COMMERCIAL AND INDUSTRIAL LOAD MANAGEMENT AGREEMENT BETWEEN ARIZONA PUBLIC SERVICE COMPANY AND ALTERNATIVE ENERGY RESOURCES, INC. DATED: SEPTEMBER 12, 2008 APS CONTRACT NO. 90211 COMMERCIAL AND INDUSTRIAL LOAD MANAGEMENT AGREEMENT TABLE OF CONTENTS

 

COMMERCIAL AND INDUSTRIAL LOAD MANAGEMENT AGREEMENT

BETWEEN

ARIZONA PUBLIC SERVICE COMPANY

AND

ALTERNATIVE ENERGY RESOURCES, INC.

 

DATED:        SEPTEMBER 12, 2008

APS CONTRACT NO. 90211

 

COMMERCIAL AND INDUSTRIAL LOAD MANAGEMENT AGREEMENT

TABLE OF CONTENTS

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COMMERCIAL AND INDUSTRIAL LOAD MANAGEMENT AGREEMENT

This COMMERCIAL AND INDUSTRIAL LOAD MANAGEMENT AGREEMENT (the "Agreement"), dated as of September 12, 2008, is entered into, by and between Arizona Public Service Company (“APS” or "Buyer"), an Arizona corporation, and Alternative Energy Resources, Inc. (“AER” or “Seller”), a Delaware corporation. APS and Seller may be referred to herein individually as “Party” and collectively as “Parties.”

RECITALS

WHEREAS, APS is seeking to expand its resource portfolio by entering into contracts for the purchase of demand response Capacity;

WHEREAS, Seller operates a Commercial and Industrial Load Management Program, which provides Capacity to utilities by reducing peak demand in targeted geographic areas through the use of energy management expertise, technology and a communications network; and

WHEREAS, APS and Seller desire to enter into an agreement whereby APS will purchase from Seller and Seller will provide a specified volume of load reduction as set forth in this Agreement, pursuant to the operation of the Program throughout and limited to APS' metro Phoenix and Yuma service territory.

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, THE PARTIES AGREE as follows:

ARTICLE ONE:           DEFINITIONS

1.1       Definitions. The terms set forth below, when used in this Agreement, shall have the meanings set forth below. The capitalized terms listed in this Article shall have the meanings set forth herein whenever the terms appear in this Agreement, whether in the singular or the plural or in the present or past tense. Other terms used in this Agreement but not listed in this Article shall have meanings ascribed to them in Good Utility Practice or, if not applicable, as commonly used in the English language.

“ACC” means the Arizona Corporation Commission or any successor thereto.

“ACC Approval” means a final and non-appealable order of the ACC, acceptable in all respects ***, which approves the Program.

"Adjusted Hourly Customer Specific Baseline (“CSB”)" means the adjusted customer specific baseline, expressed in kilowatts, that is derived by multiplying the Unadjusted Hourly CSB by the Adjustment Ratio, in accordance with the example set forth in Appendix H.

“Adjustment Ratio” means the number derived by dividing the average of the energy actually used in the hour before and the hour after APS' Event notification by the average of the energy used for the same period in the Unadjusted Hourly CSB.

“Affiliate” means, with respect to any party, any other party (other than an individual) that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such party. For this purpose, "control" means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having ordinary voting power.

“Agreement” means this Commercial and Industrial Load Management Agreement and the Appendices attached hereto, which are incorporated herein by reference, as the same may be amended, modified or supplemented from time to time.

“Ambient Temperature” means the temperature, at the beginning of the hour in which an Event has been called, as measured by the National Weather Service Forecast Office in Phoenix, Arizona.

 

 

 

"AMI" means advanced metering infrastructure.

“Applicable Laws” means applicable laws, statutes, ordinances, rules, and regulations of any governmental authority applicable to such Party and its activities under this Agreement.

"APS Key Account Manager" means an APS account manager with the responsibility of maintaining the overall relationship between APS and that key account customer.

“APS Marketing Approval” means APS has approved the marketing materials or provided reasonable recommendations to allow for the approval of the materials, as described in Section 6.1.

"APS Purchase Damages" shall be defined as follows:

(a)APS shall provide the APS Purchase Damages calculations, including the supporting data such as associated charges and other relevant assumptions used to calculate the APS Purchase Damages to the degree APS deems pertinent.Upon receipt of the APS Purchase Damages, if Seller disputes the calculation of the APS Purchase Damages, in whole or in part, Seller shall, within fifteen (15) Business Days of receipt of notice, provide to APS a detailed written explanation of the basis for such dispute

***

"ASO" or "Automated Surface Observation System" means the system used by the National Weather Service Forecast Office in Phoenix, Arizona to determine the official readings for the temperature in Phoenix, which is located at the Phoenix Sky Harbor International Airport.

“Business Day(s)” means Mondays through Fridays, excluding NERC Holidays.

"Capacity" means megawatts.

"Capacity Payment Rate" shall be the applicable rates for Capacity as set forth in the table on Appendix I.

"Capacity Retest" means the retest of the Capacity following a Capacity Test or Program Event, or following APS' Notice of termination, as more fully defined in Section 4.5.

"Capacity Test" means the annual test of the Capacity of the Program at the beginning of each Control Season, as more fully defined in Section 4.4.

"Cash" means U.S. dollars held by, or on behalf of, a Party as Credit Support and which shall be, for purposes of obtaining and perfecting a security interest hereunder, treated as “money” as defined in the Uniform Commercial Code.

“Claims” means all third party claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.

“Committed Load Reduction” means the amount of load reduction for each Notification Period, expressed as Capacity in megawatts, that Seller commits to provide, deliver and make available to APS under the Program, as more fully defined in Section 4.6 and Appendix G.

“Confidential Information” means all information, whether written or oral, that is disclosed or otherwise available in connection with this Agreement or the performance by either Party of any of its duties hereunder, except any information which: (i) at the time of disclosure or thereafter is generally available to the public (other than as a result of a disclosure by any Party in violation of this Agreement); (ii) was available to any Party on a non-confidential basis from a source other than the Party hereto providing the Confidential Information, provided that such source is not and was not known by the receiving Party to be bound by a confidentiality agreement that protected

 

 

 

the Confidential Information; or (iii) has been independently acquired or developed by any Party without violating any of its obligations under this Agreement.

"Control Device" means a digital control unit, thermostat or other equipment installed at a Participating Facility and used to control a Participating Facility's End-Use Equipment.

"Control Season" means June 1 through September 30 of each Program Year.

"Control Season Day" means the period beginning midnight and ending on the following 11:59 p.m. MST Monday through Sunday during the Control Season.

"Control Season Failure" means the occurrence of two (2) Seller Load Reduction Failures in separate Control Season Months during a single Control Season.

"Control Season Month" means any calendar Month within a Control Season.

"Credit Rating" means, with respect to any entity, the rating then assigned to such entity's unsecured, senior long-term debt obligations (not supported by third party credit enhancements) or if such entity does not have a rating for its senior unsecured long-term debt, then the rating then assigned to such entity as an issuer rating by S&P, Moody's or any other rating agency agreed by the Parties.

“Credit Support” means (i) Cash; (ii) a Letter of Credit; or (iii) such other form of Credit Support acceptable to APS in its sole discretion as set forth in Section 10.1.

"Customer Enrollment Form" means the standard offer agreement between Seller and any Participating Facility ***, which enables the Participating Facility’s participation in the Program, the form of which is attached as Appendix L and whose terms and conditions are at the sole discretion of Seller***

"Data Pulse Equipment" means a pulse initiator providing a form C contact closure (KYZ) and any equipment or appurtenances, including junction boxes, fuses and terminal trips.

“Defaulting Party” means the Party that is in default pursuant to Article Nine.

“Delivered Load Reduction,” expressed in megawatts, means the hourly difference between the Adjusted Hourly CSB and the actual hourly metered load during an Event, both on an aggregated basis. Delivered Load Reduction is calculated hour by hour by subtracting the sum of all the actual hourly metered load of all Participating Facilities during an Event from the sum of the Adjusted Hourly CSB of all Participating Facilities during an Event, as more fully defined in Appendix H.

"Direct Load Control System" means all equipment and components necessary for the operation of the Program including, without limitation, Control Devices, a head-end control system, proprietary software and required third-party application software.

“Early Termination Date” means the date that is designated by the Non-Defaulting Party as the termination date of this Agreement.

"Effective Date" means the date when APS provides Notice of ACC Approval.

“Eligible Days” means the ten (10) previous Business Days prior to an Event, excluding Event days.

“Eligible Facility” means a small, medium, large or extra large APS *** building or Facility located in the APS metro Phoenix or Yuma service territory, that:

 

 

 

"End-Use Equipment" means any device mutually agreed upon by AER and the Participating Facility with curtailable loads located at a Participating Facility site.

