HomeMy WebLinkAboutAgenda Report - March 16, 2016 C-09CITY OF LODI
COUNCIL COMMUNICATION
AGENDA ITEM
C-9
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AGENDA TITLE: Authorize City Manager to Execute Amended Option to Lease and Associated
Ground Lease with Pacific Gas and Electric (PG&E) Company, for the Location of
a Compressed Air Energy Storage Facility at White Slough
MEETING DATE: March 16, 2016
PREPARED BY: City Manager
RECOMMENDED ACTION:
Authorize City Manager to execute Amended Option to Lease and
Associated Ground Lease with Pacific Gas and Electric (PG&E)
Company, for the location of a compressed air energy storage
facility at White Slough.
BACKGROUND INFORMATION: Council first considered a lease with PG&E for a power plant in
February of 2014. PG&E and the City agreed to an initial draft
subject to Northern California Power Agency's exclusive option on
the site. This revised draft addresses terms necessary to secure NCPA's waiver of its Option and allow
the lease agreement to go forward.
PG&E desires to construct a compressed air energy storage facility on City -owned property at the White
Slough Water Pollution Control Facility (CAES Project). The CAES Project will work much like a large-
scale energy storage system (a battery), compressing air during low cost "off-peak" hours and pumping it
into an expired underground natural gas well located west of Interstate 5 along the Highway 12 corridor.
During higher demand "peak" power usage times, the CAES Project will release the compressed air
through a turbine to regenerate electricity. Energy storage systems are considered critical in the energy
markets to achieve the full promise of renewable energy sources because they will bridge the gap
between the hours renewable energy is typically generated (off-peak hours) and the hours renewable
energy is at its highest market demand (peak hours).
PG&E has secured a federal grant to study the feasibility, perform environmental analysis and approval,
and if approved, construct the CAES Project. As is common with grants, PG&E is required to
demonstrate site control for a facility location as a condition of drawing down on the grant. The typical
mechanism to obtain site control is through an option to lease. The option would commit PG&E to pay
the option price and give them the right to enter a lease on set terms at a later date. However, if the
Project was not approved, lost funding, or PG&E determined that the project was not feasible; the option
does not require PG&E to enter into the lease. NCPA has an exclusive five-year option on the site. The
attached proposed amended option conditions the option on NCPA agreeing to waive its option.
The original option terms set the price at $50,000 per year during each of the six years as set forth in the
proposed amended option to lease attached to this staff report as Exhibit 1. Within that six-year period,
PG&E would have the right to enter into the draft ground lease attached to this staff report as Exhibit 2.
The lease allows PG&E to select between 15 and 25 acres to locate the CAES Project at an annual lease
APPROVED:
St 3
abau
r, City Manager
price of $140,000 per acre, netting an annual lease value of between $2,100,000 and $3,500,000 per
year. By comparison, the partially City -owned NCPA Lodi Energy Center and STIG plants pay $100,000
per acre for that 10 -acre site. The lease term is 50 years with a 49 -year optional renewal.
However NCPA has an exclusive option on the site. NCPA is appropriately concerned about impacts the
CAES Project may have on its operations and is unwilling to waive its option unless those impacts are
mitigated. First, NCPA is charged "congestion" fees for the transmission of power from NCPA's power
plant at White Slough to the power grid. Those fees are charged because lines from NCPA to the grid
are oversubscribed as defined by the California Independent System Operator (ISO). NCPA just
awarded a contract to increase the capacity of the lines, but the construction of the CAES Project will
leave NCPA right back at its starting point from a congestion perspective. Since congestion fees are
charged regardless of which operator comes first or causes the congestion, the CAES Project would
subject NCPA to the same congestion fees it is paying to upgrade the lines to avoid. Second, NCPA is
concerned that its water supply not be reduced by the construction of the CAES Project.
As a result, NCPA requested indemnity against congestion fees as a condition to waiving its option.
NCPA, the City and PG&E have agreed to the following terms to accomplish the indemnity. First, the
City will dedicate up to $10,000,000 in rent payments from PG&E toward indemnifying NCPA for
congestion charges incurred by NCPA that would not have been incurred except to the construction of
the CAES Project. Lodi's indemnity obligation is limited to PG&E rental payments as they are paid. In
other words, if NCPA incurred $3,000,000 in congestion fees year one and the City received $2,000,000
in rent, the City would pay the $2,000,000 in year one and any additional amounts as the rent comes in
from PG&E until the amount of congestion fees paid by NCPA was reached to a maximum of
$10,000,000. Thereafter, PG&E would indemnify NCPA for any additional congestions charges incurred
until such time that PG&E constructs further upgrades to the transmission lines to eliminate continued
congestion fees.
PG&E also has agreed to construct an eight million gallon clean water storage tank or alternatively dry
cool the CAES Project. In the event PG&E elects to dry cool the CAES Project, rent payable to the City
would drop from the previously agreed $140,000 per acre to $135,000 per acre.
FISCAL IMPACT: Option revenue of up to $50,000 per year for six years and lease revenue
of up to $3,500,000 per year if the option is exercised.
FUNDING AVAILABLE: Not applicable.
Step en chwab.uer
City Manager
DSS
EXHIBIT 1
AMENDED OPTION TO LEASE
In consideration of the option payments and other covenants hereinafter set forth, the City of
Lodi, a municipal corporation ("Optionor") hereby grants to Pacific Gas and Electric Company,
a California corporation ("Optionee") an option to lease not less than 15 or more than 25 acres of
that certain land owned by Optionor and described on Exhibit "A" attached hereto (the "Option
Land") upon the terms, covenants and conditions hereinafter set forth.
1. Option Term. The Option Term shall be six (6) years from and after the Effective
Date hereof, which Effective Date shall be the date on which this Option is last signed by both
Optionor and Optionee, unless sooner terminated by written notice from Optionee to Optionor.
2. Written Waiver of NCPA Right of First Refusal to Lease and to Lease Additional
Land; Option Payments. Pursuant to that certain Ground Lease between the City of Lodi, as
Landlord, and Northern California Power Agency ("NCPA"), as Tenant, NCPA holds a right of
first refusal to lease land from Optionor (Section 22.2) and a right to lease additional land from
Optionor (Section 22.3), which NCPA rights include the Option Land. Promptly following the
Effective Date hereof Optionor and Optionee shall exercise reasonable commercial efforts to
obtain from NCPA a written waiver of: (i) NCPA's right of first refusal to lease solely with
respect to this Option Agreement and exercise of this Option Agreement; and (ii) NCPA's right
to lease additional land solely with respect to the Option Land and during the term of this Option
Agreement (the "NCPA Waiver"). The NCPA Waiver shall be obtained and a copy thereof
provided to Optionee within a period of sixty (60) days following the Effective Date hereof,
failing in which Optionee may elect to terminate this Option Agreement by written notice to
Optionor. Optionee and Optionor agree to the terms set forth in Exhibit "B" as an inducement to
NCPA to secure the waiver referenced herein.
Optionee shall pay an Option Payment of $50,000 to Optionor within thirty (30) days of
the date of Optionee's receipt of a copy of the NCPA Waiver. Thereafter, on or before each
anniversary of the Effective Date, Optionee shall pay to Optionor the amount of $50,000.00
annually, in advance, for the ensuing year of Option Term unless prior to such an anniversary
this Option is terminated by written notice from Optionee to Optionor. Optionee shall be entitled
to prepay one or more years of Option Payments at any time. The amount of all Option
Payments paid by Optionee to Optionor shall not apply as a credit against rent if the Option is
exercised.
3. Method of Exercise of Option. This Option may be exercised only from and after
July 1, 2018 and following receipt of the NCPA Waiver and compliance with the California
Environmental Quality Act through a California Energy Commission approved process, and may
be exercised by Optionee providing written Notice of Exercise to Optionor at least 90 days prior
to the expiration of the Option Term. This option may only be exercised if Optionee has met all
of its obligations under this Option to Lease, including making all option payments. A Notice of
Exercise shall designate and provide a legal description of not less than a 15 acre portion nor
more than a 25 acre portion of the Option Land, which shall constitute the leased premises.
Within sixty (60) days of Optionor's receipt of a proper Notice of Exercise from Optionee,
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Optionor and Optionee shall enter into a ground lease substantially in the form attached hereto as
Exhibit "C" (the "Lease") for the term, rental, and upon the covenants and conditions therein set
forth.
4. Limited Rights of Entry During Option Term. Prior to Optionee's exercise of this
Option, Optionee may, upon providing at least 48 hours prior written notice to Optionor, enter
upon the Option Land through its employees, agents and contractors to conduct activities to
evaluate the suitability of such property to install a Compressed Air Energy Storage Facility, as
described in Section 2 of the Lease, including, without limitation, collection of data, taking soil
samples, surveying (including environmental, biological and cultural surveys). Optionee agrees
to save and hold Optionor free and harmless from and to defend and indemnify Optionor against
any loss and damage which shall be caused by any wrongful or negligent act or omission of
Optionee or its contractors, agents or employees in the course of their employment; provided,
however, that this indemnity shall not extend to that portion of such loss or damage that shall
have been caused by Optionor's active negligence or willful misconduct.
5. Optionor's Representations and Warranties. Optionor makes the following
representations and warranties, which are material and relied upon by Optionee and which shall
be true and correct as of the Effective Date and as of the Effective Date of the Lease should the
Option be exercised:
a. Title. Optionor holds fee simple title to and agrees to defend such title to
the Option Land, subject to all covenants, conditions, restrictions, easements, reservations, and
rights-of-way of site and/or record. Should Optionor hereafter acquire any additional right, title
or interest in or to such property, it shall be subject to the provisions hereof to the same extent as
if owned by Optionor on the Effective Date. Optionor does not otherwise warrant title, either
expressly or by implication, to the Option Land save and except for covenants, conditions,
restrictions, easements, reservations, and rights-of-way which are not of record and which were
created by, through or under Optionor.
b. No Litigation. Excepting recurring RWQCB permit renewals, no
litigation, administrative proceeding or similar hearing is pending or, to the best of Optionor's
knowledge, threatened or anticipated with respect to the Option Land or affecting such property.
c. Hazardous Substances. Excepting nitrates and treated and untreated
industrial and residential wastewater, to the best of Optionor's knowledge, there are no
Hazardous Substances on or under the Option Land. Excepting nitrates, and a false positive that
arose during the LEC environmental review, Optionor has not received any notice of violation,
administrative complaint, judicial complaint, or other notice (i) alleging that conditions on such
property are or have been in violation of any Environmental Law, (ii) informing Optionor that
such property is subject to investigation or inquiry regarding the presence of Hazardous
Substances or (iii) alleging a potential violation of any Environmental Law. However, Tenant
acknowledges that the Option land is used and has been used to treat and dispose of domestic
and industrial wastewater. Tenant agrees to perform its own environmental studies prior to
exercising its Option and will rely exclusively on its environmental studies in determining
whether to exercise its option.
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As used in this Option Agreement, the term `Environmental Law" means any
federal, state or local law, statute, ordinance, or regulation pertaining to health, industrial
hygiene, or environmental conditions, and any other federal, state or local law, statute,
ordinance, or regulation now in effect or hereinafter enacted which pertains to health, industrial
hygiene, or the regulation or protection of the environment, including without limitation, ambient
air, soil, ground water, surface water, and/or land use. As used in this Option Agreement, the
term "Hazardous Substance" means any material, waste, substance, pollutant, or contaminant
which may or could pose a risk of entry or threat to health or the environment, including without
limitation, any material regulated by any Environmental Law, including any material or
substance which is defined as a "hazardous substance", "hazardous waste", "hazardous
material", "extremely hazardous waste", "restricted hazardous waste", or "toxic substance" or
words of similar import under any applicable Environmental Law.
d. Power and Authority. Optionor has the full power and authority to enter
into this Option Agreement and to perform Optionor's obligations hereunder, and this Option
Agreement does not violate any contract, agreement, instrument, judgment or order to which
Optionor is a party or the Option Land is subject, and Optionor has obtained all consents to this
Option Agreement as may be necessary under such contracts, agreements, instruments,
judgments and/or orders. Optionor has the unrestricted right and authority and has taken all
necessary action to authorize Optionor to execute this Option Agreement and grant to Optionee
the rights granted hereunder. Each person signing this Option Agreement on behalf of Optionor
is authorized to do so and all persons having any ownership interest in the Option Land are
signing this Option Agreement. All of the documents executed by Optionor will be duly
authorized, executed and delivered by Optionor. When signed by Optionor, this Option
Agreement constitutes a valid and binding agreement enforceable against Optionor and the
Option Land in accordance with its terms. All representations in this paragraph are subject to the
exceptions set forth in paragraph 2.
e. Access. The Option Land has access to a public road, and there are no
proceedings pending, or to the best of Optionor's knowledge, threatened against the Option Land
that would impair or curtail such access.
6. Obligations of Optionor. Optionor shall:
a. Allow Optionee reasonable access to the Option Land to exercise the
limited rights of entry provided under Section 4 hereof so long as Optionee is not in default
under the terms of this Option Agreement.
b. Not engage in or allow any activity on the Option Land that would impede
or decrease the ability of Optionee to construct and operate the Project as defined in Section 2 of
the Lease or otherwise interfere with Optionee's rights under this Option Agreement, including,
without limitation, Optionee's right to access the Option Land.
c. Not encumber the Option Land in any way that may impair Optionee's
rights under this Option Agreement.
d. Provide Optionee with keys or with the combinations to any locks on
exterior gates on the Option Land.
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7. Assignment. This Option Agreement shall extend to and be binding upon the
heirs, assigns, executors, administrators, personal representatives, and successors of the parties
hereto. Optionor may assign, transfer, and convey, either in whole or in part, its ownership or
interest in the Option Land, rights, privileges and interests therein; but no change in ownership of
the Option Land shall be binding upon the Optionee until the instrument conveying title thereto
shall have been properly recorded in the Official County Records and a certified copy thereof
shall have been furnished to the Optionee. Optionee shall have the right to assign or transfer this
Option Agreement subject to obtaining the prior written consent of Optionor which shall not be
unreasonably withheld, conditioned or delayed. Any such assignment or transfer shall be subject
to all of the terms, covenants and conditions of this Option Agreement. Optionee shall provide
written notice to Optionor of any assignment of Optionee's interest hereunder, including the
name, address and phone number of the party receiving the assignment, provided that failure to
give such notice shall not constitute a default under this Option Agreement. No assignment shall
release Optionee from its obligations hereunder unless and until such assignment is to the
entirety of this Option Agreement in which event Optionee shall be released from all obligations
hereunder except from obligations already accrued at the effective date and time of such
assignment.
