HomeMy WebLinkAboutResolution 55-14RECORD OF RESOLUTIONS
Dayton Legal Blank, Inc., Fonn No. 30045
Resolution No.
55 -14
Passed — --20
A RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER
INTO AN EQUIPMENT LEASE AGREEMENT BETWEEN THE CITY
OF DUBLIN AND DUBLIN ADVANCED ENERGY PARTNERS, LTD.
WHEREAS, Dublin Advanced Energy Partners, Ltd. is willing to design, construct,
install, own, maintain and lease to the City certain equipment (a combined heat
and power unit), which will simultaneously produce electric and thermal energy
for the Dublin Community Recreation Center (DCRC); and
WHEREAS, the use of combined heat and power is considered by the U.S.
Department of Energy and the U.S. Environmental Protection Agency to be a
highly efficient, clean and green approach to generating electrical power and
capturing wasted thermal energy; and
WHEREAS, the City desires to continue its energy efficiency efforts by entering
into an Equipment Lease, attached hereto as Exhibit A with Dublin Advanced
Energy Partners, Ltd.
NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of Dublin,
State of Ohio, of the elected members concurring that:
Section 1. The City Manager is hereby authorized to execute the attached
Equipment Lease with Dublin Advanced Energy Partners, Ltd. for the design,
construction, installation and lease of certain equipment, which will
simultaneously produce electric and thermal energy for the Dublin Community
Recreation Center.
Section 2. This Resolution shall take effect upon passage, in accordance with
Section 4.04(a) of the Revised Charter.
Passed this 6 Aja day of 2014.
— Presiding Officer
ATTEST:
Clerk of Council
0
Office of the City Manager
5200 Emerald Parkway a Dublin, OH 43017 -1090
City o f Dublin Phone: 614 - 410 -4400 • Fax: 614- 410 -4490
To: Members of Dublin City Council
From: Marsha I. Grigsby, City Manager /Pwl
Date: June 19, 2014
Initiated By: Michelle L. Crandall, Assistant City Manager
Brian Ashford, Facilities Manager
Memo
Re: Resolution 55 -14- Authorizing an Equipment Lease Agreement with
Dublin Advanced Energy Partners, Ltd
Summary
For the past several months, City staff has been working with representatives from IGS Energy and
Hull & Associates, both Dublin -based firms, to negotiate a lease agreement for the installation of a
combined heat and power (CHP) unit at the Dublin Community Recreation Center (DCRC). IGS
and Hull & Associates have formed Dublin Advanced Energy Partners, Ltd. (DAEP) with plans to
expand this business concept, using Dublin as a demonstration site for potential clients. A more
detailed memorandum and information providing a description of the Combined Heat and Power
system, along with the proposed 15 -year equipment lease, was included in Council's June 9
Council packet (attached).
If approved by City Council, the proposed lease agreement would provide a small savings on the
City's current electricity rates (approximately 8.3 cents per kWh versus the approximate 8.4 cents
per kWh that the City is currently paying). However, these savings are expected to grow over time
due to the fact that the lease rate is frozen for five years, while electricity rates will likely increase.
A major benefit of this technology will be the ability to utilize the "waste" heat from the engine to
assist in providing the hot water needed to heat much of the DCRC in the winter and the pools
year round. Additionally, the boilers will not need to run as long, which will result in an
undetermined savings on natural gas costs. The City will also save approximately $60,000 in
capital costs with one of the three boilers scheduled to be replaced no longer being needed.
Recommendation
Staff recommends approval of Resolution 55 -14 authorizing the City Manager to execute an
equipment lease agreement with Dublin Advanced Energy Partners, Ltd.
Office of the City Manager
5200 Emerald Parkway • Dublin, OH 43017 -1090
City of Dublin Phone: 614 - 410 -4400 • Fax: 614 - 410 -4490
To: Members of Dublin City Council
From: Marsha I. Grigsby, City Managervv\�
Date: June 5, 2014
Initiated By: Michelle L. Crandall, Assistant City Manager
Brian Ashford, Facilities Manager
Memo
Re: Combined Heat and Power Unit at the Dublin Community Recreation Center
Summary
For the past several months, City staff has been working with representatives from IGS Energy and
Hull & Associates, both Dublin -based firms, to negotiate a lease agreement for the installation of a
combined heat and power (CHP) unit at the Dublin Community Recreation Center (DCRC). IGS
and Hull & Associates have formed Dublin Advanced Energy Partners, Ltd. (DAEP) with plans to
expand this business concept, using Dublin as a demonstration site for potential clients. A draft of
the agreement and a power point overview are attached for Council's review. This agreement will
be brought forward to Council as a resolution at the June 23 Council meeting.
The following is a summary of the technology and the proposed agreement.
Combined Heat and Power Systems
A combined heat and power system provides for the generation of electricity and usable thermal
energy via one fuel source. The unit planned for installation at the DCRC would be fueled by
natural gas and would produce 248kW of electricity /hour, providing 60% of the building's power
needs. Additionally, the thermal energy expended by the unit would be captured and used to pre-
heat the water used in the building's boilers, which primarily heat the swimming pools. This would
reduce boiler operation time, as well as reduce maintenance of the boilers and extend their
replacement life - cycle. Finally, the system will continue running when there is a loss of grid
power, allowing for continued use of most of the facility during power outages.
Combined heat and power is considered by the U.S. Department of Energy and the U.S.
Environmental Protection Agency to be a highly efficient, clean and green approach to generating
electrical power and capturing otherwise wasted thermal energy. An August 2012 report co-
authored by these two agencies cites that the "average efficiency of power generation in the
United States has remained at 34 percent since the 1960s." The CHP unit planned for installation
in the DCRC has an estimated energy efficiency of 90 %.
Equipment Lease
The proposed equipment lease would be for a 15 -year period. The lease is based upon the
equipment's actual kilowatt hours produced. During the first five years of the agreement, the rate
is set at $12.5215/KWh. Assuming an annual equipment operation of 8,232 hours, the lease for
the first five years would be $8,589.74/month ($103,077 annually). Years 6 -15 of the agreement
would include an annual escalating increase of 3 %. Appendix 3 of the attached draft agreement
shows the detailed calculations of the estimated lease rates. The City would only pay for the
Memo re. Combined Heat and Power Unit at the Dublin Community Recreation Center
June 5, 2014
Page 2 of 2
annual kilowatt hours generated, which will be tracked by a meter mounted to the CHP unit.
Should the equipment not operate for the full 8,232 hours anticipated or at the capacity estimated,
the lessor would issue a capacity adjustment against the affected year's invoice at the end of the
year. At the conclusion of the 15 -year lease, the City would have the option to purchase the
system, extend the lease or request that the equipment be removed at the owner's expense.
DAEP would be responsible for the installation, operation and maintenance of the system during
the entire 15 years of the agreement.
Direct energy cost savings are estimated to be $19,046 for the first five years of the agreement.
Other indirect savings include that the City would not need to replace an existing boiler that is
planned for replacement in 2015 (at an estimated cost of $69,046) and the City would not need to
invest in an additional generator to provide back -up power during power loss (at an estimated cost
of$100,000). While the overall energy cost savings do not appear to be dramatic, this investment
provides a solution that is much more energy efficient and uses natural gas as the source fuel,
which is a cleaner fuel with lower emissions.
In addition to IGS Energy and Hull & Associates, other Dublin -based companies involved with this
project include Prater Engineering, Kinetics Noise Control and Air Force One. The City of Dublin
CHP unit will be the first installation of this type in Central Ohio. More than 50 CHP units are
installed in manufacturing, university, museum and military facilities throughout Ohio.
Recommendation
For information only. Should you have questions regarding this memorandum, please contact
Michelle Crandall at 410 -4403 (desk) or 206 -4886 (mobile).
City of Dublin
Combined Heat and Power (CHP) Project
May. 271h,2014
@@ Agenda
Project Summary
Value of CHP System to the City
CHP Equipment Lease Agreement
Project Responsibilities
43 Next Steps
1 00 Project Summary
a
0
A Combined Heat & Power (CHP) System will be installed at the Dublin Community Recreation Center
( "DCRC ")
— IGS Generation & Hull & Assoc., dba Dublin Advanced Energy Partners ( "DAEP "), will design, build, own
and maintain the new CHP facility.
