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As Filed with the Securities and Exchange Commission on
June
Ï
, 2004 Registration No. 333-[ _____ ]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933
__________________
U.S.
GEOTHERMAL INC.
(Name of small business issuer in its charter)
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Delaware
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49
11
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84-
1472231
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(State of incorporation)
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(Primary Standard Industrial
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(IRS Employer
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Classification Code Number
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Idenitifcation Number)
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1
509 Tyrell Lane, Suite B,
Boise, Idaho 83706
208-424-
1027
(Address and telephone number of principal executive office and principal place
of business)
_______________
Daniel Kunz
Chief Executive Officer
1
509 Tyrell Lane, Suite B,
Boise, Idaho 83706
208-424-
1027
(Name, address, and telephone number of agent for service)
Copy to:
Susan E. Lehr, Esq.
Williams, Kastner & Gibbs
Two Union Square, Suite 4
1
00
Seattle ,Washington 98
1
0
1
- 2380
Telephone (206) 628-6600
Facsimile (206) 628-66
11
___________________
Approximate Date of Proposed Sale to the Public:
As
soon as practicable after this Registration Statement has become effective.
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act, check the following box
:
x
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration statement
for the same offering.
¨
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If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box.
¨
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS
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AMOUNT TO BE
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PROPOSED MAXIMUM
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PROPOSED
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OF SECURITIES TO BE
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REGISTERED (2)
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OFFERING PRICE PER
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MAXIMUM
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REGISTERED
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SHARE (1)
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AGGREGATE
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OFFERING PRICE
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Common shares
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19,025,285
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$0.721995
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$1,373,616.54
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(1)
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The registration fee has been calculated
in accordance with rule 457(c). On July 5, 2004, the average of the bid
and ask price for the company's common stock on the TSX Venture Exchange,
Inc. was $0.97 Cdn, and the exchange rate was Cdn $1.00 = US $0.744325.
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(2)
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Plus such additional shares as may be issued
pursuant to anti-dilution provisions of the options and warrants, the
shares resulting from the exercise of which are included in this prospectus.
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The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall
thereafter become effective in accordance with Section 8(a) of the Securities Act of
1
933, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED JULY 7, 2004
This prospectus relates to the resale of up to 19,025,285 shares of our common stock by the selling securityholders named in this prospectus from time to time. The shares of common stock offered for resale hereby consist of 12,922,693 shares which
are currently issued and outstanding and 6,102,592 shares issuable upon exercise of currently outstanding options and warrants.
We will not receive any of the proceeds from the sale of the shares sold pursuant to this prospectus, other than the exercise price, if any, to be received upon exercise of the options and warrants. We will bear substantially all of the expenses
incident to the registration of the shares, except for any applicable underwriting discounts, brokerage fees or commissions and transfer taxes, as well as the fees and disbursements of the selling securityholders’ counsel and advisors.
Our common stock is traded in Canadian dollars on the TSX Venture Exchange,
Inc. under the symbol “GTH.” Our shares are not currently traded on
any United States stock exchange or in the over-the-counter market in the United
States, and, accordingly, there is currently no public market for our shares
in the United States. As of July 5, 2004, the bid and ask prices of our common
stock on the TSX Venture Exchange was $0.94 Cdn and $1.00 Cdn, respectively.
The exchange rate on that date was $1.00 Cdn = US $0.744325.
__________________
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The securities offered in this prospectus involve a high degree of risk. Among other things, we received an opinion from our independent auditors with respect to our financial statements as of and for the year ended March 3
1
, 2004,
which contained an explanatory paragraph discussing the existence of substantial doubt regarding our ability to continue as a going concern.
You should carefully read and consider the “Risk Factors” commencing on page _ for information that should be considered in determining whether to purchase any of the securities.
____________________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OF THESE SECURITIES OR
DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________
We expect that these shares of common stock may be sold or distributed from time to time by or for the account of the holders through underwriters or dealers, through brokers or other agents, or directly to one or more purchasers, including
pledgees, at market prices prevailing at the time of sale or at prices otherwise negotiated. The shares also may be sold by donees or by other persons acquiring the shares. The holders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.
______________________
This prospectus is part of a registration statement we filed with the SEC. You should rely only on the information or representations provided in this prospectus and any information we have incorporated by reference. The information contained on our
website is not incorporated by reference in this prospectus and shall not be considered a part of this prospectus. We have not authorized anyone to provide you with any information other than that provided in this prospectus. We have not authorized
anyone to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus is accurate as of any date other than the
date set forth below.
_______________________
The date of this prospectus is July 7, 2004.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed information regarding our company and the common stock being registered by this prospectus, including the risk factors and the financial statements and related notes, included
elsewhere in this prospectus. Because it is only a summary, it may not contain all of the information that you may find useful or important.
The Company
U.S. Geothermal Inc. (or “GTH”) is a Delaware corporation. Our shares of common stock trade on the TSX Venture Exchange under the symbol “GTH.” On December 19, 2003, we acquired all of the outstanding securities of U.S.
Geothermal, Inc., an Idaho corporation (“Geo-Idaho”) incorporated in February 2002, through a transaction merging Geo-Idaho into Evergreen Power Inc., a wholly-owned Idaho subsidiary formed for purposes of the merger transaction. Following
the merger, although we maintained our corporate and legal identity, we changed our name from U.S. Cobalt Inc. to U.S. Geothermal Inc. Pursuant to the merger, Geo-Idaho became a wholly owned subsidiary of ours. In that the securityholders of
Geo-Idaho acquired a majority of the voting securities of our company, Geo-Idaho is deemed to be the acquiror for accounting purposes. Unless the context requires otherwise, references in this prospectus to our company for periods prior to December
19, 2003 are to Geo-Idaho.
Our operations are conducted through Geo-Idaho. We also have a wholly-owned inactive subsidiary, U.S. Cobalt Inc, a corporation organized under the laws of Colorado, which we refer to in this prospectus as “USC Colorado.” Unless the
context requires otherwise, reference to our company and its operations include the operations of the parent and the subsidiary companies.
In connection with the Geo-Idaho merger transaction, we effected a one-for-five reverse stock split of our common stock. All common stock data set forth in this prospectus has been adjusted for and reflects this reverse stock split.
Our principal executive office is located at 1509 Tyrell Lane, Suite B, Boise,
Idaho 83706. Our telephone number there is 208-424-1027 and our fax number is
208-424-1030. Our internet address is
www.usgeothermal.com
.
The information contained on our website is
not
incorporated by reference
in this prospectus and should
not
be considered a part of this prospectus.
Our Business
GTH is engaged in the acquisition, development and exploitation of geothermal resources, and, more particularly, the “Raft River project,” the development of which is our principal focus (please see the more detailed discussion of our
business starting at page 17 for more information about the Raft River project).
GTH is still a development stage company and has produced no revenues to date.
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The Offering
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Shares offered:
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Up to 19,025,285 shares of common stock are to be offered
by the selling security holders as follows:
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• 12,922,693 of which are currently
issued and outstanding;
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• 6,102,592 of which will be
issued upon exercise of our outstanding warrants and options.
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Use of proceeds:
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We will not receive any of the proceeds from the sale of shares
of common stock offered in this prospectus, other than the exercise price,
if any, to be received upon exercise of warrants and options.
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Summary Historical Financial Data
The summary historical financial information presented below has been derived from our financial statements for each of the years ended March 31, 2004 and 2003. We are providing historical financial data from the incorporation of Geo-Idaho in
February 2002. All financial information in this prospectus is in US dollars unless otherwise noted.
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YEARS ENDED MARCH 31,
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2004
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2003
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STATEMENT OF OPERATIONS DATA:
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AUDITED
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Revenues
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Nil
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Nil
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Total expenses
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$
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439,484
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$
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164,909
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Net loss
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$
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(436,001
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)
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$
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(164,909
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Net loss per share
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$
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(0.05
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)
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$
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(0.03
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Weighted average number of shares-basic and diluted
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7,197,569
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5,939,992
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AS OF MARCH 31
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BALANCE SHEET DATA:
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2004
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2003
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AUDITED
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Cash and cash equivalents
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$
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870,513
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$
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29,729
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Working capital
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$
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692,948
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$
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79,106
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Total assets
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$
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1,373,831
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$
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384,664
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Stockholders' equity (deficit)
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$
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1,188,366
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$
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347,541
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RISK FACTORS
An investment in shares of our common stock involves a high degree of risk. You should consider the following factors, in addition to the other information contained in this prospectus, in evaluating our business and proposed activities before you
purchase any shares of our common stock. You should also see the section on Forward-Looking Statements immediately following these Risk Factors regarding risks and uncertainties relating to us and to forward looking statements in this prospectus.
Risks Relating To Our Business
Our ability to continue as a going concern is uncertain.
Our financial statements have been prepared on a going concern basis, which
contemplates continuity of operations, realization of assets and liquidation
of liabilities in the ordinary course of business. We have a need for substantial
funds to develop our geothermal properties. We have financed our activities
to date using private debt and equity financings, and we have no line of credit
or other financing agreement providing borrowing availability with a commercial
lender. Our ability to continue as a going concern is dependent upon adequate
sources of capital and the ability to sustain positive results of operations
and cash flows sufficient to continue to explore for and develop our geothermal
assets.
All the foregoing lead to questions concerning our ability to meet our obligations as they come due. There is no assurance that the carrying amounts of our assets will be realized or that liabilities will be liquidated or settled for the amounts
recorded. GTH is in a development stage and there is no assurance, at this time, that we will procure a long term power purchase agreement or the associated equity and/or debt financing required to build and commission a geothermal electrical power
generation facility.
We have a limited operating history, have incurred losses to date, and
cannot give any assurance that we can ever attain profitability.
Our company has been engaged in limited activities in the geothermal business
since Geo-Idaho’s incorporation in February 2002. As a result of our brief
operating history, our operating results from historical periods are not readily
comparable to and may not be indicative of future results. We have not generated
revenues from operations to date, and cannot give any assurance that we will
be able to generate revenues in the future. For the years ended March 31, 2003
and 2004, we incurred net losses of ($164,909) and ($436,061), respectively.
At March 31, 2004, we had an accumulated deficit of ($1,009,136). We expect
to incur losses for at least the next 24 months. We cannot give you any assurance
that we will soon make a profit or that we will ever make a profit. To achieve
profitability, we must, among other things, procure a long-term power purchase
agreement from an investment grade utility, and obtain financing to build and
commission a geothermal electrical power generation facility.
Our future performance depends on our ability to establish that the geothermal
resource is economically exploitable.
Geothermal resource exploration and development involves a high degree of risk.
The independent accountants' report on our financial statements as of and for
the year ended March
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31, 2004 includes an explanatory paragraph, which states that GTH has not yet determined whether its properties contain economically recoverable geothermal reserves. The recovery of the amounts shown for geothermal properties and related deferred
costs on our financial statements, as well as the execution of our business plan generally, is dependent upon the existence of economically recoverable reserves. Until the balance of the development program is completed and an independent reserve
appraisal undertaken, the potential of the Raft River property is undetermined.
We have a need for substantial additional financing and will have to significantly
curtail or cease operations if we are unable to secure such financing.
At March 31, 2004, we had a cash position of $870,513. We require substantial
additional financing to fund the cost of continued development of the Raft River
project and other operating activities, to acquire the remaining ownership of
property making up the project, and to finance the growth of our business, including
the construction and commissioning of a power generation facility. If further
funding is not obtained by December 31, 2004, we may be required to significantly
curtail or cease operations. We may not be able to obtain the needed funds on
terms acceptable to us or at all. Further, if additional funds are raised by
issuing equity securities, significant dilution to our current shareholders
may occur and new investors may get rights that are preferential to current
shareholders. Alternatively, we may have to bring in a joint venture partner
to fund further development work, which would result in reducing our interest
in the project.
It is very costly to place geothermal resources into commercial production.
If a commercial geothermal resource is established in respect to the Raft River
project, before the sale of any power can occur, it will be necessary to construct
a gathering and disposal system, a power plant, and a transmission line, and
considerable administrative costs would be incurred, together with the drilling
of additional wells. We have estimated these costs to be around US $30,000,000.
To fund expenditures of this magnitude, we may have to find a joint venture
participant with substantial financial resources. There can be no assurance
that a participant can be found and, if found, it would result in GTH having
to substantially reduce its interest in the project.
If we are unable to enter into a long-term power purchase agreement or
a power distribution agreement to deliver our power, we will be unable to distribute
power and generate revenues.
Once our reserves are established, our strategy is to enter into a long-term
power purchase agreement from an investment grade utility, which we anticipate
will allow us to obtain financing to build and commission a geothermal electrical
power generation facility. If our power purchase agreement does not provide
access to a power distribution grid, we will also need to enter into an agreement
with a power distribution network. Even if our reserves are established, we
cannot assure you that we will be able to negotiate, execute and maintain favorable
power purchase or distribution agreements.
We may not be able to manage our growth.
Significant growth in our operations will place demands on our operational,
administrative and financial resources, and the increased scope of our operations
will present challenges to us due to
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increased management time and resources required and our existing limited staff. Our future performance and profitability will depend in part on our ability to successfully integrate the operational, financial and administrative functions of Raft
River and other acquired properties into our operations, to hire additional personnel and to implement necessary enhancements to our management systems to respond to changes in our business. There can be no assurance that we will be successful in
these efforts. Our inability to integrate acquired properties, to hire additional personnel or to enhance our management systems could have a material adverse effect on our results of operations.
If we incur additional debt to fund our business, the risks significant
debt levels pose will increase.
We will need to procure significant additional financing to construct, commission
and operate a power plant at Raft River in order to generate and sell electricity.
If this financing includes the issuance of material amounts of debt, this would
expose GTH to additional risks including, among others, the following:
• a
portion of our cash flow from operations would be used for the payment of principal
and interest on our indebtedness and would not be available for financing capital
expenditures or other purposes;
• our
level of indebtedness and the covenants governing our indebtedness could limit
our flexibility in planning for, or reacting to, changes in our business because
certain activities or financing options may be limited or prohibited under the
terms of agreements relating to such indebtedness;
• our
level of indebtedness may make us more vulnerable to defaults by the purchasers
of electricity or in the event of a downturn in our business because of our
fixed debt service obligations; and
• the
terms of agreements may require us to make interest and principal payments and
to remain in compliance with stated financial covenants and ratios. If the requirements
of such agreements were not satisfied, the lenders would be entitled to accelerate
the payment of all outstanding indebtedness and foreclose on the collateral
securing payment of that indebtedness, which would likely include our interest
in the project.
In such event, we cannot assure you that we would have sufficient funds available or could obtain the financing required to meet our obligations, including the repayment of outstanding principal and interest on such indebtedness.
The success of our business relies on retaining our key personnel.
We are dependent upon the services of our President and Chief Executive Daniel
J. Kunz, our Chief Operating Officer, Douglas J. Glaspey and our Chief Financial
Officer, Ronald P. Bourgeois. The loss of any of their services could have a
material adverse effect upon us. GTH has executed employment agreements with
these persons but does not have key-man insurance on any of them.
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Our development activities are inherently very risky.
The risks involved in the development of a geothermal resource cannot be over-stated.
The development of a geothermal resource is such that there cannot be any assurance
of success. Exploration costs are not fixed, and the resource cannot be relied
upon until substantial development has taken place, which entails high exploration
and development costs. The costs of development drilling are subject to numerous
variables which could result in substantial cost overruns. Drilling for geothermal
resource may involve unprofitable efforts, not only from dry wells, but from
wells that are productive but do not produce sufficient net revenues to return
a profit after drilling, operating and other costs. Our drilling operations
may be curtailed, delayed or cancelled as a result of numerous factors, many
of which are beyond our control, including economic conditions, mechanical problems,
title problems, weather conditions, compliance with governmental requirements
and shortages or delays of equipment and services. If our drilling activities
are not successful, we would experience a material adverse effect on our future
results of operations and financial condition.
In addition to the substantial risk that wells drilled will not be productive, hazards such as unusual or unexpected geologic formations, pressures, downhole fires, mechanical failures, blowouts, cratering, explosions, uncontrollable flows of well
fluids, pollution and other physical and environmental risks are inherent in geothermal exploration and production. These hazards could result in substantial losses to us due to injury and loss of life, severe damage to and destruction of property
and equipment, pollution and other environmental damage and suspension of operations. As protection against operating hazards, we maintain insurance coverage against some, but not all, potential losses. We do not fully insure against all risks
associated with our business either because such insurance is not available or because the cost of such coverage is considered prohibitive. The occurrence of an event that is not covered, or not fully covered, by insurance could have a material
adverse effect on our financial condition and results of operations.
The impact of governmental regulation could adversely affect our business.
Our business is subject to certain federal, state and local laws and regulations,
including laws and regulations on taxation, the exploration for and development,
production and distribution of electricity, and environmental and safety matters.
Many laws and regulations require drilling permits and govern the spacing of
wells, rates of production, prevention of waste and other matters. Such laws
and regulations may increase the costs of planning, designing, drilling, installing,
operating and abandoning our geothermal wells, the power plant and other facilities.
In addition, our operations are subject to complex environmental laws and regulations
adopted by federal, state and local jurisdictions where we operate. We could
incur liability to governments or third parties for any unlawful discharge of
pollutants into the air, soil or water, including responsibility for remedial
costs. We could potentially discharge such materials into the environment in
any of the following ways:
-
from a well or drilling equipment at a drill site;
-
leakage from gathering systems, pipelines, power plant and storage tanks;
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damage to geothermal wells resulting from accidents during normal operations; and
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blowouts, cratering and explosions.
In addition, the submission and approval of environmental impact assessments may be required. Environmental legislation is evolving in a manner which means stricter standards, and enforcement, fines and penalties for non-compliance are more
stringent. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies and directors, officers and employees. The cost of compliance with changes in governmental regulations has a potential to reduce the
profitability of operations.
Because the requirements imposed by such laws and regulations are frequently changed, we cannot assure you that laws and regulations enacted in the future, including changes to existing laws and regulations, will not adversely affect our business.
In addition, because we acquire interests in properties that have been operated in the past by others, we may be liable for environmental damage caused by such former operators.
Industry competition may impede our growth.
The electrical power generation industry, of which geothermal power is a sub-component,
is highly competitive and we may not be able to compete successfully or grow
our business. We compete in areas of pricing, grid access and markets. The industry
in the Pacific Northwest, in which the Raft River project is located, is complex
as it is composed of public utility districts, cooperatives and investor-owned
power companies. Many of the participants produce and distribute electricity.
Their willingness to purchase electricity from an independent producer may be
based on a number of factors and not solely on pricing and surety of supply.
Claims have been made that some geothermal plants cause seismic activity
and related property damage.
There are approximately two dozen geothermal plants operating within a fifty-square-mile
region in the area of Anderson Springs, in Northern California, and there is
general agreement that the operation of these plants causes a generally low
level of seismic activity. Some residents in the Anderson Springs area have
asserted property damage claims against those plant operators. There are significant
issues whether the plant operators are liable, and to date no court has found
in favor of such claimants. Even if liability is imposed on operators in the
Anderson Springs area, we do not believe the area of the Raft River project
or our intended operation of a power plant present the same geological or seismic
risks.
Changes in wholesale power prices may affect our profitability.
The wholesale power price is beyond our control and subject to significant fluctuations.
There is no guarantee that the wholesale power price in effect at any point
in time will result in the profitable operation of a geothermal power producer.
There are some risks for which we do not or cannot carry insurance.
GTH may become subject to liability for pollution or other hazards against which
it cannot insure or against which it may elect not to insure because of high
premium costs or other reasons. In particular, GTH is not insured for environmental
liability or earthquake damage.
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Our officers and directors may have conflicts of interests arising out
of their relationships with other companies.
Several of our directors and officers serve (or may agree to serve) as directors
or officers of other companies or have significant shareholdings in other companies.
Because our executive officers currently serve in only part-time capacities,
the extent that such other companies require their services may conflict with
the available time or scheduling of services performed for GTH. To the extent
that such other companies may participate in ventures in which GTH may participate,
the directors may have a conflict of interest in negotiating and concluding
terms respecting the extent of such participation. If a conflict of interest
arises, a director who has such a conflict will abstain from voting for or against
the approval of such a participation or such terms. From time to time several
companies may participate in the acquisition, exploration and development of
natural resource properties thereby allowing for their participation in larger
programs, permitting involvement in a greater number of programs and reducing
financial exposure in respect of any one program. It may also occur that a particular
company will assign all or a portion of its interest in a particular program
to another of these companies due to the financial position of the company making
the assignment. Under the laws of the State of Delaware, the directors of GTH
would be required to act honestly, in good faith and in the best interests of
GTH. In determining whether or not GTH would participate in a particular program
and what interest GTH would acquire in it, the directors would primarily consider
the degree of risk to which GTH would be exposed and its financial position
at that time.
Risks Relating To The Market For Our Securities
There is currently no U.S. public market for our common shares and one
may not develop or be maintained.
Our common shares currently have no trading market in the United States. Even
though we are registering shares under the Securities Act, our common shares
are not listed on any U.S. exchange or over-the-counter market. We intend to
seek to have a trading market for our common shares develop in the United States,
but there can be no assurance that we will be successful in this regard. We
do not meet the requirements to have our common shares included in any NASDAQ
trading system or listed on any national securities exchange. However, we do
intend to seek to have our shares quoted on the NASD OTC Bulletin Board. In
order to do so, a broker-dealer in securities in the United States may be required
to file with the NASD a notice that will enable the broker-dealer to enter quotations
for our common shares on the OTC Bulletin Board. There can be no assurance that
a broker-dealer will agree to file such a notice or, if filed, that quotations
will be accepted on the OTC Bulletin Board. Further, there can be no assurance
that if a broker-dealer commences to enter bid and asked quotations for our
common shares on the OTC Bulletin Board that a viable and active trading market
will develop. There can be no assurance that any market will develop for our
shares, or that there will be a sufficient market so that holders of common
shares will be able to sell their shares, or the price at which holders may
be able to sell their shares. Future trading prices of the common shares will
depend on many factors, including, among others, our operating results and the
market for similar securities.
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A significant number of shares of our common stock will become eligible
for sale upon the effectiveness of the registration statement of which this
prospectus forms a part, which could have an adverse effect on the market price
for our common stock and could adversely affect our ability to raise needed
capital.
A significant number of shares will become saleable upon effectiveness of the
registration statement of which this prospectus is a part. Currently, the number
of shares in the public float on the TSX Venture Exchange is 7,146,900. The
market price for our common stock could decrease significantly at such time
and our ability to raise capital could be adversely affected.
Vulcan Power Company holds approximately
1
4% of the outstanding
shares of our common stock and has the option to acquire an additional
11
%,
and accordingly could have significant influence over the outcome of all matters
submitted to the shareholders for approval, which influence may be exercised
to the detriment of other shareholders.
Vulcan Power Company presently owns 1,755,156 shares of our common stock, representing
approximately 14%, and has warrants to purchase an additional 2,420,217 shares
of our common stock, representing approximately an additional 11% of our outstanding
shares of common stock. Accordingly, Vulcan Power has significant influence
over the outcome of all matters submitted to the shareholders for approval,
including the election of directors.
We do not anticipate paying dividends on our common stock.
We have never paid dividends on our common stock and do not anticipate paying
dividends in the foreseeable future. We intend to follow a policy of retaining
all of our earnings, if any, to finance development and expansion of our business.
The possible issuance of substantial amounts of additional shares without
shareholder approval may dilute the percentage ownership of our shareholders.
There are 12,922,693 shares of our common stock outstanding and 6,102,592 shares
of common stock issuable upon exercise or conversion of outstanding options
and warrants. There are 100,000,000 shares of our common stock authorized for
issuance. All of our authorized shares in excess of those currently outstanding
may be issued without any action or approval by our shareholders and may dilute
the percentage ownership of our current shareholders.
Because the public market for shares of our common stock is limited, you
may be unable to resell your shares of common stock.
There is currently only a limited public market for our common stock on the
TSX Venture Exchange, and no public market in the United States, and you may
be unable to resell your shares of common stock. Even though we intend to list
our common stock on the Over-the Counter Bulletin Board, the development of
an active public trading market depends upon the existence of willing buyers
and sellers that are able to sell their shares and market makers that are willing
to make a market in the shares. Under these circumstances, the market bid and
ask prices for the shares may be significantly influenced by the decisions of
the market makers to buy or sell the shares for their own account, which may
be critical for the establishment and maintenance of a liquid public market
in our common stock. Market makers are not required to maintain a continuous
two-sided market and are free to withdraw firm quotations at any time. We cannot
give you any assurance that an active public trading market for the shares will
develop or be sustained.
- 15 -
The price of our common stock is volatile, which may cause investment losses
for our shareholders.
The market for our common stock is highly volatile. The trading price of
our common stock on the TSX Venture Exchange is (and if and when listed on the
OTC is anticipated to be) subject to wide fluctuations in response to, among
other things, quarterly variations in operating and financial results, and general
economic and market conditions. In addition, statements or changes in opinions,
ratings, or earnings estimates made by brokerage firms or industry analysts
relating to our market or relating to our company could result in an immediate
and adverse effect on the market price of our common stock. The highly volatile
nature of our stock price may cause investment losses for our shareholders.
Our common stock will be considered to be a “penny stock,” which
may make it more difficult for investors to sell their shares.
Our common stock will be considered to be a “penny stock.” The
Securities and Exchange Commission has adopted rules that regulate broker-dealer
practices in connection with transactions in “penny stocks.” Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted
on NASDAQ, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system). Prior
to a transaction in a penny stock, a broker-dealer is required to:
• deliver
a standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock market;
• provide
the customer with current bid and offer quotations for the penny stock;
• explain
the compensation of the broker-dealer and its salesperson in the transaction;
• provide
monthly account statements showing the market value of each penny stock held
in the customer’s account; and
• make
a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser’s written agreement to the
transaction.
These requirements may have the effect of reducing the level of trading activity in the secondary market for our stock and investors may find it more difficult to sell their shares.
FORWARD-LOOKING STATEMENTS
Statements contained in this prospectus include “forward-looking statements.” Forward-looking statements involve known and unknown risks, uncertainties and other factors which could cause the actual results, performance and achievements,
whether expressed or implied by such forward-looking statements, not to occur or be realized. Such forward-looking statements generally are based upon our best estimates of future results, performance or achievement, based
- 16 -
upon current conditions and the most recent results of operations. Forward-looking statements may be identified by the use of forward-looking terminology such as “may,” “expect,” “believe,” “estimate,”
“anticipate,” “continue,” or similar terms, variations of such terms or the negative of such terms. Potential risks and uncertainties include, among other things, such factors as:
• our
access to debt and equity capital and the availability of joint venture development
arrangements,
• our
business strategy,
• our
ability to enhance and maintain production from existing wells and successfully
develop additional producing wells,
• our
ability to procure a long-term power purchase agreement,
• our
statements about quantities of electrical generation, continuing production
rates of those levels, estimated or proved geothermal resources, and borrowing
availability based on proved resources,
• our
ability to attract and retain qualified personnel, and
• the
other factors and information disclosed and discussed under “Risk Factors”
above.
Investors should carefully consider such risks, uncertainties and other information, disclosures and discussions which contain cautionary statements identifying important factors that could cause actual results to differ materially from those
provided in the forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
PRICE RANGE OF COMMON STOCK
Our common shares are traded on the TSX Venture Exchange under the symbol GTH. Our common shares are not currently traded on any United States stock exchange or in the over-the-counter market in the United States, and, accordingly, there is
currently no public market for our common shares in the United States.
The following sets forth information relating to the trading of GTH shares on the TSX Venture Exchange. The trading prices reflect the reverse stock-split on a 5 to 1 basis which was effected December 19, 2003. The trading of GTH shares was halted
on April 3, 2002, prior to the announcement of the acquisition of Geo-Idaho. The last trade of shares of GTH prior to the halt was at CDN $0.80 per share ($0.16 pre-consolidation). Trading resumed on December 22, 2003 with the initial trade not
occurring until January 5, 2004.
- 17 -
|
BID PRICES
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|
|
|
|
|
|
|
|
2002
|
HIGH
|
|
LOW
|
|
|
|
|
|
|
|
|
|
(CDN)
|
|
(CDN)
|
|
|
First Quarter
|
$1.00
|
|
$0.15
|
|
|
Second Quarter
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$1.00
|
|
$0.75
|
|
|
Third Quarter
|
n/a
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|
n/a
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|
Fourth Quarter
|
n/a
|
|
n/a
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|
|
|
|
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
(CDN)
|
|
(CDN)
|
|
|
First Quarter
|
n/a
|
|
n/a
|
|
|
Second Quarter
|
n/a
|
|
n/a
|
|
|
Third Quarter
|
n/a
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|
n/a
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|
Fourth Quarter
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none
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none
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|
2004
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|
|
|
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(CDN)
|
|
(CDN)
|
|
|
First Quarter
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$0.54
|
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$0.90
|
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|
Second Quarter
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$0.70
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$1.05
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July 1
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$0.94
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$1.00
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As of July 1, 2004, we had approximately 255 stockholders of record.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of common stock offered in this prospectus, other than the exercise price, if any, to be received upon exercise of the warrants and options. We will pay substantially all of the
expenses related to the registration of the securities.
DIVIDEND POLICY
We have never paid and do not intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to retain any future earnings for reinvestment in our business. Any future determination to pay cash dividends will be
at the discretion of our board of directors and will be dependent upon our financial condition, results of operations, capital requirements and other relevant factors.
THE COMPANY AND ITS BUSINESS
Business Development
U.S. Geothermal Inc.(or “GTH”) is a Delaware corporation. GTH was originally incorporated in the province of British Columbia, Canada, under the name “Mango Resources Ltd.” on September 14, 1987. On October 7, 1999, the Company
changed its name from “Mango
- 18 -
Resources Ltd.” to “Consolidated Mango Resources Ltd.” and its share capital was consolidated on the basis of five pre-consolidation common shares for one post-consolidation common share.
On March 10, 2000, GTH completed a plan of arrangement (the “Arrangement”) under the Company Act (British Columbia) with U.S. Cobalt Inc., a private Colorado corporation incorporated in April 1998 (“USC Colorado”), pursuant to
which GTH continued its jurisdiction of incorporation from the Company Act (British Columbia) to Delaware under the Delaware General Corporation Law, and changed its name from “Consolidated Mango Resources Ltd.” to “U.S. Cobalt
Inc.” In conjunction with the Arrangement, our authorized capital was changed from 100,000,000 common shares without par value to 100,000,000 shares of common stock with a par value of US $0.001 per share. GTH owns 100% of USC Colorado, which
is inactive.
Historically, GTH had operated in the resources sector and held interests in various properties. In March of 2002, GTH determined it would focus its business efforts on renewable, “green” energy projects. The opportunity to be involved in
the geothermal business as presented by Geo-Idaho was attractive to GTH’s board of directors and subsequently approved by its shareholders.
1
In December 2003, we acquired Geo-Idaho through the merger of Geo-Idaho with a wholly-owned subsidiary, EverGreen Power Inc., an Idaho corporation formed for that purpose. Geo-Idaho is the surviving corporation and the subsidiary through which GTH
conducts operations. As part of this acquisition, we changed our name to U.S. Geothermal Inc. Geo-Idaho was incorporated in February 2002 as an Idaho corporation. Because the former Geo-Idaho shareholders became the majority holders of GTH, the
transaction is treated as a “reverse takeover” for accounting purposes.
Geo-Idaho was formed as an Idaho corporation in February 2002. On March 5, 2002, Geo-Idaho entered into a letter agreement with Vulcan Power Company, pursuant to which Geo-Idaho agreed to acquire from Vulcan all of the real property, personal
property and permits that comprised Vulcan’s interest in the Raft River project. We generally refer to Vulcan’s real and personal property interests as the “Vulcan Property”. On December 3, 2002, the letter agreement was replaced
by a formal agreement with Vulcan (the “Vulcan Agreement”) which provided for the acquisition of 100% of the Vulcan Property upon the fulfillment of various conditions. As of February 17, 2004, GTH had acquired a 75% undivided interest in
the property, and can acquire the remaining 25% interest for a payment of $125,000 at any time prior to construction of the initial power plant.
Business
Geo-Idaho was incorporated for the sole purpose of acquiring one or more geothermal projects and more particularly, entering into the agreement with Vulcan Power Company to acquire a 100% interest in the Raft River project. Prior to the
incorporation of Geo-Idaho, its founding shareholders had been actively pursuing a potential acquisition of a geothermal project in Idaho since early 2001. The company acquired Geo-Idaho in order to pursue geothermal energy
________________________________________________________
1
Messrs. Glaspey, Kunz and Larkin were each directors, officers and shareholders
of both Geo-Idaho and GTH. An independent fairness opinion was provided to GTH
by MCSI Consulting Services Inc., an independent firm of corporate finance advisors.
A copy of the opinion is available upon written request of the company.
- 19 -
development, and particularly the development of the Raft River project. Since the acquisition of Geo-Idaho, GTH has continued to seek and acquire additional property interests with geothermal resources.
Geothermal Energy
Geothermal energy is natural heat energy stored within the earth’s crust at accessible depth. In certain areas of the earth, economic concentrations of heat energy result from a combination of geological conditions that allow water to penetrate
into hot rocks at depth, become heated, then circulate to a near surface environment. In these settings, commercially viable extraction of the geothermal energy and its conversion to electricity become possible and a “geothermal resource”
is present.
There are four major components (or factors) to a geothermal resource:
|
1.
|
heat source and temperature – The
economic viability of a geothermal resource is related to the amount of
heat generated. The higher the temperature, the more valuable the geothermal
resource is.
|
|
|
|
|
2.
|
fluid – A geothermal resource is commercially
viable only when the system contains water and/or steam as a medium to
transfer the heat energy to the surface.
|
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|
|
3.
|
permeability – The fluid present underground
must be able to move. In general, significant porosity and permeability
within the rock formation are needed to create a viable reservoir.
|
|
|
|
|
4.
|
depth – the cost of development increases
with depth, as does resource temperatures. Closeness of the reservoir
to the surface is therefore a key factor in the economic valuation of
a geothermal resource.
|
Exploration.
In order to assess the potential of a geothermal resource, a variety of geological, geochemical and geophysical investigation techniques are employed. For example, subsurface temperatures are measured by drilling; detailed
gravity and magnetic measurements yield models of the underground geologic structure; and measurements of the earth’s electrical resistivity assist in defining possible zones of hot water and/or the hydrothermally altered rocks that typically
overlie a thermal aquifer.
Production.
The energy necessary to operate a geothermal power plant is typically obtained from at least several production wells which are drilled using established technology similar to that employed in the oil and gas industry. Production
wells are typically located within one mile of the power plant. Wells are also needed to inject most of the spent and cooled geothermal water back underground.
Geothermal Power Plants.
Geothermal power plants fall into two general categories. A direct-steam plant uses steam directly (either from dry steam wells or separated from water under pressure) to drive turbines connected to generators. A
binary power plant uses a heat transfer system to transfer the heat energy from hot water (and/or steam) to a working fluid with a lower
- 20 -
boiling temperature than water. Binary systems are mostly employed at medium-grade resources (with temperatures below about 180°C). Some projects employ combinations of direct-steam and binary systems.
Environmental Benefits.
Geothermal energy is a clean renewable energy with almost zero emission of greenhouse and acid-rain gases. Practically no waste is generated in a binary power plant such as that planned at the Raft River
project. After extraction of heat energy from geothermal fluids, all remaining gases and liquids are re-injected to the ground. Geothermal energy projects involve minimum disturbance to the surface and the underground rock formation.
The Raft River Project
Location and Property Description of Raft River Project.
The Raft River project is located in south-central Idaho, approximately 55 miles southeast of Burley, the county seat of Cassia County. Burley has a population of 8,300 and is the local agricultural and manufacturing center for the area, providing a
full range of light to heavy industrial services. A commercial airport is located 90 miles to the northeast in Pocatello, Idaho. Pocatello, population 53,000, is a regional center for agriculture, heavy industry (mining, phosphate refining),
technology and education with Idaho State University. Malta, a town with a population of 180, is 12 miles north of the project site where basic services, fuel, and groceries are available. Year-round access to the project from Burley is via
Interstate Highway 84 south to State Highway 81 south, then east on the Narrows Canyon Road, an improved county road.
- 21 -
The Raft River project currently consists of five parcels (generally referred to as the Vulcan Property, the Crank Lease, the Newbold Lease, the Jensen Lease and the Jensen Investments Lease) comprising 560 acres of fee land and 3,179.25 acres of
contiguous leased geothermal rights located in Sections 23, 24, 25, 26, 27, 28, 33, 34 and 35, Township 15 South, Range 26 East Boise Meridian, and Sections 17, 18, 19, 29, and 30, Township 15 South, Range 27 East Boise Meridian, Cassia County,
Idaho. All parcels are defined by legal subdivision or by metes and bounds survey description. The five parcels are as follows:
The Vulcan Property.
The Vulcan Property includes both surface and geothermal rights and consists of two units. The first unit has a total area of 240 acres and is comprised of the East half of the South-East quarter of Section 22, plus the
South-West quarter of Section 23, Township 15 South, Range 26 East Boise Meridian. Three geothermal wells (RRGE-1, RRGP-4 and RRGP-5) are located on this parcel. The second unit has a total area of 320 acres, and is comprised of the South half of
the North-West quarter, the South half of the North-East quarter, and the entire South-East quarter of Section 25, Township 15, South, Range 26 East Boise Meridian. Three additional geothermal wells (RRGE-3, RRGI-6 and RRGI-7) are located on this
parcel. A fourth well, RRGE-2, although located on the property covered by the Crank lease, was acquired by the company as part of its purchase of the Vulcan Property.
The Crank Lease.
The Crank lease covers 160 acres of geothermal rights, with right of ingress and egress. The lease is comprised of the NE quarter of Section 23, Township 15 South, Range 26 East Boise Meridian. The lease has a primary term of
5 years and is extended indefinitely so long as production from the well or from the geothermal field is maintained.
The Newbold Lease.
The Newbold lease covers 20 acres of both surface and geothermal rights. The lease is comprised of the NE quarter of Section 23, Township 15 South, Range 26 East Boise Meridian. The lease has a primary term of 10 years and
is extended indefinitely so long as production from the geothermal field is maintained.
The Jensen Lease.
The Jensen lease covers 2,954.75 acres of geothermal rights only. It is contiguous with the Vulcan property and the Crank lease with land parcels located in Sections 24, 25, 26, 27, 33, and 34, Township 15 South, Range 26
East Boise Meridian, and in Sections 18, 19, 20, 29, and 30, Township 15 South, Range 27 East Boise Meridian.
The Jensen Investments Lease.
The Jensen Investments lease covers 44.5 acres of surface and geothermal rights in Section 35, Township 15 South, Range 26 East Boise Meridian, and is contiguous with the Jensen lease. The lease has a primary
term of 10 years and is extended indefinitely so long as production from the geothermal field is maintained.
- 22 -
Lease/Royalty Terms
The four leased parcels (the Crank lease, the Newbold lease, the Jensen lease and the Jensen Investments lease) have production royalties payable under the following terms:
(a)
|
Energy produced, saved and used for the generation of electric power, which is then sold by lessee, has a royalty of ten percent (10%) of the net proceeds.
|
(b)
|
Energy produced, saved and sold by lessee, then used by the purchaser for generation of electric power, has a royalty of ten percent (10%) of the market value.
|
|
(c)
|
Energy produced, which is used for any purpose other than
the generation of electricity has a royalty of five percent (5%) of the
gross proceeds.
|
In addition, the following lease and other royalty terms apply to the individual leases:
The Crank Lease.
Advanced production royalties are payable under the Crank lease as follows:
-
On signing: US $5,000
-
Year 2: US $10,000
-
Year 3: US $10,000
- 23 -
-
Year 4: US $15,000
-
Year 5: US $15,000
The advanced production royalties can be credited toward production royalties owed. During commercial production, there is a minimum annual production royalty of US $18,000.
The Newbold Lease
. The Newbold lease has a primary term of 10 years and is extended indefinitely so long as production from the geothermal field is maintained. Lease payments are as follows:
-
Years 1-4: $10.00 per acre.
-
Years 6-10: $15.00 per acre
The Jensen Lease.
The Jensen lease has a primary term of 10 years and is extended indefinitely so long as production from the geothermal field is maintained. Lease payments are as follows:
-
Years 1-5: US $2.50 per acre (Year 1 paid on signing)
-
Years 6-10: US $3.00 per acre
The Jensen Investments Lease.
The Jensen Investments lease has a primary term of 10 years and is extended indefinitely so long as production from the geothermal field is maintained. Lease payments are as follows:
-
Years 1-5: US $2.50 per acre
-
Years 6-10: US $3.00 per acre
All of the lease payments are current through June 1, 2004.
History of the Raft River Project
2
A geothermal resource in the Raft River valley was first identified before 1950 at two shallow agricultural wells which produced boiling water (the “Crank” well and the “Bridge” well). Interest in exploring and developing the
geothermal resource of the Raft River valley began in the early 1970s, first by the U.S. Geological Survey, which undertook reconnaissance geochemical and geological work in 1972. One of the most significant results of this work was that chemical
geothermometry of samples from the two boiling wells indicated a resource temperature of about 300°F.
In 1971, the Raft River Rural Electric Cooperative began preliminary investigations into the
________________________________________________________
2
Much of the historical information set forth is from the August 2002
report of GeothermEx Inc. “Technical Report On The Raft River Geothermal
Resource, Cassia County Idaho.” A copy of the report is available from
GTH on written request.
- 24 -
possibility of generating electric power from this resource. Supported by the U.S. Energy Research and Development Administration (ERDA), the predecessor to the U.S. Department of Energy (DOE), investigations focused on using binary technology,
which was experimental at that time, to generate electric power. In late 1973, the U.S. Geological Survey began an integrated geological, geophysical, geochemical and hydrological analysis of geothermal resources in general, and the Raft River
geothermal resource specifically. Drilling activities in the Raft River area included 34 auger holes of 100-foot depth, an offset to the Bridge well (one of the two shallow boiling wells mentioned above), and five core holes (also referred to as
“intermediate holes”) ranging in depth from 250 to 1,423 feet. These core holes were drilled to provide information to test geophysical interpretations of the subsurface structure and lithology, and to provide hydrologic and geologic data
on the shallow part of the geothermal system.
The next phase of drilling consisted of seven deep, full-diameter wells: RRGE-1, RRGE-2, RRGE-3, RRGP-4, RRGP-5, RRGI-6 and RRGI-7. These were completed during 1975 to 1978, and were the subject of extensive testing. All of these wells are located
on the lands comprising the Raft River project.
Well RRGE-1 was located between the Bridge and Crank wells, and targeted the Bridge Zone (an inferred north-northeast-trending fault zone in the area near the boiling shallow wells) at depth. Completed in April 1975, the well was a success, although
there was no evidence that it had penetrated a fault. Well RRGE-2, located about 3,000 feet northeast of RRGE-1, also targeted the Bridge Zone, but deeper, in the basement rock. Completed in June 1975, it too was a successful producer, but again,
there was no evidence of fault penetration. These two wells were flow tested for several months, and RRGE-2 was injection tested. After the injection testing, well RRGE-2 was deepened by about 500 feet in March 1976.
Further investigation of the postulated Bridge Zone was dropped in 1976; instead, the focus of drilling shifted to evaluating the extent and capacity of the geothermal reservoir. Well RRGE-3, located more than a mile southeast of RRGE-1, was drilled
for this purpose and was deliberately side-tracked three times (legs A, B, and C), with modest displacements (< 500 feet) of the bottomhole locations relative to the surface location in all three legs. The purpose of drilling the side-tracks was
to determine if additional production could be obtained from a multi-legged well at less cost than drilling an additional well or wells; however, the flow rate from the three legs was lower than that of either of the first two wells. The well was
completed in May 1976.
The fourth well was to be an injection well, and was therefore named RRGI-4. Located about 1,800 feet south of well RRGE-1, this well was completed in May 1977. Seven monitoring wells (MW-1 through MW-7) were drilled to depths ranging from 500 to
1,300 feet in 1978. Injection testing of well RRGI-4 in early 1978 revealed a hydraulic connection to nearby monitoring wells (MW-1, USGS-3 and the BLM Offset of the Bridge well). In November 1978, RRGI-4 was deepened and completed as a producer
with two legs, and its name was changed to RRGP-4. However, it produced only a small amount of fluid under artesian flow.
The next well to be drilled was RRGI-6, located about 3,500 feet E of well RRGE-3. Completed in May 1978, this well was a moderately successful injector. Moving back to the eastern flank of the Jim Sage Mountains, the next well to be drilled was
RRGP-5, located about 2,800 feet
- 25 -
southwest of RRGE-1. The target for this well was the Bridge Zone or the Horse Well Zone (a second north-northeast-trending structure closer to the mountains). Completed in September 1978, this well produced artesian flow at lower rates than RRGE-1
or RRGE-2.
Finally, well RRGI-7 was completed in August 1978. RRGI-7 is located about 2,000 feet southwest of RRGI-6, and achieved similar results.
In 1979, well RRGP-4 (leg B) was hydraulically fractured; this apparently improved its production rate somewhat. A fracture treatment was also performed on well RRGP-5 in November 1979.
Limited testing was undertaken during or immediately after the drilling of each well; however, these tests were not instrumented and few data are available. All of the production wells were artesian, and self- flow tests of each well were conducted
to enable later pump tests to be designed. Pulse tests (a series of tests of each well at different flow rates for relatively short duration, with pressure recovery recorded between each rate step) were also conducted by pumping. Longer-term pump
tests were also conducted, using either submersible or line-shaft pumps. Relatively short-term injection tests were conducted. Finally, interference tests, in which one or more wells were produced while pressure data were collected in monitoring
wells, were conducted.
Based on the early drilling results from RRGE-1 and RRGE-2, design of a 5 MW binary pilot power plant began in 1976 and was completed by the end of 1978. Plant construction began in August 1979 and was completed in September 1981. The plant was
operated in September, October and November 1981. Repairs and modifications were then made, and the plant operated again from March 1982 through June 1982. The output of the plant was about 4 MW, and the project confirmed the technical feasibility
of binary plant operation with a geothermal fluid source. Wells RRGE-1, RRGE-2 and RRGE-3 were used to supply the plant during its periods of operation, while wells RRGI-6 and RRGI-7 were used for injection. Fluid from well RRGP-5 was used to heat
the flow lines after long periods of shut-down. After an expenditure of nearly US $40,000,000, the entire project was officially shut down at the end of September 1982.
Raft River Production Wells
|
Well Number
|
Depth
|
Bottom Hole
Temperature ºC
|
|
RRGE – 1
|
4,989
|
147
|
|
RRGE – 2
|
6,543
|
148
|
|
RRGE – 3
|
5,917
|
149
|
|
RRGP – 4
|
5,099
|
143
|
|
RRGP – 5
|
4,911
|
133
|
As described above, in the 1970s and early 1980s, the Raft River area, including the Raft River
- 26 -
project, was under development by agencies of the United States government, beginning with ERDA and concluding with the successor organization to ERDA, the DOE. U.S. government-sponsored activities at Raft River concluded in 1982. In 1983, Hydra-Co
Enterprises, a firm based in Syracuse, New York, purchased the Raft River geothermal site and associated equipment, and moved the geothermal power plant to the Brady’s Hot Springs geothermal field in Nevada. Hydra-Co sold the property in l993
to Vulcan. Vulcan did not perform any work on the property.
Work Completed by GTH
In February 2002 GeothermEx, Inc. was engaged to prepare an appraisal of the geothermal well field located on the Vulcan property. According to the GeothermEx appraisal, the replacement cost of the geothermal well field assets is estimated to be US
$9,529,800.00. Well RRGE-2 had an estimated replacement value of US $1,797,600, resulting in a total replacement value for the Raft River well field of US $11,327,400.
3
Additional geothermal leases have been negotiated with landowners adjacent to the Vulcan property and the four leases described above were signed. The Crank lease covers 160 acres of geothermal rights under a production steam well (RRGE-2) that is
part of the Vulcan Property and was drilled by the Department of Energy during its tenure on the site. The Newbold lease covers 20 acres of geothermal rights in the area, the Jensen lease covers 2,954 acres of geothermal rights in the area, and the
Jensen Investments lease covers 44.5 acres of both surface and geothermal rights.
GeothermEx, Inc. was again hired in May 2002 to prepare the technical report for the Raft River project previously referred to. A detailed review of all available technical data available for the site was undertaken and a comprehensive report was
completed in August 2002. GeothermEx. also estimated energy reserves using a US Geological Survey volumetric reserve estimation method. The reserve calculation estimated the most likely MW capacity for the project is 15.6 MW per square mile, and
that there is a greater than 99% probability that at least 10MW of reserves exist per square mile. The nearly 6 square miles of geothermal rights controlled by GTH may amount to as much as 90MW if the entire leasehold proves as productive as the
area developed to date. Finally, GeothermEx concluded that if all five existing production wells can be restored to full productivity, it should be possible to supply a 14 to17MW(net) power plant with the addition of one to three new injection
wells. A 30MW(net) plant could be supported by a total of 9 to 10 production wells and 7 to 9 injection wells.
A Department of Energy Geothermal Resource Exploration and Definition II (GRED II) cost-sharing grant was awarded to Geo-Idaho in September 2002. The grant request, “Resource Confirmation Testing and Demonstration of Generating Capacity, Raft
River Project, Cassia County, Idaho”, covered the phase one well testing program as recommended by GeothermEx. The total phase one program cost which qualified for the grant is US $265,096.00 of which 80 percent (US $212,077) will be reimbursed
by DOE to GTH.
________________________________________________________
3
A copy of the GeothermEx appraisal is available upon written request
of the company.
- 27 -
GeothermEx also reviewed a cash flow model prepared by GTH for a single 10 MW power facility, and, based on its review, estimated the net present value of such a project with a 25-year lifetime to be US $1,224,000, net of projected capital and based
on a selling price of US $0.05 per kilo watt hour of electricity. This geothermal energy reserves report is also available for review upon request of the company.
In early June, 2003, the wellhead valves on the production and injection valves were overhauled and lubricated in preparation for well investigation operations. A high temperature video camera was lowered down in to each well to conduct a downhole
camera investigation and inspection of the integrity of the wellbore and determine, if possible, whether the wells were open. The video inspection revealed that four of the production wells had Baker Packers with flapper valves installed downhole to
restrict artesian flow and that two of the four wells had either debris or flow stingers left in the wells. One well, RRGE-2, could not be entered due to the master valve not closing. The two injection wells and production well RRGE-4 were inspected
to full depth and found to be open and in good condition.
Due to the discovery of the Baker Packers and the debris, flow testing could not be accomplished without either the removal of the packers or placement of new stingers to open the flapper valves. An updated plan was submitted to the Department of
Energy GRED II program to resolve the packer and debris problems and prepare the wells for flow testing. The amended plan was approved by DOE on September 15, 2003, with a total budget of $396,521. GTH will be reimbursed for 80% of the budget
(estimated at approximately $317,217). Subsequently, the program was expanded to include an interference test, which helps determine the impact of production pumping on the well field as a whole, and the GRED II program cost was increased to
approximately $700,000 with a plan of phased expenditures.
The well workover program began on April 13, 2004, and by May 14 had successfully removed the debris, placed new stingers, and prepared all of the production wells for flow testing. Flow testing and the downhole investigation (pressure and
temperature surveys) began on May 18 and was completed on June 21. Each production well was allowed to self- flow for 24-48 hours while fluid flow, temperature and pressure measurements were collected. Preliminary data from the testing program
indicates that the wells are in producible condition and should be useable for the production of electricity. The collected flow test data will be examined by GeothermEx Inc. to determine the potential production flow available from the existing
well field as part of a resource utilization study.
Under federal law, GTH is considered to be a Qualifying Facility (QF). GTH is in the process of negotiating a power purchase agreement with Idaho Power Company for a 10 MW power project. The contract would have a 20 year term and the electricity
price would be determined by the Idaho Public Utility Commission (IPUC) under federal PURPA law. In Idaho, for QF projects of 10 MW or less the IPUC prices power using an “avoided cost rate” that is calculated based on the full cost of
power as if the utility were to build a 230 MW combined cycle, natural gas fired power plant.
In addition, on March 22, 2004, GTH submitted a proposal to PacifiCorp for a 20 MW power plant as part of a renewable energy request for proposals. PacifiCorp is seeking 1400 MW of
- 28 -
renewable energy for their utilities operating in the Pacific Northwest and western states. PacifiCorp is in the process of evaluating all of the proposals submitted, and is expected to announce a short list of candidates by the end of the
3
rd
quarter 2004. GTH has also submitted a 30 MW, unsolicited proposal to sell power to the Bonneville Power Administration.
A point-to-point transmission request was submitted to Bonneville Power Administration – Transmission for 30 MW of transmission capacity on the 138 kV transmission line that crosses the Raft River property. This request provides the
transmission required to deliver power to Idaho Power Company at the Minadoka substation approximately 40 miles north of the project site. Bonneville Power Administration is preparing an interconnect study for the project, which will determine the
equipment requirements and cost for our power plant to connect to the transmission system at the Bridge substation, approximately 1.5 miles from the plant site.
Development Program
Resource Utilization Planning.
Data from the downhole investigation and well flow testing will be used to estimate the generating potential of both the resource and the existing wells and to develop a preliminary design for a power plant and
gathering system. This information will also determine or identify (1) if any wells need a workover, (2) if any additional production and/or injection wells will be needed to support the initial 10MW commercial power plant development, (3) whether
interference or injection testing is required, and (4) potential operational constraints. If the results of the resource utilization plan confirm that the existing well field is capable of producing 10 Megawatts net of power and there are no other
operational constraints identified, then engineering and EPC contracts (see below) can proceed. If the results indicate that operational constraints exist and additional testing and development is required, then the time table for development will
be delayed in order to complete the test work and development work.
Engineering / EPC Contract.
The results of the resource utilization program will be used as the basis for a request for proposals from engineering and/or engineering-procurement-construction (“EPC”) contractors.
Power Purchase Agreement.
GTH expects to sign a power purchase agreement (“PPA”) by the end of the 3
rd
quarter 2004 with either the Idaho Power Company or PacifiCorp. The power purchase agreement will form the basis for
the economic development of the Raft River project and allow for the arrangement of a financing package to construct the facilities, including the power plant.
Transmission / Interconnect Agreement.
The interconnect study is underway and the negotiation of a transmission agreement with Bonneville Power Administration - Transmission will begin in July 2004. We expect these agreements will be
finalized by the end of December 2004.
Permitting.
Using the permitting report prepared by Kleinfelder, and an internal review of overall permitting requirements, GTH anticipates beginning permitting activities upon the execution of a PPA. Permitting activities will be ongoing
throughout the execution of the project. Most of the project is on private ground and GTH believes the project does not require a federal environmental impact statement. During the Department of Energy’s development of the
- 29 -
Raft River project in the early 1980’s, a multi-year survey of land, plant, animal, archeological, weather, and human health survey was undertaken. The DOE published an extensive report in 1982. GTH recently contacted the Department of the
Interior Fish and Wildlife Service regarding any plants or animals in the region that are listed as an endangered species, and received a reply stating that there are no threatened or endangered species present at the site.
Project Financing.
Discussions are currently taking place with potential lending institutions that specialize in power plant project debt financing, as well as investment banking firms interested in raising the equity portion of the capital
cost for the project, and with potential participants who may be interested in utilizing tax credits that may be available to the project. Once a power purchase agreement is signed and the economic terms are fixed, final negotiations will take place
with financing institutions for both construction and long term financing.
Potential Acquisitions of Additional Property Interests.
GTH continues to seek ownership or leasehold interests in properties that it believes will add to the value of the company’s geothermal resources. It is currently in the early
stages of negotiation with a limited liability company that owns a geothermal project in Nevada. GTH has entered into a letter of intent with respect to the acquisition of the Nevada project, which if consummated would be for consideration comprised
of cash, stock, royalties and possible executive employment for the Nevada company’s principals. The letter of intent provides for an exclusive dealing period of 60 days, during which the company will conduct due diligence, but is otherwise
non-binding.
Interim Financing.
Additional working capital will likely be required prior to completion of a power purchase agreement, particularly in connection with acquisitions and development of additional property interests. GTH has entered into an
engagement letter with Dundee Securities Corporation of Toronto, Canada, to raise additional capital by way of private placement of securities. The engagement is on a best efforts basis to raise approximately CDN $3,400,000, through the sale of up
to 4 million Units at CDN $0.85 per Unit, with each Unit consisting of a share and a warrant to purchase one share for a period of 24 months at an exercise price of CDN $1.25, callable if GTH shares trade at or above CDN $1.65 for at least twenty
days. The placement is to be conducted in Canada and other jurisdictions outside of North America in accordance with the exemptions from registration provided by Regulation S, as promulgated under the Securities Act.
Competition
Although the market for different forms of energy is large and dominated by very powerful players, we perceive our industrial competition to be independent power producers and in particular those producers who provide “green “ renewable
power. Our definition of green power is electricity derived from a source that does not pollute the air, water or earth. Sources of green power, in addition to geothermal, include wind, solar, biomass and run-of-the river hydroelectric. Green power
is a niche sub-market, in which many power purchasers are committed to increasing their investments. Accordingly, the conventional energy producers do not provide direct competition.
In the Pacific Northwest there are currently no geothermal facilities. There exist a number of
- 30 -
wind farms, as well as biomass and run-of-the river hydroelectric facilities.
However, GTH believes that the combination of greater reliability from geothermal,
access to infrastructure for deliverability, and a low "full life" cost will
allow it to successfully compete for long term power purchase agreements.
Governmental Approvals and Regulation
GTH is subject to both federal and state regulation in respect of the production,
sale and distribution of electricity. Federal legislation includes The Public
Utilities Act of 1935 (which has two titles: The Public Utility Holding Company
Act ("PUHCA") and the Federal Power Act), as well as the Public Utility Regulatory
Policies Act of 1978 ("PURPA") and the Energy Policy Act of 1992 ("EPACT ").
Because GTH is defined as an independent power producer under the rules and
regulations of the Federal Energy Regulatory Commission ("FERC"), the relevant
aspects of federal legislation are that its electrical generating facilities
qualify under the policy set forth under PURPA which encourages alternative
energy sources such as geothermal, wind, biomass, solar and cogeneration. Additionally,
under EPACT, the company is currently exempt from PUHCA legislation regulating
rates for electricity on the wholesale level.
The State of Idaho also regulates electricity. The Public Utility law of the
State of Idaho (Title 61 of the Idaho Code) grants authority for rules and regulation
to the Idaho Public Utility Commission ("IPUC"). Regulated utilities have the
exclusive right to distribute and sell electricity within their service area.
They may purchase electricity in the wholesale market from independent producers
like GTH. The IPUC, in accordance with Federal PURPA legislation has the authority
to set the rules and regulations governing the sale of electricity generated
from alternative energy sources. Regulated utilities are required to purchase
electricity on an avoided cost basis from qualifying facilities. Currently,
the IPUC defines such a facility as having a capacity of 10 Megawatts (MW) per
hour and a contract term of 20 years. All PURPA contracts in Idaho are subject
to the approval of the IPUC. GTH is not required to market any of the electricity
that it may generate at Raft River to Idaho utilities; under EPACT, it can transmit
and sell its electricity in another state.
GTH will require the approval of various federal, state and local authorities
for construction of a geothermal facility at Raft River. These authorities include
the U.S. Fish and Wildlife Service, Environmental Protection Agency, Idaho Department
of Environmental Quality, Idaho Department of Water Resources, Idaho Bureau
of Hazardous Materials, Idaho State Historical Society, Cassia County and the
Southern Idaho Regional Solid Waste District. We have retained Kleinfelder Inc.
of Boise, Idaho, an independent environmental and regulatory consultant, to
advise GTH as to the situs and design for purpose of governmental approvals.
Environmental Compliance
GTH has identified the following environmental issues for which it will have
to demonstrate compliance in the construction and operation of a geothermal
facility at Raft River: air quality, water quality, water use, threatened and
endangered species, wetlands, cultural resources, storm water, hazardous materials,
hazardous and solid waste, underground storage tanks and asbestos.
- 31 -
A major portion of the government approval identified in the previous section
("Government Approvals and Regulation") addresses compliance with environmental
laws. The relevant legislation includes: Clean Air Act, Endangered Species Act,
Clean Water Act, Rivers and Harbors Act, National Historic Preservation Act,
National Pollutant Discharge Elimination System, Resource Conservation and Recovery
Act, Idaho Solid Waste Facilities Act and the IDAPA Drilling for Geothermal
Resource Rules.
We believe that a geothermal facility can be designed, constructed and placed
into operation at Raft River that will meet environmental compliance requirements.
Because the process of application and approvals have not as yet been initiated,
the capital and operating cost of compliance at the federal, state and local
levels cannot be determined at this time.
Employees
GTH has five employees including two full time employees. Once a power purchase
agreement is executed and financing is obtained, we intend to hire the necessary
staff and engage contractors and service providers.
Reports to Securityholders
Upon effectiveness of the registration statement of which this prospectus
is a part, we intend to become a reporting company under and subject to the
Securities and Exchange Act of 1934, and to file all reports and other information
required under that Act. This will include an annual report to securityholders
which will include audited financial statements.
Plant and Equipment
Other than minor office equipment located in our executive office, all of
our plant and equipment is located at the Raft River project site. Infrastructure
on the site includes five geothermal production wells, two injection wells,
wellheads, lined drilling sumps, roads, and security fencing. The plant site
has a 50' x 95' office/control room building, a 50' x 100' x 30' office/shop
maintenance building with a 15-ton overhead crane, and a 300,000 gallon water
tank with a 40'x 30' pump house. At the RRGE-1 well site, there is a 40'x 40'
x 20' warehouse building and a 50'x 100' office building. Road access and line
power is available at all production and injection well sites. A 138 kV transmission
line with a designed capacity of 120 MW runs along the northern boundary of
the property. The Raft River Rural Electric Cooperative owns the transmission
line, and has leased the transmission capacity to the Bonneville Power Administration
("BPA"). GTH has submitted a point-to-point transmission request and has an
interconnect study underway with the BPA.
We sub-lease general office space for our executive office in Boise from an
affiliate of Daniel Kunz, the company's Chief Executive Officer, at an annual
cost of $7,650. The underlying lease is a year-to-year lease that expires on
January 31, 2005.
- 32 -
MANAGEMENT
Directors, Executive Officers and Significant Employees
The following sets forth certain information concerning the current directors,
executive officers and significant employees of our company. Each director has
been elected to serve until our next annual meeting of stockholders and until
his successor has been elected and qualified. Each executive officer serves
at the discretion of the board of directors of our company.:
|
NAME
|
|
AGE
|
|
POSITION
|
|
|
|
|
|
|
|
Daniel J. Kunz
|
|
52
|
|
Chief Executive Officer, President and Director
|
|
Douglas J. Glaspey (1)
|
|
51
|
|
Chief Operating Officer and Director
|
|
John H. Walker
|
|
55
|
|
Chairman of the Board and Director
|
|
Paul A. Larkin (1)
|
|
53
|
|
Director
|
|
Jon Wellinghoff (1)
|
|
54
|
|
Director
|
|
Ronald P. Bourgeois
|
|
53
|
|
Chief Financial Officer and Secretary
|
|
Kevin Kitz
|
|
43
|
|
Vice President, Development, Geo-Idaho
|
(1) Member of the Audit Committee.
Daniel J. Kunz
is the President and Chief Executive Officer and a director
of GTH and the President of Geo-Idaho. He has served as a director of the company
since March 2000, and was Chairman of the Board of Directors from March 2000
until December 2003. Prior to the acquisition of Geo-Idaho, he served as a director
and the President for that company from February 2002 until the acquisition.
Mr. Kunz was an executive of Ivanhoe Mines Ltd. from 1997, and served as its
President and Chief Executive Officer from November 1, 2000 until March 1, 2003.
From March 2, 2003 until March 8, 2004, Mr. Kunz served as Interim President
of Jinshan Gold Mines Inc. Mr. Kunz has more than 27 years of experience in
international mining, engineering and construction, including, marketing, business
development, management, accounting, finance and operations, having held key
positions in Sonoma Resources Corporation (President & CEO), MK Gold Company
(President & CEO) and Morrison Knudsen Corporation (Vice President &
Controller, and as CFO to the Mining Group) . Mr. Kunz holds a Masters of Business
Administration and a Bachelor of Science in Engineering Science. He is currently
a director of several companies publicly traded on the TSX Venture Exchange,
including Jinshan Gold Mines Inc., Triumph Gold Corp., Tyner Resources Ltd.,
and Chesapeake Gold Corp. Mr. Kunz recently resigned as a director of American
Gold and Diamond Holdings, Inc., an OTC Bulletin Board listed company, and serves
as a director of China Mineral Acquisition Corporation, a privately held company
in the process of becoming a publicly traded company. .
Douglas J. Glaspey
is the Chief Operating Officer and a director of
GTH. He has served as a director of the company since March 2000, and served
as its President from March 2000 until the acquisition of Geo-Idaho. He also
served as a director and the Chief Executive Officer of Geo-Idaho from February
2002 until the acquisition, and continues to serve as President. From December
1986 to the present, Mr. Glaspey has been a Metallurgical Engineer and Project
Manager with Twin Gold Corporation. Mr. Glaspey has 26 years of operating and
management experience. He holds a Bachelor of Science in Mineral Processing
Engineering and an Associate
- 33 -
of Science in Engineering Science. His experience includes production management,
planning and directing resource exploration programs, preparing feasibility
studies and environmental permitting. He has formed and served as an executive
officer of several private resource development companies in the United States,
including Drumlummon Gold Mines Corporation and Black Diamond Corporation.
John H. Walker
is a director and the Chairman of the Board of directors
of GTH. He has held that position since December 2003. He has served (and continues
to serve) as Chief Executive Officer of Mihaly International Canada Limited
since 1987. Prior to that Mr. Walker was a Senior Advisor to Falconbridge Limited
from September 2000 to April 2002; and Managing Director of Loewen, Ondaatje,
McCutcheon, from November 1996 to August 2000. Mr. Walker holds a Master of
Environmental Studies degree from York University in Toronto. For many years
he was an executive with Ontario Hydro where he directed programs in renewable
energy and international business development, specifically in respect of thermal
power generation. Currently as CEO of Mihaly International Canada Limited, based
in Oakville, Ontario, he provides services to development and mining companies,
corporations, banks, and insurance companies on a range of issues related to
project management, construction, fuel supply, build own operate and transfer,
project finance and risk management.
Paul Larkin
serves as a director of GTH, a position he has held since
March 2000. He has served as Secretary of GTH since December, 2003, and served
as a director and the Secretary-Treasurer of Geo-Idaho from February 2002 until
the acquisition.
Since 1983, Mr. Larkin has also been the President of
the New Dawn Group, an investment and financial consulting firm located in Vancouver,
British Columbia, and the President of Tyner Resources Ltd., a TSX Venture Exchange
listed company. New Dawn is primarily involved in corporate finance, merchant
banking and administrative management of public companies. Mr. Larkin held various
accounting and banking positions for over a decade before founding New Dawn
in 1983, and currently serves on the boards of the following companies which
are listed on the TSX Venture Exchange: Eventure Capital Corp., Tyner Resources
Ltd., and Webtech Wireless Inc.
Jon Wellinghoff
is a director of GTH, a position he has held since
December 2003. Since November 2000, Mr. Wellinghoff has been an attorney in
private practice with the firm of Beckley Singleton of Las Vegas, Nevada. From
May 1999 to November 2000, he served as Regional Manager of Noresco, and served
as General Counsel with Nevada P.U.C. from May 1998 to May 1999. He was an attorney
in private practice from July 1989 until joining Nevada P.U.C. Mr. Wellinghoff
has an extensive background in the renewable energy field including, Federal
Trade Commission with a focus on renewable energy development. He was the first
Nevada Consumer Advocate and wrote the first integrated resource planning acts
for Nevada. He has been involved with and advised clients in connection with
the negotiation of power purchase agreements with utilities and PURPA issues.
Mr. Wellinghoff drafted and advocated the Nevada Renewable Portfolio Standard,
and is counsel for other geothermal and renewable power producers.
Ronald P. Bourgeois
serves as the company's Chief Financial Officer
and as its Secretary. He served as a director of Geo-Idaho from April 2002 until
the acquisition. He has served (and continues to serve) as President of Petrodyne
Canada Inc. since April 2001. Prior to that he was
- 34 -
a private management consultant from 1998 to 2001. Mr. Bourgeois holds a Bachelor
of Administrative Studies (Honours) and is a Chartered Accountant. Mr. Bourgeois
started his career with PricewaterhouseCoopers and has held various executive
positions within the oil and gas industry over the past 25 years. He has specialized
in managing complex corporate transactions, the financial analysis and evaluation
of prospective capital commitments, establishing investor/client relation programs,
and the implementation of strategic corporate transactions. Mr. Bourgeois is
also a director of Tyner Resources Ltd., a TSX Venture Exchange listed company.
Kevin Kitz
is the Vice President-Development of Geo-Idaho. He is a
mechanical engineer with 18 years of geothermal power plant design, construction
and operating experience with UNOCAL. He holds a Bachelor of Science in Mechanical
Engineering and Material Science, and is a Professional Engineer in California.
During his career with Unocal, he was a Production and Operations Engineer at
the 75MW Salton Sea geothermal power plant in southern California, a Senior
Production Engineer at the Geysers geothermal field in northern California,
and a Power Plant Engineering Advisor in the Philippines for geothermal power
plants ranging from 12 to 55 MW.
Audit Committee
Effective with the closing of the acquisition of Geo-Idaho by GTH in December
2003, an audit committee of the board was formed with Messrs Paul Larkin (Chairman),
Wellinghoff and Glaspey as its members.
Our audit committee, among other things, meets with our independent accountants
to review our accounting policies, internal controls and other accounting and
auditing matters; makes recommendations to the board of directors as to the
engagement of independent accountants; and reviews the letter of engagement
and statement of fees relating to the scope of the annual audit and special
audit work which may be recommended or required by the independent accountants.
Executive Compensation
The following table sets forth information concerning the annual compensation
earned or paid to our then serving chief executive officers (the "named executive
officer") for the periods presented. For the period prior to December 19, 2003,
the date of the acquisition by us of Geo-Idaho, the following table includes
compensation earned at Geo-Idaho. No executive officer of GTH or Geo-Idaho had
compensation that exceeded $100,000, was awarded options or received any award
of long-term compensation during the fiscal year ending March 31, 2004. Long
term compensation in the form of options that had been issued prior to that
time, were cancelled in accordance with the vote of the shareholders of GTH
approving the acquisition of Geo-Idaho. No annual bonuses or other compensation
have been paid to any named executive officer for any period prior to March
31, 2004. All of our executive officers have employment agreements with the
company.
- 35 -
|
NAME AND PRINCIPAL POSITION
|
|
YEAR ENDED
|
|
ANNUAL SALARY
|
|
|
|
|
March 31
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Kunz
|
|
2003
|
|
$9,144
(1)
|
|
|
Chief Executive Officer
|
|
2002
|
|
NIL
|
|
|
and President
|
|
2001
|
|
NIL
|
|
|
Douglas J. Glaspey
|
|
2003
|
|
$64,178
(2)
|
|
|
Chief Operating Officer,
|
|
2002
|
|
$30,000
(3)
|
|
|
President of Geo-Idaho
|
|
2001
|
|
$26,000
(3)
|
|
|
(1)
|
30,479 shares of Geo-Idaho at Cdn $0.30 per share.
|
|
(2)
|
Includes $18,000 paid by Geo-Idaho and 78,929 shares of GTH at Cdn $0.30
per share.
|
|
(3)
|
Paid by GTH prior to acquisition of Geo-Idaho.
|
Director Compensation
Directors who are not otherwise remunerated per an employment agreement are
paid a per diem of $1,000 per director and committee meeting, effective January
1, 2004. Directors who are also officers do not receive any cash compensation
for serving in that capacity. However, all directors are reimbursed for their
out-of-pocket expenses in attending meetings.
Option Grants in Last Fiscal Year
On February 4, 2004, GTH granted 1,745,000 stock options at an exercise price
of CDN $0.60 per share to the officers, employees and consultants identified
below. The options vest in quarterly increments, starting with the date of grant
and every six months thereafter, and expire on January 3, 2009.
|
Optionee
|
Number of Options
|
|
John Walker
|
80,000
|
|
Daniel J. Kunz
|
200,000
|
|
Douglas J. Glaspey
|
200,000
|
|
Ronald P. Bourgeois
|
200,000
|
|
Paul Larkin
|
200,000
|
|
Jon Wellinghoff
|
60,000
|
|
Kevin Kitz
|
50,000
|
|
Kerry Hawkley
|
40,000
|
|
Kip Runyan
|
35,000
|
|
Bill Price
|
80,000
|
|
Brad Platt
|
80,000
|
|
John Snow
|
80,000
|
|
Steve McGrath
|
50,000
|
|
David Kunz
|
15,000
|
|
JP Larkin
|
25,000
|
|
Mike Dake
|
25,000
|
|
Sylvia Martin
|
15,000
|
|
Milt Datsopolous
|
100,000
|
- 36 -
|
Dan Palinkrosis
|
50,000
|
|
Roy Eigurin
|
40,000
|
|
James Miscoll
|
40,000
|
|
Clayton Nichols
|
40,000
|
|
Fred Cowans
|
40,000
|
The stock option plan was approved by the shareholders at the meeting held in
April, 2003. The plan originally included options for 2,200,000 shares, and options
for 455,000 shares remain available under the plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Geo-Idaho was organized as an Idaho corporation on February 26, 2002, under
the name U.S. Geothermal Inc. At that time, Daniel J. Kunz, Douglas J. Glaspey,
Paul A. Larkin and Ronald P. Bourgeois, who may be deemed to be our founders,
each subscribed for 650,000 shares of our common stock each (for an aggregate
of 2,600,000 shares) for a total consideration of $40,000.
On March 5, 2002 a letter agreement was entered into with the Vulcan Power
Company ("Vulcan") whereby, as part of the consideration for the right to acquire
up to 100% ownership in the Raft River Property, Geo-Idaho issued 1,895,000
shares of common stock and 1,612,000 warrants to purchase common stock to Vulcan.
On November 1, 2002, an aggregate of 1,033,667 shares were subscribed from
Geo-Idaho for a total consideration of $310,100, composed of $307,100 in cash
and $3,000 for consulting services. Mr. Kunz subscribed for 260,000 shares of
Geo-Idaho for a consideration of $78,000. Mr. Walker subscribed for 16,667 shares
of Geo-Idaho for a consideration of $5,000.
On February 14, 2003, GTH (then U.S. Cobalt Inc.) issued 151,170 shares to
the following persons for past services, at a deemed aggregate consideration
of $45,350:
|
|
Name
|
|
No. of Shares
|
|
|
|
Daniel J. Kunz
|
|
30,479
|
|
|
|
Douglas J. Glaspey
|
|
78,929
|
|
|
|
Paul A. Larkin
|
|
41,762
|
|
|
|
Total
|
|
151,170
|
|
On June 28, 2003, GTH (then U.S. Cobalt Inc.) procured a $269,000 bridge loan
to commence well inspection work on the Raft River Project. The loan was convertible
into units, with each unit comprising one share and one half of one share purchase
warrant on the same terms as the private offering closed in connection with
the acquisition of Geo-Idaho. The interest rate was 20% per annum. Mr. Kunz
loaned $100,000 of this amount, which was subsequently repaid in January 2004.
The remaining principal amount, plus accrued interest, was converted as of February
20, 2004, into 385,864 shares and 192,932 share purchase warrants.
- 37 -
As consideration for of the acquisition of Geo-Idaho, the company issued 6,939,992
common shares and 2,420,217 share purchase warrants exercisable at $0.75 per
share for 24 months. As parties to that transaction the following persons received:
|
|
Name
|
|
No. Of Shares
|
|
No. of Warrants
|
|
|
|
Daniel J. Kunz
|
|
1,254,769
|
|
--
|
|
|
|
Douglas J. Glaspey
|
|
1,014,649
|
|
--
|
|
|
|
Paul A. Larkin
|
|
863,187
|
|
--
|
|
|
|
Ronald Bourgeois
|
|
821,425
|
|
--
|
|
|
|
John Walker
|
|
66,607
|
|
--
|
|
|
|
Vulcan Power Company
|
|
1,755,156
|
|
2,420,217
|
|
|
|
Total
|
|
5,775,793
|
|
2,420,217
|
|
In connection with the acquisition of Geo-Idaho, shares and warrants of the
above individuals and Vulcan Power Company were made subject to an escrow agreement.
The following escrow conditions apply to these shares and warrants:
• In
accordance with TSX Venture Exchange rules and regulations, 90% of 4,775,793
of the shares are held in escrow and released at the rate of 15% every 6 months
over a 36 month period.
• 1,000,000
in the aggregate of the shares issued to Messrs. Kunz, Glaspey and Larkin are
held in escrow, 750,000 of which will be released if the Raft River Project
is licensed and able to generate and distribute ten megawatts of electricity
at standard commercial prices. The balance of 250,000 shares will be released
if an additional five megawatts of electricity is licensed.
Mr. Kunz was a subscriber in the private offering completed as a condition
to the acquisition of Geo-Idaho. He subscribed for 1,111,111 units at a purchase
price of $0.45 per unit. The units were comprised of one share of common stock
and one-half warrant to purchase one share of common stock at an exercise price
is $0.75 per share over 24 months.
BENEFICIAL OWNERSHIP OF SECURITIES
The following table sets forth the common stock owned by (1) our directors
and "named executive officer," (2) persons known by us to beneficially own,
individually, or as a group, more than 5% of our outstanding common stock as
of June 1, 2004 and (3) all of our current directors and executive officers
as a group. As of June 1, 2004, we had 12,922,693 common shares outstanding.
There were also 1,745,000 options, and warrants to purchase up to 4,357,592
shares. The options were granted February 4, 2004, at a price of CDN $0.60 per
share, expiring January 3, 2009, 25% of which vested upon grant, and an additional
25% of which will vest in each of August, 2004, February 2005 and August 2005.
Of the warrants, 2,420,217 were issued to Vulcan Power Company, have an exercise
price of $0.75, and expire December 19, 2005, and the remaining 1,937,375, were
issued primarily in conjunction with the private placement conducted in connection
with the acquisition of Geo-Idaho, have an exercise price of $0.45 per
- 38 -
share, and expire December 19, 2005. All of the warrants are exercisable at
any time prior to expiration.
|
Name and
|
|
Outstanding
|
|
Options (1)
|
|
Warrants (1)
|
|
Total Number
|
|
Percentage of Shares
|
|
|
Address (2)
|
|
Shares (3)
|
|
|
|
|
|
of Shares
|
|
Outstanding (1)
|
|
|
|
|
|
|
|
|
|
|
Beneficially Owned (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Kunz
|
|
2,418,725
|
|
100,000
|
|
555,555
|
|
3,074,280
|
|
40.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas J. Glaspey
|
|
1,161,131
|
|
100,000
|
|
0
|
|
1,261,131
|
|
17.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul A. Larkin
|
|
944,916
|
|
100,000
|
|
0
|
|
1,044,916
|
|
14.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald P. Bourgeois
|
|
821,425
|
|
100,000
|
|
0
|
|
921,425
|
|
13.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John H. Walker
|
|
102,807
|
|
40,000
|
|
0
|
|
142,807
|
|
2.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jon Wellinghoff
|
|
0
|
|
30,000
|
|
0
|
|
30,000
|
|
0.4%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vulcan Power
|
|
1,755,159
|
|
0
|
|
2,420,217
|
|
3,705,376
|
|
39.6%
|
|
|
Company (4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Directors and
|
|
5,449,004
|
|
470,000
|
|
555,555
|
|
6,944,559
|
|
87.2%
|
|
|
Officers as a group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
This tabular information is intended to conform with Rule 13d-3 promulgated
under the Securities Exchange Act of 1934 relating to the determination
of beneficial ownership of securities. The tabular information gives effect
to the exercise of warrants and options exercisable on or before December
31, 2004, owned in each case by the person or group whose percentage ownership
is set forth opposite the respective percentage and is based on the assumption
that no other person or group exercise their warrants or options.
|
|
|
|
(2)
|
Unless otherwise indicated, the address for each of the above is c/o
U.S. Geothermal Inc., 1509 Tyrell Lane, Suite B, Boise, Idaho, 83706.
|
|
|
|
(3)
|
A majority of the shares of Messrs. Kunz, Glaspey, Larkin, Bourgeois
and Walker and of Vulcan Power Company included in this column are subject
to the Escrow Agreement described below.
|
|
|
|
(4)
|
Vulcan Power Company's address is 1183 NW Wall Street, Suite G, Bend
, Oregon, 97701
|
|
|
Escrow Agreement
As part of the acquisition of Geo-Idaho and in accordance with requirements
of the TSX Venture Exchange, an Escrow Agreement was entered into as of December
19, 2003, by the principal shareholders of GTH and Geo-Idaho covering 9,782,993
shares and 2,420,217 share purchase warrants. Under this agreement the escrowed
securities are to be released from escrow pro-rata to the respective shareholders
over 36 months. Ten percent of the escrowed securities were released upon the
acquisition of Geo-Idaho, and 15% of the escrowed securities will be released
on the date which is 6 months thereafter (June 22, 2004), and 15% of the escrowed
securities
- 39 -
after each of the five 6-month periods thereafter. The following shares were
subject to this Escrow Agreement as of June 1, 2004:
|
|
Shareholder
|
|
Shares in Escrow
|
|
|
|
Daniel J. Kunz
|
|
2,129,292
|
|
|
|
Douglas J. Glaspey
|
|
913,184
|
|
|
|
Paul A. Larkin
|
|
776,868
|
|
|
|
Ronald P. Bourgeois
|
|
739,283
|
|
|
|
John P. Walker
|
|
66,426
|
|
|
|
Vulcan Power Company
|
|
1,579,640
|
|
SELLING SECURITYHOLDERS
The securities covered by this prospectus are shares of our common stock that
have been issued and shares of our common stock that may be issued upon the
exercise of warrants and options to purchase shares of our common stock. Because
the selling securityholders may sell all or a portion of their shares at any
time and from time to time after the date hereof, no estimate can be made of
the number of shares of common stock that each selling securityholder may retain
upon the completion of the Offering. The number of shares of common stock that
may be actually sold by the selling securityholders will be determined by such
securityholders. We are registering for the selling securityholders named herein
an aggregate of 19,025,285 shares of common stock. The shares of common stock
to which this prospectus relates consist of the following:
|
|
• 2,274,616
shares of common stock, issued by GTH prior to December 19, 2003.
|
|
|
|
|
|
• 6,939,992
shares of common stock, issued by GTH as of December 19, 2003, to the former
shareholders of Geo-Idaho in connection with the acquisition of Geo-Idaho.
|
|
|
|
|
|
• 2,420,217
shares of common stock issuable upon the exercise of warrants, issued by
GTH as of December 19, 2003, to Vulcan Power Company in connection with
the acquisition of Geo-Idaho.
|
|
|
|
|
|
• 3,322,221
shares of common stock, issued by GTH as of December 19, 2003, in connection
with the private offering completed as a condition to the acquisition of
Geo-Idaho
|
|
|
|
|
|
• 1,661,110
shares of common stock issuable upon the exercise of warrants, issued by
GTH as of December 19, 2003, as part of the private offering completed as
a condition to the acquisition of Geo-Idaho.
|
|
|
|
|
|
• 83,333
shares of common stock issuable upon the exercise of warrants, issued by
GTH as of December 19, 2003, to Toll Cross Securities for fees in connection
with the private offering completed as a condition to the acquisition of
Geo-Idaho.
|
|
|
|
|
|
• 385,864
shares of common stock, issued by GTH on February 20, 2004, in connection
with the conversion of loans to GTH made in June 2003.
|
- 40 -
|
|
• 192,932
shares of common stock issuable upon the exercise of warrants, issued by
GTH on February 20, 2004 in connection with the conversion of loans to GTH
made in June 2003.
|
|
|
|
|
|
• 1,745,000
shares of common stock issuable upon the exercise of options, issued by
GTH on February 4, 2004, to employees, directors and consultants.
|
Except as noted below or in the "Beneficial Ownership of Securities" and the
"Management" sections of this prospectus, none of the selling securityholders
has, or within the past three years has had, and relationship, position or office
with us or our predecessors or affiliates.
The following table sets forth, as of June 1, 2004, (1) the name of each selling
securityholder, (2) the number of shares of our common stock beneficially owned
by each selling securityholder, including the number of shares purchasable upon
exercise of options or warrants or conversion of notes, and (3) the maximum
number of shares of common stock which the selling securityholders can sell
pursuant to this prospectus. Because all of the selling securityholders are
registering all of the shares held by them, they would own no shares of common
stock if they sold all of the shares registered by this prospectus.