8. Notices. Any notice to be given or other document to be delivered by either party
to the other party may be given by personal delivery or nationally recognized overnight courier
or may be deposited in the United States mail in the State of California, duly registered or
certified, with postage prepaid, and addressed to the party for whom intended as follows:
TO OPTIONOR: City Manager, City of Lodi
221 West Pine Street
Lodi, CA 95240
TO OPTIONEE:
If to PG&E by U.S. Mail or by registered or certified mail, return receipt requested:
Manager, Land Management
PG&E Land & Environmental Management
P.O. Box 770000, Mail Code N10A
San Francisco, CA 94177
If to PG&E by delivery by hand or overnight courier:
Manager, Land Management
PG&E Land & Environmental Management
245 Market St. Room 1036 San
Francisco, CA 94105
Either party hereto may from time to time by written notice to the other party designate a
different address which shall be substituted for the one specified above. If any notice or other
document is sent by registered or certified mail, as provided above, the same shall be deemed
served or delivered seventy-two (72) hours after the mailing thereof.
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9. Default. Optionor shall not exercise any right, power or remedy under this Option
Agreement, and under no circumstances shall Optionor terminate this Option Agreement, if: (i)
in the event of a default in the payment of any sum due under this Option Agreement the
Optionee pays such sum within twenty (20) days after receipt of a written notice specifying such
default from the Optionor; or (ii) in the event of any default other than the payment of any sum
due under this Option Agreement, the Optionee shall cure the default within thirty (30) days,
after receipt of written notice specifying such default from the Optionor or, if such default is not
susceptible of being cured within thirty (30) days, Optionee has commenced steps necessary to
cure the default and proceeds diligently to cure the default and demonstrates to Optionor's
reasonable satisfaction that it can cure the default within a commercially reasonable time.
10. Negotiation: Mediation. Except as provided in this Section, Optionor and
Optionee agree to first negotiate and then mediate with respect to any claim or dispute arising out
of or relating to this Option Agreement, before resorting to court action. Either party may initiate
settlement negotiations by providing written notice to the other party, setting forth the subject of
the claim or dispute. Optionee and Optionor agree to cooperate in scheduling negotiations and to
participate in the settlement negotiations in good faith. If Optionor and Optionee fail to settle
such claim or dispute within thirty (30) days after the date of mailing of the notice initiating
settlement negotiations or within such additional time period as the parties may agree in writing
(the "Negotiation Period"), the parties agree to submit the matter to JAMS for mediation within
thirty (30) days thereafter. Either party may commence mediation by providing to JAMS and the
other party a written request for mediation, setting forth the subject of the claim or dispute and
the relief requested (the "Mediation Notice"). Except as provided herein or by written agreement
of the parties, the mediation shall be conducted in San Francisco pursuant to the JAMS rules.
The parties will cooperate in selecting a mediator from the JAMS panel of neutrals, and in
scheduling the mediation proceedings. If the parties do not select a mediator within thirty (30)
days of the Mediation Notice, the parties agree that either party may request that JAMS in San
Francisco, California, facilitate the choice of mediator by applying the "strike and rank" process
used for appointment of arbitrators in arbitration proceedings, or to appoint a mediator, if
necessary, and both parties agree to the appointment of such mediator as so selected. The parties
agree to participate in the mediation in good faith, and to share equally in its costs. All offers,
promises, conduct and statements, whether oral or written, made in the course of the mediation
by either of the parties, their employees, agents, experts and attorneys, and by the mediator and
any other JAMS employees, are confidential, privileged and inadmissible for any purpose,
including impeachment, in any litigation or other proceeding involving the parties, but evidence
that is otherwise admissible or discoverable shall not be rendered inadmissible or non -
discoverable as a result of its use in the mediation. If JAMS should no longer exist at the time the
claim or dispute arises, the matter shall be submitted to its successor entity, or if there is no such
successor entity, to the American Arbitration Association or other similar organization mutually
agreed upon by the parties, and except as provided herein or by mutual agreement of the parties,
the mediation rules of such successor or alternate organization shall apply. Except as may be
expressly set forth in any written settlement agreement, should the matter be settled by
negotiation or mediation prior to commencing court action, each party shall pay its own
attorneys' fees and costs. Except as provided below, neither party may commence an action
arising out of or relating to this Option Agreement until expiration of the Negotiation Period and
completion of the initial mediation session in accordance with this Section. If either party
commences an action with respect to a claim or dispute covered by this Section without first
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attempting to resolve the matter through negotiation and mediation, or refuses to negotiate or
mediate after a request has been made, then that party shall not be entitled to recover attorneys'
fees and costs, even if such fees and costs would otherwise be available to that party in such
action. Either party may seek equitable relief to preserve the status quo prior to participating in
the negotiation and mediation proceedings required pursuant to this Section. In addition, matters
that are within the jurisdiction of probate, small claims, or bankruptcy court are excluded from
mandatory negotiation and mediation hereunder. The provisions of this Section may be enforced
by any court of competent jurisdiction, and the party seeking enforcement shall be entitled to an
award of all fees and costs, including reasonable attorneys' fees, to be paid by the party against
which enforcement is ordered. The covenants of Optionee and Optionor contained in this Section
10 shall survive the termination of this Agreement.
11. Governing Law. This Option Agreement, its validity, construction and all rights
under it shall be governed by the laws of the State of California and without reference to the
choice of law principles of the State of California or any other state.
12. Insurance. Prior to any entry on the Property pursuant to the terms of this Option
Agreement, prior to Optionee's commencement of operations on the Property and thereafter so
long as this Option Agreement is in effect or if the option to purchase is exercised, Optionee
shall, at Optionee's expense, obtain and maintain in force commercial general liability insurance
in a combined single limit of not less than Two Million Dollars ($2,000,000.00) for bodily
injury, personal injury and property damage covering Optionee's activities on the Property.
Optionee shall have the right to self -insure with respect to the foregoing insurance requirements.
Optionee's self-insurance program shall meet all requirements set forth in Exhibit "D" at all
times during the Option Term.
If Optionee acquires commercial general liability insurance from an independent
insurer, Optionee shall provide Optionor with a certificate of insurance evidencing the required
Commercial General Liability insurance and naming Optionor as an additional insured.
13. Interpretation. The Parties agree that the terms and provisions of this Option
Agreement embody their mutual intent and that such terms and conditions are not to be
construed more liberally in favor of, or more strictly against, either Party.
14. Required Actions of Optionor and Optionee. Optionor and Optionee agree to
execute such instruments and documents and to diligently undertake such actions as may be
required in order to consummate the transaction herein contemplated.
15. Entire Agreement. This Option Agreement, together with its attached exhibits,
contains the entire agreement between the Parties with respect to the subject matter hereof, and
any prior or contemporaneous agreements, discussions or understandings, written or oral
(including any options or agreements for leases and/or easements previously entered into by the
Parties with respect to all or any portion of the Option Land), are superseded by this Option
Agreement and shall be of no force or effect. No addition or modification of any term or
provision of this Option Agreement shall be effective unless set forth in writing and signed by
each of the Parties.
16. Memorandum. The Parties shall execute and record a memorandum of this
Option Agreement in the form attached to this Agreement as Exhibit "E".
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17. No Joint Venture. Neither this Option Agreement nor any agreements or
transactions contemplated hereby shall be interpreted as creating any partnership, joint venture,
association or other relationship between the Parties, other than that of optionor and optionee
with respect to this Option Agreement and grantor and grantee with respect to the easements.
18. Counterparts; Facsimiles. This Option Agreement may be executed, and any
memorandum thereof recorded, in two or more counterparts, each of which shall be deemed an
original and all of which, when taken together, shall constitute one and the same instrument.
Each Party shall be entitled to rely upon executed copies of this Option Agreement transmitted
by facsimile or email to the same and full extent as the originals.
19. No Offsets. Optionor acknowledges that Optionee is executing this Option
Agreement in its capacity as the developer of a Compressed Air Energy Storage Facility, and not
in its capacity as the provider of electricity and natural gas to the Property. Notwithstanding
anything to the contrary contained herein, no act or omission of Pacific Gas and Electric
Company or its employees, agents or contractors as a provider of electricity and natural gas shall
abrogate, diminish, or otherwise affect the respective rights, obligations and liabilities of
Optionor and Optionee under this Option Agreement. Further, Optionee covenants not to raise
as a defense to its obligations under this Option Agreement, or assert as a counterclaim or cross-
claim in any litigation or arbitration between Optionor and Optionee relating to this Option
Agreement, any claim, loss, damage, cause of action, liability, cost or expense (including,
without limitation, attorneys' fees) arising from or in connection with Pacific Gas and Electric
Company's provision of (or failure to provide) electricity and natural gas.
20. Lesser Interest Clause. If the Optionor owns a less interest in the Option Land
than the entire and undivided fee simple estate therein, then the various payments referred to in
this Option Agreement shall be proportionately reduced.
21. Surrender. Optionee, at its option, may at any time quitclaim and surrender its
rights hereunder to the Optionor in which event this Option Agreement shall be at an end, and
Optionee shall be relieved of all obligations thereunder except the obligations then accrued.
22. Force Majeure. Performance of the covenants and conditions imposed upon the
parties hereunder shall be excused while, and to the extent that, said party is hindered in or
prevented from complying therewith, in whole or in part, by war, riots, strikes, walkouts, action
of the elements, laws, rules, and regulations of any federal, state, municipal or other
governmental agency or any other cause beyond the control of the party, whether similar or
dissimilar to those herein specifically enumerated without regard to whether such cause exists at
the date hereof or hereafter arises; provided, however, that party shall provide written notice to
the other party of any claim of suspension or excuse of the party's obligations under this section,
specifying with particularity the act, event, or condition giving rise to such claim of suspension
or excuse and specifying the date on which such act, event, or condition arose.
[Signatures follow on the next page]
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OPTIONOR:
CITY OF LODI, a municipal corporation
By:
Its: City Manager
Date:
OPTIONEE:
PACIFIC GAS AND ELECTRIC COMPANY
By:
Its:
Date:
ATTEST:
Jennifer M. Ferraiolo, City Clerk
Approved As To Form:
Janice D. Magdich, City Attorney
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PARCEL ONE:
THAT PORTION OF THE FOLLOWING DESCRIBED REAL PROPERTY, LYING WESTERLY OF AND
CONTIGUOUS TO THE WESTERLY UTNE OF THAT CERTAIN PORTION THEREOF, CONVEYED TO THE
STATE OF CAL 1 0RNIA. BY DEB) RECORDED MAY 15, 1968. IN vfl u. ' 3709 PAI F 776, SAN JOAQUIN
COUNTY RECORDS;
BEGINNING AT AN IRON ROD, AT THE INTERSECTION OF THE NORTH LINE OF SOUTH 1/2 OF SECTION
24, TOWNSHIP 3 NORTH RANGE 5 EAST, MOUNT DIAELO BASE AND HERRMAN WITH THE 11143TERLY
RIGHT OF WAY LINE OF COUNTY ROAD, KNCNVN A5 MOSEL Y/THORNTON ROAD, SAID ROD BEING AT
THE NORTHEAST CORNER OF THAT CERTAIN TRACT OF LAND ACQLIDRED BY TIE CITY OF LODI, MOM
GEORGE W. BIDE. ET.AL, BY DEED RECORDED RUNE 19. 1944, IN Vnr:1AFMal PacF tai, OF OFFICIAL
RECORDS, AND AS SAID ROD IS INDICATED ON MAP OF SURVEY, F1IED FOR RECORD APRIL 28, 1947,
IN vOUAlly. PAGE 9, RECORD OF SURVEYS; THENCE SOUTH 89 58' WEST. ALONG THE NORTH LIE OF
SAID CJTY OF LODI PARC., AND ITS WESTERLY PROJECTION, 5,075.5 FEET TO A POINT: THERM
NORTH 0 34' WEST, ALONG A FENCE LINE, 1317.0 FEET TO TIE FENCE UNE ON THE NORTH LINE OF
THAT CERTAD4 TRACT OF LAND ACQUIRED 8Y GEORGE W. BEE. ET. AL, Ran CLYDE O. FOX, BY
DEED RECORDED OCTOBER 24, 1944, IN VOIul.N 902. PAGRi N. OF OFFIC AL RECORDS, SAID FENCE
LINE BEING ON THE SOUTH UNE OF THE LAND KNOWN A5 THE TREDWAY RANCH; THETA NORTH 89
54 1/2' EAST, ALONG SAID LIE, 3660.4 FEET TO THE WESTERLY RIGHT OF WAY UNE OF SAID
MOSELEY/THORNTON ROAD; THENCE SOUTHEASTERLY ALONG SAID WESTERLY RIGHT OF WAY LIME,
ON A CURVE TO THE LIFT, THROUGH A CENTRAL ANGLE OF 12 391/2',RADW5 OF 3584.02 FEE TO
THE BID OF CURVE; THENCE SOUTHH 49 48' EAST, ALONG SAID WESTERLY RIGHT OF WAY UNE.
