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Resolution No. 2012-048RESOLUTION NO. 2012-48 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AND RATIFYING THE EXECUTION OF (i) A BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS, CONTRACT NUMBER 1, BY AND BETWEEN THE CITY OF VERNON AND ELEMENT MARKETS RENEWABLE ENERGY, LLC AND (ii) A BIOMETHANE TRANSACTION CONFIRMATION NUMBER 1 BY AND BETWEEN THE CITY OF VERNON AND ELEMENT MARKETS RENEWABLE ENERGY, LLC FOR THE PURCHASE OF BIOMETHANE FUEL TO BE USED AT THE MALBURG GENERATING STATION WHEREAS, the City of Vernon (the "City") owns and operates a municipal natural gas distribution system for supplying the City's municipal electric system with natural gas and providing natural gas to businesses and industries within the City; and WHEREAS, the City desires to sell and purchase prepaid gas to or from Element Markets Renewable Energy, LLC ("Element Markets"), on a firm or interruptible basis, under general terms and conditions published by the North American Energy Standards Board ("NAESB"); and WHEREAS, the City has determined that it is to the City's advantage, and in the public interest of the residents and businesses in the City, to enter into a contract with Element Markets for the purchase and sale of natural gas; and WHEREAS, on January 3, 2012, the City Council of the City of Vernon adopted Resolution No. 2012-02 approving and adopting a Renewable Resources Procurement Plan and Enforcement Program (SBX1 2 Compliance Plan); and WHEREAS, the City desires to sell and purchase biomethane fuel to or from Element Markets, on a firm or interruptible basis, in compliance with the Renewable Resources Procurement Plan and Enforcement Program; and WHEREAS, the City has determined that it is to the City's advantage, and in the public interest of the residents and businesses in the City, to enter into a contract with Element Markets for the purchase of biomethane fuel to be used at the Malburg Generating Station; and WHEREAS, in order to meet the California Energy Commission's current eligibility of biogas under the California Renewable Portfolio Standard Rule, the Director of Light & Power executed a (i) Base Contract for Sale and Purchase of Natural Gas, Contract Number 1, and (ii) Biomethane Transaction Confirmation Number 1 with Element Markets effective March 2, 2012, subject to ratification by the City Council; and WHEREAS, by memo dated March 29, 2012, the Director of Light & Power has recommended that the City ratify the execution of the (i) Base Contract for Sale and Purchase of Natural Gas, Contract Number 1, and (ii) Biomethane Transaction Confirmation Number 1; and WHEREAS, the City Council of the City of Vernon desires to approve and ratify the actions of the Director of Light & Power in executing a (i) Base Contract for Sale and Purchase of Natural Gas, Contract Number 1, and (ii) Biomethane Transaction Confirmation Number 1 with Element Markets. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained hereinabove are true and correct. SECTION 2: The City Council of the City of Vernon hereby approves and ratifies the execution of the Base Contract for Sale and 2 Purchase of Natural Gas, Contract Number 1, with Element Markets by the Director of Light & Power dated March 2, 2012, a copy of which is attached hereto as Exhibit A. SECTION 3: The City Council of the City of Vernon hereby approves and ratifies the execution of the Biomethane Transaction Confirmation Number 1 with Element Markets by the Director of Light & Power dated March 2, 2012, a copy of which is attached hereto as Exhibit B. SECTION 4: The City Council of the City of Vernon hereby instructs the Director of Light & Power, or his designee, to take whatever actions are deemed necessary or desirable, and to execute and deliver such other agreements, documents and certificates, and to perform such other acts and deeds, as may be necessary or convenient to effect the purposes of this Resolution and the transactions herein authorized for the purpose of implementing and carrying out the purposes of this Resolution and the transactions herein approved or authorized. SECTION 5: The City Council of the City of Vernon hereby directs the City Clerk, or the City Clerk's designee, to send one fully executed Base Contract and one fully executed Biomethane Transaction Confirmation to Element Markets. 3 SECTION 6: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk of the City of Vernon shall cause this resolution and the City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 17t" day of April, 2012. r y Name: William J. Davis Title / Mayor Pro-Tem STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Willard G. Yamaguchi, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2012-48, was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Tuesday, April 17, 2012, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this Io day of April, 2012, at Vernon, California. Willard Mamu i ity Clerk (SEAL) 5 EXHIBIT A Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following date: March 2, 2012 The parties to this Base Contract are the following: PARTY A PARTY B ELEMENT MARKETS RENEWABLE ENERGY, LLC PARTYNAME CITY OF VERNON, LIGHT AND POWER DEPARTMENT 3555 Timmons Lane, Suite 900 ADDRESS 4305 S. Santa Fe Avenue Houston, TX 77027 Vernon, CA 90058 www.elementmarkets.eom BUSINESS WEBSITE www.cityofvernon.org CONTRACTNUMBER 1 96-809-2698/�'� D-U-N-SONUMBER 06-088-3022 * US FEDERAL: 20-3316079 (disr' "I egard0d Entity) X US FEDERAL: 95-6000808 • OTHER: s TAX ID NUMBERS 0 OTHER: Delawa JURISDICTION OF ORGANIZATION California • Corporation X L, LC 0 Corporation 0 LLC • Limited Partnership o partnership 0 Limited Partnership 0 Partnership • js�.'--4111 le LUP COMPANYTYPF 0 LLP X Other: OTHER DE ATTN.' ADDRESS: GUARANTOR CONTACT INFORMATION LEGAL CHECKS (IFAPPUCABLE) AT'rN: ADDRESS: Copyright 0 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved September 5, 2006 Base Contract for Sale and Purchase of Natural Gas (Continued) This Base Contract incorporates by reference for all purposes the General Terms and Conditions for Sale and Purchase of Natural Gas published by the North American Energy Standards Board. The parties hereby agree to the following provisions offered in said General Terms and Conditions. In the event the parties fail to check a box, the specified default provision shall apply. Select the aoorooriate box(es) from each section: Copyright ® 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 2 of 2 September 5, 2006 Execution Copy SPECIAL PROVISIONS TO THE BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS NO. 1 BETWEEN ELEMENT MARKETS RENEWBLE ENERGY, LLC ("Party A") AND CITY OF VERNON, LIGHT AND POWER DEPARTMENT ("Party B") DATED AS OF: March 2, 2012 ("Effective Date") These Special Provisions amend the North American Energy Standards Board, Inc. ("NAESB") Base Contract for Sale and Purchase of Natural Gas and its accompanying General Terms and Conditions, as published September 5, 2006 (the "Base Contract"). The Base Contract, together with these Special Provisions, the Transaction Confirmations and any Credit Support Obligation form a single agreement between Party A and Party B, collectively, the "Contract'. If there is any inconsistency between the Base Contract, the General Terms and Conditions and the Special Provisions, these Special Provisions will govern. Except as amended in these Special Provisions or in a Transaction Confirmation, the Base Contract and the General Terms and Conditions remain in full force and effect. All capitalized terms not otherwise defined in these Special Provisions have the meaning set out in the Base Contract or in Transaction Confirmations. 1. AMENDMENTS TO SECTION 10, FINANCIAL RESPONSIBILITY �.� The following sentence is added at the end of the first paragraph of Section 10.3.1 of the Base Contract: "Notwithstanding the foregoing, in no event shall the Non -Defaulting Party owe any amounts to the Defaulting Party on account of this Transaction as a Terminated Transaction, whatever the difference between Market Value and Contract Value. However, nothing in this section releases (x) Party B from its obligation to remit payment to Party A for any natural gas or Biogas delivered to Party B pursuant to any Transaction Confirmation or (y) Party A from any damages due and payable pursuant to Section 7.3 of the Transaction Confirmation." 1.2 Section 10.2 of the Base Contract is deleted in its entirety and replaced with the following: "if an Event of Default (defined below) occurs in relation to a party ("Defaulting Party"), and the Defaulting Party or, if the Defaulting Party is Party A, the Secured 1 Execution Copy Party does not remedy the Event of Default within the specified period, if applicable, then the other party (the "Non -Defaulting Party") has the right, at its sole election and subject to Section 15.1 of the Base Contract, to withhold and/or suspend deliveries or payments upon notice and/or to terminate and liquidate the transactions under the Contract, in the manner provided in Section 10.3, in addition to any and all other remedies available under the Contract. It is an Event of Default if a party: (i) makes an assignment or any general arrangement for the benefit of creditors; (ii) files a petition or otherwise commences, authorizes, or acquiesces in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors, or has such petition filed or proceeding commenced against it which is not dismissed within 60 days of the date it is filed; (iii) otherwise becomes bankrupt or insolvent (however evidenced); (iv) is unable to pay its debts as they fall due; (v) has a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of its assets; (vi) fails to give Adequate Assurance of Performance under Section 10.1 within 48 hours (but at least two Business Days) of a written request by the other party; (vii) has not paid any amount due the other party hereunder on or before the 10 days following written notice that such payment is due; (viii) is the affected party with respect to any Additional Event of Default (as set out below); (ix) materially breaches a representation or warranty and fails to cure such breach within 10 days of written notice; (x) fails to perform any material covenant or obligation set forth in this Contract (except for such party's obligations to deliver or receive the Biogas, the exclusive remedy for which is provided in the Transaction Confirmation), if such failure is not remedied on or before 10 days after the other party gives notice of such failure; (xi) fails to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Obligation, if such failure is continuing after any applicable grace period has elapsed; (xii) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Obligation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); or (xiii) consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, or reorganizes, reincorporates or reconstitutes into or 2 Execution Copy as, another entity and, at the time of such consolidation, amalgamation, merger, transfer, reorganization, reincorporation or reconstitution: (a) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Guarantor under this Contract or any Credit Support Obligation to which it or its predecessor was a party; or (b) the benefits of any Credit Support Obligation fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Contract; or (c) the creditworthiness of the affected party or, if applicable, the successor, surviving or transferee entity of the affected party, after taking into account any applicable Credit Support Obligation, is materially weaker immediately after the occurrence of such event than that of the affected party immediately prior to the occurrence of such event. 1.3 The following is added as new Section 10.8 of the Base Contract: "Notwithstanding anything to the contrary contained in this Agreement or any Confirmation: (i) Party B's payment obligations to Party A are payable solely from revenues of Party B's electric system; (ii) any payments for Delivered Biogas constitute operating expenses of Party B's electric system having payment priority over debt of such electric system; and (iii) any termination payment due from Party B in respect of any Early Termination Date under Section 10.3.1 will be payable solely from revenues of Party B's electric system after paying operating expenses and all payments associated with debt of such electric system." 2. AMENDMENTS TO SECTION 15.1, ASSIGNMENT 2.1 The following is added at the end of Section 15.1 of the Base Contract: "A "Secured Parry" is: (x) any bona fide non-affiliated lender or other such financing party of Party A or Party A's Affiliates to which a security interest in or to this Contract or any Transaction Confirmation is granted of which written notice has been provided to Party B including Secured Party's address for notices in a form reasonably satisfactory to Party B; or (y) (i) any party not affiliated with Party A who owns a facility producing Gas sold under this Contract or (ii) a bona fide non-affiliated lender or other such financing party of a party named in clause (i) of this Section 2.1, in either case to which a security interest in or to this Contract or any Transaction Confirmation is granted Execution Copy and of which written notice has been provided to Party B, including Secured Party's address for notices in a form reasonably satisfactory to Party B; provided, however, that a Secured Party defined in clause (x) does not currently hold such security interest. A Secured Party or its assignee has the rights set out in sections (A), (B) and (C) below, provided that the Secured Party or its assignee, as applicable, must be of least as creditworthy as Party A to exercise such rights; provided, further that the rights in section (C) shall be subject to Party B's prior written consent. Party B shall not unreasonably withhold, condition or delay its consent, but Party B may withhold its consent if: (i) Party B has reasonable grounds for insecurity regarding the creditworthiness of the Secured Party or its assignee, as applicable, or the financial wherewithal of the Secured Party or its assignee, as applicable, to ensure performance of its obligations under the Contract; and (ii) Party B does not receive documentation addressing to Party B's satisfaction (acting reasonably) Party B's concerns within 10 Business Days of the date of Party B's written notice to the Secured Party of Party B's intent to withhold its consent. (A) The Secured Party has the right to (i) substitute itself for Party A and perform the duties of Party A hereunder and (ii) exercise any rights or remedies of Party A under the Contract on behalf of Party A; provided, however, that nothing in these Special Provisions shall effect, cause or permit a novation of Party A that is not consented to in writing by Party B as determined in its sole and reasonable discretion, such consent not to be unreasonably withheld, delayed or conditioned. (B) If an Event of Default occurs on the part of Party A, Party B must provide Party A and Secured Party with prior written notice of its intent to terminate or suspend this Agreement due to such Event of Default, specifying the Event of Default giving rise to such right. Following the date of receipt of such notice (the "Notice Date") from Party B, the Secured Party shall have (x) five Business Days to provide Party B with notice of its intent to pursue cure of such Event of Default and/or substitute itself for Party A and perform the duties of Party A hereunder, in the event such Event of Default is not curable and (y) 30 days after the Notice Date to cure the Event of Default giving rise to the right of termination (or the applicable cure period provided to Party A with respect to such Event of Default in the Contract, if longer) or commence performance of the duties of Party A hereunder (the "Initial Cure Period"); provided that if (i) such Event of Default cannot reasonably be cured or performance cannot be commenced by the Secured Party within the Initial Cure Period and (ii) the Secured Party commences and diligently pursue cure of such Event of Default or performance, as applicable, within the Initial Cure Period, Party B may, in its reasonable discretion, grant the Secured Party's request for additional time not to exceed 90 days after the Notice Date to cure the Event of Default or commence performance, as applicable, for a reasonable period of time under the circumstances as determined by Party B in its reasonable discretion (the total 4 Execution Copy period to cure, the "Cure Period"). The respective obligations of Party A and Party B will otherwise remain in effect during the Cure Period. For the avoidance of doubt, Parry A shall be precluded from terminating the Contract due to an Event of Default set forth in Section 10.2 until the Secured Party has had the opportunity to cure such Event of Default and/or substitute itself for Party A and perform the duties of Party A hereunder as provided in this Section 15.1. If Secured Party substitutes itself for Party A and commences performance following an Event of Default on the part of Party A for which no cure period is provided, Party B shall be deemed to waive its right under Section 10.2 to liquidate or terminate the Contract due to such Event of Default; provided that Party B shall be entitled to pursue any other rights or remedies available hereunder against Party A; provided, further that Party B shall have the right to terminate the Contract if an Event of Default for which a cure period is provided occurs and is continuing and is not cured within the applicable cure periods set forth herein. (C) Upon (i) any rejection of the Contract due to any process undertaken with respect to Party A under the United States Bankruptcy Code or any other law affecting creditors' rights or (ii) termination of the Contract by Party B due to a non -curable Event of Default (an Event of Default for which no cure period is provided) on the part of Party A, at the request of Secured Party made within 30 days of such termination or rejection, Party B shall enter into a new agreement with Secured Party or its assignee with the same terms and conditions as this Contract for the remainder of the Delivery Period without demanding additional consideration therefor. (D) Party B agrees to cooperate with any reasonable request of Party A or a Secured Parry in connection with the creation or enforcement of the rights of the Secured Party set forth in this Section 15.V' 3. AMENDMENTS TO SECTION 15.10, CONFIDENTIALITY 3.1 The following is added at the end of Section 15.10 of the Base