Document:

Exhibit 10.3.38

                            SECOND AMENDMENT TO LEYTE
                       OPTIMIZATION PROJECT BOT AGREEMENT

     THIS SECOND AMENDMENT to LEYTE OPTIMIZATION PROJECT BOT AGREEMENT (this
"Amendment") is made as of April 1, 1996, between PNOC-ENERGY DEVELOPMENT
CORPORATION, a wholly owned subsidiary of the Philippine National Oil Company,
organized and existing under Philippine law ("PNOC-EDC") and ORMAT LEYTE CO.
LTD. a Philippine limited partnership ("Operator").

     A. PNOC-EDC and ORMAT LEYTE CO. LTD., a Philippine Partnership executed
that certain Leyte Optimization Project BOT Agreement dated August 4, 1995 which
has been assigned to the Operator (the "Original Agreement"), concerning the
development and operation of a 49 MW (net) geothermal power production
facilities in Leyte Province, the Philippines. All capitalized terms not defined
herein shall have the meanings given them in the Original Agreement.

     B. PNOC-EDC and Operator each acknowledge that some but not all of the
conditions to "Effectivity" of the Original Agreement set forth in Sections
26.1, 26.2 and 26.3 of the Original Agreement have been fulfilled.

     C. PNOC-EDC and Operator recognize that additional time is needed in order
to fulfill the remaining conditions to Effectivity set forth in Sections 26.1,
26.2 and 26.3 of the Original Agreement.

     D. Section 15.1 of the Original Agreement and its First Amendment provides,
inter alia, that if by the Effectivity Date of April 10, 1996, one or more of
the conditions set forth in Sections 26.1, 26.2 and 26.3 have not been fulfilled
or waived by PNOC-EDC or the Operator, as the case may be, the parties shall
consult in good faith with a view to achieving Effectivity. Furthermore, Section
3.1(a) states that if the Effectivity Date does not occur on or before April 10,
1996, the parties shall discuss and agree on any further extension of the Bid
Security.

     E. PNOC-EDC and Operator wish to amend the Original Agreement and the Bid
Security as more fully set forth in this Amendment.

     NOW THEREFORE, the parties hereto, intending to be legally bound, and to
bind their successors and assigns, agree as follows:

     1. Amendment of Section 3.1(a) of the Original Agreement. Section 3.1(a) of
the Original Agreement is hereby amended to read in its entirety as follows:

     (a) To guarantee the faithful performance by the Operator of its obligation
to completely construct the Power Plant in accordance with the terms and
conditions of this Agreement, within ten (10) days of the Effectivity Date the
Operator shall post and deliver the Construction Performance Security in a form
acceptable to PNOC-EDC in a sum equivalent to One Hundred Dollars (US $100) per
kilowatt (kW) of total Contracted Capacity for all the Plants or its equivalent
in Philippine Pesos or other currencies. Prior to such delivery, the Operator
shall ensure that the Bid Security required under the bid documents shall be
extended until such time the Construction Performance Security shall have been
posted and delivered; provided that, in the event that the Effectivity Date does
not occur on or before April 22, 1996, the parties shall discuss and agree on
any further extension of the Bid Security. PNOC-EDC shall have recourse to the
Construction Performance Security to satisfy the final judgment in an arbitral
proceeding in accordance with Article 21.

     2. Amendment of Section 4.1(a) of the Original Agreement Section 4.1(a) of
the Original Agreement is hereby amended to read in its entirety as follows:

     (a) The Operator shall in good faith use all reasonable efforts to
construct the Power Plant in accordance with the following schedule:

Activity                                      Date
Target Effectivity Date                       April 22, 1996

Ordering of long lead items                   the later of (i) July 1, 1996 or
(turbogenerators)                             (ii) 120 days after the
                                              Effectivity Date

Start of Commissioning Period                 May 1, 1997
of Plants 1, 2 and 3

Start of Commissioning Period                 October 1, 1997
of Plant 4

Scheduled Completion Date                     September 1, 1997
for Plants 1, 2 and 3

Scheduled Completion Date                     January 1, 1998
for Plant 4

Guaranteed Commercial Operation               September 25, 1997
Date for Plants 1, 2 and 3

Guaranteed Commercial Operation               January 25, 1998
Date for Plant 4

                                       2

If the Commercial Operation Date of any Power Plant does not occur on or before
the relevant Guaranteed Commercial Operation Date, the Operator shall be subject
to the penalty provisions set forth in Section 4.11. The Operator, however, may
request for an extension of the relevant milestone dates.

     3. Amendment of Section 15.1(b) of the Original Agreement Section 15.1(b)
of the Original Agreement is hereby amended to read in its entirety as follows:

          (b) If the Effectivity Date has not occurred by April 22, 1996, or
within such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.1 to have been satisfied prior to such date,
if such conditions have not been waived in writing by PNOC-EDC, the parties
shall consult with each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall have the
right to terminate this Agreement by giving written notice to the other party.
Upon such termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid securities,
letters of credit and bank guarantees, the Operator shall reimburse PNOC-EDC for
all costs and expenses incurred by PNOC-EDC as of the date of and in connection
with this Agreement except those of PNOC-EDC related to the preparation of the
request for proposals and the bid evaluation until such termination, and
thereafter, neither party shall have any further liability to the other and this
Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     4. Amendment of Section 15.1(c) of the Original Agreement Section 15.1(c)
of the Original Agreement is hereby amended to read in its entirety as follows:

