CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
Exhibit 10.4.26
GEOTHERMAL RESOURCES LEASE
THIS LEASE, entered into this 27th day of June, 1988, by and
between XXXXXXX XXXXXX, XXXXXX XXXXXX and XXXXX XXXXXXXX, Trustees and
Beneficiaries of the Xxxxxx Trust ("Lessor"), and FAR WEST CAPITAL, INC., a Utah
corporation ("Lessee").
1. INTEREST GRANTED:
In consideration of the covenants and agreements contained herein,
Lessor hereby grants and leases to Lessee the exclusive right and privilege to
drill for, extract, produce, remove, utilize, sell, and dispose of geothermal
steam and associated geothermal resources as defined in NRS 534A.010,
(hereinafter called "geothermal resources"), in or under that certain parcel of
property (the "Premises") consisting of approximately sixty (60) acres, as more
particularly described as follows:
All that certain real property consisting of 60 acres located in
Washoe County, state of Nevada, more particularly described as
the W1/2 NE 1/4 SE 1/4 and the SE 1/4 SE 1/4 Section 29, T. 18
N., R. 20 E., M.D.B.&M.
together with:
(a) The non-exclusive right to conduct within the leased area
geological and geophysical exploration;
(b) The right to construct or erect and to use, operate, and
maintain within the leased area, together with ingress and egress
thereupon, all xxxxx, pumps, pipes, pipe lines, buildings, plants,
stumps, brine pits, reservoirs, tanks, waterworks, pumping stations,
roads, electric power generating plants, transmission lines, industrial
facilities, electric telegraph or telephone lines, and such other works
and structures and to use so much of the surface of the land may be
reasonably necessary or convenient for the production, utilization, and
processing of geothermal resources or for the full enjoyment of the
rights granted by this Lease, subject to applicable laws and regulations.
The Lessor shall have the right to
approve the location of the various facilities including plant, lines,
wells, pipes, etc., provided that approval shall not be unreasonably
withheld.
(c) The non-exclusive right to drill potable water xxxxx in
accordance with Nevada statutory water laws within the leased area and to
use the water produced therefrom for operation of the leased lands, free
of costs, provided that such drilling and development conducted in such a
way that they do not interfere with Lessor's activities on the leased
land.
(d) The right, without the payment of royalties hereunder, to
reinject into the leased lands geothermal resources and condensates to
the extent that such resources and condensates are not utilized; but
their reinjection is necessary for operation under this Lease in the
recovery or processing of geothermal resources. If the Lessee, pursuant
to a plan approved by the Nevada Division of Environmental Protection,
disposes of the usable brine and waste products into underlying
formations, it may do so without the payment of royalties.
2. TERM:
The term of this Lease shall commence upon the date of its
execution and subject to the conditions set forth below shall continue for a
term of twenty (20) years and for so long thereafter as geothermal resources are
produced or utilized in commercial quantities on the leased property, or lands
pooled or unitized therewith.
(a) Within ninety (90) days of date hereof, Lessee shall decide
whether or not to construct a production well upon the Premises. A
production well shall be defined as one of adequate size and depth to
supply a conventional geothermal power generation project. Should Lessee
choose not to construct the production well, then it shall promptly
notify
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Lessor of such fact. In that event, this Geothermal Resource Lease shall
be immediately terminated, without further liability of either party. In
the event Lessee elects to construct a production well, then such
construction shall be concluded by February 1, 1989.
(b) In the event Lessee drills a well on the Premises for the
purpose of producing geothermal fluid in commercial quantities, the term
of this Lease shall be automatically extended for five years from the
date of execution hereof.
(c) If Lessee shall obtain a contract for the sale of electrical
energy generated by the use of geothermal fluids produced from the
Premises during either of the periods in subparagraphs (a) or (b) above,
then in that event the term of this Lease shall be automatically extended
for an additional three years from the termination date that would
otherwise be applicable. If a power plant capable of generating
electrical energy by the use of geothermal fluids is thereafter
constructed within the extended lease term then the Lease term shall then
be as provided in the initial paragraph of this section 2.