Contract: "Party A acknowledges that (a) Party B is a municipality subject to the requirements of the California Public Records Act ("CPRA") and (b) Party B may be required to disclose certain information regarding this Base Contract or the terms of any transaction hereunder between the parties to the public as part of its approval process. If Party B receives a request for information concerning this Base Contract or the terms of any transaction hereunder between the parties under the CPRA or becomes aware of a need for public disclosure as part of the approval process, Party B will notify Party A prior to the date of required disclosure as to the nature of the request or requirement and Party B's interpretation of the applicable disclosure requirement(s). Party B agrees to cooperate with Party A's reasonable requests to avoid or minimize the scope of any such disclosure to the extent permitted under applicable law." 5 Execution Copy 4. CREDIT SUPPORT 4.1 The following is added as Section 10.9 of the Base Contract: "10.9 (A) Party A agrees to provide or cause to be provided a Credit Support Obligation in the amount of $1,000,000 for the benefit of Party B in order to enter into the Transaction Confirmation under this Base Contract. The Credit Support Obligation must be provided within five Business Days of the date upon which Party B notifies Party A that (i) the Initial Certification Date has occurred and (ii) Party B has accepted the form of Credit Support Obligation. If a material positive change occurs in the credit profile of Party A, Party B agrees to review the Credit Support Obligation of Party A to reflect such change. (B) Notwithstanding anything in this Section 10.9 or Section 10.1 to the contrary, Party B shall have no Credit Support Obligation if its Credit Rating is (x) Baa3 or higher by Moody's Rating Services or (y) BBB- or higher by Standard & Poor's. In the event that Party B's Credit Rating is below the aforementioned thresholds, Party A may request Adequate Assurance of Performance pursuant to Section 10.1. (C) For the purposes of this Section 10.9, a Letter of Credit is an irrevocable, unconditional, transferable, standby letter of credit, issued in favor of Party A or Party B, as applicable, by a Qualified Institution (other than a party hereto or any of its Affiliates). Qualified Institution means the United States Office of a commercial bank (which is not an Affiliate of the issuing Party) organized under the laws of the United States of America or a political subdivision thereof, or a foreign bank with a branch office located in the United States and, in either case, (i) subject to supervision or examination by a federal or state authority of the United States of America and (ii) either (a) having a Credit Rating of "A" or higher by Standard & Poor's and Fitch Rating Services, or "A2" or higher by Moody's Rating Services; or (b) having a minimum asset base of at least $10 billion. The Letter of Credit must be acceptable and approved by the beneficiary Party. (E) The Party providing the Credit Support Obligation hereunder is responsible for all costs involved in obtaining and maintaining the Credit Support Obligation. (F) The issuing Party shall renew or cause the renewal of the Credit Support Obligation, as applicable, at least 20 Business Days prior to the expiration of the outstanding Credit Support Obligation. (G) Upon the occurrence of a Credit Support Default (as defined below), the defaulting Party must deliver a substitute Credit Support Obligation that is acceptable to the beneficiary Party in its reasonable discretion, or provide another Credit Support Obligation in the form of cash, in each case within five Business Days following written notice of the default. "Credit Support Default" means, with respect to an outstanding Credit Support Obligation, any of the following events: (i) the Issuer of a Letter of Credit ceases to be a Qualified M Execution Copy Institution, (ii) the Issuer of a Letter of Credit disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, the Letter of Credit; or (iii) the Credit Support Obligation expires or terminates, or fails or ceases to be in full force and effect at any time. (H) Upon or at any time after the occurrence of an Event of Default with respect to the issuing Party, the beneficiary Party may draw up to the entire undrawn portion of any outstanding Credit Support Obligation in accordance with the terms associated with such Credit Support Obligation. Cash received from drawing upon the Credit Support Obligation shall be applied against the Early Termination Damages in Section 10.3.1 of the Base Contract. In addition, the issuing Party remains obligated to the beneficiary Party for any amounts owing to the beneficiary Party and remaining unpaid after the application of any amounts so drawn by the beneficiary Party." IN WITNESS WHEREOF, the parties have caused this Contract to be duly executed as of the Effective Date. ELEM NT MARKETS RENEWABLE CITY OF VERN N, LIGHT AND POWER ENE R Y,LLC DEPARTME By: By: Name: Angela Schwarz Name: Carlos Fandino Title: President Title: Director of Light and Power EXHIBIT B Execution Copy BIOGAS TRANSACTION CONFIRMATION Between ELEMENT MARKETS RENEWABLE ENERGY, LLC and CITY OF VERNON LIGHT AND POWER DEPARTMENT Dated as of: March 2, 2012 Transaction Confirmation Number: 1 Execution Copy Table of Contents 1. PURPOSE OF TRANSACTION CONFIRMATION............................................................................... 3 2. DEFINITIONS.......................................................................................................................................3 3. SALE AND PURCHASE OBLIGATIONS.............................................................................................. 8 4. MAKE -GOOD BIOGAS...................................................................................:..................................... 9 5. NOMINATIONS AND TIMING OF DELIVERY...................................................................................... 9 6. PAYMENT FOR BIOGAS AND ENVIRONMENTAL ATTRIBUTES....................................................10 7. DAMAGES FOR BREACH OF OBLIGATION TO DELIVER OR RECEIVE BIOGAS:.........................10 8. ENVIRONMENTAL ATTRIBUTES GENERALLY................................................................................ 11 9. CERTIFICATION................................................................................................................................12 10. GHG ATTRIBUTES ............................................................................................................................12 11. CHANGE IN LAW AND TERMINATION RIGHTS...............................................................................13 12. FORCE MAJEURE.............................................................................................................................14 13. PRIORITY OF TRANSACTION CONFIRMATION..............................................................................16 Appendix A: Calculation of Damages 1. Damages if Seller fails to deliver Biogas — Section 7.3.......................................................................17 2. Damages if Buyer fails to take Biogas — Section 7.4...........................................................................18 3. RPS Payment under Section 8.4(a)....................................................................................................18 4. Carbon Payment under Section 8.4(b)................................................................................................ 19 5. Calculation of the Minimum Quantity — examples...............................................................................19 2 Execution Copy BIOGAS TRANSACTION CONFIRMATION This Transaction Confirmation is subject to the Base Contract for Sale and Purchase of Natural Gas between Seller and Buyer dated as of March 2, 2012, No. 1 ('Base Contract'). The terms of this Transaction Confirmation are binding. SELLER: BUYER: Element Markets Renewable Energy, LLC City of Vernon, Light and Power Department 3555 Timmons Lane, Suite 900 4305 S. Santa Fe Avenue Houston, TX 77027 Vernon, CA 90058 Attention: Randall N. Lack Attention: Abraham Alemu Phone:281-207-7213 Phone:323-583-8811 Fax: 281-207-7211 Fax: 323-826-1408 Contract Price: Per MMBtu delivered at the Delivery Point: $10.25 plus the Transportation Cost Reimbursement Amount (as defined herein); in total for Biogas and all associated Environmental Attributes (as defined herein) delivered from . the Commencement Date until the end of the Delivery Period, subject to Section 6. Delivery Period: Commences on March 2, 2012 (the "Commencement Date") and ends on the 10" anniversary of the Initial Certification Date. Contract Quantity: 1,000 MMBtus/day Delivery Point: SoCalGas-City Gate, as defined in the SoCalGas Tariff. Special Conditions: 1. PURPOSE OF TRANSACTION CONFIRMATION 1.1 The purpose of this Transaction Confirmation is to set forth the terms of a transaction for the purchase and sale of Biogas (the "Transaction") produced by one or more Biogas Facilities that, when combusted at the Power Station and other Designated Facilities: (a) generates energy without giving rise to a carbon dioxide or other GHG emissions liability; and (b) generates RPS-eligible electricity, as certified by the CEC, and RECs (conditions (a) and (b) together being "Biogas Compliance"). 1.2 The terms of this Transaction Confirmation amend and supplement the terms of the Base Contract for the purpose of the Transaction. 2. DEFINITIONS The following additions and amendments are made to the definitions in the Base Contract for the purposes of this Transaction Confirmation: 2.1 "Allowance" means a California greenhouse gas emissions allowance as defined in the Cap and Trade Regulation, being a limited tradable authorization, issued by CARE, to emit up to one metric ton of carbon dioxide equivalent. 3 Execution Copy the meaning set forth in Section 3.2 of this 2.3 "Biogas" means "digester gas", "landfill gas" or other form of biogas injected into a natural gas intrastate or interstate pipeline for the purposes of electricity generation which, subject to Section 11 and other applicable provisions hereunder: (a) is a renewable fuel as listed in, and is capable of being transported to California in the manner required in, the CEC Renewables Portfolio Standard Eligibility Guidebook as of the Execution Date; (b) meets the quality specifications required by the Transporter(s); and (c) qualifies as "biomass -derived fuel" under the Cap and Trade Regulation and is verifiable as such under the Mandatory Reporting Regulation. 2.4 'Biogas Compliance" or "Biogas Compliant" has the meaning set out in Section 1.1 of this Transaction Confirmation. 2.5 "Biogas Facility" or "Biogas Facilities" means one or more facilities that produce Biogas. "Bu 2.6 yer Payment" means the amount Buyer owes Seller in the circumstances set out in Section 7.4 of this Transaction Confirmation, calculated in accordance with Section 2 of Appendix A to this Transaction Confirmation. 2.7 "Buyer's Certification Notice" has the meaning set out in Section 9.2 of this Transaction Confirmation. 2.8 "Cap and Trade Regulation" means the regulation entitled "California Cap on Greenhouse Gas Emissions and Market -Based Compliance Mechanisms", as approved by the Office of Administrative Law on December 13, 2011, set forth in division 3, chapter 1, subchapter 10, article 5 of title 17 of the California Code of Regulations. 2.9 "CARB" means the California Air Resources Board. 2.10 "Carbon Payment" has the meaning in Section 4 of Appendix A to this Transaction Confirmation. 2.11 "CEC" means the California Energy Commission. 2.12 "Certification" means CEC's certification of a Designated Facility as RPS-eligible in respect of the Biogas from a Biogas Facility. 2.13 "Certification Date" means the date on which the CEC notifies Buyer that Certification has occurred in relation to Biogas from a particular Biogas Facility. 2.14 "Certification Amount" means the Contract Price minus the Pre-Cert Price, multiplied by the number of MMBtus of Biogas from a particular Biogas Facility that are delivered to Buyer prior to the Initial Certification Date and accrue Renewable Energy Attributes upon the Initial Certification Date. If the Certification Amount is negative, the Certification Amount will be deemed to be zero. 2.15 "Change in Law" has the meaning set out in Section 11.3(b) of this Transaction Confirmation. 2.16 "Commencement Date" has the meaning set out on page 3 of this Transaction Confirmation. 2.17 "Commercially Reasonable Efforts" means the efforts that a prudent person desirous of 1I Execution Copy achieving a result would use to achieve the result without taking any action that would or is likely to result in any of the following: (a) a material adverse effect on the benefit derived from this Transaction Confirmation by such person; (b) a material adverse change in the profitability or operations of such person's business; or (c) the expenditure of material funds (in excess of $10,000 per year in any calendar year) by or the imposition of any other material burden on such person. 2.18 "Contract Price" means the price per MMBtu for Biogas and all associated Environmental Attributes set out on page 3 of this Transaction Confirmation (subject to Section 6). 2.19 "Contract Quantity" means the quantity of Biogas set out on page 3 of this Transaction Confirmation. 2.20 "Contract Year" means a 12 month period, other than the first and final Contract Years which may be less than 12 months. The first Contract Year begins on the Initial Certification Date and the second Contract Year begins on January 1 of the calendar year following the Initial Certification Date. 2.21 "Delivered Biogas" means Biogas delivered to the Delivery Point by Seller on any Day pursuant to this Transaction Confirmation, including any Make -Good Biogas delivered pursuant to Section 4 of this Transaction Confirmation. References to Delivered Biogas purchased and sold hereunder include all associated Environmental Attributes. 2.22 "Delivery Period" has the meaning set out on page 3 of this Transaction Confirmation. 2.23 "Delivery Point" has the meaning set out on page 3 of this Transaction Confirmation. 2.24 "Delivery Shortfall" has the meaning set out in Section 4.1 of this Transaction Confirmation. 2.25 "Designated Facility" means the Power Station and any other power generation facilities at which Buyer may combust Biogas, as designated by Buyer in writing to Seller from time to time. 2.26 "Environmental Attribute(s)" means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the production and combustion of the Delivered Biogas. Environmental Attributes include but are not limited to: (a) GHG Attributes; (b) Renewable Energy Attributes; and (c) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants other than as noted in clauses (d) through (i) below. Environmental Attributes do not include: (d) any energy, capacity, reliability or other power attributes from a generating facility; (e) tax credits associated with the construction or operation of energy projects and other financial incentives in the form of credits, reductions, or allowances associated with an energy project that are applicable to a state or federal income taxation obligation; subsidies or "tipping fees" that may be paid to Seller to accept certain 5 Execution Copy fuels, or local subsidies received by the landfill operator for the destruction of particular pre-existing pollutants or the promotion of local environmental benefits; (g) emission reduction credits encumbered or used by a generating facility for compliance with local, state, or federal operating and/or air quality permits; (h) any credits or payments (other than offset credits) associated with the reduction of solid waste and treatment benefits created by the utilization of biomass or biogas fuels; or (i) any other existing or future credits, benefits, emissions reductions, offsets or allowances that are required by the owner or operator of the Biogas Facility or of the site at which the Biogas Facility is located for compliance with applicable environmental laws or regulations. 2.27 "Execution Date" means the later of: (a) the date that Buyer signs this Transaction Confirmation; or (b) the date that Seller signs this Transaction Confirmation. 2.28 "Force Majeure" has the meaning set out in Section 12.3 of this Transaction Confirmation. 2.29 "Gas" as referenced in the Base Contract means Biogas as defined in this Transaction Confirmation. 2.30 "GHG Attribute" means: (a) the ability of the Delivered Biogas to be verified as "biomass -derived fuel" under the Mandatory Reporting Regulation (assuming that Buyer makes Commercially Reasonable Efforts to obtain such verification); (b) any certificates issued in relation to the Delivered Biogas under a biofuel certification program established by CARB pursuant to the Mandatory Reporting Regulation; (c) any avoided emissions of carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs) attributable to the Delivered Biogas that have been determined by the United Nations Intergovernmental Panel on Climate Change to contribute to the actual or potential threat of altering the Earth's climate by trapping heat in the atmosphere, including all offset credits issued in respect of such avoided emissions; and (d) the reporting rights to these attributes, provided that Seller retains any reporting rights to the extent required for a compliance obligation of a Biogas Facility. 2.31 "Initial Certification" means the first Certification to occur in respect of the Biogas from a Biogas Facility. 2.32 "Initial Certification Date" means the earlier to occur of (a) the date upon which the CEC notifies Buyer that the Initial Certification has occurred and (b) the date upon which Buyer provides Seller with written notice that Buyer desires to waive the requirement for Initial Certification and initiate deliveries of the Contract Quantity. 2.33 "Make -Good Biogas" means Biogas delivered to Buyer in excess of the Contract Quantity on any Day in the circumstances set out in Section 4.2. The quantity of Make -Good Biogas is limited as follows: (a) the Make -Good Biogas must not exceed 20% of the Contract Quantity on any Day (i.e. Delivered Biogas shall not exceed 120% of the Contract Quantity); provided that 0 Execution Copy if Buyer refuses any Make -Good Biogas pursuant to Section 4.3, Seller may deliver Make -Good Biogas in an amount up to 40% of the Contract Quantity on any Day (i.e. Delivered Biogas shall not exceed 140% of the Contract Quantity) until such time as all refused Make -Good Biogas has been delivered to Buyer; and (b) nomination of and requests to nominate any Make Good Biogas must cease when the actual average daily quantity of Biogas delivered by Seller in the relevant Contract Year equals the Contract Quantity. 