Resolution No. 815040 1;
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RESOLUTION NO. 8150
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON AUTHORIZING AND APPROVING THE ISSUANCE OF
NOT TO EXCEED $165,000,000 AGGREGATE PRINCIPAL
AMOUNT OF ELECTRIC SYSTEM REVENUE BONDS; APPROVING
THE INDENTURE OF TRUST AND SUPPLEMENTAL INDENTURES
OF TRUST PURSUANT TO WHICH SUCH BONDS ARE TO BE
ISSUED; AUTHORIZING AND APPROVING CERTAIN DOCUMENTS
IN CONNECTION WITH THE ISSUANCE, SECURING AND SALE
OF SUCH BONDS; AND AUTHORIZING CERTAIN OTHER
MATTERS RELATING THERETO
WHEREAS, the City of Vernon (the "City") is a municipal
corporation and a chartered city of the State of California organized
and existing under its Charter and the Constitution of the State of
California; and
WHEREAS, the City is authorized pursuant to the provisions
lof its Charter and the City of Vernon Municipal Facilities Revenue
Bond Law, constituting Chapter 2, Article XI of the Vernon City Code
to issue bonds, notes and other obligations payable from the Net
Revenues of the Electric System (capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the
Indenture mentioned below).to finance the Costs of improvements and
additions to the Electric System and to refund such bonds, notes and
other obligations; and
WHEREAS, pursuant to an Indenture of Trust (such Indenture
of Trust, in the form presented to this meeting with such changes,
insertions and deletions as are made pursuant to this Resolution,
being referred to as the "Master Indenture"), to be dated as of
March 1, 2003, and to be entered into by the City and BNY Western
Trust Company, as trustee (the "Trustee"), the City has provided the
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Iterms and conditions for the issuance and securing of its Electric
System Revenue Bonds to finance the Costs of improvements and
additions to the Electric System or to refund any Outstanding Bond or
lBonds; and
WHEREAS, the City has determined to make certain
improvements and additions to its Electric System consisting of the
134 megawatt, combined cycle electric generating station and certain
facilities, improvements and equipment relating thereto consisting of
the Malburg Generating Station; and
WHEREAS, the City has determined to provide for the
financing of a portion of the Costs of the Malburg Generating Station
through the issuance of Bonds pursuant to the Master Indenture as
supplemented by Supplemental Indentures of Trust as herein provided;
and
WHEREAS, the City desires to provide for the issuance of its
Malburg Generating Station Project Electric System Revenue Bonds, 2003
Series A (the "2003 Series A Bonds") to, among other things, finance a
portion of the Costs of the Malburg Generating Station; and
WHEREAS, the 2003 Series A Bonds are to be issued under and
pursuant to the Master Indenture as supplemented by the First
Supplemental Indenture of Trust, to be dated as March 1, 2003, and to
be entered into by the City and the Trustee (such First Supplemental
Indenture of Trust, in the form presented to this meeting with such
changes, insertions and deletions as are made pursuant to this
Resolution being referred to herein as the "First Supplemental
Indenture"); and
WHEREAS, the 2003 Series A Bonds are to be issued as
variable rate bonds in a Weekly Interest Rate Period (as defined in
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the First Supplemental Indenture) and are subject to optional and
mandatory tender for purchase as provided in the First Supplemental
(Indenture; and
WHEREAS, the City has determined to provide credit
enhancement for the 2003 Series A Bonds by causing an irrevocable,
direct -pay letter of credit (the "2003 Series A Letter of Credit") to
be issued by Bank of America, N.A. (the "2003 Series A Bank") to the
Trustee to secure the payment of the principal and Purchase Price of,
and interest on, the 2003 Series A Bonds in accordance with the terms
iset forth in the 2003 Series A Letter of Credit; and
WHEREAS, in order to provide for the payment of certain
amounts due the 2003 Series A Bank with respect to the 2003 Series A
Letter of Credit, the City has determined to enter into a
reimbursement agreement (such reimbursement agreement, in the form
presented to this meeting with such changes, insertions and deletions
as are made pursuant to this Resolution, being referred to herein as
the "2003 Series A Reimbursement Agreement") with the 2003 Series A
JBank; and
WHEREAS, to provide funds for the purchase of 2003 Series A
Bonds tendered or deemed tendered for purchase, the City has
determined to enter into a Remarketing Agreement (such Remarketing
Agreement, in the form presented to this meeting with such changes,
insertions and deletions as are made pursuant to this Resolution,
being referred to herein as the "2003 Series A Remarketing Agreement")
with Banc of America Securities LLC as remarketing agent for the 2003
Series A Bonds; and
WHEREAS, the City desires to provide for the issuance of its
Malburg Generating Station Project Electric System Revenue Bonds, 2003
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Series B (the "2003 Series B Bonds") to, among other things, finance a
portion of the Costs of the Malburg Generating Station; and
WHEREAS, the 2003 Series B Bonds are to be issued under and
pursuant to the Master Indenture as supplemented by. the Second
Supplemental Indenture of Trust, to be dated as March 1, 2003, and to
be entered into by the City and the Trustee (such Second Supplemental
Indenture of Trust, in the form presented to this meeting with such
changes, insertions and deletions as are made pursuant to this
Resolution being referred to herein as the "Second Supplemental
Indenture"); and
WHEREAS, the 2003 Series B Bonds are to be issued as
variable rate bonds in a Weekly Interest Rate Period (as defined in
the Second Supplemental Indenture) and are subject to optional and
mandatory tender for purchase as provided in the Second Supplemental
lIndenture; and
WHEREAS, the City has determined that it is necessary in
connection with the 2003 Series B Bonds to provide credit enhancement
for such Bonds by causing an irrevocable, direct -pay letter of credit
(the "2003 Series B Letter of Credit") to be issued by one or more
Icommercial banks approved by the Mayor or the City Administrator which
(banks shall be rated such that the ratings for the 2003 Series B Bonds
by Moody's and S&P shall be not less than "Aa3" and "AA-" respectively
(such bank or banks being herein collectively referred to as the "2003
Series B Bank") to the Trustee to secure the payment of the principal
and Purchase Price of, and interest on, the 2003 Series B Bonds in
accordance with the terms set forth in the 2003 Series B Letter of
Credit; and
WHEREAS, in order to provide for the payment of certain
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deletions as may be approved by the Authorized Officer executing said
2003 Series B Remarketing Agreement and as are consistent with the
Second Supplemental Indenture, said execution being conclusive
evidence of such approval, and the City Clerk is hereby authorized to
fattest thereto.
SECTION 16: Each of the Authorized Officers, acting singly,
lis hereby authorized to determine the Interest Rate Period (as defined
in the Second Supplemental Indenture) to be in effect for the 2003
Series B Bonds from time to time. In connection with each Conversion
lof the Interest Rate Period for the 2003 Series B Bonds, each of the
Authorized Officers, acting singly, is hereby authorized to execute
and deliver any and all documents (and the City Clerk is hereby
authorized to attest thereto) and perform such acts as may be
necessary or convenient in connection with such Conversion.
SECTION 17: The Third Supplemental Indenture, in
substantially the form submitted to this meeting and made a part
thereof as though set forth in full herein, be and the same is hereby
approved. Each of the Authorized Officers, acting singly, is hereby
authorized to execute and deliver the Third Supplemental Indenture, in
the name of and on behalf of the City, in substantially the form
presented to this meeting with such changes, insertions and deletions
as may be approved by the Authorized Officer executing the Third
Supplemental Indenture, said execution being conclusive evidence of
such approval, and the City Clerk is hereby authorized to attest
thereto.
SECTION 18: The issuance of the 2003 Series C Bonds on the
terms and conditions set forth in the Third Supplemental Indenture,
and subject to the limitations specified in this Resolution, is hereby
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authorized and approved. The aggregate principal amount of the 2003
Series C Bonds, when added to the principal amount of the other 2003
Series Bonds, shall not exceed One Hundred Sixty -Five Million Dollars.
The 2003 Series C Bonds will be dated as provided in, will bear
interest at the rates set forth in (provided that no 2003 Series C
Bond shall have a stated, coupon interest rate in excess of 12% per
annum), will mature on the date or dates provided in, will be issued
in the form provided in, will have the Sinking Fund Installments
specified in, will be subject to redemption as provided in, and will
have such other terms as shall be provided in, the Third Supplemental
Indenture as the same is completed as provided in this Resolution.
SECTION 19: The Authorized Officer executing the Third
Supplemental Indenture is hereby authorized, subject to the
limitations set forth in Section 12 hereof, to determine the
following: (i) the maturity date or dates of the 2003 Series C Bonds
(but no 2003 Series,C Bond shall mature later than July 1, 2040); (ii)
the principal amount of the 2003 Series C Bonds maturing on each
maturity date; and (iii) the Sinking Fund Installments, if any, for
the 2003 Series C Bonds; (iv) the redemption provisions for the 2003
Series C Bonds.
SECTION 20: The proceeds, including any accrued interest, of
the sale of the 2003 Series C Bonds shall be applied as set forth in
the Third Supplemental Indenture.
SECTION 21: The 2003 Series A Purchase Contract, in
substantially the form submitted to this meeting and made a part
hereof as though set forth in full herein, be and the same is hereby
approved. Each of the Authorized Officers, acting singly, is hereby
authorized to execute and deliver the 2003 Series A Purchase Contract,
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Series B Purchase Contract and as are consistent with the
determinations of the terms of the 2003 Series B Bonds made pursuant
Ito this Resolution, said execution being conclusive evidence of such
approval.
Each of the Authorized Officers, acting singly, is hereby
authorized to determine the purchase price to be paid for the 2003
Series B Bonds under the 2003 Series B Purchase Contract; provided,
however, that the aggregate Underwriter's discount (not including
original issue discount which shall not exceed five percent of the
aggregate principal amount of the 2003 Series B Bonds) for the 2003
Series B Bonds shall be not more than one percent of the aggregate
principal amount of the 2003 Series B Bonds. The sale of the 2003
Series B Bonds to the Underwriter on the terms and conditions
contained in the 2003 Series B Purchase Contract, as the same may be
completed in accordance with the'provisions of this Resolution, with
such changes, insertions and deletions as are authorized hereby, is
(hereby approved and authorized.
SECTION 23: The 2003 Series C Purchase Contract, in
substantially the form submitted to this meeting and made a part
hereof as though set forth in full herein, be and the same is hereby
approved. Each of the Authorized Officers, acting singly, is hereby
authorized to execute and deliver the 2003 Series C Purchase Contract,
lin the name of and on behalf of the City, in substantially the form
presented to this meeting with such changes, insertions and deletions
as may be approved by the Authorized Officer executing said 2003
Series C Purchase Contract and as are consistent with the
determinations of the terms of the 2003 Series C Bonds made pursuant
to this Resolution, said execution being conclusive evidence of such
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lapproval.
Each of the Authorized Officers, acting singly, is hereby
authorized to determine the purchase price to be paid for the 2003
Series C Bonds under the 2003 Series C Purchase Contract; provided,
however, that the aggregate Underwriter's discount (not including
original issue discount which shall not exceed five percent of the
aggregate principal amount of the 2003 Series C Bonds) for the 2003
Series C Bonds shall be not more than one percent of the aggregate
principal amount of the 2003 Series C Bonds. The sale of the 2003
Series C Bonds to the Underwriter on the terms and conditions
contained in the 2003 Series C Purchase Contract, as the same may be
completed in accordance with the provisions of this Resolution, with
such changes, insertions and deletions.as are authorized hereby, is
hereby approved and authorized.
SECTION 24: The Preliminary Official Statement, in
substantially the form presented to this meeting and made a part
hereof as though set forth in full herein, be and the same is hereby
approved. Each of the Authorized Officers, acting singly, is hereby
authorized to deliver the Preliminary Official Statement to the
Underwriter in substantially the form presented to this meeting with
such changes, insertions and deletions as may be approved by the
Authorized Officer delivering the Preliminary Official Statement to
the Underwriter and as are consistent with the determinations of the
terms of the 2003 Series Bonds made pursuant to this Resolution
(including without limitation the insertion of the terms of the 2003
Series B Bonds and the adjustment of the designations of the 2003
Series C Bonds and the Third Supplemental Indenture, as appropriate),
said delivery being conclusive evidence of such approval. The use of
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the Preliminary Official Statement in connection with the offering and
sale of the 2003 Series Bonds by the Underwriter is hereby authorized
(land approved.
SECTION 25: The preparation and delivery,of a final Official
Statement relating to the 2003 Series Bonds (the "Official
Statement"), and its use by the Underwriter in connection with the
offering and sale of the 2003 Series Bonds, be and the same is hereby
authorized and approved. Each of the Authorized Officers, acting
singly, is hereby authorized to execute the Official Statement and any
amendment or supplement thereto contemplated by any of the Purchase
Contracts, in the name and on behalf of the City, and thereupon to
cause the Official Statement and any such amendment or supplement to
be delivered to the Underwriter. The Official Statement shall be in
substantially the form of the Preliminary Official Statement delivered
to the Underwriter pursuant to Section 24 with such changes,
insertions and deletions as may be approved by the Authorized Officer
executing said Official Statement, said execution being conclusive
evidence of such approval.
Each of the Authorized Officers, acting singly, is hereby
authorized to determine that the Preliminary Official Statement and/or
the final Official Statement is deemed final for purposes of Rule
15c2-12 of the Securities and Exchange Commission ("Rule 15c2-12").
SECTION 26: The Continuing Disclosure Agreement, in
substantially the form attached to the Preliminary Official Statement
presented to this meeting and made a part hereof as though set forth
in full herein, be and the same is hereby approved. Each of the
Authorized Officers, acting singly, is hereby authorized to execute
and deliver the Continuing Disclosure Agreement, in the name of and on
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behalf of the City, in substantially the form presented to this
meeting with such changes, insertions and deletions as may be approved
by the Authorized Officer executing the same, said execution being
conclusive evidence of such approval, and the City Clerk is hereby
authorized to attest thereto.
SECTION 27: In the event an Authorized Officer determines
that no qualifying 2003 Series B Bank is willing to issue the 2003
Series B Letter of Credit on the terms of the 2003 Series B
Reimbursement Agreement authorized by this Resolution, then the 2003
Series B Bonds shall not be issued. In this event, the authorization
lof the 2003 Series A Bonds and the 2003 Series C Bonds on the terms
and conditions contained in this Resolution shall not be affected
except that references herein to the 2003 Series C Bonds shall be
deemed to refer to the proper Series designation for the Bonds
referred to herein as the 2003 Series C Bonds and except that
references herein to the Third Supplemental Indenture shall be deemed
Ito refer to the proper.designation for the Supplemental Indenture of
Trust referred to herein as the Third Supplemental Indenture.
SECTION 28: The Mayor, the City Administrator, the City
Clerk, the Director of Utilities, the Deputy Director of Utilities and
any other proper officer of the City, acting singly, be and each of
them hereby is authorized to execute and deliver any and all documents
and instruments and to do and cause to be done any and all acts and
things necessary or convenient in carrying out the transactions
contemplated by the documents and instruments approved or authorized
by this Resolution, including without limitation, entering into any
agreements with respect to continuing disclosure required by Rule
15c2-12 and making any determinations or submission of any documents
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or reports which are required by any rule or regulation of any
governmental entity in connection with the issuance and sale of the
2003 Series Bonds and the authorization, execution, delivery and
performance by the City of its obligations under the documents and
instruments approved or authorized by this Resolution.
SECTION 29: All actions heretofore taken by any committee of
the City Council, or any officer, representative or agent of the City,
in connection with the issuance and sale of the 2003 Series Bonds, the
Malburg Generating Station or the authorization, execution, delivery,
or performance of the City's obligations under, the documents and
instruments approved or authorized by this Resolution and the other
actions contemplated by this Resolution is hereby ratified, approved
and confirmed.
SECTION 30: The City Clerk of the City of Vernon shall
certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 19th day of February, 2003.
ATTEST:
" e f -- - G'
,,, /
BRUCE V. MALKENHORST, City Clerk
EONIS C. MALBURG, Mayor
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STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
hereby certify that the foregoing Resolution, being*Resolution No.
8150, was duly adopted by the City Council of the City of Vernon at a
regular meeting of the City Council duly held on Wednesday,
February 19, 2003, and thereafter was duly signed by the Mayor of the
City of Vernon.
(SEAL)
BRUCE V. MALKENHORST, City Clerk
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EXHIBIT
0
SUPPORTING
DOCUMENTS
[W&C Draft: (Los Angeles) February 1, 2003f'
REIMBURSEMENT AGREEMENT
Dated as of 12003
Between
CITY OF VERNON
and
BANK OF AMERICA, N.A.
Relating to $50,000,000
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series A
TABLE OF CONTENTS
PSe
ARTICLE I DEFINITIONS ..................... ..................... I
..............................................................
Section 1.1 Definitions...............................................................................................1
Section 1.2 Incorporation of Certain Definitions by Reference .................................... 9
Section 1.3 Accounting Terms and Determinations..................................................... 9
Section 1.4 Interpretation................................................................... ....9
ARTICLE II LETTER OF CREDIT; REIMBURSEMENT;, ADVANCES; TERM LOANS .......9
Section 2.1 Application for Letter of Credit, Advances and Term Loans ..................... 9
Section 2.2 Conditions Precedent to Issuance of the Letter of Credit ........................... 9
Section 2.3 Request to Extend LOC Period...............................................................12
Section 2.4 Advances; Term Loans ........................................... .....12
...........................
Section 2.5 Prepayments..........................................................................................14
Section 2.6 Reimbursement of Drawings ................................... ....14
Section 2.7 Evidence of Debt..................................................................................14
Section2.8 Security..................................................................................................14
Section 2.9 Limited Recourse Obligations................................................................15
Section 2.10 Credit Provider Bonds............................................................................15
ARTICLE III PAYMENT TERMS ........................................................15
...................................
Section 3.1 Bank Rights to Payments........................................................................15
Section 3.2 Upfront Fee; and Letter of Credit Fee.....................................................16
Section 3.3 Increased Costs and Reduced Return ......................................................17
Section 3.4 Interest on Overdue Payments ................................. .............................18
Section3.5 Payments................................................................................................19
ARTICLE IV NATURE OF OBLIGATIONS; INDEMNITY...................................................19
Section 4.1 Obligations of the City...........................................................................19
Section 4.2 Indemnification...................................................................................... 20
Section 4.3 Obligations and Liability of the Bank ..................................................... 21
ARTICLE V REPRESENTATIONS AND WARRANTIES..................................................... 22
...............
Section 5.1 Existence and Power.............................................................................. 22
Section 5.2 City and Governmental Authorization; Contravention; Approvals ....... 23
Section 5.3 Enforceability......................................................................................... 23
Section5.4 Litigation................................................................................................23
Section 5.5 Financial Information............................................................................. 24
Section 5.6 Disclosure.............................................................................................. 24
Section 5.7 Environmental Matters...........................................................................24
Section 5.8 Incorporation of Representations and Warranties by Reference .............. 25
Section 5.9 Use of 2003 Bond Proceeds.................................................................... 25
Section 5.10 Pledge of Net Revenues.......................................................................... 25
Section 5.11 Constitutional Matters............................................................................ 25
Section 5.12 No Sovereign Immunity......................................................................... 25
ARTICLE VI COVENANTS....................................................................................................25
Section 6.1 Reports and Other Information............................................................... 26
Section 6.2 Books and Records; Inspections............................................................. 27
Section 6.3 Maintain Existence................................................................................. 27
Section 6.4 Compliance with Laws........................................................................... 27
Section 6.5 Compliance with Agreements................................................................. 28
Section 6.6 Incorporation of Covenants by Reference ............................................... 28
Section 6.7 Minimum Ratings................................................................................... 28
LOSANGELES 89045 (2K) (ii)
Section 6.8 Minimum Cash Balance......................................................................... 28
Section 6.9 Reimbursement Holdback...................................................................... 28
Section 6.10 Limitation on Issuance of Debt............................................................... 29
Section 6.11 Related Documents and Construction Documents...................................29
Section 6.12 Trustee; Tender Agent and Remarketing Agent ...................................... 29
Section 6.13 Substitute Credit Facility........................................................................ 29
Section 6.14 Return of Letter of Credit....................................................................... 29
Section 6.15 Official Statement.................................................................................. 29
Section 6.16 Use of Proceeds...................................................................................... 29
Section 6.17 Optional Redemption............................................................................. 29
Section 6.18 Ranking of Obligations........................................................................... 30
Section 6.19 Waiver of Sovereign Immunity............................................................... 30
Section 6.20 Further Assurances................................................................................. 30
ARTICLE VII DEFAULTS AND REMEDIES......................................................................... 30
Section 7.1 Events of Default..................................................................................... 30
Section 7.2 Rights and Remedies Upon Default........................................................ 3.1
ARTICLE VIII MISCELLANEOUS ...................................................................................... 32
Section 8.1 Right of Setoff; Other Collateral............................................................. 32
Section8.2 Notices................................................................................................... 33
Section 8.3 Governing Law and Jurisdiction............................................................. 34
Section 8.4 WAIVER OF JURY TRIAL................................................................... 34
Section 8.5 Successors and Assigns..........................................................................35
Section 8.6 Severability of Provisions....................................................................... 35
Section 8.7 Amendments; Waivers...........................................................................36
LOSANGELES 89045 (2K) (iii)
Section 8.8 Execution in Counterparts........_............................................................. 36
Section 8.9 Headings; Table of Contents................................................................... 36
EXHIBIT A FORM OF LETTER OF CREDIT
EXHIBIT B FORM OF CUSTODIAN AGREEMENT
LOSANGELES 89045 (2K) (iV)
This REIMBURSEMENT AGREEMENT, dated as of , 2003 (as the same
may be amended, modified, supplemented and restated from time to time, this '"Agreement"), is
entered into between CITY OF VERNON, a municipal corporation and chartered city of the
State of California (the "City"), and BANK OF AMERICA, N.A., a national banking association
(the `Bank").
WITNESSETH:
WHEREAS, the City has requested the Bank to issue an irrevocable direct -pay letter of
credit to provide credit and liquidity support for certain limited recourse bonds to be issued by
the City; and
WHEREAS, the Bank is willing to issue such a letter of credit upon the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises
contained herein and other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and in order to induce the Bank to issue the Letter of Credit defined below, the
City and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the following meanings as
used herein:
"Additional Bonds" has the meaning set forth in the Indenture.
"Additional Parity Obligations" has the meaning set forth in the Indenture.
"Adjusted Debt Service" has the meaning set forth in the Indenture.
"Adjusted Letter of Credit Amount" means at any time (i) the principal amount of the
2003 Bonds then Outstanding plus (ii) an amount equal to the, interest accruing thereon at an
assumed interest rate of 12 percent per annum during a period of 40 days (calculated on the basis
of a 365 day year).
"Advance" and "Advances" have the meanings set forth in Section 2.4(a) hereof.
"Advance Payment Date" has the meaning set forth in Section 2.4(a) hereof.
"Advance Term Loan" has the meaning set forth in Section 2.4(b) hereof.
"Affiliate" means, as to any Person, any other Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, such Person. A Person shall be
deemed to be "controlled by" any other Person if such other Person possesses, directly or
indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having
LOSANGELES 89045 (2K)
ordinary voting power for the election of directors or managing general partners; or (b) to direct
or cause the direction of the management and policies of such Person whether by contract or
otherwise.
"Alternate 2003 Credit Support Instrument" has the meaning set forth in the First
Supplemental Indenture.
"Applicable Rate" means, for any day, the rate set forth below opposite the Applicable
Rating Level for such day:
Applicable Rating Level Applicable Rate
Level I 0.0080
Level II 0.0095
Level III 0.0110
"Applicable Rating Level" means and shall be determined by reference to the ratings
issued from time to time by Moody's (or any successor thereto) and S&P (or any successor
thereto) (or, Moody's or S&P, if ratings shall be available from only one of such rating agencies)
in respect of the unsecured non -enhanced long-term Debt of the Electric System in accordance
with the following (provided that, if ratings are in effect from both rating agencies but fall within
different Levels, the Level corresponding to the less favorable of such ratings shall apply):
S&P Moody's
Level I >A+ >Al
Level II A or A- A2 or A3
Level III <BBB+ <Baal
For purposes of the foregoing, (i) ">" means a rating equal to or more favorable than; (ii) "<"
means a rating equal to or less favorable than; (iii) if ratings for the unsecured non -enhanced
long-term Debt of the Electric System shall not be available as a result of the withdrawal;
suspension or termination thereof, Level III shall apply; (iv) if determinative ratings shall change
(other than as a result of change in the rating system used by any applicable rating agency) such
that a change in Applicable Rating Level would result, such change shall effect a change in
Applicable Rating Level as of the day on which it is first announced by the applicable rating
agency, and any change in the Applicable Rate shall apply commencing on the effective date of
such change and ending on the date immediately preceding the effective date of the next such
change; and (v) if the rating system of any of the rating agencies shall change, the Applicable
Rate in effect on the date of such change shall remain in effect as if no such change in the rating
system had occurred for a period of sixty days from the date of the change in the rating system,
during which sixty day period the City and the Bank shall negotiate in good faith to amend the
LOSANGELES 89045 (2K) -2-
references to specific ratings in this definition to reflect such changed rating system, and if no
amendment to reflect such changed rating system is executed by the end of such 60-day period,
Level III shall apply.
"Assignee" has the meaning set forth in Section 8.5(b) hereof.
"Authorized Denomination" means any denomination of the 2003 Bonds authorized
pursuant to the Indenture.
"Authorized City Representative" has the meaning set forth in the Indenture.
"Bank" has the meaning assigned to it in the initial paragraph.
"Bank Rate" means for any day and for (a) any Advance a fluctuating rate per annum
equal to the higher of (i) the LIBOR Daily Floating Rate in effect on the date such Advance is
made plus 1.25% and (ii) the Base Rate or (b) any Term Loan a fluctuating rate per annum equal
to the higher of (i) the LIBOR Daily Floating Rate in effect on the date such Advance is made
plus 2.25% and (ii) the Base Rate plus 1%.
"Bank -Related Persons" means the Bank, its Affiliates and the officers, directors,
employees, agents and attorneys -in -fact of the Bank and Affiliates.
"Base Rate" means for any day a fluctuating rate per annum equal to the higher of (a) the
Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly
announced from time to time by the Bank as its "prime rate." Such prime rate is a rate set by the
Bank based upon various factors including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some loans, which may
be priced at, above, or below such announced rate. Any change in such prime rate announced by
the Bank shall take effect at the opening of business on the day specified in the public
announcement of such change.
"Bondowner" or "Owner" has the meaning set forth in the Indenture.
"Bond" has the meaning set forth in the Indenture.
"Business Da v" has the meaning set forth in the Indenture.
"Charter" has the meaning set forth in the Indenture.
"City" has the meaning assigned to it in the initial paragraph.
"City Administrative Code" has the meaning set forth in the Indenture.
"City Council" has the meaning set forth in the Indenture.
"Code means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder. Section references, if any, to the Code are to the Code, as in effect at
LOSANGELES 89045 (2K) -3-
the date of this Agreement, and to any subsequent provisions of the Code amendatory thereof,
supplemental thereto or substituted therefor.
"Construction Documents" means each of the documents listed on Schedule 1.
"Construction Period" means the period commencing on the Date of Issuance and ending
on the date on which the Malburg Generating Station commences the generation of electric
power for consumption on a routine basis.
"Contract of Purchase" means the Contract of Purchase, dated as of , 2003,
between the City and the purchasers named therein.
"Credit Provider Bonds" has the same meaning as is given to the term "2003 Credit
Provider Bonds" in the First Supplemental Indenture.
"Custodian Aggreement" means the Custodian Agreement to be entered into among the
Bank, the City and BNY Western Trust Company on or prior to the Date of Issuance, the form of
which is attached hereto as Exhibit B.
"Daily Interest Rate" has the meaning set forth in the First Supplemental Indenture.
"Date of Issuance" means the date on which the Letter of Credit is issued by the Bank
and delivered to the Trustee.
"Debt" shall mean (a) all indebtedness (including principal, interest, fees and charges) of
the City for borrowed money that is payable from, or secured in whole or in part by, the Trust
Estate, (b) the deferred purchase price of property or services (other than accrued expenses and
current trade accounts payable incurred in the ordinary course of business) that is payable from,
or secured in whole or in part by, the Trust Estate and which, in accordance with Generally
Accepted Accounting Principles, would be shown on the liability side of the balance sheet of the
Light and Power Department Fund, provided that amounts payable with respect to property
and/or services which are included within the defined term "Operating and Maintenance
Expenses" shall not constitute "Debt," (c) the face amount of all letters of credit issued for the
account of the City and all drafts drawn thereunder to the extent issued in support of obligations
which themselves are "Debt", (d) all obligations other than power purchase obligations under
conditional sale or other title retention agreements relating to property purchased by the City and
payable from, or secured in whole or in part by, the Trust Estate, (e) all liabilities secured by any
Lien on any part of the Trust Estate but not exceeding the fair market value of the Trust Estate
securing such Lien, whether or not such liabilities have been assumed by the City, (f) the
aggregate amount required to be capitalized under leases under which the City is the lessee to the
extent that the lease payments thereunder are payable from, or secured in whole or in part by, the
Trust Estate, (g) the amount of all indebtedness, obligations or other liabilities of the City that are
payable from, or secured in whole or in part by, the Trust Estate (other than power purchase
obligations) to its counter parties in respect of interest rate and currency protection agreements
(e.g., swaps, caps and collars) after netting out the amount of all indebtedness, obligations or
other liabilities owed to the City by its counter parties in respect of such agreements (provided
such net indebtedness, obligations and liabilities are greater than zero) and (h) all Contingent
Obligations of the City in respect of any indebtedness, obligations or liabilities of any other
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Person of the type referred to in clauses (a) through (g) of this definition; provided, however, that
in the event an item of Debt falls in more than one of the categories of Debt described above it
shall be counted once only. For purposes of calculating indebtedness, obligations and liabilities
under interest rate and currency protection agreements, such calculation shall be made in
accordance with market convention at the time of such calculation or, should a Default or an
Event of Default have occurred and be continuing, in accordance with the definition of "Market
Quotation" set forth in the Interest Rate and Currency Exchange Agreement of the International
Swap Dealers Association, Inc. as in effect on the date hereof. As used in this defined term, the
term "Contingent Obligations" means any obligation of the City guaranteeing or intended to
guarantee any Debt, leases, dividends or other obligations other than power purchase obligations
(any such Debt, leases, dividends or other obligations, the "primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of the City, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security therefor, (b) to advance
or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the holder of any such primary obligation of the ability of ` the primary
obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless
the holder of such primary obligation against loss in respect thereof, provided, however, that the
term "Contingent Obligation" shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by the City in good faith.
"Default" means any condition or event which constitutes an Event of Default hereunder
or which, with the giving of notice or lapse of time or both could reasonably be expected to,
unless cured or waived, become an Event of Default.
"Dollars" and the sign' $" means lawful money of the United States of America.
"Drawing" means a drawing made or permitted to be made pursuant to the terms of the
Letter of Credit.
"Electric Service" has the meaning set forth in the Indenture.
"Electric System" has the meaning set forth in the Indenture.
"Environmental Laws" means any and all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to the environment or
to emissions, discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into the environment
including, without limitation, ambient air, surface water, ground water, or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
LOSANGELES 89045 (2K) -5-
or handling of pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other remediation thereof.
"Event of Default" has the meaning set forth in Section 7.1 of this Agreement.
"Expiration Date" has the meaning set forth in the Letter of Credit.
"Expiration Drawing" means a Drawing made under the Letter of Credit for the purpose
of purchasing 2003 Bonds tendered for purchase pursuant to Section 4.04(b) or 4.04(c) of the
First Supplemental Indenture and not remarketed.
"Expiration Term Loan" has the meaning set forth in Section 2.4(b) hereof.
"Federal Funds Rate" means, for any day, the rate per annum equal to the weighted
average of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank on the Business Day next succeeding such day; provide d that (a) if such day is not
a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on
the next precedingBusiness Day as so published on the next succeeding Business Day, and (b) if
no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for
such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of
1%) charged to the Bank on such day on such transactions as determined by the Bank.
"First Supplemental Indenture" means the First Supplemental Indenture of Trust, dated as
of , 2003, between the City and the Trustee.
"Fiscal Year" has the meaning set forth in the Indenture.
"Generally Accepted AccountingPrinciple s" has the meaning set forth in the Indenture.
"Government Acts means any act or omission to act, whether rightful or wrongful, of
any present or future de jure or de facto government or governmental authority.
"Governmental Authority" means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body, court,
administrative tribunal, central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital ownership or otherwise,
by any of the foregoing.
"Incorporated Provisions" has the meaning set forth in Section 6.6 of this Agreement.
"Indenture" means the Indenture of Trust, dated as of , 2003, between the City
and the Trustee, and all supplemental indentures entered into pursuant thereto.
"Key Provisions" has the meaning set forth in Section 6.6 of this Agreement.
LOSANGELES 89045 (2K) -6-
"Letter of Credit" means an irrevocable direct -pay letter of credit in the form of Exhibit
A hereto, with blanks appropriately completed, executed and issued by the Bank in favor of the
Trustee for the benefit of the Owners.
"LIBOR Daily Floating Rate" means, for any date of determination, a fluctuating rate of
interest equal to the average per annum interest rate (rounded upwards to the nearest 1/100 of
one percent) at which U.S. dollar deposits would be offered for one month by major banks in the
London inter -bank market, as shown on Telerate Page 3750 (or any successor page) as
determined for each banking day at approximately 11:00 a.m. London time two (2) London
Banking Days prior to the date in question, as adjusted from time to time in the Bank's sole
discretion for reserve requirements, deposit insurance assessment rates and other regulatory
costs. If such rate does not appear on Telerate Page 3750 (or any successor page), the rate will
be determined by such alternate method as reasonably selected by the Bank. A "London
Banking; Day" is a day on which the Bank's London Banking Center is open for business and
dealing in offshore dollars.
"Lien" means, with respect to any property, tangible or intangible, real or personal, any
mortgage, lien, pledge, charge, security interest or other encumbrance of any kind in respect of
such property.
"Light and Power Department Fund" has the meaning set forth in the Indenture.
"LOC Period" means the period commencing on the Date of Issuance and ending on the
Expiration Date.
"Malburg Generating Station" has the meaning set forth in the First Supplemental
Indenture.
"Mood's" means Moody's Investors Service, Inc.
"Net Revenues" has the meaning set forth in the Indenture.
"Obligations" shall mean the City's obligation to reimburse all Drawings, to repay all
Advances and Term Loans, to pay debt service on the Credit Provider Bonds, to pay the
principal, interest, fees, expenses, costs and other amounts owed to the Bank or the Parent
pursuant to the terms of this Agreement, any Related Document or any other document,
instrument or agreement entered into by the City with or in favor of the Bank in connection
herewith or therewith and to make net payments to the Bank or any Affiliate of the Bank under
the terms of any Qualified Swap Agreement entered into by the City and the Bank or any
Affiliate of the Bank, together with all guaranties, covenants and duties owing by the City to the
Bank of any kind or description, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising.
"Official Statement" means the Official Statement, dated , 2003 (including
any amendments or supplements thereto), with respect to the 2003 Bonds.
"Operating and Maintenance Expenses" has the meaning set forth in the Indenture.
LOSANGELES 89045 (2K) -7-
"Outstandinsz" has the meaning set forth in the Indenture.
"Parent" means any Person controlling the Bank.
"Parity Obligations" has the meaning set forth in the Indenture.
"Participant" has the meaning assigned to it in Section 8.5(b) of this Agreement.
"Permitted Investments" has the meaning assigned to that term in the Indenture.
"Person" means an individual, a corporation, a partnership, a limited liability company,
an association, a joint venture, a trust, an unincorporated organization or any other entity or
organization, including a government or political subdivision or an agency or instrumentality
thereof.
"Qualified Swap Agreement" has the meaning set forth in the Indenture.
"Refundin Bonds" has the meaning set forth in the Indenture.
"Refunding Parity atg ions" has the meaning set forth in the Indenture.
"Related Documents" means the Indenture, the First Supplemental Indenture, the 2003
Bonds, the Remarketing Agreement, the Contract of Purchase, the Custodian Agreement, any
Qualified Swap Agreement entered into by the City and the Bank or any Affiliate of the Bank
and the Official Statement.
"Remarketing Agent" has the meaning set forth in the First Supplemental Indenture.
"Remarketing Agreement" has the meaning set forth in the First Supplemental Indenture.
"Revenues" has the meaning set forth in the Indenture.
"Stated Termination Date" has the meaning set forth in the Letter of Credit.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Incorporated.
"Subordinated Obligation" has the meaning set forth in the Indenture.
"Taxes" has the meaning set forth in Section 3.5(b) hereof.
"Tender Agent" has the meaning set forth in the First Supplemental Indenture.
"Tender Drawing" means a Drawing made under the Letter of Credit for the purpose of
purchasing 2003 Bonds tendered for purchase pursuant to Section 4.01 of the First Supplemental
Indenture and not remarketed.
"Term Loan" and "Term Loans have the meanings set forth in Section 2.4(b) hereof.
LOSANGELES 89045 (2K) -8-
"Term Loan Payment Date" has the meaning set forth in Section 2.4(b) hereof.
"Trust Estate" has the meaning set forth in the Indenture.
"Trustee" has the meaning set forth in the Indenture.
"2003 Bonds" means the City of Vernon Malburg Generating Station Project Electric
System Revenue Bonds, 2003 Series A, initially issued and authenticated in an aggregate
principal amount of $50,000,000.
"Weekly Interest Rate" has the meaning set forth in the First Supplemental Indenture.
Section 1.2 Incorporation of Certain Definitions by Reference. Each capitalized term
used herein and not otherwise defined herein shall have the meaning provided therefor in the
Indenture.
Section 1.3 Accounting Terms and Determinations. All accounting terms not
specifically defined herein shall be construed in accordance with Generally Accepted
Accounting Principles.
Section 1.4 Interpretation. The following rules shall apply to the construction of this
Agreement unless the context requires otherwise: (a) the singular includes the plural, and the
plural the singular; (b) words importing any gender include the other gender and the neuter
gender; (c) references to statutes are to be construed as including all statutory provisions
consolidating, and all regulations promulgated pursuant to, such statutes; (d) references to
"writing" include printing, photocopy, typing, lithography and other means of reproducing words
in a tangible visible form; (e) the words "including", "includes" and "include" shall be deemed to
be followed by the words "without limitation"; (f) references to the introductory paragraph,
recitals, articles, sections (or clauses or subdivisions of sections), exhibits, appendices, annexes
or schedules are to those of this Agreement unless otherwise indicated; (g) references to
agreements and other contractual instruments shall be deemed to include all subsequent
amendments and other modifications to such instruments, but only to the extent that such
amendments and other modifications are permitted or not prohibited by the terms of this
Agreement; (h) article and section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement for any other
purpose; and (i) unless otherwise indicated, references to Persons include their respective
permitted successors and assigns.
ARTICLE II
LETTER OF CREDIT• REIMBURSEMENT, ADVANCES, TERM LOANS
Section 2.1 Application for Letter of Credit. Advances and Term Loans. The City
hereby applies to the Bank for, and authorizes and instructs the Bank to issue for the City's
account, the Letter of Credit, and to make Advances and Term Loans.
Section 2.2 Conditions Precedent to Issuance of the Letter of Credit. Upon
satisfaction of each and every condition listed below, the Bank hereby agrees to issue the Letter
LOSANGELES 89045 (2K) -9-
of Credit. The Bank agrees that it will pay all Drawings under the Letter of Credit from its own
funds. Such conditions precedent to the issuance of the Letter of Credit are:
(a) Receipt by the Bank, on or prior to the Date of Issuance, of those portions,
if any, of the Charter and the City Administrative Code and all amendments thereto that relate to
the Electric System, certified as to accuracy and completeness by the clerk of the City;
(b) Receipt by the Bank, on or prior to the Date of Issuance, of a copy of the
resolutions of the City authorizing the execution, delivery and performance of this Agreement
and the Related Documents to which it is a party, certified by an appropriate official of the City,
which certification shall include a statement to the effect that such resolutions are in full force
and effect on the Date of Issuance;
(c) Receipt by the Bank, on or prior to the Date of Issuance, of a certificate of
the City certifying the names and true signatures of the officials of the City authorized to sign
this Agreement and the Related Documents to which it is a party and the other documents to be
delivered by the City hereunder;
(d) To the extent not included in (b) above, receipt by the Bank, on or prior to
the Date of Issuance, of originals (or copies certified to be true copies by an appropriate official
of the City) of all governmental and regulatory approvals necessary for the City to enter into this
Agreement and the Related Documents to which it is a party and to perform its obligations as
contemplated hereby and thereby, and of all other documents evidencing any other necessary
City action;
(e) Receipt by the Bank, on or prior to the Date of Issuance of opinions (or in
the case of clause (i) below, a reliance letter) addressed to the Bank and dated the Date of
Issuance, of (i) Orrick, Herrington & Sutcliffe LLP, bond counsel, substantially in the form
attached to the Official Statement, (ii) the City Attorney for the City, substantially in the form set
forth in or attached to the Contract of Purchase, [(iii) special counsel to the City, substantially in
the form set forth in or attached to the Contract of Purchase], and (iv) special counsel to the
Trustee and the Tender Agent, in form and substance satisfactory to the Bank;
(f) An executed copy of this Agreement, an executed copy (or a copy
certified to be an accurate and complete copy by an appropriate official of the City) of each
Related Document and a copy of the Official Statement shall have been delivered by the City to
the Bank and, such documents shall each be in form and substance satisfactory to the Bank;
(g) Receipt by the Bank on or prior to the Date of Issuance of the most recent
audited financial statements of the Electric System and the most recent unaudited financial
statements of the Electric System, which statements shall be in form and substance satisfactory
to the Bank;
(h) The following statements shall be true and correct on the Date of Issuance,
and the Bank shall have received a certificate signed by the Authorized City Representative of
the City, dated the Date of Issuance, stating that:
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(i) the representations and warranties of the City contained in this
Agreement (including those incorporated by reference) and each certificate furnished or
delivered by the City to the Bank pursuant hereto are true and correct on and as of the
Date of Issuance as though made on and as of such date;
(ii) no Default or Event of Default has occurred and is continuing or
would result from the issuance of the Letter of Credit or the making of any Advance or
Term Loan; and
(iii) the 2003 Bonds have been assigned a long-term/short-term rating
of AA-/A-1+ by S&P, if rated by S&P, and a rating of Aal/Pl by Moody's, if rated by
Moody's, and the unsecured unenhanced long-term Debt of the Electric System has been
assigned a long-term rating of not less than BBB+ by S&P and not less than Baal by
Moody's;
(i) On the bate of Issuance (i) there exists no Default or Event of Default and
(ii) there has been no material adverse change in the business, financial position, result of
operation or prospects of the Electric System since the most recent audited financial statements;
0) Receipt by the Bank, on or prior to the Date of Issuance, of a certificate of
the secretary or an assistant secretary of the Trustee certifying the offices held, names and true
signatures of the officers of the Trustee authorized to authenticate the 2003 Bonds and to sign the
Related Documents to which the Trustee is a party;
(k) Receipt by the Bank, on or prior to the Date of Issuance, of a certificate of
the secretary or an assistant secretary of the Tender Agent certifying the offices held, names and
true signatures of the officers of the Tender Agent authorized to sign the Related Documents to
which the Tender Agent is a party;
(1) Receipt by the Bank, on or prior to the Date of Issuance, of a certificate of
an authorized officer of Navigant Consulting, Inc. authorizing the Bank to rely on the engineer's
report relating to the Malburg Generating Station prepared by Navigant Consulting, Inc. and
included in the Official Statement as if such report were addressed to the Bank;
(m) Receipt by the Bank, on or prior to the Date of Issuance, of a copy of each
of Construction Document, which documents shall be in form and substance satisfactory to the
Bank;
(n) Receipt by the Bank of all amounts due to it on or before the Date of
Issuance pursuant to Section 3.2;
(o) Receipt by the Bank of executed copies of each other agreement,
document, instrument, certificate or opinion (other than the opinion of counsel to the
underwriters delivered to the underwriters) required to be delivered by any Person pursuant to
the Contract of Purchase, each of which shall be in form and substance satisfactory to the Bank
and, in the case of each such opinion, a letter addressed to the Bank from the counsel rendering
such opinion stating that the Bank is entitled to rely upon such opinion as if such opinion were
addressed to it;
LOSANGELES 89045 (2K) -1 1-
(p) Receipt by the Bank, on or prior to the Date of Issuance, of a certificate of
the City listing all insurance coverage maintained by the City and covering the Electric System,
its personnel and its properties and assets;
(q) Receipt by the Bank of a copy of the most recent annual budget adopted
by the City for the Electric System; and
(r) Receipt by the Bank, on or prior to the Date of Issuance, of such other
documents, instruments, approvals (and, if requested by the Bank, certified duplicates of
executed copies thereof) or opinions as the Bank may reasonably request.
Section 2.3 Request to Extend LOC Period. During the 90-day period to each
anniversary of the Date of Issuance, the City may, by written notice to the Bank, request that the
Stated Termination Date be extended for an additional one-year period. Following its receipt of
such a request, the Bank, in its sole and absolute discretion shall notify the City of its decision
with respect to such request within 60 days of such receipt, together with any conditions thereto
(including, without limitation, change in pricing), it being understood and agreed that the failure
of the Bank to notify the City of any decision within such 60-day period shall be deemed to be a
rejection of such request and the Bank shall not incur any liability or responsibility whatsoever to
any Person by reason of its failure so to notify the City or as a result of its rejection of such
request.
Section 2.4 Advances: Term Loans.
(a) Unless the commitment of the Bank to make advances hereunder shall
have terminated in accordance with Section 7.2(c)(i), if the Bank shall honor payment of a
Tender Drawing and such payment is not reimbursed by 1:00 p.m. (Los Angeles time) on the day
such payment is made and the conditions of subsection (c) are satisfied on such day, such
payment shall constitute, and the Bank shall be deemed to have extended, an advance to the City
on such day and in the amount of such Tender Drawing (each such advance, an "Advance" and,
collectively, the "Advances"). Subject to Section 7.2(c)(ii), each Advance made by the Bank to
the City shall mature and the outstanding principal amount of such Advance shall be due and
payable on the earliest to occur of (the "Advance Payment Date") (i) the Expiration Date and (ii)
thirty-first day following the day on which such Advance is made. Interest shall accrue on each
Advance from the date of incurrence thereof to but excluding the applicable Advance Payment
Date, at a rate per annum equal to the Bank Rate, and shall be payable on the Advance Payment
Date for such Advance and on each date of prepayment; provided, however, that in the event
such interest is not paid on such outstanding Advance when due and payable, the City shall pay
interest on the principal amount of such Advance and the amount of the unpaid interest, if any,
on demand, at the rate set forth in Section 3.4(a), beginning from the date the unpaid interest first
started to accrue.