          (c) If the Effectivity Date has not occurred by April 22, 1996, or
within such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.2 to have been satisfied prior to such date,
if such conditions have not been waived in writing by the Operator, the parties
shall consult each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall have the
right to terminate this Agreement by giving written notice to the other party.
Upon such termination, PNOC-EDC shall return to the Operator all security held
by PNOC-EDC in connection with this Agreement, including any bid securities,
letters of credit and bank guarantees, PNOC-EDC shall reimburse the Operator for
all costs and expenses incurred by the Operator as of the date of and in
connection with this Agreement, and

                                       3

thereafter, neither party shall have any further liability to the other and this
Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     5. Amendment of Section 15.1(d) of the Original Agreement Section 15.1 (d)
of the Original Agreement is hereby amended to read in its entirety as follows:

          (d) If the Effectivity Date has not occurred by April 22, 1996, or
within such longer period as the parties may agree to, due to a failure of the
conditions set forth in Section 26.3 to have been satisfied prior to such date,
if such conditions have not been waived in writing by both parties, the parties
shall consult each other in good faith with the view to achieving the
Effectivity Date. If a mutually acceptable arrangement is not reached and
implemented within fifteen (15) days thereafter, either party shall bear its own
costs and expenses. In the event, however, of the failure of the condition in
Section 26.3(a)(ii) other than for reasons due to adverse economic or political
conditions in the Philippines, and the parties do not waive the fulfillment of
this condition, either party may terminate this Agreement by giving written
notice to the other party, and the Operator shall reimburse PNOC-EDC as of the
date of and in connection with this Agreement except those of PNOC-EDC related
to the preparation of the request for proposals and the bid evaluation until
such termination. Neither party shall have any further liability to the other
and this Agreement shall immediately and automatically become null and void.
Notwithstanding anything to the contrary in this Agreement, this provision shall
become effective upon execution of this Agreement and shall remain effective
until the Effectivity Date.

     6. General Ratification. Except as expressly amended hereby, all the terms
and provisions of the Original Agreement are hereby ratified and confirmed and
remain in full force and effect.

     IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Leyte Optimization Project BOT Agreement as of the date first above written.

PNOC-ENERGY DEVELOPMENT CORPORATION,
a wholly-owned subsidiary of the
Philippine National Oil Company

By: /s/ Nazario C. Vasquez
    ------------------------------
    Name:  Nazario C. Vasquez
    Title: President

                                       4

ORMAT LEYTE CO. LTD.
a Philippine limited partnership

By: /s/ Nessim Forte
    ------------------------------
    Name:  Nessim Forte
    Title: Authorized Representative

                                       5

                             EFFECTIVITY CERTIFICATE

     Reference is made to (i) the Leyte Optimization Project - BOT Agreement
dated August 4, 1995 (the "BOT Agreement") between PNOC Energy Development
Corporation ("PNOC EDC") and Ormat, Inc., and (ii) the Accession Undertaking
dated as of February 15, 1996 between PNOC EDC, Ormat, Inc. and Ormat Leyte Co.
Ltd. (the "Operator"). All capitalized terms used but not defined herein have
the respective meanings assigned to such terms in the BOT Agreement.

     1.   PNOC EDC, does hereby certify, that each of the conditions set forth
          in Section 26.1 (PNOC EDC Conditions on Operator) and Section 26.3(a)
          [Other Conditions] of the BOT Agreement have been satisfied by the
          Operator or waived by PNOC EDC.

     2.   The Operator does hereby certify, that each of the conditions set
          forth in Section 26.2 (Operator Conditions on PNOC EDC) and Section
          26.3(b) [Other Conditions] of the BOT Agreement have been satisfied by
          PNOC-EDC or waived by the Operator.

     3.   The BOT Agreement is hereby declared effective in accordance with its
          terms and the Effectivity Date is hereby declared to be April 30,
          1996.

     4.   Notwithstanding the above Effectivity Date, the milestones and
          commitments of the Operator referred to under Section 4.1 of the BOT
          Agreement remain unchanged.

     IN WITNESS WHEREOF, PNOC EDC and Ormat Leyte Co. Ltd have signed this
certificate as of this 30th day of April, 1996.

                                            PNOC Energy Development Corporation

                                            By:    /s/ Raul S. Manglapus
                                                   -----------------------------
                                            Name:  Raul S. Manglapus
                                            Title: Chairman

                                            Ormat Leyte Co. Ltd.
                                            By:    Orleyte Company
                                            Its:   General Partner

                                            By:    /s/ Nessim J. Forte
                                                   -----------------------------
                                            Name:  Nessim J. Forte
                                            Title: Authorized RepresentativeExhibit 10.4.1

                                     Ormesa
                         BLM Geothermal Resources Lease
                                     CA 966

Form 3200-21
(May 1974)

         UNITED STATES                      Serial Number:  CA 966
         DEPARTMENT OF THE INTERIOR                 USGS - KGRA Determination:
         BUREAU OF LAND MANAGEMENT
                                                    EAST MESA KGRA
         GEOTHERMAL RESOURCES LEASE
         [X] Competitive   [ ] Noncompetitive

In consideration of the terms and conditions contained herein, and the grant
made hereby, this lease is entered into by the UNITED STATES OF AMERICA
(hereinafter called the "Lessor"), acting through the Bureau of Land Management
(hereinafter called the "Bureau") of the Department of the Interior (hereinafter
called the "Department"), and REPUBLIC GEOTHERMAL INC. and CITY OF BURBANK, each
as to an undivided 1/2 interest (hereinafter called the "Lessee").

