CITY OF SIMI VALLEY MEMORANDUM

Transcription

1 CITY OF SIMI VALLEY MEMORANDUM AGENDA ITEM NO. 6A March 14, 2016 TO: FROM: City Council Office of the City Manager SUBJECT: A PUBLIC HEARING TO CONSIDER APPROVING A CONTRACT WITH OPTERRA ENERGY SERVICES, INC. FOR THE DESIGN AND CONSTRUCTION OF SOLAR POWER SYSTEMS AND OTHER RELATED IMPROVEMENTS AT CITY FACILITIES, ADOPTING NECESSARY FINDINGS IN ACCORDANCE WITH THE CALIFORNIA GOVERNMENT CODE, A DETERMINATION THAT THE PROJECT IS EXEMPT FROM THE CALIFORNIA ENVIRONMENTAL QUALITY ACT, AUTHORIZATION TO ENGAGE STRADLING YOCCA CARLSON & RAUTH FOR BOND COUNSEL SERVICES, AND ADOPTION OF A RESOLUTION STAFF RECOMMENDATION Staff recommends the City Council: 1. Adopt the attached resolution (page 12) approving and authorizing the execution of a contract with OpTerra Energy Services in accordance with California Government Code Section through for the design and construction of solar power systems and other related improvements at City facilities and making specific findings. 2. Authorize the City Attorney to enter into an agreement with Stradling Yocca Carlson and Rauth to act as bond counsel for the financing of energy efficiency projects at City facilities, and to pay for such services through the bond proceeds to the extent feasible. 3. Direct staff to solicit proposals from other energy services companies for the nonsolar energy conservation measures at City facilities. CITY MANAGER S RECOMMENDATION Staff has provided several alternatives to the City Council. The City Manager recommends the approval of a contract with OpTerra Energy Services for the design and construction of solar power systems and other related improvements at City facilities.

2 2 The City Council could further direct the City Manager to either solicit proposals for other energy services companies for the non-solar energy conservation measures or request that the City negotiate the other improvements with OpTerra. The solar component is the most critical as of this date due to the deadline to maintain the grant assistance for the installation of solar improvements. BACKGROUND AND OVERVIEW In May 2014, the City Council considered various different energy efficiency strategies that could be implemented at City facilities. As a result of that discussion, the City Council provided direction to staff to engage Chevron Energy Solutions (now OpTerra Energy Services) (OpTerra) to develop a comprehensive energy efficiency strategy, including a financing plan and a design/build of the proposed improvements. In September 2014 and pursuant to California Government Code Section et seq., the City Council adopted a resolution authorizing the City to enter into a contract with OpTerra for an energy assessment and for the development of a scope of work for the energy efficiency improvements. On September 28, 2015, the City Council received an update from staff on the progress of the relationship with OpTerra and directed staff to continue to move in the current direction. On February 22, 2016 staff returned to the City Council with a further update of the OpTerra negotiations and discussion and outlined the many outstanding issues that need to be resolved prior to a March 16, 2016 deadline to enter into a contract with OpTerra to commence the project and engage financing. Staff has resolve most issues and is recommending the City Council enter into a contract with OpTerra for the design and construction of solar power systems at various City facilities. FINDINGS AND ALTERNATIVES The project originally proposed by OpTerra contains many different components that will offer the City energy savings and thus a reduction in energy costs. Energy conservation measures (ECMs) that were identified as part of the project include: Interior and exterior LED lighting upgrades Streetlight conversions for those lights owned by the City HVAC system replacement and improvements Electrical system improvements Water conservation improvements Retro Commissioning of City facilities Solar power systems Entering into a contract with OpTerra to design and construct all the ECMs, the City would achieve a turnkey approach to energy savings. However, embarking on such an all-encompassing project would cost approximately $15.8 million resulting in an

3 3 annual debt service of approximately $1.1 million over a twenty year period based on a February 22, 2016 Council report. Staff has spent a considerable amount of time analyzing the OpTerra proposal to fund and construct the solar power system and the other non-solar ECMs. Among the discoveries is while the solar power system is the main source of energy savings to the City, the savings generated by the solar power system is burdened with costs from the other ECMs and thus reducing the overall net savings to the extent that it is possible to have multiple years in which there is no savings to the City. As discussed below, staff s analysis of the OpTerra proposal has led to the recommendation to pursue only the solar power systems with OpTerra at this time. With respect to the other non-solar ECMs, staff feels that there are alternatives available that could result in a cost savings to design, acquire, and construct versus the current costs proposed by OpTerra. In consultation with industry experts and other energy services companies, the energy savings market has become very competitive, especially in the area of LED lighting systems. With further analysis and seeking proposals from other energy services companies in a competitive environment, staff believes that additional cost savings can be obtained through refinement of the proposed products to be used as well as containment of soft costs (design and engineering, general conditions, profit and overhead). Additionally, as the non-solar ECMs are not burdened by the March 16, 2016 deadline of the California Solar Incentive (CSI) program (discussed below), staff can work through a competitive process and receive greater savings. While staff is not recommending proceeding with the non-solar portion with OpTerra at this time, OpTerra will be asked to provide a separate proposal for that portion of the work through the subsequent process. Further, by separating the solar power system from the non-solar components, staff will also be able to separate the funding mechanisms for each and achieve the best funding available. Working on behalf of the City, OpTerra filed for and was successful in receiving a reservation for a $1.6 million incentive from the California Solar Incentive program. These CSI funds are available to the City to offset the initial start-up costs for a solar power system and are paid directly to the City over the first 5 years of the system being operational. As part of the CSI program requirements, a deadline of March 16, 2016 was set for the City and OpTerra to submit a project Milestone Package to show that the project for which the CSI reservation was granted is moving forward. The Milestone Package is to include, among other things, a copy of the executed contract with the City. Failure to file the Milestone Package will result in the City loss of the CSI funding. As a result, it is in the City s best interest to move forward with OpTerra on the solar power system component. If the contract with OpTerra is approved this evening, OpTerra must forward an executed copy of the contract with the Milestone Package by March 16 th to preserve the City s CSI allocations. However, should the Milestone Package fail to be filed and absent the CSI funding, the City is still able to take advantage of other solar power system construction and funding methods including a Power Purchase Agreement (PPA).

4 4 One alternative to entering into a contract with OpTerra is the option to enter into a Power Purchase Agreement (PPA) for the solar project. While the OpTerra proposal involves the City acquiring the solar power system, a PPA is structured around the City leasing the solar power system from a third party. The solar power system is designed, permitted and installed on City property at little to no cost. The third party then sells the City power at a fixed rate that is lower than the rate being charged by SCE; the City will lower the amount of power needed to be purchased from SCE and the third party will gain by selling the power to the City and taking advantage of any tax credits that may be available. The City would have no responsibility for the operations and maintenance of the solar power system and would have an option to acquire the system at the end of the lease term (typically 20 years) or at negotiated intervals. The attractiveness of the PPA is that there is little to no upfront cost involved. However, this little to no upfront cost is offset by the fact that generally the purchase model (as proposed with OpTerra) allows the City to capture more of the savings from the solar system. If this option is pursued, the City would lose the $1.6 million in CSI funds but would gain the ability to take advantage of tax credits that could offset the overall cost. Staff has negotiated with OpTerra for several months regarding the contract and the cost of the improvements. For a solar only project, staff negotiated a total contract price of not-to-exceed $9,511,523. This cost will provide the City with solar panels at City Hall (panels to the placed on the roof), the Library (panels placed in the parking lot north of the building), the Senior Center (panels to be placed in the parking lot west of the building), the Police Station (panels to be placed on the roof and in the parking lot west of the building), and at the Water Quality Control Plant (panels placed at ground level at the southwest corner of the plant). The work will also include the replacement of the roof at City Hall. Due to the age of the roof and work that will necessitate the placement of the panels, the City, with OpTerra, will replace the roof with a cool roof which will save energy costs as well as provide a solid surface to place the new panels. Additionally, the work will include the replacement of the parking lot located north of the Library. This location will have new panels placed on carports however due to the deteriorated condition of the parking lot and the work that will place the new carports with solar panels, the parking lot surface will be replaced. Lastly, the contract price will include two dual car chargers to be installed. These car chargers are included due to the parking lot being disturbed for the carports and not wanting to install the car chargers after the parking lots have been resealed. Based on the current assumptions that include a project cost of $9,511,523 and an interest rate of 1.16%, the City is projected to save in the first 20 years approximately $220,000 annually on a variable amortization of the financing or a range from $25,000 to approximately $400,000 for a straight amortization. However, it is generally believed that the savings gained from the solar project will be greater than anticipated. Once the bonds are paid in full, the annual savings are over $1 million annually. The annual debt service for the financing on a straight amortization is estimated at $533,100 and the variable amortization ranges from $360,000 to $720,000. Once the final budget and financing is in place, staff will know the final debt service amount.

5 5 Based on the work involved, staff believes that this cost is a fair and reasonable cost for the solar power system. In addition to these costs, staff will need to budget a contingency as well as other costs (permit fees, site reconfigurations, bond issuance costs). Staff will return to the City Council with a financing plan and authorization to issue bonds to finance the proposed improvements. At that time, staff will present a final budget to the City Council for approval. Prior to the staff recommendation to move forward with the solar power system only, staff and OpTerra were working to develop a comprehensive program to address all the ECMs, the cost of which was reported to the City Council on February 22, 2016 at $15.8 million. OpTerra recently provided a revised cost schedule that would reduce the City s cost of the comprehensive project to $14.3 million. The comprehensive project will include the construction of all ECMs identified earlier in the report. Based on preliminary numbers provided by OpTerra for the revised comprehensive project, the City is projected to save in the first 20 years approximately $307,100 annually on a variable amortization of the financing or a range from $91,000 to approximately $480,000 for a straight amortization. However, it is generally believed that the savings gained will be greater than anticipated. Once the bonds are paid in full, the annual savings are over $1 million annually. The annual debt service for the financing of the comprehensive project on a straight amortization is estimated at $865,100 and the variable amortization ranges from $649,293 to $1,041,300. If this option is chosen and once the final budget and financing is in place, staff will know the final debt service amount. Because of the March 16, 2016 CSI deadline to submit a Milestone Package that includes an executed contract for the solar power system, the City needs to enter into a contract with OpTerra this evening to take advantage of the $1.6 million CSI program. If the City Council desires to move forward with OpTerra on the comprehensive project at a cost of $14.3 million, staff recommends the City Council enter into the attached solaronly contract with OpTerra this evening and direct staff to negotiate pricing terms and conditions and return to the City Council with a modification to the contract to include the remaining ECMs. This option is provided as Alternative 2a & b in the Alternative section of this staff report. Staff s analysis of the project costs proposed by OpTerra show that the projects are burden with heavy soft costs (design and engineering, general conditions, profit and overhead, etc.). By breaking the comprehensive project into two projects (solar and non-solar), the City is better able to evaluate the products proposed and control soft costs as well as move into a competitive environment to achieve the best pricing. While OpTerra has reduced their pricing for the comprehensive project by $1.5 million, it remains staff s recommendation that the City move forward with only the solar power system with OpTerra and seek proposals for the remaining ECMs. As noted above, staff expects that OpTerra would submit a proposal and compete in the subsequent non-solar process. The attached contract is the culmination of negotiation with OpTerra representatives and City staff. The contract provides for the construction of the above noted improvements, identifies the responsibilities of the parties, and the process to manage

6 6 the project. In addition, the contract contains language that specifies the Measurement and Verification (M&V) of the power generated by the solar power system. Based on the size of the solar power system being installed, the City will generate approximately 1/3 the power necessary for the City s daily operations. As part of the M&V, the City is guaranteed a specific annual Southern California Edison cost avoidance based on the energy generated by the solar power system. For the first year of operation, OpTerra is projecting a cost avoidance of $507,124 with an escalation of 3.5% per year. If the City does not meet that cost avoidance level, OpTerra will reimburse the City for the missed cost avoidance. The City cost for the M&V guarantee is $10,000 for the first year and increases annually at 3%. Over the projected 20 year period for the M&V, the City will pay approximately $270,000. If it appears the solar power system is generating the energy anticipated, the City does have the option to terminate the M&V commitment. In addition, the contract contains language for OpTerra to annually maintain and clean the solar panels. While the City will own the solar power system, the City will not be required to perform the annual cleaning maintenance of the approximately 7,000 solar panels. The cost to the City for the maintenance services initially is $44,393 and increases annually at 3%; over the course of the 20 year maintenance period, the City cost will be approximately $2.1 million. The City does have the option during the 20 year maintenance period to discontinue the maintenance by OpTerra and either perform the work ourselves or contract out to another vendor. Both the annual M&V and maintenance costs are not being financed through the bond financing for the project. These costs will be annual recurring costs and included in the City s Annual Budget to be managed by City staff. However, these costs are factored into the annual savings calculated to the City for the solar power system. At the February 22, 2016 City Council meeting, staff was directed to analyze the financial impact if the City were to inject City funds into the financing to reduce the amount of funds borrowed and lower the debt service. At this time, staff is only seeking approval of the contract with OpTerra to construct the solar power system. Staff continues to work on the financing of the project. As noted above, staff will present to the City Council a financing plan for the project and will include in that analysis the impact of an infusion of City funds based upon the anticipated interest rate and financing terms and provide options to the City Council. With respect to the financing, staff presented the concept of applying for Clean Renewal Energy Bonds. The City has been introduced to an alternative financing mechanism that will reduce the overall debt service. Through a U.S. Internal Revenue Service program, Clean Renewal Energy Bonds (CREBs) can be used to finance the solar power system portion of the project. Through the use of CREBs, the bondholder receives a federal tax credit in lieu of the traditional bond interest, which results in a lower interest rate for the City (as borrower). Using the CREBs option, the City can take advantage of an interest rate in the low 1 to 2% range as opposed to a current rate in the mid 3% range. The City has engaged the PFM Group as financial advisor to assist the City with the CREBs application process and anticipate receiving our allocation within the next 90 days.

7 7 Further, as part of the CREBs process, the City will rely upon special legal counsel to assist with the bond documents and City protections. To this end, the City Attorney is recommending the City engage the services of Stradling Yocca Carlson & Rauth (Stradling) to act as bond counsel. The City has utilized the services of Kurt Yeager with the firm for many years and his service has been exemplary. The City Attorney is recommending the City Council approve the City Attorney entering into an agreement with Stradling for the financing of the CREBs financing and any subsequent financing related to the energy efficiency projects, and payments under such agreement to be funded through the bond offerings to the extent feasible. Environmental Review and CEQA Requirements Under the provisions of Section of the California Environmental Quality Act (CEQA), the proposed solar power systems to be installed on the City Hall roof and the existing parking lots at the Civic Center have been determined to be exempt from CEQA. Section states that CEQA does not apply to the installation of a solar energy system on the roof of an existing building or at an existing parking lot. The solar power systems to be installed on the roofs and new carport roofs in parking lots at City Hall meet the criteria specified in this section. Under the provisions of Section of the California Environmental Quality Act (CEQA) Guidelines, the proposed solar power systems to be installed at the Simi Valley Water Quality Control Plant have been determined to be exempt from CEQA. Section of the state CEQA Guidelines, titled Accessory Structures, exempts the construction or placement of minor structures accessory to existing commercial, industrial, or institutional facilities. The solar panels at the Water Quality Control Plant would be minor structures accessory to the facility. Therefore the project meets the standards set forth in Sections and 15311, and is exempt from further review under CEQA. Based upon this determination and pursuant to Section 15062, a Notice of Exemption has been prepared. The following alternatives are available to the City Council: 1. (a) Adopt the attached resolution approving and authorizing the execution a contract with OpTerra Energy Services in accordance with California Government Code Section through for the design and construction of solar power systems and other related improvements at City facilities and making specific findings, and; (b) (c) Authorize the City Attorney to enter into an agreement with Stradling Yocca Carlson and Rauth to act as bond counsel for the financing of energy efficiency projects at City facilities, and to pay for such services out of the bond proceeds to the extent feasible, and; Direct staff to solicit proposals from other energy services companies for the non-solar energy conservation measures at City facilities.