“Event of Default” means at such time as a Party is in material default of its obligations pursuant to this Agreement upon the occurrence of any one or more of the events of default as set forth in Article Nine.

“Event” means a Program Event, Capacity Test and/or Capacity Retest.

“Event Hour” means each consecutive sixty (60) minute period following the start of an Event concluding at the end of the Event.

“Exclusivity Period” means the period beginning on the Effective Date of this Agreement through ***.

“Effective Duration of Event Load Reduction Factor (“LRF”)” means the number of days the LRF is effective, the application of which is more fully described in Appendix P.

"Facility" means a physical customer premise in the APS metro Phoenix or Yuma service territories containing one meter or a set of meters totalized for billing purposes as one customer account.

“FERC” means Federal Energy Regulatory Commission or any successor thereto.

“Good Utility Practice” means the practices, methods, and acts (including but not limited to the practices, methods, and acts engaged in or approved by a significant portion of the electric utility industry) that, at a particular time, in the exercise of reasonable judgment in light of the facts known, would have been expected to accomplish the desired result in a manner consistent with law, regulation, codes, standards, equipment manufacturer’s recommendations, reliability, safety, environmental protection, economy, and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be generally accepted and consistently adhered to acceptable practices, methods, or acts. With respect to each Participating Facility, Good Utility Practice(s) includes, but is not limited to, taking reasonable steps to ensure that:

 

 

 

"Hourly Energy Usage Payments" expressed in U.S. Dollars, equals (i) the Delivered Load Reduction for each hour of such Program Event or Capacity Test, multiplied by (ii) the Hourly Energy Usage Payment Rate, as set forth in Section 5.2 and Appendix J.

“Hourly Energy Usage Payment Rate” means any of the hourly energy rates set forth in Appendix J.

"ICE" means Intercontinental Exchange.

"ICE Data Day Ahead Power Price Report" means the report, as published by ICE, which contains data from actively traded day ahead markets during the morning’s trading session on ICE.

"IDR" means interval data recorder.

“Indemnifying” or “Indemnified Parties” shall have the meaning set forth in Section 13.1.

“Intra-month Period” equals the number of days within a Control Season Month for which an Event LRF is effective as more fully described in Appendix K.

“Interest Rate” means the rate per annum equal to the one Month London Interbank Offered Rate for Dollar deposits as may from time to time be in effect as reported in the Wall Street Journal. Such interest shall be calculated on the basis of the actual number of days elapsed and on the basis of a year of 360 days.

“kW” means kilowatt.

“Letter(s) of Credit" means one or more irrevocable, transferable standby letters of credit issued by a U.S. commercial bank or a foreign bank with a U.S. branch with such bank having a Credit Rating of at least A- from S&P or A3 from Moody's and acceptable to APS in its sole and reasonable discretion, in substantially the form set forth in Appendix N hereto; provided, however that such form may be modified by the issuing bank as long as such modifications are acceptable to the beneficiary in its sole discretion. Costs of a Letter of Credit shall be borne by the applicant for such Letter of Credit.

“Load Reduction Factor” or “LRF,” expressed as a percentage for a Control Season Day equals the lowest hourly Delivered Load Reduction during an Event divided by the amount of Committed Load Reduction called by APS, not to exceed one hundred percent (100%), in accordance with the Monthly Billing Example attached as Appendix K.

“Load Reduction Shortfall,” expressed in megawatts, shall mean the difference between the Committed Load Reduction and the Delivered Load Reduction.

“Maintenance” means routine and non-routine maintenance and repairs as described in Section 7.1(d).

"Maximum Control Season Failure" means the occurrence of two (2) Maximum Seller Load Reduction Failures in separate Control Season Months during a single Control Season.

“Maximum Program Event Hours” means *** in any Control Season per Notification Period.

 

 

 

“Maximum Seller Load Reduction Failure” means the failure by Seller to achieve at least *** Load Reduction Factor during Measurable Program Hours of any Event, subject to any voluntary adjustments made by Seller pursuant to Section 4.7; provided, however that multiple failures in a single Control Season Day shall be deemed one Maximum Seller Load Reduction Failure.

"Measurable Program Hour(s)" means only those Program Availability Hours between *** MST in which the Ambient Temperature is at or above *** Fahrenheit.

“Metering Devices” means all APS-owned meters, metering equipment and data processing equipment, including IDR or AMI meters or any other metering device, used to measure, record or transmit data relating to the electric power usage at a Participating Facility.

“Minimum Customer Satisfaction Requirement” means the customer satisfaction requirements outlined in Appendix M.

"Month" means a calendar Month. The term “Monthly” shall have a meaning correlative to a Month.

“Monthly Billing Example” shall be the billing example attached as Appendix K.

“Monthly Capacity Payment” expressed in U.S. Dollars, and payable for each Control Season Month, equals the total Committed Load Reduction multiplied by the LRF multiplied by the Payment Weighting Factor multiplied by the Capacity Payment Rate for each Intra-month Period. The Monthly Capacity Payment shall be calculated in accordance with Appendix K.

“Monthly Energy Usage Payment” expressed in U.S. Dollars, equals the sum of the Hourly Energy Usage Payment for each hour of each Program Event or Capacity Test called during such Control Season Month as more fully described in Section 5.2.

"Moody's" means Moody's Investor Services, Inc. or its successor.

"MST" means Mountain Standard Time.

"MW" means megawatt.

"MWh" means megawatt hour.

"National Weather Service Forecast Office in Phoenix, Arizona" means the weather service for Phoenix, Arizona that operates an ASO and provides the official temperature for the City of Phoenix.

“NERC Holidays” means those holidays set forth by the North American Electric Reliability Corporation ("NERC").

“Non-Defaulting Party” means the Party under the Agreement not in default, as described in Article Nine.

"Notice" means any notice, request, consent or other communication as set forth in Section 15.1.

“Notice to Add Participating Facility” means the notice provided by Seller to APS when it desires to enroll an Eligible Facility in the Program, the form of which is attached hereto as Appendix A.

“Notice to Remove Participating Facility” means the notice provided by Seller to APS in the event Seller removes a building or Facility as a Participating Facility from the Program, the form of which is attached hereto as Appendix C.

"Notification Period" means the two (2) periods in which APS has the ability to notify Seller in order to call an Event, as more fully identified and described in Section 4.3.

"Palo Verde On Peak ICE Day Ahead Index Price" means the weighted average index price for each calendar day as published in the Palo Verde section of ICE Data Day Ahead Power Price Report for HE 0700 – HE 2200 PPT Mondays through Sundays, including NERC holidays or, if

 

 

 

such report is no longer available, then such successor publication or such other publication or report as mutually agreed to by the Parties.

“Participating Facility” means an Eligible Facility participating in the Program pursuant to Section 3.2.

“Participating Facility Agreement” means the agreement between Seller and any Participating Facility ***, which enables the Participating Facility’s participation in the Program, the form of which is attached as Appendix B and whose terms and conditions are at the sole discretion of the Seller***

“Payment Weighting Factor,” expressed as a percentage, equals the number of days in an Intra-month Period divided by the total number of days in that Control Season Month. There is a Payment Weighting Factor applicable to each Intra-month Period.

“Program” means the APS Commercial and Industrial Load Management Program.

“Program Availability Hours” means all hours between *** and *** pm MST of any Control Season Day.

“Program Event” means an event dispatched by Notification Period, during Program Availability Hours whereby Seller shall be called upon to reduce energy usage at any number of Participating Facilities at Seller’s discretion.

“Program Year” means January 1 through December 31 of each calendar year from 2010 through 2024.

"Proxy Event Days" means the three (3) days with the highest peak demands, regardless of the hour in which that peak occurs, out of the previous ten (10) Eligible Days.

"Recording" means the creation of a tape or electronic recording.

"S&P" means the Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.) or its successor.

“Seller Equipment” means equipment and software (other than Metering Devices which shall be installed by APS, subject to the provisions of Section 7.2) necessary to (i) communicate with the Participating Facility; (ii) control each Participating Facility’s electrical energy usage so as to enable Seller to achieve the Committed Load Reduction; and (iii) gather data. Such Seller Equipment is more fully described in Section 7.1.

“Seller Load Reduction Failure” means the failure of Seller to achieve at least an *** Load Reduction Factor during any Measurable Program Hour of an Event, subject to any adjustments made by pursuant to Section 4.7 and 4.9; provided, however, that multiple failures in a single Control Season Day shall be deemed one Seller Load Reduction Failure.

“Seller Sales Damages” shall mean ***

Seller shall provide the Seller Sales Damages calculation, including any pertinent supporting data and relevant assumptions used to calculate the Seller Sales Damages. Upon receipt of the Seller Sales Damages, if APS disputes the calculation of Seller's Sales Damages, in whole or in part, APS shall, within fifteen (15) Business Days of receipt of Notice, provide to Seller a detailed written explanation of the basis for such dispute; ***

“Settlement Amount” means: (i) if APS is the Non-Defaulting Party, APS Purchase Damages; and (ii) if Seller is the Non-Defaulting Party, Seller Sales Damages.

