EXHIBIT 10.1

 

  STWA, Inc.
  735 State Street, Suite 500
  Santa Barbara, CA 93101
  Toll Free +1(877) USA-STWA
  Main +1(805) 845-3581
  Fax +1(805) 845-4377
  Web www.stwa.com
     
  Lease Agreement No.     TBD

 

 

EQUIPMENT LEASE/OPTION TO PURCHASE AGREEMENT

 

THIS EQUIPMENT LEASE/OPTION TO PURCHASE AGREEMENT (the "Lease") is made effective the day of July 15, 2014 ("Effective Date")

 

BETWEEN:

 

Save The World Air, Inc.

(the "Lessor")

- and -

Kinder Morgan Crude & Condensate LLC

("Kinder Morgan")

collectively, the "Parties" or individually, a "Party")

 

RECITALS

 

WHEREAS Kinder Morgan operates a high pressure oil pipeline and related facilities and the Lessor has developed certain technology known as "Applied Oil Technology™ (AOT™) ("Technology");

 

AND WHEREAS Kinder Morgan wishes to lease and test the effectiveness of Lessor's Technology and Equipment (as described below);

 

AND WHEREAS the Lessor is prepared to lease the Equipment to Kinder Morgan on the terms and conditions set forth in this Lease, which includes an option for Kinder Morgan to purchase the Equipment during or upon termination of the Initial Term or Extended Term, if any (defined below).

 

NOW, THEREFORE in consideration of the covenants set forth below and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by the Parties, the Parties agree, as follows:

 

1.Equipment Leased.

 

The Lessor hereby leases, non-exclusively, to Kinder Morgan and Kinder Morgan leases from the Lessor the equipment, along with the equipment attached thereto or contained therein as specified in Schedule A attached to this Lease and made a part hereof (the "Equipment"), together with all parts, components, accessories, replacements, substitutions, additions and improvements now or in the future attached to or forming a part thereof.

 

 

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2.Delivery, Installation, Data Collection and Maintenance of the Equipment.

 

A.The Lessor, at Lessor's expense, shall deliver the Equipment to Kinder Morgan at a location designated by Kinder Morgan by a date no later than December 31, 2014. This date may be extended by mutual written consent of the Parties.

 

B.Installation shall be performed by and at the expense of Kinder Morgan in a professional and workmanlike manner in conformance with all recommendations of Lessor, and in compliance with good construction and engineering practices.

 

C.The Lessor shall provide Kinder Morgan with instructional service in the installation and operation of the Equipment.

 

D.Any alterations or modifications to the Equipment may be made only upon consultation with and written approval by the Lessor, which approval shall not be unreasonably withheld.

 

E.Kinder Morgan, at its expense, shall keep and maintain the Equipment in good working order and repair. In the event the Equipment, during the Term hereof, is lost, damaged, destroyed, in whole or in part, or stolen, Kinder Morgan shall pay to Lessor the replacement cost of the Equipment, and the obligations of this Lease shall end.

 

F.All repairs and maintenance of the Equipment shall be performed promptly by Kinder Morgan. Kinder Morgan shall supply labor, at Kinder Morgan's cost, and all materials shall be provided by Lessor, at Lessor's cost. Lessor shall provide Kinder Morgan with a designated person to assist in Kinder Morgan's repairs and maintenance of the Equipment.

 

G.Data acquisition will be collaborative and transparent between Lessor and Kinder Morgan, including, but is not limited to data described in Schedule C. All data collected will be subject to mutually binding confidentiality and nondisclosure agreements. Subject to Section 4 of that certain Mutual Confidentiality Agreement between the Parties of even date herewith data cannot be shared or released to any outside entity (other than Lessor or Kinder Morgan) or third party without the written consent of both Parties.

 

H.Lessor or Kinder Morgan may, from time to time, make changes, alterations, modifications or improvements to the Equipment ("Improvements"). Any such Improvements will be the sole intellectual property of Lessor. Kinder Morgan may not make any Improvements to the Equipment without the express written consent of Lessor.

 

3.Term and Lease Payment.