8 8 2. (a) Adopt the attached resolution approving and authorizing the execution a contract with OpTerra Energy Services in accordance with California Government Code Section through for the design and construction of solar power systems and other related improvements at City facilities and making specific findings and direct staff to negotiate pricing terms and conditions with OpTerra and return to the City Council with a modification to the contract to include the remaining non-solar energy conservation measures at City facilities, and; (b) Authorize the City Attorney to enter into an agreement with Stradling Yocca Carlson and Rauth to act as bond counsel for the financing of energy efficiency projects at City facilities, and to pay for such services out of the bond proceeds to the extent feasible. 3. Elect not to move forward with a contract with OpTerra Energy Services at this time and direct staff to move forward with a power purchase agreement for the solar power system. 4. Provide staff with further direction. Staff recommends Alternative Nos. 1(a) through 1(c). SUGGESTED CITY COUNCIL MOTION I move to: 1. (a) Adopt Resolution approving and authorizing the execution a contract with OpTerra Energy Services in accordance with California Government Code Section through for the design and construction of solar power systems and other related improvements at City facilities and making specific findings. (b) (c) Authorize the City Attorney to enter into an agreement with Stradling Yocca Carlson and Rauth to act as bond counsel for the financing of energy efficiency projects at City facilities, and to pay for such services out of the bond proceeds to the extent feasible. Direct staff to solicit proposals from other energy services companies for the non-solar energy conservation measures at City facilities. SUMMARY In May 2014, the City Council considered various different energy efficiency strategies that could be implemented at City facilities. As a result of that discussion, the City Council provided direction to staff to engage Chevron Energy Solutions (now OpTerra Energy Services) to develop a comprehensive energy efficiency strategy, including a financing plan and a design/build of the proposed improvements. On February 22, 2016

9 9 staff returned to the City Council with a further update of the OpTerra negotiations and discussion and outlined the many outstanding issues that need to be resolved prior to a March 16, 2016 deadline to enter into a contract with OpTerra to commence the project and engage financing. Staff has resolve most issues and is recommending the City Council enter into a contract with OpTerra for the design and construction of solar power systems at various City facilities. Alternatively, OpTerra has submitted a revised proposal for the comprehensive project and has requested the City Council to consider this option. Brian P. Gabler, Director of Economic Development/Assistant City Manager Prepared by: Brian P. Gabler, Director of Economic Development/Assistant City Manager INDEX Page Public Hearing Procedure Resolution Approving Contract Exhibit A OpTerra Contract Notice of Exemption... 66

10 10 PUBLIC HEARING PROCEDURE HEARING DATE: March 14, MAYOR: This is the time and place set for a public hearing to consider approving a contract with OpTerra Energy Services, Inc. for the design and construction of solar power systems and other related improvements at City facilities, adopting necessary findings in accordance with the California Government Code, a determination that the project is exempt from the California Environmental Quality Act, authorization to engage Stradling Yocca Carlson & Rauth for bond counsel services, and adoption of a resolution May I have a reading of the proposed resolution? 2. CITY CLERK: (Clerk reads proposed resolution title) 3. MAYOR: May we have an oral report on this matter by staff? 4. STAFF: (Report) 5. ANY COUNCIL MEMBER : (Questions of staff and staff response) 6. MAYOR: Is there anyone in the City Council Chamber wishing to be heard on this matter? 7. AUDIENCE: (Comments) 8. MAYOR: The hearing is closed. Are there any comments or questions from members of the City Council? 9. ANY COUNCIL MEMBER : (Comments) 10. MAYOR: The Chair will now entertain a motion. 11. ANY COUNCIL MEMBER : City Council Actions (by motion of any Council Member): 1) Adopt, modify, or not adopt Resolution No (requires a second and a vote; requires reading of resolution). 2) Authorize the City Attorney to enter into an agreement with Stradling Yocca Carlson and Rauth to act as bond counsel for the financing of energy efficiency projects at

11 ANY COUNCIL MEMBER : Second 12. MAYOR: (Call for vote) 13. MAYOR: Proceed to the next item. City facilities, and to pay for such services out of the bond proceeds to the extent feasible. 3) Direct staff to solicit proposals from other energy services companies for the non-solar energy conservation measures at City facilities. * Any action to refer the matter back to staff or to continue the matter requires a second and a vote.

12 12 RESOLUTION NO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SIMI VALLEY APPROVING A CONTRACT WITH OPTERRA ENERGY SERVICES FOR THE DESIGN AND CONSTRUCTION OF ENERGY EFFICIENCY IMPROVEMENTS AND MAKING CERTAIN FINDINGS HEREWITH WHEREAS, the City Council of the City of Simi Valley has been a leader in the promotion and implementation of energy efficiency programs; and WHEREAS, the City Council has reviewed a proposal from OpTerra Energy Services regarding the design, construction, and community benefits resulting from a contract with OpTerra Energy Services; and WHEREAS, California Government Code Sections through , authorize the City Council to enter into an energy service contract for the implementation of energy related improvements if the City Council finds that it is in the best interest of the City to enter into such energy service contract and that the anticipated cost to the City for thermal or electrical energy or conservation services provided by the energy conservation facility under the contract will be less than the anticipated marginal cost to the City of thermal, electrical, or other energy that would have been consumed by the City in the absence of those purchases; and WHEREAS, the cost to the City for the energy service contract by and between the City and OpTerra Energy Services for the implementation of certain energy measures for thermal or electrical energy or conservation services will be less than the anticipated marginal cost to the City of thermal, electrical, or other energy that would have been consumed by the City in the absence of the implementation of the improvements under the energy service contract. WHEREAS, the City Council finds and determines that it is in the best interest of the City to enter into a contract with OpTerra Energy Services for the proposed improvements. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The City Council finds that (1) it is in the best interest of the City of Simi Valley to enter into an energy service contract with OpTerra Energy Services for the implementation of certain energy related improvements to City facilities, and (2) the anticipated cost to the City for thermal or electrical energy or conservation services provided by the energy conservation facility under the contract will be less than the anticipated marginal cost to the City of thermal, electrical, or other energy that would have been consumed by the City in the absence of those purchases.

13 13 RES. NO SECTION 2. The City Council hereby approves the energy service contract, attached as Exhibit A, by and between the City and OpTerra Energy Services for the implementation of certain energy related improvements to City facilities in accordance with these findings and California Government Code Sections through SECTION 3. The City Council hereby authorizes the City Manager to execute the energy service contract by and between the City and OpTerra Energy Services. SECTION 4. The City Manager is authorized to make modifications to the proposed improvements under consideration by the contract with OpTerra Energy Services and he or his designee is authorized to approve Change Orders above the Not-To-Exceed contract amount as required to complete the proposed improvements within Council-approved budgetary authority. SECTION 5. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk. Attest: PASSED and ADOPTED this 14 th day of March Ky Spangler, Deputy Director/City Clerk Robert O. Huber, Mayor of the City of Simi Valley, California Approved as to Form: Approved as to Content: Lonnie J. Eldridge, City Attorney Eric J. Levitt, City Manager Brian P. Gabler, Director of Economic Development/Assistant City Manager

14 14 RES. NO EXHIBIT A ENERGY SERVICES CONTRACT DIR Project Registration # OpTerra ES Project #: OpTerra ES Contract # R This ENERGY SERVICES CONTRACT (this Contract ) is made and entered into as of 14 March 2016 (the Contract Effective Date ) by and between OpTerra Energy Services, Inc., a Delaware corporation ( OpTerra Energy Services ), and the City of Simi Valley, a municipal corporation of the State of California ( City and together with OpTerra Energy Services the Parties and each of City and OpTerra Energy Services a Party ). CONTRACT RECITALS WHEREAS, City owns and/or operates certain public facilities specifically described in Attachment A (the Facilities ) and City wishes to reduce the Facilities energy consumption, efficiency, and/or costs and improve the Facilities energy quality and reliability; and WHEREAS, OpTerra Energy Services is a full-service energy services company with the technical capabilities to provide services to City including identifying supply-side and/or demand-side energy conservation measures ( ECMs ), engineering, procurement, construction management, installation, construction and training; and WHEREAS, City and OpTerra Energy Services executed a Program Development Agreement providing for an integrated energy assessment and OpTerra Energy Services provided City with recommendations (the Recommendations ) for the implementation of certain ECMs; and WHEREAS, in February 2015 OpTerra Energy Services delivered the Recommendations, on an arms length basis, to personnel of City, for City to make judgments and determinations as to the desired scope of work; and WHEREAS, City has accepted certain of the Recommendations and determined that entering into this energy services contract to implement those ECMs is in the best interests of City. ARTICLE 1. NOW, THEREFORE, City and OpTerra Energy Services hereby agree as follows: DEFINITIONS For purposes of this Contract and its Attachments, defined terms will have the following meanings: Abnormally Severe Weather Conditions means typhoons, hurricanes, tornadoes, and other like climatic and weather conditions that are abnormally severe for the period of time when, and the area where, such conditions occur, in each case occurring at a property, the access roads to a property, or any other location where Work or Professional Services are then being performed. Affiliate means any Person that directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified. For purposes of this definition, control of a Person means the power, direct or indirect, to direct or cause the direction of the management and policies of such Person whether by contract or otherwise; ownership of fifty percent (50%) or more of the voting securities of another Person creates a rebuttable presumption that such Person controls such other Person. Applicable Law means any statute, law, treaty, building code, rule, regulation, ordinance, code, enactment, injunction, writ, order, decision, authorization, judgment, decree, protocol, procedure or other legal or regulatory determination or restriction by a court or Governmental Authority of competent jurisdiction, as may be in effect at the time any activities by either Party under this Contract, including without limitation the Work or Professional Services, are undertaken. Applicable Permits means all permits and approvals required to be issued by any Governmental Authority in connection with the Professional Services or the building, installation and start-up of the Work or any activity required for the Work to be performed by OpTerra Energy Services under this Contract. Application for Payment means a monthly progress payment as described in Section 8.01 or an invoice for materials stored off-site as described in Section Rev. Date: Page 1 of 52 ESC CA Public V 1/27/12

15 15 RES. NO Attachment means the following attachments to this Contract, each of which is an Attachment: Attachment A Attachment B Attachment C Attachment D Attachment E Attachment F Attachment G Attachment H City s Facilities and Existing Equipment Scope of Work Scope of Monitoring Installation M&V Services Maintenance Services Form Of Tax Benefits Allocation Lighting Survey Form of Contract Bonds Beneficial Use means when ECM Projects included in the Scope of Work are properly installed, inspected, operational, and are capable of being used for their intended purpose. Criteria for Beneficial Use of equipment / systems will be established as defined in Attachment B. Business Day means any calendar day other than a Saturday, a Sunday or a calendar day on which City is not open to transact business with the public. CEQA means the California Environmental Quality Act, codified at California Public Resource Code et seq., and the applicable state and local guidelines promulgated thereunder. CEQA Clearance is defined in Section 5.03(d). Certificate of Final Completion means a certificate, first signed by OpTerra Energy Services, and provided to City in accordance with Section A Certificate of Final Completion may only be offered by OpTerra Energy Services to City for discrete ECM Projects or for all Work under this Contract, when OpTerra Energy Services reasonably believes such ECM Project or Work under this Contract has been completed. Certificate of Substantial Completion means the certificate issued by OpTerra Energy Services to City in accordance with this Contract, and signed by City, all in accordance with Section A Certificate of Substantial Completion may be executed for an individual subcontract, a specific building, a portion of the Work, or for the entire Work. Change means any addition to, deletion from, suspension of, or other modification to the quality, function, intent, or cost of the Work or Professional Services. Change in Law means any of the following events or circumstances occurring after the Contract Effective Date: (i) an amendment, modification, binding interpretation, construction by a court of law or regulatory agency, enforcement standard, supplement or other change in or repeal of an existing Applicable Law; or (ii) an enactment or making of a new Applicable Law (excluding a change in any income or franchise tax law, worker s compensation, payroll or withholding tax law); provided that, in all occurrences otherwise satisfying either (i) or (ii), that such occurrence be material to the performance of this Contract by either Party. Change Order means a written document, signed by both OpTerra Energy Services and City, authorizing OpTerra Energy Services to perform a Change. The Change Order modifies the Scope of Work and should identify: (i) the applicable Change; (ii) any additional or lesser compensation to be paid to OpTerra Energy Services to perform such Change; and (iii) any extension or reduction of time to complete the Project. City is defined in the Preamble. City Indemnitees is defined in Section City Persons means City, its agents, employees, contractors, subcontractors, architects, general contractors, lease/leaseback contractors or other Persons authorized by and acting on behalf of City, but does not include OpTerra Energy Services or OpTerra Energy Services subcontractors. Construction means any and all Work to be performed that involves construction, alteration, repair, installation or removal of equipment, addition to, subtraction from, improving, moving, wrecking or demolishing any building, parking facility, excavation, or other structure or improvement, or any part thereof. Construction Documents means the final designs, drawings, specifications and submittals that are used for Construction, and any Change Orders affecting those documents, that describe the technical requirements for the installation of all the materials and equipment pursuant to this Contract. Construction Period means the period beginning with the date identified in the Notice to Proceed and continuing until the M&V Commencement Date. Rev. Date: Page 2 of 52 ESC CA Public