What is a CHP System?
— System that produces electricity and usable thermal energy via the same input fuel source.
OLD NEW
TRADITIONAL ICHP SYSTEM'
® HEAT HFAT
■�
Boller �
g POWER
`M1 PowER `• E � POWER
1i //
The system will use natural gas as its fuel source: Natural Gas
Produce 248kW of electricity per hour, totaling 60% of the building's power needs.
Provide 1.5 million BTU of thermal energy per hour totaling 50% of the building's heating needs,
primarily serving the heated swimming pools.
® Total system efficiency over 90 %.
3
no CHP Provides Backup Power
The CHP system is enabled to run in "island mode"
The system will be able to continue running when there is a loss of grid power
This enables DCRC to continue using the building for emergency operations during power
outages
12
Ing Local Project Development Team
e Hull & Associates — Dublin -based project developer and 50% owner
0 IGS Energy— Dublin -based project developer and 50% owner
0 WW Williams — Local CHP system vendor (MTU Onsite Power)
0 Prater Engineering — Dublin -based CHP facility design /engineering
a Kinetics Noise Control — Dublin -based CHP system enclosure
Settle -Muter Electric — Local electrical contractor
0 Air Force One — Dublin -based mechanical contractor
5
100 Significant Value to the City of Dublin
--------------------------------------------
Immediate cost savings Grid Resiliency
Eliminates need for a boiler ; System provides backup power ,
replacement, saving nearly during grid outage — saving
$50,000 $100,000 over installing a
CHP system installed by similar sized backup generator
Hull /IGS at no cost
' Green energy solution '
Protection against rising ; Aligns with City's vision for the
energy costs future: It's Greener in Dublin
Long -term lease agreement
provides rice stability for ' 4 ,
p P Y Annual Savings: , �
15 years i — 187 cars taken off the road
Projected to save DCRC over i — 7 acres of forest preserved '
$260,000 in utility bills over
15 years i — 126 homes of CO2 emissions
900 tons of CO2 removed
��------- ---------------- --------- - - - - -- ---------
IMM CHP Saves DCRC on 5 Year Energy Costs
------------------------------------------------
Bills Years 1— 5 Without CHP
AEP Charges
$884,360 '
Columbia Charges
$303,737
'
Total $1,.188,,097
-- --
Bills Years 1— 5 With CHP
DAEP Charges i $ 504,567 '
Columbia Charges $664,484
Total ' '
$1,169,051 ,
---------- T --------- - - - - -- —
' 5 Year Utility Savings $19,046 '
5 Year Savings Including Boiler '_ _ _ _ _ _ _ _ _ _ _ _ _ $ 69 046 * '
Including Backup Gen Solution ; _ _ $169,046 **
-------------------------- - - - - -- _. --
*Assumes $50,000 boiler value
* *Assumes $100,000 backup solution value
7
Ion CHP Saves DCRC on 15 Year Energy Costs
_____________ _______________________________
Bills Years 1 -15 Without CHP
AEP Charges
$3,126,086
Columbia Charges
$1,064,049
' Total '
_ $4,190,1
, � -------------------- - �
Bills Years 1 -15 With CHP
' DAEP Charges
$1,696,132
Columbia Charges $2,233,704
Total '
$3,929,836 �
— — — — T — — — — — — —
� � 1
' 5 Year Utility Savings $260,299
5 Year Savings Including Boiler 1 $310,299 * '
_________________ __ _________________________
8 ®` Including Backup Gen Solution $410,299 **
e o
_ o
*Assumes $50,000 boiler value
* *Assumes $100,000 backup solution value 8
1,00 Long -Term Lease Agreement
0 The DCRC and DAEP will enter into a 15 -year CHP System Lease Agreement
— DCRC utilizes all of the electricity and thermal energy generated by the
CHP system
® City pays an hourly rate for the use of the CHP system.
— DAEP will provide a monthly invoice based on the total CHP run hours for
the previous month.
— The first 5 years of the contract will have a fixed hourly rate, then rates
escalate 3% annually until the end of the 15 -year term.
At the end of the initial term the DCRC will have the options to:
T, Purchase the system
4 Extend the contract
a Request equipment to be removed at owner's expense.
E
'N Project Responsibilities
0 Operations
— DAEP will be responsible for installation, operation and ongoing
maintenance of the CHP system for 15 years.
The CHP system will be equipped with remote monitoring which will be
managed by DAEP.
— The DCRC will always remain grid connected. In the event the CHP system is
unavailable, the system will revert to how it operates today:
Electricity required will be supplied from the grid (AEP).
Boilers will supply all the heat and simply operate at a higher load
Financial Obligations
-- DAEP is responsible for all capital investment and maintenance costs.
— DCRC is responsible to pay an hourly rate for the leased equipment, unless
the system is unavailable outside of its control.
10
Ing Location of CHP System
MODEL OF CHP SYSTEM
Installed in the dumpster area of
DCRC, north of chiller systems
• Installed in noise - reducing
enclosure to minimize sound to
visitors
• Kiosk inside DCRC being
considered to provide educational
opportunities for visitors
FINAL DRAFT
Equipment Lease
Between
Dublin Advanced Energy Partners, Ltd.
And
City of Dublin, Ohio
TABLE OF CONTENTS
Page
ARTICLE 1 AGREEMENT DEFINITIONS ................................................... ..............................1
ARTICLE 2 DESCRIPTION OF SYSTEM .................................................... ............................... 5
2.1 GENERAL DESCRIPTION OF SYSTEM ............................. ............................... 5
2.1.1 System ........................................................................... ..............................5
2.1.2 Detailed Designs Subject To Approval ........................ ............................... 5
2.1.3 Selection Of Contractors .............................................. ............................... 5
2.1.4 Point Of Delivery ......................................................... ............................... 5
2.2 LOCATION ............................................................................... ..............................6
ARTICLE 3 SYSTEM REQUIREMENTS ..................................................... ............................... 6
3.1 INSTALLATION OF SYSTEM ............................................ ............................... 6
3.2 PRODUCTION OF ENERGY ................................................. ............................... 6
3 .3 STATUS REPORTS ................................................................ ............................... 6
3 .4 LICENSE ................................................................................... ..............................6
3.4.1 Lessor Use Of License ................................................. ............................... 6
3.4.2 Interference with Uses .................................................. ............................... 7
3.4.3 Condition Of Licensed Area ......................................... ............................... 7
ARTICLE 4 RENT AND PAYMENT TERMS .............................................. ............................... 6
4.1 RENT ...................................................................................... ............................... 6
4.1.1 Annual Estimation of Equipment Hours and Rent ....... ............................... 7
4.1.2 Adjustment to Rent Based on Actual Equipment Hours ........................... 7
4 .1.3 Annual Statement ....................................................... ............................... 7
4.1.4 Lessor's Records ........................................................ ............................... 8
4.2 ENVIRONMENTAL ATTRIBUTES AND TAXES .............. ............................... 8
4.2.1 Environmental Attributes ............................................. ............................... 8
4.2.2 Taxes ............................................................................. ..............................8
4.3 BILLING AND PAYMENT .................................................... ............................... 8
4.3.1 Invoices ........................................................................ ............................... 8
4.3.2 Payments . .................................................................................................... 8
4.3.3 Invoice Errors ............................................................... ............................... 9
ARTICLE 5 TERM AND TERMINATION .................................................... ............................... 9
5.1 TERM ...................................................................................... ............................... 9
5.2 SCHEDULE OF CONSTRUCTION ....................................... ............................... 9
5.3 FORCE MAJEURE .................................................................. ............................... 9
5.4 DELAYS AND REMEDIES .................................................... ............................... 9
5.5 EXPIRATION OF TERM; EXTENSION; PURCHASE ........ .............................10
ARTICLE 6 OBLIGATIONS OF THE PARTIES .......................................... .............................10
6.1 LESSOR'S OBLIGATIONS .................................................... .............................10
6.1.1 Financing Condition ............................. ............................... 10
6.1.2 Permits And Licensing ................................................. .............................10
6.1.3 Maintenance Of System ............................................... .............................10
6.1.4 Inspection ..................................................................... .............................11
6.1.5 Communications And Telemetry .............................. ............................... 11
6.1.6 Electric Utility Standby Charges ................................ ............................... 11
6.2 LESSEE'S OBLIGATIONS .................................................... .............................12
6.2.1 General ......................................................................... .............................12
6.2.2 Protection Of Facilities ................................................. .............................12
6.3 OBLIGATIONS OF BOTH PARTIES .................................. ............................... 12
6.3.1 Inspection ..................................................................... .............................12
6.3.2 System Disconnect ....................................................... .............................12
