Exhibit B
Expenditure Strategy
CITY OF VICTORVILLE
MEASURE I CAPITAL IMPROVEMENT PLAN
EXPENDITURE STRATEGY
Fiscal Year 2025/2026 – Fiscal Year 2029/2030
The City of Victorville has a carryover balance of $11,838,605.00, in the Measure I Local Street fund and anticipates approximately $6.4 million in new revenue for FY25/26. In this next fiscal year, the City is planning to use approximately $8 .9 million for street new construction, reconstruction, rehabilitation and preservation capital projects. $4.1 million will be used for operations and maintenance. The remaining balance will be accumulated for planned future capital projects.
The City of Victorville’s Measure I Capital Improvement Expenditure Strategy balances expenditures between different categories of projects based on the City’s needs. The project categories include the following: new construction; reconstruction and rehabilitation; maintenance; preliminary engineering and environmental studies; right of way acquisition; and final design. Also included are categorical expenditures for maintenance of roads, traffic controls, traffic signals, traffic engineering and the purchase of vehicles or equipment for street related purposes.
New construction may incorporate a complete streets approach to include widening existing roads and bridges, construction of bikeways, curbs, sidewalks, curb ramps and new traffic signals as an integral part of the street system. Reconstruction and rehabilitation can include bridge improvements, removing and replacing pavement sections and non- ADA compliant curb ramps and drive approaches , asphalt -concrete overlays of one inch or more in thickness or various other methods, including re- striping for bike lanes. Preservation or maintenance of roads can include thin overlays two inches or less, mircorsurfacing, cape seals, chips seals, and slurry seals. Traffic control includes the maintenance and operation of signing and striping including sign and marking replacements and new signs and markings. Traffic signal maintenance includes operations and maintenance for traffic signals and var ious equipment replacements or upgrades. Traffic engineering encompasses all traffic engineering activities.
Item Number: 19
City Council / Board of Directors
Written Communications
Meeting of: August 19, 2025
Submitted By:
Fredy Bonilla, City Engineer
Subject:
Development Impact Fee Credit Agreement for Regional Drainage Fees by and between Victorville 142 LP and the City of Victorville
Recommendation:
That the Honorable City Council:
(1) Approve the attached Development Impact Fee Credit Agreement for Regional Drainage Fees between Victorville 142 LP and the City of Victorville; and (2) Authorize the City Manager and City Attorney to make non-substantive changes and clarifications, if needed, to the Development Impact Fee Credit Agreement.
Fiscal Impact:
This action will result in an estimated fiscal impact that would range from $159,489.15 to $195,599.26. The approval of this agreement will provide a credit of $2,018.85 to $2,475.94 per residential lot against the Regional Drainage Development Impact Fees (DIF). The Drainage DIF is due at the time of occupancy of the individual residential parcels that are currently being developed by Victorville 142 LP. The DIF account is shown in the table below.
Account Description Account Code
Storm Drain DIF Revenue 3570010-44500
As explained in the Background and Discussion Sections of this report, the City’s Implementation Plan for residential development will increase DIFs on January 1, 2026, and since DIFs are due at occupancy, the final credit amount will depend on the DIFs due at occupancy.
Strategic Plan Goal:
This item aligns with “Goal E Invest in Infrastructure” in the City of Victorville Strategic Plan 2023-2026. This DIF credit agreement will assist Victorville 142 LP in offsetting the 4 2
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construction of a 60" master planned storm drain on Mojave Drive between Onyx Road and Topaz Road.
Background:
On June 7, 2022, the City Council approved Resolution No. 22-050, which adopted Nexus Studies for various DIF and Capacity Charges, established fees associated with each respective DIF/Capacity Charge category, a Capital Improvement Plan, and Council Policy CP-22-01, which included a Phased Fee Implementation plan for residential development (collectively as amended, the “DIF Program”). The City is currently in Year 3 of the 4-year phasing plan and the current Regional Drainage Fee is $2,018.85 per lot.
Please note that on January 1, 2026, the Regional Drainage DIF will increase to $2,475.94 per lot.
Council Policy CP-22-01, which has since been rescinded and replaced first by CP-23- 02, and most recently by CP-24-05 (Attachment D), also outlines the criteria for receiving DIF Credits for public improvements a developer installs as part of its project. CP-24-05 requires a developer to submit a letter requesting a credit, followed by an internal staff review of the request, and finally Council’s approval of a Development Impact Fee Credit Agreement (DIF Credit Agreement). Furthermore, CP-24-05, Section VII, Subsection C outlines the circumstances in which a developer may receive credit for Drainage Improvements. On July 7, 2025, Victorville 142 LP submitted a letter formally requesting DIF Credits (Attachment C).
Please note: Although Policy No. CP-24-05 is the Council Policy currently in effect, the provisions of prior Policy No. CP-23-02, which was in effect when the Developer acquired the Property that govern certain aspects of the attached DIF Credit Agreement.
Tract Map No. 16894 is a residential subdivision of 142 single-family lots, located at the southwest corner of Mojave Drive and Topaz Road (Attachment A). On December 27, 2017, Mojave Onyx Development Company (Mojave Onyx), a California limited liability company, as the property owner recorded Phase 1 of the map after providing a Subdivision Improvement Agreement (SIA) secured by a lien agreement as security for the required public improvements. On April 21, 2021, Mojave Onyx, as the property owner recorded Phase 2 of the map after providing a SIA secured by a lien agreement as security for the required public improvements. When Phase 2 recorded, the Phase 1 SIA and lien agreement were released, and both tracts were placed under one new SIA and lien agreement. Mojave Onyx did not construct any improvements, and all 142 residential lots remain vacant land.
On September 12, 2024, Victorville 142 LP, a California limited partnership also known as Legacy Homes, acquired the tract from Mojave Onyx and is the current owner of all 142 undeveloped lots in Tract 16894.
On May 20, 2025, the City Council approved a security substitution for Tract No. 16894 with Legacy Homes. In summary, the City Council approved a SIA with improvements bonds as security for Tract No. 16894-1 and a separate SIA with a lien agreement as 4 2
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security for Tract No. 16894-2. On June 17, 2025, the Engineering Department issued a permit to Legacy Homes for the development of Tract No. 16894-1. Legacy Homes is ready to begin the off-site improvements on the south side of Mojave Drive, which include the construction of a 60-inch master planned storm drain, the construction of an additional travel lane for eastbound traffic, curb & gutter, sidewalk, and landscaping and irrigation (LMAD) improvements from Onyx Road to Topaz Road.
Discussion:
Legacy Homes is now ready to begin the off-site improvements on the south side of Mojave Drive which include a master planned storm drain (Line E-07-01) from Onyx Road to Topaz Road. Since Mojave Drive is part of their marketing corridor, and model homes will be constructed along Onyx Road, just south of Mojave Drive, Legacy Homes has submitted a request to receive Drainage DIF credits for the regional drainage improvements that they will be installing.
Of the required and abovementioned public improvements, on the southside of Mojave Drive, only the master planned storm drain is eligible for DIF Credits. The cost of the storm drain is approximately $837,000 and each residential unit (79 total in Phase 1) is eligible for a $2,018.85 credit against the Regional Drainage DIF, so in total Legacy Homes would receive a credit in the amount of $159,489.15 which is approximately 19% of the total construction cost. If the individual homes are occupied after January 1, 2026, the Regional Drainage DIF will increase to $2,475.94 per lot and the total credit will increase to $195,599.26 which is approximately 23% of the total construction cost.
Once the construction is complete, Legacy Homes will be required to submit the following to the City Engineer:
(1) Supporting documentation for the actual cost of the work. (2) General contractor and sub-contractor names and license numbers. (3) Signed contracts and lien releases for all contractors and subcontractors associated with the work.
(4) Certified payroll substantiating that State prevailing wages were paid.
This is the second DIF Credit Agreement that has been requested since the City updated its DIF Program and the policy relative to DIF credits in June of 2022. The first DIF Credit Agreement was approved by the City Council in December 2024 for the Good Year project at SCLA that was completed earlier this year.
Staff recommends that the Honorable City Council approve the attached DIF Credit Agreement for Regional Drainage Fees between Victorville 142 LP and the City of Victorville and authorize the City Manager and City Attorney to make non-substantive and/or clarifying changes to said DIF Credit Agreement, if needed.
Staff is available for any questions Council may have.
Prepared By:
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Jean Kim, Assistant Engineer II
Attachments: A. Vicinity Map
B. Victorville 142 LP DIF Credit Agreement
C. Victorville 142 LP Letter Requesting DIF Credits
D. City Council Policy CP-24-05
Attachment A
Vicinity Map
Attachment B
Victorville 142 LP
DIF Credit Agreement
***THIS AGREEMENT SHALL BE OF NO FORCE OR EFFECT UNTIL APPROVED BY THE VICTORVILLE CITY COUNCIL AND FULLY EXECUTED BY THE PARTIES***
DEVELOPMENT IMPACT FEE CREDIT AGREEMENT
THIS DEVELOPMENT IMPACT FEE CREDIT AGREEMENT (“ Agreement”), dated August 19, 2025 for reference purposes only, is made between VICTORVILLE 142 LP , a California limited partnership (hereinafter “Developer”) and the CITY OF VICTORVILLE , a California municipal corporation and charter city (hereinafter “City”). City and Developer are from time to time individually referred to hereinafter as a “Party” and collectively referred to hereinafter as the “Parties.”
RECITALS
A. Developer is the owner and developer of certain vacant real property situated in the City of Victorville, California, commonly known as Tract Map No. 16894- 1, as more particularly described on Exhibit “A” attached hereto and incorporated herein by this reference (the “Property”); and
B. Developer and/or its predecessor in interest obtained certain entitlements from the City, including PLN-00314, Planning Commission Resolution No. 07-203, ADM16-00047, and recorded subdivision Tract Map No. 16894- 1 (the “Entitlements”), which allow for the development of 79 Single- Family Homes on the Property (the “Project”); and
C. City requires developers to pay certain development impact fees and/or capacity charges for the purpose of defraying all or a portion of the cost of public improvements, public services, and community amenities related to their projects (collectively “ Development Impact Fees” or “DIF”) as set forth in Victorville Municipal Code (“VMC”) Section 16-
5.01.080; current Victorville City Council Policy No. CP-24-05 (“Policy No. CP-24-05”); City Council Resolution Nos. 22- 045, 22-050, 23- 100, and 24 -005; Victorville Water District Resolution No s. VWD 22-005, 22-007, 23-015, and 24-011; the adopted n exus studies, the DIF Capital Improvement Plan, and the DIF fee schedules attached thereto; as such may be modified, supplemented, or superseded from time -to-time by future resolutions or ordinances of the Victorville City Council and the Victorville Water District (collectively hereinafter the “DIF Program” or “DIF Program Documents”); and
D. Policy No. CP -23-02
1 authorized the City under certain circumstances to issue credits to developers who construct certain public improvements that are included within the City ’s DIF Program to offset or reduce their DIF obligations; and
E. As a condition of City’s approval of the Project, namely condition 53 of ADMIN16-00047, the City has required Developer to construct a master planned storm drain (Line E-07-01) from Onyx Road to Topaz Road (the “DIF Improvements” as further hereinafter defined), which is among the public improvements/facilities that would be funded by payment of regional drainage fees (“Regional Drainage DIF”) under the City’s DIF Program; and
1Although Policy No. CP-24-05 is the Council Policy currently in effect, the provisions of prior Policy No. CP-23- 02 which was in effect when Developer acquired the Property govern certain aspects of this Agreement. 2 F. City and Developer now wish to enter into this Agreement for the following purposes: (1) to provide for the timely delivery of the DIF Improvements ; (2) to ensure that delivery of the DIF Improvements is undertaken as if the DIF Improvements were constructed under the direction and authority of the City; (3) and to provide a means by which the Developer’s costs for project delivery of the DIF Improvements is offset against Developer’s obligation to pay the applicable Regional Drainage DIF for the Project.
NOW, THEREFORE, for the purposes set forth herein, and for good and valuable consideration, the adequacy of which is hereby acknowledged, Developer and City hereby agree as follows:
1.0 Incorporation of Recitals . The Parties hereby affirm the facts set forth in the Recitals above and agree to the incorporation of the Recitals as though fully set forth herein.
2.0 Construction of DIF Improvements . Developer shall construct or cause to be constructed at its own cost, expense, and liability certain DIF Improvements generally described as A 60” REINFORCED CONCRETE PIPE, MASTER PLANNED STORM DRAIN (LINE E-07-01) FROM ONYX ROAD TO TOPAZ ROAD, and as shown more specifically on the plans, profiles, and specifications which have been or will be prepared by or on behalf of Developer and approved by City, and which are incorporated herein by this reference. Construction of the DIF Improvements shall include any transitions and/or other incidental work deemed necessary for drainage or public safety. Developer shall be responsible for the replacement, relocation, or removal of any component of any existing public or private improvement in conflict with the construction or installation of the DIF Improvements. Such replacement, relocation, or removal shall be performed to the complete satisfaction of the City and the owner of such improvement.
Developer further promises and agrees to provide all equipment, tools, materials, labor, tests, design work, and engineering services necessary to fully and adequately complete the DIF Improvements.
2.1 Pre-approval of Plans and Specifications . Developer is prohibited from commencing work on any portion of the DIF Improvements until all plans and specifications for the DIF Improvements have been submitted to and approved by the City. Approval by City shall not relieve Developer from ensuring that all DIF Improvements conform with all other requirements and standards set forth in this Agreement.
2.2 Permits and Notices. Prior to commencing any work, Developer shall, at its sole cost, expense, and liability, obtain all necessary permits and licenses and give all necessary and incidental notices required for the lawful construction of the DIF Improvements and performance of Developer’s obligations under this Agreement. Developer shall conduct the work in full compliance with the regulations, rules, and other requirements contained in any permit or license issued to Developer.
2.3 Public Works Requirements. To ensure that the DIF Improvements will be constructed as if they had been constructed under the direction and supervision, or under the authority of, the City, Developer shall comply with the requirements set forth in Exhibit “B” attached hereto and incorporated herein by this reference , with respect to the construction of the 3 DIF Improvements , including without limitation payment of prevailing wages as required by California law. Should Developer fail to comply with the r equirements in Exhibit “B”, any DIF Improvements so constructed shall not be eligible for DIF Credits or reimbursement (if applicable).
2.4 Quality of Work; Compliance with Laws and Codes. The construction plans and specifications for the DIF Improvements shall be prepared in accordance with all applicable federal, state and local laws, ordinances, regulations, codes, standards, and other requirements.
The DIF Improvements shall be completed in accordance with all approved maps, plans, Entitlements, specifications, standard drawings, and amendments thereto on file with City, as well as all applicable federal, state, and local laws, ordinances, regulations, codes, standards, and other requirements applicable at the time work is actually commenced.
2.5 Standard of Performance . Developer and its contractors and/or subcontractors, if any, shall perform all work required, constructing the DIF Improvements in a skillful and workmanlike manner, and consistent with the standards generally recognized as being employed by professionals in the same discipline in the State of California. Developer represents and maintains that it or its contractors and/or subcontractors, if any, shall be skilled in the professional calling necessary to perform the work. Developer warrants that all of its employees and contractors and/or subcontractors, if any, shall have sufficient skill and experience to perform the work assigned to them, and that they shall have all licenses, permits, qualifications and approvals of whatever nature that are legally required to perform the work, and that such licenses, permits, qualifications and approvals shall be maintained throughout the term of this Agreement.
2.6 Alterations to DIF Improvements . All work shall be done and the DIF Improvements completed as shown on approved plans and specifications, and any subsequent approved alterations thereto. If during the course of construction and installation it is determined that the public interest requires alterations in the DIF Improvements, Developer shall undertake such design and construction changes as may be reasonably required by City . Any and all alterations in the plans and specifications and the DIF Improvements to be completed may be accomplished without first giving prior notice thereof to Developer’s surety for this Agreement.
3.0 Maintenance of DIF Improvements. City shall not be responsible or liable for the maintenance or care of the DIF Improvements until City approves and accepts them. City shall exercise no control over the DIF Improvements until accepted. At all times prior to City’s acceptance of the DIF Improvements, a ny use by any person of the DIF Improvements, or any portion thereof, shall be at the sole and exclusive risk of Developer. Developer shall maintain all of the DIF Improvements in a state of good repair until they are completed by Developer and approved and accepted by City, and until the security for the performance of this Agreement is released. It shall be Developer’s responsibility to initiate all maintenance work, but if it shall fail to do so, it shall promptly perform such maintenance work when notified to do so by City . If Developer fails to properly prosecute its maintenance obligation under this section, City may do all work necessary for such maintenance and the cost thereof shall be the responsibility of Developer and its surety under this Agreement. City shall not be responsible or liable for any damages or injury of any nature in any way related to or caused by the DIF Improvements or their condition prior to acceptance.
4 4.0 Fees and Charges. Developer shall, at its sole cost, expense, and liability, pay all fees, charges, and taxes arising out of the construction of the DIF Improvements, including, but not limited to, all plan check, design review, engineering, inspection, and other service fees established by City.
5.0 City Inspection of DIF Improvements. Developer shall, at its sole cost, expense, and liability, and at all times during construction of the DIF Improvements, maintain reasonable and safe facilities and provide safe access for inspection by City of the DIF Improvements and areas where construction of the DIF Improvements is occurring or will occur.
6.0 Liens. Upon the expiration of the time for the recording of claims of liens as prescribed by Sections 8412 and 8414 of the Civil Code with respect to the DIF Improvements, Developer shall provide to City such evidence or proof as City shall require that all persons, firms and corporations supplying work, labor, materials, supplies and equipment to the construction of the DIF Improvements, have been paid, and that no claims of liens have been recorded by or on behalf of any such person, firm or corporation. Rather than await the expiration of the said time for the recording of claims of liens, Developer may elect to provide to the City a title insurance policy or other security acceptable to City guaranteeing that no such claims of liens will be recorded or become a lien upon any of the Property.
7.0 Acceptance of DIF Improvements; As -Built or Record Drawings . If the DIF Improvements are properly completed by Developer and approved by City , and if they comply with all applicable federal, state and local laws, ordinances, regulations, codes, standards, and other requirements, City shall be authorized to accept the DIF Improvements. City may, in its sole and absolute discretion, accept fully completed portions of the DIF Improvements prior to such time as all of the DIF Improvements are complete, which shall not release or modify Developer’s obligation to complet e the remainder of the DIF Improvements. Upon the total or partial acceptance of the DIF Improvements by City , Developer shall file with the Recorder’s Office of the County of San Bernardino a notice of completion for the accepted DIF Improvements in accordance with California Civil Code sections 8182, 8184, 9204, and 9208 (“ Notice of Completion”), at which time the accepted DIF Improvements shall become the sole and exclusive property of City without any payment therefor. Notwithstanding the foregoing, City may not accept any DIF Improvements unless and until Developer provides one (1) set of “as -built” or record drawings or plans to the City for all such DIF Improvements. The drawings shall be certified and shall reflect the condition of the DIF Improvements as constructed, with all changes incorporated therein.
8.0 Warranty and Guarantee. Developer hereby warrants and guarantees all the DIF Improvements against any defective work or labor done, or defective materials furnished in the performance of this Agreement, including the maintenance of the DIF Improvements, for a period of one (1) year following completion of the work and acceptance by City (the “Warranty”).
During the Warranty, Developer shall repair, replace, or reconstruct any defective or otherwise unsatisfactory portion of the DIF Improvements, in accordance with the current ordinances, resolutions, regulations, codes, standards, or other requirements of City , and to the approval of City. All repairs, replacements, or reconstruction during the Warranty shall be at the sole cost, expense, and liability of Developer and its surety. As to any DIF Improvements which have been 5 repaired, replaced, or reconstructed during the Warranty, Developer and its surety hereby agree to extend the Warranty for an additional one (1) year period following the City’s acceptance of the repaired, replaced, or reconstructed DIF Improvements. Nothing herein shall relieve Developer from any other liability it may have under federal, state, or local law to repair, replace, or reconstruct any DIF Improvement following expiration of the Warranty or any extension thereof.
Developer’s warranty obligation under this section shall survive the expiration or termination of this Agreement.
9.0 Administrative Costs. If Developer fails to construct and install all or any part of the DIF Improvements, or if Developer fails to comply with any other obligation contained herein, Developer and its surety shall be jointly and severally liable to City for all administrative expenses, fees, and costs, including reasonable attorney’s fees and costs, incurred in obtaining compliance with this Agreement or in processing any legal action or for any other remedies permitted by law.
10.0 Default; Notice; Remedies.
10.1 Notice. If Developer neglects, refuses, or fails to fulfill or timely complete any obligation, term, or condition of this Agreement, or if C ity determines there is a violation of any federal, state, or local law, ordinance, regulation, code, standard, or other requirement, C ity may at any time thereafter declare Developer to be in default or violation of this Agreement (“Default”) and make written demand upon Developer, to remedy the D efault withing the time period specified in such written demand (“Default Notice”). If the Default pertains to the failure of the Developer to reasonably and timely prosecute to completion the applicable DIF Improvements, Developer shall substantially commence or cause the commencement of the work required to remedy the Default within five (5) days of the Default Notice; however, if the Default constitutes an immediate threat to the public health, safety, or welfare, C ity may provide the Default Notice verbally, and Developer shall substantially commence the required work within twenty-four (24) hours thereof.
10.2 Failure to Remedy; C ity Action. If the work required to remedy the noticed Default is not diligently prosecuted to a completion acceptable to City within the time frame contained in the Default Notice, City may complete all remaining work, arrange for the completion of all remaining work, and/or conduct such remedial activity as in its sole and absolute discretion it believes is required to remedy the Default, without the necessity of giving any further notice to Developer , its contractor, or the surety. The cost of all such work or remedial activity shall be recoverable by City from Developer. City’s right to take such actions shall in no way be limited by the fact that Developer , its contractor, or the surety may have constructed any of the DIF Improvements at the time of City’s demand for performance. In the event City elects to complete or arrange for completion of the remaining work and the DIF Improvements, City may require all work by Developer , its contractor, or the surety to cease in order to all ow adequate coordination by City.
10.3 Other Remedies. No action by City pursuant to this Section 10.0 et seq . of this Agreement shall prohibit City from exercising any other right or pursuing any other legal or equitable remedy available under this Agreement or any federal, state, or local law. City may 6 exercise its rights and remedies independently or cumulatively, and City may pursue inconsistent remedies. City may institute an action for damages, injunctive relief, or specific performance.
11.0 Security; Surety Bonds. Security for the DIF Improvements was included in the Security provided with that certain Subdivision Improvement Agreement (SIA) dated May 6, 2025 between the City and Developer for Tract 16894 -1, recorded as Document No. 2025- 0174976 in the official records of the San Bernardino Recorder on July 25, 2025 (the “Tract 16894-1 SIA”).
12.0 Indemnification. Developer shall defend, indemnify, and hold harmless City, its elected officials, officers, employees, and agents (“City Indemnitees”) from and against any and all actual or alleged claims, demands, causes of action, liability, loss, damage, or injury to property or persons, including wrongful death, whether imposed by a court of law or by administrative action of any federal, state, or local governmental agency, arising out of or incident to any acts, omissions, negligence, or willful misconduct of Devel oper, its employees, contractors, or agents in connection with the performance of this Agreement, or arising out of or in any way related to or caused by the DIF Improvements or their condition prior to City ’s approval and acceptance of the DIF Improvements (“Claims”). This indemnification includes, without limitation, the payment of all penalties, fines, judgments, awards, decrees, attorneys’ fees, and related costs or expenses, and the reimbursement of the City Indemnitees for all legal expenses and costs incurred by each of them. This indemnification excludes only such portion of any Claim s which are caused solely and exclusively by the active negligence, sole negligence, or willful misconduct of City as determined by a court or administrative body of competent jurisdiction. Developer’s obligation to indemnify shall survive the expiration or termination of this Agreement, and shall not be restricted to insurance proceeds, if any, received by the City Indemnitees.
13.0 Insurance.
13.1 Requirements. At all times during the period covered by this Agreement (and through the period of any Warranty), Developer shall procure and maintain at its own expense, and shall require its contractors and subcontractors to procure and maintain, at their own expense, the following policies of insurance:
(a) Commercial General Liability (“CGL”) Insurance, providing coverage for bodily injury, personal injury, death, loss, property or other damage, with limits of at least Two Million Dollars ($2,000,000) per occurrence and at least Four Million Dollars ($4,000,000) general aggregate.
(b) Commercial Vehicle Liability Insurance of not less than One Million Dollars ($1,000,000) Combined Single Limit, covering bodily injury, death, or property damage, including hired and non-owned auto liability.
(c) Workers’ Compensation Insurance , as required by the State of California with statutory limits, and Employer’s Liability Insurance with limit of no less than $1,000,000 per accident for bodily injury or disease. The Workers’ Compensation policy shall be endorsed with a waiver of subrogation in favor of the City for all work performed by the Contractor, its employees, agents and subcontractors.
7 (d) Professional Liability. For any consultant or other professional who will engineer or design the DIF Improvements, liability insurance for errors and omissions with limits not less than $1,000,000 per occurrence, shall be procured and maintained for a period of five (5) years following completion of the DIF Improvements. Such insurance shall be endorsed to include contractual liability.
(e) Pollution Liability Insurance, providing coverage for bodily injury, property damage, including cleanup costs and defense costs resulting from sudden, accidental and gradual pollution conditions, including the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, hydrocarbons, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any water course or body of water. The minimum limit shall be Two Million ($2,000,000) each occurrence or claim.
13.2 Additional Insurance Requirements . With respect to the policies of insurance set forth above, compliance with the following is also required:
(a) Additional Insureds. Notwithstanding any inconsistent statement in any required insurance policies or any subsequent endorsements attached thereto, the protection offered by all policies, except for Workers' Compensation coverage and Professional Liability, shall bear an endorsement whereby it is provided that, the City and its elected and appointed officials, officers, employees, servants, volunteers, agents and independent contractors, including, without limitation, the City Attorney, are named as Additional Insureds.
(b) Waiver of Subrogation Rights . Developer and its contractors shall require the carriers of all required insurance policies to waive all rights of subrogation against the City and its elected or appointed officials, officers, volunteers, employees, contractors, and subcontractors. Each policy of insurance shall be endorsed to reflect such waiver.
(c) Sufficiency of Insurers . Developer and its contractors and subcontractors must secure all policies of insurance required by this Agreement from a good and responsible company or companies licensed and authorized to do insurance business in the State of California, with an AM Best’s rating of not less than A:VII, unless otherwise unless otherwise acceptable to the City.
(d) Proof of Insurance Coverage Required Prior to Commencement of Work. Two (2) weeks prior to the commencement of any work hereunder, certificates of insurance evidencing the policies of insurance, coverages, and endorsements required by this Agreement and satisfactory to the City shall be furnished by Developer and its contractors to the City Clerk. In no event shall any work on the DIF Improvements be permitted to commence until adequate proof of insurance and endorsements have been so furnished.
(e) Other Endorsements. The policies shall be endorsed to provide that in the event of cancellation or amendment of any required insurance policy for any reason whatsoever, the City shall be notified by mail, postage prepaid, not less than thirty (30) days before the 8 cancellation or amendment is effective. In the case of cancellation for non -payment, ten (10) days advance written notice shall be given. The CGL and vehicle liability policies shall be endorsed as Primary and Non-contributory.
14.0 DIF Credits.
14.1 Developer’s DIF Obligation. Developer hereby agrees and accepts that as of the date of this Agreement, the amount Developer is obligated to pay to City as part of the DIF Program for the Project is ONE HUNDRED FIFTY-NINE THOUSAND FOUR HUNDRED EIGHTY-NINE AND 15/100 DOLLARS ($ 159,489.15) (the “DIF Obligation”). This DIF Obligation represents the estimated amount of R egional Drainage DIF due under the applicable DIF Program Documents in effect for the City as determined at the time Developer submitted its building permit application s for the Project homes . Notwithstanding the foregoing, Developer agrees that nothing in this Agreement shall prohibit the City from adjusting the DIF Obligation in accordance with DIF Program Documents. The DIF Obligation does not have to be paid until the time of final inspection of the completed Project homes (prior to the issuance of certificates of occupancy); however, if the DIF Improvements have not been completed and costs verified by such time, Developer must pay to City the full amount of Regional Drainage DIF due, subject to refund as set forth in Section 14.4.
14.2 Credit Offset Against DIF Obligation . Pursuant to Section VII of Policy No. CP -23-02 and in consideration for Developer's obligation under this Agreement for the delivery of the DIF Improvements, credit in the amount of ONE HUNDRED FIFTY- NINE THOUSAND FOUR HUNDRED EIGHTY- NINE AND 15/100 DOLLARS ($ 159,489.15), shall be applied by the City to offset the DIF Obligation, subject to adjustment and reconciliation under the provisions of this Section 14 (the “DIF Credit”). Developer hereby agrees that this DIF Credit shall not be applied until after the final inspection and acceptance of the completed DIF Improvements by the City, provided that Developer has complied with all requirements of this Agreement, including those specified in Exhibit B , and further provided that the DIF Verified Costs (as defined below) ar e not less than the DIF Obligation. In the event the DIF Obligation specified in Section 14.1 increases in accordance with the DIF Program Documents, the DIF Credit will be adjusted commensurately. However, a t no time will the DIF Credit exceed Developer’s DIF Obligation.
14.3 Verified Cost of the DIF Improvements. Following the inspection by the City and acceptance of the DIF Improvements by the City Council, Developer shall submit to the City Engineer the information set forth in the attached Exhibit “ D”. The City Engineer, or his or her designee, shall use the information provided by Developer to calculate the total actual costs incurred by Developer in delivering the DIF Improvements covered under this Agreement (“ DIF Verified Costs”). The City Engineer will use his or her best efforts to determine whether the DIF Verified Costs are at least equal to the DIF Obligation and provide Developer written notice thereof within thirty (30) calendar days of receipt of all the required information from Developer.
14.4 Reconciliation; Final Credit Offset Against DIF Obligations ; Refunds .
The Developer is aware of and accepts the fact that credits are speculative and conceptual in nature.
No DIF Credit will be awarded until the DIF Verified Costs are determined , as set forth above, 9 and the City finds the DIF Improvements meet all requirements of this Agreement. In such event, Developer’s DIF Obligation shall be deemed to have been fully satisfied through application of the DIF Credit. If Developer previously paid the Regional Drainage DIF pursuant to Section 14.1, an appropriate refund will be issued to Developer by City. However, if this Agreement is not fully performed and Developer fails to properly complete the DIF Improvements, no DIF Credit will be issued nor refund provided, a nd Developer shall pay the full amount of Regional Drainage DIF due to the City in accordance with the DIF Program Documents.
15.0 Term. This Agreement shall expire and become null and void five (5) years from the later of the date first indicated above, or the date of execution by both Parties.
16.0 Miscellaneous.
16.1 Assignment. Developer may assign all or a portion of its rights pursuant to this Agreement to a purchaser of a portion or portions of the Property ("Assignment"). Developer and such purchaser and assignee (" Assignee") shall provide to City such reasonable proof as it may require that Assignee is the purchaser of such portions of the Property. Any assignment pursuant to this section shall not be effective unless and until Developer and Assignee have executed an assignment agreement with City in a form reasonably acceptable to City , whereby Developer and Assignee agree, except as may be otherwise specifically provided therein, to the following: (1) that Assignee shall receive all or a portion of Developer's rights pursuant to this Agreement, including such credit as is determined to be applicable to the portion of the Property purchased by Assignee pursuant to Section 14.0 et seq. of this Agreement, and (2) that Assignee shall be bound by all applicable provisions of this Agreement. All DIF Credits issued under this Agreement are Project-specific and remain with the land.
16.2 Relationship Between the Parties . The Parties hereby mutually agree that this Agreement shall not operate to create the relationship of partnership, joint venture, or agency between City and Developer. Developer’s contractors are exclusively and solely under the control and dominion of Developer. Any person or entities retained by Developer or any contractor to work on the DIF Improvements shall be retained on an independent contractor basis and shall not be employees of City. Nothing herein shall be deemed to make Developer or its contractors an agent or contractor of the City.
16.3 Warranty as to Property Ownership; Authority to Enter Agreement .
Developer hereby warrants that it owns fee title to the Property and that it has the legal capacity to enter into this Agreement. Each Party warrants that the individuals who have signed this Agreement have the legal power, right, and authority to execute this Agreement and bind each respective Party.
16.4 Prohibited Interests. For the term of this Agreement, no member, officer or employee of Developer or City, during the term of his or her service with Developer or City shall have any direct interest in this Agreement or obtain any present or anticipated material benefit arising therefrom.
10 16.5 Notices. All notices required by or provided for under this Agreement shall be in writing and delivered in person or sent by certified or registered mail, postage prepaid and addressed as provided in this Section. Notice shall be effective on the date it is delivered in person, or, if mailed, on the date of deposit in the United States Mail. Notices shall be addressed as follows:
If to City: City of Victorville
Attention: City Engineer
P.O. Box 5001
14343 Civic Drive
Victorville, CA 92393-5001
With a copy to: Green de Bortnowsky, LLP
30077 Agoura Court, Suite 210
Agoura Hills, CA 91301-2713
Attn: Andre de Bortnowsky, City Attorney
If to Developer: Victorville 142 LP
3202 West March Lane, Suite A
Stockton, CA 95219
With a copy to: Victorville 142 LP
1885 California Avenue
Corona, CA 92881
If to surety: Markel Insurance Company
2103 City West Boulevard, Suite 1300
Houston, Texas 77042
Any Party or the surety may change such address by providing notice in writing to the other Party and thereafter notices shall be addressed and transmitted to such new address.
16.6 Cooperation; Further Acts . The Parties shall fully cooperate with one another and shall take any additional acts or sign any additional documents as may be necessary, appropriate, or convenient to attain the purposes of this Agreement.
16.7 Construction; References; Captions . It being agreed the Parties or their agents have participated in the preparation of this Agreement, the language of this Agreement shall be construed simply, according to its fair meaning, and not strictly for or against any Party. Any term referencing time, days, or period for performance shall be deemed calendar days and not work days. All references to Developer include all personnel, employees, agents, and contractors of Developer, except as otherwise specified in this Agreement. All references to the City include its elected officials, officers, employees, agents, and volunteers except as otherwise specified in this Agreement. The captions of the various articles and paragraphs are for convenience and ease of reference only, and do not define, limit, augment, or describe the scope, content, or intent of this Agreement.
11 16.8 Amendment; Modification. No supplement, modification, or amendment of this Agreement shall be binding or effective unless executed in writing and signed by both Parties.
16.9 Waiver. No waiver of any default shall constitute a waiver of any other default or breach, whether of the same or other covenant or condition. No waiver, benefit, privilege, or service voluntarily given or performed by a Party shall give the other Party any contractual right by custom, estoppel, or otherwise.
16.10 Binding Effect. Each and all of the covenants and conditions shall be binding on and shall inure to the benefit of the Parties, and their successors, heirs, personal representatives, or assigns. This section shall not be construed as an authorization for any Party to assign any right or obligation.
16.11 No Third Party Beneficiaries . There are no intended third party beneficiaries of any right or obligation assumed by the Parties.
16.12 Invalidity; Severability . If any portion of this Agreement is declared invalid, illegal, or otherwise unenforceable by a court of competent jurisdiction, the remaining provisions shall continue in full force and effect.
16.13 Governing Law; Consent to Jurisdiction and Venue. This Agreement shall be construed in accordance with and governed by the laws of the State of California. Any legal action or proceeding brought to interpret or enforce this Agreement, or which in any way arises out of the Parties’ activities undertaken pursuant to this Agreement, shall be filed and prosecuted in the appropriate California State Court in the County of San Bernardino, California.
16.14 Attorneys’ Fees and Costs. If any arbitration, lawsuit, or other legal action or proceeding is brought by one Party against the other Party in connection with this Agreement or the Property, the prevailing party, whether by final judgment or arbitration award, shall be entitled to and recover from the other party all costs and expenses incurred by the prevailing party, including actual attorneys’ fees (“Expenses and Costs”). Any judgment, order, or award entered in such legal action or proceeding shall contain a specific provision providing for the recovery of such Expenses and Costs, which shall include, without limitation, attorneys’ an d experts’ fees, costs and expenses incurred in the following: (a) post judgment motions and appeals, (b) contempt proceedings, (c) garnishment, levy, and debtor and third party examination, (d) discovery, and (e) bankruptcy litigation. This section shall survive the termination or expiration of this Agreement.
16.15 Time is of the Essence. Time is of the essence in this Agreement, and the Parties agree to execute all documents and proceed with due diligence to complete all covenants and conditions.
16.16 Counterparts. This Agreement may be signed in counterparts, each of which shall constitute an original and which collectively shall constitute one instrument.
12 17.0 Entire Agreement. This Agreement, together with all exhibits, constitutes the entire agreement of the Parties and supersedes any prior written or oral agreements between them with respect to the subject matter hereof.
18.0 Other Public Improvements Associated with Project . Nothing in this Agreement shall affect Developer’s obligation to construct such other non DIF funded public improvements as are required by the conditions of approval in the Entitlements for this Project . Developer has previously executed the Tract 16894 -1 SIA and shall install and construct such other required public improvements in accordance therewith.
[END OF PAGE – SIGNATURE PAGE FOLLOWS]
13 I
N WITNESS WHEREOF, the Parties hereto have executed this Agreement, as of the dates set forth beneath their signatures below:
DEVELOPER
V
ictorville 142 LP
By: MHP Builders, Inc., a California corporation
I
ts: General Partner
B
y: _________________________________
Chris Jones, Vice President
D
ate: ______________________________
(
Proper Notarization of Developer’s
Signature is required and shall be attached)
CITY
C
ity of Victorville
By: ________________________________
Name: Elizabeth Becerra
Title: Mayor
Date: ______________________________
A
TTEST:
___________________________________
Jennifer Thompson, City Clerk
AP
PROVED AS TO FORM:
A
ndre de Bortnowsky, City Attorney
RI
SK MANAGEMENT:
__________________________________
Sandra Bostick, Risk Manager
14 EXHIBIT “A”
LEGAL DESCRIPTION OF PROPERTY
All that real property situated in the City of Victorville , County of San Bernardino, State of California described as follows:
Lots A, B, C, and lots 1 through 79, of Tract Map No. 16894-1, per Book 348/92-96, recorded as Document No. 2017-0549524.
EXHIBIT “B”
BIDDING AND CONTRACTING REQUIREMENTS FOR DIF IMPROVEMENTS
1. Developer shall publicly advertise and obtain sealed bids for the construction of the DIF Improvements from qualified and state -licensed contractors in conformance with the standard procedures and requirements of the City with respect to its public works (as set forth in Article IV of Chapter 2.28 of the Vic torville Municipal Code (VMC) and herein), or in a manner which is approved in writing by the City Manager or his/her designee.
2. Developer shall require, and the specifications and bid and contract documents shall require, all such contractors to pay prevailing wages (in accordance with Articles 1 and 2 of Chapter 1, Part 7, Division 2 of the California Labor Code and Title 8, Section 16000 et seq . of the California Code of Regulations) and to otherwise comply with applicable provisions of the California Labor Code, the Government Code and the Public Contract Code relating to public works projects of cities and in conformance with the standard procedures and requirements of the City for its public works (as set forth in Article IV of Chapter 2.28 of the VMC and herein), or in a manner which is approved in writing by the City Manager or his/her designee.
3. The contract or contracts for the construction of the DIF Improvements shall be awarded to the responsible bidder(s) submitting the lowest responsive bid(s) for the construction of the DIF Improvements.
4. All such contractors shall be required to provide proof of insurance coverage throughout the term of the construction of the DIF Improvements which they will construct in conformance with City’s standard procedures and requirements and the plans and specifications approved by the City.
5. The developer shall maintain certified payroll records for all labor costs incurred on all work for a minimum period of four (4) years from the date of recordation of the Notice of Completion. Said payroll records shall be made available to the City or any state regulatory agency for review, audit and inspection or copying upon request.
6. Developer and all such contractors shall comply with such other requirements relating to the construction of the DIF Improvements which City may impose by written notification delivered to Developer and each such contractor at any time, either prior to the receipt of bids by Developer for the construction of the DIF Improvements, or, to the extent required as a result of changes in applicable laws, during the progress of construction thereof.
7. Developer shall provide proof to City, at such intervals and in such form as City may require that the foregoing requirements have been satisfied.
