifically the
performance of the terms and provisions of the merger agreement in the Delaware
courts.
73
VOTING AGREEMENT
The following is a summary of certain material terms of the
voting agreement. The summary is not complete and must be read together with the
actual form of voting agreement, a copy of which is attached as Annex B. We
encourage you to read the voting agreement carefully and in its entirety because
the rights and obligations of the parties are governed by the express terms of
the voting agreement and not by this summary or any other information contained
in this proxy statement. This summary may not contain all the information about
the voting agreement that is important to you.
Please note that the representations, warranties, covenants
and agreements in the voting agreement were made only for purposes of the merger
agreement and may not represent the actual state of facts.
Parties and Background to the Voting Agreement
Each of the directors and executive officers of U.S. Geothermal
have entered into a voting agreement with U.S. Geothermal dated as of the date
of the merger agreement. The directors and executive officers collectively
beneficially owned approximately 20.1% of our outstanding shares as of December
31, 2017 (approximately 16.9% of which are issued and outstanding and
approximately 3.9% are shares underlying options).
The voting agreement expressly does not limit or affect any
actions or omissions of the directors or executive officers in each of their
capacities as directors or officers.
Voting
Pursuant to the voting agreement, each director and officer has
agreed to vote all shares of U.S. Geothermal common stock beneficially owned by
them as of the record date (i) in favor of the merger and the merger agreement,
(ii) against the approval of any takeover proposal, (iii) against any action,
proposal, transaction or agreement which could reasonably be expected to result
in a breach under the merger agreement and (iv) against any action, proposal,
transaction or agreement that could reasonably be expected to impede, interfere
with, delay, discourage, adversely affect or inhibit the timely consummation of
the merger or the fulfillment of any of the parties conditions under the merger
agreement or change in any manner the voting rights of any class of shares of
the Company (including any amendments to any of the governing documents).
Notwithstanding the foregoing, the obligations imposed by the preceding sentence
will be suspended for so long as the Companys Board is not recommending that
its stockholders vote in favor of the merger.
Waiver of Appraisal Rights
Each director and officer has waived, and agreed not to assert
or perfect, any rights of appraisal or rights to dissent from the merger that
such director or officer would otherwise have had by virtue of their ownership
of common stock.
Termination
The voting agreement will remain in effect until the earliest
of (i) the effective time, (ii) the termination of the merger agreement and
(iii) the making of any change by amendment, waiver or other modification to any
provision of the merger agreement that decreases the amount or changes the form
of the merger consideration.
74
Other Information Not Authorized by U.S. Geothermal Inc.
We have not authorized anyone to provide any information other
than that which is contained or incorporated by reference in this proxy
statement. We have not authorized any other person to provide you with different
or additional information and we take no responsibility for, and can provide no
assurance as to the reliability of, any other information that others may give
you. Further, you should not assume that the information contained or
incorporated by reference in this proxy statement, or in any document
incorporated by reference is accurate as of any date other than the respective
dates thereof.
For your convenience, we have included certain website
addresses and other contact information in this proxy statement. However,
information obtained from those websites or contacts is not part of this proxy
statement (except for any particular documents specifically incorporated by
reference into this proxy statement, as set forth under Where You Can Find More
Information on page 88).
Subsequent Developments
This proxy statement is dated March 20, 2018. You should not
assume that the information contained in this proxy statement is accurate as of
any date other than that date, and the mailing of this proxy statement to
stockholders does not and will not create any implication to the contrary. Our
business, financial condition, results of operations and prospects may have
changed since those dates.
We may (and in certain limited circumstances may be legally
required to) update this proxy statement prior to the special meeting, including
by filing documents with the SEC for incorporation by reference into this proxy
statement without delivering them to our stockholders. Therefore, you should
monitor and review our SEC filings until the special meeting is completed.
However, although we may update this proxy statement, we undertake no duty to do
except as otherwise expressly required by law.
Context for Assertions Embodied in Agreements
The merger agreement and other agreements are being included or
incorporated by reference into this proxy statement only to provide our
stockholders with information regarding their respective terms, and not to
provide investors with any other factual information regarding the parties,
their affiliates, or their respective businesses. In particular, you should not
rely on the assertions embodied in the representations, warranties, and
covenants contained in these agreements, or any descriptions of them, as
characterizations of any actual state of facts. The representations, warranties,
and covenants in each of these agreements (a) were made only for purposes of
that agreement and solely for the benefit of the parties to that agreement (and
not for the benefit of our stockholders), (b) were made only as of specified
dates and do not reflect subsequent information, (c) are subject to limitations
agreed upon by the parties to such agreement, including in certain
cases being subject to confidential disclosure schedules that modify, qualify,
and create exceptions to such representations, warranties, and covenants, (d)
may also be subject to a contractual standard of materiality different from that
generally applicable under federal securities laws and (e) may have been made
for the purposes of allocating risk between the parties to that agreement
instead of establishing matters of fact.
86
Forward-Looking Statements
This proxy statement contains a variety of forward-looking
statements, which are subject to a number of risks and uncertainties. We caution
you not to place undue reliance on forward-looking statements. See Cautionary
Statement Concerning Forward-Looking Information on page 14.
87
WHERE YOU CAN FIND MORE INFORMATION
U.S. Geothermal files annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy this
information at the following location of the SEC:
Public Reference Room
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Room 1580
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100 F Street, N.E.
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Washington, D.C. 20549
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Please call the SEC at (800) 732-0330 for further information
on the public reference room. You may also obtain copies of this information by
mail from the Public Reference Section of the SEC, Room 1580, 100 F Street,
N.E., Washington, D.C. 20549, at prescribed rates. U.S. Geothermals public
filings are also available to the public from document retrieval services and
the website maintained by the SEC at http://www.sec.gov.
U.S. Geothermals annual, quarterly and current reports are
available, without exhibits, to any person, including any beneficial owner of
U.S. Geothermals common stock, to whom this proxy statement is delivered,
without charge, upon written request directed to the Company by emailing Scott
Anderson at sanderson@usgeothermal.com.
Statements contained in this proxy statement, or in any
document incorporated in this proxy statement by reference, regarding the
contents of any contract or other document, are not necessarily complete and
each such statement is qualified in its entirety by reference to that contract
or other document filed as an exhibit with the SEC. The SEC allows us to
incorporate by reference information into this proxy statement. This means
that we can disclose important information by referring to another document
filed separately with the SEC. The information incorporated by reference is
considered to be part of this proxy statement. This proxy statement and the
information that we later file with the SEC may update and supersede the
information incorporated by reference. Similarly, the information that we later
file with the SEC may update and supersede the information in this proxy
statement. We also incorporate by reference into this proxy statement the
following documents filed by us with the SEC under the Exchange Act and any
documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this proxy statement and before the date of the
special meeting (
provided
that we are not incorporating by reference any
information furnished to, but not filed with, the SEC):
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our Annual Report on Form 10-K for the fiscal
year ended December 31, 2017; and
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our Current Reports on Form 8-K filed on
January 11, 2018, January 24, 2018, and January 25, 2018.
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The information contained in this proxy statement speaks only
as of the date indicated on the cover of this proxy statement unless the
information specifically indicates that another date applies.
You should rely only on the information contained in this
proxy statement. No persons have been authorized to give any information or to
make any representations other than those contained, or incorporated by
reference, in this proxy statement and, if given or made, such information or
representations must not be relied upon as having been authorized by U.S.
Geothermal or any other person.
88
ANNEX A
MERGER AGREEMENT
Annex A - 1
EXECUTION VERSION
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AGREEMENT AND PLAN OF MERGER
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among
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ORMAT NEVADA INC.,
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OGP HOLDING CORP.
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and
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U.S. GEOTHERMAL INC.
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dated as of
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January 24, 2018
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Annex A - 2
TABLE OF CONTENTS
ARTICLE I THE MERGER
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6
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Section 1.01
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The Merger
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6
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Section 1.02
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Closing
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7
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Section 1.03
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Effective Time
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7
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Section 1.04
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Effects of the Merger
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7
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Section 1.05
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Certificate of Incorporation;
Bylaws
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7
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Section 1.06
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Directors and Officers
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7
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ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK
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7
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Section 2.01
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Effect of the Merger on Capital Stock
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7
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Section 2.02
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Surrender and Payment
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8
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Section 2.03
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Dissenting Shares
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10
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Section 2.04
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Adjustments
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10
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Section 2.05
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Withholding Rights
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10
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Section 2.06
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Lost Certificates
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10
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Section 2.07
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Treatment of Stock Options
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10
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
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11
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Section 3.01
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Organization, Standing and Corporate Power
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11
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Section 3.02
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Capitalization
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12
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Section 3.03
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Authority; Non-contravention; Voting
Requirements
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13
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Section 3.04
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Governmental Approvals
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14
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Section 3.05
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Company SEC Documents; Reporting Issuer;
Undisclosed Liabilities
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14
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Section 3.06
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Absence of Certain Changes
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17
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Section 3.07
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Legal Proceedings
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17
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Section 3.08
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Compliance With Laws; Permits;
Regulations
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17
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Section 3.09
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Affiliate Transactions
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19
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Section 3.10
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Tax Matters
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19
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Section 3.11
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Employee Benefits
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20
|
Section 3.12
|
Labor and Employment Matters
|
21
|
Section 3.13
|
Environmental Matters
|
22
|
Section 3.14
|
Rights Agreement; Anti-Takeover
Provisions
|
23
|
Section 3.15
|
Project Company Title to Property; Leases; Real
Estate
|
23
|
Section 3.16
|
Other Real Property
|
24
|
Section 3.17
|
Material Contracts
|
24
|
Section 3.18
|
Material Project Documents
|
26
|
Section 3.19
|
Insurance
|
26
|
Section 3.20
|
Opinion of Financial Advisor
|
27
|
Section 3.21
|
Brokers and Other Advisors
|
27
|
Section 3.22
|
Status under Certain Statutes.
|
27
|
Section 3.23
|
No Other Representations or Warranties
|
28
|
|
|
|
ARTICLE IV Representations and Warranties of
Parent and Merger Sub
|
28
|
|
|
|
Section 4.01
|
Organization; Standing
|
28
|
Section 4.02
|
Authority; Non-contravention
|
28
|
Section 4.03
|
Governmental Approvals
|
29
|
Section 4.04
|
Ownership and Operations of
Merger Sub
|
29
|
Section 4.05
|
Funding Capability
|
29
|
Annex A - 3
Section 4.06
|
Solvency
|
29
|
Section 4.07
|
Certain Arrangements
|
30
|
Section 4.08
|
Brokers and Other Advisors
|
30
|
Section 4.09
|
Ownership of Company Shares
|
30
|
Section 4.10
|
Legal Proceedings
|
30
|
Section 4.11
|
Independent Investigation; No Other Company
Representations or Warranties
|
30
|
Section 4.12
|
Company Estimates, Projections,
Forecasts, Forward-Looking Statements and Business Plans
|
30
|
Section 4.13
|
Proxy Statement
|
31
|
|
|
|
ARTICLE V COVENANTS
|
31
|
|
|
|
Section 5.01
|
Conduct of Business
|
31
|
Section 5.02
|
Other Actions
|
34
|
Section 5.03
|
Access to Information; Confidentiality
|
34
|
Section 5.04
|
No Solicitation
|
34
|
Section 5.05
|
Stockholders Meeting; Preparation of Proxy
Materials; Approval by Sole Stockholder of Merger Sub.
|
37
|
Section 5.06
|
Notices of Certain Events
|
38
|
Section 5.07
|
Employees; Benefit Plans
|
38
|
Section 5.08
|
Directors and Officers
Indemnification and Insurance
|
39
|
Section 5.09
|
Commercially Reasonable Efforts
|
41
|
Section 5.10
|
Public Announcements
|
42
|
Section 5.11
|
Takeover Statutes
|
42
|
Section 5.12
|
Section 16 Matters
|
43
|
Section 5.13
|
Further Assurances
|
43
|
Section 5.14
|
Stockholder Litigation
|
43
|
Section 5.15
|
De-listing of Company Securities
|
43
|
Section 5.16
|
Change of Control Payments and
Service Bonus.
|
43
|
|
|
|
ARTICLE VI CONDITIONS TO
CONSUMMATION OF THE MERGER
|
45
|
|
|
|
Section 6.01
|
Conditions to Each Partys
Obligation to Effect the Merger
|
45
|
Section 6.02
|
Conditions to Obligations of Parent and Merger
Sub
|
45
|
Section 6.03
|
Conditions to Obligation of the
Company
|
46
|
|
|
|
ARTICLE VII TERMINATION,
AMENDMENT AND WAIVER
|
47
|
|
|
|
Section 7.01
|
Termination By Mutual Consent
|
47
|
Section 7.02
|
Termination By Either Parent or the Company
|
47
|
Section 7.03
|
Termination By Parent
|
47
|
Section 7.04
|
Termination By the Company
|
48
|
Section 7.05
|
Notice of Termination; Effect
of Termination
|
48
|
Section 7.06
|
Fees and Expenses Following Termination
|
49
|
Section 7.07
|
Amendment
|
50
|
Section 7.08
|
Extension; Waiver
|
50
|
|
|
|
ARTICLE VIII MISCELLANEOUS
|
50
|
|
|
|
Section 8.01
|
Definitions
|
50
|
Section 8.02
|
Interpretation; Construction
|
61
|
Section 8.03
|
Survival
|
62
|
Section 8.04
|
Governing Law
|
62
|
Section 8.05
|
Submission to Jurisdiction
|
62
|
Section 8.06
|
Waiver of Jury Trial
|
63
|
Section 8.07
|
Notices
|
63
|
Annex A - 4
Section 8.08
|
Entire Agreement
|
64
|
Section 8.09
|
No Third Party Beneficiaries
|
64
|
Section 8.10
|
Severability
|
64
|
Section 8.11
|
Assignment
|
64
|
Section 8.12
|
Remedies
|
64
|
Section 8.13
|
Specific Performance
|
64
|
Section 8.14
|
Counterparts; Effectiveness
|
65
|
Exhibit A Form of Voting Agreement
Exhibit B Certificate of Incorporation of the Surviving
Corporation
Exhibit C Form of Option Holder Acknowledgement, with spousal
consents
Annex A - 5
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF
MERGER
, dated as of January 24, 2018 (this
Agreement
), is by and
among Ormat Nevada Inc., a Delaware corporation (
Parent
), OGP Holding
Corp., a Delaware corporation and a wholly owned Subsidiary of Parent
(
Merger Sub
), and U.S. Geothermal Inc., a Delaware corporation (the
Company
). Each of Parent, Merger Sub and the Company is referred to
herein individually as a
party
and collectively as the
parties
. Certain capitalized terms used in this Agreement are used as
defined in Section 8.01.
RECITALS
WHEREAS, the parties intend that
Merger Sub be merged with and into the Company, with the Company surviving that
merger on the terms and subject to the conditions set forth herein;
WHEREAS, in the Merger, upon the
terms and subject to the conditions of this Agreement, each outstanding share of
common stock, par value $0.001 per share, of the Company (the
Company
Shares
) will be converted into the right to receive the Merger
Consideration except as otherwise provided in this Agreement;
WHEREAS, the Board of Directors
of the Company (the
Company Board
) has unanimously: (a) determined that
it is in the best interests of the Company and its stockholders, and declared it
advisable, to enter into this Agreement with Parent and Merger Sub; (b) approved
the execution, delivery, and performance of this Agreement and the consummation
of the transactions contemplated hereby, including the Merger (the
Transactions
); and (c) resolved, subject to the terms and conditions
set forth in this Agreement, to recommend adoption of this Agreement by the
stockholders of the Company (the
Company Board Recommendation
); in each
case, in accordance with the Delaware General Corporation Law (the
DGCL
);
WHEREAS, the Board of Directors
of Merger Sub has unanimously: (a) determined that it is in the best interests
of Merger Sub, and declared it advisable, to enter into this Agreement; and (b)
approved the execution, delivery, and performance of this Agreement and the
consummation of the Transactions, including the Merger; in each case, in
accordance with the DGCL;
WHEREAS, the Board of Directors
of Parent, as the sole stockholder of Merger Sub, has unanimously approved and
adopted this Agreement in accordance with the DGCL; WHEREAS, the parties desire
to make certain representations, warranties, covenants, and agreements in
connection with the Merger and the Transactions and also to prescribe certain
conditions to the Merger;
WHEREAS, concurrently with the
execution and delivery of this Agreement, and as a condition and inducement to
Parents and Merger Subs willingness to enter into this Agreement, each Person
listed in Section 1.01 of the Company Disclosure Schedule is entering into a
Voting Agreement in the form attached as
Exhibit A
hereto (collectively,
the
Voting Agreements
) pursuant to which those shareholders, among
other things, will agree to vote all securities in the Company beneficially
owned by them in favor of the approval of this Agreement, the Merger and each
other Transaction; and
NOW, THEREFORE, in consideration
of the foregoing and of the representations, warranties, covenants, and
agreements contained in this Agreement, the parties, intending to be legally
bound, agree as follows:
ARTICLE I
THE MERGER
Section
1.01
The Merger
. On the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at the
Effective Time: (a) Merger Sub will merge with and into the Company (the
Merger
); (b) the separate corporate existence of Merger Sub will cease;
and (c) the Company will continue its corporate existence under the DGCL as the
surviving corporation in the Merger and a Subsidiary of Parent (sometimes
referred to herein as the
Surviving Corporation
).
Annex A - 6
Section
1.02
Closing
. Upon the terms and subject to the
conditions set forth herein, the closing of the Merger (the
Closing
)
will take place at 10:00 am, Eastern time, as soon as practicable (and, in any
event, within three Business Days) after the satisfaction or, to the extent
permitted hereunder, waiver of all conditions to the Merger set forth in ARTICLE
VI (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or, to the extent permitted hereunder,
waiver of all such conditions), unless this Agreement has been terminated
pursuant to its terms or unless another time or date is agreed to in writing by
the parties hereto. The Closing shall be held at Norton Rose Fulbright US LLP,
1301 Avenue of the Americas, New York, NY 10019, unless another place is agreed
to in writing by the parties hereto, or by electronic exchange and release of
documents, and the actual date of the Closing is hereinafter referred to as the
Closing Date
.
Section
1.03
Effective Time
. Subject to the provisions of
this Agreement, at the Closing, the Company, Parent, and Merger Sub will cause a
certificate of merger (the
Certificate of Merger
) to be executed,
acknowledged, and filed with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL. The Merger will become effective
at such time as the Certificate of Merger has been duly filed with the Secretary
of State of the State of Delaware or at such later date or time as may be agreed
by the Company and Parent in writing and specified in the Certificate of Merger
in accordance with the DGCL (the effective time of the Merger being hereinafter
referred to as the
Effective Time
).
Section
1.04
Effects of the Merger
. The Merger shall have
the effects set forth herein and in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, from and
after the Effective Time, all property, rights, privileges, immunities, powers,
franchises, licenses, and authority of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, and duties of each of the Company and Merger Sub shall become the
debts, liabilities, obligations, restrictions, and duties of the Surviving
Corporation.
Section
1.05
Certificate of Incorporation; Bylaws
. At the
Effective Time: (a) the certificate of incorporation of the Surviving
Corporation shall be amended and restated so as to read in its entirety as set
forth in
Exhibit B
, and, as so amended and restated, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended in accordance with the terms thereof or as provided by applicable Law;
and (b) the bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation, except that references to
Merger Subs name shall be replaced with references to the Surviving
Corporations name, until thereafter amended in accordance with the terms
thereof, the certificate of incorporation of the Surviving Corporation, or as
provided by applicable Law (and subject to Section 5.08) .
Section
1.06
Directors and Officers
.
(a) The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation, as of and immediately following the
Effective Time, until their respective successors are duly elected or appointed
and qualified or their earlier death, resignation or removal in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation.
(b) The
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, as of and immediately following the
Effective Time, until their respective successors are duly appointed and
qualified or their earlier death, resignation or removal in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK
Section
2.01
Effect of the Merger on Capital Stock
. At
the Effective Time, as a result of the Merger and without any action on the part
of Parent, Merger Sub, or the Company or the holder of any capital stock of
Parent, Merger Sub, or the Company:
Annex A - 7
(a)
Cancellation of Certain Company Shares
; Treatment of Stock Held by
Company
Subsidiaries
. Each Company Share that is owned by Parent,
Merger Sub, or the Company (as treasury stock or otherwise) or any of their
respective direct or indirect wholly-owned Subsidiaries as of immediately prior
to the Effective Time will automatically be cancelled and retired and will cease
to exist, and no consideration will be delivered in exchange therefor. Any
Company Shares owned by any direct or indirect wholly-owned Subsidiary of the
Company shall not represent the right to receive the Merger Consideration and
shall be cancelled.
(b)
Conversion of Company Share
s
. Each Company Share issued and outstanding
immediately prior to the Effective Time (other than: (i) shares to be cancelled
and retired in accordance with Section 2.01(a); and (ii) Dissenting Shares) will
be automatically converted into the right to receive an amount in cash equal to
the Offer Price (as defined herein), without interest (the
Merger
Consideration
).
(c)
Cancellation of Shares. At the Effective Time, all Company Shares will no longer
be outstanding and all Company Shares will be cancelled and retired and will
cease to exist, and, subject to Section 2.03, each holder of: (i) a certificate
formerly representing any Company Shares (each, a
Certificate
); or (ii)
any book-entry shares which immediately prior to the Effective Time represented
Company Shares (each, a
Book-Entry Share
) will cease to have any rights
with respect thereto, except the right to receive the Merger Consideration in
accordance with Section 2.02 hereof (or in the case of any Dissenting Shares, as
otherwise provided in Section 2.03) .
(d)
Conversion of Merger Sub Capital Stock. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one validly
issued, fully paid and non-assessable share of common stock, par value $0.001
per share, of the Surviving Corporation with the same rights, powers, and
privileges as the shares so converted and shall constitute the only outstanding
shares of capital stock of the Surviving Corporation. From and after the
Effective Time, all certificates representing shares of Merger Sub common stock
shall be deemed for all purposes to represent the number of shares of common
stock of the Surviving Corporation into which they were converted in accordance
with the immediately preceding sentence.
Section 2.02
Surrender and
Payment
.
(a)
Paying Agent; Payment Fund. Prior to the Effective Time, Parent shall appoint a
paying agent reasonably acceptable to the Company (the
Paying Agent
) to
act as the agent for the purpose of paying the Merger Consideration for: (i) the
Certificates; and (ii) Book-Entry Shares. In connection therewith, the parties
shall enter into an agreement with the Paying Agent in a form reasonably
acceptable to Parent and the Company. On or before the Effective Time, Parent
shall deposit, or cause Merger Sub to deposit, with the Paying Agent, sufficient
funds to pay the aggregate Merger Consideration that is payable in respect of
all of the Company Shares represented by the Certificates and the Book-Entry
Shares (other than: (A) shares to be cancelled and retired in accordance with
Section 2.01(a); and (B) Dissenting Shares) (the
Payment Fund
) in
amounts and at the times necessary for such payments. If for any reason
(including losses) the Payment Fund is inadequate to pay the amounts to which
holders of shares shall be entitled under Section 2.01(b), Parent shall take all
steps necessary to enable or cause the Surviving Corporation promptly to deposit
in trust additional cash with the Paying Agent sufficient to make all payments
required under this Agreement. The Payment Fund shall not be used for any other
purpose. The Surviving Corporation shall pay all charges and expenses, including
those of the Paying Agent, in connection with the exchange of Company Shares for
the Merger Consideration. Promptly after the Effective Time (but in any event
not later than three Business Days after the Effective Time), Parent shall send,
or shall cause the Paying Agent to send, to each record holder of Company Shares
at the Effective Time, a letter of transmittal and instructions (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the Certificates (or affidavits of loss in
lieu thereof pursuant to Section 2.06) or transfer of the Book-Entry Shares to
the Paying Agent, and which letter of transmittal will be in customary form and
have such other provisions as Parent and the Surviving Corporation may
reasonably specify) for use in such exchange (the
Letter of
Transmittal
).
Annex A - 8
(b)
Procedures for Surrender; No Interest. Each holder of Company Shares that have
been converted into the right to receive the Merger Consideration shall be
entitled to receive the Merger Consideration in respect of the Company Shares
represented by a Certificate or Book-Entry Share upon: (i) surrender to the
Paying Agent of a Certificate (or an affidavit of loss in lieu thereof pursuant
to Section 2.06), together with a duly completed and validly executed Letter of
Transmittal and such other documents as may reasonably be requested by the
Paying Agent; or (ii) receipt of an agents message by the Paying Agent (or
such other evidence, if any, of transfer as the Paying Agent may reasonably
request) in the case of Book-Entry Shares. Until so surrendered or transferred,
as the case may be, and subject to the terms set forth in Section 2.03, each
such Certificate or Book-Entry Share, as applicable, shall represent after the
Effective Time for all purposes only the right to receive the Merger
Consideration payable in respect thereof. No interest shall be paid or accrued
on the Merger Consideration payable upon the surrender of any Certificate (or an
affidavit of loss in lieu thereof pursuant to Section 2.06) or transfer of any
Book-Entry Share. Upon payment of the Merger Consideration pursuant to the
provisions of this ARTICLE II, each Certificate or Certificates or Book-Entry
Share or Book-Entry Shares so surrendered or transferred, as the case may be,
shall immediately be cancelled.
(c)
Investment of Payment Fund. Until disbursed in accordance with the terms and
conditions of this Agreement, the cash in the Payment Fund will be invested by
the Paying Agent, as directed by Parent or the Surviving Corporation, in: (i)
obligations of or fully guaranteed by the United States or any agency or
instrumentality thereof and backed by the full faith and credit of the United
States with a maturity of no more than 30 days; (ii) commercial paper
obligations rated A-1 or P-1 or better by Moodys Investors Service, Inc. or
Standard & Poors Corporation, respectively; or (iii) certificates of
deposit, bank repurchase agreements, or bankers acceptances of commercial banks
with capital exceeding $1,000,000,000 (based on the most recent financial
statements of such bank that are then publicly available). No losses with
respect to any investments of the Payment Fund will affect the amounts payable
to the holders of Certificates or Book-Entry Shares. Any income from investment
of the Payment Fund will be payable to Parent or the Surviving Corporation, as
Parent directs.
(d)
Payments to Non-Registered Holders. If any portion of the Merger Consideration
is to be paid to a Person other than the Person in whose name the surrendered
Certificate or the transferred Book-Entry Share, as applicable, is registered,
it shall be a condition to such payment that: (i) such Certificate shall be
properly endorsed or shall otherwise be in proper form for transfer or such
Book-Entry Share shall be properly transferred; and (ii) the Person requesting
such payment shall pay to the Paying Agent any transfer or other Tax required as
a result of such payment to a Person other than the registered holder of such
Certificate or Book-Entry Share, as applicable, or establish to the reasonable
satisfaction of the Paying Agent that such Tax has been paid or is not payable.
(e) Full
Satisfaction. All Merger Consideration paid upon the surrender of Certificates
or transfer of Book-Entry Shares in accordance with the terms hereof shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
Company Shares formerly represented by such Certificate or Book-Entry Shares,
and from and after the Effective Time, there shall be no further registration of
transfers of Company Shares on the stock transfer books of the Surviving
Corporation. If, after the Effective Time, Certificates or Book-Entry Shares are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for the Merger Consideration provided for, and in accordance with the procedures
set forth, in this ARTICLE II.
(f)
Termination of Payment Fund. Any portion of the Payment Fund that remains
unclaimed by the holders of Company Shares nine (9) months after the Effective
Time shall be returned to Parent, upon demand, and any such holder who has not
exchanged Company Shares for the Merger Consideration in accordance with this
Section 2.02 prior to that time shall thereafter look only to Parent (subject to
abandoned property, escheat, or other similar Laws), as general creditors
thereof, for payment of the Merger Consideration without any interest.
Notwithstanding the foregoing, Parent shall not be liable to any holder of
Company Shares for any amounts paid to a public official pursuant to applicable
abandoned property, escheat, or similar Laws.
Annex A - 9
(g)
Dissenting Shares Merger Consideration. Any portion of the Merger Consideration
made available to the Paying Agent in respect of any Dissenting Shares shall be
returned to Parent, upon demand.
Section
2.03
Dissenting
Shares
. Notwithstanding any provision of this Agreement to the contrary,
including Section 2.01, Company Shares issued and outstanding immediately prior
to the Effective Time (other than shares cancelled in accordance with Section
2.01(a)) and held by a holder who has not voted in favor of adoption of this
Agreement or consented thereto in writing and who is entitled to demand and has
properly exercised appraisal rights of such shares in accordance with Section
262 of the DGCL (such Company Shares being referred to collectively as the
Dissenting Shares
until such time as such holder fails to perfect or
otherwise waives, withdraws, or loses such holders appraisal rights under the
DGCL with respect to such shares) shall not be converted into a right to receive
the Merger Consideration, but instead shall be entitled to only such rights as
are granted by Section 262 of the DGCL;
provided, however
, that if, after
the Effective Time, such holder fails to perfect, waives, withdraws, or loses
such holders right to appraisal pursuant to Section 262 of the DGCL or if a
court of competent jurisdiction shall determine that such holder is not entitled
to the relief provided by Section 262 of the DGCL, such Company Shares shall be
treated as if they had been converted as of the Effective Time into the right to
receive the Merger Consideration in accordance with Section 2.01(b), without
interest thereon, upon surrender of such Certificate formerly representing such
share or transfer of such Book-Entry Share, as the case may be. The Company
shall provide Parent prompt written notice of any demands received by the
Company for appraisal of Company Shares, any waiver or withdrawal of any such
demand, and any other demand, notice, or instrument delivered to the Company
prior to the Effective Time that relates to such demand, and Parent shall have
the opportunity and right to direct all negotiations and proceedings with
respect to such demands. Except with the prior written consent of Parent, the
Company shall not make any payment with respect to, or settle, or offer to
settle, any such demands.
Section
2.04
Adjustments
. Without limiting the other
provisions of this Agreement, if at any time during the period between the date
of this Agreement and the Effective Time, any change in the outstanding shares
of capital stock of the Company shall occur (other than the issuance of
additional shares of capital stock of the Company as permitted by this
Agreement), including by reason of any reclassification, recapitalization, stock
split (including reverse stock split), or combination, exchange, readjustment of
shares, or similar transaction, or any stock dividend or distribution paid in
stock, the Merger Consideration and any other amounts payable pursuant to this
Agreement shall be appropriately adjusted to reflect such change;
provided,
however
, that this sentence shall not be construed to permit the Company to
take any action with respect to its securities that is prohibited by the terms
of this Agreement.
Section
2.05
Withholding Rights
. Each of the Paying
Agent, Parent, Merger Sub, and the Surviving Corporation shall be entitled to
deduct and withhold from the consideration otherwise payable to any Person
pursuant to this Agreement such amounts as may be required to be deducted and
withheld with respect to the making of such payment under any Tax Laws and to
require the delivery of necessary Tax forms and any other required information.
To the extent that amounts are so deducted and withheld by the Paying Agent,
Parent, Merger Sub, or the Surviving Corporation, as the case may be, such
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of which the Paying Agent, Parent, Merger Sub, or the
Surviving Corporation, as the case may be, made such deduction and withholding.
Notwithstanding the foregoing, the Parties agree that no amounts shall be
withheld from the consideration payable to any Person pursuant to this Agreement
under Section 1445 of the Code.
Section
2.06
Lost Certificates
. If any Certificate shall
have been lost, stolen, or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen, or destroyed
and, if required by Parent, the posting by such Person of a bond, in such
reasonable amount as Parent may direct, as indemnity against any claim that may
be made against it with respect to such Certificate, the Paying Agent will
issue, in exchange for such lost, stolen, or destroyed Certificate, the Merger
Consideration to be paid in respect of the Company Shares formerly represented
by such Certificate as contemplated under this ARTICLE II.
Section
2.07
Treatment of Stock Options
.
Annex A - 10
(a) At or
prior to the Effective Time, the Company shall take all actions necessary
(including obtaining any necessary determinations and/or resolutions of the
Company Board or a committee thereof and amending the Company Stock Plan) to:
(i)
terminate the Company Stock Plan;
(ii)
provide that each outstanding option to purchase Company Shares granted under
the Company Stock Plan (each, an
Option
) that is outstanding and
unexercised (without regard to the exercise price of such Option) as of
immediately prior to the Effective Time, whether vested or unvested, shall
become fully vested and exercisable immediately prior to and contingent on the
Closing; and
(iii)
cancel, as of the Effective Time, each Option that is outstanding and
unexercised (without regard to the exercise price of such Option), as of
immediately prior to the Effective Time (in each case, without the creation of
additional liability to the Company or any of its Subsidiaries), subject, if
applicable, to payment pursuant to Section 2.07(b) .