3. RENTALS AND ROYALTIES:
(a) After Lessee has commenced the production of electrical
energy, Lessee may, at its option, suspend or defer such production. If
Lessee does not then resume production within one year, Lessee shall pay
rent for the year, in arrears, at the rate of $*** per acre. If
production is suspended for more than eighteen (18) months at any one
time, this agreement shall terminate automatically as to both parties.
(b) Royalty. On or before the last day of the calendar month after
the month of commencement of production in commercial quantities of
geothermal resources and thereafter on a monthly basis, the Lessee shall
pay to the Lessor:
*** Confidential material redacted and filed separately with the Commission.
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(i) During the period of time required to amortize the
initial long term financing (as opposed to construction financing)
of a plant built to generate electrical energy utilizing
geothermal resources produced from the Premises (which period
shall not exceed 10 years), a royalty equal to the greater of (a)
*** percent (***%) of the gross sales of electricity from a power
plant built upon or utilizing geothermal resources from the
Premises, or land pooled or unitized therewith or (b) *** percent
(***%) of the Net Distributable Cash Flow derived from such sales.
(ii) After the initial long term financing is amortized,
Lessor may elect to receive a royalty of *** percent (***%) of the
Net Distributable Cash Flow or *** percent (***%) of the gross
sales of electricity from a power plant built upon or utilizing
geothermal fluids produced from the Premises or land pooled or
unitized therewith.
(c) For purposes of this agreement "Net Distributable Cash Flow"
shall mean all cash proceeds from the sale of electrical power generated
from geothermal resources produced from the Premises less debt service,
operating cost, insurance, legal, accounting, or other expert or
consulting services, taxes including but not limited to severance and
property taxes and other expenses or costs directly attributable to
ownership or operation of the power plant and reasonable overhead and
administrative cost reasonably allocable to the management of the power
plant.
4. TAXES AND ASSESSMENTS:
Taxes and Improvements. Lessee shall pay all taxes levied against
the Property and against the Lessee's improvements on the Property. Lessor shall
promptly supply Lessee all tax notices and statements. Should Lessor install
improvements upon the real property, then Lessor
*** Confidential material redacted and filed separately with the Commission.
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shall pay its pro rata and fair share of the real property and ad valorem real
property taxes. Lessee, at its option, may pay and discharge any delinquent
taxes, mortgages, trust deeds, or, other delinquent liens or encumbrances
existing, levied or assessed on or against the Property. If Lessee exercises
such option, Lessee thereof and shall have the right, in addition to other
remedies provided by law or equity, to reimburse itself by applying to the
discharge of any such mortgage, tax, or other lien or encumbrance any and all
payments accruing to Lessor hereunder.
Severance Taxes. If any tax should be levied or assessed against
Geothermal Resources appurtenant to or produced from the Property, Lessor shall
pay its royalty share (as determined pursuant to Section 2.3) of such taxes and
Lessee shall pay the remainder.
Depletion Allowance. In the event income tax depletion allowances
become available to Lessor and become available to the Property, then Lessor
shall be allocated its royalty share (as determined pursuant to section 2.3) of
any such available income tax depletion allowances and Lessee shall be allocated
the remainder.
5. XXXXX:
(a) Lessee shall not drill or operate water xxxxx or take water in
such a way as to injure water xxxxx, ponds or reservoirs of Lessor or
interfere with or restrict the supply of water to Lessor or its tenants
for domestic, livestock, or agricultural use. If Lessee elects to
permanently abandon any well drilled by Lessee on the leased land, Lessor
shall have the option of requiring, in writing, that Lessee turn over
such well to Lessor. In that event, Lessee shall have the right to remove
the pump, motor, and ancillary equipment. Lessor shall have the right to
possession and ownership of the well and will assume all responsibility
for plugging when abandoned and bonding the well as required by Nevada
law. Conversely, should Lessor choose to abandon the well, then Lessee
agrees to plug
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each well in accordance with the then existing regulations of the Nevada
State Engineer and the Nevada Department of Minerals.