16 16 RES. NO Contract is defined in the Preamble, and includes all Attachments hereto (all of which are incorporated herein by this reference), as well as all Change Orders and amendments hereto. Contract Bonds is defined in Section Contract Effective Date is defined in the Preamble. Contract Term is defined in Section Conveyed Project Items is defined in Section Delay means any circumstances involving delay, disruption, hindrance or interference that materially affects the time of performance of the Work or the Professional Services. Design Refinement is defined in Section 4.01(b). Dispute is defined in Section Early Occupancy or Use is defined in Section ECM is defined in the Recitals. ECM 5 Interconnection Amount means Two Hundred Seventy-Five Thousand Dollars ($275,000). ECM Project means major, discrete sets of equipment and/or services as defined and set forth in Attachment B. EMS means an energy management system. Energy Delivery Point means, for each Generating Facility, the point at which Utility meter energy is being delivered, as designated in the Interconnection Agreement. Energy Savings Term is defined in Attachment D. Energy Usage Data is defined in Section Environmental Incentives is defined in Section 12.02(a). Event of Default is defined in ARTICLE 14. Excusable Event means an act, event, occurrence, condition or cause beyond the control of either Party, including, but not limited to, the following: (i) any material act or failure to act of, or other Delay caused by any Person of either Party which affects the other Party; (ii) the failure to obtain, or Delay in obtaining, despite reasonable diligence, any Applicable Permit, or approval of a Governmental Authority (including due to failure to make timely inspection), or Delays caused by Changes and/or modifications to the Scope of Work legally required by a Governmental Authority, other than a failure caused by the action or inaction of OpTerra Energy Services; (iii) undisclosed or unforeseen conditions encountered at the Project Location, including discovery or existence of Hazardous Substances, which cause Delay; (iv) information provided by one Party to the other that is later found to be materially inaccurate or incomplete, which causes Delay; (v) Force Majeure; (vi) any Change in Law causing Delay; (vii) Delay caused by pending dispute resolution; (viii) a legally-binding requirement by Utility that any Generating Facility discontinue operation; (ix) any action by a Governmental Authority that prevents or materially inhibits the Parties from carrying out their respective obligations under this Contract (including an unstayed order of a court or administrative agency having the effect of subjecting the sales of energy output to federal or state regulation of prices and/or services); or (x) any Utility power outage at a Facility. Extended Delay Event is defined in Section Facilities is defined in the Recitals. Final Completion means the stage in the progress of the Work at which the Work, or an ECM Project, has been completed and commissioned, including completion of all Punch List items, completion of all required training, and delivery to City of the final documentation (as-built drawings, operation and maintenance manuals, warranty documentation and final submittals). Finance Cancellation Notice is defined in Section Force Majeure means (i) acts of God; (ii) acts of the public enemy or terrorist acts; (iii) relocation of transmission facilities or the shutdown of such facilities for the purpose of necessary repairs; (iv) work by Utility; (v) flood, earthquake, tornado, storm, fire, explosions, lightning, landslide or similar cataclysmic occurrence; (vi) sabotage; vandalism causing material damage; riots or civil disobedience; or (vii) labor disputes or strikes; (xvii) Abnormally Severe Weather Conditions. Generating Facility means each of the photovoltaic, solar powered generating facilities located at the sites listed in Attachment D, and includes all associated photovoltaic panels, mounting assemblies, inverters, converters, Rev. Date: Page 3 of 52 ESC CA Public

17 17 RES. NO metering, lighting fixtures, transformers, ballasts, disconnects, combiners, switches, wires and other equipment that may be necessary to connect the Generating Facility to the applicable Energy Delivery Point. Governmental Authority means any federal, state, regional, town, county, city, municipal or local government agency, department or regulatory body having jurisdiction under Applicable Law over the matter in question. Hazardous Substances means (i) any hazardous, toxic, or dangerous wastes, substances, chemicals, constituents, contaminants, pollutants, and materials and any other carcinogenic, corrosive, ignitable, radioactive, significantly reactive, or toxic substances or mixtures (whether solids, liquids, gases) now or at any time subject to regulation, control, remediation, or otherwise similarly addressed under Applicable Laws; (ii) any hazardous substance as defined by the Resource, Conservation and Recovery Act of 1976 (42 U.S.C et seq.), as amended, and regulations promulgated thereunder; (iii) any hazardous, toxic or dangerous waste, substance or material specifically defined as such in 42 U.S.C et seq.), as amended and regulations promulgated thereunder; and (iv) any hazardous, toxic or dangerous waste, substance, or material as defined in any so-called superfund or superlien law. Incentive Funds is defined in Section Initial Payment is defined in Section Installation means the setting up, construction, and placement of any equipment or materials in the manner it will be operated, in accordance with the Scope of Work and in accordance with all Applicable Laws. Instruments of Service is defined in Section 10.01(b). Interconnection Agreement means the Interconnection Agreement to be entered into between City and the Utility with respect to the Generating Facilities. Interconnection Facilities means any distribution or transmission lines and other facilities that may be required to connect equipment supplied under this Contract to an electrical distribution/transmission system owned and maintained by the Utility. Interconnection Facilities Work means all work, including but not limited to engineering or construction work. (including installation of equipment) to be performed by the Utility on the Utility s side of the Energy Delivery Point at the expense of OpTerra Energy Services, as the Utility requires for the Interconnection Facilities. Interest means interest calculated at the lesser of (i) the prime rate plus two percent (2%) or (ii) the maximum rate permitted by Applicable Law. The prime rate will be the Prime Rate of interest per annum for domestic banks as published in The Wall Street Journal in the Money Rates section. Losses is defined in Section M&V Commencement Date means the first day of the month immediately following the later of (i) OpTerra Energy Services receipt of the fully signed Master Certificate of Final Completion, and (ii) OpTerra Energy Services receipt of funds equal to the Not to Exceed Amount, or such different amount as may be properly adjusted from the Not to Exceed Amount pursuant to the terms of this Contract. M&V Services are defined in Attachment D. M&V Term is defined in Attachment D. Maintenance Services are defined in Attachment E. Maintenance Term is defined in Attachment E. Major Change is defined in Section 5.05(b). Master Certificate of Final Completion is defined in Section Measurement Period means each one-year period following the M&V Commencement Date. Minor Change is defined in Section 5.05(a). NEC means the National Electric Code. Non-Regular Times is defined in Section 5.03(i). Not to Exceed Amount means an amount equal to Nine Million Five Hundred Eleven Thousand Five Hundred Twenty-Three Dollars ($9,511,523), which is the total maximum compensation for the Work (but excluding Professional Services) payable to OpTerra Energy Services by City under this Contract and any Change Orders. The performance of, or payment for, any Work not included in the Not to Exceed Amount must be approved in a valid Change Order or amendment to this Contract signed by both Parties. Neither Party has any obligation, duty, or Rev. Date: Page 4 of 52 ESC CA Public

18 18 RES. NO responsibility whatsoever to agree to a Change Order or amendment to this Contract to perform or pay for Work not included in the Not to Exceed Amount. Notice to Proceed is defined in Section OpTerra Energy Services is defined in the Preamble. OpTerra Energy Services Warranty is defined in Section Party and Parties are defined in the Preamble. Person means any natural person, corporation, general partnership, limited partnership, limited liability company, proprietorship, other business organization, trust, union, association or Governmental Authority. Pre-Existing Condition is defined in Section Professional Services means Maintenance Services and M&V Services provided by OpTerra Energy Services to City under this Contract. Progress Payment is defined in Section Project means the entirety of Work to be performed by OpTerra Energy Services pursuant to the Scope of Work, and any Change Orders. Project Location means the area or areas where the Project materials and equipment and any other energy related equipment, as described in the Scope of Work, are installed, and the general area where the Work is performed. Project Schedule the detailed master project schedule described in Section 2.04, which includes, among other things, the estimated start time of each ECM Project. Punch List means, with respect to any ECM Project, a list of corrective items which need to be completed or corrected in order to complete such ECM Project, but do not impair City s ability to beneficially operate and utilize such ECM Project. Recommendations is defined in the Recitals. Retained Items is defined in Section Retention is defined in Section Schedule of Values is defined in Section Scope of Work means the Work set forth in Attachments B, C and G, as modified by any Change Order. Substantial Completion means the stage in the progress of the Work or an ECM Project at which such Work or ECM Project is sufficiently complete, in conformance with the Scope of Work, the Construction Documents and any Change Orders, so that City can take Beneficial Use thereof. Surety means the surety supplying the Contract Bonds, which must be an admitted surety insurer, as defined by California Code of Civil Procedure , authorized to do business in the State of California, and reasonably satisfactory to City. Unknown Hazardous Substances is defined in Section 5.06(b). Utility is defined in Section Work means all work (not including the Professional Services), as described in the Scope of Work, to be performed by OpTerra Energy Services under this Contract, subject to any Change Orders. ARTICLE 2. TERM; PERFORMANCE OF THE WORK Section 2.01 Contract Term. The term of this Contract (the Contract Term ) commences on the Contract Effective Date and ends on the last day of the later to end of (i) the M&V Term, or (i) the Maintenance Term, unless terminated earlier as provided in this Contract. Section 2.02 Performance of Work. The Work and Professional Services to be performed hereunder will be provided in accordance with the terms of this Contract and the applicable standard of care. OpTerra Energy Services will perform its obligations under this Contract (i) using the degree of skill and care that is required by current, good and sound professional procedures and practices, and (ii) in conformance with (x) generally accepted professional standards prevailing at the time the Work is performed, (y) the covenants, terms and conditions of this Contract, and (z) applicable laws, codes, rules and regulations, including, without limitation, the applicable provisions of the California Building Code. OpTerra Energy Services represents and warrants that it is fully experienced in projects of the nature and scope of the Rev. Date: Page 5 of 52 ESC CA Public

19 19 RES. NO Work and Professional Services, and that it is properly qualified, licensed and equipped to supply and perform the Work and Professional Services. The Work and Professional Services completed herein must meet the approval of City, such approval to be granted or denied in accordance with the requirements set forth in this Contract, and will be further subject to City s general right of inspection and supervision to secure the satisfactory completion thereof in accordance with this Contract. (a) (b) Section 2.03 Scope of Work. The Scope of Work may not materially vary from that set forth in Attachments B, C and G, except pursuant to a Change Order, or as otherwise specifically permitted in this Contract. The Professional Services may not materially vary from those set forth in Attachments D and E, except pursuant to a Change Order, or as otherwise specifically permitted in this Contract. Section 2.04 Project Schedule. Subject to Section 5.03(d), the proposed Project Schedule will be submitted to City within thirty (30) days after the Contract Effective Date. Within ten (10) Business Days after submittal, the City will either approve the proposed Project Schedule, or submit suggested changes to OpTerra Energy Services. OpTerra Energy Services will then submit a revised proposed Project Schedule to City for approval. After the City approves the Project Schedule, OpTerra Energy Services will maintain the Project Schedule using Microsoft Project. OpTerra Energy Services will establish a weekly construction meeting at which time the Work of the previous week will be reviewed and a two-week look ahead will be coordinated. The Project Schedule will be checked for accuracy monthly and updated when necessary with the prior agreement of City. Section 2.05 Notice to Proceed. Within ten (10) days after City has closed the financing referenced in Section 2.07, City will issue to OpTerra Energy Services a signed Notice to Proceed ( Notice to Proceed ). If City fails to issue the Notice to Proceed within twenty (20) calendar days after the financing has closed, OpTerra Energy Services will be entitled to an equitable extension of time as a result of such Delay. Section 2.06 City s Energy and Operational Records and Data. After the Contract Effective Date, and only if in OpTerra Energy Services reasonable opinion such information is necessary or desirable to assist OpTerra Energy Services in the completion of its obligations under this Contract, OpTerra Energy Services may make a single request to City to provide to OpTerra Energy Services, within sixty (60) calendar days after such request, City s Energy Usage Data for the twelve (12) months preceding the Contract Effective Date. If additionally requested, City will make commercially reasonable efforts to provide the Energy Usage Data for the thirty-six (36) months preceding the Contract Effective Date. If upon receipt of such request, City reasonably believes that City needs more time to fulfill such request, City will notify OpTerra Energy Services of the expected time of completion of the request, and the Project Schedule will be extended accordingly, if necessary. Energy Usage Data means all of City s records and complete data concerning energy usage, energy-related maintenance, and other related costs for the Facilities, and including, without limitation, utility records; occupancy information; descriptions of any past, present or anticipated changes in a building s structure or its heating, cooling, lighting or other systems or energy requirements; descriptions of all energy consuming or saving equipment used in the Facilities; applicable building drawings, specifications, existing AutoCAD files, operation and maintenance manuals, and as-builts; bills and records relating to operation and maintenance of systems and equipment within the Facilities, and a description of operation and management procedures currently utilized. OpTerra Energy Services may further make a single request to City to provide to OpTerra Energy Services, within sixty (60) calendar days after such request, any prior energy audits of the Facilities, and copies of City s financial statements and records related to energy usage and operational costs for said time period at the Facilities, and will authorize City s agents and employees to provide and freely discuss such records and to make themselves available for consultations and discussions (however with City staff time and effort being incidental and upon reasonable notice to City) with authorized representatives, employees, subcontractors, and agents of OpTerra Energy Services. Section 2.07 Finance Contingency. It is acknowledged and agreed by the Parties that the continued existence of this Contract is expressly contingent upon City closing financing that will allow it to make the payments to OpTerra Energy Services required by this Contract. Upon execution of this Contract, City will have one hundred (100) calendar days to close such financing (the Finance Closing ). City has the sole discretion to determine whether City has closed financing sufficient to constitute a Finance Closing, and will provide a written notice to OpTerra Energy Services declaring a Finance Closing if such Finance Closing has been attained by City. If the financing is not closed within this time, for any reason, either Party may by written notice to the other Party declare this Contract to be null and void (the Finance Cancellation Notice ); and the Contract will be null and void as of the other Party s receipt of this notice. Notwithstanding the foregoing, if the Finance Closing occurs beyond the one hundred (100) day period, and OpTerra Energy Services thereafter commences the performance of the Work, such Finance Cancellation Notice cannot be sent. It is acknowledged and agreed that OpTerra Energy Services will have no obligation to commence performance of the Work unless and until the financing has been closed. Section 2.08 Non-Appropriation of Funds. Following the Finance Closing, payments to OpTerra Energy Services under this Contract will be within the City s budget and within an available and unencumbered appropriation of City. In the event City has not appropriated sufficient funds for payment of OpTerra Energy Services services beyond the current fiscal year, City shall only be responsible for payments due hereunder in any fiscal year to the extent that Rev. Date: Page 6 of 52 ESC CA Public