8. Any of the above provisions re lating to competitive bidding shall not apply to the DIF Improvements covered by this Agreement. However, Developer compliance with all other provisions of this Exhibit B is required in order to receive DIF Credits.
EXHIBIT “C”
Not Applicable to this Agreement
EXHIBIT “D”
DOCUMENTATION TO BE PROVIDED TO CITY BY DEVELOPER FOR
DETERMINATION OF CONSTRUCTION COSTS
To assist City in determining the Construction Costs for a completed DIF Improvement, Developer shall provide the following documents to City:
1. Plans, specifications and Developer’s civil engineer’s cost estimate;
2. List of bidders from whom bids were requested;
3. Construction schedules and progress reports;
4. Contracts, insurance certificates and change orders with each contractor or vendor;
5. Invoices received from all vendors;
6. Canceled checks or proof of electronic payments made to contractors and vendors (copy both front and back of canceled checks);
7. Spreadsheet showing total costs incurred in and related to the construction of each DIF Improvement and the check number or electronic transaction information for each item of cost and invoice;
8. Final lien releases from each contractor and vendor;
9. Proof of payment of State Prevailing Wages (copies of certified payrolls); and
10. Such further documentation as may be reasonably required by City to evidence the completion of construction and the payment of each item of cost and invoice.
Attachment C
Victorville 142 LP
Letter Requesting DIF Credits
LEGACY HOMES
July 7, 2025
City of Victorville
Attn: Fredy Bonilla, City Engineer
14343 Civic Center Drive
Victorville, CA 92395
Subject: Request for Development Impact Fee Agreement and Termination of Utility Surety Agreement
Dear Fredy,
We are writing to formally request the preparation and provision of a Development Impact Fee Agreement by the City Attorney. This agreement should demonstrate fee credit(s) for Storm Drain Improvements associated with Tr. 16894-1.
Should you have any questions or require further clarification, please do not hesitate to contact our office immediately.
Thank you for your prompt attention to these matters.
Sincerely,
Tara Mitchell
Director of Entitlements & Planning
Legacy Homes
CC: Chris Jones, Legacy Homes/MHP Builders Inc./Victorville 142, LP
1885 California Avenue ♦ Corona, California 92881 ♦ 951.582.7004 ♦ Facsimile 951.582.7003 www.legacyhomesusa.com
Attachment D
City Council Policy CP-24-05
City of Victorville
Council Policy
Policy No. CP-24-05SUBJECT:
(Superseding Policy No. CP-23-02)
Development Impact Fees and
Capacity Charges
Adopted: December 17, 2024
Effective Date: January 1, 2025
I. Purpose
The purpose of this policy is to establish guidelines for the implementation of Development Impact Fees ( DIF) for Parks and Recreation, Libraries, Fire Protection, Police, Public Buildings, Road Improvements, Regional Drainage, as well as Capacity Charges for Sewer and Water ( Capacity Charges) and the associated Administrative Fee as adopted by the City Council and Board of Directors for the Victorville Water District. This policy does not govern the collection of fees by the City on behalf of outside agencies, such as VVWRA or any of the local school districts.
II. Implementation Timeline
A. Grandfathering of Projects – Certain projects, subject to the terms and conditions outlined below, shall be exempt from new DIF and Capacity Charges. In these instances, projects shall only be subject to DIF and Capacity Charges in effect prior to January 1, 2023. The exemption shall expire for any projects that have not pulled building permits before January 1, 2025, at which point projects shall become subject to DIF and Capacity Charges in effect at that time.
a. Single Family Residential Tracts – Projects for residential tracts within Victorville would be exempt from new DIF and Capacity Charges if they are significantly underway as of June 30, 2022; meaning the project has a final map submission to the City for plan check review, recorded Final Maps (including a recorded Dash Map within an approved, unexpired Tentative Tract Map) or is in the Final Map Approval Process.
i. For this policy, the following definitions shall apply:
1. Final Map Approval Process - having an approved, unexpired tentative map with an active improvement plan check being processed by the City as of June 30, 2022.
2. Dash Map - a phased tract map with a dash between the tract number and phase number.
b. Multi-family Developments – Projects that are fully entitled or have submitted a Complete Entitlement Application to the Planning Department prior to January 1, 2023, are exempt from new DIF and Capacity Charges. i. For this policy, the following definitions shall apply:
1. Complete Entitlement Application - the submission of all the required application filing requirements to entitle a project that is deemed complete by City staff within 30 days of the
submission.
c. Non-Residential Developments – All non-residential projects (e.g. commercial and industrial) that have received project entitlements from the Planning Commission and have submitted construction plans to the Building Department for plan check prior to January 1, 2023.
III. Annual Cost Adjustment
Following the initial effective date, DIF and Capacity Charges shall be adjusted In December of each year by utilizing the California Construction Cost Index, published by the State Department of General Services ( CCCI),1 July over July comparison, with an effective date of March 1st.
For Single Family Residential Tracts and Multi-Family Development projects subject to phased implementation, the annual cost adjustment shall be applied starting on March 1st of the first year after the final phase is implemented and shall be based on a single year adjustment (not a cumulative adjustment covering multiple years).
IV. Fee Collection
Except as may otherwise be provided in Government Code section 66007, the collection of DIF and Capacity Charges shall be required prior to, but not later than, the time of final inspection. If a developer is requesting full release of all utilities prior to final inspection, including gas and electric service, these fees may be required to be paid at that time.
V. Determination of Applicable Fee
Except for grandfathering of projects outlined in Section II, or as otherwise required by law, the applicable DIF and Capacity Charges will be determined based on the date of submittal of an application for a permit to the Building Department. The application must be for the specific building or improvement for which the fee would be applied. For example, within a tract of homes, the permit application would have to be for a specific home on a specific lot. Separate grading permits or permits for other types of improvements would not have the effect of establishing the DIF and Capacity Charges. This rate will remain the effective rate while the plan check for 1 The CCCI is based on Engineering News Record Building Cost Index data specific to California.
that application remains active. If the plan check expires, the applicant will have to submit a new application and will be subject to any DIF and Capacity Charge updates that have occurred between the initial expired submittal and the new submittal.
VI. Exemptions
The following categories of projects shall be exempt from the requirement for the payment DIF and Capacity Charges.
A. Old Town – Projects located within the Old Town Specific Plan geographical area.
B. City-owned Property – Development of facilities on land owned by the City or any of its subsidiary agencies, provided it is developed for public use or benefits the health, safety and welfare of the community at large.
C. Accessory Dwelling Units (ADUs) less than 750 sq. ft.
VII. Credits Toward Applicable Fees
A developer may be eligible to receive credits for certain public improvements constructed by the developer to offset DIF and Capacity Charges.
Criteria establishing the eligibility for fee credits for a category of public improvements are specific to that fee category as described below.
A. Park Land and Park Improvements
1. Land dedicated to the City by a developer, for the use of a planned City park, may be eligible for a DIF credit if it is determined that the land will support the development of a park that will benefit the community in a manner consistent with the City’s Parks and Recreation Master Plan. An appraisal report prepared by a qualified appraiser shall be submitted to the City for review. The dollar amount of the credit will be based on an appraised value found to be acceptable to the City.
2. Park improvements constructed by a developer for the use of a planned City park, may be eligible for a DIF credit if it is determined that the park improvements will benefit the community in a manner consistent with the City’s Parks and Recreation Master Plan.
B. Road Improvements
1. The maximum Road DIF credit available is 67 percent of the Road DIF collected for the development, which is the “Local Road Improvements” portion of the cost estimate in the most recent DIF Study, or the cost of the eligible road improvements, whichever is less. The remaining 33 percent of
the Road DIF paid is reserved for the SBCTA Nexus Study Road Improvements portion of the most recent DIF Study. The percentages may be adjusted based on future DIF study updates.
2. The project must be on the most recently adopted DIF Road Project list.
3. Only the center portion of a road is eligible for credit, because only the center portion was included in the cost estimate for the Road project list.
The eligible center width is as follows by street classification:
a. Arterial
b. Major Arterial
26 feet
38 feet
c. Super Arterial 60 feet
4. Utility relocation costs are not eligible. Culvert crossings for drainage are eligible if they are required as part of the approved road improvements, but longitudinal storm drain facilities are not eligible.
5. Projects on the State Highways System are not eligible for Road DIF credits because arterial road projects on the Road Project list are only City roads and interchanges on I-15 will not be constructed by a developer.
6. Road portions outside of the City Limits (an adjacent City or County unincorporated area) are not eligible for Road DIF credits.
C. Drainage Improvements
1. The project must be on the most recently adopted DIF Regional Drainage Facilities Project list.
2. Only regional facilities are eligible, which in general, are the larger facilities identified as Regional in a Master Plan of Drainage prepared by the San Bernardino County Flood Control District. Typically, these facilities convey at least 750 cubic feet per second for the peak 100-year storm frequency.
3. For the Southern California Logistics Airport (SCLA), eligible facilities are also identified in the DIF Regional Drainage Facilities Project list and consistent with the facilities identified in the most recent the SCLA Specific Plan update.
D. Sewer Collection System Improvements
1. The project must be identified in the latest update of the Sewer Master Plan or a separate sewer study approved by the Engineering Department.
2. The project must increase the capacity of the sewer system.
3. Projects can include replacing an existing sewer main with a main of increased diameter or constructing a new sewer main. Sewer mains must be larger than 8 inches in diameter.
E. Water System Improvements
1. The project must be identified in the latest update of the Water Master Plan or a separate water study approved by the Engineering Department.
2. The project must increase the capacity of the water system.
3. Projects can include replacing an existing water main with a main of increased diameter or constructing a new sewer main. Water mains must be larger than 8 inches in diameter.
F. Demolished Buildings
Credits for demolished buildings or removed plumbing fixtures may be assigned to new permits on the same property on a like for like basis at the discretion of the Building Official. To qualify for these credits, detailed demolition plans must be submitted with plans for the new development indicating which structures or plumbing fixtures are being removed as part of the project.
G. General Requirements for Credits
If a project is determined to be eligible for DIF and/or Capacity Charge credits, the following general requirements shall apply:
1. A letter must be submitted to the City requesting the credit.
2. City staff will determine the eligible credit amount.
3. If the cost of land dedicated or improvements constructed exceeds the amount of DIF and/or Capacity Charge required to be paid by the developer, the developer may be eligible for reimbursement. The reimbursement amount is subject to available City DIF and Capacity Charge funds and must be specified in an agreement.
4. The City’s standard Fee Credit Agreement must be used. The standard agreement has a term of five years, after which the agreement becomes void. City Council must approve the agreement.
5. DIF/Capacity Charge credits cannot be transferred to a different development project. The agreement is project specific.
6. Assignment of Road DIF/Capacity Charge credits to another party requires another agreement for the transfer of the credits, and approval by the City Council. The DIF/Capacity Charge credits remain with the land.
7. Competitive bidding procedures specified in the City’s standard Fee Credit Agreement must be used.
8. The improvements shall be installed by a contractor appropriately licensed in the State of California for the type of improvements constructed.
9. State prevailing wage rates shall be paid to the contractors that install the improvements.
10. Improvements shall be designed to City standards in accordance with approved plans by the City Engineer.
11. After construction of the project, the following information is required:
a. Supporting documentation for the actual cost of the work. b. General contractor and sub-contractor names and license numbers. c. Signed contracts and lien releases for all contractors and subcontractors associated with the work.
d. Certified payroll substantiating that State prevailing wages were paid.
12. The maximum amount of DIF/Capacity Charge credit cannot exceed the actual cost of the eligible improvements unless the developer is eligible for reimbursement in accordance with an approved agreement.
13. The credit is subtracted from the DIF/Capacity Charge required to be paid by the developer. The Building Division administers the DIF/Capacity Charge credits after the agreement is approved.
Item Number: 20
City Council / Board of Directors
Written Communications
Meeting of: August 19, 2025
Submitted By:
Brenda Hampton, Director of Electric Utility Services
Subject:
Approval of the North American Energy Standards Board Base Contract and Special Provisions (“NAESB”) for the Sale and Purchase of Natural Gas with EDF Trading North America, LLC.
Recommendation:
The Honorable City Council:
(1) Approve the North American Energy Standards Board Base Contract, Special Provisions to the Base Contract, Credit Support Addendum, and Special Provisions to the Credit Support Addendum (collectively, the “NAESB”) with EDF Trading North America, LLC. “EDF” for natural gas supply and related services and authorize the City Manager to execute the agreement; and (2) Allow the City Manager and/or his/her designee to execute transaction confirmations under the NAESB contract for procurement of firm gas supply not to exceed the City Manager’s Purchasing Authority pursuant to Ordinance No. 2381.
Fiscal Impact:
There is no fiscal impact associated with the execution of the North American Energy Standards Board Base Contract and Special Provisions to the Base Contract Strategic Plan Goal:
This item supports the City’s Strategic Plan, Goal A, Fiscal Sustainability. Execution of this contract will enable Victorville Municipal Utility Services “VMUS” to procure firm natural gas supply delivered from the Kern River Gas Transmission system (“Kern River” or “KRGT”) at competitive market prices thereby reducing total delivered cost of gas for VMUS customers.
4 2
6 5
Background:
On February 7th, 2023, the Victorville City Council approved the execution of an Interconnection Agreement (“IA”) with KRGT to enable construction of a natural gas pipeline interconnection, meter station facilities, odorizer, and VMUS pipeline extension construction project. The construction of this infrastructure provided a new natural gas delivery point for the City.
On July 16th, 2024, the Victorville City Council approved a Capacity Release Agreement with High Desert Power Project, LLC (“HDPP”) and a Transportation Services Agreement with Kern River Gas Transmission Company for the permanent release of HDPP firm gas transmission capacity on the KRGT High Desert Lateral (“HDL”) to serve the City of Victorville’s new gas delivery point on the HDL. Construction and commissioning of the new Kern River interconnection was completed in September 2024.
Kern River transports approximately 1.8 billion cubic feet of gas per day from gas production basins in the Rocky Mountains to end-user customers in Utah, Nevada, and California. VMUS’s current gas supply needs are small in comparison, less than 1,000 cubic feet per day.
Most of the natural gas purchased and sold in the U.S. and on the Kern River system is transacted under NAESB contracts, which are largely based on the Uniform Commercial Code (UCC). The NAESB is a standard contract designed for transactional efficiency. A NAESB “Contract” consists of several related documents:
1. NAESB Base Contract. The NAESB Base Contract identifies the parties, selected options where options are provided in the General Terms and Conditions, and the non-price/non-volume aspects of the parties agreement;
2. General Terms and Conditions. These are attached to the NAESB Base Contract and are largely based on UCC law;
3. Special Provisions. Special Provisions are negotiated modifications of and additions to the General Terms and Conditions to reflect the business needs of the parties. Special Provisions can include terms such as credit support, added representations and warranties, and alternative dispute resolution;
4. Transaction Confirmation(s) (1-2 pages). Transaction Confirmations (TCs) contain the price, volume, term, and delivery point terms of the agreement.
The Victorville City Council has previously approved two NAESB Base Contracts and Special Provisions on November 19, 2024, and on January 21, 2025. It is important and beneficial for VMUS to have multiple NAESB contracts on file because it grants VMUS access to contract with a variety of suppliers who will provide competitive market pricing and terms. This will allow VMUS to pass-through competitive and fair market costs to its customers.
VMUS negotiated the attached NAESB Contract and Special Provisions with EDF to allow VMUS to do business in the future with this supplier.
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6 5
A NAESB Contract consisting solely of the NAESB Base Contract, General Terms and Conditions and Special Provisions is valid and executory indefinitely unless terminated by one or both parties with 30-days prior notice. It is the execution of one or more TCs that activates that NAESB Contract and the parties’ obligations to physically deliver and receive gas at the specified volume, delivery point and pricing. Termination of a NAESB Contract only becomes effective upon completion of the parties’ performances under any executory TCs.
Discussion:
A NAESB Contract is required to allow VMUS to procure gas supply from a reputable and creditworthy marketer for delivery into the Kern River capacity for ultimate delivery into the VMUS distribution system. The current TC with Morgan Stanley will expire on October 31, 2025. The City will issue a Request for Proposal “RFP” in Summer of 2025 to obtain competitive pricing and terms and will execute a TC with the most qualified bidder.
Currently, VMUS is only asking for approval to sign the EDF NAESB and Special Provisions to have on file and to be prepared for the issuance of the RFP.
The NAESB was negotiated by the VMUS commercial team, with review and advice from the City attorney and an outside consultant with in-depth expertise in the natural gas industry.
Due to its relatively small gas demand, VMUS will only take gas supply from one supplier at any given time. This will be accomplished by executing one or more TCs with one of the suppliers where an NAESB contract has been established. Execution of the NAESB contracts does not preclude the City from executing additional NAESB contracts with other qualified suppliers.
Since the NAESB contracts are standardized contracts and to further improve time efficiency, staff will only bring forth NAESB’s for the City Council approval should there be a substantive change to the standard NAESB.
Execution of these contracts and authorizing the City Manager or his/her designee to execute subsequent transaction confirmations will allow VMUS to efficiently and reliably manage gas supply to VMUS customers.
Staff remains available to answer any questions the City Council may have.
Prepared By:
Kinda Salloum, Senior Administrative Analyst
Attachments: A. Base Contract and Special Provisions for Sale and Purchase of Natural Gas with General Terms and Conditions with EDF Trading North America
Attachment A
Base Contract and Special
Provisions for Sale and Purchase
of Natural Gas with General Terms
and Conditions with EDF Trading
North America
Copyright © 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 1 of 13 September 5, 2006
Base Contract for Sale and Purchase of Natural Gas
This Base Contract is entered into as of the following date: July 22, 2025 The parties to this Base Contract are the following:
PARTY A
City of Victorville
PARTY NAME PARTY B
EDF Trading North America, LLC
14343 Civic Drive, Victorville, CA 92392 ADDRESS 601 Travis Street, Suite 1700 Houston, TX 77002
Victorville, CA (victorvilleca.gov) BUSINESS WEBSITE www.edftrading.com
CONTRACT NUMBER
09-324-0653 D-U-N-S® NUMBER 130385763
US FEDERAL: 95-2235918
OTHER:
TAX ID NUMBERS US FEDERAL: 30-0464462
OTHER:
California JURISDICTION OF
ORGANIZATION
Corporation LLC
Limited Partnership Partnership
LLP Other: Municipal Corporation
COMPANY TYPE
Corporation LLC
Limited Partnership Partnership
LLP Other:
GUARANTOR
(IF APPLICABLE)
CONTACT INFORMATION
ATTN: Victorville Municipal Utility Services
TEL#: 760-243-6340 FAX#: 760-269-0039
EMAIL: [email protected]
COMMERCIAL
Same as above
ATTN: Gas Desk
TEL#: 281-781-0333 FAX#:
EMAIL:
ATTN: Victorville Municipal Utility Services
TEL#: 760-243-6340 FAX#: 760-269-0039
EMAIL: [email protected]
SCHEDULING
Same as above
ATTN: Gas Scheduling
TEL#: 281-781-0333 FAX#:
EMAIL: [email protected]
ATTN: Victorville Municipal Utility Services
TEL#: 760-243-6340 FAX#: 760-269-0039
EMAIL: [email protected]
CONTRACT AND
LEGAL NOTICES
Same as above
ATTN: Contract Administration
TEL#: 281-781-0333 FAX#:
EMAIL: H [email protected]
ATTN: Victorville Municipal Utility Services
TEL#: 760-243-6340 FAX#: 760-269-0039
EMAIL: [email protected]
CREDIT
Same as above
ATTN: Credit Department
TEL#: 281-781-0333 FAX#: _________
EMAIL: [email protected]
ATTN: Victorville Municipal Utility Services
TEL#: 760-243-6340 FAX#: 760-269-0039
EMAIL: [email protected]
TRANSACTION
CONFIRMATIONS
Same as above
ATTN: Confirmation Department
TEL#: 281-781-0333 FAX#:
EMAIL: [email protected]
ACCOUNTING INFORMATION
ATTN: Accounts Payable
TEL#: 760-243-1956 FAX#:
EMAIL: [email protected]
INVOICES
PAYMENTS
SETTLEMENTS
Same as above
ATTN: Gas Accounting
TEL#: 281-781-0333 FAX#:
EMAIL: [email protected]
BANK: Wells Fargo Bank
ABA: 121000248 ACCT: 9940075261
OTHER DETAILS:
WIRE TRANSFER
NUMBERS
(IF APPLICABLE)
BANK: Bank of America, NA
ABA: 026009593 ACCT: 4427288595
OTHER DETAILS:
BANK: Wells Fargo Bank
ABA: 121042882 ACCT: 9940075261
OTHER DETAILS:
ACH NUMBERS
(IF APPLICABLE)
BANK: Bank of America, NA
ABA: 111000012 ACCT: 4427288595
OTHER DETAILS:
ATTN: Accounts Receivable
ADDRESS: 14343 Civic Drive, PO Box 5001
Victorville, CA 92393-5001
CHECKS
(IF APPLICABLE)
ATTN:
ADDRESS:
Copyright © 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 2 of 13 September 5, 2006
Base Contract for Sale and Purchase of Natural Gas
(Continued)
This Base Contract incorporates by reference for all purposes the General Terms and Conditions for Sale and Purchase of Natural Gas published by the North American Energy Standards Board. The parties hereby agree to the following provisions offered in said General Terms and Conditions. In the event the parties fail to check a box, the specified default provision shall apply. Select the appropriate box(es) from each section:
Section 1.2
Transaction
Procedure
Oral (default)
OR
Written
Section 10.2
Additional
Events of
Default
No Additional Events of Default (default)
Indebtedness Cross Default
Party A: 3% of Shareholder’s Equity
Party B: 3% of Shareholder’s Equity
For the purposes of this definition, "Shareholder’s
Equity" means, at any time, the amount of paid-in
capital in respect of all issued and fully-paid shares
of the share capital of the relevant entity, together
with the contributed surplus, the cumulative
translation adjustment (if any) and the retained
earnings calculated in accordance with generally
accepted accounting principles in the country in
which that entity is organized, consistently applied.
Transactional Cross Default
Specified Transactions:
Section 2.7
Confirm
Deadline
2 Business Days after receipt (default)
OR
Business Days after receipt
Section 2.8
Confirming
Party
Seller (default)
OR
Buyer
OR
Other: EDF Trading North America, LLC
Section 3.2
Performance
Obligation
Cover Standard (default)
OR
Spot Price Standard Section 10.3.1
Early
Termination
Damages
Early Termination Damages Apply (default)
OR
Early Termination Damages Do Not Apply
Note: The following Spot Price Publication applies to both of the immediately preceding.
Section 10.3.2
Other
Agreement
Setoffs
Other Agreement Setoffs Apply (default)
Bilateral (default)
Triangular
OR
Other Agreement Setoffs Do Not Apply
Section 2.31
Spot Price
Publication
Gas Daily Midpoint (default)
OR
Section 6
Taxes
Buyer Pays At and After Delivery Point (default) OR
Seller Pays Before and At Delivery Point
Section 7.2
Payment
Date
25th Day of Month following Month of delivery (default) OR
Day of Month following Month of delivery
Section 15.5
Choice Of Law California
Section 7.2
Method of
Payment
Wire transfer (default)
Automated Clearinghouse Credit (ACH)
Check Section 15.10
Confidentiality
Confidentiality applies (default)
OR
Confidentiality does not apply Section 7.7
Netting
Netting applies (default)
OR
Netting does not apply
Special Provisions: Number of sheets attached: 5
Addendum(s): _______________________________
IN WITNESS WHEREOF, the parties hereto have executed this Base Contract in duplicate.
CITY OF VICTORVILLE PARTY NAME EDF TRADING NORTH AMERICA, LLC
By:
SIGNATURE
By:
Keith C. Metzler PRINTED NAME Gerald Nemec
City Manager TITLE General Counsel
Copyright © 2006 North American Energy Standards Board, Inc. NAESB Standard 6.3.1 All Rights Reserved Page 3 of 13 September 5, 2006
General Terms and Conditions
Base Contract for Sale and Purchase of Natural Gas
SECTION 1. PURPOSE AND PROCEDURES
1.1. These General Terms and Conditions are intended to facilitate purchase and sale transactions of Gas on a Firm or Interruptible basis. "Buyer" refers to the party receiving Gas and "Seller" refers to the party delivering Gas. The entire agreement between the parties shall be the Contract as defined in Section 2.9.
The parties have selected either the “Oral Transaction Procedure” or the “Written Transaction Procedure” as indicated on the Base Contract.
Oral Transaction Procedure:
1.2. The parties will use the following Transaction Confirmation procedure. Any Gas purchase and sale transaction may be effectuated in an EDI transmission or telephone conversation with the offer and acceptance constituting the agreement of t he parties. The parties shall be legally bound from the time they so agree to transaction terms and may each rely thereon. Any such transaction shall be considered a “writing” and to have been “signed”. Notwithstanding the foregoing sentence, the parties agree that Confirming Party shall, and the other party may, confirm a telephonic transaction by sending the other party a Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means within three Business Days of a transaction covered by this Section 1.2 (Oral Transaction Procedure) provided that the failure to send a Transaction Confirmation shall not invalidate the oral agreement of the parties. Confirming Party adopts its confirming letterhead, or the like, as its signature on any Trans action Confirmation as the identification and authentication of Confirming Party. If the Transaction Confirmation contains any provisions other than those relating to the commercial terms of the transaction (i.e., price, quantity, performance obligation, delivery point, period of delivery and/or transportation conditions), which modify or supplement the Base Contract or General Terms and Conditions of this Contract (e.g., arbitration or additional representations and warranties), such provisions shall not be deemed to be accepted pursuant to Section 1.3 but must be expressly agreed to by both parties; provided that the foregoing shall not invalidate any transaction agreed to by the parties.
Written Transaction Procedure:
1.2. The parties will use the following Transaction Confirmation procedure. Should the parties come to an agreement regarding a Gas purchase and sale transaction for a particular Delivery Period, the Confirming Party shall, and the other party may, record that agreement on a Transaction Confirmation and communicate such Transaction Confirmation by facsimile, EDI or mutually agreeable electronic means, to the other party by the close of the Business Day following the date of agreement. The parties acknowledge that their agreement will not be binding until the exchange of nonconflicting Transaction Confirmations or the passage of the Confirm Deadline without objection from the receiving party, as provided in Section 1.3.
1.3. If a sending party's Transaction Confirmation is materially different from the receiving party's understanding of the agreement referred to in Section 1.2, such receiving party shall notify the sending party via facsimile, EDI or mutually agreeable electronic means by the Confirm Deadline, unless such receiving party has previously sent a Transaction Confirmation to the sending party. The failure of the receiving party to so notify the sending party in writing by the Confirm Deadline constitutes the receiving party's agreement to the terms of the transaction described in the sending party's Transaction Confirmation. If there are any material differences between timely sent Transaction Confirmations governing the same transaction, then neither Transaction Confirmation shall be binding until or unless such differences are resolved including the use of any evidence that clearly resolves the differences in the Transaction Confirmations. In the event of a conflict among the terms of (i) a binding Transaction Confirmation pursuant to Section 1.2, (ii) the oral agreement of the parties which may be evidenced by a recorded conversation, where the parties have selected the Oral Transaction Procedure of the Base Contract, (iii) the Base Contract, and (iv) these General Terms and Conditions, the terms of the documents shall govern in the priority listed in this sentence.
1.4. The parties agree that each party may electronically record all telephone conversations with respect to this Contract between their respective employees, without any special or further notice to the other party. Each party shall obtain any necessary consent of its agents and employees to such recording. Where the parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, the parties agree not to contest the validity or enforceability of telephonic recordings entered into in accordance with the requirements of this Base Contract.
SECTION 2. DEFINITIONS
The terms set forth below shall have the meaning ascribed to them below. Other terms are also defined elsewhere in the Contr act and shall have the meanings ascribed to them herein.
2.1. “Additional Event of Default” shall mean Transactional Cross Default or Indebtedness Cross Default, each as and if selected by the parties pursuant to the Base Contract.
2.2. “Affiliate” shall mean, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, “control” of any entity or person means ownership of at least 50 percent of the voting power of the entity or person.
2.3. “Alternative Damages” shall mean such damages, expressed in dollars or dollars per MMBtu, as the parties shall agree upon in the Transaction Confirmation, in the event either Seller or Buyer fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer.
2.4. "Base Contract" shall mean a contract executed by the parties that incorporates these General Terms and Conditions by reference; that specifies the agreed selections of provisions contained herein; and that sets forth other information required herein and any Special Provisions and addendum(s) as identified on page one.
2.5. "British thermal unit" or "Btu" shall mean the International BTU, which is also called the Btu (IT).
2.6. "Business Day(s)" shall mean Monday through Friday, excluding Federal Banking Holidays for transactions in the U.S.
2.7. "Confirm Deadline" shall mean 5:00 p.m. in the receiving party's time zone on the second Business Day following the Day a Transaction Confirmation is received or, if applicable, on the Business Day agreed to by the parties in the Base Contract; provided, if the Transaction Confirmation is time stamped after 5:00 p.m. in the receiving party's time zone, it shall be deemed received at the opening of the next Business Day.
2.8. "Confirming Party" shall mean the party designated in the Base Contract to prepare and forward Transaction Confirmations to the other party.
2.9. "Contract" shall mean the legally -binding relationship established by (i) the Base Contract, (ii) any and all binding Transaction Confirmations and (iii) where the parties have selected the Oral Transaction Procedure in Section 1.2 of the Base Contract, any and all transactions that the parties have entered into through an EDI transmission or by telephone, but that have not been confirmed in a binding Transaction Confirmation, all of which shall form a single integrated agreement between the parties.
2.10. "Contract Price" shall mean the amount expressed in U.S. Dollars per MMBtu to be paid by Buyer to Seller for the purchase of Gas as agreed to by the parties in a transaction.
2.11. "Contract Quantity" shall mean the quantity of Gas to be delivered and taken as agreed to by the parties in a transaction.
2.12. "Cover Standard", as referred to in Section 3.2, shall mean that if there is an unexcused failure to take or deliver any quantity of Gas pursuant to this Contract, then the performing party shall use commercially reasonable efforts to (i) if Buyer is the performing party, obtain Gas, (or an alternate fuel if elected by Buyer and replacement Gas is not available), or (ii) if Sell er is the performing party, sell Gas, in either case, at a price reasonable for the delivery or production area, as applicable, consistent with:
the amount of notice provided by the nonperforming party; the immediacy of the Buyer's Gas consumption needs or Seller's Gas sales requirements, as applicable; the quantities involved; and the anticipated length of failure by the nonperforming party.
2.13. "Credit Support Obligation(s)” shall mean any obligation(s) to provide or establish credit support for, or on behalf of, a party to this Contract such as cash, an irrevocable standby letter of credit, a margin agreement, a prepayment, a security interest in an asset, guaranty, or other good and sufficient security of a continuing nature.
2.14. "Day" shall mean a period of 24 consecutive hours, coextensive with a "day" as defined by the Receiving Transporter in a particular transaction.
2.15. "Delivery Period" shall be the period during which deliveries are to be made as agreed to by the parties in a transaction.
2.16. "Delivery Point(s)" shall mean such point(s) as are agreed to by the parties in a transaction.
2.17. "EDI" shall mean an electronic data interchange pursuant to an agreement entered into by the parties, specifically relating to the communication of Transaction Confirmations under this Contract.
2.18. "EFP" shall mean the purchase, sale or exchange of natural Gas as the "physical" side of an exchange for physical transaction involving gas futures contracts. EFP shall incorporate the meaning and remedies of "Firm", provided that a party’s excuse for nonperformance of its obligations to deliver or receive Gas will be governed by the rules of the relevant futures exchange regulated under the Commodity Exchange Act.
2.19. "Firm" shall mean that either party may interrupt its performance without liability only to the extent that such performance is prevented for reasons of Force Majeure; provided, however, that during Force Majeure interruptions, the party invoking For ce Majeure may be responsible for any Imbalance Charges as set forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by the Transporter.
2.20. "Gas" shall mean any mixture of hydrocarbons and noncombustible gases in a gaseous state consisting primarily of methane.
2.21. “Guarantor” shall mean any entity that has provided a guaranty of the obligations of a party hereunder.
2.22. "Imbalance Charges" shall mean any fees, penalties, costs or charges (in cash or in kind) assessed by a Transporter for failure to satisfy the Transporter's balance and/or nomination requirements.
2.23. “Indebtedness Cross Default” shall mean if selected on the Base Contract by the parties with respect to a party, that it or its Guarantor, if any, experiences a default, or similar condition or event however therein defined, under one or more agreements or instruments, individually or collectively, relating to indebtedness (such indebtedness to include any obligation whether pres ent or future, contingent or otherwise, as principal or surety or otherwise) for the payment or repayment of borrowed money in an aggregate amount greater than the threshold specified in the Base Contract with respect to such party or its Guarantor, if any, which r esults in such indebtedness becoming immediately due and payable.
2.24. "Interruptible" shall mean that either party may interrupt its performance at any time for any reason, whether or not caused by an event of Force Majeure, with no liability, except such interrupting party may be responsible for any Imbalance Charges as set
forth in Section 4.3 related to its interruption after the nomination is made to the Transporter and until the change in deliveries and/or receipts is confirmed by Transporter.
2.25. "MMBtu" shall mean one million British thermal units, which is equivalent to one dekatherm.
2.26. "Month" shall mean the period beginning on the first Day of the calendar month and ending immediately prior to the commencement of the first Day of the next calendar month.
2.27. "Payment Date" shall mean a date, as indicated on the Base Contract, on or before which payment is due Seller for Gas received by Buyer in the previous Month.
2.28. "Receiving Transporter" shall mean the Transporter receiving Gas at a Delivery Point, or absent such receiving Transporter, the Transporter delivering Gas at a Delivery Point.
2.29. "Scheduled Gas" shall mean the quantity of Gas confirmed by Transporter(s) for movement, transportation or management.
2.30. “Specified Transaction(s)” shall mean any other transaction or agreement between the parties for the purchase, sale or exchange of physical Gas, and any other transaction or agreement identified as a Specified Transaction under the Base Contract.
2.31. "Spot Price " as referred to in Section 3.2 shall mean the price listed in the publication indicated on the Base Contract, under the listing applicable to the geographic location closest in proximity to the Delivery Point(s) for the relevant Day; provided, if there is no single price published for such location for such Day, but there is published a range of prices, then the Spot Pr ice shall be the average of such high and low prices. If no price or range of prices is published for such Day, then the Spot Price shall be the average of the following: (i) the price (determined as stated above) for the first Day for which a price or range of prices is published that next precedes the relevant Day; and (ii) the price (determined as stated above) for the first D ay for which a price or range of prices is published that next follows the relevant Day.
2.32. "Transaction Confirmation" shall mean a document, similar to the form of Exhibit A, setting forth the terms of a transaction formed pursuant to Section 1 for a particular Delivery Period.
2.33. “Transactional Cross Default” shall mean if selected on the Base Contract by the parties with respect to a party, that it shall be in default, however therein defined, under any Specified Transaction.
2.34. “Termination Option” shall mean the option of either party to terminate a transaction in the event that the other party fails to perform a Firm obligation to deliver Gas in the case of Seller or to receive Gas in the case of Buyer for a designated number of days during a period as specified on the applicable Transaction Confirmation.
2.35. "Transporter(s)" shall mean all Gas gathering or pipeline companies, or local distribution companies, acting in the capacity of a transporter, transporting Gas for Seller or Buyer upstream or downstream, respectively, of the Delivery Point pursuant to a particular transaction.
SECTION 3. PERFORMANCE OBLIGATION
3.1. Seller agrees to sell and deliver, and Buyer agrees to receive and purchase, the Contract Quantity for a particular transaction in accordance with the terms of the Contract. Sales and purchases will be on a Firm or Interruptible basis, as agreed to by the parties in a transaction.
The parties have selected either the “Cover Standard” or the “Spot Price Standard” as indicated on the Base Contract.
Cover Standard:
3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an am ount equal to the positive difference, if any, between the purchase price paid by Buyer utilizing the Cover Standard and the Contract Price, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually delivered by Seller for such Day(s) excluding any quantity for which no replacement is available; or (ii) in the event of a breach by Buyer on any Day(s), payment by Buyer to Seller in the amount equal to the positive difference, if any, between the Contract Price and the price received by Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially reasonable differences in transportation costs to or from the Delivery Point(s), multiplied by the difference between the Contract Quantity and the quantity actually taken by Buyer for such Day(s) excluding any quantity for which no sale is available; and (iii) in the event that Buyer has used commercially reasonable efforts to replace the Gas or Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such replacement or sale is available for all or any portion of the Contract Quantity of Gas , then in addition to (i) or (ii) above, as applicable, the sole and exclusive remedy of the performing party with respect to the Gas not replaced or sold shall be an amount equal to any unfavorable difference between the Contract Price and the Spot Price, adjusted for such transportation to the applicable Delivery Point, multiplied by the quantity of such Gas not replaced or sold. Imbalance Charges shall not be recovered under this Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party’s invoice, which shall set forth the basis upon which such amount was calculated.
Spot Price Standard:
3.2. The sole and exclusive remedy of the parties in the event of a breach of a Firm obligation to deliver or receive Gas shall be recovery of the following: (i) in the event of a breach by Seller on any Day(s), payment by Seller to Buyer in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the Contract Price from the Spot Price; or (ii) in the event of a
breach by Buyer on any Day(s), payment by Buyer to Seller in an amount equal to the difference between the Contract Quantity and the actual quantity delivered by Seller and received by Buyer for such Day(s), multiplied by the positive difference, if any, obtained by subtracting the applicable Spot Price from the Contract Price. Imbalance Charges shall not be recovered under thi s Section 3.2, but Seller and/or Buyer shall be responsible for Imbalance Charges, if any, as provided in Section 4.3. The amount of such unfavorable difference shall be payable five Business Days after presentation of the performing party’s invoice, whic h shall set forth the basis upon which such amount was calculated.
3.3. Notwithstanding Section 3.2, the parties may agree to Alternative Damages in a Transaction Confirmation executed in writing by both parties.
3.4. In addition to Sections 3.2 and 3.3, the parties may provide for a Termination Option in a Transaction Confirmation executed in writing by both parties. The Transaction Confirmation containing the Termination Option will designate the lengt h of nonperformance triggering the Termination Option and the procedures for exercise thereof, how damages for nonperformance will be compensated, and how liquidation costs will be calculated.
SECTION 4. TRANSPORTATION, NOMINATIONS, AND IMBALANCES
4.1. Seller shall have the sole responsibility for transporting the Gas to the Delivery Point(s). Buyer shall have the sole responsibility for transporting the Gas from the Delivery Point(s).
4.2. The parties shall coordinate their nomination activities, giving sufficient time to meet the deadlines of the affected Transporter(s).
Each party shall give the other party timely prior Notice, sufficient to meet the requirements of all Transporter(s) involved in the transaction, of the quantities of Gas to be delivered and purchased each Day. Should either party become aware that actual deliveries at the Delivery Point(s) are greater or lesser than the Scheduled Gas, such party shall promptly notify the other party.
4.3. The parties shall use commercially reasonable efforts to avoid imposition of any Imbalance Charges. If Buyer or Seller receives an invoice from a Transporter that includes Imbalance Charges, the parties shall determine the validity as well as the cause of such Imbalance Charges. If the Imbalance Charges were incurred as a result of Buyer’s receipt of quantities of Gas greater than or less than the Scheduled Gas, then Buyer shall pay for such Imbalance Charges or reimburse Seller for such Imbalance Charges paid by Seller. If the Imbalance Charges were incurred as a result of Seller’s delivery of quantities of Gas greater than or less than the Scheduled Gas, then Seller shall pay for such Imbalance Charges or reimburse Buyer for such Imbalance Charges paid by Buyer.
SECTION 5. QUALITY AND MEASUREMENT
All Gas delivered by Seller shall meet the pressure, quality and heat content requirements of the Receiving Transporter. The unit of quantity measurement for purposes of this Contract shall be one MMBtu dry. Measurement of Gas quantities hereunder shall be in accordance with the established procedures of the Receiving Transporter.
SECTION 6. TAXES
The parties have selected either “Buyer Pays At and After Delivery Point” or “Seller Pays Before and At Delivery Point” as indicated on the Base Contract.