1165.2 FST, TO THE POINT OF BEGINNING.
PARD . TWO:
THAT PORTION OF THE Fell -OWING D1 REAL PROPERTY. LYING EASTERLY OF AND
CONTIGUOUS TO THE EASTERLY L E1E OF THAT COMM PORTION CONVEYED TO THE STATE OF
CALIFORNIA. BY DEED RECORDED APRIL 14, 1970, IN VcA).1141 3344. PAGE 1, SAN JOAQUIN COUNTY
RECORDS:
f1EGINNING AT AN IRON ROD. AT THE SOUTHWEST COINER CF THE EAST 1/2 OF THE SOUTHEAST
QUARTER OF SECTION 23, TOWNSHIP 3 NORTH, RANGE 5 EAST, MOUNT DIABLO ERASE AND
AMMAN, SAID ROD LEING AT TIE SOUTHWEST PROPERTY CORNER OF THAT CERTAIN TRACT OF
LAND, ACQUIRED BY TIE CITY OF 1.001, FROM GEORGE W. BIDE, ET. AL., BY DEED RECORDED RIPE
19, 1977, IN VOR.UME AU, PAGE i i, SAN JOAQUIN COUNTY REO3RD5. AND AS INDICAIU) ON MAP OF
SURVEY, FRED FOR RECORD APRIL 28, 1947,114 vnt Mir 7 PAGE 9, RECORD OF SURVEYS: THENCE
NORTH 00 03 1/2 WEST, ALONG THE WEST UNE OF SAID CITY OF LODI PARCEL, 2637.25 FEET, TO AN
IRON ROD AT THE NORTHWEST CORNER OF SAID EAST 1/2; THENCE SOUTH 89 58' WEST, ALONG THE
NORTH UNE OF SAID SOUTHEAST 1/4 AND 1T5 WESTERLY PROJECTION, 1607.3 FST, TOA POINT ON
THE NORTH LINE OF PROPERTY ACQUIRED BY GEORGE W. BIDE. ET.AL.. FROM LULU F. BRCS BY
DEED RECORDED RINE 19, 1944,114 VOLU6A! tt7 PAGE ss, SAN JOAQUIN COUNTY RECORDS; THENCE
SOUTH 89 541/2 WEST. ALONG SAID NORTH LINE, 1017.0 FEET TO A POINT; THENCE SOUTH 89 58
1/2' WEST, ALONG SAID NORTH UNE, 2476.4 TETT, TO THE NORTHWEST CORNER OF SAID NORTH
1
{00968894}.7
12/11/15
EXHIBIT "B"
OPTION WAIVER AGREEMENT
Recitals:
A. The City of Lodi, a municipal corporation and Pacific Gas and Electric Company, a
California corporation ("PG&E") entered into an Option to Lease ("Option") land for the
purpose of developing and constructing a Compressed Air Energy Storage Facility
("CAES Project") at the City's White Slough Water Pollution Control Facility ("White
Slough") on , 2016. The Option is subject to certain rights held by Northern
California Power Agency ("NCPA") which also owns power production facilities that
transmit power on transmission facilities starting at the Lodi Energy Center up to and
including the substation at 8 Mile Road ("Node") that would be used by the CAES
Project. NCPA is not willing to waive its rights without measures that would mitigate
NCPA's exposure to regulatory charges for congestion within the Node caused by the
operation of the CAES Project.
B. The Option gives PG&E the qualified right to lease between 15 and 25 acres at White
Slough at a cost of either $135,000 per acre per year if PG&E elects not to receive
reclaimed water from the City or $140,000 per acre per year if PG&E elects to receive
reclaimed water from the City for a total lease value of $ 2.025 million to $3.5 million per
year depending on the number of acres exercised with the Option and whether water is
supplied to the CAES Project from White Slough.
C. The Lodi -Eight Mile 230 kV circuit is currently experiencing significant local congestion
and the need to re -conductor the 2.2 mile segment, to minimize the local congestion, is
currently assigned to the CAISO Queue Cluster 6 generators of which NCPA is one of
the generators.
D. City has several water supply obligations at White Slough including those owed to
NCPA. NCPA is concerned that construction of the CAES Project, if it utilizes water
from the White Slough, could impact the City's ability to meet its water supply obligations
to NCPA.
Operative Terms:
1. In the event that NCPA is charged congestion fees for congestion in the Node after re-
conductoring of the 2.2 mile segment of the Lodi -Eight Mile 230kV segment currently
assigned to CAISO Queue Cluster 6 is completed and within 5 years of the CAES
Project coming on line that are 5% over and above those paid on average within the last
5 years by NCPA after the 2.2 mile segment was re-conductored as part of the CAISO
Queue Cluster 6, PG&E or its assignee agrees that it will work through the CAISO
1
process to perform the work necessary to upgrade the capacity of the Node, to minimize
local congestion by the amount of capacity determined by the CAISO process required
to re-establish system conditions to the CAISO Queue Cluster 6 conditions prior to the
CAES Project coming on-line within _ years of NCPA providing PG&E receipt of the
over and above charges.
2. Further, in the event that NCPA is charged congestion fees after the CAES Project
comes on line, for congestion in the Node after re-conductoring of the 2.2 mile segment
of the Lodi -Eight Mile 230kV segment currently assigned to CAISO Queue Cluster 6 is
completed and within 5 years of the CAES Project coming on line that are 5% over and
above those paid on average within the last 5 years by NCPA after the 2.2 mile segment
was re-conductored as part of the CAISO Queue Cluster 6, Lodi agrees to pay to NCPA
a total not to exceed $10,000,000 to offset actual congestion charges from the CAES
Project lease proceeds as they paid to Lodi without interest. In other words Lodi will
reimburse congestion fees solely from CAES Project lease proceeds as they come in
and without interest on any initially short payments. In the event, that the congestion
charges exceed $10,000,000 before which time the necessary upgrades have been
completed by the CAISO to address the congestion incurred subsequent to the CAES
Project coming on line, PG&E or its assignee, will pay the incremental congestion
charges above the $10,000,000. At such time the necessary upgrades have been
completed, there will be no further obligation on the part of City of Lodi or PG&E to
reimburse the NCPA for congestion charges.
3. If PG&E or its assignee elects to utilize water from the White Slough for operations at the
CAES Project, it will construct and complete an 8 million gallon Title 22 Treated
Wastewater Storage Tank and conveyance system to serve Lodi's water users on
property owned by and designated by the City of Lodi to be used exclusively by the City
to meet its various water supply obligations at White Slough. The Storage Tank shall be
completed and operational prior to operation of the CAES Project and shall be dedicated
to the City of Lodi. If PG&E or Assignee elects not to utilize its right to the water from
White Slough, it has no obligation to construct the additional water storage tank
identified herein.
4. NCPA will waive its rights set forth in Paragraph's 22.2 and 22.3 of the Ground Lease
between the City of Lodi and NCPA.
2
EXHIBIT "C"
GROUND LEASE
THIS LEASE, entered into this day of 20 , by and between the
CITY OF LODI, a municipal corporation ("Landlord"), and PACIFIC GAS AND ELECTRIC
COMPANY, a California corporation ("Tenant").
1. Premises. Landlord leases to Tenant and Tenant leases from Landlord that real property
in the City of Lodi, County of San Joaquin, California, described in Exhibit A attached hereto
and made a part hereof, and Landlord hereby grants to Tenant an easement for the term and
extended term of this Lease for underground air pipelines and gas pipelines and underground or
overhead transmission and utility lines along the routes identified on Exhibit "B" attached hereto,
together with a temporary construction easement ("TCE") upon the terms and conditions set
forth in Section 16 hereof within the 5 and 2.5 acre areas depicted on Exhibit "B" attached
hereto. The premises leased to Tenant are referred to in this Lease as the "Leased Premises" or
the "Premises."
2. Use. Tenant shall have the use of the Leased Premises for the purpose of the
construction, operation and maintenance of an Compressed Air Energy Storage Facility
consisting of: (i) a compressor station for the compression and injection of air into an offsite
subsurface depleted gas field; (ii) an electric generating plant; (iii) control, office building and
corporate yard for operation and maintenance; (iv) an electric substation; and (v) necessary or
convenient ancillary facilities, and incidental ancillary uses that are a part of and support the
Electric Conversion Facility (the "Project").
3. Term: Extension. The term of this Lease shall commence on , 20
("Commencement Date"), and shall terminate, unless earlier terminated in accordance with the
provisions of this Lease, on a date fifty (50) years from the Commencement Date. Tenant's right
to exclusive possession shall commence on the Commencement Date. Tenant shall have the
right to extend the term of this Lease on all the terms and conditions set forth herein for an
additional period of forty-nine (49) years, to be exercised by written notice to Landlord during
the last year of the initial term of this Lease.
4. Rent.
(A) Annual Rent. Rent payments will begin on an annual basis as provided below.
Tenant shall pay to Landlord the initial rent within sixty (60) days of the
Commencement Date with the written notice of Cooling Election provided for in
Section 9.(A) hereof and thereafter or before each anniversary of the
Commencement Date during the term of this Lease, in advance. The annual rent
shall be One Hundred Forty Thousand DOLLARS ($140,000.00) per acre of
Leased Premises per year if Tenant elects to construct a Water Cooled Electric
Conversion Facility, or One Hundred Thirty Five Thousand DOLLARS
($135,000.00) per acre of Leased Premises per year if Tenant elects to construct a
Dry Cooled Electric Conversion Facility for _ acres for a total annual rent of
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(B) Rental Adjustments. Commencing with the first anniversary of the
Commencement Date and on each such anniversary thereafter rent shall be
adjusted, up or down, in a percentage equal to the percentage increase or decrease
in the U.S. Department of Labor's Consumer Price Index for the San Francisco
Oakland Urban Area, All Goods/All Consumers (the Index"), for the prior one
year period using the Indices published nearest in time prior to each relevant
anniversary.
(C) Payments. All rent to be paid by Tenant to Landlord shall be in lawful
money of the United States of America and shall be paid without deduction or
offset, prior notice or demand, and at such place or places as may be designated
from time to time by Landlord.
5. tit i 1 it ies. During the term of this Lease, Tenant agrees to pay all charges and expenses in
connection with utility services and to protect Landlord and the Leased Premises from all such
charges and expenses.
6. Repairs and Maintenance.
(A) At all times during the term of this Lease, Tenant shall, at its cost and
expense, maintain the Leased Premises and all improvements thereon in good
order and repair and safe condition, including but not limited to, fences and
roadways predominantly used by Tenant. Tenant shall keep Landlord apprised of
the volume and nature of truck traffic upon the demised premises.
(B) Landlord shall not be obligated to make changes, alterations, additions or repairs
in, on or about the Leased Premises or any part hereof or any improvements
installed thereon. Tenant waives all provisions of law that may impose a duty of
repair on Landlord.
(C) Tenant shall indemnify and save harmless Landlord against all actions,
claims and damages by reason of (1) Tenant's failure to perform the terms of this
paragraph, or (2) Tenant's nonobservance or nonperformance of any law,
ordinance or regulation applicable to the Leased Premises, (3) any damages
caused by Tenant to the non -leased portion of Landlord's property including
access roads, property of other tenants, wastewater facilities and improvements;
(4), any costs to cure impacts to, rerouting of or replacement of Landlord's and
its existing tenant's known and unknown facilities and improvements that arise
during construction of the plant; (5) and any liability or duty to repair imposed by
the laws of California.
(D) Tenant agrees to construct a perimeter fence around the Leased Premises
according to the specifications attached as Exhibit "C".
7. Covenant Against Liens and Claims. Tenant shall not allow or permit to be
enforced against the Leased Premises or any part thereof, any mechanic's, materialmen's,
contractor's or subcontractor's liens arising from any claim growing out of work of any
construction, repair, restoration, operation, replacement or improvement, or any other claim or
demand no matter how the same may arise except where caused by the active negligence or
willful misconduct of Landlord or its employees. Tenant shall pay or cause to be paid all of said
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liens, claims or demands before any lawsuit is brought to enforce them against the Leased
Premises. Tenant agrees to indemnify and hold the Landlord and the Leased Premises free and
harmless from all liability for any and all such liens, claims and demands, together with
reasonable attorneys' fees and all costs and expenses incurred by Landlord in connection
therewith. Tenant shall require all construction contractors working on the Leased Premises to
provide performance bonds in the amount of 100 percent of the contract value and labor and
material bonds in the amount of 50% of the contract value. Tenant shall include terms in all of
its contracts during the term of this lease that the property is owned by a governmental entity and
not subject to Mechanics Liens and that the bond is their sole and exclusive remedy.
8. Insurance and Indemnity.
(A) Landlord's Non -liability. Landlord shall not be liable for any loss, damage
or injury of any kind to any person or property arising from any use of the Leased
Premises, or any part thereof, or caused by any defect in any building, structure or
other improvement thereon or in any equipment or other facility therein, or caused
by or arising from any act or omission of Tenant or any of its agents, employees,
licensees or invitees, or by or from any accident on the Leased Premises or any
fire or other casualty thereon, or occasioned by the failure of Tenant to maintain
the Leased Premises and all improvements thereto in a safe condition, or arising
from any other cause except where caused by the active negligence or willful
misconduct of Landlord, or its employees.
(B) Indemnification of Landlord. Notwithstanding anything to the contrary
contained in this Lease, and irrespective of any insurance carried by Tenant for
the benefit of Landlord under the terms of this Lease, Tenant agrees to protect,
indemnify and hold the Landlord and the Lease Premises harmless from any and
all damages and liabilities at any time occasioned by or arising out of (1) Tenant's
use of the Leased Premises, (2) any wrongful or negligent act or omission of
Tenant, or of its agents or employees in the course of their employment, or (3)
any state or condition of the Leases Premises or any part hereof, save and except
for any hazardous condition that may exist on the Leased Premises as of the
Commencement Date of this Lease; provided, however, that this indemnity shall
not extend to that portion of such damage or liability that shall have been caused
by Landlord's comparative negligence or willful misconduct. This provision shall
survive the termination or expiration of this Lease.
(C) Liability Insurance. Tenant shall procure and maintain at all times during the
term of this Lease, at its sole cost and expense, a policy or policies of commercial
public liability insurance by the terms of which Landlord and Tenant are named
as insured and are indemnified against liability for damage or injury to property or
person, including death, of any person entering upon or using the Leased Premises
or any improvements thereon or any part thereof, with a combined single limit for
bodily injury and property damage in an amount of not less than TEN MILLION
DOLLARS ($10,000,000.00) as further set forth in Exhibit "D" to this Lease.
Such public liability insurance policy or policies shall be stated to be primary and
noncontributing with any insurance which may be carried by Landlord and shall
contain a provision that the Landlord, although named as an insured shall
nevertheless be entitled to recover under that policy for any loss, injury or damage
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to the Landlord, its agents and employees or the property of such persons by
reason of the negligence of Tenant. Tenant shall have the right to self -insure with
respect to the foregoing insurance requirements provided that Tenant's self-
insurance program meets all requirements set forth in Exhibit "D" at all times
during the term of this Lease.
(D) Certificate of Insurance. All policies of insurance procured and maintained
by Tenant hereunder shall be issued by companies having not less than Best's A:
Class X rating and shall be issued in the name of the Landlord and Tenant for the
mutual and joint benefit and protection of the parties. Executed copies of all
insurance policies or a certificate thereof shall contain a provision that not less
than thirty (30) days' written notice shall be given to Landlord prior to the
cancellation, reduction of coverage, expiration or any material change in any such
policy.
