Agenda Item No. 9b May 13, 2008 TO: Honorable Mayor and City Council Attention: David J. Van Kirk, City Manager FROM: Mike Palombo, Economic Development Manager SUBJECT: APPROVAL OF A GROUND LEASE AGREEMENT AND A

CONSTRUCTION LAYDOWN LEASE AGREEMENT BETWEEN CPV VACAVILLE, LLC AND THE CITY OF VACAVILLE FOR THE DEVELOPMENT AND OPERATION OF A PROPOSED ELECTRICAL GENERATION FACILITY ON THE EASTERLY WASTEWATER TREATMENT PLANT SITE

BACKGROUND: CPV Vacaville, LLC (“CPV”) approached the City of Vacaville (“City”) in the fall of 2007 with a proposal to lease property from the City, on which they would develop a natural gas-fired, 500+ megawatt (MW), electrical generating facility and ancillary equipment (“Plant”) on an approximately 25-acre site located on a portion of the Easterly Wastewater Treatment Plant site. The proposal arose out of CPV’s desire to respond to an anticipated competitive solicitation from Pacific Gas and Electric (PG&E) in the form of a Request for Offer (RFO) to private electrical power companies calling for the generation of up to 1,200 MW of new power from a variety of new plants in several locations within PG&E’s service territory. The RFO was finally released on April 1, 2008. The Easterly site was selected by CPV principally because of the confluence of the following features: availability of treated wastewater, proximity to both a high capacity PG&E natural gas pipeline and electrical transmission lines, and separation from densely populated areas. These features are key factors in the submission package that CPV is preparing to submit to PG&E for consideration. The selection process begins with PG&E choosing one or more of the submitted proposals and completing negotiations with the selected companies for long-term power supply contracts. The selected projects must then be submitted for review and approval by the private firms to the State of California. The State has preempted local control of the development process for larger thermal power plants and placed the review, approval and licensing responsibility with the California Energy Commission (CEC) and the California Public Utilities Commission (CPUC). The CEC review process leading to licensing typically takes 12 to 18 months to complete. Part of the licensing process is the requirement that the CEC conduct an environmental analysis pursuant to the California Environmental Quality Act (“CEQA”) on the impacts of the proposed Plant. Overall, the entire process could take several years to complete before a project is “finally selected and approved” and allowed to proceed to construction. The City Council at its December 11, 2007 meeting, considered CPV’s development proposal and approved a Memorandum of Understanding and an Option to Lease Agreement that identified most of the lease terms for the proposed Plant site. After that meeting, further research was conducted and it was determined that State law specifically permitted local public agencies to proceed with executing a lease for the “Plant” site prior to the completion by CEC of the environmental analysis for the project. Consequently, the need for an Option to Lease period pending the completion of CEC’s environmental review became unnecessary and staff proceeded forward with the lease negotiations. DISCUSSION: In order for the project to proceed there will be at least three and likely four agreements on which the Council will be asked to act. Only the proposed Leases for the Plant site and the Construction Laydown property are being presented to Council tonight. After discussion with CPV, it was decided that because preliminary discussions are starting this month between the competing companies and PG&E, it was competitively advantageous for CPV to be able

to demonstrate it had control of their proposed site. This is the reason that the two leases are being presented before the rest of the documents. The remaining two agreements, which are still in negotiation, deal with the City selling reclaimed and potable water to the CPV and possibly a lease for an easement allowing the use of an additional portion of the Easterly Waste Water Plant to be used as a Right of Way for a connection to the PG&E electrical transmission line towers that are located westerly of the proposed Plant. The proposed leases under consideration are for two separate but adjacent sites. The Ground Lease for the Plant applies to a 24.99 + acre site, on which the electrical generation plant is proposed to be located. That site is located on the southeast corner of the Easterly Wastewater Treatment Plant property, and fronts on both Fry and Lewis Roads. The second lease is for a construction laydown area, which will be used during the building of the power plant and supporting facilities, to provide an area in which to stage the development of the power plant. That site, which fronts on Lewis Road, is 21.44 acres in area and is north and adjacent to the power plant site. As mentioned above, the project, if it proceeds, will have to go through an environmental review process by the CEC. That process will identify potential impacts of the project on the environment and then identify ways to remediate those impacts. It is at this stage that the public, including the City of Vacaville, will have an opportunity to comment on the impacts of the proposed project. The proposed Plant is a very large industrial complex. As such it will inevitably raise a number of concerns in regards to aspects such as appearance, noise, emissions, lighting, etc. All of these concerns may be raised by the public during the CEC’s environmental review process. The City is concerned about all of the potential negative features of both the Easterly Wastewater Treatment Plant and the proposed electrical generation facility. It is proposing, regardless of the outcome of the CPV proposal to PG&E and the State, to continue its efforts to screen the entire site, by continuing the landscaping of a 25 foot wide strip around the perimeter of the property, with trees of varying heights and bushes along the street frontages. Part of the revenue from the “Plant” has been earmarked for reimbursing the City for these costs. The State CEQA process could require larger buffer areas that would be the responsibility of CPV. While there are some negatives to any proposal, there are also positives. One of these is that California needs more and cleaner sources of electrical generation. Natural gas driven plants are the cleanest, in terms of emissions, of the thermal plants. While the amount of electricity produced by renewable sources is growing, those efforts are not nearly sufficient by themselves. Consequently, a new, up to date natural gas driven plant is preferable to other alternatives. Another advantage of the proposed “Plant” is that if it should it be selected by PG&E and approved by the responsible State Agencies, the leases will generate a significant revenue stream for the City of Vacaville. A portion of that will be derived from the sale of reclaimed waste water from the Easterly Treatment Plant, which is currently not being used. Depending upon a variety of factors, an operating 500 Megawatt Plant could produce about $3.3 Million annually, in City revenues. These funds are badly needed to cover the rising costs of services. Because the revenue is tied to inflation indexes, the amount will increase over time. The property is currently zoned for Community Facilities use, and a thermal electrical generation plant is a permitted use in that district. CEQA ANALYSIS: Under CEQA, the responsibility for conducting a full and complete environmental analysis of the proposed thermal power plant project lies with the CEC, as the approving body for the project. Consequently, Section 21080(b)(6) of the Public Resources Code and Section 15271 of the California Code of Regulations exempts the early planning and development

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activities of a public agency such as the City relating to such a facility, so long as the thermal power plant site is to be the subject of full environmental review by the CEC. The project cannot proceed without CEC and CPUC approval and licensing. A summary of the primary terms of each lease and a copy of each of the proposed leases are attached as Exhibit A, and A-1 and Exhibit B and B -1. RECOMMENDATION: 1. By simple motion, to approve a Ground Lease Agreement for a 24.99-acre portion of the

Easterly Wastewater Treatment Plant Property Between CPV Vacaville, LLC and the City of Vacaville, find that the action is exempt from CEQA, and authorize the City Manager to make minor changes to the Lease and to execute the Lease Agreement once the site legal descriptions have been finalized.

2. By simple motion, to approve a Construction Laydown Lease Agreement for a 21.44-acre

portion of the Easterly Wastewater Treatment Plant Property Between CPV Vacaville, LLC and the City of Vacaville, find that the action is exempt from CEQA, and authorize the City Manager to make minor changes to the Lease and to execute the Lease Agreement once the site legal descriptions have been finalized.

ATTACHMENTS GROUND LEASE Exhibit A Summary of Terms Exhibit A-1 GROUND LEASE AGREEMENT LAYDOWN LEASE Exhibit B Summary of Terms Exhibit B-1 CONSTRUCTION LAYDOWN LEASE Exhibit C – Annual Benefits Exhibit D – Proposed Lease Sites Exhibit E – Easterly Area Map

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EXHIBIT A

Summary of Principal Terms and Conditions Ground Lease Agreement for a Portion of the Easterly Wastewater Treatment Plant Property

1. Parties. Lease is between the City of Vacaville, California, a California municipal corporation, and CPV Vacaville, LLC.

2. Premises. A 24.99-acre portion of the Easterly Wastewater Treatment Plant Property located at the southeastern corner of the site (Lewis and Fry Roads).

3. Term. The lease term shall begin upon the Commencement of Construction and shall be for a term of twenty-five (25) years. The lease term may be extended at CPV’s election for an additional two periods of ten (10) years each.

4. Lease Consideration (Rent)

4.1 Rent Following Effective Date: Commencing upon the Effective Date of the Lease extending to the Commencement Date, CPV shall pay as rent on an annual basis as follows:

(a). May 13, 2008 to December 31, 2008 - $59,100 (b). January 1, 2009 to December 31, 2009 - $125,000 (c). For each calendar year commencing on January 1, 2010, rent payment shall be equal to rent for the previous calendar year, plus $25,000. 4.2 Rent Following Commencement Date: Starting with Commencement Date and extending to the Commercial Operations Date, CPV shall pay to the

City one-half (1/2) annual Base Rental of Six Hundred Fifty Thousand Dollars ($650,000) which Base Rental shall increase annually at a rate equal to the increase in the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index – All Urban Consumers, San Francisco-Oakland-San Jose CA.

4.3 Rent Following Commercial Operations Date: Starting with the

Commercial Operations Date and extending to the last day of the Lease Term, CPV shall pay to the City the annual Base Rental of Six Hundred Fifty Thousand Dollars ($650,000) which Base Rental shall increase annually at a rate equal to the increase in the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index – All Urban Consumers, San Francisco-Oakland-San Jose CA.

5. Lease Consideration (Additional)

5.1 Lump Sum Payment. On Commencement Date, CPV shall pay City

$750,000. Of this amount, $500,000 is a Sewer Utility Benefit Payment and $250,000 is a reimbursement payment for the City’s cost to install perimeter landscaping on City-owned land along Lewis and Fry Roads.

5.2 Property Tax. Each tax year during the Lease Term commencing upon

the Commercial Operations Date, CPV shall pay to the City the difference

CPVI\46763\717277.8

between what it receives annually from property taxes plus the Tax Premium payment on the project and $1,000,000 indexed from May 13, 2008 (City expects to receive around $1,700,000 initially in property taxes due to the Indexing). The guarantee payment shall be capped at $250,000, indexed, during any period when CPV is out of contract with a power purchaser.

5.3 Tax Premium Payment. CPV shall pay to the City an additional sum equal to fifteen percent (15%) of the City’s Designated Property Tax Receipt (the “Tax Premium”).

5.4 Sales Tax: CPV shall cause to be established a Vacaville point of sale

location and cooperate with the City to ensure that the City collects its share of sales tax revenues on the Project.

5.5 Utilities. The provision of utilities shall be covered in a separate Effluent

and Easterly Potable Water Agreement. 6. Use. CPV with a statement of the deemed proceeds of developing, constructing and operating a gas-fired electric generation facility and certain ancillary equipment. 7. Assignments. With some specified exceptions, neither CPV nor the City will assign or transfer any right, obligation, or interest without consent of other Party. 8. Insurance. CPV agrees to carry insurance naming the City and others as additional

insureds of a type and coverage listed below: 8.1 Commercial General Liability Insurance - $1,000.000 & $2,000,000 8.2 Auto Liability - $1,000,000 8.3 Umbrella Liability - $25,000,000 8.4 Workers Compensation - $1,000,000 8.5 Pollution Liability - $5,000,000 9. Termination. The Ground Lease Agreement may be terminated for: 9.1 Default. Failure to make required payments and/or failure to comply with

terms of the Ground Lease Agreement, Water Supply Agreement. 9.2. Failure to Act in Timely Manner. (a). Construction Commencement Date shall not have occurred within 4

years of Commencement Date. (b). Commencement Date shall not have occurred on or prior to

December 11, 2012. (c). CPV has right to terminate at anytime prior to December 12, 2012 9.3. Expiration of Lease Term

CPVI\46763\717277.8

10. Condition of Leased Premises. City is leasing premises in its present “AS-IS, WHERE-IS CONDITION WITH ALL FAULTS” without representation or warranty regarding the condition of the Leased Premises.

11. Surrender Condition of Leased Area Upon Termination or Expiration. Premises shall be free and clear of all liens. CPV agrees to remove all improvements above ground and those 6 feet below the surface grade and return the site to a condition suitable for agriculture.

CPVI\46763\717277.8

DSMDB-2406741v08

Dickstein Shapiro LLP – May 2, 2008

EXHIBIT A-1

LEASE AGREEMENT

Dated as of ____________________

Between

The City of Vacaville, as Lessor

and

CPV Vacaville, LLC, as Lessee

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LEASE AGREEMENT

This LEASE AGREEMENT (this “Agreement”) dated as of May_____, 2008 (the “Effective Date”), by and between the City of Vacaville, a California municipal corporation, whose mailing address is 650 Merchant Street, Vacaville, California 95688 (the “Lessor”), and CPV Vacaville, LLC, a Delaware limited liability company, whose mailing address is Silver Spring Metro Plaza I, 8403 Colesville Road, Suite 915, Silver Spring, Maryland 20910 (the “Lessee”) (Lessor and Lessee are sometimes referred to herein individually as a “Party” and collectively, as the “Parties”), provides as follows:

AGREEMENT

NOW THEREFORE, for and in consideration of the premises, the agreements herein, and in reliance upon the representations and warranties herein, Lessor and Lessee do hereby adopt and incorporate all exhibits, attachments, and/or schedules attached hereto, and do further agree as follows:

ARTICLE 1 DEFINITIONS; INTERPRETATION

Section 1.1. Definitions. As used in this Agreement, (a) the terms set forth in the attached Annex A shall have the respective meanings so set forth, and (b) the terms defined elsewhere in this Agreement shall have the meanings therein so specified.

Section 1.2. Interpretation. In this Agreement, unless a clear contrary intention appears: (a) the singular includes the plural and vice versa; (b) a reference to any Person includes such Person’s successors and permitted assigns but, in the case of a Party, only if such successors and assigns are permitted by this Agreement; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document, instrument or tariff means such agreement, document, instrument or tariff as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; (e) reference to any Governmental Rule means such Governmental Rule as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including, if applicable, rules and regulations promulgated thereunder; (f) reference to any Section means such Section of this Agreement, and references in any Section or definition to any clause means such clause of such Section or definition; (g) “hereunder”, “hereof”, “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof; (h) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including.”

Section 1.3. Titles and Headings. Section, Annex, Exhibit and Schedule titles and headings in this Agreement are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.

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ARTICLE 2 LEASE AND GRANT OF EASEMENTS

Section 2.1. Lease of Leased Premises. Lessor hereby demises and leases to Lessee, and Lessee hereby leases from Lessor, that certain land situated in the City of Vacaville, Solano County, California as is more particularly described on the attached Schedule 2.1(a) (such land, the “Leased Premises”), subject to the matters set forth in the attached Schedule 2.1(b) (such matters the “Permitted Encumbrances”); TO HAVE AND TO HOLD the Leased Premises unto Lessee and, subject to the provisions hereof, unto its successors and assigns, commencing as of the Effective Date and expiring on the Lease Termination Date.

Section 2.2. Grant of Easements. Lessor does, subject to the reservations and restrictions set forth herein, hereby grant, bargain, sell and convey unto Lessee the following described non-exclusive easements (“Easements”) upon, over, beneath, and across the land identified on the attached Schedule 2.2 (the “Lessor’s Lands”) less and except the Leased Premises (such land the “Easement Property”), for the following purposes related to Lessee’s operation of the natural gas-fired electric generation facility and certain ancillary equipment (the “Plant”):

2.2.1 Pedestrian and vehicular ingress and egress between Lewis Road and the Leased Premises and the equipment and the buildings and facilities utilized by Lessee and located on the Easement Property, over all present and future roads located on the Easement Property; provided, however, that during an emergency, such ingress and egress shall be from any public right of way adjacent to the Lessor’s Lands and the Leased Premises and the equipment and the buildings and facilities utilized by Lessee and located on the Easement Property;

2.2.2 Ingress to and egress from the location of, and for the installation, operation, use, maintenance, alteration, modification, repair, replacement, reading, inspection, testing, adjustment and/or restoration of the gas mains wherever located on the Easement Property;

2.2.3 The conduct of activities of and relating to Hazardous Materials, including, without limitation, use of protective materials for the absorption of hazardous materials or hazardous substance spills, leaks and releases;

2.2.4 Ingress to and egress from the location of, and for the installation, operation, use, maintenance, alteration, modification, repair, replacement, reading, inspection, testing, adjustment and/or restoration of Lessee’s service water piping and service water measuring devices located on the Easement Property;

2.2.5 Ingress to and egress from the location of, and for the installation, operation, use, maintenance, alteration, modification, repair, replacement, reading, inspection, testing, adjustment and/or restoration of the storm water system owned, leased or subleased by Lessee and located on the Easement Property;

2.2.6 The encroachment, as of the date hereof, of the Plant, or any portion

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thereof, or any Lessee equipment upon the Easement Property;

2.2.7 Ingress to and egress from any location on the Easement Property on which Lessee and Lessor agree that Lessee may place directional and identification signs, and for the construction, installation, erection, support, maintenance, repair, replacement, alteration, and restoration of such signs;

2.2.8 Ingress to and egress from the location of, and for the installation, operation, use, maintenance, alteration, modification, repair, replacement, reading, inspection, testing, adjustment and/or restoration of all storm water system and outfalls necessary to Lessee’s occupation of the Leased Premises and Lessee’s operations thereon;

2.2.9 Ingress to and egress from the location of, and for installation, operation, use, maintenance, alteration, modification, repair, replacement, reading, inspection, testing, adjustment and/or restoration of all electrical utility lines, telephone lines, optical fiber lines, natural gas lines, potable water pipes, service water pipes, sanitary sewer pipes, and other pipes and facilities serving the Leased Premises; and

2.2.10 Ingress to and egress from the location of, and for the installation, operation, use, maintenance, alteration, modification, repair, replacement, reading, inspection, testing, adjustment and/or restoration, of all pipes, wiring, conveyors, and/or other equipment or facilities that are owned, leased, and/or subleased by Lessee and located upon Easement Property; it being the intent of the Parties that the Easements should afford Lessee sufficient access and use of the Lessee’s Easement Equipment to operate and maintain the Plant.

The equipment, improvements, fixtures and other tangible property owned by Lessee and installed on the Easement Property in connection with the installation, operation, use, maintenance, alteration, modification, repair and replacement of the Plant is referred to as the “Lessee’s Easement Equipment”.

TO HAVE AND TO HOLD all such easements unto Lessee and its successors and permitted assigns from the date hereof until the termination of such easements as provided in Article 3.

Section 2.3. Lessee’s Exercise of Rights.

2.3.1 The Easements herein granted to Lessee may be utilized by Lessee’s contractors and their subcontractors, operator and its subcontractor, and each of their employees, officers, members, shareholders, partners, invitees, and licensees. Notwithstanding the immediately preceding sentence, Lessee, its contractors, employees, and invitees and any other entity (including any utility) which supplies services or utilities to the Leased Premises shall not be entitled to enter any portion of the Lessor Property not otherwise subject to this Agreement except (a) for emergencies directly related to the Plant or the Lessee’s Easement Equipment after such notice to Lessor as is reasonable under the circumstances, or (b) with the prior written consent of Lessor, which consent shall not be unreasonably withheld or delayed; and in any event, Lessee

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and/or such contractor, employee, invitee, and/or any other entity shall enter subject to and abide by Lessor’s rules for safety and security. In the case of entries pursuant to clause (b) of the immediately preceding sentence, such entry by Lessee or such contractor, employee, invitee, and/or any other entity, shall be upon not less than one (1) day’s notice to Lessor and during Lessor’s normal business hours and only if Lessee, or such contractor, employee, agent, invitee, and/or other entity is accompanied by a representative of Lessor. Notwithstanding the above, Lessee shall not, in its entry upon the Easement Property or not otherwise subject to an easement held by Lessee for any purpose, materially interfere with Lessor’s operation or utilization thereof. Further, Lessee and/or such contractor, employee, invitee, and/or any other entity shall take such precautions as may be reasonably necessary to prevent unnecessary foreseeable damage to adjacent or adjoining property or injury to persons.

2.3.2 Subject to the provisions of Section 16.3, upon Lessee’s completion of any maintenance, repair or replacement work on the Easement Property, Lessee shall restore the subject area to its former condition with all debris removed at its sole cost and expense.

Section 2.4. Plant. Lessee shall have the right to construct, install, operate, use, maintain, alter, modify, repair, replace and disassemble the Plant on the Leased Premises and the Lessee’s Easement Equipment on the Easement Property.

Section 2.5. Title to Plant and Lessee’s Easement Equipment. The Parties acknowledge that the title to the Plant and the Lessee’s Easement Equipment is and shall remain the property of Lessee during the Lease Term, regardless of the manner of installation or affixation of the Plant to the Leased Premises or the Lessee’s Easement Equipment to the Easement Property. It is the intention of the Parties that the separation of the title to the Leased Premises from the title to the Plant, and the Lessee’s Easement Equipment from the title to the Easement Property is to remain so separated throughout the Lease Term.

Section 2.6. Easements Appurtenant. Subject to Section 3.2, the Easements granted pursuant to this Agreement are for the benefit of and appurtenant to the Leased Premises and shall run as covenants running with the land and are and shall be binding upon and inure to the benefit of Lessor and Lessee and their respective successors and permitted assigns.

Section 2.7. Possession of Leased Premises and Use of Easements. Notwithstanding the foregoing provisions of this Article 2, until the Commencement Date Lessee shall not have any right to possession of the Leased Premises or use of the Easement Property; provided, however, that Lessee shall have rights of access to the Leased Premises and the Lessee’s Easement Equipment pursuant to the terms and conditions of the Memorandum of Understanding and the Option to Lease. For the avoidance of doubt, prior to the Commencement Date the Leased Premises may be used by Lessor for any purpose so long as such use shall not interfere with Lessee’s occupancy and use of the Leased Premises, and exercise of its rights, pursuant to this Agreement on and after the Commencement Date and Lessee’s exercise of its rights under that

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Memorandum of Understanding and the Option to Lease, and so long as such use shall not delay Lessee’s ability to possesses and occupy the Leased Premises on the Commencement Date.

ARTICLE 3 LEASE TERM

Section 3.1. Lease Term.

3.1.1 Base Term. The initial term of this Agreement (the “Base Term”) shall commence on the Effective Date and shall, unless sooner terminated or renewed or extended as provided herein, continue in effect until 11:59 P.M. Pacific Standard time on the date that is the twenty-fifth (25th) anniversary of the last day of the calendar quarter in which the Commencement Date occurs.

3.1.2 Renewal Term. Lessee has the option to extend the term of this Agreement for two (2) periods of ten (10) years each (each such period, a “Lease Renewal Term”), and this Agreement shall terminate, unless sooner terminated or renewed or extended as provided herein, at 11:59 PM Pacific Standard time on the last day of the applicable Lease Renewal Term.

3.1.3 Lease Term. Wherever this Agreement refers to the “Lease Term,” such reference shall be deemed to mean the Base Term together with any Lease Renewal Term and any holdover period pursuant to Section 16.1 of this Agreement, subject to early termination pursuant to Section 3.4 of this Agreement. Wherever this Agreement refers to the “Lease Termination Date,” such reference shall be deemed to mean the last day of the Lease Term.

3.1.4 Lease Year. Wherever this Agreement refers to a “Lease Year,” such reference shall be deemed to mean, with respect to the first Lease Year, the period from the Commencement Date until the anniversary of the last day of the calendar quarter in which the Commencement Date occurs, and with respect to all other Lease Years, the period from the anniversary of the first day of the first calendar quarter after the Commencement Date until the anniversary of the last day of the calendar quarter in which the Commencement Date occurs. By way of example, if the Commencement Date is November 15, 2009, the first Lease Year shall commence on November 15, 2009 and end on December 31, 2010. The second Lease Year shall commence on January 1, 2011 and end on December 31, 2011. Within thirty (30) days of the Commencement Date, the Parties shall execute a memorandum reflecting the Lease Year.

Section 3.2. Termination of Easements. The Easements shall terminate on the later of: (i) the date that the Lease terminates; or (ii) the date that any permitted holdover by Lessee under this Agreement ends.

Section 3.3. Memorandum of Lease. Contemporaneously herewith, the Parties have executed, acknowledged, and delivered to each other duplicate originals of a recordable memorandum of lease agreement and grant of easements in the form of Schedule 3.3 hereto (the “Memorandum of Lease”). Lessee, at its sole cost and

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expense, shall submit such Memorandum of Lease for recording in the land records of the county in which the Leased Premises is located and any other documents or instruments which may be required for recording the same.

Section 3.4. Early Termination Rights. This Agreement may be terminated upon the occurrence of the following events:

3.4.1 Upon a default by Lessor under the Water Supply Agreement, at any time after such default until such default is cured or waived by Lessee (after the expiration of all notice and cure periods), Lessee shall have the right to terminate this Agreement by giving written notice thereof to Lessor.

3.4.2 If the Construction Commencement Date shall not have occurred within four (4) years after the Commencement Date, subject to delays due to Force Majeure Events, either Party shall have the right to terminate this Agreement by giving written notice thereof to the other Party.

3.4.3 If the Commencement Date shall not have occurred on or prior to December 11, 2012, either Party shall have the right to terminate this Agreement by giving written notice thereof to the other Party.

3.4.4 At any time prior to December 11, 2012, Lessee shall have the right to terminate this Agreement.

Section 3.5. Commencement Date. At any time after the Effective Date and on or prior to December 11, 2012, Lessee shall have the right to deliver written notice to Lessor (such notice, a “Notice of Commencement Date”) which written notice shall specify the Commencement Date; provided, however, that the date specified in such notice shall not be subsequent to December 11, 2012.

ARTICLE 4 PERMITTED USE

Section 4.1. Permitted Use. The Leased Premises shall be used solely for the erection, construction, use, operation, repair and maintenance of the Plant and any additions or modifications thereto, for all purposes incidental thereto, and for no other purpose. Lessee shall not use, nor knowingly permit to be used, the Leased Premises in any manner or for any purpose which shall violate any Governmental Rule or cause forfeiture of Lessor’s title in and to the Leased Premises.

ARTICLE 5 RENT

Section 5.1. Base Rent.

5.1.1 Base Rent Amount; C.P.I Escalator. The “Fixed Base Rent Amount” shall mean a sum equal to Six Hundred Fifty Thousand and 00/100 Dollars. The “Base Rent Amount” shall mean, for each Lease Year during the Lease Term, a sum equal to

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the Fixed Base Rent Amount multiplied by a fraction (the “C.P.I. Escalator”), the numerator of which is the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index – All Urban Consumers, San Francisco-Oakland-San Jose CA, All Items, 1982-84=100 (currently available at http://data.bls.gov under the series CUURA422SA0) (the “C.P.I. Index”), last published on the date not later that the sixtieth (60th) day prior to the first day of the then applicable Lease Year, and the denominator of which is the C.P.I. Index last published immediately prior to December 11, 2007.

5.1.2 Base Rent.

(a) From the Effective Date until the Commencement Date, Lessee shall pay to Lessor annual base rent in the amount set forth on the attached Schedule 5.1.2. (b) From and including the Commencement Date until the Commercial Operations Date, Lessee shall pay to Lessor annual base rent in the sum of one-half of the Base Rent Amount for the applicable Lease Year. (c) From and including the Commercial Operations Date until the last day of the Lease Term, Lessee shall pay to Lessor annual base rent in the sum of the Base Rent Amount for the applicable Lease Year. (d) The annual base rent payable pursuant to this Section 5.1.2 is hereinafter referred to as the “Base Rent”. 5.1.3 Timing of Base Rent. Base Rent shall be payable in advance on the first

day of each calendar quarter in four equal installments. Notwithstanding the foregoing, (a) for the period from the Effective Date until December 31, 2008, Lessee shall make a payment of $25,000 on June 11, 2008, and a payment of $29,110 on September 11, 2008, (b) on the Commencement Date Lessee shall pay to Lessor a sum equal to the Base Rent payable for the first full calendar quarter following the Commencement Date plus a sum equal to the pro rata amount of Base Rent payable with respect to the period from and including the Commencement Date until the last day of the calendar quarter in which the Commencement Date Occurs (on a per diem basis) minus the unutilized portion of the Base Rent paid in accordance with Section 5.1.3(a), and (c) within thirty (30) days after the Commercial Operations Date, Lessee shall pay to Lessor a sum equal to the increase in the Base Rent for the period from the Commercial Operations Date until the last day of the calendar quarter in which the Commercial Operations Date occurs. The Base Rent amounts payable pursuant to this Section 5.1.3 are set forth in Section 5.1.2.

5.1.4 Payment on Commencement Date. On the Commencement Date Lessee shall pay to Lessor the sum of Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00), which payment is comprised of a Five Hundred Thousand and No/100 Dollar ($500,000.00) sewer utility benefit payment and a Two Hundred Fifty Thousand and No/100 Dollar ($250,000.00) reimbursement payment for certain of Lessor’s costs of designing acquiring and installing the landscape buffer on the land identified on the attached Schedule 5.1.4 (the “Landscape Buffer Land”).

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Section 5.2. Net Lease. The Parties intend that this Agreement shall constitute a “net lease.” Accordingly, Lessee shall pay as additional rent and discharge, before failure to pay the same shall create a material risk of forfeiture or give rise to a penalty, each and every item of expense, of every kind and nature whatsoever, related to or arising from the Leased Premises, or by reason of or in any manner connected with or arising from the operation, maintenance, repair, use or occupancy of the Leased Premises or any portion of the Leased Premises by Lessee from and after the Commencement Date, excluding any physical condition respecting the Leased Premises, or any portion thereof, in existence prior to the Commencement Date. Notwithstanding anything to the contrary contained in this Agreement, Lessee shall not be required to pay any of the following: (a) principal, interest or other charges payable under any Fee Mortgage encumbering the Lessor Facilities and/or the Leased Premises (except any leasehold mortgage or other financing created by, through, or under Lessee), or both; (b) depreciation, amortization, financing or refinancing costs incurred by Lessor with respect to the Lessor Facilities or the Leased Premises; (c) consulting, legal, staff and other similar costs incidental to Lessor’s ownership of the Leased Premises, other than reasonable attorneys’ fees incurred by Lessor and payable by Lessee pursuant to express provisions of this Agreement; (d) any costs arising from or pursuant to any instrument or agreement affecting the Leased Premises that is not a Permitted Lien and to which Lessor is a party and Lessee is not a party; and (e) any cost or expense arising directly or indirectly from any conditions existing on, at or with respect to the Leased Premises before the Commencement Date.

Section 5.3. Payment of Impositions.

5.3.1 Real Estate Taxes. Commencing on the Commencement Date and continuing throughout the Lease Term, Lessee shall pay any real estate taxes, special assessments and other governmental charges and impositions, general or special, ordinary or extraordinary, foreseen or unforeseen, of any kind and nature relating to this Agreement, the Leased Premises or the improvements thereon owned, leased or subleased by Lessee, or similar tax or charge which is now or hereafter levied, assessed, or imposed upon Lessor or Lessee by the State of California, or by any political subdivision thereof, or which Lessor or Lessee is now or hereafter otherwise required by the State of California, or any political subdivision thereof to pay, with respect to the Lease, the use or occupancy of the Leased Premises or Lessor’s fee ownership of the Leased Premises (such taxes, assessments, charges and impositions collectively, “Impositions”); provided, however, that Lessee shall not be required to pay any such Imposition during any period that Lessee shall in good faith contest the validity or the amount of any such Imposition, provided such contest of the validity or application of any such Imposition by appropriate proceedings does not involve any imminent danger of the sale, forfeiture or loss of any of Lessor’s rights in the ownership of the Lessor Facilities or the Leased Premises or any part thereof.

5.3.2 Taxes on Rentals and/or Plant Income.

5.3.2.1 Notwithstanding anything contained in this Agreement to the contrary (other than Lessee’s obligation to pay all charges payable in connection

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with the recordation of the Memorandum of Lease), Lessee shall have no liability or obligation with respect to the payment of any tax or imposition charged or levied upon the rentals payable by Lessee under this Agreement.

5.3.2.2 Lessor shall have no liability or obligation with respect to the payment of any tax or imposition charged or levied upon any income of Lessee resulting from the operation or ownership of the Plant and the Lessee’s Easement Equipment.

5.3.3 Imposition Payable in Installments. If, by law, any Imposition is or may be payable in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Lessee may pay the same (with any interest accruing during the Lease Term on the unpaid balance of said Imposition) in installments as the same becomes due and before any additional interest or other charge may be added thereto for the nonpayment of any such installment. With respect to any Imposition which by law is or may be payable in installments, Lessee shall pay only those installments which accrue during the Lease Term.

5.3.4 Proration of Imposition. Any Imposition accruing during a fiscal tax period during which the Lease Term shall expire shall be adjusted between Lessor and Lessee as of the expiration of this Agreement, so that Lessee shall pay only an amount which bears the same relation to the total Imposition as the part of such fiscal tax period included within the Lease Term bears to the entire fiscal tax period.

5.3.5 Lessor’s Right to Pay Impositions. If at any time during the Lease Term, any Impositions payable by Lessee as provided herein are not paid when due and payable, then Lessor, upon thirty (30) days’ notice to Lessee, or with such notice (if any) as is reasonably practicable under the circumstances in the case of an emergency, shall have the right, but not the obligation, to pay the same and be reimbursed therefore by Lessee as set forth in Section 5.3.6 hereof; provided that Lessor shall have no right to pay any such Imposition during any period that Lessee shall in good faith be contesting the validity or the amount of such Imposition so long as such contest of the validity or amount of such Imposition by appropriate proceedings does not involve any imminent danger of the sale, forfeiture or loss of any of Lessor’s rights in the ownership of the Leased Premises or any part thereof.