20 20 RES. NO properly appropriated funds are available in that fiscal year; provided that City s payment obligations shall not be extinguished until OpTerra Energy Services has been paid in full for Work already authorized and begun under this Contract, in accordance with this Contract, but not in any event to exceed the Not to Exceed Amount. ARTICLE 3. PROJECT IMPLEMENTATION - GENERAL Section 3.01 Permits and Approvals. City will cooperate fully with OpTerra Energy Services in obtaining all Applicable Permits required under this Contract. City will provide ordinary plan check services for the permits, but OpTerra Energy Services is required to prepare, process, modify and finalize such permits at its own expense. In addition, OpTerra Energy Services is responsible for obtaining and paying for Applicable Permits as may be required by other governmental jurisdictions having authority over the Work. After a Certificate of Final Completion for any particular ECM Project has been received and signed by City, City will be responsible for obtaining and paying for all other permits or approvals that may be required, including annual operating permits and any approvals or exemptions required by CEQA, as applicable, for that particular ECM Project. Section 3.02 Interconnection Facilities Work. OpTerra Energy Services will fully prepare and assist City in completing the Interconnection Agreement. OpTerra Energy Services will also pay for all permitting required by the Utility in order for OpTerra Energy Services to fully implement the ECM Projects. Subject to Section 3.03, any Interconnection Facilities Work that may be required by the Utility and any other Work that may be required to complete the Interconnection Facilities will be paid for by OpTerra Energy Services and performed by the Utility under the Interconnection Agreement. Section 3.03 ECM 5 Interconnection Amount. If the cost of the Interconnection Facilities Work invoiced by the Utility for ECM Project #5 exceeds the ECM 5 Interconnection Amount, OpTerra Energy Services may request a Change Order that provides for each of the Parties to pay fifty percent (50%) of the invoiced cost of the ECM Project #5 Interconnection Facilities Work in excess of the ECM 5 Interconnection Amount. Notwithstanding the foregoing, either Party may, in its reasonable discretion, cancel the remainder of ECM Project #5 that would necessitate such Change Order, without further obligation with respect to that particular ECM Project, other than paying for Work under this Contract already performed by OpTerra Energy Services for that particular ECM Project. Section 3.04 Coordination. Unless this Contract specifically states otherwise, OpTerra Energy Services will be responsible for coordinating the activities of OpTerra Energy Services and OpTerra Energy Services subcontractors and suppliers with those of City Persons. OpTerra Energy Services will coordinate the Interconnection Facilities Work and any other Work that may be required to complete the Interconnection Facilities. Section 3.05 Project Meetings/Status Updates. During the course of the Work, OpTerra Energy Services will meet weekly with City to report on the general status and progress of the Work, unless otherwise jointly agreed by the Parties. Section 3.06 Project Location Access. City hereby grants to OpTerra Energy Services, without cost to OpTerra Energy Services, all rights of ingress and egress at the Project Locations, necessary for OpTerra Energy Services to perform the Work and provide all services contemplated by this Contract. OpTerra Energy Services will provide twenty-four-hour advance notice to City for access to any City Facilities. All persons entering the Project Locations, including City and its employees and agents, must follow OpTerra Energy Services safety procedures, unless City s safety procedures are more protective, in which case the more protective procedures will be followed. Section 3.07 Consents; Cooperation. Whenever a Party s consent, approval, satisfaction, or determination will be required or permitted under this Contract, and this Contract does not expressly state that the Party may act in its sole discretion, such consent, approval, satisfaction, or determination will not be unreasonably withheld, qualified, conditioned, or delayed, whether or not such a reasonableness standard is expressly stated in this Contract. Whenever a Party s cooperation is required for the other Party to carry out its obligations hereunder, each Party agrees that it will act in good faith and reasonably in so cooperating with the other Party or its designated representatives or assignees or subcontractors. Section 3.08 Independent Contractor. The Parties hereto agree that OpTerra Energy Services, and any agents and employees of OpTerra Energy Services, its subcontractors and/or consultants, is acting in an independent capacity in the performance of this Contract, and not as a public official, officer, employee, consultant, or agent of City for purposes of conflict of interest laws or any other Applicable Law. ARTICLE 4. (a) (b) Section 4.01 FINAL DESIGN PHASE CONSTRUCTION DOCUMENTS / EQUIPMENT PROCUREMENT General Provisions. After the Contract Effective Date, subject to Section 5.03(d), OpTerra Energy Services will proceed with the preparation of any necessary designs, drawings, and specifications related to the Scope of Work. After the Notice to Proceed is issued, subject to Section 5.03(d), OpTerra Energy Services will, if necessary, refine the design of a particular ECM Project within the parameters of the Scope of Work and the requirements Rev. Date: Page 7 of 52 ESC CA Public

21 21 RES. NO (c) (d) (e) of this Contract (the Design Refinement ). OpTerra Energy Services will work collaboratively with City on any Design Refinement for any particular ECM Project. OpTerra Energy Services can request written approval of the final plans and specifications by City as OpTerra Energy Services conducts Design Refinements. The Design Refinements will include an estimated date of ordering of all equipment specified for the particular ECM Project. After such written approval of the final plans and specifications, OpTerra Energy Services will order the equipment identified in the Scope of Work, and any other necessary materials and supplies, in order to meet the Project Schedule. City will designate a single-point representative, and may also designate a backup representative, with whom OpTerra Energy Services may consult on a reasonable, regular basis and who is authorized to act on City s behalf with respect to the Design Refinements. City s representative will convey decisions in a timely manner with regard to any documents submitted by OpTerra Energy Services and to other requests made by OpTerra Energy Services, in order to avoid Delay in the orderly and sequential progress of the Design Refinements. After the Contract Effective Date, when reasonably required for OpTerra Energy Services to complete any ECM Project, OpTerra Energy Services may make the following requests, which City will attempt to promptly satisfy utilizing ordinary due diligence: (i) (ii) (iii) (iv) furnish all surveys or other information in City s possession that describe the physical characteristics, legal limitations, and utility locations in and around the Project Location for a particular ECM Project; disclose any prior environmental review documentation and all information in its possession concerning subsurface conditions, including without limitation the existence of any known Hazardous Substances, in or around the general area of the Project Location for a particular ECM Project, if such information has not previously been provided to OpTerra Energy Services by City; supply OpTerra Energy Services with all relevant information in City s possession, including any as-built drawings and photographs, of prior construction undertaken at the Project Location for a particular ECM Project; and at City s reasonable discretion, obtain any and all title reports for those Project Locations reasonably requested by OpTerra Energy Services. All information furnished pursuant to this Section 4.01 will be supplied at City s expense. City makes no guarantee as to the accuracy or completeness of such information, but City agrees that OpTerra Energy Services may utilize such information. (f) If, in the reasonable opinion of OpTerra Energy Services, any information disclosed under this Section 4.01 gives rise to a Change to the Work or an Excusable Event, OpTerra Energy Services will notify City. The Parties will meet and confer with respect to those Changes, and the Parties may agree to an equitable extension of time. Notwithstanding the foregoing, City may, in its reasonable discretion, cancel the remainder of the particular ECM Project that would necessitate such Change Order, without further obligation with respect to that particular ECM Project, other than paying for Work under this Contract already performed by OpTerra Energy Services for that particular ECM Project. If the Parties, however, are unable to agree on whether City s disclosed information gives rise to a Change to the Work or an Excusable Event, those disputes are to be resolved in accordance with ARTICLE 17. Section 4.02 Review of Construction Documents. As part of the Design Refinement for each ECM Project, and consistent with Section 4.01(b), OpTerra Energy Services will prepare and submit all drawings and specifications to City for review. City will review the documents and provide any comments in writing to OpTerra Energy Services within ten (10) Business Days after receipt of the documents. OpTerra Energy Services will incorporate City comments into the applicable drawings and specifications, or will notify City if OpTerra Energy Services reasonably determines City s comments cannot be incorporated. OpTerra Energy Services reserves the right to issue the drawings and specifications in phases for any particular ECM Project to allow Construction to be performed in phases. If City fails to provide written comments within the ten (10) Business Day period, or has not provided written notice that City will reasonably require more time to provide such comments, and an estimate of the time required on the part of City to provide such comments, City will be deemed to have no comments regarding the documents. Section 4.03 Permits. The respective obligations of the Parties in obtaining permits are as specified in Section City will agree to any nonmaterial changes to the designs, drawings, and specifications required by any Governmental Authority. A Change required by a Governmental Authority (not including City) which necessitates more time by either Party to complete the relevant Work will be incorporated into the Project Schedule by the Parties. If such Change is material in that it causes more than thirty (30) days delay or reasonably costs more than $10,000 to implement (excluding staff time), the Parties agree to negotiate a Change Order to the benefit of the affected Party upon the request of the affected Party, provided the affected Party did not cause, by omission or mistake, the Change to be required; however, no such Change Order will be issued that may cause the total amount of funds expended under the Contract to exceed the Not to Exceed Amount. Rev. Date: Page 8 of 52 ESC CA Public

22 Section 4.04 Changes during Final Design Phase. If during the Design Refinement any authorized City Person requests material Changes and/or modifications to the Work, OpTerra Energy Services will discuss a potential Change Order (not to exceed the Not to Exceed Amount in aggregate) regarding such Changes before such Changes are incorporated into the Design Refinement. ARTICLE 5. CONSTRUCTION PHASE Section 5.01 General Provisions. Upon securing the requisite Applicable Permits pursuant to Section 3.01, and completion of Construction Documents, OpTerra Energy Services will commence the construction of the Project in accordance with the Construction Documents. The construction will be performed in accordance with all Applicable Laws and Applicable Permits, by OpTerra Energy Services and/or one or more licensed subcontractors qualified to perform the Work. (a) (b) (c) (d) (e) (f) Section 5.02 OpTerra Energy Services Responsibilities during Construction Phase. As an independent contractor to City, OpTerra Energy Services will provide, or cause to be provided by its subcontractor(s), labor, materials, equipment, tools, construction equipment and machinery, water, heat, utilities, transportation, and other facilities and services necessary for the proper execution, construction, and completion of the Work whether temporary or permanent and whether or not incorporated or to be incorporated into the Work. OpTerra Energy Services will purchase in advance all necessary materials and supplies for the construction of the Project in order to assure the prompt and timely delivery of the completed Work pursuant to the Project Schedule. OpTerra Energy Services will also be responsible for all means, methods, techniques, sequences, and procedures required by the Construction Documents. OpTerra Energy Services will make commercially reasonable efforts to coordinate construction activities and perform the Work to minimize disruption to City s operations at the Project Location. OpTerra Energy Services will provide at least thirty (30) calendar days written notice to City of any planned power outages that will be necessary for the construction. OpTerra Energy Services will cooperate with City in scheduling such outages, and City agrees to provide its reasonable approval of any scheduled outage. OpTerra Energy Services will take commercially reasonable precautions to protect existing sidewalks, curbs, pavements, utilities, adjoining properties, and structures and to avoid damage thereto, and repair any damage caused by OpTerra Energy Services and its subcontractors. All costs for such repairs and or replacements will be borne by OpTerra Energy Services. OpTerra Energy Services will initiate and maintain a safety program in connection with its Construction of the Project. OpTerra Energy Services will take reasonable precautions for the safety of, and will provide reasonable protection to prevent damage, injury, or loss to: (i) employees of OpTerra Energy Services and subcontractors performing Work under this Contract; (ii) OpTerra Energy Services property and other materials to be incorporated into the Project, under the care, custody, and control of OpTerra Energy Services or its subcontractors; and (iii) other property at or adjacent to the Project Location not designated for removal, relocation, or replacement during the course of construction. OpTerra Energy Services will provide notice to City of scheduled test(s) of installed equipment, if any, and City and/or its designees will have the right to be present at any or all such tests conducted by OpTerra Energy Services, any subcontractor, and/or manufacturers of the equipment. Pursuant to California Labor Code 6705, if the Work is a public work involving an estimated expenditure in excess of $25,000 and includes the excavation of any trench or trenches five (5) feet or more in depth, OpTerra Energy Services will, in advance of excavation, submit to City and/or a registered civil or structural engineer, employed by City, to whom authority to accept has been delegated, a detailed plan showing the design of shoring, bracing, sloping, or other provisions to be made for worker protection from the hazard of caving ground during the excavation of such trench or trenches, which provisions will be no less effective than the current and applicable CAL-OSHA Construction Safety Orders. No excavation of such trench or trenches may be commenced until this detailed plan has been accepted by City or by the person to whom authority to accept has been delegated by City. Pursuant to California Labor Code 6705, nothing in this Section 5.02(e) imposes tort liability on City or any of its employees. Pursuant to California Public Contract Code 7104, if the Work is a public work involving digging trenches or other excavations that extend deeper than four (4) feet below the surface of the ground: (i) 22 RES. NO OpTerra Energy Services will promptly, and before the following conditions are disturbed, notify City, in writing, of any: 1) Material that OpTerra Energy Services believes may be material that is hazardous waste, as defined in California Health and Safety Code 25117, that is required to be removed to a Class I, Class II, or Class III disposal site in accordance with provisions of existing law; Rev. Date: Page 9 of 52 ESC CA Public

23 23 RES. NO (a) (b) (c) (d) (e) (ii) (iii) Section ) Subsurface or latent physical conditions at the site differing from those indicated by information about the site made available to OpTerra Energy Services before the Contract Effective Date; 3) Unknown physical conditions at the site of any unusual nature, different materially from those ordinarily encountered and generally recognized as inherent in work of the character provided for in this Contract. City will promptly investigate the conditions and, if it finds that the conditions do materially so differ or do involve hazardous waste, and cause a decrease or increase in OpTerra Energy Services cost of, or the time required for, performance of any part of the Work will issue a Change Order under the procedures described in this Contract. Notwithstanding the foregoing, City may, in its reasonable discretion, cancel the remainder of the particular ECM Project that would necessitate such Change Order, without further obligation with respect to that particular ECM Project, other than paying for Work under this Contract already performed by OpTerra Energy Services for that particular ECM Project. If a dispute arises between City and OpTerra Energy Services, whether the conditions materially differ, or involve hazardous waste, or cause a decrease or increase in OpTerra Energy Services cost of, or time required for, performance of any part of the Work, OpTerra Energy Services will not be excused from any scheduled completion date provided for by this Contract but will proceed with all Work to be performed under this Contract, unless the relevant ECM Project has been cancelled in accordance with this Contract. OpTerra Energy Services will retain any and all rights provided either by contract or by law which pertain to the resolution of disputes and protests between the Parties. City s Responsibilities during Construction Phase. City will designate a single-point representative, and may also designate a backup representative, authorized to act on City s behalf with respect to Project construction and/or equipment installation. City may from time to time change the designated representative, and backup representative if any, and will provide written notice to OpTerra Energy Services of such change. Any independent review of the construction by City, other than those reviews otherwise expressly set forth or described in this Contract, will be undertaken at City s sole expense, and will be performed in a timely manner so as to not unreasonably delay the orderly progress of OpTerra Energy Services Work. City will provide a temporary staging area for OpTerra Energy Services, or its subcontractors, to use during the construction phase to store and assemble equipment for completion of the Work, if needed. OpTerra Energy Services shall be responsible for all security at temporary staging and storage areas. City will provide sufficient space at the Facilities for the performance of the Work and the storage, installation, and operation of any equipment and materials and will take reasonable steps to protect any such equipment and materials from harm, theft and misuse. OpTerra Energy Services shall be responsible for the proper care and protection of all materials delivered to the Project Location to be incorporated into the Work, until Beneficial Use. OpTerra Energy Services shall erect and properly maintain at all times all necessary safeguards, signs, barriers, fences, lights, and any other protections for materials, equipment, workers, and the public. City will provide access to the Facilities, including parking permits and identification tags if any, for OpTerra Energy Services and subcontractors to perform the Work during regular business hours, or such other reasonable hours as may be requested by OpTerra Energy Services and acceptable to City. City will also either provide a set or sets of keys to OpTerra Energy Services (signed out per City policy) or provide a readily available escort to unlock and lock doors. City will not unreasonably restrict OpTerra Energy Services access to Facilities to make emergency repairs or corrections as OpTerra Energy Services may reasonably determine are needed. City will maintain the portion of the Project Location that is not directly affected by OpTerra Energy Services Work. City will keep the designated Project Location and staging area for the Project free of obstructions, waste, and materials within the control of City. City will obtain any required environmental clearance from, and any environmental permits required by, any federal, state, and local jurisdictions, including but not limited to any clearances required under CEQA, prior to scheduled construction start date. It is a condition precedent to City s obligations under this Contract that the City Council approves the activities contemplated by the Contract under CEQA and/or finds the activities exempt from CEQA ( CEQA Clearance ). OpTerra Energy Services shall not commence the Work until CEQA Clearance has been achieved. In the event CEQA Clearance is not achieved, City will not authorize proceeding (or paying for) activities by OpTerra Energy Services under this Contract. OpTerra Energy Services will prepare the Project Location for construction, including, but not limited to, clearance of all above and below ground obstructions, such as vegetation, buildings, appurtenances, and utilities, unless specifically set forth in the Scope of Work as an obligation of City. Subsurface conditions and obstacles (buried pipe, utilities, etc.) that are neither (a) specifically set forth in Attachment A nor (b) otherwise Rev. Date: Page 10 of 52 ESC CA Public