(b) Unless (i) the commitment of the Bank to make term loans hereunder has
terminated in accordance with Section 7.2(c)(i) or (ii) the City has given the Bank at least one
Business Day's prior notice that it intends to pay an Advance in full on the Advance Payment
Date therefor, if the conditions of subsection (d) are satisfied on the Advance Payment Date for
an Advance, the unpaid principal amount of such Advance shall be converted into, and the Bank
LOSANGELES 89045 (2K) -12-
shall be deemed to have extended to the City, a term loan (each, an "Advance Term Loan").
Unless (x) the commitment of the Bank to make term loans hereunder has terminated in
accordance with Section 7.2(c)(i) or (y) the City has given the Bank at least one Business Day's
prior notice that it intends to reimburse in full the amount of the Expiration Drawing on the date
the Bank honors payment thereof, if the conditions of subsection (e) are satisfied at the time at
which the Bank honors payment of the Expiration Drawing, the City's obligation to reimburse
the Bank in the amount of such Drawing shall be deemed satisfied and the Bank shall be deemed
to have extended a term loan to the City in the amount of such Drawing at the time the Bank
honors payment of such Drawing (such term loan, the "Expiration Term Loan'; the Expiration
Term Loan and each Advance Term Loan are hereinafter referred to individually as a "Term
Loan" and collectively as the "Term Loans"). Subject to Section 7.2(c)(ii), payment of the
principal of each Term Loan shall be made in twelve equal quarterly installments, commencing
on the three month anniversary of the date on which such Term Loan was extended and
continuing on each three month anniversary thereafter or, if any three month anniversary is not a
Business Day, the next succeeding Business Day (each a "Term Loan Payment Date"). Interest
shall accrue on each Term Loan from the date of incurrence thereof to and excluding each Term
Loan Payment Date, at a rate per annum equal to the Bank Rate, and shall be payable on each
Term Loan Payment Date and on each date of prepayment; provided, however, that in the event
such interest is not paid on such outstanding Term Loan when due and payable, the City shall
pay interest on the principal amount of such Term Loan and the amount of the unpaid interest, if
any, on demand, at the rate set forth in Section 3.4(a) in effect from time to time, beginning from
the date the unpaid interest first started to accrue.
(c) An unreimbursed Tender Drawing shall be deemed paid and become an
Advance on the day such Tender Drawing is made if the following statements shall be true and
correct on such day: (i) the representations and warranties contained in Article V are correct on
and as of the date of such Advance as though made on and as of such date and (ii) no event has
occurred and is continuing, or would result from the making of such Advance, which constitutes
an Event of Default or a Default. Unless the City shall have previously advised the Bank, in
writing that one or more of the above statements are no longer true, the City shall be deemed to
have represented and warranted on the date of each Advance that the above statements are true
and correct.
(d) An unpaid Advance shall be deemed paid and become an Advance Term
Loan on the Advance Payment Date for such Advance if the following statements shall be true
and correct on such date: (i) the representations and warranties contained in Article V are correct
on and as of such Advance Payment Date as though made on and as of such date and (ii) no
event has occurred and is continuing, or would result from the making of such Advance Term
Loan, which constitutes an Event of Default or a Default. Unless the City shall have previously
advised the Bank in writing that one or more of the above statements are no longer true, the City
shall be deemed to have represented and warranted on the applicable Advance Payment Date that
the above statements are true and correct.
(e) If the Expiration Drawing is honored and not reimbursed, the Expiration
Drawing shall be deemed paid and become the Expiration Term Loan on the day such Expiration
Drawing is made if the following statements shall be true and correct on such day: (i) the
representations and warranties contained in Article V are correct on and as of the date of the
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Expiration Drawing is honored as though made on and as of such date and (ii) no event has
occurred and is continuing, or would result from the making of the Expiration Term Loan, which
constitutes an Event of Default or a Default. Unless the City shall have previously advised the
Bank in writing that one or more of the above statements are no longer true, the City shall be
deemed to have represented and warranted on the date of the Expiration Drawing that the above
statements are true and correct.
Section 2.5 Prepay.
(a) Voluntary Prepayment. The City may, on any Business Day, upon at least
two Business Days' notice to the Bank, prepay the outstanding amount of any Advance or Term
Loan, in whole or in part in amounts aggregating $100,000 or any multiple of $100,000 in excess
thereof, with accrued interest to the date of such prepayment on the amount prepaid. In the event
the City partially prepays a Term Loan, such prepayment shall be applied to reduce all remaining
principal payments in respect of such Term Loan as nearly as possible by equal amounts.
(b) Mandatory Prepayment. Upon the remarketing of Credit Provider Bonds,
the City shall cause the Tender Agent to deliver to the Bank all proceeds thereof. If the Bank
receives proceeds from the remarketing of Credit Provider Bonds accompanied by a certificate
completed and signed by the Trustee in the form of Annex H to the Letter of Credit, the Bank
shall (i) apply such proceeds (with interest being paid before principal) to the payment of the
principal of, and interest on, the Advance or Advance Term Loan resulting from the Tender
Drawing the proceeds of .which were used to purchase such Credit Provider Bonds and (ii)
reinstate the Letter of Credit in accordance with its terms.
Section 2.6 Reimbursement of Drawings. Except as otherwise provided in Section
2.4, the City shall pay the Bank as reimbursement for each Drawing honored by the Bank a sum
equal to the full amount of such Drawing no later than 1:00 p.m. (Los Angeles time) on the date
such Drawing is honored.
Section 2.7 Evidence of Debt. The Bank shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the City resulting from each
Drawing made from time to time under the Letter of Credit, the making of Advances, the making
of Term Loans and the amounts of principal and interest payable and paid from time to time
hereunder. Such account or accounts shall be made available to the City during regular business
hours upon the reasonable request of the City to the Bank. In any legal action or proceeding in
respect of this Agreement, the entries made in such account or accounts shall be conclusive
evidence (absent manifest error) of the existence and amounts of the obligations of.the City
therein recorded.
Section 2.8 Security. Subject to the application of Net Revenues as permitted in the
Indenture, to secure the timely payment of all Obligations (other than the payment of the
principal of, interest on and redemption price of Credit Provider Bonds) and to secure the
performance and observance of all of the covenants, agreements and conditions contained in this
Agreement and the Related Documents to which the Bank or any Affiliate thereof is a party, the
City hereby irrevocably grants a lien on and a security interest in, and pledges, the Net Revenues
to the Bank (for the benefit of the Bank and any Affiliate of the Bank to whom any Obligation
LOSANGELES 89045 (2K) -14-
(other than the payment of the principal of, interest on and redemption price of Credit Provider
Bonds) is at any time owed), which lien on, security interest in and pledge of the Net Revenues is
on a parity with the pledge of Net Revenues set forth in the Indenture and any pledge of Net
Revenues securing Parity Obligations other than the Obligations. This lien on and security
interest in and pledge of the Net Revenues shall constitute a valid pledge of and charge and lien
upon the Net Revenues, shall immediately attach and be effective, binding, and enforceable
against the City, its successors, purchasers of any of the Net Revenues, creditors, and all others
asserting rights therein to the extent set forth in, and in accordance with, the Indenture,
irrespective of whether those parties have notice of the lien on, security interest in and pledge of
the Net Revenues and without the need for any physical delivery, recordation, filing or further
act.
Section 2.9 Limited Recourse Obligations. The Obligations (other than the payment
of the principal of, interest on and redemption price of Credit Provider Bonds) shall not be
payable from any income, receipts or revenues of the City other than those included in the Net
Revenues, nor shall the Obligations (other than the payment of the principal of, interest on and
redemption price of Credit Provider Bonds) constitute a legal or equitable pledge, charge, lien, or
encumbrance upon any of the property or upon any of the income, receipts, or revenues of the
City, except the Net Revenues. The payment of the principal of, interest on and redemption
price of Credit Provider Bonds shall not be payable from any income, receipts or revenues of the
City other than those included in the Trust Estate, nor shall the payment of the principal of,
interest on and redemption price of Credit Provider Bonds constitute a legal or equitable pledge,
charge, lien, or encumbrance upon any of the property or upon any of the income, receipts, or
revenues of the City, except the Trust Estate.
Section 2.10 Credit Provider Bonds. Bonds purchased by the Bank with the proceeds
of a Tender Drawing or the Expiration Drawing shall constitute Credit Provider Bonds and shall,
from the date of such purchase and while they are Credit Provider Bonds, bear interest at the rate
and have other characteristics of Bonds set forth in the Indenture and the First Supplemental
Indenture. Upon purchasing Credit Provider Bonds, the Bank shall be entitled to and, where
necessary, shall be deemed assigned all rights and privileges accorded Bondowners, except to the
extent such rights and privileges conflict with this Agreement, in which case the terms of this
Agreement shall prevail and govern. Upon purchasing Credit Provider Bonds, the Bank shall be
recognized by the City, the Tender Agent and the Trustee as the true and lawful owner of such
Credit Provider Bonds, free from any claims, liens, security interests, equitable interests and
other interests of the City, except as such interests might exist under the terms of the Credit
Provider Bonds with respect to all owners of the Bonds. Credit Provider Bonds purchased by
the Bank shall held by the Tender Agent, as custodian, pursuant to the terms of the Custodian
Agreement.
ARTICLE III
PAYMENT TERMS
Section 3.1 Bank Rights to Payments. The City shall pay, or cause to be paid, to the
Bank, the following amounts at the following times:
LOSANGELES 89045 (2K) -15 -
(a) On or before the Business Day on which the Bank is obligated to honor
and make payment under the Letter of Credit pursuant to any Drawing, a non-refundable draw
fee of $250;
(b) Upon each transfer of the Letter of Credit in accordance with its terms, a
transfer commission equal to $3,000. A transfer shall be deemed to have occurred whenever the
Trustee is replaced, substituted or changed as a result of sale, assignment, merger, consolidation,
reorganization or an act of law. A transfer shall not be deemed to have occurred solely as a
result of a change in the legal name of the Trustee;
(c) On demand, any and all costs and expenses incurred by the Bank
(including attorneys' fees) in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement, the Related Documents and any
other documents delivered hereunder, whether or not suit is filed and whether or not an Event of
Default exists (including all such costs and expenses incurred during any "workout" or
restructuring in respect of the Obligations and during any legal proceeding, including any
proceeding under any debtor relief law); and
(d) On demand, any and all costs and expenses incurred by the Bank
(including attorneys' fees) in connection with any amendment, waiver, supplement or
restatement of this Agreement, the Related Documents and any other documents delivered
hereunder, whether or not any such amendment, waiver, supplement or restatement is executed;
and
(e) On demand, the out-of-pocket expenses of the Bank incurred in
connection with the negotiation, preparation and execution of this Agreement, the Letter of
Credit, and the Related Documents, which out-of-pocket expenses shall not exceed $
(f) On demand, the fees and out-of-pocket expenses of White & Case LLP,
counsel to the Bank, incurred in connection with the negotiation, preparation and execution of
this Agreement, the Letter of Credit, and the Related Documents, which fees shall not exceed
$50,000.
Section 3.2 Upfront Fee; and Letter of Credit Fee.
(b) On or before the Date of Issuance, the City shall pay a nonrefundable
upfront fee to the Bank in an amount equal to the product of the Adjusted Letter of Credit
Amount on the Date of Issuance and 0.001 (10 basis points).
(c) In consideration of the issuance by the Bank of the Letter of Credit, the
City agrees to pay to the Bank, (i) in advance for the first year of the LOC Period, a fee equal to
the product of (A) the Adjusted Letter of Credit Amount on the Date of Issuance, (B) the
Applicable Rate on the Date of Issuance and (C) a fraction, the numerator of which is 366 and
the denominator of which is 360, which fee shall be payable on or before the Date of Issuance
and (ii) in arrears, from and including the first anniversary of the Date of Issuance and for the
remainder of the LOC Period, on each March 31, June 30, September 30 and December 31,
commencing with the first such date following the first anniversary of the Date of Issuance and
on the Expiration Date, a fee, which shall be equal to the sum for each day during such period of
LOSANGELES 89045 (2K) -16-
the product of (A) the Adjusted Letter of Credit Amount for such day (determined at 5:00 p.m.
Los Angeles time on such day), (B) the Applicable Rate for such day and (C) a fraction, the
numerator of which is one (1) and the denominator of which is 360.
Notwithstanding the preceding sentence, in the event the fee calculated in
accordance with clause (i) above: (x) exceeds the sum for each day during the first year of the
LOC Period of the product of (1) the Adjusted Letter of Credit Amount for such day (determined
at 5:00 p.m. Los Angeles time on such day), (2) the Applicable Rate for such day and (3) a
fraction, the numerator of which is one (1) and the denominator of which is 360, such excess
shall be credited dollar -for -dollar against the fee payments due pursuant to clause (ii) above in
chronological order; provided, however, that, in the event the Letter of Credit is terminated prior
to the first anniversary of the Date of Issuance, the Bank shall not be required to refund any fee
paid pursuant to clause (i) above, or (y) is less than the sum for each day during the first year of
the LOC Period of the product of (1) the Adjusted Letter of Credit Amount for such day
(determined at 5:00 p.m. Los Angeles time on such day), (2) the Applicable Rate for such day
and (3) a fraction, the numerator of which is one (1) and the denominator of which is 360, the
shortfall shall be added to the first fee payment due pursuant to clause (ii) above.
Section 3.3 Increased Costs and Reduced Return.
(a) If the Bank shall have determined that, after the date hereof, the adoption
of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or administration thereof,
including, without limitation, any Superintendent or Commissioner of Banking, the Board of
Governors of the Federal Reserve Bank or the Federal Deposit Insurance Corporation, or
compliance by the Bank with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such Governmental Authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the capital of the Bank (or
its Parent) relating to the Bank's obligations hereunder or under the Letter of Credit to a level
below that which the Bank (or its Parent) would have achieved but for such adoption, change or
compliance (taking into consideration the Bank's policies with respect to capital adequacy), then
from time to time, within 30 days after written demand by the Bank, the City shall pay to the
Bank (or its Parent), such additional amount or amounts as will compensate the Bank (or its
Parent) for such reduction in the rate of return on the capital of the Bank (or its Parent) relating
to the Bank's obligations hereunder or under the Letter of Credit. The agreements in this
subsection shall survive the termination of the Letter of Credit and repayment of all of the
Obligations.
(b) If, after the date hereof, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the interpretation or administration thereof by
any Governmental Authority, central bank or comparable agency charged with the interpretation
or administration thereof or compliance by the Bank with any request or directive (whether or
not having the force of law) of any such Governmental Authority, central bank or comparable
agency:
LOSANGELES 89045 (2K) -17-
(i) Shall subject the Bank to any tax, duty, assessment or other charge
with respect to the Letter of Credit or the commitment of the Bank to make Advances
and/or Term Loans, or shall change the basis of taxation of payments to the Bank of
reimbursements of Drawings and payments of Advances and/or Term Loans or in respect
of any other amounts due under this Agreement (except for changes in the rate of tax on
the overall net income of the Bank); or
(ii) Shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any imposed by the Board
of Governors of the Federal Reserve Bank but excluding any imposed to the extent
included in the computation of the LIBOR Daily Floating Rate) against assets of, deposits
with or for the account of, or credit extended by, the Bank or shall impose on the Bank or
on the United States market for letters of credit any other condition affecting its
obligation to issue or maintain the Letter of Credit or the Bank's commitment to make
Advances and/or Term Loans or in respect of Advances and/or Term Loans made by the
Bank;
and the result of any of the foregoing is to increase the cost to the Bank of making or maintaining
the Letter of Credit or the Bank's commitment to make Advances and/or Term Loans or
Advances or Term Loans made by the Bank or to reduce the amount of any sum received or
receivable by the Bank under this Agreement or the Letter of Credit, within 30 days after written
demand by the Bank, the City agrees to pay or cause to be paid to the Bank such additional
amount or amounts as will compensate the Bank for such increased cost or reduction. The
agreements in this subsection shall survive the termination of the Letter of Credit and repayment
of all of the Obligations.
(c) The Bank will promptly notify the City in writing of any event of which it
has knowledge, occurring after the date hereof, which will entitle the Bank to compensation
pursuant to this Section. The failure of the Bank to so notify the City shall in no manner release
the City from its obligations under this Section 3.3. A certificate of the Bank claiming
compensation under this Section and setting forth the additional amount or amounts to be paid to
them hereunder shall be conclusive in the absence of manifest error. In determining such
amount, the Bank may use any reasonable averaging and attribution methods.
Section 3.4 Interest on Overdue Pa ments.
(a) Overdue principal and overdue interest in respect of each Drawing, each
Advance, each Term Loan and any other overdue amount payable by the City hereunder shall
bear interest at a rate per annum equal to 3% per annum in excess of the otherwise applicable
interest rate (or, if no rate is in effect therefor, the per annum rate shall be the Base Rate plus
3%). During the continuance of an Event of Default, each Drawing, each Advance, each Term
Loan and other any other amount payable by the City hereunder shall bear interest at a rate per
annum equal to 3% per annum in excess of the interest rate in effect therefor immediately prior
to the occurrence of such Event of Default (or, if no rate is in effect therefor, the per annum rate
shall be the Base Rate plus 3%).
LOSANGELES 89045 (2K) -18-
(b) Interest not paid when due pursuant to Section 3.4 (a) above, shall, to the
extent permitted by law, be compounded on a monthly basis and added to principal.
Section 3.5 Payments.
(a) Method and Place of Payment. Except as otherwise specifically provided
herein, all amounts payable under this Agreement shall be made to the Bank not later than 1:00
p.m. Los Angeles time on the date when due and shall be made in Dollars in immediately
available funds. Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next succeeding
Business Day and, with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
(b) Net Payments. All payments made by the City hereunder shall be made
without setoff, counterclaim or other defense. All such payments will be made free and clear of,
and without deduction or withholding for, any present or future taxes, levies, imposts, duties,
fees, assessments or other charges of whatever nature now or hereafter imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or therein (but excluding,
except as provided below, any tax imposed on or measured by the overall net income of the Bank
pursuant to the laws of the jurisdiction (or any political subdivision or taxing authority thereof or
therein) under which the Bank is organized) and all interest, penalties or similar liabilities with
respect thereto (collectively, "Taxes"). If the City shall be required by any law, rule or
regulation to deduct any Taxes from or in respect of any sum payable under this Agreement or
any Related Document to the Bank, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions applicable to additional sums payable
under this Section), the Bank receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the City shall make such deductions, (iii) the City shall pay the
full amount deducted to the relevant taxation authority or other authority in accordance with
applicable laws, rules and regulations and (iv) within 45 days after the date of such payment, the
City shall furnish to the Bank the original or a certified copy of a receipt evidencing payment
thereof. The City will indemnify and hold harmless the Bank, and reimburse the Bank upon its
written request, for the amount of any Taxes so levied or imposed and paid by the Bank. The
agreements in this subsection shall survive the termination of the Letter of Credit and repayment
of all of the Obligations.
ARTICLE IV
NATURE OF OBLIGATIONS; INDEMNITY
Section 4.1 Obligations of the City. The obligations of the City under this Agreement
shall be primary, absolute, independent, unconditional and irrevocable and shall be performed
strictly in accordance with the terms of this Agreement, including without limitation the
following circumstances:
(a) Any lack of validity or enforceability of the Letter of Credit, the Related
Documents or any other agreement or instrument relating to any of the above;
LOSANGELES 89045 (2K) ' 19-
(b) Any amendment or waiver of, or any consent to or departure from, any
provision of any of the Related Documents, except for any waiver or consent granted by the
Bank; I
(c) The existence of any claim, setoff, defense or other rights that the City
may have at any time against the Trustee, any beneficiary or transferee of the Letter of Credit (or
any Person for whom the Trustee, any such beneficiary or any such transferee may be acting),
the Bank or any other Person, whether in connection with this Agreement, the Related
Documents or any unrelated transaction;
(d) Any breach of contract or other dispute between the City and the Trustee,
any beneficiary or transferee of the Letter of Credit (or any Person for whom the Trustee, any
such beneficiary or any such transferee may be acting), any Owner, the Bank or any other
Person;
(e) Any demand, statement or any other document presented under the Letter
of Credit or hereunder proving to have been forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect whatsoever;
(f) Payment by the Bank under the Letter of Credit against presentation of a
draft or certificate which does not comply strictly with the terms of the Letter of Credit;
(g) Any non -application or misapplication by the Trustee, any paying agent or
the Tender Agent or otherwise of the proceeds of any Drawing or Advance or Term Loan;
(h) The failure by the Bank to honor any Drawing under the Letter of Credit
or to make any payment demanded under the Letter of Credit on the grounds that the demand for
such payment does not conform strictly to the terms and conditions of the Letter of Credit;
(i) Any delay, extension of time, renewal, compromise or other indulgence or
modification granted or agreed to by the Bank, with or without notice to or approval by the City
in respect of any of the City's obligations; or
0) Any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing.
Section 4.2 Indemnification.
(a) The City agrees to indemnify, save and hold harmless each Bank -Related
Person from and against: (i) any and all claims, demands, actions or causes of action that are
asserted against any Bank -Related Person by any Person relating directly or indirectly to a claim,
demand, action or cause of action that such Person asserts or may assert against the City or any
of its elected officials, officers or employees, the Electric System or any plant, property or
equipment of the Electric System; (ii) any and all claims, demands, actions or causes of action
that may at any time (including at any time following repayment of the Obligations) be asserted
or imposed against any Bank -Related Person, arising out of or relating to, this Agreement, any
Related Agreement or any Construction Document, the use or contemplated use of the proceeds
of any Drawing, any Advance or any Term Loan, or the relationship of City and the Bank under
LOSANGELES 89045 (2K) -20-
this Agreement or any Related Document; (iii) any investigative, administrative or judicial
proceeding by any Governmental Authority arising out of or related to a claim, demand, action
or cause of action described in subsection (i) or (ii) above; and (iv) any and all liabilities
(including liabilities under indemnities), losses, costs or expenses (including attorney costs) that
any Bank -Related Person suffers or incurs as a result of the assertion of any foregoing claim,
demand, action, cause of action or proceeding, or as a result of the preparation of any defense in
connection with any foregoing claim, demand, action, cause of action or proceeding, in all cases,
and whether or not a Bank -Related Person is a party to such claim, demand, action, cause of
action or proceeding; provided that no Bank -Related Person shall be entitled to indemnification
for any claim caused by its own gross negligence or willful misconduct or for any loss asserted
against it by another Bank -Related Person. The agreements in this subsection shall survive the
termination of the Letter of Credit and repayment of all of the Obligations.
(b) The City shall also indemnify and hold harmless the Bank from any
transfer taxes, documentary taxes, assessments or charges made by any governmental authority
by reason of the execution and delivery of this Agreement and the Related Documents or the
issuance of the Letter of Credit. The agreements in this subsection shall survive the termination
of the Letter of Credit and repayment of all of the Obligations.
Section 4.3 Obligations and Liability of the Bank.
(a) Except as provided in this Agreement, the Bank shall not be obligated to
issue any further credits, to cure any defaults under any Related Document or otherwise, or in
any other manner to extend any financial consideration or accommodation to the City.
(b) The City shall not be deemed to have waived or released any of its rights
or remedies (whether specified in or arising under this Agreement or otherwise available to it by
law or agreement) unless the Bank shall have signed a written waiver or release. Delay or failure
to act on the Bank's part shall not constitute a waiver of or otherwise preclude enforcement of
any of their rights and remedies. All of the Bank's rights and remedies shall be cumulative and
may be exercised separately or concurrently. The Bank need not resort to any particular right or
remedy before exercising or enforcing any other, and the Bank's resort to any right or remedy
shall not preclude the exercise or enforcement of any other right or remedy.
(c) The City assumes all risks of the acts or omissions of the Trustee, any
transferee of the Letter of Credit, the Tender Agent and the Remarketing Agent with respect to
its use of the Letter of Credit and the Tender Agent; provided that this assumption with respect to
the Bank is not intended to, and shall not, preclude the City's pursuing such rights and remedies
as it may have against the Trustee, such transferee, the Tender Agent or the Remarketing Agent
at law or under any other agreement. Neither the Bank nor any of its officers, directors,
employees or agents shall be liable or responsible for: `
(i) The use that may be made of the Letter of Credit or for any acts or
omissions of the Trustee or any transferee of the Letter of Credit in connection therewith;
(ii) The form, validity, sufficiency, accuracy or genuineness of
documents, or of any endorsements thereon, even if such documents should prove to be
LOSANGELES 89045 (2K) -21
in any or all respects invalid, insufficient, inaccurate, fraudulent or forged, so long as the
Bank was not grossly negligent or guilty of willful misconduct as determined by a court
of competent jurisdiction;
(iii) Payment by the Bank against presentation of documents that do not
comply strictly with the terms of the Letter of Credit, including failure of any documents
to bear any reference or adequate reference to the Letter of Credit;
(iv) The validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign the Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason;
(v) Errors, omissions, interruptions or delays in transmission or
delivery of any messages, by telex, mail, cable, telegraph, facsimile or otherwise, whether
or not they have been in cipher, including any Drawings under the Letter of Credit;
(vi) Errors in interpretation of technical terms; or
(vii) Any consequences arising from causes beyond the control of the
Bank, including, without limitation, any Government Acts;
provided that, notwithstanding anything in the preceding clauses (i) through (vii) to the contrary,
the City shall have a claim against the Bank, and the Bank shall be liable to the City, to the
extent, but only to the extent, of any direct, as opposed to consequential, damages suffered by the
City that the City proves were caused by (A) the Bank's failure to pay under the Letter of Credit
after the presentation to it by the Trustee of a sight draft and certificate strictly complying with
the terms and conditions of the Letter of Credit or (B) the Bank's willful or grossly negligent
payment under the Letter of Credit as determined by a court of competent jurisdiction.
In furtherance and not in limitation of the foregoing, the Bank may accept documents that
appear on their face to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary; provide d that, if the Bank shall receive written
notification from the Trustee that sufficiently identifies (in the reasonable opinion of the Bank)
documents to be presented to the Bank that are not to be honored, the Bank agrees that it will not
honor such documents thereafter.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The City represents and warrants as of the date hereof as follows:
Section 5.1 Existence and Power. The City is a municipal corporation and chartered
city duly organized and existing under and by virtue of the laws of the State of California and the
Charter, and is possessed of full powers to lease and purchase real and personal property, to own
and operate the Electric System and to enter into contracts such as this Agreement, the Related
Documents to which it is a party and the Construction Documents to which it is a party, which
LOSANGELES 89045 (2K) -22-
powers have been validly exercised in connection with the transactions effected by this
Agreement, the Related Documents and the Construction Documents.
Section 5.2 City and Governmental Authorization; Contravention; Approvals. The
execution, delivery and performance by the City of this Agreement and the Related Documents
and Construction Documents to which it is a party and the other documents contemplated hereby
and thereby are within the powers of City, have been duly authorized by all necessary actions
and (i) do not contravene the Charter or the City Administrative Code or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award or any indenture,
agreement, lease, instrument or other contractual restriction binding on or affecting the City, the
contravention of which would impair the ability of the City to execute, deliver and perform this
Agreement and any Related Document or Construction Document to which it is a party or would
have a material adverse effect on the condition (financial or otherwise) of the Electric System
and (ii) except as provided in or contemplated by this Agreement and the Related Documents, do
not result in or require the creation of any Lien, security interest or other charge or encumbrance
upon or with respect to any asset of the Electric System. The City is not in violation of or in
default in any respect under any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any indenture, agreement, lease, instrument or other contractual
restriction or the Related Documents or Construction Documents to which it is a party. All
orders, consents and other authorizations or approvals of all Governmental Authorities and all
other Persons have been obtained (and no additional authorization, approval or other action by,
and no notice to or filing or registration with, any Governmental Authority is required to be
made or obtained by the City) for the due (a) execution, delivery and performance by the City of
this Agreement and the Related Documents to which it is a party, (b) execution and delivery by
the City of the Construction Documents to which it is a party (c) performance by the City of
those obligations required to be performed by the City on or prior to the date hereof under the
Construction Documents to which it is a party.
Section 5.3 Enforceability. This Agreement, the Related Documents, the Construction
Documents and other documents contemplated hereby and thereby to which the City is a party or
by which it is bound are legally valid and binding obligations of the City enforceable against the
City in accordance with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally and
by general principles of equity.
Section 5.4 Litigation. Except as disclosed in the Official Statement, there are no
actions, suits, proceedings, inquiries or investigations, at law or in equity, before any court,
Governmental Authority or arbitrator pending or, to the best knowledge of the City, threatened,
against or directly involving the City (including, without limitation, the ability of the City to
establish and collect rates for the generation, transmission and distribution of power), affecting
the existence of the City, the title of any officials to their respective offices, the Electric System,
or affecting or seeking to prohibit, restrain or enjoin the execution or delivery of this Agreement,
any Related Document or any Construction Document, or in any way contesting or affecting the
validity or enforceability of the 2003 Bonds, this Agreement, any Related Document, any
Construction Document or contesting the tax-exempt status of the 2003 Bonds, or contesting in
any way the completeness or accuracy of the Official Statement or any supplements or
amendments thereto, or contesting the powers of the City or any authority for the issuance of the
LOSANGELES 89045 (2K) -23 -
2003 Bonds, the execution and delivery of this Agreement or the Related Documents and
Construction Documents to which the City is a party, nor, to the best, knowledge of the City, is
there any basis therefor, which, if determined adversely to the City would materially and
adversely affect the validity or enforceability of the 2003 Bonds or the City's ability to perform
its obligations under this Agreement and the Related Documents and Construction Documents to
which it is a party or which could materially adversely affect the business, financial position,
results of operations or prospects of the Electric System.
Section 5.5 Financial Information.
(a) The audited financial statements of the Electric System for the 2001-2002
Fiscal Year of the City, approved by the governing board of the City, true and correct copies of
which have heretofore been delivered to the Bank, fairly present, in conformity with Generally
Accepted Accounting Principles the financial position of the Electric System and its results of
operations and changes in financial position at the dates and for the periods indicated.
(b) Since June 30, 2002, there has been no material adverse change in the
business, financial position, results of operations or prospects of the Electric System.
(c) Except as fully reflected in the financial statements delivered pursuant to
Section 5.5(a) and except for the City's obligations set forth in this Agreement, the Related
Documents to which it is a party and the Construction Documents to which it is a party, there are
as of the date hereof no liabilities or obligations with respect to the City , of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which,
in the aggregate, would be material to the Electric System. The City does not know of any basis
for the assertion against the City of any liability or obligation of any nature whatsoever that is
not fully reflectedin the financial statements delivered pursuant to Section 5.5(a) which, in the
aggregate, could be material to the Electric System.
Section 5.6 Disclosure. No written information furnished by the City to the Bank in
connection with this Agreement (except information which has been superseded by subsequent
information provided by the City) includes any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements made in such information and all
other written information delivered by the City, when taken together and in light of the
circumstances in which they were made, not misleading in any material respect. Except for
information contained in the Official Statement under the subcaptions "Letter of Credit",
"Reimbursement Agreement" and "The Bank", as to which no representation is made, the
Official Statement is, and any supplement or amendment to either shall be, accurate in all
materials respects for the purpose for which its use is, was or shall be, authorized; and except for
information contained in the Official Statement under the previously mentioned captions, as to
which no representation is made, the Official Statement does not, and any such supplement or
amendment will not, contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements made therein, in the light of the circumstances under which
they are or were made, not misleading.
Section 5.7 Environmental Matters. The City is not aware (after due inquiry) of any
violation of any Environmental Law, or compliance with any Environmental Law not currently
LOSANGELES 89045 (2K) -24-
being complied with [or included in the projected pro forma financial results provided to the
Bank,]' violation of which or the compliance with which, could reasonably be expected to have a
material adverse effect on the business, financial condition or results of operations of the Electric
System.
Section 5.8 Incorporation of Representations and Warranties by Reference. The City
hereby makes every representation and warranty made by it in any Related Document or
Construction Document to which it is a party, which representations and warranties, as well as
the defined terms contained therein that are necessary for a correct interpretation thereof, are
incorporated herein by this reference with the same effect as if each and every such provision
and defined term were set forth herein in its entirety. No amendment to such representations and
warranties or defined terms made pursuant to any such Related Document or Construction
Document and no termination or replacement of any such Related Document or Construction
Document shall be effective to amend, terminate or replace such representations and warranties
or defined terms as incorporated by reference therein without the prior written consent of the
Bank.
Section 5.9 Use of 2003 Bond Proceeds. The proceeds of the 2003 Bonds will be
expended in the manner set forth in the First Supplemental Indenture on the Malburg Generating
Station that serves essential governmental functions and public purposes of the City.
Section 5.10 Pledge of Net Revenues. The Obligations constitute Parity Obligations.
This Agreement creates a valid security interest in the Net Revenues as security for the punctual
payment and performance of the Obligations.
Section 5.11 Constitutional Matters. To the best knowledge of the City, there is no
amendment, or proposed amendment certified for placement on a statewide ballot, to the
Constitution of the State of California or any published administrative interpretation of the
Constitution of the State of California or any State of California law, or any legislation which has
passed either house of the State legislature or is under consideration by any conference or similar
committee, or any published judicial decision interpreting any of the foregoing, the effect of
which is to materially adversely affect the ability of the City to perform its obligations under this
Agreement or any of the Related Documents or Construction Documents to which it is a party.
Section 5.12 No Sovereign Immunity. The City does not enjoy any rights of immunity
on the grounds of sovereign immunity in respect of its obligations under this Agreement or any
Related Document or Construction Document to which it is a party.
ARTICLE VI
COVENANTS
Until the Letter of Credit has terminated on accordance with its terms and all Obligations
of the City shall have been paid and performed in full, unless the Bank shall otherwise consent in
writing, the City agrees that:
The bracketed language was proposed by Gene and needs to be discussed.
LOSANGELES 89045 (2K) -25-
Section 6.1 Reports and Other Information. The City will furnish, or cause to be
furnished, at the City's expense to the Bank`
(a) As soon as possible and in any event within 5 days after the occurrence of
any Event of Default, a statement of the Authorized City Representative of the City setting forth
details of such Event of Default and the action that the City proposes to take with respect thereto;
(b) As soon as available and in any event within 180 days after the end of
each Fiscal Year of the Electric System, a copy of the annual audit report for such year for the
Electric System, including a balance sheet of the City as at the end of such Fiscal Year and the
related statements of revenues, expenses and changes in fund balances and statement of cash
flows, all in reasonable detail and reported on by a firm of independent certified public accoun-
tants that is satisfactory to the Bank, and the report of such firm of independent certified public
accountants shall state, without qualification, that such financial statements present fairly the
financial position of the Electric System as of the end of such Fiscal Year, the results of
operations, the changes in fund balances and cash flows of the Electric System for such Fiscal
Year then ended in conformity with Generally Accepted Accounting Principles;
(c) Simultaneously with the delivery of each set of financial statements
referred to in clause (b) above, a certificate of the chief financial officer of the Electric System (i)
setting forth in reasonable detail the calculations required to establish compliance with the
provisions of Section 6.02 of the Indenture and Section 6.10 of this Agreement for the period
ended on the date of such financial statements and (ii) stating whether there exists on the date of
such certificate any Event of Default or Default and, if any Event of Default or Default then
exists, setting forth the details thereof and the action that the City is taking or proposes to take
with respect thereto;
(d) Simultaneously with the delivery of each set of financial statements
referred to in clause (b) above and the certificate referred to in clause (c) above, a statement of
the firm of independent public accountants which reported on such statements to the effect that
such firm has reviewed the certificate referred to in clause (c) above and the certificates referred
to in clause (e) below and the detail supporting the calculations contained therein and, based on
such review and its review of the City's financial statements, nothing has come to its attention to
cause it to believe that the City breached any provision of Section 6.02 of the Indenture or
Section 6.8 or 6.10 of this Agreement during the period covered by such financial statements;
(e) As soon as available and in any event within 10 days after each June 30
and each December 31, a report of the chief financial officer of the Electric System setting forth
in reasonable detail the calculations required to establish compliance with Section 6.8;
(f) As soon as possible and in any event within 5 days after the City obtains
actual knowledge of: (i) any litigation pending against the City involving a potential uninsured
liability to the City in respect of the Electric System in excess of $1,000,000 in compensatory
damages or $1,000,000 in punitive damages and any arbitration proceeding or governmental
proceeding material to the City's ability to perform its obligations under this Agreement and the
Related Documents and Construction Documents to which the City is a party; (ii) a change or
amendment to the Charter or the City Administrative Code, which change or amendment is
LOSANGELES 89045 (2K) -26-
materially adverse to the City's ability to perform its obligations under this Agreement and the
Related Documents and Construction Documents to which the City is a party; or (iii) any other
event or condition causing a material adverse change in the City's ability to perform its
obligations under this Agreement and the Related Documents and Construction Documents to
which the City is a party, in each case a statement of the Authorized City Representative of the
City setting forth details describing the same and the steps being taken with thereto;
(g) As soon as available and in any event within 10 days after the end of each
calendar month during the Construction Period, a statement of the City's chief engineer setting
forth (i) the percentage completion of the construction of the Malburg Generating Station and (ii)
the actual construction cost of the Malburg Generating Station versus the budgeted construction
cost of the Malburg Generating Station, in each case as of the last day of the applicable calendar
month;
(h) No later than July 31 of each Fiscal Year, a copy of the annual budget for
the Electric System adopted by the City for the current Fiscal Year;
(i) Promptly following its receipt thereof, a copy of any non -routine notice,
certification, demand or other non -routine writing or communication from the Trustee, the
Tender Agent or the Remarketing Agent under or in connection with the 2003 Bonds or any of
the Related Documents;
0) As soon as practicable, any disclosure documents publicly distributed in
connection with any issue of bonds under the Indenture;
(k) As soon as practicable, notice of any change in, or the withdrawal of, any
rating of the unsecured non -enhanced long-term Debt of the Electric System; and
(1) From time to time, such additional information (including, without
limitation, management letters) regarding the financial position, results of operations, business or
prospects of the Electric System as the Bank may reasonably request.
Section 6.2 Books and Records; Inspections. The City will keep proper books of
record and account with respect to the Electric System in which full and correct entries shall be
made of assets and liabilities, financial transactions and business of the Electric System in
conformity with Generally Accepted Accounting Principles. The City will upon reasonable
notice permit any Person designated by the Bank in writing to visit any of the properties of the
Electric System and to examine the books and financial records of the City relating to the
Electric System and make copies thereof or extracts therefrom, and to discuss the affairs,
finances and accounts of the Electric System with the principal officers of the City all at such
reasonable times and as often as the Bank may reasonably request.
Section 6.3 Maintain Existence. The City will preserve and maintain its existence,
rights (statutory), and franchises as a municipal corporation duly organized and existing under
the Constitution and laws of the State of California.
Section 6.4 Compliance with Laws. The City will comply with the requirements of all
laws, rules, regulations and orders of any Governmental Authority having jurisdiction over the
LOSANGELES 89045 (2K) -2 / -
Electric System, noncompliance with which would materially adversely affect the ability of the
City to perform its obligations under this Agreement and the Related Documents and
Construction Documents to which the City is a party.
Section 6.5 Compliance with Agreements. The City will observe and perform all of
its obligations under this Agreement and the Related Documents and Construction Documents to
which it is a party.
Section 6.6 Incorporation of Covenants by Reference. The City, by this reference,
hereby incorporates into this Agreement the covenants and agreements made by it in Section
5.01 of the Indenture and Article VI of the Indenture, as such covenants and agreements exist on
the date hereof, as if such covenants and agreements were set forth herein in their entirety
together with all defined terms and interpretative provisions necessary for a complete
understanding thereof (such enumerated covenants, agreements and defined and interpretative
terms, the "Key Provisions"; the Key Provisions as so incorporated, the "Incorporated
Provisions"). The Incorporated Provisions shall be deemed to be made for the benefit of the
Bank and shall be enforceable against the City by the Bank. To the extent that any Key
Provision permits any Person to waive compliance with such provision or requires that a
document, opinion or other instrument or any event or condition be acceptable or satisfactory to
any Person, the corresponding Incorporated Provision shall require that such waiver be
acceptable to the Bank and that such document, opinion or other instrument or any event or
condition be acceptable or satisfactory to the Bank. No termination or amendment or
modification of any of the Key Provisions shall be effective to terminate or amend or modify the
Incorporated Provisions without the prior written consent of the Bank. The Incorporated
Provisions shall be in addition to the express covenants contained herein and shall not be limited
by the express covenants contained herein nor shall the Incorporated Provisions be a limitation
on the express covenants contained .herein. In the event of a conflict between the covenants and
agreements set forth in this Article VI (other than the Incorporated Provisions) and the
Incorporated Provisions, the covenants and agreements set forth in the other provisions of Article
VI shall prevail.
Section 6.7 Minimum Ratings. So long as Moody's and S&P each continues to rate
long-term revenue bonds, the City shall apply for and maintain at all times with each of Moody's
and S&P a rating with respect to the unsecured non -enhanced long-term Debt of the Electric
System of not less than "Baal" and "BBB+", respectively.
Section 6.8 Minimum Cash Balance. The City shall have on deposit in the Light and
Power Department Fund on June 30 and December 31 of each Fiscal Year (each, a "Test Date")
cash and cash equivalents in an aggregate amount not less than the amount of the Operating and
Maintenance Expenses for the 270 consecutive day period ended on the applicable Test Date.
Section 6.9 Reimbursement Holdback. Until such time as (a) the City has obtained
the final approval of the California Energy Commission for the construction and operation of the
Malburg Generating Station and (b) construction of the Malburg Generating Station has
commenced, the City shall not submit to the Trustee a requisition for reimbursement from
amounts on deposit in the "2003 Series Construction Fund" established and maintained pursuant
to the First Supplemental Indenture of any out-of-pocket expenditures incurred by the City in
LOSANGELES 89045 (2K) -28-
respect of the Malburg Generating Station. The City shall notify the Bank in writing when each
of the conditions set forth in clauses (a) and (b) above has been satisfied.
Section 6.10 Limitation on Issuance of Debt. Except for the 2003 Bonds, the "City of
Vernon Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series B", in
the aggregate principal amount of not more than $120,000,000, and any Refunding Bonds issued
to refund such 2003 Bonds and/or "City of Vernon Malburg Generating Station Project Electric
System Revenue Bonds, 2003 Series B", pLovided that debt service payments on the Refunding
Bonds does not exceed the debt service payments on the Bonds being refunded, the City shall not
issue, create, incur, assume or otherwise become or remain obligated in respect of, or permit to
be outstanding, or suffer to exist, any Bonds, Parity Obligations, Additional Bonds, Additional
Parity Obligations, Refunding Bonds, Refunding Parity Obligations, Subordinated Obligations or
any other obligation secured by the Trust Estate.
Section 6.11 Related Documents and Construction Documents. Except as otherwise
provided in Section 6.5, the City will not amend, supplement or otherwise modify, or agree to the
amendment, modification or termination of, any of the Related Documents or Construction
Documents if such action could reasonably be expected to materially adversely affect the City's
ability to perform its obligations under this Agreement and the Related Documents and
Construction Documents to which it is a party or materially adversely affect the business,
financial position, results of operations or prospects of the Electric System.
Section 6.12 Trustee: Tender Agent and Remarketing Agent. The City will not dismiss,
replace or permit the resignation of the Trustee, the Tender Agent or the Remarketing Agent
unless it has appointed a new trustee, tender agent or remarketing agent, as the case may be,
which shall have been confirmed in writing by the Bank as reasonably satisfactory to it.
Section 6.13 Substitute Credit Facility. The City agrees that any termination of the
Letter of Credit as a result of the provision of any Alternate 2003 Credit Support Instrument will
require, as a condition thereto, that the City or the issuer of the Alternate 2003 Credit Support
Instrument will provide funds on the date of such termination or provision, which funds, when
taken together with funds available to the Bank under the First Supplemental Indenture, will be
sufficient to insure the payment (without duplication) of all Obligations due to the Bank
hereunder.
Section 6.14 Return of Letter of Credit. The City shall, upon the occurrence of the
Expiration Date, cause the Trustee to surrender forthwith the Letter of Credit to the Bank for
cancellation.
Section 6.15 Official Statement. The City shall not change any reference to the Bank in
the Official Statement without the Bank's prior written consent thereto.
Section 6.16 Use of Proceeds. The City will use the proceeds of the 2003 Bonds solely
as provided for in the First Supplemental Indenture.
Section 6.17 Optional Redemption. The City shall not seek or request an optional
redemption of any 2003 Bonds without the prior written consent of the Bank.
LOSANGELES 89045 (2K) - -29-
Section 6.18 Ranking of Obligations. The City shall not take any action that would
result in the Obligations not ranking at least pari passu in right of payment with all obligations of
the City to the other creditors that are secured by the Trust Estate.
Section 6.19 Waiver of Sovereign Immunity. The City agrees that it will not assert any
immunity it may have against lawsuits brought by any Bank -Related Person under this
Agreement or in connection therewith.
