THIRD AMENDMENT TO GEOTHERMAL LEASE
THIS THIRD AMENDMENT TO GEOTHERMAL LEASE (the "Third Amendment") is
made and entered into as of April 12, 1991, by and between MAGMA POWER COMPANY,
a Nevada corporation ("Lessor") and MAMMOTH-PACIFIC, L.P., a California limited
partnership ("Lessee") with reference to the foregoing facts:
A. Magma Energy, Inc., a Nevada corporation, and ▇▇▇▇ Geothermal
Company, a California corporation, entered into that certain Geothermal Lease
dated August 31, 1983, and recorded in memorandum form on September 6, 1983, in
Book 389, Page 37 of Official Records of Mono County, California (the "Original
Lease").
B. Magma Energy, Inc. has merged with and into Lessor, and Lessor is
the successor-in-interest to Magma Energy, Inc., by operation of law, as fee
owner of the real property covered by the Original Lease.
C. By an Assignment of Lease dated August 31, 1983, and recorded in
memorandum form on September 20, 1983, in Book 390, Page 90 of the Official
Records of Mono County, California, ▇▇▇▇ Energy Company assigned all of its
right, title and interest in the Original Lease to Mammoth-Pacific, a California
general partnership ("MPGP").
D. The Original Lease was previously amended by the First Amendment to
Geothermal Lease dated as of April 30, 1987 between Magma Energy, Inc. and MPGP
(the "First Amendment") and by the Second Amendment to Geothermal Lease dated as
of January 1, 1990 between Lessor and MPGP (the "Second Amendment") (the
Original Lease, the First Amendment and the Second Amendment are referred to
collectively herein as the "Lease").
E. MPGP has dissolved and, as a result of such dissolution, Pacific
Geothermal Company, a California corporation ("PGC"), succeeded to 100% of
MPGP's interest in the Lease.
F. PGC is a general partner of Lessee, holding not less than 50%
interests in both partnership capital and profits.
G. By an Assignment and Assumption Agreement dated as of January 29,
1990 (the "Assignment Agreement"), PGC assigned an undivided 50% interest in the
Lease to Lessee and an undivided 50% in the Lease to the CD Companies (as
defined in the Assignment Agreement) (the "CD Companies"). Said Assignment
Agreement was recorded in memorandum form on January 29, 1990 in Book 548, Page
592 of the Official Records of Mono County, California.
H. Concurrently with the Assignment to the CD Companies described in
Recital G, the CD Companies assigned their entire interest in the Lease to
Lessee.
I. Lessor and Lessee now desire to modify the Lease for purpose of,
among other things, modifying and/or clarifying certain rights and obligations
of Lessor and Lessee under the Lease.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, Lessor and Lessee agree to amend
the Lease as follows:
1. Definitions. All capitalized terms contained herein, unless
otherwise defined, shall have the meanings ascribed to such terms in the Lease.
2. Modification of Exhibit "A-l". Lessor and Lessee agree to amend
Exhibit "A-1" to the First Amendment promptly upon the occurrence of "firm
operation" of each New Plant, which amendment(s) shall be prepared on the basis
of the same assumptions used for purposes of initially preparing said Exhibit
"A-l", but which amendment(s) shall accurately reflect the appropriate
commencement date for the effectiveness thereof.
3. Modification of Exhibit "A-2". Exhibit "A-2" to the First Amendment
is hereby deleted in its entirety and Exhibit "A-2" hereto is substituted in its
place.
4. Property Taxes. Paragraph 18 of the Lease is hereby amended by
adding the following before the last sentence of Paragraph 18:
In this regard, all property taxes assessed by the Assessor on the
respective property interests of the parties hereunder in respect of
the leased land shall be shared by Lessee and Lessor in proportion to
which the Assessor allocates the assessment of value among structures,
improvements and personal property made or placed upon the leased land
by Lessee, on the one hand, and the leased land as such (including the
geothermal resources and the right to production thereof), on the
other hand; provided, however, that any increase in tax assessments
which arise after the date hereof by reason of a change in control of
or ownership interests in Lessee shall be paid by Lessee, and Lessee
shall indemnify and hold Lessor harmless therefor, including, without
limitation, changes in control of or ownership interests in Lessee
arising by reason of redemptions or transfers of interest. In
addition, from and after January 1, 1990, Lessor and Lessee shall
cooperate in good faith to pursue a joint strategy of settling on an
agreed-upon methodology with the Assessor for valuation and allocation
of property taxes, both historically and prospectively during the term
of this Lease. Lessor and Lessee agree that each party shall represent
its own interests as they shall appear and shall bear its own
fees and costs, but shall seek, in good faith and to the extent
reasonably practicable, to present a common position to the Assessor
in a good faith effort to achieve the lowest overall property tax
assessment applicable to both parties.