“Shortfall Damages” means damages for Seller's failure to provide the Committed Load Reduction during a Program Event or Capacity Test, the calculation of which shall be done pursuant to Section 4.9(c).

 

 

 

"Survey" means the customer satisfaction survey conducted at the end of each Control Season, as set forth in Appendix M.

“Term” means from the Effective Date through the Control Season ending Program Year 2024.

"Unadjusted Hourly CSB" means the calculated average of Proxy Event Days averaged together on an hourly basis for each individual Participating Facility, in accordance with the example set forth in Appendix H.

ARTICLE TWO:         GENERAL TERMS

2.1       Term and Termination. This Agreement is effective upon the Effective Date and shall remain in full force and effect through the Control Season ending Program Year 2024.

2.2       Exclusivity. In consideration of the terms of this Agreement, and subject to the termination provisions contained herein, APS agrees to grant Seller the exclusive right to implement the Program in accordance with the terms set forth in this Agreement during the Exclusivity Period. ***

2.3       Regulatory Approval. Each Party’s obligations under this Agreement, including without limitation APS’ obligation for the payment of any Monthly Capacity Payment and Monthly Energy Usage Payment, are expressly conditioned upon ACC Approval of the Program that is acceptable in all respects ***. APS will provide Seller with Notice of ACC Approval within five (5) Business Days after it occurs. The Parties agree to cooperate and use all reasonable efforts to obtain ACC Approval as soon as is practicable.

If ACC Approval of the Program has not been received by ***, either Party may terminate this Agreement, in which case neither Party shall have any further liability or obligation to the other Party. Should the ACC issue an order approving the Program with conditions or modifications that materially alter the commercial aspects of this Agreement, the Parties agree to negotiate in good faith to amend this

 

 

 

Agreement as to the specific affected provisions. If, within ninety (90) days thereafter, no agreement is reached, this Agreement will not go into effect.

***.

2.4       Continuance In Effect. In addition to those set forth in Section 15.11, applicable provisions of this Agreement shall continue in effect after termination to the extent necessary to: (a) satisfy the terms and conditions of this Agreement; (b) provide for removal of Control Devices from Participating Facilities as may be requested by a Participant and provided for under Appendix C; (c) establish final billings and adjustments related to any period prior to termination or the repayment of any money due and owing either Party pursuant to this Agreement; and/or (d) comply with the indemnifications specified in this Agreement. The Confidentiality provision of Section 15.5 shall survive any termination of this Agreement for a period of three (3) years following the date of such termination.

ARTICLE THREE:       PARTICIPATING FACILITIES

3.1       Project Description. Pursuant to this Agreement and the Appendices attached hereto, Seller shall, in accordance with Good Utility Practice, design, build, own and operate a Direct Load Control System that will, on demand (as defined in the Agreement), provide APS with the ability to achieve the Committed Load Reduction through dispatch of End-Use Equipment at Participating Facilities within the APS metro Phoenix and Yuma service territories. ***

3.2       Participating Facility. Only those Eligible Facilities designated by Seller through receipt of a completed Notice to Add Participating Facility (the form of which is attached hereto as Appendix A, and which may be amended from time to time upon the mutual consent of the Parties) shall be deemed a Participating Facility. Such Notice shall be provided thirty (30) calendar days prior to Seller entering such Participating Facility into the Program. Notwithstanding the foregoing, in accordance with Section 7.2, during Program Years ***, in the event a Participating Facility does not already have an AMI meter installed at its Facility, Seller shall provide APS with *** written Notice prior to Seller entering such Participating Facility into the Program.

***.

With each submission of a Notice to Add Participating Facility, Seller shall provide a written authorization executed by the customer, the form of which is attached as Appendix O (as may be amended from time to time by APS in its sole discretion), that will allow APS to release such Participating Facility's customer-specific information to Seller, including but not limited to billing and metered data. Such written authorization shall be provided to APS before any customer-specific information related to the Eligible Facility is released to Seller. APS shall provide such information as soon as reasonably practicable after its receipt of the written authorization referenced herein, which it expects will be within ten (10) Business Days thereafter.

In the event Seller removes a Participating Facility, then Seller shall deliver to APS no more than *** days following such removal a completed Notice to Remove Participating Facility (the form of which is attached hereto as Appendix C, and which may be amended from time to time upon the mutual consent of the Parties). ***.

 

3.3 Indemnification By Seller. Seller shall fully indemnify and defend APS and its Indemnified Parties from and against any and all losses, costs, damages, injuries, liabilities, claims, demands, penalties and interest, including reasonable attorneys' fees, directly or indirectly related to the Participating Facility Agreement and/or the Customer Enrollment Form, or to the performance or non-performance thereof.The applicable indemnification procedure for claims pursuant to this Section 3.3 is set forth in Section 13.2.

ARTICLE FOUR:        PROGRAM EVENTS; PERFORMANCE

4.1 Availability. The Parties agree that Program Events may be dispatched by APS at any time during Program Availability Hours pursuant to the means described in Section 4.3. When initiated by APS, Program Events shall be scheduled for a duration of no less than *** and no more than *** per Notification

 

 

 

Period in any single Control Season Day and the Capacity associated with each Notification Period will not be called more than once per Control Season Day.  Program Events, which are called by Notification Period, may be called at separate times during the same Control Season Day, do not have to run concurrently, and shall expire upon the earlier of: (a) notification by APS, pursuant to the means described in Section 4.3, that such Program Event has ended; (b) the expiration of such *** period; or (c) *** p.m. MST.

4.2       Program Event. During the Term of this Agreement, subject to any dispatch limitations and the notification requirements as set forth in Section 4.3, APS shall have the right, but not the obligation, to schedule a Program Event pursuant to the Committed Load Reduction schedule set forth in Appendix G.

4.4 Capacity Tests .There will be a Capacity Test at the beginning of each Control Season. There will be test events for each Notification Period and the requirements described in Section 4.3 shall apply to all such tests. Specifically, there will be a test for each of the *** and *** Notification Periods. ***

 

 

 

Buyer will notify Seller of each Capacity Test in accordance with the procedures set forth in Section 4.3. Specifically, Buyer will provide *** advance Notice prior to the Capacity Test for the *** Notification Period and ***advance Notice for the ***Notification Period. Each Capacity Test will last a minimum of four (4) hours and a maximum of six (6) hours at Buyer's sole discretion. Such test event hours shall ***.

In the event that one or more of the Capacity Tests produces a Load Reduction Factor, or LRF, less than *** during Measurable Program Hours then the Monthly Capacity Payment shall be adjusted in accordance with the provisions set forth in Section 5.1 and in accordance with Appendix K. ***

4.5 Capacity Retest. Seller may call for one (1) Capacity Retest *** as soon as practicable following a Program Event or a Capacity Test described in Section 4.4; *** subject to the terms and conditions contained herein. Such Capacity Retest shall include a retest of each Notification Period of Committed Load Reduction as described in Section 4.3. Buyer shall call the Capacity Retest for each Notification Period after Seller notifies Buyer of its desire for a retest. Each Capacity Retest shall be called by APS  ***

In the event that the Capacity Retest produces a LRF less than *** during Measurable Program Hours then the Monthly Capacity Payment shall be adjusted in accordance with the provisions of Section 5.1 and Appendix K.***

In addition, Seller shall also be entitled, . ***

4.6 Committed Load Reduction.Subject to the provisions of Sections 4.7 and 4.9, which provide for a change to the Committed Load Reduction, Seller hereby commits to provide, deliver and make available to APS under the Program the Committed Load Reductions set forth in Appendix G.

4.7       Changes in the Committed Load Reduction. Notwithstanding Section 4.9, any changes to the Committed Load Reduction must be mutually agreed upon by the Parties in writing and signed by both parties. Under the following three (3) circumstances, however, Seller may voluntarily change the Committed Load Reduction without APS' consent:

 

 

 

Any election to reduce the Committed Load Reduction in accordance with this Section 4.7(c) must be made in writing to APS no later than *** of the applicable Program Year. Any reduction made during an applicable Program Year will only represent Participating Facilities that terminated their participation during the previous twelve (12) Months.

For purposes of clarity, if Seller elects to increase its Committed Load Reduction in accordance with Section 4.7(b), but makes any reduction during Program Year *** in accordance with Section 4.7(c), then Seller is still bound to the Committed Load Reduction of *** MWs beginning with Control Season ***, subject only to an adjustment in accordance with Section 4.9(a) or in accordance with this Section 4.7(c) but then only to the extent that Participating Facilities terminated their participation between ***.

4.8       Adjusted Hourly Customer Specific Baseline. For purposes of determining the baseline used to calculate the Delivered Load Reduction and corresponding Monthly payments APS will use an aggregated Adjusted Hourly CSB. See Appendix H for an example of the calculation described herein.