 

3.1The term of this Lease of Equipment shall be for a period of four (4) months (the "Initial Term"), commencing on the date of successful completion of the Equipment's direct current power supply is successfully energized by Lessor following installation pre-startup safety review (PSSR) by Kinder Morgan, which shall be completed by Kinder Morgan no later than thirty (30) days following Lessor's delivery and Kinder Morgan's acceptance of the Equipment in accordance with Section 5.1 below. On sixty (60) days' written notice prior to the expiration of the Initial Term, Kinder Morgan shall have an option to extend the Lease for a minimum of twelve (12) and a maximum of eighty-four (84) additional months ("Extended Term"), subject to Kinder Morgan's exercise, if at all, of its option to purchase the Equipment in accordance with Section 12, below.

 

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3.2During the Initial Term and Extended Term, if any, Kinder Morgan shall pay to the Lessor, a monthly lease fee in U.S. Dollars in the amount of Twenty Thousand Dollars ($20,000) ("Monthly Lease Payment"). In the event the Equipment is removed from service at its initial location and re-installed to a new location during the Initial Term of the Lease, the Monthly Lease Payment during the Initial Term of the Lease shall be reduced to $5,000 per month ("Standby Lease Payment") until the Equipment is placed back in service at its new location, at which time the Monthly Lease Payments shall again be Twenty Thousand Dollars ($20,000). If the Equipment is in service for a partial month, the Monthly Lease Payment and Standby Lease Payment shall be calculated and paid on a pro rata per day basis.

 

3.3Kinder Morgan shall pay each Monthly Lease Payment to the Lessor within 15 days of invoicing by Lessor during the Initial Term and Extended Term, if any, of this Lease.

 

3.4Kinder Morgan shall pay each Monthly Lease Payment to a bank account designated by the Lessor.

 

3.5Kinder Morgan shall be responsible for payment of all licensing and registration fees in respect of the Equipment.

 

4.Title.

 

The Parties agree that title and ownership to the Equipment shall remain at all times with the Lessor, unless purchased by Kinder Morgan in accordance with Section 12, below.

 

5.Acceptance of Delivery.

 

5.1Upon receipt of Equipment delivery, Kinder Morgan shall inspect Equipment and either promptly report any deficiencies to Lessor or accept possession. By accepting possession of the Equipment under this Lease, Kinder Morgan accepts the condition of the Equipment.

 

5.2Upon consultation with and written approval by Lessor, the Parties agree that Kinder Morgan is authorized, at its sole expense, to furnish or install on the Equipment new or renewed replacement parts and to make any additions or improvements which Kinder Morgan deems necessary for the proper maintenance and operation of the Equipment. All such parts, additions and Improvements shall be deemed a part of the Equipment, and subject to Section 4, above. Notwithstanding anything to the contrary, contained herein, installation materials and components such as hardware, pipe, flanges, fittings, valves, wiring, computers, controllers and electronics procured and installed by Kinder Morgan, as necessary to install the Equipment to Kinder Morgan's pipeline, shall remain property of Kinder Morgan. Installation materials and components as described above procured and installed by Lessor, shall remain property of Lessor.

 

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6.Operating Use.

 

Kinder Morgan shall operate the Equipment during the Initial Term and Extended Term, if any, for the purpose only as set forth in the Recitals, above.

 

7.Limitations of Liability.

 

7.1Each Party shall be liable to the other Party, its agents and employees for all losses or damages arising out of or attributable to the acts or omissions, willful misconduct or breach of this Lease by such Party.

 

7.2Kinder Morgan acknowledges that Kinder Morgan will obtain the Equipment on an "as is where is basis" without relying on the Lessor. The Lessor makes no warranty or representation, express or implied, statutory or otherwise, as to the design, quality, capacity or fitness of the Equipment for any particular purpose.

 

7.3Kinder Morgan agrees that no defect or unfitness of the Equipment shall relieve Kinder Morgan of the obligation to pay the Monthly Lease Payments throughout the Initial Term and Extended Term, if any, hereof.

 

7.4Kinder Morgan acknowledges and agrees that the Lessor shall not be liable or responsible for any non-compliance with any statute, law, ordinance, rule or regulation relating to the installation, operation, use or maintenance of the Equipment, it being expressly understood that all such liability shall be the responsibility of Kinder Morgan. Lessor shall be responsible to confirm the manufacturing of the Equipment is within compliance with all applicable state and federal regulations and codes.

