Portions of this exhibit were omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to an application for confidential treatment filed with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. Such portions are marked by [****].

July 2, 2009

Jean Roy

Senior Program Manager

Tecogen, Inc.

45 First Avenue

Waltham, MA 02451

Dear Jean Roy:

Your Public Interest Energy Research grant has been approved.

PURPOSE: TO BROADEN THE MARKET REACH OF SMALLER NATURAL GAS-FUELLED COMBINED HEAT AND POWER (CHP) OF ABOUT 30 KILOWATT-ELECTRIC AND 35-45 TONS CHILLER AND HEAT PUMP.

TERM: 06/30/2009 – 03/31-2012 [SIC: 0/31-2013]        AWARD AMOUNT: $999,824.00

CEC PROJECT MANAGER: RIZALDO ALDAS        PHONE: (916) 654-4037

Effective Date of this Agreement is the date the California Energy Commission signs the Agreement. The California Energy Commission shall be the last party to sign. No work is authorized, nor shall any work begin, until on or after the effective date.

There are two offices at the Commission with staff to assist you with your grant award. Contact me at ###-###-#### for administrative questions and the Commission Project Manager listed above for technical questions.

Sincerely,

Grants and Loans Office

Enclosures

Cc: Rizaldo Aldas, Energy Commission

1.    Grant Agreement    1

2.    Attachments and References    1

3.    Funding Limitations    2

4.    Due Diligence    2

5.    Products    2

6.    Reports    3

7.    Legal Statement on Reports and Products    4

8.    Amendments    5

9.    Contracting and Procurement Procedures    7

10.    Key Personnel, Key Subcontractors, and Prevailing Wage    9

11.    Bonding and Insurance    11

12.    Permits and Clearances    11

13.    Equipment    11

14.    Termination    11

15.    Travel and Per Diem    12

16.    Standard of Performance    13

17.    Payment of Funds    13

18.    Recordkeeping, Cost Accounting, and Auditing    18

19.    Indemnification    20

20.    Disputes    20

21.    Workers' Compensation Insurance    22

22.    Confidentiality    22

23.    Intellectual Property Items Developed Prior to This Agreement    23

24.    Rights of Parties Regarding Intellectual Property    23

25.    Royalty Payments to Commission    28

26.    General Provisions    29

27.    Certifications and Compliance    31

28.    Definitions……………………………………………………………………………..…………..33

This project is being funded with a grant from the California Energy Commission (Energy Commission). Funding for this project was authorized by Assembly Bill No. 995, Chapter 1051, Statutes of 2000, and consists of funds from the Public Interest Research, Development, and Demonstration Fund.

Program refers to the entire effort undertaken and planned by the Recipient including the work co-funded by the Commission. The program may coincide with or extend beyond the Agreement period. Project refers to the work elements of the program. Typically, there are distinct projects within the program being paid for by the Commission under this Agreement.

This Agreement is comprised of the grant funding award, the Terms and Conditions, and all attachments. These Terms and Conditions are standard requirements for Public Interest Energy Research (PIER) grant awards. The Commission may impose special conditions in this grant Agreement which address the unique circumstances of this project. Special conditions that conflict with these standard provisions take precedence. Any special conditions are attached to this Agreement.

The Recipient shall sign all three copies of this Agreement and return two signed packages to the Commission's Grants and Loans Office within 30 days. Failure to meet this requirement may result in the forfeiture of this award. When all required signatures are obtained, an executed copy will be returned to the Recipient.

All work and/or the expenditure of funds (Commission-reimbursed and/or match share) must occur within the approved term of this Agreement. The Commission cannot authorize any payments until all parties sign this Agreement. The start term of this Agreement is either the specified start term or the date the Energy Commission signs the Agreement, whichever is later. The Energy Commission will only sign the Agreement after the Recipient signs it and it has been approved at an Energy Commission Business Meeting.

The following are attached and hereby expressly incorporated into this Agreement.

    

The Office of Management and Budget (OMB) Circulars and/or federal regulations identified below are incorporated by reference as part of this Agreement. These Terms and Conditions and any Special Conditions take precedence over the circulars and/or regulations. The OMB Circulars and federal regulations are used to help guide the administration of the award when questions arise during the course of performance of the award. OMB Circulars may be accessed on the OMB web site at www.whitehouse.gov/omb/circulars/index.html and federal regulations may be accessed at www.arnet.gov/far/, or by calling the Office of Administration, Publications Office, at ###-###-####.Common Rule for Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments.

Any federal, state, and local laws and regulations applicable to your project not expressly listed in this Agreement are incorporated herein as part of this Agreement.

The Recipient is required to take timely actions which, taken collectively, move this project to completion. The Commission Project Manager will periodically evaluate the schedule for completion of Work Statement tasks. If the Commission Project Manager determines (1) the Recipient is not being diligent in completing the tasks in the Work Statement or (2) the time remaining in the funding award is insufficient to complete all project work tasks by the Agreement term end date, the Project Manager may recommend to the Policy Committee of the Commission (Committee) that this Agreement be terminated, and the Committee may, without prejudice to any of its remedies, terminate this Agreement.

Products are defined as any tangible item specified in the Work Statement. Unless otherwise directed, draft copies of all products identified in the Work Statement shall be submitted to the Commission’s Accounting Office at the address below. The Accounting Office will forward products to the Commission Project Manager for review and comment. The Recipient will submit an original and two copies of the final version of all products to the Accounting Office. If the Commission Project Manager determines a product is substandard, given the description and intended use of the product as described in the Work Statement and the grant application, the Commission Project Manager may refuse to authorize payment for the product and any subsequent products that rely upon or are based upon that product under this Agreement.

The Recipient shall submit all products listed in the Work Statement to the Commission Project Manager for review and comment in accordance with the approved Schedule of Products and Due Dates.

If a draft product is required, the Commission Project Manager will provide written comments back to the Recipient on the draft product within ten (10) working days of receipt. Once agreement has been reached on the draft, the Recipient shall submit the final product to the Commission Project Manager. The Commission Project Manager shall provide written approval of the final product within five (5) working days of receipt. The Recipient shall include key elements from the products in the Final Report for this Agreement.

