LEASE AGREEMENT

Exhibit 10.1

LEASE AGREEMENT

This Lease (“ Lease ”) is made and entered into on January 31, 2008 (the “ Effective Date ”), between SIERRA PACIFIC INDUSTRIES, a California corporation (“ Lessor ”), and RENEGY SUSANVILLE, LLC, an Arizona limited liability company (“ Lessee ”).

RECITALS

A. Lessee has acquired from Lessor certain assets located on the Premises (defined below), consisting of a biomass power plant and desires to lease from Lessor the Premises for the purpose of operating such biomass power plant (the “Plant”).

B. Lessor desires to lease Lessee and Lessee desires to lease from Lessor that certain real property, including any improvements not included in the assets comprising the Plant, located at Sunkist Drive, Susanville, California (the “Premises”), and more particularly described in the schedule attached to and made a part of this Lease as Exhibit A .

C. Contemporaneously with the Effective Date, Lessor and Lessee entered into a certain “Option Agreement” wherein Lessor sold to Lessee an option to purchase the Premises pursuant to that Option Agreement.

In consideration of the mutual covenants contained herein, the parties agree as follows:

SECTION ONE
SUBJECT AND PURPOSE

Lessor leases the Premises to Lessee for Lessee’s use only for operation of the Plant and related activities. Lessee shall conduct no business activity on the Premises other than as specifically provided for herein.

SECTION TWO
TERM

Lessor hereby leases the above Premises for a term of five (5) years (the “Term”), commencing on January 31, 2008, and terminating on January 30, 2013, or sooner as provided herein. In the event Lessee elects to exercise its option pursuant to the Option Agreement, this Lease shall terminate and be of no further force and effect as of the closing date of Lessee’s purchase of the Premises.

SECTION THREE
RENT

The total acreage of the Premises is forty (40) acres, and the monthly rental amount shall be the sum of $750/acre. The rent shall be payable in advance on the first day of each month during the Term with no right of claim, offset or any other deduction. The first rent payment pursuant to this Section shall be due January 31, 2008, and all rental payments shall be made to Lessor at the address specified above. Lessee shall pay the rent as specified herein and in Section Four hereof. One hundred percent (100%) of the first twenty four (24) months of rental payments made by Lessee hereunder shall apply to the “Purchase Price” defined under the Option Agreement; provided, however, that on and after the first day following the 24 ^th month of the Term, only fifty percent (50%) of all rental payments made within the first twenty four (24) months and thereafter of the Term shall apply to the Purchase Price. For avoidance of doubt the option price specified in the Option Agreement shall not be similarly reduced.

SECTION FOUR
ADDITIONAL RENT

All taxes, charges, costs and expenses that Lessee assumes or agrees to pay hereunder, together with all interest and penalties that may accrue thereon in the event of the failure of Lessee to pay those items, and all other damages, costs, expenses and sums that Lessor may suffer or incur, or that may become due, by reason of any default of Lessee or failure by Lessee to comply with the terms and conditions of this Lease shall be deemed to be additional rent, and, in the event of nonpayment after expiration of any applicable cure period, Lessor shall have all the rights and remedies as herein provided for failure to pay rent.

SECTION FIVE
ALTERATIONS, ADDITIONS AND IMPROVEMENTS

A. Lessee shall not make or permit to be made any alterations to the Premises without prior written consent of Lessor, which consent will not be unreasonably withheld; provided, however, that Lessee shall not be required to obtain Lessor’s consent for any alterations to the Premises which do not exceed $25,000 individually or $100,000 in the aggregate. If Lessee makes any alterations to the Premises in excess of the amounts set forth herein, the alterations shall not be commenced until five (5) days after Lessee has received written consent to such alterations from the Lessor so that Lessor may post and record any appropriate notice of non-responsibility; provided, however, that if Lessor fails to provide written notice to Lessee of its consent to, or rejection of, such alterations within fifteen (15) days after receiving Lessee’s request, Lessor shall be deemed to have approved the alterations. Alterations shall be performed in a workmanlike manner and shall not weaken or impair the structural strength, or lessen the value, of any improvement on the Premises, or change the purposes for which the improvement, or any part thereof, may be used.