5.3.6 Additional Rent for Impositions Paid by Lessor. If at any time during the Lease Term, Lessor shall have paid any Impositions payable by Lessee hereunder, the amount of such payment shall be payable to Lessor as additional rent payable hereunder. Such additional rent shall be payable by Lessee to Lessor within thirty (30) days after Lessor has notified Lessee in writing of Lessor’s payment of such Impositions (which notice shall contain documentation evidencing such payment by Lessor).

5.3.7 Place of Payment. All sums payable by Lessee to Lessor hereunder shall be paid by Lessee’s check payable to the order of Lessor and mailed or delivered to Lessor at the address provided for notice in Section 19.1 of this Agreement or at such other place or in such other manner as Lessor may from time to time designate by notice

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to Lessee. Lessee’s obligation to pay any additional rent shall survive the Lease Termination Date.

5.3.8 Ad Valorem Tax Returns and Notices. Lessee shall prepare and file any tax return, rendition, report or similar information as to the Leased Premises and the real or personal property thereon, as may be required by any Government Rule, including ad valorem real property taxes on centrally assessed utility property and general and special assessments related thereto. Promptly upon receipt, each Party shall furnish to the other any tax assessment notices related to the Leased Premises that it receives.

Section 5.4. Utilities. Except as expressly provided in the Water Supply Agreement, Lessor shall not have any obligation pursuant to this Agreement to provide utilities to Lessee. If Lessee shall contract for the provision of utilities, then Lessee shall pay the expenses of the installation, maintenance, use and service of such utilities to the extent attributable to Lessee’s use of such utilities during the Lease Term.

Section 5.5. Additional Lease Consideration.

5.5.1 Definitions. For purposes of this Section 5.5, the following terms shall have the following meanings:

“Property Tax Floor” means for each Lease Year after the Commercial Operations Date, the sum of One Million and No/100 Dollars ($1,000,000.00), multiplied by the C.P.I. Escalator.

“Deemed Property Tax Receipt” means the sum equal to 0.18% of the assessed value of the Lessee’s Leasehold Improvements as reflected on Lessee’s tax statement from the County applicable to each Lease Year after the Commercial Operations Date (which is eighteen percent (18%) of the one percent (1%) tax limitation of assessed value of the Lessee’s Leasehold Improvements).

“Tax Premium” means a sum equal to fifteen percent (15%) of the Deemed Property Tax Receipt.

“Tax Backfill Payment” means the difference (but only if such difference is a positive number) between (a) the Property Tax Floor minus (b) the sum of the Deemed Property Tax Receipt plus the Tax Premium; provided, however, that if such difference is greater that the Tax Backfill Payment Cap and Lessee and Power Purchaser have not entered into the Power Purchase Agreement, then the Tax Backfill Payment shall be equal to the Tax Backfill Payment Cap. If the Lessee and Power Purchaser have not entered in the Power Purchase Agreement for any portion of a Lease Year, and the Tax Backfill Payment is payable, then the Tax Backfill Payment for such Lease Year shall be pro rated.

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“Tax Backfill Payment Cap” means each Lease Year after the Commercial Operations Date, the sum of Two Hundred Fifty Thousand and No/100 Dollars ($250,000.00), multiplied by the C.P.I. Escalator.

5.5.2 Tax Premium and Tax Backfill Payment. From and after the Commercial Operations Date, within ninety (90) days after the Lessee’s receipt of a tax statement from the County, with respect to each Lease Year, Lessee shall pay to Lessor, as additional consideration, the sum of (a) the Tax Premium, plus (b) the Tax Backfill Payment. If the Commercial Operations Date shall occur during a Lease Year, the additional consideration payable by Lessee to Lessor pursuant to this Section 5.5 during such Lease Year shall be prorated (on a per diem basis).

Section 5.6. Proration of Base Rent. If the Lease Term shall terminate early pursuant to the provisions of Section 3.4 on a date other than the last day of a calendar quarter, then Base Rent shall be pro rated on a per diem basis.

ARTICLE 6 QUIET ENJOYMENT

Section 6.1. Quiet Enjoyment. Lessor warrants that it owns the Leased Premises, subject to no Liens other than the Permitted Encumbrances, with full right, title and authority to lease the Leased Premises pursuant to the terms of this Agreement. Lessor covenants with Lessee that it shall defend and hold harmless Lessee and its successors and permitted assigns in their peaceable, quiet and undisputed enjoyment of the Leased Premises (subject to the Permitted Encumbrances) against any and all claims of all persons claiming by, through or under Lessor. Lessor represents and warrants that it is not in default of any of its obligations under the Permitted Encumbrances. Lessor covenants that it shall defend and hold harmless Lessee and its successors and permitted assigns against any claims relating to any illegal or improper subdivision by Lessor of the Leased Premises.

ARTICLE 7 ACCESS RIGHTS; LESSOR EXERCISE OF RIGHTS WITH RESPECT TO THE

EASEMENTS

Section 7.1. Lessor’s Rights of Access. Lessor, its contractors, employees, agents and invitees, and any other entity (including any utility) which supplies services to the Lessor Facilities, shall not be entitled to enter the Leased Premises except (a) for emergencies directly related to the Lessor Facilities, or (b) with the prior consent of Lessee, which consent shall not be unreasonably withheld or delayed. Lessor shall abide by Lessee’s rules for safety and security at times during Lessor’s entry upon the Leased Premises. Lessor’s entry upon the Leased Premises shall not materially interfere with Lessee’s operation or utilization thereof.

Section 7.2. Lessor’s Exercise of Rights. Lessor shall not interfere in any manner with Lessee’s use of the Easements granted hereunder, nor with the location of

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any of the Lessee’s Easement Equipment or its use and enjoyment of the Easements and rights herein granted.

ARTICLE 8 LIENS

Section 8.1. Lessor’s Discharge of Liens. Lessor shall not directly or indirectly do, or omit to do, any act which shall give rise to any Lien on or with respect to the Lessee’s Leasehold Improvements, title thereto or any interest therein, except those Liens included in the Permitted Encumbrances; provided, however, that Lessor shall not be responsible or liable for, nor be deemed to have breached its obligations hereunder as a result of, any Liens upon the Leased Premises or the Lessee’s Leasehold Improvements resulting from acts or omissions of Lessee. Lessor shall not amend any of the Permitted Encumbrances if any such amendment would affect the Leased Premises or the Lessee’s Leasehold Improvements or any addition or modification thereto unless Lessor shall first notify Lessee of such proposed amendment and obtain Lessee’s written consent thereto, which consent shall not be unreasonably withheld or delayed. If any Lien not excepted above shall arise at any time, Lessor shall within thirty (30) days of notice of the filing thereof, at its own expense, take such action as may be necessary to discharge or eliminate (or bond in a manner reasonably satisfactory to Lessee) any such Lien; provided, however, that Lessor shall not be required to discharge any such Lien during any period that Lessor shall in good faith contest the validity or the amount of any such Lien, provided such contest of the validity or application of any such Lien by appropriate proceedings does not involve any imminent danger of the sale, forfeiture or loss of any of Lessee’s rights in the ownership, lease or use, as applicable, of the Leased Premises, the Lessee’s Leasehold Improvements or any part thereof. Except as otherwise provided in this Agreement, Lessor further agrees that it shall pay or cause to be paid on or before the time or times prescribed by law (after giving effect to any applicable grace period) any Impositions imposed on Lessor or the Leased Premises under the laws of any jurisdiction that, if unpaid, might result in any Lien prohibited herein.

Section 8.2. Lessee’s Discharge of Liens. Lessee covenants and agrees that it shall keep, or cause to be kept, the Leased Premises, title thereto or any interest therein, free and clear of mechanics’, laborers’ or materialman’s liens and other liens of a similar nature which may arise in connection with work of any character performed with respect to the Leased Premises or the Lessee’s Leasehold Improvements by or at the direction of Lessee and shall not directly or indirectly create, incur, assume or suffer to exist any Lien except for Liens arising under any Financing Document by, through, or under Lessee; provided, however, that Lessee shall not be responsible or liable for, nor be deemed to have breached its obligations hereunder as a result of, any Liens resulting from acts or omissions of Lessor. Lessee shall within thirty (30) days of notice of the filing thereof, at its own expense, take such action as may be necessary to discharge or eliminate (or bond in a manner, reasonably satisfactory to Lessor) any such Lien (other than Liens arising under Financing Documents) if the same shall arise at any time; provided, however, that Lessee shall not be required to discharge any such Lien during any period that Lessee shall in good faith contest the validity or the amount of any such Lien, provided such contest of the validity or application of any such Lien by appropriate proceedings does

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not involve any imminent danger of the sale, forfeiture, or loss of any of Lessor’s rights in the ownership of the Lessor Facilities or any part thereof.

Section 8.3. Discharge by Other Party. Upon either Party’s discovery of a Lien required to be discharged by it under this Article 8, such Party shall promptly give written notice thereof to the other Party. If such Party shall fail to discharge any such Lien within the period allotted for such discharge hereunder (including such time during which such Lien may be contested in good faith), then, in addition to any other right or remedy of the other Party, the other Party may, but shall not be obligated to, procure the discharge of the same by paying the amount claimed to be due or by applying the amount claimed to be due by deposit in court or bonding and concurrently with such discharge, providing notice of such discharge to the other Party. Any amount paid or deposited by the other Party for any of the aforesaid purposes, and all costs and other expenses of the other Party, including reasonable attorneys’ fees, in defending any such action or in procuring the discharge of such Lien, with all necessary disbursements in connection therewith, together with simple interest thereon at an annual rate of interest equal to the lesser of (a) the Default Rate; or (b) the maximum interest rate allowed under law of the jurisdiction in which the Leased Premises is located, from the date of payment or deposit, shall be payable by such Party to the other Party within fifteen (15) days of demand.

Section 8.4. No Authority to Bind Lessor. Neither Lessee nor any agent, employee, representative, contractor, subcontractor, supplier, materialman, workman or other Person who shall engage in or participate in any construction of, or any improvements to, the Plant or the Lessee’s Easement Equipment or in any additions, alterations, changes or replacements thereto shall have any power or authority to do any act or thing or to make any contract or agreement which shall bind Lessor or which may create or be the foundation for any mechanics’ lien or other lien or claim upon or against Lessor’s interest in the Lessor Facilities, and Lessor shall have no responsibility to any such Person who shall engage in or participate in any such construction; provided that the foregoing limitation shall not apply if Lessor, its employees, its agents, or its contractors are commissioning or actually performing such work.

Section 8.5. No Authority to Bind Lessee. Neither Lessor nor any agent, employee, representative, contractor, subcontractor, supplier, materialman, workman or other Person who shall engage in or participate in any construction of any improvements to the Lessor Facilities or in any additions, alterations, changes or replacements thereto shall have any power or authority to do any act or thing or to make any contract or agreement which shall bind Lessee or which may create or be the foundation for any mechanics’ lien or other Lien or claim upon or against Lessee’s interest in the Leased Premises or the Lessee’s Leasehold Improvements, and Lessee shall have no responsibility to any such person or entity who shall engage in or participate in any such construction; provided that the foregoing limitation shall not apply if Lessee, its employees, its agents, or its contractors are commissioning or actually performing such work.

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ARTICLE 9 ENVIRONMENTAL COVENANTS AND ENVIRONMENTAL

INDEMNIFICATION

Section 9.1. Environmental Covenants of Lessee. Lessee shall not cause any Environmental Conditions or Environmental Noncompliances at the Leased Premises or the Easement Property, and shall not suffer the existence of any Environmental Conditions or Environmental Noncompliances at the Leased Premises (except to the extent that such Environmental Conditions or Environmental Noncompliances arise from matters as to which Lessor is obligated under this Agreement to indemnify Lessee), which could reasonably be expected to lead to any material Environmental Claim or Environmental Expense asserted against or incurred by Lessor or its Affiliates.

Section 9.2. Environmental Covenants of Lessor. Lessor shall not cause any Environmental Conditions or Environmental Noncompliances at the Lessor’s Lands, and shall not suffer the existence of any Environmental Conditions or Environmental Noncompliances at (a) the Lessor’s Lands (except to the extent that such Environmental Conditions or Environmental Noncompliances arise from matters as to which Lessee is obligated under this Agreement to indemnify Lessor) or (b) at the Easement Equipment (except to the extent that such Environmental Conditions or Environmental Noncompliances are caused by Lessee or its Affiliates), in each case, which could reasonably be expected to lead to any material Environmental Claim or Environmental Expense asserted against or incurred by Lessee or its Affiliates.

Section 9.3. Lessor Environmental Indemnity.

9.3.1 Lessor agrees to indemnify, defend and hold harmless Lessee and its directors, officers and employees (each a “Lessee Indemnified Party”) from and against any and all Environmental Claims brought against such Lessee Indemnified Party by any third party and any and all Environmental Expenses imposed upon or reasonably incurred by such Lessee Indemnified Party in connection with Environmental Conditions or Environmental Noncompliances on the Lessor’s Lands (a) arising or occurring prior to the Commencement Date, and (b) arising or occurring during the Lease Term, except to the extent such Environmental Conditions or Environmental Noncompliances are attributable to the acts or omissions of any Lessee Indemnified Party or any Representative of Lessee. Lessor’s obligations pursuant to this Section 9.3.1 shall exist regardless of whether any Lessee Indemnified Party or Representative of Lessee is alleged or held to be strictly or jointly and severally liable under any action, legal provision, permit, rule, regulation, order or otherwise.

9.3.2 If Lessor sells the Lessor’s Lands or any property related to the Lessor’s Lands, Lessor shall retain all obligations and liabilities under this Section 9.3 related to such property sold arising out of any facts or circumstances existing as of or prior to the date of any such sale (whether known at the time of any such sale or thereafter discovered as having existed as of the date thereof) and the Person to whom Lessor sells any such property shall assume all obligations and liabilities of Lessor under this Section 9.3 related to such property sold arising out of facts or circumstances that occur or come into

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existence after the date of any such sale.

9.3.3 If Lessee sells the Lessee’s Leasehold Improvements, the Lessee Indemnified Parties shall retain all rights of the Lessee Indemnified Parties under this Section 9.3 and the Person to whom Lessee sells the Lessee’s Leasehold Improvements or any interest therein shall by assigned by Lessee all rights of the Lessee Indemnified Parties under this Section 9.3.

Section 9.4. Lessee Environmental Indemnity.

9.4.1 Lessee agrees to indemnify, defend and hold harmless Lessor and its officers and employees (each a “Lessor Indemnified Party”) from and against any and all Environmental Claims brought against such Lessor Indemnified Parties by any third party and any and all Environmental Expenses imposed upon or reasonably incurred by such Lessor Indemnified Party in connection with (i) Environmental Noncompliances arising or occurring during the Lease Term located at or otherwise relating to (a) the Leased Premises, to the extent such Environmental Conditions or Environmental Noncompliances are attributable to the acts or omissions of any Lessee Party or any Representative of Lessee, or (b) any areas of the Easement Property (excluding the Construction Laydown Lease Premises and the property subject to the Electric Transmission Line Easement Agreement) which Lessee has the right to occupy or possess under any license or easement (excluding the Construction Laydown Lease and the Electric Transmission Line Easement Agreement) to the extent such Environmental Conditions or Environmental Noncompliance are attributable to the acts or omissions of any Lessee Party or any Representative of Lessee, or (iii) Environmental Conditions or Environmental Noncompliances located at or otherwise relating to the Leased Premises and arising or occurring during the Lease Term except to the extent such Environmental Conditions or Environmental Noncompliances are attributable to the acts or omissions of any Lessor Indemnified Party or any Representative of Lessor. Lessee’s obligations under this Section 9.4.1 shall exist regardless of whether any Lessor Indemnified Party is alleged or held to be strictly or jointly and severally liable under any action, legal provision, permit, rule, regulation, order or otherwise.

9.4.2 If Lessee sells the Lessee’s Leasehold Improvements or any property related to the Lessee’s Leasehold Improvements, Lessee shall retain all obligations and liabilities under this Section 9.4 related to such property sold arising out of any facts or circumstances existing as of or prior to the date of any such sale (whether known at the time of any such sale or thereafter discovered as having existed as of the date thereof) and the Person to whom Lessee sells any such property shall assume all obligations and liabilities of Lessee under this Section 9.4 related to such property sold arising out of facts or circumstances that occur or come into existence after the date of any such sale.

9.4.3 If Lessor sells the Lessor’s Lands or any interest therein, the Lessor Indemnified Parties shall retain all rights of the Lessor Indemnified Parties under this Section 9.4, and the Person to whom Lessor sells the Lessor’s Lands or any interest therein shall be assigned by Lessor all rights of Lessor Indemnified Parties under this Section 9.4.

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Section 9.5. Joint Liability. In the event that any Environmental Claims or Environmental Expenses arise, directly or indirectly, in whole or in part, out of the joint or concurrent negligence of Lessor and Lessee, or their respective officers, directors, agents, attorneys or employees, notwithstanding any contrary provision of Section 9.3 or 9.4, each Party’s liability under Sections 9.3 and 9.4 shall be limited to providing contribution to the other Party with respect to such liability in the same proportion that such Party’s degree of fault was a cause of such Environmental Claims or Environmental Expenses.

Section 9.6. Cooperation Regarding Claims. If a Party shall receive notice or have knowledge of any Claim, then the provisions of Section 10.2.2. shall be applicable.

ARTICLE 10 COMPLIANCE WITH LAWS, INDEMNITIES

Section 10.1. Compliance With Governmental Rules. Each Party shall comply with all Government Rules as they pertain to this Agreement.

Section 10.2. Indemnities and Limitations of Liability.

10.2.1 Indemnification. Lessor and Lessee (each an “Indemnifying Party”) agree to indemnify the other Party and its respective directors, officers and employees (an “Indemnified Party”) from and against all third party actions, causes of actions, damages, costs, liabilities, claims, losses, judgments, penalties and expenses of every type and description, including without limitation any fees and/or costs reasonably incurred by Lessor’s staff attorneys or contract attorneys and any and all costs, fees and expenses incurred in enforcing this provision (hereafter collectively referred to as a “Claim”) arising out of or in connection with the performance of any term, provision or covenant of this Agreement; provided, however the Indemnifying Party’s obligation is limited to providing contribution to the Indemnified Party with respect to such liability in the same proportion that the Indemnifying Party’s negligence or other tortious conduct was a cause of the damages awarded to such third party.

10.2.2 Cooperation Regarding Claims. If an Indemnified Party shall receive notice or have knowledge of any claim, demand, action, suit or proceeding that may result in a Claim by such Indemnified Party (the “Claiming Party”) against an Indemnifying Party pursuant to Article 9 or this Article 10, the Claiming Party shall, as promptly as is reasonably possible, give the Indemnifying Party notice of such Claim, including (i) a reasonably detailed description of the facts and circumstances relating to such Claim, (ii) a reasonably detailed description of the basis for its potential claim for indemnification with respect thereto, and (iii) a complete copy of all notices, pleadings and other papers related thereto; provided, that failure promptly to give such notice or to provide such information and documents shall not relieve the Indemnifying Party of any indemnification obligation it may have under Article 9 or this Article 10 unless such failure shall materially diminish the ability of the Indemnifying Party to respond to or to defend the Claiming Party as a result of its failure to give such notice. Lessor and Lessee shall consult and cooperate with each other regarding the response to and the defense of

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any Claim and the Indemnifying Party shall promptly assume the defense or represent the interests of the Claiming Party in respect of such Claim, which shall include the right to select legal counsel, reasonably satisfactory to the Claiming Party, and other consultants to appear in proceedings on behalf of the Claiming Party and to propose, accept or reject offers of settlement, all at Indemnifying Party’s sole cost; provided that no such settlement shall be made without the written consent of the relevant Claiming Party, such consent not to be unreasonably withheld or delayed; provided, further that if the Claim is settled without the Indemnifying Party’s consent, the Claiming Party shall be deemed to have waived all rights hereunder against the Indemnifying Party for damages arising out of such Claim. Nothing herein shall prevent the Claiming Party from retaining its own counsel and participating in its own defense at its own cost and expense. The Parties shall cooperate with each other in any notifications to insurers.

10.2.3 Limitation of Liability. Except for the indemnification under Article 9 and this Article 10, a Party shall only be liable to the other Party for such Party’s direct damages as a result of a breach or default by such Party under this Agreement. Except for the indemnification under Article 9 and this Article 10, in no event shall a Party be liable to the other Party, whether under contact, tort (including negligence), strict liability or any other cause of or form of action whatsoever, for claims by such Party of cost of money, loss of profits, loss of use of capital or revenue or any other incidental, special, indirect or consequential loss or damage of any nature arising at any time or from any cause whatsoever, or for punitive or exemplary damages.

Section 10.3. Assignment of Liable Party’s Rights. If any entity providing insurance covering any liability of a Party for indemnification or contribution within the scope of Article 9 or this Article 10 (the “Liable Party”) refuses to make payment with respect to such liability, the Liable Party shall, at the request of the other Party, execute such documents as may be necessary to effect an assignment of the Liable Party’s rights to payment from such entity, provided that nothing in this Section 10.3 shall relieve the Liable Party from liability under Article 9 or this Article 10.

Section 10.4. Brokers and Finders. Pursuant to the provisions of this Article 10, each Party shall indemnify, hold harmless and defend the other Party from the payment of any and all broker’s and finder’s expenses, commissions, fees or other forms of compensation which may be due or payable from or by the Indemnifying Party, or may have been earned by any third party acting on behalf of the Indemnifying Party in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby and thereby.

Section 10.5. Limitation of Liability for Other Party’s Debts. Notwithstanding anything to the contrary contained herein, except as provided in the Estoppel and Consent (if any), (i) Lessor shall have no liability whatsoever with respect to, and no Lien shall be placed on Lessor’s assets in connection with, the obligations of Lessee under its Financing Documents, and (ii) except as expressly set forth in this Agreement, including Article 11, Lessee shall have no liability whatsoever with respect to, and no Lien shall be placed on Lessee’s assets in connection with, the obligations of Lessor under its financing agreements.

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Section 10.6. No Release of Insurers. The provisions of Section 10.2 shall not be construed so as to relieve any insurer of its obligation to pay any insurance proceeds in accordance with the terms and conditions of valid and collectible insurance policies.

Section 10.7. Representatives. No officer, director, manager, agent, attorney, employee or other individual representative of any party hereto shall be personally liable for any loss under the provisions contained in Article 9 or this Article 10. Nothing herein shall relieve either party hereto of any liability to make any payment expressly required to be made by such party pursuant to this Agreement.

ARTICLE 11 INSURANCE

Section 11.1. Insurance Provided by Lessee. Lessee agrees to procure and maintain in full force and effect during the Lease Term policies of insurance described in this Section 11.1 and until such insurance coverage has been procured by the Lessee, Lessee shall not occupy or commence work on the Leased Premises and the Easement Property. All insurance will be obtained from insurance companies qualified to do business in California whose ratings from A.M. Bests are not less than A - IX, or are otherwise acceptable to Lessor. In the event a particular policy is discontinued or the coverage is no longer available on commercially reasonable terms, Lessee will provide substitute coverage that is as nearly equivalent as is available on commercially reasonable terms and Lessee will so notify Lessor. The Parties will promptly thereafter discuss and attempt in good faith to agree to a method of providing on commercially reasonable terms equivalent or similar coverage to that coverage which had been discontinued or was no longer available on commercially reasonable terms.

Section 11.2. CGL Insurance. Commercial general liability coverage, including contractual liability, personal injury liability, products/completed operations, and independent contractors, all applicable to personal and bodily injury and property damage, including the cost of defense of any action for bodily injury, death, personal injury and property damage which may arise out of the operations of Lessee. Limits of coverage shall be a combined single limit of One Million and No/100 Dollars ($1,000,000) for each occurrence and Two Million and No/100 Dollars ($2,000,000) in the aggregate annually.

Section 11.3. Automobile Liability. Automobile Liability insurance covering any loss, including the cost of defense of any action for bodily injury, death, personal injury and property damage which may arise out of the operation, maintenance or use of any vehicle whether or not owned by the Lessee, on or off Lessor’s premises. The policy shall provide a minimum combined single limit of One Million and No/100 Dollars ($1,000,000) per accident. This insurance shall provide contractual liability covering all motor vehicles and mobile equipment to the extent coverage may be excluded from general liability insurance.

Section 11.4. Umbrella Liability. Umbrella or Excess Liability insurance policy with a minimum limit of Twenty-Five Million and No/100 Dollars ($25,000,000) per

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occurrence and in the aggregate excess shall provide coverage at least as broad as specified for underlying coverages and covering those insured in the underlying policies. Coverage shall be “pay on behalf”, with defense costs payable in addition to policy limits. There shall be no cross liability exclusion of claims or suits by one insured against another.

Section 11.5. Workers Compensation. Workers’ compensation insurance in accordance with the laws of the State of California and Employers’ Liability Insurance in the amount of One Million and No/100 Dollars ($1,000,000) per accident or disease with respect to any work on or about the Leased Premises, the Lessee’s Leasehold Improvements, or the Easement Property. A waiver of subrogation endorsement must accompany the policy.

Section 11.6. Pollution Liability. Pollution (environmental impairment) liability insurance shall be written on a Contractor's Pollution Liability form or other form acceptable to Lessor, providing coverage for liability arising out of sudden, accidental and gradual pollution and remediation. The policy limits shall be no less than Five Million and No/100 Dollars ($5,000,000) per claim and in the aggregate. Lessee agrees to renew this policy at the end of the policy term, that is each coverage year, with substantially the same terms and conditions and limits of liability no less than those stated herein.

Section 11.7. Business Interruption Insurance. Lessee shall also maintain or cause to be maintained with respect to its operations on the Leased Premises business interruption insurance on an “all risk” basis, in an amount not less than the sum of twelve (12) months gross revenues less any non-continuing expenses.

Section 11.8. Additional Insureds. Lessee shall make Lessor and other required parties, additional insureds under the Comprehensive General Liability Insurance Policy, Automobile Liability Policy, pollution liability policy, and the Excess Liability/Umbrella Policy except with respect to such Party’s independent negligence. The insurance provided to the additional insureds shall be primary and any other valid and collectable insurance available to the additional insureds shall be excess. Each insurer shall agree that its policy is primary insurance, and that it shall be liable under its policy, only to the extent arising out of the negligence of Lessee, for the full amount of any loss up to and including the total amount of liability without right of contribution from any other insurance affected by Lessor. The inclusion of Lessor as an additional insured shall not in any way affect its rights with respect to any claim, demand, suit or judgment made, brought or recovered against Lessee. Said policy or policies shall protect Lessee and Lessor in the same manner as though a separate policy has been issued to each; however, nothing in said policy shall operate to increase the insurer’s liability as set forth in the policy beyond the amount or amounts shown or to which insurer would have been liable if only one interest had been named as an insured. A severability of interest clause will be included within the terms of each policy.

Section 11.9. Notice of Discontinuance. All certificates of insurance from the insuring companies required to be furnished to Lessor hereunder shall include the

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following clause: “At least thirty (30) days’ advance notice shall be given in writing by certified mail, return receipt requested, to Lessor at its notice address set forth in Section 19.1 of this Agreement, to the attention of its risk management department, prior to cancellation, termination, or any alteration of the policy or policies evidenced by this certificate.”

Section 11.10. Periodic Review of Insurance Requirements. The minimum policy limits of the foregoing insurance requirements, shall be subject to review for adequacy by the Parties every five (5) years during the Term, and such policy limits may be increased, upon the mutual agreement of the Parties, in light of the probable risks and liabilities known to the Parties at the time of such review; provided, however, that in no event shall Lessee be obligated to reduce the deductible amount of any insurance policy specified in this Article 11 below the greater of any amount set forth above or any deductible amount required by any Lender to Lessee. In the event Lessee and Lessor cannot agree upon the minimum policy limits of the foregoing insurance requirements, the Parties shall submit the matter to binding arbitration pursuant to Section 20.1 of this Agreement.

Section 11.11. Lender Insurance Requirements. Notwithstanding the foregoing provisions of this Agreement, Lessee agrees to procure and maintain in full force and effect all insurance policies required by each Lender to Lessee (and to satisfy the requirements for each such policy, including, without limitation, the policy limits and deductibles thereunder). Lessee agrees to cause the Lessor to be named as an additional named insured on such policies. For the avoidance of doubt, Lessee shall not be required to procure and maintain the insurance required by such Lenders upon the termination of Lessee’s indebtedness to such Lenders and upon satisfaction of such indebtedness Lessee shall only required to satisfy the requirements of the foregoing provisions of this Article 11.

Section 11.12. Waiver of Subrogation. Each Party to this Lease hereby releases and relieves the other, and waives its entire right of recovery against the other, for direct or consequential loss or damage arising out of or related to any accident covered by property insurance carried by such Party, its Affiliates, agents, employees, contractors and/or invitees, whether or not due to the negligence of the Lessor or the Lessee (as the case may be) their respective Affiliates, agents, employees, contractors and/or invitees.

ARTICLE 12 ASSIGNMENTS, SUBLEASES AND MORTGAGES

Section 12.1. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their successors and permitted assigns.

Section 12.2. Assignment. Except as expressly provided in Section 12.3, neither Party will assign or transfer any right, obligation or interest under this Agreement without the prior written consent of the other Party, which consent will not be unreasonably withheld or delayed; provided, however, that the consent of the other Party shall not be required in connection with (a) any Party’s assignment of this Agreement to

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an Affiliate of such Party or a purchaser or transferee of substantially all of the assets of a Party, but only upon assumption by such Affiliate, purchaser or transferee of all of such Party’s obligations under this Agreement, or (b) the merger (or similar transaction) of a Party. If a Party assigns this Agreement to an Affiliate of such Party, the assigning Party shall remain liable for its obligations hereunder. Any assignee of this Agreement pursuant to the foregoing provisions of this paragraph shall have the right to further assign this Agreement as provided for in this paragraph. If in connection with any assignment permitted pursuant to this paragraph any Lender to or equity investor of Lessee (and any direct or indirect wholly-owned subsidiary of Lessee) requests Lessor to consent in writing to such an assignment even though such consent is not required hereunder, Lessor shall promptly provide such consent. In the case of an assignment that does not require Lessor’s consent, Lessee’s sole obligation under this Article 12 is to provide Lessor with notice of such assignment.

Section 12.3. Collateral Assignments. Notwithstanding the foregoing, without the prior consent of the Lessor, Lessee may assign its rights and interest under this Agreement and in and to the Leased Premises (collectively, the “Leasehold Interest”) to (a) any Lenders to Lessee (and any direct or indirect wholly-owned subsidiary of Lessee) providing construction, interim or long term financing for the Plant and the Lessee’s Easement Equipment (including a leveraged lease or any other refinancing thereof), and (b) any equity investors of Lessee, including, without limitation, holders of the membership interests in Lessee and any direct or indirect wholly-owned subsidiary of Lessee, in each case as collateral security for the obligations of Lessee (and any direct or indirect wholly-owned subsidiary of Lessee). Lessor shall reasonably cooperate with Lessee (and any direct or indirect wholly-owned subsidiary of Lessee) and their respective Lenders and equity investors from time to time, including, without limitation, the furnishing of such information and documentation as such Lender or equity investors reasonably requests from Lessor, or an opinion of counsel addressed to any such Lender or equity investor concerning such matters, as such Lenders and equity investors may reasonably request, and in connection with any such collateral assignment, Lessor shall enter into a consent and agreement (an “Estoppel and Consent”) with such Lenders or equity investors on such terms as may be customary under the circumstances and as shall be reasonably required by such Lenders or equity investors, provided that the foregoing undertaking shall not obligate Lessor to change any of its rights or benefits, or impose or increase any of its burdens, liabilities, or obligations, under this Agreement.

Section 12.4. Rights of Leasehold Mortgagee. Lessee may from time to time, without the prior consent of Lessor, grant one or more Leasehold Mortgages (including one or more additional deeds of trust) on its leasehold interest in this Agreement, in addition to, or in substitution of, such grants under the Financing Documents; provided that at the time any such grant is made Lessee retains its obligations hereunder. Any holders of a Leasehold Mortgage, including Lenders, and any assignee of or other successor to the right, title and interest of such a holder in, to and under a Leasehold Mortgage, shall be deemed a “Leasehold Mortgagee” for the purposes of this Agreement.

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Section 12.5. Obligations of Leasehold Mortgagees. The provisions of this Article 12 are for the benefit of each Leasehold Mortgagee, as well as of Lessee, and shall be enforceable by any of them. Lessor hereby agrees that no Leasehold Mortgagee shall be obligated to perform any obligation or be deemed to incur any liability or obligation provided herein on the part of Lessee unless such Leasehold Mortgagee forecloses its Leasehold Mortgage and takes possession of the Leased Premises.

Section 12.6. Leasehold Mortgagee Rights and Protections.

12.6.1 When Liability of Leasehold Mortgagee Accrues. No Leasehold Mortgagee in the exercise of its rights under this Agreement, shall be deemed to be an assignee or transferee or mortgagee in possession of the Leasehold Interest so as to require such Leasehold Mortgagee to assume or otherwise be obligated to perform any of Lessee’s obligations under this Agreement except when such Leasehold Mortgagee has obtained Control of the Leased Premises. No Leasehold Mortgagee or purchaser at a foreclosure sale held pursuant to a Leasehold Mortgage shall be liable under this Agreement unless and until such time as it becomes, and then only for so long as it remains, the owner of the Leasehold Interest.