Except as otherwise noted below, the number of shares of our common stock
registered for sale hereunder for a selling securityholder consists of shares
of our common stock either beneficially owned or issuable upon exercise of the
warrants or options described above.
|
U.S. GEOTHERMAL INC. - COMMON SHARES
|
|
|
|
|
|
|
|
Holder Name
|
Total Shares
|
Shares for resale
|
|
BATIUK, WILLIAM DAVID
|
17,000
|
17,000
|
|
BEACH, WAYNE
|
77,175
|
77,175
|
|
BEATY, ROSS
|
85,000
|
85,000
|
|
BEAULIEU, JOHN
|
20,000
|
20,000
|
|
BENETTI, DOLLY
|
240
|
240
|
|
BOURGEOIS, RON
|
821,425
|
821,425
|
|
BRANT INVESTMENTS
|
555,556
|
555,556
|
|
BROCK, WILLIAM
|
33,333
|
33,333
|
|
CAMPBELL, DOUGLAS I D
|
23,573
|
23,573
|
|
CDS & CO
|
785,883
|
785,883
|
|
CEDE & CO
|
308,443
|
308,443
|
|
CHI, STEVEN Y
|
36,667
|
36,667
|
|
CLIFFWOOD DEVELOPMENT LTD
|
120,000
|
120,000
|
|
COBBS, HARTZELL
|
4,000
|
4,000
|
|
COX, JOHNNIE
|
200
|
200
|
|
CRYER, EDWIN T
|
10,000
|
10,000
|
|
DATSOPOULOS, MILTON
|
222,222
|
222,222
|
|
DUNDEE SECURITIES
|
|
|
|
CORPORATION in trust for DANIEL
|
|
|
|
KUNZ
|
1,111,111
|
1,111,111
|
|
EGGER, BURTON
|
40,000
|
40,000
|
- 41 -
|
FALCONER, DONALD
|
25,725
|
25,725
|
|
FALLS, ROBERT
|
24,000
|
24,000
|
|
GLASPEY, DOUGLAS J
|
1,161,131
|
1,161,131
|
|
GLASPEY, MARGO J
|
120,000
|
120,000
|
|
GRIM ESTATES LTD
|
180,000
|
180,000
|
|
HOLAHAN, COLLEEN
|
160
|
160
|
|
JENSEN, STEVEN
|
21,000
|
21,000
|
|
KITZ, KEVIN
|
12,851
|
12,851
|
|
KNAPP, CHARLES R
|
4,832
|
4,832
|
|
KUNZ, CAROL
|
50,000
|
50,000
|
|
KUNZ, DANIEL J
|
1,307,673
|
1,307,673
|
|
LARKIN, PAUL
|
924,487
|
924,487
|
|
LENNOX-KING, OLIVER
|
77,175
|
77,175
|
|
LEONARD, JOHN W
|
35,000
|
35,000
|
|
LYNN, NICHOLAS
|
120,000
|
120,000
|
|
MARCUS, BARRY
|
15,000
|
15,000
|
|
MENNING, TOM
|
183,332
|
183,332
|
|
MILLER, ROBERT J
|
236,397
|
236,397
|
|
MINK, MARY
|
10,000
|
10,000
|
|
NELSON, DONALD
|
108,000
|
108,000
|
|
PENSION FINANCIAL SERVICES
|
|
|
|
CANADA INC
|
|
|
|
in trust for 4WAAA5F
|
55,555
|
55,555
|
|
PENSION FINANCIAL SERVICES
|
|
|
|
CANADA INC
|
|
|
|
in trust for 4WEAE4B
|
55,555
|
55,555
|
|
PENSION FINANCIAL SERVICES
|
|
|
|
CANADA INC
|
|
|
|
in trust for TOLL CROSS
|
111,111
|
111,111
|
|
ROYAL TRUST COMPANY
|
|
|
|
in trust for A/C 050321001
|
195,000
|
195,000
|
|
ROYAL TRUST COMPANY in trust for
|
|
|
|
A/C 050328001
|
125,000
|
125,000
|
|
ROYAL TRUST COMPANY in trust for
|
|
|
|
A/C 085311001
|
90,000
|
90,000
|
|
ROYAL TRUST COMPANY in trust for
|
|
|
|
A/C 115830001
|
25,000
|
25,000
|
|
ROYAL TRUST COMPANY in trust for
|
|
|
|
A/C 127245001
|
42,000
|
42,000
|
|
SASGES, MARY ANN
|
2,059
|
2,059
|
|
SMITH, STEVE R
|
45,000
|
45,000
|
|
SNEDDON, GERALD L
|
80,000
|
80,000
|
|
SNEDDON in trust for the SNEDDON
|
|
|
|
FAMILY TRUST, GERALD L
|
50,000
|
50,000
|
|
SWARTLEY, JOHN
|
36,667
|
36,667
|
|
TOLL CROSS INVESTMENTS INC
|
192,938
|
192,938
|
|
VERITABLE QUANDARY LLC
|
10,000
|
10,000
|
|
VULCAN POWER COMPANY
|
1,755,156
|
1,755,156
|
|
WALKER, JOHN H
|
73,807
|
73,807
|
- 42 -
|
WALMESLEY, MARK
|
100,000
|
100,000
|
|
WARD joint tenancy, ROSCOE &
|
|
|
|
JOYCE WARD
|
5,000
|
5,000
|
|
WEST COAST SOFTWEAR LTD
|
514,111
|
514,111
|
|
YANKE, DANIEL R
|
95,046
|
95,046
|
|
YANKE, RONALD C
|
212,712
|
212,712
|
The selling securityholders (and their respective pledgees, transferees, donees
or other successors in interest) may offer and some or all of the shares of
common stock owned by them or derived from the exercise of warrant covered by
this prospectus from time to time as follows:
|
|
• in
the open market;
|
|
|
|
|
|
• on
the TSX Venture Exchange or such other market or exchange on which the shares
of common stock are traded;
|
|
|
|
|
|
• in
privately negotiated transactions;
|
|
|
|
|
|
• in
an underwritten offering; or
|
|
|
|
|
|
• a
combination of such methods or any other legally available means.
|
Such sales may be made at varying prices determined by reference to, among
other things:
• Market
value prevailing at the time of the sale;
• Prices
related to the then-prevailing market price; or
• Negotiated
prices.
Negotiated transactions may include:
|
|
• Purchases
by a broker-dealer as principal and resale by such broker-dealer for its
account pursuant to this prospectus;
|
|
|
|
|
|
• Ordinary
brokerage transactions and transactions in which a broker solicits purchasers;
or
|
|
|
|
|
|
• Block
trades in which a broker-dealer so engaged will attempt to sell the shares
as agent but may take a position and resell a portion of the block as principal
to facilitate the transaction.
|
- 43 -
In connection with distribution of our common stock, any selling securityholder
may:
|
|
• Enter
into hedging transactions with broker-dealers and the broker-dealers may
engage in short-sales of our common stock in the course of hedging the positions
they assume with the selling securityholders;
|
|
|
|
|
|
• Sell
our common stock short and deliver the common stock to close out such short
positions;
|
|
|
|
|
|
• Enter
into option or other transactions with broker-dealers that involve the
delivery of our common stock to the broker-dealers, which may then resell
or otherwise transfer such common stock; and
|
|
|
|
|
|
• Loan
or pledge our common stock to a broker-dealer which may then sell our
common stock so loaned, and upon a default, the common stock may be sold
or otherwise transferred.
|
During such time as the selling securityholders may be engaged in a distribution
of the securities we are registering by this registration statement, they are
required to comply with the applicable provisions of the Securities Exchange
Act and the rules and regulations thereunder. Under such rules and regulations
as currently in effect, any person engaged in a distribution of any of the shares
of common stock may not simultaneously engage in market activities with respect
to the common stock for a period of five business days prior to the commencement
of such distribution. In addition, and without limiting the foregoing, the selling
securityholders will be subject to Regulation M. Regulation M may limit the
timing of purchases and sales or market-making activities with respect to our
common stock. The selling securityholders may, however, engage in short sales
in accordance with Rule 104 of Regulation M. Short sales, if engaged in by the
selling securityholders, may affect the market price of our common stock. Regulation
M specifically prohibits short sales that are the result of fraudulent, manipulative
or deceptive practices. Selling securityholders are required to consult with
their own legal counsel to ensure compliance with Regulation M. All of the foregoing
may affect the marketability of the common stock.
Broker-dealers may receive commissions or discounts from the selling securityholders
in amounts to be negotiated immediately prior to the sale. The selling securityholders
and any broker executing selling orders on behalf of the selling securityholders
may be deemed to be an "underwriter" within the meaning of the Securities Act.
Commissions received by any such broker may be deemed to be underwriting commissions
under the Securities Act. We do not know of any existing arrangements between
the selling securityholders and any underwriter, broker, dealer or other agent
relating to the offer, sale or distribution of the shares registered by this
prospectus by the selling securityholders.
We will pay substantially all of the expenses incident to this registration
of securities other than commissions and discounts of underwriters, brokers,
dealers or agents. The selling securityholders may indemnify any broker, dealer,
agent or underwriter that participates in transactions involving sales of the
securities against certain liabilities, including liabilities arising under
the Securities Act.
- 44 -
DESCRIPTION OF SECURITIES
Under our Certificate of Incorporation, the total number of shares of all
classes of stock that we have authority to issue is 100,000,000, consisting
of 100,000,000 shares of common stock, with a par value of $0.001 per share.
As of May 31, 2004, there were 12,922,693 shares of our common stock issued
and outstanding. Our common stock is traded on the TSX Venture Exchange under
the symbol "GTH". The holders of common stock:
|
|
• are
entitled to one vote per share on each matter submitted to a vote of stockholders;
|
|
|
|
|
|
• have
no cumulative voting rights, and, accordingly, the holders of a majority
of the outstanding shares have the ability to elect all of the directors;
|
|
|
|
|
|
• have
no preemptive or other rights to subscribe for shares; and
|
|
|
|
|
|
• are
entitled to such distributions as may be declared from time to time by the
board of directors from funds legally available therefor, and upon liquidation
are entitled to share ratably in the distribution of assets remaining
after payment of liabilities.
|
The following table sets forth our cash and cash equivalents and our capitalization
at March 31, 2004:
|
Cash and Cash Equivalents
|
$
|
870,513
|
|
|
Total long term obligations
|
$
|
0
|
|
|
Capital Stock
|
|
|
|
|
Authorized: 100,000,000 common shares, par value
|
$
|
12,923
|
|
|
$0.001 per share, issued 12,536,829
|
|
|
|
|
common shares
|
|
|
|
|
Additional paid-in capital
|
$
|
2,148,787
|
|
|
Accumulated deficit, since February 26, 2002
|
$
|
(1,009,136)
|
|
|
|
|
|
|
|
Accumulated other comprehensive income
|
$
|
35,7920
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
$
|
1,188,366
|
|
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of our Certificate of Incorporation provides for indemnification
of officers and directors except (i) for any breach of a director's duty of
loyalty to the corporation or its stakeholders (ii) acts and omission that are
not in good faith or that involve intentional misconduct or knowing violation
of law, (iii) under Section 174 of the general corporate law of
- 45 -
the State of Delaware, or (iv) for any transaction from which the director
derived any improper benefit.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers or controlling persons
of the company pursuant to the foregoing provisions, or otherwise, the company
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be passed
upon for us by Williams, Kastner & Gibbs PLLC, Seattle, Washington.
EXPERTS
The financial statements as of March 31, 2004 and 2003, included in this prospectus
have been so included in reliance on the report (which contains an explanatory
paragraph relating to our ability to continue as a going concern as described
in Note 1 to the financial statements) of Morgan and Company, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
MANAGEMENT'S PLAN OF OPERATION
GTH is engaged in the acquisition, development, and exploitation of geothermal
resources. It is in a development stage, and has yet to construct and operate
a geothermal based electrical power generation facility. Because GTH was incorporated
in February 2002, it has no history of operations. Additionally, our predecessor,
U.S. Cobalt Inc. (now renamed U.S. Geothermal Inc.) was exclusively involved
in the mineral sector and had no experience in the geothermal industry. Accordingly,
there have been no revenues from geothermal operations in the last two fiscal
years.
Our plan of operation for the next 12 months includes the following elements:
|
|
(1)
|
Complete the well flow test program.
|
|
|
|
|
(2)
|
Based on the flow test data, complete the independent study by GeothermEx
Inc. which is a key component to the procurement of a power purchase agreement
|
|
|
|
|
(3)
|
Negotiate and execute a power purchase agreement.
|
|
|
|
|
(4)
|
Procure equity and/or debt financing required to construct a commercial
electrical generation facility at Raft River.
|
- 46 -
|
|
(5)
|
Negotiate and execute an engineering, procurement and construction agreement
with an engineering firm with expertise in the design, construction and
commissioning of geothermal based electrical power generation facilities.
|
|
|
|
|
(6)
|
Continue to seek and acquire additional geothermal resource properties.
|
Our cash position, as at March 31, 2004, is adequate to fund our activities
to December 31, 2004. In connection with the identification of the potential
acquisition in Nevada and other potential properties, as well as for additional
working capital, we have entered into an engagement with Dundee Securities Corporation
to raise capital through a placement of equity securities (see the discussion
at p. 28). In order to continue after December 31, we will have to raise additional
capital to develop the Raft River facility, and for working capital.
We intend to increase our number of employees once we have executed a power
purchase agreement and obtained related financing. At that point, those of our
executive officers who currently provide their services on a part-time basis
will commit full-time to GTH.
Since February 2002, we have engaged in several transactions in respect of
the Raft River Project in south-central Idaho. On March 5, 2002, we entered
into a letter agreement with Vulcan Power Company ("Vulcan") to acquire the
Vulcan Property, that is, all of the real property, personal property, and permits
that comprised Vulcan's interest in the Raft River Project. On December 3, 2002
the letter agreement was replaced by a definitive purchase agreement ("Vulcan
Agreement"). The Vulcan Property is comprised of 560 acres of both surface and
geothermal rights. There are 4 deep production wells and 2 injector wells on
the property, and one production well located on a leased property, with the
production wells varying from 4,989 feet in depth to 6,543 feet. In addition
to the Vulcan Property, three additional geothermal leases were acquired during
the summer of 2002, and a fourth acquired in April 2004, representing approximately
3,180 acres contiguous to the Vulcan Property. An additional production well
(which is included in the Vulcan Property) is located on one of these leases.
In February 2002, Geo-Idaho retained GeothermEx Inc. an independent geothermal
consulting firm located in Richmond, California, to appraise the replacement
costs of the geothermal well field. In a report dated March 29, 2002, GeothermEx
estimated a replacement cost of $11,327,400. GeothermEx additionally provided
a recommended well evaluation program, including extended well flow, from which
a reservoir assessment could be independently prepared.
On March 28, 2002, Geo-Idaho and GTH (which was known as U.S. Cobalt Inc.
at that time) entered into a letter agreement whereby GTH would acquire 100%
of Geo-Idaho's issued and outstanding shares and warrants, in consideration
of an aggregate of approximately 79% of GTH's shares (on a fully-diluted basis
and after the 5 for 1 share consolidation), plus the concurrent closing of a
private placement that would result in at least CDN $500,000 of proceeds to
GTH, and the change of its name to U.S. Geothermal Inc.
On September 29, 2002, Geo-Idaho was awarded a grant from the U.S. Department
of Energy (DOE) in the amount of $212,077, which represented a right to reimbursement
for 80% of the
- 47 -
cost of a program to test the Raft River wells as recommended by GeothermEx.
Subsequently, the scope of the program was expanded and on September 19, 2003
the DOE grant was increased to a right of reimbursement of $317,219, representing
80% of a $396,521 projected cost.
On April 2, 2003, the stockholders of GTH approved the acquisition of Geo-Idaho,
the share consolidation, the private placement and the name change. This transaction
was closed on December 22, 2003 and 6,939,992 common shares and 2,420,217 share
purchase warrants were issued to the stockholders of Geo-Idaho for 100% of its
issued and outstanding shares.
Concurrent with the closing, the TSX Venture Exchange approved the resumption
of trading of GTH stock on its exchange.
On February 11, 2004, an application was submitted to the DOE to expand the
well testing program to include measured response to high rate flows from producing
wells. Accordingly, a $750,000 budget was submitted, which if approved, will
increase the DOE grant to $600,000 (which is 80% of a $750,000 cost estimate).
As of February 17, 2004, GTH has completed the acquisition of 75% of the Vulcan
Property, and need only pay $125,000 any time prior to project financing to
acquire the remainder. GTH continues to acquire and seek acquisition of property
interests with geothermal resources, and has identified a potential acquisition
in Salt Hills, Nevada. GTH has entered into a letter of intent with respect
to the acquisition of the Nevada property, which provides for an exclusive dealing
period of 60 days during which GTH will complete a due diligence investigation,
but otherwise is non-binding. If the acquisition of the Nevada property moves
forward, the parties will negotiate a definitive agreement, and GTH anticipates
that it will acquire the Nevada property for a combination of cash and stock
(payable in part based on meeting benchmarks), with royalty payments and executive
management positions for one or more of the principals.
Statement Of Operations
A review of operating results for the years ended March 3
1
,
2004 and 2003
We incurred a net loss of $436,061 for the year ended March 31, 2004, compared
to a net loss of $164,909 for the same period in 2003. During the year ended
March 31, 2004 there were no revenues, which was the situation for the year
ended march 31, 2003, as GTH was still in a development stage and had not yet
placed its resources into a commercial electricity power generation.Whereas
the year ended March 31, 2003 was the initial year of operations for the Company,
there is no comparison to be made to prior years. We incurred a net loss of
$117,610.
There was no revenue or other income. Our expenses were $439,484 as compared
to $164,909 a year earlier. The general and administrative portion was $421,343,
and exploration expenditures were $18,141. In the year ended March 31, 2003,
general and administrative expenses were $147,610, and exploration expenditures
were $17,299. Professional fees of 117,169, for the year ended March 31, 2004
and $73,190, for the year ended March 31, 2003, amounts included in general
and administrative expenses, were primarily composed of non-recurring expenses
incurred in the reverse takeover of U.S. Cobalt Inc. being 100%.
- 48 -
There were no write-down of assets. Stock based compensation of $55,744 is
included in consulting fees for the year ended March 31, 2004, and included
in general and administrative expenses.
Liquidity And Capital Resources
Years ended March 3
1
, 2004 and 2003
Net cash provided by equity financing activities in 2004 was $1,506,378 as
compared to 319,250 in 2003. Acquisition and development expenditures were $250,000
as compared to $242,000 in 2003. An advance to the predecessor company (U.S.
Cobalt Inc.) in 2003 of $86,500 was repaid in 2004. In 2004, $479,878 was utilized
in operations, $77,933 was used in operations for 2003. The working capital
as at March 31, 2004 was $692,948 as compared to $79,106 on March 31, 2003.
Cash resources were $870,513 and unpaid current liabilities were $185,465, including
$55,744 for stock-based compensation as at March 31, 2004. Cash resources were
$29,729 and unpaid liabilities were $37,123 as at March 31, 2003.
Critical Accounting Policies
Costs of acquisition and exploration of geothermal properties are capitalized
on an area-of-interest basis. Amortization of these costs will be on a unit-of-production
basis, based on estimated proven geothermal reserves should such reserves be
found. If an area of interest is abandoned, the costs thereof are charged to
income in the year of abandonment.
We capitalize our costs including salaries and fringe benefits of employees
and consultants directly engaged in the acquisition, exploration and development
of geothermal resources. These costs do not include any costs related to electricity
generation facility operations, general corporate overhead or similar activities.
Whereas there are no commercial operations, there has not been any calculation
of depreciation, depletion and amortization ("DD&A"). It is contemplated
that an independent reserve appraisal will be undertaken which will be used
to calculate DD&A.
A full cost ceiling test is undertaken quarterly to assess whether or not
there has been impairment to the costs capitalized in regards to our geothermal
properties. Accordingly a write-down will be incurred if the estimated future
discounted cash flow will be less than the associated capitalized costs. Additionally,
where a project is abandoned, any and all associated capitalized costs will
be written down in the fiscal quarter of the abandonment.
Our future profitability and revenues will be dependent on the sale price
for electricity. Although there is a spot market for electricity, the location
of GTH's geothermal resources, the competitive factors of the Pacific Northwest
market and the requirement to procure future project financing, all indicate
that GTH will seek long term sales contracts with the public utilities or industrial
users. Sales will be recorded at the delivery point on the electrical power
grid.
- 49 -
Income Taxes
As part of the process of preparing the consolidated financial statements,
we are required to estimate the federal and state income taxes in each of the
jurisdictions in which we operate. This process involves estimating the actual
current tax exposure together with assessing temporary differences resulting
from differing treatment of items, such as derivative instruments, depreciation,
depletion and amortization, and certain accrued liabilities for tax and accounting
purposes. These differences and the net operating loss ("NOL") carry forwards
result in deferred tax assets and liabilities, which are included in our consolidated
balance sheet. We must then assess, using all available positive and negative
evidence, the likelihood that the deferred tax assets will be recovered from
future taxable income. If we believe that recovery is not likely, we must establish
a valuation allowance. To the extent we establish a valuation allowance or increase
or decrease this allowance in a period, we must include an expense or reduction
of an expense within the tax provisions in the consolidated statement of operations.
Under SFAS 109, Accounting for Income Taxes, an enterprise must use judgement
in considering the relative impact of negative and positive evidence. The weight
given to the potential effect of negative and positive evidence should be commensurate
with the extent to which it can be objectively verified. The more negative evidence
that exists (a) the more positive evidence is necessary and (b) the more difficult
it is to support a conclusion that a valuation allowance is not needed for some
portion, or all of the deferred tax asset. Among the more significant types
of evidence that we consider are:
|
|
• Taxable
income projections in future years
|
|
|
|
|
|
• Whether
the carry forward period is so brief that it would limit realization of
tax benefits
|
|
|
|
|
|
• Future
sales and operating cost projections that will produce more than enough
taxable income to realize the deferred tax asset based on existing sales
prices and cost structures and
|
|
|
|
|
|
• Our
earnings history exclusive of the loss that created the future deductible
amount coupled with the evidence indicating that the loss is an aberration
rather than a continuing condition.
|
Since we have no earnings history to determine the likelihood of realizing
the benefits of the deferred tax asset, we are unable to determine our ability
to realize NOL carry forwards prior to their expiration. Accordingly, we are
required to provide a valuation allowance against our deferred tax asset. As
of March 31, 2004 we have a deferred tax asset of approximately $350,503, which
we have not recognized because we do have not established a history of earnings
and cannot project future sales and operating costs at this time.
US
Geothermal
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
F-1
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
U.S. Geothermal Inc.
(Formerly U.S. Cobalt Inc.)
(A development stage company)
We have audited the consolidated balance sheets of U.S. Geothermal
Inc. (formerly U.S. Cobalt Inc.) (a development stage company) and subsidiaries
as at March 31, 2004 and 2003, and the related consolidated statements of operations,
cash flows, and stockholders' equity for the years ended March 31, 2004 and
2003, and for the period from February 26, 2002 (date of inception) to March
31, 2004. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform an audit to obtain reasonable assurance whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company as at March 31, 2004 and 2003, and the consolidated results of
their operations and their consolidated cash flows for the periods indicated
in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in to Note 1(c) to
the financial statements, the Company incurred a net loss of $1,009,136 since
inception, has not attained profitable operations and is dependent upon obtaining
adequate financing to fulfil its development activities. These factors raise
substantial doubt that the Company will be able to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 1(c).
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
|
Vancouver, Canada
|
|
"Morgan & Company"
|
|
|
|
|
|
June 17, 2004
|
|
Chartered Accountants
|
|
Tel: (604) 687-5841
|
|
P.O. Box 10007 Pacific Centre
|
|
fax: (604) 687-0075
|
Sute 1488 - 700 West Georgia Street
|
|
www.morgan-cas.com
|
Vancouver, B.C. V7Y 1A1
|
F-2
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
(Stated in U.S. Dollars)
|
|
|
MARCH 31
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
870,513
|
|
$
|
29,729
|
|
|
Goods and Services Tax recoverable
|
|
7,900
|
|
|
-
|
|
|
Due from affiliated company
|
|
-
|
|
|
86,500
|
|
|
|
|
878,413
|
|
|
116,229
|
|
|
|
|
|
|
|
|
|
|
Property, Plant And Equipment
(Note 4)
|
|
495,418
|
|
|
268,435
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,373,831
|
|
$
|
384,664
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
$
|
185,465
|
|
$
|
37,123
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
|
100,000,000
common shares with a $0.001 par value
|
|
|
|
|
|
|
|
Issued:
|
|
|
|
|
|
|
|
12,922,693
shares at March 31, 2004 and
|
|
|
|
|
|
|
|
6,079,837
shares at March 31, 2003
|
|
12,923
|
|
|
6,080
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-In Capital
|
|
2,148,787
|
|
|
506,370
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income
|
|
35,792
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Accumulated Deficit During Development Stage
|
|
(1,009,136
|
)
|
|
(164,909
|
)
|
|
|
|
1,188,366
|
|
|
347,541
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,373,831
|
|
$
|
384,664
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
|
CUMULATIVE
|
|
|
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
|
INCORPORATION
|
|
|
|
|
|
|
|
|
|
|
FEBRUARY 26
|
|
|
|
|
YEARS ENDED
|
|
|
2002 TO
|
|
|
|
|
MARCH 31
|
|
|
MARCH 31
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
$
|
123,868
|
|
$
|
-
|
|
$
|
123,868
|
|
|
Corporate administration and
|
|
|
|
|
|
|
|
|
|
|
development
|
|
46,879
|
|
|
8,470
|
|
|
55,349
|
|
|
Exploration expenditures
|
|
18,141
|
|
|
17,299
|
|
|
35,440
|
|
|
Interest
|
|
9,254
|
|
|
-
|
|
|
9,254
|
|
|
Professional fees
|
|
117,169
|
|
|
73,190
|
|
|
190,359
|
|
|
Management fees
|
|
111,855
|
|
|
54,000
|
|
|
165,855
|
|
|
Travel and promotion
|
|
12,318
|
|
|
11,950
|
|
|
24,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before The Following
|
|
(439,484
|
)
|
|
(164,909
|
)
|
|
(604,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income
|
|
3,423
|
|
|
-
|
|
|
3,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss For The Period
|
$
|
(436,061
|
)
|
$
|
(164,909
|
)
|
$
|
(600,970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic And Diluted Loss Per Share
|
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number Of Shares
Outstanding
|
|
9,197,569
|
|
|
5,939,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year
|
$
|
(436,061
|
)
|
$
|
(164,909
|
)
|
|
|
|
|
Foreign currency translation adjustment
|
|
35,792
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Loss
|
$
|
(400,269
|
)
|
$
|
(164,909
|
)
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
|
CUMULATIVE
|
|
|
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
|
INCORPORATION
|
|
|
|
|
|
|
|
|
|
|
FEBRUARY 26
|
|
|
|
|
YEARS ENDED
|
|
|
2002 TO
|
|
|
|
|
MARCH 31
|
|
|
MARCH 31
|
|
|
|
|
2004
|
|
|
2003
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
$
|
(436,061
|
)
|
$
|
(164,909
|
)
|
$
|
(600,970
|
)
|
|
Add: Non-cash items:
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
323
|
|
|
253
|
|
|
576
|
|
|
Shares
issued for other than cash
|
|
-
|
|
|
49,600
|
|
|
49,600
|
|
|
Stock
based compensation
|
|
55,744
|
|
|
-
|
|
|
55,744
|
|
|
|
|
(379,994
|
)
|
|
(115,056
|
)
|
|
(495,050
|
)
|
|
Change in non-cash working capital
items:
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued liabilities
|
|
(97,802
|
)
|
|
37,123
|
|
|
(60,679
|
)
|
|
Goods
and Services Tax recoverable
|
|
(2,082
|
)
|
|
-
|
|
|
(2,082
|
)
|
|
|
|
(479,878
|
)
|
|
(77,933
|
)
|
|
(557,811
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
(227,306
|
)
|
|
(251,688
|
)
|
|
(478,994
|
)
|
|
Cash acquired on business combination
|
|
5,798
|
|
|
-
|
|
|
5,798
|
|
|
|
|
(221,508
|
)
|
|
(251,688
|
)
|
|
(473,196
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Issuance of share capital, net
of share issue cost
|
|
1,419,878
|
|
|
405,850
|
|
|
1,865,728
|
|
|
Advances to affiliated companies
|
|
86,500
|
|
|
(86,500
|
)
|
|
-
|
|
|
|
|
1,506,378
|
|
|
319,350
|
|
|
1,865,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Effect On Cash
|
|
35,792
|
|
|
-
|
|
|
35,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) In Cash
|
|
840,784
|
|
|
(10,271
|
)
|
|
870,513
|
|
|
Cash And Cash Equivalents, Beginning Of Period
|
|
29,729
|
|
|
40,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash And Cash Equivalents, End Of Period
|
$
|
870,513
|
|
$
|
29,729
|
|
$
|
870,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
Interest paid
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Non-cash financing activities
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for settlement of debt
|
|
173,639
|
|
|
-
|
|
|
173,639
|
|
|
Shares
issued for professional services
|
|
-
|
|
|
49,600
|
|
|
49,600
|
|
|
Shares issued for
geothermal property
|
|
-
|
|
|
17,000
|
|
|
17,000
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
MARCH 31, 2004
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFICIT
|
|
|
|
|
|
|
|
|
|
NUMBER
|
|
|
|
|
|
ADDITIONAL
|
|
|
DURING
|
|
|
OTHER
|
|
|
|
|
|
|
OF
|
|
|
|
|
|
PAID-IN
|
|
|
EXPLORATION
|
|
|
COMPREHEN
SIVE
|
|
|
|
|
|
|
SHARES
|
|
|
AMOUNT
|
|
|
CAPITAL
|
|
|
STAGE
|
|
|
INCOME
|
|
|
TOTAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2002
|
2,600,000
|
|
$
|
2,600
|
|
$
|
37,400
|
|
$
|
-
|
|
$
|
-
|
|
$
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
1,418,667
|
|
|
1,419
|
|
|
404,431
|
|
|
-
|
|
|
-
|
|
|
405,850
|
|
|
Professional services
|
166,170
|
|
|
166
|
|
|
49,434
|
|
|
-
|
|
|
-
|
|
|
49,600
|
|
|
Geothermal property
|
1,895,000
|
|
|
1,895
|
|
|
15,105
|
|
|
-
|
|
|
-
|
|
|
17,000
|
|
|
Net loss for the period
|
-
|
|
|
-
|
|
|
-
|
|
|
(164,909
|
)
|
|
-
|
|
|
(164,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2003
|
6,079,837
|
|
|
6,080
|
|
|
506,370
|
|
|
(164,909
|
)
|
|
-
|
|
|
347,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to number of shares issued and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
outstanding as a result of the
reverse take-over
|
(6,079,837
|
)
|
|
(6,080
|
)
|
|
6,080
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
transaction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares issued at time of reverse take-over
|
2,274,616
|
|
|
2,275
|
|
|
(2,275
|
)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
2,274,616
|
|
|
2,275
|
|
|
510,175
|
|
|
(164,909
|
)
|
|
-
|
|
|
347,541
|
|
|
Shares issued for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of U.S. Geothermal
Inc. (Note 3)
|
6,939,992
|
|
|
6,940
|
|
|
(6,940
|
)
|
|
(408,166
|
)
|
|
-
|
|
|
(408,166
|
)
|
|
Private placement, net of share
issue costs of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$100,559
|
3,322,221
|
|
|
3,322
|
|
|
1,416,556
|
|
|
-
|
|
|
-
|
|
|
1,419,878
|
|
|
Settlement of debts
|
385,864
|
|
|
386
|
|
|
173,252
|
|
|
-
|
|
|
-
|
|
|
173,638
|
|
|
Stock options granted
|
-
|
|
|
-
|
|
|
55,744
|
|
|
-
|
|
|
-
|
|
|
55,744
|
|
|
Foreign currency translation
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
35,792
|
|
|
35,792
|
|
|
Net loss for the period
|
-
|
|
|
-
|
|
|
-
|
|
|
(436,061
|
)
|
|
-
|
|
|
(436,061
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2004
|
12,922,693
|
|
$
|
12,923
|
|
$
|
2,148,787
|
|
$
|
(1,009,136
|
)
|
$
|
35,792
|
|
$
|
1,188,366
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
1.
|
NATURE OF OPERATIONS AND GOING CONCERN
|
|
|
|
|
a)
|
Organization
|
|
|
|
|
|
U.S. Cobalt, Inc. ("GTH") completed a reverse take-over
on December 19, 2003 (Note 3). The effect of this reverse take-over was
that the former stockholders of U.S. Geothermal Inc. ("GEO – Idaho")
a company incorporated on February 26, 2002 in the state of Idaho, acquired
control of GTH. In connection with the transaction U.S. Cobalt Inc. changed
its name to U.S. Geothermal Inc. and consolidated its common shares on
a one new to five old basis. All references to common shares in these
financial statements have been restated to reflect the roll-back of common
stock.
|
|
|
|
|
b)
|
Development Stage Activities
|
|
|
|
|
|
The Company has been in the development stage since
its formation and has not yet realized any revenues from its planned operations.
GEO - Idaho operates for the purpose of acquiring geothermal properties
and more particularly, entering into an agreement with Vulcan Power Company
("Vulcan") of Bend, Oregon, U.S.A., pursuant to which the Company has
agreed to acquire a 100% interest in the Raft River Geothermal Property
located in Cassia County, Idaho, U.S.A. (Note 4).
|
|
|
|
|
c)
|
Going Concern
|
|
|
|
|
|
These financial statements have been prepared on
the basis of accounting principles applicable to a going concern, which
assumes the realization of assets and discharge of liabilities in the
normal course of business. As shown in the accompanying financial statements,
the Company has incurred an accumulated deficit of $1,009,136 for the
period from February 26, 2002 (inception) to March 31, 2004, and has no
revenue.
|
|
|
|
|
|
The Company is in the process of developing its
geothermal properties and has not yet determined whether these properties
contain economically recoverable geothermal reserves. The recoverability
of the amounts shown for geothermal properties is dependent upon the existence
of economically recoverable reserves, the ability of the Company to obtain
necessary financing to complete the development of the properties, and
upon future profitable production. The Company expects to continue to
incur substantial losses to complete the development of its business.
Since its inception, the Company has funded operations through common
stock issuances in order to meet its strategic objectives. Management
believes that sufficient funding will be available to meet its business
objectives, including anticipated cash needs for working capital, and
is currently evaluating several financing options. Management intends
to seek additional capital through a private placement of its common stock.
In the event the Company is unable to obtain additional financing, there
is no assurance that the Company will be able to continue as a going concern.
These financial statements do not give effect to any adjustments, which
may be necessary should the Company be unable to continue as a going concern.
|
F-7
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
2.
|
ACCOUNTING POLICIES
|
|
|
|
|
The financial statements of the Company
have been prepared in accordance with generally accepted accounting principles
in the United States. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates which
have been made using careful judgement.
|
|
|
|
|
a)
|
Basis of Presentation
|
|
|
|
|
|
These consolidated financial statements
are prepared in accordance with accounting principles generally accepted
in the United States. These consolidated financial statements include
the accounts of the following companies:
|
|
|
|
|
|
i)
|
U.S. Geothermal, Inc. (incorporated in the state
of Delaware);
|
|
|
|
ii)
|
U.S. Geothermal, Inc. (incorporated in the state
of Idaho);
|
|
|
|
iii)
|
U.S. Cobalt Inc. (incorporated in the state of Colorado).
|
|
|
|
|
b)
|
Property, Plant and Equipment
|
|
|
|
|
|
Costs of acquisition of geothermal properties
are capitalized on an area-of-interest basis. Amortization of these costs
will be on a unit-of-production basis, based on estimated proven geothermal
reserves should such reserves be found. If an area of interest is abandoned,
the costs thereof are charged to income in the year of abandonment.
|
|
|
|
|
|
The Company expenses all costs related
to the exploration of geothermal reserves prior to the establishment of
proven and profitable reserves.
|
|
|
|
|
|
Other equipment is recorded at cost. Depreciation
of other equipment is calculated on a 30% straight line basis.
|
|
|
|
|
c)
|
Impairment of Long-Lived Assets
|
|
|
|
|
|
SFAS No. 144 - "Accounting for the Impairment
or Disposal of Long-Lived Assets" establishes a single accounting model
for long-lived assets to be disposed of by sale including discontinued
operations. SFAS 144 requires that these long-lived assets be measured
at the lower of the carrying amount or fair value less cost to sell, whether
reported in continuing operations or discontinued operations.
|
F-8
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
2.
|
ACCOUNTING POLICIES
(Continued)
|
|
|
d)
|
Income Taxes
|
|
|
|
|
|
|
|
The Company accounts for income taxes pursuant to
SFAS No. 109 – "Accounting for Income Taxes". Under SFAS No. 109,
the Company is required to compute tax asset benefits for net operating
losses carried forward. Potential benefit of net operating losses have
not been recognized in these financial statements because the Company
cannot be assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
|
|
|
|
|
e)
|
Stock Based Compensation
|
|
|
|
|
|
As permitted by SFAS No. 123 – "Accounting
for Stock Based Compensation", as amended by SFAS – "Accounting for
Stock Based Compensation – Transition on Disclosure", the Company
has elected to apply the intrinsic value method of accounting in accordance
with Accounting Principles Board Opinion No. 25 – "Accounting for
Stock Issued to Employees" (APB 25). Under the intrinsic value method
of accounting, compensation expense is recognized if the exercise price
of the Company's employee stock options is less than the market price
of the underlying common stock on the date of grant. Stock based compensation
for employees is recognized on the straight line basis over the vesting
period of the individual options. Stock options granted to non-employees
are accounted for under SFAS No. 123, which establishes a fair value based
method of accounting for stock based awards, and recognizes compensation
expense based on the fair market value of the stock award or fair market
value of the goods and services received, whichever is more reliably measurable.
Under the provisions of SFAS 148, the Company is required to disclose
the pro-forma net income (loss) that would have resulted from the use
of the fair value based method under SFAS 123.
|
|
|
|
|
f)
|
Financial Instruments
|
|
|
|
|
|
The Company's financial instruments consist of cash
and equivalents, Goods and Services Tax recoverable, due from affiliated
company, and accounts payable and accrued liabilities. Unless otherwise
noted, it is management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial instruments.
The fair values of these financial instruments approximate their carrying
values, unless otherwise noted.
|
F-9
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
2.
|
ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
g)
|
Basic and Diluted Loss Per Share
|
|
|
|
|
|
In accordance with SFAS No. 128 –
"Earnings Per Share", the basic loss per common share is computed by dividing
net loss available to common stockholders by the weighted average number
of common shares outstanding. Diluted loss per common share is computed
similar to basic loss per common share except that the denominator is
increased to include the number of additional common shares that would
have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. At March 31, 2004, the
Company has no stock equivalents that were anti-dilutive and excluded
in the earnings per share computation.
|
|
|
|
|
h)
|
Foreign Currency Translation
|
|
|
|
|
|
The Company's functional currency is the
U.S. dollar. Transactions in foreign currency are converted into U.S.
dollars using the current method whereby:
|
|
|
|
|
|
i)
|
monetary items at the rate prevailing at the balance sheet date;
|
|
|
|
ii)
|
non-monetary items at the historical exchange rate;
|
|
|
|
iii)
|
revenue and expense at the average rate in effect during the applicable
accounting period.
|
|
|
|
|
|
Adjustments arising from the translation
of the foreign currency amounts are included as a separate component of
stockholders' equity.
|
|
|
|
|
i)
|
Restoration Costs
|
|
|
|
|
|
In June 2001, the Financial Accounting
Standards Board issued SFAS No. 143 - "Accounting for Asset Retirement
Obligations," which is effective for fiscal years beginning after June
15, 2002. The Statement requires legal obligations associated with the
retirement of long-lived assets to be recognized at their fair value at
the time that the obligations are incurred. Upon initial recognition of
a liability, that cost should be capitalized as part of the related long-lived
asset and allocated to expense over the useful life of the asset. The
implementation of SFAS No. 143 did not have a material effect on the Company's
consolidated financial statements.
|
F-10
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
2.
|
ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
j)
|
Recent Accounting Pronouncements
|
|
|
|
|
|
In May 2003, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 150 – "Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity". SFAS No. 150 establishes standards for
how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability
(or an asset in some circumstances). The requirements of SFAS No. 150
apply to issuers' classification and measurement of freestanding financial
instruments, including those that comprise more than one option or forward
contract. SFAS No. 150 does not apply to features that are embedded in
a financial instrument that is not a derivative in its entirety. SFAS
No. 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003, except for mandatorily
redeemable financial instruments of non-public entities. It is to be implemented
by reporting the cumulative effect of a change in an accounting principle
for financial instruments created before the issuance date of SFAS No.
150 and still existing at the beginning of the interim period of adoption.
Restatement is not permitted. The adoption of this standard did not have
a material effect on the Company's results of operations or financial
position.
|
|
|
|
|
|
FASB has also issued SFAS No. 145, 146, 147 and
149 but they will not have any relationship to the operations of the Company,
therefore, a description of each and their respective impact on the Company's
operations have not been disclosed.
|
|
|
|
3.
|
REVERSE TAKE-OVER
|
|
|
|
|
Effective December 19, 2003, GTH acquired
100% of the issued and outstanding voting shares of GEO - Idaho by issuing
6,939,992 common shares and 2,420,217 share purchase warrants. Each share
purchase warrant entitles the holder to purchase one additional common
share at a price of $0.75 per share until December 15, 2005. Since the
transaction resulted in the former shareholders of GEO - Idaho owning
the majority of the issued shares of GTH, the transaction, which is referred
to as a "reverse take-over", has been treated for accounting purposes
as an acquisition by GEO - Idaho of the net assets and liabilities of
GTH. Under this purchase method of accounting, the results of operations
of GTH are included in these financial statements from December 19, 2003.
GEO - Idaho is deemed to be the purchaser for accounting purposes. Accordingly,
its net assets are included in the balance sheet at their previously recorded
values.
|
F-11
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
3.
|
REVERSE TAKE-OVER
(Continued)
The acquisition is summarized as follows:
|
|
|
Current assets (including cash of $5,798)
|
$
|
11,616
|
|
|
|
Current liabilities
|
|
(419,782
|
)
|
|
|
|
|
|
|
|
|
Net liabilities assumed
|
$
|
(408,166
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.
|
PROPERTY, PLANT AND EQUIPMENT
GEO - Idaho entered into an agreement, as amended December
3, 2002, with Vulcan Power Company ("Vulcan"), a company incorporated
in Oregon, U.S.A., to purchase a 100% interest in the Raft River Geothermal
Property ("the Property") located in Cassia County, Idaho, U.S.A.
As at March 31, 2004, the Company has acquired 75% interest
in the Property by issuing 1,755,156 common shares, warrants to purchase
up to 2,420,217 common shares of the Company at a price of $0.75 per share
until December 15, 2005, making cash payments totalling $475,000, and
completing a work program of $200,000.
To purchase of the remaining 25% interest in the Property,
the Company must pay Vulcan $125,000 on or before receipt of project financing
for construction of the power plant.
Property, plant and equipment consisted of the following:
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
Geothermal property (land and equipment)
|
$
|
492,000
|
|
$
|
267,000
|
|
|
|
Other equipment
|
|
3,994
|
|
|
1,688
|
|
|
|
|
|
495,994
|
|
|
268,688
|
|
|
|
Less: Accumulated depreciation
|
|
(576
|
)
|
|
(253
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
495,418
|
|
$
|
268,435
|
|
F-12
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
5.
|
SHARE CAPITAL
|
|
|
|
|
a)
|
Private Placement
|
|
|
|
|
|
On December 19, 2003, the Company issued 3,322,221
units for private placements at a price of $0.45 per unit. Each unit consists
of one common share and one half of one share purchase warrant. Each share
purchase warrant entitles the holder to purchase one additional common
share at a price of $0.75 per share until December 19, 2005. In connection
with the private placements, the Company issued share purchase warrants
to purchase up to 83,333 common shares valued at $25,437 for finder's
fee exercisable at a price of $0.45 until December 19, 2005.
|
|
|
|
|
b)
|
Settlement of Debts
|
|
|
|
|
|
On February 17, 2004, the Company issued 385,864
units in settlement of $173,639 loans received including interest accrued
at a rate of 20% per annum. Each unit consists of one common share and
one half of one share purchase warrant. Each share purchase warrant entitles
the holder to purchase one additional common share at a price of $0.75
per share until February 17, 2006.
|
|
|
|
|
c)
|
Escrow Shares
|
|
|
|
|
|
As at March 31, 2004, the Company has 6,439,565
common shares and 2,420,217 share purchase warrants held in escrow.
|
|
|
|
|
d)
|
Warrants
|
|
|
|
|
|
As at March 31, 2004, the following share purchase
warrants are outstanding:
|
|
NUMBER
|
|
EXERCISE
|
|
EXPIRY
|
|
OF WARRANTS
|
|
PRICE
|
|
DATE
|
|
|
|
|
|
|
|
4,081,327
|
|
$0.75
|
|
December 15, 2005
|
|
192,932
|
|
$0.75
|
|
February 17, 2006
|
|
83,333
|
|
$0.45
|
|
December 15, 2005
|
|
|
|
|
|
|
|
4,357,592
|
|
|
|
|
F-13
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
6.
|
STOCK BASED COMPENSATION
The Company‘s
2004 stock option plan provides for the grant of incentive stock options
for up to 2,200,000 common shares to employees, consultants, officers
and directors of the company. Options are granted for a term of up to
five years from the date of grant. Stock options granted generally vest
over a period of eighteen months.
During the year ended March 31, 2004, the Company granted
1,745,000 stock options to consultants, directors and officers exercisable
at a price of $0.44 until January 3, 2009, of which 436,250 stock options
vested by March 31, 2004. Compensation expense related to stock options
granted to consultants is recorded at their fair value as calculated by
the Black-Scholes option pricing model of $55,744 and is included in consulting
fees for the year ended March 31, 2004. The remaining compensation expense
of $167,242 will be recognized over the vesting period.
The changes in stock options are as follows:
|
|
|
|
|
|
|
EXERCISE
|
|
|
|
NUMBER
|
|
|
PRICE
|
|
|
Balance outstanding, March 31, 2002 and
2003
|
-
|
|
$
|
-
|
|
|
Granted
|
1,745,000
|
|
|
0.44
|
|
|
Balance outstanding, March 31, 2004
|
1,745,000
|
|
$
|
0.44
|
|
|
|
|
|
The following table summarizes information about
the stock options outstanding at March 31, 2004:
|
|
OPTIONS OUTSTANDING
|
|
OPTIONS EXERCISABLE
|
|
|
|
|
|
REMAINING
|
|
|
|
|
|
EXERCISE
|
|
NUMBER
|
|
CONTRACTUAL
|
|
NUMBER
|
|
EXERCISE
|
|
PRICE
|
|
OF SHARES
|
|
LIFE (YEARS)
|
|
OF SHARES
|
|
PRICE
|
|
|
|
|
|
|
|
|
|
|
|
$ 0.44
|
|
1,745,000
|
|
4.76
|
|
436,250
|
|
$ 0.44
|
F-14
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
6.
|
STOCK BASED COMPENSATION
(Continued)
Had the Company determined compensation cost to employees
and directors at the grant dates for those options granted during the
year consistent with the fair value method of accounting for stock based
compensation, the Company's net loss would have been increased to the
pro-forma amounts indicated below:
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year – as reported
|
$
|
(436,061
|
)
|
$
|
(164,909
|
)
|
|
|
Add: Stock based compensation expense included in net
|
|
|
|
|
|
|
|
|
loss
as reported
|
|
55,744
|
|
|
-
|
|
|
|
Less: Stock based compensation expense determined
|
|
|
|
|
|
|
|
|
under
fair value method
|
|
(128,842
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year – pro-forma
|
$
|
(509,159
|
)
|
$
|
(164,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share (basic and diluted) - as
reported
|
$
|
(0.05
|
)
|
$
|
(0.03
|
)
|
|
|
Loss per share (basic and diluted) – pro-forma
|
$
|
(0.06
|
)
|
$
|
(0.01
|
)
|
|
|
|
|
|
The fair value of the stock
options including the preceding pro forma amounts was estimated using
the Black-Scholes option-pricing model and is amortized over the vesting
period of the underlying options. The weighted average fair value of options
granted was $0.30 per share. The assumptions used to calculate the pro-forma
disclosure and the weighted average information are as follows:
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
Risk free interest rate
|
4.18%
|
|
|
|
Expected dividend yield
|
0
|
|
|
|
Expected lives
|
5
|
|
|
|
Expected volatility
|
136%
|
|
|
|
|
|
|
|
|
Changes in the subjective
input assumptions can materially affect the fair value estimate and, therefore,
the existing models do not necessarily provide a reliable measure of the
fair value of the Company's stock options.
|
F-15
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
7.
|
INCOME TAX LOSSES
The Company's provision
for income taxes differs from the amounts computed by applying the United
States federal statutory income tax rates to the loss as a result of the
following:
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
Statutory rates
|
|
35%
|
|
|
35%
|
|
|
|
Recovery of income taxes computed at statutory rates
|
$
|
(152,621
|
)
|
$
|
(57,718
|
)
|
|
|
Non-deductible items
|
|
19,510
|
|
|
-
|
|
|
|
Tax benefit not recognized on current year's losses
|
|
133,111
|
|
|
57,718
|
|
|
|
|
$
|
-
|
|
$
|
-
|
|
|
|
The tax effects of temporary timing differences that
give rise to significant components of the future tax assets and future
tax liabilities are as follows:
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carry forward
|
$
|
191,000
|
|
$
|
58,000
|
|
|
|
Property, plant and equipment
|
|
172,000
|
|
|
93,000
|
|
|
|
Less: Valuation allowance
|
|
(363,000
|
)
|
|
(151,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax asset
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
At March 31, 2004, the Company
has net operating losses of approximately $545,000, which may be carried
forward to apply against future years' income for tax purposes expiring
as follows:
|
|
2023
|
$
|
165,000
|
|
2024
|
$
|
380,000
|
|
8.
|
COMMITMENTS
The Company has entered in several
lease agreements with terms expiring up to February 2014, for geothermal
properties adjoining the Raft River Geothermal Property.
|
F-16
U.S. GEOTHERMAL INC.
(Formerly U.S. Cobalt Inc.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004 AND 2003
(Stated in U.S. Dollars)
|
8.
|
COMMITMENTS
(Continued)
|
|
|
|
|
The leases provide for the following annual payments:
|
|
2005
|
$
|
17,500
|
|
2006
|
$
|
17,500
|
|
2007
|
$
|
27,000
|
|
2008
|
$
|
27,000
|
|
2009 and thereafter
|
$
|
27,000
|
|
9.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
|
a)
|
As at March 31, 2004, an amount of $147,616 (2003
- $33,269) is payable to directors and officers of the Company.
|
|
|
|
|
b)
|
During the year, the Company incurred the following
transactions with directors, officers and a company with a common director:
|
|
|
|
|
|
2004
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
$
|
111,855
|
|
$
|
44,000
|
|
|
|
|
Consulting fees
|
|
24,123
|
|
|
10,000
|
|
|
|
|
Administrative services
|
|
10,029
|
|
|
-
|
|
|
|
|
Rent
|
|
10,067
|
|
|
622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
156,074
|
|
$
|
54,622
|
|
F-17
- 50 -
WHERE YOU CAN FIND MORE INFORMATION
After the registration statement of which this prospectus is a part becomes
effective, we will be subject to the informational filing requirements of the
U.S. Securities Exchange Act of 1934, as amended, and its rules and regulations.
This means that we will file reports, proxy and information statements and other
information with the U.S. Securities and Exchange Commission. The reports, proxy
and information statements and other information that we will file can be read
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, Northwest, Washington, DC 20549; and at the Commission's
regional offices located at 175 West Jackson Boulevard, Suite 900, Chicago,
Illinois 60664 and at 233 Broadway, New York, New York 10279. Please call the
Commission at 1-800-SEC-0330 for information on the operation of the public
reference rooms. Copies of such material can also be obtained from the Commission
at prescribed rates through its Public Reference Section at 450 Fifth Street,
Northwest, Washington, DC 20549. The Commission maintains a Web site that will
contain the reports, proxy and information statements and other information
that we file electronically with the Commission and the address of that Web
site is
http://www.sec.gov
.
This prospectus is part of a registration statement we filed with the SEC.
You should rely only on the information or representations provided in this
prospectus and any information we have incorporated by reference. We have not
authorized anyone to provide you with any information other than that provided
in this prospectus. We have not authorized anyone to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
Holders of shares of our common stock may obtain a copy of our audited year-end
financial statements, by mailing their request to U.S. Geothermal Inc., Suite
910 – 885 Dunsmuir Street, Vancouver, British Columbia, V6C 1N5.
GTH also files disclosure information as required by the British Columbia
Securities Commission and the TSX Venture Exchange. This information can be
found at the following Web site: www.sedar.com.
- 51 -
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 174 of the General Corporal Law of the State of Delaware and Article
XIII of the Certificate of Incorporation provide for indemnification of present
and former officers, directors, employees and agents.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the securities
being registered hereunder, other than underwriting commissions and expenses,
are estimated to be as follows:
|
|
Registration Fee
|
$ *
|
|
|
|
Printing Expenses
|
$ *
|
|
|
|
Accounting Fees and Expenses
|
$ *
|
|
|
|
Legal Fees and Expenses
|
$ *
|
|
|
|
Miscellaneous Expenses
|
$ *
|
|
|
|
TOTAL
|
$ *
|
|
|
|
|
|
|
|
|
* To be provided by amendment.
|
|
|
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, GTH has issued the following unregistered securities.
1. On February 2, 2002,
the following persons, as founders, purchased an aggregate of 2,600,000 shares
of Geo-Idaho common stock for a total purchase price of $40,000:
|
|
Daniel J. Kunz
|
650,000
|
|
|
|
Douglas J. Glaspey
|
650,000
|
|
|
|
Paul A. Larkin
|
650,000
|
|
|
|
Ronald P. Bourgeois
|
650,000
|
|
The shares were issued in a transaction exempt from the registration requirements
of the Securities Act by virtue of the exemption afforded by Section 4(2). Each
of such persons purchased the shares for his own account, for investment and
not with a view to the distribution of the shares. The certificates for the
shares bear a restrictive legend and stop transfer instructions have been placed
against the transfer of the shares. No commissions were paid with respect to
the issuance.
2. On March 5, 2002,
1,895,000 shares of Geo-Idaho common stock and 1,612,000 warrants to purchase
shares of Geo-Idaho common stock were issued by Geo-Idaho to Vulcan Power
- 52 -
Company in exchange for interests in the Raft River project. The securities
were issued in a transaction exempt from the registration requirements of the
Securities Act in reliance on Section 4(2). Vulcan Power Company purchased the
securities for its own account, for investment and not with a view to the distribution
of the securities. The certificates for the securities bear a restrictive legend
and stop transfer instructions have been placed against the transfer of securities.
No commissions were paid with respect to the issuance.
3. On May 28, 2002,
an aggregate of 400,000 shares of Geo-Idaho common stock were purchased by 13
persons for a subscription price of $0.25 per share, and gross proceeds of $95,000
in cash and $5,000 in consulting services. The purchasers either represented
that they were "accredited investors" as defined in Regulation D, or the sales
were to non-US persons and took place outside of the United States, as defined
in Regulation S. None of the purchasers were officers or directors. The shares
were issued in transactions exempt from the registration requirements of the
Securities Act in reliance on and compliance with Regulations D and S. No commissions
were paid with respect to the issuance.
4. On November 1, 2002,
an aggregate of 1,033,607 shares of Geo-Idaho common stock were purchased by
18 persons, including Daniel Kunz and John Walker, who are officers and/or directors
of Geo-Idaho and GTH, for a subscription price of $0.30 per share, and gross
proceeds of $310,082. The purchasers were either "accredited investors" as defined
in Regulation D, or the sales were to non-US persons and took place outside
of the United States, as defined in Regulation S. The shares were issued in
transactions exempt from the registration requirements of the Securities Act
in reliance on and compliance with Regulations D and S. No commissions were
paid with respect to the issuance.
5. In June 2003, GTH
issued convertible promissory notes in the aggregate principal amount of $269,000
to a group of six investors, including Daniel Kunz and Kevin Kitz, officers
of the company. The investors were either "accredited investors" as defined
in Regulation D, or the transactions were with non-US persons and took place
outside of the United States, as defined in Regulation S. The notes were issued
in transactions exempt from the registration requirements of the Securities
Act in reliance on and compliance with Regulations D and S. Each of such persons
purchased the notes for his own account, for investment and not with a view
to the distribution of the notes. The notes bear a restrictive legend and stop
transfer instructions were placed against the transfer of the notes. No commissions
were paid with respect to the issuance.
6. On December 19, 2003,
GTH issued 6,939,992 shares of its common stock and 2,420,217 warrants to purchase
its common stock in exchange for 100% of Geo-Idaho's outstanding shares and
warrants. The shares were issued to the following persons, each of whom was
a securityholder of Geo-Idaho, in reliance on Section 4(2):
- 53 -
|
|
NAME
|
NO. OF SHARES
|
|
|
|
|
|
|
|
|
Vulcan Power Company
|
1,755,156
|
|
|
|
Daniel J. Kunz
|
1,254,769
|
|
|
|
Douglas J. Glaspey
|
1,014,649
|
|
|
|
Paul A. Larkin
|
863,187
|
|
|
|
Ronald Bourgeois
|
821,425
|
|
|
|
Tom Menning
|
183,332
|
|
|
|
Grim Estate Ltd.
|
180,000
|
|
|
|
Donald Nelson
|
108,000
|
|
|
|
Ronald C. Yanke
|
108,000
|
|
|
|
Ross Beaty
|
85,000
|
|
|
|
Gerald Sneddon
|
80,000
|
|
|
|
John H. Walker
|
73,807
|
|
|
|
Sneddon Family Trust
|
50,000
|
|
|
|
Steve R. Smith
|
45,000
|
|
|
|
Burton Egger
|
40,000
|
|
|
|
Steven Chi
|
36,667
|
|
|
|
Dr. John Swartley
|
36,667
|
|
|
|
John W. Leonard
|
35,000
|
|
|
|
William Brock
|
33,333
|
|
|
|
Robert Falls
|
24,000
|
|
|
|
Steven Jensen
|
21,000
|
|
|
|
John Beaulieu
|
20,000
|
|
|
|
William Batiuk
|
17,000
|
|
|
|
Barry Marcus
|
15,000
|
|
|
|
Leland Mink
|
10,000
|
|
The warrants were issued solely to Vulcan Power Company, the sole warrant
holder of Geo-Idaho, in reliance on Section 4(2), and are exercisable at
a price of $0.75 per share, for a period of two years. Each of such persons
purchased the securities for his or its own account, for investment and not with
a view to the distribution of the securities. The certificates for the securities
bear a restrictive legend and stop transfer instructions have been placed against
the transfer of the securities.
7. On December 19, 2003,
GTH sold 3,222,221 shares of common stock and 1,661,000 warrants to purchase
shares of its common stock in a private offering under Regulations D and S,
at a price of $0.45 per unit (a unit being one share and one-half share purchase
warrant), for gross proceeds of $1,500,000. Of the 13 purchasers, two were residents
of the United States who represented that they were "accredited investors" under
Regulation D, and the remaining 11 sales were to non-US persons and took place
outside of the United States, as defined in Regulation S. Daniel J. Kunz, an
officer and director of GTH, subscribed for 1,111,111 shares and 555,555 share
purchase warrants. Toll Cross Securities of Toronto, Canada, was paid a cash
fee of $52,500 and issued warrants to purchase 83,333 shares of GTH at an exercise
price of $0.45, exercisable for 24 months, as compensation for placing 1,666,667
units under the private offering. The securities were issued in transactions
exempt from the registration requirements of the Securities Act in reliance
on and compliance with Regulations D and S. Each of such persons purchased the
securities for his own account, for investment and not with a view to the
- 54 -
distribution of the securities. The certificates for the securities bear a
restrictive legend and stop transfer instructions have been placed against the
transfer of the securities.
8. On February 20, 2004,
GTH issued 385,864 shares and 192,932 share purchase warrants in connection
with the conversion of most of the promissory notes referred to in paragraph
5, above. Mr. Kunz did not participate in the conversion, and was repaid his
principal and interest. The warrants are exercisable for 24 months at an price
of $0.45 per share. The securities were issued in transactions exempt from the
registration requirements of the Securities Act in reliance on and compliance
with Regulations D and S. Each of such persons purchased the securities for
his own account, for investment and not with a view to the distribution of the
securities. The certificates for the securities bear a restrictive legend and
stop transfer instructions have been placed against the transfer of the securities.
No commissions were paid with respect to the issuance.
9. GTH has engaged Dundee
Securities Corporation with respect to a private placement of units in Canada
and outside of North America in accordance with the requirements of Regulation
S under the Securities Act. The placement is intended to raise up to CDN $3,400,000
through the sale of units at a price of CDN $0.85 per unit. Each unit will be
comprised of one share and one warrant to purchase one share at an exercise
price of CDN $1.25 for a period of two years. GTH will have the right to accelerate
the exercise period of the warrants on twenty days notice if the closing price
on a public market exceeds CDN $1.65 for twenty consecutive business days.
ITEM 27. EXHIBITS*
- 55 -
|
10.3
|
|
Amendment No. 2 to "Agreement by
and between U.S. Geothermal Inc. And Vulcan Power Company" dated December
30, 2003
|
|
10.4
|
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Letter Agreement dated January 8,
2004 between U.S. Geothermal Inc. and Vulcan Power Company
|
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10.5
|
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Geothermal Lease and Agreement dated
June 14, 2002, by and between Sergene Jensen, Personal Representative of
the Estate of Harlan B. Jensen, and U.S. Geothermal Inc., an Idaho corporation
|
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10.6
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Geothermal Lease and Agreement dated
June 14, 2002, by and between Jensen Investments Inc. and U.S. Geothermal
Inc., an Idaho corporation
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10.7
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Geothermal Lease and Agreement dated
March 1, 2004, by and between: Jay Newbold and U.S. Geothermal Inc., an
Idaho corporation
|
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10.8
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Geothermal Lease and Agreement dated
June 28, 2003, by and between Janice Crank and the children of Paul Crank
and U.S. Geothermal Inc., an Idaho corporation
|
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10.9
|
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Fiscal Consulting Agreement between
U.S. Geothermal and Cowans & Company Ltd. dated February 1, 2004
|
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10.10
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Administrative Services Contract
between U.S. Geothermal Inc. and New Dawn Holdings Ltd.
|
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10.11
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Employment Agreement with Douglas
Glaspey
|
|
10.12
|
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Employment Agreement for Daniel
Kunz
|
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10.13
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Employment Agreement for Ronald
Bourgeois
|
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10.14
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Consulting Agreement for Kevin
Kitz
|
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10.15
|
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Escrow Agreement made December
19, 2003, among U.S. Geothermal Inc., Pacific Corporate Trust Company as
escrow agent, and certain securityholders
|
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10.16
|
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First Amended and Restated Merger
Agreement among U.S. Cobalt Inc., a Delaware corporation, EverGreen Power
Inc., an Idaho corporation, U.S. Geothermal Inc., an Idaho corporation ("Geo"),
and the stockholders of Geo
|
|
10.17
|
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Agreement with Dundee Securities
Corporation dated June 28, 2004
|
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10.18
|
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Stock Option Plan of U.S. Cobalt
Inc. (now known as U.S. Geothermal Inc.) dated April 3, 2003
|
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21
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List of Subsidiaries
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23.1
|
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Consent of Morgan and Company, Chartered
Accountants
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23.2
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Consent of Williams, Kastner &
Gibbs (included in Exhibit 5)
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24
|
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Powers of Attorney (included in the Signature
Pages of this Registration Statement)
|
* Filed with this Registration Statement.
ITEM 28. UNDERTAKINGS
A.
The
undersigned Registrant hereunder undertakes:
- 56 -
(1)
to file, during any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
(i)
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Act");
(ii)
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and
(iii)
include any additional or changed material information on the plan of distribution.
(2)
That, for the purpose of determining liability under the Act, to treat each
such post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3)
File a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4)
For purposes of determining any liability under the Act, to treat the information
omitted from the form of prospectus filed as part of a registration statement
in reliance upon Rule 430A and contained in the form of prospectus filed by
the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act as
part of this registration statement as of the time the Commission declared it
effective.
(5)
For determining any liability under the Act, to treat each post-effective amendment
that contains a form of prospectus as a new registration statement for the securities
offered in the registration statement, and that offering of the securities at
that time as the initial bona fide offering of those securities.
B.
Insofar as indemnification for liabilities arising under the Act may be permitted
to directors, officers and controlling persons of GTH pursuant to the provisions
of its Certificate of Incorporation, or otherwise, GTH has been advised that
in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by GTH of expenses incurred or paid by a director, officer
or controlling person of GTH in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in connection
with the securities being registered, GTH will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
- 57 -
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form SB-2, and authorized this Registration Statement
to be signed on its behalf by the undersigned, in the City of Boise, State of
Idaho, on July 7, 2004.
U.S. GEOTHERMAL INC.
|
|
By:
|
/s/ Daniel J. Kunz
|
|
|
|
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Daniel J. Kunz, President,
|
|
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
|
/s/ Daniel J. Kunz
|
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Director and President, Chief
|
|
|
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Daniel J. Kunz
|
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Executive Officer (Principal
|
|
July 7, 2004
|
|
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Executive Officer)
|
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/s/ Douglas J. Glaspey
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Director and Chief Operating
|
|
July 7, 2004
|
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Douglas
J. Glaspey
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Officer
|
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/s/ Ronald P. Bourgeois
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Chief Financial Officer (Principal
|
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Ronald P. Bourgeois
|
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Financial and Accounting Officer)
|
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July 7, 2004
|
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|
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/s/ John Walker
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Director and Chairman
|
|
July 7, 2004
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John Walker
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/s/ Paul Larkin
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Director
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July 7, 2004
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Paul Larkin
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/s/ Jon Wellinghoff
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Director
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July 7, 2004
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Jon Wellinghoff
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- 58 -
POWER OF ATTORNEY
KNOW
ALL PERSONS BY THESE PRESENTS that each of the undersigned directors and officers
of U.S. Geothermal Inc., a Delaware corporation, which is filing a Registration
Statement on Form SB-2 with the Securities and Exchange Commission, Washington,
D.C. 20549 under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), hereby constitutes and appoints Daniel J. Kunz, as such individual's
true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign such Registration Statement and any or all amendments, including
post-effective amendments, to the Registration Statement, including a Prospectus
or an amended Prospectus therein and any registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act, and all other documents in connection therewith to be filed
with the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact as agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated.
|
Daniel J. Kunz
|
|
Director and President,
|
|
July 7, 2004
|
|
|
|
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Chief Executive Officer
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(Principal Executive
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|
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|
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Officer)
|
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Douglas J. Glaspey
|
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Director and Chief
|
|
July 7, 2004
|
|
|
|
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Operating Officer
|
|
|
|
|
|
|
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|
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Ronald P. Bourgeois
|
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Chief Financial Officer
|
|
July 7, 2004
|
|
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(Principal Financial and
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Accounting Officer)
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John Walker
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Director and Chairman
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July 7, 2004
|
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Paul Larkin
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Director
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|
July 7, 2004
|
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Jon Wellinghoff
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Director
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July 7, 2004
|
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CERTIFICATE OF INCORPORATION
OF
U.S. COBALT INC.
ARTICLE I
Name
The name of the
corporation is U. S. Cobalt Inc. (herein the “Corporation”).
ARTICLE II
Registered Office
The
address of the Corporation’s registered office in the State of Delaware
is 1013 Centre Road, County of Newcastle, Wilmington, Delaware, 19805. The name
of the Corporation’s registered agent at such address is Corporation Service
Company. The registered office and/or registered agent of the Corporation may
be changed from time to time as determined by the Board of Directors.
ARTICLE III
Powers
The
nature of the business of the Corporation and the purposes for which it is organized
are to engage in any business and lawful act or activity for which corporations
may be organized under the laws of the State of Delaware. The Corporation shall
have all the powers and privileges of a corporation organized under the General
Corporation Law of the State of Delaware (the “DGCL”).
ARTICLE IV
Term
The Corporation
is to have perpetual existence.
ARTICLE V
Incorporator
The name and mailing
address of the incorporator are as follows:
|
Name
|
Mailing Address
|
|
Scott M. Reed
|
1919 14th Street, Suite 330
Boulder, Colorado 80302
|
-2-
ARTICLE VI
Directors
A.
Number; Vacancies.
The number of Directors of the Corporation shall be
such number as shall be established from time to time in accordance with Bylaws.
Vacancies in the Board of Directors of the Corporation, however caused, and
newly created directorships shall be filled by a vote of a majority of the Directors
then in office, whether or not a quorum, and any Director so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of the class to which the Director has been chosen expires and when the
Director’s successor is elected and qualified.
B.
Initial Board of Directors.
The initial Board of Directors shall consist
of the following individuals:
|
Name
|
Municipality of Residence
|
|
Douglas J. Glaspey
|
3392 Maze Avenue, Boise, Idaho, 83706
|
|
Dr. Robert J. Miller
|
2847 Tincup Circle, Boulder, Colorado, 80303
|
|
Nicholas S. Lynn
|
5929 So Moline Way, Englewood, Colorado
|
|
Daniel Kunz
|
2007 Warm Springs Avenue, Boise, Idaho, 83712
|
|
Paul Larkin
|
2188 West 53rd Avenue, Vancouver, British Columbia, V6P 1L7
|
ARTICLE VII
Capital Stock
The
aggregate number of shares of all classes of capital stock which the Corporation
has authority to issue is 100,000,000 of which 100,000,000 are to be shares
of common stock, $0.001 par value per share. The shares may be issued by the
Corporation from time to time as approved by the Board of Directors of the Corporation
without the approval of the stockholders, except as otherwise provided in this
Article VII.
A
description of the different classes and series (if any) of the Corporation’s
capital stock, and a statement of the relative powers, designations, preferences
and rights of the shares of each class and series (if any) of capital stock,
and the qualifications, limitations or restrictions thereof, are as follows:
Common
Stock.
Except as provided in this Certificate, the holders of the common
stock shall exclusively possess all voting power. Each holder of shares of common
stock shall be entitled to vote for each share held by such holder, except as
otherwise expressly set forth in this Certificate.
Each
share of common stock shall have the same relative powers, preferences and rights
as, and shall be identical in all respects with, all the other shares of common
stock of the Corporation, except as otherwise expressly set forth in this Certificate.
-3-
ARTICLE VIII
No Preemptive Rights
No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any class or series,
or any unissued bonds, certificates or indebtedness, debentures, or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued stock,
bonds, certificates or indebtedness, debentures or other securities convertible
into or exchangeable for stock or carrying any right to purchase stock may be
issued pursuant to a resolution of the Board of Directors of the Corporation
to such persons, firms, corporations or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the Board of Directors
in the exercise of its sole discretion.
ARTICLE IX
Meetings of Stockholders; No Cumulative Voting
A.
Special meetings of the stockholders of the Corporation, for any purpose or
purposes, may be called at any time by the Board of Directors, the Chairman
of the Board, the Chief Executive Officer, or the President of the Corporation
or by one or more stockholders holding shares in the aggregate sufficient to
vote not less than a majority of all of the issued and outstanding shares of
the Corporation.
B.
There shall be no cumulative voting by stockholders of any class or series in
the election of Directors of the Corporation.
C.
Meetings of stockholders may be held at such place as the Bylaws may provide.
ARTICLE X
Notice for Nominations and Proposals
A.
Nominations for the election of Directors and proposals for any new business
to be taken up at any annual or special meeting of stockholders may be made
by the Board of Directors of the Corporation or by stockholder(s) holding, in
aggregate, not less than 10% of shares with voting rights of the Corporation
entitled to vote generally in the election of Directors. In order for a stockholder
of the Corporation to make any such nominations and/or proposals, he or she
shall give notice thereof in writing, delivered or mailed by first class mail,
postage prepaid, to the Secretary of the Corporation not less than forty days
nor more than sixty days prior to the date of any such meeting. Each such notice
given by a stockholder with respect to nominations for the election of Directors
shall set forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the principal occupation
or employment of each such nominee; and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such nominee. In addition,
the stockholder making such nomination shall promptly provide any other information
reasonably requested by the Corporation.
-4-
B.
Each such notice given by a stockholder to the Secretary with respect to business
proposals to be brought before a meeting shall set forth in writing as to each
matter: (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting; (ii)
the name and address, as they appear on the Corporation’s books, of the
stockholder proposing such business; (iii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in this Certificate to the contrary, no new business shall be conducted at the
meeting except as may be put before the meeting in accordance with the procedures
set forth in this Article and with the prior approval of the chairman of the
meeting.
C.
The Chairman of the annual or special meeting of stockholders may, if the facts
warrant, determine and declare to such meeting that a nomination or proposal
was not made in accordance with the foregoing procedure or that it is not appropriate
to be brought before the meeting in question, and, if he should so determine,
he shall so declare to the meeting and the defective nomination or proposal
shall be disregarded and, if deemed appropriate in the discretion of the Directors,
will be laid over for action at the next succeeding special or annual meeting
of the stockholders. This provision shall not require the holding of any adjourned
or special meeting of stockholders for the purpose of considering such defective
nomination or proposal.
ARTICLE XI
Removal of Directors
Notwithstanding any other provision of this Certificate or
Bylaws of the Corporation, any Director or the entire Board of Directors of
the Corporation may be removed, at any time, but only by the affirmative vote
of the holders of not less than a majority of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of Directors
cast at a meeting of the stockholders called for that purpose.
ARTICLE XII
Indemnification
A.
Nature of Indemnity.
Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a “proceeding”),
by reason of the fact that he (or a person of whom he is the legal representative),
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary, or agent
of another corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis
of such proceeding is alleged action in an official capacity as a director,
officer, employee, fiduciary or agent or in any other capacity while serving
as a director, officer, employee, fiduciary or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent which it is empowered
to do so by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law
-5-
permitted the Corporation to provide prior to such amendment)
against all expense, liability and loss (including attorneys’ fees actually
and reasonably incurred by such person in connection with such proceeding and
such indemnification shall inure to the benefit of his or her heirs, executors
and administrators; provided, however, that, except as provided in Section B
of this Article XII, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only
if such proceeding was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred, in this Article XII shall be a contract
right and, subject to section B and E of this Article XII, shall include the
right to payment by the Corporation of the expenses incurred in defending any
such proceeding in advance of its final disposition. The Corporation may, by
action of the Board of Directors, provide indemnification to employees and agents
of the Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
B.
Procedure for Indemnification of Directors and Officers.
Any indemnification
of a director of officer of the corporation under Section A of this Article
XII or advance of expenses under Section B of this Article XII shall be made
promptly, and in any event within 30 days, upon the written request of the director
or officer. If a determination by the Corporation that the director of officer
is entitled to indemnification pursuant to this Article XII is required, and
the Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved the request. If
the Corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request
is not made within 30 days, the right to indemnification or advances as granted
by this Article XII shall be enforceable by the director or officer in any court
of competent jurisdiction. Such person’s costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such action shall also be indemnified by the Corporation.
It shall be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any, has been tendered
to the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the General Corporation Law of the State of Delaware
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the Corporation. Neither the failure of the
Corporation (including the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
C.
Nonexclusivity of Article XII
. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article XII shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, provision
of this Certificate of Incorporation, Bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
D.
Insurance.
The Corporation may purchase and maintain insurance on its
own behalf and on behalf of any person who is or was a director, officer, employee,
fiduciary, or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee or
-6-
agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her
and incurred by him or her in any such capacity, whether or not the Corporation
would have the power to indemnify such person against such liability under this
Article XII.
E.
Expenses.
Expenses incurred by any person described in Section A of this
Article XII in defending a proceeding shall be paid by the Corporation in advance
of such proceeding’s final disposition unless otherwise determined by the
Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
F.
Employees and Agents.
Persons who are not covered by the foregoing provisions
of this Article XII and who are or were employees or agents of the Corporation,
or who are or were serving at the request of the Corporation as employees or
agents of another corporation, partnership, joint venture, trust or other enterprise,
may be indemnified to the extent authorized at any time or from time to time
by the Board of Directors.
ARTICLE XIII
Limitations on Directors’ Liability
A
Director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a Director,
except: (i) for any breach of the Director’s duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions that are not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the Director
derived any improper personal benefit. If the DGCL or other Delaware law is
amended or enacted after the date of filing of this Certificate to further limit
or eliminate the personal liability of Directors, then the liability of a Director
of the Corporation shall be limited or eliminated to the fullest extent permitted
by the DGCL, as so amended, or such other Delaware law. Any repeal or modification
of the foregoing paragraph by the stockholders of the Corporation shall not
adversely affect any right or protection of a Director of the Corporation existing
at the time of such repeal or modification.
ARTICLE XIV
Amendment of Bylaws
In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to adopt, repeal, alter,
amend and rescind the Bylaws of the Corporation. The Bylaws may also be repealed,
altered, amended or rescinded as provided in the Bylaws or as otherwise provided
in the DGCL.
-7-
ARTICLE XV
Amendment of Certificate of Incorporation
The
Corporation reserves the right to repeal, alter, amend or rescind any provision
contained in this Certificate in the manner now or hereafter prescribed by law,
and all rights conferred on stockholders herein are granted subject to this
reservation.
I,
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the DGCL, do make this Certificate, hereby
declaring and certifying that this is may act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this __________ day
of _____________________ , 2000.
___________________________
Scott M. Reed, Incorporator
STATE OF DELAWARE
CERTIFICATE OF DOMESTICATION
OF
NON-UNITED STATES CORPORATION
|
FIRST:
|
The undersigned is a Non-United States
Corporation originally incorporated in British Columbia, Canada (the “Corporation”)
on September 14, 1987.
|
|
|
|
|
SECOND:
|
The Corporation’s name immediately
prior to filing this Certificate of Domestication is Consolidated Mango
Resources Ltd.
|
|
|
|
|
THIRD:
|
The Corporation’s jurisdiction immediately
prior to filing this Certificate of Domestication is British Columbia,
Canada.
|
|
|
|
|
FOURTH:
|
The Corporation now desires to incorporate
in the United States and file a Certificate of Incorporation with the
Secretary of State of Delaware using the name U.S. Cobalt Inc. as set
forth in Article I of the attached Certificate of Incorporation.
|
IN WITNESS WHEREOF, said Corporation has caused this Certificate
to be signed by an authorized officer, this ________ day of __________________
, 2000.
|
|
CONSOLIDATED MANGO RESOURCES LTD.,
a British Columbia corporation
|
|
|
|
|
|
|
By:
|
|
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|
|
Authorized Person
|
|
|
|
|
|
|
Name:
|
Peter Maclean
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Title:
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Director
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CERTIFICATE OF INCORPORATION
OF
U.S. COBALT INC.
ARTICLE I
Name
The name of the
corporation is U. S. Cobalt Inc. (herein the “Corporation”).
ARTICLE II
Registered Office
The
address of the Corporation’s registered office in the State of Delaware
is 1013 Centre Road, County of Newcastle, Wilmington, Delaware, 19805. The name
of the Corporation’s registered agent at such address is Corporation Service
Company. The registered office and/or registered agent of the Corporation may
be changed from time to time as determined by the Board of Directors.
ARTICLE III
Powers
The
nature of the business of the Corporation and the purposes for which it is organized
are to engage in any business and lawful act or activity for which corporations
may be organized under the laws of the State of Delaware. The Corporation shall
have all the powers and privileges of a corporation organized under the General
Corporation Law of the State of Delaware (the “DGCL”).
ARTICLE IV
Term
The Corporation
is to have perpetual existence.
ARTICLE V
Incorporator
The name and mailing
address of the incorporator are as follows:
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Name
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Mailing Address
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Scott M. Reed
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1919 14th Street, Suite 330
Boulder, Colorado 80302
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ARTICLE VI
Directors
A.
Number; Vacancies.
The number of Directors of the Corporation shall be
such number as shall be established from time to time in accordance with Bylaws.
Vacancies in the Board of Directors of the Corporation, however caused, and
newly created directorships shall be filled by a vote of a majority of the Directors
then in office, whether or not a quorum, and any Director so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of the class to which the Director has been chosen expires and when the
Director’s successor is elected and qualified.
B.
Initial Board of Directors.
The initial Board of Directors shall consist
of the following individuals:
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Name
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Municipality of Residence
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Douglas J. Glaspey
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3392 Maze Avenue, Boise, Idaho, 83706
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Dr. Robert J. Miller
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2847 Tincup Circle, Boulder, Colorado, 80303
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Nicholas S. Lynn
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5929 So Moline Way, Englewood, Colorado
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Daniel Kunz
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2007 Warm Springs Avenue, Boise, Idaho, 83712
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Paul Larkin
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2188 West 53rd Avenue, Vancouver, British Columbia, V6P 1L7
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ARTICLE VII
Capital Stock
The
aggregate number of shares of all classes of capital stock which the Corporation
has authority to issue is 100,000,000 of which 100,000,000 are to be shares
of common stock, $0.001 par value per share. The shares may be issued by the
Corporation from time to time as approved by the Board of Directors of the Corporation
without the approval of the stockholders, except as otherwise provided in this
Article VII.
A
description of the different classes and series (if any) of the Corporation’s
capital stock, and a statement of the relative powers, designations, preferences
and rights of the shares of each class and series (if any) of capital stock,
and the qualifications, limitations or restrictions thereof, are as follows:
Common
Stock.
Except as provided in this Certificate, the holders of the common
stock shall exclusively possess all voting power. Each holder of shares of common
stock shall be entitled to vote for each share held by such holder, except as
otherwise expressly set forth in this Certificate.
Each
share of common stock shall have the same relative powers, preferences and rights
as, and shall be identical in all respects with, all the other shares of common
stock of the Corporation, except as otherwise expressly set forth in this Certificate.
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ARTICLE VIII
No Preemptive Rights
No holder of any of the shares of any class or series of stock
or of options, warrants or other rights to purchase shares of any class or series
of stock or of other securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any class or series,
or any unissued bonds, certificates or indebtedness, debentures, or other securities
convertible into or exchangeable for stock of any class or series or carrying
any right to purchase stock of any class or series; but any such unissued stock,
bonds, certificates or indebtedness, debentures or other securities convertible
into or exchangeable for stock or carrying any right to purchase stock may be
issued pursuant to a resolution of the Board of Directors of the Corporation
to such persons, firms, corporations or associations, whether or not holders
thereof, and upon such terms as may be deemed advisable by the Board of Directors
in the exercise of its sole discretion.
ARTICLE IX
Meetings of Stockholders; No Cumulative Voting
A.
Special meetings of the stockholders of the Corporation, for any purpose or
purposes, may be called at any time by the Board of Directors, the Chairman
of the Board, the Chief Executive Officer, or the President of the Corporation
or by one or more stockholders holding shares in the aggregate sufficient to
vote not less than a majority of all of the issued and outstanding shares of
the Corporation.
B.
There shall be no cumulative voting by stockholders of any class or series in
the election of Directors of the Corporation.
C.
Meetings of stockholders may be held at such place as the Bylaws may provide.
ARTICLE X
Notice for Nominations and Proposals
A.
Nominations for the election of Directors and proposals for any new business
to be taken up at any annual or special meeting of stockholders may be made
by the Board of Directors of the Corporation or by stockholder(s) holding, in
aggregate, not less than 10% of shares with voting rights of the Corporation
entitled to vote generally in the election of Directors. In order for a stockholder
of the Corporation to make any such nominations and/or proposals, he or she
shall give notice thereof in writing, delivered or mailed by first class mail,
postage prepaid, to the Secretary of the Corporation not less than forty days
nor more than sixty days prior to the date of any such meeting. Each such notice
given by a stockholder with respect to nominations for the election of Directors
shall set forth (i) the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the principal occupation
or employment of each such nominee; and (iii) the number of shares of stock
of the Corporation which are beneficially owned by each such nominee. In addition,
the stockholder making such nomination shall promptly provide any other information
reasonably requested by the Corporation.
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B.
Each such notice given by a stockholder to the Secretary with respect to business
proposals to be brought before a meeting shall set forth in writing as to each
matter: (i) a brief description of the business desired to be brought before
the meeting and the reasons for conducting such business at the meeting; (ii)
the name and address, as they appear on the Corporation’s books, of the
stockholder proposing such business; (iii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder; and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in this Certificate to the contrary, no new business shall be conducted at the
meeting except as may be put before the meeting in accordance with the procedures
set forth in this Article and with the prior approval of the chairman of the
meeting.
C.
The Chairman of the annual or special meeting of stockholders may, if the facts
warrant, determine and declare to such meeting that a nomination or proposal
was not made in accordance with the foregoing procedure or that it is not appropriate
to be brought before the meeting in question, and, if he should so determine,
he shall so declare to the meeting and the defective nomination or proposal
shall be disregarded and, if deemed appropriate in the discretion of the Directors,
will be laid over for action at the next succeeding special or annual meeting
of the stockholders. This provision shall not require the holding of any adjourned
or special meeting of stockholders for the purpose of considering such defective
nomination or proposal.
ARTICLE XI
Removal of Directors
Notwithstanding any other provision of this Certificate or
Bylaws of the Corporation, any Director or the entire Board of Directors of
the Corporation may be removed, at any time, but only by the affirmative vote
of the holders of not less than a majority of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of Directors
cast at a meeting of the stockholders called for that purpose.
ARTICLE XII
Indemnification
A.
Nature of Indemnity.
Each person who was or is made a party or is threatened
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a “proceeding”),
by reason of the fact that he (or a person of whom he is the legal representative),
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee, fiduciary, or agent
of another corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis
of such proceeding is alleged action in an official capacity as a director,
officer, employee, fiduciary or agent or in any other capacity while serving
as a director, officer, employee, fiduciary or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent which it is empowered
to do so by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law
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permitted the Corporation to provide prior to such amendment)
against all expense, liability and loss (including attorneys’ fees actually
and reasonably incurred by such person in connection with such proceeding and
such indemnification shall inure to the benefit of his or her heirs, executors
and administrators; provided, however, that, except as provided in Section B
of this Article XII, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only
if such proceeding was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred, in this Article XII shall be a contract
right and, subject to section B and E of this Article XII, shall include the
right to payment by the Corporation of the expenses incurred in defending any
such proceeding in advance of its final disposition. The Corporation may, by
action of the Board of Directors, provide indemnification to employees and agents
of the Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
B.
Procedure for Indemnification of Directors and Officers.
Any indemnification
of a director of officer of the corporation under Section A of this Article
XII or advance of expenses under Section B of this Article XII shall be made
promptly, and in any event within 30 days, upon the written request of the director
or officer. If a determination by the Corporation that the director of officer
is entitled to indemnification pursuant to this Article XII is required, and
the Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved the request. If
the Corporation denies a written request for indemnification or advancing of
expenses, in whole or in part, or if payment in full pursuant to such request
is not made within 30 days, the right to indemnification or advances as granted
by this Article XII shall be enforceable by the director or officer in any court
of competent jurisdiction. Such person’s costs and expenses incurred in
connection with successfully establishing his right to indemnification, in whole
or in part, in any such action shall also be indemnified by the Corporation.
It shall be a defense to any such action (other than an action brought to enforce
a claim for expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any, has been tendered
to the Corporation) that the claimant has not met the standards of conduct which
make it permissible under the General Corporation Law of the State of Delaware
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the Corporation. Neither the failure of the
Corporation (including the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
C.
Nonexclusivity of Article XII
. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article XII shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, provision
of this Certificate of Incorporation, Bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
D.
Insurance.
The Corporation may purchase and maintain insurance on its
own behalf and on behalf of any person who is or was a director, officer, employee,
fiduciary, or agent of the Corporation or was serving at the request of the
Corporation as a director, officer, employee or
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agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him or her
and incurred by him or her in any such capacity, whether or not the Corporation
would have the power to indemnify such person against such liability under this
Article XII.
E.
Expenses.
Expenses incurred by any person described in Section A of this
Article XII in defending a proceeding shall be paid by the Corporation in advance
of such proceeding’s final disposition unless otherwise determined by the
Board of Directors in the specific case upon receipt of an undertaking by or
on behalf of the director or officer to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate.
F.
Employees and Agents.
Persons who are not covered by the foregoing provisions
of this Article XII and who are or were employees or agents of the Corporation,
or who are or were serving at the request of the Corporation as employees or
agents of another corporation, partnership, joint venture, trust or other enterprise,
may be indemnified to the extent authorized at any time or from time to time
by the Board of Directors.
