# RESPONSE OF THE OFFICE OF

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

RESPONSE OF THE OFFICE OF
PUBLIC UTILITY REGULATION

Our Ref. No. 03-6-OPUR
RealEnergy, Inc., Et Al.

DIVISION OF INVESTMENT MANAGEMENT

File No. 132-3

Based on the facts and representations in your letter of August 12, 2003, and without
necessarily agreeing with your legal analysis, we would not recommend any enforcement
action to the Commission against RealEnergy, Inc. ("RealEnergy") or RealEnergy Projects I
LLC ("RealEnergy Projects") under section 2(a)(3) of the Public Utility Holding Company
Act of 1935 if RealEnergy and RealEnergy Projects engage in the distributed generation
activities described in your letter under the circumstances described in your letter.
You should note that facts or conditions different from those presented in your letter
might require a different conclusion. Further, this response expresses only the Division's
position on enforcement action. It does not purport to express any legal conclusion on the
questions presented.

David G. LaRoche
Special Counsel
August 12, 2003

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

t

WASHINGTON. D.C. 20549

o t m c e OF
JLIC U T I L I T Y R E G U L A T I O N

August 12, 2003

John W. Jimison, Esquire
Cameron McKenna LLP
2175 K Street, N.W.
Washington, D.C. 20037

Re:

RealEnergy , Inc., g a.
File No. 132-3

Dear Mr. Jirnison:
Enclosed is our response to your letter of August 12, 2003. By incorporating our
answer in the enclosed copy of your letter, we avoid having to recite or summarize the facts
involved.
Very truly yours,

David G. LaRoche
Special Counsel

Enclosure

A

Cameron McKenna LLP

Cameron McKenna LLP

August 12,2002

2175 K Street, N
W
Fifth Floor
Washington, D.C. 20037
Tel 202 466 0060
Fax 202 466 0077
www. cmcklaw.com

Mr. David B. Smith, Jr.
Associate Director
Division of Investment Management
Office of Public Utility Regulation
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re:

John W. Jimison
Jjimison@cmcklaw.com

Request for No-Action Letter under Section 2(a)(3) of the Public Utility
Holding Company Act of 1935

Dear Mr. Smith:
On behalf of our clients, RealEnergy, Inc. ("RealEnergy") and RealEnergy
Projects I LLC ("RealEnergy Projects"), we hereby request that the Staff of the Securities
and Exchange Commission ("SEC") provide its assurance that, based upon the facts and
circumstances described below, the Division of Investment Management (the "Staff')
will not recommend that the SEC institute an enforcement action under the Public Utility
Holding Company Act of 1935 ("PUHCA" or "the Act") to deem RealEnergy or
RealEnergy Projects to be an "electric utility company" under Section 2(a)(3) of the Act
by virtue of their installation, ownership and operation of small distributed generation,
combined heat and power, and solar photovoltaic power plants located within or adjacent
to the premises of various buildings to provide thermal energy and power together or
separately to such buildings.'

1

It is our understanding that a "no-action" determination with regard to the applicability o f Section
2(a)(3) o f the Act with respect to RealEnergy and RealEnergy Projects based on this request will also
preclude any possibility that any owner, investor, affiliate, or subsidiary o f RealEnergy or RealEnergy
Projects will be deemed jurisdictional as affiliates, associate companies, subsidiaries, or holding companies
under the Act solely as a result o f the activities o f RealEnergy and RealEnergy Projects as described in this
request.
Cameron McKenna LLP Is asaoclated wlth CMS Cameron McKenna and CMS, the transnational legal and tax services organization.
CMS Cameron McKenna printipel ofliee: M~treHwse. 160 Aldersgate Slreel. London EClA 4DD.
CMS ofi-a and assoaaled ofices worldwide Berlin. B ~ s s e l s .London. Paris, Ulrecht. Vienna. Zlmch, Aberdeen. Amsterdam. Amhem. Beilmg. Belgrade.
Brat~slava.Brislol. Bucharest. Budapest. Buenos A~res.Casablanca. Chemn~lz.Dresden. Dusseldofl. Frankfur(. Hamburg. H~lversum.Hong Kong. Le~pz~g.
Lyon.
Madrld. Monlev~deo.Moscow. Munch. New York. Prague. Rio de Jane~ro.SlullgaR. Toronlo, Warsaw and Washlnglon. DC

Mr. David B. Smith, Jr.
August 12,2003
Page 2

1.

BACKGROUND
A.

Description of RealEnergy

RealEnergy is solely engaged in providing energy services to various building
owners that the building owners could otherwise provide for themselves. RealEnergy7s
business consists of installing, owning, and operating small, highly efficient, singlebuilding-scale, on-site power generation plants. * These plants are often referred to as
distributed generation or "DG" plants. RealEnergy7sDG plants are typically configured
as combined heat and power ("CHP") plants, solar photovoltaic ("PV") plants, peak
shaving plants or back-up generation in various types of buildings. Each DG unit
operates within or adjacent to a building (generally using space rented from the building
owner) and sells electric power and/or thermal energy (hot water, chilled water, or steam)
together or separately as required by the building owner, who distributes the same to the
building's tenants or occupants.
RealEnergy currently operates fourteen CHP plants and three PV plants.
Currently, all the plants are located in the State of California, but RealEnergy plans to
begin operations with new DG plants in New York, Massachusetts, and New Jersey later
in 2003. The capacities of the CHP plants currently in operation range in size from 200
kW to 1000 kW, and the PV units from 110-120 kW. RealEnergy7sgenerating plants are
typically designed to serve 50-75% of a given building's load, not to export power to the
grid, and thus are not designed with the purpose of providing energy to the general
public. Since its plants are sized well below the building's needs, RealEnergy supplies
only a portion of the power requirements of its customers, who obtain their remaining
power requirements from traditional electric utility companies via the electric grid.
RealEnergy does not own any electric transmission or distribution facilities, nor even the
wires within a building served by a RealEnergy plant. RealEnergy has no monopoly
service area or power of eminent domain.
Instead, RealEnergy effectively serves as a subcontractor to the building owner,
enabling the owner to provide electricity and thermal energy advantageously for its own
use or for its tenants' use. RealEnergy sells thermal and/or electric energy together or
separately to building owners. When sold together the relative amounts may vary, but the
power and thermal energy are each contractually assured to be competitive with the
building owner's alternatives.
Except for its solar units, RealEnergy's CHP plants contain a natural gas-fired,
engine-driven generator that produces electricity on-site. Unlike the case with traditional
2

By "small," RealEnergy accepts the tentative definition proposed by the Federal Energy Regulatory
Commission ("FERC") that a "small" generator has a capacity of 20 Megawatts or less (FERC Docket No.
RM-02- 12-000).

I

Mr. David B. Smith, Jr.
August 12,2003
Page 3

electric generation, waste heat is recovered from the CHP engines and exhaust systems
for use in heating applications andor in absorption chillers for cooling applications. All
systems remain connected to and run parallel with the grid, but are not designed to make
sales of power to the incumbent utilities nor to other customers over the grid. The CHP
plants obtain their gas supply from the existing gas distribution lines supplying the
building in question.
While individual investors own a majority of RealEnergy's shares, two of its
owners are corporations or investment partnerships owning more than 10% of
RealEnergy. These two owners are not "holding companies" within the meaning of
§2(a)(7) of the Act as a function of other interests they may have. No person that owns
more than 5% of RealEnergy owns 5% or more of any public utility or utility holding
company. In addition, RealEnergy owns a subsidiary LLC, RealEnergy Projects I LLC,
organized at the request of lenders to own ten of RealEnergy's projects solely in order to
isolate the assets of those projects as the collateral for the loans that financed the
installation of the projects. This subsidiary is organized as a Delaware limited liability
company although none of its assets are in Delaware. It is not an operating entity and has
no function other than to provide separate financial organization of certain assets. This
request for a "no-action" determination is made jointly for RealEnergy and RealEnergy
Projects.

B.

Description of RealEnergy's Transactions

RealEnergy and the building owner typically enter into a long-term contract
(fifteen years is usual) under which RealEnergy installs and maintains a DG plant in the
owner's building, in most instances utilizing space rented for these purposes. The
installation is such that the output of the DG plant is supplied to the building, on the
customer's side of the utility meter. The DG plant's output includes both electric power
and, where applicable, thermal energy (hot water, chilled water, or steam) as the building
owner requires. 3
Under normal operations, no net power (other than de minimis amounts) is
exported from the building because the building's electricity requirements generally
exceed the power output of the RealEnergy plants.4 The building continues to be
connected to the electric grid and to receive power as needed from the local utility. The

3

At the conclusion of a contract (including any extensions by mutual consent), the equipment
installed by RealEnergy is either purchased by the building owner or removed by RealEnergy.

4

It is conceivable that under some circumstances, a de minimis amount of electricity generated by
RealEnergy's equipment might be exported to the grid. This might occur, for example, when the building's
load suddenly drops at a rate quicker than the DG plant can reduce its output. In such cases, neither
RealEnergy nor the building owner receives any compensation related to the power inadvertently exported
to the grid. Because the amount of power produced by the DG plants is generally considerably less than
the building itself requires, such instances are in any event very rare.

Mr. David B. Smith, Jr.
August 12,2003
Page 4

presence of the DG plant reduces the amount of power that the building purchases from
the electricity grid, but does not eliminate the building's connection to the grid.
The DG plants include devices to disconnect from the grid automatically if the
grid's power is interrupted, to ensure the safety of any personnel working to restore
power to the grid. RealEnergy's customer is the building owner, who either uses the
plant's output for its own use or sells the output to the building's tenants or occupants
under their lease agreements. The building owner thus either uses the DG plant's output
for itself or supplies the output to the tenants in the same way as if the building owner
also owned the DG plant. In effect, RealEnergy stands in the shoes of the building
owner, providing a service that the building owner could itself provide, but chooses
instead to outsource.
In order to provide further details about the typical business relationship between
RealEnergy and its building-owner customers, we attach to this request a sample contract
such as RealEnergy concludes prior to constructing and operating its DG plants. We
have redacted from this contract commercially sensitive terms, and believe that it
adequately demonstrates that this business model does not require or warrant regulation
by this Commission under PUHCA.