(b) Each
holder of an Option that is outstanding and unexercised as of immediately prior
to the Effective Time and has an exercise price per share that is less than the
per share Merger Consideration shall be entitled to receive as soon as
reasonably practicable after the Effective Time, a cash amount equal to the
Designated Consideration for each Company Share then subject to the Option (less
all applicable Tax deductions and withholdings required by Law to be withheld in
respect of such payment and without interest). Holders of Options listed on
Section 2.07(b) of the Company Disclosure Schedule are required to execute and
deliver an Option Holder Acknowledgement prior to and as a pre-condition to
receiving the Designated Consideration. For purposes of this Agreement,
Designated Consideration
means, with respect to any Company Share
issuable under a particular Option, an amount equal to the excess, if any, of
(i) the Merger Consideration per Company Share over (ii) the exercise price
payable in respect of such Company Share issuable under such Option.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and
warrants to Parent and Merger Sub that the statements contained in this ARTICLE
III are true and correct as of the date hereof and as of the Closing (or, if a
specific date is indicated in any such statement, as of such specified date),
except as set forth (a) in such statement or in the corresponding Section of the
definitive disclosure schedule delivered by the Company to Parent and Merger Sub
on the date of this Agreement (the
Company Disclosure Schedule
) or, to
the extent that the relevance of such disclosure to the applicable
representation or warranty is reasonably apparent on the face of such
disclosure, in other Sections of the Company Disclosure Schedule, or (b) in any
Company SEC Document or other forms, documents, statements, schedules and
reports filed or furnished by the Company with or to the SEC (and that are
publicly available) on or after October 1, 2015 and prior to the date hereof
(collectively, the
Filed SEC Documents
), other than (i) the exhibits
and schedules to the Filed SEC Documents or (ii) disclosures in such Filed SEC
Documents referred to in the Risk Factors and Forward Looking Statements
sections thereof (it being acknowledged and agreed that nothing disclosed in the
Filed SEC Documents shall be deemed to qualify or modify the representations and
warranties set forth in Section 3.01, Section 3.02, Section 3.03, Section 3.10,
Section 3.14 and Section 3.21) . No reference to or disclosure of any item or
other matter in the Company Disclosure Schedule shall be construed as an
admission or indication that such item or other matter is material or that such
item or other matter is required to be referred to or disclosed in the Company
Disclosure Schedule. The information set forth in the Company Disclosure
Schedule is disclosed solely for the purposes of this Agreement, and no
information set forth therein shall be deemed to be an admission by any party to
any third party of any matter whatsoever, including of any violation of law or
breach of any agreement.
Section 3.01
Organization, Standing
and Corporate Power
.
(a) The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware and has all requisite corporate power
and authority necessary to own, lease and operate all of its properties and assets and to
carry on its business as it is now being conducted. The Company is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned, leased or operated by it makes such licensing
or qualification necessary, except where the failure to be so licensed,
qualified or in good standing has not had and would not reasonably be expected
to have a Company Material Adverse Effect.
Annex A - 11
(b) Each
of the Companys Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization except where the
failure to be in good standing has not had and would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
Each of the Companys Subsidiaries has all requisite corporate, limited
liability company or similar power and authority necessary to own, lease and
operate all of its properties and assets and to carry on its business as it is
now being conducted.
Section 3.02
Capitalization
.
(a) The
authorized capital stock of the Company consists of 250,000,000 Company Shares
and no other classes of stock. At the close of business on December 31, 2017
(the
Capitalization Date
), (i) 19,449,984 Company Shares were issued
and outstanding (with no restricted Company Shares outstanding under the Company
Stock Plan), (ii) no Company Shares were held by the Company in its treasury,
and (iii) 2,082,763 Company Shares were reserved for issuance pursuant to
outstanding Options under the Company Stock Plan.
(b)
Section 3.02(b) of the Company Disclosure Schedule sets forth, as of the
Capitalization Date, a list of all holders of Options under the Company Stock
Plan, the date of grant, the number of Company Shares subject to such Option and
the price per share at which such Option may be exercised. Each Option (i) was
granted in compliance with all applicable Laws and all of the terms and
conditions of the Company Stock Plan pursuant to which it was issued, (ii) has
an exercise price per Company Share equal to or greater than the fair market
value of a Company Share as of the market close on the day prior to the date of
such grant, (iii) has a grant date identical to the date on which the Company
Board or a committee thereof actually awarded such Option, except for any
adjustment pursuant to a share consolidation and (iv) has not been repriced
through amendment, cancellation and reissuance or any other means, other than by
way of any duly and validly authorized and approved share consolidation, stock
split or reverse stock split. All Company Shares subject to issuance under the
Company Stock Plan, upon issuance in accordance with the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid, and non-assessable.
(c)
Except as described in this Section 3.02, as of the Capitalization Date, there
were (i) no outstanding shares of capital stock of the Company and (ii) no other
outstanding Equity Securities issued by the Company (the items in clauses (i)
and (ii) being referred to collectively as
Company Securities
). There
are no outstanding Contracts, commitments or other arrangements of any kind
which obligate the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities, or obligating the Company to grant,
extend or enter into any such Contracts, commitments or other arrangements
relating to any Company Securities, including any agreements granting any
preemptive rights, subscription rights, anti-dilutive rights, rights of first
refusal or similar rights with respect to any Company Securities. No direct or
indirect Subsidiary of the Company owns any Company Securities. None of the
Company or any Subsidiary of the Company is a party to or bound by any
stockholders agreement, voting trust agreement, registration rights agreement,
proxy or other similar agreement or understanding relating to any Company
Securities or any other agreement relating to the registration, disposition,
voting or dividends with respect to any Company Securities. All outstanding
Company Shares have been duly authorized and validly issued and are fully paid,
non-assessable and free of preemptive rights. From the Capitalization Date to
the execution of this Agreement, neither the Company nor any of its Subsidiaries
has (A) issued any Equity Securities, other than pursuant to the Options
referred to above that were outstanding as of the Capitalization Date or (B)
established a record date for, declared, set aside for payment or paid any
dividend on, or made any other distribution in respect of, any of its Equity
Securities.
Annex A - 12
(d)
Section 3.02(d) of the Company Disclosure Schedule sets forth the name and
jurisdiction of organization of each Subsidiary of the Company and sets forth a
complete and accurate list of all outstanding Equity Securities of each
Subsidiary and the registered and beneficial owner(s) thereof. Except as set
forth in Section 3.02(d) of the Company Disclosure Schedule, all of the
outstanding Equity Securities of each Subsidiary of the Company (except for
directors qualifying shares or the like) are owned directly or indirectly,
beneficially and of record, by the Company free and clear of all Liens, except
for such transfer restrictions of general applicability as may be provided under
the United States Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (collectively, the
Securities Act
)
or other applicable securities Laws. Except as set forth in Section 3.02(d) of
the Company Disclosure Schedule, each outstanding Equity Security of each
Subsidiary of the Company, which is held, directly or indirectly, by the
Company, is duly authorized, validly issued, fully paid, non-assessable and free
of preemptive rights, and there are no subscriptions, options, warrants, rights,
calls, contracts or other commitments, understandings, restrictions or
arrangements relating to the issuance, acquisition, redemption, repurchase or
sale of any Equity Security of any Subsidiary of the Company, including any
right of conversion or exchange under any outstanding security, instrument or
agreement, any agreements granting any preemptive rights, subscription rights,
anti-dilutive rights, rights of first refusal or similar rights with respect to
any securities of any Subsidiary. None of the Subsidiaries has any outstanding
equity compensation plans or policies relating to any Equity Security of the
Company or any Subsidiary of the Company. Neither the Company nor any Subsidiary
thereof owns, directly or indirectly, any Equity Security in any Person other
than the Subsidiaries of the Company. Except as set forth in Section 3.02(d) of
the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
has any obligation to make any payments based on the price or value of any
Equity Security of any Subsidiary of the Company or dividends paid thereon or
revenues, earnings or financial performance or any other attribute of any
Subsidiary of the Company.
(e) As of
the date of this Agreement, there was no outstanding Indebtedness of the Company
or its Subsidiaries other than Indebtedness identified in Section 3.02(e) of the
Company Disclosure Schedule.
(f) Since
the Capitalization Date, neither the Company nor any of its Subsidiaries has
issued, granted, awarded, authorized, redeemed, repurchased or reserved for
issuance any Equity Securities of the Company or any of its Subsidiaries, except
for any issuance of Company Shares pursuant to the Options referred to in
Section 3.02(a)(iii) .
Section
3.03
Authority; Non-contravention; Voting
Requirements
.
(a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
Transactions, subject to adoption of this Agreement by the stockholders of the
Company. The execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the Transactions, have been duly and
validly authorized and approved by the Company Board, and no other corporate
action on the part of the Company is necessary to authorize the execution,
delivery and performance by the Company of this Agreement and the consummation
by it of the Transactions, subject only, in the case of consummation of the
Transactions, to the receipt of stockholder approval. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due and
valid authorization, execution and delivery hereof by the other parties,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws of general
application affecting or relating to the enforcement of creditors rights
generally and (ii) is subject to general principles of equity, whether
considered in a proceeding at law or in equity (the
Bankruptcy and Equity
Exception
).
(b) The
Company Board has, at a meeting duly called and held, unanimously adopted
resolutions (i) determining that the Transactions are fair to, and in the best
interests of, the Company and its stockholders, (ii) declaring advisable entry
into this Agreement and the Transactions, including the Merger, (iii) approving
the Companys execution, delivery and performance of this Agreement and the consummation of the Transactions, including the Merger, (iv)
resolving, subject to Section 5.04, to make the Company Board Recommendation,
and (v) directing that the adoption of this Agreement be submitted to a vote at
a meeting of the Companys stockholders. As of immediately prior to the
execution of this Agreement, such resolutions have not been rescinded, modified
or withdrawn.
Annex A - 13
(c) The
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the Transactions and the performance of or
compliance by the Company with any of the terms or provisions hereof will not
(i) conflict with or violate any provision of the Company Charter Documents or
of the similar organizational documents of any of the Companys Subsidiaries or
(ii) assuming that the authorizations, consents and approvals referred to in
Section 3.04, and adoption of this Agreement by the stockholders of the Company,
are obtained and the filings referred to in Section 3.04 are made, (A) violate
or conflict with any Law or Order applicable to the Company or any of its
Subsidiaries, (B) result in a violation or breach of or constitute a default
(with or without notice or lapse of time, or both) under, or give rise to any
right of termination, cancellation, payment, acceleration or revocation
(
Default
) under, any Material Contract to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound, except as set forth in Section 3.03(c) of the Company Disclosure
Schedule or (C) result in the creation of any Lien on any properties or assets
of the Company or any of its Subsidiaries, other than any such event described
in items (B) or (C) of clause (ii) which has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(d)
Assuming the accuracy of the representations and warranties set forth in Section
4.09, the affirmative vote of the holders of a majority of the outstanding
Company Shares (the
Requisite Company Vote
) is the only vote or
approval of the holders of any Equity Security of the Company necessary to adopt
this Agreement and approve and consummate the Transactions under applicable Law
and the Company Charter Documents.
Section
3.04
Governmental Approvals
. Except
for (i) any filings required under, and in compliance with applicable
requirements of the Exchange Act and the rules of the NYSE American, (ii) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware pursuant to the DGCL, (iii) filings required under, and compliance with
other applicable requirements of, the HSR Act and any other applicable Antitrust
Laws, (iv) filings with, and the consent of, FERC under Section 203 of the FPA
and (v) the approvals set forth in Section 3.04 of the Company Disclosure
Schedule (the
Company Approvals
), no consent, approval, authorization,
order, license, permit or waiver (each a
Consent
) of, or filing,
declaration, registration or notice (each, a
Filing
) with or to, any
Governmental Authority or any stock market or stock exchange on which Company
Shares are listed for trading are necessary for the execution and delivery of
this Agreement by the Company, the performance by the Company of its obligations
hereunder and the consummation by the Company of the Transactions, except where
the failure to obtain any Consent or make any Filing is immaterial to the
Company and its Subsidiaries (which, for the avoidance of doubt, shall not
include any Consents or Filings pursuant to the foregoing subparts (i) through
(v)).
Section
3.05
Company SEC Documents; Reporting Issuer;
Undisclosed Liabilities
.
(a) Since
October 1, 2015, the Company has filed with or furnished to the United States
Securities and Exchange Commission (the
SEC
), on a timely basis, all
required registration statements, certifications, reports and proxy statements
(collectively, and in each case including all exhibits and schedules thereto and
documents incorporated by reference therein, the
Company SEC
Documents
). As of their respective effective dates (in the case of Company
SEC Documents that are registration statements filed pursuant to the
requirements of the Securities Act) and as of their respective SEC filing dates
(in the case of all other Company SEC Documents) (or if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
the Company SEC Documents complied in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act
of 2002 (as amended and including the rules and regulations promulgated
thereunder, the
Sarbanes-Oxley Act
), as the case may be, applicable to
such Company SEC Documents, and none of the Company SEC Documents as of such
respective dates (or, if amended prior to the date of this Agreement, the date
of the filing of such amendment, with respect to the disclosures that are
amended) contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. As of
the date of this Agreement, there are no outstanding or unresolved comments in
comment letters received from the SEC or its staff. There has been no material
written correspondence between the SEC and the Company since October 1, 2015
that is not available on the SECs Electronic Data Gathering, Analysis and
Retrieval (EDGAR) database. To the Knowledge of the Company, none of the Company
SEC Documents is the subject of ongoing SEC review. None of the Companys
Subsidiaries is required to file any forms or reports under Section 13(a) or
15(d) under the Exchange Act.
Annex A - 14
(b) The
Company is a reporting issuer (or its equivalent) under applicable Canadian
securities Laws of each of the Provinces of British Columbia, Alberta and
Ontario. The Company is not currently in default in any material respect of any
requirement of such Canadian securities Laws and the Company is not included on
a list of defaulting reporting issuers maintained by any of the securities
commissions or similar regulatory authorities in each of such Provinces and has
not filed any confidential material change reports which continue to be
confidential. No suspension of trading in or cease trading order with respect to
the Companys Equity Securities is pending or, to the Knowledge of the Company,
threatened. Since December 31, 2016, the Company has not received any
correspondence or notice from a securities commission or similar regulatory
authority concerning a review of any of the Companys continuous disclosure
documents in respect of which any matters remain outstanding, except as
disclosed in Section 3.05(b) of the Company Disclosure Schedule.
(c) The
consolidated financial statements of the Company (including all related notes or
schedules) included or incorporated by reference in the Company SEC Documents
(i) have been prepared from, and are in accordance with, the books and records
of the Company and its Subsidiaries, (ii) have complied as to form, as of their
respective dates of filing with the SEC, in all material respects with all
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC), (iii) have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except, with
respect to financial statements included in Company SEC Documents filed as of
the date of this Agreement, as may be indicated in the notes thereto to the
extent permitted by Regulation S-X) and (iv) fairly present in all material
respects, in accordance with GAAP, the consolidated financial position of the
Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and changes in shareholders equity and cash flows
of such companies as of the dates and for the periods shown (subject, in the
case of unaudited quarterly financial statements, to normal year-end adjustments
that will not be material). The books and records of the Company and its
Subsidiaries relevant to the preparation of financial statements of the Company
and its Subsidiaries have been and are being maintained in all material respects
in accordance with GAAP. Since October 1, 2015, there has been no material
change in the Companys accounting methods or principles that would be required
to be disclosed in the Companys financial statements in accordance with GAAP,
except as described in the notes thereto.
(d)
Neither the Company nor any of its Subsidiaries has any Liabilities except for
Liabilities: (i) disclosed in the balance sheet of the Company and its
Subsidiaries as of September 30, 2017 (the
Balance Sheet Date
) or in
the notes thereto included in the Filed SEC Documents (the
Company Balance
Sheet
), (ii) incurred after the Balance Sheet Date in the ordinary course
of business consistent with past practices, (iii) incurred pursuant to this
Agreement or in connection with the Transactions, (iv) that have not had and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is a party to, or has any commitment to become a party to, any joint venture,
off-balance sheet arrangement or any similar Contract (including any Contract or
arrangement relating to any transaction or relationship between or among the
Company and any of its Subsidiaries, on the one hand, and any unconsolidated
affiliate, on the other hand), including any structured finance, special purpose
or limited purpose entity or Person, or any off-balance sheet arrangement (as
defined in Item 303(a) of Regulation S-K under the Securities Act), where the
purpose, result or effect of such Contract or arrangement is to avoid disclosure
of any material transaction involving, or any material Liabilities of, the
Company or any of its Subsidiaries in the Company SEC Documents (including any
audited financial statements and unaudited interim financial statements included
therein).
Annex A - 15
(e) (i)
Since October 1, 2015, subject to any applicable grace periods, the Company has
been and is in compliance in all material respects with (A) the applicable
provisions of the Sarbanes-Oxley Act and (B) the applicable listing and
corporate governance rules and regulations of the NYSE American.
(ii) The
Company has established and maintains disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) and internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) as required under Rule 13a-15 and Rule 15d-15 of the Exchange
Act.
(iii) The
Company has implemented disclosure controls and procedures (as defined in Rule
13a-15(e) of the Exchange Act) that are reasonably designed to ensure that all
material information relating to the Company, including its Subsidiaries,
required to be included in reports filed or furnished under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC, and that all such material information is
accumulated and communicated to the Companys management as appropriate to allow
timely decisions regarding required disclosure and for the Companys principal
executive officer and principal financial officer to make the certifications
required to be made pursuant to Section 302 and 906 of the Sarbanes-Oxley
Act.
(iv) The
Company maintains (in accordance with Rule 13a-15(f) of the Exchange Act) a
system of internal control over financial reporting designed to provide
reasonable assurance regarding the reliability of the Companys financial
reporting and the preparation of financial statements for external purposes in
conformity with GAAP. The Company has evaluated the effectiveness of the
Companys internal control over financial reporting and presented in any
applicable Company SEC Document its conclusions about the effectiveness of the
internal control over financial reporting as of the end of the period covered by
such Company SEC Document based on such evaluation. Since December 31, 2012,
none of the Company, the Company Board or audit committee nor, to the Knowledge
of the Company, the Company's auditors have been advised of, and the Company's
principal executive officer and its principal financial officer have not
disclosed, based on their evaluation of the Company's internal controls referred
to above, to the Company's auditors or the Company Board or audit committee (i)
any significant deficiencies or material weaknesses in the design or operation
of internal controls over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report
financial information or (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal control over financial reporting.
(v) No
executive officer of the Company has failed to make the certifications required
of him or her under Section 302 or 906 of the Sarbanes-Oxley Act. Neither the
Company nor any of its executive officers has received notice from any
Governmental Authority challenging or questioning the accuracy, completeness,
form or manner of filing of such certifications. To the Companys Knowledge,
there are no facts or circumstances that would prevent its principal executive
officer and principal financial officer from giving the certifications and
attestations required pursuant to the rules and regulations adopted pursuant to
Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.
(vi)
Neither the Company nor any of its Subsidiaries has outstanding, extensions of
credit to directors or executive officers of the Company within the meaning of
Section 402 of the Sarbanes-Oxley Act of 2002.
(vii)
Since October 1, 2015, (A) there have been no material internal investigations
regarding accounting, auditing or revenue recognition discussed with, reviewed
by or initiated at the direction of the Companys management or the Company
Board, (B) neither the Company nor any of its Subsidiaries has received any
written or, to the Knowledge of the Company, oral complaint, allegation,
assertion or claim regarding accounting, internal accounting controls, auditing
practices, procedures, methodologies or methods of the Company or any of its
Subsidiaries, or unlawful account or auditing matters with respect to the
Company or any of its Subsidiaries and (C) no attorney representing the Company or
any of its Subsidiaries, whether or not employed by the Company or any of its
Subsidiaries, has reported evidence of a violation of securities Laws, breach of
fiduciary duty or similar violation by the Company or any of its Subsidiaries or
any of their respective Representatives to the Companys management or the
Company Board pursuant to SEC rules adopted under Section 307 of the
Sarbanes-Oxley Act, except, in each case, as has not been, and would not
reasonably be expected to be, individually or in the aggregate, materially
adverse to the Company and its Subsidiaries taken as a whole.
Annex A - 16
(f) None
of the information included or incorporated by reference in the letter to the
stockholders, notice of meeting, proxy statement, and forms of proxy
(collectively, the
Company Proxy Statement
) to be filed with the SEC in
connection with the Merger, will, at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders Meeting or at
the time of any amendment or supplement thereof, contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. Notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to statements made or incorporated
by reference therein based on information supplied by Parent or Merger Sub
expressly for inclusion or incorporation by reference in the Company Proxy
Statement. The Company Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act.
Section
3.06
Absence of Certain Changes
. Since the
Balance Sheet Date through the date of this Agreement (a) except for the
execution and performance of this Agreement and the discussions and negotiations
related thereto, the business of the Company and its Subsidiaries has been
carried on and conducted in all material respects, in the ordinary course of
business consistent with past practice, (b) there has not been any effect,
change, event, state of fact, development, circumstance or occurrence that,
individually or in the aggregate, has had or would reasonably be expected to
have a Company Material Adverse Effect and (c) there has not occurred any action
or event that, had such action or event occurred after the date of this
Agreement and prior to the Effective Time, would have breached any of the
covenants contained in Section 5.01(b)(i)(B), (C) or (D), (iii), (v), (viii),
(x), (xi), (xii), (xiv)(A) or (B), (xv), (xvi), (xix) or (xx) (but only as it
relates to any of the foregoing clauses of Section 5.01(b)) .
Section
3.07
Legal Proceedings
. Except as disclosed in
Section 3.07 of the Company Disclosure Schedule, as of the date of this
Agreement, there is no pending or, to the Knowledge of the Company, threatened,
material Legal Action against the Company or any of its Subsidiaries, nor is
there any injunction, order, judgment, ruling, determination, decision,
condition, verdict, sentence, award, decree, writ, stipulation, arbitration
award or other legal requirement, restraint or prohibition (each, an
Order
) imposed upon the Company or any of its Subsidiaries, in each
case, by or before any Governmental Authority. As of the date of this Agreement,
to the Knowledge of the Company, no director or officer of the Company or any of
its Subsidiaries is a defendant in any suit, action or proceeding to which the
Company or any of its Subsidiaries is not also a defendant, including as a
nominal defendant, in connection with his or her status as a director or officer
of the Company or any of its Subsidiaries. As of the date of this Agreement,
there are no material Orders outstanding against the Company or any of its
Subsidiaries or to which the Company or any of its Subsidiaries are subject.
Section
3.08
Compliance With Laws; Permits; Regulations
.
(a) The
Company and its Subsidiaries are and, since October 1, 2015 have been, in
compliance with all, and have not breached or violated any, Laws or Order
applicable to the Company or any of its Subsidiaries, except where the failure
to comply with such Laws or Orders has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has received any written
notice or, to the Knowledge of the Company, any other communication regarding
any actual or alleged violation of, or failure to comply with, any such Law or
Order.
(b) The
Company and each of its Subsidiaries hold all Permits necessary for the lawful
conduct of their respective businesses as such businesses are being operated as
of the date hereof, except for any Permits for which the failure to obtain or
hold would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect. All such Permits are valid and in full force and effect. The Company and its Subsidiaries are, and
since October 1, 2015 have been, in compliance with the terms of all such
Permits, except where the failure to comply has not had and would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. No suspension, cancellation, revocation, limitation or other
change of any such Permit is pending or threatened by the applicable
Governmental Authority or other issuing Person except as disclosed in Section
3.08(b) of the Company Disclosure Schedule. The Company has made available to
Parent true, correct and complete copies of all such Permits currently held by
the Company or any of its Subsidiaries.
Annex A - 17
(c) None
of the Company, its Subsidiaries or, to the Knowledge of the Company, their
respective Representatives or any other Person acting on behalf of the Company
or its Subsidiaries has at any time (i) directly or indirectly through its
Representatives or any other Person, given, loaned, paid, promised, offered or
authorized the payment of anything of value to any Government Official for the
purpose of (A) influencing any official act or decision, (B) inducing a
Government Official to use his or her position to influence any official act or
decision or (C) otherwise persuading a Government Official to take an action (or
fail to take an action) in order to help the Company or its Subsidiaries, or any
other Person, obtain or keep business, or to secure some other improper
advantage, (ii) used any Company funds or assets to make any bribe or other
unlawful contribution, gift, expense or payment to any Government Official or
(iii) otherwise violated or engaged in any activity that would violate in any
material respect, any Anti-Corruption Laws.
(d) The
Company and its Subsidiaries have at all times (i) made and kept books, records
and accounts that accurately and fairly reflect the character and amount of all
transactions and the distribution of the Companys and its Subsidiaries assets,
(ii) devised and maintained a system of internal accounting controls sufficient
to provide reasonable assurances that transactions are taken in accordance with
managements directives and are properly recorded, in each case, in accordance
with the Anti-Corruption Laws and (iii) maintained effective controls and
procedures and an internal controls system that is sufficient to provide
reasonable assurances that violations of the Anti-Corruption Laws would be
prevented, detected and deterred.
(e)
During the past five (5) years, none of the Company, its Subsidiaries or, to the
Knowledge of the Company, any other Person acting on behalf of the Company or
its Subsidiaries (i) has been or is currently the subject of any Legal Action
regarding any alleged violation of any Anti-Corruption Laws, (ii) has conducted
or initiated any internal investigation or made a voluntary, directed or
involuntary disclosure to any Governmental Authority regarding any alleged
violation of any Anti-Corruption Laws or with respect to any alleged act or
omission arising under or relating to any material noncompliance with any
Anti-Corruption Laws, (iii) has received any written notice, request or citation
for any actual or potential noncompliance with any Anti-Corruption Laws or (iv)
is aware of any threatened Legal Action or any circumstances likely to give rise
to a Legal Action regarding any alleged violation of any Anti-Corruption
Laws.
(f)
Except as set forth in Section 3.08(f) of the Company Disclosure Schedule, no
transfers, replacements or notifications are required by any Governmental
Authority for, or in connection with, any Permit, Water Right, bond or other
financial surety to remain valid and in full force and effect.
(g)
Compliance with Anti-Terrorism Laws.
(i) To
the extent applicable, the Company and its Subsidiaries are in compliance with
(A) each of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (B) the USA PATRIOT
Act.
(ii) None
of the Company or its Subsidiaries, and, to the Knowledge of the Company, no
Representative of the Company or any of its Subsidiaries, (A) is currently
subject to any U.S. sanctions administered by the Office of Foreign Assets
Control of the U.S. Department of the Treasury (
OFAC
), or (B) is
designated a Blocked Person by OFAC.
Annex A - 18
Section
3.09
Affiliate Transactions
. Since October 1,
2015, there have been no transactions, or series of related transactions,
agreements, arrangements or understandings, nor are there any currently proposed
transactions, or series of related transactions, agreements, arrangements or
understandings that would be required to be disclosed under Item 404 of
Regulation S-K promulgated under the Securities Act in the Companys Form 10-K
or a proxy statement relating to the Companys annual meeting of shareholders.
Section
3.10
Tax Matters
.
(a) All
income and all other material Tax Returns required to be filed by or with
respect to the Company and each of its Subsidiaries have been timely filed
(taking into account valid extensions of time within which to file) and all such
Tax Returns (taking into account any filed amendments thereto) are true, correct
and complete in all material respects.
(b) The
Company and each of its Subsidiaries have timely paid all Taxes that are due and
payable (whether or not shown to be payable on the Tax Returns described in
Section 3.10(a)) and all Taxes and Tax Liabilities of the Company and its
Subsidiaries that have accrued under GAAP as of the Balance Sheet Date but that
are not yet due and payable are accrued on the Company Balance Sheet in
accordance with GAAP. Since the Balance Sheet Date, neither the Company nor any
of its Subsidiaries has incurred any Liability for Taxes arising from any
transactions outside of the ordinary course of business.
(c) As of
the date of this Agreement, there are no pending audits, examinations,
investigations or other Legal Actions in respect of income Taxes for which the
Company has received a written notice from a Governmental Authority or, to the
Knowledge of the Company, in respect of a material amount of any other Taxes, in
each case with respect to either the Company or any of its Subsidiaries.
(d) No
jurisdiction where the Company and its Subsidiaries do not file a Tax Return has
made a claim in writing that the Company or any of its Subsidiaries is or may be
required to file a Tax Return or is subject to Tax in such jurisdiction.
(e) Other
than the Permitted Liens, there are no Liens for Taxes on any of the assets of
the Company or any of its Subsidiaries.
(f) None
of the Company or any of its Subsidiaries has been a controlled corporation or
a distributing corporation in any distribution occurring during the two-year
period ending on the date of this Agreement that was purported or intended to be
governed by Section 355 of the Code (or any similar provision of state, local or
foreign Law).
(g) For
tax years of the Company or any of its Subsidiaries that remain open either by
operation of Law or by agreement with a relevant taxing authority, to the
Knowledge of the Company, all material amounts of Tax required to be withheld by
the Company and each of its Subsidiaries have been timely withheld, and all such
withheld amounts have been timely paid over to the appropriate Governmental
Authority in accordance with applicable Law.
(h)
Neither the Company nor any of its Subsidiaries (A) has been a member of an
affiliated group filing a U.S. consolidated federal income Tax Return (other
than a group the common parent of which was the Company), (B) has any actual or
potential liability for the Taxes of any person (other than the Company or any
of its Subsidiaries) under Treasury Regulation Section 1.1502 -6 (or any similar
provision of state, local or non-U.S. Law) or as a transferee or successor, or
(C) is a party to or is bound by any Tax sharing, allocation or indemnification
agreement or arrangement relating to Taxes (other than (1) such an agreement or
arrangement the parties to which consist exclusively of the Company and its
Subsidiaries and (2) customary Tax indemnifications contained in credit or other
commercial agreements the primary purpose of which agreements does not relate to
Taxes).
(i)
Neither the Company nor any of its Subsidiaries has participated in any listed
transaction or transaction of interest within the meaning of Treasury
Regulation Section 1.6011 -4(b).
Annex A - 19
(j) As of
January 16, 2018, the Company Shares are regularly quoted on an established
securities market located in the United States by two or more brokers or dealers
making a market in such interests as described in Treasury Regulation Section
1.897 -9T(d)(2).
(k)
Neither the Company nor its Subsidiaries will be required to include any
material item of income in, or exclude any material item of deduction from,
taxable income for any period or portion thereof beginning after the Closing
Date as a result of any (i) intercompany transaction entered into prior to the
Closing Date outside the ordinary course of business, (ii) installment sale or
open transaction disposition made at or prior to the Closing Date outside the
ordinary course of business, (iii) prepaid amount received at or prior to the
Closing Date outside the ordinary course of business or (iv) change in
accounting method made prior to the Closing Date that would be applicable to any
period or portion thereof beginning after the Closing Date.
(l)
Except as set forth in Section 3.10(l) of the Company Disclosure Schedule and
before giving effect to the Merger, there currently are no limitations on the
utilization of the net operating losses, capital losses, Tax credits or similar
items of the Company and its Subsidiaries under Section 382 or Section 383 of
the Code.
Section
3.11
Employee Benefits
.
(a)
Section 3.11(a) of the Company Disclosure Schedule contains a true, correct and
complete list of each Company Plan. The Company has made available to Parent
true, correct and complete copies of (i) each Company Plan document, including
any amendments thereto and in the case of unwritten Company Plans, written
descriptions thereof, (ii) the three most recent annual reports (Form 5500
series or local law equivalent) required to be filed with the IRS with respect
to each Company Plan (if any such report was required) and the three most recent
actuarial valuations or similar reports with respect to each Company Plan for
which such report is available, (iii) the most recent IRS determination or
opinion letter received with respect to each Company Plan, (iv) the most recent
summary plan description for each Company Plan for which such summary plan
description is required, (v) each trust agreement, insurance or group annuity
contract or other funding vehicle relating to any Company Plan, (vi) each
employee handbook or other similar employee communication, (vii) annual
compliance test reports for the three most recent plan years with respect to
each Company Plan for which such annual compliance tests are required and (viii)
any 280G calculation prepared (whether or not final) with respect to any
employee, director or independent contractor of the Company in connection with
the Transactions (together with the underlying documentation on which such
calculation is based).
(b) Each
Company Plan has been, in all respects, administered in compliance with its
terms and applicable Laws, including ERISA and the Code, as applicable. Each
Company Plan intended to be qualified within the meaning of Section 401(a) of
the Code has received a favorable determination letter from the IRS for the most
recent remedial amendment cycle or is entitled to rely upon a favorable opinion
issued by the IRS for such cycle, and to the Knowledge of the Company, there are
no existing circumstances or any events that have occurred that could reasonably
be expected to affect adversely the qualified status of any such Company Plan.
There are no pending, or to the Knowledge of the Company, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any Company Plan or any trust related thereto. No Company Plan is, or
within the last six (6) years has been the subject of any Legal Action and, to
the Knowledge of the Company, no Legal Action is threatened or anticipated with
respect to such plan. The Company has satisfied all material reporting and
disclosure requirements under the Code and ERISA and all other Laws that are
applicable to the Company Plans. The Company has not terminated any Company Plan
or taken any action with respect thereto that would result in a Lien on any of
the assets or properties of the Company.
(c)
Neither the Company nor any ERISA Affiliate maintains, contributes to,
participates in or has an obligation to contribute to or any Liability in
respect of (i) a multiemployer plan within the meaning of Section 3(37) of ERISA
(a
Multiemployer Plan
) or (ii) a pension plan that is subject to Title
IV of ERISA or Section 412 of the Code (a
Pension Plan
) nor has the
Company or any ERISA Affiliate maintained, contributed to, participated in or
had any obligation to contribute to or any Liability in respect of such plan within the six year period immediately preceding
the date hereof. Neither the Company nor any of its Subsidiaries, nor to the
Knowledge of the Company, any party-in-interest or interested party in respect
of any Company Plan, has committed any prohibited transaction (within the
meaning of Section 4975 of the Code or Section 406 of ERISA) with respect to any
Company Plan that has subjected or is reasonably expected to subject the Company
to a tax or penalty pursuant to Section 502 of ERISA or Section 4975 of the Code
or any other liability with respect thereto. Each Company Plan and any related
contracts may be amended or terminated without penalty other than the payment of
benefits, fees or charges accrued or incurred through the date of termination.