2.34 "Mandatory Reporting Regulation" means the regulation for the mandatory reporting of greenhouse gas emissions promulgated by CARB and set forth in division 3, chapter 1, subchapter 10, article 2 of title 17 of the California Code of Regulations, including the amendments approved by the Office of Administrative Law on December 14, 2011. 2.35 "Minimum Delivery Failure" means Seller delivering less than the Minimum Quantity of Biogas to Buyer during any Contract Year (including as delivered any Make -Good Biogas that was requested to be nominated to but refused by Buyer and remains undelivered at the end of that Contract Year pursuant to Section 4.3), other than due to Force Majeure. 2.36 "Minimum Quantity" means a daily average quantity of Biogas, calculated beginning on the Initial Certification Date for each Contract Year for the remainder of the Delivery Period, excluding from the calculation any days on which Force Majeure affected Seller's performance, as notified to Buyer in accordance with Section 11 of the Base Contract, equal to: (a) 80% of the Contract Quantity, unless Section 2.36(b) applies; or (b) 90% of the Contract Quantity if: i. in each of the two previous Contract Years, Seller delivered less than 80% of the Contract Quantity on average (if this situation has not previously occurred during the Delivery Period); or ii. the situation in clause (i) of this Section 2.36(b) has previously occurred during the Delivery Period and, in the preceding Contract Year, Seller delivered less than the Minimum Quantity applying in that Contract Year. Examples of the calculation of Minimum Quantity are set out in Section 5 of Appendix A to this Transaction Confirmation. For the avoidance of doubt, if any Contract Year is shorter than a full calendar year, the Minimum Quantity will be calculated using the number of days in the shortened Contract Year. 2.37 "Monthly Nomination" has the meaning set out in Section 5.1 of this Transaction Confirmation. 2.38 "Power Station" means the Malburg Generating Station at 2715 East 50th Street, Vernon, California. 2.39 "Pre-Cert Price" means, per MMBtu, the Spot Price on the Day such Biogas is delivered. 2.40 "REC" means a renewable energy certificate, registered with WREGIS, that can be used for compliance with the RPS and that meets the requirements of section 399.16(b)(1) of the California Public Utilities Code (as that section may be amended, restated or supplemented from time to time) and any applicable binding determinations made or regulations promulgated under that section by governmental authorities. 2.41 "Renewable Energy Attribute" means the ability to generate RECs or similar instruments 7 Execution Copy in respect of the electricity generated from the combustion of the Biogas at a Designated Facility. 2.42 "Replacement Biogas" means: (a) "digester gas", "landfill gas" or other form of biogas injected into a natural gas pipeline that: i. is a renewable fuel as listed in, and is capable of being transported to California in the manner required in, the CEC Renewables Portfolio Standard Eligibility Guidebook as of the Execution Date; ii. meets the quality specifications required by the Transporter(s); and iii. qualifies as "biomass -derived fuel" under the Cap and Trade Regulation and is verifiable as such under the Mandatory Reporting Regulation; and (b) any Environmental Attributes associated with such Replacement Biogas. 2.43 "Replacement Price" has the meaning set out in Section 1 of Appendix A to this Transaction Confirmation. 2.44 "RPS" means the Renewable Portfolio Standard as set forth in California Public Utilities Code Section 399.11 et seq, and any regulations promulgated under such sections that are applicable to Buyer. 2.45 "RIPS Payment" has the meaning set forth in Section 3 of Appendix A to this Transaction Confirmation. 2.46 "Seller Documents" has the meaning set out in Section 8.3 of this Transaction Confirmation. 2.47 "Seller Payment" means the amount Seller owes Buyer in the circumstances set out in Section 7.3 of this Transaction Confirmation, calculated in accordance with Section 1 of Appendix A to this Transaction Confirmation. 2.48 "SoCalGas Tariff' means the Southern California Gas Company tariff approved by the California Public Utilities Commission applicable to deliveries hereunder at the Delivery Point. 2.49 "Term" means the term of this Contract, which commences on the Execution Date and ends concurrently with the Delivery Period. 2.50 "Transportation Cost Reimbursement Amount" means, per MMBtu of Biogas delivered hereunder at the Delivery Point, $0.65. 2.51 "WREGIS" means the Western Renewable Energy Generation Information System. 3. SALE AND PURCHASE OBLIGATIONS 3.1 Contract Quantity: Under this Transaction Confirmation, Seller agrees to sell to Buyer at the Delivery Point, and Buyer agrees to purchase from Seller at the Delivery Point, Biogas and all Environmental Attributes associated with that Biogas, in an amount up to the Contract Quantity in accordance with the terms of this Contract. 3.2 Additional Volume: Seller may, from time to time during the Term, offer up to 2,500 MMBtu of additional Biogas to Buyer for purchase at the Delivery Point in accordance with the terms of this Contract by providing written notice of such availability (including the proposed date of first delivery) to Buyer (such notice an "Availability Notice"). Buyer may, Execution Copy as determined in its sole discretion, agree to purchase all or any portion of the Biogas set forth in the Availability Notice by sending written confirmation of acceptance to Seller within thirty (30) days of receiving the Availability Notice from Seller. Any and all references to "Contract Quantity" in this Contract shall include such additional quantities of Biogas purchased and sold pursuant to this Section 3.2 as of the first Day upon which any such Biogas is delivered to Seller. For the avoidance of doubt, the Contract Quantity shall not exceed 3,500 MMBtu at any time during the Term except as Buyer and Seller may otherwise agree in writing. 4. MAKE -GOOD BIOGAS 4.1 Delivery Shortfall: A "Delivery Shortfall' occurs if at any time during a Contract Year Seller has delivered less than the Contract Quantity of Biogas to Buyer, as determined on average for the Contract Year to date (by deriving the actual average quantity of Delivered Biogas in such Contract Year and comparing such average with the Contract Quantity). 4.2 Nomination of Make -Good Biogas: If a Delivery Shortfall occurs, Seller may request to nominate Make -Good Biogas for delivery to Buyer. If Seller desires to deliver Make -Good Biogas to Buyer on any Day, Seller shall submit an updated nomination to Buyer on or before 6:00 a.m. Pacific Standard Time on the third Business Day prior to the Day on which the Biogas will be delivered which indicates the quantity of Make -Good Biogas to be delivered on such Day. 4.3 Refusal to Accept Make -Good Biogas: Buyer may refuse to accept delivery of nominated Make -Good Biogas by providing notice of such refusal to Seller on or before 6:00 a.m. Pacific Standard Time on the Business Day prior to the proposed delivery of such Make - Good Biogas; provided that Seller shall be entitled to include any Make -Good Biogas that is refused by Buyer in a subsequent nomination request under this Section 4.3 at any time during the same Contract Year until all such nominated Make -Good Biogas is accepted by and delivered to Buyer. Notwithstanding the foregoing, Buyer may only reject Make -Good Biogas under this Section 4.3 if the Power Station is experiencing a shutdown or reduction in capacity. 4.4 Undelivered Make -Good Biogas: If any Make -Good Biogas refused by Buyer remains undelivered by Seller at the end of a Contract Year, the aggregate quantity of such Make - Good Biogas shall be applied to reduce the Minimum Quantity of Biogas deliverable by Seller during such Contract Year. 5. NOMINATIONS AND TIMING OF DELIVERY 5.1 Monthly Nominations: On or before the sixth Business Day prior to the first Business Day of each Month, Seller must submit to Buyer its non -binding nomination of the quantity of Biogas (including any Make -Good Biogas, if applicable) that Seller expects to deliver to Buyer at the Delivery Point on each day during such Month ("Monthly Nomination"). 5.2 Updating Monthlv Nominations: Seller shall update its Monthly Nomination, if necessary, on or before 6:00 a.m. Pacific Standard Time on the Business Day prior to each Day on which Biogas will be delivered at the Delivery Point, by providing notice to Buyer of the quantity of Biogas to be delivered on such Day. 5.3 Timing of Delivery: Seller will use Commercially Reasonable Efforts to coordinate with Buyer to optimize the timing of the delivery of Biogas in order to maximize the use of Biogas by Designated Facilities. Execution Copy 6. PAYMENT FOR BIOGAS AND ENVIRONMENTAL ATTRIBUTES 6.1 Pre-Cert Price payable prior to Initial Certification Date: Buyer will pay Seller the Pre-Cert Price for each MMBtu of Biogas that is delivered under this Transaction Confirmation on each Day prior to the Initial Certification Date, in accordance with Section 7.2 of the Base Contract. For the avoidance of doubt, Buyer must pay Seller under this Section 6.1 regardless of whether the Initial Certification is received. 6.2 Certification Amounts: Within 15 Days following the Initial Certification Date, Seller shall invoice Buyer for the Certification Amount. Buyer will pay the Certification Amount to Seller in accordance with Section 7.2 of the Base Contract. All rights, title and interest in and to the Renewable Energy Attributes associated with Biogas delivered prior to the Initial Certification Date will transfer to Buyer when Buyer pays the Certification Amount. 6.3 Contract Price payable after Initial Certification Date: Buyer will pay Seller the Contract Price for each MMBtu of Biogas delivered to Buyer (up to the Contract Quantity plus any Make -Good Biogas) on or after the Initial Certification Date. 6.4 Payment for Natural Gas: Seller may, from time to time as determined in its sole discretion, deliver natural gas to Buyer in connection with the management of transportation losses or pipeline imbalances. Any such deliveries shall not exceed (and Buyer shall not have the obligation to pay for any natural gas in excess of) 2% of the Contract Quantity for any Day. Seller shall not be in breach of this Transaction Confirmation as a result of or in connection with any delivery of natural gas as described in this Section 6.4. If Buyer receives natural gas pursuant to this Section 6.4, Buyer shall pay Seller 95% of the Spot Price as of the date of delivery for each MMBtu of such gas when invoiced by Seller in accordance with this Contract. Seller must provide separate invoices for the natural gas and Biogas. 6.5 Base Contract Section 7.1: For purposes of this Transaction, Section 7.1 of the Base Contract is deleted and all references to that section will be deemed to be references to Section 6.6 of this Transaction Confirmation. 6.6 Invoicing Requirements: Seller shall invoice Buyer for Delivered Biogas and, for the avoidance of doubt, all associated Environmental Attributes, received by Buyer in the preceding Month along with supporting documentation consistent with standard industry practice and documentation required by the CEC and the CARB or other similar regulatory agency, including metering data and transport records for Delivered Biogas, subject to Seller's obligation to use Commercially Reasonable Efforts to maintain Biogas Compliance as set forth Section 11 of this Transaction Confirmation. 7. DAMAGES FOR BREACH OF OBLIGATION TO DELIVER OR RECEIVE BIOGAS 7.1 Alternative Damages: Pursuant to Section 3.3 of the Base Contract, for purposes of this Transaction Confirmation the parties elect Alternative Damages. 7.2 Base Contract Section 3.2: For purposes of this Transaction Confirmation, Section 3.2 of the Base Contract is deleted in its entirety and all references to that section will be deemed to be references to the following sections of this Section 7. 7.3 Minimum Delivery Failure: If a Minimum Delivery Failure occurs, Buyer's sole and exclusive remedy, is recovery of the Seller Payment for the quantity of Biogas by which deliveries in the relevant Contract Year fell short of the Minimum Quantity. 10 Execution Copy 7.4 Failure to Accept Delivered Biogas: If on any day of the Delivery Period Buyer fails to accept all of the Delivered Biogas, other than due to Force Majeure, Buyer shall pay to Seller the Buyer Payment for the difference between the Delivered Biogas and the quantity of Biogas actually taken by Buyer on the relevant Day(s). 7.5 Due Date for Payments: Amounts due under this Section 7 are payable 30 Days after the date of the performing party's invoice to the non -performing party. The invoice must set out the basis upon which the amount due was calculated. If the non -performing party disputes the invoiced amount, the non -performing party must pay the invoiced amount in full before pursuing any remedies available to it, notwithstanding Section 7.4 of the Base Contract. 7.6 Imbalance Charges: Imbalance Charges are not payable under this Section 7, but Seller and/or Buyer will be responsible for Imbalance Charges, if any, as provided in Section 4.3 of the Base Contract. 8. ENVIRONMENTAL ATTRIBUTES GENERALLY 8.1 Title to Environmental Attributes: Except as referenced in Section 10.3 and Section 6, Seller represents and warrants that Seller holds the rights to all Environmental Attributes associated with the Delivered Biogas under this Transaction Confirmation prior to delivery. Title to all Environmental Attributes associated with the Delivered Biogas passes to Buyer when the Biogas reaches the Delivery Point, except as set out in Section 6.2 of this Transaction Confirmation. 8.2 Seller's Warranty: For purposes of this Transaction Confirmation, the following sentence is added after the first sentence of Section 8.2 of the Base Contract: "Seller represents and warrants that the Delivered Biogas is Biogas Compliant under all relevant laws and regulations as such laws and regulations stand on the Execution Date." 8.3 Seller Documents: Seller must, at its cost, provide the following documents and information ("Seller Documents"): (a) all attestations and other information required by the CEC or CARB regarding the Delivered Biogas and its transportation to the Delivery Point for Biogas Compliance; and (b) on Buyer's reasonable request, documentation which verifies that Buyer is receiving all Environmental Attributes from the Delivered Biogas, including offsets for avoided GHG emissions, and that none of the Environmental Attributes associated with the Delivered Biogas have been sold or otherwise transferred to any other person or entity, except in the circumstances set out in Section 10.3 of this Transaction Confirmation. 8.4 Damages Relating to Seller Documents: If it is determined that Seller made knowingly misleading or fraudulent statements in, was grossly negligent as to the accuracy of, or was grossly negligent or intentional in the failure to comply with attestations made in, any Seller Documents and this conduct of Seller results in either of the following, Seller owes Buyer damages as set forth below: (a) If the combustion of the Biogas to which the Seller Document relates is not eligible to generate RPS-compliant renewable energy and RECs solely as a result of Seller's wrongful conduct described in this Section 8.4 Seller will owe Buyer the RPS Payment 11 Execution Copy calculated in accordance with Section 3 of Appendix A to this Transaction Confirmation; and (b) If the combustion of the Biogas to which the Seller Document relates creates a carbon dioxide or other GHG emissions liability on the part of Buyer solely as a result of Seller's wrongful conduct described in this Section 8.4, Seller will owe Buyer the Carbon Payment calculated in accordance with Section 4 of Appendix A to this Transaction Confirmation. 8.5 Nettinq Payments: If Seller is required to pay damages to Buyer pursuant to Section 8.4, Buyer shall send Seller an invoice setting out the reason for and calculation of the applicable damages. Buyer may deduct the RPS Payment or Carbon Payment from amounts Buyer owes to Seller under this Transaction Confirmation in accordance with Section 7.7 of the Base Contract. 9. CERTIFICATION 9.1 Obtaining Certification: Buyer and Seller shall use all reasonable efforts to promptly obtain pre -Certification and Certification of the Power Station and any other Designated Facility, including reasonably cooperating to submit to relevant Governmental Authorities all necessary documentation. Failure to obtain any Certification for Buyer's or Seller's economic reasons does not constitute reasonable efforts for the purposes of this Section 9.1. 9.2 Notice of Initial Certification Date: Buyer will promptly inform Seller when the Initial Certification Date occurs or Buyer receives notice from the CEC (after providing all required documents to the CEC) that Initial Certification will not occur or the certification of Biogas projects has been indefinitely halted (in each case, "Buyer's Certification Notice"). If Buyer receives notice from the CEC that Certification will not occur due to an error or omission that is administrative in nature, each of Buyer and Seller shall use all reasonable efforts to make any changes or additional filings required to obtain Certification. 9.3 Buyer's Failure to Maintain Certification: Failure of Buyer to maintain Certification of the Power Plant, not caused by a breach of Seller's obligations hereunder, shall not relieve Buyer of its obligation to pay the Contract Price for Delivered Biogas. 10. GHG ATTRIBUTES 10.1 Biogas Verification: Seller shall, at its cost, use Commercially Reasonable Efforts to ensure that Delivered Biogas is verifiable under the Mandatory Reporting Regulation or any successor relevant CARB regulation. Seller shall, at its cost, use Commercially Reasonable Efforts to provide Buyer with all necessary information and assistance in conducting any verification of the Delivered Biogas that may be required. Notwithstanding the foregoing, Buyer and Seller shall each bear 50% of all third party direct costs associated with the verification of the Delivered Biogas as required by CARB. 10.2 Biogas Certification: Seller shall use Commercially Reasonable Efforts to obtain and maintain CARB certification for the Delivered Biogas under the Mandatory Reporting Regulation promptly after such certification becomes available. 