EXECUTION COPY

 

 

 

ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT

Between

US Geothermal, Inc.

And

Ormat Nevada, Inc.

 

 

Dated as of December 5, 2005

 

 

CONFIDENTIAL

EXECUTION COPY

CONTENTS

ARTICLE 1.		DEFINITIONS, INTERPRETATION AND CONTRACT DOCUMENTS	1
	1.1	Definitions	1
	1.2	Interpretation	9
	1.3	Documents Included	9
ARTICLE 2.		CONTRACTOR RESPONSIBILITIES	11
	2.1	General Responsibilities	11
	2.2	Specific Responsibilities	11
	2.3	Contractor’s Personnel and Labor Relations	12
	2.4	Representations and Warranties of Contractor	13
	2.5	Use of Spare Parts	14
ARTICLE 3.		COMPANY RESPONSIBILITIES	14
	3.1	General Responsibilities	14
	3.2	Company’s Representative	15
	3.3	Representations and Warranties of Company	15
	3.4	Sale of Project	16
	3.5	Future Projects	16
ARTICLE 4.		COMMENCEMENT OF WORK	17
	4.1	Notice to Proceed	17
	4.2	Commencement	17
	4.3	Substantial Completion	17
	4.4	Substantial Completion Certificate	18
	4.5	Deemed Substantial Completion	18
	4.6	Delay Liquidated Damages and Bonus	18
	4.7	Final Completion	19
	4.8	Final Completion Certificate	19
	4.9	Punchlist	20
	4.10	Failure to Achieve Final Completion by the Guaranteed Final Completion Date	20

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ARTICLE 5.		COMPENSATION AND PAYMENT	21
	5.1	Contract Price	21
	5.2	Payment Milestones	22
	5.3	Payment	22
	5.4	Final Completion Payment for the Facility	23
	5.5	Payments Not Acceptance of Work	23
	5.6	Payment of Subcontractor	23
	5.7	Waiver of Liens	23
	5.8	Interest	24
	5.9	Security Interest	24
ARTICLE 6.		TESTING	24
	6.1	General	24
	6.2	Test Procedures	24
	6.3	Notice of Testing	24
	6.4	Delayed Tests; Deemed Completion	25
	6.5	Facilities	26
	6.6	Repeat Performance Tests	26
	6.7	Certification or Disagreement as to Test Results	26
ARTICLE 7.		INTENTIONALLY OMITTED	26
ARTICLE 8.		CONSTRUCTION SUSPENSION AND ACCELERATION; CHANGE ORDER	26
	8.1	Construction Suspension and Acceleration	26
	8.2	Change Orders	27
	8.3	Procedure for Change Orders	27
	8.4	Change Orders Due to Contractor Error	28
	8.5	Change Orders Due to Changes in Law	28
	8.6	Effect of Force Majeure; Excused Performance	28
	8.7	Company-Caused Changes	30
	8.8	Price Change	30
	8.9	Effectiveness; Continued Performance Pending Resolution of Disputes	31
	8.10	Documentation	31

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	8.11	Continue Work	32
	8.12	Critical Path Schedule Updates	32
	8.13	Change Order Constitutes Complete Relief	32
	8.14	Effect of Changes on Warranties and Safety	32
ARTICLE 9.		DESIGN AND DOCUMENTATION	33
	9.1	Ownership of and Responsibility for Design	33
	9.2	Inspection of Work	33
	9.3	As-Built Drawings	33
	9.4	License to Use	33
	9.5	Use of Documents After Termination	34
	9.6	O&M Manual	34
ARTICLE 10.		WARRANTIES	34
	10.1	Warranty	34
	10.2	Warranty Period	35
	10.3	Defect Remedy Work	35
	10.4	Implementation of Warranty	36
	10.5	Disclaimer and Release	36
ARTICLE 11.		PERFORMANCE AND PERFORMANCE RELATED REMEDIES; EXCLUSIVITY; LIMITATION OF LIABILITY	37
	11.1	Performance Liquidated Damages and Performance Bonus	37
	11.2	Exclusivity	37
	11.3	General Limitation of Liability	37
	11.4	Other Provisions	38
ARTICLE 12.		TITLE; CARE OF THE WORK	38
	12.1	Passage of Title	38
	12.2	Risk of Loss	39
	12.3	Care, Custody and Control	39
ARTICLE 13.		INSURANCE	39
	13.1	Contractor Provided Insurance	39
	13.2	Company Provided Insurance	40
	13.3	Policies	41

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	13.4	Payment of Deductibles	42
	13.5	Evidence of Insurance	42
ARTICLE 14.		DISPUTE RESOLUTION	43
	14.1	Settlement by Mutual Agreement	43
	14.2	Mediation	43
	14.3	Pending Disputes	43
ARTICLE 15.		INDEMNIFICATION	44
	15.1	General	44
	15.2	Indemnification for Bodily Injury or Property Damage	44
	15.3	Indemnity from Liens	44
	15.4	Contractor’s Infringement Indemnity	44
	15.5	Company’s Indemnity	45
	15.6	Notice and Settlement of Claims	45
ARTICLE 16.		ASSIGNMENT	46
	16.1	Assignment by Company	46
	16.2	Assignment by Contractor	46
	16.3	Succession	46
ARTICLE 17.		SUBCONTRACTORS	46
	17.1	Subcontracts	46
	17.2	Subcontract Provisions	47
	17.3	Approved Vendors	47
	17.4	Exclusion	47
ARTICLE 18.		SUSPENSION	48
	18.1	Right of Company to Suspend Work	48
	18.2	Initial Payments to Contractor	48
	18.3	Extended Suspension	48
	18.4	Right of Contractor to Suspend	48
	18.5	Additional Changes Resulting From Suspensions	48
	18.6	Resumption of Work	49
ARTICLE 19.		TERMINATION	49