ARTICLE 7 DEFAULT AND REMEDIES .................................................... .............................12
7.1 DEFAULT ................................................................................ .............................12
7.2 LENDER'S CURE PERIOD .................................................... .............................13
7.3 REMEDIES UPON DEFAULT ............................................... .............................13
ARTICLE 8 WAIVER OF CONSEQUENTIAL DAMAGES ..................... .............................14
8.1 WAIVER .................................................................................. .............................14
8.2 COOPERATION ...................................................................... .............................14
ARTICLE 9 GENERAL PROVISIONS .......................................................... .............................14
9.1 REPRESENTATIONS AND WARRANTIES ........................ .............................14
9.2 ASSIGNMENT; SUCCESSORS ............................................. .............................15
9.2.1 Assignment ................................................................... .............................15
9.2.2 Encumbrances .............................................................. .............................15
9.3 INSURANCE ........................................................................... .............................16
9.3.1 Required Insurance Coverage ...................................... .............................16
9.3.2 Property Damage And Casualty Insurance .................. .............................16
9.3.3 No Decreases ................................................................ .............................16
9.3.4 Additional Insured ........................................................ .............................16
9.3.5 Alternative Forms Of Coverage ................................... .............................16
9.4 GOVERNING LAW; WAIVER OF WARRANTIES ............. .............................17
9.5 FURTHER ASSURANCES ..................................................... .............................17
9.6 SEVERABILITY ..................................................................... .............................17
9.7 MODIFICATION OR AMENDMENT ................................... .............................17
9.8 NO DUTY TO THIRD PARTIES ........................................... .............................17
9.9 NO PARTNERSHIP ................................................................ .............................17
9.10 NON- WAIVER ........................................................................ .............................17
9.11 CAPTIONS .............................................................................. .............................18
9.12 ENTIRE AGREEMENT .......................................................... .............................18
ARTICLE10 NOTICES .................................................................................. .............................18
ARTICLE 11 DISPUTE RESOLUTION ......................................................... .............................18
11.1 SCOPE ...................................................................................... .............................18
11.2 INFORMAL DISPUTE RESOLUTION PROCEDURES ....... .............................18
11.3 MEDIATION ........................................................................... .............................18
11.4 LITIGATION ........................................................................... .............................19
11.5 PROVISIONAL REMEDIES .................................................. .............................19
APPENDIX
1. EQUIPMENT, SPECIFICATIONS AND MINIMUM OUTPUT REQUIREMENTS OF
SYSTEM
2. LICENSED AREA
3. RENT SCHEDULE /CAPACITY REDUCTION CREDIT
EQUIPMENT LEASE
This Equipment Lease (the "Lease ") is entered into as of February _2014 (the "Execution Date "),
by and between City of Dublin ( "Lessee "), and Dublin Advanced Energy Partners, Ltd., an Ohio
limited liability company ( "Lessor ") (together, the "Parties ").
RECITALS:
WHEREAS, Lessor is willing to design, construct, install, own, maintain, and lease to Lessee
certain equipment (`Equipment," the major components of which are as more particularly
described below and in Appendix 1) which will simultaneously produce electric and thermal
energy for Lessee; and
WHEREAS, Lessee owns and operates a facility located at 5600 Post Road, Dublin, Ohio 43017,
and wishes to lease Lessor's Equipment on its Facilities for purposes of satisfying a portion of
Lessee's electricity and thermal energy requirements; and
WHEREAS, using natural gas as a fuel source, this Equipment will produce electric and thermal
energy and deliver such electricity and thermal energy to Lessee's on- premises electricity
distribution network and hot water network respectively; and
WHEREAS, Lessor wishes to lease to Lessee, and Lessee wishes to lease from Lessor the
Equipment at the rent set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties agree as follows:
ARTICLE 1
DEFINITIONS
The capitalized terms listed in this Article shall have the meanings set forth herein whenever the
terms appear in this Lease, whether in the singular or the plural or in the present or past tense. Other
terms used in this Lease but not listed in this Article shall have meanings as commonly used in the
English language and, where applicable, in Good Utility Practice.
"Affiliate" means any other person or entity that controls, is under the control of, or is under
common control with, the named entity.
"Business Day" means any day except a Saturday, Sunday or a Federal Reserve Bank holiday. A
Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time for the relevant Party's
principal place of business.
"Capacity Reduction Credit" means the credit in an amount calculated according to the formula
set forth on Appendix 3.
"Communications and Telemetry Equipment" is the telemetering, communications, and data
acquisition equipment that is necessary for the effective operation of the Equipment within any
applicable regulations and requirements of the transmission provider in addition to those required
by any Interconnecting Utility. The Communications and Telemetry Equipment may include
communication and data transmission (telemetering) facilities operable from any single location
designated by Lessee, from time to time (in addition to those required by the Interconnecting
Utility).
"Completion Date" means the date when System Completion has occurred and Lessor has
delivered Notice to Lessee of the same.
"Debt" means the full obligations of Lessor under any loan, credit agreement, note, bond,
mortgage or other financing or refinancing document with a lender, including, without limitation,
any mortgagees or lessees in the case of lease financing.
"Default" has the meaning set forth in Article 7 below.
"Electric Energy" means the electrical power measured in kilowatt hours ( "kWh ") and capacity
generated from the Equipment over the proposed Term, consistent with the specifications and
Minimum Output Requirements set forth in Appendix 1.
"Emergency" means any abnormal interconnection or system condition including, but not limited
to, equipment or transmission limitations and constraints caused by thermal limits, stability,
voltage, or loop flows that the transmission provider, Interconnecting Utility, or Lessee determines,
in its sole discretion (exercised in accordance with Good Utility Practices) requires automatic or
immediate manual operation to prevent or limit loss or damage to the Facilities or generation
supply, any interconnected electric system, or could otherwise pose a threat to public safety.
"Energy" means, collectively, the Electrical Energy and Thermal Energy.
"Environmental Attributes" means all environmental, economic, and other related credits,
emissions credits, Renewable Energy Certificates, allowances, state, federal or local tax credits, air
emissions credits, and emissions reductions credits, offsets, allowances or benefits that are
attributable to the capacity of the System and the Energy generated during the Term.
Environmental Attributes includes not only the described credits, offsets, allowances, or benefits
that are now available, but also those that may become available in the future for Energy generated
by the Equipment during the Term.
"Equipment" means a cogeneration facility owned by Lessor and located on Lessee's Facilities as
described in further detail at Appendix 1 and built and maintained in accordance with this Lease.
Equipment includes without limitation the generator, gas conditioning equipment, step -up
transformers, electric energy collection network, output breakers, inverters, power lines, pipes,
pumps, plumbing, heat exchangers and any other tangible assets, land rights and contract rights
obtained by Lessor that are reasonably necessary for the construction and maintenance of the
Equipment that produces and delivers to Lessee Energy under this Lease.
-2-
"Equipment Hours" means, with respect to the Equipment, the total number of hours the
Equipment was used by Lessee in the production of Energy during any period of time.
"Facilities" means Lessees real property located at 5600 Post Road, Dublin, Ohio 43017, and all
fixtures and personal property located thereon including, without limitation, all wiring, meters,
service panels, boiler, pipes, pumps and plumbing and other related equipment, components or
devices existing on Lessee's side of the Point of Delivery, including the AC disconnect box
through the end use in Lessee's facility, as may be repaired, upgraded or replaced, through the
Term of this Lease.
"Force Majeure" means an event or circumstance or combination of events or circumstances
beyond the reasonable control of the Party claiming the Force Majeure, including, but not limited
to acts of God; strikes, lockouts, and/or violent labor disputes; terrorism, sabotage, war or riots;
explosions; severe cold or hot weather or other extreme weather conditions; other actions of the
elements such as floods, earthquakes, lightening or hurricanes. Notwithstanding the foregoing,
Lessor shall prepare and, if necessary, implement contingency plans allowing for continued
operation of the Equipment during strikes or labor disputes involving Lessor or any contractor or
sub - contractor selected by Lessor.