 

7.5IN NO EVENT SHALL EITHER PARTY HERETO BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INDIRECT CONSEQUENTIAL OR PUNITIVE DAMAGE, WHETHER BASED ON TORT OF CONTRACT.

 

8.Indemnity.

 

8.1Each Party ("Indemnitor") shall indemnify and hold harmless the other Party "(Indemnitee"), its affiliates and each of their representatives, directors, officers, employees and agents from and against all claims, demands, losses, costs (including attorneys' fees), damages, suits or proceedings by third parties (collectively referred to as "Claims") that arise out of or are attributable to:

 

(i)Kinder Morgan's installation, operation and maintenance of the Equipment;

 

(ii)any breach of this Lease by the Indemnitor, or its personnel, agents or subcontractors;

 

(iii)Kinder Morgan's obligations to pay taxes and fees as a result of this Lease, and any related penalties imposed by any governmental or other authority having jurisdiction.

 

(iv)in the case of Lessor, any claim or suit for alleged infringement of any patent, industrial design, license, copyright or trademark resulting from or arising in connection with the manufacture, sale, or use or other disposition of the Equipment. If the Equipment or any portion thereof constitutes an infringement, Lessor shall, in addition to its other obligations under this Agreement, at its own expense and as directed by Kinder Morgan, either procure for Kinder Morgan the right to continue using such Equipment without liability for such infringement, or modify or replace such Equipment with non-infringing Equipment accomplishing the same purpose as the replaced Equipment.

 

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8.2The Indemnitor will assume on behalf of the Indemnitee, and conduct with due diligence and in good faith, the defense of any Claims with counsel reasonably satisfactory to the Indemnitee; provided that the Indemnitee and their insurer shall have the right to be represented therein by advisory counsel of their own selection and at their own expense; provided further that if the defendants in any such action include both the Indemnitor and the Indemnitee, and if the Indemnitee will have reasonably concluded that there may be legal defenses available to it which are different from, additional to, or inconsistent with those available to the Indemnitor, then the Indemnitee and their insurer shall have the right to select separate cousel to participate in the defense of such Claims on its own behalf and that the Indemnitor's expense. Without the prior consent of the Indemnitee, the Indemnitor will not enter into any settlement of any Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee.

 

9.Insurance.

 

Kinder Morgan shall bear the risk, responsibility and liability for the installation, operation and maintenance of the Equipment. Kinder Morgan shall maintain, at its cost, all such insurance on the Equipment with losses payable to Lessor against fire, theft, destruction, property damage, personal injury, general liability and other risks as are appropriate and specified by Lessor. Kinder Morgan shall provide Lessor proof of such insurance.

 

10.Default.

 

10.1Kinder Morgan shall be in default hereunder if Kinder Morgan fails to pay the Monthly Lease Payment as required hereunder within fifteen (15) business days of the due date thereof.

 

10.2Either Party will be in default under this Lease if the Party defaults in the performance of an obligation required from the Party under this Lease.

 

10.3If either Party defaults in performance of any of its obligations under this Lease, the other Party shall provide a written notice of the default to the defaulting Party and if the defaulting Party does not remedy the default within ten (10) business days after the receipt of such notice, the other Party may rely on any legal or equitable remedy available in law or equity.

 

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11.Return Condition.

 

11.1Subject to Kinder Morgan's option to purchase under Section 12, below, upon the expiration or termination of this Lease, Kinder Morgan shall, at Kinder Morgan's expense, disconnect and prepare the Equipment. The Equipment shall be free and clear of oil and in substantially the same condition as received except for ordinary wear and tear. Lessor will retrieve Equipment from the site at Lessor's expense.

 

12.Option to Purchase.

 

12.1Provided Kinder Morgan is not in default with respect to any obligations or payments required to be made under this Lease, the Lessor grants to Kinder Morgan, during the Initial Term and Extended Term, if any, hereof, an option to purchase the Lessor's interest in the Equipment for the amounts set forth in the attached Schedule B.