Alternative review timeframes may be specified in the Work Statement. Review timeframes specified in the Work Statement will take precedence over the timeframes stated herein.

The required format for products can be found in the PIER Style Manual published on the Energy Commission's website:

The Recipient shall use and follow these formats unless otherwise instructed in writing by the Commission Project Manager or the product is described differently in the Work Statement.

The Recipient shall deliver documents to the Commission Project Manager in the following formats:

Submit any requests for exemption to the electronic file in writing at least ninety (90) days before the product is due. The Commission Project Manager must approve or deny the request in writing.

a.    Submission of Reports

All reports will be submitted to the Accounting Office at the address listed in Section 5 above.

b.    Progress Reports

The Recipient shall prepare progress reports on the schedule provided in the work statement. The Recipient shall prepare progress reports which summarize all grant activities conducted by the Recipient for the reporting period, including an assessment of the ability to complete the project within the current budget and any anticipated cost overruns. See Attachment 1 “Content and Format of Progress Reports” for more information.

The Recipient shall prepare a final report outline, draft final report and final report on the schedule provided in the work statement. The final report shall describe the original purpose, approach, results and conclusions of the work done under this Agreement. See Style Manual: Preparing Public Interest Energy Research (PIER) Program Technical Research Project Reports located online at http://www.energy.ca.gov/contracts/pier/contractors/.

Upon receipt of the final report, the Commission Project Manager shall ensure that all work has been satisfactorily completed. The Payment Request for the final payment (including any retention) may only be submitted after the final report is completed and the Commission Project Manager has verified satisfactory completion of the work.

The Commission reserves the right to use and reproduce all reports and data produced and delivered pursuant to this Agreement, and reserves the right to authorize others to use or reproduce such materials. Each report becomes the property of the Commission.

Failure to comply with the reporting requirements contained in this award will be considered a material noncompliance with the terms of the award. Noncompliance may result in withholding of future payments, suspension or termination of the current award, and withholding of future awards.

No product or report produced as a result of work funded by this program shall be represented to be endorsed by the Commission, and all such products or reports shall include the following statement:

This document was prepared as a result of work sponsored by the California Energy Commission. It does not necessarily represent the views of the Energy Commission, its employees, or the State of California. The Commission, the State of California, its employees, contractors, and subcontractors make no warranty, express or implied, and assume no legal liability for the information in this document; nor does any party represent that the use of this information will not infringe upon privately owned rights. This report has not been approved or disapproved by the Commission nor has the Commission passed upon the accuracy of the information in this report.

For example, if under an agreement the Energy Commission agrees to pay a Recipient $100,000 and the Recipient is supplying $500,000 in match funding, the ten percent (10%) limitation applies to the $100,000. Only up to $10,000 of Energy Commission funds can be reallocated without a formal amendment. If under an agreement the Energy Commission agrees to pay a recipient $800,000, ten percent would be $80,000, but the cap is $75,000, so the most that could be reallocated without a formal amendment is $75,000.

The addition of personnel also requires a formal amendment unless there is already an identified classification of rates in the budget that the new personnel will be filling.

Changes that are not significant to the Agreement do not need to be approved at an Energy Commission Business Meeting through a formal amendment. These changes shall be documented in writing to the Commission Project Manager. Only the following changes are deemed non-significant:

Significant changes to this Agreement require a formal amendment which must be approved at an Energy Commission Business Meeting. Significant Changes are defined as any modifications to the Agreement that do not meet the requirements in paragraph 8.b. above. Examples of significant changes include, but are not limited to:

When seeking to change this Agreement, Recipient understands and acknowledges that it can take the Energy Commission six (6) months or more to process an amendment.

This section provides general requirements for an agreement between the Recipient and a third party (“subcontractor”).

The Recipient is responsible for handling all contractual and administrative issues arising out of or related to any subcontracts it enters into under this Agreement.

All subcontracts must incorporate all of the following:

All subcontracts must also incorporate language conforming to the following provisions specified in this Agreement, and these provisions shall expressly flow down to all subcontractors:

Nothing contained in this Agreement or otherwise, shall create any contractual relation between the Commission and any subcontractors, and no subcontract shall relieve the Recipient of its responsibilities and obligations hereunder. The Recipient agrees to be as fully responsible to the Commission for the acts and omissions of its subcontractors or persons either directly or indirectly employed by any of them as it is for the acts and omissions of persons directly employed by the Recipient. The Recipient’s obligation to pay its subcontractors is an independent obligation from the Commission’s obligation to make payments to the Recipient. As a result, the Commission shall have no obligation to pay or to enforce the payment of any monies to any subcontractor.

Recipient shall be responsible for establishing and maintaining contractual agreements with and reimbursement of each subcontractor for work performed in accordance with the terms of this Agreement.

All subcontracts entered into pursuant to this Agreement shall be subject to examination and audit by the Energy Commission and/or Bureau of State Audits for a period of three years after final payment under this Agreement.

Recipient shall provide a copy of its subcontracts upon request by the Energy Commission.

Failure to comply with the above requirements may result in the termination of this Agreement.

a.    Key Personnel

Key personnel are employees of the Recipient who are critical to the outcome of the project. For example, they may have expertise in the particular field or have experience that is not available from another source. Replacing these individuals may affect the outcome of the project. Key personnel, listed in the Budget exhibit, may not be substituted without the Commission Project Manager’s approval. Such approval shall not be unreasonably withheld. Recipient may substitute all other personnel, with reasonable advance notification made to the Commission Project Manager.

Key subcontractors are subcontractors or vendors to the Recipient who are critical to the outcome of the project. As with key personnel, key subcontractors may have expertise in the particular field or have experience that is not available from another source. Replacing these subcontractors may affect the outcome of the project. An employee of the Recipient’s subcontractor or vendor may also qualify as “key.” Key subcontractors, listed in the Budget exhibit, may not be substituted without the Commission Project Manager’s approval. Such approval shall not be unreasonably withheld. Recipient may substitute all other subcontractors, with reasonable advance notification made to the Commission Project Manager. Replacement of key subcontractors is subject to the “Contracting and Procurement Procedures” section contained within these terms and conditions.