Annex A - 20
(d)
Except as required under Section 601 et seq. of ERISA (or a similar state law),
no Company Plan provides benefits or coverage in the nature of health, life or
disability insurance following retirement or other termination of employment.
(e)
Except as set forth in Section 3.11(e) of the Company Disclosure Schedule, the
signing of this Agreement or the consummation of the Transactions will not,
either alone or in combination with another event, (i) entitle any employee,
director, officer or independent contractor of the Company or any of its
Subsidiaries to severance pay, unemployment compensation or any other payment,
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee, director, officer or independent
contractor, (iii) directly or indirectly cause the Company to transfer or set
aside any assets to fund any benefits under any Company Plan, (iv) otherwise
give rise to any material liability under any Company Plan, (v) limit or
restrict the right to amend, terminate or transfer the assets of any Company
Plan on or following the Effective Time or (vi) result in any payment that would
constitute an excess parachute payment (as such term is defined in Section
280G(b)(1) of the Code) to any current or former employee, director, officer or
independent contractor of the Company or any of its Subsidiaries or that were or
would not be deductible under Code Sections 162(m) or that would be required to
be included by any current or former employee, director, officer or independent
contractor of the Company or any of its Subsidiaries in gross income under Code
Section 409A(a)(1)(A) as a result of a violation of Code Section 409A. The
Company does not have an obligation to gross-up, indemnify or otherwise
reimburse any current or former service provider to the Company for any tax
incurred by such service provider pursuant to Sections 280G or 409A of the Code.
Without limiting the foregoing, Schedule 3.11(e) sets forth a true, correct and
complete list of any amount and type of any payment, acceleration, increase,
vesting, liability or funding referred to in the immediately preceding sentence
with respect to such current or former employee, director, officer or
independent contractor, including without limitation the amount of any excess
parachute payment and loss of deduction to the Company and the calculations
supporting such amounts.
(f) The
Company has properly classified for all purposes (including, without limitation,
for all Tax, insurance, workers compensation and benefit plan eligibility
purposes) all employees, leased employees, consultants, partners and independent
contractors, and has withheld and paid all applicable Taxes and made all
appropriate filings in connection with services provided by such persons.
(g) No
Company Plan is maintained or sponsored primarily for the benefit of current or
former employees or service providers located outside of the United States or is
subject to the Laws of a jurisdiction other than the United States, and the
Company does not have any obligation to provide for statutorily mandated
benefits in a jurisdiction outside of the United States.
(h) Each
arrangement that constitutes non-qualified deferred compensation within the
meaning of Code Section 409A has been in operational and documentary compliance
with or is otherwise exempt from Code Section 409A since the applicable deadline
for such compliance with or exemption from Code Section 409A.
Section
3.12
Labor and Employment Matters
.
(a)
Except as set forth in Section 3.12(a) of the Company Disclosure Schedule, (i)
neither the Company nor any of its Subsidiaries is a party, or otherwise
subject, to any collective bargaining Contract or other agreement with a labor
union, works council or other employee representative body; (ii) to the
Knowledge of the Company, as of the date hereof, there are no activities or
proceedings of any labor union, works council or other employee representative body to organize
any employees of the Company or any of its Subsidiaries, there is no demand for
recognition as the exclusive bargaining representative of any employees that has
been made by or on behalf of any labor union, works council or other employee
representative body, and there have been no such activities, proceedings or
demands since October 1, 2014 (iii) no employee of the Company or any of its
Subsidiaries is represented by any labor union, works council or other employee
representative body with respect to his or her employment with the Company or
any of its Subsidiaries; (iv) as of the date hereof, there is no pending or, to
the Knowledge of the Company, threatened strike, picketing, lockout, slowdown,
work stoppage or similar activity, and there have been no such activities since
October 1, 2014; (v) as of the date hereof, there is no unfair labor practice
charge against the Company or any of its Subsidiaries pending before the
National Labor Relations Board or any other labor relations authority; (vi) as
of the date hereof, there is no pending or, to the Knowledge of the Company,
threatened Legal Action by or before any Governmental Authority with respect to
any current or former employees, applicants or independent contractors of the
Company or any of its Subsidiaries; (vii) the Company and its Subsidiaries are
in material compliance, and since October 1, 2014 have been in material
compliance with all material Laws related to employment, employment practices,
wages, hours, immigration and other terms and conditions of employment
(including without limitation affirmative action obligations, occupational
health and safety and the classification and compensation of employees and
independent contractors for purposes of the Fair Labor Standards Act and similar
state Laws); (viii) neither the Company nor any of its Subsidiaries has, during
the three year period prior to the date hereof, taken any action that would
constitute a Mass Layoff or Plant Closing within the meaning of the Worker
Adjustment and Retraining Notification Act or similar state Law or otherwise
trigger mass layoff or plant closing obligations under applicable Law; and (ix)
neither the Company nor any of its Subsidiaries will incur any notice,
information, consultation, consent or similar obligations with respect to any
labor union, works council or other employee representative body in connection
with the execution of this Agreement or the Transactions.
Annex A - 21
(b) True,
correct and complete information as to the name, current job title and position,
work location, annual base salary or hourly rate, bonus eligibility, date of
hire, years of service, status (exempt vs. non-exempt, full-time or part-time)
and leave status (type, duration and expected return date), bonus, equity awards
and other compensation for 2016 of all current directors and employees of the
Company and its Subsidiaries has been provided to Parent. Except as set forth in
Section 3.12(b) of the Company Disclosure Schedule, as of the date hereof, to
the Knowledge of the Company, no current executive or group of employees has
given notice of termination of employment or otherwise disclosed plans to
terminate employment with the Company or any of its Subsidiaries within the next
twelve (12) months. No executive of the Company or any of its Subsidiaries is
employed under a non-immigrant work visa or other work authorization that is
limited in duration.
Section
3.13
Environmental Matters
. Except as set
forth on Section 3.13 of the Company Disclosure Schedule or as to those matters
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect, (a) each of the Company and
its Subsidiaries is and has been in compliance with all applicable Environmental
Laws and Governmental Approvals issued pursuant to Environmental Laws, and to
the Knowledge of the Company, no capital expenditures or modifications to such
business operations are required within the next two years in order to maintain
such compliance, (b) as of the date hereof, there is no Legal Action, notice,
demand or request for information relating to or arising under any Environmental
Law or for the Release of Hazardous Materials that is pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries or any real property currently owned, operated or leased by the
Company or any of its Subsidiaries, (c) neither the Company nor any of its
Subsidiaries has received any notice of or assumed either contractually or, to
the Knowledge of the Company, by operation of Law any uncompleted, outstanding
or unresolved Liability arising under the Environmental Laws or for the Release
of Hazardous Materials, (d) to the Knowledge of the Company, there are and have
been no Hazardous Materials present or Released on or from any real property
currently or formerly owned or leased by the Company or any of its Subsidiaries
or from any offsite location at which the Company or any of its Subsidiaries
disposed of (or used to dispose of) Hazardous Materials resulting in or that
could reasonably be expected to result in Liability under the Environmental
Laws, (e) neither the Company nor any of its Subsidiaries is conducting or
paying for any remediation, investigation, response or corrective action under
any Environmental Law or has received any unresolved demand related to any such
remediation, investigation, response or corrective action or Release or presence
of Hazardous Materials, (f) neither the Company nor any of its Subsidiaries has entered into an
indemnity with respect to, otherwise assumed or, to the Knowledge of the
Company, become subject to, any Liability of any other Person relating to
Environmental Laws or Hazardous Materials and (g) neither the Company nor any of
its Subsidiaries is the beneficiary of any indemnification obligation relating
to Environmental Laws or Hazardous Materials that is not disclosed in Section
3.13 of the Company Disclosure Schedule.
Annex A - 22
Section 3.14
Rights Agreement;
Anti-Takeover Provisions
.
(a) The
Company is not party to, and has not adopted, a rights agreement, poison pill
or similar agreement or plan.
(b) Assuming
the accuracy of the representations and warranties set forth in Section 4.09,
the Company Board has taken all necessary action so that the restrictions
contained in Section 203 of the DGCL are inapplicable to this Agreement and the
Transactions and there are no other takeover, anti-takeover, moratorium, fair
price, control share or other similar Laws applicable to this Agreement or
the Transactions.
Section
3.15
Project Company Title to Property; Leases;
Real Estate
. Except as set forth in Section 3.15 of the Company Disclosure
Schedule, (a) each Project Company has good, indefeasible, marketable and (other
than with respect to Geothermal Resources and Water Rights) insurable title to,
or valid, existing and (other than with respect to Geothermal Resources and
Water Rights) insurable leasehold interests which are subsisting and are in full
force and effect in all respects in, its Project, Site, Geothermal Resource,
Water Rights and all of its other properties that individually or in the
aggregate are material to such Project Company and its Project, free and clear
of Liens (other than Permitted Liens), (b) the Water Rights for the Projects
have been obtained in such amounts that are sufficient to operate the businesses
of the Project Companies as presently conducted, (c) the applicable Geothermal
Leases, Water Rights and all other leases, rights of way, easements and real
property interests (the
Real Property Rights
) that individually
or in the aggregate are material to each Project Company and its Project are
valid and subsisting and are in full force and effect in all respects, (d) any
Real Property Rights that are Contracts are valid and binding on the Company or
its Subsidiaries party thereto, and, to the Knowledge of the Company, each other
party thereto, and are in full force and effect and enforceable in accordance
with their respective terms, except where the failure to be valid, binding,
enforceable and in full force and effect has not had or would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (e) neither the Company nor any of its Subsidiaries is in default under
any terms of any Geothermal Lease or Water Rights to which it is a party, and no
event or omission has occurred which with the giving of notice or lapse of time,
or both, would constitute a default under any such Geothermal Lease or Water
Rights and (f) the real property interests, leasehold estates, easements and
other rights of USG Oregon Project Company and USG Idaho Project Company, as set
forth in the Title Policy, as supplemented by the Supplemental Rights, and of
USG Nevada Project Company, as set forth in the Title Policy or encumbered by
the Deed of Trust, together with the Geothermal Resources and Real Property
Rights: (i) comprise all of the property interests necessary to secure any right
required with respect to the operation or maintenance of the applicable Project
in accordance with all requirements of Law, Contracts and Permits, including all
Company Approvals, (ii) are sufficient to enable the applicable Project to be
located, operated and routinely maintained on the applicable Site and (iii)
provide adequate ingress and egress for any reasonable purpose in connection
with the operation, routine maintenance and construction of the applicable
Project. Neither the Company nor any of its Subsidiaries has received any notice
from any Person that such Person intends to terminate, or not renew, any Real
Property Rights or is seeking the renegotiation thereof in any material respect
or substitute performance thereunder in any material respect. Section 3.15 of
the Company Disclosure Schedule sets forth a true, correct and complete list of
all Real Property Rights that are material to each Project Company. Except as to
those matters that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, (A) each of
the Company and its Subsidiaries is and has been in compliance with all
applicable Laws applicable to the Water Rights, (B) as of the date hereof, there
is no Legal Action, notice, demand or request for information relating to or
arising under any Law that is pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries regarding the Water
Rights, (C) neither the Company nor any of its Subsidiaries has received any
notice of or assumed either contractually or, to the Knowledge of the Company,
by operation of Law any uncompleted, outstanding or unresolved Liability arising
under the Laws applicable to the Water Rights, (D) the Company or one of its
Subsidiaries is the holder of the Water Rights located in Idaho according to the
records of the Idaho Department of Water Resources, (E) the Company or one of its Subsidiaries is
the holder of the Water Rights located in Nevada according to the records of the
Nevada Division of Water Resources, and (F) neither the Company nor any of its
Subsidiaries is conducting or paying for any investigation, response or
corrective action under any Law applicable to the Water Rights or has received
any unresolved demand related to any such investigation, response or corrective
action.
Annex A - 23
Section
3.16
Other Real Property
. Except as has not
had and would not be reasonably expected to have, individually or in the
aggregate, a Company Material Adverse Effect, (a) the Company or one of its
Subsidiaries has good and marketable fee simple title to the real estate it
purports to own and a valid and insurable leasehold interest in the real estate
it purports to lease, in each case, other than that real estate owned or leased
by a Project Company (the
Other Real Property
), including to all of the
buildings, structures and other improvements thereon, free and clear of all
Liens (other than Permitted Encumbrances), (b) none of the Company, any of its
Subsidiaries or any Other Real Property is in material Default under any
Contract evidencing any Lien or other agreement affecting the Other Real
Property, (c) each material Company Lease and all other real property rights
that, individually or in the aggregate, are material to the Company or any of
its Subsidiaries are valid and subsisting and are in full force and effect in
all respects, and (d) the Company or one of its Subsidiaries owns or leases all
of the material personal property shown to be owned or leased by the Company or
any of its Subsidiaries reflected in the latest audited financial statements
included in the Company SEC Documents or acquired after the date thereof, free
and clear of all Liens (other than Permitted Liens), except to the extent
disposed of in the ordinary course of business since the date of the latest
audited financial statements included in the Company SEC Documents. Neither the
Company nor any of its Subsidiaries has received notice of any pending, and to
the Knowledge of Company, there is no threatened, condemnation proceeding with
respect to any Other Real Property. Neither Company nor or any of its
Subsidiaries is a party to any agreement that obligates the Company or its
Subsidiaries to purchase any material real property or interest in real property
other than the Other Real Property.
Section 3.17
Material
Contracts
.
(a) Section
3.17(a) of the Company Disclosure Schedule sets forth a true, correct and
complete list of all Material Contracts as of the date of this Agreement. For
purposes of this Agreement,
Material Contracts
means all Contracts to
which the Company or any of its Subsidiaries is a party or by which the Company,
any of its Subsidiaries or any of their respective properties or assets is bound
(other than Company Plans) which have remaining unfulfilled obligations (whether
affirmative or negative) on the Company or any of its Subsidiaries and that:
(i) are
or would be required to be filed by the Company as a material contract
pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or
disclosed by the Company on a Current Report on Form 8-K;
(ii) relate
to the formation, creation, operation, management or control of any joint
venture, partnership, strategic alliance or similar arrangement with a third
party that are material, individually or collectively, to the business of the
Company and its Subsidiaries, taken as a whole;
(iii) relate
to Indebtedness and have an outstanding amount in excess of $500,000
individually or $1,000,000 in the aggregate or that require the Company or any
of its Subsidiaries to make any advance, loan or commitment or provide any
credit support for or any capital contribution to, or other investment in, any
Person (other than the Company or any of its wholly-owned Subsidiaries) in
excess of $500,000;
(iv) involve
the acquisition from another Person or disposition to another Person, directly
or indirectly (by merger, purchase, exchange, license or otherwise), of assets
or capital stock or other Equity Securities of another Person or the Company or
any of its Subsidiaries, respectively, (A) for aggregate consideration under
such Contract (or series of related Contracts) in excess of $250,000 or (B) that
contain representations, warranties covenants, indemnities or other obligations
(including indemnification, earn-out or other contingent obligations), that
are still in effect and, individually or in the aggregate, could reasonably be
expected to result in payments by the Company or any of its Subsidiaries in
excess of $250,000 (in the case of each of clause (A) and (B), other than acquisitions or dispositions of
inventory in the ordinary course of business);
Annex A - 24
(v) are
for the purchase of materials, supplies, goods, services, equipment or other
assets providing for either (a) annual payments by the Company and its
Subsidiaries (under any Contract or series of related Contracts) of $250,000 or
more or (b) aggregate payments by the Company and its Subsidiaries (under any
Contract or series of related Contracts) of $1,000,000 or more;
(vi) are
tolling, sales, distribution, offtake or power purchase agreements
(
PPAs
), transmission, distribution, storage or interconnection
agreements or other similar Contracts providing for the sale by the Company or
any Subsidiary of electricity, capacity, renewable energy credits or ancillary
services, in each case, that provide for either (a) annual payments to the
Company and its Subsidiaries of $250,000 or more or (b) aggregate payments to
the Company and its Subsidiaries of $1,000,000 or more;
(vii)
prohibit the payment of dividends or distributions in respect of any Equity
Security of the Company or any of its Subsidiaries, prohibit the pledging of any
Equity Security of the Company or any of its Subsidiaries, prohibit the issuance
of any guaranty by the Company or any of its Subsidiaries or prohibit the
granting of a Lien on any property or asset of the Company or any of its
Subsidiaries;
(viii)
are license agreements that are material to the business of the Company and its
Subsidiaries, taken as a whole, pursuant to which the Company or any of its
Subsidiaries licenses in material Intellectual Property or licenses out material
Intellectual Property owned by the Company or its Subsidiaries (other than
license agreements for commercially available software on standard terms or
licenses by the Company or any of its Subsidiaries granted to third parties in
the normal course of providing its products or services);
(ix)
contain provisions that prohibit the Company or any of its Subsidiaries or any
Person that controls, or is under common control with, the Company from
competing in any material line of business or grants a right of exclusivity to
any Person which prevents the Company or a Subsidiary from entering any
territory, market or field or freely engaging in business anywhere in the world
(including any agreement to which the Company or any of its Subsidiaries or any
Person that controls, or is under common control with, the Company are subject
that grants to any party most-favored-nation, exclusivity, rights of first offer
or first refusal or similar rights);
(x) are
with a labor union, works council or other employee representative body;
(xi)
provide for the payment, increase or vesting of any benefits or compensation in
connection with the execution of this Agreement or the Transactions;
(xii)
provide for any individual base annual compensation in excess of $100,000 or
severance benefits to any officer, director, employee, independent contractor,
consultant, or other individual;
(xiii)
other than purchase orders, accounted for aggregate revenue to the Company or
any of its Subsidiaries of more than $250,000 during the Companys fiscal year
ended December 31, 2015 or 2016, or $175,000 for the first three fiscal quarters
of the Company ended September 30, 2017; (xiv) are necessary for the ownership,
operation and maintenance of each Project and the generation, transmission,
interconnection and sale of capacity and/or energy generated by, or
environmental attributes associated with, such Project (the
Material Project
Documents
);
Annex A - 25
(xv) are
for future purchase, exchange or sale of electric energy with a marked-to-market
value in excess of $500,000 in the aggregate after the date of this Agreement
(other than Contracts solely between the Company and any of its wholly-owned
Subsidiaries or solely among its wholly-owned Subsidiaries);
(xvi) are
Derivative Contracts;
(xvii)
provide for product warranty or repair obligations by a manufacturer or vendor
of equipment owned or leased by the Company or any of its Subsidiaries with a
fair market value of more than $250,000;
(xviii) relate
to construction and have a contract value or payment obligations or Liabilities
thereunder of $250,000 or more in the aggregate;
(xix) are
of the type that is or would be required to be disclosed under Item 404 of
Regulation S-K under the Securities Act or are Contracts that provide for
indemnification, advancement of expenses, contribution or defense for directors,
officers, employees, agents or Affiliates of the Company or any of its
Subsidiaries; or
(xx) are
Contracts or a group of Contracts with a Person which is not of the type
described in any of clauses (i) through (xix) above and the
termination or breach of which would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) (i)
Each Material Contract is valid and binding on the Company and any of its
Subsidiaries party thereto, as applicable, and to the Knowledge of the Company,
each other party thereto, and is in full force and effect and enforceable in
accordance with its terms, except where the failure to be valid, binding,
enforceable and in full force and effect, has not had or would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (ii) the Company and each of its Subsidiaries, and, to the Knowledge of
the Company, any other party thereto, has performed all obligations required to
be performed by it under each Material Contract, except where such noncompliance
has not had and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, (iii) there are no events or
conditions which constitute, and neither the Company nor any of its Subsidiaries
has received notice of the existence of any event or condition which
constitutes, or, after notice or lapse of time or both, will constitute, a
Default under, on the part of the Company or any of its Subsidiaries, any
Material Contract, except where such Default has not had or would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect, (iv) to the Knowledge of the Company, there are no events or
conditions which constitute, or, after notice or lapse of time or both, will
constitute a Default under, on the part of any counterparty, any Material
Contract, except as does not have, and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; and (v)
neither the Company nor any of its Subsidiaries has received any notice from any
Person that such Person intends to terminate, or not renew, any Material
Contract, or is seeking the renegotiation thereof in any material respect or
substitute performance thereunder in any material respect. The Company has made
available to Parent true, correct and complete copies of all Material Contracts,
including all material amendments, modifications, extensions or renewals with
respect thereto.
Section
3.18
Material Project Documents
. Each Material
Project Document is in full force and effect and constitutes the legal, valid
and binding obligation of the Company and any of its Subsidiaries, as
applicable, party thereto. None of the Company, its Subsidiaries or, to the
Knowledge of the Company, any other Person party to a Material Project Document
or related material Contract with the Company or any of its Subsidiaries is in
Default under, any terms of a Material Project Document or related material
Contract nor has any event or condition occurred which would constitute a
Default under any of the Material Project Documents or related material
Contracts.
Section
3.19
Insurance
. The Company has made available to
Parent true, correct and complete copies of all material insurance policies
currently available and all material self-insurance programs and arrangements
relating to the business, assets and operations of the Company
and its Subsidiaries in effect as of the date of this Agreement. Except as would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, (a) all such insurance policies are in full force and
effect, (b) the Company and its Subsidiaries are in compliance with the terms
and conditions of all such insurance policies, (c) neither the Company nor any
of its Subsidiaries is in Default under, and, to the Knowledge of the Company,
no event or condition has occurred which would constitute such a Default under,
any such insurance policies, (d) all premiums due with respect to each such
insurance policy have been paid, (e) neither the Company nor any of its
Subsidiaries has received written notice of any pending or threatened
cancellation or modification (including with respect to coverage and premium) of
such insurance policies and (f) the Company and its Subsidiaries maintain
insurance in such amounts and against such risks as is required by (i)
applicable Laws, Orders and Permits and (ii) the terms of the Material
Contracts, including the Material Project Documents. Except as disclosed in
Section 3.19 of the Company Disclosure Schedule, as of the date of this
Agreement, there is no material claim pending under any of such policies as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies.
Annex A - 26
Section
3.20
Opinion of Financial Advisor
. The Company
Board has received the opinion of ROTH Capital Partners (the
Company
Financial Advisor
) to the effect that, as of the date of such opinion, and
subject to the various assumptions and qualifications set forth therein, the
Offer Price and Merger Consideration to be received by holders of Company Shares
is fair, from a financial point of view, to such holders and a copy of such
opinion will be provided to Parent, solely for informational purposes, following
receipt thereof by the Company.
Section
3.21
Brokers and Other Advisors
. Except for ROTH
Capital Partners, the fees and expenses of which will be paid by the Company, no
broker, investment banker, financial advisor or other Person is entitled to any
brokers, finders, financial advisors or other similar fee or commission, or
the reimbursement of expenses that is or may be payable by the Company, any of
its Subsidiaries or Parent, in connection with the Transactions. The Company has
made available to Parent a complete and accurate copy of all agreements pursuant
to which any Person identified in this Section 3.21 is entitled to any fees and
expenses in connection with the Transactions.
Section
3.22
Status under Certain Statutes.
None of the
Company or any of its Subsidiaries is an investment company or a company
controlled by an investment company within the meaning of the Investment
Company Act of 1940, as amended.
(b) Each
of the Company and its Subsidiaries is not subject to or is exempt from
regulation under PUHCA in either case as a public-utility company or as a
holding company of a public-utility company.
(c) Each
Project is a QF. Those certain Notices of Self-Certification that were filed
with FERC in Docket Nos. QF12-389, QF06-187, and QF12-163 on or about January
18, 2013, September 20, 2007, and January 17, 2012 for each Project that is an
operating project are in full force and effect and are factually accurate. Each
Project Company (i) has obtained and maintained status for its Project as a QF
and (ii) has made the requisite QF filings with FERC and any applicable utility
and state regulatory authority.
(d) Each
Project and Project Company is entitled to the following exemptions.
(i) The
Raft River Project and the Raft River Project Company are entitled to (x) all of
the exemptions from the FPA provided for in 18 C.F.R. § 292.601 (c), including
the exemptions from Sections 205 and 206 of the FPA set forth in§ 292.60l(c)(l);
(y) the exemption from PUHCA set forth in 18 C.F.R. § 292.602(b); and (z) the
exemption from certain state Laws and regulations set forth in § 292.602(c) .
(ii) The
USG Oregon Project and the USG Oregon Project Company are entitled to (x) all of
the exemptions from the FPA provided for in 18 C.F.R. § 292.60l(c) except for
the exemptions from Sections 205 and 206 of the FPA set forth in§ 292.60l(c)(l);
(y) the exemption from PUHCA set forth in 18 C.F.R. § 292.602(b); and (z) the
exemption from certain state Laws and regulations set forth in § 292.602(c) .
(iii) The
USG Nevada Project and the USG Nevada Project Company are entitled to (x) all of
the exemptions from the FPA provided for in 18 C.F.R. § 292.60l(c), including
the exemptions from Sections 205 and 206 of the FPA set forth in§
292.60l(c)(l); (y) the exemption from PUHCA set forth in 18 C.F.R. § 292.602(b);
and (z) the exemption from certain state Laws and regulations set forth in §
292.602(c) .
Annex A - 27
(e) The
Company is not itself a public utility under the FPA. The Company holds the
exemption from PUHCA that is provided for by 18 C.F.R. § 366.3(a), to the extent
set forth therein.
(f) The
USG Nevada Project is an exempt wholesale generator. The Notice of
Self-Certification of Exempt Wholesale Generator Status that was filed in
Docket No. EG12-32, on February 16, 2012, is in full force and effect and is
factually accurate.
(g) The
USG Oregon Project Company holds market-based rate authority from FERC under
18 C.F.R. Part 35 Subpart H of its regulations (MBR Authority), which MBR
Authority is in full force and effect. The order of FERC in Docket No.
ER13-413-002 is in full force and effect.
(h) No
suit, action, investigation, inquiry, or other legal or administrative
proceeding by any Governmental Authority, by or before FERC (including the staff
thereof), or by any other Person has been or is pending or threatened which
questions or challenges the validity of, or seeks to enjoin, the status of
either of the Projects as a QF, nor the MBR Authority of the USG Oregon Project
Company.
(i) The
PPA and Interconnection Agreement executed by each Project Company have received
all approvals required from all applicable Governmental Authorities. Each
Interconnection Agreement is sufficient to permit the applicable Project to: (i)
inject all of such Project's electric energy, capacity and ancillary services up
to the point of interconnection specified therein and (ii) satisfy the
electrical delivery obligations of the applicable Project Company under the
applicable PPA.
(j) Each
Project Company is in material compliance with all and is not in violation of
any applicable requirements and rules of the Public Utilities Commission of
Oregon, the Public Utilities Commission of Idaho and the Public Utilities
Commission of Nevada, as applicable, and FERC, including but not limited to all
requirements applicable to such Project Company under Section 215 of the FPA.
Neither the Company nor any Subsidiary requires permission or authorization
from, and is not required to deliver any notice to, the Public Utilities
Commission of Oregon, the Public Utilities Commission of Idaho or Public
Utilities Commission of Nevada in order for the Company to execute and deliver
this Agreement and consummate the Transactions.
Section
3.23
No Other Representations or Warranties
.
Except for the representations and warranties made by the Company in this
ARTICLE III, neither the Company nor any other Person makes any representation
or warranty with respect to the Company or its subsidiaries or their respective
businesses, operations, assets, liabilities, condition (financial or otherwise)
or prospects, notwithstanding the delivery or disclosure to Parent or any of its
Representatives of any documentation, forecasts or other information with
respect to any one or more of the foregoing.
ARTICLE IV
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub jointly and
severally represent and warrant to the Company as of the date hereof and as of
the Closing Date (or, if a specific date is indicated in any such statement, as
of such specified date):
Section 4.01
Organization; Standing
. Parent is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the Laws of the State of Delaware.
Section 4.02
Authority; Non-contravention
.
(a) Each
of Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement, to perform their respective obligations
hereunder and, subject to the adoption of this Agreement by Parent as the sole stockholder of
Merger Sub, which action Parent shall take immediately after the execution
hereof, to consummate the Transactions. The execution, delivery and performance
by Parent and Merger Sub of this Agreement, and, subject to the adoption of this
Agreement by Parent as the sole stockholder of Merger Sub, which action Parent
shall take immediately after the execution hereof, the consummation by Parent
and Merger Sub of the Transactions, have been duly and validly authorized by all
necessary corporate action on the part of Parent and Merger Sub. This Agreement
has been duly and validly executed and delivered by Parent and Merger Sub and,
assuming the due and valid authorization, execution and delivery hereof by the
Company, constitutes a legal, valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of them in accordance with its terms,
subject to the Bankruptcy and Equity Exception.
Annex A - 28
(b) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the consummation by Parent or Merger Sub of the Transactions and the performance
of or compliance by Parent or Merger Sub with any of the terms or provisions
hereof, will not (i) conflict with or violate any provision of the certificate
of incorporation or bylaws of Parent or Merger Sub or (ii) assuming that the
authorizations, consents and approvals referred to in Section 4.03 are obtained
and the filings referred to in Section 4.03 are made and assuming the adoption
of this Agreement by Parent as the sole stockholder of Merger Sub, which action
Parent shall take immediately after the execution hereof, (A) violate or
conflict with any Law or Order applicable to Parent or any of its Subsidiaries,
or (B) result in a violation or breach of or constitute a default (with or
without notice or lapse of time or both) under any of the terms, conditions or
provisions of any Contract to which Parent, Merger Sub or any of their
respective Subsidiaries is a party, except, in the case of clause (ii), for such
violations or defaults as would not reasonably be expected to have a material
adverse effect on the ability of Parent or Merger Sub to perform its obligations
hereunder or prevent or materially delay consummation of the Transactions.
Section
4.03
Governmental Approvals
. Except for (i) the
filing with the SEC of any documents required to be filed with the SEC by Parent
or Merger Sub pursuant to this Agreement or in connection with the Transactions,
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware pursuant to the DGCL, (iii) any filings required under, and in
compliance with other applicable requirements of, the HSR Act and any other
applicable Antitrust Laws and (iv) filings with, and the consent of, FERC under
Section 203 of the FPA, no Consents or Filings with or to any Governmental
Authority are necessary for the execution, delivery and performance of this
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the Transactions, other than such other Consents or Filings that, if not
obtained, made or given, would not reasonably be expected to have a material
adverse effect on the ability of Parent or Merger Sub to perform its obligations
hereunder or prevent or materially delay consummation of the Transactions.
Section
4.04
Ownership and Operations of Merger Sub
.
Parent owns beneficially and of record all of the outstanding capital stock of
Merger Sub. Merger Sub was formed solely for the purpose of engaging in the
Transactions and, has engaged in no other business activities other than those
relating to the Transactions.
Section
4.05
Funding Capability
. Parent has or will have,
or will cause Merger Sub to have, prior to the Effective Time, sufficient funds
to pay the aggregate Merger Consideration contemplated by this Agreement and to
perform the other obligations of Parent and Merger Sub contemplated by this
Agreement.
Section
4.06
Solvency
. Neither Parent nor Merger Sub is
entering into the Transactions with the intent to hinder, delay or defraud
either present or future creditors of the Company or its Subsidiaries.
Immediately after giving effect to all of the Transactions, including the
funding and the payment of the aggregate Offer Price, Merger Consideration and
the Designated Consideration and any repayment or refinancing of Indebtedness
contemplated by this Agreement, assuming (a) satisfaction of the conditions set
forth in ARTICLE VI, (b) the accuracy of the representations and warranties of
the Company set forth in ARTICLE III that are relevant to the representations
and warranties set forth in this Section 4.06, (c) that the consolidated
financial statements of the Company (including all related notes or schedules)
included or incorporated by reference in the Company SEC Documents fairly
present in all material respects the consolidated financial condition of the
Company and its Subsidiaries as at the end of the periods covered thereby and
the consolidated results of operations of the Company and its Subsidiaries for
the periods covered thereby and (d) that the estimates, projections or forecasts
of the Company and its Subsidiaries have been prepared in good faith based upon assumptions that were
and continue to be reasonable, the Surviving Corporation as of and immediately
after the Effective Time will be solvent.
Annex A - 29
Section
4.07
Certain Arrangements
. There are no Contracts
between Parent and Merger Sub, on the one hand, and any member of the Companys
management or directors, on the other hand, as of the date hereof that relate in
any way to the Company or the Transactions.
Section
4.08
Brokers and Other Advisors
. No broker,
investment banker, financial advisor or other Person is entitled to any
brokers, finders, financial advisors or other similar fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of
Parent or any of its Subsidiaries except for Persons, if any, whose fees and
expenses will be paid by Parent.
Section
4.09
Ownership of Company Shares
. None of Parent,
Merger Sub or any of their affiliates or associates is, or at any time
during the last three (3) years has been, an interested stockholder (as such
term is defined in Section 203 of the DGCL) of the Company. Prior to the date
hereof, neither Parent nor Merger Sub has taken, or authorized or permitted any
Representatives of Parent or Merger Sub to take, any action that would
reasonably be expected to cause, Parent, Merger Sub or any of their affiliates
or associates to be deemed an interested stockholder (as such term is
defined in Section 203 of the DGCL).
Section
4.10
Legal Proceedings
. As of the date hereof,
there is no pending or, to the knowledge of Parent, threatened, Legal Action
against Parent or any of its Subsidiaries, including Merger Sub, nor is there
any Order imposed upon Parent or any of its Subsidiaries, including Merger Sub,
that would, individually or in the aggregate, reasonably be expected to have a
material adverse effect on Parents and Merger Subs ability to consummate the
Transactions.