Section 6.20 Further Assurances. The City agrees to do such further acts and things
and to execute and deliver to the Bank such additional assignments, agreements, powers and
instruments as the Bank may reasonably require or reasonably deem advisable to carry into effect
the purposes of this Agreement or to better assure and confirm to the Bank its rights, powers and
remedies hereunder and under the Related Documents.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.1 Events of Default. The occurrence and continuance of one or more of the
following events shall constitute an event of default hereunder ("Event of Default"):
(a) The City shall fail to pay when due (i) the amount of any Drawing; (ii) the
principal of any Advance or any Term Loan; (iii) the interest on any Advance or any Term Loan,
and such default shall continue unremedied for 2 Business Days, or (iv) any other amount
payable hereunder, and such default shall continue unremedied for 5 days; or
(b) The City shall (i) default in the due performance or observance by it of
any Incorporated Provision (other than the provisions incorporated from Sections 6.10 and 6.11
of the Indenture) or any term, covenant or agreement. contained in Sections 6.1(a), 6.1(e), 6.3,
6.6, 6.7, 6.8, 6.9, 6.10, 6.11, 6.15, 6.16, 6.17 or 6.18; (ii) default in the due performance or
observance by it of any other term, covenant or agreement contained in Sections 6.1(b), 6.1(c),
6.1(d), 6.1(f) or 6.1(g) and such default shall continue unremedied for a period of 5 days; or (iii)
default in the due performance or observance by it of the Incorporated Provisions from Sections
6.10 and 6.11 of the Indenture or any other term, covenant or agreement hereunder (other than
those referred to in Section 7.1(a), 7.1(b)(i) and 7.1(b)(ii)) and such default shall continue
unremedied for a period of 30 days after written notice to the City by the Bank; or
(c) Any representation, warranty, certification or statement made or deemed
made by the City in this Agreement, any Related Document, any Construction Document, or in
any certificate, financial statement or other document delivered pursuant to this Agreement shall
prove when made or deemed made, in the reasonable judgment of the Bank, to have been
inaccurate and misleading in any material respect; or
(d) The City shall (i) default in any payment of any Debt beyondthe period of
grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such
Debt was created, or (ii) default in the observance or performance of any agreement or condition
relating to any Debt contained' in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of which default or other
LOSANGELES 89045 (2K) -30-
event or condition is to cause, or to permit the holder or holders of any Debt (or a trustee or agent
on behalf of such holder or holders) to cause, with the giving of notice if required, such Debt to
become due prior to its stated maturity; or (iii) any Debt shall be declared to be due and payable,
or required to be prepaid other than by a regularly scheduled required prepayment, prior to the
stated maturity thereof, or
(e) The City shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of itself or any substantial part of its
property, or shall consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally, or in the reasonable
judgment of the Bank be unable, to pay its debts as they become due, or shall take any action to
authorize -any of the foregoing; or
(f) An involuntary case or other proceeding shall be commenced against the
City seeking liquidation, reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator,, custodian or other similar official of it or any substantial part of
its property and such case or proceeding is not controverted within 30 days and dismissed within
90 days; or an order for relief shall be entered against the City under the federal bankruptcy laws
as now or hereafter in effect; or
(g) A court of competent jurisdiction shall enter a final and non -appealable
judgment, order or decree declaring (i) the Indenture, (ii) the First Supplemental Indenture or (iii)
any obligation of the City contained in this Agreement to be invalid, not binding or
unenforceable against the City; or
(h) A moratorium shall have been declared or announced by a Governmental
Authority (whether or not in writing) with respect to any Debt of the City; or
(i) A judgment or order for the payment of money in excess of $1,000,000
and for which insurance proceeds shall not be available shall be rendered against the City and
such judgment or order shall continue unstayed, unbonded or unsatisfied for a period of 60 days;
or
0) Any event which materially and adversely affects the financial condition
of the Electric System or the ability of the City to observe and perform its obligations under this
Agreement and the Related Documents and Construction Documents to which it is a party shall
have occurred and be continuing; or
(k) An event of default shall have occurred under any of the Related
Documents or Construction Documents.
Section 7.2 Rights and Remedies Upon Default.
LOSANGELES 89045 (2K) -3 1-
Upon the occurrence of an Event of Default hereunder the Bank, in its sole discretion,
may do any, none or all of the following:
(a) Deliver a written notice to the Trustee requiring the Trustee to (i) cause a
mandatory purchase of all Outstanding 2003 Bonds pursuant to Section 4.04(b) of the First
Supplemental Indenture and (ii) submit a final Drawing under the Letter of Credit to pay the
purchase price of such 2003 Bonds upon their mandatory purchase; or
(b) The Bank may by written notice to the City take any or all of the
following actions, without prejudice to the rights of the Bank to enforce its claims against the
City (provided, that, if an Event of Default specified in Section 7.1(e) or 7.1(f) shall occur, the
result which would occur upon the giving of written notice by the Bank to the City as specified
in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i)
declare the commitment of the Bank to make Advances and Term Loans terminated, whereupon
such commitment shall forthwith terminate immediately; and (ii) declare the principal of and any
accrued interest in respect of all Advances, all Term Loans and all other Obligations (other than
the payment of the principal of and interest on Credit Provider Bonds) owing hereunder to be,
whereupon the same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the Borrower; or
(c) Exercise any rights and remedies available to the Bank at law, equity or
under any Related Document, including, without limitation, directing the Trustee to accelerate
the payment of the principal of and interest on the 2003 Bonds to the extent permitted by Section
10.04 of the Indenture.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Right of Setoff; Other Collateral.
(a) Upon the occurrence and during the continuance of an Event of Default,
the Bank is hereby authorized at any time and from time to time without notice to the City (any
such notice being expressly waived by the City), and to the fullest extent permitted by law, to
setoff, to exercise any banker's lien or any right of attachment and to apply any and all balances,
credits, deposits (general or special, time or demand, provisional or final), accounts or monies at
any time held and other debt at any time owing by the Bank to or for the account of the Electric
System (irrespective of the currency in which such accounts, monies or debt may be
denominated and the Bank is authorized to convert such accounts, monies and debt into United
States dollars) against any and all of the Obligations of the City, whether or not the Bank shall
have made any demand hereunder or thereunder.
(b) The rights of the Bank under this Section are in addition to, in
augmentation of, and do not derogate from or impair, other rights and remedies (including,
without limitation, other rights of setoff) that the Bank may have. The Bank agrees to promptly
notify the City in writing after any such setoff and application referred to in subsection (a) above,
LOSANGELES 89045 (2K) -32-
provided that failure to give such notice shall not affect the validity of such setoff and
application.
Section 8.2 Notices.
(a) Except as otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing, mailed by registered or certified
mail, with return receipt requested, delivered by a nationally recognized overnight courier,
telecopied or hand delivered. All such notices and other communications shall be effective (i) if
given by mail, 3 days after the date of deposit in the mails, postage prepaid, addressed as
specified in this Section, (ii) if given by facsimile, when sent to the facsimile number set forth
below (or such other number as may be provided to each of the other parties listed in this Section
in writing) and when confirmed by telephone or (c) if given by other means, when delivered to
the address specified herein:
If to the City, to it at:
Attention:
Facsimile:
Telephone:
If to the Trustee or the Tender Agent, to it at:
Attention:
Facsimile:
Telephone:
If to the Remarketing Agent, to it at:
Attention:
Facsimile:
Telephone:
If to the Bank, to:
Bank of America, N.A.
Attention:
Facsimile:
Telephone:
LOSANGELES 89045 (2K) -3 3`
with a copy to:
Bank of America, N.A.
Attention:
Facsimile:
Telephone:
or at such other address as shall be designated by such party in a written notice to the other party
hereto.
(b) This Agreement and the Custodian Agreement may be transmitted and/or
signed by facsimile. The effectiveness of any such documents and signatures shall, subject to
applicable law, have the same force and effect as manually signed originals and shall be binding
on the City and the Bank.
(c) Electronic mail and hyperlinks to internet websites that do not require
passwords may be used only to distribute routine notices, such as financial statements and other
information, and to distribute documents for execution by the parties thereto, and may not be
used for any other purpose unless delivery by such means is promptly followed by hand delivery,
delivery by courier or delivery by facsimile.
Section 8.3 Governing Law and Jurisdiction.
(a) This Agreement shall be deemed to be a contract made under the laws of
the State of California and for all purposes shall be construed in accordance with the laws of said
state, without regard to the principles of conflicts of laws.
(b) Any action or proceeding arising out of or relating to this Agreement or
the Letter of Credit shall be heard and determined in an appropriate state or federal court located
in Los Angeles, California. Each party irrevocably waives, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of venue of any such suit, action
or proceeding brought in such courts and any claim that any such suit, action or proceeding has
been brought in an inconvenient forum. Each party irrevocably consents to the service of any
and all process in any such suit, action or proceeding by mailing or delivering copies of such
process to such party at its address provided in Section 8.2. Each party agrees that a final
judgment in any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. All mailings under
this Section 8.3 shall be by certified mail, return receipt requested.
(c) Nothing in this Section 8.3 shall affect the right of a party to serve legal
process on the other party in any other manner permitted by law or affect the right of a party to
bring any suit, action or proceeding against the other party or its property in the courts of any
other jurisdiction.
Section 8.4 WAIVER OF JURY TRIAL. EACH OF THE CIY AND THE BANK
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
LOSANGELES 89045 (2K) -34-
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LETTER
OF CREDIT ANY RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
Section 8.5 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and shall inure to
the benefit of the City and the Bank and their respective successors and assigns, except that City
may not assign or otherwise transfer any of its rights or obligations under this Agreement
without the prior written consent of the Bank. Except as provided subsections (b) and (c) below,
the Bank may not assign or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the City.
(b) The Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its rights(but not its
oblijzationsl under this Agreement and the Letter of Credit. The Bank may at any time grant to
one or more banks or other institutions (each a "Participant") participating interests in the
Drawings under the Letter of Credit and the reimbursement obligations, Advances and Term
Loans arising therefrom. In the event of any such grant by the Bank of a participating interest to
a Participant, whether or not upon notice to the City, the Bank shall remain responsible for the
performance of its obligations hereunder and under the Letter of Credit, and the City shall
continue to deal solely and directly with the Bank in connection with the Bank's rights and
obligations under this Agreement and the Letter of Credit. Any agreement pursuant to which the
Bank may grant such a participating interest shall provide that the Bank shall retain the sole right
and responsibility to enforce the obligations of the City hereunder and under the Related
Documents, including, without limitation, the right to approve any amendment, modification or
waiver of any provision of this Agreement or any Related Document; provided that such
participation agreement may provide that, without first obtaining the consent of the Participant
thereunder, the Bank will not agree to any modification, amendment or waiver of this Agreement
or the Indenture which (i) increases or decreases the stated amount of the Letter of Credit, (ii)
reduces the principal of or interest on any unreimbursed Drawing or Advance or Term Loan
owing to the Bank, (iii) postpones or changes the date fixed for any payment of principal of or
interest on any unreimbursed Drawing or Advance or Term Loan or fees owing to the Bank, (iv)
decreases the formula by which the fees for the Letter of Credit are calculated or (v) releases the
Lien of the Trustee over the Trust Estate.
(c) The Bank may at any time assign all or any portion of its rights under this
Agreement and the Letter of Credit to a Federal Reserve Bank. No such assignment by the Bank
shall release the Bank from its obligations hereunder or under the Letter of Credit.
Section 8.6 Severability of Provisions. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or, unenforceability without invalidating the remaining provisions
hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
LOSANGELES 89045 (2K) -3 5
Section 8.7 Amendments; Waivers. None of the provisions of this Agreement may be
amended, changed, waived, discharged or terminated except by an instrument in writing signed
and duly executed by the parties.
Section 8.8 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute one and the same Agreement. This Agreement
constitutes the entire agreement and understanding between the parties hereto and supersedes any
and all prior agreements and understandings, oral or written, relating to the subject matter hereof.
Section 8.9 Headings, Table of Contents. Article and Section headings in this
Agreement and the Table of Contents are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
LOSANGELES 89045 (2K) -3 6-
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly
executed and delivered by its respective officer thereunto duly authorized as of the date first
written above.
Attest: CITY OF VERNON
By —
Title:
By
Title:
BANK OF AMERICA, N.A.
By_
Title:
-Signature Page
LOSANGELEs 89045 (zx) Reimbursement Agreement
SCHEDULE I
CONSTRUCTION DOCUMENTS
LOSANGELES 89045 (2K) Schedule 1 Page I
CONTRACT
THIS CONTRACT is made, entered into and executed in duplicate originals, either
copy of which may be considered and used as the original hereof for all purposes, as of this a,
February, 2003, in the City of Vernon, County of Los Angeles,
BY AND BETWEEN
RECITALS
THE CITY OF VERNON, a
Municipal Corporation
(hereinafter, "City")
4305 Santa Fe Avenue
Vernon, CA 90058
MARELICH MECHANICAL CO., Inc.
DBA UNIVERSITY MARELICH
MECHANICAL & GALLIERA, INC.,
DBA TRICO CONSTRUCTION, a Joint
Venture (hereinafter, "Contractor")
1000 N. Kraemer Place
Anaheim, California 92806-2610
WHEREAS, City has completed the development of a Combined Cycle Power Plant
(hereinafter, the "Project") for purposes of installing additional generating capacity within the City
that is capable of yielding cost effective, efficient and reliable electricity to meet its goals, while
meeting Federal, State and local environmental and siting requirements; and
WHEREAS, City sought proposals for the detailed engineering, procurement,
construction and startup of a combined cycle power plant to create the Project, and
WHEREAS, City subsequently determined that it was necessary to separately
contract with a consultant for required engineering services for the Project and to have a separate
contractor provide the procurement, construction and start-up services for the Project; and
WHEREAS, Contractor submitted a proposal to City dated November 18, 2002for
the equipment and services defined herein; and
WHEREAS, City's Utilities Department has determined that the construction of the
Project and the purchase of the equipment and services from Contractor will assist City in meeting
its electricity goals and is in the public interest; and
WHEREAS, Contractor has advised City that it is qualified to perform such services
under this Contract.
mydocuments!agreements/marelich020203 1
0liz2izuus 1b:42 FAX 925 933 5167 WRNS ENGINEERIMG
RA i
AGREEMENT FOR PROFESSIONAL CONSULTING SERVICES
THIS AGREEMENT (the "Agreement") is made,:entered into and
executed in duplicate originals, either copy of which may be
considered and used as the original hereof for all purposes, as of
this 22nd day of January, 2003, in the City of Vernon, County of Los
Angeles, California '
BY AND BETWEEN
AND
THE CITY OF VERNON
(hereinafter referred to as
.,City„ )
4305 Santa Fe Avenue
Vernon, CA 90058-0805
WRMS ENGINEERING, INC.,
(hereinafter referred to as
"Consultant"), a wholly owned
subsidiary of Calpine
Corporation
1556 Parkside Drive
Walnut Creek, CA 94596
RECITALS
WHEREAS, City is developing a Combined Cycle Power Plant
(the "Project") for purposes of installing additional generating
capacity that is capable of 'yielding cost effective, efficient and
reliable electricity to meet its goals, while meeting Federal, State
and local environmental and siting requirements; and
WHEREAS, City requires certain engineering consulting and
other related consulting services for the Project; and
WHEREAS, Consultant has proposed to the City to perform the
consulting services outlined in the "Scope of Work" a copy of which is
attached hereto as Exhibit "A" and incorporated herein by this
reference (the "Scope Document"); and
WHEREAS, Consultant represents that it is qualified to
- 1 -
Jan-08-03 04:44pm From -POWER ENGINEERS,ANNEX +2087883017 T-500 P.02/12 F-762
AGREEDUM FOR PROFESSIONAL CONSULTING SERVICES
THIS AGREEMENT is made, entered into and executed in
duplicate originals, either copy of which may be considered and used
as the original hereof for all purposes, as of this day of
January, 2003, in the City of Vernon, County of Los Angeles,
California
BY ANTD BETWEEN THE CITY OF VERNON
(hereinafter referred to as
the -City")
4305 Santa Fe Avenue
Vernon, California 90058-0805
AND POWER ENGINEERS, INCORPORATED
(hereinafter referred to as
�Consultant�)
1295 South Eagle Flight
Boise, Idaho 94568-3139
RECITALS
WHEREAS, the City is developing a Combined Cycle Power Plant
(the "Project,) for purposes of installing additional generating
capa7ity that is capable of yielding cost effective, efficient and
relitble electricity to meet its goals, while meeting Federal, State
and Local environmental and siting requirements; and
WHEREAS, the City has previously approved an Engineering
proeirement and construction contract (^EPC") for the Project but has
had .o restructure this aspect of the project; and
WHEREAS, Consultant was previously part of the EPC group and
has Derformed a substantial amount of engineering work for the
Project; and
WHEREAS, Consultanc has advised the City that it desires to
continue with the engineering portion of the EPC segment of the
Proj.?ct and submitted a proposal to the City dated December 18, 2002
- 1 -
IRREVOCABLE DIRECT -PAY LETTER OF CREDIT
BANK OF AMERICA, N.A.
(L/C NUMBER
BNY Western Trust Company,
as trustee
Attn: Corporate Trust Services
Ladies and Gentlemen:
i mpu :I
2003
1. We, Bank of America, N.A. (the "Bank"), hereby establish, at the request and for
the account of the City of Vernon, a municipal corporation and chartered city duly organized and
existing under the laws of the State of California (the "City"), in your favor, as trustee (together
with any successor trustee designated in accordance with paragraph 15 hereof, the "Trustee")
under the Indenture of Trust, dated as of , 2003 (the "Indenture"), between the City
and you, and the First Supplemental Indenture of Trust, dated as of , 2003 (the "First
Supplemental Indenture"), between the City and you, pursuant to which $ ,000,000 aggregate
principal amount of the City's Malburg Generating Station Project Electric System Revenue
Bonds, Variable Rate Demand 2003 Series A (the `Bonds") are being issued, our Irrevocable
Direct -Pay Letter of Credit Number , in the amount described below.
2. This Letter of Credit shall be effective immediately and shall expire and terminate
on the earliest of the following (the `Expiration Date"): (a) , 20061 or such later
date as we shall give you notice pursuant to the Reimbursement Agreement, dated as of
, 2003, between the City and Bank of America, N.A. (such agreement as the same
may be amended, modified, supplemented and restated from time to time, the "Reimbursement
Agreement"; and such date, the "Stated Termination Date"); (b) the date on which we honor
payment on a drawing accompanied by your signed certificate in the form of Annex C hereto; (c)
fifteen (15) days after your receipt of written notice from us directing you to purchase all
outstanding Bonds and present your final drawing under this Letter of Credit as a result of the
occurrence of an "event of default" under the Reimbursement Agreement (a "Default Notice");
or (d) the date on which this Letter of Credit is surrendered by you to the Bank accompanied by a
certificate substantially in the form of Annex F signed by you and acknowledged by the City.
3. We hereby irrevocably authorize you to draw on the Bank, in accordance with the
terms and conditions hereof, an aggregate amount of $50,657,535 (said amount being referred to
herein as the "Face Amount") which may be drawn upon (i) in an amount not exceeding
$50,000,000 (the "Principal Portion") with respect to the payment of the unpaid principal amount
' Insert the date that is the third anniversary of the Date of Issuance.
A-1
LOSANGELES 89045 (2K)
of the Bonds and/or the principal component of the purchase price of the Bonds and (ii) an
amount not exceeding $657,535 (the "Interest Portion") which may be drawn with respect to the
payment of accrued interest on the Bonds and/or the interest component of the purchase price of
the Bonds, which amount represents interest accruing during a period of 40 days on the principal
amount of the Bonds (based on a 365-day year), at an interest rate up to 12% per annum. No
amount may be drawn under this Letter of Credit for the payment of principal of or interest on
Bonds registered in the name of the City or the Bank. All drawings under this Letter of Credit
will be paid with our own funds.
4. Funds under this Letter of Credit are only available to you against your sight
draft(s) (substantially in the form of Annex G hereto) drawn on the Bank, stating on their face:
"Drawn under Irrevocable Direct -Pay Letter of Credit Number of Bank of America,
N.A.," and upon your presenting to the Bank one or more of the following written certificates as
may be applicable to the type of drawing you are making:
(a) A Drawing. If you are demanding funds for the payment of interest on the
Bonds (other than the payment of interest in connection with your final drawing or the
payment of interest in connection with a purchase of Bonds upon optional or mandatory
tender) (an "A Drawing"), you must present a written certificate signed by you
substantially in the form of Annex A hereto. You must comply with all of the
instructions in brackets and fill in all of the blanks in preparing Annex A.
(b) B Drawine. If you are demanding funds for the payment of principal of
the Bonds (other than the payment of principal in connection with your final drawing or
the payment of principal in connection with a purchase of Bonds upon optional or
mandatory tender) (a `B Drawing"), you must present a written certificate signed by you
substantially in the form of Annex B hereto. You must comply with all of the
instructions in brackets and fill in all of the blanks in preparing Annex B.
(c) C Drawing. If you are demanding funds for (i) the payment of the
purchase price of the Bonds upon mandatory tender in accordance with Section 4.04 of
the First Supplemental Indenture: (A) in connection with the substitution of this Letter of
Credit with an Alternate 2003 Credit Support Instrument; (B) your receipt of a Default
Notice; (C) as a result of the conversion of the interest rate on the Bonds to a rate other
than a Weekly Interest Rate or a Daily Interest Rate; or (D) as a result of the expiration of
this Letter of Credit (in each case as indicated in your certificate in the form of Annex C
delivered in connection with such purchase); (ii) the payment of the principal of, and
interest on, the Bonds upon the acceleration of the Bonds in accordance with Section
10.04 of the Indenture; or (iii) the final payment of principal of the Bonds (whether at
maturity or by redemption or by sinking fund installment) after which payment no Bonds
shall remain outstanding (the "C Drawina"), you must present a written certificate signed
by you substantially in the form of Annex C hereto. You must comply with all of the
instructions in brackets and fill in all of the blanks in preparing Annex C. Only one C
Drawing may be presented for payment against this Letter of Credit; except for the
presentation of an A Drawing concurrently with the presentation of a C Drawing of the
type described in clause (iii) above, upon any such presentation, no certificate whatsoever
LOSANGELES 89045 (2K) A-2
(including any certificate in the form of Annex A, B or D) may be drawn and presented
hereunder.
A D Drawing. If you are demanding funds for the payment of the purchase
price of the Bonds upon optional tender by the registered holder thereof (a "D Drawing"),
you must present a written certificate signed by you substantially in the form of Annex D
hereto. You must comply with all of the instructions in brackets and fill in all of the
blanks in preparing Annex D.
Presentation of such sight draft(s) and certificate(s) shall be made by courier, hand
delivery or facsimile to: Bank of America, N.A.,
Attention: Telephone Number: (_) __ , Facsimile
Number: (_ or any other address as may be designated by the Bank by written
notice delivered to you.
A telephone confirmation and a confirming signed letter from you addressed to us shall
be delivered to us immediately following any such communication by facsimile telecopy (but the
failure to so confirm by telephone or so deliver a confirming letter will not affect the validity of
any such communication by facsimile telecopy).
5. After any drawing by the Trustee under this Letter of Credit in respect of an A
Drawing, the Interest Portion shall be reduced by the amount of such drawing. The Interest
Portion so reduced shall be automatically reinstated without further action as of the Bank's
opening of business in Los Angeles, California on the third Business Day after the Business Day
on which the Bank honors payment of an A Drawing unless you shall have received from the
Bank a Default Notice. In the event you receive a Default Notice, the Bank will not reinstate the
Interest Portion of the Letter of Credit.
6. After any drawing by the Trustee under this Letter of Credit in respect of a B
Drawing, (a) the Principal Portion shall be automatically and permanently reduced by an amount
equal to the amount so drawn with respect to the payment of principal of the Bonds and (b) the
Interest Portion shall be automatically and permanently reduced by an amount determined in
accordance with the following calculation (the "Interest Coverage Calculation"):
A = P x 0.12 x (40/365);
where "A" is the reduction in the Interest Portion and "P" is the principal amount of Bonds that
have been paid.
7. After any drawing by the Trustee under this Letter of Credit in respect of a C
Drawing, the Face Amount, the Principal Portion and the Interest Portion shall be automatically
and permanently reduced to zero.
8. After any drawing by the Trustee under this Letter of Credit in respect of a D
Drawing, (a) the Principal Portion shall be automatically reduced by the principal amount of
Bonds to be purchased with the proceeds of such drawing and (b) the Interest Portion shall be
automatically reduced by an amount determined in accordance with the Interest Coverage
Calculation (where "P" is the principal amount of the Bonds to be purchased). Following the
LOSANGELES 89045 (2K) A-3
remarketing of Bonds purchased with the proceeds of a D Drawing and receipt by Bank of your
executed certificate in the form of Annex H with blanks appropriately completed, (i) the
Principal Portion shall be automatically reinstated without further action by the principal amount
of Bonds remarketed and (ii) the Interest Portion shall be automatically reinstated without further
action by an amount determined in accordance with the Interest Coverage Calculation (where
"P" is the principal amount of the Bonds so remarketed).
9. Only you, as Trustee, may make drawings under this Letter of Credit. Upon
payment to you, as Trustee, of the amount specified in a draft drawn hereunder, our obligation
with respect to such draft shall be discharged under this Letter of Credit, and we shall not
thereafter be obligated to make any further payments with respect to such draft to you or to any
other person who may have made to you or who makes to you a demand for payment of principal
of or interest on any Bond. This Letter of Credit does not apply to any interest that may accrue
on any Bonds after maturity thereof. By paying to you an amount demanded in such draft(s) we
make no representation as to the correctness of the amount demanded in such draft(s).
10. If the Bank receives any of your sight draft(s) and certificate(s) in the form of
Annex A, B or C in accordance with this Letter of Credit at or prior to 1:00 p.m. (Los Angeles
time) on a Business Day on or prior to the Expiration Date, payment shall be made to you in
immediately available funds by 1:00 p.m. (Los Angeles time) on the next Business Day. If the
Bank receives any of your sight draft(s) and certificate(s) in the form of Annex A, B or C in
accordance with this Letter of Credit after 1:00 p.m. (Los Angeles time) on a Business Day on or
prior to the Expiration Date, payment shall be made to you in immediately available funds by
1:00 p.m. (Los Angeles time) on the second Business Day after presentment. If the Bank
receives your sight draft(s) and certificate(s) in the form of Annex D in accordance with this
Letter of Credit at or prior to 9:15 a.m. (Los Angeles time) on any Business Day on or prior to
the Expiration Date, payment shall be made to you in immediately available funds by 11:30 p.m.
(Los Angeles time) on the same Business Day. If the Bank receives your sight draft(s) and
certificate(s) in the form of Annex D in accordance with the Letter of Credit after 9:15 a.m. (Los
Angeles time) on any Business Day on or prior to the Expiration Date, payment shall be made to
you in immediately available funds by 11:30 p.m. (Los Angeles time) on the next Business Day
after presentment.
11. Notwithstanding the times set forth paragraph 10 for payments by the Bank under
this Letter of Credit, if any applicable law, rule or regulation, or any interpretation thereof by any
governmental authority, central bank or comparable agency, or any directive of any such
authority, bank or agency, shall limit the ability of the Bank to make payments at such times, the
Bank shall make payments when permissible_
12. As used herein, "Business Day" shall mean any day of the year other than (i) a
Saturday, (ii) a Sunday, (iii) any day which shall be in Los Angeles, California or New York,
New York a legal holiday or a day on which banking institutions are authorized or required by
law or other government action to close, and (v) any day which you shall advise us in writing is a
legal holiday or a day on which banking institutions are authorized or required by law or other
government action to close in the city in which your principal corporate trust office is located.
LOSANGELES 89045 (2K) A-4
13. This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits (1993 revision), ICC Publication Number 500 (the "Uniform Customs").
As to matters not governed by the Uniform Customs, this Letter of Credit shall be governed by
and construed in accordance with the laws of the State of California.
14. Communications with respect to this Letter of Credit shall be in writing and shall
be mailed or physically delivered to Bank of America, N.A., ,
Attention: Telephone Number:
Facsimile Number: (__) _-
15. Anything to the contrary in Article 48 of the Uniform Customs notwithstanding,
this Letter of Credit is transferable any number of times, but only in the amount of the full
unutilized balance hereof and not in part. The transfer may be made to any person or entity that
you or any successor trustee hereunder designates as successor trustee under the Indenture.
Transfer of this Letter of Credit to such transferee shall be effected by the presentation to the
Bank of this Letter of Credit accompanied by a request designating your successor in the form of
Annex E attached hereto, with the signature of the appropriate officer signing on your behalf
guaranteed by another one of your officers. Upon presentation of Annex E, we shall forthwith
affect a transfer of this Letter of Credit to your designated transferee.
16. Anything to the contrary in Article 41 of the Uniform Customs notwithstanding,
this Letter of Credit is intended to remain in full force and effect until it expires in accordance
with its terms. Any failure by you or any successor Trustee to draw upon this Letter of Credit
with respect to a scheduled interest payment on the Bonds in accordance with the terms and
conditions of the Indenture shall not cause this Letter of Credit to be unavailable for any future
drawing in accordance with the terms and conditions of the Indenture.
LOSANGELES 89045 (2K) A-5
17. This Letter of Credit sets forth in full our undertaking but not any of our rights
(whether under applicable law or otherwise), and such undertaking but not any of our rights
(whether under applicable law or otherwise) shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or agreement referred to herein
(including, without limitation, the Reimbursement Agreement, the Indenture, the First
Supplemental Indenture or the Bonds), except only the annexes referred to herein; and any such
reference shall not be deemed to incorporate herein by reference or otherwise any document,
instrument or agreement except for such annexes.
Very truly yours,
BANK OF AMERICA, N.A.
By:
Title:
LOSANGELES 89045 (2K) A-6
Annex A to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Drawing for Interest
Ladies and Gentlemen:
We refer to Irrevocable Direct -Pay Letter of Credit Number of Bank of
America, N.A. (the "Letter of Credit"). Any capitalized term below that is defined in the Letter
of Credit shall have the same meaning when used herein. The undersigned, a duly authorized
officer of [insert name] (the "Trustee" or "we"), hereby certifies to you that:
I . We are the Trustee under the Indenture for the holders of the Bonds.
2. We are making a drawing under the Letter of Credit in the amount of
$ with respect to the payment of interest on the Bonds due on an Interest Payment
Date (as defined in the First Supplemental Indenture) as provided in the First Supplemental
Indenture.
3. The amount of the draft accompanying this certificate does not exceed the amount
of the Interest Portion available on the date hereof to be drawn under the Letter of Credit in
respect of interest accrued on the Bonds. This amount was computed in accordance with the
terms and conditions of the Bonds, the Letter of Credit and the First Supplemental Indenture.
4. The Letter of Credit has not terminated prior to the time of the delivery of this
certificate and the accompanying draft.
5. This certificate is dated and is being presented to the Bank on the Business Day
preceding the date on which interest on the Bonds is due and payable in accordance with the
First Supplemental Indenture.
6. No amount of the draft accompanying this certificate is being drawn to pay
interest on Bonds registered on the registration books of the Trustee in the name of the City or
the Bank.
7. Please pay the amount hereby demanded to our account: [insert payment
instructions.]
A-7
LOSANGELES 89045 (2K)
IN WITNESS WHEREOF, we have executed and delivered this certificate as Trustee as
of the — day of, 20 .
Very truly yours,
[Insert name], as Trustee
By
[Insert name and title of authorized officer]
LOSANGELES 89045 (2K) A-8
Annex B to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Drawing for Principal
Ladies and Gentlemen:
We refer to Irrevocable Direct -Pay Letter of Credit Number of Bank of
America, N.A. (the "Letter of Credit"). Any capitalized term below that is defined in the Letter
of Credit shall have the same meaning when used herein. The undersigned, a duly authorized
officer of [insert name] (the "Trustee" or "we"), hereby certifies to you that:
We are the Trustee under the Indenture for the holders of the Bonds.
2. [Insert one of the following statements:]
[We are making a drawing in the amount of $ with respect to the
payment on the Business Day following the date on which this certificate is being presented (the
"Principal Payment Date") of the principal amount of Bonds. Such principal amount of Bonds
has, or on the Principal Payment Date will, become due and payable in accordance with the
terms and conditions of the Bonds, the Letter of Credit and the First Supplemental Indenture.
Following the payment of the principal amount of such Bonds, $ aggregate principal
amount of Bonds will remain outstanding. [DO NOT USE THIS CERTIFICATION IF THE
AMOUNT IN THE LAST SENTENCE IS OR WILL BE ZERO. IF THE AMOUNT IN THE
LAST SENTENCE IS OR WILL BE ZERO YOU SHOULD USE A C DRAWING.]]
or
[We are making a drawing in the amount of $ with respect to the
payment on the Business Day following the date on which this certificate is being presented (the
"Redemption Date") of the principal amount of Bonds to be redeemed in accordance with
Section [3.01(b)] [3.01(g)] [insert one cross reference only]. Such principal amount of Bonds
has, or on the Redemption Date will, become due and payable in accordance with the terms and
conditions of the Bonds, the Letter of Credit and the First Supplemental Indenture. Following the
payment of the principal amount of such Bonds, $ aggregate principal amount of
Bonds will remain outstanding. [DO NOT USE THIS CERTIFICATION IF THE AMOUNT IN
THE LAST SENTENCE IS OR WILL BE ZERO. IF THE AMOUNT IN THE LAST
SENTENCE IS OR WILL BE ZERO YOU SHOULD USE A C DRAWING.]]
A-9
LOSANGELES 89045 (2K)
3. The amount of the draft accompanying this certificate does not exceed the
Principal Portion available on the date hereof to be drawn under the Letter of Credit in respect of
the principal of the Bonds. This amount was computed in accordance with the terms and
conditions of the Bonds, the Letter of Credit and the First Supplemental Indenture.
4. The Letter of Credit has not terminated prior to the time of the delivery of this
certificate and the accompanying draft.
5. This certificate is dated and is being presented to the Bank on the Business Day
preceding the date on which the unpaid principal amount of the Bonds is due and payable in
accordance with the First Supplemental Indenture.
6. No amount of the draft accompanying this certificate is being drawn to pay
principal of Bonds registered on the registration books of the Trustee in the name of the City or
the Bank.
7. Please pay the amount hereby demanded to our account: [insert payment
instructions.]
IN WITNESS WHEREOF, we have executed and delivered this certificate as Trustee as
of the — day of , 20
Very truly yours,
[Insert name], as Trustee
By
[Insert name and title of authorized officer]
LOSANGELES 89045 (2K) A-10
Annex C to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Final Drawing and Termination
Ladies and Gentlemen:
We refer to Irrevocable Direct -Pay Letter of Credit Number of Bank of
America, N.A. (the "Letter of Credit"). Any capitalized term below that is defined in the Letter
of Credit shall have the same meaning when used herein. The undersigned, a duly authorized
officer of [insert name] (the "Trustee" or "we"), hereby certifies to you that:
1. We are the Trustee under the Indenture for the holders of the Bonds.
2. We are making a drawing in the amount of $ of which
$ shall be with respect to payment of the principal of the Bonds and $
shall be with respect to payment of interest accrued on such Bonds.
3. [Insert statement (A), (B), (C) or (D), as applicable:]
(A) We are making a final drawing as a result of a mandatory purchase of all
outstanding Bonds as a result of [insert one of the following]:
[A conversion of the interest rate on all outstanding Bonds to a rate other than a
Daily Interest Rate or a Weekly Interest Rate — a purchase in accordance with Section
4.03 of the First Supplemental Indenture.]
[The substitution of the Letter of Credit by an Alternate 2003 Credit Support
Instrument (as such term is defined in the First Supplemental Indenture) — a purchase in
accordance with Section 4.04(a) of the First Supplemental Indenture.]
[Your receipt from us of a Default Notice — a purchase in accordance with Section
4.04(b) of the Indenture.]
[The expiration of the Letter of Credit in accordance with its terms — a purchase in
accordance with Section 4.04(c) of the First Supplemental Indenture.]
(B) We are making a final drawing with respect to the payment at maturity of
all outstanding Bonds. All outstanding Bonds will mature on the Business Day following the
date on which this certificate is being presented.
A-11
LOSANGELES 99045 (2K)
(C) We are making a final drawing with respect to the redemption of all
outstanding Bonds in accordance with Section [3.01(b)] [3.01(g)] [insert one cross reference
only] of the First Supplemental Indenture. All outstanding Bonds are to be redeemed on the
Business Day following the date on which this certificate is being presented.
(D) We are making a final drawingwith respect to the payment of all
outstanding Bonds as a result of the acceleration thereof in accordance with Section 10.04 of the
Indenture. All accelerated Bonds are to be paid on the Business Day following the date on which
this certificate is being presented.
4. The amount of the draft accompanying this certificate does not exceed either the
Principal Portion or the Interest Portion available on the date hereof to be drawn under the Letter
of Credit in respect of the principal of or interest on the Bonds. This amount was computed in
accordance with the terms and conditions of the Bonds, the Letter of Credit and the First
Supplemental Indenture.
5. The Letter of Credit has not terminated prior to the time of the delivery of this
certificate and the accompanying draft.
6. This certificate is dated and is being ,presented to the Bank on the Business Day
preceding the date, or on the date, on which the Bonds are to be purchased in accordance with
the Indenture.
7. No amount of the draft accompanying this certificate is being drawn to pay the
principal of or interest on Bonds registered on the registration books of the Trustee in the name
of the City or the Bank.
8. This drawing constitutes the final drawing available under the Letter of Credit,
and upon payment of the draft accompanying this certificate, the Letter of Credit is hereby
cancelled.
9. Please pay the amount hereby demanded to our account: [insert payment
instructions.]
LOSANGELES 89045 (2K) A-12
IN WITNESS WHEREOF, we have executed and delivered this certificate as Trustee as
of the _ day of , 20_.
Very truly yours,
[Insert name], as Trustee
By
[Insert name and title of authorized officer]
LOSANGELES 89045 (2K) A- 13
Annex D to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Optional Drawing
Ladies and Gentlemen:
We refer to Irrevocable Direct -Pay Letter of Credit Number of Bank of
America, N.A. (the "Letter of Credit"). Any capitalized term below that is defined in the Letter
of Credit shall have the same meaning when used herein. The undersigned, a duly authorized
officer of [insert name] (the "Trustee" or "we"), hereby certifies to you that:
1. We are the Trustee under the Indenture for the holders of the Bonds.
2. We are making a drawing in the amount of $ , of which
$ shall be with respect to payment of the principal of the Bonds and $
shall be with respect to payment of interest accrued on such Bonds. This drawing is being made
as a result of an optional tender of Bonds by the registered holder thereof in accordance with
Section 4.01 of the First Supplemental Indenture and the inability of the Remarketing Agent (as
such term is defined in the First Supplemental Indenture) to remarket such Bonds.
3. The amount of the draft accompanying this certificate does not exceed the amount
available on the date hereof to be drawn under the Letter of Credit. This amount was computed
in accordance with the terms and conditions of the Bonds, the Letter of Credit and the Indenture.
4. The Letter of Credit has not terminated prior to the time of the delivery of this
certificate and the accompanying draft.
5. This certificate is dated and is being presented to the Bank on the Business Day
on which the Bonds are to be purchased in accordance with the First Supplemental Indenture.
6. No amount of the draft accompanying this certificate is being drawn to pay
principal of or interest on Bonds registered on the registration books of the Trustee in the name
of the City or the Bank.
7. Please pay the amount hereby demanded to our account: [insert payment
instructions.]
A-14
LOSANGELES 89045 (2K)
IN WITNESS WHEREOF, we have executed and delivered this certificate as Trustee as
of the day of 20.
Very truly yours,
[Insert name], as Trustee
By
[Insert name and title of authorized officer]
LOSANGELES 89045 (2K) A-15
Annex E to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Letter of Credit Number [ I
Transfer of Letter of Credit
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably instructs you to
transfer to:
(name of transferee)
(address) .
all rights of the undersigned beneficiary to draw under the above -captioned Letter of Credit (the
"Letter of Credit"). The transferee has succeeded the undersigned as "Trustee" under the
Indenture (as defined in the Letter of Credit).
By this transfer, all rights of the undersigned beneficiary in the Letter of Credit are
transferred to the transferee, and the transferee shall hereafter have the sole rights as beneficiary
thereof, provided that no rights shall be deemed to have been transferred to the transferee until
such transfer complies with the requirements of the Letter of Credit pertaining to transfers,
including any amendments. All amendments are to be advised directly to the transferee without
necessity of any consent of or notice to the undersigned beneficiary.
By its signature below, the undersigned transferee acknowledges that it has succeeded to
[insert name of retiring Trustee], as Trustee under the Indenture
and agrees to be bound by the terms of the Indenture as if it were the Trustee originally a party
thereto.
A-16
LOSANGELES 99045 (2K)
The Letter of Credit is returned herewith, and in accordance therewith we ask that this
transfer be affected.
Very truly yours,
[Insert name], as Predecessor Trustee
By
[Insert name and title of authorized officer]
SIGNATURE OF THE ABOVE PARTY,
DULY AUTHORIZED TO ACT ON
BEHALF OF
AUTHORIZATION BY:
[Name and Title]
Acknowledged by
[insert name of Transferee]
as successor Trustee
By
[Insert name and Title of authorized officer]
LOSANGELES 89045 (2K) A-17
Annex F to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Surrender of Letter of Credit
Ladies and Gentlemen:
We refer to Irrevocable Direct -Pay Letter of Credit Number of Bank of
America, N.A. (the "Letter of Credit"). Any capitalized term in this Agreement that is defined
in the Letter of Credit shall have the same meaning when used herein. The undersigned, a duly
authorized officer of [insert name] (the "Trustee or "we"), hereby certifies to you that:
1. We are the Trustee under the Indenture for the holders of the Bonds.
2. We hereby surrender the attached Letter of Credit to you.
3. The Letter of Credit is hereby terminated in accordance with its terms.
4. No payment is demanded of you in connection with this surrender of the Letter of
Credit.
INWITNESS WHEREOF, we have executed and delivered this certificate as Trustee as
of the day of 20_.
Very truly yours,
[Insert name], as Trustee
By
[Insert name and title of authorized officer]
A-18
LOSANGELES 89045 (2K)
ACKNOWLEDGMENT OF
CITY OF VERNON
The undersigned, City of Vernon (the "City"), is the account party under the Letter of
Credit. The City hereby acknowledges and agrees with the surrender and termination of the
Letter of Credit.
CITY OF VERNON
By:
[Insert name and title of authorized officer]
LOSANGELES 89045 (2K) A-19
(Place)
Annex G to
Letter of Credit
20
PAY TO on
(Name of Trustee)
U.S. $ , ( UNITED STATES DOLLARS). Drawn under
Irrevocable Direct -Pay Letter of Credit Number of Bank of America, N.A.
(Name of Trustee)
(Title)
Bank of America, N.A.
Attention:
A-20
LOSANGELES 89045 (2K)
Annex H to
Letter of Credit
[Date]
Bank of America, N.A.
Attention:
Re: Reinstatement of Letter of Credit
Ladies and Gentlemen:
We refer to Irrevocable Direct -Pay Letter of Credit Number of Bank of
America, N.A. (the "Letter of Credit"). Any capitalized term below that is defined in the Letter
of Credit shall have the same meaning when used herein. The undersigned, a duly authorized
officer of [insert name] (the "Trustee" or "we"), hereby certifies to you that:
1. We are the Trustee under the Indenture for the holders of the Bonds.
2. The amount of $ paid to you today by the City or by the Tender Agent
(as such term is defined in the First Supplemental Indenture) on behalf of the City is a payment
made to reimburse you for amounts drawn under the Letter of Credit by one or more D Drawings
and is the amount by which the Letter of Credit is to be reinstated.
3. Of the amount referred to in paragraph 2, $ represents the aggregate
principal amount of Bonds resold on behalf of the City and is the amount by which the Principal
Portion should be reinstated.
4. The Interest Portion should be reinstated by $ , which represents the
Interest Coverage Calculation for the amount specified in paragraph 3 above computed in
accordance with the terms and conditions of the Letter of Credit.
A-21
LOSANGELES 89045 (2K)
IN WITNESS WHEREOF, we have executed and delivered this certificate as Trustee as
of the _ day of , 20^
Very truly yours,
[Insert name], as Trustee
By
[Insert name and title of authorized officer]
LOSANGELES 89045(2K) A-22
oi: 0 8-3
CUSTODIAN AGREEMENT, dated as of 2003 (as the same may be
amended, modified and supplemented from time to time, this "Agreement"), BANK OF
AMERICA, N.A. (the "Bank"), CITY OF VERNON (the "City") and BNY WESTERN TRUST
COMPANY C' NY" ), as custodian for the Bank.
WITNESSETH:
WHEREAS, the Bank has agreed to issue its irrevocable direct -pay letter of credit (the
"Letter of Credit") to provide credit and liquidity support for the City of Vernon Malburg
Generating Station Project Electric System Revenue Bonds, Variable Rate Demand 2003 Series
A (the "Bonds") issued pursuant to an Indenture of Trust, dated as of , 2003 (the
"Indenture"), by and between the City and BNY, in its capacity as trustee for the holders of the
Bonds (the "Trustee"), and a First Supplemental Indenture of Trust, dated as of ,
2003 (the "First Supplemental Indenture"), by and between the City and the Trustee;
WHEREAS, the Letter of Credit may be drawn upon to pay, among other things, the
purchase price of Bonds tendered or deemed tendered for purchase under certain circumstances
as set forth in the First Supplemental Indenture; and
WHEREAS, it is a condition precedent, among others, to the obligation of the Bank to
enter into the Reimbursement Agreement, dated as of , 2003 (as the same may be
amended, modified, supplemented and restated from time to time, the "Reimbursement
Agreement"), between the City and the Bank, that BNY shall have executed and delivered this
Custodian Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the terms and
conditions of this Custodian Agreement, and other good and valuable consideration, the parties
hereto do hereby agree as follows:
1. Definitions. All terms capitalized herein and not defined herein shall have the
meaning ascribed to them in the First Supplemental Indenture, or, if not defined therein, the
meanings ascribed to them in the Indenture, or, if not defined therein, the meanings ascribed to
them in the Reimbursement Agreement.
2. Appointment and Acceptance.
(a) The Bank hereby appoints BNY to act as agent, bailee and custodian
("Custodian") for the exclusive benefit of the Bank with respect to the 2003 Credit Provider
Bonds. BNY hereby accepts such appointment and agrees to maintain and hold all 2003 Credit
Provider Bonds (at any time delivered to it as agent, bailee or custodian for the exclusive benefit
of the Bank in accordance with the terms of this Agreement.
(b) The Custodian acknowledges and agrees that it is acting and will act with
respect to the 2003 Credit Provider Bonds at the direction of the Bank for the exclusive benefit
of the Bank and is not and shall not at any time be subject in any manner or to any extent to the
direction or control of the City with respect to such 2003 Credit Provider Bonds. The Custodian
LOSANGELES 89045 (2K) -i-
agrees to act in strict accordance with this Agreement and in accordance with any lawful written
instructions from the Bank delivered to the Custodian from time to time pursuant hereto. Under
no circumstances shall the Custodian deliver possession of the 2003 Credit Provider Bonds to, or
cause 2003 Credit Provider Bonds to be registered in the name of, the City, the Remarketing
Agent or any Person other than the Bank except in accordance with the express terms of this
Agreement or otherwise upon the written instructions of the Bank.
(c) The Custodian may rely and shall be protected in acting upon any
document believed by it to be genuine and to have been signed or presented by the proper party
or parties. The Custodian shall not be liable for any error in judgment made in good faith by its
responsible officers, employees and agents unless the Custodian, its responsible officers,
employees or agents were negligent or engaged in willful misconduct. Anything herein to the
contrary notwithstanding, the Custodian shall have no liability hereunder for any act or omission
except as shall result from its gross negligence or willful misconduct.
3. Receipt of the 2003 Credit Provider Bonds. The Custodian agrees to receive and
hold 2003 Credit Provider Bonds in custody for the Bank; provide d, however, if the Bonds are
Book -Entry Bonds, the Custodian shall establish a beneficial ownership account in the name of
the Bank on its books and records as a Participant and shall credit such account with all 2003
Credit Provider Bonds (or beneficial ownership interests therein) acquired by the Bank.