(E) Failure to Provide Insurance. If Tenant fails or refuses to procure or to
maintain insurance as required by this Lease or fails or refuses to furnish
Landlord with required proof that the insurance has been procured and is in force
and paid for, Landlord shall have the right at Landlord's election, upon ten (10)
days advance written notice, to procure and maintain such insurance. The
premiums paid by Landlord shall be treated as added rent due from Tenant with
interest at the Bank of America prime rate, to be paid within thirty (30) days of
demand. Landlord shall give prompt notice of the payments of such premiums,
stating the amounts paid and the names of the insurer or insurers.
(F) Waiver of Subrogation. Tenant hereby releases landlord and their
respective representatives, from any claims for damage to any person or to the
Premises and the improvements which may be located upon the Premises and to
the fixtures, personal property, tenant's improvements and alterations of tenant in
or on the Premises and the improvements which may be located upon the
Premises that are caused by or result from risks insured against under any
insurance policies carried by the tenant and in force at the time of any such
damage. Tenant shall cause each insurance policy obtained by it to provide that
the insurance company waives all right of recovery by way of subrogation against
landlord in connection with any damage covered by any policy, provided
obtaining such a waiver in each such policy is then available at a reasonable
charge. Neither party hereto shall be liable to the other for any damage caused by
fire or any of the risks insured against under any insurance policy required by this
Lease.
9. Landlord's Covenants.
(A) PG&E shall elect by written notice to Landlord within sixty (60) days of the
Commencement Date (the "Cooling Election") whether to construct a Dry Cooled
Electric Conversion Facility and not receive the supply of reclaimed water as
described in Section 9.(B), or, to construct a Water Cooled Electric Conversion
Facility and receive the supply of reclaimed water as described in Section 9.(B).
Annual Rent shall be established as set forth in Section 4.(A) of the Lease.
(B) Water Supply. Landlord shall make available to Tenant, at no charge to
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Tenant, up to one thousand (1000) acre feet per year of reclaimed water from the
White Slough Treatment Plant, at a flow rate of not less than 893,000 gallons per
24 hour day. Tenant shall have exclusive responsibility for managing its daily
water needs including storage and pumping of any daily water in excess of the
daily 893,000 gallon supply. Tenant shall have the option to reject all or any
portion of the daily flow. Tenant acknowledges that Landlord's water supply is
subject to uncertainties associated with plant upsets, regulatory orders,
mechanical and material failures. Landlord shall have no liability to deliver water
in the event for such events as long as landlord diligently proceeds to remedy the
cause of the failure.
(C) Discharge of Water. Landlord shall accept Tenant's industrial wastewater
in an amount not to exceed 1,200,000 gallons per day from the Project into the
White Slough Water Pollution Control Facility or other suitable treatment plant,
within reasonable distance, at the Landlord's then existing industrial or domestic
rate as applicable based on the wastewater's constituents. Tenant shall pay all
applicable impact and connection fees, and the cost to construct the facilities from
the Project to the treatment plant. Landlord's obligation to accept the waste shall
be subject to the terms of a discharge permit by Landlord. Per current permit
requirements and the result of a 2013 USEPA compliance inspection, the City is
updating the local Limits for industrial dischargers to be approved by the Central
Valley RWQCB. Any discharged wastewater must meet any and all local limits
and all limits required by the Central Valley RWQCB as amended from time to
time. Tenant shall also pay the Art In Public Places Fees and Wastewater Impact
and Connection Fees in place at the time of connection.
(D) Continuing Obligations. The obligations of Landlord set forth in Sections 9.(B)
and 9.(C) above shall continue throughout the term and extended term of this
Lease notwithstanding any sale or transfer of a Landlord owned treatment plant
providing such service to Tenant. The sale or transfer of any such treatment plant
by Landlord shall be made expressly subject to such obligations.
10. Repair and Restoration. If during the term of this Lease any building or improvement on
the Leased Premises or any part thereof shall be damaged or destroyed by fire or other casualty,
Tenant may, at its sole cost and expense, repair or restore the same or may elect not to repair or
restore. If Tenant elects not to repair or restore, Tenant may elect to terminate this Lease by
written notice to Landlord, but Tenant shall not be entitled to reimbursement of any rental paid in
advance. Tenant waives the provisions of Civil Code Sections 1932(2) and 1933(4) with respect
to any destruction of the Premises. Any monies received by Landlord as compensation for
damage or loss to improvements installed by Tenant on the Premises shall be paid to Tenant and
are hereby assigned to Tenant.
11. Assignment. This Lease shall extend to and be binding upon the heirs, assigns,
executors, administrators, personal representatives, and successors of the parties hereto.
Landlord may assign, transfer, and convey, either in whole or in part, its ownership or interest in
the land, rights, privileges and property covered by this Lease; but no change in ownership of the
Leased Premises shall be binding upon the Tenant until the instrument conveying title thereto
shall have been property recorded in the Official County Records and a certified copy thereof
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shall have been furnished to Tenant. Tenant shall have the right to assign, sublease or otherwise
transfer all or any portion of this Lease (the right to finance Project development and operation
activities by having a security interest placed on the Tenant's interest is governed by Section 14,
below) subject to Landlord's prior written consent which shall not be unreasonably withheld,
conditioned or delayed; provided, however, that any and all such assignments or transfers shall
be subject to all of the terms, covenants and conditions of this Lease. Moreover, any assignee or
transferee shall be adequately capitalized to meet all of Tenant's obligations under this
Agreement. Tenant shall provide written notice to Landlord of any assignment or sublease of
Tenant's interest hereunder, including the name, address and phone number of the party
receiving the assignment or sublease, provided that failure to give such notice shall not constitute
a default under this Lease. No assignment shall release Tenant from its obligations hereunder
unless and until such assignment is to the entirety of this Lease in which event Tenant shall be
released from all obligations hereunder except from: obligations already accrued at the effective
date and time of such assignment.
12. Default. The occurrence of any one or more of the following events shall constitute a
default under this Lease by Tenant:
(A) Failure to pay an installment of rent or other sum;
(B) Failure to pay any insurance premium, lien, claim, demand, judgment or
other charge provided for in this Lease to be paid or caused to be paid by Tenant
at the time and in the manner as provided in this Lease;
(C) Failure to maintain the Leased Premises or cause the same to be maintained
as provided for in this Lease;
(D) Abandonment of the Leased Premises after completion of construction for a
continuous period of one hundred twenty (120) days; or
(E) Failure to perform or breach of any other covenant, condition or restriction
provided for in this Lease.
(F) Exceeding the waste discharge permit conditions.
13. Remedies in Event of Default. Upon any default of Tenant, and in the event the said
default is due to the failure of Tenant to make the payment of any installment of rent or other
sum when due, and in the event Tenant shall fail to remedy such default within twenty (20) days
after written notice to do so, or upon any other default by Tenant, and in the event that Tenant
shall fail to remedy such other default within thirty (30) days after written notice from Landlord
so to do specifying the nature of such default, or if such default cannot be cured within thirty
(30) days, Tenant has not commenced corrective action and prosecuted the same to completion
with due diligence, or in the event that the default is of such a nature that it cannot be cured by
any action of Tenant, then and in any of these events, in addition to any other remedy Landlord
may have by operation of law, Landlord shall have the right but not the obligation without any
further demand or notice to reenter the Leased Premises and eject all persons from the Leased
Premises, using due process of law, and immediately terminate Tenant's right to possession of
the Premises, and repossess the same by summary proceedings or other appropriate action, and
Landlord shall thereupon be entitled to receive from Tenant all damages allowed by law.
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14. Covenants for Lenders' Benefit. Tenant may at any time assign, sublicense, sublease, or
transfer to any lenders, banks or other commercial transferees (herein, "Lenders") or assign or
transfer to a Trustee a deed of trust for the benefit of any Lender or an agent for Lenders
("Agent") all or any part of Tenant's interest under this Lease without the consent of Landlord.
Tenant shall give written notice to Landlord of any such assignment, sublease or transfer, and of
any further assignment by any such Lender or Agent, providing in each case the name and
address of such Lender or Agent. Should Tenant assign, sublicense, sublease, or transfer any of
its interest as provided above, Tenant and Landlord expressly agree between themselves and for
the benefit of any Lenders or Agent for Lenders as follows:
(A) Landlord shall promptly deliver to Lenders or Agent a copy of any notice of
default hereunder sent to the Tenant under this Lease and agrees that any notice to
the Tenant of any default or intention by the Landlord to terminate this Lease
shall not be effective against the Lenders or Agent unless Landlord shall have
given to Lenders or Agent notice of such default or termination. Any such notice
(a "notice") to the Lenders or Agent shall be in writing, shall be addressed to
Lenders or Agent at their address designated in writing by notice to Landlord and
shall be deemed given or made upon the third business day following deposit
thereof in the mail, postage prepaid. The Lenders or Agent may by notice to the
Landlord change the address to which such notices, demands, requests or other
communication shall be given.
(B) Landlord shall not exercise any right, power or remedy under this Lease,
and under no circumstances shall the Landlord terminate this Lease, if, after
expiration of the applicable cure period for the Tenant after Tenant's receipt of a
written notice of default from Landlord pursuant to paragraph 12 hereof: (i) in the
event of a default in the payment of rent or other sum due under this Lease, the
Lenders or Agent pay or cause to be paid such rent or other sum within thirty (30)
days after receipt of a further written notice specifying such default from the
Landlord; or (ii) in the event of any default other than the payment of rent or other
sum due under this Lease, the Lenders or Agent shall cure or cause to be cured the
default within sixty (60) days after receipt of a further written notice specifying
such default from the Landlord or, if such default is not susceptible of being cured
within sixty (60) days, the Lenders or Agent have commenced steps necessary to
cure the default and proceed diligently to cure the default and the default can be
cured in a commercially reasonable time.
(C) If this Lease and Tenant's leasehold interest in the Property is sold, assigned
or transferred to the Lenders or Agent pursuant to the exercise of any right, power
or remedy reserved to the Lenders or Agent under a credit agreement or deed of
trust, the Lenders or Agent shall have the right to assign this Lease without the
Landlord's consent and upon such assignment the Lenders and Agent, if any, shall
be released from the performance of all obligations of the Tenant under this
Lease.
(D) If this Lease is terminated for any reason whatsoever, other than a
termination by reason of Lender's or Agent's failure to cure a default which is
susceptible of being cured pursuant to Paragraphs 12 and 14(B), hereof, the
Landlord shall, upon the request of the Lenders or Agent, immediately recognize
the Lenders or Agent or their or its nominee, purchaser, assignee or transferee as
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the Tenant under this Lease for the remainder of the term of this Lease and, in
such event, the Lenders or Agent or their or its nominee, purchaser, assignee, or
transferee shall be automatically substituted as the Tenant under this Lease.
(E) Landlord shall not consent to any modifications or amendments of this Lease
without the consent of the Lenders or Agent.
(F) Landlord certifies as of the date above first written and thereafter, in
accordance with Paragraph 14(G), hereof, that (i) this Lease is currently in full
force and effect and has not been modified, amended or revoked, and (ii) no
default, or event which with the giving of notice or the passage of time, or both,
would constitute a default under this Lease has occurred and is continuing.
(G) Tenant and/or Lenders or Agent shall have the right from time to time to
deliver to Landlord in accordance with Paragraph 17 of this Lease, a written
request ("Written Request") that Landlord confirm to Lenders or Agent (at the
address set forth in such Written Request) the certifications contained in
Paragraph 14(F), herein, or, alternatively, inform Agent of any exceptions that
have arisen with respect to the certifications contained in Paragraph 14(F), herein.
Should Landlord fail to respond within ten (10) days of its receipt of such Written
Request, Landlord (i) shall be deemed to have made the certifications contained in
Paragraph 14(F) of this Lease as of the date of such Written Request and (ii) shall
be estopped from claiming that any default or breach has occurred under this
Lease on or prior to the date of such Written Request unless landlord had no
knowledge of the breach or default.
15. Ownership of Improvements. Title to any buildings, improvements or fixtures which
may be placed on the Premises by Tenant shall remain in Tenant. Landlord agrees to
subordinate all rights, if any, which Landlord may have in any of such improvements to the
rights of Tenant. Tenant may remove the improvements at any time during the term of this
Lease. Any improvements remaining on the Premises after expiration or sooner termination of
the Lease shall at landlords election become the property of Landlord or be removed by Tenant
as provided in paragraph 17(D).
16. TCE. The TCE shall be subject to the following terms, covenants and conditions:
(A) Payment. Tenant shall pay to Landlord the sum of Fifty Thousand DOLLARS
($50,000.00) in lawful money of the United States of America for the TCE within
fifteen days of taking possession of the TCE.
(B) Term. The TCE shall commence on the Commencement Date and shall
terminate on the date of completion of construction of the Project and restoration
of the TCE utilized by Tenant, but in no event later than three (3) years from and
after the Commencement Date.
(C) Use. The TCE may be used for parking during construction, storage of
construction equipment and materials, and laydown/assembly areas.
(D) Restoration of TCE Utilized by Tenant. Upon completion of
construction of the Project, and in any event prior to the third anniversary of the
Commencement Date, Tenant shall remove any and all equipment, debris and
other materials placed upon the TCE Areas by or for Tenant and restore the
surface thereof to its condition prior to use by Tenant.
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(E) Applicability of Certain Provisions of the Lease. The provisions of Sections 6(A),
(B) and (C) and Sections 7, 8, 11, 12, 13, 17 and 18 of this Lease shall apply to
the TCE.