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	19.1	Termination by Company	49
	19.2	Termination by Contractor	50
	19.3	Due to Force Majeure	51
	19.4	Due to Company’s Convenience	51
	19.5	Exclusive Remedy	51
	19.6	Actions Required Following Termination	51
	19.7	Termination and Transfer of Subcontracts and Other Rights	52
	19.8	Surviving Obligations	52
ARTICLE 20.		INTENTIONALLY OMITTED	53
ARTICLE 21.		CONFIDENTIALITY	53
	21.1	Both Parties to Keep Information Confidential	53
	21.2	Use of Information	53
	21.3	Exclusions	53
	21.4	Company Not to Remove Logos	53
ARTICLE 22.		NOTICES	53
ARTICLE 23.		MISCELLANEOUS	55
	23.1	Governing Law	55
	23.2	Construction	55
	23.3	Nature of Agreement	55
	23.4	Severability	55
	23.5	Amendments and Waivers	56
	23.6	Survival	56
	23.7	Counterparts	56
	23.8	Entire Contract	56
	23.9	Waivers	56
	23.10	Counterparts; Transmitted Copies	56
	23.11	Further Assurances	57

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LIST OF EXHIBITS

Exhibit A	Scope of Work Allocation and Interface Points
Exhibit B	Contract Price, Milestone Payment Schedule and Work Milestone Schedule
Exhibit C	Power Plant Design Criteria, Drawings and Specifications per itemized list of Section 1.3.
Exhibit D	Performance Tests and Correction Curves
Exhibit E	Warranty Claim Procedures
Exhibit F	Approved Vendors List
Exhibit G	Permits
Exhibit H	Certificate of Substantial Completion
Exhibit I	Certificate of Final Completion
Exhibit J	Form of Final Lien Waiver
Exhibit K	Liquidated Damages and Bonuses
Exhibit L	Change Order Form
Exhibit M	Change Order Request Form

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ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT

          THIS ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT (“ Contract ”) dated as of December 5, 2005, is made by and between:

(1)	US GEOTHERMAL, INC. , an Idaho corporation, with its principal place of business at 1509 Tyrell Lane, Suite B, Boise, Idaho 83706 (“ Company ”); and
(2)	ORMAT NEVADA, INC. , a Delaware corporation, with its principal place of business at 980 Greg Street, Sparks, NV 89431-6039 (“ Contractor ”).

RECITALS

           A.       Company is developing a thirteen (13) MW geothermal power plant in the Raft River Known Geothermal Resource Area in the State of Idaho and desires to retain Contractor to provide certain construction related services and to supply equipment in relation to such power plant.

           B.       Contractor desires to be retained by Company to provide construction related services and supply equipment in relation to Company’s power plant.

AGREEMENT

     THEREFORE, Company and Contractor (each individually, a “ Party ” and together, the “ Parties ”) agree as follows:

ARTICLE 1.        DEFINITIONS, INTERPRETATION AND CONTRACT DOCUMENTS

           1.1        Definitions

          In addition to the terms defined elsewhere in this Contract, the definitions of certain terms used in this Contract with initial letters capitalized are as set forth herein.

          “ Affiliate ” means, with respect to any person or entity, any other person or entity (including any officer, director, shareholder, partner, employee, agent or representative of such person or entity) that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such first person or entity. For purposes of this definition, “ control ” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person or entity, whether through the ownership of voting securities, partnership or other ownership interests, by contract, by Law or otherwise.

          “ Approved Vendors ” means the vendors set forth in Exhibit F, as amended from time-to-time pursuant to Section 17.3.

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          “ As-Built Drawings ” has the meaning given to it in Section 9.3.

          “ Capacity Test ” has the meaning given to it in Exhibit D.

          “ Certificate of Final Completion ” means the certificate issued by Contractor to Company under this Contract, pursuant to Section 4.4.

          “ Certificate of Substantial Completion ” means the certificate issued by Contractor to Company under this Contract, pursuant to Section 4.3.

          “ Change in the Work ” means a change to the Work as provided in Article 8.

          “ Change of Law ” means any Law, official interpretation thereof or manner of interpretation thereof, that is amended or modified, is enacted, adopted, promulgated or otherwise becomes effective or is repealed, revoked, suspended or not renewed after the Effective Date and which increases Contractor’s cost of performing the Work, delays Contractor’s performance of the Work or otherwise adversely affects Contractor’s performance of its obligations under this Contract.

          “ Change Order ” means a written change order based on the form set forth in Exhibit L describing the Change in the Work and its effect, if any, on the Contract Price, the Milestone Payment Schedule, the Schedule and any other provision of this Contract that is affected.

          “ Commencement Date ” has the meaning given to it in Section 4.2.

          “ Company ” has the meaning set forth in the introductory paragraph to this Contract .

          “ Company Default ” means the failure or delay of Company or its representatives, agents, subcontractors or suppliers (other than Contractor and its Subcontractors and their agents and employees) to meet Company’s material obligations under this Contract, including the obligations identified in Section 3.1.

           “Company Indemnified Party” has the meaning set forth in Section 15.1.

          “ Company Permits ” means the Permits to be obtained by Company as described in Exhibit G and, other than the Contractor Permits, any Permits otherwise necessary for the construction, operation and maintenance of the Project.

          “ Company’s Representative ” has the meaning given to it in Section 3.2.

          “ Contract ” means this Engineering, Procurement and Construction Contract together with the Exhibits attached hereto, as the same may be amended or otherwise modified from time-to-time as permitted herein.

          “ Contract Price ” means the total aggregate price payable to Contractor by Company as set forth in Exhibit B, and as adjusted pursuant to the provisions of this Contract.

          “ Contractor ” has the meaning given to it in the Preamble.

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          “ Contractor Hazardous Materials ” has the meaning given to it in Section 2.2(h) .