12.6.2 Modifications Requested By A Leasehold Mortgagee. If any Leasehold Mortgagee or prospective Leasehold Mortgagee shall require any modification(s) of this Agreement (including clarifications and supplementations) such Person shall deliver to Lessee and Lessor such instruments in recordable form effecting such modifications(s) as such Leasehold Mortgagee or prospective Leasehold Mortgagee shall reasonably require, and Lessor and Lessee shall execute such instruments; provided, however, that Lessor shall not be required to execute such instruments if such modification(s) will adversely affect any of Lessor’s rights or increase Lessor’s obligations under this Agreement.

12.6.3 Foreclosure or Transfer In Lieu of Foreclosure. Notwithstanding anything to the contrary in this Agreement, any sale of this Agreement and of the Leasehold Interest in any proceedings for foreclosure of any Leasehold Mortgage, or any assignment, transfer or conveyance in lieu of such foreclosure, or any assignment of this Agreement and of the Leasehold Interest by a Leasehold Mortgagee, shall not be deemed to violate this Agreement.

12.6.4 Commencement and Termination of Leasehold Mortgagee Protections. A Leasehold Mortgagee shall be entitled to the Leasehold Mortgagee protections provided for under this Agreement only if Lessee and/or Leasehold Mortgagee shall have given to Lessor prior written notice of such Leasehold Mortgagee’s name and address. If a Leasehold Mortgagee is entitled to the Leasehold Mortgagee protections provided for under this Agreement, then such entitlement shall not terminate unless and until (a) such time as the Leasehold Mortgage shall have been satisfied and discharged of record as evidenced by the recording of a satisfaction and cancellation of the Leasehold Mortgage in the land records for the County, or (b) the expiration of or, subject to the provisions of this Article 12, the termination of this Agreement.

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Section 12.7. Leasehold Mortgagee Protections. If Lessee at any time or from time to time enters into any Leasehold Mortgage(s), then so long as the Leasehold Mortgagee(s) thereunder are entitled to the protections provided for under this Agreement:

12.7.1 Leasehold Mortgagee Consent. Except as otherwise provided in this Agreement, Lessee’s cancellation, termination (including Lessee’s termination of this Agreement pursuant to any express right of termination provided for in this Agreement), surrender, abandonment, amendment, or modification of this Agreement shall not bind a Leasehold Mortgagee or affect the lien of any Leasehold Mortgage unless Leasehold Mortgagee has given its prior written consent to such cancellation, termination, abandonment, amendment, or modification.

12.7.2 Notice to Leasehold Mortgagee. If Lessor shall give any notice to Lessee (including any notice of default and any notice of termination of this Agreement for any reason), then Lessor shall at the same time and by the same means give a copy of such notice to each Leasehold Mortgagee. No Lease Event of Default or termination of this Agreement predicated upon the giving of notice to Lessee shall be deemed to have occurred unless like notice shall have been so given to each Leasehold Mortgagee at the same time and by the same means, which notice shall describe in reasonable detail the alleged Lease Event of Default or other grounds for termination. Notwithstanding anything to the contrary in this Section 12.7.2, if any Leasehold Mortgagee has not provided, or caused to have been provided, to Lessor such Leasehold Mortgagee’s name and address, Lessor shall have no obligation to deliver a copy of any such notice described in this Section 12.7.2, or any other notice, to such Leasehold Mortgagee and any Lease Event of Default shall be deemed to occur, vis-à-vis such Leasehold Mortgagee, notwithstanding such Leasehold Mortgagee’s lack of notice thereof.

12.7.3 Right of Leasehold Mortgagee to Perform for Lessee. Any Leasehold Mortgagee shall have the right, but not the obligation, to perform any obligation of Lessee under this Agreement and to remedy any default by Lessee as set forth in Section 12.7.5, below. Lessor shall accept performance by or at the instigation of a Leasehold Mortgagee in fulfillment of Lessee’s obligations, for the account of Lessee and with the same force and effect as if performed by Lessee. No such performance by a Leasehold Mortgagee shall cause such Leasehold Mortgagee to become a “mortgagee in possession” or otherwise cause such Leasehold Mortgagee to be deemed in possession of the Leased premises or bound by this Agreement.

12.7.4 Additional Time for Leasehold Mortgagee to Exercise Cure Rights. If a default by Lessee occurs under this Agreement and such default shall not be remedied within the cure period allotted under this Agreement, Lessor shall give each Leasehold Mortgagee, that has provided its name and address to Lessor, additional written notice of the default, and shall allow such Leasehold Mortgagee(s) the additional time provided for below within which to take (if such Leasehold Mortgagee so elects) whichever of the actions set forth below shall apply with respect to the default described in such notice of default (such actions, “Mortgagee’s Cure,” and a Leasehold Mortgagee’s rights to take such actions, “Mortgagee’s Cure Rights”).

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12.7.4.1 Default That Can Be Cured Without Possession. In the case of a Monetary Default or a Non-Monetary Default that Leasehold Mortgagee is reasonably capable of curing without obtaining possession of the Leased Premises within the cure period allowed to Lessee under this Agreement, Leasehold Mortgagee shall be entitled (but not required) to cure such default within a cure period consisting of Lessee’s cure period under this Agreement plus thirty (30) days.

12.7.4.2 Default That Cannot Be Cured Without Possession or That Cannot Be Cured By a Leasehold Mortgagee. In the case of a Non-Monetary Default that is not reasonably susceptible of being cured by Leasehold Mortgagee without obtaining possession of the Leased Premises, or that is otherwise not reasonably susceptible of being cured by a Leasehold Mortgagee, then Leasehold Mortgagee shall be entitled (but not required) to do the following, so long as, with respect to any defaults other than those referred to in this Section 12.7.4.2, such Leasehold Mortgagee has exercised or is exercising the applicable Mortgagee’s Cure Rights as defined in this Agreement:

(a) Within a period consisting of Lessee’s cure period for such Non-Monetary Default plus thirty (30) days, advise Lessor of Leasehold Mortgagee’s intention to take all reasonable steps necessary to remedy such Non-Monetary default.

(b) At any time during the cure period, if any, that applies to Lessee plus thirty (30) days thereafter, Leasehold Mortgagee shall be entitled to institute proceedings, and diligently prosecute the same to completion, subject to the occurrence of any Force Majeure Event(s), to obtain possession of the Leased Premises as a mortgagee, or to acquire the Leasehold Interest by foreclosure proceedings or otherwise, including delivery or an assignment in lieu of foreclosure (the obtaining of such possession or the completion of such acquisition, “Control of the Leased Premises”).

(c) Upon obtaining Control of the Leased Premises, Leasehold Mortgagee shall be required to duly commence the cure of such Non-Monetary Default and thereafter diligently prosecute to completion (to the full extent it is able to do so) on or before the one hundred eightieth (180th) day after the date that Leasehold Mortgagee obtains Control of the Leased Premises.

12.7.5 Failure to Cure. If any Leasehold Mortgagee commences to cure a Lease Event of Default pursuant to Section 12.7.4 of this Agreement, including its sub-parts, but fails to cure such default within the time periods allowed under Section 12.7.4 and its sub-parts, Lessor may at the expiration of such cure periods (except for such defaults that, by their very nature, are not susceptible of being cured by a Leasehold Mortgagee) proceed to enforce its remedies under Section 14.3 of this Agreement.

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12.7.6 No Obligation to Continue to Obtain Control of Leased Premises. A Leasehold Mortgagee shall not be required to continue to exercise its Mortgagee’s Cure Rights or otherwise proceed to obtain or to exercise Control of the Leased Premises if and when the default that such Leasehold Mortgagee was attempting to cure shall have been cured. Upon such cure and the cure of any other defaults in accordance with this Agreement, the Lease shall continue in full force and effect as if no default(s) had occurred.

12.7.7 Cure Period Limitation on Lessor’s Remedies. So long as the time period of a Leasehold Mortgagee to exercise its Mortgagee Cure Rights with respect to a Non-Monetary Default by Lessee has not expired (and provided that all Monetary Defaults are cured within Leasehold Mortgagee’s cure period provided for under this Agreement), Lessor shall not (i) re-enter the Leased Premises (except as permitted under this Agreement), (ii) serve a notice of election to terminate this Agreement (subject to the early termination provisions of Section 3.4 of this Agreement), or (iii) bring a proceeding on account of such default to (a) dispossess Lessee and/or other occupants of the Leased Premises, (b) re-enter the Leased Premises, (c) terminate this Agreement or the Leasehold Interest, or (d) otherwise exercise any rights or remedies under this Agreement by reason of such default. Nothing in the Leasehold Mortgagee protections provided for in this Agreement shall be construed to extend the Lease Term beyond the Lease Termination Date that would have applied if no default had occurred.

12.7.8 Entry to Effectuate a Mortgagee Cure. Lessor and Lessee authorize each Leasehold Mortgagee to enter the Leased Premises and to use the Easements to effect the Leasehold Mortgagee’s Cure and to take any action(s) reasonably necessary to effect the Leasehold Mortgagee’s Cure. A Leasehold Mortgagee’s rights under this paragraph shall not constitute Control of the Leased Premises or otherwise be construed to mean that such Leasehold Mortgagee has possession of the Leased Premises.

12.7.9 Lessor to Recognize Purchaser of Leasehold Interest at Foreclosure. If any Leasehold Mortgagee or its nominee or a purchaser at a foreclosure sale shall acquire Control of the Leased Premises, then Lessor shall recognize any purchaser of the Leasehold Interest pursuant to a foreclosure sale under a Leasehold Mortgage, or any transferee of the Leasehold Interest under an assignment in lieu of foreclosure, or, if the Leasehold Mortgagee should be such purchaser or assignee, the Leasehold Mortgagee and any assignee of the Leasehold Mortgage, as the Lessee hereunder; provided, however, that any such Person shall be obligated to timely cure all Monetary Defaults and promptly proceed and diligently continue to exercise Mortgagee’s Cure Rights within the time periods herein allowed.

12.7.10 Limitation on Liability of Leasehold Mortgagee and New Tenant. Notwithstanding anything to the contrary in this Agreement, no Leasehold Mortgagee, no New Tenant, and no one acting for or on behalf of a Leasehold Mortgagee or a New Tenant shall have any liability under or with respect to this Agreement (or the New Lease) except during such period as such person is the tenant under this Agreement (or the New Lease), and, subject to Section 12.7, such liability shall in any event terminate upon such Person’s assignment of the Lease (or the New Lease).

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12.7.11 Lessor Obligations To Enter Into New Lease. If this Agreement shall terminate for any reason before the last day of the Lease Term, then (in addition to any other or previous notice required to be given by Lessor to a Leasehold Mortgagee), Lessor shall, within thirty (30) days of such termination, give notice of such termination to each Leasehold Mortgagee entitled to Leasehold Mortgagee protections under this Agreement pursuant to Section 12.6 of this Agreement. Any such Leasehold Mortgagee may request, in writing within thirty (30) days of such notice, that Lessor enter into a new lease of the Leased Premises with such Leasehold Mortgagee or its nominee (the “New Tenant”), effective as of such termination date, for the remainder of the Lease Term (including, if applicable, the Lease Renewal Term) on the same terms and provisions contained in this Agreement, including all rights or privileges of Lessee under this Agreement, but excluding any requirements that have already been performed or no longer apply (a “New Lease”). The closing for the execution and delivery of the New Lease shall occur within ten (10) Business Days of such Leasehold Mortgagee’s request to enter the New Lease. At or before the closing for the New Lease, such Leasehold Mortgagee shall: (i) pay to Lessor any and all sums then due under this Agreement as if this Agreement had not been terminated; and (ii) commence and diligently prosecute the cure of any other default hereunder that remains uncured at that time, to the extent such default is susceptible of being cured by a Leasehold Mortgagee. If a Leasehold Mortgagee or its nominee enters into a New Lease, then such Leasehold Mortgagee shall pay all reasonable expenses, including reasonable attorneys’ fees, court costs and disbursements, incurred by Lessor in connection with Lessee’s default and the termination of this Agreement, the recovery of possession of the Leased Premises, and the preparation, execution and delivery of the New Lease. The following provisions shall apply to any New Lease:

12.7.11.1 Lessor and the Leasehold Mortgagee or its nominee shall, contemporaneously with the execution and delivery of the New Lease, execute, acknowledge and deliver duplicate originals of a recordable memorandum of lease agreement with respect to the New Lease. Such memorandum shall (a) be in form and substance reasonably satisfactory to both parties and (b) contain such information as may be legally required to be contained in a memorandum of lease. Following such execution, acknowledgement and delivery, the Leasehold Mortgagee, at its sole cost and expense, may submit such memorandum and any other documents or instruments which may be required for recording the same in the land records of the County.

12.7.11.2 The New Lease shall not be subject to any rights, Liens, or interests other than those to which this Agreement was subject at the time of its termination. The provisions of the immediately preceding sentence shall be self-executing.

12.7.11.3 Lessor shall, if requested, execute and deliver such resolutions and other documents as shall be reasonably necessary to enable the New Tenant to obtain title insurance with respect to the New Lease, at such New Tenant’s expense.

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12.7.11.4 Upon execution of a New Lease, Lessor shall assign to New Tenant all of Lessor’s right, title and interest in and to (a) all moneys, if any, then held by, or payable to, Lessor that Lessee would have been entitled to receive but for the termination of this Agreement, and (b) all subleases of the Leased Premises.

12.7.11.5 Between the date on which the Lease was terminated and the date of execution and delivery of a New Lease, if a Leasehold Mortgagee shall have requested a New Lease in accordance with the terms hereof, Lessor shall not cancel any permitted sublease of the Leased Premises, or accept any cancellation, termination or surrender of any such sublease, without the consent of such Leasehold Mortgagee.

12.7.12 Priority of Mortgagees. If more than one Leasehold Mortgagee desires to exercise Mortgagee’s Cure Rights or the right to obtain a New Lease or any other right granted to Leasehold Mortgagees hereunder, then Lessor shall recognize either (i) the Leasehold Mortgagee that desires to exercise such right or privilege whose Leasehold Mortgage is most senior in Lien, or (ii) such other Leasehold Mortgagee as has been designated in writing by all Leasehold Mortgagees to exercise such right or privilege. Priority of Leasehold Mortgages shall be conclusively evidenced by the then-current report or certificate of any reputable title insurance company licensed to do business in the State of California. Lessor shall have no liability whatsoever to any Leasehold Mortgagee or any other Person if Lessor erroneously recognizes a junior Leasehold Mortgagee as most senior if the title report or certificate relied upon by Lessor evidences that such Leasehold Mortgagee is the most senior.

12.7.13 No Merger of Estates. Without the written consent of Lessor, Lessee, and all Leasehold Mortgagees, the Leased Premises, the Plant and the Lessee’s Easement Equipment (to the extent it is an improvement or a fixture) and the Leasehold Interest shall remain distinct and separate estates and shall not merge for so long as Lessor is obligated to enter into a New Lease pursuant to Section 12.7.11 of this Agreement, notwithstanding the acquisition of both the Leased Premises and the Leasehold Interest by Lessor, Lessee, any Leasehold Mortgagee, or any other Person, whether by purchase or otherwise.

Section 12.8. Fee Mortgages. Lessor covenants and agrees that it shall not grant any Mortgage encumbering all or any portion of the Leased Premises (whether alone or as part of a larger portion of the Leased Premises being encumbered by such Mortgage) (such a Mortgage, a “Fee Mortgage”) unless such Fee Mortgage (a) expressly states that it is subject and subordinate to this Agreement (as this Agreement may be modified, supplemented or otherwise amended after the date of such Fee Mortgage, which amendments may be effected without the consent of the grantee of such Fee Mortgage) and to any and all Leasehold Mortgages, and (b) contains the covenant of the grantee thereof to not disturb the Lien of any Leasehold Mortgage. At the request of Lessee or any Leasehold Mortgagee, Lessor shall cause each Person having a Fee Mortgage to acknowledge in writing that this Agreement and Lessee’s and the Leasehold Mortgage(s)

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right of quiet enjoyment hereunder are superior to and shall not be disturbed by such Fee Mortgage.

ARTICLE 13 TERMINATION

Section 13.1. Termination. This Agreement shall terminate only (a) upon the expiration hereof, and/or (b) as expressly provided in Section 3.4 of this Agreement, and/or (c) as expressly provided in Article 14 of this Agreement, and/or (d) as expressly provided in Article 15 of this Agreement, and/or (e) by the mutual written agreement of Lessor and Lessee, subject to Section 12.7 of this Agreement, and shall not otherwise terminate, nor shall Lessee’s interest be extinguished, lost, conveyed or otherwise impaired, or be merged into or with any other interest or estate in the Leased Premises or any other property interest, in whole or in part, by any other cause or for any other reason whatsoever, whether similar or dissimilar to any of the foregoing.

ARTICLE 14 DEFAULT

Section 14.1. Events of Default. The following events shall be deemed to be events of default (“Lease Event(s) of Default”) by either Party (as the case may be) under this Agreement:

14.1.1 Monetary Default. Failure to pay any payment required to be made hereunder (a “Monetary Default”), including Impositions (unless such Impositions shall have been bonded or are being diligently contested as provided in this Agreement), or any other sum required to be paid hereunder, and such failure shall continue for ten (10) Business Days after written notice thereof has been given to the nonpaying party by Lessor; or

14.1.2 Non-Monetary Default. Failure to comply in any material respect with any material term, provision or covenant of this Agreement, other than the payment of sums to be paid hereunder (a “Non-Monetary Default”), and such failure shall continue for thirty (30) days after due written notice thereof has been given to the nonperforming party; or, if such failure cannot reasonably be cured within the said thirty (30) days but can be cured within a reasonable longer period and the nonperforming party shall have commenced to cure such failure within said period and shall thereafter proceed with reasonable due diligence and good faith to cure such failure, for such longer period as shall be necessary for such party to cure the same with all reasonable diligence.

Section 14.2. Intentionally Deleted.

Section 14.3. Remedies. Subject to the rights of Lenders or any other Leasehold Mortgagee hereunder or pursuant to the Estoppel and Consent, upon the occurrence and during the continuation of any Lease Event of Default, the nondefaulting party may exercise any remedy it may have at law or in equity, terminate this Agreement by notice to the other party and in conformity with procedures required hereby, or enforce, by all proper and legal suits and other means, its rights hereunder, without reentering or

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resuming possession of the Leased Premises and without terminating this Agreement. Without prejudice to any other remedy for default and subject to Section 5.3.5 (Lessor’s Right to Pay Impositions), the nondefaulting party may perform any obligation or make any payment reasonably required to cure a Lease Event of Default by the other party under this Agreement after at least thirty (30) days’ notice to the defaulting party of the nondefaulting party’s intent to pursue this remedy if the Lease Event of Default is not cured within such time period; provided, however, that thirty (30) day’s notice shall not be required in cases of emergency where action is required to protect lives or property located at the Lessor Facilities or the Plant or the Lessee’s Easement Equipment and the defaulting party is not proceeding to take appropriate remedial action (but the nondefaulting party in any event shall attempt to notify the defaulting party, by telephone or in writing, as to the emergency and what actions the nondefaulting party is taking or proposes to take). The reasonable costs of performance, including all reasonable disbursements, shall immediately be repaid by the defaulting party upon demand, together with interest from the date of expenditure until fully paid at an annual rate of interest equal to the lesser of (a) the Default Rate; or (b) the maximum interest rate allowed under California law.

ARTICLE 15 CONDEMNATION

Section 15.1. Parties, Rights and Obligations. If during the Lease Term there is any taking of all or any part of the Leased Premises by Condemnation, the rights and obligations of the Parties shall be determined by this Article 15.

Section 15.2. Total Taking. If the Leased Premises is totally and permanently taken by Condemnation, this Lease shall terminate on the Date of Taking and neither Party shall have any further liability hereunder or thereunder except as specifically provided herein or therein.

Section 15.3. Partial Taking. If a portion of the Leased Premises is taken by Condemnation, this Agreement shall remain in effect if such partial Condemnation does not materially and adversely affect Lessee’s rights hereunder. Otherwise, Lessee may, but shall have no obligation to, terminate this Lease upon thirty (30) days’ notice to Lessor delivered to Lessor not later than thirty (30) days after the Date of Taking, which termination shall be effective on the later of (a) the Date of Taking and (b) thirty (30) days after delivery of such termination notice to Lessor, and neither Party shall have any further liability hereunder or thereunder except as specifically provided herein or therein.

Section 15.4. Award Distribution. Lessor (or Lessor’s mortgagee(s), if applicable) shall be entitled to receive that part of any award (“Award”) attributable to the value of the Leased Premises (exclusive of the Lessee’s Leasehold Improvements and Lessee’s interest in this Agreement) taken. Lessee shall be entitled to receive, subject to the rights of the Leasehold Mortgagees, that part of any Award attributable to the value of the Lessee’s Leasehold Improvements and the Leasehold Interest, each to the extent taken.

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Section 15.5. Temporary Taking. The taking of the Leased Premises, or any part thereof, by military or other public authority shall constitute a taking by Condemnation only when the use and occupancy by the taking authority has continued for longer than twelve (12) months. During any such twelve (12) month period, which shall be a temporary taking, whether or not such temporary taking affects the Leased Premises and/or the Lessee’s Leasehold Improvements, all the provisions of this Agreement shall remain in full force and effect.

Section 15.6. Condemnation by Lessor or its Affiliates. Notwithstanding the foregoing provisions of this Article 15, if during the Lease Term Lessor or any Person that is controlled or formed by Lessor shall Condemn all or any part of the Leased Premises, in addition to all other payments required to be paid by Lessor or such Person under all applicable law or as otherwise required pursuant to the terms of this Agreement, Lessor shall pay to Lessee the following: (a) Lessee’s cost of relocating the Lessee’s Leasehold Improvements to an alternative site, including, without limitation, the costs of dismantling the Lessee’s Leasehold Improvements and the cost of the storage of such dismantled Lessee’s Leasehold Improvements (or, if it is more economical to replace certain components of the Lessee’s Leasehold Improvements than it is to relocate such components, the cost of replacing such components); (b) the cost of obtaining all necessary permits and other approvals and consents pursuant to all applicable Governmental Rules in connection with the relocation of the Lessee’s Leasehold Improvements to an alternative site and the commencement of operations at the alternative site; and (c) all net profits not realized by Lessee from the date of the cessation of operations at the Leased Premises as a direct result of the Condemnation until the commencement of commercial operations at an alternative site, less any net savings realized or reasonably anticipated to be realized by Lessee during the remainder of the Lease Term as a result of the relocation of the Lessee’s Leasehold Improvements and commencement of commercial operations at such alternative site (e.g., reduction in rent, operating costs, etc.), discounted to its net present value at a reasonable discount rate. In connection with the foregoing, Lessee covenants and agrees to use commercially reasonable efforts to locate an alternative site, negotiate rights to possess and occupy such alternative site, and to obtain all necessary permits and other approvals and consents pursuant to all applicable Governmental Rules in connection with the installation of the Lessee’s Leasehold Improvements at such alternative site and the commercial operations of the Plant thereon. at such alternative site.

ARTICLE 16 SURRENDER; HOLDOVER

Section 16.1. To Remain Lessee’s Leasehold Improvements. During the period commencing one year prior to, and ending on, the scheduled expiration of the Lease Term, Lessor and Lessee shall meet to discuss the removal of the Lessee’s Leasehold Improvements. During such meeting, Lessor may request that Lessee not remove some or all of the Lessee’s Leasehold Improvements. Lessee shall have the right to determine which of such requested Lessee’s Leasehold Improvements it will not remove at the end of the scheduled expiration of the Lease Term (such items, the “To Remain Lessee’s Leasehold Improvements”).

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Section 16.2. Holdover Rights. At the expiration of the Lease Term, Lessee may holdover for a period not to exceed six (6) months, subject to the payment of rent hereunder, during which time Lessee shall remove do and take such actions to satisfy its obligations under Section 16.3.

Section 16.3. Surrender Condition. At the later of the expiration of the Lease Term or any holdover period, (a) the Leased Premises shall be free and clear of all Liens on the Leased Premises in any way created by Lessee, its agents, contractors, employees, sublessees, successors and assigns, other than such Liens to which Lessor shall have expressly consented in writing to remain in effect on or after such termination, and (b) Lessee shall remove the Lessee’s Leasehold Improvements that are above the surface grade of the Leased Premises and the Easement Property, and that are six feet or less below the surface grade of the Leased Premises and the Easement Property, less and except the To Remain Lessee’s Leasehold Improvements, and restore the Leased Premises and the Easement Property, less and except the areas of the Leased Premises and the Easement Property upon which the To Remain Lessee’s Leasehold Improvements are located, to a condition suitable for agriculture, including, but not limited to, sufficient topsoil available for agriculture. For the avoidance of doubt, Lessee shall not be required to remove the To Remain Lessee’s Leasehold Improvements, or any foundations, pilings or other underground improvements on the Leased Premises or the Easement Property, installed by Lessee, if and to the extent such foundations, pilings or other underground improvements are more than six feet below the surface grade of the Leased Premises or the Easement Property. In addition, in no event shall Lessee be required to remove any foundations, pilings or other underground improvements not installed by Lessee. In addition, within thirty (30) days after the last day of the Lease Term, Lessee shall deliver to Lessor in writing the results of an environmental assessment of the Leased Premises.

Section 16.4. Security for Lessee Obligation to Satisfy the Surrender Condition. Prior to the Construction Commencement Date, Lessee shall deliver to Lessor cash, a letter or credit, a performance bond, or other credit or security reasonably acceptable to Lessor (the “Removal Obligation Security”), in an amount sufficient to pay for Lessee’s obligations to remove the Lessee’s Leasehold Improvements and the Lessee’s Easement Equipment from the Leased Premises and the Easement Equipment pursuant to Section 16.3. Lessee shall provide to Lessor evidence reasonably acceptable to Lessor of the cost to Lessee to satisfy its obligations to remove the Lessee’s Leasehold Improvements and the Lessee’s Easement Equipment from the Leased Premises and the Easement Equipment pursuant to Section 16.3. Lessor shall hold the Removal Obligation Security in trust. Within thirty (30) days after Lessee’s satisfaction of its obligations pursuant to Section 16.3, Lessor shall deliver the Removal Obligation Security to Lessee. If an Event of Default shall occur as a result of Lessee’s breach of its obligations pursuant to Section 16.3, Lessor shall have the right to perform Lessee’s obligations pursuant to Section 16.3 and apply the Removal Obligation Security to the cost thereof.

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ARTICLE 17 REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 17.1. Representations and Warranties of Lessee. Lessee hereby makes the following representations and warranties to Lessor:

17.1.1 Lessee is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to do business in the State of California and has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.

17.1.2 The execution, delivery and performance by Lessee of this Agreement has been duly authorized by all necessary limited liability company action, and does not and will not require any consent or approval of Lessee’s members other than that which has been obtained (evidence of which shall be, if it has not heretofore been, delivered to Lessor).

17.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any legal requirements, or any organizational documents, agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Lessee is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.

17.1.4 This Agreement constitutes the legal, valid and binding obligation of Lessee enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.

17.1.5 There is no pending or, to the knowledge of Lessee, threatened action or proceeding affecting Lessee before any Governmental Authority, which purports to affect the legality, validity or enforceability of this Agreement.

17.1.6 Lessee has obtained all approvals of any Governmental Authority necessary for it to enter into and perform its obligations under this Agreement, including, but not limited to, certification of a final Environmental Impact Report or its equivalent by the State of California, Energy Resources Conservation and Development Commission.

17.1.7 Lessee owns, leases, and/or subleases the Lessee’s Leasehold Improvements.

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Section 17.2. Covenants of Lessee.

17.2.1 Lessee agrees to use commercially reasonable efforts to cause the Lessor to be the point of sale with respect to the construction of the Plant; provided, however, that Lessee shall not be liable to Lessor if as a result of such efforts tax revenues to the Lessor are not maximized.

17.2.2 Prior to the Commencement Date, Lessee shall use commercially reasonable efforts to obtain all approvals of any Governmental Authority necessary for it to perform its obligations under this Agreement, including, but not limited to, certification of a final Environmental Impact Report or its equivalent by the State of California, Energy Resources Conservation and Development Commission.

Section 17.3. Representations and Warranties of Lessor. Lessor hereby makes the following representations and warranties to Lessee:

17.3.1 Lessor is a municipal corporation duly organized, validly existing and in good standing under the laws of the State of California, is qualified to do business in the State of California and has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.

17.3.2 The execution, delivery and performance by Lessor of this Agreement have been duly authorized by all necessary official action, and do not and will not require any consent or approval of Lessor’s City Council other than that which has been obtained (evidence of which shall be, if it has not heretofore been, delivered to Lessee).

17.3.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any legal requirements, or its articles of incorporation or bylaws, or any deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Lessor is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.

17.3.4 This Agreement constitutes the legal, valid and binding obligation of Lessor enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.

17.3.5 There is no pending or, to the knowledge of Lessor, threatened action or proceeding affecting Lessor before any Governmental Authority, which purports to affect the legality, validity or enforceability of this Agreement.

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17.3.6 Lessor has all approvals of any Governmental Authority necessary for it to perform its obligations under this Agreement.

17.3.7 Subject to the Permitted Encumbrances, Lessor owns the Leased Premises.

17.3.8 Subject to the Permitted Encumbrances, on the Effective Date Lessee will have a valid leasehold estate in and to the Leased Premises.

17.3.9 The Leased Premises is free of all debris and improvements, including, without limitation, foundations of any preexisting improvements.

Section 17.4. Covenants of Lessor.

17.4.1 Lessor covenants and agrees to execute and join in all applications for license and permits necessary for Lessee’s construction, installation and operation of the Plant and the Lessee’s Easement Equipment. Lessor’s execution and joining into such applications shall not modify or alter Lessee’s indemnification obligations pursuant to Section 10.2.

Section 17.5. Mutual Covenants of Lessee and Lessor.

17.5.1 Lessor and Lessee acknowledge and agree that in connection with the issuance by the California Energy Commission to Lessee of a permit to develop, construct and operate the Plant, trees, shrubs or other vegetation materials may be required to be planted in and on the Landscape Buffer Land, and in such event Lessor agrees to permit such trees, shrubs or other vegetative materials to be planted in and on the Landscape Buffer Land, and Lessee shall be obligated to pay for the cost of the acquisition and installation of such trees, shrubs and other vegetative materials.

ARTICLE 18 CONDITION OF THE LEASED PREMISES; ALTERATIONS AND

MAINTENANCE

Section 18.1. As-Is, Where-Is. The Lessee is leasing the Leased Premises in its present “AS-IS, WHERE-IS CONDITION WITH ALL FAULTS”, subject to the reasonable and ordinary wear and tear of the Property, and without representation or warranty of any kind, express or implied, except to the extent of the representations and warrants set forth in this Agreement. Except as expressly set forth herein, the Lessor has not made, does not make, and has not authorized anyone else to make any representation as to the present or future physical condition, value, presence or absence of hazardous materials, financing status, leasing, operation, use, tax status, income and expense or any other matter or thing pertaining to the Leased Property, and the Lessee acknowledges that no such representation or warranty has been made and that in entering into this Agreement, it does not rely on any representation or warranty other than those expressly set forth in this Agreement.

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Section 18.2. Alterations and Maintenance. Lessor shall have no obligation hereunder for the alteration or maintenance of the Leased Premises, the Plant or the Lessee’s Easement Equipment.

ARTICLE 19 NOTICES

Section 19.1. Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received by the applicable Party hereto if personally delivered; when transmitted by the applicable Party hereto if transmitted by telecopy, electronic or digital transmission method, subject to the sender’s facsimile machine or other device receiving the correct answerback of the addressee and confirmation of uninterrupted transmission by a transmission report or the recipient confirming by telephone to sender that he has received the message; and when received by the applicable Party hereto, if sent for next day delivery to a domestic address by recognized overnight delivery service or if sent by certified or registered mail, return receipt requested.

Notices shall be given:

If to Lessor, to:

The City of Vacaville 650 Merchant Street Vacaville, CA 95688 Attn: City Manager Facsimile No: (707) 469-6480

If to Lessee, to:

CPV Vacaville, LLC c/o Competitive Power Ventures, Inc. 55 2nd Street, Suite 525 San Francisco, CA 94105 Attn: Project Manager Facsimile No: (415) 975-9886

and

CPV Vacaville, LLC c/o Competitive Power Ventures, Inc. 35 Braintree Hill Office Park, Suite 400 Braintree, MA 02184 Attn: Project Manager Facsimile No: (781) 848-5804

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ARTICLE 20 GENERAL

Section 20.1. Arbitration. Any dispute relating to and/or arising out of this Agreement as between or among Lessee and Lessor while this Agreement is in effect, shall be resolved by arbitration administered by the American Arbitration Association under the Commercial Arbitration Rules (the “Commercial Arbitration Rules”). The arbitration tribunal shall be composed of three arbitrators (one arbitrator selected by each of Lessee and Lessor with the third selected by the other two arbitrators) within thirty (30) days of the filing of a demand for arbitration and failing such agreement, by the Parties under the Commercial Arbitration Rules. The arbitration proceedings shall be held in San Francisco, California. The decision, award and order of the arbitration tribunal shall be final, binding and conclusive as to Lessee and Lessor. All documents, information and other evidence produced for or in connection with such arbitration proceedings shall be held in confidence by the Parties. Other than the fees and expenses of the arbitrators, which shall be shared equally by the Parties, each Party shall bear the compensation and expenses of its own legal counsel, witnesses and employees.

Section 20.2.No Third Party Beneficiary. This Agreement and all rights hereunder are intended for the sole benefit of the Parties hereto and, to the extent expressly provided, for the benefit of the Lenders and the other Indemnified Parties, and shall not imply or create any rights on the part of, or obligations to, any other Person.