This Lease is made pursuant to the Geothermal Steam Act of 1970 (84 Stat. 1566;
30 U.S.C. 1001--1025) (hereinafter called "the Act") to be effective on August
1, 1974 (hereinafter called the "effective date"). It is subject to all the
provisions of the Act and to all the terms, conditions, and requirements of (a)
all regulations promulgated by the Secretary of the Interior (hereinafter called
"the Secretary") in existence upon the effective date, specifically including,
but not limited to, 43 CFR Parts 3000 and 3200 and 30 CFR Parts 270 and 271, (b)
all geothermal resources operational orders (hereinafter called "GRO orders")
issued pursuant thereto, all of which are incorporated herein and by reference
made a part hereof, and (c) any regulations hereafter issued by the Secretary
(except those inconsistent with any specific provisions of this lease other than
regulations incorporated herein by reference) all of which shall, be upon their
effective date, incorporated herein and, by reference, made a part hereof.

Sec. 1. GRANT - The Lesser hereby grants and leases to the Lessee the exclusive
right and privilege to drill for, extract, produce, remove, utilize, sell, and
dispose of geothermal steam and associated geothermal resources, (hereinafter
called "geothermal resources"), in or under the following described lands
situated within the County of IMPERIAL, State of California.

------------------------------------------------------- -----------------------------------------------------
National Resource Lands                                 Acquired Lands
T.       ; R.     ;        Meridian                     T.       ; R.     ;        Meridian

                                       2

EAST MESA KGRA
T. 15 S., R. 16 E., SB Mer.
    Sec. 23, E1/2SE1/4;
    Sec. 24, S1/2;
    Sec. 25, All;
    Sec. 26, E1/2NE1/4.

T. 15 S., R. 17 E., SB Mer.
    Sec. 19, S1/2;
    Sec. 20, SW1/4;
    Sec. 29, W1/2;
    Sec. 30, All.

      Total Area        2549.09                         Total Area
------------------------------------------------------- -----------------------------------------------------

Containing 2549.09 acres (hereinafter called the "leased area" or "leased
lands"), together with:

     (a) The nonexclusive right to conduct within the leased area geological and
geophysical exploration in accordance with applicable regulations; and

     (b) The right to construct or erect and to use, operate, and maintain
within the leased area, together with ingress and egress thereupon all wells,
pumps, pipes, pipelines, buildings, plants, sumps, brine pits, reservoirs,
tanks, waterworks, pumping stations, roads, electric power generating plants,
transmission lines, industrial facilities, electric, telegraph or telephone
lines, and such other works and structures and to use so much of the surface of
the lend as may be necessary or reasonably convenient for the production,
utilization, and processing of geothermal resources or to the full enjoyment of
the rights granted by this lease, subject to compliance with applicable laws and
regulations; Provided that, although the use of the leased area for an electric
power generating plant or transmission facilities or a commercial or industrial
facility is authorized hereunder, the location of such facilities and the terms
of occupancy therefor shall be under separate instruments issued under any
applicable laws and regulations; and

         (c) The nonexclusive right to drill potable water wells in accordance
with state water laws within the leased area and to use the water produced
therefrom for operations on the leased lands free of cost, provided that such
drilling and development

                                       3

are conducted in accordance with procedures approved by the Supervisor of the
Geological Survey (hereinafter called "Supervisor"); and

     (d) The right to convert this lease to a mineral lease under the Mineral
Leasing Act of February 25, 1920, as amended, and supplemented (30 U.S.C.
181--287) or under the Mineral Leasing Act for Acquired Lands (30 U.S.C.
351--359), whichever is appropriate, if the leasehold is primarily valuable for
the production of one or more valuable by-products which are leasable under
those statutes, and the lease is incapable of commercial production or
utilization of geothermal steam: Provided that, an application is made therefor
prior to the expiration of the lease extension by reason of by-product
production as hereinafter provided, and subject to all the terms and conditions
of said appropriate Acts. The Lessee is also granted the right to locate mineral
deposits under the mining laws (30 U.S.C. 21-54), which would constitute
by-products if commercial production or utilization of geothermal steam
continued, but such a location to be valid must be completed within ninety (90)
days after the termination of this lease. Any conversion of this lease to a
mineral lease or a mining claim is contingent on the availability of such lands
for this purpose at the time of the conversion. If the lands are withdrawn or
acquired to aid of a function of any Federal Department or agency, the mineral
lease or mining claim shall be subject to such additional terms and conditions
as may be prescribed by such Department or agency for the purpose of making
operations thereon consistent with the purposes for which these lands are
administered; and

     (e) The right without the payment of royalties hereunder, to reinject into
the leased lands geothermal resources and condensates to the extent that such
resources and condensates are not utilized, but their reinjection is necessary
for operations under this lease in the recovering or processing of geothermal
resources. If the Lessee, pursuant to any approved plan, disposes of the
unusable brine and produced waste products into underlying formations, he may do
so without the payment of royalties.

Sec. 2. TERM

     (a) This lease shall be for a primary term of ten (10) years from the
effective date and so long thereafter as geothermal steam is produced or
utilized in commercial quantities but shall in no event continue for more then
forty (40) years after the end of the primary term. However, if at the end of
that forty-year period geothermal steam is being produced or utilized in
commercial quantities, and the leased lands are not needed for other purposes,
the Lessee shall have a preferential right to a renewal of this lease for a
second forty-year term in accordance with such terms and conditions as the
Lessor deems appropriate.

     (b) If actual drilling operations are commenced on the leased lands or
under an approved plan or agreement on behalf of the leased lands prior to the
end of the

                                       4

primary term, and are being diligently prosecuted at the end of the primary
term, this lease shall be extended for five (5) years and so long thereafter,
but not more than thirty-five (35) years, as geothermal steam is produced or
utilized in commercial quantities. If at the end of such extended term
geothermal steam is being produced or utilized in commercial quantities, the
Lessee shall have a preferential right to a renewal for a second term as in (a)
above.