ARTICLE XIII
Limitations on Directors’ Liability
A
Director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a Director,
except: (i) for any breach of the Director’s duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions that are not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which the Director
derived any improper personal benefit. If the DGCL or other Delaware law is
amended or enacted after the date of filing of this Certificate to further limit
or eliminate the personal liability of Directors, then the liability of a Director
of the Corporation shall be limited or eliminated to the fullest extent permitted
by the DGCL, as so amended, or such other Delaware law. Any repeal or modification
of the foregoing paragraph by the stockholders of the Corporation shall not
adversely affect any right or protection of a Director of the Corporation existing
at the time of such repeal or modification.
ARTICLE XIV
Amendment of Bylaws
In
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of the Corporation is expressly authorized to adopt, repeal, alter,
amend and rescind the Bylaws of the Corporation. The Bylaws may also be repealed,
altered, amended or rescinded as provided in the Bylaws or as otherwise provided
in the DGCL.
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ARTICLE XV
Amendment of Certificate of Incorporation
The
Corporation reserves the right to repeal, alter, amend or rescind any provision
contained in this Certificate in the manner now or hereafter prescribed by law,
and all rights conferred on stockholders herein are granted subject to this
reservation.
I,
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the DGCL, do make this Certificate, hereby
declaring and certifying that this is may act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this __________ day
of _____________________ , 2000.
___________________________
Scott M. Reed, Incorporator
BYLAWS
OF
U.S. COBALT INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
1.
CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the corporation
shall be signed by, or in the name of, the corporation by the Chairperson or
Vice-Chairperson of the Board of Directors, if any, or by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the corporation. Any or all the signatures on any
such certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with
the same effect as if such person were such officer, transfer agent, or registrar
at the date of issue.
Whenever
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class of stock, and whenever the corporation shall
issue any shares of its stock as partly paid stock, the certificates representing
shares of any such class or series of any such partly paid stock shall set forth
thereon the statements prescribed by the General Corporation Law. Any restrictions
on the transfer or registration of transfer of any shares of stock of any class
or series shall be noted conspicuously on the certificate representing such
shares.
The
corporation may issue a new certificate of stock or uncertified shares in place
of any certificate theretofore issued by it, alleged to have been lost, stolen,
or destroyed, and the Board of Directors may require the owner of the lost,
stolen, or destroyed certificate, or such owner's legal representative, to provide
the corporation with a bond sufficient to indemnify the corporation against
any claim that may be made against it on account of the alleged loss, theft,
or destruction of any such certificate or the issuance of any such new certificate
or uncertificated shares.
2.
UNCERTIFICATED SHARES. Subject to any conditions imposed by the General Corporation
Law, the Board of Directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of the stock of
the corporation shall be uncertificated shares. Within a reasonable time after
the issuance or transfer of any uncertificated shares, the corporation shall
send to the registered owner thereof any written notice prescribed by the General
Corporation Law.
3.
FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to,
issue fractions of a share. If the corporation does not issue fractions of a
share, it
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shall (1) arrange for the disposition of fractional interests
by those entitled thereto, (2) pay in cash the fair value of fractions of a
share as of the time when those entitled to receive such fractions are determined,
or (3) issue scrip or warrants in registered form (either represented by a certificate
or uncertificated) or bearer form (represented by a certificate) which shall
entitle the holder to receive a full share upon the surrender of such scrip
or warrants aggregating a full share. A certificate for a fractional share or
an uncertificated fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the corporation
in the event of liquidation. The Board of Directors may cause scrip or warrants
to be issued subject to the conditions that they shall become void if not exchanged
for certificates representing the full shares or uncertificated full shares
before a specified date, or subject to the conditions that the shares for which
scrip or warrants are exchangeable may be sold by the corporation and the proceeds
thereof distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
4.
STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or
registration of transfer of shares of stock, if any, transfers or registration
of transfers of shares of stock of the corporation shall be made only on the
stock ledger of the corporation by the registered holder thereof, or by the
registered holder's attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the corporation or with a transfer
agent or a registrar, if any, and, in the case of shares represented by certificates,
on surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5.
RECORD DATE FOR STOCKHOLDERS. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than sixty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting. In order that
the corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors. If no record date has
been fixed by the Board of Directors, the record date for determining the stockholders
entitled to consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is required by the General Corporation
Law, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified
or registered
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mail, return receipt requested. If no record date has been
fixed by the Board of Directors and prior action by the Board of Directors is
required by the General Corporation Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be
at the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action. In order that the corporation may determine
the stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion, or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall not be more than sixty days
prior to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
6.
MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of
a meeting of stockholders or a waiver thereof or to participate or vote thereat
or to consent or dissent in writing in lieu of a meeting, as the case may be,
the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder"
or "stockholders" refers to an outstanding share or shares of stock and to a
holder or holders of record of outstanding shares of stock when the corporation
is authorized to issue only one class of shares of stock, and said reference
is also intended to include any outstanding share or shares of stock and any
holder or holders of record of outstanding shares of stock of any class upon
which or upon whom the certificate of incorporation confers such rights where
there are two or more classes or series of shares of stock or upon which or
upon whom the General Corporation Law confers such rights notwithstanding that
the certificate of incorporation may provide for more that one class or series
of shares of stock, one or more of which are limited or denied such rights thereunder;
provided, however, that no such right shall vest in the event of an increase
or a decrease in the authorized number of shares of stock of any class or series
which is otherwise denied voting rights under the provisions of the certificate
of incorporation, except as any provision of law may otherwise require.
7. STOCKHOLDER
MEETINGS.
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TIME. The annual meeting shall be held on the date and at the time fixed, from
time to time, by the directors, provided, that the first annual meeting shall
be held on a date within thirteen months after the organization of the corporation,
and each successive annual meeting shall be held on a date within thirteen months
after the date of the preceding annual meeting. A special meeting shall be held
on the date and at the time fixed by the directors.
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PLACE. Annual meetings and special meetings shall be held at such place within
or without the State of Delaware, as the directors may, from time to time, fix.
Whenever the directors shall fail to fix such place, the meeting shall be held
at the registered office of the corporation in the State of Delaware.
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CALL. Annual meetings and special meetings may be called by the directors or
by any officer instructed by the directors to call the meeting.
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NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating
the place, date, and hour of the meeting and stating the place within the city
or other municipality or community at which the list of stockholders of the
corporation may be examined. The notice of an annual meeting shall state that
the meeting is called for the election of directors and for the transaction
of other business which may properly come before the meeting, and shall (if
any other action which could be taken at a special meeting is to be taken at
such annual meeting) state the purpose or purposes. The notice of a special
meeting shall in all instances state the purposes or purposes for which the
meeting is called. The notice of any meeting shall also include, or be accompanied
by, any additional statements, information, or documents prescribed by the General
Corporation Law. Except as otherwise provided by the General Corporation Law,
a copy of the notice of any meeting shall be given, personally or by mail, not
less than ten days nor more than sixty days before the date of the meeting,
unless the lapse of the prescribed period of time shall have been waived, and
directed to each stockholder at such stockholder's record address or at such
other address which such stockholder may have furnished by request in writing
to the Secretary of the corporation. Notice by mail shall be deemed to be given
when deposited, with postage thereon prepaid, in the United States Mail. If
a meeting is adjourned to another time, not more than thirty days hence, and/or
to another place, and if an announcement of the adjourned time and/or place
is made at the meeting, it shall not be necessary to give notice of the adjourned
meeting unless the directors, after adjournment, fix a new record date for the
adjourned meeting. Notice need not be given to any stockholder who submits a
written waiver of notice signed by such stockholder before or after the time
stated therein. Attendance of a stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder attends
the meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
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STOCKHOLDER LIST. The officer who has charge of the stock ledger of the corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten days prior to the meeting, either at a place within
the city or other municipality or community where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof,
and may be inspected by any stockholder who is present. The stock ledger shall
be the only evidence as to who are the stockholders entitled to examine the
stock ledger, the list required by this section or the books of the corporation,
or to vote at any meeting of stockholders.
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CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by one
of the following officers in the order of seniority and if present and acting
- the Chairperson of the Board, if any, the Vice-Chairperson of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairperson to be chosen by the stockholders. The
Secretary of the corporation, or in such Secretary's absence, an Assistant
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Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present the chairperson
of the meeting shall appoint a secretary of the meeting.
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PROXY REPRESENTATION. Every stockholder may authorize another person or persons
to act for such stockholder by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by such stockholder's attorney-in-fact.
No proxy shall be voted or acted upon after three years from its date unless
such proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy
may be made irrevocable regardless of whether the interest with which it is
coupled is an interest in the stock itself or an interest in the corporation
generally.
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INSPECTORS. The directors, in advance of any meeting, may, but need not, appoint
one or more inspectors of election to act at the meeting or any adjournment
thereof. If an inspector or inspectors are not appointed, the person presiding
at the meeting may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act, the vacancy
may be filled by appointment made by the directors in advance of the meeting
by the person presiding thereat. Each inspector, if any, before entering upon
the discharge of duties of inspector, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting with strict impartiality
and according to the best of such inspector's ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect or proxies, and shall receive votes, ballots,
or consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election
or vote with fairness to all stockholders. On request of the person presiding
at the meeting, the inspector or inspectors, if any, shall make a report in
writing of any challenge, question, or matter determined by such inspector or
inspectors and execute a certificate of fact found by such inspector or inspectors.
Except as may otherwise be required by subsection (e) of Section 231 of the
General Corporation Law, the provisions of that Section shall not apply to the
corporation.
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QUORUM. The holders of one-third of the outstanding shares of stock shall constitute
a quorum at a meeting of stockholders for the transaction of any business. The
stockholders present may adjourn the meeting despite the absence of a quorum.
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VOTING. Each share of stock shall entitle the holder thereof to one vote. Directors
shall be elected by a plurality of the votes of the shares present in person
or represented by proxy at the meeting and entitled to vote on the election
of directors. Any other action shall be authorized by a majority of the votes
cast except when the General Corporation Law prescribes a different percentage
of votes and/or a different exercise of voting power, and except as may be otherwise
prescribed by the provisions of the certificate of incorporation and these Bylaws.
In the election of directors, and for any other action, voting need not be by
ballot.
8.
STOCKHOLDER ACTION WITHOUT MEETINGS. Except as any provision of the General
Corporation Law may otherwise require, any action required by the General Corporation
6
Law to be taken at any annual or special meeting of stockholders,
or any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if
a consent in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing. Action taken pursuant to this paragraph shall be subject
to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1.
FUNCTIONS AND DEFINITION. The business and affairs of the corporation shall
be managed by or under the direction of the Board of Directors of the corporation.
The Board of Directors shall have the authority to fix the compensation of the
members thereof. The use of the phrase "whole board" herein refers to the total
number of directors which the corporation would have if there were no vacancies.
2.
QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a citizen of
the United States, or a resident of the State of Delaware. The initial Board
of Directors shall consist of five persons. Thereafter the number of directors
constituting the whole board shall be at least one. Subject to the foregoing
limitation and except for the first Board of Directors, such number may be fixed
from time to time by action of the stockholders or of the directors, or, if
the number is not fixed, the number shall be three. The number of directors
may be increased or decreased by action of the stockholders or of the directors.
3.
ELECTION AND TERM. The first Board of Directors, unless the members thereof
shall have been named in the certificate of incorporation, shall be elected
by the incorporator or incorporators and shall hold office until the first annual
meeting of stockholders and until their successors are elected and qualified
or until their earlier resignation or removal. Any director may resign at any
time upon written notice to the corporation. Thereafter, directors who are elected
at an annual meeting of stockholders, and directors who are elected in the interim
to fill vacancies and newly created directorships, shall hold office until the
next annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Except as the General
Corporation Law may otherwise require, in the interim between annual meetings
of stockholders or of special meetings of stockholders called for the election
of directors and/or for the removal of one or more directors and for the filling
of any vacancy in that connection, newly created directorships and any vacancies
in the Board of Directors, including unfilled vacancies resulting from the removal
of directors for cause or without cause, may be filled by the vote of a majority
of the remaining directors then in office, although less than a quorum, or by
the sole remaining director.
7
4. MEETINGS.
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TIME. Meetings shall be held at such time as the Board shall fix, except that
the first meeting of a newly elected Board shall be held as soon after its election
as the directors may conveniently assemble.
- PLACE. Meetings
shall be held at such place within or without the State of Delaware as shall
be fixed by the Board.
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CALL. No call shall be required for regular meetings for which the time and
place have been fixed. Special meetings may be called by or at the direction
of the Chairperson of the Board, if any, the Vice-Chairperson of the Board,
if any, or the President, or of a majority of the directors in office.
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NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular
meetings for which the time and place have been fixed. Written, oral, or any
other mode of notice of the time and place shall be given for special meetings
in sufficient time for the convenient assembly of the directors thereat. Notice
need not be given to any director or any member of a committee of directors
who submits a written waiver of notice signed by such director or member before
or after the time stated therein. Attendance of any such person at a meeting
shall constitute a waiver of notice of such meeting, except when such person
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
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QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except
when a vacancy or vacancies prevents such majority, whereupon a majority of
the directors in office shall constitute a quorum, provided, that such majority
shall constitute at least one-third of the whole Board. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as herein otherwise provided, and except as otherwise
provided by the General Corporation Law, the vote of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board.
The quorum and voting provisions herein stated shall not be construed as conflicting
with any provisions of the General Corporation Law and these Bylaws which govern
a meeting of directors held to fill vacancies and newly created directorships
in the Board or action of disinterested directors.
Any
member or members of the Board of Directors or of any committee designated by
the Board, may participate in a meeting of the Board, or any such committee,
as the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
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CHAIRPERSON OF THE MEETING. The Chairperson of the Board, if any and present
and acting, shall preside at all meetings. Otherwise, the Vice-Chairperson of
the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
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5.
REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General Corporation
Law, any director or the entire Board of Directors may be removed, with or without
cause, by the holders of a majority of the shares then entitled to vote at an
election of directors.
6.
COMMITTEES. The Board of Directors may designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of any member of any such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, shall have and may exercise
all the powers and authority of the Board of Directors in the management of
the business and affairs of the corporation with the exception of any power
or authority the delegation of which is prohibited by Section 141 of the General
Corporation Law, and may authorize the seal of the corporation to be affixed
to all papers which may require it.
7.
WRITTEN ACTION. Any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board or committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of proceedings
of the Board or committee.
ARTICLE III
OFFICERS
The
officers of the corporation shall consist of a President, a Secretary, a Treasurer,
and, if deemed necessary, expedient, or desirable by the Board of Directors,
a Chairperson of the Board, a Vice-Chairperson of the Board, an Executive Vice-President,
one or more other Vice-Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers with such titles as the resolution
of the Board of Directors choosing them shall designate. Except as may otherwise
be provided in the resolution of the Board of Directors choosing such officer,
no officer other than the Chairperson or Vice-Chairperson of the Board, if any,
need be a director. Any number of offices may be held by the same person, as
the directors may determine.
Unless
otherwise provided in the resolution choosing such officer, each officer shall
be chosen for a term which shall continue until the meeting of the Board of
Directors following the next annual meeting of stockholders and until such officer's
successor shall have been chosen and qualified.
All
officers of the corporation shall have such authority and perform such duties
in the management and operation of the corporation as shall be prescribed in
the resolutions of the Board of Directors designating and choosing such officers
and prescribing their authority and duties, and shall have such additional authority
and duties as are incident to their office except to the extent that such resolutions
may be inconsistent therewith. The Secretary or an Assistant
9
Secretary of the corporation shall record all of the proceedings
of all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to such Secretary or Assistant Secretary.
Any officer may be removed, with or without cause, by the Board of Directors.
Any vacancy in any office may be filled by the Board of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate
seal shall be in such form as the Board of Directors shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year
of the corporation shall be fixed, and shall be subject to change, by the Board
of Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject
to the provisions of the certificate of incorporation and the provisions of
the General Corporation Law, the power to amend, alter, or repeal these Bylaws
and to adopt new Bylaws may be exercised by the Board of Directors or by the
stockholders.
PLAN OF MERGER
This PLAN OF MERGER (the "Plan") is entered into as of the
___ day of , 2003 between U.S. Geothermal, Inc., an Idaho corporation ("Geo"),
and EverGreen Power Inc., an Idaho corporation ("Subco"), a wholly-owned subsidiary
of U.S. Cobalt, Inc., a Delaware corporation ("USC"), with reference to the
following facts:
A. Geo and Subco (the "Constituent Corporations"), certain
shareholders of Geo (the "Principal Geo Shareholders") and USC have previously
executed a merger agreement dated , 2003 (the "Merger Agreement" and capitalized
terms used but not defined herein shall have the meanings assigned to them in
the Merger Agreement), a copy of which will be provided to the shareholders
of the Constituent Corporations prior to their approval hereof; and
B. As further described in the Merger Agreement, the following
actions or events are to occur: (i) the issued and outstanding shares of common
stock of USC are to be consolidated on a five to one basis (the "Consolidation");
(ii) the shareholders of USC are to approve the change of the name of USC to
"U.S. Geothermal, Inc." effective upon completion of the merger transaction
described herein (the "Name Change"); and (iii) USC shall be ready, willing
and able to close (immediately after effectiveness of the transactions contemplated
by this Plan) a private placement of up to 2,000,000 units of its securities
(each unit consisting of one share of common stock of USC and one warrant to
purchase a share of common stock of USC at an exercise price of $0.875) to raise
gross proceeds of $1,500,000, provided that the minimum amount of net proceeds
raised shall be Cdn $500,000 (the "Private Placement"); and
C. The Constituent Corporations and their respective boards
of directors deem it advisable and in the best interest of each of the Constituent
Corporations, and hereby recommend to their respective shareholders, that Geo
and Subco be merged pursuant to the applicable laws of the State of Idaho and
Section 368(a) of the Internal Revenue Code of 1986, as amended, on the terms
and conditions set forth below.
NOW, THEREFORE, the Constituent Corporations have agreed to
merge, on the terms and conditions herein provided, as follows:
1.
The Merger
1.1
Governing Law
. As
of the Effective Time (as hereafter defined), Geo shall be merged with Subco
in accordance with the applicable laws of the State of Idaho, the separate existence
of Subco shall cease and Geo shall continue in existence as the surviving corporation,
and such merger shall in all respects have the effect provided for in Idaho
Code §30-1-1106 (the "Merger").
1.2
Shareholder Approval;
Effective Time
. This Plan shall be submitted to the shareholders of each
of the Constituent Corporations as provided by the laws of the State of Idaho.
If (a) the requisite votes or written consents of such shareholders duly authorize
and adopt this Plan; (b) the Plan is not terminated and abandoned pursuant to
Article 4 hereof; and
Page 1
(c) each of the conditions to the Merger set forth in section
2.7 hereof is satisfied, then the Articles of Merger in substantially the form
attached hereto as Exhibit A (the "Articles of Merger") shall be filed with
the Secretary of State of the State of Idaho. The Merger shall become effective
on the date and at the time (the "Effective Time") of filing of the Articles
of Merger with the Secretary of State of the State of Idaho.
2.
Terms of Transaction
2.1
General
. As consideration
for the Merger, in exchange for all of the 4,184,837 issued and outstanding
shares of common stock of Geo (the "Geo Shares") and all of the 1,612,000 warrants
to purchase shares of common stock of Geo (the "Geo Warrants"), the shareholders
of Geo will be issued, in the aggregate, 6,725,384 shares of common stock of
USC (the "Exchange Shares") and 2,325,000 warrants to purchase shares of common
stock of USC, pursuant to the terms and conditions of the form of Warrant attached
hereto as Exhibit B (the "Exchange Warrants"). All references in this Plan to
shares of common stock of USC are deemed to be after the effectiveness of the
Consolidation.
2.2
Share Conversion
.
At the Effective Time, by virtue of the Merger and without any action on the
part of the Geo shareholders, each issued and outstanding share of common stock
of the Geo shareholders other than Vulcan Power Company ("Vulcan") shall be
converted into the right to receive one (1) Exchange Share.
2.3
Share and Warrant Conversion
– Vulcan
. At the Effective Time, by virtue of the Merger and without
any action on the part of Vulcan, the 1,895,000 issued and outstanding shares
of Geo common stock and the issued and outstanding warrants to purchase 1,612,000
shares of Geo common stock held by Vulcan (respectively, the "Vulcan Shares"
and the "Vulcan Warrants") shall be converted into the right to receive 1,540,548
Exchange Shares and 2,325,000 Exchange Warrants, respectively.
2.4
Performance Shares
.
The remaining 1,000,000 Exchange Shares not issued pursuant to sections 2.2
and 2.3 above (the "Performance Shares") shall be issued to the officers and
directors of USC listed on Schedule 2.4 hereto, in the amounts listed on such
Schedule, and are subject to cancellation unless certain milestones are met,
as described in the Information Circular.
2.5
Surrender of Shares;
Procedure for Obtaining New Certificates
. The Geo shareholders shall surrender
the certificates for their Geo Shares to USC and Vulcan shall surrender the
Vulcan Shares and the Vulcan Warrants to USC, and a completed form of the Transferee's
Acknowledgement and Warranty included in the Merger Materials on or before the
Closing Date (as defined in the Merger Agreement). At the Closing Date, USC
shall cause the Exchange Shares and the Exchange Warrants to be delivered to
the Geo shareholders who have surrendered their certificates for Geo Shares,
as set forth above, subject to the provisions of the Escrow Agreement(s). All
certificates for Geo Shares which are issued prior to the Effective Time shall,
upon the effectiveness of the Merger, be deemed canceled, whether or not surrendered
as set forth herein.
Page 2
2.6
Fractional Shares
.
Notwithstanding any other provision of this Plan, if any Geo shareholder would
be entitled to receive a number of Exchange Shares that includes a fraction,
then, in lieu of a fractional share, such shareholder will be entitled to receive,
upon surrender of share certificates representing such holder's Geo Shares,
the number of Exchange Shares rounded down to the nearest whole number.
2.7
Conditions to Merger
.
The Merger shall not be effective unless and until each of the following occur:
(a) All conditions to Closing
under the Merger Agreement shall have been satisfied or waived, in the sole
discretion of the party to which the benefits of such conditions run. Without
limiting the generality of the foregoing, no Geo Shareholder shall have exercised
dissenters' rights under the Idaho Code in connection with the Merger.
(b) The shareholders of the
Constituent Corporations shall have approved the Plan.
(c) The Consolidation shall
have been effected.
(d) The Name Change shall have
been approved by the requisite shareholder vote of USC.
(e) The Private Placement shall
be fully subscribed and ready to close immediately after the effectiveness of
the Merger.
3.
Effect of the Merger
3.1
Effects
. At the Effective
Time, Subco will be merged with and into Geo in accordance with the Idaho Code,
whereupon the separate existence of Subco shall cease, and Geo shall be the
surviving corporation (the "Surviving Corporation") and, from and after the
Effective Time, the Merger shall have all the effects of a merger under the
laws of the state of Idaho including, but not limited to, the fact that the
Surviving Corporation will assume title to all assets owned by Subco and Geo,
and will assume all liabilities of Subco and Geo.
3.2
Articles of Incorporation
and Bylaws
. The Articles of Incorporation of Geo as in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the Surviving
Corporation after the Effective Time, until thereafter amended in accordance
with the provisions thereof and the applicable law. The Bylaws of Geo as in
effect immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation after the Effective Time, until duly amended in accordance with
the provisions thereof, the Articles of Incorporation of the Surviving Corporation
and the Idaho Code.
3.3
Directors and Officers
.
The directors and officers of Geo shall be the directors and officers of the
Surviving Corporation from and after the Effective Time. Such directors and
officers shall serve until they are removed or replaced in accordance with the
Articles of Incorporation and Bylaws of the Surviving Corporation.
Page 3
3.4
Further Action
. Each
of the Principal Geo Shareholders, on the one hand, and USC on the other hand,
have covenanted and agreed that at any time and from time to time after the
Closing Date, it or they will, upon the request of the other, do, execute, acknowledge
and deliver or cause to be done, executed, acknowledged and delivered all such
further acts, deeds, assignments, transfers, conveyances and assurances as may
be required for the better carrying out and performance of all terms of the
merger, including, without limitation, any documents required to comply with
securities or stock exchange requirements.
3.5
Rights, Duties, Powers,
Liabilities, Etc.
At the Effective Time, the separate existence of Subco
and Geo shall cease, and Subco and Geo shall be merged in accordance with the
provisions of this Plan and the Merger Agreement with and into the Surviving
Corporation, which shall possess all the properties and assets, and all the
rights, privileges, powers, immunities and franchises, of whatever nature and
description, and shall be subject to all restrictions, disabilities, duties
and liabilities of each of the Constituent Corporations; and all such things
shall be taken and deemed to be transferred to and vested in the Surviving Corporation
without further act or deed; and the title to any real estate or other property,
or any interest therein, vested by deed or otherwise in either the Constituent
Corporations, shall be vested in the Surviving Corporation without revision
or impairment. Any claim existing or action or proceeding, whether civil, criminal
or administrative, pending by or against either Constituent Corporation, may
be prosecuted to judgment or decree as if the Merger had not taken place, and
the Surviving Corporation may be substitute in any such action or proceeding.
4.
Termination; Amendment
4.1
Termination Provision
.
Anything contained in this Plan and the Merger Agreement to the contrary notwithstanding,
this Plan may be terminated and the Merger abandoned:
(a) Upon written notice at any
time prior to the Effective Time by mutual consent of the Constituent Corporations;
or
(b) Upon written notice either
by USC or Geo that conditions to the Merger have not been fulfilled or complied
with as provided in this Plan or in the Merger Agreement.
4.2
Amendment Provision
.
Prior to the Effective Time (and at any time before or after approval or adoption
of this Plan by the shareholders of the Constituent Corporations), the respective
boards of directors of the Constituent Corporations may amend, modify and supplement
this Plan as they may agree, provided, however, that after approval of the Plan
by the shareholders of the Constituent Corporations, no such amendment, modification
or supplement shall affect the rights of such shareholders in a manner which
is materially adverse to such shareholders, in the sole discretion of the boards
of directors. No modification of the Merger Agreement may be made unless agreed
to by the parties thereto in writing.
4.3
Board Action
. In
exercising their rights under this Section 4, each of the Constituent Corporations
and USC may act by their respective boards of directors, and such
Page 4
rights may be so exercised, notwithstanding any prior approval
of this Plan by the shareholders of the Constituent Corporations, if required.
IN WITNESS WHEREOF, this Plan,
having first been duly approved by resolutions of the boards of directors of
each of the Constituent Corporations, recommended by such boards of directors
to the shareholders of the Constituent Corporations for their approval, and
subsequently approved by the shareholders of the Constituent Corporations, is
hereby adopted on behalf of each of the Constituent Corporations and USC by
their respective officers thereunto duly authorized.
U.S. Geothermal, Inc.
, an Idaho corporation
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By: _______________________________
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Date: ___________________
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___________________, President
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EverGreen Power Inc.
, an Idaho corporation
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By: ______________________________
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Date: ___________________
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___________________, President
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Acknowledged:
U.S. Cobalt, Inc.
, a Delaware corporation
By:___________________________________ Date: ____________________________
_____________________, President
Page 5
FIRST AMENDMENT TO
PLAN OF MERGER
This
First Amendment (“Amendment”), dated December __, 2003, is to the
Plan of Merger dated March 3, 2003 (the “Plan”), between U.S. Geothermal
Inc., an Idaho corporation (“Geo”), EverGreen Power Inc., an Idaho
corporation (“Subco”) and a wholly-owned subsidiary of U.S. Cobalt
Inc., a Delaware corporation (the “USC”), with reference to the following
facts:
A.
When the Plan was entered into, the parties contemplated that there would be
a Private Placement (as defined in the Plan, and all capitalized terms used
in this Amendment and not defined herein shall have the meanings assigned to
them in the Plan) of up to 2,000,000 Units at a price of US $0.75 per Unit,
with each Unit comprised of one share of USC Common Stock (after giving effect
to the Consolidation) and one warrant entitling the holder to purchase one share
of the Company Common Stock (after giving effect to the Consolidation) at a
price of $0.875 for up to 18 months after Closing; and
B.
USC has modified the terms of the Private Placement (the “Revised Offering”)
as follows: USC will issue up to 3,322,221 Units at a price of US $0.45 per
Unit, with each Unit comprised of one share of USC Common Stock (after giving
effect to the Consolidation) and one-half warrant to purchase one share of USC
Common Stock (after giving effect to the Consolidation) at a price of US$0.75
for each full share for up to 24 months after Closing, with the warrants included
in the Units being exercisable only for whole shares; and
C.
The Constituent Corporations, with USC and the Principal Geo Shareholders, have
amended and restated the Merger Agreement to reflect,
inter alia
, the
Revised Offering (the “First Amended and Restated Merger Agreement”);
and
D.
The Constituent Corporations and their respective boards of directors are authorized
under the Plan to amend the Plan after approval by the shareholders of the Constituent
Corporations, provided such amendment does not materially adversely affect the
rights of such shareholders, in the discretion of the boards of directors of
the Constituent Corporations; and
E.
The boards of directors of the Constituent Corporations have determined that
the amendments to the Merger Agreement, including, without limitation, the Revised
Offering, do not materially adversely affect the rights of the shareholders
of the Constituent Corporations.
NOW,
THEREFORE, the Constituent Corporations have agreed to amend the Plan, on the
terms and conditions herein provided, as follows:
1.
Amendment to Reflect Revised Offering
. The parties acknowledge that the
Company will conduct the Revised Offering in lieu of the Private Placement as
originally contemplated in the Agreement, and hereby agree to and accept the
terms of the Revised Offering. The Plan shall be deemed to be amended in all
respects necessary to be consistent with the terms or intent of the Revised
Offering, including, without limitation, in the following respects:
(a)
Section 2.1 of the Plan is hereby amended to provide that the number of Geo
Shares to be exchanged shall be 6,079,836 (instead of 4,184,837); the aggregate
number of Exchange Shares shall be 6,939,992 (instead of 6,725,384); and the
aggregate number of Exchange Warrants shall be 2,420,217 (instead of 2,325,000);
and
(b)
Section 2.3 of the Plan is hereby amended to provide that the number of Exchange
Shares into which the Vulcan Shares are to be converted shall be 1,775,156 (instead
of 1,540,548) and the number of Exchange Warrants into which the Vulcan Warrants
are to be converted shall be 2,420,217 (instead of 2,325,000); and
(c)
Section 2.7(e) is hereby amended to provide that the Revised Offering (instead
of the Private Placement) shall be fully subscribed and ready to close after
the effectiveness of the Merger.
2.
Amendment to Reflect Other Changes to Merger Agreement
. The additional
amendments to the Merger Agreement reflected in the First Amended and Restated
Merger Agreement are hereby accepted, and the Constituent Corporations hereby
waive any violation of any conditions or breaches or failure of performance
of any provisions of the Merger Agreement that could be deemed to have occurred
by virtue of the changed facts and circumstances reflected in such amendments.
3.
Execution
in Counterparts
. This Amendment to the Plan of Merger may be signed in counterparts
and by facsimile.
IN
WITNESS WHEREOF, this Amendment to the Plan of Merger, having first been duly
approved by resolutions of the boards of directors of each of the Constituent
Corporations, is hereby adopted on behalf of each of the Constituent Corporations
and USC by their respective officers thereunto duly authorized, and the Plan
of Merger is hereby amended as set forth above.
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U.S. Geothermal, Inc., an Idaho corporation
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By
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Date: __________
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Daniel Kunz, President
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EverGreen Power Inc., an Idaho corporation
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By
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Date: __________
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Douglas J. Glaspey, President
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Acknowledged:
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U.S. Cobalt Inc., a Delaware corporation
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By
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Date __________
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Douglas J. Glaspey, President
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Unless permitted under securities legislation,
the holder of the securities shall not trade the securities before June
1, 2004.
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Without prior written approval of the TSX Venture
Exchange and compliance with all applicable securities legislation, the
securities represented by this certificate may not be sold, transferred,
hypothecated or otherwise traded on or through the facilities of the TSX
Venture Exchange or otherwise in Canada or to or for the benefit of a
Canadian resident until June 1, 2004.
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WARRANT TO PURCHASE COMMON STOCK
OF
U.S. GEOTHERMAL INC.
(formerly U.S. Cobalt Inc.)
Warrant Certificate No: •
THIS WARRANT AND THE SECURITIES
TO BE ISSUED UPON ITS EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER APPLICABLE STATE SECURITIES LAWS. THE WARRANT REPRESENTED
HEREBY MAY NOT BE EXERCISED BY OR ON BEHALF OF
ANY U.S. PERSON UNLESS
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES
LAWS, OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE. EACH PERSON
EXERCISING THE WARRANT REPRESENTED BY THIS CERTIFICATE SHALL BE REQUIRED TO
GIVE A WRITTEN CERTIFICATION THAT IT IS NOT A U.S. PERSON AND
THE WARRANT
IS NOT BEING EXERCISED ON BEHALF OF A U.S. PERSON, OR AN OPINION OF COUNSEL,
ACCEPTABLE TO THE COMPANY, TO THE EFFECT THAT THE WARRANT REPRESENTED HEREBY
AND THE SECURITIES DELIVERABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND UNDER APPLICABLE STATE SECURITIES LAWS
OR ARE EXEMPT FROM REGISTRATION THEREUNDER. HEDGING TRANSACTIONS INVOLVING THIS
WARRANT AND THE UNDERLYING COMMON STOCK MAY
NOT BE CONDUCTED UNLESS IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933.
FOR VALUE RECEIVED
U.S. Geothermal Inc., a Delaware corporation (the "Company"), grants the following
rights to •., having an address at • ("Holder").
ARTICLE 1. DEFINITIONS
As used herein, the following terms shall have the following meanings, unless the context shall otherwise require:
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(a)
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"Call Event"
shall mean that the Company
(or a subsidiary thereof) has obtained a license from the applicable permitting
authorities for a 10 megawatt power plant, including a power purchase
agreement and transmission agreement.
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(b)
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"Common Stock"
shall mean the common stock,
$.001 par value per share, of the Company.
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(c)
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"Corporate Office"
shall mean the office
of the Company (or its successor) at which at any particular time its
principal business shall be administered, which office is located at the
date hereof at 1509 Tyrell Lane, Suite B, Boise, Idaho 83706.
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(d)
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"Exercise Date"
shall mean any date upon
which the Holder shall give the Company a Notice of Exercise, which shall
be deemed the date the Notice of Exercise was first deposited in the US
Mails, if mailed, or the date received by the courier company if delivered
by recognized courier company, or the date received by the Company if
otherwise given or delivered.
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(e)
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"Exercise Price"
shall mean the price to
be paid to the Company for each whole share of Common Stock to be purchased
upon exercise of this Warrant in accordance with the terms hereof, which
shall be • per share.
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(f)
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"Expiration Date"
shall mean the first to
occur of (i) 5:00 PM (Pacific time) on December 19, 2005 or (ii) the end
of the period of Notice set forth in Section 2.2 if sooner called pursuant
to Article 2.
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(g)
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"SEC"
shall mean the United States Securities
and Exchange Commission.
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ARTICLE 2. EXERCISE
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2.1
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Exercise of Warrant
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This Warrant shall entitle Holder to purchase
up to • shares of Common Stock (the "Shares") at the Exercise Price.
This Warrant shall be exercisable at any time and from time to time prior
to the Expiration Date (the "Exercise Period"). This Warrant and the right
to purchase Shares hereunder shall expire and become void at the Expiration
Date. This Warrant may be exercised for whole Shares only.
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2.2
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Acceleration of Exercise Period
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The Company shall have the right, at any
time after the occurrence of a Call Event, to accelerate the Exercise
Period by sending to the Holder, at the Holder's address written above,
a Notice of Acceleration in substantially the form attached as Appendix
I hereto (the "Notice"). In the event the Company does accelerate the
Exercise Period, Holder shall have until 5:00 p.m. (Pacific time) on the
date which is thirty (30) days from the date the Holder is deemed to receive
the Notice within which to exercise this Warrant in the manner provided
for in Section 2.3. If this Warrant is not exercised within said period,
thereafter this Warrant and the right to purchase the Shares hereunder,
to the extent not previously exercised, shall expire and become void.
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2.3
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Manner of Exercise
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(a)
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Holder may exercise this Warrant at any time and
from time to time during the Exercise Period, in whole or in part by delivering
to the Company at its Corporate Office (i) a duly executed Notice of Exercise
in substantially the form attached as Appendix II hereto and (ii) a bank
cashier's or certified check for the aggregate Exercise Price of the Shares
being purchased.
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(b)
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From time to time upon exercise of this Warrant,
in whole or part, in accordance with its terms, the Company will cause
its transfer agent to countersign and deliver stock certificates to the
Holder representing the number of Shares being purchased pursuant to such
exercise, subject to adjustment as described herein.
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(c)
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Promptly following any exercise of this Warrant,
if the Warrant has not been fully exercised and has not expired, the Company
will deliver to the Holder a new Warrant for the balance of the Shares
covered hereby.
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2.4
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Termination
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All rights of the Holder in this Warrant, to the extent they have not
previously expired or been exercised, shall terminate on the Expiration
Date.
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2.5
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No Rights Prior to Exercise
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Prior to its exercise pursuant to Section 2.3 above, this Warrant shall
not entitle the Holder to any voting or other rights as holder of Shares.
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2.6
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Adjustments
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In case of any reclassification, capital reorganization, stock dividend,
or other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital reorganization,
stock dividend, or other change of outstanding shares of Common Stock),
or in case of any sale or conveyance to another corporation of the property
of the Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that the Holder shall have the right thereafter,
by exercising this Warrant, to purchase the kind and number of shares of
stock or other securities or property (including cash) receivable upon such
reclassification, capital reorganization, stock dividend, or other change,
consolidation, merger, sale or conveyance as the Holder would have been
entitled to receive had the Holder exercised this Warrant in full immediately
before such reclassification, capital reorganization, stock dividend, or
other change, consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments that shall be as nearly equivalent
as may be practicable to the adjustments provided for in this Section 2.6.
The foregoing provisions shall similarly apply to successive reclassifications,
capital reorganizations, stock dividends, and other changes of outstanding
shares of Common Stock and to successive consolidations, mergers, sales
or conveyances. The Company shall have the exclusive authority to make all
such adjustments.
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2.7
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Fractional Shares
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No fractional Shares shall be issuable upon exercise or conversion of
this Warrant and the number of Shares to be issued shall be rounded down
to the nearest whole Share. If a fractional Share interest arises upon any
exercise or conversion of the Warrant, the Company shall eliminate such
fractional Share interest by paying Holder the amount computed by multiplying
the fractional interest by the closing bid price of a full Share on the
date of the Notice of Exercise.
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ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY
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3.1
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Representations and Warranties
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The Company hereby represents and warrants to the Holder as
follows:
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(a)
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All Shares which may be issued upon the exercise
of the purchase right represented by this Warrant shall, upon issuance,
by duly authorized, validly issued, fully-paid and non- assessable, and
free of any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable securities laws, and not subject
to any pre-emptive rights.
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(b)
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The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and has the full
power and authority to issue this Warrant and to comply
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with the terms hereof. The execution, delivery and
performance by the Company of its obligations under this Warrant, including,
without limitation, the issuance of the Shares upon any exercise of the
Warrant, have been duly authorized by all necessary corporate action.
This Warrant has been duly executed and delivered by the Company and is
a valid and binding obligation of the Company, enforceable in accordance
with its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting enforceability of
creditors' rights generally and except as the availability of the remedy
of specific enforcement, injunctive relief or other equitable relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
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(c)
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The Company is not subject to or bound by any provision
of any certificate or articles of incorporation or by-laws, mortgage,
deed of trust, lease, note, bond, indenture, other instrument or agreement,
license, permit, trust, custodianship, other restriction or any applicable
provision of any law, statute, any court, governmental body, administrative
agency or arbitrator which could prevent or be violated by or under which
there would be a default (or right of termination) as a result of the
execution, delivery and performance by the Company of this Warrant.
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ARTICLE 4. MISCELLANEOUS
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4.1
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Restrictions on Transfer
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This Warrant may not be transferred or assigned,
in whole or in part, at any time.
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4.2
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Loss, Theft, Destruction or Mutilation
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If this Warrant shall become mutilated or defaced
or be destroyed, lost or stolen, the Company shall execute and deliver
a new Warrant in exchange for and upon surrender and cancellation of such
mutilated or defaced Warrant or, in lieu of and in substitution for such
Warrants so destroyed, lost or stolen, upon the Holder filing with the
Company evidence satisfactory to it that such Warrant has been so mutilated,
defaced, destroyed, lost or stolen. However, the Company shall be entitled,
as a condition to the execution and delivery of such new Warrant, to demand
indemnity satisfactory to it and payment of the expenses and charges incurred
in connection with the delivery of such new Warrant. Any Warrant so surrendered
to the Company shall be cancelled.
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4.3
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Notices
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All notices and other communications from the Company
to the Holder or vice versa shall be deemed delivered and effective when
given personally (including by recognized courier delivery), by facsimile
transmission and confirmed in writing, or three (3) days after being mailed
by first- class United States Postal Service mail, postage prepaid, at
such address and/or facsimile number as may have been furnished to the
Company or the Holder, as the case may be, in writing by the Company or
the Holder from time to time; provided, however, that the Notice of Exercise
may not be delivered by facsimile transmission.
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4.4
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Waiver
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This Warrant and any term hereof may be changed,
waived, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination
is sought.
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4.5
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Governing Law
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This Warrant shall be governed by and construed
in accordance with the laws of the State of Delaware
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without
giving effect to its principles regarding conflicts of law.
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4.6
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Restrictions on Shares
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This Warrant and any Shares issuable on its exercise
are subject to resale restrictions under applicable securities laws. If
the Shares underlying the Warrants are not the subject of an effective
registration statement under the Act upon issuance by the Company, legends
stating that such Shares have not been registered and referring to restrictions
on transferability and sale of the Shares may be placed upon all certificates
or other documents evidencing ownership, and stop- order instructions
prohibiting transfer of the Shares or similar notations may be made on
the Company's records to prevent the disposition of Shares other than
in accordance with applicable law.
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Dated: •
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U.S. Geothermal Inc.
, a Delaware corporation
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By: __________________________
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Paul Larkin, Director
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APPENDIX I
NOTICE OF ACCELERATION
Dated: ___________________
U.S. Geothermal Inc. (the "Company") does hereby notify you of its election
to exercise its right, pursuant to Section 2.2 of the Warrant issued to you
by the Company on _________________
(the "Warrant"), to accelerate the exercise period of
such Warrant with respect to all unexercised Shares for which the Warrant may be exercised. Please be advised that you have thirty (30) days from the date you are deemed to receive this Notice of Acceleration (the "Notice Period") to exercise your
Warrant in the manner provided for in the Warrant. You will be deemed to have received this Notice of Acceleration three (3) days after the date when this Notice of Acceleration was first deposited in the United States mail, if mailed, or upon
receipt if delivered personally or by facsimile.
You will automatically forfeit your right to purchase any shares of common
stock issuable upon exercise of such Warrant, unless the Warrant is exercised
with respect to such Shares before the end of the Notice Period.
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U.S. Geothermal Inc., a Delaware corporation
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By: _______________________
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Name: _____________________
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Title: ______________________
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APPENDIX II
NOTICE OF EXERCISE
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1.
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The undersigned hereby elects to purchase ________ shares of the Common
Stock of U.S.
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Geothermal Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
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2.
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Please issue a certificate or certificates representing said shares and
reissue a Warrant for the balance of the shares remaining in the name of
the undersigned holder as specified below.
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3.
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The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
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Holder: ________________________________
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___________________________
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___________________________
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(Signature)
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(Date)
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Address: ___________________________
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___________________________
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Exhibit 4.3
Rights of Security Holders
Articles VI through XI of the Certificate of Incorporation are hereby incorporated
by reference.
[Letterhead of Williams, Kastner & Gibbs, PLLC]
July 7, 2004
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20006
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Re:
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U.S. Geothermal Inc.
Registration Statement on Form SB-2
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Dear Sirs/Madams:
We have acted as counsel for U.S. Geothermal Inc., a Delaware corporation (the
“Company”), in connection with the registration under the Securities
Act of 1933, as amended, of an aggregate of 19,025,285 shares (the “Shares”)
of the common stock, par value $.0001 per share (the “Common Stock”),
of the Company, to be offered and sold by certain securityholders of the Company
(the “Selling Securityholders”). In this regard, we have participated
in the preparation of a Registration Statement on Form SB-2 (the “Registration
Statement”) relating to the Shares. The Shares include an aggregate of
6,102,592 shares (the “Underlying Shares”) of Common Stock issuable
upon exercise of outstanding options and warrants (collectively the “Derivative
Securities”) of the Company.
We are of the opinion that (a) the Shares issued and outstanding on the date
hereof are duly authorized, legally issued, fully paid and non-assessable and
(b) the Underlying Shares, upon issuance in accordance with the terms of the
respective Derivative Securities, will be duly authorized, legally issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the use of our name under the caption “Legal Matters”
in the Registration Statement and in the Prospectus included therein.
Sincerely,
WILLIAMS, KASTNER & GIBBS PLLC
AGREEMENT
Dated as of December 3, 2002
By and Between
U.S. Geothermal, Inc.
and
Vulcan Power Company
THIS AGREEMENT ("Agreement"), dated December
3, 2002 is by and between U.S. Geothermal, Inc., an Idaho corporation ("Buyer")
and Vulcan Power Company, a Colorado corporation ("Seller").
RECITALS
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A.
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The parties hereto wish to provide for the terms and conditions upon which
Buyer will acquire certain, assets, properties, and rights of Seller.
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B.
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The parties hereto wish to make certain representations, warranties, covenants
and agreements in connection with such acquisition of Seller’s Assets.
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C.
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The parties wish to provide for the purchase by Buyer of Seller’s
assets in “as-is” condition.
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AGREEMENT
Accordingly, and in consideration of the representations,
warranties, covenants, agreements and conditions herein contained, the parties
hereto agree as follows:
Section 1.
Purchase of Assets
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(a)
Assets to be Purchased
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Pursuant to the terms and conditions contained herein, Seller shall sell, transfer,
assign and deliver to Buyer, and Buyer shall purchase from such Seller, seller’s
assets set forth in the schedules attached hereto as Exhibits A and B (the “Seller’s
Assets”).
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Raft River Agreement – Page 1
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_________________
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Buyer
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Seller
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(b)
Terms of Purchase
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Seller hereby agrees to sell to Buyer and Buyer agrees to purchase from Seller
a 100% interest in and to Seller’s Assets on the terms and conditions set
forth herein.
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(i)
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Upon execution of this Agreement, Seller shall execute and deliver
to Buyer a 20% undivided interest in Seller’s Assets and shall execute
and deposit acceptable Title Escrow Instructions and Warranty Deeds (“Deed
or Deeds”) for a 49% undivided interest in Seller’s Assets with
Land Title Escrow, Inc., of Burley, Idaho (“Escrow”). Seller
has already executed a 100% Deed which will be transferred to Buyer upon
completion of the remaining 51% of Seller’s interest in Seller’s
Assets as provided for in Section 1 (b) (ii) below.
Buyer has made payments to Seller in the total amount of $175,000. In
addition, Buyer has made payments of taxes and other items necessary to
maintain Seller’s Assets in the total amount of $20,514.88 for Cassia
County property taxes and interest for tax years 1997 through 2002. Seller
acknowledges that Buyer, in making such tax payments, makes no accusation
of any noncompliance or breach of any prior agreement of the parties on
account of tax payments, nor waives any right to future performance by
Seller hereunder. Seller acknowledges no breach of any prior agreement
nor waives any right to performance by Buyer on account of tax payments.
In order to complete the purchase of the first 20% interest in Seller’s
Assets, Buyer shall make the Intermediate Payments in (E) below at which
time such interest will be transferred to Buyer. In order to complete
the purchase of an additional 29% interest in Seller’s Assets, Buyer
shall complete the items listed in (A), (B), (C), (D), (F) and (G) below:
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(A)
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Buyer has issued to Seller 1,895,000 common shares
of Buyer and 1,612,000 warrants to purchase commons shares of Buyer for
24 months at a price of $0.75 per share (such shares and warrants held
in escrow as security until “Acquisition Closing” when these
shares and warrants will be exchanged for newly issued Pubco shares and
warrants as detailed in (B) below);
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(B)
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Buyer has entered into agreement with the publicly
traded company U.S. Cobalt, Inc., (hereinafter referred to as “Pubco”)
pursuant to which Pubco agrees to acquire all outstanding and issued shares
and warrants of Buyer (the “Acquisition”). The Acquisition will
be accomplished by Pubco dissolving 100% of Buyer’s outstanding and
issued shares and warrants, including those in (A) above, and issuing
new Pubco shares and warrants. The date on which: i) the Acquisition is
completely performed, ii) the cash funds have been transferred to Pubco
as required under the terms of a public capital financing of Pubco; and,
iii) Buyer is acquired by Pubco through the exchange of shares, is defined
as “Acquisition Closing”. Acquisition Closing is a public market
transaction and as such is subject to regulatory authority approvals,
Pubco shareholder approvals, and market conditions all outside Buyer’s
control. The parties hereto anticipate that Acquisition Closing will be
completed March 18, 2003.
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Raft River Agreement – Page 2
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_________________
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Buyer
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Seller
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In exchange for the Buyer shares held in escrow as
security on behalf of Seller as detailed in (A) above, Pubco will issue
to Seller that number of common shares of Pubco that is equal to 14% of
the issued and outstanding common shares of Pubco on Acquisition Closing
plus warrants to purchase an additional 11% of the issued and outstanding
common shares of Pubco as of the date of Acquisition Closing. Such warrants
shall have a validity period of 24 months from Acquisition Closing at
a price equal to $0.75. Restrictions and terms of sales of such shares
and warrants may be imposed by the regulatory agencies of the Toronto
Venture Exchange. In addition to the escrow provisions imposed by the
regulatroy agencies, Buyer’s Pubco shares and warrants will be subject
to the escrow arrangement described in Section 1(b) (i) (E) below;
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(C)
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For further certainty, as a result of this transaction
with the issuance to Seller of 14% of the common shares and 11% of the
warrants of Pubco as set out above, Seller will own, or through the exercise
of warrants, have the right to acquire, a total of 25% of the issued and
outstanding common shares of Pubco on a fully diluted basis as of the
date of Acquisition Closing.
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(D)
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Seller will be entitled to nominate one seat representation
on Pubco’s board upon Acquisition Closing so long as Seller shall
own stock or warrants of Buyer. Such nominee shall be acceptable to Pubco
and meet the requirements of the Canadian and US Securities regulatory
requirements;
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(E)
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Buyer shall pay the balance of $54,485.12 upon execution
of this Agreement (“Intermediate Payment”). Buyer may pay legitimate
costs prior to Acquisition Closing to a third party to keep Seller’s
Assets in good standing and/or to remove any charges, liens or encumbrances
on Seller’s Assets after first gaining agreement to any such payments
by Seller. Prior to Acquisition Closing, property taxes shall be apportioned
according to the Parties various ownership interests, e.g. after 11/29/02,
Buyer shall be responsible for 20% of property taxes. Seller may elect
to make such payments, if any, itself and provide proof of same to Buyer.
Any such approved payments made by Buyer on behalf of Seller may be deducted
from the subsequent payment due to Seller pursuant to subsections F and
G, below;
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(F)
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Spend $200,000 on or for the benefit of Seller’s
Assets no later than 12 months following Acquisition Closing, which is
expected to be May 2004 substantially in accordance with the program of
work and budgeted costs set out in Exhibit C hereto (the “Work Program”).
Such obligation of Buyer shall be reduced by: (i) any excess paid by Buyer
as described in subsection E, above; (ii) any amounts approved by Seller
and paid by Buyer after Intermediate Payment by Buyer to a third party
to keep Seller’s Assets in good standing and/or to remove any charges,
liens or encumbrances on Seller’s Assets; and,
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(G)
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Pay to Seller $100,000 upon Acquisition Closing.
Buyer intends to build a 10 megawatt or larger Power Plant within a 10
mile radius of the Seller’s Assets.
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Raft River Agreement – Page 3
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_________________
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_________________
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Buyer
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Seller
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(H)
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Buyer has and agrees to continue to use its best
efforts to acquire geothermal development rights and lease rights within
a 10-mile radius of Seller’s Assets. Buyer has acquired rights to
the Crank well and lease, and other leases which will be listed as Exhibit
E hereto. Upon the date of a feasibility study for the construction of
a Power Plant, Buyer will furnish Seller a complete list of all its geothermal
development rights and leases.
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Upon completion of the terms set forth in subsections
(A), (B),(C),(D),(F),and (G) an additional 29% interest in Seller’s
Assets will be vested in Buyer, and the deed for such interest released
from Escrow to Buyer. For further clarity, upon completion of items (A),(B),(C),(D),(E),(F),and
(G) Buyer shall own 49% interest in Seller’s Assets.
(ii) In order to complete
the purchase of the remaining 51% interest in Seller’s Assets, in
addition to satisfying the terms set forth in Section 1(b)(i), above,
Buyer shall pay to Seller $250,000 on or before receipt of project financing
for construction of the Power Plant (“Project Financing”), currently
expected to be within 30 months of Acquisition Closing. Upon such payment,
the deed for Seller’s remaining interest in Seller’s Assets
will be released from Escrow to Buyer.
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(c)
Escrow of Shares and Warrants
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Upon Acquisition Closing the Buyer shares and warrants provided for in Section
1. (b)(i)(A) above will be purchased by Pubco by issuance of new shares and
warrants of Pubco to be issued to Seller pursuant to the Acquisition and will
be issued to Seller in the following tranches: (i) two thirds of shares and
warrants within 5 business days of Acquisition Closing; and (ii) one third of
shares and warrants to be held in escrow and issued to Seller upon commencement
of construction of the Power Plant. In addition to this Escrow holding period,
there may be additional escrow requirements on Buyer and Seller regarding the
sale of their Pubco shares and warrants imposed by the Toronto Venture Exchange.
(d)
Pledge of Buyer’s
Shares
. The Buyer has placed in Escrow on behalf of Seller the Buyer shares
and warrants as described in Section 1. (b)(i)(A) above. Upon execution of this
agreement, Buyer shall demonstrate to the Seller in writing that it has pledged
all of its shares outstanding as of March 5, 2002, to the Seller. The pledged
security shall be released at Acquisition Closing upon Pubco issuing new shares
and warrants to Seller as described in Section 1(b)(i)(B) above. If Pubco fails
to issue shares and warrants to Seller as described in Section 1(b)(i)(B) above,
Seller shall be entitled to retain all of the pledged shares and all of the
directors of Buyer shall resign. Prior to Acquisition Closing, Buyer shall not
transfer Seller’s Assets to any company other than Pubco without Seller
approval. Such approval shall not be unreasonably withheld and will only be
granted, if at all, if Seller determines it will realize equal or better value
from the effect of any such transferal.
(e)
Access to Seller’s
Assets
. Seller hereby grants Buyer the exclusive right and privilege from
and after Intermediate Payment to enter onto Seller’s Assets for the purposes
of the Work Program as described more specifically in Exhibit C, including the
right of ingress and egress for personnel, machinery, equipment, supplies and
products and the right to use so much of the surface of and water on or appurtenant
to Seller’s Assets as Buyer needs, subject to any federal or state law
concerning the appropriation and use of the water, including discharge. Buyer
is granted the right to use Seller’s Assets
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Raft River Agreement – Page 4
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_________________
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_________________
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Buyer
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Seller
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including, but without being limited to, the full right, authority,
and privilege of placing and using excavations, ditches and drains, of constructing,
maintaining, using all buildings, structures, roadways, pumps, pipelines, electrical
power lines and all other improvements on Seller’s Assets. Prior to such
access and use, Buyer shall have in place the indemnification insurance policy
set forth in Section 8. Buyer shall also be responsible to Seller for loss or
destruction of Seller’s Assets from March 5, 2002 through Buyer purchase
completion of 100% of Seller’s Assets.
(f)
Approvals
. The parties
acknowledge that the transaction with Pubco will require the approval of the
shareholders of Public and the applicable regulatory authorities and that the
conditions of regulatory approval may include the escrowing of the securities
issued by Pubco. Seller and Buyer agree to abide by such conditions.
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(g)
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Estimated Asset Purchase Schedule
. A list
of the Seller’s Assets anticipated purchase actions of the Buyer
and amounts and dates of purchase payments and estimated stock and warrant
issuance to Seller is attached as Exhibit D and incorporated as if more
fully set forth herein. The list is for reference only and the specific
terms and conditions describing each action are set forth in Section 1
above.
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(h)
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Area of Interest
. An Area of Interest is established
by the parties that includes the State of Idaho in which Seller shall
not directly or indirectly acquire any interest in or rights to geothermal
property. Seller is not precluded from non-geothermal power development
in the Area of Interest and is not precluded from conducting geothermal
power sales into the Area of Interest provided that the generating source
is located outside the Area of Interest.
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(i)
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Seller’s Pubco Shares and Warrants
. Buyer
shall have the right for 36 months from Acquisition Closing to acquire
any Pubco shares and warrants that Seller desires to sell or exercise,
as the case may be, subject to these terms. Seller shall notify Buyer
in writing (“Notice”) of Seller’s desire for a potential
sale of Pubco shares and/or the potential exercise of Pubco warrants.
Buyer shall, within 3 business day of the date of Buyer’s receipt
of Notice, provide Seller with a written proposal (“Proposal”)
for the acquisition of the shares and/or warrants. The Proposal market
price for and number of shares of the Pubco shares, shall be established
by Seller in the Notice. If Buyer fails to provide the Proposal and execute
a market transaction and in the time prescribed then Seller is free to
market the Pubco shares or warrants and this right shall expire as to
the number of shares and/or warrants included in the Notice. Payment shall
be by certified check via FedEx or wire transfer. Seller shall timely
issue instructions to its broker transfer agent to transfer the shares.
Seller shall have the right to decline any Proposal and withdraw the Notice.
Buyer and Seller shall keep confidential the terms of any Notice under
this clause.
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Section 2.
Representations and Warranties of Sellers
.
Seller hereby represents and warrants to Buyer
as of the date hereof as follows:
(a)
Corporate Organization
. Seller is
a corporation duly organized, validly existing and in good standing under the
law of the state of Colorado.
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Raft River Agreement – Page 5
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_________________
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_________________
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Buyer
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Seller
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(b)
Authorization
. Seller
has the legal capacity to enter into this Agreement and to carry out the transactions
contemplated herein. This Agreement has been duly and validly executed by Seller
and is the valid and binding legal obligation of Seller.
(c)
Non-Contravention
.
Neither the execution, delivery and performance of this Agreement nor the consummation
of the transactions contemplated herein will:
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(i) violate or be in conflict with any provision of the articles or
certificates of incorporation or bylaws of Seller; or
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(ii) to the knowledge of Seller, violate any law.
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(d)
Consents and Approvals
.
No consent or approval from any individual or entity, including without limitation
any Authority (“Consent” or “Consents”), is required in
connection with the performance of this Agreement by Seller.
(e)
Real Properties
.
Seller has good and marketable fee simple record title in and to, all of its
real property assets and fixtures reflected the schedule attached hereto as
Exhibit A. Documents have been provided to Buyer which contain the legal description
of all real property included in Seller’s Assets (the "Real Property").
All leasehold or permit interests in the Real Property are valid and in full
force and effect and enforceable in accordance with their terms.
(f) Except as set forth herein,
Buyer is purchasing the Real Estate in “as-is” condition and Seller
makes no representations or warranties as to the condition of the Real Property,
or as to its fitness for a particular purpose or present or intended use.
(g)
Machinery, Equipment,
and Personal Property
. Seller has good and merchantable right, title and
interest in and to all its machinery, equipment, and other personal property
reflected in Exhibit A as of March 5, 2002. Except as set forth herein, Buyer
is purchasing Seller’s machinery, equipment and other personal property
in “as-is” condition and Seller makes no representations or warranties
as to the condition of the machinery, equipment and other personal property
reflected on Exhibit A, or as to its fitness for a particular purpose or present
or intended use or its location after March 5, 2002.
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(i) Buyer represents that to the best of its knowledge
all such machinery, equipment and personal property listed in Exhibit
A is still at its original location as of the date of this Agreement;
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(ii) Buyer agrees that Seller has no further responsibilities
as to such machinery or equipment or personal property remaining in place
henceforth after the date of Escrow which was March 5, 2002.
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(h)
Litigation
. Seller
is not a party to and knows of no litigation or administrative proceeding which
would materially affect its ability to perform under and consummate this Agreement.
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Raft River Agreement – Page 6
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_________________
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_________________
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Buyer
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Seller
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(i)
Compliance with Law
.
To the best of Seller’s knowledge, Seller’s Assets were in material
compliance with all Laws in effect as of March 5, 2002.
(j)
Environmental
. Seller
was not aware of any environmental problems concerning property as of March
5, 2002 that it created or was responsible for. Both Parties are aware of Transite
pipeline on Seller’s Assets and possibly on US Government or other lands
placed there by a US Department of Energy contractor. No Party had made demand
for removal of remaining Transite pipeline to the best knowledge of Seller as
of March 5, 2002
(k)
Brokers
. Neither
Seller nor its Subsidiaries, nor any of their directors, officers or employees
has employed any broker, finder, or financial advisor or incurred any liability
for any brokerage fee or commission, finder's fee or financial advisory fee,
in connection with the transactions contemplated hereby, nor is there any basis
known to Seller for any such fee or commission to be claimed by any person or
entity.
(l)
Accuracy of Information
.
No representation or warranty by Seller in this Agreement contains any untrue
statement of material fact or omits to state any material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading as of the date of the representation
or warranty.
Section 3.
Representations and Warranties of
Buyer
.
Buyer represents and warrants
to Seller as of the date hereof as follows:
(a)
Corporate Organization
.
Buyer is a corporation duly organized, validly existing and in good standing
under the law of the State of Idaho.
(b)
Authorization
. Buyer
has full corporate power and authority to enter into this Agreement and to carry
out the transactions contemplated herein. The Board of Directors of Buyer has
taken all action required to authorize the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated herein.
This Agreement is the valid and binding legal obligation of Buyer.
(c)
Non-Contravention
.
Neither the execution, delivery and performance of this Agreement nor the consummation
of, the transactions contemplated herein will:
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(i) violate any provision of the articles or certificates of incorporation
or bylaws of Buyer; or
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(ii) to the knowledge of Buyer, violate any Law.
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(d)
Accuracy of Information
.
No representation or warranty by Buyer in this Agreement contains or will contain
any untrue statement of material fact or omits or will omit to state any material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which made, not misleading as of the date of the representation
or warranty.
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Raft River Agreement – Page 7
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_________________
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_________________
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Buyer
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Seller
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(e)
Brokers
. Neither
Buyer nor any of its directors, officers or key employees have employed any
broker, finder or financial advisor, or incurred any liability for any brokerage
fee or commission, finder's fee or financial advisory fee, in connection with
the transactions contemplated hereby, nor is there any basis known to Buyer
for any such fee or commission to be claimed by any person or entity.
Section 4.
Covenants
.
(a)
No Solicitation of Alternate
Transaction
. So long as Seller’s Assets shall be in Escrow under this
Agreement, Seller shall not, and shall ensure its directors, officers and employees,
independent contractors, consultants, counsel, accountants, investment advisors
and other representatives and agents do not, directly or indirectly, solicit,
initiate or encourage discussions or negotiations with, provide any nonpublic
information to, or enter into any agreement with, any third party concerning
Seller’s Assets. During such Escrow, Seller shall immediately inform Buyer
of any unsolicited offer regarding Seller’s Assets, including the terms
thereof and the identity of the person or entity making such offer.
(b)
Access to Seller’s
Assets
. Prior to Intermediate Payment, Seller shall afford to Buyer and
its authorized representatives and agents free and full access to Seller’s
Assets and to the associated books and records of Seller in order to make such
investigations as it shall desire; and Seller shall furnish such additional
financial and operating data and other information relating to Seller’s
Assets as Buyer shall reasonably request if Seller has such data.
(c)
Further Assurances; Cooperation;
Notification
. Each party shall, during the performance of this Agreement,
execute and deliver such instruments and take such other actions as the other
party or parties, as the case may be, may reasonably require in order to carry
out the intent of this Agreement. At all times from the date hereof until the
conclusion of the events set forth in Section 1, above, each party shall promptly
notify the other in writing of the occurrence of any event which it reasonably
believes will or may result in a failure by such party to satisfy the conditions
specified herein.
(d)
Transactional Tax Undertakings
.
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(i) The parties hereto
shall cooperate and Buyer shall make any necessary filings with state
and local taxing authorities and to furnish any required supplemental
information to any state and local tax liabilities resulting from the
consummation of the transactions contemplated herein so long as Sellers
Assets remain in Escrow and/or after Closing.
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(e)
Title Insurance Policy
Commitment
. At least five (5) days prior to Acquisition Closing, Buyer,
at its sole cost and expense, shall furnish to Seller and Buyer a title commitment
(the "Title Commitment") from a company to be selected by Buyer (the "Title
Company") with a Title insurance policy which shall be provided at the cost
of Buyer. The Title Commitment shall:
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(i) show good and marketable
title to all of the Real Property included in Seller’s Assets; and
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(ii) commit to ensure
good and marketable title to such Real Property, subject to the standard
exceptions contained in a policy of title insurance issued in Cassia County,
Idaho.;
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Raft River Agreement – Page 8
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_________________
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_________________
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Buyer
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Seller
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(g)
No Further Encumbrances
.
Seller shall not cause or allow any of Seller’s Assets to become subject
to any further lien, encumbrance, default, charge or claim between the time
of execution of this Agreement and the completion of Buyer’s purchase of
Seller’s Assets. Buyer shall not allow any of Seller’s Assets to become
subject to any further lien, encumbrance, default, charge or claim between the
time of execution of this Agreement and the completion of Buyer’s purchase
of Seller’s Assets.
Section 5.
Conditions to Obligations of Buyer
.
The obligations of Buyer to effect the transactions contemplated herein
shall be subject to the satisfaction at or prior to each deadline specified
in Section 1(b), of each of the following conditions:
(a)
Representations and Warranties
True
. The representations and warranties of Seller contained in this Agreement
shall be in all material respects true, complete and accurate.
(b)
Performance
. Seller
has performed and complied in all material respects with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or complied
with by Seller.
(c)
Certificates
. Buyer
has received such certificates from the Seller, in a form and substance reasonably
satisfactory to Buyer, to evidence compliance with the conditions of this Agreement.
Section 6.
Conditions to Obligations of Seller
.
The obligation of Seller to effect the transactions contemplated herein
shall be subject to the satisfaction at or prior to each deadline specified
in Section 1(b), of each of the following conditions:
(a)
Representations and Warranties
True
. The representations and warranties of Buyer contained in this Agreement
shall be in all material respects true, complete and accurate.
(b)
Performance
. Buyer
shall have performed and complied in all material respects with all agreements,
covenants, obligations and conditions required by this Agreement to be performed
or complied with by Buyer at or prior to each such deadline.
(c)
No Proceeding or Litigation
.
No suit, action, investigation, inquiry or other proceeding by any Authority
or other person or entity shall have been instituted or threatened which questions
the validity or legality of the transactions contemplated hereby.
(d) Certificate from the State
of Colorado with a recent date of issue indicating that Seller is a corporation
in good standing and a certified consent resolution from the Seller’s board
of directors consenting to this Agreement are provided to Buyer upon the date
of this Agreement.
Section 7.
Termination and Abandonment
.
(a)
Methods of Termination
.
This Agreement may be terminated and the transactions contemplated herein may
be abandoned prior to completion of the events set forth in Section 1 above:
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(i) By mutual written consent of Buyer and
Seller.
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Raft River Agreement – Page 9
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_________________
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_________________
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Buyer
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Seller
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(ii) Through nonperformance of Buyer or Seller under this Agreement.
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(b)
Procedure Upon Termination
. In the
event of termination and abandonment pursuant to Section 7(a), written notice
thereof shall forthwith be given to the other party, and the provisions of this
Agreement (except to the extent provided in Section 8) shall terminate, and
the transactions contemplated herein shall be abandoned. If this Agreement is
terminated as provided herein, each party will redeliver all documents, work
papers and other material of any other party relating to the transactions contemplated
herein, whether so obtained before or after the execution hereof, to the party
furnishing the same. If terminated or abandoned, Buyer shall immediately instruct
Escrow agent to return any unearned portion of Seller Assets to Seller and corresponding
undelivered Buyers shares and warrants to Buyer and provide a copy of those
instructions to Seller by fax and FedEx.
Provided
, however, that the
termination provisions set forth in this Section 7 shall be in the alternative
to, and shall not limit, either party’s right to seek any other remedy
available at law or equity for the other party’s breach or failure to perform.
Section 8.
Survival and Indemnification
.
(a)
Survival
. The representations and
warranties of each of the parties hereto shall survive the complete performance
of this Agreement.
(b)
Indemnification
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(i) The Buyer shall indemnify and hold Seller
harmless from any claims, demands, liabilities or liens arising out of Buyer’s
activities on and responsibilities related to Seller’s Assets. Buyer
will obtain and carry and maintain a policy of liability insurance naming
Seller as additional named insured in the amount of $2,000,000 or more to
protect Seller against any claims resulting from Buyer’s operations.
Buyer will obtain or require its drill contractor to carry a control of
well insurance policy prior to commencement of any physical work on the
wells included in Seller’s Assets and/or any new wells drilled on Seller’s
Assets.
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Section 9.
Force Majeure
.
In the event the performance by either party
of an obligation hereunder is prevented or delayed by a cause beyond that party’s
control, in the exercise of due care, such party’s obligation shall be
deferred until the conclusion of such prevention or delay. The party claiming
such prevention or delay shall promptly notify the other party thereof. Lack
of funds or inability to obtain financing shall not constitute an excusable
prevention or delay of performance.
Section 10.
Miscellaneous Provisions
.
(a)
Expenses
. Except as otherwise provided
herein, each of the parties hereto shall bear its own costs, fees and expenses
in connection with the negotiation, preparation, execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
(b)
Confidentiality
. Except as required
to be made public by regulatory agencies, any information disclosed by either
party to the other or its representatives in connection with the transactions
contemplated by this agreement, which information is not public information
and is not otherwise known
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Raft River Agreement – Page 10
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_________________
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_________________
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Buyer
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Seller
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to the person to which it is disclosed, shall be deemed to be confidential information of the party disclosing it and shall be used only for purposes of evaluating the transactions contemplated by this agreement and shall not be disclosed to any
other person, except with the consent of the parties.
(c)
Amendment and Modification
. This
Agreement may be amended or modified by the parties at any time;
provided,
however
, that all such amendments and modifications must be in writing duly
executed by all of the parties.
(d)
Waiver of Compliance; Consents
. Any
failure of a party to comply with any obligation, covenant, agreement or condition
herein may be expressly waived in writing by the party entitled hereby to such
compliance, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure. No single
or partial exercise of a right or remedy shall preclude any other or further
exercise thereof or of any other right or remedy hereunder. Whenever this Agreement
requires or permits the consent by or on behalf of a party, such consent shall
be given in writing in the same manner as for waivers of compliance.
(e)
No Third Party Beneficiaries
. Nothing
in this Agreement shall entitle any person or entity (other than a party hereto
and his, her or its respective successors and assigns permitted hereby) to any
claim, cause of action, remedy or right of any kind.
(f)
Notices
. All notices, requests, demands
and other communications required or permitted hereunder shall be made in writing
and shall be deemed to have been duly given and effective.
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(i) on the date of delivery, if delivered personally;
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(ii) on the earlier of the fifth day after mailing or the date of the
return receipt acknowledgement, if mailed, postage prepaid, by certified
or registered mail, return receipt requested; or
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(iii) on the date of transmission, if sent by facsimile telefax transmission:
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If to Seller:
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To:
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Mr. Steve Munson, CEO
Vulcan Power Company
1183 NW Wall St., Suite G
Bend, OR 97701
Fax: 541-317-2879
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or to such other person or address as Seller shall furnish to Buyer in writing
in accordance with this subsection.
If to Buyer:
To: Daniel Kunz
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Raft River Agreement – Page 11
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_________________
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_________________
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Buyer
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Seller
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U.S. Geothermal, Inc.
3392 Maze Ave.
Boise, ID 83706
Fax: 208-367-1014
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or to such other person or address as Buyer shall furnish to Seller in writing
in accordance with this subsection.
(g)
Assignment
. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned (whether voluntarily, involuntarily, by operation
of law or otherwise) by either party hereto without the prior written consent
of the other party.
(h)
Governing Law
. This
Agreement and the legal relations among the parties hereto shall be governed
by and construed in accordance with the internal substantive laws of the State
of Idaho as to all matters, including without limitation matters of validity,
construction, effect, performance and remedies.
(i)
Counterparts
. This
Agreement may be executed simultaneously in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j)
Headings
. The table
of contents and the headings of the Sections and subsections of this Agreement
are inserted for convenience only and shall not constitute a part hereof.
(k)
Entire Agreement; Severability
.
The exhibits and schedules referred to in this Agreement are part of this Agreement,
and together with this document they embody the entire agreement and understanding
of the parties hereto in respect of the transactions contemplated by this Agreement
and together they are referred to as "this Agreement" or the "Agreement". This
Agreement supersedes and nullifies all prior agreements and understandings between
the parties with respect to Seller’s Assets and the terms and conditions
of their sale and obligations of the Parties to this Agreement. There are no
restrictions, promises, warranties, agreements, covenants or undertakings, other
than those expressly set forth or referred to in this Agreement. If any provision
of this Agreement shall become invalid or unenforceable under applicable law
such provision shall be stricken to the extent necessary and the remainder of
such provisions and the remainder of this Agreement shall continue in full force
and effect.
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Raft River Agreement – Page 12
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_________________
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_________________
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Buyer
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Seller
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IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed as of the day and year first above
written.
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U.S. Geothermal, Inc.
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By ____________________________
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Its
President
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Vulcan Power Company
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By ____________________________
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Its
CEO and President
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STATE OF IDAHO
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)
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: ss.
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County of Ada
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)
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On this ______ day of May, 2004, before me,
the undersigned, a Notary Public in and for said state, personally appeared
________________, known or identified to me to be the ________________ of U.S.
Geothermal, Inc., the person who executed the foregoing instrument on behalf
of said corporation, and acknowledged to me that __________ executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year first above written.
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__________________________________________
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Notary Public for Idaho
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Residing at ______________________ , Idaho
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(SEAL)
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My Commission Expires: ____________________
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Raft River Agreement – Page 13
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_________________
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_________________
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Buyer
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Seller
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STATE OF __________
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)
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: ss.
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County of ________
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)
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On this ______ day of May, 2004, before me,
the undersigned, a Notary Public in and for said state, personally appeared
_________ , known or identified to me to be the __________ of Vulcan Power Company,
the person who executed the foregoing instrument on behalf of said corporation,
and acknowledged to me that ___ executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed my official seal the day and year first above written.
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__________________________________________
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Notary Public for Idaho
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Residing at ______________________ , Idaho
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(SEAL)
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My Commission Expires: ____________________
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Raft River Agreement – Page 14
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_________________
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_________________
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Buyer
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Seller
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EXHIBIT
A
Real Property
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Parcel No. 1:
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The Northeast ¼ of the Southeast ¼
of Section 22, the Northwest ¼ of the Southwest ¼ of Section
23, and the East ½ of the Southwest ¼ of Section 23, all
in Township 15 South, Range 26 East, Boise Meridian, Cassia County, Idaho
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Parcel No. 2:
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The Southeast ¼ of the Southeast ¼
of Section 22, and the Southwest ¼ of the Southwest ¼ of
Section 23, all in Township 15 South, Range 26 East of the Boise Meridian,
Cassia County, Idaho,
excepting and reserving therefrom
all dips,
spurs, angles, metals, ores, gold and silver bearing quartz, mineral bearing
rocks and earth therein, and all mineral rights, privileges and franchises
thereof incident, appendant and appurtenant, or therewith usually had
and enjoyed.
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Parcel No. 3:
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The South ½ of the North ½ of Section
25, and the Southeast ¼ of Section 25, all in Township 15 South,
Range 26 East, Boise Meridian, Cassia County, Idaho.
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Geothermal Production, Injection and Monitoring Wells
PRODUCTION WELLS
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RRGE-1
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NE4SE4, Sec. 23, T15S, R26E, B.M.
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IDWR Permit #43-GR-6
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RRGE-3
|
SE4NW4, Sec. 25, T15S, R26E, B.M.
|
IDWR Permit #43-GR-8
|
|
RRGP-4*
|
SE4SW4, Sec. 23, T15S, R26E, B.M.
|
IDWR Permit #43-GR-9
|
|
RRGP-5*
|
NW4SW4, Sec. 23, T15S, R26E, B.M.
|
IDWR Permit #43-GR-10
|
INJECTION WELLS
|
RRGI-6*
|
SE4NE4, Sec. 25, T15S, R26E, B.M.
|
IDWR Permit #43-GR-11
|
|
RRGI-7*
|
NW4NE4, Sec. 25, T15S, R26E, B.M.
|
IDWR Permit #43-GR-12
|
MONITORING WELLS
|
MW-1
|
MW-3
|
MW-5
|
MW-7
|
|
MW-2
|
MW-4
|
MW-6
|
|
*The parties hereto understand and agree that the following
wells are permitted with the state of Idaho under different well numbers but
represent the same wells:
|
Current Well No.
|
Permitted Well No.
|
|
RRGP-4
|
RRGE-4
|
|
RRGP-5
|
RRGE-5
|
|
RRGI-6
|
RRGE-6
|
|
RRGI-7
|
RRGE-7
|
|
|
Raft River Agreement – Page 15
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
Improvements (all dimensions are approximate)
PLANT SITE AND/OR SELLER’S ASSETS REAL PROPERTY:
Pump house – 40’x 30’
Office/shop – 30’x 100’x 50’, including a 15-ton overhead
bridge crane
Office/Control Building – 95’x 50’
Storage tank – 300,000 gallon capacity
Storage ponds – triple lined 2-3 million total capacity
Two sheds
Five underground storage tanks
All pipelines on or in Seller’s Assets Real Property
Pipeline rights, if any, located off Seller’s Assets
WELL SITE 1:
Warehouse building – 40’x 40’x 20’
Office building – 100’x 50’
Well house – 14’x 14’
WELL SITE 3:
Well house – 12’x 14’
WELL SITE 4:
Well house – 10’x 10’
WELL SITE 5:
Well house – 12’x 14’
WELL SITE 6:
Pump house – 14’x 16’ Instrument building – 10’x 12’
WELL SITE 7:
Pump house – 12’x 14’ Instrument building – 10’x 12’
MONITORING WELLS:
Insulated, steel silos on all sites
|
|
Raft River Agreement – Page 16
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
EXHIBIT B
Permits
1) Idaho Department of Water Resources Geothermal Permits:
|
|
Permit No.
|
Well No.
|
|
|
43-GR-6
|
RRGE-1
|
|
|
43-GR-8
|
RRGE-3
|
|
|
43-GR-9
|
RRGP-4
|
|
|
43-GR-10
|
RRGP-5
|
|
|
43-GR-11
|
RRGI-6
|
|
|
43-GR-12
|
RRGI-7
|
|
|
Raft River Agreement – Page 17
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
EXHIBIT C
Work Program
Property expenditures of $200,000 include direct corporate
overhead and expenses associated with the following activities:
Acquisition of adjoining property and Crank well.
Completion of a reservoir test sufficient to use as a basis
for a feasibility study.
Feasibility study.
Negotiation and acquisition of a power purchase agreement,
and Engineering Procurement Construction Management contract.
Political efforts focused on the State of Idaho implementing
a Renewable Portfolio Standard and/or PUC directive for the use of renewable
energy.
Insurance, taxes and other payments required to keep the Property
in good standing.
US Department of Energy Grant
Buyer has applied for and has been notified that it has been
awarded, subject to Congressional funding allocations to be made in the months
ahead, a grant for reimbursement of 80% of the costs associated with the reservoir
test work portion of the Work Program.
|
|
Raft River Agreement – Page 18
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
EXHIBIT D
Anticipated Timetable of Buyer/Seller Actions To Demonstrate Seller’s Assets and Funds Transfers
|
|
Estim ated Date Action To
|
Funds To
|
Stock and W arrant
|
|
Action
|
Be Competed By
|
Vulcan
|
Amounts To Vulcan
|
|
20% Assets Transferred to Buyer
|
11/29/02
|
$54,485.12
|
|
|
|
|
|
|
|
Anticipated Acquisition Closing
|
3/18/03
|
$100,000.00
|
|
|
|
|
|
|
|
Escrow Vulcan:
|
3/18/03
|
|
|
|
Common Stock
|
|
|
33% of 14%
|
|
Warrants @ $0.75
|
|
|
33% of 11%
|
|
|
|
|
|
|
Issue Vulcan:
|
3/21/03
|
|
|
|
Common Stock
|
|
|
67% of 14%
|
|
Warrants @ $0.75
|
|
|
67% of 11%
|
|
|
|
|
|
|
49% Assets Transferred to Buyer
|
3/18/03
|
|
|
|
|
|
|
|
|
Complete
|
|
|
|
|
Feasibility Study
|
3/18/04
|
|
|
|
|
|
|
|
|
Issue $2 Million
|
|
|
|
|
Well Indemnification
|
|
|
|
|
Vulcan Co-Insured
|
6/18/03
|
|
|
|
|
|
|
|
|
Escrow Release To Vulcan:
|
9/18/2005
|
|
|
|
Shares
|
|
|
33% of 14%
|
|
Warrants
|
|
|
33% of 11%
|
|
|
|
|
|
|
Complete Work Program
|
|
|
|
|
at Raft River
|
3/18/2004
|
|
|
|
($200,000)
|
|
|
|
|
|
|
|
|
|
Begin to Construct Power Plant
|
9/18/2005
|
$250,000.00
|
|
|
Transfer 51% Asset to Buyer
|
9/18/2005
|
|
|
|
|
|
|
|
|
Estimated Pubco Share Structure at Acquisition
Closing
|
|
|
|
Basic
|
Warrants
|
Fully Diluted
|
Fully Diluted
|
|
|
Shares
|
Ownership Warrants
|
Price
|
Shares
|
Ownership
|
|
Existing Pubco
|
2,259,452
|
20.5%
|
|
2,259,452
|
14.6%
|
|
Buyer (with Performance Sh
|
5,200,000
|
47.3%
|
|
5,200,000
|
33.6%
|
|
Seller
|
1,540,548
|
14.0% 2,325,000
|
$0.750
|
3,865,548
|
25.0%
|
|
Public Financing
|
2,000,000
|
18.2% 2,140,000
|
$0.875
|
4,140,000
|
26.8%
|
|
Total
|
11,000,000
|
100.0% 4,465,000
|
|
15,465,000
|
100.0%
|
|
|
Raft River Agreement – Page 19
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
EXHIBIT E
Geothermal Interest Within Ten Mile Radius
1.) Crank Lease – encompasses geothermal well RRGE#2 and 160 acres of geothermal rights.
2.) Jensen Lease – encompasses 2,954.75 acres of geothermal rights.
3.) Jensen Investments Lease – encompasses 44.5 acres of surface and geothermal rights
|
|
Raft River Agreement – Page 19
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
Amendment No. 1 to
“Agreement
by and between
U.S. Geothermal Inc.
And Vulcan Power Company”
RECITALS
WHEREAS, Vulcan Power Company, a Colorado corporation (“Seller”),
and U.S. Geothermal Inc., an Idaho corporation (“Buyer”), entered
into that certain “Agreement” dated December 3, 2002, concerning certain
assets in Cassia County, Idaho, including specifically, the assets referred
to by the Agreement in Exhibits A and B (the Seller’s Assets”), and
WHEREAS, Seller and Buyer now desire to amend certain provisions
of Exhibit A and Exhibit B; and
NOW THEREFORE, Buyer and Seller agree to the following:
AGREEMENT TO AMEND
|
1.0
|
Buyer and Seller agree to this Amendment No. 1 to the Agreement effective
on November 15, 2003.
|
|
|
|
|
2.0
|
The parties hereby agree that Exhibit A and Exhibit B of the Agreement
are amended by deleting them in their entirety and replacing them with the
amended Exhibits attached.
|
The parties have hereto executed this agreement effective the date provided
in Section 1.0 above.
|
U.S. Geothermal Inc
|
Vulcan Power Company
|
|
|
|
|
|
|
|
___________________________
|
___________________________
|
|
By:
|
Daniel Kunz
|
By:
|
Stephen Munson
|
|
|
President
|
|
CEO & President
|
|
|
Raft River Agreement – Page 1
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
EXHIBIT A – Amendment No. 1
Real Property
|
Parcel No. 1:
|
The Northeast ¼ of the Southeast ¼ of Section 22, the Northwest
¼ of the Southwest ¼ of Section 23, and the East ½
of the Southwest ¼ of Section 23, all in Township 15 South, Range
11 East, Boise Meridian, Cassia County, Idaho
|
|
|
|
|
Parcel No. 2:
|
The Southeast ¼ of the Southeast ¼ of Section 22, and the
Southwest ¼ of the Southwest ¼ of Section 23, all in Township
15 South, Range 11 East of the Boise Meridian, Cassia County, Idaho,
excepting
and reserving therefrom
all dips, spurs, angles, metals, ores, gold
and silver bearing quartz, mineral bearing rocks and earth therein, and
all mineral rights, privileges and franchises thereof incident, appendant
and appurtenant, or therewith usually had and enjoyed.
|
|
|
|
|
Parcel No. 3:
|
The South ½ of the North ½ of Section 25, and the Southeast
¼ of Section 25, all in Township 15 South, Range 11 East, Boise Meridian,
Cassia County, Idaho.
|
Geothermal Production, Injection and Monitoring Wells
PRODUCTION WELLS
|
RRGE-1
|
NE4SE4, Sec. 23, T15S, R26E, B.M.
|
IDWR Permit #43-GR-19
|
|
RRGE-2
|
NE4NE4, Sec. 23, T15S, R26E, B.M.
|
IDWR Permit #43-GR-20
|
|
RRGE-3
|
SE4NW4, Sec. 25, T15S, R26E, B.M.
|
IDWR Permit #43-GR-21
|
|
RRGP-4*
|
SE4SW4, Sec. 23, T15S, R26E, B.M.
|
IDWR Permit #43-GR-22
|
|
RRGP-5*
|
NW4SW4, Sec. 23, T15S, R26E, B.M.
|
IDWR Permit #43-GR-23
|
INJECTION WELLS
|
RRGI-6*
|
SE4NE4, Sec. 25, T15S, R26E, B.M.
|
IDWR Permit #43-GR-24
|
|
RRGI-7*
|
NW4NE4, Sec. 25, T15S, R26E, B.M.
|
IDWR Permit #43-GR-25
|
MONITORING WELLS
|
MW-1
|
MW-3
|
MW-5
|
MW-7
|
|
MW-2
|
MW-4
|
MW-6
|
|
*The parties hereto understand and agree that the following wells are permitted with the state of Idaho under different well numbers but represent the same wells:
|
|
Current Well No.
|
Permitted Well No.
|
|
|
RRGP-4
|
RRGE-4
|
|
|
RRGP-5
|
RRGE-5
|
|
|
RRGI-6
|
RRGE-6
|
|
|
RRGI-7
|
RRGE-7
|
|
|
Raft River Agreement – Page 2
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
Improvements (all dimensions are approximate)
PLANT SITE AND/OR SELLER’S ASSETS REAL PROPERTY:
Pump house – 40’x 30’
Office/shop – 30’x 100’x 50’, including a 15-ton overhead
bridge crane
Office/Control Building – 95’x 50’
Storage tank – 300,000 gallon capacity
Storage ponds – triple lined 2-3 million total capacity
Two sheds
Five underground storage tanks
All pipelines on or in Seller’s Assets Real Property
Pipeline rights, if any, located off Seller’s Assets
WELL SITE 1:
Warehouse building – 40’x 40’x 20’
Office building – 100’x 50’
Well house – 14’x 14’
WELL SITE 2:
Well house – 10’x10’
Weather Station Building – 12’x14’
WELL SITE 3:
Well house – 12’x 14’
WELL SITE 4:
Well house – 10’x 10’
WELL SITE 5:
Well house – 12’x 14’
WELL SITE 6:
Pump house – 14’x 16’
Instrument building – 10’x 12’
WELL SITE 7:
Pump house – 12’x 14’
|
|
Raft River Agreement – Page 3
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
Instrument building – 10’x 12’
MONITORING WELLS:
Insulated, steel silos on all sites
|
|
Raft River Agreement – Page 4
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
EXHIBIT B – Amendment No.