For purposes of this paragraph, “public works” means construction, alteration, demolition, installation, repair or maintenance work over $1,000; and “Contractor” means all contractors that provide public works activities for the Project.

Recipient shall ensure that all agreements with contractors for public works activities for the Project contain the following provisions:

Project; comply with overtime and working hour requirements; comply with apprenticeship obligations; comply with payroll recordkeeping requirements; and comply with other obligations as required by law.

The Recipient will comply with all bonding and insurance requirements relating to bid guarantees, performance bonds, and payment bonds without regard to the dollar value of the subcontract(s) in accordance with applicable federal and state laws and regulations.

The Recipient is responsible for ensuring all necessary permits and environmental documents are prepared and clearances are obtained from the appropriate agencies.

Title to equipment acquired by the Recipient with grant funds shall vest in the Recipient. The Recipient shall use the equipment in the project or program for which it was acquired as long as needed, whether or not the project or program continues to be supported by grant funds and the Recipient shall not encumber the property without Commission Project Manager approval. When no longer needed for the original project or program, the Recipient shall contact the Commission Project Manager for disposition instructions.

Recipient should refer to the applicable OMB Circulars and/or federal regulations incorporated by reference in this Agreement for additional equipment requirements.

The parties agree that because the Energy Commission is a state entity and provides funding on behalf of all Californian ratepayers, it is necessary for the Energy Commission to be able to terminate, at once, upon the default of Recipient and to proceed with the work required under the Agreement in any manner the Energy Commission deems proper. Recipient specifically acknowledges that the termination of the Agreement by the Energy Commission under the terms set forth below is an essential term of the Agreement, without which the Energy Commission would not enter into the Agreement. Recipient further agrees that upon any of the events triggering the termination of the Agreement by the Energy Commission, the Energy Commission has the right to terminate the Agreement, and it would constitute bad faith of the Recipient to interfere with the immediate termination of the Agreement by the Energy Commission.

The Energy Commission shall provide Recipient written notice of intent to terminate due to Recipient’s breach. Recipient will have fifteen (15) calendar days to fully perform or cure the breach. In the event Recipient does not cure the breach within fifteen (15) days, the Energy Commission may, without prejudice to any of its other remedies, terminate this Agreement upon five (5) calendar days written notice to Recipient. In such event, the Energy Commission shall

pay Recipient only the reasonable value of the satisfactorily performed services rendered by Recipient before the notice of termination, as may be agreed upon by the parties or determined by a court of law, but not in excess of the Agreement maximum payable.

The Energy Commission may, for cause, and at its option, terminate this Agreement upon giving thirty (30) calendar days advance written notice to Recipient. In such event, Recipient agrees to use all reasonable efforts to mitigate its expenses and obligations. The Energy Commission will pay Recipient for services rendered and expenses incurred within thirty (30) days after notice of termination which could not by reasonable efforts of Recipient have been avoided, but not in excess of Agreement maximum payable. Recipient agrees to relinquish possession of equipment purchased for this Agreement with Energy Commission funds to the Commission, or Recipient may, with approval of the Energy Commission, purchase the equipment as provided by the terms of this Agreement.

The term “for cause” includes, but is not limited to, the following reasons:

For purposes of payment, Recipient's headquarters shall be considered the location of the Recipient's office where the employees assigned responsibilities for this award are permanently assigned. Travel expenditures not listed in this section cannot be reimbursed.

Travel not listed in the Budget section of this Agreement shall require prior written authorization from the Commission Project Manager. Recipient shall be reimbursed for authorized travel and per diem up to, but not to exceed, the rates allowed non-represented state employees. A copy of the current allowable travel reimbursement rates can be obtained from the Commission’s web site at http://www.energy.ca.gov/contracts/ or by contacting the Commission’s Grants and Loans Office at ###-###-####.

Travel expense claims must detail expenses using the allowable rates, and Recipient must sign and date travel expense claim before submitting the travel expense claim to the Commission for payment. Expenses must be listed by trip including dates and times of departure and return. Travel expense claims supporting receipts and expense documentation shall be attached to the Recipient’s Payment Request. A vehicle license number is required when claiming mileage, parking, or toll charges. Questions regarding allowable travel expenses or per diem should be addressed to the Commission Project Manager.

The Energy Commission agrees to reimburse the Recipient for actual allowable expenditures incurred in accordance with the Budget. The rates in the Budget are rate caps, or the maximum amount allowed to be billed. The Recipient can only bill for actual expenses incurred at the Recipient’s actual direct labor rate(s), fringe benefit rate(s), and indirect rate(s), not to exceed the rates specified in the Budget.

a.    Payment Requests

Unless indicated otherwise in Special Conditions, the Recipient may request payment from the Energy Commission at any time during the term of this Agreement, but no more frequently than monthly, although it is preferred that payment requests be submitted with the progress reports.

Payments will be made on a reimbursement basis for Recipient’s expenditures, i.e., after the Recipient has paid for a service, product, supplies, or other approved budget item. No reimbursement for food or beverages shall be made other than allowable per diem charges.

The Energy Commission, at its sole discretion, may honor advance payment requests subject to special conditions specified by the Commission’s Grants and Loans Office.

Funds in this award have a limited period in which they must be expended. All Recipient expenditures (Energy Commission-reimbursable and match share) must occur within the approved term of this Agreement.

b.    Payment Request Format

A request for payment shall consist of, but is not limited to:

The Commission will accept computer-generated or electronically transmitted invoices without backup documentation provided that the Recipient sends a hardcopy the same day.

Recipient shall submit all invoices to the following address:

c.    Certification

The following certification shall be included on each Payment Request form and signed by the Recipient’s authorized officer:

d.    Government Entity

Government Entity is defined as a governmental agency from California or any state or a state college or state university from California or any state; a local government entity or agency, including those created as a Joint Powers Authority; an auxiliary organization of the California State University or a California community college; the Federal government; a foundation

organized to support the Board of Governors of the California Community Colleges or an auxiliary organization of the Student Aid Commission established under Education Code 69522.

e.    Release of Funds

Each invoice is subject to Commission Project Manager approval. The Commission Project Manager will not process any payment request during the Agreement term if the following conditions have not been met:

Payments shall be made to the Recipient only for undisputed invoices. An undisputed invoice is an invoice executed by the Recipient for project expenditures, that meets all payment conditions of the Agreement, and for which additional evidence is not required to make payment. The invoice may be disputed if all products due for the billing period have not been received and approved, if the invoice is inaccurate, or if it does not comply with the terms of this Agreement. If the invoice is disputed the Recipient will be notified via a Dispute Notification Form within 15 working days of receipt of the invoice.