4.9       Seller Load Reduction Failure. In the event that Seller fails to achieve the Committed Load Reduction during any Event, the following remedies will apply.

For example, assume that the Committed Load Reduction is *** MWs in Control Season *** and further assume Seller achieves the following Load Reduction Factor during the listed Events:

 

 

In this example, if the Committed Load Reduction during this period was *** MWs, then the APS Purchase Damages would be calculated based on the ***MW difference between Committed Load Reduction and ***

***

 

 

 

reasonable detail the calculation of such amount.       ***. Shortfall Damages shall be calculated on an hourly basis as follows:

Load Reduction Shortfall = The Committed Load Reduction – Delivered Load Reduction for each Event hour during Measurable Program Hours

Shortfall Damages = ***

In the event the Shortfall Damages are a negative number than the Shortfall Damages shall be deemed to be zero (-0-) dollars.

ARTICLE FIVE:           PRICING

5.1 Monthly Capacity Payments. For each Month during any given Control Season, subject to the provisions of Article Eight, APS shall pay to Seller a Monthly Capacity Payment in exchange for APS’ right to dispatch a Program Event and receive Committed Load Reduction, under the terms of this Agreement in the amounts set forth in Appendix G attached hereto.      Any such Monthly Capacity Payment shall be subject to an adjustment resulting from any Event, during Measurable Program Hours, in which the LRF is less than ***. All such adjustments to the Monthly Capacity Payment shall be done in accordance with the provisions set forth in Sections 4.4 and 4.5 and in accordance with Appendix K.

5.2 Monthly Energy Usage Payments. Commencing on the Effective Date until the expiration or earlier termination of the Agreement, APS shall pay a Monthly Energy Usage Payment payable in respect of each Control Season Month during the Term of this Agreement, in the amount equal to the sum of Hourly Energy Usage Payments (as described in Appendix J) of each hour of each Program Event or Capacity Test called during such Control Season Month.

If APS does not call a Program Event or Capacity Test during a Control Season Month, no Monthly Energy Usage Payment shall be payable in respect of such Control Season Month.

ARTICLE SIX:             MARKETING, RECRUITMENT AND RETENTION

6.1       Marketing Plan; Marketing Materials. Seller shall conduct the marketing, recruitment and retention activities required to market to, recruit and retain Participating Facilities for the Program, as described in Appendix D attached hereto and made a part hereof. No announcements, publicity, advertising, press release, or promotional or marketing plans or materials shall be made, distributed, published or disseminated to third parties or to the public without the prior written approval of APS, which shall not be unreasonably or untimely withheld. Seller shall within thirty (30) days of the Effective Date meet with APS to submit a marketing plan in accordance with the parameters set forth in Appendix D herein. Within thirty (30) Business Days of receipt of the marketing plan, APS shall either approve the marketing plan or provide reasonable recommendations to allow for approval of the plan. Seller will provide updates to the marketing plan as the Program progresses. Within thirty (30) Business Days of receipt of each marketing plan update, APS shall either approve the updated marketing plan or provide reasonable recommendations to allow for approval of the plan. Seller shall submit all marketing materials and activities to APS for review and any materials or activities that contain the APS brand shall be subject to written approval in advance by APS. Within thirty (30) Business Days of receipt of such materials, APS shall provide APS Marketing Approval before final production.

6.2       Joint Marketing. For all APS customers who have a dedicated APS Key Account Manager, Seller shall coordinate all initial communication and marketing activities directed to that customer with the APS Key Account Manager and shall provide reasonable advance Notice to APS of its intent to market to such customers. *** The Parties shall work together in good faith to ensure there are no delays in marketing to such APS customer described in this Section 6.2.

ARTICLE SEVEN:       EQUIPMENT INSTALLATION AND MAINTENANCE

 

 

 

Utility Practice. In addition, any and all upgrades to Seller Equipment shall be Seller’s responsibility, and at Seller's sole cost and expense.

In the event APS or Seller receives several complaints with respect to any employee or sub-contractor employed or contracted by Seller, or any single complaint with respect to the foregoing that APS deems to be egregious, upon receipt of Notice by APS, such employee or contractor shall be prohibited from performing any further services under this Agreement.

In the event the ACC receives complaints from APS customers related to the Program, whether formal or informal complaints, Seller shall act in good faith and in an expeditious manner to assist APS in order to make a full and prompt investigation of the complaint so that APS will be able to respond to the ACC within five (5) Business Days (as required pursuant to Arizona Administrative Code R14-2-212) and resolve such complaints.

 

 

 

Seller shall provide to APS Monthly contact logs for the previous Month, together with Monthly customer participation reports. Customer participation reports shall include customer complaints and resolution, and ad hoc reports as reasonably requested.

ARTICLE EIGHT:        BILLING AND PAYMENT

8.1 Billing and Payment. The calendar Month shall be the standard period for all payments under this Agreement. Within ten (10) days after the end of each Month during the Control Season, *** shall have ten (10) Business Days from receipt of such statement to dispute such statement, or any portion thereof.***, as applicable, shall make any undisputed payment on or before the twenty-fifth (25^th) day of each Month.All payments shall be made by electronic funds transfer, or by other mutually agreeable method(s), to the account designated by such Party.

 

 

 

8.2 Measurement and Verification. APS shall collect hourly energy usage data from all Participating Facilities to establish the Adjusted Hourly CSB and the actual hourly load during an Event for each Participating Facility. To determine the actual load for any given hour during an Event, APS shall take the average of the actual metered load taken at fifteen (15) minute intervals for that hour. For billing purposes only, if an Event does not begin on a clock quarter hour, then the next clock quarter hour following the start of the Event shall be the beginning of the measurement hour. If the last hour of the Event is not a complete hour for these billing purposes, then the data to be used for that partial hour will be whatever quarter hour data is collected during such hour. For example, if APS calls a four (4) hour Event to begin at 1:10 p.m., that Event will conclude at 5:10 p.m. for purposes of Program operation. The billing hours for that program Event will begin at 1:15 p.m. and conclude at 5:00 p.m. with the last hourly load being determined by only having three (3) measurable fifteen (15) minute intervals (between 4:15 p.m. and 5:00 p.m.)APS shall provide any and all such data within five (5) days following the collection of such data, so that Seller may verify the accuracy of the Monthly statements provided by APS in accordance with Section 8.1.

8.3       Disputes and Adjustments of APS Statements. Except as otherwise provided in Section 8.1, either Party may, in good faith, dispute the correctness of any calculation or adjustment rendered under this Agreement or adjust any statement for any arithmetic or computational error within twelve (12) Months of the statement date or the date on which an adjustment to a statement was rendered. In the event a statement or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the statement shall be required to be made when due, with Notice of the objection given to the other Party. Any statement dispute or statement adjustment shall be in writing and shall state the basis for the dispute or adjustment. Except as otherwise provided in this Agreement, payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment shall be made within ten (10) Business Days of such resolution along with interest accrued at the Interest Rate from and including the due date to but excluding the date paid. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued at the Interest Rate from and including the date of such overpayment to but excluding the date repaid or deducted by the Party receiving such overpayment. Any dispute with respect to a statement is waived unless the other Party is notified in accordance with this Section within twelve (12) Months after the statement is rendered or any specific adjustment to the statement is made.

8.4 Netting of Payments. The Parties hereby agree that they shall discharge mutual debts and payment obligations due and owing to each other on the same date pursuant to this Agreement through netting, in which case all amounts owed by each Party to the other Party during the Monthly billing period under this Agreement, including any related damages calculated pursuant to Section 4.9, interest, and payments or credits, shall be netted so that only the excess amount remaining due shall be paid by the Party who owes it.Any costs associated with the Data Pulse Equipment, which are the responsibility of Seller, shall not be included in this netting provision and shall be billed and paid for separately.

ARTICLE NINE:          DEFAULT AND TERMINATION

9.1       Events of Default of Seller. Seller shall be immediately in material default of its obligations pursuant to this Agreement upon the occurrence of any one or more of the following events of default (each, an “Event of Default”), subject to any applicable cure periods as set forth herein:

 

 

 

9.2       Events of Default of APS. APS shall be immediately in material default of its obligations pursuant to this Agreement upon the occurrence of any one or more of the following events of default (each, an “Event of Default”), subject to any applicable cure periods as set forth herein:

9.3       Remedies. If an Event of Default occurs and is continuing, then either Party, in its discretion, may terminate this Agreement and exercise any other remedies available to it in this Agreement or otherwise available to it at law, in equity, or by statute, in this Agreement or otherwise subject, to the dispute resolution procedures set forth in Section 15.6. Except as expressly provided in this Agreement, nothing in this Agreement shall be construed to limit any right or remedy available at law or in equity, including the right to any and all damages for any breach or other failure to perform hereunder. All remedies in this Agreement shall survive termination or cancellation of this Agreement and are cumulative.