Immediately upon the Custodian's receipt of 2003 Credit Provider Bonds, the Custodian shall (a)
promptly give telephonic notice to the Bank that it has received such 2003 Credit Provider Bonds
and (b) within 2 Business Days following such receipt, send or cause to be sent to the Bank, (i) a
copy of the transfer journal entry for such 2003 Credit Provider Bonds identifying the principal
amount of such 2003 Credit Provider Bonds and (ii) confirmation that the Bank or its nominee
has been registered as the owner of such 2003 Credit Provider Bonds.
4. Payments with respect to the Bonds. If, while this Agreement is in effect, the
Custodian shall become entitled to receive or shall receive any payment in respect of any 2003
Credit Provider Bonds, the Custodian agrees to accept the same as the Bank's agent and to hold
the same in trust on behalf of the Bank and to deliver the same forthwith to the Bank in
accordance with the payment instructions provided to the Custodian from time to time by the
Bank in writing (any such payment instructions to remain effective until the Custodian receives
written instructions from the Bank to the contrary).
5. Release of 2003 Credit Provider Bonds. Upon the remarketing of any 2003 Credit
Provider Bonds, the Bank shall as soon as practicable after receipt of written notice thereof from
the Remarketing Agent prior to 8:45 a.m. Los Angeles time on a Business Day instruct the
Custodian by telephone (promptly confirmed in writing) to deliver to the Tender Agent (no later
than 10.45 a.m. Los Angeles time) on the same Business Day, against receipt of the purchase
price (which purchase price shall consist of the sum of the principal amount of such 2003 Credit
Provider Bonds and any accrued but unpaid interest with respect thereto, at the rate borne by
Bonds, from the prior Interest Payment Date through but excluding the date such 2003 Credit
Provider Bonds are remarketed, 2003 Credit Provider Bonds in a principal amount equal to the
principal amount so remarketed. In order to facilitate the transfer of 2003 Credit Provider
Bonds, the Bank agrees to deliver to the Custodian from time to time upon the written request of
the Custodian, instruments of transfer duly endorsed in blank by the Bank.
LOSANGELES 89045 (2K) -ii-
6. No Disposition, Etc. Except as provided in Section 5 above, without the prior
written consent of the Bank, the Custodian agrees that it will not sell, assign, transfer, exchange
or otherwise dispose of, or grant any option with respect to, 2003 Credit Provider Bonds, and
will not create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security
interest, charge, option or any other encumbrance or take any other action with respect to 2003
Credit Provider Bonds, or any interest therein, or any proceeds thereof.
7. Information Regarding 2003 Credit Provider Bonds. The Custodian shall deliver
to the Bank at the Bank's request such information as may be in the possession of the Custodian
with respect to 2003 Credit Provider Bonds.
8. Standard of Care. The Custodian agrees that it will perform its duties hereunder
in accordance with the express terms of this Agreement. The Custodian shall perform such
duties and only such duties as set forth herein. The Custodian shall not be liable to the Bank
except for gross negligence or willful misconduct in the performance of its obligations under this
Agreement. The Bank shall indemnify the Custodian for and hold it harmless against any and all
liability arising out of the performance of its obligations under the Agreement except for any
liability arising out of the gross negligence or willful misconduct of the Custodian. The terms of
this paragraph shall survive the termination of this Agreement.
9. Removal or Resignation. The Bank may, at any time, effective immediately, and
with or without cause, remove and discharge the Custodian from the performance of the
Custodian's duties under this Agreement by written notice to the Custodian. Upon the effective
date of any such termination, the Custodian shall deliver all 2003 Credit Provider Bonds then in
its custody to any successor custodian to be held in accordance with this Agreement or any other
document executed by such successor custodian or, if the Bank has not designated a successor
custodian, to the Bank.
10. Insurance. The Custodian, at its own expense, shall maintain and keep in full
force and effect at all times during the existence of this Agreement: (a) fidelity insurance, (b)
theft of documents insurance, (c) forgery insurance, and (d) errors and omissions insurance
(which may be maintained by self-insurance). All such insurance shall be in amounts, with
standard coverage and subject to deductibles, that are customary for insurance typically
maintained by a bank or other financial institution acting as custodian.
11. Payment of Expenses. The City acknowledges and agrees that the transactions
contemplated by this Agreement are for the benefit of the City and the City agrees to pay or
cause to be paid all reasonable out-of-pocket fees, costs disbursements, taxes and expenses
(including, without limitation, the reasonable attorney's fees) incurred in connection with the
enforcement of this Agreement by the Bank and, except as otherwise provided herein, the
performance by the Custodian and the Bank of their respective obligations hereunder.
12. Further Assurances. The Custodian and the City each agree that at any time upon
the written request of the Bank and at the expense of the City, such party will execute and deliver
or cause to be executed and delivered any and all such further documents and do any and all such
further acts and things as the Bank may reasonably request in order to effect the purposes of this
Agreement.
LOSANGELES 89045 (2K) -111-
13. Availability of Documents. The Custodian agrees to keep and to cause its agents
to keep such books and records as shall be consistent with prudent industry practice and to make
such books and records available upon reasonable prior notice for inspection by the Bank, its
agents, accountants, attorneys and auditors.
14. Originals and Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which counterparts shall be deemed to be an original, and
which counterparts shall constitute and be one and the same instrument.
15. Notices. Except as otherwise expressly provided in this Agreement, all notices
shall be in writing, and delivered personally or by certified or registered United States mail,
postage prepaid, or by expedited mail or courier, return receipt requested, charges prepaid,
addressed to the respective party at the address set forth below:
If to the Bank: Bank of America, N.A.
If to the Custodian:
If to the City:
Attention:
Telephone:
Facsimile:
U-.
BNY Western Trust Company
Attention:
Telephone: (� _-
Facsimile: (� _-
City of Vernon
Attention:
Telephone
Facsimile:
Any party may change the address to which notices are to be sent by giving written notice of
such change to the other parties hereto.
16. Severability. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
17. Waivers, Amendments. None of the terms or provisions of this Agreement may
be waived, altered, modified or amended except by an instrument in writing, duly executed by
each of the Bank, the City and the Custodian. This Agreement and all obligations of the
LOSANGELES 89045 (2K) -lv-
Custodian and the City hereunder shall be binding upon their respective successors and assigns
and shall, together with the rights and remedies of the Bank hereunder, inure to the benefit of the
Bank and its successors and assigns.
18. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
LOSANGELES 89045 (2K)
-v-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed and delivered on the day and year first above written.
BANK OF AMERICA, N.A.
By:
Name:
Title:
CITY OF VERNON
By:
Name:
Title:
BNY WESTERN TRUST COMPANY,
in its capacity as Custodian
By:
Name:
Title:
LOSANGELES 89045 (2K) -vi-
SABW LLP
Draft of 2/18/2003
CITY OF VERNON
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A
REMARKETING AGREEMENT
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Ladies and Gentlemen:
, 2003
This is to confirm the agreement (the "Agreement") between the undersigned, Banc of
America Securities LLC ("Banc of America" or the "Remarketing Agent") and the City of
Vernon (the "City"), for Banc of America to act as exclusive remarketing agent in connection
with the offering and sale from time to time in the secondary market of the City's $
aggregate principal amount of Malburg Generating Station Project Electric System Revenue
Bonds, 2003 Series A (the "2003A Bonds") issued pursuant to an Indenture of Trust, dated as of
March 1, 2003, as supplemented by the First Supplemental Indenture of Trust, dated as of
March 1, 2003 (collectively, the "Indenture"), by and between the City and BNY Western Trust
Company, as trustee (the "Trustee"). All capitalized terms used herein and not defined herein
shall have the meanings specified in the Indenture.
Concurrently with the issuance of the 2003A Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "Letter of Credit") pursuant to a Reimbursement Agreement,
dated as of March _, 2003 (the "Reimbursement Agreement"), between the City and Bank of
America, N.A. (the `Bank").
1. Appointment of Remarketing Agent; Responsibilities of Remarketing Agent.
(A) Subject to the terms and conditions herein contained, Banc of America is hereby
appointed, and Banc of America hereby accepts such appointment and the duties and obligations
imposed on it hereunder and under the Indenture, as exclusive remarketing agent in connection
with the determination of interest rates, the offering and sale of the 2003A Bonds from time to
time in the secondary market subsequent to the initial offering, and the performance and
discharge of all other responsibilities stated to be that of the Remarketing Agent under the
Indenture. Banc of America agrees to perform the duties and obligations as remarketing agent as
set forth hereunder and under the Indenture. The principal office of the Remarketing Agent shall
be as set forth under Section 11 hereof.
SFl 1317420v4
(B) It is understood and agreed that the Remarketing Agent's responsibilities hereunder
and under the Indenture will include (i) exercising its best efforts in its sale of the 2003A Bonds,
(ii) effecting and processing such purchases, (iii) billing and receiving payment of Bond
purchases, (iv) causing the proceeds from the secondary sale of the 2003A Bonds to be
transferred to the Tender Agent or the Trustee as appropriate, (v) determining the Daily Interest
Rate, Weekly Interest Rate, Commercial Paper Term and Commercial Paper Term Rate and
Long Term Interest Rate, as applicable, and (vi) performing such other related functions as
provided in the Indenture of the Remarketing Agent or reasonably requested by the City and
agreed to by the Remarketing Agent.
(C) The obligations of the Remarketing Agent hereunder and under the Indenture, with
respect to the date on which the 2003A Bonds are to be remarketed pursuant to this Agreement,
are also subject to the further conditions that (i) the Indenture, this Agreement, the Liquidity
Facility and the Policy shall be in full force and effect and shall not have been amended,
modified or supplemented in any way which would materially and adversely affect the
remarketing of the 2003A Bonds, except as may have been agreed to in writing by the
Remarketing Agent, that no Events of Default under the Indenture shall have occurred and be
continuing and there shall be in full force and effect such additional resolutions, agreements,
certificates (including such certificates as may be required by regulations for the Internal
Revenue Service in order to establish or preserve the tax-exempt character of interest on the
2003A Bonds) and opinions, which resolutions, agreements, certificates and opinions shall be
reasonably satisfactory in form and substance to Bond Counsel and counsel for the Remarketing
Agent, and (ii) at or prior to the closing date for the 2003A Bonds, the Remarketing Agent shall
have received all closing documents required by, and delivered pursuant to the Contract of
Purchase relating to the 2003A Bonds (the "Purchase Contract").
2. The 2003A Bonds.
As more fully described in the Indenture, the 2003A Bonds will be issuable, subject to
the terms and conditions of the Indenture, in the form of fully registered 2003A Bonds in the
denominations, and having such tender, redemption, payment and other terms, as specified in the
Indenture.
3. Furnishing of Offering Materials.
(A) The City agrees to furnish the Remarketing Agent with as many copies as the
Remarketing Agent may reasonably request of the Official Statement, dated , 2003 (the
"Official Statement"), and such other information associated with the City, the Electric System
and the 2003A Bonds as the Remarketing Agent shall reasonably request from time to time,
including, without limitation, information deemed necessary by the Remarketing Agent to amend
or supplement the Official Statement or the preparation of any other similar disclosure document,
as well as receipt of a "comfort letter" or similar written information from the City's accountants
if deemed necessary by the Remarketing Agent.
(B) The City agrees to cooperate with the Remarketing Agent in the preparation of a new
Official Statement or other offering material for the 2003A Bonds if the Remarketing Agent
2
SF1 1317420v4
determines that the preparation and distribution of such Official Statement or offering material is
necessary or desirable in connection with remarketing the 2003A Bonds.
(C) In connection with any remarketing of the 2003A Bonds that constitutes a "primary
offering" within the meaning of Rule 15c2-12 of the Securities and Exchange Commission
where an official statement is required to be delivered, the City will use its best efforts to provide
information to be used in such amendments or supplements, so that the Official Statement, as so
amended or supplemented, will not contain any untrue fact necessary in order to make the
statements made therein, in the light of the circumstances under which the Official Statement is
to be used, not misleading. In addition, the City, at its own expense and upon the request of the
Remarketing Agent, will (i) register the sale of the 2003A Bonds in the manner required under
any Federal or state securities law and take all action required to qualify the Indenture under the
Trust Indenture Act of 1939, as amended, if such shall become required under such laws, and
(ii) take all steps reasonably requested by the Remarketing Agent to enable the Remarketing
Agent to establish a "due diligence" defense to any action commenced against it, in respect of
the Official Statement or any document incorporated by reference therein.
(D) If, at any time during the term of this Remarketing Agreement, any event known to
the City shall occur which might affect the correctness or completeness of any statement of a
material fact contained in the Official Statement, the City will promptly notify the Remarketing
Agent in writing of the circumstances and details of such event. The City agrees to prepare an
amendment or supplement to the Official Statement, at its own expense, if in the judgement of
the City or the Remarketing Agent such amendment or supplement is necessary to ensure that at
all times the Official Statement, as amended or supplemented, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not misleading.
(E) In connection with the remarketing of the 2003A Bonds as a result of, or in
anticipation of, (i) an expiration or termination of a Credit Support Instrument, (ii) the
Conversion of the 2003A Bonds from the Weekly Interest Rate Period to another Interest Rate
Period pursuant to the Indenture, or (iii) the establishment of a Long Term Interest Rate, the City
will prepare any disclosure documents, which in the reasonable opinion of the Remarketing
Agent or the City are necessary or desirable. The City hereby agrees to cooperate fully with the
Remarketing Agent in the preparation of such disclosure documents. All costs incurred in
connection with the preparation of such disclosure documents shall be borne by the City.
4. Representation Warranties Covenants and Agreements of the City.
The representations, warranties and agreements of the City set forth in the Purchase
Contract are hereby incorporated herein as being made as of the date hereof. The City shall
deliver to the Remarketing Agent such additional information concerning the business and
financial condition of the City and the Electric System as the Remarketing Agent may reasonably
request.
3
SF1 1317420v4
5. Term and Termination of Remarketing Agreement.
The Remarketing Agent may be removed at the direction of the City at any time on 45
days prior written notice, by an instrument signed by the City, filed with the Remarketing Agent,
the Bank, the Trustee and the Tender Agent, and may resign at any time on 60 days' written
notice to the Tender Agent, the Trustee, the Bank and the City. Following termination, the
provisions of Sections 8, 9 and 10 will continue in effect as to transactions prior to the date of
termination, and each party will pay the other any amounts owing at the time of termination.
The Remarketing Agent (after prior consultation with the City) may cease remarketing and
selling the 2003A Bonds with immediate effect if it determines, in its reasonable judgment, that
for any reason, including without limitation, (i) a pending or proposed change in applicable tax
laws, (ii) a material adverse change in the financial condition of the City, (iii) a banking
moratorium, (iv) hostilities, (v) a downgrade or withdrawal of the rating of the 2003A Bonds,
(vi) the termination of a Credit Support Instrument, (vii) an imposition of material restrictions on
the 2003A Bonds or similar obligations, (viii) trading on the New York Stock Exchange or any
other major national stock exchange shall have been wholly suspended, (ix) an event, including,
without limitation, the bankruptcy or default of any other issuer of or obligor on obligations of
the general character of the 2003A Bonds or on similar commercial paper, shall have occurred or
(x) a material misstatement or omission in the Official Statement as then modified or
supplemented, that it is not advisable to attempt to remarket the 2003A Bonds.
6. Dealing in 2003A Bonds by Remarketing Agent.
The Remarketing Agent, in its individual capacity, either as principal or agent, may buy,
sell, own, hold and deal in any of the 2003A Bonds, and may join in any action which any owner
of any Bond may be entitled to take with the like effect as if it did not act in any capacity
hereunder. The Remarketing Agent, in its individual capacity, either as principal or agent, may
also engage in or be interested in any financial or other transaction with the City and may act as
depositary, trustee or agent for any committee or body of Bondholders or other obligations of the
City as freely as if it did not act in any capacity hereunder.
7. Payment of Fees and Expenses.
While the 2003A Bonds accrue interest at a Daily Interest Rate, a Weekly Interest Rate or
Commercial Paper Rates (as such terms are defined in the Indenture), the City shall pay the
Remarketing Agent directly, as compensation for its services hereunder, a fee equal to
of one percent (_%o) per annum of the weighted average principal amount of the
2003A Bonds outstanding during each three-month period, or such other amount as may be
agreed upon from time to time by the City and the Remarketing Agent, payable quarterly in
arrears on each 1, 1, 1, and 1, commencing
1, 2003. The parties anticipate that separate arrangements will be made for the
remarketing of 2003A Bonds accruing interest at a Long Term Interest Rate.
8. Indemnity and Contribution.
(A) To the extent permitted by law, the City agrees to indemnify and hold harmless the
Remarketing Agent and each person who controls the Remarketing Agent within the meaning of
11
SF1 1317420v4
Section 15 of the Securities Act of 1933, from and against any and all losses, claims, damages or
liabilities, caused by (i) the failure to register any security under the Securities Act of 1933, as
amended, or to qualify any indenture under the Trust Indenture Act of 1939, as amended in
connection with the remarketing of the 2003A Bonds; or (ii) any untrue statement or alleged
untrue statement of a material fact contained in any offering document used in connection with
the remarketing of the 2003A Bonds (which may include the Official Statement (the "Offering
Document") or any amendment thereof or supplement thereto, or caused by the omission or
alleged omission to state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished under the heading
"UNDERWRITING" in the Offering Document.
(B) hi case any action shall be brought against the Remarketing Agent or any person
controlling the Remarketing Agent, in respect of which indemnity may be sought against the
City, the Remarketing Agent shall, as a condition to the above indemnity, promptly notify the
City in writing, and the City shall assume the defense thereof, including the employment of
counsel and payment of all expenses. The Remarketing Agent or any such controlling person
shall have the right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the expense of the
Remarketing Agent or controlling person, as the case may be, unless (i) the employment of such
counsel has been specifically authorized by the City in writing prior to the employment of such
counsel or (ii) the named parties to any such action (including any impleaded parties) including
both the Remarketing Agent or such controlling person and the City, and the Remarketing Agent,
or such controlling person, as the case may be, shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from or additional to
those available to the City and that joint representation may be inappropriate under professional
standards, in which case the City shall not have the right to assume the defense of such action on
behalf of the Remarketing Agent or such controlling person, as the case may be, it being
understood, however, that the City shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Remarketing Agent (including controlling persons), and any
such firm shall be designated in writing by the Remarketing Agent. The City shall not be liable
for any settlement of any such action effected without its written consent, but if settled with the
prior written consent of the City, or if there be a final judgment for the plaintiff in any such
action, the City agrees to indemnify and hold harmless the Remarketing Agent and any such
controlling person from and against any loss or liability by reason of such settlement or
judgment.
(C) The Remarketing Agent agrees to indemnify and hold harmless the City, its directors
and officers and any person controlling the City to the same extent as the indemnity from the
City to the Remarketing Agent set forth in subsection 8(A)(ii), but only with reference to
information under the heading "UNDERWRITING" in the Offering Document. In case any
action shall be brought against the City, any of its directors or any such officer or controlling
person based on the Official Statement and in respect of which indemnity may be sought against
the Remarketing Agent, the Remarketing Agent shall have the rights and duties given to the City,
5
SF1 131742Ov4
and the City, its directors or any such officer or controlling persons shall have the rights and
duties given to the Remarketing Agent by subsection 8(B).
(D) If the indemnification provided for in this Section 8 is unavailable to or insufficient
to hold harmless an indemnified party under subsection (A) or (C) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the City on the one hand
and the Remarketing Agent on the other from the remarketing of the 2003A Bonds. If, however,
the allocation provided by the immediately preceding sentence is not permitted by applicable law
or if the indemnified party failed to give the notice required under subsection (B) above, then
each indemnifying party shall contribute to such amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such relative benefits but also the
relative fault of the City on the one hand and the Remarketing Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable considerations. The relative
benefits received by the City on the one hand and the Remarketing Agent on the other shall be
deemed to be in the same proportion as the total net proceeds from the remarketing (before
deducting expenses) received by the City bear to the total underwriting discounts and
commissions received by the Remarketing Agent. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to information supplied by
the City on the one hand or the Remarketing Agent on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or
omission. The City and the Remarketing Agent agree that it would not be just and equitable if
contribution pursuant to this subsection (D) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable considerations referred
to above in this subsection (D). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this
subsection (D) shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (D), the Remarketing Agent shall not be
required to contribute any amount in excess of the amount by which the total price at which the
2003A Bonds were offered to the public exceeds the amount of any damages which the
Remarketing Agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation.
(E) The indemnity and contribution provisions of this Remarketing Agreement shall not
supersede any other indemnity in any other agreement or arising otherwise by law.
9. Remarketing Agent's Liabilities.
The Remarketing Agent shall incur no liability to the City, or any other party for its
actions as Remarketing Agent pursuant to the terms hereof and of the Indenture except for (i) the
6
SF1 1317420v4
liabilities for which the Remarketing Agent has agreed to indemnify the City and other pursuant
to Section 8(C) above and (ii) its gross negligence or willful misconduct. The obligation of the
Remarketing Agent to remarket bonds hereunder shall be on a best efforts basis.
10. Intention of Parties.
It is the express intention of the parties hereto that no purchase, sale or transfer of any
2003A Bonds, as herein provided, shall constitute or be construed to be the extinguishment of
any Bond or the indebtedness represented thereby or the reissuance of any Bond or the refunding
of any indebtedness represented thereby.
11. Miscellaneous.
(A) Except as otherwise specifically provided in this Agreement, all notices and formal
communications under this Agreement shall be in writing and mailed, telegraphed or delivered
to:
The Remarketing Agent:
Banc of America Securities LLC
Municipal Bond Department
300 South Grand Avenue, 19' Floor
Los Angeles, CA 90071
Attention:
Telephone:
Facsimile:
The City:
City of Vernon
4305 Sante Fe Avenue
Vernon, California 90058
Attention:
Telephone:
Facsimile:
The Remarketing Agent and City may, by notice given under this Agreement, designate
other addresses to which subsequent notices, requests, reports or other communications shall be
directed.
(B) The obligations of the respective parties hereto may not be assigned or delegated to
any other person without the consent of the other parties hereto. This Agreement will inure to
the benefit of and be binding upon the City and the Remarketing Agent and their respective
successors and assigns, and will not confer any rights upon any other person, partnership,
association or corporation other than persons, if any, controlling the Remarketing Agent within
the meaning of the Securities Act.
7
SF1 1317420v4
(C) All of the representations, warranties and agreements contained in this Agreement of
the City and the Remarketing Agent shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of the Remarketing Agent or the City,
(ii) delivery of and any payment for any 2003A Bonds hereunder or (iii) termination or
cancellation of this Agreement.
(D) Section headings have been inserted in this Agreement as a matter of convenience of
reference only, and it is agreed that such section headings are not a part this Agreement and will
not be used in the interpretation of any provision of this Agreement.
(E) If any provisions of this Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution,
statute, rule of public policy, or any other reason, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or unenforceable in any other case or
circumstances, or of rendering any other provisions inoperative or unenforceable to any extent
whatsoever.
(F) This Agreement constitutes the entire agreement between the parties hereto with
respect to the matters covered hereby, and supersedes all prior agreements and understandings
between the parties. This Agreement shall only be amended, supplemented or modified in a
writing signed by both of the parties hereto.
(G) This Agreement may be executed in several counterparts, each of which shall be
regarded as an original and all of which shall constitute one and the same document.
(H) This Agreement will be governed by and construed in accordance with the laws of
New York.
Very truly yours,
Banc of America Securities LLC
Accepted and agreed to as of the date first above
written:
City of Vernon
SF1 1317420v4
OHS DRAFT 2/18/03
SECOND SUPPLEMENTAL
INDENTURE OF TRUST
between
CITY OF VERNON
and
BNY WESTERN TRUST COMPANY, as Trustee
Relating to
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series B
Dated as of March 1, 2003
DOCSLA1:440643.1
42797-2 EJC
TABLE OF CONTENTS
Page
ARTICLE I AUTHORITY AND DEFINITIONS............................................................... 1
Section 1.01.
Supplemental Indenture of Trust..........................................................
1
Section 1.02.
Authority for the Second Supplemental Indenture of Trust .................
2
Section1.03.
Definitions............................................................................................
2
Section 1.04.
Interpretation......................................................................................
16
ARTICLE II THE 2003 Series B BONDS..........................................................................
16
Section 2.01.
Principal Amount and Designation; Conditions to Issuance .............
16
Section 2.02.
Terms of the 2003 Series B Bonds; Registration;
Denominations; Payment of Principal and Interest ............................
17
Section 2.03.
................................
Payment of Principal and Interest .................. ..
18
Section 2.04.
Daily Interest Rate Period..................................................................
20
Section 2.05.
Weekly Interest Rate Period...............................................................
22
Section 2.06.
Long -Term Interest Rate Period.........................................................
23
Section 2.07.
Commercial Paper Interest Rate Period .............................................
25
Section 2.08.
Rescission of Conversion; Conditions to Conversion .......................
28
Section 2.09.
ARB Provisions.................................................................................
30
ARTICLE III REDEMPTION OF 2003 SERIES B BONDS ..............................................
...................
38
Section 3.01.
Terms of Redemption ...................... ..
.................................................
38
Section 3.02.
Selection of 2003 Series B Bonds for Redemption ............................
40
ARTICLE IV TENDER OF BONDS...................................................................................
40
Section 4.01.
Optional Tender During Daily Interest Rate Period or Weekly
InterestRate Period............................................................................
40
Section 4.02.
Mandatory Tender Following Commercial Paper Term ....................
41
Section 4.03.
Mandatory Tender on Second Day of Interest Rate Period.. ..............
42
Section 4.04.
Mandatory Tender Upon Termination or Expiration of 2003
Series B Credit Support Instrument ...................................................
42
Section 4.05.
Notice to Owners of Mandatory Tender ............................................
42
Section 4.06.
Undelivered Bonds.............................................................................
43
Section 4.07.
General Provisions Relating to Tenders .............................................
44
Section 4.08.
Remarketing of 2003 Series B Bonds; Notice of Interest Rates ........
48
Section 4.09.
2003 Series B Credit Support Instrument; Alternate 2003
Series B Support Instruments.............................................................
49
DOCSLAI :440643.1
42797-2 EJC
TABLE OF CONTENTS
(continued)
Page
Section 4.10. Termination of 2003 Series B Credit Support Instrument;
Purchase by 2003 Series B Credit Provider; Notices .........................
50
ARTICLE V APPLICATION OF PROCEEDS ............................................. ..........
51
Section 5.01. Application of Proceeds of 2003 Series B Bonds ..............................
51
Section 5.02. 2003 Series Costs of Issuance Fund ...................................................
52
Section 5.03. 2003 Construction Fund.....................................................................
52
ARTICLE VI CERTAIN TAX MATTERS .......................... ..................
.............................
54
Section 6.01. Tax Covenants...................................................................................
54
Section6.02. Rebate Fund.......................................................................................
55
ARTICLE VII MISCELLANEOUS......................................................................................
55
Section 7.01. Indenture to Remain in Effect............................................................
55
Section 7.02. Provisions Relating to 2003 Series B Credit Provider .......................
55
Section 7.03. Continuing Disclosure ................ .......................................................
.
56
Section7.04. Counterparts.......................................................................................
56
EXHIBIT A FORM OF 2003 SERIES B BONDS...........................................................
A-1
EXHIBIT B AUCTION AND SETTLEMENT PROCEDURES ....................................
B-1
EXHIBIT C FORM OF NOTICE OF CURE OF ARB PAYMENT DEFAULT ............
C-1
EXHIBIT D FORM OF AUCTION AGENT AGREEMENT .........................................
D-1
EXHIBIT E FORM OF BROKER -DEALER AGREEMENT .........................................E-1
EXHIBIT F FORM OF MARKET AGENT AGREEMENT ...........................................
F-1
EXHIBIT G FORM OF REQUISITION FOR MONEY FROM THE 2003
CONSTRUCTIONFUND...........................................................................
G-1
DOCSLA1:440643.1 -il-
42797-2 EJC
SECOND SUPPLEMENTAL INDENTURE OF TRUST
THIS SECOND SUPPLEMENTAL INDENTURE OF TRUST, dated as of
March 1, 2003, is entered into by and between the City of Vernon (the "City"), a municipal
corporation and chartered city of the State of California and BNY Western Trust Company, as
trustee (the "Trustee"), a banking corporation, duly established and existing under and pursuant
to the laws of the State of California, authorized to accept and execute trusts of the character in
the Indenture set forth;
WITNESSETH:
WHEREAS, the City has entered into the Indenture of Trust, dated as of March 1,
2003 (the "Master Indenture") by and between the City and the Trustee to provide for the
issuance from time to time by the City of Bonds to pay the Costs of Capital Improvements and to
refund Outstanding Parity Obligations (capitalized terms used herein shall have the meanings
given such terms pursuant to Section 1.03); and
WHEREAS, the Master Indenture authorizes the City and the Trustee to enter
into Supplemental Indentures to provide for the issuance of Bonds; and
WHEREAS, the City desires to issue $ aggregate principal
amount of its 2003 Series B Bonds in order to provide a portion of the moneys to finance the
Malburg Generating Station and to pay certain costs in connection with the issuance of the 2003
Series Bonds; and
WHEREAS, the City has determined that all acts and things have been done and
performed which are necessary to make the Indenture, as supplemented by this Second
Supplemental Indenture, a valid and binding agreement for the security of the 2003 Series B
Bonds authenticated and delivered hereunder;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
SECOND SUPPLEMENTAL INDENTURE OF TRUST WITNESSETH:
That, in consideration of the premises, the acceptance by the Trustee of the trusts
hereby created and originally created by the Master Indenture, the mutual covenants herein
contained and the purchase and acceptance of the 2003 Series B Bonds by the Owners thereof,
and for other valuable consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payment of the principal of, Redemption Price, if any, and interest on the 2003 Series
B Bonds according to their tenor and effect, and the performance and observance by the City of
all the covenants and conditions in the Indenture and in the 2003 Series B Bonds contained on its
part to be performed, it is agreed by and between the City and the Trustee as follows:
DOCSLA1:440643.1
42797-2 EJC
ARTICLE I
AUTHORITY AND DEFINITIONS
Section 1.01. Supplemental Indenture of Trust. This Second Supplemental Indenture
is supplemental to the Master Indenture.
Section 1.02. Authority for the Second Supplemental Indenture of Trust. This
Second Supplemental Indenture is entered into (a) pursuant to the Charter and Bond Ordinance
and (b) in accordance with Article II and Article VII of the Master Indenture.
Section 1.03. Definitions.
(a) Except as otherwise defined by this Second Supplemental Indenture, all
terms which are defined in Section 1.01 of the Master Indenture shall have the same meanings,
respectively, in this Second Supplemental Indenture as such terms are given in said Section 1.01
of the Master Indenture.
(b) Additional Definitions. The following terms shall, with respect to the
2003 Series B Bonds and for all purposes hereof, have the meanings set forth below:
"AA Composite Commercial Paper Rate" means, as of any date of determination,
the interest equivalent of the 30-day rate on financial commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA" by S&P, or the equivalent of such rating by S&P
or another nationally recognized securities rating agency, as such 30-day rate is made available
on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date of determination. If, however, the Federal Reserve Bank of
New York does not make available any such rate, then the arithmetic average of the interest
equivalent of the 30-day rate on commercial paper placed on behalf of such issuers, as quoted to
the Auction Agent on a discount basis or otherwise, by the Commercial Paper Dealers, as of the
close of business on the Business Day immediately preceding such date of determination. If any
Commercial Paper Dealer does not quote a commercial paper rate required to determine the
"AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be
determined on the basis of the quotation or quotations furnished by the remaining Commercial
Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a
given day's maturity shall be equal to the product of (i) 100 multiplied by (ii) the quotient
(rounded upward to the next higher one thousandth (.001) of 1%) of (x) the discount rate
(expressed in decimals) divided by (y) the difference between (1) 1.00 and (2) a fraction, the
numerator of which shall be the product of the discount rate (expressed in decimals) multiplied
by the number of days from (and including) the date of determination to (but excluding) the date
on which such commercial paper matures and the denominator of which shall be 360.
hereof.
"Additional Funding Amount" has the meaning ascribed to it in Section 4.07(e)(ii)
DOCSLA1:440643.1
42797-2 EJC
-2-
"After -Tax Equivalent Rate" means, on any date of determination, the interest rate
per annum equal to the product of (i) the "AA" Composite Commercial Paper Rate on such date
and (ii) 1.00 minus the Statutory Corporate Tax Rate on such date.
"All -Hold Rate" means, on any date of determination, the interest rate per annum
equal to 85% (as such percentage may be adjusted pursuant to Section 2.09(d) hereof) of the
lesser of (i) the After -Tax Equivalent Rate on such date and (ii) the Index on such date; provided,
that in no event shall the All -Hold Rate be more than the ARB Maximum Rate.
"Alternate 2003 Series B Support Instrument" means a line of credit, standby
purchase agreement or similar 2003 Series B Credit Support Instrument issued by a commercial
bank or other financial institution and delivered to the Tender Agent in accordance with Section
4.09 hereof which replaces the 2003 Series B Credit Support Instrument then in effect.
"Applicable ARB Rate" means, while the 2003 Series B Bonds are in an ARB
Interest Rate Period, the rate per annum at which interest accrues with respect to the 2003 Series
B Bonds for any ARB Interest Period.
"Applicable Percentage" means, with respect to any 2003 Series B Bonds which
are ARBs on any date of determination, the percentage determined (as such percentage may be
adjusted pursuant to Section 2.09(d) hereof), based on Moody's or S&P ratings of such 2003
Series B Bonds in effect at the close of business on the Business Day immediately preceding
such date, or, if such 2003 Series B Bonds are then rated by both Moody's and S&P, based on the
lower of such ratings on such Business Day, as set forth below:
Credit Ratings
Moody's Standard & Poor's
"Aaa" "AAA„
"Aa„ - «,AA„
«A„ «A„
"Baa" "BBB"
Below `Baa" Below "BBB"
Applicable Percentage
[175%
175%
175%
200%
265%]
provided, that if any ARBs are not then rated by an ARB Rating Agency, the
Applicable Percentage with respect to such ARBs shall be 265% of the Index on such date. For
purposes of this definition, S&P Rating Categories of "AAA", "AA", "A" and "BBB," and
Moody's Rating Categories of "Aaa," "Aa," "A" and "Baa" shall refer to and include the
respective Rating Categories correlative thereto if either or both of such rating agencies shall
have changed or modified their generic Rating Categories or if Moody's or S&P shall not rate, or
no longer rate, the ARBs or shall have been replaced.
"ARBs" means, on any date, the 2003 Series B Bonds in an ARB Interest Rate
Period as to which interest accrues on such date as auction rate securities as provided in Section
2.09 hereof and the Auction Procedures applicable thereto.
DOCSLA1:440643.1
42797-2 EJC _3_
"ARB Beneficial Owner" means the Person who is the beneficial owner of an
ARB according to the records of (i) the Securities Depository or its participants while such ARB
is a Book -Entry Bond or (ii) the Trustee while the ARBs are not Book -Entry Bonds.
"ARB Defaulted Interest" means interest on any ARB which is payable but is not
punctually paid or duly provided for on any ARB Interest Payment Date.
"ARB Interest Payment Date" means, with respect to ARBs, the Business Day
immediately following each Auction Period for such ARBs.
"ARB Interest Period" means the period commencing on and including an ARB
Interest Payment Date and ending on and including the day immediately preceding the next
succeeding ARB Interest Payment Date; provided, that the Second ARB Interest Period within
each ARB Interest Rate Period shall commence on and include the applicable Conversion Date.
"ARB Interest Rate" means the interest rate with respect to ARBs determined as
provided in Section 2.09 hereof and the Auction Procedures.
"ARB Interest Rate Period" means each Interest Rate Period during which the
2003 Series B Bonds are ARBs.
"ARB Maximum Rate" means, on any date of determination, the interest rate per
annum equal to the lesser of (i) the Applicable Percentage of the higher of (A) the After -Tax
Equivalent Rate on such date and (B) the Index on such date, and (ii) 15% per annum; provided,
that in no event shall the ARB Maximum Rate be more than the Maximum Lawful Rate.
"ARB Payment Default" means (i) a default in the due and punctual payment of
any installment of interest on ARBs or (ii) a default in the due and punctual payment of any
principal of or premium, if any, on ARBs at stated maturity or pursuant to a mandatory
redemption.
"ARB Rating Agency" means Moody's or S&P, or if either Moody's or S&P
discontinues its securities rating service, then such other nationally recognized securities rating
agency as may be specified by the Market Agent with the consent of the City.
"Auction" means the implementation of the Auction Procedures on an Auction
Date.
"Auction Agent" means a Person meeting the requirements of Section 2.09(f)
hereof which is a party to an Auction Agent Agreement and agrees with the Trustee to perform
the duties of the Auction Agent herein with respect to ARBs.
"Auction Agent Agreement" means, on any date, an auction agent agreement in
substantially the form of Exhibit D attached hereto, as from time to time in effect.
"Auction Agent Fee" has the meaning provided in each Auction Agent
Agreement.
DOCSLA1:440643.1
42797-2 EJC -4-
"Auction Date" means, with respect to ARBs, the Business Day immediately
preceding the first day of each Auction Period, other than
(i) each Auction Period commencing after the ARBs are no longer Book -
Entry Bonds;
(ii) each Auction Period commencing after the occurrence and during the
continuance of an ARB Payment Default; or
(iii) any Auction Period commencing less than two Business Days after the
cure or waiver of an ARB Payment Default.
The Auction Date determined as provided in this definition may be adjusted as
provided in Section 2.096) hereof.
"Auction Period" means (i) with respect to ARBs in a seven-day mode, any of (A)
a period, generally of seven days, beginning on and including a Monday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a Sunday) and
ending on and including the Sunday thereafter (unless such Sunday is not followed by a Business
Day, in which case ending on and including the next succeeding day which is followed by a
Business Day), (B) a period, generally of seven days, beginning on and including a Tuesday (or
the day following the last day of the prior Auction Period if the prior Auction Period does not end
on a Monday) and ending on and including the Monday thereafter (unless such Monday is not
followed by a Business Day, in which case ending on and including the next succeeding day
which is followed by a Business Day), (C) a period, generally of seven days, beginning on and
including a Wednesday (or the day following the last day of the prior Auction Period if the prior
Auction Period does not end on a Tuesday) and ending on and including the Tuesday thereafter
(unless such Tuesday is not followed by a Business Day, in which case ending on and including
the next succeeding day which is followed by a Business Day), (D) a period, generally of seven
days, beginning on and including a Thursday (or the day following the last day of the prior
Auction Period if the prior Auction Period does not end on a Wednesday) and ending on and
including the Wednesday thereafter (unless such Wednesday is not followed by a Business Day,
in which case ending on and including the next succeeding day which is followed by a Business
Day) or (E) a period, generally of seven days, beginning on and including a Friday (or the day
following the last day of the prior Auction Period if the prior Auction Period does not end on a
Thursday) and ending on and including the Thursday thereafter (unless such Thursday is not
followed by a Business Day, in which case ending on and including the next succeeding day
which is followed by a Business Day) and (ii) with respect to ARBs in a 35-day mode, any of (A)
a period, generally of 35 days, beginning on and including a Monday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a Sunday) and
ending on and including the fifth Sunday thereafter (unless such Sunday is not followed by a
Business Day, in which case ending on and including the next succeeding day which is followed
by a Business Day), (B) a period, generally of 35 days, beginning on and including a Tuesday (or
the day following the last day of the prior Auction Period if the prior Auction Period does not end
on a Monday) and ending on and including the fifth Monday thereafter (unless such Monday is
not followed by a Business Day, in which case ending on and including the next succeeding day
followed by a Business Day), (C) a period, generally of 35 days, beginning on and including a
DOCSLA1:440643.1
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Wednesday (or the day following the last day of the prior Auction Period if the prior Auction
Period does not end on a Tuesday) and ending on and including the fifth Tuesday thereafter
(unless such Tuesday is not followed by a Business Day, in which case ending on and including
the next succeeding day followed by a Business Day), (D) a period, generally of 35 days,
beginning on and including a Thursday (or the day following the last day of the prior Auction
Period if the prior Auction Period does not end on a Wednesday) and ending on and including the
fifth Wednesday thereafter (unless such Wednesday is not followed by a Business Day, in which
case ending on and including the next succeeding day followed by a Business Day) or (E) a
period, generally of 35 days, beginning on and including a Friday (or the day following the last
day of the prior Auction Period if the prior Auction Period does not end on a Thursday) and
ending on and including the fifth Thursday thereafter (unless such Thursday is not followed by a
Business Day, in which case ending on and including the next succeeding day which is followed
by a Business Day); provided, however, that in the event of a Conversion of the 2003 Series B
Bonds from another Interest Rate Period to an ARB Interest Rate Period the initial Auction
Period with respect to such ARBs following such Conversion shall begin on and include the
Conversion Date.
"Auction Procedures" means, with respect ARBs, the provisions set forth in
Section 2 of the Auction and Settlement Procedures set forth in Exhibit B attached hereto.
"Auction Rate" means, with respect to the interest rate on ARBs, the rate of
interest per annum that results from implementation of the Auction Procedures, and determined
as described in Section 2(c)(ii) of the Auction Procedures; provided, however, that the Auction
Rate shall not exceed the ARB Maximum Rate.
"Authorized Denominations" means with respect to the 2003 Series B Bonds in
any (i) Long -Term Interest Rate Period, $5,000 and any integral multiple thereof; (ii)
Commercial Paper Interest Rate Period, Daily Interest Rate Period or Weekly Interest Rate
Period, $100,000 and any integral multiple of $5,000 in excess of $100,000, and (iii) ARB
Interest Rate Period, $25,000 and any integral multiple thereof.
"Available Moneys" means (a) during any period in which a 2003 Series B Credit
Support Instrument is in effect with respect to the Outstanding 2003 Series B Bonds, (i) funds
received by the Trustee pursuant to any 2003 Series B Credit Support Instrument; (ii)
remarketing proceeds received by the Tender Agent from the Remarketing Agent or any
purchaser of 2003 Series B Bonds (other than funds provided by the City or any affiliate of the
City); (iii) moneys which have been continuously on deposit with the Trustee (A) held in any
separate and segregated fund, account or subaccount established hereunder in which no other
moneys which are not Available Moneys are held, and (B) which have so been on deposit with
the Trustee for at least 124 consecutive days from their receipt by the Trustee and not
commingled with any moneys so held for less than said period and during and prior to which
period, and as of the date of the application thereof to a payment with respect to the 2003 Series
B Bonds, no Event of Bankruptcy has occurred with respect to the City; (iv) any other moneys if
there is delivered to the Trustee at the time such moneys are deposited with the Trustee an
opinion of counsel (which may assume that no Owner of 2003 Series B Bonds is an "insider"
within the meaning of the Federal Bankruptcy Code) from a firm experienced in bankruptcy
matters to the effect that the use of such moneys to pay amounts due on 2003 Series B Bonds
DOCSLA1:440643.1
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would not be recoverable from the Owners thereof pursuant to Section 550 of the Federal
Bankruptcy Code as avoidable preferential payments under Section 547 of the Federal
Bankruptcy Code in the event of the occurrence of an Event of Bankruptcy with respect to the
City; or (v) proceeds of the investment of funds qualifying as Available Moneys under the
foregoing clauses; (b) during any period in which no 2003 Series B Credit Support Instrument is
in effect with respect to the Outstanding 2003 Series B Bonds, any moneys deposited with the
Trustee.
"Beneficial Owner" means any Person which has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of any of the 2003 Series B
Bonds (including any Person holding 2003 Series B Bonds through nominees, depositories or
other intermediaries).
"Bid" has the meaning provided in Section 2(a)(i) of the Auction Procedures.
"BMA Index" means the "BMA Municipal Swap Index" (such index previously
known as the "PSA Municipal Swap Index") announced by Municipal Market Data on the rate
determination date and based upon the weekly interest rate resets of Tax -Exempt variable rate
issues included in a database maintained by Municipal Market Data which meets specified
criteria established by the Bond Market Association. The BMA Index shall be based upon
current yields of high -quality weekly adjustable variable rate demand bonds which are subject to
tender upon seven days notice, the interest on which is Tax -Exempt and not subject to any
personal "alternative minimum tax" or similar tax under the Code unless all Tax -Exempt
securities are subject to such tax.
"Bond Purchase Fund" means the "2003 Series B Bond Purchase Fund"
established pursuant to Section 4.07 hereof.
"Broker -Dealer" means any broker or dealer (each as defined in the Securities
Exchange Act of 1934), commercial bank or other entity permitted by law to perform the
functions required of a Broker -Dealer set forth in the Auction Procedures which (i) is a
participant in or member of the Securities Depository as determined by the rules or bylaws of the
Securities Depository (or an affiliate of such a participant or member), (ii) has been appointed as
such by the City pursuant to Section 2.09(g) hereof, and (iii) has entered into a Broker -Dealer
Agreement that is in effect on the date of reference.
"Broker -Dealer Agreement" means, on any date, the agreement in substantially
the form of Exhibit E attached hereto between the Auction Agent and a Broker -Dealer pursuant
to which the Broker -Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, as from time to time amended or supplemented.
"Business Day" means a day which is not (a) a Saturday, Sunday or any other day
bank institutions located in New York, New York, or the city or cities in which the principal or
other designated corporate office of the Trustee, the Tender Agent, the 2003 Series B Credit
Provider, the Remarketing Agent or the 2003 Series B Credit Provider (if any) is located are
required or authorized to close, or (b) a day on which The New York Stock Exchange is closed.
DOCSLA1:440643.1
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"Calendar Week" means with respect to the 2003 Series B Bonds in a Weekly
Interest Rate Period the period during which interest accrues with respect to the 2003 Series B
Bonds at a particular Weekly Interest Rate and will be the period from Wednesday of one week
(whether or not a Business Day) to and including the Tuesday of the following week (whether or
not a Business Day); provided that the initial Calendar Week for each Weekly Interest Rate
Period shall be the period from the first day of such Weekly Interest Rate Period to the next
succeeding Tuesday (whether or not a Business Day); and provided further that the final Calendar
Week for a Weekly Interest Rate Period which ends on a day other than a Tuesday shall be the
period from the Wednesday (whether or not a Business Day) preceding the last day of such
Weekly Interest Rate Period to the last day of such Weekly Interest Rate Period.