Buyer Pays At and After Delivery Point:
Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas at the Delivery Point(s) and all Taxes after the Delivery Point(s). If a party is required to remit or pay Taxes that are the other party’s responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes. Any party entitled to an exemption from any such Taxes or charges shall furnish the other party any necessary documentation thereof.
Seller Pays Before and At Delivery Point:
Seller shall pay or cause to be paid all taxes, fees, levies, penalties, licenses or charges imposed by any government authority (“Taxes”) on or with respect to the Gas prior to the Delivery Point(s) and all Taxes at the Delivery Point(s). Buyer shall pay or cause to be paid all Taxes on or with respect to the Gas after the Delivery Point(s). If a party is required to remit or pay Taxes that are the other party’s responsibility hereunder, the party responsible for such Taxes shall promptly reimburse the other party for such Taxes. Any party entitled to an exemption from any such Taxes or charges shall furnish the other party any necessary documentation thereof.
SECTION 7. BILLING, PAYMENT, AND AUDIT
7.1. Seller shall invoice Buyer for Gas delivered and received in the preceding Month and for any other applicable charges, providing supporting documentation acceptable in industry practice to support the amount charged. If the actual quantity delivered is not known by the billing date, billing will be prepared based on the quantity of Scheduled Gas. The invoiced quantity will then be adjusted to the actual quantity on the following Month's billing or as soon thereafter as actual delivery information is available.
7.2. Buyer shall remit the amount due under Section 7.1 in the manner specified in the Base Contract, in immediately available funds, on or before the later of the Payment Date or 10 Days after receipt of the invoice by Buyer; provided that if the Payment Date is not a Business Day, payment is due on the next Business Day following that date. In the event any payments are due Buyer hereunder, payment to Buyer shall be made in accordance with this Section 7.2.
7.3. In the event payments become due pursuant to Sections 3.2 or 3.3, the performing party may submit an invoice to the nonperforming party for an accelerated payment setting forth the basis upon which the invoiced amount was calculated. Payment from the nonperforming party will be due five Business Days after receipt of invoice.
7.4. If the invoiced party, in good faith, disputes the amount of any such invoice or any part thereof, such invoiced party will pay such amount as it concedes to be correct; provided, however, if the invoiced party disputes the amount due, it must provide supporting documentation acceptable in industry practice to support the amount paid or disputed without undue delay. In the event the parties are unable to resolve such dispute, either party may pursue any remedy available at law or in equity to enforce its rights pursuant to this Section.
7.5. If the invoiced party fails to remit the full amount payable when due, interest on the unpaid portion shall accrue from the date due until the date of payment at a rate equal to the lower of (i) the then-effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate.
7.6. A party shall have the right, at its own expense, upon reasonable Notice and at reasonable times, to examine and audit and to obtain copies of the relevant portion of the books, records, and telephone recordings of the other party only to the extent reasonably necessary to verify the accuracy of any statement, charge, payment, or computation made under the Contract. This right to examine, audit, and to obtain copies shall not be available with respect to proprietary information not directly relevant to transactions under this Contract. All invoices and billings shall be conclusively presumed final and accurate and all associated claims for under- or overpayments shall be deemed waived unless such invoices or billings are objected to in writing, with adequate explanation and/or documentation, within two years after the Month of Gas delivery. All retroactive adjustments under Section 7 shall be paid in full by the party owing payment within 30 Days of Notice and substantiation of such inaccuracy.
7.7. Unless the parties have elected on the Base Contract not to make this Section 7.7 applicable to this Contract, the parties shall net all undisputed amounts due and owing, and/or past due, arising under the Contract such that the party owing the greater amount shall make a single payment of the net amount to the other party in accordance with Section 7; provided that no payment required to be made pursuant to the terms of any Credit Support Obligation or pursuant to Section 7.3 shall be subject to netting under this Section. If the parties have executed a separate netting agreement, the terms and conditions therein shall prevail to the ex tent inconsistent herewith.
SECTION 8. TITLE, WARRANTY, AND INDEMNITY
8.1. Unless otherwise specifically agreed, title to the Gas shall pass from Seller to Buyer at the Delivery Point(s). Seller shall have responsibility for and assume any liability with respect to the Gas prior to its delivery to Buyer at the specified Delivery Point(s).
Buyer shall have responsibility for and assume any liability with respect to said Gas after its delivery to Buyer at the Delivery Point(s).
8.2. Seller warrants that it will have the right to convey and will transfer good and merchantable title to all Gas sold hereunder and delivered by it to Buyer, free and clear of all liens, encumbrances, and claims. EXCEPT AS PROVIDED IN THIS SECTION 8.2 AND IN SECTION 15.8, ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE, ARE DISCLAIMED.
8.3. Seller agrees to indemnify Buyer and save it harmless from all losses, liabilities or claims including reasonable attorneys' fees and costs of court ("Claims"), from any and all persons, arising from or out of claims of title, personal injury (including death) or property damage from said Gas or other charges thereon which attach before title passes to Buyer. Buyer agrees to indemnify Seller and save it harmless from all Claims, from any and all persons, arising from or out of claims regarding payment, personal injury (including death) or property damage from said Gas or other charges thereon which attach after title passes to Buyer.
8.4. The parties agree that the delivery of and the transfer of title to all Gas under this Contract shall take place within the Customs Territory of the United States (as defined in general note 2 of the Harmonized Tariff Schedule of the United States 19 U.S.C. §1202, General Notes, page 3); provided, however, that in the event Seller took title to the Gas outside the Customs Territory of the United States, Seller represents and warrants that it is the importer of record for all Gas entered and delivered into the United States, and shall be responsible for entry and entry summary filings as well as the payment of duties, taxes and fees, if any, and all applicable record keeping requirements.
8.5. Notwithstanding the other provisions of this Section 8, as between Seller and Buyer, Seller will be liable for all Claims to the extent that such arise from the failure of Gas delivered by Seller to meet the quality requirements of Section 5.
SECTION 9. NOTICES
9.1. All Transaction Confirmations, invoices, payment instructions, and other communications made pursuant to the Base Contract ("Notices") shall be made to the addresses specified in writing by the respective parties from time to time.
9.2. All Notices required hereunder shall be in writing and may be sent by facsimile or mutually acceptable electronic means, a nationally recognized overnight courier service, first class mail or hand delivered.
9.3. Notice shall be given when received on a Business Day by the addressee. In the absence of proof of the actual receipt date, the following presumptions will apply. Notices sent by facsimile shall be deemed to have been received upon the sendin g party's receipt of its facsimile machine's confirmation of successful transmission. If the day on which such facsimile is received is not a Business Day or is after five p.m. on a Business Day, then such facsimile shall be deemed to have been received on the next following Business Day. Notice by overnight mail or courier shall be deemed to have been received on the next Business Day after it was sent or such earlier time as is confirmed by the receiving party. Notice via first class mail shall be considered del ivered five Business Days after mailing.
9.4. The party receiving a commercially acceptable Notice of change in payment instructions or other payment information shall not be obligated to implement such change until ten Business Days after receipt of such Notice.
SECTION 10. FINANCIAL RESPONSIBILITY
10.1. If either party (“X”) has reasonable grounds for insecurity regarding the performance of any obligation under this Contract (whether or not then due) by the other party (“Y”) (including, without limitation, the occurrence of a material change in the creditworthiness of Y or its Guarantor, if applicable), X may demand Adequate Assurance of Performance. “Adequate Assurance of Performance” shall mean sufficient security in the form, amount , for a term, and from an issuer, all as reasonably acceptable to X, including, but not limited to cash, a standby irrevocable letter of credit, a prepayment, a security interest in an asset or guaranty. Y hereby grants to X a continuing first priority security interest in, lien on, and right of setoff against all Adequate Assurance of Performance in the form of cash transferred by Y to X pursuant to this Section 10.1. Upon the return by X to Y of such Adequate Assurance of Performance, the security interest and lien granted hereunder on that Adequate Assurance of Performance shall be released automatically and, to the extent possible, without any further action by either party.
10.2. In the event (each an "Event of Default") either party (the "Defaulting Party") or its Guarantor shall: (i) make an assignment or any general arrangement for the benefit of creditors; ( ii) file a petition or otherwise commence, authorize, or acquiesce in the commencement of a proceeding or case under any bankruptcy or similar law for the protection of creditors or have such petition filed or proceeding commenced against it; ( iii) otherwise become bankrupt or insolvent (however evidenced); ( iv) be unable to pay its debts as they fall due; ( v) have a receiver, provisional liquidator, conservator, custodian, trustee or other similar official appointed with respect to it or substantially all of its assets; (vi) fail to perform any obligation to the other party with respect to any Credit Support Obligations relating to the Contract; ( vii) fail to give Adequate Assurance of Performance under Section 10.1 within 48 hours but at least one Business Day of a written request by the other party; (viii) not have paid any amount due the other party hereunder on or before the second Business Day following written Notice that such payment is due; or ix) be the affected party with respect to any Additional Event of Default; then the other party (the "Non-Defaulting Party") shall have the right, at its sole election, to immediately withhold and/or suspend deliveries or payments upon Notice and/or to terminate and liquidate the transactions under the Contr act, in the manner provided in Section 10.3, in addition to any and all other remedies available hereunder.
10.3. If an Event of Default has occurred and is continuing, the Non-Defaulting Party shall have the right, by Notice to the Defaulting Party, to designate a Day, no earlier than the Day such Notice is given and no later than 20 Days after such Notice is given, as an early termination date (the “Early Termination Date”) for the liquidation and termination pursuant to Section 10.3.1 of all transactions under the Contract, each a “Terminated Transaction”. On the Early Termination Date, all transactions will termin ate, other than those transactions, if any, that may not be liquidated and terminated under applicable law (“Excluded Transactions ”), which Excluded Transactions must be liquidated and terminated as soon thereafter as is legally permissible, and upon termination shall be a Terminated Transaction and be valued consistent with Section 10.3.1 below. With respect to each Excluded Transaction, its actual termination date shall be the Early Termination Date for purposes of Section 10.3.1.
The parties have selected either “Early Termination Damages Apply” or “Early Termination Damages Do Not Apply” as indicated on the Base Contract.
Early Termination Damages Apply:
10.3.1. As of the Early Termination Date, the Non-Defaulting Party shall determine, in good faith and in a commercially reasonable manner, (i) the amount owed (whether or not then due) by each party with respect to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all other applicable charges relating to such deliveries and receipts (including without limitation any amounts owed under Section
3.2), for which payment has not yet been made by the party that owes such payment under this Contract and (ii) the Market Value, as defined below, of each Terminated Transaction. The Non-Defaulting Party shall (x) liquidate and accelerate each Terminated Transaction at its Market Value, so that each amount equal to the difference between such Market Value and the Contract Value, as defined below, of such Terminated Transaction(s) shall be due to the Buyer under the Terminated Transaction(s) if such Market Value exceeds the Contract Value and to the Seller if the opposite is the case; and (y) where appropriate, discount each amount then due under clause (x) above to present value in a commercially reasonable manner as of the Early Termination Date (to take account of the period between the date of liquidation and the date on which such amount would have otherwise been due pursuant to the relevant Terminated Transactions).
For purposes of this Section 10.3.1, “Contract Value” means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the Contract Price, and “Market Value” means the amount of Gas remaining to be delivered or purchased under a transaction multiplied by the market price for a similar transaction at the Delivery Point determined by the Non-Defaulting Party in a commercially reasonable manner. To ascertain the Market Value, the Non-Defaulting Party may consider, among other valuations, any or all of the settlement prices of NYMEX Gas futures contracts, quotations from leading dealers in energy swap contracts or physical gas trading markets, similar sales or purchases and any other bona fide third-party offers, all adjusted for the length of the term and differences in transportation costs. A party shall not be required to enter into a replacement transaction(s) in order to determine the Market Value. Any extension(s) of the term of a transaction to which parties are not bound as of the Early Termination Date (including but not limited to “evergreen provisions”) shall not be considered in determining Contract Values and Market Values. For the avoidance of doubt, any option pursuant to which one party has the right to extend the term of a transaction shall be considered in determining Contract Values and Market Values. The rate of interest used in calculating net present value shall be determined by the Non-Defaulting Party in a commercially reasonable manner.
Early Termination Damages Do Not Apply:
10.3.1. As of the Early Termination Date, the Non-Defaulting Party shall determine, in good faith and in a commercially reasonable manner, the amount owed (whether or not then due) by each party with respect to all Gas delivered and received between the parties under Terminated Transactions and Excluded Transactions on and before the Early Termination Date and all
other applicable charges relating to such deliveries and receipts (including without limitation any amounts owed under Sectio n
3.2), for which payment has not yet been made by the party that owes such payment under this Contract.
The parties have selected either “Other Agreement Setoffs Apply” or “Other Agreement Setoffs Do Not Apply” as indicated on the Base Contract.
Other Agreement Setoffs Apply:
Bilateral Setoff Option:
10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”). At its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized to setoff any Net Settlement Amount against (i) any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract; and (ii) any amount(s) (including any excess cash margin or excess cash collateral) owed or held by the party that is entitled to the Net Settlement Amount under any other agreement or arrangement between the parties.
Triangular Setoff Option:
10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”). At its sole option, and without prior Notice to the Defaulting Party, the Non-Defaulting Party is hereby authorized to setoff (i) any Net Settlement Amount against any margin or other collateral held by a party in connec tion with any Credit Support Obligation relating to the Contract; (ii) any Net Settlement Amount against any amount(s) (including any excess cash margin or excess cash collateral) owed by or to a party under any other agreement or arrangement between the parties; (iii) any Net Settlement Amount owed to the Non- Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Non-Defaulting Party or its Affiliates to the Defaulting Party under any other agreement or arrangement; (iv) any Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Defaulting Party to the Non-Defaulting Party or its Affiliates under any other agreement or arrangement; and/or (v) any Net Settlement Amount owed to the Defaulting Party against any amount(s) (including any excess cash margin or excess cash collateral) owed by the Defaulting Party or its Affiliates to the Non-Defaulting Party under any other agreement or arrangement.
Other Agreement Setoffs Do Not Apply:
10.3.2. The Non-Defaulting Party shall net or aggregate, as appropriate, any and all amounts owing between the parties under Section 10.3.1, so that all such amounts are netted or aggregated to a single liquidated amount payable by one party to the other (the “Net Settlement Amount”). At its sole option and without prior Notice to the Defaulting Party, the Non-Defaulting Party may setoff any Net Settlement Amount against any margin or other collateral held by a party in connection with any Credit Support Obligation relating to the Contract.
10.3.3. If any obligation that is to be included in any netting, aggregation or setoff pursuant to Section 10.3.2 is unascertained, the Non-Defaulting Party may in good faith estimate that obligation and net, aggregate or setoff, as applicable, in respect of the estimate, subject to the Non-Defaulting Party accounting to the Defaulting Party when the obligation is ascertained. Any amount not then due which is included in any netting, aggregation or setoff pursuant to Section 10.3.2 shall be discounted to net present value in a commercially reasonable manner determined by the Non-Defaulting Party.
10.4. As soon as practicable after a liquidation, Notice shall be given by the Non-Defaulting Party to the Defaulting Party of the Net Settlement Amount, and whether the Net Settlement Amount is due to or due from the Non-Defaulting Party. The Notice shall include a written statement explaining in reasonable detail the calculation of the Net Settlement Amount, provided that failure to give such Notice shall not affect the validity or enforceability of the liquidation or give rise to any claim by the Defaulting Party against the Non-Defaulting Party. The Net Settlement Amount as well as any setoffs applied against such amount pursuant to Section 10.3.2, shall be paid by the close of business on the second Business Day following such Notice, which date shall not be earlier than the Early Termination Date. Interest on any unpaid portion of the Net Settlement Amount as adjusted by setoffs, shall accrue from the date due until the date of payment at a rate equal to the lower of (i) the then-effective prime rate of interest published under "Money Rates" by The Wall Street Journal, plus two percent per annum; or (ii) the maximum applicable lawful interest rate.
10.5. The parties agree that the transactions hereunder constitute a "forward contract" within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each "forward contract merchants" within the meaning of the United States Bankruptcy Code.
10.6. The Non-Defaulting Party's remedies under this Section 10 are the sole and exclusive remedies of the Non-Defaulting Party with respect to the occurrence of any Early Termination Date. Each party reserves to itself all other rights, setoffs, counterclaims and other defenses that it is or may be entitled to arising from the Contract.
10.7. With respect to this Section 10, if the parties have executed a separate netting agreement with close- out netting provisions, the terms and conditions therein shall prevail to the extent inconsistent herewith.
SECTION 11. FORCE MAJEURE
11.1. Except with regard to a party's obligation to make payment(s) due under Section 7, Section 10.4, and Imbalance Charges under Section 4, neither party shall be liable to the other for failure to perform a Firm obligation, to the extent such failure was caused by
Force Majeure. The term "Force Majeure" as employed herein means any cause not reasonably within the control of the party claiming suspension, as further defined in Section 11.2.
11.2. Force Majeure shall include, but not be limited to, the following: (i) physical events such as acts of God, landslides, lightning, earthquakes, fires, storms or storm warnings, such as hurricanes, which result in evacuation of the affected area, floods, washouts, explosions, breakage or accident or necessity of repairs to machinery or equipment or lines of pipe; (ii) weather related events affecting an entire geographic region, such as low temperatures which cause freezing or failure of wells or lines of pi pe; (iii) interruption and/or curtailment of Firm transportation and/or storage by Transporters; (iv) acts of others such as strikes, lockouts or other industrial disturbances, riots, sabotage, insurrections or wars , or acts of terror ; and (v) governmental actions such as necessity for compliance with any court order, law, statute, ordinance, regulation, or policy having the effect of law promul gated by a governmental authority having jurisdiction. Seller and Buyer shall make reasonable efforts to avoid the adverse impacts of a Force Majeure and to resolve the event or occurrence once it has occurred in order to resume performance.
11.3. Neither party shall be entitled to the benefit of the provisions of Force Majeure to the extent performance is affected by any or all of the following circumstances: (i) the curtailment of interruptible or secondary Firm transportation unless primary, in-path, Firm transportation is also curtailed; (ii) the party claiming excuse failed to remedy the condition and to resume the perfor mance of such covenants or obligations with reasonable dispatch; or (iii) economic hardship, to include, without limitation, Seller’s ability to sell Gas at a higher or more advantageous price than the Contract Price, Buyer’s ability to purchase Gas at a lower or more advantageous price than the Contract Price, or a regulatory agency disallowing, in whole or in part, the pass through of costs resulting from this Contract; (iv) the loss of Buyer’s market(s) or Buyer’s inability to use or resell Gas purchased hereunder, except, in either case, as provided in Section 11.2; or (v) the loss or failure of Seller’s gas supply or depletion of reserves, except, in either case, as provided in Section 11.2.
The party claiming Force Majeure shall not be excused from its responsibility for Imbalance Charges.
11.4. Notwithstanding anything to the contrary herein, the parties agree that the settlement of strikes, lockouts or other industrial disturbances shall be within the sole discretion of the party experiencing such disturbance.
11.5. The party whose performance is prevented by Force Majeure must provide Notice to the other party. Initial Notice may be given orally; however, written Notice with reasonably full particulars of the event or occurrence is required as soon as reasonably possible. Upon providing written Notice of Force Majeure to the other party, the affected party will be relieved of its obligation, from the onset of the Force Majeure event, to make or accept delivery of Gas, as applicable, to the extent and for the duration of Force Majeure, and neither party shall be deemed to have failed in such obligations to the other during such occurrence or event.
11.6. Notwithstanding Sections 11.2 and 11.3, the parties may agree to alternative Force Majeure provisions in a Transaction Confirmation executed in writing by both parties.
SECTION 12. TERM
This Contract may be terminated on 30 Day’s written Notice, but shall remain in effect until the expiration of the latest Delivery Period of any transaction(s). The rights of either party pursuant to Section 7.6, Section 10, Section 13, the obligations to make payment hereunder, and the obligation of either party to indemnify the other, pursuant hereto shall survive the termination of the Base Contract or any transaction.
SECTION 13. LIMITATIONS
FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY. A PARTY’S LIABILITY
HEREUNDER SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, A PARTY’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY. SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS
EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE,
EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE
LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR
CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE
LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICU LT OR IMPOSSIBLE TO DETERMINE, OR
OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS.
SECTION 14. MARKET DISRUPTION
If a Market Disruption Event has occurred then the parties shall negotiate in good faith to agree on a replacement price for the Floating Price (or on a method for determining a replacement price for the Floating Price) for the affected Day, and if the parties have not so agreed on or before the second Business Day following the affected Day then the replacement price for the Floating Pr ice shall be determined within the next two following Business Days with each party obtaining, in good faith and from non- affiliated market participants in the relevant market, two quotes for prices of Gas for the affected Day of a similar quality and quanti ty in the geographical location closest in proximity to the Delivery Point and averaging the four quotes. If either par ty fails to provide two quotes then the average of the other party’s two quotes shall determine the replacement price for the Floating Price. "Floating Price" means the price or a factor of the price agreed to in the transaction as being based upon a specified index. "Market Disruption Event" means, with respect to an index specified for a transaction, any of the following events: (a) the failure of the index to announce or publish information necessary for determining the Floating Price; (b) the failure of trading to commence or the permanent discontinuation or material suspension of trading on the exchange or market acting as the index; (c) the temporary or permanent discontinuance or unavailability of the index; (d) the temporary or permanent closing of any exchange acting as the index; or (e) both parties agree that a material change in the formula for or the method of determining the Floating Price has occurred. For the purposes of the calculation of a replacement price for the Floating Price, all numb ers shall be rounded to three decimal places. If the fourth decimal number is five or greater, then the third decimal number shall be increased by one and if the fourth decimal number is less than five, then the third decimal number shall remain unchanged.
SECTION 15. MISCELLANEOUS
15.1. This Contract shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, and heirs of the respective parties hereto, and the covenants, conditions, rights and obligations of this Contract shall run for the full term of this Contract.
No assignment of this Contract, in whole or in part, will be made without the prior written consent of the non-assigning party (and shall not relieve the assigning party from liability hereunder), which consent will not be unreasonably withheld or delayed; provided, either party may (i) transfer, sell, pledge, encumber, or assign this Contract or the accounts, revenues, or proceeds hereof in connection with any financing or other financial arrangements, or (ii) transfer its interest to any parent or Affiliate by assignment, merger or otherwise without the prior approval of the other party. Upon any such assignment, transfer and assumption, the transferor shall remain principally liable for and shall not be relieved of or discharged from any obligations hereunder.
15.2. If any provision in this Contract is determined to be invalid, void or unenforceable by any court having jurisdiction, such determination shall not invalidate, void, or make unenforceable any other provision, agreement or covenant of this Contract.
15.3. No waiver of any breach of this Contract shall be held to be a waiver of any other or subsequent breach.
15.4. This Contract sets forth all understandings between the parties respecting each transaction subject hereto, and any prior contracts, understandings and representations, whether oral or written, relating to such transactions are merged into and superseded by this Contract and any effective transaction(s). This Contract may be amended only by a writing executed by both parties.
15.5. The interpretation and performance of this Contract shall be governed by the laws of the jurisdiction as indicated on the Base Contract, excluding, however, any conflict of laws rule which would apply the law of another jurisdiction.
15.6. This Contract and all provisions herein will be subject to all applicable and valid statutes, rules, orders and regulations of any governmental authority having jurisdiction over the parties, their facilities, or Gas supply, this Contract or transaction or any provisions thereof.
15.7. There is no third party beneficiary to this Contract.
15.8. Each party to this Contract represents and warrants that it has full and complete authority to enter into and perform this Contract.
Each person who executes this Contract on behalf of either party represents and warrants that it has full and complete authority to do so and that such party will be bound thereby.
15.9. The headings and subheadings contained in this Contract are used solely for convenience and do not constitute a part of this Contract between the parties and shall not be used to construe or interpret the provisions of this Contract.
15.10. Unless the parties have elected on the Base Contract not to make this Section 15.10 applicable to this Contract, neither party shall disclose directly or indirectly without the prior written consent of the other party the terms of any transaction to a third party (other than the employees, lenders, royalty owners, counsel, accountants and other agents of the party, or prospective purchasers of all or substantially all of a party’s assets or of any rights under this Contract, provided such persons shall have agreed to keep such terms confidential) except (i) in order to comply with any applicable law, order, regulation, or exchange rule, (ii) to the extent necessary for the enforcement of this Contract , (iii) to the extent necessary to implement any transaction, (iv) to the extent necessary to comply with a regulatory agency’s reporting requirements including but not limited to gas cost recovery proceedings; or (v) to the extent such information is delivered to such third party for the sole purpose of calculating a published index. Each party shall notify the other party of any proceeding of which it is aware which may result in disclosure of the terms of any transaction (other than as permitted hereunder) and use reasonable efforts to prevent or limit the disclosure. The existence of this Contract is not subject to this confidentiality obligation. Subject to Section 13, the parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidentiality obligation. The terms of any transaction hereunder shall be kept confidential by the parties hereto for one year from the expiration of the transaction.
In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclos ure, and shall cooperate (consistent with the disclosing party’s legal obligations) with the other party’s efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party.
15.11. The parties may agree to dispute resolution procedures in Special Provisions attached to the Base Contract or in a Transaction Confirmation executed in writing by both parties
15.12. Any original executed Base Contract, Transaction Confirmation or other related document may be digitally copied, photocopied, or stored on computer tapes and disks (the “Imaged Agreement”). The Imaged Agreement, if introduced as evidence on paper, the Transaction Confirmation, if introduced as evidence in automated facsimile form, the recording, if introduced a s evidence in its original form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings will be admissible as between the parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissi bility of the recording, the Transaction Confirmation, or the Imaged Agreement on the basis that such were not originated or maintained in documentary form. However, nothing herein shall be construed as a waiver of any other objection to the admissibility of such evidence.
DISCLAIMER: The purposes of this Contract are to facilitate trade, avoid misunderstandings and make more definite the terms of contracts of purchase and sale of natural gas. Further, NAESB does not mandate the use of this Contract by any party. NAESB DISCLAIMS AND EXCLUDES, AND ANY USER OF
THIS CONTRACT ACKNOWLEDGES AND AGREES TO NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR
REPRESENTATIONS, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CONTRACT OR ANY PART THEREOF, INCLUDING
ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR
ANY PARTICULAR PURPOSE (WHETHER OR NOT NAESB KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT
AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. EACH USER OF THIS CONTRACT ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CONTRACT.
TRANSACTION CONFIRMATION EXHIBIT A
FOR IMMEDIATE DELIVERY
Letterhead/Logo
Date: ____________________________, _____
Transaction Confirmation #: _______________
This Transaction Confirmation is subject to the Base Contract between Seller and Buyer dated ______________________. The terms of this Transaction Confirmation are binding unless disputed in writing within 2 Business Days of receipt unless otherwise specified in the Base Contract.
SELLER:
_______________________________________________
_______________________________________________
_______________________________________________
Attn: ___________________________________________
Phone: _________________________________________
Fax: ___________________________________________
Base Contract No. ________________________________
Transporter: _____________________________________
Transporter Contract Number: _______________________
BUYER:
_______________________________________________
_______________________________________________
_______________________________________________
Attn: ___________________________________________
Phone: _________________________________________
Fax: ___________________________________________
Base Contract No. ________________________________
Transporter: _____________________________________
Transporter Contract Number: _______________________
Contract Price: $ /MMBtu or ______________________________________________________________________
Delivery Period: Begin: , ___ End: , ___
Performance Obligation and Contract Quantity: (Select One)
Firm (Fixed Quantity): Firm (Variable Quantity): Interruptible:
MMBtus/day MMBtus/day Minimum Up to MMBtus/day EFP MMBtus/day Maximum
subject to Section 4.2. at election of
Buyer or Seller
Delivery Point(s): ________________________
(If a pooling point is used, list a specific geographic and pipeline location):
Special Conditions:
Seller: __________________________________________
By: ____________________________________________
Title: ___________________________________________
Date: __________________________________________
Buyer: __________________________________________
By: ____________________________________________
Title: ___________________________________________
Date: __________________________________________
1 Special Provisions to Base Contract for Sale and Purchase of Natural Gas (the “NAESB”) Between
City of Victorville
and
EDF Trading North America, LLC
dated July 22, 2025
Section 9.2 shall be amended by adding the term “electronic mail,” before the word “facsimile”.
Section 10.1 shall be suspended in its entirety during the term of the Credit Support Addendum between the parties dated July 22, 2025, and shall have no force or effect for so long as such Credit Support Addendum remains in effect.
Section 10.2 shall be amended by the following:
a. On the seventh line, in subsection 10.2(vii), replacing “48 hours but at least one Business Day” with “three (3) Business Days “;
b. On the ninth line, deleting the word “or” before the number “ix)”;
c. On the ninth line, adding “; or (x) have failed to perform any other material obligation under the Contract for reasons other than Force Majeure” after the word “Default” and before the phrase “; then”;
d. Adding the following at the end of the last sentence, after the word “hereunder” and before the period:
“, provided however that to the extent an Event of Default is capable of being cured (Section 3.2 not being a cure of an Event of Default), the Non- Defaulting Party has complied with the following notice requirements. The Non-Defaulting Party has the right to terminate the Contract for uncured Events of Default provided that the Non-Defaulting Party has given written notice of such Event of Default to the Defaulting Party and the Defaulting Party has not cured such Event of Default within five (5) Days from the date of such notice”.
Amendment to Section 10.5 Financial Responsibility:
Section 10.5 is amended by adding the following at the end thereof:
“In addition, each party represents and warrants to the other party, as of the date of the Base Contract and as of the date of each transaction thereunder, and as of each date of delivery of Gas in connection with such transaction, that:
2 (a) Status of Parties . It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; and the other party is not acting as a fiduciary for or an adviser to it in respect of a transaction;
(b) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into a transaction and as to whether a transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary; it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into a transaction, it being understood that information and explanations related to the terms and co nditions of a transaction will not be considered investment advice or a recommendation to enter into a transaction; and no communication (written or oral) received from the other party will be deemed to be an assurance or guarantee as to the expected resul ts of a transaction;
(c) Assessment and Understanding . It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of any transaction, is capable of assuming, and assumes, the risks of any transaction and acknowledges that the other party is not acting as a fiduciary for, or an advisor to, it in respect of this Contract or any transaction; and (d) Eligible Contract Participant. It is an “Eligible Contract Participant” as defined in Section 1a(18) of the Commodity Exchange Act, as amended, 7 U.S.C. § 1a(18).”
Amendment to Section 15. Miscellaneous:
Section 15.10 is amended to read in its entirety as follows:
“Unless the parties have elected on the Base Contract not to make this Section 15.10 applicable to this Contract, neither party shall disclose directly or indirectly without the prior written consent of the other party the terms of this Contract, any transaction, any other documents relating to this Contract, if any, or any information made available by a party and/or a parent or guarantor of a party with respect to this Contract, to a third party (other than the employees, lenders, royalty owners, counsel, accountants and other agents of the party, or prospective purchasers of all or substantially all of a party’s assets or of any rights under this Contract, provided such persons shall have agreed to keep such terms confidential) except (i) in order to comply with any applicable law, order, regulation, or exchange rule; (ii) to the extent necessary for the enforcement of this Contract; (iii) to the extent necessary to implement any transaction; (iv) to the extent necessary to comply with a regulatory agency’s reporting requirements including but not limited to gas cost recovery proceedings; or (v) to the extent such information is delivered to such third party for the sole purpose of calculating a published index. Each party shall notify the other party of any proceeding of which it is aware which may result in disclosure of the terms of any transaction (other than as permitted hereunder) and use reasonable efforts to prevent or limit the disclosure. The existence of this Contract is not subject to this confi dentiality obligation. Subject to Section 13, the parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidentiality obligation. The terms of any transaction hereunder shall be kept confidential by the parties hereto for one year from the expiration of the transaction.
In the event that disclosure is required by a governmental body or applicable law, the party subject to such requirement may disclose the material terms of this Contract to the extent so required, but shall promptly notify the other party, prior to disclos ure, and shall cooperate (consistent with the disclosing party’s legal obligations) with the other party’s efforts to obtain protective orders or similar restraints with respect to such disclosure at the expense of the other party.
3 The provisions of this Section 15.10 notwithstanding , the parties agree that the provisions of Section 15.13 shall apply to any disclosures required by the California Public Records Act or the Ralph M. Brown Act.”
e. Section 15 is further amended by adding the following new sections to the end thereof:
15.13 California Public Records and Brown Act. Party B acknowledges that Party A is a public entity subject to the requirements of the California Public Records Act, Cal. Gov. Code § 7920.000 et seq. (“CPRA”) and the Ralph M. Brown Act, Cal. Gov. Code § 54950 et seq , (“Brown Act”).
Party B acknowledges that pursuant to the Brown Act, Party A may be required to make public the Base Contract (which may be partially redacted by Party A consistent with the CPRA) in connection with the process of seeking approval from its governing body for the execution of the Base Contract.
Party B may also submit information to Party A that Party B considers confidential, proprietary, or trade secret information pursuant to the Uniform Trade Secrets Act, Cal. Civ. Code § 3426 et seq., or otherwise pr otected from disclosure pursuant to an exemption to the CPRA (“ Confidential Information”), which information Party B will flag, mark, label or otherwise identify as Confidential Information prior to such submission. Upon request or demand of any third person or entity not a party to the Base Contract or any Transaction Confirmation (“ Requestor”) under the CPRA for production, inspection and/or copying of the Base Contract, any Transaction Confirmation, or any information considered by Party B to be Confidential Information, Party A as soon as practical shall notify Party B that such request has been made. Party B shall be solely responsible for taking whatever legal steps are necessary to protect Confidential Information and to prevent release of Confidential Information to the Requestor by Party A. If Party B takes no such action within ten (10) days after receiving the foregoing notice from Party A, Party A may comply with the Requestor’s demand.”
15.14 Dispute Resolution. All disputes, claims, or controversies arising out of or relating to this Contract shall be resolved in accordance with the provisions of this this Section 15. 14.
15.14.1 Negotiation. Except where an express remedy is provided elsewhere in this Contract, the parties agree to attempt in good faith to resolve any dispute, claim, or controversy arising out of or relating to this Contract through confidential negotiation. Either party may initiate negotiations by delivering written notice to the other party, identifying the nature of the dispute and proposing a resolution. The receiving party shall respond in writing within ten (10) business days. If the dispute is not reso lved through this exchange, each party shall designate a representative with full settlement authority to meet—either in person or via video conference—within fifteen (15) business days of the response, at a mutually agreed time and method, to further attempt resolution. All communications made during these negotiations shall be treated as confidential and inadmissible in any subsequent legal proceeding, to the extent permitted by applicable law.
15.14.2 Escalation and Legal Remedies. If the dispute is not resolved within thirty (30) business days after the initial notice, either party may pursue any available legal or equitable remedies. The parties agree that any litigation may be brought exclusively in a court of competent jurisdicti on located in San Bernardino County, California, unless otherwise mutually agreed in writing.
15.14.3 Attorneys’ Fees . In the event judicial proceedings are instituted by either party for the enforcement of this Contract or any provisions hereof, the prevailing party may seek recovery of its reasonable attorneys’ fees and costs only in actions involving material breach, indemnification claims, or confidentiality violations . The court shall have discretion to determine whether such fees and costs are warranted based on the nature and outcome of the proceedings.
4 15.15. Mobile-Sierra. To the extent, if any, that a transaction does not qualify as a “first sale” as defined by the Natural Gas Act and §§ 2 and 601 of the Natural Gas Policy Act, each party irrevocably waives its rights, including its rights under §§ 4-5 of the Natural Gas Act, unilaterally to seek or support a change in the rate(s), charges, classifications, terms or conditions of this Contract and any transaction hereunder (collectively, the “Agreements”). By this provision, each party expressly waives its right to seek or support: (i) an order from the U.S. Federal Energy Regulatory Commission (“FERC”) finding that the market -based rate(s), charges, classifications, terms or conditions agreed to by the parties under the Agreements are unjust and unreasonable; or (ii) any refund with respect thereto. Each party agrees not to make or support such a filing or request, and that these covenants and waivers shall be binding notwithstanding any regulatory or market changes that may occur hereafter. Absent the agreement of both parties to the proposed change, the standard of review for changes in the rate, charge, classification, term or condition of the Agreements proposed by a party (to the extent that any waiver as set forth herein is unenforceable or ineffective as to such party), a non-party or FERC acting sua sponte, shall solely be the “public interest” application of the "just and reasonable" standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp. , 350 U.S. 332 (1956) and Federal Power Commissi on v.
Sierra Pacific Power Co., 350 U.S. 348 (1956) and clarified by Morgan Stanley Capital Group, Inc. v. Public Util. Dist. No. 1 of Snohomish 554 U.S. 527 (2008) and NRG Power Marketing, LLC v.
Maine Public Utilities Commission 130 S. Ct. 693 (2010) ( the “Mobile-Sierra” doctrine).
15.16. Financial Documents. Unless publicly available, if requested by a party, the other party, or its Guarantor, if applicable, (“Delivering Party”) shall deliver (i) within 120 days following the end of each fiscal year, a copy of the annual report containing audited consolidated financial statements for such fiscal year for the Delivering Party. In all cases the statements shall be for the most recent accounting period and shall be prepared in accordance with generally accepted accounting principles; provided, however, that shou ld any such statements not be available on a timely basis due to a delay in preparation or certification, such delay shall not be an Event of Default so long as the relevant entity diligently pursues the preparation, certification and delivery of the statements.
The delivery of such financial statements shall be deemed to be a Credit Support Obligation.
15.17. Incumbency and Tax Certificates. The parties shall also deliver to each other, upon the execution of this Contract: (i) a United States Internal Revenue Service Form W-9, or any successor form; (ii) an incumbency certificate or other evidence reasonably satisfactory to the other party of (a) the authority of the individual signing this Contract to execute binding agreements on behalf of the party; and (b) certification that the signature is genui ne; and (iii) a Uniform Sales & Use Tax Certificate – Multijurisdictional or other similar applicable resale tax exemption certificates .
[Signature page follows.]
5 IN WITNESS WHEREOF, the parties have caused these Special Provisions to be duly executed and become effective as of the date first written above.
City of Victorville EDF Trading North America, LLC
By:
By:
Name: KEITH C. METZLER Name: GERALD NEMEC
Title: CITY MANAGER Title: GENERAL COUNSEL
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Credit Support Addendum
to the
Base Contract for Sale and Purchase of Natural Gas
by and between
City of Victorville (“Party A”)
and
EDF Trading North America, LLC (“Party B”)
dated July 22, 2025
This Credit Support Addendum (“CSA”) is entered into as of July 22, 2025.
The parties to this CSA are the following:
Party A Party B
City of Victorville EDF Trading North America, LLC
14343 Civic Drive 601 Travis, Suite 1700
Victorville, CA 92392 Houston, Texas 77002
Base Contract Date: _____________ Base Contract Date:
Base Contract Number: Base Contract Number:
Notices:
City of Victorville EDF Trading North America, LLC
14343 Civic Drive 601 Travis, Suite 1700
Victorville, CA 92392 Houston, Texas 77002
Attn: Finance Department Attn: Contract Administration
Phone: (760) 243-6340 Phone: 281-781-0333
Email: [email protected] Email: [email protected]
Wire Transfer or ACH Numbers (if applicable):
Bank: Wells Fargo Bank Bank: Bank of America, NA
ABA: 121042882 ABA: 026009593
ACCT: 9940075261 ACCT: 4427288595
Other Details: Other Details:
This CSA is published by the North American Energy Standards Board, Inc. The parties hereby agree to the following provisions offered in said CSA Elections.
Credit Support
Provider
Party A: None
Party B: None
Interest Rate (i) With respect to Cash held by a party, the Federal Funds Effective Rate – the rate for that day opposite the caption ‘Federal Funds (Effective)’ as set forth in the weekly statistical release designated as H.15 (519), or any successor publication, published by the Board of
Governors of the Federal Reserve System and (ii) with
respect to Cash held by a Custodian of a party, the
Interest Rate will not apply, and the definition of Interest Amount will mean the earnings, if any, earned through
the investment and reinvestment of such Cash by the
Custodian of a party in a interest -bearing account
selected by the Secured Party.
Eligible
Collateral
Valuation
Percentage
Party A: Cash 100%
Letters of Credit 100%*
□ Other ____________ ___%
Party B: Cash 100% Letters of Credit 100%*
□ Other_____________ ___%
* - See Definition of Valuation Percentage.