9.4 Calculation of Settlement Amounts Following Termination. If an Event of Default with respect to a Defaulting Party shall have occurred and be continuing, the Non-Defaulting Party shall have the right to: (i) designate a day, no earlier than the day such Notice is effective and no later than twenty (20) days after such Notice is effective, as an early termination date ("Early Termination Date") to accelerate all amounts owing between the Parties and to liquidate and terminate this Agreement between

 

 

 

the Parties; (ii) withhold any payments due to the Defaulting Party under this Agreement; and (iii) suspend its performance under this Agreement. The Non-Defaulting Party shall calculate in a commercially reasonable manner the Settlement Amount due to the Non-Defaulting Party, if any, as of the Early Termination Date.  In the event the Seller is the Defaulting Party and APS calculates a Settlement Amount in accordance with this Section 9.4, the Settlement Amount shall not exceed the Amount of Credit Support provided in Section 10.1.

9.5       Rights and Responsibilities Following Termination. Upon any termination of this Agreement, Seller shall, within five (5) Business Days following such termination, notify each Participating Facility of such termination and shall deliver to APS a completed Notice to Remove Participating Facility for each Participating Facility.

ARTICLE TEN:           CREDIT SUPPORT

10.1      Credit Support. In order to secure Seller's obligations hereunder, Seller shall post and maintain at all times during the Term of this Agreement Credit Support in accordance with the schedule below:

 

 

 

successors and assigns; and (iii) inure to the benefit of APS and its successors, transferees and assigns. On the expiration date of this Agreement, the security interest granted hereunder shall terminate and all rights to the Credit Support shall revert to the Seller. Upon such termination, APS shall return all Credit Support in its possession or otherwise under its control to the Seller and, at the Seller’s expense, execute and deliver to the Seller such documents as the Seller shall reasonably request to evidence termination of the security interest.

10.3      Financial Information. If requested by either Party, the other Party shall deliver: (i) within 120 days following the end of each fiscal year, a copy of its annual report, if any, containing in each case audited consolidated financial statements for such fiscal year certified by independent certified public accountants; and (ii) within ninety (90) days after the end of each of its first three (3) fiscal quarters of each fiscal year, a copy of its quarterly report containing unaudited consolidated financial statements for such fiscal quarter. In all cases the statements shall be for the most recent accounting period and prepared in accordance with Generally Accepted Accounting Principles provided that, should any such statements not be available timely due to a delay in preparation or certification, such delay shall not be considered a default so long as such Party diligently pursues the preparation, certification and delivery of the same. If at any time either Party is required to file financial statements under the Securities Exchange Act of 1934, such Party need not deliver financial information pursuant to this Section 10.3 but shall notify the other Party promptly upon its filing of any Form 8-K.

ARTICLE ELEVEN:     REPRESENTATIONS AND WARRANTIES

11.1      Seller’s Representations and Warranties. Seller hereby covenants, represents and warrants as follows:

 

 

 

properties or assets may be bound or affected, the breach or default of which could reasonably be expected to have a material adverse effect on the ability of Seller to perform its obligations under this Agreement.

11.2      APS’ Representations and Warranties. APS hereby covenants, represents and warrants the following:

ARTICLE TWELVE:   INSURANCE

12.1      Seller’s Insurance Requirements. On or before the execution date of this Agreement, and throughout the Term of this Agreement, Seller shall obtain and maintain such insurance policies and coverage as required by law and Good Utility Practice, and as set forth in Appendix F.

12.3      Certificates of Insurance. On or before the execution date of this Agreement, and thereafter as the terms of insurance may be modified from time to time, Seller shall provide APS with

 

 

 

original, current certificates of insurance, and renewal certificates of insurance thereafter, executed by a duly authorized representative of each insurer, or by the insurance agent or broker authorized to do so, as evidence of all insurance policies required in Appendix F. Failure of Seller to obtain the insurance coverage required by this Article Twelve, or to provide APS with the certificates or copies of receipts, shall in no way relieve Seller of the insurance requirements of this Article or limit Seller’s obligations and liabilities under any provision of this Agreement. Notwithstanding any provision of the insurance policies, such policies may not be canceled, non-renewed or materially changed without the insurer giving thirty (30) days’ prior written Notice to APS, or ten (10) days' prior written Notice for non-payment of premium. Seller shall provide APS with renewal certificates of insurance or binders within five (5) Business Days prior to or after such expiration. Insurance shall be maintained without lapse in coverage during the term of this Agreement. Seller shall provide APS with certified copies of Seller’s policies of insurance, upon request.

12.4      No Contribution from APS. The required policies and any of Seller’s policies providing coverage in excess of the required policies shall provide that the coverage is primary for all purposes and Seller shall not seek any contribution from any insurance or self-insurance maintained by APS.

12.5      Rating. All required policies of insurance under this Article shall be written by companies having an A.M. Best rating of “A -, VII” or better, or equivalent.

12.6      Deductible. Seller shall be solely responsible for any deductible or self-insured retention on insurance required hereunder this Agreement.

12.7        Subcontractor Insurance. Seller shall accept total responsibility to require all other persons, firms and corporations engaged or employed by Seller in connection with its performance under this Agreement to carry and maintain coverage with limits not less than those required in this Article.Subcontractors shall obtain insurance in accordance with Good Utility Practice, including at least $1,000,000 of Commercial General Liability, $1,000,000 of Automobile Liability, Workers’ Compensation covering obligations imposed by federal and state statutes with jurisdiction over Subcontractor's employees, Employer's Liability insurance of at least $500,000, and a $2,000,000 Umbrella or “excess” policy. Seller will obtain and verify accuracy in their entirety of certificates of insurance evidencing required coverage prior to permitting its subcontractors, sub-subcontractors, suppliers, and agents from performing work or services on the property of APS.Seller shall furnish original certificates of insurance and additional insured endorsements from all its subcontractors, sub-subcontractors, suppliers, and agents as evidence thereof as APS may reasonably request.

ARTICLE THIRTEEN:               INDEMNITY/ LIMITATION OF LIABILITY

13.1      General Indemnity. EACH PARTY (THE “INDEMNIFYING PARTY”) SHALL FULLY INDEMNIFY AND DEFEND THE OTHER PARTY AND EACH OF THE OTHER PARTY’S SUBSIDIARIES AND AFFILIATES, AND THE PARTNERS, MEMBERS, PARTICIPANTS, PRINCIPALS, REPRESENTATIVES, SHAREHOLDERS, DIRECTORS, TRUSTEES, OFFICERS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS OF EACH OF THEM (EACH, AN “INDEMNIFIED PARTY” AND TOGETHER, THE "INDEMNIFIED PARTIES") FROM AND AGAINST ANY AND ALL THIRD PARTY LOSSES, COSTS, DAMAGES, INJURIES, LIABILITIES, CLAIMS, DEMANDS, PENALTIES AND INTEREST, INCLUDING REASONABLE ATTORNEYS’ FEES (“DAMAGES”), DIRECTLY OR INDIRECTLY RELATED TO THIS AGREEMENT OR THE PERFORMANCE OR NON-PERFORMANCE THEREOF, TO THE EXTENT CAUSED OR CONTRIBUTED TO BY: (A) THE FAULT, INTENTIONAL ACT, NEGLIGENCE OR STRICT LIABILITY OF THE INDEMNIFYING PARTY OR ITS SUBSIDIARIES, AFFILIATES, CONTRACTORS OR SUBCONTRACTORS OR ANY OF THE OFFICERS, PARTNERS, MEMBERS, PARTICIPANTS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, TRUSTEES, EMPLOYEES, AGENTS, REPRESENTATIVES, SUCCESSORS OR ASSIGNS OF ANY OF THEM; OR (B) A MATERIAL BREACH BY THE INDEMNIFYING PARTY OF THIS AGREEMENT, INCLUDING THE MATERIAL BREACH OF THE REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE INDEMNIFYING PARTY.

 

 

 

The foregoing indemnification obligation shall not apply to the extent that such Claim or Loss is caused by the willful misconduct of the Indemnified Party or Indemnified Parties or to any such Party's sole negligence, nor shall it apply to claims or loss arising under Sections 3.3, 7.1(g) or 7.2(b), the specific terms of which are set forth in those Sections.