"Change of Tax Law" means, with respect to any ARB Beneficial Owner, any
amendment to the Code or other statute enacted by the Congress of the United States or any
temporary, proposed or final regulation promulgated by the United States Treasury after the
Delivery Date, which (i) changes or would change any deduction, credit or other allowance
allowable in computing liability for any federal tax with respect to, or (ii) imposes or would
impose or reduces or would reduce or increases or would increase any federal tax (including, but
not limited to, preference or excise taxes) upon, any interest earned by any holder of Tax -Exempt
securities.
"Commercial Paper Dealer" means each of Banc of America Securities, LLC, its
successors and assigns, and any other commercial paper dealer appointed as provided in Section
2.09(b)(ii) hereof.
"Commercial Paper Interest Rate Period" means each Interest Rate Period,
comprised of Commercial Paper Terms, during which Commercial Paper Term Rates are in
effect with respect to the 2003 Series B Bonds.
"Commercial Paper Rate" means, with respect to each 2003 Series B in a
Commercial Paper Interest Rate Period, an interest rate with respect to such 2003 Series B Bond
established for a Commercial Paper Term in accordance with Section 2.07 hereof.
"Commercial Paper Term" means, with respect to any 2003 Series B Bond in a
Commercial Paper Interest Rate Period, each period established in accordance with Section 2.07
hereof during which such 2003 Series B Bond shall bear interest at a particular Commercial
Paper Rate.
"Conversion" means a conversion of the 2003 Series B Bonds from one Interest
Rate Period to another Interest Rate Period.
"Conversion Date" means the effective date of a Conversion.
"Daily Interest Rate" means an interest rate with respect to the 2003 Series B
Bonds in a Daily Interest Rate Period established in accordance with Section 2.04 hereof.
"Daily Interest Rate Period" shall mean each Interest Rate Period during which
Daily Interest Rates are in effect.
DOCSLA1:440643.1
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"Delivery Date" means , 2003.
"Differential Interest Amount" shall have the meaning ascribed to such term in the
Initial 2003 Series B Credit Support Instrument, or if an Alternate 2003 Series B Support
Instrument is in place, the meaning ascribed to the equivalent term in such Alternate 2003 Series
B Support Instrument.
"Drawing Time" means, with respect to the Initial 2003 Series B Credit Support
Instrument, 1:00 p.m., New York City time, and with respect to each Alternate 2003 Series B
Support Instrument, the time specified therein by which the Tender Agent must submit a draw
request in order to receive immediately available funds on the date such draw request is made.
"Existing Owner" means, with respect to any Auction, a Person who was listed as
the ARBs Beneficial Owner in the applicable Existing Owner Registry at the close of business on
the Business Day immediately preceding such Auction.
"Existing Owner Registry" means, with respect to ARBs, the registry of Persons
who are the ARB Beneficial Owners of the ARBs, maintained by the Auction Agent as provided
in the Auction Agent Agreement.
"Expiration Date" means (i) the date upon which a 2003 Series B Credit Support
Instrument is scheduled to expire (taking into account any extensions of such Expiration Date by
virtue of extensions of a particular 2003 Series B Credit Support Instrument, from time to time)
in accordance with its terms, including without limitation, termination upon delivery of an
Alternate 2003 Series B Support Instrument to the Trustee and (ii) the date upon which a 2003
Series B Credit Support Instrument terminates following voluntary termination by the City
pursuant to Section 4.10 hereof.
"Second Supplemental Indenture" shall mean this Second Supplemental Indenture
of Trust, supplementing the Master Indenture, as the same may be amended and supplemented in
accordance with the provisions of the Master Indenture.
"Fixed Rate Conversion Date" means the Conversion Date for the 2003 Series B
Bonds to a Long -Term Interest Rate for a Long -Term Interest Rate Period ending on the day
immediately preceding the Maturity Date.
"Hold Order" has the meaning provided in Section 2(a)(i) of the Auction
Procedures.
"Index" means, with respect ARBs, on any date of determination, the BMA Index
or, if the BMA Index is not available, the Index so determined by the Market Agent for ARBs,
which shall equal the prevailing rate for bonds rated in the highest short-term Rating Category by
Moody's and S&P that are subject to tender by the holders thereof for purchase on not more than
seven (7) days notice and the interest on which is (i) variable on a weekly basis, (ii) Tax -Exempt,
and (iii) not subject to an "alternative minimum tax" or similar tax under the Code, unless all
Tax -Exempt securities are subject to such tax.
DOCSLA1:440643.1
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"Initial 2003 Series B Credit Support Agreement" means that certain
Reimbursement Agreement between the City and the Initial 2003 Series B Credit Support
Provider as the same may be amended and supplemented in accordance with its terms.
"Initial 2003 Series B Credit Support Instrument" means that certain irrevocable,
direct -pay letter of credit issued by the Initial 2003 Series B Credit Support Provider and
delivered to the Trustee on the Delivery Date, or any extension or renewal thereof.
"Initial 2003 Series B Credit Support Provider" means
"Interest Accrual Date" means (i) with respect to each Daily Interest Rate Period,
the first day thereof and, thereafter, the first day of each calendar month, (ii) with respect to each
Weekly Interest Rate Period, the first day thereof and, thereafter, the first Wednesday of each
calendar month, (iii) with respect to each Long -Term Interest Rate Period, the first day thereof,
and thereafter, each 1, and 1, (iv) with respect to each any ARB Interest Rate
Period, the first day thereof and, thereafter, [the last day of each Auction Period], and (v) with
respect to each Commercial Paper Term within a Commercial Paper Interest Rate Period, the first
day thereof.
"Interest Payment Date" means (i) with respect to each Daily Interest Rate Period,
the fifth Business Day of each calendar month, (ii) with respect to each Weekly Interest Rate
Period, the first Wednesday of each calendar month (or the next succeeding Business Day if such
Wednesday is not a Business Day); (iii) with respect to each Long -Term Interest Rate Period,
each 1 and 1 or if any such 1 or 1 is not a Business Day, the
next succeeding Business Day; provided that the first interest payment made for any Long -Term
Interest Rate Period shall be at least ninety (90) days from the first day of such period; (iv) with
respect to each 2003 Series B Bond in each Commercial Paper Interest Rate Period, the day next
succeeding the last day of each Commercial Paper Term for such 2003 Series B Bond; (v) with
respect to each ARB Interest Rate Period, each ARB Interest Payment Date; (vi) with respect to
each Interest Rate Period, the day next succeeding the last day thereof; and (vii) with respect to
2003 Series B Credit Provider Bonds, the dates set forth in the applicable 2003 Series B Credit
Support Agreement.
"Interest Rate Period" means a Daily Interest Rate Period, a Weekly Interest Rate
Period, a Commercial Paper Interest Rate Period, a Long -Term Interest Rate Period or an ARB
Interest Rate Period.
"Long -Term Conversion Date" means the date on which the 2003 Series B Bonds
begin to bear interest at a Long -Term Interest Rate pursuant to the provisions of Section 2.06
hereof and such term shall include the Fixed Rate Conversion Date for the 2003 Series B Bonds.
"Long -Term Interest Rate" means an interest rate with respect to the 2003 Series
B Bonds during a Long -Term Interest Rate Period established in accordance with Section 2.06
hereof.
"Long -Term Interest Rate Period" means each Interest Rate Period during which a
Long -Term Interest Rate is in effect with respect to the 2003 Series B Bonds.
DOCSLA1:440643.1
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"Malburg Generating Station" means an approximately 134 megawatt electric
generating facility to be located at Substation A of the City's Electric System, consisting of two
gas combustion turbine generators and a steam turbine generator and related facilities and
equipment, including electric facilities necessary for the station to interconnect with the Electric
System and all rights, properties and improvements necessary therefor, including fuel and water
facilities and resources and rights thereto or therein, and capital improvements thereto (including
replacement of any generating unit presently included in the station) that may be constructed
from time to time, and interests in certain other property and rights relating thereto.
"Market Agent" means a Person meeting the requirements of Section 2.09(e)
hereof which is a party to a Market Agent Agreement and agrees with the Trustee to perform the
duties of the Market Agent herein with respect to ARBs.
"Market Agent Agreement" means, on any date, a market agent agreement in
substantially the form of Exhibit F attached hereto, in each case as from time to time in effect.
"Maturity Date" means
"Master Indenture" means the Indenture of Trust, dated as of March 1, 2003 by
and between the City and the Trustee.
"Maximum Interest Rate" means: (i) with respect to 2003 Series B Bonds other
than ARBs and 2003 Series B Credit Provider Bonds, twelve percent (12%) per annum; (ii) with
respect to ARBs, the ARB Maximum Rate; and (iii) with respect to 2003 Series B Credit
Provider Bonds, twenty-five percent (25%) per annum; provided, however, that the Maximum
Interest Rate for any 2003 Series B Bond shall not exceed the Maximum Lawful Rate.
"Maximum Lawful Rate" means the maximum rate of interest on the relevant
obligation permitted by applicable law which, as of the date of this Trust Agreement, is twelve
percent (12%) per annum for all 2003 Series B Bonds other than 2003 Series B Credit Provider
Bonds.
"Non -Payment Rate" means, on any date of determination, the interest rate per
annum equal to the lesser of (i) 265% of the Index on such date (as such percentage may be
adjusted pursuant to Section 2.09(d) hereof) or (ii) 15% per annum; provided, that in no event
shall the Non -Payment Rate be more than the Maximum Lawful Rate.
"Notice of ARB Payment Default" means a notice substantially in the form of
Exhibit C to the Auction Agent Agreement.
"Notice of Cure of ARB Payment Default" means a notice substantially in the
form of Exhibit C attached hereto.
"Notice of Percentage Change" means a notice to the Trustee and the Auction
Agent substantially in the form provided as Exhibit D to the Market Agent Agreement.
"Notice of Proposed Percentage Change" means a notice to the Trustee and the
Auction Agent substantially in the form provided as Exhibit C to the Market Agent Agreement.
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"Notice of Termination"means the notice provided in the 2003 Series B Credit
Support Agreement relating to a 2003 Series B Credit Support Instrument to the effect that 2003
Series B Credit Provider's obligation to advance funds to purchase 2003 Series B Bonds under a
2003 Series B Credit Support Instrument terminates as of the date specified in such notice due to
a default under specified sections of such 2003 Series B Credit Support Agreement, which date
of termination shall be fifteen (15) days (or such longer period as is specified in the 2003 Series
B Credit Support Agreement) after the date of receipt by the Trustee of such notice.
"Order" has the meaning set forth in Section 2(a)(i) of the Auction Procedures.
"Participant" means an entity which is recognized as a participant in the book -
entry system of maintaining records with respect to the ownership of 2003 Series B Bonds by the
Securities Depository.
"Potential Owner" means, with respect to any Auction, any Person, including any
Existing Owner, who may be interested in acquiring a beneficial interest in ARBs subject to such
Auction in addition to the ARBs, if any, currently owned by such Person.
"Principal Office" means, (i) with respect to the Tender Agent, the designated
corporate trust office of the Tender Agent in Los Angeles, which as of the date hereof is located
at 700 South Flower Street, Suite 500, Los Angeles, CA 90017-4104, Attention: Corporate Trust
Department; and (ii) with respect to the Remarketing Agent, the address for the Remarketing
Agent designated in the Remarketing Agreement with such Remarketing Agent.
"Proper Delivery" means, with respect to the delivery of a Tendered Bond to the
Tender Agent to receive the Purchase Price thereof in connection with any optional or mandatory
tender of such Tendered Bond for purchase pursuant to Section 4.01, 4.02, 4.03 or 4.04 hereof:
(a) if such Tendered Bond is a Book -Entry Bond, the making of, or the irrevocable authorization
to make, by 10:00 a.m., New York City time, on the applicable Purchase Date, entries on the
books of the Securities Depository or a Participant of such Securities Depository as provided by
such Securities Depository; and (2) if such Tendered Bond is not a Book -Entry Bond, the
delivery of such Tendered Bond to the Tender Agent at its Principal Office, by 10:00 a.m., New
York City time, on the applicable Purchase Date, accompanied by an instrument of transfer
thereof in form satisfactory to the Tender Agent, executed in blank by the Owner thereof or by
the Owner's duly authorized attorney, with such signature guaranteed by a commercial bank,
trust company or member firm of the New York Stock Exchange.
"Purchase Date" means, with respect to each Tendered Bond, the date on which
such Tendered Bond is tendered or deemed tendered for purchase pursuant to Section 4.01, 4.02,
4.03 or 4.04.
"Purchase Price" means, with respect to any Tendered Bond (or portion thereof),
an amount, payable in funds immediately available on the applicable Purchase Date, equal to the
principal amount thereof plus accrued interest from and including the Interest Accrual Date
immediately preceding the applicable Purchase Date but not including the applicable Purchase
Date; provided, however, that (1) if the Purchase Date for any Tendered Bond is on or after the
Record Date for an Interest Payment Date and on or prior to such Interest Payment Date, the
DOCSLA1:440643.1
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Purchase Price thereof shall be the principal amount thereof, and interest on such Tendered Bond
shall be paid to the Owner of such Tendered Bond as of the applicable Record Date as provided
for the payment of interest on 2003 Series B Bonds herein and (2) in the case of a Purchase Date
which is the first day of an Interest Rate Period which is preceded by a Long -Term Interest Rate
Period and which commences prior to the day originally established as the last day of such
preceding Long -Term Interest Rate Period, "Purchase Price" of any Tendered Bond means the
optional redemption price determined pursuant to Section 4.01(c) hereof which would have been
applicable to the redemption of such Tendered Bond on such Purchase Date pursuant to
Section 4.01(c) hereof if the preceding Long -Term Interest Rate Period had continued to the day
originally established as its last day.
"Rebate Fund" means the fund designated as the "2003 Series B Rebate Fund"
established in Section 5.02.
"Rebate Instructions" means those calculations and written directions required to
be delivered to the Trustee by the City pursuant to Section 5.01 hereof.
"Rebate Requirement" means the Rebate Requirement as defined in the 2003
Series Tax Certificate.
"Record Date" means (i) with respect to each Interest Payment Date for 2003
Series B Bonds in a Daily Interest Rate Period, the last day of the calendar month preceding the
month in which such Interest Payment Date falls, (ii) with respect to each Interest Payment Date
for 2003 Series B Bonds in a Weekly Interest Rate Period or a Commercial Paper Interest Rate
Period, the Business Day immediately preceding the such Interest Payment Date, (iii) with
respect to each Interest Payment Date for 2003 Series B Bonds in a Long -Term Interest Rate
Period, the fifteenth day of the month preceding the month in which such Interest Payment Date
falls, and (iv) with respect to each Interest Payment Date for 2003 Series B Bonds which are
ARBs, the second Business Day next preceding the applicable ARB Interest Payment Date.
"Redemption Date" means, with respect to the 2003 Series B Bonds, the date
fixed for redemption of 2003 Series B Bonds subject to redemption in any notice of redemption
given in accordance with the terms of the Indenture.
"Remarketing Agent" means Banc of America Securities LLC or any successor or
additional Remarketing Agent appointed in accordance with Section 8.07 hereof with respect to
the 2003 Series B Bonds.
"Remarketing Agreement" shall mean the Remarketing Agreement dated as of
March 1, 2003, between the City and the Banc of America Securities LLC or the agreement or
instrument pursuant to which a successor or additional Remarketing Agent for the 2003 Series B
Bonds shall perform its services.
"Remarketing Proceeds Account" means the account by that name within the
Bond Purchase Fund established pursuant to Section 4.07 hereof.
"Required Stated Amount" means with respect to a 2003 Series B Credit Support
Instrument, at any time of calculation, an amount equal to the aggregate principal amount of all
DOCSLA1:440643.1
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Outstanding 2003 Series B Bonds as to which the Purchase Price is payable pursuant to
Section 4.09(d)(ii) hereof from the proceeds of a drawing on such 2003 Series B Credit Support
Instrument, together with interest accruing thereon (assuming an annual rate of interest equal to
the Maximum Interest Rate) for the period specified in a Certificate of an Authorized City
Representative to be the minimum period specified by each Rating Agency then rating such
Eligible 2003 Series B Bonds as necessary to obtain (or maintain) a specified short-term rating of
the 2003 Series B Bonds.
"Second Supplemental Indenture" means this Second Supplemental Indenture of
Trust, dated as of March 1, 2003, between the City and the Trustee supplementing the Master
Indenture, as the same may be supplemented and amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Sell Order" has the meaning set forth in Section 2(a)(i) of the Auction
Procedures.
"Sinking Fund Installment" means, with respect to the 2003 Series B Bonds, the
amount required by Section 4.01(g) hereof to be paid by the City on any single date for the
retirement of 2003 Series B Bonds.
"State" means the State of California.
"Statutory Corporate Tax Rate" means, as of any date of determination, the
highest tax rate bracket (expressed in decimals) now or hereafter applicable in each taxable year
on the taxable income of every corporation as set forth in section 11 of the Code or any successor
section, without regard to any minimum additional tax provision or provisions regarding changes
in rates during a taxable year. The Statutory Corporate Tax Rate as of the date hereof is [35]%.
"Submitted Hold Orders" has the meaning provided in Section 2(c)(i) of the
Auction Procedures.
"Sufficient Clearing Bids" has the meaning provided in Section 2(c)(i) of the
Auction Procedures.
"Tender Agent" shall mean the Trustee, or any successor tender agent appointed
pursuant to Section 8.09 hereof.
"Tendered Bond" means any 2003 Series B Bond (or the portion of any 2003
Series B Bond) tendered or deemed tendered for purchase pursuant to Section 4.01, 4.02, 4.03 or
4.04.
"Third Supplemental Indenture" means that certain Third Supplemental Indenture
of Trust, dated as of March 1, 2003, between the City and the Trustee supplementing the Master
Indenture, as the same may be supplemented and amended.
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"2003 Construction Fund" shall mean the 2003 Construction Fund established
pursuant to Section 5.03 of the First Supplemental Indenture.
"2003 Cost of Issuance Fund" shall mean the 2003 Cost of Issuance Fund
established pursuant to Section 5.02 of the First Supplemental Indenture.
"2003 Series B Credit Provider" means the Initial 2003 Series B Credit Provider
and the commercial bank or other financial institution issuing (or having primary obligation, or
acting as agent for the financial institutions obligated, under) an Alternate 2003 Series B Support
Instrument.
"2003 Series B Credit Provider Bonds" means 2003 Series B Bonds which are
Credit Provider Bonds.
"2003 Series B Credit Support Agreement" means the Initial 2003 Series B Credit
Support Agreement, and any other agreement entered into in connection with any Alternate 2003
Series B Support Instrument and serving the same function.
"2003 Series B Credit Support Instrument" means the Initial 2003 Series B Credit
Support Instrument and, in the event of the delivery of an Alternate 2003 Series B Support
Instrument, such Alternate 2003 Series B Support Instrument.
"2003 Series B Credit Support Instrument Account" means the account by that
name in the Bond Purchase Fund established pursuant to Section 4.07 hereof.
"2003 Series B Credit Support Instrument Rate" means, collectively, the rates per
annum, if any, specified as applicable to 2003 Series B Credit Provider Bonds in the related 2003
Series B Credit Support Agreement.
"2003 Series A Bonds" means the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A authorized by Article II of the First Supplemental
Indenture.
"2003 Series B Bonds" shall mean the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B authorized by Article II.
"2003 Series C Bonds" means the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C authorized by Article II of the Third
Supplemental Indenture.
"2003 Series Bonds" means the 2003 Series B Bonds, the 2003 Series B Bonds
and the 2003 Series C Bonds.
"2003 Series Tax Certificate" shall mean that certain Tax Certificate and
Agreement signed by the City on the Delivery Date and relating to the requirements of Section
148 of the Code.
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"Undelivered Bond" means, with respect to each Purchase Date, each Tendered
Bond subject to purchase on such Purchase Date as to which Proper Delivery of such Tendered
Bond to the Tender Agent is not made on such Purchase Date; provided, however, no such
Tendered Bond shall be considered an Undelivered Bond on such Purchase Date unless the
Tender Agent holds sufficient available moneys in trust for the Owners of the Tendered Bonds to
pay in full the applicable Purchase Price of all Tendered Bonds due on such Purchase Date.
"Variable Index" means the BMA Index. If for any reason the BMA Index for any
rate determination date is not announced or is otherwise unavailable or is held to be invalid or
unenforceable by a court of law, except as otherwise provided with respect to ARBs in the
definition of "Index", the Variable Index for such rate determination date shall be an index
selected by the Remarketing Agent which is a composite of bid -side yields of obligations (a)
which (i) provide for a weekly adjustment of the interest rate, and (ii) which (A) must be
purchased on demand of the owner thereof at any time upon notice of up to seven (7) days or (B)
are payable in full not later than seven (7) days after the date of evaluation and (b) the interest on
which is Tax -Exempt and not subject to any personal "alternative minimum tax" or similar tax
under the Code unless all Tax -Exempt bonds are subject to such tax. If no such index is so
selected by the Remarketing Agent or if any such index is held to be invalid or unenforceable by
a court of law, except as otherwise provided with respect to ARBs in the definition of "Index,"
the Variable Index for such rate determination date shall be an index computed by the
Remarketing Agent and shall be equal to 95% of the yield applicable to 91-day United States
Treasury bills, such yield to be computed on the basis of the coupon equivalent of the average per
annum discount rate at which such Treasury bills shall have been sold at the most recent Treasury
auction conducted prior to such rate determination date.
"Weekly Interest Rate" means a variable interest rate with respect to the 2003
Series B Bonds in a Weekly Interest Rate Period established in accordance with Section 2.05
hereof.
"Weekly Interest Rate Period" shall mean each Interest Rate Period during which
Weekly Interest Rates are in effect.
Section 1.04. Interpretation.
(a) Unless the context otherwise indicates, defined terms shall include all
variants thereof, words expressed in the singular shall include the plural and vice versa and the
use of the neuter, masculine or feminine gender is for convenience only and shall be deemed to
mean and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof
are solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof.
(c) References herein to the Securities Depository shall include both the
Securities Depository and any nominee of the Securities Depository in whose name the 2003
Series B Bonds may be registered.
DOCSLA1:440643.1
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(d) Unless otherwise indicated, references herein to Articles and Sections shall
be to the Articles and Sections of this Second Supplemental Indenture. The words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this Second
Supplemental Indenture as a whole and not to any particular Article, Section or subdivision
hereof.
(e) References herein to the Owner of an Undelivered Bond shall refer to the
Person listed as the registered owner of such Undelivered Bond at the commencement of the
applicable Purchase Date and not the Person listed as the registered owner of the 2003 Series B
Bond sold to the Person purchasing such Undelivered Bond on the applicable Purchase Date.
ARTICLE II
THE 2003 Series B BONDS
Section 2.01. Principal Amount and Designation; Conditions to Issuance. (a)
Pursuant to the provisions of the Master Indenture and this Second Supplemental Indenture and
the provisions of the Charter and the Bond Ordinance, Bonds entitled to the benefit, protection
and security of such provisions is hereby authorized in the aggregate principal amount of
$ . Such Bonds shall be designated as, and shall be distinguished from the Bonds of
all other Series by the title, "City of Vernon Malburg Generating Station Project Electric System
Revenue Bonds, 2003 Series B." The 2003 Series B Bonds shall be in substantially the form
attached hereto as Exhibit A with such variations and omissions as are necessary to reflect the
particular terms of each 2003 Series B Bond.
(b) The 2003 Series B Bonds are issued for the purpose of providing a portion
of the moneys to finance the Costs of the Malburg Generating Station Project and to pay the
Costs of Issuance of the 2003 Series Bonds.
(c) All (but not less than all) of the 2003 Series B Bonds shall be executed by
the City for issuance under the Indenture and delivered to the Trustee and thereupon shall be
authenticated by the Trustee and by it delivered to the City or upon its order but only upon receipt
by the Trustee of the items required pursuant to Section 2.04 and Section 2.07 of the Master
Indenture with respect to the 2003 Series B Bonds and the receipt by the Trustee of the Initial
2003 Series B Credit Support Instrument.
Section 2.02. Terms of the 2003 Series B Bonds; Registration; Denominations;
Payment of Principal and Interest. (a) The 2003 Series B Bonds shall be issued as fully
registered Bonds without coupons in Authorized Denominations. The 2003 Series B Bonds shall
be registered initially in the name of "Cede & Co.," as nominee of DTC, the initial Securities
Depository, and shall be evidenced by one bond certificate in the total aggregate principal
amount of the 2003 Series B Bonds. Registered ownership of the 2003 Series B Bonds, or any
portion thereof, may not thereafter be transferred except as set forth in Section 3.04 of the Master
Indenture.
(b) The 2003 Series B Bonds shall be dated the Delivery Date.
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(c) Except as otherwise provided in the 2003 Series B Credit Support
Instrument with respect to 2003 Series B Credit Provider Bonds, the 2003 Series B Bonds shall
mature on the Maturity Date.
(i) The Sinking Fund Installments established for the 2003 Series B
Bonds pursuant to Section 3.01(g) hereof shall be redesignated as maturity dates and
Sinking Fund Installments for the 2003 Series B Bonds on the Fixed Rate Conversion
Date for the 2003 Series B Bonds as follows:
(1) If the Fixed Rate Conversion Date is on or before
principal of the 2003 Series B Bonds shall mature (i) in _ serial maturities
in amounts equal to the Sinking Fund Installments established for such dates pursuant to
Section 3.01(g) hereof commencing on the 1 immediately succeeding the Fixed
Rate Conversion Date, and on 1 of each of the succeeding years, and (ii) in a
term maturity on the Maturity Date for the remaining 2003 Series B Bonds.
(2) If the Fixed Rate Conversion Date is after ,
principal of the 2003 Series B Bonds shall mature in serial maturities in principal
amounts equal to the Sinking Fund Installments established for such dates pursuant to
Section 3.01(g) hereof commencing on the 1 immediately succeeding the Fixed
Rate Conversion Date and on 1 of each of the succeeding years.
(3) Sinking Fund Installments for the 2003 Series B Bonds
established pursuant to subparagraph (1) above shall be in principal amounts equal to the
Sinking Fund Installments established for such dates pursuant to Section 3.01(g) hereof
and be payable on 1 of each year, commencing on 1 of the year
immediately following the final serial maturity established for the 2003 Series B Bonds
pursuant to subparagraph (1) above and ending on Maturity Date.
(4) Notwithstanding anything above to the contrary, if, due to
the serialization of the 2003 Series B Bonds pursuant to this subsection (c)(ii), a
Favorable Opinion of Bond Counsel cannot be delivered, then no such serialization shall
occur.
(d) The 2003 Series B Bonds shall be subject to redemption as provided in
Article III and optional and mandatory tender for purchase as provided in Article IV.
(e) The Trustee shall identify all payments (whether made by check or by wire
transfer) of interest, principal, Purchase Price and Redemption Price by CUSIP number of the
2003 Series B Bonds.
(f) The Second Interest Rate Period for the 2003 Series B Bonds shall be a
Weekly Interest Rate Period commencing on the Delivery Date with an initial Weekly Interest
Rate of _ percent (_%) per annum.
Section 2.03. Payment of Principal and Interest.
DOCSLA1:440643.1
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(a) The Purchase Price of the 2003 Series B Bonds shall be payable in lawful
money of the United States of America.
(b) The term of the 2003 Series B Bonds will be divided into consecutive
Interest Rate Periods, each of which will be one of the following: (i) a Daily Interest Rate Period
during which interest on the 2003 Series B Bonds will accrue at Daily Rates; (ii) a Weekly
Interest Rate Period during which interest on the 2003 Series B Bonds will accrue at Weekly
Interest Rates; (iii) a Long -Term Interest Rate Period, during which interest on the 2003 Series B
Bonds will accrue at a Long -Term Interest Rate; (iv) a Commercial Paper Interest Rate Period
during which interest on the 2003 Series B Bonds will accrue at Commercial Paper Interest
Rates; or (v) an ARB Interest Rate Period during which interest on the 2003 Series B Bonds will
accrue at ARB Interest Rates.
(e) Interest on the 2003 Series B Bonds will accrue at the rates determined
pursuant to this Article II; provided, however, that in no event shall the rate of interest on any
2003 Series B Bond exceed at any time the applicable Maximum Interest Rate. If an Event of
Default shall have occurred prior to the Fixed Rate Conversion Date and shall be continuing, the
interest rate with respect to the 2003 Series B Bonds during the period such Event of Default
continues shall be the Maximum Interest Rate.
(d) Interest on each 2003 Series B Bond shall accrue from and including the
Interest Accrual Date immediately preceding the date of authentication thereof, or, if such date of
authentication shall be an Interest Payment Date to which interest on the 2003 Series B Bonds
has been paid in full or duly provided for, from such Interest Payment Date or if such date of
authentication shall be prior to the second Interest Accrual Date, from the Delivery Date;
provided, however, that if, as shown by the Bond Register, interest on the 2003 Series B Bonds
shall be in default, interest on 2003 Series B Bonds issued in exchange for 2003 Series B Bonds
surrendered for registration of transfer or exchange shall accrue from the date to which interest
has been paid in full on the 2003 Series B Bonds or, if no interest has been paid on the 2003
Series B Bonds, from the Delivery Date. For each Daily Interest Rate Period, interest on the
2003 Series B Bonds shall be payable on each Interest Payment Date for the period commencing
on (and including) the Interest Accrual Date in the preceding calendar month and ending on (and
including) the last day in the preceding calendar month, unless the Interest Payment Date shall be
the day next succeeding the last day of a Daily Interest Rate Period, in which case interest shall
be payable on such Interest Payment Date for the period commencing on (and including) the
Interest Accrual Date to which interest shall have been paid in full and ending on (and including)
the day immediately preceding such Interest Payment Date. For each Weekly Interest Rate
Period, interest on the 2003 Series B Bonds shall be payable on each Interest Payment Date for
the period commencing on (and including) the immediately preceding Interest Accrual Date (or,
if any Interest Payment Date is not a Wednesday, commencing on (and including) the second
preceding Interest Accrual Date) and ending on (and including) the Tuesday immediately
preceding the Interest Payment Date (or, if sooner, the last day of such Weekly Interest Rate
Period). For each Commercial Paper Interest Rate period interest on each 2003 Series B Bond
shall be payable on each Interest Payment Date for such 2003 Series B Bond for the period
commencing on (and including) the immediately preceding Interest Accrual Date for such 2003
Series B Bond and ending on the day immediately preceding such Interest Payment Date. For
each Long -Term Interest Rate Period, interest on the 2003 Series B Bonds shall be payable on
DOCSLAl :440643.1
42797-2 EJC -19-
each Interest Payment Date for the period commencing on (and including) the immediately
preceding Interest Accrual Date and ending on the day immediately preceding such Interest
Payment Date. For each ARB Interest Rate Period, interest on the 2003 Series B Bonds shall be
payable on each ARB Interest Payment Date for the period commencing on (and including) the
immediately preceding Interest Accrual Date and ending on the day immediately preceding such
Interest Payment Date. In any event, interest on the 2003 Series B Bonds shall be payable for the
final Interest Rate Period to but not including the date on which the 2003 Series B Bonds shall
have been paid in full.
(e) Interest shall be computed, in the case of a Long -Term Interest Rate
Period, on the basis of a 360-day year consisting of twelve 30-day months, in the case of an ARB
Interest Rate Period, on the basis of a 360-day year for the actual number of days elapsed, and in
the case of any other Interest Rate Period, on the basis of a 365.or 366-day year, as appropriate,
for the actual number of days elapsed.
(f) The principal or Redemption Price of the 2003 Series B Bonds shall be
payable in lawful money of the United States of America at the Principal Office of the Trustee
upon surrender of the 2003 Series B Bonds to the Trustee for cancellation; provided that the
Trustee may agree with the Owner of any 2003 Series B Bond that such Owner may, in lieu of
surrendering the same for a new 2003 Series B Bond, endorse on such 2003 Series B Bond a
record of partial payment of the principal of such 2003 Series B Bond in the form set forth below
(which shall be typed or printed on such 2003 Series B Bond):
PAYMENTS ON ACCOUNT OF PRINCIPAL
Principal Balance of Principal Signature
Payment Date Amount Paid Amount Unpaid of Owner
The Trustee shall maintain a record of each such partial payment made in
accordance with the foregoing agreement and such record of the Trustee shall be conclusive.
Such partial payment shall be valid upon payment of the amount thereof to the Owner of such
2003 Series B Bond, and the City and the Trustee shall be fully released and discharged from all
liability to the extent of such payment regardless of whether such endorsement shall or shall not
have been made upon such 2003 Series B Bond by the Owner thereof and regardless of any error
or omission in such endorsement.
(g) Notwithstanding the foregoing provisions of this Section, (1) the interest
rate and payment terms of 2003 Series B Credit Provider Bonds shall be governed by the
provisions of the 2003 Series B Credit Support Agreement and (2) the interest rate and payment
terms of ARBs shall be governed by the provisions of Section 2.09 hereof.
DOCSLA1:440643.1
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Section 2.04. Daily Interest Rate Period.
(a) Determination of Daily Interest Rates. During each Daily Interest Rate
Period, the 2003 Series B Bonds shall bear interest at Daily Interest Rates, which, except as
otherwise provided herein, shall be determined by the Remarketing Agent by no later than 9:30
a.m., New York City time, on each Business Day during such Daily Interest Rate Period. The
Daily Interest Rate shall be the rate of interest per annum determined by the Remarketing Agent
(based on market conditions) to be the minimum interest rate which, if borne by the 2003 Series
B Bonds, would enable the Remarketing Agent to sell the 2003 Series B Bonds on the effective
date of such rate at a price (without regarding accrued interest) equal to the principal amount
thereof. In the event that the Remarketing Agent fails to establish a Daily Interest Rate for any
day, then the Daily Interest Rate for such day shall be the same as the Daily Interest Rate for the
immediately preceding day if the Daily Interest Rate for such preceding day was determined by
the Remarketing Agent. In the event that the Daily Interest Rate for the immediately preceding
day was not determined by the Remarketing Agent, or in the event that the Daily Interest Rate
determined by the Remarketing Agent shall be held to be invalid or unenforceable by a court of
law, then the interest rate for such day shall be equal to 110% of the BMA Index made available
for the week preceding the date of determination, or if such index is no longer available, or no
such index was so made available for the week preceding the date of determination, 75% of the
interest rate on 30-day high grade unsecured commercial paper notes sold through dealers by
major corporations as reported in The Wall Street Journal on the day the Daily Interest Rate
would otherwise be determined as provided herein for such Daily Interest Rate Period.
(b) Conversion to Daily Interest Rate Period. Subject to Section 2.08
hereof, at any time, the City, by written direction to the Trustee (with copies to the Tender Agent
(if any), the 2003 Series B Credit Provider (if any), the Remarketing Agent (if any), the Auction
Agent (if any) and the Broker -Dealer (if any)), may elect that the Interest Rate Period for the
2003 Series B Bonds be Converted to a Daily Interest Rate Period. Such direction of the City
shall specify (i) the proposed Conversion Date of such Conversion to a Daily Interest Rate
Period, which shall be (1) a Business Day not earlier than the twelfth day (or the fifteenth day if
the then current Interest Rate Period shall be a Long -Term Interest Rate Period) following the
second Business Day after receipt by the Trustee of such direction, (2) in the case of a
Conversion from a Weekly Interest Rate Period, the Interest Payment Date which is not less than
30 days following the second Business Day after receipt by the Trustee of such direction, (3) in
the case of a Conversion from a Long -Term Interest Rate Period, the day immediately following
the last day of the then -current Long -Term Interest Rate Period or a day on which the 2003 Series
B Bonds otherwise would be subject to optional redemption pursuant to Section 4.01(c) if such
Conversion did not occur, (4) in the case of a Conversion from a Commercial Paper Interest Rate
Period, the day immediately following the last day of the Commercial Paper Interest Rate Period
and (5) in the case of a Conversion from an ARB Interest Rate Period, an ARB Interest Payment
Date; and (ii) if the Conversion is not from a Weekly Interest Rate Period, the Purchase Date for
the 2003 Series B Bonds in connection with the mandatory tender of 2003 Series B Bonds for
purchase as a result of such Conversion to a Daily Interest Rate Period. In addition, such
direction shall be accompanied by (1) a letter of Bond Counsel that it expects to be able to give a
Favorable Opinion of Bond Counsel on the proposed Conversion Date to the Daily Interest Rate
Period and (2) a form of the notice to be mailed by the Trustee to the Owners of the 2003 Series
B Bonds as provided in Section 2.04(c).
DOCSLA1:440643.1
42797-2 EX -21-
(c) Notice of Conversion to Daily Interest Rate Period. The Trustee shall
give notice (by registered or certified mail, or by telecopy, confirmed by registered or certified
mail) to the Owners of the 2003 Series B Bonds of a Conversion of the 2003 Series B Bonds to a
Daily Interest Rate Period not less than [ten] days (or [twelve] days if the then current Interest
Rate Period shall be a Long -Term Interest Rate Period) prior to the proposed Conversion Date to
such Daily Interest Rate Period. Such notice shall state: (i) that, subject to the satisfaction of the
conditions to such Conversion contained in Section 2.08(b) hereof, the Interest Rate Period for
the 2003 Series B Bonds shall be Converted to a Daily Interest Rate Period unless the City
rescinds its election to Convert the Interest Rate Period for the 2003 Series B Bonds pursuant to
Section 2.08(a) hereof; (ii) the proposed Conversion Date to a Daily Interest Rate Period; and
(iii) except for the Conversion of the 2003 Series B Bonds to a Daily Interest Rate Period from a
Weekly Interest Rate Period that: (A) all 2003 Series B Bonds are subject to mandatory tender
for purchase on the Conversion Date to the Daily Interest Rate Period, (B) that the 2003 Series B
Bonds (other than ARBs) are subject to mandatory tender for purchase on the proposed
Conversion Date even if the proposed Conversion to a Daily Interest Rate Period does not occur,
(C) the applicable Purchase Price and the place of Proper Delivery for the tender of 2003 Series
B Bonds for purchase in connection with such Conversion, and (D) that the Purchase Price of
2003 Series B Bonds tendered or deemed tendered shall be payable only from the sources
specified in Section 4.07(f) hereof, specifying such sources.
Section 2.05. Weekly Interest Rate Period.
(a) Determination of Weekly Interest Rates. During each Weekly Interest
Rate Period, the 2003 Series B Bonds shall bear interest at Weekly Interest Rates, which, except
as otherwise provided herein, shall be determined for each Calendar Week by the Remarketing
Agent by no later than 5:00 p.m., New York City time, on the Tuesday immediately preceding
each Calendar Week, or if such day shall not be a Business Day, then by 12:00 noon, New York
City time, on the next succeeding Business Day; provided, however, that if the 2003 Series B
Bonds are to be Converted to a Weekly Interest Rate Period from another Interest Rate Period,
the Weekly Interest Rate for the initial Calendar Week of such Weekly Interest Rate Period shall
be determined not later than the Business Day next preceding the effective date of such Weekly
Interest Rate Period. The Weekly Interest Rate shall be the rate of interest per annum determined
by the Remarketing Agent to be the minimum interest rate which, if borne by the 2003 Series B
Bonds, would enable the Remarketing Agent (based on then -prevailing market conditions) to sell
the 2003 Series B Bonds on the effective date of such rate at a price (without regarding accrued
interest) equal to the principal amount thereof. In the event that the Remarketing Agent fails to
establish a Weekly Interest Rate for any Calendar Week, then the Weekly Interest Rate for such
Calendar Week shall be the same as the Weekly Interest Rate for the immediately preceding
Calendar Week if the Weekly Interest Rate for such preceding week was determined by the
Remarketing Agent. In the event that the Weekly Interest Rate for the immediately preceding
Calendar Week was not determined by the Remarketing Agent, or in the event that the Weekly
Interest Rate determined by the Remarketing Agent shall be held to be invalid or unenforceable
by a court of law, then the interest rate for such Calendar Week shall be equal to the Variable
Index on the day such Weekly Interest Rate would otherwise be determined as provided herein.
(b) Conversion to Weekly Interest Rate Period. Subject to Section 2.08, at
any time, the City, by written direction to the Trustee (with copies to the Tender Agent (if any),
DOCSLA1:440643.1
42797-2 EJC -22-
the 2003 Series B Credit Provider (if any), the Remarketing Agent (if any), the Auction Agent (if
any) and the Broker -Dealer (if any)), may elect that the Interest Rate Period for the 2003 Series B
Bonds be Converted to a Weekly Interest Rate Period. Such direction of the City shall specify (i)
the proposed Conversion Date of such Conversion to a Weekly Interest Rate Period, which shall
be (1) a Business Day not earlier than the thirtieth (30th) day following the second Business Day
after receipt by the Trustee of such direction, (2) in the case of a Conversion from a Daily Interest
Rate Period, the Interest Payment Date which is not less than 30 days following the second
Business Day after receipt by the Trustee of such direction (3) in the case of a Conversion from a
Long -Term Interest Rate Period, the day immediately following the last day of the then -current
Long -Term Interest Rate Period or a day on which the 2003 Series B Bonds otherwise would be
subject to optional redemption pursuant to Section 4.01(c) if such Conversion did not occur, (4)
in the case of a Conversion from a Commercial Paper Interest Rate Period, the day immediately
following the last day of the Commercial Paper Interest Rate Period and (5) in the case of a
Conversion from an ARB Interest Rate Period, an ARB Interest Payment Date; and (ii) if the
Conversion is not from a Daily Interest Rate Period, the Purchase Date for the 2003 Series B
Bonds in connection with the mandatory tender of 2003 Series B Bonds for purchase as a result
of such Conversion to a Weekly Interest Rate Period. In addition, such direction shall be
accompanied by (1) a letter of Bond Counsel that it expects to be able to give a Favorable
Opinion of Bond Counsel on the proposed Conversion Date to the Weekly Interest Rate Period
and (2) a form of the notice to be mailed by the Trustee to the Owners of the 2003 Series B
Bonds as provided in Section 2.05(c) hereof.
(c) Notice of Conversion to Weekly Interest Rate Period. The Trustee
shall give notice (by registered or certified mail, or by telecopy, confirmed by registered or
certified mail) to the Owners of the 2003 Series B Bonds of a Conversion of the 2003 Series B
Bonds to a Weekly Interest Rate Period not less than thirty (30) days prior to the proposed
Conversion Date to such Weekly Interest Rate Period. Such notice shall state: (i) that, subject to
the satisfaction of the conditions to such Conversion contained in Section 2.08(b) hereof, the
Interest Rate Period for the 2003 Series B Bonds shall be Converted to a Weekly Interest Rate
Period unless the City rescinds its election to Convert the Interest Rate Period for the 2003 Series
B Bonds pursuant to Section 2.08(a) hereof; (ii) the proposed Conversion Date to a Weekly
Interest Rate Period, and (iii) except for the Conversion of the 2003 Series B Bonds to a Weekly
Interest Rate Period from a Daily Interest Rate Period that: (A) all 2003 Series B Bonds are
subject to mandatory tender for purchase on the Conversion Date, (B) that all 2003 Series B
Bonds (other than ARBs) are subject to such mandatory tender for purchase on the proposed
Conversion Date even if the proposed Conversion to a Weekly Interest Rate Period does not
occur, (C) the applicable Purchase Price and the place of Proper Delivery for the tender of 2003
Series B Bonds for purchase in connection with such Conversion, and (D) that the Purchase Price
of 2003 Series B Bonds tendered or deemed tendered shall be payable only from the sources
specified in Section 4.07(f) hereof, specifying such sources.
Section 2.06. Long -Term Interest Rate Period.
(a) Determination of Long -Term Interest Rate. During each Long -Term
Interest Rate Period with respect to the 2003 Series B Bonds, the 2003 Series B Bonds shall bear
interest at the Long -Term Interest Rate. The Long -Term Interest Rate for each Long -Term
Interest Rate Period shall not exceed the Maximum Interest Rate and shall be determined by the
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42797-2 EJC -23-
Remarketing Agent on a Business Day no later than the Long -Term Conversion Date to such
Long -Term Interest Rate Period. Subject to the provisions of Section 2.06(d) hereof, the Long -
Term Interest Rate shall be the rate of interest per annum determined by the Remarketing Agent
(based on then -prevailing market conditions) to be the minimum interest rate which, if borne by
the 2003 Series B Bonds, would enable the Remarketing Agent to sell the 2003 Series B Bonds
on such date at a price (without regarding accrued interest) equal to the principal amount thereof.
(b) Conversion to or Establishment of Another Long -Term Interest Rate
Period.
(i) Subject to Section 2.08 hereof, at any time, the City, by written
direction to the Trustee (with copies sent to the Tender Agent (if any), the 2003 Series B
Credit Provider (if any), the Remarketing Agent (if any), the Auction Agent (if any) and
the Broker -Dealer (if any)), may elect that the Interest Rate Period for the 2003 Series B
Bonds shall be Converted to a Long -Term Interest Rate Period. Such direction of the
City (1) shall specify the duration of the Long -Term Interest Rate Period; (2) shall specify
the proposed Conversion Date to the Long -Term Interest Rate Period, which date shall be
(a) a Business Day not earlier than the thirtieth (30th) day following the second Business
Day following receipt by the Trustee of such direction, (b) in the case of a Conversion
from a Commercial Paper Interest Rate Period to a Long -Term Interest Rate Period, the
day immediately following the last day of the Commercial Paper Interest Rate Period, (c)
in the case of the establishment of a Long -Term Interest Rate Period following a Long -
Term Interest Rate Period, the day immediately following the last day of the then -current
Long -Term Interest Rate Period or a day on which the 2003 Series B Bonds otherwise
would be subject to optional redemption pursuant to Section 4.01(c) if such Conversion
did not occur, and (d) in the case of a Conversion from an ARB Interest Rate Period, an
ARB Interest Payment Date; (3) shall specify the last day of such Long -Term Interest
Rate Period (which last day shall be either the day immediately prior to the Maturity Date,
or a day which both immediately precedes a Business Day and is at least one hundred
eighty-one (181) days after the proposed Conversion Date); and (4) with respect to any
such Long -Term Interest Rate Period, may specify redemption prices and Redemption
Dates which are different than those set forth in Section 4.01(c) hereof, if approved by
Bond Counsel as provided in Section 2.05(b)(ii) hereof.
(ii) The direction of the City described in Section 2.06(b)(i) hereof
shall be accompanied by a letter of Bond Counsel that it expects to be able to give a
Favorable Opinion of Bond Counsel on the proposed Long -Term Conversion Date and by
a form of the notice to be mailed by the Trustee to the Owners of the 2003 Series B
Bonds as provided in Section 2.06(c) hereof.
(iii) If, by the twenty-ninth (29th) day prior to the last day of any Long
Term Interest Rate Period for the 2003 Series B Bonds which ends on a day other than the
day immediately preceding the Maturity Date, the Trustee shall not have received notice
of the City's election that, during the next succeeding Interest Rate Period, the Interest
Rate Period for the 2003 Series B Bonds shall be Converted to another Interest Rate
Period or that another Long -Term Interest Rate Period, is to be established for the 2003
Series B Bonds, the Interest Rate Period for the 2003 Series B Bonds shall automatically
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42797-2 EJC -24-
Convert to a Weekly Interest Rate Period with a Conversion Date of the day following
such Long -Term Interest Rate Period.