     (c) If the Lessor determines at any time after the primary term that this
lease is incapable of commercial production and utilization of geothermal steam,
but one or more valuable by-products are or can be produced in commercial
quantities, this lease shall be extended for so long as such by-products are
produced in commercial quantities but not for more than five (5) years from the
date of such determination.

Sec. 3. RENTALS AND ROYALTIES

     (a) Annual Rental - For each lease year prior to the commencement of
production of geothermal resources in commercial quantities on the leased lands,
the Lessee shall pay the Lessor on or before the anniversary date of the lease a
rental of $2.00 for each acre or fraction thereof.

     (b) Escalating Rental - Beginning with the sixth lease year and for each
year thereafter until the lease year beginning on or after the commencement of
production of geothermal resources in commercial quantities, the Lessee shall
pay on or before the anniversary date of the lease an escalated rental in an
amount per acre or fraction thereof equal to the rental per acre for the
preceding year and an additional sum of one (1) dollar per acre or fraction
thereof. If the lease is extended beyond ten (10) years for reasons other than
the commencement of production of geothermal resources in commercial quantities,
the rental for the eleventh year and for each lease year thereafter until the
lease year beginning on or after the commencement of such production will be the
amount of rental for the tenth lease year. If any expenditures are made in any
lease year for diligent exploration on the leased lands in excess of the minimum
required expenditures for that year, the excess may be credited against any
rentals in excess of $6.00 per acre or fraction thereof due the Lessor for that
or any future year.

     (c) Royalty - On or before the last day of the calendar month after the
month of commencement of production in commercial quantities of geothermal
resources and thereafter on a monthly basis, the Lessee shall pay to the Lessor:

          (1) A royalty of 10 percent on the amount or value of steam, or any
other form of heat or other associated energy produced, processed, removed,
sold, or utilized from this lease or reasonably susceptible to sale or
utilization by the Lessee.

                                       5

          (2) A royalty of 5 percent of the value of any by-product derived from
production under this lease, produced, processed, removed, sold, or utilized
from this lease or reasonably susceptible of sale or utilization by the Lessee,
except that as to any by-product which is a mineral named in Sec. 1 of the
Mineral Leasing Act of February 25, 1920, as amended, (30 U.S.C. 181), the rate
of royalty for such mineral shall be the same as that provided in that statute
and the maximum rate of royalty for such mineral shall not exceed the maximum
royalty applicable under that statute.

          (3) A royalty of 5 percent of the value of commercially demineralized
water which has been produced from the leased lands, and has been sold or
utilized by the Lessee or is reasonably susceptible of sale or utilization by
the Lessee. In no event shall the Lessee pay to the Lessor, for the lease year
beginning on or after the commencement of production in commercial quantities on
the leased lands or any subsequent lease year, a royalty of less than two (2)
dollars per acre or fraction thereof. If royalty paid on production during the
lease year has not satisfied this requirement, the Lessee shall pay the
difference on or before the expiration date of the lease year for which it is
paid.

     (d) Waiver and Suspension of Rental and Royalties - Rentals or royalties
may be waived, suspended, or reduced pursuant to the applicable regulations on
the entire leasehold or any portion thereof in the interest of conservation or
for the purpose of encouraging the greatest ultimate recovery of geothermal
resources if the Lessor determines that it is necessary to do so to promote such
development, or because the lease cannot be successfully operated under the
terms fixed herein.

     (e) Undivided Fractional Interests - Where the interest of the Lessor in
the geothermal resources underlying any tract or tracts described in Sec. 1 is
an undivided fractional interest, the rentals and royalties payable on account
of each such tract shall be in the same proportion to the rentals and royalties
provided in this lease as the individual fractional interest of the Lessor in
the geothermal resources underlying such tract is to the full fee interest.

     (f) Readjustments - Rentals and royalties hereunder may be readjusted in
accordance with the Act and regulations to rates not in excess of the rates
provided therein, and at not less than twenty (20) year intervals beginning
thirty-five (35) years after the date geothermal steam is produced from the
lease as determined by the Supervisor.

Sec. 4. PAYMENTS - It is expressly understood that the Secretary may establish
the values and minimum values of geothermal resources to compute royalties in
accordance with the applicable regulations. Unless otherwise directed by the
Secretary, all payments to the Lessor will be made as required by the
regulations. If there is no well on the leased

                                        6

lands capable of producing geothermal resources in commercial quantities, the
failure to pay rental on or before the anniversary date shall cause the lease to
terminate by operation of law except as provided by Sec. 3244.2 of the
regulations. If the time for payment falls on a day on which the proper office
to receive payment is closed, payment shall be deemed to be made on time if made
on the next official working day.

Sec. 5. BONDS - The Lessee shall file with the Authorized Officer of the Bureau
(hereinafter called the "Authorized Officer") shall maintain at all times the
bonds required under the regulations to be furnished as a condition to the
issuance of this lease or prior to entry on the leased lands in the amounts
established by the Lessor and to furnish such additional bonds or security as
may be required by the Lessor upon entry on the lands or after operations or
production have begun.

Sec. 6. WELLS

     (a) The Lessee shall drill and produce all wells necessary to protect the
leased land from drainage by operations on lands not the property of the Lessor,
or other lands of the Lessor leased at a lower royalty rate, or on lands as to
which royalties and rentals are paid into different funds from those into which
royalties under this lease are paid. However, in lieu of any part of such
drilling and production, with the consent of the Supervisor, the Lessee may
compensate the Lessor in full each month for the estimated loss of royalty
through drainage in the amount determined by said Supervisor.