13.3      Limitation of Liability. NEITHER PARTY NOR ITS SUBSIDIARIES OR AFFILIATES NOR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS, DIRECTORS, TRUSTEES, SUCCESSORS OR ASSIGNS OF ANY OF THEM SHALL IN ANY EVENT BE LIABLE TO THE OTHER PARTY OR ITS SUBSIDIARIES OR AFFILIATES OR THE OFFICERS, AGENTS, EMPLOYEES, REPRESENTATIVES, PARTICIPANTS, PARTNERS, MEMBERS, SHAREHOLDERS, PRINCIPALS, DIRECTORS OR TRUSTEES OF ANY OF THEM FOR INCIDENTAL, PUNITIVE,

 

 

 

CONSEQUENTIAL (EXCEPT AS PROVIDED FOR HEREIN), SPECIAL, OR INDIRECT DAMAGES OF ANY NATURE, ARISING AT ANY TIME, FROM ANY CAUSE WHATSOEVER, WHETHER ARISING IN TORT, CONTRACT, WARRANTY, STRICT LIABILITY, BY OPERATION OF LAW OR OTHERWISE, CONNECTED WITH OR RESULTING FROM PERFORMANCE OR NON-PERFORMANCE UNDER THIS AGREEMENT. NOTHING IN THIS ARTICLE SHALL BE DEEMED TO AFFECT OR LIMIT THE RIGHT OF AN INDEMNIFIED PARTY TO CLAIM INDEMNIFICATION FROM THE INDEMNIFYING PARTY UNDER THIS AGREEMENT. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. UNLESS EXPRESSLY PROVIDED OTHERWISE IN THIS AGREEMENT, FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY (OTHER THAN INJUNCTIVE RELIEF AS PROVIDED IN THIS AGREEMENT) ARE WAIVED.

ARTICLE FOURTEEN:              REGULATORY JURISDICTION AND COMPLIANCE

14.1      Governmental Jurisdiction and Regulatory Compliance. Each Party shall at all times comply with all Applicable Laws and shall give all Notices, and shall procure and maintain all governmental permits, licenses, and inspections, as may be required by Applicable Laws or otherwise necessary for its performance of this Agreement.

14.2      Provision of Support. Seller shall make available, upon APS’ reasonable request, any personnel of Seller and any records relating to the Participating Facilities to the extent that APS requires the same in order to fulfill any regulatory approval and reporting requirements, or to assist APS in administrative proceedings before any APS regulatory authority.

14.3      Regulatory Reporting. Seller shall comply with any and all regulatory reporting requirements applicable to this Agreement or the Program as such requirements may be in effect from time to time, which compliance may include providing any materials, documentation, reports or other information applicable to the Program or Seller’s performance under this Agreement. Such information may include, but shall not be limited to, incentives being offered to Participating Facilities or other material terms of Participating Facility Agreements. In addition, upon APS’ request, and at no additional cost to APS, Seller shall prepare and provide to APS any such materials, documentation, reports or other information to the extent necessary for APS to comply with its own regulatory reporting requirements. Both Parties shall utilize commercially reasonable efforts to file under protective order, seal, or confidentiality provisions of this contract that are of confidential in nature, as determined mutually by the Parties.

ARTICLE FIFTEEN:   MISCELLANEOUS

15.1Notices in Writing. Except as otherwise set forth in this Agreement, any Notice, request, consent, or other communication required or authorized under this Agreement to be given by one Party to the other Party shall be in writing and delivered to the address(es) for such other Party as set forth in Appendix E attached hereto and shall either be: (a) personally delivered; (b) sent by U.S. first-class mail, postage prepaid; (c) sent via a nationally recognized pre-paid overnight courier service; or (d) by facsimile or other electronic means, with a follow-up copy sent promptly thereafter via one of the other methods described above. Any such Notice, request, consent, or other communication shall be deemed to be given when delivered or mailed.Notices relating to operations and dispatch, as required pursuant to Section 4.3 may be given electronically and shall be deemed effective upon receipt. A Party may change its addresses by providing Notice of same in accordance herewith.

15.2      Operating Records. Seller and APS shall each keep complete and accurate records and all other data required by it for the purposes of proper administration of this Agreement, including such records as may be required by state or federal regulatory authorities. To facilitate payment and verification, the Parties shall keep all books and records necessary for billing and payments and shall grant the other Party reasonable access to those records.

 

 

 

15.3      Examination of Records. APS may examine the financial and operating records and data kept by Seller relating to transactions under, and administration of, this Agreement at any time during the period the records are required to be maintained, upon reasonable request and during normal business hours. APS shall also have the right to audit and review each Participating Facility Agreement; notwithstanding the foregoing, APS shall not be responsible for monitoring, auditing, reviewing or enforcing any such Participating Facility Agreement.

15.4        Assignment. Neither Party shall assign this Agreement or its rights hereunder without the prior written consent of the other Party,***; provided, however, either Party may, without the consent of the other Party (and without relieving itself from liability hereunder): (a) transfer, sell, pledge, encumber or assign this Agreement or the accounts, revenues or proceeds hereof in connection with any financing or other financial arrangements; (b) transfer or assign this Agreement to an Affiliate of such Party which Affiliate’s creditworthiness is equal to or higher than that of such Party; or (c) transfer or assign this Agreement to any person or entity succeeding to all or substantially all of the assets whose creditworthiness is equal to or higher than that of such Party; provided, however, that in each such case, any such assignee shall agree in writing to be bound by the terms and conditions hereof and the transferring Party shall deliver such tax and enforceability assurance as the non-transferring Party may reasonably request.

15.5      Confidentiality. The Parties will make commercially best efforts to safeguard Confidential Information against disclosure by employing the same means to protect such Confidential Information as that Party uses to protect its own non-public, confidential or proprietary information, and otherwise in accordance with the provisions of this Section 15.5. Specifically, no receiving Party shall itself, or permit its employees, consultants and/or agents to disclose to any person, corporation or other entity the Confidential Information without the prior written consent of the Party providing the Confidential Information, except a receiving Party may distribute the Confidential Information to its board members, officers, employees, agents, consultants, potential investors and Facility Lenders and others who have a need for such Confidential Information.

The Parties acknowledge, however, that Seller may need to disclose this Agreement and/or Confidential Information to the Security and Exchange Commission and APS may need to disclose the Confidential Information in connection with its regulatory filings or to otherwise satisfy its regulatory requirements. In the event that APS intends to disclose any of the Confidential Information to its regulatory authorities including, but not limited to, the Arizona Corporation Commission ("ACC"), the Residential Utility Consumer Office ("RUCO"), the Federal Energy Regulatory Commission ("FERC"), or any employee, staff member, consultant, and/or agent of the foregoing, the Parties shall use commercially reasonable efforts to seek a protective order. In the event that a protective order or other remedy is not obtained, Seller waives compliance with the terms hereof with respect to such Confidential Information. Nothing herein shall be deemed to permit Seller to disclose the Confidential Information to the foregoing regulatory agencies, unless such disclosure is otherwise permitted by this Agreement. In addition, each Party specifically agrees not to use the other Party’s name in connection with this Agreement or the Project in any press releases, public meetings or hearings, or other public communications, including any release to any newswire service, without the express written consent of the other Party. The Parties anticipate that at some future time it may be in the best interests of one or both of them to disclose Confidential Information to the media and the Parties anticipate entering into a subsequent agreement that will govern the terms of such disclosure. The Parties expressly agree, however, that unless and until such subsequent agreement is executed between the Parties, the terms of this Agreement shall be binding with respect to such disclosure.

In the event that any Party receiving the Confidential Information becomes legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the Confidential Information, the legally compelled Party shall give the other Party providing the Confidential Information prompt prior written Notice of such requirement so that the providing Party may seek a protective order or other appropriate remedy and/or waive compliance with the terms of this Agreement. In the event that such protective order or other remedy is not obtained, the providing Party waives compliance with the terms hereof.

Each Party acknowledges that the unauthorized disclosure of any Confidential Information may cause irreparable harm and significant injury that may be difficult to ascertain. Each Party therefore agrees that specific performance or injunctive relief, in addition to other legal and equitable relief, are appropriate

 

 

 

remedies for any actual or threatened violation or breach of this Agreement, although neither Party shall be entitled to any special, consequential, indirect or punitive damages as a result of a breach of this Agreement, whether a claim is based in contract, tort or otherwise. The Parties agree that the respondent in any action for an injunction, specific performance decree or similar relief shall not allege or assert that the initiating Party has an adequate remedy at law in respect to the relief sought in the proceeding, nor shall the respondent seek the posting of a bond by the Party initiating the action. Under no circumstances will either Party’s directors, management, employees, agents or consultants be individually liable for any damages resulting from the disclosure of Confidential Information in violation of the terms of this Agreement.

15.6      Non-Solicitation. For a period of *** following the execution of this Agreement, Seller agrees that neither it nor any of its employees, agents or representatives will, directly or indirectly solicit, recruit or otherwise encourage any APS employee who was involved directly or indirectly, in the negotiation and/or execution of this Agreement to terminate employment with APS.

15.7      Alternative Dispute Resolution. All disputes arising under this Agreement are subject to the provisions of this Section 15.7.