Minimum
Transfer
Amount
Party A: $100,000
Party B: $100,000
Letter of
Credit Issuer
Requirements
Major U.S. commercial bank or a U.S. branch office of
a foreign bank (which is not an affiliate of such party), in either case, having assets of at least $10 billion and a Credit Rating of at least “A -“ by S&P and “A 3” by
Moody’s.
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Transfer
Method for
Other Eligible
Collateral
Party A: _________________________
Party B: _________________________
Notification
Time
Close of
Business
□ 1 p.m. Prevailing Mountain Time
Other 1 p.m. New York Prevailing Time
□ 5 p.m. Prevailing Mountain Time
Other: 5:00 p.m. local time at the relevant party’s
principal place of business. The relevant party is the intended recipient of a Notice of demand.
Collateral
Threshold □ Rating Matrix:
Flat amounts
Party A: $20,000,000
Party B: $10,000,000
Rounding
Amount
Party A: $10,000
Party B: $10,000
Independent
Amount
Party A: $0
Party B: $0
Eligibility
Requirements
to Hold Cash
A party or a wholly owned, direct or indirect,
subsidiary of Party A’s Credit Support Provider shall
be entitled to hold Cash [with a Qualified
Institution] provided that the following conditions
are satisfied: (1) it is not a Defaulting Party, and
(2) Cash shall be held only in any jurisdiction
within the United States.
Note: Include definition of Qualified Institution if
requested by Credit.
Custodian
Requirements
A commercial bank or trust company organized under
the laws of the United States or a political subdivision thereof (which is not an affiliate of such party) , having assets of at least $10 billion and with a Credit Rating of at least (a) "A -" by S&P and "A 3" by Moody’s, if such entity is rated by both S&P and Moody’s.
OPTION A for CSA Paragraphs 4, 5 and 6 – OR – □ OPTION B for CSA Paragraphs 4, 5 and 6 (Exhibit A for elections is attached.) Special Provisions Number of sheets attached: 3 (three) IN WITNESS WHEREOF, the parties hereto have executed the second page of this CSA in duplicate.
City of Victorville EDF Trading North America, LLC
By By
Name: Keith C. Metzler Name: Gerald Nemec
Title: City Manager Title: General Manager
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GENERAL TERMS AND CONDITIONS
of the
CREDIT SUPPORT ADDENDUM
to the
BASE CONTRACT FOR PURCHASE AND SALE OF NATURAL GAS
Paragraph 1. Purpose
This CSA constitutes an Addendum to that certain Base Contract for Sale and Purchase of Natural Gas, as identified on the front page herein, between the parties (“Base Contract”), and supplements, forms part of, and amends the Base Contract affecting transactions thereunder. Capitalized terms used in this CSA that are not herein defined will have the meanings ascribed to them in the Base Contract. In the event of a conflict between the terms of this CSA and the Base Contract, the terms of this CSA shall apply for the purposes of this CSA.
The terms set forth below shall have the meanings ascribed to them below. Other terms are also defined elsewhere in the Base Contract and shall have the meanings ascribed to them therein.
Paragraph 2. Definitions.
As used in this CSA:
“Cash” shall mean United States Dollars.
“Close of Business” shall have the meaning set forth in the elections on Page 2 herein.
"Collateral Requirement" shall have the meaning set forth in Paragraph 3 herein.
"Collateral Threshold" shall mean, with respect to a party, the amount, if any, set forth in the elections on
be zero (0) upon the occurrence and during the continuance of an Event of Default.
"Credit Support Default" shall have the meaning set forth in Paragraph 10 herein.
“Credit Support Provider”, if applicable, shall mean the entity set forth in the elections on Page 1 herein.
“Custodian” shall mean an entity that meets the Custodian Requirements set forth in the elections on Page 1 herein.
"Defaulting Party" shall have the meaning set forth in Paragraph 10 herein.
"Demand Date" shall mean, with respect to a party's (i) demand for the Transfer of Eligible Collateral pursuant to Paragraph 4 herein, (ii) demand for Reduction or Substitution of Posted Collateral pursuant to Paragraph 5 herein, and/or (iii) demand for Disputed Calculations pursuant to Paragraph 6 herein:
(a) the date on which a demand is made, if such demand is received prior to the Notification Time on a Business Day; or
(b) the following Business Day if a demand is made on a non -Business Day or after the Notification Time on a Business Day.
"Eligible Collateral" shall have the meaning set forth in the elections on Page 1 herein.
"Exposure" shall mean the Net Settlement Amount, as calculated by the Secured Party in good faith and in a commercially reasonable manner, that the Pledging Party would owe to the Secured Party if an Early Termination Date had been designated as of the date of such calculation as provided for in Section 10 of the Base Contract; provided that such calculations shall be at the mid point between the bid price and the offer price.
“Independent Amount” shall mean, with respect to a party, the amount specified as such for that party herein, if no amount is specified, zero.
"Interest Amount" shall mean the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Cash held by the Secured Party on that day, determined for each such day as follows: (x) the amount of Cash on that day; multiplied by (y) the Interest Rate for that day: divided by (z) 360.
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"Interest Period" shall mean the period from (and including) the last Business Day on which an Interest Amount was Transferred (or if no Interest Amount has yet been Transferred, the Business Day on which Cash was Transferred to the Secured Party) to (but excluding) the Business Day on which the current Interest Amount is to be Transferred.
"Interest Rate" shall have the meaning set forth in the elections on Page 1 herein.
"Letter of Credit" shall have the meaning set forth in Paragraph 7 (a) herein. “Letter of Credit Default” shall have the meaning set forth in Paragraph 7(b) herein.
“Minimum Transfer Amount” shall mean the amount set forth in the elections on Page 1 herein for a party.
“Notification Time” shall have the meaning set forth in the elections on Page 2 herein.
“Notice” shall have the meaning set forth in Paragraph 9 herein.
“Pledging Party” shall have the meaning set forth in Paragraph 3 herein.
"Posted Collateral" shall mean (1) all Eligible Collateral and all proceeds thereof that have been Transferred to or received by the Secured Party hereunder and not Transferred to the Pledging Party pursuant to Paragraph 4 or released by the Secured Party, (2) any Interest Amount or portion thereof held by the Secured Party and not Transferred pursuant to Paragraph 8(c), and (3) any Cash received and held by the Secured Party after drawing on any Letter of Credit.
"Reference Market Maker" shall mean a leading dealer in the relevant market that is not an affiliate of either party selected by a party determining any disputed calculations pursuant to Paragraph 6 herein in a commercially reasonable manner from among dealers which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit. “Rounding Amount” shall mean the amount set forth in the elections on Page 1 herein for a party.
“Secured Party” shall have the meaning set forth in Paragraph 3(b) herein.
"Letter of Credit Issuer Requirements" shall have the meaning set forth in the elections on Page 1 herein.
"Transfer” or “Transferred" shall mean, with respect to any Eligible Collateral, Posted Collateral, or Interest Amount, and in accordance with the instructions of the appropriate party:
(i) in the case of Cash, payment or delivery by ACH or wire transfer in immediately available federal funds into one or more bank accounts set forth on Page 1 herein (or as otherwise specified in a demand Notice);
(ii) in the case of Letters of Credit, delivery of the Letter of Credit by the Pledging Party to the Secured Party at the address specified in this CSA (or as otherwise specified in a demand Notice) or delivery of an executed amendment to such Letter of Credit (extending the term or increasing the amount available to the Secured Party thereunder) by the Pledging Party, to the Secured Party; and for purposes of Paragraph 5, return of the Letter of Credit by the Secured Party to the Pledging Party or delivery of an executed amendment (which amendment shall be given by the Pledging Party to the Secured Party) to the Letter of Credit in form and substance satisfactory to the Secured Party, reducing the amount available to the Secured Party thereunder, in each case to the address specified in the applicable demand letter or this CSA; and
(iii) in the case of any other Eligible Collateral, the Transfer methodology specified by the parties in the elections on Page 1 herein.
(iv) in any case in which Eligible Collateral or Posted Collateral is in the form of a Letter of Credit, the deadlines set forth in Paragraph 7 (h).
In connection with each Transfer of any Eligible Collateral to the Secured Party pursuant to this CSA, the Secured Party will, upon request of the Pledging Party, provide a receipt in form and substance reasonably satisfactory to the Pledging Party showing the Eligible Collateral Transferred to it.. In connection with each Transfer of any Posted Collateral to the Pledging Party pursuant to this CSA, the Pledging Party will, upon request of the Secured Party, provide a receipt in form and substance reasonably satisfactory to the Secured Party showing the Posted Collateral Transferred to it.
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“Valuation Percentage” shall mean the percentage set forth in the elections on Page 1 herein for each form of Eligible Collateral; provided with respect to Letters of Credit the Valuation Percentage shall be 100% unless either (i) a Letter of Credit Default shall apply with res pect to such Letter of Credit or (ii) 20 or fewer Business Days remain prior to the expiration of such Letter of Credit, in which case the Valuation Percentage shall be zero (0).
"Value" shall mean the Valuation Percentage multiplied by the amount of Posted Collateral; provided with respect to Letters of Credit, such amount shall be the amount then available to be unconditionally drawn under the Letter of Credit held by the Secured Party.
Paragraph 3. Calculation of Collateral Requirement.
On any Business Day, the " Collateral Requirement " for a party (the “ Pledging Party ”) means the Secured Party’s Exposure minus the sum of:
(a) the Pledging Party's Collateral Threshold; plus
(b) the Value of all Posted Collateral then held by the party other than the Pledging Party (the “Secured Party”), and any accrued Interest Amount that has not yet been Transferred to the Pledging Party;
provided, however, that, the Collateral Requirement of the Pledging Party will be deemed to be zero (0) whenever the calculation of such Pledging Party’s Collateral Requirement yields a number less than zero (0).
OPTION A: Paragraphs 4, 5, and 6
If the parties select Option A of the elections on Page 1 herein, the following Paragraphs 4, 5 and 6 shall apply.
Paragraph 4. Transfer of Eligible Collateral.
On any Business Day on which (i) no Credit Support Default with respect to the Secured Party has occurred and is continuing, (ii) no Event of Default with respect to the Secured Party has occurred and is continuing, (iii) no Early Termination Date has occurred or been designated by the Pledging Party for which there exist any unsatisfied payment obligations under the Base Contract, and (iv) the Pledging Party’s Collateral Requirement equals or exceeds its Minimum Transfer Amount, the Secured Party may demand, by Notice to the Pledging Party, that the Pledging Party Transfer to the Secured Party, and the Pledging Party shall Transfer or cause to be Transferred to the Secured Party, Eligible Collateral for the benefit of the Secured Party having a Value on the date of Transfer at least equal to the Pledging Party’s Collateral Requirement. The amount of Eligible Collateral required to be Transferred hereunder shall be rounded up to the nearest integral multiple of the Rounding Amount. Unless otherwise agreed t o in writing by the parties, the Pledging Party shall Transfer the Eligible Collateral by the Close of Business on the Business Day following the Demand Date. Any Letter of Credit or other type of Eligible Collateral (other than Cash) shall be Transferred to the address specified in this CSA or to such address as the Secured Party shall specify in its demand, pursuant to this Paragraph 4. Any demand made by the Secured Party pursuant to this Paragraph 4 shall specify ACH or wire transfer information for the account(s) to which Eligible Collateral in the form of Cash shall be Transferred if different then that set forth in this CSA. Notwithstanding anything to the contrary in this CSA, in the event of a Credit Support Default or an Event of Default, with respect to the Pledging Party which gives rise to an obligation to Transfer Eligible Collateral, the Pledging Party shall have no obligation to Transfer such Eligible Collateral if such event is cured or otherwise no longer exists prior to the time that such Eligible Collateral is required to be provided hereunder.
Paragraph 5. Reduction and Substitution of Posted Collateral. (a) On any Business Day a Pledging Party may demand, by Notice to the Secured Party, a reduction in the amount of Posted Collateral previously provided by the Pledging Party for the benefit of the Secured Party, and the Secured Party shall comply with said de mand, provided that after giving effect to the demanded reduction in Posted Collateral, (i) the Pledging Party shall have a Collateral Requirement of zero (0) as of the date the Secured Party would be required to return the requested Posted Collateral, (ii) no Credit Support Default with respect to the Pledging Party has occurred and is continuing, (iii) no Event of Default with respect to the Pledging Party has occurred and is continuing, and (iv) no Early Termination Date has occurred or been designat ed by the Secured Party for which there exist any unsatisfied payment obligations under the Base Contract. The amount of the Posted Collateral reduction shall be made by the Secured Party if such amount equals or exceeds the Secured Party’s Minimum Transfer Amount; provided however, such amount actually returned by the Secured Party shall be rounded down to the nearest integral multiple of the Rounding Amount. Unless otherwise agreed in writing by the parties, the Secured Party shall effect a permitted reduction in Posted Collateral by the Close of Business on the Business Day following the Demand Date for such reduction. If a permitted reduction in Posted Collateral is to be effected by a reduction in the amount that may be drawn under an outstanding Letter of Credit previously issued for the benefit of the Secured Party, the Secured Party shall promptly take such action as is reasonably necessary to cooperate with the Pledging Party to effectuate such reduction.
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(b) Except when (i) a Credit Support Default with respect to the Pledging Party has occurred and is continuing, or (ii) an Event of Default with respect to the Pledging Party has occurred and is continuing, or (iii) no Early Termination Date has occurred or been designated by the Secured Party for which there exist any unsatisfied payment obligation under the Base Contract, the Pledging Party may substitute for existing Posted Collateral new Eligible Collateral of equal or greater Value (provided that, if such substitute Eligible Collateral is of a type not designated as Eligible Collateral in the elections on Page 1 herein, then the substitution may not occur unless the Secured Party consents to such substitution). Upon the Transfer to the Secured Party of the substitute Eligible Collateral, the Secured Party shall Transfer the relevant replaced Posted Collateral (as specified by the Pledging Party) to the Pledging Party by the Close of Business on the second Business Day after such Transfer has been effect ed. Notwithstanding anything herein to the contrary, no such substitution shall be permitted unless (x) the substitute Eligible Collateral is Transferred to the Secured Party prior to, the release of the Posted Collateral to be returned to the Pledging Party and, if applicable, the security interest in, and lien upon, such substituted Eligible Collateral granted pursuant hereto in favor of the Secured Party shall have been perfected as required by applicable law and shall constitute a first priority perfec ted security interest therein and general first lien thereon, and (y) after giving effect to such substitution, the Value of such substitute Eligible Collateral, together will all other Posted Collateral held by the Secured Party, shall equal or exceed the Pledging Party’s Collateral Requirement. Each substitution of Eligible Collateral shall constitute a representation, warranty and agreement by the Pledging Party that the substituted Eligible Collateral shall be subject to and governed by the terms and conditions of this CSA, including without limitation and if applicable, the security interest in, general first lien on and right of offset against, such substituted Eligible Collateral granted pursuant to Paragraph 13(a) in favor of the Secured Party.
(c) The Transfer of any Posted Collateral by the Secured Party to the Pledging Party in accordance with this Paragraph 5 shall be deemed a release by the Secured Party of its security interest, general first lien and right of offset granted pursuant to Paragraph 13(a) hereof only with respect to such returned Posted Collateral.
Paragraph 6. Disputed Calculations.
(a) If the Pledging Party disputes the amount of Eligible Collateral requested by the Secured Party and such dispute relates to the amount of the Exposure as determined by the Secured Party, then the Pledging Party shall (i) notify the Secured Party of the existence and nature of the dispute not later than the Close of Business on the Demand Date, and (ii) Transfer Eligible Collateral to or for the benefit of the Secured Party in accordance with Paragraph 4 and in an amount equal to the Pledging Party's own calculation of its Collateral Requirement as determined, in accordance with Paragraph 3. Such calculation shall be made in good faith and a commercially reasonable manner that is consistent with Section 10 of the Base Contract. In all such cases, the parties thereafter shall promptly consult with each other in order to reconcile the two conflicting calculations. If the parties have not been able to resolve their dispute on or before the Notification Time on the second Business Day following the Demand Date, then the amount of the Exposure shall be recalculated with each party requesting quotations from one (1) Reference Market -Maker by the Notification Time on the third (3
rd) Business Day following the Demand Date (taking the arithmetic average of those quotations obtained to obtain the average Exposure, provided, that, if only one (1) quotation can be obtained, then that quotation shall be used and if no quotations can be obtained, then the Secured Party’s calculation shall control) for the purpose of recalculating the Exposure of each transaction in respect of which the parties disagree as to the Exposure thereof. The Pledging Party shall inform the Secured Party of the quotation it has obtained, if any, by the Notification Time on the third (3
rd) Business Day following the Demand Date. The Secured Party shall inform the Pledging Party of the results of such recalculation in reasonable detail by the Notification Time on the fourth (4th) Business Day following the Demand Date. Eligible Collateral shall thereupon be provided, returned, or reduced, if necessary, by the Close of Business on the fifth (5th) Business Day following the Demand Date. If the Pledging Party fails to dispute the amount of the Collateral requirement within the time period specified above, then the Pledging Party shall Transfer or cause to be Transferred to the Secured Party, Eligible Collateral for the benefit of the Secured Party having a Value on the date of Transfer at least equal to the Pledging Party's Collateral Requirement, as originally demanded by the Secured Party.
(b) If the Secured Party disputes the amount of Eligible Collateral to be reduced by the Secured Party and such dispute relates to the amount of the Exposure claimed by the Pledging Party, then the Secured Party shall (i) notify the Pledging Party of the exis tence and nature of the dispute by the Close of Business on the Demand Date for such reduction, and (ii) effect the reduction of Eligible Collateral to or for the benefit of the Pledging Party in accordance with Paragraph 5 and in an amount equal to the Secured Party's own estimate, made in a commercially reasonable manner, of the Pledging Party’s Collateral Requirement as determined in accordance with Paragraph 3. In all such cases, the parties thereafter shall promptly consult with each other in order to reconcile the two conflicting amounts. If the parties have not been able to resolve their dispute on or before the Notification Time on the second (2 nd) Business Day following
the Demand Date for such reduction, then the Secured Party’s Exposure shall be recalculated by each party requesting quotations from one (1) Reference Market-Maker by the Notification Time on the third (3rd) Business Day following the Demand Date for such reduction (taking the arithmetic average of those quotations obtained to obtain the average Exposure; provided, that, if only one (1) quotation can be obtained, then that quotation shall be used and if no quotations can be obtained, then the Secured Party’s calculations shall control) for the purpose of recalculating the Exposur e of each transaction in respect of which the parties disagree as to the Exposure thereof. The Pledging Party shall inform the Secured Party of the quotation it has obtained, if any, by the Notification Time on the third (3rd) Business Day after the Demand Date. The Secured Party shall inform the Pledging Party of the results of such recalculation in reasonable EDFTNA v20180319
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detail by the Notification Time on the fourth (4 th) Business Day after the Demand Date for such reduction. Eligible Collateral shall thereupon be provided, returned, or reduced, if necessary, by the Close of Business on the fifth (5 th) Business Day after the Demand Date for such reduction. If the Secured Party fails to dispute the amount of the demanded reduction within the time period specified above, then the Secured Party shall Transfer or cause to be Transferred to the Pledging Party, Eligible Collateral for the benefit of the Pledging Party having a Value on the date of Transfer at least equal to the Pledging Party's demanded reduction.
OPTION B: Paragraphs 4, 5, and 6
If the parties select Option B of the elections on Page 1 herein, the following Paragraphs 4, 5 and 6 and the related timing requirements and party information set forth in the Exhibit A to this CSA shall apply.
Paragraph 4. Transfer of Eligible Collateral.
On any Business Day on which (i) no Credit Support Default with respect to the Secured Party has occurred and is continuing, (ii) no Event of Default with respect to the Secured Party has occurred and is continuing, (iii) no Early Termination Date has occurred or been designated by the Pledging Party for which there exist any unsatisfied payment obligations under the Base Contract, and (iv) the Pledging Party’s Collateral Requirement equals or exceeds its Minimum Transfer Amount, the Secured Party may demand, by Notice to the Pledging Party, that the Pledging Party Transfer to the Secured Party, and the Pledging Party shall Transfer or cause to be Transferred to the Secured Party, Eligible Collateral for the benefit of the Secured Party having a Value on the date of Transfer at least equal to the Pledging Party’s Collateral Requirement. The amount of Eligible Collateral required to be Transferred hereunder shall be rounded up to the nearest integral multiple of the Rounding Amount. Unless otherwise agreed t o in writing by the parties, the Pledging Party shall Transfer the Eligible Collateral by the Close of Business on the (‘A’) Business Day following the Demand Date. Any Letter of Credit or other type of Eligible Collateral (other than Cash) shall be Transferred to the address specified in this CSA or to such address as the Secured Party shall specify in its demand, pursuant to this Paragraph 4. Any demand made by the Secured Party pursuant to this Paragraph 4 shall specify wire transfer information for the account(s) to which Eligible Collateral in the form of Cash shall be Transferred if different then that set forth in this CSA. Notwithstanding anything to the contrary in this CSA, in the event of a Credit Support Default or an Event of Default, with re spect to the Pledging Party which gives rise to an obligation to Transfer Eligible Collateral, the Pledging Party shall have no obligation to Transfer such Eligible Collateral if such event is cured or otherwise no longer exists prior to the time that such Eligible Collateral is required to be provided hereunder.
Paragraph 5. Reduction and Substitution of Posted Collateral. (a) On any Business Day a Pledging Party may demand, by Notice to the Secured Party, a reduction in the amount of Posted Collateral previously provided by the Pledging Party for the benefit of the Secured Party, and the Secured Party shall comply with said de mand, provided that after giving effect to the demanded reduction in Posted Collateral, (i) the Pledging Party shall have a Collateral Requirement of zero (0) as of the date the Secured Party would be required to return the requested Posted Collateral; (ii) no Credit Support Default with respect to the Pledging Party has occurred and is continuing; (iii) no Event of Default with respect to the Pledging Party has occurred and is continuing; and (iv) no Early Termination Date has occurred or been designat ed by the Secured Party for which there exist any unsatisfied payment obligations under the Base Contract. The amount of the Posted Collateral reduction shall be made by the Secured Party if such amount equals or exceeds the Secured Party’s Minimum Transfer Amount; provided however, such amount actually returned by the Secured Party shall be rounded down to the nearest integral multiple of the Rounding Amount. Unless otherwise agreed in writing by the parties, the Secured Party shall effect a permitted reduction in Posted Collateral by the Close of Business on the (‘B’) Business Day following the Demand Date for such reduction. If a permitted reduction in Posted Collateral is to be effected by a reduction in the amount that may be drawn under an outstanding Letter of Credit previously issued for the benefit of the Secure d Party, the Secured Party shall promptly take such action as is reasonably necessary to cooperate with the Pledging Party to effectuate such reduction.
(b) Except when (i) a Credit Support Default with respect to the Pledging Party has occurred and is continuing, or (ii) an Event of Default with respect to the Pledging Party has occurred and is continuing or (iii) no Early Termination Date has occurred or bee n designated by the Secured Party for which there exist any unsatisfied payment obligation under the Base Contract, the Pledging Party may substitute for existing Posted Collateral new Eligible Collateral of equal or greater Value on the (‘C’) Business Day following the Demand Date thereof (provided that, if such substitute Eligible Collateral is of a type not designated as Eligible Collateral in the elections on Page 1 herein, then the substitution may not occur unless the Secured Party consents to such substitution). Upon the Transfer to the Secured Party and/or its Custodian of the substitute Eligible Collateral, the Secured Party and/or its Custodian shall Transfer the relevant replaced Posted Collateral (as specified by the Pledging Party) to the Pl edging Party by the Close of Business on the (‘D’) Business Day after such Transfer has been effected. Notwithstanding anything herein to the contrary, no such substitution shall be permitted unless (x) the substitute Eligible Collateral is Transferred to the Secured Party and/or its Custodian simultaneously with, or has been Transferred to the Secured Party and/or its Custodian prior to, the release of the Eligible Collateral to be returned to the Pledging Party and, if applicable, the security interest i n, and lien upon, such substituted Eligible Collateral granted pursuant hereto in favor of the Secured Party shall have been perfected as required by applicable law and shall constitute a first priority perfected security interest therein and general first lien EDFTNA v20180319
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thereon, and (y) after giving effect to such substitution, the Value of such substitute Eligible Collateral, together will al l other Posted Collateral held by the Secured Party, shall equal or exceed the Pledging Party’s Collateral Requirement.
Each substitution of Eligible Collateral shall constitute a representation, warranty and agreement by the Pledging Party that the substituted Eligible Collateral shall be subject to and governed by the terms and conditions of this CSA, including without limitation and if applicable, the security interest in, general first lien on and right of offset against, such substituted Eligible Collateral granted pursuant to Paragraph 12(a) in favor of the Secured Party.
(c) The Transfer of any Eligible Collateral by the Secured Party and/or its Custodian to the Pledging Party in accordance with this Paragraph 5 shall be deemed a release by the Secured Party of its security interest, general first lien and right of offset granted pursuant to Paragraph 12(a) hereof only with respect to such returned Eligible Collateral.
Paragraph 6. Disputed Calculations.
(a) If the Pledging Party disputes the amount of Eligible Collateral requested by the Secured Party and such dispute relates to the amount of the Exposure as determined by the Secured Party, then the Pledging Party shall (i) notify the Secured Party of the exi stence and nature of the dispute not later than the Close of Business on the (‘A’) Business Day following the Demand Date that the demand for Eligible Collateral is made by the Secured Party pursuant to Paragraph 4, and (ii) Transfer Eligible Collateral to or for the benefit of the Secured Party in accordance with Paragraph 4 and in an amount equal to the Pledging Party's own calculation of its Collateral Requirement, in accordance with Paragraph 3. Such calculation shall be made in good faith and a commercially reasonable manner that is consistent with Section 10 of the Base Contract. In all such cases, the parties thereafter shall promptly consult with each other in order to reconcile the two conflicting calculations. If the parties have not been able t o resolve their dispute on or before the Notification Time on the (‘E’) Business Day following the Demand Date, then the amount of the Exposure shall be recalculated with each party requesting quotations from one (1) Reference Market-Maker by the Notification Time on the (‘F’) Business Day following the Demand Date (taking the arithmetic average of those quotations obtained to obtain the average Exposure, provided, that, if only one (1) quotation can be obtained, then that quotation shall be used and if no quotations can be obtained, then the Secured Party’s calculation shall control) for the purpose of recalculating the Exposure of each transaction in respect of which the parties disagree as to the Exposure thereof. The (‘A1’) Party shall inform the (‘A2’) Party of the quotation it has obtained, if any, by the Notification Time on the (‘G’) Business Day following the Demand Date. The (‘A3’) Party shall inform the (‘A4’) Party of the results of such recalculation in reasonable detail by the Notification Time on the (‘H’) Business Day following the Demand Date.
Eligible Collateral shall thereupon be provided, returned, or reduced, if necessary, by the Close of Business on the (‘I’) Business Day following the Demand Date. If the Pledging Party fails to dispute the amount of the Collateral requirement within the time period specified above, then the Pledging Party shall Transfer or cause to be Transferred to the Secured Party, Eligible Collateral for the benefit of the Secured Party having a Value on the date of Transfer at least equal to the Pledging Party's Collateral Requirement, as demanded by the Secured Party.
(b) If the Secured Party disputes the amount of Eligible Collateral to be reduced by the Secured Party and such dispute relates to the amount of the Exposure claimed by the Pledging Party, then the Secured Party shall (i) notify the Pledging Party of the existence and nature of the dispute by the Close of Business on the (‘J’) Business Day following the Demand Date for such reduction, and (ii) effect the reduction of Eligible Collateral to or for the benefit of the Pledging Party in accordance with Paragraph 5 and in an amount equal to the Secured Party's own estimate, made in a commercially reasonable manner, of the Pledging Party’s Collateral Requirement in accordance with Paragraph 3. In all such cases, the parties thereafter shall promptly consult with each other in order to reconcile the two conflicting amounts. If the parties have not been able to resolve their dispute on or before the Notification Time on the (‘K’) Business Day following the Demand Date for such reduction, then the Secured Party’s Exposure shall be recalculated by each party requesting quotations from one (1) Reference Market-Maker by the Notification Time on the (‘L’) Business Day following the Demand Date for such reduction (taking the arithmetic average of those quotations obtained to obtain the average Exposure; provided, that, if only one (1) quotation can be obtained, then that quotation shall be used and if no quotations can be obtained, then the Pledging Party’s calculations shall control) for the purpose of recalculating the Exposure of each transaction in respect of which the parties disagree as to the Exposure thereof. The (‘A5’) Party shall inform the (‘A6’) Party of the quotation it has obtained, if any, by the Notification Time on the (‘M’) Business Day after the Demand Date. The (‘A7’) Party shall inform the (‘A8’) Party of the results of such recalculation in reasonable detail by the Notification Time on the (‘N’) Business Day after the Demand Date for such reduction. Eligible Collateral shall thereupon be provided, returned, or reduced, if necessary, by the Close of Business on the (‘O’) Business Day after the Demand Date for such reduction. If the Secured Party fails to dispute the amount of the demanded reduction within the time period specified above, then the Secured Party shall Transfer or cause to be Transferred to the Pledging Party, Eligible Collateral for the benefit of the Pledging Party having a Value on the date of Transfer at least equal to the Pledging Party's demanded reduction.
Paragraph 7. Letters of Credit.
Eligible Collateral provided in the form of a Letter of Credit shall be subject to the following provisions.
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(a) Each “Letter of Credit” shall be an irrevocable, transferable, standby letter of credit, issued by an entity that meets the requirements of a Letter of Credit Issuer Requirements set forth in the elections on Page 1 herein in a form reasonably acceptable to the Secured Party.
(b) “Letter of Credit Default” shall mean with respect to an outstanding Letter of Credit that is held by the Secured Party as Posted Collateral the occurrence of any of the following events: (i) the issuer of such Letter of Credit shall fail to meet the Letter of Credit Issuer Requirements set forth in the elections on Page 1 herein, (ii) the issuer of such Letter of Credit goes bankrupt; (iii) the issuer of the Letter of Credit shall fail to comply with or perform its obligations under such Letter of Credit i f such failure shall be continuing after the lapse of any applicable grace period; (iv) the issuer of such Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; or (v) suc h Letter of Credit shall expire or terminate, or shall fail or cease to be in full force and effect (other than in accordance with its terms) prior to the satisfaction of all obligations of the Pledging Party under each transaction to which such Letter of Credit shall relate without the written consent of the other party; provided , however, that no Letter of Credit Default shall occur in any event with respect to a Letter of Credit after the time such Letter of Credit is required to be canceled or returned to the Pledging Party in accordance with the terms of this CSA. Upon the occurrence of a Letter of Credit Default, the Pledging Party agrees to Transfer to the Secured Party either a substitute Letter of Credit or other Eligible Collateral, in each case on or before the second Business Day after the occurrence thereof (or the fifth (5) Business Day after the occurrence thereof if and only if clause (i) under the definition of Letter of Credit Default applies).
(c) Unless otherwise agreed in writing by the parties, each Letter of Credit shall be provided in accordance with this Paragraph 7 and each Letter of Credit shall be maintained for the benefit of the Secured Party. The Pledging Party shall (i) renew or cause the renewal of each outstanding Letter of Credit on a timely basis as provided in the relevant Letter of Credit, (ii) Transfer either a substitute Letter of Credit or other Eligible Collateral, in each case at least twenty (20) Business Days prior to the expiration of the outstanding Letter of Credit, and (iii) Transfer for the benefit of the Secured Party either a substitute Letter of Credit or other Eligible Collateral, in each case within one (1) Business Day, if the bank issuing a Letter of Credit shall fail to honor the Secured Party’s properly documented request to draw on an outstanding Letter of Credit, provided that, as a result of the Pledging Party’s failure to perform in accordance with (i), (ii), or (iii) above, the Pledging Party’s Collateral Requirement would be greater than zero (0). (d) As one method of providing Posted Collateral, the Pledging Party may increase the amount of an outstanding Letter of Credit or establish one or more additional Letters of Credit. (e) Upon or at any time after the occurrence of an Event of Default with respect to the Pledging Party and/or the designation of an Early Termination Date by the Secured Party, the Secured Party may draw on the entire undrawn portion of any outstanding Letter( s) of Credit upon submission to the bank issuing such Letter of Credit in accordance with the specific requirements of the Letter of Credit. Cash proceeds received from drawing upon the Letter of Credit shall be deemed Posted Collateral as security for th e Pledging Party’s obligations to the Secured Party and the Secured Party shall have the rights and remedies set forth in this CSA with respect to such Cash proceeds. Notwithstanding the Secured Party’s receipt of Cash under the Letter of Credit, the Pledging Party shall remain liable (i) for any failure to Transfer sufficient Posted Collateral, and (ii) for any amounts owing to the Secured Party and remaining unpaid after the application of the amounts so drawn by the Secured Party.
(f) A Pledging Party may substitute a Letter of Credit for one or more other outstanding Letter(s) of Credit issued for the benefit of the Secured Party, provided that the Value of such substitute Letter of Credit shall be at least equal to the Value of the Letter(s) of Credit being replaced, and provided further that no Letter of Credit shall be canceled unless and until the Letter of Credit to be substituted therefor shall have been validly executed, issued and Transferred for the benefit of the Secured Party in accordance with applicable law. (g) In all cases, the costs and expenses incurred by the Pledging Party to establish, renew, substitute, cancel, and/or increase the amount of (as the case may be) a Letter of Credit shall be borne by the Pledging Party. (h) In any case in which Eligible Collateral or Posted Collateral is in the form of a Letter of Credit (which permits draws based on a facsimile copy), the deadlines set forth in this CSA for providing such collateral to the other party may be met by providing a facsimile copy of the Letter of Credit with an original transmitted by overnight courier for delivery on the next Business Day.
Paragraph 8. Care and Use of Cash.
Eligible Collateral provided in the form of Cash shall be subject to the following provisions.
(a) Eligibility to Hold Cash.
(i) If a party is not eligible to hold Cash as set forth in the elections on Page 1 herein, then such Cash shall be held in a Collateral Account in accordance with the provisions of Paragraph 8(e).
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(ii) The Secured Party or its Custodian will be entitled to hold Cash provided that the following conditions, as applicable, are satisfied: (1) the Secured Party is not a Defaulting Party, (2) the Secured Party or its Credit Support Provider, if applicable, meets the Eligibility Requirements to Hold Cash requirements set forth in the elections on Page 1 herein, (3) Cash shall be held only in any jurisdiction within the United States, and (4) the Custodian meets the Custodian Requirements set f orth in the el ections on Page 1 herein. If a party or its Custodian is not eligible, or subsequently becomes ineligible, to hold Posted Collateral pursuant to this Section, then it shall be considered a “Downgraded Party” or a “Downgraded Custodian”, as the case may be, and Posted Collateral shall be maintained in accordance with Paragraph 8(e).
(iii) Upon Notice by the Secured Party to the Pledging Party of the appointment of a Custodian, the Pledging Party’s obligations to make any Transfer will be discharged by making the Transfer to that Custodian.
The holding of Cash by a Custodian will be deemed to be the holding of Cash by the Secured Party for which the Custodian is acting. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions.
(b) Use of Cash. Notwithstanding the provisions of applicable law, if the Secured Party is eligible to hold cash in accordance with Paragraph 8(a), is not a Defaulting Party and no Early Termination Date has occurred or been designated by the Pledging Party as a result of an Event of Default with respect to the Secured Party, then the Secured Party shall have the right to sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Cash it holds, free from any claim or right of any nature whatsoever of the Pledging Party, including any equity or right of redemption by the Pledging Party.
(c) Interest Payments on Cash. So long as no Event of Default with respect to the Pledging Party has occurred and is continuing, and no Early Termination Date (for which any unsatisfied payment obligations of the Pledging Party exist) has occurred or been designated as the result of an Event of Default with respect to the Pledging Party and to the extent that an obligation to Transfer Posted Collateral would not be created or increased by the Transfer, the Secured Party will upon written request Transfer to the Pledging Party, in lieu of any interest or other amounts paid or deemed to have been paid with respect to the Cash (all of which may be retained by the Secured Party), the Interest Amount on the third Business Day of each calendar month.
On or after the occurrence of an Event of Default with respect to the Pledging Party or an Early Termination Date as a result of an Event of Default with respect to the Pledging Party, the Secured Party shall retain any such Interest Amount as additional Eligible Collateral hereunder until the obligations of the Pledging Party under the Base Contract have been satisfied.
(d) Care of Cash. Without limiting the Secured Party’s rights under Paragraph 8(b), the Secured Party will exercise reasonable care to assure the safe custody of all Cash held by it as Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property.
Except as specified in the preceding sentence, the Secured Party will have no dut y with respect to Cash, including, without limitation, any duty to enforce or preserve any rights pertaining thereto.
(e) Holding of Cash by a Custodian. The provisions of Paragraph 8(b) will apply to the parties; provided, however, that if a party or its Custodian is not eligible to hold Cash pursuant to Paragraph 8(a) (the event that caused it or its Custodian, if any, to be ineligible to hold Cash shall be a “Credit Rating Event”; if such Credit Rating Event occurs with respect t o a party, such party shall be the “Downgraded Party”; and if such Credit Rating Event occurs with respect to a party’s Custodian, such Custodian shall be the “Downgraded Custodian”), then:
(1) the provisions of Paragraph 8(b) will not apply with respect to the Downgraded Party as the Secured Party for so long as either the Secured Party or its Custodian, if any, remain a Downgraded Party or a Downgraded Custodian, respectively, and (2) the Downgraded Party shall be required to deliver (or cause the Downgraded Custodian to deliver, as the case may be) by the Close of Business on the second (2nd) Business Day following such Credit Rating Event all Cash in its possession or held on its behalf (i) to a Custodian that meets the Custodian Requirements, and (ii) to a segregated, safekeeping or custody account (“Collateral Account”) within such Custodian with the title of the Collateral Account indicating that the property contained therein is being held as Posted Collateral for the Downgraded Party; provided, that, if the Credit Rating Event occurs with respect to a party’s Custodian that is holding Posted Collateral on behalf of such party, then such Downgraded Custodian may also deliver such Posted Collateral to such party if such party is not a Downgraded Party, and (iii) the parties agree to enter into a control agreement (“Control Agreement”) with the Custodian maintaining the Collateral Account. The Control Agreement shall be in such form as shall be reasonably acceptable to each of the parties and shall provide for such items as the timing and release of the funds in the Collateral Account and the investment and reinvestment of Cash held in the C ollateral Account.
The Control Agreement shall further provide that Custodian shall serve as Custodian with respect to the Posted Collateral in the Collateral Account, and shall hold such Posted Collateral in accordance with the terms of this CSA and for the security interest of the Downgraded Party and, subject to such security interest, for the ownership of the non-Downgraded Party. The parties further agree that notwithstanding the fact that Cash is being held by a Custodian in a Collateral Account pur suant to a Control Agreement, the Downgraded Party EDFTNA v20180319
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shall be required to make interest payments to the non-Downgraded Party in an amount equal to the Interest Amount in accordance with the provisions of Paragraph 8(c).
Paragraph 9. Notices
(a) “Notice” shall mean a notice or other communication in respect of this CSA. Notice may be given in any manner set forth below to the address or number or in accordance with the electronic messaging system details provided on Page 1 of this CSA and will be deemed effective as indicated:
(i) if in writing and delivered in person or by courier, on the Business Day it is delivered;
(ii) if sent by facsimile transmission, on the date that transmission is received by the recipient in legible form (which may be evidenced by a transmission report generated by the sender's facsimile machine) unless such facsimile transmission is received on a non-Business Day or after the Close of Business then such facsimile shall be deemed to have been received on the next following Business Day.
(iii) if sent by certified or registered mail or the equivalent (return receipt requested), on the Business Day that mail is delivered or its delivery is attempted; or
(iv) if sent by electronic messaging system, on the date that electronic message is received, unless such electronic message is received on a non-Business Day or after the Close of Business, then such electronic message shall be deemed to have been received on the next following Business Day.
(b) Any other Notice, including but not limited to, Notice of an Event of Default, must be given pursuant to Section 9 of the Base Contract.