(b) Subject to the terms of this paragraph 5, within six (6)
months after abandonment of any well, including those abandonments
resulting from termination of this Lease, Lessee shall remove all
machinery, material, and structures used in connection with said well and
not used in its other operations, if any, on the leased land, and shall
fill in and level off all excavations, pits, or other alterations to the
surface of the leased land caused in connection with said well, and,
insofar as practical, shall, restore the leased land and the means of
ingress and egress to as good a condition as existed when Lessee
commenced operations under this Lease, except reasonable wear and tear,
acts of nature and conditions beyond the control of Lessee.
6. COMMINGLING, POOLING, AND UNITIZATION:
(a) Lessee shall have the right to commingle (for purposes of
storing, transporting, handling, unitizing, selling or processing)
geothermal resources produced or extracted from the leased land and lands
pooled, unitized or combined therewith, with similar substances produced
or extracted from other lands or units. In the event of such commingling,
Lessee shall meter, gauge, or measure, according to prevalent industry
standards, the production from the Premises at the well head, or from the
unit or units including the leased land or other units or lands, as
applicable, and compute and pay Lessor's royalty attributable to Lessor's
land on the basis of such production as so determined or allocated.
(b) Lessee may, as a recurring right for drilling, development or
operating purposes, pool, unitize, or combine all or part of the leased
land into a unit with any other land or lands (whether held by Lessee or
others), whether or not adjacent or contiguous, which
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Lessee desires to develop or operate as a unit. Any well (whether or not
Lessee's well) commenced, drilled, drilling and/or producing or being
capable of producing in any part of such unit shall for all purposes of
this Lease be deemed a well commenced, drilled, drilling and/or producing
on the leased land, and the Lessee shall have the same rights and
obligations with respect thereto and the drilling and producing
operations upon the lands from time to time included within any such unit
as Lessee would have if such lands constituted the leased lands;
provided, however, that notwithstanding this or any other provision or
provisions of this Lease to the contrary:
(i) Production as to which royalty is payable from any such
xxxxx or xxxxx drilled upon any such unit, whether located on the
leased land or other lands, shall be allocated to the leased land
in the proportion that the acreage of the leased land in such unit
bears to the total acreage of such unit. Such allocated portion
thereof shall for all purposes be considered as having been
produced from the leased land, and the royalty, payable under this
Lease with respect to the leased land in such unit shall be
payable only upon that proportion of production so allocated, and
(ii) If taxes of any kind are levied or assessed (other than
taxes on the surface and on Lessor's improvements), any portion of
which is chargeable to Lessor under the provisions of this Lease,
then this share of such taxes to be borne by Lessor shall be in
proportion to the share of the production from such unit allocated
to the leased land.
7. RESERVATIONS TO LESSOR:
All rights in the leased area not granted to Lessee by this Lease
are hereby reserved to Lessor. Without limiting the generality of the foregoing,
such reserved rights include:
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(a) Disposal - the right to sell or otherwise dispose of the
surface of the leased lands or any resource in the leased lands under
existing laws, or laws hereinafter enacted, subject to the rights of the
Lessee under this Lease.
(b) Rights of Way - the right to authorize geological and
geophysical explorations on the leased land which do not interfere with
or endanger actual operations under this Lease and the right to grant
such easements or rights of way for joint or several use upon, through,
or in the leased area for steam lines and other public or private
purposes which do not interfere with or endanger planned or actual
operations or facilities constructed under this Lease.
(c) Mineral Rights - the ownership of the right to extract
minerals, oil, hydrocarbon gas, and helium from the leased lands.
(d) Casing - the right to acquire the well and casing at the fair
market value of the casing where the Lessee finds only potable water, and
such water is not required in lease operations.
(e) Measurements - the right to measure geothermal resources and
to sample any production thereof.
(f) Exploit Unused Geothermal Potential - to the extent Lessee
does not construct a power plant which utilizes the full potential of the
geothermal resource available from the Premises (estimated to be capable
of serving a ten (10) megawatt plant) or is not preceding in a reasonable
manner to expand its plant within a reasonable period, Lessor shall have
the right after giving twelve (12) months' written notice to construct a
power plant to utilize the potential not being exploited by Lessee's
power plant or power plants. However, Lessor shall not construct an
additional power plant if Lessee provides an opinion of
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Geothermex, Inc. which opinion states that the plant planned by Lessor
would adversely affect the geothermal fluids or the use of the geothermal
resource currently being made by Lessee.
