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Resolution No. 2012-050RESOLUTION NO. 2012-50 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 BY AND BETWEEN THE CITY OF VERNON AND CLEAN ENERGY RENEWABLE FUELS, LLC AND (ii) A BIOMETHANE TRANSACTION CONFIRMATION BY AND BETWEEN THE CITY OF VERNON AND CLEAN ENERGY RENEWABLE FUELS, 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 Clean Energy Renewable Fuels, LLC ("Clean Energy"), 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 Clean Energy 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 Clean Energy, 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 Clean Energy 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 and (ii) Biomethane Transaction Confirmation with Clean Energy effective March 8, 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 and (ii) Biomethane Transaction Confirmation; 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 and (ii) Biomethane Transaction Confirmation with Clean Energy. 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 Purchase of Natural Gas with Clean Energy by the Director of Light& Power dated March 8, 2012, a copy of which is attached hereto as Exhibit A. - 2 - SECTION 3: The City Council of the City of Vernon hereby approves and ratifies the execution of the Biomethane Transaction Confirmation with Clean Energy by the Director of Light & Power dated March 8, 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 Clean Energy. _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 17th day, of April, 2012. Name: William J. Davis T4tle<—i4a� xo / 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. 2012-50, 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 L day of April, 2012 at Vernon, California. (SEAL) k - 5 - EXHIBIT A Base Contract for Sale and Purchase of Natural Gas This Base Contract is enteredinto as of the following date: March 8. 2012 The parties to this Base Contract are the following: PARTY A I PARTY B CLEAN ENERGY RENEWABLE FUELS, LLC PARTYNAME CITY OF VERNON, LIGHT AND POWER DEPARTMENT 3020 Old Ranch Parkway, Suite 400, Seal Beach, CA 90740 4305 S. Santa Fe Avenue ADDRESS Vernon, CA 90058 www.cloonenergyfuels.com BUSINESS WEBSITE www.citvofvernon.oLq CONTRACTNUMBER 1 96-866-2457 D-U-NSO NUMBER 06-088-3022 0 US FEDERAL: US FEDERAL: o OTHER: TAX ID NUMBERS o OTHER: California JUR'Sof"ONOF RISDI ION OF CT California NJ 7 0 ORGANIZA77ON ORGANIZATION • Corporation 0 11 Corporation 0 LLC • Limited Partnership El Partnership COMPANY TYPE 0 Limited Partnership 0 Partnership • LLP 0 LLP 0 Other. Pontical Subdivision A R U � G ��To IF APPLICABLE CONTACT INFORMATION AT7,V;,: NOrrison CjAy;Fr4)Werrt ATTN: aritgadeh 'h- TE�,fl-�(o.tP)493A 04, -,OAX#- .8594 0 C'o iiliMERCM% (323) d' ' TE" 82 A-4 3 EA#.QL1-, a d u Isco EAI AUndo its A* ` FIS01 Id ent TEL* _2) 493404 FAX#.7 (562)4�0-8594 Or, % � - SCHEDULING AT&,� Same as A46V.0 TE0.FAX#.': .%; 1 EMAiL- a ensftk4ehorel Counsel ,,:��'r'� ;1 CO TRAC - ATiif.;� Javier Valdez. 93'W4 k4956 LEGAL TE (323) 4431 ea 0 r jvaidez sident A Trk,;.' 'VFAX#: (604)460-8594 1, 0CREDIT TEL#., rluell m r EMAIL' A771TW010 on t = _. , f ATTN E (562) 3D-8594 1�., W.— EMAI ih uells NTING IN m,alson V City of -859 *iO 4 TEq°:� 32358 ()3-QX (4 091 EjV a . . a ins A 322 ACCT. -,;IWRE TRAIj.&FER BAt', ;East West N 07038 -.,�322 �P, 0,1 2817 46 W APPLI PLE) ACHS —111X I `4 N ACC O IL .. 1 APPLI LE) CHECK APPLICt'f LEJ AD S: .,JIF Copyright 0 2006 North American Energy Standards Board, Inc. All Rights Reserved NAESB Standard 6.3.1 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 M Natural Gas published by the North American Energy Standards Board. The parties hereby agree to the following provisions offered in said General Terns and Conditions. In the event the parties fail to check a box, the specified default provision shall annly. Salart tho annrnnriam hnv&r i r...... ems. ..e„a..... Section 1.2 Transaction ❑ Oral (default) OR Section 10.2 0 No Additional Events of Default (default) Procedure ® Written Additional Events of Default 'Ll ® Indebtedness Cross Default Additional events of default are specified in the Special Section ® 2 Business ' . Days aft¢t receipt (default) Confirm Deadline e OR Provisions (attached). D _ Business Days "Or recelpt Section 2.3 ® Seller (default)'�'� Confirming Party OR ❑ Buyer r Section 3.2 Performance ® Cover SteAftnig.stault) -- OREarly Section 10.3.1 ® Early Termination Damages Apply (default) Obligation U- Spot Pri ell erd Termination OR Damages r:... .. C Early Termination Damages Do Not Apply Note: The to/lowing Spot Price Publleatfon appbess to both of the - immediafe . laeed/n. $gction10.3.2 OO Omer Agreemefd.SetottsApply„(gelauiQ SeMlo4q' r 7 LA, Gas'Delly Midpoint. (petault) 'Agieemeht O BI(elgrell(default) Spot Pre Publikatlgli;: OR,;Setottg. r ';� r o-T,Rei7p01e ❑'^ , OR D Other Agreement Sbit mI)o NM Apply - SeMlonBuybr Pays At a613� tr�r Delwer)t m f(dl4[au0) � Taxes QRt- ©'' �3e`I{i3t Peys Betorer$1)'d At Dellvery PO.liit`�, Sectton7.?2 "Day of Month¢iollovdng Month,of(eltvery SeMlon 18:5 CelHoefe Psym@l1t�Daie $`(default) Choice Of Lew . ❑ Oa'�of Month foltkiwln d Month of daily, Memo�"(R4eyment ,5) Clansfer ee�hpuee ConUdentiailtlieipp(t),s`(defeult) .� pmated Cratllt�( ,` {I° 1 Confid@fiai�pR '� - ❑ Con fidenaell�yr�ifindti8f?ply SeMI h f M1 4 � ,lit lr' N r 'i appbestle'fe`uIQ Natlin ' Aa does r not ,• X Speo 11'„ld�lslon sheets 7 ❑ Adt�,� a LKI C o13I7: rmva SISNATURE Copyright® 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.Y All Rights Reserved Page 2 of 13 September 5, 2006 General Terms and Conditions Base Contract for Sale and Purchase of Natural Gas SECTION 1. PURPOSE AND PROCEDURES 1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to the party receiving Gas and "Seller" refers to the party delivering Gas. The entire agreement between the parties shall be the Contract as defined in Section 2.9. The parties have selected either the "Oral Transaction Procedure" or the "Written Transaction Procedure" as indicated on the Base Contract. Oral Transaction Procedure: 1.2. The parties will use the folloWing Transaction Confirmation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmission of -telephone conversation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally borind from the time they so agree to transaction terms and may each rely thereon. Any such transaction shall be considered a "writing" and::to have been "signed". Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall antl the other pally. may, confirm a telephonic transaction by sending the other parry a Transaction Confirmation by facsimile EDI of m}itually a))�eejbie electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction,' �topedure) pfovided that the failure to send a Transaction Confirmation shall not invalidate the oral agreement of the parties Confirming Pony Adopts its confirming letterhead, or the like, as its signature on any Transaction Confirmation as the Identification and sueJtiI tion of Confirming Party. If the Transaction Confirmation contains any provisions other than those relating to the opmmet(a)t{I jle"rtns of the transaction (i.e., price, quantity, performance obligation, delivery point, period of delivery and/or transportafift conditions), which modify or supplement the Base Contract or General Terms and Conddig)is of this Contract (%g., arbitration or addltlpgal representations and warranties), such provisions shall. not be deemed to be i3cqopted purs6nt to Section 1,3 but mustbe ei;pri s, -agreed to by both parties prdAlded;lhat 10 °foregoing shall not tra t a<tio ',4i reed to li the parties:.. Wrltfe `_; tisactlititi.#il'baedure 1 2 he)rartiesSuilJ t!se the followjh�,Transactioni;in'frmation procedure. Shoilltl the partiesoilf'etofin agreafilent'r@garding a Ga's �ur�hase and Sale,transaction j¢e a partcular pelJuery Period, the Confirming'party shall,, and the •gther party flay; record that a¢Ikement on a Transaction Cprffii'mation end communicete sudli Transaction Confirmatiprt lay faosimile, 1<Dl,or:mutually agreeable electrohil;jlreans, to fhe •ettaer party by {he•Gbse of the Business Day following the date'.pf.apreement: the parties ackhgWl$d(�e that 9lteir 8greement III Knot be bmdl'rmg ftntil the exchange of nonii9nfiidmg Transaction Confirmatioh_s or the ass sofih Contrrn:Deadline without<ob'ectlon ftflni'the receivin art as rovideel in Section 1,9; 1 3 If Aseh rit¢,pdJVs Transaicilt)n Confirmation it Materially different from the receiving pa Ays yr dats�nding pflhe agreement referred 9p In �actlofl 1 SUch receivtr c ��ssarty shall n64 ', h$. sending party via facsimile, f Dl or mutuplly'a-rat3slile elestrorlic rileans by the CAr>tir)ri eadhde less such rer�elyhjg party has pri?vlously sent a Transaction Confirmation tp1his sansiing,parfy. The failure of the re IV _ ar[yYp etr fi4ttlylhe sending rty in wntmg Q5)r a Confirm Deadli a constitutes the rocisl in Ij3 h g p�Tty a�reemgnt to th terms of the irar sedlioh esgiibed ion the senrgiilg�partys Trartsapirort Confirmation Iti there are any thalami ditler hces beitbeen 3Jmely sent TraMs t to 4oril rlhal(bns oveming the same traniiat fi, xheM heather Ttertsooion Confinnatlgh shall l ¢ faitlS�m� t ill pl unless such dlffeteiioa% Are resit(Jed if)cluding the dsg of any avi�lenf� #lfat dearly resolve& the differences 1n the litof �e(flbh c6h.0 in0trpns. In the ever3t Y Fie iaM(rpf amo g i[ a terms of i)` a?binding Trait' i 1pn ConfinnaUofrptarjfta to Section 1.4 ," lid l 1 �greerrji tlf;Ifs parties whir)h nlay tre lsit�ile[tl)ail by a rewrdeY! z onversatiiS :v3here the parties have selected the Oralydr%dlfiiYi:Proce�ule OY )he Base Coiitrad[s: iq) the B; si? citfact, and ttv`) Ihese Geneial lio ms and Conditions, the teams of the docittrf'¢Fi'�s 5lisll govern lh�the priority fisted infils serttenq; 1 4 the rtY pcppee that each rtY may el atiptlly record all telephone collVersations wdhy lA this l)rtfe2etween that rksp�t�tive " p s i without alt�pec al or fu ll r e to the otFter party. I a ,arty shall i recess ' F)b M of its age ritS emplo a Se );uch recorJ�j Where t)e prtie5 have selected the Off) Transaction In S�idrST3 of the Base7S�ract tbreagree notiti,. ntest the v?�ldityt?Y enforceabil'riy of telephonic recordings eliteP.nto in acodYdptit edvith the require rasnusormis 4ese+jonrraa. SEC1-Ii. U)IN 2. DEFINITIOW, The left7i$ et forth b'att shall have t p. meaning 6ij*li sd 4o them below. Other teribs are also defined elsewhere in4he Contract and sir-1J`have the iiieFjlfigs ascribed them herein. 2 1. "Additipkiil.84pnl of DefauttY shall mead'Tisheactional Cross Default or Indebtedness Gross D.efault•,�,each, as and if seleot6rl.py the perkier pursuant to the Base Contract• 2.2. ,Affiliate" shall mean, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of at least 50 percent of the voting power of the entity or person. Copyright ®2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 3 of 13 September 5, 2006 2.3. "Alternative Damages" shall mean such damages, expressed in dollars or dollars per MMBtu, as the parties shall agree upon in the Transaction Confirmation, in the event either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the rase of Buyer. 2.4. "Base Contract" shall mean a contract executed by the parties that incorporates these General Terms and Conditions by reference; that specifies the agreed selections of provisions contained herein; and that sets forth other information required herein and any Special Provisions and addendum(s) as Identified on page one. 2.5. "British thermal unit' or "Btu" shall mean the International BTU, which is also called the Btu (IT). 2.6. "Business Day(s)" shall mean Monday through Friday, excluding Federal Banking Holidays for transactions in the U.S 2.7. "Confirm Deadline" shall mean 5:00 p.m, in the receiving party's time zone on the second Business Day following the Day a Transaction Confirmation is received or, if applicable, on the Business Day agreed to by the parties in the Base Contract; provided, if the Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party's time zone, it shall be deemed received at the opening of the next Business Day. 2.8. "Confirming Party" shall mean ifieparly designated in the Base Cordract to prepare and forward Transaction Confirmations to the other party. 2.9. "Contract" shall mean the iggaity binding relationship established by (1) the Base Contract, (ii) any and all binding Transaction Confirmations and`(if!) where lhe.;parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the part)es have entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties. 2.10. "Contract Price" snail *an the 'btrlbbnt expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to.bythe partlasiirailransaction. 2.11. "Contract Quantity"'shall mean"th$ quantity of Gas to be delivered and taken as agreed to by the parties in a transaction. 2.12. "Cover Standard", as referred to in Section 3.1 quantity, of Gas puraeantto''his Contract, then fhe-geff61rn perforitirlg party obtgm -Gas, (or an altemate fuel if elgot perforffij party, idl-fi ji, in either rase, at a pride fEAbri the ampurlt of notice prQrrided by the flonperforming ptlrty sales ril q menu; as applicable; the quantities involved;?; 2.13. "Credit Support Obiigation(s)" shall meah any I party to this Contract--suc as cash, ar irrevocable t ta6lloy an asset, guaranty, or other good and sufficient security of 2.14. kDay" shall mean a period of 24 consecutive:16o a partiCulartransact(iti, 2.15" Dpljv6fy Period" shall be'the'period during y,(t it 2.16, 2.17" 219, 'Firr pertorfiarrte is mvok(n4.§rce the notr"1hplion 2.20. `'"Gai a)" shall rtean such poi in an electronic data i on of Transaction Conf 3n the purchase, sale utures cootis cts. EFP e of its bllli6ations to he Commbt3ity Exchan .an that either party for reasdris�f Force I iy be responsible for a he Transpoorter and unt shall mean that if there is an unexcused;failure to, take or deliver any ing party shall use commercially reasonable efforts td.(l) ff Guyer is.the d by Buyer and replacement Gas rs not avaflablg), or (il) ,,Seller is the iable for the'delivery or pioduction are�,'as appl cable tn'isfitnt with: the immediacy of the Buyer's Gas con$ r ptioh needs or Oar's Gas nd the anticipated length of failure by the i 6npeiforming party. bligation(s) to provide or establish credit support for, or on behalf of, a letter of credit, a margin agreement, a prepayment, a security interest in i continuing nature. irs, coextensive with a 'day" as defined by the Receiving Transporter in i deliveries are to be made as agreed to by fhe parties in a transection. re agreed to by the parties in-eiransastion> le pursuant to an agreement ehtered-ftitp by the.parttes, specifically under this Cb6ract. ige of natural Gas as the "physical side of an exchange for,physical orporate, the meaning and remedies .bf !0r`rm :, provided ibat a party's r receive Gas will be governed by tW fLles .cif the ;relelaOf futures rupt its performance without liability. drily Yp the ex3abi that such trovided, however, that during Force Maieure interruptions„ the party nee Charges as set forth ih Section 4 S telaietl<to its interruption after ige in deliveries and/or receipts is confirrna l by:the Trgho,'Ok}eh and noncombustible gases in a gaseous Stkitd consisting prirharily of methane. 2.21. "Guarantorshall mean anYeotitythat has provided a guaranty of obligations of a party hereuhdeg 2.22, "Imbalance Charges" shall mean any fees penalties, costs or charges (in oash or in kind) assessed by a Transporter for failure td Eatisty the T arisporter's bafknee and/or norhi tlon requirements. 2.23. "Indebtgiinass'Cross Default" shall mean tf aoleoted on the Base Contract by the parties nth respectib a jfa'ny, that it or its Guarantor, if any; experiences a default, or _alklar condition or event however ther'eih 'defined, under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether present or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed money in an aggregate amount greater than the threshold specified in the Base Contract with respect to such party or its Guarantor, if any, which results in such indebtedness becoming immediately due and payable. Copyright 0 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 4 of 13 September 5, 2006 in any mixture of hydn 2.24. "Interruptible" shall mean that either party may interrupt its performance at any time for any reason, whether or not caused by an event of Force Majeure, with no liability; except such interrupting party may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by Transporter. 2.25. "MMBtu" shall mean one million British thermal units, which is equivalent to one dekathern. 2.26. "Month" shall mean the period beginning on the first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar month. 2.27. 'Payment Date" shall mean a date, as indicated on the Base Contract, on or before which payment is due Seller for Gas received by Buyer in the previous Month. 2.28. "Receiving Transporter" shall mean the Transporter receiving Gas at a Delivery Point, or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point. 2.29. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporter(s) for movement, transportation or management. 2.30. "Specified Transection(s)" shalt Mean any other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas, and any other transaction or agreement identified as a Specified Transaction under the Base Contract. 2.31. "Spot Price " as referred to in Section 3.2 shall mean the price listed in the publication indicated on the Base Contract, under the listing applicable to the geographic location closest in proximity to the Delivery Point(s) for the relevant Day; provided, if there is no single price published for such location for such Day, but there is published a range of prices, then the Spot Price shall be the average of such high and 19w prices; If no price or range of prices is published for such Day, then the Spot Price shall be the average of the following: (i) the price jdetermined as stated above) for the first Day for which a price or range of prices is published that next precedes the relevant lay;, and (it) the price (determined as stated above) for the first Day for which a price or range of prices is published that next follows the relevant Day. 2.32. "Transaction Confirmation" shall mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant,tb Section 1 for a particulat DeliveryPeriod: 2.33. PTransactional=Cross Default" shall mean, ifselected on the Base Contract by the parties with respect to a party, that it shall be ih tlefeult, however therein daijhad, under any-§peGified Transaction. 2.34. 'Termination Option" shall mean the opfidn of either party to terminate a transaction in the event that the other party fails to pertorrn;i Firm obligsfion to deliver Gas in the case of Seller of to receive Gas in the case of Buyer fora designated number of days during a period asspebfiedonhe:applicable Transaction Confirmation. 2.35, "Transporter(s)" shall mean all Gas gathering or pipeline companies, or local distribution companies, epting in the capacity of a transporter, transportipg teas for Selleror Buyer up$treatn,or downstream, respectively; of the Delivery Point pursuant to a particular transaction. SECT IQN 3. PERFORMANCE OBLIGATION 3 1, Seller agr@es to sell and c(eljlrgt, and Buyer, a�jeg to receive and purchase, the Contract Cliianttty for a particular transacfion in accordol'be wtththeianns of the Conked `Sales and purchases will be on a.Firm or Intenuptilile basis, ,a§",B gd to by tfie-,potties in a trsrtsactib�ri. The,parties have selected either the."Cover Standard" or the. "Spot price Standard" as indibatedon the 11364 Contract. Cover�tanda�. 3 2 Thet i$10.." ¢xclusive rellitedy of the parhes m,the event of.is breach of a Firm obhgatrpn t0 deliver or rabewe Gas shall be reoobery cline ft311k 069: (i) in the 61rent of a breach,by Seller on any Day(s) payment by Sell artb Buyer in an .Jniidriht kqual to the positive diftdrel'Irce,'1f any, betwepen the purchaser } ryge paid by Buyer utihzmg the Cover Whdartl and the t;ontfact Price, adJJusted for cor tnetpfajjy reasonabre differences rn transportation Costs to or from the Delivery polnt(s) mulhphed by the drifetencC'�tetweer� tFjontrsct Ctlajity and therarility;actually dellyered by Sallee for such aJe) �ifoludmgen)iw4uantity for which mosleplatie(ilelit 1f "available er li) in the e ltt�t a breach by':;Buyer on airy'Day(s) p$ ri7 rfib Buyet.te elfer in the amount yual to fife positive differetJde; if any bfdyJ�fte Contra price and ihe,price receltft �°faller ut/It lb A14$ Cover Stendartt Ior the',,r435e1e 'pf such G 3; adjusted for YAhnercially reasonable Jiff# bces m trail; Sp iron costs $�trr )loin the Deliveryy Z bint(s), tnthtlphbd by the lifetence betyfle rf, fee' Contract Upantity and fthg quantity aoju lly''t ken by flyer Yor such Day(s)'ejlluding aily:;yuahtity for Whi6h_no sale rs-attail@ble; and (iii) Ih the event that Buyer ha§ use d oisihmerciily4easonsble effo"6 to replace th has or Seller has used corllm fsially reasonable efforts to Sell the Gas t0 a third par4y and no such replaoem nt or sofa is available for Il or any ppl rbn t�f the Contract Quantity riY has, then rn , 0 iipn to (1) oi, (lid above, as appGoab ,•the sde aid `1 occlusive really of the peY�t3P1rinp party with'respect to tlf( has not reptatiOd, l ,061d shallts� arj amount equal tb any unfavoralsl2 difference between the Cg1Srai t Price and the Spot Pr�ee, adiuslel foJ'auoli teen �,,ppprtitsh to the appltclb, a Delivery pdirit; multiplied by the quantity df(gbh Gas not replaced or sold. Imbalance hatgQs'shall ipt_pe recovered under this Section 3:2, lSut Seller and/or Buyer shall be Yesponsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party's invoice, Copyright ® 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 13 September 5, 2006 3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (I) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, If any, obtained by subtracting the Contract Price from the Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the applicable Spot Price from the Contract Price. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, If any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party's invoice, which shall 3.3. Notwithstanding Section 3.2 the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by both parties. 3.4. In addition to Sections 3 2 aqd; �1.3, the parties may provide for a Termination Option in a Transaction Confirmation executed in writing by both parties. TI1e Transaction Confirmation containing the Termination Option will designate the length of nonperformance triggering the Termination Option and the procedures for exercise thereof, how damages for nonperformance will be compensated, and how liquidation costs Will be calculated. SECTION 4. 4.1. Seller shall have the 641E for transporting the Gas from the:pelJ 4.2. The parties shall coordin Each parry shall give the other parry I the quantities of Gas to be deliverer Poirn(s).are greater orlesser.than the 4.1 the pariloahall use con an inva,, 0 from a Transporter that Scheduled Ws, then BUyet shall pay*i -' Imbalanc(ore Charges were incurred as a t shall pay such Imbolancee Charges b,f SECTION 5. QUALITY AAft, All Gas delivered by $ellarshall meet the.f measurement for pUfpopes of this Corflra6 the eslal lished.pror-aces of the Receiva q SECTION.A. TAXES ANDIMBALANCES the Gas to the Delivery Point(s). Buyer shall have the sole responsibility fmination activities, giving sufficient time to meet the deadlines of the affected Transporter(s). INotioe, sufficient to meet the requirements of all Transporter(s) involved in the transaction, of ;haled each Day. Should either party become aware that actual deliveries at the Delivery i Gas, auehparty shall promptly notify the other party. reas6g6ble farts to avoid imiposltion of any Imbalance,ghafbes.ItEuyer.