(iv) After the Fixed Rate Conversion Date, the 2003 Series B Bonds
shall no longer be subject to or have the benefit of the provisions of Article IV hereof.
(c) Notice of Conversion to or Establishment of Another Long -Term
Interest Rate Period. The Trustee shall give notice (by registered or certified mail, or by
telecopy, confirmed by registered or certified mail) of a Conversion to a (or the establishment of
another) Long -Term Interest Rate Period to the Owners of the 2003 Series B Bonds not less than
thirty (30) days prior to the proposed Long -Term Conversion Date to such Long -Term Interest
Rate Period. Such notice shall state: (i) that, subject to the satisfaction of the conditions to such
Conversion contained in Section 2.08(b) hereof, the Interest Rate Period for the 2003 Series B
Bonds shall be Converted to a Long -Term Interest Rate Period or to a new Long -Term Interest
Rate Period unless the City rescinds its election to Convert the Interest Rate Period for the 2003
Series B Bonds pursuant to Section 2.08(a) hereof; (ii) the duration of such Long -Term Interest
Rate Period; (iii) the proposed Long -Term Conversion Date to such Long -Term Interest Rate
Period; (iv) that all 2003 Series B Bonds are subject to mandatory tender for purchase on the
Conversion Date; (v) that all 2003 Series B Bonds (other than ARBs) are subject to such
mandatory tender for purchase on the proposed Conversion Date even if the proposed
Conversion to (or establishment of another) Long -Term Interest Rate Period does not occur;
(vi) the applicable Purchase Price and the place of Proper Delivery for the tender of 2003 Series
B Bonds for purchase in connection with such Conversion, and (vii) that the Purchase Price of
2003 Series B Bonds tendered or deemed tendered shall be payable only from the sources
specified in Section 4.07(f) hereof, specifying such sources.
(d) Remarketing at Premium or Discount. Notwithstanding the provisions
of Section 2.06(a), the Long -Term Interest Rate for a Long -Term Interest Rate Period shall be the
rate of interest per annum determined by the Remarketing Agent (based on then -prevailing
market conditions) to be the interest rate which, if borne by the 2003 Series B Bonds, would
enable the Remarketing Agent to sell the 2003 Series B Bonds at a price (without regarding
accrued interest) which will result in the lowest net interest cost for the 2003 Series B Bonds,
after taking into account any premium or discount at which the 2003 Series B Bonds are sold by
the Remarketing Agent, provided that:
(i) The Remarketing Agent certifies to the Trustee, the Tender Agent,
the 2003 Series B Credit Provider (if any) and the City that the sale of the 2003 Series B
Bonds at the interest rate and premium or discount specified by the Remarketing Agent is
expected to result in the lowest net interest cost for the 2003 Series B Bonds on the Long -
Term Conversion Date;
(ii) the City consents in writing to the sale of the 2003 Series B Bonds
by the Remarketing Agent at such premium or discount;
(iii) The remarketing proceeds available on the Conversion Date and
the amount made available under the 2003 Series B Credit Support Instrument (if any) on
the proposed Long -Term Conversion Date shall not be less than the amount required to
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42797-2 EJC -25-
purchase all of the Tendered Bonds at the applicable Purchase Price (unless the City, in
its sole discretion, transfers, or cause to be transferred, to the Tender Agent for
application to such Purchase Price Available Moneys in the amount of such deficiency on
or before the Long -Term Conversion Date in funds which will be immediately available
on the Long -Term Conversion Date);
(iv) On or before the date of the determination of the Long -Term
Interest Rate, the City delivers to the Trustee and the Remarketing Agent a letter of Bond
Counsel to the effect that Bond Counsel expects to be able to give a Favorable Opinion of
Bond Counsel on the Long -Term Conversion Date; and
(v) On or before the Long -Term Conversion Date, a Favorable
Opinion of Bond Counsel shall have been received by the Trustee.
Section 2.07. Commercial Paper Interest Rate Period.
(a) Determination of Commercial Paper Terms and Commercial Paper
Term Rates. During each Commercial Paper Interest Rate Period, each 2003 Series B Bond
shall bear interest during each Commercial Paper Term for such 2003 Series B Bond at the
Commercial Paper Term Rate for such 2003 Series B Bonds determined as provided in this
Section 2.07. The Commercial Paper Term and the Commercial Paper Term Rate need not be
the same for all the 2003 Series B Bonds, even if determined on the same date. Each of such
Commercial Paper Terms and Commercial Paper Term Rates for each 2003 Series B Bond shall
be determined by the Remarketing Agent no later than the first day of each Commercial Paper
Term. Each Commercial Paper Term shall be for a period of days within the range or ranges
announced as possible Commercial Paper Terms no later than 9:30 a.m., New York City time, on
the first day of each Commercial Paper Term by the Remarketing Agent. Each Commercial
Paper Term for each 2003 Series B Bond shall be a period of not more than one hundred eighty
(180) days, shall end not later than twenty (20) Business Days prior to the Expiration Date of the
2003 Series B Credit Support Instrument, and shall be determined by the Remarketing Agent to
be the period, except as provided by Section 2.07(d) hereof, which, together with all other
Commercial Paper Terms for all 2003 Series B Bonds then Outstanding, will result in the lowest
overall interest expense on the 2003 Series B Bonds over the next succeeding one hundred eighty
(180) days. Each Commercial Paper Term shall end on either a day which immediately precedes
a Business Day or on the day immediately preceding the Maturity Date. If, for any reason, a
Commercial Paper Term for any 2003 Series B Bond cannot be so determined by the
Remarketing Agent, or if the determination of such Commercial Paper Term is held by a court of
law to be invalid or unenforceable, then such Commercial Paper Term shall be thirty (30) days,
but if the last day so determined shall not be a day immediately preceding a Business Day, shall
end on the first day immediately preceding the Business Day next succeeding such last day, or if
such last day would be after the day immediately preceding the Maturity Date, shall end on the
day immediately preceding the Maturity Date. In determining the number of days in each
Commercial Paper Term, the Remarketing Agent shall take into account the following factors:
(i) existing short-term, tax-exempt market rates and indices of such short-term rates; (ii) the
existing market supply and demand for short-term Tax -Exempt securities; (iii) existing yield
curves for short-term and long-term Tax -Exempt securities of credit quality comparable to the
2003 Series B Bonds; (iv) general economic conditions; (v) industry economic and financial
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conditions that may affect or be relevant to the 2003 Series B Bonds; (vi) the Commercial Paper
Terms of other 2003 Series B Bonds; and (vii) such other facts, circumstances and conditions
pertaining to financial markets as the Remarketing Agent, in its sole discretion, shall determine
to be relevant.
The Commercial Paper Term Rate for each Commercial Paper Term for each
2003 Series B Bond during a Commercial Paper Interest Rate Period shall be the rate of interest
per annum determined by the Remarketing Agent to be the minimum interest rate which, if borne
by such 2003 Series B Bond, would enable the Remarketing Agent (based on then -prevailing
market conditions) to sell such 2003 Series B Bond on the effective date of such rate at a price
equal to the principal amount thereof. If, for any reason, a Commercial Paper Term Rate for any
2003 Series B Bond is not so established by the Remarketing Agent for any Commercial Paper
Term, or if such Commercial Paper Term Rate is determined by a court of law to be invalid or
unenforceable, then the Commercial Paper Term Rate for such Commercial Paper Term shall be
the rate per annum equal to the Variable Index on the first day of such Commercial Paper Term.
(b) Conversion to Commercial Paper Interest Rate Period. Subject to
Section 2.08 hereof, at any time, the City, by written direction to the Trustee (with a copy to the
Tender Agent (if any), the 2003 Series B Credit Provider (if any), the Remarketing Agent (if
any), the Auction Agent (if any) and the Broker -Dealer (if any)), may elect to Convert the Interest
Rate Period for the 2003 Series B Bonds to a Commercial Paper Interest Rate Period. Such
direction of the City shall specify (i) the proposed Conversion Date to the Commercial Paper
Interest Rate Period (during which the 2003 Series B Bonds shall bear interest at Commercial
Paper Term Rates) which shall be (1) a Business Day not earlier than the thirtieth (30th) day
following the second Business Day after receipt by the Trustee of such direction, (2) in the case
of a Conversion from a Long -Term Interest Rate Period, the day immediately following the last
day of the then -current Long -Term Interest Rate Period or a day on which the 2003 Series B
Bonds otherwise would be subject to optional redemption pursuant to Section 4.01(c) hereof if
such Conversion did not occur, (3) in the case of a Conversion from a Daily Interest Rate Period,
the Interest Payment Date which is not less than 30 days following the second Business Day after
receipt by the Trustee of such direction, (4) in the case of a Conversion from a Weekly Interest
Rate Period, the Interest Payment Date which is not less than thirty days following the second
Business Day after receipt by the Trustee of such direction, and (5) in the case of a Conversion
from an ARB Interest Rate Period, an ARB Interest Payment Date; and (ii) the Purchase Date for
the 2003 Series B Bonds in connection with the mandatory tender of the 2003 Series B Bonds for
purchase as a result of the Conversion to Commercial Paper Interest Rate Period. In addition, the
direction of the City shall be accompanied by (1) a letter of Bond Counsel that it expects to be
able to give a Favorable Opinion of Bond Counsel on the proposed Conversion Date to the
Commercial Paper Interest Rate Period and (2) a form of the notice to be mailed by the Trustee to
the Owners of the 2003 Series B Bonds as provided in Section 2.08(c) hereof. During each
Commercial Paper Interest Rate Period for the 2003 Series B Bonds commencing on the date so
specified and ending, with respect to each 2003 Series B Bond, on the day immediately preceding
the effective date of the next succeeding Interest Rate Period with respect to such 2003 Series B
Bond, each 2003 Series B Bond shall bear interest at a Commercial Paper Term Rate during each
2003 Series B Bond Interest Term for such 2003 Series B Bond.
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(c) Notice of Conversion to Commercial Paper Interest Rate Period. The
Trustee shall give notice (by registered or certified mail, or by telecopy, confirmed by registered
or certified mail) to the Owners of the 2003 Series B Bonds of a Conversion to a Commercial
Paper Interest Rate Period not less than thirty (30) days prior to the proposed Conversion Date to
such Commercial Paper Interest Rate Period. Such notice shall state: (i) that, subject to the
satisfaction of the conditions to such Conversion contained in Section 2.08(b) hereof, the Interest
Rate Period for the 2003 Series B Bonds shall be Converted to a Commercial Paper Interest Rate
Period unless the City rescinds its election to Convert the Interest Rate Period for the 2003 Series
B Bonds pursuant to Section 2.08(a) hereof; (ii) the proposed Conversion Date to such
Commercial Paper Interest Rate Period; (iii) that all 2003 Series B Bonds are subject to
mandatory tender for purchase on the Conversion Date; (iv) that all 2003 Series B Bonds (other
than ARBs) are subject to such mandatory tender for purchase if the proposed Conversion to a
Commercial Paper Interest Rate Period does not occur; (v) the applicable Purchase Price and the
place of Proper Delivery for the tender of 2003 Series B Bonds for purchase in connection with
such Conversion; and (vi) that the Purchase Price of 2003 Series B Bonds tendered or deemed
tendered shall be payable only from the sources specified in Section 4.07(f) hereof, specifying
such sources.
(d) Conversion from Commercial Paper Interest Rate Period. Subject to
Section 2.08(b), at any time during a Commercial Paper Interest Rate Period for the 2003 Series
B Bonds, the City may elect, pursuant to Sections 2.04(b), 2.05(b), 2.06(b) or 2.09(k) hereof, to
Convert the Interest Rate Period for the 2003 Series B Bonds from a Commercial Paper Interest
Rate Period to another Interest Rate Period. The latest date on which Commercial Paper Terms
for the 2003 Series B Bonds in effect on the date the Remarketing Agent receives a copy of the
direction of the City to Convert the 2003 Series B Bonds to another Interest Rate Period ends
shall be the last day of the then -current Commercial Paper Interest Rate Period and the day next
succeeding such date shall be the Conversion Date to the Interest Rate Period for the 2003 Series
B Bonds elected by the City. Notwithstanding the provisions of Section 2.07(a) hereof, upon
receipt of a copy of the direction of the City to Convert the 2003 Series B Bonds from a
Commercial Paper Interest Rate Period to another Interest Rate Period, the Remarketing Agent
shall not establish a Commercial Paper Term during such Commercial Paper Interest Rate Period
which ends on or after the proposed Conversion Date to the new Interest Rate Period.
Section 2.08. Rescission of Conversion; Conditions to Conversion.
(a) Notwithstanding anything in this Article H to the contrary, in connection
with any Conversion of the Interest Rate Period for the 2003 Series B Bonds, the City shall have
the right to deliver to the Trustee (with a copy to Remarketing Agent (if any), the Tender Agent
(if any), the 2003 Series B Credit Provider (if any), the Auction Agent (if any) and the Broker -
Dealer (if any)), on or prior to 10:00 a.m. on the second Business Day preceding the proposed
Conversion Date of any such Conversion a notice to the effect that the City elects to rescind its
election to make such Conversion. If the City delivers a notice of rescission of election to
Convert the 2003 Series B Bonds to the Trustee prior to the time a notice of such Conversion has
been mailed to the Owners of the 2003 Series B Bonds as provided in Section 2.04(c), 2.05(c),
2.06(c) or 2.09(k)(ii) hereof, as applicable, then the Interest Rate Period shall not be Converted
and the 2003 Series B Bonds shall continue to bear interest in the Interest Rate Period in effect
immediately prior to such proposed Conversion. In any event, if notice of a Conversion has been
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mailed to the Owners of the 2003 Series B Bonds as provided in Section 2.04(c), 2.05(c), 2.06(c),
2.07(c) or 2.09(k)(ii) hereof, as applicable, and the City rescinds its election to make such
Conversion, then (i) the 2003 Series B Bonds (except ARBs, which shall not be subject to
mandatory tender) shall continue to be subject to mandatory tender for purchase on the date
which would have been the Conversion Date of the Conversion to a new Interest Rate Period as
provided in Section 4.05 hereof, and (ii) the Interest Rate Period shall not be Converted and the
2003 Series B Bonds shall continue to bear interest in the Interest Rate Period in effect
immediately prior to the proposed Conversion (provided, that the period of any such Long -Term
Interest Rate Period shall be one year). In the case of the ARBs, the ARBs shall bear interest at
the ARB Maximum Rate until the next succeeding Auction Period and then at the Applicable
ARB Rate.
(b) No Conversion from one Interest Rate Period to another shall take effect
under this Indenture unless each of the following conditions, to the extent applicable, shall have
been satisfied.
(i) The Trustee shall have received a Favorable Opinion of Bond
Counsel with respect to such Conversion on the Conversion Date.
(ii) The remarketing proceeds available on the Conversion Date and
the amount made available under the 2003 Series B Credit Support Instrument (if any)
shall not be less than the amount required to purchase all of the Tendered Bonds at the
applicable Purchase Price (unless the City, in its sole discretion, transfers or causes to be
transferred, to the Tender Agent for application to the payment of such Purchase Price
Available Moneys in the amount of such deficiency on or before the Conversion Date in
funds which are immediately available on the Conversion Date).
(iii) In the case of any Conversion of the 2003 Series B Bonds from an
ARB Interest Rate Period to any other Interest Rate Period (except a Long -Term Interest
Rate Period effective to the day immediately preceding the Maturity Date), prior to the
Conversion Date the City shall have appointed a Tender Agent and a Remarketing Agent
with respect to the 2003 Series B Bonds, there shall have been executed and delivered
with respect to the 2003 Series B Bonds a Tender Agent Agreement and a Remarketing
Agreement and the City has caused a 2003 Series B Credit Support Instrument in the
Required Stated Amount to be delivered to the Tender Agent.
(iv) In the case of any Conversion of the 2003 Series B Bonds to an
ARB Interest Rate Period from another Interest Rate Period, prior to the Conversion Date
the City shall have appointed an Auction Agent, a Market Agent and a Broker -Dealer
with respect to the 2003 Series B Bonds and there shall have been executed and delivered
with respect to the 2003 Series B Bonds, a Market Agent Agreement, an Auction Agent
Agreement and a Broker -Dealer Agreement.
(v) Prior to any Conversion into an ARB Interest Rate Period, the City
shall receive a firm underwriting commitment or contract to purchase from an investment
bank or other purchaser.
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(vi) In the case of any Conversion of the 2003 Series B Bonds to a
Long -Term Interest Rate Period, the Remarketing Agent shall have determined the Long -
Term Interest Rate for such Long -Term Interest Rate Period on or prior to the proposed
Conversion Date to such Long -Term Interest Rate Period.
(c) If any condition to the Conversion of the 2003 Series B Bonds to another
Interest Rate Period shall not have been satisfied, then the current Interest Rate Period shall not
be Converted and the 2003 Series B Bonds shall continue to bear interest in the Interest Rate
Period in effect immediately prior to such proposed Conversion, and the 2003 Series B Bonds
(except ARBs) shall continue to be subject to mandatory tender for purchase on the date which
would have been the Conversion Date as provided in Section 4.07 hereof. If the Interest Rate
Period in effect immediately prior to such proposed Conversion is a Long -Term Interest Rate
Period, then the Long -Term Interest Rate Period commencing on such proposed Conversion Date
shall be for one year. In the case of ARBs, the ARBs shall continue to be owned by the Owners
thereof and shall bear interest at the ARB Maximum Rate until the next succeeding Auction
Period following such proposed Conversion Date, then at the Applicable ARB Rate.
(d) Notwithstanding anything in this Article II to the contrary, in connection
with the Conversion from a Long -Term Interest Rate Period that would require the mandatory
tender for purchase of 2003 Series B Bonds at a Purchase Price greater than the principal amount
thereof plus unpaid accrued interest thereon as provided in Section 4.07 hereof, the City, as a
condition to exercising its option to cause a Conversion of the Interest Rate Period, shall deliver
or cause to be delivered to the Tender Agent prior to the mailing of notice of such Conversion,
Available Moneys in an amount which is sufficient to pay such premium, unless the 2003 Series
B Credit Support Instrument, if any, then in effect with respect to such 2003 Series B Bonds
provides for the payment of such premium.
(e) The Trustee shall send a copy of each notice of a Conversion sent to the
Owners of the 2003 Series B Bonds to the 2003 Series B Credit Provider and each Rating
Agency promptly after sending such notice to such Owners.
Section 2.09. ARB Provisions.
This Section 2.09 governs the interest rates and payment terms of 2003 Series B
Bonds which are ARBs. With respect to 2003 Series B Bonds when not in an ARB Interest Rate
Period, such matters are governed by Sections 2.04 through 2.08 hereof.
(a) Payments with Respect to ARBs.
(i) Interest with respect to ARBs shall accrue from and including, as
applicable, the Conversion Date or the most recent Interest Accrual Date to which interest
has been paid or duly provided for.
(ii) The Trustee shall determine the aggregate amount of interest
payable in accordance with subsection (vi) below with respect ARBs on each ARB
Interest Payment Date. The Trustee shall promptly notify the Securities Depository of its
calculations, as provided in Section 2.09(c) hereof.
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(iii) Interest on ARBs shall be computed on the basis of a 360-day year
for the actual number of days elapsed. The applicable ARB Interest Rate Period shall be
determined by the Auction Agent. The Applicable ARB Interest Rate for the initial ARB
Interest Rate Period shall be determined by the Broker -Dealer. The Applicable ARB Rate
for each ARB Interest Period after the Second ARB Interest Period shall be the Auction
Rate; provided that:
(1) if a notice of a proposed adjustment in the percentages used
to determine the ARB Maximum Rate, the All -Hold Rate and the Non -Payment Rate
shall have been given by the Market Agent in accordance with Section 2.09(d)(ii) hereof
with respect to the ARBs and because of a failure to satisfy either of the conditions set
forth in clause (1) or (2) of Section 2.09(d)(iii) hereof such Conversion shall not have
taken effect, then an Auction with respect to the ARBs shall not be held on the Auction
Date immediately preceding the next succeeding ARB Interest Payment Date and the
Applicable ARB Rate with respect to the ARBs for such next succeeding ARB Interest
Period shall equal the ARB Maximum Rate on such Auction Date; and
(2) if, on any Auction Date for the ARBs, an Auction is not
held for any reason then the Applicable ARB Rate for the ARBs for the next succeeding
ARB Interest Period shall equal the ARB Interest Rate in effect on the day immediately
preceding such Auction Date.
(iv) Notwithstanding the foregoing:
(1) if the ARBs are no longer Book -Entry Bonds, the
Applicable ARB Rate for any ARB Interest Period commencing after the delivery of
certificates representing the ARBs pursuant to Section 2.02 hereof shall equal the ARB
Maximum Rate; or
(2) if an ARB Payment Default shall have occurred, the
Applicable ARB Rate for the ARB Interest Period commencing on or immediately after
such ARB Payment Default and for each ARB Interest Period thereafter, to and including
the ARB Interest Period, if any, during which, or commencing less than two Business
Days after, such ARB Payment Default is cured in accordance with this Indenture, shall
equal the Non -Payment Rate on the first day of each such ARB Interest Period, provided
that if an Auction occurred on the Business Day immediately preceding any such ARB
Interest Period, the Applicable ARB Rate for such ARB Interest Period shall be the Non -
Payment Rate.
(v) Medium of Payment.
(1) The principal of and premium, if any, and interest on ARBs
shall be payable in any currency of the United States of America which on the respective
dates for payment thereof is legal tender for the payment of public and private debts. The
principal of and premium, if any, and interest on ARBs (other than at maturity) shall be
payable by check mailed to the registered owner thereof on the Record Date at the address
of such registered owner as it appears on the Bond Register.
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Rate.
(2) The principal of each ARB at maturity will be paid upon
presentation and surrender thereof at the Principal Office of the Trustee.
(3) Unless otherwise requested by the Securities Depository,
payments of the principal of ARBs, at maturity or upon redemption, and payments of
interest on ARBs made by wire transfer, shall be made by the Trustee in immediately
available funds, provided, however, that such method of payment may be modified by
written agreement among the Trustee, the Securities Depository and the Auction Agent.
(vi) Computation of Interest Distributable on ARBs. The amount of
interest distributable to ARB Beneficial Owners, in respect of each $25,000 in principal
amount thereof for any ARB Interest Period or part thereof, shall be calculated by the
Trustee by applying the Applicable ARB Rate, for such ARB Interest Period or part
thereof, to the principal amount of $25,000, multiplying such sum by the actual number
of days in such ARB Interest Period or part thereof divided by 360 and rounding the
resultant figure to the nearest cent (half a cent being rounded upward).
(vii) ARB Defaulted Interest.
(1) The Trustee shall determine not later than 2:00 p.m., New
York City time, on each ARB Interest Payment Date, whether an ARB Payment Default
has occurred. If an ARB Payment Default has occurred, the Trustee shall, not later than
2:30 p.m. New York City time on such Business Day, send a Notice of ARB Payment
Default to the Auction Agent and each Broker -Dealer by telecopy or similar means and, if
such ARB Payment Default is cured, the Trustee shall immediately send a Notice of Cure
of ARB Payment Default to the Auction Agent and each Broker -Dealer by telecopy or
similar means.
(2) ARB Defaulted Interest shall forthwith cease to be payable
to the ARB Beneficial Owner on the relevant Record Date by virtue of having been such
ARB Beneficial Owner and such ARB Defaulted Interest shall be payable to the Person in
whose name the ARBs with respect to such ARB Payment Default occurred are registered
at the close of business on a special Record Date fixed therefor by the Trustee, which
shall not be more than fifteen days and not less than ten days prior to the date of the
proposed payment of ARB Defaulted Interest. The Trustee shall promptly notify the City
of the special Record Date and at the City's expense mail to each ARB Beneficial Owner
of ARBs as to which ARB Defaulted Interest is payable, not less than ten days before the
special Record Date, notice of the date of the proposed payment of such ARB Defaulted
Interest.
(b) Calculation of ARB Maximum Rate, All -Hold Rate and Non -Payment
(i) The Auction Agent shall calculate the ARB Maximum Rate and
the All -Hold Rate on each Auction Date. If the ARBs are no longer Book -Entry Bonds,
the Auction Agent shall calculate the ARB Maximum Rate on the Business Day
immediately preceding each ARB Interest Payment Date after the delivery of certificates
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representing the ARBs pursuant to Section 2.02 hereof. If an ARB Payment Default shall
have occurred, the Trustee shall calculate the Non -Payment Rate on the first day of (i)
each ARB Interest Period commencing on or after the date of the occurrence and during
the continuance of such ARB Payment Default and (ii) any ARB Interest Period
commencing less than two Business Days after the cure of any ARB Payment Default.
The Auction Agent shall determine the "AA" Composite Commercial Paper Rate for each
ARB Interest Period other than the Second ARB Interest Period, provided, that if the
ARB are no longer Book -Entry Bonds, or if an ARB Payment Default has occurred, then
the Trustee shall determine the "AA" Composite Commercial Paper Rate for each such
ARB Interest Period. The determination by the Trustee or the Auction Agent, as the case
may be, of the "AA" Composite Commercial Paper Rate, ARB Maximum Rate, All -Hold
Rate and Non -Payment Rate shall (in the absence of manifest error) be final and binding
upon all ARB Beneficial Owners and all other parties. If calculated or determined by the
Auction Agent, the Auction Agent shall promptly advise the Trustee of the "AA"
Composite Commercial Paper Rate, ARB Maximum Rate, All -Hold Rate and Non -
Payment Rate.
(ii) If the Federal Reserve Bank of New York has not made available
its 30-day commercial paper rate for purposes of determining the "AA" Composite
Commercial Paper Rate, the Auction Agent or the Trustee, as the case may be, shall
request that the City appoint at least three commercial paper dealers to provide
commercial paper quotes for purposes of determining the "AA" Composite Commercial
Paper Rate; and if the City shall fail to make any such appointment within three Business
Days following such request, the Trustee shall appoint such commercial paper dealers and
notify the City of such appointment.
(c) Notification of Rates, Amounts and Payment Dates. On the Business
Day preceding each ARB Interest Payment Date with respect to the ARBs, the Trustee shall
advise the Securities Depository, so long as the ARBs are Book -Entry Bonds, of the amount of
interest distributable in respect of each $25,000 in principal amount (taken without rounding to
the nearest .000001) of ARBs for any ARB Interest Period or part thereof, calculated in
accordance with Section 2.09(a)(ii) hereof.
If any day scheduled to be an ARB Interest Payment Date shall be changed after
the Trustee shall have given the notice referred to in the preceding sentence, the Trustee shall, not
later than 9:15 a.m., New York City time, on the Business Day next preceding the earlier of the
day immediately preceding the new ARB Interest Payment Date or the old ARB Interest Payment
Date, by such means as the Trustee deems practicable, give notice of such change to the Auction
Agent, so long as no ARB Payment Default has occurred and is continuing and the ownership of
the ARB is maintained in book entry form by the Securities Depository. ARBs are Book -Entry
Bonds.
(d) Adjustment in Percentages.
(i) The Market Agent shall adjust the percentage used in determining
the All -Hold Rate, the Applicable Percentages used in determining the ARB Maximum
Rate and the percentage of the Index used in calculating the Non -Payment Rate, if any
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such adjustment is necessary, in the judgment of the Market Agent, to reflect any Change
of Tax Law or change in Financial Conditions such that an ARB bearing interest at the
ARB Maximum Rate, an ARB bearing interest at the All -Hold Rate and an ARB bearing
interest at the Non -Payment Rate in each case shall have substantially the same market
value after such Change of Tax Law or change in Financial Conditions, as applicable, as
before such Change of Tax Law or change in Financial Conditions, as applicable. In
making any such adjustment, the Market Agent shall take into account the following
factors, as in existence both before and after such Change of Tax Law: (i) short-term
taxable and Tax -Exempt market rates and indices of such short-term rates; (ii) the market
supply and demand for short-term Tax -Exempt securities; (iii) yield curves for short-term
and long-term Tax -Exempt securities or obligations having a credit rating that is
comparable to the ARBs; (iv) general economic conditions; and (v) economic and
financial factors present in the securities industry that may affect, or that may be relevant
to, the ARBs.
(ii) The Market Agent shall communicate its determination to adjust
the percentage used in determining the All -Hold Rate, the Applicable Percentages used in
determining the ARB Maximum Rate and the percentage of the Index used in calculating
the Non -Payment Rate pursuant to subsection (i) above by means of a Notice of Proposed
Percentage Change delivered in writing at least 10 days prior to the Auction Date on
which the Market Agent desires to effect the change to the City, the Trustee, the Broker -
Dealer and the Auction Agent. Such notice shall be effective only if it is accompanied by
a letter of Bond Counsel that it expects to be able to deliver a Favorable Opinion of Bond
Counsel in connection with such adjustment.
(iii) An adjustment in the percentage used to determine the All -Hold
Rate, the Applicable Percentage used in determining the ARB Maximum Rate and the
percentage of the Index used in calculating the Non -Payment Rate shall take effect on an
Auction Date only if:
(1) The Trustee, the City, the Broker -Dealer, the 2003 Series B
Credit Provider (if any) and the Auction Agent receive, by 11:00 a.m., New York City
time, on the Business Day immediately preceding such Auction Date, a Notice of
Percentage Change from the Market Agent by telecopy or similar means, (i) authorizing
the adjustment of the percentage used to determine the All -Hold Rate, the Applicable
Percentages used to determine the ARB Maximum Rate and the percentage of the Index
used to determine the Non -Payment Rate which shall be specified in such authorization,
and (ii) confirming that Bond Counsel expects to be able to deliver a Favorable Opinion
of Bond Counsel in connection with such adjustment on or prior to such Auction Date;
and
(2) The Trustee receives by 9:30 a.m., New York City time, on
such Auction Date, a Favorable Opinion of Bond Counsel.
If any of the conditions referred to in (1) or (2) above are not met, the existing
percentage used in determining the All -Hold Rate, the percentage of the Index used in
determining the Non -Payment Rate and the Applicable Percentages used in determining the ARB
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Maximum Rate shall remain in effect and the rate of interest for each succeeding ARB Interest
Period until each such condition is met shall equal the ARB Maximum Rate on the Auction Date
for such succeeding ARB Interest Period.
(e) Market Agent.
(i) The Market Agent shall serve as such under the terms and
provisions hereof and of the Market Agent Agreement. The Market Agent shall be a
member of the National Association of Securities Dealers, Inc. having capitalization of at
least $25,000,000, and be authorized by law to perform all the duties imposed upon it by
this Indenture and the Market Agent Agreement. The Market Agent may be removed by
the Trustee at any time upon and pursuant to the written direction of (1) the City or (2) the
ARB Beneficial Owners of 66-2/3% of the aggregate principal amount of the ARBs then
Outstanding, by an instrument signed by the Trustee and filed with the Market Agent, the
Auction Agent and the City; provided that such removal shall not take effect until the
appointment by the ARB Beneficial Owners or the Trustee of a substitute Market Agent.
The Market Agent may resign upon 30 days' written notice delivered to the Trustee,
provided that such resignation shall not take effect until the appointment by the ARB
Beneficial Owners or the Trustee of a substitute Market Agent. If the Trustee is unable to
appoint a substitute Market Agent within 30 days following receipt of such written notice
of resignation, the Market Agent may petition the appropriate court having jurisdiction to
appoint a substitute Market Agent.
(ii) The Market Agent may be removed at any time, at the written
request of the City, for any breach of its obligations hereunder or under the Market Agent
Agreement.
(f) Auction Agent.
(i) Any Auction Agent shall be (i) subject to the written approval of
each Broker -Dealer, (ii) a bank or trust company duly organized under the laws of the
United States of America or any state or territory thereof having its principal place of
business in the Borough of Manhattan, New York, or such other location as approved by
the Trustee and the Market Agent in writing and having a combined capital stock or
surplus of at least $15,000,000, or (iii) a member of the National Association of
Securities Dealers, Inc., having a capitalization of at least $15,000,000, and, in either
case, authorized by law to perform all the duties imposed upon it hereunder and under the
Auction Agent Agreement. The Auction Agent may at any time resign and be discharged
of the duties and obligations created by this Indenture by giving at least 90 days' notice to
the Trustee, the Broker -Dealer, the City and the Market Agent. The Auction Agent may
be removed at anytime by the Trustee, upon the written direction of (1) the City or (2) the
ARB Beneficial Owners of 66-2/3% of the aggregate principal amount of the ARBs then
Outstanding, by an instrument signed by the Trustee and filed with the Auction Agent, the
2003 Series B Credit Provider (if any), the Market Agent and the City upon at least 30
days' notice. Neither the resignation nor the removal of the Auction Agent pursuant to the
preceding two sentences shall be effective until and unless a substitute Auction Agent has
been appointed and has accepted such appointment. If required by the Market Agent, a
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substitute Auction Agent Agreement shall be entered into with a substitute Auction
Agent. Notwithstanding the foregoing, the Auction Agent may terminate the Auction
Agent Agreement if, within 45 days after notifying the Trustee, the City and the Market
Agent in writing that it has not received payment of any Auction Agent Fee due it in
accordance with the terms of the Auction Agent Agreement, the Auction Agent does not
receive such payment. The Trustee shall not be liable for any action taken, suffered or
omitted by the Auction Agent.
(ii) If the Auction Agent shall resign or be removed or be dissolved, or
if the property or affairs of the Auction Agent shall be taken under the control of any state
or federal court or administrative body because of bankruptcy or insolvency, or for any
other reason, the Trustee, at the direction of the City, shall use its best efforts to appoint a
substitute Auction Agent.
(iii) The Auction Agent is acting as agent for the Trustee in connection
with Auctions. In the absence of bad faith, negligent failure to act or negligence on its
part, the Auction Agent shall not be liable for any action taken, suffered or omitted or any
error of judgment made by it in the performance of its duties under the Auction Agent
Agreement and shall not be liable for any error of judgment made in good faith unless the
Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the
pertinent facts.
(iv) The Auction Agent may be removed at any time, at the written
request of the City, for any breach of its obligations hereunder or under the Auction
Agent Agreement.
(v) The Auction Agent shall not be responsible or liable for any failure
or delay in the performance of its obligations under this Indenture arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control, including
without limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; epidemics; riots; labor disputes; acts of civil or military authority
or governmental actions; it being understood that the Auction Agent shall use reasonable
efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
(g) Broker -Dealers.
(i) the City may, from time to time, appoint one or more Persons to
serve as Broker -Dealers under Broker -Dealer Agreements and shall be responsible for
providing such Broker -Dealer Agreements to the Trustee and the Auction Agent.
(ii) Any Broker -Dealer may be removed at any time at the written
request of the City.
(h) Provisions Relating to Auctions. None of the City, the Trustee or the
Auction Agent shall be responsible for any failure of a Broker -Dealer to submit an Order to the
Auction Agent on behalf of any Existing Owner or Potential Owner, nor shall any of the City, the
Trustee or the Auction Agent be responsible for failure by any Securities Depository to effect any
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transfer or to provide the Auction Agent with current information regarding registration of
transfers. None of the City, the Trustee, the Broker -Dealer or the Auction Agent shall have any
liability in the event that there are not Sufficient Clearing Bids from time to time pursuant to the
Auction Procedures.
(i) Agreement of Owners. By purchasing ARBs, whether in an Auction or
otherwise, each prospective purchaser of ARBs or its Broker -Dealer will be deemed to have
agreed to the provisions for the replacement of the Auction Agent, each Broker -Dealer and the
Market Agent as provided in this Indenture, and relevant agreements among the City, the Trustee,
the Auction Agent, the Market Agent and the Broker -Dealer, as appropriate.
0) Changes in Auction Period or Auction Date.
(i) Changes in Auction Period.
(1) The Auction Period for the 2003 Series B Bonds with
respect to each ARB Interest Rate Period, if any, initially shall be either a seven-day
period or a thirty-five day period commencing generally on a Monday, generally on a
Tuesday, generally on a Wednesday, generally on a Thursday or generally on a Friday, in
each case as announced by the City in its notice of the proposed Conversion of the 2003
Series B Bonds to such subsequent ARB Interest Rate Period as provided in Section
2.09(k) hereof.
(2) During any ARB Interest Rate Period, the City may from
time to time on any ARB Interest Payment Date change the length of the Auction Period
with respect to all of the ARBs between 7 days and 35 days or change the first day of
each Auction Period, or both, in each case in order to accommodate economic and
financial factors that may affect or be relevant to the length of the Auction Period and the
interest rate borne by the 2003 Series B Bonds. The City shall initiate the change in the
length or day of commencement of the Auction Period, or both, by giving written notice
to the Trustee, the Auction Agent, the 2003 Series B Credit Provider (if any), the Broker -
Dealer and the Securities Depository that the Auction Period shall change if the
conditions described herein are satisfied and the proposed effective date of the change, at
least thirty (30) days prior to the Auction Date for such Auction Period.
(3) Any such changed Auction Period shall be for a period of 7
days or 35 days and shall be for all of the ARBs.
(4) No change in the length or the day of commencement of the
Auction Period for the ARBs shall be allowed unless Sufficient Clearing Bids existed at
both the Auction before the date on which the notice of the proposed change was given as
provided in clause (2) of this subsection 0) and the Auction immediately preceding the
proposed change.
(5) The change in length of the Auction Period for the ARBs
shall take effect only if Sufficient Clearing Bids exist at the Auction on the Auction Date
for the Second such Auction Period. For purposes of the Auction for such Second
Auction Period only, each Existing Owner shall be deemed to have submitted Sell Orders
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with respect to all of its ARBs except to the extent such Existing Owner submits a Hold
Order with respect to such ARBs. If the condition referred to in the Second sentence of
this clause (v) is not met, the Auction Rate for the next Auction Period shall be the ARB
Maximum Rate, and the Auction Period shall be the Auction Period already in effect.
(ii) Changes in Auction Date. During any ARB Interest Rate Period,
the City may specify an earlier Auction Date for any Business Day earlier (but in no event
more than five Business Days earlier) than the Auction Date that would otherwise be
determined in accordance with the definition of "Auction Date" in order to conform with
then current market practice with respect to similar securities or to accommodate
economic and financial factors that may affect or be relevant to the day of the week
constituting an Auction Date and the interest rate borne on the ARBs. The City shall
provide notice of its determination to specify an earlier Auction Date for an Auction
Period by means of a written notice delivered at least thirty (30) days prior to the
proposed changed Auction Date to the Trustee, the 2003 Series B Credit Provider (if any),
the Broker -Dealer and the Securities Depository.
(k) Conversion to ARB Interest Rate Period.
(i) Conversion to ARB Interest Rate Period. Subject to Section 2.08
hereof, the City, from time to time, by written direction to the Trustee(with a copy to the
Tender Agent (if any), the 2003 Series B Credit Provider (if any), the Remarketing Agent
(if any), the Auction Agent (if any) and each Broker -Dealer (if any)), may elect that the
Interest Rate Period for 2003 Series B Bonds shall be converted to an ARB Interest Rate
Period. The direction of the City shall specify (A) the proposed Conversion Date to the
ARB Interest Rate Period, which shall be (1) in each case, a Business Day not earlier than
the 30th day following the second Business Day after receipt by the Trustee of such
direction, (2) in the case of a Conversion from a Long -Term Interest Rate Period, the day
immediately following the last day of the then -current Long Term Interest Rate Period or
a day on which the 2003 Series B Bonds would otherwise be subject to optional
redemption pursuant to Section 4.01(c) hereof if such Conversion did not occur, and (3)
in the case of a Conversion from a Commercial Paper Interest Rate Period, the day
determined pursuant to Section 2.07(d) hereof, (B) the Purchase Date for the 2003 Series
B Bonds subject to mandatory tender for purchase in connection with the Conversion of
the 2003 Series B Bonds to an ARB Interest Rate Period, which shall be the proposed
Conversion Date to the ARB Interest Rate Period and (C) the initial Auction Period for
the 2003 Series B Bonds during such ARB Interest Rate Period. In addition, the direction
of the City shall be accompanied by a form of notice to be mailed to the Owners of the
2003 Series B Bonds by the Trustee as provided in Section 2.09(k)(ii) hereof.
(ii) Notice of Conversion to ARB Interest Rate Period. The Trustee
shall give notice (by registered or certified mail, or by telecopy, confirmed by registered
or certified mail) of a Conversion to an ARB Interest Rate Period to the Owners of the
2003 Series B Bonds not less than 30 days prior to the proposed Conversion Date to such
ARB Interest Rate Period. Such notice shall state (i) that, subject to the satisfaction of the
conditions to such Conversion contained in Section 2.08(b) hereof, the Interest Rate
Period for the 2003 Series B Bonds shall be converted to an ARB Interest Rate Period
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unless the City rescinds its election to Convert the 2003 Series B Bonds to such Interest
Rate Period pursuant to Section 2.08 hereof; (ii) the proposed Conversion Date to the
ARB Interest Rate Period; (iii) that the 2003 Series B Bonds are subject to mandatory
tender for purchase on the Conversion Date to the Daily Interest Rate Period; (iv) that the
2003 Series B Bonds are subject to mandatory tender for purchase on the proposed
Conversion Date whether or not the Conversion to an ARB Interest Rate Period occurs;
(v) the Purchase Price and the place of Proper Delivery for the tender of 2003 Series B
Bonds for purchase in connection with such Conversion; and (vi) that the Purchase Price
of 2003 Series B Bonds tendered or deemed tendered shall be payable only from the
sources specified in Section 4.07(f) hereof, specifying such sources.
ARTICLE III
REDEMPTION OF 2003 SERIES B BONDS
Section 3.01. Terms of Redemption.
(a) The 2003 Series B Bonds are subject to redemption prior to their stated
maturity, at the option of the City in whole or in part (in such amounts as may be specified by the
City) on any date, from: (i) insurance or condemnation proceeds and (ii) from any source of
money if all or substantially all of the Malburg Generating Station is damaged or destroyed, taken
by any public entity in the exercise of its powers of eminent domain or disposed of or abandoned,
at a Redemption Price equal to the principal amount of the 2003 Series B Bonds to be redeemed,
plus unpaid accrued interest to the date fixed for redemption, without premium.
(b) While any Daily Interest Rate Period or any Weekly Interest Rate Period is
in effect, the 2003 Series B Bonds are also subject to redemption prior to their stated maturity, at
the option of the City, in whole or in part (in such amounts as may be specified by the City), on
any date at a Redemption Price equal to the principal amount of 2003 Series B Bonds to be
redeemed, plus unpaid accrued interest to the date fixed for redemption, without premium.
(c) While any Long -Term Interest Rate Period is in effect, the 2003 Series B
Bonds are also subject to redemption prior to their stated maturity, at the option of the City, in
whole or in part (in such amounts as may be specified by the City) on the first day of such Long -
Term Interest Rate Period at a Redemption Price equal to the principal amount of 2003 Series B
Bonds to be redeemed, plus accrued interest to the date fixed for redemption, without premium,
and thereafter, during the periods specified below (or if approved in a Favorable Opinion of Bond
Counsel, during the periods and at the Redemption Prices specified in a notice of the City to the
Trustee) in whole or in part (in such amounts as may be specified by the City) on any date at the
Redemption Prices (expressed as a percentage of principal amount of the 2003 Series B Bonds to
be redeemed) hereinafter indicated (or specified in the notice of the City to the Trustee
mentioned above), plus unpaid accrued interest to the date fixed for redemption:
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42797-2 EJC -39-
Length of Long -Term
Interest Rate Period Redemption
(expressed in years) Price
greater than 15 after 10 years at 101 %
declining by 1 % every year
to 100%
less than or equal to 15 after 7 years at 101 %
and greater than 10 declining by 1 % every year
to 100%
less than or equal to 10 after 5 years at 101 %
and greater than 7 declining by 1 % every year
to 100%
less than or equal to 7 after 3 years at 101 %
and greater than 4 declining by 1 % every year
to 100%
less than or equal to 4 after 2 years at 100%
(d) While any Commercial Paper Interest Rate Period is in effect, each 2003
Series B Bond is also subject to redemption prior to its stated maturity, at the option of the City,
in whole or in part (in such amounts as may be specified by the City), on the day succeeding the
last day of each Commercial Paper Term for such 2003 Series B Bond at a Redemption Price
equal to the principal amount of the 2003 Series B Bond to be redeemed, plus unpaid accrued
interest thereon to the date fixed for redemption, without premium.
(e) While any ARB Interest Rate Period is in effect, the 2003 Series B Bonds
are also subject to redemption prior to their stated maturity, at the option of the City, in whole or
in part (in such amounts as may be specified by the City), on any ARB Interest Payment Date at a
Redemption Price equal to the principal amount of 2003 Series B Bonds to be redeemed, plus
unpaid accrued interest thereon to the date fixed for redemption, without premium.
(f) The 2003 Series B Bonds are also subject to redemption in part prior to
their stated maturity from Sinking Fund Installments established pursuant to subsection (g) of
this Section on any 1 on or after 1, , at a Redemption Price equal to the
principal amount of the 2003 Series B Bonds to be redeemed together with interest unpaid
accrued thereon to the date fixed for redemption, without premium. Notwithstanding the
foregoing, when any 2003 Series B Bond to be redeemed pursuant to this subsection (f) is subject
to an ARB Interest Rate Period, if such 1 is not an ARB Interest Payment Date, the
redemption from Sinking Fund Installments shall occur on the ARB Interest Payment Date
immediately preceding such 1.
(g) The following shall be the Sinking Fund Installments for the 2003 Series B
Bonds. Such installments shall be due on 1 of each of the years set forth in the
following table in the respective amounts set forth opposite such years in said table; except that
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42797-2 EJC -40-
if, pursuant to subsection (f) of this Section, any Redemption Date from Sinking Fund
Installments is an ARB Interest Payment Date preceding a 1 listed below, the applicable
Sinking Fund Installment shall be due on such ARB Interest Payment Date:
Year Amount
(h) Notwithstanding the foregoing provisions of this Section, the terms of
redemption of 2003 Series B Credit Provider Bonds (including mandatory redemption) shall be
governed by the 2003 Series B Credit Support Instrument. Notwithstanding the foregoing
provisions of this Section, the terms of redemption of 2003 Series B Credit Provider Bonds
(including mandatory redemption) shall be governed by the 2003 Series B Credit Support
Instrument.