Indirect cost rates must be developed in accordance with generally accepted accounting principles and the applicable OMB circulars or federal acquisition regulations. If the Recipient has an approved fringe benefits or indirect cost rate (indirect overhead, G&A, or F&A) from their cognizant Federal Agency, the Recipient may bill at the federal rate up to the Budget rate caps if the following conditions are met:

`        www.energy.ca.gov/contracts/pier/PIERInvoicingInstructions.doc.

g.    Retention

It is the Commission's policy to retain 10 percent of any payment request or 10 percent of the total Commission award at the end of the project. After the project is complete the Recipient must submit a completed payment request form requesting release of the retention. The Commission Project Manager will review the project file and, when satisfied that the terms of the funding Agreement have been fulfilled, will authorize release of the retention.

h.    State Controller’s Office

Payments are made by the State Controller’s Office.

1)    Conditions for payment:

a.    Cost Accounting

Recipient agrees to keep separate, complete, and correct accounting of the costs involved in completing the grant and match funded (if any) portion of this project. The Commission or its agent shall have the right to examine Recipient’s books of accounts at all reasonable times to the extent and as is necessary to verify the accuracy of Recipient’s reports.

b.    Accounting Procedures

The Recipient’s costs shall be determined on the basis of the Recipient’s accounting system procedures and practices employed as of the effective date of this Agreement, provided that the Recipient shall use generally accepted accounting principles and cost reimbursement practices. The Recipient’s cost accounting practices used in accumulating and reporting costs during the performance of this Agreement shall be consistent with the practices used in estimating costs for any proposal to which this Agreement relates; provided that such practices are consistent with the other terms of this Agreement and provided, further, that such costs may be accumulated and reported in greater detail during performance of this Agreement. The Recipient’s accounting system shall distinguish between direct costs and indirect costs. All costs incurred for the same purpose, in like circumstances, are either direct costs only or indirect costs only with respect to costs incurred under this Agreement.

c.    Allowability of Costs

The costs for which the Recipient shall be reimbursed under this Agreement include all costs, direct and indirect, incurred in the performance of work that are identified in the grant Budget. Costs must be incurred within the term of the Agreement. Factors to be considered in determining whether an individual item of cost is allowable include (i) reasonableness of the item, (ii) appropriate use of the allowability of the item to the work, (iii) applicable federal OMB circulars and/or federal regulations incorporated by reference in this Agreement, and (iv) the terms and conditions of this Agreement.

2)    Unallowable Costs

The following is a description of some specific items of cost that are unallowable; provided, however, that the fact that a particular item of cost is not included shall not mean that it is allowable. Details concerning the allowability of costs are available from the Energy Commission’s Accounting Office.

a)    Profit or Fees, Contingency Costs, Imputed Costs (e.g., Cost of Money), Fines and Penalties, Losses, Excess Profit Taxes and increased rates and fees for this Agreement.

d.    Audit Rights

Recipient shall maintain books, records, documents, and other evidence, based on the procedures set forth above, sufficient to reflect properly all costs claimed to have been incurred in performing this Agreement. The Energy Commission, an agency of the state or, at the Energy Commission’s option, a public accounting firm designated by the Energy Commission, may audit such accounting records at all reasonable times with prior notice by the Energy Commission. The Energy Commission shall bear the expense of such audits. It is the intent of the parties that such audits shall ordinarily be performed not more frequently than once every twelve (12) months

during the performance of the work and once at any time within three (3) years following payment by the Energy Commission of the Recipient’s final invoice. However, performance of any such interim audits by the Energy Commission does not preclude further audit.

Recipient agrees that the Energy Commission, the Department of General Services, the Bureau of State Audits, or their designated representative shall have the right to review and to copy any records and supporting source documentation pertaining to the performance of this Agreement. Recipient agrees to maintain such records for possible audit for a minimum of three (3) years after final payment, unless a longer period of record retention is stipulated. Recipient agrees to allow the auditor(s) access to such records during normal business hours and to allow interviews of any employees who might reasonably have information related to such records. Further, Recipient agrees to include a similar right of the state to audit records and interview staff in any subcontract related to performance of this Agreement.

e.    Refund to the Energy Commission

If the Energy Commission determines, that any invoiced and paid amounts exceed the actual allowable incurred costs, Recipient shall repay such amounts to the Energy Commission within thirty (30) days of request or as otherwise agreed by the

Energy Commission and Recipient. If the Energy Commission does not receive such repayments, the Energy Commission shall be entitled to withhold further payments to the Recipient or seek repayment from the Recipient.

f.    Audit Cost

The cost of the audit shall be borne by the Energy Commission except when the results of the audit reveal an error detrimental to the Energy Commission exceeding more than ten percent (10%) or $5,000 (whichever is greater) of 1) the amount audited, or 2) if a royalty audit, the total royalties due in the period audited. Recipient shall pay the refund as specified in “e. Refund to the Energy Commission,” and Recipient agrees to reimburse the Energy Commission for reasonable costs and expenses incurred by the Energy Commission in conducting such audit.

g.    Match or Cost Share (match)

If the Budget includes a match share requirement, the Recipient's commitment of resources, as described in this Agreement, is a required expenditure for receipt of Energy Commission funds. Grant funds will be released only if the required match percentages are expended. The Recipient must maintain accounting records detailing the expenditure of the match (actual cash and in-kind services) and report on match share expenditures on the Recipient’s request for payment.

The Recipient agrees to indemnify, defend, and save harmless the state, its officers, agents, and employees from any and all claims and losses accruing or resulting to Recipient and to any and all contractors, subcontractors, materialmen, laborers, and any other person, firm, or corporation furnishing or supplying work, services, materials, or supplies in connection with the performance of this Agreement, and from any and all claims and losses accruing or resulting to any person, firm, or corporation who may be injured or damaged by the Recipient in the performance of this Agreement.