Section
4.11
Independent Investigation; No Other Company
Representations or Warranties
. Parent and Merger Sub have conducted their
own independent investigation, review, and analysis of the business, results of
operations, prospects, condition (financial or otherwise), or assets of the
Company, and acknowledge that they have been provided such access as they have
requested to the personnel, properties, assets, premises, books and records, and
other documents and data of the Company for such purpose. Parent and Merger Sub
acknowledge and agree that: (a) in making their decision to enter into this
Agreement and to consummate the Transactions, Parent and Merger Sub have relied
solely upon their own investigation and the express representations and
warranties of the Company set forth in ARTICLE III of this Agreement (including
the related portions of the Company Disclosure Schedule); and (b) neither the
Company nor any of its Subsidiaries, nor any of their respective
Representatives, nor any other Person, has been authorized by the Company or any
of its Subsidiaries to make any other express or implied representation or
warranty with respect to this Agreement, the Company or any of its Subsidiaries
or their respective business or operations, including with respect to any
information provided or made available to Parent or Merger Sub. Neither the
Company nor any of its Subsidiaries, nor any of their respective stockholders,
directors, officers, employees, Affiliates, advisors, agents or Representatives,
will have any indemnification obligation to Parent or Merger Sub resulting from
the delivery, dissemination or any other distribution to Parent, Merger Sub or
their respective stockholders, directors, officers, employees, Affiliates or
Representatives, or the use by Parent, Merger Sub or their respective
stockholders, directors, officers, employees, Affiliates or Representatives of
any information, documents, estimates, projections, forecasts or other
forward-looking information, business plans or other material provided or made
available to Parent, Merger Sub or their respective stockholders, directors,
officers, employees, Affiliates or Representatives, including without limitation
in certain data rooms, confidential information memoranda or management
presentations in anticipation or contemplation of any of the Transactions, other
than fraud in connection therewith.
Section
4.12
Company Estimates, Projections, Forecasts,
Forward-Looking Statements and Business
Plans
. In connection with the
due diligence investigation of the Company by Merger Sub and Parent and their
respective Affiliates and Representatives, Merger Sub and Parent and their
respective Affiliates and Representatives have received and may continue to
receive after the date hereof from the Company and its Affiliates and
Representatives certain estimates, projections, forecasts and other
forward-looking information, as well as certain business plan information,
regarding the Company and its business and operations. Merger Sub and Parent
hereby acknowledge and agree that (a) there are uncertainties inherent in
attempting to make such estimates, projections, forecasts and other
forward-looking statements, as well as in such business plans, with which Merger
Sub and Parent are familiar, (b) actual results may deviate from such
estimates, projections, forecasts and other forward-looking statements and
business plans, and those deviations may be material, (c) such estimates,
projections, forecasts and other forward-looking statements and business plans
are based upon certain assumptions which the Companys management believed were
reasonable when made, but which may not be realized for various reasons and (d)
except to the extent such information is expressly included in the
representations and warranties made by the Company and contained in this
Agreement, Merger Sub and Parent hereby waive any claim against the Company or
any of its Subsidiaries, or any of their respective Affiliates or
Representatives with respect to any information described in this Section 4.12,
other than fraud in connection therewith. Accordingly, Merger Sub and Parent
hereby acknowledge and agree that none of the Company nor any of its
Subsidiaries, or any of their respective Affiliates or Representatives, has made
or is making any express or implied representation or warranty with respect to
such estimates, projections, forecasts, forward-looking statements or business
plans (other than the reasonableness of the assumptions underlying such
estimates, projections, forecasts, forward-looking statements or business
plans), except as otherwise explicitly set forth herein or in cases of fraud,
bad faith or gross negligence.
Annex A - 30
Section
4.13
Proxy Statement
. None of the information
with respect to Parent or Merger Sub that Parent or any of its Representatives
furnishes in writing to the Company expressly for use or incorporation in the
Company Proxy Statement, will, at the date such Proxy Statement is first mailed
to the Company's stockholders or at the time of the Company Stockholders Meeting
or at the time of any amendment or supplement thereof, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by Parent
or Merger Sub with respect to statements made or incorporated by reference
therein supplied by the Company or its Representatives.
ARTICLE V
COVENANTS
Section 5.01
Conduct of Business
.
(a)
Except (i) as required by applicable Law, (ii) expressly required or explicitly
permitted by this Agreement, (iii) as described in Section 5.01 of the Company
Disclosure Schedule or (iv) as consented to in writing by Parent (which consent
will not be unreasonably withheld, conditioned or delayed), during the period
from the date of this Agreement until the earlier of the Effective Time and the
date on which this Agreement is terminated pursuant to Section 7.01 (the
Pre-Closing Period), the Company shall, and shall cause each of its
Subsidiaries to, (x) carry on its business in the ordinary course consistent
with past practice, and (y) use its Commercially Reasonable Efforts to preserve
its and each of its Subsidiaries business organizations intact and maintain
existing relations with material customers, suppliers, distributors, employees
and other Persons with whom the Company or its Subsidiaries have business
relationships.
(b)
Without limiting the generality of Section 5.01(a), except (i) as required by
applicable Law, (ii) expressly required or explicitly permitted by this
Agreement, (iii) as described in Section 5.01 of the Company Disclosure Schedule
or (iv) as consented to in writing by Parent (which consent will not be
unreasonably withheld, conditioned or delayed), during the Pre-Closing Period,
the Company shall not, and shall not permit any of its Subsidiaries to:
(i) (A) issue,
sell, grant, pledge, transfer, dispose of or otherwise subject to a Lien any
Equity Securities of the Company or any of its Subsidiaries,
provided
that the Company may issue Company Shares as required to be issued upon exercise
or settlement of Options or other equity rights or obligations under the Company
Stock Plan outstanding on the date hereof in accordance with the terms of the
Company Stock Plan in effect on the date hereof and such Options; (B) redeem,
purchase or otherwise acquire any Equity Securities of the Company or any of its
Subsidiaries, except in connection with withholding to satisfy Tax obligations
with respect to Options acquisitions in connection with the forfeiture of equity
awards, or acquisitions in connection with the net exercise of Options; (C)
establish a record date for, declare, authorize, set aside for payment or pay
any dividend on, or make any other distribution in respect of, any Equity Securities of the Company or any of its Subsidiaries (other
than dividends or distributions paid in cash to the Company or a wholly-owned
Subsidiary from a direct or indirect wholly-owned Subsidiary); or (D) split,
combine, subdivide or reclassify any Equity Securities of the Company or any of
its Subsidiaries;
Annex A - 31
(ii)
enter into, amend or extend any collective bargaining Contract or other Contract
or memorandum of understanding with a labor union, works council or other
employee representative body;
(iii) (A)
incur, issue, modify, renew, syndicate, refinance, guarantee, assume or
otherwise become liable for any Indebtedness (excluding (x) Indebtedness in the
ordinary course of business incurred under the Companys existing operating line
listed on Section 3.02(e) of the Company Disclosure Schedule and (y) the
extension or refinancing of any existing letters of credit required under any
PPA, in the case of clauses (x) and (y) above, up to an aggregate cap of
$100,000) or announce or authorize the announcement of any of the foregoing, (B)
enter into any swap or hedging transaction or other derivative agreements other
than in the ordinary course of business consistent with past practice or (C)
make any loans, capital contributions or advances to, or investments in, any
Person (other than the Company and any majority-owned Subsidiary of the Company
or to any employee as advances for ordinary and necessary business expenses
incurred in the ordinary course of business consistent with past practice);
(iv) sell,
lease, license, subject to a Lien (other than a Permitted Lien) or otherwise
dispose of, in a single transaction or series of related transactions, any of
its properties or assets whose value or purchase price, individually or in the
aggregate, exceeds $100,000, except (A) dispositions of obsolete or worthless
assets in the ordinary course of business consistent with past practice, (B)
transfers among the Company and its Subsidiaries or (C) Liens on after-acquired
property solely (1) that secure Indebtedness permitted under Section
5.01(b)(iii) and (2) that are attached and perfected as of the date of this
Agreement;
(v) make or
authorize capital expenditures, except (A) those capital expenditures set forth
in Section 5.01(b)(v) of the Company Disclosure Schedule or (B) capital
expenditures that do not exceed $250,000 in the aggregate;
(vi) make any
acquisition of (A) the Equity Securities of any other Person, (B) a material
portion of the assets of any other Person or (C) any other properties or assets
of any other Person (other than the Company or any of its Subsidiaries) for a
purchase price that, individually or in the aggregate, exceeds $250,000, except,
in each case, for the acquisition of supplies, parts, fuel, materials and other
inventory in the ordinary course of business consistent with past practices or
any capital expenditures made in accordance with Section 5.01(b)(v);
(vii) (A)
increase the compensation or benefits in respect of any of its or its
Subsidiaries current or former directors or executive officers, other than as
required by the terms of any applicable agreement or benefit plan in existence
on the date of execution of this Agreement and set forth in Section 3.11(a) of
the Company Disclosure Schedule, (B) provide increases in salaries, wages,
benefits or other compensation of current or former employees or independent
contractors who are not executive officers or directors of the Company other
than (x) as required by the terms of any Company Plan in existence as of the
date hereof or (y) in the ordinary course of business consistent with past
practice, (C) enter into any severance, change-incontrol, or retention agreement
with any employee, director or independent contractor, (D) establish, adopt,
terminate or amend any Company Plan or any plan, program, arrangement, practice
or agreement that would be a Company Plan if it were in existence on the date
hereof, or (E) hire or commit to hire any employee, or engage or commit to
engage any independent contractor, in either case with an annual compensation in
excess of $100,000 or with aggregate annual compensation of all such employees
and independent contractors in excess of $250,000;
Annex A - 32
(viii) make any changes in
financial accounting methods, principles or practices (or change an annual
accounting or period), except insofar as may be required by applicable Law or a
change in GAAP;
(ix) (A)
modify, amend, renew, extend or terminate, or waive or release any rights under,
in a manner that is adverse to the Company, any Material Contract, (B) enter
into any Contract, which if entered into prior to the date hereof would have
been a Material Contract or (C) enter into any new Contract that contains a
change in control provision in favor of the other party or parties thereto or
would otherwise require a payment to or give rise to any rights to such other
party or parties in connection with the Transactions;
(x) grant any
refunds, credits, rebates or other allowances by the Company or its Subsidiaries
to any supplier, vendor or distributor in excess of $100,000 per supplier,
vendor or distributor, or $250,000 in the aggregate;
(xi) amend the
Company Charter Documents or organizational documents of any Subsidiary;
(xii) adopt a
plan or agreement of complete or partial liquidation or dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its Subsidiaries, or enter into a letter of intent or
agreement in principle with respect thereto, other than the Merger;
(xiii) fail to
maintain, terminate or cancel any insurance coverage maintained by the Company
or any of its Subsidiaries with respect to any material assets or risk without
replacing such coverage with insurance coverage in comparable amounts and scope;
(xiv) pay,
discharge, settle, compromise, waive or release any pending or threatened Legal
Action which (A) requires payment to or by the Company or any Subsidiary of the
Company (exclusive of attorneys fees) in excess of $150,000 in any single
instance or in excess of $250,000 in the aggregate, (B) involves injunctive or
equitable relief or restrictions on the business activities of, or criminal
sanctions on, the Company or any of its Subsidiaries, (C) involves the issuance
of Equity Securities of the Company or any of its Subsidiaries, or (D) relates
to the Transactions;
(xv) (A) make
any change (or file a request to make any such change) in any method of Tax
accounting or any annual Tax accounting period that would materially prejudice
the Company or any Subsidiary for a period after the Closing as compared to
periods prior to the Closing; (B) make, change or rescind any Tax election; (C)
settle or compromise any Tax liability, audit claim, refund or assessment in
excess of $100,000 in any single instance or in excess of $250,000 in the
aggregate; (D) surrender any right to claim for a Tax refund in excess of
$10,000; (E) file any Tax Return that is prepared on a basis that is materially
inconsistent with the elections, accounting methods, conventions and principles
of taxation used for the most recent taxable periods for which comparable Tax
Returns involving similar Tax items have been filed by the Company; or (F) amend
any federal income Tax Return with respect to an amount of Taxes that is
material to the Company and its Subsidiaries, taken as a whole, unless otherwise
required by Law;
(xvi) permit
any of its Subsidiaries or its or their respective Representatives or
independent contractors to promise, authorize or make any payment to, or
otherwise contribute any item of value to, directly or indirectly, any non-U.S.
official, in each case, in violation of the FCPA or Other Anti-Corruption Laws;
(xvii) enter
into any transaction, or series of related transactions, agreement, arrangement
or understanding that would be required to be disclosed under Item 404 of
Regulation S-K promulgated under the Securities Act;
Annex A - 33
(xviii)
negotiate or enter into any interconnection or transmission Contract, PPA or
other Contract for the sale of capacity, energy and/or environmental attributes
from or to any Project, Expansion Project or Development Project;
(xix) enter
into any new line of business outside the existing businesses of the Company and
its Subsidiaries;
(xx) adopt any
rights agreement, poison pill or similar Contract or plan; or
(xxi)
authorize any of, commit or agree or adopt resolutions, in writing or otherwise,
to take any of, the foregoing actions.
(c) If
the Company identifies any activities of the Company or any of its Subsidiaries,
including those activities of their respective Representatives or independent
contractors, that the Company reasonably believes to be in violation of the FCPA
or Other Anti-Corruption Laws, (i) the Company shall and shall cause each of its
Subsidiaries to cease such activities and (ii) the Company will give Parent
written notice, describing in reasonable detail, to the extent known, the nature
and scope of such violation. The Company shall and shall cause its Subsidiaries
to take all actions required by Law to remediate any actions taken by the
Company, its Subsidiaries or any of its or their respective Representatives or
independent contractors in violation of the FCPA or any Other Anti-Corruption
Law.
Section
5.02
Other Actions
. During the Pre-Closing
Period, the Company and Parent shall not, and shall not permit any of their
respective Subsidiaries to, take, or agree or commit to take, any action (except
as otherwise expressly permitted by this Agreement) that would reasonably be
expected to, individually or in the aggregate, prevent, materially delay, or
materially impede the consummation of the Merger or the other Transactions.
Section 5.03
Access to Information; Confidentiality
.
(a)
During the Pre-Closing Period, the Company shall, and shall cause its
Subsidiaries to, afford to Parent and Parents Representatives reasonable
access, at reasonable times and in a manner as shall not unreasonably interfere
with the business or operations of the Company or any Subsidiary thereof, to the
Representatives, properties, offices, and other facilities and to all books,
records, contracts, and other assets of the Company and its Subsidiaries, and
the Company shall, and shall cause its Subsidiaries to, furnish promptly to
Parent such additional financial, accounting, operating, environmental,
technical, engineering, geological and other data and information concerning the
business and properties of the Company and its Subsidiaries as Parent may
reasonably request from time to time. Neither the Company nor any of its
Subsidiaries shall be required to provide access to or disclose information
where such access or disclosure would jeopardize the protection of
attorney-client privilege or contravene any Law (it being agreed that the
parties shall use their Commercially Reasonable Efforts to cause such
information to be provided in a manner that would not result in such jeopardy or
contravention). No investigation shall affect the Companys representations,
warranties, covenants, or agreements contained herein, or limit or otherwise
affect the remedies available to Parent or Merger Sub pursuant to this
Agreement.
(b)
Parent and the Company shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Non-Disclosure Agreement, dated October 30, 2017, between Parent and the Company
(the
Confidentiality Agreement
), which shall survive the termination of
this Agreement in accordance with the terms set forth therein, except for (i)
Section 6 thereof, which shall terminate as of the Closing Date and (ii) Section
10 thereof, which shall terminate as of the date of this Agreement.
Section 5.04
No Solicitation
.
(a) The
Company shall not, and shall cause its Subsidiaries not to, and shall not
authorize or permit its and its Subsidiaries Representatives to, and shall give
written instructions to all such Representatives not to, directly or indirectly,
solicit, initiate, seek or knowingly take any action to facilitate or encourage
the making, submission or announcement of any Takeover Proposal, or any inquiry,
discussion, request, offer or proposal that could reasonably be
expected to lead to any Takeover Proposal, or, subject to Section 5.04(b): (i)
conduct or engage in any discussions or negotiations with, disclose any
non-public information relating to the Company or any of its Subsidiaries to,
afford access to the business, properties, assets, books, or records of the
Company or any of its Subsidiaries to, or knowingly assist, participate in,
facilitate, or encourage any effort by, any Person in connection with or in
response to, or that could reasonably be expected to lead to, any Takeover
Proposal; (ii) except where the Company Board determines that the failure to do
so would be inconsistent with its fiduciary duties, (A) amend or grant any
waiver or release under any standstill or similar agreement with respect to any
class of Equity Securities of the Company or any of its Subsidiaries, or (B)
approve any transaction under, or any Person becoming an interested
stockholder under, Section 203 of the DGCL (other than the Merger, the
Transactions, Parent and Merger Sub); or (iii) adopt, approve or enter into any
agreement in principle, letter of intent, term sheet, memorandum of
understanding, acquisition agreement, merger agreement, option agreement, joint
venture agreement, partnership agreement, or other Contract providing for or
relating to any Takeover Proposal (each, a
Company Acquisition
Agreement
). The Company shall, and shall cause its Subsidiaries to cease
immediately and cause to be terminated, and shall not authorize or permit any of
its or their Representatives to continue, and shall give written instructions to
all such Representatives not to continue, any and all existing activities,
discussions, negotiations or solicitations, if any, with any Person (other than
Parent or Merger Sub) with respect to any Takeover Proposal and shall use its
Commercially Reasonable Efforts to cause any such Person (other than Parent or
Merger Sub) and its Representatives in possession of non-public information in
respect of the Company or any of its Subsidiaries that was furnished by or on
behalf of the Company and its Subsidiaries to return or destroy (and confirm
destruction of) all such information and terminate the access of any such Person
(other than Parent or Merger Sub) and its Representatives to any electronic data
room maintained by or on behalf of the Company or any of its Subsidiaries.
Annex A - 34
(b)
Notwithstanding Section 5.04(a), prior to the receipt of the Requisite Company
Vote, if the Company or any of its Subsidiaries receives any bona fide written
unsolicited Takeover Proposal that did not result from a material breach of this
Section 5.04, the Company Board, directly or indirectly through any
Representative, may, subject to Section 5.04(c): (i) contact the Person who made
such bona fide written unsolicited Takeover Proposal for the purpose of
clarifying such Takeover Proposal and the material terms and conditions and
likelihood of consummation thereof in order to determine whether such Takeover
Proposal constitutes or would reasonably be expected to result in a Superior
Proposal and (ii) if the Company Board determines in good faith, after
consultation with its outside legal and financial advisors, that such Takeover
Proposal constitutes or would reasonably be expected to result in a Superior
Proposal, thereafter (A) furnish to such Person non-public information relating
to the Company or any of its Subsidiaries pursuant to an executed
confidentiality agreement that constitutes an Acceptable Confidentiality
Agreement; (B) make a Company Adverse Recommendation Change and (C) take any
action that any court of competent jurisdiction orders the Company to take
(which order remains unstayed), but in each case referred to in the foregoing
clauses (A) through (C), only if the Company Board determines in good faith,
after consultation with its outside legal and financial advisors, that the
failure to take such action would be inconsistent with its fiduciary duties
under applicable Law. Nothing contained herein shall prevent the Company Board
from disclosing to the Companys stockholders a position contemplated by Rule
14d-9 and Rule 14e-2(a) promulgated under the Exchange Act with regard to a
Takeover Proposal, if the Company determines that failure to disclose such
position would constitute a violation of applicable Law.
(c) The
Company Board shall not take any of the actions referred to in clauses (i) or
(ii) of Section 5.04(b) unless the Company shall have delivered to Parent at
least five Business Days prior written notice advising Parent that it intends
to take such action and stating the factors taken into account by the Company
Board in determining that any such Takeover Proposal constitutes or would
reasonably be expected to result in a Superior Proposal. The Company shall
notify Parent promptly (but in no event later than 24 hours after Knowledge of
the Companys (or any of its Subsidiaries or any of its or their
Representatives) receipt ) of any Takeover Proposal, any inquiry or request that
could reasonably be expected to lead to a Takeover Proposal, any request for
non-public information relating to the Company or any of its Subsidiaries or for
access to the business, properties, assets, books, or records of the Company or
any of its Subsidiaries by any Person (other than Parent or Merger Sub). In such
notice, the Company shall identify the Person making, and details of the material terms
and conditions of, any such Takeover Proposal, indication or request. The
Company shall keep Parent reasonably informed, on a prompt basis, of the status
and material terms of any such Takeover Proposal, indication or request,
including any material amendments or proposed amendments as to price and other
material terms thereof. The Company shall promptly provide Parent with a list of
any non-public information concerning the Companys and any of its Subsidiarys
business, present or future performance, financial condition, or results of
operations, provided to any Person, and, to the extent such information has not
been previously provided to Parent, copies of such information. The Company will
not, and will not cause or permit any Subsidiary of the Company to, enter into
any Contract with any Person, or otherwise take any action, that would prohibit
or restrict in any way the Company or such Subsidiary from providing any
information to Parent hereunder.
Annex A - 35
(d)
Except as expressly permitted by this Section 5.04, the Company Board shall not
effect a Company Adverse Recommendation Change or enter into (or permit any
Subsidiary to enter into) a Company Acquisition Agreement. Notwithstanding the
foregoing, at any time prior to the receipt of the Requisite Company Vote, the
Company Board may effect a Company Adverse Recommendation Change or enter into
(or permit any Subsidiary to enter into) a Company Acquisition Agreement, if:
(i) the Company promptly notifies Parent, in writing, at least five Business
Days (the
Superior Proposal Notice Period
) before making a Company
Adverse Recommendation Change or entering into (or causing a Subsidiary to enter
into) a Company Acquisition Agreement, of its intention to take such action with
respect to a Superior Proposal, which notice shall state expressly that the
Company has received a Takeover Proposal, that the Company Board intends to
declare a Superior Proposal and that the Company Board intends to effect a
Company Adverse Recommendation Change and/or the Company intends to enter into
(or permit any Subsidiary to enter into) a Company Acquisition Agreement; (ii)
the Company attaches to such notice the most current version of the proposed
agreement (which version shall be updated promptly after material amendment
thereto) and the identity of the Person making such Superior Proposal; (iii) the
Company shall, and shall cause its Representatives to, during the Superior
Proposal Notice Period, negotiate with Parent in good faith to make such
adjustments in the terms and conditions of this Agreement so that such Takeover
Proposal ceases to constitute a Superior Proposal, if Parent, in its discretion,
proposes to make such adjustments (it being agreed that in the event that, after
commencement of the Superior Proposal Notice Period, there is any material
revision to the terms of a Superior Proposal, including, any revision in price,
the Superior Proposal Notice Period shall be extended, if applicable, to ensure
that at least five Business Days remain in the Superior Proposal Notice Period
subsequent to the time the Company notifies Parent of any such material
revision); and (iv) the Company Board determines in good faith, after
consultation with its outside legal and financial advisors, that such Takeover
Proposal continues to constitute a Superior Proposal after taking into account
any adjustments made by Parent during the Superior Proposal Notice Period in the
terms and conditions of this Agreement and that failure to make a Company
Adverse Recommendation Change or enter into (or permit any Subsidiary to enter
into) a Company Acquisition Agreement would continue to be inconsistent with its
fiduciary duties under applicable Law.
(e)
Notwithstanding anything to the contrary in the foregoing, in response to an
Intervening Event that has occurred after the date of this Agreement but prior
to the receipt of the Requisite Company Vote, the Company Board may effect a
Company Adverse Recommendation Change if: (i) prior to effecting the Company
Adverse Recommendation Change, the Company promptly notifies Parent, in writing,
at least five Business Days (the
Intervening Event Notice Period
)
before taking such action of its intent to consider such action (which notice
shall not, by itself, constitute a Company Adverse Recommendation Change), and
which notice shall include a reasonably detailed description of the underlying
facts giving rise to, and the reasons for taking, such action; (ii) the Company
shall, and shall cause its Representatives to, during the Intervening Event
Notice Period, negotiate with Parent in good faith to make such adjustments in
the terms and conditions of this Agreement so that the underlying facts giving
rise to, and the reasons for taking such action, ceases to constitute an
Intervening Event, if Parent, in its discretion, proposes to make such
adjustments (it being agreed that in the event that, after commencement of the
Intervening Event Notice Period, there is any material development in an
Intervening Event, the Intervening Event Notice Period shall be extended, if
applicable, to ensure that at least five Business Days remain in the Intervening
Event Notice Period subsequent to the time the Company notifies Parent of any
such material development); and (iii) the Company Board determines in good
faith, after consultation with its outside legal and financial advisors, that the failure to
effect such Company Adverse Recommendation Change, after taking into account any
adjustments made by Parent during the Intervening Event Notice Period, would
continue to be inconsistent with its fiduciary duties under applicable Law. The
Company acknowledges and hereby agrees that any Company Adverse Recommendation
Change effected (or proposed to be effected) in response to or in connection
with any Takeover Proposal may be made solely and exclusively pursuant to
Section 5.04(d) only, and may not be made pursuant to this Section 5.04(e), and
any Company Adverse Recommendation Change may only be made pursuant to this
Section 5.04 and for no other reason.
Annex A - 36
Section
5.05
Stockholders Meeting; Preparation of Proxy
Materials; Approval by Sole Stockholder of
Merger Sub.
(a) The
Company shall take all action necessary in accordance with the Company Charter
Documents to establish a record date and duly call, give notice of, convene, and
hold the Company Stockholders Meeting as soon as reasonably practicable after
the date of this Agreement, and, in connection therewith, the Company shall mail
the Company Proxy Statement to the holders of Company Shares in advance of such
meeting. Except to the extent that the Company Board shall have effected a
Company Adverse Recommendation Change as permitted by Section 5.04 hereof, the
Company Proxy Statement shall include the Company Board Recommendation. Subject
to Section 5.04 hereof, the Company shall use Commercially Reasonable Efforts
to: (i) solicit from the holders of Company Shares proxies in favor of the
adoption of this Agreement and approval of the Merger; and (ii) take all other
actions necessary or advisable to secure the vote or consent of the holders of
Company Shares required by applicable Law to obtain such approval. The Company
shall not submit any other proposals for approval at the Company Stockholders
Meeting without the prior written consent of Parent. The Company shall keep
Parent and Merger Sub updated with respect to proxy solicitation results as
requested by Parent or Merger Sub. Once the Company Stockholders Meeting has
been called and noticed, the Company shall not postpone or adjourn the Company
Stockholders Meeting without the consent of Parent, which consent may not be
unreasonably withheld, other than: (A) in order to obtain a quorum of its
stockholders; (B) to allow reasonable additional time after the filing and
mailing of any supplemental or amended disclosures to the Company Proxy
Statement for compliance with applicable legal requirements, to the extent
required by applicable Law; or (C) to allow reasonable additional time to
solicit proxies to secure the approval of the Agreement. If the Company Board
makes a Company Adverse Recommendation Change, it will not alter the obligation
of the Company to submit the adoption of this Agreement and the approval of the
Merger to the holders of Company Shares at the Company Stockholders Meeting to
consider and vote upon, unless this Agreement shall have been terminated in
accordance with its terms prior to the Company Stockholders Meeting.
(b) In
connection with the Company Stockholders Meeting, as soon as reasonably
practicable following the date of this Agreement the Company shall prepare and
file the Company Proxy Statement with the SEC. Parent, Merger Sub, and the
Company will cooperate and consult with each other in the preparation of the
Company Proxy Statement. Without limiting the generality of the foregoing, each
of Parent and Merger Sub will furnish the Company the information relating to it
as the Company may reasonably request, including such information that is
required by the Exchange Act and the rules and regulations promulgated
thereunder to be set forth in the Company Proxy Statement. The Company shall not
file the Company Proxy Statement, or any amendment or supplement thereto,
without providing Parent a reasonable opportunity to review and comment thereon
(which comments shall be considered in good faith by the Company and
incorporated in the Company Proxy Statement, to the extent reasonable). The
Company shall use its Commercially Reasonable Efforts to cause the Company Proxy
Statement at the date that it (and any amendment or supplement thereto) is first
published, sent, or given to the stockholders of the Company and at the time of
the Company Stockholders Meeting, to comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder. The Company shall use its Commercially Reasonable
Efforts to resolve, and each party agrees to consult and cooperate with the
other party in resolving, all SEC comments with respect to the Company Proxy
Statement as promptly as practicable after receipt thereof and to cause the
Company Proxy Statement in definitive form to be cleared by the SEC and mailed
to the Companys stockholders as promptly as reasonably practicable following
filing with the SEC. The Company agrees to consult with Parent prior to responding to SEC comments with respect to the preliminary
Company Proxy Statement. Each of Parent, Merger Sub, and the Company agree to
correct any information provided by it for use in the Company Proxy Statement
which shall have become false or misleading and the Company shall promptly
prepare and mail to its stockholders an amendment or supplement setting forth
such correction. The Company shall as soon as reasonably practicable: (i) notify
Parent of the receipt of any comments from the SEC with respect to the Company
Proxy Statement and any request by the SEC for any amendment to the Company
Proxy Statement or for additional information; and (ii) provide Parent with
copies of all written correspondence between the Company and its
Representatives, on the one hand, and the SEC, on the other hand, with respect
to the Company Proxy Statement.
Annex A - 37
(c)
Immediately following the execution and delivery of this Agreement, Parent, as
sole stockholder of Merger Sub, shall adopt this Agreement and approve the
Merger, in accordance with the DGCL.
Section
5.06
Notices of Certain Events
. The Company shall
notify Parent and Merger Sub, and Parent and Merger Sub shall notify the
Company, promptly of: (a) any notice or other communication from any Person
alleging that the Consent of such Person is or may be required in connection
with the Transactions; (b) any notice or other communication from any
Governmental Authority in connection with the Transactions; (c) any Legal
Actions commenced, or to such partys Knowledge, threatened, against the Company
or any of its Subsidiaries or Parent or its Subsidiaries, as applicable, that
are related to the Merger or the other Transactions; and (d) any event, change,
or effect between the date of this Agreement and the Effective Time which causes
or is reasonably likely to cause the failure of the conditions set forth in
Section 6.02(a), Section 6.02(b), or Section 6.02(c) of this Agreement (in the
case of the Company and its Subsidiaries) or Section 6.03(a) or Section 6.03(b)
of this Agreement (in the case of Parent and Merger Sub), to be satisfied. In no
event shall: (i) the delivery of any notice by a party pursuant to this Section
5.06 limit or otherwise affect the respective rights, obligations,
representations, warranties, covenants, or agreements of the parties or the
conditions to the obligations of the parties under this Agreement; or (ii)
disclosure by the Company or Parent be deemed to amend or supplement the Company
Disclosure Schedule or constitute an exception to any representation or
warranty.
Section 5.07
Employees; Benefit
Plans
.
(a) No
later than forty-five (45) days prior to the date of the Company Stockholders
Meeting, Parent (or its designee) shall offer employment to such employees of
the Company or its Subsidiaries as Parent may determine in its sole discretion
and such offers of employment shall be conditioned on the Closing. Parent shall
provide, or shall cause to be provided, to each such employee who accepts an
offer of employment (the
Continuing Employees
) compensation and
benefits that, taken as a whole, are at a level substantially similar to the
compensation and benefits (other than severance benefits and Equity Securities)
provided by the Company or its Subsidiaries to such Continuing Employees
immediately prior to the Effective Time;
provided
,
however
, that
nothing in this Agreement shall create any right to continued employment in any
Continuing Employee or prohibit the Surviving Corporation from terminating the
employment of any Continuing Employee or from amending, modifying or terminating
any Company Plan.
(b) For
purposes of vesting, eligibility to participate and levels of benefits (but not
accrual) under the employee benefit plans of Parent and its Subsidiaries
providing benefits to any Continuing Employee after the Effective Time
(including the Company Plans), Parent shall use Commercially Reasonable Efforts
to provide that each Continuing Employee shall be credited with his or her years
of service with the Company and its Subsidiaries and their respective
predecessors before the Effective Time, to the same extent as such Continuing
Employee was entitled, before the Effective Time, to credit for such service
under any similar Company Plan in which such Continuing Employee participated or
was eligible to participate immediately prior to the Effective Time, provided
that the foregoing shall not apply to the extent that its application would
result in a duplication of benefits with respect to the same period of service.
In addition, and without limiting the generality of the foregoing, Parent shall
use its Commercially Reasonable Efforts to cause (i) any applicable waiting
period under any employee benefit plan of Parent and its Subsidiaries providing
benefits to any Continuing Employee after the Effective Time to be waived with
respect to each such Continuing Employee to the extent coverage under such plan
is replacing comparable coverage under a Company Plan in which such Continuing
Employee participated immediately before the Effective Time and (ii) for purposes of each such
plan providing medical, dental, pharmaceutical and/or vision benefits to any
Continuing Employee, all pre-existing condition exclusions and actively-at-work
requirements of such plan to be waived for such Continuing Employee and his or
her covered dependents, to the extent such conditions were inapplicable or
waived under the comparable Company Plan of the Company or its Subsidiaries in
which such Continuing Employee participated immediately prior to the Effective
Time. Parent shall take Commercially Reasonable Efforts to cause any eligible
expenses incurred by any Continuing Employee and his or her covered dependents
during the portion of the plan year of the applicable Company Plan ending on the
date such Continuing Employees participation in the corresponding employee
benefit plan of Parent and its Subsidiaries begins to be taken into account
under such plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such Continuing Employee and
his or her covered dependents for the applicable plan year as if such amounts
had been paid in accordance with such plan.