     (b) At the Lessee's election, and with the approval of the Supervisor, the
Lessee shall drill and produce other wells in conformity with any system of well
spacing or production allotments affecting the field or area in which the leased
lands are situated, which is authorized by applicable law.

     (c) After due notice in writing, the Lessee shall diligently drill and
produce such wells as the Supervisor shall require so that the leased lands may
be properly and timely developed and for the production of geothermal steam and
its by-products, including commercially demineralized water for beneficial uses
in accordance with applicable state laws. However, the Supervisor may waive or
modify the requirements of this subparagraph (c) in the interest of conservation
of natural resources or for economic feasibility or other reasons satisfactory
to him. If the products or by-products of geothermal production from wells
drilled on this lease are susceptible of producing commercially demineralized
water for beneficial uses, and a program therefor is not initiated with due
diligence, the Lessor may at its option elect to take such products or
by-products and the Lessee shall deliver all or any portion thereof to the
Lessor at any point in the Lessee's geothermal gathering or disposal system
without cost to the Lessee, if the Lessee's activities, under the lease, would
not be impaired and such delivery would otherwise be consistent with field and
operational requirements. The retention of this

                                       7

option by the Lessor shall in no way relieve the Lessee from the duty of
producing commercially demineralized water where required to do so by the
Lessor, except when the option is being exercised and then only with respect to
wells where it is being exercised, or limit the Lessor's right to take any
action under Sec. 25 to enforce that requirement.

Sec. 7. INSPECTION - The Lessee shall keep open at all reasonable times for the
inspection of any duly authorized representative of the Lessor the leased lands
and all wells, improvements, machinery, and fixtures thereon and all production
reports, maps, records, books, and accounts relative to operations under the
lease, and well logs, surveys, or investigations of the leased lands.

Sec. 8. CONDUCT OF OPERATIONS - The Lessee shall conduct all operations under
this lease in a workmanlike manner and in accordance with all applicable
statutes, regulations, and GRO orders, and all other appropriate directives of
the Lessor to prevent bodily injury, danger to life or health, or property
damage, and to avoid the waste of resources, and shall comply with all
requirements which are set forth in 43 CFR Group 3200, including, but not
limited to, Sub-part 3204, or which may be prescribed by the Lessor pursuant to
the regulations, and with the special stipulations which are attached to the
lease, all of which are specifically incorporated into this lease. A breach of
any term of this lease, including the stipulations attached hereto, will be
subject to all the provisions of this lease with respect to remedies in case of
default. Where any stipulation is inconsistent with a regular provision of this
lease, the stipulation shall govern.

Sec. 9. INDEMNIFICATION

     (a) The Lessee shall be liable to the Lessor for any damage suffered by the
Lessor in any way arising from or connected with the Lessee's activities and
operations conducted pursuant to this lease, except where damage is caused by
employees of the Lessor acting within the scope of their authority.

     (b) The Lessee shall indemnify and hold harmless the Lessor from all claims
arising from or connected with the Lessee's activities and operations under this
lease.

     (c) In any case where liability without fault is imposed on the Lessee
pursuant to this section, and the damages involved were caused by the action of
a third party, the rules of subrogation shall apply in accordance with the law
of the jurisdiction where the damage occurred.

Sec. 10. CONTRACTS FOR SALE OR DISPOSAL OF PRODUCTS - The Lessee shall file with
the Supervisor not later than thirty (30) days after the effective date thereof
any

                                        8

contract, or evidence of other arrangement for the sale or disposal of
geothermal resources.

Sec. 11. ASSIGNMENT OF LEASE OR INTEREST THEREIN - Within ninety (90) days from
the date of execution thereof, the Lessee shall file for approval by the
Authorized Officer any instruments of transfer made of this lease or of any
interest therein, including assignments of record title and working or other
interests.

Sec. 12. REPORTS AND OTHER INFORMATION - At such times and in such form as the
Lessor may prescribe, the Lessee shall comply with all reporting requirements of
the geothermal resources leasing, operating, and unit regulations and shall
submit quarterly reports containing the data which it has collected through the
monitoring of air, land, and water quality and all other data pertaining to the
effect on the environment by operations under the lease. The Lessee shall also
comply with such other reporting requirements as may be imposed by the
Authorized Officer or the Supervisor. The Lessor may release to the general
public any reports, maps, or other information submitted by the Lessee except
geologic and geophysical interpretations, maps, or data subject to 30 CFR 270.79
or unless the Lessee shall designate that information as proprietary and the
Supervisor or the Authorized Officer shall approve that designation.

Sec. 13. DILIGENT EXPLORATION - In the manner required by the regulations, the
Lessee shall diligently explore the leased lands for geothermal resources until
there is production in commercial quantities applicable to this lease. After the
fifth year of the primary term the Lessee shall make at least the minimum
expenditures required to qualify the operations on the leased lands as diligent
exploration under the regulations.

Sec. 14. PROTECTION OF THE ENVIRONMENT (LAND, AIR AND WATER) AND IMPROVEMENTS -
The Lessee shall take all mitigating actions required by the Lessor to prevent:
(a) soil erosion or damage to crops or other vegetative cover on Federal or
non-Federal lands in the vicinity; (b) the pollution of land, air, or water; (c)
land subsidence, seismic activity, or noise emissions; (d) damage to aesthetic
and recreational values; (e) damage to fish or wildlife or their habitats; (f)
damage to or removal of improvements owned by the United States or other
parties; or (g) damage to or destruction or loss of fossils, historic or
prehistoric ruins, or artifacts. Prior to the termination of bond liability or
at any other time when required and to the extent deemed necessary by the
Lessor, the Lessee shall reclaim all surface disturbances as required, remove or
cover all debris or solid waste, and, so far as possible, repair the offsite and
onsite damage caused by his activity or activities incidental thereto, and
return access roads or trails and the leased lands to an acceptable condition
including the removal of structures, if required. The Supervisor or the
Authorized Officer shall prescribe the steps to be taken by Lessee to protect
the surface and the environment and for the restoration of the leased lands and
other lands affected by operations on the leased lands and

                                        9

improvements thereon, whether or not the improvements are owned by the United
States. Timber or mineral materials may be obtained only on terms and conditions
imposed by the Authorized Officer.