Section 20.3. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of California without regard to its conflicts of laws provisions.

Section 20.4. Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. In the event that such a construction would be unreasonable or would deprive a Party of a material benefit under this Agreement, the Parties shall seek to amend this Agreement to remove the invalid provision and otherwise provide the benefit unless prohibited by any Governmental Rule.

Section 20.5. Waivers. The failure of either Party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision or of any other term or condition contained herein or a waiver of any subsequent breach or violation of the same or any other term or condition, nor in any way to affect the validity of this Agreement or any part hereof or the right of a Party thereafter to enforce each and every such provision. A waiver under this Agreement must be in writing and

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state that it is a waiver. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

Section 20.6. Entire Agreement And Amendments. This Agreement (including the Exhibits, Schedules and Annex hereto which are an integral part of this Agreement) supersedes all previous representations, understandings, negotiations and agreements either written or oral between the Parties hereto or their representatives, including, without limitation, the Memorandum of Understanding and the Option to Lease.

Section 20.7. Counterparts. This Agreement may be signed in multiple originals and/or using counterpart signature pages. All such multiple originals shall constitute but one and the same document.

Section 20.8. Decision-Making By Parties. Except where this Agreement expressly provides for a different standard, whenever this Agreement provides for determination, decision, permission, consent or approval of a Party, the Party shall promptly make such determination, decision, grant or withholding of permission, consent or approval in a commercially reasonable manner and without unreasonable delay. Any denial of consent required to be made in a commercially reasonable manner shall include in reasonable detail the reason for denial or aspect of the request that was not acceptable.

Section 20.9. No Recourse To Affiliate. This Agreement is solely and exclusively between Lessor and Lessee, and any obligations created herein shall be the sole obligations of the Parties hereto. No Party shall have recourse to any parent, member, shareholder, subsidiary, partner joint venture, affiliate, director or officer of the other Party for performance of said obligations unless the obligations are assumed in writing by the Person against whom recourse is sought.

Section 20.10. Further Assurances. Lessor and Lessee agree to cooperate in all reasonable respects necessary to consummate the transactions contemplated by this Agreement and each will take all reasonable actions within its authority to secure the cooperation of its affiliates.

Section 20.11. Survival. The provisions of this Agreement that relate to the enforcement of rights and obligations accruing before the end of the Lease Term shall survive termination of this Agreement to the extent necessary to enforce such rights and obligations.

Section 20.12. No Partnership. The Parties intend that nothing contained in this Agreement shall be deemed or construed to create a partnership, joint venture or other co-ownership arrangement between the Parties.

Section 20.13. Cumulative Remedies. All rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.

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Section 20.14. WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT.

Section 20.15. Past-Due Amounts. Any amounts due hereunder, if not timely paid by the party from whom they are due, shall bear simple interest at an annual rate of interest equal to the lesser of (i) Default Rate; or (ii) the maximum interest rate allowed under California law, from the date that such amount was due without regard to any grace period herein provided until the time that such amount is paid in full. Additionally, if any amount due hereunder is not paid by the party from whom such amount is due, the other party, upon thirty (30) days notice to the defaulting party, may elect to set-off the amount remaining overdue at the end of such thirty-day period (with such interest thereon) against amounts due or becoming due from the other party to the defaulting party hereunder until such other party shall have recovered in full the amount owed to it by the defaulting party.

Section 20.16. Estoppel Certificates. Within thirty (30) days after receipt of a written request, either party shall deliver a written statement to the other stating whether this Agreement is unmodified and in full force and effect, whether the other party is in compliance with this Agreement and any other matters that may reasonably be requested.

Section 20.17. Consents. Except where this Agreement expressly provides for a different standard, whenever this Agreement provides for a determination, decision, permission, consent, or approval of a party, the party shall promptly make such determination, decision, grant or withholding of permission, consent or approval in a commercially reasonable manner and without unreasonable delay. Any denial of consent required to be made in a reasonable manner shall include in reasonable detail the reason for denial or aspect of the request that was not acceptable.

Section 20.18. Legal Representation of Parties. This Agreement was negotiated by the Parties with the benefit of legal representation and any rule of construction or interpretation requiring this Agreement to be construed or interpreted against any Party, shall not apply to any construction or interpretation hereof or thereof.

Section 20.19. Non-Interference, Access. Neither of the Parties hereto shall undertake or engage in, any activities which unreasonably interfere with the operation of the Plant, the Lessee’s Easement Equipment or the Lessor Facilities.

Section 20.20. Sale of Leased Premises. In the event that Lessor, in accordance with the terms and provision of this Agreement, sells or transfers fee title to the Leased Premises to any Person or entity, this Agreement shall remain in full force and effect.

Comment: Duplicative of Section 20.8

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Section 20.21. Confidentiality. Except for the terms disclosed in the Memorandum of Lease, each Party agrees that it will not and shall direct its respective employees, officers, agents and representatives not to, directly or indirectly, release or cause or permit to be released to the public any press notices, publicity (oral or written) or advertising promotion relating to the execution of this Agreement, or otherwise publicly announce or disclose or cause or permit to be publicly announced or disclosed, in any manner whatsoever, the terms, conditions or substance of this Agreement or the transactions contemplated herein, without first obtaining the consent of the other Party. It is understood that the foregoing shall not (i) preclude any party from discussing the substance or any relevant details of the transactions contemplated in this Agreement on a confidential basis with any of its partners, attorneys, officers, directors, employees, accountants, professional consultants, financial advisors, rating agencies, or potential lenders, as the case may be (the “Representatives”) provided that such Representatives have been informed of the applicable Party’s obligations hereunder or (ii) prevent it from complying with applicable laws, including, without limitation, governmental regulatory, disclosure, tax and reporting requirements, including, but not limited to, the California Public Records Act (Government Code § 6250 et seq.).

ARTICLE 21 RIGHT OF FIRST REFUSAL.

Section 21.1. Right of First Refusal to Purchase Leased Premises. Lessor hereby grants to Lessee a right of first refusal to purchase any of the Leased Premises. If Lessor receives an offer from a third party to purchase all or any portion of the Leased Premises which Lessor, in its sole and exclusive discretion is prepared to accept, Lessor shall deliver to Lessee written notice of its receipt of such offer stating the Leased Premises (or any portion thereof) to be purchased, the proposed date of the sale, the proposed purchase price, and the other terms and conditions upon which the purchase is proposed to be made. Such notice shall constitute an offer (the “Offer”) by Lessor to sell the Leased Premises identified in the notice to Lessee, at the price and upon the terms and conditions set forth in the notice. For a period of thirty (30) days after the receipt of the notice Lessee shall have the right of first refusal, exercisable by written notice to Lessor, to accept the Offer. Following the last date by which Lessee may exercise its rights of first refusal under this Section 21.1, Lessee shall be deemed to have declined to purchase any of the Leased Premises on the terms set forth in the Offer, and Lessor shall be permitted, during the period of thirty (30) days thereafter to sell the Leased Premises identified in the Offer to the third party (that made the initial offer), at a price and upon terms and conditions no more favorable than those specified in the Offer.

Section 21.2. Right of First Refusal to Lease Adjacent Land. Lessor hereby grants to Lessee a right of first refusal to lease additional land owned by Lessor or its Affiliates and adjacent to the Leased Premises (the “Adjacent Land”). If Lessor receives an offer from a third party to lease the Adjacent Land which Lessor, in its sole and exclusive discretion is prepared to accept, Lessor shall deliver to Lessee written notice of its receipt of such offer stating the Adjacent Land to be leased, the proposed

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commencement date of the lease, the rent to be paid thereunder, and the other terms and conditions of such lease. Such notice shall constitute an offer (the “Offer”) by Lessor to lease the Adjacent Land identified in the notice to Lessee, at the rent and upon the terms and conditions set forth in the notice. For a period of thirty (30) days after the receipt of the notice Lessee shall have the right of first refusal, exercisable by written notice to Lessor, to accept the Offer and enter into a lease with Lessor. Following the last date by which Lessee may exercise its rights of first refusal under this Section 21.2, Lessee shall be deemed to have declined to purchase any of the Leased Premises on the terms set forth in the Offer, and Lessor shall be permitted, during the period of thirty (30) days thereafter to enter into a lease with the third party (that made the initial offer) the Leased Premises at a rent and upon terms and conditions no more favorable than those specified in the Offer.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

DSMDB-2406741v08

SIGNATURE PAGE TO LEASE AGREEMENT

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date set forth at the beginning of this Agreement.

LESSOR:

CITY OF VACAVILLE

By: Name: Title:

APPROVED AS TO FORM:

GERALD L. HOBRECHT, City Attorney

By: Name: Title:

LESSEE:

CPV VACAVILLE, LLC

By: Name: Title:

Annex A - 1 DSMDB-2406741v08

Annex A

Defined Terms

“Adjacent Land” has the meaning specified in Section 21.2.

“Affiliate” of a specified Person means any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the specified Person. As used in this definition, “control”, “controlled by” and “under common control with” shall mean possession, directly or indirectly, or power to direct or cause the direction of management or policies of such Person (whether through ownership of securities or other partnership or ownership interests, by contract or otherwise), provided that in any event, any Person which owns directly, indirectly or beneficially ten percent (10%) or more of the securities having voting power for the election of directors or other governing body of a corporation or ten percent (10%) or more of the partnership interests or other ownership interests of any other Person will be deemed to control such Person. Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate of a Person solely by reason of his or her being a director, committee member, officer or employee of such Person.

“Award” means all compensation, sums or anything of value awarded, paid or received on a total or partial Condemnation.

“Bankruptcy” means with respect to a Person that such Person (i) ceases doing business as a going concern, generally does not pay its debts as they become due or admits in writing its inability to pay its debts as they become due, files a voluntary petition in bankruptcy or is adjudicated a bankrupt or insolvent, or files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy code or any other present or future applicable federal, state or other Governmental Rule, or seeks or consents to or acquiesces in the appointment of any trustee, receiver, custodian or liquidator of said Person or of all or any substantial part of its properties, or makes an assignment for the benefit of creditors, or said Person takes any corporate action to authorize or that is in contemplation of the actions set forth in this clause (i); or (ii) a proceeding is initiated against the Person seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy code or any other Governmental Rule and, such proceeding is not dismissed within ninety (90) days after the commencement, or any trustee, receiver, custodian or liquidator of said Person or of all or any substantial part of its properties is appointed without the consent or acquiescence of said Person, and such appointment is not vacated or stayed on appeal or otherwise within ninety (90) days after the appointment or, within ninety (90) days after the expiration of any such stay, has not been vacated, provided that, notwithstanding the foregoing, the exercise of rights to take over operation of a Person’s assets, or to foreclose on any of a Person’s assets, by a secured creditor of such Person (including the appointment of a receiver or other representative in connection with the exercise of such rights) shall not constitute a Bankruptcy.

“Base Rent” has the meaning specified in Section 5.1.2(e).

Annex A - 2 DSMDB-2406741v08

“Base Rent Amount” has the meaning given in Section 5.1.1.

“Base Term” has the meaning specified in Section 3.1.1.

“Business Day” means each weekday (Monday through Friday) except the days on which the banks in California are closed.

“Claim” has the meaning specified in Section 10.2.1.

“Claiming Party” has the meaning specified in Section 10.2.2.

“Commencement Date” means the date specified in the Notice of Commencement Date given by Lessee to Lessor pursuant to Section 3.5.

“Commercial Arbitration Rules” has the meaning specified in Section 20.1.

“Commercial Operations Date” means the date upon which Plant is deemed to become commercially operable according to generally accepted industry standards.

“Condemnation” means (a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary sale or transfer by Lessor or Lessee to any Condemnor, either under threat of condemnation or while legal proceedings for Condemnation are pending.

“Condemnor” means any public or quasi-public authority, or private corporation or individual, having the power of Condemnation.

“Construction Commencement Date” means the date that the Lessee commences construction of the Plant.

“Construction Laydown Lease Agreement” means the Construction Laydown Lease Agreement of even date herewith between Lessor and Lessee.

“Construction Laydown Lease Premises” means that portion of the Lessor’s Lands that are subject to the Construction Laydown Lease Agreement.

“Control of the Leased Premises” has the meaning specified in Section 12.7.4.2(b).

“County” means Solano County, California.

“C.P.I. Escalator” has the meaning given in Section 5.1.1.

“C.P.I. Index” has the meaning given in Section 5.1.1.

“Date of Taking” means the date the Condemnor has the right to possession of the property being condemned.

“Deemed Property Tax Receipt” has the meaning specified in Section 5.5.1.

Annex A - 3 DSMDB-2406741v08

“Default Rate” means six percent (6%) per annum.

“Easement Property” has the meaning specified in Section 2.2.

“Easements” has the meaning specified in Section 2.2.

“Effective Date” shall have the meaning given to such term in the Introductory Paragraph of this Agreement.

“Electric Transmission Line Easement Agreement” means the Electric Transmission Line Easement Agreement of even date herewith between Lessor and Lessee.

“Environmental Claims” means all claims, demands, suits, causes of action for personal injury or property damage, including, without limitation, actual or threatened damages to natural resources; claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, removal, remedial or other response actions under any Environmental Laws; a requirement to implement “corrective action” pursuant to any order or permit issued pursuant to RCRA; claims for restitution, contribution or equitable indemnity from third parties or any governmental Authority; fines, penalties, liens against property; claims for injunctive relief or other orders or notices of violation from any Governmental Authority; any requirement to install pollution control equipment to comply with any Environmental Laws; and, with regard to any present or former employees or other natural persons, exposure to or injury from Environmental Conditions or Environmental Noncompliance.

“Environmental Conditions” means (i) any environmental conditions, circumstances or other matters of fact, pertaining to, relating to or otherwise affecting the environment, including any natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, and relating to or arising out of the presence, use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal (including, without limitation, the abandonment or discarding of barrels, containers and other closed receptacles containing any hazardous Materials), dumping or threatened release (as such term is used in CERCLA or other similar Environmental Laws) of Hazardous Materials, and (ii) the exposure of any persons (including any present or former employee to Hazardous Materials within any workplace within the Lessor’s Lands or the Lessee’s Leasehold Improvements (as the case may be), or the exposure of other natural persons within or outside the boundaries of the Lessor’s Lands or the Lessee’s Leasehold Improvements (as the case may be) to Hazardous Materials related to or otherwise arising from operations, acts, omissions or other conduct at the Lessor’s Lands or the Lessee’s Leasehold Improvements (as the case may be).

“Environmental Expenses” means all liabilities, losses, costs and expenses arising out of Environmental Conditions or Environmental Noncompliance, including, without limitation, costs of investigation, cleanup, remedial, removal or other response

Annex A - 4 DSMDB-2406741v08

action, the costs associated with posting financial assurances for the completion of response, remedial or corrective actions, the preparation of any closure or other necessary or required plans or analyses, other reports or analyses submitted to or prepared by Governmental Authorities, including the cost of health risk assessments, epidemiological studies and the like, retention of engineers or other expert consultants, legal counsel, capital improvements (including without limitation costs to install any pollution control equipment to comply with any Environmental Laws), operation and maintenance testing and monitoring costs, power and utility costs and pumping taxes or fees, and administrative, oversight and other costs incurred by Governmental Authorities; provided, however, that “Environmental Expenses” shall only include those Environmental Expenses which are reasonably necessary and are in reasonable amounts in view of the then existing circumstances giving rise to such Environmental Expenses.

“Environmental Laws” means any law, regulation, rule or ordinance now or hereafter in effect relating to Environmental Conditions, including, without limitation, CERCLA, the TSCA, the RCRA, the CWA, the CAA, the FIFRA, the AEA, the EPCRKA, the Safe Drinking Water Act, 42 U.S.C. §300f et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §1802, the Oil Pollution Act of 1990, 33 U.S.C. §2761, the Occupational Health and Safety act, 29 U.S.C. §651 et seq., and the Pollution Prevention Act, 42 U.S.C. §13101 et seq.,; the State Environmental Laws; any amendments thereto now or hereafter adopted or that otherwise become effective; any plans, rules, regulations or ordinances adopted (including without limitation fire, land use, zoning, and other codes and regulations relating to Environmental Conditions), any permits and licenses issued pursuant to any of the foregoing, or other guidelines, guidance or policies promulgated pursuant to the foregoing; and any common law principles (including without limitation decisions by or orders or courts, agencies, boards of appeals or similar bodies with mandatory or persuasive authority) relating to the Environmental Conditions.

“Environmental Noncompliance” means any violation of Environmental Laws including, without limitation: (i) the discharge, emission, release or threatened release (as such term issued in CERCLA, the CWA, the CAA or other similar Environmental laws) of any Hazardous Materials in violation of any Environmental laws; (ii) any noncompliance with Environmental Laws regarding the construction, modification, operation and maintenance of physical structures, equipment, processes or facilities; (iii) any noncompliance with federal, state or local requirements governing occupational safety and health related to hazardous Materials; (iv) any facility operations, procedures, designs, or other matters which do not conform to the statutory or regulatory requirements of Environmental Laws, including the CAA, the CWA, the TSCA and the RCRA; (v) the failure to have obtained or to maintain in full force and effect permits, variances or other authorizations necessary for the legal operation of any equipment, process, facility or any other activity, to the extent required for compliance with Environmental laws; or (vi) the operation of any facility, process or equipment in violation of any permit, condition, schedule of compliance, administrative or court order, to the extend required for compliance with Environmental Laws.

“Estoppel and Consent” has the meaning specified in Section 12.3.

Annex A - 5 DSMDB-2406741v08

“Fee Mortgage” has the meaning specified in Section 12.8.

“Financing Documents” shall mean the loan agreement that Lessee or its Affiliates, as provided in Section 12.4, negotiates together with all agreements necessary to consummate that loan and provide the Lenders with perfected security interests in the collateral for that loan.

“Fixed Base Rent Amount” has the meaning specified in Section 5.1.1.

“Force Majeure Event” means an act, condition, event or circumstances which prevents one Party from performing its obligations under this Agreement, which act, condition, event or circumstances is not within the reasonable control of, and without fault or negligence of, the Party claiming the occurrence of a Force Majeure Event. A Force Majeure Event includes, without limitation, sabotage, strikes or other labor difficulties, riots or civil disturbance, acts of God, acts of a public enemy, drought, earthquakes, floods, abnormally severe storms, explosions or fires, lightning, landslides, or similarly cataclysmic occurrence. A Force Majeure Event also includes condemnation, taking, seizure, involuntary conversion or requisition of title to or use of the Plant or Lessee Easement Property or any material portion thereof by action of the federal or state government. A Force Majeure Event shall not mean any act or event to the extent resulting from the fault or negligence of any person claiming a Force Majeure Event, or the financial inability of any person to perform its obligations under this Agreement.

“Governmental Authority” means any national, state or local government (whether domestic or foreign), and political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, department, bureau or entity (including without limitation any zoning authority, the United States Securities and Exchange Commission, the Federal Energy Regulatory Commission, the California Public Utilities Commission, the California Energy Commission or any comparable authority).

“Governmental Rule” means any law, rule, regulation, ordinance, order, code, permit, interpretation, judgment, decree, directive, guideline, policy or similar form of decision of any Governmental Authority having the effect and force of law, including without limitation any Environmental Laws.

“Hazardous Materials” means hazardous wastes, hazardous substances, hazardous constituents, air contaminants or toxic substances, whether solids, liquids or gases, including substances defined or otherwise regulated as “hazardous substances, “ “pollutants,” “reproductive toxins,” “radioactive materials,” “toxic chemicals,” or other similar designations in, or otherwise subject to regulation under, any Environmental Laws, including without limitation, petroleum hydrocarbons, asbestos-containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls and radio nuclides.

“Impositions” has the meaning specified in Section 5.3.1.

Annex A - 6 DSMDB-2406741v08

“Indemnified Party” has the meaning specified in Section 10.2.1.

“Indemnifying Party” has the meaning specified in Section 10.2.1.

“Landscape Buffer Land” has the meaning specified in Section 5.1.4.

“Lease Event(s) of Default” has the meaning specified in Section 14.1.

“Lease Renewal Term” has the meaning specified in Section 3.1.2.

“Lease Term” has the meaning specified in Section 3.1.3.

“Lease Termination Date” has the meaning specified in Section 3.1.3.

“Lease Year” has the meaning specified in Section 3.1.4.

“Leased Premises” has the meaning specified in Section 2.1.

“Leasehold Interest” has the meaning specified in Section 12.3.

“Leasehold Mortgage” has the meaning specified in Section 12.4.

“Leasehold Mortgagee” has the meaning specified in Section 12.4.

“Lenders” shall mean providers of debt financing, owners of debt instruments, and their respective successors and assigns, including transferees of debt instruments, and any trustee, collateral agent or other fiduciary or nominee acting on behalf of any of the foregoing Persons.

“Lessee” shall have the meaning specified in the introductory paragraph of this Agreement, and any successor or permitted assign thereof.

“Lessee’s Easement Equipment” has the meaning specified in Section 2.2.

“Lessee’s Leasehold Improvements” means the Plant, the Lessee’s Easement Equipment and all other equipment, Facilities, fixtures or improvements of Lessee located on the Leased Premises or the Easements.

“Lessee Indemnified Party” has the meaning specified in Section 9.3.1. “Lessor” shall mean have the meaning specified in the introductory paragraph of this Agreement, and any successor or permitted assign thereof.

“Lessor Indemnified Party” has the meaning specified in Section 9.4.1.

“Lessor Facilities” means the facilities owned by Lessor and located on the Lessor’s Lands.

“Lessor’s Lands” has the meaning specified in Section 2.2.

Annex A - 7 DSMDB-2406741v08

“Liable Party” has the meaning specified in Section 10.2.3.2.

“Liens” means any Mortgage, lien, claim, pledge, option, charge, easement, security interest, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof.

“Memorandum of Lease” has the meaning specified in Section 3.3.

“Memorandum of Understanding and the Option to Lease” means that Memorandum of Understanding dated December 11, 2007, between the Lessor and Competitive Power Ventures, Inc., and that Option to Lease dated December 11, 2007 between the Lessor and Competitive Power Ventures, Inc., each of which was assigned by Competitive Power Ventures, Inc. to Lessee.

“Monetary Default” has the meaning specified in Section 14.1.1.

“Mortgage” means any mortgage, deed of trust, deed to secure debt, assignment, security interest, pledge, financing statement or any other instrument(s) or agreement(s) intended to grant security for any obligation encumbering an interest in real property.

“Mortgagee’s Cure Rights” has the meaning specified in Section 12.7.4.

“New Lease” has the meaning specified in Section 12.7.11.

“New Tenant” has the meaning specified in Section 12.7.11.

“Non-Monetary Default” has the meaning specified in Section 14.1.2.

“Notice of Commencement Date” has the meaning specified in Section 3.5.

“Offer” has the meaning specified in Section 21.1 or 21.2, as applicable.

“Party” has the meaning given to it in the introductory paragraph of this Agreement.

“Permitted Encumbrances” has the meaning given in Section 2.1.

“Permitted Liens” means (a) Liens for Taxes that are not delinquent or that are being contested in good faith by appropriate proceedings; (b) such other Liens as, in the aggregate, (i) are not substantial in amount, (ii) do not materially detract from the value of the Lessee’s Leasehold Improvements and (iii) do not materially interfere with the ability to operate the Plant or the Lessee’s Easement Equipment; (c) Liens arising in connection with or under Lessee or its affiliates financing documents; and (d) Permitted Encumbrances.

Annex A - 8 DSMDB-2406741v08

“Person” means any natural person, corporation, partnership, firm, association, trust, unincorporated organization, Governmental Authority or any other entity whether acting in an individual, fiduciary or other capacity.

“Plant” has the meaning specified in Section 2.2.

“Power Purchaser” means the counterparty to Lessee pursuant to the Power Purchase Agreement.

“Power Purchase Agreement” means one or more long term electricity sales agreements pursuant to which Lessee agrees to sell electricity produced at the Plant, , and any replacement agreement thereto.

“Property Tax Floor” has the meaning specified in Section 5.5.1.

“Removal Obligation Security” has the meaning specified in Section 16.4.

“Representatives” has the meaning specified in Section 20.21.

“State Environmental Law” means any state or local law, regulation, rule or ordinance now or hereafter in effect relating to Environmental Conditions including any amendments thereto now or hereafter adopted or that otherwise become effective; and plans, rules, regulations, orders or ordinances adopted (including, without limitation fire, land use, zoning and other codes and regulations relating to Environmental Conditions), or other guidance or policies promulgated pursuant to the preceding laws; and local laws, ordinances, codes or regulations pertaining to or otherwise addressing Environmental Conditions; or any terms or conditions in state or local permits, licenses or other authorizations relating to Environmental Conditions; and common law principles (including without limitation decisions by or orders of courts, agencies, boards or appeals or similar bodies with mandatory or persuasive authority) relating to Environmental Conditions.

“Tax Backfill Payment” has the meaning specified in Section 5.5.1.

“Tax Backfill Payment Cap” has the meaning specified in Section 5.5.1.

“Tax Premium” has the meaning specified in Section 5.5.1.

“Taxes” means all federal, state, local and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, withholding, payroll, employment, excise, property, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amount with respect thereto.

“To Remain Lessee’s Leasehold Improvements” has the meaning specified in Section 16.1.

Annex A - 9 DSMDB-2406741v08

“Water Supply Agreement” means that Effluent and Easterly Potable Water Services Agreement between Lessor and Lessee of concurrent date herewith.

Schedule 2.1(a) - 1 DSMDB-2406741v08

Schedule 2.1(a)

Leased Premises

BEING A PORTION OF NORTHEAST QUARTER OF SECTION 30, TOWNSHIP 6 NORTH, RANGE 1 EAST, MOUNT DIABLO MERIDIAN AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF A LINE LYING 25.00 FEET NORTHWESTERLY AND PARALLEL WITH THE NORTHWESTERLY LINE (NORTH 53º20’20” EAST 68.00 FEET FOR THE PURPOSES OF THIS DESCRIPTION, NORTH 52º36’15” EAST 68.00 FEET PER 1975 OR 12717) OF THE PARCEL OF LAND DESCRIBED IN THE DEED TO SOLANO COUNTY RECORDED IN BOOK 1975, PAGE 12717, OFFICIAL RECORDS OF SOLANO COUNTY AND A LINE LYING 25.00 WESTERLY AND PARALLEL WITH THE WESTERLY LINE OF COUNTY ROAD NO. 125 (LEWIS ROAD), 60.00 FEET WIDE; THENCE ALONG FIRST SAID PARALLEL LINE SOUTH 53º20’20” WEST 47.09 FEET TO A LINE LYING 25.00 FEET NORTHERLY AND PARALLEL WITH THE NORTHERLY LINE OF SAID PARCEL; THENCE ALONG LAST SAID PARALLEL LINE NORTH 89º34’52” WEST 1204.28 FEET TO A LINE LYING 1267.00 FEET (MEASURED ALONG SAID NORTHERLY LINE (NORTH 89º34’52” WEST)) WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE NORTH 00º05’49” EAST 877.00 FEET TO A LINE LYING 902.00 FEET (MEASURED ALONG SAID WESTERLY LINE) NORTHERLY AND PARALLEL WITH SAID NORTHERLY LINE (NORTH 89º34’52” WEST); THENCE ALONG LAST SAID PARALLEL LINE SOUTH 89º34’52” EAST 1242.00 FEET TO FIRST SAID PARALLEL LINE WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE SOUTH 00º05’49” WEST 848.61 FEET TO THE POINT OF BEGINNING.

CONTAINING 24.99 ACRES MORE OR LESS.

Schedule 2.1(b) - 1 DSMDB-2406741v08

Schedule 2.1(b)

Permitted Encumbrances

Unless otherwise indicated, all recording references in this Schedule 2.1(b) are to the records appearing in the land records of Solano County, California.

1. Rights of the public as to any portion of the land lying within the area commonly known as Fry Road (aka County Road No. 125) and/or Lewis Road (aka County Road No. 125).

2. Easement(s) for the purpose(s) shown below and rights incidental thereto as granted in the document.

Granted to: Pacific Bell Purpose: Communication facilities Recorded: May 25, 1989, Instrument No. 890033633, of Official Records Affects: A portion of said land

3. Agreement and Covenant Running with the Land dated October 11, 1991, executed by and between City of Vacaville, a municipal corporation and William A. Lozano, Carmen P. Lozano, and Armando Lozano recorded October 11, 1991, Instrument No. 1991-00076562, of Official Records.

4. Settlement Agreement and Stipulated Judgment in Eminent Domain dated, executed by and between William A. Lozano, Rudolfo B. Lozano, Carmen P. Lozano, Armando Lozano, and the City of Vacaville, a municipal corporation recorded August 17, 1999, Instrument No. 1999-00071332, of Official Records.

5. An easement for drainage for the existing drainage ditch along Lewis Road, as reserved by William A. Lozano, et al, in Settlement Agreement and Stipulated Judgment in Eminent Domain Recorded August 17, 1999 as Instrument No. 1999-00071332, Solano County Records.

Schedule 2.2 - 1 DSMDB-2406741v08

Schedule 2.2

Lessor’s Lands THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF VACAVILLE, COUNTY OF SOLANO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS: The Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian. Excepting that portion thereof lying within the parcel of land described in the Deed from William P. Evanikoff, et ux., to the City of Vacaville, dated December 26, 1958, recorded February 20, 1959 in Book 962 of Official Records, Page 396, Instrument No. 3822, as follows: Commencing at an iron pipe at the North end of a course 87.62 feet in length as shown on a Map entitled: "A Map of Record of Survey in The Village of Elmira, Section 19, of Township 6 North, Range 1 East, Mount Diablo Base and Meridian, which Map was filed with the Office of the Recorder, County of Solano, State of California, in Book 4 of Surveys at Page 52, said pipe being on the Southerly bank of Alamo Creek; thence North 0° 47' West, 13 feet to the approximate centerline of Alamo Creek and the beginning of this description; thence Easterly along the centerline of above mentioned Alamo Creek as follows: North 84° 04' 55" East, 121.80 feet; thence North 55° 36' 37" East, 149.75 feet; thence South 86° 04' 29" East, 134.34 feet; thence South 63° 49' 14" East, 111.21 feet; thence South 89° 39' 22' East, 244.81 feet; thence South 63° 12' 05" East, 311.17 feet; thence South 82° 33' 38" East, 163.18 feet; thence South 75° 34' 39" East, 86.47 feet; thence South 46° 43' 47" East, 97.29 feet to a point where the sixteenth section line of the Southeast quarter of aforementioned Section 19, Township 6 North, Range 1 East, intersects the centerline of above mentioned Alamo Creek; thence South 0° 47" East, 799.28 feet along said sixteenth section line to the section line between Sections 19 and 30 of the above mentioned Township 6 North, Range 1 East; thence South 0° 23' 51" East, 324.98 feet along the sixteenth section line of the Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian; thence South 89° 55' 55" West, 1314.59 feet to the quarter section line of the above mentioned Section 30, said quarter section line being also the centerline of County Road Number 247 as so designated by the County Surveyor of Solano County; thence North 0° 23' 43" West, 324.98 feet along said centerline of Road 247 to the section line between Sections 19 and 30 of aforementioned Township 6 North, Range 1 East; thence North 0° 47' West 1013 feet along said aforementioned centerline of Road 247 to the true point of beginning. Also excepting therefrom those portions thereof described in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated July 22, 1971 and recorded September 8, 1971 in Book 1705 of Official Records, Page 398 as Instrument No. 18198 and in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated February 29, 1972, and recorded March 22, 1972 in Book 1740 of Official Records, Page 91, as Instrument No. 6259. Also excepting therefrom all that portion thereof described in the Deed to the County of Solano, recorded April 3, 1975 in Book 1975 of Official Records, Page 12717, as Instrument No. 8115. Also excepting therefrom one-half of all oil, mineral gas, and other hydrocarbon substances below a depth of five hundred feet (500') from the surface without the right of surface entry, for a period of fifteen (15) years from January 19, 1977 as reserved in the

Schedule 2.2(b) - 2 DSMDB-2406741v08

Deed from Kathryn Jacobson, et al., to Rodolfo B. Lozano, et al., recorded January 19, 1977 in Book 1977 of Official Records, Page 3658, Instrument No. 2236. APN: 0142-200-040

Schedule 3.3 - 1 DSMDB-2406741v08

Schedule 3.3

Form of Memorandum Of Lease Agreement and Grant Of Easements

This MEMORANDUM OF LEASE AGREEMENT AND GRANT OF EASEMENTS is entered into and executed by The City of Vacaville, a California municipal corporation (the “Lessor”), and CPV Vacaville, LLC, a Delaware limited liability company (the “Lessee”), as of the _______ day of _______ (the “Effective Date”):

RECITALS

Lessor and Lessee have entered into that Lease Agreement of concurrent date herewith (the “Lease Agreement”) and desire to provide record notice thereof pursuant to this Memorandum of Lease Agreement.

KNOW ALL BY THESE PRESENTS THAT, Lessor and Lessee adopt and incorporate the recitals set forth above and do further, pursuant to Section _____ of the Code of California, state as follows:

1. Lessor and Lessee have entered into an unrecorded Lease Agreement (“Lease”), dated as of _____. The Lease covers and affects the following described lands located in Solano County, California, more particularly described on the attached Exhibit A.

2. The Lease is for a term of twenty-five (25) years from and after the last day of the calendar quarter in which the Commencement Date occurs. The Commencement Date shall occur on a date which is on or prior to December 11, 2012. The Lease contains an option by which Lessor may renew the Lease for two (2) additional term(s) of ten (10) years each. Reference to the original counterparts of the Lease is here made for all purposes.