 

 

 

bound to schedule and hear the dispute within six (6) Months after his/her appointment and shall render the panel’s decision within thirty (30) calendar days after the hearing concludes. It is agreed that the arbitration proceeding shall be conducted in a neutral location mutually agreed to by the Parties. It is further agreed that the arbitrator(s) shall have no authority to award consequential, treble, exemplary, or punitive damages of any type or kind regardless of whether such damages may be available under any law or right, with the Parties hereby affirmatively waiving their rights, if any, to recover or claim such damages. The compensation and any costs and expenses of the arbitrators shall be borne equally by the Parties. Any arbitration proceedings, decision or award rendered hereunder and the validity, effect and interpretation of this arbitration provision shall be governed by the Federal Arbitration Act. The award shall be final and binding on the Parties and judgment upon any award may be entered in any court of competent jurisdiction. The Parties agree that all information exchanged as a result of any proceeding as described herein shall be deemed Confidential Information.

15.8      Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

15.9      Jurisdiction and Costs. Subject to the mandatory arbitration provisions herein, with respect to any proceeding in connection with any claim, counterclaim, demand, cause of action, dispute and controversy arising out of or relating to this Agreement, the Parties hereby consent to the exclusive jurisdiction of the federal courts sitting in Phoenix, Arizona. Both Parties waive any right to trial by jury in such action. In the event such judicial proceedings are instituted by either Party, the prevailing Party shall be entitled to award of its costs and reasonable attorneys’ fees incurred in connection with such proceedings.

15.10    Forward Contract. The Parties acknowledge and agree that all Transactions constitute “forward contracts” within the meaning of the United States Bankruptcy Code.

15.11    General. No delay of a Party in the exercise of, or the failure to exercise, any rights under this Agreement shall operate as a waiver of such rights, a waiver of any other rights under this Agreement or a release of the other Party from any of its obligations under this Agreement. Any provision declared or rendered unlawful by any applicable court of law or regulatory agency or deemed unlawful because of a statutory change (individually or collectively, such events referred to as “Regulatory Event”) will not otherwise affect the remaining lawful obligations that arise under this Agreement; and provided, further, that if a Regulatory Event occurs, the Parties shall use their best efforts to reform this Agreement in order to give effect to the original intention of the Parties. The term “including” when used in this Agreement shall be by way of example only and shall not be considered in any way to be in limitation. The headings used herein are for convenience and reference purposes only. The indemnity provisions of this Agreement shall survive the termination of this Agreement for the period of the applicable statute of limitations. The audit provisions of this Agreement shall survive the termination of this Agreement for a period of twelve (12) Months. This Agreement shall be binding on each Party’s successors and permitted assigns.

15.12    Entire Agreement; Amendment. This Agreement, together with any appendices, schedules, and any written supplements hereto constitutes the entire agreement between the Parties relating

 

 

 

to the subject matter hereof. This Agreement shall be considered for all purposes as prepared through the joint efforts of the Parties and shall not be construed against one Party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof. Except to the extent herein provided for, no amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by both Parties.

15.13    Taxes. Seller shall be responsible for any and all present or future federal, state, municipal, or other lawful taxes applicable by reason of the operation of the Program.

15.15    Equal Employment Opportunity Compliance Certification. Seller acknowledges that as a government contractor APS is subject to various federal laws, executive orders, and regulations regarding equal employment opportunity and affirmative action. These laws may also be applicable to Seller. All applicable equal opportunity and affirmative action clauses shall be deemed to be incorporated herein as required by federal laws, executive orders, and regulations, including but not limited to 41 C.F.R. §601.4(a)(1-7).

15.16    Counterparts. This Agreement may be executed in any number of counterparts, and each executed counterpart shall have the same force and effect as an original instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

IN WITNESS THEREOF, the Parties hereto made and executed this Agreement, signed by their duly authorized officers or individuals, as of the day and year first above written.

 

 

 

 

 

APPENDIX A

NOTICE TO ADD PARTICIPATING FACILITY

Alternative Energy Resources, Inc. (“AER”) plans to enroll the following customer of Arizona Public Service Company (“APS”) in its demand response load management program (the “Program”) pursuant to the Commercial and Industrial Load Management Agreement between AER and APS (the “Load Management Agreement”):

CUSTOMER NAME: __________________________________  

ADDRESS: __________________________________________

APS CUSTOMER ACCOUNT #: _________________________

In accordance with the terms of the Load Management Agreement, AER specifically represents and warrants the following with respect to the above-referenced customer:

*** following the receipt of this Notice by APS.

*** following the receipt of this Notice by APS.

 

 

 

By its signature below, the customer evidences its consent to all of the representations and warranties contained in paragraphs (b), (c) and (d) above and further designates AER to act on its behalf as its aggregator, for purposes specifically listed in the Participation Agreement or the Customer Enrollment Form and for notices or other communications as may be required by the Load Management Agreement.

 

 

 

 

 

APPENDIX B

PARTICIPATING FACILITY AGREEMENT

[The Participating Facility Agreement will be mutually agreed upon by the Parties within thirty (30) days after execution of this Agreement and inserted herein]

 

 

APPENDIX C

NOTICE TO REMOVE PARTICIPATING FACILITY

Alternative Energy Resources, Inc. (“AER”) hereby provides notice, pursuant to Section 3.2 of the Commercial and Industrial Load Management Agreement between AER and Arizona Public Service Company (“APS”) (the “Load Management Agreement”), that the following APS customer has been removed from its demand response load management program, effective:

CUSTOMER NAME: __________________________________

ADDRESS: __________________________________________

APS CUSTOMER ACCOUNT #: _________________________

Accordingly, as of the above-referenced date, such customer is no longer deemed a Participating Facility, as that term is defined in the Load Management Agreement.

AER

By: _____________________________________

Title: ___________________________________

Signature:_______________________________

Date: ___________________________________

 

 

 

APPENDIX D

MARKETING, RECRUITMENT AND RETENTION

1.0       Scope of Work. Marketing, recruitment and retention will include all activities required to solicit and retain Participating Facilities for the Program. Activities include but are not limited to the development of the Marketing Plan described in Section 2.0 below, enrollment and education materials and periodic communications to minimize Participant abandonment. APS will have final approval of any marketing activities that include the APS brand and shall provide a timely review of all submitted materials. APS needs to be made aware of all other marketing and customer recruiting activities regarding the Program. A minimum of one marketing strategy evaluation session is required prior to initiating any customer marketing or promotion. Activity associated with the existing marketing effort may be halted to deploy any updated strategy.

2.0       Marketing Plan. Seller will work to develop a Marketing Plan for submittal to APS. The Marketing Plan may include, as necessary:

3.1       Staffing. Seller shall assign dedicated project management staff to design, develop and distribute all enrollment materials including enrollment operations; education packages and other activities. Project management staff shall provide the following support activities:

3.2       Marketing Designs. Seller will design branded marketing materials, as required to achieve program goals*** prior to any distribution, publication or dissemination of such material to the public or any third parties. Such approval shall include, without limitation, APS’ right to approve all uses of and references to its logos, trademarks and name. The detailed activities for this task may include, as appropriate:

 

 

 

3.3       Customer Education. Seller may provide, as appropriate, program introduction materials to potential Participating Facilities. The package shall include information that describes how the specific features of the Program will work. The information shall be professionally printed with tracking identification that measures effectiveness of materials.

3.4       Marketing Campaign. Seller will be responsible for all costs associated with development, production, printing and mailing and distribution of marketing material and any associated media costs. In addition to direct mail, the Seller will be responsible for outreach to organizations such as trade associations, Chambers of Commerce and local publications.

3.5 Participant Enrollment Form. Seller may develop a Notice to Add Participating Facility form. Seller shall be responsible for obtaining signed participant enrollment forms to be included in the Program system database.Seller will forward original signed Notice to Add Participating Facility forms to APS. Participant enrollment forms shall be provided to APS on a weekly basis, but in no event ninety (90) days prior to each Participating Facility's activation into the Program.

With each submission of a Notice to Add Participating Facility, Seller shall provide a written authorization, the form of which shall be developed by APS, executed by the customer that will allow APS to release such Participating Facility's customer specific information to Seller, including but not limited to billing and metered data, which shall include consumption, demand and power factor. Such written authorization shall be provided to APS before any customer specific information related to the Participating Facility is released to Seller.

3.6       Customer Complaints. Seller shall develop and implement a process for the management and resolution of customer complaints in an expedited manner including, but not limited to: (a) ensuring adequate levels of professional customer service staff; (b) direct access of customer complaints to supervisory and/or management personnel; (c) documenting each customer complaint upon receipt; reporting a summary of complaints by category to APS on a Monthly basis; and (d) elevating any complaint that is not resolved within five (5) days of receipt to APS.

In the event APS or Seller receives several complaints with respect to an employee or a sub-contractor employed by Seller, upon receipt of Notice by APS, such employee or contractor shall be prohibited from performing any further services under this Agreement.