24 24 RES. NO (f) (g) (h) (i) (j) (a) (b) described in documentation made available to OpTerra Energy Services and acknowledged in the Scope of Work, are the responsibility of City. Notwithstanding the foregoing, if a material increase in cost or time is required (either through a Change Order with OpTerra Energy Services, or by City staff or through other City contractors) to resolve any problem created by a subsurface condition or obstacle, City retains sole discretion to cancel the portion or entire remainder of the relevant ECM Project that would necessitate such Change Order, and neither OpTerra Energy Services nor City will have any further obligation with respect to that particular portion or entire remainder of the ECM Project, other than City s obligation to pay for Work under this Contract already performed by OpTerra Energy Services for that particular ECM Project. City will remove any Hazardous Substances either known to City prior to the commencement of the Work or encountered by OpTerra Energy Services during the construction of the Project, which would necessitate a material increase in cost or time for the Work, if necessary in order for the Work to progress safely, that were not knowingly released or brought to the site by OpTerra Energy Services, unless City elects to discontinue the affected ECM Project pursuant to Section OpTerra Energy Services will respond to the discovery of Hazardous Substances at or around the Project Location during the course of OpTerra Energy Services construction in accordance with Section City will cooperate with OpTerra Energy Services coordination of the Work to be performed by OpTerra Energy Services with City s own operations and with any other construction project that is ongoing at or around the Project Location. City will, and will cause City Persons to, allow OpTerra Energy Services and its subcontractors access to and reasonable use of necessary quantities of City s water and other utilities, including electrical power, as needed for the construction of the Work, at no cost to OpTerra Energy Services. Notwithstanding the foregoing, hoses, conduits, extension cords and the like to facilitate the use of such utilities will be provided by OpTerra Energy Services. City will, and will cause City Persons to, provide OpTerra Energy Services and/or its subcontractors with reasonable access to the Project Location to perform the Work, including without limitation and at no extra cost to OpTerra Energy Services, access to perform Work on Saturdays, Sundays, legal holidays, and non-regular working hours ( Non-Regular Times ); provided that, OpTerra Energy Services will reasonably attempt to schedule Work at Non-Regular Times, if at all, in advance so as to not cause City to incur additional staff expense over City s normal staff expenditures. City will also do the following: (i) (ii) (iii) Section 5.04 Attend the regularly scheduled progress meetings at agreed-upon reasonable times. Participate as needed regarding scheduling of the Work. When requested by OpTerra Energy Services, participate in the job inspection walk-throughs with OpTerra Energy Services as necessary or convenient under the requirements of this Contract. Perform a final walk-through of the Project and, upon receipt of the operation and maintenance manuals and as-built drawings (as-builts to be provided in hard copy and CAD format reasonably acceptable to City), sign the Master Certificate of Final Completion after all Certificates of Final Completion for all ECM Projects have been signed by both Parties pursuant to the procedure in Section Changes. Change Orders Generally. Changes and/or modifications to the Scope of Work will be authorized by a written Change Order, which must be signed by both Parties to be valid. The Change Order should state the change and/or modification to the Scope of Work, any additional or lesser compensation to be paid, and any applicable extension or reduction of time. Requests for a Change Order must include an itemized account of the change with appropriate supporting data, including, without limitation, detailed proposals, actual invoices or quotes from subcontractors and/or suppliers, costs of materials, supplies, equipment, labor, and unit prices. OpTerra Energy Services, in the event of a dispute involving a Change Order request, shall not cause any Delay in or cessation of any of the Work, but shall proceed with the performance of all Work in dispute. Any disputed work or Change Order shall be a Dispute and the Parties will use reasonable efforts to achieve resolution as provided in ARTICLE 17. Neither Party shall reimburse or pay the other Party for creating draft Change Orders that have not been executed by both Parties. Method for Adjustment. An increase or decrease in the Not to Exceed Amount and/or time resulting from a Change Order must be determined by one or more of the following methods: (i) (ii) unit prices set forth in this Contract or as subsequently agreed; a mutually accepted lump sum; or Rev. Date: Page 11 of 52 ESC CA Public

25 (c) (a) (b) (a) (b) (c) (iii) costs calculated on a basis agreed upon by both Parties plus a fee (either a lump sum or a fee based on a percentage of cost) to which the Parties agree. Disagreements Regarding Change Orders. The Parties commit to working together amicably to resolve, if possible, issues regarding Change Orders. Notwithstanding the foregoing, if there is a disagreement between the Parties as to whether a Change Order should be issued, those disputes are to be resolved in accordance with the provisions of ARTICLE 17. Section 5.05 Minor Changes and Major Changes to Scope of Work. Minor Changes. OpTerra Energy Services has the authority to make minor changes that do not change the monies to be paid by City, are of minimal value, and are consistent with the intent of the Construction Documents ( Minor Changes ), with prior notice to City. If prior notice to City is impractical, OpTerra Energy Services will promptly inform City, in writing, of any minor changes made during the implementation of the Project as soon as practicable. Further, OpTerra Energy Services will make available to City at the Project Location a set of as-built drawings that will be kept current to show those Minor Changes. Major Changes: If either Party voluntarily requests a major change to the Scope of Work which causes a change in the number of days contained in the Project Schedule or a change in the Not To Exceed Amount in the Contract ( Major Changes ) the Parties agree to negotiate a Change Order before such Major Change will proceed. Unless specifically required elsewhere in this Contract, City is not obligated to enter into any Change Order. OpTerra Energy Services agrees to consider any Change Order proposed by City for a Major Change if such Major Change will not materially affect OpTerra Energy Services ability to perform under the Contract. Section 5.06 Hazardous Substances. The Parties do not anticipate that Hazardous Substances will exist at the Project Locations, except as have been specifically disclosed by City to OpTerra Energy Services in Attachment A and acknowledged in the Scope of Work. OpTerra Energy Services will promptly provide written notice to City if OpTerra Energy Services observes any Hazardous Substance, for which the removal or other response thereto would require a material increase in the expected cost or time to OpTerra Energy Services, at or around the Facilities during the course of Construction or installation of any equipment which have not been disclosed by City or otherwise addressed as part of the Scope of Work ( Unknown Hazardous Substances ). City will be solely responsible for further investigating such Unknown Hazardous Substances, and for determining and implementing the appropriate removal and remediation measures with respect to the Unknown Hazardous Substances; provided that City will have the sole discretion, if such Unknown Hazardous Substances are discovered, to cancel by written notice the particular ECM Project to which the Unknown Hazardous Substances pertain, without further obligation with respect to that particular ECM Project, other than paying for Work under this Contract already performed by OpTerra Energy Services for that particular ECM Project. City and OpTerra Energy Services will comply with all Applicable Laws with respect to the identification, removal and proper disposal of any known Hazardous Substances or Unknown Hazardous Substances discovered at or around the Facilities, and in such connection City will execute all generator manifests with respect thereto. OpTerra Energy Services will comply with all Applicable Laws in connection with the use, handling, and disposal of any Hazardous Substances used by it in the performance of its Work. Section 5.07 Pre-Existing Conditions. Certain conditions may exist as of the Contract Effective Date within the Facilities that (i) are non-compliant with applicable codes, or (ii) may cause OpTerra Energy Services completed Work to be non-compliant with applicable codes ( Pre-Existing Conditions ). Unless such Pre-Existing Conditions are specifically disclosed in Attachment A and acknowledged in the Scope of Work, OpTerra Energy Services will not be responsible for repairing such Pre-Existing Conditions unless such responsibility is expressly provided for in an approved Change Order. If bringing such Pre-Existing Conditions into compliance is reasonably necessary to allow OpTerra Energy Services to fully complete its Work on any particular ECM Project, OpTerra Energy Services may request a Change Order in order to bring such Pre-Existing Conditions into compliance. If the Parties do not agree on such a Change Order, either Party may cancel the relevant ECM Project by written notice; in such case, neither OpTerra Energy Services nor City will have any further obligation with respect to that particular ECM Project, other than City s obligation to pay for Work already performed by OpTerra Energy Services for that particular ECM Project. ARTICLE 6. PROJECT COMPLETION 25 RES. NO Section 6.01 Early Occupancy or Use of Work. With the agreement of OpTerra Energy Services (such agreement not to be unreasonably withheld), City may take early occupancy or use ( Early Occupancy or Use ) of any completed or partially completed ECM Project at any stage before such portion is Substantially Complete, provided that such occupancy or use is authorized or not prohibited by Governmental Authority, and provided further, that City assumes responsibility for the security of, insurance coverage for, maintenance (which responsibility City may satisfy, from and after the M&V Commencement Date, through the Maintenance Services provided by OpTerra Energy Services Rev. Date: Page 12 of 52 ESC CA Public

26 26 RES. NO under Attachment E), utilities for, and damage to or destruction of such ECM Project (such damage or destruction not caused by OpTerra Energy Services or any OpTerra Energy Services Person), which may be evidenced by a signed writing from City to OpTerra Energy Services referencing City s assumption of responsibility pursuant to this Section If Substantial Completion of an ECM Project is not yet achieved, occupancy or use of such ECM Project will not commence until City and City s insurance company (unless such consent of City s insurance company is waived by OpTerra Energy Services) has consented to such occupancy or use. City s taking Early Occupancy or Use does not, by itself, trigger any payment to OpTerra Energy Services if not otherwise authorized under this Contract, and does not relieve OpTerra Energy Service s obligation to reach Substantial and/or Final Completion of the relevant ECM Project. Section 6.02 Substantial Completion. When OpTerra Energy Services considers an ECM Project to be Substantially Complete, OpTerra Energy Services will supply to City a written Certificate of Substantial Completion, signed by OpTerra Energy Services, with respect to such ECM Project, including, if necessary, a Punch List of items and the time for their completion or correction. City will within thirty (30) calendar days of receipt of the Certificate of Substantial Completion, review such ECM Project for the sole purpose of determining that it is Substantially Complete and, if City agrees that such ECM Project is Substantially Complete, City will countersign and return the Certificate of Substantial Completion to OpTerra Energy Services. The Certificate of Substantial Completion will address only the following: (i) that such ECM Project is Substantially Complete; (ii) the date of such Substantial Completion; (iii) that from the date of Substantial Completion City will assume responsibility for the security of, insurance coverage for, maintenance, utilities for, and damage to or destruction of such ECM Project, and (iv) a Punch List, if needed. If City does not sign a particular Certificate of Substantial Completion, City must provide a detailed list of any items which, if completed or remedied, would allow City to sign that Certificate of Substantial Completion. City agrees that approval of a Certificate of Substantial Completion will not be unreasonably withheld, delayed or conditioned. (a) (b) Section 6.03 Final Completion. When OpTerra Energy Services considers an ECM Project (including any Punch List items) to be Finally Complete, OpTerra Energy Services will supply to City a written Certificate of Final Completion, signed by OpTerra Energy Services, with respect to such ECM Project. City will inspect the ECM Project to verify the status of Final Completion within thirty (30) calendar days after its receipt of the Certificate of Final Completion and, if City agrees that such ECM Project is Finally Complete, City will countersign and return the Certificate of Final Completion to OpTerra Energy Services. If City does not sign a particular Certificate of Final Completion, City must provide a detailed list of any items which, if completed or remedied, would allow City to sign that Certificate of Final Completion. City agrees that approval of a Certificate of Final Completion will not be unreasonably withheld, delayed or conditioned. After all Certificates of Final Completion for all ECM Projects have been signed by both Parties, OpTerra Energy Services will supply to City a written master certificate of final completion, signed by OpTerra Energy Services, with respect to the entirety of the Work ( Master Certificate of Final Completion ). City will verify the status of Final Completion of all ECM Projects within ten (10) Business Days after City s receipt of OpTerra Energy Services signed Master Certificate of Final Completion. If City does not sign the Master Certificate of Final Completion, City must provide a detailed list of any items which, if completed or remedied, would allow City to sign the Master Certificate of Final Completion. Once both Parties have signed the Master Certificate of Final Completion, City will pay OpTerra Energy Services any remaining compensation due with respect to the Work and any outstanding Retention being withheld by City, in accordance with Section City may give OpTerra Energy Services written notice of acceptance of the Work and will promptly record a notice of completion or notice of acceptance in the office of the county recorder in accordance with California Civil Code Retention will be released only upon confirmation that there are no outstanding liens, stop notices, judgments, or other claims against the Work and in accordance with the relevant time periods set forth in the California Public Contract Code. Section 6.04 Transfer of Title; Risk of Loss. Title to all or a portion of the Project equipment, supplies and other components of the Construction Work ( Conveyed Project Items ) will pass to City upon the earlier of (i) the date payment for such Conveyed Project Items is made by City or (ii) the date any such Conveyed Project Items are incorporated into the Project Location. OpTerra Energy Services will retain care, custody and control and risk of loss of such Conveyed Project Items until the earlier of Beneficial Use or Substantial Completion. Transfer of title in the Conveyed Project Items to City will in no way affect City s and OpTerra Energy Services rights and obligations as set forth in other provisions of this Contract. Except as provided in this Section 6.04, or elsewhere specifically in this Contract, after a Certificate of Final Completion is signed by both Parties for any particular ECM Project, OpTerra Energy Services will have no further obligations or liabilities to City arising out of or relating to that particular ECM Project, except for the obligation to complete any Punch List items, the obligation to perform any warranty service under Section 9.01, and obligations which, pursuant to their terms, survive the termination of this Contract. ARTICLE 7. SUBCONTRACTORS Section 7.01 Authority to Subcontract. OpTerra Energy Services may utilize subcontractors (provided subcontractors possess valid California Contractors License for their respective trade as verified by the California Rev. Date: Page 13 of 52 ESC CA Public