Annex A - 38
(c) The
provisions of this Section 5.07 and Section 5.16(f) are solely for the benefit
of the parties, and no provision of this Section 5.07 or Section 5.16(f) is
intended to, or shall, constitute the establishment or adoption of or an
amendment to any employee benefit plan for purposes of ERISA or otherwise and no
current or former employee or independent contractor of the Company, the
Surviving Corporation or any of their respective Subsidiaries, or any other
individual associated therewith shall be regarded for any purpose as a third
party beneficiary of this Section 5.07 or Section 5.16(f) or have the right to
enforce the provisions hereof or thereof.
(d) From
time to time during the period between the date of this Agreement and the date
referred to in Section 5.07(a), the Company shall, and shall cause its
Subsidiaries to, make available to Parent and its Representatives reasonable
access (subject to the provisions in the following sentence) to such of the
officers and employees of the Company and its Subsidiaries as the Parent may
from time to time reasonably request for purposes of: (x) evaluating which, if
any, of those persons may be employed by Parent, Merger Sub or any of their
Affiliates from and after the Effective Time; (y) discussing with any such
persons the terms and conditions, if any, on which they may be employed by
Parent, Merger Sub or any of their Affiliates from and after the Effective Time;
and (z) making (or not making) offers of employment as provided in Section
5.07(a), notwithstanding any contrary provision of the Confidentiality
Agreement. Such access will include the opportunity for individual or group
meetings (either in person or through telephonic, video or other electronic
communication media) with one or more such persons, or all employees, at
offices, plants and other facilities of Seller and its Subsidiaries, or at
off-site locations, in each case as reasonably requested by Parent, subject to
the following limitations:
(i) In the
case of any access involving in-person meetings at offices, plants and other
facilities of Seller and its Subsidiaries, such access will be on such dates and
at times (either before, during or after normal business hours for the employees
involved) mutually agreed by Parent and the Company, and subject to the normal
safety and security restrictions at the location of such meetings.
(ii) In
each case, such access will not unreasonably interfere with the business and
operations of the Company and its Subsidiaries and will be conducted in
compliance with applicable Laws and Permits.
Section 5.08
Directors and Officers Indemnification and Insurance
.
(a) From
and after the Effective Time through the sixth anniversary of the date on which
the Effective Time occurs, each of Parent and the Surviving Corporation and
their respective applicable Subsidiaries shall, (i) indemnify and hold harmless
each individual who at the Effective Time is, or at any time prior to the
Effective Time was, a director or officer of the Company or of a Subsidiary of
the Company (each, an
Indemnitee
and, collectively, the
Indemnitees
) with respect to all claims, liabilities, losses, damages,
judgments, fines, penalties, costs (including amounts paid in settlement or
compromise) and expenses (including fees and expenses of legal counsel) in
connection with any claim, suit, action, proceeding or investigation (whether
civil, criminal, administrative or investigative), whenever asserted, based on
or arising out of, in whole or in part, (A) the fact that an Indemnitee was a
director or officer of the Company or such Subsidiary or (B) acts or
omissions by an Indemnitee in the Indemnitees capacity as a director, officer,
employee or agent of the Company or such Subsidiary or taken at the request of
the Company or such Subsidiary (including in connection with serving at the
request of the Company or such Subsidiary as a director, officer, employee,
agent, trustee or fiduciary of another Person (including any employee benefit
plan)), in each case under (A) or (B), at, or at any time prior to, the
Effective Time (including any claim, suit, action, proceeding or investigation
relating in whole or in part to the Transactions), to the same extent such
Indemnitees are entitled to indemnification as of the date of this Agreement by
the Company or any of its Subsidiaries pursuant to applicable Law, the Company
Charter Documents, the organizational documents of such Subsidiaries or any
indemnification agreements in existence on the date of this Agreement and made
available to Parent prior to the date hereof, and (ii) assume all obligations of
the Company and such Subsidiaries to the Indemnitees in respect of
indemnification and exculpation from liabilities for acts or omissions occurring
at or prior to the Effective Time as provided in the Company Charter Documents
and the organizational documents of such Subsidiaries as currently in effect;
provided, however
, that if, at any time prior to the sixth anniversary of
the Effective Time, any Indemnitee delivers to Parent or the Surviving
Corporation a written notice asserting a claim for indemnification under this
Section 5.08(a), then the claim asserted in such notice shall survive the sixth
anniversary of the Effective Time until such time as such claim is fully and
finally resolved. Without limiting the foregoing, Parent, from and after the
Closing until six (6) years from the Effective Time, shall cause, unless
otherwise required by Law, the certificate of incorporation and bylaws of the
Surviving Corporation to contain provisions no less favorable to the Indemnitees
with respect to limitation of liabilities of directors and officers and
indemnification than are set forth as of the date of this Agreement in the
Company Charter Documents, which provisions shall not be amended, repealed or
otherwise modified or superseded in any manner that would adversely affect the
rights thereunder of the Indemnitees. In addition, from the Closing until six
(6) years from date on which the Effective Time occurs, Parent shall, and shall
cause the Surviving Corporation to, advance any expenses (including the fees and
expenses of legal counsel) of any Indemnitee under this Section 5.08 (including
in connection with enforcing the indemnity and other obligations referred to in
this Section 5.08) as incurred to the same extent such Indemnitees are entitled
to advancement of expenses as of the date of this Agreement by the Company or
any of its Subsidiaries pursuant to applicable Law, the Company Charter
Documents, the organizational documents of such Subsidiaries or any
indemnification agreements in existence on the date of this Agreement and made
available to Parent prior to the date hereof,
provided
,
however
,
that the individual to whom expenses are advanced provides, if requested by
Parent, an undertaking to repay such advances if it shall be determined that
such individual is not entitled to be indemnified pursuant to this Section
5.08(a) . The Surviving Corporation shall reasonably cooperate in good faith in
the defense of any such matters;
provided
, that requests by Indemnitees
or their Representatives to interview Representatives, examine the books and
records or access the properties of the Surviving Corporation shall be made
during normal business hours and upon reasonable notice and shall not
significantly or materially impact the operations of the Surviving
Corporation.
Annex A - 39
(b) Prior
to the Effective Time, the Company may purchase, for an aggregate amount not to
exceed 300% of the current aggregate annual premium (the
Maximum
Premium
), a six-year prepaid tail policy (
Tail Policy
) providing
coverage for the Indemnitees on terms and conditions providing substantially
equivalent benefits as the current policies of directors and officers
liability insurance maintained by the Company and its Subsidiaries with respect
to matters existing or occurring prior to the Effective Time, covering without
limitation the Transactions;
provided
,
however
, that if the
premium for such Tail Policy shall exceed the Maximum Premium, the Company shall
provide or cause to be provided a Tail Policy for the applicable individuals
with the best coverage as shall then be available at an annual premium equal to
the Maximum Premium. After the Effective Time, the Surviving Corporation shall
cause such policy to be maintained in full force and effect, for its full term,
and to honor all of its obligations thereunder and neither Parent nor the
Surviving Corporation shall have any further obligations under this Section
5.08(b) .
(c) The
provisions of this Section 5.08 are (i) intended to be for the benefit of, and
shall be enforceable by, each Indemnitee, his or her heirs and his or her
Representatives and (ii) in addition to, and not in substitution for, any other
rights to indemnification or contribution that any such individual may have under the Company Charter Documents, by Contract or otherwise
(it being expressly agreed that the Indemnitees to whom this Section 5.08
applies shall be third party beneficiaries of this Section 5.08) .
Annex A - 40
(d) In
the event that Parent, the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of Parent or the
Surviving Corporation shall assume all of the obligations thereof set forth in
this Section 5.08.
(e)
Nothing in this Agreement is intended to, shall be construed to or shall
release, waive or impair any rights to Indemnitees insurance claims under any
policy that is or has been in existence with respect to the Company or any of
its Subsidiaries for any of their respective directors, officers or other
employees, it being understood and agreed that the indemnification provided for
in this Section 5.08 is not prior to or in substitution for any such claims
under such policies.
Section 5.09
Commercially Reasonable Efforts
.
(a) Upon
the terms and subject to the conditions of this Agreement, each of the parties
shall cooperate with the other parties and use (and shall cause their respective
Subsidiaries to use) their respective Commercially Reasonable Efforts to
promptly (i) unless, with respect to any action, another standard of performance
is expressly provided for herein, take, or cause to be taken, all actions, and
do, or cause to be done, all things, necessary, proper or advisable to cause the
other partys (with respect to Parent and Merger Sub) or parties (with respect
to the Company) conditions to Closing to be satisfied as promptly as practicable
and to consummate and make effective, in the most expeditious manner
practicable, the Transactions, including preparing and filing promptly and fully
all documentation to effect all necessary Filings, including, if applicable,
requesting expedited treatment for any such Filing, (ii) obtain all Consents,
Permits, expirations or terminations of waiting periods and other confirmations
from any Governmental Authority or other Person necessary, proper or advisable
to consummate the Transactions and continue the businesses of the Company and
its Subsidiaries uninterrupted as currently conducted, (iii) obtain any Consents
or make any Filings that are required by any Governmental Authority for or in
connection with any Permit, Water Right, bond or other financial surety, (iv)
execute and deliver any additional instruments necessary to consummate the
Transactions and (v) avoid, defend or contest (A) any Legal Action brought by a
Governmental Authority or other Person or (B) entry of any Law or Order that
would, in each case, prevent or materially impede, interfere with, hinder or
delay the consummation of the Transactions. In connection with the foregoing and
to the extent not prohibited by applicable Law, the Company will provide Parent,
and Parent will provide the Company, with copies of any material correspondence,
Filing or communication between such party or any of its Representatives, on the
one hand, and any Governmental Entity, on the other hand, with respect to this
Agreement and the Transactions, promptly after receipt or submission thereof,
other than Item 4(c) and 4(d) documents submitted with a partys Notification
and Report Form filing pursuant to the HSR Act; notwithstanding the foregoing,
in no instance shall either party be required to provide valuation information
to the other party or its Representatives.
(b) In
furtherance and not in limitation of the foregoing, the Company and Parent shall
each use its Commercially Reasonable Efforts to (i) take all action necessary to
ensure that no state takeover statute or similar Law is or becomes applicable to
any of the Transactions and (ii) if the restrictions of any state takeover
statute or similar Law become applicable to any of the Transactions, take all
action necessary to ensure that the Transactions may be consummated as promptly
as practicable on the terms contemplated by this Agreement and otherwise
lawfully minimize the effect of such Law on the Transactions.
(c) Each
party agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the Transactions as promptly as
practicable and in any event within ten (10) Business Days of the date hereof
and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and to use
Commercially Reasonable Efforts to avoid or eliminate each and every impediment
and obtain all consents, approvals and expirations or terminations of waiting
periods under any Antitrust Laws that may be required by any foreign or U.S. federal, state or local Governmental
Authority so as to enable the parties to close the Transactions. The Company and
Parent will each request early termination of the waiting period with respect to
the Transactions under the HSR Act.
Annex A - 41
(d) Each
of the parties shall use its Commercially Reasonable Efforts to (i) cooperate in
all respects with each other in connection with any Filing with or to a
Governmental Authority in connection with the Transactions and in connection
with any investigation or other inquiry by or before a Governmental Authority
relating to the Transactions, including any proceeding initiated by a private
Person, and (ii) keep the other party informed in all material respects and on a
reasonably timely basis of any material communication received by such party
from, or given by such party to, the Federal Trade Commission, the Antitrust
Division of the Department of Justice, FERC or any other Governmental Authority
and of any material communication received or given in connection with any
proceeding by a private Person, in each case regarding any of the Transactions.
Subject to applicable Laws relating to the exchange of information and all
privileges, including the attorney-client privilege, each of the parties shall
have the right to review in advance, and to the extent practicable, each will
consult, and consider in good faith the views of, the other on, all the
information relating to the other parties and their respective Subsidiaries, as
the case may be, that appears in any Filing made with, or written materials
submitted to, any Governmental Authority or other Person in connection with the
Transactions, other than Item 4(c) and 4(d) documents submitted with a partys
Notification and Report Form filing pursuant to the HSR Act. To the extent
permitted by applicable Law, each party shall provide the other parties (in the
case of Parent and Merger Sub) or party (in the case of the Company) with the
opportunity to attend any meetings with or other appearances before any
Governmental Authority with respect to the Transactions. Any party may, as it
deems advisable and necessary, reasonably designate any highly confidential or
competitively sensitive material provided to another party under this Section
5.09 as Outside Counsel Only. Such materials and the information contained
therein shall be given only to the outside antitrust legal counsel of the
recipient and will not be disclosed by such outside counsel to employees,
officers, or directors of the recipient, unless express written permission is
obtained in advance from the source of the materials.
(e)
Notwithstanding anything to the contrary in this Section 5.09, none of Parent,
Merger Sub or the Company shall be required in order to resolve any objections
asserted under Antitrust Laws by any Governmental Authority with respect to the
Transactions to divest any of its businesses, product lines or assets, or to
take or agree to take any other action or to agree to any limitation or
restriction of any kind on its business, operations, properties or assets.
Section
5.10
Public Announcements
. The initial press
release with respect to this Agreement and the Transactions shall be a release
mutually agreed to by the Company and Parent. Thereafter, (a) the Company and
Parent will consult with each other before issuing, and give each other the
opportunity to review and comment upon, any press release or before making any
public release or announcement concerning the Transactions and (b) the Company,
Parent and Merger Sub agree that no such press release, public release or
announcement shall be issued by any party without the prior written consent of
the Company and Parent (which consent, in each case, shall not be unreasonably
withheld, conditioned, or delayed), except as may be required by applicable Law
or the rules or regulations of the NYSE American, the NYSE, the Tel Aviv Stock
Exchange or any other Governmental Authority to which the relevant party is
subject or submits. Notwithstanding the foregoing, the restrictions set forth in
this Section 5.10 shall not apply to any release or announcement made or
proposed to be made in connection with and related to a Company Adverse
Recommendation Change or in compliance with Section 5.04.
Section
5.11
Takeover Statutes
. None of the Company, any
of its Subsidiaries or the Company Board shall take any action that would result
in any control share acquisition, fair price, moratorium, business
combination, or other anti-takeover Law becoming applicable to the Company, the
Merger or any other Transaction and if any such anti-takeover Law becomes or is
deemed to be applicable to the Company, the Merger, or any other Transaction,
then each of the Company and the Company Board shall grant such approvals and
take such actions as are necessary so that the Transactions may be consummated
as promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of, or render inapplicable to the Company, the Merger or
any other Transaction, such anti-takeover Law.
Annex A - 42
Section
5.12
Section 16 Matters
. Prior to the Effective
Time, the Company shall take all such steps as may be required to cause to be
exempt under Rule 16b-3 promulgated under the Exchange Act any dispositions of
Company Shares (including derivative securities with respect to such Company
Shares and Options) that result from the Transactions by each director or
officer of the Company who is subject to the reporting requirements of Section
16(a) of the Exchange Act with respect to the Company immediately prior to the
Effective Time.
Section
5.13
Further Assurances
. At and after the
Effective Time, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company or
Merger Sub, any deeds, bills of sale, assignments, or assurances and to take and
do, in the name and on behalf of the Company or Merger Sub, any other actions
and things to vest, perfect, or confirm of record or otherwise in the Surviving
Corporation any and all right, title, and interest in, to and under any of the
rights, properties, or assets of the Company acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger.
Section
5.14
Stockholder Litigation
. Parent and the
Company shall notify the other party promptly of the commencement of any Legal
Action that is a stockholder or derivative suit related to this Agreement, the
Merger or any other Transaction of which it has received written notice. So long
as the Parent and the Company share a common interest, and any such disclosure
required by this Section 5.14 will not waive any confidentiality or privilege
attached to that information, the Company shall (a) provide Parent with the
opportunity (i) to participate in the defense or settlement of any such Legal
Action against the Company or its Affiliates or any of its or their respective
directors or officers and (ii) to review and comment upon filings and responses
related thereto, which the Company shall consider and implement in good faith
and (b) keep Parent apprised of, and consult with Parent with respect to,
proposed strategy and any significant decisions related thereto.
Section
5.15
De-listing of Company Securities
. The
Surviving Corporation shall cause the Companys securities to be de-listed from
the NYSE American as promptly as practicable following the Effective Time, and
the Company shall, prior to the Effective Time, cooperate with Parent with
respect thereto.
Section 5.16
Change of Control Payments and Service Bonus.
(a)
Parent and Merger Sub hereby acknowledge that the Transactions contemplated by
this Agreement shall constitute a change in control, change of control or
term or concept of similar import of the Company and its Subsidiaries under the
terms of the items required to be disclosed in Section 3.11 of the Company
Disclosure Schedule pursuant to Section 3.11(e)(i) (the
Severance
Provisions
). Parent and Merger Sub acknowledge and agree that the Company
and its Subsidiaries, from and after the Effective Time, shall honor all
obligations and rights under the Severance Provisions in accordance with their
terms, including, at the Effective Time, paying any amounts due under the
Severance Provisions with respect to the occurrence of the Transactions.
(b)
Subject to the terms and conditions in this Section 5.16, the Company or the
Surviving Corporation, as applicable, will pay to each of the persons listed in
Section 5.16(b) of the Company Disclosure Schedule (the
Service Bonus
Recipients
) the respective amounts set forth opposite the name of each
Service Bonus Recipient in Section 5.16(b) of the Company Disclosure Schedule,
reduced by (i) any amounts required to be withheld under any applicable Laws,
including for Taxes, and (ii) in the case of Service Bonus Recipients who are
employees of U.S. Geothermal Guatemala, S.A., any severance, economic advantages
or other compensation or benefits required to be paid to those persons under any
applicable Laws (the
Service Bonus
).
(c) The
obligation of the Company or the Surviving Corporation, as applicable, to pay,
and the right of any Service Bonus Recipient to receive, any Service Bonus will
be subject to satisfaction (or waiver by Parent, in its sole discretion) of each
of the following conditions:
(i) The Closing must occur before or
contemporaneously with payment of the Service Bonus, and no Service Bonus will
be paid to any Service Bonus Recipient if this Agreement is terminated prior to
the Closing.
Annex A - 43
(ii) The
Service Bonus Recipient must be continuously employed by the Company or one of
its Subsidiaries during the period commencing on the date of this Agreement and
ending on the date that is (x) except for those Service Bonus Recipients who are
Transition Employees (as defined below), the Closing Date, or (y) in the case of
any Service Bonus Recipient who is requested by Parent no later than forty-five
(45) days prior to the date of the Company Stockholders Meeting to provide any
transition services to the Surviving Corporation or any of its Subsidiaries of
substantially similar time commitment and duties at the same location (the
Transition Services
) for any limited period of time after the Closing
Date that may be requested by Parent (excluding for the avoidance of doubt any
Person who becomes a Continuing Employee pursuant to Section 5.07 providing
ongoing services as employees of Parent or any of its Subsidiaries for an
indefinite period of time after the Closing Date) (the
Transition
Employees
), the date that is the last day of the period (the
Transition
Service Period
) commencing on the Closing Date and ending on the earliest
of:
(A) the last
day of the period of service Parent requested that Transition Employee to
provide;
(B) the date
prior to the day referred to in clause (A) above, if any, on which the
employment of that Transition Employee is terminated without cause (as
determined by Parent in its sole discretion); and
(C) the date
of death or permanent disability of the Transition Employee.
For the avoidance of doubt, any
Service Bonus Recipient who is requested to provide and declines or fails to
provide any or all Transition Services requested by Parent will be paid no
Service Bonus.
(iii) Any
Service Bonus Recipient who is a Transition Employee must provide during the
Transition Service Period those Transition Services that have been requested by
Parent with the same amount of skill, diligence, integrity, time and effort, in
all material respects, as that Transition Employee used in providing comparable
services to the Company or its Subsidiaries prior to the Closing.
(iv) Each
Service Bonus Recipient who is not a Transition Employee must, on or prior to
the Closing Date, (x) execute and deliver to Parent and the Company a general
release (in form and substance reasonably satisfactory to Parent and the
Company) in favor of the Company, its Subsidiaries and their respective
Representatives (and their respective successors, administrators, executors,
heirs and assigns), against any and all claims relating to or arising out of the
Service Bonus Recipients employment relationship with the Company and its
Subsidiaries and the termination of that relationship and (y) not revoke such
general release within the time provided by applicable Law (such general release
which meets the requirements of subclauses (x) and (y) is hereinafter referred
to as an
Effective General Release
).
(v) Each
Service Bonus Recipient who is a Transition Employee must, within twenty-one
(21) days (forty-five (45) days in the case of a group termination) following
the earliest of the dates specified in subclauses (A), (B) or (C) in Section
5.16(c)(iii), execute and deliver to Parent and the Surviving Corporation an
Effective General Release.
(d) Any
Service Bonus payable in accordance with this Section 5.16 will be paid, in
cash, though the normal payroll payment mechanism of the Company or the
Surviving Corporation, as applicable, at the following times:
(i) except for
those Service Bonus Recipients who are Transition Employees, on the Closing
Date, immediately prior to the Effective Time, and in any event no later than
March 15th of the calendar year following the year in which such amount vests.
Annex A - 44
(ii) for
any Service Bonus Recipients who are Transition Employees, on the last day of
his or her Transition Service Period, unless his or her Transition Service
Period is longer than ninety (90) days after the Closing Date, in which case on
the date that is ninety (90) days after the Closing Date, unless that is not a
Business Day, in which case on the first Business Day following the date that is
ninety (90) days after the Closing Date, and in any event no later than March
15th of the calendar year following the year in which such amount vests and in
compliance with the requirements of Section 409A related to payments in
connection with general release agreements.
Notwithstanding the foregoing, Parent will have no obligation
to pay, and no Service Bonus Recipient will have the right to receive, any
Service Bonus until such time as such Service Bonus Recipient has executed and
delivered an Effective General Release.
(e) The
arrangement to provide Service Bonuses set forth in this Section 5.16 and
Section 5.16(b) of the Company Disclosure Schedule is intended to be exempt from
Section 409A of the Code and the Treasury Regulations promulgated thereunder
(
Section 409A
). Notwithstanding the foregoing, none of the Company,
Parent or Merger Sub make any representation or covenant regarding the status of
such program under Section 409A.
(f)
Unless otherwise agreed by Parent and any Transition Employee, Parent shall
provide, or shall cause to be provided, to each Transition Employee during his
or her Transition Service Period compensation and benefits that, taken as a
whole, are at a level substantially similar to the compensation and benefits
(other than severance benefits and Equity Securities) provided by the Company or
its Subsidiaries to such Transition Employees immediately prior to the Effective
Time for services comparable to the Transition Services provided by that
Transition Employee.
(g)
Nothing in this Section 5.16 or Section 5.16(b) of the Company Disclosure
Schedule shall create any right to continued employment for any Service Bonus
Recipient.
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
Section
6.01
Conditions to Each Partys Obligation to Effect
the Merger
. The respective obligations of each party to this Agreement to
effect the Merger is subject to the satisfaction or waiver (where permissible
pursuant to applicable Law) in writing at or prior to the Effective Time of each
of the following conditions:
(a)
Company Stockholder Approval
. This Agreement will have been duly adopted
by the Requisite Company Vote.
(c)
Regulatory Approvals
. Any waiting period applicable to the consummation
of the Merger (or any extension thereof) shall have expired or been terminated
and all required filings have been made and all required approvals obtained
under the HSR Act and any other applicable Antitrust Laws.
(d)
No
Injunctions, Restraints, or Illegality
. No Governmental Authority having
jurisdiction over any party hereto shall have enacted, issued, promulgated,
enforced, or entered any Laws or Orders, whether temporary, preliminary, or
permanent, that make illegal, restrain, enjoin, or otherwise prohibit
consummation of the Merger or the other Transactions.
(e)
FERC
Approvals
. The required approvals from FERC shall have been obtained.
(f)
Authorizations and Consents
. All Consents and Filings set forth in
Section 3.04 and Section 4.03 and required to consummate the Merger and the
other Transactions (other than the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware) shall have been obtained or made
and shall be in full force and effect.
Section
6.02
Conditions to Obligations of Parent and Merger
Sub
. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the satisfaction or waiver (where permissible pursuant to applicable Law) in writing by Parent and Merger Sub at or prior
to the Effective Time of the following additional conditions:
Annex A - 45
(a)
Representations and Warranties
. (i) The representations and warranties of
the Company (other than in Section 3.01, Section 3.02, Section 3.03(a), Section
3.03(b), Section 3.03(c)(i), Section 3.03(d), Section 3.06(b), Section 3.06(c)
and Section 3.21) set forth in ARTICLE III of this Agreement shall be true and
correct in all respects (without giving effect to any limitation indicated by
the words Company Material Adverse Effect, in all material respects, in any
material respect, material, materially, or similar terms) when made and as
of immediately prior to the Effective Time, as if made at and as of such time
(except those representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as of that
date), except where the failure of such representations and warranties to be so
true and correct would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect; (ii) the representations and
warranties of the Company contained in Section 3.02(a), Section 3.02(b) (first
sentence only), Section 3.02(c) (first sentence only), and Section 3.02(f)
(individually and collectively the
Designated Capitalization Reps
)
shall be true and correct when made and as of immediately prior to the Effective
Time, as if made at and as of such time (except those representations and
warranties that address matters only as of a particular date, which shall be
true and correct as of that date) except in each case for such inaccuracies that
are
de minimis
individually and in the aggregate; (iii) the
representations and warranties of the Company contained in Section 3.02 other
than the Designated Capitalization Reps shall be true and correct when made and
as of immediately prior to the Effective Time, as if made at and as of such time
(except those representations and warranties that address matters only as of a
particular date, which shall be true and correct as of that date) except in each
case for such inaccuracies that would not reasonably be expected to result in
additional Merger Consideration, Designated Consideration or other cost, expense
or Liability to Parent, Merger Sub or the Surviving Corporation, individually or
in the aggregate, of more than $250,000, and (iv) the representations and
warranties contained in Section 3.01, Section 3.03(a), Section 3.03(b), Section
3.03(c)(i), Section 3.03(d), Section 3.06(b), Section 3.06(c) and Section 3.21
shall be true and correct in all respects when made and as of immediately prior
to the Effective Time, as if made at and as of such time (except those
representations and warranties that address matters only as of a particular
date, which shall be true and correct in all respects as of that date).
(b)
Performance of Covenants
. The Company shall have performed in all
material respects all obligations, and complied in all material respects with
the agreements and covenants, in this Agreement required to be performed by or
complied with by it at or prior to the Effective Time.
(c)
Company Material Adverse Effect
. Since the date of this Agreement, there
shall not have been any Company Material Adverse Effect or any effect, change,
event, state of fact, development, circumstance or occurrence that would,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
(d)
Officers Certificate
. Parent will have received a certificate, dated as
of the Closing Date and signed by the chief executive officer or chief financial
officer of the Company, certifying as to the matters set forth in Section
6.02(a), Section 6.02(b), and Section 6.02(c) hereof.
(e)
Company Expenses
. Parent will have received a list, dated as of the
Closing Date, of all Expenses incurred by the Company or any of its Subsidiaries
prior to the Closing Date or expected to be incurred by the Company or any of
its Subsidiaries on or after the Closing Date.
Section
6.03
Conditions to Obligation of the Company
. The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver (where permissible pursuant to applicable Law) in writing
by the Company at or prior to the Effective Time of the following additional
conditions:
(a)
Representations and Warranties
. The representations and warranties of
Parent and Merger Sub set forth in ARTICLE IV of this Agreement shall be true
and correct in all respects (without giving effect to any limitation indicated
by the words material adverse effect, in all material respects, in any
material respect, material, materially, or similar terms) when made and as
of immediately prior to the Effective Time, as if made at and as of such time
(except those representations and warranties that address matters only as of a
particular date, which shall be true and correct in all respects as of that
date), except where the failure of such representations and warranties to be so
true and correct would not reasonably be expected to have, individually or in
the aggregate, a material adverse effect on Parents and Merger Subs ability to
consummate the Transactions.
Annex A - 46
(b)
Performance of Covenants
. Parent and Merger Sub shall have performed in
all material respects all obligations, and complied in all material respects
with the agreements and covenants, of this Agreement required to be performed by
or complied with by them at or prior to the Closing.
(c)
Officers Certificate
. The Company will have received a certificate,
signed by an officer of Parent, certifying as to the matters set forth in
Section 6.03(a) and Section 6.03(b) .
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section
7.01
Termination By Mutual Consent
. This
Agreement may be terminated at any time prior to the Effective Time (whether
before or after the receipt of the Requisite Company Vote) by the mutual written
consent of Parent, Merger Sub, and the Company.
Section
7.02
Termination By Either Parent or the Company
.
This Agreement may be terminated by either Parent or the Company at any time
prior to the Effective Time (whether before or after the receipt of the
Requisite Company Vote):
(a) if
the Merger has not been consummated on or before the date that is one hundred
twenty (120) days after the date hereof (such date or such later date, if any,
as is provided in the second proviso to this Section 7.02(a), the
End
Date
);
provided
,
however
, that the right to terminate this
Agreement pursuant to this Section 7.02(a) shall not be available to any party
whose breach of any representation, warranty, covenant, or agreement set forth
in this Agreement has been the cause of, or resulted in, the failure of the
Merger to be consummated on or before the End Date;
provided further
,
that the End Date may be amended by mutual agreement of the parties pursuant to
Section 7.07 of this Agreement;
provided further
, that the right to
terminate this Agreement pursuant to this Section 7.02(a) shall not be available
to any party during the pendency of a legal proceeding by any party for specific
performance pursuant to Section 8.13;
(b) if any
Governmental Authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced, or entered any Law or Order making illegal, permanently
enjoining, or otherwise permanently prohibiting the consummation of the Merger
or the other Transactions, and such Law or Order shall have become final and
nonappealable;
provided
,
however
, that the party seeking to
terminate this Agreement pursuant to this Section 7.02(b) shall have complied
with its obligations under Section 5.09(a) to avoid the entry of any such Law or
Order;
provided
further
, that the right to terminate this
Agreement pursuant to this Section 7.02(b) shall not be available to any party
whose breach of any representation, warranty, covenant, or agreement set forth
in this Agreement has been the cause of, or resulted in, the issuance,
promulgation, enforcement, or entry of any such Law or Order; or
(c) if this
Agreement has been submitted to the stockholders of the Company for adoption at
a duly convened Company Stockholders Meeting and the Requisite Company Vote
shall not have been obtained at such meeting (unless such Company Stockholders
Meeting has been adjourned or postponed, in which case at the final adjournment
or postponement thereof).
Section
7.03
Termination By Parent
. This Agreement may be
terminated by Parent at any time prior to the Effective Time:
(a) if a
Company Adverse Recommendation Change shall have occurred; or
Annex A - 47
(b) if
there shall have been a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement such that the
conditions to the Closing of the Merger set forth in Section 6.02(a) or Section
6.02(b), as applicable, would not be satisfied and, in either such case, such
breach is incapable of being cured or, if curable, is not cured by the Company
on or before the earlier of (i) the End Date and (ii) thirty (30) days following
receipt by the Company of written notice of such breach from Parent;
provided
,
however
, that Parent shall not have the right to
terminate this Agreement pursuant to this Section 7.03(b) if it is then in
material breach of any representations, warranties, covenants or other
agreements hereunder, and such breach shall not have been cured in all material
respects.
(c) if
(i) all of the conditions set forth in Section 6.01 and Section 6.03 (other than
conditions that by their nature are to be satisfied at the Closing) have been
satisfied, (ii) Parent has irrevocably confirmed by written notice to the
Company that all of the conditions set forth in Section 6.02 have been satisfied
or that it is willing to waive any unsatisfied conditions in Section 6.02 and
(iii) the Company willfully refuses to consummate the Merger within three (3)
Business Days following the later to occur of (x) the date the Closing should
have occurred pursuant to Section 1.02 and (y) the delivery of such notice.
Section 7.04
Termination By the Company
. This Agreement may be terminated by the
Company at any time prior to the Effective Time:
(a) if
prior to the receipt of the Requisite Company Vote at the Company Stockholders
Meeting, (i) the Company has received a Superior Proposal, (ii) the Company is
in compliance with Section 5.04 and (iii) the Company Board approves, and
concurrently with the termination of this Agreement the Company enters into, a
Company Acquisition Agreement (other than an Acceptable Confidentiality
Agreement) with respect to such Superior Proposal;
provided
,
however
, that the Company shall have paid to Parent, as a condition to
such termination, the Company Termination Fee in accordance with Section 7.06(a)
hereof at the time specified therein;
(b) if there shall
have been a breach of any representation, warranty, covenant or agreement on the
part of Parent or Merger Sub set forth in this Agreement such that the
conditions to the Closing of the Merger set forth in Section 6.03(a) or Section
6.03(b), as applicable, would not be satisfied and, in either such case, such
breach is incapable of being cured or, if curable, is not cured by Parent or
Merger Sub, as applicable, on or before the earlier of (i) the End Date and (ii)
thirty (30) days following receipt by the Parent or Merger Sub, as applicable,
of written notice of such breach from the Company;
provided
,
however
, that the Company shall not have the right to terminate this
Agreement pursuant to this Section 7.04(b) if it is then in material breach of
any representations, warranties, covenants or other agreements hereunder and
such breach shall not have been cured in all material respects; or
(c) if (i) all of
the conditions set forth in Section 6.01 and Section 6.02 (other than conditions
that by their nature are to be satisfied at the Closing) have been satisfied,
(ii) the Company has irrevocably confirmed by written notice to Parent that all
of the conditions set forth in Section 6.03 have been satisfied or that it is
willing to waive any unsatisfied conditions in Section 6.03 and (iii) Parent and
Merger Sub willfully refuse to consummate the Merger within three (3) Business
Days following the later to occur of (x) the date the Closing should have
occurred pursuant to Section 1.02 and (y) the delivery of such notice.