In the event of a dispute or grievance between Recipient and the Energy Commission, both parties shall follow the procedure below. Recipient shall continue with the responsibilities under this Agreement during any dispute.

The Recipient shall first discuss the problem informally with the Commission Project Manager. If the problem cannot be resolved at this stage, the Recipient must direct the grievance together with any evidence, in writing, to the Grants and Loans Office. The grievance must state the issues in the dispute, the legal authority or other basis for the Recipient’s position and the remedy sought. The Grants and Loans Office and the Program Office Manager must make a determination on the problem within ten (10) working days after receipt of the written communication from the Recipient. The Grants and Loans Office shall respond in writing to the Recipient, indicating a decision and explanation for the decision. Should the Recipient disagree with the Grants and Loans Office’s decision, the Recipient may appeal to the second level.

The Recipient must prepare a letter indicating why the Grants and Loans Office’s decision is unacceptable, attaching to it the Recipient’s original statement of the dispute with supporting documents, along with a copy of the Grants and Loans Office’s response. This letter shall be sent to the Energy Commission’s Executive Director within ten (10) working days from receipt of the Grants and Loans Office’s decision. The Executive Director or designee shall meet with the Recipient to review the issues raised. A written decision signed by the Executive Director or designee shall be returned to the Recipient within twenty (20) working days of receipt of the Recipient’s letter. The Executive Director may inform the Energy Commission of the decision at an Energy Commission business meeting. Should the Recipient disagree with the Executive Director’s decision, the Recipient may appeal to the Energy Commission at a regularly scheduled business meeting. Recipient will be provided with the current procedures for placing the appeal on a Energy Commission business meeting agenda.

Should the Energy Commission’s Dispute Resolution procedure above fail to resolve an Agreement dispute or grievance to the satisfaction of either party, the Recipient and the Energy Commission mutually may elect to have the dispute or grievance resolved through binding arbitration. If one party does not agree, the matter shall not be submitted to arbitration. The arbitration proceeding shall take place in Sacramento County, California, and shall be governed by the commercial arbitration rules of the American Arbitration Association (AAA) in effect on the date the arbitration is initiated. The dispute or grievance shall be resolved by one (1) arbitrator who is an expert in the particular field of the dispute or grievance. The arbitrator shall be selected in accordance with the AAA commercial arbitration rules. If arbitration is mutually decided by the parties, arbitration is in lieu of any court action and the decision rendered by the arbitrator shall be final and may not be appealed to a court through the civil process). However, judgment may be entered upon the arbitrator’s decision and is enforceable in accordance with the applicable law in any court having jurisdiction over this Agreement. The demand for arbitration shall be made no later six (6) months after the date of the Agreement’s termination, despite when the dispute or grievance arose, and despite the applicable statute of limitations for a suit based on the dispute or grievance. If the parties do not mutually agree to arbitration, the parties agree that the sole forum to resolve a dispute is California state court.

The cost of arbitration shall be borne by the parties as follows:

At the option of the parties, any or all of these arbitration costs may be deducted from any balance of Agreement funds. Both parties must agree, in writing, to utilize Agreement funds to pay for arbitration costs.

a.    Recipient hereby warrants that it carries Worker's Compensation Insurance for all of its employees who will be engaged in the performance of this Agreement, and agrees to furnish to the Commission Project Manager satisfactory evidence of this insurance at any time the Commission Project Manager may request.

b.    If Recipient is self-insured for worker's compensation, it hereby warrants such self-insurance is permissible under the laws of the State of California and agrees to furnish to the Commission Project Manager satisfactory evidence of this insurance at any time the Commission Project Manager may request.

a.    Information Considered Confidential

All Recipient information considered confidential at the commencement of this Agreement is designated an Attachment to this Agreement.

b.    Confidential Products: Labeling and Submitting Confidential Information

Prior to the commencement of this Agreement, the parties have identified in an Attachment to this Agreement, specific Confidential Information to be provided as a product. All such confidential products shall be marked, by the Recipient, as “Confidential” on each page of the document containing the Confidential Information and presented in a sealed package to the Grants and Loans Office. (Non-confidential products are submitted to the Commission Project Manager.) All Confidential Information will be contained in the “confidential” volume: no Confidential Information will be in the “public” volume.

The Recipient and the Commission agree that during this Agreement, it is possible that the Recipient may develop additional data or information not originally anticipated as a confidential product. In this case, Recipient shall follow the procedures for a request for designation of Confidential Information specified in title 20 CCR 2505. The Energy Commission’s Executive Director makes the determination of confidentiality. Such subsequent determinations may be added to the list of confidential products in an Attachment to this Agreement.

Disclosure of Confidential Information by the Energy Commission may only be made pursuant to 20 CCR 2506 and 2507. All confidential data, records or products that are legally disclosed by the Recipient or any other entity become public records and are no longer subject to the above confidentiality designation.

Products and reports specified for delivery to the Energy Commission under this Agreement shall become the property of the Energy Commission. The Energy Commission may use, publish, and reproduce the products and reports subject to the provisions of subsection c.

b.    Rights in Technical, Generated, and Product Data

1)    Recipient’s Rights

All data (i.e., technical, generated and product data) produced under this Agreement shall be the property of the Recipient, limited by the license retained by the Energy Commission in 2) below, and the rights the Energy Commission has in products specified above in a).

2)    Energy Commission’s Rights

Recipient shall provide the Commission Project Manager and any designated reviewer(s) with a copy of all technical, generated and product data produced under the Agreement, when requested. Recipient is not required to copy and submit data the Commission Project Manager has identified as being unusable to the Energy Commission and the PIER program such as raw data that is too disaggregated or voluminous for practical application. Such data shall be retained at the Recipient’s facility for inspection, review and possible copying by the Commission Project Manager for a minimum of three (3) years after final payment unless a longer period of records retention is stipulated.

Upon request by Commission Project Manager, Recipient shall provide the

Commission Project Manager and any designated reviewer(s) access to review technical and generated data produced in the course of this Agreement that is not requested to be delivered to the Energy Commission.