Sec. 15. WASTE - The Lessee shall use all reasonable precautions to prevent
waste of natural resources end energy, including geothermal resources, or of any
minerals, and to prevent the communication of water or brine zones with any oil,
gas, fresh water, or other gas or water bearing formations or zones which would
threaten destruction or damage to such deposits. The Lessee shell monitor noise,
air, and water quality conditions in accordance with any orders of the
Supervisor.

Sec. 16. MEASUREMENTS - The Lessee shall gauge or otherwise measure all
production, sales, or utilization of geothermal resources and shall record the
same accurately in records as required by the Supervisor. Reports on production,
sales, or utilization of geothermal resources shall be submitted in accordance
with the terms of this lease and the regulations.

Sec. 17. RESERVATIONS TO LESSOR - All rights in the leased area not granted to
the Lessee by this lease are hereby reserved to the Lessor. Without limiting the
generality of the foregoing such reserved rights include:

     (a) Disposal - The right to sell or otherwise dispose of the surface of the
leased lands or any resource in the leased lands under existing laws, or laws
hereafter enacted, subject to the rights of the Lessee under this lease;

     (b) Rights-of-way - The right to authorize geological and geophysical
explorations on the leased lands which do not interfere with or endanger actual
operations under this lease, and the right to grant such easements or
rights-of-way for joint or several use upon, through or in the leased area for
steam lines and other public or private purposes which do not interfere with or
endanger actual operations or facilities constructed under this lease;

     (c) Mineral Rights - The ownership of and the right to extract oil,
hydrocarbon gas, and helium from all geothermal steam and associated geothermal
resources produced from the leased lands;

     (d) Casing - The right to acquire the well and casing at the fair market
value of the casing where the Lessee finds only potable water, and such water is
not required in lease operations; and

     (e) Measurements - The right to measure geothermal resources and to sample
any production thereof.

                                       10

Sec. 18. ANTIQUITIES AND OBJECTS OF HISTORIC VALUE - The Lessee shall
immediately bring to the attention of the Authorized Officer any antiquities or
other objects of historic or scientific interest, including but not limited to
historic or prehistoric ruins, fossils, or artifacts discovered as a result of
operations under this lease, and shall leave such discoveries intact. Failure to
comply with any of the terms and conditions imposed by the Authorized Officer
with regard to the preservation of antiquities may constitute a violation of the
Antiquities Act (16 U.S.C. 431-433). Prior to operations, the Lessee shall
furnish to the Authorized Officer a certified statement that either no
archaeological values exist or that they may exist on the leased lands to the
best of the of the Lessee's knowledge and belief and that they might be impaired
by geothermal operations. If the Lessee furnishes a statement that
archaeological values may exist where the land is to be disturbed or occupied,
the Lessee will engage a qualified archaeologist, acceptable to the Authorized
Officer, to survey and salvage, in advance of any operations, such
archaeological values on the lands involved. The responsibility for the cost for
the certificate, survey, and salvage will be borne by the Lessee, and such
salvaged property shall remain the property of the Lessor or the surface owner.

Sec. 19. DIRECTIONAL DRILLING - A directional well drilled under the leased area
from a surface location on nearby land not covered by the lease shall be deemed
to have the same affect for all purposes of this lease as a well drilled from a
surface location on the leased area. In such circumstances, drilling shall be
considered to have been commenced on the nearby land for the purposes of this
lease, and production of geothermal resources from the leased area through any
directional well located on nearby land, or drilling or reworking of any such
directional well shall be considered production or drilling or reworking
operations (as the case may be) on the leased area for all purposes of this
lease. Nothing contained in this section shall be construed as granting to the
Lessee any right in any land outside the leased area.

Sec. 20. OVERRIDING ROYALTIES - The Lessee shall not create overriding royalties
of less than one-quarter (1/4) of one percent of the value of output nor in
excess of 50 percent of the rate of royalty due to the Lessor specified in Sec.
3 of this lease except as otherwise authorized by the regulations. The Lessee
expressly agrees that the creation of any overriding royalty which does not
provide for a prorated reduction of all overriding royalties so that the
aggregate rate of royalties does not exceed the maximum rate permissible under
this section, or the failure to suspend an overriding royalty during any period
when the royalties due to the Lessor have been suspended pursuant to the terms
of this lease, shall constitute a violation of the lease terms.

Sec. 21. READJUSTMENT OF TERMS AND CONDITIONS - The terms and conditions of this
lease other then those related to rentals and royalties may be readjusted in
accordance with the Act at not less than ten-year intervals beginning ten (10)
years

                                       11

after the date geothermal steam is produced from the leased premises as
determined by the Supervisor.