27 27 RES. NO Contractors State License Board) and other service or material providers as OpTerra Energy Services may select in its discretion to perform the Work, with the consent of City, which will not be reasonably withheld. OpTerra Energy Services will not be required to enter into any subcontracts with parties whom OpTerra Energy Services has not selected or subcontractors whom OpTerra Energy Services has objection to using. OpTerra Energy Services will maintain a complete list of all subcontractors working on the Contract, will update this list as subcontractors are changed, and will provide this list to City when requested. If feasible, OpTerra Energy Services will provide City notice before a subcontractor is added to the list. If City does not provide notice of an objection to the proposed subcontractor within ten (10) Business Days, OpTerra Energy Services may utilize the proposed subcontractor. OpTerra Energy Services will require each subcontractor to act in conformance with the requirements of this Contract to the extent applicable to the activities of that subcontractor. Section 7.02 Prompt Payment of Subcontractors. OpTerra Energy Services will promptly pay, when due, all amounts payable for labor and materials furnished in the performance of this Contract and will endeavor to prevent any lien or other claim under any provision of Applicable Law from arising against any City property, against OpTerra Energy Services rights to payments hereunder, or against City. Section 7.03 Relationship. Nothing in this Contract constitutes or will be deemed to constitute a contractual relationship between any of OpTerra Energy Services subcontractors and City, or any obligation on the part of City to pay any sums to any of OpTerra Energy Services subcontractors. (a) (b) Section 7.04 Prevailing Wages. To the extent required by California Labor Code 1771 or other Applicable Law, all employees of OpTerra Energy Services and OpTerra Energy Services subcontractors performing Work at the Project Location will be paid the per diem prevailing wages for the employee s job classification in the locality in which the Work is performed. In accordance with California Labor Code 1773 and , City will obtain from the Director of Industrial Relations the general prevailing rate of per diem wages and the general prevailing rate for holiday and overtime work, in the locality in which the Work is to be performed, for each craft, classification or type of worker needed to execute the Work at the Project Location, and will cause copies of such determinations to be kept on file at its principal office and posted at each Project Location. City will promptly notify OpTerra Energy Services of any changes to any such prevailing wage determination. OpTerra Energy Services shall comply with all applicable California laws related to prevailing wage, including but not limited to California Labor Code 1720 et seq., and all other California prevailing wage laws and regulations, and all requirements, regulations or decisions of the California Department of Industrial Relations related thereto. OpTerra Energy Services further agrees to follow all requirements and pay any penalties due, if any, under California Labor Code OpTerra Energy Services and all subcontractors must be registered and remain registered with DIR (California Department of Industrial Relations) through the term of the Contract in accordance with the California Labor Code, in particular Section , and any successor or replacement provision thereto. OpTerra Energy Services further agrees that it will follow all requirements and obligations set forth in California Labor Code Section 7.05 Assignment. Except as provided in this Section 7.05, neither Party may assign any of its rights, or delegate any of its obligations, under this Contract without the prior written consent of the other Party, such consent not to be unreasonably withheld or delayed. This Contract will be binding on, enforceable by, and inure to the benefit of, the Parties and their respective successors and permitted assigns. OpTerra Energy Services may assign this Contract and all related contracts without the consent of City (i) to an Affiliate; or (ii) pursuant to a merger, consolidation, transfer of substantially all its assets, or by operation of law. OpTerra Energy Services may also assign its rights, but not its obligations, under this Contract and all related contracts without the consent of City to (x) a lender providing financing to OpTerra Energy Services, or (y) a special purpose entity that is an Affiliate of or is controlled by such lender. ARTICLE 8. PAYMENTS Section 8.01 Initial Payment. Upon execution of this Contract, OpTerra Energy Services will invoice City for the assessment fee for the Recommendations in the amount of Fifty-Five Thousand Dollars ($55,000) plus an engineering, design and mobilization payment in an amount equal to five percent (5%) of the Not to Exceed Amount (collectively, the Initial Payment ), as set forth in the Schedule of Values. These amounts must be paid to OpTerra Energy Services within thirty (30) calendar days after City s receipt of an Application for Payment for those amounts. Section 8.02 Monthly Progress Payments. Payment of City approved invoices will be made on a monthly basis, net of Retention as described in Section Invoiced amounts must be paid to OpTerra Energy Services within thirty (30) calendar days after City s receipt of an Application for Payment. Within thirty (30) calendar days after the Contract Effective Date, OpTerra Energy Services will prepare and submit to City for approval (not to be unreasonably withheld) a schedule of values apportioned to the various divisions or phases of the Work ( Schedule of Values ). Each line item contained in the Schedule of Values will be assigned a value such that the total of all items equals the Not to Exceed Amount. All Applications for Payment will be in accordance with the Schedule of Values. Monthly itemized invoices will be based upon the percentage of work complete as agreed by City and OpTerra Energy Services, and the Rev. Date: Page 14 of 52 ESC CA Public

28 28 RES. NO extent of inspections, tests, and City s acceptance of each item shown on the approved Schedule of Values for the pay period involved. Payment of General Condition items such as trailer, power, security, supervision, project management, profit, overhead will be computed on a percentage basis for the amount of the Work completed. All approved Change Orders will be listed separately on a payment request application. Section 8.03 Materials Stored Off-Site. Upon prior approval of City, major purchases in which the relevant materials will be stored off-site before use may be invoiced by OpTerra Energy Services. Original detailed copies of invoices from suppliers, acceptable to City, will be required as supporting information for payment requests for stored material. OpTerra Energy Services will also furnish to City written consent from the Surety approving the advance payment for materials stored off site. If approved, City will pay for such major purchases, less Retention. OpTerra Energy Services will protect stored materials from damage and City assumes no responsibility for any stored material. Damaged materials, even though paid for, will not be incorporated into the Work. Section 8.04 Retention. City, or its designee, must approve and pay each Application for Payment, less a retention amount ( Retention ) of five percent (5%) in accordance with California Public Contract Code 7201, within thirty (30) calendar days after its receipt of the Application for Payment. Retention held by City is for claim protection and not for uncompleted work or corrective work. If remaining funds are not sufficient, City, at its sole discretion, may use Retention for uncompleted or corrective work. A failure to approve and pay an Application for Payment in a timely manner pursuant to this Contract is a material default by City under this Contract; provided, however, that in the case of a payment default, OpTerra Energy Services will provide thirty (30) additional calendar days notice to City to cure such default, and City may cure such default by either approval and payment of the Application for Payment within such thirtyday period, or by providing written notice of any deficiency which City reasonably believes constitutes a basis to excuse City s payment obligation, and a detailed list of such deficiencies which, when cured, would allow City to approve or pay such Application for Payment. City will pay OpTerra Energy Services the Retention amount upon a Master Certificate of Final Completion being signed by both Parties. In lieu of Retention being held by City, OpTerra Energy Services may request that securities be substituted or Retention be held in an escrow account pursuant to California Public Contract Code 22300, and using the model Escrow Agreement set forth in that Section 22300, except that the phrase reading The Owner shall have a right to draw upon the securities in the event of a default by Contractor shall be changed to read The Owner shall have a right to draw upon the securities if the Owner declares in writing a default by Contractor in that model Escrow Agreement. Section 8.05 Final Payment. The final Application for Payment may be submitted after the Master Certificate of Final Completion has been signed by both Parties. The final payment amount must also include payment to OpTerra Energy Services for any remaining Retention withheld by City. Section 8.06 Disputed Applications for Payment. City may in good faith dispute any Application for Payment, or part thereof, within twenty (20) calendar days after the date the Application for Payment was received by City. If City disputes all or a portion of any Application for Payment, City will pay the undisputed portion when due and provide OpTerra Energy Services a written notice and explanation of the basis for the dispute and the amount of the Application for Payment being withheld related to the dispute. City will be deemed to have waived and released any dispute known to it with respect to an Application for Payment (but only with respect to such Application for Payment and not for the underlying Work) if such notice and written explanation is not provided within twenty (20) calendar days after the date the Application for Payment was received by City. If any amount disputed by City is finally determined to be due to OpTerra Energy Services, either by agreement between the Parties or as a result of dispute resolution pursuant to ARTICLE 17 below, it will be paid to OpTerra Energy Services within ten (10) Business Days after such final determination, plus Interest from the date invoiced or claimed until such amount is paid. Section 8.07 Rebate Programs. OpTerra Energy Services will assist City in the preparation and submission to the applicable agencies of applications and documentation necessary for the California Solar Initiative incentive program. OpTerra Energy Services makes no guarantee that City will receive funding from any energy efficiency rebate, incentive, and/or loan program(s), including the California Solar Initiative incentive program (collectively, Incentive Funds), or any portion thereof; OpTerra Energy Services expressly disclaims any liability for City s failure to receive any portion of the Incentive Funds, and City acknowledges and agrees that OpTerra Energy Services will have no liability for any failure to receive all or any portion of the Incentive Funds, except those failures due to the sole negligence of OpTerra Energy Services. Procurement, or lack thereof, of the Incentive Funds will not alter the Not to Exceed Amount of this Contract or any payment timelines in this Contract. Section 8.08 False Claims Act Certification. OpTerra Energy Services acknowledges that it is aware of liabilities resulting from submitting a false claim for payment to the City under the California False Claims Act (California Government Code et seq.), including treble damages, cost of legal actions to recover payments, and civil penalties of up to $10,000 per false claim. In each Application for Payment or other request for payment under this Contract, OpTerra Energy Services shall include the following statement: OpTerra Energy Services hereby certifies that this Application for Payment is true and correct to the best of OpTerra Energy Services knowledge, and that OpTerra Energy Services acknowledges that this Application for Payment is subject to the California False Claims Act and other applicable law. Rev. Date: Page 15 of 52 ESC CA Public

29 ARTICLE 9. WARRANTY EXCEPT FOR THE WARRANTIES PROVIDED IN THIS ARTICLE 9, OPTERRA ENERGY SERVICES MAKES NO WARRANTIES IN CONNECTION WITH THE WORK PROVIDED UNDER THIS CONTRACT, WHETHER EXPRESS OR IMPLIED IN LAW, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY IMPLIED WARRANTIES AGAINST INTELLECTUAL PROPERTY INFRINGEMENT. CITY WILL HAVE NO REMEDIES UNDER THIS WARRANTY AGAINST EITHER OPTERRA ENERGY SERVICES OR ANY OPTERRA ENERGY SERVICES SUBCONTRACTOR OR VENDOR FOR ANY DEFECTIVE MATERIALS OR EQUIPMENT INSTALLED, EXCEPT FOR THE REPAIR OR REPLACEMENT OF SUCH MATERIALS OR EQUIPMENT IN ACCORDANCE WITH THE WARRANTIES INDICATED BELOW. SPECIFICALLY, NEITHER OPTERRA ENERGY SERVICES, NOR OPTERRA ENERGY SERVICES SUBCONTRACTORS OR VENDORS, WILL BE LIABLE TO CITY FOR LOSS OF PROFITS OR FOR ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY FOR OPTERRA ENERGY SERVICES PERFORMANCE OR NONPERFORMANCE UNDER THIS WARRANTY. THE RIGHTS AND REMEDIES OF CITY AND THE DUTIES OF OPTERRA ENERGY SERVICES UNDER THIS WARRANTY DO NOT ALTER, REDUCE, INCREASE, OR OTHERWISE CHANGE THE RIGHTS AND REMEDIES OF EITHER PARTY UNDER OTHER ARTICLES OF THIS CONTRACT OR ELSEWHERE UNDER THIS CONTRACT BESIDES THIS ARTICLE 9. Section 9.01 OpTerra Energy Services warrants to City that material and equipment furnished under this Contract will be of good quality and new, unless otherwise specifically required or permitted by this Contract. OpTerra Energy Services further warrants that its workmanship provided hereunder, including its subcontractors workmanship, will be free of material defects for a period of one (1) year from the date of a Certificate of Final Completion for a particular ECM Project is signed by both Parties ( OpTerra Energy Services Warranty ) for that particular ECM Project. Section 9.02 Equipment and material warranties that exceed the OpTerra Energy Services Warranty period will be provided directly by the equipment and/or material manufacturers and such warranties will be assigned directly to City, after the one (1) year period. During the OpTerra Energy Services Warranty period, OpTerra Energy Services will be City s primary interface with, and will handle all communications with and will work with the equipment and material manufacturers in resolving any equipment or material warranty issues. If any material defects are discovered within the OpTerra Energy Services Warranty period, OpTerra Energy Services, or OpTerra Energy Services subcontractors, will correct its defects, and/or OpTerra Energy Services will work with the equipment or material manufacturer to facilitate the manufacturer s correction of the equipment or material defect. Such warranty services will be performed in a timely manner and at the reasonable convenience of City. If a warranty issue arises on any equipment or material installed after the OpTerra Energy Services Warranty period, and the equipment or material has a warranty period that exceeds one (1) year, City will contact the manufacturer directly to resolve such warranty issues and City acknowledges that the manufacturer will have sole responsibility for such issues. Section 9.03 The warranties in this ARTICLE 9 expressly exclude any remedy under this ARTICLE 9 for damage or defect caused by improper or inadequate maintenance of the installed equipment by service providers other than OpTerra Energy Services or its subcontractors, corrosion, erosion, deterioration, abuse, modifications or repairs not performed by an authorized OpTerra Energy Services subcontractor, improper use or operation, or normal wear and tear under normal usage. Unless otherwise specified, all warranties in this ARTICLE 9, including without limitation those for defects, whether latent or patent, in design, engineering, or construction, will terminate one (1) year from the date of Substantial Completion; and thereafter, OpTerra Energy Services will have no liability under this ARTICLE 9 for breach of any warranty or for any latent or patent defect of any kind pursuant to California Code of Civil Procedure and 338. ARTICLE 10. (a) (b) Section OWNERSHIP OF CERTAIN PROPERTY AND EXISTING EQUIPMENT Ownership of Certain Proprietary Property Rights. 29 RES. NO Ownership: City will not acquire, by virtue of this Contract, any rights or interest in any formulas, patterns, devices, software, inventions or processes, copyrights, patents, trade secrets, other intellectual property rights, or similar items of OpTerra Energy Services property which are or may be used in connection with the Work. OpTerra Energy Services will own all inventions, improvements, technical data, models, processes, methods, and information and all other work products developed by OpTerra Energy Services and used in connection with the Work, including all intellectual property rights therein. Ownership and Use of Instruments of Service. OpTerra Energy Services will be deemed the author of all plans, specifications, flow sheets, drawings, and other detailed products of the Work (the Instruments of Service ), and will retain all common law, statutory and other reserved rights, including copyrights, in the Instruments of Service. City may use the Instruments of Service for any purpose that City, in its sole discretion, deems appropriate or desirable, either with or without the participation of OpTerra Energy Services, and for no additional payment or compensation whatsoever to OpTerra Energy Services; provided that any use by City of the Instruments of Service for implementation purposes, including additions, alterations, or completion of the Rev. Date: Page 16 of 52 ESC CA Public

30 30 RES. NO Project, by employees, agents or contractors other than OpTerra Energy Services, will be at City s sole risk and without liability to OpTerra Energy Services, unless such use is permitted under this Contract in order for City to comply with City s obligations under this Contract; and provided further that if the Instruments of Service are used without the participation of OpTerra Energy Services and not as part of either Party s performance under this Contract, City agrees to and hereby does waive and release, and indemnify and hold harmless, OpTerra Energy Services, its subcontractors, and their directors, employees, subcontractors, and agents from any and all Losses associated with or resulting from such use. Any ideas, methods, or information provided by City to OpTerra Energy Services will remain the property of City. Furthermore, OpTerra Energy Services acknowledges that any data, proposals, plans, specifications, flow sheets, drawings, and other work product prepared or produced by City will remain City s property. Section Ownership of any Existing Equipment. Ownership of any equipment and materials presently existing at the Facilities at the time of execution of this Contract will remain the property of City even if such equipment or materials are replaced or their operation made unnecessary by work performed by OpTerra Energy Services. If applicable, OpTerra Energy Services will advise City in writing of all equipment and materials that will be replaced at the Facilities and City will, within five (5) Business Days of OpTerra Energy Services notice, designate in writing to OpTerra Energy Services which replaced equipment and materials should not be disposed of off-site by OpTerra Energy Services (the Retained Items ). City will be responsible for and designate the location and storage for the Retained Items. OpTerra Energy Services will be responsible for the disposal of replaced equipment and materials, except for the Retained Items. OpTerra Energy Services will use commercially reasonable efforts to remove the Retained Items in such a manner as to avoid damage thereto, or if it is unreasonable to avoid damage altogether, to minimize the damage done. OpTerra Energy Services will not be responsible for the removal and/or disposal of any Hazardous Substances except as required by the Scope of Work or as otherwise expressly set forth in this Contract. ARTICLE 11. INDEMNIFICATION / INSURANCE / BONDS Section Indemnification. To the full extent permitted by Applicable Laws, OpTerra Energy Services will indemnify, hold harmless, release and defend City, its officers, employees, volunteers and agents (collectively, City Indemnitees ) from and against any and all actions, claims, demands, damages, disabilities, fines, penalties, losses, costs, expenses (including reasonable consultants and attorneys fees and other reasonable defense expenses) and liabilities of any nature for death, bodily injury or personal injury to any person, or damage or destruction to any property ( Losses ) that may be asserted by any person or entity, to the extent arising out of OpTerra Energy Services performance, non-performance or activities hereunder, including the performance or activities of other persons employed or utilized by OpTerra Energy Services in the performance of this Contract, excepting liabilities to the extent due to the negligence or willful misconduct of a City Indemnitee. Additionally, OpTerra Energy Services will defend and indemnify City Indemnitees from any and all actions, claims, demands, damages, disabilities, fines, penalties, losses, costs, expenses (including reasonable consultants and attorneys fees and other reasonable defense expenses) and liabilities of any nature for intellectual property infringement (including but not limited to patent, copyright, trademark and trade secrets) that may be asserted by any person or entity, to the extent arising out of OpTerra Energy Services performance, non-performance or activities hereunder, excepting liabilities to the extent due to the negligence or willful misconduct of a City Indemnitee. This indemnification obligation will continue to bind OpTerra Energy Services after the termination of this Contract. Section Waiver of Consequential Damages and Limitation of Liability. Except for the indemnification obligations set forth in Section 11.01, (a) the liability of a defaulting Party will be limited to direct, actual damages, (b) neither Party shall be liable to the other Party for any special, indirect, incidental or consequential damages whatsoever, whether in contract, tort (including negligence) or strict liability, including, but not limited to, operational losses in the performance of business such as lost profits or revenues or any increase in operating expense, and (c) each Party waives any claims for negligence against the other Party to the greatest extent permitted by Applicable Law. Section OpTerra Energy Services Insurance. OpTerra Energy Services will maintain, or cause to be maintained, for the duration of this Contract, the insurance coverage outlined in (a) through (f) below, and all such other insurance as required by Applicable Law. Evidence of coverage will be provided to City via an insurance certificate. (a) (b) Workers Compensation/Employers Liability for states in which OpTerra Energy Services is not a qualified selfinsured. Limits as follows: * Workers Compensation: Statutory * Employers Liability: Bodily Injury by accident $1,000,000 each accident Bodily Injury by disease $1,000,000 each employee Bodily Injury by disease $1,000,000 policy limit Commercial General Liability insurance with limits of: * $2,000,000 each occurrence for Bodily Injury and Property Damage * $4,000,000 General Aggregate - other than Products/Completed Operations Rev. Date: Page 17 of 52 ESC CA Public