1
Permits
1) Idaho Department of Water Resources Geothermal Permits:
|
|
Permit No.
|
Well No.
|
|
|
43-GR-19
|
RRGE-1
|
|
|
43-GR-20
|
RRGE-2
|
|
|
43-GR-21
|
RRGE-3
|
|
|
43-GR-22
|
RRGP-4
|
|
|
43-GR-23
|
RRGP-5
|
|
|
43-GR-24
|
RRGI-6
|
|
|
43-GR-25
|
RRGI-7
|
|
|
Raft River Agreement – Page 5
|
|
|
_________________
|
|
_________________
|
|
Buyer
|
|
Seller
|
Amendment No. 2 to
“Agreement
by and between
U.S. Geothermal Inc.
And Vulcan Power Company
RECITALS
WHEREAS, Vulcan Power Company, a Colorado corporation (“Seller”),
and U.S. Geothermal Inc., an Idaho corporation (“Buyer”), entered
into that certain “Agreement” dated December 3, 2002 and amended
November 15, 2003, concerning certain assets in Cassia County, Idaho, including
specifically, the assets referred to by the Agreement in Exhibits A and B (the
Seller’s Assets), and
WHEREAS, Seller and Buyer now desire to amend certain provisions of the Agreement;
and
NOW THEREFORE, Buyer and Seller agree to the following:
AGREEMENT TO AMEND
|
1.0
|
Buyer and Seller agree to this Amendment No. 2 to the Agreement effective
on December 30, 2003.
|
|
2.0
|
The parties hereby agree that paragraph (ii) in Section 1 (b) of the
Agreement be replaced in its entirety as follows:
“(ii) In order to complete the purchase of the
remaining 51% interest in Seller’s Assets, in addition to satisfying
the terms set forth in Section 1(b)(i), above, Buyer shall pay to Seller
$125,000 on or before December 31, 2003. Upon such payment, the deed for
Seller’s remaining interest in Seller’s Assets will be released
from Escrow to Buyer”
|
The parties have hereto executed this agreement effective the date provided
in Section 1.0 above.
|
U. S. Geothermal Inc.
|
Vulcan Power Company
|
|
|
|
|
_____________________
|
_____________________
|
By: Daniel Kunz
CEO
|
By: Stephen Munson
CEO & President
|
LAW OFFICES
CLAUDE V. MARCUS
CRAIG MARCUS
BARRY MARCUS*
GALE M. MERRICK
MICHAEL CHRISTIAN†
TRENT MARCUS
DANIEL R. HARDEE
|
MARCUS, MERRICK, CHRISTIAN
& HARDEE LLP
THE MARCUS LAW BUILDING
737 NORTH 7TH STREET
BOISE, IDAHO 83702-5595
|
TELEPHONE
(208) 342-3563
TELEFAX
(208) 342-2170
|
*Also Admitted to the California State Bar
† Also Admitted to the Washington State Bar
January 8, 2004
Via Facsimile: (303) 629-3450
Marc J. Musyl
Dorsey & Whitney LLP
370 Seventeenth Street
Suite 4700
Denver, CO 80202
Re:
U.S. Geothermal, Inc./Vulcan Power, Inc.
Dear Marc:
This
letter is intended to memorialize the agreement to settle the present dispute
between Vulcan Power Company (“Vulcan”) and U.S. Geothermal, Inc.,
an Idaho corporation (“USGEO”) and U.S. Geothermal, Inc., a Delaware
Corporation (“Pubco”). The terms set forth below are based on a telephone
conversation which I understand took place yesterday between Daniel Kunz and
Steve Munson, each acting in their capacity as authorized representatives of
their respective companies. The terms of the agreement are:
|
|
1.
|
Paragraphs 1(b)(i) and (ii) of the December
3, 2002 Agreement (“the Agreement”) between USGEO and Vulcan
are amended to provide that USGEO may immediately obtain a 75% undivided
interest in the Seller’s Assets (as defined in the Agreement), upon
payment to Vulcan of $125,000, with $100,000 paid as described in the
following sentence and $25,000 paid when Vulcan delivers the materials
described in Section 6, below. USGEO will wire or direct deposit the $100,000
to Vulcan’s account immediately upon receipt of an original copy
of this letter executed by an authorized representative of Vulcan and
an original warranty deed for the undivided 75% interest in the Seller’s
Assets, in the form attached hereto, also executed by an authorized representative
of Vulcan. USGEO will not be authorized to record the warranty deed until
receipt of the wired funds in Vulcan’s account is confirmed. Upon
completion of exchange of the executed letter agreement and payment, Vulcan
and USGEO will execute escrow instructions for the destruction of the
49% deed by the Escrow Agent (Land Title and Escrow Inc. of Burley, ID).
|
|
|
|
|
|
|
2.
|
USGEO’s acquisition of Vulcan’s
remaining interest in the Seller’s Assets will continue to be subject
to the schedule set forth in paragraph 1(b)(ii) of the Agreement, i.e.,
payment of a final $125,000 on or before receipt of project construction
financing.
|
2
|
|
3.
|
Vulcan acknowledges that USGEO has completed
items (A) through (G) of paragraph 1(b)(i) of the Agreement.
|
|
|
|
|
|
|
4.
|
Pubco will use its reasonable best efforts
to file for and complete United States registration of its common shares,
including stock held by Vulcan under the Securities Act of 1933, provided
that the filing will take place no later than 180 days of the date of
this agreement.
|
|
|
|
|
|
|
5.
|
Vulcan waives and releases any and all
claims related to alleged representations from each of USGEO and Pubco
or their representatives regarding: (a) the ability of Pubco stock to
be freely traded on the TSX Venture Exchange; (b) the existence of a buyer
for any Pubco stock or warrants issued to Vulcan, or USGEO’s or Pubco’s
efforts to locate any such buyer; and (c) the amount of time devoted or
to be devoted by Daniel Kunz to USGEO or Pubco business.
|
|
|
|
|
|
|
6.
|
Vulcan will provide to USGEO by January
14, 2004: (a) a board of directors resolution reiterating its consent
to the Agreement, as amended; (b) an originally executed copy of a consent
resolution of the directors of Vulcan in the form attached hereto as Schedule
“A”; (c) an undated and originally executed Direction in connection
with a $30,000 loan in the form attached hereto as Schedule “B”;
(d) an undated originally signed medallion guaranteed share transfer form
in connection with the $30,000 loan in the form attached hereto as Schedule
“C”; (e) an undated originally signed medallion guaranteed warrant
transfer form in connection with the $30,000 loan in the form attached
hereto as Schedule “D”; (f) an undated originally signed certified
copy of a consent resolution of the directors of Vulcan in the form attached
as Schedule “E”; (g) an undated and originally executed Direction
in connection with a $25,000 loan in the form attached hereto as Schedule
“F”; (h) an undated originally signed medallion guaranteed share
transfer form in connection with the $25,000 loan in the form attached
hereto as Schedule “G”; and (i) an undated originally signed
medallion guaranteed warrant transfer form in connection with the $25,000
loan in the form attached hereto as Schedule “H”.
|
|
|
|
|
|
|
7.
|
Both parties wish to conclude the exchange
described in paragraph 1, above, by the close of business tomorrow, January
9, 2004.
|
|
|
|
|
|
|
8.
|
Except as set forth herein, the terms
of the Agreement remain effective.
|
If
these terms accurately reflect the agreement between Mr. Kunz and Mr. Munson
and are acceptable to Vulcan, please have Mr. Munson indicate Vulcan’s
acceptance by signing below in his capacity as Vulcan’s authorized representative.
I have also faxed a copy of this letter, with my signature, to your office.
Very truly yours
MARCUS, MERRICK, CHRISTIAN & HARDEE, L.L.P.
Michael Christian
3
The above terms are accepted and agreed to:
VULCAN POWER COMPANY
By:________________________________
Stephen Munson, its CEO and President
MC:
Schedule “A”
CONSENT RESOLUTION OF THE DIRECTORS OF
VULCAN POWER COMPANY
(the “Company”)
The following resolutions were consented to and adopted in
writing by the undersigned, being all Directors of the Company as of the 18th
day of December, 2003.
I
Merger of U.S. Geothermal Inc. and EverGreen Power Inc.
WHEREAS, effective February 28, 2003, U.S. Cobalt Inc. (“USC”)
entered into a Merger Agreement (the “Merger Agreement”) with EverGreen
Power Inc. (“Subco”), U.S. Geothermal Inc. (“Geo”), and
certain shareholders of Geo, including the Company, with respect to the merger
of Geo with and into Subco (the “Merger”); and
WHEREAS, since that time, certain facts and circumstances
have changed, including, without limitation, changes in the representations
and warranties of Geo and the Principal Geo Shareholders (as defined in the
Merger Agreement) under and changes in the terms of USC’s private placement
as contemplated by the Merger Agreement; and
WHEREAS, in recognition of such changes, the parties to the
Merger Agreement have amended and restated the Merger Agreement as the First
Amended and Restated Merger Agreement (the “First Amendment”), which
the Board has reviewed; and
WHEREAS, the Board has determined that it is in the best interests
of the Company and its shareholders to amend the Merger Agreement and proceed
with the Merger as set forth in the First Amendment; now, therefore
RESOLVED, that the First Amendment be, and all of its terms,
provisions and conditions are, hereby ratified and confirmed in all respects;
and it is
FURTHER RESOLVED, that any and all actions previously taken
by the officers and directors of the Company with respect to the Merger, including,
without limitation, the execution and delivery of the First Amendment be, and
they hereby are, authorized, approved, ratified, and confirmed in all respects.
II
Escrow Agreement
WHEREAS, in accordance with the terms of the First Amendment
and the policies of the TSX Venture Exchange, the Company wishes to enter into
an escrow agreement (the “Escrow Agreement”) upon closing of the Merger
between USC, Pacific Corporate Trust Company and certain shareholders of USC,
including the Company, in respect of the terms of escrow for
2
certain of the securities issued or to be issued to such shareholders,
in the form presented to the Board; now, therefore
RESOLVED, that the Escrow Agreement, in the form presented
to the Board, be and is hereby approved and the officers of the Company, acting
individually or in concert, be and each hereby is authorized to execute the
Escrow Agreement on behalf of the Company under the corporate seal or otherwise,
along with such amendments or modifications to the Escrow Agreement as are considered
necessary or desirable in the discretion of such officer(s).
III
Loans
WHEREAS, on July 18, 2003 the Company borrowed from Geo $30,000
(the “First Loan”), the terms of which were set out in a loan letter
agreement dated July 18, 2003 (the “First Loan Agreement”); and
WHEREAS, on September 18, 2003 the Company borrowed from Geo
$25,000 (the “Second Loan”), the terms of which were set out in a
loan letter agreement dated September 18, 2003 (the “Second Loan Agreement”);
and
WHEREAS, the Company and Geo have agreed to amend the terms
of the First Loan and the Second Loan; now, therefore
RESOLVED, that the borrowing of $30,000 as the First Loan
is hereby ratified and confirmed in all respects; and it is
FURTHER RESOLVED, that the entering into the First Loan Agreement
and an agreement dated December 11, 2003 (the “First Amending Agreement”)
to amend and restate the terms of the First Loan Agreement, both in the form
provided to the Board, are hereby authorized, ratified and confirmed; and it
is
FURTHER RESOLVED, that the execution of the Security Documents
(as defined in the First Amending Agreement) and the granting of security over
80,737 shares and 80,737 warrants as contemplated in the First Amending Agreement
are hereby authorized, ratified and confirmed; and it is
RESOLVED, that the borrowing of $25,000 as the Second Loan
is hereby ratified and confirmed in all respects; and it is
FURTHER RESOLVED, that the entering into the Second Loan Agreement
and an agreement dated December 11, 2003 (the “Second Amendment Agreement”)
to amend and restate the terms of the Second Loan Agreement, both in the form
presented to the Board, are hereby authorized, ratified and confirmed; and it
is
FURTHER RESOLVED, that the execution of the Security Documents
(as defined in the Second Amending Agreement) and the granting of security over
an additional 80,737 shares and 80,737 warrants as contemplated in the Second
Amending Agreement are hereby authorized, ratified and confirmed; and it is
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RESOLVED that Steven Munson be and he is hereby authorized
to sign on behalf of Vulcan Power Company any and all documents and transfer
forms required to sell, assign or transfer 161,474 shares and 161,474 warrants
of U.S. Geothermal Inc. (formerly U.S. Cobalt Inc.) registered in the name of
the Company, and to affix the seal of the Company to all such documents.
IV
Amendment No.
1
WHEREAS, the Company entered into an agreement dated December
3, 2002 with Geo relating to the acquisition by Geo of certain assets from the
Company in Cassia County, Idaho (the “Purchase Agreement”); and
WHEREAS, effective November 15, 2003 the Company and Geo have
agreed to amend the Purchase Agreement as set forth in the Amendment No. 1 to
the Purchase Agreement (“Amendment No. 1”), which the Board has reviewed;
now, therefore
RESOLVED that Amendment No. 1 be, and all of its terms, provisions
and conditions are, hereby ratified and confirmed in all respects.
V
Miscellaneous
RESOLVED, that any one director or officer of the Company
be and is hereby authorized to do all acts and things, to execute, under the
common seal of the Company or otherwise, and to deliver all agreements, documents,
certificates and instruments, to give all notices and to deliver, file and distribute
all documents and information which such person determines to be necessary or
desirable in connection with or to give effect to and carry out the foregoing
resolutions.
FURTHER RESOLVED, that these resolutions may be signed by
directors by facsimile and in as many counterparts as may be necessary, each
of which so signed shall be deemed to be an original, and such counterparts
together shall constitute one and the same instrument and notwithstanding the
date of execution shall be deemed to bear the effective date set forth below.
The undersigned, being all of the directors of the Company
by signature hereunder, consent as of the date set forth to the actions described
and adoption of the resolutions set forth above, and waive any and all notices
required by law or the Company’s articles of incorporation or bylaws.
_______________________________________
Steve Munson, Chairman of the Board & CEO
_______________________________________
George Marshall, Director
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Steve Pitcher, Director
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CORPORATE SEAL
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William Pons, Director
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Corporate Secretary
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Schedule “B”
DIRECTION
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TO:
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U.S. Cobalt Inc.
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Attention: Mr. Doug Glaspey
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AND:
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Pacific Corporate Trust Company
10th Floor, 625 Howe Street
Vancouver, British Columbia, V6C 3B8
Attention: Ms. Sandy Hunter
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Re: US$30,000 Loan from U.S. Geothermal Inc.
to Vulcan Power Company
Reference is made to the proposed acquisition (the “Acquisition”)
by U.S. Cobalt Inc. (“USC”) of U.S. Geothermal Inc. (“Geo”)
as more particularly described in the notice of meeting and information circular
of USC dated February 28, 2003 (the “Circular”).
Pursuant to the Acquisition, USC, Vulcan Power Company, Pacific
Corporate Trust Company (the “Escrow Agent”) and certain others will
enter into an escrow agreement (the “Escrow Agreement”).
Under the Escrow Agreement, shares and warrants of USC issued
to Vulcan on completion of the Acquisition will be held in escrow by the Escrow
Agent and released in accordance with the Escrow Agreement.
We hereby irrevocably authorize and direct USC and the Escrow
Agent to deliver to Geo or such other person as may be directed by Geo 80,737
of the
first
shares and 80,737 of the
first
warrants that are
to be released to Vulcan under the Escrow Agreement after receipt of this direction
by the Escrow Agent.
Upon the Escrow Agent delivering the aforesaid shares and
warrants to Geo or as directed by Geo, Vulcan shall be deemed to have assigned
all of its right, title and interest in and to such shares and warrants , to
Geo or the persons directed by Geo.
This direction is irrevocable and enures to the benefit of
and is binding upon Vulcan and its successors and permitted assigns.
DATED the ________ day of ___________________________, 200____.
VULCAN POWER COMPANY
Per: _________________________________
(Authorized Signatory)
Schedule “C”
SHARE TRANSFER FORM
(Stock Power of Attorney - Shares)
FOR VALUE RECEIVED the undersigned hereby sells, assigns,
and transfers unto _______________________________________ 80,737 common shares
of U.S. Geothermal Inc., formerly known as U.S. Cobalt Inc. (the “Company”)
registered in the name of the undersigned on the books of the Company and irrevocably
constitutes and appoints __________________________________ the attorney of
the undersigned to transfer the said shares on the register of transfers of
the said Company with full power to substitute hereunder.
DATED the ________ day of ___________________________, 2004.
Vulcan Power Company
Per: __________________________________
(Authorized Signatory)
Schedule “D”
SHARE TRANSFER FORM
(Stock Power of Attorney - Warrants)
FOR VALUE RECEIVED the undersigned hereby sells, assigns,
and transfers unto _______________________________________ 80,737 warrants of
U.S. Geothermal Inc., formerly known as U.S. Cobalt Inc. (the “Company”)
registered in the name of the undersigned on the books of the Company and irrevocably
constitutes and appoints _______________________________________ the attorney
of the undersigned to transfer the said warrants on the register of transfers
of the said Company with full power to substitute hereunder.
DATED the ________ day of ___________________________, 2004.
Vulcan Power Company
Per: __________________________________
(Authorized Signatory)
Schedule “E”
Certified Copy of Directors’ Resolutions
I, the undersigned, being the Chief Executive Officer of Vulcan
Power Company (the “Company”), hereby certify the following resolution
to be a true copy of a resolution of the Directors of the Company duly passed
by resolution in writing dated as of the 18th day of December, 2003, and that
the same is still in full force and effect and has not been rescinded as at
the date hereof.
“
Transfer to U.S. Geothermal Inc.
BE IT RESOLVED that Steven Munson be and he is hereby authorized
to sign on behalf of Vulcan Power Company any and all documents and transfer
forms required to sell, assign or transfer 161,474 shares and 161,474 warrants
of U.S. Geothermal Inc. (formerly U.S. Cobalt Inc.) registered in the name of
the Company, and to affix the seal of the Company to all such documents.”
Certified a true copy this ______ day of ________________ , 200 ______ .
________________________________________
Steve Munson
Director and Chief Executive Officer
Schedule “F”
DIRECTION
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TO:
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U.S. Cobalt Inc.
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Attention: Mr. Doug Glaspey
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AND:
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Pacific Corporate Trust Company
10th Floor, 625 Howe Street
Vancouver, British Columbia, V6C 3B8
Attention: Ms. Sandy Hunter
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Re: US$25,000 Loan from U.S. Geothermal
Inc. to Vulcan Power Company
Reference is made to the proposed acquisition (the “Acquisition”)
by U.S. Cobalt Inc. (“USC”) of U.S. Geothermal Inc. (“Geo”)
as more particularly described in the notice of meeting and information circular
of USC dated February 28, 2003 (the “Circular”).
Pursuant to the Acquisition, USC, Vulcan Power Company, Pacific
Corporate Trust Company (the “Escrow Agent”) and certain others will
enter into an escrow agreement (the “Escrow Agreement”).
Under the Escrow Agreement, shares and warrants of USC issued
to Vulcan on completion of the Acquisition will be held in escrow by the Escrow
Agent and released in accordance with the Escrow Agreement.
We hereby irrevocably authorize and direct USC and the Escrow
Agent to deliver to Geo or such other person as may be directed by Geo 80,737
of the
first
shares and 80,737 of the
first
warrants that are
to be released to Vulcan under the Escrow Agreement after receipt of this direction
by the Escrow Agent.
Upon the Escrow Agent delivering the aforesaid shares and
warrants to Geo or as directed by Geo, Vulcan shall be deemed to have assigned
all of its right, title and interest in and to such shares and warrants , to
Geo or the persons directed by Geo.
This direction is irrevocable and enures to the benefit of
and is binding upon Vulcan and its successors and permitted assigns.
Dated this day of , 200____.
VULCAN POWER COMPANY
Per: _________________________________
(Authorized Signatory)
Schedule “G”
SHARE TRANSFER FORM
(Stock Power of Attorney - Shares)
FOR VALUE RECEIVED the undersigned hereby sells, assigns,
and transfers unto ________________________________________ 80,737 common shares
of U.S. Geothermal Inc., formerly known as U.S. Cobalt Inc. (the “Company”)
registered in the name of the undersigned on the books of the Company and irrevocably
constitutes and appoints _______________________________ the attorney of the
undersigned to transfer the said shares on the register of transfers of the
said Company with full power to substitute hereunder.
DATED the ________ day of ___________________________, 2004.
Vulcan Power Company
Per: __________________________________
(Authorized Signatory)
Schedule “H”
SHARE TRANSFER FORM
(Stock Power of Attorney - Warrants)
FOR VALUE RECEIVED the undersigned hereby sells, assigns,
and transfers unto ________________________________________ 80,737 warrants
of U.S. Geothermal Inc., formerly known as U.S. Cobalt Inc. (the “Company”)
registered in the name of the undersigned on the books of the Company and irrevocably
constitutes and appoints ________________________________________ the attorney
of the undersigned to transfer the said warrants on the register of transfers
of the said Company with full power to substitute hereunder.
DATED the ________ day of ___________________________, 2004.
Vulcan Power Company
Per: __________________________________
(Authorized Signatory)
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RECORDING REQUESTED BY
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WHEN
RECORDED MAIL TO
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SPACE
ABOVE THIS LINE FOR RECORDER’S USE
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RAFT RIVER
GEOTHERMAL LEASE AND AGREEMENT
THIS
GEOTHERMAL LEASE AND AGREEMENT, (herein sometimes referred to as “Lease”)
made and entered as of the 14th day of June, 2002 by and between Sergene Jensen,
Personal Representative of the Estate of Harlan B. Jensen hereinafter referred
to as “Lessor”, whether one or more, and U.S. GEOTHERMAL Inc., an
Idaho corporation, hereinafter referred to as “Lessee”;
WITNESSETH:
1. That
Lessor, for and in consideration of Ten Dollars ($10.00) in hand paid to Lessor
by Lessee, the rentals provided for hereinafter, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
in consideration of the covenants and agreements hereinafter contained has granted,
leased, let and demised and by these presents does grant, lease, let and demise
exclusively to Lessee, its grantees, successors and assigns, upon and subject
to the terms and conditions hereinafter set forth, all that certain land, geothermal
and mineral rights for real property located in the County of CASSIA, State
of IDAHO, more particularly described in Exhibit “A” attached hereto
and by this reference made a part hereof (hereinafter referred to as the “leased
rights” ), including all roads, streets, alleys, easements and rights of
way owned or claimed by Lessor, on, within, or adjoining the lands above described.
This Lease shall cover all the interest in the leased rights now owned or hereafter
acquired by Lessor.
By the use of such methods as Lessee may desire, Lessee, and
its designated representatives, shall have the sole and exclusive right to utilize
the leased rights, including but not limited to the right to explore for, drill
for, test, develop, operate, produce, extract, take, remove or sell Hot Water,
Steam and Thermal Energy and Extractable Minerals, and to store, utilize, process,
convert and otherwise treat such Hot Water, Steam and Thermal Energy, and to
extract any Extractable Minerals during the term hereof and to transport same,
and to inject or reinject effluents into the well or any wells drilled pursuant
to the leased rights; or inject water, gas or other fluid or substances by artificial
means into formations containing Hot Water, Steam or Thermal Energy. Further,
Lessee, its designated representatives and anyone purchasing Leased Substances
(as hereinafter defined) from Lessee are hereby granted the use of any easements
owned by Lessor across said land, to the full extent of any such rights held
by Lessor. In the event this Lease should terminate with respect to a portion
of the rights granted Lessee, it shall nevertheless continue in full force and
effect to any rights of way and any easements appurtenant thereto that are being
used from time to time when such termination occurs and shall continue in effect
so long as such rights of way and easements or any of them continue to be used
from time to time for the purposes above described or for the production and
utilization of Geothermal Resources from lands in the vicinity thereof by Lessee,
its designated representatives, or anyone who has purchased, or is purchasing,
Leased Substances from Lessee, their successors and assigns. The possession
by Lessee of the leased rights shall be sole and exclusive for the purposes
hereof and for purposes incident or related thereto. Lessee agrees to conduct
its activities in a manner which will not unreasonably interfere with any rights
reserved to Lessor.
1
2. This
Lease shall be for a term of ten (10) years from and after the date hereof (hereinafter
referred to as the “Primary Term”) and so long thereafter as Leased
Substances, or any of them, are derived or produced in commercial quantities
from the well or through the leased rights, or lands, rights or facilities pooled,
unitized or combined therewith, and for so long as Lessee is prevented from
producing same, or the obligations of Lessee hereunder are suspended, for the
causes hereinafter set forth, or this Lease is continued in force by reason
of any other provision hereof.
If
at the expiration of the Primary Term, Lessee is then engaged in operations
for drilling, reworking, recompleting, redrilling or enhancement of the well,
or any well developed in exercise of the leased rights, or any well on or lands
pooled, unitized or combined therewith, this Lease shall remain in force so
long as any such drilling, reworking, recompleting, redrilling or enhancement
operations are prosecuted (whether on the same or different wells) with no cessation
of such operations for more than six (6) months, and if such operations result
in production or the establishment to the satisfaction of the Lessee of the
existence of Sufficient Power Potential or Extractable Minerals in Commercial
quantities, such well or wells will be deemed to have been completed during
the primary term of this Lease.
3.
It is understood and agreed that the initial consideration paid upon the execution
hereof, covers both the rental in full hereunder for a period of one (1) year
from the date of this Lease and for all other rights conferred hereunder. Thereafter,
for the first five (5) years of the lease, on or before said anniversary date,
Lessee shall pay or tender to Lessor an annual rental in the amount of
TWO
AND ONE-HALF DOLLARS ($2.50)
per acre, which shall constitute rental until
the next anniversary date hereof. For the second five (5) year period of the
lease, Lessee shall, on or before each succeeding anniversary date during the
Primary Term hereunder, pay or tender to Lessor an annual rental in the amount
of
THREE AND NO/100 DOLLARS ($3.00) per acre
, until such time as from
the drilling of a well or wells on the leased land, or lands pooled, unitized
or combined therewith, there has been established to the satisfaction of the
Lessee the existence of Sufficient Power Potential or Extractable Minerals in
Commercial quantities. Upon such establishing as aforesaid, Lessee may nevertheless
continue to pay or tender annual rental payments on or before each anniversary
date, until Lessee has commenced the actual sale of one or more Leased Substances,
and so long as such annual rental payments to be paid or tendered, whether beyond
the Primary Term or not, this lease shall remain in force and effect. All payments
so paid or tendered after the expiration of said Primary Term shall be deemed
advance royalties. Lessee shall have the right to reimburse itself for any such
payments of one-half (1/2) of any royalties which shall thereafter become payable
hereunder. So long as such payments are paid or tendered each well or wells
shall be deemed to be actually producing one or more Leased Substances in Commercial
Quantities under the terms hereof; provided, however, that if within five (5)
years after the date of expiration of the Primary Term hereof Lessee shall have
failed to make, or make arrangements for (by executed contract or contracts)
a bona fide Commercial sale of one or more Leased Substances (or electric energy
generated therefrom) then Lessor, at its option, may consider Lessee in default
hereunder. Additionally, should Lessee fail to make any annual payment herein
provided for on or before a particular anniversary date, Lessor may, at its
option, consider Lessee in default hereunder.
4. Lessee
shall conduct all work in compliance with the applicable laws and regulations
of the state of Idaho and the United States of America. Lessee shall be fully
responsible for compliance with all applicable Federal, state, and local statutes,
regulations, and ordinances relating to such work, and for reclamation bonding
and any bonding required for geothermal wells. Lessor agrees to cooperate with
Lessee in Lessee’s application for governmental licenses, permits, and
approvals, all costs of which shall be borne by Lessee.
Lessee
shall, upon written request of Lessor or the owner of the land upon which the
well is located or with which the leased rights are associated, fence all excavations
(including sumps and settling ponds), and, upon the termination of the Lease,
Lessee shall level and fill all sump holes and excavations, shall remove all
debris and shall leave the locations or premises used by Lessee in a clean and
sanitary condition.
Lessee
shall replace all fences which the Lessee may have removed for its purposes
and repair all fences which Lessee may have damaged, and if and when so required
by the Lessor, will provide a proper livestock guard at any point of entry upon
lands used by Lessee.
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Lessee
shall protect Lessor’s interest in the leased rights against liens of every
character arising from its operations thereon. Lessee, at its own expense, prior
to commencing operations pursuant to the leased rights, shall obtain, and thereafter
while this Lease is in effect shall maintain, adequate Workers Compensation
Insurance. Lessee shall protect Lessor against damages of every kind and character
arising out of the operations or working of Lessee or those under Lessee’s
control pursuant to the leased rights, but Lessee shall not be liable hereunder
in the event of the negligence or willful misconduct of parties other than Lessee.
5. Royalties shall be payable as follows:
(a) With respect
to Hot Water, Steam or Thermal Energy (collectively to be referred to as “Energy
Produced”) produced, saved and sold by Lessee and then used by the purchaser
for the generation of electric power, Lessee shall pay to Lessor as royalty
Ten Percent (10%) of the market value of such Hot Water, Steam or Thermal Energy
produced from the well or in exercise of the leased rights at and as of the
point of origin on the land associated with the well or the leased rights, which
market value shall be deemed to be the gross proceeds received by Lessee from
such sale at the point of origin, unless the sale occurs at a location other
than the point of origin, in which case the market value shall be deemed to
be the gross proceeds received by lessee from such sale less all costs and expenses
of processing and transportation between the point of origin and the point of
sale.
(b) With respect
to Hot Water, Steam or Thermal Energy produced, saved and used for the generation
of electric power which is then sold by Lessee, Lessee shall pay to Lessor as
royalty Ten Percent (10%) of the Net Proceeds in accordance with the definition
of Net Proceeds in paragraph 19, subparagraph (h).
(c) With respect
to Energy Produced, saved and sold by Lessee and which is used for any purpose
other than the generation of electric power, Lessee shall pay to Lessor as royalty
Five Percent (5%) of the gross proceeds received by Lessee from the sale of
Energy Produced, as such, produced from the well or in exercise of the leased
rights at and as of the point of origin on the land associated with the well
or the leased rights.
(d) With respect
to Extractable Minerals, Lessee shall pay as royalty to Lessor Five Percent
(5%) of the net proceeds received by Lessee from the sale of any gases (as herein
defined) and from the sale of effluents (containing minerals and/or minerals
in solution) produced and sold from the well or in exercise of the leased rights,
or, in the event Lessee extracts from the effluents minerals and/or minerals
in solution, Five Percent (5%) of the proceeds received by Lessee from the sale
of minerals and/or minerals in solution contained in and extracted from such
effluents less costs of transportation and extraction. If Lessee consumes Leased
Substances or electric power generated therefrom, by either use or exchange,
for purposes other than its operations with respect to the well or the leased
rights, then such Leased Substances or electric power generated therefrom shall
be deemed sold for royalty purposes and the above-described royalty shall be
paid on the same value basis as if such Leased substances or electric power
generated therefrom had been sold by Lessee at the time of production under
Lessee’s then existing sales contract.
Lessee
shall pay to Lessor on or before the twenty-fifth day of each month the royalties
accrued and payable for the preceding calendar month, or on or before the twenty-fifth
day of the month next following that in which Lessee receives payment therefor
from the purchaser thereof, whichever method may be chosen by Lessee from time
to time, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.
Lessee
shall not be required to account to Lessor for or to pay any royalty on Hot
Water, Steam, Thermal Energy or Extractable Minerals produced by Lessee which
is not utilized, saved and sold, or which is used by Lessee in its operations
with respect to the well or the leased rights for or in connection with the
developing, recovering, producing, extracting and/or processing of Hot Water,
Steam, Thermal Energy and/or minerals in solution or in facilities for the generation
of electric power, or which are unavoidably lost.
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Lessee
shall have the right from time to time and at any time to commingle (for purposes
of storing, transporting, utilizing, selling and processing, or any of them)
the Leased Substances, or any of them, that are produced or extracted from the
well or in exercise of the leased rights or lands pooled, unitized or combined
therewith, with Geothermal Resources, or any of them, produced from other lands
or units in the vicinity of the well or the land associated with the leased
rights, and in the event of such commingling, Lessee shall meter, gauge, or
measure the production from the well or in exercise of the leased rights, or
from the unit or units, including leased and other units or lands, as the case
may be, and compute and pay Lessor’s royalty payable under the provisions
hereof on the basis of such production so determined or allocated, as the case
may be.
6. Lessee
shall have the right to drill such well or wells as Lessee may deem desirable
for the exercise of the leased rights, including wells for injection or reinjection
purposes, and shall have the further right to dispose in any such wells waste
brine, water and other substances, waste products from a well or wells, power
plants or other facilities. Lessee shall further have the right for testing
purposes, to freely transfer Leased Substances and Geothermal Resources and
to inject such leased Substances and Geothermal Resources into well or into
any wells developed pursuant to the leased rights.
7. Lessee
may, at any time or from time to time, as a recurring right for drilling, development,
production or operating purposes, pool, unitize or combine all or any part of
the leased rights into a unit with any other land or lands or lease or leases
(whether held by Lessee or others) adjacent, adjoining or in the immediate vicinity
of the land on which the well is located or with which the leased rights are
associated, which Lessee desires to develop or operate as a unit, provided that
the total acreage to be embraced within any such drilling, development, production,
or operating unit shall no exceed one thousand nine hundred twenty (1,920) acres,
plus an acreage tolerance of Ten Percent (10%), except that a larger unit may
be created to conform to State or Federal regulations. Such unit shall be deemed
created either upon Lessee recording in the office of the county recorder a
written declaration of such unit or upon Lessee giving written notice of such
unit to Lessor. 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 in exercise of the leased rights, and Lessee shall
have the same rights and obligations with respect thereto and to drilling and
producing operations upon the lands from time to time included within any such
unit as provided under this Lease provided, however, that notwithstanding this
or any other provision or provisions of this Lease to the contrary:
(a) Production
as to which royalty is payable from any such well or wells drilled upon any
such unit, whether located upon the leased rights or other lands, shall be allocated
to the well and leased rights in the proportion that the acres of geothermal
rights associated with the leased rights bears to the total geothermal acreage
of such unit, and such allocated portion thereof shall for all purposes of this
Lease be considered as having been produced pursuant to the leased rights and
the royalty payable under this Lease shall be payable only upon that proportion
of such production so allocated thereto, and
(b) If
any taxes of any kind are levied or assessed (other than taxes on the land and
on Lessor’s improvements), any portion of which is chargeable to Lessor
under Paragraph 14 hereof, then the share of such taxes to be borne by Lessor
as provided in the Lease, shall be in proportion to the share of the production
from such unit allocated to the well and leased rights.
Allocation
of unit production whether to the well and the leased rights or to other lands
in the unit, shall continue after any termination of all or any part of this
or any other lease covering lands in the unit until any exploration, drilling,
remedial drilling or production operations are begun on the lands so terminated,
or until contracts regarding any such operations are entered into, whereupon
all such terminated lands shall be excluded in the production to be allocated
to the respective lands in such unit. In the event of the failure of Lessor’s,
or any other owner’s, title as to any portion of the rights or land included
in any such unit, such portion of such land or associated land shall likewise
be excluded in allocating production from such unit, provided, however, Lessee
shall not be held to account for any production allocated to any lands excluded
from any such operating unit unless and until Lessee has actual knowledge of
the circumstances requiring such
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exclusion. Any exclusion shall be deemed
effective the first day of the month next following the date upon which such
exclusion becomes finally established.
Lessee
may, at its sole option, at any time when there is no Commercial production
in such unit, terminate, enlarge or diminish such unit either by Lessee recording
in the office of the county recorder a written declaration thereof, or by Lessee
giving written notice thereof to Lessor.
8. Lessor,
or its agents, at Lessor’s sole cost and risk, may during normal hours
of operation examine the any working, installations, structures, or operations
of Lessee constructed or undertaken pursuant to the leased rights, and may at
reasonable times inspect the books and records of Lessee with respect to matters
pertaining to the payment of royalties to Lessor.
9. Upon
the violation of any of the terms and conditions of this Lease by Lessee (including
but not limited to payment of rental, advance royalty and/or royalty) and the
failure of Lessee, as to monetary matters, to make payment, and as to other
violations, to begin in good faith to remedy the same, within sixty (60) days
after written notice from Lessor so to do, specifying in said notice the nature
of such default, then at the option of Lessor this Lease shall forthwith cease
and terminate and all rights of Lessee in and to the well and the leased rights
shall be at an end, except for each and any well then being drilled, or capable
of producing, or capable of being used for injection purposes, and in respect
to which Lessee shall not be in default, together with the rights, rights of
way and easements which may be retained by Lessee by virtue of the granting
clause of this Lease.
10. Notwithstanding
any other provisions of this Lease, and in consideration of the payment made
by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
the right at any time prior to or after default hereunder, to quitclaim and
surrender to Lessor all right, title and interest of Lessee in and to the well
and the leased rights, and thereupon all rights and obligations of the parties
hereto one to the other shall cease and terminate, save and except as to any
then accrued royalty obligations of Lessee then payable as to which Lessee shall
remain liable to Lessor, and save and except the rights, rights of way and easements
which may be retained by Lessee by virtue of the granting clause of this Lease.
11. Notwithstanding
any other provisions of this Lease, and in consideration of the payment made
by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
the right at any time prior to or after default hereunder, to quitclaim and
surrender to Lessor all right, title and interest of Lessee in and to the leased
rights, or any part thereof, and thereupon all rights and obligations of the
parties hereto one to the other shall cease and terminate as to the lands or
areas so quitclaimed and surrendered, save and except as to any then accrued
royalty obligations of Lessee then payable as to which Lessee shall remain liable
to Lessor, and save and except the rights, rights of way and easements which
may be retained by Lessee by virtue of the granting clause of this Lease and
paragraph 8, provided that in the event of a partial quitclaim and surrender,
any future rentals will be reduced proportionately by the number of acres so
quitclaimed and surrendered.
12. In
the event Lessor at the time of making this Lease owns an interest in the leased
land less than One Hundred Percent (100%) of the right, title and interest purportedly
granted or leased hereby to Lessee, then any payments due Lessor hereunder shall
be paid to Lessor only in the proportion which Lessor’s Interest bears
to a One Hundred Percent (100%) interest in the leased land. Notwithstanding
the foregoing, should Lessor hereafter acquire any additional right, title or
interest in or to the leased land, it shall be subject to the provisions hereof
to the same extent as if owned by Lessor at the date hereof, and any increase
in payments of money hereunder necessitated thereby shall commence with the
payment next following receipt by Lessee of satisfactory evidence of Lessor’s
acquisition of such additional interest. In the event Lessor has no interest
in the Leased Substances produced hereunder, but has an interest in said land,
Lessee shall pay Lessor an overriding royalty of One Percent (1%) of the Net
Proceeds received by Lessee from the sale of Leased Substances produced from
the leased land, as rental for the surface thereof.
13. Lessor
hereby warrants and agrees to defend title to the leased rights and agrees that
Lessee, at its option, may pay and discharge any taxes, mortgages, trust deeds
or other liens or encumbrances existing, levied or assessed on or against the
well or the leased rights, and in the event Lessee exercises such option, Lessee
shall be
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subrogated to the rights of any holder thereof, and shall
have, among other rights, the right of applying to the discharge of any such
mortgage, tax or other lien or encumbrance any payments accruing to Lessor hereunder.
14.
Lessee shall pay all taxes levied on structures and improvements constructed
by Lessee pursuant to this Lease. In the event any taxes are levied or assessed
against the right to produce Leased Substances, or against any Leased Substances
on or in the land associated with the well or the leased rights, or in the event
any increase in the taxes levied or assessed against the well or the leased
rights shall be based upon the production of Leased Substances from, or reserves
of Leased Substances attributed to, the well or the lease rights, then in either
such event Lessee shall pay Ninety Percent (90%) of any such taxes or increase,
as the case may be, and Lessor shall pay Ten (10%) thereof. Lessor shall pay
all taxes levied and assessed against all structures and improvements owned
by Lessor or placed by or pursuant to permission of Lessor.
15. The
rights of either party hereunder may be assigned in whole or in part, and the
right and privilege to do so is hereby reserved by each party, and the provisions
hereof shall extend to the heirs, personal representatives, successors and assigns
of the parties hereto, but no change or division in ownership of the well, rights,
rentals or royalties, however accomplished, shall operate to enlarge the obligations
or diminish the rights of Lessee, and no such change in ownership shall be binding
upon Lessee until the expiration of thirty (30) days after Lessee is furnished
with written notice of such transfer or assignment, together with a certified
copy of the instruments of transfer or assignment. In the event of assignment
of this lease as to a segregated portion of the leased right, the rentals payable
hereunder shall be apportionable between the several leasehold owners ratably
according to the surface area of each, and default in rental payment by one
shall not affect the rights of other leasehold owners hereunder. Lessee’s
right of assignment expressly includes the right to sublease all or any portion
of its rights and obligations hereunder. Lessee must notify the Lessor, in writing,
within 30 days of any assignment.
16. The
obligation of the Lessee hereunder shall be suspended and the terms of this
Lease shall be extended as the case may be, while Lessee is prevented from complying
therewith, in whole or in part, by strikes, lockouts, riots, war or the results
thereof, acts of God or the elements, fire, flood, accidents, delays in transportation,
inability to secure labor or material in the open market, laws, orders, rules,
or regulations of Federal, State, County, Municipal, or other governmental agencies,
authority, or representative, or any other matter or condition beyond reasonable
control of Lessee, whether or not similar to the conditions or matters herein
specifically enumerated, or while litigation contesting Lessor’s title
to the well or the leased rights or the rights granted Lessee hereunder or litigation
involving Lessee’s operations hereunder shall be pending and undetermined
or during any period when Lessee has no market for the products it is then capable
of producing from the leased rights or the market price then available for such
products will not produce an acceptable profit. For so long as any of the above
circumstances continue to exist, Lessee, without impairment of its rights hereunder,
shall be excused from performance of al obligations hereunder except payment
of taxes and protection of the leased rights. It is expressly agreed that the
prevention of settlement of any litigation or strike or labor disturbance shall
not be considered a matter subject to Lessee’s control within the meaning
of this Paragraph.
If
the permission of approval of any governmental agency is necessary before drilling
or producing operations may be commenced pursuant to the leased rights, then
if such permission or approval has been applied for at least thirty (30) days
prior to the date upon which such operations much be commenced under the terms
hereof, the obligation to commence such operations shall be suspended until
ninety (90) days after the governmental permit is granted or approval given,
of if such permit or approval is denied initially, then so long as Lessee in
good faith appeals from such denial or conducts further proceedings in an attempt
to secure such permit or approval and ninety (90) days thereafter. Lessor agrees
to fully support and cooperate with Lessee in securing permits and authorizations
to conduct geothermal operations on the leased rights, all costs of which shall
be borne by Lessee.
17. All
statements of production and royalty and all payments to be made by Lessee to
Lessor hereunder shall be sent to the person hereinafter set forth, at the address
indicated:
Lessee
shall, upon written notification of change of ownership in the well or leased
rights or in the rentals or royalties hereunder, as provided in Paragraph 12
hereof, divide and distribute the same to the new owners of
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such interest; provided, however, that if at any time there
are three or more persons entitled to rentals or royalties hereunder, Lessee
may, at its option, withhold payment of such rentals or royalties until a majority
in interest of such persons designate in writing in a recordable instrument
delivered to Lessee, a bank, trust company or corporation, as a common agent
and depositary, to receive all payments due hereunder to such persons. Such
designation may be changed at any time in the same manner. Delivery of all statements
and payments hereunder may be made by depositing same in the United States mail
duly addressed to Lessor at the above address or addresses or to such agent
and depositary, which shall constitute full performance of Lessee’s obligation
to make such delivery. In the event that the amount payable under this Lease
shall result in a payment of less than Twenty-Five dollars ($25.00) becoming
due Lessor, Lessee may, at is option, withhold and accrue sufficient periodic
payments until the total due Lessor exceeds Twenty-Five Dollars ($25.00).
18. Any notice herein required or permitted
to be given or furnished by one party to the other shall be in writing. Delivery
of such written notice to Lessor shall be made by deposition the same in the
United States mail duly certified and addressed to Lessor at 7 River Run Drive,
Burley , Idaho 83318 and delivery of such written notice to Lessee shall be
made by depositing the same in the United States mail duly certified or delivered
by express delivery and addressed to Lessee at 3392 Maze Avenue, Boise, Idaho
83706. Either party hereto may by written notice to the other party change its
address to any other location.
19. For the purposes of this Lease the following
definitions shall apply:
(a) The terms “Hot
Water”, “Steam” and “Thermal Energy”, collectively
referred to as “Energy Produced”, each shall mean natural geothermal
water and/or steam, and shall also mean the natural heat of the earth and the
energy present in, resulting from or created by, or which may be extracted from,
the natural heat of the earth or the heat present below the surface of the earth,
in whatever form such heat or energy naturally occurs;
(b) The term “Extractable
Minerals” shall mean any minerals in solution in the well effluents and
all minerals and gases produced from or by means of the well or any well or
wells developed in exercise of the leased rights or by means of condensing steam
or processing water produced from the effluents from any such well or wells.
Said terms shall also include any water so produced or obtained from condensation
or steam; provided, however, that the term “gases” shall not include
hydrocarbon gases that can be produced separately from the well effluents;
(c) The term “Leased
Substances” shall collectively man the matter, substances and resources
defined in subparagraphs 16(a) and 16(b) that are subject to this Lease;
(d) The term “Geothermal
Resources” shall collectively mean the matter, substances and resources
defined in subparagraph 16(a) and 16(b) that are not subject to this Lease but
are located on adjacent land or lands in reasonable proximity thereto;
(e) The term “Power
Potential” shall mean, when used herein with respect to any well or wells,
the quantity, or units, of energy capable of being recovered from the Hot Water,
Steam or Thermal Energy produced therefrom by means of any energy conversion
or utilization facility (including, but not limited to, electrical generating
facilities) or equipment designed for use thereof;
(f) The term “Sufficient
Power Potential” shall mean that Power Potential which, in the sole judgment
of Lessee shall be sufficient for the Commercial sale or utilization thereof,
or shall warrant the construction of facilities for the Commercial sale or other
utilization thereof, or shall justify additional drilling or other operations
in exercise of the leased rights;
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(g) The
term “Commercial” shall mean those qualities of Leased Substances
produced, sold or used, the value of which, after determining Lessee’s
direct operating costs (or extraction costs in the case of Extractable Minerals)
will be capable of providing a sufficient return to cause Lessee, in its sole
judgment, to continue production thereof or to elect to proceed with further
development or exploratory operations in exercise of the leased rights.
(h) The
term “Net Proceeds” is defined as proceeds from the sale of generated
electric power to a third party, independent of the Lessor or Lessee, less deductions
of the sum of direct operating costs, property taxes, franchise taxes, marketing
expenses and the depreciation of production wells, pipelines, production facilities,
power generation and power lines through to the sales delivery point. Depreciation
shall be on a fifteen (15) year straight-line basis with asset capitalization
in accordance with generally accepted accounting principles. Electric power
is computed and paid for on the basis of kilowatt- hours (“Kwh”) and
the royalty shall be calculated on a basis of cents per Kwh.
20. 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, 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 being specifically understood and agreed that the provisions
hereof are severable for the purposes of the provisions of this clause. In this
connection, this Lease shall not in any event extend beyond such term as may
be legally permissible under present applicable laws, and should be any such
applicable law limit the term hereof to less than that herein provided, then
this Lease shall not be void but shall be deemed to be in existence for such
term and no longer.
21. If
more than one person is named as Lessor herein and one or more of them fails
to execute this Lease, said Lease shall nevertheless (when accepted by Lessee)
become effective as a lease from such of said named parties Lessor as may have
executed the same.
22. 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.
23. This
Geothermal Lease and Agreement and all of the terms, covenants and conditions
hereof shall extend to the benefit of and be binding upon the respective heirs,
personal representatives, successors and assigns of the parties hereto.
IN
WITNESS WHEREOF, the parties have caused this instrument to be duly executed
as of the date hereinabove first written.
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Social Security Number
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Sergene Jensen,
Personal Representative
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Lessor
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By:
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Douglas J. Glaspey, CEO & Director
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Lessee
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State of Idaho
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On this _____ day of June 2002, before me,
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County of ________________________________________
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the undersigned Notary Public, personally appeared
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( ) personally
known to me
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( ) proved to me on the basis of satisfactory
evidence to be the person(s) whole name(s) ______________________________
subscribed to the within instrument, and acknowledged that ___________________________________________
executed it.
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WITNESS my hand and official seal.
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Notary’s
Signature
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State of Idaho
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On this _____ day of June 2002, before me,
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County of ________________________________________
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the undersigned Notary Public, personally appeared
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( ) personally
known to me
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( ) proved to me on the basis of satisfactory
evidence to be the person(s) whole name(s) ______________________________
subscribed to the within instrument, and acknowledged that ___________________________________________
executed it.
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WITNESS my hand and official seal.
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Notary’s
Signature
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9
EXHIBIT A
Parcel No. 1 – 961.16 acres more or less:
Township 15 South, Range 26 East, Boise Meridian
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Section 24:
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S½ NW¼, NE¼NE¼, S½NE¼,
SE¼, NE¼SW¼, LESS a 3 rod right-of-way over the West
side of the SW¼SE¼ for ingress and egress and ditch purposes.
Tax No. 2194 being the North 3 rods of the SE ¼SW¼ .
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Section 25:
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N½NE¼
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Township 15 South, Range 27 East, Boise Meridian
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Section 18:
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All of Lot 4 (SW¼SW¼) EXCEPT the North 2 rods
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Section 19:
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Part of the SW¼NE¼ described as follows:
Beginning at the SW corner of said SW¼NE ¼ ; thence East
440 feet along the South boundary line of said SW¼NE¼ to
the True Point of Beginning; thence continuing East 880 feet to the SE
corner of said SW¼NE¼; thence North 1320 feet along the
East boundary line of said SW¼NE¼ to the NE corner of said
SW¼NE¼; thence West along the North boundary line of said
SW¼NE¼ 880 feet to a point; thence South 1320 feet to the
True Point of Beginning.
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SE¼, SE¼NE¼, Lots 1, 2, and
3 LESS a 3 rod right-of-way along the East side of Lots 2 and 3.
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ALSO LESS part of the W½SE¼ described
as follows: Beginning at the SW corner of the W½SE¼ of said
Section 19; thence East 440 feet along the South line of said W½SE¼
to a point; thence North 2640 feet to the North line of said W½SE¼;
thence West 440 feet along the North line of said W½SE¼
to the NW corner of said W½SE¼; thence south 2640 feet along
the West boundary line of said W½SE¼ to the Point of Beginning.
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Section 29:
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W½NW¼
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Section 30:
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NE¼NE¼
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Parcel No. 2 – 167.92 acres more or less
Township 15 South, Range 27 East, Boise Meridian
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Section 17:
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SW¼SW¼
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Section 18:
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SE¼SE¼
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Section 19:
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NE¼NE¼
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Section 20:
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Beginning at a point 1200 feet West of the Southeast
corner of the NE¼NW¼ ; thence West 1440 feet; thence South
2220 feet; thence East 440 feet to the West boundary line of Clear Creek;
thence in a Northeasterly direction along the West boundary line of Clear
Creek, approximately 2409 beet to the Point of Beginning.
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Parcel No. 3 – 472.08 acres more or less
Township 15 South, Range 27 East, Boise Meridian
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Section 20:
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W½SE¼, S½NW¼, and the
SW¼ EXCEPTING that part of the S½NW¼ lying North
and West of Clear Creek AND ALSO EXCEPTING all that part of the North
900 feet of the NW¼SW¼ lying North and West of the Channel
of Clear Creek.
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NW¼NW¼
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Section 29:
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W½NE¼ and E½NW¼
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Parcel No. 4 – 1,353.59 acres more or less
Township 15 South, Range 26 East, Boise Meridian
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Section 25:
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N½NW¼
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Section 26:
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E½SW¼, N½, W½SW¼
and W½SE¼, EXCEPT a right-of-way for ingress and egress
from a point approximately 30 rods South of the Northeast corner of the
NW¼NE¼ of Section 26, to the present roadway intersection
the North line of said Quarter approximately 6 rods West of the Northeast
corner of said Quarter, for the use and benefit of the premises immediately
adjoining on the East of said Quarter.
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And EXCEPTING from the above the following: Beginning
at the Northeast corner of the NW¼ of Section 25, running thence
West 240 rods; thence South 3 rods; thence East 240 rods; thence North
3 rods to the Point of Beginning.
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SUBJECT to the right-of-way for irrigation ditch
as not constructed along the North line of said property, with the right
of ingress and egress along the South bank of said ditch.
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Section 27:
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SE¼, SE¼NE¼ EXCEPTING AND RESERVING
85% of all oil, gas and mineral rights unto Richard H. Smith, a widower.
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S½SW¼, NE¼SW¼, N½NE¼,
SW¼ NE¼
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Section 28:
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SE¼SE¼
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Section 33:
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NE ¼ NE ¼
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Section 34:
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NW¼NW¼ EXCEPTING AND RESERVING an undivided
one-half interest in all oil, gas and mineral rights in Boyd H. Stewart,
Sybil S. Stewart, Lynn Stewart, Mabel R. Stewart and Laura C. Stewart.
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Township 15 South, Range 27 East, Boise Meridian
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Section 18:
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NE¼ EXCEPTING the following described parcel
of land, to-wit: Beginning at the Northeast corner of said Section, thence
West 18 rods, thence South 18 rods, thence East 18 rods, thence North
to the Place of Beginning.
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RECORDING REQUESTED BY
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WHEN RECORDED MAIL TO
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SPACE ABOVE THIS LINE FOR RECORDER’S
USE
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RAFT RIVER
GEOTHERMAL LEASE AND AGREEMENT
THIS
GEOTHERMAL LEASE AND AGREEMENT, (herein sometimes referred to as “Lease”)
made and entered as of the 14th day of June, 2002 by and between Jensen Investments
Inc. hereinafter referred to as “Lessor”, whether one or more, and
U.S. GEOTHERMAL Inc., an Idaho corporation, hereinafter referred to as “Lessee”;
WITNESSETH:
1. That
Lessor, for and in consideration of Ten Dollars ($10.00) in hand paid to Lessor
by Lessee, the rentals provided for hereinafter, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
in consideration of the covenants and agreements hereinafter contained has granted,
leased, let and demised and by these presents does grant, lease, let and demise
exclusively to Lessee, its grantees, successors and assigns, upon and subject
to the terms and conditions hereinafter set forth, all that certain land, geothermal
and mineral rights for real property located in the County of CASSIA, State
of IDAHO, more particularly described in Exhibit “A” attached hereto
and by this reference made a part hereof (hereinafter referred to as the “leased
rights” ), including all roads, streets, alleys, easements and rights of
way owned or claimed by Lessor, on, within, or adjoining the lands above described.
This Lease shall cover all the interest in the leased rights now owned or hereafter
acquired by Lessor.
By the use of such methods as Lessee may desire, Lessee, and
its designated representatives, shall have the sole and exclusive right to utilize
the leased rights, including but not limited to the right to explore for, drill
for, test, develop, operate, produce, extract, take, remove or sell Hot Water,
Steam and Thermal Energy and Extractable Minerals, and to store, utilize, process,
convert and otherwise treat such Hot Water, Steam and Thermal Energy, and to
extract any Extractable Minerals during the term hereof and to transport same,
and to inject or reinject effluents into the well or any wells drilled pursuant
to the leased rights; or inject water, gas or other fluid or substances by artificial
means into formations containing Hot Water, Steam or Thermal Energy. Further,
Lessee, its designated representatives and anyone purchasing Leased Substances
(as hereinafter defined) from Lessee are hereby granted the use of any easements
owned by Lessor across said land, to the full extent of any such rights held
by Lessor. In the event this Lease should terminate with respect to a portion
of the rights granted Lessee, it shall nevertheless continue in full force and
effect to any rights of way and any easements appurtenant thereto that are being
used from time to time when such termination occurs and shall continue in effect
so long as such rights of way and easements or any of them continue to be used
from time to time for the purposes above described or for the production and
utilization of Geothermal Resources from lands in the vicinity thereof by Lessee,
its designated representatives, or anyone who has purchased, or is purchasing,
Leased Substances from Lessee, their successors and assigns. The possession
by Lessee of the leased rights shall be sole and exclusive for the purposes
hereof and for purposes incident or related thereto. Lessee agrees to conduct
its activities in a manner which will not unreasonably interfere with any rights
reserved to Lessor.
1
2. This
Lease shall be for a term of ten (10) years from and after the date hereof (hereinafter
referred to as the “Primary Term”) and so long thereafter as Leased
Substances, or any of them, are derived or produced in commercial quantities
from the well or through the leased rights, or lands, rights or facilities pooled,
unitized or combined therewith, and for so long as Lessee is prevented from
producing same, or the obligations of Lessee hereunder are suspended, for the
causes hereinafter set forth, or this Lease is continued in force by reason
of any other provision hereof.
If
at the expiration of the Primary Term, Lessee is then engaged in operations
for drilling, reworking, recompleting, redrilling or enhancement of the well,
or any well developed in exercise of the leased rights, or any well on or lands
pooled, unitized or combined therewith, this Lease shall remain in force so
long as any such drilling, reworking, recompleting, redrilling or enhancement
operations are prosecuted (whether on the same or different wells) with no cessation
of such operations for more than six (6) months, and if such operations result
in production or the establishment to the satisfaction of the Lessee of the
existence of Sufficient Power Potential or Extractable Minerals in Commercial
quantities, such well or wells will be deemed to have been completed during
the primary term of this Lease.
3. It
is understood and agreed that the initial consideration paid upon the execution
hereof, covers both the rental in full hereunder for a period of one (1) year
from the date of this Lease and for all other rights conferred hereunder. Thereafter,
for the first five (5) years of the lease, on or before said anniversary date,
Lessee shall pay or tender to Lessor an annual rental in the amount of
TWO
AND ONE-HALF DOLLARS ($2.50)
per acre, which shall constitute rental until
the next anniversary date hereof. For the second five (5) year period of the
lease, Lessee shall, on or before each succeeding anniversary date during the
Primary Term hereunder, pay or tender to Lessor an annual rental in the amount
of
THREE AND NO/100 DOLLARS ($3.00) per acre
, until such time as from
the drilling of a well or wells on the leased land, or lands pooled, unitized
or combined therewith, there has been established to the satisfaction of the
Lessee the existence of Sufficient Power Potential or Extractable Minerals in
Commercial quantities. Upon such establishing as aforesaid, Lessee may nevertheless
continue to pay or tender annual rental payments on or before each anniversary
date, until Lessee has commenced the actual sale of one or more Leased Substances,
and so long as such annual rental payments to be paid or tendered, whether beyond
the Primary Term or not, this lease shall remain in force and effect. All payments
so paid or tendered after the expiration of said Primary Term shall be deemed
advance royalties. Lessee shall have the right to reimburse itself for any such
payments of one-half (1/2) of any royalties which shall thereafter become payable
hereunder. So long as such payments are paid or tendered each well or wells
shall be deemed to be actually producing one or more Leased Substances in Commercial
Quantities under the terms hereof; provided, however, that if within five (5)
years after the date of expiration of the Primary Term hereof Lessee shall have
failed to make, or make arrangements for (by executed contract or contracts)
a bona fide Commercial sale of one or more Leased Substances (or electric energy
generated therefrom) then Lessor, at its option, may consider Lessee in default
hereunder. Additionally, should Lessee fail to make any annual payment herein
provided for on or before a particular anniversary date, Lessor may, at its
option, consider Lessee in default hereunder.
4. Lessee
shall conduct all work in compliance with the applicable laws and regulations
of the state of Idaho and the United States of America. Lessee shall be fully
responsible for compliance with all applicable Federal, state, and local statutes,
regulations, and ordinances relating to such work, and for reclamation bonding
and any bonding required for geothermal wells. Lessor agrees to cooperate with
Lessee in Lessee’s application for governmental licenses, permits, and
approvals, all costs of which shall be borne by Lessee.
Lessee
shall, upon written request of Lessor or the owner of the land upon which the
well is located or with which the leased rights are associated, fence all excavations
(including sumps and settling ponds), and, upon the termination of the Lease,
Lessee shall level and fill all sump holes and excavations, shall remove all
debris and shall leave the locations or premises used by Lessee in a clean and
sanitary condition.
Lessee
shall replace all fences which the Lessee may have removed for its purposes
and repair all fences which Lessee may have damaged, and if and when so required
by the Lessor, will provide a proper livestock guard at any point of entry upon
lands used by Lessee.
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Lessee
shall protect Lessor’s interest in the leased rights against liens of every
character arising from its operations thereon. Lessee, at its own expense, prior
to commencing operations pursuant to the leased rights, shall obtain, and thereafter
while this Lease is in effect shall maintain, adequate Workers Compensation
Insurance. Lessee shall protect Lessor against damages of every kind and character
arising out of the operations or working of Lessee or those under Lessee’s
control pursuant to the leased rights, but Lessee shall not be liable hereunder
in the event of the negligence or willful misconduct of parties other than Lessee.
5. Royalties
shall be payable as follows:
(a) With
respect to Hot Water, Steam or Thermal Energy (collectively to be referred to
as “Energy Produced”) produced, saved and sold by Lessee and then
used by the purchaser for the generation of electric power, Lessee shall pay
to Lessor as royalty Ten Percent (10%) of the market value of such Hot Water,
Steam or Thermal Energy produced from the well or in exercise of the leased
rights at and as of the point of origin on the land associated with the well
or the leased rights, which market value shall be deemed to be the gross proceeds
received by Lessee from such sale at the point of origin, unless the sale occurs
at a location other than the point of origin, in which case the market value
shall be deemed to be the gross proceeds received by lessee from such sale less
all costs and expenses of processing and transportation between the point of
origin and the point of sale.
(b) With
respect to Hot Water, Steam or Thermal Energy produced, saved and used for the
generation of electric power which is then sold by Lessee, Lessee shall pay
to Lessor as royalty Ten Percent (10%) of the Net Proceeds in accordance with
the definition of Net Proceeds in paragraph 19, subparagraph (h).
(c) With
respect to Energy Produced, saved and sold by Lessee and which is used for any
purpose other than the generation of electric power, Lessee shall pay to Lessor
as royalty Five Percent (5%) of the gross proceeds received by Lessee from the
sale of Energy Produced, as such, produced from the well or in exercise of the
leased rights at and as of the point of origin on the land associated with the
well or the leased rights.
(d) With
respect to Extractable Minerals, Lessee shall pay as royalty to Lessor Five
Percent (5%) of the net proceeds received by Lessee from the sale of any gases
(as herein defined) and from the sale of effluents (containing minerals and/or
minerals in solution) produced and sold from the well or in exercise of the
leased rights, or, in the event Lessee extracts from the effluents minerals
and/or minerals in solution, Five Percent (5%) of the proceeds received by Lessee
from the sale of minerals and/or minerals in solution contained in and extracted
from such effluents less costs of transportation and extraction. If Lessee consumes
Leased Substances or electric power generated therefrom, by either use or exchange,
for purposes other than its operations with respect to the well or the leased
rights, then such Leased Substances or electric power generated therefrom shall
be deemed sold for royalty purposes and the above-described royalty shall be
paid on the same value basis as if such Leased substances or electric power
generated therefrom had been sold by Lessee at the time of production under
Lessee’s then existing sales contract.
Lessee
shall pay to Lessor on or before the twenty-fifth day of each month the royalties
accrued and payable for the preceding calendar month, or on or before the twenty-fifth
day of the month next following that in which Lessee receives payment therefor
from the purchaser thereof, whichever method may be chosen by Lessee from time
to time, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.
Lessee
shall not be required to account to Lessor for or to pay any royalty on Hot
Water, Steam, Thermal Energy or Extractable Minerals produced by Lessee which
is not utilized, saved and sold, or which is used by Lessee in its operations
with respect to the well or the leased rights for or in connection with the
developing, recovering, producing, extracting and/or processing of Hot Water,
Steam, Thermal Energy and/or minerals in solution or in facilities for the generation
of electric power, or which are unavoidably lost.
3
Lessee
shall have the right from time to time and at any time to commingle (for purposes
of storing, transporting, utilizing, selling and processing, or any of them)
the Leased Substances, or any of them, that are produced or extracted from the
well or in exercise of the leased rights or lands pooled, unitized or combined
therewith, with Geothermal Resources, or any of them, produced from other lands
or units in the vicinity of the well or the land associated with the leased
rights, and in the event of such commingling, Lessee shall meter, gauge, or
measure the production from the well or in exercise of the leased rights, or
from the unit or units, including leased and other units or lands, as the case
may be, and compute and pay Lessor’s royalty payable under the provisions
hereof on the basis of such production so determined or allocated, as the case
may be.
6. Lessee
shall have the right to drill such well or wells as Lessee may deem desirable
for the exercise of the leased rights, including wells for injection or reinjection
purposes, and shall have the further right to dispose in any such wells waste
brine, water and other substances, waste products from a well or wells, power
plants or other facilities. Lessee shall further have the right for testing
purposes, to freely transfer Leased Substances and Geothermal Resources and
to inject such leased Substances and Geothermal Resources into well or into
any wells developed pursuant to the leased rights.
7. Lessee
may, at any time or from time to time, as a recurring right for drilling, development,
production or operating purposes, pool, unitize or combine all or any part of
the leased rights into a unit with any other land or lands or lease or leases
(whether held by Lessee or others) adjacent, adjoining or in the immediate vicinity
of the land on which the well is located or with which the leased rights are
associated, which Lessee desires to develop or operate as a unit, provided that
the total acreage to be embraced within any such drilling, development, production,
or operating unit shall no exceed one thousand nine hundred twenty (1,920) acres,
plus an acreage tolerance of Ten Percent (10%), except that a larger unit may
be created to conform to State or Federal regulations. Such unit shall be deemed
created either upon Lessee recording in the office of the county recorder a
written declaration of such unit or upon Lessee giving written notice of such
unit to Lessor. 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 in exercise of the leased rights, and Lessee shall
have the same rights and obligations with respect thereto and to drilling and
producing operations upon the lands from time to time included within any such
unit as provided under this Lease provided, however, that notwithstanding this
or any other provision or provisions of this Lease to the contrary:
(a) Production
as to which royalty is payable from any such well or wells drilled upon any
such unit, whether located upon the leased rights or other lands, shall be allocated
to the well and leased rights in the proportion that the acres of geothermal
rights associated with the leased rights bears to the total geothermal acreage
of such unit, and such allocated portion thereof shall for all purposes of this
Lease be considered as having been produced pursuant to the leased rights and
the royalty payable under this Lease shall be payable only upon that proportion
of such production so allocated thereto, and
(b) If
any taxes of any kind are levied or assessed (other than taxes on the land and
on Lessor’s improvements), any portion of which is chargeable to Lessor
under Paragraph 14 hereof, then the share of such taxes to be borne by Lessor
as provided in the Lease, shall be in proportion to the share of the production
from such unit allocated to the well and leased rights.
Allocation
of unit production whether to the well and the leased rights or to other lands
in the unit, shall continue after any termination of all or any part of this
or any other lease covering lands in the unit until any exploration, drilling,
remedial drilling or production operations are begun on the lands so terminated,
or until contracts regarding any such operations are entered into, whereupon
all such terminated lands shall be excluded in the production to be allocated
to the respective lands in such unit. In the event of the failure of Lessor’s,
or any other owner’s, title as to any portion of the rights or land included
in any such unit, such portion of such land or associated land shall likewise
be excluded in allocating production from such unit, provided, however, Lessee
shall not be held to account for any production allocated to any lands excluded
from any such operating unit unless and until Lessee has actual knowledge of
the circumstances requiring such
4
exclusion. Any exclusion shall be deemed
effective the first day of the month next following the date upon which such
exclusion becomes finally established.
Lessee
may, at its sole option, at any time when there is no Commercial production
in such unit, terminate, enlarge or diminish such unit either by Lessee recording
in the office of the county recorder a written declaration thereof, or by Lessee
giving written notice thereof to Lessor.
8. Lessor,
or its agents, at Lessor’s sole cost and risk, may during normal hours
of operation examine the any working, installations, structures, or operations
of Lessee constructed or undertaken pursuant to the leased rights, and may at
reasonable times inspect the books and records of Lessee with respect to matters
pertaining to the payment of royalties to Lessor.
9. Upon
the violation of any of the terms and conditions of this Lease by Lessee (including
but not limited to payment of rental, advance royalty and/or royalty) and the
failure of Lessee, as to monetary matters, to make payment, and as to other
violations, to begin in good faith to remedy the same, within sixty (60) days
after written notice from Lessor so to do, specifying in said notice the nature
of such default, then at the option of Lessor this Lease shall forthwith cease
and terminate and all rights of Lessee in and to the well and the leased rights
shall be at an end, except for each and any well then being drilled, or capable
of producing, or capable of being used for injection purposes, and in respect
to which Lessee shall not be in default, together with the rights, rights of
way and easements which may be retained by Lessee by virtue of the granting
clause of this Lease.
10. Notwithstanding
any other provisions of this Lease, and in consideration of the payment made
by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
the right at any time prior to or after default hereunder, to quitclaim and
surrender to Lessor all right, title and interest of Lessee in and to the well
and the leased rights, and thereupon all rights and obligations of the parties
hereto one to the other shall cease and terminate, save and except as to any
then accrued royalty obligations of Lessee then payable as to which Lessee shall
remain liable to Lessor, and save and except the rights, rights of way and easements
which may be retained by Lessee by virtue of the granting clause of this Lease.
11. Notwithstanding
any other provisions of this Lease, and in consideration of the payment made
by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
the right at any time prior to or after default hereunder, to quitclaim and
surrender to Lessor all right, title and interest of Lessee in and to the leased
rights, or any part thereof, and thereupon all rights and obligations of the
parties hereto one to the other shall cease and terminate as to the lands or
areas so quitclaimed and surrendered, save and except as to any then accrued
royalty obligations of Lessee then payable as to which Lessee shall remain liable
to Lessor, and save and except the rights, rights of way and easements which
may be retained by Lessee by virtue of the granting clause of this Lease and
paragraph 8, provided that in the event of a partial quitclaim and surrender,
any future rentals will be reduced proportionately by the number of acres so
quitclaimed and surrendered.
12. In
the event Lessor at the time of making this Lease owns an interest in the leased
land less than One Hundred Percent (100%) of the right, title and interest purportedly
granted or leased hereby to Lessee, then any payments due Lessor hereunder shall
be paid to Lessor only in the proportion which Lessor’s Interest bears
to a One Hundred Percent (100%) interest in the leased land. Notwithstanding
the foregoing, should Lessor hereafter acquire any additional right, title or
interest in or to the leased land, it shall be subject to the provisions hereof
to the same extent as if owned by Lessor at the date hereof, and any increase
in payments of money hereunder necessitated thereby shall commence with the
payment next following receipt by Lessee of satisfactory evidence of Lessor’s
acquisition of such additional interest. In the event Lessor has no interest
in the Leased Substances produced hereunder, but has an interest in said land,
Lessee shall pay Lessor an overriding royalty of One Percent (1%) of the Net
Proceeds received by Lessee from the sale of Leased Substances produced from
the leased land, as rental for the surface thereof.
13.
Lessor hereby warrants and agrees to defend title to the leased rights and agrees
that Lessee, at its option, may pay and discharge any taxes, mortgages, trust
deeds or other liens or encumbrances existing, levied or assessed on or against
the well or the leased rights, and in the event Lessee exercises such option,
Lessee shall be
5
subrogated to the rights of any holder thereof, and shall
have, among other rights, the right of applying to the discharge of any such
mortgage, tax or other lien or encumbrance any payments accruing to Lessor hereunder.
14. Lessee
shall pay all taxes levied on structures and improvements constructed by Lessee
pursuant to this Lease. In the event any taxes are levied or assessed against
the right to produce Leased Substances, or against any Leased Substances on
or in the land associated with the well or the leased rights, or in the event
any increase in the taxes levied or assessed against the well or the leased
rights shall be based upon the production of Leased Substances from, or reserves
of Leased Substances attributed to, the well or the lease rights, then in either
such event Lessee shall pay Ninety Percent (90%) of any such taxes or increase,
as the case may be, and Lessor shall pay Ten (10%) thereof. Lessor shall pay
all taxes levied and assessed against all structures and improvements owned
by Lessor or placed by or pursuant to permission of Lessor.
15. The
rights of either party hereunder may be assigned in whole or in part, and the
right and privilege to do so is hereby reserved by each party, and the provisions
hereof shall extend to the heirs, personal representatives, successors and assigns
of the parties hereto, but no change or division in ownership of the well, rights,
rentals or royalties, however accomplished, shall operate to enlarge the obligations
or diminish the rights of Lessee, and no such change in ownership shall be binding
upon Lessee until the expiration of thirty (30) days after Lessee is furnished
with written notice of such transfer or assignment, together with a certified
copy of the instruments of transfer or assignment. In the event of assignment
of this lease as to a segregated portion of the leased right, the rentals payable
hereunder shall be apportionable between the several leasehold owners ratably
according to the surface area of each, and default in rental payment by one
shall not affect the rights of other leasehold owners hereunder. Lessee’s
right of assignment expressly includes the right to sublease all or any portion
of its rights and obligations hereunder. Lessee must notify the Lessor, in writing,
within 30 days of any assignment.
16. The
obligation of the Lessee hereunder shall be suspended and the terms of this
Lease shall be extended as the case may be, while Lessee is prevented from complying
therewith, in whole or in part, by strikes, lockouts, riots, war or the results
thereof, acts of God or the elements, fire, flood, accidents, delays in transportation,
inability to secure labor or material in the open market, laws, orders, rules,
or regulations of Federal, State, County, Municipal, or other governmental agencies,
authority, or representative, or any other matter or condition beyond reasonable
control of Lessee, whether or not similar to the conditions or matters herein
specifically enumerated, or while litigation contesting Lessor’s title
to the well or the leased rights or the rights granted Lessee hereunder or litigation
involving Lessee’s operations hereunder shall be pending and undetermined
or during any period when Lessee has no market for the products it is then capable
of producing from the leased rights or the market price then available for such
products will not produce an acceptable profit. For so long as any of the above
circumstances continue to exist, Lessee, without impairment of its rights hereunder,
shall be excused from performance of al obligations hereunder except payment
of taxes and protection of the leased rights. It is expressly agreed that the
prevention of settlement of any litigation or strike or labor disturbance shall
not be considered a matter subject to Lessee’s control within the meaning
of this Paragraph.
If
the permission of approval of any governmental agency is necessary before drilling
or producing operations may be commenced pursuant to the leased rights, then
if such permission or approval has been applied for at least thirty (30) days
prior to the date upon which such operations much be commenced under the terms
hereof, the obligation to commence such operations shall be suspended until
ninety (90) days after the governmental permit is granted or approval given,
of if such permit or approval is denied initially, then so long as Lessee in
good faith appeals from such denial or conducts further proceedings in an attempt
to secure such permit or approval and ninety (90) days thereafter. Lessor agrees
to fully support and cooperate with Lessee in securing permits and authorizations
to conduct geothermal operations on the leased rights, all costs of which shall
be borne by Lessee.
17. All
statements of production and royalty and all payments to be made by Lessee to
Lessor hereunder shall be sent to the person hereinafter set forth, at the address
indicated:
Lessee
shall, upon written notification of change of ownership in the well or leased
rights or in the rentals or royalties hereunder, as provided in Paragraph 12
hereof, divide and distribute the same to the new owners of such interest; provided,
however, that if at any time there are three or more persons entitled to rentals
or royalties
6
hereunder, Lessee may, at its option, withhold payment of such
rentals or royalties until a majority in interest of such persons designate
in writing in a recordable instrument delivered to Lessee, a bank, trust company
or corporation, as a common agent and depositary, to receive all payments due
hereunder to such persons. Such designation may be changed at any time in the
same manner. Delivery of all statements and payments hereunder may be made by
depositing same in the United States mail duly addressed to Lessor at the above
address or addresses or to such agent and depositary, which shall constitute
full performance of Lessee’s obligation to make such delivery. In the event
that the amount payable under this Lease shall result in a payment of less than
Twenty-Five dollars ($25.00) becoming due Lessor, Lessee may, at is option,
withhold and accrue sufficient periodic payments until the total due Lessor
exceeds Twenty-Five Dollars ($25.00).
18. Any notice herein required or permitted
to be given or furnished by one party to the other shall be in writing. Delivery
of such written notice to Lessor shall be made by deposition the same in the
United States mail duly certified and addressed to Lessor at PO Box 140478,
Boise, Idaho 83714 and delivery of such written notice to Lessee shall be made
by depositing the same in the United States mail duly certified or delivered
by express delivery and addressed to Lessee at 3392 Maze Avenue, Boise, Idaho
83706. Either party hereto may by written notice to the other party change its
address to any other location.
19. For the purposes of this Lease the following
definitions shall apply:
(a) The terms “Hot Water”,
“Steam” and “Thermal Energy”, collectively referred to as
“Energy Produced”, each shall mean natural geothermal water and/or
steam, and shall also mean the natural heat of the earth and the energy present
in, resulting from or created by, or which may be extracted from, the natural
heat of the earth or the heat present below the surface of the earth, in whatever
form such heat or energy naturally occurs;
(b) The term “Extractable Minerals”
shall mean any minerals in solution in the well effluents and all minerals and
gases produced from or by means of the well or any well or wells developed in
exercise of the leased rights or by means of condensing steam or processing
water produced from the effluents from any such well or wells. Said terms shall
also include any water so produced or obtained from condensation or steam; provided,
however, that the term “gases” shall not include hydrocarbon gases
that can be produced separately from the well effluents;
(c) The term “Leased Substances”
shall collectively man the matter, substances and resources defined in subparagraphs
16(a) and 16(b) that are subject to this Lease;
(d) The term “Geothermal
Resources” shall collectively mean the matter, substances and resources
defined in subparagraph 16(a) and 16(b) that are not subject to this Lease but
are located on adjacent land or lands in reasonable proximity thereto;
(e) The term “Power Potential”
shall mean, when used herein with respect to any well or wells, the quantity,
or units, of energy capable of being recovered from the Hot Water, Steam or
Thermal Energy produced therefrom by means of any energy conversion or utilization
facility (including, but not limited to, electrical generating facilities) or
equipment designed for use thereof;
(f) The term “Sufficient Power
Potential” shall mean that Power Potential which, in the sole judgment
of Lessee shall be sufficient for the Commercial sale or utilization thereof,
or shall warrant the construction of facilities for the Commercial sale or other
utilization thereof, or shall justify additional drilling or other operations
in exercise of the leased rights;
7
(g) The
term “Commercial” shall mean those qualities of Leased Substances
produced, sold or used, the value of which, after determining Lessee’s
direct operating costs (or extraction costs in the case of Extractable Minerals)
will be capable of providing a sufficient return to cause Lessee, in its sole
judgment, to continue production thereof or to elect to proceed with further
development or exploratory operations in exercise of the leased rights.
(h) The
term “Net Proceeds” is defined as proceeds from the sale of generated
electric power to a third party, independent of the Lessor or Lessee, less deductions
of the sum of direct operating costs, property taxes, franchise taxes, marketing
expenses and the depreciation of production wells, pipelines, production facilities,
power generation and power lines through to the sales delivery point. Depreciation
shall be on a fifteen (15) year straight-line basis with asset capitalization
in accordance with generally accepted accounting principles. Electric power
is computed and paid for on the basis of kilowatt- hours (“Kwh”) and
the royalty shall be calculated on a basis of cents per Kwh.
20. 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, 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 being specifically understood and agreed that the provisions
hereof are severable for the purposes of the provisions of this clause. In this
connection, this Lease shall not in any event extend beyond such term as may
be legally permissible under present applicable laws, and should be any such
applicable law limit the term hereof to less than that herein provided, then
this Lease shall not be void but shall be deemed to be in existence for such
term and no longer.
21. If
more than one person is named as Lessor herein and one or more of them fails
to execute this Lease, said Lease shall nevertheless (when accepted by Lessee)
become effective as a lease from such of said named parties Lessor as may have
executed the same.
22. 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.
23. This
Geothermal Lease and Agreement and all of the terms, covenants and conditions
hereof shall extend to the benefit of and be binding upon the respective heirs,
personal representatives, successors and assigns of the parties hereto.
IN
WITNESS WHEREOF, the parties have caused this instrument to be duly executed
as of the date hereinabove first written.
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Lessor
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By:
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Douglas
J. Glaspey, CEO & Director
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Lessee
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State of Idaho
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On this _____ day of June 2002, before me,
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County of ________________________________________
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the undersigned Notary Public, personally appeared
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( ) personally known to me
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( ) proved to me on the basis of satisfactory
evidence to be the person(s) whole name(s) ______________________________
subscribed to the within instrument, and acknowledged that ___________________________________________
executed it.
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WITNESS my hand and official seal.
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Notary’s
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State of Idaho
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On this _____ day of June 2002, before me,
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County of ________________________________________
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the undersigned Notary Public, personally appeared
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evidence to be the person(s) whole name(s) ______________________________
subscribed to the within instrument, and acknowledged that ___________________________________________
executed it.
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WITNESS my hand and official seal.
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Notary’s
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9
EXHIBIT A
44.5 acres more or less
Township 15 South, Range 26 East, Boise Meridian
Section 25: T4184
Part of the NW¼
Section 26: T8014
Part of the NE¼NE¼
Section 35: NW¼NE¼
10
GEOTHERMAL
LEASE AND AGREEMENT
This Lease and Agreement is made and entered into as of this 1st day of March, 2004, by and between:
Jay Newbold,
Party of the first part,
hereinafter referred to as “Lessor”
and
US Geothermal Inc.
, an Idaho corporation,
Party of the second part,
hereinafter referred to as “Lessee”
who are referred to in the plural as the “Parties”.
Recitals
WHEREAS
Lessor is the owner of certain land and geothermal
rights situated in Cassia County, in the State of Idaho, which the Parties believe
are suited for the development of Hot Water, Steam and Thermal Energy for use
as such and/or the conversion of such geothermal energy to the production of
electric power, or for any purpose other than the generation of electric power,
and
WHEREAS
It is the desire of Lessor and Lessee to enter
into an agreement which will enable the development of said Hot Water, Steam
and Thermal Energy for any of the aforesaid purposes for the mutual profit of
the Parties,
BE IT THEREFORE HEREBY AGREED AS FOLLOWS:
1. Purpose.
For and in consideration of the sum of Ten Dollars ($10.00) and
other valuable consideration set forth in clauses (4.) and (5.) below, receipt
of which initial sum and sufficiency of which is hereby acknowledged, and in
consideration of the covenants and agreements hereinafter contained, Lessor
has granted, leased, let and demised to Lessee, its grantees, successors and
assigns, upon and subject to the terms and conditions contained herein, the
land hereinafter described, the sole and exclusive right to drill for, produce,
extract, take, remove and sell geothermal heat energy including , Hot Water,
Steam, or Thermal Energy therefrom, and to store, utilize, process, convert
and otherwise treat such geothermal energy upon said land, during the term hereof,
with the right of entry thereon and use and occupancy thereof at all times for
said purposes and the furtherance thereof, including the right to construct,
use and maintain thereon and to remove therefrom structures, facilities and
installations, pipelines, utility and power transmission lines.
1
The possession by Lessee of said land shall be sole and exclusive
for the purposes hereof and for the purposes incident or related thereto, excepting
that Lessor reserves the right to use and occupy said land, or to lease or otherwise
deal with the same, without interference with Lessee rights, for residential,
agricultural, commercial, or grazing uses, or for any and all uses other than
the uses and rights permitted to Lessee herein.
2. Lands.
The land which is the subject of this lease is situated in the county and state
above first named consisting of approximately 20 acres and which is described
in Exhibit A attached hereto and incorporated as if more fully set forth herein,
including also in the leased land all rights of Lessor, presently owned or hereafter
acquired, in and under roads, ditches, and rights of way traversing or adjacent
to said land, (hereinafter referred to as “Lands”).
3. Term.
This Lease shall be for a term of ten (10) years from and after the date hereof
(hereinafter referred to as the “Primary Term”) and so long thereafter
as Leased Substances, or any of them, are derived or produced in commercial
quantities from the leased land or lands pooled, unitized or combined therewith,
and for so long as Lessee is prevented from producing same, or the obligations
of Lessee hereunder are suspended, for the causes hereinafter set forth, or
this Lease is continued in force by reason of any other provision hereof.
If at the expiration of the Primary Term, Lessee has not completed
one or more wells on the leased land or lands pooled, unitized or combined therewith,
which well or wells separately or collectively are either producing, or capable
of producing, Hot Water, Steam or Thermal Energy of Sufficient Power Potential
in Commercial quantities, but lessee is then engaged in operations for drilling,
reworking, recompleting, redrilling or enhancement of any well on the leased
land or lands pooled, unitized or combined therewith, this Lease shall remain
in force so long as drilling, reworking, recompleting, redrilling or enhancement
operations are prosecuted (whether on the same or different wells) on the leased
land or lands pooled, unitized or combined therewith with no cessation of such
operations for more than six (6) months, and if such operations result in production
or the establishment to the satisfaction of the lessee of the existence of Sufficient
Power Potential in Commercial quantities, such well or wells will be deemed
to have been completed and such existence is established during the primary
term of this Lease.