17. Miscellaneous.
(A) Negotiation; Mediation. Except as provided in this paragraph, Landlord
and Tenant agree to first negotiate and then mediate with respect to any claim or
dispute arising out of or relating to this Agreement, before resorting to court
action. Either party may initiate settlement negotiations by providing written
notice to the other party, setting forth the subject of the claim or dispute. Tenant
and Landlord agree to cooperate in scheduling negotiations and to participate in
the settlement negotiations in good faith. If Landlord and Tenant fail to settle such
claim or dispute within thirty (30) days after the date of mailing of the notice
initiating settlement negotiations or within such additional time period as the
parties may agree in writing (the "Negotiation Period"), the parties agree to
submit the matter to JAMS for mediation within thirty (30) days thereafter. Either
party may commence mediation by providing to JAMS and the other party a
written request for mediation, setting forth the subject of the claim or dispute and
the relief requested (the "Mediation Notice"). Except as provided herein or by
written agreement of the parties, the mediation shall be conducted in San
Francisco pursuant to the JAMS rules. The parties will cooperate in selecting a
mediator from the JAMS panel of neutrals, and in scheduling the mediation
proceedings. If the parties do not select a mediator within thirty (30) days of the
Mediation Notice, the parties agree that either party may request that JAMS in
San Francisco, California, facilitate the choice of mediator by applying the "strike
and rank" process used for appointment of arbitrators in arbitration proceedings,
or to appoint a mediator, if necessary, and both parties agree to the appointment of
such mediator as so selected. The parties agree to participate in the mediation in
good faith, and to share equally in its costs. All offers, promises, conduct and
statements, whether oral or written, made in the course of the mediation by either
of the parties, their employees, agents, experts and attorneys, and by the mediator
and any other JAMS employees, are confidential, privileged and inadmissible for
any purpose, including impeachment, in any litigation or other proceeding
involving the parties, but evidence that is otherwise admissible or discoverable
shall not be rendered inadmissible or non -discoverable as a result of its use in the
mediation. If JAMS should no longer exist at the time the claim or dispute arises,
the matter shall be submitted to its successor entity, or if there is no such
successor entity, to the American Arbitration Association or other similar
organization mutually agreed upon by the parties, and except as provided herein
or by mutual agreement of the parties, the mediation rules of such successor or
alternate organization shall apply. Except as may be expressly set forth in any
written settlement agreement, should the matter be settled by negotiation or
mediation prior to commencing court action, each party shall pay its own
attorneys' fees and costs. Except as provided below, neither party may commence
an action arising out of or relating to this Agreement until expiration of the
Negotiation Period and completion of the initial mediation session in accordance
3/7/2016 2:33 PM
with this paragraph. If either party commences an action with respect to a claim or
dispute covered by this paragraph without first attempting to resolve the matter
through negotiation and mediation, or refuses to negotiate or mediate after a
request has been made, then that party shall not be entitled to recover attorneys'
fees and costs, even if such fees and costs would otherwise be available to that
party in such action. Either party may seek equitable relief to preserve the status
quo prior to participating in the negotiation and mediation proceedings required
pursuant to this paragraph. In addition, matters that are within the jurisdiction of
probate, small claims, or bankruptcy court are excluded from mandatory
negotiation and mediation hereunder. The provisions of this paragraph may be
enforced by any court of competent jurisdiction, and the party seeking
enforcement shall be entitled to an award of all fees and costs, including
reasonable attorneys' fees, to be paid by the party against which enforcement is
ordered. The covenants of Tenant and Landlord contained in this paragraph 26
shall survive the termination of this Agreement.
(B) Waiver. No waiver of any breach of any of the terms, covenants,
agreements, restrictions or conditions of this Lease shall be construed as a waiver
of any succeeding breach of the same or other covenants, agreements, restrictions
and conditions hereof. No delay or omission of Landlord to exercise any right or
remedy shall be construed as a waiver of any such right or remedy or of any
default by Tenant under this Lease. The various rights and remedies reserved to
Landlord herein including those not specifically described in this Lease shall be
cumulative and, except as otherwise provided by California statutory law in force
at the time of execution of this Lease, Landlord may pursue any or all of such
rights and remedies whether at the same time or otherwise.
(C) Holding Over. If Tenant shall hold over the Leased Premises after the
expiration of the term hereof with the consent of Landlord, either express or
implied, such holding over shall be construed to be only a tenancy from month to
month, subject to all the covenants, conditions and obligations hereof, and Tenant
hereby agrees to pay to Landlord the same rental as provided in this Lease;
provided, however, that nothing herein contained shall be construed to give
Tenant any rights to so hold over and to continue in possession of the Leased
Premises after the expiration of the term hereof.
(D) Surrender at End of Term; Decommissioning. Upon the end of the term of
this Lease, as provided herein, or any extension thereof, or sooner termination of
this Lease, Tenant shall surrender to Landlord all and singular the Leased
Premises, and shall dismantle and remove all improvements and all fixtures and
equipment and return the property to its condition upon the date of
commencement of this Lease at Tenant's sole cost and expense, all within a
period of two (2) years.
(E) No Offsets. Landlord acknowledges that Tenant is executing this Agreement in
its capacity as the developer of a Compressed Air Energy Storage Facility, and
not in its capacity as the provider of electricity and natural gas to the Property.
Notwithstanding anything to the contrary contained herein, no act or omission of
Pacific Gas and Electric Company or its employees, agents or contractors as a
provider of electricity and natural gas shall abrogate, diminish, or otherwise affect
3/7/2016 2:33 PM
the respective rights, obligations and liabilities of Landlord and Tenant under this
Agreement. Further, Tenant covenants not to raise as a defense to its obligations
under this Agreement, or assert as a counterclaim or cross-claim in any litigation
or arbitration between Landlord and Tenant relating to this Agreement, any claim,
loss, damage, cause of action, liability, cost or expense (including, without
limitation, attorneys' fees) arising from or in connection with Pacific Gas and
Electric Company's provision of (or failure to provide) electricity and natural gas.
(F) Inspection. Landlord reserves the right for Landlord and Landlord's agents
and representatives to enter upon the Leased Premises at any reasonable time for
the purpose of attending to Landlord's interest hereunder, and to inspect the
Leased Premises.
(G) Relationship of Parties. The relationship of the parties hereto is that of Landlord
and Tenant, and it is expressly understood and agreed that Landlord does not in
any way nor for any purpose become a partner of Tenant or a joint venturer with
Tenant in the conduct of Tenant's business or otherwise.
(H) Time of the Essence. Time is expressly declared to be of the essence of this
Lease.
(I) Memorandum of Lease. This Lease shall not be recorded, but the parties
agree to execute and deliver a Memorandum of this Lease in recordable form,
which Memorandum shall be recorded.
(J) Quitclaim. At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord within five (5) days after
written demand from Landlord to Tenant any quitclaim deed or other document
required by any reputable title company to remove the cloud of this Lease from
the real property subject to this Lease.
(K) Number and Gender. Whenever the singular number is used in this Lease
and when required by the context, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders, and the word
"person" shall include corporation, firm or association. If there is more than one
Tenant, the obligations imposed under this Lease upon Tenant shall be joint and
several.
(L) Headings and Titles. The marginal headings or titles to the paragraphs of
this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.
(M) Entire Agreement. This Lease contains the entire agreement of the parties
hereto with respect to the matters covered hereby, and no other previous
agreement, statement or promise made by any party hereto which is not contained
herein shall be binding or valid.
(N) Force Majeure. Except as to the payment of rent, neither of the parties
hereto shall be chargeable with, liable for, or responsible to, the other for anything
or in any amount for any delay caused by fire, earthquake, explosion, flood,
hurricane, the elements, acts of God, or the public enemy, action or interference
of governmental authorities or agents, war, invasion, insurrection, rebellion, riots,
strikes, or lockouts or any other cause whether similar or dissimilar to the
foregoing, which is beyond the control of such parties and any delay due to said
3/7/2016 2:33 PM
causes or any of them shall not be deemed a breach of or default in the
performances of this Lease.
(0) Disclaimer of Representations. Except as otherwise specifically provided
herein, Landlord has made no representations or warranties to the Tenant
concerning the Leased Premises, the present use thereof or the suitability for
Tenant's intended use of the property. The foregoing disclaimer includes,
without limitation, topography, climate, air, water, water rights, utilities, present
and future zoning, soil, subsoil, drainage, access to public roads, proposed routes
of roads, or extension thereof, or effect of any state or federal environmental
protection laws or regulations. Tenant represents and warrants to Landlord that
he and his representatives have made or will made their own independent
inspection and investigation of the Leased Premises and Tenant, in entering into
this Lease, is relying solely on such inspection and investigation. No patent or
latent physical condition of Leased Premises, whether or not known or
discovered, shall affect the rights of either party hereto. Any agreement,
warranties or representations not expressly contained herein shall in no way bind
either Tenant or Landlord. Landlord and Tenant waive any right or rescission and
all claims for damages by reason of any statement, representations, warranty,
promise and agreement, if any, not contained in this Lease.
(P) Quiet Enjoyment. This Lease is subject and junior only to all existing
easements, covenants, conditions and restrictions and other matters and
encumbrances of record as of the date of this Lease. As long as Tenant is not in
default of any provision of this Lease. Tenant shall have quiet enjoyment of the
Premises.
(Q) Termination. Tenant may terminate this Lease at any time upon six (6)
months advance notice.
(R) City of Lodi to be Designated Point of Sale. All construction and purchase
contracts for the Project shall, to the extent commercially reasonable to do so,
include a point of sale clause identifying the City of Lodi as the point of sale for
all material and equipment purchases.
(S) Taxes. Tenant shall be responsible for payment of any possessory interest
taxes which may be assessed against the Leased Premises and for payment of any
personal property taxes assessed against the personal property of Tenant on the
Leased Premises.
(T) Governing Law. This Option Agreement, its validity, construction and all rights
under it shall be governed by the laws of the State of California and without
reference to the choice of law principles of the State of California or any other
state.
18. Payments and Notices. Any notice to be given or other document to be delivered by
either party to the other party may be given by personal delivery or nationally recognized
overnight courier or may be deposited in the United States mail in the State of California, duly
registered or certified, with postage prepaid, and addressed to the party for whom intended as
follows:
3/7/2016 2:33 PM
TO LANDLORD: City Manager, City of Lodi
221 West Pine Street
Lodi, CA 95240
TO TENANT:
If to PG&E by U.S. Mail or by registered or certified mail, return receipt requested:
Manager, Land Management
PG&E Land & Environmental Management
P.O. Box 770000, Mail Code N10A
San Francisco, CA 94177
If to PG&E by delivery by hand or overnight courier:
Manager, Land Management
PG&E Land & Environmental Management
245 Market St. Room 1036
San Francisco, CA 94105
Either party hereto may from time to time by written notice to the other party designate a
different address which shall be substituted for the one specified above. If any notice or other
document is sent by registered or certified mail, as provided above, the same shall be deemed
served or delivered seventy-two (72) hours after the mailing thereof
19. This Ground Lease has been executed on the date first set forth, to become effective as
provided for in paragraph 3 hereof.
LANDLORD:
CITY OF LODI, a municipal corporation
By:
Stephen Schwabauer
Its: City Manager
Date:
TENANT:
PACIFIC GAS AND ELECTRIC COMPANY
By:
Its:
Date:
3/7/2016 2:33 PM
ATTEST:
Jennifer M. Ferraiolo, City Clerk
Approved As To Form:
Janice D. Magdich, City Attorney
3/7/2016 2:33 PM
LNHIBrr "A"
PARCEL ONE:
THAT PORTION OF THE FOLLOWING DESCRIBED REAL PROPERTY. LYING WESTERLY OF AND
ODNIYOUOIIS TO THE WESTERLY LINE OF THAT CERTAIN PORTION THEREOF. CONVEYED TO THE
STATE OF CA /FORMA, BY DEED RECORDED MAY 15, 1968. IN vo * 3204_ Phar 274, SAH JOAQUIN
COUNTY RECORDS:
BEGINNING AT AN IRON ROD, AT THE INTERSECTION OF THE NORTH LIFE OF SOUTH 1/2 OF SECTION
24, TOWNSHIP 3 NORTH RANGE 5 EAST, MOUNT DIABLO BASE AND MERIDIAN WITH THE WESTERLY
RIGHT OF WAY LIIHE OF COUNTY ROAD, KNOWN AS MOSELEY/]NORNTON ROAD. SAID ROD BEING AT
THE NORTHEAST CORNER OF THAT CERTAIN TRACT OF LAND ACQUIRED BY THE CITY OF L001, FROM
GEORGE W. EIDE, ET.AL., BY DEED RECORDED JUNE 19, 1944, IN OF OFFICIAL
RECORDS, AND AS SAID ROD 15 MIMED ON MAP OF SURVEY, FILED FOR RECORD APRIL 28, 1947,
84 Vo4UM! 7, WA 9, RECORD OF SURVEYS: THENCE SOUTH 89 58' WEST, ALONG THE NORTH LINE OF
SAID CITY OF LODE PAR($, AND 17S WESTERLY PROJECTION. 5,075.5 FEET TO A POINT; THENCE
NORTH 0 34' WEST, ALONG A FENCE UNE, 1317.0 FEET TO THE FENCE LINE ON THE NORT}t LONE OF
THAT CERTAIN TRACT OF LAND ACQUIRED BY GEORGE W. ELIDE. ET. AL., FROM CLYDE O. FOX. BY
DEED RECORDED OCTOBER 24, 1944,14 VOLUME 902. PACE 16, OF OFTICIAL RECORDS, SAID FENCE
LINE BEING ON THE SOUTH LINE OF THE LAND KNOWN AS THE TRECWAY RANCH: THENCE NORTH 89
54 1/2' EAST. ALONG SAID LIFE, 3660.4 FEET TO THE WESTERLY RIGHT OF WAY LINE OF SAID
MOSIREY/TNORNTON ROAD; TINB4CE SOUTHEASTERLY ALONG SAID WESTERLY RIGHT OF WAY LINE,
ON A CURVE TD THE LEFT, THROUGH A CENTRAL MGM OF 12 391/2'.RADRS OF 3584.02 FEE TO
THE END OF CURVE HENCE SOUTH 49 48' EAST, ALONG SAID WESTERLY RIGHT OF WAY UNE,
1165.2 FEET, 10 THE POINT OF BEGINNING.
PARCEL 'TWO:
THAT PORTION OF THE FOLLOWING DESCRIBED REAL. PROPERTY, LYING EASTERLY OF AND
CONTIGUOUS TO THE EASTERLY LIFE OF THAT CERTAIN PORTION. CONVEYED TO THE STATE OF
CALIFORNIA. BY DEED RECORDED APRIL 14, 1970,1N VOLUME 3344_ PAGE SAN 3OAQUIN COUNTY
RECORDS:
BEGINNING AT AN IR061 ROD. AT THE SOUTHWEST CORNER OF THE EAST 1/2 OF THE SOUTHEAST
QUARTER OF SECTION 23, TOWNSHIP 3 NORTH, RANGE 5 EAST, MOUNT DIABLO BASE AND
MERIDIAN. SAID ROD BEING AT TIE SOUTHWEST PROPERTY CORNER OF THAT CERTAIN TRACT OF
LAND, ACQUIRED BY THE CITY OF LODI, FROM GEORGE W. EPEE, ET. AL, BY DEED RECORDED IUNE
19, 1977,111 y00.MNE VIM PAGE 141, SAN JOAQU1H COUNTY RECORDS, AND AS INDICATED ON MIP OF
SURVEY, FILED FOR RECORD APRIL 28. 1947, IN VD►I W 7 PAGE 9, RECORD OF SURVEYS; THENCE
NORTH 00 03 1/2' WEST, ALONG THE WEST LINE OF SAID CITY OF LODI PARCEL, 2637.25 FEET, TO AN
IRON RCD AT THE NORTHWEST CORNER OF SAID EAST 1/2; THENCE SOUTH 89 58' WEST, ALONG THE
NORTH UNE OF SAID SOUTHEAST 1/4 AND ITS WIS TERLY PROJECTION, 1607.3 FEET, TO A POINT ON
THE NORTH UNE OF PROPERTY ACQUIRED BY GEORGE W. BIDE, ET.AL., FROM UJLU F. RINDS. BY
Dm RBOOROED JUNE 19, 1944. IN yauzglizaArzug, SAN iOAQUIN COUNTY RECORDS; THENCE
SOUTH 89 541/2' YAW, ALONG SAID NORTH LINE, 1017.0 FEET TO A PONT; THENCE SOUTH 89 58
1/2' WEST, ALONG 5A1D NORTH LINE, 24764 FST, TO THE NORTHIM M T CORNER OF SAID NORTH
1
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)W1EiIBTT
RECORDING RNWORM ew Net
MEN RECORDED MAL TU.