Sec. 22. COOPERATIVE OR UNIT PLAN - The Lessee agrees that it will on its own,
or at the request of the Lessor where it is determined to be necessary for the
conservation of the resource or to prevent the waste of the resource, subscribe
to and operate under any reasonable cooperative or unit plan for the development
and operation of the, area, field, or pool, or part thereof embracing the lands
subject to this lease as the Secretary may determine to be practicable and
necessary or advisable in the interest of conservation. In the event the leased
lands are included within a unit, the terms of this lease shall be deemed to be
modified to conform to such unit agreement. Where any provision of a cooperative
or unit plan of development which has been approved by the Secretary, and which
by its terms affects the leased area or any part thereof, is inconsistent with a
provision of this lease, the provisions of such cooperative or unit plan shall
govern.

Sec. 23. RELINQUISHMENT OF LEASE - The Lessee may relinquish this entire lease
or any officially designated subdivision of the leased area in accordance with
the regulations by filing in the proper BLM office a written relinquishment, in
triplicate, which shall be effective as of the data of filing. No relinquishment
of this lease or any portion of the leased area shall relieve the Lessee or its
surety from any liability for breach of any obligation of this lease, including
the obligation to make payment of all accrued rentals and royalties and to place
all wells in the leased lands to be relinquished in condition for suspension or
abandonment, and to protect or restore substantially the surface or subsurface
resources in a manner satisfactory to the Lessor.

Sec. 24. REMOVAL OF PROPERTY ON TERMINATION OR EXPIRATION OF LEASE

     (a) Upon the termination or expiration of this lease in whole or in part,
or the relinquishment of the lease in whole or in part, as herein provided, the
Lessee shall within a period of ninety (90) days (or such longer period as the
Supervisor may authorize because of adverse climatic conditions) thereafter
remove from the leased lands, no longer subject to the lease all structures,
machinery, equipment, tools, and materials in accordance with applicable
regulations and orders of the Supervisor. However, the Lessee shall, for a
period of not more then six (6) months, continue to maintain any such property
needed in the relinquished area, as determined by the Supervisor, for producing
wells or for drilling or producing geothermal resources on other leases.

     (b) Any structures, machinery, equipment, tools, appliances, and materials,
subject to removal by the Lessee, as provided above, which are allowed to remain
on the leased lands shall become the property of the Lessor on expiration of the
90-day period or any extension of that period which may be granted by the
Supervisor. If the Supervisor

                                       12

directs the Lessee to remove such property, the Lessee shall do so at its own
expense, or if it fails to do so within a reasonable period, the Lessor may do
so at the Lessee's expense.

Sec. 25. REMEDIES IN CASE OF DEFAULT

     (a) Whenever the Lessee fails to comply with any of the provisions of the
Act, or the terms and stipulations of this lease, or of the regulations issued
under the Act, or of any order issued pursuant to those regulations, and that
default shall continue for a period of thirty (30) days after service of notice
by the Lessor, the Lessor may (1) suspend operations until the requested action
is taken to correct the noncompliance, or (2) cancel the lease in accordance
with Sec. 12 of the Act (30 U.S.C. 1011). However, the 30-day notice provision
applicable to this lease under Sec. 12 of the Act shall also apply as a
prerequisite to the institution of any legal proceedings by the Lessor to cancel
this lease while it is in a producing status. Nothing in this subsection shall
be construed to apply to, or require any notice with respect to any legal action
instituted by the Lessor other than an action to cancel the lease pursuant to
Sec. 12 of the Act.

     (b) Whenever the Lessee fails to comply with any of the provisions of the
Act, or of this lease, or the regulations, or of any GRO Orders, or other
orders, and immediate action is required, the Lessor without waiting for action
by the Lessee may enter on the leased lends and take such measures as it may
deem necessary to correct the failure, including a suspension of operations or
production, all at the expense of the Lessee.

     (c) A waiver of any particular violation of the provisions of the Act, or
of this lease, or of any regulations promulgated by the Secretary under the Act,
shall not prevent the cancellation of this lease or the exercise of any other
remedy or remedies under paragraphs (a) and (b) of this section by reason of any
other such violation, or for the same violation occurring at any other time.

     (d) Nothing herein shall limit or effect the Lessee's right to a hearing
and appeal as provided in Sec. 12 of the Act and in the regulations promulgated
thereunder.

     (e) Upon cancellation, the Lessee shall remove all property in accordance
with Sec. 24 hereof, and shall restore the leased lands in a manner acceptable
to the Lessor or as may be otherwise required by the Lessor.

Sec. 26. HEIRS AND SUCCESSORS IN INTEREST - Each obligation hereunder shall
extend to and be binding upon, and every benefit hereof shall inure to, the
heirs, executors, administrators, successors, or assigns, of the respective
parties hereto.

                                       13

Sec. 27. UNLAWFUL INTEREST - No Member of, or Delegate to Congress, or Resident
Commissioner, after his election or appointment, either before or after he has
qualified, and during his continuance in office, and no officer, agent, or
employee of the Department shall be admitted to any share or part in this lease
or derive any benefit that may arise therefrom; and the provisions of Sec. 3741
of the Revised Statutes (41 U.S.C. Sec. 22), as amended, and Sections 431, 432,
and 433 of Title 18 of the United States Code, relating to contracts made or
entered into, or accepted by or on behalf of the United States, form a part of
this lease so far as the same may be applicable.

Sec. 28. MONOPOLY AND FAIR PRICES - The Lessor reserves full power and authority
to protect the public interest by promulgating and enforcing all orders
necessary to insure the sale of the production from the leased lands at
reasonable prices, to prevent monopoly, and to safeguard the public interest.