4. Primary
Term Consideration. It is understood and agreed that the initial consideration
paid upon the execution hereof, covers both the rental in full hereunder for
a period of one (1) year from the date of this Lease and for all other rights
conferred hereunder. Thereafter, for the first five (5) years of the lease,
on or before said anniversary date, Lessee shall pay or tender to Lessor an
annual rental in the amount of TEN DOLLARS ($10.00) per acre , which shall constitute
rental until the next anniversary date hereof. For the second five (5) year
period of the lease, Lessee shall, on or before each succeeding anniversary
date during the primary term hereunder, pay or tender to Lessor an annual rental
in the amount of FIFTEEN DOLLARS ($15.00) per acre , until such time as from
the drilling of a well or wells on the leased land, or lands pooled, unitized
or combined therewith, there has been established to the satisfaction of
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the Lessee the existence of Sufficient Power Potential in Commercial
quantities. Upon such establishing as aforesaid, Lessee may nevertheless continue
to pay or tender annual rental payments on or before each anniversary date,
until Lessee has commenced the actual sale of one or more Leased Substances,
and so long as such annual rental payments to be paid or tendered, whether beyond
the primary term or not, this lease shall remain in force and effect. All payments
so paid or tendered after the expiration of said primary term shall be deemed
advance royalties. So long as such payments are paid or tendered each well or
wells shall be deemed to be actually producing one or more Leased Substances
in Commercial quantities under the terms hereof; provided, however, that if
within five (5) years after the date of expiration of the primary term hereof
Lessee shall have failed to make, or make arrangements for (by executed contract
or contracts) a bona fide Commercial sale of one or more Leased Substances (or
electric energy generated therefrom) than Lessor, at its option, may consider
Lessee in default hereunder. Additionally, should lessee fail to make any annual
payment herein provided for on or before a particular anniversary date, Lessor
may, at its option, consider lessee in default hereunder.
5. Geothermal
Royalties. Royalties shall be payable as follows:
(a)
With respect to
Hot Water, Steam or Thermal Energy produced, saved and sold by Lessee and then
used by the purchaser for the generation of electric power, Lessee shall pay
to Lessor as a royalty Ten Percent (10%) of the market value of such Hot Water,
Steam or Thermal Energy produced from the leased land at and as of the point
of origin on the leased land, which market value shall be deemed to be the gross
proceeds received by Lessee from such sale at the point of origin on the leased
land, unless the sale occurs at a location other than the point of origin on
the leased land, in which case the market value shall be deemed to be the gross
proceeds received by Lessee from such sale less all costs and expenses of extraction,
production, storage, processing, reinjection, and transportation between the
point of origin on the leased land and the point of sale.
(b)
With respect to
Hot Water, Steam or Thermal Energy produced (collectively to be referred to
as “Energy Produced”), saved and used for the generation of electric
power which is then sold by Lessee, Lessee shall pay to Lessor as a royalty
Ten Percent (10%) of the Net Proceeds from the sale of Energy Produced from
the leased land, at and as of the point of origin on the leased land in accordance
with the definition of Net Proceeds from the sale of Energy Produced as defined
in paragraph 19, subparagraph (h).
(c)
With respect to
Energy Produced, saved and sold by Lessee and which is used for any purpose
other than the generation of electric power, Lessee shall pay to Lessor as a
royalty Five Percent (5%) of the gross proceeds received by Lessee from the
sale of Energy Produced, as such, produced from the leased land at and as of
the point of origin on the leased land.
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Lessee
shall pay to Lessor on or before the twenty-fifth day of each month the royalties
accrued and payable for the preceding calendar month, or on or before the twenty-fifth
day of the month next following that in which Lessee receives payment therefore
from the purchaser thereof, whichever method may be chosen by Lessee from time
to time, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.
Lessee
shall not be required to account to Lessor for or to pay any royalty on Hot
Water, Steam, Thermal Energy produced by Lessee on the leased land which is
not utilized, saved and sold, or which is used by Lessee in its operations on
or with respect to the leased land for or in connection with the developing,
recovering, producing, extracting and/or processing of Hot Water, Steam, or
Thermal Energy or in facilities for the generation of electric power, or which
are unavoidably lost.
Lessee
shall have the right from time to time and at any time to commingle (for purposes
of storing, transporting, utilizing, selling and processing, or any of them)
the Leased Substances, or any of them, that are produced or extracted from the
leased land or lands pooled, unitized or combined therewith, with Geothermal
Resources, or any of them, produced from other lands or units in the vicinity
of the leased land, and in the event of such commingling, Lessee shall meter,
gauge, or measure the production from the leased land, or from the unit or units,
including leased and other units or lands, as the case may be, and compute and
pay Lessor’s royalty payable under the provisions hereof on the basis of
such production so determined or allocated, as the case may be.
From the time when Lessor shall commence Commercial production
from said Lands, Lessee shall then pay Lessor the geothermal royalty set forth
herein, or the initial term annual payments, whichever shall be the larger.
This change from annual lease payments to geothermal royalty payments shall
occur at the time when geothermal royalties exceed annual lease payments in
any given month.
6. Commingled
and Unit Operations. Lessee shall have the right to commingle, or unitize said
leased land, for the purpose of utilizing, selling, processing, the Leased Substances
produced from the lease land with the steam or heat energy produced from other
lands, and to meter or gauge the production of steam or heat energy from leased
land and to compute and pay Lessor royalty on the basis of such production as
so determined.
In the event that the production of Leased Substances from
the leased lands or from lands in the general area of the leased land should
at any time exceed the demand for the facility use thereof in the opinion of
Lessee and the Lessee elects to reduce the total amount of steam produced or
consumed, then in that event each well participating on a commingling basis
shall be reduced in percentage amount equal to its proportion of the whole.
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7. Use
Of Lease. Lessee shall have the right to drill such wells on leased land as
Lessee may deem desirable for the purposes hereof including the exploration
and production of Geothermal Resources for heat or electric power production
purposes and any reinjection of fluids thereof. Lessee shall have the right
to construct upon leased land such equipment and structures as Lessee may deem
desirable for the purpose of utilizing Leased Substances including geothermal
power plants, access and piping and transmission equipment related thereto.
8. Minimize
Use. Notwithstanding any provisions of this lease to the contrary, Lessee shall
utilize for such purpose only so much of the leased land as shall be reasonably
necessary for Lessee activities and operations thereon and shall interfere as
little as reasonably possible with the use and occupancy of the leased land
by the Lessor.
Lessee agrees, upon written request of Lessor, to fence all
excavations (including sumps and setting ponds, and, upon the termination of
the Lease, Lessee shall level and fill all sump holes and excavations, shall
remove all debris and shall leave the locations or premises used by Lessee in
a clean and sanitary condition.
Lessee agrees to replace all fences which the Lessee may have
removed for its purposes and repair all fences which Lessee may have damaged,
and if and when so required by the Lessor, will provide a proper livestock guard
at any point of entry upon lands used by Lessee.
In the event this Lease terminates as to a portion of either
the leased land or rights granted hereunder, it shall continue in full force
and effect as to those facilities necessary to the permitted use of the remaining
leased lands or rights hereunder.
Lessee shall have the right at any time and from time to time
to remove from the leased land any and all casing, machinery, equipment, structures,
installations and property of every kind and character placed upon said leased
land by or pursuant to permission of Lessee, provided that if such removal should
occur after termination of all rights granted herein, it shall be completed
within a reasonable time thereafter.
9. Exclusive
Rights. Lessee shall have exclusively the rights to all Leased Substances and
to all power production from Leased Substances on and/or from leased land during
the term hereof, subject only to payment of the royalties to Lessor as is set
forth herein.
10. Water.
Lessee shall have reasonable access to and use of water from the leased land
for Lessee’s drilling, testing and exploration operations thereon, in the
vicinity thereof, or on land or lands pooled, unitized or combined therewith.
Lessee shall purchase such water owned by Lessor at standard commercial rates
for the area and will reimburse Lessor for the use of any water which is being
purchased by Lessor.
11. Permits.
Any wells drilled by Lessee hereunder shall only be drilled after first obtaining
any relevant governmental agency permits regarding geothermal well drilling
on the leased land and in conformance with approved well design by relevant
agencies.
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Power plant structures shall be engineered and constructed
in conformance with and only after obtaining any relevant governmental agency
permits regarding geothermal or biomass power plants. Lessor agrees to cooperate
with Lessee’s application for governmental licenses, permits, and approvals,
the cost of which shall be borne by Lessee.
12. Partial
Ownership Interests. In the event Lessor at the time of making this Lease owns
an interest in the leased land less than One Hundred Percent (100%) of the right,
title and interest purportedly granted or leased hereby to Lessee, then any
payments due Lessor hereunder shall be paid to Lessor only in the proportion
which Lessor’s Interest bears to a One Hundred Percent (100%) interest
in the leased land. Notwithstanding the foregoing, should Lessor hereafter acquire
any additional right, title or interest in or to the leased land, it shall be
subject to the provisions hereof to the same extent as if owned by Lessor at
the date hereof, and any increase in payments of money hereunder necessitated
thereby shall commence with the payment next following receipt by Lessee of
satisfactory evidence of Lessor’s acquisition of such additional interest.
In the event Lessor has no interest in the Leased Substances produced hereunder,
but has an interest in said land, Lessee shall pay Lessor an overriding royalty
of One Percent (1%) of the Net Proceeds received by Lessee from the sale of
Leased Substances produced from the leased land, as rental for the surface thereof.
13. Assignment.
There is hereby expressly reserved to Lessor and to Lessee the right and privilege
to convey, transfer or assign, in whole or in part, or to deal with in any manner,
subject to the provisions hereof, their respective rights and interests in and
under this Lease and Agreement or in the leased land, or the Leased Substances
produced on or from the leased land but in the event Lessor shall sell or transfer
any part or parts of the leased land or any interest in the aforesaid Leased
Substances therefrom then Lessees obligations hereunder shall not thereby be
altered, increased or enlarged, but Lessee may continue to operate the leased
land and to pay and settle rents and royalties as an entirety.
14. Force
Majeure. The obligation of the Lessee hereunder shall be suspended and the terms
of this Lease shall be extended as the case may be, while Lessee is prevented
from complying therewith, in whole or in part, by strikes, lockouts, riots,
war or the results thereof, acts of God or the elements, fire, flood, accidents,
delays in transportation, inability to secure labor or material in the open
market, laws, orders, rules, or regulations of Federal, State, County, Municipal,
or other governmental agencies, authority, or representative, or any other matter
or condition beyond reasonable control of Lessee, whether or not similar to
the conditions or matters herein specifically enumerated, or while litigation
contesting Lessor’s title to the leased land or the rights granted Lessee
hereunder or litigation involving Lessee’s operations hereunder shall be
pending and undetermined or during any period when Lessee has no market for
the products it is then capable of producing from the leased land or the market
price then available for such products will not produce an acceptable profit.
For so long as any of the above circumstances continue to exist, Lessee, without
impairment of its rights hereunder, shall be excused from performance of all
obligations hereunder except payment of taxes and protection of the leased land.
It is expressly agreed that the
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prevention of settlement of any litigation or strike or labor
disturbance shall not be considered a matter subject to Lessee’s control
within the meaning of this Paragraph.
15. Tax Payments.
Lessee shall pay all taxes on Lessee structures and improvements placed upon
the leased land by Lessee and shall pay taxes levied and assessed against products
of Lessee operations hereunder and taxes levied and assessed against the right
to produce steam and heat energy from leased lands. Lessor shall pay all taxes
levied and assessed against leased land not covered by this lease and/or Lessee
tax payment requirements herein.
16. Project
Costs. All labor to be performed and materials to be furnished in operations
of Lessee hereunder shall be at the cost and expense of Lessee, and Lessor shall
not be chargeable with, or liable for, any part thereof. Lessee shall protect
the leased land against liens arising from its operations thereon. Upon commencement
of operations upon leased land, Lessee shall protect Lessor against damages
of every kind and character which may be occasioned to any of the parties hereto
or to any other person by reason of the operations or workings of the Lessee
upon said leased land. The protection of Lessor shall include maintenance of
workman’s compensation insurance typical for geothermal drilling and power
plant construction projects and good and safe drilling, construction and power
plant operations designed by competent drilling and power plant engineering
experts.
17. Land Compensation.
In return for actual surface use of leased land required for well site, pipeline,
transmission and plant operations hereunder, Lessee shall compensate Lessor
at the annual rate of $50.00 per acre for such lands so affected for the duration
of their use. For these purposes, any pipelines or transmission lines shall
be deemed to require a 10 foot wide ground area. All pipelines shall be insulated
as per typical project specifications and shall be colored according to industry
norms or permit requirements as may be imposed.
18. Default
Notice. Upon violation of any of the terms and conditions of this lease by Lessee
and the failure of Lessee to begin in good faith to remedy same within 30 days
after written notice from Lessor to do so, specifying in said notice the nature
of such default, then at the option of Lessor this lease shall forthwith cease
and terminate and all rights of Lessee in and to said leased land shall be at
an end, except that in the event of such termination Lessee shall have the right
to remove from the leased land all surface facilities and improvements of whatsoever
kind and character placed upon leased land by Lessee. Upon default, if any,
Lessee shall remove from leased land any and all machinery and structures placed
upon leased land within one hundred twenty (120) days thereof.
19. Title.
Lessor hereby warrants and agrees to defend title to the leased land and agrees
that Lessee, at its option, may pay and discharge any taxes, mortgages, trust
deeds or other liens or encumbrances existing, levied or assessed on or against
leased land, and in the event Lessee exercises such option, Lessee shall be
subrogated to the rights of any holder or holders thereof, and shall have the
right to reimburse itself by applying to the discharge of any such mortgage,
tax or other lien or encumbrance any royalties or rentals accruing to Lessor
hereunder.
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20. Notice.
Any notice or other communication hereunder from Lessor to Lessee shall be given
in writing by delivering same personally to Lessee or by sending same by registered
or certified mail postage prepaid or Federal Express to Lessee at 1509 Tyrell
Lane, Suite B, Boise, Idaho 83706. Any notice or other communication hereunder
from Lessee to Lessor shall be given in writing by delivering same personally
to Lessor or by sending same by registered or certified mail postage prepaid
or Federal Express to Lessor at the Lessor address set forth on the signature
page of this lease. Any notice so sent shall be deemed to have been given and
received within 96 hours of deposit thereof in the United States mail or within
48 hours of deposit thereof with Federal Express, providing that Lessor has
provided and street address and telephone number. The parties may upon written
notice to the other party, at any time and from time to time change their respective
addresses for the purposes hereof.
21. Definitions.
For the purposes of this Lease the following definitions shall apply:
(a)
The terms “Hot
Water”, “Steam” and “Thermal Energy”, collectively
referred to as Energy Produced, each shall mean natural geothermal water and/or
steam, and shall also mean the natural heat of the earth and the energy present
in, resulting from or created by, or which may be extracted from, the natural
heat of the earth or the heat present below the surface of the earth, in whatever
form such heat or energy naturally occurs;
(b)
The term “Leased
Substances” shall collectively mean the matter, substances and resources
defined in subparagraph 21(a) that are subject to this Lease;
(c) The
term “Geothermal Resources” shall collectively mean the matter, substances
and resources defined in subparagraph 21(a) that are not subject to this Lease
but are located on adjacent land or lands in reasonable proximity thereto;
(d) The
term “Power Potential” shall mean, when used herein with respect to
any well or wells, the quantity, or units, of energy capable of being recovered
from the Hot Water, Steam or Thermal Energy produced therefrom by means of any
energy conversion or utilization facility (including, but not limited to, electrical
generating facilities) or equipment designed for use thereof;
(e) The
term “Sufficient Power Potential” shall mean that Power Potential
which, in the sole judgment of Lessee shall be sufficient for the Commercial
sale or utilization thereof, or shall warrant the construction of facilities
for the Commercial sale or other utilization thereof, or shall justify additional
drilling or other operations on the leased land;
(f)
The term “Commercial”
shall mean those qualities of Leased Substances produced, sold or used, the
value of which, after determining Lessee’s direct operating costs will
be capable of providing a sufficient return to cause Lessee, in its sole judgment,
to continue production thereof or to elect to proceed with further development
or exploratory operations on the leased land.
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(g) The
term “Net Proceeds” is defined as proceeds from the sale of generated
electric power to a third party, independent of the Lessor or Lessee, less deductions
of the sum of all direct operating costs, financing costs, interest expense
on capital, property taxes, franchise and other taxes, administration and marketing
expenses and the depreciation of production wells, reinjection wells, monitoring
wells, pipelines, all production facilities, power generation facilities, electrical
distribution equipment and power lines through to the sales delivery point.
Depreciation shall be on a fifteen (15) year straight-line basis with asset
capitalization in accordance with generally accepted accounting principles.
Electric power is computed and paid for on the basis of kilowatt- hours (“Kw-h”)
and the royalty shall be calculated on a basis of cents per Kw-h.
22. Severability.
In the event that 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, or any Lessor rights or obligations are not, or would not be so held
to be, void or unenforceable, which said remaining terms and conditions and
such Lessor rights or obligations, as aforesaid, of this instrument shall remain
binding, valid and subsisting and in full force and effect between the parties
hereto, it being specifically understood and agreed that the provisions hereof,
and the Lessor rights or obligations embraced within such provisions, are severable
for the purposes of the provisions of this clause.
23. Governing
Law. This lease and agreement shall be interpreted, governed by and construed
under the laws of the state of Idaho, without consideration of any conflicts
of law between the location of the parties or states of domicile thereof.
24. Execution
Authority. The signatories hereto represent that they are the proper person
to execute this Lease and Agreement on behalf of the parties hereto.
25. Binding
Effect. This Lease and Agreement and all of the terms, covenants and conditions
hereof shall extend to the benefit of and be binding upon the respective successors
and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have caused this instrument
to be duly executed as of the date hereinabove first written.
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U. S. Geothermal Inc
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Jay Newbold – Lessor
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By: Douglas J. Glaspey, COO - Lessee
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Lee Newbold – Lessor
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9
1228 117
th
Street East
Puyallup, WA 98374
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State of ________________
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)
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On this _____ day of ________________ 2004, before
me,
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County of _______________________________
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the undersigned Notary Public, personally appeared
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( ) personally known to me
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( ) proved to me on the basis of satisfactory evidence
to be the person(s) whole name(s) subscribed to the within instrument, and
acknowledged that executed it.
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WITNESS my hand and official seal.
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Notary’s
Signature
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State of Idaho
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On this _____ day of ________________ 2004, before
me,
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County of _______________________________
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)
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the undersigned Notary Public, personally appeared
Douglas Glaspey
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( ) personally known to me
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( ) proved to me on the basis of satisfactory evidence
to be the person(s) whole name Douglas Glaspey subscribed to the within
instrument, and acknowledged that he executed it.
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WITNESS my hand and official seal.
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Notary’s
Signature
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11
Exhibit
A
20.0 acres more or less
100% Surface, Minerals and Geothermal:
Township 15 South, Range 26 East
Section 23: E1/2 NE ¼
SE ¼
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RECORDING REQUESTED BY
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WHEN
RECORDED MAIL TO
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SPACE
ABOVE THIS LINE FOR RECORDER’S USE
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RAFT RIVER
GEOTHERMAL LEASE AND AGREEMENT
THIS
GEOTHERMAL LEASE AND AGREEMENT, (herein sometimes referred to as “Lease”)
made and entered as of the 28th day of June, 2003 by and between Janice Crank
and the children of Paul Crank hereinafter referred to as “Lessor”,
whether one or more, and U.S. GEOTHERMAL Inc., an Idaho corporation, hereinafter
referred to as “Lessee”;
WITNESSETH:
1. That
Lessor, for and in consideration of Ten Dollars ($10.00) in hand paid to Lessor
by Lessee, the rentals provided for hereinafter, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
in consideration of the covenants and agreements hereinafter contained has granted,
leased, let and demised and by these presents does grant, lease, let and demise
exclusively to Lessee, its grantees, successors and assigns, upon and subject
to the terms and conditions hereinafter set forth, those certain geothermal
and mineral rights for real property located in the County of CASSIA, State
of IDAHO, more particularly described in Exhibit “A” attached hereto
and by this reference made a part hereof (hereinafter referred to as the “leased
rights”), including easements and rights of way owned or claimed by Lessor,
on, within, or adjoining the lands above described. This Lease shall cover all
the interest in the leased rights now owned or hereafter acquired by Lessor.
By
the use of such methods as Lessee may desire, Lessee, and its designated representatives,
shall have the sole and exclusive right to utilize the leased rights, including
but not limited to the right to explore for, drill for, test, develop, operate,
produce, extract, take, remove or sell Hot Water, Steam and Thermal Energy and
Extractable Minerals, and to store, utilize, process, convert and otherwise
treat such Hot Water, Steam and Thermal Energy, and to extract any Extractable
Minerals during the term hereof and to transport same, and to inject or reinject
effluents into any wells drilled pursuant to the leased rights; or inject water,
gas or other fluid or substances by artificial means into formations containing
Hot Water, Steam or Thermal Energy. Further, Lessee, its designated representatives
and anyone purchasing Leased Substances (as hereinafter defined) from Lessee
are hereby granted the use of the easements owned by Lessor across said land,
to the full extent of any such rights held by Lessor. In the event this Lease
should terminate with respect to a portion of the rights granted Lessee, it
shall nevertheless continue in full force and effect to any rights of way and
any easements appurtenant thereto that are being used from time to time when
such termination occurs and shall continue in effect so long as such rights
of way and easements or any of them continue to be used from time to time for
the purposes above described or for the production and utilization of Geothermal
Resources from lands in the vicinity thereof by Lessee, its designated representatives,
or anyone who has purchased, or is purchasing, Leased Substances from Lessee,
their successors and assigns. The possession by Lessee of the leased rights
shall be sole and exclusive for the purposes hereof and for purposes incident
or related thereto. Lessee agrees to conduct its activities in a manner which
will not unreasonably interfere with any rights reserved to Lessor.
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2. This
Lease shall be for a term of four (4) years from and after the date hereof (hereinafter
referred to as the “Primary Term” ending June 28, 2007) and so long
thereafter as Leased Substances, or any of them, are derived or produced in
commercial quantities through the leased rights, or lands, rights or facilities
pooled, unitized or combined therewith, and for so long as Lessee is prevented
from producing same, or the obligations of Lessee hereunder are suspended, for
the causes hereinafter set forth, or this Lease is continued in force by reason
of any other provision hereof.
If
at the expiration of the Primary Term, Lessee is then engaged in operations
for drilling, reworking, recompleting, redrilling or enhancement of the well,
or any well developed in exercise of the leased rights, or any well on or lands
pooled, unitized or combined therewith, this Lease shall remain in force so
long as any such drilling, reworking, recompleting, redrilling or enhancement
operations are prosecuted (whether on the same or different wells) with no cessation
of such operations for more than six (6) months, and if such operations result
in production or the establishment to the satisfaction of the Lessee of the
existence of Sufficient Power Potential or Extractable Minerals in Commercial
quantities, such well or wells will be deemed to have been completed during
the primary term of this Lease.
3. Lessee
shall conduct all work in compliance with the applicable laws and regulations
of the state of Idaho and the United States of America. Lessee shall be fully
responsible for compliance with all applicable Federal, state, and local statutes,
regulations, and ordinances relating to such work, and for reclamation bonding
and any bonding required for geothermal wells. Lessor agrees to cooperate with
Lessee in Lessee’s application for governmental licenses, permits, and
approvals, all costs of which shall be borne by Lessee.
Lessee
shall protect Lessor’s interest in the leased rights against liens of every
character arising from its operations thereon. Lessee, at its own expense, prior
to commencing operations pursuant to the leased rights, shall obtain, and thereafter
while this Lease is in effect shall maintain, adequate Workers Compensation
Insurance. Lessee shall protect Lessor against damages of every kind and character
arising out of the operations or working of Lessee or those under Lessee’s
control pursuant to the leased rights, but Lessee shall not be liable hereunder
in the event of the negligence or willful misconduct of parties other than Lessee.
4. Royalties shall be payable as follows:
(a) Lessor acknowledges
that $15,000.00 has been paid for the years 2002-2003 and 2003-2004 under the
terms of the June 28, 2002 lease and that these payments will be credited as
advances on future production royalties. At the beginning of successive years
of the Primary Term, Lessee will pay to Lessor the following sums on the anniversary
of the Lease as further advances on production royalties:
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June 28, 2003
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Year 2003 - 2004:
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$10,000.00 (Paid)
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June 28, 2004
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Year 2004 - 2005:
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$10,000.00
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June 28, 2005
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Year 2005 - 2006:
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$10,000.00
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June 28, 2006
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Year 2006 - 2007:
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$10,000.00
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Lessee
shall be entitled to credit all advance royalties paid toward production royalties
owed pursuant to the following subparagraphs. Lessor will be entitled to payment
of production royalties only after crediting of all advance royalties previously
paid by Lessee.
(b) If
Leased Substances are derived or produced in commercial quantities through the
Leased Rights from and after the Primary Term, a minimum annual production royalty
of $18,000.00 will be due to Lessor.
2
(c) With
respect to Hot Water, Steam or Thermal Energy (collectively to be referred to
as “Energy Produced”) produced, saved and sold by Lessee and then
used by the purchaser for the generation of electric power, Lessee shall pay
to Lessor as royalty Ten Percent (10%) of the market value of such Hot Water,
Steam or Thermal Energy produced in exercise of the leased rights at and as
of the point of origin on the land associated with the leased rights, which
market value shall be deemed to be the gross proceeds received by Lessee from
such sale at the point of origin, unless the sale occurs at a location other
than the point of origin, in which case the market value shall be deemed to
be the gross proceeds received by lessee from such sale less all costs and expenses
of processing and transportation between the point of origin and the point of
sale.
(d) With
respect to Hot Water, Steam or Thermal Energy produced, saved and used for the
generation of electric power which is then sold by Lessee, Lessee shall pay
to Lessor as royalty Ten Percent (10%) of the Net Proceeds in accordance with
the definition of Net Proceeds in paragraph 16, subparagraph (h).
(e) With
respect to Energy Produced, saved and sold by Lessee and which is used for any
purpose other than the generation of electric power, Lessee shall pay to lessor
as royalty Five Percent (5%) of the gross proceeds received by Lessee from the
sale of Energy Produced, as such, produced in exercise of the leased rights
at and as of the point of origin on the land associated with the leased rights.
(f) With
respect to Extractable Minerals, Lessee shall pay as royalty to lessor Five
Percent (5%) of the net proceeds received by Lessee from the sale of any gases
(as herein defined) and from the sale of effluents (containing minerals and/or
minerals in solution) produced and sold from the well or in exercise of the
leased rights, or, in the event Lessee extracts from the effluents minerals
and/or minerals in solution, Five Percent (5%) of the net proceeds received
by Lessee from the sale of minerals and/or minerals in solution contained in
and extracted from such effluents less all costs of transportation, injection
and extraction. If Lessee consumes Leased Substances or electric power is generated
therefrom, by either use or exchange, for purposes other than its operations
with respect to the leased rights, then such Leased Substances or electric power
generated therefrom shall be deemed sold for royalty purposes and the above-described
royalty shall be paid on the same value basis as if such Leased substances or
electric power generated therefrom had been sold by Lessee at the time of production
under Lessee’s then existing sales contract.
Lessee
shall pay to Lessor on or before the twenty-fifth day of each month the royalties
accrued and payable for the preceding calendar month, or on or before the twenty-fifth
day of the month next following that in which Lessee receives payment therefor
from the purchaser thereof, whichever method may be chosen by Lessee from time
to time, and in making such royalty payments Lessee shall deliver to Lessor
statements setting forth the basis for computation and determination of such
royalty.
Lessee
shall not be required to account to Lessor for or to pay any royalty on Hot
Water, Steam, Thermal Energy or Extractable Minerals produced by Lessee which
is not utilized, saved and sold, or which is used by Lessee in its operations
with respect to the leased rights for or in connection with the developing,
recovering, producing, extracting and/or processing of Hot Water, Steam, Thermal
Energy and/or minerals in solution or in facilities for the generation of electric
power, or which are unavoidably lost.
Lessee
shall have the right from time to time and at any time to commingle (for purposes
of storing, transporting, utilizing, selling and processing, or any of them)
the Leased Substances, or any of them, that are produced or extracted in exercise
of the leased rights or lands pooled, unitized or combined therewith, with Geothermal
Resources, or any of them, produced from other lands or units in the vicinity
of the land associated with the leased rights, and in the event of such commingling,
Lessee shall meter, gauge, or measure the production in exercise of the leased
rights, or from the unit or units, including leased and other units or lands,
as the case may be, and compute and pay Lessor’s royalty payable under
the provisions hereof on the basis of such production so determined or allocated,
as the case may be.
3
5. Lessee
shall have the right to drill such well or wells as Lessee may deem desirable
for the exercise of the leased rights, including wells for injection or reinjection
purposes, and shall have the further right to dispose in any such wells waste
brine, water and other substances, waste products from a well or wells, power
plants or other facilities. Lessee shall further have the right for testing
purposes, to freely transfer Leased Substances and Geothermal Resources and
to inject such leased Substances and Geothermal Resources into any wells developed
pursuant to the leased rights.
6. Lessee
may, at any time or from time to time, as a recurring right for drilling, development,
production or operating purposes, pool, unitize or combine all or any part of
the leased rights into a unit with any other land or lands or lease or leases
(whether held by Lessee or others) adjacent, adjoining or in the immediate vicinity
of the land with which the leased rights are associated, which Lessee desires
to develop or operate as a unit, provided that the total acreage to be embraced
within any such drilling, development, production, or operating unit shall no
exceed one thousand nine hundred twenty (1,920) acres, plus an acreage tolerance
of Ten Percent (10%), except that a larger unit may be created to conform to
State or Federal regulations. Such unit shall be deemed created either upon
Lessee recording in the office of the county recorder a written declaration
of such unit or upon Lessee giving written notice of such unit to Lessor. Any
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 in exercise of the leased rights,
and Lessee shall have the same rights and obligations with respect thereto and
to drilling and producing operations upon the lands from time to time included
within any such unit as provided under this Lease provided, however, that notwithstanding
this or any other provision or provisions of this Lease to the contrary:
(a) production
as to which royalty is payable from any such well or wells drilled upon any
such unit, whether located upon the leased rights or other lands, shall be allocated
to the leased rights in the proportion that the acres of geothermal rights associated
with the leased rights bears to the total geothermal acreage of such unit, and
such allocated portion thereof shall for all purposes of this Lease be considered
as having been produced pursuant to the leased rights and the royalty payable
under this Lease shall be payable only upon that proportion of such production
so allocated thereto, and
(b) if
any taxes of any kind are levied or assessed (other than taxes on the land and
on Lessor’s improvements), any portion of which is chargeable to Lessor
under Paragraph 14 hereof, then the share of such taxes to be borne by Lessor
as provided in the Lease, shall be in proportion to the share of the production
from such unit allocated to the well and leased rights.
Allocation
of unit production to the leased rights or to other lands in the unit, shall
continue after any termination of all or any part of this or any other lease
covering lands in the unit until any exploration, drilling, remedial drilling
or production operations are begun on the lands so terminated, or until contracts
regarding any such operations are entered into, whereupon all such terminated
lands shall be excluded in the production to be allocated to the respective
lands in such unit. In the event of the failure of Lessor’s, or any other
owner’s, title as to any portion of the rights or land included in any
such unit, such portion of such land or associated land shall likewise be excluded
in allocating production from such unit, provided, however, Lessee shall not
be held to account for any production allocated to any lands excluded from any
such operating unit unless and until Lessee has actual knowledge of the circumstances
requiring such exclusion. Any exclusion shall be deemed effective the first
day of the month next following the date upon which such exclusion becomes finally
established.
Lessee
may, at its sole option, at any time when there is no Commercial production
in such unit, terminate, enlarge or diminish such unit either by Lessee recording
in the office of the county recorder a written declaration thereof, or by Lessee
giving written notice thereof to Lessor.
7. Lessor,
or its agents, at Lessor’s sole cost and risk, may during normal hours
of operation examine any working, installations, structures, or operations of
Lessee constructed or undertaken pursuant to the leased rights, and may at reasonable
times inspect the books and records of Lessee with respect to matters pertaining
to the payment of royalties to Lessor.
4
8. Upon
the violation of any of the terms and conditions of this Lease by Lessee (including
but not limited to payment of rental, advance royalty and/or royalty) and the
failure of Lessee, as to monetary matters, to make payment, and as to other
violations, to begin in good faith to remedy the same, within sixty (60) days
after written notice from Lessor so to do, specifying in said notice the nature
of such default, then at the option of Lessor this Lease shall forthwith cease
and terminate and all rights of Lessee in and to the well and the leased rights
shall be at an end, except for each and any well then being drilled, or capable
of producing, or capable of being used for injection purposes, and in respect
to which Lessee shall not be in default, together with the rights, rights of
way and easements which may be retained by Lessee by virtue of the granting
clause of this Lease.
9. Notwithstanding
any other provisions of this Lease, and in consideration of the payment made
by the Lessee to the Lessor for the execution of this Lease, Lessee shall have
the right at any time prior to or after default hereunder, to quitclaim and
surrender to Lessor all right, title and interest of Lessee in the leased rights,
and thereupon all rights and obligations of the parties hereto one to the other
shall cease and terminate, save and except as to any then accrued royalty obligations
of Lessee then payable as to which Lessee shall remain liable to Lessor, and
save and except the rights, rights of way and easements which may be retained
by Lessee by virtue of the granting clause of this Lease.
10. Lessor
hereby warrants and agrees to defend title to the leased rights and agrees that
Lessee, at its option, may pay and discharge any taxes, mortgages, trust deeds
or other liens or encumbrances existing, levied or assessed on or against the
leased rights, and in the event Lessee exercises such option, Lessee shall be
subrogated to the rights of any holder thereof, and shall have, among other
rights, the right of applying to the discharge of any such mortgage, tax or
other lien or encumbrance any payments accruing to lessor hereunder.
11. Lessee
shall pay all taxes levied on structures and improvements constructed by Lessee
pursuant to this Lease.
12. The
rights of either party hereunder may be assigned in whole or in part, and the
right and privilege to do so is hereby reserved by each party, and the provisions
hereof shall extend to the heirs, personal representatives, successors and assigns
of the parties hereto, but no change or division in ownership of the rights,
rentals or royalties, however accomplished, shall operate to enlarge the obligations
or diminish the rights of Lessee, and no such change in ownership shall be binding
upon Lessee until the expiration of thirty (30) days after Lessee is furnished
with written notice of such transfer or assignment, together with a certified
copy of the instruments of transfer or assignment. In the event of assignment
of this lease as to a segregated portion of the leased right, the rentals payable
hereunder shall be apportionable between the several leasehold owners ratably
according to the surface area of each, and default in rental payment by one
shall not affect the rights of other leasehold owners hereunder. Lessee’s
right of assignment expressly includes the right to sublease all or any portion
of its rights and obligations hereunder. Lessee must notify the Lessor, in writing,
within 30 days of any assignment.
13. The
obligation of the Lessee hereunder shall be suspended and the terms of this
Lease shall be extended as the case may be, while Lessee is prevented from complying
therewith, in whole or in part, by strikes, lockouts, riots, war or the results
thereof, acts of God or the elements, fire, flood, accidents, delays in transportation,
inability to secure labor or material in the open market, laws, orders, rules,
or regulations of Federal, State, County, Municipal, or other governmental agencies,
authority, or representative, or any other matter or condition beyond reasonable
control of Lessee, whether or not similar to the conditions or matters herein
specifically enumerated, or while litigation contesting Lessor’s title
to the well or the leased rights or the rights granted Lessee hereunder or litigation
involving Lessee’s operations hereunder shall be pending and undetermined
or during any period when Lessee has no market for the products it is then capable
of producing from the leased rights or the market price then available for such
products will not produce an acceptable profit. For so long as any of the above
circumstances continue to exist, Lessee, without impairment of its rights hereunder,
shall be excused from performance of al obligations hereunder except payment
of taxes and protection of the leased rights. It is expressly agreed that the
prevention of settlement of any litigation or strike or labor disturbance shall
not be considered a matter subject to Lessee’s control within the meaning
of this Paragraph.
5
If
the permission of approval of any governmental agency is necessary before drilling
or producing operations may be commenced pursuant to the leased rights, then
if such permission or approval has been applied for at least thirty (30) days
prior to the date upon which such operations much be commenced under the terms
hereof, the obligation to commence such operations shall be suspended until
ninety (90) days after the governmental permit is granted or approval given,
of if such permit or approval is denied initially, then so long as Lessee in
good faith appeals from such denial or conducts further proceedings in an attempt
to secure such permit or approval and ninety (90) days thereafter. Lessor agrees
to fully support and cooperate with Lessee in securing permits and authorizations
to conduct geothermal operations on the leased rights, all costs of which shall
be borne by Lessee.
14. All
statements of production and royalty and all payments to be made by Lessee to
Lessor hereunder shall be sent to the person hereinafter set forth, at the address
indicated:
Janice
Crank
2246 Tanglewood Lane
Emmett, Idaho 83617
Lessee
shall, upon written notification of change of ownership in the leased rights
or in the rentals or royalties hereunder, as provided in Paragraph 12 hereof,
divide and distribute the same to the new owners of such interest; provided,
however, that if at any time there are three or more persons entitled to rentals
or royalties hereunder, Lessee may, at its option, withhold payment of such
rentals or royalties until a majority in interest of such persons designate
in writing in a recordable instrument delivered to Lessee, a bank, trust company
or corporation, as a common agent and depositary, to receive all payments due
hereunder to such persons. Such designation may be changed at any time in the
same manner. Delivery of all statements and payments hereunder may be made by
depositing same in the United States mail duly addressed to Lessor at the above
address or addresses or to such agent and depositary, which shall constitute
full performance of Lessee’s obligation to make such delivery. In the event
that the amount payable under this Lease shall result in a payment of less than
Twenty-Five dollars ($25.00) becoming due Lessor, Lessee may, at is option,
withhold and accrue sufficient periodic payments until the total due Lessor
exceeds Twenty-Five Dollars ($25.00).
15. Any notice herein required or permitted
to be given or furnished by one party to the other shall be in writing. Delivery
of such written notice to Lessor shall be made by deposition the same in the
United States mail duly certified and addressed to Lessor at 2246 Tanglewood
Lane, Emmett, Idaho 83617 and delivery of such written notice to Lessee shall
be made by depositing the same in the United States mail duly certified or delivered
by express delivery and addressed to Lessee at 1509 Tyrell Lane, Suite B,, Boise,
Idaho 83706. Either party hereto may by written notice to the other party change
its address to any other location.
16. For the purposes of this Lease the following
definitions shall apply:
(a) The terms “Hot
Water”, “Steam” and “Thermal Energy”, collectively
referred to as “Energy Produced”, each shall mean natural geothermal
water and/or steam, and shall also mean the natural heat of the earth and the
energy present in, resulting from or created by, or which may be extracted from,
the natural heat of the earth or the heat present below the surface of the earth,
in whatever form such heat or energy naturally occurs;
(b) The term “Extractable
Minerals” shall mean any minerals in solution in the well effluents and
all minerals and gases produced from or by means of the well or any well or
wells developed in exercise of the leased rights or by means of condensing steam
or processing water produced from the effluents from any such well or wells.
Said terms shall also include any water so produced or obtained from condensation
or steam; provided, however, that the term “gases” shall not include
hydrocarbon gases that can be produced separately from the well effluents;
(c) The term “Leased
Substances” shall collectively man the matter, substances and resources
defined in subparagraphs 16(a) and 16(b) that are subject to this Lease;
6
(d) The
term “Geothermal Resources” shall collectively mean the matter, substances
and resources defined in subparagraph 16(a) and 16(b) that are not subject to
this Lease but are located on adjacent land or lands in reasonable proximity
thereto;
(e) The term
“Power Potential” shall mean, when used herein with respect to any
well or wells, the quantity, or units, of energy capable of being recovered
from the Hot Water, Steam or Thermal Energy produced therefrom by means of any
energy conversion or utilization facility (including, but not limited to, electrical
generating facilities) or equipment designed for use thereof;
(f) The term “Sufficient
Power Potential” shall mean that Power Potential which, in the sole judgment
of Lessee shall be sufficient for the Commercial sale or utilization thereof,
or shall warrant the construction of facilities for the Commercial sale or other
utilization thereof, or shall justify additional drilling or other operations
in exercise of the leased rights;
(g) The term “Commercial”
shall mean those qualities of Leased Substances produced, sold or used, the
value of which, after determining Lessee’s direct operating costs (or extraction
costs in the case of Extractable Minerals) will be capable of providing a sufficient
return to cause Lessee, in its sole judgment, to continue production thereof
or to elect to proceed with further development or exploratory operations in
exercise of the leased rights.
(h) The term
“Net Proceeds” is defined as proceeds from the sale of generated electric
power to a third party, independent of the Lessor or Lessee, less deductions
of the sum of all direct operating costs, financing costs, interest expense
of capital, property taxes, franchise and other taxes, marketing expenses and
the depreciation of production, injection and monitoring wells, pipelines, production
facilities, power generation and distribution facilities, and power lines through
to the sales delivery point. Depreciation shall be on a fifteen (15) year straight-line
basis with asset capitalization in accordance with generally accepted accounting
principles. Electric power is computed and paid for on the basis of kilowatt-
hours (“Kwh”) and the royalty shall be calculated on a basis of cents
per Kwh.
17. 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, 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 being specifically understood
and agreed that the provisions hereof are severable for the purposes of the
provisions of this clause. In this connection, this Lease shall not in any event
extend beyond such term as may be legally permissible under present applicable
laws, and should be any such applicable law limit the term hereof to less than
that herein provided, then this Lease shall not be void but shall be deemed
to be in existence for such term and no longer.
18. If more than one person is named as Lessor
herein and on or more of them fails to execute this Lease, said Lease shall
nevertheless (when accepted by Lessee) become effective as a lease from such
of said named parties Lessor as may have executed the same.
19. 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.
20. This Geothermal Lease and Agreement and
all of the terms, covenants and conditions hereof shall extend to the benefit
of and be binding upon the respective heirs, personal representatives, successors
and assigns of the parties hereto.
7
IN
WITNESS WHEREOF, the parties have caused this instrument to be duly executed
as of the date hereinabove first written.
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Social
Security Number
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Janice
Crank Lessor
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By:
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Douglas
J. Glaspey, CEO & Director
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Lessee
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State of Idaho
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)
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On this _____ day of July 2003, before me,
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)
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County of ________________________________________
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)
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the undersigned Notary Public, personally appeared
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( ) personally known to me
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( ) proved to me on the basis of satisfactory
evidence to be the person(s) whole name(s) ______________________________
subscribed to the within instrument, and acknowledged that ___________________________________________
executed it.
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WITNESS my hand and official seal.
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Notary’s
Signature
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8
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State of Idaho
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)
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On this _____ day of July 2003, before me,
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)
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County of ________________________________________
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)
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the undersigned Notary Public, personally appeared
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( ) personally known to me
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( ) proved to me on the basis of satisfactory
evidence to be the person(s) whole name(s) ______________________________
subscribed to the within instrument, and acknowledged that ___________________________________________
executed it.
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WITNESS my hand and official seal.
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Notary’s
Signature
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9
EXHIBIT A
Mineral rights, geothermal rights and the right of ingress
and egress for the removal of such mineral and geothermal rights for the Northeast
Quarter (NE ¼) of Section 23, Township 15 South, Range 26 East Boise
Meridian
10
COWANS & COMPANY LTD.
95 Howard Ave.
Oakville, ON
L6J 3Y4
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U.S. Geothermal Inc.
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1509 Tyrell lane, Suite B,
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Boise, Idaho
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February 1, 2004
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USA
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83706
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Dear Sirs:
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Re: Fiscal Consulting Agreement
Cowans & Company Ltd.
("Cowans") would be pleased
to act on behalf of
U.S. Geothermal Inc.
and its successors (the "Company")
to assist in developing relationships with analysts and institutional investors
as follows:
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1.
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Services
Cowans
will provide to the Company during the Term (as herein defined) and any
renewal thereof the services of Consultant as follows:
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a)
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assist the company in the creation of a marketing
strategy, representing the Company in presentations to analysts and investors,
with the objective of creating awareness of the Company; assist the Company
in the development of and continuous monthly updating of a Power Point
presentation and corresponding hand out materials for existing and prospective
investors and shareholders
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b)
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identify and contact appropriate investment industry
analysts in Canada and in the United States. In the case of the US, the
focus will be on those analysts based in New York city;
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c)
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arrange follow up meetings with the target analysts
to introduce senior management of the Company;
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d)
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maintain existing relationships with analysts and
potential investors known to the Company;
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e)
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report to the company on developments with regard
to these relationships;
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2.
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Fees The Company agrees to pay Cowans US$2,000 per
month for a period of six months that will be subject to written
renewal. If as a direct result of introductions to investors by
Cowans the Company raises debt or equity financing
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- 2 -
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("Financing Transaction"), the Company will pay
a success fee of
5% (five percent)
of the net proceeds to the Company
resulting from any Financing Transaction. As additional consideration,
subject to an available prospectus exemption and to required regulatory
approvals, including the approval of the TSX Venture Exchange, the Company
shall grant to Cowans compensation options entitling the Cowans to purchase
that number of securities equal to 5% (five percent) of the number of
securities issued by the Company in respect of the Financing Transaction.
In addition, should the Financing Transaction involve the issue of warrants
to the Investors, or any other right to purchase Common Shares or convert
the instrument that is the subject of the Financing Transaction into Common
Shares, the Company shall grant to Cowans compensation options entitling
the Cowans to purchase that number of Common Shares equal to 5% (five
percent) of such Common shares that are to be issued to the Investors
upon a full exercise of such rights.
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Compensation options will be exercisable from the
date of grant for 18 months from the date of closing the Financing Transaction
at a purchase price per share equal to the price per share equal to the
Financing Transaction as approved by the TSX. Venture Exchange.
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3.
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Expenses
It is expected that travel to New
York will be required. The Company shall reimburse Cowans for all reasonable
out-of-pocket expenses incurred by Cowans in providing services hereunder,
including but not limited to travel, courier, and telephone costs. Any
single expense over $100 shall require pre- approval by the Company.
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4.
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Payment of Fees and Expenses
Payment shall
be made against invoices as at the last business day monthly, in advance,
commencing on the execution of this agreement.
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5.
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Term
Subject to paragraph 6, the term of
this agreement (the "Term") shall commence on February 1, 2004 and shall
end on July 30, 2004.
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6.
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Termination
The Company may terminate this
agreement at any time on 30 days' notice without liability for damages
or otherwise, except for its continuing obligations as set out herein,
including without limiting the foregoing, those obligations set forth
in sections 4, 9 and 10 herein.
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Cowans may terminate this agreement by notice in
writing to the Company at any time.
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- 3 -
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Previously accrued fees and expenses unpaid at
the time of termination shall remain payable to Cowans at the time of
such termination. Nothing contained herein shall prejudice the Company's
other rights and remedies upon termination of this agreement, at law,
in equity or otherwise.
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7.
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Notification of Actions
The Company shall
promptly notify Cowans of any suit, proceeding or other action commenced
or taken against the Company or any facts or circumstances of which the
Company is aware which may reasonably form the basis of any suit, proceeding
or action against the Company.
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8.
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Indemnity
The Company covenants and agrees
to indemnify Cowans as provided for in Schedule "A" attached hereto, which
schedule is hereby incorporated into and forms part of this agreement.
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9.
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Confidentiality of Information
Cowans will
keep all information, data and documents provided to it in connection
herewith confidential and shall not disclose any of the same not previously
disclosed to the public except: (a) to employees of the Company or its
affiliates; (b) as may be required by law in connection with any legal,
stock exchange or regulatory proceedings; or (c) with the consent of the
Company.
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10.
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Confidentiality of Dealings
Cowans will
keep confidential all dealings with potential investors and agrees that
at all times in dealings with potential investors and otherwise in connection
with the Company, Cowans will comply with all applicable laws and all
applicable rules, regulations and policies of all regulatory bodies having
jurisdiction, including without limitation, the TSX Venture Exchange.
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11.
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Jurisdiction
This agreement will be governed
by and construed according to the laws prevailing in the Province of Ontario.
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12.
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Counterparts
This agreement may be executed
in one or more counterparts, in facsimile or original form, and when so
executed shall form one agreement.
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If this agreement accurately reflects your understanding of
the terms of our agreement and you agree to be legally bound thereby, please
execute this letter (in counterparts, if necessary) where indicated below and
return a copy to Cowans & Company Ltd.. (attn: Fred Cowans, President).
Yours very truly,
COWANS & COMPANY LTD.
Per: _________________________
J. Frederick Cowans, President
The foregoing accurately reflects the terms of the Consulting Agreement that we hereby agree to enter into and the undersigned agrees to be legally bound hereby.
Accepted this 1 st day of February 2004
U.S. GEOTHERMAL INC.
By: _________________________
- 4 -
- 5 -
SCHEDULE "A"
U.S. Geothermal Inc.
(the "Indemnitor") hereby agrees
to indemnify and hold Cowans & Company Ltd. and the members of its syndicate
and/or any of their respective affiliates (hereinafter referred to collectively
as the "Agents") and their directors, officers, employees, agents and shareholders
(hereinafter referred to as the "Personnel")(collectively the Personnel and
the Agents are the "Indemnified Parties" and individually, an "Indemnified Party")
harmless from and against any and all expenses, losses, claims, actions, damages
or liabilities, whether joint or several (including the aggregate amount paid
in reasonable settlement of any actions, suits, proceedings or claims), but
not including any amount for lost profits, and the reasonable fees and expenses
of its counsel that may be incurred in investigating or advising with respect
to and/or defending any action, suit, proceeding or claim that may be made against
the Agents and/or the Personnel, whether or not resulting in liability, to which
the Agents and/or the Personnel may become subject or otherwise involved in
any capacity under any statute or common law or otherwise insofar as such expenses,
losses, claims, damages, liabilities or actions arise out of or are based, directly
or indirectly, upon the performance of professional services rendered to the
Indemnitor by the Indemnified Parties hereunder or otherwise in connection with
the matters referred to in the letter to which this is attached, provided, however,
that this indemnity shall not apply to the extent that a court of competent
jurisdiction in a final judgment that has become non-appealable shall determine
that:
I an Indemnified Party has engaged in wilfull misconduct,
been dishonest, fraudulent or grossly negligent, or has breached applicable
law or any policy, rule or regulation of a regulatory body.
and
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(ii)
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the expenses, losses, claims, damages or liabilities, as to which indemnification
is claimed, were directly caused by willful misconduct, gross negligence,
dishonesty, fraud, or breach of law, rule or regulation referred to in (i).
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If for any reason (other than the occurrence of any of the
events itemized in (i) and (ii) above), the foregoing indemnification is unavailable
to the Agents or insufficient to hold them harmless, then the Indemnitor shall
contribute to the amount paid or payable by the Indemnified Parties as a result
of such expense, loss, claim, damage or liability in such proportion as is appropriate
to reflect not only the relative benefits received by the Indemnitor on the
one hand and the Agents on the other hand but also the relative fault of the
Indemnitor and the Indemnified Parties, as well as any relevant equitable considerations;
provided that the Indemnitor shall in any event contribute to the amount paid
or payable by the Indemnified Parties as a result of such expense, loss, claim,
- 6 -
damage or liability any excess of such amount over the amount
of the fees received by the Agents hereunder pursuant to the letter to which
this is attached. The rights of contribution herein provided shall be in addition
to and not in derogation of any other right to contribute which the Indemnified
Parties or the Personnel may have by statute or other by law.
The Indemnitor agrees that in case any legal proceeding shall
be brought against the Indemnitor and/or the Agents by any governmental commission
or regulatory authority or any stock exchange or other entity having regulatory
authority, either domestic or foreign, shall investigate the Indemnitor and/or
the Agents and Personnel or the Agents shall be required to testify in connection
therewith or shall be required to respond to procedures designed to discover
information regarding, in connection with, or by reason of the performance of
professional services rendered to the Indemnitor by the Agents and the Personnel
in connection with the matters referred to in the attached letter agreement,
the Agents shall have the right to employ its own counsel in connection therewith,
and the reasonable fees and expenses of such counsel as well as the reasonable
costs (including an amount to reimburse the Agents for time spent by the Personnel
in connection therewith) and out-of-pocket expenses incurred by the Agents and
the Personnel in connection therewith shall be paid by the Indemnitor as they
occur.
Promptly after receipt of notice of the commencement of any
legal proceeding against the Agents or any of the Personnel or after receipt
of notice of the commencement of any investigation, which is based, directly
or indirectly, upon any matter in respect of which indemnification may be sought
from the Indemnitor, the Agents will notify the Indemnitor in writing of the
commencement thereof and, throughout the course thereof, will provide copies
of all relevant documentation to the Indemnitor, will keep the Indemnitor advised
of the progress thereof and will discuss with the Indemnitor all significant
actions proposed. No settlement of any claim shall be made without the consent
of the Indemnitor, the Agents and any of the Personnel who are affected. If
the Indemnitor gives written notice of a settlement of a specific claim, which
settlement it is prepared to accept, and the Agents or any of the Personnel
who are affected (the "Indemnitee") is unwilling to accept such settlement,
the amount which the Indemnitor is required to pay to the Indemnitee in respect
of that specific claim shall be limited to an amount equal to the amount of
such proposed settlement plus the amount of all expenses for which the Indemnitee
would be entitled to be reimbursed or indemnified as of the effective date of
such settlement.
The indemnity and contribution obligations of the Indemnitor
shall be in addition to any liability which the Indemnitor may otherwise have,
shall extend upon the same terms and conditions to the Personnel and shall be
binding upon and enure to the benefit of any successors, assigns, heirs and
personal representatives of the Indemnitor, the Agents and any of the Personnel.
the Agents hereby declares that it holds the benefits and rights conferred hereunder
in trust for the Personnel and the Indemnitor acknowledges and
- 7 -
agrees that the Personnel is so entitled to such rights and
benefits and may be enforced by the Agents on behalf of the Personnel.
The foregoing provisions shall survive the completion of professional
services rendered under the letter to which this is attached or any termination
of the authorization given by the letter to which this is attached.
ADMINISTRATIVE SERVICES CONTRACT
THIS AGREEMENT
made the 1
st
of January,
2004 between
, U.S. GEOTHERMAL INC.
(the "Company") of 910 - 885
Dunsmuir Street, Vancouver, British Columbia, V6C 1N5 and
NEW DAWN HOLDINGS
LTD.,
("NDH") of 910 - 885 Dunsmuir Street, Vancouver, British Columbia,
V6C 1N5.
R.1 Whereas
the Company wishes to
retain NDH to provide services with respect to the administrative and corporate
affairs of the Company;
R.2 Whereas
NDH is a professional
administration and corporate services company;
R.3 Whereas
NDH has agreed to provide
its administrative and corporate services to the Company on the terms and subject
to the conditions hereinafter set forth.
WITNESS THAT
in consideration of the premises
and the mutual covenants and agreements herein contained, the parties hereto
do covenant and agree each with the other as follows:
APPOINTMENT
1.
The Company hereby appoints NDH and NDH hereby accepts such appointment to provide
Administrative Services to the Company for an initial term of one (1) year from
the date of this Agreement, and thereafter annually,
SUBJECT ALWAYS
to the direction and supervision of the Board of Directors and the management
of the Company,
PROVIDED HOWEVER,
that either the Company or NDH
may terminate this Agreement by giving one (1) months' written notice thereof
to the other party.
2. NDH
covenants and agrees to provide the services hereunder in a faithful and diligent
manner.
ADMINISTRATIVE SERVICES.
3.
NDH hereby agrees to provide to the Company general office
facilities and, in connection therewith, the following services (herein collectively
referred to as the "Administrative Services"):
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General office administration and secretarial services; as required;
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Accounting services, including compilation of the Company's unaudited
financial statements from financial information provided by the Company
and it’s subsidiaries, and
the filing of the quarterly report form 61 with Sedar. Sedar costs are
for the account of the Company.
-
General liaison with the Company's professional representatives; including
local dissemination of the Company’s News Releases.
-
General supervisory and integration services in connection with the administrative
affairs of the Company's subsidiaries, affiliates and associated companies,
if any, in accordance with the direction of the Company's management.
CORPORATE SERVICES.
4.
NDH agrees to provide, at the Company's request, the following
additional services (herein collectively referred to as the "Corporate Services"):
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Liaison with the Company's representatives on matters other than of a
general administrative nature;
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Shareholder relation services, (other than of a general administrative
nature,) including, without limitation, preparation and dissemination of
communications to shareholders or potential shareholders of the Company;
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Such further and other corporate services as the Company may, from time
to time, request.
REMUNERATION.
5.
The Company hereby agrees to pay to NDH during the currency
of this Agreement, as remuneration for the provision of the "Administrative
Services", the amount of $4,587 plus GST per month. On the first day of each
month the $4,587 plus G.S.T. will be invoiced and will be immediately payable.
6.
The Company hereby agrees to pay to NDH forthwith upon provision thereof, as
remuneration for the "Corporate Services", the amount set out for such services
in NDH's Schedule of Fees for Corporate Services, from time to time in force,
at the time of the Company's request for such services.
2
7.
The Company further agrees to reimburse to NDH, at the time of making payment
for services hereunder, the out-of-pocket expenses incurred by NDH, its consultants,
advisors, sub-agents and employees, in connection with the provision of any
of the services outlined,
PROVIDED ALWAYS
that NDH will submit
to the Company invoices detailing such out-of-pocket expenses.
GENERAL.
8.
The Company represents and warrants to NDH that the Company
is duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has the power and capacity to enter
into this Agreement and to carry out its terms and the execution and delivery
of this Agreement by the Company has been duly and validly authorized by all
necessary corporate action.
9.
Any notices to be given by either party to the other shall be well and sufficiently
given if delivered personally or if sent by double registered mail, postage
prepaid, to the parties hereto at the respective addresses set out above, or
to such other address or addresses as the parties hereto may notify to the other
from time to time in writing. Such notice shall be deemed to have been given
at the time of delivery, if delivered in person, or forty-eight (48) hours from
the date of posting if mailed from Vancouver, British Columbia.
10.
This Agreement may not be assigned by either party hereto
without the written consent of the other.
11.
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns.
12.
This Agreement is subject to its acceptance for filing on
behalf of the Company by the Vancouver Stock Exchange.
IN WITNESS WHEREOF
the parties hereto have executed
this Agreement on the day and year first above written.
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U.S. GEOTHERMAL INC.
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NEW DAWNHOLDINGS LTD.,
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Per:______________________________
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Per:______________________________
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Authorized Signatory:
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Authorized Signatory: Paul A. Larkin
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3
New Dawn Holdings Ltd.,
# 910 – 885 Dunsmuir Street, Vancouver, B.C., V6C 2T6, Canada
Tel: (604) 687-7767; Fax: (604) 688-9895
C O R P O R A T E S E R V I C E S
S C H E D U L E O F F E E S
J
A N U A R Y 2 0 0 4 :
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Hourly ($)
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Daily ($)
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Senior Officer: ....................
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100.00
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800.00
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Administrative Officer: ……
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40.00
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360.00
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Travel time charged at 50% of either
the hourly or
daily rate.
Operational or administrative expenses incurred by NDH on
behalf of client will be charged at cost plus a 10% administrative fee.
The above fee schedule includes the following services not
referenced in earlier versions of NDH’s Administrative Services Contract.
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a)
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Accounting Services, additional to preparation of
the Company’s unaudited Financial Statements, required by the Board
of Directors, Auditor or Chief Financial Officer.
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b)
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Coordination and assistance on preparation of the
Company’s Annual Report, Annual General Meeting material, and Extraordinary
General Meeting material, as required.
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c)
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Coordination, preparation and attendance at trade
shows, or Investor Relations Conferences.
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d)
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Broker meetings and individual investor presentations.
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4
EMPLOYMENT AGREEMENT
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BETWEEN:
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US Geothermal Inc.
, a body corporate
having an office at Suite B
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1509 Tyrell Lane Boise, Idaho 83706
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(the "
Company
")
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AND:
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Douglas Glaspey
of 1509 Tyrell Lane,
Suite B, Boise, Idaho
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83706
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(the "
Employee
")
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WHEREAS:
THIS AGREEMENT
made as of the 1st day of January, 2003
(A)
the Company
is in the business of developing its Raft River geothermal property;
(B)
the Company
wishes to engage the Employee as Chief Operating Officer; and
(C)
the parties
hereto wish to enter into this Agreement for the purpose of fixing the compensation
and terms applicable to the employment of the Employee during the period hereinafter
set out.
NOW THEREFORE THIS AGREEMENT WITNESSES
that the parties
hereto, in consideration of the respective covenants and agreements on the part
of each of them herein contained, do hereby covenant and agree as follows:
1.
Employment
The Company hereby engages the Employee as Chief Operating
Officer of the Company, and the Employee hereby accepts such employment, upon
the terms and conditions hereinafter set out.
2.
Term
This Agreement will be effective from January 1, 2003 and
will remain in full force and effect until terminated as hereinafter provided.
3.
Responsibility
The Employee will devote one third of his working time to
his Employment hereunder, and while engaged in his employment will have the
authority and duty to perform and
- 2 -
carry out such duties and responsibilities as are customarily
carried out by persons holding similar positions in other mining companies comparable
in size to the Company and such additional and related duties as may from time
to time be assigned, delegated, limited or determined by the President.
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4.
Other
Business Activities
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It is agreed that the Employee's employment
hereunder shall constitute one third of his working time which shall be
devoted exclusively for the benefit of the Company, and therefore:
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(a)
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the Employee may engage in any other business
activities, so long as such activities will not interfere with, or impede,
in any significant manner the performance of his duties as Chief Operating
Officer of the Company provided, however, that:
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(i)
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other than the business activities already
disclosed to the President, before the Employee can engage in any such
other business activity which involves the Employee owning or acquiring
any interest, directly or indirectly, in any geothermal property or the
rendering of any advice or service to another person, partnership or other
legal entity or a joint venture engaged in the business of exploring for
and/or developing geothermal resources the Employee must disclose full
particulars thereof in writing to the President, and within 15 days after
the date of such disclosure, the Employee must receive from the President
a decision that such activities by the Employee will not, in the opinion
of the President, interfere or be in conflict with the Employee's performance
of his duties to the Company hereunder;
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(ii)
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before engaging in any such other business activity other than an investment
or acquisition of the kind described in sub- paragraph (a)(i) of this Section
4, the Employee shall have disclosed same in writing to the President; and,
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(iii)
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an investment or acquisition of the kind
described in sub-paragraph (a)(i) of this Section 4 does not include investment
in publicly traded mining companies, where such investment does not constitute
10%, either directly or after exercise of any share acquisition rights,
of the issued capital of the company in question, nor a control position,
nor part of a control block.
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(b)
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the Employee shall refer to the President
any and all matters and transactions in respect of which an actual or
potential conflict of interest between the Employee and the Company has
arisen or may arise, however remote the possibility, and the Employee
shall not proceed with any such matter or transaction until the President's
approval
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- 3 -
therefor is obtained. For purposes of clarification, this
provision is not intended to limit in any way the Employee's other fiduciary
obligations to the Company which may arise in law or in equity.
5.
Compensation
In consideration of the performance by the Employee of his
responsibilities and duties as Chief Operating Officer hereunder:
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(a)
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the Company will pay the Employee the
sum of US$36,000 per annum, payable in monthly installments. The Employee
may elect to have any compensation payable hereunder paid into any jurisdiction
of his choice, but the Company may decline to pay such compensation to
the Employee at the place specified if the Company determines that such
payment in such jurisdiction would violate the laws of the jurisdiction
of the place of payment specified by the Employee or the laws of any other
country or if the Company otherwise determines that payment to the Employee
or for his account in such place would be prejudicial to the Company;
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(b)
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the Company will grant the Employee incentive
stock options in such amount and on such conditions as the Board of Directors
of the Company may determine from time to time; and
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(c)
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the Company will provide the Employee
and his immediate family (consisting of spouse and children) with medical,
dental and related coverages as are or may become available to the other
employees of the Company.
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6.
Expenses
The Company will reimburse the Employee for any and all reasonable
and documented expenses actually and necessarily incurred by the Employee in
connection with the performance of his duties under this Agreement. The Employee
will furnish the Company with an itemized account of his expenses in such form
or forms as may reasonably be required by the Company and at such times or intervals
as may be required by the Company.
7.
Vacation
The Employee will be entitled to a paid vacation of one week within each 12 month period under the terms of this Agreement, to be calculated from the date of commencement of employment set forth in Section 2 herein. This vacation must be taken on
dates which do not adversely compromise the Employee's performance of his duties under this Agreement.
8.
Termination
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This Agreement and the Employee's employment may be terminated
by the Company summarily and without notice, payment in lieu of notice, severance
payments, benefits, damages or any sums whatsoever, on the occurrence of any
one or more of the following events:
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(a)
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the Employee's failure to carry out his
duties hereunder in a competent and professional manner;
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(b)
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the Employee's appropriation of corporate
opportunities for the Employee's direct or indirect benefit or his failure
to disclose any material conflict of interest;
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(c)
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the Employee's plea of guilty to, or conviction
of, an indictable offence once all appeals (if any) have been completed
without such conviction having been reversed;
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(d)
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the existence of cause for termination
of the Employee at common law including but not limited to cause related
to fraud, dishonesty, illegality, breach of statute or regulation, or
gross incompetence;
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(e)
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failure on the part of the Employee to
disclose material facts concerning his business interests or employment
outside of his employment by the Company, provided such facts relate to
the Employee's duties hereunder;
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(f)
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refusal on the part of the Employee to
follow the reasonable and lawful directions of the Company;
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(g)
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breach of fiduciary duty to the Company
on the part of the Employee;
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(h)
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material breach of this Agreement or gross
negligence on the part of the Employee in carrying out his duties under
this Agreement; or
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(i)
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a declaration of bankruptcy on the part
of the Employee by a court of competent jurisdiction.
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8.1
In the event of the early termination of the Agreement for any reason set out
in Section 8 above, the Employee shall only be entitled to such compensation
as would otherwise be payable to the Employee hereunder up to and including
such date of termination, as the case may be.
8.2
This Agreement and the Employee's employment may be terminated on notice by
the Company to the Employee for any reason other than for the reasons set out
in Section 8 above of this Agreement upon one month notice to the Employee.
In such event, the Employee will be entitled to payment of salary and expenses
until the date one month after which notice was given.
- 5 -
8.3
This Agreement and the Employee's employment may be terminated on notice by
the Employee to the Company for any reason upon one month notice to the Company.
In such event, the Employee will be entitled to payment of salary and expenses
until the date one month after which notice was given.
9.
Confidential
Information
The Employee agrees to keep the affairs and Confidential Information
(as defined below) of the Company strictly confidential and shall not disclose
the same to any person, company or firm, directly or indirectly, during or after
his employment by the Company except as authorized in writing by the Board.
"Confidential Information" includes, without limitation, the following types
of information or material, both existing and contemplated, regarding the Company
or its parent, affiliated or subsidiary companies: corporate information, including
contractual licensing arrangements, plans, strategies, tactics, policies, resolutions,
patent, trademark and trade name applications; any litigation or negotiations;
information concerning suppliers; marketing information, including sales, investment
and product plans, customer lists, strategies, methods, customers, prospects
and market research data; financial information, including cost and performance
data, debt arrangements, equity structure, investors and holdings; operational
and scientific information, including trade secrets; technical information,
including technical drawings and designs; any information relating to any mineral
projects in which the Company has an actual or potential interest; and personnel
information, including personnel lists, resumes, personnel data, organizational
structure and performance evaluations. The Employee agrees not to use such information,
directly or indirectly, for his own interests, or any interests other than those
of the Company, whether or not those interests conflict with the interests of
the Company during or after his employment by the Company. The Employee expressly
acknowledges and agrees that all information relating to the Company, whether
financial, technical or otherwise shall, upon execution of this Agreement and
thereafter, as the case may be, be the sole property of the Company, whether
arising before or after the execution of this Agreement. The Employee expressly
agrees not to divulge any of the foregoing information to any person, partnership,
Company or other legal entity or to assist in the disclosure or divulging of
any such information, directly or indirectly, except as required by law or as
otherwise authorized in writing by the Board. The provisions of this Section
9 and Section 9.1 below shall survive the termination of this Agreement.
9.1
The
Employee agrees that all documents of any nature pertaining to the activities
of the Company or its related corporate entities, including Confidential Information,
in the Employee's possession now or at any time during the Employee's period
of employment, are and shall be the property of the Company and that all such
documents and copies of them shall be surrendered to the Company when requested
by the Company.
- 6 -
10.
Non-Competition
During the Non-Competition Period (as defined below), the
Employee shall not, either individually or in partnership or jointly or in conjunction
with any other person, entity or organization, as principal, agent, consultant,
lender, contractor, employer, employee, investor, shareholder or in any other
manner, directly or indirectly, advise, manage, carry on, establish, control,
engage in, invest in, offer financial assistance or services to, or permit the
Employee's name or any part thereof to be used by, any business in geothermal
resources that competes with the business of the Company, its parent, affiliated
or subsidiary companies, or any business in which the Company, its parent, affiliated
or subsidiary companies is engaged. For purposes of this Agreement, "Non-Competition
Period" means a period ending twelve (12) months after the end of the termination
of this Agreement.
11.
Acknowledgement
The Employee acknowledges that damages would be an insufficient
remedy for a breach by him of this Agreement and agrees that the Company may
apply for and obtain any relief available to it in a court of law or equity,
including injunctive relief, to restrain breach or threat of breach of this
Agreement by the Employee or to enforce the covenants contained therein and,
in particular, the covenants contained in Sections 9 and 10, in addition to
rights the Company may have to damages arising from said breach or threat of
breach.
12.
Representations
and Warranties
The Employee represents and warrants to the Company that the
execution and performance of this Agreement will not result in or constitute
a default, breach, or violation, or an event that, with notice or lapse of time
or both, would be a default, breach, or violation, of any understanding, agreement
or commitment, written or oral, express or implied, to which the Employee is
currently a party or by which the Employee or Employee's property is currently
bound.
13.
Governing
Law
This Agreement shall be construed and enforced in accordance
with the laws of the State of Idaho, USA.
14.
Entire
Agreement
This Agreement constitutes the entire agreement between the
parties hereto with respect to the relationship between the Company and the
Employee and supersedes all prior arrangements and agreements, whether oral
or in writing between the parties hereto with respect to the subject matter
hereof.
15.
Amendments
No amendment to or variation of the terms of this Agreement
will be effective or
- 7 -
binding upon the parties hereto unless made in writing and
signed by both of the parties hereto.
16.
Assignment
This Agreement is not assignable by the Employee. This Agreement
is assignable by the Company to any other company which controls, is controlled
by, or is under common control with the Company. This Agreement shall enure
to the benefit of and be binding upon the Company and its successors and permitted
assigns and the Employee and his heirs, executors and administrators.
17.
Severability
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of the prohibition or unenforceability and shall be severed from the balance
of this Agreement, all without affecting the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other jurisdiction.
18.
Headings
The division of this Agreement into Sections and the insertion
of headings are for convenience or reference only and shall not affect the construction
or interpretation of this Agreement.
19.
Time
of Essence
Time shall be of the essence in all respects of this Agreement.
20.
Independent
Legal Advice
The Employee agrees that he has had, or has had the opportunity
to obtain, independent legal advice in connection with the execution of this
Agreement and has read this Agreement in its entirety, understands its contents
and is signing this Agreement freely and voluntarily, without duress or undue
influence from any party.
21.
Notice
Any notice required or permitted to be made or given under
this Agreement to either party shall be in writing and shall be sufficiently
given if delivered personally, by electronic transmission, or if sent by prepaid
registered mail to the intended recipient of such notice at their respective
addresses set forth below or to such other address as may, from time to time,
be designated by notice given in the manner provided in this Section:
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in the case of Company:
US Geothermal Inc.
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Attention: Corporate Secretary
Fax No.: 208 424 1030
in the case of Employee:
Douglas Glaspey
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Fax No.: 208 424 1030
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21.1
Any
notice delivered to the party to whom it is addressed shall be deemed to have
been given and received on the day it is so delivered or, if such day is not
a business day, then on the next business day following any such day. Any notice
mailed shall be deemed to have been given and received on the 10th business
day following the date of mailing. In the case of facsimile transmission, notice
is deemed to have been given or served on the party to whom it was sent at the
time of dispatch if, following transmission, the sender receives a transmission
confirmation report or, if the sender's facsimile machine is not equipped to
issue a transmission confirmation report, the recipient confirms in writing
that the notice has been received.
IN WITNESS WHEREOF
the parties hereto have executed this Agreement as of the day and year first above written.
|
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US GEOTHERMAL INC.
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|
By: ____________________________
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Authorized
Signatory
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SIGNED
by the Employee in the presenceof:
|
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__________________________
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______________________
|
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Witness
|
Douglas Glaspey
|
__________________________
Printed Name of Witness
EMPLOYMENT AGREEMENT
THIS AGREEMENT
made as of the 1st day of January 2004
BETWEEN:
|
|
US Geothermal Inc.
, a body corporate having an office at Suite
B,1509 Tyrell Lane Boise, Idaho 83706
(the "
Company
")
|
AND:
|
|
Daniel Kunz
of 1509 Tyrell Lane, Suite B, Boise, Idaho 83706
(the "
Employee
")
|
WHEREAS:
|
(A)
|
the Company is in the business of developing the Raft River geothermal
property;
|
|
|
|
|
(B)
|
the Company wishes to engage the Employee as President and Chief Executive
Officer; and
|
|
|
|
|
(C)
|
the parties hereto wish to enter into this Agreement
for the purpose of fixing the compensation and terms applicable to the
employment of the Employee during the period hereinafter set out.
|
NOW THEREFORE THIS AGREEMENT WITNESSES
that the parties
hereto, in consideration of the respective covenants and agreements on the part
of each of them herein contained, do hereby covenant and agree as follows:
1.
Employment
The Company hereby engages the Employee as President and Chief
Executive Officer of the Company, and the Employee hereby accepts such employment,
upon the terms and conditions hereinafter set out.
2.
Term
This Agreement will be effective from 1
st
January
2004 and will remain in full force and effect until terminated as hereinafter
provided.
3.
Responsibility
The Employee will devote appropriate working time to his Employment
hereunder, and while engaged in his employment will have the authority and duty
to perform and
- 2 -
carry out such duties and responsibilities as are customarily
carried out by persons holding similar positions in other development companies
comparable in size to the Company and such additional and related duties as
may from time to time be assigned, delegated, limited or determined by the Board
of Directors.
4.
Other
Business Activities
It is agreed that the Employee's employment hereunder shall
constitute no less than eighty (80) hours per month which shall be devoted exclusively
for the benefit of the Company, and therefore: The Employee may be required
to provide additional time to perform his duties and responsibilities and will
be remunerated for such incremental time in accordance with Paragraph 5 (b).
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(a)
|
the Employee may engage
in any other business activities, so long as such activities will not
interfere with, or impede, in any significant manner the performance of
his duties as President and Chief Executive Officer of the Company provided,
however, that:
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|
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(i)
|
other than the business activities already disclosed
to the Board of Directors , before the Employee can engage in any such
other business activity which involves the Employee owning or acquiring
any interest, directly or indirectly, in any geothermal property or the
rendering of any advice or service to another person, partnership or other
legal entity or a joint venture engaged in the business of exploring for
and/or developing geothermal resources the Employee must disclose full
particulars thereof in writing to the Board of Directors, and within 15
days after the date of such disclosure, the Employee must receive from
the President a decision that such activities by the Employee will not,
in the opinion of the Board of Directors, interfere or be in conflict
with the Employee's performance of his duties to the Company hereunder;
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(ii)
|
Before engaging in any such other business activity
other than an investment or acquisition of the kind described in sub-paragraph
(a)(i) of this Section 4, the Employee shall have disclosed same in writing
to the Board of Directors; and,
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|
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|
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|
(iii)
|
an investment or acquisition of the kind described
in sub-paragraph (a)(i) of this Section 4 does not include investment
in publicly traded development or other resource companies, where such
investment does not constitute 10%, either directly or after exercise
of any share acquisition rights, of the issued capital of the company
in question, nor a control position, nor part of a control block.
|
- 3 -
|
|
(b)
|
the Employee shall refer to the Board of Directors
any and all matters and transactions in respect of which an actual or
potential conflict of interest between the Employee and the Company has
arisen or may arise, however remote the possibility, and the Employee
shall not proceed with any such matter or transaction until the Board
of Director’s approval therefore is obtained. Such approval shall
not be denied unless it is evident that it will impact the Company’s
competitive position. For purposes of clarification, this provision is
not intended to limit in any way the Employee's other fiduciary obligations
to the Company, which may arise in law or in equity.
|
5.
Compensation
In consideration of the performance by the Employee of his
responsibilities and duties as President and Chief Executive Officer hereunder:
|
|
(a)
|
the Company will pay the Employee the sum of US$50,000
per annum, payable in monthly installments of $4,166.67 no later than
the last working day of the month. The Employee may elect to have any
compensation payable hereunder paid into any jurisdiction of his choice,
but the Company may decline to pay such compensation to the Employee at
the place specified if the Company determines that such payment in such
jurisdiction would violate the laws of the jurisdiction of the place of
payment specified by the Employee or the laws of any other country or
if the Company otherwise determines that payment to the Employee or for
his account in such place would be prejudicial to the Company;
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|
|
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|
(b)
|
Where on a monthly basis the Employee has provided
in excess of eighty (80) hours, up to a maximum of $10,000, the incremental
will be remunerated in the form of common shares of the Company to be
issued in accordance with the rules and regulations of the TSX Venture
Exchange. Such increment will be earned at the rate of $55.00 per hour.
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(c)
|
the Company will grant the Employee incentive
stock options in such amount and on such conditions as the Board of Directors
of the Company may determine from time to time; and
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|
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|
(d)
|
the Company will provide the Employee and his immediate
family (consisting of spouse and children) with medical, dental and related
coverage as are available to the other employees of the Company. The Company
will also provide reasonable life insurance and accidental death coverage
with proceeds payable to the Employee's estate or specified family member.
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|
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|
(e)
|
in recognition of the Employee’s work and effort
from January 1, 2003 to December 31, 2003, specifically in respect of
the reorganization which closed on December 19, 2003; the Employee shall
receive a one-time consideration of
|
- 4 -
|
|
|
$38,000. This consideration shall be paid with $5,000
in cash and a $33,000 stipend to be applied against the exercise of the
Company’s stock options. In addition for services rendered prior
to January 1, 2003 Employee shall be paid a stipend in the amount of the
invoices already submitted by Employee for 2001 and 2002. The cash stipend
shall be applied against the exercise of the Company’s stock options.
Payment of the cash portion shall be made no later than January 15
th
2004 whereas the exercise of options shall be made within 10 working days
of the stock option grant.
|
6.
Expenses
The Company will reimburse the Employee for any and all reasonable
and documented expenses actually and necessarily incurred by the Employee in
connection with the performance of his duties under this Agreement. The Employee
will furnish the Company with an itemized account of his expenses in such form
or forms as may reasonably be required by the Company and at such times or intervals
as may be required by the Company.
7.
Review
of Agreement Upon Financial Close
Whereas the purpose of the organization of the Company is
to commercially develop the Raft River, Idaho geothermal resource, it is mutually
acknowledged that the working time commitment and compensation of the Employee
may materially change upon procurement of a Power Purchase Agreement and the
closing of a financial package to construct and commission an electrical generation
facility. The Company shall request that the Executive Committee of the Board
of Directors, within fifteen (15) working days of said close to review and if
deemed appropriate replace this Employment Agreement with a new employment agreement.
Such an undertaking shall not be construed as a contractual obligation on the
part of the Company to provide an increase in compensation.
8.
Change
of Control
Cognizant that the Company is a publicly owned entity, should
a Change of Control occur, the Employee, at his option shall elect to receive
compensation of $75,000 no later than five (5) working days after the effective
date that the Change of Control has occurred. This compensation is payable by
the Company or its Successor regardless of whether or not the Employee continues
under employment pursuant to this Employment Agreement or is replaced with a
new agreement.
9.
Termination
This Agreement and the Employee's employment may be terminated by the
- 5 -
Company summarily and without notice, payment in lieu of notice,
severance payments, benefits, damages or any sums whatsoever, on the occurrence
of any one or more of the following events:
|
|
(a)
|
The Employee’s failure to carry out his duties
hereunder in a competent and professional manner;
|
|
|
|
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|
(b)
|
The Employee’s appropriation of corporate opportunities
for the Employee’s direct or indirect benefit or his failure to disclose
any material conflict of interest;
|
|
|
|
|
|
|
(c)
|
The Employee’s plea of guilty to, or conviction
of, an indictable offence once all appeals (if any) have been completed
without such conviction having been reversed;
|
|
|
|
|
|
|
(d)
|
The existence of cause for termination of the Employee
at common law including but not limited to cause related to fraud, dishonesty,
illegality, breach of statute or regulation, or gross incompetence;
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|
|
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(e)
|
Failure on the part of the Employee to disclose
material facts concerning his business interests or employment outside
of his employment by the Company, provided such facts relate to the Employee’s
duties hereunder;
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|
|
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(f)
|
Refusal on the part of the Employee to follow the reasonable and lawful
directions of the Company;
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|
|
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|
(g)
|
Breach of fiduciary duty to the Company on the part of the Employee;
|
|
|
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|
|
(h)
|
Material breach of this Agreement or gross negligence
on the part of the Employee in carrying out his duties under this Agreement;
or
|
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|
|
|
|
|
(i)
|
A declaration of bankruptcy on the part of the Employee by a court of
competent jurisdiction.
|
9.1
In the event of the early
termination of the Agreement for any reason set out in Section 9 above, the
Employee shall only be entitled to such compensation as would otherwise be payable
to the Employee hereunder up to and including such date of termination, as the
case may be.
9.2
This Agreement and the Employee's
employment may be terminated on notice by the Company to the Employee for any
reason other than for the reasons set out in Section 9 above of this Agreement
upon one month notice to the Employee. In such event, the Employee will be entitled
to payment of salary and expenses until the date one month after which notice
was given.
- 6 -
9.3
This Agreement and the Employee's
employment may be terminated on notice by the Employee to the Company for any
reason upon one month notice to the Company. In such event, the Employee will
be entitled to payment of salary and expenses until the date one month after
which notice was given.
10.
Confidential
Information
The Employee agrees to keep the affairs and Confidential Information
(as defined below) of the Company strictly confidential and shall not disclose
the same to any person, company or firm, directly or indirectly, during or after
his employment by the Company except as authorized in writing by the Board.
"Confidential Information" includes, without limitation, the following types
of information or material, both existing and contemplated, regarding the Company
or its parent, affiliated or subsidiary companies: corporate information, including
contractual licensing arrangements, plans, strategies, tactics, policies, resolutions,
patent, trademark and trade name applications; any litigation or negotiations;
information concerning suppliers; marketing information, including sales, investment
and product plans, customer lists, strategies, methods, customers, prospects
and market research data; financial information, including cost and performance
data, debt arrangements, equity structure, investors and holdings; operational
and scientific information, including trade secrets; technical information,
including technical drawings and designs; any information relating to any mineral
projects in which the Company has an actual or potential interest; and personnel
information, including personnel lists, resumes, personnel data, organizational
structure and performance evaluations. The Employee agrees not to use such information,
directly or indirectly, for his own interests, or any interests other than those
of the Company, whether or not those interests conflict with the interests of
the Company during or after his employment by the Company. The Employee expressly
acknowledges and agrees that all information relating to the Company, whether
financial, technical or otherwise shall, upon execution of this Agreement and
thereafter, as the case may be, be the sole property of the Company, whether
arising before or after the execution of this Agreement. The Employee expressly
agrees not to divulge any of the foregoing information to any person, partnership,
Company or other legal entity or to assist in the disclosure or divulging of
any such information, directly or indirectly, except as required by law or as
otherwise authorized in writing by the Board. The provisions of this Section
10 and Section 10.1 below shall survive the termination of this Agreement.
10.1
The Employee agrees that
all documents of any nature pertaining to the activities of the Company or its
related corporate entities, including Confidential Information, in the Employee's
possession now or at any time during the Employee's period of employment, are
and shall be the property of the Company and that all such documents and copies
of them shall be surrendered to the Company when requested by the Company.
11.
Non-Competition
During the Non-Competition Period (as defined below), the Employee shall not,
- 7 -
either individually or in partnership or jointly or in conjunction
with any other person, entity or organization, as principal, agent, consultant,
lender, contractor, employer, employee, investor, shareholder or in any other
manner, directly or indirectly, advise, manage, carry on, establish, control,
engage in, invest in, offer financial assistance or services to, or permit the
Employee's name or any part thereof to be used by, any business in geothermal
resources that competes with the business of the Company, its parent, affiliated
or subsidiary companies, or any business in which the Company, its parent, affiliated
or subsidiary companies is engaged. Competition, for purposes of this paragraph
is defined as a 100-mile radius around any and all geothermal properties acquired
by the Company up to and inclusive of the date of termination. For purposes
of this Agreement, “Non-Competition Period” means a period ending
twelve (12) months after the end of the termination of this Agreement.
12.
Acknowledgement
The Employee acknowledges that damages would be an insufficient
remedy for a breach by him of this Agreement and agrees that the Company may
apply for and obtain any relief available to it in a court of law or equity,
including injunctive relief, to restrain breach or threat of breach of this
Agreement by the Employee or to enforce the covenants contained therein and,
in particular, the covenants contained in Sections 10 and 11, in addition to
rights the Company may have to damages arising from said breach or threat of
breach. The Company, in turn, acknowledges that in seeking remedy in a court
of law or equity, it is not attempting to deny the Employee, if in good faith
he is seeking to improve his financial well being.
13.
Representations
and Warranties
The Employee represents and warrants to the Company that the
execution and performance of this Agreement will not result in or constitute
a default, breach, or violation, or an event that, with notice or lapse of time
or both, would be a default, breach, or violation, of any understanding, agreement
or commitment, written or oral, express or implied, to which the Employee is
currently a party or by which the Employee or Employee's property is currently
bound.
14.
Governing
Law
This Agreement shall be construed and enforced in accordance with the laws
of the State of Idaho, USA.
15.
Entire
Agreement
This Agreement constitutes the entire agreement between the
parties hereto with respect to the relationship between the Company and the
Employee and supersedes all prior arrangements and agreements, whether oral
or in writing between the parties hereto with respect to the subject matter
hereof.
- 8 -
16.
Amendments
No amendment to or variation of the terms of this Agreement
will be effective or binding upon the parties hereto unless made in writing
and signed by both of the parties hereto.