2.

DISCUSSION

Section 2(a)(3) of the Act provides that an "electric utility company" is "any
company which owns or operates facilities used for the generation, transmission or
distribution of electric energy for sale, other than sale to tenants or employees of the
company operating such facilities for their own use and not for resale." 15 U.S.C. $
79b(a)(3). We submit that RealEnergy and RealEnergy Projects should each qualify for
an SEC order declaring that it is not an "electric utility company7'as defined in Section 2
(a)(3) of the Act. In that light, because neither RealEnergy nor RealEnergy Projects are
"electric utility companies" under the Act, neither RealEnergy nor its investors should be
deemed to be "holding companies" under the Act. The SEC has the flexibility to
interpret the Act so as to determine that it has no regulatory interest in certain types of
operations and transactions that do not in any way involve the types of abuses that the
Act was intended to address and where there is no detriment to the public interest or the
protection of investors or consumers. As explained below, it is clear that RealEnergy is
not the type of entity that the Act was intended to cover.

A.

RealEnergy is Only Providing those Services that the Building Owner
itself Could Perform without Being Subject to PUHCA, and is thus
not Engaging in Sales of Electric Energy within the Act

RealEnergy is not engaged in the type of sales to which the Act applies. Among
other things, the Act defines as an "electric utility" a company that engages in sales of
electric energy, "other than sale to tenants or employees of the company operating such

Mr. David B. Smith, Jr
August 12,2003
Page 5
facilities for their own use and not for resale." 15 U.S.C. 5 79b(a)(3). It is therefore clear
that if the owner of the building itself were the owner and operator of the DG plant, and
was using that DG plant to provide energy to itself or to its tenants, the owner would not
be subject to PUHCA jurisdiction.
RealEnergy in effect "stands in the shoes" of the building owner. Each of its DG
plants is located in or adjacent to the owner's building on the owner's property, on the
owner's side of the electric meter, and supplies only a portion of the building's energy
needs. The DG unit itself is effectively indistinguishable from the other facilities used to
serve the tenants; it is an integrated element of the services provided to the tenants. The
only difference is that instead of providing this service itself, the building owner
L L ~ ~ b ~ ~ nfor
t rsuch
a ~ tservice
~ ' 7 through RealEnergy, which owns and operates the plant.
In effect, RealEnergy is merely a contractor for the building owner in providing services
to the owner and building's tenants. If the activities performed by RealEnergy were
instead performed by the building owner, the building owner would not be subject to
PUHCA.
In addition, the building owners with whom RealEnergy contracts could clearly
use their own employees to operate equipment of this type without being deemed to be an
electric utility under the Act. The difference here is that the activities are performed by a
contractor of the building owner, rather than by an employee of the building owner. The
fact that the services are being provided by such a contractor should not result in the
contractor being deemed an "electric utility," because its activities are effectively
identical to and therefore are a commercial substitute for building owners providing their
own energy services. The resulting sales of electricity still are being made solely to the
tenants of the building or to the building owner for its own purposes within the building.5
Prior staff No-Action letters, although not addressing this specific set of facts,
have been consistent with this position. For example, the SEC Staff agreed not to
recommend enforcement action in NIPSCO Industries, SEC No-Action Letter, January
5

In states where RealEnergy operates or is planning to operate its DG plants, it is not considered a
public utility for purposes of State regulation. RealEnergy is not regulated by the state regulatory
commission in California and does not expect to be regulated by the state regulatory commissions in
Massachusetts, New Jersey and New York, and as such, is not required to obtain a certificate of
convenience for the construction of its various projects. For example, the relevant California statute
specifies that entities are not designated as public utilities solely due to their ownership or operation of
cogeneration units:
Ownership or operation of a facility that employs cogeneration technology or produces
power from other than a conventional power source or the ownership or operation of a
facility which employs landfill gas technology does not make a corporation or person a
public utility within the meaning of this section solely because of the ownership or
operation of that facility.
California Pub. Util. Code § 2 16 (d) (2003). Regulation of RealEnergy under the Act is therefore not
required in order to aid and supplement state regulation of the company.

7

.

Mr. David B. Smith, Jr.
August 12,2003
Page 6

19, 1996. In that letter, the SEC Staff provided assurances that it would not recommend
enforcement action against a firm that would construct, own and operate a steam turbine
generator on the property of a steel company where all the electricity generated would be
owned and consumed by the steel company.
The Staffs position in these prior No-Action letters is an acknowledgment that
regulation under the Act of companies that are "inside-the-fence" of another entity (not
itself subject to regulation as a regulated public utility) is not required or necessary. See
also Kenetech Facilities Management, Inc., SEC No-Action Letter, February 24, 1993
(operation and maintenance for exempt wholesale generator facilities does not subject the
entity providing such services to PUHCA); Metro Energy LLC, SEC No-Action Letter,
January 11,2000 (operation of facilities for an exempt entity does not subject the
operator to PUHCA). RealEnergy likewise is a company that by virtue of providing
services behind the meter to an exempt entity, in the same way as if that entity was itself
taking those actions, should not be considered an electric utility company under the ~ c t . ~

B.

PUHCA is not Intended to Apply to Companies like RealEnergy

Congress did not enact PUHCA in order to regulate behind-the-meter generators
such as RealEnergy. RealEnergy's business model does not raise the concerns Congress
sought to address in PUHCA. Nor would extending the scope of the Act to reach a
company such as RealEnergy advance the public policy interests related to the Act. The
intent of PUHCA was to respond to abuses committed by holding companies that
engaged in actions considered by Congress to result in abuses of investors or abuses of
consumers that state regulators could not remedy. 7 Because RealEnergy's plants are
located on the customer side of the utility's meter, the effect on the grid and to the public
at large is indistinguishable from any other energy efficiency measure or change in
operation that the building owner may institute. Actions of this type clearly and
unambiguously do not place an entity in the position of being a public utility.
Furthermore, as RealEnergy's plants are matched individually to RealEnergy's
customers, with each plant offering energy based on market prices and existing tariffs,
there is no potential leverage among RealEnergy's multiple plants that could be applied
to the disadvantage of any customer. Because such individualized provision of energy
6

While the first-cited cases represent instances where the entity sought exemption as an inside-thefacility ownerloperator of a unit, the latter-cited cases and other cases not cited here represent instances
where no-action letters were issued to operators of units owned by the facility or building's owner.
RealEnergy submits that its ownership of such inside-the-facility units does not change the logical basis for
exemption of an entity that merely operated such units. Building owners may choose to contract for the
services provided with a unit they have purchased with their own capital investment, or may contract for
such services including the service of providing the capital investment represented by the unit. In either
case, the services are internally required and are provided under a contract that fully protects the building
owner's interests, negotiated and performed under fully competitive terms and conditions.
7

See 15 U.S.C. 5 79a(b).

Mr. David B. Smith, Jr.
August 12,2003
Page 7

services is consciously left unregulated by the states because it is not seen as a public
utility function, RealEnergy's operations do not disable or bypass any state regulator or
subject any consumer to market power.
Public utility customers and investors cannot be the victim of abuse by a company
such as RealEnergy which operates only small-scale stand-alone generators, not
interconnected with each other, not interdependent in any manner, each required
contractually and competitively to offer advantages relative to local utility service, and
not otherwise able to affect each other's operations or sales to their separate building
owners. The concerns specific to regulated companies, such as protecting the customers
of subsidiary public utilities from the holding company's provision of services or
materials at drastically inflated costs and profits, are likewise irrelevant to RealEnergy,
because it has no monopoly on either power or thermal energy sales under which it could
pass through any inflated costs or profits.
RealEnergy's customers are contractually assured that RealEnergy's power and
thermal offerings will be based on market conditions and existing tariff structures. Even
within the buildings where RealEnergy operates, the owners continue to buy residual
power from the grid and may obtain thermal energy from other sources, so they remain
well aware of the competitive advantages offered by RealEnergy.
Because the competitive markets in which RealEnergy sells its products and
services assure efficiency for market purposes, extending PUHCA to RealEnergy is also
not necessary to address any lack of efficiency in operations, management, raising of
capital, and other functions which holding companies performed for their utility
subsidiaries. Building owners are not bound through any exercise of market power to
purchase RealEnergy's services. Those building owners purchase from RealEnergy only
when they find doing so commercially advantageous on a going-forward basis.
Furthermore, the Act's objective of protecting utility investors by providing them
uniform accounting and transparency of ownership structures also is irrelevant to
RealEnergy, which does not treat its units as separate subsidiaries, is not publicly traded,
is not wholly-owned by any parent company, and observes uniform accounting principles
and standards.
RealEnergy clearly is not the type of entity that the Act includes within the
definition of "electric utility company" or "holding company." Nor would any public
policy objective be served by regulating RealEnergy or its investors. RealEnergy is
fundamentally different from the type of company that the Act was intended to cover, and
its operations do not give rise to circumstances that could result in the types of abuses the
Act is meant to prevent. Accordingly, it is not in the public interest for the SEC to take
any action against RealEnergy, its subsidiaries or its owners. Neither RealEnergy nor
RealEnergy Projects should be considered an electric utility company within the scope of
the Act, and, consistent therewith, their owners and subsidiaries should not be considered
holding companies or otherwise regulated under the Act.

Mr. David B. Smith, Jr.
August 12,2003
Page 8

3.