          “ Contractor Permits ” means the Permits to be obtained by Contractor as described in of Exhibit G.

          “ Contractor’s Representative ” has the meaning given to it in Section 2.3.2.

          “ Correction Curves ” has the meaning(s) given to it in Exhibit D and shall be used to adjust Facility performance from variations from the Design Conditions and/or other specified factors (e.g., degradation) as provided therein.

          “ Day ” means a twenty-four (24) hour period beginning and ending at 12:00 midnight .

          “ Defect ” or “ Defective ” means any Work, including any part or component thereof, that: (i) contains improper or inferior workmanship; (ii) fails to conform in any material respect with the relevant Drawings or Specifications, including any Change in the Work; (iii) is not manufactured in any material respect with the applicable Drawings and the Specifications; and (iv) is not free from defects in material and workmanship.

          “ Defect Remedy Work ” means Contractor’s repair or replacement of any Defect or Work that is Defective.

          “ Delay Liquidated Damages ” has the meaning given to it in Section 4.6.1.

          “ Delayed Payment Rate ” means a per annum rate of interest equal to the lesser of (i) twelve percent (12%) and (ii) the maximum rate permitted by applicable Law.

          “ Design Conditions ” means the design operating conditions for the Facility as set forth in Exhibit C.

          “ Documents ” means any design, drawing (including the Drawings), certificate, specification (including the Specifications), report, studies, model, program, record, pattern, sample, written information and data and other document of whatever nature (including a record thereof in software form).

          “ Dollars ” or “ $ ” means the lawful currency of the United States of America.

          “ Drawings ” means the Facility drawings set forth in Exhibit C or otherwise provided by Contractor to Company pursuant to Article 9 or other terms of this Contract, including the As-Built Drawings.

          “ Effective Date ” means the date of this Contract.

          “ Facility ” means the unit number one geothermal power plant and related infrastructure to be located the Raft River Known Geothermal Resource Area in Cassia County in the State of Idaho to be constructed as part of the development of the Project on the Site, all as more particularly described in Exhibits A and C, but for avoidance of doubt excludes the

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interconnection facilities, geothermal production, re-injection and cooling tower make-up water wells, the gathering system and other portions of the Project outside of the power plant island.

          “ Final Completion ” means the satisfaction or deemed satisfaction of each of the following: (a) Substantial Completion has occurred; (b) Contractor has delivered final lien waivers and releases from Contractor and Contractor’s Subcontractors to Company; (c) all Documents which are to be delivered to Company, by Contractor on or before the Final Completion Date pursuant to this Contract have in-fact been delivered to Company; (d) all of Contractor’s supplies, personnel, rubbish and Contractor Hazardous Materials have been removed from the Site; and (e) all Work other than Punch List Items have been completed in accordance with this Agreement.

          “ Final Completion Date ” means the earlier of (a) the date upon which the Certificate of Final Completion was issued by Contractor to Company pursuant to Section 4.7 (provided that such Certificate of Final Completion has been subsequently countersigned by Company pursuant to Section 4.8) or (b) the date upon which Final Completion is deemed to have occurred under this Contract pursuant to Section 4.8 or Section 6.4.3.

          “ Financing Parties ” means (a) any and all lenders providing senior or subordinated construction, interim or long-term debt financing or refinancing; and (b) any and all equity investors providing leveraged lease-financing or refinancing, and in each case any trustee or agent acting on their behalf, for the Facility. Company shall provide written notice to Contractor of the names of all of the Financing Parties.

          “ Force Majeure ” means any war, declared or not, invasion, armed conflict or act of public enemy, blockage, embargo, revolution, insurrection, riot, civil commotion, act of terrorism, or sabotage provided that any such event occurs within or directly involving the United States or any individual state, or any other country from which machinery, equipment or material for the Facility are procured or transported through, an act of God, including, but not limited to, lightning, fire, earthquakes, volcanic activity, floods, storms or unusual weather conditions, cyclones, typhoons, or tornadoes, labor disputes including strikes, or slowdowns, or lockouts that extend beyond the Facility or are widespread or nationwide, or any other event or circumstances or combination of event(s) or circumstances beyond the reasonable control of a Party, that have a real, quantifiable and adverse impact on cost or performance of the Work.

          “ Gross Invoice Amount ” has the meaning given to it in Section 5.3.1.

          “ Governmental Authority ” means any local, state, regional, central or national government administrative, judicial or executive organs, but excluding any similar foreign or multinational entity, that has or purports to have or asserts or attempts to assert, jurisdiction to legislate, decree, adjudicate or enforce any decision related to, or bearing on, the Facility or the Work.

          “ Guaranteed Final Completion Date ” means the Guaranteed Final Completion Date identified in the Schedule, as the same may be amended from time-to-time in accordance with this Contract.

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          “ Guaranteed Substantial Completion Date ” means the Guaranteed Substantial Completion Date identified in the Schedule, as the same may be amended from time-to-time in accordance with this Contract.

          “ Hazardous Materials ” means any hazardous or toxic substances, materials and wastes which are regulated or are classified as hazardous or toxic by any Governmental Authority having jurisdiction over the Site, including, but not limited to, those substances included in the definitions of “Hazardous Substances,” “Hazardous Materials,” “Toxic Substances,” “Hazardous Waste,” “Solid Waste,” “Pollutant,” or “Contaminant " ” in any federal, state, local or other Law pertaining to public or worker health, welfare or safety or the environment, including, but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. § 9601 et seq. , as amended by the Superfund Amendments and Reauthorization Act of 1986; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. § 6901 et seq. ; the Federal Clean Air Act, 42 U.S.C. § 7401-7626; the Federal Water Pollution Control Act and Federal Clean Water Act of 1977, as amended, 33 U.S.C. § 1251 et seq. ; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 135 et seq. ; the Federal Environmental Pesticide Control Act, the Federal Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. ; the Federal Safe Drinking Water Act, 42 U.S.C. § 300(f) et seq. ; the Emergency Planning and Community Right-To-Know Act of 1986, 42 U.S.C. § 11001 et seq. ; and the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq. and in the regulations promulgated pursuant to those laws.