For all data (technical, generated and product data) produced under this Agreement, the Energy Commission retains a no-cost, non-exclusive, non-transferable, irrevocable, royalty-free, worldwide, perpetual license to use, publish, translate, produce and to authorize others to produce, translate, publish and use the data, subject to the provisions of subsection c.

d.    Exclusive Remedy

In the event the Energy Commission intends to publish or has disclosed data the Recipient considers confidential, the Recipient’s exclusive remedy is a civil court action for injunctive relief. Such court action shall be filed in Sacramento County, Sacramento, California.

e.    Waiver of Consequential Damages

Proprietary data owned by the Recipient shall remain with the Recipient throughout the term of this Agreement and thereafter. The extent of Commission access to the same and the testimony available regarding the same shall be limited to that reasonably necessary to demonstrate, in a scientific manner to the satisfaction of scientific persons, the validity of any premise, postulate or conclusion referred to or expressed in any product or to establish a baseline for repayment purposes. Upon request by Commission Project Manager, Recipient shall provide the Commission Project Manager and any designated reviewer(s) access to review Recipient’s Proprietary Data produced in the course of this Agreement that is not requested to be delivered to the Energy Commission. The Energy Commission shall not disclose any of Recipient’s Proprietary Data accessed or reviewed to any third party.

Any data which is reserved to the Recipient by the express terms hereof, and Proprietary Data and Trade Secrets that have been utilized to support any premise, postulate or conclusion referred to or expressed in any product hereunder, shall be preserved by the Recipient at the Recipient's own expense for a period of not less than three years after final payment, unless a longer period of records retention is stipulated.

Before the expiration of three years or the stipulated records retention period, and before changing the form of or destroying any Data or Trade Secrets, the Recipient shall notify the Energy Commission of any such contemplated action and the Energy Commission may, within thirty (30) days after said notification, determine whether it desires said data to be further preserved. If the Energy Commission so elects, the expense of further preserving said data shall

be paid for by the Energy Commission. Recipient agrees that the Energy Commission may, at its own expense, have reasonable access to said data throughout the time during which said data is preserved. Recipient agrees to use its best efforts to identify competent witnesses to testify in any court of law regarding said data or, at the Energy Commission’s expense, to furnish such competent witnesses.

Patent rights for Subject Inventions will be the property of Recipient, subject to the Energy Commission retaining a no-cost, nonexclusive, nontransferable, irrevocable, royalty-free, worldwide perpetual license to use or have practiced for or on behalf of the State of California the Subject Invention(s) for governmental purposes. Recipient must obtain agreements to effectuate this clause with all persons or entities, except for the U.S. Department of Energy (DOE), obtaining ownership interest in the patented Subject Invention(s). Previously documented (whether patented or unpatented under the patent laws of the United States of America or any foreign country) inventions are exempt from this subsection.

k.    March-In Rights

The Recipient shall forfeit and assign to the Energy Commission, at the Energy Commission’s request, all rights to a Subject Invention if either: 1) Recipient fails to apply for a patent on Subject Inventions(s) developed under this Agreement within six (6) months of conceiving or first actually reducing the technology to practice, or, 2) Recipient or assignee has not taken, or is not expected to take within a reasonable time, effective steps to achieve practical application of the Subject Invention. In this event, the Recipient agrees to relinquish all rights, subject to DOE reserved rights, to the Subject Invention to the Energy Commission. The Energy Commission will have the unfettered right to use and/or dispose of the rights in whatever manner it deems most suitable to help transfer the Technology into the market place, including but not limited to, seeking patent protection, or licensing the Subject Invention.

Recipient and all persons and/or entities obtaining an ownership interest in Subject Invention(s) shall include within the specification of any United States patent application, and any patent issuing thereon covering a subject invention, the following statement:

"THIS INVENTION WAS MADE WITH STATE OF CALIFORNIA SUPPORT UNDER CALIFORNIA ENERGY COMMISSION GRANT NUMBER

PIR-08-022. THE ENERGY COMMISSION HAS CERTAIN RIGHTS TO THIS INVENTION."

publication, and all reprints using the following form or such other form as may be reasonably specified by the Energy Commission.

“ۙ[YEAR OF FIRST PUBLICATION OF PRODUCT],

[THE COPYRIGHT HOLDER’S NAME].

ALL RIGHTS RESERVED.”

In the event software is developed that is not a product under the Agreement, Recipient shall have the right to copyright and/or patent such software and grants the Energy Commission a royalty-free, no-cost, non-exclusive, irrevocable, non-transferable, worldwide, perpetual license to produce and use the software, its derivatives and upgrades for governmental purposes.

Recipient warrants that Recipient will not, in supplying work under this Agreement’s Work Statement, knowingly infringe or misappropriate any intellectual property right of a third party, and that it will conduct a reasonable investigation of the intellectual property rights of third parties to avoid such infringement. Recipient will defend and indemnify Energy Commission from and against any claim, lawsuit or other proceeding, loss, cost, liability or expense (including court costs and reasonable fees of attorneys and other professionals) to the extent arising out of: (i) any third party claim that a product infringes any patent, copyright, trade secret or other intellectual property right of any third party, or (ii) any third party claim arising out of the negligent or other tortious act(s) or omission(s) by the Recipient, its employees, subcontractors or agents, in connection with or related to the products or the Recipient’s performance thereof under this Agreement.

Commission royalties under the following terms and conditions.

days of the due date shall thereupon become debt obligations of Recipient to the Energy Commission, due upon demand and bearing interest at the maximum interest rate allowed by law.

a.    Governing Law

It is hereby understood and agreed that this Agreement shall be governed by the laws of the State of California as to interpretation and performance.

b.    Independent Capacity

The Recipient, and the agents and employees of the Recipient, in the performance of this Agreement, shall act in an independent capacity and not as officers or employees or agents of the State of California.

c.    Assignment

Without the written consent of the Energy Commission in the form of a formal written amendment, this Agreement is not assignable or transferable by Recipient either in whole or in part.

d.    Timeliness

Time is of the essence in this Agreement.

    

e.    Unenforceable Provision

In the event that any provision of this Agreement is unenforceable or held to be unenforceable, then the parties agree that all other provisions of this Agreement have force and effect and shall not be affected thereby.