3. Pursuant to the terms of the Lease, Lessor granted to Lessee certain easements over, across and upon certain real property more particularly described on the attached Exhibit B.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Schedule 3.3 - 2 DSMDB-2406741v08

IN WITNESS WHEREOF, the parties hereto have duly signed these presents as of the date first set forth above for the sole purpose of giving record notice of the executed Lease and the existence thereof.

LESSOR:

CITY OF VACAVILLE

By: Name: Title:

STATE OF CALIFORNIA

COUNTY OF SOLANO

I, the undersigned Notary Public in and for said County in said State, hereby certify that ________________________________ whose name as ________________________ of _______ , a ______ corporation, is signed to the foregoing Memorandum of Lease and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he/she, as voluntarily for and as the act of said corporation.

Given under my hand and seal this the ______ day of _____.

______________________________

Notary Public

[AFFIX NOTARIAL SEAL]

My commission Expires: ___________________

Schedule 3.3 - 3 DSMDB-2406741v08

LESSEE:

CPV VACAVILLE, LLC

By: Name: Title:

COMMONWEALTH OF MASSACHUSETTS

COUNTY OF NORFOLK

I, the undersigned Notary Public in and for said County in said State, hereby certify that ________________________________ whose name as ________________________ of _____, a _____, is signed to the foregoing Memorandum of Lease Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he/she, executed the same voluntarily for and as the act of said limited liability company.

Given under my hand and seal this the ______ day of ______.

______________________________

Notary Public

[AFFIX NOTARIAL SEAL]

My commission Expires: ___________________

INSTRUMENT PREPARED BY:

_______

_______

_______

Exhibit A - 1 DSMDB-2406741v08

Exhibit A

Leased Premises

BEING A PORTION OF NORTHEAST QUARTER OF SECTION 30, TOWNSHIP 6 NORTH, RANGE 1 EAST, MOUNT DIABLO MERIDIAN AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF A LINE LYING 25.00 FEET NORTHWESTERLY AND PARALLEL WITH THE NORTHWESTERLY LINE (NORTH 53º20’20” EAST 68.00 FEET FOR THE PURPOSES OF THIS DESCRIPTION, NORTH 52º36’15” EAST 68.00 FEET PER 1975 OR 12717) OF THE PARCEL OF LAND DESCRIBED IN THE DEED TO SOLANO COUNTY RECORDED IN BOOK 1975, PAGE 12717, OFFICIAL RECORDS OF SOLANO COUNTY AND A LINE LYING 25.00 WESTERLY AND PARALLEL WITH THE WESTERLY LINE OF COUNTY ROAD NO. 125 (LEWIS ROAD), 60.00 FEET WIDE; THENCE ALONG FIRST SAID PARALLEL LINE SOUTH 53º20’20” WEST 47.09 FEET TO A LINE LYING 25.00 FEET NORTHERLY AND PARALLEL WITH THE NORTHERLY LINE OF SAID PARCEL; THENCE ALONG LAST SAID PARALLEL LINE NORTH 89º34’52” WEST 1204.28 FEET TO A LINE LYING 1267.00 FEET (MEASURED ALONG SAID NORTHERLY LINE (NORTH 89º34’52” WEST)) WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE NORTH 00º05’49” EAST 877.00 FEET TO A LINE LYING 902.00 FEET (MEASURED ALONG SAID WESTERLY LINE) NORTHERLY AND PARALLEL WITH SAID NORTHERLY LINE (NORTH 89º34’52” WEST); THENCE ALONG LAST SAID PARALLEL LINE SOUTH 89º34’52” EAST 1242.00 FEET TO FIRST SAID PARALLEL LINE WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE SOUTH 00º05’49” WEST 848.61 FEET TO THE POINT OF BEGINNING.

CONTAINING 24.99 ACRES MORE OR LESS.

Exhibit B - 1 DSMDB-2406741v08

Exhibit B

Easement Land THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF VACAVILLE, COUNTY OF SOLANO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS: The Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian. Excepting that portion thereof lying within the parcel of land described in the Deed from William P. Evanikoff, et ux., to the City of Vacaville, dated December 26, 1958, recorded February 20, 1959 in Book 962 of Official Records, Page 396, Instrument No. 3822, as follows: Commencing at an iron pipe at the North end of a course 87.62 feet in length as shown on a Map entitled: "A Map of Record of Survey in The Village of Elmira, Section 19, of Township 6 North, Range 1 East, Mount Diablo Base and Meridian, which Map was filed with the Office of the Recorder, County of Solano, State of California, in Book 4 of Surveys at Page 52, said pipe being on the Southerly bank of Alamo Creek; thence North 0° 47' West, 13 feet to the approximate centerline of Alamo Creek and the beginning of this description; thence Easterly along the centerline of above mentioned Alamo Creek as follows: North 84° 04' 55" East, 121.80 feet; thence North 55° 36' 37" East, 149.75 feet; thence South 86° 04' 29" East, 134.34 feet; thence South 63° 49' 14" East, 111.21 feet; thence South 89° 39' 22' East, 244.81 feet; thence South 63° 12' 05" East, 311.17 feet; thence South 82° 33' 38" East, 163.18 feet; thence South 75° 34' 39" East, 86.47 feet; thence South 46° 43' 47" East, 97.29 feet to a point where the sixteenth section line of the Southeast quarter of aforementioned Section 19, Township 6 North, Range 1 East, intersects the centerline of above mentioned Alamo Creek; thence South 0° 47" East, 799.28 feet along said sixteenth section line to the section line between Sections 19 and 30 of the above mentioned Township 6 North, Range 1 East; thence South 0° 23' 51" East, 324.98 feet along the sixteenth section line of the Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian; thence South 89° 55' 55" West, 1314.59 feet to the quarter section line of the above mentioned Section 30, said quarter section line being also the centerline of County Road Number 247 as so designated by the County Surveyor of Solano County; thence North 0° 23' 43" West, 324.98 feet along said centerline of Road 247 to the section line between Sections 19 and 30 of aforementioned Township 6 North, Range 1 East; thence North 0° 47' West 1013 feet along said aforementioned centerline of Road 247 to the true point of beginning. Also excepting therefrom those portions thereof described in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated July 22, 1971 and recorded September 8, 1971 in Book 1705 of Official Records, Page 398 as Instrument No. 18198 and in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated February 29, 1972, and recorded March 22, 1972 in Book 1740 of Official Records, Page 91, as Instrument No. 6259. Also excepting therefrom all that portion thereof described in the Deed to the County of Solano, recorded April 3, 1975 in Book 1975 of Official Records, Page 12717, as Instrument No. 8115. Also excepting therefrom one-half of all oil, mineral gas, and other hydrocarbon substances below a depth of five hundred feet (500') from the surface without the right of surface entry, for a period of fifteen (15) years from January 19, 1977 as reserved in the Deed from Kathryn Jacobson, et al., to Rodolfo B. Lozano, et al., recorded January 19,

Exhibit B - 2 DSMDB-2406741v08

1977 in Book 1977 of Official Records, Page 3658, Instrument No. 2236. Also excepting therefrom the land described in Exhibit A to this Memorandum of Lease. APN: 0142-200-040

Schedule 5.1.2 - 1 DSMDB-2406741v08

Schedule 5.1.2

Annual Base Rent From Effective Date until the Commencement Date

Period Annual Base Rent

Effective Date until December 31, 2008 $59,110.00

January 1, 2009 until December 31, 2009 $125,000.00

For each calendar year commencing on January 1, 2010, annual base rent shall be in a sum equal to the annual base rent for the previous calendar year, plus $25,000.00.

EXHIBIT B

Summary of Principal Terms and Conditions Construction Laydown Lease Agreement for a 21.44-Acre Portion of the

Easterly Wastewater Treatment Plant Property

1. Parties. Lease is between the City of Vacaville, California, a California municipal corporation, and CPV Vacaville, LLC, a Delaware corporation.

2. Premises. A 21.44-acre portion of the Easterly Wastewater Treatment Plant Property located at the southeastern corner of the site, fronting on Lewis Road, immediately adjacent to the north of the proposed Ground Lease with CPV.

3. Term. The Base term of this Agreement shall commence on May 13, 2008, which is the Effective Date of the Agreement. CPV has until December 11, 2012 to initiate the Commencement Date for the lease. The lease will terminate no later than the Fifth Anniversary of the last day of the calendar quarter in which the Commencement Date occurs. The Lease could last from May 13, 2008, to December 2017.

4. Lease Consideration (Rent)

4.1. No Rent Period. In the period between the Effective Date and the Commencement Date, no rent shall be due the City from CPV. During that period, the City retains the right to use the Lease property for its own purposes.

4.2 Rent Following Commencement Date: Starting with Commencement Date and extending to the termination of the lease, CPV shall pay to the City an

initial Base rent of $125,000 annually. The Base Rental shall increase annually at a rate equal to the increase in the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index – All Urban Consumers, San Francisco-Oakland-San Jose CA. The C.P.I. Index is measured from the last Index published prior to December 11, 2007.

5. Use. Tenant shall use the Leased Premises solely for the purpose of staging and

storing materials and equipment that support the development of the proposed electrical generation plant and certain ancillary equipment.

. 6. Assignments. With some specified exceptions, neither CPV nor the City will

assign or transfer any right, obligation, or interest without consent of other Party. 7. Insurance. CPV agrees to carry insurance naming the City and others as

additional insureds of a type and coverage listed below: 7.1 Commercial General Liability Insurance - $1,000.000 & $2,000,000 7.2 Auto Liability - $1,000,000 7.3 Umbrella Liability - $25,000,000 7.4 Workers Compensation - $1,000,000 7.5 Pollution Liability - $5,000,000

CPVI\46763\717277.8

8. Termination. The Ground Lease Agreement may be terminated for: 8.1 Default. Failure to make required payments and/or failure to comply with

terms of the Construction Laydown Lease Agreement. 8.2. Failure to Act in Timely Manner. (a). Construction Commencement Date shall not have occurred within 4

years of Commencement Date. (b). Commencement Date shall not have occurred on or prior to

December 11, 2012. (c). CPV has right to terminate at anytime prior to expiration of Lease

Term. 8.3. Expiration of Lease Term 9. Condition of Leased Premises. City is leasing premises in its present “AS-IS,

WHERE-IS CONDITION WITH ALL FAULTS” without representation or warranty regarding the condition of the Leased Premises.

10. Surrender Condition of Leased Area Upon Termination or Expiration. Premises shall be free and clear of all liens. CPV agrees to remove all improvements above ground and those 6 feet below the surface grade and return the site to a condition suitable for agriculture.

CPVI\46763\717277.8

Dickstein Shapiro LLP – May 2, 2008

EXHIIT B-1

CONSTRUCTION LAYDOWN LEASE AGREEMENT

Dated as of ____________________

Between

The City of Vacaville, as Lessor

and

CPV Vacaville, LLC, as Lessee

DSMDB-2382488v06

CONSTRUCTION LAYDOWN LEASE AGREEMENT

This CONSTRUCTION LAYDOWN LEASE AGREEMENT (this “Agreement”) dated as of May_____, 2008 (the “Effective Date”), by and between the City of Vacaville, a California municipal corporation, whose mailing address is 650 Merchant Street, Vacaville, California 95688 (the “Lessor”), and CPV Vacaville, LLC, a Delaware limited liability company, whose mailing address is Silver Spring Metro Plaza I, 8403 Colesville Road, Suite 915, Silver Spring, Maryland 20910 (the “Lessee”) (Lessor and Lessee are sometimes referred to herein individually as a “Party” and collectively, as the “Parties”), provides as follows:

AGREEMENT

NOW THEREFORE, for and in consideration of the premises, the agreements herein, and in reliance upon the representations and warranties herein, Lessor and Lessee do hereby adopt and incorporate all exhibits, attachments, and/or schedules attached hereto, and do further agree as follows:

ARTICLE 1 DEFINITIONS; INTERPRETATION

Section 1.1. Definitions. As used in this Agreement, (a) the terms set forth in the attached Annex A shall have the respective meanings so set forth, and (b) the terms defined elsewhere in this Agreement shall have the meanings therein so specified.

Section 1.2. Interpretation. In this Agreement, unless a clear contrary intention appears: (a) the singular includes the plural and vice versa; (b) a reference to any Person includes such Person’s successors and permitted assigns but, in the case of a Party, only if such successors and assigns are permitted by this Agreement; (c) reference to any gender includes each other gender; (d) reference to any agreement (including this Agreement), document, instrument or tariff means such agreement, document, instrument or tariff as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; (e) reference to any Governmental Rule means such Governmental Rule as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time, including, if applicable, rules and regulations promulgated thereunder; (f) reference to any Section means such Section of this Agreement, and references in any Section or definition to any clause means such clause of such Section or definition; (g) “hereunder”, “hereof”, “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof; (h) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; and (i) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including.”

Section 1.3. Titles and Headings. Section, Annex, Exhibit and Schedule titles and headings in this Agreement are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.

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ARTICLE 2 LEASE AND GRANT OF EASEMENTS

Section 2.1. Lease of Leased Premises. Lessor hereby demises and leases to Lessee, and Lessee hereby leases from Lessor, that certain land situated in the City of Vacaville, Solano County, California as is more particularly described on the attached Schedule 2.1(a) (such land, the “Leased Premises”), subject to the matters set forth in the attached Schedule 2.1(b) (such matters the “Permitted Encumbrances”); TO HAVE AND TO HOLD the Leased Premises unto Lessee and, subject to the provisions hereof, unto its successors and assigns, commencing as of the Effective Date and expiring on the Lease Termination Date.

Section 2.2. Grant of Easements. Lessor does, subject to the reservations and restrictions set forth herein, hereby grant, bargain, sell and convey unto Lessee the following described non-exclusive easements (“Easements”) upon, over, beneath, and across the land identified on the attached Schedule 2.2(a) (the “Lessor’s Lands”) less and except the Leased Premises (the Lessor’s Lands, less and except the Leased Premises, the “Easement Property”), for the following purposes related to Lessee’s development and construction of the natural gas-fired electric generation facility and certain ancillary equipment (the “Plant”) to be constructed and installed on the land identified on the attached Schedule 2.2(b) (the “Plant Land”) and certain easement thereto as provided for in the Plant Lease:

2.2.1 Pedestrian and vehicular ingress and egress between Lewis Road and the Leased Premises and the equipment and the buildings and facilities utilized by Lessee and located on the Easement Property, over all present and future roads located on the Easement Property; provided, however, that during an emergency, such ingress and egress shall be from any public right of way adjacent to the Lessor’s Lands and the Leased Premises and the equipment and the buildings and facilities utilized by Lessee and located on the Easement Property;

2.2.2 The conduct of activities of and relating to Hazardous Materials, including, without limitation, use of protective materials for the absorption of hazardous materials or hazardous substance spills, leaks and releases;

2.2.3 Ingress to and egress from any location on the Easement Property on which Lessee and Lessor agree that Lessee may place directional and identification signs, and for the construction, installation, erection, support, maintenance, repair, replacement, alteration, and restoration of such signs;

The equipment, improvements, fixtures and other tangible property owned by Lessee and installed on the Easement Property in connection with the use of the Leased Premises is referred to as the “Lessee’s Easement Equipment”.

TO HAVE AND TO HOLD all such easements unto Lessee and its successors and permitted assigns from the date hereof until the termination of such easements as provided in Article 3.

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Section 2.3. Lessee’s Exercise of Rights.

2.3.1 The Easements herein granted to Lessee may be utilized by Lessee’s contractors and their subcontractors, operator and its subcontractor, and each of their employees, officers, members, shareholders, partners, invitees, and licensees. Lessee shall not, in its entry upon the Easement Property for any purpose, materially interfere with Lessor’s operation or utilization thereof. Further, Lessee and/or such contractor, employee, invitee, and/or any other entity shall take such precautions as may be reasonably necessary to prevent unnecessary foreseeable damage to adjacent or adjoining property or injury to persons.

2.3.2 Subject to the provisions of Section 16.3, upon Lessee’s completion of any maintenance, repair or replacement work on the Easement Property, Lessee shall restore the subject area to its former condition with all debris removed at its sole cost and expense.

Section 2.4. Lay Down of Equipment and Installation of Trailers. Lessee shall have the right to lay down and store all materials and equipment, and shall have the right to install and operate temporary trailers (all such materials, equipment, trailers and other tangible personal property situated, located otherwise placed on the Leased Premises in connection with the construction and installation of the Plant, collectively, the “Construction Improvements”), in connection with the construction and installation of the Plant on the Plant Land and all easements appurtenant thereto.

Section 2.5. Title to Construction Improvements. The Parties acknowledge that the title to the Construction Improvements and the Lessee’s Easement Equipment is and shall remain the property of Lessee during the Lease Term, regardless of the manner of installation or affixation to the Leased Premises or the Easement Property. It is the intention of the Parties that the separation of the title to the Leased Premises from the title to the Construction Improvements, and the Lessee’s Easement Equipment from the title to the Easement Property, is to remain so separated throughout the Lease Term.

Section 2.6. Easements Appurtenant. Subject to Section 3.2, the Easements granted pursuant to this Agreement are for the benefit of and appurtenant to the Leased Premises and shall run as covenants running with the land and are and shall be binding upon and inure to the benefit of Lessor and Lessee and their respective successors and permitted assigns.

Section 2.7. Possession of Leased Premises and Use of Easements. Notwithstanding the foregoing provisions of this Article 2, until the Commencement Date Lessee shall not have any right to possession of the Leased Premises or use of the Easement Property. For the avoidance of doubt, prior to the Commencement Date the Leased Premises may be used by Lessor for any purpose so long as such use shall not interfere with Lessee’s occupancy and use of the Leased Premises, and exercise of its rights, pursuant to this Agreement on and after the Commencement Date and Lessee’s exercise of its rights under that Memorandum of Understanding and the Option to Lease,

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and so long as such use shall not delay Lessee’s ability to possesses and occupy the Leased Premises on the Commencement Date.

ARTICLE 3 LEASE TERM

Section 3.1. Lease Term.

3.1.1 Base Term. The initial term of this Agreement (the “Base Term”) shall commence on the Effective Date and shall, unless sooner terminated or renewed or extended as provided herein, continue in effect until 11:59 P.M. Pacific Standard time on the date that is the fifth (5th) anniversary of the last day of the calendar quarter in which the Commencement Date occurs.

3.1.2 Intentionally Deleted.

3.1.3 Lease Term. Wherever this Agreement refers to the “Lease Term,” such reference shall be deemed to mean the Base Term together with any holdover period pursuant to Section 16.1 of this Agreement, subject to early termination pursuant to Section 3.4 of this Agreement. Wherever this Agreement refers to the “Lease Termination Date,” such reference shall be deemed to mean the last day of the Lease Term.

3.1.4 Lease Year. Wherever this Agreement refers to a “Lease Year,” such reference shall be deemed to mean, with respect to the first Lease Year, the period from the Commencement Date until the anniversary of the last day of the calendar quarter in which the Commencement Date occurs, and with respect to all other Lease Years, the period from the anniversary of the first day of the first calendar quarter after the Commencement Date until the anniversary of the last day of the calendar quarter in which the Commencement Date occurs. By way of example, if the Commencement Date is November 15, 2009, the first Lease Year shall commence on November 15, 2009 and end on December 31, 2010. The second Lease Year shall commence on January 1, 2011 and end on December 31, 2011. Within thirty (30) days of the Commencement Date, the Parties shall execute a memorandum reflecting the Lease Year.

Section 3.2. Termination of Easements. The Easements shall terminate on the later of: (i) the date that the Lease terminates; or (ii) the date that any permitted holdover by Lessee under this Agreement ends.

Section 3.3. Memorandum of Lease. Contemporaneously herewith, the Parties have executed, acknowledged, and delivered to each other duplicate originals of a recordable memorandum of lease agreement and grant of easements in the form of Schedule 3.3 hereto (the “Memorandum of Lease”). Lessee, at its sole cost and expense, shall submit such Memorandum of Lease for recording in the land records of the county in which the Leased Premises is located and any other documents or instruments which may be required for recording the same.

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Section 3.4. Early Termination Rights. This Agreement may be terminated upon the occurrence of the following events:

3.4.1 Upon a default by Lessor under the Water Supply Agreement, at any time after such default until such default is cured or waived by Lessee (after the expiration of all notice and cure periods), Lessee shall have the right to terminate this Agreement by giving written notice thereof to Lessor.

3.4.2 If the Construction Commencement Date shall not have occurred within four (4) years after the Commencement Date, subject to delays due to Force Majeure Events, either Party shall have the right to terminate this Agreement by giving written notice thereof to the other Party.

3.4.3 If the Commencement Date shall not have occurred on or prior to December 11, 2012, either Party shall have the right to terminate this Agreement by giving written notice thereof to the other Party.

3.4.4 At any time prior to the scheduled last day of the Lease Term, Lessee shall have the right to terminate this Agreement.

Section 3.5. Commencement Date. At any time after the Effective Date and on or prior to December 11, 2012, Lessee shall have the right to deliver written notice to Lessor (such notice, a “Notice of Commencement Date”) which written notice shall specify the Commencement Date; provided, however, that the date specified in such notice shall not be subsequent to December 11, 2012.

ARTICLE 4 PERMITTED USE

Section 4.1. Permitted Use. The Leased Premises shall be used solely for the lay down and storage of equipment and materials to be used in connection with the construction and installation of the Plant, and the installation, operation and use of the Construction Improvements. Lessee shall not use, nor knowingly permit to be used, the Leased Premises in any manner or for any purpose which shall violate any Governmental Rule or cause forfeiture of Lessor’s title in and to the Leased Premises.

ARTICLE 5 RENT

Section 5.1. Base Rent.

5.1.1 Base Rent Amount; C.P.I. Escalator. The “Fixed Base Rent Amount” shall mean a sum equal to One Hundred Twenty Five Thousand and 00/100 Dollars. The “Base Rent Amount” shall mean, for each Lease Year during the Lease Term, a sum equal to the Fixed Base Rent Amount multiplied by a fraction (the “C.P.I. Escalator”), the numerator of which is the U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index – All Urban Consumers, San Francisco-Oakland-San Jose CA, All Items, 1982-84=100 (currently available at http://data.bls.gov under the series

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CUURA422SA0) (the “C.P.I. Index”), last published on the date not later that the sixtieth (60th) day prior to the first day of the then applicable Lease Year, and the denominator of which is the C.P.I. Index last published immediately prior to December 11, 2007.

5.1.2 Base Rent.

(a) From and including the Commencement Date until the last day of the Lease Term, Lessee shall pay to Lessor annual base rent in the sum of the Base Rent Amount for the applicable Lease Year. (b) The annual base rent payable pursuant to this Section 5.1.2 is hereinafter referred to as the “Base Rent”. 5.1.3 Timing of Base Rent. Base Rent shall be payable in advance on the first

day of each calendar quarter in four equal installments. Notwithstanding the foregoing, on the Commencement Date Lessee shall pay to Lessor a sum equal to the Base Rent payable for the first full calendar quarter following the Commencement Date plus a sum equal to the pro rata amount of Base Rent payable with respect to the period from and including the Commencement Date until the last day of the calendar quarter in which the Commencement Date Occurs (on a per diem basis),within thirty (30) days after the Commencement Date.

5.1.4 Proration of Base Rent. If the Lease Term shall terminate early pursuant to the provisions of Section 3.4 on a date other than the last day of a calendar quarter, then Base Rent shall be pro rated on a per diem basis.

Section 5.2. Net Lease. The Parties intend that this Agreement shall constitute a “net lease.” Accordingly, Lessee shall pay as additional rent and discharge, before failure to pay the same shall create a material risk of forfeiture or give rise to a penalty, each and every item of expense, of every kind and nature whatsoever, related to or arising from the Leased Premises, or by reason of or in any manner connected with or arising from the operation, maintenance, repair, use or occupancy of the Leased Premises or any portion of the Leased Premises by Lessee from and after the Commencement Date, excluding any physical condition respecting the Leased Premises, or any portion thereof, in existence prior to the Commencement Date. Notwithstanding anything to the contrary contained in this Agreement, Lessee shall not be required to pay any of the following: (a) principal, interest or other charges payable under any Fee Mortgage encumbering the Leased Premises (except any leasehold mortgage or other financing created by, through, or under Lessee), or both; (b) depreciation, amortization, financing or refinancing costs incurred by Lessor with respect to the Leased Premises and/or any improvements located thereon; (c) consulting, legal, staff and other similar costs incidental to Lessor’s ownership of the Leased Premises, other than reasonable attorneys’ fees incurred by Lessor and payable by Lessee pursuant to express provisions of this Agreement; (d) any costs arising from or pursuant to any instrument or agreement affecting the Leased Premises that is not a Permitted Lien and to which Lessor is a party and Lessee is not a

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party; and (e) any cost or expense arising directly or indirectly from any conditions existing on, at or with respect to the Leased Premises before the Commencement Date.

Section 5.3. Payment of Impositions.

5.3.1 Real Estate Taxes. Commencing on the Commencement Date and continuing throughout the Lease Term, Lessee shall pay any real estate taxes, special assessments and other governmental charges and impositions, general or special, ordinary or extraordinary, foreseen or unforeseen, of any kind and nature relating to this Agreement, the Leased Premises or the improvements thereon owned, leased or subleased by Lessee, or similar tax or charge which is now or hereafter levied, assessed, or imposed upon Lessor or Lessee by the State of California, or by any political subdivision thereof, or which Lessor or Lessee is now or hereafter otherwise required by the State of California, or any political subdivision thereof to pay, with respect to the Lease, the use or occupancy of the Leased Premises or Lessor’s fee ownership of the Leased Premises (such taxes, assessments, charges and impositions collectively, “Impositions”); provided, however, that Lessee shall not be required to pay any such Imposition during any period that Lessee shall in good faith contest the validity or the amount of any such Imposition, provided such contest of the validity or application of any such Imposition by appropriate proceedings does not involve any imminent danger of the sale, forfeiture or loss of any of Lessor’s rights in the ownership of the Lessor Facilities or the Leased Premises or any part thereof.

5.3.2 Taxes on Rentals.

5.3.2.1 Notwithstanding anything contained in this Agreement to the contrary (other than Lessee’s obligation to pay all charges payable in connection with the recordation of the Memorandum of Lease), Lessee shall have no liability or obligation with respect to the payment of any tax or imposition charged or levied upon the rentals payable by Lessee under this Agreement.

5.3.2.2 Lessor shall have no liability or obligation with respect to the payment of any tax or imposition charged or levied upon any income of Lessee resulting from the operation or ownership of the Construction Improvements and the Lessee’s Easement Equipment.

5.3.3 Imposition Payable in Installments. If, by law, any Imposition is or may be payable in installments (whether or not interest shall accrue on the unpaid balance of such Imposition), Lessee may pay the same (with any interest accruing during the Lease Term on the unpaid balance of said Imposition) in installments as the same becomes due and before any additional interest or other charge may be added thereto for the nonpayment of any such installment. With respect to any Imposition which by law is or may be payable in installments, Lessee shall pay only those installments which accrue during the Lease Term.

5.3.4 Proration of Imposition. Any Imposition accruing during a fiscal tax period during which the Lease Term shall expire shall be adjusted between Lessor and

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Lessee as of the expiration of this Agreement, so that Lessee shall pay only an amount which bears the same relation to the total Imposition as the part of such fiscal tax period included within the Lease Term bears to the entire fiscal tax period.

5.3.5 Lessor’s Right to Pay Impositions. If at any time during the Lease Term, any Impositions payable by Lessee as provided herein are not paid when due and payable, then Lessor, upon thirty (30) days’ notice to Lessee, or with such notice (if any) as is reasonably practicable under the circumstances in the case of an emergency, shall have the right, but not the obligation, to pay the same and be reimbursed therefore by Lessee as set forth in Section 5.3.6 hereof; provided that Lessor shall have no right to pay any such Imposition during any period that Lessee shall in good faith be contesting the validity or the amount of such Imposition so long as such contest of the validity or amount of such Imposition by appropriate proceedings does not involve any imminent danger of the sale, forfeiture or loss of any of Lessor’s rights in the ownership of the Leased Premises or any part thereof.

5.3.6 Additional Rent for Impositions Paid by Lessor. If at any time during the Lease Term, Lessor shall have paid any Impositions payable by Lessee hereunder, the amount of such payment shall be payable to Lessor as additional rent payable hereunder. Such additional rent shall be payable by Lessee to Lessor within thirty (30) days after Lessor has notified Lessee in writing of Lessor’s payment of such Impositions (which notice shall contain documentation evidencing such payment by Lessor).

5.3.7 Place of Payment. All sums payable by Lessee to Lessor hereunder shall be paid by Lessee’s check payable to the order of Lessor and mailed or delivered to Lessor at the address provided for notice in Section 19.1 of this Agreement or at such other place or in such other manner as Lessor may from time to time designate by notice to Lessee. Lessee’s obligation to pay any additional rent shall survive the Lease Termination Date.

5.3.8 Ad Valorem Tax Returns and Notices. Lessee shall prepare and file any tax return, rendition, report or similar information as to the Leased Premises and the real or personal property thereon, as may be required by any Government Rule, including ad valorem real property taxes on centrally assessed utility property and general and special assessments related thereto. Promptly upon receipt, each Party shall furnish to the other any tax assessment notices related to the Leased Premises that it receives.

Section 5.4. Utilities. Except as expressly provided in the Water Supply Agreement, Lessor shall not have any obligation pursuant to this Agreement to provide utilities to Lessee. If Lessee shall contract for the provision of utilities, then Lessee shall pay the expenses of the installation, maintenance, use and service of such utilities to the extent attributable to Lessee’s use of such utilities during the Lease Term.

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ARTICLE 6 QUIET ENJOYMENT

Section 6.1. Quiet Enjoyment. Lessor warrants that it owns the Leased Premises, subject to no Liens other than the Permitted Encumbrances, with full right, title and authority to lease the Leased Premises pursuant to the terms of this Agreement. Lessor covenants with Lessee that it shall defend and hold harmless Lessee and its successors and permitted assigns in their peaceable, quiet and undisputed enjoyment of the Leased Premises (subject to the Permitted Encumbrances) against any and all claims of all persons claiming by, through or under Lessor. Lessor represents and warrants that it is not in default of any of its obligations under the Permitted Encumbrances. Lessor covenants that it shall defend and hold harmless Lessee and its successors and permitted assigns against any claims relating to any illegal or improper subdivision by Lessor of the Leased Premises.

ARTICLE 7 ACCESS RIGHTS; LESSOR EXERCISE OF RIGHTS WITH RESPECT TO THE

EASEMENTS

Section 7.1. Lessor’s Rights of Access. Lessor, its contractors, employees, agents and invitees, and any other entity (including any utility) which supplies services to the Lessor Facilities, shall not be entitled to enter the Leased Premises except (a) for emergencies directly related to the Lessor’s improvements, if any, on the Leased Premises, or (b) with the prior consent of Lessee, which consent shall not be unreasonably withheld or delayed. Lessor shall abide by Lessee’s rules for safety and security at times during Lessor’s entry upon the Leased Premises. Lessor’s entry upon the Leased Premises shall not materially interfere with Lessee’s operation or utilization thereof.

Section 7.2. Lessor’s Exercise of Rights. Lessor shall not interfere in any manner with Lessee’s use of the Easements granted hereunder, nor with the location of any of the Lessee Equipment or its use and enjoyment of the Easements and rights herein granted.

ARTICLE 8 LIENS

Section 8.1. Lessor’s Discharge of Liens. Lessor shall not directly or indirectly do, or omit to do, any act which shall give rise to any Lien on or with respect to the Lessee’s Leasehold Improvements, title thereto or any interest therein, except those Liens included in the Permitted Encumbrances; provided, however, that Lessor shall not be responsible or liable for, nor be deemed to have breached its obligations hereunder as a result of, any Liens upon the Leased Premises or the Lessee’s Leasehold Improvements resulting from acts or omissions of Lessee. Lessor shall not amend any of the Permitted Encumbrances if any such amendment would affect the Leased Premises or the Lessee’s Leasehold Improvements or any addition or modification thereto unless Lessor shall first notify Lessee of such proposed amendment and obtain Lessee’s written consent thereto,

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which consent shall not be unreasonably withheld or delayed. If any Lien not excepted above shall arise at any time, Lessor shall within thirty (30) days of notice of the filing thereof, at its own expense, take such action as may be necessary to discharge or eliminate (or bond in a manner reasonably satisfactory to Lessee) any such Lien; provided, however, that Lessor shall not be required to discharge any such Lien during any period that Lessor shall in good faith contest the validity or the amount of any such Lien, provided such contest of the validity or application of any such Lien by appropriate proceedings does not involve any imminent danger of the sale, forfeiture or loss of any of Lessee’s rights in the ownership, lease or use, as applicable, of the Leased Premises, the Lessee’s Leasehold Improvements or any part thereof. Except as otherwise provided in this Agreement, Lessor further agrees that it shall pay or cause to be paid on or before the time or times prescribed by law (after giving effect to any applicable grace period) any Impositions imposed on Lessor or the Leased Premises under the laws of any jurisdiction that, if unpaid, might result in any Lien prohibited herein.