Section 7.05
Notice of Termination; Effect of Termination
. The party desiring to
terminate this Agreement pursuant to this ARTICLE VII (other than pursuant to
Section 7.01) shall deliver written notice of such termination to each other
party hereto specifying with particularity the reason for such termination, and
any such termination in accordance with this Section 7.05 shall be effective
immediately upon delivery of such written notice to the other party. If this
Agreement is terminated pursuant to this ARTICLE VII, it will become void and of
no further force and effect, with no liability on the part of any party to this
Agreement (or any Representative of such party) to any other party hereto,
except: (a) with respect to Section 5.03(b), this Section 7.05, Section 7.06,
and ARTICLE VIII (and any related definitions contained in any such Sections or
Article), which shall remain in full force and effect; and (b) with respect to
any liabilities or damages incurred or suffered by a party, to the extent such
liabilities or damages were the result of fraud or the Knowing, Intentional
Breach by another party of any of its representations, warranties, covenants, or
other agreements set forth in this Agreement.
Annex A - 48
Section 7.06
Fees and Expenses Following Termination
.
(a) If
this Agreement is terminated by Parent pursuant to Section 7.03(a), Section
7.03(b), where the term breach is replaced with Knowing, Intentional Breach in
each instance, or Section 7.03(c) or is terminated by the Company pursuant to
Section 7.04(a), then the Company shall pay, or cause to be paid, to Parent the
Company Termination Fee, by wire transfer of immediately available funds and, in
the case of termination by Parent pursuant to Section 7.03(a) or by the Company
pursuant to Section 7.04(a), concurrently with or prior to such termination. In
no event shall the Company be required to pay the Company Termination Fee on
more than one occasion.
(b) If
this Agreement is terminated by the Company pursuant to Section 7.04(b), where
the term breach is replaced with Knowing, Intentional Breach in each instance,
or pursuant to Section 7.04(c), Parent shall pay, or cause to be paid, to the
Company the Parent Termination Fee as promptly as possible (but in any event
within two Business Days after such termination) by wire transfer of immediately
available funds. In no event shall Parent be required to pay the Parent
Termination Fee on more than one occasion.
(c) The
parties acknowledge and hereby agree that the provisions of this Section 7.06
are an integral part of the Transactions contemplated by this Agreement
(including the Merger), and that, without such provisions, the parties would not
have entered into this Agreement. Each of the parties hereto acknowledges that
each of the Company Termination Fee and the Parent Termination Fee is not a
penalty, but is liquidated damages in a reasonable amount that will compensate
Parent or the Company, as applicable, in the circumstances in which such fee is
payable for the efforts and resources expended and opportunities foregone while
negotiating this Agreement and in reliance on this Agreement and on the
expectation of the consummation of the Transactions, which amount would
otherwise be impossible to calculate with precision. If the Company, on the one
hand, or Parent, on the other hand, shall fail to pay in a timely manner the
amounts due pursuant to this Section 7.06, and, in order to obtain such payment,
the other party makes a claim against the non-paying party that results in a
judgment against the non-paying party for such amounts, the non-paying party
shall pay to the other party the reasonable costs and expenses (including its
reasonable attorneys fees and expenses) incurred or accrued in connection with
such suit, together with interest on the amounts set forth in this Section 7.06
at the prime lending rate prevailing during such period as published in
The
Wall Street Journal
, plus two percent (2%) per annum. Any interest payable
hereunder shall be calculated on a daily basis from the date such amounts were
required to be paid until (but excluding) the date of actual payment, and on the
basis of a 360-day year. Subject only to the last sentence of this Section
7.06(c), the Companys right to terminate this Agreement and receive payment of
the Parent Termination Fee upon termination pursuant to Section 7.06(b) shall
constitute the sole and exclusive remedy of the Company, its Subsidiaries and
any of their respective former, current or future Representatives or assignees
(the
Company Parties
) against Parent, Merger Sub and their respective
former, current or future Representatives or assignees (the
Parent
Parties
) for all losses or damages suffered as a result of the failure of
the Transactions to be consummated, and, upon payment of such amount, none of
the Parent Parties shall have any further Liability relating to or arising out
of this Agreement or the Transactions. Subject only to the last sentence of this
Section 7.06(c), Parents right to terminate this Agreement and receive payment
of the Company Termination Fee upon termination pursuant to Section 7.06(a)
shall constitute the sole and exclusive remedy of the Parent Parties against the
Company Parties for all losses or damages suffered as a result of the failure of
the Transactions to be consummated, and, upon payment of such amount, none of
the Company Parties shall have any further Liability relating to or arising out
of this Agreement or the Transactions. Notwithstanding the foregoing, prior to
any valid termination of this Agreement by Parent or the Company in accordance
with the terms hereof, any right to specific performance and other equitable
relief provided by Section 8.13 shall be the sole and exclusive remedy of the
parties to this Agreement.
(d)
Except as expressly set forth in Section 7.06(c), all Expenses incurred in
connection with this Agreement and the Transactions will be paid by the party
incurring such Expenses at or prior to Closing;
provided, however
, that
Parent and the Company shall each be responsible for one half of the filing fees
payable in connection with the filings under the HSR Act and any other
applicable Antitrust Laws.
Annex A - 49
Section
7.07
Amendment
. At any time prior to the
Effective Time, this Agreement may be amended or supplemented in any and all
respects by written agreement signed by each of the parties hereto.
Section
7.08
Extension; Waiver
. At any time prior to the
Effective Time, Parent or Merger Sub, on the one hand, or the Company, on the
other hand, may: (a) extend the time for the performance of any of the
obligations of the other party(ies); (b) waive any inaccuracies in the
representations and warranties of the other party(ies) contained in this
Agreement or in any document delivered under this Agreement; or (c) unless
prohibited by applicable Law, waive compliance with any of the covenants,
agreements, or conditions contained in this Agreement. Any agreement on the part
of a party to any extension or waiver will be valid only if set forth in an
instrument in writing signed by such party. The failure or delay of any party to
assert any right, power or privilege under this Agreement will not constitute a
waiver thereof and any single or partial exercise thereof will not preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
ARTICLE VIII
MISCELLANEOUS
Section
8.01
Definitions
. For purposes of this Agreement,
the following terms will have the following meanings when used herein with
initial capital letters:
Acceptable Confidentiality
Agreement
means any customary confidentiality and standstill agreement that
(i) does not contain any provision prohibiting the Company or any of its
Subsidiaries from making any of the disclosures required to be made to Parent
pursuant to Section 5.04 and (ii) contains confidentiality and standstill
provisions that are no less favorable to the Company than those contained in the
Confidentiality Agreement.
Affiliate
means, with
respect to any Person, any other Person that directly or indirectly controls, is
controlled by, or is under common control with, such first Person. For the
purposes of this definition, control (including, the terms controlling,
controlled by, and under common control with), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through the
ownership of voting securities, by Contract, or otherwise.
Agreement
has the meaning set
forth in the Preamble.
Anti-Corruption Laws
means, as applicable, the FCPA, the OECD Convention on Combating Bribery of
Foreign Officials in International Business Transactions, the Inter-American
Convention Against Corruption (of the Organization of American States) and any
other Laws relating to corruption, bribery, money laundering, political
contributions or gifts, entertainment and gratuities involving any Governmental
Authority or Government Official and applicable to the Company and its
Subsidiaries, together with any rules or regulations promulgated thereunder.
Antitrust Laws
means the
Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, all applicable foreign antitrust Laws, and all
other applicable Laws issued by a Governmental Authority that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition.
Associate
has the meaning set
forth in Section 203(c)(2) of the DGCL.
Balance Sheet Date
has the
meaning set forth in Section 3.05(d) .
Bankruptcy and Equity
Exception
has the meaning set forth in Section 3.03(a) .
Book-Entry Share
has the
meaning set forth in Section 2.01(c) .
Business Day
means any
day, other than Saturday, Sunday, or any day on which banking institutions
located in New York, New York, Reno, Nevada or Boise, Idaho are authorized or
required by Law or other governmental action to close.
Certificate
has the meaning
set forth in Section 2.01(c) .
Annex A - 50
Certificate of Merger
has the
meaning set forth in Section 1.03.
Closing
has the meaning set
forth in Section 1.02.
Closing Date
has the meaning
set forth in Section 1.02.
Code
means the Internal
Revenue Code of 1986, as amended.
Commercially Reasonable
Efforts
means the efforts, time and costs a prudent Person desirous of
achieving a result would use, expend or incur in similar circumstances to
achieve such results as expeditiously as possible, provided that such Person is
not required to expend funds or assume Liabilities beyond those that are
reasonable in nature and amount in the context of the Transactions.
Company
has the meaning set
forth in the Preamble.
Company Acquisition Agreement
has the meaning set forth in Section 5.04(a) .
Company Adverse
Recommendation Change
means the Company Board: (a) failing to make,
withdrawing, amending, modifying, or materially qualifying, in a manner adverse
to Parent, the Company Board Recommendation, or publicly proposing to do any of
the foregoing; (b) failing to include the Company Board Recommendation in the
Company Proxy Statement that is mailed to the Companys stockholders; (c)
recommending, adopting, approving or endorsing or publicly proposing to
recommend, adopt, approve or endorse a Takeover Proposal; (d) failing to
recommend against acceptance of any tender offer or exchange offer for the
Company Shares within ten (10) Business Days after the commencement of such
offer; (e) failing to reaffirm (publicly, if so requested by Parent) the Company
Board Recommendation within ten (10) Business Days after the date any Takeover
Proposal (or material modification thereto) is first publicly disclosed by the
Company or the Person making such Takeover Proposal; (f) making any public
statement inconsistent with the Company Board Recommendation, or (g) resolving
or agreeing to take any of the foregoing actions.
Company Approvals
has the
meaning set forth in Section 3.04.
Company Balance Sheet
has the
meaning set forth in Section 3.05(d) .
Company Board
has the meaning
set forth in the Recitals.
Company Board Recommendation
has the meaning set forth in the Recitals.
Company Charter
Documents
means the Companys certificate of incorporation and bylaws, each
as amended to the date of this Agreement.
Company Disclosure Schedule
has the meaning set forth in the introductory language in ARTICLE III.
Company Financial Advisor
has
the meaning set forth in Section 3.20.
Company Lease
means any
lease, sublease, sub-sublease, license and other agreement under which the
Company or any of its Subsidiaries leases, subleases, licenses, uses or occupies
(in each case whether as landlord, tenant, sublandlord, subtenant or by other
occupancy arrangement), or has the right to use or occupy, now or in the future,
any property.
Company MAE Excluded
Matters
means any effect, change, event, state of fact, development,
circumstance or occurrence (i) generally affecting (A) any of the industries in
which the Company and its Subsidiaries operate or (B) the economy, credit or
financial or capital markets, in the United States or elsewhere in the world,
including changes in interest or exchange rates, or (ii) to the extent arising
out of, resulting from or attributable to (A) changes in Law (or in the
interpretation thereof) or GAAP (or in the interpretation thereof) after the
date hereof, (B) the announcement, pendency or performance of this Agreement or
the consummation of the Transactions (other than for purposes of any
representation or warranty contained in Section 3.03(c) and Section 3.04), (C)
acts of war, sabotage or terrorism occurring, or any escalation or worsening of
any such acts of war, sabotage or terrorism, (D) earthquakes, hurricanes,
tornados or other natural disasters, (E) any action taken by the Company or its Subsidiaries that is expressly required by this
Agreement (other than with respect to the Companys obligations to comply with
Section 5.01(a)) or with Parents written consent or at Parents written
request, (F) any decline in the market price, or change in trading volume, of
the capital stock of the Company, (G) any failure to meet any internal or public
projections, forecasts or estimates of revenue or earnings in and of itself
(provided that the exceptions in clauses (F) and (G) shall not prevent or
otherwise affect a determination that the underlying cause of any such decline
or failure is a Company Material Adverse Effect) or (H) any change in, or loss
of, the relationship of the Companys or its Subsidiaries customers, suppliers,
vendors, lenders or employees as a result of the execution, pendency or
performance of this Agreement or the consummation of the Transactions (other
than for purposes of any representation or warranty contained in Section
3.03(c), Section 3.04 and Section 3.18);
provided
,
however
, that
any effect, change, event, circumstance or occurrence referred to in clauses (i)
or (ii)(A), (C) or (D) shall not be disregarded and shall be taken into account
in determining whether or not there has been a Company Material Adverse Effect
if any such effect, change, event, circumstance, state of fact or development
adversely affects the Company and its Subsidiaries, taken as a whole, in a
materially disproportionate manner as compared to other participants in the
industries in which the Company and its Subsidiaries operate.
Annex A - 51
Company Material Adverse
Effect
means any effect, change, event, state of fact, development,
circumstance or occurrence (whether or not constituting any breach of a
representation, warranty, covenant or agreement set forth in this Agreement)
that, individually or in the aggregate with all other effects, changes, events,
circumstances, states of fact or developments, would or would reasonably be
expected to (a) have a material adverse effect on the business, results of
operations, assets, liabilities or financial condition of (i) any significant
subsidiary of the Company (as such term is defined in Rule 1-02(w) under
Regulation S-X) or (ii) the Company and its Subsidiaries taken as a whole, or
(b) prevent or materially impair or delay the consummation of the Transactions,
except that none of the Company MAE Excluded Matters (by itself or when
aggregated with other Company MAE Excluded Matters) will be deemed to be or
constitute a Company Material Adverse Effect or will be taken into account when
determining whether a Company Material Adverse Effect has occurred or exists.
Company Parties
has the
meaning set forth in Section 7.06(c) .
Company Plan
means each
plan, program, policy, agreement or other arrangement covering current or former
employees, directors, independent contractors or consultants, that is (i) an
employee welfare plan within the meaning of Section 3(1) of ERISA (whether or
not subject to ERISA), (ii) an employee pension benefit plan within the meaning
of Section 3(2) of ERISA (whether or not subject to ERISA), (iii) a stock
option, stock purchase, restricted stock, stock appreciation right, restricted
stock unit, dividend equivalent or other stock-based agreement, program or plan,
(iv) an individual employment, consulting, retention, change of control,
severance or other similar agreement or (v) a bonus, incentive, deferred
compensation, savings, profit-sharing, pension, retirement, cash balance,
post-retirement, vacation, severance or termination pay, medical, dental, vision
or other health, short- or long-term disability, life, long term care, employee
assistance, education, relocation, benefit or fringe-benefit plan, program,
policy, agreement or other arrangement, in each case that is sponsored,
maintained or contributed to by the Company or any of its Subsidiaries or to
which the Company or any of its Subsidiaries contributes or is obligated to
contribute to or has or may have any liability.
Company Proxy Statement
has
the meaning set forth in Section 3.05(f) .
Company SEC Documents
has the
meaning set forth in Section 3.05(a) .
Company Securities
has the
meaning set forth in Section 3.02(c) .
Company Shares
has the meaning
set forth in the Recitals.
Company Stock Plan
means the
Companys 2009 Stock Incentive Plan.
Company Stockholders
Meeting
means the special meeting of the stockholders of the Company to be
held to consider and vote upon the adoption of this Agreement.
Company Termination Fee
means an amount in cash equal to three percent (3%) of the Merger Consideration.
Annex A - 52
Confidentiality Agreement
has
the meaning set forth in Section 5.03(b) .
Consent
has the meaning set
forth in Section 3.04.
Continuing Employees
has the
meaning set forth in Section 5.07(a) .
Contracts
means any
contracts, agreements, arrangements, concessions, franchises, licenses, notes,
bonds, mortgages, deeds, indentures, leases, or other binding instruments or
binding commitments, whether written or oral.
Deed of Trust
means the
Deed of Trust with Assignment of Leases, Contracts and Rents, Security Agreement
and Fixture Filing, dated September 26, 2013, duly executed by the USG Nevada
Project Company in favor of Stewart Title Guaranty Company for the benefit of
Deutsche Bank Trust Company Americas.
Default
has the meaning set
forth in Section 3.03(c) .
Delaware Courts
has the
meaning set forth in Section 8.05.
Derivative Contract
means futures, swaps, collars, puts, calls, floors, caps, options or other
Contracts that are intended to benefit from or reduce or eliminate the risk of
fluctuations in interest rates or the price of commodities, including such
Contracts relating to physical or financial electric power (in any form,
including energy capacity or ancillary services) or securities.
Designated Capitalization Reps
has the meaning set forth in Section 6.02(a) .
Development Projects
means, collectively, the planned electric generating facilities under
development by the Company or its Subsidiaries and set forth in Section 8.01 -DP
of the Company Disclosure Schedule.
DGCL
has the meaning set forth
in the Recitals.
Dissenting Shares
has the
meaning set forth in Section 2.03.
Effective General Release
has
the meaning set forth in Section 5.16(c)(iv) .
Effective Time
has the meaning
set forth in Section 1.03.
End Date
has the meaning set
forth in Section 7.02(a) .
Environmental Laws
means
any applicable Law, and any order or binding agreement with any Governmental
Authority: (a) relating to pollution (or the cleanup thereof) or the protection
of natural resources, endangered or threatened species, human health, safety, or
the environment (including air, soil, surface water or groundwater, or
subsurface strata); or (b) concerning the presence of, exposure to, or the
management, manufacture, use, containment, storage, recycling, reclamation,
reuse, treatment, generation, Release, transportation, processing, production or
remediation of any Hazardous Materials. The term Environmental Law includes,
without limitation, the following (including their implementing regulations and
any state analogs): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601
et. seq.
; the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976,
as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§
6901
et. seq.
; the Federal Water Pollution Control Act of 1972, as
amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251
et. seq.
; the
Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601
et.
seq.
; the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. §§ 11001
et. seq.
; the Clean Air Act of 1966, as amended by the
Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401
et. seq.
; the
Endangered Species Act, as amended, 16 U.S.C. §§ 1531
et seq
.; the
Migratory Bird Treaty Act, 16 U.S.C. §§ 703-712; the Bald and Golden Eagle
Protection Act, 16 U.S.C. §§ 668
et seq
. and the Occupational Safety and
Health Act of 1970, as amended, 29 U.S.C. §§ 651
et. seq
., along with any
state or local analogs.
Equity Security
means,
with respect to any Person: (a) capital stock, equity or voting securities
(whether referred to as shares, stock or interests (partnership, membership,
trust or other), units or other instruments) of any corporation, partnership (general, limited or limited
liability) limited liability company, trust (statutory or other), joint venture,
association or other business organization; (b) any Contract for that Person to
make any payments of any kind based on (i) the price or value of any Equity
Security or any dividends or distributions thereon or (ii) any revenues,
earnings, financial metric or other attribute of that Person, including any
phantom stock right, stock-based performance unit, stock appreciation right,
restricted stock unit or other equity-based award that may be exercised or
exchanged for, or converted into, cash or cash equivalents; (c) any debt or
equity security of that Person that is convertible into, or exchangeable or
exercisable for, any other Equity Security of that Person, including any option,
warrant, subscription right or preemptive right, and any phantom stock right,
stock-based performance unit, stock appreciation right, restricted stock unit or
other equity-based award that may be exercised or exchanged for, or converted
into, any other Equity Security; and (d) any debt security of that Person which
grants the holder voting rights of the type held by any other Equity Security of
that Person, in each case, individually or collectively as the context
requires.
Annex A - 53
ERISA
means the Employee
Retirement Income Security Act of 1974, as amended.
ERISA Affiliate
means
any Person which is, or at any relevant time was, a member of (A) a controlled
group of corporations (as defined in Code Section 414(b)), (B) a group of trades
or businesses under common control (as defined in Code Section 414(c)), (C) an
affiliated service group (as defined under Code Section 414(m)) or (D) any group
specified in regulations under Code Section 414(o) or Section 4001 of ERISA, any
of which includes or at any time included the Company or its Subsidiaries.
Exchange Act
means the
United States Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
Expansion Projects
means
those activities undertaken or planned to be undertaken in respect of each of
the USG Oregon Project, the Raft River Project and the USG Nevada Project and
set forth in Section 8.01 -EP of the Company Disclosure Schedule.
Expenses
means, with
respect to any Person, all reasonable and documented out-of-pocket fees and
expenses (including all fees and expenses of counsel, accountants, financial
advisors, investment bankers and consultants of such Person and its Affiliates),
incurred by such Person or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution, and performance of this
Agreement and any Transactions related thereto, any litigation with respect
thereto, the preparation, printing, filing, and mailing of the Proxy Statement,
the filing of any required notices under the HSR Act or any other Antitrust
Laws, or in connection with other regulatory approvals, and all other matters
related to the Merger and the other Transactions.
FCPA
means the US Foreign
Corrupt Practices Act of 1977, as amended.
FERC
means the Federal
Energy Regulatory Commission, or any successor agency to its duties and
responsibilities.
Filed SEC Documents
has the
meaning set forth in the introductory language in ARTICLE III.
Filing
has the meaning set
forth in Section 3.04.
FPA
means the Federal
Power Act, 16 U.S.C. §§791 et seq., as amended, and the regulations of FERC
thereunder.
GAAP
means generally accepted
accounting principles in the United States, consistently applied.
Geothermal Leases
means
each of the USG Oregon Geothermal Lease, Raft River Geothermal Lease and USG
Nevada Geothermal Lease.
Geothermal Resources
means the geothermal reservoirs available for use by the Projects or any
Expansion Project.
Annex A - 54
Governmental Authority
means any government, court, regulatory or administrative agency, commission or
authority or other governmental instrumentality, whether federal, tribal, state
or local, domestic, foreign or multinational, and any mediator, arbitrator or
arbitral body.
Governmental Official
means (a) any officer or employee of any Governmental Authority, or anyone
otherwise acting in an official capacity of a Governmental Authority (including
any Person owned or controlled by a Governmental Authority), (b) any candidate
for public or political office, (c) any royal or ruling family member, (d) any
Representative of any public international organization, including but not
limited to the United Nations or the World Bank Group or (e) any Representative
of any of those Persons listed in clauses (a)-(d) above.
Hazardous Materials
means any hazardous substances, pollutants, contaminants, wastes or materials
(including petroleum, crude oil, or any fraction thereof, petroleum wastes,
radioactive material, hazardous wastes, toxic substances or asbestos or any
materials containing asbestos) designated, regulated or defined under or with
respect to which any requirement or liability may be imposed pursuant to any
Environmental Law.
HSR Act
means the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
Indebtedness
means (i)
any indebtedness for borrowed money (including the issuance of any debt
security) to any Person other than the Company or any of its Subsidiaries, (ii)
any obligations evidenced by notes, bonds, debentures or similar Contracts to
any Person other than the Company or any of its Subsidiaries, (iii) any
obligations for the deferred purchase price of property, goods or services to
any Person other than the Company or any of its Subsidiaries (other than trade
payables incurred in the ordinary course of business), (iv) any capital lease
obligations to any Person other than the Company or any of its Subsidiaries, (v)
any obligations in respect of letters of credit and bankers acceptances, (vi)
any Derivative Contract or (vii) any guaranty of any such obligations described
in clauses (i) through (vi) of any Person other than the Company or any of its
Subsidiaries.
Indemnitee
has the meaning
set forth in Section 5.08(a) .
Intellectual Property
means any and all of the following arising pursuant to the Laws of any
jurisdiction throughout the world: (a) trademarks, service marks, trade names,
and similar indicia of source or origin, all registrations and applications for
registration thereof, and the goodwill connected with the use of and symbolized
by the foregoing; (b) copyrights and all registrations and applications for
registration thereof; (c) trade secrets and know-how; (d) patents and patent
applications; (e) internet domain name registrations; and (f) other intellectual
property and related proprietary rights.
Intervening Event
means
any event, circumstance, change, effect, development, or condition occurring or
arising after the date hereof that affects or would be reasonably likely to
affect the business, assets, properties, Liabilities, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole and that (a) was neither known to, nor reasonably foreseeable by, any
member of the Company Board as of the date of this Agreement, (b) is not (i) a
change or development in the national, foreign, regional, state or local
wholesale or retail markets or prices for electric power, capacity, emissions
allowances, fuel, water or steam or the transportation of any of the foregoing
or (ii) a change in the rates that the Company or any of its Subsidiaries may
charge for electricity, energy, capacity and/or ancillary services or any other
product or service subject to regulation by FERC and (c) does not relate to any
Takeover Proposal;
provided
,
however
, that in no event shall any
of the following events constitute an Intervening Event: (x) compliance with or
performance under this Agreement or the Transactions or (y) changes in the price
or trading volume of the Company Shares (except that the underlying causes
giving rise to or contributing to any such change may be taken into account in
determining whether an Intervening Event has occurred).
Intervening Event Notice
Period
has the meaning set forth in Section 5.04(e) .
IRS
means the United States
Internal Revenue Service.
Knowing, Intentional
Breach
means a breach of this Agreement by a party to this Agreement that
(a) knows of its actions, (b) knows that such actions breach this Agreement and
(c) intends for such actions to breach this Agreement.
Annex A - 55
Knowledge
means, with
respect to the Company and its Subsidiaries, the actual knowledge of each of the
individuals listed in Section 8.01 -K of the Companys Disclosure Schedule,
after reasonable inquiry.
Laws
means any federal,
tribal, state, local municipal, provincial, foreign, multi-national or other
laws, common law, statutes, constitutions, ordinances, rules, regulations,
codes, orders, injunctions, judgments, writs, decrees, governmental guidelines
or interpretations having the force of law, or legally enforceable requirements
enacted, issued, adopted, promulgated, enforced, ordered or applied by any
Governmental Authority.
Legal Action
means any
claim, charge, complaint, action, suit, audit, proceeding, arbitration,
mediation, hearing, inquiry or, to the knowledge of the Person in question,
investigation (in each case, whether civil, criminal, administrative,
investigative, formal, or informal) commenced, brought, conducted or heard by or
before, or otherwise involving, any Governmental Authority.
Letter of Transmittal
has the
meaning set forth in Section 2.02(a) .
Liability
shall mean any
liability, indebtedness, or obligation of any kind (whether accrued, absolute,
contingent, matured, unmatured, determined, determinable, or otherwise, and
whether or not required to be recorded or reflected or reserved for on a balance
sheet under GAAP or in the footnotes thereto).
Liens
means, with
respect to any property or asset, all pledges, liens, mortgages, claims,
charges, encumbrances, hypothecations, options, rights of first refusal, rights
of first offer, transfer restrictions and security interests of any kind or
nature whatsoever (including, in the case of any Equity Security, any
restriction on the right to vote, sell, transfer or otherwise dispose of that
Equity Security).
Material Contracts
has the
meaning set forth in Section 3.17(a) .
Material Project Documents
has the meaning set forth in Section 3.17(a)(xiv) .
Maximum Premium
has the
meaning set forth in Section 5.08(b) .
MBR Authority
has the meaning
set forth in Section 3.22(g) .
Merger
has the meaning set
forth in Section 1.01.
Merger Consideration
has the
meaning set forth in Section 2.01(b) .
Merger Sub
has the meaning
set forth in the Preamble.
Multiemployer Plan
has the
meaning set forth in Section 3.11(c) .
NYSE
means the New York Stock
Exchange, LLC.
NYSE American
means the NYSE
AMERICAN LLC.
OFAC
has the meaning set
forth in Section 3.08(g)(ii) .
Offer Price
means a price of
$5.45 per Company Share.
Option Holder
Acknowledgement
means an option holder acknowledgement, by and between the
holder of any Options immediately prior to the Effective Time and the Company,
substantially in the form attached hereto as
Exhibit C
.
Order
has the meaning set
forth in Section 3.07.
Other Real Property
has the
meaning set forth in Section 3.16.
Parent
has the meaning set
forth in the Preamble.
Parent Parties
has the
meaning set forth in Section 7.06(c) .
Annex A - 56
Parent Termination Fee
means
an amount equal to three percent (3%) of the Merger Consideration.
Paying Agent
has the meaning
set forth in Section 2.02(a) .
Payment Fund
has the meaning
set forth in Section 2.02(a) .
Pension Plan
has the meaning
set forth in Section 3.11(c) .
Permits
means any
action, approval, consent, certification, waiver, exemption, variance,
franchise, order, permit, authorization, registration, right or license of, with
or from a Governmental Authority or other authority that is required under
Law.
Permitted Encumbrances
means, with respect to any parcel of real property, (i) easements,
rights-of-way, encroachments, restrictions, conditions and other similar
encumbrances incurred or suffered in the ordinary course of business and which,
individually or in the aggregate, (A) are not substantial in character, amount
or extent in relation to the applicable real property and (B) do not and would
not materially impair the use (or contemplated use), utility or value of the
applicable real property or otherwise materially impair the present or
contemplated business operations at such location and (ii) zoning, entitlement,
building and other land use regulations imposed by Governmental Authorities
having jurisdiction over such real property, which are not violated by the
current use and operation of such real property.
Permitted Liens
means:
(a) statutory Liens for current Taxes or other governmental charges not yet due
and payable or the amount or validity of which is being contested in good faith
(provided appropriate reserves required pursuant to GAAP have been made in
respect thereof); (b) mechanics, carriers, workers, repairers, and similar
statutory Liens arising or incurred in the ordinary course of business for
amounts which are not delinquent or which are being contested by appropriate
proceedings (provided appropriate reserves required pursuant to GAAP have been
made in respect thereof); (c) zoning, entitlement, building, and other land use
regulations imposed by Governmental Authorities having jurisdiction over such
Persons owned or leased real property, which are not violated by the current
use and operation of such real property; (d) covenants, conditions,
restrictions, easements, and other similar non-monetary matters of record
affecting title to such Persons owned or leased real property, which do not
materially impair the occupancy or use of such real property for the purposes
for which it is currently used in connection with such Persons businesses; (e)
any right of way or easement related to public roads and highways, which do not
materially impair the occupancy or use of such real property for the purposes
for which it is currently used in connection with such Persons businesses; (f)
Liens arising under workers compensation, unemployment insurance, social
security, retirement, and similar legislation; (g) exceptions and exclusions
from coverage noted in the Title Policies; and (h) any outstanding Liens related
to secured Indebtedness identified on Section 3.17 of the Company Disclosure
Schedule.
Person
means any
individual, corporation, limited or general partnership, limited liability
company, limited liability partnership, trust, association, joint venture,
Governmental Authority, or other entity or group (which term will include a
group as such term is defined in Section 13(d)(3) of the Exchange Act).
PPAs
has the meaning set
forth in Section 3.17(a)(vi) .
Pre-Closing Period
has the
meaning set forth in Section 5.01(a) .
Project
means each of
the USG Oregon Project, the Raft River Project and the USG Nevada Project
(collectively, the
Projects
).
Project Company
means
each of the USG Oregon Project Company, Raft River Project Company and USG
Nevada Project Company, which operate the USG Oregon Project, Raft River Project
and the USG Nevada Project, respectively, and, solely with respect to any
additional development of the Raft River Project, USG Idaho.
PUHCA
means the Public
Utility Holding Company Act of 2005, as amended, and all rules and regulations
adopted thereunder.
QF
means a qualifying
small power production facility (as that term is defined under 16 U.S.C. §
796(17)(C) and the regulations of the FERC at 18 C.F.R. Part 292 thereunder).
Annex A - 57
Raft River Geothermal
Lease
means each of the (a) Raft River Geothermal Lease and Agreement,
dated as of June 28, 2003, among Janice Crank and the children of Paul Crank and
USG Idaho, as amended by that Agreement for Ratification and Amendment of
Geothermal Lease Agreement, dated August 18, 2005, among USG Idaho and Julie
Crank, Judson Crank, Joshua Crank, Jarred Crank and Jason Crank and that Second
Amendment to Geothermal Lease Agreement, dated August 11, 2006, as assigned by
USG Idaho to the Raft River Project Company pursuant to that Assignment,
Assumption and Indemnity Agreement, dated September 1, 2006, (b) Geothermal
Lease and Agreement, dated April 3, 2015, between Ronda B. Doman and the Raft
River Project Company, (c) Geothermal Lease and Agreement, dated as of January
25, 2006, between Philip Glover and USG Idaho, as assigned by USG Idaho to the
Raft River Project Company pursuant to that Assignment, Assumption and Indemnity
Agreement, dated September 1, 2006, (d) Geothermal Lease and Agreement, dated as
of April 30, 2015, between Jensen Investments, Inc. and the Raft River Project
Company, (e) Geothermal Lease and Agreement, dated as of March 1, 2004, between
Jay Newbold and USG Idaho, as assigned by USG Idaho to the Raft River Project
Company pursuant to that Assignment, Assumption and Indemnity Agreement, dated
September 1, 2006, (f) Raft River Geothermal Lease and Agreement, dated as of
October 19, 2006, between USG Idaho and the Raft River Project Company, (g)
Geothermal Lease and Agreement, dated as of December 1, 2004, among Reid S.