 

12.2This option may be exercised by Kinder Morgan giving the Lessor written notice (the "Notice") of its intention to exercise the option. The Notice shall set forth the time for the closing of the sale which shall be the date which is sixty (60) days after the date of the notice or in the event there are less than sixty (60) days remaining in the Initial Term or Extended Term, if any, at the end of such term (the "Closing date"). On the Closing Date, Kinder Morgan shall pay the purchase price set forth in Schedule B to the Lessor by way of certified check or money order and the Lessor shall transfer its interest in the Equipment to Kinder Morgan whereupon this Lease shall cease.

 

12.3Kinder Morgan shall pay any and all taxes, license or registration fees, or other fees, costs, or charges payable in connection with any such sale and purchase of the Equipment. The bill of sale from the Lessor to Kinder Morgan shall contain warranties on the part of the Lessor that it has done not act nor created any security interest in the Equipment that would adversely affect the title to it.

 

13.Encumbrances, Taxes and Other Laws.

 

Kinder Morgan shall keep the Equipment free and clear of any liens or other encumbrances, and shall not permit any act where Lessor's title or rights may be negatively affected. Kinder Morgan shall be responsible for complying with and conforming to all laws, regulations, ordinances and statutes relating to the possession, use, operation or maintenance of the Equipment. Furthermore, Kinder Morgan shall promptly pay all taxes, fees, licenses and governmental charges, together with any penalties or interest thereon, relating to the possession, use, operation or maintenance of the Equipment.

 

14.Termination.

 

During the Initial Term, either Party may terminate this Agreement at any time for any reason on forty-five (45) days written notice to the other.

 

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15.Mutual Representations and Warranties. Each Party agrees, represents and warrants to the other Party that:

 

(a)This Lease constitutes a valid and legally binding obligation of the Party, enforceable against the Party in accordance with its terms and all applicable laws;

 

(b)Neither the entering into or the delivery of this Lease nor the completion of the transactions contemplated in this Lease by the Party will result in the violation of any agreement or other instrument to which the Party is a party or by which the Party is bound or in a violation of any laws applicable to the Party;

 

(c)Lessor owns all right, title and interest in and to the Equipment and any parts, additions and Improvements made thereon or thereto.

 

16.Address.

 

Any notice or documentation required under this Lease must be provided either by personal service to the address below, or e-mail to the address below, or delivery by registered mail to the Party's address below.

 

  To Kinder Morgan:  
  Kinder Morgan  
  1435 Windward Concourse  
  Alpharetta, GA 30005  

 

  Attention: Shawn Cox
  Telephone: 770.751.4099 (office)
    678.296.4680 (mobile)
  email: shawn_cox@kindermorgan.com

 

 

  To the Lessor:  
  STWA, Inc.  
  735 State Street, Suite 500  
  Santa Barbara, CA 93101  

 

  Attention: Gregg M. Bigger, President and CEO
  Telephone: 805.729.1815
  email: gregg.bigger@stwa.com
  Attention: Bjorn D. Simundson, CTO
  Telephone: 805.705.4472
  Email: simundson@stwa.com

 

17.General Provisions.

 

17.1In this Lease, the words importing the singular will include the plural and vice versa.

 

17.2Unless something in the subject matter is inconsistent therewith, all references to Articles, Sections or Schedules refer to Articles, Sections or Schedules of this Lease.

 

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17.3A waiver by any Party of the strict performance of any covenant or provision of this Lease will not of itself constitute a waiver or any subsequent breach of such covenant or provision or of any other covenant, provision or term of this Lease. A waiver will be effective if it is in writing an signed by a duly authorized representative of the Party granting the waiver.

 

17.4Each Party will from time to time and at all times do all such further acts and execute and deliver all such further documents and assurances as shall be reasonably required in order to fully perform and carry out the terms of this Lease.

 

17.5Time is of the essence in all respects of this Lease.

 

17.6This Lease may be amended from time to time upon mutual agreement. All amendments must be in writing and signed by duly authorized representatives of the parties.

 

17.7This Lease, including Schedules A, B and C, constitutes the entire agreement between the Parties with respect to its subject matter. There are no other agreements, representations, warranties, conditions, terms or understandings, written, verbal, express or implied between the Parties, unless mutually agreed to and confirmed in writing subsequent to the date of this Lease.

 

17.8In the event, and to the extent, of conflict between any of the terms of this Lease and Schedule A, Schedule B or Schedule C, the terms of this Lease shall prevail.