          “ Information ” means any Drawings, Specifications or other information furnished directly or indirectly by the other Party hereto in connection with the Contract and the Facility and the Project whether such Information has been furnished prior to, during or following termination of the Contract in connection with the performance of this Contract.

          “ Insolvency Event ” means the bankruptcy, insolvency, liquidation, administration or other receivership or dissolution of a Party and any equivalent or analogous Proceedings by whatever name known and in whatever jurisdiction and any step taken (including the presentation of a petition or the passing of a resolution) for or with a view to any of the foregoing.

          “ Law ” means any federal, state, commonwealth, local or other constitution, charter, act statute, law, ordinance, treaty, resolution, directive (to the extent having the force of law), code, rule, regulation, order, specified standards or objective criteria contained in any applicable permit or approval, which standards or criteria must be met in order for the Facility to be constructed and operated lawfully, and other legislative or administrative action of any Governmental Authority, or a final decree, judgment or order of a court, or any applicable engineering, construction, safety or electrical generation code.

          “ Letter of Credit ” means a stand-by letter of credit procured: (i) by Company, or (ii) through one or more of the Financing Parties for the benefit of Company and in favor of Contractor, and which shall be sufficient to pay Contractor any balance of sums owed to Contractor by Company pursuant to this Contract (as such Letter of Credit may be updated from

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time-to-time), but in particular with respect to the payment terms set forth in Section 5.3.1 and the Schedule.

          “ Liability ” or “ Liabilities ” means any fine, penalty, damage, loss, cost, claim or expense or other liability (including any related fees, expenses and disbursements of a Party’s counsel).

          “ Liquidated Damages ” means Delay Liquidated Damages, Performance Liquidated Damages, Shortfall Generation Liquidated Damages and Net Performance Liquidated Damages.

          “ Major Vendor ” means any vendor engaged directly by Contractor to provide equipment for incorporation into the Work at the Site, whose Work is valued in excess of One Million Dollars ($1,000,000).

          “ Materials ” means all equipment, supplies, apparatus, instruments, machinery (including the OEC), parts, tools, components, appliances, spare parts and appurtenances thereto to be supplied under this Contract by Contractor as described in or required by the Scope of Work.

          “ Milestone Payment Schedule ” means the payment schedule for payment of the Contract Price as set forth in Exhibit B.

          “ Minimum Payment ” has the meaning given to it in Section 5.3.1.

          “ Month ” means a period beginning at 12:00 midnight on the last Day of the preceding calendar month and ending at 12:00 midnight on the last Day of the calendar month.

          “ MW ” means megawatts.

          “ Net Deliverable Capacity ” has the meaning given to it in Exhibit D.

          “ Net Performance Liquidated Damages ” means the Performance Liquidated Damages less the amount of Shortfall Generation Liquidated Damages paid or payable by Contractor to Company pursuant to Section 4.10.

          “ Notice to Proceed ” means the notice issued by Company to Contractor authorizing Contractor to commence the Work under this Contract.

          “ O&M Manual ” means the operation and maintenance manual to be provided by Contractor to Company pursuant to Section 9.6.

          “ OEC ” means the Ormat Energy Converter.

          “ Party ” and “ Parties ” have the meanings given to them in the Preamble.

          “ Performance Bonus ” has the meaning given to it in Section 11.1.3.

          “ Performance Guarantee ” means the guaranteed minimum level of Net Deliverable Capacity to be attained as specified in Exhibit D.

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          “ Performance Liquidated Damages ” has the meaning given to it in Section 11.1.1.

          “ Performance Tests ” means the Synchronization Test, the Trip Test, the Capacity Test, the Reliability Test, and the Turbine Run Back Test (all as are defined in Exhibit D) to be carried out to determine whether the Facility satisfies the performance requirements set forth in this Contract.

          “ Permits ” means the permits, approvals and licenses required from Governmental Authorities necessary for the construction, operation and maintenance of the Facility and the performance of the Work.

          “ PPA ” means the Firm Energy Sales Agreement in effect between Idaho Power Company and US Geothermal Inc. under which the output from the Facility would be delivered and bought.

          “ Proceeding ” means any claim, suit, demand, allegation, arbitration, dispute or other action process, or proceeding whether actual or threatened.

          “ Project ” means the geothermal power generation project unit number one to be constructed in the Raft River Known Geothermal Resource Area in Cassia County in the State of Idaho, including the Facility and the related substation, geothermal production and re-injection wells and the gathering system, all as more particularly described in the Power Plant Design Criteria document included in Exhibit C.

          “ Prudent Industry Practices ” means those practices, methods, equipment, specifications and standards of safety and performance, as the same may change from time-to-time, as are commonly used in operations of privately-owned geothermal electric power generation facilities similar to the Facility, which in the exercise of reasonable judgment and in light of the facts known at the time the decision was made, are considered good, safe and prudent practice in connection with the operation and maintenance of geothermal electric power generation facilities similar to the Facility. Prudent Industry Practices are not intended to be limited to the optimal practices, methods, equipment, specifications and standards, but rather to be the practices, methods, equipment, specifications and standards generally accepted in the privately-owned geothermal electric power industry.

          “ Punchlist Items ” means unfinished items of Work (such as Spare Parts, painting, fine-finish grading or clean-up, updating of Drawings, manuals or other Documents) the lack of which or the failure of which to complete (considered individually or in the aggregate of all Punchlist Items) does not or will not adversely affect the, safety or integrity of the Facility and does not impact the performance of the Facility.

          “ Safety Plans ” has the meaning given to it in Section 2.3.4.