5. Indemnification. Paragraph 18 of the Lease is hereby further
amended by adding the following after the first sentence of Paragraph 18:
Without limiting the generality of the foregoing or any other
provision of this Lease (including, without limitation, Paragraphs 12
and 15 hereof) and in furtherance thereof, Lessee acknowledges that
Lessor has not itself utilized or monitored Lessee's activities on the
leased land and Lessee (i) acknowledges and agrees that Lessee is
relying solely on its own investigation of the leased land with
respect to the effect of (a) the presence, if any, of any underground
tanks on the leased land or of any "hazardous substances", "hazardous
materials" or "hazardous wastes" (as defined under federal or
California Law) (collectively, the "Hazardous Materials"), (ii)
assumes the risk of all liabilities, claims, demands, actions and
causes of action arising out of any such storage tanks or Hazardous
Materials on, at, in, under or about the leased land whether placed
there now or at any point in the future while this Lease is in effect
and, (iii) agrees to hold harmless, indemnify and defend Lessor
against all claims with respect to the foregoing.
6. Assignment of BLM Lease. Concurrently with the execution and
delivery hereof, Lessor is assigning to Lessee all of Lessor's right, title and
interest in and to that certain Geothermal Resource Lease (Mono-Long Valley
Parcel #12) dated March 1, 1982, between the United States and Magma Energy, as
assigned to Lessor (the "BLM Lease"). In consideration for such Assignment,
Lessee shall pay to Lessor, on the date hereof, the amount of $89,468.06 by wire
transfer of immediately available funds.
7. BLM Approval. Lessee shall, within 180 days following the date
hereof, obtain from the Department of Interior, Bureau of Land Management
("BLM") such approvals to the Assignment of the BLM Lease described in Paragraph
6 of this Third Amendment as may be required in accordance with 43 C.F.R.
3241.2, and either (a) Lessee shall post a bond satisfactory to BLM if required
thereby or (b) if Lessor has heretofore posted a bond with BLM, then Lessee
shall replace such bond and cause such bond to be released to Lessor. In the
event Lessee fails to perform its obligations under this ▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇▇
shall, upon request of Lessor, assign the BLM Lease to Lessor.
8. Cross Default. Lessee shall be deemed to be in material breach of
the Lease, as amended hereby, in the event
Lessee fails for any reason whatsoever to pay within five (5) days when due all
royalties payable by Lessee to Lessor under the Lease, as amended hereby, in
respect of the BLM Lease, including without limitation in the event the payment
of all or any part of said royalties are determined to constitute impermissible
overriding royalties. If Lessee or any lender or other party holding a
beneficial interest in the BLM Lease fails to pay any royalty due under the BLM
Lease within sixty (60) days after such royalty comes due, Lessor shall have the
right to terminate the Lease upon written notice to Lessee.
9. BLM Lease Property Taxes. From and after the date hereof, Lessee
shall pay all property taxes payable in respect of the BLM Lease property and
all rental and royalties payable under the BLM Lease, as though Lessee were the
direct and original lessee thereunder, and Lessee shall indemnify and hold
harmless Lessor for all losses, liabilities, costs and expenses (including
without limitation reasonable attorneys' fees) in respect thereof.
10. Matters Concerning the BLM Leases. To the best of Lessor's
knowledge, without any review of title reports but based solely on Lessor's not
having received any notice, certificate or document to the contrary, Lessor has
no reason to believe there are any defects in Lessor's title to the BLM Lease.
In addition, Lessor represents that all rental Payments and taxes attributable
to the BLM Lease which have become due and payable have been paid in full.
11. Effectiveness of Third Amendment. This Third Amendment shall be
effective and become of full force and effect only upon receipt by Lessor of
insurance binders or certificates in a form reasonably satisfactory to Lessor
evidencing the maintenance by Lessee of all policies of insurance required to be
maintained pursuant to Paragraph 18 of the Lease.
12. Continued Effectiveness. Except as specifically provided in this
Third Amendment, the Lease shall remain in full force and effect in accordance
with its original terms and conditions, except that the term "Lease" as used in
the Lease shall hereafter mean the Lease as amended hereby.
13. Counterparts. This Third Amendment may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute a single original instrument.
14. Entire Agreement-Amendments. This Third Amendment, together with
the Lease and those certain letter agreements date of even date herewith,
between Lessor and Lessee, constitute the entire agreement of the parties with
respect to the matters set forth herein, and the provisions hereof, together
with the other documents enumerated in this Paragraph 14, shall supersede any
and all prior agreements or understandings relating to the same subject matter.
The Lease, as amended hereby, may be further amended only
by a writing signed by a duly authorized representative of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be signed by their duly authorized officers as of the day and year
first above written.