10.3 Replacement of GHG Attributes: If any GHG Attribute associated with Biogas from a Biogas Facility has been sold or encumbered prior to the Execution Date, Seller may only deliver that Biogas to Buyer under this Transaction Confirmation if: (a) Seller provides Buyer with a GHG Attribute of like kind and vintage to satisfy its 12 Execution Copy to provide GHG Attributes to Buyer; and (b) the provision of such like kind and vintage GHG Attributes does not in itself result in the failure of the relevant Biogas to be Biogas Compliant. 11. CHANGE IN LAW AND TERMINATION RIGHTS 11.1 Challenging Proposed Changes: Seller must provide reasonable support to Buyer upon request in challenging any proposed change in law or regulation that impacts Biogas Compliance, the mutual interest of both parties, or the ability of Seller to perform hereunder as contemplated by this Transaction Confirmation. 11.2 Efforts of Parties to Maintain Biogas Compliance: Each party must use Commercially Reasonable Efforts to ensure that, throughout the Delivery Period, the Delivered Biogas is Biogas Compliant (subject to Section 6 and Section 9.1). 11.3 Termination due to Ineligibility: (a) If at any time between the Execution Date and December 31, 2012, Buyer reasonably determines, in its good faith discretion, that the Biogas, when combusted, does not generate RPS-eligible renewable energy and RECs, whether due to production issues, transportation path issues or otherwise, Buyer may terminate this Transaction Confirmation by providing 5 days' prior written notice to Seller of such termination. Buyer hereby acknowledges and agrees that any determination based upon economic hardship, including, without limitation, Buyer's ability to procure RPS-eligible renewable energy and RECs at a lower or more advantageous price than the Contract Price, shall not be considered a reasonable determination made in Buyer's good faith discretion for the purposes of this Section 11.3(a). (b) It is a "Change in Law" if (x) a governmental authority makes a binding determination, adopts a law, ruling or regulation, or issues a binding clarification of an existing law, ruling or regulation by judicial or administrative proceeding which, in the written opinion of counsel of either party, provides that the Biogas, when combusted, does not or will not generate RPS-eligible renewable energy and RECs, whether due to production issues, transportation path issues, or otherwise, or (y) the CEC issues a notice that Initial Certification will not occur or, as of December 31, 2012, Initial Certification has not occurred. If a Change in Law occurs, each party must use its reasonable efforts to negotiate appropriate revisions to this Agreement to resolve the effect of such Change in Law. If the parties are unable to agree on an appropriate revision to this Transaction Confirmation within 45 days of commencing such negotiations, either party may terminate this Transaction Confirmation by providing written notice of such termination to the other party. The date of termination shall be, and this Transaction Confirmation shall remain in full force and effect until, the first to occur of (i) 30 days following conclusion of the negotiations contemplated in this Section 11.3(b), so long as the Change in Law is also effective at such time or (ii) the date upon which the Change in Law becomes effective. (c) If a governmental authority makes a binding determination or adopts a law, ruling or regulation that subjects the Biogas to a material additional tax, charge, impost or other cost ("Biogas Tax"), the affected party shall provide the other party ("receiving party") with notice of and details regarding the Biogas Tax. Following receipt of such notice, the receiving party shall have 30 days to determine whether the receiving party desires to pay the Biogas Tax or adjust the terms of this Transaction Confirmation to 13 Execution Copy reflect the Biogas Tax) and provide notice of such determination to the affected party, specifying the details of any proposed payment or adjustment. If the receiving party agrees to make payment or adjustment pursuant to this Section 11.3(c), each party must execute any amendment or other documentation related thereto within 10 days of receipt of the affirmative notice. If the receiving party declines to pay the Biogas Tax, the affected party may elect to terminate this Transaction Confirmation by providing 30 days' prior written notice to the receiving party. 11.4 Consequences of Termination: No termination or any other damages under this Transaction Confirmation are payable upon termination pursuant to Section 11.3, including, without limitation, any Early Termination Damages set forth in the Contract. Buyer will remain obligated to pay the Certification Amount to Seller as set out in Section 6.2 of this Transaction Confirmation if the Initial Certification Date occurs at any time following the date of such termination. 12. FORCE MAJEURE 12.1 Force Maieure and Obligation to Perform: If a Force Majeure event affects a party, that party's performance of its obligations under this Contract is excused to the extent the Force Majeure event affects those obligations. However, nothing in this Section 12.1 shall relieve: (a) Buyer of its obligation to pay for any Delivered Biogas or damages; or (b) Seller of its obligation to deliver Biogas and pay any damages, in each case incurred prior to the declaration of Force Majeure pursuant to this Section 12.1. 12.2 Base Contract Section 11.2: Section 11.2 of the Base Contract is hereby deleted in its entirety and all references to that section are deemed to be references to Section 12.3 and Section 12.4 of this Transaction Confirmation. 12.3 Definition of Force Maieure: Force Majeure shall include, but not be limited to, the following: (a) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (b) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (c) interruption and/or curtailment of (A) Firm transportation and/or storage by Transporters on an interstate pipeline or (B) any level of transportation and/or storage service on an intrastate pipeline; (d) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections or wars, or acts of terror; (e) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction; 14 Execution Copy (f) an adverse occurrence or change that results in material curtailment of Biogas production at a Biogas Facility that (A) is not attributable to any of the foregoing clauses of this Section 12.3 and (B) could not have been avoided through reasonably prudent operation of the Biogas Facility; provided that curtailments (C) of the type generally encountered in the ordinary course of operation of the Biogas Facility or (D) of a duration shorter than two weeks shall not qualify as Force Majeure pursuant to this clause (f); and (g) an adverse occurrence or change that results in the material curtailment of power generation at a Designated Facility that (A) is not attributable to any of the foregoing clauses of this Section 12.3 and (B) could not have been avoided through reasonably prudent operation of the Designated Facility; provided that curtailments (C) of the type generally encountered in the ordinary course of generation operations or (D) of a duration shorter than two weeks shall not qualify as Force Majeure pursuant to this clause (g). 12.4 Response to Force Maieure: Seller and Buyer must use reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance. 12.5 Change to Non -Force Maieure Event: For purposes of this Transaction Confirmation, Section 11.3(iii) of the Base Contract is deleted and replaced with the following: "(iii) economic hardship, to include, without limitation, Seller's ability to sell Biogas and/or Environmental Attributes at a higher or more advantageous price than the Contract Price, Buyer's ability to purchase Biogas and/or Environmental Attributes at a lower or more advantageous price than the Contract Price, or a regulatory agency or any other applicable entity disallowing, in whole or in part, the pass through of costs resulting from this Contract;" 12.6 Offsetting decreased production: Seller will use Commercially Reasonable Efforts to offset a decrease in production at a Biogas Facility that otherwise would be excused by Force Majeure with Biogas produced by another Biogas Facility; provided that Seller may claim Force Majeure with respect to a Biogas Facility if, despite Seller's Commercially Reasonable Efforts, replacement production of at least 2,500 MMBtu per Day is not available to Seller from a Biogas Facility (i.e. not otherwise contracted). 12.7 Replacement Designated Facility: If Force Majeure occurs with respect to the Power Station or other Designated Facility, Buyer will use Commercially Reasonable Efforts to identify and obtain Certification of (as required) a replacement Designated Facility for combustion of the Biogas. 12.8 Termination for Continuing Force Maieure: If Force Majeure affects performance of an obligation under this Transaction Confirmation for a period of six consecutive months, the party claiming Force Majeure must provide the non -claiming party with documentation or other information regarding the duration or expected resolution of the Force Majeure event. If the non -claiming party reasonably believes that the Force Majeure will continue for more than one additional month (a total duration of seven months or longer) thereafter, the non -claiming party may, at its discretion, terminate this Transaction Confirmation at any time by providing 60 days' prior written notice to the party claiming Force Majeure. Notwithstanding the foregoing, the Contract will remain in full force and effect if the party claiming Force Majeure (a) commences performance of its obligations under this Transaction Confirmation for a minimum of ten consecutive Days and (b) provides the 15 Execution Copy non -claiming party with written notice that the Force Majeure has ended, prior to the end of the 60 day notice period. No early termination damages will apply to any termination pursuant to this Section 12.8. 12.9 Force Maieure and Operators: Seller will use Commercially Reasonable Efforts to work with operators of each Biogas Facility to minimize the duration and extent of any Force Majeure events involving the applicable Biogas Facility. If Seller does not exercise its rights to compel the operator of the applicable Biogas Facility to minimize the duration and extent of any such Force Majeure events, Seller will assign such rights to Buyer to the full extent of Seller's lawful right to do so. Seller covenants not to conspire with any operator of any Biogas Facility to cause any interruption of delivery of Biogas to Buyer under this Transaction Confirmation. 13. PRIORITY OF TRANSACTION CONFIRMATION 13.1 If there is any discrepancy between the terms of this Transaction Confirmation and any terms of the Base Contract, the terms of this Transaction Confirmation shall govern. Seller: Ellemej Markets Renewable Energy, LLC Signature: Name: Angela Schwarz Buyer: City of Vernon, Light and Power Departmen Signature: Name: Carlos Fandino Title: President I Title: Director of Light and Power Execution Copy Appendix A to Transaction Confirmation CALCULATION OF DAMAGES 1. Damages if Seller fails to deliver Biogas — Section 7.3 Seller Payment ($) _ [Replacement Price ($/MMBtu) — Contract Price ($/MMBtu)] x Undelivered Gas Quantity (MMBtu) Undelivered Gas Quantity (MMBtu) x [Gas Purchase Price ($/MMBtu) + (REC Price ($/MWh) + 7.5 (MMBtu/MWh)) + (Allowance Price ($/mtCO2e) x 0.06342 (mtCO2e/MMBtu)) — Contract Price ($/MMBtu)] Where: Replacement Price = The price per MMBtu at which Buyer, acting in a commercially reasonable manner, purchases or arranges to purchase Replacement Biogas at the Delivery Point or an equivalent delivery point using the Cover Standard, plus any reasonable costs incurred by Buyer in purchasing the Replacement Biogas including any Imbalance Charges, if applicable. Undelivered Gas = The difference, in MMBtu, between the Minimum Quantity and Quantity the quantity of Biogas Seller actually delivered to Buyer in the Contract Year. Gas Purchase Price = Purchase price paid by Buyer per MMBtu of natural gas, without associated Environmental Attributes, utilizing the Cover Standard. To the extent no such purchase is reasonably available, the Gas Purchase Price will be the Spot Price. REC Price = The average of the prices obtained for a REC generated at a generating facility located in California in the year in which the breach occurred from two recognized participants in the REC market, one designated by Seller and one designated by Buyer. Seller and Buyer must each use Commercially Reasonable Efforts to seek the lowest available price for such RECs. Allowance Price = Average clearing price for an Allowance at the four allowance auctions conducted by CARB immediately prior to the breach. If fewer than four such auctions have taken place, the Allowance Price will be the average of quotations from three independent brokers for the price of an Allowance delivered in the year in which the breach occurred. 17 Execution Copy The Allowance Price will be equal to zero unless and until Buyer has a compliance obligation under the Cap and Trade Regulation. If the result of the calculation of the Seller Payment is a negative amount, the Seller Payment will be zero. 2. Damages if Buyer fails to take Biogas — Section 7.4 Buyer Payment ($) = Gas Quantity (MMBtu) x (Contract Price ($/MMBtu) —Gas Sale Price ($/MMBtu)) Where: Gas Quantity = Sum of the difference, in MMBtu, between the Delivered Biogas and the quantity of Biogas Buyer actually took on each Day on which Buyer breached its obligation to receive Biogas. Gas Sale Price = Price per MMBtu received by Seller utilizing the Cover Standard for the resale of the Biogas Buyer did not take, as natural gas without associated Environmental Attributes. To the extent no such sale is reasonably available, the Gas Sale Price will be the Spot Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point. If the result of the calculation of the Buyer Payment is a negative amount, the Buyer Payment will be zero. 3. RPS Payment under Section 8.4(a) If Section 8.4(a) of this Transaction Confirmation applies, the RPS Payment will be calculated as follows: RPS Payment ($) = Gas Quantity (MMBtu) x REC Price ($/MWh) _ 7.5 (MMBtu/MWh) Where: Gas Quantity = Quantity of gas, in MMBtu, to which Section 8.4(a) of this Transaction Confirmation applies. REC Price = Average of the prices obtained for a REC generated at a generating facility located in California in the year in which the Biogas that is determined to be non-RPS-compliant was delivered from two recognized participants in the REC market, one designated by Seller and one designated by Buyer. Seller and Buyer must each use Commercially Reasonable Efforts to seek the lowest available price for such RECs. 18 Execution Copy 4. Carbon Payment under Section 8.4(b) If Section 8.4(b) of this Transaction Confirmation applies, the Carbon Payment will be calculated as follows: Carbon Payment ($) = Gas Quantity (MMBtu) x Allowance Price ($/mtCO2e) x 0.06342 (mtCO2e/MMBtu) Where: Gas Quantity = Quantity of gas, in MMBtu, to which Section 8.4(b) of this Transaction Confirmation applies. Allowance Price = Average clearing price for an Allowance at the four allowance auctions conducted by CARB immediately prior to the date on which it is determined that the gas is unable to be verified. If fewer than four such auctions have taken place, the Allowance Price will be the average of quotations from three independent brokers for the price of an Allowance delivered in the year in which it is determined that the gas is unable to be verified. 5. Calculation of the Minimum Quantity — examples • In 2012 the Minimum Quantity is 80% of the Contract Quantity. Assume Seller delivers 75% of the Contract Quantity — damages will be payable under section 1 above for the missing 5%, but the Minimum Quantity for 2013 remains 80% of the Contract Quantity because there is an initial two-year grace period. • In 2013 Seller delivers 82% of the Contract Quantity — the Minimum Quantity for 2014 remains 80% of the Contract Quantity. • In 2014 Seller delivers 74% of the Contract Quantity — damages will be payable under section 1 above for the missing 6%, but the Minimum Quantity for 2015 remains 80% of the Contract Quantity. • In 2015 Seller delivers 70% of the Contract Quantity — damages will be payable under section 1 above for the missing 10%, and the Minimum Quantity for 2016 will be 90% of the Contract Quantity, because there have been two consecutive years of delivery below 80% of the Contract Quantity. • In 2016 Seller delivers 85% of the Contract Quantity — damages will be payable under section 1 above for the missing 5%, and the Minimum Quantity for 2017 will remain 90% of the Contract Quantity. • In 2017 Seller delivers 92% of the Contract Quantity - the Minimum Quantity for 2018 will return to 80% of the Contract Quantity. • In 2018 Seller delivers 77% of the Contract Quantity — damages will be payable under section 1 above for the missing 3%, and the Minimum Quantity for 2019 will be 90% of the Contract Quantity. • In 2019 Seller delivers 90% of the Contract Quantity — the Minimum Quantity for 2020 will return to 80% of the Contract Quantity. W Execution Copy Year Minimum Example delivery Damages under Effect on Minimum Quantity in Quantity (as average % of Appendix A Section 1? following year Contract Quantity) 2012 80% 75% Yes, for missing 5% No effect — 2 year grace period 2013 80% 82% No Remains 80% - target met 2014 80% 74% Yes, for missing 6% No effect — 2 year grace period 2015 80% 70% Yes, for missing 10% Increases to 90%— 2nd year in a row below target 2016 900/0 85% Yes, for missing 5% Remains 90% - target not met 2017 90% 92% No Decreases to 80% - target met 2018 80% 77% Yes, for missing 3% Increases to 90% - target not met 2019 90% 90% No Decreases to 80% - target met 2020 80% 98% No Remains 80% - target met 2021 80% 78% Yes, for missing 2% Not applicable 20 OFFICE OF THE CITY CLERK 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 April 18, 2012 Randall N. Lack Element Markets Renewable Energy, LLC 3555 Timmons Lane, Suite 900 Houston, TX 77027 Re: Base Contract Nos. 1 and 2 and Biomethane Transaction Confirmation Nos. 1 and 2 Dear Mr. Lack: Transmitted herewith are fully executed originals of the above -referenced contracts and transaction confirmations, approved by City Council on April 17, 2012, through Resolution Nos. 2012-48 and 2012-49. If you have any questions regarding this matter, please call Carlos Fandino at 323/583-8811 ext. 834. Very ly yours, WIL RD G. M U I City Clerk WGY:dj Enclosures c: Abraham Alemu Carlos Fandino Resolution Nos. 2012-48, 2012-49 Agreement File Nos. 12-031, 12-032 Exclusively Industrial Execution Copy BIOGAS TRANSACTION CONFIRMATION Between ELEMENT MARKETS RENEWABLE ENERGY, LLC and CITY OF VERNON LIGHT AND POWER DEPARTMENT Dated as of: March 2, 2012 Transaction Confirmation Number: 1 1 Execution Copy Table of Contents 1. PURPOSE OF TRANSACTION CONFIRMATION............................................................................... 