"Forced Outage" means any condition resulting from immediate mechanical, electrical or
hydraulic control system trips or operator - initiated trips in response to System conditions or alarms
at the System that requires immediate removal of the Equipment, or some part thereof, either from
service, another outage state, or a reserve shutdown state.
"Good Utility Practice(s)" means the standard of care required to be exercised by Lessor based on
the practices, methods, and acts that, at a particular time, in the exercise of reasonable judgment in
light of the facts known or that should reasonably have been known at the time a decision was made,
would have been expected to accomplish the desired result in a manner consistent with law,
regulation, codes, standards, equipment manufacturer's recommendations, reliability, safety,
environmental protection, economy, and expedition. Good Utility Practice is not intended to be
limited to the optimum practice or method to the exclusion of all others, but rather to be acceptable
practices, methods, or acts generally accepted in the region.
"Interconnection Agreement" means the agreement between Lessee and the Interconnecting
Utility, if any, which relates to this Equipment and has been prepared by the Lessor and reviewed
and approved by the Lessee.
"Interconnecting Utility" means AEP Ohio, or any other utility or corporation that provides
electrical power to the area where Lessee is located to the extent that performance of the Lease
involves such an interconnection. For purposes of this Lease, "Interconnecting Utility" also means
PJM Interconnect LLC, or any successor entity.
"Interconnection Facilities" means all of the facilities, if any, installed by Lessor for the purpose
of interconnecting the Equipment to the Interconnecting Utility's system including, without
limitation, transformers and associated equipment, relay and switching equipment, and safety
equipment, all as more fully described in the Interconnection Agreement.
-3-
"Interest Rate" means, for any date, the lesser of (a) the per annum rate of interest equal to the
prime lending rate as may from time to time be published in The Wall Street Journal under "Money
Rates" on such day (or if not published on such day on the most recent preceding day on which
published), plus two percent (2 %) and (b) the maximum rate permitted by applicable law.
"Laws" means all applicable national, state or local laws of the United States of America or any
political subdivisions thereof including statutes, regulations, by -laws, ordinances, codes, and
instructions of governmental or local authorities and related consents, approvals, licenses or
permits applicable to the System.
"Lease" has the meaning stated in the introductory paragraphs of this Lease and includes all
Exhibits attached hereto.
"Licensed Area" means the area within the Facilities where the System is located and such
surrounding areas and ingress and egress as are reasonably necessary for Lessor to install and
maintain the System as specified in the site plan which has been designated as Appendix 2 to this
Lease.
"Metering Equipment" means any meters and appurtenances thereto to measure the Electric
Energy produced by the Equipment and delivered to Lessee. Such meters shall be utility grade
meters.
"Minimum Output Requirements" means the minimum Electric Energy and Thermal Energy
required to be produced by the System as further described on Appendix 1 to this Lease.
"Notice" means a written communication delivered to the other Party at a location and through
verifiable means as specified in Article 10.
"Operating Records" means the System operating logs, blueprints for construction of the System,
invoices for all Equipment components comprising the System, all operating manuals, all
warranties on Equipment, and all other documents and agreements associated with the System,
whether in printed or electronic format, that the Lessor uses or maintains for the System.
"Party" or "Parties" has the meaning stated in the introductory paragraph of this Lease.
"Point of Delivery" means the point of interconnection where Electric Energy and Thermal
Energy are discharged from the Equipment or at such other point as the Parties, from time to time,
may agree to in writing.
"System" means the Equipment, Metering Equipment, Point of Delivery, and connection to the
Interconnection Facilities.
"System Completion" shall occur when (i) the System is constructed in accordance with Good
Utility Practices and is available to receive and deliver Energy from the Equipment; and (ii)
-4-
approvals have been received that are required by the Federal Energy Regulatory Commission or
the Public Utilities Commission of Ohio, if any, for the System to deliver Energy.
"Tariff Schedule" means the schedule for Electric Energy utilized by the Lessee from its
Interconnecting Utility.
"Taxes" means federal, state and local taxes of whatever kind, including, without limitation, sales,
use, kilowatt-hour, excise, property, governmental charges, licenses and fees.
"Term" shall have the meaning set forth in Article 5 hereof.
"Thermal Energy" means the thermal energy measured in British thermal units ( "Btu ") generated
from the production, sale and delivery from the Equipment to Lessee over the proposed Term,
consistent with the specifications and Minimum Output Requirements set forth in Appendix 1.
ARTICLE 2
DESCRIPTION OF SYSTEM
2.1 GENERAL DESCRIPTION OF SYSTEM
2.1.1 System. The System has been or will be designed by Lessor as a 248 kW
cogeneration facility using natural gas as its fuel source. Lessor shall own the Equipment
and maintain the System to purposefully meet the obligations established by this Lease.
Lessee shall have no ownership interest in or duty to maintain and repair the System.
2.1.2 Detailed Designs Subject To Approval. Lessor shall provide detailed designs of
the System to Lessee for approval, which shall not be unreasonably withheld or delayed.
2.1.3 Selection of Contractors. Lessor shall utilize qualified contractors and
sub - contractors for the design, construction, and maintenance of the System. All such
contractors and sub - contractors shall be required by Lessor to follow Lessee's health and
safety rules and Lessee's security procedures, and unless Lessor grants a waiver in writing,
all contractors and sub - contractors shall be required by Lessor to maintain the same levels
and types of insurance specified herein for Lessor. Lessor shall indemnify and save Lessee
harmless against any claims made by a supplier as a result of the supplier's interaction with
Lessor.
2.1.4 Point Of Delivery. The Point of Delivery shall be the points of direct
interconnection with Lessee's facility for Electric Energy and Thermal Energy as agreed
upon by the Parties, and more particularly described in Appendix 1. Lessor shall install the
Metering Equipment such that there will be one meter at the Point of Delivery to measure
Electric Energy generated by the Equipment, and Lessor will coordinate with the
Interconnecting Utility to ensure the installation of equipment required by the
Interconnecting Utilities' net metering agreement.
-5-
2.2 LOCATION
All components of the System, including but not limited to, the Equipment, the generator, the gas
conditioning equipment, and the power lines, shall be constructed within the Licensed Area. If any
of these locations are determined by Lessor or Lessee to be technically unfeasible, the Parties shall
select a modified location through mutual agreement and shall amend the Licensed Area set forth
on Appendix 2.
ARTICLE 3
SYSTEM REQUIREMENTS
3.1 INSTALLATION OF SYSTEM
Lessor agrees to design, construct, install, maintain and operate the System within the Licensed
Area in accordance with Good Utility Practices and achieve System Completion on or before the
Completion Date. Lessor shall use reasonable commercial efforts to ensure that the necessary
construction work does not interfere with Lessee's ongoing operations at this facility.
3.2 PRODUCTION OF ENERGY
Lessor represents and warrants that the upon System Completion, the System will provide the
Minimum Output Requirements of Electric Energy and Thermal Energy in any year during the
Term equal to the minimum amounts set forth in Appendix 1. Subject to Section 6.1.7, in the event
the System fails to meet the Minimum Output Requirements for more than twenty -four (24) hours
for reasons other than Force Majeure, then Lessor shall be entitled to a Capacity Reduction Credit.
3.3 STATUS REPORTS
Lessor shall provide monthly status reports to Lessee on or about the first day of each month
regarding the construction of the System beginning in the month following the Execution Date of
this Lease and continuing until the Completion Date. These status reports shall describe the work
that has been completed in the preceding month, the work that is scheduled for the upcoming
month and any delays which may cause the System Completion to occur after the Completion
Date.
3.4 LICENSE
Lessee hereby grants to Lessor, its specified agents and specified contractors a license, for the
Term of this Lease, to enter upon, use and occupy the Licensed Area for the purpose of
construction, installation, repair, and maintenance of the System subject to Lessee's superior rights
to occupy, use and enjoy all of Lessee's Facilities.