Stewart and Ruth O. Stewart and USG Idaho, as assigned by USG Idaho to the Raft
River Project Company pursuant to that Assignment, Assumption and Indemnity
Agreement, dated September 1, 2006, (h) Geothermal Lease and Agreement, dated as
of April 7, 2015, by and between R. Michael Griffin and Cleo S. Griffin, husband
and wife, Harlow R. Griffin and Pauline Griffin, husband and wife, Douglas
Griffin and Margaret Griffen, husband and wife, J. Terry Griffin and Sue
Griffin, husband and wife, Vincent Jorgenson and Phyllis Jorgensen, husband and
wife, and Allice Mae Griffen Shorts, a widow, collectively as lessors and USG
Geothermal, Inc., as lessee, and (i) Geothermal Lease and Agreement, dated May
7, 2014, by and between Jenson Investments, Inc., as lessor, and U.S.
Geothermal, Inc., as lessee.
Raft River Project
means
the 13 MW (net) geothermal electric generating facility located in Cassia
County, Idaho utilizing a water cooled binary generating unit manufactured by
Parent.
Raft River Project Company
means Raft River Energy I LLC, a Delaware limited liability company.
Raft River Site
means
the real property on which the Raft River Project or the Raft River Geothermal
Resource is located, the legal description of which is set forth in the Title
Policy for the Raft River Site and all related easements, rights-of-way and
other rights and interests.
Real Property Rights
has the
meaning set forth in Section 3.15(c) .
Release
or
Released
means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of
any Hazardous Materials.
Representatives
means,
with respect to any Person, its officers, directors, employees, general
partners, managers, members, consultants, agents, advisors, Affiliates and other
representatives.
Requisite Company Vote
has
the meaning set forth in Section 3.03(d) .
Sarbanes-Oxley Act
has the
meaning set forth in Section 3.05(a) .
SEC
has the meaning set forth
in Section 3.05(a) .
Section 409A
has the meaning
set forth in Section 5.16(b) .
Securities Act
has the
meaning set forth in Section 3.02(d) .
Service Bonus
has the meaning
set forth in Section 5.16(b) .
Service Bonus Recipients
has
the meaning set forth in Section 5.16(b) .
Severance Provisions
has the
meaning set forth in Section 5.16(a) .
Sites
means, collectively,
the USG Oregon Site, the Raft River Site and the USG Nevada Site.
Annex A - 58
Subsidiary
of a Person
means a corporation, partnership, limited liability company, or other business
entity of which a majority of the shares of voting securities is at the time
beneficially owned, or the management of which is otherwise controlled, directly
or indirectly, through one or more intermediaries, or both, by such Person.
Superior Proposal
means
a bona fide written Takeover Proposal (replacing any reference to 20% with
50%) that the Company Board determines in good faith, after consultation with
its outside legal and financial advisors, (a) that is reasonably likely to be
consummated in accordance with its terms, taking into account factors that it
considers relevant, but in any event includes legal, financial (including the
availability of committed financing), regulatory, timing and other aspects
(including certainty of closing) of such Takeover Proposal, the Person or group
(as defined in Section 13(d) of the Exchange Act) making the proposal and any
revisions to the terms of this Agreement and the Merger proposed by Parent
during the Superior Proposal Notice Period set forth in Section 5.04(d) and (b)
that would result in a transaction that, if consummated, would be more favorable
to the holders of the Company Shares than the Transactions from a financial
perspective.
Superior Proposal Notice
Period
has the meaning set forth in Section 5.04(d) .
Supplemental Rights
means (a) with respect to the Raft River Site, the easement granted pursuant to
Easement from USG Idaho to Raft River Project Company, dated December 5, 2006,
and recorded as Instrument No. 312473 with the Recorder of Cassia County, Idaho,
Raft River Energy Geothermal Unit Agreement, by Raft River Project Company,
dated December 1, 2015 (Corrected Memorandum of Geothermal Unit Agreement dated
April 7, 2016, recorded on April 18, 2016 as #2016-00157), and (b) with respect
to the USG Oregon Site, mineral rights granted pursuant to Quitclaim Deed from
BRP LLC to USG Oregon Project Company, dated December 18, 2012, and recorded as
Instrument No. 2013-4885 with the records of Malheur County, Oregon.
Surviving Corporation
has the
meaning set forth in Section 1.01.
Tail Policy
has the meaning
set forth in Section 5.08(b) .
Takeover Proposal
means
any bona fide inquiry, proposal, or offer from, or indication of interest in
making a proposal or offer by, any Person or group (other than Parent and its
Subsidiaries, including Merger Sub), relating to any transaction or series of
related transactions, involving any: (a) direct or indirect acquisition of
assets of the Company or its Subsidiaries (including any Equity Securities of
Subsidiaries, but excluding sales of assets in the ordinary course of business)
equal to 20% or more of the Fair Market Value of the Companys consolidated
assets or to which 20% or more of the Companys net revenues or net income on a
consolidated basis are attributable; (b) direct or indirect acquisition of 20%
or more of any Equity Securities of the Company; (c) tender offer or exchange
offer that if consummated would result in any Person or group (as defined in
Section 13(d) of the Exchange Act) beneficially owning (within the meaning of
Section 13(d) of the Exchange Act) 20% or more of the voting power of the
Company; (d) merger, consolidation, other business combination, or similar
transaction involving the Company or any of its Subsidiaries, pursuant to which
such Person or group (as defined in Section 13(d) of the Exchange Act) would own
20% or more of the Fair Market Value of the Companys consolidated assets or 20%
or more of the net revenues or net income of the Company and its Subsidiaries,
taken as a whole; (e) liquidation, dissolution (or the adoption of a plan of
liquidation or dissolution), or recapitalization or other significant corporate
reorganization of the Company or one or more of its Subsidiaries which,
individually or in the aggregate, generate or constitute 20% or more of the Fair
Market Value of the Companys consolidated assets or 20% or more of the net
revenues or net income of the Company and its Subsidiaries, taken as a whole; or
(f) any combination of the foregoing. For purposes of this definition, Fair
Market Value means the value resulting from discounting the operating cash
flows of the Company and its Subsidiaries using a discount rate of 7.0% per
annum, and taking into account the following factors and assumptions:
|
(1)
|
Revenues, operations and maintenance costs and capital
expenditures expected for the Companys Projects and Expansion
Projects.
|
|
|
|
|
(2)
|
Any operating cash flows projected for any period which
occurs after the expiration of the power purchase agreement of an
operating project will be based on the last years operating cash flows
assuming 2% escalation until the end of the 50 year
period.
|
Annex A - 59
Tax Returns
means any
return, declaration, report, claim for refund, information return or statement,
or other document relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
Taxes
means all federal,
state, local, foreign, and other income, alternative or add-on minimum, capital
gain, net worth, gross receipts, sales, use, production, ad valorem, value
added, transfer, franchise, registration, profits, license, lease, service,
service use, withholding, payroll, employment, unemployment, estimated, excise,
severance, environmental, stamp, occupation, premium, property (real or
personal), real property gains, windfall profits, customs, duties or other
taxes, fees, assessments, or charges of any kind whatsoever, together with any
interest, additions, or penalties with respect thereto and any interest in
respect of such additions or penalties.
Title Policy
means (a)
Policy No. 472511487576MN-CTORM issued by Chicago Title Insurance Company on
February 23, 2011 with respect to the USG Oregon Site, (b) Policy No. 03207148
issued by Commonwealth Land Title Insurance Company on December 6, 2006 with
respect to the Raft River Site and (c) Policy No. M-9302-2631217 issued by
Stewart Title Guaranty Company on September 26, 2013 with respect to the USG
Nevada Site.
Transactions
has the meaning
set forth in the Recitals.
Transition Employees
has the
meaning set forth in Section 5.16(c)(ii) .
Transition Service Period
has
the meaning set forth in Section 5.16(c)(ii) .
Transition Services
has the
meaning set forth in Section 5.16(c)(ii) .
Treasury Regulations
means
the Treasury regulations promulgated under the Code.
USG Idaho
means U.S.
Geothermal Inc., an Idaho corporation.
USG Nevada
Deed of
Trust
means the Deed of Trust with Assignment of Leases, Contracts and
Rents, Security Agreement and Fixture Filing, dated September 26, 2013, duly
executed by USG Nevada LLC in favor of Stewart Title Guaranty Company for the
benefit of Deutsche Bank Trust Company Americas, recorded September 26, 2013.
USG Nevada Geothermal
Lease
means each of (a) the Geothermal Lease dated as of October 14, 1987
between The Kosmos Company, as lessor, and Michael B. Stewart, as lessee,
recorded October 16, 1987 in Book 2633, Page 282, as Document No. 1200497 of
Official Records, as assigned to San Emidio Resources, Inc. by that certain
Assignment of Lease dated May 26, 1992 and recorded as Document No. 1583278 of
Official Records, as further assigned to Empire Farms, a Nevada Partnership, by
that certain Assignment of Lease dated September 18, 1995 and recorded October
13, 1995 as Document No. 1933483 of Official Records, and as further assigned to
Empire Energy, LLC, a Nevada limited liability company, by that certain
Assignment and Assumption Agreement dated November 24, 1999, as evidenced by
that certain Memorandum of Assignment recorded May 11, 2000 as Document No.
2446152 of Official Records, and as further assigned to Empire Geothermal Power,
LLC by that certain Assignment of Geothermal Project Rights and Leasehold
Estates dated August 31, 2003, and recorded on October 3, 2003 as Document No.
2934363 of Official Records, and as further assigned to the USG Nevada Project
Company by that certain Assignment and Acceptance of Assignment of Kosmos
Geothermal Lease dated April 2008 and recorded on April 30, 2008 as Document No.
3645581 of Official Records, as amended by that certain First Amendment to
Geothermal Lease dated March 15, 2008 for reference purposes and that certain
Second Amendment to Geothermal Lease dated as of May 5, 2007 for reference
purposes, and (b) each of the following licenses, land leases and leases for
geothermal resources and grants of rights-of-way issued by the United States
Bureau of Land Management to the USG Nevada Project Company on land located in
Washoe County, Nevada: BLM serial numbers NVN-42707, NVN-43284, NVN-47395,
NVN-49240, NVN-57441, NVN-57909, NVN-63004, NVN-63006, NVN-63007, NVN-75557,
NVN-47169, NVN-75555 and NVN-75558.
USG Nevada Project
means
the approximately 8.6 MW (net) geothermal electric generation facility located
on the USG Nevada Site utilizing a water cooled binary generating unit
manufactured by TAS Energy Systems, Inc.
Annex A - 60
USG Nevada Project Company
means USG Nevada LLC, a Delaware limited liability company.
USG Nevada Site
means
the real property on which the USG Nevada Project or the USG Nevada Geothermal
Resource is located, the legal description of which is set forth in Exhibit A
and Exhibit D to the USG Nevada Deed of Trust and all related easements,
rights-of-way and other rights and interests.
USG Oregon Geothermal
Lease
means each of the (a) Hot Springs Ranch Geothermal Lease and
Agreement, dated as of January 24, 2007, between Cyprus Gold Exploration
Corporation and the Company, as assigned by the Company to the USG Oregon
Project Company pursuant to that Assignment, Assumption and Indemnity Agreement,
dated February 16, 2010 (as evidenced by that certain Memorandum of Geothermal
Lease Assignment, dated February 17, 2010, executed by the Company and the USG
Oregon Project Company), such assignment being consented to by Cyprus Gold
Exploration Corporation pursuant to that Consent to Assignment, dated January
29, 2010, (b) Hot Spring Ranch Geothermal Lease and Agreement, dated as of May
24, 2006, between JR Land and Livestock Inc. and the Company, as assigned to the
USG Oregon Project Company pursuant to the Assignment, Assumption and Indemnity
Agreement, dated February 16, 2010 (as evidenced by that certain Memorandum of
Geothermal Lease Assignment, dated February 17, 2010, executed by the Company
and the USG Oregon Project Company), such assignment being acknowledged by JR
Land and Livestock Inc. pursuant to that Acknowledgement of Lease
Assignment/Waiver of Notice, dated September 1, 2010, (c) Geothermal Lease and
Agreement, dated as of November 1, 2009, among John and Kathy Jordan and USG
Idaho, as assigned to the USG Oregon Project Company pursuant to Assignment,
Assumption and Indemnity Agreement, dated February 16, 2010 (as evidenced by
that certain Memorandum of Geothermal Lease Assignment, dated February 17, 2010,
executed by USG Idaho and the USG Oregon Project Company), such assignment being
acknowledged by John and Kathy Jordan pursuant to that Acknowledgement of Lease
Assignment/Waiver of Notice, dated August 31, 2010 and (d) each of the following
licenses, land leases and leases for geothermal resources and grants of
rights-of-way issued by the United States Bureau of Land Management to the USG
Oregon Project Company on land located in Malheur County, Oregon: BLM serial
numbers OR-65701, OR-66877, OR-66192.
USG Oregon Project
means
the approximately 22 MW (net) geothermal electric generating facility located in
Malheur County, Oregon utilizing an air cooled binary generating unit
manufactured by TAS Energy Systems, Inc.
USG Oregon Project Company
means USG Oregon LLC, a Delaware limited liability company.
USG Oregon Site
means
the real property on which the USG Oregon Project or the USG Oregon Geothermal
Resource is located, the legal description of which is set forth in the Title
Policy for the USG Oregon Site and all related easements, rights-of-way and
other rights and interests.
Voting Agreements
has the
meaning set forth in the Recitals.
Water Rights
means all
water and water rights (whether permitted, certificated, vested, or decreed, and
whether or not appurtenant to the land), including applications to appropriate
water filed with either the Oregon Water Resources Department, the Idaho
Department of Water Resources, or the Nevada Division of Water Resources, ditch
and ditch rights, wells, well permits, and well rights, stock or membership
interests in any irrigation, canal, ditch, or water company, and all
applications or rights to change the point of diversion, place of use, and
manner of use with respect thereto, which are now held or are hereafter acquired
by the Company or any Project Company, including those that are otherwise
relating to, appurtenant to, or used in connection with, all or any part of the
respective Site, Project or Development Project, or the use and enjoyment
thereof, including, without limitation, the following water rights permits:
those certain water rights leased by the Raft River Project Company from USG
Idaho, under that certain Water Lease Agreement, dated November 2, 2006, between
USG Idaho and Raft River Project Company; Nevada Department of Conservation and
Natural Resources, Division of Water Resources Permit Numbers 66946, 68756,
69320, 79899, and 79900.
Section
8.02
Interpretation; Construction
.
(a) The
table of contents and headings herein are for convenience of reference only, do
not constitute part of this Agreement and shall not be deemed to limit or
otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section, Exhibit, Article, or Schedule, such reference shall be to a Section of, Exhibit to, Article of, or
Schedule of this Agreement unless otherwise indicated. Unless the context
otherwise requires, references herein: (i) to an agreement, instrument, or other
document means such agreement, instrument, or other document as amended,
supplemented, and modified from time to time to the extent permitted by the
provisions thereof; and (ii) to a statute means such statute as amended from
time to time and includes any successor legislation thereto and any regulations
promulgated thereunder. Whenever the words include, includes, or including
are used in this Agreement, they shall be deemed to be followed by the words
without limitation, and the word or is not exclusive. The word extent in
the phrase to the extent means the degree to which a subject or other thing
extends, and does not simply mean if. A reference in this Agreement to $ or
dollars is to U.S. dollars. The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. The words hereof,
herein, hereby, hereto, and hereunder and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. Whenever this Agreement requires any
Subsidiary of the Company or Merger Sub to take any action, such requirement
shall be deemed to include an undertaking on the part of the Company and Parent
to cause such Subsidiary of the Company or Merger Sub, respectively, to take
such action. Any reference to a specific date or a particular date for
purposes of determining whether any representation or warranty is true and
correct or otherwise accurate or complete shall not include the date of this
Agreement, the date hereof or similar phrases.
Annex A - 61
(b) This
Agreement is the result of negotiations between, and has been reviewed by, the
parties and their respective legal counsel. In the event that an ambiguity or a
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
Section
8.03
Survival
. None of the representations
and warranties contained in this Agreement or in any instrument delivered under
this Agreement will survive the Effective Time. This Section 7.03 does not limit
any covenant or agreement of the parties contained in this Agreement which, by
its terms, contemplates performance after the Effective Time.
Section
8.04
Governing Law
. This Agreement shall be
governed by and construed in accordance with the internal Laws of the State of
Delaware (both substantive and procedural) without giving effect to any choice
or conflict of law provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the application of Laws of any jurisdiction
other than those of the State of Delaware.
Section
8.05
Submission to Jurisdiction
. Each of the
parties hereto irrevocably and unconditionally agrees that any Legal Action with
respect to this Agreement and the rights and obligations arising hereunder, the
Transactions or any matter related to or arising out of or in connection with
this Agreement or the Transactions (including the negotiation of this Agreement)
or for recognition and enforcement of any judgment in respect of this Agreement
and the rights and obligations arising hereunder brought by any other party
hereto or its successors or assigns shall be brought and determined exclusively
in the Delaware Chancery Court and any state appellate court therefrom within
the State of Delaware, or, if and only if the Delaware Chancery Court shall not
have or declines to accept jurisdiction over a particular matter, in any federal
court located in the State of Delaware or other Delaware state court (the
Delaware Courts
). Each of the parties hereto agrees that mailing of
process or other papers in connection with any such action or proceeding in the
manner provided in Section 8.07 or in such other manner as may be permitted by
applicable Laws, will be valid and sufficient service thereof. Each of the
parties hereto hereby irrevocably and unconditionally submits with regard to any
such Legal Action for itself and in respect of its property, generally and
unconditionally, to the personal jurisdiction of the aforesaid courts and agrees
that it will not bring any action relating to this Agreement or any of the
Transactions in any court or tribunal other than the aforesaid courts. Each of
the parties hereto hereby irrevocably and unconditionally waives, and agrees not
to assert, by way of motion, as a defense, counterclaim, or otherwise, in any
action or proceeding with respect to this Agreement and the rights and
obligations arising hereunder, or for recognition and enforcement of any
judgment in respect of this Agreement and the rights and obligations arising
hereunder: (a) any claim that it is not personally subject to the jurisdiction
of the above named courts for any reason other than the failure to serve process
in accordance with this Section 8.05; (b) any claim that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior
to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise); and (c) to the fullest extent permitted by
the applicable Law, any claim that (i) the suit, action or proceeding in such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper, or (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
Annex A - 62
Section
8.06
Waiver of Jury Trial
. EACH PARTY
ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE,
EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY TO
THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT: (A) NO REPRESENTATIVE OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION; (B)
SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (C) SUCH PARTY MAKES
THIS WAIVER VOLUNTARILY; AND (D) SUCH
PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.06.
Section
8.07
Notices
. All notices, requests,
consents, claims, demands, waivers, and other communications hereunder shall be
in writing and shall be deemed to have been given: (a) when delivered by hand
(with written confirmation of receipt); (b) when received by the addressee if
sent by a nationally recognized overnight courier (receipt requested); (c) on
the date sent by facsimile or email of a PDF document (with confirmation of
transmission) if sent during normal business hours of the recipient, and on the
next Business Day if sent after normal business hours of the recipient; or (d)
on the third day after the date mailed, by certified or registered mail, return
receipt requested, postage prepaid. Such communications must be sent to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
8.07):
If to Parent or Merger Sub, to:
Ormat Technologies, Inc.
6225 Neil
Road
Reno, NV 89511
Attention: Chief Financial Officer
Facsimile: (775) 356-9029
with a copy (which will not constitute
notice to Parent or Merger Sub) to:
Noam Ayali, Esq.
Norton Rose
Fulbright US LLP
1200 New Hampshire Avenue, NW
Washington, DC 20036
E-mail:
noam.ayali@nortonrosefulbright.com
Facsimile: (202)
974-6723
If to the Company, to:
Douglas J. Glaspey
U.S. Geothermal
Inc.
390 E. Parkcenter Boulevard, Suite 250
Boise, ID 83706
E-mail:
dglaspey@usgeothermal.com
Facsimile: (208) 424-1027
with a copy (which will not constitute
notice to the Company) to:
Kimberley R. Anderson
Dorsey &
Whitney LLP
701 5th Avenue Suite 6100
Seattle, WA 98104
E-mail:
anderson.kimberley@dorsey.com
Facsimile: (206) 260-8917
Annex A - 63
or to such other Persons, addresses or facsimile numbers as may
be designated in writing by the Person entitled to receive such communication as
provided above.
Section
8.08
Entire Agreement
. This Agreement (including
the Exhibits to this Agreement), the Company Disclosure Schedule and the
Confidentiality Agreement constitute the entire agreement among the parties with
respect to the subject matter of this Agreement and supersede all other prior
agreements, understandings, representations and warranties, whether written or
oral, among the parties to this Agreement with respect to the subject matter of
this Agreement. In the event of any inconsistency between the statements in the
body of this Agreement, the Confidentiality Agreement and the Company Disclosure
Schedule (other than an exception expressly set forth as such in the Company
Disclosure Schedule), the statements in the body of this Agreement will control.
Section
8.09
No Third Party Beneficiaries
. Except as
provided in Section 5.08 hereof or Section 5.16 thereof (other than Section
5.16(f)) (which shall be to the benefit of the parties referred to in such
section), this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and respective successors and nothing herein, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit, or remedy of any nature whatsoever under or
by reason of this Agreement.
Section
8.10
Severability
. If any term or provision of
this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such
invalidity, illegality, or unenforceability shall not affect any other term or
provision of this Agreement or invalidate or render unenforceable such term or
provision in any other jurisdiction. Upon such determination that any term or
other provision is invalid, illegal, or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
greatest extent possible.
Section
8.11
Assignment
. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither party may assign its rights or
obligations hereunder without the prior written consent of the other party,
which consent shall not be unreasonably withheld, conditioned, or delayed. No
assignment shall relieve the assigning party of any of its obligations
hereunder.
Section
8.12
Remedies
. Except as otherwise provided in
this Agreement (including Section 7.05), any and all remedies expressly
conferred upon a party to this Agreement will be cumulative with, and not
exclusive of, any other remedy contained in this Agreement, at Law, or in
equity, and the exercise by a party to this Agreement of any one remedy will not
preclude the exercise by it of any other remedy.
Section
8.13
Specific Performance
. The parties hereto
agree that money damages may not be an adequate remedy if any provision of this
Agreement were not performed in accordance with the terms hereof or was
otherwise breached or the Merger was not consummated. It is accordingly agreed
that, prior to any valid termination of this Agreement, the parties shall be
entitled to an injunction or injunctions or any other appropriate form of
specific performance or equitable relief, to prevent breaches or threatened
breaches of this Agreement or to enforce specifically the performance of the
terms and provisions hereof (including the other respective parties obligations
to consummate the Merger) in the Delaware Courts. Each party hereby agrees it
will not oppose the granting of an injunction, specific performance and other
equitable relief on the basis that such other parties have an adequate remedy at
Law or that any award of specific performance is not an appropriate remedy for
any reason at Law or in equity. Any party seeking an injunction or other Order
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof shall not be required to post any bond or other security in
connection therewith.
Annex A - 64
Section
8.14
Counterparts; Effectiveness
. This Agreement
may be executed in any number of counterparts, all of which will be one and the
same agreement. This Agreement will become effective when each party to this
Agreement will have received counterparts signed by all of the other parties.
Any facsimile, portable document format (pdf) or other electronic copy hereof or
signature hereon shall for all purposes be deemed originals.
[
Signature Pages Follow
]
Annex A - 65
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed as of the date first written
above by their respective officers thereunto duly authorized.
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U.S. GEOTHERMAL INC.
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By:
_______________________________________________
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Name:
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Title:
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ORMAT NEVADA INC.
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By:
______________________________________________
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Name:
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Title:
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OGP HOLDING CORP.
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By:
_______________________________________________
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Name:
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Title:
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[
Signature Page to Agreement and Plan of Merger
]
Annex A - 66
EXHIBIT A
Form of Voting Agreement See Annex B
A-1
EXHIBIT B
Certificate of Incorporation of the Surviving Corporation
B - 1
CERTIFICATE OF INCORPORATION
OF
OGP HOLDING CORP.
ARTICLE I
Name
The name of the Corporation is OGP Holding Corp. (the
Corporation).
ARTICLE II
Registered Office
The address of the Corporations
registered office in the State of Delaware is 800 N. State Street, Suite 402,
Dover, Delaware 19901 in Kent County. The name of the Corporations registered
agent at such address is TRAC - The Registered Agent Company.
ARTICLE III
Purpose
The nature of the business or
purposes to be conducted or promoted by the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
Capital Stock
The total number of shares of
stock that the Corporation shall have authority to issue is One Hundred (100),
and the par value of each of such shares is One Cent ($0.01) .
ARTICLE V
Incorporator
The name and mailing address of the
sole incorporator are as follows:
Name
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Mailing Address
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Ross Shepard
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Norton Rose Fulbright US LLP
1301 Avenue of
the Americas
New York, New York 10019
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ARTICLE VI
Amendment of By-Laws
The Board of Directors is
authorized to adopt, amend or repeal the By-Laws of the Corporation without any
action on the part of the stockholders.
B - 2
ARTICLE VII
Meetings of Stockholders
Meetings of stockholders shall be
held at such place, within or without the State of Delaware, as may be
designated by or in the manner provided in the By-Laws, or, if not so designated
or provided, as determined by the Board of Directors. Elections of directors
need not be by written ballot unless and to the extent that the By-Laws so
provide.
ARTICLE VIII
Indemnification
A.
Nature of Indemnity
. Each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
Proceeding
), by reason of the fact that he or she (or a person of whom
he or she is the legal representative), is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such Proceeding is
alleged action in an official capacity as a director, officer, employee,
fiduciary or agent or in any other capacity while serving as a director,
officer, employee, fiduciary or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent which it is empowered to do so by the
General Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment) against all expense, liability and loss (including attorneys fees
actually and reasonably incurred by such person in connection with such
Proceeding) and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators;
provided, however
, that except as
provided in Section B of this Article VIII, the Corporation shall indemnify any
such person seeking indemnification in connection with a Proceeding initiated by
such person only if such Proceeding was authorized by the Board of Directors.
The right to indemnification conferred in this Article VIII shall be a contract
right and, subject to Sections B and E of this Article VIII, shall include the
right to payment by the Corporation of the expenses incurred in defending any
such Proceeding in advance of its final disposition. The Corporation may, by
action of the Board of Directors, provide indemnification to employees and agent
of the Corporation with the same scope and effect as the foregoing
indemnification of directors and officers.
B.
Procedure for Indemnification of Directors and Officers
. Any
indemnification of a director or officer of the Corporation under Section A of
this Article VIII or advancement of expenses under Section E of this Article
VIII shall be made promptly, and in any event within thirty (30) days, upon the
written request of the director or officer. If a determination by the
Corporation that the director or officer is entitled to indemnification pursuant
to this Article VIII is required, and the Corporation fails to respond within
sixty (60) days to a written request for indemnity, the Corporation shall be
deemed to have approved the request. If the Corporation denies a written request
for indemnification or advancement of expenses, in whole or in part, or if
payment in full pursuant to such request is not made within thirty (30) days,
the right to indemnification or advancement of expenses as granted by this
Article VIII shall be enforceable by the director or officer in any court of
competent jurisdiction. Such persons costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any Proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of such defense shall be on the Corporation. Neither the failure of the
Corporation (including the Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standards of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination by
the Corporation (including the Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standards of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standards of conduct.
B - 3
C.
Non-exclusivity of Article VIII
. The rights to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Article VIII shall not be exclusive of any other
right which any person may or hereafter acquire under any statute, provision of
this Certificate of Incorporation, By-Law, agreement, vote of stockholders or
disinterested directors or otherwise.
D.
Insurance
. The Corporation may purchase and maintain insurance on its own
behalf and on behalf of any person who is or was a director, officer, employee,
fiduciary or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee, fiduciary or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not the Corporation would have the power to indemnify such
person against such liability under this Article VIII.
E.
Expenses
. Expenses incurred by any person described in Section A of this
Article VIII in defending a Proceeding shall be paid by the Corporation in
advance of such Proceedings final disposition unless otherwise determined by
the Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the
Corporation. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
F.
Employees and Agents
. Persons who are not covered by the foregoing
provisions of this Article VIII and who are or were employees or agents of the
Corporation, or who are or were serving at the request of the Corporation as
employees or agents of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to the extent authorized at any time or
from time to time by the Board of Directors.
ARTICLE IX
Limitations on Directors Liability
A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except: (i) for any
breach of the directors duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions that are not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware or (iv) for any transaction
from which the director derived any improper personal benefit. If the General
Corporation Law of the State of Delaware or other Delaware law is amended or
enacted after the date of filing of this Certificate of Incorporation to further
limit or eliminate the personal liability of directors, then the liability of a
director of the Corporation shall be limited or eliminated to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended, or such other Delaware law. Any repeal or modification of the foregoing
paragraph by the stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE X
Reorganization
Whenever a compromise or
arrangement is proposed between the Corporation and its creditors or any class
of them and/or between the Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of Delaware may, on
the application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for the Corporation under Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
B - 4
ARTICLE XI
Amendment of Certificate of Incorporation
The Corporation reserves the
right to amend, alter or repeal any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by statute, and all
rights of stockholders herein are subject to this reservation.
B - 5
THE UNDERSIGNED, being the sole
incorporator above named, for the purpose of forming a corporation pursuant to
the General Corporation Law of the State of Delaware, has signed this instrument
this 22nd day of January, 2018.
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/s/
Ross Shepard
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Ross Shepard
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Sole Incorporator
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B - 6
EXHIBIT C
Form of Option Holder Acknowledgement
C- 1
Option Holder Acknowledgement
U.S. Geothermal Inc.
390 E. Parkcenter Boulevard, Suite 250
Boise, ID 83706
Re:
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Cancellation and Termination of Options
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Ladies and Gentlemen:
This is to confirm that:
1.
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I am the holder of the options to purchase the number of
shares of Common Stock, par value $0.001 per share (the
Common
Stock
), of U.S. Geothermal Inc., a Delaware corporation (the
Company
) at the exercise prices listed on Schedule 1 (the
Options
).
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2.
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I elect to have all of my options cancelled and
terminated in exchange for the right to receive a cash payment equal to
the
excess of
(x) $5.45 per share of Common Stock subject to the
Options
over
(y) the exercise price per share of Common Stock
subject to the Options (
Designated Consideration
), less any taxes
required to be withheld as set forth below, in each case as provided in
the Agreement and Plan of Merger, dated as of January 24, 2018 (the
Merger Agreement
), by and among the Company, Ormat Nevada Inc., a
Delaware corporation (
Buyer
) and OGP Holding Corp., a Delaware
corporation (
Merger Sub
) and a wholly-owned subsidiary of
Parent.
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3.
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I represent and understand
that:
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a.
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I am the owner of the Options, free and clear of all
liens, claims and encumbrances;
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b.
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I have not exercised, sold, assigned, given away or
otherwise transferred, in any way, any right, title or interest in, to or
under the Options or the option agreements related thereto;
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c.
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I have the legal capacity to execute and deliver this
Agreement and to consummate the transactions contemplated to be performed
by me under this Agreement;
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d.
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This Agreement is my binding obligation, enforceable
against me in accordance with its terms; and
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e.
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I have received and had an opportunity to review the
proxy statement dated March 20, 2018 which the Company sent to its
stockholders and option holders in connection with the transactions
contemplated by the Merger Agreement (the
Company Proxy
Statement
) and such other information as I have considered relevant
for purposes of entering into this Agreement.
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4.
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I understand that as a result of the cancellation and
termination of the Options and my receipt of the Designated Consideration,
I may incur a tax liability which I must pay. I further understand and
agree that the Company will withhold all applicable federal, state and
local income and employment taxes required to be withheld from the
Designated Consideration before paying the balance to me.
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5.
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Effective upon cancellation and termination of the
Options and the payment to me of the Designated Consideration, less any
taxes required to be withheld, I hereby irrevocably
release,
waive and relinquish any and all rights, claims and
benefits which I may have with respect to the Options and with respect to
shares of Common Stock that would have been issuable upon exercise of the
Options (including, without limitation, any rights I may have under the
Companys 2009 Stock Incentive Plan (the Plan), any Option award letter
or grant instrument or any other plans, contracts, agreements or
understandings related thereto), except for the right to receive the
Designated Consideration.
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C- 2
6.
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This Agreement will remain in full force and effect
notwithstanding my death or incapacity and will be binding upon my heirs,
executors, administrators, successors and assigns.
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7.
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This Agreement will be governed by and construed in
accordance with the internal laws of the State of Delaware (both
substantive and procedural) without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the application of laws of any
jurisdiction other than those of the State of Delaware.
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8.
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I hereby irrevocably and unconditionally agree that any
claim, action, suit or proceeding with respect to this Agreement and the
rights and obligations arising hereunder, or any matter related to or
arising out of or in connection with this Agreement shall be brought and
determined exclusively in the Delaware Chancery Court and any state
appellate court therefrom within the State of Delaware, or, if and only if
the Delaware Chancery Court shall not have or declines to accept
jurisdiction over a particular matter, in any federal court located in the
State of Delaware or other Delaware state court. I further agree that the
mailing of any process, summons, notice or document in connection with any
such claim, action, suit or proceeding hand delivered or sent by U.S.
registered mail to my address below will be valid and sufficient service
thereof. I irrevocably and unconditionally submit with regard to any such
claim, action, suit or proceeding for myself and in respect of my
property, generally and unconditionally, to the jurisdiction of the
aforesaid courts and agree that I will not bring any action relating to
this Agreement in any court or tribunal other than the aforesaid courts. I
irrevocably and unconditionally waive, and agree not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement and the rights and obligations
arising hereunder, or for recognition and enforcement of any judgment in
respect of this Agreement and the rights and obligations arising
hereunder: (a) any claim that I am not personally subject to the
jurisdiction of the above named courts for any reason other than the
failure to serve process in accordance herewith, (b) any claim that I or
my property is exempt or immune from jurisdiction of any such court or
from any legal process commenced in such courts (whether through service
of notice, attachment prior to judgment, attachment in aid of execution of
judgment, execution of judgment or otherwise) and (c) to the fullest
extent permitted by applicable law, any claim that (i) the suit, action or
proceeding in such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper or (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
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9.