Paragraph 10. Credit Support Default
(a) A “Credit Support Default" shall exist with respect to a party (the "Defaulting Party") if:
(i) a party fails (or fails to cause its Custodian, as applicable) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it, and such failure continues for one (1) Business Day after Notice of that failure is provided to that party; or
(ii) a party fails to comply with or perform any material agreement or obligation provided for in this CSA, and such failure continues for one (1) Business Day after Notice of that failure is provided to that party; or
(iii) a party or its Custodian fails to comply with any of the obligations under Paragraph 8 herein and the failure continues for one (1) Business Day after notice of the failure is given to that party.
(b) Credit Support Default shall constitute and have the effect of an Event of Default set forth in Section 10.2 (vi) of the Base Contract.
Paragraph 11. Representations and Warranties.
Each party continuously represents and warrants to the other party that: (a) it has the power and authority under the law of the jurisdiction of its organization or incorporation and under its organizational and constituent documents to grant to the Secured Party a valid, enforceable, first-priority security interest in, and lien on, all Posted Collateral (other than Letters of Credit) that it Transfers as the Pledging Party, and has taken all necessary actions to authorize the granting and perfection of that security interest and lien; (b) as of each date on which it, as the Pledging Party, Transfers Eligible Collateral to the Secured Party or to any agent of the Secured Party for the benefit of the Secured Party (or, in the case of after-acquired Posted Collateral, at the time the Secured Party or its agent acquires rights therein), it has title to, and will be the sole owner of such Eligible Collateral, free and clear of any security interest, lien, pledge, charge, encumbrance, or other interests or restrictions other than the security interest granted to the Secured Party hereby; (c) the Secured Party will have a valid and perfected first -priority security interest in, and lien on, all Posted Collateral (other than Letters of Credit) upon receipt thereof; (d) the performance by it of its obligations under this CSA will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted pursuant to this CSA; and (e) in connection with the delivery, issuance, renewal, substitution, or increase (as the case may be) which constitutes a Transfer of a Letter of Credit, such Letter of Credit is the legal, valid and binding obligation of the Issuer thereof, enforceable in accordance with its terms.
Paragraph 12. Certain Rights and Remedies.
(a) Secured Party’s Rights and Remedies. If at any time (i) an Event of Default with respect to the Pledging Party has occurred and is continuing, or (ii) an Early Termination Date has occurred or been designated as a result of an Event of Default with respect to the Pledging Party, then the Secured Party may do any one or more of EDFTNA v20180319
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the following: (x) exercise any of the rights and remedies of a secured party with respect to the Posted Collateral, including any such rights and remedies under law then in effect; (y) exercise its rights of setoff against any and all property of the Pledging Party in the possession of the Secured Party or its agent; and (z) draw on any outstanding Letter of Credit issued for its benefit under its terms and this CSA. The Secured Party shall either (y) apply the proceeds of the Posted Collateral realized upon the exercise of any such rights or remedies to reduce the Pledging Party's obligations under the Base Contract or this CSA (the Pledging Party remaining liable for any amounts owing to the Secured Party after such application), subject to the Secured Party’s obligation to return any surplus proceeds remaining after such obligations are satisfied in full and/or (z) hold such proceeds as collateral security for the Pledging Party's obligations under the Base Contract or this CSA, subject to the Secured Party’s obligation to return the proceeds after such obligations are satisfied in full.
(b) Pledging Party's Rights and Remedies . If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default with respect to the Secured Party, then: (i) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount, if any, to the Pledging Party; and (ii) the Pledging Party may do any one or more of the following: (x) exercise any of the rights and remedies of a pledgor with respect to the Posted Collateral, including any such rights and remedies under law then in effect; (y) to the extent that the Posted Collateral or the Interest Amount is not Transferred to the Pledging Party as required in (i) above, setoff amounts payable by the Pledging Party to the Secured Party against the Posted Collateral held by the Secured Party or to the extent its rights to setoff are not exercised, withhold payment of any remaining amounts payable by the Pledging Party, up to the value of any remaining Posted Collateral held by the Secured Party, until the Posted Collateral is Transferred to the Pledging Party; and/or (z) exercise rights and remedies available to the Pledging Party under the terms of any Letter of Credit.
Paragraph 13. General.
(a) To secure its obligations under the Base Contract and all outstanding transactions, each party, as the Pledging Party, hereby grants to the other party, as the Secured Party, a present and continuing first -priority security interest in, and lien on (and r ight of setoff against), all Posted Collateral (other than Letters of Credit) Transferred to the Secured Party hereunder. Each party agrees to take such action as the other party reasonably requires in order to perfect or maintain the other party’s first-priority continuing security interest in, and lien on (and right of setoff against), such Posted Collateral.
(b) Each party will pay its own costs and expenses in connection with performing its obligations under this CSA and neither party will be liable for any costs or expenses incurred by the other party in connection herewith.
(c) This CSA has been and is made solely for the benefit of the parties and their permitted successors and assigns, and no other entity shall acquire or have any right under or by virtue of this CSA.
(d) No failure or delay by either party hereto in exercising any right, power, privilege, or remedy hereunder shall operate as a waiver thereof.
(e) The headings in this CSA are for convenience of reference only, and shall not affect the meaning or construction of any provision thereof.
DISCLAIMER: The purposes of this CSA are to facilitate trade, avoid misunderstandings and make more definite the terms of margining arrangements related to contracts of purchase and sale of natural gas. Further, NAESB does not mandate the use of this CSA by any party. NAESB DISCLAIMS AND EXCLUDES, AND ANY USER OF THIS CSA ACKNOWLEDGES AND
AGREES TO NAESB'S DISCLAIMER OF, ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS,
EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THIS CSA OR ANY PART THEREOF, INCLUDING
ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, OR
FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE (WHETHER OR NOT NAESB KNOWS, HAS REASON
TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING.
EACH USER OF THIS CSA ALSO AGREES THAT UNDER NO CIRCUMSTANCES WILL NAESB BE LIABLE FOR ANY
DIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES ARISING OUT OF ANY USE OF THIS CSA.
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SPECIAL PROVISIONS
to the
CREDIT SUPPORT ADDENDUM
to the
BASE CONTRACT FOR PURCHASE AND SALE OF NATURAL GAS
EDF Trading North America, LLC (“Party A”) and City of Victorville (“Party B”) hereby agree to the following Special Provisions (“Special Provisions”) to the Credit Support Addendum (“CSA”) to the NAESB Base Contract for Sale and Purchase of Natural Gas (“Base Contract”), which hereby modifies and amends the Base Contract dated and effective as of July 22, 2025.
Paragraph 2 – Definitions
Add the following provisions to the defined terms in the CSA:
“Guarantor” shall mean an entity which shall be a Credit Support Provider that has provided a Guaranty to the Secured Party.
“Guaranty” shall mean a guaranty of payment and not performance, issued by a Guarantor and in form and for an amount reasonably acceptable to the Secured Party. “Moody’s” means Moody’s Investors Service, Inc., or its successor.” "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.
“Qualified Institution” means a U.S. commercial bank or trust company or the U.S. branch of a foreign bank (in either case, which is not an affiliate of either party) having assets of at least $10 billion and a Credit Rating of at least (i) A3 from Moody’s and (ii) A- from S&P.”
““S&P” means Standard & Poor’s Financial Services LLC, or its successor.” Under “Transfer” or “Transferred” delete the first reference to item (iv) which begins “in any case in which Eligible Collateral” and substitute therefor:
“(iv) In any case in which Eligible Collateral or Posted Collateral is in the form of a Letter of Credit or Guaranty, the deadlines set forth for providing such collateral to the other party may be met by providing a facsimile copy of the Letter of Credit with an original transmitted by overnight courier for delivery on the next Business Day.”
Paragraph 4. Transfer of Eligible Collateral (Option A)
Paragraph 4 is hereby amended by adding in the third sentence the word “second” between the words “Close of Business on the” and “Business Day”.
Paragraph 5. Reduction and Substitution of Posted Collateral. (Option A)
Under Paragraph 5 (a) after the beginning phrase “On any Business Day” in the first sentence insert the parenthetical phrase “(but not more frequently than weekly for Letters of Credit and daily with respect to Cash)”.
Under Paragraph 5(a) after “no Event of Default” in the sixth line, insert “or Potential Event of Default”.
Under Paragraph 5(b) after “an Event of Default” in the second line, insert “nor a Potential Event of Default”.
Under Paragraph 5(b), after “the” and before “Business” in the ninth (9th) line, delete “Second.”
Paragraph 6. Disputed Calculations. (Option A)
Under Paragraph 6(a), after “the” and before “Business” in the ninth (9th) line, delete “Second.” EDFTNA v20180319
___________________________________________________________________________________________________________ Copyright 2003 North American Energy Standards Board, Inc. Model Credit Support Addendum All Rights Reserved Page 14 Adopted October 9, 2003
Under Paragraph 6(a), in line eleven (11), delete “Third (3rd)”and replace with “Second (2nd).”
Under Paragraph 6(a), in line sixteen (16), delete “Third (3rd)”and replace with “Second (2nd).”
Under Paragraph 6(a), in line seventeen (17), delete “Fourth (4th)”and replace with “Third (3rd).”
Under Paragraph 6(a), in line eighteen (18), delete “Fifth (5th)”and replace with “Fourth (4th).”
Add the following as Section 6(c) under Option A;
“(c) Notwithstanding the foregoing dispute rights under Paragraphs 6(a) and (b), in no event shall a disputing Party be entitled to prevent the Secured Party from holding and realizing against Posted Collateral held by it or on its behalf in the event of an Event of Default by the Pledging Party, in which event, the Secured Party shall be entitled to act with respect to all rights and remedies possessed by it under the CSA, the Contract, at law or in equity. Provided further that to the extent that the dispute involving the Collateral Requirement calculation is not related to the calculation of Exposure (e.g., the Value of Eligible Collateral/Posted Collateral), and the parties cannot resolve the dispute after having consulted with each other in good faith, neither party shall be prevented from pursuing any rights and remedies it may possess under the CSA, the Contract, at law or in equity.”
Paragraph 7. Letters of Credit.
Make the following changes to Paragraph 7:
Under Paragraph 7(b), (i) delete the phrase “if such failure shall be continuing after the lapse of any applicable grace period” under (iii) in the fifth line, and (ii) delete “Second” in the fourteenth (14th) line after “the” and before “Business.”
Under Paragraph 7(h) add the following sentence at the end of the paragraph:
“If any Letter of Credit does not permit draws based on facsimile copy, the deadlines set forth in this CSA for providing Eligible Collateral to the other party shall not be met until the original of the Letter of Credit is delivered to the Secured Party at the address specified in this CSA (or as otherwise specified by the Secured Party in the demand notice).”
EDFTNA v20180319
___________________________________________________________________________________________________________ Copyright 2003 North American Energy Standards Board, Inc. Model Credit Support Addendum All Rights Reserved Page 15 Adopted October 9, 2003
IN WITNESS WHEREOF , the parties have caused th ese Special Provisions to the CSA to the Base Contract to be duly executed as of the Effective Date.
City of Victorville EDF Trading North America, LLC
By:
______________________________________
By:
_________________________________________
Name: Keith C. Metzler
______________________________________
Name: Gerald Nemec
_________________________________________
Title: City Manager
______________________________________
Title: General Counsel
_________________________________________
Date:
_______________________________________
Title:
_________________________________________
Date:
_________________________________________
Item Number: 21
City Council / Board of Directors
Written Communications
Meeting of: August 19, 2025
Submitted By:
James Murawski, Airport Director
Subject:
Standard Sublease Agreement for Buildings 676, 677 and 678 by and between the Southern California Logistics Airport Authority and The Boeing Company Recommendation:
That the Southern California Logistics Airport Authority (“SCLAA”) Board of Directors:
(1) Approve entering into a Standard Sublease Agreement for Buildings 676, 677 and 678 (“Agreement”), by and between the SCLAA and The Boeing Company, (“Boeing”); and
(2) Authorize the Executive Director to execute said Agreement; and (3) Adopt Resolution No. SCLAA 25-011 amending the 2025/2026 budget increasing budgeted revenue in Airport account 4501111A-45200 by $9,881.40 and budgeted revenue in Airport account 4501112A-45200 by $50,052.02 and decreasing budgeted revenue in Airport account 4501110A-45200 by $110,915.98.
Fiscal Impact:
The Agreement presented herein will generate approximately $21,763,399.91 in gross lease revenue over the initial term (September 01, 2025 – August 31, 2035). A maximum rent credit of $3,000,000 is contained in this lease for specific tenant improvements, which if fully realized will reduce the net income generated by this Agreement to approximately $18,763,399.91. The table below outlines the fiscal impact of the initial 4 years of the Agreement with the rent credits commencing in November of 2028.
Fiscal
Year
FY 2025-26
September 25 – June 26
FY 2026-27
July 26 – June 27
FY 2027-28
July 27 – June 28
FY 2028-29
July 28 – June 29
Revenue $1,582,027.00 $1,945,893.21 $2,004,270.01 $2,064,398.11 4 2
5 4
Rent
Credit $0 $0 $0 $(666,666.67)
Net
Income $1,582,027.00 $1,945,893.21 $2,004,270.01 $1,397,731.44 The revenue associated with this Agreement increases budgeted revenue established for Buildings 677 and 678 for fiscal year 2025/2026 and thereby requires an additional revenue appropriation for Building 677 in the amount of $9,881.40 in account 4501111A- 45200 and $50,052.02 in account 4501112A-45200 for Building 678. The Agreement decreases budgeted revenue established for Building 676 by $110,915.98 in account 4501110A-45200. The current budgeted revenue for Building 676 contains revenue for an additional building that has been bifurcated out of the Agreement presented herein, thereby causing the reduction to budgeted revenue for Building 676.
Resolution No. SCLAA 25-011 is presented herein for the purpose of requesting approval of the required budget adjustment as outlined below.
Current FY25/26 Budget
Revenue Expense
Account 4501111A-45200 Building 677 $0 $0
Account 4501112A-45200 Building 678 $977,000 $0
Account 4501110A-45200 Building 676 $975,654 $0
Proposed FY25/26 Budget
Revenue Expense
Account 4501111A-45200 Building 677 $9,881.40 $0
Account 4501112A-45200 Building 678 $1,027,052.02 $0
Account 4501110A-45200 Building 676 $864,738.02 $0
Future appropriations for the subject Agreement will be considered at the time the annual budget is approved.
This Agreement contains provisions for tenant improvements and rent credits. The agreed upon tenant improvements include a new HVAC system, a major electrical system upgrade that includes the installation of new wiring, the conversion of existing high energy consumption lights to energy efficient LED light fixtures, and the replacement of aged transformers and circuit breakers with modern equipment, hangar door system repairs and/or replacement, a restroom remodel, and office carpet replacement.
Rent credits are issued in accordance with the terms of the Agreement following substantial completion of the Tenant Improvements, after a thorough review of all cost documentation, including proof of payment, and documented pre and post tenant improvement inspections by SCLAA staff. In the case of this Agreement, the tenant has until August 31, 2028, to substantially complete the contemplated improvements. 4 2
5 4
The rent credits for the anticipated tenant improvements are scheduled to begin in November of 2028 and will be budgeted for in the appropriate fiscal years. The maximum amount of rent credits allowed in this Agreement are fixed at a not to exceed amount of $3,000,000, which shall be applied over 36 consecutive months in an amount not to exceed $83,333.33 per month. Actual rent credits could be substantially lower, depending on what work is completed. Staff is confident the tenant improvements listed in this Agreement will add considerable long-term value to the hangars.
Strategic Plan Goal:
The City of Victorville Strategic Plan 2023-2026 identifies multi-year strategic goals and various strategies to work toward achieving those goals. Goal A fosters fiscal health through disciplined long-term planning, cost control, increased revenues, and cost recovery.
Background:
Boeing is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. Boeing also provides leasing and product support services. Boeing is among the largest global aerospace manufacturers; it is the fourth-largest defense contractor in the world based on 2022 revenue and is the largest exporter in the United States by dollar value. Boeing stock is included in the Dow Jones Industrial Average and Boeing is ranked 54th on the Fortune 500 list.
Since 2003, Boeing has been one of the largest companies to maintain operations at the Southern California Logistics Airport (“SCLA”). Given a number of positive attributes associated with the SCLA and the surrounding airspace, Boeing started performing aircraft flight tests at the SCLA in 2010. Boeing has steadily expanded operations at the SCLA to include aircraft financing via the Boeing Capital Corporation, flight test operations, and Maintenance Repair and Overhaul (“MRO”) services for its Aircraft on Ground (“AOG”) and Fleet Care divisions.
With approximately 790 employees, Boeing is the largest employer at the SCLA. Since executing their first lease agreement in 2003, Boeing has grown to its current leasehold estate that includes seven SCLA owned buildings and a ground leasehold interest.
Boeing has leased Building 676 since February 2019 and Building 678 since November 2013.
Discussion:
Boeing continues to thrive at the SCLA and desires to renew and combine their agreements for office, hangar and ramp space. The proposed Agreement for Buildings 676, 677 and 678 entails an initial term of ten-years with a commencement date of September 1, 2025. The Agreement also contemplates two additional, five-year, option terms. The Subleased Premises consist of Building 676 which is comprised of approximately 83,070 square feet of office and hangar space, Building 677 which is comprised of 3,366 square feet of storage space, and Building 678 which is comprised of 117,323 office, hangar and ramp space. Boeing has agreed to pay $158,202.70 per 4 2
5 4
month with an annual 3% inflator. This amounts to $.85 per square foot per month for Building 676, $.23 per square foot per month for Building 677, and $.74 per square foot per month for Building 678, which is comparable with similar SCLA buildings. The rent rates for Buildings 676 and 677 will not increase with this agreement and are kept at their current lease rates while Building 678’s rate has been increased by 10% from Boeing’s current $0.67 per square foot rate.
Because the Standard Sublease Agreement will maintain local employment, produce a steady revenue stream, and will maintain airport operations, staff recommends that the Southern California Logistics Airport Authority Board approve the Standard Sublease Agreement with The Boeing Company for Buildings 676, 677 and 678 and authorize the Executive Director to execute said agreement. Such approval is being requested, subject to any minor, non-substantive modifications to the Sublease Agreement as approved by the Southern California Logistics Airport Authority Legal Counsel and the Southern California Logistics Airport Authority Executive Director.
Staff remains available for any questions or comments you may have.
Prepared By:
Lilly Franco, Airport Administrative Manager
Sam Evans, Airport Business Analyst
Jose Gutierrez, Airport Business Technician
Attachments: A. General Site Map
B. Standard Sublease Agreement for Buildings 676, 677 and 678 C. Resolution No. SCLAA 25-011
ATTACHMENT A
GENERAL SITE MAP
Attachment A
Bldg 677 Bldg 676 Bldg 678
Bldg 681
Bldg 683
Phantom West
ATTACHMENT B
STANDARD SUBLEASE
AGREEMENT FOR
BUILDINGS 676, 677, AND
678
SCLAA Standard Sublease Page 1 Boeing Bldg 676, 677 & 678
SOUTHERN CALIFORNIA LOGISTICS AIRPORT AUTHORITY
STANDARD SUBLEASE AGREEMENT
BUILDINGS 676, 677 AND 678
This Sublease Agreement (the “Sublease”) is made this _________ day of _________, 2025, by and between the SOUTHERN CALIFORNIA LOGISTICS AIRPORT AUTHORITY (“SCLAA”), a California joint powers authority, (hereinafter referred to as “Sublessor”) and THE BOEING COMPANY, a Delaware corporation (hereinafter referred to as “Sublessee”). Sublessor and Sublessee are sometimes referred to hereinafter individually as a “Party” and collectively as the “Parties.”
RECITALS
These Recitals are included to assist in interpreting this Sublease and to understand the basis upon which certain terms and conditions have been included. It is not intended, nor should it be construed, to supersede or amend the specific terms and conditions of this Sublease.
A. The United States Air Force (“Air Force”) and the Victor Valley Economic Development Authority (“the Authority”) have previously entered into certain Department of the Air Force Leases pertaining to portions of the former George Air Force Base, which is now known as the Southern California Logistics Airport (“SCLA”) (hereinafter the “Air Force Leases”).
B. The Authority has delegated its decision-making authority with respect to the SCLA to the Sublessor, who now has the authority to enter into transactions on behalf of the Authority.
C. The Air Force (“Grantor”) and the SCLAA (“Grantee”) have entered into certain Air Force Quitclaim Deed(s) (“Quitclaim Deed(s)”), which release and forever quitclaim to the Grantee all the real property described in such Quitclaim Deed(s), subject to the Covenants, Conditions and Restrictions set forth in the Quitclaim Deed(s).
D. Sublessee seeks to sublease from the Sublessor a portion of the property subject to the Air Force Leases (hereinafter the “Subleased Premises”).
E. Although many portions of the SCLA are subject to and governed by the Air Force Leases, some portions (which may include appurtenances, access/use rights, privileges and/or easements associated with the Subleased Premises) have been transferred from the Air Force to Sublessor by means of various deeds (hereinafter the “Airport Deeds”) and are subject to the provisions and conditions of such Airport Deeds.
F. The Parties have previously entered into a certain Sublease Agreement dated February 6, 2019, (the “Original Buildings 676 and 717A Sublease”) pertaining to the sublease of property at the SCLA. The Original Buildings 676 and 717A Sublease contained three (3) additional one (1) year option terms which were exercised with the SCLAA Standard Sublease Page 2 Boeing Bldg 676, 677 & 678 final Option Term expiring on January 31, 2023. The Original Buildings 676 and 717A Sublease consolidated a new sublease agreement for Building 676 with the renewal of the Sublease agreement for Building 717A into one (1) sublease. Subsequently, the Parties entered into a certain Sublease Agreement dated January 24, 2023, (the “Buildings 676 and 717A Sublease Renewal”) pertaining to the Sublease of Buildings 676 and 717A at the SCLA with an Expiration Date of August 31, 2025. The Buildings 676 and 717A Sublease Renewal contained two (2) additional five (5) year option terms with Expiration Dates of August 31, 2030, and August 31, 2035. Sublessee does not desire to exercise the remaining Option Terms but rather to enter into a new sublease agreement for Buildings 676, 677 and 678.
G. The Parties have previously entered into a certain Lease Agreement dated November 1, 2013, (the “Original Building 678 Lease”) pertaining to the lease of Building 678 at the SCLA. The Original Building 678 Lease contained three (3) additional three (3) year option terms with Expiration Dates of August 31, 2019, August 31, 2022, and August 31, 2025. The Parties entered into a First Amendment to the Original Building 678 Lease dated September 1, 2015, to expand the definition of the Leased Premises to include portions of Building 682A. The Parties additionally entered into a Second Amendment dated September 1, 2018, to the Original Building 678 Lease to expand the definition of the Leased Premises to include additional area in Building 678. The Parties additionally entered into a Third Amendment to the Original Building 678 Lease dated September 27, 2021, to add one (1) additional three (3) year Option Term with an Expiration Date of August 31, 2028. Sublessee does not desire to exercise the final Option Term but rather to enter into a new sublease agreement for Buildings 676, 677 and 678.
TERMS AND CONDITIONS
1. Subleased Premises. Subject to the terms and conditions herein contained, Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor certain property which is part of the SCLA, described as follows (the “Subleased Premises”):
a. A portion of that certain real property designated as Hangar Building 676, comprised of approximately Eighty-Three Thousand Seventy (83,070) square feet of hangar, office and mechanical room space, together with the improvements thereon, located at the SCLA at 13010 Aerospace Drive, Victorville, CA 92394, together with the improvements thereon, and access, on a non-exclusive basis, during flight test operations, to aircraft parking space for two (2) Boeing aircraft (referred to as “Cargo Ramp Space”) the location of which is subject to change upon approval by Sublessor.
The general location of the Cargo Ramp Space during flight test operations shall be west of Building 728 on the Cargo Ramp. Specific parking assignments will be coordinated by the Airport Operations Division as depicted on Exhibit A attached hereto and incorporated herein by this reference; and
SCLAA Standard Sublease Page 3 Boeing Bldg 676, 677 & 678 b. A portion of that certain real property designated as Building 677, Nose Docks 5, 6, and 7 comprised of approximately Three Thousand Three Hundred Sixty-Six (3,366) square feet of storage space located at 12950 Aerospace Drive, Victorville, CA 92394, together with the improvements thereon, as depicted on Exhibit A, attached hereto and incorporated herein by this reference; and
c. A portion of that certain real property designated as Hangar Building 678 comprised of approximately One Hundred Seventeen Thousand Three Hundred Twenty-Three (117,323) square feet of hangar, office, shipping and receiving, and foam room space located at 18200 Phantom West, Victorville, CA 92394, together with the improvements thereon, as depicted on Exhibit A, attached hereto and incorporated herein by this reference.
1.1 Additional Access and Right of Use Area. In addition to the Subleased Premises, Sublessee shall also have:
a. The right of use, on a non-exclusive basis, to area located north and south of Hangar Buildings 676 and 678 as depicted on Exhibit A, attached hereto and incorporated herein by this reference (the “Right of Use Area”). Said Right of Use Area is primarily intended for the purpose of providing ingress and egress to multiple subleased premises and shall be shared in common with the sublessee of Building 681. Sublessee shall not commit any action that impedes or limits the timely movement of the aircraft of other lessees or sublessees or in any other way denies the timely movement of aircraft within the Right of Use Area. Subordinate to providing ingress and egress, the Right of Use Area is available to Sublessees for staging of aircraft that are incidental to the Sublessee’s scheduled hangar maintenance operations and may be utilized as an extension of Sublessee’s hangar operations for the performance of light aircraft maintenance, provided Sublessee remains in compliance with the aforementioned primary intended purpose of said Right of Use Area; and
b. Access, on a non-exclusive basis, during flight test operations, to aircraft parking space for two (2) Boeing aircraft (referred to as “Cargo Ramp Space”) the location of which is subject to change upon approval by Sublessor. The general location of the Cargo Ramp Space during flight test operations shall be west of Building 728 on the Cargo Ramp as depicted on Exhibit A
c. At no additional charge, Sublessor shall make available, on a non- exclusive right of use basis, aircraft parking space (“Aircraft Staging Space”) adequate for the parking of two (2) B-747 sized aircraft, the location of which is depicted on Exhibit A. The Aircraft Staging location is subject to change upon approval by Sublessor and reasonable advance written notice to Sublessee. In the event Sublessee requires aircraft parking space greater than that provided as Aircraft Staging Space, such additional aircraft parking space shall be approved first by the Airport Director (or its designee) and shall be subject to the aircraft parking rates incorporated as a part of the Southern California Logistics Airport Rules and Regulations, as set forth in Exhibit C, and the Southern California Logistics Airport Fee Schedule, as may be amended from time to SCLAA Standard Sublease Page 4 Boeing Bldg 676, 677 & 678 time, and hereto incorporated herein by this reference; and
d. all appurtenances, rights, privileges, and easements in any way applicable thereto.
2. Term. The initial term of this Sublease shall be for a period of ten (10) years, (the “Initial Term”) commencing on September 1, 2025, (the “Sublease Commencement Date”) and expiring on August 31, 2035, (the “Sublease Expiration Date”) unless sooner terminated or extended as hereinafter provided. To the extent any of the leases or subleases referenced in Recital A hereof are terminated, and such lease or sublease governs this Sublease, then this Sublease shall also terminate, as of the date of termination of the applicable governing lease or sublease.
3. Option to Extend Term. Upon expiration of the Initial Term, Sublessee shall have the option to renew this Sublease for two (2) additional five (5) year terms (each an “Option Term”), provided that: (i) Sublessee is in good standing and otherwise in full compliance with all of the terms and conditions of this Sublease; (ii) Sublessee provides Sublessor written notice of its desire to renew no later than one hundred eighty (180) days prior to the expiration of the Term; and (iii) Sublessor confirms in writing Sublessee’s Option Term. Only one (1) Option Term may be exercised at a time by Sublessee, and upon confirmation of such exercise by Sublessor, all references to the Sublease Expiration Date following any such exercise of the Options shall mean August 31, 2040 and August 31, 2045 respectively. All further references to the Term of this Sublease shall mean and include the Initial Term and any confirmed Option Term.
4. Termination. This Sublease shall only terminate prior to the Expiration Date for such reasons as are specifically set forth in the provisions of this Sublease.
5. Right to Terminate for Development. INTENTIONALLY OMITTED.
6. Rent.
a. Monthly Base Rent. During the first year of the Initial Term, Sublessee shall pay to Sublessor as rent for the Subleased Premises the amount of One Hundred Fifty-Eight Thousand Two Hundred Two Dollars and Seventy Cents ($158,202.70) per month (the “Monthly Base Rent”). Commencing on September 1, 2026, the Monthly Base Rent shall be increased by three percent (3%), and on each annual anniversary of the Sublease Commencement Date thereafter during the Term (or during any Option Term exercised in accordance with the provisions of Section 3 hereof), the then-current Monthly Base Rent shall be increased by an additional three percent (3%). All further references to the Monthly Base Rent shall mean and include any such increased amount as calculated under the provisions of this paragraph. The Monthly Base Rent represents the summation of Hangar Building 676 rent in the amount of Seventy Thousand Six Hundred Nine Dollars and Fifty Cents ($70,609.50), Building 677 rent in the amount of Seven Hundred Seventy-Four Dollars and Eighteen Cents ($774.18), and Hangar Building 678 rent in the amount of Eighty-Six Thousand Eight SCLAA Standard Sublease Page 5 Boeing Bldg 676, 677 & 678 Hundred Nineteen Dollars and Two Cents ($86,819.02).
b. Use of Cargo Ramp Space shall accrue at the rate of Two Hundred Dollars ($200) per day (or any portion of a day) per aircraft parked during flight test operations, hereafter referred to as “Cargo Ramp Fees”. Cargo Ramp Fees will be invoiced in arrears along with Landing Fees, as per the Southern California Logistics Airport Rules and Regulations. Cargo Ramp Fees will be invoiced in arrears along with Landing Fees, as per the Southern California Logistics Airport Rules and Regulations, as set forth on Exhibit B, as amended and attached hereto and incorporated herein by this reference;
c. Tenant Improvements. Within three (3) years of the Sublease Commencement Date, for a final completion date of no later than August 31, 2028, Sublessee shall undertake and substantially complete, at its sole expense, certain tenant improvements to the Subleased Premises (the “Tenant Improvements”) as further described on Exhibit B attached hereto and incorporated herein by this reference.
Sublessee shall construct the Tenant Improvements in accordance with Section 14, 17 and 22 of this Sublease, using its own staff and/or properly licensed and insured contractors and in full compliance with any applicable prevailing wage or public bidding requirements.
d. Rent Credits. As consideration for substantially completing the Tenant Improvements within the time period set forth above, and subject to the provisions of subsections i and ii hereof, Sublessor shall, commencing on November 1, 2028, and continuing for thirty-six (36) consecutive months of the Initial Term of this Sublease, provide Sublessee with a monthly rental credit in an amount to One Hundred percent (100%) of the actual cost of up to Three Million Dollars ($3,000,000), which includes the Sublessee’s cost of funds associated with the construction period and reconciliation period for the Tenant Improvements to Hangar Buildings 676 and 678. The rental credit shall be based upon actual costs incurred by Sublessee to construct the Tenant Improvements, as verified and approved by Sublessor pursuant to subsection (i) below.
The rental credit shall not exceed a total of Three Million Dollars ($3,000,000) and shall be applied on a monthly basis toward the Sublessee’s Monthly Base Rent in an amount not to exceed Eighty-Three Thousand Three Hundred Thirty-Four Dollars ($83,334) monthly.
i. Following the substantial completion of the Tenant
Improvements, Sublessee shall provide to Sublessor all invoices with proof of payment, Tenant Improvement Certifications, as further described on Exhibit B, and other evidence of actual cost incurred together with a cost summary cover page (the “Close-Out Statement”). Upon receipt of the Close-Out Statement, Sublessor shall verify same and calculate the actual total amount of the rent credits due to Sublessee.
ii. Should Sublessee not substantially complete the Tenant Improvements within Three (3) years following the Sublease Commencement Date for a final completion date of August 31, 2028 and provide a Close-Out Statement to Sublessor SCLAA Standard Sublease Page 6 Boeing Bldg 676, 677 & 678 documenting the actual costs incurred, Sublessee shall not be eligible for rent credits described in Section 6.d.
f. Payment. Monthly Base Rent shall be payable in advance prior to the first (1st) day of each calendar month and without demand to:
Southern California Logistics Airport Authority
Attention: Airport Director
18374 Phantom West
Victorville, California 92394
or at such other place as Sublessor may designate in writing from time to time. Sublessee shall also pay to Sublessor within thirty (30) days of presentation of an invoice, such other charges as it may incur for use of facilities and services at the SCLA which shall be charged in accordance with the SCLA Rules and Regulations as set forth on Exhibit C, attached hereto and incorporated herein by this reference, as such may be amended from time to time by Sublessor.
7. Security Deposit. INTENTIONALLY OMITTED.
8. Brokerage Commission. Sublessor and Sublessee represent and affirm to each other that they have not had any dealings with any real estate brokers, finders or agents and no commissions or fees are payable by either Party in connection with this Sublease.
9. Late Charge. Sublessee hereby acknowledges that late payment by Sublessee to Sublessor of any installment of rent, or any other sums due hereunder will cause Sublessor to incur costs not contemplated by the Sublease, the exact amount of which will be extremely difficult to ascertain. Accordingly, if any installment of rent, or any other sum due from Sublessee is not received by the Sublessor within ten (10) days after such amount is due, whether or not any notice of default or other notice has been given, Sublessee shall pay to the Sublessor a charge equal to six percent (6%) of the amount past due (the “Late Charge”), in addition to the payment of the past due amount itself.
The Parties hereby agree that such Late Charge represents a fair and reasonable estimate of the costs the Sublessor will incur by reason of late payment by Sublessee, and no more than one (1) Late Charge shall be assessed per month. Notwithstanding the foregoing, in the event the Sublessee elects to make annual payments in advance, then no Late Charge shall apply.
10. Limited Right to Possession of the Subleased Premises. Sublessor shall deliver possession of the Subleased Premises to Sublessee on or before the Sublease Commencement Date, free and clear of all tenants, occupants, and right of any third parties except as hereafter provided in this Section 10. Sublessee agrees that the terms of its possession shall be subject to any outstanding easements and rights-of-way not within the control of the Sublessor and further to the right of entry by the United States Air Force as provided under the Air Force Leases. The Sublessor shall use best efforts to ensure the quiet use and enjoyment of the Subleased Premises by Sublessee.
SCLAA Standard Sublease Page 7 Boeing Bldg 676, 677 & 678 However, unreasonable interference by Sublessor or the Air Force with Sublessee’s quiet enjoyment of the Subleased Premises that results in material and demonstrable financial detriment to Sublessee and Sublessee being unable to continue its business functions in a commercially reasonable manner, shall be grounds for termination of the Sublease by Sublessee.
11. Holding Over. In the event Sublessee, with the Sublessor’s prior written consent, holds over and continues in possession of the Subleased Premises, or any part thereof, after the Expiration Date, such occupancy shall be considered a month-to-month tenancy subject to all the terms and conditions of this Sublease in effect on the day immediately preceding the Expiration Date, except that the Monthly Base Rent for any such holdover period shall be increased to one hundred fifty percent (150%) of the then current Monthly Base Rent. If Sublessee, without the Sublessor’s prior written consent, holds over or continues in possession of the Subleased Premises, or any part thereof, after the Sublease Expiration Date of this Sublease, such occupancy shall be deemed a tenancy at sufferance, permitting the Sublessor to immediately commence eviction proceedings without notice to Sublessee.
12. Right to Relocate. INTENTIONALLY OMITTED.
13. Maintenance. Excessive repair and maintenance necessitated solely by Sublessor’s activities shall be borne to the Sublessor. Additionally, Sublessor shall, at Sublessor’s expense, maintain and repair the structural components of the Subleased Premises i.e., foundations, slabs, exterior walls, (excluding glass and doors), and the structural and waterproofing membrane portions of the roof. Sublessor represents, and Sublessee hereby acknowledges, that the hangar portion of Hangar Building 676 was constructed with a “Water Shedding” roof that is designed to keep the floor space below the roof substantially dry. Consequently, and dependent upon rain volume, wind speed, and wind direction, the hangar roof of Hangar Building 676 is expected to experience minor leakage. Sublessor shall maintain and repair the roof of Hangar Building 676 to the extent required to ensure that no individual leaks exceed a flow rate of two (2) gallons per hour. Sublessor shall perform semiannual maintenance on the freight elevator located in Hangar Building 676 until the elevator must be decommissioned due to parts or the elevator becoming obsolete. Excluding the aforementioned, Sublessee shall at all times during the Term hereof and until surrender and termination, keep and maintain the Subleased Premises in good and substantial order and repair, and shall undertake all necessary repair and maintenance of the Subleased Premises. Sublessee shall be responsible for all operating expenses associated with maintaining the Subleased Premises including, but not limited to: cleaning; light bulb replacement; procurement of supplies and materials; preventative maintenance; repair; upkeep and emptying of emergency/hazardous spill trench drains and reservoir; signs; sidewalks; Sublessee’s logos or signage, all monthly, quarterly, and annual inspection/servicing and repair of the Subleased Premises mechanical, electrical, lighting, plumbing, and life safety systems; water backflow inspection and maintenance, furniture and window cleaning; servicing of fire extinguishers and fire suppression systems; repairs to trade fixtures and/or equipment, doors, hangar door motors, ceilings, floors; exterior painting, resurfacing SCLAA Standard Sublease Page 8 Boeing Bldg 676, 677 & 678 paved exterior areas and the like; landscaping of parking lot, associated fees, etc.
Sublessee agrees at Sublessee’s sole cost and expense to procure, maintain throughout the Term, and supply copies to Sublessor, contracts for the inspection/servicing and maintenance of HVAC equipment, fire extinguishing and suppression systems, fire alarms and/or smoke detection systems, and air compressor systems. Sublessee also agrees throughout the Term to supply copies of all life safety related certifications and/or inspection records to the Sublessor in a timely manner. Notwithstanding the foregoing or anything else in this Sublease, Sublessor shall be responsible, at its sole cost and expense, for compliance with CA Senate Bill No. 1044, “Firefighting Equipment and Foam: PFAS Chemicals”, as it relates to the Subleased Premises.
14. Use and Condition of Subleased Premises. The Subleased Premises are to be used by Sublessee for those purposes more particularly provided for on Exhibit D, attached hereto and incorporated herein by this reference, and for no other purpose unless expressly agreed to by the Sublessor in writing. Sublessee shall have access to the Subleased Premises twenty-four (24) hours a day, seven (7) days a week at all times during the Term, as my extended. Sublessee agrees to use the Subleased Premises in such a manner as to not interfere with the Sublessor’s rights in the Subleased Premises or the surrounding areas, to comply with all airport rules and regulations, all applicable governmental laws, ordinances, and regulations in connection with its use of the Subleased Premises, to keep the Subleased Premises in a clean and sanitary condition, and to use all reasonable precaution to prevent damage, or injury to the Subleased Premises.
a. Permits. Sublessee, at its sole cost and expense, shall apply for and obtain any and all permits and/or certifications required by any federal, state or local governmental entity, including but not limited to the Mojave Desert Air Quality Board, in connection with the painting, maintenance and/or overhaul of aircraft in or about the Subleased Premises. Such permits shall include, but not be limited to, any which may be required for the air handling and ventilation requirements for the Subleased Premises.
Furthermore, Sublessee shall coordinate and cooperate with the Mojave Desert Air Quality Board as may be required from time to time. Any and all such permits and/or certifications shall be obtained in such a manner so as to run in favor of the Subleased Premises and/or the Sublessor, and such permits or certifications shall remain with the Subleased Premises upon the expiration or termination of the Sublease.
b. No Warranties. Except as provided herein, Sublessee agrees that no promises, covenants, representations, statements or warranties have been made on behalf of the Sublessor to Sublessee respecting the condition of the Subleased Premises, or the manner of operating the Subleased Premises or the maintaining of any repairs to the Subleased Premises.
c. Acceptance of Subleased Premises. Sublessee acknowledges that it has satisfied itself by its own independent investigation that the Subleased Premises are suitable for their intended use, and that neither the Sublessor nor the Sublessor’s agent or agents have made any representation or warranty as to the present or future SCLAA Standard Sublease Page 9 Boeing Bldg 676, 677 & 678 suitability of the Subleased Premises for the conduct of Sublessee’s business.