CONCLUSION

On the basis of the facts set forth above, it is our opinion, and we respectfully
request your concurrence, that neither RealEnergy, Inc. nor RealEnergy Projects I LLC
will be an "electric utility company" as defined in Section 2(a)(3) of the Act by virtue of
the ownership and operation of RealEnergy's various DG plants in the United States as
set forth in this request.
If you require any further information or have any questions, please do not
hesitate to call the undersigned.
Respectfully submitted,

"Attorney for
RealEnergy, Inc. and RealEnergy Projects I LLC
Attachment: Sample Contract

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 03.01.03

LEASE AND ENERGY SERVICES AGREEMENT
This Lease and Energy Services Agreement ("Agreement") is made as of the - day of
, 2003 ("Effective Date"), by and between:

Owner:

[Owner Name], a [
] with its mailing address for
1, (hereinafter
notices and a principal office at [
referred to as "Owner").

and

RealEnergy:

REALENERGY, LNC., a Delaware corporation, with its
mailing address for notices and a principal office at 5957 Variel
Avenue, Woodland Hills, CA 9 1367 (hereinafter referred to as
"Real Energy").
BACKGROUND

Owner is the owner of a commercial office building located at [
] (the "Facility").
Owner desires to obtain from RealEnergy electrical energy [and thermal energy] for Owner's tenants and
the common areas of the Facility. The electrical energy [and thermal energy] will be provided to Owner
by RealEnergy from an energy plant (the "System") to be installed on premises in or near the Facility to
be leased by RealEnergy from Owner.
NOW, THEREFORE, in consideration of the mutual promises and agreements set forth herein,
Owner and RealEnergy hereby agree as follows:

AGREEMENT
ARTICLE 1
Defined Terms
Terms used but not defined in the text of this Agreement shall have the meanings set forth in
Schedule 1 attached hereto.

ARTICLE 2
Lease of Premises and Related Matters
2.01
Lease of Premises. Owner hereby demises and leases to RealEnergy, and RealEnergy
hereby rents from Owner, those premises ("Premises") located in the Facility which are described in
Exhibit A. RealEnergy shall lease the Premises "as-is" in their existing condition. Owner shall not have
any obligation to provide any services or improvements to the Premises except as set forth in Exhibit A
or elsewhere herein.

FORM LEASE (COMhlERCIAL)
With Base Rent
Updated 05.01.O3

2.02

Term and Rent.

Term. The term of the lease of the Premises shall be the Term of this Agreement
(a)
as set forth in Section 6.01.
Commencement Date. The "Commencement Date" means the earlier of (i) the
(b)
date that is -days after Owner approves the Initial Plans according to Section 3.01(b) below. or (ii) the
Energy Delivery Date; provided, however, that the -day period described in clause (i) above will be
extended one (1) day for each day that RealEnergy is delayed in completing the Installation as result of
Force Majeure.

Rent. Commencing on the Commenceme~itDate and then throughout the Term,
(c)
RealEnergy will pay Owner Rent according to the following provisions:
dollars ($
)
"Rent" means the amount of
(9
per month. Rent will be payable in monthly installments (prorated for any partial month). in advance, on
or before the first day of each and every month after the Commencement Date during the Term.
However, if the Commencement Date occurs on other than the first day of a month or the Term ends on a
day other than the last day of a month, Rent for such month will be appropriately adjusted on a prorated
basis. Rent will be applied toward payment of the Access Fee in accordance with Article 5.
All Rent will be paid to Owner in lawful money of the United States of
(ii)
America, at Owner's address set forth at the beginning of this Agreement or to such other person or at
such other place as Owner may from time to time designate in writing.

2.03 Appurtenant Rights. RealEnergy shall have, as an appurtenant right to its occupancy
and use of the Premises, the right to enter upon and to access such portions of the Facility and such utility
lines, gas lines, ductwork, electrical lines, metering equipment and the like as are reasonably necessary
for the construction, reconstruction, replacement, installation, maintenance, care, repair and operation of
the System and to carry out activities thereon, subject in each instance to customary security procedures
and the Facility's rules and regulations, set forth on Schedule 2.03 (the "Owner's Rules"). RealEnergy
shall also have the non-exclusive right to utilize Owner Plant Facilities during the Term of this
Agreement for the transmission of Electrical Energy from the System to Owner or to the electric grid for
sale to third parties in direct or wholesale transactions. RealEnergy shall exercise its access rights
granted herein in such a manner so as not to materially interfere with the operations of the Facility,
including the operations of other tenants. Any ductwork, utility lines and other facilities installed by
RealEnergy shall be installed to the extent practicable in areas of the Facility controlled by Owner and in
such manner so as not to materially interfere with the tenant improvements installed by other tenants of
the Facility. It is understood that all existing Owner Plant Facilities are, and shall remain, the property of
Owner. If any of RealEnergy's activities cause a material disturbance or damage to the Owner Plant
Facilities or the Facility, RealEnergy shall, at its own expense, promptly make repairs and restore the
Owner Plant Facilities or the Facility to substantially their condition prior to such damage.

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 09.01.03

RealEnergy and its officers, employees, agents, customers and invitees shall have the
nonexclusive right, in common with Owner and all others to whom Owner has or may hereafter grant
rights, to use the Common Areas, subject to the Owner's Rules and such other reasonable regulations as
Owner may from time to time impose related to the designation of (i) the days and hours of operation and
use; (ii) specific areas in which motor vehicles owned or used by RealEnergy. its officers, employees,
and agents must be parked; and (iii) fees charged for parking.

Use of Premises. RealEnergy shall use the Premises or cause the Premises to be used
2.04
solely for the purposes of (i) installing the System and (ii) generating, producing, enhancing,
transforming and transmitting for sale, Electrical Energy and Thermal Energy (if applicable) and
activities related thereto pursuant to this Agreement. RealEnergy shall not use or permit the Premises or
any other area of the Facility to be used for any purpose not contemplated in this Agreement. Except f w
materials necessary for the operation and maintenance of the System, as approved by Owner and in
compliance with applicable law, RealEnergy shall not use, or allow another person or entity within its
control, to use any part of the Premises or the Facility for storage, use, treatment or sale of any
Hazardous Material, except as permitted by applicable Laws. Furthermore, RealEnergy shall indemnify,
defend and hold Owner harmless from and against all loss, cost, liability and damage, including without
limitation, reasonable attorneys' fees and litigation costs, arising from the current or future release of
Hazardous Materials to the extent caused or permitted by RealEnergy or its agents or representatives.
The indemnity obligation set forth in this Section 2.04 shall survive the expiration or early termination of
this Agreement.
Maintenance of Owner Plant Facilities. Owner shall at all times during the Term of
2.05
this Agreement maintain the Owner Plant Facilities in good condition and repair so as to be able to
receive and utilize the Electrical Energy and Thermal Energy delivered to the Owner from the System
and receive and utilize electrical energy and or thermal energy from the Owner Utilities. Owner shall
maintain in good working order and available at all times on an immediate demand basis, its hookup to
and its service contract with, the relevant Owner Utilities, or any successors thereto, so that during
periods where the System is not in operation for any reason, Owner can immediately obtain its full
requirements for electrical energy and thermal energy from such Owner Utilities.
2.06
Water, Sewer and Gas. Owner shall be responsible for providing access to adequate
water supply, sewer and gas service necessary for the operation of the System; provided that Owner will
not be billed for any parasitic load used by RealEnergy for the operation of the System.
2.07
Reserved Rights. Owner reserves the use of the land, walls and roof of the Facility,
together with the right to install, maintain, use, repair and replace pipes, ducts, conduits, wires and
structural elements leading through the Facility in locations which will not materially interfere with
RealEnergy's use of the Facility, or if such action would cause material interference with the
RealEnergy's use of the Facility, Owner shall conduct such installation, maintenance, repair or
replacement only after at least forty-eight (48) hours advance notice to RealEnergy and at a time that
minimizes such interference, outside of normal business hours, if reasonably practical. If Owner's
interference with RealEnergy's use of the Premises restricts full operation of the System (a "Directed
Shutdown"), Owner agrees to compensate RealEnergy pursuant to the terms of Article 7.
2.08
Hazardous Materials. Notwithstanding anything herein to the contrary, Owner shall be
responsible for the removal in accordance with all applicable Laws of all Hazardous Materials released
or threatened to be released in, on, under or about or emanating from the Premises, or the Facility, known
or unknown, as of the date of execution of this Agreement or hereafter coming to be released or

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 09.01.03

threatened to be released on, under or about or to emanate from the Facility from the act or omission of
Owner, other tenants andor other persons. In the event of any current or future release or threat of
release of Hazardous Materials upon adjacent lands (if caused or permitted by Owner or its agents or its
representatives or persons claiming under Owner) or upon the Facility (if caused by any party other than
RealEnergy or its agents or representatives), Owner shall promptly remedy the problem in accordance
with all applicable Laws and requirements. Furthermore, Owner shall indemnify. defend and hold
RealEnergy harmless from and against all loss, cost, liability and damage, including without limitation
reasonable attorneys' fees and litigation costs, arising from the current or future release or threat of
release of Hazardous Materials to the extent caused or permitted by Owner or its agents or
representatives or other tenants or other persons. The indemnity obligation set forth in this Section 2.08
shall survive the expiration or early termination of this Agreement.
Entry to Facility. Owner shall have the right to enter the area of the Facility where the
2.09
System is installed at all reasonable times for the purposes of inspection, repair and maintenance,
provided that: (i) RealEnergy is given written notice of such entry not less than 48 hours in advance; (ii)
RealEnergy or any agent or employee of RealEnergy designated thereby shall be permitted to be present
during such entry; and (iii) Owner shall indemnify, hold harmless, and agree to defend with counsel
reasonably acceptable to RealEnergy, RealEnergy from and against any and all loss, cost, Claim, damage,
or expense, caused directly or indirectly, in whole or in part, by such entry, including but not limited to
damage to the System, the Premises, or any other property or person. The provisions of this Section 2.09
shall survive the expiration or earlier termination of this Agreement.
2.10
RealEnergy Property. The System and all designs, plans and specifications of the
System and alterations, additions, improvements or installations made thereto by RealEnergy and all
RealEnergy property used in connection with the installation, operation and maintenance of the System
is, and shall remain, the personal property of RealEnergy ("RealEnergy Property"). In no event shall any
RealEnergy Property be deemed to be a fixture, nor shall Owner, nor anyone claiming by, through, or
under Owner (including but not limited to any present or future mortgagee of the Facility or the
Premises) have any rights in or to the RealEnergy Property at any time. Owner acknowledges and agrees
that RealEnergy may be required to grant or cause to be granted to the secured party a security interest in
RealEnergy Property and Owner expressly disclaims and waives any rights it may have in the
RealEnergy Property, at any time and from time to time, pursuant to this Agreement, at law or in equity.