Section 3.02. Selection of 2003 Series B Bonds for Redemption. Whenever provision
is made in this Second Supplemental Indenture for the redemption of less than all of the 2003
Series B Bonds, the Trustee shall select the 2003 Series B Bonds to be redeemed, from all 2003
Series B Bonds subject to redemption and not previously called for redemption, by lot in any
manner which the Trustee in its sole discretion shall deem appropriate and fair; provided,
however, that 2003 Series B Bonds shall be redeemed in the following order of priority (and by
lot within each priority):
SECOND: Any 2003 Series B Bonds which are 2003 Series B Credit
Provider Bonds; and
SECOND: Any other 2003 Series B Bonds.
ARTICLE IV
TENDER OF BONDS
Section 4.01. Optional Tender During Daily Interest Rate Period or Weekly
Interest Rate Period. (a) During each Daily Interest Rate Period, the Owner (or with respect to
a Book -Entry Bond, the Beneficial Owner through its direct Participant in the Securities
Depository) of a 2003 Series B Bond may tender such 2003 Series B Bond (or with respect to a
Book -Entry Bond, its interests in such 2003 Series B Bond), or a portion thereof as provided
below, on any Business Day, for purchase at the applicable Purchase Price, upon delivery to the
Tender Agent at its Principal Office for delivery of notices, with a copy to the Remarketing
Agent, of an irrevocable written notice, or telephone notice promptly confirmed in writing, which
states the principal amount of such 2003 Series B Bond (or the portion thereof) that is being
irrevocably tendered for purchase. The Purchase Date for any 2003 Series B Bond (or portion
thereof) for which the Owner (or Beneficial Owner, as applicable) has given such notice of
tender for purchase shall be the date of delivery of such notice to the Tender Agent. Any notice
of tender for purchase given pursuant to this subsection delivered to the Tender Agent after 11:00
a.m., New York City time, shall be deemed to have been received on the next succeeding
Business Day. In the case of a tender for purchase of less than the full principal amount of a
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42797-2 EJC -41-
2003 Series B Bond, both the portion of the 2003 Series B Bond being tendered for purchase and
the portion not so tendered shall be in an Authorized Denomination.
(b) During each Weekly Interest Rate Period the Owner (or with respect to a
Book -Entry Bond, the Beneficial Owner through its direct Participant in the Securities
Depository) of a 2003 Series B Bond may tender such 2003 Series B Bond (or with respect to a
Book -Entry Bond, its interest in such 2003 Series B Bond), or a portion thereof as provided
below, on any Business Day, for purchase at the applicable Purchase Price, upon delivery to the
Tender Agent at its Principal Office for delivery of notices, with a copy to the Remarketing
Agent, of an irrevocable written notice which states the principal amount of such 2003 Series B
Bond (or the portion thereof) that is being irrevocably tendered for purchase and the date on
which the same shall be purchased, which date shall be a Business Day not prior to the seventh
day next succeeding the date of the delivery of such notice to the Tender Agent. Any notice
delivered to the Tender Agent after 4:00 p.m., New York City time, shall be deemed to have been
received on the next succeeding Business Day. In the case of a tender for purchase of less than
the full principal amount of a 2003 Series B Bond, both the portion of the 2003 Series B Bond
tendered for purchase and the portion not so tendered shall be in an Authorized Denomination.
(c) The giving of notice by an Owner or Beneficial Owner of a 2003 Series B
Bond to have such 2003 Series B Bond purchased as provided in this Section shall constitute the
irrevocable tender for purchase of such 2003 Series B Bond, regardless of whether Proper
Delivery of such 2003 Series B Bond is made to the Tender Agent on the applicable Purchase
Date.
(d) In the event that an Owner of a 2003 Series B Bond has delivered a tender
notice pursuant to this Section with a Purchase Date on or prior to the Purchase Date on which
such 2003 Series B Bond is subject to mandatory tender for purchase pursuant to Section 4.04
hereof as a result of the delivery of a Notice of Termination with respect to, or as a result of the
Expiration Date of, or in connection with the delivery of an Alternate 2003 Series B Support
Instrument for, a 2003 Series B Credit Support Instrument, such 2003 Series B Bond shall be
subject to purchase in accordance with this Section on the Purchase Date determined pursuant to
this Section.
Section 4.02. Mandatory Tender Following Commercial Paper Term. During each
Commercial Paper Interest Rate Period, each 2003 Series B Bond shall be subject to mandatory
tender for purchase, at the applicable Purchase Price, on the day next succeeding the last day of
each Commercial Paper Term for such 2003 Series B Bond, unless such day is the first day of a
new Interest Rate Period for such 2003 Series B Bond (in which event such 2003 Series B Bond
shall be subject to mandatory tender for purchase pursuant to Section 4.03 hereof).
Section 4.03. Mandatory Tender on Second Day of Interest Rate Period. The 2003
Series B Bonds shall be subject to mandatory tender for purchase, at the applicable Purchase
Price, on the first day of each Interest Rate Period (other than upon the Conversion from a Daily
Interest Rate Period to a Weekly Interest Rate Period or the Conversion from a Weekly Interest
Rate Period to a Daily Interest Rate Period) and (except for any Conversion from an ARB
Interest Rate Period) on the proposed Conversion Date specified in the notice of the Conversion
to an alternate Interest Rate Period given to the Owners pursuant to Section 4.05(b) hereof).
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42797-2 EJC -42_
Section 4.04. Mandatory Tender Upon Termination or Expiration of 2003 Series B
Credit Support Instrument. The 2003 Series B Bonds shall be subject to mandatory tender for
purchase, at the applicable Purchase Price, on the date which is the Second Business Day which
is not less than five (5) days prior to each of the following with respect to the 2003 Series B
Credit Support Instrument then in effect with respect to the 2003 Series B Bonds: (a) termination
of such 2003 Series B Credit Support Instrument upon the delivery of an Alternate 2003 Series B
Support Instrument; (b) the termination date set forth in a Notice of Termination of such 2003
Series B Credit Support Instrument; or (c) the Expiration Date for such 2003 Series B Credit
Support Instrument.
Section 4.05. Notice to Owners of Mandatory Tender. (a) In connection with the
mandatory tender of 2003 Series B Bonds for purchase in accordance with Section 4.02 hereof,
no notice need be given to Owners of 2003 Series B Bonds.
(b) In connection with any mandatory tender of 2003 Series B Bonds for
purchase in accordance with Section 4.03 hereof, the Tender Agent shall give the notice provided
herein as a part of the notice given to the Owners pursuant to Section 2.04(c), 2.05(c), 2.06(c),
2.07(c) or 2.09(k)(ii) hereof, as applicable. Such notice shall state: (i) that, the Purchase Price of
each 2003 Series B Bond so subject to mandatory tender for purchase shall be payable only upon
Proper Delivery of such 2003 Series B Bond to the Tender Agent at its Principal Office, and
describing the actions and document necessary to make such Proper Delivery; (ii) that all 2003
Series B Bonds so subject to mandatory tender for purchase are to be purchased (but only from
the funds available for such purchase pursuant to Section 4.07(f) hereof, describing such funds)
on the Purchase Date which shall be explicitly stated; and (iii) that if on such Purchase Date, the
Tender Agent holds in trust for the Owners of the Tendered Bonds the Purchase Price for all
Tendered Bonds to be purchased on such Purchase Date, any such Tendered Bond as to which
Proper Delivery is not made to the Tender Agent on the Purchase Date shall be deemed to be an
Undelivered Bond and to have been tendered for purchase on such Purchase Date and purchased
as herein provided and the Owner of such Undelivered Bond shall thereafter have no rights with
respect to such Undelivered Bond except to receive payment of the Purchase Price thereof from
the funds held for such purpose by the Tender Agent and only upon Proper Delivery of such 2003
Series B Bond to the Tender Agent. Any notice given substantially as provided in this subsection
(b) shall be conclusively presumed to have been duly given, whether or not actually received by
each Owner of a 2003 Series B Bond.
(c) In connection with the mandatory tender of 2003 Series B Bonds for
purchase in accordance with Section 4.04 hereof, the Tender Agent shall give notice (by
registered or certified mail, or by telecopy, confirmed by registered or certified mail) to the
Owners of the mandatory tender of the 2003 Series B Bonds for purchase as a result of the
occurrence of any event specified in Section 4.06 hereof not less than five (5) days prior to the
applicable Purchase Date. Such notice shall state: (i) that the Purchase Price of each 2003 Series
B Bond so subject to mandatory tender for purchase shall be payable only upon Proper Delivery
of such 2003 Series B Bond to the Tender Agent at its Principal Office; (ii) that all 2003 Series B
Bonds so subject to mandatory tender for purchase are to be purchased (but only from the funds
available for such purchase pursuant to Section 4.09(f) hereof, describing such funds) on the
Purchase Date which shall be explicitly stated; and (iii) that, if on such Purchase Date, the
Tender Agent holds in trust for the Owners of the Tendered Bonds sufficient available moneys to
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42797-2 EJC -43-
pay the Purchase Price for all Tendered Bonds to be purchased on such Purchase Date, any such
Tendered Bond as to which Proper Delivery is not made to the Tender Agent on the Purchase
Date shall be deemed to be an Undelivered Bond and to have been tendered for purchase on such
Purchase Date and purchased as herein provided and the Owner of such Undelivered Bond shall
thereafter have no rights with respect to the Undelivered Bond except to receive payment of the
Purchase Price thereof from the funds held for such purpose by Tender Agent and only upon
Proper Delivery of such 2003 Series B Bond to the Tender Agent. Any notice given substantially
as provided in this subsection (c) shall be conclusively presumed to have been duly given,
whether or not actually received by each Owner of a 2003 Series B Bond. Upon giving the
notice specified in this subsection (c), all Owners of 2003 Series B Bonds shall be required to
make Proper Delivery of their 2003 Series B Bonds to the Tender Agent for purchase on the
Purchase Date specified in such notice
Section 4.06. Undelivered Bonds. The Tender Agent may refuse to accept delivery of
any Tendered Bond as to which Proper Delivery has not been made; such refusal, however, shall
not affect the validity of the purchase of such Tendered Bond either upon the remarketing thereof
as herein provided or upon the purchase of such 2003 Series B Bond from a draw on a 2003
Series B Credit Support Instrument. For all purposes of this Indenture, the Tender Agent shall
determine whether there has been Proper Delivery of Tendered Bonds. Such determination shall
be binding on the Owners of the 2003 Series B Bonds, the City and the Remarketing Agent,
absent manifest error. If the Owner or Beneficial Owner of a 2003 Series B Bond who has given
notice of tender for purchase pursuant to Section 4.01 hereof, or any Owner of a 2003 Series B
Bond subject to mandatory tender for purchase pursuant to Section 4.02, 4.03 or 4.04 hereof,
fails to make Proper Delivery of such 2003 Series B Bond to the Tender Agent by 10:00 a.m.
New York City time on the applicable Purchase Date and if moneys equal to the Purchase Price
of all 2003 Series B Bonds to be purchased on such Purchase Date in accordance with this
Indenture shall be available to the Tender Agent for the payment thereof, such Tendered Bond
shall constitute an Undelivered Bond. From and after the applicable Purchase Date, (1) each
Undelivered Bond shall be deemed to be purchased and shall no longer be deemed to be
Outstanding under this Indenture; (2) interest shall no longer accrue with respect to such
Undelivered Bond; and (3) funds in the amount of the Purchase Price of the Undelivered Bond
shall be held by the Tender Agent in the Bond Purchase Fund for the benefit of the Owner of
such Undelivered Bond, to be paid when Proper Delivery of such Undelivered Bond is made to
the Tender Agent. Any funds held by the Tender Agent as described in clause (3) of the
preceding sentence shall be held uninvested.
Section 4.07. General Provisions Relating to Tenders.
(a) Creation of Bond Purchase Fund. (i) There shall be created and
established hereunder with the Tender Agent a Rind to be designated the 2003 Series B Bonds of
Irvine Ranch Water District Consolidated Series 2003 Bond Purchase Fund to be held in trust
only for the benefit of the Owners of Tendered Bonds who shall thereafter be restricted
exclusively to the moneys held in such fund for the satisfaction of any claim for the Purchase
Price of such Tendered Bonds. Amounts in the Bond Purchase Fund constitutes the price paid
for Tendered Bonds whether upon the remarketing thereof or upon draws on the 2003 Series B
Credit Support Instrument and shall constitute amounts held for such Tendered Bonds for
purposes of Section 10.03 hereof. Neither the City nor any other Person (other than the Owner of
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a Tendered Bond, the purchaser of a Tendered Bond upon the remarketing thereof and the
Liquidity Provider) shall have any right, title or interest in any of the funds held on deposit in any
account in the Bond Purchase Fund nor any remarketing proceeds held for any period of time by
the Remarketing Agent.
(ii) There shall be created and designated the following accounts
within the Bond Purchase Fund: the "Remarketing Proceeds Account" and the "2003
Series B Credit Support Instrument Account." Moneys paid to the Tender Agent for the
purchase of Tendered Bonds received from (1) the Remarketing Agent shall be deposited
in the Remarketing Proceeds Account in accordance with the provisions of Section
4.07(e)(i) hereof, and (2) payments pursuant to a 2003 Series B Credit Support
Instrument, if any, shall be deposited in the 2003 Series B Credit Support Instrument
Account in accordance with the provisions of Section 4.07(e)(ii) hereof. Payments under
a 2003 Series B Credit Support Instrument not required to shall be returned to the 2003
Series B Credit Provider in accordance with Section 4.07(e) (iii) hereof.
(iii) Moneys in the 2003 Series B Credit Support Instrument Account
and the Remarketing Proceeds Account shall not be commingled with other funds held by
the Tender Agent and shall remain uninvested.
(b) Deposit of Tendered Bonds. The Tender Agent agrees to hold all
Tendered Bonds delivered to it in trust for the benefit of the respective Owners (including, if
applicable, the 2003 Series B Credit Provider) which shall have so delivered such Tendered
Bonds for purchase until moneys representing the Purchase Price of such Tendered Bonds have
been delivered to or for the account of such Owner in accordance with the provisions hereof.
Bonds.
(e) Information Regarding Tender and Remarketing of 2003 Series B
(i) Immediately upon its receipt, but not later than 11:00 a.m., New
York City time, in the case of 2003 Series B Bonds in a Daily Interest Rate Period, or no
later then 12:00 noon, New York City time on the following Business Day in the case of
2003 Series B Bonds in a Weekly Interest Rate Period, of a notice of optional tender of
2003 Series B Bonds for purchase pursuant to Section 4.01 hereof, the Tender Agent shall
notify the Remarketing Agent, the 2003 Series B Credit Provider, and the City by
telephone, promptly confirmed in writing, or by telecopy, of receipt of such notice,
specifying the principal amount of 2003 Series B Bonds for which it has received a notice
pursuant to Section 4.01 hereof, the names of the Owners thereof and the date on which
such 2003 Series B Bonds are to be purchased in accordance with Section 4.01 hereof.
(ii) As soon as practicable, but in no event later than 45 minutes prior
to the Drawing Time on the Purchase Date in the case of 2003 Series B Bonds to be
purchased pursuant to Section 4.01(a) or Section 4.02 hereof and by no later than 4:00
p.m. New York City time on the last Business Day prior to the Purchase Date in the case
of 2003 Series B Bonds to be purchased pursuant to Section 4.01(b), 4.03 or 4.04, the
Remarketing Agent shall inform the Tender Agent (and, if the 2003 Series B Bonds are
not Book -Entry Bonds, the City and the Trustee) by telephone, promptly confirmed in
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writing, of the principal amount of Tendered Bonds for which the Remarketing Agent has
identified prospective purchasers and, if the 2003 Series B Bonds are not Book -Entry
Bonds, of the name, address and taxpayer identification number of each such purchaser,
the principal amount of Tendered Bonds to be purchased by each prospective purchaser
and the Authorized Denominations in which such Tendered Bonds are to be delivered to
each such prospective purchaser. If the 2003 Series B Bonds are not Book -Entry Bonds,
the City shall cause to be prepared and executed, and the Trustee shall authenticate, or
cause the Tender Agent to authenticate, replacement 2003 Series B Bonds for the
Tendered Bonds as follows: (1) for delivery to the Remarketing Agent pursuant to
Section 4.07(g) hereof, a principal amount of 2003 Series B Bonds equal to the principal
amount of Tendered Bonds purchased with moneys from the Remarketing Proceeds
Account, in such Authorized Denominations and registered in such names as indicated in
the information provided by the Remarketing Agent pursuant to this Section 4.07(c)(ii);
and (2) for delivery to the Liquidity Provider pursuant to Section 4.07(g) hereof, a
principal amount of 2003 Series B Bonds equal to the principal amount of Tendered
Bonds purchased from moneys on deposit in the 2003 Series B Credit Support Instrument
Account in such Authorized Denominations and registered in the name of the 2003 Series
B Credit Provider or as otherwise provided in the 2003 Series B Credit Support
Agreement.
(d) Transfer of Remarketing Proceeds. Not later than 12:30 p.m., New
York City time, on each Purchase Date, the Remarketing Agent shall transfer all proceeds
received in connection with the remarketing of Tendered Bonds to the Tender Agent for deposit
in the Remarketing Proceeds Account. Until so transferred to the Tender Agent, the
Remarketing Agent shall hold all amounts received by it in connection with any remarketing of
2003 Series B Bonds in trust only for the benefit of the purchasers of the Tendered Bonds on the
remarketing thereof and shall not commingle such amounts with any other moneys.
(e) Deposits of Funds.
(i) The Tender Agent shall deposit into the Remarketing Proceeds
Account any amounts received by it from the Remarketing Agent as the proceeds of the
remarketing of Tendered Bonds and shall apply such amounts as provided in Section
4.07(f) hereof.
(ii) At least twenty minutes prior to the Drawing Time on each
Purchase Date, the Tender Agent shall notify the 2003 Series B Credit Provider (if any)
for the Tendered Bonds and the City by telephone, immediately confirmed in writing, of
the additional amount of funds, if any, required to be transferred to the Tender Agent (the
"Additional Funding Amount") which shall be the amount, if any, by which the total
Purchase Price of the Tendered Bonds exceeds the sum of the amounts then on deposit in
the Remarketing Proceeds Account pursuant to Section 4.07(d). Neither the failure of the
Tender Agent to give the notice required by the preceding sentence nor any defect or
inaccuracy therein shall affect the obligation of the 2003 Series B Credit Provider to
honor draws on the 2003 Series B Credit Support Instrument in accordance with its terms.
The Tender Agent shall, not less than five minutes prior to the Drawing Time on each
Purchase Date, take such action, including presenting drafts, as shall be necessary to
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receive payment under the 2003 Series B Credit Support Instrument on such Purchase
Date in an amount equal to the Additional Funding Amount. The Tender Agent shall
deposit such amounts in the 2003 Series B Credit Support Instrument Account.
(iii) The Tender Agent shall hold all moneys received from the
Remarketing Agent pursuant to this Section 4.07(e) in trust for the benefit of the
purchasers upon the remarketing of the Tendered Bonds until such Tendered Bonds shall
have been registered in the names of or on behalf of such purchasers and, if such
Tendered Bonds are not Book -Entry Bonds, such Tendered Bonds (or, if applicable,
replacement 2003 Series B Bonds therefor) shall have been delivered to the Remarketing
Agent on behalf of such purchasers, subject to application as provided in Section 4.07(e)
hereof. The Tender Agent shall hold all moneys received from the 2003 Series B Credit
Provider pursuant to this Section 4.07(e) in trust for the Owners of the Tendered Bonds
who have tendered or are deemed to have tendered such Tendered Bonds for purchase
pursuant hereto, subject to application as provided in this Section 4.07(e) and Section
4.07(f) hereof. In holding such moneys, the Tender Agent will be acting on behalf of
such Owners by facilitating purchase of the Tendered Bonds and not on behalf of the City
and will not be subject to the control of the City. Subject to the provisions of Section
4.07(f) hereof, following payment in full of the Purchase Price of the Tendered Bonds as
to which Proper Delivery has been made to the Tender Agent on the Purchase Date and
the setting aside in segregated accounts in the Bond Purchase Fund of moneys sufficient
to pay the Purchase Price of Undelivered Bonds, the Tender Agent shall pay any moneys
remaining in the 2003 Series B Credit Support Instrument Account directly to the
Liquidity Provider. If for any reason the amount available in the Bond Purchase Fund on
any Purchase Date, and any Available Moneys paid by the City to the Tender Agent
pursuant to Section 2.06(d)(iii) hereof or Section 2.08(b)(ii) hereof, is not sufficient to
pay in full the Purchase Price of all Tendered Bonds to be purchased on such Purchase
Date, then moneys in the Remarketing Proceeds Account shall be returned to the potential
purchasers of the Tendered Bonds identified in the remarketing thereof.
(f) Disbursements; Payment of Purchase Price. Moneys in the Bond
Purchase Fund on a Purchase Date (other than moneys held by the Tender Agent to pay the
Purchase Price of Undelivered Bonds with respect to a prior Purchase Date) shall be applied at or
before 3:00 p.m. New York City time on such Purchase Date to pay, in funds immediately
available on such Purchase Date, the Purchase Price of Tendered Bonds as to which Proper
Delivery has been made in the following order of application and, to the extent not so applied on
such Purchase Date, an amount equal to the Purchase Price of Undelivered Bonds shall be held in
separate and segregated accounts in the Bond Purchase Fund for the benefit of the Owners of the
Undelivered Bonds which were to have been purchased on such Purchase Date:
Account.
SECOND: Moneys deposited in the Remarketing Proceeds Account.
SECOND: Moneys deposited in the 2003 Series B Credit Support Instrument
THIRD: Moneys made available by the City pursuant to Section 2.06(d)(iii)
hereof or Section 2.08(b)(ii) hereof.
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-47-
(g) Transfer of Tendered Bonds.
(i) The Remarketing Agent shall give notice with respect to the
Tendered Bonds, if any, sold by it pursuant to Section 4.08(a) hereof and Section 4.08(b)
hereof as provided in Section 4.07(c)(ii) hereof. If the 2003 Series B Bonds are Book -
Entry Bonds, the Tender Agent shall cause a principal amount of 2003 Series B Bonds
equal to the principal amount of Tendered Bonds purchased on each Purchase Date with
moneys in the Remarketing Proceeds Account to be transferred to such Participant or
Participants of the Securities Depository as shall be directed by the Remarketing Agent.
If the 2003 Series B Bonds are not Book -Entry Bonds, by 1:30 p.m. New York City time
on the Purchase Date in the case of Tendered Bonds to be purchased pursuant to Section
4.02 hereof and by 12:00 noon New York City time in the case of Tendered Bonds to be
purchased pursuant to Section 4.01, 4.03 or 4.04 hereof, a principal amount of 2003
Series B Bonds equal to the principal amount of Tendered Bonds purchased on each
Purchase Date with moneys from the Remarketing Proceeds Account shall be made
available by the Tender Agent to the Remarketing Agent against payment therefor in
immediately available funds. The Tender Agent shall deliver 2003 Series B Bonds
received by it pursuant to Section 4.07(c)(ii) hereof as directed by the Remarketing
Agent.
(ii) If the 2003 Series B Bonds are Book -Entry Bonds, the Tender
Agent shall cause a principal amount of 2003 Series B Bonds equal to the principal
amount of Tendered Bonds purchased from moneys on deposit in the Liquidity Provider
Account to be transferred to the 2003 Series B Credit Provider or such Participant or
Participants of the Securities Depository on behalf of the 2003 Series B Credit Provider,
and in such respective Authorized Denominations, as shall be directed by the 2003 Series
B Credit Provider. If the 2003 Series B Bonds are not Book -Entry Bonds, a principal
amount of 2003 Series B Bonds equal to the principal amount of Tendered Bonds
purchased on each Purchase Date from moneys on deposit in the 2003 Series B Credit
Support Instrument Account shall be delivered on the Purchase Date by the Tender Agent
to or as directed by the 2003 Series B Credit Provider. The Trustee shall register such
2003 Series B Bonds in the Bond Register in the name of the 2003 Series B Credit
Provider or as otherwise provided in the 2003 Series B Credit Support Instrument.
(h) Payment of Purchase Price. The Purchase Price of any Tendered Bond
purchased pursuant to Section 4.01, 4.02, 4.03 or 4.04 hereof shall be payable only upon Proper
Delivery of such Tendered Bond to the Tender Agent. If Proper Delivery of any Tendered Bond
is made by 10:00 a.m., New York City time, on the applicable Purchase Date or any Business
Day thereafter, the Purchase Price therefor shall be paid (but only from the funds provided
therefor pursuant to Section 4.07(f) hereof) in immediately available funds on the date such
Proper Delivery is made and if such Proper Delivery is made after 10:00 a.m., New York City
time, on such Purchase Date or any Business Day thereafter, the Purchase Price therefor shall be
paid (but only from the funds provided therefor pursuant to Section 4.07(f) hereof) in
immediately available funds on the Business Day immediately succeeding such date of Proper
Delivery.
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-48-
(i) Payment of Premiums and Discounts. Notwithstanding the provisions
of Section 4.07(f) hereof, if the Purchase Price of any Tendered Bond includes a premium, the
Tender Agent shall apply moneys provided by the City in accordance with Section 2.06(d)(iii)
hereof to pay such premium. Notwithstanding the provisions of Section 4.07(f) hereof, if any
Tendered Bond is to be remarketed at a price below the principal amount thereof and, if
applicable, unpaid accrued interest thereon, pursuant to Section 2.06(d) hereof, the Tender Agent
shall apply moneys provided to the Tender Agent by the City in accordance with Section 2.06(d)
(iii) hereof to the payment of the Purchase Price of such Tendered Bonds as part of the Purchase
Price of such Tendered Bonds. Any moneys provided by the City in accordance with Section
2.06(d)(iii) hereof not applied to the payment of such Purchase Price shall be returned to the City
by the Tender Agent not later than the Business Day next succeeding the applicable Purchase
Date.
Section 4.08. Remarketing of 2003 Series B Bonds; Notice of Interest Rates.
(a) Upon each Purchase Date for Tendered Bonds, other than 2003 Series B
Credit Provider Bonds, the Remarketing Agent shall offer for sale and use its best efforts to sell
such Tendered Bonds, any such sale to be made on the applicable Purchase Date in accordance
with this Article IV at a price equal to (except as otherwise provided in Section 2.06(d) hereof)
the applicable Purchase Price of the Tendered Bonds. The Remarketing Agent agrees that it shall
not sell any 2003 Series B Bonds purchased pursuant to this Article IV to the City or to any
Person who controls, is controlled by, or is under common control with, the City.
(b) The Remarketing Agent shall offer for sale and use its best efforts to sell
2003 Series B Credit Provider Bonds at a price equal to the principal amount thereof plus, if
applicable, unpaid accrued interest to the date of purchase (based on the rate per annum which
would have been applicable to such 2003 Series B Bonds if they were not 2003 Series B Credit
Provider Bonds). 2003 Series B Credit Provider Bonds shall not be delivered upon remarketing
unless the Tender Agent shall have received a written confirmation from the 2003 Series B
Credit Provider that the 2003 Series B Credit Support Instrument is reinstated in accordance with
its terms by an amount equal to that portion of the Required Stated Amount relating to such 2003
Series B Credit Provider Bonds.
(c) The Remarketing Agent shall determine the rate of interest on the 2003
Series B Bonds during each Daily Interest Rate Period, Weekly Interest Rate Period and Long -
Term Interest Rate Period, the interest rate with respect to each 2003 Series B Bond during each
Commercial Paper Term for such 2003 Series B Bond and the Commercial Paper Terms for each
2003 Series B Bond during each Commercial Paper Interest Rate Period as provided in Article II
hereof and shall furnish to the Tender Agent and, upon request to the City, on the date of
determination, each such rate of interest and Commercial Paper Term so determined by
telephone, telecopy, electronic mail or readily accessible electronic means, promptly confirmed
in writing.
(d) The Remarketing Agent shall transfer the proceeds of the remarketing of
Tendered Bonds as provided in Section 4.07(d).
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Section 4.09. 2003 Series B Credit Support Instrument; Alternate 2003 Series B
Support Instruments. (a) The City has, concurrently with the issuance of the 2003 Series B
Bonds, caused the Initial 2003 Series B Credit Support Instrument to be delivered to the Tender
Agent.
(b) Unless the 2003 Series B Bonds are ARBs or the Fixed Rate Conversion
Date shall have occurred, the City shall maintain a 2003 Series B Credit Support Instrument for
the 2003 Series B Bonds with the Tender Agent in the Required Stated Amount. At least forty
(40) days prior to the Expiration Date of the existing 2003 Series B Credit Support Instrument,
including any renewals or extensions thereof (which shall not be considered the delivery of an
Alternate 2003 Series B Support Instrument), the City shall cause to be delivered to the Tender
Agent notice that the City expects the Liquidity Provider for the existing 2003 Series B Credit
Support Instrument to renew or extend of the term of such 2003 Series B Credit Support
Instrument or that the City expects to provide an Alternate 2003 Series B Support Instrument for
the 2003 Series B Bonds satisfying the requirements of subsection (c) of this Section. At least
fifteen (15) days prior to the Expiration Date of the existing 2003 Series B Credit Support
Instrument, including any renewals or extensions thereof, the City shall cause to be delivered to
the Tender Agent a renewal or extension of the term of such 2003 Series B Credit Support
Instrument or an Alternate 2003 Series B Support Instrument for the 2003 Series B Bonds
satisfying the requirements of subsection (c) of this Section.
(c) the City may, at any time at its sole option, furnish an Alternate 2003
Series B Support Instrument to the Tender Agent in substitution for the 2003 Series B Credit
Support Instrument then in effect to provide for the purchase of Tendered Bonds upon their
optional or mandatory tender for purchase in accordance with Section 4.01, 4.02, 4.03 or 4.04
hereof, as applicable, if such Alternate 2003 Series B Support Instrument satisfies the following
conditions and the City causes the documents and opinions specified in subsection (d) of this
Section to be delivered to the Tender Agent:
(i) The Alternate 2003 Series B Support Instrument shall be issued by,
or shall otherwise be an obligation of, a commercial bank, insurance company or other
financial institution;
(ii) The term of the Alternate 2003 Series B Support Instrument shall
be not less than one hundred eighty (180) days or such shorter period to the later of the
Maturity Date or the final Redemption Date for any Outstanding 2003 Series B Bonds;
(iii) The obligations of the Liquidity Provider under the Alternate 2003
Series B Support Instrument to provide funds to pay the Purchase Price of Tendered
Bonds shall not be subject to termination or suspension on less than fifteen (15) days
notice to the City and the Tender Agent; provided, however, that the obligations of the
Liquidity Provider to provide funds to pay the Purchase Price of Tendered Bonds, may be
immediately terminated or suspended without such notice upon the occurrence of such
events as may be provided in the Alternate 2003 Series B Support Instrument and which
are disclosed to the purchasers of the Tendered Bonds in connection with the remarketing
of the Tendered Bonds upon the mandatory tender for purchase pursuant to the provisions
of Section 4.04;
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(iv) The Alternate 2003 Series B Support Instrument must take effect
upon or prior to the remarketing of the Tendered Bonds upon the mandatory tender
thereof for purchase pursuant to the provisions of Section 4.04 as a result of the delivery
of such Alternate 2003 Series B Support Instrument; provided that the Purchase Price of
Tendered Bonds so subject to mandatory tender for purchase pursuant to Section 4.04
hereof shall be payable from the then -current 2003 Series B Credit Support Instrument
and not such Alternate 2003 Series B Support Instrument; and
(v) The Alternate 2003 Series B Support Instrument must provide for
payments thereunder in an amount not less than the Required Stated Amount.
(d) On or prior to the date of delivery of an Alternate 2003 Series B Support
Instrument to the Tender Agent pursuant to this Section, the City shall cause to be furnished to
the Tender Agent: (i) a Favorable Opinion of Bond Counsel with respect to such delivery, (ii) an
opinion of counsel to the Liquidity Provider of such Alternate 2003 Series B Support Instrument
to the effect that such Alternate 2003 Series B Support Instrument has been duly authorized,
executed and delivered by such Liquidity Provider and constitutes the valid, legal and binding
obligation of such Liquidity Provider enforceable against such Liquidity Provider in accordance
with its terms; provided, however, that such opinions may be subject to such limitations and
exceptions as are customarily taken in transactions such as the delivery of the Alternate 2003
Series B Support Instrument.
Section 4.10. Termination of 2003 Series B Credit Support Instrument; Purchase
by 2003 Series B Credit Provider; Notices. (a) The obligation of the 2003 Series B Credit
Provider to provide funds pursuant to a 2003 Series B Credit Support Instrument to pay the
Purchase Price of Tendered Bonds may expire or be suspended automatically and without prior
notice upon the occurrence of certain defaults as shall be set forth in the 2003 Series B Credit
Support Agreement relating to such 2003 Series B Credit Support Instrument subject, however,
to the provisions of Section 4.09(c)(iii).
(b) If automatic termination or suspension of the 2003 Series B Credit Support
Instrument occurs, the Tender Agent shall, immediately upon receiving written notice thereof,
notify the City, the Trustee, each Rating Agency, the 2003 Series B Credit Provider (if any), the
Remarketing Agent and the Owners of all Outstanding 2003 Series B Bonds that the 2003 Series
B Credit Support Instrument has been terminated or suspended and the reasons therefor, that the
Tender Agent will no longer be able to draw on such 2003 Series B Credit Support Instrument to
pay the Purchase Price of Tendered Bonds and the 2003 Series B Credit Provider will be under
no obligation to advance funds under such 2003 Series B Credit Support Instrument to pay the
Purchase Price of Tendered Bonds.
(c) (i) On the date set forth in a Notice of Termination, the Tender Agent
will no longer be able to draw on the 2003 Series B Credit Support Instrument to pay the
Purchase Price of Tendered Bonds. Promptly upon the receipt of a Notice of Termination from
the 2003 Series B Credit Provider, but in no event more than two (2) Business Days after receipt
thereof, the Tender Agent shall give notice to the City, the Trustee, the Remarketing Agent, and
each Rating Agency of the receipt of the Notice of Termination, the date of termination of the
2003 Series B Credit Support Instrument as a result of the receipt of such Notice of Termination
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and the Purchase Date on which, pursuant to Section 4.04 hereof, the 2003 Series B Bonds are
subject to mandatory tender for purchase as a result of such termination. Notice of such
mandatory tender of 2003 Series B Bonds for purchase shall be given to the Owners as provided
in Section 4.05(c) hereof.
(ii) At least twenty (20) days prior to the Expiration Date of the 2003
Series B Credit Support Instrument then in effect with respect to 2003 Series B Bonds,
the Tender Agent shall give notice to the City, the Trustee, the Remarketing Agent, each
Rating Agency of the scheduled Expiration Date for the 2003 Series B Credit Support
Instrument and the Purchase Date on which, pursuant to Section 4.04 hereof, the 2003
Series B Bonds are subject to mandatory tender for purchase as a result of such
Expiration Date. Notice of such mandatory tender for purchase shall be given to the
Owners of the 2003 Series B Bonds as provided in Section 4.05(c) hereof.
(iii) At least twenty (20) days prior to the substitution of an Alternate
2003 Series B Support Instrument for the 2003 Series B Credit Support Instrument then
in effect with respect to the 2003 Series B Bonds, the Trustee shall give notice to the City,
the Trustee, the Remarketing Agent and each Rating Agency of the scheduled substitution
of an Alternate 2003 Series B Support Instrument for the 2003 Series B Credit Support
Instrument then in effect and the Purchase Date on which, pursuant to Section 4.04
hereof, the 2003 Series B Bonds are subject to mandatory tender for purchase as a result
of such substitution. Notice of such mandatory tender for purchase shall be given to the
Owners of the 2003 Series B Bonds as provided in Section 4.05(c) hereof.
(iv) Each notice given pursuant to this subsection (c) shall be given by
registered or certified mail, or by telecopy, confirmed by registered or certified mail, and
shall (1) state that the Tender Agent may no longer draw on the 2003 Series B Credit
Support Instrument (and the 2003 Series B Credit Provider will have no obligation) to
pay (or provide funds for the payment of) the Purchase Price of Tendered Bonds after the
termination date set forth in the Notice of Termination, the Expiration Date or
substitution of an Alternate 2003 Series B Support Instrument, as applicable, (2) specify
the termination date established pursuant to the Notice of Termination, the Expiration
Date or the date of substitution of an Alternate 2003 Series B Support Instrument, as
applicable, (3) state that the 2003 Series B Bonds are subject to mandatory tender for
purchase on the Purchase Date determined pursuant to Section 4.04 hereof, which
Purchase Date shall be explicitly stated, and (4) state, if applicable, the name of the
provider of the proposed Alternate 2003 Series B Support Instrument and the terms
thereof.
ARTICLE V
APPLICATION OF PROCEEDS
Section 5.01. Application of Proceeds of 2003 Series B Bonds. The proceeds of the
sale (less underwriter's discount) of the 2003 Series B Bonds shall be applied simultaneously
with the delivery of the 2003 Series B Bonds, as follows:
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(a) The City shall cause the initial purchaser of the 2003 Series B Bonds to
wire transfer $ of the purchase price of the 2003 Series B Bonds to the Initial 2003
Series B Credit Provider as payment of the initial fees for the Initial 2003 Series B Credit
Support Instrument;
(b) There shall be deposited in the Debt Service Reserve Fund the sum of
$ , representing the amount required so that the balance on deposit in such Fund shall
equal the Debt Service Reserve Requirement calculated immediately after the authentication and
delivery of the 2003 Series B Bonds;
(c) There shall be deposited in the 2003 Series Costs of Issuance Fund the
sum of $
(d) The remaining balance of the proceeds of the sale of the 2003 Series B
Bonds, in the amount of $ , shall be deposited in the 2003 Construction Fund.
Section 5.02. 2003 Series Costs of Issuance Fund.
(a) The Trustee shall establish and maintain in trust a separate fund designated
as the "2003 Cost of Issuance Fund." Money deposited in said fund shall be used to pay Costs of
Issuance with respect to the 2003 Series Bonds. At the end of one year from the date of initial
delivery of the 2003 Series B Bonds, or upon earlier receipt of a statement of a City Authorized
Representative that amounts in said fund are no longer required for the payment of such Costs of
Issuance, said fund shall be terminated and any amounts then remaining in said fund shall be
transferred to such accounts in Debt Service Fund or to the Redemption Fund, in each case as
directed by an Authorized City Representative.
(b) The Trustee shall make payments from the 2003 Series Costs of Issuance
Fund, except payments and withdrawals pursuant to subsection (c) of this Section, in the
amounts, at the times, in the manner and on the other terms and conditions set forth in this
subsection. Before any such payment from the 2003 Series Costs of Issuance Fund shall be
made, there shall be filed with the Trustee a requisition therefor, signed by an Authorized City
Representative. Each such requisition shall state, in respect of the payment to be made (a) the
name and address of the person, firm or corporation to whom payment is due, (b) the amount of
such payment, and (c) the particular item of the cost to be paid and that such payment in the
stated amount is a proper charge against the 2003 Cost of Issuance Fund and that no part of such
payment shall be applied to any item which has previously been paid as a Cost of Issuance of the
2003 Series Bonds. The Trustee shall promptly issue its check to the City or to the Person
identified in the requisition in the amount or amounts specified in each such requisition or, if
requested pursuant to any such requisition, shall by interbank transfer or other method arrange to
promptly make each payment required by such requisition. The City shall apply, or cause to be
applied, all such moneys received from the 2003 Cost of Issuance Fund to the payment of the
Costs of Issuance of the 2003 Series Bonds identified in the requisition relating to such moneys.
(c) Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the 2003 Series Costs of Issuance Fund
shall be applied to the payment of Bond debt service when due.
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Section 5.03. 2003 Construction Fund.
(a) The Trustee shall establish and maintain in trust a separate fund designated
as the "2003 Construction Fund." Money deposited in said fund shall be used to pay Costs of the
Malburg Generating Station as provided in this Section.
(b) The Trustee shall make payments from the 2003 Construction Fund,
except payments and withdrawals pursuant to subsection (d) of this Section, in the amounts, at
the times, in the manner and on the other terms and conditions set forth in this subsection.
Before any such payment from the 2003 Construction Fund shall be made, there shall be filed
with the Trustee a requisition therefor, signed by an Authorized City Representative substantially
in the form of Exhibit G hereto. Each such requisition shall state, in respect of the payment to be
made (a) the name and address of the person, firm or corporation to whom payment is due, (b)
the amount of such payment, and (c) the particular item of the Cost of the Malburg Generating
Station to be paid and that such payment in the stated amount is a proper charge against the 2003
Construction Fund and that no part of such payment shall be applied to any item which has
previously been paid as a Cost of the Malburg Generating Station. The Trustee shall promptly
issue its check to the City or to the Person identified in the requisition in the amount or amounts
specified in each such requisition or, if requested pursuant to any such requisition, shall by
interbank transfer or other method arrange to promptly make each payment required by such
requisition. The City shall apply, or cause to be applied, all such moneys received by it from the
2003 Construction Fund to the payment of the Costs of the Malburg Generating Station identified
in the requisition relating to such moneys.
Each such requisition shall be sufficient evidence to the Trustee of the facts stated therein
and the Trustee shall have no duty to confirm the accuracy of such facts. Upon receipt of each
such requisition, signed by an Authorized City Representative, the Trustee shall pay the amount
set forth therein as directed by the terms thereof.
(c) Upon the receipt by the Trustee of a certificate of an Authorized City
Representative requesting the Trustee to close the 2003 Construction Fund, and after payment of
Costs payable from the 2003 Construction Fund or provision having been made for payment of
such Costs not yet due by retaining sufficient amounts to pay such Costs in the 2003
Construction Fund or otherwise as directed in such certificate, the Trustee shall transfer any
remaining balance in the 2003 Construction Fund into a separate account within the Fund, which
the Trustee shall establish and hold in trust, and which shall be entitled the "Surplus Account."
The moneys in the Surplus Account shall be used and applied, subject to the provisions of
Section 5.04 of the Master Indenture, at the written direction of an Authorized City
Representative (unless some other application of such moneys is requested by an Authorized City
Representative and there is delivered to the Trustee a Favorable Opinion of Bond Counsel to the
effect that such application would not, in and of itself, adversely affect the Tax -Exempt status of
interest on the Outstanding Bonds) to the payment when due of principal, sinking fund payments
or interest on the 2003 Series Bonds, to the purchase of 2003 Series Bonds for cancellation or to
the redemption of 2003 Series Bonds, in each case as designated by an Authorized City
Representative. Moneys held in the 2003 Construction Fund may, subject to the 2003 Series Tax
Certificate, be invested and reinvested to the fullest extent practicable in any investment in which
the City can legally invest its funds, which mature not later than such times as shall be necessary
DOCSLA1:440643.1
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to provide moneys when needed for payments to be made from the 2003 Construction Fund.
Any investment earnings on moneys on deposit in the 2003 Construction Fund shall be deposited
in the 2003 Construction Fund and be used in the same manner as other amounts on deposit in
the 2003 Construction Fund. Notwithstanding the foregoing sentence, the moneys in the Surplus
Account shall be invested at a yield no higher than the yield on the Outstanding 2003 Series
Bonds (unless there is delivered to the Trustee a Favorable Opinion of Bond Counsel to the effect
that investment at a higher yield would not, in and of itself, adversely affect the Tax -Exempt
status of interest on the 2003 Series Bonds), and all such investment income shall be deposited in
the Surplus Account and expended or reinvested as provided above.
(d) In the event of redemption of all the 2003 Series Bonds or an Event of
Default which causes acceleration of the Bonds, any moneys then remaining in the 2003
Construction Fund shall be transferred to the Debt Service Fund.
ARTICLE VI
CERTAIN TAX MATTERS
Section 6.01. Tax Covenants.
(1) The City covenants that it shall not take any action, or fail to take any
action, if any such action or failure to take action would adversely affect the exclusion from gross
income of the interest on the 2003 Series B Bonds under Section 103 of the Code. The City shall
not directly or indirectly use or permit the use of any proceeds of the 2003 Series B Bonds in
such a manner as would adversely affect the exclusion of interest on any 2003 Series B Bonds
from gross income under Section 103 of the Code. The City shall not directly or indirectly use or
permit the use of any proceeds of any 2003 Series B Bonds, or of any facilities financed thereby,
or other funds of the City, or take or omit to take any action, that would cause any 2003 Series B
Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the
City shall comply with all requirements of Section 148 of the Code and all regulations of the
United States Department of the Treasury issued thereunder to the extent such requirements are,
at the time, in effect and applicable to the 2003 Series B Bonds. In the event that at any time the
City is of the opinion that for purposes of this Section it is necessary to restrict or to limit the
yield on the investment of any moneys held by the Trustee under the Indenture, the City shall so
instruct the Trustee in writing, and the Trustee shall take such action as may be directed in such
instructions.
(2) The City specifically covenants that:
(a) Except as approved in a Favorable Opinion of Bond Counsel, the
City shall not allow the amount of Gross Proceeds of the 2003 Series B Bonds invested during
any Bond Year in Nonpurpose Investments with a Yield in excess of the Yield on the 2003 Series
B Bonds to exceed the lesser of (a) one hundred fifty percent (150%) of the scheduled debt
service for that Bond Year or (b) the amounts on deposit in the Debt Service Reserve Account
and attributed to the 2003 Series B Bonds (provided that such amounts do not exceed ten percent
(10%) of the proceeds of the 2003 Series B Bonds) plus $100,000.
DOCSLA1:440643.1
42797-2 EJC -55-
(b) The City shall pay or cause to be paid the Rebate Requirement as
provided in the 2003 Series Tax Certificate.
(c) The City shall determine the amount of and cause to be deposited
in the Rebate Fund the Rebate Requirement as provided in the 2003 Series Tax Certificate
(which is incorporated herein by reference). Subject to the provisions of this Section, moneys
held in the Rebate Fund are hereby pledged to secure payments to the United States of America,
and the City and the Owners of the 2003 Series B Bonds shall have no rights in or claim to such
moneys. The Trustee shall invest all amounts held in the Rebate Fund as directed in writing by
an Authorized City Representative.
Upon receipt of the Rebate Instructions required to be delivered to the Trustee, the
Trustee shall remit part or all of the balance held in the Rebate Fund, together with any
completed forms to be filed therewith prepared by the City and delivered with such Rebate
Instructions, to the United States of America to the extent so directed, including rebate due in
connection with any Series of 2003 Series B Bonds. In addition, if the Rebate Instructions so
direct, the Trustee shall deposit moneys into or transfer moneys out of the Rebate Fund from or
into such Accounts or Funds as the Rebate Instructions direct.
The Trustee shall conclusively be deemed to have complied with the provisions of
this Section if it follows the directions of the City set forth in the Rebate Instructions and shall
not be required to take any actions thereunder in the absence of Rebate Instructions from an
Authorized City Representative.