Iwo Manager, Land Management
PG&E Land a Enwwanmental Management
AMPS SS
246 Mulct.' Street. Room 1036
utr,
■!A] C
LP Lei*
San Fremise°. CA 64106
[SPACE A8OVE Tres UNE RESERVED FOR RECORDER'. usEY
SIESIORAMIUM OF ELECTRIC CONVERSION FACILITY SUE OPTION TO LEASE
ACREEMENT
FOR VALUABLE CONSIDERATION, the maps mod aderoteey ofwb h is botchy aclmawledged, the
wrdersizntd lathdoaikt(s) COO:Iow ). avd Pacific Cas and Elecbic Company. a Califomia corporation
("Operoee'). have entered into an Electric Canvrr~lion Facility Site Option to Lore Agreement under rvInch
Optiaoor =tamed and hereby tom, to Optiaoee the right to limbos is fee simple that oaf Baal property
described =Exhibit it "A" attached heebo, all upon the WEN, examen and oxalic= set hit in such
Electric Censer-,im Facility Site Option to Uwe Agreement which to= and conations am incarparated
henna by the; reference- Such Elector Comrr:roo Facility Site Op i n m lease Agreement is dated effective
the _ day of . 2014 (the °'Effectin Dom").
OPTIONOR:
City el
a municipal corporatine
BT
(Title)
OPTIOINI'Z:
PACIFIC CAS AM/ ELECTRIC COh PRAY
Tide:
{00968894},7 12/11/15
Exhibit 2
GROUND LEASE
THIS LEASE, entered into this day of , 20, by and between the
CITY OF LODI, a municipal corporation ("Landlord"), and PACIFIC GAS AND ELECTRIC
COMPANY, a California corporation ("Tenant").
1. Premises. Landlord leases to Tenant and Tenant leases from Landlord that real property
in the City of Lodi, County of San Joaquin, California, described in Exhibit A attached hereto
and made a part hereof, and Landlord hereby grants to Tenant an easement for the term and
extended term of this Lease for underground air pipelines and gas pipelines and underground or
overhead transmission and utility lines along the routes identified on Exhibit "B" attached hereto,
together with a temporary construction easement ("TCE") upon theterms and conditions set
forth in Section 16 hereof within the 5 and 2.5 acre areas depicted on Exhibit "B" attached
hereto. The premises leased to Tenant are referred to in this Lease as the "Leased Premises" or
the "Premises."
2. Use. Tenant shall have the use of the Leased Premises for the purpose of the
construction, operation and maintenance of an Compressed Air Energy Storage Facility
consisting of: (i) a compressor station for the compression and injection of air into an offsite
subsurface depleted gas field; (ii) an electric generating plant; (iii) control, office building and
corporate yard for operation and maintenance; (iv) an electric substation; and (v) necessary or
convenient ancillary facilities, and incidental ancillary uses that are a part of and support the
Electric Conversion Facility (the "Project").
3. Term: Extension. The term of this Lease shall commence on , 20
("Commencement Date"), and shall terminate, unless earlier terminated in accordance with the
provisions of this Lease, on a date fifty (50) years from the Commencement Date. Tenant's right
to exclusive possession shall commence on the Commencement Date. Tenant shall have the
right to extend the term of this Lease on all the terms and conditions set forth herein for an
additional period of forty-nine (49) years, to be exercised by written notice to Landlord during
the last year of the initial term of this Lease.
4. Rent.
(A) Annual Rent. Rent payments will begin on an annual basis as provided below.
Tenant shall pay to Landlord the initial rent within sixty (60) days of the
Commencement Date with the written notice of Cooling Election provided for in
Section 9.(A) hereof and thereafter or before each anniversary of the
Commencement Date during the term of this Lease, in advance. The annual rent
shall be One Hundred Forty Thousand DOLLARS ($140,000.00) per acre of
Leased Premises per year if Tenant elects to construct a Water Cooled Electric
Conversion Facility, or One Hundred Thirty Five Thousand DOLLARS
($135,000.00) per acre of Leased Premises per year if Tenant elects to construct a
Dry Cooled Electric Conversion Facility for acres for a total annual rent of
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(B) Rental Adjustments. Commencing with the first anniversary of the
Commencement Date and on each such anniversary thereafter rent shall be
adjusted, up or down, in a percentage equal to the percentage increase or decrease
in the U.S. Department of Labor's Consumer Price Index for the San Francisco
Oakland Urban Area, All Goods/All Consumers (the Index"), for the prior one
year period using the Indices published nearest in time prior to each relevant
anniversary.
(C) Payments. All rent to be paid by Tenant to Landlord shall be in lawful
money of the United States of America and shall be paid without deduction or
offset, prior notice or demand, and at such place or places as may be designated
from time to time by Landlord.
5. Utilities. During the term of this Lease, Tenant agrees to pay all charges and expenses in
connection with utility services and to protect Landlord and the Leased Premises from all such
charges and expenses.
6. Repairs and Maintenance.
(A)
(B)
(C)
(D)
At all times during the term of this Lease, Tenant shall, at its cost and
expense, maintain the Leased Premises and all improvements thereon in good
order and repair and safe condition, including but not limited to, fences and
roadways predominantly used by Tenant. Tenant shall keep Landlord apprised of
the volume and nature of truck traffic upon the demised premises.
Landlord shall not be obligated to make changes, alterations, additions or repairs
in, on or about the Leased Premises or any part hereof or any improvements
installed thereon. Tenant waives all provisions of law that may impose a duty of
repair on Landlord.
Tenant shall indemnify and save harmless Landlord against all actions,
claims and damages by reason.of (1) Tenant's failure to perform the terms of this
paragraph, or (2) Tenant's nonobservance or nonperformance of any law,
ordinance or regulation applicable to the Leased Premises, (3) any damages
caused by Tenant to the non -leased portion of Landlord's property including
access roads, property of other tenants, wastewater facilities and improvements;
(4), any costs to cure impacts to, rerouting of or replacement of Landlord's and
its existing tenant's known and unknown facilities and improvements that arise
during construction of the plant; (5) and any liability or duty to repair imposed by
the laws of California.
Tenant agrees to construct a perimeter fence around the Leased Premises
according to the specifications attached as Exhibit "C".
7. Covenant Against Liens and Claims. Tenant shall not allow or permit to be
enforced against the Leased Premises or any part thereof, any mechanic's, materialmen's,
contractor's or subcontractor's liens arising from any claim growing out of work of any
construction, repair, restoration, operation, replacement or improvement, or any other claim or
demand no matter how the same may arise except where caused by the active negligence or
willful misconduct of Landlord or its employees. Tenant shall pay or cause to be paid all of said
3/7/2016 2:33 PM
liens, claims or demands before any lawsuit is brought to enforce them against the Leased
Premises. Tenant agrees to indemnify and hold the Landlord and the Leased Premises free and
harmless from all liability for any and all such liens, claims and demands, together with
reasonable attorneys' fees and all costs and expenses incurred by Landlord in connection
therewith. Tenant shall require all construction contractors working on the Leased Premises to
provide performance bonds in the amount of 100 percent of the contract value and labor and
material bonds in the amount of 50% of the contract value. Tenant shall include terms in all of
its contracts during the term of this lease that the property is owned by a governmental entity and
not subject to Mechanics Liens and that the bond is their sole and exclusive remedy.
8. Insurance and Indemnity.
(A) Landlord's Non -liability. Landlord shall not be liable for any loss, damage
or injury of any kind to any person or property arising from any use of the Leased
Premises, or any part thereof, or caused by any defect in any building, structure or
other improvement thereon or in any :equipment or other facility therein, or caused
by or arising from any act or omission of Tenant or anyof its agents, employees,
licensees or invitees, or by or from any accident on the Leased Premises or any
fire or other casualty thereon, or occasioned by the failure of Tenant to maintain
the Leased Premises and all improvements thereto in a safe condition, or arising
from any other cause: except where caused'by the active negligence or willful
misconduct of Landlord,' or its employees.
(B) Indemnification of Landlord. Notwithstanding anything to the contrary
contained in this Lease, and irrespective of any insurance carried by Tenant for
the benefit of Landlord under the terms °of this Lease, Tenant agrees to protect,
indemnify and hold the Landlord and the Lease Premises harmless from any and
all damages and liabilities at any time occasioned by or arising out of (1) Tenant's
use of the Leased Premises, (2) any wrongful or negligent act or omission of
Tenant, or efts agents or employees in the course of their employment, or (3)
any state or condition of the Leases Premises or any part hereof, save and except
for any hazardous condition that may exist on the Leased Premises as of the
Commencement Date of this Lease; provided, however, that this indemnity shall
not extend to that portion of such damage or liability that shall have been caused
by Landlord's comparative negligence or willful misconduct. This provision shall
survive the termination or expiration of this Lease.
(C) Liability Insurance.. Tenant shall procure and maintain at all times during the
term of this Lease, at its sole cost and expense, a policy or policies of commercial
public liability insurance by the terms of which Landlord and Tenant are named
as insured and`are indemnified against liability for damage or injury to property or
person, including death, of any person entering upon or using the Leased Premises
or any improvements thereon or any part thereof, with a combined single limit for
bodily injury and property damage in an amount of not less than TEN MILLION
DOLLARS ($10,000,000.00) as further set forth in Exhibit "D" to this Lease.
Such public liability insurance policy or policies shall be stated to be primary and
noncontributing with any insurance which may be carried by Landlord and shall
contain a provision that the Landlord, although named as an insured shall
nevertheless be entitled to recover under that policy for any loss, injury or damage
3/7/2016 2:33 PM
to the Landlord, its agents and employees or the property of such persons by
reason of the negligence of Tenant. Tenant shall have the right to self -insure with
respect to the foregoing insurance requirements provided that Tenant's self-
insurance program meets all requirements set forth in Exhibit "D" at all times
during the term of this Lease.
(D) Certificate of Insurance. All policies of insurance procured and maintained
by Tenant hereunder shall be issued by companies having not less than Best's A:
Class X rating and shall be issued in the name of the Landlord and Tenant for the
mutual and joint benefit and protection of the parties. Executed copies of all
insurance policies or a certificate thereof shall contain a provision that not less
than thirty (30) days' written notice shall be given to Landlord prior to the
cancellation, reduction of coverage, expiration or any material change in any such
policy.
(E) Failure to Provide Insurance. If Tenant fails or refuses to procure or to
maintain insurance as required by this Lease or fails or refuses to furnish
Landlord with required proof that the insurance has been procured and is in force
and paid for, Landlord shall have the right at Landlord's election, upon ten (10)
days advance written notice, to procure and maintain such insurance. The
premiums paid by Landlord shall be treated as added rent due from Tenant with
interest at the Bank of America prime rate, to be paid within thirty (30) days of
demand. Landlord shall give prompt notice of the payments of such premiums,
stating the amounts paid and the names of the insurer or insurers.
(F) Waiver of Subrogation. Tenant hereby releases landlord and their
respective representatives, from any claims for damage to any person or to the
Premises and the improvements which may be located upon the Premises and to
the fixtures, personal property, tenant's improvements and alterations of tenant in
or on the Premises and the improvements which may be located upon the
Premises that are caused by or result from risks insured against under any
insurance policies carried by the tenant and in force at the time of any such
damage. Tenant shall cause each insurance policy obtained by it to provide that
the insurance company waives all right of recovery by way of subrogation against
landlord in connection with any damage covered by any policy, provided
obtaining such a waiver in each such policy is then available at a reasonable
charge. Neither party hereto shall be liable to the other for any damage caused by
fire or any of the risks insured against under any insurance policy required by this
Lease.
9. Landlord's Covenants.
(A) PG&E shall elect by written notice to Landlord within sixty (60) days of the
Commencement Date (the "Cooling Election") whether to construct a Dry Cooled
Electric Conversion Facility and not receive the supply of reclaimed water as
described in Section 9.(B), or, to construct a Water Cooled Electric Conversion
Facility and receive the supply of reclaimed water as described in Section 9.(B).
Annual Rent shall be established as set forth in Section 4.(A) of the Lease.
(B) Water Supply. Landlord shall make available to Tenant, at no charge to
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Tenant, up to one thousand (1000) acre feet per year of reclaimed water from the
White Slough Treatment Plant, at a flow rate of not less than 893,000 gallons per
24 hour day. Tenant shall have exclusive responsibility for managing its daily
water needs including storage and pumping of any daily water in excess of the
daily 893,000 gallon supply. Tenant shall have the option to reject all or any
portion of the daily flow. Tenant acknowledges that Landlord's water supply is
subject to uncertainties associated with plant upsets, regulatory orders,
mechanical and material failures. Landlord shall have no liability to deliver water
in the event for such events as long as landlord diligently proceeds to remedy the
cause of the failure.