17.
Assignment
This Agreement is not assignable by the Employee. This Agreement
is assignable by the Company to any other company, which controls, is controlled
by, or is under common control with the Company. This Agreement shall enure
to the benefit of and be binding upon the Company and its successors and permitted
assigns and the Employee and his heirs, executors and administrators.
18.
Severability
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of the prohibition or unenforceability and shall be severed from the balance
of this Agreement, all without affecting the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other jurisdiction.
19.
Headings
The division of this Agreement into Sections and the insertion
of headings are for convenience or reference only and shall not affect the construction
or interpretation of this Agreement.
20.
Time
of Essence
Time shall be of the essence in all respects of this Agreement.
21.
Independent
Legal Advice
The Employee agrees that he has had, or has had the opportunity
to obtain, independent legal advice in connection with the execution of this
Agreement and has read this Agreement in its entirety, understands its contents
and is signing this Agreement freely and voluntarily, without duress or undue
influence from any party.
22.
Notice
Any notice required or permitted to be made or given under
this Agreement to either party shall be in writing and shall be sufficiently
given if delivered personally, by electronic transmission, or if sent by prepaid
registered mail to the intended recipient of such notice at their respective
addresses set forth below or to such other address as may, from time to time,
be designated by notice given in the manner provided in this Section:
- 9 -
In the case of Company:
US Geothermal Inc.
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Attention: Corporate Secretary
Fax No.: 208 424 1030
In the case of Employee:
Daniel Kunz
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Fax No.: 208 424 1030
21.1
Any notice delivered to
the party to whom it is addressed shall be deemed to have been given and received
on the day it is so delivered or, if such day is not a business day, then on
the next business day following any such day. Any notice mailed shall be deemed
to have been given and received on the 10th business day following the date
of mailing. In the case of facsimile transmission, notice is deemed to have
been given or served on the party to whom it was sent at the time of dispatch
if, following transmission, the sender receives a transmission confirmation
report or, if the sender’s facsimile machine is not equipped to issue a
transmission confirmation report, the recipient confirms in writing that the
notice has been received.
IN WITNESS WHEREOF
the parties hereto have executed this Agreement as of the day and year first above written.
US GEOTHERMAL INC.
SIGNED
by the Employee in the presence of:
- 10 -
EMPLOYMENT AGREEMENT
THIS AGREEMENT
made as of the 1st day of January, 2004
|
BETWEEN:
|
|
|
|
|
|
|
US Geothermal Inc.
, a body corporate having an office
at Suite B
|
|
|
1509 Tyrell Lane Boise, Idaho 83706
|
|
|
(the "Company")
|
|
|
|
|
AND:
|
|
|
|
|
|
|
Ronald P. Bourgeois of
3630 West 34
th
Avenue,
Vancouver,
|
|
|
British Columbia, Canada, V6N 2L1
|
|
|
(the "Employee")
|
WHEREAS:
(A)
the Company is in the business of developing its Raft River geothermal property;
(B)
the Company wishes to engage the Employee as Chief Financial Officer and Secretary; and
(C)
the parties hereto wish to enter into this Agreement for the purpose of fixing the compensation and terms applicable to the employment of the Employee during the period hereinafter set out.
NOW THEREFORE THIS AGREEMENT WITNESSES
that the parties
hereto, in consideration of the respective covenants and agreements on the part
of each of them herein contained, do hereby covenant and agree as follows:
1.
Employment
The Company hereby engages the Employee as Chief Financial
officer and Secretary of the Company, and the Employee hereby accepts such employment,
upon the terms and conditions hereinafter set out.
2.
Term
This Agreement will be effective from January 1, 2004 and
will remain in full force and effect until terminated as hereinafter provided.
- 2 -
3.
Responsibility
The Employee will devote appropriate working time to his Employment hereunder, and while engaged in his employment will have the authority and duty to perform and carry out such duties and responsibilities as are customarily carried out by persons
holding similar positions in other development companies comparable in size to the Company and such additional and related duties as may from time to time be assigned, delegated, limited or determined by the Board of Directors.
4.
Other Business Activities
It is agreed that the Employee's employment hereunder shall
constitute provide no less than forty (40) hours per month which shall be devoted
exclusively for the benefit of the Company, and therefore: The Employee may
be required to provide additional time to perform his duties and responsibilities
and will be remunerated for such incremental time in accordance with Paragraph
5 (b).
|
(a)
|
the Employee may engage
in any other business activities, so long as such activities will not
interfere with, or impede, in any significant manner the performance of
his duties as Chief Financial Officer and Secretary of the Company provided,
however, that:
|
|
|
(i)
|
other than the business activities already
disclosed to the President, before the Employee can engage in any such
other business activity which involves the Employee owning or acquiring
any interest, directly or indirectly, in any geothermal property or the
rendering of any advice or service to another person, partnership or other
legal entity or a joint venture engaged in the business of exploring for
and/or developing geothermal resources the Employee must disclose full
particulars thereof in writing to the President, and within 15 days after
the date of such disclosure, the Employee must receive from the President
a decision that such activities by the Employee will not, in the opinion
of the President, interfere or be in conflict with the Employee's performance
of his duties to the Company hereunder;
|
|
|
(ii)
|
Before engaging in any such other business
activity other than an investment or acquisition of the kind described
in sub-paragraph (a)(i) of this Section 4, the Employee shall have disclosed
same in writing to the President; and,
|
|
|
(iii)
|
an investment or acquisition of the
kind described in sub-paragraph (a)(i) of this Section 4 does not include
investment in publicly traded
|
- 3 -
development or other resource companies,
where such investment does not constitute 10%, either directly or after exercise
of any share acquisition rights, of the issued capital of the company in question,
nor a control position, nor part of a control block.
|
(b)
|
the Employee shall refer to the President any and
all matters and transactions in respect of which an actual or potential
conflict of interest between the Employee and the Company has arisen or
may arise, however remote the possibility, and the Employee shall not
proceed with any such matter or transaction until the President's approval
therefore is obtained. Such approval shall not be denied unless it is
evident that it will impact the Company’s competitive position. For
purposes of clarification, this provision is not intended to limit in
any way the Employee's other fiduciary obligations to the Company, which
may arise in law or in equity.
|
5.
Compensation
In consideration of the performance by the Employee of his
responsibilities and duties as Chief Operating Officer hereunder:
(a)
|
the Company will pay the Employee the
sum of US$24,000 per annum, payable in monthly installments of $2,000
no later than the last working day of the month. The Employee may elect
to have any compensation payable hereunder paid into any jurisdiction
of his choice, but the Company may decline to pay such compensation to
the Employee at the place specified if the Company determines that such
payment in such jurisdiction would violate the laws of the jurisdiction
of the place of payment specified by the Employee or the laws of any other
country or if the Company otherwise determines that payment to the Employee
or for his account in such place would be prejudicial to the Company;
|
(b)
|
Where on a monthly basis the Employee
has provided in excess of forty (40) hours, up to a maximum of $5,000,
the incremental will be remunerated in the form of common shares of the
Company to be issued in accordance with the rules and regulations of the
TSX Venture Exchange. Such increment will be earned at the rate of $55.00
per hour.
|
(c)
|
the Company will grant the Employee
incentive stock options in such amount and on such conditions as the Board
of Directors of the Company may determine from time to time; and
|
- 4 -
|
|
in recognition of the Employee’s work and effort
from January 1, 2003 to December 31, 2003, specifically in respect of
the reorganization which closed on December 19, 2003; the employee shall
receive a one-time consideration of $18,000. This consideration shall
be paid with $5,000 in cash and a $13,000 stipend to be applied against
the exercise of the Company’s stock options. The stipend shall be
applied against the exercise of the Company’s stock options. Payment
of the cash portion shall be no later than January 15
th
2004
whereas the exercise of the options shall be made within 10 working days
of the exercise of the stock option grant.
|
6.
Expenses
The Company will reimburse the Employee for any and all reasonable
and documented expenses actually and necessarily incurred by the Employee in
connection with the performance of his duties under this Agreement. The Employee
will furnish the Company with an itemized account of his expenses in such form
or forms as may reasonably be required by the Company and at such times or intervals
as may be required by the Company.
7.
Review of Agreement Upon Financial
Close
Whereas the purpose of the organization of the Company is
to commercially develop the Raft River, Idaho geothermal resource, it is mutually
acknowledged that the working time commitment and compensation of the Employee
may materially change upon procurement of a Power Purchase Agreement and the
closing of a financial package to construct and commission an electrical generation
facility. The Company shall request that the Executive Committee of the Board
of Directors, within fifteen (15) working days of said close to review and if
deemed appropriate replace this Employment Agreement with a new employment agreement.
Such an undertaking shall not be construed as a contractual obligation on the
part of the Company to provide an increase in compensation.
8.
Change of Control
Cognizant that the Company is a publicly owned entity, should
a Change of Control occur, the Employee, at his option shall elect to receive
compensation of $50,000 no later than five (5) working days after the effective
date that the Change of Control has occurred. This compensation is payable by
the Company or its Successor regardless of whether or not the Employee continues
under employment pursuant to this Employment Agreement or is replaced with a
new agreement.
- 5 -
9.
Termination
This Agreement and the Employee's employment may be terminated
by the Company summarily and without notice, payment in lieu of notice, severance
payments, benefits, damages or any sums whatsoever, on the occurrence of any
one or more of the following events:
|
|
(a)
|
The Employee’s failure to carry
out his duties hereunder in a competent and professional manner;
|
|
|
(b)
|
The Employee’s appropriation of
corporate opportunities for the Employee’s direct or indirect benefit
or his failure to disclose any material conflict of interest;
|
|
|
(c)
|
The Employee’s plea of guilty to,
or conviction of, an indictable offence once all appeals (if any) have
been completed without such conviction having been reversed;
|
|
|
(d)
|
The existence of cause for termination
of the Employee at common law including but not limited to cause related
to fraud, dishonesty, illegality, breach of statute or regulation, or
gross incompetence;
|
|
|
(e)
|
Failure on the part of the Employee
to disclose material facts concerning his business interests or employment
outside of his employment by the Company, provided such facts relate to
the Employee’s duties hereunder;
|
|
|
(f)
|
Refusal on the part of the Employee
to follow the reasonable and lawful directions of the Company;
|
|
|
(g)
|
Breach of fiduciary duty to the Company
on the part of the Employee;
|
|
|
(h)
|
Material breach of this Agreement or
gross negligence on the part of the Employee in carrying out his duties
under this Agreement; or
|
|
|
(i)
|
A declaration of bankruptcy on the part
of the Employee by a court of competent jurisdiction.
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9.1
In the event of the early termination of the Agreement
for any reason set out in Section 9 above, the Employee shall only be entitled
to such compensation as would otherwise be payable to the Employee hereunder
up to and including such date of termination, as the case may be.
9.2
This Agreement and the Employee's employment may
be terminated on notice by the Company to the Employee for any reason other
than for the reasons set out in Section 8 above of this Agreement upon one month
notice to the Employee. In such event, the Employee
- 6 -
will be entitled to payment of salary and expenses until the
date one month after which notice was given.
9.3
This Agreement and the Employee's employment may
be terminated on notice by the Employee to the Company for any reason upon one
month notice to the Company. In such event, the Employee will be entitled to
payment of salary and expenses until the date one month after which notice was
given.
10.
Confidential Information
The Employee agrees to keep the affairs and Confidential Information
(as defined below) of the Company strictly confidential and shall not disclose
the same to any person, company or firm, directly or indirectly, during or after
his employment by the Company except as authorized in writing by the Board.
"Confidential Information" includes, without limitation, the following types
of information or material, both existing and contemplated, regarding the Company
or its parent, affiliated or subsidiary companies: corporate information, including
contractual licensing arrangements, plans, strategies, tactics, policies, resolutions,
patent, trademark and trade name applications; any litigation or negotiations;
information concerning suppliers; marketing information, including sales, investment
and product plans, customer lists, strategies, methods, customers, prospects
and market research data; financial information, including cost and performance
data, debt arrangements, equity structure, investors and holdings; operational
and scientific information, including trade secrets; technical information,
including technical drawings and designs; any information relating to any mineral
projects in which the Company has an actual or potential interest; and personnel
information, including personnel lists, resumes, personnel data, organizational
structure and performance evaluations. The Employee agrees not to use such information,
directly or indirectly, for his own interests, or any interests other than those
of the Company, whether or not those interests conflict with the interests of
the Company during or after his employment by the Company. The Employee expressly
acknowledges and agrees that all information relating to the Company, whether
financial, technical or otherwise shall, upon execution of this Agreement and
thereafter, as the case may be, be the sole property of the Company, whether
arising before or after the execution of this Agreement. The Employee expressly
agrees not to divulge any of the foregoing information to any person, partnership,
Company or other legal entity or to assist in the disclosure or divulging of
any such information, directly or indirectly, except as required by law or as
otherwise authorized in writing by the Board. The provisions of this Section
10 and Section 10.1 below shall survive the termination of this Agreement.
10.1
The Employee agrees that all documents of any
nature pertaining to the activities of the Company or its related corporate
entities, including Confidential Information, in the Employee's possession now
or at any time during the Employee's period of employment, are and shall be
the property of the Company and that all such documents and copies of them shall
be surrendered to the Company when requested by the Company.
- 7 -
11.
Non-Competition
During the Non-Competition Period (as defined below), the
Employee shall not, either individually or in partnership or jointly or in conjunction
with any other person, entity or organization, as principal, agent, consultant,
lender, contractor, employer, employee, investor, shareholder or in any other
manner, directly or indirectly, advise, manage, carry on, establish, control,
engage in, invest in, offer financial assistance or services to, or permit the
Employee's name or any part thereof to be used by, any business in geothermal
resources that competes with the business of the Company, its parent, affiliated
or subsidiary companies, or any business in which the Company, its parent, affiliated
or subsidiary companies is engaged. Competition, for purposes of this paragraph
is defined as a 100-mile radius around any and all geothermal properties acquired
by the Company up to and inclusive of the date of termination. For purposes
of this Agreement, “Non-Competition Period” means a period ending
twelve (12) months after the end of the termination of this Agreement.
12.
Acknowledgement
The Employee acknowledges that damages would be an insufficient
remedy for a breach by him of this Agreement and agrees that the Company may
apply for and obtain any relief available to it in a court of law or equity,
including injunctive relief, to restrain breach or threat of breach of this
Agreement by the Employee or to enforce the covenants contained therein and,
in particular, the covenants contained in Sections 10 and 11, in addition to
rights the Company may have to damages arising from said breach or threat of
breach. The Company, in turn, acknowledges that in seeking remedy in a court
of law or equity, it is not attempting to deny the Employee, if in good faith
he is seeking to improve his financial well being.
13.
Representations and Warranties
The Employee represents and warrants to the Company that the
execution and performance of this Agreement will not result in or constitute
a default, breach, or violation, or an event that, with notice or lapse of time
or both, would be a default, breach, or violation, of any understanding, agreement
or commitment, written or oral, express or implied, to which the Employee is
currently a party or by which the Employee or Employee's property is currently
bound.
14.
Governing Law
This Agreement shall be construed and enforced in accordance
with the laws of the State of Idaho, USA.
15.
Entire Agreement
This Agreement constitutes the entire agreement between the
parties hereto with
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respect to the relationship between the Company and the Employee
and supersedes all prior arrangements and agreements, whether oral or in writing
between the parties hereto with respect to the subject matter hereof.
16.
Amendments
No amendment to or variation of the terms of this Agreement
will be effective or binding upon the parties hereto unless made in writing
and signed by both of the parties hereto.
17.
Assignment
This Agreement is not assignable by the Employee. This Agreement
is assignable by the Company to any other company, which controls, is controlled
by, or is under common control with the Company. This Agreement shall enure
to the benefit of and be binding upon the Company and its successors and permitted
assigns and the Employee and his heirs, executors and administrators.
18.
Severability
Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of the prohibition or unenforceability and shall be severed from the balance
of this Agreement, all without affecting the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other jurisdiction.
19.
Headings
The division of this Agreement into Sections and the insertion
of headings are for convenience or reference only and shall not affect the construction
or interpretation of this Agreement.
20.
Time of Essence
Time shall be of the essence in all respects of this Agreement.
21.
Independent Legal Advice
The Employee agrees that he has had, or has had the opportunity
to obtain, independent legal advice in connection with the execution of this
Agreement and has read this Agreement in its entirety, understands its contents
and is signing this Agreement freely and voluntarily, without duress or undue
influence from any party.
- 9 -
22.
Notice
Any notice required or permitted to be made or given under
this Agreement to either party shall be in writing and shall be sufficiently
given if delivered personally, by electronic transmission, or if sent by prepaid
registered mail to the intended recipient of such notice at their respective
addresses set forth below or to such other address as may, from time to time,
be designated by notice given in the manner provided in this Section:
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In the case of Company:
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US Geothermal Inc.
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1509 Tyrell Lane, Suite B
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Boise, Idaho 83706
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Attention: Corporate Secretary
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Fax No.: 208 424 1030
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In the case of Employee:
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Ronald P. Bourgeois
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3630 West 34
th
Avenue
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Vancouver, British Columbia, V6N 2L1
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Fax No.: 604 263 3950
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Execution
Any notice delivered to the party to whom it is addressed
shall be deemed to have been given and received on the day it is so delivered
or, if such day is not a business day, then on the next business day following
any such day. Any notice mailed shall be deemed to have been given and received
on the 10th business day following the date of mailing. In the case of facsimile
transmission, notice is deemed to have been given or served on the party to
whom it was sent at the time of dispatch if, following transmission, the sender
receives a transmission confirmation report or, if the sender’s facsimile
machine is not equipped to issue a transmission confirmation report, the recipient
confirms in writing that the notice has been received.
IN WITNESS WHEREOF
the parties hereto have executed this Agreement as of the day and year first above written.
US GEOTHERMAL INC.
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By: ______________________________
Authorized Signatory
SIGNED
by the Employee in the presence of:
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__________________________
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__________________________
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Witness
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Ronald P Bourgeois
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__________________________
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Printed Name of Witness
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CONTRACT NO.
K2 Engineering: K2-USGEO_Contract_03’03
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US Geothermal
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K2 Engineering
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1509 Tyrell Lane, Suite B
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PO Box 170240
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Boise, ID 83706
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Boise, ID 83717
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CONSULTING CONTRACT
THIS AGREEMENT, entered into this
1st
day of
March,
2003
between
US Geothermal,
hereinafter referred
to as THE CORPORATION, and Kevin Kitz, an independent contractor representing
himself, hereinafter referred to as CONSULTANT.
WITNESSETH: That;
I. SCOPE, FINANCIAL TERMS AND DURATION OF THE CONTRACT.
I.1. DESCRIPTION OF SERVICES OR WORK TO BE PERFORMED BY CONSULTANT
CONSULTANT, from time to time shall provide
consulting services as requested by THE CORPORATION and as described in separate
Statements of Work that are executed by THE CORPORATION and CONSULTANT for each
assignment that CONSULTANT accepts. Each Statement of Work that is executed
by THE CORPORATION and CONSULTANT shall as a minimum specify the project, the
performance period, the services to be provided, a fixed price or time and materials
rate for the services, any applicable deliverables or milestones for the performance
of the services, a statement that the Statement of Work is subject to the terms
of this Agreement, and the signatures of the CONSULTANT and an officers of THE
CORPORATION. All Statement of Work shall incorporate this Agreement by reference
and shall be construed to be a part of this Agreement and subject to all the
terms and conditions of this Agreement.
It is understood between the parties herein
that no performance is required hereunder except after receipt by CONSULTANT
of specific Statements of Work from THE CORPORATION, this Service Contract serving
only to establish the terms and conditions of performance pursuant to any such
instructions. Each set of such instructions shall be deemed a separate contract
and transaction.
I.2. ALTERATIONS
I.2.1 No changes or alterations shall be made
from instructions of THE CORPORATION unless first ordered and acknowledged by
a representative of THE CORPORATION. CONSULTANT shall not be entitled to payment
for changes and/or alterations unless same is made as above provided. Any changes
and/or alterations which are made as above provided shall not in any way release
any surety on any CONSULTANT'S bond furnished by CONSULTANT hereunder, if any.
I.2.2 All notices required between the parties
under any of the provisions of this Contract, shall, unless otherwise specifically
provided, be given in writing by personal delivery or by Philippine registered
mail or telegram, postage charge prepaid and addressed as follows to the principal
party-signatory or his designated representative:
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3/01/03
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THE CORPORATION:
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Doug Glaspey
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US Geothermal
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1509 Tyrell Lane, Suite B
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Boise, ID 83706
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CONSULTANT:
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Kevin Kitz
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K2 Engineering
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PO BOX 170240
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Boise, ID 83716
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phone: +1 (208) 336-6065
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fax: +1 (208) 344-3606
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e-mail kevin@kitzworks.com
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I.2.3. THE CORPORATION may assign this Agreement to a parent,
subsidiary, affiliate, or successor in interest carrying on the business of
the assigning party.
I.3. TERMS OF PAYMENT
I.3.1 As the sole consideration
for the services specified in each Statement of Work, THE CORPORATION agrees
to pay CONSULTANT for the work performed by CONSULTANT on either a fixed price,
time and materials, or time and materials with a maximum rate basis, or other
method, as specified in each Statement of Work. If THE CORPORATION agrees to
pay for CONSULTANT's services on a time and material basis, then the rates shall
be specified in the Statement of Work.
I.3.2 The rates specified in
the Statement of Work shall be all-inclusive, including but not limited to,
CONSULTANT’s self-financing of insurance, vacation, and retirement.
I.3.3 All valid expenses, as
determined by THE CORPORATION’s written guidelines, incurred by CONSULTANT
in the conduct of authorized work shall be reimbursed by THE CORPORATION, at
cost plus 5%, upon submission of an expense statement with supporting documentation.
I.4. TIME OF PAYMENT
CONSULTANT shall bill THE CORPORATION
at THE CORPORATION'S address at the end of each month for all work performed
and any expense reimbursement. Payment shall be made hereunder in the place
of billing when all the work to be done by CONSULTANT has been accepted by THE
CORPORATION as being in full compliance with all the terms, conditions, and
requirements of this Contract. Upon approval by THE CORPORATION, CONSULTANT
may elect to submit invoices to PGI twice a month for work performed.
I.5. TAXES
All US taxes, whether local
or national, arising from CONSULTANT’S earnings under this Agreement will
be solely for the account of CONSULTANT. THE CORPORATION will pay applicable
foreign taxes including but not limited to value-added tax (VAT) and income
tax for work performed outside of the US, if any.
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I.6. LABOR, EQUIPMENT, MATERIALS, SUPPLIES AND SERVICES
I.6.1 CONSULTANT guarantees
that all work and labor to be performed under the terms of this Contract will
be performed in strict accordance with all national and local laws, rules, regulations,
orders, and ordinances.
I.6.2. CONSULTANT shall keep
and maintain equipment furnished by THE CORPORATION in good condition, and upon
the termination of the use of such equipment, turn over same to THE CORPORATION
in as good condition as when received, subject, however, to ordinary wear and
tear.
I.6.3. CONSULTANT shall examine
before using, all materials, equipment and supplies furnished by THE CORPORATION
for performance directed pursuant to this Contract, and will exercise reasonable
diligence to report to THE CORPORATION any defects therein in time to allow
THE CORPORATION to replace same without delaying the work. CONSULTANT shall
not exclude or modify any express or implied warranties which would otherwise
attach to such materials, equipment, or supplies, or to a product furnished
by CONSULTANT, or waive any remedy available to THE CORPORATION or CONSULTANT
as a consequence of any breach of such warranties.
I.7. DURATION OF CONTRACT
I.7.1 The Term of this contract
is:
EFFECTIVE DATE OF CONTRACT:
March
1, 2003
EXPIRATION DATE OF CONTRACT:
February
29, 2008
I.7.2 This contract may be canceled
by THE CORPORATION at any time upon fourteen- (14) days written notice to CONSULTANT,
unless otherwise specified in a signed Statement of Work between the CORPORATION
and the CONSULTANT. This contract may be canceled by CONSULTANT at any time
upon fourteen (14) days written notice to THE CORPORATION, unless otherwise
specified in a signed Statement of Work between the CORPORATION and the CONSULTANT.
From and after the effective date of any termination of this Agreement, neither
party shall have any rights and obligations hereunder except such rights and
obligation as shall have accrued prior to said effective date, and CONSULTANT's
obligations under Paragraphs III.1 and III.2 hereof shall survive termination
of this Agreement.
I.7.3 This contract may be renewed
or extended by mutual agreement.
I.8. FORCE MAJEURE
This Contract is subject to
all national and local laws, order, rules and regulations and neither THE CORPORATION
nor CONSULTANT shall be liable for any delay or damage due, occasioned or caused
as a result of such laws, order, rules or regulations or by strikes, action
of the elements or causes beyond the control of the parties, and any delay due
to above causes or any of them shall not be deemed to be a breach of or failure
to perform this Contract, or any part thereof, but the party hereunder that
is rendered unable, wholly or in part, to carry out its obligations under this
Contract shall give notice and full particulars of the cause of said delay in
writing to the other party promptly after the occurrence of the cause relied
upon and the cause of said delay so far as possible shall be remedied with all
reasonable dispatch. THE CORPORATION shall not pay or be liable to CONSULTANT
for any continuous period that normal operations cannot be carried out due to
Force Majeure.
I.9. GOVERNING LAW
This Agreement shall be governed by the laws
of the State of Idaho.
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1.10. ARBITRATION
All disputes arising out of
or relating to this Agreement shall be referred to arbitration in accordance
with the rules of the American Arbitration Association. The arbitration shall
be held in Boise, Idaho.
II. RELATIONSHIP AND INDEMNIFICATION
II.1. INDEPENDENT CONSULTANT RELATIONSHIP
II.1.1 CONSULTANT shall be an
independent CONSULTANT with respect to performance of all work hereunder. Neither
CONSULTANT nor anyone employed by CONSULTANT shall be deemed for any purpose
to be the employee, agent, servant, or representative of THE CORPORATION in
the performance of any work or service or any part thereof in any manner dealt
with hereunder.
II.1.2 NO BENEFITS. None of
the benefits provided by THE CORPORATION to its employees, including but not
limited to medical, life, accident or disability insurance, pensions, unemployment
or worker's compensation or profit sharing plans, shall be available to CONSULTANT,
or anyone employed by CONSULTANT, as a result of rendering services pursuant
to this Agreement (other than benefits that accrued or vested prior to this
Agreement, or are otherwise provided in a Statement of Work).
II.2. INDEMNIFICATION
II.2.1 THE CORPORATION agrees
to release, protect, defend, indemnify and save CONSULTANT harmless from and
against all claims, liabilities, demands, and causes of action of every kind
and character, without limit, on account of bodily injury, death or damage to
property, arising from or in connection with CONSULTANT'S performance under
this Contract, so long as such injury, death, or damage was not due to CONSULTANT’S
gross negligence.
II.2.2 PATENTS: For equipment,
materials and processes supplied or used by THE CORPORATION or the CONSULTANT
in connection with work under this agreement THE CORPORATION shall indemnify
and hold the CONSULTANT hereto harmless from any and all claims, costs, damages,
settlements, and the like for infringement or alleged infringement of patents
or trade secret misappropriation based on such equipment, materials or processes.
II.2.3 The CONSULTANT is liable
for actual damages incurred by THE CORPORATION as a result of CONSULTANT’s
gross negligence or knowing breach of the terms of this contract to a maximum
of the amount of services billed by CONSULTANT to THE CORPORATION in the preceding
12 months.
III RESPONSIBILITIES
III.1 CONFIDENTIALITY
III.1.1 CONSULTANT acknowledges
that technical information pertaining to the projects described in Statements
of Work and/or to THE CORPORATION’s other technology, as well as any business
information relating to THE CORPORATION's business, which is developed or received
by CONSULTANT in connection with CONSULTANT's work hereunder, or which is otherwise
disclosed to CONSULTANT, either directly or indirectly, or orally or in writing,
is the property, or proprietary business information of THE CORPORATION. CONSULTANT
agrees to maintain such information in confidence and not to use such information
other than in the course of the services to be rendered to THE CORPORATION pursuant
to this Agreement. Furthermore, the results of CONSULTANT's work are deemed
to be proprietary to THE CORPORATION. CONSULTANT shall prevent the disclosure
to others of the technical and business information and the results of CONSULTANT's
work for THE CORPORATION, and CONSULTANT shall not duplicate or use any technical
information or results of the work for any purpose other than for performing
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the services specified in this Agreement without first entering
into a separate written agreement with THE CORPORATION authorizing the same.
The foregoing obligations shall
not apply to information or results which:
(1) were in the public domain
prior to CONSULTANT's receipt of the same hereunder, or which subsequently become
part of the public domain by publication or otherwise, except by CONSULTANT's
wrongful act; or
(2) CONSULTANT can show were
developed by CONSULTANT and were in its possession prior to its receipt of the
same hereunder and were not acquired directly or indirectly from PGI; or
(3) CONSULTANT can show were
rightfully received by it from a third party who did not acquire the same directly
or indirectly from THE CORPORATION and who did not require CONSULTANT to maintain
the same in confidence; it being understood that specific technical information
disclosed by THE CORPORATION pursuant to the provisions of this Agreement or
discovered in connection with CONSULTANT's work for THE CORPORATION shall not
be deemed to be within any of the above exclusions merely because it is embraced
by more general information within one of said exclusions.
III.1.2. THE CORPORATION FACILITIES.
Any photographs or video images taken shall be treated as confidential information,
subject to the terms of paragraph III.1.1, above.
III.2 INTELLECTUAL PROPERTY
The performance of this Agreement
may result in the development of new, proprietary, and secret concepts, methods,
techniques, processes, adaptations, and ideas. Such developments shall be the
property of THE CONSULTANT as provided below, without regard to their origin,
and shall be subject to the terms of this Agreement.
III.2.1 INVENTIONS. Inventions
discovered during the course of the work of the CONSULTANT for THE CORPORATION,
shall be owned jointly by THE CORPORATION and the CONSULTANT, if the invention
is made by representatives of both THE CORPORATION and the CONSULTANT. An invention
shall be owned solely by the CONSULTANT, if the CONSULTANT is the sole inventor,
even if the invention is made during the course of work by the CONSULTANT for
THE CORPORATION.
III.2.2 WORKS OF AUTHORSHIP.
With respect to all original works of authorship (including but not limited
to technical papers, photographs and computer software) created by CONSULTANT,
either alone or with others, during the course of services for THE CORPORATION,
the parties agree that such works are not "works for hire" as defined in the
United States Copyright Law and CONSULTANT agrees to assign, and hereby assigns
to THE CORPORATION the entire right, title and interest thereto, including but
not limited to any copyrights therein.
III.3. RESPONSIBILITY ON HEALTH AND SAFETY
The CONSULTANT shall abide by
all the rules on occupational health and safety procedures prescribed and furnished
in writing by THE CORPORATION;
In this regard, THE CORPORATION
has the right to halt any activity where CONSULTANT is not in accordance with
safe operating procedures. Grave violation of the above provision on the observance
of safety procedures shall be a ground for the early termination of this Contract.
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III.4. RESPONSIBILITY ON SECURITY
The CONSULTANT shall abide by
all written security policies, rules, and regulations being provided by THE
CORPORATION. It shall be the responsibility of CONSULTANT to:
III.4.1 Wear the proper identification,
issued by THE CORPORATION, at all times.
III.4.2 Entry onto THE CORPORATION’S
property constitutes consent to an inspection of one’s person and personal
effects when entering or leaving THE CORPORATION’S property. Refusal to
permit an inspection shall be a ground’s for the early termination of this
Contract.
III.5. DRUG AND ALCOHOL POLICY
CONSULTANT agrees to the following
terms while on THE CORPORATION’S premises concerning alcohol and drugs:
(1) The use, possession, sale,
transfer, or purchase of illegal drugs is prohibited.
(2) The presence in one's blood
of more than 0.08% alcohol is prohibited.
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IN WITNESS WHEREOF, the parties have executed this AGREEMENT
in two (2) copies as of the day and year first above written.
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K2 ENGINEERING
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US Geothermal
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BY:
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Kevin Kitz
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BY:
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Doug Glaspey
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CONSULTANT
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COO
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WITNESS (if required)
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WITNESS (if required)
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__________________________
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__________________________
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FORM 5D
ESCROW AGREEMENT
(VALUE SECURITY)
THIS AGREEMENT
is made as of the 19th day of December, 2003
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AMONG:
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U.S. GEOTHERMAL INC. (formerly U.S. COBALT INC.)
a Delaware corporation having an office at 1509 Tyrell Lane, Suite B,
Boise, Idaho, 83706
(the
“Issuer”
)
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AND:
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PACIFIC CORPORATE TRUST COMPANY
, having an office
at 10th Floor, 625 Howe Street, Vancouver, British Columbia, V6C 3B8
(the
“Escrow Agent”
)
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AND:
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EACH OF
THE UNDERSIGNED SECURITYHOLDERS OF THE ISSUER
(a
“Securityholder”
or
“you”
)
(collectively, the
“Parties”
)
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This Agreement
is being entered into by the Parties
under TSX Venture Exchange (the
“Exchange”
)
Policy 5.4 -
Escrow, Vendor Consideration and Resale Restrictions
(the
“Policy”
)
in connection with a Qualifying Transaction. The Issuer is a Tier 2 Issuer
as described in
Policy 2.1 - Minimum Listing Requirements.
For good and valuable consideration,
the Parties agree
as follows:
PART 1 ESCROW
1.1 Appointment
of Escrow Agent
The Issuer and the Securityholders appoint the Escrow Agent
to act as escrow agent under this Agreement. The Escrow Agent accepts the appointment.
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FORM 5D
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ESCROW AGREEMENT
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Page 1
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(as at August 2002)
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1.2 Deposit of Escrow
Securities in Escrow
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(1)
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You are depositing the securities (
“escrow
securities”
)
listed opposite your name in Schedule “A”
with the Escrow Agent to be held in escrow under this Agreement. You will
immediately deliver or cause to be delivered to the Escrow Agent any share
certificates or other evidence of these securities which you have or which
you may later receive.
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(2)
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If you receive any other securities (
“additional escrow securities”
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(a)
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as a dividend or other distribution on escrow securities;
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(b)
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on the exercise of a right of purchase, conversion
or exchange attaching to escrow securities, including securities received
on conversion of special warrants;
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(c)
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on a subdivision, or compulsory or automatic conversion
or exchange of escrow securities; or
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(d)
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from a successor issuer in a business combination,
if Part 6 of this Agreement applies,
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|
|
you will deposit them in
escrow with the Escrow Agent. You will deliver or cause to be delivered
to the Escrow Agent any share certificates or other evidence of those
additional escrow securities. When this Agreement refers to escrow securities,
it includes additional escrow securities.
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(3)
|
You will immediately deliver to the Escrow Agent
any replacement share certificates or other evidence of additional escrow
securities issued to you.
|
1.3 Direction to
Escrow Agent
The Issuer and the Securityholders direct the Escrow Agent
to hold the escrow securities in escrow until they are released from escrow
under this Agreement.
PART 2 RELEASE OF
ESCROW SECURITIES
2.1 Release Provisions
The provisions of Schedule(s) B(2) Value Security Escrow Agreement for Tier 2 Issuer and B(1) Value Security Escrow Agreement for Tier 1 Issuer are incorporated into and form part of this Agreement.
2.2 Additional Escrow
Securities
If you acquire additional escrow securities in connection with the transaction to which this agreement relates, those securities will be added to the securities already in escrow, to increase
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FORM 5D
|
ESCROW AGREEMENT
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Page 2
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(as at August 2002)
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the number of remaining escrow securities. After that, all
of the escrow securities will be released in accordance with the applicable
release schedule.
2.3 Additional Requirements
for Tier 2 Surplus Escrow Securities
Where securities are subject to a Tier 2 Surplus Security
Escrow Agreement Schedule B(4), the following additional conditions apply:
|
(1)
|
The escrow securities will be cancelled if the asset,
property, business or interest therein in consideration of which the securities
were issued, is lost, or abandoned, or the operations or development of
such asset, property or business is discontinued.
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|
|
|
(2)
|
The Escrow Agent will not release escrow securities
from escrow under schedule B(4) unless the Escrow Agent has received,
within the 15 days prior to the release date, a certificate from the Issuer
that:
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|
(a)
|
is signed by two directors or officers of the Issuer;
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(b)
|
is dated not more than 30 days prior to the release
date;
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(c)
|
states that the assets for which the escrow securities
were issued (the “Assets”) were included as assets on the balance
sheet of the Issuer in the most recent financial statements filed by the
Issuer with the Exchange; and
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(d)
|
states that the Issuer has no reasonable knowledge
that the Assets will not be included as assets on the balance sheet of
the Issuer in the next financial statements to be filed by the Issuer
with the Exchange.
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(3)
|
If, at any time during the term of this Agreement,
the Escrow Agent is prohibited from releasing escrow securities on a release
date specified schedule B(4) as a result of section 2.3(2) above, then
the Escrow Agent will not release any further escrow securities from escrow
without the written consent of the Exchange.
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(4)
|
If as a result of this section 2.3, the Escrow Agent
does not release escrow securities from escrow for a period of five years,
then:
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(a)
|
the Escrow Agent will deliver a notice to the Issuer,
and will include with the notice any certificates that the Escrow Agent
holds which evidence the escrow securities; and
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(b)
|
the Issuer and the Escrow Agent will take such action as is necessary
to cancel the escrow securities.
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(5)
|
For the purposes of cancellation of escrow securities
under this section, each Securityholder irrevocably appoints the Escrow
Agent as his or her attorney, with authority to appoint substitute attorneys,
as necessary.
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FORM 5D
|
ESCROW AGREEMENT
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Page 3
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(as at August 2002)
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2.4 Delivery of
Share Certificates for Escrow Securities
The Escrow Agent will send to each Securityholder any share
certificates or other evidence of that Securityholder’s escrow securities
in the possession of the Escrow Agent released from escrow as soon as reasonably
practicable after the release.
2.5
Replacement Certificates
If, on the date a Securityholder’s escrow securities
are to be released, the Escrow Agent holds a share certificate or other evidence
representing more escrow securities than are to be released, the Escrow Agent
will deliver the share certificate or other evidence to the Issuer or its transfer
agent and request replacement share certificates or other evidence. The Issuer
will cause replacement share certificates or other evidence to be prepared and
delivered to the Escrow Agent. After the Escrow Agent receives the replacement
share certificates or other evidence, the Escrow Agent will send to the Securityholder
or at the Securityholder’s direction, the replacement share certificate
or other evidence of the escrow securities released. The Escrow Agent and Issuer
will act as soon as reasonably practicable.
2.6 Release upon
Death
|
(1)
|
If a Securityholder dies, the Securityholder’s
escrow securities will be released from escrow. The Escrow Agent will
deliver any share certificates or other evidence of the escrow securities
in the possession of the Escrow Agent to the Securityholder’s legal
representative provided that:
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|
(a)
|
the legal representative of the deceased Securityholder
provides written notice to the Exchange of the intent to release the escrow
securities as at a specified date which is at least 10 business days and
not more than 30 business days prior to the proposed release; and
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|
(b)
|
the Exchange does not provide notice of its objection
to the Escrow Agent prior to 10:00 a.m. (Vancouver time) or 11:00 a.m.
(Calgary time) on such specified date.
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(2)
|
Prior to delivery the Escrow Agent must receive:
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(a)
|
a certified copy of the death certificate; and
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|
(b)
|
any evidence of the legal representative’s status
that the Escrow Agent may reasonably require.
|
2.7 Exchange Discretion
to Terminate
If the Escrow Agent receives a request from the Exchange to
halt or terminate the release of escrow securities from escrow, then the Escrow
Agent will comply with that request, and will not release any escrow securities
from escrow until it receives the written consent of the Exchange.
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FORM 5D
|
ESCROW AGREEMENT
|
Page 4
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|
(as at August 2002)
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|
2.8 Discretionary
Applications
The Exchange may consent to the release from escrow of escrow
securities in other circumstances and on terms and on conditions it deems appropriate.
Securities may be released from escrow provided that the Escrow Agent receives
written notice from the Exchange.
PART 3 EARLY RELEASE
ON CHANGE OF ISSUER STATUS
3.1 Early Release
– Graduation to Tier 1
|
(1)
|
When a Tier 2 Issuer becomes a Tier 1 Issuer, the
release schedule for its escrow securities changes.
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|
(2)
|
If the Issuer reasonably believes that it meets
the Minimum Listing Requirements of a Tier 1 Issuer as described in
Policy
2.1 –
Minimum Listing Requirements
, the Issuer may make
application to the Exchange to be listed as a Tier 1 Issuer. The Issuer
must also concurrently provide notice to the Escrow Agent that it is making
such an application.
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|
(3)
|
If the graduation to Tier 1 is accepted by the Exchange,
the Exchange will issue an Exchange Bulletin confirming final acceptance
for listing of the Issuer on Tier 1. Upon issuance of this Bulletin the
Issuer must immediately:
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|
(a)
|
issue a news release:
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|
(i)
|
disclosing that it has been accepted for graduation to Tier 1; and
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(ii)
|
disclosing the number of escrow securities to be
released and the dates of release under the new schedule; and
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|
(b)
|
provide the news release, together with a copy
of the Exchange Bulletin, to the Escrow Agent.
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|
(4)
|
Upon completion of the steps in section 3.1(3) above,
the Issuer’s release schedule will be replaced as follows:
|
|
Applicable Schedule Pre-Graduation
|
Applicable Schedule Post-Graduation
|
|
Schedule B(2)
|
Schedule B(1)
|
|
(5)
|
Within 10 days of the Exchange Bulletin confirming
the Issuer’s listing on Tier 1, the Escrow Agent must release any
escrow securities from escrow securities which under the new release schedule
would have been releasable at a date prior to the Exchange Bulletin.
|
PART 4 DEALING WITH
ESCROW SECURITIES
4.1 Restriction
on Transfer, etc.
Unless it is expressly permitted in this Agreement, you will
not sell, transfer, assign, mortgage, enter into a derivative transaction concerning,
or otherwise deal in any way with your escrow
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FORM 5D
|
ESCROW AGREEMENT
|
Page 5
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|
(as at August 2002)
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|
securities or any related share certificates or other evidence
of the escrow securities. If a Securityholder is a private company controlled
by one or more Principals of the Issuer, the Securityholder may not participate
in a transaction that results in a change of its control or a change in the
economic exposure of the Principals to the risks of holding escrow securities.
4.2 Pledge,
Mortgage or Charge as Collateral for a Loan
Subject to Exchange acceptance, you may pledge, mortgage or
charge your escrow securities to a financial institution as collateral for a
loan, provided that no escrow securities or any share certificates or other
evidence of escrow securities will be transferred or delivered by the Escrow
Agent to the financial institution for this purpose. The loan agreement must
provide that the escrow securities will remain in escrow if the lender realizes
on the escrow securities to satisfy the loan.
4.3
Voting of Escrow Securities
Although you may exercise voting rights attached to your escrow
securities, you may not, while your securities are held in escrow, exercise
voting rights attached to any securities (whether in escrow or not) in support
of one or more arrangements that would result in the repayment of capital being
made on the escrow securities prior to a winding up of the Issuer.
4.4
Dividends on Escrow Securities
You may receive a dividend or other distribution on your escrow
securities, and elect the manner of payment from the standard options offered
by the Issuer. If the Escrow Agent receives a dividend or other distribution
on your escrow securities, other than additional escrow securities, the Escrow
Agent will pay the dividend or other distribution to you on receipt.
4.5
Exercise of Other Rights Attaching to Escrow Securities
You may exercise your rights to exchange or convert your escrow
securities in accordance with this agreement.
PART 5
PERMITTED TRANSFERS WITHIN ESCROW
5.1
Transfer to Directors and Senior Officers
|
(1)
|
You may transfer escrow
securities within escrow to existing or, upon their appointment, incoming
directors or senior officers of the Issuer or any of its material operating
subsidiaries, if the Issuer’s board of directors has approved the
transfer and provided that:
|
|
|
|
|
|
|
(a)
|
you make application to transfer under the Policy
at least 10 business days and not more than 30 business days prior to
the date of the proposed transfer; and
|
|
|
|
|
|
|
(b)
|
the Exchange does not provide notice of its objection
to the Escrow Agent prior to 10:00 a.m. (Vancouver time) or 11:00 a.m.
(Calgary time) on such specified date.
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|
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|
FORM 5D
|
ESCROW AGREEMENT
|
Page 6
|
|
(as at August 2002)
|
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|
(2)
|
Prior to the transfer the
Escrow Agent must receive:
|
|
|
(a)
|
a certified copy of the
resolution of the board of directors of the Issuer approving the transfer;
|
|
|
(b)
|
a certificate signed by
a director or officer of the Issuer authorized to sign, stating that the
transfer is to a director or senior officer of the Issuer or a material
operating subsidiary and that any required acceptance from the Exchange
the Issuer is listed on has been received;
|
|
|
(c)
|
an acknowledgment in the
form of Form 5E signed by the transferee; and
|
|
|
(d)
|
a transfer power of attorney,
completed and executed by the transferor in accordance with the requirements
of the Issuer’s transfer agent.
|
5.2
Transfer to Other Principals
|
(1)
|
You may transfer escrow
securities within escrow:
|
|
|
(a)
|
to a person or company that
before the proposed transfer holds more than 20% of the voting rights
attached to the Issuer’s outstanding securities; or
|
|
|
(b)
|
to a person or company that
after the proposed transfer
|
|
|
|
(i)
|
will hold more than 10% of the voting
rights attached to the Issuer’s outstanding securities, and
|
|
|
|
(ii)
|
has the right to elect or appoint one
or more directors or senior officers of the Issuer or any of its material
operating subsidiaries,
provided that:
|
|
|
(c)
|
you make an application
to transfer under the Policy at least 10 business days and not more than
30 business days prior to the date of the proposed transfer; and
|
|
|
(d)
|
the Exchange does not provide
notice of its objection to the Escrow Agent prior to 10:00 a.m. (Vancouver
time) or 11:00 a.m. (Calgary time) on such specified date.
|
(2)
|
Prior to the transfer the
Escrow Agent must receive:
|
|
|
(a)
|
a certificate signed by
a director or officer of the Issuer authorized to sign, stating that:
|
|
|
|
(i)
|
the transfer is to a person or company
that the officer believes, after reasonable investigation, holds more
than 20% of the voting rights attached to the Issuer’s outstanding
securities before the proposed transfer; or
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 7
|
|
(as at August 2002)
|
|
|
|
|
|
(ii)
|
the transfer is to a person
or company that:
|
|
|
|
|
(A)
|
the officer believes, after reasonable investigation,
will hold more than 10% of the voting rights attached to the Issuer’s
outstanding securities; and
|
|
|
|
|
(B)
|
has the right to elect or appoint one or more directors
or senior officers of the Issuer or any of its material operating subsidiaries
|
|
|
|
|
after the proposed transfer;
and
|
|
|
|
(iii)
|
any required approval from
the Exchange or any other exchange on which the Issuer is listed has been
received;
|
|
|
(b)
|
an acknowledgment in the
form of Form 5E signed by the transferee; and
|
|
|
(c)
|
a transfer power of attorney,
completed and executed by the transferor in accordance with the requirements
of the Issuer’s transfer agent.
|
5.3 Transfer upon
Bankruptcy
|
(1)
|
You may transfer escrow
securities within escrow to a trustee in bankruptcy or another person
or company entitled to escrow securities on bankruptcy provided that:
|
|
|
(a)
|
you make application to
transfer under the Policy at least 10 business days and not more than
30 business days prior to the date of the proposed transfer; and
|
|
|
(b)
|
the Exchange does not provide
notice of its objection to the Escrow Agent prior to 10:00 a.m. (Vancouver
time) or 11:00 a.m. (Calgary time) on such specified date.
|
|
(2)
|
Prior to the transfer, the
Escrow Agent must receive:
|
|
|
(a)
|
a certified copy of either
|
|
|
|
(i)
|
the assignment in bankruptcy filed with the Superintendent
of Bankruptcy, or
|
|
|
|
(ii)
|
the receiving order adjudging the Securityholder
bankrupt;
|
|
|
(b)
|
a certified copy of a certificate
of appointment of the trustee in bankruptcy;
|
|
|
(c)
|
a transfer power of attorney,
duly completed and executed by the transferor in accordance with the requirements
of the Issuer’s transfer agent; and
|
|
|
(d)
|
an acknowledgment in the
form of Form 5E signed by
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 8
|
|
(as at August 2002)
|
|
|
|
|
|
(i)
|
the trustee in bankruptcy or
|
|
|
|
(ii)
|
on direction from the trustee, with evidence of that
direction attached to the acknowledgement form, another person or company
legally entitled to the escrow securities.
|
5.4 Transfer Upon
Realization of Pledged, Mortgaged or Charged Escrow Securities
|
(1)
|
You may transfer escrow
securities you have pledged, mortgaged or charged under section 4.2 to
a financial institution as collateral for a loan within escrow to the
lender on realization provided that:
|
|
|
(a)
|
you make application to transfer under the Policy at
least 10 business days and not more than 30 business days prior to the
date of the proposed transfer; and
|
|
|
(b)
|
the Exchange does not provide notice of its objection
to the Escrow Agent prior to 10:00 a.m. (Vancouver time) or 11:00 a.m.
(Calgary time) on such specified date.
|
|
(2)
|
Prior to the transfer the
Escrow Agent must receive:
|
|
|
(a)
|
a statutory declaration of an officer of the financial
institution that the financial institution is legally entitled to the
escrow securities;
|
|
|
(b)
|
evidence that the Exchange has accepted the pledge,
mortgage or charge of escrow securities to the financial institution;
|
|
|
(c)
|
a transfer power of attorney, executed by the transferor
in accordance with the requirements of the Issuer’s transfer agent;
and
|
|
|
(d)
|
an acknowledgement in the form of Form 5E signed
by the financial institution.
|
5.5 Transfer to Certain
Plans and Funds
|
(1)
|
You may transfer escrow securities
within escrow to or between a registered retirement savings plan (RRSP),
registered retirement income fund (RRIF) or other similar registered plan
or fund with a trustee, where the beneficiaries of the plan or fund are
limited to you and your spouse, children and parents provided that:
|
|
|
(a)
|
you make application to transfer under the Policy at
least 10 business days and not more than 30 business days prior to the
date of the proposed transfer; and
|
|
|
(b)
|
the Exchange does not provide notice of its objection
to the Escrow Agent prior to 10:00 a.m. (Vancouver time) or 11:00 a.m.
(Calgary time) on such specified date.
|
|
(2)
|
Prior to the transfer the
Escrow Agent must receive:
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 9
|
|
(as at August 2002)
|
|
|
|
|
(a)
|
evidence from the trustee of the transferee plan
or fund, or the trustee’s agent, stating that, to the best of the
trustee’s knowledge, the annuitant of the RRSP or RRIF or the beneficiaries
of the other registered plan or fund do not include any person or company
other than you and your spouse, children and parents;
|
|
|
(b)
|
a transfer power of attorney, executed by the transferor
in accordance with the requirements of the Issuer’s transfer agent;
and
|
|
|
(c)
|
an acknowledgement in the form of Form 5E signed by the trustee of the
plan or fund.
|
5.6 Effect of Transfer
Within Escrow
After the transfer of escrow securities within escrow, the
escrow securities will remain in escrow and released from escrow under this
Agreement as if no transfer has occurred, on the same terms that applied before
the transfer. The Escrow Agent will not deliver any share certificates or other
evidence of the escrow securities to transferees under this Part 5.
5.7 Discretionary
Applications
The Exchange may consent to the transfer within escrow of
escrow securities in other circumstances and on such terms and conditions as
it deems appropriate.
PART 6 BUSINESS
COMBINATIONS
6.1 Business Combinations
This Part applies to the following (
“business combinations”
):
|
(a)
|
a formal take-over bid for all outstanding securities
of the Issuer or which, if successful, would result in a change of control
of the Issuer
|
|
(b)
|
a formal issuer bid for all outstanding equity securities of the Issuer
|
|
(c)
|
a statutory arrangement
|
|
(d)
|
an amalgamation
|
|
(e)
|
a merger
|
|
(f)
|
a reorganization that has an effect similar to an amalgamation or merger
|
6.2 Delivery to Escrow
Agent
|
(1)
|
You may tender your escrow securities to a person
or company in a business combination. At least five business days prior
to the date the escrow securities must be tendered under the business
combination, you must deliver to the Escrow Agent:
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 10
|
|
(as at August 2002)
|
|
|
|
|
(a)
|
a written direction signed by you that directs the
Escrow Agent to deliver to the depositary under the business combination
any share certificates or other evidence of the escrow securities and
a completed and executed cover letter or similar document and, where required,
transfer power of attorney completed and executed for transfer in accordance
with the requirements of the Issuer’s depository, and any other documentation
specified or provided by you and required to be delivered to the depositary
under the business combination;
|
|
|
(b)
|
written consent of the Exchange; and
|
|
|
(c)
|
any other information concerning the business combination
as the Escrow Agent may reasonably require.
|
6.3 Delivery to
Depositary
|
(1)
|
As soon as reasonably practicable,
and in any event no later than three business days after the Escrow Agent
receives the documents and information required under section 6.2, the
Escrow Agent will deliver to the depositary, in accordance with the direction,
any share certificates or other evidence of the escrow securities, and
a letter addressed to the depositary that
|
|
|
(a)
|
identifies the escrow securities that are being tendered;
|
|
|
(b)
|
states that the escrow securities are held in escrow;
|
|
|
(c)
|
states that the escrow securities are delivered only
for the purposes of the business combination and that they will be released
from escrow only after the Escrow Agent receives the information described
in section 6.4;
|
|
|
(d)
|
if any share certificates or other evidence of the
escrow securities have been delivered to the depositary, requires the
depositary to return to the Escrow Agent, as soon as practicable, the
share certificates or other evidence of escrow securities that are not
released from escrow into the business combination; and
|
|
|
(e)
|
where applicable, requires the depositary to deliver
or cause to be delivered to the Escrow Agent, as soon as practicable,
share certificates or other evidence of additional escrow securities that
you acquire under the business combination.
|
6.4 Release of Escrow
Securities to Depositary
|
(1)
|
The Escrow Agent will release
from escrow the tendered escrow securities provided that:
|
|
|
(a)
|
you or the Issuer make application to release the
tendered securities under the Policy on a date at least 10 business days
and not more than 30 business days prior to the date of the proposed release
date; and
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 11
|
|
(as at August 2002)
|
|
|
|
(b)
|
the Exchange does not provide
notice of its objection to the Escrow Agent prior to 10:00 a.m. (Vancouver
time) or 11:00 a.m. (Calgary time) on such specified date;
|
|
(c)
|
the Escrow Agent receives
a declaration signed by the depositary or, if the direction identifies
the depositary as acting on behalf of another person or company in respect
of the business combination, by that other person or company, that
|
|
|
(i)
|
the terms and conditions of the business combination
have been met or waived; and
|
|
|
(ii)
|
the escrow securities have either been taken up and
paid for or are subject to an unconditional obligation to be taken up
and paid for under the business combination.
|
6.5 Escrow of New
Securities
|
(1)
|
If you receive securities
(
“new securities”
)
of another issuer (
“successor
issuer”
) in exchange for your escrow securities, the new securities
will be subject to escrow in substitution for the tendered escrow securities,
unless, immediately after completion of the business combination,
|
|
|
(a)
|
the successor issuer is an exempt issuer as defined
in the National Policy;
|
|
|
(b)
|
the escrow holder was subject to a Value Security
Escrow Agreement and is not a Principal of the successor issuer; and
|
|
|
(c)
|
the escrow holder holds less than 1% of the voting
rights attached to the successor issuer’s outstanding securities.
(In calculating this percentage, include securities that may be issued
to the escrow holder under outstanding convertible securities in both
the escrow holders securities and the total securities outstanding.)
|
6.6 Release from Escrow
of New Securities
|
(1)
|
The Escrow Agent will send
to a Securityholder share certificates or other evidence of the Securityholder’s
new securities as soon as reasonably practicable after the Escrow Agent
receives
|
|
|
(a)
|
a certificate from the successor
issuer signed by a director or officer of the successor issuer authorized
to sign
|
|
|
|
(i)
|
stating that it is a successor issuer to the Issuer
as a result of a business combination;
|
|
|
|
(ii)
|
containing a list of the securityholders whose new
securities are subject to escrow under section 6.5;
|
|
|
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FORM 5D
|
ESCROW AGREEMENT
|
Page 12
|
|
(as at August 2002)
|
|
|
|
|
|
(iii)
|
containing a list of the securityholders whose new
securities are not subject to escrow under section 6.5;
|
|
|
(b)
|
written confirmation from
the Exchange that it has accepted the list of Securityholders whose new
securities are not subject to escrow under section 6.5; and
|
|
(2)
|
The escrow securities of
the Securityholders whose securities are not subject to escrow under section
6.5, will be released, and the Escrow Agent will send any share certificates
or other evidence of the escrow securities in the possession of the Escrow
Agent in accordance with section 2.4.
|
|
(3)
|
If your new securities are
subject to escrow, unless subsection (4) applies, the Escrow Agent will
hold your new securities in escrow on the same terms and conditions, including
release dates, as applied to the escrow securities that you exchanged.
|
|
(4)
|
If the Issuer is a Tier
2 Issuer and the successor issuer is a Tier 1 Issuer, the release provisions
in section 3.1(4) relating to graduation will apply.
|
PART 7 RESIGNATION
OF ESCROW AGENT
7.1 Resignation of
Escrow Agent
|
(1)
|
If the Escrow Agent wishes to resign as escrow agent,
the Escrow Agent will give written notice to the Issuer and the Exchange.
|
|
(2)
|
If the Issuer wishes to terminate the Escrow Agent
as escrow agent, the Issuer will give written notice to the Escrow Agent
and the Exchange.
|
|
(3)
|
If the Escrow Agent resigns or is terminated, the
Issuer will be responsible for ensuring that the Escrow Agent is replaced
not later than the resignation or termination date by another escrow agent
that is acceptable to the Exchange and that has accepted such appointment,
which appointment will be binding on the Issuer and the Securityholders.
|
|
(4)
|
The resignation or termination of the Escrow Agent
will be effective, and the Escrow Agent will cease to be bound by this
Agreement, on the date that is 60 days after the date of receipt of the
notices referred to above by the Escrow Agent or Issuer, as applicable,
or on such other date as the Escrow Agent and the Issuer may agree upon
(the “resignation or termination date”), provided that the resignation
or termination date will not be less than 10 business days before a release
date.
|
|
(5)
|
If the Issuer has not appointed a successor escrow
agent within 60 days of the resignation or termination date, the Escrow
Agent will apply, at the Issuer’s expense, to a court of competent
jurisdiction for the appointment of a successor escrow agent, and the
duties and responsibilities of the Escrow Agent will cease immediately
upon such appointment.
|
|
(6)
|
On any new appointment under this section, the successor
Escrow Agent will be vested
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 13
|
|
(as at August 2002)
|
|
|
with the same powers, rights, duties
and obligations as if it had been originally named herein as Escrow Agent, without
any further assurance, conveyance, act or deed. The predecessor Escrow Agent,
upon receipt of payment for any outstanding account for its services and expenses
then unpaid, will transfer, deliver and pay over to the successor Escrow Agent,
who will be entitled to receive, all securities, records or other property on
deposit with the predecessor Escrow Agent in relation to this Agreement and
the predecessor Escrow Agent will thereupon be discharged as Escrow Agent.
|
(7)
|
If any changes are made to Part 8 of this Agreement
as a result of the appointment of the successor Escrow Agent, those changes
must not be inconsistent with the Policy and the terms of this Agreement
and the Issuer to this Agreement will file a copy of the new Agreement
with the Exchange.
|
PART 8 OTHER CONTRACTUAL
ARRANGEMENTS
8.1 Escrow Agent
Not a Trustee
The Escrow Agent accepts duties and responsibilities under
this Agreement, and the escrow securities and any share certificates or other
evidence of these securities, solely as a custodian, bailee and agent. No trust
is intended to be, or is or will be, created hereby and the Escrow Agent shall
owe no duties hereunder as a trustee.
8.2 Escrow
Agent Not Responsible for Genuineness
The Escrow Agent will not be responsible or liable in any
manner whatever for the sufficiency, correctness, genuineness or validity of
any escrow security deposited with it.
8.3 Escrow
Agent Not Responsible for Furnished Information
The Escrow Agent will have no responsibility for seeking,
obtaining, compiling, preparing or determining the accuracy of any information
or document, including the representative capacity in which a party purports
to act, that the Escrow Agent receives as a condition to a release from escrow
or a transfer of escrow securities within escrow under this Agreement.
8.4
Escrow Agent Not Responsible after Release
The Escrow Agent will have no responsibility for escrow securities
that it has released to a Securityholder or at a Securityholder’s direction
according to this Agreement.
8.5
Indemnification of Escrow Agent
The Issuer and each Securityholder hereby jointly and severally
agree to indemnify and hold harmless the Escrow Agent, its affiliates, and their
current and former directors, officers, employees and agents from and against
any and all claims, demands, losses, penalties, costs, expenses, fees and liabilities,
including, without limitation, legal fees and expenses, directly or indirectly
arising out of, in connection with, or in respect of, this Agreement, except
where same result directly and principally from gross negligence, wilful misconduct
or bad faith on the part
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 14
|
|
(as at August 2002)
|
|
|
of the Escrow Agent. This indemnity survives the release of
the escrow securities, the resignation or termination of the Escrow Agent and
the termination of this Agreement.
8.6 Additional Provisions
(1) The Escrow Agent will be protected in acting and relying
reasonably upon any notice, direction, instruction, order, certificate, confirmation,
request, waiver, consent, receipt, statutory declaration or other paper or document
(collectively referred to as
“Documents”
) furnished to it and
purportedly signed by any officer or person required to or entitled to execute
and deliver to the Escrow Agent any such Document in connection with this Agreement,
not only as to its due execution and the validity and effectiveness of its provisions,
but also as to the truth or accuracy of any information therein contained, which
it in good faith believes to be genuine.
(2) The Escrow Agent will not be bound by any notice of a
claim or demand with respect thereto, or any waiver, modification, amendment,
termination or rescission of this Agreement unless received by it in writing,
and signed by the other Parties and approved by the Exchange, and, if the duties
or indemnification of the Escrow Agent in this Agreement are affected, unless
it has given its prior written consent.
(3) The Escrow Agent may consult with or retain such legal
counsel and advisors as it may reasonably require for the purpose of discharging
its duties or determining its rights under this Agreement and may rely and act
upon the advice of such counsel or advisor. The Escrow Agent will give written
notice to the Issuer as soon as practicable that it has retained legal counsel
or other advisors. The Issuer will pay or reimburse the Escrow Agent for any
reasonable fees, expenses and disbursements of such counsel or advisors.
(4) In the event of any disagreement arising under the terms
of this Agreement, the Escrow Agent will be entitled, at its option, to refuse
to comply with any and all demands whatsoever until the dispute is settled either
by a written agreement among the Parties or by a court of competent jurisdiction.
(5) The Escrow Agent will have no duties or responsibilities
except as expressly provided in this Agreement and will have no duty or responsibility
under the Policy or arising under any other agreement, including any agreement
referred to in this Agreement, to which the Escrow Agent is not a party.
(6) The Escrow Agent will have the right not to act and will
not be liable for refusing to act unless it has received clear and reasonable
documentation that complies with the terms of this Agreement. Such documentation
must not require the exercise of any discretion or independent judgment.
(7) The Escrow Agent is authorized to cancel any share certificate
delivered to it and hold such Securityholder’s escrow securities in electronic,
or uncertificated form only, pending release of such securities from escrow.
(8) The Escrow Agent will have no responsibility with respect
to any escrow securities in respect of which no share certificate or other evidence
or electronic or uncertificated form of
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 15
|
|
(as at August 2002)
|
|
|
these securities has been delivered to it, or otherwise received by it.
8.7 Limitation of
Liability of Escrow Agent
The Escrow Agent will not be liable to any of the Parties
hereunder for any action taken or omitted to be taken by it under or in connection
with this Agreement, except for losses directly, principally and immediately
caused by its bad faith, wilful misconduct or gross negligence. Under no circumstances
will the Escrow Agent be liable for any special, indirect, incidental, consequential,
exemplary, aggravated or punitive losses or damages hereunder, including any
loss of profits, whether foreseeable or unforeseeable. Notwithstanding the foregoing
or any other provision of this Agreement, in no event will the collective liability
of the Escrow Agent under or in connection with this Agreement to any one or
more Parties, except for losses directly caused by its bad faith or wilful misconduct,
exceed the amount of its annual fees under this Agreement or the amount of three
thousand dollars ($3,000.00), whichever amount shall be greater.
8.8 Remuneration
of Escrow Agent
The Issuer will pay the Escrow Agent reasonable remuneration
for its services under this Agreement, which fees are subject to revision from
time to time on 30 days' written notice. The Issuer will reimburse the Escrow
Agent for its expenses and disbursements. Any amount due under this section
and unpaid 30 days after request for such payment, will bear interest from the
expiration of such period at a rate per annum equal to the then current rate
charged by the Escrow Agent, payable on demand.
8.9 Additional Escrow
Release Requirements
(1) Notwithstanding that the escrow release provisions set
forth in Section 2.1 shall have been satisfied, the following additional restrictions
shall apply to the escrow securities:
|
|
(a)
|
no more than two-thirds of the original number of
escrow securities deposited into escrow by Vulcan Power Company under
this Agreement shall be released prior to the commencement of construction
of a power plant at the at the Issuer’s Raft River geothermal project
in Cassia County, Idaho;
|
|
|
(b)
|
all of the escrow securities deposited into escrow
by the individuals named below shall be released from escrow upon satisfaction
of the release provisions set forth in Section 2.1 except for that number
of escrow securities set forth in column A below, which will continue
to be held in escrow under this Agreement and released in two tranches
as set forth in columns B below and C below:
|
|
|
A
|
B
|
C
|
|
Name
|
Total
|
First Tranche
|
Second Tranche
|
|
Daniel Kunz
|
314,290
|
235,750
|
78,540
|
|
Douglas Glaspey
|
285,720
|
214,300
|
71,420
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 16
|
|
(as at August 2002)
|
|
|
|
|
A
|
B
|
C
|
|
Name
|
Total
|
First Tranche
|
Second Tranche
|
|
Paul Larkin
|
171,425
|
128,560
|
42,865
|
|
Ron Bourgeois
|
171,425
|
128,560
|
42,865
|
|
John Walker
|
57,140
|
42,830
|
14,310
|
|
Total:
|
1,000,000
|
750,000
|
250,000
|
|
|
|
The first tranche will be released at such time as
the Issuer has: (i) obtained all material permits and licenses necessary
to authorize the Issuer, or an affiliate of the Issuer, to begin construction
of a 10 megawatt power plant, (ii) entered into a power purchase agreement
to sell at standard commercial prices the power to be generated by such
power plant, and (iii) entered into a power transmission agreement to
transmit the power to be generated by such power plant, provided all of
the foregoing shall have occurred by June 19, 2005.
The second tranche will be released at such time as
the Issuer has: (i) obtained all material permits and licenses necessary
to authorize the Issuer, or an affiliate of the Issuer, to begin construction
of (or to expand its existing facility or authorization to) a 15 megawatt
power plant, (ii) entered into a power purchase agreement to sell at standard
commercial prices the power to be generated by such power plant, and (iii)
entered into a power transmission agreement to transmit the power to be
generated by such power plant, provided all of the foregoing shall have
occurred by December 19, 2005;
|
|
|
(c)
|
if the release criteria set forth in subsections 8.9
(1) (a) or (b) above are not satisfied, the escrow securities subject
to such criteria, as applicable, shall be returned to the Issuer and cancelled;
|
|
|
(d)
|
for the purposes of determining whether or not subsections
8.9 (1) (a) and (b) above have or have not been satisfied, the Escrow
Agent shall be entitled to rely on a statutory declaration of an independent
director of the Issuer confirming that the release criteria set forth
in subsection (a) or (b) have or have not been satisfied, as the case
may be. The Escrow Agent shall promptly provide a copy of each statutory
declaration that it receives pursuant to this subsection to the Issuer
and to each holder of escrow securities under this Agreement. For the
purposes hereof, a director is not independent if the director or a shareholder
that has appointed the director will receive a release of escrowed securities
as a consequence of the Escrow Agent relying on the statutory declaration
sworn by such director; and
|
|
|
(e)
|
the Escrow Agent shall wait five business days after
receiving any statutory declaration pursuant to this section 8.9 before
taking any action in respect thereof, other than sending copies of the
statutory declaration to the Issuer and each holder of escrow securities
under this Agreement.
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 17
|
|
(as at August 2002)
|
|
|
PART 9 INDEMNIFICATION
OF THE EXCHANGE
9.1 Indemnification
|
(1)
|
The Issuer and each Securityholder
jointly and severally:
|
|
|
(a)
|
release, indemnify and save harmless the Exchange
from all costs (including legal cost, expenses and disbursements), charges,
claims, demands, damages, liabilities, losses and expenses incurred by
the Exchange;
|
|
|
(b)
|
agree not to make or bring a claim or demand, or
commence any action, against the Exchange; and
|
|
|
(c)
|
agree to indemnify and save harmless the Exchange
from all costs (including legal costs) and damages that the Exchange incurs
or is required by law to pay as a result of any person’s claim, demand
or action,
|
|
|
arising from any and every
act or omission committed or omitted by the Exchange, in connection with
this Agreement, even if said act or omission was negligent, or constituted
a breach of the terms of this Agreement.
|
|
(2)
|
This indemnity survives
the release of the escrow securities and the termination of this Agreement.
|
PART 10 NOTICES
10.1 Notice to Escrow
Agent
Documents will be considered to have been delivered to the
Escrow Agent on the next business day following the date of transmission, if
delivered by fax, the date of delivery, if delivered by hand during normal business
hours or by prepaid courier, or 5 business days after the date of mailing, if
delivered by mail, to the following:
Pacific Corporate Trust Company
10th Floor - 625 Howe Street
Vancouver, B.C.
V6C 3B8
Attention: Corporate Trust Department
Facsimile: 604-689-8144
10.2
Notice to Issuer
Documents will be considered to have been delivered to the
Issuer on the next business day following the date of transmission, if delivered
by fax, the date of delivery, if delivered by hand or by prepaid courier, or
5 business days after the date of mailing, if delivered by mail, to the following:
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 18
|
|
(as at August 2002)
|
|
|
U.S. Geothermal Inc. (formerly U.S. Cobalt Inc.)
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
Attention: Mr. Daniel Kunz
Facsimile: 208-424-1030
10.3 Deliveries to
Securityholders
Documents will be considered to have been delivered to a Securityholder
on the date of delivery, if delivered by hand or by prepaid courier, or 5 business
days after the date of mailing, if delivered by mail, to the address on the
Issuer’s share register.
Any share certificates or other evidence of a Securityholder’s
escrow securities will be sent to the Securityholder’s address on the Issuer’s
share register unless the Securityholder has advised the Escrow Agent in writing
otherwise at least ten business days before the escrow securities are released
from escrow. The Issuer will provide the Escrow Agent with each Securityholder’s
address as listed on the Issuer’s share register.
10.4 Change of Address
|
(1)
|
The Escrow Agent may change its address for delivery
by delivering notice of the change of address to the Issuer and to each
Securityholder.
|
|
(2)
|
The Issuer may change its address for delivery by
delivering notice of the change of address to the Escrow Agent and to
each Securityholder.
|
|
(3)
|
A Securityholder may change that Securityholder’s
address for delivery by delivering notice of the change of address to
the Issuer and to the Escrow Agent.
|
10.5 Postal Interruption
A party to this Agreement will not mail a Document if the
party is aware of an actual or impending disruption of postal service.
PART 11 GENERAL
11.1 Interpretation
– “holding securities”
Unless the context otherwise requires, all capitalized terms
that are not otherwise defined in this Agreement, shall have the meanings as
defined in
Policy 1.1
-
Interpretation
or
in
Policy 5.4
-
Escrow, Vendor Consideration and Resale Restriction
s
.
When this Agreement refers to securities that a Securityholder
“holds”, it means that the Securityholder has direct or indirect beneficial
ownership of or control or direction over the securities.
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 19
|
|
(as at August 2002)
|
|
|
11.2 Enforcement
by Third Parties
The Issuer enters this Agreement both on its own behalf and
as trustee for the Exchange and the Securityholders of the Issuer, and this
Agreement may be enforced by either the Exchange, or the Securityholders of
the Issuer, or both.
11.3 Termination,
Amendment, and Waiver of Agreement
|
(1)
|
Subject to subsection 11.3(3),
this Agreement shall only terminate:
|
|
|
(a)
|
with respect to all the
Parties:
|
|
|
|
(i)
|
as specifically provided in this Agreement;
|
|
|
|
(ii)
|
subject to subsection 11.3(2), upon the agreement
of all Parties; or
|
|
|
|
(iii)
|
when the Securities of all Securityholders have been
released from escrow pursuant to this Agreement; and
|
|
|
(b)
|
with respect to a Party:
|
|
|
|
(i)
|
as specifically provided in this Agreement; or
|
|
|
|
(ii)
|
if the Party is a Securityholder, when all of the
Securityholder’s Securities have been released from escrow pursuant
to this Agreement.
|
|
(2)
|
An agreement to terminate
this Agreement pursuant to section 11.3(1)(a)(ii) shall not be effective
unless and until the agreement to terminate
|
|
|
(a)
|
is evidenced by a memorandum
in writing signed by all Parties;
|
|
|
(b)
|
has been consented to in
writing by the Exchange; and
|
|
|
(c)
|
has been approved by a majority
of securityholders of the Issuer who are not Securityholders.
|
|
(3)
|
Notwithstanding any other
provision in this Agreement, the obligations set forth in section 9.1
shall survive the termination of this Agreement and the resignation or
removal of the Escrow Agent.
|
|
(4)
|
No amendment or waiver of
this Agreement or any part of this Agreement shall be effective unless
the amendment or waiver:
|
|
|
(a)
|
is evidenced by a memorandum
in writing signed by all Parties;
|
|
|
(b)
|
has been approved in writing
by the Exchange; and
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 20
|
|
(as at August 2002)
|
|
|
|
|
(c)
|
has been approved by a majority of securityholders
of the Issuer who are not Securityholders.
|
|
(5)
|
No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision (whether similar or not), nor shall any waiver
constitute a continuing waiver, unless expressly provided.
|
11.4 Severance of
Illegal Provision
Any provision or part of a provision of this Agreement determined
by a court of competent jurisdiction to be invalid, illegal or unenforceable
shall be deemed stricken to the extent necessary to eliminate any invalidity,
illegality or unenforceability, and the rest of the Agreement and all other
provisions and parts thereof shall remain in full force and effect and be binding
upon the parties hereto as though the said illegal and/or unenforceable provision
or part thereof had never been included in this Agreement.
11.5 Further
Assurances
The Parties will execute and deliver any further documents
and perform any further acts reasonably requested by any of the Parties to this
agreement which are necessary to carry out the intent of this Agreement.
11.6 Time
Time is of the essence of this Agreement.
11.7 Consent
of Exchange to Amendment
The Exchange must approve any amendment to this Agreement.
11.8 Additional
Escrow Requirements
A Canadian exchange may impose escrow terms or conditions
in addition to those set out in this Agreement.
11.9 Governing
Laws
The laws of the Province of British Columbia and the applicable
laws of Canada will govern this Agreement.
11.10 Counterparts
The Parties may execute this Agreement by fax and in counterparts,
each of which will be considered an original and all of which will be one agreement.
11.11 Singular and
Plural
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 21
|
|
(as at August 2002)
|
|
|
Wherever a singular expression is used in this Agreement, that expression is considered as including the plural or the body corporate where required by the context.
11.12 Language
This Agreement has been drawn up in the English language at the request of
all parties. Cet acte a été rédigé en anglais à
la demande de toutes les parties.
11.13 Benefit and
Binding Effect
This Agreement will benefit and bind the Parties and their heirs, executors, administrators, successors and permitted assigns and all persons claiming through them as if they had been a Party to this Agreement.
11.14 Entire Agreement
This is the entire agreement among the Parties concerning the subject matter set out in this Agreement and supersedes any and all prior understandings and agreements.
11.15 Successor to
Escrow Agent
Any corporation with which the Escrow Agent may be amalgamated, merged or consolidated, or any corporation succeeding to the business of the Escrow Agent will be the successor of the Escrow Agent under this Agreement without any further act on its
part or on the part or any of the Parties, provided that the successor is recognized by the Exchange.
The Parties have executed and delivered this Agreement as of the date set out above.
PACIFIC CORPORATE TRUST COMPANY
____________________________
Authorized signatory
____________________________
Authorized signatory
U.S. GEOTHERMAL INC.
____________________________
Authorized signatory
____________________________
Authorized signatory
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 22
|
|
(as at August 2002)
|
|
|
If the Securityholder is an individual:
|
Signed, sealed and delivered by
|
)
|
|
|
DANIEL KUNZ in the presence of:
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Name
|
)
|
|
|
|
)
|
|
|
Address
|
)
|
DANIEL KUNZ
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Occupation
|
)
|
|
If the Securityholder is an individual:
|
Signed, sealed and delivered by
|
)
|
|
|
DOUGLAS GLASPEY in the presence of:
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Name
|
)
|
|
|
|
)
|
|
|
Address
|
)
|
DOUGLAS GLASPEY
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Occupation
|
)
|
|
If the Securityholder is an individual:
|
Signed, sealed and delivered by
|
)
|
|
|
PAUL LARKIN in the presence of:
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Name
|
)
|
|
|
|
)
|
|
|
Address
|
)
|
PAUL LARKIN
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Occupation
|
)
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 23
|
|
(as at August 2002)
|
|
|
If the Securityholder is an individual:
|
Signed, sealed and delivered by
|
)
|
|
|
RONALD BOURGEOIS in the presence of:
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Name
|
)
|
|
|
|
)
|
|
|
Address
|
)
|
RONALD BOURGEOIS
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Occupation
|
)
|
|
If the Securityholder is an individual:
|
Signed, sealed and delivered by
|
)
|
|
|
JOHN WALKER in the presence of:
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Name
|
)
|
|
|
|
)
|
|
|
Address
|
)
|
JOHN WALKER
|
|
|
)
|
|
|
|
)
|
|
|
|
)
|
|
|
Occupation
|
)
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VULCAN POWER COMPANY
_________________________________
Authorized signatory
_________________________________
Authorized signatory
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 24
|
|
(as at August 2002)
|
|
|
Schedule “A” to Escrow Agreement
Securityholder
Name: Daniel Kunz
Signature: ____________________
Address for Notice:
|
2997 Warm Springs Avenue
|
|
Boise, Idaho
|
|
83712
|
Securities:
Class and Type
(i.e. Value Securities or Surplus
Securities
|
Number
|
Certificate(s) (if applicable)
|
|
common shares - value securities
|
2,365,880
|
|
|
warrants – value securities
|
555,555
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 25
|
|
(as at August 2002)
|
|
|
Securityholder
Name: Douglas Glaspey
Signature: ____________________
Address for Notice:
|
3392 Maze Avenue
|
|
Boise, Idaho
|
|
83706
|
Securities:
Class and Type
(i.e. Value Securities or Surplus
Securities
|
Number
|
Certificate(s) (if applicable)
|
|
common shares - value securities
|
1,014,649
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 26
|
|
(as at August 2002)
|
|
|
Securityholder
Name: Paul Larkin
Signature: _______________
Address for Notice:
|
2188 West 53rd Avenue
|
|
Vancouver, B.C.
|
|
V6P 1L7
|
Securities:
Class and Type
(i.e. Value Securities or Surplus
Securities
|
Number
|
Certificate(s) (if applicable)
|
|
common shares - value securities
|
863,187
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 27
|
|
(as at August 2002)
|
|
|
Securityholder
Name: Ronald Bourgeois
Signature: _______________
Address for Notice:
|
3630 West 34th AAvenue
|
|
Vancouver, British Columbia
|
|
V6N 2L1
|
Securities:
Class and Type
(i.e. Value Securities or Surplus
Securities
|
Number
|
Certificate(s) (if applicable)
|
|
common shares - value securities
|
821,425
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 28
|
|
(as at August 2002)
|
|
|
Securityholder
Name: John Walker
Signature: _______________
|
81 Chartwell Road
|
|
Oakville, Ontario
|
|
L6J 323
|
Securities:
Class and Type
(i.e. Value Securities or Surplus
Securities
|
Number
|
Certificate(s) (if applicable)
|
|
common shares - value securities
|
73,807
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 29
|
|
(as at August 2002)
|
|
|
Securityholder
Name: Vulcan Power Company
|
Signature:
|
|
|
|
(Authorized signatory)
|
|
|
|
|
|
|
|
|
(Authorized signatory)
|
Address for Notice:
Securities:
Class and Type
(i.e. Value Securities or Surplus
Securities
|
Number
|
Certificate(s) (if applicable)
|
|
common shares - value securities
|
1,755,156
|
|
|
warrants - value securities
|
2,420,217
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 30
|
|
(as at August 2002)
|
|
|
SCHEDULE B(1) – TIER 1 VALUE SECURITY ESCROW AGREEMENT
RELEASE OF SECURITIES
Timed Release
|
Release Dates
|
Percentage of Total
Escrowed Securities to be
Released
|
Total Number of Escrowed
Securities to be Released
|
[Insert date of Exchange
Bulletin]
|
1/4 of your escrow securities
|
|
[Insert date 6 months
following Exchange
Bulletin]
|
1/3 of your remaining
escrow securities
|
|
[Insert date 12 months
following Exchange
Bulletin]
|
1/2 of your remaining
escrow securities
|
|
[Insert date 18 months
following Exchange
Bulletin]
|
all of your remaining escrow
securities
|
|
|
TOTAL
|
100%
|
|
|
*
|
In the simplest case where there are no changes to
the escrow securities initially deposited and no additional escrow securities,
then the release schedule outlined above results in the escrow securities
being released in equal tranches of 25%.
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 31
|
|
(as at August 2002)
|
|
|
SCHEDULE B(2) – TIER 2 VALUE SECURITY ESCROW AGREEMENT
RELEASE OF SECURITIES
Timed Release
|
Release Dates
|
Percentage of Total Escrowed
Securities to be Released
|
Total Number of Escrowed
Securities to be Released
|
|
December 19, 2003
|
1/10 of your escrowed
securities
|
689,410 shares
297,577 warrants
|
|
June 19, 2004
|
1/6 of your remaining escrow
securities
|
1,034,116 shares
446,365 warrants
|
|
December 19, 2004
|
1/5 of your remaining escrow
securities
|
1,034,116 shares
446,365 warrants
|
|
June 19, 2005
|
1/4 of your remaining escrow
securities
|
1,034,116 shares
446,365 warrants
|
|
December 19, 2005
|
1/3 of your remaining escrow
securities
|
1,034,116 shares
446,365 warrants
|
|
June 19, 2006
|
1/2 of your remaining escrow
securities
|
1,034,116 shares
446,365 warrants
|
|
December 19, 2006
|
all of your remaining escrow
securities
|
1,034,114 shares
446,370 warrants
|
|
TOTAL
|
100%
|
6,894,104 shares
2,975,772 warrants
|
|
*
|
In the simplest case where there are no changes to
the escrow securities initially deposited and no additional escrow securities,
the release schedule outlined above results in the escrow securities being
released in equal tranches of 15% after completion of the release on the
date of the Exchange Bulletin.
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 32
|
|
(as at August 2002)
|
|
|
SCHEDULE B(3) – TIER 1 SURPLUS SECURITY ESCROW AGREEMENT
RELEASE OF SECURITIES
Timed Release
|
Release Dates
|
Percentage of Total Escrowed
Securities to be Released
|
Total Number of Escrowed
Securities to be Released
|
[Insert date of Exchange
Bulletin]
|
1/10 of your escrow securities
|
|
[Insert date 6 months
following Exchange
Bulletin]
|
1/6 of your remaining escrow
securities
|
|
[Insert date 12 months
following Exchange
Bulletin]
|
1/5 of your remaining escrow
securities
|
|
[Insert date 18 months
following Exchange
Bulletin]
|
1/4 of your remaining escrow
securities
|
|
[Insert date 24 months
following Exchange
Bulletin]
|
1/3 of your remaining escrow
securities
|
|
[Insert date 30 months
following Exchange
Bulletin]
|
1/2 of your remaining escrow
securities
|
|
[Insert date 36 months
following Exchange
Bulletin]
|
all of your remaining escrow
securities
|
|
|
TOTAL
|
100%
|
|
|
*
|
In the simplest case where there are no changes to
the escrow securities initially deposited and no additional escrow securities,
the release schedule outlined above results in the escrow securities being
released in equal tranches of 15% after completion of the release on the
date of the Exchange Bulletin.
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 33
|
|
(as at August 2002)
|
|
|
SCHEDULE B(4) – TIER 2 SURPLUS SECURITY ESCROW AGREEMENT
RELEASE OF SECURITIES
Timed Release
|
Release Dates
|
Percentage of Total
Escrowed Securities to be
Released
|
Total Number of
Escrowed Securities to be
Released
|
[Insert date of Exchange
Bulletin]
|
no release
|
|
[Insert date 6 months following
Exchange Bulletin]
|
1/20 of your escrow
securities
|
|
[Insert date 12 months
following Exchange Bulletin]
|
1/19 of your remaining
escrow securities
|
|
[Insert date 18 months
following Exchange Bulletin]
|
1/18 of your remaining
escrow securities
|
|
[Insert date 24 months
following Exchange Bulletin]
|
1/17 of your remaining
escrow securities
|
|
[Insert date 30 months
following Exchange Bulletin]
|
1/8 of your remaining
escrow securities
|
|
[Insert date 36 months
following Exchange Bulletin]
|
1/7 of your remaining
escrow securities
|
|
[Insert date 42 months
following Exchange Bulletin]
|
1/6 of your remaining
escrow securities
|
|
[Insert date 48 months
following Exchange Bulletin]
|
1/5 of your remaining
escrow securities
|
|
[Insert date 54 months
following Exchange Bulletin]
|
1/4 of your remaining
escrow securities
|
|
[Insert date 60 months
following Exchange Bulletin]
|
1/3 of your remaining
escrow securities
|
|
[Insert date 66 months
following Exchange Bulletin]
|
1/2 of your remaining
escrow securities
|
|
[Insert date 72 months
following Exchange Bulletin]
|
all of your remaining escrow
securities
|
|
|
TOTAL
|
100%
|
|
|
|
|
FORM 5D
|
ESCROW AGREEMENT
|
Page 34
|
|
(as at August 2002)
|
|
|
FIRST AMENDED AND RESTATED MERGER AGREEMENT
FIRST
AMENDED AND RESTATED MERGER AGREEMENT, dated effective November 20, 2003 (the
“First Amendment”
), by and among U.S. Cobalt Inc., a Delaware
corporation (the
“Company”
), EverGreen Power Inc., an Idaho
corporation and a wholly-owned subsidiary of the Company (
“Sub”
),
U.S. Geothermal Inc., an Idaho corporation (
“Geo”)
, and the
stockholders of Geo set forth on the signature pages hereto (collectively, the
“Principal Geo Shareholders”
). Geo and Sub are sometimes herein
collectively referred to as the
“Constituent Corporations.”