          “ Safety Report ” has the meaning given to it in Section 2.3.4.

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          “ Schedule ” means Exhibit B, as it may be amended from time-to-time as set forth in this Contract, which sets forth the Work performance and payment milestone schedule for the Facility.

          “ Schedule Bonus ” has the meaning given to it in Section 4.6.2.

          “ Scope of Work ” means the specific delineation of items of Work to be performed by Contractor as set forth in Exhibit A, which may be modified pursuant to a Change Order pursuant to Article 8, and which shall conform to the Drawings and the Specifications.

          “ Shortfall Generation Liquidated Damages ” has the meaning given to it in Section 4.10.3.

          “ Site ” means the site more specifically described in Exhibit C, together with spaces, surface water, ground water, diversion weirs, roads, easements, privileges, access rights, rights-of-way and other rights and interests in land and water acquired or to be acquired by Company to develop, engineer, build, own, operate or maintain the Facility and appurtenant facilities, including any associated working and laydown areas for Contractor.

          “ Spare Parts ” means the spare parts for the Facility to be provided by Company as described in Exhibit C.

          “ Specifications ” means the system descriptions, technical specifications and performance specifications and standards for the Facility and the performance of the Work as set forth in Exhibit C.

          “ Synchronization Test ” means a test whereby the Facility OEC is synchronized to the power grid, as described in Exhibit D.

          “ Subcontract ” means an agreement between Contractor and a Subcontractor for the performance of any portion of the Work.

          “ Subcontractor ” means any person or entity, other than Contractor’s employees, engaged by Contractor to perform services relating to the Work.

          “ Substantial Completion ” means the performance of the Work requirements specified in Section 4.3.

          “ Substantial Completion Date ” means the earlier of (a) the date upon which the Certificate of Substantial Completion was issued by Contractor to Company pursuant to Section 4.3 (provided that such Certificate of Substantial Completion is subsequently countersigned by Company pursuant to Section 4.4) or (b) the date upon which Substantial Completion is deemed to have occurred under this Contract pursuant to Section 4.5.

          “ Tax ” means any present or future tax, charge, levy, impost or duty of any kind whatsoever, or any amount payable on account of or as security for any of the foregoing,

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imposed by any Governmental Authority together with any penalties, additions, liens, surcharges and interest relating thereto.

          “ Trip Test ” has the meaning given to it in Exhibit D.

          “ Warranty Period ” has the meaning given to it in Section 10.2.

          “ Work ” means all of the work, services and other duties, obligations and responsibilities that are to be carried out by or under the direction of Contractor pursuant to this Contract, including that work specifically described as Contractor liabilities in the Scope of Work.

           1.2       Interpretation

                      1.2.1      Where the context requires, words importing the singular shall include the plural and vice versa, and words importing persons shall include entities.

                      1.2.2      A reference in this Contract to any Article, Section, Exhibit, Clause or Paragraph is, except where it is expressly stated to the contrary, a reference to such article, section, exhibit, clause or paragraph in this Contract.

                       1.2.3      Headings are for convenience of reference only.

                       1.2.4      Each reference to this Contract shall include a reference to each agreed variation of or supplement to this Contract as may be amended, varied or supplemented from time-to-time.

                       1.2.5      Where the context requires, any reference to a person, entity or Party shall include such person’s, entity’s or Party’s successors and permitted assigns.

                      1.2.6      References to the word “include” or “including” are to be construed without limitation.

           1.3        Documents Included

          This Contract shall consist of this document and the following Exhibits, which are specifically incorporated herein and made a part hereof by this reference.

	Exhibit A	Scope of Work Allocation and Interface Points
	Exhibit B	Contract Price, Milestone Payment Schedule and Work Milestone Schedule
	Exhibit C	Power Plant Design Criteria, Drawings and Specifications

 

a)

Power Plant Design Criteria, dated December 5, 2005;

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	b)	Design Point Heat and Mass Balance Diagrams (Guaranteed, Design, Winter Average, Summer Average), drawing numbers 0.002.95.873.0, sheets 1 through 4, Rev 0.
	c)	The Process Flow Diagram number 7.011.00.981.0, rev P5;
	d)	P&ID drawing numbers (not a complete list of all drawings required for the Facility):

 

 

e)

Electrical 1-line and other control, and protection drawings numbers.

 

 

f)

Site Plan drawing number 7.011.00.970.0, rev P5.

 

	Exhibit D	Performance Tests and Correction Curves
	Exhibit E	Warranty Claim Procedures
	Exhibit F	Approved Vendors List
	Exhibit G	Permits
	Exhibit H	Certificate of Substantial Completion

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	Exhibit I	Certificate of Final Completion
	Exhibit J	Form of Final Lien Waiver
	Exhibit K	Liquidated Damages and Bonuses
	Exhibit L	Change Order Form
	Exhibit M	Change Order Request Form

ARTICLE 2.        CONTRACTOR RESPONSIBILITIES

           2.1        General Responsibilities

                      2.1.1      Except as otherwise expressly set forth in this Contract, Contractor, in consideration of the Contract Price, shall provide, furnish and perform, or cause to be provided, furnished or performed, engineering and design services, Materials, consumables and utilities, and supervision, labor and services required for the development, design, engineering, procurement, manufacturing, transport to Site, quality assurance, inspection, erection, construction, commissioning and performance testing of the Facility as specified in the Scope of Work and in accordance with the provisions of this Contract.

                      2.1.2      Contractor shall diligently prosecute the Work in a good and workmanlike manner in accordance with the Schedule and in accordance with the provisions of this Contract.