LESSOR:
MAGMA POWER COMPANY, a Nevada
corporation
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Its: Senior Vice President
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Its: Assistant Secretary
LESSEE:
MAMMOTH-PACIFIC, L.P., a California
limited partnership
By: Pacific Geothermal company,
a California corporation,
General Partner
By: /s/ Illegible
--------------------------------
Name: ______________________________
Its: Sr. Vice President
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
By: CD Mammoth Lakes I, Inc.,
a MaryLand corporation
General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Its: President
By:
--------------------------------
Name:
------------------------------
Its:
-------------------------------
EXHIBIT "A-2"
EXISTING PLANT BASELINE REVENUE FORECAST
BASELINE
REVENUE
CAPACITY NET ENERGY AGREEMENT FORECAST
PRICE MW HRS PRICE PRICE ($m)
-------- ------ ------ --------- --------
1987 .0194 70,000 .0700 .0894 6,258
1988 .0194 70,000 .0700 .0894 6,258
1989 .0194 70,000 .0700 .0894 6,258
1990 .0194 70,000 .0700 .0894 6,258
1991 .0194 70,000 .0700 .0894 6,258
1992 .0194 70,000 .0700 .0894 6,258
1993 .0194 70,000 .0700 .0894 6,258
1994 .0194 70,000 .0700 .0894 6,258
1995 .0194 70,000 .0700 .0894 6,258
1996 .0194 68,273 .0630 .0824 5,626
70,000* 5,768*
1997 .0194 68,273 .0668 .0862 5,884
70,000* 6,034*
1998 .0194 68,273 .0708 .0902 6,157
70,000* 6,314*
1999 .0194 68,273 .0750 .0944 6,447
70,000* 6,608*
2000 .0194 68,273 .0795 .0989 6,755
70,000* 6,923*
2001 .0194 68,273 .0843 .1037 7,080
70,000* 7,259*
2002 .0194 68,273 .0894 .1088 7,426
70,000* 7,616*
2003 .0194 68,273 .0947 .1141 7,792
70,000* 7,987*
2004 .0194 68,273 .1004 .1198 8,180
70,000* 8,386*
2005 .0194 68,273 .1064 .1258 8,591
70,000* 8,806*
2006 .0194 68,273 .1128 .1322 9,027
70,000* 9,254*
2007 .0194 68,273 .1196 .1390 9,489
70,000* 9,730*
2008 .0194 68,273 .1268 .1462 9,979
70,000* 10,234*
2009 .0194 68,273 .1344 .1538 10,499
70,000* 10,766*
2010 .0194 68,273 .1424 .1618 11,049
70,000* 11,326*
2011 .0194 68,273 .1510 .1704 11,633
2012 .0194 68,273 .1600 .1794 12,251
2013 .0194 68,273 .1696 .1890 12,907
2014 .0194 68,273 .1798 .1992 13,602
2015 .0194 68,273 .1906 .2100 14,338
2016 and for the balance of the term of the Lease to be calculated using the
same bases.
For purposes of this Exhibit "A-2", the figures noted with an asterisk
(*) for the period between and including 1996 and 2010 shall be the effective
figures for their corresponding years only until such time as 87.5% of the
amount of the cumulative gross revenues attributable to the increment of
megawatt hours sold each year by the Existing Plant between and including 68,274
MW hours and 70,000 MW hours equals $1,157,895, plus simple interest at a rate
of 7% per annum beginning January 1, 1990 (on the full amount of $1,157,895 and
not on the declining balance thereof). Thereafter, the numbers not noted with
asterisk (*) during such period shall become effective for their corresponding
years.
The remaining amount representing 12.5% of the cumulative gross
revenues attributable to the increment of megawatt hours sold each year by the
Existing Plant between and including 68,274 MW hours and 70,000 MW hours shall
be paid to Lessor as additional Existing Plant Base Royalty, in addition to (1)
the Existing Plant Base Royalty to be paid to Lessor pursuant to Paragraph 5.1
of the Lease and (2) Bonus Royalty to be paid to Lessor pursuant to Paragraph
5.3 of the Lease.
Exhibit "A-l"
New Plant Baseline Revenue Forecast
Revised June 1991
BASELINE
REVENUE
FORECAST
YEAR ($M)
------------------ ----------------
1991 8,829
1992 9,650
1993 10,457
1994 11,272
1995 12,177
1996 13,018
1997 14,021
1998 15,051
1999 16,072
2000 16,072
2001 9,958
2002 10,448
2003 10,967
2004 11,518
2005 12,101
2006 12,720
2007 13,376
2008 14,071
2009 14,808
2010 15,589
2011 16,417
2012 17,294
2013 18,225
2014 19,211
2015 20,256
2016 21,364
2017 22,538
2018 23,783
2019 25,104
2020 26,506
2021 27,993
2022 and for the To be calculated
balance of the using the same
term of the Lease, bases.
G A POWER COMPANY
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
January 10, 1995
Via Certified Mail
Mammoth-Pacific L.P. RECEIVED
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ JAN 13 1995
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇.▇. ▇▇▇▇▇▇
Re: Change in Notice Address for Magma Power Company
Dear ▇▇. ▇▇▇▇▇▇:
In connection with the acquisition of Magma Power Company by
California Energy Company, Inc., effective immediately, all notices to Magma
Power Company pursuant to the Geothermal Lease dated August 31, 1983, as amended
by the First Amendment to Geothermal Lease dated April 30, 1982, the Second
Amendment to the Geothermal Lease dated January 1, 1990 and the Third Amendment
to Geothermal Lease dated April 12, 1991 between Mammoth-Pacific L.P. and Magma
Power Company should be delivered to the following address:
Magma Power Company
c/o California Energy Company, Inc.
▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President/Operations
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Attention: General Counsel
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Sincerely,
Magma Power Company
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Vice President,
Chief Financial Officer
JGS/dc
cc: Pacific Energy