No waiver of any breach of this Agreement shall be held to be a waiver of any other or subsequent breach. All remedies afforded in this Agreement shall be taken and construed as cumulative, that is, in addition to every other remedy provided therein or by law.

g.    Assurances

The Commission reserves the right to seek further written assurances from the Recipient and its team that the work of the project under this Agreement will be performed consistent with the terms of the Agreement.

h.    Change in Business

a)    A change of address.

b)    A change in the business name or ownership.

c)    The existence of any litigation or other legal proceeding affecting the project.

d)    The occurrence of any casualty or other loss to project personnel, equipment or third parties.

e)    Receipt of notice of any claim or potential claim against Recipient for patent, copyright, trademark, service mark and/or trade secret infringement that could affect the Energy Commission’s rights.

The Energy Commission staff or its representatives shall have reasonable access to all project sites and to all records related to this Agreement.

It is understood and agreed that certain provisions shall survive the completion or termination date of this Agreement for any reason. The provisions include, but are not limited to:

Recipient shall comply with all applicable federal, state and local laws, rules and regulations.

During the performance of this Agreement, Recipient and its subcontractors shall not unlawfully discriminate, harass or allow harassment, against any employee or applicant for employment because of sex, sexual orientation, race, color, ancestry, religious creed, national origin, physical disability (including HIV and AIDS), mental disability, medical condition (cancer), age (40), marital status, and denial of family care leave. Recipient and its subcontractors shall insure that the evaluation and treatment of their employees and applicants for employment are free from such discrimination and harassment. Recipient and its subcontractors shall comply with the provisions of the Fair Employment and Housing Act (Government Code Sections 12990 et seq.) and the applicable regulations promulgated thereunder (California Code of Regulations, Title 2, Section 7285et seq.). The applicable regulations of the Fair Employment and Housing Commission implementing Government Code Section 12990 (a-f), set forth in Chapter 5 of Division 4 of Title 2 of the California Code of Regulations are incorporated into this Agreement by reference and made a part of it as if set forth in full. Recipient and its subcontractors shall give written notice of their obligations under this section to labor organizations with which they have a collective bargaining or other Agreement.

The Recipient shall include the nondiscrimination and compliance provisions of this section in all subcontracts to perform work under this Agreement.

c.    Drug Free Workplace Certification

By signing this Agreement, the Recipient hereby certifies under penalty of perjury under the laws of the State of California that the Recipient will comply with the requirements of the Drug-Free Workplace Act of 1990 (Government Code Section 8350 et seq.) and will provide a drug-free workplace by taking the following actions:

Failure to comply with these requirements may result in suspension of payments under the Agreement or termination of the Agreement or both, and the Recipient may be ineligible for any future state awards if the Commission determines that any of the following has occurred: (1) the Recipient has made false certification, or (2) violates the certification by failing to carry out the requirements as noted above.

d.    National Labor Relations Board Certification (Not applicable to public entities)

Recipient, by signing this Agreement, does swear under penalty of perjury that no more than one final unappealable finding of contempt of court by a Federal Court has been issued against the Recipient within the immediately preceding two year period because of the Recipient's failure to comply with an order of a Federal Court which orders the Recipient to comply with an order of the National Labor Relations Board.

e.    Child Support Compliance Act (Applicable to California Employers)

For any agreement in excess of $100,000, the Recipient acknowledges that:

f.    Air or Water Pollution Violation

Under the state laws, the Recipient shall not be:

g.    Americans With Disabilities Act

By signing this Agreement, Recipient assures the State that it complies with the Americans with Disabilities Act (ADA) of 1990 (42 U.S.C. 12101, et seq.), which prohibits discrimination on the basis of disability, as well as applicable regulations and guidelines issued pursuant to the ADA.

 

Small-scale, engine-based combined heat and power (CHP) systems have lost momentum in the California market. The outdated automotive engines used in current CHP systems have lackluster efficiencies and rely primarily on exhaust catalysts for emissions control. Even with advanced air-fuel ratio control, catalytic after-treatment is stretched to meet and sustain the California Air Resources Board (ARB) 2007 CHP emission standards. Additionally, modest engine efficiency causes under sizing or poor utilization in many commercial applications with relatively high electric-to-thermal loads. Finally, cost-effective CHP technology is lacking below 75 kilowatt (kW) in size, leaving a significant market population without a CHP option.

The goal of this Agreement is to increase penetration of California’s CHP market by introducing modern automotive engine technology. It aims to broaden the market reach with smaller natural gas-fueled products that include: 1) an electric CHP package of about 30 kW; and 2) a mechanical CHP chiller and heat pump producing about 35-45 tons of cooling/heating.

The objectives of this Agreement are to:

For complete product guidelines, refer to Section 5 in the Terms and Conditions.

The goal of this task is to establish the lines of communication and procedures for implementing this Agreement.

The administrative portion of the meeting shall include, but not be limited to, the following:

The technical portion of the meeting shall include, but not be limited to, the following:

The Commission Project Manager shall designate the date and location of this meeting.

The goal of this task is to determine if the project should continue to receive Energy Commission funding to complete this Agreement and to identify any needed modifications to the tasks, products, schedule or budget.

CPRs provide the opportunity for frank discussions between the Energy Commission and the Recipient. CPRs generally take place at key, predetermined points in the Agreement, as determined by the Commission Project Manager and as shown in the Technical Task List above. However, the Commission Project Manager may schedule additional CPRs as necessary, and any additional costs will be borne by the Recipient.

Participants include the Commission Project Manager and the Recipient and may include the Commission Grants Officer, the Public Interest Energy Research (PIER) Program Team Lead, other Energy Commission staff and Management as well as other individuals selected by the Commission Project Manager to provide support to the Energy Commission.

Recipient Product:     CPR Report(s)

The goal of this task is to closeout this Agreement.

This meeting will be attended by, at a minimum, the Recipient, the Commission Grants Office Officer, and the Commission Project Manager. The technical and administrative aspects of Agreement closeout will be discussed at the meeting, which may be two separate meetings at the discretion of the Commission Project Manager.