           2.2        Specific Responsibilities

          Without limiting the generality of Section 2.1.1 and subject to the terms and conditions set forth in this Contract, Contractor shall at its own expense furnish, undertake, provide or cause to be furnished, undertaken or provided the following:

                    (a)      preparation of the conceptual design and integrated detail design and engineering for the Facility such that the Facility conforms to the Scope of Work and meets the performance and other requirements described in this Contract;

                    (b)      obtain the Contractor Permits from the applicable Governmental Authorities;

                   (c)      coordinate its activities pursuant to this Contract with those activities of Company’s other contractors as requested by Company; provided, however, that such coordination does not delay or otherwise unreasonably interfere with Contractor’s performance of the Work in accordance with the Schedule;

                    (d)      clearing, excavation, backfilling, compaction, consolidation and removal or importation of related materials required with respect to preparation of the Site in accordance with the Scope of Work;

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                    (e)      procurement, supply and transportation to the Site of all Materials necessary to complete the Facility;

                    (f)      supervision and direction of construction and other Work activities on the Site, including construction by Subcontractors, and the coordination of the Work under this Contract;

                    (g)      keep the Site from waste materials or rubbish caused by Contractor’s activities and in a reasonably presentable condition given the nature of the Work. Contractor may store all rubbish and construction debris in an authorized disposal area furnished by Company as provided in Section 3.1(i) . Contractor shall be responsible for the containment of any such material within such area. All rubbish and construction debris caused by Contractor’s activities shall be disposed through a licensed waste hauler, or in a licensed waste disposal site.

                    (h)      remediate and dispose of in accordance with applicable Law any Hazardous Materials generated, transported or released by Contractor or any Subcontractor on or about the Site (“ Contractor Hazardous Materials ”);

                    (i)      training, in the operation and maintenance of the Facility, of a reasonable number of operating and maintenance personnel furnished by Company pursuant to Section 3.1(f) . Such training shall be carried out in conjunction with the normal commissioning, start-up operations and testing activities of Contractor;

                    (j)      provide periodic reports to Company, not less frequently than monthly, regarding the progress of the Work, including a Gantt Chart in MS Project format in sufficient detail to allow a reasonably experienced engineer to evaluate the progress of the Work;

                    (k)      commission and test the Facility as detailed in Exhibit D; and

                    (l)      clearance of the Site of temporary structures, surplus Materials and tools that were delivered or created by Contractor through the course of the Work, upon completion of field work; provided that Contractor shall offer to sell to Company at cost any such temporary structures, surplus Materials and tools that Contractor does not want to retain.

           2.3        Contractor’s Personnel and Labor Relations

                      2.3.1      Contractor shall ensure that there are at all times at the Site while the Work is being performed at the Site there are sufficient suitably qualified and experienced personnel to supervise and perform such Work.

                      2.3.2      Contractor shall designate, by written notice to Company, a representative who shall act as a single point of contact with Company in all matters relating to the Work (“ Contractor’s Representative ”). Contractor’s Representative shall have full authority to act on behalf of Contractor for all purposes in connection with this Contract.

                      2.3.3      Company shall be entitled by written notice to Contractor to object to any representative or person employed by Contractor (including Contractor’s Representative) or any

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Subcontractor in the execution of the Work who, in the reasonable opinion of Company, is incompetent or negligent, or engaged in misconduct, and Contractor shall promptly remove such person from the Work and appoint a suitable replacement, or ensure that the relevant Subcontractor does so.

                      2.3.4      Contractor shall develop, present to Company and implement a safety plan for its own construction activities on the Site and for emergency situations prior to the commencement of Work at the Site (“ Safety Plans ”). During performance of the Work, Contractor shall publish work safety rules for the Site in compliance with the Safety Plan, which safety rules shall apply to any and all visitors to the Site, including representatives of Company. Each week (or other interval mutually agreeable to Company and Contractor), Contractor shall prepare and provide to Company a written report (“ Safety Report ”) listing (i) any breaches or violations of the Safety Plan, (ii) a description of any incidents resulting therefrom, (iii) incidents related to safety issues at the Site, (iv) the cause of any such incident, (v) the nature of such incident, (vi) the severity of such incident, and (vii) the remedial actions planned to remedy such incident and prevent such incident from occurring in the future.

                      2.3.5      Contractor shall be responsible for the security and protection (i) of its equipment, supplies and tools used in connection with the Work through the Final Completion Date, and (ii) for all of the other property owned or leased by Contractor or any of its Subcontractors located at the Site at areas thereon provided by Company or stored or warehoused off the Site through the Final Completion Date. Contractor shall use due care to protect any of Company’s property at any time in its possession or under its control while performing the Work which shall not be less than the care exercised by Contractor with its own property and Contractor shall be responsible for any damage to such property resulting from its failure to use such care.

                      2.3.6      Contractor shall conduct all of its activities within the boundaries of the Site. Contractor, its Subcontractors, agents and employees shall observe all pertinent and reasonable regulations and rules issued by Company to Contractor which are in effect at the Site, as the case may be, regarding passes, badges and proper conduct on such Site. Company may issue reasonable modifications to such regulations and rules from time-to-time.

                      2.3.7      Company and its agents, employees and other contractors shall observe all pertinent and reasonable regulations and rules issued by Contractor, including the Safety Plan, which are in effect at the Site, as the case may be, regarding passes, badges and proper conduct on such Site. Contractor may issue reasonable modifications to such regulations and rules from time-to-time.

           2.4        Representations and Warranties of Contractor

          Contractor represents and warrants to Company that:

                    (a)      Contractor is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware and has the requisite legal power and authority to execute, deliver and perform this Contract;

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                    (b)      the execution, delivery and performance by Contractor of this Contract has been duly authorized by all requisite action of Contractor, and there is no provision in its charter documents requiring further consent for such action by any other person or entity; and

                    (c)      this Contract constitutes the legal, valid and binding obligation of Contractor, enforceable against Contractor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, reorganization, moratorium or similar laws affecting or limiting creditors’ rights generally or by equitable principles relating to enforceability.