Subordination, Non-Disturbance and Attornment. Owner shall use its best efforts to
2.11.
obtain from any current lender or mortgagee of the Facility a written undertaking in favor of RealEnergy
to the effect that such lender or mortgagee will not disturb RealEnergy's right of possession of the
Premises if RealEnergy is not then or thereafter in default of this Agreement, and in no case shall such
lender interfere with RealEnergy's right to possession andlor ownership of the System. Owner shall have
the right to cause this Agreement to be and become and remain subject and subordinate to any and all
ground or underlying leases, mortgages or deeds of trust which may hereafter be executed covering the
Facility or the property or any renewals, modifications, consolidations, replacements or extensions
thereof, for the full amount of all advances made or to be made thereunder and without regard to the time
or character of such advances, together with interest thereon and subject to all the terms and provisions
thereof; provided, however, that Owner obtains from the lender or other party in question a written
undertaking in favor of RealEnergy to the effect that such lender or other party will not disturb
RealEnergy's right of possession under this Agreement if RealEnergy is not then or thereafter in breach
of any covenant or provision of this Agreement. RealEnergy agrees, within ten (10) days after Owner's
written request therefor, to execute, acknowledge and deliver upon request any and all documents or
instruments reasonably requested by Owner or necessary or proper to assure the subordination of this

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01 -03

Agreement to any such mortgages, deeds of trust, or leasehold estates in accordance with the terms
hereof. RealEnergy agrees that in the event any proceedings are brought for the foreclosure of any
mortgage or deed of trust or any deed in lieu thereof, to attorn to the purchaser or any successors thereto
upon any such foreclosure sale o r deed in lieu thereof as so requested to do so by such purchaser and to
recognize such purchaser as the lessor under this Agreement; RealEnergy shall, within five (5) days after
request execute such further instruments or assurances as such purchaser may reasonably deem necessary
to evidence or confirm such attornment. RealEnergy agrees to provide copies of any notices of Owner's
default under this Agreement to any mortgagee or deed of trust beneficiary whose address has been
provided in writing to RealEnergy and RealEnergy shall provide such mortgagee or deed of trust
beneficiary a commercially reasonable time after receipt of such notice within which to cure any such
default. RealEnergy waives the provisions of any current or future statute, rule or law which may give or
purport to give RealEnergy any right or election to terminate or otherwise adversely affect this
Agreement and the obligations of the RealEnergy hereunder in the event of any foreclosure proceeding or
sale.

Casualty. If the Facility is substantially destroyed or damaged by fire or otherwise so as
2.12
to impair materially the performance of Owner's or RealEnergy's obligations under this Agreement, then
Owner or RealEnergy shall each have the option, upon written notice to the other party within thirty (30)
days after such casualty, to terminate this Agreement. In addition, Owner shall have the right to
terminate this Agreement upon fifteen (15) days prior written notice if a substantial portion of the
Facility suffers a casualty and (i) in Owner's reasonable determination, such casualty cannot be restored
within one hundred twenty (1 20) days after the date Owner discovers such casualty; or (ii) the damage is
not fully covered by insurance proceeds available to Owner; or (iii) such damage occurs during the last
twelve (1 2) months of the term o f this Agreement. In the event of a casualty, unless this Agreement is
terminated by Owner or RealEnergy as provided in this section, RealEnergy shall, as soon as possible,
repair, or cause to be repaired, the System in a manner and to at least a condition equal to that existing
prior to its destruction or casualty, and reopen or cause to be reopened the System for operation; provided
that RealEnergy shall not be required to expend more than the proceeds of any insurance or claim
received by RealEnergy with respect to such casualty.
Eminent Domain. If the Facility, or a portion thereof such as to impair materially the
performance of Owner's or RealEnergy's obligations under this Agreement, is taken by condemnation or
the right of eminent domain, or by agreement between Owner and those authorized to exercise such right
(collectively the "condemnation proceedings"), then Owner or RealEnergy shall be entitled to terminate
this Agreement immediately upon delivery of written notice to the other party, provided that such notice
is given not later than sixty (60) days after such taking. Any award made for any taking of the Facility,
or any portion thereof, shall belong to and be paid to Owner, and RealEnergy hereby assigns to Owner all
of its right, title and interest in any such award; provided, however, that RealEnergy shall be entitled to
receive any portion of the award that is made to Owner specifically (i) for the taking of RealEnergy
Property, (ii) for the interruption of RealEnergy's business, goodwill or its moving costs, or (iii) for the
value of any leasehold improvements installed thereon and paid for by RealEnergy, including the System.
Should any part of the Facility be so taken and should this Agreement not be terminated in accordance
with the foregoing provisions, then (A) Owner covenants and agrees promptly after such taking at its cost
to restore the Facility as nearly like its condition prior to such taking as shall be practicable, and (B)
RealEnergy shall restore the System to as nearly like its condition prior to such taking as shall be
practicable. In no event shall Owner or RealEnergy be obligated to expend more for such restoration
than the amount of the award from the condemning authority actually available to Owner and
RealEnergy.
2.13

FORM LEASE (COMMERCIAL)

With Base Rent
Updated 05.01.03
Surrender of Premises. On the expiration or earlier termination of this Lease,
2.14
RealEnergy shall remove all equipment of RealEnergy in the Premises or elsewhere in the Facility and
surrender the Premises in good order, repair and condition. reasonable wear and tear and damage by fire
or casualty or eminent domain taking excepted.
ARTICLE 3
RealEnergy System Installation and Operations

3.01

Development, Construction a n d Installation.

RealEnergy shall, at its sole cost and expense, design. build, own, maintain, repair and
(a)
operate the System at the Facility substantially in compliance with the plans and specifications set forth
in a project design to be approved by the Owner in its reasonable discretion and in accordance with
Section 3.01(b) below. The general contractor and subcontractors to be hired by RealEnergy to install
the System shall be approved by Owner in its reasonable discretion. Prior to the commencement of any
work, such contractor and subcontractors shall deliver to Owner evidence of the insurance required under
Article 9 below. RealEnergy shall obtain, at RealEnergy's sole cost, any permits or regulatory approvals
required for the installation and operation of the System, and the installation of the System shall be in
compliance with all Laws. RealEnergy shall be responsible for completing the installation of the System
within three hundred sixty (360) days after the date that Owner approves the Project Design (defined in
Section 3.01(b)), plus a day-for-day extension for any delays caused by Force Majeure events or delays
in the approval of the contractor or subcontractors within a reasonable time. RealEnergy shall obtain, at
RealEnergy's sole cost, any permits or regulatory approvals required for the installation of the System.
The construction and installation of the System shall be in compliance with all Laws and in accordance
with the Project Design.
RealEnergy shall prepare and submit to Owner the initial plans and specifications for the
(b)
design, engineering, construction and installation of the System ("Initial Plans") within thirty (30)
business days after the Effective Date. Owner will provide its review and comments on the Initial Plans
within ten (10) business days after receipt of the Initial Plans. If so requested by Owner, RealEnergy
'shall revise the Initial Plans and provide revised Initial Plans within fifteen (15) business days after
receipt of the comments from Owner. Owner may continue this process in good faith: (i) until the Initial
Plans are approved by Owner; o r (ii) Owner has elected to terminate the review of the Initial Plans and
has elected to terminate this Agreement based on the materially unacceptable condition of the revised
Initial Plans submitted by RealEnergy. After and subject to the Owner's approval of the Initial Plans
(such approved Initial Plans are referred to herein as the "Project Design"), the System shall be designed,
engineered, constructed and installed in accordance with the Project Design.

3.02
Operations. On and after the Energy Delivery Date, RealEnergy shall cause the System
and the Interconnection Facilities to be operated and maintained at RealEnergy's sole cost, including the
cost of capital repairs and replacements, in a commercially reliable manner throughout the Term of this
Agreement and in accordance with prevailing industry standards and Laws. RealEnergy shall provide
Electrical Energy and Thermal Energy to Owner from the System as set forth in Sections 4.01 and 4.02
below. If the supply of Electrical Energy or Thermal Energy for the Facility is interrupted as a result of a
malfunction or other shutdown o f the System, RealEnergy shall use commercially reasonable efforts to
remedy such interruption and return the System to normal operation. RealEnergy shall operate the
System so as not to unreasonably disrupt the Owner Plant Facilities. If at any time the System is
reasonably determined by Owner to be materially disruptive to the Owner Plant Facilities, Owner shall

FORM LEASE (COMMERCIAL)