The technical portion of the meeting shall present an assessment of the degree to which project and task goals and objectives were achieved, findings, conclusions, recommended next steps (if any) for the Agreement, and recommendations for improvements. The Commission Project Manager will determine the appropriate meeting participants.

The administrative portion of the meeting shall be a discussion with the Commission Project Manager and the Grants Officer about the following Agreement closeout items:

The goal of this task is to periodically verify that satisfactory and continued progress is made towards achieving the research objectives of this Agreement on time and within budget.

The objectives of this task are to summarize activities performed during the reporting period, to identify activities planned for the next reporting period, to identify issues that may affect performance and expenditures, and to form the basis for determining whether invoices are consistent with work performed.

Product:    Monthly Progress Reports

The goal of the Final Report is to assess the project’s success in achieving its goals and objectives, advancing science and technology, and providing energy-related and other benefits to California.

The objectives of the Final Report are to clearly and completely describe the project’s purpose, approach, activities performed, results, and advancements in science and technology; to present a public assessment of the success of the project as measured by the degree to which goals and objectives were achieved; to make insightful observations based on results obtained; to draw conclusions; and to make recommendations for further RD&D projects and improvements to the PIER project management processes.

The Final Report shall be a public document. If the Recipient has obtained confidential status from the Energy Commission and will be preparing a confidential version of the Final Report as well, the Recipient shall perform the following activities for both the public and confidential versions of the Final Report.

The goal of this task is to ensure that the match funds planned for this Agreement are obtained for and applied to this Agreement during the term of this Agreement.

The costs to obtain and document match fund commitments are not reimbursable through this Agreement. Although the PIER budget for this task will be zero dollars, the Recipient may utilize match funds for this task. Match funds shall be spent concurrently or in advance of PIER funds for each task during the term of this Agreement. Match funds must be identified in writing and the associated commitments obtained before the Recipient can incur any costs for which the Recipient will request reimbursement.

If match funds were a part of the proposal that led to the Energy Commission awarding this Agreement, then provide in the letter a list of the match funds that identifies the:

The goal of this task is to obtain all permits required for work completed under this Agreement in advance of the date they are needed to keep the Agreement schedule on track.

Permit costs and the expenses associated with obtaining permits are not reimbursable under this Agreement. Although the PIER budget for this task will be zero dollars, the Recipient shall budget match funds for any expected expenditures associated with obtaining permits. Permits must be identified in writing and obtained before the Recipient can make any expenditures for which a permit is required.

The goal of this task is to select a modern automotive-type gasoline engine that is suitable for usage in the subject applications, which will incorporate low-pressure Natural Gas (NG) fueling and an Atkinson cycle operating strategy.

Product:    Task Report (No draft)

The goal of this task is to replace the engine’s gasoline fuel system with a NG metering system and controls capable of maintaining optimum catalyst feedgas composition, enabling emission compliance with project guidelines (ARB 2007 CHP).

The goal of this task is to achieve at least a 10% improvement in net engine thermal efficiency by incorporating Atkinson cycle combustion strategies. Emissions must remain compliant. Engine testing will be performed on a dynamometer at AVL’s center.

The goal of this task is to assess the various interface connection points to the engine and adapt the subsystems required for stationary CHP applications.

The goal of this task is to show that the engine system has adequate mechanical and emissions durability, based on dynamometer tests. Durability testing will be conducted at Tecogen and will be done in accordance with the Laboratory Performance Test Plan generated for the laboratory validation.

The goal of this task is to stimulate market adoption of the technology advances by disseminating information on project results with stakeholders and market participants. The objective of this task is to present advances in science and technology made under this project with the peer technical community, other stakeholders, and decision-makers in the private and public sectors. The outreach material will also convey how the advanced engine technology developed under this contract will be integrated into Tecogen CHP products.

The goal of this task is to develop a Commercialization Readiness Plan for integrating this advanced engine into the Tecogen CHP product line. This engine will be readily adapted to the heat pump product and a small-sized electrical generation package. All design drawings and bills of material, produced by AVL, will be transferred to Tecogen. The production model will be analyzed to determine the most streamlined method of manufacturing between Tecogen, the engine supplier, and sub-suppliers. Later, this advanced engine technology will be adapted to Tecogen’s larger sized engines for chillers and CHP.

The Commercialization Readiness Plan will identify the actions, time, and funding required to integrate this engine to Tecogen’s products in order to provide a benefit to California utility customer. The plan will also quantify the expected market penetration of the product, and identify and quantify the California utility customer return on investment.

[This should be the complete list as contained in the revised Work Statement and Exhibit B. Highlight differences between actual and planned.]

Overall schedule for the ______________ project.

[Planned is solid blue, actual is red striped. This work flow diagram needs to correlate with the schedule in Exhibit B. This example has been prepared as a Word Picture, but a comparable Excel diagram or Gantt chart is fine.]

Overview of Fiscal Status: (See invoices for detail.)

[It is useful to track the rate of expenditure of project funds. The most useful way to do this is to compare the actual expenditure rate with the planned expenditure rate. You get the planned rate at the beginning of the project, so it becomes a baseline. If you change course at a critical project review, you should show the original and the modified baseline, and then track against the new one.]

[Include photographs where appropriate to document progress.] The photos shall be shot with color print film or be very high quality digital photos (at least 300 dpi).

If there is a long time between interim products, then attach evidence of the progress being made (e.g., test data, product mock-ups, field site descriptions, preliminary analyses) to the progress reports to allow the Commission Project Manager to review progress and gauge the quality of research results.

The progress report on each project should be 1-2 pages long (plus photographs) and take about 1 hour to prepare for each reporting period.

 

Recipient Project Manager:

Commission Project Manager:

[This is taken directly from the section on “What we expect to accomplish during the next period” from the last progress report]

[Concise description of major activities and accomplishments.]

[Explain the differences, if any, between the planned and the actual accomplishments. Describe what needs to be done, if anything, to get back on track.]

[Describe any significant technical or fiscal problems. Request approval for significant changes in work scope, revised milestone due dates, changes in key personnel assigned to the project, or reallocation of budget cost categories. If none, include the following statement: “Progress and expenditures will result in project being completed on time and within budget.”]

[Concise description of major activities and accomplishments expected. This will be transferred to the next progress report.]