&BeJler receives nbalance barges, the pani'a were nourre4's shall determine the validily vi"s well as the q Ueb of such s a result of Buyer's receipt of quantities pfIQas greater than oHas6than the Imbalanc@;Gharges or reimburse Seller ipr such Imbalance)�hiiyges paid' Sellai. If the Seller's pelniery of quantities of Gas greatof than or less ihan the Schedulei, then Seller rite BuyerTor such Imbalance Charges paid,by Buyer. :ea rofraaitmT re, qualityand-heat content requirements ofthe Receiving Transporter. The unit. of quantity be one.MMBtu dry. Measurement of Gas quantities hereunder shall be in asnce with sporter. ' The palrties have a01eirted either "Buyer Pays At and After Delivery Point" or "Seller Pays Before and At Delivery Point" as indict d;qn ttie Baseoittract. BuyerNya Atelivid After pelivery Points. Seller strait pay by oaus e to be paid aII aXes, fees levle6, palialtias, licenses or charges imposed by any �pverltment adtho�ity, (Taxes'? on Or wdh'respeetloYt a as prior to the alivery Polnt(s);"buyer shall pay or cause to be paid all Tales plt#hrM ith respect fa thai Gas at the pelive)y Pd1ht(s) and all Taxes agar the Delivery Plifh((ss). If a party is required to, remit or pay Totes that are lha other partys respoRsi[ ilrjy hereUntlery the party resppriSible for sudut shall promptly reimburse ih , other party fproilt h Taxes. Ahypalty entitled to an eXkrn Von iYh An : guch Taxes off, : a es she �sifrrtis Jhe other a: an nece5 1j documen omit teof. Seller ' Bef re $klt`I Y1� Delivery 1141 Seller$IiAlJpay or 9060 .6 be paid all#8kes, fees labial `penalties, licenses or charges unposed by ahyljtivarriment aUthorll)'( Taxes on or vJitFl respect to fife t3as prior to the'�?elivery Polnt(sj'aiid all Taxes at'the Delivery Nint(s). Buyer 6lipll flay or cause td be paid all Taxes, fa or with tosp 016 the Gas afit�r the Delivery tiai�li�t(s). If a party is required toremit or pay'f es that are Ahe slither parlys responsibility hereuF,d r,1he party respgrtsible for such Tal4esshall promptly reimburseiFie other partylorsUch Taxes. Any'patty entitled to ah exer h tion from an such Taxes ot.nha es shall Pun ish the other a ; an neces a documentaioh therea SECTION 7. 8ILLING, PAYMENT, AND "AUDIT 7.1. Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for any other applicable urges, providing supporting documentation acceptable in industry practice to support the amount charged. If the actual qu6htky delivered is not known by the billing date, billing will be prepared based on the quantity of Scheduled Gas. The invoiced quantity will then be adjusted to the actual quantity on the following Mordh's billing or as soon thereafter as actual delivery information is available. Copyright ®2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 6 of 13 September 5, 2006 7.2. Buyer shall remit the amount due under Section 7.1 in the manner specified in the Base Contract, in immediately available funds, on or before the later of the Payment Date or 10 Days after receipt of the invoice by Buyer; provided that if the Payment Date is not a Business Day, payment is due on the next Business Day following that date. In the event any payments are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2. 7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the nonperforming party for an accelerated payment setting forth the basis upon which the invoiced amount was calculated. Payment from the nonperforming party will be due five Business Days after receipt of invoice. 7.4. If the invoiced party, in good faith, disputes the amount of any such invoice or any part thereof, such invoiced party will pay such amount as it concedes to be correct; provided, however, If the invoiced party disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay. In the event the parties are unable to resolve such dispute, either party may pursue any remedy available at law or in equity to enforce its rights pursuant to this Section. 7.5. If the invoiced party fails to-iemit:the full amount payable when due, interest on the unpaid portion shall accrue from the date due until the date of payment at a rate equal to the lower of (i) the ther•effedive prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum;or(1) the maximum applicable lawful interest rate. 7.6. A party shall have the right, at tit; own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the books, records, and telephone recordings of the other party only to the extent reasonably necessary to verify the accuracy of any statement, dtarge, payment, or computation made under the Contract. This right to examine, audit, and to obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Contract. All invoices and billings shall be coh�usiyf ly presumad'final and accurate and all associated daims for under- or overpayments shall.be deemed waived unless such invoices or'j i -gs are objeisad to in writing, with adequate explanation and/or documentation, within two years after the Month of Gas delivery. All retrpet�ve adjustments under Section 7 shall be paid in full by the party owing payment within 30 Days of Notice and substantiation of such inacco0cy, 7.7. Unless the parties have bled#d oil the Base Contract not to make this Section 7.7 applicable to this Contract, the parties shall net all undisputed amounts due and owing, and/or past due, arising under the Contract such that the party owing the greater amount shall makes single payment of the net amount,to,the other party in.accordance with Sedion, 7 prowided,ihat no payment requtr&d +o be maH@ hrisufint to the=terms of eny i;reil l $uppbrf'Obligation or pursuant to 5ectipn � S sjia(I be sUb)ect to netting under9hts Section, tf the;partles have a ecuted a separate netting agreement, the terms and conditions (herein sti911 prevail to the extent 1nCphsistenfil0reWith. SECTION 8. Tj7LE, WARFANTY, AND INDEMNITY 8.1. Unless'otherwise specifically agreed, title to the'Gas shall pass from Seller to Buyer at the Delivery Poirt(s). Seller shall have responsibility ter and assume an) liability with reseed to the Gas prior to Its, delivery to Buyer it the specified Delivery Poiht(s)., Buyer shall have responsibility for and aSedme any liability with respect {o said Gas after its ,delivery"to Buyer at the Delivery gint(s)• that it wlfFitiave the i r if to BuyRt,'ifree and ,TION 1$,, AIL OTHI FITNESS,VAR ANY PP Seller a leas to indem 6n rs' fees 6606 of court vey and will transfer good and merchantable title to all. Gas sold liens, encumbrances, and claims Eft WT AS PRO\4DEp IN THIS NTIES, EXPRESS OR IMPLIED INCA�LJ)ING ANY 1N%iRRANTY OF 'URPOSE, ARE DISCLAIMED. damag(a,ftpm said G@o ar, dSti er charge save ihh slytiless fromIlail)is, from any ) or prbpeEty damage 0464 Sa'rEt: Gas or othf all losses, Srisino from reasonable sgnal injury ly¢r. Buyer 8 4. Thep ree that the delivery of and ,1*, transfer of title to all Gas under this CorliratK 1hall take ptape within the Customs Terntory,lfShe United States'(as define9lh,,0*6bral note 2 4f the Harmonized Tariff Schkll5dle of the t nItedMates 1E U S102 Genera) Notes, page provide$ tdylQyer, that in the event Selit took title tth )(fa'S outs file the trustoms Ternto yrt? the tSrJh{ fates, Selle $resents anal f kl 'ts that k is)tte importer 6ftecord for r311 Yerad a 4 r ed intc the Idt3ltgStatesrn hell be re nslble far entty�ndre>ftry summary filings as iNall=as the paynt� duties, ts{{�rlff fees, i1 any, arir7 ll appk lit ieCord keepi%Uquirements Pf ij 8 5 ' Notwithf",ndit the other ptohhstons of this Sa6f0b- 8, as between Seller and Boyar, Seller will be'iiable'for all Claims to the extent that suchatise from{he;�alure of Gas d$Ii red by Sellarto"iri Ei the quality requirements of Section 5. $ECG 1 N 9. NOTICES 9.1. All Trafiagi4ibri Confirmalibris, invoices pays nt instructions, and other communications made pursuant to the Base Contract t NoticW)'sfialliba made to& addresses specified in writing by the respective parties Trom't me to time. 9.2. All Notioas.,required hereunder shall be lKWAtrig and may besent by facsimile or mutuallyaCoeptableeleotronic means, a nationally recognized overnight courier service, first class mail or hand delivered. 9.3. Notice shall be given when received on a Business Day by the addressee. In the absence of proof of the actual receipt date, the following presumptions will apply. Notices sent by facsimile shall be deemed to have been received upon the sending party's receipt of its facsimile machine's confirmation of successful transmission. If the day on which such facsimile is received is 0 2006 North American Energy Standards Board, Inc. Reserved Page 7 of 13 =SB Standard 6.3.1 September 5, 2006 not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall be considered delivered five Business Days after mailing. 9.4. The party receiving a commercially acceptable Notice of change in payment instructions or other payment information shall not be obligated to implement such change until ten Business Days after receipt of such Notice. SECTION 10. FINANCIAL RESPONSIBILITY 10.1. If either party ("X") has reasonable grounds for insecurity regarding the performance of any obligation under this Contract (whether or not then due) by the other party ("Y") (including, without limitation, the occurrence of a material change in the creditworthiness of Y or its Guarantor, if -applicable), X may demand Adequate Assurance of Performance. "Adequate Assurance of Performance" shall mean sufficient security in the form, amount, for a term, and from an issuer, all as reasonably acceptable to X, including, but not limited to cash, a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty. Y hereby grants to X a continuing first btiority security interest in, lien on, and right of setoff against all Adequate Assurance of Performance in the form of cash ttansfattetj;;by Y to X pursuant to this Section 10.1. Upon the return by X to Y of such Adequate Assurance of Performance, the security jit i est and lien granted hereunder on that Adequate Assurance of Performance shall be released automatically and, to the eMerphpgssible, without any further action by either party. 10.2. In the event (each an "Event of assignment or any general Arrangement fol acquiesce in the commencernetst of a proceot such petition filed or proceedir)g ,r tirnmene>td unable to pay its debts as th.,ilull due (tj )h official appointed with respect 1d d or subStpli to any Credit Support Obligations reI t, tail within 48 hours but at least one Business Day second to of )efault") either party (the "Defaulting Party") or its Guarantor shall: (i) make an fhe benefit of creditors; (i) file a petition or otherwise commence, authorize, or or case under any bankruptcy or similar law for the protection of creditors or have igalnst it; (iii) otherwise become bankrupt or insolvent (however evidenced); (iv) be ve a receiver, provisional liquidator, conservator, custodian, trustee or other similar arty all of its assets; (vi) fail to perform any obligation to the other party with respect Contract; (vii) fail to give Adequate Assurance of Performance under Section 10.1 of a written request by the other party; (viii) not have paid any amount due the other ness Rai following, wntten Notice that such paym pt,js due; or, jx be the atfacted renes or payments upon Notice ani in Section.10.3, in addition to any L vl A ar-uaraua nob iorcurrea Ono Is continuing, the Non -Defaulting Party sh, Defaulting Party, to designate a Day, ,ho' earlier than the Day such Notice is given and no later given, as an early te"rrtrirlation date (the;?'Early Termtnhtibn Date") for the liquidation,errd terrains all trans1.ahtfons under the Contract, each a Terminated Transaction". On the. herly Term temuhata other thel , 3h6$e transadidns, if any nthet :rr(ay not be liquidated and iQrminated Trarrsatitl. in§)whldh,itluclecl Tranpaotions must bg�l undated and terminated ais spon there upon ierrr�tttattbn shall pe, a Termr60"' 'Transactlbfi�arj ;(fie valued consistent wdh'Section 10 or "Early Ili 6J? A3 bl tits early Termination Date the �a 6h befaulting Party atlalt determine, jt7 reasonable mQnttef, f if tlai3 amount 00:0 (whether or 0 t4hen due) by,6616K laity with respect belwaiA he parties Under' Terminateli T.ransactiorls - �tcluded Transactions on and before 1 other atlj�licably ttherQe>3 relating to sfach'deliveries,4tif! nodblpts (including without limitation any'. for vphl ph$ not yet been rriade by the party#t owes such payment udder this Con defined.1,Qow tSfaeah `f'erminaled trlansactlon f! In --Defaulting, Party shall ( liquidate Tran3aptrt)n at its fl(#rtralue, 15 so teach amopht ty(it to the difference betwee :such Mar as ddfii'4(beloW, stidh TerminateX nsadron )r Olfbe due to the: Buyer under l e Termin VelUe eitt' ads the > otitYBct Value Andjo the SellerAftfj"e {ipposite is the case; an" (y) where a then tluii t hder claUbe (1<) above to present value 111 a oornlnercially reasonable manner as of th acco0nt•6f,the penoillbetween the date of liquidahori i6k0he date on which such amount would f to the relevant Ternitlj'bteil Transectiont ) fr to terminate and.tiquidate the W. 4,1l .ether remedial Available heVO, Jbe right, by ,Wipe to the an 20 pays after sugb =Notice is on pui,tf ant to S¢etlori ,10.3.1 of Won pafo, all transactions will ndel applicable IaW ("EXcluded er,es is Iagally perffilssible, and 1 pelaw, With respeoito each 5't.Sectibti 10.3.1 nt 4thages DoWi6l %{ppiy" as minauon Rate and all d untler SQgtlon 3.2), the t,a Value, as ate Qebtj ,rhinated d the ttQ( Value, tion(`4j ttudti`Market isceyiit e�cWamount linatibn [)Ate_`(to take For ptrrpg5es of this &ebton 10.31 contract Valuer tilealis the amount of Gas re pining to be dalpveced or putohaefiunder a trahsabtibtl multiplI66iihe ContragtPrice, and Ma eWAIue" means the amount o�, Gas remaining 4ti,be delivefboi of fluibhased under a transaction multiplied by the itlArket pace ford similar transaction at the Delivery Point dete"r`mipea by the' Noh:R.afaulting Party rn a commetciglly reasonable manner. To alcettpn the Market Value, the Non=befaulting Paify::inay consrd#r, among other valuations, any or alt of the settlement prices of Nl Ml ii'Gas futures contracts, quotations fri rr loading dealers in energy swap contracts or physical gas trading markets, similar sales or purchases and any other bona fide third -party offers, all adjusted for the length of the term and differences in transportation costs. A party shall not be required to enter into a replacement transaction(s) in order to determine the Market Value. Any extension(s) of the term of a transaction to which parties are not bound as of the Early Termination Dafw linniwiinn h.,f nm n, i4.A f.. ___..:_:___,,. _ _.... .. . . Copyright ® 2006 North American Energy Standards Board, Inc. NAESB Standard 8.3.1 All Rights Reserved Page 8 of 13 September 5, 2006 Market Values. For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction shall be considered in determining ContractValues and Market Values. The rate of interest used in calculating net resent value shall be determined by the Non -Defaulting Party in a commercially reasonable manner. Early Termination Damages Do Not Apply: 10.3.1. As of the Early Termination Date, the Non -Defaulting Party shall determine, in good faith and in a commercially reasonable manner, the amount owed (whether or not then due) by each party with respect to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such deliveries and receipts (including without limitation any amounts owed under Section 3.2), [Bilateral r which a ment has not et been made b the artthat owes such payment under this Contract. he parties have selected either "Other Agreement Setoffs Apply" or "Other Agreement Setoffs Do Not Apply" as dicated on the Base Contract. her A reein t Setoffs Apply: Setoff Option: 10.3.2. The Non -Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties der Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At ite`s'ole option and without prior Notice to the Defaulting Party, the Non -Defaulting Party is hereby authorized to setoff any Net Settlement Amount against (I) any margin or other collateral held by a party in connection with any Credit Support Obligation, relating to the (;antract; and (it) any amount(s) (including any excess cash margin or excess cash collateral) owed or held by the .pary that is'eri(ttled to the Net Settlement Amount under any other agreement or arrangement between the parties. Triangular Setoff Option: 10.3.2. The Non -Defaulting Party :ahall :'net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settternent Amount"). At its sale option,, and without prior Notice to the Defaulting Party, the ]Jon -Defaulting Party is her$gp>3lithonzecl to seioff;(i) any Net Settle hereby against any margin or other collateral held: by;a early in connection with art 'Cf,64 Support, I ligation relating 62the Contr$tit;�(]) any Net Settlement Amount against eny araount(s) (including arty excess cash hlalgln or ext;es$ tjsh collateral):9ived by or 10 0,,pii ty under any, other agreement or arrailgtilrieht',between the petties; (iii) any f leY4 e}tlement ]4mo(]nt owed to the Ylon Defau]tt(1 ity against Ony amounts) •(including any=eggs gash mar Pn ise excess cash �>p110%ral) dared "'by the Nof',00laulting Piky;: l'r its Affiliates :to the Defaulting Party under• any other.afijs@fnent or arrangement, (iv) a ty-Net Settlement Amount owedfla;1he Defaulting Party agarnst.any amount(s);(irioluding any i1(cess cash margin �r alccess cash collateral) ow6q by the Qefaylting Party to "the Non DeTaUtting Party or its Affiliates under al%y other agreetlieltt 4r arrangem@nt; and/or (v) et y Net SettteniieiM Amount owed to the D61661ting Party against any amounts) (including any ex608s cash or excess "th collateral) 6yve8 by the Defaulting Party or its Affiliates to the Nqn-Defaulting l arty under ,- an othere rem ntOr,arran ement„, Other p'"i grhent ,etgYfs Do Not A °'l`: 10 3; The Non Defaulting 3Hy shall net or aggregate, as appropriate, any and all amounts dwing betN/een the parties under Septrbn 10 �;; sol at all such ar+lounts are ne #ed;6r aggregated to a single liquid kerfamounl 0A.- ble byone'petty to the other (ilia 'dJat Seitlrshiel t Amounty, At its sole 4ptiOn.,8rrd without prior Notice to the Defautting Party, the Nop+Qi°faUrting Party may setntf any Net Settlement Amount against any tnat`gWor other collalsral held by a parry in ca nectioh With �t1y Credit Support Obli atibfi'feletfn °fo':he Contradt. ._ tNW:,a n Jany ogrINauon tnal •is to us mcluged in any netting, :aggG$gation or setoff pursuant to Seoti4n 10.3.2 is una5oertarned, ttie ttun-1 efauting Party may m gi.6.0*hl estimate that obligation and net aggregale'or setoff s applicable, in respect Off the a ttma�e, subject to the Jpn-Defaulting Party accounting :to the Defaulting Party wheel the bbligatioh is ascertained. Any anrgL t not then de -which is inrlluded in anyh"I6d,'`aggregatton or setoff pursuant to Se& 1i13 2 shall 6e ptsCounted to net press t valueNd e,1 Orramercially reaspnabla mi mdretFrletermined by the Non-Defautting Party 10 9 Sao as p[acticable a ai a liquidah(3n a`t shall be (oven by the NSh-Defaultin P idy So the Da'fandiih Party of the Net Settlement Atttpiiht, and wl� tht3r the Net D fie rie tt Amount is: due to or dui•:from the t dt1 p it? t]img P `r]� the Notice shall 1nfs�p. ee a wafter] statement expla]nmg in reast3ne0ie detail the calculation of the"Net Settlen(irdj4M,66nt, proihded, N6t failure to give eYich Notht sh8]] hot affect the validity or ehfofdeaoility of the liquidation of Qi�ve rise to any claim try the.be ulUr g Party against the Non Defaulting Party. ins ;Net Settleinejtt amount as well as any setoffs applied a�arri5i ouch am(aitn pursuant to Sectio1.n iQ 3 2 shall fie paid by the ct4sa of businas tr(the second Business Day following suolt Notice which.ple shall not be eadier tir0h the 6 it 7eFrrrination Dete :Interest on eny 4npeid portion df are Net Setgehient Amount s atlj(ietgd by s4lb7fs; shot) accrue from the )fate due uht ill date of paymeht'at a rate equal t¢ the lower of (i) the then effecUVe pdme rate 6ftrjtere5t published un(lai "'Money Rates" iSy.The Wall Street Journal, plus tWy:percent peranrium;•or (i) the maximum applicable lawful intene$t'"rate, 10.5.1 The parties agree that the transactions hereunder constitute a "forward'-bontract' within ;the meaning of he United States Bankruptcy Code and that Buyer and Seller are each "forward contract merchants" within the:meaning of the United States Bankruptcy Code. 10.6. The Non -Defaulting Party's remedies under this Section 10 are the sole and exclusive remedies of the Non -Defaulting Party with respect to the occurrence of any Early Termination Date. Each party .reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or may be entitled to arising from the Contract. Copyright 0 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 13 September 5, 2006 10.7. With respect to this Section 10, if the parties have executed a separate netting agreement with close-out netting provisions, the terms and conditions therein shall prevail to the extent inconsistent herewith. SECTION 11. FORCE MAJEURE 11.1. Except with regard to a party's obligation to make payment(s) due under Section 7, Section 10.4, and Imbalance Charges under Section 4, neither party shall be liable to the other for failure to perform a Firm obligation, to the extent such failure was caused by Force Majeure. The tens "Force Majeure" as employed herein means any cause not reasonably within the control of the party claiming suspension, as further defined in Section 11.2. 11.2. Force Majeure shall include, but not be limited to, the following: (i) 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; (it) weather related events affecting an entire geographic re-gion, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances; riots, sabotage, insurrections or wars, or acts of terror; and (v) governmental actions such as necessity for compliance with any covit order, law, statute, ordinance, regulation, or policy having the effect of law promulgated by a governmental authority having jurisdiction. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or oeourrence once it has occurred in order to resume performance. 11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by any or all of the following circumstances: (1) the curtailment of interruptible or secondary Firm transportation unless primary, in -path, Firm,transportation is also curtailk (ii) the patty'claiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations with reasonshle,dispatch; or (III) economic hardship, to include, without limitation, Sellers ability to sell Gas at a higher or more advanta'gebus pried 4han; the Contract Price, Buyers ability to purchase Gas at a lower or more advantageous price than the Contract Price, or a, regulatoryagency disallowing, in whole or in part, the pass through of costs resulting from this Contract; (iv) the loss of Buyers market(s), or buyers inability to use. or resell Gas purchased hereunder, except, in either case, as provided in Section 11.2; or (v) the loss br failure of Sellers gas supply or depletion of reserves, except, in either case, as provided in Section 11.2. The party,claiming Force Majeure shall not be excused from its responsibility for Imbalance Charges. 