Sublessee’s taking possession or use of the Subleased Premises for any purpose shall constitute Sublessee’s acceptance of the Subleased Premises “as-is” in its existing condition.
d. Notice of Presence of Asbestos and Lead-Based Paint. Sublessee, its successors and assigns are warned that the Subleased Premises may contain asbestos materials and lead-based paint materials. No warranties, either expressed or implied, are given with regard to the quantity, location or condition of the asbestos containing materials or the lead-based paint materials. Sublessee, its successors and assigns, shall be deemed to have relied solely on their own judgment in assessing the overall condition of all or any portion of the Subleased Premises, including any asbestos hazards or lead-based paint hazards or concerns. Sublessee acknowledges that Sublessee was given every opportunity to inspect the Subleased Premises to assess the risk, if any, from asbestos containing material or lead-based paint materials.
e. No Liability Assumed by Sublessor. The Sublessor assumes no liability for damages for personal injury, illness, disability or death to Sublessee or to Sublessee’s successors, assigns, employees, invitees, or any other persons subject to Sublessee’s control or direction, or to any person, including members of the general public arising from or incident to the purchase, transportation, removal, handling, use, disposition or any activity causing or leading to contact of any kind whatsoever with asbestos or lead-based paint on the Subleased Premises which is the subject of this Sublease, whether Sublessee, its successors or assigns has or have properly warned or failed to properly warn the individuals injured. Sublessee, its successors and assigns, further agree that in its use and occupancy of the Subleased Premises, it will comply with all federal, state and local laws relating to asbestos and lead-based paint.
f. Personal Property. Sublessee shall, at the Sublease Expiration Date or such other termination of this Sublease, by lapse of time or otherwise, remove all of Sublessee’s personal property, repair any damage to the Subleased Premises resulting therefrom, and surrender the Subleased Premises to the Sublessor in as good a condition as when Sublessee took possession, normal wear and tear excepted.
15. Waste or Nuisance. Sublessee shall not commit or permit the commission by others of any waste on the Subleased Premises. Sublessee shall not maintain, commit, or permit the maintenance or commission of any nuisance on the Subleased Premises nor shall Sublessee use or permit the use of the Subleased Premises for any unlawful purpose.
16. Taxes. Sublessee shall pay when due and prior to delinquency all taxes, assessments, and other charges including possessory interest taxes levied or imposed by any governmental entity on the possessory interest of Sublessee in the Subleased Premises and the personal property, trade fixtures, appliances, and leased equipment placed by Sublessee in, on, or about the Subleased Premises during the Term of this Sublease. Sublessee recognizes that the interests of Sublessee in this Sublease shall SCLAA Standard Sublease Page 10 Boeing Bldg 676, 677 & 678 be subject to the imposition of a possessory interest tax by the San Bernardino County Assessor, and Sublessee agrees to pay such tax amount as may be so levied with respect to the possessory interest of Sublessee in the Subleased Premises under this Sublease.
Sublessee further acknowledges that pursuant to California Health and Safety Code Section 33673, the property shall be assessed in the same manner as privately owned property and Sublessee shall pay taxes upon the assessed value of the entire property and not merely the assessed value of its leasehold interest.
17. Compliance with Air Force Leases, Airport Deeds, Covenants, Conditions and Restrictions and Related Agreements.
a. Sublessee acknowledges that a copy of the applicable Air Force Leases and/or Airport Deeds are available and on file in the SCLA office.
b. Sublessee expressly acknowledges that the Sublessor has assumed certain duties and obligations to the Air Force under the Air Force Leases and/or Airport Deeds affecting the use and occupancy of the Subleased Premises. Sublessee further agrees that as of the Sublease Commencement Date, it shall observe and perform the
duties and obligations of the Sublessor relating to the Subleased Premises in favor of the Air Force which arise under the Air Force Leases. These duties and obligations as assumed by Sublessee include but are not limited to the following which are presented below for purposes of reference and convenience:
I. Air Force Lease Condition 10 (Environmental Protection); and
II. Air Force Lease Condition 17 (Development and Alterations); and
III. Air Force Lease Condition 26 (Restrictions on Use of Leased Premises)
c. Any use, occupancy or activity of Sublessee on the Subleased Premises which may result in either the receipt by the Sublessor of a notice of default from the Air Force under the Air Force Leases or a notice of default or a notice of violation from either the Air Force or the Federal Aviation Administration (“FAA”) under any Airport Deeds, shall be deemed to be a default of Sublessee under this Sublease. The response of the Sublessor following receipt of any such notice of default or breach from either the Air Force under the Air Force Leases or from the Air Force and/or the FAA under the Airport Deeds, shall not waive, stay or otherwise mitigate or remedy the default of Sublessee to the Sublessor under this Sublease. Sublessee shall have no right under this Sublease to participate in any proceeding between the Air Force, the FAA and the Sublessor for the resolution of an alleged default, breach or other dispute of the parties arising under the Air Force Leases and/or the Airport Deeds except to the extent the Sublessee is alleged to have directly caused such breach or default.
d. Sublessee acknowledges that the Subleased Premises are, or will SCLAA Standard Sublease Page 11 Boeing Bldg 676, 677 & 678 be, subject to certain Declaration of Covenants, Conditions and Restrictions to be recorded in the official records of San Bernardino County, California, as amended (the “CC&Rs”). There shall also be included in any assessments the amount of assessments levied pursuant to the CC&Rs and applicable to the Subleased Premises, determined by the ratio that the rentable area of building on the Subleased Premises bears to the total net rentable area of building or buildings which include the Subleased Premises and for which a separate assessment is made pursuant to the CC&Rs.
e. Sublessee further expressly acknowledges that it is subject to and shall comply with all provisions and conditions of the applicable Air Force Leases.
18. Insurance. Sublessee shall procure and maintain for the duration of the Sublease insurance against claims for injuries to persons or damages to property which may arise from or in connection with Sublessee’s operation and use of the Subleased Premises. The cost of such insurance shall be borne by the Sublessee. Coverage shall be at least as broad as:
a. Commercial General Liability Insurance. (“CGL”): Insurance Services Office Form CG 00 01 covering CGL on an “occurrence” basis, including products completed operations, property damage, bodily injury and personal and advertising injury with limits no less than Five Million Dollars ($5,000,000) per occurrence.
If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence.
b. Property Insurance. Sublessee acknowledges that the insurance to be maintained by the Sublessor on the Subleased Premises will not insure against any of the Sublessee’s property or improvements made by the Sublessee. Accordingly, Sublessee shall maintain in full force and effect insurance against all risks of loss to any improvements or betterments, at full replacement cost with no coinsurance penalty provision.
c. Commercial Vehicle Liability Insurance. ISO Form Number CA 00 01 covering any auto (Code 1), or if Sublessee has no owned autos, hired (Code 8) and non-owned (Code 9), with limit no less than One Million Dollars ($1,000,000) per accident for bodily injury and property damage.
d. Workers’ Compensation Insurance. Workers’ Compensation: as required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limits of no less than One Million Dollars ($1,000,000) per accident for bodily injury or disease. If Sublessee has no employees, it may certify or warrant to the Sublessor that it does not currently have any employees or individuals who are defined as “employees” under the Labor Code and the requirement for Workers’ Compensation coverage may be waived by the Risk Manager.
SCLAA Standard Sublease Page 12 Boeing Bldg 676, 677 & 678 e. Sublessee may use Umbrella or Excess Policies to provide the liability limits as required in this Sublease. This form of insurance will be acceptable provided that all of the Primary and Umbrella or Excess policies shall provide all of the insurance coverages herein required, including, but not limited to, primary and noncontributory, additional insured, Self-Insured Retentions, indemnity and defense requirements. The Umbrella and Excess policies shall be provided on a true “following form” or broader coverage basis, with coverage at least as broad as provided on the underlying CGL insurance. No insurance maintained by the Additional Insureds, whether primary or excess, and which also apply to loss covered hereunder, shall be called upon to contribute to a loss until Sublessee’s primary and excess policies are exhausted.
f. The insurance policies are to contain, or be endorsed to contain the following provisions:
i. Additional Insureds. Notwithstanding any inconsistent statement in any required insurance policies or any subsequent endorsements attached thereto, the protection offered by the commercial general liability policy described in subsection (a) above shall bear an endorsement whereby it is provided that, the Southern California Logistics Airport Authority (“Sublessor”), the City of Victorville, the City Attorney, the Victor Valley Economic Development Authority, the United States Air Force, and their respective officers, officials, employees, servants, volunteers, agents, and independent contractors are named as Additional Insureds to the extent of the Sublessee’s indemnification obligations herein. General Liability coverage can be provided in the form of an endorsement to the Sublessee’s insurance (at least as broad as ISO Form CG 20 10 11 85 or if not available, through the addition of both CG 20 10, CG 20 26, CG 20 33, or CG 2038; and CG 20 37 if a later edition is used).
ii. Waiver of Subrogation Rights. Sublessee hereby grants to the Southern California Logistics Airport Authority (“Sublessor”), the City of Victorville, the City Attorney, the Victor Valley Economic Development Authority, the United States Air Force, and their respective officers, officials, employees, servants, volunteers, agents, and independent contractors a waiver of any right to subrogation which any insurer of said Sublessee may acquire against the Southern California Logistics Airport Authority, the City of Victorville, the City Attorney, the Victor Valley Economic Development Authority, and the United States Air Force. Sublessee agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the Sublessor has received a waiver of subrogation endorsement from the insurer.
iii. For any claims related to this Sublease, the Sublessee’s coverage shall be primary and noncontributory and at least as broad as ISO CG 20 01 04 13 with respects to the Southern California Logistics Airport Authority (“Sublessor”), the Victor Valley Economic Development Authority, the City of Victorville, the City Attorney and the United States Air Force and their officers, officials, employees, volunteers, contractors, and subcontractors. Any insurance or self-insurance maintained by the Southern California Logistics Airport Authority (“Sublessor”), the Victor Valley Economic SCLAA Standard Sublease Page 13 Boeing Bldg 676, 677 & 678 Development Authority, the City of Victorville, the City Attorney and the United States Air Force and their officers, officials, employees, volunteers, contractors, and subcontractors shall be in excess of the Sublessee’s insurance and shall not contribute with it.
19. Proof of Insurance Coverage.
a. Sublessee shall secure from a good and responsible company or companies authorized to do insurance business in the State of California the policies of insurance required by this Sublease and furnish to Sublessor certificates of said insurance on or before the Sublease Commencement Date.
b. Each insurance policy required in the Sublease shall provide that coverage should not be canceled, except with written notice to the Sublessor.
c. Sublessee shall furnish the Sublessor with original certificates of insurance and amendatory endorsements, or copies of applicable policy language effecting coverage required by this Sublease. All certificates and endorsements and are to be received and approved before the Commencement Date. However, failure to obtain the required documents prior to the Commencement Date shall not waive the Sublessee’s obligation to provide them.
d. Self-insured. If Sublessee is self-insured, it shall provide certificates or evidence to Sublessor indicating that its insurance meets the levels and requirements as set forth herein above.
20. Personal Property at Risk of Sublessee. All personal property which Sublessee maintains at the Subleased Premises shall be at the risk of Sublessee only.
Except for the grossly negligent, reckless, or unlawful intentional acts of the Sublessor, its agents, employees, guests, or invitees, the Sublessor shall not be liable for any damage to any property of Sublessee or for any damage to Sublessee’s property in moving the same to or from the Subleased Premises.
21. Utilities and Other Services.
a. Payment for Utility Charges. At the Sublessor’s expense, Sublessor shall provide the following utilities to the Subleased Premises: water, natural gas, electricity, fire/alarm service or monitoring, and sewer/trash, hereinafter collectively referenced as “Utilities”. In acknowledgment of the Utilities provided to the Subleased Premises, Sublessee shall reimburse the Sublessor one hundred percent (100%) of the total cost associated with the Utilities for Buildings 676, 677 and 678, (the “Utilities Reimbursement”), which shall be computed or determined based on the total amount incurred by Sublessee plus an additional three percent (3%) administrative fee.
During the Term, Sublessee shall pay the Utilities Reimbursement on a monthly basis in addition to the Monthly Base Rent. Notwithstanding the foregoing, Sublessee shall be permitted to fund the Utilities Reimbursement during the term, on a monthly basis, in a fixed amount equal to the average amount calculated by Sublessor for the previous year’s SCLAA Standard Sublease Page 14 Boeing Bldg 676, 677 & 678 billing. Sublessor shall perform an annual utilities reimbursement reconciliation (the “Reconciliation”) and shall provide Sublessee with an updated good faith estimate of the upcoming year’s new Utilities Reimbursement fixed amount. Any overages or shortages of this fixed amount shall be reconciled among Sublessor and Sublessee against the actual utility costs during the Reconciliation. The Reconciliation will be performed by Sublessor approximately within thirty (30) days following the annual anniversary of the Sublease Commencement Date during the Term or any Option Term exercised.
Sublessee shall make the updated fixed amount Utilities Reimbursement monthly payments throughout such year. Following the Reconciliation, any adjustment (overage or shortage) will be applied to the next utility billing coming due. In the event that the fixed Utility Reimbursement amount is less than actual utility cost, Sublessor agrees to not consider Sublessee in default of the Sublease unless Sublessee chooses to not comply with the payments due upon the Reconciliation, provided a Utilities Reimbursement amount remains due.
In no event shall the Sublessor be liable for any interruption or failure in the supply of such utilities to the Subleased Premises, however, Sublessor shall make commercially reasonable efforts to minimize the period of any utility disruption. All other utilities shall be paid directly by the Sublessee to the respective utility service provider. If the Sublease Commencement Date is other than the first (1st) day of a month, the Utilities Reimbursement for the first (1st) month shall be prorated based upon a thirty (30) day month. Additionally, Sublessor represents, and Sublessee hereby acknowledges its understanding that the United States Air Force is operating a soil vapor extraction well outside the north/west corner of Hangar Building 676, as depicted on Exhibit A, that draws electrical power from the same source that supplies Hangar Building 676. Said vapor extraction system is internally metered and requires a monthly Sublessor reading to procure reimbursement from the Air Force’s contractor that is operating the system.
b. Consent to Energy Use Data Disclosure. By executing this Sublease, Sublessee hereby consents to disclosure of its energy usage data as required for Sublessor to comply with the California Public Resources Code section 25402.10 and the implementing regulations of the California Energy Commission (20 Cal. Code Regs.
Sections 1680 through 1685). Strictly for the purposes of ensuring such compliance, including any required public disclosure of aggregated energy use, Sublessee agrees to provide such energy usage data directly to Sublessor and/or authorizes Sublessor to obtain the required energy usage data directly from Sublessee’s utility providers upon request without the need to execute any further authorizations or consent forms.
Sublessee’s consent and authorization is deemed given upon the execution of this Sublease and shall continue to be in effect throughout the Term or any extension thereof.
22. Alterations, Improvements and Additions.
a. Sublessee shall not make any alterations, improvements, or additions to the Subleased Premises (collectively hereinafter the “Improvements”) without the prior written consent of the Sublessor. The Sublessor shall own all alterations, improvements, and additions that are affixed to the Subleased Premises without SCLAA Standard Sublease Page 15 Boeing Bldg 676, 677 & 678 compensation to Sublessee, subject to subsection (b) below. Any personal property belonging to Sublessee may be removed by Sublessee at any time prior to the expiration of the Term of this Sublease, or extension thereof.
b. Once completed, Improvements authorized in writing by Sublessor and/or any specific Tenant Improvements as may be provided for elsewhere in this Sublease, shall not be removed by Sublessee, unless so required by the Sublessor in its sole discretion. At the end of the Term of this Sublease (or upon any earlier termination as may be provided for herein) Sublessor shall have the option to either require Sublessee to remove the Improvements or Tenant Improvements or elect to have such Improvements or Tenant Improvements become the property of Sublessor. In the case of removal of equipment or fixtures, Sublessee shall restore the area of the Subleased Premises from which such removals are made to its original condition. Sublessee shall require the issuance of a Faithful Performance Bond and a Payment Bond for any work performed on the Subleased Premises as set forth below:
BOND REQUIREMENTS - A Faithful Performance Bond benefitting the Sublessor in the amount of one hundred twenty-five percent (125%) of the bid amount and a Payment Bond in the amount of one hundred twenty-five percent (125%) of the bid amount. Bonds must be issued by an admitted surety insurer in the State of California. When a contract for constructing Sublessor authorized Improvements or Tenant Improvements is signed, the successful bidder shall provide, within ten (10) working days, the Faithful Performance and Payment Bonds in the amounts set forth above in this paragraph.
23. Airport Development. The Sublessor, at its sole discretion, shall determine and may from time to time change the routes of surface ingress and egress to and from the Subleased Premises, but agrees to locate such routes as conveniently as may be done for Sublessee, having in mind the reasonable requirements of the Sublessor with respect to the operation of the SCLA. Notwithstanding the above, if the rerouting of such ingress and egress routes significantly disrupts the normal operations of Sublessee such that it results in material financial detriment to Sublessee, then Sublessee shall have the right to terminate this Sublease.
24. Signs. Sublessee shall not post, install, erect, or operate any sign, placard, poster or other device on any part of the Subleased Premises without the prior written permission of the Sublessor. Such signs as may from time to time be permitted by the Sublessor shall be made, posted, maintained and removed, and repair any damage caused by removal, at Sublessee’s own cost and expense. Sublessor shall have the right to remove unauthorized signs at Sublessee’s expense. Sublessee shall be responsible for all costs associated with the purchase and installation of the required Building Standard Suite Signage in accordance with local codes.
25. Liens. Sublessee shall not suffer or permit any liens to stand against the Subleased Premises, or any part thereof, by reason of any work, labor, services, or materials done for, or supplied to Sublessee or anyone holding the Subleased Premises or any part thereof through or under Sublessee. If any such lien shall at any time be filed SCLAA Standard Sublease Page 16 Boeing Bldg 676, 677 & 678 against the Subleased Premises, Sublessee shall cause such lien to either be discharged of record sixty (60) days after the date that Sublessee receives notice of the filing.
Notwithstanding the above, in any bona fide dispute between Sublessee and any third party concerning work done by the third party on or for the Subleased Premises, and as a result of the dispute the third party files a lien against the Subleased Premises, then, in lieu of obtaining the discharge of the lien within the sixty (60) day period, Sublessee, at its option, may either file suit against the third party, a part of the suit being to judicially negate or remove the lien or Sublessee may file an appropriate bond or other device allowed by law to remove the lien.
26. Inspection by the Sublessor. Sublessee shall permit the Sublessor, or its agents, representatives, or employees to enter the Subleased Premises at mutually agreeable, reasonable times for the purpose of inspecting the Subleased Premises to determine whether Sublessee is complying with the terms of this Sublease, for the purpose of doing other lawful acts that may be necessary to protect the Sublessor’s interest in the Subleased Premises, or for the purpose of performing the Sublessor’s duties under this Sublease. Except in the event of an emergency, the Sublessor shall contact Sublessee, no less than twenty-four (24) hours prior to the time that Sublessor desires to enter the Subleased Premises to arrange a mutually agreeable time for the inspection.
27. Damage or Destruction of Subleased Premises. Unless occasioned by the negligence or intentionally unlawful act of Sublessee, if, during the Term of this Sublease or any renewal thereof, any portion of the Subleased Premises shall be damaged by fire or other catastrophic event, so as to render such portion of the Subleased Premises untenable, the obligations under this Sublease shall be immediately suspended while such portion of the Subleased Premises remains untenantable. In the event of such damage, the Sublessee shall give Sublessor notice of such untenantable conditions and the Sublessor shall elect in its sole discretion, whether to repair the Subleased Premises or to cancel this Sublease with respect thereto. It shall notify Sublessee in writing of its election within thirty (30) days after such damage. In the event Sublessor elects to repair the Subleased Premises, the work or repair shall begin promptly and shall be carried on without unnecessary delay. In the event the Sublessor elects not to repair the Subleased Premises or portion thereof, the Sublease shall be deemed canceled as of the date of damage with respect to the applicable portion. Such damage shall not extend the Sublease Term. In the event that insurance proceeds are received by Sublessee under the Property Insurance policy required to be carried by Sublessee, and the Sublease is terminated under this Section, the Sublessor shall be entitled to the portion of such proceeds attributable to the fixtures, improvements, and other property which would remain with the Subleased Premises, and Sublessee shall be entitled to the portion of such proceeds attributed to the fixtures and property on the Subleased Premises which would be removed by Sublessee. Notwithstanding anything in this paragraph to the contrary, if the Subleased Premises are rendered inadequate for Sublessee to conduct its normal operations in or upon the Subleased Premises (or such portion of the Subleased Premises which is still tenantable), and it is reasonably anticipated that the damages shall not be repaired or otherwise resolved, within sixty (60) days of the date SCLAA Standard Sublease Page 17 Boeing Bldg 676, 677 & 678 the damage occurred, then Sublessee, at its sole and exclusive option, may immediately terminate this Sublease. Additionally, irrespective of whether Sublessee remains in possession and occupancy of the Subleased Premises or elects to terminate this Sublease, rent payable under this Sublease shall abate during the period that the Subleased Premises are not totally useable by Sublessee. The abatement shall be pro rata in proportion to the ratio that the amount of space which Sublessee is actually able to occupy and from which it is able to conduct operations bears to the total Subleased Premises. Sublessee shall continue to make all other payments during this period, including taxes.
28. Assignment and Subletting.
a. Sublessee shall not cause, or permit, by operation of law or otherwise, any assignment, encumbrance or transfer of this Sublease or any estate or
interest therein without the prior written consent of the Sublessor, not to be unreasonably withheld, conditioned, or delayed.
b. Sublessee shall not sublet the Subleased Premises or any part thereof without the prior written consent of the Sublessor, not to be unreasonably withheld, conditioned, or delayed. Any consent to a sublease or assignment shall be conditioned upon the proposed subtenant or assignee demonstrating to Sublessor its ability to perform and complete the obligations of Sublessee under this Sublease, a determined by objective standards of financial capability, creditworthiness and experience required for such performance. In addition, except in the event of an assignment or sublease to a parent, affiliate, or wholly owned subsidiary of Sublessee, if Sublessee’s proposed sublease or assignment arrangement will result in any increased rents or profits accruing to Sublease in excess of the Monthly Base Rent due to Sublessor under this Sublease, such consent shall further be conditioned upon Sublessor receiving fifty percent (50%) of the excess amount thereof. An assignment or subletting shall not relieve Sublessee of any of its obligations or liabilities under this Sublease: both Sublessee and any subsequent assignees will be deemed to be bound hereunder. The Sublessor’s consent to any such assignment, transfer or subletting shall not constitute consent to any further assignment, transfer, or subletting.
c. The provisions of this Section 28 are not intended, nor should they be construed, to prevent Sublessee from allowing such independent contractors onto the Subleased Premises who are involved in Sublessee’s normal operations on the Subleased Premises (such as repair and maintenance personnel, janitorial personnel, and similar personnel). Additionally, nothing in this Section 28 should be construed to prevent subcontractors of Sublessee from conducting their work on the Subleased Premises in conjunction with the normal operations conducted by Sublessee. To the extent that Sublessor must grant its consent for Sublessee’s subcontractors to enter onto the Subleased Premises for the above-described purposes, consent is hereby deemed to be granted. Further, no consent of Sublessor shall be required in order for Sublessee to assign this Sublease or sublet the Subleased Premises to a parent, affiliate or SCLAA Standard Sublease Page 18 Boeing Bldg 676, 677 & 678 subsidiary of Sublessee, so long as Sublessee remains primarily liable for the performance of Sublessee’s obligations hereunder.
29. Indemnification. To the fullest extent permitted by law, Sublessee hereby agrees to defend, indemnify and hold harmless Sublessor, the City of Victorville, the Victor Valley Economic Development Authority, the United States Air Force and each of their respective officers, officials, employees, directors, agents, volunteers, independent contractors and assigns (collectively hereinafter the “Indemnified Parties”), from and against any and all claims, actions, suits, proceedings, demands, losses, judgments and costs and expenses, including reasonable attorneys’ fees, arising from any legal action or proceeding initiated by any individual or entity arising out of, or resulting from the performance of this Sublease, except for any such claim arising out of the negligence or willful misconduct of the Indemnified Parties.
30. The Sublessor’s Environmental Representations.
a. Except as otherwise provided in Section 14 hereof, Sublessee shall not be held responsible or deemed liable by the Sublessor for any hazardous environmental condition on the Subleased Premises, which existed prior to Sublessee’s occupancy of the Subleased Premises.
b. Except as provided in Section 14 hereof, the Sublessor represents that to the best of its actual knowledge, the Subleased Premises are free from any violations of law or regulations pertaining to occupational hazards and environmental conditions or Hazardous Materials as defined in Section 31 of this Sublease. In the event that any hazardous environmental conditions exist on the Subleased Premises as of the Sublease Commencement Date which result in a loss to Sublessee and which were caused by Sublessor, the Air Force or parties or entities within the control of, or under contract with Sublessor, then the Sublessor shall indemnify, defend and hold Sublessee harmless from any costs, expenses, attorney fees or liabilities relating to any claims of such violations or conditions existing prior to Sublessee’s occupancy of the Subleased Premises. Sublessor shall indemnify Sublessee from hazardous environmental conditions or violations caused directly by the Sublessor, its employees, agents, or licensees during or subsequent to the Term of this Sublease.
c. Sublessee shall be solely responsible for obtaining at its cost and expense; any environmental permits required for its operation under this Sublease independent of any existing permits.
31. Compliance with Environmental Laws.
a. The words and phrases set forth below shall have the following definitions:
i. “Hazardous Materials” means and includes any material that SCLAA Standard Sublease Page 19 Boeing Bldg 676, 677 & 678 because of its quality, concentration or physical or chemical characteristics, poses a significant present or potential hazard to human health and safety or to the environment if released into the workplace or the environment. Hazardous Materials include hazardous wastes, toxic substances, petroleum products and motor fuels and similar substances and materials, including all substances and materials defined as hazardous or toxic substances or materials under California Health and Safety Code section 25501(n) or any other similarly applicable state, federal or local law.
ii. “Environmental Laws” means and includes the various health and safety laws and regulations of state, federal and local agencies pertaining to the manufacture, use, storage, disposal, release, and reporting relating to Hazardous Materials
b. Following the Commencement Date, Sublessee shall not cause or permit any Hazardous Materials to be used, generated, manufactured, produced, stored, brought upon, or released, on, under or about the Subleased Premises, or transported to and from the Subleased Premises, by Sublessee, its agents, employees, contractors, or invitees in violation of any Environmental Laws. Sublessee shall indemnify, defend, and hold harmless the Sublessor from any damage, cost, expense, liability, fine, or penalty resulting from any unauthorized discharge, emission, spill, storage, release, disposal or use of any Hazardous Materials by Sublessee, its officers, agents, employees, contractors or invitees or any of them. This obligation of Sublessee shall survive the Expiration Date or earlier termination of this Sublease and shall apply whenever the Sublessor incurs cost or liability arising from any use or activity of Sublessee relating to Hazardous Materials during the Term hereof.
c. Without limiting the foregoing, if the presence of any Hazardous Materials on, under or about the Subleased Premises caused by Sublessee, its agents, employees, contractors, or invitees results in an unpermitted, unscheduled or unauthorized release or contamination of the Subleased Premises by such Hazardous Materials at any time during the Term or any extension thereof, then Sublessee shall at its sole cost and expense promptly take all actions necessary to return the Subleased Premises to the condition existing prior to the unpermitted, unscheduled or unauthorized release of any such Hazardous Materials on the Subleased Premises.
d. Sublessee shall promptly notify the Sublessor of the occurrence of any of the following events: (i) receipt by Sublessee of any correspondence or communication from any governmental entity regarding the application of Environmental Laws to the Subleased Premises or the investigation or enforcement by such governmental entity of any such Environmental Laws in connection with Sublessee’s occupancy or use of the Subleased Premises, and (ii) unpermitted, unscheduled or unauthorized release of any Hazardous Materials on the Subleased Premises which may occur at any time during the Term (or any extension thereof) of the Sublease.
e. To the extent Sublessee may conduct any use or activity on the Subleased Premises which includes the use, handling, transport, or disposal of any SCLAA Standard Sublease Page 20 Boeing Bldg 676, 677 & 678 Hazardous Materials in quantities which exceed the threshold amounts authorized under California Health and Safety Code Section 25507, Sublessee shall, at its sole cost and expense, prepare and submit to the City of Victorville (or designated local Certified Unified Program Agency “CUPA”) for approval, renewal or amendment, as applicable, a Business Plan for the Subleased Premises, as the term “Business Plan” is described under California Health and Safety Code Section 25505.
f. Notwithstanding any of the foregoing, in the event Sublessee, its agents, employees, contractors, or invitees, fails to use and maintain the Subleased Premises in accordance with the provisions of this Section 31, Sublessor and/or the City of Victorville (the “City”) shall, after providing Sublessee notice and a reasonable opportunity to cure any such failure, have the right, but not the obligation, to enter the Subleased Premises and undertake remedial action as necessary in order to ensure that the Subleased Premises are in compliance with all Environmental Laws. In such event, Sublessee shall reimburse Sublessor and/or the City for all reasonable sums incurred by it for such remediation activities for which Sublessee is responsible pursuant to Sections 30 and 31. In such event Sublessor may, in its sole discretion, and not limiting its ability to recover through any other means provided in law or equity, determine to deduct all or a part of such sums due under this section from the Security Deposit.
32. Surrender of Subleased Premises. On the Expiration Date, Sublessee shall surrender and deliver possession of the Subleased Premises to the Sublessor clean and free of debris and in as good condition as it was on the Sublease Commencement Date, reasonable wear and tear excepted.
33. Compliance with Laws. Sublessee shall comply with all applicable Federal, State, and local laws, regulations and standards that are or may become applicable to Sublessee’s activities on the Subleased Premises (hereafter collectively “Laws”, including without limitation the SCLA and FAA Rules and Regulations). Sublessee agrees to abide by and conform to the SCLA Rules and Regulations, attached hereto as Exhibit C, and incorporated herein by this reference as such may be amended from time to time, and to cause its officers, agents, employees, suppliers, shippers, customers, and invitees to so abide and conform. The Sublessor shall have the right, from time to time, to modify, amend and enforce said rules and regulations. In addition, Sublessee agrees to abide by the Selected FAA Rules and Regulations, attached hereto as Exhibit E and incorporated herein by this reference, as such may be amended from time to time, and to cause its officers, agents, employees, suppliers, shippers, customers, and invitees to so abide and conform. Sublessor shall not be responsible to Sublessee for the noncompliance with said rules by other tenants, their officers, agents, employees, and invitees. The judgment of any court of competent jurisdiction, or the admission of Sublessee in a proceeding brought against Sublessee by any government entity, that Sublessee has violated any such Laws (except where such admission may be the basis for settlement) shall be conclusive as between the Sublessor and Sublessee and shall constitute grounds for declaration of default, breach, forfeiture, and termination of this Sublease by the Sublessor.
SCLAA Standard Sublease Page 21 Boeing Bldg 676, 677 & 678
34. Defaults.
a. In the event Sublessee should default in the performance of any covenant or condition of this Sublease (excluding the payment of any monthly rent or other amounts due hereunder) and such default is not cured or removed within thirty (30) days after service of written notice upon Sublessee of such default in the performance of any covenants and conditions; then in such event, the Sublessor shall have the right and option to terminate this Sublease, to re-enter the Subleased Premises, to evict Sublessee and to remove Sublessee’s possessions, all without being deemed guilty of any trespass, and without prejudice to any claim for arrears of rent or breach of covenant.
Notwithstanding the foregoing, if Sublessee, prior to the expiration of such thirty (30) day period for default diligently commences to cure such default but is unable to do so within the thirty (30) day period, then such period shall be extended for an additional thirty (30) days provided Sublessee continues to make a diligent effort to cure the default.
The occurrence of any of the following events shall also be a Default under this Sublease; (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 or any successor statue thereto (unless, in the case of a petition filed against Sublessee, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Sublessee’s assets located at the Subleased Premises or of Sublessee’s interest in this Sublease, where possession is not restored to Sublessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all Sublessee’s assets located at the Subleased Premises or of Sublessee’s interest in this Sublease, where such seizure is not discharged within thirty (30) days; provided, however, in the event that any provision of this paragraph is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.
b. Failure to pay Monthly Base Rent or any other amounts required to be paid to Sublessor by Sublessee when due shall also be deemed a default which Sublessee shall cure such default within ten (10) business days after service of written notice.
c. Any statutory notice required as part of any eviction action or similar type of proceeding may be included with any notice of default given pursuant to this Section and the Sublessor need not declare a default and have such default remain uncured prior to delivery of such statutory notice.
35. Remedies of the Sublessor. In the event of any breach of the Sublease by Sublessee and the cure periods described in Section 34 hereof have expired, the Sublessor may at any time thereafter, with or without notice or demand and without limiting the Sublessor in the exercise of any other right or remedy which the Sublessor SCLAA Standard Sublease Page 22 Boeing Bldg 676, 677 & 678 may have by reason of such breach, do any of the following:
a. terminate Sublessee’s right to possession of the Subleased Premises by any lawful means, in which case this Sublease shall terminate, and Sublessee shall surrender possession of the Subleased Premises to the Sublessor. This may involve the Sublessor filing an unlawful detainer action and receiving a court order for Sublessee to vacate the premises. In any such event, the Sublessor shall be entitled to recover from Sublessee all damages incurred by the Sublessor by reason of Sublessee’s default, including, but not limited to the cost of repairing or restoring damages to the Subleased Premises caused by Sublessee, the cost or removal of Sublessee’s improvements, fixtures and other contents of the Subleased Premises, costs associated with past or future brokerage commissions and marketing expenses and the other costs payable by the Sublessor in connection with the recovery of possession of the Subleased Premises, including but not limited to reasonable attorneys’ fees and court costs, as well as: (a) the worth at the time of award by the court having jurisdiction thereof of the unpaid rent which had been earned at the time of termination; and (b) the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the Term after the time of such award may exceed the amount of such rental loss for the same period that Sublessee proves could be reasonably avoided; or
b. pursue any other remedy now or hereafter available to the Sublessor under the laws or judicial decisions of the State of California.
36. Default of Sublessor. In the event Sublessor should default in the performance of any covenant or condition of this Sublease and such default is not cured or removed within thirty (30) days after service of written notice of default upon Sublessor, then, Sublessee shall have the right and option to terminate this Sublease. If Sublessor, prior to the expiration of such thirty (30) day period for a default, diligently commences to cure such default, but is unable to do so within the thirty (30) day period, then such period shall be extended for an additional thirty (30) days provided Sublessor continues to make a diligent effort to cure the default. In the event of an uncured default Sublessee shall have all remedies available at law or in equity for any default or breach of this Sublease by the Sublessor.
37. Force Majeure-Unavoidable Delays. If the performance of any act required by this Sublease to be performed by either Party is prevented or delayed by reason of an act of God; strike; lockout; labor disputes; inability to secure materials; unreasonably restrictive governmental laws or regulations; or any other cause except financial inability that is not the fault of the Party required to perform the act, the time for performance of the act will be extended for a period equivalent to the period of delay, and performance of the act during the period of delay will be excused. However, nothing contained in this Section shall excuse the prompt payment of rent by Sublessee as required by this Sublease or the performance of any act rendered difficult solely because of the financial condition of the Party required to perform the act.
SCLAA Standard Sublease Page 23 Boeing Bldg 676, 677 & 678
38. Notices. Any and all notices or demands required or permitted to be given hereunder must be mailed by registered or certified mail, return receipt requested, or sent by a nationally recognized overnight courier, addressed as follows:
To the Sublessor: Southern California Logistics Airport Authority 18374 Phantom West
Victorville, CA 92394
Attn: Airport Director
With copies to: Green de Bortnowsky, LLP
30077 Agoura Court, Suite 210
Agoura Hills, CA 91301
Attn: Andre de Bortnowsky, Esq.
To the Sublessee: The Boeing Company
Attn: Global Real Estate
Global Real Estate, MC S221-1400
6200 James S. McDonnell Blvd.
Bulk Mail 101 Dock
Berkeley, MO 63134
With Copies To: The Boeing Company
C/O MBG Consulting Inc.
980 N. Michigan Ave., Suite 1000
Chicago, IL 60611-4521
or at such other address or addresses that either Party may hereafter designate in writing to the other. All notices shall be effective upon being deposited in the United States mail, or sent by overnight courier, in the manner prescribed in this Section 38; however, the time period in which a response to any such Notice must be given shall commence to run from the date of the Notice if sent by United States mail, or the day after being sent by overnight courier. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to constitute receipt of the notice, demand, request or communication sent. Notice of change of address shall be given by written notice in the manner detailed in this Section 38.
39. Miscellaneous.
a. One or more waivers of any provision of this Sublease by the Sublessor shall not be construed as a waiver of a subsequent breach of the same provision and the Sublessor’s consent or approval shall not be deemed to waive or render unnecessary the Sublessor’s consent or approval to or of any subsequent or similar act by Sublessee.
SCLAA Standard Sublease Page 24 Boeing Bldg 676, 677 & 678
b. If either Party to this Sublease shall bring any action for any relief against the other, declaratory or otherwise, to enforce the terms hereof or to declare rights here under (collectively, an Action), the losing Party shall pay to the prevailing Party reasonable attorneys’ fees and costs incurred in bringing and prosecuting such Action and/or enforcing any judgment, order, ruling, or award (collectively, a Decision) granted therein, all of which shall be deemed to have accrued on the commencement of such Action and shall be paid whether such Action is prosecuted to a Decision. Any Decision entered in such Action shall contain a specific provision providing for the recovery of attorneys’ fees and costs incurred in enforcing such Decision. The court may fix the amount of reasonable attorneys’ fees and costs on the request of either Party. For the purposes of this paragraph, attorneys’ fees shall include, without limitation, fees incurred in the following: (1) post-judgment motions and collection actions; (2) contempt proceedings; (3) garnishment, levy, and debtor and third party examinations; (4) discovery; and (5) bankruptcy litigation. “Prevailing Party” within the meaning of this paragraph includes, without limitation, a Party who agrees to dismiss an Action upon the other Party’s payment of the sums allegedly due or performance of the covenants allegedly breached, or who obtains substantially the relief sought by it. Nothing contained in the Section shall be interpreted to mean that Sublessor has agreed to arbitrate any dispute which may arise hereunder.
c. This Sublease can be modified, supplemented, amended, or rescinded only by a writing expressly referring to this Sublease and signed by authorized representatives of the Parties.
d. If any provision of this Sublease or any application thereof shall be invalid or unenforceable, the remainder of this Sublease and any other application of such provision shall not be affected thereby. Unless otherwise expressly provided herein, any approval or consent of Sublessor required hereunder shall not be unreasonably withheld or delayed. This Sublease shall be binding upon and inure to the benefit of and be enforceable by the respective successors of the Parties hereto. The Section headings in this Sublease are for purposes of reference only and shall not limit or define the meaning hereof.
e. This Sublease contains the entire understanding and agreement of the Parties, supersedes all prior understandings and agreements, and cannot be changed orally. This Sublease shall be construed in accordance with the laws of the State of California. Time is of the essence.
f. Any conflict between the printed provisions, exhibits, or addenda of this Sublease and the typewritten or handwritten provisions, if any, shall be controlled by the typewritten or handwritten provisions provided such typewritten or handwritten provisions are initialed by both Parties.
SCLAA Standard Sublease Page 25 Boeing Bldg 676, 677 & 678
g. This Sublease shall be of no force or effect unless executed by both Parties. Each person executing this Sublease for the respective Parties expressly represents and warrants that he or she has the authority to enter into leases on behalf of and bind the entity on whose behalf this Sublease is executed.
h. This Sublease may be executed by the Parties in counterparts, and when executed by each of the Parties, each counterpart shall be deemed to be a part of the same instrument.
[END OF THIS PAGE – SIGNATURES FOLLOW]
SCLAA Standard Sublease Page 26 Boeing Bldg 676, 677 & 678 IN WITNESS WHEREOF, the Parties have executed this Sublease as of the day and year first written above.