B. Conditions with respect to alterations, additions or improvements are as follows:

(1) Before commencement of any work, all plans and specifications shall be filed with and approved by all governmental departments or authorities having jurisdiction and any public utility company having an interest therein, and all work shall be done in accordance with requirements of all governmental regulations.

(2) Prior to commencement of any work, Lessee shall obtain appropriate additional insurance coverage and pay the amount of any increase in premiums on insurance policies provided for herein because of endorsements to be made covering the risk, and the alterations, additions and improvements, both during and after the course of work.

C. All alterations, additions and improvements on or in the Premises at the commencement of the Term, and that may be erected or installed during the Term, shall become part of the Premises and the sole property of Lessor, except that all moveable trade fixtures installed by Lessee shall be and remain the property of Lessee.

D. Except as otherwise provided herein, Lessor shall not be required or obligated to make any changes, alterations, additions, or improvements in, on, or about the Premises, or any part thereof.

SECTION SIX
REPAIRS

Lessee shall, at all times during the lease and at its own cost and expense, repair, replace and maintain in a good, safe and substantial condition, the Plant, as well as any leased improvements, additions and alterations thereto on the Premises, and shall use all reasonable precaution to prevent waste, damage or injury to the Premises. Lessee hereby waives the provisions of California Civil Code Sections 1941 and 1942 that allow a tenant to make repairs at landlord’s expense.

SECTION SEVEN
TAXES

Lessee shall reimburse Lessor, within thirty (30) days of presentation by Lessor of a statement therefor, for all taxes, assessments or other governmental charges that shall or may during the Term be imposed on, or arise in connection with the use of, the Premises or any part thereof. Lessee shall reimburse Lessor for all taxes assessed in lieu of or in addition to the foregoing under all present or future laws of all governmental authorities whatsoever. Lessee shall have the right to request that Lessor apply for the conversion of any special assessment for local improvements in order to cause the same to be payable in installments and, upon conversion, Lessee shall be obligated to reimburse Lessor only for those installments that may become due during the Term. It is the intention of the parties that the rent herein is net rental, and Lessor shall receive the same free from all taxes reimbursable from Lessee to Lessor.

Upon execution of this Lease, Lessor shall present to Lessee a statement setting forth the amount of such taxes, assessments or other governmental charges which have been prepaid by Lessor for 2008 and 2009 and which are attributable to any time period covered by this Lease, and Lessee shall pay such sum to Lessor with ten (10) days of the beginning of the Term.

SECTION EIGHT
UTILITIES

All applications and connections for necessary utility services on the Premises shall be made in the name of Lessee only, and Lessee shall be solely liable for utility charges as they become due, including those for sewer, water, gas, electricity and telephone services.

SECTION NINE
INSURANCE

A. At all times during the term of this Lease, Lessee shall procure and maintain, at its own expense, all of the following coverage and in the amounts described below:

(1) Regardless of the minimum statutory requirements of the State of California, employer liability coverage under Workers’ Compensation Insurance will have minimum limits of no less than $1,000,000;

(2) Commercial General Liability (CGL) insurance shall be maintained with minimum limits of $2,000,000 each occurrence; $2,000,000 General Aggregate; and $2,000,000 Products/Completed Operations Aggregate. CGL insurance shall be written on ISO occurrence form CG 00 01 or equivalent and shall cover liability arising from premises, operations, independent contractors, products-completed operations, personal injury and advertising injury, and liability assumed under an insured contract (including the tort liability of another assumed in a business contract). Such CGL insurance shall name and include Lessor and Sierra Pacific Holding Company, and all subsidiaries and affiliates of both, as Additional Insureds using ISO additional insured endorsement CG 20 10 11 85 or its equivalent; and

(3) A fire insurance policy in an amount of not less than One Million Five Hundred Thousand Dollars ($1,500,000) including an ordinance or law endorsement, debris removal (with pollutant clean-up) endorsement, and a lost rent endorsement for the benefit of Lessor. Such insurance shall insure against loss or damage by fire of all buildings, improvements, and equipment on the Premises, including alterations, additions, and improvements with Lessor named as loss payee.