11.4. Notwithstanding anything to the contrary therein, the parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the party experiencing such disturbance. 11.5. The paNty-Whoee performance is prevented $y Force Majeure must provide Notice to the other party. Initial Notice may be given orally; however, written Notice :With reasonably UAi particulars of.the event or oceurrenoe is requYed=as soon bi4easonably possible, Upon providing written Notice -of Force Majeurelo the other party, the affected:party will be reiieved of its obligib"611,1rom the onset of the Force Majepte event, to make or accept delivery of Gas, as applicable, to the extent and for- the duration of Force Majeure, and neither party shall be deemed to haYefailed in such pbligations to the other during such occurrenbe pr event. 11.6. Notwithstanding Sections 11;2 and 11.3; the patties may agree to alternative Force Majedte provisions jn a Trahsactiom Confittnatlohexecut$tl in writing by bbth.;parties. . . SECTION 12. - 1'ERM This ated on 30 Day's written Notice, but shall remain in effect until the expiration of the latest Delivery Period of s of efthe't party pursuant ib $?otion 7.6, Section 10, Sect on 13, tf a obllgalionS to make paj ment hereunder, party to intlemnify the other, pursuant hereto shall survive the ternniltolion bf the Base Contract or any 1S, . Lj;MITATI ROVISIOWFOR WHICH JAN `EXPRESS REMEDY OR MEASURE OF DAMAGES IS PRbVjMD; SUCH AFASURE ( DAMAGES' {1Fl L BE THE SOLE AND ,, CLUSIVE EDY . A PAi§_1 ;UABILITY MITE AS f FORTH ifa I }3 PROVISION, AND ALLO HER REM 1 `0"R,0AMAg%, LAW OR IF N(5 REMEDY OR $,URE OF DAMAGES IS CPRESSLY pj �;O) ADeD H �(y"O t IN A 'S LIABILI TY SHALL BE Q 'IzTED TO DIRECT ACTUAL taAMAGES ONt a$WCH DYI TACTUAL SOLE ANb1(CLUSIVE WY, AND ALL-bTHER REMI PIES OR DAIv]Ai'$ AT LAsi311N EQUITY EXPRESSLY HEREIN ,}VJDED, NEITh3ER PARTY �SWALL BE jA jAy FQR Cf �J PbUENTIAL, EXEMPLARY OR INDII Ty AMAGES LOST PROFIAS OR OTH _91NESS 1NT 0101.1PTI0N N TORT dt.ONTRACI otd _d f2 ANY INDEMNITY PROUI i0N OR OT},1E]1tS; IT IS AtF1(ENT OF LIMITATItjA?iS HEREIN dM p ON REM DIES AND "E MEASUFR>v f DAMAGES $FWITHOUT OR CADS J&EAELATEIJ`TH tE O, INCLUDING THE NEPI;IGENCE OF Atty AIaFtTY, Utll rtj l2 SUCH )INT OR O6-,, URRENT (?kt L'I IVE OR PASSIVE. TO THE EXTENT ANY,DAMACsES REQtfIRF6 TO BE UUIDATe6 tHE PARTIL.§-ACISNOWLEDGE THAT THE DAMAGES ARE-t)IFFICULT OR IMP�S$IbLE TO VISE OBTAINING AN A1EAllATE REMEDY•IS INCONVENIENT AND 1I1E ti9MAGES CALCULATED A REASONABLE APPR(4X1MA7ION OF THE HARM OR LOSS. Copyright 0 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 10 of 13 September 5, 2006 SECTION 14. MARKET DISRUPTION If a Market Disruption Event has occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price for the Floating Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected Day then the replacement price for the Floating Price shall be determined within the next two following Business Days with each party obtaining, in good faith and from non- affiliated market participants in the relevant market, two quotes for prices of Gas for the affected Day of a similar quality and quantity in the geographical location closest in proximity to the Delivery Point and averaging the four quotes. If either party fails to provide two quotes then the average of the other party's two quotes shall determine the replacement price for the Floating Price. "Floating Price" means the price or a factor of the price agreed to in the transaction as being based upon a specified index. "Market Disruption Event" means, with respect to an index specified for a transaction, any of the following events: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of trading to commence or the permanent discontinuation or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (a) both parties agree that a material change in the formula for or the method of determining the Floating Price has occurred. For the purposes of the calculation of a replacement price for the Floating Price, all numbers shall be rounded to three decimal places. If the fourth decimal nu'mher is five or greater, then the third decimal number shall be increased by one and if the fourth decimal number is less than five; then the third decimal number shall remain unchanged. SECTION 15. MISCELLANEOUS 15.1. This Contract shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, acid the covenants; conditions, rights and obligations of this Contract shall run for the full term of this Contract. No assignment of this Contract, ih *h6le or in part, will be made without the prior written consent of the non -assigning party (and shall not relieve the assigning party fio(n It(llity hereunder), which consent will not be unreasonably withheld or delayed; provided, either party may (1) transfer, sell, pledge,.,ahoitrfiller, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements, or (ii) transfer its interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any ouch assignment, transfer and assumption, the transferor shall remain principally liable for and shall neibeYalievedofordlschargedYroi anyobligationshereunder. 15.2. If any pr§wsion in this Cbbtract is detemtineti to be invalid, Void or unenforceable by any x0utta aving ju'a lion, such delermihation shall nqt tny'I'd e, vord, 9F make unenforceabie any other provision, agrao ent or coverlarli4of►his:Contradt. 15.3: No waiver of Shy breach otti5ig!Contract shall be held to be a waiver of any other or subsegUe6f breach. 15.4. This Contract sets forth all understandings between the parties respecting each transaction subject hereto, and any prior contracts, understandings and representations, whether oral or written, relating to such transactions are merged into and superseded by this Contract and any effective irensadtior is). This Contract may be amended only by a Writing executed by both,parties.. 15.5. The interpretation and pedohrtance of this Cpritract shall be governed by thedaws of the jurisdiction.as indicated On the Base Contract; Excluding, however, any conflid.2f laws rule which would apply the law of another jurisdiction. 15.6. This Contract and all provisions herein will be subject to all applicable and valid statutes, rules, .orders and regulations of any governmental authority having jurisdiction over the parties, their facilities, or Gas supply, this Contract or transaction or any provisions thereof. 157. There is fib third party beneficiary to this Contract: 1 15.9, EapFtparty'to this Contract represents and warrants that it has full and complete authodty:to enter into and ,perform this iach person who executes this; Contract on behalf of either party represents and warrants that It has full and Complete authority i that such party will be boUntl'thereby. Contract tlatweehRhe:paft"as and shall frotbe used ontract are used solely 1 orinterprethe provisior 15.1 D: Unlessthep,arlies have elected on the Base P_ ' not to make this Sectiiih',J5.10 appl shall Ittsclose dlreptly oY indirectly withoikthe prior wnderi'&�nsem of the other party the Terms of ar than the employees, {enders, royaltyowners, counsel oireountants and other agents of the party, substantlollly all of a party'$ assets or bf bny rights under4lijs Contract, provided such persons she wnfidential) except (ij ri order to cenrpfy lvith any applipaplt3law, order, regulation, or exchange rule enforcement of this Co66 1 , (iii) to the extent necess ary fb implement any transaction,. (iv) to the regu76tory;Sgency's r8l erfli requirements including bd,npt limited togas cost recovery proceedings; Is do""red to 5 u0h third party for the sole purpose Of ,Cdlcrllating a put7lished index ,Each party proceeding of which iris a»are which may result in disclosure of the terms Of any trensacti 3n (other thi reasonal?1e efforts #o prevent or limit the disclosure. The ,etiistence of this Contract is not subject to th. to Sectiort 13 the p rhea shall be entitled to all remedjes;airailable at law or in equitytti enforce, o conti4a"tiality oblig ors, 1 he terms of eijy transaction hereunder shall be kept confidential by the:p expiration of the transaction. constltute a part of this to puroh$a¢r6 of all or to Woo, such terms nt pec6ii, ry for the try 10 bphbl fy with a y of any and use Subject with this from the In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclosure, Copyright ® 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 11 of 13 September 5, 2006 and shall cooperate (consistent with the disclosing party's legal obligations) with the other party's efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party. 15.11. The parties may agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties 15.12. Any original executed Base Contract, Transaction Confirmation or other related document may be digitally copied, photocopied, or stored on computer tapes and disks (the "Imaged Agreement"). The Imaged Agreement, if introduced as evidence on paper, the Transaction Confirmation, if introduced as evidence in automated facsimile form, the recording, if introduced as evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative, proceedings will be admissible as between the parties to the same extent and under the same conditions as other business records originated and maintained in documentary form.. Neither Party shall object to the admissibility of the recording, the Transaction Confirmation, or the Imaged Agreement on the basis that such were not originated or maintained in documentary form. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence. DISCLAIMER. The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of purchase and sale of natural gas. Further NAESB dogs not mandatefhe use of this Contract by any party. NAESB DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGE.S.AMp AGREES TO NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESSORIMPWED, ORAL flk WRITTEN, WITH RESPECT TO THIS CONTRACTOR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES bR CONDj,'11ONS'OF TITLE, NONdNFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR 14l'i7 j�1A,ESB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER A' TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER bF THI$ CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT. Copyright 0 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 12 of 13 September 5, 2006 TRANSACTION CONFIRMATION EXHIBIT A FOR IMMEDIATE DELIVERY Letterhead/Logo I Date: Transaction Confirmation #: This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated The terms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract. SELLER: Attn: Phone: Fax: Base Contract No. Transporter: Transporter Contract Number: Contract Price: $ /MMBtu or Delivery Period- �Eenin- and Contract Quantity: (Select One) Firm (Fixed Quantity): MMBtus/day ❑ EFP list a Title; BUYER: Attn: Phone: Fax: Base Contract No. Transporter: Transporter Contract Number: End: Firm (Variable Quantity): MMBtus/day Minimum MMBtus/day Maximum subject to Section 4.2. at election of ❑ Buyer or o Seller n�.e Interruptible: up to . MMBtus/day Copyright 0 2006 North American Energy Standards Board, Inc. All Rights Reserved NAESB Standard 6.3.1 Page 13 of 13 September 5, 2006 Execution Version SPECIAL PROVISIONS TO THE BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BETWEEN CLEAN ENERGY RENEWABLE FUELS, LLC ("Party A") AND CITY OF VERNON, LIGHT AND POWER DEPARTMENT ("Party B") DATED AS OF: (March 8, 2012) 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 tt 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 related to its failure to deliver any natural gas or Biogas prior to the termination date of any Transaction Confirmation as required pursuant to any 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 Party A or Party B ("Defaulting Party"), and the Defaulting Party does not remedy the Event of Default Execution Version within the specified period, if applicable, then the other party (the "Non -Defaulting Party") has the right, at its sole election, 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 Party A or Party B: (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 lt which is not dismissed within 30 days of the date it is filed; (111) 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 one Business Day of a written request by the other party; (vii) has not paid any amount due the other party hereunder on or before 10 days following written notice that such payment is due; (vii!) is the affected party with respect to any Additional Event of Default (as set out below); (!x) 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 Version 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. The following events are Additional Events of Default.on the part of the affected party: (xiv) The expiration or termination of a Credit Support Obligation or the failing or ceasing of such Credit Support Obligation, or any security interest granted by a party or a Guarantor to the other party pursuant to any such Credit Support Obligation, to be in full force and effect for the purpose of this Contract (in each case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Specified Transaction to which such Credit Support Obligation relates without the written consent of the other party; (xv) An Indebtedness Cross Default, if that default is not cured within two Business Days of the date it occurs; (xvi) In relation to a Specified Transaction, a party or any Guarantor of such party: (a) defaults (other than by failing to make a delivery) under a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obtigaflons under, or an early termination of, that Specified Transaction; (b) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment due on the last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, R there is no applicable notice requirement or grace period, such default continues for at least one Business Day, or defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, all transactions Execution Version outstanding under the documentation applicable to that Specified Transaction; or (c) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or evidenced by a document or other confirming evidence executed and delivered by such party or Guarantor of such party (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf)." 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) Parry 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 15.10, CONFIDENTIALITY 2.1 The following is added at the end of Section 15.10 of the Base Contract: "Party A acknowledges that Party B is a municipality subject to the requirements of the California Public Records Act ("CPRA"). If Party B receives a request for information concerning this Base Contract or the terms of any transaction hereunder between the parties, Party B will notify Party A as to the nature of the request and Party B's interpretation of its disclosure requirements under CPRA. Moreover, Party B may need to have certain information related to any transaction between the Parties, including the definitive documentation therefor, disclosed to the public as part of its approval process. Party B shall have no liability whatsoever to Party A arising out of or relating to disclosures made by Party B that Party B reasonably believed were required to be made by applicable law. " S. CREDIT SUPPORT. LETTER OF CREDIT The following is added as Section 10,9 of the Base Contract: 1110.9 Party A agrees to provide a Credit Support Obligation in the amount of $1,500,000 (subject to section D below) for the benefit of Party B in the form of a Letter of Credit in order to enter into the Transaction Confirmations under this 4 Execution Version Base Contract. Party A must instruct its bank to provide the Letter of Credit within five Business Days of the Execution Date. (A) Letter of Credit is an irrevocable, unconditional, transferable, standby letter of credit, issued in favor of Party B 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 Party A) 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, (1) 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 Party B. (B) Party A is responsible for all costs involved in obtaining and maintaining the Letter of Credit. (C) Party A shall renew or cause the renewal of the Letter of Credit at least 20 Business Days prior to the expiry of the outstanding Letter of Credit. (D) Party A may remove the Letter of Credit if: (i) Party A's credit rating increases to A- or higher by Standard & Poor's and Fitch Rating Services, or Baal or higher by Moody's Rating Services, and (11) Party B provides written authorization to Party A to remove the Letter of Credit, following a request from Party A. (E) Upon the occurrence of a Letter of Credit Default (as defined below), Party A must either cause another Qualified Institution to deliver a substitute Letter of Credit, or provide another Credit Support Obligation in the form of Cash, in each case within five Business Days after the default occurs. "Letter of Credit Default" means with respect to an outstanding Letter of Credit any of the following events: (i) the Issuer of the Letter of Credit ceases to be a Qualified Institution, (ii) the Issuer of the 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 Letter of Credit expires or terminates, or fails or ceases to be in full force and effect at any time, other than in accordance with section D above. (F) Upon or at any time after the occurrence of an Event of Default with respect to Party A, Party B may draw up to the entire undrawn portion of any outstanding Letter of Credit upon presenting to the Issuer one or more certificates in accordance with the specific requirements of any such Letter of Credit. Cash received from drawing upon the Letter of Credit shall be applied against the Early Termination Damages in Section 10.3.1 of the Base Contract. In addition, Party A remains obligated to Party B for any amounts owing to Party B and remaining unpaid after the application of any amounts so drawn by Party B. . 5 Execution Version (G) 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 Standard & Poor's or (y) BBB- or higher by Moody's Rating Services" IN WITNESS WHEREOF, the parties have caused this Contract to be duly executed as of the Effective Date. CLEAN. ENERGY RENEWABLE CITY OF VERNO , LIGHT AND POWER FUELS, LLC DEPARTMENT By: By: Name: �-1c1- Krf -i S_ I-Y-) CA2C-( Name: CARLOS R. FANDINO, Title: ��c-1��'l Title: DIRECTOR OF LIGHT & POWER 2 EXHIBIT B BIOMETHANE TRANSACTION CONFIRMATION Between CLEAN,64t.RGY RENEWABLE FUELS, LLC and CITY OF'VERNfl'N LIGHT AND POWER DEPARTMENT 1 Table of Contents 1. 2. 3. 4. 5. 6. 7. 8. 9., 10. 11. 12. 13. PURPOSE OF TRANSACTION CONFIRMATION 3 ..................................................................... ADDITIONAL DEFINITIONS.................................................................................................4 SALE AND PURCHASE OBLIGATIONS................................................................................. 7 ADDITIONAL SUPPLIES 9 F, BIOMETHANE FROM NEW PROJECTS ......................................... 8 AND TIMING OF DELIVERY ................................................. 8 Y PAYMENTI P..... OR B OMP,�''H AND ENVIRONMENTAL ATTRIBUTES ................:..................... h 9 DAMAGES FOR BRE&4-H LIGATION TO DELIVER OR RECEIVE BIOMETHANE g .............10 ENVIRONMENTAL F1 TRI GENERALLY.................................................................... 10 RENEWABLE ENERGY ATTRI61 ES AND CERTIFICATION................................................. -. 11 EARLY TERMIN5 j... a�l. ,,v ... .................................................................................. A GHG ATTRIBU 11 h ", IR .. 12 CHANGE IN LAWtza .................... 12 ............................................... 2 BIOMETHANE TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY This Transaction Confirmation is subject to the Base Contract for Sale and Purchase of Natural Gas between Seller and Buyer dated 03/08/12 , No. n/a ('Base Contract'). The terms of this Transaction Confirmation are binding. SELLER: BUYER: Clean Energy Renewable Fuels, LLC . City of Vernon, Light and Power Department 3020 Old Ranch Parkway, Suite 200 4305 S. Santa Fe Avenue Seal Beach, CA 90740 Vernon, CA 90058 Attention: Harrison Clay Attention: Abraham Alemu Phone:562-493-7231 Phone:323-583-8811 Fax: 562-493-6101 Fax: r323-826-14081 Contract Price: $10.65 per MM.Btu delivered at the Delivery Point, for the Biomethane and all associated Environmental Attributes, subject to section 6. Contract Quantity (subject to sections 3.4 and 4.3): 1,500 MMBtus/day Delivery Period: From the date that the Project commences commercial operations (the "Commencement Date") until:the 10'h anniversary of the Commencement Date. Seller shall notify Buyer of the anticipated Commencement Date in writing at least 30 days prior to the Commencement Date. Within two days of the Commencement Date Seller will provide Buyer written confirmation of the Commencement Date. Delivery Point: SpCalGas-Citygate, as defined in the Southern California Gas Company tariff approved by the California Public Utilities Commission.("SoCalGas Tariff'). SPECIAL CONDITIONS: 1. PURPOSE OF TRANSACTION CONFIRMATION 1.1 The purpose; of this Transaction Confirmation is to sell and purchase l3ip nethane.generated at the ProjecC(s), that, when combus#ed at the Power Station and other Desghated Facliities: (a) generates RPS-eligible electricity,as certified by the CEC, and RECs; and (b) does not result in carbon dioxide emissions compliance obligation in California; conditions (a) and (b) together being "Biomethane Compliance." 3 2. ADDITIONAL DEFINITIONS 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. 2.2 'Biomethane" means gas produced from raw biogas from the anaerobic digestion of organic matter, which: Q=• (a) is produced at tl* e ject; (b) is a renewable u listed in section 11.13 of the CEC Renewables Portfolio Standard Eligibility Guild ouidebook", as amended from time to time) that is transported to California inpco"" ' A with the requirements of the Guidebook; (c) meets the r uirement ,T acceptance into the natural gas pipeline system into which the Biometfi inje� ; and (d) meets the m R lying to 'biomass -derived fuel' set out in the Cap and Trade Regulationa tory Reporting Regulation. 2.3 'Biomethane E 2.12 occurred. 'Biomethane Compliant' has the meaning set out in section the Gas of 10, r be that Certification has 4 d emissions of poli, ar)#s to the air, soil Ides px), cart)d1l Mohoxide ( fJ) and QtiSe r = € �� Attnbtat s do no �rfde: Ma caPO rehab ht�jff ether power attribute: A ;nth e';'Qtax cs asso1E struction" fnaince 4f cred %h9, with an; eneraiM tlirmhi, :es" the#stay be receiy the or the' ; "inotior eductis credits state, federal or pdur ..nts (c 2.13 "Commencement Date" has the meaning set out on page 3 of this Transaction Confirmation. 2.14 "Contract Price" means the price per MMBtu for gas and all associated Environmental Attributes set out on page 3 of this Transaction Confirmation. 