RECITALS
A.
Geo is engaged in the business of acquiring and developing one or more geothermal
projects (the
“Business”
).
B.
The Company, Sub and Geo desire to effect a merger (
“Merger”
)
of Sub with Geo, pursuant to which (i) subject to Sections 2.1(f) and 2.5 hereof,
(a) each share of Geo’s common stock, $.001 par value per share (
“Geo
Common Stock”
) will be converted into shares of the voting Common Stock
of the Company, $.001 par value per share (
“Company Common Stock”
),
and (b) all outstanding common share purchase warrants of Geo will be converted
into warrants to purchase Company Common Stock and (ii) the Company will become
the sole stockholder of the Surviving Corporation (as defined below).
C.
The Boards of Directors of the Company, Sub and Geo have each approved the Merger
upon the terms and subject to the conditions set forth herein and deem it advisable
and in the best interests of their respective stockholders that the Merger be
consummated.
D.
For federal income tax purposes, it is intended that the Merger shall qualify
as a reorganization within the meaning of Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended (the
“Code”
).
E.
Effective February 28, 2003, the parties entered into a Merger Agreement (the
“Agreement”
), to memorialize the terms of the Merger. Since
that time, certain facts and circumstances have changed, and the parties wish
to amend and restate the Agreement to reflect their agreement with and to such
changes.
F.
Capitalized terms used herein are defined or their definitions are referenced
on Schedule E hereto.
AGREEMENTS
NOW,
THEREFORE, in consideration of the recitals (which are deemed to be a part of
this First Amendment), mutual covenants, representations, warranties and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
and restate the Agreement and agree as follows:
ARTICLE I
THE MERGER
SECTION
1.1.
The Merger; Surviving Corporation
. Upon the terms and subject to
the conditions hereof, and in accordance with the provisions of the Idaho Code
§ 30-1-1101
et seq
, as amended (the
- 2 -
“Idaho Code”
), Sub shall be merged with and
into Geo as soon as practicable after satisfaction or waiver of the conditions
set forth in Article VII. Following the Merger, the separate existence of Sub
shall cease, and Geo shall continue as the surviving corporation in the Merger
(the
“Surviving Corporation”
).
SECTION
1.2.
Effect of the Merger
. The Merger shall have the effects set forth
in the Idaho Code. From and after the Effective Time, the Surviving Corporation
shall be a wholly-owned subsidiary of the Company.
SECTION
1.3.
Articles of Incorporation of the Surviving Corporation
. The Articles
of Incorporation of Geo, as in effect immediately prior to the Effective Time
of the Merger, shall be the Articles of Incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
SECTION
1.4.
Bylaws of the Surviving Corporation
. At the Effective Time and without
any further action on the part of the Constituent Corporations, the Bylaws of
Geo shall be the Bylaws of the Surviving Corporation.
SECTION
1.5.
Board of Directors and Officers of the Surviving Corporation
. At
the Effective Time, the persons listed on
Schedule 1.5(a)
shall be the
directors of the Surviving Corporation and the persons listed on
Schedule
1.5(b)
shall be the officers of the Surviving Corporation, holding such
positions as are indicated on such Schedule, each of such directors and officers
to hold office until their respective successors are duly elected and qualified,
or their earlier death, resignation or removal.
SECTION
1.6.
Effective Time of the Merger
. The Constituent Corporations will
cause articles of merger and such other documents as are required by the Idaho
Code to be duly filed with the Secretary of State of the State of Idaho (the
“
Idaho Authority
”). The Merger shall become effective upon
the filing of articles of merger substantially in the form attached hereto as
Exhibit
A with the Idaho Authority.
ARTICLE II
CONVERSION OF SHARES
SECTION
2.1.
Conversion of Capital Stock
. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holders of the capital
stock of the Constituent Corporations:
(a)
Sub Common Stock
. All of the issued and outstanding shares of Sub common
stock, $.001 par value per share (
“Sub Common Stock”
), shall
be converted into and become one fully paid and non-assessable share of common
stock of the Surviving Corporation.
(b)
Cancellation of Treasury Stock
. All shares, if any, of Geo Common Stock
and Geo Warrants or other rights to acquire any interest in the equity of Geo,
directly or indirectly (collectively
“Geo Securities”
) that
are owned directly or indirectly by Geo shall be cancelled, and no consideration
shall be delivered in exchange therefor.
(c)
Conversion of Geo Common Stock
. Except as provided in Sections 2.2 and
2.3 and subject to Section 2.1(e), all of the issued and outstanding shares
of Geo Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive and exchanged solely for 6,939,992
shares of Company Common Stock (after giving effect to the Consolidation), which
shall be distributed to the Geo Shareholders as set forth in
Schedule 2.1(c)
hereto.
- 3 -
(d)
Conversion of Geo Warrants
. Except as provided in Sections 2.2 and 2.3
and subject to Section 2.1(e), all of the issued and outstanding Geo Warrants
issued and outstanding immediately prior to the Effective Time shall be converted
into the right to receive and exchanged solely for the 2,420,217 Exchange Warrants
which shall be distributed to Vulcan.
(e)
Escrow Shares
. Notwithstanding the foregoing, the Company shall deposit
into the Escrow (as defined below) 5,782,993 shares (or such greater number
as shall be required under an Escrow Agreement (as defined below)) of the Company
Common Stock and all of the Exchange Warrants otherwise deliverable pursuant
to Section 2.1(c) and Section 2.1(d) hereof (the
“Escrow Securities”
),
which Escrow Securities shall, immediately after the Closing without any further
action by any Person, become subject to the terms and conditions of the escrow
(the
“Escrow”
) established pursuant to one or more escrow agreements
to be entered into among the Company, the Escrow Agent and certain shareholders
of the Company on such terms and conditions as are agreed among the Company,
the Exchange and Escrow Agent (the
“Escrow Agreement(s)”
).
(f)
Equitable Adjustments
. Notwithstanding the foregoing, the number of shares
of Company Common Stock and Exchange Warrants to be issued pursuant to Sections
2.1(c) and 2.1(d) of this First Amendment (including the number of Escrow Securities)
shall be equitably adjusted to the extent that such adjustment is necessary
to preserve the economic value of such shares as determined by an independent
accounting firm selected by the Company in the event of a change in the number
of outstanding shares of the Company’s capital stock resulting from a stock
dividend, stock split, reverse stock split, share combination, recapitalization,
merger, consolidation, acquisition of property or shares, asset spin-off, split-off,
reorganization, stock rights offering, liquidation or similar event (other than
the Consolidation), of or by the Company between the date hereof and the date
such shares are distributed.
(g)
Definition of Merger Consideration
. The shares of the Company Common
Stock and the Exchange Warrants (including, without limitation, the Escrow Securities)
to be received pursuant to Sections 2.1(c) and this 2.1(d) upon the conversion
of Geo Securities shall be referred to as the
“Merger Consideration.”
SECTION
2.2.
Dissenters’ Rights
. It is a condition to the obligations of
the Company and Sub to proceed to closing under this First Amendment that no
Geo Shareholders exercise any dissenters’ rights under applicable law.
If such condition is waived (but without creating or implying any obligation
to do so), the Geo Shareholders as to which dissenters’ rights shall have
been duly demanded under applicable law (
“Dissenting Shares”
),
if any, shall be entitled to payment by the Surviving Corporation only of the
fair value of such shares plus accrued interest to the extent permitted by and
in accordance with the provisions of applicable law;
provided
,
however,
that (i) if any holder of Dissenting Shares shall, under the circumstances permitted
by applicable law, subsequently deliver a written withdrawal of such holder’s
demand or (ii) if any holder fails to establish such holder’s entitlement
to demand or receive payment as provided under applicable law, such holder or
holders (as the case may be) shall forfeit such right to payment for such Geo
Securities and such securities shall thereupon be deemed to have been converted
into Company Common Stock as of the Effective Time in accordance with Section
2.1 hereof (including, without limitation, that such shares of Company Common
Stock shall constitute additional Escrow Securities subject to the terms of
the Escrow in accordance with Section 2.1(e)).
SECTION
2.3.
No Fractional Shares
. No certificates representing fractional shares
of Company Common Stock shall be issued upon the surrender for exchange of certificates
formerly representing Geo Common Stock or deposited into the Escrow pursuant
to this Article II. Fractions of shares will be rounded down to the closest
whole number.
- 4 -
SECTION
2.4.
Certificates; Surrender and Payment
.
(a)
Effect of Merger on Geo Stock Certificates
. As of the Effective Time,
each certificate representing Geo Securities shall cease to represent such Geo
Securities and shall represent only (i) in the case of Dissenting Shares, if
any, the rights of the holder as provided in Section 2.2 or (ii) in all other
cases, the right to receive Merger Consideration pursuant to and in accordance
with the terms hereof and any holder thereof shall cease to have any rights
as a securityholder of Geo or the Surviving Geo.
(b)
Surrender and Payment
. On or before the Closing Date, the Geo Shareholders
shall surrender the certificates for their Geo Securities to the Company along
with fully-executed forms of the Transferee Acknowledgement and Warranty included
in the Merger Materials, and the Company shall issue the Exchange Securities
to the Geo Shareholders in accordance with the provisions of Sections 2.1(c)
and 2.1(d) hereof, subject to the provisions of the Escrow Agreement(s).
(c)
Closing of Geo’s Transfer Books
. After the Effective Time, no transfers
of Geo Securities shall be recorded in the stock transfer books of the Surviving
Corporation or its transfer agent.
SECTION
2.5.
Transfer of Company Common Stock
. No Geo Shareholder shall sell,
assign, convey or otherwise transfer any Company Common Stock or Exchange Warrants
issued pursuant to this First Amendment except pursuant to an effective registration
statement under the Securities Act of 1933, as amended, (the
“Securities
Act”
) or an applicable exemption from registration thereunder and otherwise
in accordance with all applicable federal and state securities laws. Unless
and until otherwise permitted by this First Amendment, each certificate of Company
Common Stock and Exchange Warrants issued pursuant to this First Amendment to
any Stockholder or his or her nominee, or to any subsequent transferee of such
certificate shall be stamped or otherwise imprinted with a legend in substantially
the following form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, OR APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE NOT BEEN ACQUIRED WITH A VIEW TO DISTRIBUTION
OR RESALE, AND MAY NOT BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT REGISTRATION
IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR UNDER APPLICABLE STATE
SECURITIES LAWS.”
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF GEO AND THE PRINCIPAL GEO SHAREHOLDERS
Geo
and the Principal Geo Shareholders hereby jointly and severally represent and
warrant to each of the Company and Sub as of the date hereof and as of the Effective
Time as set forth below. The information disclosed on any Schedule attached
hereto shall be deemed to relate solely to the section of this Article III to
which such Schedule relates and shall not be deemed made for other sections
to which such disclosure may apply unless such disclosure is cross-referenced
in the Schedule(s) relating to such other section(s), and only to the extent
that the applicable information or risk is described.
- 5 -
SECTION
3.1.
Organization and Authority
. Geo is duly incorporated, validly existing
and in good standing under the laws of the State of Idaho, with all requisite
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted. No order has been made or petition presented
or resolution adopted which relates to the winding-up of Geo or for an administration
order in respect of Geo, nor has any administrative or other receiver been appointed
by any Governmental Authority or other Person with respect to all or part of
the assets of Geo, and no power to make any such appointment has arisen. Geo
has delivered to the Company complete and correct copies of the Articles of
Incorporation and Bylaws presently in effect for Geo, and Geo is not in default
under or in violation of any provision of such documents.
SECTION
3.2.
Qualification
. Geo is qualified and licensed to do business and
is in good standing in the State of Idaho, and is not required to be licensed
or qualified in any other jurisdiction.
SECTION
3.3.
Authorization
. Geo has full corporate power and authority to enter
into, execute and deliver this First Amendment and the Additional Agreements
to which it is a party and to perform and observe fully its obligations hereunder
and thereunder and to perform the transactions contemplated hereby and thereby;
provided, however that consummation of the Merger shall require approval of
the Geo Shareholders in accordance with the Idaho Code and Geo’s Articles
of Incorporation and By-laws (
“Geo Shareholder Approval”
).
Geo’s Board of Directors has taken all action required by law, Geo’s
Articles of Incorporation and Bylaws, or otherwise to authorize the execution,
delivery and performance of this First Amendment and the Additional Agreements
to which Geo is a party and the consummation by Geo of the transactions contemplated
hereby and thereby, and no other corporate proceedings on the part of Geo are
necessary to authorize the entry into, execution, delivery or performance of
this First Amendment and the Additional Agreements other than Geo Shareholder
Approval. This First Amendment and the Additional Agreements to which Geo is
a party have been duly and validly executed and delivered by Geo, and, assuming
due authorization, execution and delivery by the Company and Sub, constitute
valid and binding legal obligations of Geo, enforceable against Geo in accordance
with their terms.
SECTION
3.4.
No Violation
. Neither the execution, delivery or performance of
this First Amendment or the Additional Agreements nor (assuming Geo Shareholder
Approval) the consummation of the transactions contemplated hereby or thereby
will (a) violate, conflict with or result in any breach of any provision of
the Articles of Incorporation or Bylaws of Geo, (b) violate, conflict with or
result in a violation or breach of, or constitute a default (with or without
due notice or lapse of time or both) under, or permit the termination of, or
require any notice under, or require the consent of any other party to, or result
in the acceleration of, or entitle any party to accelerate (whether as a result
of a change in control of Geo or otherwise) any obligation or agreement, or
result in the loss of any benefit or the imposition of any fee or penalty, or
give rise to the creation of any Lien upon any of the properties or assets of
Geo, in each case under any of the terms, conditions or provisions of any debt,
note, bond, mortgage, indenture, deed of trust, license, lease, permit, agreement
or other instrument or obligation to which Geo is a party or by which it or
any of its properties or assets may be bound or affected (unless requisite waivers
or consents satisfactory in form and substance to the Company shall have been
obtained in writing and delivered to the Company prior to the Closing) or (c)
violate any Rules (including foreign, federal and state securities laws) of
any Governmental Authority applicable to Geo or any of its properties, assets
or operations.
SECTION
3.5.
Capitalization of Geo
. The authorized capital stock of Geo consists
of 10,000,000 shares of Geo Common Stock. There are issued and outstanding 6,079,836
shares of Geo Common Stock owned of record and beneficially by the Persons and
in the amounts specified on
Schedule 3.5(a)
attached hereto, free and
clear of all Liens, other than the Lien created by the Vulcan Agreement, which
- 6 -
will terminate at Closing. There are no Geo Securities held
by Geo as treasury stock. All of the issued and outstanding Geo Securities are
validly issued, fully paid, non-assessable and are without, and were not issued
in violation of, any preemptive rights, and were not issued in violation of
federal or state securities laws. No other class of capital stock of Geo other
than the Geo Common Stock is issued or outstanding, and other than the 1,612,000
Geo Warrants (which Geo Warrants and their holders are accurately described
on
Schedule 3.5(b))
, there are no options, warrants, calls, subscriptions,
conversion or other rights, agreements or commitments to acquire from Geo any
shares of capital stock or any other securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of capital stock or
any other security of Geo or the Surviving Corporation. There are no outstanding
or authorized stock appreciation, phantom stock or similar rights with respect
to Geo. Geo is not subject to any obligation (contingent or otherwise) to repurchase
or otherwise acquire or retire any shares of its capital stock. Geo has delivered
to the Company accurate and complete copies of the stock records of Geo including
copies of the duly cancelled certificates representing any shares of the capital
stock of Geo which were previously issued and then cancelled.
SECTION
3.6.
No Subsidiaries
. Geo does not own any investment, equity securities
or other legal and/or beneficial interests in any Person.
SECTION
3.7.
Consents and Approvals
. Except for consents and approvals of or
filings or registrations with (a) the Idaho Authority relating to the filing
of a certificate of merger pursuant to the Idaho Code, and (b) as set forth
on
Schedule 3.
7, no filing or registration with, no notice to and no
permit, authorization, consent or approval of, any third party or any Governmental
Authority is necessary for the consummation by the Geo Shareholders and Geo
of the transactions contemplated by this First Amendment or the Additional Agreements
or to enable Geo to continue to conduct its business after the Effective Time
in a manner which is consistent with that in which it is presently conducted
or contemplated to be conducted.
SECTION
3.8.
Books and Records
. The books and records of Geo are, and have been,
maintained in the usual, regular, ordinary and appropriate manner by Geo, and
all of the transactions of Geo are properly reflected therein.
SECTION
3.9.
Financial Statements
. Geo has furnished to the Company copies of
the audited balance sheet of Geo as of September 30, 2002 (such balance sheet
being referred to herein as the
“Most Recent Balance Sheet”
),
together with the related audited statements of income, stockholders’ equity
and changes in cash flows for the period from Geo’s inception until September
30, 2002, and the notes and supplementary information thereto, accompanied by
the report thereon of Geo’s independent public accountant (such financial
statements being hereinafter referred to as the
“Financial Statements”
).
The Financial Statements and each item therein, including the notes thereto
(i) were prepared in accordance with generally accepted accounting principles
in the United States of America applied on a consistent basis throughout the
periods covered thereby (
“GAAP”
), (ii) present fairly the financial
position, results of operations and changes in cash flows, as applicable, of
Geo, (iii) are accurate, correct and complete and are, in all material respects,
in accordance with the books of account and records of Geo and (iv) can be reconciled
with the financial statements and the financial records maintained and the accounting
methods applied by Geo for federal income tax purposes.
SECTION
3.10.
Absence of Undisclosed Liabilities
. Notwithstanding any limitations
or qualifications of, or exceptions to any other representation and warranty
contained in this Article III, (a) there are no Liabilities, commitments or
obligations of Geo of any kind whatsoever, (b) neither Geo nor any Principal
Geo Shareholder Knows of any valid basis for the assertion of any such Liabilities,
commitments or obligations, and (c) neither Geo nor any Principal Geo Shareholder
Knows of any
- 7 -
existing condition, situation or set of circumstances which
is reasonably likely to result in such a Liability, commitment or obligation,
other than (x) Liabilities, commitments and obligations to the extent and in
the amounts set forth on the Most Recent Balance Sheet (none of which results
from, arises out of, relates to, is in the nature of or was caused by any breach
of contract, breach of warranty, tort, infringement or violation of law), (y)
obligations to perform the executory portions of contracts to which Geo is a
party, provided that such obligations are set forth in such contracts, such
contracts are set forth on Schedule 3.14 hereto, and such contracts were entered
into in the ordinary course of business and have been made available to the
Company, and (z) additional accruals of Liabilities of the type that would be
included on a balance sheet of Geo in accordance with GAAP incurred in the ordinary
course of business consistent with past practices subsequent to the date of
the Most Recent Balance Sheet and prior to the date hereof or the Closing Date
(as applicable), provided that none of such additional accruals results from,
arises out of, relates to, is in the nature of, or was caused by any breach
of contract, breach of warranty, tort, infringement or violation of law or relates
to indebtedness for borrowed money or inter-company debt or debt owed to Affiliates
and such additional accruals are not, in the aggregate, material.
SECTION
3.11.
Absence of Certain Changes
. Except as set forth on Schedule 3.11
hereto, since September 30, 2002, Geo has conducted its businesses only in the
ordinary and usual course using its best efforts to maintain and enhance the
Business and there has been no material adverse change in the assets, properties,
business, operations, prospects, customer, licensor, licensee, supplier or employee
relations, net income or condition (financial or otherwise) of Geo or in the
ability of Geo or any of the Principal Geo Shareholders to perform this First
Amendment, the Additional Agreements and the transactions contemplated hereby
and thereby (a
“Material Adverse Effect”
). For purposes of
this First Amendment, any change or effect exceeding an amount or value or having
an impact of $5,000 or more individually, or $10,000 or more in the aggregate,
or adversely affecting Geo’s rights under the Geothermal Agreements or
the Vulcan Agreement, shall be deemed to be “material” and result
in a Material Adverse Effect. There is no event, condition, circumstance or,
to the Knowledge of Geo or any Principal Geo Shareholder, prospective development
which has had or may have a Material Adverse Effect. Without limiting the generality
of the foregoing, except as set forth on Schedule 3.11 hereto, Geo has not since
September 30, 2002:
(a) declared, set aside or paid any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
Geo,
(b) purchased, redeemed (or called for redemption), issued, sold,
or otherwise acquired or disposed of any shares of capital stock or other equity
securities of Geo, or granted any options, warrants or other rights to purchase,
or convert any obligation into, shares of capital stock or any evidence of indebtedness
or other securities of Geo,
(c) incurred or assumed any indebtedness (whether directly or by
way of guarantee or otherwise) for borrowed money, or become bound to repay
prematurely any borrowed money,
(d) forgiven or canceled any debts or claims,
(e) discharged or satisfied any Lien, or paid any Liability, other
than current liabilities for trade or business obligations shown on the Most
Recent Balance Sheet or incurred thereafter (but only to the extent such payment
was in the ordinary course of business consistent with past practices),
(f) changed its credit policies or practices,
- 8 -
(g) (i) increased the rate or terms of compensation (including
termination and severance pay) payable or to become payable by Geo to its directors,
officers, employees or agents, or increased the rate or terms of any bonus,
insurance, pension or other employee benefit plan, program or arrangement made
to, for or with any such directors, officers, employees or agents, except increases
occurring in the ordinary course of business consistent with past practice or
as required by applicable law, or (ii) entered into any employment, severance
or termination agreement with any such Person,
(h) made any loan, advance or capital contribution to any Person,
(i) waived any significant rights relating to the business
of Geo or arising under or relating to any of its assets, interests or properties,
(j) experienced any damage, destruction or loss to the properties
or assets owned, leased or used by Geo, whether or not covered by insurance
and whether as a result of fire, flood, riot, strike, act of God, other hazard
or otherwise,
(k) changed its financial or tax accounting principles or methods,
(l) changed, or authorized any change, in its Articles of Incorporation
or Bylaws,
(m) changed any of its business policies, customs or practices, including
advertising, licensing, investment, marketing, pricing, credit, the collection
of receivables, the payment of payables, purchasing, production, personnel,
sales, returns, budget, research and development and product acquisition policies,
(n) commenced, accelerated, ceased or curtailed any research and
development efforts other than in the ordinary course of business, consistent
with past practices,
(o) sold, leased, licensed, abandoned or made any other disposition
of, or created or permitted to exist any Liens with respect to, any of its properties,
Proprietary Rights or assets or made any acquisition of all or any part of the
properties, assets, capital stock or business of any other Person,
(p) entered into any merger, consolidation, recapitalization
or other business combination or reorganization,
(q) amended, terminated or failed to renew, or received any
threat to terminate or fail to renew, any Contract (as hereinafter defined)
or other agreement other than in the ordinary course of business and where such
amendment, termination, failure to renew or threat, singly or together with
other such actions, will not have a Material Adverse Effect,
(r) failed to pay trade payables of its business in the
ordinary course of business or done anything to adversely affect its relationship
with customers, suppliers, licensors or licensees,
(s) induced any employee, agent or consultant of Geo to leave
or terminate his or her employment or engagement with Geo or acted to otherwise
adversely affect the relation of Geo with any key employee, consultant or agent,
(t) terminated, amended or modified any Plans, or adopted any
employee benefit plan, agreement, arrangement, commitment, policy or practice,
- 9 -
(u)
without limiting the foregoing, engaged in any other material transaction
other than in the ordinary course of business consistent with past practices,
or
(v) agreed, either in writing or in a binding oral agreement, to
do any of the foregoing.
SECTION
3.12.
Litigation
. There are no Claims pending or, to the Knowledge of
Geo or the Principal Geo Shareholders, threatened by or before any Governmental
Authority or before any arbitrator of any nature, brought by or against Geo,
or any of its officers, directors, stockholders, employees or agents involving,
affecting or relating to the business, assets, operations or securities of Geo,
or the transactions contemplated by this First Amendment or the Additional Agreements,
nor is there any basis for any such Claim. Neither Geo nor any of its businesses,
assets or properties is subject to any order, writ, judgment, award, injunction
or decree of any Governmental Authority or arbitrator. No present or former
employee of Geo (or any predecessor of its business) has made or is entitled
to assert any Claim against Geo.
SECTION
3.13.
Assets; Liens and Encumbrances
. Geo has never held and does not
currently own or use in its business and operations any material tangible personal
property assets. There are no Liens with respect to Geo, its assets, businesses
or operations except for Liens (a) for taxes not yet delinquent or the validity
of which are being contested in good faith by appropriate actions, and (b) on
assets leased or licensed by Geo as described in any Schedule hereto, in which
case Geo holds a leasehold or licensed interest free and clear of all other
Liens except for the lessor’s or licensor’s interest therein. Neither
Geo nor any of the Principal Geo Shareholders are aware of (i) any assets of
Geo which require substantial repair or replacement, (ii) any manufacturer,
supplier or servicer of any assets of Geo which has terminated its operations
or suffered a significant adverse change in its condition (financial or otherwise)
or (iii) any other facts or circumstances which would materially adversely affect
the Surviving Corporation’s ability to obtain repair or replacement products,
parts or services with respect to any assets of Geo after the Closing.
SECTION
3.14.
Contracts
. Set forth on Schedule 3.14 attached hereto is a list
of all contracts, mortgages, notes, security agreements, trust indentures, arrangements,
leases, licenses, commitments and other agreements and instruments (collectively,
“Contracts”
) to which Geo is a party which are material and
relate to or affect the capital stock, business, assets, properties or operations
of Geo or to which Geo or its business, assets, properties or operations may
be bound or subject, including all written or oral, express or implied Contracts
(a) relating to Proprietary Rights owned or used by Geo, (b) not made in the
ordinary course of business, (c) relating to the borrowing of money or for lines
of credit,(d) involving leases and subleases of real or personal
property, (e) for the sale of any assets other than in the ordinary course of
business or for the grant of any options or preferential rights to purchase
any assets, property or rights, (f) granting any power of attorney with respect
to the affairs of Geo, (g) involving suretyship contracts, working capital
maintenance or other form of guaranty agreements, (h) limiting or restraining
Geo from engaging or competing in any lines of business or with any Person,
(i) involving partnerships or joint ventures which Geo is a partner or
participant in, (j) pursuant to which Geo may make or receive payments in excess
of $5,000, (k) with any current or former stockholder, officer, director, employee,
agent or consultant of Geo, or with any entity in which any of the foregoing
is or was a controlling person, (l) involving any Plan, (m) involving non-competition,
secrecy or confidentiality agreements, (n) involving the employment of temporary
employees or the retention of independent contractors, (o) the benefits or which
are contingent or accelerated, or the terms of which are altered, by the occurrence
of, or the value of any benefits of which will be calculated on the basis of,
any of the transactions contemplated by this First Amendment or the Additional
Agreements, (p) which involves exclusive dealing, supply or requirements obligations,
(q) pursuant to which Geo has any indemnification obligations, (r) which provide
for warranties or return of product, (s) which is a
- 10 -
“futures” contract committing Geo to purchase, or
accept delivery of product at future times at fixed prices, or (t) involving
amendments, modifications, extensions or renewals of any of the foregoing.
Schedule
3.14
also sets forth all such material contracts and agreements currently
being negotiated by Geo. The Contracts can be performed in the ordinary course
of business (consistent with past practices). Each of the Contracts is valid
and binding and in full force and effect and is enforceable against the parties
thereto in accordance with its terms, and there are no existing defaults or
events of default which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default by Geo
thereunder or any other party thereto. Except as set forth on
Schedule 3.14
,
the consummation of the transactions contemplated hereby, without notice to
or consent or approval of any party, will not constitute a default under or
a breach of any provisions of any Contracts and the Company and the Surviving
Corporation will have and may enjoy and enforce all rights and benefits under
each such Contract. There is no Lien on Geo’s interests under any of the
Contracts. True and complete originals or copies of the Contracts listed or
required to be listed in
Schedule 3.14
have been delivered by Geo to
the Company. Geo is not a party to any oral Contract.
SECTION
3.15.
Employee Benefit Plans
. Geo does not have any Plans.
SECTION
3.16.
Taxes
. Geo is a calendar year taxpayer which began operations in
2002. It has not yet filed, and is not delinquent with respect to, any federal,
state, local and foreign Tax (as defined below) or information returns, forms,
estimates, information statements and reports (
“Returns”
) required
to be filed by it on or before the Effective Time and will pay or caused to
be paid, or make adequate provision or set up an adequate accrual or reserve
for the payment of, all Taxes required to be paid in respect of the periods
for which such Returns are due. For these purposes, the Tax attributable to
the period including the Effective Time should be determined as if the taxable
year ended at the Effective Time. Geo is not delinquent in the payment of any
Tax, and, no deficiencies for any Tax, assessment or governmental charge have
been claimed, proposed, assessed or, to the Knowledge of Geo or the Principal
Geo Shareholders, threatened. There are no Liens on the assets of Geo for unpaid
Taxes, except for Liens relating to Taxes that are not yet due and payable.
No waiver or extension of time to assess any Taxes has been given or requested.
No claim has been made by any taxing authority in any jurisdiction where Geo
does not file Tax returns that Geo is or may be subject to taxation by that
jurisdiction. For the purposes of this Section, the term
“Tax”
shall include all taxes, charges, withholdings, fees, levies, penalties, additions,
interest or other assessments imposed by any federal, state, local or foreign
or other taxing authority on Geo or any of its properties, assets or operations
(including as a result of being a member of an affiliated, combined or unitary
group or as a result of any obligation arising out of an agreement to indemnify
any other Person), and including those related to income, employee welfare or
retirement (including social security), gross receipts, sales, use, occupation,
services, leasing, valuation, addition of value, transfer, license, excise,
customs duties or franchise. Geo has not been a member of an Affiliated Group
or been included in a combined, consolidated or unitary Tax return. Geo is not
a party to or bound by any Tax allocation or Tax sharing agreement or has any
current or potential obligation to indemnify any other Person with respect to
Taxes. Geo has not been a United States real property holding corporation within
the meaning of Code Section 897(c)(2) during the applicable periods specified
in Code Section 897(c)(1)(A). Geo is not required to make any adjustments under
Section 481(a) of the Code by reason of a change in accounting method which
affects any taxable year ending after the Closing Date, or has any application
pending to effect such a change of accounting method. Geo is not obligated to
make any payments, or is a party to an agreement that could make it obligated
to make payments, which will not be deductible under Section 280G of the Code.
- 11 -
SECTION
3.17.
Compliance with Applicable Law
.
(a)
The only licenses, permits, franchises, authorizations, registrations and approvals
(the
“Licenses”
) issued or granted to Geo by any Governmental
Authority and all pending applications therefor are Geo’s organizational
documents filed with the Idaho Authority, complete and correct copies of which
have been delivered to the Company. Geo holds, and at all times has held, all
Licenses necessary for the lawful conduct of its business under and pursuant
to, and the business of Geo is not being and has not been conducted in violation
of, any Rule of any Governmental Authority applicable to Geo or any of its properties,
assets or operations.
(b)
Geo has complied with the Rules, and has not received any notification of any
asserted present or past failure by it to comply with the Rules. None of Geo,
any of Geo’s officers, agents or employees nor any distributor, licensee
or any other Person acting on behalf of Geo has (i) made any unlawful political
contributions, (ii) made any payment or provided services which were not legal
to make or provide or which such Person Knew or should have Known were not legal
for the payee or the recipient of such services to receive, (iii) received any
payments, services or gratuities which were not legal to receive or which Geo
or such Persons should have Known were not legal for the payor or the provider
to make or provide, (iv) had any transactions or payments which are not recorded
in its accounting books and records or disclosed in its financial statements,
(v) has had any off-book bank or cash accounts or “slush funds”, (vi)
made any payments to governmental officials in their individual capacities for
the purpose of affecting their action or the action of the government they represent
to obtain special concessions, or (vii) made illegal payments to obtain or retain
business.
SECTION
3.18.
Brokers’ Fees and Commissions
. Except for a sponsorship agreement
with First Associates, neither Geo nor any Principal Geo Shareholder nor any
of their respective directors, officers, employees or agents has employed any
investment banker, broker, finder or intermediary in connection with the transactions
contemplated hereby. A true and correct copy of the First Associates sponsorship
agreement has been delivered to the Company.
SECTION
3.19.
Labor Matters
. Geo has never had and currently has no employees
nor has it offered employment to any Person. Geo has no and has never had any
ERISA Affiliates.
Schedule
3.19
sets forth a true and complete
list of directors and officers who perform services for Geo, and for each such
Person includes a complete and accurate summary description of the material
compensation paid to such Person (including the date of the most recent increase
thereof) and any severance pay, lump sum or other payment, compensation or other
remuneration that such Person is or would be eligible to receive, or has received,
upon termination of employment or service or as a result of any of the transactions
contemplated by this First Amendment. Geo has no oral or written severance policy
or severance obligations.
SECTION
3.20.
Non-Compete Agreements
. No oral or written Contract, license or
permit restricts the ability of Geo to own, possess or use its assets or conduct
its business or operations in any geographic area or other market or market
segment or restricts in any way the full participation of the Principal Geo
Shareholders or, to the Knowledge of Geo or the Principal Geo Shareholders,
any key employees, officers, agents or consultants of Geo in the operation of
such business.
SECTION
3.21.
Inventory and Accounts Receivable
. Geo does not have any inventory
or accounts receivable.
- 12 -
SECTION
3.22.
Bank Accounts
.
Schedule 3.22
attached hereto sets forth
the names and addresses of all banks, trust companies, savings and loan associations
and other financial institutions at which Geo maintains an account, deposit,
safe deposit box, lock box or other arrangement for the collection of accounts
receivable or line of credit or other loan facility relationship or accounts
of any nature and the names of all Persons authorized to draw thereon, make
withdrawals therefrom or have access thereto. Prior to or at the Effective Time,
Geo will deliver or make available to the Company copies of all records pertaining
to such bank accounts.
Schedule 3.22
sets forth an accurate and complete
list of all certificates of deposit, debt or equity securities and other investments
owned, beneficially or of record, by Geo (
“Investments”
). Geo
has good and marketable title to all of the Investments.
SECTION
3.23.
Insurance
. Geo carries a $2,000,000 Commercial General Liability
insurance policy.
SECTION
3.24.
Real Property
.
(a)
Geo has good and marketable fee title to an undivided twenty percent (20%) interest
the Vulcan Property, and there are no liens, encumbrances, leases, security
interests, easements, rights-of-way, charges, adverse claims, management agreements,
continuing contracts or other exceptions to title affecting title to the Vulcan
Property other than the matters set forth in the Preliminary Commitment for
Title Insurance issued by Commonwealth Land Title Insurance Company under Order
No. 35376, (the “Title Report”) a true and correct copy of which has
been provided to the Company.
(b)
The Geothermal Properties comply in all material respects with all applicable
laws, ordinances, rules and regulations (including without limitation those
relating to zoning and platting), and none of Geo or the Principal Geo Shareholders
has any Knowledge of a violation of any such laws, ordinances, rules or regulations.
There is sufficient access to the Geothermal Properties to permit Geo to conduct
the Business as contemplated.
(c)
All notices, licenses, permits, certificates and authority required in connection
with the construction, use, occupancy, and operation of the Geothermal Properties
by Geo prior to and as of the date hereof and the Effective Time, have been
obtained and are in full force and effect, and none will be adversely affected
by the Merger.
(d)
None of Geo or the Principal Geo Shareholders has any Knowledge of any structural
defects in any improvements located on the Geothermal Properties.
(e)
Schedule 3.24
sets forth an accurate, correct and complete list of the
Geothermal Agreements, a description of the leasehold rights, street address
(if applicable), annual rent, royalty or other consideration obligations, expiration
date, other material provisions, and list of contracts, agreements, leases,
subleases, options and commitments, oral or written, affecting the Geothermal
Properties or any interest therein to which Geo is a party or by which any of
its interests in the Geothermal Properties is bound, and all improvements thereon.
Geo has been in peaceable possession of the real property covered by each Geothermal
Agreement since the commencement of the original term of such agreement, and
has performed all obligations required to be performed by it to date under such
Geothermal Agreement. Except as disclosed on
Schedule 3.24
, neither the
Geothermal Properties nor the leasehold interest nor any of the leasehold improvements
of Geo with respect to the Geothermal Properties is subject to any Liens; and
none of the Geothermal Properties is subject to any easements, rights of way,
licenses, grants, building or use restrictions, exceptions, reservations, limitations
or other impediments which adversely affect the value of the Geo’s interest
therein or which interfere with or impair the present and continued use thereof
in the usual and normal conduct of the business of Geo as contemplated to be
conducted.
- 13 -
Neither Geo nor, to the Knowledge of Geo or the Principal
Geo Shareholders, any other party to the Geothermal Agreements is in default
under any of the Geothermal Agreements.
(f)
Except as disclosed on
Schedule 3.24
, no real property other than the
Geothermal Properties is or has been used in the business of Geo. Except as
disclosed on
Schedule 3.24
, to the Knowledge of Geo and the Principal
Geo Shareholders, no Geothermal Property is located within a wetland or flood
or waterfront erosion hazard area, and the buildings, structures and improvements
situated thereon and appurtenances thereto and are in good condition (subject
to normal wear and tear), and as such are adequate to conduct the business of
Geo as presently conducted and as contemplated. Neither the whole nor any portion
of any Geothermal Property has been condemned, requisitioned or otherwise taken
by any public authority, and no notice of any such condemnation, requisition
or taking has been received. No such condemnation, requisition or taking is,
to the Knowledge of Geo or the Principal Geo Shareholders, threatened or contemplated.
Except as disclosed on
Schedule 3.24
, there are no public improvements
pending or contemplated which may result in special assessments against or otherwise
affect the Geothermal Properties.
(g)
The Geothermal Properties are, to the Knowledge of Geo and the Principal Geo
Shareholders, in compliance with, include all rights necessary to assure compliance
with, and all buildings, structures, other improvements and fixtures on such
Properties and the operations thereon conducted conform in all respects to,
all applicable health, fire, water, environmental, safety, zoning, building,
use or similar Rules. The zoning of each parcel of the Geothermal Properties
permits the existing improvements and the continuation following consummation
of the transactions contemplated hereby of the business of Geo as presently
conducted thereon. Geo has all licenses, certificates of occupancy, permits
and authorizations required to operate its businesses and utilize the Geothermal
Properties. Geo has all easements and rights necessary or appropriate to conduct
its operations, including easements for all utilities, services, roadway and
other means of ingress and egress and each parcel of the Geothermal Properties
has direct access to public roadways. The execution, delivery and performance
of this First Amendment and the transactions contemplated hereby will not result
in the imposition of any transfer or other Tax with respect to the Geothermal
Properties.
SECTION
3.25.
Transactions with Related Parties
. Except as set forth on
Schedule
3.25
attached hereto, (a) there have never been nor are there now any transactions
between Geo and (i) any director, officer, employee, stockholder or Affiliate
of Geo, or (ii) any relative or spouse (or relative of such spouse) of any such
director, officer, employee, stockholder or Affiliate (such Persons in (i) and
(ii) being referred to herein as a
“Related Party”
or collectively
as the
“Related Parties”
), (b) no Related Party has ever been
a director or officer of, or has had any direct or indirect interest in, any
firm, corporation, association or business enterprise which during such period
has been a supplier, customer, sales agent, licensor, licensee, lessor or lessee
of Geo, or has competed with or been engaged in any business of the kind being
conducted by Geo, (c) no Related Party has an interest in or owns, directly
or indirectly, in whole or in part, any tangible or intangible property of Geo,
or that Geo uses in the conduct of its business, (d) no Related Party has any
cause of action or other claim whatsoever against or owes any money or other
amounts to, nor is any Related Party owed any money or other amounts by, Geo
other than amounts owed for compensation, employee benefits or travel expenses
incurred in the ordinary course of business and (e) no Related Party is a party
to any contract, lease, agreement, arrangement or commitment used in the operations
of Geo. Except as set forth on
Schedule 3.25
attached hereto, Geo has
no indebtedness to or from any Related Party.
SECTION
3.26.
Names
. Geo has never operated under any name other than U.S. Geothermal
Inc.
- 14 -
SECTION
3.27.
Disclosure
. All documents, agreements and other papers and materials
delivered by or on behalf of Geo or the Principal Geo Shareholders in connection
with this First Amendment, the Additional Agreements and the transactions contemplated
hereby and thereby are true, complete and accurate. All documents referred to
in this First Amendment, including in the Schedules or Exhibits, and the corporate
minute books of Geo have been delivered to the Company. Such corporate minute
books contain all of the minutes of meetings of stockholders, board of directors,
and any committees of the board of directors that have been held and all of
the written consents to action executed in lieu thereof. None of the representations,
warranties or statements of Geo or the Principal Geo Shareholders contained
in this First Amendment, in the Schedules or Exhibits hereto, or in any other
agreement, instrument or document executed or delivered by or on behalf of such
Person in connection with the transactions contemplated by this First Amendment
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the representations,
warranties or statements made, in the context in which made, not false or misleading.
There is no fact that Geo or the Principal Geo Shareholders have not disclosed
to the Company and Sub in writing that causes a Material Adverse Effect or could
result in a Material Adverse Effect. Without limiting the generality of the
foregoing, the information with respect to Geo in the Information Circular does
not contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the representations,
warranties or statements made, in the context in which made, not false or misleading.
Geo and the Principal Geo Shareholders acknowledge that the statements contained
in this Section shall not be deemed to limit or qualify any of the other representations
or warranties contained in this First Amendment, in the Schedules or Exhibits
hereto or in any agreement or document delivered in connection herewith.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PRINCIPAL GEO SHAREHOLDERS
Each
of the Principal Geo Shareholders hereby represents and warrants, severally
but not jointly, to each of the Company and Sub as of the date hereof and as
of the Effective Time as set forth below. The information disclosed on any Schedule
attached hereto shall be deemed to relate solely to the section of this Article
IV to which such Schedule relates and shall not be deemed made by other sections
to which such discloses may apply unless such disclosure is cross-referenced
in the Schedule(s) relating to such other section(s), and only to the extent
that the applicable information or risk is described.
SECTION
4.1.
Authorization
. Each Principal Geo Shareholder, to the extent that
it is not a natural person, is an entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, with full
power and authority to enter into, execute and deliver this First Amendment
and the Additional Agreements to which it is a party and to perform and observe
fully its obligations hereunder and thereunder and to perform the transactions
contemplated hereby and thereby. Each Principal Geo Shareholder, to the extent
that he or she is a natural person, has the legal capacity to enter into this
First Amendment and the Additional Agreements to which such Person is a party
and to consummate the transactions contemplated hereby and thereby. Each Principal
Geo Shareholder has taken all action required by law, Geo’s Articles of
Incorporation and Bylaws, its own organizational documents, if applicable, or
otherwise to authorize the execution, delivery and performance of this First
Amendment and the Additional Agreements to which such Person is a party and
the consummation by such Principal Geo Shareholder of the transactions contemplated
hereby and thereby. This First Amendment and the Additional Agreements to which
such Person is a party have been duly and validly authorized (if applicable),
executed and delivered by each Principal Geo Shareholder and, assuming due authorization,
execution and delivery by the Company and Sub, constitute valid and binding
legal
- 15 -
obligations of such Principal Geo Shareholder, enforceable
against such Principal Geo Shareholder in accordance with their terms.
SECTION
4.2.
No Violation
. Neither the execution, delivery or performance of
this First Amendment or the Additional Agreements by each Principal Geo Shareholder
nor the consummation of the transactions contemplated hereby or thereby will
(a) violate, conflict with or result in any breach of any provision of the organizational
or governing documents of such Principal Geo Shareholder, (b) violate, conflict
with or result in a violation or breach of, or constitute a default (with or
without due notice or lapse of time or both) under, or permit the termination
of, or require any notice under, or require the consent of any other party to,
or result in the acceleration of, or entitle any party to accelerate (whether
as a result of a change in control of Geo or otherwise) any obligation or agreement,
or result in the loss of any benefit or the imposition of any fee or penalty,
or give rise to the creation of any Lien upon any of the respective properties
or assets of Geo or such Principal Geo Shareholder (including the Principal
Geo Shareholder’s Geo Securities), in each case under any of the terms,
conditions or provisions of any debt, note, bond, mortgage, indenture, deed
of trust, license, lease, permit, agreement or other instrument or obligation
to which Geo or such Principal Geo Shareholder is a party or by which they or
any of their respective properties or assets may be bound or affected (unless
requisite waivers or consents satisfactory in form and substance to the Company
shall have been obtained in writing and delivered to the Company prior to the
Closing) or (c) violate any Rules (including foreign, federal and state securities
laws) of any Governmental Authority applicable to Geo or such Principal Geo
Shareholder or any of their respective properties, assets or operations.
SECTION
4.3.
Ownership of Securities
. Each Principal Geo Shareholder owns of
record and beneficially the amounts and type of Geo Securities specified as
owned by such Principal Geo Shareholder on
Schedule 3.5
attached hereto,
free and clear of all Liens and no Principal Geo Shareholder owns, beneficially
or of record, any other debt or equity securities of Geo or any option, warrant,
call, subscription or any other right to acquire any such securities. There
are no options, warrants, calls, subscriptions, conversion or other rights,
agreements or commitments to acquire from any Principal Geo Shareholder any
shares of capital stock of Geo or any other securities convertible into, exchangeable
for or evidencing the right to subscribe for any shares of capital stock or
any other security of Geo or the Surviving Corporation. There are no voting
agreements, voting trust agreements, proxies or stockholder or similar agreements
relating to the capital stock of Geo to which any Principal Geo Shareholder
is a party. Each Principal Geo Shareholder has sole power of disposition and
voting with respect to all of Geo Securities owned beneficially or of record
by such Principal Geo Shareholder, including without limitation, the sole power
to demand, assert or otherwise exercise dissenter’s or appraisal rights,
regardless of whether such Principal Geo Shareholder is a resident of any state
which is subject to community property laws.
SECTION
4.4.
Investment Representation
. Each Principal Geo Shareholder will accept
the Merger Consideration for his, her or its own account and not for any other
Person and for investment purposes only and without any view to distribute,
resell or otherwise transfer the same. Each Principal Geo Shareholder represents,
warrants and acknowledges that he, she or it has such knowledge and experience
in business and financial matters as to be capable of evaluating the merits
and risks of the investment contemplated to be made hereunder and that he, she
or it has sufficient financial strength to hold the same as an investment and
to bear the economic risks of such investment (including possible loss of such
investment) for an indefinite period of time. Each Principal Geo Shareholder
acknowledges that he, she or it is fully informed that the Merger Consideration
is being issued pursuant to a private offering exemption of the Securities Act,
and is not being registered under the Securities Act or under the securities
or blue sky laws of any state or foreign jurisdiction; that such securities
must be held indefinitely unless they are subsequently registered under the
Securities Act and any applicable state
- 16 -
securities or blue sky laws, or unless an exemption from registration
is available thereunder; and that the Company has no obligation to register
such securities. Each Principal Geo Shareholder acknowledges that he, she or
it has such knowledge and experience in financial and business matters so as
to be capable of evaluating the risks and merits of this investment, that all
public documents and records pertaining to the investment in the Company have
been made available or delivered to them; that they have had an opportunity
to ask questions of and receive answers from the Company concerning the terms
and conditions of this First Amendment and the Additional Agreements and to
obtain additional information, to the extent that the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in such public documents
and records. Each Principal Geo Shareholder acknowledges that the Merger Consideration
is being issued pursuant to exemptions provided under the
Securities Act
(British Columbia) and as such the securities comprising the Merger Consideration
will also be subject to resale restrictions under the
Securities Act
(British Columbia).
SECTION
4.5
Environmental Matters
.
(a)
Except as set forth on
Schedule 4.5
attached hereto, Geo (and its predecessors)
are, and at all times have been, in compliance with all applicable Environmental
Laws, which compliance includes the possession by Geo (and such predecessors)
of all permits and other governmental authorizations required under applicable
Environmental Laws, and compliance with the terms and conditions thereof. Except
as set forth on
Schedule 4.5
attached hereto, Geo has not received any
communication (written or oral), and Geo and the Principal Geo Shareholders
have no Knowledge that the any predecessor to Geo or its business has received
any communication (written or oral), whether from a Governmental Authority,
Person, citizens group or otherwise, that alleges that Geo or any such predecessor
is not or was not in compliance with any Environmental Law, and there are no
circumstances that may prevent or interfere with such compliance in the future.
All permits and other governmental authorizations currently held by Geo pursuant
to the Environmental Laws are identified on
Schedule 4.5
.
Schedule
4.5
sets forth all environmental audits and similar reports with respect
to each parcel of the Geothermal Properties and each parcel of real property
which Geo previously owned, used, leased or subleased. Geo has provided the
Company with accurate and complete copies of such environmental audits and similar
reports.
(b)
Except as set forth on
Schedule 4.5
, there is no Environmental Claim
pending or, to the Knowledge of Geo or the Principal Geo Shareholders, threatened
against Geo or against any Person whose Liability for any Environmental Claim
that Geo has or may have retained or assumed either contractually or by operation
of law.
(c)
To the Knowledge of the Company and the Principal Geo Shareholders, there are
no past or present actions, activities, circumstances, conditions, events or
incidents, including the release, emission, discharge, presence or disposal
of any Materials of Environmental Concern, or exposures of employees or other
Persons to Materials of Environmental Concern that could form the basis of any
Environmental Claim against Geo or against any Person whose Liability for any
Environmental Claim Geo has or may have retained or assumed either contractually
or by operation of law.
(d)
Without in any way limiting the generality of the foregoing, (i) all on-site
and off-site locations where Geo has stored or has disposed or arranged for
the disposal of, Materials of Environmental Concern, are identified in
Schedule
4.5
, (ii) all underground storage tanks previously or presently located
on property owned or leased by Geo are identified in
Schedule 4.5
, along
with a description of the capacity and contents of such tanks, any removal or
closure activities associated with such tanks and the compliance of such tanks
with underground storage tank requirements and (iii) except as set forth in
- 17 -
Schedule
4.5
, there is no asbestos contained in or forming part of any building,
building component, equipment, structure or office space owned or leased by
Geo.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND SUB
The
Company and Sub hereby jointly and severally represent and warrant to Geo and
the Principal Geo Shareholders that:
SECTION
5.1.
Organization and Qualification
. Each of the Company and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and Idaho, respectively.
SECTION
5.2.
Authorization
. The Company and Sub each have full corporate power
and authority to execute and deliver this First Amendment and the Additional
Agreements to which it is a party and to perform and observe fully their respective
obligations hereunder and thereunder and to consummate the transactions contemplated
hereby and thereby, subject to receipt of the Company Shareholder Approval and
Regulatory Approval (each as defined in Section 8.2 hereof). Each of the Company
and Sub has or prior to Closing will have taken all corporate action required
to authorize the execution, delivery and performance by it of this First Amendment
and the Additional Agreements to which it is a party and the consummation by
it of the transactions contemplated hereby and thereby. This First Amendment
and the Additional Agreements to which the Company or Sub is a party have been
duly and validly executed and delivered by the Company or Sub, as applicable,
and, assuming due authorization, execution and delivery by Geo and the Principal
Geo Shareholders, will constitute a valid and binding obligation of the Company
or Sub, as applicable, subject to receipt of the Company Shareholder Approval
and Regulatory Approval.
SECTION
5.3.
No Violation
. Subject to receipt of the Company Shareholder Approval
and Regulatory Approval, neither the execution and delivery of this First Amendment
by the Company and Sub and the performance by the Company and Sub of their obligations
hereunder nor the consummation by the Company and Sub of the transactions contemplated
hereby will (a) violate, conflict with or result in any breach of any provision
of the respective Certificate or Articles of Incorporation or Bylaws of the
Company or Sub, (b) violate, conflict with or result in a violation or breach
of, or constitute a default (with or without due notice or lapse of time or
both) under, or permit the termination of, or result in the acceleration of,
any of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which the Company or Sub is a party or by which they or any of their respective
properties or assets may be bound or affected or (c) violate any Rule of any
Governmental Authority applicable to the Company or Sub or any of their respective
properties, assets or operations, excluding from the foregoing clauses (b) and
(c) violations, conflicts, breaches or defaults which, in the aggregate would
not have a material adverse effect on the business, properties, operations or
condition (financial or otherwise) of the Company or Sub.
SECTION
5.4.
Capitalization of the Company
. The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock. At the Effective
Time, including the issuance of the Merger Consideration, the Company will have
issued and outstanding not more than 9,500,000 shares of Company Common Stock
and warrants to purchase 2,420,217 shares of Company Common Stock (after giving
effect to the Consolidation), and upon completion of the Proposed Transactions,
the Company will have issued and outstanding (on a fully-diluted basis) not
more than
- 18 -
18,000,000 shares of Company Common Stock (after giving effect
to the Consolidation); all of which (assuming full performance by subscribers
in the Private Placement and in exercising the Exchange Warrants and the Warrants)
will be validly issued, fully paid, non-assessable and free and clear of preemptive
rights and Liens (except as may arise from any action of the holder thereof).
SECTION
5.5.
Consents and Approvals
. Subject to receipt of the Company Shareholder
Approval and Regulatory Approval, the filing of a certificate of merger pursuant
to the Idaho Code and requirements of federal and state securities laws, no
filing or registration with, no notice to and no permit, authorization, consent
or approval of, any public or governmental body or authority is necessary for
the consummation by the Company or Sub of the transactions contemplated by this
First Amendment.
SECTION
5.6.
Brokers
. Except for the finders agreement with Toll Cross and the
sponsorship agreement with First Associates, the Company has not engaged any
investment banker, broker or finder in connection with the transactions contemplated
hereby.
SECTION
5.7
TSX Listing
. The shares of Company Common Stock are listed and posted
for trading on the Exchange, although trading is currently suspended.
SECTION
5.6.
Disclaimer
. No promises or representations have been or are made
by the Company to Geo or any Principal Geo Shareholder except as expressly set
forth in this First Amendment, whether regarding the Company’s conduct
of the Business following the Closing, the operations of the Company following
the Closing, any projections or forecasts of the Business or the Company relating
to the period following the Closing, or otherwise and Geo and the Principal
Geo Shareholders, in entering into this First Amendment, have not relied on
any representations or promises except as set forth in this First Amendment.
ARTICLE VI
COVENANTS
SECTION
6.1.
Conduct of Business of Geo Prior to the Effective Time
. From the
date hereof through the Effective Time, Geo and the Principal Geo Shareholders
agree that, except as expressly contemplated or permitted by this First Amendment
or to the extent that the Company shall otherwise consent in writing, Geo and
the Principal Geo Shareholders shall use their best efforts to carry on their
respective business and affairs in such a manner so that the representations
and warranties contained in Article III shall continue to be true and correct
on and as of the Closing as if made again by Geo and the Principal Geo Shareholders
on the Closing Date, and Geo shall carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted,
and use its best efforts to preserve intact its property, assets and real property
interests (including, without limitation, the Vulcan Property and the Geothermal
Agreements) and its present business organizations, keep available the services
of its present officers, timely and fully perform all of its obligations under
any Contract to which it is a party, and preserve its relationships with Persons
having business dealings with Geo. From the date hereof through the Effective
Time, the Principal Geo Shareholders agree that except as expressly contemplated
or permitted by this First Amendment or to the extent that the Company shall
otherwise consent in writing, the Principal Geo Shareholders shall carry on
their affairs so that the representations and warranties contained in Article
IV hereof shall continue to be true and correct on and as of the Closing as
if made again by the Principal Geo Shareholders on the Closing Date. Without
limiting the generality of the foregoing, prior to the Effective Time, and except
as expressly
- 19 -
contemplated or permitted by this First Amendment, Geo and
the Principal Geo Shareholders agree Geo will not, without the prior written
consent of the Company:
(a) split, combine or reclassify any shares of its capital stock
or other equity interests, declare, pay or set aside for payment any dividend
or other distribution in respect of its capital stock or other equity interests,
or directly or indirectly, redeem, purchase or otherwise acquire any shares
of its capital stock or other securities;
(b) issue, sell, pledge, dispose of, encumber or deliver (whether
through the issuance or granting of any options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock or other equity interests of any
class of Geo or any securities convertible into or exercisable or exchangeable
for shares of stock or other equity interests of any class of Geo (other than
the issuance of stock certificates in replacement of lost certificates;
(c) incur any Liability or obligation other than in the ordinary
and usual course of business and consistent with past practice, issue any debt
securities, make, create, incur, assume or suffer to exist any Lien on its assets,
or assume, guarantee, endorse or otherwise as an accommodation become responsible
for the Liabilities of any other Person;
(d) pay any deferred Tax Liability or repay any other Tax Liability
other than in the ordinary course of business;
(e) acquire (by merger, consolidation, acquisition of stock or assets
or otherwise) any corporation, partnership or other business organization or
division or significant assets thereof or acquire, directly or indirectly, any
equity interest in any Person or incur any capital expenditures;
(f) amend, modify or waive compliance with the Articles of Incorporation
or Bylaws of Geo or the terms of any securities;
(g) sell, lease, license, encumber or otherwise dispose of any assets;
(h) make any change in financial or tax accounting methods, principles
or practices or make or cause to be made any elections on Tax returns of Geo,
except as consistent with past practices;
(i) enter into, amend or terminate, or agree to enter into,
amend or terminate, any Contract other than in the ordinary course of business
unless, in each case, such amendment, termination, or agreement, singly or together
with other such actions, will not have a Material Adverse Effect;
(j) fail to maintain and keep in full force and effect all
insurance on assets and property or for the benefit of employees of the business,
all liability and other casualty insurance, and all bonds on personnel, presently
carried, fail to present all claims under such insurance policies in a proper
and timely manner or breach any obligation under such insurance policies;
(k) fail to preserve intact the organization of the business, keep
all Licenses in full force and effect, keep available the services of the present
executives, employees and agents of the business (other than customary turnover
not initiated by Geo) and preserve and enhance the goodwill of suppliers, distributors,
customers and others having business relationships with Geo;
(l) fail to maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with prior years;
- 20 -
(m) fail
to conduct its business in the usual and ordinary course consistent with past
practices;
(n) take any action that would require disclosure under Section 3.11 hereof;
(o) directly or indirectly engage in any transaction with any officer,
director, stockholder or other insider or Affiliate which is not at arm’s
length;
(p) fail to use its best efforts to take or omit to take any action
where such failure would make any representation or warranty in Article III
hereof untrue or incorrect as of the Closing provided, however, that the failure
to spend money outside the usual and ordinary course of business shall not constitute
a violation of this subsection (p);
(q) adopt any Plan;
(r) grant, or become obligated to grant, any increase in the compensation
of officers or employees of Geo (except for increases in compensation in the
ordinary course of business consistent with past practice);
(s) enter into any employment or similar agreement or arrangement
with any director or employee of Geo or any independent contractor to provide
services to Geo; or
(t) terminate or waive any right of substantial value;
(u) make any capital expenditures;
(v) agree, in writing or otherwise, to do any of the foregoing.
SECTION
6.2.
No Solicitation
. Neither Geo nor the Principal Geo Shareholders
shall, and each shall cause their respective Affiliates, officers, partners,
directors, employees, representatives and agents, not to, directly or indirectly,
encourage, solicit, initiate, engage or participate in discussions or negotiations
with, or provide any information to, any Person other than the Company, Sub
or their Affiliates (a
“Third Party”
) in connection with any
exchange offer, merger, consolidation, sale of substantial or material assets,
sale of securities, acquisition of beneficial ownership of or the right to vote
securities, liquidation, dissolution or similar transaction involving Geo (such
proposals, announcements or transactions being referred to herein as
“Acquisition
Proposals”
). Geo and the Principal Geo Shareholders shall promptly
inform the Company of any inquiry (including the terms thereof and the identity
of the Third Party making such inquiry) which any one of them may receive in
respect of an Acquisition Proposal and furnish to the Company a copy of any
such written inquiry.
SECTION
6.3.
Access to Information
. Between the date of this First Amendment
and the Effective Time, at reasonable times without significant disruption to
the business of Geo, Geo will give the Company and its authorized representatives
full access at the Company’s expense to all personnel, Geothermal Properties,
offices and other facilities, and to all books and records of Geo (including
Tax returns and accounting work papers) and shall permit the Company to make
and shall fully cooperate with regard to such inspections (in order to conduct,
among other things, interviews of individuals, visual inspections of facilities,
and environmental and similar assessments of the Geothermal Properties and other
facilities) as it may require and shall cause its officers to furnish the Company
such financial and operating data and other information with respect to the
business and properties of Geo as the Company may from time to time reasonably
request. The representations and warranties of Geo and the Principal Geo Shareholders
contained herein or in any certificate or other documents delivered to the
- 21 -
Company shall not be deemed waived or otherwise affected by
any such investigation made by the Company or any of its representatives.
SECTION
6.4.
All Reasonable Efforts
. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done as promptly
as practicable, all things necessary, proper and advisable under applicable
laws and regulations to consummate and make effective the transactions contemplated
by this First Amendment. If at any time after the date hereof any further action
is necessary or desirable to carry out the purposes of this First Amendment,
including the execution of additional instruments, each party to this First
Amendment shall take all such necessary action.
SECTION
6.5.
Consents and Approvals
. Geo and the Principal Geo Shareholders shall
(a) use their best efforts to obtain all necessary permits, consents, waivers,
approvals, orders and authorizations of all Governmental Authorities and other
Persons required to be obtained by Geo and the Principal Geo Shareholders in
connection with the execution, delivery and performance of this First Amendment,
the Additional Agreements and the consummation of the transactions contemplated
hereby and thereby by each such party, (b) diligently assist and cooperate with
the Company in preparing and filing all documents required to be submitted by
the Company to any Governmental Authority or its stockholders in connection
with the execution, delivery and performance of this First Amendment, the Additional
Agreements and the consummation of the transactions contemplated hereby and
thereby and the obtaining of the Company Shareholder Approval and Regulatory
Approval (which assistance and cooperation shall include timely furnishing to
the Company of all information concerning Geo or Geo Shareholders which, in
the opinion of counsel to the Company, is required to be included in such documents),
and in obtaining any permits, consents, waivers, approvals, orders and authorizations
which may be required to be obtained by the Company in connection therewith
and (c) keep the Company apprised of the status of any inquiries made of such
party by any Governmental Authority with respect to this First Amendment, the
Additional Agreements or the transactions contemplated hereby and thereby.
SECTION
6.6.
Public Announcements
. The Company shall determine when and the extent
to which it is desirable or necessary to issue any press release or other public
statements with respect to the transactions contemplated by this First Amendment,
including the Merger and neither Geo nor the Principal Geo Shareholders shall
make any such press release or public statement without the prior consent of
the Company. The Company shall not issue any such press release or make any
such public statement without consulting with Geo and providing Geo with a copy
of any such written press release, except as may be required by applicable law
or by obligations pursuant to any listing agreement with any securities market
or any securities market regulations.
SECTION
6.7.
Disclosure Supplements
. Geo and the Principal Geo Shareholders shall
promptly deliver to the Company in writing any information which, if existing,
occurring or Known at the date of this First Amendment, would have been required
to be set forth or described in any Schedule hereto or which is necessary to
correct any information in any Schedule which has been rendered inaccurate thereby.
SECTION
6.8.
Geo Shareholder Approval
.
(a)
As promptly as practicable, Geo and the Principal Geo Shareholders shall (i)
in accordance with the applicable provisions of the Idaho Code and Geo’s
Articles of Incorporation and By-laws, call, give notice, convene a special
meeting, or solicit written consents of Geo Shareholders for the purpose of
approving the Merger, (ii) recommend such approvals to Geo Shareholders and
solicit proxies or
- 22 -
consents therefor, and (iii) use their best efforts to obtain
such approvals of the Geo Shareholders. The Principal Geo Shareholders shall
vote, cause to be voted or execute a written consent with respect to all Geo
Securities directly or indirectly owned beneficially or of record by them in
favor of such approvals, and shall use their best efforts to cause the other
Geo Shareholders to vote or execute a written consent in favor of such approvals.
Each Principal Geo Shareholder hereby fully and forever waives any and all dissenter’s
or appraisal rights in connection with the Merger and any other transactions
contemplated hereby which such Principal Geo Shareholder may now or hereafter
have under applicable law or otherwise.
(b)
In connection with the solicitation of such consent and approval, Geo will prepare
materials with respect to the Merger and the Merger Consideration and include
therein all of the information required to be furnished to Geo Shareholders
under the Idaho Code, Geo’s Articles of Incorporation and By-laws and federal
and state securities laws (the
“Merger Materials”
) and to be
mailed or otherwise delivered to each Geo Shareholder, all at the earliest practicable
time;
provided
,
however,
that the Merger Materials shall be subject
to the prior review and approval of the Company. None of the information supplied
or to be supplied by Geo for inclusion in or with the Merger Materials (other
than information provided by the Company in writing expressly for inclusion
in or with the Merger Materials) will, at the date of the Merger Materials,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading.
SECTION
6.9.
Directors and Officers
. As of the Effective Time, upon the request
of the Company, the Principal Geo Shareholders shall promptly cause any officer
or director of Geo to tender his or her resignation with respect to such office
or directorship as may be requested by the Company.
SECTION
6.10.
Specific Performance
. Each of the parties hereto hereby acknowledges
and agrees that the other parties would be damaged irreparably if any of the
material provisions of this First Amendment are not substantially performed
in accordance with their specific terms or are otherwise breached. Accordingly,
each of the parties hereto hereby agrees that the other parties shall be entitled
to an injunction or injunctions to prevent breaches of the material provisions
of this First Amendment and to enforce specifically this First Amendment and
the terms and provisions hereof in addition to any other remedy to which they
may be entitled pursuant hereto.
ARTICLE VII
RESTRICTIVE COVENANTS.
In
consideration of the Merger Consideration, each of the Principal Geo Shareholders
covenants with the Company as follows:
SECTION
7.1.
Restrictions
. Each Principal Geo Shareholder acknowledges that the
Company has paid valuable consideration for Geo and its assets, particularly
know-how, goodwill and other proprietary business information and trade secrets
of Geo. The use by any Principal Geo Shareholder of these relationships and
such confidential information in a business or activity which competes with
the Company or its Affiliates would provide the competing business with an unfair
advantage over the Company or its Affiliates. Accordingly, the Company wishes
to restrict each Principal Geo Shareholder’s use of such information and
each Principal Geo Shareholder’s ability to compete with the Company and
its Affiliates. Each Principal Geo Shareholder agrees, for the Merger Consideration,
to comply with the terms of this Article, all of which are reasonable and necessary
to protect the confidential business information and trade secrets being acquired
by the Company and to prevent any
- 23 -
unfair advantage from being conferred upon a competing business of the Company or its Affiliate, as set forth below.
SECTION
7.2.
Non-competition
. For a period of three years from the date hereof,
no Principal Geo Shareholder shall, directly or indirectly, either alone or
as a stockholder, partner, consultant, owner, agent, creditor, coventurer of
any other Person, or in any other capacity, directly or indirectly, engage in
the Business within the State of Idaho; provided that nothing herein shall prohibit
any Stockholder from being an owner of not more than 1% of the outstanding stock
of any class of a corporation which is publicly traded, so long as such Principal
Geo Shareholder does not actively participate in the business of such corporation.
SECTION
7.3.
Non Interference with Business Relations
. For a period of three
years after the Closing Date, no Principal Geo Shareholder shall, directly or
indirectly, solicit, induce or attempt to solicit or induce any customer, supplier,
licensee, government agency, utility or other business relation of the Company
or its Affiliates to cease doing business with the Company or its Affiliates,
or in any way interfere with any such business relation of the Company or its
Affiliates.
SECTION
7.4.
Solicitation of Customers and Employees
. For a period of three years
after the Closing Date, no Principal Geo Shareholder shall, directly or indirectly,
either alone or as a stockholder, partner, consultant, adviser, owner, agent,
creditor, coventurer of any other Person, or in any other capacity, solicit,
hire, attempt to solicit or hire, or participate in any attempt to solicit or
hire any person who was an employee of Geo or any of its Affiliates as of the
Closing Date or within the six-month period prior thereto.
SECTION
7.5.
Confidential Information
. Each Principal Geo Shareholder recognizes
that the Company’s business interests require the fullest practical protection
and confidential treatment of all information not generally known within the
relevant trade group or by the public, including all documents, writings, memoranda,
business plans, illustrations, designs, plans, processes, programs, inventions,
computer software, reports, sources of supply, customer lists, supplier lists,
trade secrets and all other valuable or unique information and techniques acquired,
developed or used by Geo relating to its businesses, operations, employees and
consultants (hereinafter collectively termed “
Protected Information
”).
Each Principal Geo Shareholder expressly acknowledges and agrees that Protected
Information constitutes trade secrets and confidential and proprietary business
information of the Company. Protected Information shall not include information
which is or becomes part of the public domain through no breach of this First
Amendment by any Principal Geo Shareholder. Each Principal Geo Shareholder acknowledges
that Protected Information is essential to the success of the Business, and
it is the policy of the Company to maintain as secret and confidential Protected
Information which gives the Company a competitive advantage over those who do
not know the Protected Information and is expressly and implicitly protected
by the Company from unauthorized disclosure. Accordingly, each Principal Geo
Shareholder agrees to hold such Protected Information in a fiduciary capacity,
to keep secret and to treat confidentially and not to, and not to permit any
other Person to, directly or indirectly, appropriate, divulge, disclose or otherwise
disseminate to any other Person nor use in any manner for any Principal Geo
Shareholder or any other Person’s purposes or benefit any Protected Information,
and not to use or aid others in using any such Protected Information in competition
with the Company or its Affiliates except to the extent that disclosure is required
by law; provided, however, that each Principal Geo Shareholder shall provide
the Company with notice as far in advance of any required disclosure as is practicable
in order for the Company to obtain an order or other assurance that any information
required to be disclosed will be treated as Protected Information and each Principal
Geo Shareholder shall use all reasonable efforts to cooperate with the Company
in connection therewith and in
- 24 -
furtherance thereof. This obligation of non-disclosure of information
shall continue to exist for so long as such information remains Protected Information.
SECTION
7.6.
Scope
. If, at the time of enforcement of this Article VII, a court
shall hold that the duration, scope or area restrictions stated herein are unreasonable
under circumstances then existing, the parties agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area.
SECTION
7.7.
Remedies
. Each Principal Geo Shareholder agrees that if he, she
or it shall commit or threaten to commit a breach of any of the covenants contained
in this Article VII, then the Company shall have the right to obtain all appropriate
injunctive and other equitable remedies therefor, in addition to any other rights
and remedies that may be available at law, it being acknowledged and agreed
that any such breach would cause irreparable injury to the Company and that
money damages would not provide an adequate remedy therefor.
ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1.
Conditions to Each Party’s Obligations under this First
Amendment
.
(a) The
respective obligations of each party under this First Amendment shall be subject
to the fulfillment at or prior to the Effective Time of the following conditions
precedent:
(i) The Consolidation shall have become effective.
(ii) No injunction, restraining order or other ruling or order issued
by any Governmental Authority or other legal restraint or prohibition preventing
the consummation of the Merger shall be in effect and no proceeding brought
by any Governmental Authority shall be pending or threatened which seeks any
injunction, restraining order or other order which would prohibit consummation
of the Merger or materially impair the ability of the Company to own and operate
the business and assets of the Surviving Corporation after the Effective Time.
(iii) Geo Shareholder Approval shall have duly and validly obtained.
(b) The respective obligations of each party under this First
Amendment shall be subject to the fulfillment immediately after the Effective
Time of the following condition subsequent: the Company, the Principal Geo Shareholders
and certain other Persons required by the Company, the Exchange and/or the Escrow
Agent shall have executed and delivered the Escrow Agreements, which agreements
shall become effective as of the Effective Time.
SECTION
8.2.
Conditions to the Obligations of the Company and Sub under this First
Amendment
. The obligations of the Company and Sub under this First Amendment
shall be further subject to the satisfaction, at or prior to the Effective Time,
of the following conditions, any of which may be waived in full or part by the
Company:
(a) Each of the covenants, obligations and conditions of Geo and
the Principal Geo Shareholders required to be performed or complied with or
satisfied by such Person at or prior to the Closing pursuant to this First Amendment
shall have been duly performed, complied with and satisfied, and each of the
representations and warranties of Geo and the Principal Geo Shareholders contained
in this First
- 25 -
Amendment (including the Schedules delivered on the date of
this First Amendment but not including any information delivered to the Company
subsequent to the date hereof pursuant to Section 6.7 hereof) shall be true
and correct as of the date of this First Amendment and as of the Effective Time
as though made at and as of the Effective Time, and the Company and Sub shall
have received certificates to that effect signed by an officer of Geo and the
Principal Geo Shareholders.
(b) All
(i) action required by law or otherwise to be taken by the Board of Directors
and Shareholders of Geo to authorize the execution, delivery and performance
of this First Amendment and the Additional Agreements and the Plan of Merger
and the transactions contemplated hereby and thereby shall have been duly and
validly taken, (ii) licenses, permits, consents, waivers, approvals and similar
authorizations of or from any Governmental Authorities or other Persons necessary
or advisable in connection with the consummation of the Merger and the other
transactions contemplated by this First Amendment or any Additional Agreement
or the Plan of Merger or for the lawful conduct of the business of the Surviving
Corporation following the Closing Date shall have been delivered, made or obtained,
and the Company shall have received copies thereof in form and substance satisfactory
to the Company.
(c) There shall be no Dissenting Shares.
(d) The Company shall have received all permits, consents, waivers,
approvals, orders and authorizations of all Governmental Authorities and other
Persons required to be obtained by Geo and the Principal Geo Shareholders in
connection with the execution, delivery and performance of this First Amendment,
the Additional Agreements and the Plan of Merger and the consummation of the
transactions contemplated hereby and thereby by each such party, in each case
in form and substance satisfactory to counsel to the Company.
(e) The Company shall have received such certificates of Geo’s
officers and the Principal Geo Shareholders and such other documents or agreements,
in each case in form and substance satisfactory to counsel to the Company, as
may reasonably be requested by the Company or set forth in the Plan of Merger.
Without limiting the foregoing, each Principal Geo Shareholder shall provide
the the Company on Closing with a certificate, in form and substance satisfactory
to the the Company, confirming that all of the conditions of Closing have been
waived or satisfied and certifying such other matters as may be specified by
the the Company.
(f) The Company and Sub and their respective employees, Affiliates,
agents, lenders, environmental consultants and accounting and legal representatives
shall have completed their environmental, tax, accounting, business and legal
due diligence review of Geo, and the Company and Sub shall be satisfied with
the results of such due diligence review in their sole discretion.
(g) The Company’s shareholders shall have duly adopted and approved
an amendment to the Company’s Certificate of Incorporation approving the
Name Change and shall have approved the Consolidation and Merger (collectively,
“Company Shareholder Approval”
), and the Company shall have
duly filed an amendment to its Certificate of Incorporation with the Secretary
of State of Delaware to effect the Name Change.
(h) The Proposed Transactions shall have been accepted for filing
by the Exchange (
“Regulatory Approval”
).
- 26 -
(i) The Company shall have determined that appropriate prospectus
and registration exemptions are available under applicable securities laws in
connection with the securities to be issued pursuant to or in connection with
the Merger.
(j) The
Company shall have received subscriptions for and shall be ready to close the
Private Placement to permit the Company to have a minimum of Cdn $500,000 in
net proceeds immediately after the Effective Time.
SECTION 8.3.
Conditions to the Obligations of Geo and the Principal Geo Shareholders
under this First Amendment
.
(a) The obligations of Geo and the Principal Geo Shareholders under
this First Amendment shall be further subject to the satisfaction, at or prior
to the Effective Time, of the following condition precedent, which may be waived
in full or part by Geo: Each of the covenants, obligations and conditions of
the Company and Sub, respectively, required to be performed, complied with or
satisfied by either at or prior to the Closing pursuant to the terms of this
First Amendment shall have been duly performed, complied with and satisfied,
and each of the representations and warranties of the Company and Sub contained
in this First Amendment shall be true and correct as of the date of this First
Amendment and as of the Effective Time as though made at and as of the Effective
Time.
(b) The obligations of Geo and the Principal Geo Shareholders under
this First Amendment shall be further subject to the satisfaction, immediately
after the Effective Time, of the following conditions subsequent, any of which
may be waived in full or part by Geo:
(i) There will be no more than 18,000,000 shares of Company Common
Stock outstanding after giving effect to the Proposed Transactions, including
the Private Placement, and assuming full exercise of warrants issued in connection
with the Merger and the Private Placement.
(ii) Upon completion of the Proposed Transactions, the Company
shall have at least Cdn $500,000 in its treasury.
ARTICLE IX
CLOSING
SECTION
9.1.
Closing
. The closing (the
“Closing”
) of the transactions
contemplated by this First Amendment shall take place at the offices of McCullough,
O'Connor, Irwin, Solicitors,1100-888 Dunsmuir Street, Vancouver, B.C. V6C 3K4,
at 10:00 a.m., local time, on the first business day following the day on which
the last of the conditions set forth in Article VIII is fulfilled or waived,
or at such other time and place and on such other date as the Company and Geo
shall agree (the
“Closing Date”
).
(a) At the Closing, Geo shall deliver to the Company the following:
(i) all previously undelivered documents required to be delivered
by Geo to the Company at or prior to the Closing in connection with the transactions
contemplated hereby; and
(ii) such other certificates, agreements and documents as the Company
shall reasonably request.
- 27 -
(b)
At the Closing, the Company shall deliver to Geo the following:
(i)
all previously undelivered documents required to be delivered by the Company
to Geo at or prior to the Closing in connection with the transactions contemplated
hereby; and
(ii) such other certificates, agreements and documents as Geo shall
reasonably request.
(c) At the Closing, the Company shall deliver or cause to be delivered
to the Escrow Agent certificates evidencing the number of shares of the Company
Common Stock and Exchange Warrants to be delivered to the Escrow Agent under
Sections 2.1(e) hereof, which certificates will be duly issued and registered
as required by the Escrow Agent.
ARTICLE X
TERMINATION AND ABANDONMENT
SECTION
10.1.
Termination
. This First Amendment may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Time:
(a) by mutual consent of Geo and the Company;
(b) by either Geo or the Company:
(i) if there shall have been a material breach of any representation,
warranty, covenant or agreement on the part of the Company and Sub on the one
hand, or Geo or any of the Principal Geo Shareholders on the other, set forth
in this First Amendment which breach shall not have been cured without material
cost to the breaching party, in the case of a representation or warranty, prior
to the date on which the conditions other than the accuracy of the representation
and warranty in question would be satisfied for the Closing or, in the case
of a covenant or agreement, within five business days following receipt by the
breaching party of notice of such breach;
(ii) if a Governmental Authority shall have issued an order,
decree or ruling or taken any other action, in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this First
Amendment, and such order, decree, ruling or other action shall have become
final and nonappealable; or
(iii) if the Effective Time shall not have occurred on or before
December 31, 2003;
provided
,
however
, that the right to terminate
this First Amendment shall not be available to any party whose breach of this
First Amendment has been the cause of, or resulted in, the failure of the Merger
to occur on or before such date.
SECTION
10.2.
Procedure and Effect of Termination
. In the event of termination
of this First Amendment pursuant to Section 10.1 hereof, written notice thereof
shall forthwith be given to the other parties to this First Amendment and this
First Amendment shall terminate and the Merger shall be abandoned, without further
action by any of the parties hereto. If this First Amendment is terminated as
provided herein, no party hereto shall have any liability or further obligation
to any other party to this First Amendment resulting from such termination except
(i) that the provisions of this Section 10.2, and the proviso of Section 10.1(b)(iii)
shall remain in full force and effect, and (ii) no party waives any claim or
right against a breaching party to the extent that such termination results
from the breach by a party
- 28 -
hereto of any of its representations, warranties, covenants
or agreements set forth in this First Amendment. The parties hereby acknowledge
and agree that if Geo and the Principal Geo Shareholders, on the one hand, or
the Company and Sub, on the other, are unable to provide the certificates required
by Section 8.2(a) or 8.3(a), as applicable, because the representations and
warranties of such parties contained in this First Amendment are not true and
correct as of the Effective Time due to circumstances beyond the control of
such parties discovered after the date hereof and prior to the Effective Time
(an “
Intervening Event
”), and such Intervening Event did not
constitute a breach of such parties’ representations and warranties made
in this First Amendment on the date hereof, then the other set of parties may
either (i) refuse to close the transaction for failure to satisfy the closing
condition set forth in Section 8.2(a) or 8.3(a), as applicable, or close the
transaction notwithstanding such failure, in which event no breach of a representation
or warranty shall be deemed to have occurred as a result of the Intervening
Event. If Geo and the Principal Geo Shareholders, on the one hand, or the Company
and Sub, on the other, are unable to provide the certificates required by Section
8.2(a) or 8.3(a), as applicable, because the representations and warranties
of such parties contained in this First Amendment are not true and correct as
of the Effective Time due to an Intervening Event, and such Intervening Event
constituted a breach of such parties’ representations and warranties made
in this First Amendment on the date hereof, then the other set of parties may
either (i) refuse to close the transaction for failure to satisfy the closing
condition set forth in Section 8.2(a) or 8.3(a), as applicable, and seek recourse
pursuant to Section 11 of this First Amendment, as applicable, or (ii) close
the transaction notwithstanding such failure and seek recourse pursuant to Section
11 of this First Amendment, as applicable.
ARTICLE XI
SURVIVAL AND INDEMNIFICATION
SECTION
11.1.
Survival and Remedies
. All representations and warranties of each
of the parties hereto contained in this First Amendment or the Additional Agreements,
including all statements contained in any certificate, schedule, document or
other writing delivered pursuant hereto or in connection with the transactions
contemplated hereby, shall be deemed to be representations and warranties within
the meaning of this Section 11.1, shall be deemed to be material and to have
been relied upon by the Company or the Principal Geo Shareholders, as the case
may be, and shall survive the Closing. All of the covenants and agreements of
each of the parties hereto contained in this First Amendment or in any document
delivered pursuant to this First Amendment shall survive the Closing, and claims
for indemnification relating to a breach of any such covenant or agreement may
be made at any time. In the event of a breach of any of such representations,
warranties, covenants and agreements, the party to whom such representation,
warranty, covenant or agreement has been made shall have all rights and remedies
for such breach available to it under the provisions of this First Amendment,
or otherwise, whether of law or in equity, regardless of any disclosure to,
or investigation made by or on behalf of such party on or before the Closing
Date. The rights and remedies of any party based upon, arising out of or otherwise
in respect of any inaccuracy in or breach of any representation, warranty, covenant
or agreement contained in this First Amendment or any Additional Agreement shall
in no way be limited by the fact that the act, omission, occurrence or other
state of facts upon which any claim of any such inaccuracy or breach is based
may also be the subject matter of any other representation, warranty, covenant
or agreement contained in this First Amendment or any Additional Agreement as
to which there is no inaccuracy or breach.
SECTION
11.2.
Indemnification of the Company by Geo and the Principal Geo Shareholders
.
Geo and the Principal Geo Shareholders shall, to the extent not covered and
promptly paid by applicable insurance, jointly and severally indemnify, defend
and hold harmless, the Company and its past, present
- 29 -
and future directors, officers, employees, agents, subsidiaries
and Affiliates (the “
Company Indemnified Parties
”) for any
and all loss, damage, expense (including court costs, amounts paid in settlement,
judgments, attorneys’ fees and other expenses for investigating and defending),
claim, deficiency, Liability or obligation related to, resulting from, caused
by or arising from (a) any inaccuracy in or breach of any representation or
warranty made by Geo or any of the Principal Geo Shareholders in this First
Amendment (excluding Article IV hereof) or made by Geo or the Principal Geo
Shareholders in any other agreement, instrument or document or information delivered
or provided by Geo pursuant hereto or provided by Geo or the Principal Geo Shareholders
to the Company for use by the Company in connection with any disclosure document,
including, without limitation, the Merger Materials, the Information Circular
and materials distributed by the Company in connection with the Private Placement,
(b) any and all claims made in good faith based upon facts alleged that, if
true, would have constituted any such inaccuracy or breach under subsection
(a) above, (c) any failure to perform or breach by Geo prior to the Effective
Time of any covenant or agreement made by Geo herein or in any other agreement,
instrument or document delivered by Geo or any of their respective Affiliates
pursuant hereto, and (d) any and all claims made in good faith based upon facts
alleged that, if true, would have constituted any such breach or failure under
subsection (c) above (collectively, the “
Damages
”). The foregoing
in no way shall limit any remedy provided for herein or at law or equity resulting
from a breach of any obligation under Article VII hereunder.
SECTION
11.3.
Indemnification of the Company by the Principal Geo Shareholders
.
Each Principal Geo Shareholder shall, to the extent not covered and promptly
paid by applicable insurance, severally but not jointly, indemnify, defend and
hold harmless the Company Indemnified Parties for any and all loss damage, expense
(including court costs, amounts paid in settlement, judgments, attorneys’
fees and other expenses for investigating and defending), Claim, deficiency,
Liability or obligation related to, resulting from, caused by or arising from
(a) any inaccuracy in or breach of any representation or warranty made by such
Principal Geo Shareholder in Article IV herein or in any other agreement, instrument
or document delivered by such Principal Geo Shareholder pursuant to Article
IV herein, and (b) any and all claims made in good faith based upon facts alleged
that, if true, would have constituted any such inaccuracy or breach under subsection
(a) above, (c) any failure to perform or breach by such Principal Geo Shareholder
of any covenant or agreement made by such Principal Geo Shareholder herein or
in any other agreement, instrument or document delivered by such Principal Geo
Shareholder or any of his, her or its Affiliates pursuant hereto, and (d) any
and all claims made in good faith based upon facts alleged, that if true, would
have constituted any such breach or failure under subsection (c) above.
SECTION
11.4.
Indemnification Procedure for Third Party Claims
.
(a)
If subsequent to the Effective Time any Company Indemnified Party asserts a
claim for indemnification or receives notice of the assertion of any claim or
of the commencement of any action or proceeding by any entity which is not a
party to this First Amendment (including any Governmental Authority) (a
“Third
Party Claim”
) against such Company Indemnified Party, with respect
to which the Company or the Principal Geo Shareholders (
“Indemnifying
Party”
) are required to provide indemnification under this First Amendment,
the Company Indemnified Party shall give written notice together with a statement
of any available information regarding such claim (the
“Notice of Claim”
)
to the Indemnifying Party promptly after learning of such claim;
provided
,
however,
that notice to the Principal Geo Shareholders in accordance
with Section 12.6 hereof shall be deemed notice to all of the Principal Geo
Shareholders. The Company Indemnified Party shall have the right to conduct
such defense, at the Indemnifying Party’s expense, in good faith with counsel
reasonably acceptable to the Indemnifying Party, but the Company Indemnified
Party shall be prohibited from compromising or settling the claim without the
prior written consent of the Indemnifying Party, which consent shall not be
- 30 -
unreasonably withheld or delayed. The Indemnifying Party will,
at its expense, make available to the Company Indemnified Party such assistance
and materials as the Company Indemnified Party may reasonably request.