           2.5       Use of Spare Parts

          Spare parts may be withdrawn by Contractor from the Spare Parts for the purposes of the Work. Contractor shall be responsible, at its cost, for replacing any such withdrawn Spare Parts as soon as reasonably practicable and in any event no later than the expiration of the Warranty Period.

ARTICLE 3.        COMPANY RESPONSIBILITIES

           3.1        General Responsibilities

          Company shall, at Company’s expense, furnish, undertake, provide or cause to be furnished, undertaken or provided the following:

                    (a)      make available to Contractor and its Subcontractors by the time specified in the Schedule, and continuing until the end of the Warranty Period, the Site, including space for all construction facilities, laydown and storage areas, and roads and other means of access to and from the Site in a timely manner and in accordance with Contractor’s reasonable requirements regarding amount, weight and dimensions of equipment to be transported and the size and layout of the laydown and storage areas;

                    (b)      obtain and maintain in effect all Company Permits from the Governmental Authorities in a timely manner as required to permit Contractor and its Subcontractors to proceed with the Work in accordance with the Schedule;

                    (c)      prepare and/or obtain all environmental impact assessments, studies and statements and geotechnical reports required in connection with the ownership, financing, construction, operation and maintenance of the Facility and the performance of this Contract;

                    (d)      furnish to Contractor copies of any environmental impact assessment, studies and statements and geotechnical reports prepared or obtained as provided in Section 3.1(c) and any information, a power of attorney (if required) and any other items reasonably necessary for Contractor to obtain the Contractor Permits or perform the Work in a timely manner as required to permit Contractor and its Subcontractors to proceed with the Work in accordance with the Schedule;

                    (e)      arrange for electricity, water and other utilities to be available to Contractor at then current market terms for the same for use in the construction, start-up, testing

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and commissioning of the Facility, in a timely manner as required to permit Contractor and its Subcontractors to proceed with the Work in accordance with the Schedule;

                    (f)      provide a reasonably sufficient number of operating personnel, including their supervisors, for training by Contractor as provided in Section 2.2(i), and for participating in the start-up, testing, commissioning, maintenance and upkeep of the Facility through to Final Completion. Each person designated for training by Company shall be a qualified technician and said trainees shall not be deemed employees or Subcontractors of Contractor;

                    (g)      provide the geothermal heat resource in the quantity and quality detailed in the Design Conditions, and in the time frame as required to permit Contractor and its Subcontractors to proceed with the Work in accordance with the Schedule;

                    (h)      provide or make arrangements for the tie-in point to the electricity grid (or any other defined electricity consumer) to be ready in a timely manner in accordance with the Schedule;

                    (i)      provide to Contractor a rubbish and construction debris (but not for Contractor Hazardous Materials) storage area on or adjacent to the Site. Disposal of such Contractor materials stored therein shall be the responsibility of the Contractor, pursuant to Section 2.2 (g).

                    (j)      any removal or disposal of the existing transite pipe on the Site exposed during the Work; and

                    (k)      remediate and dispose of in accordance with applicable Law any Hazardous Materials that are found or are uncovered on or about the Site other than Contractor Hazardous Materials that are the responsibility of Contractor as provided in Section 2.2(h) .

           3.2        Company’s Representative

          Company shall designate by written notice to Contractor a representative who shall act as a single point of contact with Contractor in all matters relating to the Work (“ Company’s Representative ”). Company’s Representative shall have full authority to act on behalf of Company for all purposes in connection with this Contract.

           3.3       Representations and Warranties of Company

          Company represents and warrants that:

                    (a)      Company is a corporation duly organized and validly existing under the Laws of the State of Idaho and has all requisite legal power and authority to execute, deliver and perform this Contract;

                    (b)      the execution, delivery and performance by Company of this Contract have been duly authorized by all requisite corporate action of Company and there is no provision

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in its charter documents requiring further consent for such action by any other person or entity; and

                    (c)      this Contract constitutes the legal, valid and binding obligation of Company, enforceable against Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, reorganization, moratorium or similar laws affecting or limiting creditors’ rights generally or by equitable principles relating to enforceability.

           3.4        Sale of Project

          If prior to the expiry of the Warranty Period (or any extension thereof) Company elects to convey or otherwise transfer its right, title and interest in and to the Project or in and to the owner of the Project, Company shall provide written notice of such intent to Contractor. Transfer to any third party shall not relieve Company of any obligation hereunder, whether such obligation arises prior to or after the transfer.

           3.5        Future Projects

          In the event that Company or its Affiliates elect to pursue up to two (2) additional geothermal power plants in its expansion of the Project, Company or its Affiliates shall have the option to acquire from Contractor, and Contractor shall have the option to provide to Company or its Affiliates, the services and equipment of the type provided by Contractor under this Contract for a lump-sum payment for each power plant equal to the Contract Price subject to adjustment as follows. The Contract Price, for purposes of this Section 3.5, may be adjusted to reflect changes in applicable materials and labor prices as determined from relevant published cost indices from the Effective Date of this Contract, to the effective date of the subsequent contract(s). The services and equipment provided by Contractor with respect to the power plants described above shall be provided and subject to an EPC agreement with terms and conditions substantially the same as set forth in this Contract.

          In the event that Company elects to pursue the installation of the two such additional power plant in its expansion of the Project at the same time, Company or its Affiliates shall have the option to acquire from Contractor and Contractor shall have the option to provide to Company or its Affiliates the services and equipment of the type provided by Contractor under this Contract with respect to such power plant for a lump-sum payment equal to (a) two (2) times the Contract Price subject to adjustment as provided above minus, (b) a reasonable discount, determined by Contractor in its sole discretion, that reflects the economies of scale in performing EPC contract services and equipment for the simultaneous supply of the two geothermal power plants. The option provided to each of Company (and its Affiliates) and Contractor if such parties have not entered into a definitive EPC agreement or EPC agreements reflecting such terms and conditions on or before December 31, 2007.