2.15 "Contract Quantity' has the meaning set out on page 3, provided that that Buyer and Seller may agree, in writing, to increase the Contract Quantity from the Project(s) at any time. 2.16 "Contract Year" meths a 12 month period. The first Contract Year begins on the Certification Date ai`e subsequent Contract Year begins on the first anniversary of the Certification Date. 2.17 "Delivery Period" s tl��eaning set out on page 3 of this Transaction Confirmation. 2.18 "Delivery Point" thering set out on page 3 of this Transaction Confirmation. 2.19 "Designated F ylt 'h,mearPower Station and any other power generation facilities at which Buyer m bus�3 ethane, as notified by Buyer to Seller from time to time. x � 2.20 "Environmental�ut��ans any and all credits, benefits, emissions reductions, offsets, and allowances, Wr r entitled, attributable to the production and combustion of ��ome� r�� ur teased under tktis Tfansa, tiQn pnfirmation. En�irgrtn7e ltal �gtt�f Wtes include 1 2.21 "Execut"ign date" means the later of;; Via) the 1 #hat Buys signs this"Tiansact on Co firmatibn; or (b) the date that Seller signs this Transaction Confirmation. the offset credits) associate d by the utilizatio"f bio 5 local solid 2.22 "GHG Attribute" means: 2.23 K (a) the ability of the Biomethane to be verified as "biomass -derived fuel" under the Cap and Trade Regulation and the Mandatory Reporting Regulation, such that the combustion of the Biomethane does not result in a carbon dioxide emissions compliance obligation under the Cap and Trade Regulation; (b) any certificates issued in relation to the Biomethane under a biofuel certification program establis ' by CARB pursuant to the Mandatory Reporting Regulation; (c) any avoided emr sy s of carbon dioxide (CO2), methane (CH4) and other greenhouse gases (GHGs)b a` - ve been determined by the United Nations Intergovernmental Panel onCliff to c Earth's , f ge to contribute to the actual or potential threat of altering the limatby,,.:. ng heat in the atmosphere, including all offset credits issued in respect of s,h a emissions; and (d) the reportirt�r fits to tt�e attributes. "Governmental , ritys any federal, state, local or other governmental, regulatory or administrate �en rt, commission, department, board or other governmental subdivision le i k ur making board, tribunal, or other governmental authority. yG��o,,vernmental Aaju�tyho++rity` includes, but is not limited to, the CEC, the CARB, and the 60§ 9'br agency. �#�2,tyJandYrh eportiRegulate Sans th regulate for the` Ito � f) ry�ng of togas erf�Jfi)ns pr�frted by $BARB ash"� t forth �A£�n ter 1, ubchapVgr �0, artiol of title 1�`of the Ct�dlifomia P' dle of F e la�tions, inplu �n the arnend of ;thereto p roved r ti office ofAdmirnstra#eve Law o�hkAe tuber 1, or 594he a e may hex er be at'.,`�1)' or recoOlfied. " r AIR, Ire a s - +t aS �C /I�cirrAnnual)�t�tity ms'he Con{Yct Quari(�ty of BioS.tir�e, inflfi�u per d ly m ed by 30 ,, ,, provide A � nonth ntit of e m ^ a)rt blivery �Iure" m IQf elter dd y ring less�%l i um a Pity of wee* a -g P f tko Buye firing are tact Yeer u er this Tr' �ifir r ° a0" 4 � �� 1Ai or any Jhan Force Majeu a .w -I, ,:; r, , , rFr e. u 1 ' , e F 45 5 y" £ apv�5 Fx l'1 x lijp antity £ ans a E+verage gft of Biomfi<�'leulater the ;pug ontractar (exciclfcrom thealculatiom any da55o� (h Fijeure e a r s pe anance,, ' I ied to uyer in Gordan 5 l sctioY x gf the each per 2 than is 2.30 "Project" means the Sauk Trail Hills Landfill in Canton, Michigan, the North Shelby Landfill in Millington, Tennessee, and any additional Biomethane projects nominated by Seller and approved by Buyer pursuant to section 4 that produce Biomethane. 2.31 "REC" means a renewable energy certificate, registered with WREGIS, that meets the requirements of Portfolio Content Category One (also known as Bucket One) in section 399.16(b)(1) of the California Public Utilities Code (as that section may be amended from time to time) and all determinations or regulations made by Governmental Authorities relating to that section. t„ r 2.32 "Renewable Energy=r� te" means the ability to generate RECs or instruments of a similar value in respect p thl�ectricity generated from the combustion of the Biomethane at a Designated Faciiii A 2.33 "RPS" means the Renewablortfolio Standard as set forth in California Public Utilities Code section 39911"ffq (asIfse sections may be amended from time to time) and in all determinationslatia s tt+ade by Governmental Authorities relating to those sections. 2.34 "RPS Paymenf' 1a tha Ling set forth in section 1 of the Appendix to this Transaction Confirmation. this 1"action t r i ation, c )culated tr accordM$O sedttorr <;of the its it the Njiyery Penpd, Sellel( §!b§ `io seJ14,04 "yer at to pur�t,�;��e from 01lIOT f q %Iive6'6 the ruuiuuies; prow t�t��Orvrlytic�oing anyit�lfd . tittGi1r�n to the the Gifcatione,,tller sltl t�i�i1y be ob(i�ki~dk q ell toyer such )met I,,,- as are tf~ ry to obfa� rtification itities `Woess Buyy�t„ft`�� provided: is pnor tionsent, But(��i!utll not b�.re�i iced to day,,, quantity, bf ethane,-, reater than 130% 7 4. 4.1 Year, up to 25% above the Contract Quantity listed on page 3 of this Transaction Confirmation. The notice must include a reasonable explanation for the proposed changes. The new Contract Quantities will take effect 60 days after the date of the notice. ADDITIONAL SUPPLIES OF BIOMETHANE FROM NEW PROJECTS Proposal for New Proidcts: Seller must provide Buyer with a written proposal ("Proposal") for Biomethane from h - iomethaneproject(s)develo ed b Seller that Seller proposes -to �,' P Y include as Project(s)n erthis Transaction Confirmation ("New Projects"). The Proposal must include:' (a) a description 67 th�Project; and b the anticit?d :F O p� u�'i�'ti�i�s of Biomethane available for delivery ("Total Expected Quantity) ` ,...... 4.2 Acceotance of ONE 16'al I � ,er accepts the terms of the Proposal, Buyer must send Seller a written notice d� ptae,r"r the New Project and the Total Expected Quantity within 60 days of the datAW 'bl ("Acceptance Notice"). 8 5.5 Governmental audits: Each party must cooperate with the other party and provide the other party with additional documentation (to the extent reasonably available) if a Governmental Authority audits this Transaction Confirmation. 6. PAYMENT FOR BIOMETHANE AND ENVIRONMENTAL ATTRIBUTES 6.1 6.2 6.3 for each MMBtu of each Day prior to Contract. For the regardless of whetl Buyer for the accordance wi Renewable E Certification D; each MMBtu of section 3.2) with Certification Date: Buyer will pay Seller the Pre-Cert Price e that is delivered under this Transaction Confirmation on ration Date, in accordance with Section 7.2 of the Base of doubt, Buyer must pay Seller under this section 6.1 ion is received. 15 Days following the Certification Date, Seller shall invoice ,mount. Buyer will pay the Certification Amount to Seller in ?f the Base Contract. All rights, title and interest in and to the vs associated with Biomethane delivered prior to the o Buyer when Buyer pays the Certification Amount. certification Date: Buyer will pay Seller the Contract Price for delivered to Buyer (up to the maximum quantities set out in 1 Environmental Attributes on or after the Certification Date. A the f that onfirma1joft .ligible "general Inated cility tt c a I c u I in a c i :ion; a tl�"A r to b� ified n due faul n (which is in for( ;e with e, ion 2 .nMt ovmia "f dame �n Confli etion is St sen(ffi tier an and tf�e;-calcula and y eithef deduct t eller do,'- r this Contracts ,or regL within,..$ Days th the f0javant re y of Br ethane, ompliat4enewa o fault i§Y Buyer with s#ctlon 1 i lass -de.) ),yid fuel' er ands 'A Buyer IgpWill i yer (pendixe,�jrai action 6�(a)or s e termi,eted undo; settingiat the red the RPS Payme Payment or Carb Her to pay the ie date of the ii 9 has Seller the for or this ad in RPS in not as 7 of , as 6.6 Invoicing, requirements: For purposes of this Transaction Confirmation, Section 7.1 of the Base Contract is deleted and replaced with the following: "Seller shall invoice Buyer for Biomethane and Environmental Attributes delivered and received in the preceding Month. Invoices must be accompanied with supporting documentation consistent with standard industry practice and all documentation required by the CEC and the CAF B or other similar regulatory agency for the purposes of Biomethane Compliance, includingiomethane metering data and transport records." 7. DAMAGES FOR BR"H OF OBLIGATION TO DELIVER OR RECEIVE BIOMETHANE 7.1 Alternative Damags uant to Section 3.3 of the Base Contract, for purposes of this Transaction Conf%friaY� a parties elect Alternative Damages. ,. r` -,11 7.2 Base Contract ectwni1 for purposes of this Transaction Confirmation, Section 3.2 of the Base Contr t s.,delete `�n its entirety and all references to that section will be deemed to be referenc �e follt raig sections of this section 7. 6 a'e 7.3 Minimum Deli pail°r f Minimum Delivery Failure occurs, Seller owes Buyer the Seller Payment`e ,`:ty of Biomethane by which deliveries in the relevant Contract Year fell short of tht' t'irrium Quantity. 8.3 Seller to provide documents: Seller must, at its cost, provide the following documents and information: IT#] 1 (a) all attestations and other information required by the CEC or CARB regarding the Biomethane and its transportation to the Delivery Point for Biomethane Compliance; (b) on Buyer's reasonable request, documentation verifying that Buyer is receiving all Environmental Attributes associated with the Biomethane purchased under this Transaction Confirmation, including offsets for avoided GHG emissions from the sites of the Project(s), and that no Environmental Attributes associated with the Biomethane purchased under this Transaction Confirmation have been sold or otherwise transferred to any other persftr entity; (c) on Buyer's r Biomethane volume and Month; and (d) until the C9 plant has ON any construe# will be delive first the request, information and supporting documentation on historical i and forecasts of future Biomethane production, and on the waste delivered to the sites of the Projects in the preceding Icem LDate, reports to Buyer approximately every 60 days on the Proj <. �wwards completion, including notice that construction and nt 's equipment is substantially complete, notification that the n -up of Biomethane production processes and notification of fires that will delay the completion of the Project. These reports tb' a Buyer representative named on page 3 of this Transaction T"v apY; 4 S,Wro sC gyp: rposeaY hj�s Trans tion Cor j"nation, rr`3x plrvingk, s nce is j�nce of § 18.2 of the` Base C htract tR nt ur',00�# applicai_,le laws ift reg � =�I for�'1t�,`�uel set brit in secfron 95 ATTRISMMl AND any iertiflCaIto Motice Beer will k',,O1fipfly inform Seller w n the i T�ISu �— Y' £r' � a a . yetg++rs notica from thefter prove ; rng all r{Liired c i ;rertt dpjlryill neverccur 0 r11 >�rtificatioa procesr bior 3defi� �t�%1jalted (inah case,"�yr s Certrfi ation Ntsti}e"). If She CS; that; Certification will nt?tccgr due ton error or iomisa .166ture, `$uyer and Seiler must each use all feasonabj efforts addition lliljrjgs required to obtain Gertfcation. i. EARLY tEI21NINAT!GN 1 Mutual rtermnation Rights: Either Party may terminate this Tian; first to occur of the following events: is of Mki.' 'b and irs or ) that been from ve in ;s or on the 11 (a) September 1, 2012, if the Commencement Date has not occurred by that date; or (b) six months after the Commencement Date, if the Certification Date has not occurred by that date; or (c) Buyer provides a Certification Notice that indicates that Certification has been denied or indefinitely halted, provided that the Parties have satisfied the requirements of section 9.2 above. ... 10.2 Conseauences of terr titration: No termination or other damages are payable upon termination pursuant to section 10. 11. GHG ATTRIBUTES s�'a 11.1 Biomethane verifcatioanx15,,ller shall ensure that the Biomethane it delivers under this Transaction is 4,�verified ion Co rmatpable of being veed in the manner set out in the section on verifying bioma�Wenved finis -in the Mandatory Reporting Regulation. Seller shall, at its cost, fig provide Buyer uneceinformation and assistance in conducting such verification and with all forms o�afio° #1�B requires from producers or sellers of Biomethane. gr rig 11.2 Biomethane certl#+tiotn y.�ier must use commercially reasonable efforts to obtain and maintain CARB certification for the Biomethane under the Mandatory, Reporting Regulation if ..., . , 1 yp1,y 111u;?uixuviue ieasonaDie support to tne•oxrtet party ` lli ha any p po§ed cha% n)aw or regulation that; impacts J0 ftWb obh,"Ol ance, tla fntal�lnaerest o f5b h partiesr 41e ability o Seller to2p rform hereUl¢f asneplated rhis,iataction imatlon, �Fvr f 3 st' & „, 1 *s ffd`rtsbntain Bit ethane Ct�taliance: If there is a change m 2�etgulat3pliter the „ #poutitti ,ate rel to B)p } ne Coi dance, Seller Sti lip s all Ww"iprcially forts to 1# stain Bio tf�ane Com S-fapce 1 '+' aintain r7B:iometha� 13ce `. * (3 s j,f 1 f# k change IK�1rctlhg'ij iett�ethane orh a ccurs, ' liars obli bdfs under, �° x #laition 12 wi71 etafed If�llet: uses k rrl f l�atl s;reason® efforts iaintain Bjpmethano Complies e= eri if, 01" ;those efoi$, thane �mpliance iefihtot be mintainedt ell wd(xgfifir in Ita,of its ,bligeiider thlstintract t1Ytoe Seller; commercially reas¢i1ae#forts�t'e1ange 4, lay+ f1sRBiomett�ne Compllar�t_,' k 12,4 M7ermYtaiori for chance in law: fhis Transaet101 Confirrnafon may sbo tert7inatciNtth prior uvritteri riotjFia to the gtler party 1f a Covemmeital Authorify makes a fiinel deterinihafon or adopts : l uv, ruling er regulaYtorj that would result in the Blo , ha' subject ,.to this Transac ion Confirmafio`n no longer being able, when do' busted, td gengrate RPS=eligible renewable §hergy and RECs, whetherdue to production issues, trans,, ransion path issues, or otherwise; vf,the Biog�-s is subleot to material,Additional tax, charge,tttpost or o#het cost as a resuf ©fe change iri law or regu�Y�4n (t)y ttf the foregoing a "hehe of-L=euJ j, With such termination to be effective as of the date of effective date of the Change of Law. Any election to terminate or not to terminate this Transaction Confirmation under this section does not affect 12 Seller's liability for any RPS Payments arising under section 6.4(a) for Biomethane that was delivered prior to the effective date of the Change of Law. 13. FORCE MAJEURE 13.1 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: 13.2 "(iii) economic ha Environmental Al Buyer's ability to advantageous pri in part, the pass 1 obligation unde the party who terminate this' other party. No include, without limitation, Seller's ability to sell Biomethane and t a higher or more advantageous price than the Contract Price, Biomethane and Environmental Attributes at a lower or more p Contract Price, or a regulatory agency disallowing, in whole or osts resulting from this Contract;". ce Maieure: If Force Majeure affects performance of an i Confirmation for a period of six consecutive months or more, is not prevented by Force Majeure may, at its discretion, 'mation at any time by providing 60 days' written notice to the damages will apply. 13 15. PRIORITY OF TRANSACTION CONFIRMATION 15.1 If there is any discrepancy between (1) any terms of this Transaction Confirmation and (2) any terms of the Base Contract, the terms of this Transaction Confirmation shall govern. Seller: Clean Energy Renewable Fuels, LLC Buyer: City of Ver on Light ow a ent Signature: �E `.<. Signature: Name: r Name: CARLOS R. FAND O, JR. t Title: Title: DIRECTOR OF LIGHT & POWER Date: J Date: 037T8712 14 Appendix to Transaction Confirmation No. 1 CALCULATION OF DAMAGES 1. RPS Payment under Section 6.4(a) 2. If section 6.4(a) of this Transaction Confirmation applies, the RPS Payment will be calculated as follows: RPS Payment ($) = Gas Quantity (MMBtu) x [(Renewable Energy Price ($/MWh) — Energy Price ($/MWh)) _ 7.5 (MMBtu/MWh)] Where: Gas Quantity = Quantity of gas, in MMBtu, to which section 6.4(a) of this Transaction Confirmation applies. Renewable Energy = Average of quotations from three independent brokers for the Price price, in MWh, of renewable energy that includes RECs generated in the year of delivery of the I3iomethane.that cannot generate RECs orris determined to be non-RPS-compliant, and delivered at the delivery point specified as` TH�SP1 GEN APND on the California :Independent System Operator ("CAISO") OASIS website. Energy Price = Average of the hourly Locational Marginal Price for the delivery the x, if this information is not avaihkjle energy price information) for the pe Dane that is determined to be non-1 e to generate RECs was delivered. Carbon Payment under Section G4(b) If section 6:4(b) of this Transaction Confirmation applies; the Carbon Payment will be calculated.as follows Carbon Payment ($) = Gas Qiantity (MMBtu) x Allowance Price ($/mtCO2e) x 0 OP42 (mtCO2e/MMBtu) Where: bas Quantity = QL164typf gas, in MMBtu, to which section 6.4(b) of this Transaction Confirmation applies. 9 Allowance Price = Average clearing price for an Allowance at the four allowance auctions conducted by CARB immediately prior to the date on or 15 which it Is determined that the gas is unable to be verified. If fewer than four such auctions have taken place, the Allowance Price will be the average of quotations from three independent brokers for the price of an Allowance delivered in the year in which it is determined that the gas is unable to be verified. 3. Damages if Seller fa)ls,to deliver Biomethane under Section 7.3 Seller Payment ($) Undelivered Gas Quantity (MMBtu) x [Gas Purchase Price ($/MMBtu) + ((Renewable Energy Price ($/MWh)— Energy rice ($/MWh)) +].5 (MMBtu/MWh)} + (Allowance Price f „($/mtCO2e) x 0.05342 (mtCO2e/MMBtu)) — Contract Price ;w (/MMBtu)) Where: Undelivered Gad r' Quantity 51 IFsection 7.3 of the Transaction Confirmation applies: The difference, in MMBtu, between the Minimum Quantity and the gWar Fy of Bipmetl�epe Seller actuail + dela er d iA Beyer in the PutrYarprice pdild by the extent no = AvgOFf quotati¢frs from 1hPee in pncraIWh, of rrewableiergy ger�6"' in the y' in which,jjq del) rat the de' erg point s TH�EI A�n the CA = Av r ge tf the ho onal M-, poiHSP15 GN_APNb publis web r, if this r formatid%•is not soufic' nergy rice infornaion) the,i occurred. = AvO- � clearing price for an Allow, auctions Conducted by CARB rmmediatibly pnor to the tr If fewer than four such auctions have taken pace, the Allowance Price will be the average of,' uptations from 'l indeperlcJent brokers for the,O.rice of ar7ON nce dbliv, the',yeartn yuhch the;breach occurred. If the result of the calculation of the Seller Payment is a negative amount, the Seller Payment will be zero. in 16 4.. Damages if Buyer fails to receive Biomethane under Section 7.4 Buyer Payment ($) = Gas Quantity (MMBtu) x (Contract Price ($/MMBtu) — Gas Sale Price ($/MMBtu)) Where: Gas Quantity Gas Sale Price Sum of the difference, in MMBtu, between the Contract Quantity and the quantity of Biomethane Buyer actually took on each Day on which Buyer breached its obligation to receive :e per MMBtu received by Seller utilizing the Cover ndard for the resale of the Biomethane Buyer did not take, iatural gas without associated Environmental Attributes. To extent no such sale is reasonably available, the Gas Sale e will be the Spot Price, adjusted for commercially tunable differences in transportation costs to or from the 17 OFFICE OF THE CITY CLERK 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 April 18, 2012 Harrison Clay President Clean Energy Renewable Fuels, LLC 3020 Old Ranch Parkway, Suite 200 Seal Beach, CA 90740 Re: Base Contract and Biomethane Transaction Confirmation Dear Mr. Clay: Transmitted herewith are fully executed originals of the above -referenced contract and transaction confirmation, approved by City Council on April 17, 2012, through Resolution No. 2012-50. If you have any questions regarding this matter, please call Carlos Fandino at 323/583-8811 ext. 834. 5Very ly yours; L RD G. Y City Clerk WGY:dj Enclosures c: Abraham Alemu Carlos Fandino Resolution No. 2012-50 Agreement File No. 12-033 E)Ccfusivefy Industrial BIOMETHANE TRANSACTION CONFIRMATION Between CLEAN ENERGY RENEWABLE FUELS, LLC and CITY OF VERNON LIGHT AND POWER DEPARTMENT Dated: March 8. 2012 Transaction Confirmation Number: 1 19 Table of Contents 1. PURPOSE OF TRANSACTION CONFIRMATION..................................................................... 3 2. ADDITIONAL DEFINITIONS................................................................................................. 4 3. SALE AND PURCHASE OBLIGATIONS................................................................................. 7 4. ADDITIONAL SUPPLIES OF BIOMETHANE FROM NEW PROJECTS ......................................... 8 5. NOMINATIONS, FORECASTS AND TIMING OF DELIVERY...................................................... 8 6. PAYMENT FOR 7. DAMAGES FOR 8. ENVIRONMENTAL 9. RENEWABLE ENE 10. EARLY TERMI 11. GHG ATTRIBL 12. CHANGE IN Li 13. FORCE MAJEI 14. ASSIGNMENT 15. ' PRIORITY OF ;THANE AND ENVIRONMENTAL ATTRIBUTES ...................................... 9 -1H OF,OBLIGATION TO DELIVER OR RECEIVE BIOMETHANE ............. 10 'RIBUTES; GENERALLY.................................................................... 10 'ATTRIBUTES AND CERTIFICATION................................................. 11 ,N ........ ........................................................................................ 11 ..........i......................................................................................... 12 ............................................................................................... 12 2 BIOMETHANE TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY This Transaction Confirmation is subject to the Base Contract for Sale and Purchase of Natural Gas between Seller and Buyer dated 03/08/12 No. n/a ('Base Contract'). The terms of this Transaction Confirmation are binding. SELLER: BUYER: Clean Energy Renewable Fuels, LLC City of Vernon, Light and Power Department 3020 Old Ranch Parkway, Suite 200 4305 S. Santa Fe Avenue Seal Beach, CA 90740 Vernon, CA 90058 Attention: Harrison Clay Attention: Abraham Alemu Phone: 562-493-7231 Phone: 323-583-8811 Fax: 562-493-6101 Fax: r323-826-14081 Contract Price: $10.66 per MMBtu delivered at the Delivery Point, for the Biomethane and all associated Environmental Attributes, subject to section 6. Contract Quantity (subject to sections 3.4 and 4.3): 1,500 MMBtus/day Delivery Period: From the date that the Project commences commercial operations (the "Commencement Date") until the 10th anniversary of the Commencement Date. Seller shall notify Buyer of the anticipated Commencement Date in writing at least 30 days prior to the Commencement Date. Within two days of the Commencement Date Seller will provide Buyer written confirmation of the Commencement Date. Delivery Point: SoCalGas-Citygate, as defined in the Southern California Gas Company tariff approved by the California Public Utilities Commission ("SoCalGas Tariff"). SPECIAL CONDITIONS: 1. PURPOSE OF TRANSACTION CONFIRMATION 1.1 The purpose of this Transaction Confirmation is to sell and purchase Biomethane generated at the Project(s), that, when combusted at Power Station and other Designated Facilities: (a) generates RPS-eligible electricity, as certified by the CEC, and RECs; and (b) does not result in carbon dioxide emissions compliance obligation in California, conditions (a) and (b) together being `Biomethane Compliance." 