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I HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT
I MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
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[Signature Page Follows]
C- 3
Sincerely,
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Signature
_________________________________
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Date ____________, 2018
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Print
Name
_________________________________
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Address
_________________________________
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_________________________________
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Social Security #
_________________________________
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Spousal Consent
The undersigned spouse of the Option holder (i) is fully aware
of, understands and fully consents and agrees to the provisions of this Option
Holder Acknowledgement and their binding effect upon any marital or community
property interests he/she may now or hereafter own, (ii) has had the opportunity
to consult with counsel regarding this Spousal Consent and this Option Holder
Acknowledgement and (iii) agrees that the termination of his/her and the Option
holders marital relationship for any reason shall not effect this Spousal
Consent and this Option Holder Acknowledgement and that his/her awareness,
understanding, consent and agreement are evidenced by his/her signature below.
______________
Spouses Name
:
[
Signature Page to Option Holder Acknowledgement
]
C- 4
SCHEDULE 1
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Number of Shares of
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Exercise Price Per
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Option Issue
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Common Stock
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Share of Common
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Aggregate Exercise
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Date
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Subject to Option
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Stock
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Price of Option
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C- 5
ANNEX B
VOTING AGREEMENT
Annex B - 1
Voting Agreement
This Voting Agreement (this
Agreement
), dated as of January 24, 2018, is by and between the
undersigned stockholder (the
Stockholder
) of U.S. Geothermal Inc., a
Delaware corporation (the
Company
), and Ormat Nevada Inc., a Delaware
corporation (
Parent
).
Preliminary Statements
A.
Stockholder owns the Equity Securities of the Company (the Company
Securities) set forth on Schedule A (the Original
Shares) and may
acquire other Company Securities (Additional
Shares) through the
exercise, exchange or conversion of Original Shares, acquisition of new Company
Securities or otherwise after the date hereof (the Original Shares and any
Additional Shares are sometimes referred to herein individually or collectively
as Shares).
B.
The Company, Parent and OGP Holding Corp., a Delaware corporation and wholly
owned subsidiary of Parent (
Merger Sub
), are parties to an Agreement
and Plan of Merger (as the same may be amended from time to time, the
Merger
Agreement
), providing for, among other things, the merger of Merger Sub
with and into the Company (the
Merger
) pursuant to the terms and
conditions of the Merger Agreement.
C.
Stockholder desires to have the Merger completed in accordance with the
Merger Agreement.
D.
To induce Parent and Merger Sub to complete the Merger, Stockholder is
willing to enter into this Agreement.
NOW, THEREFORE, in consideration
of the premises and for other good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
Agreement
1.
Definitions
. For
purposes of this Agreement, terms defined in the preamble, preliminary
statements or other sections of this Agreement have the meanings set forth
therein, capitalized terms used and not otherwise defined in this Agreement have
the respective meanings given to them in the Merger Agreement and the following
terms have the meanings set forth below.
Governing
Instruments
means (a)
the certificate of incorporation and bylaws of the Company and (b) in the case
of any Company Securities that are options, any option agreement referred to on
Schedule A
and any Company Stock Plan applicable to those options.
Transfer
means, with respect to any Shares, any
transfer, sale, offer, exchange, assignment, grant of Lien, gift or other
disposition of any kind, whether direct or indirect.
2.
Representations of
Stockholder
. Stockholder represents and warrants to Parent that:
(a)
Stockholder (i) has received and read and is familiar with the Merger
Agreement, and (ii) has obtained all other information considered necessary or
appropriate to evaluate the merits and risks of the Merger and this Agreement.
(b)
Stockholder owns, of record and beneficially (as such term is defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended), all of the
Original Shares.
(c)
Stockholder has good and marketable title to the Original Shares free and clear
of all Liens, other than any Lien under the Governing Instruments.
(d)
Stockholder has not Transferred any interest in, to or under the
Original Shares. There are no Contracts of any kind relating to the Original
Shares, including any voting trust or voting agreement, options, swaps or other
derivative contracts, security interests or pledges, or other rights,
agreements, arrangements, commitments or understandings, of any kind, whether or
not legally binding, to which Stockholder is a party, relating to the Original Shares, except for the Governing Instruments. For the
avoidance of doubt, the fact that the Original Shares are held in a margin
account shall not be deemed a violation of Section 2(c) or this Section 2(d).
Annex B - 2
(e)
Stockholder does not own, of record or beneficially, any Company
Securities other than as set forth on
Schedule A
. Stockholder does not
have any direct or indirect interest in, to or under any Company Securities
(other than the Original Shares) under any Contract of any kind, including any
voting trust or voting agreement, options, swaps or other derivative contracts,
Liens, or other rights, agreements, arrangements, commitments or understandings,
of any kind, whether or not legally binding, to which Stockholder is a party,
except for the Governing Instruments.
(f)
Stockholder has full power and authority and legal capacity to enter into,
execute and deliver this Agreement and to perform fully Stockholders
obligations hereunder (including the giving of the proxies described in Section
3(b) below). This Agreement has been duly and validly executed and delivered by
Stockholder and constitutes the legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms.
(g)
None of the execution and delivery of this Agreement by Stockholder,
the consummation by Stockholder of the transactions contemplated hereby or
compliance by Stockholder with any of the provisions hereof will conflict with
or constitute a Default under any provision of any Contract, or conflict with or
violate any Law, in each case, applicable to Stockholder or to Stockholders
property or assets.
(h)
No Consent of, or Filing with, any Governmental Authority or other
Person on the part of Stockholder is required in connection with the valid
execution and delivery of this Agreement or the consummation by Stockholder of
the transactions contemplated hereby or compliance by Stockholder with any of
the provisions hereof.
(i)
Unless this Agreement is accompanied by an executed spousal consent in
the form of
Exhibit A
, no consent of Stockholders spouse is necessary
under any community property or other Laws in order for Stockholder to enter
into and perform its obligations under this Agreement.
3.
Agreement to Vote Shares;
Irrevocable Proxy
.
(a)
Stockholder agrees during the term of this Agreement to vote the
Shares, and to cause any holder of record of Shares to vote or execute a written
consent or consents if holders of Company Securities are requested to vote their
shares through the execution of an action by written consent in lieu of any
meeting of holders of Company Securities: (i) in favor of the Merger and the
Merger Agreement at every meeting (or in connection with any action by written
consent) of the holders of Company Securities at which such matters are
considered and at every adjournment or postponement thereof; (ii) against (A)
any Takeover Proposal of any Person other than Parent and its Affiliates, (B)
any action, proposal, transaction or agreement which could reasonably be
expected to result in a breach of any covenant, representation or warranty or
any other obligation or agreement of the Company under the Merger Agreement or
of Stockholder under this Agreement and (C) any action, proposal, transaction or
agreement that could reasonably be expected to impede, interfere with, delay,
discourage, adversely affect or inhibit the timely consummation of the Merger or
the fulfillment of Parents, the Companys or Merger Subs conditions under the
Merger Agreement or change in any manner the voting rights of any class of
shares of the Company (including any amendments to any of the Governing
Instruments);
provided
, that each of Stockholders voting obligations set
forth in this Section 3(a) and Stockholders appointment of Parent as its proxy
and attorney-in-fact pursuant to Section 3(b) will be suspended for so long as
the Companys board of directors is not recommending that stockholders of the
Company vote in favor of the Merger. For the avoidance of doubt, each of
Stockholders voting obligations set forth in this Section 3(a) and
Stockholders appointment of Parent as its proxy and attorney-in-fact pursuant
to Section 3(b) will be in full force at any time that the Companys board of
directors is recommending that stockholders of the Company vote in favor of the
Merger.
(b)
Stockholder hereby appoints Parent and any designee of Parent, and each
of them individually, as its proxies and attorneys-in-fact, with full power of
substitution and re-substitution, to vote or act by written consent during the
term of this Agreement with respect to the Shares in accordance with Section
3(a). This proxy and power of attorney is given to secure the performance of the
duties of Stockholder under this Agreement. Stockholder shall take such further
action or execute such other instruments as may be necessary to effectuate the
intent of this proxy.
Annex B - 3
This proxy and power of attorney granted by Stockholder shall
be irrevocable during the term of this Agreement, shall be deemed to be coupled
with an interest sufficient in law to support an irrevocable proxy and shall
revoke any and all prior proxies granted by Stockholder with respect to the
Shares. The power of attorney granted by Stockholder herein is a durable power
of attorney and shall survive the dissolution, bankruptcy, death or incapacity
of Stockholder. The proxy and power of attorney granted hereunder shall
terminate upon the termination of this Agreement.
4.
No Voting Trusts
or Other Arrangement
.
Stockholder agrees that
Stockholder will not, and will not permit any Person under Stockholders control
to, deposit any of the Shares in a voting trust, grant any proxies with respect
to the Shares or subject any of the Shares to any arrangement with respect to
the voting of the Shares, other than in accordance with this Agreement.
5.
Transfer and Encumbrance
.
(a)
Stockholder agrees that during the term of this Agreement, Stockholder
will not, directly or indirectly, Transfer any of the Shares or enter into any
Contract, option or other agreement with respect to, or consent to a Transfer
of, any of the Shares or Stockholders voting or economic interest therein. Any
attempted Transfer of Shares or any interest therein in violation of this
Section 5 shall be null and void.
(b)
This Section 5 shall not prohibit a Transfer of the Shares by
Stockholder to (i) any member of Stockholders immediate family, or to a trust
for the benefit of Stockholder or any member of Stockholders immediate family,
or upon the death of Stockholder or (ii) an Affiliate of Stockholder that is
controlled solely by Stockholder;
provided
, that a Transfer referred to
in this Section 5(b) shall be permitted only if, as a condition to such
Transfer, the transferee agrees in writing, in form and substance reasonably
satisfactory to Parent, to be bound by all of the terms of this Agreement.
6.
Additional Shares
.
Stockholder agrees that all
Company Securities that Stockholder purchases, acquires the right to vote or
otherwise acquires beneficial ownership (as such term is defined in Rule 13d-3
under the Securities Exchange Act of 1934) of after the execution of this
Agreement shall be subject to the terms of this Agreement and shall constitute
Shares for all purposes of this Agreement.
7.
Waiver of Appraisal and
Dissenters Rights
.
Stockholder hereby waives, and
agrees not to assert or perfect, any rights of appraisal or rights to dissent
from the Merger that Stockholder may have by virtue of ownership of the Shares.
8.
Letter of
Transmittal
.
Stockholder agrees to tender a
Letter of Transmittal, appropriately completed and duly executed by or on behalf
of Stockholder in accordance with the terms of the Merger Agreement and the
applicable Letter of Transmittal, as a condition to receipt of any portion of
the Merger Consideration in respect of any Shares owned by Stockholder.
Stockholder expressly waives any right it may have to assert that it is entitled
to receive Merger Consideration without tendering a Letter of Transmittal in
accordance with the Merger Agreement and the Letter of Transmittal.
9.
Termination
.
This Agreement shall terminate
upon the earliest to occur of (a) the Effective Time, (b) the date on which the
Merger Agreement is terminated in accordance with its terms and (c) the making
of any change by amendment, waiver or other modification to any provision of the
Merger Agreement that decreases the amount or changes the form of the Merger
Consideration.
10.
No Agreement as Director or
Officer
.
Annex B - 4
Stockholder makes no agreement or
understanding in this Agreement in Stockholders capacity as a director or
officer of the Company or any of its Subsidiaries (if Stockholder holds such
office), and nothing in this Agreement: (a) will limit or affect any actions or
omissions taken by Stockholder in Stockholders capacity as such a director or
officer, including in exercising rights under the Merger Agreement, and no such
actions or omissions shall be deemed a breach of this Agreement or (b) will be
construed to prohibit, limit or restrict Stockholder from exercising
Stockholders fiduciary duties as an officer or director to the Company or
holders of Company Securities. 11.
Specific Performance
.
Each party hereto acknowledges
that it will be impossible to measure in money the damage to the other party if
a party hereto fails to comply with any of the obligations imposed by this
Agreement, that every such obligation is material and that, in the event of any
such failure, the other party may not have an adequate remedy at law or damages.
Accordingly, each party hereto agrees that injunctive relief or other equitable
remedy, in addition to any remedies at law or damages, is the appropriate remedy
for any such failure and will not oppose the seeking of such relief on the basis
that the other party has an adequate remedy at law or damages. Each party hereto
agrees that it will not seek, and agrees to waive any requirement for, the
securing or posting of a bond in connection with the other partys seeking or
obtaining such equitable relief.
12.
Entire Agreement
.
This Agreement supersedes all
prior agreements, written or oral, between the parties hereto with respect to
the subject matter hereof and, together with the Merger Agreement, any Letter of
Transmittal or other document referred to in the Merger Agreement, contains the
entire agreement between the parties with respect to the subject matter hereof.
This Agreement may not be amended or supplemented, and no provisions hereof may
be modified or waived, except by an instrument in writing signed by both of the
parties hereto. No waiver of any provisions hereof by any party hereto shall be
deemed a waiver of any other provisions hereof by such party, nor shall any such
waiver be deemed a continuing waiver of any provision hereof by such party.
13.
Notices
.
All notices and other
communications among the parties to this Agreement shall be in writing and shall
be deemed to have been duly given (a) when delivered in person, (b) when
delivered after posting in the United States mail having been sent registered or
certified mail, return receipt requested, postage prepaid, (c) when delivered by
FedEx or other nationally recognized overnight delivery service or (d) when
delivered by email (solely if receipt is confirmed), addressed as follows:
(a)
If to Parent, to:
Ormat Nevada Inc.
c/o Ormat
Technologies, Inc.
6225 Neil Road
Reno, Nevada 89511
Attention:
Chief Financial Officer
Email:
dblachar@ormat.com
with copies to:
Norton Rose Fulbright US LLP
1200
New Hampshire Avenue, NW
Washington, DC 20036
Attention: Noam Ayali
Email:
noam.ayali@nortonrosefulbright.com
(b)
If to Stockholder, to the address or email set forth for Stockholder on
Schedule A
.
14.
Miscellaneous
.
Annex B - 5
(a)
This Agreement, and all claims or causes of action based upon, arising
out of, or related to this Agreement, shall be governed by and construed in
accordance with the internal Laws of the State of Delaware (both substantive and
procedural), without giving effect to any choice or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the Laws of any jurisdiction other than those of the
State of Delaware.
(b)
Each of the parties hereto irrevocably and unconditionally agrees that
any claim, proceeding or cause of action with respect to this Agreement or any
Letter of Transmittal and the rights and obligations arising hereunder or
thereunder, or any matter related to or arising out of or in connection with
this Agreement (including the negotiation of this Agreement) or any Letter of
Transmittal, or for recognition and enforcement of any judgment in respect of
this Agreement or any Letter of Transmittal and the rights and obligations
arising hereunder or thereunder brought by any other party hereto or its
successors or assigns shall be brought and determined exclusively in the
Delaware Courts. Each of the parties hereto agrees that mailing of process or
other papers in connection with any such claim, proceeding or cause of action in
the manner provided in Section 13 or in such other manner as may be permitted by
applicable Laws will be valid and sufficient service thereof. Each of the
parties hereto hereby irrevocably and unconditionally submits with regard to any
such claim, proceeding or cause of action for himself, herself or itself and in
respect of his, her or its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any action relating to this Agreement or any Letter of Transmittal in any court
or tribunal other than the aforesaid courts. Each of the parties hereto hereby
irrevocably and unconditionally waives, and agrees not to assert, by way of
motion, as a defense, counterclaim, or otherwise, in any action or proceeding
with respect to this Agreement or any Letter of Transmittal and the rights and
obligations arising hereunder or thereunder, or for recognition and enforcement
of any judgment in respect of this Agreement or any Letter of Transmittal and
the rights and obligations arising hereunder or thereunder: (i) any claim that
he, she or it is not personally subject to the jurisdiction of the above named
courts for any reason other than the failure to serve process in accordance with
this Section 14(b); (ii) any claim that he, she, it or his, her or its property
is exempt or immune from jurisdiction of any such court or from any legal
process commenced in such courts (whether through service of notice, attachment
prior to judgment, attachment in aid of execution of judgment, execution of
judgment or otherwise); and (iii) to the fullest extent permitted by applicable
Laws, any claim that (A) the suit, action or proceeding in such court is brought
in an inconvenient forum, (B) the venue of such suit, action or proceeding is
improper, or (C) this Agreement, any Letter of Transmittal or the subject matter
hereof or thereof, may not be enforced in or by such courts.
(c)
EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (I) NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF
A LEGAL ACTION, (II) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER,
(III) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (IV) SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 14(c).
(d)
If any term or provision of this Agreement is invalid, illegal or
unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Agreement
or invalidate or render unenforceable such term or provision in any other
jurisdiction. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.
(e)
This Agreement may be executed in any number of counterparts, all of
which will be one and the same agreement. This Agreement will become effective
when each party to this Agreement will have received counterparts signed by all of the other parties. Any facsimile,
portable document format (pdf) or other electronic copy hereof or signature
hereon shall for all purposes be deemed originals.
Annex B - 6
(f)
Each party hereto shall execute and deliver such additional documents
as may be necessary or desirable to effect the transactions contemplated by this
Agreement.
(g)
All Section headings herein are for convenience of reference only and
are not part of this Agreement, and no construction or reference shall be
derived therefrom.
(h)
The obligations of Stockholder set forth in this Agreement shall not be
effective or binding upon Stockholder until after such time as the Merger
Agreement is executed and delivered by the Company, Parent and Merger Sub, and
the parties agree that there is not and has not been any other agreement,
arrangement or understanding between the parties hereto with respect to the
matters set forth herein.
(i)
Neither party hereto shall assign this Agreement or any part hereof
without the prior written consent of the other parties to this Agreement, except
that Parent may assign, in its sole discretion, all or any of its rights,
interests and obligations hereunder to any of its Affiliates. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties to this Agreement and their respective permitted successors and
assigns.
[
Signature Page Follows
]
Annex B - 7
IN WITNESS WHEREOF, the parties
hereto have executed and delivered this Agreement as of the date first written
above.
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ORMAT NEVADA INC.
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By: __________________________
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Name: Doron Blachar
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Title: Treasurer
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______________________________
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Name:
_________________________
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[
Signature Page to Voting Agreement
]
Annex B - 8
Schedule A
Name of
Stockholder
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Address of
Stockholder
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Email Address of
Stockholder
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Shares of Common Stock held by Stockholder, of record or
beneficially
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Options held by Stockholder under option agreements
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Options held by Stockholder other than under option
agreements
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Other Company Securities held by Stockholder, of record or
beneficially
|
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[
Signature Page to Voting Agreement
]
Schedule A - 1
Exhibit A
Spousal Consent
The undersigned spouse of the
Stockholder (i) is fully aware of, understands and fully consents and agrees to
the provisions of this Agreement and their binding effect upon any marital or
community property interests he/she may now or hereafter own, (ii) has had the
opportunity to consult with counsel regarding this Spousal Consent and this
Agreement and (iii) agrees that the termination of his/her and the Stockholders
marital relationship for any reason shall not effect this Spousal Consent and
this Agreement and that his/her awareness, understanding, consent and agreement
are evidenced by his/her signature below.
____________________________________________
Spouses Name:
[
Signature Page to Voting Agreement
]
A - 1
ANNEX C
ROTH Capital Partners Opinion
Annex C - 1
ANNEX C
January 23, 2018
Special Committee of the Board of Directors
U.S. Geothermal
Inc.
390 E. Parkcenter Blvd., Suite 250
Boise, Idaho 83706
Members of the Special Committee:
ROTH Capital Partners, LLC (we or ROTH) understands that
U.S. Geothermal Inc., a corporation organized under the laws of Delaware (the
Company), Ormat Nevada Inc., a corporation organized under the laws of
Delaware (Parent), and OGP Holding Corp., a corporation organized under the
laws of Delaware and a wholly owned subsidiary of Parent (Merger Sub), propose
to enter into an Agreement and Plan of Merger, substantially in the form of the
draft delivered to ROTH on January 23, 2018 (the Merger Agreement), which
provides, among other things, that (a) the Merger Sub will merge with and into
the Company (the Merger); (b) the separate corporate existence of Merger Sub
will cease; (c) the Company will continue its corporate existence as the
surviving corporation in the Merger and a Subsidiary of Parent; and (d) each
outstanding share of common stock, par value $0.001 per share, of the Company
(the Company Shares) will be converted into the right to receive the
consideration set forth in the Merger Agreement, except as otherwise provided in
the Merger Agreement. Each Company Share issued and outstanding immediately
prior to the Effective Time (other than shares to be cancelled and retired in
accordance with the Merger Agreement and Dissenting Shares) will be
automatically converted into the right to receive an amount in cash equal to the
Offer Price, without interest (the Merger Consideration). Defined terms not
otherwise defined herein shall have the meaning set forth in the Merger
Agreement. The terms and conditions of the Merger are more fully set forth in
the Merger Agreement.
You have asked for our opinion as to whether the Merger
Consideration to be received by the holders of Company Shares pursuant to the
Merger Agreement is fair, from a financial point of view, to such holders.
In connection with our review of the proposed Merger, and in
arriving at our opinion, we have: (i) reviewed the Merger Agreement; (ii)
reviewed certain information, including financial forecasts, relating to the
business, earnings, cash flow, assets, liabilities and prospects of the Company
that was furnished to us by management of the Company; (iii) conducted
discussions with members of senior management of the Company concerning the
matters described in clause (ii); (iv) reviewed publicly available information
relating to the Company; (v) reviewed the financial terms, to the extent
publicly available, of certain acquisitions that we deemed relevant; (vi)
reviewed the financial terms, to the extent publicly available, of certain
public companies that we deemed relevant; and (vii) performed such other
analyses and considered such other factors as we deemed appropriate for the
purpose of rendering our opinion.
Annex C - 2
Special Committee of the Board of Directors
U.S. Geothermal
Inc.
January 23, 2018
We have relied upon and assumed, without assuming liability or
responsibility for independent verification, the accuracy and completeness of
all information that was publicly available or was furnished, or otherwise made
available, to us or discussed with or reviewed by or for us. We have further
assumed that the financial information provided has been prepared on a
reasonable basis in accordance with industry practice, and that management of
the Company is not aware of any information or facts that would make any
information provided to us incomplete or misleading. Without limiting the
generality of the foregoing, for the purpose of this opinion, we have assumed
that with respect to financial forecasts, estimates and other forward-looking
information reviewed by us, that such information has been reasonably prepared
based on assumptions reflecting the best currently available estimates and
judgments of the Companys management as to the expected future results of
operations and financial condition of the Company. We express no opinion as to
any such financial forecasts, estimates or forward-looking information or the
assumptions on which they were based.
In connection with our opinion, we have assumed and relied
upon, without independent verification, the accuracy and completeness of all of
the financial, legal, regulatory, tax, accounting and other information provided
to, discussed with or reviewed by us. Our opinion does not address any legal,
regulatory, tax or accounting issues.
In arriving at our opinion, we have assumed that the executed
Merger Agreement will be in all material respects identical to the draft Merger
Agreement reviewed by us. We have relied upon and assumed, without independent
verification, that (i) the representations and warranties of all parties set
forth in the Merger Agreement and all related documents and instruments that are
referred to therein are true and correct, (ii) each party to the Merger
Agreement will fully and timely perform all of the covenants and agreements
required to be performed by such party, (iii) the Merger will be consummated
pursuant to the terms of the Merger Agreement without amendments thereto, and
(iv) all conditions to the consummation of the Merger will be satisfied without
waiver by any party of any conditions or obligations thereunder. Additionally,
we have assumed that all the necessary regulatory approvals and consents
required for the Merger will be obtained in a manner that will not adversely
affect the Company or the contemplated benefits of the Merger.
In arriving at our opinion, we have not performed any
appraisals or valuations of any specific assets or liabilities (fixed,
contingent or other) of the Company, and have not been furnished or provided
with any such appraisals or valuations. Without limiting the generality of the
foregoing, we have undertaken no independent analysis of any pending or
threatened litigation, regulatory action, possible unasserted claims or other
contingent liabilities, to which the Company is a party or may be subject, and
at the direction of the Special Committee and with its consent, our opinion
makes no assumption concerning, and therefore does not consider, the possible
assertion of claims, outcomes or damages arising out of any such matters (other
than to the extent set forth in the Merger Agreement or the financial
information provided to us by or on behalf of the Company).
This opinion is necessarily based upon the information
available to us and facts and circumstances as they exist and are subject to
evaluation on the date hereof; events occurring
Annex C - 3
Special Committee of the Board of Directors
U.S. Geothermal
Inc.
January 23, 2018
after the date hereof could materially affect the assumptions
used in preparing this opinion. We are not expressing any opinion herein as to
the price at which the Companys shares may trade following announcement of the
Merger or at any future time. We have not undertaken to reaffirm or revise this
opinion or otherwise comment upon any events occurring after the date hereof and
do not have any obligation to update, revise or reaffirm this opinion.
We have been engaged by the Special Committee of the Board of
Directors of the Company to act as its financial advisor and, under certain
circumstances, we will be entitled to receive certain fees from the Company for
providing such services, including the provision of this opinion. Our fee for
providing this opinion is not contingent upon the consummation of the Merger.
The Company has agreed to indemnify us against certain liabilities and reimburse
us for certain expenses in connection with our services. In the ordinary course
of business, we and our affiliates may acquire, hold or sell, for our and our
affiliates' own accounts and for the accounts of customers, equity, debt and
other securities and financial instruments (including bank loans and other
obligations) of the Company and the other parties to the Merger, and,
accordingly, may at any time hold a long or a short position in such securities.
We have not otherwise had a material relationship with, nor otherwise received
fees from, the Company or any other parties to the Merger during the two years
preceding the date hereof. In the future, we may provide financial advisory and
investment banking services to the Company and its affiliates for which we would
expect to receive compensation.
Consistent with applicable legal and regulatory requirements,
ROTH Capital Partners, LLC has adopted policies and procedures to establish and
maintain the independence of our research departments and personnel. As a
result, our research analysts may hold views, make statements or investment
recommendations and/or publish research reports with respect to the Company
and/or the Merger that differ from the views of our investment banking
personnel.
This opinion has been prepared for the information of the
Special Committee of the Board of Directors of the Company for its use in
connection with its consideration of the Merger and is not intended to be and
does not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote on any matter relating to the Merger or any other
matter. Except with respect to the inclusion of this opinion in the
prospectus/proxy statement or other filings with the U.S. Securities and
Exchange Commission relating to the Merger in accordance with our engagement
letter, this opinion shall not be disclosed, referred to or published (in whole
or in part), nor shall any public references to us be made, without our prior
written approval. This opinion has been approved for issuance by the ROTH
Capital Partners, LLC Fairness Opinion Committee.
This opinion addresses only the fairness, from a financial
point of view, to the holders of Company Shares of the Merger Consideration and
does not address the relative merits of the Merger or any alternatives to the
Merger, the Companys underlying decision to proceed with or effect the Merger,
or any other aspect of the Merger. This opinion does not address the fairness of
the Merger to the holders of any class of securities, creditors or other
constituencies of the Company. This opinion is not a valuation of the Company or
its assets or any class of its securities. We are not experts in, nor do we
express an opinion on, legal, tax, accounting or regulatory issues. We do not
express an opinion about the fairness of the amount or nature of any
Annex C - 4
Special Committee of the Board of Directors
U.S. Geothermal
Inc.
January 23, 2018
compensation payable or to be paid to any of the officers,
directors or employees, of the Company, whether or not relative to the Merger.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the Merger Consideration is fair, from a financial
point of view, to the holders of Company Shares.
Sincerely,
ROTH Capital Partners, LLC
Annex C - 5
ANNEX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who holds
shares of stock on the date of the making of a demand pursuant to subsection (d)
of this section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in favor
of the merger or consolidation nor consented thereto in writing pursuant to §
228 of this title shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholders shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word stockholder means a holder of record of stock in a corporation; the
words stock and share mean and include what is ordinarily meant by those
words; and the words depository receipt mean a receipt or other instrument
issued by a depository representing an interest in 1 or more shares, or
fractions thereof, solely of stock of a corporation, which stock is deposited
with the depository.
(b) Appraisal rights shall be available for the shares of any
class or series of stock of a constituent corporation in a merger or
consolidation to be effected pursuant to § 251 (other than a merger effected
pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this
section, § 251(h) of this title), § 252, § 254, § 255, § 256, § 257, § 258, §
263 or § 264 of this title: (1) Provided, however, that, except as expressly
provided in § 363(b) of this title, no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of the meeting of stockholders to
act upon the agreement of merger or consolidation, were either: (i) listed on a
national securities exchange or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in § 251(f) of this title.
(2) Notwithstanding paragraph (b)(1) of this section, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252,
254, 255, 256, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect thereof;
b.
Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or
depository receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing paragraphs (b)(2)a. and b. of this section;
or
d. Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing paragraphs (b)(2)a., b. and c. of this section.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 251(h), § 253 or § 267 of this
title is not owned by the parent immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware corporation.
(4) In the event of an amendment to a corporations certificate
of incorporation contemplated by § 363(a) of this title, appraisal rights shall
be available as contemplated by § 363(b) of this title, and the procedures of
this section, including those set forth in subsections (d) and (e) of this
section, shall apply as nearly as practicable, with the word amendment
substituted for the words merger or consolidation, and the word corporation
substituted for the words constituent corporation and/or surviving or
resulting corporation.
Annex D - 1
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be available for
the shares of any class or series of its stock as a result of an amendment to
its certificate of incorporation, any merger or consolidation in which the
corporation is a constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of incorporation contains
such a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for notice of such meeting (or such members who received notice in accordance
with § 255(c) of this title) with respect to shares for which appraisal rights
are available pursuant to subsection (b) or (c) of this section that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section and, if 1
of the constituent corporations is a nonstock corporation, a copy of § 114 of
this title. Each stockholder electing to demand the appraisal of such
stockholders shares shall deliver to the corporation, before the taking of the
vote on the merger or consolidation, a written demand for appraisal of such
stockholders shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholders shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to § 228, § 251(h),
§ 253, or § 267 of this title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving or resulting
corporation within 10 days thereafter shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a copy
of this section and, if 1 of the constituent corporations is a nonstock
corporation, a copy of § 114 of this title. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice or, in the case of a merger approved pursuant to § 251(h)
of this title, within the later of the consummation of the tender or exchange
offer contemplated by § 251(h) of this title and 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holders shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within 10
days after such effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first notice or, in the case
of a merger approved pursuant to § 251(h) of this title, later than the later of
the consummation of the tender or exchange offer contemplated by § 251(h) of
this title and 20 days following the sending of the first notice, such second
notice need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice that
such notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation may
fix, in advance, a record date that shall be not more than 10 days prior to the
date the notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day next
preceding the day on which the notice is given.
Annex D - 2
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) of this section hereof and who is
otherwise entitled to appraisal rights, may commence an appraisal proceeding by
filing a petition in the Court of Chancery demanding a determination of the
value of the stock of all such stockholders. Notwithstanding the foregoing, at
any time within 60 days after the effective date of the merger or consolidation,
any stockholder who has not commenced an appraisal proceeding or joined that
proceeding as a named party shall have the right to withdraw such stockholders
demand for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) of this section hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholders written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) of this
section hereof, whichever is later. Notwithstanding subsection (a) of this
section, a person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such person may, in such
persons own name, file a petition or request from the corporation the statement
described in this subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or resulting
corporation, which shall within 20 days after such service file in the office of
the Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded payment
for their shares and with whom agreements as to the value of their shares have
not been reached by the surviving or resulting corporation. If the petition
shall be filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine
the stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After the Court determines the stockholders entitled to an
appraisal, the appraisal proceeding shall be conducted in accordance with the
rules of the Court of Chancery, including any rules specifically governing
appraisal proceedings. Through such proceeding the Court shall determine the
fair value of the shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation, together with
interest, if any, to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all relevant
factors. Unless the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through the date of
payment of the judgment shall be compounded quarterly and shall accrue at 5%
over the Federal Reserve discount rate (including any surcharge) as established
from time to time during the period between the effective date of the merger and
the date of payment of the judgment. Upon application by the surviving or
resulting corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, proceed to trial upon
the appraisal prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted such stockholders certificates of stock to the Register
in Chancery, if such is required, may participate fully in all proceedings until
it is finally determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair
value of the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto. Payment shall be so
made to each such stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates
representing such stock. The Courts decree may be enforced as other decrees in
the Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
Annex D - 3
(j) The costs of the proceeding may be determined by the Court
and taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholders demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just; provided, however that this provision shall not affect the
right of any stockholder who has not commenced an appraisal proceeding or joined
that proceeding as a named party to withdraw such stockholders demand for
appraisal and to accept the terms offered upon the merger or consolidation
within 60 days after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been converted had
they assented to the merger or consolidation shall have the status of authorized
and unissued shares of the surviving or resulting corporation.
Annex D - 4