31 31 RES. NO * $4,000,000 Products/Completed Operations Aggregate * $2,000,000 Personal and Advertising Injury * $ 100,000 Damage to premises rented to OpTerra Energy Services (c) (d) (e) Coverage to be written on an occurrence form. Coverage to be at least as broad as ISO form CG 0001 (04/13) or its equivalent forms, without endorsements that limit the policy terms with respect to: (1) provisions for severability of interest or (2) explosion, collapse, underground hazard. Auto Liability insurance for owned, hired and non-owned vehicles with limits of $1,000,000 per accident. Coverage to be written on an occurrence form. Professional Liability insurance with limits of: * $1,000,000 per occurrence * $1,000,000 aggregate Coverage to be written on a claims-made form. Umbrella/Excess Liability Insurance. Limits as follows: * $1,000,000 each occurrence * $1,000,000 aggregate (f) Coverage terms and limits to apply excess of the per occurrence and/or aggregate limits provided for Commercial General Liability and Professional Liability written on a claims made form. Coverage terms and limits also to apply in excess of those required for Employers Liability and Auto Liability written on an occurrence form. Policy Endorsements. * The insurance provided for Workers Compensation and Employers Liability above will contain waivers of subrogation rights against City, but only to the extent of the indemnity obligations contained in this Contract. * The insurance provided for Commercial General Liability and Auto Liability above will: (i) include City as an additional insured with respect to Work performed under this Contract, but only to the extent of the indemnity obligations contained in this Contract, and (ii) provide that the insurance is primary coverage with respect to all insureds, but only to the extent of the indemnity obligations contained in this Contract. Section Performance and Payment Bonds. Prior to commencing Work under this Contract, OpTerra Energy Services will furnish a performance bond, in an amount equal to one hundred percent (100%) of the Not to Exceed Amount, and a payment bond to guarantee payment of all claims for labor and materials furnished, in an amount equal to one hundred percent (100%) of the Not to Exceed Amount, in the forms attached hereto as Attachment H (collectively, the Contract Bonds ). The Contract Bonds are not being furnished to cover the performance of any Professional Services, including any energy guaranty or guaranteed savings under this Contract, nor to cover any equipment warranty and/or material manufacturer s warranty or other third-party warranty being assigned to City. ARTICLE 12. (a) (b) CREDITS; TAX BENEFITS Section Energy Policy Act of As authorized by 1331 of the Energy Policy Act of 2005 (Pub. L. No ) City agrees that for the Work, OpTerra Energy Services will be the designer as that term is identified in Internal Revenue Bulletin , Notice , and OpTerra Energy Services will have the exclusive right to report to any federal, state, or local agency, authority or other party any tax benefit associated with the Work. Upon Final Completion, City agrees to execute a written allocation including a declaration related to Internal Revenue Code 179D, in substantially the form attached hereto as Attachment F. Upon Final Completion, OpTerra Energy Services will suggest any needed alterations to the declaration described in Attachment F, if any, if such alterations should become required by law, and will prepare a final declaration, including any reasonable changes suggested by City. If any law, rule or regulation, including but not limited to those related to the financing of the Contract or any grants, rebates or energy programs, prohibits the issuance of such declaration, such declaration shall not be issued. To the extent permitted by Applicable Law, OpTerra Energy Services shall indemnify and hold harmless City, its agents, officials, officers, representatives, employees and volunteers, from and against all claims, lawsuits, liabilities or damages of whatever nature arising out of or in connection with, the City s declaration as described in Section 12.01(a). Rev. Date: Page 18 of 52 ESC CA Public

32 Section Environmental Benefits. Other than those benefits described in Section 12.01, City shall own all right, title, and interest associated with or resulting from the development, construction, installation and ownership of the Generating Facilities and each of its component parts. This ownership includes the production, sale, purchase or use of the energy output including, without limitation: (a) (b) (c) (d) (e) (f) (g) ARTICLE 13. All Environmental Incentives associated in any way with the Generating Facilities. Environmental Incentives means all rights, credits (including tax credits), rebates, benefits, reductions, offsets and allowances and entitlements of any kind, howsoever entitled or named (including carbon credits and allowances), whether arising under federal, state or local law, international treaty, trade association membership or the like arising from the Generating Facilities or the energy produced or otherwise from the development, construction, installation or ownership of the Generating Facilities or the production, sale, purchase, consumption or use of the energy produced from the Generating Facilities. Without limiting the forgoing, Environmental Incentives includes green tags, renewable energy credits, tradable renewable certificates, portfolio energy credits, the right to apply for (and entitlement to receive) incentives under the California Solar Initiative or other incentive programs offered by the State of California and the right to claim federal income tax credits under Internal Revenue Code 45 or 48 as such credits are available arising from the environmental attributes of the Generating Facilities or the energy produced from the Generating Facilities or the production, sale, purchase, consumption or use of the energy produced from the Generating Facilities. All rights and interests in performance based incentive payments to be made under the California Solar Initiative. All reporting rights and the exclusive rights to claim responsibility for the delivery of the energy from the Generating Facilities. All reporting rights and the exclusive rights to claim responsibility for the reductions in emissions of pollution and greenhouse gases resulting from the generation and delivery of energy. All carbon reduction credits as defined under the California Action Reserve or such similar definition as enacted by the State of California or the U.S. Federal Government. All renewable energy credits, as such term is defined in California Public Utilities Code (h)(2), associated with the Generating Facilities. The proceeds of any and all other incentive programs available in relation to the Generating Facilities. MUNICIPAL ADVISOR Section THE PARTIES ACKNOWLEDGE AND AGREE THAT OPTERRA ENERGY SERVICES REPRESENTS THAT IT IS NOT A MUNICIPAL ADVISOR AND CANNOT GIVE ADVICE TO CITY WITH RESPECT TO MUNICIPAL SECURITIES OR MUNICIPAL FINANCIAL PRODUCTS ABSENT CITY BEING REPRESENTED BY, AND RELYING UPON THE ADVICE OF, AN INDEPENDENT REGISTERED MUNICIPAL ADVISOR, AND THAT OPTERRA ENERGY SERVICES IS NOT SUBJECT TO A FIDUCIARY DUTY WITH REGARD TO CITY OR THE PROVISION OF INFORMATION TO CITY. ARTICLE 14. EVENTS OF DEFAULT Section Events of Default by OpTerra Energy Services. Each of the following events or conditions will constitute an Event of Default by OpTerra Energy Services: (i) (ii) Section of Default by City: (i) 32 RES. NO any substantial failure by OpTerra Energy Services to perform or comply with this Contract, including a material breach of any covenant contained herein, and such failure continues for thirty (30) calendar days after notice to OpTerra Energy Services demanding that such failure to perform be cured; provided that (y) such failure to perform will not be deemed a default hereunder if it is excused by a provision of this Contract, and (z) if such cure cannot reasonably be effected in thirty (30) calendar days, OpTerra Energy Services will be deemed to have cured the default upon the commencement of a cure within thirty (30) calendar days and diligent subsequent completion thereof within ninety (90) calendar days; or any representation or warranty furnished by OpTerra Energy Services in this Contract which was false or misleading in any material respect when made. Events of Default by City. Each of the following events or conditions will constitute an Event any substantial failure by City to perform or comply with this Contract, including a material breach of any covenant contained herein, and such failure continues for thirty (30) calendar days after notice to City demanding that such failure to perform be cured; provided that (y) such failure to perform will not be deemed a default hereunder if it is excused by a provision of this Contract; and Rev. Date: Page 19 of 52 ESC CA Public

33 33 RES. NO ARTICLE 15. (z) if such cure cannot reasonably be effected in thirty (30) calendar days, City will be deemed to have cured the default upon the commencement of a cure within thirty (30) calendar days and diligent subsequent completion thereof within ninety (90) calendar days; or (ii) any failure by City to pay any amount to OpTerra Energy Services which is not paid within ten (10) calendar days (or, with respect to an Application for Payment, such longer period as may be provided in Section 8.06) after written notice from OpTerra Energy Services that the amount is past due, unless City reasonably disputes the relevant Application for Payment and provides written notice of the reasons for such non-payment to OpTerra Energy Services. TERMINATION FOR CAUSE Section Termination for Cause. If there is an Event of Default by either Party under this Contract, unless such Event of Default has been cured within the applicable time periods for a cure set forth in this Contract, the non-defaulting Party may terminate this Contract by providing ten (10) Business Days written notice to the defaulting Party. Upon termination of this Contract, each Party will promptly return to the other all papers, materials, and property of the other held by such Party in connection with this Contract. Each Party will also assist the other in the orderly termination of this Contract and the transfer of all aspects hereof, tangible and intangible, as may be necessary for the orderly, non-disrupted business continuation of each Party. If this Contract is so terminated, OpTerra Energy Services will be entitled to payment for Work satisfactorily performed, earned profit and overhead, and costs incurred in accordance with this Contract up to the date of termination. Notwithstanding the foregoing, each Party will retain all rights and remedies to pursue any legal or equitable action the Parties may deem necessary or advisable pursuant to ARTICLE 17, and further, any payment due to OpTerra Energy Services pursuant to the preceding sentence may be offset by any damages or payments due to City. ARTICLE 16. CONDITIONS BEYOND CONTROL OF THE PARTIES Section Excusable Events. If any Party is delayed in, or prevented from, performing or carrying out its obligations under this Contract by reason of any Excusable Event not caused by that same Party, such circumstance will not constitute an Event of Default, and such Party will be excused from performance hereunder, for the duration of the Excusable Event, with respect to the specific ECM Project(s) affected by the Excusable Event and will not be liable to the other Party for or on account of any loss, damage, injury or expense resulting from, or arising out of, such delay or prevention. Notwithstanding the foregoing, no Party will be excused from any payment obligations under this Contract as a result of an Excusable Event, except to the extent that such payment obligation arises from performance that is not performed because of the Excusable Event. If any Excusable Event causes a Delay of more than one hundred twenty (120) calendar days (an Extended Delay Event ) on any particular ECM Project, either Party may cancel that particular ECM Project by written notice to the other Party; in such case, neither OpTerra Energy Services nor City will have any further obligation with respect to that particular ECM Project, other than City s obligation to pay for Work under this Contract already performed by OpTerra Energy Services for that particular ECM Project. Neither Party is required to sign or accept a Change Order due to an Extended Delay Event. Section Utility Work. City expressly understands and agrees that an Excusable Event may occur due to Interconnection Facilities Work which requires a longer time period to complete than that customarily and reasonably expected for such Interconnection Facilities Work. OpTerra Energy Services will include in the Project Schedule sufficient time for Interconnection Facilities Work that is customarily and reasonably expected in the utility industry. Notwithstanding such Excusable Event due to Interconnection Facilities Work, OpTerra Energy Services can only request a modification to the Project Schedule or a Change Order limited to time, but without additional compensation, for any Delay caused by such Excusable Event. ARTICLE 17. GOVERNING LAW AND RESOLUTION OF DISPUTES Section Governing Law. This Contract is governed by and must be interpreted under the laws of the State of California, without regard to the jurisdiction s choice of law rules. Section Initial Dispute Resolution. If a dispute arises out of or relates to this Contract, the transaction contemplated by this Contract, or the breach of this Contract (a Dispute ), either Party may initiate the dispute resolution process set forth in this ARTICLE 17 by giving notice to the other Party. The Parties will endeavor to settle the Dispute as follows: (i) (ii) Field Representatives Meeting: Within fifteen (15) Business Days after notice of the Dispute, OpTerra Energy Services senior project management personnel will meet with City s project representative in a good faith attempt to resolve the Dispute. Management Representatives Meeting: If OpTerra Energy Services and City s project representatives fail to meet, or if they are unable to resolve the Dispute, senior executives for OpTerra Energy Services and for City, neither of whom have had day-to-day management Rev. Date: Page 20 of 52 ESC CA Public

34 34 RES. NO responsibilities for the Project, will meet, within thirty (30) calendar days after notice of the Dispute, in an attempt to resolve the Dispute and any other identified disputes or any unresolved issues that may lead to a dispute. Section Jurisdiction and Venue. If the Dispute is not settled by the Management Representatives Meeting, or if a Management Representatives Meeting is not held within the time provided herein, each Party retains all rights to exercise any remedies available to such Party. Jurisdiction is in the State of California and venue lies in Ventura County. In the event of any dispute, each Party shall bear its own fees and costs (including attorneys fees). Section Multiparty Proceeding. Either Party may join third parties whose joinder would facilitate complete resolution of the Dispute and matters arising from the resolution of the Dispute. Section Lien Rights. Nothing in this ARTICLE 17 limits any rights or remedies not expressly waived by OpTerra Energy Services that OpTerra Energy Services may have under any lien laws or stop notice laws. ARTICLE 18. ARTICLE 19. Section (i) (ii) (iii) (iv) REPRESENTATIONS AND WARRANTIES Each Party warrants and represents to the other that: it has all requisite power and authority to enter into this Contract, to perform its obligations hereunder and to consummate the transactions contemplated hereby; the execution, delivery, and performance of this Contract have been duly authorized by its governing body, or are in accordance with its organizational documents, and this Contract has been duly executed and delivered for it by the signatories so authorized, and constitutes its legal, valid, and binding obligation; the execution, delivery, and performance of this Contract will not breach or violate, or constitute a default under, its organizational documents or any contract, lease or instrument to which it is a party or by which it or its properties may be bound or affected; and it has not received any notice, nor to the best of its knowledge is there pending or threatened any notice, of any violation of any Applicable Laws, awards or permits which would materially and adversely affect its ability to perform hereunder. NOTICE Any notice required or permitted hereunder will be deemed sufficient if given in writing and delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, or delivered to a nationally recognized express mail service, charges prepaid, receipt obtained, to the address shown below or to such other persons or addresses as are specified by similar notice. TO OPTERRA ENERGY SERVICES: With a COPY TO: TO CITY: OpTerra Energy Services, Inc. 150 East Colorado Boulevard, Suite 360 Pasadena, CA Tel: Cell: Attention: Legal Department OpTerra Energy Services, Inc. 150 East Colorado Boulevard, Suite 360 Pasadena, CA Tel: Attention: Contract Administrator City of Simi Valley 2929 Tapo Canyon Road Simi Valley, CA Tel: Fax: Attention: Assistant City Manager ARTICLE 20. CONSTRUCTION OF CONTRACT This Contract is the result of arms-length negotiations between two sophisticated parties and ambiguities or uncertainties in it will not be construed for or against either Party. Rev. Date: Page 21 of 52 ESC CA Public