0 2. ADDITIONAL DEFINITIONS 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. 2.2 "Biomethane" means gas produced from raw biogas from the anaerobic digestion of organic matter, which: (a) is produced at the Project; (b) is a renewable fuel as listed in section II.B of the CEC Renewables Portfolio Standard Eligibility Guidebook ("Guidebook", as amended from time to time) that is transported to California in accord ance.with the requirements of the Guidebook; (c) meets the requirements for acceptance into the natural gas pipeline system into which the Biomethane`is injected; and (d) meets the requirements applying to "biomass -derived fuel" set out in the Cap and Trade Regulatiomand the Mandatory Reporting Regulation. 2.3 "Biomethane Compliance" or "Biomethane Compliant" has the meaning set out in section 1.1 of this Transaction Confirmation., 2.4 "Buyer Payment" means the amount Buyer owes Seller for failing to 'receive Biomethane under section 7.4 of this Transaction Confirmation, calculated in accordance with section 4 of the Appendix to this Transaction Confirmation. 2.5 "Buyers Certification Notice" has ,the meaning; set out in section 9.2 of this Transaction Confirmation. 2.6 -"Cap and Trade Regulation" means the regulation entitled "California Cap on; Greenhouse Gas °Emissions and Market -Based Compliance Mechanisms" approved by the Office of Administrative Law on December 1.3, 2011, set forth in division 3, 5ch6pter 1, subchapter 10, drticlld.5 of title 17 of the California Code of Requlations, as th&r same may hereafter be amended or'recodified. 2.7 "CARB" `means the California Air Resources Board•orits successor agency. 2.8 "Carbon; Payment" has the meaning in section 2 of ;the Appendix to' this Transaction Confirmation. 2.9 "CEC.", means the California Energy Commission or its successor agency. 2.10 ''Certification" means CEC's certification of the Power Station as RPS-eligible in respect of Biomethane from the Project. 2.11 "Certification Amount" means the Contract Price minus the Pre -Cent Price, multiplied by the number of MMBtus of Biomethane that are delivered to Buyer prior to the Certification Date and accrue 'Renewable Energy Attributes upon the Certification ,Date. if the Certification Amount is negative, the Certification Amount will be deemed to be zero. 2.12 "Certification Date" means the date on which the CEC notifies Buyer that Certification has occurred. 2 2.13 "Commencement Date" has the meaning set out on page 3 of this Transaction Confirmation. 2.14 "Contract Price' means the price per MMBtu for gas and all associated Environmental Attributes set out on page 3 of this Transaction Confirmation. 2.15 "Contract Quantity" has the meaning set out on page 3, provided that that Buyer and Seller may agree, in writing, to increase the Contract Quantity from the Project(s) at any time. 2.16 "Contract Year' means a 12 month period. The first Contract Year begins on the Certification Date and the subsequent Contract Year begins on the first anniversary of the Certification Date. 2.17 "Delivery Period' has the'meaning set out on page 3 of this Transaction Confirmation. 2.18 "Delivery Point' has the meaning set out on page 3 of this Transaction Confirmation. 2.19 "Designated Facility Means, the Power Station and any other power generation facilities at which Buyer may combust Biomethane, as notified by Buyer to Seller from time to time. 2.20 "Environmental Mribute(s)" means any and all credits, benefits, emissions reductions, offsets, and allowances,howsoever entitled, attributable to the production and combustion of Biomethane. purchased under this Transaction Confirmation. Environmental Attributes include but are notlimited 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. Environmental Attributes do not include: (d) anyenergy, capacity, reliability or other power attributes from a generating facility; .(e) production 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; (f) "tipping fees' that may be paid to a landfill operator to accept certain materials; 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, orfederal operating and/or air quality permits; or (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. 2.21 "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. 5 2.22 "GHG Attribute" means: 2.23 (a) the ability of the Biomethane to be verified as "biomass -derived fuel" under the Cap and Trade Regulation and the Mandatory Reporting Regulation, such that the combustion of the Biomethane does not result in a carbon dioxide emissions compliance obligation under the Cap and Trade Regulation; (b) any certificates program establi: (c) any avoided em gases (GHGs),,', Panel on Climb Earth's climate respect of such (d) the reporting rig or administrat subdivision, Ii Governmental Califorr ed in relation to the Biomethane under a biofuel certification by CARB pursuant to the Mandatory Reporting Regulation; is of carbon dioxide (CO2), methane (CH4) and other greenhouse lave been determined by the United Nations Intergovernmental iange to contribute to the actual or potential threat of altering the piling heat in the atmosphere, including all offset credits issued in ed'emissions; and to these attributes. \uthority"; means any federal, state, local or other governmental, regulatory agency; court, commission, department, board or other governmental islature,..rulemaking board, tribunal, or other governmental authority. kuthority includes, but is not limited to, the CEC, the CARB, and the Utilities Commission or its successor agency. greennouse gas emissions p subchapter 10, article 2 of t amendments thereto approved as the same may hereafter be 25 '!Maximum Annual Quantity" ;day, multiplied by 365 to provi 26 "Minimum Delivery Failure" r Biomethane-:to Buyer during a reason other than Force Male 0 i" means the regulation for the mandatory reporting of ulgated by CARB as set forth in :division 3, chapter 1, 17 of I the California Code of Regulations, including the the Office of Administrative Law on December 14, 2011, or :nded or recodified. ans the Contract Quantity of Biomethane, in MMBtu per a 12-month quantity. ns- Seller delivering less than the •'Minimum Quantity of Contract Year under this Transaction Confirmation for any 3ily average quantity of Biomethane calculated over the course of.a Contract Year (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) 75%{of the Contract Quantity; unless section 2.27(b) applies; or (b) 85%`of the Contract Quantity if in the previous Contract Year, Seller delivered less than the Minimum Quantity applying in that Contract Year.. 2.28 "Power Station" means the Malburg Generating Station at 2715 East 50th Street, Vernon, California. 2.29 "Pre -Cent Price" means, per MMBtu, the Spot Price on the Day the Biomethane is delivered, for each Day prior to the Certification Date. 2 2.30 "Project" means the Sauk Trail Hills Landfill in Canton, Michigan, the North Shelby Landfill in Millington, Tennessee, and any additional Biomethane projects nominated by Seller and approved by Buyer pursuant to section 4 that produce Biomethane. 2.31 "REC" means a renewable energy certificate, registered with WREGIS, that meets the requirements of Portfolio Content Category One (also known as Bucket One) in section 399.16(b)(1) of the California Public Utilities Code (as that section may be amended from time to time) and all determinations or regulations made by Governmental Authorities relating to that section. 2.32 "Renewable Energy Attribute' means the ability to generate RECs or instruments of a similar value in respect of the electricity generated from the combustion of the Biomethane at a Designated Facility. 2.33 "RPS" means the Renewable Portfolio Standard as set forth in California Public Utilities Code section 399.11 et seq (as those sections may be amended from time to time) and in all determinations or, regulations made by Governmental Authorities relating to those sections. 2.34 "RPS Payment" has the meaning set forth in section 1 of the Appendix to this Transaction Confirmation. 2.35 "Seller Payment" means the amount Seller owes Buyer for under-deliveryof Biomethane under section 7.3 of this Transaction Confirmation, calculated in accordance with section 3 of the Appendix to this Transaction Confirmation. 2.36 "WREGIS" means the Western Renewable Energy Generation Information System or its successor system. 3. SALEAND PURCHASE OBLIGATIONS 3.1 Sale and purchase obligation: Throughout the Delivery Period, Seller agrees to sell to Buyer at the Delivery Point, and Buyer agrees to purchase from Seller. at the Delivery Point, the Co ;' En cor qua 3.2 Me pui (b) the ntities of Biomethane as are necessary to obtain Certification herein to the to Buyer such :imum quantities: Unless Buyer has provided its prior consent, Buyer will not be required to ;hale: in any one day, a quantity of, Biomethane greater than 130% of the Contract Quantity; or in any one Contract Year, a quantity of Biomethane greater than the Maximum Annual Quantity. 3.3 Engineering report: Within 90 days after the Commencement Date, Seller shall deliver to Buyer an engineering report, prepared by a reputable third -party firm, providing estimates of Biomethane deliveries expected from the Project(s) for the following three years. 3.4 One-time change to Contract Quantity: Within 90 days of the Commencement Date, Seller may provide a notice to Buyer setting out increased Contract Quantities for each Contract 7 Year, up to 25% above the Contract Quantity listed on page 3 of this Transaction Confirmation. The notice must include a reasonable explanation for the proposed changes. The new Contract Quantities will take effect 60 days after the date of the notice. 4. ADDITIONAL SUPPLIES OF BIOMETHANE FROM NEW PROJECTS 4.1 Proposal for New Projects: Seller must provide Buyer with a written proposal ("Proposal") for Biomethane from new `biomethane project(s) developed by Seller that Seller proposes to include as Project(s) under this Transaction Confirmation ("New Projects"). The Proposal must include: (a) a description of the. New Project; and (b) the anticipated quantities of Biomethane available for delivery ("Total Expected Quantity"). 4.2 Acceptance of Proposal: If Buyer accepts the terms of the Proposal, Buyer must send Seller a written notice of.acceptarce for the New Project and the Total Expected Quantity within 60 days of the date of the Proposal ("Acceptance Notice"). 43Amendment to.Transaction Confirmation: If Buyer provides an Acceptance Notice, Buye,r,and Seller must execute an amendment to this Transaction Confirmation that lists the New Project as a Project and, if applicable, increases the Contract Quantity to include the Total Expected 11 Quantity of Biomethane from the'New Project, within 30 days from the date of the Acceptance Notice. 5. NOMINATIONS, FORECASTS AND TIMING OF DELIVERY 5.1 Monthly `Nominations: bn or before the fourth Business Day prior to the first Day of each Month, Seller must submit to Buyer its nomination of the quantity of Biomethane that Seller expects to deliver to Buyer at the:Delivery Point on each day during 'such- Month ("Monthly Nominafon") 5.2, Qpdating nominations: Seller shall', update its Monthly Nomination, if, necessary, on or before 6:30 a.m+. Pacific Standard Time on the Business bay prior to each day on.which biomethane will' be delivered at the Delivery; Point by providing notice to Buyer of the quantity of biomethane to be delivered on such Day. 5.3, Changes to' requirements: The, dates and times by which nominations and updated nominations will be submitted maybe varied to accommodate changes in the requirements relating to the SoCalGas Tariff. 5.4 Timing of delivery: Seller will make commercially, reasonable efforts to coordinate with Buyer to optimize the timing of the delivery of Biomethane in order to maximize the use of Biomethane by Designated Facilities. Buyer will make commercially reasonable efforts to ensure that Seller's Biomethane is placed and ranked as highest priority with respect'to the natural gas flow delivered to Buyer's Power Station. E 5.5 Governmental audits: Each party must cooperate with the other party and provide the other party with additional documentation (to the extent reasonably available) if a Governmental Authority audits this Transaction Confirmation. 6. PAYMENT FOR BIOMETHANE AND ENVIRONMENTAL ATTRIBUTES 6.1 Pre-Cert Price payable prior to Certification Date: Buyer will pay Seller the Pre-Cert Price for each MMBtu of Bomethane that is delivered under this Transaction Confirmation on each Day prior to th6 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 Certification is received. 6.2 Certification Amount: Within 15 Days following the 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 Biomethane delivered prior to the Certification Date.will transfer to Buyer when Buyer pays the Certification Amount. 6.3 Contract Price payable after Certification Date: Buyer will pay Seller the Contract Price for each MMBtu of'Biomethane'delivered to Buyer (up to the maximum quantities set out in section 3.2) with all associated Environmental Attributes on or after the Certification Date. 6.4 Damages for. missing Environmental Attributes: If the relevant Governmental Authority;, verifier or auditor determines, in accordance with the relevant regulations and based on an accurate assessment of the data, that a'quantity of Biomethane that has been delivered under this Transaction Confirmation: (a) was not eligible to generate RPS-compliant renewable energy and RECs when used in the Designated Facility through no fault of Buyer — Seller will owe Buyer the RPS Payment calculated in accordance with section 1 of the Appendix to this Transaction Confirmation; and / or (b) is unable to be, verified as "biomass -derived fuel" under the Mandatory Reporting Regulation due to.no fault of Buyer and the <Buyer is'subject-tojhe Cap and=Trade Regulation (which is in force) `= Seller will owe Buyer the Carbon Payment calculated in accordance with section 2 of the Appendix to this Transaction Confirmation. 6.5 Invoicing and payment,of damages: If',section 6.4(a) or section 6.4(b);applies, whether or not this Transaction Confirmation is or may be terminated under section 101 or section 12.4:' (a) Buyer must send Seller an Jnvoice setting out the reason for the missing Environmental Attribute and the calculation of the RPS Payment or the ''Carbon Payment, as applicable; and (b) Buyer may either 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, or require Seller to pay the RPS Payment, or Carbon Payment, as applicable, within 30 Days after the date of the invoice. E] 7. Invoicing requirements: For purposes of this Transaction Confirmation, Section 7.1 of the Base Contract is deleted and replaced with the following: "Seller shall invoice Buyer for Biomethane and Environmental Attributes delivered and received in the preceding Month. Invoices must be accompanied with supporting documentation consistent with standard industry practice and all documentation required by the CEC and the CARB or other similar regulatory agency for the purposes of Biomethane Compliance, including;` Biomethane metering data and transport records." DAMAGES FOR BREACH OF OBLIGATION TO DELIVER OR RECEIVE BIOMETHANE 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:'Jf1 a Minimum Delivery Failure occurs, Seller owes Buyer the Seller Payment for the ,cjuartity of Biomethane by which deliveries in the relevant Contract Year fell short of the Minimum Quantity. 7.4 failure.to Accept Delivered Biomethane: If"on any day of the Delivery Period Buyer fails to accept all of the Biomethane delivered at the Delivery Point, up to the maximum quantities "set out in section 3.2, other than due to Force MajeureI Buyer must pay Seller the eBuyer Payment for the difference between the delivered Biomethane (up "to the maximum ;quantities set out in section 3.2) and the quantity of Biomethane 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 arnount in full before under Z of the 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 Hof the Base Contract. 8. ENVIRONMENTAL ATTRIBUTES ;GENERALLY 8.1 Environmental Attributes included: ' All Environmental 'Attributes ' associated with the Biomethane are included with the delivery of Biomethane under this Transaction Confirmation. 8.2 Title to Environmental Attributes: Seller represents and warrants that Seller holds the eights to all Environmental Attributes associated with the Biomethane prior to delivery. Title to all Environmental Attributes associated with the Biomethane shall pass to Buyer when the Biomethane reaches the Delivery Point. 8.3 Seller to provide documents: Seller must, at its cost, provide the following documents and information: 10 (a) all attestations and other information required by the CEC or CARB regarding the Biomethane and its transportation to the Delivery Point for Biomethane Compliance; (b) on Buyer's reasonable request, documentation verifying that Buyer is receiving all Environmental Attributes associated with the Biomethane purchased under this Transaction Confirmation, including offsets for avoided GHG emissions from the sites of the Project(s), and that no Environmental Attributes associated with the Biomethane purchased .under this Transaction Confirmation have been sold or otherwise transferred to any other person. or entity; (c) on Buyer's reasonable request, information and supporting documentation on historical Biomethane production and forecasts of future Biomethane production, and on the volume and type(s) of waste delivered to the sites of the Projects in the preceding Month; and (d.) until the Commencement Date, reports to Buyer approximately every 60 days on the progress of the Project towards completion, including notice that construction and installation of plant process equipment is substantially complete, notification that the plant has cmm oenced start-up of Biomethane production processes and notification of any construction difficulties that will delay the completion of the Project. These reports will be delivered to the Buyer representative named. on page 3 of this Transaction Confirmation. 8.4 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 as of the date of execution of this Transaction ;Confirmation the Biomethane sold hereunder: (a) is Biomethane Compliant under all applicable laws and regulations;, and (b). meets the requirements for "new" fuel set out in section 95852.1.1,(a)(2) of the Cap and Trade Regulation," Certification of the F cooperating to submit 9.2 Certification Notice: I Buyer receives notici Certification will nevE indefinitely halted (in the CEC that Certifrc nature, Buyer and € additional filings requi ATTRIBUTES AND CER uyer any ar will promptly inform Seller when the Certification Date occurs or im the CEC (after providing all required documents to the CEC) that ccur or the certification process for biomethane projects has been ;h case, "Buyer's Certification Notice"). If Buyer receives notice from n will not occur due to an error or omission that is administrative in -r must each use all reasonable efforts to make any changes or to obtain Certification. 10. EARLY TERMINATION 10.1 Mutual Termination Rights: Either Party may terminate this Transaction Confirmation on the first to occur of the following events: 11 (a) September 1, 2012, if the Commencement Date has not occurred by that date; or (b) six months after the Commencement Date, if the Certification Date has not occurred by that date; or (c) Buyer provides a Certification Notice that indicates that Certification has been denied or indefinitely halted, provided that the Parties have satisfied the requirements of section 9.2 above. 10.2 Consequences of termination: pursuant to section 10.1 11. GHG ATTRIBUTES No termination or other damages are payable upon termination 11.1 Biomethane verification: :'Seller shall ensure that the Biomethane it delivers under this Transaction Confirmation is capable of being verified in the manner set out in the section on verifying biomass -derived fuelsin the Mandatory Reporting Regulation. Seller shall, at its cost, provide Buyer with all necessary information and assistance in conducting such verification and with all forms or attestations CARB requires from producers or sellers of Biomethane. 11.2 Biomethane certification: Seller must use commercially reasonable efforts to obtain and maintain CARB certification for the Biomethane under the Mandatory Reporting Regulation if such certification becomes required for Biomethane Compliance. 12. CHANGE IN LAW 12.1 Challenging proposed changes: Each party must provide reasonable support to the other party in challenging any proposed change in law or regulation that impacts Biomethane Compliance, the mutual interest of both parties, or the ability of Seller to perform hereunder as contemplated by this Transaction Confirmation. 12.2 Efforts to maintain Biomethane Compliance: If there is a change in law or regulation after the Execution Date relating to Biomethane Compliance, Seller. shall use all commercially reasonable efforts to maintain Biomethane Compliance. 12.3, tFailure Jo maintain Biomethane .Compliance: If a change in law- affecting Biomethane Compliance occurs, Sellers obligations under this section 12 will be, satisfied if Seller uses commercially reasonable efforts to rmaintain Biomethane Compliance ,even' if, despite those efforts, 'Biomethane Compliance cannot be maintained. Seller will not be in breach of its obligations under this Contract if, despite Sellers commercially reasonable efforts, the change in law affects Biomethane Compliance. 12.4 'Termination for change: in law: This Transaction Confirmation may be terminated with prior written notice to the other party if a Governmental Authority makes a final determination or adopts a law, ruling or regulation that would result in the Biomethane subject to this Transaction Confirmation no longer being able, when combusted, to generate RPS-eligible renewable energy and RECs, whether due to production issues, transportation path issues, or otherwise, or the Biogas is subject to a material additional tax, charge,; impost or other cost as a result of the change in law or regulation (any of the foregoing a "Change of Law'), with such termination to be effective as of the date of effective date of the Change of Law. Any election to terminate or not to terminate this Transaction Confirmation under this section does not affect 12 Sellers liability for any RPS Payments arising under section 6.4(a) for Biomethane that was delivered prior to the effective date of the Change of Law. 13. FORCE MAJEURE 13.1 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 Biomethane and Environmental Attributes; at a higher or more advantageous price than the Contract Price, Buyer's ability to purchase Biomethane and Environmental Attributes at a lower or more advantageous price than the Contract Price, or a regulatory agency disallowing, in whole or in part, the pass through ofjcosts resulting from this Contract;". 13.2 Termination for continuing Force Maieure: If Force Majeure affects performance of an obligation under this Transaction Confirmation for a period of six consecutive months or more, the party whose performance is not prevented by Force Majeure may, at its discretion, terminate this TransactionConfirmation at any time by providing 60 days' written notice to the other party. No early termination damages will apply. 