8. DEFAULT AND TERMINATION:
Whenever the Lessee fails to comply with any of the terms and
provisions of this Lease, and does not commence to remedy such failure within
ninety (90) days after receipt of written notice from Lessor, the Lessor may (a)
suspend operations until the requested action is taken to correct the
noncompliance, or (b) cancel this Lease by delivering written notice of its
intent to do so to Lessee. Such cancellations shall be effective immediately
upon delivery of said notice. The following property shall be excepted from any
Lease termination hereunder as a result of default: (a) each and any well then
capable of producing in commercial quantities the substances covered by this
Lease, and in respect to which Lessee is not in default; and (b) rights of way
and easements across lands subject to such Lease termination, which rights of
way and easements are necessary for conducting Lessee's operations on or in the
vicinity of the lands retained, with respect to which Lessee is not in default,
including sites for electric generating units.
9. INDEMNIFICATION:
The Lessee shall indemnify and hold harmless Lessor, its officers,
agents and employees from any and all claims for liability of any kind arising
from or connected with Lessee's activities and operations under this Lease.
Lessee shall pay to the person beneficially interested in the damaged object all
damages caused by Lessee's operations on the surface of the leased land,
including but not limited to damages to growing crops, pasture and improvements
on
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the leased land, or to animals or livestock. Lessee agrees to take reasonable
steps to prevent its operation from:
(a) Causing or contributing to soil erosion, or to the injury to
soil conserving structures on the leased land;
(b) Polluting the waters of reservoirs, springs, streams, or water
xxxxx on the leased land;
(c) Damaging crops or pasture, consistent with the purposes of
this Lease; or
(d) Harming or injuring in any way the animals or livestock owned
by Lessor or his tenants, or kept or pastured on the leased land,
including the erection and maintenance of fences, gates, and cattle
guards where necessary for such purposes.
In no event shall Lessor be indemnified for liability or loss
resulting from its sole negligence.
10. CONDEMNATION:
Eminent domain proceedings resulting in the condemnation of a part
of the Premises leased herein, but leaving the remaining Premises reasonably
usable by Lessee for the purposes of the activities described in paragraph 1
above, will not terminate this Lease unless Lessor and Lessee mutually agree to
such termination. The effect of any such partial condemnation will be to
terminate the Lease as to the portion of the Premises condemned, and the Lease
of the remainder of the Premises shall remain intact. Lessee hereby assigns and
transfers to Lessor any claim it may have to compensation for damages or award
as a result of any condemnation, that does not materially impair its ability to
carry out the activities described in paragraph 1.
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11. PERMITTING:
Lessee shall obtain and maintain any and all permits, licenses,
and governmental approvals necessary for the conduct of Lessee's activities on
the leased land. All labor to be performed and material to be furnished in the
operations hereunder shall be at the sole cost and expense of Lessee, and Lessee
shall hold Lessor free and harmless from liability thereunder. Lessee shall keep
the leased Premises fully protected against any and all liens of every character
arising from or connected with Lessee's operations hereunder.
Lessee, on behalf of Lessor, shall record a Notice of
Non-Responsibility with the Washoe County Recorder. A true copy of that document
is attached hereto as Exhibit "A".
12. ASSIGNMENTS AND SUBLEASES:
(a) Neither party shall voluntarily assign this Lease without the
prior written consent of the other party, unless the assignment is to a
partnership in which one of the parties to this Lease is a general
partner.
(b) In the event that either party to this Lease wishes to assign
this Lease to a corporation or other entity, which does not fall into
subsection (a) above, said party shall provide the other party with
written notice of such intent. Said written notice shall describe the
financial structure and assets of the potential assignee in sufficient
detail to permit the noticed party to evaluate the effect of the
assignment on its interest in this Lease. The party giving such notice
shall have thirty (30) days from its receipt of the notice to consent or
refuse to consent to the assignment. Failure to give written consent or
refusal within said thirty day period shall be deemed consent by the
noticed party. In no event shall consent to any assignment be
unreasonably withheld.