3.4.1 Lessor's use of License. Lessor may not use or allow the use of the Licensed Area
for any purpose other than design, construction, repair, and maintenance of the System in
accordance with this Lease. Lessor and its agents and contractors will comply with all
commercially reasonable rules and regulations adopted by the Lessee for the Facilities,
In
including, but not limited to, rules and regulations governing use of firearms, alcohol, or
illegal drugs.
3.4.2 Interference with Uses. Lessor shall not create or permit any nuisance in the
Licensed Area nor unreasonably obstruct or interfere with Lessee's use of its Facilities and
shall operate the System so as to minimize any interference with the Lessee's use of the
Facilities. Lessee may construct, re- construct or modify Lessee's Facilities so long as such
activities do not unreasonably interfere with Lessor's property use rights as described
herein.
3.4.3 Condition of Licensed Area. Lessor shall inspect the Licensed Area and may
utilize such experts as the Lessor may choose and at Lessor's expense. Lessee shall
cooperate with any studies or inspections as required to assure that the Licensed Area is in a
suitable condition for placement and operation of the System and shall promptly remedy
any deficiencies, subject to Lessor's prior consent and approval.
ARTICLE 4
RENT AND PAYMENT TERMS
4.1 RENT
4.1.1 Annual Estimation of Equipment Hours and Rent. Lessor and Lessee shall
mutually agree on an estimate of the total Equipment Hours used for the Equipment during
each calendar year of the Term, as more fully detailed in the attached Appendix 3 (the
"Rent "), and Lessee shall pay said Rent in equal monthly installments in advance.
Notwithstanding anything to the contrary herein, the Lessor and Lessee agree that the
Equipment Hours and corresponding rates may be adjusted based on actual amount of Electric
Energy and Thermal Energy produced by the System pursuant to Section 3.2.
4.1.2 Adjustment to Rent Based on Actual Equipment Hours. In the event that the
estimated Equipment Hours is less than the actual Equipment Hours utilized, calculated as of
the last day of each calendar year, then the resulting deficiency in Rent otherwise due by
Lessee shall be paid to Lessor within 30 days after demand therefor. In the event that the
estimated Equipment Hours is more than the actual Equipment Hours utilized, calculated as of
the last day of each calendar year, then the resulting excess in Rent shall be credited against
Lessee's estimate of Rent due in the following calendar year beginning with the first month
and continuing in each successive month until the amount of said excess is entirely credited;
provided, however, if the excess occurs in the last year of the Term, then at Lessee's sole
option, Lessor shall either (i) pay such amount directly to Lessee, (ii) credit such excess
against the estimated Rent for the first year of the extension term pursuant to Section 5.5.1(a)
or (iii) credit such excess against the Lessee's cost of the Equipment pursuant to Section
5.5.1(b).
4.1.3 Annual Statement. Within 30 days following the end of each calendar year, Lessor
shall provide to Lessee a certified statement (the "Statement ") showing: (i) the actual number
-7-
of Equipment Hours incurred by Lessee with respect to the Equipment during such calendar
year, and (ii) the amount of Rent paid by Lessee during such calendar year.
4.1.4 Lessor's Records. Lessor shall maintain, for a period of three years, records of the
Metering Equipment upon which the number of Equipment Hours are calculated each
calendar year. Upon giving Lessor reasonable prior notice, Lessee shall have the right to
examine such records during the normal business hours of Lessor at the place where such
records are kept. If Lessee reasonably takes exception to any matter contained in the
Statement, then Lessor and Lessee shall refer the matter to a mutually acceptable certified
public accountant ( "CPA'), whose certification as to the proper amount shall be final and
conclusive between Lessor and Lessee. Lessee shall promptly pay the cost of the CPA's
certification unless such certification determines that the actual amount of rent charged by
Lessor was in error to Lessee's detriment by five percent or more, in which event Lessor shall
pay the cost of such certification by CPA.
4.2 ENVIRONMENTAL ATTRIBUTES, OTHER INCENTIVES, AND TAXES
4.2.1 Environmental Attributes and Other Incentives. Environmental Attributes that
may result from or be associated with the System, the Electric Energy, Thermal Energy, or
this Lease shall in all cases accrue to and be the sole property of Lessor. All incentives paid
from the applicable natural gas or electric utility through any energy efficiency, demand
side management, or other similar program and related to or arising from the use of the
Equipment under this Lease will be accrued to and shared equally by the parties as follows:
Lessor 50 %, Lessee 50 %.
4.2.2 Taxes. Each Party shall use reasonable efforts to administer this Lease in a manner
that will minimize the imposition of Taxes. Lessee is responsible for paying all applicable
Taxes related to this Lease and operation of the Equipment, except for income tax based on
Lessor's revenue. Lessor will assess, collect, and remit any applicable kilowatt-hour tax;
Lessor will show the kilowatt-hour tax as a separate line item on its monthly invoice to
Lessee.
4.3 BILLING AND PAYMENT
4.3.1 Invoices. Lessor shall provide to Lessee a monthly invoice that specifies during
such period (a) the quantity of Equipment Hours, (b) with respect to the Minimum Output
Requirement, the (i) estimated kWh production, (ii) actual kWh production, (iii)
year -to -date kWh production vs. estimated kWh production, and (c) the total amount of
Rent due and owing by Lessee. Lessee shall pay Lessor not later than thirty (30) days after
receipt by the Lessee of the Lessor's invoice the amount of Rent due as reflected in Lessor's
monthly invoice. If the due date is not a Business Day, then Lessee's payment is due the
next Business Day.
4.3.2 Payments. Without limiting Lessor's other remedies for a breach of this provision,
payment made more than thirty (3 0) business days after Notice from Lessor shall be subject
to an Interest Rate. In the event of partial payment of the invoice, the Interest Rate shall
10
apply only to the unpaid balance. Lessee shall make such payment by wire transfer or ACH
to an account specified in writing by Lessor.
4.3.3 Invoice Errors. Either Party may, within one year of any due date of a monthly
invoice, provide Notice to the other Party of an alleged error in such monthly invoice. If
within such one (1) year period, Lessor or Lessee does not provide Notice to the other Party
of an alleged error in the monthly invoice of which Lessor or Lessee is aware or should be
aware, Lessor or Lessee shall be deemed to have waived any error in the monthly invoice
and such monthly invoice shall be considered correct and complete. In circumstances of
disagreement, Lessor and Lessee shall meet within fifteen (15) days after receipt of Notice
from the other Party to resolve such disagreement. If within thirty (30) days after such
initial meeting the Parties are unable to resolve the disagreement, the matter shall be
resolved in accordance with the dispute resolution procedures set forth in Article 11.
ARTICLE 5
TERM OF LEASE AND TERMINATION
5.1 TERM
The Term of this Lease commences on the Execution Date and shall continue for fifteen (15) full
years from the Completion Date (the "Term "), unless otherwise extended or terminated by the
provisions of this Lease.
5.2 SCHEDULE OF CONSTRUCTION
Lessor agrees that the Completion Date shall occur no later than 24 months from the Execution
Date unless otherwise agreed by the Parties in writing. In the event that the System Completion
does not occur within 24 months of the Execution Date, then Lessee may terminate this Lease upon
thirty (30) days' notice to Lessor and Lessor shall, thereafter, assert no claims against Lessee or
have any rights under this Lease.
5.3 FORCE MAJEURE
If either Party is rendered wholly or partly unable to perform its obligations under this Lease
because of Force Majeure, that Party shall be excused from whatever performance is affected by
the Force Majeure to the extent so affected; provided that: the affected Party gives the other Party
Notice of the occurrence within two (2) days after the affected Party's knowledge that an event
constituting a Force Majeure; the suspension of the affected Party's performance is of no greater
scope and of no longer duration than is required by the Force Majeure; the affected Party uses
reasonable efforts to remedy its inability to perform; and the affected Party resumes performance
of its obligations under this Lease as expeditiously as possible.
5.4 DELAYS AND REMEDIES
The Term of this Lease shall be extended day- for -day for the time period during which a Party is
rendered wholly or partly unable to carry out its obligations under this Lease by a Force Majeure
in
event; provided, however, if the performance of this Lease by either Party is interrupted for more
than six (6) consecutive months, then the other Party may terminate this Lease upon thirty (30)
days Notice.