13.3_ Minimizing Force. Maieure: Seller will make Commercially Reasonable Efforts to minimize the duration?and extent of any Force Majeure events involving Projects. 14. ASSIGNMENT 14.1 c For the purposes of this Transaction Confirmation, Section 15.1 of the Base Contract is deleted and replaced with the following: This Contract is binding upon and will inure to the benefit of the successors,.assigns, personal representatives, and heirs of the parties to this Contract, The covenants, conditions, rights and obligations of•this Contract will run; for the full>term of this "Contract. No assignment of the Contract, in whole or in part, will be made witko'di the prior, written 'consent of the non=assigning party. The non=assigning party must not unreasonably withhold or delay its consent. However, the prior approval of the non -assigning party is not required ff,a party: (i) transfers, sells, pledges, encumbers, or assigns this Contract or the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements; or (ii) transfers its interest to any parent or Affiliate by assignment, merger,or otherwise. Buyer may assign this Contract to the Southern California Public Power Authority ("SCPPA") or any other member of SCPPA on the same terms, if Seller approves the transferee's creditworthiness (and Seller must not unreasonably, withhold or delay its approval) and subject to Section 10.1 of the Base Contract applying to the transferee. Upon any assignment, transfer and assumption, the transferor will remain principally liable for and will not be relieved of or discharged from any obligations that the transferor incurred under this Contract prior to the date of the assignment, transfer and assumption." 13 15. PRIORITY OF TRANSACTION CONFIRMATION 15.1 If there is any discrepancy between (1) any terms of this Transaction Confirmation and (2) any terms of the Base Contract, the terms of this Transaction Confirmation shall govern. Seller: Clean Energy Renewable Fuels, LLC Buyer: City of Vernon Light an Power Department r � Signature: Signature: Name: Name: CARLOS R. FANDINO, JR. Title: Title: DIRECTOR OF LIGHT & POWER Date: Date: 3/8/12 A ST: • / /fit i Wi-Ilard GV Yamag h', C' y Clerk 14 Appendix to Transaction Confirmation No. 1 CALCULATION OF DAMAGES 1. RPS Payment under Section 6.4(a) If section 6.4(a) of this Transaction Confirmation applies, the RPS Payment will be calculated as follows: RPS Payment ($) = Gas Quantity (MMBtu) x [(Renewable Energy Price ($/MWh) — Energy Price ($/MWh)) _ 7.6 (MMBtu/MWh)] Where: Gas Quantity = Quantity of gas, in MMBtu, to which section 6.4(a) of this Transaction Confirmation applies. Renewable Energy = Average of quotations from three independent brokers for the Price price, in MWh, of renewable energy that includes RECs generated in the year of delivery of the Biomethane that cannot generate RECs or is determined to be non-RPS-compliant, and delivered at the delivery point specified as TH_SP15_GEN APND on the California Independent System Operator (" CAISO") OASIS website. Energy Price = Average of the hourly Locational Marginal Price for the delivery point TH_SP15 GEN APND published on the CAISO OASIS website (or, if this information is not available, another similar source of energy price information) for the period during which the Biomethane that is determined to be non-RPS-compliant or not eligible to generate RECs was delivered. 2. Carbon Payment under Section 6.4(b) If section 6.4(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 6.4(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 15 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. 3. Damages if Seller fails to deliver Biomethane under Section 7.3 Seller Payment ($) = Undelivered Gas Quantity (MMBtu) x [Gas Purchase Price ($/MMBtu) + ((Renewable Energy Price ($/MW h) — Energy Price ($/MWh)) + 7.5 (MMBtu/MWh)) + (Allowance Price ($/mtCO2e) x 0.05342 (mtCO2e/MMBtu)) — Contract Price ($/MMBtu)] Where: Undelivered Gas . _ Jf section 7.3 of the Transaction Confirmation applies: The Quantity "difference, in MMBtu, between the Minimum Quantity and the quantity of Biomethane 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 theSpot Price. Renewable Energy = Average'of quotations from three independent brokers for the Price price, in MWh, of renewable energy that jncludes RECs generated in the year in which the breach occurred, and delivered at the delivery point specified as TH SP15 GEN APND on the CAISO OASIS website. Energy Price = Average of the hourly Locational Marginal Price for the delivery point TH_SP15 GEN_APND published on th,6 CAISO OASIS website For, if this information is not available, another similar source ofenergy price information) for:the period during which the breach occurred. 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 independentbrokers for the price of an Allowance delivered in the year in which the breach occurred. If the result of the calculation of the Seller Payment is a negative amount, the Seller Payment will be zero. 16 4. Damages if Buyer fails to receive Biomethane under 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 Contract Quantity and the quantity of Biomethane Buyer actually took on each Day on which Buyer breached its obligation to receive Biomethane. Gas Sale Price = Price per MMBtu received by Seller utilizing the Cover Standard for the resale of the Biomethane 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. 17 Base Contract for Sale and Purchase of Natural Gas This Base Contract is entered into as of the following date: March B. 2012 The parties to this Base Contract are the following: PARTY A II PARTY B CLEAN ENERGY RENEWABLE FUELS,, LLC PARTYNAME CITY OF VERNON, LIGHT AND POWER DEPARTMENT 3020 Old Ranch Parkway, Suite 400, Seal Beach, CA 90740 4305 S. Santa Fe Avenue ADDRESS Vernon, CA 90058 www.cleanenergyfuels.com BUSINESS WEBSITE www.citvofvernon.oLq CONTRACTNUMBER 1 96-866-2457 D-U-N-S®NUMBER 06-088-3022 © US FEDERAL: © US FEDERAL: ❑ OTHER: TAX ID NUMBERS ❑ OTHER: California JURISDICTIONOF California ORGANIZATION ❑ Corporation 0 LLC ❑ Corporation ❑ LLC ❑ Limited Partnership ❑ Partnership COMPANY TYPE ❑ Limited Partnership ❑ Partnership ❑ LLP ❑ Other: ❑ LLP O Other: Political §ubdivision GUARANTOR IF APPLICABLE CONTACT INFORMATION ATTN: Harrison Clay, President ATTN: Efrain Sandoval / Shawn Sharifzadeh TELM (562) 493-2804 FAX#: (562) 430-8594 - COMMERCIAL TEL#: (323) 826-1424 .FAX#. (323)-826-3629 EMAIL: hclav(a)cleaneneravfuels.com EMAIL: esandoval0ci.vernon ca us ssharif ci.vernon.ca.us ATTN: Harrison Clay, President ATTN: Same as above TEL#: (562) 493.2804 FAX#: (562) 430-8594 • SCHEDULING TELM FAX#: EMAIL: hclay_@cleanenergyfuels.com EMAIL: ATTN: Nate Jensen, General Counsel • CONTRACT AND ATTN: Javier Valdez TELM (562) 493-2804 FAX#: (562) 493-4956 LEGAL NOTICES TEL#: (323) 583-8811 FAX#. (323) 826-1431 EMAIL: hclayMcleanenergyfuels.com EMAIL: 'valdez ci.vernon.ca.us ATTN., Harrison Clay, President ATTN. TEL#. (562) 493-2804 FAX#: (562) 430-8594 • CREDIT TEL#: FAX#: EMAIL: h la leenener uels.com EMAIL: ATTN: Clay, President Harrison ATTN., Edwin Ochoa TELM (562) 493-2804 FAX#: (562) 430-8594 • TRANSACTION CONFIRMATIONS TEL#: ( )323 583-8811 FAX#: (323) 826-3629 EMAIL: hcla cleanener fuels.com EMAIL: eochoa ci.vernon.ca.us ACCOUNTING INFORMATION ATTN: Clay, President Harrison • INVOICES ATTN: City of Vernon Treasury Department TEL#: (562) 493-2804 FAX#: (562) 430-8594 • PAYMENTS TEL#: (323) 583-8811 FAX#: (323) 826-1491 EMAIL: helay0cleaneneravfuels com • SETTLEMENTS EMAIL: invoicesOci.vernon.ca.us BANK., Plains Capital Bank WIRE TRANSFER BANK., East West Bank ABA: 111322994 ACCT.' 3100032592 NUMBERS ABA: #322070381 ACCT: 80362817 OTHER DETAILS: (IF APPLICABLE) OTHER DETAILS: BANK: ACH NUMBERS BANK: ABA: ACCT: ABA. ACCT: OTHER DETAILS: (IF APPLICABLE) OTHER DETAILS: ATTN: CHECKS ATTN: ADDRESS: ADDRESS: (IF APPLICABLE) 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 Terns and Conditions. In the event the parties fall to check a box, the specified default provision shall apply. Select the appropriate box(es) from each section: Section 1.2 D Oral (default) Section 10.2 No Additional Events of Default (default) Transaction OR Additional Procedure O Written Events of Default -. © Indebtedness Cross Default Additional events of default are specified In the Special Section 2.7 ® 2 Business Days after receipt (default) Provisions (attached). Confirm Deadline OR CJ _ Business Days after receipt Section 2.6 © Seller (default) Confirming Parry OR Buyer Section 3.2 0 Cover Standard (default) Section 10.3.1 © 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. Section 10.3.2 Other ED Other Agreement Setoffs Apply .(default) Section 2.31 0 Gas Daily Midpoint (default) Agreement O Bilateral (default) Spot Price OR - Setoffs Triangular Publication - - OR -. Other Agreement Setoffs Do Not Apply Section ©- Buyer Pays At and After Delivery Point (default) Taxes OR D Seller Pays Before: and At Delivery Point Section 7i2 Z 26" Day of Month following Month of delivery Section 15.5 California Payment Date (default) Choice Of Law OR 0 Day.of Month following Month of delivery, Section 7.2 - -0 Wlre translor (default) - Section 16.10 ® Confidentiality appllea (default) Method 61 Payment p Automated Clearinghouse Credit (AOH) Confidentiality OR ri Check C Confidentiality. doesmot,apply Section 7.7 IM Netting applies (default) Netting OR. .: D Netting does not a -pf _ X Special Prgvlslons,Numberof sheets attached: 7 D AddendUtq(s): -'Transaction Confirmation IN WITNESS W HEREOF, the parties hereto have executed this BB Contract in duplicate. -: CLEAN ENERGY RENEWABLE FUELS PARTYNAMR CITY OF V NON, LIGHT AND POVIIER DEPARTMENT SIGNATURE B: B: 0, . Harrison Cloy PRINTED NAME CARLOS R, ,'.: _. . President THE IRECTOR OF LIGHT A POWER General Terms and Conditions Base Contract for Sale and Purchase of Natural Gas SECTION 1. PURPOSE AND PROCEDURES 1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to the party receiving Gas and "Seller" refers to the party delivering Gas. The entire agreement between the parties shall be the Contract as defined in Section 2.9. The parties have selected either the "Oral Transaction Procedure" or the "Written Transaction Procedure" as indicated on the Base Contract. Oral Transaction Procedure: 1.2. The parties will use the following Transaction Confirmation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmission or telephone conversation with the offer and acceptance constituting the agreement of the parties. The parties shall be legally bound from the time they so agree to transaction terms and may each rely thereon. Any such transaction shall be considered a "writing" and to have been "signed". Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may, confirm a telephonic transaction by sending the other party a Transaction Confirmation by facsimile, EDf or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction Procedure) provided that the failure to send a Transaction Confirmation shall not invalidate the oral agreement of the parties. Confirming Party: adopts its confirming letterhead, or the like, as its signature on any Transaction Confirmation as the identification and authentication of Confirming Party. If the Transaction Confirmation contains any provisions other than those relating to the+commercial terms of the transaction (i.e., price, quantity, performance obligation, delivery point, period of delivery and/or transportation conditions), which modify or supplement the Base Contract or General Terms and Conditions of this Contract (e.g., arbitration or additional representations and warranties), such provisions shall not be deemed to be accepted pursuant to Section 1.3 but must be expressly agreed to by both parties; provided thaf the foregoing shall not invalidate any transaction agreed to by the parties. Written Transaction Procedure: 1.2. The parties will use the following Transaction Confirmation procedure. Should the parties come to an agreement regarding a Gas, purchase and sale transaction for a particular Delivery Period, the Confirming, Party shall, and the other party may, record that agreement on.a Transaction Confirmation and communicate such Transaction Confirmation by facsimile, EDI ormutually agreeable electronic means, to the other party by the close of the Business Day following the date of agreement. The parties acknowledge ,that their agreement will not be binding until the exchange of nonconflicting Transaction Confirmations or the pass a a of the Confirm Deadline without obiection from the receiving art as provided in Section 1.3. 1.3. If a sending party's Transaction Confirmation is referred to in.Section: t2, such receiving party shall notify th the Confirm Deadline,, unless such receiving party has previc receiving party to so notify the sending party in writing by the the transaction described In the sending -party's Transactic Transaction Confirmations governing the same transaction re differences aresolved including the use of any evidence t event of conflict among the terms of (I) a binding Trahsacti which may be•e'videnced"by a recorded conversation, whi Contract; (iii) the Base Contract, and (iv) these General Tei listed in this sentence. erially different from the receiving party's understanding of the agreement :nding parry via facsimile, EDI or mutually agreeable electronic means by y sent a Transaction Confirmation to the sending party. The failure of the infirm Deadline constitutes the receiving parry's apreementto the terms of )onfirmation. if there are any material'diffeiences between timely sent m neither Transaction Confirmation shall be binding until" or unless such clearly resolves the differences in the Transaction Confirmations. In the :onfirmafion pursuant to Section 1.2, (li) the oral agreement of the parties the parties have selected the Oral Transaction Procedure of the Base and Conditions, the terms of the documents shall govern imthe priority 1.4. The parties agree that each parry may electronically record all telephone conversations with respect to this Contract between their respective employees; without any special or further police to the other party. Each parry shall obtain any necessary, consent of its agents and employees, tosuch recording: Where the parties have selected the Oral Transaction Procedure in Section 1`.2 of the Base Contract, the parties agree not to contest the validity;or enforceability of telephonio recordings entered'into in aocortlance with the requirements of this Base Contract. SECTION 2. DEFINITIONS The terms set forth below shall have the meaning ascribed to them below. Other terms are also defined elsewhere in the Contract and shall have the meanings ascribed to them herein. 2.1. "Additional Event of Default" shall mean Transactional Cross Default or Indebtedness Cross Default, each as and if selected by the parties pursuant to the`Base Contract. 2.2. "Affiliate" shall mean, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "oonfrof' of any entity or person means ownership of at least 50 percent of the voting power of the entity or person. Copyright® 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 3 of 13 September 5, 2006 2.3. "Alternative Damages" shall mean such damages, expressed in dollars or dollars per MMBtu, as the parties shall agree upon in the Transaction Confirmation, in the event either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer. 2.4. "Base Contract" shall mean a contract executed by the parties that incorporates these General Terms and Conditions by reference; that specifies the agreed selections of provisions contained herein; and that sets forth other information required herein and any Special Provisions and addendum(s) as identified on page one. 2.5. "British thermal unit" or "Btu" shall mean the International BTU, which is also called the Btu (IT). 2.6. "Business Day(s)" shall mean Monday through Friday, excluding Federal Banking Holidays for transactions in the U.S. 2.7. "Confirm Deadline" shall mean 5:00 p.m. in the receiving party's time zone on the second Business Day following the Day a Transaction Confirmation is received or, if applicable, on the Business Day agreed to by the parties in the Base Contract; provided, if the Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party's time zone, it shall be deemed received at the opening of the next Business Day. 2.8. "Confirming Party' shall mean the.party designated in the Base Contract to prepare and forward Transaction Confirmations to the other party. 2.9. "Contract" shall mean the legally -binding relationship established by (i) the Base Contract, (ii) any and all binding Transaction Confirmations and (ill) where the;:parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties. 2.10. "Contract Price' shall mean the amount expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the partiesin transaction. 2.11. "Contract Quantity" shall mean the quantity of Gas to be delivered and taken as agreed to by the parties in a transaction. 2.12. "Cover Standard", as referred to in Section 3.2, shall mean that if there is an unexcused failure to take or deliver any quantity of Gas pursuant to this Contract, then the performing party shell use commercially reasonable.efforts to (i) if Buyer is the performing party, obtain Gas, (or an alternate fuel if elected by Buyer and replacement Gas is not available), or (tf) if Seller is the performing party, sell Gas, in either case, at a price reasonable for the delivery or production area, as applicable, consistent with: the amountofnotice provided by the. nonperforming party; the immediacy of the Buyer's Gas consumption needs or Seller's Gas sales requirements, as applicable; the quantities involved; and the anticipated length of failure by the nonpeirlorming party. 2.13. "Credit Support Obligation(s)" shall mean any obligation(s) to provide or establish credit support for, or on behalf of, a party to this Contract such as cash, an irrevocable standby letter of credit, a margin agreement, a prepayment, a security interest in an: asset, guaranty;: or other good and sufficient security of a continuing nature. 2.14. 'Day" shaltmeen a period of 24 consecutive hours, coextensive with a "day" as defined by the Receiving Transporter in a particular transaction. 2.1�5. "Delivery Period" shall bethe period during which deliveries are to be made as agreed to by the Parties in a transaction. 2.16. Delivery Point(s)" shall mean such point(s) as are agreed to by the parties in a transaction. 2.17. "EDI' shall mean an electronic data interchange pursuant to an agreement entered into by the parties, specifically relating to the communication of Transaction Confirmations under this Contract. 2.18. ' EFP" shall mean the purchase, sale or exchange of natural Gas as the "physical' side of an exchange for physical transaction involving gas .futures contracts. EFP shall. incorporate the meaning and remedies of ' Firm', provided. that a party's excuse for nonperformance of its obligations to deliver or receive Gas will be governed by the rules of the relevant futures exchange regulated under the Commodity Exchange Act. 2.19. 'Firm" shall mean that either parry may interrupt its performance Without liability only to the extent that such performance is prevented for reasons of Force Majeure; provided, however, that during Force Majeure interruptions, the party invoking Force Majeure may be responsible for any imbalance Charges as set forth: in Section 4.3 related to its interruption after the nomination is made tothe Transporter and until the change in deliveries and/or receipts is confirmed by the Transporter. 2.20. , "Gas" shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous"state consisting primarily of methane; 2.21. - "Guarantor" shall mean any:entilythat has provided a guaranty of the obligations of a parry hereunder. 2.22. Imbalance Charges" shall mean any fees, penalties, costs or charges (in cash or in kind) assessed by a Transporter for failure to satisfy theiTransporter's balance and/or nomination requirements. 2.23. "Indebtedness Cross Default" shall mean'if selected on the Base Contract by the parties with respect to aparty, that it or its Guarantor, if any; experiences a default, or similar condition or event however therein defined, under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether present or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed money in an aggregate amount greater than the threshold specified in the Base Contract with respect to such party or its Guarantor, if any, which results in such indebtedness becoming immediately due and payable. Copyright C 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved . Page 4 of 13 September 5, 2006 3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the Spot Price; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the applicable Spot Price from the Contract Price. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party's invoice, which shall 3.3. Notwithstanding Section 3.2 the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by both parties. 3.4. In addition to Sections 3.2 and 3.3, the parties may provide for a Termination Option in a Transaction Confirmation executed in writing by both parties. The. Transaction Confirmation containing the Termination Option will designate the length of nonperformance triggering the Termination Option and the procedures for exercise thereof, how damages for nonperformance will be compensated, and how liquidation costs will be calculated. SECTION 4. TRANSPORTATION, NOMINATIONS, AND IMBALANCES 4.1. Seller shall have the sole responsibility for transporting the Gas to the Delivery Point(s). Buyer shall have the sole responsibility for transporting the Gas from the Delivery Point(s). - 4.2. The parties shall coordinate their nomination activities, giving sufficient time to meet the deadlines of the affected Transporter(s). Each parry shall give the other parry timely prior Notice, sufficient to meet the requirements of all Transporter(s) involved in the transaction, of the quantities of Gas to be delivered and purchased each Day. Should either party become aware that actual deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas, such, party shall promptly notify the other party. 