In the event the ACC receives complaints from APS customers related to the Program, whether formal or informal complaints, Seller shall act in good faith and in an expeditious manner to assist APS in order to make a full and prompt investigation of the complaint so that APS will be able to respond to the ACC within five (5) Business Days (as required pursuant to Arizona Administrative Code R14-2-212), and resolve such complaints.

3.7       Customer Retention. Seller shall develop and distribute*** periodic communications designed to maintain high customer satisfaction and minimize dropout.

 

 

 

APPENDIX E

NOTICES AND BILLING INFORMATION

 

 

 

 

 

APPENDIX F

INSURANCE

CGL insurance shall be written on ISO occurrence form CG 00 01 01 96 (or a substitute form providing equivalent coverage) and shall cover liability arising from premises, operations, independent contractors, products/completed operations, contracts, property damage, personal injury and advertising injury, and liability assumed under an insured contract (including the tort liability of another assumed in a business contract), all with limits as specified above. There shall be no endorsement or modification of the CGL insurance limiting the scope of coverage for liability arising from explosion, collapse, or underground property damage.

Business Automobile Liability insurance shall be written on ISO form CA 00 01, CA 00 05, CA 00 12, CA 00 20, or a substitute form providing equivalent liability coverage. If necessary, the policy shall be endorsed to provide contractual liability coverage equivalent to that provided in the 1990 and later editions of CA 00 01.

Seller shall waive, and require its insurers to waive, any and all recovery rights to which any insurer of Seller may have against Buyer by virtue of the payment of any loss under any insurance. To the extent that the insurance policies required under this Section are not occurrence based policies, except for Workers’ Compensation, Seller shall either: (i) maintain claims made policies for at least three (3) years following termination of this Agreement; or (ii) obtain extended discovery periods for such policies of at least three (3) years following termination of this Agreement. Further, all policies required under this Section, except for Workers’ Compensation insurance, shall contain a severability of interest provision, and shall not contain any commutation clause or any other provision that limits third party actions over claims

Seller shall ensure that the insurance policies required in sections (1), (2), (5) above provide:

 

 

 

APPENDIX G

COMMITTED LOAD REDUCTION

TOTAL COMMITTED LOAD REDUCTION

(MWS)

 

 

NOTIFICATION PERIODS FOR COMMITTED LOAD REDUCTION

 

 

*If the Committed Load Reduction changes in accordance with Section 4.7 and 4.9(a), then the total Committed Load Reduction schedule shall be modified.

 

 

APPENDIX H

CALCULATION OF ADJUSTED HOURLY CSB

AND DELIVERED LOAD REDUCTION PARTICIPATING FACILITY EXAMPLE

***

 

 

APPENDIX I

CAPACITY PAYMENT RATES

***

 

 

 

APPENDIX J

HOURLY ENERGY USAGE PAYMENT RATES

***

 

 

APPENDIX K***

APPENDIX K

MONTHLY BILLING EXAMPLE (CONTINUED)

***

 

 

 

APPENDIX L

CUSTOMER ENROLLMENT FORM

[Customer Enrollment Form will be negotiated by the Parties within thirty (30) days after execution of this Agreement and inserted herein]

 

 

 

APPENDIX M

***

 

 

 

APPENDIX N

FORM OF LETTER OF CREDIT

STANDBY LETTER OF CREDIT

DATE:

ADDRESS:

GENTLEMEN:

BY THE ORDER OF:

APPLICANT:

ADDRESS:

WE, BANK NAME (“ISSUER”), ISSUE THIS IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER __________________ (“LETTER OF CREDIT”) IN FAVOR OF [____________] (“BENEFICIARY”) FOR THE ACCOUNT OF (“APPLICANT”), FOR AN AMOUNT OF USD $ __________ (AMOUNT IN WORDS AND 00/100 UNITED STATES DOLLARS), WE UNDERSTAND THIS LETTER OF CREDIT IS ISSUED RELATIVE TO THE OBLIGATIONS OF THE APPLICANT UNDER THE [___________ CONTRACT DATED ______________ (THE “RELEVANT CONTRACT”) AVAILABLE BY PAYMENT AT SIGHT WHEN ACCOMPANIED BY ONE OR MORE OF THE FOLLOWING STATEMENTS DATED AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF BENEFICIARY                     (SIGNED AS SUCH):

OR

THIS LETTER OF CREDIT EXPIRES ON _____________ (“EXPIRATION DATE”) AT THE OFFICE OF OUR SERVICER, __________________

SPECIAL CONDITIONS:

PARTIAL AND MULTIPLE DRAWINGS ARE PERMITTED, AND THE AMOUNT OF THIS LETTER OF CREDIT WILL BE REDUCED BY THE AMOUNT OF EACH DRAWING HONORED BY US.

ALL ISSUING BANK CHARGES ARE FOR THE ACCOUNT OF THE APPLICANT.

It is a condition of this Letter of Credit that it shall be deemed automatically extended, without amendment, for additional period(s) of one year from the expiry date hereof, or any future expiration date unless AT LEAST 30 (THIRTY) days prior to any expiration date we notify you by certified mail (return receipt

 

 

 

requested) or by any other receipted means that we elect not to consider EXPIRY DATE OF this Letter of Credit renewed for any such additional period.

THIS LETTER OF CREDIT MAY NOT BE AMENDED, CHANGED OR MODIFIED WITHOUT THE EXPRESS WRITTEN CONSENT OF THE BENEFICIARY AND THE ISSUER; PROVIDED, HOWEVER, THE AMOUNT AVAILABLE FOR DRAWING UNDER THIS LETTER OF CREDIT MAY BE REDUCED AUTOMATICALLY, WITHOUT AMENDMENT, FROM TIME TO TIME UPON OUR RECEIPT OF REDUCTION CERTIFICATE STATING THE AMOUNT OF REDUCTION AND AVAILABLE AMOUNT AFTER SUCH REDUCTION, EXECUTED BY BOTH APPLICANT AND BENEFICIARY.

IF A COMPLYING PRESENTATION IS MADE PRIOR TO 12:00 P.M. NEW YORK TIME ON A BUSINESS DAY THEN ISSUER SHALL, PRIOR TO CLOSE OF BUSINESS ON THE FIRST FOLLOWING BUSINESS DAY, MAKE PAYMENT IN IMMEDIATELY AVAILABLE FUNDS. IF A COMPLYING PRESENTATION IS MADE AT OR AFTER 12:00 P.M. ([LOCAL TIME]) ON A BUSINESS DAY, THEN ISSUER SHALL, PRIOR TO CLOSE OF BUSINESS ON THE SECOND FOLLOWING BUSINESS DAY, MAKE PAYMENT IN IMMEDIATELY AVAILABLE FUNDS. BUSINESS DAY AS STATED IN THIS LETTER OF CREDIT MEANS ANY DAY OTHER THAN A SATURDAY, SUNDAY, OR BANK HOLIDAY IN THE STATE OF NEW YORK.

WE HEREBY ENGAGE WITH YOU THAT DOCUMENTS PRESENTED UNDER AND IN CONFORMITY WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT WILL BE DULY HONORED ON PRESENTATION IF PRESENTED ON OR BEFORE THE EXPIRATION DATE OF THIS LETTER OF CREDIT AT THE OFFICE OF OUR SERVICER,.__________________________________________________________________.

THIS LETTER OF CREDIT IS GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND, EXCEPT AS OTHERWISE EXPRESSLY STATED HEREIN, IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES, ICC PUBLICATION NO. 590 (THE “ISP98”); IN THE EVENT OF ANY CONFLICT, THE LAWS OF THE STATE OF NEW YORK WILL CONTROL WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.

PLEASE ADDRESS ALL CORRESPONDENCE REGARDING THIS LETTER OF CREDIT TO THE ATTENTION OF____________________________________________, INCLUDING THE LETTER OF CREDIT NUMBER MENTIONED ABOVE. FOR TELEPHONE ASSISTANCE, PLEASE CONTACT______________________.

VERY TRULY YOURS,

[INSERT BANK NAME]

~!

PREPARER/AUTHORIZED SIGNER

~!

AUTHORIZED SIGNER

 

 

APPENDIX O

APS CUSTOMER INFORMATION RELEASE REQUEST

 

ADDRESS

And County of ____________________________, State of Arizona, does hereby appoint:

__________________________

NAME OF THIRD PARTY

 

___________________________

 

To perform the following specific acts and functions on behalf of the undersigned:

Request and receive billing records and history of the undersigned’s account(s), including basic metering information (meter number, UNI, customer energy consumption history, load data and service plan and dollars billed), to the undersigned by Arizona Public Service Company (“APS”).

 

 

(for additional accounts please provide information on an attached sheet)

The undersigned hereby authorizes APS to release the account information to the above-named party.

NOTE: Any information requests differing from this written authorization must be resubmitted in writing and executed by the customer.

Executed this day of..

 

 

 

 

 

APPENDIX P

EFFECTIVE DURATION OF AN EVENT LRF

***