Ground Lease

GROUND LEASE


DATE: Dec. 9, 1995


LESSOR: EMIL B. NOBEL and MARY ANN NOBEL


7859 SHORT ROAD


KLAMATH FALLS OR 97603


LESSEE: NEW EARTH COMPANY


1300 MAIN STREET


KLAMATH FALLS OR 97601


RECITALS


Lessor is the owner of the land described on the attached Exhibit "A" (cross-hatched portion) consisting of approximately 21 acres, together with any appurtenances, and is referred to in this lease as "the Premises." Lessee wishes to construct a building on the Premises for use as an algae processing and storage facility.


The parties therefore agree as follows:


SECTION 1. AGREEMENT TO LEASE


Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the Premises on the terms and conditions set forth below.


SECTION 2. TERM


TERM. The term of this lease shall begin on November 29, 1995. The term shall continue for 25 years from that date to midnight on November 28, 2020. Lessee shall be entitled to renew this Lease for an additional term of 25 years at the rent in effect at the end of the original term. All terms of this lease shall remain in effect in the renewal term, including the escalation in rent set forth below.


SECTION 3. RENT; SECURITY


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3.1 BASIC RENT. Basic rent shall be the sum of $12,000.00 per year. Lessee shall pay basic rent annually in advance on the anniversary of the commencement of this lease each year. It is understood that rent for the first year is paid upon execution of this agreement.


3.2 GENERAL RENT PROVISIONS. All rents shall be payable without deduction or offset to the order of Lessor at the address shown in paragraph 14.2 or at such other address as may be designated from time to time by Lessor. It is the intention of the parties that all rents payable under this lease shall be net to Lessor and that all costs, expenses and obligations during the lease term relating to the premises shall be paid by Lessee.


3.3 ESCALATION. On November 29, 1996, and on the 29th day of November of each succeeding year, there shall be computed any increase in the cost of living based on the "Consumer Price Index -All cities and U.S. Average" (1967-100) hereinafter called the "Index", published by the Bureau of Labor statistics of the U. S. Department of Labor. The Index number entitled "All Items" for the month of January, 1996, shall be the base Index number for purposes of computation. The monthly basic rent set forth in Sub-paragraph (a) hereof shall, in the event of an increase in the cost of living determined as above-mentioned, be increased effective the 29th day of November of each succeeding calendar year during the term of this Lease Agreement wherein there is an increase in said cost of living. The current Index number shall be divided by the base Index number and the result multiplied by the basic monthly rental mentioned above shall be the adjusted monthly rental. Lessor shall, within a reasonable time after determining the appropriate information, with respect to said increase, give Lessee notice of such increase, and Lessor's computation thereof shall be binding and conclusive unless Lessee shall, within fifteen (15) days after the giving of said notice, advise Lessor of any dispute in conjunction therewith. Any dispute between the parties as to such computation shall be determined by a Board of Arbitration with one member selected by Lessor and one member selected by Lessee and one member selected by the selectees of Lessor and Lessee. If publication of the Consumer Price Index shall be discontinued, the parties shall thereafter accept com- parable statistics on the cost of living for the city of Portland as they shall be computed and published by any government agency or by a responsible financial periodical of recognized authority. In the event that any method is not utilizable and does not have an appropriate Index for the given month that is herein involved, computation shall be undertaken in the form of interpolation between given dates that are applicable so that the spirit and intent of this paragraph can be given effect.


SECTION 4. USE OF PREMISES. Lessee shall use and permit the use of the premises only for the construction, maintenance, and operation of an algae processing and storage facility, as well as any agricultural use and wetlands preservation.


SECTION 5. TAXES AND ASSESSMENTS; UTILITIES


5.1 PAYMENT BY LESSEE. Lessee shall pay before delinquency all real and personal property taxes, general and special assessments, and other charges of every description levied on or assessed against the Premises, improvements located on the Premises or personal property or fixtures located on the Premises or in the improvements during the lease term. Lessee shall make all such payments directly to the taxing authority. If any such tax, assessment or charge may be


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paid in installments, Lessee may elect to do so as long as each installment together with interest is paid before it becomes delinquent.


5.2 PRORATIONS. Taxes, assessments and charges for the tax years in which the lease term commences and expires shall be prorated between the parties on a daily basis as of the date of commencement or expiration. If any tax, assessment or charge is payable in installments and an election to so pay has been made with respect to the Premises, Lessee shall pay all installments which fall due during the lease term regardless of whether some installments fall due before or after the lease term.


5.3 RIGHT TO CONTEST. Lessee may contest in good faith the validity or amount of any tax, assessment or charge in accordance with the procedures established by statute or administrative rule for such contest so long as the Premises are not subjected to a11y lien as a result of the contest. Lessee may prosecute such contest in the name of Lessor as Lessor's attorney in fact. All tax contests shall be at the sole expense of Lessee. Any return or rebate from any taxing authority on account of any tax or assessment which was originally paid by Lessee shall be the sole property of the Lessee.


5.4 PROOF OF COMPLIANCE. Lessee shall annually on May 15 of each year furnish to lessor receipts or other proof of payment of all taxes and assessments payable by Lessee during the twelve months immediately preceding such date.


5.5 UTILITIES. Lessee shall pay when due all charges for electricity, natural gas, water, sewage, telephone, refuse collection and all other services or utilities used on or in connection with the Premises. In addition, Lessee shall pay the charges of Klamath: Irrigation District for water supplied the premises and Lessor's adjoining property.


5.6 TAX PENALTY. It. is anticipated that Lessee's use of the subject property shall result in a tax penalty concerning the property's prior Greenbelt status. It is agreed that Lessee shall pay said penalty in full when due and before delinquent.


SECTION 6. INITIAL CONSTRUCTION


LESSEE'S OBLIGATION TO CONSTRUCT. Lessee shall construct a building on the premises designed for use as an algae processing and storage facility. In addition, Lessee shall install a fence separating the premises from the residue of Lessor's property. Further, Lessee shall plant trees in the area of the fence ...