4.3. The parties shall use commercially reasonable efforts to avoid imposition of any mbalance Charges. If Buyer or Seller receives an invoice from a Transporter that includes Imbalance Charges, the parties shall determine the validity as well as the cause of such Imbalance Charges. of the Imbalance Charges were incurred as a result of Buyer's receipt: of quantities of Gas greater than or less than the Scheduled Gas, then Buyer shall pay for such Imbalance Charges or reimburse Seller for such Imbalance Charges paid by Seller. If the Imbalance Charges, were incurred as a result of Seller's delivery of quantities of Gas greater than or less than' the. Scheduled Gas, then Seller shall pay for such Imbalance Charges or reimburse Buyerfor such Imbalance Charges paid by Buyer. SECTION 5. QUALITY AND MEASUREMENT All Gas delivered by Seller shall meet the pressure, quality and heat content requirements of the Receiving Transporter. The unit of quantity measurement for purposes of this Contract shall be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving Transporter. SECTION 6. TAXES The parties have selected either "Buyer Pays At and After Delivery. Point" or "Seller Pays Beforetand At Delivery Point" as indleated;on the Base Contract. Buyer Pas At and AfterDeliver Point:: Seller sl all•pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by anygovemment authority (1'Taxes") on or with respect to the Gas prior to the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on br, wRh respect to the Gas at the Delivery Point(s) and all Taxes afterSthe Delivery PoiOt(s). If a parry is required to remit or pay Taxes that are the other parry's responsibility hereunder, the parry responsible for such Taxes;shall promptly reimburse the other partyfor such Taxes. Any partyentitled to am.exern Lion from an such Taxes or char as shall furnish he other a an necesso documentation.Yhereot. Sellar Pe s Before and At Delive Point; Sellerstiall pay or cause to be paid all taxes, fees, Isvies,:panalties, licenses or charges imposed by any government authority ('Taxes") on or with respect4o file Gas prior to theAelivery Point(s);and all Taxes at the Delivery Point(s), Buyer`shall, pay or cause to be, paid all Taxes on or with respect to the Gas after the Delivery Point(s). If a party is required to remit or pay Taites'that are tfe other padys responsibility, hereunder; the party responsible for such Taxesshall promptly reimburse the other party for such Taxes. Any parry entitled to an exemption from an .such Taxes or, charges shall furnish the other a an necessar documentation thereof. SECTION 7. BILLING, PAYMENT, AND AUDIT 7.1. Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for any other applicable charges, providing supporting documentation acceptable in industry practice to support the amount charged. If the actual quantity delivered is not known by the billing date, billing will be prepared based on the quantity of Scheduled Gas. The invoiced quantity will then be adjusted to the actual quantity on the following Month's billing or as soon thereafter as actual delivery information is available. Copyright ® 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 6 of 13 September 5, 2006 7.2. Buyer shall remit the amount due under Section 7.1 in the manner specified In the Base Contract, in immediately available funds, on or before the later of the Payment Date or 10 Days after receipt of the invoice by Buyer; provided that if the Payment Dale is not a Business Day, payment is due on the next Business Day following that date. In the event any payments are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2. 7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the nonperforming party for an accelerated payment setting forth the basis upon which the invoiced amount was calculated. Payment from the nonperforming party will be due five Business Days after receipt of invoice. 7.4. If the invoiced party, in good faith, disputes the amount of any such invoice or any part thereof, such invoiced party will pay such amount as it concedes to be correct; provided, however, it the invoiced parry disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay. In the event the paries are unable to resolve such dispute, either parry may pursue any remedy available at law or in equityto enforce its rights pursuant to this Section. 7.5. If the invoiced parry fails to remit the full amount payable when due, interest on the unpaid portion shall accrue from the date due until the date of payment at a rate equal tome lower of (i) the then -effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum;,or (11) the maximum applicable lawful interest rate. 7.6. A parry shall have the right, atrits own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the books, records, and telephone recordings of the other party only to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under the Contract. This right to examine, audit, and to obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Contract. All invoices and billings shall be conclusively presumed final and accurate and all associated claims for under- or overpayments shall be deemed waived unless such Invoices or billings are objected to in writing, with adequate explanation and/or documentation, within two years after the Month of Gas delivery. All retroactive adjustments under Section 7 shall be paid in full by the party owing payment within 30 Days of Notice and substantiation of such inaccuracy. 7.7. Unless the parties have elected -onthe Base Contract not to make this Section 7.7 applicable to this Contract, the parties shall net all undisputed amounts due and owing, and/or past due, arising under the Contract such that the party owing the greater amount shall make a single payment of the net amount to the other party in accordance with Section 7; provided that no payment required to be made pursuant to the terms of any. Credit Support Obligation or pursuant to Section 7.3 shall be subjecttonettingunder this Section. If the parties have executed a separate netting agreement, the terms and conditions therein shall prevail to the extentinconsistent: herewith. - SECTION 8. TITLE, WARRANTY, AND INDEMNITY 8.1. Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the Delivery Point(s). Seller shall have responsibility for and assume any liability with respect to the Gas prior to its delivery to Buyer at the specified. Delivery Point(s). Buyer shall have responsibility for and assume any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s). 8.2. Seller warrants that it will have the right, to hereunder and delivered. by it to Buyer, free and clear; o SECTIONI'A2 AND IN'SECTION 15.6, ALL OTHER,WA MERCHANTABILITY OR OF FITNESS FOR ANY PARTICUL 8.3.:: Seller agrees to indemnify Buyer and save attorneys fees and costs of court ("Claims'), from any (including death) or.property damage from said Gas or t agrees to indemnify Seller and save it harmless from aft Clair personatinjury (including,death) or property damage from set 8.4. The parties agree that the delivery of and the Customs Territoryof the United States (as defined in:,ge be responsible for convey and will transfer good and merchantable title to .all. Gas sold fall liens, encumbrances, and claims. EXCEPT AS PROVIDEDINTHIS 3RANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF AR PURPOSE, ARE DISCLAIMED.. harmless from all losses, liabilities d' all persons; arising from or out of sr charges thereon which attach befor from any and all persons, arising from or as or other charges thereon which attach/ nsfer'of title to all Gas .under this Con1 at note 2.of the Harmonized Tariff Scl that in the event Seller took title to r that it is the importer of record for all ry summary filings as well as the paym or claims including reasonable .claims of title, ;personal injury e tle passes to Buyer. Buyer take place within the the Unitetl States 19 ad into fees, if WWI miu au appnuai:?iereeuro Keepmg.reguiremenis. 8.5. Notwithstanding the other provisions of this Seot on'8, as between Seller and Buyer, Seller will be liable for all Claims to the extent that such arise from the failure of Gas delivered by Seller to meet the quality requirements of Section 5. SECTION 9. NOTICES 9.1. All Transaction Confirmations, invoices, payment instructions, and other communications made pursuant to the Base Contract ("Notices") /shall be made to the addresses specified in writing.by the respective parties from time to time. 9.2. All Notices required hereunder shall be in writing and may be sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service, first class mail or hand delivered. 9.3. Notice shall be given when received on a Business Day by the addressee. In the absence of proof of the actual receipt date, the following presumptions will apply. Notices sent by facsimile shall be deemed to have been received upon the sending party's receipt of its facsimile machine's confirmation of successful transmission. If the day on which such facsimile is received is ® 2006 North American Energy Standards Reserved Page 7 of 13 NAESB Standard 6.3.1 September 5, 2006 2.24. "Interruptible" shall mean that either party may interrupt its performance at any time for any reason, whether or not caused by an event of Force Majeure, with no liability, except such interrupting party may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by Transporter. 2.25. "MMBtu" shall mean one million British thermal units, which is equivalent to one dekatherm. 2.26. "Month" shall mean the period beginning on the first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar month. 2.27. "Payment Date" shall mean a date, as indicated on the Base Contract, on or before which payment is due Seller for Gas received by Buyer in the previous Month. 2.28. "Receiving Transporter" shall mean the Transporter receiving Gas at a Delivery Point, or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point. 2.29. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporter(s) for movement, transportation or management. 2.30. "Specified Transaction(s)" shall mean any other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas, and any other transaction or agreement identified as a Specified Transaction under the Base Contract. 2.31. "Spot Price " as referred to in Section 3.2 shall mean the price listed in the publication indicated on the Base Contract, under the listing applicable to the. geographic location closest in proximity to the Delivery Point(s) for the relevant Day; provided, if there is no single price published for such location for such Day, but there is published a range of prices, then the Spot Price shall be the average of such high and low prices. Ifno price or range of prices is published for such Day, then the Spot Price shall be the average of the following: (i) the price (determined as stated above) for the first Day for which a price or range of prices is published that next precedes the relevant Day;:and (ii) the price (determined as stated above) for the first Day for which a price or range of prices is published that next followsthe relevant Day. 2.32. "Transaction Confirmation" shall mean a document, similar to the form o1 Exhibit A, setting forth the terms of a transaction formed pursuant to Section 1 for a particular Delivery Period. 2.33. "Transactional Cross Default' shall mean if selected on the Base Contract by the parties with respect to a:party, that it shall be in default, however therein defined, under any Specified Transaction. 2.34. 'Termination Option" shall mean the option of either parry to terminate a transaction in the event that the other, party fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer for a designated number of days during a period as specified on the applicable Transaction Confirmation. 2.35. 'Transporter(s)" shall mean all Gas gathenng,or pipeline companies, or local distribution companies, acting in the capacity of a transporter, transporting Gas for Seller or Buyer upstream -or downstream, respectively, of the Delivery Point pursuant to -a. particular transaction. SECTION3. PERFORMANCE OBLIGATION 3.1. Seller agrees to sell and deliver, and Buyer agrees to receive and, purchase, the Contract Quantity for a particular transaction in accordance with thelterms of the Contract. Sales and purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction. The parties have selected either the "Cover Standard" or the "Spot Price Standard" as In on the Base Contract, Cover Standard: 3.2. The sole'end exclusive remedy of the part ies.inthe event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the,event of a breach by?Seller on any Day(s), payment by Seller to Buyer in an amount equal to the positive difference; if any, between the purchase price paid by Buyer utilizing .the Cover Standard and the Contract Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s)' excluding Iany quantity for which no replacement is available; or (if) in the eveht of ;a breach by Buyer on any;Day(s), payment: by Buyer to Seller in the amount: equal to the positive difference; if any, between the Contract Price and the; price received;by-Seller utilizing the Cover Standard for the resale of such Gas, ;adjusted for commercially reasonable differences in transportation costs to or from the DeliveryPoint(s), multiplied by the difference betweerr the Contract Quantity and the quantity actually taken by buyer for such Day(s) excluding anyquantity for which no sale is available; and (iii) in the event that Buyer has used commeroiallyreasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to `sell the Gas to a third party;'and:.no such replacement or sale is available for all or any portion 'of'the Contract Quantity of Gas, then in addition to (i) or (ii) above, as applicable, the sole and exclusive remedy of the performing party with respect to the Gas not replaced or sold shall.be an amount equal to any unfavorable difference between the Contract Price and the Spot Price, adjusted for such transportation to the applicable Delivery<Ppinti multiplied by the quantity of such Gas not replaced or sold. Imbalance Charges shall not be recovered under this Section'3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as providedinSection 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party's invoice, Copyright 02006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 5 of 13 September 5, 2006 not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall be considered delivered five Business Days after mailing. 9.4. The party receiving a commercially acceptable Notice of change in payment instructions or other payment information shall not be obligated to implement such change until ten Business Days after receipt of such Notice. SECTION 10. FINANCIAL RESPONSIBILITY 10.1. If either party ('X") has reasonable grounds for insecurity regarding the performance of any obligation under this Contract (whether or not then due) by the other party ("Y") (including, without limitation, the occurrence of a material change in the creditworthiness of Y or its Guarantor, if applicable), X may demand Adequate Assurance of Performance. "Adequate Assurance of Performance" shall mean sufficient security in the form, amount, for a term, and from an issuer, all as reasonably acceptable to X, including, but not limited to cash; a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty. Y hereby grants to X a continuing first.priority security interest In, lien on, and right of setoff against all Adequate Assurance of Performance in the form of cash .transferred.by Y to X pursuant to this Section 10.1. Upon the return by X to Y of such Adequate Assurance of Performance, the security interest and lien granted hereunder on that Adequate Assurance of Performance shall be released automatically and, to the extent possible, without any further action by either party. 10.2. In the event (each an "Event of Default") either party (the "Defaulting Party") or its Guarantor shall: (i) make an assignment or any general arrangement for the benefit of creditors; (ii) file a petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; (ill) otherwise become bankrupt or insolvent (however evidenced); (iv) be unable to pay its debts as they fall due; (v) have a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respectto it or substantially all of its assets; (vi) fail to perform any obligation to the other party with respect to any Credit Support Obligations relating. to the Contract; (vii) fail to give Adequate Assurance of Performance under Section 10.1 within 48 hours but at least one Business Day of a written request by the other party; (viii) not have paid any amount due the other party hereunder on or before the second Business Day following written Notice that such payment is due; or ix) be the affected party, with respect to any Additional Event of Default; then the other party (the "Non -Defaulting Party") shelf] have the right, at its sole election, to immediately withhold and/or suspenddeliveries 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 atl other rei edies'available hereunder. 10.3. If an Event of Default has occurred and is continuing, the Non -Defaulting Party shall have the right, by Notice to the Defaulting Party, to. designate a Day, no earlier than the Day such Notice is given and no later than 20 Days after such Notice is given, as an early termination date (the "Early Termination` Date") for the liquidation ,and termination pursuant to Section 10.3.1 of all transactions under the Contract, each a "Terminated Transaction". On the Early Termination Date, all transactions will terminate, other than those transactions, if any, that;may not be liquidated and terminated under applicable'16W ("Excluded Transactions"), which Excluded Transactions must be liquidated and terminated asrsoon thereafter as is legally permissible, and upon termination shall be a Terminated Transaction and be valued consistent with Section 10,S.1 below. With, respect to each Excluded Transaction, its .actual termination date shall bathe Early Termination Date for purposes of Section 10.3.1. The parties have selected either "Early Termination Damages Apply" or "Early Termination Damages Do Not Apply" as indicated on the Base Contract. Earl Termination Dame es Apply: 10,3.1. As of the Early Termination Date, the Non -Defaulting Party shall determine, in good faith and in a commercially reasonable Memel,, (t) the amount owed (whether or not then due) by each party with respect to all Gas delivered and received between the pafties::under Terminated Transactions and Excluded Transactions omand beforelhe Early Termination Date and all th oer applicable charges relating to such deliveries an&r' ceipts (including without limitation any amounts owed underSect on 3.2), for which paymentF as not yet been made by the party;that owes such payment under this Contract and'(if) the Market Value, as defined' below, of each Terminated Transaction. Thp,Non-Defaulting; Party shall (x) liquidate antl accelerate each Terminated Transaction at its: Market Value, so thafeach amount.equal to the difference between'such Market •Value and the Contract Value, as defined below, of such Terminated Transaction(ai shall be due to the. Buyer under the Terminated T.ransaction(s) if such Market Value exceeds the Contract Value andjo the SelleY if the opposite is the case; and (y) where appropriate, discount each Lamount then clue under clause (k) above to present value in a commercially reasonable manner as of the Early Termination Data Ito take accountiof the period between the date of liquidation artd,tne date on which such amount would have otherwise been due pursuant to the relevant Terminated Transactions). For purposes of this Section 10.3.1, "Contract Value" means the amount of Gas remaining to be 'delivered or purchased: under a transaction multiplied by the Contract Price, and "Market Value" means the amount of'Gas remaining tote deliver`edior purchased under a'transaction multiplied by the market price for a -similar transaction at the Delivery Point determined by the Non -Defaulting Party in a commercially reasonable manner. To ascertain the Market Value, the Non -Defaulting Party may consider; among other valuations, any or all of the settlement prices of NYMEX Gas futures contracts, quotations from leading dealers in energy swap contracts or physical gas trading markets, similar sales or purchases and any other bona fide third -party offers, all adjusted for the length of the term and differences in transportation casts. A party shall not be required to enter into a replacement transaction(s) in order to determine the Market Value. Any extension(s) of the term of a transaction to which parties are not bound as of the Early Termination Date (including but not limited to "evergreen provisions") shall not be considered in determinina Contract Valuoq and Copyright 0 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 8 of 13 September 5, 2006 Market Values. For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction shall be considered in determining Contract Values and Market Values. The rate of interest used in calculating net resent value shall be determined by the Non -Defaulting Party in a commercially reasonable manner. Early Termination Damages Do Not Apply: 10.3.1. As of the Early Termination Date, the Non -Defaulting Party shall determine, in good faith and in a commercially reasonable manner, the amount owed (whether or not then due) by each party with respect to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such deliveries and receipts (including without limitation any amounts owed under Section 3.2), for which payment has not yet been made by the party that owes such payment under this Contract. The parties have selected either "Other Agreement Setoffs Apply" or "Other Agreement Setoffs Do Not Apply" as indicated on the Base Contract. Other Agreement Setoffs Apply: Bilateral Setoff Option: 10.3.2. The Non -Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). At its sole option and without prior Notice to the Defaulting Party, the Non -Defaulting Party is hereby authorized to setoff any Net SetllementAmount against (i) any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; and (ii) any amount(s) (including any excess cash margin or excess cash collateral) owed or held by the party that is entitled to the Net Settlement Amount under any other agreement or arrangement between the parties. Triangular Setoff Option: 10.3.2. The Non -Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the "Net Settlement Amount"). Atits sole option, and without prior Notice to the Defaulting Party, the Non -Defaulting Party is hereby. authorized to setoff 0) any Net Settlement Amount against any margin or other collateral held by a party in:.connection With any Credit Support' Obligation relating to the Contract; (ii)any Net Settlement Amount against any.amount(s) (including any excess cash margin or excess cash collateral)' owed by or to a party under any other agreement or arrangement between the parties; (iii) any Net Settlement Amount owed to the Non-Detaultirig Party against any amount(s) (including any excess cash margin or excess cash :collateral) owed by the Non -Defaulting Patty or its Affiliates to the Defaulting Party under any other agreement or arrangement; (iv) :any 'Net Settlement Amouni owed to the Defaulting Party against any amount(s) _(including any excess cash margin: or excess cash collateral) owed by the Defaulting Party to the Non -Defaulting Party or its Affiliates under ,any other agreement or arrangement; and/or (v) any Net Settlement Amount owed to the Defaulting Party against any amount(s):(including any excess cash margin or excess cash collateral) owed by the Defaulting Party or Affiliates to the Non -Defaulting Party under an other a reement or arran ement. Other A reement Setoffs Do Not Apply. 10:3.2. The Non -Defaulting Party shall net or aggregate, as appropriate, any and .all amounts -owing between the parties under Section 10 37,. so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the"Net Settlement Amount"). At its sole option' and without prior Notice to the Defaulting Party, the Non6Defaulting Party may setoff any NetiSettlement Amount against any margin or other collateral'held by a party in connection with any'Credit Support Obli`ationrelatin 3otheContract. 