 

17.9If any one or more provisions of this Lease are found to be invalid, unenforceable or void by any court or tribunal of competent jurisdiction, the remaining terms and provisions will be deemed to be severable from the part so found and remain in full force and effect.

 

17.10This Lease is subject to and shall be construed in accordance with the laws in force in the State of Texas. The federal or state courts located in Harris County, Texas shall have exclusive jurisdiction over any disputes arising under this Lease.

 

17.11This Lease may be executed in counterparts, each of which will be deemed an original and all of which will together constitute one and the same instrument. Delivery of this Lease may be made by facsimile or other electronic format attached to email.

 

[Signature Page Follows]

 

 

 

 

 

 

 

 

 

 

 

 

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IN WITNESS WHEREOF the Parties have executed this Lease as of the day and year first above written.

 

Kinder Morgan Crude & Condensate LLC   STWA, Inc.
     
Per: /s/ James Holland   Per: /s/ Gregg Bigger
Name: James Holland   Name:Greggory M. Bigger
Title: V.P. Technical Services   Title: Chief Executive Officer
     

 

 

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Schedule A

 

The Equipment is generally described as follows:

 

·AOT™ Midstream, skid mounted ; Quantity = 1

 

·Header assembly: 12" 600 series nozzles; Quantity = 2 (intake and outtake)

 

·AOT™ Power Supply; Quantity = 1

 

DESCRIPTION  MAKE  MANUFACTURER  MODEL  YEAR  Serial #  License #
AOT Pressure Vessel  361D-18-VCOF-1200-12 REV 2  Power Service, Inc.  36/1200/12  2013  926  N/A
DC Power Supply  LH 19: 6U Rack Mount  Glassman HV  PS/LH070R072-21  2013  N368284-01  N/A
HV specialty cable  HVC050  Glassman HV  DS2124  2013  N/A  N/A
12" 600# Spool Pieces  STWA  Industrial Screen & Maintenance, Inc.  12" 600#  2013  N/A  N/A

 

 

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Schedule B

 

Option to Purchase Leased Equipment

 

Kinder Morgan may, at its option, purchase the Equipment during the Initial Term of the Lease for a fixed price of One Million Two Hundred U.S. Dollars ($1,200,000).

 

If Kinder Morgan extends the Lease for twelve (12) months, Kinder Morgan may, at its option, at the expiration of the twelve (12) month extended term, purchase the Equipment for $1,050,000. If Kinder Morgan extends the Lease for eighty-four (84) months, the purchase price for the Equipment at the expiration of the eighty-four (84) month extended term shall be $600,000. If the Lease is extended for any period of time greater than twelve (12) months up to a maximum of eighty-four (84) months, the purchase price shall be equal to $1,050,000, less the sum of $6,250 for each month during any such extended term through the date of purchase.

 

 

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Schedule C

 

DATA COLLABORATION

 

STWA, Inc.'s AOT™ Midstream operation requires collaborative access to specific data points for the successful implementation of the Equipment and for testing purposes. Data points are required from immediately upstream and downstream of the Equipment and installation point, currently described in Schedule A to determine the safe and successful operation of the devices as installed by Kinder Morgan to the Sweeney Lateral Pipeline. The data points desired for collaborative real-time access and recording from the signals and data acquisition SCACA/PLC includes but is not limited to the following:

 

1. Pipeline Engineering Hydraulic Engineering data Report/Profile

2. System time and date

3. Pump station status

4. Main pipeline temperature directly upstream of pump station

5. Main pipeline pressure directly upstream of pump station

6. Product Density

7. Ground Temperature as available

8. Pipeline Thermal Profile, if available

9. Wax/Hydrate Deposition Laboratory and Field Data/Details

10. Wax/Hydrate Composition Laboratory and Field Data

11. Electrical Conductivity Profile vs. Time of Wax/Hydrate after treatment

12. Cathodic Protection Profile over 120day period post initial energization, if available

13. Pump motor variable frequency drive (VFD)

14. Pump station pipeline flow rate

15. Oil pressure Upstream/Pump Discharge/Downstream

16. Oil temperature Upstream/Pump Discharge/Downstream

17. Oil temperature directly downstream of pump station

18. Oil pressure directly downstream of pump station

19. Pipeline pressure differential profile/Deltas

20. Flow summary, data and graphs

 

 

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