Section 8.2. Lessee’s Discharge of Liens. Lessee covenants and agrees that it shall keep, or cause to be kept, the Leased Premises, title thereto or any interest therein, free and clear of mechanics’, laborers’ or materialman’s liens and other liens of a similar nature which may arise in connection with work of any character performed with respect to the Leased Premises or the Lessee’s Leasehold Improvements by or at the direction of Lessee and shall not directly or indirectly create, incur, assume or suffer to exist any Lien except for Liens arising under any Financing Document by, through, or under Lessee; provided, however, that Lessee shall not be responsible or liable for, nor be deemed to have breached its obligations hereunder as a result of, any Liens resulting from acts or omissions of Lessor. Lessee shall within thirty (30) days of notice of the filing thereof, at its own expense, take such action as may be necessary to discharge or eliminate (or bond in a manner, reasonably satisfactory to Lessor) any such Lien (other than Liens arising under Financing Documents) if the same shall arise at any time; provided, however, that Lessee shall not be required to discharge any such Lien during any period that Lessee shall in good faith contest the validity or the amount of any such Lien, provided such contest of the validity or application of any such Lien by appropriate proceedings does not involve any imminent danger of the sale, forfeiture, or loss of any of Lessor’s rights in the ownership of the Lessor Facilities or any part thereof.

Section 8.3. Discharge by Other Party. Upon either Party’s discovery of a Lien required to be discharged by it under this Article 8, such Party shall promptly give written notice thereof to the other Party. If such Party shall fail to discharge any such Lien within the period allotted for such discharge hereunder (including such time during which such Lien may be contested in good faith), then, in addition to any other right or remedy of the other Party, the other Party may, but shall not be obligated to, procure the discharge of the same by paying the amount claimed to be due or by applying the amount claimed to be due by deposit in court or bonding and concurrently with such discharge, providing notice of such discharge to the other Party. Any amount paid or deposited by the other Party for any of the aforesaid purposes, and all costs and other expenses of the other Party, including reasonable attorneys’ fees, in defending any such action or in procuring the discharge of such Lien, with all necessary disbursements in connection therewith, together with simple interest thereon at an annual rate of interest equal to the

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lesser of (a) the Default Rate; or (b) the maximum interest rate allowed under law of the jurisdiction in which the Leased Premises is located, from the date of payment or deposit, shall be payable by such Party to the other Party within fifteen (15) days of demand.

Section 8.4. No Authority to Bind Lessor. Neither Lessee nor any agent, employee, representative, contractor, subcontractor, supplier, materialman, workman or other Person who shall engage in or participate in any construction of, or any improvements to, the Construction Improvements or the Lessee’s Easement Equipment or in any additions, alterations, changes or replacements thereto shall have any power or authority to do any act or thing or to make any contract or agreement which shall bind Lessor or which may create or be the foundation for any mechanics’ lien or other lien or claim upon or against Lessor’s interest in the Leased Premises, and Lessor shall have no responsibility to any such Person who shall engage in or participate in any such construction; provided that the foregoing limitation shall not apply if Lessor, its employees, its agents, or its contractors are commissioning or actually performing such work.

Section 8.5. No Authority to Bind Lessee. Neither Lessor nor any agent, employee, representative, contractor, subcontractor, supplier, materialman, workman or other Person who shall engage in or participate in any construction of any improvements to the Leased Premises or in any additions, alterations, changes or replacements thereto shall have any power or authority to do any act or thing or to make any contract or agreement which shall bind Lessee or which may create or be the foundation for any mechanics’ lien or other Lien or claim upon or against Lessee’s interest in the Leased Premises or the Lessee’s Leasehold Improvements, and Lessee shall have no responsibility to any such person or entity who shall engage in or participate in any such construction; provided that the foregoing limitation shall not apply if Lessee, its employees, its agents, or its contractors are commissioning or actually performing such work.

ARTICLE 9 ENVIRONMENTAL COVENANTS AND ENVIRONMENTAL

INDEMNIFICATION

Section 9.1. Environmental Covenants of Lessee. Lessee shall not cause any Environmental Conditions or Environmental Noncompliances at the Leased Premises or the Easement Property, and shall not suffer the existence of any Environmental Conditions or Environmental Noncompliances at the Leased Premises (except to the extent that such Environmental Conditions or Environmental Noncompliances arise from matters as to which Lessor is obligated under this Agreement to indemnify Lessee), which could reasonably be expected to lead to any material Environmental Claim or Environmental Expense asserted against or incurred by Lessor or its Affiliates.

Section 9.2. Environmental Covenants of Lessor. Lessor shall not cause any Environmental Conditions or Environmental Noncompliances at the Lessor’s Lands, and shall not suffer the existence of any Environmental Conditions or Environmental Noncompliances at (a) the Lessor’s Lands (except to the extent that such Environmental

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Conditions or Environmental Noncompliances arise from matters as to which Lessee is obligated under this Agreement to indemnify Lessor) or (b) at the Easement Property (except to the extent that such Environmental Conditions or Environmental Noncompliances are caused by Lessee or its Affiliates), in each case, which could reasonably be expected to lead to any material Environmental Claim or Environmental Expense asserted against or incurred by Lessee or its Affiliates.

Section 9.3. Lessor Environmental Indemnity.

9.3.1 Lessor agrees to indemnify, defend and hold harmless Lessee and its directors, officers and employees (each a “Lessee Indemnified Party”) from and against any and all Environmental Claims brought against such Lessee Indemnified Party by any third party and any and all Environmental Expenses imposed upon or reasonably incurred by such Lessee Indemnified Party in connection with Environmental Conditions or Environmental Noncompliances on the Lessor’s Lands (a) arising or occurring prior to the Commencement Date, and (b) arising or occurring during the Lease Term, except to the extent such Environmental Conditions or Environmental Noncompliances are attributable to the acts or omissions of any Lessee Indemnified Party or any Representative of Lessee. Lessor’s obligations pursuant to this Section 9.3.1 shall exist regardless of whether any Lessee Indemnified Party or Representative of Lessee is alleged or held to be strictly or jointly and severally liable under any action, legal provision, permit, rule, regulation, order or otherwise.

9.3.2 If Lessor sells the Lessor’s Lands or any property related to the Lessor’s Lands, Lessor shall retain all obligations and liabilities under this Section 9.3 related to such property sold arising out of any facts or circumstances existing as of or prior to the date of any such sale (whether known at the time of any such sale or thereafter discovered as having existed as of the date thereof) and the Person to whom Lessor sells any such property shall assume all obligations and liabilities of Lessor under this Section 9.3 related to such property sold arising out of facts or circumstances that occur or come into existence after the date of any such sale.

9.3.3 If Lessee sells the Lessee’s Leasehold Improvements, the Lessee Indemnified Parties shall retain all rights of the Lessee Indemnified Parties under this Section 9.3 and the Person to whom Lessee sells the Lessee’s Leasehold Improvements or any interest therein shall by assigned by Lessee all rights of the Lessee Indemnified Parties under this Section 9.3.

Section 9.4. Lessee Environmental Indemnity.

9.4.1 Lessee agrees to indemnify, defend and hold harmless Lessor and its officers and employees (each a “Lessor Indemnified Party”) from and against any and all Environmental Claims brought against such Lessor Indemnified Parties by any third party and any and all Environmental Expenses imposed upon or reasonably incurred by such Lessor Indemnified Party in connection with (i) Environmental Noncompliances arising or occurring during the Lease Term located at or otherwise relating to (a) the Leased Premises, to the extent such Environmental Conditions or Environmental

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Noncompliances are attributable to the acts or omissions of any Lessee Party or any Representative of Lessee, or (b) any areas of the Easement Property to the extent such Environmental Conditions or Environmental Noncompliance are attributable to the acts or omissions of any Lessee Party or any Representative of Lessee, or (iii) Environmental Conditions or Environmental Noncompliances located at or otherwise relating to the Leased Premises and arising or occurring during the Lease Term except to the extent such Environmental Conditions or Environmental Noncompliances are attributable to the acts or omissions of any Lessor Indemnified Party or any Representative of Lessor. Lessee’s obligations under this Section 9.4.1 shall exist regardless of whether any Lessor Indemnified Party is alleged or held to be strictly or jointly and severally liable under any action, legal provision, permit, rule, regulation, order or otherwise.

9.4.2 If Lessee sells the Lessee’s Leasehold Improvements or any property related to the Lessee’s Leasehold Improvements, Lessee shall retain all obligations and liabilities under this Section 9.4 related to such property sold arising out of any facts or circumstances existing as of or prior to the date of any such sale (whether known at the time of any such sale or thereafter discovered as having existed as of the date thereof) and the Person to whom Lessee sells any such property shall assume all obligations and liabilities of Lessee under this Section 9.4 related to such property sold arising out of facts or circumstances that occur or come into existence after the date of any such sale.

9.4.3 If Lessor sells the Lessor’s Lands or any interest therein, the Lessor Indemnified Parties shall retain all rights of the Lessor Indemnified Parties under this Section 9.4, and the Person to whom Lessor sells the Lessor’s Lands or any interest therein shall be assigned by Lessor all rights of Lessor Indemnified Parties under this Section 9.4.

Section 9.5. Joint Liability. In the event that any Environmental Claims or Environmental Expenses arise, directly or indirectly, in whole or in part, out of the joint or concurrent negligence of Lessor and Lessee, or their respective officers, directors, agents, attorneys or employees, notwithstanding any contrary provision of Section 9.3 or 9.4, each Party’s liability under Sections 9.3 and 9.4 shall be limited to providing contribution to the other Party with respect to such liability in the same proportion that such Party’s degree of fault was a cause of such Environmental Claims or Environmental Expenses.

Section 9.6. Cooperation Regarding Claims. If a Party shall receive notice or have knowledge of any Claim, then the provisions of Section 10.2.2. shall be applicable.

ARTICLE 10 COMPLIANCE WITH LAWS, INDEMNITIES

Section 10.1. Compliance With Governmental Rules. Each Party shall comply with all Government Rules as they pertain to this Agreement.

Section 10.2. Indemnities and Limitations of Liability.

10.2.1 Indemnification. Lessor and Lessee (each an “Indemnifying Party”)

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agree to indemnify the other Party and its respective directors, officers and employees (an “Indemnified Party”) from and against all third party actions, causes of actions, damages, costs, liabilities, claims, losses, judgments, penalties and expenses of every type and description, including without limitation any fees and/or costs reasonably incurred by Lessor’s staff attorneys or contract attorneys and any and all costs, fees and expenses incurred in enforcing this provision (hereafter collectively referred to as a “Claim”) arising out of or in connection with the performance of any term, provision or covenant of this Agreement; provided, however the Indemnifying Party’s obligation is limited to providing contribution to the Indemnified Party with respect to such liability in the same proportion that the Indemnifying Party’s negligence or other tortious conduct was a cause of the damages awarded to such third party.

10.2.2 Cooperation Regarding Claims. If an Indemnified Party shall receive notice or have knowledge of any claim, demand, action, suit or proceeding that may result in a Claim by such Indemnified Party (the “Claiming Party”) against an Indemnifying Party pursuant to Article 9 or this Article 10, the Claiming Party shall, as promptly as is reasonably possible, give the Indemnifying Party notice of such Claim, including (i) a reasonably detailed description of the facts and circumstances relating to such Claim, (ii) a reasonably detailed description of the basis for its potential claim for indemnification with respect thereto, and (iii) a complete copy of all notices, pleadings and other papers related thereto; provided, that failure promptly to give such notice or to provide such information and documents shall not relieve the Indemnifying Party of any indemnification obligation it may have under Article 9 or this Article 10 unless such failure shall materially diminish the ability of the Indemnifying Party to respond to or to defend the Claiming Party as a result of its failure to give such notice. Lessor and Lessee shall consult and cooperate with each other regarding the response to and the defense of any Claim and the Indemnifying Party shall promptly assume the defense or represent the interests of the Claiming Party in respect of such Claim, which shall include the right to select legal counsel, reasonably satisfactory to the Claiming Party, and other consultants to appear in proceedings on behalf of the Claiming Party and to propose, accept or reject offers of settlement, all at Indemnifying Party’s sole cost; provided that no such settlement shall be made without the written consent of the relevant Claiming Party, such consent not to be unreasonably withheld or delayed; provided, further that if the Claim is settled without the Indemnifying Party’s consent, the Claiming Party shall be deemed to have waived all rights hereunder against the Indemnifying Party for damages arising out of such Claim. Nothing herein shall prevent the Claiming Party from retaining its own counsel and participating in its own defense at its own cost and expense. The Parties shall cooperate with each other in any notifications to insurers.

10.2.3 Limitation of Liability. Except for the indemnification under Article 9 and this Article 10, a Party shall only be liable to the other Party for such Party’s direct damages as a result of a breach or default by such Party under this Agreement. Except for the indemnification under Article 9 and this Article 10, in no event shall a Party be liable to the other Party, whether under contact, tort (including negligence), strict liability or any other cause of or form of action whatsoever, for claims by such Party of cost of money, loss of profits, loss of use of capital or revenue or any other incidental, special, indirect or consequential loss or damage of any nature arising at any time or from any

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cause whatsoever, or for punitive or exemplary damages.

Section 10.3. Assignment of Liable Party’s Rights. If any entity providing insurance covering any liability of a Party for indemnification or contribution within the scope of Article 9 or this Article 10 (the “Liable Party”) refuses to make payment with respect to such liability, the Liable Party shall, at the request of the other Party, execute such documents as may be necessary to effect an assignment of the Liable Party’s rights to payment from such entity, provided that nothing in this Section 10.3 shall relieve the Liable Party from liability under Article 9 or this Article 10.

Section 10.4. Brokers and Finders. Pursuant to the provisions of this Article 10, each Party shall indemnify, hold harmless and defend the other Party from the payment of any and all broker’s and finder’s expenses, commissions, fees or other forms of compensation which may be due or payable from or by the Indemnifying Party, or may have been earned by any third party acting on behalf of the Indemnifying Party in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby and thereby.

Section 10.5. Limitation of Liability for Other Party’s Debts. Notwithstanding anything to the contrary contained herein, except as provided in the Estoppel and Consent (if any), (i) Lessor shall have no liability whatsoever with respect to, and no Lien shall be placed on Lessor’s assets in connection with, the obligations of Lessee under its Financing Documents, and (ii) except as expressly set forth in this Agreement, including Article 11, Lessee shall have no liability whatsoever with respect to, and no Lien shall be placed on Lessee’s assets in connection with, the obligations of Lessor under its financing agreements.

Section 10.6. No Release of Insurers. The provisions of Section 10.2 shall not be construed so as to relieve any insurer of its obligation to pay any insurance proceeds in accordance with the terms and conditions of valid and collectible insurance policies.

Section 10.7. Representatives. No officer, director, manager, agent, attorney, employee or other individual representative of any party hereto shall be personally liable for any loss under the provisions contained in Article 9 or this Article 10. Nothing herein shall relieve either party hereto of any liability to make any payment expressly required to be made by such party pursuant to this Agreement.

ARTICLE 11 INSURANCE

Section 11.1. Insurance Provided by Lessee. Lessee agrees to procure and maintain in full force and effect during the Lease Term the policies of insurance described in this Section 11.1 and until such insurance coverage has been procured by the Lessee, Lessee shall not occupy the Leased Premises and the Easement Property. All insurance will be obtained from insurance companies qualified to do business in California whose ratings from A.M. Bests are not less than A - IX, or are otherwise acceptable to Lessor. In the event a particular policy is discontinued or the coverage is

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no longer available on commercially reasonable terms, Lessee will provide substitute coverage that is as nearly equivalent as is available on commercially reasonable terms and Lessee will so notify Lessor. The Parties will promptly thereafter discuss and attempt in good faith to agree to a method of providing on commercially reasonable terms equivalent or similar coverage to that coverage which had been discontinued or was no longer available on commercially reasonable terms.

Section 11.2. CGL Insurance. Commercial general liability coverage, including contractual liability, personal injury liability, products/completed operations, and independent contractors, all applicable to personal and bodily injury and property damage, including the cost of defense of any action for bodily injury, death, personal injury and property damage which may arise out of the operations of Lessee. Limits of coverage shall be a combined single limit of One Million and No/100 Dollars ($1,000,000) for each occurrence and Two Million and No/100 Dollars ($2,000,000) in the aggregate annually.

Section 11.3. Automobile Liability. Automobile Liability insurance covering any loss, including the cost of defense of any action for bodily injury, death, personal injury and property damage which may arise out of the operation, maintenance or use of any vehicle whether or not owned by the Lessee, on or off Lessor’s premises. The policy shall provide a minimum combined single limit of One Million and No/100 Dollars ($1,000,000) per accident. This insurance shall provide contractual liability covering all motor vehicles and mobile equipment to the extent coverage may be excluded from general liability insurance.

Section 11.4. Umbrella Liability. Umbrella or Excess Liability insurance policy with a minimum limit of Twenty-Five Million and No/100 Dollars ($25,000,000) per occurrence and in the aggregate excess shall provide coverage at least as broad as specified for underlying coverages and covering those insured in the underlying policies. Coverage shall be “pay on behalf”, with defense costs payable in addition to policy limits. There shall be no cross liability exclusion of claims or suits by one insured against another.

Section 11.5. Workers Compensation. Workers’ compensation insurance in accordance with the laws of the State of California and Employers’ Liability Insurance in the amount of One Million and No/100 Dollars ($1,000,000) per accident or disease with respect to any work on or about the Leased Premises, the Lessee’s Leasehold Improvements, or the Easement Property. A waiver of subrogation endorsement must accompany the policy.

Section 11.6. Pollution Liability. Pollution (environmental impairment) liability insurance shall be written on a Contractor's Pollution Liability form or other form acceptable to Lessor, providing coverage for liability arising out of sudden, accidental and gradual pollution and remediation. The policy limits shall be no less than Five Million and No/100 Dollars ($5,000,000) per claim and in the aggregate. Lessee agrees to renew this policy at the end of the policy term, that is each coverage year, with

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substantially the same terms and conditions and limits of liability no less than those stated herein.

Section 11.7. Additional Insureds. Lessee shall make Lessor and other required parties, additional insureds under the Comprehensive General Liability Insurance Policy, Automobile Liability Policy, pollution liability policy, and the Excess Liability/Umbrella Policy except with respect to such Party’s independent negligence. The insurance provided to the additional insureds shall be primary and any other valid and collectable insurance available to the additional insureds shall be excess. Each insurer shall agree that its policy is primary insurance, and that it shall be liable under its policy, only to the extent arising out of the negligence of Lessee, for the full amount of any loss up to and including the total amount of liability without right of contribution from any other insurance affected by Lessor. The inclusion of Lessor as an additional insured shall not in any way affect its rights with respect to any claim, demand, suit or judgment made, brought or recovered against Lessee. Said policy or policies shall protect Lessee and Lessor in the same manner as though a separate policy has been issued to each; however, nothing in said policy shall operate to increase the insurer’s liability as set forth in the policy beyond the amount or amounts shown or to which insurer would have been liable if only one interest had been named as an insured. A severability of interest clause will be included within the terms of each policy.

Section 11.8. Notice of Discontinuance. All certificates of insurance from the insuring companies required to be furnished to Lessor hereunder shall include the following clause: “At least thirty (30) days’ advance notice shall be given in writing by certified mail, return receipt requested, to Lessor at its notice address set forth in Section 19.1 of this Agreement, to the attention of its risk management department, prior to cancellation, termination, or any alteration of the policy or policies evidenced by this certificate.”

Section 11.9. Periodic Review of Insurance Requirements. The minimum policy limits of the foregoing insurance requirements, shall be subject to review for adequacy by the Parties every five (5) years during the Lease Term, and such policy limits may be increased, upon the mutual agreement of the Parties, in light of the probable risks and liabilities known to the Parties at the time of such review; provided, however, that in no event shall Lessee be obligated to reduce the deductible amount of any insurance policy specified in this Article 11 below the greater of any amount set forth above or any deductible amount required by any Lender to Lessee. In the event Lessee and Lessor cannot agree upon the minimum policy limits of the foregoing insurance requirements, the Parties shall submit the matter to binding arbitration pursuant to Section 20.1 of this Agreement.

Section 11.10. Lender Insurance Requirements. Notwithstanding the foregoing provisions of this Agreement, Lessee agrees to procure and maintain in full force and effect all insurance policies required by each Lender to Lessee (and to satisfy the requirements for each such policy, including, without limitation, the policy limits and deductibles thereunder). Lessee agrees to cause the Lessor to be named as an additional named insured on such policies. For the avoidance of doubt, Lessee shall not be required

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to procure and maintain the insurance required by such Lenders upon the termination of Lessee’s indebtedness to such Lenders and upon satisfaction of such indebtedness Lessee shall only required to satisfy the requirements of the foregoing provisions of this Article 11.

Section 11.11. Waiver of Subrogation. Each Party to this Lease hereby releases and relieves the other, and waives its entire right of recovery against the other, for direct or consequential loss or damage arising out of or related to any accident covered by property insurance carried by such Party, its Affiliates, agents, employees, contractors and/or invitees, whether or not due to the negligence of the Lessor or the Lessee (as the case may be) their respective Affiliates, agents, employees, contractors and/or invitees.

ARTICLE 12 ASSIGNMENTS, SUBLEASES AND MORTGAGES

Section 12.1. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their successors and permitted assigns.

Section 12.2. Assignment. Except as expressly provided in Section 12.3, neither Party will assign or transfer any right, obligation or interest under this Agreement without the prior written consent of the other Party, which consent will not be unreasonably withheld or delayed; provided, however, that the consent of the other Party shall not be required in connection with (a) any Party’s assignment of this Agreement to an Affiliate of such Party or a purchaser or transferee of substantially all of the assets of a Party, but only upon assumption by such Affiliate, purchaser or transferee of all of such Party’s obligations under this Agreement, or (b) the merger (or similar transaction) of a Party. If a Party assigns this Agreement to an Affiliate of such Party, the assigning Party shall remain liable for its obligations hereunder. Any assignee of this Agreement pursuant to the foregoing provisions of this paragraph shall have the right to further assign this Agreement as provided for in this paragraph. If in connection with any assignment permitted pursuant to this paragraph any Lender to or equity investor of Lessee (and any direct or indirect wholly-owned subsidiary of Lessee) requests Lessor to consent in writing to such an assignment even though such consent is not required hereunder, Lessor shall promptly provide such consent. In the case of an assignment that does not require Lessor’s consent, Lessee’s sole obligation under this Article 12 is to provide Lessor with notice of such assignment.

Section 12.3. Collateral Assignments. Notwithstanding the foregoing, without the prior consent of the Lessor, Lessee may assign its rights and interest under this Agreement and in and to the Leased Premises (collectively, the “Leasehold Interest”) to (a) any Lenders to Lessee (and any direct or indirect wholly-owned subsidiary of Lessee) providing construction, interim or long term financing for the Plant, the Construction Improvements and the Lessee’s Easement Equipment (including a leveraged lease or any other refinancing thereof), and (b) any equity investors of Lessee, including, without limitation, holders of the membership interests in Lessee and any direct or indirect wholly-owned subsidiary of Lessee, in each case as collateral security for the obligations

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of Lessee (and any direct or indirect wholly-owned subsidiary of Lessee). Lessor shall reasonably cooperate with Lessee (and any direct or indirect wholly-owned subsidiary of Lessee) and their respective Lenders and equity investors from time to time, including, without limitation, the furnishing of such information and documentation as such Lender or equity investors reasonably requests from Lessor, or an opinion of counsel addressed to any such Lender or equity investor concerning such matters, as such Lenders and equity investors may reasonably request, and in connection with any such collateral assignment, Lessor shall enter into a consent and agreement (an “Estoppel and Consent”) with such Lenders or equity investors on such terms as may be customary under the circumstances and as shall be reasonably required by such Lenders or equity investors, provided that the foregoing undertaking shall not obligate Lessor to change any of its rights or benefits, or impose or increase any of its burdens, liabilities, or obligations, under this Agreement.

Section 12.4. Rights of Leasehold Mortgagee. Lessee may from time to time, without the prior consent of Lessor, grant one or more Mortgages (including one or more additional deeds of trust) on its leasehold interest in this Agreement (a “Leasehold Mortgage”), in addition to, or in substitution of, such grants under the Financing Documents; provided that at the time any such grant is made Lessee retains its obligations hereunder. Any holders of a Leasehold Mortgage, including Lenders, and any assignee of or other successor to the right, title and interest of such a holder in, to and under a Leasehold Mortgage, shall be deemed a “Leasehold Mortgagee” for the purposes of this Agreement.

Section 12.5. Obligations of Leasehold Mortgagees. The provisions of this Article 12 are for the benefit of each Leasehold Mortgagee, as well as of Lessee, and shall be enforceable by any of them. Lessor hereby agrees that no Leasehold Mortgagee shall be obligated to perform any obligation or be deemed to incur any liability or obligation provided herein on the part of Lessee unless such Leasehold Mortgagee forecloses its Leasehold Mortgage and takes possession of the Leased Premises.

Section 12.6. Leasehold Mortgagee Rights and Protections.

12.6.1 When Liability of Leasehold Mortgagee Accrues. No Leasehold Mortgagee in the exercise of its rights under this Agreement, shall be deemed to be an assignee or transferee or mortgagee in possession of the Leasehold Interest so as to require such Leasehold Mortgagee to assume or otherwise be obligated to perform any of Lessee’s obligations under this Agreement except when such Leasehold Mortgagee has obtained Control of the Leased Premises. No Leasehold Mortgagee or purchaser at a foreclosure sale held pursuant to a Leasehold Mortgage shall be liable under this Agreement unless and until such time as it becomes, and then only for so long as it remains, the owner of the Leasehold Interest.

12.6.2 Modifications Requested By A Leasehold Mortgagee. If any Leasehold Mortgagee or prospective Leasehold Mortgagee shall require any modification(s) of this Agreement (including clarifications and supplementations) such Person shall deliver to Lessee and Lessor such instruments in recordable form effecting such modifications(s) as

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such Leasehold Mortgagee or prospective Leasehold Mortgagee shall reasonably require, and Lessor and Lessee shall execute such instruments; provided, however, that Lessor shall not be required to execute such instruments if such modification(s) will adversely affect any of Lessor’s rights or increase Lessor’s obligations under this Agreement.

12.6.3 Foreclosure or Transfer In Lieu of Foreclosure. Notwithstanding anything to the contrary in this Agreement, any sale of this Agreement and of the Leasehold Interest in any proceedings for foreclosure of any Leasehold Mortgage, or any assignment, transfer or conveyance in lieu of such foreclosure, or any assignment of this Agreement and of the Leasehold Interest by a Leasehold Mortgagee, shall not be deemed to violate this Agreement.

12.6.4 Commencement and Termination of Leasehold Mortgagee Protections. A Leasehold Mortgagee shall be entitled to the Leasehold Mortgagee protections provided for under this Agreement only if Lessee and/or Leasehold Mortgagee shall have given to Lessor prior written notice of such Leasehold Mortgagee’s name and address. If a Leasehold Mortgagee is entitled to the Leasehold Mortgagee protections provided for under this Agreement, then such entitlement shall not terminate unless and until (a) such time as the Leasehold Mortgage shall have been satisfied and discharged of record as evidenced by the recording of a satisfaction and cancellation of the Leasehold Mortgage in the land records for the County, or (b) the expiration of or, subject to the provisions of this Article 12, the termination of this Agreement.

Section 12.7. Leasehold Mortgagee Protections. If Lessee at any time or from time to time enters into any Leasehold Mortgage(s), then so long as the Leasehold Mortgagee(s) thereunder are entitled to the protections provided for under this Agreement:

12.7.1 Leasehold Mortgagee Consent. Except as otherwise provided in this Agreement, Lessee’s cancellation, termination (including Lessee’s termination of this Agreement pursuant to any express right of termination provided for in this Agreement), surrender, abandonment, amendment, or modification of this Agreement shall not bind a Leasehold Mortgagee or affect the lien of any Leasehold Mortgage unless Leasehold Mortgagee has given its prior written consent to such cancellation, termination, abandonment, amendment, or modification.

12.7.2 Notice to Leasehold Mortgagee. If Lessor shall give any notice to Lessee (including any notice of default and any notice of termination of this Agreement for any reason), then Lessor shall at the same time and by the same means give a copy of such notice to each Leasehold Mortgagee. No Lease Event of Default or termination of this Agreement predicated upon the giving of notice to Lessee shall be deemed to have occurred unless like notice shall have been so given to each Leasehold Mortgagee at the same time and by the same means, which notice shall describe in reasonable detail the alleged Lease Event of Default or other grounds for termination. Notwithstanding anything to the contrary in this Section 12.7.2, if any Leasehold Mortgagee has not provided, or caused to have been provided, to Lessor such Leasehold Mortgagee’s name and address, Lessor shall have no obligation to deliver a copy of any such notice

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described in this Section 12.7.2, or any other notice, to such Leasehold Mortgagee and any Lease Event of Default shall be deemed to occur, vis-à-vis such Leasehold Mortgagee, notwithstanding such Leasehold Mortgagee’s lack of notice thereof.

12.7.3 Right of Leasehold Mortgagee to Perform for Lessee. Any Leasehold Mortgagee shall have the right, but not the obligation, to perform any obligation of Lessee under this Agreement and to remedy any default by Lessee as set forth in Section 12.7.5, below. Lessor shall accept performance by or at the instigation of a Leasehold Mortgagee in fulfillment of Lessee’s obligations, for the account of Lessee and with the same force and effect as if performed by Lessee. No such performance by a Leasehold Mortgagee shall cause such Leasehold Mortgagee to become a “mortgagee in possession” or otherwise cause such Leasehold Mortgagee to be deemed in possession of the Leased premises or bound by this Agreement.

12.7.4 Additional Time for Leasehold Mortgagee to Exercise Cure Rights. If a default by Lessee occurs under this Agreement and such default shall not be remedied within the cure period allotted under this Agreement, Lessor shall give each Leasehold Mortgagee, that has provided its name and address to Lessor, additional written notice of the default, and shall allow such Leasehold Mortgagee(s) the additional time provided for below within which to take (if such Leasehold Mortgagee so elects) whichever of the actions set forth below shall apply with respect to the default described in such notice of default (such actions, “Mortgagee’s Cure,” and a Leasehold Mortgagee’s rights to take such actions, “Mortgagee’s Cure Rights”).

12.7.4.1 Default That Can Be Cured Without Possession. In the case of a Monetary Default or a Non-Monetary Default that Leasehold Mortgagee is reasonably capable of curing without obtaining possession of the Leased Premises within the cure period allowed to Lessee under this Agreement, Leasehold Mortgagee shall be entitled (but not required) to cure such default within a cure period consisting of Lessee’s cure period under this Agreement plus thirty (30) days.

12.7.4.2 Default That Cannot Be Cured Without Possession or That Cannot Be Cured By a Leasehold Mortgagee. In the case of a Non-Monetary Default that is not reasonably susceptible of being cured by Leasehold Mortgagee without obtaining possession of the Leased Premises, or that is otherwise not reasonably susceptible of being cured by a Leasehold Mortgagee, then Leasehold Mortgagee shall be entitled (but not required) to do the following, so long as, with respect to any defaults other than those referred to in this Section 12.7.4.2, such Leasehold Mortgagee has exercised or is exercising the applicable Mortgagee’s Cure Rights as defined in this Agreement:

(i) Within a period consisting of Lessee’s cure period for such Non-Monetary Default plus thirty (30) days, advise Lessor of Leasehold Mortgagee’s intention to take all reasonable steps necessary to remedy such Non-Monetary default.

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(ii) At any time during the cure period, if any, that applies to Lessee plus thirty (30) days thereafter, Leasehold Mortgagee shall be entitled to institute proceedings, and diligently prosecute the same to completion, subject to the occurrence of any Force Majeure Event(s), to obtain possession of the Leased Premises as a mortgagee, or to acquire the Leasehold Interest by foreclosure proceedings or otherwise, including delivery or an assignment in lieu of foreclosure (the obtaining of such possession or the completion of such acquisition, “Control of the Leased Premises”).

(iii) Upon obtaining Control of the Leased Premises, Leasehold Mortgagee shall be required to duly commence the cure of such Non-Monetary Default and thereafter diligently prosecute to completion (to the full extent it is able to do so) on or before the one hundred eightieth (180th) day after the date that Leasehold Mortgagee obtains Control of the Leased Premises.

12.7.5 Failure to Cure. If any Leasehold Mortgagee commences to cure a Lease Event of Default pursuant to Section 12.7.4 of this Agreement, including its sub-parts, but fails to cure such default within the time periods allowed under Section 12.7.4 and its sub-parts, Lessor may at the expiration of such cure periods (except for such defaults that, by their very nature, are not susceptible of being cured by a Leasehold Mortgagee) proceed to enforce its remedies under Section 14.3 of this Agreement.

12.7.6 No Obligation to Continue to Obtain Control of Leased Premises. A Leasehold Mortgagee shall not be required to continue to exercise its Mortgagee’s Cure Rights or otherwise proceed to obtain or to exercise Control of the Leased Premises if and when the default that such Leasehold Mortgagee was attempting to cure shall have been cured. Upon such cure and the cure of any other defaults in accordance with this Agreement, this Agreement shall continue in full force and effect as if no default(s) had occurred.

12.7.7 Cure Period Limitation on Lessor’s Remedies. So long as the time period of a Leasehold Mortgagee to exercise its Mortgagee Cure Rights with respect to a Non-Monetary Default by Lessee has not expired (and provided that all Monetary Defaults are cured within Leasehold Mortgagee’s cure period provided for under this Agreement), Lessor shall not (i) re-enter the Leased Premises (except as permitted under this Agreement), (ii) serve a notice of election to terminate this Agreement (subject to the early termination provisions of Section 3.4 of this Agreement), or (iii) bring a proceeding on account of such default to (a) dispossess Lessee and/or other occupants of the Leased Premises, (b) re-enter the Leased Premises, (c) terminate this Agreement or the Leasehold Interest, or (d) otherwise exercise any rights or remedies under this Agreement by reason of such default. Nothing in the Leasehold Mortgagee protections provided for in this Agreement shall be construed to extend the Lease Term beyond the Lease Termination Date that would have applied if no default had occurred.