(c)
The Indemnified Party will cooperate with and make available to the Company
Indemnifying Party such assistance and materials as it may reasonably request,
all at the expense of the Indemnifying Party. The Indemnifying Party shall have
the right at its expense to participate in the defense assisted by counsel of
its own choosing. If the Indemnifying Party does not cooperate with and make
available to the Company Indemnified Party such assistance and materials as
the Company Indemnified Party shall request, then (a) the Company Indemnified
Party shall have the right, but not the obligation, to undertake at the expense
of the Indemnifying Party the defense or settlement of such Third Party Claim
for the account and at the risk of the Indemnifying Party without the prior
written consent of the Indemnifying Party, and (b) the Indemnifying Party shall
be bound by any defense or settlement that the Indemnified Party may make as
to such Third Party Claim.
(d)
Any judgment entered or settlement agreed upon in the manner provided herein
shall be binding upon the Indemnifying Party, and shall be conclusively deemed
to be an obligation with respect to which the Company Indemnified Party is entitled
to prompt indemnification hereunder, subject to the Indemnifying Party’s
right to appeal an appealable judgment or order.
SECTION
11.4
Failure to Give Timely Notice
. A failure by a Company Indemnified
Party to give timely, complete or accurate notice as provided in this Article
XI will not affect the rights or obligations of any party hereunder except and
only to the extent that, as a result of such failure, any party entitled to
receive such was actually damaged as a result of such failure to give timely
notice.
SECTION
11.5.
Insurance
. If an Indemnified Party both collects proceeds from
any insurance company and receives a payment from the Indemnifying Party hereunder,
and the sum of such proceeds and payment is in excess of the Damages or losses
with respect to the matter that is the subject of the indemnity, then the Indemnified
Party shall promptly refund to the Indemnifying Party the amount of such excess.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION
12.1.
Amendment and Modification
. This First Amendment may be amended
only pursuant to a written instrument signed on behalf of Geo, the Company and
the Principal Geo Shareholders.
SECTION
12.2.
Waiver of Compliance; Consents
. Any failure of the Company or Sub,
on the one hand or Geo or any of the Principal Geo Shareholders, on the other
hand, to comply with any obligation, covenant, agreement or condition contained
herein may be waived only in writing by Geo and the Principal Geo Shareholders
or the Company and Sub, respectively, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any other failure.
The failure of any party hereto to enforce at any time any provision of this
First Amendment shall not be construed to be a waiver of such provision, nor
in any way to affect the validity of this First Amendment or any part hereof
or the right of any party to enforce any such provision. Any amendment or waiver
effected in accordance with Section 12.1 or this Section 12.2 shall be binding
upon each of the Principal Geo Shareholders.
- 31 -
SECTION
12.3.
Validity
. The invalidity or unenforceability of any provision of
this First Amendment shall not affect the validity or enforceability of any
other provisions of this First Amendment, which shall remain in full force and
effect.
SECTION
12.4.
Expenses and Obligations
. All costs and expenses incurred in connection
with the consummation of the transactions contemplated by this First Amendment
by the Company and Sub shall be paid by the Company or Sub and all costs and
expense incurred in connection with the consummation of the transactions contemplated
by this First Amendment by Geo or the Principal Geo Shareholders shall be paid
by the Principal Geo Shareholders
SECTION
12.5.
Parties in Interest
. This First Amendment shall be binding upon
and inure solely to the benefit of each party hereto, and, nothing in this First
Amendment except as set forth in Article X hereof, express or implied, is intended
to confer upon any other Person any rights or remedies of any nature whatsoever
under or by reason of this First Amendment.
SECTION
12.6.
Notices
. All notices and other communications hereunder shall be
in writing and shall be deemed given upon the earlier of delivery thereof if
by hand or upon receipt if sent by mail (registered or certified mail, postage
prepaid, return receipt requested) or on the next business day after deposit
if sent by a recognized overnight delivery service or upon transmission if sent
by telecopy or facsimile transmission (with request of assurance of receipt
in a manner customary for communication of such type) as follows:
(a)
If to the Company or Sub, or to Geo after the Effective Time, to:
U.S.
Cobalt Inc.
775 Mariposa Street
Denver, Colorado 80204
(b) if to Geo or the Principal Geo Shareholders prior to the Effective
Time, to:
U.S. Geothermal Inc.
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
(c) if to any of the Principal Geo Shareholders after the Effective
Time, to:
c/o Doug Glaspey
1509 Tyrell Lane, Suite B
Boise, Idaho 83706
And to:
Vulcan Power Company
1183 NW Wall Street, Suite G
Bend, Oregon 97701
SECTION
12.7.
Governing Law
. This First Amendment shall be governed by and construed
in accordance with the laws of the State of Idaho without regard to the conflicts-of-laws
rules thereof.
- 32 -
SECTION
12.8.
Counterparts
. This First Amendment may be executed in two or more
counterparts, and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one and the same agreement.
SECTION
12.9.
Headings
. The article and section headings contained in this First
Amendment are solely for the purpose of reference, are not part of the agreement
of the parties and shall not affect in any way the meaning or interpretation
of this First Amendment.
SECTION
12.10.
Entire Agreement
. This First Amendment (including all Exhibits
and Schedules attached hereto and incorporated by reference herein), the Additional
Agreements and the documents and instruments referred to herein, and the other
agreements included in or contemplated by the exhibits hereto (collectively,
the
“Transaction Agreements”
) embody the entire agreement and
understanding of the parties hereto with respect to the subject matter contained
herein or therein. The Transaction Agreements supersede all prior agreements
and understandings between the parties with respect to such subject matter,
including, without limitation, the letter agreement among the Company, Geo and
the Principal Shareholders dated March 28, 2002.
SECTION
12.11.
Assignment
. This First Amendment shall not be assigned by operation
of law or otherwise, except that it may be assigned (other than the obligations
in Article II) by the Company or Sub to one or more of their Affiliates who
agree in writing to be bound by the provisions hereof;
provided
, that
the Company remains obligated under this First Amendment. Subject to the foregoing,
this First Amendment will be binding upon and inure to the benefit of and be
enforceable by the parties and their respective successors and permitted assigns.
SECTION
12.12.
No Strict Construction
. The language used in this First Amendment
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.
SECTION
12.13.
WAIVERS OF TRIAL BY JURY
.
EACH OF GEO, THE STOCKHOLDERS,
THE COMPANY AND SUB HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OF THE ADDITIONAL AGREEMENTS, AND CONSENTS TO THE GRANTING OF SUCH LEGAL
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT.
SECTION
12.14
CONSENT TO JURISDICTION
. AS AN FURTHER INDUCEMENT TO THE COMPANY
TO ENTER INTO THIS AGREEMENT AND IN CONSIDERATION THEREFORE, GEO, THE PRINCIPAL
GEO SHAREHOLDERS AND THE COMPANY EACH COVENANT AND AGREE (I) THAT ANY STATE
OR FEDERAL COURT WITHIN ADA COUNTY, IDAHO SHALL HAVE JURISDICTION OF ANY ACTION
OR PROCEEDING RELATING TO, OR ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT
AND THE OTHER AGREEMENTS AND THE COMPANY, GEO AND EACH OF THE PRINCIPAL GEO
SHAREHOLDERS CONSENTS TO PERSONAL JURISDICTION OF SUCH COURTS AND WAIVES ANY
OBJECTION (WHETHER BASED ON FORUM NON CONVENIENS OR OTHERWISE) TO SUCH COURTS’
JURISDICTION OR AS TO THE APPROPRIATENESS OR CONVENIENCE OF ANY SUCH FORUM,
(II) THAT SERVICE OF ANY SUMMONS AND COMPLAINT OR OTHER PROCESS IN ANY SUCH
ACTION OR PROCEEDING MAY BE MADE IN ACCORDANCE WITH SECTION 12.6 HEREOF, AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED ON THE DATE SUCH SUMMONS, COMPLAINT
OR OTHER PROCESS WOULD BE DEEMED
- 33 -
DELIVERED AS SET FORTH IN SECTION 12.6 HEREOF, AND (III) TO
WAIVE PERSONAL SERVICE OF ANY SUCH SUMMONS, COMPLAINT OR OTHER PROCESS.
IN
WITNESS WHEREOF, each of the parties hereto has caused this First Amendment
to be signed as of the day and year first above written.
|
PRINCIPAL GEO SHAREHOLDERS:
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U.S. COBALT INC.
, a Delaware corporation
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___________________________________________
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By: _________________________________________
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DANIEL KUNZ
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Name: Douglas J. Glaspey
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Title: President
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U.S. GEOTHERMAL INC.
, an Idaho
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corporation
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___________________________________________
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DOUGLAS GLASPEY
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By: _________________________________________
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Name: Daniel Kunz
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Title: President
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___________________________________________
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EVERGREEN POWER INC.
, an Idaho
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PAUL LARKIN
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corporation
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By: _________________________________________
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___________________________________________
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Name: Douglas J. Glaspey
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RONALD BOURGEOIS
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Title: President
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VULCAN POWER COMPANY
, a Colorado
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corporation
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By: _________________________________________
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Name: Stephen Munson
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Title: CEO and President
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- 34 -
EXHIBITS
- 35 -
EXHIBIT A
FORM OF
ARTICLES OF MERGER
EVERGREEN POWER INC.,
an Idaho corporation
WITH AND INTO
S. GEOTHERMAL, INC.
an Idaho corporation
The
undersigned, Douglas Glaspey and Paul Larkin, being the President and Secretary,
respectively, of EverGreen Power Inc., an Idaho corporation, and Daniel Kunz
and Paul Larkin, being the President and Secretary, respectively, of U. S. Geothermal,
Inc., an Idaho corporation, DO HEREBY CERTIFY as follows:
(1) EverGreen
Power Inc., an Idaho corporation, and U. S. Geothermal, Inc., an Idaho corporation,
are the constituent corporations of a merger; U. S. Geothermal, Inc., an Idaho
corporation, is the surviving corporation.
(2) A
Plan of Merger has been approved, adopted and executed by each of the constituent
corporations in accordan ce with Idaho Code §30-1-1101.
(a)
The
Plan of Merger is attached hereto as
Attachment
A;
(b)
The
number of common shares outstanding of EverGreen Power Inc., an Idaho corporation,
outstanding and entitled to vote was one hundred (100), of which one hundred
(100) of these shares voted for and none of these shares voted against the Plan
of Merger;
(c)
The
number of common shares outstanding of U. S. Geothermal, Inc., an Idaho corporation,
outstanding and entitled to vote was 6,079,836, of which 6,079,836 of these
shares voted for and zero (0) of these shares voted against the Plan of Merger.
IN
WITNESS WHEREOF, the parties hereto have caused these Articles of Merger to
be duly executed on this ___ day of December 2003.
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EVERGREEN POWER INC.,
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U. S. GEOTHERMAL, INC.,
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an Idaho corporation
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an Idaho corporation
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By:
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By:
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Douglas Glaspey, President
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Daniel Kunz, President
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By:
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By:
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Paul Larkin, Secretary
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Paul Larkin, Secretary
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- 36 -
EXHIBIT B
FORM OF EXCHANGE WARRANT
|
Unless permitted under securities legislation, the holder of the securities
shall not trade the
securities before
•, 200
•.
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|
Without prior written approval of the TSX Venture
Exchange and compliance with all
applicable securities legislation,
the securities represented by this certificate may not be
sold,
transferred, hypothecated or otherwise traded on or through the facilities
of the TSX
Venture Exchange or otherwise in Canada or to or for
the benefit of a Canadian resident
until
•, 200•
.
|
WARRANT TO PURCHASE COMMON STOCK
OF
U.S. GEOTHERMAL INC.
(formerly U.S. Cobalt Inc.)
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT OR
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
FOR VALUE RECEIVED
U.S. Geothermal Inc., a Delaware corporation (the "Company"),
grants the following rights to
Vulcan Power Company
, an Oregon corporation,
having an address at 1183 NW Wall Street, Suite G, Bend, Oregon 97701 ("Holder").
ARTICLE 1. DEFINITIONS
As used herein, the following terms shall have the following
meanings, unless the context shall otherwise require:
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(a)
|
"Common Stock"
shall mean the
common stock, $.001 par value per share, of the Company.
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(b)
|
"Corporate Office"
shall mean
the office of the Company (or its successor) at which at any particular
time its principal business shall be administered, which office is located
at the date hereof at 1509 Tyrell Lane, Suite B, Boise, Idaho 83706.
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(c)
|
"Exercise Date"
shall mean any
date upon which the Holder shall give the Company a Notice of Exercise,
which shall be deemed the date the Notice of Exercise was first deposited
in the US Mails, if mailed, or the date received by the courier company
if delivered by recognized courier company, or the date received by the
Company if otherwise given or delivered.
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- 37 -
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(d)
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"Exercise Price"
shall mean the
price to be paid to the Company for each share of Common Stock to be purchased
upon exercise of this Warrant in accordance with the terms hereof, which
shall be $0.75 per share.
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(e)
|
"Expiration Date"
shall mean
5:00 PM (Pacific time) on the 24 month anniversary of the date hereof,
if a business day, or the next succeeding business day thereafter.
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(f)
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"SEC"
shall mean the United States
Securities and Exchange Commission.
|
ARTICLE 2. EXERCISE
|
2.1
|
Exercise of Warrant
This Warrant shall entitle Holder to purchase up to 2,420,217 shares of
Common Stock (the "Shares") at the Exercise Price. This Warrant shall
be exercisable at any time and from time to time prior to the Expiration
Date (the "Exercise Period"). This Warrant and the right to purchase Shares
hereunder shall expire and become void at the Expiration Date.
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2.2
|
Manner of Exercise
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(a)
|
Holder may exercise this Warrant at
any time and from time to time during the Exercise Period, in whole or
in part (but not in denominations of fewer than 50,000 Shares, except
upon an exercise of this Warrant with respect to the remaining balance
of Shares purchasable hereunder at the time of exercise), by delivering
to the Company at its Corporate Office (i) a duly executed Notice of Exercise
in substantially the form attached as Appendix I hereto and (ii) a bank
cashier's or certified check for the aggregate Exercise Price of the Shares
being purchased.
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(b)
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From time to time upon exercise of this
Warrant, in whole or part, in accordance with its terms, the Company will
cause its transfer agent to countersign and deliver stock certificates
to the Holder representing the number of Shares being purchased pursuant
to such exercise, subject to adjustment as described herein.
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(c)
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Promptly following any exercise of this
Warrant, if the Warrant has not been fully exercised and has not expired,
the Company will deliver to the Holder a new Warrant for the balance of
the Shares covered hereby.
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2.3
|
Termination
All rights of the Holder in this Warrant, to the extent they have not
previously expired or been exercised, shall terminate on the Expiration
Date.
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2.4
|
No Rights Prior to
Exercise
Prior to its exercise pursuant to Section 2.2 above, this Warrant shall
not entitle the Holder to any voting or other rights as holder of Shares.
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2.5
|
Adjustments
In case of any reclassification, capital reorganization, stock dividend,
or other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization, stock dividend, or other change of outstanding shares
of Common Stock), or in case of any sale or conveyance to another corporation
of the property of the Company as, or substantially as, an entirety (other
than a sale/leaseback, mortgage or other financing transaction), the Company
shall cause effective provision to be made so that the Holder shall have
the right thereafter, by exercising this Warrant, to purchase the kind
and number of shares of
|
- 38 -
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|
stock or other securities
or property (including cash) receivable upon such reclassification, capital
reorganization, stock dividend, or other change, consolidation, merger,
sale or conveyance as the Holder would have been entitled to receive had
the Holder exercised this Warrant in full immediately before such reclassification,
capital reorganization, stock dividend, or other change, consolidation,
merger, sale or conveyance. Any such provision shall include provision
for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 2.5. The foregoing provisions
shall similarly apply to successive reclassifications, capital reorganizations,
stock dividends, and other changes of outstanding shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. The Company
shall have the exclusive authority to make all such adjustments.
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2.6
|
Fractional Shares
No fractional Shares shall be issuable upon exercise or conversion of
this Warrant and the number of Shares to be issued shall be rounded down
to the nearest whole Share. If a fractional Share interest arises upon
any exercise or conversion of the Warrant, the Company shall eliminate
such fractional Share interest by paying Holder the amount computed by
multiplying the fractional interest by the closing bid price of a full
Share on the date of the Notice of Exercise.
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ARTICLE 3. REPRESENTATIONS
AND COVENANTS OF THE COMPANY
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3.1
|
Representations and
Warranties
The Company hereby represents and warrants to the Holder as follows:
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(a)
|
All Shares which may be issued upon
the exercise of the purchase right represented by this Warrant shall,
upon issuance, be duly authorized, validly issued, fully-paid and nonassessable,
and free of any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable securities laws, and not subject
to any pre-emptive rights.
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(b)
|
The Company is a corporation duly organized
and validly existing under the laws of the State of Delaware and has the
full power and authority to issue this Warrant and to comply with the
terms hereof. The execution, delivery and performance by the Company of
its obligations under this Warrant, including, without limitation, the
issuance of the Shares upon any exercise of the Warrant, have been duly
authorized by all necessary corporate action. This Warrant has been duly
executed and delivered by the Company and is a valid and binding obligation
of the Company, enforceable in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or
similar laws affecting enforceability of creditors' rights generally and
except as the availability of the remedy of specific enforcement, injunctive
relief or other equitable relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
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(c)
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The Company is not subject to or bound
by any provision of any certificate or articles of incorporation or by-laws,
mortgage, deed of trust, lease, note, bond, indenture, other instrument
or agreement, license, permit, trust, custodianship, other restriction
or any applicable provision of any law, statute, any court, governmental
body, administrative agency or arbitrator which could prevent or be violated
by or under which there would be a default (or right of termination) as
a result of the execution, delivery and performance by the Company of
this Warrant.
|
- 39 -
ARTICLE 4. MISCELLANEOUS
|
4.1
|
Restrictions on Transfer
This Warrant may not be transferred or assigned, in whole or in part,
at any time, except with the consent of the Company and in compliance
with applicable securities laws.
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4.2
|
Loss, Theft, Destruction or Mutilation
If this Warrant shall become mutilated or defaced or be destroyed, lost
or stolen, the Company shall execute and deliver a new Warrant in exchange
for and upon surrender and cancellation of such mutilated or defaced Warrant
or, in lieu of and in substitution for such Warrants so destroyed, lost
or stolen, upon the Holder filing with the Company evidence satisfactory
to it that such Warrant has been so mutilated, defaced, destroyed, lost
or stolen. However, the Company shall be entitled, as a condition to the
execution and delivery of such new Warrant, to demand indemnity satisfactory
to it and payment of the expenses and charges incurred in connection with
the delivery of such new Warrant. Any Warrant so surrendered to the Company
shall be canceled.
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4.3
|
Notices
All notices and other communications from the Company to the Holder or
vice versa shall be deemed delivered and effective when given personally
(including by recognized courier delivery), by facsimile transmission
and confirmed in writing, or three (3) days after being mailed by first-class
national mail, postage prepaid, at such address and/or facsimile number
as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or the Holder from time to time; provided,
however, that the Notice of Exercise may not be delivered by facsimile
transmission.
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4.4
|
Waiver
This Warrant and any term hereof may be changed, waived, or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.
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4.5
|
Governing Law
This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware
,
without giving effect to
its principles regarding conflicts of law.
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4.6
|
Restrictions on Shares
This Warrant and any Shares issuable on its exercise are subject to resale
restrictions under applicable securities laws. If the Shares underlying
the Warrants are not the subject of an effective registration statement
under the Act upon issuance by the Company, legends stating that such
Shares have not been registered and referring to restrictions on transferability
and sale of the Shares may be placed upon all certificates or other documents
evidencing ownership, and stop-order instructions prohibiting transfer
of the Shares or similar notations may be made on the Company's records
to prevent the disposition of Shares other than in accordance with applicable
law.
|
Dated: _____________________________________
|
|
U. S. Geothermal Inc.
, a Delaware corporation
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|
By: ____________________________________________
|
|
|
Dan
Kunz, Chief Executive Officer
|
- 40 -
APPENDIX I
NOTICE OF EXERCISE
|
1.
|
The undersigned hereby elects to purchase
________ shares of the Common Stock of U. S. Geothermal Inc., a Delaware
corporation, pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
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|
2.
|
Please issue a certificate or certificates
representing said shares in the name of the undersigned holder as specified
below.
|
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|
3.
|
The undersigned represents it is acquiring
the shares solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution thereof except
in compliance with applicable securities laws.
|
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Holder: ________________________________________
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(Signature)
|
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(Date)
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|
Address: ________________________________________
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________________________________________
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|
- 41 -
EXHIBT C
FORM OF UNIT WARRANT
|
Unless permitted under securities legislation, the holder of the securities
shall not trade the
securities before •
, 200
•
.
|
|
Without prior written approval of the TSX Venture
Exchange and compliance with all
applicable securities legislation,
the securities represented by this certificate may not be
sold,
transferred, hypothecated or otherwise traded on or through the facilities
of the TSX
Venture Exchange or otherwise in Canada or to or for
the benefit of a Canadian resident
until
•, 200
•
.
|
WARRANT TO PURCHASE COMMON STOCK
OF
U.S. GEOTHERMAL INC.
(formerly U.S. Cobalt Inc.)
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS REGISTERED UNDER THE ACT OR
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE
FOR VALUE RECEIVED
U.S. Geothermal Inc., a Delaware corporation (the "Company"), grants the following
rights to _________________________________________________________________________________________________,
having an address at ____________________________________________________ ("Holder").
ARTICLE 1. DEFINITIONS
As used herein, the following terms shall have the following meanings, unless
the context shall otherwise require:
|
|
(a)
|
“Call Event”
shall
mean that the Company (or a subsidiary thereof) has obtained a license
from the applicable permitting authorities for a 10 megawatt power plant,
including a power purchase agreement and transmission agreement.
|
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|
(b)
|
"Common Stock"
shall mean the
common stock, $.001 par value per share, of the Company.
|
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|
|
|
|
|
(c)
|
"Corporate Office"
shall mean
the office of the Company (or its successor) at which at any particular
time its principal business shall be administered, which office is located
at the date hereof at 1509 Tyrell Lane, Suite B, Boise, Idaho 83706.
|
|
|
|
|
|
|
(d)
|
"Exercise Date"
shall mean any
date upon which the Holder shall give the Company a Notice of Exercise,
which shall be deemed the date the Notice of Exercise was first deposited
in the US Mails, if mailed, or the date received by the courier company
if delivered by recognized courier
|
- 42 -
|
|
|
company, or the date received by the
Company if otherwise given or delivered.
|
|
|
|
|
|
|
(e)
|
"Exercise Price"
shall mean the
price to be paid to the Company for each whole share of Common Stock to
be purchased upon exercise of this Warrant in accordance with the terms
hereof, which shall be $0.75 per share.
|
|
|
|
|
|
|
(f)
|
"Expiration Date"
shall mean
the first to occur of (i) 5:00 PM (Pacific time) on the 24 month anniversary
of the date hereof, if a business day, or the next succeeding business
day thereafter, or (ii) the end of the period of Notice set forth in Section
2.2 if sooner called pursuant to Article 2.
|
|
|
|
|
|
|
(g)
|
"SEC"
shall mean the United States
Securities and Exchange Commission.
|
ARTICLE 2. EXERCISE
|
2.1
|
Exercise of Warrant
This Warrant shall entitle Holder to purchase up to ____________________
shares of Common Stock (the "Shares") at the Exercise Price. This Warrant
shall be exercisable at any time and from time to time prior to the Expiration
Date (the "Exercise Period"). This Warrant and the right to purchase Shares
hereunder shall expire and become void at the Expiration Date. This Warrant
may be exercised for whole Shares only.
|
|
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|
|
2.2
|
Acceleration of Exercise
Period
The Company shall have the right, at any time after the occurrence of
a Call Event, to accelerate the Exercise Period by sending to the Holder,
at the Holder's address written above, a Notice of Acceleration in substantially
the form attached as Appendix I hereto (the "Notice"). In the event the
Company does accelerate the Exercise Period, Holder shall have until 5:00
p.m. (Pacific time) on the date which is thirty (30) days from the date
the Holder is deemed to receive the Notice within which to exercise this
Warrant in the manner provided for in Section 2.3. If this Warrant is
not exercised within said period, thereafter this Warrant and the right
to purchase the Shares hereunder, to the extent not previously exercised,
shall expire and become void.
|
|
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|
|
2.3
|
Manner of Exercise
|
|
|
(a)
|
Holder may exercise this Warrant at
any time and from time to time during the Exercise Period, in whole or
in part by delivering to the Company at its Corporate Office (i) a duly
executed Notice of Exercise in substantially the form attached as Appendix
II hereto and (ii) a bank cashier's or certified check for the aggregate
Exercise Price of the Shares being purchased.
|
|
|
|
|
|
|
(b
|
From time to time upon exercise of this
Warrant, in whole or part, in accordance with its terms, the Company will
cause its transfer agent to countersign and deliver stock certificates
to the Holder representing the number of Shares being purchased pursuant
to such exercise, subject to adjustment as described herein.
|
|
|
|
|
|
|
(c)
|
Promptly following any exercise of this
Warrant, if the Warrant has not been fully exercised and has not expired,
the Company will deliver to the Holder a new Warrant for the balance of
the Shares covered hereby.
|
|
|
|
|
|
2.4
|
Termination
All rights of the Holder in this Warrant, to the extent they have not
previously expired or been exercised, shall terminate on the Expiration
Date.
|
- 43 -
|
2.5
|
No Rights Prior to
Exercise
Prior to its exercise pursuant to Section 2.3 above, this Warrant shall
not entitle the Holder to any voting or other rights as holder of Shares.
|
|
|
|
|
2.6
|
Adjustments
In case of any reclassification, capital reorganization, stock dividend,
or other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation
(other than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization, stock dividend, or other change of outstanding shares
of Common Stock), or in case of any sale or conveyance to another corporation
of the property of the Company as, or substantially as, an entirety (other
than a sale/leaseback, mortgage or other financing transaction), the Company
shall cause effective provision to be made so that the Holder shall have
the right thereafter, by exercising this Warrant, to purchase the kind
and number of shares of stock or other securities or property (including
cash) receivable upon such reclassification, capital reorganization, stock
dividend, or other change, consolidation, merger, sale or conveyance as
the Holder would have been entitled to receive had the Holder exercised
this Warrant in full immediately before such reclassification, capital
reorganization, stock dividend, or other change, consolidation, merger,
sale or conveyance. Any such provision shall include provision for adjustments
that shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2.6. The foregoing provisions shall similarly
apply to successive reclassifications, capital reorganizations, stock
dividends, and other changes of outstanding shares of Common Stock and
to successive consolidations, mergers, sales or conveyances. The Company
shall have the exclusive authority to make all such adjustments.
|
|
|
|
|
2.7
|
Fractional Shares
No fractional Shares shall be issuable upon exercise or conversion of
this Warrant and the number of Shares to be issued shall be rounded down
to the nearest whole Share. If a fractional Share interest arises upon
any exercise or conversion of the Warrant, the Company shall eliminate
such fractional Share interest by paying Holder the amount computed by
multiplying the fractional interest by the closing bid price of a full
Share on the date of the Notice of Exercise.
|
|
|
|
|
ARTICLE 3. REPRESENTATIONS
AND COVENANTS OF THE COMPANY
|
|
|
|
|
3.1
|
Representations and
Warranties
The Company hereby represents and warrants to the Holder as follows:
|
|
|
|
|
|
|
(a)
|
All Shares which may be issued upon
the exercise of the purchase right represented by this Warrant shall,
upon issuance, by duly authorized, validly issued, fully-paid and nonassessable,
and free of any liens and encumbrances except for restrictions on transfer
provided for herein or under applicable securities laws, and not subject
to any pre-emptive rights.
|
|
|
|
|
|
|
(b)
|
The Company is a corporation duly organized
and validly existing under the laws of the State of Delaware and has the
full power and authority to issue this Warrant and to comply with the
terms hereof. The execution, delivery and performance by the Company of
its obligations under this Warrant, including, without limitation, the
issuance of the Shares upon any exercise of the Warrant, have been duly
authorized by all necessary corporate action. This Warrant has been duly
executed and delivered by the Company and is a valid and binding obligation
of the Company, enforceable in accordance with its terms, except as enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or
similar laws affecting enforceability of creditors' rights generally and
except as the availability of the remedy of specific enforcement,
|
- 44 -
|
|
|
injunctive relief or other equitable relief is subject
to the discretion of the court before which any proceeding therefor may
be brought.
|
|
|
|
|
|
|
(c)
|
The Company is not subject to or bound by any provision
of any certificate or articles of incorporation or by-laws, mortgage,
deed of trust, lease, note, bond, indenture, other instrument or agreement,
license, permit, trust, custodianship, other restriction or any applicable
provision of any law, statute, any court, governmental body, administrative
agency or arbitrator which could prevent or be violated by or under which
there would be a default (or right of termination) as a result of the
execution, delivery and performance by the Company of this Warrant.
|
|
|
|
|
|
ARTICLE 4. MISCELLANEOUS
|
|
|
|
|
|
4.1
|
Restrictions on Transfer
This Warrant may not be transferred or assigned, in whole or in part,
at any time.
|
|
|
|
|
4.2
|
Loss, Theft, Destruction
or Mutilation
If this Warrant shall become mutilated or defaced or be destroyed, lost
or stolen, the Company shall execute and deliver a new Warrant in exchange
for and upon surrender and cancellation of such mutilated or defaced Warrant
or, in lieu of and in substitution for such Warrants so destroyed, lost
or stolen, upon the Holder filing with the Company evidence satisfactory
to it that such Warrant has been so mutilated, defaced, destroyed, lost
or stolen. However, the Company shall be entitled, as a condition to the
execution and delivery of such new Warrant, to demand indemnity satisfactory
to it and payment of the expenses and charges incurred in connection with
the delivery of such new Warrant. Any Warrant so surrendered to the Company
shall be canceled.
|
|
|
|
|
4.3
|
Notices
All notices and other communications from the Company to the Holder or
vice versa shall be deemed delivered and effective when given personally
(including by recognized courier delivery), by facsimile transmission
and confirmed in writing, or three (3) days after being mailed by first-class
United States Postal Service mail, postage prepaid, at such address and/or
facsimile number as may have been furnished to the Company or the Holder,
as the case may be, in writing by the Company or the Holder from time
to time; provided, however, that the Notice of Exercise may not be delivered
by facsimile transmission.
|
|
|
|
|
4.4
|
Waiver
This Warrant and any term hereof may be changed, waived, or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.
|
|
|
|
|
4.5
|
Governing Law
This Warrant shall be governed by and construed in accordance with the
laws of the State of Delaware
,
without giving effect to
its principles regarding conflicts of law.
|
|
|
|
|
4.6
|
Restrictions on Shares
This Warrant and any Shares issuable on its exercise are subject to resale
restrictions under applicable securities laws. If the Shares underlying
the Warrants are not the subject of an effective registration statement
under the Act upon issuance by the Company, legends stating that such
Shares have not been registered and referring to restrictions on transferability
and sale of the Shares may be placed upon all certificates or other documents
evidencing ownership, and stop-order instructions prohibiting transfer
of the Shares or similar notations may be made on the Company's records
to prevent the disposition of Shares other than in accordance with applicable
law.
|
- 45 -
Dated: _____________________________________
|
|
U. S. Geothermal Inc.
, a Delaware corporation
|
|
|
|
|
|
By: ____________________________________________
|
|
|
Douglas
J. Glaspey, President
|
- 46 -
APPENDIX I
NOTICE OF ACCELERATION
Dated: _____________________________________
U.S. Geothermal Inc. (the "Company") does hereby notify you
of its election to exercise its right, pursuant to Section 2.2 of the Warrant
issued to you by the Company on _________________ (the "Warrant"), to accelerate
the exercise period of such Warrant with respect to all unexercised Shares for
which the Warrant may be exercised. Please be advised that you have thirty (30)
days from the date you are deemed to receive this Notice of Acceleration (the
"Notice Period") to exercise your Warrant in the manner provided for in the
Warrant. You will be deemed to have received this Notice of Acceleration three
(3) days after the date when this Notice of Acceleration was first deposited
in the United States mail, if mailed, or upon receipt if delivered personally
or by facsimile.
You will automatically forfeit your right to purchase any
shares of common stock issuable upon exercise of such Warrant, unless the Warrant
is exercised with respect to such Shares before the end of the Notice Period.
|
|
U.S. Geothermal Inc., a Delaware corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
|
|
|
Title:
|
|
- 47 -
APPENDIX II
NOTICE OF EXERCISE
|
1.
|
The undersigned hereby elects to purchase
________ shares of the Common Stock of U.S. Geothermal Inc. pursuant to
the terms of the attached Warrant, and tenders herewith payment of the
purchase price of such shares in full.
|
|
|
|
|
2.
|
Please issue a certificate or certificates
representing said shares and reissue a Warrant for the balance of the
shares remaining in the name of the undersigned holder as specified below.
|
|
|
|
|
4.
|
The undersigned represents it is acquiring
the shares solely for its own account and not as a nominee for any other
party and not with a view toward the resale or distribution thereof except
in compliance with applicable securities laws.
|
|
Holder: ________________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Signature)
|
|
(Date)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Address: ________________________________________
|
|
|
|
|
|
|
|
________________________________________
|
|
|
- 48 -
SCHEDULE E
DEFINED TERMS
For purposes of this First Amendment, capitalized terms shall
have the meanings assigned to them below.
“Acquisition”
is defined in the Information Circular.
“Acquisition
Proposals”
is defined in Section 6.2 of this First Amendment.
“Additional
Agreements”
shall mean the Escrow Agreement(s) and all other agreements
and documents contemplated by this First Amendment.
“Agreement”
is defined in Recital E of this First Amendment.
“Affiliate”
shall mean (i) a Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, another Person
and (ii) any parent, spouse, lineal descendant or adopted child of a Person
specified in clause (i), any spouse or adopted child of any such descendant
or any child of such spouse, the executors, administrators, conservators or
personal representatives of any Person referred to in this clause (ii) and any
Person which, directly or indirectly, is owned or controlled by one or more
of the Persons referred to in this clause (ii).
“Affiliated
Group”
means any affiliated group as defined in Section 1504 of the
Code (or any analogous combined, consolidated or unitary group under state,
local or foreign income Tax law) of which Geo or any of its Affiliates is or
has been a member.
“Business”
is defined in Recital A of this First Amendment.
“Claims”
shall mean all pending and threatened claims, actions, causes of action, demands,
orders, notices, suits, grievances, proceedings, disputes, arbitrations and
investigations.
“Closing”
is defined in Section 9.1 of this First Amendment, and refers only to the
closing of the Merger.
“Closing
Date”
is defined in Section 9.1 of this First Amendment.
“Code”
is defined in Recital D of this First Amendment.
“Company”
has the meaning assigned to it in the preamble.
“Company
Common Stock”
means shares of the common stock of the Company, par
value $.001 per share, after giving effect to the Consolidation.
“Company
Indemnified Parties”
is defined in Section 11.2 of this First Amendment.
“Company
Shareholder Approval”
is defined in Section 8.2(g) of this First Amendment.
“Consolidation”
is defined in the Information Circular.
“Constituent
Corporations”
is defined in the preamble.
- 49 -
“Contracts”
is defined in Section 3.14 of this First Amendment.
“Damages”
is defined in Section 11.2 of this First Amendment.
“Dissenting
Shares”
is defined in Section 2.2 of this First Amendment.
“Effective
Time”
is defined in the Information Circular.
“Environmental
Claim”
shall mean any Claim (written or oral) by any Person or any
Governmental Authority alleging potential Liability or obligations (including
potential Liability or obligations for or requirement to incur investigatory
costs, cleanup costs, governmental response costs, natural resources damages,
property damages, personal injuries, or penalties) arising out of, based on
or resulting from (i) the presence, release or threatened release into the environment,
of any Materials of Environmental Concern at any location, whether or not owned
or operated by Geo, or (ii) circumstances forming the basis of any violation,
potential violation or alleged violation, or Liability, potential Liability
or alleged Liability, under any Environmental Law.
“Environmental
Laws”
shall mean all Rules and permit conditions relating to pollution
or protection of human health or the environment (including ambient air, indoor
air, surface water, ground water, land surface or subsurface strata), including
Rules relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or handling
of Materials of Environmental Concern.
“ERISA
Affiliate”
shall mean any corporation or other Person which is a member
of the same controlled group (within the meaning of Section 414(b) of the Code)
of corporations or other Persons as Geo, or which is under common control (within
the meaning of Section 414(c) of the Code) with Geo, or any corporation or other
Person which is a member of an affiliated service group (within the meaning
of Section 414(m) of the Code) with Geo, or any corporation or other Person
which is required to be aggregated with Geo pursuant to Section 414(o) of the
Code or the regulations promulgated under Sections 414(b), (c), (m) or (o) of
the Code.
“Escrow”
is defined in Section 2.1(e) of this First Amendment.
“Escrow
Agent”
means Pacific Corporate Trust Company.
“Escrow
Agreement(s)”
is defined in Section 2.1(e) of this First Amendment.
“Escrow
Securities”
is defined in Section 2.1(e) of this First Amendment.
“Exchange”
is defined in the Information Circular.
“Exchange
Warrants”
means the warrants to purchase 2,420,217 shares of the Company
Common Stock to be issued in consideration for the acquisition by Geo of the
1,612,000 outstanding Geo Warrants pursuant to the Merger. Each Exchange Warrant
will entitle the holder to purchase one share of Company Common Stock (after
giving effect to the Consolidation) at a price of $0.75 per share on or before
24 months after Closing, substantially in the form attached as Exhibit B.
“Financial
Statements”
is defined in Section 3.9 of this First Amendment.
- 50 -
“First
Associates”
is defined in the Information Circular.
“Forecasts”
is defined in Section 3.27 of this First Amendment.
“GAAP”
is defined in Section 3.3 of this First Amendment.
“Geo”
is defined in the preamble.
“Geo
Common Stock”
is defined in Recital B of this First Amendment.
“Geo
Securities”
is defined in Section 2.1(b) of this First Amendment.
“Geo
Shareholder Approval”
is defined in Section 3.3 of this First Amendment.
“Geo
Warrants”
is defined in the Information Circular.
“Geothermal
Agreements”
shall mean the Crank Lease, the Jensen Lease, the Jensen
Investments Lease and the Vulcan Agreement, each of which is defined in the
Information Circular.
“Geothermal
Properties”
shall mean the real properties which are the subjects of
the Geothermal Agreements and the Vulcan Property, which is defined in the Information
Circular.
“Governmental
Authority”
shall mean any court (federal, state, local, foreign or
otherwise), any arbitration or other alternative dispute mechanism, any federal,
state, local, foreign or other government or governmental department, agency,
board, commission, bureau or instrumentality and any other regulatory authority.
“Idaho
Authority”
is defined in Section 1.6 of this First Amendment.
“Idaho
Code”
is defined in Section 1.1 of this First Amendment.
“Indemnifying
Party”
is defined in Section 11.4 of this First Amendment.
“Information
Circular”
means the Information Circular dated as of February 28, 2003,
prepared by the Company in connection with seeking Company Shareholder Approval
of,
inter alia
, the Merger, a copy of which is included in the Merger
Materials.
“Intervening
Event”
is defined in Section 10.2 of this First Amendment.
“Investments”
is defined in Section 3.22 of this First Amendment.
“Knowledge”
(or any form of such term, such as “Knows”, “Known”, etc.)
as used in this First Amendment with respect to a party’s awareness of
the presence or absence of a fact, event or condition shall mean (i) the actual
knowledge of such Person after due inquiry, and in the case of any Person other
than an individual, any director, officer, shareholder (beneficial or of record),
managing director, partner, trustee or similar individual of such Person plus
(ii) the knowledge that should be obtained by a party conducting itself reasonably
and with sound discretion in the management of its own affairs.
“Know-how”
shall mean laboratory journals, specialized knowledge (including product knowledge
and use and application knowledge), trade secrets, formulae, product formulations,
recipes, processes, product designs, specifications, quality control, procedures,
manufacturing, engineering and other
- 51 -
drawings, computer data bases and software, technology, other
intangibles, technical information, safety information, engineering data and
design and engineering specifications, research records, market surveys and
all promotional literature, customer and supplier lists and similar data.
“Liability”
means any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due and regardless of when or
by whom asserted), including any liability for Taxes.
“Licenses”
is defined in Section 3.17 of this First Amendment.
“Liens”
shall mean all title defects, charges, claims, restrictions, liens, pledges,
security interests, mortgages, tenancies and other possessory interests, conditional
sale or other title retention agreements, assessments, easements, rights of
way, covenants, restrictions, rights of first refusal, encroachments and other
burdens, options, restrictions or encumbrances of any kind.
“Material
Adverse Effect”
is defined in Section 3.11 of this First Amendment.
“Materials
of Environmental Concern”
shall mean chemicals or other substances
subject to regulation pursuant to Environmental Laws, including pollutants,
contaminants, wastes, by products, toxic substances, radionuclides, polychlorinated
biphenyls, asbestos, petroleum (including crude oil or any fraction thereof)
and petroleum products.
“Merger
Consideration”
is defined in Section 2.1(g) of this First Amendment.
“Merger
Materials”
is defined in Section 6.8(b) of this First Amendment.
“Most
Recent Balance Sheet”
is defined in Section 3.9 of this First Amendment.
“Name
Change”
is defined in the Information Circular.
“Notice
of Claim”
is defined in Section 11.4 of this First Amendment.
“Patents”
shall mean patents (including all reissues, reexaminations, divisions, continuations,
continuations in part and extensions thereof), utility models, patent applications
and patent disclosures docketed.
“Person”
shall mean an individual, corporation, limited liability Geo, partnership, joint
venture, association, trust, unincorporated organization or, as applicable,
any other entity.
“Plan”
shall mean each bonus, pension, stock option, stock purchase, stock bonus, benefit,
welfare, profit sharing, retirement, disability, vacation, severance, hospitalization,
insurance, incentive, deferred compensation and other similar fringe or employee
benefit plans, funds, programs or arrangements, all employment contracts or
executive compensation agreements, written or oral, and all collective bargaining
agreements and each other “employee benefit plan” (within the meaning
of Section 3(3) of ERISA), in each of the foregoing cases which cover, are maintained
for the benefit of, or relate to any or all employees (regardless whether such
employees’ regular place of employment is within or without the United
States) or terminated employees of Geo or ERISA Affiliate.
- 52 -
“Principal
Geo Shareholders”
means Daniel Kunz, Douglas Glaspey, Paul Larkin,
Ronald Bourgeois and Vulcan.
“Private
Placement”
means the private placement by the Company of up to 3,322,222
Units to raise gross proceeds of $1,494,999, to be closed immediately after
the Closing under this First Amendment.
“Proprietary
Rights”
shall mean (i) Patents, (ii) Trademarks, (iii) Trade Names,
(iv) Know-how, (v) rights in trade dress and packaging and (vi) shop rights,
copyrights, inventions, trade secrets, service marks and all other intellectual
property rights, in each case whether registered or not and in each case wherever
such rights exist throughout the world, and including the right to recover for
any past infringement.
“Proposed
Transactions”
shall mean the Name Change, the Consolidation, the Merger
and the Private Placement.
“Protected
Information”
is defined in Section 7.5 of this First Amendment.
“Regulatory
Authority”
is defined in Section 8.2(h) of this First Amendment.
“Related
Party”
is defined in Section 3.25 of this First Amendment.
“Returns”
is defined in Section 3.16(a) of this First Amendment.
“Rules”
shall mean any federal, state, local or foreign statute, law, code, ordinance,
rule, regulation, judgment, writ, decree, injunction, order, concession, grant,
franchise, permit or license or other governmental or regulatory authorization
or approval applicable to Geo, or any of the Principal Geo Shareholders or any
of their respective assets, properties, operations or any Plan.
“Securities
Act”
is defined in Section 2.5 of this First Amendment.
“Sub”
is defined in the preamble, and is referred to in the Information Circular as
USC Subco.
“Sub
Common Stock”
is defined in Section 2.1(a) of this First Amendment.
“Surviving
Corporation”
is defined in Section 1.1 of this First Amendment.
“Tax”
is defined in Section 3.16 of this First Amendment.
“Third
Party”
is defined in Section 6.2 of this First Amendment.
“Third
Party Claim”
is defined in Section 11.4 of this First Amendment.
“Toll
Cross”
means Toll Cross Securities Inc.
“Trademarks”
shall mean trademarks, service marks, brand marks, registrations thereof, pending
applications for registration thereof, and such unregistered rights which are
used in the business of Geo.
“Trade
Names”
shall mean (i) trade names and other identifying names, (ii)
brand names, and (iii) logos and all other names and slogans used in the business
of Geo.
- 53 -
“Transaction
Agreements”
is defined in Section 12.10 of this First Amendment.
“Unit”
means a unit to be sold in the Private Placement comprised of one share of Company
Common Stock (after giving effect to the Consolidation) and one-half warrant
entitling the holder to purchase one share (with a full warrant) of Company
Common Stock (after giving effect to the Consolidation) at a price of $0.75
for 24 months after Closing, substantially in the form attached as Exhibit C.
“Vulcan”
is defined in the Information Circular.
“Vulcan
Agreement”
is defined in the Information Circular.
- 54 -
SCHEDULE 1.5
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
|
(a)
|
Directors:
|
|
|
|
|
|
|
|
|
|
Douglas Glaspey
|
|
|
|
|
Daniel Kunz
|
|
|
|
|
Paul Larkin
|
|
|
|
|
Ronald Bourgeois
|
|
|
|
|
|
|
|
(b)
|
Officers:
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer:
|
Douglas Glaspey
|
|
|
|
|
|
|
|
|
President:
|
Daniel Kunz
|
|
|
|
|
|
|
|
|
Secretary-Treasurer:
|
Paul Larkin
|
- 55 -
SCHEDULE 2.1(C)
DISTRIBUTION OF MERGER CONSIDERATION
|
Name
|
Exchange Shares Issuable
|
Exchange Warrants Issuable
|
|
|
|
|
|
1. Douglas J. Glaspey
|
1,014,649
|
|
|
|
|
|
|
2. Daniel Kunz
|
1,254,769
|
|
|
|
|
|
|
3. Paul Larkin
|
863,187
|
|
|
|
|
|
|
4. Ron Bourgeois
|
821,425
|
|
|
|
|
|
|
5. Vulcan Power Company
|
1,775,156
|
2,420,217
|
|
|
|
|
|
6. Gerald L. Sneddon
|
80,000
|
|
|
|
|
|
|
7. Sneddon Family Trust
|
50,000
|
|
|
|
|
|
|
8. Steven Y Chi
|
36,667
|
|
|
|
|
|
|
9. Roscoe & Joyce Ward
|
5,000
|
|
|
|
|
|
|
10. Robert Falls
|
24,000
|
|
|
|
|
|
|
11. Tom Menning
|
183,333
|
|
|
|
|
|
|
12. Burton Egger
|
40,000
|
|
|
|
|
|
|
13. John Beaulieu
|
20,000
|
|
|
|
|
|
|
14. Veritable Quandary LLC
|
10,000
|
|
|
|
|
|
|
15. Dr. John Swartley
|
36,667
|
|
|
|
|
|
|
16. Grim Estates Ltd.
|
180,000
|
|
|
|
|
|
|
17. Edwin T Cryer
|
10,000
|
|
|
|
|
|
|
18. Steve R. Smith
|
45,000
|
|
|
|
|
|
|
19. Steven Jensen
|
21,000
|
|
|
|
|
|
|
20. John W. Leonard
|
35,000
|
|
|
|
|
|
|
21. Ross Beaty
|
85,000
|
|
- 56 -
|
22. William Brock
|
33,333
|
|
|
|
|
|
|
23. Barry Marcus
|
15,000
|
|
|
|
|
|
|
24. Hartzell Cobbs
|
4,000
|
|
|
|
|
|
|
25. Leland Mink
|
10,000
|
|
|
|
|
|
|
26. Donald Nelson
|
108,000
|
|
|
|
|
|
|
27. Ronald C. Yanke
|
108,000
|
|
|
|
|
|
|
28. John H. Walker
|
73,807
|
|
|
|
|
|
|
29. William David Batiuk
|
17,000
|
|
|
|
|
|
|
Total Geo Exchange
|
|
|
|
Securities
Shares:
|
6,939,992
|
Warrants: 2,420,217
|
- 57 -
SCHEDULE 3.5 (a)
|
Geo Shares
|
|
|
|
|
|
|
|
Name
|
Shares
|
|
|
|
|
|
|
1. Douglas J. Glaspey
|
728,929
|
|
|
|
|
|
|
2. Daniel Kunz
|
940,479
|
|
|
|
|
|
|
3. Paul Larkin
|
691,762
|
|
|
|
|
|
|
4. Ron Bourgeois
|
650,000
|
|
|
|
|
|
|
5. Vulcan Power Company
|
1,895,000
|
|
|
|
|
|
|
6. Gerald L. Sneddon
|
80,000
|
|
|
|
|
|
|
7. Sneddon Family Trust
|
50,000
|
|
|
|
|
|
|
8. Steven Y Chi
|
36,667
|
|
|
|
|
|
|
9. Roscoe & Joyce Ward
|
5,000
|
|
|
|
|
|
|
10. Robert Falls
|
24,000
|
|
|
|
|
|
|
11. Tom Menning
|
183,333
|
|
|
|
|
|
|
12. Burton Egger
|
40,000
|
|
|
|
|
|
|
13. John Beaulieu
|
20,000
|
|
|
|
|
|
|
14. Veritable Quandary LLC
|
10,000
|
|
|
|
|
|
|
15. Dr. John Swartley
|
36,667
|
|
|
|
|
|
|
16. Grim Estates Ltd.
|
180,000
|
|
|
|
|
|
|
17. Edwin T Cryer
|
10,000
|
|
|
|
|
|
|
18. Steve R. Smith
|
45,000
|
|
|
|
|
|
|
19. Steven Jensen
|
21,000
|
|
|
|
|
|
|
20. John W. Leonard
|
35,000
|
|
- 58 -
|
21. Ross Beaty
|
85,000
|
|
|
|
|
|
|
22. William Brock
|
33,333
|
|
|
|
|
|
|
23. Barry Marcus
|
15,000
|
|
|
|
|
|
|
24. Hartzell Cobbs
|
4,000
|
|
|
|
|
|
|
25. Leland Mink
|
10,000
|
|
|
|
|
|
|
26. Donald Nelson
|
108,000
|
|
|
|
|
|
|
27. Ronald C. Yanke
|
108,000
|
|
|
|
|
|
|
28. John H. Walker
|
16,667
|
|
|
|
|
|
|
29. William David Batiuk
|
17,000
|
|
|
|
|
|
|
Total GEO shares issued
|
6,079,836
|
|
SCHEDULE 3.5 (b)
Geo Warrants
1,612,000 warrants issued 3-15-02 to Vulcan Power Company
at an exercise price of $0.75, for an exercise period of 2 years following Closing
- 59 -
SCHEDULE 3.11
Geo has loaned $55,000 to Vulcan for use in its operations
pending the completion of the Proposed Transactions. It acquired the loaned
funds through loans from shareholders. See Schedules 3.14 and 3.25.
- 60 -
SCHEDULE 3.14
Contracts
|
1.
|
US Cobalt agreement dated March 28,
2002
|
|
|
|
|
2.
|
Vulcan Agreement dated December 2, 2002
|
|
|
|
|
3.
|
Crank Lease dated June 28, 2002
|
|
|
|
|
4.
|
Jensen Lease dated July 11, 2002
|
|
|
|
|
5.
|
Jensen Investments Lease dated July
12, 2002
|
|
|
|
|
6.
|
Loan to Vulcan dated July 18, 2003,
as amended from time to time.
|
|
|
|
|
7.
|
Loan to Vulcan dated September 16, 2003,
as amended from time to time.
|
|
|
|
|
8.
|
Kunz Loans to Geo dated July 20 and
September 16, 2003, as amended from time to time.
|
|
|
|
|
9.
|
Kitz Loan to Geo dated September 16,
2003, as amended from time to time.
|
|
|
|
|
10.
|
Glaspey Loan to Geo dated September
16, 2003, as amended from time to time.
|
|
|
|
|
11.
|
Larkin Loan to Geo dated September 16,
2003, as amended from time to time.
|
|
|
|
|
12.
|
Bourgeois Loan to Geo dated September
16, 2003, as amended from time to time.
|
Other Agreements
US Department of Energy Geothermal Resource Exploration and
Development (GREDII) Grant. Instrument Number: DE-FC04-2002AL68299 Awarded September
29, 2002
First Associates Investment Inc. letter of engagement for
financing dated November 21, 2002, which has been terminated
First Associates Investments Inc. sponsorship agreement dated
February 21, 2003
- 61 -
SCHEDULE 3.19
Geo Labor Matters
Douglas J. Glaspey is paid a monthly Management Fee of $3,000.00
under a verbal agreement, on a month-to-month basis. No set term.
- 62 -
SCHEDULE 3.22
|
Bank Accounts
|
|
|
|
|
|
|
|
Wells Fargo Bank
|
Business Checking Account
|
Acct.#8902377269
|
|
818 E. Boise Ave.
|
|
|
|
Boise, Idaho 83706
|
|
|
Signature Authority: Douglas J. Glaspey, Daniel Kunz
No other accounts, certificates of deposit, debt, equity securities or other
investments.
- 63 -
SCHEDULE 3.24
Agreements
1.
The
Vulcan Property
On March 5, 2002, Geo entered into a letter agreement with
Vulcan, pursuant to which Geo agreed to acquire from Vulcan all of the real
property, personal property and permits that comprised Vulcan’s interest
in the Raft River Project. On December 3, 2002, the letter agreement was replaced
by the Vulcan Agreement which provides for the acquisition of 100% interest
in the Vulcan Property by Geo on the following basis:
|
1.
|
To earn a 20% interest in the Vulcan
Property, Geo must pay to or for the benefit of Vulcan US$250,000. As
at December 31, 2002, this amount has been paid and Geo has acquired the
20% interest.
|
|
|
|
|
2.
|
The issue to Vulcan of 1,895,000 Geo
Shares and 1,612,000 Geo Warrants. These securities have been issued.
|
|
|
|
|
3.
|
Geo must cause a publicly traded company
to acquire all of the Geo Shares and Geo Warrants, including those issued
to Vulcan, in exchange for securities of the public company which will
result in Vulcan owning 14% of the issued shares and, through the exercise
of warrants, having the right to acquire, an additional 11% of the shares
for a total of 25% of the fully diluted issued and outstanding shares
of the public company as of the date of acquisition of the Geo Shares
and Geo Warrants by the publicly traded company.
The completion of the Acquisition and Consolidation
will satisfy this requirement. Upon completion of the Proposed Transactions
Vulcan will hold 1,755,156 Consolidated USC Shares (approximately 11%
of the outstanding Consolidated USC Shares) and 2,420,217 Exchange Warrants,
which if exercised, would result in Vulcan owing 25% of the common stock
of the Resulting Issuer. The securities to be issued to Vulcan will be
subject to escrow. See “The Resulting Issuer - Securities of the
Resulting Issuer held in Escrow, in Pool or Subject to Hold Restrictions”.
|
|
|
|
|
4.
|
Geo must complete a US$200,000 work
program on the Vulcan Property within 12 months of the Closing.
|
|
|
|
|
5.
|
Geo was to pay to Vulcan US$100,000 on
the Closing. As at April 28, 2003, $50,000 has been paid and Geo will
pay the balance of $50,000 on Closing.
Once all of the foregoing have been satisfied, Geo will
own a 49% interest in the Vulcan Property.
|
|
|
|
|
6.
|
In order to acquire the remaining 51%
of the Vulcan Property, Geo must pay to Vulcan US$250,000 on or before
receipt of project financing for completion of a power plant.
|
All of the issued and outstanding Geo Shares as at March 5,
2002, other than those held by Vulcan, have been pledged to Vulcan as security
for Geo’s obligations to Vulcan under the Vulcan Agreement. The pledge
will be released on Closing.
- 64 -
Prior to entering into the Vulcan Agreement Vulcan was at
arm’s length to Geo. The consideration payable to Vulcan under the Vulcan
Agreement was determined through arm’s length negotiations.
Under the Vulcan Agreement, Geo has agreed to acquire 100%
of the 560 acres of fee land comprising the Vulcan Property. The Vulcan Property
includes both surface and geothermal rights and consists of two units. The first
unit has a total area of 240 acres and is comprised of the E half of the SE
quarter of Section 22, plus the SW quarter of Section 23 (Township 15 South,
Range 26 East). Three geothermal wells (RRGE-1, RRGP-4 and RRGP-5) are located
on this parcel. The second unit has a total area of 320 acres, and is comprised
of the S half of the NW quarter, the S half of the NE quarter, and the entire
SE quarter of Section 25 (Township 15 South, Range 26 East). Three additional
geothermal wells (RRGE-3, RRGI-6 and RRGI-7) are located on this parcel.
As the Vulcan Property is fee land that would be owned by
the project developer, there is no royalty burden. A preliminary title report
was prepared in March 2002 for the Vulcan Property by Land Title and Escrow,
Inc. of Burley, Idaho, which includes a Commitment For Title Insurance from
the Commonwealth Land Title Insurance Company.
2.
Crank
Lease
The Crank Lease covers 160 acres of geothermal rights, with
right of ingress and egress. The lease is comprised of the NE quarter of Section
23 (Township 15 South, Range 26 East) and includes the use of an existing geothermal
well RRGE-2. The lease has a primary term of 5 years and is extended indefinitely
so long as production from the well or from the geothermal field is maintained.
Geo does not control access to the surface lands related to the Crank Lease
except for ingress and egress for removal of the geothermal resource. Advanced
production royalties are payable as follows:
|
•
|
On signing: US$5,000 (paid)
|
|
|
|
|
•
|
Year 2: US$10,000
|
|
|
|
|
•
|
Year 3: US$10,000
|
|
|
|
|
•
|
Year 4: US$15,000
|
|
|
|
|
•
|
Year 5: US$15,000
|
The advanced production royalties can be credited toward production
royalties owed. During commercial production, there is a minimum annual production
royalty of US$18,000.
Janice Crank is at arm’s length to Geo. The consideration
payable by Geo under the Crank Lease was determined through arm’s length
negotiation.
- 65 -
3.
Jensen
Lease
The Jensen Lease covers 2,954.75 acres of geothermal rights
only. It is contiguous with the Vulcan Property and the Crank Lease with land
parcels located in Sections 24, 25, 26, 27, 33, and 34 (Township 15 South, Range
26 East), and in Sections 18, 19, 20, 29, and 30 (Township 15 South, Range 27
East). Geo does not control surface access to all lands covered by the Jensen
Lease.
The lease has a primary term of 10 years and is extended indefinitely
so long as production from the geothermal field is maintained. Lease payments
are as follows:
|
•
|
Years 1-5: US$2.50 per acre (Year 1 paid on signing)
|
|
|
|
|
•
|
Years 6-10: US$3.00 per acre
|
Sergene Jensen is at arm’s length to Geo. The consideration
payable by Geo under the Jensen Lease was determined through arm’s length
negotiation.
4.
Jensen
Investments Lease
The Jensen Investments Lease covers 44.5 acres of surface
and geothermal rights in Section 35, Township 15 South, Range 26 East, and is
contiguous with the Jensen Lease. The lease has a primary term of 10 years and
is extended indefinitely so long as production from the geothermal field is
maintained. Lease payments are as follows:
|
•
|
Years 1-5: US$2.50 per acre (Year 1 paid on signing)
|
|
|
|
|
•
|
Years 6-10: US$3.00 per acre
|
The three leased parcels, (Crank Lease, Jensen Lease and Jensen
Investments Lease) have production royalties payable under the following terms:
|
(a)
|
Energy produced, saved and used for
the generation of electric power, which is then sold by lessee, has a
royalty of ten percent (10%) of the net proceeds.
|
|
|
|
|
(b)
|
Energy produced, saved and sold by lessee,
then used by the purchaser for generation of electric power, has a royalty
of ten percent (10%) of the market value.
|
|
|
|
|
(c)
|
Energy produced, which is used for any
purpose other than the generation of electricity has a royalty of five
percent (5%) of the gross proceeds.
|
Jensen Investments Inc. is at arm’s length to Geo. The
consideration payable by Geo under the Jensen Investment Lease was determined
through arm’s length negotiation.
Geo has not determined whether any wetlands exist on these
properties nor whether any of the properties are in a flood plain. All buildings,
infrastructure, and geothermal wells located on the properties are offered in
an “as is” condition and no warranty or representation is made as
to their ultimate use.
Additional lease agreements are under negotiation with Reid
Stewart.
- 66 -
SCHEDULE 3.25
Related Party Transactions
Vulcan Power Company (shareholder) – Vulcan Agreement
dated December 3, 2002
Douglas J. Glaspey, Daniel Kunz, and Paul Larkin (shareholders,
directors and officers) are also shareholders, directors, and officers of US
Cobalt Inc.
Douglas J. Glaspey is paid a monthly management fee of $3,000.00
on a month-to-month basis.
Daniel Kunz loaned $35,000 to Geo to fund Geo’s loans
to Vulcan on July 20 and September 16, 2003.
Kevin Kitz loaned $8,000 to Geo to fund Geo’s loans to
Vulcan on September 16, 2003.
Doug Glaspey loaned $5,000 to Geo to fund Geo’s loans
to Vulcan on September 16, 2003.
Paul Larkin loaned $5,000 to Geo to fund Geo’s loans to
Vulcan on September 16, 2003.
Ron Bourgeois loaned $2,000 to Geo to fund Geo’s loans
to Vulcan on September 16, 2003.
- 67 -
SCHEDULE 4.5
Environmental Matters
There are currently no permits or government authorization
held by Geo pursuant to the Environmental Laws.
No environmental audits or similar reports.
To our knowledge, there are no Environmental Claims pending.
There are two known underground diesel storage tanks on the
property installed by the US Department of Energy. The size and condition of
these tanks are not known.
There may be Transite (a cement-asbestos composite) pipe buried
on the properties which was installed by the US Department of Energy.
U.S. COBALT INC.
STOCK OPTION PLAN
Dated April 2, 2003
TABLE OF CONTENTS
STOCK OPTION PLAN
ARTICLE 1
DEFINITIONS AND INTERPRETATION
1.1
Definitions
As used herein, unless anything in the subject matter or context is inconsistent
therewith, the following terms shall have the meanings set forth below:
|
|
(a)
|
“Administrator” means, initially, the secretary
of the Corporation and thereafter shall mean such director or other senior
officer or employee of the Corporation as may be designated as Administrator
by the Board from time to time;
|
|
|
|
|
|
|
(b)
|
“affiliate” has the meaning ascribed thereto
in the
Securities Act
(British Columbia);
|
|
|
|
|
|
|
(c)
|
“associate” has the meaning ascribed thereto
in the
Securities Act
(British Columbia);
|
|
|
|
|
|
|
(d)
|
“Award Date” means the date on which the
Board grants and announces a particular Option;
|
|
|
|
|
|
|
(e)
|
“Board” means the board of directors of
the Corporation;
|
|
|
|
|
|
|
(f)
|
“Consultant” means an individual, other than an Employee or
a Director of the Corporation, that:
|
|
|
|
|
|
|
|
(i)
|
is engaged to provide on a
bona fide
basis
consulting, technical, management or other services to the Corporation
or to an affiliate of the Corporation, other than services provided in
relation to a distribution and, in the case of senior-listed issuers only,
includes an Investor Consultant;
|
|
|
|
|
|
|
|
|
(ii)
|
provides the services under a written contract between
the Corporation or the affiliate and the individual or a Consultant Company
or Consultant Partnership of the individual; and
|
|
|
|
|
|
|
|
|
(iii)
|
in the reasonable opinion of the Corporation, spends
or will spend a significant amount of time and attention on the affairs
and business of the Corporation or an affiliate of the Corporation;
|
|
|
|
|
|
|
|
(g)
|
“Consultant Company” means, for an individual
consultant, a company which the individual consultant is an employee or
shareholder;
|
|
|
|
|
|
|
(h)
|
“Consultant Partnership” means, for an individual consultant,
a partnership of which the individual consultant is an employee or partner;
|
- 2 -
|
|
(i)
|
“Corporation” means U.S. Cobalt Inc.;
|
|
|
|
|
|
|
(j)
|
“Director” means any individual holding
the office of director or officer of the Corporation or an affiliate of
the Corporation;
|
|
|
|
|
|
|
(k)
|
“Employee” means an individual regularly
employed on a full-time or part-time basis by the Corporation or an affiliate
of the Corporation or an individual who, on a regular basis and for a
minimum amount of time per week, performs services for the Corporation
or an affiliate of the Corporation normally provided by an employee other
than a Director, and for the purpose of the Plan includes a Management
Company Employee;
|
|
|
|
|
|
|
(l)
|
“Exchange” means the TSX Venture Exchange
or, if the Shares are no longer listed for trading on the TSX Venture
Exchange, such other exchange or quotation system on which the Shares
are listed or quoted for trading;
|
|
|
|
|
|
|
(m)
|
“Exercise Notice” means the notice respecting
the exercise of an Option in the form set out as Schedule “B”
hereto, duly executed by the Option Holder;
|
|
|
|
|
|
|
(n)
|
“Exercise Period” means the period during
which a particular Option may be exercised and is the period from and
including the Award Date through to and including the Expiry Date, subject
to the provisions of the Plan relating to vesting of Options;
|
|
|
|
|
|
|
(o)
|
“Exercise Price” means the price at which
an Option may be exercised as determined in accordance with paragraph
3.5;
|
|
|
|
|
|
|
(p)
|
“Expiry Date” means the date determined
in accordance with paragraph 3.3 and after which a particular Option cannot
be exercised;
|
|
|
|
|
|
|
(q)
|
“insider” has meaning ascribed thereto
in the
Securities Act
(British Columbia);
|
|
|
|
|
|
|
(r)
|
“Investor Consultant” means, a Consultant
that is a registrant or provides to the Corporation or an affiliate of
the Corporation services provided by a registrant or services that include
investor relations activities;
|
|
|
|
|
|
|
(s)
|
“Management Company Employee” means an
individual employed by a person providing management services to the Corporation,
which are required for the ongoing successful operation of the business
enterprise of the Corporation, but excluding a person involved in investor
relations activities;
|
|
|
|
|
|
|
(t)
|
“Option” means an option to acquire Shares,
awarded to a Director, Employee or Consultant pursuant to the Plan;
|
|
|
|
|
|
|
(u)
|
“Option Certificate” means the certificate,
substantially in the form set out as Schedule “A” hereto, evidencing
an Option;
|
- 3 -
|
|
(v)
|
“Option Holder” means a Director, Employee
or Consultant, or a former Director, Employee or Consultant, who holds
an unexercised and unexpired Option or, where applicable, the Personal
Representative of such person;
|
|
|
|
|
|
|
(w)
|
“Plan” means this U.S. Cobalt Inc. stock option plan;
|
|
|
|
|
|
|
(x)
|
“Personal Representative” means:
|
|
|
|
|
|
|
|
(i)
|
in the case of a deceased Option Holder, the executor
or administrator of the deceased duly appointed by a court or public authority
having jurisdiction to do so; and
|
|
|
|
|
|
|
|
|
(ii)
|
in the case of an Option Holder who for any reason
is unable to manage his or her affairs, the person entitled by law to
act on behalf of such Option Holder; and
|
|
|
|
|
|
|
|
(y)
|
“Share” or “Shares” means, as
the case may be, one or more common shares without par value in the capital
of the Corporation.
|
1.2
Choice of Law
The Plan is established under and the provisions of the Plan
shall be interpreted and construed in accordance with the laws of the Province
of British Columbia.
1.3
Headings
The headings used herein are for convenience only and are
not to affect the interpretation of the Plan.
ARTICLE 2
PURPOSE AND PARTICIPATION
2.1
Purpose
The purpose of the Plan is to provide the Corporation with
a share-related mechanism to attract, retain and motivate qualified Directors,
Employees and Consultants, to reward such of those Directors, Employees and
Consultants as may be awarded Options under the Plan by the Board from time
to time for their contributions toward the long term goals of the Corporation
and to enable and encourage such Directors, Employees and Consultants to acquire
Shares as long term investments.
2.2
Participation
The Board shall, from time to time, in its sole discretion
determine those Directors, Employees and Consultants, if any, to whom Options
are to be awarded. If the Board elects to award an Option to a Director, the
Board shall, in its sole discretion but subject to paragraph 3.2, determine
the number of Shares to be acquired on the exercise of such Option. If the Board
elects to award an Option to
- 4 -
an Employee or Consultant, the number of Shares to be acquired
on the exercise of such Option shall be determined by the Board in its sole
discretion, and in so doing the Board may take into account the following criteria:
|
|
(a)
|
the remuneration paid to the Employee or Consultant
as at the Award Date in relation to the total remuneration payable by
the Corporation to all of its Employees and Consultants as at the Award
Date;
|
|
|
|
|
|
|
(b)
|
the length of time that the Employee or Consultant
has been employed or engaged by the Corporation; and
|
|
|
|
|
|
|
(c)
|
the quality of work performed by the Employee or
Consultant.
|
2.3
Notification of Award
Following the approval by the Board of the awarding of an
Option, the Administrator shall notify the Option Holder in writing of the award
and shall enclose with such notice the Option Certificate representing the Option
so awarded.
2.4
Copy
of Plan
Each Option Holder, concurrently with the notice of the award
of the Option, shall be provided with a copy of the Plan. A copy of any amendment
to the Plan shall be promptly provided by the Administrator to each Option Holder.
2.5
Limitation
The Plan does not give any Option Holder that is a Director
the right to serve or continue to serve as a Director of the Corporation nor
does it give any Option Holder that is an Employee or Consultant the right to
be or to continue to be employed or engaged by the Corporation.
ARTICLE 3
TERMS AND CONDITIONS OF OPTIONS
3.1
Board to Allot Shares
The Shares to be issued to Option Holders upon the exercise
of Options shall be allotted and authorized for issuance by the Board prior
to the exercise thereof.
3.2
Number
of Shares
The maximum number of Shares issuable under the Plan, together
with the number of Shares issuable under outstanding options granted otherwise
than under the Plan, shall not exceed 2,200,000 Shares of the Corporation. Additionally,
the Corporation shall not grant Options:
|
|
(a)
|
to any one person in any 12 month period which could, when exercised,
result in the issuance of Shares exceeding five percent (5%) of the issued
and outstanding Shares of the Corporation; or
|
- 5 -
|
|
(b)
|
to all Consultants or to all persons employed by
the Corporation who perform investor relations activities which could,
when exercised, result in the issuance of Shares exceeding two percent
(2%) of the issued and outstanding Shares of the Corporation.
|
If any Option expires or otherwise terminates for any reason
without having been exercised in full, the number of Shares in respect of which
Option expired or terminated shall again be available for the purposes of the
Plan.
3.3
Term
of Option
Subject to paragraph 3.4, the Expiry Date of an Option shall be the date so fixed by the Board at the time the particular Option is awarded, provided that such date shall not be later than:
|
|
(a)
|
for so long as the Corporation is classified as a
Tier 2 issuer or equivalent designation of the Exchange, the fifth anniversary
of the later of the date the Shares are listed on the Exchange and the
Award Date of the Option; or
|
|
|
|
|
|
|
(b)
|
if the classification of the Corporation on the
Exchange is upgraded from that of a Tier 2 issuer, or the Shares are no
longer listed on the Exchange, the tenth anniversary of the Award Date
of the Option.
|
3.4
Termination of Option
An Option Holder may, subject to any vesting provisions applicable
to Options hereunder, exercise an Option in whole or in part at any time or
from time to time during the Exercise Period provided that, with respect to
the exercise of part of an Option, the Board may at any time and from time to
time fix a minimum or maximum number of Shares in respect of which an Option
Holder may exercise part of any Option held by such Option Holder. Any Option
or part thereof not exercised within the Exercise Period shall terminate and
become null, void and of no effect as of 5:00 p.m. local time in Vancouver,
British Columbia, on the Expiry Date. The Expiry Date of an Option shall be
the earlier of the date so fixed by the Board at the time the Option is awarded
and the date established, if applicable, in sub-paragraphs (a) to (c) below:
|
|
(a)
|
Death
In the event that the Option Holder should die while
he or she is still a Director (if he or she holds his or her Option as
Director) or Employee or Consultant (if he or she holds his or her Option
as Employee or Consultant), the Expiry Date shall be six (6) months from
the date of death of the Option Holder; or
|
|
|
|
|
|
|
(b)
|
Ceasing to Hold Office
In the event that the Option Holder holds his or her
Option as Director of the Corporation and such Option Holder ceases to
be a Director of the Corporation other than by reason of death, the Expiry
Date of the Option shall be the 90th day following the date the Option
Holder ceases to be a Director of the Corporation unless the Option Holder
ceases to be a Director of the Corporation but continues to
|
- 6 -
|
|
|
be engaged by the Corporation as an Employee, in
which case the Expiry Date shall remain unchanged, or unless the Option
Holder ceases to be a Director of the Corporation as a result of:
|
|
|
|
|
|
|
|
|
(i)
|
ceasing to meet the qualifications set forth in the
Company Act
(British Columbia); or
|
|
|
|
|
|
|
|
|
(ii)
|
a resolution having been passed by the members of
the Corporation pursuant to the
Company Act
(British Columbia);
or
|
|
|
|
|
|
|
|
|
(iii)
|
by order of the British Columbia Registrar of Companies,
British Columbia Securities Commission, the Exchange or any other regulatory
body having jurisdiction to so order, in which case the Expiry Date shall
be the date the Option Holder ceases to be a Director of the Corporation.
|
|
|
|
|
|
|
(c)
|
Ceasing to be Employed or a Consultant
In the event that the Option Holder holds his or her
Option as an Employee or Consultant of the Corporation and such Option
Holder ceases to be an Employee or Consultant of the Corporation other
than by reason of death, the Expiry Date of the Option shall be the 90th
day following the date the Option Holder ceases to be an Employee or Consultant
of the Corporation unless the Option Holder ceases to be an Employee or
Consultant of the Corporation as a result of:
|
|
|
|
|
|
|
|
(i)
|
termination for cause or, in the case of a Consultant,
breach of contract; or
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(ii)
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by order of the British Columbia Registrar of Companies,
British Columbia Securities Commission, the Exchange or any other regulatory
body having jurisdiction to so order,
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in which case the Expiry Date shall be the date the Option Holder ceases
to be an Employee or Consultant of the Corporation.
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Notwithstanding the foregoing, the Expiry Date for
Options granted to any Option Holder engaged in investor relations activities
shall be the 30th day following the date that the Option Holder ceases
to be employed in such capacity.
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3.5
Exercise
Price
The Exercise Price shall be that price per share, as determined
by the Board in its sole discretion and announced as of the Award Date, at which
an Option Holder may purchase a Share upon the exercise of an Option, and shall
not be less than the closing price of the Corporation’s Shares traded through
the facilities of the Exchange (or, if the Shares are no longer listed for trading
on the Exchange, then such other exchange or quotation system on which the Shares
are listed or quoted for trading) on the day preceding the Award Date, less
any discount permitted by the Exchange, or such other price as may be required
by the Exchange.
- 7 -
3.6
Assignment
of Options
Options may not be assigned or transferred, provided however
that the Personal Representative of an Option Holder may, to the extent permitted
by paragraph 4.1, exercise the Option within the Exercise Period.
3.7
Adjustments
If prior to the complete exercise of any Option the Shares
are consolidated, subdivided, converted, exchanged or reclassified or in any
way substituted for (collectively the “Event”), an Option, to the
extent that it has not been exercised, shall be adjusted by the Board in accordance
with such Event in the manner the Board deems appropriate. No fractional Shares
shall be issued upon the exercise of any Option and accordingly, if as a result
of the Event, an Option Holder would become entitled to a fractional Share,
such Option Holder shall have the right to purchase only the next lowest whole
number of Shares and no payment or other adjustment will be made with respect
to the fractional interest so disregarded. Additionally, no lots of Shares in
an amount less than 500 Shares shall be issued upon the exercise of the Option
unless such amount of Shares represents the balance left to be exercised under
the Option.
3.8
Vesting
All Options granted pursuant to the Plan will be subject to
such vesting requirements as may be prescribed by the Exchange, if applicable,
or as may be imposed by the Board. At any time the Corporation is classified
as a Tier 2 company or equivalent designation on the Exchange, all Options granted
pursuant to the Plan must contain conditions relating to the vesting of the
right to exercise an Option granted to any Option Holder, which will provide
that the right to purchase Shares under the Option may not be exercised any
earlier than the following times (although the Board may impose longer vesting
periods):
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Number of Shares
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Date After Which the Shares may be
Purchased
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One Quarter
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Award Date
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One Quarter
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Six Months Following Award Date
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One Quarter
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One Year Following Award Date
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One Quarter
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Eighteen Months Following Award Date
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The Option Certificate representing any such Option will disclose
any vesting conditions.
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ARTICLE 4
EXERCISE OF OPTION
4.1
Exercise of Option
An Option may be exercised only by the Option Holder or the
Personal Representative of any Option Holder. An Option Holder or the Personal
Representative of any Option Holder may exercise an Option in whole or in part
at any time or from time to time during the Exercise Period up to 5:00 p.m.
local time in Vancouver, British Columbia on the Expiry Date by delivering to
the Administrator an Exercise Notice, the applicable Option Certificate and
a certified cheque or bank draft payable to the Corporation in an amount equal
to the aggregate Exercise Price of the Shares to be purchased pursuant to the
exercise of the Option.
4.2
Issue of Share Certificates
As soon as practicable following the receipt of the Exercise
Notice, the Administrator shall cause to be delivered to the Option Holder a
certificate for the Shares purchased pursuant to the exercise of the Option.
If the number of Shares purchased is less than the number of Shares subject
to the Option Certificate surrendered, the Administrator shall forward a new
Option Certificate to the Option Holder concurrently with delivery of the aforesaid
share certificate for the balance of Shares available under the Option.
4.3
Condition of Issue
The issue of Shares by the Corporation pursuant to the exercise
of an Option is subject to this Plan and compliance with the laws, rules and
regulations of all regulatory bodies applicable to the issuance and distribution
of such Shares and to the listing requirements of any stock exchange or exchanges
on which the Shares may be listed. The Option Holder agrees to comply with all
such laws, rules and regulations and agrees to furnish to the Corporation any
information, report and/or undertakings required to comply with and to fully
co-operate with the Corporation in complying with such laws, rules and regulations.
ARTICLE 5
ADMINISTRATION
5.1
Administration
The Plan shall be administered by the Administrator on the
instructions of the Board. The Board may make, amend and repeal at any time
and from time to time such regulations not inconsistent with the Plan as it
may deem necessary or advisable for the proper administration and operation
of the Plan and such regulations shall form part of the Plan. The Board may
delegate to the Administrator or any Director, officer or employee of the Corporation
such administrative duties and powers as it may see fit.
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5.2
Interpretation
The interpretation by the Board of any of the provisions of
the Plan and any determination by it pursuant thereto shall be final and conclusive
and shall not be subject to any dispute by any Option Holder. No member of the
Board or any person acting pursuant to authority delegated by it hereunder shall
be liable for any action or determination in connection with the Plan made or
taken in good faith and each member of the Board and each such person shall
be entitled to indemnification with respect to any such action or determination
in the manner provided for by the Corporation.
ARTICLE 6
AMENDMENT AND TERMINATION
6.1
Prospective
Amendment
Subject to applicable regulatory and, if required by any relevant
law, rule or regulation applicable to the Plan, to shareholder approval, the
Board may from time to time amend the Plan and the terms and conditions of any
Option thereafter to be granted and, without limiting the generality of the
foregoing, may make such amendment for the purpose of meeting any changes in
any relevant law, rule or regulation applicable to the Plan, any Option or the
Shares or for any other purpose which may be permitted by all relevant laws,
rules and regulations provided always that any such amendment shall not alter
the terms or conditions of any Option or impair any right of any Option Holder
pursuant to any Option awarded prior to such amendment. Notwithstanding the
foregoing, the Board may, subject to section 3.8 hereof, amend the terms upon
which each Option shall become vested with respect to Shares without further
approval of the Exchange, other regulatory bodies having authority over the
Company or the Plan or the shareholders.
6.2
Retrospective
Amendment
Subject to applicable regulatory and, if required by any relevant
law, rule or regulation applicable to the Plan, to shareholder approval, the
Board may from time to time retrospectively amend the Plan and, with the consent
of the affected Option Holders, retrospectively amend the terms and conditions
of any Options which have been previously granted. For greater certainty, the
policies of the Exchange currently require that disinterested shareholder approval
be obtained for any reduction in the Exercise Price of any Option held by an
insider of the Corporation.
6.3
Termination
The Board may terminate the Plan at any time provided that
such termination shall not alter the terms or conditions of any Option or impair
any right of any Option Holder pursuant to any Option awarded prior to the date
of such termination. Notwithstanding the termination of the Plan, the Corporation,
Options awarded under the Plan, Option Holders and Shares issuable under Options
awarded under the Plan shall continue to be governed by the provisions of the
Plan.
- 10 -
6.4
Agreement
The Corporation and every person to whom an Option is awarded
hereunder shall be bound by and subject to the terms and conditions of the Plan.
ARTICLE 7
APPROVALS REQUIRED FOR PLAN
7.1
Approvals
Required for Plan
Prior to its implementation by the Corporation, the Plan is
subject to approval by the Exchange.
7.2
Substantive
Amendments to Plan
Any substantive amendments to the Plan shall be subject to
the Corporation first obtaining the approvals of:
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(a)
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the shareholders or disinterested shareholders,
as the case may be, of the Corporation at general meeting where required
by the rules and policies of any stock exchange on which the Shares may
be listed for trading; and
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(b)
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any stock exchange on which the Shares may be listed
for trading.
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SCHEDULE “A”
U.S. COBALT INC.
STOCK OPTION PLAN OPTION CERTIFICATE
This Certificate is issued pursuant to the provisions of U.S.
Cobalt Inc. (the “Corporation”) Stock Option Plan (the “Plan”)
and evidences that ____________ (the “Holder”) is the holder of an
option (the “Option”) to purchase up to ______________ common shares
(the “Shares”) in the capital stock of the Corporation at a purchase
price of $ ______________ per Share. Subject to the provisions of the Plan:
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(a)
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the Award Date of this Option is _______________________; and
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(b)
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the Expiry Date of this Option is ________________________.
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The right to purchase Shares under the Option will vest in
the Holder in increments over the term of the Option as follows:
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Date
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Cumulative Number of Shares which may be Purchased
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This Option may be exercised in accordance with its terms
at any time and from time to time from and including the Award Date through
to and including up to 5:00 local time in Vancouver, British Columbia on the
Expiry Date, by delivery to the Administrator of the Plan an Exercise Notice,
in the form provided in the Plan, together with this Certificate and a certified
cheque or bank draft payable to “U.S. Cobalt Inc.” in an amount equal
to the aggregate of the Exercise Price of the Shares in respect of which the
Option is being exercised.
This Certificate and the Option evidenced hereby is not assignable,
transferable or negotiable and is subject to the detailed terms and conditions
contained in the Plan. This Certificate is issued for convenience only and in
the case of any dispute with regard to any matter in respect hereof, the provisions
of the Plan and the records of the Corporation shall prevail.
The foregoing Option has been awarded this ______________
day of ___________________.
Without prior written consent of the TSX Venture Exchange
and compliance with all applicable securities legislation, the securities represented
by this certificate and the shares issuable upon the exercise thereof my not
be sold, transferred, hypothecated or otherwise traded on or through the facilities
of the TSX Venture Exchange or otherwise in Canada or to or for the benefit
of a Canadian resident until _____________________ .
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U.S. COBALT INC.
Per: ____________________________
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SCHEDULE “B”
EXERCISE NOTICE
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TO:
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The Administrator, Stock Option Plan
U.S. Cobalt Inc.
•
[ADDRESS]
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1.
Exercise
of Option
The undersigned hereby irrevocably gives notice, pursuant
to the U.S. Cobalt Inc. (the “Corporation”) Stock Option Plan (the
“Plan”), of the exercise of the Option to acquire and hereby subscribes
for (cross out inapplicable item):
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(a)
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all of the Shares; or
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(b)
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_________________ of the Shares which are the subject of the option certificate
attached hereto.
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Calculation of total Exercise Price:
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(a)
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number of Shares to be acquired on exercise:
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shares
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(b)
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times the Exercise Price per Share:
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$
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Total Exercise Price, as enclosed herewith:
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$
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The undersigned tenders herewith a cheque or bank draft (circle one) in the
amount of $___________ , payable to “U.S. Cobalt Inc.” in an amount
equal to the total Exercise Price of the Shares, as calculated above, and directs
the Corporation to issue the share certificate evidencing the Shares in the
name of the undersigned to be mailed to the undersigned at the following address:
DATED the _____________ day of __________________.
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__________________________________________
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__________________________________________
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Witness
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Signature of Option Holder
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__________________________________________
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__________________________________________
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Name of Witness (Print)
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Name of Option Holder (Print)
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U.S. GEOTHERMAL INC.
(formerly U.S. Cobalt Inc.)
1509 Tyrell Lane, Suite B,
Boise, ID
83706
ITEM 21
The wholly owned subsidiaries of U.S. Geothermal Inc. (GTH) are:
U.S. Cobalt (Colorado) Inc.
U.S. Geothermal (Idaho) Inc., referred to as Geo-Idaho
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement of U.S.
Geothermal Inc. on Form SB-2 of our Auditors' Report, dated June 17, 2004, on
the consolidated balance sheets of U.S. Geothermal Inc. and subsidiaries as
at March 31, 2004 and 2003, and the related consolidated statements of operations,
cash flows, and stockholders' equity for the years ended March 31, 2004 and
2003, and for the period from February 26, 2002 (date of inception) to March
31, 2004.
In addition, we consent to the reference to us under the heading "Interests
Of Named Experts And Counsel" in the Registration Statement.
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Vancouver, Canada
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"Morgan & Company"
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June 30, 2004
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Chartered Accountants
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Tel: (604) 687-5841
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P.O. Box 10007 Pacific Centre
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fax: (604) 687-0075
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Sute 1488 - 700 West Georgia Street
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www.morgan-cas.com
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Vancouver, B.C. V7Y 1A1
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