(C) Discharge of Water. Landlord shall accept Tenant's industrial wastewater
in an amount not to exceed 1,200,000 gallons per day from the Project into the
White Slough Water Pollution Control Facility or other suitable treatment plant,
within reasonable distance, at the Landlord's then existing industrial or domestic
rate as applicable based on the wastewater's constituents. Tenant shall pay all
applicable impact and connection fees, and the cost to construct the facilities from
the Project to the treatment plant. Landlord's obligation to accept the waste shall
be subject to the terms of a discharge permit by Landlord. Per current permit
requirements and the result of a 2013',USEPA compliance inspection, the City is
updating the local Limits for industrial dischargers to be approved by the Central
Valley RWQCB. Any discharged wastewater must meet any and all local limits
and all limits required by the Central Valley RWQCB as amended from time to
time. Tenant shall also pay the Art In Public Places Fees and Wastewater Impact
and Connection Fees in place at the time, of connection.
(D) Continuing Obligations. The obligations of Landlord set forth in Sections 9.(B)
and 9.(C) above shall continue throughout the term and extended term of this
Lease notwithstanding any sale or transfer of a Landlord owned treatment plant
providing such service to Tenant. The sale or transfer of any such treatment plant
by Landlord shalibe made expressly subject to such obligations.
10. Repair and Restoration. If during the term of this Lease any building or improvement on
the Leased Premises or any part thereof shall be damaged or destroyed by fire or other casualty,
Tenant may, at its sole cost and expense,' repair or restore the same or may elect not to repair or
restore. If Tenant elects not to repair or restore, Tenant may elect to terminate this Lease by
written notice to Landlord, but Tenant shall not be entitled to reimbursement of any rental paid in
advance. Tenant waives: the provisions of Civil Code Sections 1932(2) and 1933(4) with respect
to any destruction of the Premises. Any monies received by Landlord as compensation for
damage or loss to improvements installed by Tenant on the Premises shall be paid to Tenant and
are hereby assigned to Tenant.
11. Assignment. This Lease shall extend to and be binding upon the heirs, assigns,
executors, administrators, personal representatives, and successors of the parties hereto.
Landlord may assign, transfer, and convey, either in whole or in part, its ownership or interest in
the land, rights, privileges and property covered by this Lease; but no change in ownership of the
Leased Premises shall be binding upon the Tenant until the instrument conveying title thereto
shall have been property recorded in the Official County Records and a certified copy thereof
3/7/2016 2:33 PM
shall have been furnished to Tenant. Tenant shall have the right to assign, sublease or otherwise
transfer all or any portion of this Lease (the right to finance Project development and operation
activities by having a security interest placed on the Tenant's interest is governed by Section 14,
below) subject to Landlord's prior written consent which shall not be unreasonably withheld,
conditioned or delayed; provided, however, that any and all such assignments or transfers shall
be subject to all of the terms, covenants and conditions of this Lease. Moreover, any assignee or
transferee shall be adequately capitalized to meet all of Tenant's obligations under this
Agreement. Tenant shall provide written notice to Landlord of any assignment or sublease of
Tenant's interest hereunder, including the name, address and phone number of the party
receiving the assignment or sublease, provided that failure to give such notice shall not constitute
a default under this Lease. No assignment shall release Tenant from its obligations hereunder
unless and until such assignment is to the entirety of this Lease in which event Tenant shall be
released from all obligations hereunder except from: obligations already accrued at the effective
date and time of such assignment.
12. Default. The occurrence of any one or nrore of the following events shall constitute a
default under this Lease by Tenant:
(A) Failure to pay an installment of rentor other sum;
(B) Failure to pay any insurance premium, lien, claim, demand, judgment or
other charge provided:=for in this Lease to-be:paid or caused to be paid by Tenant
at the time and in the manner as provided in this Lease;
(C) Failure to maintain the Leased Premises or cause the same to be maintained
as provided for in this Lease;
(D) Abandonment ofthe Leased Premises attervompletiorl of construction for a
continuous period of one hundred- twenty (1120) -days; or
(E) Failure to. perform or breach of any other covenant, condition or restriction
provided for -in this Lease.
(F) Exceeding the waste:discharge permit -conditions.
13. Remedies in Event of Default. Upon any default of Tenant, and in the event the said
default is due to the failure of Tenant to make the payment of any installment of rent or other
sum when due, and in the event Tenant shall fail to remedy such default within twenty (20) days
after written notice to do so, or upon any other default by Tenant, and in the event that Tenant
shall fail to remedy such other default within thirty (30) days after written notice from Landlord
so to do specifying the nature of such default, or if such default cannot be cured within thirty
(30) days, Tenant has not commenced corrective action and prosecuted the same to completion
with due diligence, or in the event that the default is of such a nature that it cannot be cured by
any action of Tenant, then and in any of these events, in addition to any other remedy Landlord
may have by operation of law, Landlord shall have the right but not the obligation without any
further demand or notice to reenter the Leased Premises and eject all persons from the Leased
Premises, using due process of law, and immediately terminate Tenant's right to possession of
the Premises, and repossess the same by summary proceedings or other appropriate action, and
Landlord shall thereupon be entitled to receive from Tenant all damages allowed by law.
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14. Covenants for Lenders' Benefit. Tenant may at any time assign, sublicense, sublease, or
transfer to any lenders, banks or other commercial transferees (herein, "Lenders") or assign or
transfer to a Trustee a deed of trust for the benefit of any Lender or an agent for Lenders
("Agent") all or any part of Tenant's interest under this Lease without the consent of Landlord.
Tenant shall give written notice to Landlord of any such assignment, sublease or transfer, and of
any further assignment by any such Lender or Agent, providing in each case the name and
address of such Lender or Agent. Should Tenant assign, sublicense, sublease, or transfer any of
its interest as provided above, Tenant and Landlord expressly agree between themselves and for
the benefit of any Lenders or Agent for Lenders as follows:
(A) Landlord shall promptly deliver to Lenders or Agent a copy of any notice of
default hereunder sent to the Tenant under this Lease and agrees that any notice to
the Tenant of any default or intention by the ,Landlord to terminate this Lease
shall not be effective against the Lenders or Agent unless Landlord shall have
given to Lenders or Agent notice of such default or termination. Any such notice
(a "notice") to the Lenders or Agent shall be in writing, shall be addressed to
Lenders or Agent at their address designated in writing by notice to Landlord and
shall be deemed given or made upon the third business day following deposit
thereof in the mail, postage prepaid. The Lenders or Agent may by notice to the
Landlord change the address to which such notices, demands, requests or other
communication shall=be�ven.
(B) Landlord shall not exercise any right, power or remedy under this Lease,
and under no circumstances shall the Landlord terminate this Lease, if, after
expiration of the applicable cure period for the Tenant after Tenant's receipt of a
written notice of default from Landlord pursuant to paragraph 12 hereof: (i) in the
event of a default in the payment of rent or other sum due under this Lease, the
Lenders or Agent pay or cause to be paid such rent or other sum within thirty (30)
days after receipt of a further written notice specifying such default from the
Landlord; or (ii) in the event of any default other than the payment of rent or other
sum due under this Lease, the Lenders: or Agent shall cure or cause to be cured the
default within sixty (60) days after•receipt ofa further written notice specifying
such default from the Landlord or, if such default is not susceptible of being cured
within sixty (60) days, the Lenders or Agent have commenced steps necessary to
cure the default and proceed diligently to cure the default and the default can be
cured in a commercially reasonable time.
(C) If this Lease and Tenant's leasehold interest in the Property is sold, assigned
or transferred to the Lenders or Agent pursuant to the exercise of any right, power
or remedy reserved to the Lenders or Agent under a credit agreement or deed of
trust, the Lenders or Agent shall have the right to assign this Lease without the
Landlord's consent and upon such assignment the Lenders and Agent, if any, shall
be released from the performance of all obligations of the Tenant under this
Lease.
(D) If this Lease is terminated for any reason whatsoever, other than a
termination by reason of Lender's or Agent's failure to cure a default which is
susceptible of being cured pursuant to Paragraphs 12 and 14(B), hereof, the
Landlord shall, upon the request of the Lenders or Agent, immediately recognize
the Lenders or Agent or their or its nominee, purchaser, assignee or transferee as
3/7/2016 2:33 PM
the Tenant under this Lease for the remainder of the term of this Lease and, in
such event, the Lenders or Agent or their or its nominee, purchaser, assignee, or
transferee shall be automatically substituted as the Tenant under this Lease.
(E) Landlord shall not consent to any modifications or amendments of this Lease
without the consent of the Lenders or Agent.
(F) Landlord certifies as of the date above first written and thereafter, in
accordance with Paragraph 14(G), hereof, that (i) this Lease is currently in full
force and effect and has not been modified, amended or revoked, and (ii) no
default, or event which with the giving of notice or the passage of time, or both,
would constitute a default under this Lease has occurred and is continuing.
(G) Tenant and/or Lenders or Agent shall have the right from time to time to
deliver to Landlord in accordance with Paragraph 17 of this Lease, a written
request ("Written Request") that Landlord confirm to Lenders or Agent (at the
address set forth in such Written Request) the certifications contained in
Paragraph 14(F), herein, or, alternatively, inform Agent of any exceptions that
have arisen with respect to the certifications contained in Paragraph 14(F), herein.
Should Landlord fail to respond within ten (10) days of its receipt of such Written
Request, Landlord (i) shall be deemed to have made the certifications contained in
Paragraph 14(F) of this Lease as of the date of such Written Request and (ii) shall
be estopped from claiming that any default ;or breach has occurred under this
Lease on or prior to the date of such Writteh;Request unless landlord had no
knowledge of the breach or default.
15. Ownership of Improvements. Title to any buildings, improvements or fixtures which
may be placed on the. Premises by Tenant shall remain in Tenant. Landlord agrees to
subordinate all rights, if any, which Landlord may have in any of such improvements to the
rights of Tenant. Tenant may remove the improvements at any time during the term of this
Lease. Any improvements remaining on the Premises after expiration or sooner termination of
the Lease shall at landlords election become the property of Landlord or be removed by Tenant
as provided in paragraph 17(D).
16. TCE. The TCE shall be subject to the following terms, covenants and conditions:
(A) Payment. Tenant ;shall pay to Landlord the sum of Fifty Thousand DOLLARS
($50,000.00) in l ful money of the United States of America for the TCE within
fifteen days of taking possession of the TCE.
(B) Term. The TCE shall commence on the Commencement Date and shall
terminate on the date of completion of construction of the Project and restoration
of the TCE utilized by Tenant, but in no event later than three (3) years from and
after the Commencement Date.
(C) Use. The TCE may be used for parking during construction, storage of
construction equipment and materials, and laydown/assembly areas.
(D) Restoration of TCE Utilized by Tenant. Upon completion of
construction of the Project, and in any event prior to the third anniversary of the
Commencement Date, Tenant shall remove any and all equipment, debris and
other materials placed upon the TCE Areas by or for Tenant and restore the
surface thereof to its condition prior to use by Tenant.
3/7/2016 2:33 PM
(E) Applicability of Certain Provisions of the Lease. The provisions of Sections 6(A),
(B) and (C) and Sections 7, 8, 11, 12, 13, 17 and 18 of this Lease shall apply to
the TCE.
17. Miscellaneous.
(A) Negotiation; Mediation. Except as provided in this paragraph, Landlord
and Tenant agree to first negotiate and then mediate with respect to any claim or
dispute arising out of or relating to this Agreement, before resorting to court
action. Either party may initiate settlement negotiations by providing written
notice to the other party, setting forth the subject .of the claim or dispute. Tenant
and Landlord agree to cooperate in scheduling negotiations and to participate in
the settlement negotiations in good faith. If Landlord and Tenant fail to settle such
claim or dispute within thirty (30) days after the date of mailing of the notice
initiating settlement negotiations or within such additional time period as the
parties may agree in writing (the "Negotiation Period"), the parties agree to
submit the matter to JAMS for mediation within thirty (30) days thereafter. Either
party may commence mediation by providing to JAMS and the other party a
written request for mediation, setting forth thesubject of the claim or dispute and
the relief requested (the "Mediation Notice"). Except as provided herein or by
written agreement of the parties, the mediation shall be conducted in San
Francisco pursuant to the JAMS rules. The parties will cooperate in selecting a
mediator from the JAMS panel of neutrals, and in scheduling the mediation
proceedings. If the parties do not select a mediator within thirty (30) days of the
Mediation Notice, the parties agree that, either party may request that JAMS in
San Francisco, California, facilitate the choice of mediator by applying the "strike
and rank" process used for appointment of arbitrators in arbitration proceedings,
or to appoint a mediator, if necessary, and both parties agree to the appointment of
such mediator asso selected. The parties agree to participate in the mediation in
good faith, and to share equally in its costs. All offers, promises, conduct and
statements, whether oral or written, made in the course of the mediation by either
of the parties, 'their employees, agents, experts and attorneys, and by the mediator
and any other JAMS employees, are confidential, privileged and inadmissible for
any purpose, including impeachment, in any litigation or other proceeding
involving the parties, but evidence that is otherwise admissible or discoverable
shall not be rendered inadmissible or non -discoverable as a result of its use in the
mediation. If JAMS should no longer exist at the time the claim or dispute arises,
the mattershallbe submitted to its successor entity, or if there is no such
successor entity, to the American Arbitration Association or other similar
organization mutually agreed upon by the parties, and except as provided herein
or by mutual agreement of the parties, the mediation rules of such successor or
alternate organization shall apply. Except as may be expressly set forth in any
written settlement agreement, should the matter be settled by negotiation or
mediation prior to commencing court action, each party shall pay its own
attorneys' fees and costs. Except as provided below, neither party may commence
an action arising out of or relating to this Agreement until expiration of the
Negotiation Period and completion of the initial mediation session in accordance
3/7/2016 2:33 PM
with this paragraph. If either party commences an action with respect to a claim or
dispute covered by this paragraph without first attempting to resolve the matter
through negotiation and mediation, or refuses to negotiate or mediate after a
request has been made, then that party shall not be entitled to recover attorneys'
fees and costs, even if such fees and costs would otherwise be available to that
party in such action. Either party may seek equitable relief to preserve the status
quo prior to participating in the negotiation and mediation proceedings required
pursuant to this paragraph. In addition, matters that are within the jurisdiction of
probate, small claims, or bankruptcy court are excluded from mandatory
negotiation and mediation hereunder. The provisions of this paragraph may be
enforced by any court of competent jurisdiction, and the party seeking
enforcement shall be entitled to an award of all fees and costs, including
reasonable attorneys' fees, to be paid by the party against which enforcement is
ordered. The covenants of Tenant and Landlord contained in this paragraph 26
shall survive the termination of this Agreement.