With Base Rent
Updated 05.01.03
have the right, on written notice to RealEnergy, to demand that the System be appropriately modified to
avoid such unreasonable interference or that the System be shut down. If RealEnergy fails to take
appropriate corrective action in a prompt and responsible manner, Owner shall have the right to shut
down the System thereafter, on written notice to RealEnergy, and in accordance with written procedures
established by Owner and RealEnergy. Owner shall cooperate with RealEnergy's efforts to restore the
System to operation in a manner that is not materially disruptive. Owner shall not be liable to
RealEnergy for any such shut down performed in accordance with the established procedures.
ARTICLE 4
Purchase and Sale of System Energy
Electrical Energy Sale and Purchase. RealEnergy shall generate, sell and deliver
4.01
Electrical Energy to Owner at the Electrical Interconnection Point. Owner agrees to purchase the
Electrical Energy on the following terms:
Owner shall purchase all of the Electrical Energy supplied by RealEnergy from
(a)
the System to the extent that Electrical Energy is utilized by the Facility. Owner shall accept and
purchase Electrical Energy delivered by RealEnergy from the System prior to accepting any electrical
energy from any other source and shalI accept and purchase electrical energy from any such other source
only to the extent that RealEnergy cannot supply Owner's needs for electrical energy. RealEnergy shall
retain sole control and absolute discretion over the times of operation of the System and the amount of
Electrical Energy, if any, delivered to Owner.
Owner shaIl pay RealEnergy for all Electrical Energy delivered to the Electrical
(b)
Interconnection Point at the Electricity Purchase Price determined as set forth in Schedule 4.01.
RealEnergy shall be responsible for any Stand-by or Interconnection Charges, and any other charges
associated exclusively with the installation or operation of the System which are assessed to Owner by
the Owner Electric Utility. Owner shall cooperate with RealEnergy in seeking rate reductions, incentive
payments, rebates or the like which arise are associated exclusively with the installation or operation of
the System ("Incentive Payments"). Owner shall pay to RealEnergy an amount equal to any Incentive
Payments which are paid directly to Owner.
Title to and risk of loss for Electrical Energy shall transfer from RealEnergy to
(c)
Owner at the Electrical Interconnection Point.
RealEnergy shall measure the actual amount of Electrical Energy supplied to
(d)
Owner using a meter at the Electrical Interconnection Point (the "Meter"), which shall be installed at
RealEnergy's cost. No Electrical Energy utilized by the System shall be accounted for by the Meter,
which shall record only Electrical Energy delivered to the Electrical Interconnection Point.
RealEnergy shall render to Owner an Invoice for each Billing Cycle during the
(e)
Term of this Agreement setting forth the charges and the amounts due RealEnergy for Electrical Energy
(and any Thermal Energy supplied pursuant to Section 4.02). Owner will remit full payment with each
Invoice to RealEnergy within fifteen (1 5) calendar days subsequent to the "Invoice Date" stated on such
Invoice (the "Due Date"). Overdue payments shall accrue interest at the Contract Rate from, and
including, the Due Date to, but excluding, the date of payment. If Owner in good faith disputes an
Invoice, Owner shall provide RealEnergy with a written explanation specifying in detail the basis for the
dispute, and Owner shall pay the entire Invoice including the amount in dispute no later than the Due

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

Date. All disputes shall be resolved as provided in Section 15.08 hereof. If any amount disputed by
Owner is determined not to be owed to RealEnergy, Real Energy shall refund such amount to Owner
within five (5) days of such determination, along with the interest accrued at the Contract Rate from the
original Due Date until the date such refund is paid.
The parties acknowledge that the Owner may procure electricity commodity
(f)
from a competitive electricity supplier other than the Owner Utility ("Competitive Supplier") for that
portion of electrical energy utilized by the Facility but not provided from the System (the "Residual
Load"). Upon the Owner's entering into an electricity commodity contract for a term of at least one year
with a reputable Competitive Supplier ("Competitive Commodity Contract"), RealEnergy will adjust its
pricing under Schedule 4.01 to equal the price set in the Competitive Commodity Contract
any
incremental charges from the Facility's utility distribution company, provided that: (i) the Competitive
Commodity Contract must be based on the full electricity requirements for the Facility on a firm
commitment basis (and assuming the load profile and load factor that would exist in the absence of the
System) and not merely based on the characteristics of the Residual Load; (ii) the pricing under the
Competitive Commodity Contract reflects a time differentiated price structure with a minimum of 2
pricing time periods or otherwise consistent with tariff definitions under local utility time periods; (iii)
the adjusted pricing shall include all incremental charges (i.e. transmission, delivery, surcharges, exit fees
and other non-bypassable or mandatory charges) imposed by the Owner Utility in connection with the
Competitive Commodity Contract; and (iv) RealEnergy shall have no obligation to pay to or reimburse
Owner for any "re-marketing" or other costs or expenses associated with Owner's failure or inability to
satisfy its obligations under the Competitive Commodity Contract. The adjusted pricing shall continue
for the duration of the Competitive Commodity Contract and then revert to the Owner Utility pricing in
effect at the time of the commencement of the Competitive Commodity Contract. The pricing under this
Agreement shall not be adjusted to reflect (a) offers that are not accepted by the Owner, (b) pricing
obtained by the Owner for less than the full Facility requirements for electricity, or (c) pricing that is
offered in conjunction with additional services from the Competitive Supplier not related to the provision
of the electricity commodity. This subsection 4.01(f) shall not restrict nor prohibit Owner from
purchasing energy "power strips" (or similar products or services) nor from entering into "intenuptible
rate agreements" (or similar agreements) with respect to the Residual Load; provided that RealEnergy
shall not be required to adjust its pricing under Schedule 4.01 to equal the pricing under the "power
strips" or the "intemptible rate agreements."
4.02
Thermal Energy Sale and Purchase. RealEnergy shall generate, sell and supply
Thermal Energy in the form of hot water or chilled water to Owner at the HVAC Interconnection Point
on the terms set forth below. Owner agrees to purchase the Thermal Energy on the following terms:

Owner shall purchase all of the Thermal Energy supplied by RealEnergy from
(a)
the System to the extent that Thermal Energy is utilized by the Facility. Owner shall accept and purchase
Thermal Energy delivered by RealEnergy from the System prior to accepting any thermal energy from
any other source and shall accept and purchase thermal energy from any such other source only to the
extent that RealEnergy cannot supply Owner's needs for thermal energy. RealEnergy shall retain sole
control and absolute discretion over the times of operation of the System and the amount of Thermal
Energy, if any, delivered to Owner.
Owner shall pay RealEnergy for all Thermal Energy delivered in the form of
(b)
either hot water or chilled water to the HVAC Interconnection Point at the Thermal Energy Purchase
Price determined as set forth in Schedule 4.02(a) - Hot Water and 4.02(b) - Chilled Water.

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

(c)
Title to and risk of loss related to Thermal Energy shall transfer from
RealEnergy to Owner at the HVAC Interconnection Point.
RealEnergy shall measure the actual amount of Thermal Energy supplied to
(d)
Owner using a commercially available metering system at the HVAC Interconnection Point, which shall
be installed at RealEnergy's cost. The metering system shall be one that is utilized by utilities andlor
other providers of thermal energy.
RealEnergy shall render to Owner an Invoice for each Billing Cycle during the
(e)
Term of this Agreement setting forth the charges and the amounts due RealEnergy for Thermal Energy.
The Invoice shall also include charges for Electrical Energy, and shall be payable. as provided in Section
4.0 1(e).
ARTICLE 5
Access Fee

Commencing as of the Energy Delivery Date and continuing throughout the Term of this
Agreement, RealEnergy agrees to pay Owner as an access fee ("Access Fee") an amount equal to
percent of the amount paid to RealEnergy by Owner and other purchasers (including third-party
purchasers) of Electrical Energy and Thermal Energy produced and sold by RealEnergy from the System
during the applicable Billing Cycle (net of any utility user taxes or other similar pass-through charges
assessed in connection with the sale of Electrical Energy and Thermal Energy hereunder). RealEnergy
shall pay the Access Fee to Owner within ten (10) calendar days following receipt by RealEnergy of
payment for the System Energy-sold during the applicable Billing Cycle.
ARTICLE 6
Term; Early Termination
6.01
Term of Agreement. The term of this Agreement shall commence on the Effective Date
and shall expire on the fifteenth (15') anniversary of the Commencement Date, unless earlier terminated
pursuant to the provisions herein ("Term").
Early Termination by Owner. Owner may terminate this Agreement at any time on 30
6.02
days written notice (i) if the commencement of construction of the System does not occur on or before
360 days after Owner approves the Project Design or (ii) pursuant to Section 10. This Agreement shall
terminate upon the expiration of such notice period, and neither party shall have any further liability to
the other party hereunder, except for any provisions contained herein that are intended to survive the
expiration or earlier termination of this Agreement. In the event of an early termination of this
Agreement pursuant to subsection 6.02(ii) above, the Owner shall have the rights set forth in Section
10.02(b). Upon any early termination pursuant to this Section 6.02, RealEnergy shall remove
RealEnergy property and equipment, including the System from the Premises and leave the Premises in
substantially the same condition as it was delivered to RealEnergy at the commencement of this
Agreement, normal wear and tear and casualty and condemnation excepted.
6.03 Termination by RealEnergy. RealEnergy may terminate this Agreement at any time on
30 days written notice (i) if the commencement of construction of the System does not occur on or before
the first anniversary of the Effective Date, (ii) pursuant to Section 10 or (iii) if RealEnergy shall

'

.