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(c) In the event Lessee is contemplating an assignment such as
described in subsection (b) above, Lessor shall have a prior right to
regain Lessee's rights under the Lease, together with any and all related
improvements, at the price and on the terms of the intended assignment.
Lessor may exercise this right by notifying Lessee of its intent to do so
by the end of the thirty day period described in subsection (b) above.
Such notice shall also be deemed a refusal of consent to the assignment
of Lessee's right to a third party. Subject to the provisions of this
paragraph, all obligations hereunder shall be binding upon, and every
benefit hereof shall inure to the heirs, executors, administrators,
successors, and assigns of the respective parties hereto.
13. INSURANCE:
Lessee, at its own expense, prior to commencing operations on the
leasehold, shall obtain and thereafter while operations are conducted on the
Premises and this Lease is in effect maintain adequate Workmen's Compensation
Insurance and deliver to Lessor evidence of same.
Lessee, at its own expense prior to commencing operations on the
leasehold, shall obtain and thereafter while this Lease is in effect maintain
Comprehensive Liability and Automobile Liability of not less than $500,000
combined single limit or equivalent for bodily injury, personal injury, and
property damage as the result of any one occurrence, naming Lessor as additional
insured as its interests may lie. Lessee shall tender to Lessor prior to taking
possession of the leasehold or commencing any work, a certificate of insurance
confirming coverage for the benefit of Lessor. Further, Lessee agrees that
should any change in insurance carriers be effected, adequate notice and an
additional certificate shall be delivered to Lessor accordingly.
14. RESERVATION OF WATER RIGHTS:
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Lessor believes that it owns water rights which are valuable in
connection with the utilization of geothermal fluids for the generation of
electrical energy and that those rights can only be protected by drilling a
production well on or before February 1, 1989. In the event that Lessee is
convinced of the value of Lessor's water rights, Lessee is willing to take the
necessary action to preserve those rights including drilling a production well
on or before February 1, 1989. Lessee will investigate the value of Lessor's
water rights and what is necessary to preserve those rights and satisfy itself
on both issues within ninety (90) days following the execution of this
agreement.
15. NOTICES:
Lessor may give any notice or deliver any document hereunder to
Lessee by mailing the same by certified mail addressed to Lessee at:
Far West Capital, Inc.
0000 Xxxx Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxx 00000
or by delivering the same in person to the above-referenced address Lessee.
Lessee may give any notice or deliver any document hereunder to Lessor by
mailing the same by certified mail addressed to Lessor at:
Xxxxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxx, Xxxxxx 00000
or by delivering the same to Lessor in person. For purposes of this paragraph,
either party may change its address by written notice to the other. In case of
any notice or document delivered by certified mail, the same shall be deemed
delivered when deposited in any U.S. Post Office, properly addressed as herein
provided, with postage fully prepaid. Lessee may make any payment due Lessor to
Lessor personally or by mail at the address of Lessor given above.
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16. INSPECTION BY LESSOR:
Inspection of Property. Lessor, or his authorized agents or
representatives, shall be entitled to enter upon the leasehold at all reasonable
times for the purposes of inspection or other reasonable purposes associated
with Lessor's rights as owner of the subject property.
17. MISCELLANEOUS PROVISIONS:
Binding Effect. This Lease shall inure to the benefit of and be
binding upon the parties hereto, their respective heirs, executors,
administrators, successors, and assigns.
Applicable Law. The terms and provisions of this Lease shall be
interpreted in accordance with the laws of the State of Nevada.
Entire Lease. This Lease terminates and replaces all prior
agreements, either written, oral, or implied, between the parties hereto and
constitutes the entire agreement between the parties.
Recording Memorandum of Lease. The parties hereto agree to execute
a Memorandum of this Lease (short form) for the purpose of recording same in the
records of Washoe County, Nevada, so as to give public notice, pursuant to the
laws of the State of Nevada, of the existence of this Lease.
Void and Invalid Provisions. In the event any part or portion or
provision of this instrument shall be found or declared to be null, void, or
unenforceable for any reason whatsoever by any Court of competent jurisdiction
or any governmental agency having authority thereover, then and in such event
only such part, portion or provision shall be affected thereby, and such
finding, ruling or decision shall not in any way affect the remainder of this
instrument or any of the other terms or conditions hereof, which said remaining
terms and conditions shall remain binding, valid, and subsisting and in full
force and effect between the parties hereto, it
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being specifically understood and agreed that the provisions hereof are
severable for the purposes of the provisions of this clause.