35 ARTICLE 21. BINDING EFFECT Except as otherwise provided herein, the terms and provisions of this Contract will apply to, be binding upon, and inure to the benefit of the Parties hereto and their respective heirs, legal representatives, successors, and permitted assigns. ARTICLE 22. NO WAIVER The failure of OpTerra Energy Services or City to insist upon the strict performance of this Contract will not constitute or be construed as a waiver or relinquishment of either Party s right to thereafter enforce the same in accordance with this Contract in the event of a continuing or subsequent default on the part of OpTerra Energy Services or City. ARTICLE 23. SEVERABILITY If any clause or provision of this Contract or any part thereof becomes or is declared by a court of competent jurisdiction invalid, illegal, void, or unenforceable, this Contract will continue in full force and effect without said provisions. ARTICLE 24. HEADINGS Headings and subtitles used throughout this Contract are for the purpose of convenience only, and no heading or subtitle will modify or be used to interpret the text of any section. ARTICLE 25. COUNTERPARTS; INTEGRATION 35 RES. NO This Contract may be executed in counterparts (and by different Parties hereto in different counterparts), each of which will constitute an original, but all of which when taken together will constitute a single contract. This Contract constitutes the entire contract among the Parties relating to the subject matter hereof and supersedes any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Delivery of an executed counterpart of a signature page of this Contract by or fax will be effective as delivery of a manually executed counterpart of this Contract. [the Parties signatures appear on the following page] Rev. Date: Page 22 of 52 ESC CA Public

36 36 RES. NO IN WITNESS WHEREOF, and intending to be legally bound, the Parties hereto subscribe their names to this Contract by their duly authorized officers as of the Contract Effective Date. OPTERRA ENERGY SERVICES: OpTerra Energy Services, Inc. CITY: City of Simi Valley By: By: Name: Eric J. Levitt Title: City Manager Approved as to Form: By: By: Lonnie J. Eldridge, City Attorney, Name: City of Simi Valley Title: Rev. Date: Page 23 of 52 ESC CA Public

37 37 RES. NO ATTACHMENT A CITY S FACILITIES (a) The following City Facilities are included under the Scope of Work as listed below: Facility Address Approximate Area (Square Feet) City Hall 2929 Tapo Canyon Rd, Simi Valley, CA ,771 Police Department 3901 Alamo St, Simi Valley, CA ,000 Library 2969 Tapo Canyon Rd, Simi Valley, CA ,000 Senior Center 3900 Avenida Simi, Simi Valley, CA ,559 Waste Water Treatment Plant 600 W Los Angeles Ave, Simi Valley, CA ,174 (b) KNOWN SUBSURFACE CONDITIONS OR OBSTACLES (PURSUANT TO CONTRACT SECTION 5.03(e)): For purposes of this disclosure, it is assumed by the Parties (and hereby disclosed) that each of the locations below has usual and customary utility and service connections for water service, electric service, gas lines, sewer lines, and telecommunications facilities. OpTerra Energy Services will contact a utility location company to further determine the location and nature of any underground utilities or other services. In addition to these ordinary and expected utility and service connections, the following subsurface conditions or obstacles are hereby disclosed by City to OpTerra Energy Services: 1. City Hall: None 2. Police Department: None 3. Library: None 4. Senior Center: None 5. Waste Water Treatment Plant: None (c) KNOWN HAZARDOUS SUBSTANCES (PURSUANT TO CONTRACT SECTION 5.06): None (d) KNOWN PRE- EXISTING CONDITIONS (PURSUANT TO CONTRACT SECTION 5.07): None Rev. Date: Page 24 of 52 ESC CA Public

38 38 RES. NO ATTACHMENT B SCOPE OF WORK California State Contractor s License Number ECM Projects to Be Implemented ECM # PV1 Solar Photovoltaics Description I. GENERAL CONDITIONS SCOPE OF WORK PROVIDED BY OPTERRA ENERGY SERVICES: General Conditions Scope of Work provided by OpTerra Energy Services applicable to all ECM Projects: Project management and engineering. Construction management and supervision. An OpTerra Energy Services construction manager will be assigned to this Project and will be responsible for monitoring the on-site construction. Provide security as needed to protect materials, equipment, and construction work in progress. Provide onsite storage containers for project materials and equipment. Provide trash dumpsters as needed as well as cleanup and disposal of refuse generated by the Project. Provide portable toilets. Provide temporary fencing as required for access control in the areas of and for the duration of Work. Provide cranes, lifts and rigging necessary for Scope of Work. Provide startup, acceptance testing, training and Operation & Maintenance manuals as needed on systems provided. Record (as-builts) plans and equipment data sheets will be provided. Two (2) sets of printed record and equipment data sheets will be provided as well as one copy in electronic format. General Engineering Scope of Work provided by OpTerra Energy Services applicable to all ECM Projects: II. Prepare engineered plans to be submitted for City plan check as required per scope. Provide equipment submittals for City acceptance per ECM Project. Provide shop drawings, as appropriate for the Work per ECM Project. SCOPE OF EACH ECM PROJECT ECM PV1-5: Solar Photovoltaics OpTerra Energy Services will design, engineer, and install photovoltaic power generating systems at five (5) locations throughout City, and will coordinate the Interconnection Facilities Work with the Utility. Subject to Section 3.02 and Section 3.03 of the Contract, any Interconnection Facilities Work that may be required will be paid for by OpTerra Energy Services and performed by the Utility under the Interconnection Agreement, and any other Work that may be required to complete the Interconnection Facilities will be performed and paid for OpTerra Energy Services. The systems will be a combination of rooftop, parking shade structures or ground-mounted as described herein at each location. The precise design and arrangement of the solar systems will be determined during final engineering and will be subject to plan check approval. OpTerra Energy Services to provide engineered structural and electrical design drawing plan sets and calculation packages for the rooftop solar installation as necessary for building permit Project Locations (Specific to PV ONLY) ECM Project #1: City Hall Solar (NEM, Option R) ECM Project #2: Police Department Solar (NEM, Option R) ECM Project #3: Library Solar (NEM) ECM Project #4: Senior Center Solar (NEM) ECM Project #5: WWTP Ground mount Solar (NEM-A) Rev. Date: Page 25 of 52 ESC CA Public

39 39 RES. NO Rev. Date: Page 26 of 52 ESC CA Public

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41 41 RES. NO ECM Project #1: City Hall Solar 194kWdc.Facility Address kw dc City Hall - Rooftop 2929 Tapo Canyon Rd., Simi Valley CA, OpTerra Energy Services will perform the following work: Provide and install all materials and equipment (string inverters, racking system, PV modules) necessary to install a 194 kwdc rooftop PV system Provide structural and mechanical assembly of the provided racking system at a 5 degree tilt. Provide any required roof repairs at the points of penetration with the existing roof for new racking system Furnish and install all module mounting hardware, consisting of clips, washers, and fasteners. All items fabricated from G-90 galvanized steel coil, or mechanically galvanized components. Provide module installation. Provide rigging as necessary for all equipment onto the roof. Design and install roof racking flashing to maintain watertight integrity of the roof system in accordance with National Roofing Contractors specifications and good roofing practice utilizing commodity roofing materials. Solar installation will be detailed in compliance with the existing Johns Manville roof manufacturer s warranty and the existing warranty will be maintained Provide new electrical switchgear for PV system located outside of main electrical room on a new concrete housekeeping pad Perform horizontal boring and/or trenching of existing concrete, hardscape or asphalt areas as required to route conduits. Repair any damaged concrete, hardscape or asphalt as required Provide and install a new net generation output meter (NGOM) in the new electrical switchgear to monitor PV production Provide and install electrical conduits and power wiring from the string inverters to the new electrical switchgear Tie in new electrical switchgear into the existing main electrical switchgear panel at the electrical room. Provide and install new weather station (this weather station will be used to collect data for all Civic Center PV Systems) Provide and install electrical conduits for communication wiring from the string inverters to the new Data Acquisition System (DAS) Tie in DAS to nearest City provided dedicated IP address Provide and install new flat screen television to display graphics of PV systems located inside City Hall at location determined by City City to provide dedicated IP address for the television installed Re-Roof at City Hall as required for Solar Scope (see picture): Main roof within highlighted area (area within red curving line): Remove all foliage, and debris from the rooftop; prepare existing surface for new roofing. Clean roof as necessary to properly prepare surface for overlay. Furnish and mechanically fasten 60 mil White TPO roof system with fire rated separator sheet. Furnish and install roof flashings at all pipe penetrations and vents Furnish and install roof base flashings at existing mechanical unit curbs and existing skylight Furnish and install roofing at all drains and overflows Furnish 20 year manufacturer s warranty Pitched roof within highlighting area Removal and disposal of 3 layers of existing roofing Furnish and install thirty (30) pound felt and 30 year dimensional shingles. Rev. Date: Page 28 of 52 ESC CA Public

42 42 RES. NO ECM Project #2: Police Department Solar 600kWdc Facility Address kw dc Police Department Rooftop 3901 Alamo St. Simi Valley CA, Police Department Parking Lots() 3901 Alamo St. Simi Valley CA, OpTerra Energy Services will perform the following work: Provide all materials and equipment (string inverters, racking system, PV modules) necessary to install a 188 kwdc rooftop PV system o Provide structural and mechanical assembly of the provided racking system at a 5 degree tilt. o Provide any required roof repairs at the points of penetration with the existing roof for new racking system o Furnish and install all module mounting hardware, consisting of clips, washers, and fasteners. All items fabricated from G-90 galvanized steel coil, or mechanically galvanized components. o Provide module installation. o Provide rigging and load all components for the rooftop structure system onto the roof. o Design and install roof racking flashing to maintain watertight integrity of the roof system in accordance with National Roofing Contractors specifications and good roofing practice utilizing commodity roofing materials. o Provide and install string inverters at rooftop level Provide all materials and equipment (string inverters, support structure, PV modules) necessary to install a 422 kwdc shade structure solar PV system o String inverters will be column-mounted o PV Modules to be mounted on galvanized steel purlins per approved drawings o Parking lot areas, where solar is installed, will be resealed, and restriped, new wheel stops will be installed at column locations as required o Provide and install LED lighting fixtures on the underside of the array and drive aisles. o Tie new LED canopy lighting fixtures into existing City parking lot lighting power circuit. o Steel structure installed will be primed and painted with one coat of paint. galvanized purlins will not be painted conduit will not be painted o Steel canopy structure will be designed with a five degree tilt angle o Trees located in the general area of the array, which may affect PV output, will be trimmed back or removed by OpTerra Energy Services if less than 9 in diameter, as coordinated with City. Removal of trees affecting PV output, if over 9 in diameter, is excluded and will be the responsibility of City. Replanting of any removed trees, regardless of size, is excluded and will be the responsibility of City. o Any damaged irrigation systems will be repaired as required Provide new electrical switchgear for PV system located outside of main building on a new concrete housekeeping pad Perform horizontal boring and/or trenching of existing concrete, hardscape or asphalt areas as required to route conduits from array structure to new electrical switchgear. Repair any damaged concrete, hardscape or asphalt as required Perform underground utility survey to locate any existing unknown utilities that are in the path of horizontal boring, vertical boring or trenching. City to provide as built drawings of all known underground utilities Provide and install a new net generation output meter (NGOM) in the new electrical switchgear to monitor PV production Provide and install electrical conduits and power wiring from the string inverters to the new electrical switchgear Tie in new electrical switchgear into the existing main electrical switchgear panel in the main electrical room. Conduits will be routed in the rafter area in the underground parking lot Provide and install new dual car charging station in parking lot at location to be determined by City. Provide power to new charging stations Set new charging stations on new concrete housekeeping pads Provide start-up, energize, test and training with charging station vendor and City Provide and install electrical conduits for communication wiring from the string inverters to the new Data Acquisition System (DAS) Tie in DAS to nearest City provided dedicated IP address Rev. Date: Page 29 of 52 ESC CA Public

43 43 RES. NO ECM Project #3: Library Solar 127kW Facility Address kw dc Library Parking Lot 2969 Tapo Canyon Rd. Simi Valley CA, OpTerra Energy Services will perform the following work: Provide all materials and equipment (string inverters, support structure, PV modules) necessary to install a 127 kwdc shade structure solar PV system String inverters will be column mounted Provide and install LED lighting fixtures on the underside of the array and drive aisles. Tie new LED canopy lighting fixtures into existing City parking lot lighting power circuit. PV Modules to be mounted on galvanized steel purlins per approved drawings Steel structure installed will be primed and painted with one coat of paint. o galvanized purlins will not be painted o conduit will not be painted Steel canopy structure will be designed with a five degree tilt angle Trees located in the general area of the array, which may affect PV output, will be trimmed back or removed by OpTerra Energy Services if less than 9 in diameter, as coordinated with City. Removal of trees affecting PV output, if over 9 in diameter, is excluded and will be the responsibility of City. Replanting of any removed trees, regardless of size, is excluded and will be the responsibility of City. Any damaged irrigation systems will be repaired as required Provide new electrical switchgear for PV system located outside in the south east corner of the building adjacent to the exterior wall of the main electrical room on a new concrete housekeeping pad Perform horizontal boring and/or trenching of existing concrete, hardscape or asphalt areas as required to route conduits from array structure to new electrical switchgear. Repair any damaged concrete, hardscape or asphalt as required Perform underground utility survey to locate any existing unknown utilities that are in the path of horizontal boring, vertical boring or trenching. City to provide as built drawings of all known underground utilities Provide and install a new net generation output meter (NGOM) in the new electrical switchgear to monitor PV production Provide and install electrical conduits and power wiring from the string inverters to the new electrical switchgear Tie in new electrical switchgear into the existing main electrical switchgear panel in the main electrical room. Provide and install electrical conduits for communication wiring from the string inverters to the new Data Acquisition System (DAS) Tie in DAS to nearest City provided dedicated IP address Parking Lot Repair at Library (per highlighted area in picture) Remove and dispose of existing asphalt Provide base as required Compact base and soils as required for new asphalt installation Slurry coat, seal and stripe parking lot area (shown below in hatched area) New wheel stops will be installed at column locations as required and existing wheel stops will be re-installed Rev. Date: Page 30 of 52 ESC CA Public