12.7.8 Entry to Effectuate a Mortgagee Cure. Lessor and Lessee authorize each

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Leasehold Mortgagee to enter the Leased Premises and to use the Easements to effect the Leasehold Mortgagee’s Cure and to take any action(s) reasonably necessary to effect the Leasehold Mortgagee’s Cure. A Leasehold Mortgagee’s rights under this paragraph shall not constitute Control of the Leased Premises or otherwise be construed to mean that such Leasehold Mortgagee has possession of the Leased Premises.

12.7.9 Lessor to Recognize Purchaser of Leasehold Interest at Foreclosure. If any Leasehold Mortgagee or its nominee or a purchaser at a foreclosure sale shall acquire Control of the Leased Premises, then Lessor shall recognize any purchaser of the Leasehold Interest pursuant to a foreclosure sale under a Leasehold Mortgage, or any transferee of the Leasehold Interest under an assignment in lieu of foreclosure, or, if the Leasehold Mortgagee should be such purchaser or assignee, the Leasehold Mortgagee and any assignee of the Leasehold Mortgage, as the Lessee hereunder; provided, however, that any such Person shall be obligated to timely cure all Monetary Defaults and promptly proceed and diligently continue to exercise Mortgagee’s Cure Rights within the time periods herein allowed.

12.7.10 Limitation on Liability of Leasehold Mortgagee and New Tenant. Notwithstanding anything to the contrary in this Agreement, no Leasehold Mortgagee, no New Tenant, and no one acting for or on behalf of a Leasehold Mortgagee or a New Tenant shall have any liability under or with respect to this Agreement (or the New Lease) except during such period as such person is the tenant under this Agreement (or the New Lease), and, subject to Section 12.7, such liability shall in any event terminate upon such Person’s assignment of the Lease (or the New Lease).

12.7.11 Lessor Obligations To Enter Into New Lease. If this Agreement shall terminate for any reason (other than a termination pursuant to Section 3.4 of this Agreement) before the last day of the Lease Term , as the case may be, then (in addition to any other or previous notice required to be given by Lessor to a Leasehold Mortgagee), Lessor shall, within thirty (30) days of such termination, give notice of such termination to each Leasehold Mortgagee entitled to Leasehold Mortgagee protections under this Agreement pursuant to Section 12.6 of this Agreement. Any such Leasehold Mortgagee may request, in writing within thirty (30) days of such notice, that Lessor enter into a new lease of the Leased Premises with such Leasehold Mortgagee or its nominee (the “New Tenant”), effective as of such termination date, for the remainder of the Lease Term (including, if applicable, the Lease Renewal Term, but as may be terminated early pursuant to Section 3.4 of this Agreement) on the same terms and provisions contained in this Agreement, including all rights or privileges of Lessee under this Agreement, but excluding any requirements that have already been performed or no longer apply (a “New Lease”). The closing for the execution and delivery of the New Lease shall occur within ten (10) Business Days of such Leasehold Mortgagee’s request to enter the New Lease. At or before the closing for the New Lease, such Leasehold Mortgagee shall: (i) pay to Lessor any and all sums then due under this Agreement as if this Agreement had not been terminated; and (ii) commence and diligently prosecute the cure of any other default hereunder that remains uncured at that time, to the extent such default is susceptible of being cured by a Leasehold Mortgagee. If a Leasehold Mortgagee or its nominee enters into a New Lease, then such Leasehold Mortgagee shall pay all reasonable expenses,

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including reasonable attorneys’ fees, court costs and disbursements, incurred by Lessor in connection with Lessee’s default and the termination of this Agreement, the recovery of possession of the Leased Premises, and the preparation, execution and delivery of the New Lease. The following provisions shall apply to any New Lease:

12.7.11.1 Lessor and the Leasehold Mortgagee or its nominee shall, contemporaneously with the execution and delivery of the New Lease, execute, acknowledge and deliver duplicate originals of a recordable memorandum of lease agreement with respect to the New Lease. Such memorandum shall (a) be in form and substance reasonably satisfactory to both parties and (b) contain such information as may be legally required to be contained in a memorandum of lease. Following such execution, acknowledgement and delivery, the Leasehold Mortgagee, at its sole cost and expense, may submit such memorandum and any other documents or instruments which may be required for recording the same in the land records of the County.

12.7.11.2 The New Lease shall not be subject to any rights, Liens, or interests other than those to which this Agreement was subject at the time of its termination. The provisions of the immediately preceding sentence shall be self-executing.

12.7.11.3 Lessor shall, if requested, execute and deliver such resolutions and other documents as shall be reasonably necessary to enable the New Tenant to obtain title insurance with respect to the New Lease, at such New Tenant’s expense.

12.7.11.4 Upon execution of a New Lease, Lessor shall assign to New Tenant all of Lessor’s right, title and interest in and to (a) all moneys, if any, then held by, or payable to, Lessor that Lessee would have been entitled to receive but for the termination of this Agreement, and (b) all subleases of the Leased Premises.

12.7.11.5 Between the date on which the Lease was terminated and the date of execution and delivery of a New Lease, if a Leasehold Mortgagee shall have requested a New Lease in accordance with the terms hereof, Lessor shall not cancel any permitted sublease of the Leased Premises, or accept any cancellation, termination or surrender of any such sublease, without the consent of such Leasehold Mortgagee.

12.7.12 Priority of Mortgagees. If more than one Leasehold Mortgagee desires to exercise Mortgagee’s Cure Rights or the right to obtain a New Lease or any other right granted to Leasehold Mortgagees hereunder, then Lessor shall recognize either (i) the Leasehold Mortgagee that desires to exercise such right or privilege whose Leasehold Mortgage is most senior in Lien, or (ii) such other Leasehold Mortgagee as has been designated in writing by all Leasehold Mortgagees to exercise such right or privilege. Priority of Leasehold Mortgages shall be conclusively evidenced by the then-current report or certificate of any reputable title insurance company licensed to do business in

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the State of California. Lessor shall have no liability whatsoever to any Leasehold Mortgagee or any other Person if Lessor erroneously recognizes a junior Leasehold Mortgagee as most senior if the title report or certificate relied upon by Lessor evidences that such Leasehold Mortgagee is the most senior.

12.7.13 No Merger of Estates. Without the written consent of Lessor, Lessee, and all Leasehold Mortgagees, the Leased Premises, the Construction Improvements and the Lessee’s Easement Equipment (to the extent it is an improvement or a fixture) and the Leasehold Interest shall remain distinct and separate estates and shall not merge for so long as Lessor is obligated to enter into a New Lease pursuant to Section 12.7.11 of this Agreement, notwithstanding the acquisition of both the Leased Premises and the Leasehold Interest by Lessor, Lessee, any Leasehold Mortgagee, or any other Person, whether by purchase or otherwise.

Section 12.8. Fee Mortgages. Lessor covenants and agrees that it shall not grant any Mortgage encumbering all or any portion of the Leased Premises (whether alone or as part of a larger portion of the Leased Premises being encumbered by such Mortgage) (such a Mortgage, a “Fee Mortgage”) unless such Fee Mortgage (a) expressly states that it is subject and subordinate to this Agreement (as this Agreement may be modified, supplemented or otherwise amended after the date of such Fee Mortgage, which amendments may be effected without the consent of the grantee of such Fee Mortgage) and to any and all Leasehold Mortgages, and (b) contains the covenant of the grantee thereof to not disturb the Lien of any Leasehold Mortgage. At the request of Lessee or any Leasehold Mortgagee, Lessor shall cause each Person having a Fee Mortgage to acknowledge in writing that this Agreement and Lessee’s and the Leasehold Mortgage(s) right of quiet enjoyment hereunder are superior to and shall not be disturbed by such Fee Mortgage.

ARTICLE 13 TERMINATION

Section 13.1. Termination. This Agreement shall terminate only (a) upon the expiration hereof, and/or (b) as expressly provided in Section 3.4 of this Agreement, and/or (c) as expressly provided in Article 14 of this Agreement, and/or (d) as expressly provided in Article 15 of this Agreement, and/or (e) by the mutual written agreement of Lessor and Lessee, subject to Section 12.7 of this Agreement, and shall not otherwise terminate, nor shall Lessee’s interest be extinguished, lost, conveyed or otherwise impaired, or be merged into or with any other interest or estate in the Leased Premises or any other property interest, in whole or in part, by any other cause or for any other reason whatsoever, whether similar or dissimilar to any of the foregoing.

ARTICLE 14 DEFAULT

Section 14.1. Events of Default. The following events shall be deemed to be events of default (“Lease Event(s) of Default”) by either Party (as the case may be) under this Agreement:

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14.1.1 Monetary Default. Failure to pay any payment required to be made hereunder (a “Monetary Default”), including Impositions (unless such Impositions shall have been bonded or are being diligently contested as provided in this Agreement), or any other sum required to be paid hereunder, and such failure shall continue for ten (10) Business Days after written notice thereof has been given to the nonpaying party by Lessor; or

14.1.2 Non-Monetary Default. Failure to comply in any material respect with any material term, provision or covenant of this Agreement, other than the payment of sums to be paid hereunder (a “Non-Monetary Default”), and such failure shall continue for thirty (30) days after due written notice thereof has been given to the nonperforming party; or, if such failure cannot reasonably be cured within the said thirty (30) days but can be cured within a reasonable longer period and the nonperforming party shall have commenced to cure such failure within said period and shall thereafter proceed with reasonable due diligence and good faith to cure such failure, for such longer period as shall be necessary for such party to cure the same with all reasonable diligence.

Section 14.2. Intentionally Deleted.

Section 14.3. Remedies. Subject to the rights of Lenders or any other Leasehold Mortgagee hereunder or pursuant to the Estoppel and Consent, upon the occurrence and during the continuation of any Lease Event of Default, the nondefaulting party may exercise any remedy it may have at law or in equity, terminate this Agreement by notice to the other party and in conformity with procedures required hereby, or enforce, by all proper and legal suits and other means, its rights hereunder, without reentering or resuming possession of the Leased Premises and without terminating this Agreement. Without prejudice to any other remedy for default and subject to Section 5.3.5 (Lessor’s Right to Pay Impositions), the nondefaulting party may perform any obligation or make any payment reasonably required to cure a Lease Event of Default by the other party under this Agreement after at least thirty (30) days’ notice to the defaulting party of the nondefaulting party’s intent to pursue this remedy if the Lease Event of Default is not cured within such time period; provided, however, that thirty (30) day’s notice shall not be required in cases of emergency where action is required to protect lives or property located at the Leased Premises, the Construction Improvements or the Lessee’s Easement Equipment and the defaulting party is not proceeding to take appropriate remedial action (but the nondefaulting party in any event shall attempt to notify the defaulting party, by telephone or in writing, as to the emergency and what actions the nondefaulting party is taking or proposes to take). The reasonable costs of performance, including all reasonable disbursements, shall immediately be repaid by the defaulting party upon demand, together with interest from the date of expenditure until fully paid at an annual rate of interest equal to the lesser of (a) the Default Rate; or (b) the maximum interest rate allowed under California law.

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ARTICLE 15 CONDEMNATION

Section 15.1. Parties, Rights and Obligations. If during the Lease Term there is any taking of all or any part of the Leased Premises by Condemnation, the rights and obligations of the Parties shall be determined by this Article 15.

Section 15.2. Total Taking. If the Leased Premises is totally and permanently taken by Condemnation, this Lease shall terminate on the Date of Taking and neither Party shall have any further liability hereunder or thereunder except as specifically provided herein or therein.

Section 15.3. Partial Taking. If a portion of the Leased Premises is taken by Condemnation, this Agreement shall remain in effect if such partial Condemnation does not materially and adversely affect Lessee’s rights hereunder. Otherwise, Lessee may, but shall have no obligation to, terminate this Lease upon thirty (30) days’ notice to Lessor delivered to Lessor not later than thirty (30) days after the Date of Taking, which termination shall be effective on the later of (a) the Date of Taking and (b) thirty (30) days after delivery of such termination notice to Lessor, and neither Party shall have any further liability hereunder or thereunder except as specifically provided herein or therein.

Section 15.4. Award Distribution. Lessor (or Lessor’s mortgagee(s), if applicable) shall be entitled to receive that part of any award (“Award”) attributable to the value of the Leased Premises (exclusive of the Lessee’s Leasehold Improvements and Lessee’s interest in this Agreement) taken. Lessee shall be entitled to receive, subject to the rights of the Leasehold Mortgagees, that part of any Award attributable to the value of the Lessee’s Leasehold Improvements and the Leasehold Interest, each to the extent taken.

Section 15.5. Temporary Taking. The taking of the Leased Premises, or any part thereof, by military or other public authority shall constitute a taking by Condemnation only when the use and occupancy by the taking authority has continued for longer than twelve (12) months. During any such twelve (12) month period, which shall be a temporary taking, whether or not such temporary taking affects the Leased Premises and/or the Lessee’s Leasehold Improvements, all the provisions of this Agreement shall remain in full force and effect.

Section 15.6. Condemnation by Lessor or its Affiliates. Notwithstanding the foregoing provisions of this Article 15, if during the Lease Term Lessor or any Person that is controlled or formed by Lessor shall Condemn all or any part of the Leased Premises, in addition to all other payments required to be paid by Lessor or such Person under all applicable law or as otherwise required pursuant to the terms of this Agreement, Lessor shall pay to Lessee the following: (a) Lessee’s cost of relocating the Lessee’s Leasehold Improvements to an alternative site, including, without limitation, the costs of dismantling the Lessee’s Leasehold Improvements and the cost of the storage of such dismantled Lessee’s Leasehold Improvements (or, if it is more economical to replace certain components of the Lessee’s Leasehold Improvements than it is to relocate such

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components, the cost of replacing such components); (b) the cost of obtaining all necessary permits and other approvals and consents pursuant to all applicable Governmental Rules in connection with the relocation of the Lessee’s Leasehold Improvements to an alternative site and the commencement of operations at the alternative site; and (c) all net profits not realized by Lessee from the date of the cessation of operations at the Leased Premises as a direct result of the Condemnation until the commencement of commercial operations at an alternative site, less any net savings realized or reasonably anticipated to be realized by Lessee during the remainder of the Lease Term as a result of the relocation of the Lessee’s Leasehold Improvements and commencement of commercial operations at such alternative site (e.g., reduction in rent, operating costs, etc.), discounted to its net present value at a reasonable discount rate. In connection with the foregoing, Lessee covenants and agrees to use commercially reasonable efforts to locate an alternative site, negotiate rights to possess and occupy such alternative site, and to obtain all necessary permits and other approvals and consents pursuant to all applicable Governmental Rules in connection with the installation of the Lessee’s Leasehold Improvements at such alternative site and the commercial operations of the Plant thereon. at such alternative site.

ARTICLE 16 SURRENDER; HOLDOVER

Section 16.1. To Remain Lessee’s Leasehold Improvements. During the period commencing one year prior to, and ending on, the scheduled expiration of the Lease Term, Lessor and Lessee shall meet to discuss the removal of the Lessee’s Leasehold Improvements. During such meeting, Lessor may request that Lessee not remove some or all of the Lessee’s Leasehold Improvements. Lessee shall have the right to determine which of such requested Lessee’s Leasehold Improvements it will not remove at the end of the scheduled expiration of the Lease Term (such items, the “To Remain Lessee Leasehold Improvements”).

Section 16.2. Holdover Rights. At the expiration of the Lease Term, Lessee may holdover for a period not to exceed six (6) months, subject to the payment of rent hereunder, during which time Lessee shall remove do and take such actions to satisfy its obligations under Section 16.3.

Section 16.3. Surrender Condition. At the later of the expiration of the Lease Term or any holdover period, (a) the Leased Premises shall be free and clear of all Liens on the Leased Premises in any way created by Lessee, its agents, contractors, employees, sublessees, successors and assigns, other than such Liens to which Lessor shall have expressly consented in writing to remain in effect on or after such termination, and (b) Lessee shall remove the Lessee’s Leasehold Improvements that are above the surface grade of the Leased Premises and the Easement Property, and that are six feet or less below the surface grade of the Leased Premises and the Easement Property, less and except the To Remain Lessee Leasehold Improvements, and restore the Leased Premises and the Easement Property, less and except the areas of the Leased Premises and the Easement Property upon which the To Remain Lessee Leasehold Improvements are located, to a condition suitable for agriculture, including, but not limited to, sufficient

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topsoil available for agriculture. For the avoidance of doubt, Lessee shall not be required to remove the To Remain Lessee Leasehold Improvements, or any foundations, pilings or other underground improvements on the Leased Premises or the Easement Property, installed by Lessee, if and to the extent such foundations, pilings or other underground improvements are more than six feet below the surface grade of the Leased Premises or the Easement Property. In addition, in no event shall Lessee be required to remove any foundations, pilings or other underground improvements not installed by Lessee. In addition, within thirty (30) days after the last day of the Lease Term, Lessee shall deliver to Lessor in writing the results of an environmental assessment of the Leased Premises.

Section 16.4. Security for Lessee Obligation to Satisfy the Surrender Condition. Prior to the Commencement Date, Lessee shall deliver to Lessor cash, a letter or credit, a performance bond, or other credit or security reasonably acceptable to Lessor (the “Removal Obligation Security”), in an amount sufficient to pay for Lessee’s obligations to remove the Lessee’s Leasehold Improvements from the Leased Premises and the Easement Property pursuant to Section 16.3. Lessee shall provide to Lessor evidence reasonably acceptable to Lessor of the cost to Lessee to satisfy its obligations to remove the Lessee’s Leasehold Improvements from the Leased Premises and the Easement Property pursuant to Section 16.3. Lessor shall hold the Removal Obligation Security in trust. Within thirty (30) days after Lessee’s satisfaction of its obligations pursuant to Section 16.3, Lessor shall deliver the Removal Obligation Security to Lessee. If an Event of Default shall occur as a result of Lessee’s breach of its obligations pursuant to Section 16.3, Lessor shall have the right to perform Lessee’s obligations pursuant to Section 16.3 and apply the Removal Obligation Security to the cost thereof.

ARTICLE 17 REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 17.1. Representations and Warranties of Lessee. Lessee hereby makes the following representations and warranties to Lessor:

17.1.1 Lessee is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, is qualified to do business in the State of California and has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.

17.1.2 The execution, delivery and performance by Lessee of this Agreement has been duly authorized by all necessary limited liability company action, and does not and will not require any consent or approval of Lessee’s members other than that which has been obtained (evidence of which shall be, if it has not heretofore been, delivered to Lessor).

17.1.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement, do not and will not conflict with or constitute a breach of

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or a default under, any of the terms, conditions or provisions of any legal requirements, or any organizational documents, agreement, deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Lessee is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.

17.1.4 This Agreement constitutes the legal, valid and binding obligation of Lessee enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.

17.1.5 There is no pending or, to the knowledge of Lessee, threatened action or proceeding affecting Lessee before any Governmental Authority, which purports to affect the legality, validity or enforceability of this Agreement.

17.1.6 Lessee has obtained all approvals of any Governmental Authority necessary for it to enter into and perform its obligations under this Agreement.

Section 17.2. Intentionally Deleted.

Section 17.3. Representations and Warranties of Lessor. Lessor hereby makes the following representations and warranties to Lessee:

17.3.1 Lessor is a municipal corporation duly organized, validly existing and in good standing under the laws of the State of California, is qualified to do business in the State of California and has the legal power and authority to own its properties, to carry on its business as now being conducted and to enter into this Agreement and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement.

17.3.2 The execution, delivery and performance by Lessor of this Agreement have been duly authorized by all necessary official action, and do not and will not require any consent or approval of Lessor’s City Council other than that which has been obtained (evidence of which shall be, if it has not heretofore been, delivered to Lessee).

17.3.3 The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and the fulfillment of and compliance with the provisions of this Agreement do not and will not conflict with or constitute a breach of or a default under, any of the terms, conditions or provisions of any legal requirements, or its articles of incorporation or bylaws, or any deed of trust, mortgage, loan agreement, other evidence of indebtedness or any other agreement or instrument to which Lessor is a party or by which it or any of its property is bound, or result in a breach of or a default under any of the foregoing.

17.3.4 This Agreement constitutes the legal, valid and binding obligation of Lessor enforceable in accordance with its terms, except as such enforceability may be

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limited by bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors’ rights generally or by general equitable principles, regardless of whether such enforceability is considered in a proceeding in equity or at law.

17.3.5 There is no pending or, to the knowledge of Lessor, threatened action or proceeding affecting Lessor before any Governmental Authority, which purports to affect the legality, validity or enforceability of this Agreement.

17.3.6 Lessor has all approvals of any Governmental Authority necessary for it to perform its obligations under this Agreement.

17.3.7 Subject to the Permitted Encumbrances, Lessor owns the Leased Premises.

17.3.8 Subject to the Permitted Encumbrances, on the Effective Date Lessee will have a valid leasehold estate in and to the Leased Premises.

17.3.9 The Leased Premises is free of all debris and improvements, including, without limitation, foundations of any preexisting improvements.

Section 17.4. Covenants of Lessor.

17.4.1 Lessor covenants and agrees to execute and join in all applications for license and permits necessary for Lessee’s construction, installation and operation of the Construction Improvements and the Lessee’s Easement Equipment. Lessor’s execution and joining into such applications shall not modify or alter Lessee’s indemnification obligations pursuant to Section 10.2.

ARTICLE 18 CONDITION OF THE LEASED PREMISES; ALTERATIONS AND

MAINTENANCE

Section 18.1. As-Is, Where-Is. The Lessee is leasing the Leased Premises in its present “AS-IS, WHERE-IS CONDITION WITH ALL FAULTS”, subject to the reasonable and ordinary wear and tear of the Property, and without representation or warranty of any kind, express or implied, except to the extent of the representations and warrants set forth in this Agreement. Except as expressly set forth herein, the Lessor has not made, does not make, and has not authorized anyone else to make any representation as to the present or future physical condition, value, presence or absence of hazardous materials, financing status, leasing, operation, use, tax status, income and expense or any other matter or thing pertaining to the Leased Property, and the Lessee acknowledges that no such representation or warranty has been made and that in entering into this Agreement, it does not rely on any representation or warranty other than those expressly set forth in this Agreement.

Section 18.2. Alterations and Maintenance. Lessor shall have no obligation hereunder for the alteration or maintenance of the Leased Premises, the Construction Improvements or the Lessee’s Easement Equipment.

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ARTICLE 19 NOTICES

Section 19.1. Notices. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received by the applicable Party hereto if personally delivered; when transmitted by the applicable Party hereto if transmitted by telecopy, electronic or digital transmission method, subject to the sender’s facsimile machine or other device receiving the correct answerback of the addressee and confirmation of uninterrupted transmission by a transmission report or the recipient confirming by telephone to sender that he has received the message; and when received by the applicable Party hereto, if sent for next day delivery to a domestic address by recognized overnight delivery service or if sent by certified or registered mail, return receipt requested.

Notices shall be given:

If to Lessor, to:

The City of Vacaville 650 Merchant Street Vacaville, CA 95688 Attn: City Manager Facsimile No: (707) 469-6480

If to Lessee, to:

CPV Vacaville, LLC c/o Competitive Power Ventures, Inc. 55 2nd Street, Suite 525 San Francisco, CA 94105 Attn: Project Manager Facsimile No: (415) 975-9886

and

CPV Vacaville, LLC c/o Competitive Power Ventures, Inc. 35 Braintree Hill Office Park, Suite 400 Braintree, MA 02184 Attn: Project Manager Facsimile No: (781) 848-5804

ARTICLE 20 GENERAL

Section 20.1. Arbitration. Any dispute relating to and/or arising out of this Agreement as between or among Lessee and Lessor while this Agreement is in effect, shall be resolved by arbitration administered by the American Arbitration Association

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under the Commercial Arbitration Rules (the “Commercial Arbitration Rules”). The arbitration tribunal shall be composed of three arbitrators (one arbitrator selected by each of Lessee and Lessor with the third selected by the other two arbitrators) within thirty (30) days of the filing of a demand for arbitration and failing such agreement, by the Parties under the Commercial Arbitration Rules. The arbitration proceedings shall be held in San Francisco, California. The decision, award and order of the arbitration tribunal shall be final, binding and conclusive as to Lessee and Lessor. All documents, information and other evidence produced for or in connection with such arbitration proceedings shall be held in confidence by the Parties. Other than the fees and expenses of the arbitrators, which shall be shared equally by the Parties, each Party shall bear the compensation and expenses of its own legal counsel, witnesses and employees.

Section 20.2. No Third Party Beneficiary. This Agreement and all rights hereunder are intended for the sole benefit of the Parties hereto and, to the extent expressly provided, for the benefit of the Lenders and the other Indemnified Parties, and shall not imply or create any rights on the part of, or obligations to, any other Person.

Section 20.3. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of California without regard to its conflicts of laws provisions.

Section 20.4. Partial Invalidity. Wherever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. In the event that such a construction would be unreasonable or would deprive a Party of a material benefit under this Agreement, the Parties shall seek to amend this Agreement to remove the invalid provision and otherwise provide the benefit unless prohibited by any Governmental Rule.

Section 20.5. Waivers. The failure of either Party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision or of any other term or condition contained herein or a waiver of any subsequent breach or violation of the same or any other term or condition, nor in any way to affect the validity of this Agreement or any part hereof or the right of a Party thereafter to enforce each and every such provision. A waiver under this Agreement must be in writing and state that it is a waiver. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.

Section 20.6. Entire Agreement And Amendments. This Agreement (including the Exhibits, Schedules and Annex hereto which are an integral part of this Agreement) supersedes all previous representations, understandings, negotiations and agreements either written or oral between the Parties hereto or their representatives, including, without limitation, the Memorandum of Understanding and the Option to Lease.

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Section 20.7. Counterparts. This Agreement may be signed in multiple originals and/or using counterpart signature pages. All such multiple originals shall constitute but one and the same document.

Section 20.8. Decision-Making By Parties. Except where this Agreement expressly provides for a different standard, whenever this Agreement provides for determination, decision, permission, consent or approval of a Party, the Party shall promptly make such determination, decision, grant or withholding of permission, consent or approval in a commercially reasonable manner and without unreasonable delay. Any denial of consent required to be made in a commercially reasonable manner shall include in reasonable detail the reason for denial or aspect of the request that was not acceptable.

Section 20.9. No Recourse To Affiliate. This Agreement is solely and exclusively between Lessor and Lessee, and any obligations created herein shall be the sole obligations of the Parties hereto. No Party shall have recourse to any parent, member, shareholder, subsidiary, partner joint venture, affiliate, director or officer of the other Party for performance of said obligations unless the obligations are assumed in writing by the Person against whom recourse is sought.

Section 20.10. Further Assurances. Lessor and Lessee agree to cooperate in all reasonable respects necessary to consummate the transactions contemplated by this Agreement and each will take all reasonable actions within its authority to secure the cooperation of its affiliates.

Section 20.11. Survival. The provisions of this Agreement that relate to the enforcement of rights and obligations accruing before the end of the Lease Term shall survive termination of this Agreement to the extent necessary to enforce such rights and obligations.

Section 20.12. No Partnership. The Parties intend that nothing contained in this Agreement shall be deemed or construed to create a partnership, joint venture or other co-ownership arrangement between the Parties.

Section 20.13. Cumulative Remedies. All rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies.

Section 20.14. WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS AGREEMENT.

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Section 20.15. Past-Due Amounts. Any amounts due hereunder, if not timely paid by the party from whom they are due, shall bear simple interest at an annual rate of interest equal to the lesser of (i) Default Rate; or (ii) the maximum interest rate allowed under California law, from the date that such amount was due without regard to any grace period herein provided until the time that such amount is paid in full. Additionally, if any amount due hereunder is not paid by the party from whom such amount is due, the other party, upon thirty (30) days notice to the defaulting party, may elect to set-off the amount remaining overdue at the end of such thirty-day period (with such interest thereon) against amounts due or becoming due from the other party to the defaulting party hereunder until such other party shall have recovered in full the amount owed to it by the defaulting party.

Section 20.16. Estoppel Certificates. Within thirty (30) days after receipt of a written request, either party shall deliver a written statement to the other stating whether this Agreement is unmodified and in full force and effect, whether the other party is in compliance with this Agreement and any other matters that may reasonably be requested.

Section 20.17. Consents. Except where this Agreement expressly provides for a different standard, whenever this Agreement provides for a determination, decision, permission, consent, or approval of a party, the party shall promptly make such determination, decision, grant or withholding of permission, consent or approval in a commercially reasonable manner and without unreasonable delay. Any denial of consent required to be made in a reasonable manner shall include in reasonable detail the reason for denial or aspect of the request that was not acceptable.

Section 20.18. Legal Representation of Parties. This Agreement was negotiated by the Parties with the benefit of legal representation and any rule of construction or interpretation requiring this Agreement to be construed or interpreted against any Party, shall not apply to any construction or interpretation hereof or thereof.

Section 20.19. Non-Interference, Access. Neither of the Parties hereto shall undertake or engage in, any activities which unreasonably interfere with the operation of the Plant, the Lessee’s Easement Equipment or the Lessor Facilities.

Section 20.20. Sale of Leased Premises. In the event that Lessor, in accordance with the terms and provision of this Agreement, sells or transfers fee title to the Leased Premises to any Person or entity, this Agreement shall remain in full force and effect.

Section 20.21. Confidentiality. Except for the terms disclosed in the Memorandum of Lease, each Party agrees that it will not and shall direct its respective employees, officers, agents and representatives not to, directly or indirectly, release or cause or permit to be released to the public any press notices, publicity (oral or written) or advertising promotion relating to the execution of this Agreement, or otherwise publicly announce or disclose or cause or permit to be publicly announced or disclosed, in any manner whatsoever, the terms, conditions or substance of this Agreement or the transactions contemplated herein, without first obtaining the consent of the other Party. It is understood that the foregoing shall not (i) preclude any party from discussing the

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substance or any relevant details of the transactions contemplated in this Agreement on a confidential basis with any of its partners, attorneys, officers, directors, employees, accountants, professional consultants, financial advisors, rating agencies, or potential lenders, as the case may be (the “Representatives”) provided that such Representatives have been informed of the applicable Party’s obligations hereunder or (ii) prevent it from complying with applicable laws, including, without limitation, governmental regulatory, disclosure, tax and reporting requirements, including, but not limited to, the California Public Records Act (Government Code § 6250 et seq.).

ARTICLE 21 RIGHT OF FIRST REFUSAL.

Section 21.1. Right of First Refusal to Purchase Leased Premises. Lessor hereby grants to Lessee a right of first refusal to purchase any of the Leased Premises. If Lessor receives an offer from a third party to purchase all or any portion of the Leased Premises which Lessor, in its sole and exclusive discretion is prepared to accept, Lessor shall deliver to Lessee written notice of its receipt of such offer stating the Leased Premises (or any portion thereof) to be purchased, the proposed date of the sale, the proposed purchase price, and the other terms and conditions upon which the purchase is proposed to be made. Such notice shall constitute an offer (the “Offer”) by Lessor to sell the Leased Premises identified in the notice to Lessee, at the price and upon the terms and conditions set forth in the notice. For a period of thirty (30) days after the receipt of the notice Lessee shall have the right of first refusal, exercisable by written notice to Lessor, to accept the Offer. Following the last date by which Lessee may exercise its rights of first refusal under this Section 21.1, Lessee shall be deemed to have declined to purchase any of the Leased Premises on the terms set forth in the Offer, and Lessor shall be permitted, during the period of thirty (30) days thereafter to sell the Leased Premises identified in the Offer to the third party (that made the initial offer), at a price and upon terms and conditions no more favorable than those specified in the Offer.

Section 21.2. Right of First Refusal to Lease Adjacent Land. Lessor hereby grants to Lessee a right of first refusal to lease additional land owned by Lessor or its Affiliates and adjacent to the Leased Premises (the “Adjacent Land”). If Lessor receives an offer from a third party to lease the Adjacent Land which Lessor, in its sole and exclusive discretion is prepared to accept, Lessor shall deliver to Lessee written notice of its receipt of such offer stating the Adjacent Land to be leased, the proposed commencement date of the lease, the rent to be paid thereunder, and the other terms and conditions of such lease. Such notice shall constitute an offer (the “Offer”) by Lessor to lease the Adjacent Land identified in the notice to Lessee, at the rent and upon the terms and conditions set forth in the notice. For a period of thirty (30) days after the receipt of the notice Lessee shall have the right of first refusal, exercisable by written notice to Lessor, to accept the Offer and enter into a lease with Lessor. Following the last date by which Lessee may exercise its rights of first refusal under this Section 21.2, Lessee shall be deemed to have declined to purchase any of the Leased Premises on the terms set forth in the Offer, and Lessor shall be permitted, during the period of thirty (30) days thereafter

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to enter into a lease with the third party (that made the initial offer) the Leased Premises at a rent and upon terms and conditions no more favorable than those specified in the Offer.

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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SIGNATURE PAGE TO CONSTRUCTION LAYDOWN LEASE AGREEMENT

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date set forth at the beginning of this Agreement.

LESSOR:

CITY OF VACAVILLE

By: Name: Title:

APPROVED AS TO FORM:

GERALD L. HOBRECHT, City Attorney

By: Name: Title:

LESSEE:

CPV VACAVILLE, LLC

By: Name: Title:

DSMDB-2382488v06

Annex A

Defined Terms “Adjacent Land” has the meaning specified in Section 21.2.