SUBLESSEE
THE BOEING COMPANY
_______________________________ _____________________ Authorized Signatory Date
Title
SUBLESSOR
SOUTHERN CALIFORNIA LOGISTICS AIRPORT AUTHORITY (“SCLAA”)
__________________________
_____________________
Keith C. Metzler Date
Executive Director
ATTEST:
__________________________
_____________________
Jennifer Thompson Date
SCLAA Secretary
APPROVED AS TO STANDARD FORM:
________________________ _____________________
Andre de Bortnowsky Date
SCLAA Legal Counsel
RISK MANAGER
__________________
_____________________
Sandra Bostick Date
SCLAA Standard Sublease Page 27 Boeing Bldg 676, 677 & 678
EXHIBIT A
DESCRIPTION OF SUBLEASED PREMISES
Hangar Building 676 consisting of approximately Seventeen Thousand Nine Hundred Thirty (17,930) square feet of first (1st) and second (2nd) floor east side and west side office space, approximately Sixty -Three Thousand Nine Hundred Nineteen (63,919) square feet of hangar space and approximately One Thousand Two Hundred Twenty - One (1,221) square feet of mechanical room space for a total combined square footage of approximately Eighty Three Thousand Seventy (83,070) square feet, located on the SCLA at 13010 Aerospace Drive, Victorville, CA 92394, as depicted on Exh ibit A-1 and Exhibit A-2; and
Building 677 consisting of Nose Dock 5, Nose Dock 6 and Nose Dock 7 each consisting of approximately One Thousand One Hundred Twenty-Two square feet of storage space for a total of approximately Three Thousand Three Hundred Sixty-Six (3,366) square feet of storage space, located on the SCLA at 12950 Aerospace Drive, Victorville, CA 92394, as depicted on Exhibit A-5 and Exhibit A-6; and
Hangar Building 678 consisting of approximately Twenty-Six Thousand Five Hundred Ninety-Six (26,596) square feet of first (1
st) and second (2nd) floor central and east side
office space, approximately Eighty-Nine Thousand Two Hundred Six (89,206) square feet of hangar space, approximately One Thousand Twenty-Nine (1,029) square feet of foam room space, and approximately Four Hundred Ninety-Two (492) square feet of shipping and receiving space for a total combined square footage of approximately One Hundred Seventeen Thousand Three Hundred Twenty -Three (117,323) square feet, located on the SCLA at 18200 Phantom West , Victorville, CA 92394, as depicted on Exhibit A -7, Exhibit A-8, and Exhibit A-9.
Right of Use ramp space adjacent to Hangar Building 676 on the north and south side of the building as depicted in black on Exhibit A-3. Off Airport v ehicle parking space is located to the east of Hangar Building 676 and is depicted as 676/678 Shared Right of Use and is depicted in blue on Exhibit A-3. A ccess, on a non- exclusive basis, during flight test operations, to aircraft parking space for two (2) Boeing aircraft (referred to as “Cargo Ramp Space”) the location of which is subject to change upon approval by Sublessor. The general location of the Cargo Ramp Space during flight test operations shall be west of Building 728 on the Cargo Ramp as depicted on Exhibit A -4. Specific parking assignments will be coordinated by the Airport Operations Division; and
Right of Use ramp space is adjacent to Hangar Building 678 on the north and south side of the building as depicted in black on Exhibit A -3. Off Airport v ehicle parking space is located to the east of Hangar Building 678 and is depicted as 676/678 Shared Right of Use and is depicted in blue on Exhibit A-3; and
SCLAA Standard Sublease Page 28 Boeing Bldg 676, 677 & 678 A non-exclusive right of use basis, aircraft parking space (“Aircraft Staging Space”) adequate for the parking of two (2) B-747 sized aircraft, the location of which is depicted on Exhibit A-4 as Right of Use Aircraft Staging. The Aircraft Staging location is subject to change upon approval by Sublessor and reasonable advance written notice to Sublessee. In the event Sublessee requires aircraft parking space greater than that provided as Aircraft Staging Space, such additional aircraft parking space shall be approved first by the Airport Director (or its designee).
These properties combined in total, with the improvements thereon, represent the Subleased Premises.
Exhibit A-3
676/678
Site Map
Cargo Ln
Building
682
Flightline Road
Taxiway Charlie
Non-Exclusive Ramp Space
For 2 Boeing Aircraft
During Flight Test Operations
To be Coordinated
Through Airport Operations
Building
685
Building
681
Building
728
Building
717
Cargo Ramp
Exhibit A-4
Right of Use
Aircraft Staging
+/-165,000 SqFt
275 Ft
600 Ft
Roll Up DoorRoll Up DoorRoll Up DoorRoll Up Door
RESTROOM
NON -
USABLE
SPACE
NON -
USABLE
SPACE
NON -
USABLE
SPACE
All Docks:
13.5' High Side Walls
27' High at Peak Center
33' Wide
34' Deep
1,122 SqFt
Nose Dock 8
Separate Leasehold
1,122 SqFt
Nose Dock 7
1,122 SqFt
Nose Dock 6
1,122 SqFt
Nose Dock 5
Bldg 677
Exhibit A-5
Nose Dock 5 +/- 1,122 SqFt
Nose Dock 6 +/- 1,122 Sqft
Nose Dock 7 +/- 1,122 Sqft
Total3,366 SqFt
Bldg 671NoseDock 1Bldg 675Bldg 677NoseDock 2NoseDock 3NoseDock 4NoseDock 5NoseDock 6NoseDock 7NoseDock 8 PumpHouse 1
Bldg686Bldg 676
Bldg867Exhibit A-6
SCLAA Standard Sublease Page 29 Boeing Bldg 676, 677 & 678
EXHIBIT B
TENANT IMPROVEMENTS
Subject to the terms and conditions of the Sublease, Sublessor and Sublessee hereby affirm and acknowledge that the following items of work shall represent the Tenant Improvements contemplated for Hangar Building 676 and Hangar Building 678 within this Sublease. The Tenant Improvements must be approved in writing by Sublessor prior to any work being performed.
Location Description Notes
Hangar Bldg 676 HVAC System west office. Replace swamp cooler in west office with air handling unit.
Repair existing DX air unit in east office.
Hangar Bldg 676 Electrical system upgrade.
Hangar Bldg 676 Hangar door repair of pneumatic system.
Hangar Bldg 676 Replacement of northwest roll up door.
Hangar Bldg 676 LED lighting and associated wiring upgrade.
Hangar Bldg 676 Main floor restroom upgrades. Minimal remodel of existing original restrooms to accommodate
occupancy. Fixtures, partitions, paint, tile,
ventilation, lighting. No changes being made
for ADA compliance. Existing non-conforming.
Other improvements to Bldg 676 as approved.
Location Description Notes
Hangar Bldg 678 Hangar tail dock door replacement.
Hangar Bldg 678 LED lighting and associated wiring upgrade.
Hangar Bldg 678 Carpet replacement on east and west side offices upstairs.
Other improvements to Bldg 678 as approved.
SCLAA Standard Sublease Page 30 Boeing Bldg 676, 677 & 678
EXHIBIT C
SCLA RULES AND REGULATIONS
Southern California
Logistics Airport
Rules and Regulations
Amended
April 17, 2007
SOUTHERN CALIFORNIA LOGISTICS AIRPORT RULES AND REGULATIONS Pg.1 of 38
RULES AND REGULATIONS FOR THE U SERS OF SOUTHERN CALIFORNIA LOGISTICS AIRPORT; ESTABLISHING FEES FOR THE VARIOUS USES; DEFINING TERMS; PROHIBITING OR LIMITING CERTAIN ACTIVITIES; FIXING PENALTIES FOR VIOLATIONS; AND PROVIDING FOR AMENDMENTS TO
THESE RULES AND REGULATIONS AS MAY BE NEEDED FROM TIME TO TIME SECTION 1. SHORT TITLE:
1.1 These Rules and Regulations shall be referred to as the Southern California Logistics Airport (SCLA) Rules and Re gulations. It ma y be amended by a majority vote by the Board of the Southern California Logistics Airport Authority (SCLAA).
SECTION 2. APPLICABILITY:
2.1 These Rules and Regulations apply equally to every Airport User. The Airport Operating Manual or Specifications, as applicable, adopted in accordance with FAR Part 139, and the Ai rport Policies and Proc edures Manual are hereby made by reference a part of these Rules and Regulations.
SECTION 3. RESPONSIBILITIES:
3.1 Management: It shall be the responsibility of the Airport Director to fairly and impartially administer these Rules and Regulations.
3.2 Users: It shall be the responsibility of ev ery Airport User, pilot or other, to become familiar with the SCLA Rules and Regulatio ns and to obey those Rules and Regulations. Current copies of these Rules and Regulations will be maintained reflecting an y amendments and will be posted at the SCLA Administrative Office and at Million Air. Additional copies will be provided by the SCLA Airport Director through the SCLA Administrative Office to any Airport User who requests such copy.
SECTION 4. DEFINITIONS:
For the purposes of these Rules and Regulations, th e following definitions and meanings shall apply unless otherwise specified:
4.1 “Air Operations Area” or “AOA” means the area upon which aircraft are able to operate and includes the runways, taxiways, taxi lanes, apron area, and the vehicle and personnel gates that lead to these areas.
4.2 “Air Carrier” means an y person who undertak es directly, by lease, or other arrangement, to e ngage in air transportation of persons or things. An “Air Carrier” operates in various categories, under authority or certification by the FAA and holds a curre nt FAA certificate to transport air pass engers or property for hire.
SOUTHERN CALIFORNIA LOGISTICS AIRPORT RULES AND REGULATIONS Pg.2 of 38
4.3 “Aircraft” means a device that is used, or is intended to be used, for flight in the air. “Aircraft” includes airplanes, helicopters and gliders, and lighter than air devices such as blimps or balloons, but does not include hang gliders.
4.4 “Aircraft Owner” shall mean a Pers on who holds title to an Aircraft.
4.5 “Aircraft Operator” shall mean the Person who is operating or controlling an Aircraft while said Aircraft is on Airport property.
4.6 “Aircraft Storage” shall have t he same meaning as “Stored Aircraft”.
4.7 “Airport” means the SCLA , its buildings and facilities, all lands owned and or controlled by the SCLAA contiguous to the airport, including airspace above such land and the designated approaches thereto.
4.8 “Airport Director” means that person so appointed by the SCLAA or his designated representative.
4.9 “Airport Master Security Program” or “Airport Security Program” means the Security Program, which is the responsibility of an Airport Operator pursuant to TSA 1542.
4.10 “Airport Operations and Security Department” or means the Airport Operations and Security Department of the Southern California Logistics Airport.
4.11 “Airport Security Areas” or “Sec ure Areas” means Air Operations Areas, roadways, and common Air Carrier areas within terminal fa cilities (i.e. baggage makeup areas), excluding exclusive leaseh old structural areas, to which public access is limited or denied under Airport Master Security Program.
4.12 “Airport Security Coordinator” or “ASC” means an individual appointed by the Airport Director, charged with the responsibility to implement and enforce the Airport Master Security Program, employed by the City of Victorville and under the direction of the Airport Director, or the Airport Security Coordinator’s designated representative.
4.13 “Airport Tenant” mean s an individual, partnershi p, corporatio n or other business entity, and its agents, employ ees, representatives, and subtenants which occupies or controls all or part of Airport areas, buildings or other facilities which they lease from the Southern California Logistics Airport Authority.
SOUTHERN CALIFORNIA LOGISTICS AIRPORT RULES AND REGULATIONS
Pg.3 of 38
4.14 “Airport Tenant Security Program” s hall have the same meaning as set forth in TSA1542.113, entitled “Airport Tenant Security Programs.”
4.15 “Airport User” means any Person who uses the Southern California Logistics Airport, including but not limited to, Airport Tenants and subtenants, Fixed Base O perators, Air Carriers, Aircraft Owners, Aircraft Operators, Commercial Operators, passengers, and their employees, agents, representatives, agents, successors and assigns.
4.16 “Authorized Person” means an i ndividual authorized with a Personnel Identification Badge issued by the Airport Securi ty Coordinator, or his designated representative, to have unescorted access authority to Airport Security Areas.
4.17 “Air Traffic” means Aircraft operating in the air or on an Airport surface, exclusive of loading ramps or parking areas.
4.18 “Air Traffic Clearance” means an aut horization issued by Air Traffic Control personnel for an Aircraft to proceed under specified traffic conditions within controlled airspace.
4.19 “Air Traffic Control” or “ATC” sha ll mean the Air Traffic Control of the Southern California Logistics Airport.
4.20 “Airworthy Condition” means a conditi on wherein an Aircraft can take flight under its own power. See definition of “Non-Airworthy Aircraft” below.
4.21 “Autorotation” means a rotorcraft flight s condition in which the lifting rotor is driven entirely by action of the air w hen the rotorcraft (helicopter) is in motion.
4.22 “Balloon” means a lighter-than air aircraft, which is not engine-driven.
4.23 “Based Aircraft,” means Aircraft that ar e parked on the Airport for thirty (30) days or longer and are not part of an aircraft storage program.
4.24 “Ceiling” means the height above the ear th's surface of the lowest layer of clouds or obscuring phenomena, that is re ported as “broken,” “overcast,” or “obscuration,” and is not classified “thin” or “partial”.
4.25 “City” means the City of Victorville.
4.26 “Commercial Operator” means any Pe rson who, for compensation or hire, engages in the carriage of persons, prope rty, or mail in air commerce, or engages in other aerial activity such as flight instruction, aerial photography, fire fighting, agricultural aviation activities, or traffic surveillance.
SOUTHERN CALIFORNIA LOGISTICS AIRPORT RULES AND REGULATIONS Pg.4 of 38
4 .27 “Criminal Hi story Records Chec k (CHRC)” means a fi ngerprint-based criminal history records check as described in 49 CFR § 1542.
4.28 “Commercial Use” means use of SCLA for revenue-producing commercial activities.
4.29 “Dismantled Aircraft” means an Airc raft which has been disassembled to a point where it is not reasonable to assume that said Aircraft can be reassembled and placed in an Airworthy Condition.
4.30 “Driving Permit” means a permit issued by the Airport Director or his designee in order for an Individual to operate a Vehicle on the Airport.
4.31 “Escort” means an Authorized Pe rson or Authorized Persons accompanying, monitoring, directing and controlling the actions of an Individual or Individual s who are not displaying Personnel Identification Badges, and/or who are not otherwise Authorized Persons, within Airport Security Areas. The Authorized Person(s) performing an Escort must be displaying valid Personnel Identification Badges, must be accompanying the Individual or Individuals for perfo rmance of direct job duties and must ensure that those Individu als who are being escort ed remain within sight and sound at all times.
4.32 “Executive Director” means the Execut ive Director of the Southern California Logistics Airport Authority.
4.33 “FAA” means the Federal Aviation Administration of the United States Government or any federal agencies succeeding to its jurisdiction.
4.34 “Fixed Base Operator” means any Person who rents, leases, or owns facilities located on SCLA, who by virtue of his specific type of aviation or aviation related activity, requires the occupancy of a site with contiguous aircraft apron and direct access to t he Aircraft Operation Area, and who engages in a business activity providing aviation sales or service, including but not limited to any of the following:
1. Selling and/or servic ing new and used Aircraft and component parts;
2. Aircraft maintenance and repairs;
3. Sales and/or repair of avionics;
4. Aviation training (including gr
ound or flight instruction);
5. Aerial photography;
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6. Air ambulance service;
7. Aircraft agricultural operat ions (crop dusting, spraying, or the application of seed, fertilizers, pesticides, defoliants, etc);
8. Aircraft rental, charter, leasing;
9. Aircraft Storage;
10. Fuel and oil sales and servicing; and
11. Aircraft servicing or gr ound handling including cargo handling, baggage handling, lavatory service, water service, air starts, ground power, or other elements related to aircraft handling.
4.35 ”Flight Visibility” m eans the average forward hori zontal distance from the cockpit of an Aircraft in flight, at which prominen t unlighted objects may be seen and identified by day, and prom inent lighted objects may be seen and identified by night.
4.36 “Ground Visibility” means prevailing horizontal visibility near the earth's surface.
4.37 “Helicopter” means a rotor driven aircraft (rotorcraft) that, for its horizontal motion, depends primarily on its engine-driven rotors.
4.38 “IFR” means Instrument Flight Rules covering meteorological conditions below the minimums for flight under visual (VFR) conditions.
4.39 “Individual” means a natural person.
4.40 “Maintenance” means inspection, ov erhaul, repair, preservation, and the replacement of parts, including preventive maintenance.
4.41 “Movement Area” mean s the runways, taxiways , and other areas of the Airport, which are ut ilized for taxiing, takeoff, an d landing of Aircraft. The Movement Area does not include parking and loading ramps. Entry into the Movement Area requires ATC approval.
4.42 “Night” means the ti me between the end of ev ening civil twilight and the beginning of morning civil twilight as published in the American Air Almanac, converted to local time.
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4.43 “Non-Airworthy Condition ” means when an Aircraft cannot take flight under its own power as a result of being in disrepair or in the process of being disassembled.
4.44 “Notice of Violation” means a written notification of non-compliance with these Rules and Regulations, issued by the Ai rport Director or his designated representative.
4.45 “Person” means an individual, firm, partnership, corporation, company, association, joint-stock association, or gover nmental entity, and includes a trustee, receiver, assignee, or similar representative of any of them.
4.46 “Personnel Identification Badge” means a Personnel Id entification Badge issued to an Individual by the Southe rn California Logistics Airport for purposes of granting that Individual unescorted access authority to the Restricted Area.
4.47 “Ramp” means an improved surfaced area reserved exclusively for the parking and taxiing of Aircraft.
4.48 “Restricted Area” means all areas or facilities accessible only by Authorized Persons or Person s under Escort, and includin g all Ramp areas and the Aircraft Operations Area (AOA).
4.49 “Roadway” means that po rtion of an area improved or designed or ordinarily used for vehicular travel. A roadway on the Airport Operations Area is called a vehicle service road (“VSR”).
4.50 “Runway” means an im proved surfaced area rese rved exclusively for the landing and taking off of Aircraft.
4.51 “Scheduled Air Carrier” means any Pe rson providing scheduled passenger or cargo service from the Airport in ac cordance with a published schedule and having at least one scheduled departur e per day, or no less than five scheduled departures per week, and operating under authority of the Federal Aviation Administration and the Airport.
4.52 “Security Perimeter” means the portio n of the Airport that is enclosed by fencing, walls or other barriers, and to which ac cess is controlled through designated entry points.
4.53 “SCLA” means Southern California Logistics Airport.
4.54 “SCLAA” means Southern California Logistics Airport Authority.
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4.55 “Security Devices” means equipmen t installed or plac ed by or under the direction of the Southern California Logistics Airport Authority, or designated representative, to monito r or control entrances to and exits from Airport Security Areas. “Security Devices” include, but are not limited to, bells, sirens, communication equipment, locks and corresponding keys, emergency exits, electronic access control and other security equipment.
4.56 “Security Identification Display Area ” or “SIDA” shall have the same meaning as set forth in TSA1542.205. Before being granted unescorted access to the SIDA, Individuals must undergo a Cr iminal History Re cord Check and employment history verification.
4.57 “Security Screening Area” means an access po int, including entrances and exits, to the Airport Security Areas, Secure Areas and the Sterile Areas, where Vehicles, equipmen t, Individuals, and belonging s are inspected prior to entrance.
4.58 “Sterile Area” means an area to which access is controlled by the inspection of Individuals and property in accordance with FAA and TSA requirements.
4.59 “Stirling Airport International” or “SAI” means SCLA’s development partner.
4.60 “Stored Aircraft” means aircraft that are parked at/on airport property and are part of an aircraft storage program.
4.61 “Taxiway” means an improved surfac ed area reserved exclusively for use by aircraft to proceed to and from ramp and runway areas.
4.62 “Traffic Pattern” means the traffic flow that is prescribed for aircraft landing at or taking off from SCLA.
4.63 “Unnecessary Noise” me ans any engine noise that is greater than the level produced when the engines are at idle except when required for taxiing of the aircraft, takeoff or landings.
4.64 “Vehicle” means every device in, upon or which any Individual or property is or may be transported or drawn upon a roadway, exce pting devices moved by human power or used exclusively upon st ationary rails or tracks. A bicycle shall be considered a vehicle under all porti ons of these Rules and Regulations, which govern right-of-way.
4.65 “Vehicle Owner” means a person who holds the legal title of a vehicle.
4.66 “Vehicle Service Road ” or “VSR”. (See Roadway.)
4.67 “VVEDA” means the Victor Valley Economic Development Authority.
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4.68 “VFR” means Visual Fl ight Rules covering meteor ological conditions, above those requiring flight under IFR conditions.
4.69 “Word Construction”: The following co nstruction applies throughout these Rules and Regulations:
1. Words importing the sin gular include the plural,
2. Words importing the plural include the singular; and,
3. Words importing the ma sculine gender include the
feminine and the neutral gender.
SECTION 5. NECESSITY:
5.1 These Rules & Regulati ons are enacted to protect the h ealth, safety and peace, and to promote the welfare and convenience of the general public using SCLA, or affected by activities related to the Airport by providing for the orderly conduct of activities on, or related to, the Airport. The use of the Airport or any of its facilities in any manner shall create an obligation on the part of the Airport User to obey all of the rules and regulations herein provided.
SECTION 6. BASED AIRCRAFT:
6.1 Any Person desiring to base an Aircraft at SCLA shall register such Aircraft at the Airport Operations and Security Department as soon as possible but not later than 24 hours after the arrival of the Aircraft. If a c hange in ownership occurs while the Aircraft is based at the Airport, the new Aircraft Owner shall re-register the Aircraft with the Airport Operations and Security Department, again, no later than 24 hours after the change in ownership occurred.
6.2 Except as specifically set forth in an Airport land or facility sublease, Aircraft in a Non-Airworthy Condition shall not be pe rmitted to remain on the Airport in excess of five (5) days without the ex press prior written permission of the Airport Director. Such Aircraft shall be removed from the Airport or stored at the Aircraft Owner’s expense.
SECTION 7. AIRCRAFT STORAGE AND PARKING:
7.1 Aircraft shall only be st ored or parked at places as set forth in such Person’s sublease or as may be authorized by the Airport Director, and such storage or parking shall be at the sole risk of the Aircraft Owner and/or Aircraft Operator, and without any responsibility to SCLAA, VVEDA or Stirling Airport International, or any of their officers, employees, agents or representatives, for any loss of, or damage to the Aircraft while so stored or parked. The Aircraft Owner and/or the Aircraft O perator shall be responsi ble for the tying-down and/or securing of his Ai rcraft. The Aircraft Owner and/or Aircraft Operator shall likewise be responsibl e for any liability arising from or caused by his
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Aircraft or his activities. All Airport Tenants desiring to store Aircraft at SCLA must notify the Airport Director in writing prior to the Aircraft arriving at SCLA.
SECTION 8. COMMERCIAL ACTIVITY:
8.1 No Person shall utilize SCLA for any revenue-producing commercial activities without the express written permi ssion of SCLAA or its designated representative, and obtaining a City of Victorville Busi ness License for such activities, and paying the fees and ch arges established for such use or license.
SECTION 9. AIRPORT FEES
:
9.1 Funding for Airport opera tions and capital improvem ents is deri ved through various types or classes of Airport User Fees. Airport User fees are specifically established to compensate the Airport for the use, maintenance and repair of Airport facilities, as well as to minimize the need for on-going general taxpayer support.
9.2 A schedule of rates and c harges for the use of the Airport and its facilities may be found as Attachment A to these Rules and Regulations.
9.3 Any Aircraft Owner or Aircraft Operator who fails to pay any fee duly charged for Aircraft owned or controlled by hi m shall have such Aircraft subject to impounding until the fees are paid, along with any im pound fees, or until the Aircraft is sold for charges.
SECTION 10. HOURS OF OPERATION:
10.1 SCLA shall be open for public use at all hours of the day and night, subject to any restrictions imposed by the Airport Director due to inclement weather, condition of the landing ar ea, presentation of special events, construction or repair activities, or similar causes. The control tower is open 24 hours a day, 7 days a week. The Airport is attended from 6:00 A.M. to 10:00 P.M. daily by Million Air. Services may be obtained from Million Ai r during said hours at telephone number (760) 246-7794 or UNICOM (122.85 MHz).
SECTION 11. UNATTENDED AIRCRAFT:
11.1 No Aircraft shall be left unattended on the Airport unless properly secured or within a hangar. Aircraft Owners and/or Aircraft Operators of Aircraft left so unattended shall be liable for damage to other Aircra ft or property resulting from the failure to adequately secure or tie down the Aircraft.
SECTION 12. MAINTENANCE:
12.1 Unless otherwise authorized by the Airport Director, or specified as a permitted use in an Airport facility or land sublease, no Aircraft or Vehicle maintenance, other than that which is required to remove damaged Aircraft from the Runway or Taxiway(s), or that wh ich is necessary to replac e a flat tire, shall be
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performed at SCLA except in areas sp ecifically designated by the Airport Director for that purpose.
SECTION 13. EQUIPMENT REQUIREMENTS:
13.1 Every Aircraft usin g SCLA shall be equipped with a fully functional, two-way radio, except when operating into or from the Airport under an FAA waiver for radio maintenance. The ATC frequen cy is 118.35 MH z and the ground control frequency is 124.45 MHz. Weather and traffic advisories are broadcast on 109.40 MHz. No fixed-wing Aircra ft equipped with a tailskid shall operate on any paved surface of SCLA.
SECTION 14. ACCIDENTS:
14.1 Every Person involved in, or witnessi ng an Aircraft operating accident on the Airport shall report promptly the details of such accident to the Airport Director, ATC, or FAA.
14.2 In addition, the Aircra ft Owner and/or the Aircraft Operator, including pilot, shall report fully to the California Di vision of Aeronautics the details on any accident in which there is death or injury, or in which damage to the property of others exceeds $400.00.
14.3 The Aircraft Owner and/or the Airc raft Operator of an Aircraft which is damaged or wrecked in an accident shall be responsibl e for the prompt removal of the Aircraft as directed by the Airport Director.
14.4 Where the Aircraft Owner and/or Airc raft Operator of an Aircraft which is damaged or wrecked in an accident is unable to arrange for removal of such disabled or wrecked Aircraft, the Airport Director shal l have the authority to move, or arrange the removal of, the Aircraft when released (if applicable) by the FAA or the National Transportation Safety Board (NTSB).
14.5 No liability shall be incurred by the SCLAA, SAI, VVEDA, the Airport Director or any of their officers, employees, agents, succe ssors and assigns, for damage aggravated by, or resulting from, removal of an Aircraft pursuant to Section 14.4 of these Rules and Regulations.
SECTION 15. NOISE:
1 5 . 1 N o P e r s o n shall operate any Aircraft in flight or on the ground in such a manner as to cause Unnecessary Noise as determined by applicable Federal or State or local laws and regulations.
SECTION 16. RESTRICTED AREAS:
16.1 Restricted Areas include those area s leased to the Ar my National Training Center, Advanced Unm anned Systems-Concept Ex ploration, Southern California Aviation, Victorville Aerospace LLC, Army Reserve, or other area that has direct access to the AOA. No Person shall enter any Restricted Area
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except (a) employees or invitees of the leaseholder, (b) Persons duly authorized by the Airport Director, including, but not limited to, Authorized Persons who have received Personnel Identification Badges, or (c) security or fire-fighting personnel.
16.2 Every Person who has access to a re stricted area shall close and lock the door, gate or other device immediately after it has been used unless it is under surveillance of a Person who is responsible for controlling entry at that access point.
16.3 Every Airport Tenant w hose premises have total or limited access to any Restricted Areas shall prevent access to the Restricted Areas by Persons who are not authorized to have such access.
16.4 The Airport Director’s staff is authoriz ed to close and lock any door, gate or other device permitting access to a Restricted Area that is found open or unlocked and unattended.
16.5 Every Person to whom a key, code or access device has been issued by the Airport Security Director, or his desi gnated staff, shall us e the key, code or access device to enter a Restrict ed Area only in accordance with any conditions of issuance and only at Restricted Area access points.
16.6 Except where authorized by the Ai rport Director and subject to any conditions of issuance, no Person shall:
1. Loan or give to another Person a key, code or access device issued to him; or
2. Have possession of, or use for any purpose, a key, code or access device that was issued to him by a Person not
having authority to do so.
SECTION 17. ANIMALS:
17.1 No Person shall willfu lly and knowingly allow or permit any animal owned, possessed, or harbored by him to en ter the Airport unless the animal is leashed or restricted in such manner as to be under control, or is in a shipping container, or is otherwise under physical restraint, nor shall any Person allow or permit such animal except “special assistance animals” (i.e. guide dog) to enter any Airport building without the approval of the Airport Director.
SECTION 18. ACCESS TO RUNWAYS AND TAXIWAYS:
18.1 No Person shall enter upon any Runway or Taxiway, or the movement area as defined by FAA, without the express consent of the Air Traffic Control Tower representative.
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SECTION 19. STARTING ENGINES:
19.1 No Person shall start any Aircraft engine at SCLA:
1. Unless a competent opera tor is at the controls;
2. Unless the Aircraft is equipped with adequate brakes fully applied or the wheels are securely blocked with blocks or chocks that can be removed safely (Skid equipped helicopters do not have brakes or chocks);
3. When the Aircraft is in such a po sition that the propeller slipstream or jet blast can cause damage to, or interfere with the operation of, other Aircraft, Vehicles, mobile equipment, hangars, shops, other buildings, or can cause injury to passengers, spectators, or other personnel; and
4. When the Aircraft is within 50 feet of any buildi ng without prior written consent.
SECTION 20. ENGINE RUN-UPS:
20.1 No Person shal l conduct an aircraft engine run-up beyond idle anywhere on the Airport other than in areas designat ed by the Airport Director (with the exception of helicopters, which routinely operate with engines beyond idle as part of normal operations).
20.2 Persons who want to conduct an engine ru n-up beyond idle shall first call ATC on the ground control frequency, 124.45 MHz, and request clearance to one of the two engine run-up areas. ATC will advise the Airport User, given the current wind direction, to proceed to one of two designated engine run-up areas.
20.3 ATC will make the final determina tion of which engi ne run-up area should be used.
20.4 The Person requesting the engine run-up beyond idle will conduct the engine run-up in the ar ea designated by ATC and he shall exercise the necessary caution to ensure no damage is created by the engine run-up.
SECTION 21. TAXIING:
21.1 Only those personnel that have training and are qualified to taxi a particular type of Aircraft are permitted to taxi Aircraft at SCLA.
21.2 No Person shall taxi any Aircraft into , out of, or within any hangar or other building on or adjacent to the Airport.
21.3 No Person shall taxi any Aircraft ac ross the double yellow lines on the edge of Taxiways and the apron.
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21.4 Nor shall any Person move any Aircraft under its own power on the Airport unless that Person is in full control of such aircraft, and has assured himself that there is no danger of collision wi th other Aircraft, Ve hicles, equipment, buildings, or other obstacles. Aircraft shall be taxied at a safe speed.
SECTION 22. DUMPING REFUSE:
22.1 No Person shall place, deposit, or dump any garbage, cans, bottles, papers, ashes, sewage, carcass of any dead animal, offal, trash rubbish, debris or any other refuse in any location on the Airp ort except in containers designed for such purposes.
SECTION 23. FIREARMS:
23.1 No Person shall shoot any projectile from a firearm or other device, into, on, or across any portion of the Airport, nor have in his possession, or under his control, any firearm which is not un loaded and securely wrapped and boxed for shipment, or explosive or explosive device; provided,
23.2 However, that this Se ction does not apply to peace officers, military personnel, or Airport security guards who are acting in the performance of their duties as such. Firearms on Ai rport property are pre-co ordinated with ASCs when possible.
SECTION 24. TRAFFIC PATTERN:
24.1 Every Aircraft before landing and after takeoff shall be flown as directed by ATC.
SECTION 25. TAKE-OFFS AND LANDINGS:
25.1 No aeronautical activity shall be c onducted at SCLA exce pt in conformance with current Federal Aviation Regulations, State of California law and regulations, and these Rules and Regulations.
25.2 All initial takeoffs shall commence at the end of the Runway unless cleared by the ATC Tower.
25.3 Due to the complex mix of Aircra ft that utilize SCLA, there is need to limit those type of aircraft and aerial activities that represent a potential hazard to normal flight operations. The followin g aircraft and aerial activities are restricted from operating at SCLA exc ept in emergency situations or with prior approval of the Airport Director:
1. Hot Air Balloons;
2. Hang Gliders;
3. Parachutists;
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4. Radio Contro lled Aircraft;
5. Ultra Ligh t Aircraft;
6. Gliders; and
7. Motorized Lighter than Air Aircraft.
SECTION 26. AIRCRAFT FUELING AND DEFUELING:
26.1 In accordance with the regulations from the Na tional Fire Protection Association (NFPA), Uniform Fire Code (UFC), and the Department of Transportation (DOT) the following rules and regulat ions must be observed while fueling aircraft:
26.2 All fuel servicing must be done out side of any building or hangar. (NFPA 407 3-10).
26.3 Aircraft shall be located a minimum of fifty (50) feet away from any building openings, doors, windows, etc.
26.4 During fuel handling, no passenger shall be permitted in or on the Aircraft unless a cabin attendant is stationed at or near the cabin door.
26.5 Fueling shall not be done while an on-b oard engine is operating (“hot fueling”) without the permission of the Airport Director and then, it shall only be permitted when representatives of t he Fire Department are standing by.
Exception is allowed for A.P.U. operation on large aircraft. (NFPA 407 3-5.1)
26.6 Equipment other than Aircraft serv ice equipment shall not be permitted within fifty (50) feet of an Aircraft dur ing fueling or defueling. (NFPA 407 3-
5.1)
26.7 No open flames, smoking, battery char gers, or any material or device which is likely to cause a spark shall be in use within fifty (50) feet of an Aircraft or fueling truck during fuelin g or defueling operation. (NFPA 407 3-7, 3-8).
Exception is allowed for Ground Power Units.
26.8 All hoses, funnels and appur tenances used in fueling or defueling activities shall be equipped properly with grounding and bondin g devices to prevent possible static ignition of volatile liq uids or vapors. Such grounding and bonding devices shall be used during all fueling and defueling activities.
26.9 Refueling vehicles, fuel hoses and defueling equipment shall be maintained in a safe, sound, operational and non-leaking condition.
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26.10 Gravity (hand) fueli ng may not be accomplished with any container having a capacity greater than five (5) US gallons. (NFPA 407 3-2.3)
26.11 All portable fuel containers must be approved and marked so as to identify the product contained therein. (UFC)
26.12 Any fuel transported by privately owned vehicles, not specifically designed for the transport of flammable liqui ds and appropriately placarded, are limited to a maximum of 20 U.S. gallons in an approved and marked container. (DOT and UFC)
26.13 Portable fuel containers shall be kept in approved locations, at least fifty (50) feet from any build ing, and secured in a cabinet or locker marked “Flammable.” (UFC)
26.14 Every Person engaged in aircraft fuel handling shall exercise due care to prevent the overflow of t anks and spilling of fuel. Fuel spills are a fuel operator’s responsibility.
26.15 Where there has been a fuel spill or leak, no Person shall start the engine of any Aircraft in close proximity until the spill or leak has been cleaned up. In event such spills or leaks are over 10 ft. in any direction, or over 50 sq. ft. in area, or continues to flow, or ar e otherwise a hazard to persons or properties, the SCLA Fire Department & Haz-Mat shall be notified.
26.16 In addition, all fuel storage on the Airport shall be regulated by NFPA 407, the UFC, and be approved by the City of Victorville Fire Chief or his designee.
SECTION 27. VEHICLE OPERATIONS:
27.1 No Person shall travel on any portion of the Ai rport except upon the roads, walks, or places provided for the particular class of traffic, nor occupy the roads or walks in such manner as to hinder or obstruct their proper use.
27.2 Unless escorted by an Authorized Pe rson who is authorized to drive on the AOA, no Person shall operate a Vehicle on the Airport with out successfully passing the SCLA driving test, being issued a Personnel Identification Badge, and possessing a valid state driver’s license, with the exception of the Airport ARFF, or Law Enforcement.
27.3 No Person shall operate a powered industrial vehicle without a Driving Permit on the Ramps, Taxiways, R unways or designated Roadways. An exception will be made for employees working within the exclusive leaseholders premises as authorized by the Airport Director.
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27.4 Persons who employ Individuals at th e Airport shall be responsible to provide training for powered industrial vehicl es and equipment, and for maintaining all training materials and records relating to the employee’s duties.
27.5 SCLA requires that employers "cert ify" that training and evaluations have been completed and maintained in the em ployee’s files up to 180 days upon separation of employment, and are available for inspection by the FAA, TSA and the Airport Operations and Security Department upon request.
27.6 Motor-vehicle traffic shall yiel d the right-of-way to Aircraft.
27.7 Every vehicle, excludi ng ARFF and construction vehicles operating within the Movement Area, shall have a flashing yellow beacon and carry a 2-way radio or be escorted by a vehi cle so equipped. Constr uction vehicles must be identified with an orange and white flag and a 2-way radio or be escorted by an authorized vehicle so equipped.
27.8 Any accident, involving a motor vehicle, which results in a fatality or injury, or in property damage, shall be reported by the driver, or his representative, to the Airport Director.
27.9 No Person shall operate any motor vehicle on the airport in excess of 25 miles per hour except emergency vehi cles responding to an emergency situation, or emergency vehicles involv ed in training or drills with prior ATC coordination. On passenger loading ramps, around parked Aircraft, and in areas immediately adjacent to hangars, speed shall not exceed ten (10) miles per hour.
27.10 Vehicles shall not be parked on the Airport other than in the manner and locations indicated by posted traffic signs and markings.
27.11 Unattended Vehicles may be parked only in designated Airport vehicle parking lots.
27.12 Vehicles parked other than specified in “27.10” and “27.11” above, may be moved by Airport personnel, and in such event a towing charge will be levied prior to releasing the Vehicle from impound. Neither SCLAA, VVEDA, the City, nor any of their respective offi cers, employees, agents, or designated representatives shall be liable for damages sustained by such Vehicles during said movement.
27.13 Motor vehicles shall not be driven on or across Runways or other portions of the Movement Area without permission fr om ATC Tower to do so. Two-way radio communications with Ground Cont rol (on frequency 124.45) shall be required between the ATC Tower and such vehicles. Exceptions may be granted during maintenance activities as long as two-way radio
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communications control is maintained wi th at least one vehicle controlling the activity. ARFF vehicles may contact the ATC tower on the fire net per operational agreement.
27.14 Motor vehicles shall not be driven or parked upon, or within fi fty (50) feet of Aircraft parking areas, ramp areas, or aprons without express approval of the Airport Director. Exceptions: ai rcraft support, airport maintenance, emergency vehicles, or fuel or service vehicles.
27.15 No Person may operate a motor vehicle or Aircraft in or on any portion of the Airport while under the influence of alcohol or drugs.
27.16 No Vehicle shall be operated on the Airport unless the Vehicle has been registered to drive on the Airport with Airport Operat ions. To register a Vehicle to drive on the Air port requires: a) proof of ownership, b) proof of vehicle registration with the Department of Motor Vehicles for State of California, or the Department of Moto r Vehicles for another State; and c) proof of insurance as set forth in Section 37 of these Rules and Regulations.
27.17 Vehicles passing through electronic access perimeter security gates are required to stop just past the gate and wait for the gate to fully close before continuing. Vehicle o perators should ensure no unauthorized persons enter the AOA while the gate is closing. V ehicle entry procedure is one vehicle per gate activation unless the vehicles following are under Escort.
SECTION 28. FIRE HAZARDS:
28.1 No Person shall light or smoke any cigarette, cigar, pipe, or similar object in the following Airport areas:
i. Within any hangar, or fuel handling or fuel storage areas;
ii. Inside any Aircraft (whe ther or not such Aircraft are parked or stored) or within fifty (50) feet thereof;
iii. Within fifty (50) feet of any "No Smoking" sign posted;
iv. Within any Vehicle operating on the AOA;
v. Within any buildin g on the Airport.
28.2 No Person may use flammable liquids, solvents, or substances to clean any Aircraft, engine, part, or accessory thereof, within any hangar or building except a building specially designed for that purpose and approved in writing by the Airport Director. Such approval shall only be granted when the Airport Director approves the ventilation provisions, fireproofing, and fire-extinguishing equipment.
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28.3 No Person shall light or use any open flame for any purpose in any hangar or other building on the airpor t without the prior written consent of the Airport Director and Fire Chief.
28.4 No Person shall operate any welding or cutting equipment (electric or gas) anywhere on the Airport without prior written approval of the Airport Director and the SCLA Fire Department. A we lding permit is required and may be obtained at the fire station.