Time of the Essence. Time is of the essence of this Lease and each
and every part thereof. Confidentiality. Each party agrees, to the extent that
it may, to retain all information, whether geological or financial, in strict
confidence, delivering the same only to governmental entities which require it,
or to financial, geological, or other similar consultants.
Counterparts. This Lease may be executed in any number of
counterparts and all such counterparts shall be deemed to constitute a single
Lease and the execution of one counterpart by any party Lessor shall have the
same force and effect as if such party had signed all the other counterparts.
Warranty of Title. Lessor hereby warrants that it is the lawful
owner vested in title in the property subject of the leasehold herein. Lessor
makes no warranties or representations, however, with regard to mineral rights,
geothermal rights, or the extent thereof and Lessee hereby assumes all risk with
regard to title, validity, or extent of geothermal interests subject hereof.
Cooperation. The parties agree to cooperate in the execution of
any other documentation necessary to carry out the intent and terms of this
Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as
of the day and year first above
written.
LESSOR: TRUSTEES AND BENEFICIARIES OF THE
XXXXXX LEASE
---------------------------------------
XXXXXXX XXXXXX
15
---------------------------------------
XXXXXX XXXXXX
--------------------------------------
XXXXX XXXXXXXX
LESSEE: FAR WEST CAPITAL, INC.
By:____________________________________
Its:__________________________
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Mail Recorded Document To:
P. O. Box 2790 EXHIBIT "A"
Xxxx, Xx 00000
NOTICE OF NON-RESPONSIBILITY
----------------------------
NOTICE IS HEREBY GIVEN:
1. That the XXXXXX TRUST is the owner of real property more particularly
described as:
All that certain real property consisting of 60
acres located in Washoe County, State of Nevada,
more particularly described as the W 1/2 NE 1/4 SE
1/4 and the SE 1/4 SE 1/4 Section 29, T. 18 N., R.
20 E., M.D.B.&M.
2. The owner of the real property described herein has entered into a
certain Geothermal Resource Lease dated the 27th date of June, 1988 with Far
West Capital, Inc., a Utah corporation.
3. This Notice of Non-Responsibility is given pursuant to the provisions of
NRS 108.234, as amended.
4. None of the Trustees of Xxxxxx Trust or the Trust itself shall be
responsible for any building, structure or other improvements mentioned in or
falling within the purview of the agreement described above, constructed,
altered or repaired, and none of the same which may hereafter be constructed on
the property during the term of the Geothermal Resource Lease are or shall for
any reason be deemed to be constructed, altered, repaired or done at the
instance of the owner of the said property.
5. None of the Trustees of the Xxxxxx Trust or the Trust itself shall be
responsible for any construction, alteration or repair of any building,
structure or other
improvements placed upon the real property or constructed on all or any portion
of the real property, whether directly or indirectly, at the instance of any
person or entity acting under or by virtue of any agreement with or at the
instance of Far West Capital, Inc., a Utah corporation.
6. The address of the owner of the real property is as follows:
XXXXXX TRUST
c/o Xxxxxx Xxxxxx, Trustee
0000 Xxxxxx Xxxxxx
Xxxx, Xxxxxx 00000
DATED this 28th day of June, 1988.
/s/ Xxxx X. de Lipkau
---------------------
XXXX X. de LIPKAU
On Behalf of XXXXXX TRUST
STATE OF NEVADA )
:ss:
COUNTY OF WASHOE )
On this 28th day of June, 1988, personally appeared before me, XXXX X. de
LIPKAU, who acknowledged to me that he executed the foregoing Notice of
Non-Responsibility on behalf of the Xxxxxx Trust.
XXXXX X. XXXXX
Notary Public -- State of Nevada /s/ Xxxxx X. Xxxxx
[SEAL] Appointment Recorded in Washoe County -----------------------------
MY APPOINTMENT EXPIRES FEB. 9, 1990 Notary Public