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03
determine, in its sole discretion, at any time during the Term that it is unable to provide Electrical Energy

or Thermal Energy to Owner from the System on a basis that is profitable to RealEnergy for a period of
180 consecutive days. In the event of an early termination of this Agreement pursuant to Subsection
6.03(ii) above, then RealEnergy shall have the rights set forth in Section 10.02(a). This Agreement shall
terminate upon the expiration of such notice period, and neither party shall have any further liability to
the other party hereunder, except for any provisions contained herein that are intended to survive the
expiration or earlier termination of this Agreement and except that RealEnergy may have access to the
Premises and the Facility thereafter to remove RealEnergy Property.
Limitation of RealEnergy Liability upon Early Termination. In the event of a
6.04
termination pursuant to this Article 6, RealEnergy shall not be responsible to Owner for any lost profits
of Owner or any increased electrical energy or thermal enerjg utility costs of Owner or Owner's tenants
arising on account of any early termination of this Agreement as provided in this Article 6.
ARTICLE 7
Suspension of Operations
If the operation of the System is suspended due to the breach of this Agreement by Owner or due
to the negligence or willful misconduct of Owner or any of its employees or agents, Owner shall pay
RealEnergy (i) the amount of any actual physical damages to the System andor any associated increased
operating costs incurred by RealEnergy resulting from such breach, negligence or willful misconduct,
plus (ii) liquidated damages of $
per hour for eachI
hour that operation is suspended ("Suspension
Rate").
ARTICLE 8
Indemnity
To the extent permitted by law, Owner and RealEnergy hereby indemnify and hold each other
harmless from and against any and all Claims for personal injury or property damage (including
reasonable attorneys fees and litigation costs), to the extent caused by (a) its negligence or willful
misconduct in canying out its obligations hereunder or (b) the breach by the indemnifying party of the
terms of this Agreement. In addition, Owner hereby indemnifies RealEnergy and holds it harmless from
and against all Claims arising out of any dispute between Owner and any of its tenants regarding the
business arrangements between RealEnergy and Owner or Owner's obligations under its leases with any
other tenant(s) regarding the supply of, or charges for, electrical energy or thermal energy, or the
amounts paid by RealEnergy to Owner under this Agreement. The indemnity obligation set forth in this
Section 8 shall survive the expiration or earlier termination of this Agreement.
ARTICLE 9
Insurance
9.01
Insurance Coverage. Throughout the Term of this Agreement, RealEnergy, at its sole
cost and expense (or RealEnergy's contractor at its sole cost and expense), shall maintain the following
insurance coverages:

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

RealEnergy shall maintain Commercial general liability insurance against the
(a)
risks of personal injury and property damage occurring on, in or about the Facility, or arising from
RealEnergy's ownership, installation, use or maintenance of the System, in an amount of not less than
One Million Dollars ($1,000,000) per occurrence, Two Million Dollars ($2,000,000) annual aggregate,
including broad form property damage. Excess liability coverage shall be provided on a form following
basis, with a limit not less than Five Million Dollars ($5,000,000).
RealEnergy shall maintain Professional errors and omissions insurance with a
(b)
limit of One Million Dollars ($1,000,000) per Claim and in the aggregate.
(c)
RealEnergy shall maintain Worker's Compensation Insurance to provide
statutory workers compensation benefits, as required by the laws of the states in which the Facility and
RealEnergy's employees are located and Employers' Liability Insurance on an "occurrence" basis with a
limit of not less than One Million Dollars ($1,000,000) for each employee.
RealEnergy's contractor shall maintain Builders' risk insurance in an amount
(d)
equal to 100% of the projected completed value of the work with "increased cost of construction"
endorsement. Such insurance shall be on an all-risk policy form and shall insure against the perils of fire
and extended coverage and physical loss or damage.
RealEnergy's contractor shall provide Owner with a certificate containing evidence of such
coverage prior to commencing any work at the Facility. Prior to the Energy Delivery Date, RealEnergy
shall provide Owner with a certificate containing evidence of such coverage and RealEnergy shall
thereafter provide Owner with appropriate evidence of such coverage upon each anniversary date of the
policy.
Owner's Insurance. Owner shall procure and maintain at all times during the Term of
9.02
this Agreement, a policy or policies of insurance covering loss or damage to the Facility in an amount not
less than the amount of insurance that is generally carried by the owners of comparable buildings in the
vicinity of the Facility, providing protection against all perils included within the classification of fire
and extended coverage, vandalism coverage and malicious mischief, sprinkler leakage, water damage,
and special extended coverage.
9.03
Insurance Policies. All insurance policies required under this Article 9 shall be issued
by insurers of recognized responsibility which are licensed to do business in the state in which the
Facility is located. RealEnergy's policy of insurance for Commercial General Liability as required in
this Article 9 shall name Owner as an additional insured and shall contain an agreement by the insurer
that such policy shall not be terminated, canceled or materially reduced in coverage without at least thirty
(30) days' prior written notice to Owner; provided such notice shall be ten (10) days in the case of a
failure to pay premiums.
9.04
Waiver of Subrogation. Each party releases and waives on behalf of itself and on
behalf of the insurers of such party's property, any and all claims and any rights of subrogation of any
such insurer against the other party, its employees and agents for loss sustained from any peril to
property required to be insured against herein, whether or not such insurance is actually in force, or from
any peril to property actually insured against, though not required to be under this Agreement.

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

ARTICLE 10
DEFAULTS AND REMEDIES
10.01

Events of Default. The following shall be considered to be an "Event of Default" under

this Agreement:
Owner or RealEnergy fails to pay any amounts due under this Agreement when
(i)
the same is due and payable, and such failure continues for ten (10) days afier receipt of written notice
from the other party; or
Owner or RealEnergy fails to perform or observe any other material requirement
(ii)
of this Agreement (other than as addressed in subsection (i) above) on the part of Owner or RealEnergy
to be performed or observed and such failure continues for thirty (30) days after receipt of written notice
to the defaulting party from the other party; provided, however, that if the Event of Default is of such a
nature that it cannot reasonably be cured within such thirty (30) day period, the time within which to cure
shall be reasonably extended up to an additional sixty (60) days (i.e., ninety (90) days after receipt of
such notice) so long as the defaulting party shall commence the cure within such thirty (30) day period
and the defaulting party thereafter diligently proceeds to complete such cure and such cure is completed
on or before the date which is ninety (90) days after receipt of such notice.
Owner or RealEnergy files a petition of any type as to its bankruptcy, is declared
(iii)
bankrupt, becomes insolvent, makes an assignment for the benefit of creditors, goes into liquidation or
receivership, or otherwise loses legal control of its business involuntarily.
10.02 Remedies. Upon the occurrence of an Event of Default, the non-defaulting party may, in
addition to seeking remedies expressly set forth below, terminate this Agreement and RealEnergy shall
remove all RealEnergy Property from the Facility at the expense of the defaulting party. In addition to
termination for an Event of Default, the exclusive remedies for breach of this agreement shall include the
following:

In the case of a breach by Owner, RealEnergy may recover, as applicable: (i) damages
(a)
for any claim of personal injury or property damage, (ii) the Suspension Rate, for so long as operations
are suspended due to the breach as provided in Article 7, (iii) any amounts due and owing under the
Agreement, and (iv) any damages incurred by RealEnergy in the case of the early termination of this
Agreement pursuant to an Event of Default. In addition, RealEnergy may recover reasonable attorney's
fees or other out of pocket transition expenses associated with termination of the Agreement or the Event
of Default;
In the case of a breach by RealEnergy, Owner may recover: as applicable, (i) damages
(b)
for claims for personal injury or property damage resulting from such breach, (ii) any amounts due and
owing under the Agreement, and (iii) any out of pocket transition expenses, including reasonable attorney
fees incurred in connection with the termination of the Agreement andlor the transition to another
supplier of energy; and
The remedies set forth in this Article 10 and in Article 7 are the sole and exclusive
(c)
remedies of the parties for any breach of this Agreement.
10.03 Limitation of Liability. Neither party shall be liable in contract, in tort (including
negligence), strict liability or otherwise for any special, indirect, or consequential damages whatsoever
including, but not limited to, loss of profits or revenue, loss of use of equipment, cost of capital, cost of

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

temporary equipment, overtime, business interruption. spoilage of goods, claims of customers or tenants
of Owner or other economic harm; provided this provision shall not de deemed to limit the rights under
Section 10.02. RealEnergy shall not be responsible for any increased utility costs suffered by O~vneror
Owner's tenants on account of any breach of the Agreement by RealEnergy, except as provided herein.

ARTICLE 11
Disclaimer of Warranties
EXCEPT AS EXPRESSLY SET FORTH HEREIN, REALENERGY MAKES NO OTHER
REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED,
INCLUDING ANY REPRESENTATION OR W-ARRANTY WITH RESPECT TO THE SYSTEM, ITS
PERFORMANCE OR AS TO THE AVAILABILITY, RELIABILITY OR QUALITY OF THE
SYSTEM ENERGY.

ARTICLE 12
Assignment
12.01. Assignment by Owner. Owner may, in its sole discretion at any time, sell, exchange or
otherwise voluntarily or involuntarily transfer or assign its interests in the Facility and this Agreement,
provided that the purchaser of the Facility agrees to assume Owner's duties and obligations under this
Agreement through the end of the Term and such purchaser has the financial resources to perform
Owner's obligations hereunder and Owner pays all sums owed to RealEnergy prior to the date of such
assignment. If Owner transfers its interest in the Facility in compliance with the provisions of this
Section 12.01, then Owner shall be released from all obligations under this Agreement arising after the
date of such transfer.
12.02. Assignment by RealEnergy. RealEnergy may, in its sole discretion at any time, sell,
exchange, will or otherwise voluntarily or involuntarily transfer or assign its interests in the System and
this Agreement, provided that RealEnergy's successors in interest agree to assume RealEnergy's
obligations under this Agreement through the end of the Term and such successor has the technical
experience to perform RealEnergy's obligations hereunder. Upon such transfer, RealEnergy shall be
released from its obligations hereunder. In addition, RealEnergy may assign or encumber its interests in
the System or this Agreement without Owner consent: (i) to an affiliate of RealEnergy, or (ii) in
connection with any financing of the System.
ARTICLE 13
Notices and Certificates
13.01 Notices. Any notice, statement, certificate, request or demand required or permitted to
be given or delivered under this Agreement shall be in writing, and sent by either (i) registered or
certified mail, postage prepaid, return receipt requested, or (ii) nationally recognized overnight courier
service (such as Federal Express), in either case addressed, as the case may be, to Owner or RealEnergy
at the address shown at the beginning of this Agreement, (or to such other addresses as Owner or
RealEnergy shall designate in the manner herein provided). Should Owner designate a managing agent
and provide notice thereof to RealEnergy, such managing agent shall be authorized and designated to
sign, give or deliver to RealEnergy and receive from RealEnergy, any notice under this Agreement. Any
such notice, statement, certificate, request or demand shall, in the case of registered or certified mailing,