“Affiliate” of a specified Person means any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the specified Person. As used in this definition, “control”, “controlled by” and “under common control with” shall mean possession, directly or indirectly, or power to direct or cause the direction of management or policies of such Person (whether through ownership of securities or other partnership or ownership interests, by contract or otherwise), provided that in any event, any Person which owns directly, indirectly or beneficially ten percent (10%) or more of the securities having voting power for the election of directors or other governing body of a corporation or ten percent (10%) or more of the partnership interests or other ownership interests of any other Person will be deemed to control such Person. Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate of a Person solely by reason of his or her being a director, committee member, officer or employee of such Person.

“Award” means all compensation, sums or anything of value awarded, paid or received on a total or partial Condemnation.

“Bankruptcy” means with respect to a Person that such Person (i) ceases doing business as a going concern, generally does not pay its debts as they become due or admits in writing its inability to pay its debts as they become due, files a voluntary petition in bankruptcy or is adjudicated a bankrupt or insolvent, or files any petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy code or any other present or future applicable federal, state or other Governmental Rule, or seeks or consents to or acquiesces in the appointment of any trustee, receiver, custodian or liquidator of said Person or of all or any substantial part of its properties, or makes an assignment for the benefit of creditors, or said Person takes any corporate action to authorize or that is in contemplation of the actions set forth in this clause (i); or (ii) a proceeding is initiated against the Person seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under the present or any future federal bankruptcy code or any other Governmental Rule and, such proceeding is not dismissed within ninety (90) days after the commencement, or any trustee, receiver, custodian or liquidator of said Person or of all or any substantial part of its properties is appointed without the consent or acquiescence of said Person, and such appointment is not vacated or stayed on appeal or otherwise within ninety (90) days after the appointment or, within ninety (90) days after the expiration of any such stay, has not been vacated, provided that, notwithstanding the foregoing, the exercise of rights to take over operation of a Person’s assets, or to foreclose on any of a Person’s assets, by a secured creditor of such Person (including the appointment of a receiver or other representative in connection with the exercise of such rights) shall not constitute a Bankruptcy.

“Base Rent” has the meaning specified in Section 5.1.2(b).

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“Base Rent Amount” has the meaning given in Section 5.1.1.

“Base Term” has the meaning specified in Section 3.1.1.

“Business Day” means each weekday (Monday through Friday) except the days on which the banks in California are closed.

“Claim” has the meaning specified in Section 10.2.1.

“Claiming Party” has the meaning specified in Section 10.2.2.

“Commencement Date” means the date specified in the Notice of Commencement Date given by Lessee to Lessor pursuant to Section 3.5.

“Commercial Arbitration Rules” has the meaning specified in Section 20.1.

“Condemnation” means (a) the exercise of any governmental power, whether by legal proceedings or otherwise, by a Condemnor, and (b) a voluntary sale or transfer by Lessor or Lessee to any Condemnor, either under threat of condemnation or while legal proceedings for Condemnation are pending.

“Condemnor” means any public or quasi-public authority, or private corporation or individual, having the power of Condemnation.

“Construction Improvements” has the meaning given in Section 2.4.

“Construction Commencement Date” means the date that the Lessee commences construction of the Plant.

“Control of the Leased Premises” has the meaning specified in Section 12.7.4.2(ii).

“County” means Solano County, California.

“C.P.I. Escalator” has the meaning given in Section 5.1.1.

“C.P.I. Index” has the meaning given in Section 5.1.1.

“Date of Taking” means the date the Condemnor has the right to possession of the property being condemned.

“Default Rate” means six percent (6%) per annum.

“Easement Property” has the meaning specified in Section 2.2.

“Easements” has the meaning specified in Section 2.2.

“Effective Date” shall have the meaning given to such term in the Introductory Paragraph of this Agreement.

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“Environmental Claims” means all claims, demands, suits, causes of action for personal injury or property damage, including, without limitation, actual or threatened damages to natural resources; claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, removal, remedial or other response actions under any Environmental Laws; a requirement to implement “corrective action” pursuant to any order or permit issued pursuant to RCRA; claims for restitution, contribution or equitable indemnity from third parties or any governmental Authority; fines, penalties, liens against property; claims for injunctive relief or other orders or notices of violation from any Governmental Authority; any requirement to install pollution control equipment to comply with any Environmental Laws; and, with regard to any present or former employees or other natural persons, exposure to or injury from Environmental Conditions or Environmental Noncompliance.

“Environmental Conditions” means (i) any environmental conditions, circumstances or other matters of fact, pertaining to, relating to or otherwise affecting the environment, including any natural resources (including flora and fauna), soil, surface water, ground water, any present or potential drinking water supply, subsurface strata or the ambient air, and relating to or arising out of the presence, use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal (including, without limitation, the abandonment or discarding of barrels, containers and other closed receptacles containing any hazardous Materials), dumping or threatened release (as such term is used in CERCLA or other similar Environmental Laws) of Hazardous Materials, and (ii) the exposure of any persons (including any present or former employee to Hazardous Materials within any workplace within the Lessor’s Lands or the Lessee’s Leasehold Improvements (as the case may be), or the exposure of other natural persons within or outside the boundaries of the Lessor’s Lands or the Lessee’s Leasehold Improvements (as the case may be) to Hazardous Materials related to or otherwise arising from operations, acts, omissions or other conduct at the Lessor’s Lands or the Lessee’s Leasehold Improvements (as the case may be).

“Environmental Expenses” means all liabilities, losses, costs and expenses arising out of Environmental Conditions or Environmental Noncompliance, including, without limitation, costs of investigation, cleanup, remedial, removal or other response action, the costs associated with posting financial assurances for the completion of response, remedial or corrective actions, the preparation of any closure or other necessary or required plans or analyses, other reports or analyses submitted to or prepared by Governmental Authorities, including the cost of health risk assessments, epidemiological studies and the like, retention of engineers or other expert consultants, legal counsel, capital improvements (including without limitation costs to install any pollution control equipment to comply with any Environmental Laws), operation and maintenance testing and monitoring costs, power and utility costs and pumping taxes or fees, and administrative, oversight and other costs incurred by Governmental Authorities; provided, however, that “Environmental Expenses” shall only include those Environmental Expenses which are reasonably necessary and are in reasonable amounts in view of the then existing circumstances giving rise to such Environmental Expenses.

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“Environmental Laws” means any law, regulation, rule or ordinance now or hereafter in effect relating to Environmental Conditions, including, without limitation, CERCLA, the TSCA, the RCRA, the CWA, the CAA, the FIFRA, the AEA, the EPCRKA, the Safe Drinking Water Act, 42 U.S.C. §300f et seq., the Hazardous Materials Transportation Act, 49 U.S.C. §1802, the Oil Pollution Act of 1990, 33 U.S.C. §2761, the Occupational Health and Safety act, 29 U.S.C. §651 et seq., and the Pollution Prevention Act, 42 U.S.C. §13101 et seq.,; the State Environmental Laws; any amendments thereto now or hereafter adopted or that otherwise become effective; any plans, rules, regulations or ordinances adopted (including without limitation fire, land use, zoning, and other codes and regulations relating to Environmental Conditions), any permits and licenses issued pursuant to any of the foregoing, or other guidelines, guidance or policies promulgated pursuant to the foregoing; and any common law principles (including without limitation decisions by or orders or courts, agencies, boards of appeals or similar bodies with mandatory or persuasive authority) relating to the Environmental Conditions.

“Environmental Noncompliance” means any violation of Environmental Laws including, without limitation: (i) the discharge, emission, release or threatened release (as such term issued in CERCLA, the CWA, the CAA or other similar Environmental laws) of any Hazardous Materials in violation of any Environmental laws; (ii) any noncompliance with Environmental Laws regarding the construction, modification, operation and maintenance of physical structures, equipment, processes or facilities; (iii) any noncompliance with federal, state or local requirements governing occupational safety and health related to hazardous Materials; (iv) any facility operations, procedures, designs, or other matters which do not conform to the statutory or regulatory requirements of Environmental Laws, including the CAA, the CWA, the TSCA and the RCRA; (v) the failure to have obtained or to maintain in full force and effect permits, variances or other authorizations necessary for the legal operation of any equipment, process, facility or any other activity, to the extent required for compliance with Environmental laws; or (vi) the operation of any facility, process or equipment in violation of any permit, condition, schedule of compliance, administrative or court order, to the extend required for compliance with Environmental Laws.

“Estoppel and Consent” has the meaning specified in Section 12.3.

“Fee Mortgage” has the meaning specified in Section 12.8.

“Financing Documents” shall mean the loan agreement that Lessee or its Affiliates, as provided in Section 12.4, negotiates together with all agreements necessary to consummate that loan and provide the Lenders with perfected security interests in the collateral for that loan.

“Fixed Base Rent Amount” has the meaning specified in Section 5.1.1.

“Force Majeure Event” means an act, condition, event or circumstances which prevents one Party from performing its obligations under this Agreement, which act, condition, event or circumstances is not within the reasonable control of, and without

Annex A - 4 DSMDB-2382488v06

fault or negligence of, the Party claiming the occurrence of a Force Majeure Event. A Force Majeure Event includes, without limitation, sabotage, strikes or other labor difficulties, riots or civil disturbance, acts of God, acts of a public enemy, drought, earthquakes, floods, abnormally severe storms, explosions or fires, lightning, landslides, or similarly cataclysmic occurrence. A Force Majeure Event also includes condemnation, taking, seizure, involuntary conversion or requisition of title to or use of the Plant or Lessee Easement Property or any material portion thereof by action of the federal or state government. A Force Majeure Event shall not mean any act or event to the extent resulting from the fault or negligence of any person claiming a Force Majeure Event, or the financial inability of any person to perform its obligations under this Agreement.

“Governmental Authority” means any national, state or local government (whether domestic or foreign), and political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, department, bureau or entity (including without limitation any zoning authority, the United States Securities and Exchange Commission, the Federal Energy Regulatory Commission, the California Public Utilities Commission, the California Energy Commission or any comparable authority).

“Governmental Rule” means any law, rule, regulation, ordinance, order, code, permit, interpretation, judgment, decree, directive, guideline, policy or similar form of decision of any Governmental Authority having the effect and force of law, including without limitation any Environmental Laws.

“Hazardous Materials” means hazardous wastes, hazardous substances, hazardous constituents, air contaminants or toxic substances, whether solids, liquids or gases, including substances defined or otherwise regulated as “hazardous substances, “ “pollutants,” “reproductive toxins,” “radioactive materials,” “toxic chemicals,” or other similar designations in, or otherwise subject to regulation under, any Environmental Laws, including without limitation, petroleum hydrocarbons, asbestos-containing materials, urea formaldehyde foam insulation, polychlorinated biphenyls and radio nuclides.

“Impositions” has the meaning specified in Section 5.3.1.

“Indemnified Party” has the meaning specified in Section 10.2.1.

“Indemnifying Party” has the meaning specified in Section 10.2.1.

“Lease Event(s) of Default” has the meaning specified in Section 14.1.

“Lease Term” has the meaning specified in Section 3.1.3.

“Lease Termination Date” has the meaning specified in Section 3.1.3.

“Lease Year” has the meaning specified in Section 3.1.4.

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“Leased Premises” has the meaning specified in Section 2.1.

“Leasehold Interest” has the meaning specified in Section 12.3.

“Leasehold Mortgage” has the meaning specified in Section 12.4.

“Leasehold Mortgagee” has the meaning specified in Section 12.4.

“Lenders” shall mean providers of debt financing, owners of debt instruments, and their respective successors and assigns, including transferees of debt instruments, and any trustee, collateral agent or other fiduciary or nominee acting on behalf of any of the foregoing Persons.

“Lessee” shall have the meaning specified in the introductory paragraph of this Agreement, and any successor or permitted assign thereof.

“Lessee’s Easement Equipment” has the meaning specified in Section 2.2.

“Lessee’s Leasehold Improvements” means the Construction Improvements, the Lessee’s Easement Equipment and all other equipment, Facilities, fixtures or improvements of Lessee located on the Leased Premises or the Easements.

“Lessee Indemnified Party” has the meaning specified in Section 9.3.1.

“Lessor Indemnified Party” has the meaning specified in Section 9.4.1.

“Lessor” shall mean have the meaning specified in the introductory paragraph of this Agreement, and any successor or permitted assign thereof.

“Lessor Facilities” means the facilities owned by Lessor and located on the Lessor’s Lands.

“Lessor’s Lands” has the meaning specified in Section 2.2.

“Liable Party” has the meaning specified in Section 10. 3..

“Liens” means any Mortgage, lien, claim, pledge, option, charge, easement, security interest, right-of-way, encroachment, building or use restriction, conditional sales agreement, encumbrance or other right of third parties, whether voluntarily incurred or arising by operation of law, and includes, without limitation, any agreement to give any of the foregoing in the future, and any contingent sale or other title retention agreement or lease in the nature thereof.

“Memorandum of Lease” has the meaning specified in Section 3.3.

“Memorandum of Understanding and the Option to Lease” means that Memorandum of Understanding dated December 11, 2007, between the Lessor and Competitive Power Ventures, Inc., and that Option to Lease dated December 11, 2007

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between the Lessor and Competitive Power Ventures, Inc., each of which was assigned by Competitive Power Ventures, Inc. to Lessee.

“Monetary Default” has the meaning specified in Section 14.1.1.

“Mortgage” means any mortgage, deed of trust, deed to secure debt, assignment, security interest, pledge, financing statement or any other instrument(s) or agreement(s) intended to grant security for any obligation encumbering an interest in real property.

“Mortgagee’s Cure Rights” has the meaning specified in Section 12.7.4.

“New Lease” has the meaning specified in Section 12.7.11.

“New Tenant” has the meaning specified in Section 12.7.11.

“Non-Monetary Default” has the meaning specified in Section 14.1.2.

“Notice of Commencement Date” has the meaning specified in Section 3.5.

“Offer” has the meaning specified in Section 21.1 or 21.2, as applicable.

“Party” has the meaning given to it in the introductory paragraph of this Agreement.

“Permitted Encumbrances” has the meaning given in Section 2.1.

“Permitted Liens” means (a) Liens for Taxes that are not delinquent or that are being contested in good faith by appropriate proceedings; (b) such other Liens as, in the aggregate, (i) are not substantial in amount, (ii) do not materially detract from the value of the Lessee’s Leasehold Improvements and (iii) do not materially interfere with the ability to operate the Construction Improvements; (c) Liens arising in connection with or under Lessee or its affiliates financing documents; and (d) Permitted Encumbrances.

“Person” means any natural person, corporation, partnership, firm, association, trust, unincorporated organization, Governmental Authority or any other entity whether acting in an individual, fiduciary or other capacity.

“Plant” has the meaning specified in Section 2.2.

“Plant Land” has the meaning specified in Section 2.2.

“Plant Lease” means that Lease Agreement of even date herewith between the Parties.

“Removal Obligation Security” has the meaning specified in Section 16.4.

“Representatives” has the meaning specified in Section 20.21.

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“State Environmental Law” means any state or local law, regulation, rule or ordinance now or hereafter in effect relating to Environmental Conditions including any amendments thereto now or hereafter adopted or that otherwise become effective; and plans, rules, regulations, orders or ordinances adopted (including, without limitation fire, land use, zoning and other codes and regulations relating to Environmental Conditions), or other guidance or policies promulgated pursuant to the preceding laws; and local laws, ordinances, codes or regulations pertaining to or otherwise addressing Environmental Conditions; or any terms or conditions in state or local permits, licenses or other authorizations relating to Environmental Conditions; and common law principles (including without limitation decisions by or orders of courts, agencies, boards or appeals or similar bodies with mandatory or persuasive authority) relating to Environmental Conditions.

“Taxes” means all federal, state, local and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, withholding, payroll, employment, excise, property, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amount with respect thereto.

“To Remain Lessee Leasehold Improvements” has the meaning specified in Section 16.1.

“Water Supply Agreement” means that Effluent and Easterly Potable Water Services Agreement between Lessor and Lessee of concurrent date herewith.

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Schedule 2.1(a)

Leased Premises

REAL PROPERTY SITUATE IN THE CITY OF VACAVILLE, COUNTY OF SOLANO, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS:

BEING A PORTION OF NORTHEAST QUARTER OF SECTION 30, TOWNSHIP 6 NORTH, RANGE 1 EAST, MOUNT DIABLO MERIDIAN AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF A LINE LYING 902.00 FEET (MEASURED ALONG THE WESTERLY LINE OF COUNTY ROAD NO. 125 (LEWIS ROAD), 60.00 FEET WIDE) NORTHERLY AND PARALLEL WITH THE NORTHERLY LINE (THE BEARING NORTH 89º34’52” WEST USED FOR THE PURPOSES OF THIS DESCRIPTION, NORTH 89º41’08” EAST PER 1975 OR 12717) OF THE PARCEL OF LAND DESCRIBED IN THE DEED TO SOLANO COUNTY RECORDED IN BOOK 1975, PAGE 12717, OFFICIAL RECORDS OF SOLANO COUNTY WITH A LINE LYING 25.00 FEET WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG FIRST SAID PARALLEL LINE NORTH 89º34’52” WEST 1242.00 FEET TO A LINE LYING 1267.00 FEET (MEASURED ALONG SAID NORTHERLY LINE (NORTH 89º34’52” WEST)) WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE NORTH 00º05’49” EAST 752.00 FEET; THENCE SOUTH 89º34’52” EAST 1242.00 FEET TO FIRST SAID PARALLEL LINE WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE SOUTH 00º05’49” WEST 752.00 FEET TO THE POINT OF BEGINNING.

CONTAINING 21.44 ACRES MORE OR LESS.

Schedule 2.1(a) - 1 DSMDB-2382488v06

Schedule 2.1(b)

Permitted Encumbrances 1. Unless otherwise indicated, all recording references in this Schedule 2.1(b) are to

the records appearing in the land records of Solano County, California.

2. Rights of the public as to any portion of the land lying within the area commonly known as Fry Road (aka County Road No. 125) and/or Lewis Road (aka County Road No. 125).

3. Easement(s) for the purpose(s) shown below and rights incidental thereto as granted in the document.

Granted to: Pacific Bell Purpose: Communication facilities Recorded: May 25, 1989, Instrument No. 890033633, of Official Records Affects: A portion of said land

4. Agreement and Covenant Running with the Land dated October 11, 1991, executed by and between City of Vacaville, a municipal corporation and William A. Lozano, Carmen P. Lozano, and Armando Lozano recorded October 11, 1991, Instrument No. 1991-00076562, of Official Records.

5. Settlement Agreement and Stipulated Judgment in Eminent Domain dated, executed by and between William A. Lozano, Rudolfo B. Lozano, Carmen P. Lozano, Armando Lozano, and the City of Vacaville, a municipal corporation recorded August 17, 1999, Instrument No. 1999-00071332, of Official Records.

6. An easement for drainage for the existing drainage ditch along Lewis Road, as reserved by William A. Lozano, et al, in Settlement Agreement and Stipulated Judgment in Eminent Domain Recorded August 17, 1999 as Instrument No. 1999-00071332, Solano County Records.

Schedule 2.1(b) - 1 DSMDB-2382488v06

Schedule 2.2(a)

Lessor’s Lands

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF VACAVILLE, COUNTY OF SOLANO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS: The Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian. Excepting that portion thereof lying within the parcel of land described in the Deed from William P. Evanikoff, et ux., to the City of Vacaville, dated December 26, 1958, recorded February 20, 1959 in Book 962 of Official Records, Page 396, Instrument No. 3822, as follows: Commencing at an iron pipe at the North end of a course 87.62 feet in length as shown on a Map entitled: "A Map of Record of Survey in The Village of Elmira, Section 19, of Township 6 North, Range 1 East, Mount Diablo Base and Meridian, which Map was filed with the Office of the Recorder, County of Solano, State of California, in Book 4 of Surveys at Page 52, said pipe being on the Southerly bank of Alamo Creek; thence North 0° 47' West, 13 feet to the approximate centerline of Alamo Creek and the beginning of this description; thence Easterly along the centerline of above mentioned Alamo Creek as follows: North 84° 04' 55" East, 121.80 feet; thence North 55° 36' 37" East, 149.75 feet; thence South 86° 04' 29" East, 134.34 feet; thence South 63° 49' 14" East, 111.21 feet; thence South 89° 39' 22' East, 244.81 feet; thence South 63° 12' 05" East, 311.17 feet; thence South 82° 33' 38" East, 163.18 feet; thence South 75° 34' 39" East, 86.47 feet; thence South 46° 43' 47" East, 97.29 feet to a point where the sixteenth section line of the Southeast quarter of aforementioned Section 19, Township 6 North, Range 1 East, intersects the centerline of above mentioned Alamo Creek; thence South 0° 47" East, 799.28 feet along said sixteenth section line to the section line between Sections 19 and 30 of the above mentioned Township 6 North, Range 1 East; thence South 0° 23' 51" East, 324.98 feet along the sixteenth section line of the Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian; thence South 89° 55' 55" West, 1314.59 feet to the quarter section line of the above mentioned Section 30, said quarter section line being also the centerline of County Road Number 247 as so designated by the County Surveyor of Solano County; thence North 0° 23' 43" West, 324.98 feet along said centerline of Road 247 to the section line between Sections 19 and 30 of aforementioned Township 6 North, Range 1 East; thence North 0° 47' West 1013 feet along said aforementioned centerline of Road 247 to the true point of beginning. Also excepting therefrom those portions thereof described in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated July 22, 1971 and recorded September 8, 1971 in Book 1705 of Official Records, Page 398 as Instrument No. 18198 and in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated February 29, 1972, and recorded March 22, 1972 in Book 1740 of Official Records, Page 91, as Instrument No. 6259. Also excepting therefrom all that portion thereof described in the Deed to the County of Solano, recorded April 3, 1975 in Book 1975 of Official Records, Page 12717, as Instrument No. 8115. Also excepting therefrom one-half of all oil, mineral gas, and other hydrocarbon substances below a depth of five hundred feet (500') from the surface without the right of

Schedule 2.2(a) - 1 DSMDB-2382488v06

Schedule 2.2(b) - 2 32404.000084 WASHINGTON 400897v12

DSMDB-2355620v01 DSMDB-2382488v06

surface entry, for a period of fifteen (15) years from January 19, 1977 as reserved in the Deed from Kathryn Jacobson, et al., to Rodolfo B. Lozano, et al., recorded January 19, 1977 in Book 1977 of Official Records, Page 3658, Instrument No. 2236. APN: 0142-200-040

Schedule 2.2(b)

Plant Land BEING A PORTION OF NORTHEAST QUARTER OF SECTION 30, TOWNSHIP 6 NORTH, RANGE 1 EAST, MOUNT DIABLO MERIDIAN AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF A LINE LYING 25.00 FEET NORTHWESTERLY AND PARALLEL WITH THE NORTHWESTERLY LINE (NORTH 53º20’20” EAST 68.00 FEET FOR THE PURPOSES OF THIS DESCRIPTION, NORTH 52º36’15” EAST 68.00 FEET PER 1975 OR 12717) OF THE PARCEL OF LAND DESCRIBED IN THE DEED TO SOLANO COUNTY RECORDED IN BOOK 1975, PAGE 12717, OFFICIAL RECORDS OF SOLANO COUNTY AND A LINE LYING 25.00 WESTERLY AND PARALLEL WITH THE WESTERLY LINE OF COUNTY ROAD NO. 125 (LEWIS ROAD), 60.00 FEET WIDE; THENCE ALONG FIRST SAID PARALLEL LINE SOUTH 53º20’20” WEST 47.09 FEET TO A LINE LYING 25.00 FEET NORTHERLY AND PARALLEL WITH THE NORTHERLY LINE OF SAID PARCEL; THENCE ALONG LAST SAID PARALLEL LINE NORTH 89º34’52” WEST 1204.28 FEET TO A LINE LYING 1267.00 FEET (MEASURED ALONG SAID NORTHERLY LINE (NORTH 89º34’52” WEST)) WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE NORTH 00º05’49” EAST 877.00 FEET TO A LINE LYING 902.00 FEET (MEASURED ALONG SAID WESTERLY LINE) NORTHERLY AND PARALLEL WITH SAID NORTHERLY LINE (NORTH 89º34’52” WEST); THENCE ALONG LAST SAID PARALLEL LINE SOUTH 89º34’52” EAST 1242.00 FEET TO FIRST SAID PARALLEL LINE WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE SOUTH 00º05’49” WEST 848.61 FEET TO THE POINT OF BEGINNING.

CONTAINING 24.99 ACRES MORE OR LESS.

Schedule 2.2(b) - 1 DSMDB-2382488v06

Schedule 3.3

Form of Memorandum Of Lease Agreement and Grant Of Easements

This MEMORANDUM OF LEASE AGREEMENT AND GRANT OF EASEMENTS is entered into and executed by The City of Vacaville, a California municipal corporation (the “Lessor”), and CPV Vacaville, LLC, a Delaware limited liability company (the “Lessee”), as of the _______ day of _______ (the “Effective Date”):

RECITALS

Lessor and Lessee have entered into that Construction Laydown Lease Agreement of concurrent date herewith (the “Lease Agreement”) and desire to provide record notice thereof pursuant to this Memorandum of Lease Agreement.

KNOW ALL BY THESE PRESENTS THAT, Lessor and Lessee adopt and incorporate the recitals set forth above and do further, pursuant to Section _____ of the Code of California, state as follows:

1. Lessor and Lessee have entered into an unrecorded Construction Laydown Lease Agreement (“Lease”), dated as of _____. The Lease covers and affects the following described lands located in Solano County, California, more particularly described on the attached Exhibit A.

2. The Lease is for a term of five (5) years from and after the last day of the calendar quarter in which the Commencement Date occurs. The Commencement Date shall occur on a date which is on or prior to December 11, 2012. Reference to the original counterparts of the Lease is here made for all purposes.

3. Pursuant to the terms of the Lease, Lessor granted to Lessee certain easements over, across and upon certain real property more particularly described on the attached Exhibit B.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

Schedule 3.3 - 1 DSMDB-2382488v06

IN WITNESS WHEREOF, the parties hereto have duly signed these presents as of the date first set forth above for the sole purpose of giving record notice of the executed Lease and the existence thereof.

LESSOR:

CITY OF VACAVILLE

By: Name: Title:

STATE OF CALIFORNIA

COUNTY OF SOLANO

I, the undersigned Notary Public in and for said County in said State, hereby certify that ________________________________ whose name as ________________________ of _______ , a ______ corporation, is signed to the foregoing Memorandum of Lease and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he/she, as voluntarily for and as the act of said corporation.

Given under my hand and seal this the ______ day of _____.

______________________________

Notary Public

[AFFIX NOTARIAL SEAL]

My commission Expires: ___________________

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LESSEE:

CPV VACAVILLE, LLC

By: Name: Title:

COMMONWEALTH OF MASSACHUSETTS

COUNTY OF NORFOLK

I, the undersigned Notary Public in and for said County in said State, hereby certify that ________________________________ whose name as ________________________ of _____, a _____, is signed to the foregoing Memorandum of Lease Agreement and who is known to me, acknowledged before me on this day that, being informed of the contents of the instrument, he/she, executed the same voluntarily for and as the act of said limited liability company.

Given under my hand and seal this the ______ day of ______.

______________________________

Notary Public

[AFFIX NOTARIAL SEAL]

My commission Expires: ___________________

INSTRUMENT PREPARED BY:

_______

_______

_______

Schedule 3.3 - 3 DSMDB-2382488v06

Exhibit A

Leased Premises REAL PROPERTY SITUATE IN THE CITY OF VACAVILLE, COUNTY OF SOLANO, STATE OF CALIFORNIA DESCRIBED AS FOLLOWS:

BEING A PORTION OF NORTHEAST QUARTER OF SECTION 30, TOWNSHIP 6 NORTH, RANGE 1 EAST, MOUNT DIABLO MERIDIAN AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF A LINE LYING 902.00 FEET (MEASURED ALONG THE WESTERLY LINE OF COUNTY ROAD NO. 125 (LEWIS ROAD), 60.00 FEET WIDE) NORTHERLY AND PARALLEL WITH THE NORTHERLY LINE (THE BEARING NORTH 89º34’52” WEST USED FOR THE PURPOSES OF THIS DESCRIPTION, NORTH 89º41’08” EAST PER 1975 OR 12717) OF THE PARCEL OF LAND DESCRIBED IN THE DEED TO SOLANO COUNTY RECORDED IN BOOK 1975, PAGE 12717, OFFICIAL RECORDS OF SOLANO COUNTY WITH A LINE LYING 25.00 FEET WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG FIRST SAID PARALLEL LINE NORTH 89º34’52” WEST 1242.00 FEET TO A LINE LYING 1267.00 FEET (MEASURED ALONG SAID NORTHERLY LINE (NORTH 89º34’52” WEST)) WESTERLY AND PARALLEL WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE NORTH 00º05’49” EAST 752.00 FEET; THENCE SOUTH 89º34’52” EAST 1242.00 FEET TO FIRST SAID PARALLEL LINE WITH SAID WESTERLY LINE; THENCE ALONG LAST SAID PARALLEL LINE SOUTH 00º05’49” WEST 752.00 FEET TO THE POINT OF BEGINNING.

CONTAINING 21.44 ACRES MORE OR LESS.

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Exhibit B

Easement Land THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF VACAVILLE, COUNTY OF SOLANO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS: The Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian. Excepting that portion thereof lying within the parcel of land described in the Deed from William P. Evanikoff, et ux., to the City of Vacaville, dated December 26, 1958, recorded February 20, 1959 in Book 962 of Official Records, Page 396, Instrument No. 3822, as follows: Commencing at an iron pipe at the North end of a course 87.62 feet in length as shown on a Map entitled: "A Map of Record of Survey in The Village of Elmira, Section 19, of Township 6 North, Range 1 East, Mount Diablo Base and Meridian, which Map was filed with the Office of the Recorder, County of Solano, State of California, in Book 4 of Surveys at Page 52, said pipe being on the Southerly bank of Alamo Creek; thence North 0° 47' West, 13 feet to the approximate centerline of Alamo Creek and the beginning of this description; thence Easterly along the centerline of above mentioned Alamo Creek as follows: North 84° 04' 55" East, 121.80 feet; thence North 55° 36' 37" East, 149.75 feet; thence South 86° 04' 29" East, 134.34 feet; thence South 63° 49' 14" East, 111.21 feet; thence South 89° 39' 22' East, 244.81 feet; thence South 63° 12' 05" East, 311.17 feet; thence South 82° 33' 38" East, 163.18 feet; thence South 75° 34' 39" East, 86.47 feet; thence South 46° 43' 47" East, 97.29 feet to a point where the sixteenth section line of the Southeast quarter of aforementioned Section 19, Township 6 North, Range 1 East, intersects the centerline of above mentioned Alamo Creek; thence South 0° 47" East, 799.28 feet along said sixteenth section line to the section line between Sections 19 and 30 of the above mentioned Township 6 North, Range 1 East; thence South 0° 23' 51" East, 324.98 feet along the sixteenth section line of the Northeast quarter of Section 30, Township 6 North, Range 1 East, Mount Diablo Base and Meridian; thence South 89° 55' 55" West, 1314.59 feet to the quarter section line of the above mentioned Section 30, said quarter section line being also the centerline of County Road Number 247 as so designated by the County Surveyor of Solano County; thence North 0° 23' 43" West, 324.98 feet along said centerline of Road 247 to the section line between Sections 19 and 30 of aforementioned Township 6 North, Range 1 East; thence North 0° 47' West 1013 feet along said aforementioned centerline of Road 247 to the true point of beginning. Also excepting therefrom those portions thereof described in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated July 22, 1971 and recorded September 8, 1971 in Book 1705 of Official Records, Page 398 as Instrument No. 18198 and in the Deed from Doris A. Evanikoff, et al., to the County of Solano, dated February 29, 1972, and recorded March 22, 1972 in Book 1740 of Official Records, Page 91, as Instrument No. 6259. Also excepting therefrom all that portion thereof described in the Deed to the County of Solano, recorded April 3, 1975 in Book 1975 of Official Records, Page 12717, as Instrument No. 8115. Also excepting therefrom one-half of all oil, mineral gas, and other hydrocarbon substances below a depth of five hundred feet (500') from the surface without the right of surface entry, for a period of fifteen (15) years from January 19, 1977 as reserved in the Deed from Kathryn Jacobson, et al., to Rodolfo B. Lozano, et al., recorded January 19,

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1977 in Book 1977 of Official Records, Page 3658, Instrument No. 2236. Also excepting therefrom, the land described on Exhibit A. APN: 0142-200-040

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Schedule 3.3 - 4 DSMDB-2382488v06

COMPETITIVE POWER VENTURES, INC EXHIBIT CProposed Electrical Generation Facilityon Easterly WWTP Site

Annual Benefits:

Utility Operation 25 acre Ground Lease (indexed) $650,000Reclaimed Water Sales (indexed) 150,000

$800,000

General FundProperty Tax:

Plant Value $550,000,0001% Prop Tax $5,500,00018% City Share $990,00015% Premium (CPV) 148,500

( indexed; floor of $1,000,000) $1,138,500

City Paramedic Tax ($.03/$100AV) 165,000

VLF Growth (% change in AV x VLF Backfill):($550,000,000 / $9,270,452,011) X $6,845,332 406,122

1,709,622Overall Annual Benefits $2,509,622

One-Time Benefits:

Sewer Utility Benefit Payment (CPV) $750,00021 acre Laydown Area Lease (2yrs) 250,000General Fund - Estimated Sales Tax on Development Cost 1,375,000

$2,375,000

Exhibit D

Exhibit E Easterly Area Map