5.5 EXPIRATION OF TERM; EXTENSION; PURCHASE
5.5.1 No later than one (1) year prior to expiration of the Term and provided no default
currently exists, the Parties shall meet and determine which of the following options Lessee
shall pursue upon expiration of the Term:
(a) Lessee may renew this Lease for a mutually acceptable second term;
(b) Lessee may purchase the System for, and the residual value will be deemed
to be, the sum of $304,747; or
(c) Lessee may terminate this Lease, subject to Section 5.5.2.
5.5.2 In the event the Lessee terminates the Lease pursuant to Section 5.5.1 (c), the Lessor
shall remove the System from Lessee's Facilities and restore Lessee's Facilities to
substantially the same or better condition that existed prior to the Execution Date. Lessee
shall not interfere with Lessor's ability to remove the System provided such removal does
not interfere with Lessee's use of its Facilities. This removal work shall not begin until the
Lease has expired and shall be completed within 120 days after such expiration.
ARTICLE 6
OBLIGATIONS OF THE PARTIES
6.1 LESSOR'S OBLIGATIONS
6.1.1 Financing Condition. Notwithstanding any other provision of this Lease to the
contrary, Lessor's obligations under this Lease shall be wholly conditioned upon Lessor's
ability to obtain adequate financing (in order to consummate the transaction contemplated
under this Lease) within 120 days following the Execution Date, on terms and conditions
satisfactory to Lessor. In the event that Lessor is unable to satisfy the foregoing condition
(the "Financing Condition "), neither Party shall have any liability to the other Party under
this Lease, and this Lease shall be of no further force or effect. Lessor shall give prompt
written notice to Lessee in the event Lessor satisfies or fails to satisfy the Financing
Condition.
6.1.2 Permits and Licensing. Lessor shall be responsible for acquiring all consents,
approvals, permits and licenses necessary for the construction and operation of the System,
including, without limitation, any assistance necessary to obtain zoning modifications that
may be necessary to connect to the Interconnecting Utility. All Lessor applications for
permits, licenses, consents, and approvals, all requests for zoning modifications, and all
agreements with the Interconnecting Utility shall be subject to Lessee's approval, which
may not be unreasonably withheld or delayed.
-10-
6.1.3 Maintenance of System. Throughout the duration of the Term, Lessor will
maintain and keep the System in good condition and repair and working order such that it
will operate in accordance with Good Utility Practices at its full design capacity and
comply substantially with the performance specifications and Minimum Output
Requirements.
6.1.4 Inspection. Lessor shall give Lessee reasonable advance Notice of any test or
inspection of the System, and Lessee may observe the test and conduct its own tests, at
Lessee's expense, to verify Lessor's procedures and results. During any inspection, Lessee
shall conduct itself in such a manner that will not interfere with Lessor's operation of the
Equipment. In the event the results of Lessee's tests indicate that the System is operating
at less than the performance requirements set forth herein contrary to Lessor's tests, then
Lessor shall reimburse Lessee's reasonable cost of such tests.
6.1.5 Communications and Telemetry. Lessor shall, at Lessor's expense, design,
install, own, maintain, and control the Communications and Telemetry Equipment. Lessee
may inspect and review Lessor's Communications and Telemetry Equipment upon
reasonable Notice and during normal business hours and subject to compliance by Lessee
with Lessor's safety guidelines and risk management procedures. Upon request, Lessor
shall provide Lessee with real -time access to the data or other information available from
the System at no cost to Lessee; provided, that the aggregate costs incurred by Lessor in
providing such access shall not exceed an aggregate $1,000.
6.1.6 Electric Utility Standby Charges. Lessor will reimburse Lessee for any standby
charges assessed and collected by Lessee's electric utility as a result of the connection and
operation of the System under this Lease.
6.1.7 Failure to Operate; Inefficient Output. In the event that:
(a) the Equipment fails to operate in its entirety for more than twenty -four (24)
hours, for reasons other than scheduled maintenance or Force Majeure, and
Lessee is required to utilize the Interconnecting Utility for its additional
Electric Energy needs, then Lessor shall reimburse Lessee for the increase in
cost of Electric Energy arising from a change in the Tariff Schedule
assigned by the Interconnecting Utility, if any, arising solely from Lessee's
additional Energy requirements during the period of non - operation
( "Additional Energy Costs "). Payment shall be determined following the
re- commencement of operation of the Equipment and shall be due within
thirty (30) days therefrom. If this Agreement is terminated pursuant to
Section 7, then the calculation of Additional Energy Costs shall continue
through the date of termination.
(b) the Equipment operates but at less than the Minimum Output Requirements
for reasons other than Force Majeure, then, Lessor will (i) issue a Capacity
Reduction Credit to Lessee for the number of Equipment Hours that the
Equipment operated at less than the Minimum Output Requirements and (ii)
reimburse Lessee for any Additional Energy Costs arising from the failure
-11-
of the System to meet Minimum Output Requirements in accordance with
Section 6.1.7(a).
6.2 LESSEE'S OBLIGATIONS
6.2.1 General. Lessee shall, at Lessee's sole expense, maintain and operate Lessee's
Facilities in a commercially reasonable manner throughout the Term and keep Lessee's in
good order and repair.
6.2.2 Protection of Facilities. Lessee shall not do or permit to be done anything that will
invalidate any fire, extended coverage or other insurance covering the System. Lessee
shall comply with all state and federal laws related to the health and safety of persons and
property and shall immediately upon discovery report any damage, loss or injury that may
impact or endanger the System.
6.3 OBLIGATIONS OF BOTH PARTIES
6.3.1 Inspection. Each party has the right, after forty -eight (48) hours advance Notice to
the other party, at its sole expense and during normal business hours, to examine the
applicable records of the other party to the extent reasonably necessary to verify the
accuracy of any statement, charge or computation made pursuant to this Lease. If requested,
Lessor shall provide to Lessee copies of statements evidencing the quantities of Energy
delivered to the Point of Delivery and quantities of excess output produced. If requested,
Lessee shall provide to Lessor copies of statements from the Interconnecting Utility related
to all charges and net metering credits.
6.3.2 System Disconnect. Except in the case of an Emergency, neither Party may
disconnect the System from the Facilities without reasonable prior Notice to the other Party.
Notice should be provided in writing at least ten (10) calendar days prior to any
disconnection, unless such Notice is not practicable, in which case Notice should be
reasonable in time and manner of delivery under the circumstances. In the event of an
Emergency, either Party may disconnect the System immediately and provide Notice to the
other Party as soon as practicable. Notice under this section does not constitute Notice of
Default or any other Notice provided for in this Lease.
ARTICLE 7
DEFAULT AND REMEDIES
7.1 DEFAULT
Each of the following events shall constitute an "Event of Default" hereunder:
(a) the failure to make any undisputed payment required pursuant to this Lease within
ten (10) days of the date due;
-12-
(b) the failure of any material representation or warranty made by a Party herein to be
true and correct which failure is not cured within thirty (30) days after Notice
thereof to such Party;
(c) the failure of either Party to perform any of its material obligations under this Lease
(other than as provided in Section 7.1(d), (e) or (f) below), which failure is not
excused by Force Majeure or cured within thirty (30) days after Notice thereof to
such Party;
(d) in the case of Lessee, the occurrence, in Lessor's reasonable opinion, of a material
adverse change in the financial condition of Lessee which is not cured within sixty
(60) days after Notice thereof;
(e) in the case of Lessor, a failure to operate and maintain the System in accordance
with the terms of this Lease which is not cured within sixty (60) days after Notice
thereof;
(f) in the case of Lessor, a failure within a reasonable time period to achieve System
Completion by the Completion Date or to repair or replace essential components of
the Equipment, including, but not limited to, transformation equipment, the
generator, the gas conditioning equipment, or the power lines linking the
Equipment to the Lessee's Facilities, which is not cured within thirty 60 days after
Notice thereof; or
(g) the filing of a bankruptcy petition by a Party, or the filing of such a petition against
a Party without the petition being vacated within ninety (90) days.
7.2 LENDER'S CURE PERIOD
Notwithstanding any other provision of this Lease, Lessee shall allow Lessor's lenders or equity
investors to cure Lessor's Event of Default by providing them with thirty (30) additional days
following delivery of a Notice of Default provided Lessee determines, in its reasonable discretion,
that any such lenders or equity investors can properly discharge the duties of Lessor.