3 2. DEFINITIONS.......................................................................................................................................3 3. SALE AND PURCHASE OBLIGATIONS.............................................................................................. 8 4. MAKE -GOOD BIOGAS......................................................................................................................... 9 5. NOMINATIONS AND TIMING OF DELIVERY...................................................................................... 9 6. PAYMENT FOR BIOGAS AND ENVIRONMENTAL ATTRIBUTES.................................................... 10 7. DAMAGES FOR BREACH OF OBLIGATION TO DELIVER OR RECEIVE BIOGAS.......................... 10 8. ENVIRONMENTAL ATTRIBUTES GENERALLY................................................................................ 11 9. CERTIFICATION................................................................................................................................12 10. GHG ATTRIBUTES............................................................................................................................ 12 11. CHANGE IN LAW AND TERMINATION RIGHTS............................................................................... 13 12. FORCE MAJEURE.............................................................................................................................14 13. PRIORITY OF TRANSACTION CONFIRMATION..............................................................................16 Appendix A: Calculation of Damages 1. Damages if Seller fails to deliver Biogas — Section 7.3.......................................................................17 2. Damages if Buyer fails to take Biogas — Section 7.4...........................................................................18 3. RPS Payment under Section 8.4(a)....................................................................................................18 4. Carbon Payment under Section 8.4(b)................................................................................................19 5. Calculation of the Minimum Quantity — examples...............................................................................19 2 Execution Copy BIOGAS TRANSACTION CONFIRMATION This Transaction Confirmation is subject to the Base Contract for Sale and Purchase of Natural Gas between Seller and Buyer dated as of March 2, 2012, No. 1 ('Base Contract'). The terms of this Transaction Confirmation are binding. SELLER: BUYER: Element Markets Renewable Energy, LLC City of Vernon, Light and Power Department 3555 Timmons Lane, Suite 900 4305 S. Santa Fe Avenue Houston, TX 77027 Vernon, CA 90058 Attention: Randall N. Lack Attention: Abraham Alemu Phone: 281-207-7213 Phone: 323-583-8811 Fax: 281-207-7211 Fax: 323-826-1408 Contract Price: Per MMBtu delivered at the Delivery Point: $10.25 plus the Transportation Cost Reimbursement Amount (as defined herein); in total for Biogas and all associated Environmental Attributes (as defined herein) delivered from the Commencement Date until the end of the Delivery Period, subject to Section 6. Delivery Period: Commences on March 2, 2012 (the "Commencement Date") and ends on the 10th anniversary of the Initial Certification Date. Contract Quantity: 1,000 MMBtus/day Delivery Point: SoCalGas-City Gate, as defined in the SoCalGas Tariff. Special Conditions: 1. PURPOSE OF TRANSACTION CONFIRMATION 1.1 The purpose of this Transaction Confirmation is to set forth the terms of a transaction for the purchase and sale of Biogas (the "Transaction") produced by one or more Biogas Facilities that, when combusted at the Power Station and other Designated Facilities: (a) generates energy without giving rise to a carbon dioxide or other GHG emissions liability; and (b) generates RPS-eligible electricity, as certified by the CEC, and RECs (conditions (a) and (b) together being "Biogas Compliance"). 1.2 The terms of this Transaction Confirmation amend and supplement the terms of the Base Contract for the purpose of the Transaction. 2. DEFINITIONS The following additions and amendments are made to the definitions in the Base Contract for the purposes of this Transaction Confirmation: 2.1 "Allowance" means a California greenhouse gas emissions allowance as defined in the Cap and Trade Regulation, being a limited tradable authorization, issued by CARB, to emit up to one metric ton of carbon dioxide equivalent. Execution Copy meaning set forth in Section 3.2 of this Transaction Confirmation. 2.3 "Biogas" means "digester gas", "landfill gas" or other form of biogas injected into a natural gas intrastate or interstate pipeline for the purposes of electricity generation which, subject to Section 11 and other applicable provisions hereunder: (a) is a renewable fuel as listed in, and is capable of being transported to California in the manner required in, the CEC Renewables Portfolio Standard Eligibility Guidebook as of the Execution Date; (b) meets the quality specifications required by the Transporter(s); and (c) qualifies as "biomass -derived fuel" under the Cap and Trade Regulation and is verifiable as such under the Mandatory Reporting Regulation. 2.4 'Biogas Compliance" or "Biogas Compliant" has the meaning set out in Section 1.1 of this Transaction Confirmation. 2.5 'Biogas Facility" or "Biogas Facilities" means one or more facilities that produce Biogas. 2.6 "Buyer Payment" means the amount Buyer owes Seller in the circumstances set out in Section 7.4 of this Transaction Confirmation, calculated in accordance with Section 2 of Appendix A to this Transaction Confirmation. 2.7 "Buyer's Certification Notice" has the meaning set out in Section 9.2 of this Transaction Confirmation. 2.8 "Cap and Trade Regulation" means the regulation entitled "California Cap on Greenhouse Gas Emissions and Market -Based Compliance Mechanisms", as approved by the Office of Administrative Law on December 13, 2011, set forth in division 3, chapter 1, subchapter 10, article 5 of title 17 of the California Code of Regulations. 2.9 "CARB" means the California Air Resources Board. 2.10 "Carbon Payment" has the meaning in Section 4 of Appendix A to this Transaction Confirmation. 2.11 "CEC" means the California Energy Commission. 2.12 "Certification" means CEC's certification of a Designated Facility as RPS-eligible in respect of the Biogas from a Biogas Facility. 2.13 "Certification Date' means the date on which the CEC notifies Buyer that Certification has occurred in relation to Biogas from a particular Biogas Facility. 2.14 "Certification Amount" means the Contract Price minus the Pre-Cert Price, multiplied by the number of MMBtus of Biogas from a particular Biogas Facility that are delivered to Buyer prior to the Initial Certification Date and accrue Renewable Energy Attributes upon the Initial Certification Date. If the Certification Amount is negative, the Certification Amount will be deemed to be zero. 2.15 "Change in Law' has the meaning set out in Section 11.3(b) of this Transaction Confirmation. 2.16 "Commencement Date" has the meaning set out on page 3 of this Transaction Confirmation. 2.17 "Commercially Reasonable Efforts" means the efforts that a prudent person desirous of U Execution Copy achieving a result would use to achieve the result without taking any action that would or is likely to result in any of the following: (a) a material adverse effect on the benefit derived from this Transaction Confirmation by such person; (b) a material adverse change in the profitability or operations of such person's business; or (c) the expenditure of material funds (in excess of $10,000 per year in any calendar year) by or the imposition of any other material burden on such person. 2.18 "Contract Price" means the price per MMBtu for Biogas and all associated Environmental Attributes set out on page 3 of this Transaction Confirmation (subject to Section 6). 2.19 "Contract Quantity" means the quantity of Biogas set out on page 3 of this Transaction Confirmation. 2.20 "Contract Year" means a 12 month period, other than the first and final Contract Years which may be less than 12 months. The first Contract Year begins on the Initial Certification Date and the second Contract Year begins on January 1 of the calendar year following the Initial Certification Date. 2.21 "Delivered Biogas" means Biogas delivered to the Delivery Point by Seller on any Day pursuant to this Transaction Confirmation, including any Make -Good Biogas delivered pursuant to Section 4 of this Transaction Confirmation. References to Delivered Biogas purchased and sold hereunder include all associated Environmental Attributes. 2.22 "Delivery Period" has the meaning set out on page 3 of this Transaction Confirmation. 2.23 "Delivery Point" has the meaning set out on page 3 of this Transaction Confirmation. 2.24 "Delivery Shortfall" has the meaning set out in Section 4.1 of this Transaction Confirmation. 2.25 "Designated Facility" means the Power Station and any other power generation facilities at which Buyer may combust Biogas, as designated by Buyer in writing to Seller from time to time. 2.26 "Environmental Attribute(s)" means any and all credits, benefits, emissions reductions, offsets, and allowances, howsoever entitled, attributable to the production and combustion of the Delivered Biogas. Environmental Attributes include but are not limited to: (a) GHG Attributes; (b) Renewable Energy Attributes; and (c) any avoided emissions of pollutants to the air, soil or water such as sulfur oxides (SOx), nitrogen oxides (NOx), carbon monoxide (CO) and other pollutants other than as noted in clauses (d) through (i) below. Environmental Attributes do not include: (d) any energy, capacity, reliability or other power attributes from a generating facility; (e) tax credits associated with the construction or operation of energy projects and other financial incentives in the form of credits, reductions, or allowances associated with an energy project that are applicable to a state or federal income taxation obligation; or "tipping fees" that may be paid to Seller to accept certain 5 Execution Copy fuels, or local subsidies received by the landfill operator for the destruction of particular pre-existing pollutants or the promotion of local environmental benefits; (g) emission reduction credits encumbered or used by a generating facility for compliance with local, state, or federal operating and/or air quality permits; (h) any credits or payments (other than offset credits) associated with the reduction of solid waste and treatment benefits created by the utilization of biomass or biogas fuels; or (i) any other existing or future credits, benefits, emissions reductions, offsets or allowances that are required by the owner or operator of the Biogas Facility or of the site at which the Biogas Facility is located for compliance with applicable environmental laws or regulations. 2.27 "Execution Date" means the later of: (a) the date that Buyer signs this Transaction Confirmation; or (b) the date that Seller signs this Transaction Confirmation. 2.28 "Force Majeure" has the meaning set out in Section 12.3 of this Transaction Confirmation. 2.29 "Gas" as referenced in the Base Contract means Biogas as defined in this Transaction Confirmation. 2.30 "GHG Attribute" means: (a) the ability of the Delivered Biogas to be verified as "biomass -derived fuel" under the Mandatory Reporting Regulation (assuming that Buyer makes Commercially Reasonable Efforts to obtain such verification); (b) any certificates issued in relation to the Delivered Biogas under a biofuel certification program established by CARB pursuant to the Mandatory Reporting Regulation; (c) any avoided emissions of carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs) attributable to the Delivered Biogas that have been determined by the United Nations Intergovernmental Panel on Climate Change to contribute to the actual or potential threat of altering the Earth's climate by trapping heat in the atmosphere, including all offset credits issued in respect of such avoided emissions; and (d) the reporting rights to these attributes, provided that Seller retains any reporting rights to the extent required for a compliance obligation of a Biogas Facility. 2.31 "Initial Certification" means the first Certification to occur in respect of the Biogas from a Biogas Facility. 2.32 "Initial Certification Date" means the earlier to occur of (a) the date upon which the CEC notifies Buyer that the Initial Certification has occurred and (b) the date upon which Buyer provides Seller with written notice that Buyer desires to waive the requirement for Initial Certification and initiate deliveries of the Contract Quantity. 2.33 "Make -Good Biogas" means Biogas delivered to Buyer in excess of the Contract Quantity on any Day in the circumstances set out in Section 4.2. The quantity of Make -Good Biogas is limited as follows: (a) the Make -Good Biogas must not exceed 20% of the Contract Quantity on any Day (i.e. Delivered Biogas shall not exceed 120% of the Contract Quantity); provided that 0 Execution Copy if Buyer refuses any Make -Good Biogas pursuant to Section 4.3, Seller may deliver Make -Good Biogas in an amount up to 40% of the Contract Quantity on any Day (i.e. Delivered Biogas shall not exceed 140% of the Contract Quantity) until such time as all refused Make -Good Biogas has been delivered to Buyer; and (b) nomination of and requests to nominate any Make Good Biogas must cease when the actual average daily quantity of Biogas delivered by Seller in the relevant Contract Year equals the Contract Quantity. 2.34 "Mandatory Reporting Regulation" means the regulation for the mandatory reporting of greenhouse gas emissions promulgated by CARB and set forth in division 3, chapter 1, subchapter 10, article 2 of title 17 of the California Code of Regulations, including the amendments approved by the Office of Administrative Law on December 14, 2011. 2.35 "Minimum Delivery Failure" means Seller delivering less than the Minimum Quantity of Biogas to Buyer during any Contract Year (including as delivered any Make -Good Biogas that was requested to be nominated to but refused by Buyer and remains undelivered at the end of that Contract Year pursuant to Section 4.3), other than due to Force Majeure. 2.36 "Minimum Quantity" means a daily average quantity of Biogas, calculated beginning on the Initial Certification Date for each Contract Year for the remainder of the Delivery Period, excluding from the calculation any days on which Force Majeure affected Seller's performance, as notified to Buyer in accordance with Section 11 of the Base Contract, equal to: (a) 80% of the Contract Quantity, unless Section 2.36(b) applies; or (b) 90% of the Contract Quantity if: i. in each of the two previous Contract Years, Seller delivered less than 80% of the Contract Quantity on average (if this situation has not previously occurred during the Delivery Period); or ii. the situation in clause (i) of this Section 2.36(b) has previously occurred during the Delivery Period and, in the preceding Contract Year, Seller delivered less than the Minimum Quantity applying in that Contract Year. Examples of the calculation of Minimum Quantity are set out in Section 5 of Appendix A to this Transaction Confirmation. For the avoidance of doubt, if any Contract Year is shorter than a full calendar year, the Minimum Quantity will be calculated using the number of days in the shortened Contract Year. 2.37 "Monthly Nomination" has the meaning set out in Section 5.1 of this Transaction Confirmation. 2.38 "Power Station" means the Malburg Generating Station at 2715 East 50th Street, Vernon, California. 2.39 "Pre-Cert Price' means, per MMBtu, the Spot Price on the Day such Biogas is delivered. 2.40 "REC" means a renewable energy certificate, registered with WREGIS, that can be used for compliance with the RPS and that meets the requirements of section 399.16(b)(1) of the California Public Utilities Code (as that section may be amended, restated or supplemented from time to time) and any applicable binding determinations made or regulations promulgated under that section by governmental authorities. 2.41 "Renewable Energy Attribute" means the ability to generate RECs or similar instruments 7 Execution Copy in respect of the electricity generated from the combustion of the Biogas at a Facility. 2.42 'Replacement Biogas" means: (a) "digester gas", 'landfill gas" or other form of biogas injected into a natural gas pipeline that: is a renewable fuel as listed in, and is capable of being transported to California in the manner required in, the CEC Renewables Portfolio Standard Eligibility Guidebook as of the Execution Date; ii. meets the quality specifications required by the Transporter(s); and iii. qualifies as "biomass -derived fuel' under the Cap and Trade Regulation and is verifiable as such under the Mandatory Reporting Regulation; and (b) any Environmental Attributes associated with such Replacement Biogas. 2.43 'Replacement Price" has the meaning set out in Section 1 of Appendix A to this Transaction Confirmation. 2.44 "RPS" means the Renewable Portfolio Standard as set forth in California Public Utilities Code Section 399.11 et seq, and any regulations promulgated under such sections that are applicable to Buyer. 2.45 'RPS Payment' has the meaning set forth in Section 3 of Appendix A to this Transaction Confirmation. 2.46 "Seller Documents" has the meaning set out in Section 8.3 of this Transaction Confirmation. 2.47 "Seller Payment' means the amount Seller owes Buyer in the circumstances set out in Section 7.3 of this Transaction Confirmation, calculated in accordance with Section 1 of Appendix A to this Transaction Confirmation. 2.48 "SoCalGas Tariff" means the Southern California Gas Company tariff approved by the California Public Utilities Commission applicable to deliveries hereunder at the Delivery Point. 