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compensation for each period, the Extension Index shall be divided by the Beginning Index, and the resulting factor shall be multiplied by the annual compensation of the expiring period, and, as to the First Extension Period, the expiration of the Initial Period. (c) City shall notify Contractor of each CPI increase by mailing a written statement setting forth the calculation of the compensation. If the format or components of the Index change materially, or if the Index is discontinued, then City shall substitute an index published by the u.S. Department of Labor, Bureau of Labor Statistics or similar agency which is most nearly equivalent to the Index in effect on the commencement date of the Second Extension. (d) City shall notify Contractor of the substituted index and shall use the substituted index in the calculation of the City's compensation unless Contractor objects in writing within fifteen (15) days after its receipt of City's notice. If Contractor objects, then the substitute index shall be determined in accordance with the rules and regulations of the American Arbitration Association. The cost of such arbitration shall be borne as determined by the American Arbitration association. ( e) Until the compensation for the next Extension Period is agreed upon or set by arbitration, the compensation payable during the preceding Extension Period shall remain in effect, as to the First Extension Period, the expiration of the Initial Period.. Once compensation the next Extension Period is agreed upon or set by arbitration, City shall pay Contractor the difference between the amount of compensation paid at the preceding Period and the amount of compensation due for the subsequent Extension Period. In no case shall the compensation during the Extension Period be less than the compensation in effect immediately prior to the commencement ofthe Extension Period. 3. All of the work to be done shall be done under the direction and supervision of, and to the approval of, City or its authorized representative, and the work shall be done in the best workmanlike manner, conforming strictly to the provisions of the specifications and plans made thereof. 4. (a) Contractor shall comply with all applicable provisions of Section 1810 to 1815, inclusive, of the California Labor Code relating to working hours. Contractor shall, as a penalty to City, forfeit Twenty five and No/100 Dollars ($25.00) for each worker employed in the execution of the Contract by Contractor or by any subcontractor for each calendar day during which such worker is required or permitted to work more than 8 hours in anyone calendar day and 40 hours in anyone calendar week, unless such worker receives compensation for all hours worked in excess of eight (8) hours at not less than 1-1/2 times the basic rate of pay. (b) Pursuant to the provision of California Labor Code, Sections 1770 et seq. Contractor and any subcontractor under him shall pay not less than the prevailing rate of per diem wages as determined by the Director of the California Department of Industrial Relations. Pursuant to the provisions of California Labor Code Section 1773.2, Contractor is hereby advised that copies of the prevailing rate of per diem wages and a general prevailing rate Agmt-443 F:shared/Redwood/CounciJ FXS:djk 02/12/01 2