(B) Waiver. No waiver of any breach of any of the terms, covenants,
agreements, restrictions or conditions of this Lease shall be construed as a waiver
of any succeeding breach of the same or other covenants, agreements, restrictions
and conditions hereof. No delay or omission of Landlord to exercise any right or
remedy shall be construed as a waiver of any such right or remedy or of any
default by Tenant under this Lease. The various rights and remedies reserved to
Landlord herein including those not, specifically described in this Lease shall be
cumulative and, except as otherwise Provided by California statutory law in force
at the time of execution of this Lease; Landlord may pursue any or all of such
rights and remedies whether at the same time or otherwise.
(C) Holding Over. If Tenant shall hold over the Leased Premises after the
expiration of the term hereof with the consent of Landlord, either express or
implied, such holding over shall be construed to be only a tenancy from month to
month, subject to all the covenants, conditions and obligations hereof, and Tenant
hereby agrees to pay to Landlord the same rental as provided in this Lease;
provided, however, that nothing herein contained shall be construed to give
Tenant any rights to so hold over and to continue in possession of the Leased
Premises after the expiration of the term hereof.
(D) Surrender at End of Term; Decommissioning. Upon the end of the term of
this Lease, as provided herein, or any extension thereof, or sooner termination of
this Lease, Tenant 'Shall surrender to Landlord all and singular the Leased
Premises, and shall dismantle and remove all improvements and all fixtures and
equipment and return the property to its condition upon the date of
commencement of this Lease at Tenant's sole cost and expense, all within a
period of two (2) years.
(E) No Offsets. Landlord acknowledges that Tenant is executing this Agreement in
its capacity as the developer of a Compressed Air Energy Storage Facility, and
not in its capacity as the provider of electricity and natural gas to the Property.
Notwithstanding anything to the contrary contained herein, no act or omission of
Pacific Gas and Electric Company or its employees, agents or contractors as a
provider of electricity and natural gas shall abrogate, diminish, or otherwise affect
3/7/2016 2:33 PM
the respective rights, obligations and liabilities of Landlord and Tenant under this
Agreement. Further, Tenant covenants not to raise as a defense to its obligations
under this Agreement, or assert as a counterclaim or cross-claim in any litigation
or arbitration between Landlord and Tenant relating to this Agreement, any claim,
loss, damage, cause of action, liability, cost or expense (including, without
limitation, attorneys' fees) arising from or in connection with Pacific Gas and
Electric Company's provision of (or failure to provide) electricity and natural gas.
(F) Inspection. Landlord reserves the right for Landlord and Landlord's agents
and representatives to enter upon the Leased Premises at any reasonable time for
the purpose of attending to Landlord's interest hereunder, and to inspect the
Leased Premises.
(G) Relationship of Parties. The relationship of the parties hereto is that of Landlord
and Tenant, and it is expressly understood and agreed that Landlord does not in
any way nor for any purpose become a partner of Tenant or a joint venturer with
Tenant in the conduct of Tenant's business or otherwise.
(H) Time of the Essence. Time is expressly declared to be of the essence of this
Lease.
(I) Memorandum of Lease. This Lease shall not be -recorded, but the parties
agree to execute and deliver a Memorandum of this Lease in recordable form,
which Memorandum shall be recorded.
(J) Quitclaim. At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord within five (5) days after
written demand from Landlord to Tenant any quifelaim deed or other document
required by any reputable title company to remove the cloud of this Lease from
the real=:property subject to this Lease.
(K) Number and Gender. Whenever the singular number is used in this Lease
and when required by the context, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders, and the word
"person" shall include corporation, firm or association. If there is more than one
Tenant, the obligations imposed under this Lease upon Tenant shall be joint and
several.
(U.. Headings and Titles. The marginal headings or titles to the paragraphs of
this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part of this Lease.
(M) Entire Agreement. This Lease contains the entire agreement of the parties
hereto with.respect to the matters covered hereby, and no other previous
agreement, staternent or promise made by any party hereto which is not contained
herein shall be binding or valid.
(N) Force Majeure. Except as to the payment of rent, neither of the parties
hereto shall be chargeable with, liable for, or responsible to, the other for anything
or in any amount for any delay caused by fire, earthquake, explosion, flood,
hurricane, the elements, acts of God, or the public enemy, action or interference
of governmental authorities or agents, war, invasion, insurrection, rebellion, riots,
strikes, or lockouts or any other cause whether similar or dissimilar to the
foregoing, which is beyond the control of such parties and any delay due to said
3/7/2016 2:33 PM
causes or any of them shall not be deemed a breach of or default in the
performances of this Lease.
(0) Disclaimer of Representations. Except as otherwise specifically provided
herein, Landlord has made no representations or warranties to the Tenant
concerning the Leased Premises, the present use thereof or the suitability for
Tenant's intended use of the property. The foregoing disclaimer includes,
without limitation, topography, climate, air, water, water rights, utilities, present
and future zoning, soil, subsoil, drainage, access to public roads, proposed routes
of roads, or extension thereof, or effect of any state or federal environmental
protection laws or regulations. Tenant represents and warrants to Landlord that
he and his representatives have made or will made their own independent
inspection and investigation of the Leased Premises and Tenant, in entering into
this Lease, is relying solely on such inspectionand investigation. No patent or
latent physical condition of Leased Premises, whether or not known or
discovered, shall affect the rights of either party hereto. Any agreement,
warranties or representations not expressly contained herein shall in no way bind
either Tenant or Landlord. Landlord and Tenant waive any right or rescission and
all claims for damages by reason of any statement, representations, warranty,
promise and agreement, if any, not contained in this Lease.
(P) Quiet Enjoyment. This Lease is subject and junior only to all existing
easements, covenants, conditions and restrictions and other matters and
encumbrances of record as of the date of this Lease. As long as Tenant is not in
default of any provision of this Lease, Tenant shall have quiet enjoyment of the
Premises.
(Q) Termination. ['chant may terminate this Lease at any time upon six (6)
months advance notice.
(R) City of Lodi -to be Designated Point of Sale. All construction and purchase
contracts for the Project shall, to the extent commercially reasonable to do so,
include a point of sale clause identifying the City of Lodi as the point of sale for
all material and equipment purchases.
(S) Taxes. Tenant shall be responsible for payment of any possessory interest
taxes which may be assessed against the Leased Premises and for payment of any
personal property taxes assessed against the personal property of Tenant on the
Leased Premises,
(T) Governing Law. This Option Agreement, its validity, construction and all rights
under it shall be governed by the laws of the State of California and without
reference to the choice of law principles of the State of California or any other
state.
18. Payments and Notices. Any notice to be given or other document to be delivered by
either party to the other party may be given by personal delivery or nationally recognized
overnight courier or may be deposited in the United States mail in the State of California, duly
registered or certified, with postage prepaid, and addressed to the party for whom intended as
follows:
3/7/2016 2:33 PM
TO LANDLORD: City Manager, City of Lodi
221 West Pine Street
Lodi, CA 95240
TO TENANT:
If to PG&E by U.S. Mail or by registered or certified mail, return receipt requested:
Manager, Land Management
PG&E Land & Environmental Management
P.O. Box 770000, Mail Code N10A
San Francisco, CA 94177
If to PG&E by delivery by hand or overnight courier:
Manager, Land Management
PG&E Land & Environmental Management
245 Market St. Room 1036
San Francisco, CA 94105
Either party hereto may from time to time by written notice to the other party designate a
different address which shall be substituted for the one specified above. If any notice or other
document is sent by registered or certified mail, as provided above, the same shall be deemed
served or delivered seventy-two (72) hours after the mailing thereof.
19. This Ground Lease has been executed on the date first set f'or'th. to become effective as
provided for in paragraph 3 hereof.
LANDLORD:
CITY OF LODI, a municipal corporation
By:
Stephen Schwabauer
rts: City Manager
Date:
TENANT:
PACIFIC GAS AND ELECTRIC COMPANY
By:
Its:
Date:
3/7/2016 2:33 PM
ATTEST:
Jennifer M. Ferraiolo, City Clerk
Approved As To Form:
Janice D. Magdich, City Attorney
•
3/7/2016 2:33 PM
*AMBIT T "A"
PARCEL ONE:
THAT PORTION OF THE FOLLOWING DESCRIBED REAL PROPERTY, LYING WESTERLY OF AND
CONTIGUOUS TO THE WESTERLY LINE OF THAT INMAN PORTION THEREOF, CONVEYED TO TIE
STATE OF CALIFORNIA. BY DEQ RECORDED MAY 15, 1968, IN VOI MAE 3704 PM F276, Sell JOAQUIN
COUNTY RECORDS:
BEGINNING AT AN WON ROD. AT THE INTERSECTION OF THE NORTH UNE OF SOUTH 1/2 OF SECTION
24, TOWNSHIP 3 NORTH RANGE 5 EAST, MOUNT DIABLO BASE AND MERIDIAN WITH THE WESTERLY
RIGHT OF WAY LINE OF COMITY ROAD, KNOWN AS NOSELEY/THORNION ROAD, SAID ROD BEING AT
THE NORWEAST CORNER OF THAT CERTAIN TRACT OF LAID ACQUIRED BY THE CITY OF LOOT, ROOM
GEORGE W. EIDE, ET.AL, BY DEED RECORDED JUNE 19, 1944, 1N vni uw 882 rorf 161, OF OFFICIAL
RECORDS, AND AS SAID ROD S INDICATED ON MAP OF SURVEY, FILED FOR RECORD APRIL 2L 1947,
IN VOLUME 7, PAGE 9, RECORD OF SURVEYS; THENCE SOUTH 89 58' WEST, ALC4IG THE NNORTH UNE OF
SAID QTY OF LOOT PARRMA. AND ITS WESTERLY PROJECTION. 5,075.5 FST TOA POINT; THENCE
NORTH 034' WEST, ALONG A INCE UNE, 1317.0 FEET TO 714E FENCE LDE ON WE NORTH LINE OF
THAT CERTAIN TRACT OF LAND ACQUIRED BY GEORGE W. EDIT. ET. AL.. RION CLYDE 0. FOX. BY
DED RECORDED OCTOBER 24, 190, IN VOIUME 902. PAGE U. OF OFF7t7AL RECORDS. SAID FENCE
LDE BEING ON THE SOUTH LINE OF WE LAID KNOWN AS THE TAEDWAY RANCH; THENCE NORTH 89
941/2' EAST. ALONG SAID LIIE, 3660.4 FET TO THE WESTERLY RIGHT OF WAY LINE OF SAID
MOSELEY/THORNTON ROAD; THENCE SOUTHEASTERLY ALONG SAID WESTERLY RIGHT OF WAY LINE,
ON A CURVE TO TIE LEFT, THROUGH A CENTRAL ANGLE OF 12 39 1/2',RADIUS OF 3584.02 FEE TO
TIE BID OF CURVE; 'THENCE SOUTH 49 48' EAST, ALONG SAID WE5iERLY RIGHT OF WAY UNE,
11652 FEET. TO THE POINT OF BEGINNING.
PARCEL TWO:
THAT PORTION OF TIE FOUDWDIG DESCRIBED REAL PROPERTY, LYING EASTERLY OF AND
CONTIGUOUS TO THE EASTERLY LTTE OF THAT CERTAIN PORTION. CONVEYED TO THE STATE OF
CALIFORNIA, BY DEE RECORDED APRIL 14, 1970, IN VOWME 33$4_ PAG( 1r SAN JDAQUIN COUNTY
RECORDS:
BEGINNING AT AN IRON ROD, AT THE SOUTHWEST CORNER OF THE EAST 1/2 OF TWE SOUTHEAST
QUARTER OF SECTION 23. TOWNSHIP 3 NORTH, RANGE 5 EAST. MOUNT DIABLO BASE AND
MERIDIAN, SAID ROO BEING AT THE SOUTHWEST PROPERTY CORNER OF THAT CERTAIN TRACT OF
LAND, ACQUIRED BY THE CRY OF LODI, FROM GEORGE W. Em0E. ET. AL, BY REED RECORDED TUNE
19, 1977, IN VQUTA( 54LPASI 14b. SAN 30 AQUDNI COUNTY RE0ORDSS, AND AS INDICATED 014 MAP OF
SURVEY, FILED FOR RECORD APRIL 28. 1947, IN VOLUME 7 PAGE 9, RECORD OF SURVEYS; THENCE
NORTH 00 03 1/2' wEsT, ALONG THE WEST LINE OF SAID c1TY OF 1001 PARCEL, 2637.25 FEET, 10 AN
IRON ROD AT TIE NORTIANEST GORIER OF SAID EAST 1/2; THENCE SOUTH 89 58' WEST, ALONG THE
NORTH LINE OF SAID 9OUREAST 1/4 ARD ITS WESTERLY PROJECTION. 1607.3 FEET. TO A POINT ON
THE NORTH LURE OF PROPERTY ACQUIRED BY GEORGE W. EIDE, ET.AL., FROM LULU F. BONDS, BY
DEM RECORDED JUNE 19, 1944,1N vD U I 110 PAG, I9, SAN JOAQUIN COUNTY RECORDS; THEME
SOLIDI 89 54 1/2' WFSR, ALONG SAID NORTH LINE, 1017.0 FEET TO A POINT; THENCE SOUTH 89 58
1/2' WEST, ALONG SAID NORTH LINE. 2476.4 FLET, TO TIE NORTHWEST CORNER OF SAID NORTH
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32
Jennifer Ferraiolo
C-R
From:. Jennifer Ferraiolo
Sent:Wednesday, March 16, 2016 9:34 AM
To: 'Mike Lusk'
Cc: City Council; Steve Schwabauer; Janice Magdich
Subject: RE: Blue sheet Council meetin Mar 16 2016
Thank you for your email. It was received by the City Council and forwarded to the City Manager's office for information,
response, and/or handling. In addition, your item will be provided as a Blue Sheet item for tonight's City Council
meeting.
Jennifer M. Ferraiolo, CMC
City Clerk
P.O. Box 3006
Lodi, CA 95241-1910
(209) 333-6702
(209) 333-6807 FAX
Original Message
From: Mike Lusk [mailto:rnc€usk@softcom.net]
Sent: Wednesday, March 16, 2016 9:17 AM
To: City Council
Subject: Blue sheet Council meetin Mar 16 2016
Lodi City Council March 16, 2016
I have a couple of comments I would like to make during comments not on the agenda tonight.
I would also like a no vote a agenda item C-09 White Slough PGE lease agreement as drafted.
Respectfully
Mike Lusk, Lodi