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03
be deemed to have been given on the date mailed as aforesaid in any post office or branch post office
regularly maintained by the United States Government. and in the case of delivery by nationally
recognized overnight courier service, shall be deemed to have been given upon the date of delivery to an
authorized agent of such courier service, except in each case for notice of change of address or
revocation of a prior notice, which shall only be effective upon receipt.
13.02 Estoppel Certificates. Within ten (10) days after request by either par-9. the other
party, from time to time and without charge, shall deliver to the requesting party or to a person. firm or
corporation specified by the requesting party, a duly executed and acknowledged instrument, certifying:

that this Agreement is unmodified and in full force and effect. or if there has
(a)
been any modification, that the same is in full force and effect as modified, and identifying the date of
any such modification; and
whether the responding party knows or does not know, as the case may be, of
(b)
any default by the requesting party in the performance by the requesting party of the terms, covenants
and conditions of this Agreement, and specifying the nature of such defaults, if any.
Such certification shall not estop the responding party from thereafter asserting any existing
default of which the responding party did not have actual knowledge on the date of execution thereof.
ARTICLE 14
Representations, Warranties and Covenants
14.01 General Representations and Warranties of RealEnergy and Owner. Each of Owner
and RealEnergy hereby represents and warrants to the other that the following statements are true and
correct as of the date hereof: (a) it is duly organized, validly existing and in good standing under the laws
and jurisdiction of its formation and is qualified to conduct its business in those jurisdictions necessary to
its performance under this Agreement; (b) the execution, delivery and performance of this Agreement are
within its powers, have been duly authorized by all necessary action and do not violate any of the terms
or conditions of its governing documents or any contract to which it is a party or any Law applicable to
it; (c) this Agreement constitutes its legal, valid and binding obligation enforceable against it in
accordance with its terms, subject to Laws affecting creditors' rights generally, and with regard to
equitable remedies, subject to the discretion of the court before which proceedings to obtain the same
may be pending; (d) there are no bankruptcy, insolvency, reorganization, receivership or other similar
proceedings pending or being contemplated by it, or to its knowledge threatened against it; (e) to the best
of its knowledge, there are no suits, proceedings, judgments, rulings or orders by or before any court or
any governmental authority that could materially adversely affect its ability to perform under this
Agreement; and (f) it has sufficient knowledge and experience in business matters that enable it to
evaluate the merits and risks of entering into this Agreement.
14.02 Representation of RealEnergy. RealEnergy represents and warrants that it is not a
public utility or public service corporation under the laws of the State of California or subject to the
jurisdiction of the California Energy Commission (the "CEC") or the California Public Utility
Commission (the "CPUC") or actively regulated by the Federal Energy Regulatory Commission
("FERC") by reason of this Agreement, or by reason of its receipt of payment for System Energy.
RealEnergy further represents and warrants that its sale of System Energy to Owner hereunder does not

FORM LEASE (COMMERCIAL)

With Base Rent
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make RealEnergy an "electrical service provider" as defined in Section 2.1 8.3 of the Public Utility Code
of California. [for other stateljurisdiction, insert the appropriate rep]
14.03 Representations and Covenants of Owner. Owner further represents and covenants
that (a) Owner shall not re-sell any System Energy to any third party, provided, however. System Energy
may be provided to tenants and other occupants of the Facility by Owner and payment for such System
Energy may be included in the lease payments from such tenants to Owner, and (b) that RealEnergy shall
be the exclusive provider of distributed generation services to the Facility during the term of this
Agreement.

ARTICLE 15
Miscellaneous Provisions
15.01 Force Majeure. If Force Majeure renders a party unable to carry out, in whole or part,
its obligations under this Agreement and such party gives notice and full details of the event to the other
party as soon as practicable after the occurrence of the event, then during the pendency of such Force
Majeure, but for no longer period, the obligations of the party claiming Force Majeure (other than the
obligation to make payments then due or becoming due) shall be suspended to the extent required. The
claiming party shall use commercially reasonable efforts to remedy any Force Majeure event.
15.02 Survival of Obligations. Any sums due from either party that by the terms herein would
be payable, or are incapable of calculation until, after the expiration of or earlier termination of this
Agreement, shall survive and remain a continuing obligation until paid. Any obligations of either party
that by the terms hereof are to be performed after the expiration or earlier termination of this Agreement
shall survive and remain a continuing obligation until performed.
15.03 Effect of Captions. The captions in this Agreement are inserted only for convenient
identification of paragraphs. They do not describe, interpret, define or limit the scope of this Agreement,
or any paragraph or provision hereof.
15.04 Execution in Counterparts. This Agreement may be executed in one or more
counterparts, any one or all of which shall constitute but one agreement.
15.05 Governing Law; Successors and Assigns.
This Agreement, and any dispute
concerning this Agreement, shall be governed by the laws of the state in which the Facility is located,
without regard to that state's choice of law provisions, and any dispute concerning an interpretation of
any portion of the Agreement or the conduct of the parties hereunder shall be brought in the state where
the Facility is located. This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, except as expressly provided otherwise.
15.06 Complete Agreement; Waiver. This Agreement contains and embraces the entire
agreement between the parties with respect to the matters contained herein. Neither this Agreement nor
any part hereof may be changed, altered, modified, limited, terminated, or extended orally unless by an
agreement in writing signed by the parties hereto.
15.07 Negotiation of Disputes; Arbitration. If a dispute arises under this Agreement, the
parties shall first promptly attempt in good faith to resolve the dispute by negotiation. If such
negotiations are unsuccessful, any disputes or claims between the parties arising out of or relating to this

FORM LEASE (COMMERCIAL)
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Agreement, or the breach hereof, not settled by negotiation, shall be settled by arbitration conducted in
accordance with the commercial arbitration rules of the American Arbitration Association ("AAA") in
effect at that time, at a location specified by RealEnergy in the state where the Facility is located. A
single arbitrator shall decide all disputes. The arbitrator shall not have been previously employed by
either party, shall have knowledge and experience in the competitive electricity sales industv, and shall
not have a direct or indirect interest in either party or the subject matter of the arbitration. Such
arbitrator shall be designated as mutually agreed by the parties within twenty (20) business days after
either party requests in a writing sent to the other party that a dispute or claim be arbitrated. If the parties
fail to select an arbitrator, the arbitrator shall be selected under the expedited rules of the AAA. The
arbitrator shall issue a scheduling order that shall not be modified except by the mutual agreement of the
parties. The arbitrator shall render a decision no later than sixty (60) days after his selection, and the
arbitrator shall state in writing the factual and legal basis for the award. Any award rendered by the
arbitrator shall be final, and judgment may be entered upon it in accordance with applicable law in any
court having jurisdiction thereof. The arbitrator may award the prevailing party its costs, including
attorney's fees, incurred as a result of the dispute.
15.08 Invalidity of Particular Provisions. If any term or provision of this Agreement or the
application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to persons or circumstances
other than those as to which it is invalid or unenforceable, shall not be affected thereby, and each term
and provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.
15.09 Relationship of the Parties. Nothing contained herein shall be deemed or construed by
the parties hereto nor by any third party as creating the relationship of principal and agent or of
partnership or of joint venture between the parties hereto.
15.10 Approvals. No consent, approval or authorization required under the terms of this
Agreement to be given by either party shall be unreasonably withheld or delayed.
15.11 Further Assurances. The parties agree to take such further actions, execute or obtain
such consents and approvals and duly execute and deliver such further agreements, assignments,
consents, waivers, instructions or documents, including without limitation, the Additional Documents,
with respect to the purposes, terms and conditions of this Agreement and the consummation of the
transactions contemplated hereby.
15.12 Confidentiality. Each party hereby acknowledges and agrees that the terms of this
Agreement and any future amendments or other agreements in connection with this Agreement are
confidential and constitute proprietary information of the parties. Disclosure of the terms by RealEnergy
could adversely affect the ability of Owner to negotiate other leases or agreements and impair Owner's
relationship with other tenants and disclosure of the terms by Owner could adversely affect the ability of
RealEnergy to conduct its business at the Facility and/or other locations. Accordingly, each party agrees
that it, and its partners, agents, representatives, officers, directors, employees and attorneys, shall not
disclose, either directly or indirectly, any of the terms or conditions of this Agreement or any future
amendments or other agreements in connection with this Agreement, to any person or entity, except to
personnel employed by such party, as reasonably necessary for such party's performance of its
obligations under this Agreement or for tax reporting purposes, and to prospective sub-tenants or
assignees under this Agreement and existing or prospective mortgagees of the Facility. The preceding
provisions of this paragraph shall not apply to, or bar or limit any legal action between RealEnergy and
the Owner to enforce this Agreement.

FORM LEASE (COMMERCIAL)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and
year first written above.
REALENERGY, INC.,
a Delaware corporation
Name:
Title:

By:
Name:
Title:

FORM LEASE (COMMERCIAL)
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Schedule I
Defined Terms

Additional Documents shall mean any agreement between Owner and/or RealEnergy and any
governmental authority or public utility, including, without limitation, the respective utility company,
including, without limitation, interconnection agreements and related agreements in connection with the
System.
Billing Cycle means the period between successive Invoices.
Claims means all claims or actions, threatened or filed, and whether groundless, false or
fraudulent, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses.
damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise. and
whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.
Common Areas means the interior and exterior areas and facilities within the Facility which are
within Owner's control and are (i) not leased or intended to be leased to a tenant and are available for use
by all tenants; or (ii) designated by Owner as Common Areas.
Contract Rate means a rate per annum equal to 2.5% over the prime lending rate as from time to
time may be published in the Wall Streef Journal under "Money Rates," compounded semiannually;
provided that the Contract Rate charged and collected shall never exceed in the aggregate, taking into
account all payments constituting interest under Law, the maximum rate permitted by applicable law.
Due Date has the meaning set forth in Section 4.0 1 (e).
Electrical Energy means the electricity generated by the System, as measured in kilowatts and
kilowatt hours.
Electrical Interconnection Point means the location where the System connects to the existing
electrical systems serving the Facility.
Electricity Purchase Price means the price for electricity generated by the System and delivered
to the Electrical Connection Point, as set forth on Schedule 4.0 1 hereto.
Energy Delivery Date means the date that RealEnergy commences delivering Electrical Energy
or Thermal Energy to the Facility.
Force Majeure means an event that is not within the reasonable control of a party or which by
the exercise of its due diligence, it is unable to overcome or to obtain or cause to be obtained a
commercially reasonable substitute therefor. Force Majeure includes, but is not limited to, any changes
in Law which prohibit or frustrate a party from performing under this Agreement.
Governmental Authorities means the United States, the State of California, and any political
subdivision thereof and any agency, department, commission, board, court or instrumentality thereof.