28.5 No Person shall clean or degrease any Aircraft or part thereof except at or in a maintenance station properly equipped for such purposes, or in a space designated or authorized by the Airport Director.
28.6 No Person shall store or stock any material or subs tance, or lease or permit such activities in or on the Airport in su ch a manner, or of such nature, as to constitute a fire hazard. No Person shall keep, store or discard any flammable liquid, gas, signal flare, or other fl ammable material in any hang ar, shop, building, room, enclosure, or other pl ace on the Airport except in areas specially designated by the SCLA Fire Department for such purpose.
28.7 Lessees of hangars, shops , or other Airport areas shall provide suitable metal receptacles with hinged lid s for the storage of oily waste, rags, and other similar rubbish. The lesse e shall remove all such materials at frequent intervals.
28.8 Every lessee shall mainta in his leased area clean an d reasonably free of oil, grease, waste, other flammable materials and weeds.
28.9 Lessees shall provide, and maintain in proper wo rking order, adequate and readily accessible fire extinguishers. Each such extinguisher shall bear a suitable tag, which indicates the most rece nt date of inspection or servicing.
SCLA Fire Department shall approve all extinguishers, their type, and location.
28.10 No Person shall move , relocate, or otherwise disturb any wheeled fire extinguisher on the Airport without the permission of the SCLA Fire Department unless specifically for emergency use.
28.11 All fires on the Airp ort, regardless of size, even if extinguished, shall be immediately reported to the SCLA Fire Department without delay.
SECTION 29. FUEL SALES:
29.1 No Person shall deliver av iation fuels or lubricants to, or dispense such fuel from, at, or upon the Airport without a lease or permit from the Airport Director.
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29.2 For the right, privilege and concession of making deliveries of all types of aviation fuels and lubricants, and other fuels, to any Person or location at or upon the Airport, other than to a central fuel person or location at or upon the Airport, other than to a central fuel service stand provided by the Airport, there is levied against such lease or permit holder, a flowage fee of ten cents (.10) for each gallon of fuel so delivered.
29.3 No fuel shall be st ored anywhere on the Airport except approved by the Airport Director and the SCLA Fire Department.
SECTION 30. SECURITY:
30.1 Though not required, SC LA operates under the guidelines established by FAR Part 139 “CERTIFICATION A ND OPERATIONS SERVING CERTAIN AIRCRAFT OPERATORS.” To this end, SCLA has prepared and implemented a security program that parallels the requirements contained in TSA 1542. This program includes the following elements: Personnel Identification Badging, c ontrolled access to the Air Operations Area (AOA), driver licensing for pers onnel operating on the AOA, Vehicle registration, and perimeter security. All personnel operating at SCLA are required to abide by the SCLA Airport Master Security Program.
30.2 Personnel Identific ation Badges. Only those Individuals that have a need to be on the AOA will be issued a Personne l Identification Badge and granted unescorted access to the AOA and Rest ricted Areas. Individuals that require access must apply for a Personnel Identification Badge at the Airport Operations and Security Department. Lost or stolen Personnel Identification Badges must be reported to the Airport Operations and Security Department immediately. The application process includes:
1. A ten-year employment/educ ation or unemploy ment history verification check, with five y ears verified by the Individual’s former employer(s), and
2. A CHRC, which is information gathered from the Federal Bureau of Investigation, provided to SC LAA after submitting a Live Scan Fingerprint to the Transportation Clearing House.
30.3 Fingerprints are collected by the Ai rport Security Coordinator, or his designated representative, at the expense of the Individual’s employer.
30.4 A Fingerprint-based Crimi nal History Records Che ck as described in TSA 1542.209 is required before authorized unescorted access to the Airport is granted. The results of the CHRC wil l be among the determining factors as to whether the issuance of a Personnel Identification Badge is granted.
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30.5 Identification for Authorized Pers ons contains the I ndividual’s photograph, name, company name, expiration date, identification number and color blocks that indicate authorized access areas granted to the badge holder.
30.6 Individuals who have a need to be within the Airport Operations Area (AOA) are required to attend an Airport Familiarization a nd Security Identification Display Area (SIDA) class and will be required to di splay a Personnel Identification Badge while operating in such areas.
30.7 The Airport Badging Offi ce issues Non-Driving I dentification Badge and Identification Badges with Driving Permit, upon completion of a SIDA Class and AOA Drivers Training and satisfac tory score upon completion of a written test. Driving permits will be determined and issued in accordance with the applicant’s job related duties on the airport.
30.8 The Airport Security Coordinator wil l confirm or deny an applicant’s request for a badge based on verification of the CHRC and the
employment/education or unemployment history verification check, with five years verified by the employer, and the need of the applicant to access the AOA. If a Personne l Identification Badge is warr anted, the Airport Security Coordinator, or his designated representative, will issue the Badge.
30.9 All Personnel Identification Badges issued by the Airport Operations and Security Department are the property of Southern California Logistics Airport Authority and MUST be retu rned upon expiration, separation of employment (for any reason), when t he job function no longer requires Personnel Identification Badge, and upon demand of staff from the Southern California Logistics Airport. Any misuse or willful failure to return a Personnel Identification Badge is punishab le by fine as dictated in the Airport Rules and Regulations. Pers onnel Identificatio n Badges are non- transferable and must be used only by th e Individual to whom they are issued.
30.10 No Individual shall enter the AOA of the Airp ort without a Personnel Identification Badge unless the Individual is accompanied by an Authorized Person with a Personnel Identification Badge who shall be fully responsible for the unbadged person being escorted. Fire department personnel responding to an emergency wearing uniforms or othe r identifying clothing, shall not be required to wear an identification badge.
30.11 No Authorized Person shall Escort any Individual who is not in the performance of job-related duties and who requests access to the Airport as a visitor without the consent and approval of the Air port Director. Person(s) denied access to the Airport by Airport security officers, must abide by the decision of the security officers under the direction of this rule. Visitor Escort must be conducted during no rmal business hours of the Airport
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Operations and Security Department, unl ess prior approval of the Airport Director has been established
30.12 Authorized Persons shall always prominently display their Personnel Identification Badge while on the AOA. Failure to prominently display an issued Personnel Identification Badge wh ile on the AOA shall constitute a violation for which a fine shall be asse ssed as set forth in Section 43, PENALTIES AND APPEALS.
30.13 Individuals who do not display a Personnel Identification Badge, and who are not under Escort by an Authoriz ed Person displaying a Personnel Identification Badge, shall immediately be report ed to the Airport Director and shall be escorted off the AOA by the Airport Director or his staff.
30.14 Authorized Persons w ho have been issued a Personnel Identification Badge and are involved in an accide nt while operating on the AOA will be asked to submit to a drug-screening test. Author ized Persons who refuse to submit to the drug-screening test will be consi dered as having failed the test and the Authorized Person will be consider ed to be under the influence of drugs or alcohol.
30.15 Controlled Access to the AOA . Any Airport Tenant that has direct access to the AOA, should, because of their imm ediacy of access, be considered part of the AOA. These Airport Tenants shal l therefore take measures to protect access to the AOA. As required by TSA 1542.113 Airport Tenant Security Programs, the Airport Tenant must a ssume responsibility for specified security measures of the Secure Area, AOA, or SIDA. Airport Tenants are encouraged to develop individual securi ty programs designed to meet the needs of their particular businesses. In all cases such security programs must be approved in writing by the Airport Director.
30.16 While on the AOA, customers and cli ents of the Airport or Airport Tenants must be under Escort at all times. Failure to provide an Escort may constitute the issuance of a Notice of Violation that could result in sanctions.
See Section 43, PENALTIES AND VIOLATIONS
for a discussion on the
scope of fines/penalties associated with vi olations of the Airport Security Program.
30.17 The Airport Operations and Security Department administers the licensing program for drivers on the AOA. This program involves a study element that describes the procedures for driv ing on the AOA at SCLA. A written test will be administered and all applicants must pass the test in order to receive a license to drive on the AOA.
30.18 Vehicle Registration for driving on the AOA. All Vehicles that operate on the AOA must be registered with the Airport Operations and Security
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Department. All Vehicles that operat e on the AOA will be issued a Radio Call Sign that must be utilized wh ile on the AOA. Airport Standard Operating Procedure No. 200-01 describes the Radio Call Sign Procedure.
30.19 Perimeter Security . The Airport is surrounded by an eight-foot (8’) high chain link fence. Barbed wire is pl aced atop this fence. There are numerous locked gates that access the Airport perimeter. Airport Tenants that are situated on the immediate perimeter of the AOA must employ secured personnel doors.
30.20 All Persons that operate on the Airpor t are charged with the responsibility of maintaining the security of the Airpor t. To this end, Persons who observe breeches in security are to call said in cidents to the attention of the Airport Operations and Security Department.
30.21 A Person’s responsibi lity under Section 30.20 includes breeches to the procedural elements of the Airport Security Program, as well as the physical elements of the Airport Security Program (perimeter fence, vehicle gates, etc.).
30.22 The issuance under this Section of either (i) a Personnel Identification Badge, or (ii) a Personnel Identification Badge with Driving Permit to drive on the AOA, shall be conditioned upon the express consent of the Individual to whom the badge is issued, to a dr ug and alcohol screening in the event that such Individual is involved in an accident while on Airport property.
30.23 In the event that an Individual to whom a Personnel Identification Badge or Personnel Identification Badge with Driving Permit has been issued (a) tests positive for the use of a controlled s ubstance not prescribed by a physician or has a blood alcohol content equal to or in excess of .08, or (b) refuses to consent to a drug and alcohol screeni ng, then such Indi vidual’s Personnel Identification Badge a nd/or Driving Permit shall be revoked by the Airport Director.
30.24 A Personnel Identification Badg e and/or Driving Permit which has been revoked under Section 30. 23 of these Rules and Regulations will remain revoked until the Individual ’s employer petitions the Airport Director in writing, to have said Individual’s Personnel Identification Badge and/or Driving Permit reinstated.
30.25 Reinstatement of a Personnel Ident ification Badge and/ or Driving Permit which has been revoked under Sect ion 30.23 of these Rules and Regulations remains the prerogative of the Airport Director; however, reinstatement will not be unreasonably withheld.
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30.26 Reinstatement of a Personnel Ident ification Badge and/ or Driving Permit which has been revoked under Sect ion 30.23 of these Rules and Regulations will depend on, as a minimum, the employ er’s verification of a negative drug test as part of a return to duty test. Any Individual who has verified positive drug test results on two drug tests will not be permitted to thereafter work or drive on the AOA, r egardless of whether such Individual is accompanied by an Indi vidual properly in posse ssion of a Personnel Identification Badge and/or Permit.
SECTION 31. AIRPORT SECURITY AREAS:
31.1 Unauthorized Entry and Exit : No Person shall seek entry to or exit from Airport Security Areas except through designated entrances and exits. No Individual shall seek entry to or exit from Airport Security Areas over, under or through fencing, walls, window, air or other vents.
31.2 Only Authorized Persons, or those Individuals under Escort, shall have access by any means to Airport Security Areas.
31.3 A Person performing an Escort must, at all times, be in a position to actively monitor, direct and control the move ments and actions of the accompanied Individual(s).
31.4 No Individual shall ente r/exit or allow another I ndividual to enter/exit into Airport Security Areas except by usin g his Personnel Identification Badge.
No Individual shall follow another Individual into an Airport Security Area without first using his or her Pers onnel Identification Badge through any electronic access installed at the entry /exit point. This provision does not apply to an Individual under Escort
31.5 No Individual shall drive a Vehicle into Airport Security Areas unless the Individual has used his or her Pers onnel Identification Badge to open any electronic access installed at the entry point. No Individual shall allow other Vehicles to follow or tailgate in Airpor t Security Areas. This provision does not apply to Vehicles under Escort.
31.6 No Person shall tamper with or in any way hamper the effective operation of Security Devices.
31.7 Security of Access Points
: No Person shall leave open, propped or
unsecured any door, gate or access point leading to or allowing access to Airport Security areas. No Person sha ll hold, prop or caus e a door, gate or access point to be open beyond the period of time allowed by a Security Device unless an Authorized Person attends the door. When an Authorized Person is attending a security door, he or she must be physically present at the door and must use his or her Pers onnel Identification Badge to activate additional time for the door to be open.
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SECTION 32. RESPONSIBILITY OF AIRPORT TENANTS:
32.1 Adherence to the Security Rules and Regulations : Airport Tenants with access to Airport Security Areas on t heir leased area shall follow these Rules and Regulations by posting signs, approved by the SCLAA, which prohibit access into the Airport Security Areas. Airport Tenants with access to Airport Security Areas shall at all times keep the access secured or staffed in a manner that prevents unauthorized Individuals from accessing Airport Security Areas. Airport Tenants shall retain keys or other means of access to Airport Security Areas under their control and issue such access only to Authorized Persons.
32.2 Airport Tenants with acce ss to Airport Security Areas shall appoint at least one employee of the Airport Tenant as the security contact primarily responsible for the Air port Tenant’s leased area which access Airport Security Areas. Airport Tenants sh all advise the Airport Security Coordinator in writing of the Individual or Individuals at all times having such responsibility.
32.3 Airport Tenants must provide a quarte rly employee roster to the Airport Operations and Security Department in the months of January, April, July and October, and immediately notify the Airport Operations and Security Department of employee separation.
32.4 Airport Tenants must immediately confiscate Personnel Identification Badges, with or without access media, as well as any keys that would allow access to the Airport, from Individuals upon separation of employment. Any misuse or willful failure to return a Personnel Identification Badge is punishable by fine as dictated in these Rules and Regulations.
SECTION 33. OTHER PROHIBITED ACTS:
33.1 Bypassing Security Screening Area : No Individual shall enter a Sterile Area through a Security Screening Area unless first going through equipment that has been installed for inspection of I ndividuals and their belongings. Armed federal and local law enfor cement officers on official duties at the Airport, airport operations and maintenance per sonnel, and others exempted by the FAA do not have to be inspected, provided they follow FAA and TSA regulations.
33.2 Statements Against Avia tion Safety or Security : No Person shall make a statement to another so as to indicate that the Person or another may have possession of a firearm, bomb or explosive device while at the Airport.
33.3 Interference with Airport Personnel : No Person shall intimidate, threaten, hinder or obstruct Airport Personnel or Airport Security Officers in the performance of his or her official j ob duties or lessen the ability of such person to perform his or her duties.
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33.4 Interference with Flight Operations : No Person shall intimidate, threaten, hinder or obstruct an aircraft crewmember in the performance of his or her official job duties or lessen the abilit y of such aircraft crewmember to perform his or her duties.
33.5 Unattended Baggage : No Person shall leave any bag, luggage, box or container unattended in the terminal areas of the Airport, which are accessible to the public.
33.6 Presenting a Weapon at Security Screening Area : No Person shall place firearm(s), explosive device(s), knife/ knives or other FAA/TSA prohibited items that could be used as a w eapon onto inspection equipment at a Security Screening Area without first dec laring such item(s). Only Persons authorized by the TSA may test Security Screening Areas.
SECTION 34. ENFORCEMENT:
34.1 Notices of Violation : The Airport Operations and Security Department will conduct inspections and enforce violat ions of these Rules and Regulations, Minimum Standards, and any permits issued hereunder regarding activities at the Airport. All Personnel Identifi cation Badge holders and persons with access cards will be subject to a Notice of Violation (NOV) when reasonable grounds exist to believe that Rules and Regulations, Minimum Standards or a permit have been violated, either by commission or omission.
34.2 NOV’s will be monitor ed and issued by Airport Operations and Security Department personnel or by recommendat ion from an Authorized Person of Authority. A copy of the NOV will be given to the Personnel Identification Badge holder, or the Person(s) observed committing the violation(s).
34.3 The NOV may serve as a notice only or may include a penalty ranging from suspension to revocation. Any violati on of a severe nature as determined by the Airport Director will warrant imm ediate suspension or revocation of the Personnel Identificati on Badge. Severe violati ons include, but are not limited to, any violation that may result in property damage, injury, runway incursions, or other safety hazards, or that threatens the environment or public welfare.
34.4 The receipt of three (3) NOVs, whic h have not been appealed or that have been upheld upon appeal, within a twent y-four (24) mont h period will be considered grounds for revocation of the Personnel Identification Badge.
34.5 When an NOV or sa nction is issued, a letter indica ting as such will be sent to the Individual’s employer, advising the employer of the violation.
34.6 Upon written request, t he Airport Security Coor dinator may review and recommend modification of the NOV.
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SECTION 35. SUSPENSIONS:
An Individual’s authorization to use a Personnel Identification Badge may be suspended for any of the following reasons:
1. Violation of these Rule and Regulations.
2. Violation of any rule or regulation of SCLAA for which a criminal penalty may be imposed.
3. Violation while on Airport proper ty of any law of the State of California or the United States for which a criminal penalty may be imposed.
4. Actions which interfere with or threaten the operation of the Airport, or the comfort, safety or convenience of passengers, Authorized Person’s employed by the City of Victorville, or otherwise constitute just cause for suspension.
35.2 The Airport Director or an Airport Security Coor dinator shall issue written notice of the Suspension, which sha ll state the nature and date of the violation, the length of Suspension, and the date the Suspension shall begin and the Individual’s right to have a hear ing pursuant to the provisions of Section 43 of these Rules and Regulat ions. The suspension may be for up to ninety (90) days as determined by the Airport Director or the Airport Security Coordinator.
SECTION 36. REVOCATION:
36.1 An Individual’s author ization to use a Personnel Identification Badge may be revoked for any of the following reasons:
1. Any act that seriously endangers property or Persons or indicates willful or reckless disregard for, and which has an immediate impact on the health, safety or welfare of the public or poses a serious threat to the security of the Airport.
2. A violation warranting Suspensi on where the Individual has had a previous suspension for the same or similar offense.
36.2 The Airport Direct or or Airport Security Coordinator shall issue a written notice of Revocation, which shall state the nature and date of violation, the date and Revocation shall begin, and the Individual’s right to a hearing pursuant to the provisions of Section 43 of these Rules and Regulations.
SECTION 37. LIABILITY INSURANCE:
37.1 Every Airport User shall carry insuranc e as required by their lease, sublease or permit to operate on Southern California Logistics Airport and as required
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by State and Federal regulations. Any person operating a vehicle within the fenced area of the Airport, who does not have a lease, sublease, or Operating Permit, is required to have comprehensi ve automobile insurance with combined single limits for bodily injury and property damage of not less than $1,000,000.
37.2 Airport Users shall prov ide Certificates of Insu rance naming VVEDA, SCLA and Stirling Airports International as Additional Insured’s with respect to their lease, sublease or permit. These Certificates of Insurance shall also provide for a 30-day Notice of Cancellation for those policies listed on the Certificate of Insurance.
37.3 The Airport User shall formally advise its Insurers that all Vehicles in use with or without valid Airside Vehicle Permits ar e intended to be operated on that portion of the Souther n California Logistics Air port premises known as Airside, and should those Insurers ex clude, limit, or otherwise restrict coverage while the Vehicle is on Airs ide, the Occupant shall obtain and keep in full force and effect at all ti mes, a policy of Aviation Liability insurance covering both license-plated and unlicensed plated Vehicles while on Airside
SECTION 38. ILLEGAL ACTIVITIES:
No Person shall:
38.1 Take or use any Aircraft, aircraft parts, instruments, or tools pertaining thereto, which are owned, controlled, or operat ed by any other Person, while such Aircraft, parts, instruments, or tools are stored or otherwise left on SCLA, or within its hangars, building, or facilities, without th e written consent of the owner/operator thereof, except upon satisfactory evidence of the right to do so duly presented to the Airport Director, or authorized by him or so ordered by a court of competent jurisdiction.
38.2 Land, takeoff, taxi, or otherwise operat e any Aircraft on, at, or from SCLA when he knows such Aircraft is not oper ating properly, or is equipped with any part or safety device which is defecti ve or unsafe. Deviations from this restriction shall only be permitted by s pecific authorization from the Airport Director and/or FAA if required, or his designated representative.
38.3 Operate any Aircraft on or at the Airport, or on any Runway thereof, when the Airport or Runway has been closed to traffic by the Airport Director or other legal authority, or when such closure has been indicated by the placement of an "X" at each end of the closed Runway.
38.4 Operate any aircraft on, at, or in the vicinity of SCLA in willfu l or wanton disregard for the safety of persons or property, whet her his own or that of others.
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38.5 Engage in the performa nce of any aerobatics, stunt, or maneuver not necessary to a normal ta keoff, landing, normal turn or level flight of the Aircraft, over or within one mile of the exterior boundaries of the airport without the permission of the Airport Director or ATC.
38.6 Engage in the sale of any goods, wa res, merchandize, or services at or upon the Airport without first having se cured from the Airport Director a lease or permit therefore, and paying any required fees for such lease or permit.
38.7 Board an aircraft at the Airport wit hout the prior approval of the Aircraft’s owner or representative.
SECTION 39. AIRPORT CLOSURE:
39.1 The Airport Director is hereby directed and authorized to close the Airport, or portions thereof, or susp end operations related to the land ing, takeoff, or taxiing of Aircraft during any period in which he determ ines that such operations, or their continuance, would be hazardous.
39.2 Causes for such closure could incl ude, but would not be limited to, adverse weather conditions, runway maintenance or repairs, runway obstacles, fire, Aircraft or other accident.
39.3 The Airport Director or his designee shall immediately notify the Riverside Flight Service Station and issue a NOTAM, advising of the closure.
SECTION 40. THRU-THE-FENCE ACTIVITIES:
40.1 Thru-the-fence activi ties, defined as accessing th e Airport from private land outside the airport perimeter for the purpose of utilizing or otherwise benefiting from the Airport, are strictly prohibited.
SECTION 41. SEVERABILITY:
41.1 Should any article, section, sub-se ction, sentence, clause or phrase of these Rules and Regulations be held invalid or unconstitutional for any reason, such decision shall not affect the remaining portion of these Rules and Regulations.
41.2 The SCLA Au thority hereby declares that it would have adopted these Rules and Regulations and each article, secti on, sub-section, sentence, clause or phrase, regardless of the fact that an y one or more articles, sections, sub- sections, sentences, clauses, or phrases be declar ed invalid or unconstitutional.
SECTION 42. DISMANTLING AIRCRAFT:
42.1 No Person shall disman tle an Aircraft of any type outside of a hangar unless they receive prior written approval fr om the Airport Director. Any Person permitted to dismantle an aircraft outside of a hangar must:
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42.2 Submit a written request to the Airport Director describing the type of aircraft to be dismantled, the dismantling procedures to be employed, the procedures for disposing of all dismantled material, toxic material clean up and abatement procedures, and the schedule for dismantling an aircraft.
42.3 Conduct all aircraft dism antling within a fenced in area to prevent visual contact with the dismantling activity.
42.4 Return the area used for dismantling to its original condition as approved by the Airport Director in his/her sole discretion.
42.5 Procure a performance bond to ensure any contamination, remediation of contamination and the dismantling area is returned to its original state. The amount of the bond will depend upon the procedures set forth in the request and the potential exposure and land clean-up cost to the Airport.
42.6 Receive the prior approval of the SCLA Fire Department.
42.7 Adhere to all City of Victorville, State and Federal environmental regulations.
42.8 Upon receipt of the information set forth in 42.1 through 42.7 above, the availability of land to conduct dismantling and other airport operating requirements and/or constraints, the Airport Director will either approve the Aircraft dismantling request by issuin g a written Letter of Permit with appropriate indemnities and airport prot ection provisions to the requesting person or business or deny the request by providing a Letter of Denial to the requestor.
SECTION 43. PENALTIES AND APPEALS:
43.1 Fixing penalties for violations: Any Airport User including, without limitation, sublessees, suppliers, contra ctors, guests, invitees, or others that do not adhere to or violates these Rules and Regulations shall be sanctioned.
43.2 Sanctions may include, but are not limited to, a fine paid to the Airport, denial of the use of the Airport for a specified period of time, and/or a referral to the Transportation Security Administration and/or Airport Authority Attorney with a recommendation for criminal prosecution.
43.3 In determining the sanctions to be imposed, the Airport Director may take into consideration any mitigating or aggravating factors th at may exist including, without limitation, the number of previous violations and the cooperation of the person involved.
43.4 Fines shall be assessed from $ 100.00 to $10,000.00 per day per incident depending on the severity of the violation.
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43.5 Should an infraction occur, and should the infraction and situation surrounding the infraction warrant, fines will be assessed on a graduated/increasing basis.
43.6 All fines assessed to a sublessee, or to a sublessee’s suppliers, contractors, guests, invitees, or others, will be added to a Sublessee’s monthly rent and subjected to late fees and default provisions as set forth in a Sublessee’s land or facility Sublease.
43.7 Fines assessed to Airport Users who do not have a land or facility Sublease at SCLA, shall be paid before the Airport User is perm itted to use the Airport again.
43.8 Continuous violation of these Rules and Regulations shall result in denial to use the Airport. Attachment B provid es an example of fines as may be applied.
43.9 Removal from Airport Premises
: The Airport Director, or his designated
representative, may order removal of anyone from the Airport who knowingly and willfully violates any provision of these Rules and Regulations.
43.10 Recourse unde r Tenant’s Lease: SCLAA may take ac tion against Airport Tenants under their lease agreements irrespective of any other penalties under these Rules and Regulations.
43.11 RIGHTS OF APPEAL : Fines and other sanction s may be appealed to the Executive Director. Reque sts for appeal must be made in writing to the Executive Director within ten (10) bu siness days from the date the fine was presented to the Airport User.
43.12 The Executive Director (or his de signated representative) will convene an administrative hearing and shall serve as the hear ing officer (the “Hearing Officer”). Failure of any Airport User to properly file an appeal shall constitute a waiver of its right to an administrative hearing and adjudication of the fine or any portion of the total amount of the fine.
43.13 The Airport User or ot her Person in receipt of the fine or sanction shall be provided a written notice of the date, time, and loca tion of the hearing. The notice will include the date, time and nature of the alleged violation.
43.14 The hearing shall be conducted in an informal manner an d strict rules of evidentiary procedure will not apply. The Hearing Officer may consider any evidence that is reasonabl y probative and aids in the determination of the facts.
43.15 Parties are entitled to be represented by an attorney of th eir choice, to bring witnesses, and present documentary evidence. Parties have the right to have
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all records or documents relevant to the proceedings provided to them at the cost of reproduction.
43.16 At the conclusion of the appeal hearing, and pursuant to the Hearing Officer’s authority, the Airport Director’s im position of sanction s may be upheld, modified or reversed. Parties will be provided with the results of the hearing in writing, including any penalties imposed by the Hearing Officer. The decision of the Hearing Officer is final.
SECTION 44. EFFECTIVE DATE
44.1 These changes contai ned in the Southern Californ ia Logistics Airport Rules and regulations shall be of full force and effective immediately upon filing of same with proof of pub lication with approval of the Southern California Logistics Airport Authority.
____________________________
Peter R. Soderquist
Airport Director
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Attachment A
SOUTHERN CALIFORNIA LOGISTICS AIRPORT
Airport Rates and Charges
Introduction / Guiding Principles:
A.1 In establishing a Schedule of Airport Rates an d Charges, the Southern California Logistics Airport Authority (the “Airport Authority”) is required by federal regulations to ensure that char ges are fair, reasonable and non- discriminatory. Further, Airport Rates and Ch arges are to be reasonably consistent with the rates and charges being applied by other airports for similar types of activities , unless there is a specia l situation unique to the Southern California Logistics Airport.
A.2 The Airport Authority fully recognizes the FAA prohibition against the diversion of Airport revenues for non-airport purposes. It is recognized that failure to collect fair and reasonable fees and market-based rents for the use of Airport property, facilities and equipment can be considered a form of Revenue Diversion. The Authority also recognizes the FAA requirement to establish a Schedule of Rates and Char ges that will pe rmit the Airport to be as self- sustaining as possible.
Airport User Fees Defined:
A.3 Aircraft Landing Fees: The Sout hern California Logistic s Airport Authority (SCLA) has expended a si gnificant amount of funds to provide aviation facilities for the benefit of aircraft owners and operators. Landing fees are assessed to help offset the cost of operating and maintaining the Airport’s runway, taxiway, and aircraft parki ng ramp areas. Landing fees are based upon the Certified Maximum Gross Landing Weight (MGLW) of the aircraft multiplied by the Airport Authority’s established landing fee rate per 1,000 pounds of Certified Maximum Gross Landing Weight.
A.4 Commercial Aircraft: The Air port Authority assesses a landing fee on each aircraft landing conducted by an airlin e or other commercial Air Carrier, operating under FAR Part 121 (airline), Part 129 (inter national airline), Part 135 (air taxi), or other similar regulat ion, regardless of the purpose of the landing.
A.5 Signatory Landi ng Fees: Signatory landing fees are assessed to an airline, or other large (over 75,000 lbs MGLW ) commercial aircraft operator having a Signatory Operating Agr eement with SCLA. To be eligible for Signatory Operating Agreement stat us, the operator must have one or more of the following:
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i. A lease with the Airport Authority of a ground site having at least 10,000 square f eet or more that is used to accommodate the organization’s primary base of
business on Airport property.
ii. A lease with the Airport Authority, or an approved sublease, of a building, or part of a bu ilding totaling at least 4,000 square feet that is used as the
organization’s primary base of operations on the
Airport.
iii. Commercial Airlines operating under the military
Civilian Reserve Air Force (CRAF) program.
A.6 Non-Signatory Landing Fees: N on-signatory Landing Fees are assessed at a rate of 125% of the Signatory Landing Fee rate for large commercial operators (over 75,000 lbs MGLW) usi ng the Airport who do not have Signatory Operating Agreement status with the Airport Authority, or have an agreement, but do not meet any of the Si gnatory eligibility criteria specified in paragraph 2 above. The Non-Signatory Landing Fee is intended to compensate the Airport Authority for the operator’s use of the Airport’s runway and taxiway areas as well as compensation for the privilege of being able to access the airport to conduct business.
A.7 Private Aircraft: The Airport Authority assesses a landing fee on each aircraft landing conducted by large private operators (over 75,000 lbs MGLW) operating under FAR Part 91, or other similar regulation, regardless of the purpose of the landi ng. Landing fees for pr ivate aircraft that are operated under FAR Pa rt 91 and are based at th e airport under conditions set forth in a long term agreement with the Authority will be charged landing fees as required by that agreement.
Aircraft Parking Fees:
A8. Signatory Aircraft Parking Fees: Ai rcraft having Signatory status as defined in A.1 above, are not required to pay parking fees during the time an aircraft is in the loading/ unloadi ng process (24 hour maximu m). Signatory Aircraft are also exempt from aircraft par king fees on the weekend, and over national holidays, as long as the we ekend/holiday parking occurs in the middle of the loading/unloading process. Signatory Aircraft that are not in the unloading/loading process, and/or use airc raft parking areas in excess of the 24-hour maximum, are required to pay established aircraft parking fees.
A9. Non-Signatory Aircraft: Non-signatory aircraft are required to pay established aircraft parking fees.
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A10. Private Aircraft: All private aircraft (both heavy and light) are required to pay aircraft parking fees. Aircraft that ar e based at the airport under conditions set forth in a long term agreement with t he Authority will be charged parking fees as required by that agreement.
A.11 Aircraft Storage Fees: Aircraft stor age fees are charged to aircraft that are stored on areas other than the main parking apron. Fees are payable under one of three different categories: under 50,000 lbs MGTW, narrow body aircraft, and wide body aircraft. Remote aircraft storage is occasioned by the many acres of closed runways and taxiways that make a suitable “hard stand” for aircraft parking. The availabilit y of these areas is directly related to the longevity of these surfaces. As these surfaces fail to be usable for aircraft parking, they will be removed from the inventory of remote parking.
The Airport Authority makes no repres entation that it will maintain these surfaces and those businesses that stor e aircraft thereon do so at their own risk.
A.12 Fuel Flowage Fees: A substantial percentage of the fuel dispensed at SCLA is “pre-purchased” by large aircraft operators that enjoy discounts based on the large volumes of fuel these ca rriers purchase nationally. This pre- purchased fuel is stored in SCLA’s fuel farm to which SCLA assesses a storage fee . SCLA also assesses a flowage fee on each gallon of fuel delivered from the fuel farm to the aircraft.
A.13 Fuel flowage and fuel storage fees reflect the int ent of the Airport Authority to generate reasonable revenues for the use of the airport’s fuel storage facility, while at the same time, enc ouraging aircraft operators to use SCLA as a base of operations.
A.14 All fuel sold at SCLA is subject to the described fuel flowage fees with following exceptions:
1. Non-Signatory Air Cargo Oper ators: Commercial Air Cargo Operators that are cons idered Non-Signatory as defined in Section A.1 above and pre-purchase f uel that is stored in the Airport’s fuel farm for use in their aircraft, shall pay flowage fees and storage fees.
2. Signatory Cargo Operators: Co mmercial Air Cargo Operators that meet the requirements of Signatory st atus as defined in Section A.1 above and pre-purchase fuel that is stored in the Airport’s fuel farm for use in their aircraft shall pay the appropriate storage fee.
3. Non-Commercial Signatory: Ba sed operators (signatory) that are non-commercial (Part 91) will pay the appropriate storage fee and a modified flowage fee as provided in the operators lease agreement.
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Southern California Logistics Airport
Schedule of Rates and Charges
Landing Fees
:
Signatory airline (over 75,000 lbs MGLW) $ .85 per 1,000 pounds MGLW Non-signatory airline (over 75,000 lbs MGLW) $1.06 per 1,000 pounds MGLW Private aircraft (over 75,000 lbs MGLW) $ .85 per 1,000 pounds MGLW
Fueling Fees
:
(Flowage fee -$ .08 per gal; Storage fee -$ .02 per gallon)
Aircraft Parking Fees
: (commercial aircraft)
Signatory airline $200.00 per day
Non-signatory airline $200.00 per day
Transient Aircraft Tie down Fees
: (general aviation aircraft; main ramp)
Single engine . . . . . . . . . .. . .. . . . . . . $ 5.00 per day $ 80.00 per month Multi engine . . . . . . . . . . . . . . . . . . . . . $ 10.00 per day $120.00 per month Mid-weight aircraft (12.5K lbs to 25K lbs) $ 20.00 per day $200.00 per month Large aircraft (25Klbs to 100K lbs) $ 30.00 per day $300.00 per month Narrow body . . . . . . . . . . . . . . . . . . . . .$100.00 per day $1,000.00 per month Wide body . . . . . . . . . . . . . . . . . . . . . . . $200.00 per day $2,000.00 per month
Wash Rack:
Any aircraft……………………………….........$ 40.00 per hour $240.00 per day
Live Scan Fingerprint Transmission Fee Per Applicant for Criminal History Records Check:
Call Airport Operations at (760) 243-1915 for Fingerprint transmission fees.
Personnel Identification Badge
Personnel Identification Badge with or without access card……….…...$ 10.00 Lost Personnel Identification Badge …………………………………….$ 100.00
(Fees are subject to change)
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Notes:
Parking charges for Signatory Airlines do not apply for the first 24 hours, weekends, or holidays. Transient airc raft tie down fees apply to aircraft remaining overnight. Transient airc raft remaining parked longer than overnight Military aircra ft are exempt from payi ng landing, parking and storage fees.
Definitions
:
Signatory
–
Having a lease or sublease of a ground site or build ing space on the Airport in accordance with the Airport Author ity’s Rates and Charges Policy; or, an airline having a contractual airl ine operating arrangement with an organization that has such a lease on airport property.
Non-signatory –
Those operators who do not have an On-Airport Lease Agreement with the Airport Authority in accordance with the Rates & Charges Policy.
MGLW
– Maximum (certificated) Gross Landing Weight
MGTW
– Maximum (certificated) Gross Takeoff Weight
Narrow body aircraft
- i.e. B-727; B-737; DC-9; MD-80
Wide body aircraft
- i.e. B747; B-777; DC-10; MD-11
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Attachment B
SCLA
SCHEDULE OF FINES
B.1 In most situations , a sanction or fine will be le vied upon the employer of the Individual involved in the infraction. All sanctions or fines assessed will be added to the employ er’s basic monthly rent and subjected to late fees and default provisions as set forth in an Airport Tenant’s land or facility sublease.
Fines assessed to Airport Users who do not have a land or facility Sublease at SCLA, shall be paid before the Airport User is perm itted to use the Airport again. Continuous violatio n of these Rules and Regul ations shall result in denial to use the Airport.
B.2 The following schedule should be regarded as a suggested schedule of fines. The Airport Director has the sole discretion and authority to levy fines, their amount and final disposition.
B.3 For minor infractions related to vehicle operations on the AOA such as:
Speeding on the AOA. $100.00
Operating a vehicle on the AOA without:
Airport Issued I’D Badge or drivers permit, appropriate markings or two-way radio communication with ATCT. $100.00 Runway incursion. $500.00
Taxiway incursion. $300.00
For negligence resulting in, and failure to correct, FOD $100.00
B.4 For breeches in security such as:
1. Leaving a perimeter gate unattended. $100.00
2. Failure to accompany non-badge d person on the AOA. $100.00
3. Sharing a security code or vehicle gate card. $300.00
4. Bypassing Security. $300.00
5. Sharing a Personnel Identif ication Badge. $300.00
6. Losing a Personnel Identific ation Badge. $100.00
B.5 For miscellaneous infractions of the Rules and Regulations such as:
1. Smoking in a non-approved area. $100.00
2. Parking or storing aircraft in non-approved areas. $100.00
3. Performing aircraft maintenance in unauthorized areas. $100.00
4. Knowingly allow an unsafe condition to exist. $300.00
5. Bringing an unauthorized vehicle on the airport. $100.00
B.6 A Federal Aviation Administrati on (FAA) or Transportation Security Administration (TSA) fine levied at the SCLA may be directly forwarded to a tenant if such tenant action is cause for the FAA/TSA penalty
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A second violation of the above listed offens es will result in the doubling of the applicable fine. A third offense will result in the tripling of the applicable fine and a suspension of privileges until corrective actions are taken and documented.
SCLAA Standard Sublease Page 31 Boeing Bldg 676, 677 & 678
EXHIBIT D
USE AND CONDITION OF SUBLEASED PREMISES
The Subleased Premises are to be used by the Sublessee in the performance of its flight test operations, MRO and related support and maintenance activities. Related activities include the use of the Subleased Premises for aircraft maintenance, repair, overhaul, assembly, or in support of aircraft asset management, alteration, weight and balance checks, and inspections. Under no circumstances shall Sublessee perform any painting or fueling operations at the SCLA. Related activities also include the use of the office space for general office and data processing uses pertaining to the performance of the Sublessee’s operations. The use of the Cargo Ramp Space is permitted as outlined in the Sublease Agreement for Boeing Flight Test aircraft only and for no other purpose unless expressly agreed to by the Sublessor in writing.
Right of Use space located along the south side of Hangar Building s 676 and 678 shall allow for the parking of Sublessee’s aircraft however in no event shall said Right of Use space allow for the storage of dismantled aircraft or aircraft being dismantled.
The Right of Use space located along the northern side of Hangar Buildings 676 and 678 identified as “Right of Use” shall be shared and used as common ingress and egress with other hangar buildings at SCLA. Sublessee shall not cause this Right of Use space to become blocked or limit use of this area by other aircraft needing to enter adjac ent hangars. This Right of Use area will be available for Subl essee to use for staging of aircraft prior to entering the Subleased Premises and also may be used as an extension of the hangar for servicing aircraft as long as this use does not impede the ingress, egress or business operations of adjacent hangars and does not result in undue wear and tear or damage to the Right of Use space.
Aircraft parking space (“Aircraft Staging Space”) adequate for the parking of two (2) B - 747 sized aircraft. The Aircraft Staging location is subject to change upon approval by Sublessor and reasonable advance written notice to Sublessee. In the event Sublessee requires aircraft parking space greater than that provided as Aircraft Staging Space, such additional aircraft parking space shall be approved first by the Airport Director (or its designee).
The condition of the Subleased Premises shall be established resulting from a walk - through inspection attended by both Sublessor and Sublessee during the routine annual inspection since the Sublessee is the current tenant of the hangar buildings. The findings of this walk-through inspection shall be memorialized at the time of the walk -through via the SCLA Property Lease Checklist.
SCLAA Standard Sublease Page 32 Boeing Bldg 676, 677 & 678
EXHIBIT E
SELECTED FAA RULES AND REGULATIONS