B. All policies and coverage procured by Lessee as required herein (collectively, “Policies”) shall include a separation of insureds clause. The Policies shall not include a deductible in excess of $10,000.00 per loss without Lessor’s written approval. The Policies shall include a waiver of subrogation and a provision that specifies the Policies are primary to and non-contributory with any insurance held by Lessor and shall be endorsed such that the waiver of subrogation shall not affect its right, or any named additional insured’s right, to recover under such insurance policy.

C. All Policies described shall be procured to the satisfaction of Lessor and shall be underwritten by an insurer acceptable to Lessor (must be rated A-: VII or better in the A.M. Best’s Key Rating Guide and licensed to do business in the State of California or issued as a surplus line by a surplus line broker in the State of California). Prior to taking possession of the Premises, Lessee shall provide Lessor with a certificate of insurance, with Additional Insured Endorsement attached if applicable, evidencing the Policies required herein. If Lessor has other insurance that is applicable to any loss on an excess or contingent basis, the amount of Lessee’s liability under the Policies cannot be reduced by the existence of such other insurance. Such certificate of insurance shall provide that the coverage required herein shall not be cancelled or reduced except by written notice to Lessor, giving at least thirty (30) days prior to the effective date of such cancellation or reduction. In the event the coverage evidenced by any such certificate is cancelled or reduced, Lessee shall procure and furnish to Lessor, before the effective date of such cancellation or reduction, a new certificate conforming to the above requirements. If Lessee has failed for any reason to secure the Policies to the satisfaction of Lessor within thirty (30) days from the Effective Date, or if Lessor has not been furnished a certificate of insurance as aforesaid within thirty (30) days from the Effective Date, then Lessor shall have the right, in addition to any other remedy available to it, to (i) immediately terminate this Lease on oral notice to Lessee or (ii) secure any or all of said Policies and Lessee shall immediately reimburse Lessor for the cost of such Policies upon request by Lessor.

D. All insurance certificates or other evidence of coverage required to be submitted to Lessor pursuant to this Section Nine shall be sent to:

Sierra Pacific Industries
PO Box 496014
Redding, CA 96049
ATTN: Susan Witherspoon

SECTION TEN
SURVEY

A. The parties agree that the Premises shall be surveyed as soon as reasonably practical by a mutually acceptable surveyor, the cost of which shall be paid by Lessor; provided, however, that if Lessee elects not to exercise its option to purchase the Premises during the lease term pursuant to the Option Agreement, Lessee shall pay to Lessor an amount equal to the costs of such survey. The surveyor shall provide Lessor and Lessee with legal descriptions of the Premises, including the two 5-acre option parcels, the 0.5 acre water tower parcel, and the access easement (the “Additional Parcels”) (all as depicted on the aerial photograph set forth in Exhibit B attached hereto and incorporated herein by reference).

B. The parties shall agree on the final form of the survey, which shall delineate the Premises and Additional Parcels, and Lessee shall have the right to object to any matter depicted in the survey, and any update to the survey, which objection shall be made by written notice to Lessor no later than fifteen (15) days after receipt of the survey from surveyor. If Lessee has not objected to the survey within such fifteen (15) day period, Lessee will be deemed to have consented to the survey and all matters set forth therein.

C. All matters in dispute pertaining to the survey which are not mutually resolved by the parties after good faith negotiation shall be resolved between the parties pursuant to final and binding arbitration as set forth in Section Thirty-Seven herein. Lessee shall have the burden in any arbitration proceeding to demonstrate the inaccuracy of the survey.