Sec. 29. EQUAL OPPORTUNITY CLAUSE - The Lessee agrees that, during the
performance of this contract:

     (1) The Lessee will not discriminate against any employee or applicant for
employment because of race, color, religion, sex, or national origin. The Lessee
will take affirmative action to ensure that applicants are employed, and that
employees are treated during employment, without regard to their race, color,
religion, sex, or national origin. Such action shall include, but not be limited
to the following: employment, upgrading, demotion, or transfer; recruitment or
recruitment advertising, layoff or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The Lessee
agrees to post in conspicuous places, available to employees and applicants for
employment, notices to be provided by the Lessor setting forth the provisions of
this Equal Opportunity clause.

     (2) The Lessee will, in all solicitations or advertisements for employees
placed by or on behalf of the Lessee, state that all qualified applicants will
receive consideration for employment without regard to race, color, religion,
sex, or national origin.

     (3) The Lessee will send to each labor union or representative of workers
with which Lessee has a collective bargaining agreement or other contract or
understanding, a notice, to be provided by the Lessor, advising the labor union
or workers' representative of the Lessee's commitments under this Equal
Opportunity clause, and shall post copies of the notice in conspicuous places
available to employees and applicants for employment.

                                       14

     (4) The Lessee will comply with all provisions of Executive Order No. 11246
of September 24, 1965, as amended, and of the rules, regulations, and relevant
orders of the Secretary of Labor.

     (5) The Lessee will furnish all Information and reports required by
Executive Order No. 11246 of September 24, 1965, as amended, and by the rules,
regulations, and orders of the Secretary of Labor, or pursuant thereto, and will
permit access to its books, records, and accounts by the Secretary of the
Interior and the Secretary of Labor for purposes of investigation to ascertain
compliance with such rules, regulations, and orders.

     (6) In the event of the Lessee's noncompliance with the Equal Opportunity
clause of this lease or with any of said rules, regulations, or orders, this
lease may be canceled, terminated or suspended in whole or in part and the
Lessee may be declared ineligible for further Federal Government contracts or
leases in accordance with procedures authorized in Executive Order No. 11246 of
September 24, 1965, as amended, and such other sanctions as may be imposed and
remedies invoked as provided in Executive Order No. 11246 of September 24, 1965,
as amended, or by rule, regulation, or order of the Secretary of Labor, or as
otherwise provided by law.

     (7) The Lessee will include the provisions of Paragraphs (1) through (7) of
this Section (29) in every contract, subcontract or purchase order unless
exempted by rules, regulations, or orders of the Secretary of Labor Issued
pursuant to Section 204 of Executive Order No. 11246 of September 24, 1965. as
amended, so that such provisions will be binding upon each contractor,
subcontractor, or subcontract, or purchase order as the Secretary may direct as
a means of enforcing such provisions including sanctions for noncompliance;
provided, however, that in the event the Lessee becomes involved in, or is
threatened with, litigation with a contractor, subcontractor, or vendor as a
result of such direction by the Secretary, the Lessee may request the Lessor to
enter into such litigation to protect the interests of the Lessor.

Sec. 30. CERTIFICATION OF NONSEGREGATED FACILITIES - By entering into this
lease, the Lessee certifies that it does not and will not maintain or provide
for its employees any segregated facilities at any of its establishments, and
that it does not and will not permit its employees to perform their services at
any location, under its control, where segregated facilities are maintained. The
Lessee agrees that a breech of this certification is a violation of the Equal
Opportunity clause of this lease. As used in this certification, the term
"segregated facilities" means, but is not limited to, any waiting rooms, work
areas, rest rooms and wash rooms, or restaurants or other eating areas, time
clocks, or locker rooms, and other storage or dressing rooms, parking lots,
drinking fountains, recreation or entertainment areas, transportation, and
housing facilities provided for employees which are segregated by explicit
directive, or are in fact segregated on the basis of race, color, religion, or
national origin because of habit, local

                                       15

custom, or otherwise. Lessee further agrees that (except where it has obtained
identical certifications from proposed contractors and subcontractors for
specific time periods) it will obtain identical certifications from proposed
contractors and subcontractors prior to the award of contracts or subcontracts
exceeding $10,000 which are not exempt from the provisions of the Equal
Opportunity clause; that it will retain such certifications in its files; and
that it will forward the following certification to such proposed contractors
and subcontractors (except where the proposed contractor or subcontractor has
submitted identical certifications for specific time periods); it will notify
prospective contractors and subcontractors of requirement for certification of
nonsegregated facilities. A Certification of Nonsegregated Facilities, as
required by the May 9, 1967 Order (32 F.R. 7439, May 19, 1967) on Elimination of
Segregated Facilities, by the Secretary of Labor, must be submitted prior to the
award of a contract or subcontract exceeding $10,000 which is not exempt from
the provisions of the Equal Opportunity clause. The certification may be
submitted either for each contract and subcontract or for all contracts and
subcontracts during a period (i.e., quarterly, semiannually, or annually).

Sec. 31. SPECIAL STIPULATIONS - (stipulations, if any, are attached hereto and
made a part hereof)

Attachment "A"

ATTEST:

/s/ Evelyn L. Haley
------------------------------------
Evelyn L. Haley, City Clerk

In witness whereof the parties have executed his lease.

Lessee:

REPUBLIC GEOTHERMAL, INC.

BY:

/s/ Timothy M. Evans
------------------------------------
Timothy M. Evans

                                       16

CITY OF BURBANK, A MUNICIPAL CORP.

BY: /s/ Joseph N. Baker
   ---------------------------------
Joseph N. Baker, City Manager

July 1, 1974
[SEAL]

THE UNITED STATES OF AMERICA, Lessor:

BY: /s/ Indecipherable
   ---------------------------------
Chief, Branch of Lands and Minerals Operations,
Division of Technical Services
Sacramento, California  95825

July 10, 1975

                                       17

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