2.49 "Term" means the term of this Contract, which commences on the Execution Date and ends concurrently with the Delivery Period. 2.50 "Transportation Cost Reimbursement Amount' means, per MMBtu of Biogas delivered hereunder at the Delivery Point, $0.65. 2.51 "WREGIS" means the Western Renewable Energy Generation Information System. 3. SALE AND PURCHASE OBLIGATIONS 3.1 Contract Quantity: Under this Transaction Confirmation, Seller agrees to sell to Buyer at the Delivery Point, and Buyer agrees to purchase from Seller at the Delivery Point, Biogas and all Environmental Attributes associated with that Biogas, in an amount up to the Contract Quantity in accordance with the terms of this Contract. 3.2 Additional Volume: Seller may, from time to time during the Term, offer up to 2,500 MMBtu of additional Biogas to Buyer for purchase at the Delivery Point in accordance with the terms of this Contract by providing written notice of such availability (including the proposed date of first delivery) to Buyer (such notice, an "Availability Notice"). Buyer may, 0 Execution Copy as determined in its sole discretion, agree to purchase all or any portion of the Biogas set forth in the Availability Notice by sending written confirmation of acceptance to Seller within thirty (30) days of receiving the Availability Notice from Seller. Any and all references to "Contract Quantity" in this Contract shall include such additional quantities of Biogas purchased and sold pursuant to this Section 3.2 as of the first Day upon which any such Biogas is delivered to Seller. For the avoidance of doubt, the Contract Quantity shall not exceed 3,500 MMBtu at any time during the Term except as Buyer and Seller may otherwise agree in writing. 4. MAKE -GOOD BIOGAS 4.1 Delivery Shortfall: A "Delivery Shortfall' occurs if at any time during a Contract Year Seller has delivered less than the Contract Quantity of Biogas to Buyer, as determined on average for the Contract Year to date (by deriving the actual average quantity of Delivered Biogas in such Contract Year and comparing such average with the Contract Quantity). 4.2 Nomination of Make -Good Biogas: If a Delivery Shortfall occurs, Seller may request to nominate Make -Good Biogas for delivery to Buyer. If Seller desires to deliver Make -Good Biogas to Buyer on any Day, Seller shall submit an updated nomination to Buyer on or before 6:00 a.m. Pacific Standard Time on the third Business Day prior to the Day on which the Biogas will be delivered which indicates the quantity of Make -Good Biogas to be delivered on such Day. 4.3 Refusal to Accept Make -Good Biogas: Buyer may refuse to accept delivery of nominated Make -Good Biogas by providing notice of such refusal to Seller on or before 6:00 a.m. Pacific Standard Time on the Business Day prior to the proposed delivery of such Make - Good Biogas; provided that Seller shall be entitled to include any Make -Good Biogas that is refused by Buyer in a subsequent nomination request under this Section 4.3 at any time during the same Contract Year until all such nominated Make -Good Biogas is accepted by and delivered to Buyer. Notwithstanding the foregoing, Buyer may only reject Make -Good Biogas under this Section 4.3 if the Power Station is experiencing a shutdown or reduction in capacity. 4.4 Undelivered Make -Good Biogas: If any Make -Good Biogas refused by Buyer remains undelivered by Seller at the end of a Contract Year, the aggregate quantity of such Make - Good Biogas shall be applied to reduce the Minimum Quantity of Biogas deliverable by Seller during such Contract Year. 5. NOMINATIONS AND TIMING OF DELIVERY 5.1 Monthly Nominations: On or before the sixth Business Day prior to the first Business Day of each Month, Seller must submit to Buyer its non -binding nomination of the quantity of Biogas (including any Make -Good Biogas, if applicable) that Seller expects to deliver to Buyer at the Delivery Point on each day during such Month ("Monthly Nomination"). 5.2 Updating Monthly Nominations: Seller shall update its Monthly Nomination, if necessary, on or before 6:00 a.m. Pacific Standard Time on the Business Day prior to each Day on which Biogas will be delivered at the Delivery Point, by providing notice to Buyer of the quantity of Biogas to be delivered on such Day. 5.3 Timing of Delivery: Seller will use Commercially Reasonable Efforts to coordinate with Buyer to optimize the timing of the delivery of Biogas in order to maximize the use of Biogas by Designated Facilities. Execution Copy AL ATTRIBUTES 6.1 Pre-Cert Price payable prior to Initial Certification Date: Buyer will pay Seller the Pre-Cert Price for each MMBtu of Biogas that is delivered under this Transaction Confirmation on each Day prior to the Initial Certification Date, in accordance with Section 7.2 of the Base Contract. For the avoidance of doubt, Buyer must pay Seller under this Section 6.1 regardless of whether the Initial Certification is received. 6.2 Certification Amounts: Within 15 Days following the Initial Certification Date, Seller shall invoice Buyer for the Certification Amount. Buyer will pay the Certification Amount to Seller in accordance with Section 7.2 of the Base Contract. All rights, title and interest in and to the Renewable Energy Attributes associated with Biogas delivered prior to the Initial Certification Date will transfer to Buyer when Buyer pays the Certification Amount. 6.3 Contract Price payable after Initial Certification Date: Buyer will pay Seller the Contract Price for each MMBtu of Biogas delivered to Buyer (up to the Contract Quantity plus any Make -Good Biogas) on or after the Initial Certification Date. 6.4 Payment for Natural Gas: Seller may, from time to time as determined in its sole discretion, deliver natural gas to Buyer in connection with the management of transportation losses or pipeline imbalances. Any such deliveries shall not exceed (and Buyer shall not have the obligation to pay for any natural gas in excess of) 2% of the Contract Quantity for any Day. Seller shall not be in breach of this Transaction Confirmation as a result of or in connection with any delivery of natural gas as described in this Section 6.4. If Buyer receives natural gas pursuant to this Section 6.4, Buyer shall pay Seller 95% of the Spot Price as of the date of delivery for each MMBtu of such gas when invoiced by Seller in accordance with this Contract. Seller must provide separate invoices for the natural gas and Biogas. 6.5 Base Contract Section 7.1: For purposes of this Transaction, Section 7.1 of the Base Contract is deleted and all references to that section will be deemed to be references to Section 6.6 of this Transaction Confirmation. 6.6 Invoicing Requirements: Seller shall invoice Buyer for Delivered Biogas and, for the avoidance of doubt, all associated Environmental Attributes, received by Buyer in the preceding Month along with supporting documentation consistent with standard industry practice and documentation required by the CEC and the CARB or other similar regulatory agency, including metering data and transport records for Delivered Biogas, subject to Seller's obligation to use Commercially Reasonable Efforts to maintain Biogas Compliance as set forth Section 11 of this Transaction Confirmation. 7. DAMAGES FOR BREACH OF OBLIGATION TO DELIVER OR RECEIVE BIOGAS 7.1 Alternative Damages: Pursuant to Section 3.3 of the Base Contract, for purposes of this Transaction Confirmation the parties elect Alternative Damages. 7.2 Base Contract Section 3.2: For purposes of this Transaction Confirmation, Section 3.2 of the Base Contract is deleted in its entirety and all references to that section will be deemed to be references to the following sections of this Section 7. 7.3 Minimum Delivery Failure: If a Minimum Delivery Failure occurs, Buyer's sole and exclusive remedy, is recovery of the Seller Payment for the quantity of Biogas by which deliveries in the relevant Contract Year fell short of the Minimum Quantity. 10 Execution Copy 7.4 Failure to Accept Delivered Biogas: If on any day of the Delivery Period Buyer fails to accept all of the Delivered Biogas, other than due to Force Majeure, Buyer shall pay to Seller the Buyer Payment for the difference between the Delivered Biogas and the quantity of Biogas actually taken by Buyer on the relevant Day(s). 7.5 Due Date for Payments: Amounts due under this Section 7 are payable 30 Days after the date of the performing party's invoice to the non -performing party. The invoice must set out the basis upon which the amount due was calculated. If the non -performing party disputes the invoiced amount, the non -performing party must pay the invoiced amount in full before pursuing any remedies available to it, notwithstanding Section 7.4 of the Base Contract. 7.6 Imbalance Charges: Imbalance Charges are not payable under this Section 7, but Seller and/or Buyer will be responsible for Imbalance Charges, if any, as provided in Section 4.3 of the Base Contract. 8. ENVIRONMENTAL ATTRIBUTES GENERALLY 8.1 Title to Environmental Attributes: Except as referenced in Section 10.3 and Section 6, Seller represents and warrants that Seller holds the rights to all Environmental Attributes associated with the Delivered Biogas under this Transaction Confirmation prior to delivery. Title to all Environmental Attributes associated with the Delivered Biogas passes to Buyer when the Biogas reaches the Delivery Point, except as set out in Section 6.2 of this Transaction Confirmation. 8.2 Seller's Warranty: For purposes of this Transaction Confirmation, the following sentence is added after the first sentence of Section 8.2 of the Base Contract: "Seller represents and warrants that the Delivered Biogas is Biogas Compliant under all relevant laws and regulations as such laws and regulations stand on the Execution Date." 8.3 Seller Documents: Seller must, at its cost, provide the following documents and information ("Seller Documents"): (a) all attestations and other information required by the CEC or CARB regarding the Delivered Biogas and its transportation to the Delivery Point for Biogas Compliance; and (b) on Buyer's reasonable request, documentation which verifies that Buyer is receiving all Environmental Attributes from the Delivered Biogas, including offsets for avoided GHG emissions, and that none of the Environmental Attributes associated with the Delivered Biogas have been sold or otherwise transferred to any other person or entity, except in the circumstances set out in Section 10.3 of this Transaction Confirmation. 8.4 Damages Relating to Seller Documents: If it is determined that Seller made knowingly misleading or fraudulent statements in, was grossly negligent as to the accuracy of, or was grossly negligent or intentional in the failure to comply with attestations made in, any Seller Documents and this conduct of Seller results in either of the following, Seller owes Buyer damages as set forth below: (a) If the combustion of the Biogas to which the Seller Document relates is not eligible to generate RPS-compliant renewable energy and RECs solely as a result of Seller's wrongful conduct described in this Section 8.4, Seller will owe Buyer the RPS Payment 11 Execution Copy to this Transaction Confirmation; and (b) If the combustion of the Biogas to which the Seller Document relates creates a carbon dioxide or other GHG emissions liability on the part of Buyer solely as a result of Seller's wrongful conduct described in this Section 8.4, Seller will owe Buyer the Carbon Payment calculated in accordance with Section 4 of Appendix A to this Transaction Confirmation. 8.5 Netting Payments: If Seller is required to pay damages to Buyer pursuant to Section 8.4, Buyer shall send Seller an invoice setting out the reason for and calculation of the applicable damages. Buyer may deduct the RPS Payment or Carbon Payment from amounts Buyer owes to Seller under this Transaction Confirmation in accordance with Section 7.7 of the Base Contract. 9. CERTIFICATION 9.1 Obtaining Certification: Buyer and Seller shall use all reasonable efforts to promptly obtain pre -Certification and Certification of the Power Station and any other Designated Facility, including reasonably cooperating to submit to relevant Governmental Authorities all necessary documentation. Failure to obtain any Certification for Buyer's or Seller's economic reasons does not constitute reasonable efforts for the purposes of this Section 9.1. 9.2 Notice of Initial Certification Date: Buyer will promptly inform Seller when the Initial Certification Date occurs or Buyer receives notice from the CEC (after providing all required documents to the CEC) that Initial Certification will not occur or the certification of Biogas projects has been indefinitely halted (in each case, "Buyer's Certification Notice"). If Buyer receives notice from the CEC that Certification will not occur due to an error or omission that is administrative in nature, each of Buyer and Seller shall use all reasonable efforts to make any changes or additional filings required to obtain Certification. 9.3 Buyer's Failure to Maintain Certification: Failure of Buyer to maintain Certification of the Power Plant, not caused by a breach of Seller's obligations hereunder, shall not relieve Buyer of its obligation to pay the Contract Price for Delivered Biogas. 10. GHG ATTRIBUTES 10.1 Biogas Verification: Seller shall, at its cost, use Commercially Reasonable Efforts to ensure that Delivered Biogas is verifiable under the Mandatory Reporting Regulation or any successor relevant CARB regulation. Seller shall, at its cost, use Commercially Reasonable Efforts to provide Buyer with all necessary information and assistance in conducting any verification of the Delivered Biogas that may be required. Notwithstanding the foregoing, Buyer and Seller shall each bear 50% of all third party direct costs associated with the verification of the Delivered Biogas as required by CARB. 10.2 Biogas Certification: Seller shall use Commercially Reasonable Efforts to obtain and maintain CARB certification for the Delivered Biogas under the Mandatory Reporting Regulation promptly after such certification becomes available. 10.3 Replacement of GHG Attributes: If any GHG Attribute associated with Biogas from a Biogas Facility has been sold or encumbered prior to the Execution Date, Seller may only deliver that Biogas to Buyer under this Transaction Confirmation if: (a) Seller provides Buyer with a GHG Attribute of like kind and vintage to satisfy its 12 Execution Copy obligation to provide GHG Attributes (b) the provision of such like kind and vintage GHG Attributes does not in itself result in the failure of the relevant Biogas to be Biogas Compliant. 11. CHANGE IN LAW AND TERMINATION RIGHTS 11.1 Challenging Proposed Changes: Seller must provide reasonable support to Buyer upon request in challenging any proposed change in law or regulation that impacts Biogas Compliance, the mutual interest of both parties, or the ability of Seller to perform hereunder as contemplated by this Transaction Confirmation. 11.2 Efforts of Parties to Maintain Biogas Compliance: Each party must use Commercially Reasonable Efforts to ensure that, throughout the Delivery Period, the Delivered Biogas is Biogas Compliant (subject to Section 6 and Section 9.1). 11.3 Termination due to Ineligibility: (a) If at any time between the Execution Date and December 31, 2012, Buyer reasonably determines, in its good faith discretion, that the Biogas, when combusted, does not generate RPS-eligible renewable energy and RECs, whether due to production issues, transportation path issues or otherwise, Buyer may terminate this Transaction Confirmation by providing 5 days' prior written notice to Seller of such termination. Buyer hereby acknowledges and agrees that any determination based upon economic hardship, including, without limitation, Buyer's ability to procure RPS-eligible renewable energy and RECs at a lower or more advantageous price than the Contract Price, shall not be considered a reasonable determination made in Buyer's good faith discretion for the purposes of this Section 11.3(a). (b) It is a "Change in Law" if (x) a governmental authority makes a binding determination, adopts a law, ruling or regulation, or issues a binding clarification of an existing law, ruling or regulation by judicial or administrative proceeding which, in the written opinion of counsel of either party, provides that the Biogas, when combusted, does not or will not generate RPS-eligible renewable energy and RECs, whether due to production issues, transportation path issues, or otherwise, or (y) the CEC issues a notice that Initial Certification will not occur or, as of December 31, 2012, Initial Certification has not occurred. If a Change in Law occurs, each party must use its reasonable efforts to negotiate appropriate revisions to this Agreement to resolve the effect of such Change in Law. If the parties are unable to agree on an appropriate revision to this Transaction Confirmation within 45 days of commencing such negotiations, either party may terminate this Transaction Confirmation by providing written notice of such termination to the other party. The date of termination shall be, and this Transaction Confirmation shall remain in full force and effect until, the first to occur of (i) 30 days following conclusion of the negotiations contemplated in this Section 11.3(b), so long as the Change in Law is also effective at such time or (ii) the date upon which the Change in Law becomes effective. (c) If a governmental authority makes a binding determination or adopts a law, ruling or regulation that subjects the Biogas to a material additional tax, charge, impost or other cost ("Biogas Tax"), the affected party shall provide the other party ("receiving party') with notice of and details regarding the Biogas Tax. Following receipt of such notice, the receiving party shall have 30 days to determine whether the receiving party desires to pay the Biogas Tax (or adjust the terms of this Transaction Confirmation to 13 Execution Copy reflect the Biogas Tax) and provide notice of such determination to the affected party, specifying the details of any proposed payment or adjustment. If the receiving party agrees to make payment or adjustment pursuant to this Section 11.3(c), each party must execute any amendment or other documentation related thereto within 10 days of receipt of the affirmative notice. If the receiving party declines to pay the Biogas Tax, the affected party may elect to terminate this Transaction Confirmation by providing 30 days' prior written notice to the receiving party. 