D. The parties agree that the Lease will be executed prior to a final survey being obtained, and that upon receipt of a final survey from surveyor, which survey shall be agreed to by the parties as set forth herein, Lessor and Lessee shall enter into an amendment to this Lease to provide the final property boundaries, exhibits, and any other modifications, amendments or supplements required as a result of such survey as needed. The final property lines of the Premises shall be adjusted upon receipt of the final survey to reflect Lessee’s lease of exactly 40 acres from Lessor.

SECTION ELEVEN
COMPLIANCE WITH LAWS

Lessee shall, at Lessee’s own cost and expense, comply with all statutes, ordinances, regulations and requirements of all governmental entities, both federal (including the Americans with Disabilities Act) and state and county or municipal, including those requiring capital improvements to the Premises or existing improvements, relating to any use or occupancy of the Premises (and specifically not limited to any particular use and occupancy by Lessee), whether those statutes, ordinances, regulations, and requirements are now in force or are subsequently enacted and regardless of the Term; provided, however, that any such statute, ordinance, regulation or requirement that requires capital improvements to the Premises or existing improvements not based upon Lessee’s use of the Premises shall be the responsibility of Lessor and such improvements shall be diligently completed at Lessor’s sole cost and expense. If any license, permit, or other governmental authorization is required for the lawful use or occupancy of the Premises or any portion of the Premises, then Lessee shall procure and maintain it throughout the Term. The judgment of any court of competent jurisdiction, or the admission by Lessee in a proceeding brought against Lessee by any government entity, that Lessee has violated such statute, ordinance, regulation or requirement shall be conclusive as between Lessor and Lessee and shall constitute grounds for termination of this Lease by Lessor.

SECTION TWELVE
UNLAWFUL OR DANGEROUS ACTIVITY

Lessee shall neither use nor occupy the Premises or any part thereof for any unlawful, disreputable, or ultrahazardous business purpose nor operate or conduct its business in a manner constituting a nuisance of any kind. Lessee shall immediately, on discovery of any unlawful, disreputable or ultrahazardous use, take action to halt such activity.

SECTION THIRTEEN
HAZARDOUS MATERIALS

Lessor and Lessee are bound by the terms of the Agreement for Environmental Conditions, dated November 21, 2007, by and between Lessor and Lessee (“Agreement for Environmental Conditions”), attached hereto as Exhibit C and incorporated herein by reference, with regard to the use and presence of hazardous materials in, on, over or about the Premises or any improvements thereon, compliance with hazardous materials laws, and liability for, and indemnification of, cleanup costs and other penalties.

SECTION FOURTEEN
INDEMNITY

Except as otherwise provided in the Agreement for Environmental Conditions, Lessee shall indemnify, defend and hold harmless the Lessor Indemnitees (as defined below) from and against all claims, liabilities, losses, damages or expenses arising out of or relating to the gross negligence or willful misconduct of Lessee (or Lessee’s employees, agents, representatives, independent contractors, material and equipment suppliers and any other entity or individual for whom Lessee is responsible). This indemnity provision is not intended to and shall not in any way limit the extent of any insurance coverage available to any of the Lessor Indemnitees under any insurance policy purchased and maintained by Lessee (even coverage for any one or any combination of the Lessor Indemnitees’ sole active negligence). “Lessor Indemnitees” shall mean Lessor and Sierra Pacific Holding Company, including their successors and assigns, and each of their respective officers, directors, employees, agents, representatives, subsidiaries and affiliates.

Except as otherwise provided in the Agreement for Environmental Conditions, Lessor shall indemnify, defend and hold harmless Lessee from and against claims, liabilities, losses, damages or expenses arising out of or relating to the gross negligence or willful misconduct of Lessor (or Lessor’s employees, agents, representatives, independent contractors, material and equipment suppliers and any other entity or individual for whom Lessor is responsible).

The indemnity provided herein shall survive the termination of this Lease.

SECTION FIFTEEN
DEFAULT OR BREACH/TERMINATION

Each of the following events shall constitute a default or breach of this Lease by Lessee:

A. If Lessee, or any successor or assignee of Lessee while in possession, shall file a petition in bankruptcy or insolvency or for reorganization under any bankruptcy act, or shall voluntarily take advantage of any such act by answer or otherwise, or shall make an assignment for the benefit of creditors.