7.3 REMEDIES UPON DEFAULT
Unless otherwise limited by the terms of this Lease, in the Event of Default, the Parties shall have
the right to pursue any one or more of the following remedies:
(a) The non - defaulting Party may immediately suspend performance of its obligations
under this Lease and withhold any payment due in respect of this Lease until the
Event of Default has been cured in accordance with the terms of this Lease;
(b) The non - defaulting Party may terminate this Lease and accelerate all amounts
owing between the Parties; and
(c) The non - defaulting Party may exercise any other remedy available at law or in
equity.
-13-
In addition to the foregoing remedies, in the event of a termination of this Lease pursuant to Section
7.3, Lessor shall remove the System from Lessee's Facilities and restore Lessee's Facilities to the
substantially the same or better condition that existed on the Execution Date. Lessee shall not
interfere with Lessor's ability to remove the System provided such removal does not interfere with
Lessee's use of its Facilities. The removal work shall not begin until the Lease has been terminated
and shall be completed within ninety (90) following such termination.
ARTICLE 8
WAIVER OF CONSEQUENTIAL DAMAGES
8.1 WAIVER.
EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED
WARRANTIES ARE DISCLAIMED. The Parties waive claims against each other for
consequential damages arising out of or relating to this Lease.
8.2 COOPERATION
The Parties agree to act reasonably in the performance of this Lease. Wherever either Lessee's or
Lessor's approval is required in this Lease, it is understood that such approvals shall not be
unreasonably withheld, delayed or conditioned unless this Lease specifically provides that a
different standard should apply. This Lease to cooperate shall be construed to require each Party to
use its best efforts to cause this Lease to receive approval from all necessary governmental
authorities to enable Lessor to sell Electric Energy and recognize Environmental Attributes in
accordance with the terms and provisions of this Lease (including, without limitation, acceptance
for filing by the Federal Energy Regulatory Commission if applicable and any necessary approvals
from the Public Utilities Commission of Ohio).
ARTICLE 9
GENERAL PROVISIONS
9.1 REPRESENTATIONS AND WARRANTIES
On the effective date of this Lease and throughout the Term of this Lease, each Party hereby
represents and warrants to the other that:
(a) It is duly formed, validly existing and in good standing under the laws of its state of
formation, and has all necessary legal power and authority to enter into this Lease.
(b) The execution, delivery and performance of this Lease and the consummation of the
transactions contemplated hereby have been duly authorized.
-14-
(c) The execution and delivery of this Lease will not result in or constitute any of the
following: (i) a default, or an event that, with notice or lapse of time or both, would
be a default, breach or violation of such Party's articles of association, by -laws,
limited liability company agreement, or other organizational documents or any
instrument, contract or other agreement to which it is a party or by which it or its
property is bound, or (ii) the violation of any law, judgment, order, writ, injunction,
or decree affecting it.
(d) It is not Bankrupt and there are no proceedings pending or being contemplated by it
or, to its knowledge, threatened against it which would result in it being or
becoming Bankrupt.
(e) There is not pending or, to its knowledge, threatened against it or any of its
Affiliates any legal proceedings that could materially adversely affect its ability to
perform its obligations under this Lease.
9.2 ASSIGNMENT; SUCCESSORS
9.2.1 Assignment. Neither Party shall voluntarily assign, sell, transfer, delegate or
declare itself trustee on behalf of any person in regard to (or otherwise deal with in like
manner) its rights or duties under this Lease, or any part of such rights or duties, without the
written consent of the other Party, which will not be unreasonable withheld.
9.2.2 Encumbrances. Lessor, without approval of Lessee, may, in the form of collateral
security, encumber to a lender its interest under this Lease for the purposes of financing the
construction and maintenance of the System. The Parties agree that in the event Lessor
assigns its rights hereunder to a Lender as collateral security: (i) they will not modify or
cancel this Lease without the prior written consent of the Lender; (ii) the Lender shall have
the right, but not the obligation, to do any act required to be performed by Lessor under this
Lease, and any such act performed by the Lender shall be as effective to prevent a Default
as if done by Lessor itself; (iii) no Default which requires the giving of Notice to Lessor
shall be effective unless a like Notice is given to the Lender, and if Lessee becomes entitled
to terminate this Lease due to an uncured Default by Lessor, Lessee shall not terminate this
Lease unless it has first given Notice of such uncured Default to the Lender; (iv) in case of
termination of this Lease as a result of any Default or upon bankruptcy of Lessor, Lessee
shall give prompt Notice to the Lender and, upon written request by the first priority Lender
within thirty (30) days after receipt of Lessee's Notice and agreement by such Lender to
cure all outstanding Defaults of Lessor, agree to enter into a new equipment lease with such
Lender on the same terms and conditions as this Lease and for the period that would have
been remaining under this Lease, but for the termination; and (v) for the purpose of
implementing this Lease, Lessee will from time to time enter into reasonable consents and
agreements with any such Lender. Lessor shall within sixty (90) days after execution of
this Lease identify in writing any Lenders providing financing for this Equipment;
thereafter, if Lessor obtains additional Lenders, Lessor shall notify Lessee in writing. The
Parties further agree that they shall at any time during the term of this Lease within ten (10)
days after receipt of a Notice from the other Party, execute a written statement certifying
that this Lease is unmodified and in full force and effect (or modified and stating the
-15-
modification) and that no Defaults exist (or that Defaults exist and the nature of such
Defaults). Except as otherwise stated, this Lease inures to the benefit of the Parties, their
successors and permitted assigns.
9.3 INSURANCE
9.3.1 Required Insurance Coverage. Lessor shall, at its sole expense, maintain in full
force during the term of this Lease the following occurrence form insurance and shall
provide certificates of such insurance to Lessee before the commencement of any work
hereunder and thereafter on a yearly basis:
(a) Workers' Compensation: Statutory;
(b) Employer's Liability: $1,000,000 US;
(c) Comprehensive General Liability (including personal injury and property
damage): $1,000,000 US per occurrence;
(d) Automotive Liability (including personal injury and property damage):
$1,000,000 US per occurrence; and
(e) Professional Liability Insurance for design services with respect to the
System, written on either an "occurrence" or "claims made" basis, with
limits of liability not less than $1,000,000 per claim/$ 1,000,000 annual
aggregate, and with a deductible no greater than $25,000 insuring against any
liability described above and/or rising out of or in connection with the
negligent acts, errors or omissions of Lessee or any consultant in connection
with the carrying out of their responsibilities under this Lease.
9.3.2 Property Damage and Casualty Insurance. Lessee shall, at its sole expense,
maintain property damage and casualty insurance, sufficient to cover the depreciated
replacement value of the Equipment and identify Lessor as the sole loss payee thereon.
Lessee shall provide certificates of such insurance to Lessor on a yearly basis.
9.3.3 No Decreases. Such certificates specified in Section 9.3.1 above shall name Lessee
as an additional insured and shall not be cancelable on less than thirty (30) days' notice to
Lessee. If Lessor's insurance coverages increase in the areas stated in Section 9.3.1, then
new certificates shall be issued to reflect such increased coverages. In no event shall the
amount of coverage be decreased below the amounts stated in Section 9.3.1 without the
prior written agreement of Lessee. Any new certificates shall not be cancelable on less than
thirty (30) days notice to Lessee.
9.3.4 Additional Insured. Lessor shall name Lessee as an additional insured on
insurance coverage specified in this Section 9.3.1. Lessor shall furnish the other with
Certificates of Insurance evidencing compliance with this Section and shall provide Notice
of any material change, modification or cancellation of any insurance policy.
-16-
9.3.5 Alternative Forms of Coverage. Insurance coverage required by this Section may
be provided under blanket insurance policies so long as coverage amounts are consistent
with the requirements of this Section.
9.4 GOVERNING LAW
This contract shall be governed by the laws of the state of Ohio, without reference to principles of
conflict of law.