FORM LEASE (COMMERCIAL)
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Hazardous Materials means oil or petroleum products, asbestos, polychlorinated biphenyls
or any biologically or chemically active or other hazardous or toxic materials. substances or wastes
whether in solid, liquid or gaseous state.
HVAC Interconnection Point means the point(s) where the System connects to the esisting
HVAC system serving the Facility.
HVAC System means the heating, ventilating and air conditioning system for the Faciliv.
including any and all related equipment and all HVAC steam, make-up water supply, condensate return.
waste, potable water, and thermal fluid supply lines.
Interconnection Facilities means all facilities necessary to connect the System to (i) the
electrical grid of the Owner Electric Utility and (ii) the HVAC System.
Invoice means the "Invoice" delivered by RealEnergy to Owner each month during the Term of
this Agreement, relating to the System Energy delivered by RealEnergy to Owner during the prior month.
in accordance with the terms of Sections 4.0 1 (e) and 4.02(e), hereof.
Law means any law, statute, regulation, rule, decision, writ, order, decree or judgment, or any
interpretation thereof, that is applicable to the parties, the Owner Plant Facilities, the Owner Utilities, the
System or this Agreement.
Owner Electric Utility means the electric utility distribution company or companies providing
tariffed services to the Facility a s of the Effective Date, or any successor thereto.
Owner Natural Gas Utility means the natural gas utility distribution company or companies
providing tariffed services to the Facility as of the Effective Date, or any successor thereto.
O w n e r Plant Facilities means the existing HVAC System serving the Facility, the existing
electrical system serving the Facility, and the other existing utility systems serving the Facility.
Owner Utilities means the Owner Electric Utility or Owner Natural Gas Utility or companies
providing tariffed services to the Facility as of the Energy Delivery Date and any successor(s) thereof.
Owner's Utility Price has the meaning set forth in Schedule 4.0 1
Stand-by o r Interconnection Charges means the charges paid to the Owner Electric Utility
exclusively associated with the installation or operation of the System, that would not have been assessed
under the applicable tariff had the System not been in place.
Suspension Rate has the meaning set forth in Schedule 7.01.
System means a system for the production of Electric Energy and Thermal Energy (if applicable)
and related devices which RealEnergy shall install at the Facility in and about the Premises.
System Energy means both the Electrical Energy and the Thermal Energy produced by the
System.

FORM LEASE (COMMERCIAL)
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Taxes mean any and all governmental or quasi-governmental taxes, assessments, levies, duties.
fees, charges or withholdings of any kind or nature whatsoever and howsoever described. including but
not limited to income, gross receipts, franchise, sales. use, excise, property, capital, value added. stamp.
transfer, intangible, generation, privilege, utility, BTU, gathering, energy. consumption, lease. permit.
license, filing, custom and/or recording tax, together with any and all penalties, fines. additions or
interest thereon.
Term has the meaning set forth in Section 2.02 hereof.
Thermal Energy shall mean the chilled water, as measured in tons per hour, and/or hot water, as
measured in Therms, generated by the System and delivered to the HVAC Interconnection Point.
Thermal Energy Purchase Price shall mean the price for Thermal Energy generated by the
System and delivered to the HVAC Interconnection Point, as set forth on Schedule 4.02(a) and 4.02(b)
hereto.

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

SCHEDULE 2.03
Owner's Rules
[to be attached by Owner]

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

SCHEDULE 4.01
Electricity Purchase Price
Owner shall pay RealEnergy for all Electricity Services used by Owner hereunder based on the sum of
energy cost Owner would have incurred to purchase the same Electricity Services in the same time
period, from the Owner Electric Utility without the System, according to the following formula:

[Redactedfor reasons of commercial confidentiality]
Where:

-

Total Payment Due from Owner for Electricity over a monthly billing period.

-

Payment to RealEnergy for Electricity used by Owner in that monthly billing
period as metered.

-

Credit to Owner from RealEnergy for any charges paid by Owner to the Owner
Electric Utility (Standby or Interconnection Charges) exclusively associated
with the installation or operation of the System, that would not have been
assessed under the applicable tariff used in calculating P1, had the System not
been in place.

-

Owner's Utility Price. The actual rate, on a dollars per kilowatt and dollars
per kilowatt hour basis, that would apply for electricity service to the Facility
from the Owner Utility for the total amount of electrical energy consumed by
the Facility (assuming the absence of the System) on a time of use basis
pursuant to the following listed utility tariff rate schedule (including, but not
limited to, charges for generation, transmission and distribution; transition,
decommissioning or other fees related to de-regulation, surcharges assessed in
connection with the debt service related to any governmental bond or similar
governmental debt issuance or financing, and any Taxes and other charges that
Owner would otherwise have paid to the Owner's Electric Utility).
Facility

Landlord Utility

Rate Schedule

-

Electrical Energy delivered during the billing cycle to Owner Electrical
Interconnection Point expressed as kW and kwh's.

-

Grants, rebates, demand charge reductions, incentive payments or any other
payments or credits received by Owner from the Owner Electric Utility or
other federal or state governmental entity associated with the installation or
operation of the System or the reduction of energy consumption as a result of
the operation of the System.

FORM LEASE (CObIMERClAL)
With Base Rent
Updated 05.01.03

SCHEDULE 4.02 (a)
Thermal Energy Purchase Price - Hot Water
Owner shall pay RealEnergy for all Hot Water Thermal Energy used by Owner hereunder based on the
sum of energy cost Owner would have incurred to produce the same Hot Water Thermal Energy in the
same time period, from the Owner Natural Gas Utility without the System, according to the following
formula:
[Redacted for reasons of commercial confidentiality]
Where:
p,

p2t

-

Total Payment Due from Owner for Hot Water Thermal Energy over a monthly
billing period.

-

Payment to RealEnergy for Hot Water Thermal Energy used by Owner in that
monthly billing period as metered.

-

Credit to Owner from RealEnergy for any charges paid by Owner to the Owner
Natural Gas Utility exclusively associated with the installation or operation of
the System, that would not have been assessed under the applicable tariff used
in calculating P1, had the System not been in place.

-

Owner's Utility Price is the applicable utility tariff for the full requirements
delivery of gas [steam] for the Facility for the production of hot water
(assuming the absence of the System) pursuant t o the following rate
schedules under which Owner purchases gas [steam], expressed as Dollars
/ T h e m (including, but not limited to, charges for gas commodity, interstate
transportation charges, brokerage, fees, taxes, surcharges assessed in
connection with the debt service related to any governmental bond or similar
governmental debt issuance or financing, and other charges).
Facilitv

-

-

-

Landlord Utility

Rate Schedule

Hot Water Thermal Energy delivered during the billing cycle to Owner Hot
Water Interconnection Point expressed as Therms.
Heating System efficiency factor based on Owner's ability to produce Hot
Water Thermal Energy at the Facility, which assumes a standard boiler
efficiency of .80.
Grants, rebates, incentive payments or any other payments or credits received
by Owner from the Owner Natural Gas Utility or other federal or state
governmental entity associated with the installation or operation of the System
or the reduction of energy consumption as a result of the operation of the
System.

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

SCHEDULE 4.02 (b)
T h e r m a l Energy Purchase Price - Chilled Water
Owner shall pay RealEnergy for all Chilled Water Thermal Energy used by Owner hereunder based on
the sum of energy cost Owner would have incurred to produce the same Chilled Water Thermal Energy
in the same time period, from the Owner Electric Utility without the System, according to the following
formula:
[Redactedfor reasons of commercial conjldentiality]

Where:
p,

-

Total Payment Due from Owner for Chilled Water Thermal Energy over a
monthly billing period.
Payment to RealEnergy for Chilled Water Thermal Energy used by Owner in
that monthly billing period as metered.

-

Credit t o Owner from RealEnergy for any charges paid by Owner to the Owner
Electric Utility exclusively associated with the installation or operation of the
System, that would not have been assessed under the applicable tariff used in
calculating PIt had the System not been in place.

-

Owner's Utility Price. The actual rate, on a dollars per kilowatt and dollars per
kilowatt hour basis, that would apply for electricity service to the Facility from
the Owner Electric Utility for the electrical energy consumed by the Facility for
the production of chilled water (assuming the absence of the System) for the
production of chilled water, on a time of use basis pursuant to the following
listed utility tariff rate schedule under which Owner currently purchases
electricity service for the Facility (including, but not limited to, charges for
generation, transmission and distribution; transition, decommissioning or other
fees related to de-regulation, surcharges assessed in connection with the debt
service related to any governmental bond or similar governmental debt issuance
or financing, and any Taxes and other charges that Owner would otherwise
have paid to the Owner's Electric Utility).
Landlord Utilitv
-

Rate Schedule

RealEnergy Chilled Water Thermal Energy delivered during the billing cycle to
Owner Chilled Water Interconnection Point expressed as Ton Hours.

-

Owners Chilled Water System efficiency factor based on Owner's ability to
produce Chilled Water Thermal Energy in the same time period, at the Facility,
which is metered and expressed in kW/ton.

-

Grants, rebates, incentive payments or any other payments or credits received
by Owner from the Owner Electric Utility or other federal or state
governmental entity associated with the installation or operation of the System

FORM LEASE (COMMERCIAL)
With Base Rent
Updated 05.01.03

or the reduction of energy consumption as a result of the operation of the
System.

FORM LESA (OFFICE)
Updated 10102102

EXHIBIT A
Premises

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Asec%3A58d76a2bcb447c04. Public record. Not legal advice.