B. If involuntary proceedings under any bankruptcy law or insolvency act shall be instituted against Lessee, or if a receiver or trustee shall be appointed of all or substantially all of the property of Lessee, and such proceedings shall not be dismissed or the receivership or trusteeship vacated within thirty (30) days after the institution or appointment.

C. If Lessee shall fail to pay Lessor any rent or additional rent when the rent shall become due and shall not make the payment within fifteen (15) days after written notice thereof by Lessor to Lessee.

D. Except as specifically provided in this Section Fifteen, if Lessee shall fail to perform or comply with any of the conditions of this Lease and if the nonperformance shall continue for a period of thirty (30) days after written notice thereof by Lessor to Lessee or, if the performance cannot be reasonably had within the thirty (30) day period, Lessee shall not in good faith have commenced performance within the thirty (30) day period and shall not diligently proceed to completion of performance.

E. If Lessee shall vacate or abandon the Premises.

F. If this Lease or the estate of Lessee hereunder shall be transferred to or shall pass to or devolve on any other person or party, except in the manner herein permitted.

G. If Lessee fails to take possession of the Premises on the Term commencement date, or within ten (10) days after written notice that the Premises are available for occupancy, if the Term commencement date is not fixed herein or shall be deferred as herein provided.

H. If Lessee fails to obtain and maintain the specified insurance.

Nothwithstanding all of the foregoing and as long as Lessee is not in breach or default of this Lease, Lessee shall have the right to terminate this Lease, without cause, upon thirty (30) days prior written notice to Lessor as along as Lessee has not yet begun to sell power commercially. If Lessee has begun to sell power commercially and as long as Lessee is not in breach or default of this Lease, then Lessee shall have the right to terminate this Lease, without cause, upon thirty (30) days prior written notice to Lessor but in that case Lessee shall have to pay to Lessor, before the end of such 30 day period, a cancellation fee in the amount of six months’ rental payments hereunder.

SECTION SIXTEEN
EFFECT OF DEFAULT

In the event of any default hereunder, as set forth in Section Fifteen, the rights of Lessor shall be as follows:

A. Lessor shall have the right to cancel and terminate this Lease, as well as all of the right, title and interest of Lessee hereunder. On expiration of the time fixed in the notice to terminate the Lease, this Lease and the right, title and interest of Lessee hereunder, shall terminate in the same manner and with the same force and effect, except as to Lessee’s liability, as if the date fixed in the notice of cancellation and termination were the end of the Term. Lessor shall thereupon be entitled to receive from Lessee all damages incurred by Lessor including, without limitation, (1) the worth at the time of award of the unpaid rent which had been earned at the time of termination; (2) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; (3) the worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (4) any other amount reasonably necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom. As used in subclause (1) and (2) above, the “worth at the time of award” shall be computed by allowing interest at the maximum rate then permitted by law. As used in subclause (3) above, the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Board of San Francisco at the time of the award plus one percent (1%).

B. Lessor may elect, but shall not be obligated, to make any payment required of Lessee herein or comply with any agreement, term or condition required hereby to be performed by Lessee, and Lessor shall have the right to enter the Premises for the purpose of correcting or remediating any such default and to remain until the default has been corrected or remedied, but any expenditure for the correction by Lessor shall not be deemed to waive or release the default of Lessee or the right of Lessor to take any action as may be otherwise permissible hereunder in the case of any default.

C. Lessor may reenter the Premises immediately and remove the property and personnel of Lessee, and store the property in a public warehouse or at a place selected by Lessor, at the expense of Lessee. After reentry, Lessor may terminate the lease upon written notice of termination to Lessee. Without the notice, reentry will not terminate the lease. On termination, Lessor may recover from Lessee all damages proximately resulting from the breach, including the cost of recovering the Premises.

D. After reentry, Lessor may relet the Premises or any part thereof for any term without terminating this Lease, at such rent and on such terms as Lessor may choose. Lessor may make alterations and repairs to th