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ARTICLE 4.        COMMENCEMENT OF WORK

           4.1       Notice to Proceed

          Company shall issue a Notice to Proceed to Contractor only at such time as Company has arranged financing reasonably satisfactory to Contractor as being sufficient for Company to be able to meet its obligations under this Contract and to develop the Project and pays to Contractor simultaneously with the issuance of such Notice to Proceed the amount specified for the first payment milestone set forth in the Schedule. The Notice to Proceed shall not be issued by Company prior to February 1, 2006 and Contractor shall have the right to terminate this Contract if the Notice to Proceed has not been provided by June 1, 2006.

           4.2        Commencement

          Subject to Section 4.1, Contractor shall commence performance of the Work promptly upon receipt of a Notice to Proceed from Company (“ Commencement Date ”). Contractor shall thereafter proceed diligently to perform the Work and furnishing sufficient forces, construction plant and equipment to perform the Work in accordance with the Schedule.

           4.3        Substantial Completion

          Contractor shall achieve Substantial Completion of the Facility on or before the Guaranteed Substantial Completion Date. When all of the following conditions have been met with respect to the Facility, Contractor shall issue to Company a Certificate of Substantial Completion in substantially the same form as that set forth in Exhibit H:

                    (a)      all of the Work, except for completion of insulation, painting, final grading, the As-Built Drawings, training and any other portion of the Work not affecting the operability, safety, mechanical and/or electrical integrity of the Facility, have been properly constructed, installed, correctly adjusted and tested, are mechanically, electrically and structurally sound and comply with the Drawings and the Specifications, and can be used safely;

                    (b)      all Documents which are to be delivered to Company by Contractor on or before the Substantial Completion Date pursuant to this Contract have, in fact, been delivered to Company (including, but not limited to, a waiver and release of Contractor’s and all of its Subcontractor’s mechanics’ liens through such date (which may be conditioned upon payment by Company));

                    (c)      Contractor has made training available to Company’s personnel (or other nominees of Company) and written operating procedures sufficient to safely start-up and continuously operate the Facility; and

                    (d)      the Synchronization Test has been satisfactorily completed.

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           4.4        Substantial Completion Certificate

          Within ten (10) Days following the receipt of the Certificate of Substantial Completion, Company shall inspect the Facility and review all Work and services performed by Contractor with respect thereto, and shall either (i) deliver to Contractor the Certificate of Substantial Completion countersigned and certifying that the requirements of this Contract applicable to Substantial Completion have been fully satisfied for the Facility and Substantial Completion of the Facility has accordingly been achieved or (ii) if reasonable cause exists for doing so, notify Contractor in writing that Substantial Completion of the Facility has not been achieved, stating in detail the reasons therefore. In the event that Company determines that Substantial Completion has not been achieved and Contractor has not disputed Company’s determination, Contractor shall promptly take such corrective action or perform such additional Work or other services as shall achieve Substantial Completion of the Facility and shall issue to Company another Certificate of Substantial Completion. Such procedure shall be repeated until Substantial Completion of the Facility has been achieved; provided, however, that Company shall respond to any such subsequent Certificate of Subsequent Completion within five (5) Days following the receipt thereof.

           4.5        Deemed Substantial Completion

          Deemed completion may occur under one (1) or both of two (2) circumstances, when: (a) Company fails to provide the countersigned Certificate of Substantial Completion as contemplated in Section 4.4 within the period referenced therein; or (b) Contractor’s conduct or completion of the Synchronization Test is delayed from the date on which such test would otherwise have commenced, been conducted or completed due to a Company Default and Contractor has completed all of the other requirements set forth in Section 4.3. In the event of (b), Contractor shall notify Company of having achieved deemed Substantial Completion pursuant to Section 4.4.

           4.6        Delay Liquidated Damages and Bonus

                      4.6.1      The Parties agree that it would be extremely difficult and impracticable under the presently known and anticipated facts and circumstances to ascertain and fix the actual damages that Company would incur should Contractor fail to achieve Substantial Completion by the Guaranteed Substantial Completion Date, and accordingly, the Parties hereby agree that if Contractor fails to so achieve Substantial Completion by the Guaranteed Substantial Completion Date, then Company shall be entitled to recover from Contractor as liquidated damages for such delay, and not as a penalty, the amounts set forth in Section 1 of Exhibit K (“ Delay Liquidated Damages ”). The Delay Liquidated Damages are, subject to Section 4.10 and Article 19, Company’s sole and exclusive remedy in the event Contractor fails to achieve any of the milestones for the Facility, including Substantial Completion, by the dates set forth in the Schedule. Company and Contractor further agree that the Delay Liquidated Damages are a good faith estimate of the damages Company would suffer.

                      4.6.2      If the Substantial Completion Date occurs prior to the Guaranteed Substantial Completion Date, Company shall pay to Contractor a bonus, for each Day which

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shall elapse between the Substantial Completion Date and the Guaranteed Substantial Completion Date, the amounts set forth in Section 2 of Exhibit K (“ Schedule Bonus ”).

           4.7       Final Completion

          When all of the following conditions have been met with respect to the Facility, Contractor shall issue to Company a Certificate of Final Completion in substantially the same form as that set forth in Exhibit I:

                    (a)      except for the Punchlist Items and As-Built Drawings, the Facility and Work has been completed and complies with the Scope of Work, the Drawings, the Specifications and applicable Laws, and Contractor has made training available to Company’s personnel (or other nominees of Company);

                    (b)      the Facility has satisfied or, pursuant to Sections 6.4.2, 6.4.3 or 6.7 is deemed to have satisfied, the checks and tests under Exhibit D, including the Performance Guarantee or, if the Performance Guarantee was not met, the Performance Liquidated Damages have either been paid or agreed and shall be deducted from the final payment of the Contract Price;