10.3.3. If any obligation that is to be included in any netting, aggregation or setoff pursuant to Section'10.3.2 is unascertained, the Non -Defaulting Party may in gootl taith:estimate that obligation and net, aggregate or setoff, as.appljcable, in respect of the estimate; subject to the Non -Defaulting Party accounting to the Defaulting Party when the obligation' is ascertained. Any' amount not then due which is included In any netting;,aggregation >or setoff pursuant to Section 1 6.b.2 shall be discounted to net,preseht value in?a commercially reasonable manner determined by the Non -Defaulting Parry. As soorras practicable after a liquidation, Notice shall be given by the Non -Defaulting Party, to the Defauting `Party of the Net settlement Amount, and whether the Net Setflement Amount is due to or due from the Non -Defaulting Party. The Notice shall'include a written statement explaining in reasonable detail the calculation of the Net Settlement Amount, provided that failure to give"such Notiseshall not affect the validity or enforceability of the liquidation o`r give rise to any claim by the befapfting Party against the Non -Defaulting Party. The Net Settlement"Amount as well as any setoffs applied against such amount pursuant to Sectfon:10.3.2, shall be paid by the close of business on<the second Business Day following such Notice, which date shall not be earlier than the Early Termination Date. Interest on any unpaid portion of.the Net Settlement Amount as adjusted by setoffs, shall accrue from the date due until the fate of payment at a rate equal to the lower of (i) the then -effective prime rate of interest published under"Money Rates"by The Wall Street Journal, plus two percent per annum;;or (ii) the maximum applicable lawful interest rate: . 10.5. The parties agree that the transactions hereunder constitute a "forward contract" within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each "forward contract merchants" within the meaning of the United States Bankruptcy Code. 10.6. The Non -Defaulting Party's remedies under this Section 10 are the sole and exclusive remedies of the Non -Defaulting Party with respect to the occurrence of any Early Termination Date. Each party reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or may be entitled 10 arising from the Contract. Copyright m 2006 North Amerlcan Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 9 of 13 September 5, 2006 SECTION 14. MARKET DISRUPTION If a Market Disruption Event has occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price for the Floating Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected Day then the replacement price for the Floating Price shall be determined within the next two following Business Days with each party obtaining, in good faith and from non- affiliated market participants in the relevant market, two quotes for prices of Gas for the affected Day of a similar quality and quantity in the geographical location closest in proximity to the Delivery Point and averaging the four quotes. If either party fails to provide two quotes then the average of the other party's two quotes shall determine the replacement price for the Floating Price. "Floating Price" means the price or a factor of the price agreed to in the transaction as being based upon a specified index. "Market Disruption Event" means, with respect to an index specified for a transaction, any of the following events: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of trading to commence or the permanent discontinuation or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (a) both parties agree that a' material change in the formula for or the method of determining the Floating Price has occurred. For the purposes of the calculation of a replacement price for the Floating Price, all numbers shall be rounded to three decimal places. If the fourth decimal number is five or greater, then the third decimal number shall be increased by one and if the fourth decimal number is less than five, then';the third decimal number shall remain unchanged. SECTION 15. MISCELLANEOUS. 15A . This Contract shall be binding upon -and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and: the covenants, conditions, rights and obligations of this Contract shall run for the full term of this Contract. No assignment of this Contract, in, who(e or in part, will be made without the prior written consent of the non -assigning party (and shall not relieve the assigning party from liability hereunder), which consent will not be unreasonably withheld or delayed; provided, either party may (1) transfer, sell;: pledge, encumber, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with any financing or other financial -arrangements, or (ii) transfer its interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any such assignment, transfer and assumption, the transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations hereunder. 15.2. If any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not Invalidate, void, or make unenforceable any other provision, agreement or covenant of this "Contract. 15.3. No waiver of any breach of this Contract shall -be held to be a waiver of any other or subsequent breach. 15.4. This Contract sets forth all understandings between the parties respecting each transaction subject hereto, and any prior contracts, understandings; and representations, whether 6raf4r written, relating to such transactions are merged into and superseded by this Contract and any effective transaclion(s). This Contract may be amended only by a writing executed by both parties. 15.5. The interpretation and performance of this Contract shall be governed by the laws of the jurisdiction as indicated on the Base Contract, excluding, however, any conflict of laws rule which would apply the law of another jurisdiction. 15.6. This Contract and all provisions herein will be subject to all applicable and valid statutes, rules, orders and regulations of any governmental authorityi having jurisdiction` over the parties, their facilities, or Gas supply, this Contract or transaction or 'any provisions thereon- 15.7. There is no third party beneficiary to this Contract. 15.8. Each partydo this Contract represents and warrants that it has full and complete authority to enter into and;: perform this Contract, Each person who executes this Contract on, behalf of either party represents and warrants that It hasfull and complete authority to do sound that such party will be bound;thereby. 15.9. I. The headings and subheadings containedin this Contract are used solely for convenience and do not constitute a pert of this Contract between ine,parties and shell noibe used to constme. or interpret the provisions of this Contract. 15.10'. Unless the parties have elected on the Base Contract not to make this Section' 15.10 applicable to this Contraet,.neither party shall, disclose directlyor indirectly without,the prior written consent of the other party th"e,terms of any transaction to a third party (other than'thaI employees,, lenders, royalty owners, counsef,, accountants and other agents of the party, or prospective purchasers,of all or substantially all of a paity's assets or of any rights under,this Contract, provided such persons shall have agreed to ikeep.such terms confident al) except (t) in,order to comply with any applicable law, order, regulation, or exchange rule, (li) to the extent necessary for the enforcement of this Contract , (ifi) to the extent necessary; to'implement .any transaction;'pv) to the extent necessary comply with a regulatory agencys roporfing requirements including but not limited to gas cost recovery proceedings; or (v) to; the extentsuch information is delivered to such third:party for the sole purpose 0,calculating a published index. Each party shall ,notffy the other party of any proceeiing of which it is sware which may result in disclosure of the terms of any transaction (other than as permitted here under) use reasonable efforts to prevent or limit the disclosure. The existence of this Contract is not subject to this confidentiality obligation. Subject to Section 13, the parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidentiality obligation. The terms of any transaction hereunder shall be kept confidential by the parties hereto for one year from the expiration of the transaction. In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclosure, Copyright C 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 11 of 13 September 5, 2006 10.7. With respect to this Section 10, if the parties have executed a separate netting agreement with close-out netting provisions, the terms and conditions therein shall prevail to the extent inconsistent herewith. SECTION 11. FORCE MAJEURE 11.1. Except with regard to a patty's obligation to make payment(s) due under Section 7, Section 10.4, and Imbalance Charges under Section 4, neither party shall be liable to the other for failure to perform a Firm obligation, to the extent such failure was caused by Force Majeure. The term "Force Majeure" as employed herein means any cause not reasonably within the control of the party claiming suspension, as further defined in Section 11.2. 11.2. Force Majeure shall include, but not be limited to, the following: (i) 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; (it) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pipe; (iii) interruption and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances;riots, sabotage, insurrections or wars, or acts of terror; and (v) 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. Seller and Buyer shall make 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. 11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by any or all of the following circumstances: (i) the curtailment of interruptible or secondary Firm transportation unless primary, in -path, Firm transportation is also curtailed (it) the parfyclaiming excuse failed to remedy the condition and to resume the performance of such covenants or obligations With reasonable dispatch; or (ill) economic hardship, to include, without limitation, Seller's ability to sell Gas at a higher or more advantageous price -than the Contract Price, Buyer's ability to purchase Gas at a lower or more advantageous price than the Contract Price, or a regulatory agency disallowing, in whole or in part, the pass through of costs resulting from this Contract; (iv) the loss of Buyer's markets) or Buyers inability to use or resell Gas purchased hereunder, except, in either case, as provided in Sec[ion 11.2; or (v) the loss or failure of Seller's gas supply or depletion of reserves, except, in either case, as provided in Section.1.1.2. The party claiming Force Majeure shall not be excused from its responsibility for Imbalance Charges. 11.4. Notwithstanding anything toahe contrary herein, the parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretionof the party experiencing such disturbance. 11.5. The party whose performance is prevented by Force Majeure must provide Notice to the other party. Initial Notice may be given orally; however,: written Noticewith reasonably full particulars of the event or: occurrence is required as soon as:reasonably possible. Upon providing; written Notice of Force Majeure tothe other party, the affected party will be relieved of its obligation, from the onset 61: the Force Majeure event, to -make or accept delivery of Gas, as applicable, to the extent and for the duration of Force.Majeure, and neither party shall be deemed to have failed in such obligations to the other during such occurrence orevent. ` 11.6. Notwithstanding Sections 112 and 11.3, theparties may agree to alternative Force Majeure provisions in a Transaction Confirmation executed to writing by both parties. SECTION 12. TERM This Contract may be terminated on 30 Days written Notice, but shall remain in effect until the expiration of the latest Delivery Period of any transact!on(s). The rights of either party pursuant to Section 7.6, Section 10, Section 13, the obligations to make payrnenthereunder, and the obligation of either parry to indemnify the other, pursuant hereto shall survive the termination bf the. Base Contract or any transaction. SECTION 13. LIMITATIONS FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS i REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY& LIABILITY HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES QR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO, REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN,QIR IN A TRANSACTION, A rPARTY'S LIABILITY ;SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY; SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL :OTHER REMEDIES OR DAMAGES AT LAW ;OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE,' EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE;-1N TORT Q,R:CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT &THE INTENT OF THE PART.IES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES;; BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OP ANX;PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, OR CONCURRENT, ORACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOW LEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR. OTHERWISE OBTAINING AN ADEQUATE REMEDY" IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. Copyright 02006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 10 of 13 September 5, 2006 and shall cooperate (consistent with the disclosing party's legal obligations) with the other party's efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party. 15.11. The parties may agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties 15,12, Any original executed Base Contract, Transaction Confirmation or other related document may be digitally copied, photocopied, or stored on computer tapes and disks (the "Imaged Agreement"), The Imaged Agreement, if introduced as evidence on paper, the Transaction Confirmation, if introduced as evidence in automated facsimile form, the recording, if introduced as evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative,. proceedings will be admissible as between the parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the recording, the Transaction Confirmation, or the Imaged Agreement on the basis that such were not originated or maintained in documentary form. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence. DISCLAIMER: The purposes of this -Contract are to facilitate trade, avoid misunderstandings and make more definite the terns of contracts of purchase and sale of natural gas. Further, NAESB.doeS not mandate-66 use of this Contract by any party. NAESS DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CONTRACT ACKNOWLEDGES AND AGREES TO!NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, N014•INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT NAES13 KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE); -WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT. Copyright © 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 12 of 13 September 5, 2006 TRANSACTION CONFIRMATION FOR IMMEDIATE DELIVERY EXHIBIT A Letterhead/Logo _ Dale: , Transaction Confirmation #: This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated The terms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract. SELLER: Clean Energy Renewable Fuels, LLC BUYER: Attn: Harrison Clay Phone: (562) 493.2804 Fax: (562) 430-8594 - Base Contract No. Transporter: Transporter Contract Number., Attn: Phone: Fax: Base Contract No. Transporter: Transporter Contract Number: Contract Price: $ /MMBtu or Delivery Period: Begin: End: Performance Obligation and Contract Quantity: (Select One) Firm:(Fixed Quantity): Firm (Variable Quantity): Interruptible:. °-- MMBtus/day .. MMBtus/day Minimum Up to -MMBtus/day ❑ EFP MMBtus/day Maximum . subject to Section 4.2. at election of I Buyer or o Seller Delhiery'Point(s) . (H a;p&, oling poln[is used, list a specific geographic and pipeline location): Speciaf Conditions:. Seller.'Clean Energy Renewable Fuels By: ,Harrison Clay Title: President Date. + Buyer: By: Title: Data; Copyright m 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 13 of 13 September 5, 2006 Execution Version SPECIAL PROVISIONS TO THE BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS BETWEEN CLEAN ENERGY RENEWABLE FUELS, LLC ("Party A") AND CITY OF VERNON, LIGHT AND POWER DEPARTMENT ("Party B") DATED AS OF: (March 8, 2012) 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 related to its failure to deliver any natural gas or Biogas prior to the termination date of any Transaction Confirmation as required pursuant to any 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 Parry A or Party B ("Defaulting Party"), and the Defaulting Party does not remedy the Event of Default 1 Execution Version within the specified period, if applicable, then the other party (the "Non -Defaulting Party") has the right, at its sole election, 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 Party A or Party B: (1) 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 30 days of the date it is filed; (ill) 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 one Business Day of a written request by the other party; (vii) has not paid any amount due the other party hereunder on or before 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), H such failure is not remedied on or before 10 days after the other party gives notice of such failure; (A) 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 Version 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 parry, 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. The following events are Additional Events of Default on the part of the affected party: (xiv) The expiration or termination of a Credit Support Obligation or the failing or ceasing of such Credit Support Obligation, or any security interest granted by a party or a Guarantor to the other party pursuant to any such Credit Support Obligation, to be in full force and effect for the purpose of this Contract (in each case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Specified Transaction to which such Credit Support Obligation relates without the written consent of the other party; (xv) An Indebtedness Cross Default, if that default is not cured within two Business Days of the date it occurs; (xvi) In relation to a Specified Transaction, a party or any Guarantor of such party: (a) defaults (other than by failing to make a delivery) under a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction; (b) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment due on the last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, if there is no applicable notice requirement or grace period, such default continues for at least one Business Day, or defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations under, or an early termination of, all transactions Execution Version outstanding under the documentation applicable to that Specified Transaction; or (c) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or evidenced by a document or other confirming evidence executed and delivered by such party or Guarantor of such party (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf)." 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 Parry 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 15.10, CONFIDENTIALITY 2.1 The following is added at the end of Section 15.10 of the Base Contract: "Party A acknowledges that Party B is a municipality subject to the requirements of the California Public Records Act ("CPRA"). If Party B receives a request for information concerning this Base Contract or the terms of any transaction hereunder between the parties, Party B will notify Party A as to the nature of the request and Party B's interpretation of its disclosure requirements under CPRA. Moreover, Party B may need to have certain information related to any transaction between the Parties, including the definitive documentation therefor, disclosed to the public as part of its approval process. Party B shall have no liability whatsoever to Party A arising out of or relating to disclosures made by Party B that Party B reasonably believed were required to be made by applicable law. " 3. CREDIT SUPPORT: LETTER OF CREDIT The following is added as Section 10.9 of the Base Contract: 1110.9 Party A agrees to provide a Credit Support Obligation in the amount of $1,500,000 (subject to section D below) for the benefit of Party B in the form of a Letter of Credit in order to enter into the Transaction Confirmations under this Execution Version Base Contract. Party A must instruct its bank to provide the Letter of Credit within five Business Days of the Execution Date. (A) Letter of Credit is an irrevocable, unconditional, transferable, standby letter of credit, issued in favor of Party B 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 Party A) 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 Party B. (B) Party A is responsible for all costs involved in obtaining and maintaining the Letter of Credit. (C) Party A shall renew or cause the renewal of the Letter of Credit at least 20 Business Days prior to the expiry of the outstanding Letter of Credit. (D) Party A may remove the Letter of Credit if: (i) Party A's credit rating increases to A- or higher by Standard & Poor's and Fitch Rating Services, or Baal or higher by Moody's Rating Services, and (ii) Party B provides written authorization to Party A to remove the Letter of Credit, following a request from Party A. (E) Upon the occurrence of a Letter of Credit Default (as defined below), Party A must either cause another Qualified Institution to deliver a substitute Letter of Credit, or provide another Credit Support Obligation in the form of Cash, in each case within five Business Days after the default occurs. "Letter of Credit Default" means with respect to an outstanding Letter of Credit any of the following events: (i) the Issuer of the Letter of Credit ceases to be a Qualified Institution, (ii) the Issuer of the 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 Letter of Credit expires or terminates, or fails or ceases to be in full force and effect at any time, other than in accordance with section D above. (F) Upon or at any time after the occurrence of an Event of Default with respect to Party A, Party B may draw up to the entire undrawn portion of any outstanding Letter of Credit upon presenting to the Issuer one or more certificates in accordance with the specific requirements of any such Letter of Credit. Cash received from drawing upon the Letter of Credit shall be applied against the Early Termination Damages in Section 10.3.1 of the Base Contract. In addition, Party A remains obligated to Party B for any amounts owing to Party B and remaining unpaid after the application of any amounts so drawn by Party B. Execution Version (G) 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 Standard & Poor's or (y) BBB- or higher by Moody's Rating Services." IN WITNESS WHEREOF, the parties have caused this Contract to be duly executed as of the Effective Date. CLEAN ENERGY RENEWABLE CITY OF VERNON', LIGHT AND POWER FUELS,LLC DEPARTMENT/ By: By: �> Name: Name: CARLOS R. FANDINO, Title: {�1�C>\��Xli Title: DIRECTOR OF LIGHT & POWER �: �( R I. 9 2012 C� CITY CLERK'SOIIFICE STAFF REPORT LIGHT & POWER DATE: March 29, 2012 \ J TO: Honorable Mayor and City Council 'A FROM: Carlos Fandino Jr., Director of Light & Power '`✓� RE: Ratification of Biogas Contracts PURPOSE RECEIVED 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