11.4 Consequences of Termination: No termination or any other damages under this Transaction Confirmation are payable upon termination pursuant to Section 11.3, including, without limitation, any Early Termination Damages set forth in the Contract. Buyer will remain obligated to pay the Certification Amount to Seller as set out in Section 6.2 of this Transaction Confirmation if the Initial Certification Date occurs at any time following the date of such termination. 12. FORCE MAJEURE 12.1 Force Majeure and Obligation to Perform: If a Force Majeure event affects a party, that party's performance of its obligations under this Contract is excused to the extent the Force Majeure event affects those obligations. However, nothing in this Section 12.1 shall relieve: (a) Buyer of its obligation to pay for any Delivered Biogas or damages; or (b) Seller of its obligation to deliver Biogas and pay any damages, in each case incurred prior to the declaration of Force Majeure pursuant to this Section 12.1. 12.2 Base Contract Section 11.2: Section 11.2 of the Base Contract is hereby deleted in its entirety and all references to that section are deemed to be references to Section 12.3 and Section 12.4 of this Transaction Confirmation. 12.3 Definition of Force Majeure: Force Majeure shall include, but not be limited to, the following: (a) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (b) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (c) interruption and/or curtailment of (A) Firm transportation and/or storage by Transporters on an interstate pipeline or (B) any level of transportation and/or storage service on an intrastate pipeline; (d) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections or wars, or acts of terror; (e) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction; 14 Execution Copy (f) an adverse occurrence or change that results in material curtailment of Biogas production at a Biogas Facility that (A) is not attributable to any of the foregoing clauses of this Section 12.3 and (B) could not have been avoided through reasonably prudent operation of the Biogas Facility; provided that curtailments (C) of the type generally encountered in the ordinary course of operation of the Biogas Facility or (D) of a duration shorter than two weeks shall not qualify as Force Majeure pursuant to this clause (f); and (g) an adverse occurrence or change that results in the material curtailment of power generation at a Designated Facility that (A) is not attributable to any of the foregoing clauses of this Section 12.3 and (B) could not have been avoided through reasonably prudent operation of the Designated Facility; provided that curtailments (C) of the type generally encountered in the ordinary course of generation operations or (D) of a duration shorter than two weeks shall not qualify as Force Majeure pursuant to this clause (g). 12.4 Response to Force Maieure: Seller and Buyer must use reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance. 12.5 Change to Non -Force Maieure Event: For purposes of this Transaction Confirmation, Section 11.3(iii) of the Base Contract is deleted and replaced with the following: "(iii) economic hardship, to include, without limitation, Seller's ability to sell Biogas and/or Environmental Attributes at a higher or more advantageous price than the Contract Price, Buyer's ability to purchase Biogas and/or Environmental Attributes at a lower or more advantageous price than the Contract Price, or a regulatory agency or any other applicable entity disallowing, in whole or in part, the pass through of costs resulting from this Contract;" 12.6 Offsetting decreased production: Seller will use Commercially Reasonable Efforts to offset a decrease in production at a Biogas Facility that otherwise would be excused by Force Majeure with Biogas produced by another Biogas Facility; provided that Seller may claim Force Majeure with respect to a Biogas Facility if, despite Seller's Commercially Reasonable Efforts, replacement production of at least 2,500 MMBtu per Day is not available to Seller from a Biogas Facility (i.e. not otherwise contracted). 12.7 Replacement Designated Facility: If Force Majeure occurs with respect to the Power Station or other Designated Facility, Buyer will use Commercially Reasonable Efforts to identify and obtain Certification of (as required) a replacement Designated Facility for combustion of the Biogas. 12.8 Termination for Continuing Force Maieure: If Force Majeure affects performance of an obligation under this Transaction Confirmation for a period of six consecutive months, the party claiming Force Majeure must provide the non -claiming party with documentation or other information regarding the duration or expected resolution of the Force Majeure event. If the non -claiming party reasonably believes that the Force Majeure will continue for more than one additional month (a total duration of seven months or longer) thereafter, the non -claiming party may, at its discretion, terminate this Transaction Confirmation at any time by providing 60 days' prior written notice to the party claiming Force Majeure. Notwithstanding the foregoing, the Contract will remain in full force and effect if the party claiming Force Majeure (a) commences performance of its obligations under this Transaction Confirmation for a minimum of ten consecutive Days and (b) provides the 15 Execution Copy non -claiming party with written notice that the Force Majeure has ended, prior to the end of the 60 day notice period. No early termination damages will apply to any termination pursuant to this Section 12.8. 12.9 Force Maieure and Operators: Seller will use Commercially Reasonable Efforts to work with operators of each Biogas Facility to minimize the duration and extent of any Force Majeure events involving the applicable Biogas Facility. If Seller does not exercise its rights to compel the operator of the applicable Biogas Facility to minimize the duration and extent of any such Force Majeure events, Seller will assign such rights to Buyer to the full extent of Seller's lawful right to do so. Seller covenants not to conspire with any operator of any Biogas Facility to cause any interruption of delivery of Biogas to Buyer under this Transaction Confirmation. 13. PRIORITY OF TRANSACTION CONFIRMATION 13.1 If there is any discrepancy between the terms of this Transaction Confirmation and any terms of the Base Contract, the terms of this Transaction Confirmation shall govern. Seller: Elemerf Markets Renewable Energy, LLC Signature: Name: Angela Schwarz Title: President Buyer: City of Vernon, Light and Power Departmen Signature: Name: Carlos Fandino Title: Director of Light and Power Clerk 16 Execution Copy Appendix A to Transaction Confirmation CALCULATION OF DAMAGES 1. Damages if Seller fails to deliver Biogas — Section 7.3 Seller Payment ($) _ [Replacement Price ($/MMBtu) —Contract Price ($/MMBtu)] x Undelivered Gas Quantity (MMBtu) Undelivered Gas Quantity (MMBtu) x [Gas Purchase Price ($/MMBtu) + (REC Price ($/MWh) + 7.5 (MMBtu/MWh)) + (Allowance Price ($/mtCO2e) x 0.05342 (mtCO2e/MMBtu)) — Contract Price ($/MMBtu)] Where: Replacement Price = The price per MMBtu at which Buyer, acting in a commercially reasonable manner, purchases or arranges to purchase Replacement Biogas at the Delivery Point or an equivalent delivery point using the Cover Standard, plus any reasonable costs incurred by Buyer in purchasing the Replacement Biogas including any Imbalance Charges, if applicable. Undelivered Gas = The difference, in MMBtu, between the Minimum Quantity and Quantity the quantity of Biogas Seller actually delivered to Buyer in the Contract Year. Gas Purchase Price = Purchase price paid by Buyer per MMBtu of natural gas, without associated Environmental Attributes, utilizing the Cover Standard. To the extent no such purchase is reasonably available, the Gas Purchase Price will be the Spot Price. REC Price = The average of the prices obtained for a REC generated at a generating facility located in California in the year in which the breach occurred from two recognized participants in the REC market, one designated by Seller and one designated by Buyer. Seller and Buyer must each use Commercially Reasonable Efforts to seek the lowest available price for such RECs. Allowance Price = Average clearing price for an Allowance at the four allowance auctions conducted by CARB immediately prior to the breach. If fewer than four such auctions have taken place, the Allowance Price will be the average of quotations from three independent brokers for the price of an Allowance delivered it the year in which the breach occurred. 17 Execution Copy The Allowance Price will be equal to zero unless and until Buyer has a compliance obligation under the Cap and Trade Regulation. If the result of the calculation of the Seller Payment is a negative amount, the Seller Payment will be zero. 2. Damages if Buyer fails to take Biogas — Section 7.4 Buyer Payment ($) = Gas Quantity (MMBtu) x (Contract Price ($/MMBtu) —Gas Sale Price ($/MMBtu)) Where: Gas Quantity = Sum of the difference, in MMBtu, between the Delivered Biogas and the quantity of Biogas Buyer actually took on each Day on which Buyer breached its obligation to receive Biogas. Gas Sale Price = Price per MMBtu received by Seller utilizing the Cover Standard for the resale of the Biogas Buyer did not take, as natural gas without associated Environmental Attributes. To the extent no such sale is reasonably available, the Gas Sale Price will be the Spot Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point. If the result of the calculation of the Buyer Payment is a negative amount, the Buyer Payment will be zero. 3. RPS Payment under Section 8.4(a) If Section 8.4(a) of this Transaction Confirmation applies, the RPS Payment will be calculated as follows: RPS Payment ($) = Gas Quantity (MMBtu) x REC Price ($/MWh) = 7.5 (MMBtu/MWh) Where: Gas Quantity = Quantity of gas, in MMBtu, to which Section 8.4(a) of this Transaction Confirmation applies. REC Price = Average of the prices obtained for a REC generated at a generating facility located in California in the year in which the Biogas that is determined to be non-RPS-compliant was delivered from two recognized participants in the REC market, one designated by Seller and one designated by Buyer. Seller and Buyer must each use Commercially Reasonable Efforts to seek the lowest available price for such RECs. t� Execution Copy 4. Carbon Payment under Section 8.4(b) If Section 8.4(b) of this Transaction Confirmation applies, the Carbon Payment will be calculated as follows: Carbon Payment ($) = Gas Quantity (MMBtu) x Allowance Price ($/mtCO2e) x 0.05342 (mtCO2e/MMBtu) Where: Gas Quantity = Quantity of gas, in MMBtu, to which Section 8.4(b) of this Transaction Confirmation applies. Allowance Price = Average clearing price for an Allowance at the four allowance auctions conducted by CARB immediately prior to the date on which it is determined that the gas is unable to be verified. If fewer than four such auctions have taken place, the Allowance Price will be the average of quotations from three independent brokers for the price of an Allowance delivered in the year in which it is determined that the gas is unable to be verified. 5. Calculation of the Minimum Quantity — examples • In 2012 the Minimum Quantity is 80% of the Contract Quantity. Assume Seller delivers 75% of the Contract Quantity — damages will be payable under section 1 above for the missing 5%, but the Minimum Quantity for 2013 remains 80% of the Contract Quantity because there is an initial two-year grace period. • In 2013 Seller delivers 82% of the Contract Quantity — the Minimum Quantity for 2014 remains 80% of the Contract Quantity. • In 2014 Seller delivers 74% of the Contract Quantity — damages will be payable under section 1 above for the missing 6%, but the Minimum Quantity for 2015 remains 80% of the Contract Quantity. • In 2015 Seller delivers 70% of the Contract Quantity — damages will be payable under section 1 above for the missing 10%, and the Minimum Quantity for 2016 will be 90% of the Contract Quantity, because there have been two consecutive years of delivery below 80% of the Contract Quantity. • In 2016 Seller delivers 85% of the Contract Quantity — damages will be payable under section 1 above for the missing 5%, and the Minimum Quantity for 2017 will remain 90% of the Contract Quantity. • In 2017 Seller delivers 92% of the Contract Quantity — the Minimum Quantity for 2018 will return to 80% of the Contract Quantity. • In 2018 Seller delivers 77% of the Contract Quantity — damages will be payable under section 1 above for the missing 3%, and the Minimum Quantity for 2019 will be 90% of the Contract Quantity. • In 2019 Seller delivers 90% of the Contract Quantity — the Minimum Quantity for 2020 will return to 80% of the Contract Quantity. 19 Execution Copy Year Minimum Example delivery Damages under Effect on Minimum Quantity in Quantity (as average % of Appendix A Section 77 following year Contract Quantity) 2012 80% 75% Yes, for missing 5% No effect — 2 year grace period 2013 80% 82% No Remains 80% - target met 2014 80% 74% Yes, for missing 6% No effect — 2 year grace period 2015 80% 70% Yes, for missing 10% Increases to 90% — 2nd year in a row below target 2016 90% 85% Yes, for missing 5% Remains 90% - target not met 2017 90% 92% No Decreases to 80% - target met 2018 80% 77% Yes, for missing 3% Increases to 90% - target not met 2019 90% 90% No Decreases to 80% - target met 2020 80% 98% No Remains 80% -tar et met 2021 80% 1 78% 1 Yes, for missing 2% Not applicable 20 Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following date: March 2, 2012 The parties to this Base Contract are the following: PARTY A MARKETS RENEWABLE ENERGY, LLC PARTYNAMELIGHT PARTY B AND POWER CITY OF VERNON,ELEMENT DEPARTMENT 3555 Timmons Lane, Suite 900 Houston, TX 77027 ADDRESS 4305 S. Santa Fe Avenue Vernon, CA 90058 www.elementmarkets.com BUSINESS WEBSITE www.cityofvernon.org 1 CONTRACTNUMBER 1 96-809-2598 D-U-N-S®NUMBER 06-088-3022 X US FEDERAL: 20.3316079 (disregarded entity) ❑ OTHER: TAX ID NUMBERS X US FEDERAL: 95-6000808 ❑ OTHER: Delaware JURISDICTION OF ORGANIZATION California ❑ Corporation X .LLC ❑ Limited Partnership ❑ : Partnership ❑ LLP ❑ Other.: COMPANYTYPE ❑ Corporation ❑ LLC ❑ Limited Partnership ❑ Partnership ❑ LLP X Other: Chartered City and Municipal Corporation of California GUARANTOR IF APPLICABLE CONTACT INFORMATION 3555 Timmons Lane, Suite 900, Houston, Texas 77027 • COMMERCIAL - ATTN., Randall N.Lack ATTN: Efrain Sandoval / Shawn Snarifzadeh TEL#. 281-207-7213:. .: FAXA, 281=207-7211 TEL#: --323-826-1424 --FAX# 323-826-3629 EMAIL: rlack elementmarketscom EMAIL: esandovalOci.vernon.ca.us/ssharifOci.vernon.ca.us 3555 Timmons Lane.Suite 900, Houston, TX 77027 • SCHEDULING ATTN., Mac McGuire ATTN: Same as Above - TEL#.• 281-207-7260 FAX#: 281-207-7211 TEL#: -FAX#: EMAIL: mm uue elementmarkets com - EMAIL: 3555 Timmons Lane: Suite 900, Houston: Texas 77027 • CONTRACTAND LEGAL NOTICES ATTN., Leaal.Deoartment.:. ATTN: Javier Valdez TEL#.- 281-207-7200 FAX#: 281-207-7211 EMAIL: kbevel@elementmarkets.com TEL#: 323-583 8811 '. - FAX#: 323-826-1431 EMAIL: ivaldez ci.vernon.ca.us 3555 Timmons Lane: Suite 900, Houston, Texas 77027 •CREDIT - ATTN: Finance/Accounting. Dept ATTN: TEL#: '. 281 207-7240 FAX#.• 281-207-7211 rcasida elemenfmarkets.com TEL#: FAX#: `'EMAIL: —EMAIL 3555 Timmons Lane: Suite 900, Houston: Texas 77027 TRANSACTION ` CONFIRMATIONS ATTN- . Nominations/Operations ATTN: Edwin Ochoa TEL#.-281-207-7260 FAX#: 281-207-7211 TEL#: 323-583 8811 - FAX#: 323-826-3629 EMAIL:: noms elementmarketscom EMAIL: eochoa cl.vemon.ca us ACCOUNTING INFORMATION 3555 Timmons Lane:: Suite: 900, Houston, Texas 77027 INVOICES • PAYMENTS :• SETTLEMENTS ATTN., Operations Dept. A17N.` City of Vernon Treasury Department TEL#: 281-207-7250 FAX#., 281-207-7211 TEL# -.323-583-8811 FAX#:: 323 82fi 1491 EMAIL: oosAelementmarkets.com EMAIL.: `1nvo1ces0c1vemon.ca us BANK., JPMoroan Chase - : WIRE TRANSFER NUMBERS (IFAPPLICABLE) BANK `. East West Bank ABA: '111000614 ACCT`871443131 ABA-`#322070381 ACCT: 80362817-`. OTHER DETAILS: `: - OTHERDETAILS (ACCT1s Gas 'Entervrise Checkina) BANK., ACH NUMBERS (IFAPPLICABLE) BANK: ABA: -. - ACCT.' OTHER DETAILS: ABA: ACCT OTHER DETAILS: ATTN., CHECKS r(IFAPPLICABLE) ATTN. ADDRESS: ADDRESS: Copyright© 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved September 5, 2006 Base Contract for Sale and Purchase of Natural Gas (Continued) This Base Contract incorporates by reference for all purposes the General Terms and Conditions for Sale and Purchase of Natural Gas published by the North American Energy Standards Board. The parties hereby agree to the following provisions offered in said General Terms and Conditions. In the event the parties fail to check a box, the specified default provision shall apply. Select the appropriate boxes) from each section: Section 1.2 X Oral (default) Section 10.2 X No Additional Events of Default (default) Transaction OR Additional Procedure ❑ Written Events of Default ❑ Indebtedness Cross Default Section 2.7 D 2 Business Days after receipt (default) ❑ Party A: Confirm Deadline OR - '' - ❑ Party B: X 5 Business Days after receipt ❑ Transactional Cross Default Section 2.8 X Seller (default) Confirming Party OR ❑ Buyer ❑ Section 3.2 X Cover Standard (default) �.. Section 10.3.1 X Early Termination Damages Apply (default) Performance OR Early Obligation ❑ Spot Price Standard Termination OR Damages ❑ Early Termination Damages Do Not Apply Note: The following Spot Price Publication. applies to both of the immediately preceding. -. Section10.3.2 Other' ❑ Other Agreement Setoffs Apply(default) Section 2.31 X - :Gas Daily Midpoint (default) Agreement ❑ Bilateral (default), Spot Price OR : Setoffs ' Publication ❑ p Triangular OR X -Other Agreement Setoffs Do Not Apply Section 6 `. X Buyer Pays At and After Delivery Point (default) Taxes OR ❑ Seller Pays Before and At Delivery Point -` Section 7.2 X :: W' Day of Month following Month of delivery Section 15.5 CALIFORNIA Payment Dater : (default) .Choice Of Law - OR ❑ Day of Month following Month of delivery Section 7.2 s X Wire transfer (default) y Section'15.10 X -. Confidentiality applies (default) Method of Payment ❑ Automated Clearinghouse Credit (ACH): _ : Confidentiality OR ❑ Check ❑ Confidentiality does not apply Section 7.7- ❑ Netting applies (default) Netting OR X ; Netting does not apply X Special Provisions Number of sheets attached: 7 ❑ Addendum(s): IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate. CEMENT MARKETS RENEWABLE ENERGY, LLC = PARTTNAME - CITY OF VERVIA, LIGUT AND POWER I DEPARTMENT By: SIGNATURE B : �.. 