9.5 FURTHER ASSURANCES
If either Parry determines in its reasonable discretion that any further instruments, assurances or
other things are necessary or desirable to carry out the terms of this Lease, such Parry shall make a
written request for such from the other Party. The Party receiving such request shall reply to such
request within thirty (30) days of its receipt of such request, either complying with the request or
providing reasons for failure to comply with the request.
9.6 SEVERABILITY
If any term or provision of this Lease, or the application thereof to any person, entity or
circumstances is to any extent invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons, entities or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforceable to the fullest extent permitted by law.
9.7 MODIFICATION OR AMENDMENT
No modification or amendment of all or any part of this Lease shall be valid unless it is reduced to
writing that expressly states that the Parties thereby agree to a modification or amendment as
applicable and such writing is signed by both Parties.
9.8 NO DUTY TO THIRD PARTIES
Except as otherwise specifically provided in this Lease, nothing in this Lease, or any action taken
hereunder, shall be construed to create any duty, liability or standard of care to any person other
than a Party. Except as specifically set forth in this Lease, this Lease is not intended to create and
does not create any rights in or benefits to any third party.
9.9 NO PARTNERSHIP
Nothing contained in this Lease shall be construed to create an association, trust, partnership or
joint venture or impose a trust or partnership duty, obligation or liability between or among the
Parties.
9.10 NON - WAIVER
-17-
Except as expressly provided herein, failure to enforce any right or obligation by either Party with
respect to any matter in connection with this Lease shall not constitute a waiver as to that matter or
any other matter.
9.11 CAPTIONS
All titles, subject headings, section and clause headings, and similar items are provided for the
purpose of reference and convenience and are not intended to affect the meaning of the content or
scope of this Lease.
9.12 ENTIRE AGREEMENT
This Lease and the Appendices hereto constitute the entire understanding between the Parties with
respect to the matters set forth herein and supersedes all previous claims, agreements,
representations or understandings, whether oral or written.
ARTICLE 10
NOTICES
All Notices shall be in writing except as otherwise expressly provided in this Lease and shall be
given, tendered, or delivered as the case may be at the addresses set forth above by: (i) first -class
U.S. mail with postage prepaid addressed to the Party, return receipt requested; (ii) personal
delivery of the Notice to the Party, with signature of the recipient requested; (iii) dispatch of the
Notice to the Party by overnight delivery service, return receipt requested; or (iv) telecopying the
Notice to the Party; in each case using the addresses set forth above. Changes in such details may
be made by Notice similarly given.
A Notice takes effect from time it is received unless a later time is specified in it. A posted letter is
taken to be received on the third day after posting. A telecopy Notice is taken to be received on
production of a transmission report by the machine from which the Notice was sent that indicates
the telecopy number of the recipient.
ARTICLE 11
DISPUTE RESOLUTION
11.1 SCOPE. Any dispute arising out of, relating to, or in connection with this Agreement shall
be resolved as set forth in this Section 11.
111 INFORMAL DISPUTE RESOLUTION PROCEDURES. The Parties shall attempt in
good faith to resolve such dispute within fifteen (15) business days following receipt by one Party
of notice of such dispute from the other Party. Statements made by representatives of the Parties
during the dispute resolution procedures set forth in Sections 11.2 and 11.3 and documents
specifically prepared for such dispute resolution procedures shall be considered part of settlement
negotiations and shall not be admissible as evidence in any litigation proceeding between the
Parties without the mutual consent of the Parties.
-18-
113 MEDIATION. Mediation of a dispute under this Agreement may not be commenced until
the earlier of (i) such time as both of the Parties conclude in good faith that amicable resolution
through continued negotiation of the matter does not appear likely; or (ii) fifteen (15) business days
after receipt of notice referred to in Section 11.2. If, after such time period, the dispute remains
unresolved, the Parties shall attempt to resolve the dispute through mediation administered by the
AAA under its Commercial Mediation Procedures before resorting to litigation, as provided by
Section 11.4, provided that in no case shall any representation or decisions made within the context
of the mediation be binding upon the Parties without mutual consent of the Parties. The Parties
agree that any period of limitation to the assertion of a claim shall be deemed tolled during the
conduct of informal dispute resolution under Section 11.2 and mediation under this Section 11.3,
and that any claim of any Party shall be deemed not to have accrued until mediation is terminated.
11.4 LITIGATION. Unless the Parties otherwise agree, if mediation as set forth in Section
11.3 does not resolve the dispute within thirty (30) business days following a reference to
mediation or such longer period as the Parties may mutually agree, then the Parties shall present
the dispute to such court of competent jurisdiction located in Columbus, Ohio.
11.5 PROVISIONAL REMEDIES. No Party shall be precluded from initiating a proceeding
in a court of competent jurisdiction for the purpose of obtaining any emergency or provisional
remedy to protect its rights that may be necessary and that is not otherwise available under this
Agreement or to enforce or execute upon a judgment entered in accordance with this Agreement,
including temporary and preliminary injunctive relief and restraining orders.
[Remainder of this page intentionally left blank. Signature page to follow.]
-19-
IN WITNESS WHEREOF, each of the Parties has executed and delivered this Equipment Lease as
of the Execution Date.
DUBLIN ADVANCED ENERGY PARTNERS, LTD., as Lessor
By:
Name:
Title:
CITY OF DUBLIN, as Lessee
By:
Name:
Title:
Approved as to legal form and correctness:
By:
Director of Law
-20-
APPENDIX
DESCRIPTION OF EQUIPMENT, SPECIFICATIONS AND MINIMUM OUTPUT
REQUIREMENTS
LICENSED AREA
3. RENT SCHEDULE AND CAPACITY REDUCTION CREDIT
APPENDIX 1
DESCRIPTION OF EQUIPMENT, SPECIFICATIONS
AND MINIMUM OUTPUT REQUIREMENTS
Minimum Output Requirements:
Minimum hours as metered by the CHP System meters are set to 4,380 hours per year or
1,073,100kWh per year.
APPENDIX 2
LICENSED AREA
I
10 riFE4v7rE #�aUItCaGCC
.T.
EMIMIY- EIAM&A
voll
Building Key Plan
I ,
�r
iaDrrnacEEawn
,.,&'XL4FDSM
EMIMIY- EIAM&A
voll
Building Key Plan
APPENDIX 3
RENTSCHEDULE
Engine Hour Rate schedule:
Year
Year 1 -5
Year 6
Year 7
Year 8
Year 9
Year 10
Year 11
Year 12
Year 13
Year 14
Year 15
$ /Hour
$12.5215
$12.8972
$13.2841
$13.6826
$14.0931
$14.5159
$14.9513
$15.3999
$15.8619
$16.3377
$16.8279
Rent $ / Yr
$103,077
$106,169
$109,355
$112,635
$116,014
$119,495
$123,080
$126,772
$130,575
$134,492
$138,527
Estimated Annual Equipment Hours = 8232 hours
Net Engine Output = 245 kW
Estimated Annual Kilowatt Hours = 2,016,840 kWh
Actual Equipment Hours = Actual annual engine run hours
Annual Rent = Estimated Annual Equipment Hours * Rate
Annual Rent = 8232 * $12.5215
Annual Rent = $103,076.98
Monthly Rent = Estimated Annual Rent - 12
Monthly Rent = $8,589.74 per month
CAPACITY REDUCTION CREDIT:
Capacity Adjustment = ((Actual Operating Kilowatt Hours — Estimated Operating Kilowatt
Hours) / Net Engine Output)* Engine Hour Rate
For example, assume the Equipment operated at only 60% of Estimated Annual Kilowatt Hours
during a year of the Term. Lessor would issue a Capacity Adjustment against the affected year's
invoice, calculated as follows:
Capacity Adjustment = (((2,016,840 * .60) - 2,016,840) / 245) * $12.5215
Capacity Adjustment = ((1,210,104 - 2,016,840) / 245) * $12.5215
Capacity Adjustment = - $41,230.79 (credit)
Now assume the Equipment operated at 105% of Estimated Annual Kilowatt Hours during a year
of the Term. Lessor would issue a Capacity Adjustment against the affected year's invoice,
calculated as follows:
Capacity Adjustment = (((2,016,840 * 1.05) - 2,016,840) / 245) * $12.5215
Capacity Adjustment = (2,117,682 - 2,016,840) / 245 * $12.5215
Capacity Adjustment = $5,153.85 (debit )