'An eta Schwarz - PRINTED NAME QaflOs Fa ' o.: President MBE C ht and Power Copyright © 2006 North American Energy Standards Board, Inc. vNAESB Standard 6.3.1 All Rights Reserved Page 2 of 2 September 5, 2006 Execution Copy SPECIAL PROVISIONS TO THE BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS NO. 1 BETWEEN ELEMENT MARKETS RENEWBLE ENERGY, LLC ("Party A") AND CITY OF VERNON, LIGHT AND POWER DEPARTMENT ("Party B") DATED AS OF: March 2, 2012 ("Effective Date") These Special Provisions amend the North American Energy Standards Board, Inc. ("NAESB") Base Contract for Sale and Purchase of Natural Gas and its accompanying General Terms and Conditions, as published September 5, 2006 (the "Base Contract"). The Base Contract, together with these Special Provisions, the Transaction Confirmations and any Credit Support Obligation form a single agreement between Party A and Party B, collectively, the "Contract'. If there is any inconsistency between the Base Contract, the General Terms and Conditions and the Special Provisions, these Special Provisions will govern. Except as amended in these Special Provisions or in a Transaction Confirmation, the Base Contract and the General Terms and Conditions remain in full force and effect. All capitalized terms not otherwise defined in these Special Provisions have the meaning set out in the Base Contract or in Transaction Confirmations. 1. AMENDMENTS TO SECTION 10, FINANCIAL RESPONSIBILITY 1.1 The following sentence is added at the end of the first paragraph of Section 10.3.1 of the Base Contract: "Notwithstanding the foregoing, in no event shall the Non -Defaulting Party owe any amounts to the Defaulting Party on account of this Transaction as a Terminated Transaction, whatever the difference between Market Value and Contract Value. However, nothing in this section releases (x) Party B from its obligation to remit payment to Party A for any natural gas or Biogas delivered to Party B pursuant to any Transaction Confirmation or (y) Party A from any damages due and payable pursuant to Section 7.3 of the Transaction Confirmation." 1.2 Section 10.2 of the Base Contract is deleted in its entirety and replaced with the following: "If an Event of Default (defined below) occurs in relation to a party ("Defaulting Party"), and the Defaulting Party or, if the Defaulting Party is Party A, the Secured 1 Execution Copy Party does not remedy the Event of Default within the specified period, if applicable, then the other party (the "Non -Defaulting Party") has the right, at its sole election and subject to Section 15.1 of the Base Contract, to withhold and/or suspend deliveries or payments upon notice and/or to terminate and liquidate the transactions under the Contract, in the manner provided in Section 10.3, in addition to any and all other remedies available under the Contract. It is an Event of Default if a party: (i) makes an assignment or any general arrangement for the benefit of creditors; (ii) files a petition or otherwise commences, authorizes, or acquiesces in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors, or has such petition filed or proceeding commenced against it which is not dismissed within 60 days of the date it is filed; (iii) otherwise becomes bankrupt or insolvent (however evidenced); (iv) is unable to pay its debts as they fall due; (v) has a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of its assets; (vi) fails to give Adequate Assurance of Performance under Section 10.1 within 48 hours (but at least two Business Days) of a written request by the other party; (vii) has not paid any amount due the other party hereunder on or before the 10 days following written notice that such payment is due; (viii) is the affected party with respect to any Additional Event of Default (as set out below); (ix) materially breaches a representation or warranty and fails to cure such breach within 10 days of written notice; (x) fails to perform any material covenant or obligation set forth in this Contract (except for such party's obligations to deliver or receive the Biogas, the exclusive remedy for which is provided in the Transaction Confirmation), if such failure is not remedied on or before 10 days after the other party gives notice of such failure; (xi) fails to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Obligation, if such failure is continuing after any applicable grace period has elapsed; (xii) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Obligation (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); or (xiii) consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, or reorganizes, reincorporates or reconstitutes into or 2 Execution Copy as, another entity and, at the time of such consolidation, amalgamation, merger, transfer, reorganization, reincorporation or reconstitution: (a) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Guarantor under this Contract or any Credit Support Obligation to which it or its predecessor was a party; or (b) the benefits of any Credit Support Obligation fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Contract; or (c) the creditworthiness of the affected parry or, if applicable, the successor, surviving or transferee entity of the affected party, after taking into account any applicable Credit Support Obligation, is materially weaker immediately after the occurrence of such event than that of the affected party immediately prior to the occurrence of such event. 1.3 The following is added as new Section 10.8 of the Base Contract: "Notwithstanding anything to the contrary contained in this Agreement or any Confirmation: (i) Party B's payment obligations to Party A are payable solely from revenues of Parry B's electric system; (ii) any payments for Delivered Biogas constitute operating expenses of Party B's electric system having payment priority over debt of such electric system; and (iii) any termination payment due from Party B in respect of any Early Termination Date under Section 10.3.1 will be payable solely from revenues of Party B's electric system after paying operating expenses and all payments associated with debt of such electric system." 2. AMENDMENTS TO SECTION 15.1, ASSIGNMENT 2.1 The following is added at the end of Section 15.1 of the Base Contract: "A "Secured Party" is (x) any bona fide non-affiliated lender or other such financing party of Party A or Party A's Affiliates to which a security interest in or to this Contract or any Transaction Confirmation is granted of which written notice has been provided to Party B including Secured Party's address for notices in a form reasonably satisfactory to Party B; or (y) (i) any party not affiliated with Party A who owns a facility producing Gas sold under this Contract or (ii) a bona fide non-affiliated lender or other such financing party of a party named in clause (i) of this Section 2.1, in either case to which a security interest in or to this Contract or any Transaction Confirmation is granted 3 Execution Copy and of which written notice has been provided to Party B, including Secured Party's address for notices in a form reasonably satisfactory to Party B; provided, however, that a Secured Party defined in clause (x) does not currently hold such security interest. A Secured Party or its assignee has the rights set out in sections (A), (B) and (C) below, provided that the Secured Party or its assignee, as applicable, must be at least as creditworthy as Party A to exercise such rights; provided, further that the rights in section (C) shall be subject to Party B's prior written consent. Party B shall not unreasonably withhold, condition or delay its consent, but Party B may withhold its consent if: (i) Party B has reasonable grounds for insecurity regarding the creditworthiness of the Secured Party or its assignee, as applicable, or the financial wherewithal of the Secured Party or its assignee, as applicable, to ensure performance of its obligations under the Contract; and (ii) Party B does not receive documentation addressing to Party B's satisfaction (acting reasonably) Party B's concerns within 10 Business Days of the date of Party B's written notice to the Secured Party of Party B's intent to withhold its consent. (A) The Secured Party has the right to (i) substitute itself for Party A and perform the duties of Party A hereunder and (ii) exercise any rights or remedies of Party A under the Contract on behalf of Party A; provided, however, that nothing in these Special Provisions shall effect, cause or permit a novation of Party A that is not consented to in writing by Party B as determined in its sole and reasonable discretion, such consent not to be unreasonably withheld, delayed or conditioned. (B) If an Event of Default occurs on the part of Party A, Party B must provide Party A and Secured Party with prior written notice of its intent to terminate or suspend this Agreement due to such Event of Default, specifying the Event of Default giving rise to such right. Following the date of receipt of such notice (the "Notice Date") from Party B, the Secured Party shall have (x) five Business Days to provide Party B with notice of its intent to pursue cure of such Event of Default and/or substitute itself for Party A and perform the duties of Party A hereunder, in the event such Event of Default is not curable and (y) 30 days after the Notice Date to cure the Event of Default giving rise to the right of termination (or the applicable cure period provided to Party A with respect to such Event of Default in the Contract, if longer) or commence performance of the duties of Party A hereunder (the "Initial Cure Period"); provided that if (i) such Event of Default cannot reasonably be cured or performance cannot be commenced by the Secured Party within the Initial Cure Period and (ii) the Secured Party commences and diligently pursue cure of such Event of Default or performance, as applicable, within the Initial Cure Period, Party B may, in its reasonable discretion, grant the Secured Party's request for additional time not to exceed 90 days after the Notice Date to cure the Event of Default or commence performance, as applicable, for a reasonable period of time under the circumstances as determined by Party B in its reasonable discretion (the total 4 Execution Copy period to cure, the "Cure Period"). The respective obligations of Party A and Party B will otherwise remain in effect during the Cure Period. For the avoidance of doubt, Party A shall be precluded from terminating the Contract due to an Event of Default set forth in Section 10.2 until the Secured Party has had the opportunity to cure such Event of Default and/or substitute itself for Party A and perform the duties of Party A hereunder as provided in this Section 15.1. If Secured Party substitutes itself for Party A and commences performance following an Event of Default on the part of Party A for which no cure period is provided, Party B shall be deemed to waive its right under Section 10.2 to liquidate or terminate the Contract due to such Event of Default; provided that Party B shall be entitled to pursue any other rights or remedies available hereunder against Party A; provided, further that Party B shall have the right to terminate the Contract if an Event of Default for which a cure period is provided occurs and is continuing and is not cured within the applicable cure periods set forth herein. (C) Upon (i) any rejection of the Contract due to any process undertaken with respect to Party A under the United States Bankruptcy Code or any other law affecting creditors' rights or (ii) termination of the Contract by Party B due to a non -curable Event of Default (an Event of Default for which no cure period is provided) on the part of Party A, at the request of Secured Party made within 30 days of such termination or rejection, Party B shall enter into a new agreement with Secured Party or its assignee with the same terms and conditions as this Contract for the remainder of the Delivery Period without demanding additional consideration therefor. (D) Party B agrees to cooperate with any reasonable request of Party A or a Secured Party in connection with the creation or enforcement of the rights of the Secured Party set forth in this Section 15.1." 3. AMENDMENTS TO SECTION 15.10, CONFIDENTIALITY 3.1 The following is added at the end of Section 15.10 of the Base Contract: "Party A acknowledges that (a) Party B is a municipality subject to the requirements of the California Public Records Act ("CPRA") and (b) Party B may be required to disclose certain information regarding this Base Contract or the terms of any transaction hereunder between the parties to the public as part of its approval process. If Party B receives a request for information concerning this Base Contract or the terms of any transaction hereunder between the parties under the CPRA or becomes aware of a need for public disclosure as part of the approval process, Party B will notify Party A prior to the date of required disclosure as to the nature of the request or requirement and Party B's interpretation of the applicable disclosure requirement(s). Party B agrees to cooperate with Party A's reasonable requests to avoid or minimize the scope of any such disclosure to the extent permitted under applicable law." Execution Copy 4. CREDIT SUPPORT 4.1 The following is added as Section 10.9 of the Base Contract: "10.9 (A) Party A agrees to provide or cause to be provided a Credit Support Obligation in the amount of $1,000,000 for the benefit of Party B in order to enter into the Transaction Confirmation under this Base Contract. The Credit Support Obligation must be provided within five Business Days of the date upon which Party B notifies Party A that (i) the Initial Certification Date has occurred and (ii) Party B has accepted the form of Credit Support Obligation. If a material positive change occurs in the credit profile of Party A, Party B agrees to review the Credit Support Obligation of Party A to reflect such change. (B) Notwithstanding anything in this Section 10.9 or Section 10.1 to the contrary, Party B shall have no Credit Support Obligation if its Credit Rating is (x) Baa3 or higher by Moody's Rating Services or (y) BBB- or higher by Standard & Poor's. In the event that Party B's Credit Rating is below the aforementioned thresholds, Party A may request Adequate Assurance of Performance pursuant to Section 10.1. (C) For the purposes of this Section 10.9, a Letter of Credit is an irrevocable, unconditional, transferable, standby letter of credit, issued in favor of Party A or Party B, as applicable, by a Qualified Institution (other than a party hereto or any of its Affiliates). Qualified Institution means the United States Office of a commercial bank (which is not an Affiliate of the issuing Party) organized under the laws of the United States of America or a political subdivision thereof, or a foreign bank with a branch office located in the United States and, in either case, (i) subject to supervision or examination by a federal or state authority of the United States of America and (ii) either (a) having a Credit Rating of "A" or higher by Standard & Poor's and Fitch Rating Services, or "A2" or higher by Moody's Rating Services; or (b) having a minimum asset base of at least $10 billion. The Letter of Credit must be acceptable and approved by the beneficiary Party. (E) The Party providing the Credit Support Obligation hereunder is responsible for all costs involved in obtaining and maintaining the Credit Support Obligation. (F) The issuing Party shall renew or cause the renewal of the Credit Support Obligation, as applicable, at least 20 Business Days prior to the expiration of the outstanding Credit Support Obligation. (G) Upon the occurrence of a Credit Support Default (as defined below), the defaulting Party must deliver a substitute Credit Support Obligation that is acceptable to the beneficiary Party in its reasonable discretion, or provide another Credit Support Obligation in the form of cash, in each case within five Business Days following written notice of the default. "Credit Support Default" means, with respect to an outstanding Credit Support Obligation, any of the following events: (i) the Issuer of a Letter of Credit ceases to be a Qualified Execution Copy Institution, (ii) the Issuer of a Letter of Credit disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, the Letter of Credit; or (iii) the Credit Support Obligation expires or terminates, or fails or ceases to be in full force and effect at any time. (H) Upon or at any time after the occurrence of an Event of Default with respect to the issuing Party, the beneficiary Party may draw up to the entire undrawn portion of any outstanding Credit Support Obligation in accordance with the terms associated with such Credit Support Obligation. Cash received from drawing upon the Credit Support Obligation shall be applied against the Early Termination Damages in Section 10.3.1 of the Base Contract. In addition, the issuing Party remains obligated to the beneficiary Party for any amounts owing to the beneficiary Party and remaining unpaid after the application of any amounts so drawn by the beneficiary Party." IN WITNESS WHEREOF, the parties have caused this Contract to be duly executed as of the Effective Date. ELEM NT MARKETS RENEWABLE CITY OF VERN N, LIGHT AND POWER ENE R Y,LLC DEPARTME By: By: Name: Angela Schwarz Name: Carlos Fandino Title: President Title: Director of Liqht and Power 7 RECEIVED APR 0 9 2012 1* / -2. y/�.7 RECEIVED CITY CLERK'S OFFICE STAFF REPORT LIGHT & POWER DATE: March 29, 2012 TO: Honorable Mayor and City Council �A FROM: Carlos Fandino Jr., Director of Light & Power RE: Ratification of Biogas Contracts PURPOSE APR 0 4 2012 CITY ADMINISTRATION At the Light & Power meeting on February 21, 2012, City Council granted authorization to the Director of Light & Power to negotiate the terms and conditions of biogas contracts with vendors. Authorization was also granted to the Director of Light & Power to execute biogas agreements after final terms and conditions were met with vendors. Three (3) biogas agreements have been executed between the City of Vernon and the following vendors: Two (2) executed agreements — Element Markets Renewable Energy, LLC One (1) executed agreement — Clean Energy Renewable Fuels RECOMMENDATION: It is recommended that the City Council ratify the attached biogas contracts at the April 17, 2012 meeting. CRF:ah Attachments Two agreements — Element Markets One agreement — Clean Energy Renewable Fuels