(3) For purposes of this Section, capitalized terms not defined in Section 1.03
shall have the meanings ascribed to such terms in the 2003 Series Tax Certificate.
Section 6.02. Rebate Fund. For purposes of complying with tax covenants contained in
the Indenture, there is hereby established a fund designated the "2003 Series B Rebate Fund" to
be held by the Trustee. Amounts on deposit in the 2003 Series B Rebate Fund shall be applied as
provided in Section 6.01.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Indenture to Remain in Effect. Save and except as supplemented by this
Second Supplemental Indenture, the Master Indenture shall remain in full force and effect.
Section 7.02. Provisions Relating to 2003 Series B Credit Provider. All provisions
hereof regarding consents, approvals, directions, appointments or requests by the 2003 Series B
Credit Provider shall be deemed not to require or permit such consents, approvals, directions,
appointments or requests by the 2003 Series B Credit Provider during any time in which no 2003
Series B Credit Support Instrument is in effect and no amounts are owing to the 2003 Series B
Credit Provider, or such 2003 Series B Credit Provider has failed to honor a demand for payment
presented to it in strict conformance with the applicable provisions of the 2003 Series B Credit
Support Instrument, or after the 2003 Series B Credit Support Instrument shall at any time for
any reason cease to be valid and binding on the 2003 Series B Credit Provider, or while such
DOCSLA1:440643.1
42797-2 EJC -56-
2003 Series B Credit Provider is denying further liability or obligation under the 2003 Series B
Credit Support Instrument (unless such 2003 Series B Credit Support Instrument has been fully
drawn or to the extent that the conditions to payment thereunder have not been fully satisfied) or
after such 2003 Series B Credit Provider has rescinded, repudiated or terminated the 2003 Series
B Credit Support Instrument and no amounts are owing to the 2003 Series B Credit Provider;
provided, however, that nothing contained in this Section shall limit the rights of the 2003 Series
B Credit Provider as a Holder of 2003 Series B Credit Provider 2003 Series B Bonds.
All provisions herein relating to the 2003 Series B Credit Provider shall be of no
force and effect with respect to a particular 2003 Series B Credit Provider if the applicable 2003
Series B Credit Support Instrument is not in effect, there are no related 2003 Series B Credit
Provider 2003 Series B Bonds and all amounts owing to such 2003 Series B Credit Provider
under the applicable 2003 Series B Credit Support Instrument have been paid.
Section 7.03. Continuing Disclosure. The City hereby covenants and agrees, whenever
a Long -Term Interest Rate Period is in effect with respect to the 2003 Series B Bonds, or if
otherwise required by Rule 15c2-12, to comply with the continuing disclosure requirements for
the 2003 Series B Bonds as promulgated under Rule 15c2-12, as it may from time to time
hereafter be amended or supplemented. Notwithstanding any other provision of the Indenture,
failure of the City to comply with the requirements of Rule 15c2-12 applicable to the 2003 Series
B Bonds, as it may from time to time hereafter be amended or supplemented, or failure of the
City to comply with any continuing disclosure agreement entered into in connection with the
2003 Series B Bonds shall not be considered an Event of Default and the Trustee shall have no
right to accelerate amounts due hereunder as a result thereof; provided, however, that the Trustee
and the Owners of not less than 25% in principal amount of the Outstanding 2003 Series B
Bonds may take such actions as may be necessary and appropriate, including seeking mandate or
specific performance by court order, to cause the City to comply with its obligations in this
Section and such continuing disclosure agreement.
Section 7.04. Counterparts. This Second Supplemental Indenture may be executed in
any number of counterparts and by the different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original; but such counterparts shall together
constitute but one and the same instrument.
DOCSLA1:440643.1
42797-2 EJC -57-
IN WITNESS WHEREOF, City of Vernon has caused these presents to be signed
in its name and on its behalf by its [ ] and attested by its City Clerk and to evidence
its acceptance of the trusts hereby created, the Trustee has caused these presents to be signed in
its name and on its behalf by one of its authorized officers, all as of the first day of March, 2003.
CITY OF VERNON
By:_
Name:
Title:
Attest:
City Clerk
BNY WESTERN TRUST COMPANY, as Trustee
By:_
Name:
Title:
DOCSLA1:440643.1
42797-2 EJC
FORM OF 2003 SERIES B BONDS
[bracketed language applies only to 2003 Series B Bonds to be registered in the name of CEDE
& CO.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE CITY OF VERNON OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
No. R-
CITY OF VERNON
MALBURG GENERATING STATION PROJECT,
ELECTRIC SYSTEM REVENUE BONDS,
2003 SERIES B
Interest Rate
Variable
Dated Date Maturity Date CUSIP No.
Registered Owner: [CEDE & CO.]
Principal Amount:
, 2003 1,
CITY OF VERNON (herein called the "City"), a municipal corporation and
chartered city of the State of California, acknowledges itself indebted to, and for value received
hereby promises to pay (but only out of the Net Revenues (capitalized terms used herein shall
have the meanings given such terms pursuant to the Indenture mentioned below) and other assets
pledged therefor pursuant to the Indenture) to the Registered Owner specified above or registered
assigns, on the Maturity Date specified above (unless this Bond shall have been previously called
for redemption in whole or in part and payment of the Redemption Price shall have been duly
made), the Principal Amount specified above, in lawful money of the United States of America
and to pay interest thereon (but only from said the Net Revenues and other assets pledged
therefor pursuant to the Indenture) in like lawful money until payment of such principal sum
shall be discharged as provided in the Indenture, at the rates determined as described below,
payable on each Interest Payment Date.
DOCSLA1:440643.1
42797-2 EJC A-1
This Bond shall bear interest from the Interest Payment Date next preceding the
date of authentication thereof unless: (i) this Bond is authenticated on an Interest Payment Date,
in which event from such Interest Payment Date; and (ii) unless this Bond is authenticated after a
Record Date and before the next succeeding Interest Payment Date for this Bond, in which event
from such Interest Payment Date; provided, however, that if the date of authentication of this
Bond shall be prior to the Record Date for the Second Interest Payment Date for this Bond, this
Bond shall bear interest from the Dated Date specified above. Notwithstanding the foregoing, if
the City shall default in the payment of interest, then this Bond shall bear interest from the date to
which interest has been paid or if no interest has been paid, from the Dated Date specified above.
The principal or, if applicable, the Redemption Price hereof is payable upon
surrender hereof at the designated corporate trust office of BNY Western Trust Company, in Los
Angeles, California (together with any successor Trustee as provided in the Indenture the
"Trustee"). Interest hereon is payable by check mailed on each Interest Payment Date to the
Owner hereof as of the applicable Record Date at the address appearing on the Bond Register
maintained by the Trustee; provided Owners of at least $1,000,000 aggregate principal amount of
2003 Series B Bonds may, at any time prior to a Record Date, give the Trustee written
instructions for payment of such interest on each succeeding Interest Payment Date for such 2003
Series B Bonds by wire transfer or by deposit to an account; and provide further that in the case
of 2003 Series B Bonds bearing interest at Commercial Paper Rates (as hereinafter described), if
the Trustee shall have been provided written wire transfer instructions, by wire transfer, provided
that while the 2003 Series B Bonds bear interest at Commercial Paper Rates, except for 2003
Series B Bonds registered in the name of the Securities Depository (as defined in the Indenture
mentioned below), interest payable hereon is payable only upon presentation hereof to the
Trustee, at its Principal Office (hereinafter identified).
This Bond is one of a duly authorized issue of bonds of the City designated as
"City of Vernon, Electric System Revenue Bonds" (the "Bonds") and of a Series of the Bonds
designated as "Malburg Generating Station Electric System Revenue Bonds, 2003 Series B" (the
"2003 Series B Bonds"). The 2003 Series B Bonds are issued pursuant to the Charter and the
Bond Ordinance. The 2003 Series B Bonds have been issued in the aggregate principal amount
of $ . The 2003 Series B Bonds are issued under, and, together with all other Bonds
issued and outstanding thereunder, are equally and ratably secured by the Trust Estate and
entitled to the protection given by, the Indenture of Trust, dated as of March 1, 2003 between the
City and the Trustee, as amended and supplemented by the Second Supplemental Indenture of
Trust, dated as of March 1, 2003 between the City and the Trustee (said Indenture of Trust, as
amended and supplemented and as the same may be amended and supplemented, is herein called
the "Indenture").
As provided in the Indenture, Bonds of the City may be issued thereunder from
time to time pursuant to Supplemental Indentures in one or more Series, in various principal
amounts, may mature at different times, may bear interest at different rates and may otherwise
vary as in the Indenture provided. The aggregate principal amount of Bonds which may be
issued under the Indenture is not limited except as provided in the Indenture, and all Bonds
issued and to be issued under the Indenture are and will be equally secured by the pledge and
assignment and covenants made therein, except as otherwise expressly provided or permitted in
the Indenture.
DOCSLA1:440643.1
42797-2 EJC A-2
Copies of the Indenture are on file at the City Hall of the City and at the Principal
Office of the Trustee and reference is hereby made to the Indenture and to all amendments and
supplements thereto for a description of the provisions, among others, with respect to the nature
and extent of the security, the rights, duties and obligations of the City, the Trustee and the
Owners of the Bonds and the terms upon which the Bonds are secured under the Indenture, the
rights and remedies of the Owners of the 2003 Series B Bonds, the limitations on such rights and
remedies and the terms and conditions upon which Bonds are issued and may be issued
thereunder. The Indenture provides that other Parity Obligations secured by a pledge of the Net
Revenues on a parity with the Bonds may be issued or incurred by the City on the terms set forth
therein. By acceptance of this Bond, the Registered Owner accepts and agrees to the terms of the
Indenture.
This Bond is a special obligation of the City and the principal of, Redemption
Price, if any, and interest on this Bond are payable solely from the Net Revenues and the other
funds pledged therefor under the Indenture and shall not constitute a charge against the general
credit of the City. This Bond is not secured by a legal or equitable pledge of, or lien or charge
upon, any property of the City or any of its income or receipts except the Net Revenues pledged
pursuant to the Indenture which is subject to the provisions of the Indenture permitting the
application of the Net Revenues for the purposes and on the terms and conditions set forth
therein. Neither the faith and credit nor the taxing power of the State of California, the City or
any other public agency is pledged to the payment of the principal or Redemption Price of or the
interest on this Bond. The issuance of this Bond shall not directly, indirectly or contingently
obligate the City Council of the City to levy or pledge any form of taxation or to make any
appropriation for the payment of this Bond. The payment of the principal or Redemption Price
of or interest on this Bond does not constitute a debt, liability or obligation of the State of
California or any public agency (other than the special obligation of the City as provided in the
Indenture). Neither the members of the City Council of the City, nor any person executing this
Bond, nor any officer or employee of the City shall be individually liable for the principal or
Redemption Price of or interest on this Bond or be subject to any personal liability or
accountability by reason of the issuance of this Bond or in respect of any undertakings by the
City under the Indenture.
The 2003 Series B Bonds were issued for the purpose of financing a portion of the
Costs of the Malburg Generating Station and related purposes.
Credit Provider Bonds
2003 Series B Bonds purchased or otherwise paid with funds made available
under a 2003 Series B Credit Support Instrument constitute Credit Provider Bonds for purposes
of the Indenture. The terms of Credit Provider Bonds, including the interest rates thereon, the
Interest Payment Dates therefor, the redemption, including mandatory redemption, thereof and
certain other terms may be different from 2003 Series B Bonds which are not Credit Provider
Bonds.
Interest on the 2003 Series B Bonds
DOCSLA1:440643.1
42797-2 EJC A-3
The term of the 2003 Series B Bonds will be divided into consecutive Interest
Rate Periods each of which will be one of the following: (i) a Daily Interest Rate Period during
which the 2003 Series B Bonds will accrue at Daily Interest Rates; (ii) a Weekly Interest Rate
Period during which interest on the 2003 Series B Bonds will bear interest at Weekly Interest
Rates; (iii) a Long -Term Interest Rate Period, during which interest on the 2003 Series B Bonds
will bear interest at a Long -Term Interest Rate; (iv) a Commercial Paper Interest Rate Period
during which interest on the 2003 Series B Bonds will bear interest at Commercial Paper Interest
Rates; or (v) an ARB Interest Rate Period during which the 2003 Series B Bonds will bear
interest at ARB Interest Rates. The initial Interest Rate Period for the 2003 Series B Bonds shall
be a [Weekly Interest Rate Period] commencing on and including the Delivery Date. The Interest
Rate Period for the 2003 Series B Bonds thereafter may be Converted from time to time to a
Weekly Interest Rate Period, a Commercial Paper Interest Rate Period, a Long -Term Interest
Rate Period or an ARB Interest Rate Period and thereafter again Converted as described in the
Indenture.
Interest on each 2003 Series B Bond shall accrue from and including the Interest
Accrual Date immediately preceding the date of authentication thereof, or, if such date of
authentication shall be an Interest Accrual Date from such Interest Accrual Date or if such date of
authentication shall be prior to the second Interest Accrual Date, from the Delivery Date;
provided, however, that if, as shown by the Bond Register, interest on the 2003 Series B Bonds
shall be in default, interest on 2003 Series B Bonds issued in exchange for 2003 Series B Bonds
surrendered for registration of transfer or exchange shall accrue from the Interest Accrual Date to
which interest has been paid in full on the 2003 Series B Bonds or, if no interest has been paid on
the 2003 Series B Bonds, from the Delivery Date.
For each Daily Interest Rate Period, interest on the 2003 Series B Bonds shall be
payable on each Interest Payment Date for the period commencing on (and including) the Interest
Accrual Date in the preceding calendar month and ending on (and including) the last day in the
preceding calendar month, unless the Interest Payment Date shall be the day next succeeding the
last day of a Daily Interest Rate Period, in which case interest shall be payable on such Interest
Payment Date for the period commencing on (and including) the Interest Accrual Date to which
interest shall have been paid in full and ending on (and including) the day immediately preceding
such Interest Payment Date. For each Weekly Interest Rate Period, interest on the 2003 Series B
Bonds shall be payable on each Interest Payment Date for the period commencing on (and
including) the immediately preceding Interest Accrual Date (or, if any Interest Payment Date is
not a Wednesday, commencing on (and including) the second preceding Interest Accrual Date)
and ending on (and including) the Tuesday immediately preceding the Interest Payment Date (or,
if sooner, the last day of such Weekly Interest Rate Period). For each Commercial Paper Interest
Rate period interest on each 2003 Series B Bond shall be payable on each Interest Payment Date
for such 2003 Series B Bond for the period commencing on (and including) the immediately
preceding Interest Accrual Date for such 2003 Series B Bond and ending on the day immediately
preceding such Interest Payment Date. For each Long -Term Interest Rate Period, interest on the
2003 Series B Bonds shall be payable on each Interest Payment Date for the period commencing
on (and including) the immediately preceding Interest Accrual Date and ending on the day
immediately preceding such Interest Payment Date. For each ARB Interest Rate Period, interest
on the 2003 Series B Bonds shall be payable on each ARB Interest Payment Date for the period
commencing on (and including) the immediately preceding Interest Accrual Date and ending on
DOCSLA1:440643.1
42797-2 EJC A-4
the day immediately preceding such Interest Payment Date. In any event, interest on the 2003
Series B Bonds shall be payable for the final Interest Rate Period to but not including the date on
which the 2003 Series B Bonds shall have been paid in full. In any event, interest on the 2003
Series B Bonds shall be payable for the final Interest Rate Period but not including to the date on
which the 2003 Series B Bonds shall have been paid in full.
Interest on the 2003 Series B Bonds shall be computed, in the case of a Long -
Tenn Interest Rate Period, on the basis of a 360-day year consisting of twelve 30-day months, in
the case of an ARB Interest Rate Period, on the basis of a 360-day year for actual days elapsed,
and in the case of any other Interest Rate Period, on the basis of a 365- or 366- day year, as the
case may be, for the actual number of days elapsed.
The term "Interest Accrual Date" (i) with respect to each Daily Interest Rate
Period, the first day thereof and, thereafter, the first day of each calendar month, (ii) with respect
to each Weekly Interest Rate Period, the first day thereof and, thereafter, the Second Wednesday
of each calendar month, (iii) with respect to each Long -Term Interest Rate Period, the first day
thereof, and thereafter, each 1, and 1, (iv) with respect to each any ARB
Interest Rate Period, the first day thereof and, thereafter, [the last day of each Auction Period],
and (v) with respect to each Commercial Paper Term within a Commercial Paper Interest Rate
Period, the first day thereof.
The term "Interest Payment Date" means (i) with respect to each Daily Interest
Rate Period, the fifth Business Day of each calendar month, (ii) with respect to each Weekly
Interest Rate Period, the Second Wednesday of each calendar month (or the next succeeding
Business Day if such Wednesday is not a Business Day); (iii) with respect to each Long -Term
Interest Rate Period, each 1 and 1 or if any such 1 or 1 is not a
Business Day, the next succeeding Business Day; provided that the Second interest payment
made for any Long -Term Interest Rate Period shall be at least ninety (90) days from the first day
of such period; (iv) with respect to each 2003 Series B Bond in each Commercial Paper Interest
Rate Period, the day next succeeding the last day of each Commercial Paper Term for such 2003
Series B Bond; (v) with respect to each ARB Interest Rate Period, each ARB Interest Payment
Date; (vi) with respect to each Interest Rate Period, the day next succeeding the last day thereof;
and (vii) with respect to 2003 Series B Credit Provider Bonds, the dates set forth in the
applicable 2003 Series B Credit Support Agreement.
The term "Record Date" means (i) with respect to each Interest Payment Date for
2003 Series B Bonds in a Daily Interest Rate Period, the last day of the calendar month preceding
the month in which such Interest Payment Date falls, (ii) with respect to each Interest Payment
Date for 2003 Series B Bonds in a Weekly Interest Rate Period or a Commercial Paper Interest
Rate Period, the Business Day immediately preceding the such Interest Payment Date, (iii) with
respect to each Interest Payment Date for 2003 Series B Bonds in a Long -Term Interest Rate
Period, the fifteenth day of the month preceding the month in which such Interest Payment Date
falls, and (iv) with respect to each Interest Payment Date for 2003 Series B Bonds which are
ARBs, the second Business Day next preceding the applicable ARB Interest Payment Date.
DOCSLA1:440643.1
42797-2 EJC A-5
The interest rates on the 2003 Series B Bonds shall be determined as described
below provided that no interest rate or any 2003 Series B Bond may exceed the Maximum
Interest Rate:
(1) Daily Interest Rate. During each Daily Interest Rate Period, the 2003
Series B Bonds shall bear interest at Daily Interest Rates, which, except as otherwise
provided in the Indenture, shall be determined by the Remarketing Agent by no later than
9:30 a.m., New York City time, on each Business Day during such Daily Interest Rate
Period. The Daily Interest Rate shall be the rate of interest per annum determined by the
Remarketing Agent (based on then -prevailing market conditions) to be the minimum
interest rate which, if borne by the 2003 Series B Bonds, would enable the Remarketing
Agent to sell the 2003 Series B Bonds on the effective date of such rate at a price
(without regarding accrued interest) equal to the principal amount thereof. In the event
that the Remarketing Agent fails to establish a Daily Interest Rate for any day, then the
Daily Interest Rate for such day shall be the same as the Daily Interest Rate for the
immediately preceding day if the Daily Interest Rate for such preceding day was
determined by the Remarketing Agent. In the event that the Daily Interest Rate for the
immediately preceding day was not determined by the Remarketing Agent, or in the event
that the Daily Interest Rate determined by the Remarketing Agent shall be held to be
invalid or unenforceable by a court of law, then the interest rate for such day shall be
equal to 110% of the BMA Index made available for the week preceding the date of
determination, or if such index is no longer available, or no such index was so made
available for the week preceding the date of determination, 75% of the interest rate on 30-
day high grade unsecured commercial paper notes sold through dealers by major
corporations as reported in The Wall Street Journal on the day the Daily Interest Rate
would otherwise be determined as provided in the debenture.
(2) Weekly Interest Rate. During each Weekly Interest Rate Period, the 2003
Series B Bonds shall bear interest at Weekly Interest Rates, which, except as otherwise
provided in the Indenture, shall be determined for each Calendar Week by the
Remarketing Agent by no later than 5:00 p.m., New York City time, on the Tuesday
immediately preceding each Calendar Week, or if such day shall not be a Business Day,
then by 12:00 noon, New York City time, on the next succeeding Business Day;
provided, however, that if the 2003 Series B Bonds are to be Converted to a Weekly
Interest Rate Period from another Interest Rate Period, the Weekly Interest Rate for the
initial Calendar Week of such Weekly Interest Rate Period shall be determined not later
than the Business Day next preceding the effective date of such Weekly Interest Rate
Period. The Weekly Interest Rate shall be the rate of interest per annum determined by
the Remarketing Agent to be the minimum interest rate which, if borne by the 2003
Series B Bonds, would enable the Remarketing Agent (based on then -prevailing market
conditions) to sell the 2003 Series B Bonds on the effective date of such rate at a price
(without regarding accrued interest) equal to the principal amount thereof In the event
that the Remarketing Agent fails to establish a Weekly Interest Rate for any Calendar
Week, then the Weekly Interest Rate for such Calendar Week shall be the same as the
Weekly Interest Rate for the immediately preceding week if the Weekly Interest Rate for
such preceding Calendar Week was determined by the Remarketing Agent. In the event
that the Weekly Interest Rate for the immediately preceding Calendar Week was not
DOCSLA1:440643.1
42797-2 EJC A-6
determined by the Remarketing Agent, or in the event that the Weekly Interest Rate
determined by the Remarketing Agent shall be held to be invalid or unenforceable by a
court of law, then the interest rate for such Calendar Week shall be equal to the Variable
Index on the day such Weekly Interest Rate would otherwise be determined as provided
in the Indenture.
The term "Calendar Week" means with respect to the 2003 Series B Bonds in a
Weekly Interest Rate Period the period during which the 2003 Series B Bonds bear interest at a
particular Weekly Interest Rate and will be the period from Wednesday of one week (whether or
not a Business Day) to and including the Tuesday of the following week (whether or not a
Business Day); provided that the initial Calendar Week for each Weekly Interest Rate Period
shall be the period from the first day of such Weekly Interest Rate Period to the next succeeding
Tuesday (whether or not a Business Day); and provided further that the final Calendar Week for
a Weekly Interest Rate Period which ends on a day other than a Tuesday shall be the period from
the Wednesday (whether or not a Business Day) preceding the last day of such Weekly Interest
Rate Period to the last day of such Weekly Interest Rate Period.
(3) Long -Term Interest Rate. During each Long -Term Interest Rate Period,
the 2003 Series B Bonds shall bear interest at the Long -Term Interest Rate determined by
the Remarketing Agent on a Business Day no later than the effective date of such Long -
Term Interest Rate Period. The Long -Term Interest Rate shall be the rate of interest per
annum determined by the Remarketing Agent (based on then prevailing market
conditions) to be the minimum interest rate which, if borne by the 2003 Series B Bonds,
would enable the Remarketing Agent to sell the 2003 Series B Bonds at a price (without
regarding accrued interest) equal to the principal amount thereof (or at a discount below
or premium above par if Bond Counsel delivers a Favorable Opinion of Bond Counsel to
the Trustee). If, for any reason, the Long -Term Interest Rate is not so determined for the
Long -Term Interest Period by the Remarketing Agent on or prior to the first day of such
Long -Term Interest Period, then a Weekly Interest Rate Period shall automatically
commence on the proposed Conversion Date to the Long -Term Interest Rate Period and
the 2003 Series B Bonds shall bear interest at Weekly Interest Rates and shall continue to
bear interest at Weekly Interest Rates until such time as the Interest Rate Period for the
2003 Series B Bonds shall have been Converted to another Interest Rate Period as
provided in the Indenture.
(4) Commercial Paper Term Rates. During each Commercial Paper Interest
Rate Period, each 2003 Series B Bond shall bear interest during each Commercial Paper
Term for such 2003 Series B Bond at the Commercial Paper Term Rate. The
Commercial Paper Term and the Commercial Paper Term Rate need not be the same for
all the 2003 Series B Bonds, even if determined on the same date. Each of such
Commercial Paper Terms and Commercial Paper Term Rates for each 2003 Series B
Bond shall be determined by the Remarketing Agent no later than the first day of each
Commercial Paper Term. Each Commercial Paper Term shall be for a period of days
within the range or ranges announced as possible Commercial Paper Terms no later than
9:30 a.m., New York City time, on the first day of each Commercial Paper Term by the
Remarketing Agent. Each Commercial Paper Term for each 2003 Series B Bond shall be
a period of not more than one hundred eighty (180) days, shall end not later than five
DOCSLA1:440643.1
42797-2 EJC A-7
Business Days prior to the Expiration Date of the 2003 Series B Credit Support
Instrument, shall be determined by the Remarketing Agent to be the period, except as
provided in the Indenture with respect to a Conversion of the Interest Rate Period for the
2003 Series B Bonds, which, together with all other Commercial Paper Terms for all
2003 Series B Bonds then Outstanding, will result in the lowest overall interest expense
on the 2003 Series B Bonds over the next succeeding one hundred eighty (180) days. If,
for any reason, a Commercial Paper Term for any 2003 Series B Bond is not so
determined by the Remarketing Agent, then such Commercial Paper Term shall be [seven
(7)] days, but if the last day so determined shall not be a day immediately preceding a
Business Day, shall end on the first day immediately preceding the Business Day next
succeeding such last day, or if such last day would be after the day immediately preceding
the Maturity Date, shall end on the day immediately preceding the Maturity Date.
The Commercial Paper Term Rate for each Commercial Paper Term for each
2003 Series B Bond during a Commercial Paper Interest Rate Period shall be the rate of interest
per annum determined by the Remarketing Agent (based on then -prevailing market conditions) to
be the minimum interest rate which, if borne by such 2003 Series B Bond, would enable the
Remarketing Agent to sell such 2003 Series B Bond on the effective date of such rate at a price
equal to the principal amount thereof. If, for any reason, a Commercial Paper Term Rate for any
2003 Series B Bond is not so established by the Remarketing Agent for any Commercial Paper
Term, or if such Commercial Paper Term Rate is determined by a court of law to be invalid or
unenforceable, then the Commercial Paper Term Rate for such Commercial Paper Term shall be
the rate per annum equal to the Variable Index on the first day of such Commercial Paper Term.
(5) ARB Interest Rates. During each ARB Interest Rate Period, the 2003
Series B Bonds shall bear interest at rates determined by the periodic application of the
Auction Procedures, as provided in the Indenture.
The Trustee shall give notice to the Owners of the 2003 Series B Bonds by
Second class mail of a Conversion in the Interest Rate Period prior to the effective date of such
Interest Rate Period as provided in the Indenture.
Tender of 2003 Series B Bonds for Purchase at Option of Owner. During each
Daily Interest Rate Period, the Owner (or with respect to a Book -Entry Bond, the Beneficial
Owner through its direct Participant in the Securities Depository) of a 2003 Series B Bond may
tender such 2003 Series B Bond (or with respect to a Book -Entry Bond, its interests in such 2003
Series B Bond), or a portion thereof as described below, on any Business Day, for purchase at the
applicable Purchase Price, upon delivery to the Tender Agent at its Principal Office for delivery
of notices, with a copy to the Remarketing Agent, of an irrevocable written notice, or telephone
notice promptly confirmed in writing, which states the principal amount of such 2003 Series B
Bond (or the portion thereof) that is being irrevocably tendered for purchase. The Purchase Date
for any 2003 Series B Bond (or portion thereof) for which the Owner (or Beneficial Owner, as
applicable) has given such notice of tender for purchase shall be the date of delivery of such
notice to the Tender Agent. Any such notice of tender for purchase delivered to the Tender
Agent after 11:00 a.m., New York City time, shall be deemed to have been received on the next
succeeding Business Day. In the case of a tender for purchase of less than the full principal
DOCSLAI :440643.1
42797-2 EJC A-8
amount of a 2003 Series B Bond, both the portion of the 2003 Series B Bond being tendered for
purchase and the portion not so tendered shall be in an Authorized Denomination.
During each Weekly Interest Rate Period the Owner (or with respect to a Book -
Entry Bond, the Beneficial Owner through its direct Participant in the Securities Depository) of a
2003 Series B Bond may tender such 2003 Series B Bond (or with respect to a Book -Entry Bond,
its interest in such 2003 Series B Bond), or a portion thereof as described below, on any Business
Day, for purchase at the applicable Purchase Price, upon delivery to the Tender Agent at its
Principal Office for delivery of notices, with a copy to the Remarketing Agent, of an irrevocable
written notice which states the principal amount of such 2003 Series B Bond (or the portion
thereof) that is being irrevocably tendered for purchase and the date on which the same shall be
purchased, which date shall be a Business Day not prior to the seventh day next succeeding the
date of the delivery of such notice to the Tender Agent. Any notice delivered to the Tender
Agent after 4:00 p.m., New York City time, shall be deemed to have been received on the next
succeeding Business Day. In the case of a tender for purchase of less than the full principal
amount of a Bond, both the portion of the 2003 Series B Bond tendered for purchase and the
portion not so tendered shall be in an Authorized Denomination.
The giving of notice by an Owner or Beneficial Owner of a 2003 Series B Bond to
have such 2003 Series B Bond purchased shall constitute the irrevocable tender for purchase of
such 2003 Series B Bond, regardless of whether Proper Delivery of such 2003 Series B Bond is
made to the Tender Agent on the applicable Purchase Date.
Mandatory Tender Following, Commercial Paper Term. During each Commercial
Paper Interest Rate Period, each 2003 Series B Bond shall be subject to mandatory tender for
purchase, at the applicable Purchase Price, on the day next succeeding the last day of each
Commercial Paper Term for such 2003 Series B Bond.
Mandatory Tender on Second Day of Interest Rate Period. The 2003 Series B
Bonds shall be subject to mandatory tender for purchase, at the applicable Purchase Price, on the
first day of each Interest Rate Period (other than upon the Conversion from a Daily Interest Rate
Period to a Weekly Interest Rate Period or the Conversion from a Weekly Interest Rate Period to
a Daily Interest Rate Period) and (except for any Conversion from an ARB Interest Rate Period),
on the proposed Conversion Date specified in the notice of the Conversion to an alternate Interest
Rate Period given to the Owners.
Mandatory Tender Upon Termination or Expiration of 2003 Series B Credit
Support Instrument. The 2003 Series B Bonds shall be subject to mandatory tender for purchase,
at the applicable Purchase Price, on the date which is the Second Business Day which is not less
than five (5) days prior to each of the following with respect to the 2003 Series B Credit Support
Instrument then in effect with respect to the 2003 Series B Bonds: (a) termination of such 2003
Series B Credit Support Instrument upon the delivery of an Alternate 2003 Series B Support
Instrument; (b) the termination date set forth in a Notice of Termination of such 2003 Series B
Credit Support Instrument; or (c) the Expiration Date for such 2003 Series B Credit Support
Instrument.
DOCSLA1:440643.1
42797-2 EJC A-9
Notice of Mandatory Tender. Notice of each mandatory tender of the 2003 Series
B Bonds for purchase (other than following each Commercial Paper Term as to which no notice
will be given) shall be given as provided in the Indenture.
Purchase Price.
The term "Purchase Price" means, with respect to any Tendered Bond (or portion
thereof), an amount, payable in funds immediately available on the applicable Purchase Date,
equal to the principal amount thereof plus accrued interest from and including the Interest
Accrual Date immediately preceding the applicable Purchase Date but not including the
applicable Purchase Date; provided, however, that (1) if the Purchase Date for any Tendered
Bond is on or after the Record Date for an Interest Payment Date and on or prior to such Interest
Payment Date, the Purchase Price thereof shall be the principal amount thereof, and interest on
such Tendered Bond shall be paid to the Owner of such Tendered Bond as of the applicable
Record Date and (2) in the case of a Purchase Date which is the first day of an Interest Rate
Period which is preceded by a Long -Term Interest Rate Period and which commences prior to the
day originally established as the last day of such preceding Long -Term Interest Rate Period,
"Purchase Price" of any Tendered Bond means the optional redemption price which would have
been applicable to the redemption of such Tendered Bond on such Purchase Date if the preceding
Long -Term Interest Rate Period had continued to the day originally established as its last day.
Sources of Payment of Purchase Price.
The Purchase Price of 2003 Series B Bonds payable upon optional or mandatory
tender for purchase is payable solely from the proceeds of the remarketing of such 2003 Series B
Bonds and amounts provided pursuant to a 2003 Series B Credit Support Instrument for the 2003
Series B Bonds. The City has no obligation to provide any funds for the payment of such
Purchase Price.
Purchase Price Payable Only on Proper Delivery.
The Purchase Price of any Tendered Bond purchased pursuant to the Indenture
shall be payable only upon Proper Delivery of such Tendered Bond to the Tender Agent. If
Proper Delivery of any Tendered Bond is made by 10:00 a.m., New York City time, on the
applicable Purchase Date or any Business Day thereafter, the Purchase Price therefor shall be
paid (but only from the funds provided therefor pursuant to the Indenture) in immediately
available funds on the date such Proper Delivery is made and if such Proper Delivery is made
after 10:00 a.m., New York City time, on such Purchase Date or any Business Day thereafter, the
Purchase Price therefor shall be paid (but only from the funds provided therefor pursuant to the
Indenture) in immediately available funds on the Business Day immediately succeeding such date
of Proper Delivery.
The term "Proper Delivery" means, with respect to the delivery of a Tendered
Bond to the Tender Agent to receive the Purchase Price thereof. (a) if such Tendered Bond is a
Book -Entry Bond, the making of, or the irrevocable authorization to make, by 10:00 a.m., New
York City time, on the applicable Purchase Date, entries on the books of the Securities
Depository or a Participant of such Securities Depository as provided by such Securities
DOCSLA1:440643.1
42797-2 EJC A-10
Depository; and (2) if such Tendered Bond is not a Book -Entry Bond, the delivery of such
Tendered Bond to the Tender Agent at its Principal Office, by 10:00 a.m., New York City time,
on the applicable Purchase Date, accompanied by an instrument of transfer thereof in form
satisfactory to the Tender Agent, executed in blank by the Owner thereof or by the Owner's duly
authorized attorney, with such signature guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
Undelivered Bonds. The Tender Agent may refuse to accept delivery of any
Tendered Bond as to which Proper Delivery has not been made; such refusal, however, shall not
affect the validity of the purchase of such Tendered Bond either upon the remarketing thereof as
herein provided or upon the purchase of such Tendered Bond from a draw on a 2003 Series B
Credit Support Instrument. For all purposes of this Indenture, the Tender Agent shall determine
whether there has been Proper Delivery of Tendered Bonds. Such determination shall be binding
on the Owners of the 2003 Series B Bonds, the City and the Remarketing Agent, absent manifest
error. If the Owner or Beneficial Owner of a 2003 Series B Bond who has given notice of
optional tender for purchase, or any Owner of a 2003 Series B Bond subject to mandatory tender
for purchase, fails to make Proper Delivery of such 2003 Series B Bond to the Tender Agent by
10:00 a.m. New York City time on the applicable Purchase Date and if moneys equal to the
Purchase Price of all 2003 Series B Bonds to be purchased on such Purchase Date in accordance
with the Indenture shall be available to the Tender Agent for the payment thereof, such Tendered
Bond shall constitute an Undelivered Bond. From and after the applicable Purchase Date, (1)
each Undelivered Bond shall be deemed to be purchased and shall no longer be deemed to be
Outstanding under the Indenture; (2) interest shall no longer accrue with respect to such
Undelivered Bond; and (3) funds in the amount of the Purchase Price of the Undelivered Bond
shall be held by the Tender Agent in the Bond Purchase Fund for the benefit of the Owner of
such Undelivered Bond, to be paid when Proper Delivery of such Undelivered Bond is made to
the Tender Agent.
The above -described provisions for the optional and mandatory tender of the 2003
Series B Bonds for purchase shall not apply at any time this Bond is a Pledged 2003 Series B
Bond or this Bond is owned by, for the account of, or on behalf of, the City.
BY ACCEPTANCE OF THIS BOND, EACH OWNER IRREVOCABLY
AGREES THAT, IF THIS BOND IS TO BE PURCHASED ON ANY DATE AND
SUFFICIENT FUNDS ARE ON DEPOSIT WITH THE TENDER AGENT FOR ALL
PURCHASES TO BE MADE ON SUCH DATE AS AFORESAID, THIS BOND SHALL BE
DEEMED TO HAVE BEEN PURCHASED FOR ALL PURPOSES UNDER THE
INDENTURE AND, THEREAFTER, THE OWNER SHALL HAVE NO FURTHER RIGHTS
HEREUNDER OR UNDER THE INDENTURE WITH RESPECT TO THIS BOND, EXCEPT
TO RECEIVE THE PURCHASE PRICE FOR THIS BOND FROM THE FUNDS SO
DEPOSITED UPON PROPER DELIVERY HEREOF AS AFORESAID.
The Purchase Price of any 2003 Series B Bonds payable upon optional or
mandatory tender is payable solely from the proceeds of the remarketing of such 2003 Series B
Bonds and amounts provided pursuant to a 2003 Series B Credit Support Instrument for the 2003
Series B Bonds. The City has no obligation to provide any funds for the payment of such
Purchase Price.
DOCSLA1:440643.1
42797-2 EJC A-11
Optional Redemption. While any Daily Interest Rate Period or Weekly Interest
Rate Period is in effect, the 2003 Series B Bonds are subject to redemption, at the option of the
City in whole or in part on any date at a Redemption Price equal to the principal amount of the
2003 Series B Bonds to be redeemed, plus unpaid accrued interest thereon date fixed for
redemption, without premium. While any Commercial Paper Rate Commercial Paper Interest
Rate Period is in effect, the 2003 Series B Bonds are also subject to optional redemption by the
City, in whole or in part, on the day succeeding the last day of each Commercial Paper Term at a
Redemption Price equal to the principal amount of the 2003 Series B Bonds to be redeemed, plus
unpaid accrued interest date fixed for redemption, without premium. While any Long -Term
Interest Rate Period is in effect, the 2003 Series B Bonds are subject to redemption at the option
of the City in whole or in part in such amounts as may be specified by the City on the first day of
such Long -Term Interest Rate Period at a Redemption Price equal to the principal amount of
such 2003 Series B Bonds to be redeemed, plus unpaid accrued interest thereon fixed date for
redemption without premium, and thereafter, during the periods specified below (or, if approved
by a Favorable Opinion of Bond Counsel, during the periods and at the Redemption Prices
specified in a notice of the City to the Trustee) in whole or in part on any date, at the Redemption
Prices (expressed as a percentage of principal amount of the 2003 Series B Bonds to be
redeemed) hereinafter indicated or specified in the notice of the City to the Trustee, plus unpaid
accrued interest thereon, to the date fixed for redemption:
Length of Long -Term
Interest Rate Period Redemption
(expressed inters) Price
greater than 15 after 10 years at 102%
declining by 1 % every year
to 100%
less than or equal to 15 after 7 years at 102%
and greater than 10 declining by 1 % every year
to 100%
less than or equal to 10 after 5 years at 102%
and greater than 7 declining by 1 % every year
to 100%
less than or equal to 7 after 3 years at 101 %
and greater than 4 declining by 1 % every year
to 100%
less than or equal to 4 after 2 years at 100%
While an ARB Interest Rate Period is in effect, the 2003 Series B Bonds are
subject to redemption, at the option of the City, in whole or in part (in such amounts as may be
specified by the City), on any ARB Interest Payment Date at a Redemption Price equal to the
principal amount of 2003 Series B Bonds called for redemption, plus unpaid accrued interest
thereon to the redemption date, without premium.
DOCSLA1:440643.1
42797-2 EJC A-12
Extraordinary Optional Redemption. The 2003 Series B Bonds are subject to
redemption prior to their stated maturity, at the option of the City, in whole or in part on any date,
at a Redemption Price equal to the principal amount of the 2003 Series B Bonds to be redeemed,
plus unpaid accrued interest thereon to the date fixed for redemption, without premium (a) to the
extent of money available from: (i) from insurance or condemnation proceeds; or (ii) from any
source of money if all or substantially all of the Malburg Generating Station is damaged or
destroyed, taken by any public entity in exercise of its powers of eminent domain or disposed of
or abandoned.
Mandatory Redem tp ion. The 2003 Series B Bonds are subject to mandatory
redemption, in part, on any on and after 1, , at a
Redemption Price equal to the principal amount of the 2003 Series B Bonds to be redeemed, plus
unpaid accrued interest thereon to the date fixed for redemption, without premium, from the
Sinking Fund Installments established for the 2003 Series B Bonds in the Indenture.
Terms of Redem tp ion. If less than all of the 2003 Series B Bonds are to be
redeemed, the particular 2003 Series B Bonds to be redeemed shall be selected as provided in the
Indenture.
The 2003 Series B Bonds are payable upon redemption upon surrender thereof at
the Principal Office of the Trustee. The Trustee shall give notice, in the name of the City, of the
redemption of 2003 Series B Bonds, which notice shall be mailed, by Second class mail, postage
prepaid, not more than sixty (60) nor less than thirty (30) days before the Redemption Date to the
Owners of any 2003 Series B Bonds to be redeemed (in whole or in part) at their addresses
appearing in the Bond Register. Such notice shall specify the Series Bnd maturity of the Bonds
to be redeemed, the Redemption Date and the place or places where amounts due upon such
redemption shall be payable and, if less than all of the 2003 Series B Bonds are to be redeemed,
the letters and numbers or other distinguishing marks of such 2003 Series B Bonds so to be
redeemed, and, in the case of 2003 Series B Bonds to be redeemed in part only, such notice shall
also specify the respective portions of the principal amount thereof to be redeemed. Such notice
shall further state that on such redemption date there shall become due and payable upon each
2003 Series B Bond to be redeemed the Redemption Price thereof (or the Redemption Price of
the specified portions of the principal amount thereof to be redeemed in the case of 2003 Series B
Bonds to be redeemed in part only) and that from and after such date interest on such 2003 Series
B Bond (or the portion of such 2003 Series B Bond to be redeemed) shall cease to accrue and be
payable.
Receipt of such notice of redemption shall not be a condition precedent to the
redemption of 2003 Series B Bonds and failure of any Owner of a 2003 Series B Bond to receive
any such notice or any insubstantial defect in such notice shall not affect the validity of the
proceedings for the redemption of 2003 Series B Bonds.
The notice with respect to the redemption of 2003 Series B Bonds at the option of
the City may state that such redemption is conditional upon the receipt by the Trustee, on or prior
to the date fixed for such redemption, of moneys sufficient to pay the Redemption Price of the
2003 Series B Bonds to be redeemed, and that if such moneys shall not have been so received
said notice shall be of no force and effect and the City shall not be required to redeem such 2003
DOCSLA1:440643.1
42797-2 EJC A-13
Series B Bonds. In the event a notice of redemption of 2003 Series B Bonds contains such a
condition and such moneys are not so received, the redemption of 2003 Series B Bonds as
described in the conditional notice of redemption shall not be made and the Trustee shall, within
a reasonable time after the date on which such redemption was to occur, give notice to the
persons and in the manner in which the notice of redemption was given that such moneys were
not so received and that there shall be no redemption of 2003 Series B Bonds pursuant to the
conditional notice of redemption.
Amendment of Indenture. To the extent and in the manner permitted by the terms
of the Indenture, the provisions of the Indenture, or any indenture amendatory thereof or
supplemental thereto, may be modified or amended by the City with, in certain cases, the written
consent of the Owners of at least a majority in principal amount of the Bonds then Outstanding
under the Indenture; and, in case less than all of the Bonds would be affected thereby, with such
consent of the Owners of a majority in principal amount of the affected Outstanding Bonds;
provided, however, that, if such modification or amendment will, by its terms, not take effect so
long as any Bonds of any specified like Series Bnd maturity remain Outstanding, the consent of
the owners of such Bonds shall not be required and such Bonds shall not be deemed to be
Outstanding for the purpose of the calculation of Outstanding Bonds for purposes of such
consent. While the 2003 Series B Bonds are Tender Indebtedness, the consent of the Owners of
such 2003 Series B Bonds shall not be required for any amendment to the Indenture upon giving
such Owners notice of the amendment while such Owners may tender their 2003 Series B Bonds
for purchase as provided in the Indenture. No such modification or amendment shall permit a
change in the terms of any Sinking Fund Installment or the terms of redemption or maturity of
the principal of any Bond or of any installment of interest thereon or a reduction in the principal
amount or Redemption Price thereof or in the rate of interest thereon without the consent of the
Owner of such Bond, or shall reduce the percentages or otherwise affect the classes of Bonds the
consent of the Owners of which is required to effect any such modification or amendment, or
shall change or modify any of the rights or obligations of the Trustee or of any Paying Agent
without its written assent thereto.
The Indenture may also be amended or supplemented without the necessity of the
consent of the Owners of the 2003 Series B Bonds for any one or more of the purposes specified
in the Indenture.
Transfer of Bond. This Bond is transferable, as provided in the Indenture, only
upon the Bond Register kept for that purpose at the Principal Office of the Trustee, by the
registered owner hereof, or by his duly authorized attorney, upon surrender of this Bond together
with a written instrument of transfer satisfactory to the Trustee duly executed by the registered
owner or his duly authorized attorney. Thereupon and upon payment of the charges prescribed in
the Indenture a new registered 2003 Series B Bond or 2003 Series B Bonds, without coupons,
and for the same aggregate principal amount, shall be issued to the transferee in exchange
therefor as provided in the Indenture. The City, the Trustee and any Paying Agent may deem and
treat the person in whose name this Bond is registered as the absolute owner hereof for the
purpose of receiving payment of, or on account of, the principal or Redemption Price hereof and
interest due hereon and for all other purposes.
DOCSLA1:440643.1
42797-2 EJC A-14
Enforcement of Bond and Indenture. The Registered Owner of this Bond shall
have no right to enforce the provisions of the Indenture or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default under the Indenture,
or to institute, appear in or defend any suit or other proceedings with respect thereto, except as
provided in the Indenture. In certain events, on the conditions, in the manner and with the effect
set forth in the Indenture, the principal of all the Bonds issued under the Indenture and then
Outstanding may become or may be declared due and payable before the stated maturity thereof,
together with interest accrued thereon.
It is hereby certified and recited that all conditions, acts and things required by
law, including the City Charter and the Bond Ordinance and the Indenture to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond, exist, have
happened and have been performed in due time, form and manner and that the 2003 Series B
Bonds, together with all other indebtedness of the City, comply in all respects with the applicable
laws of the State of California, including the City Charter and the Bond Ordinance.
This Bond shall not be entitled to any benefit under the Indenture or be valid or
become obligatory for any purpose until this Bond shall have been authenticated by the execution
by the Trustee of the Trustee's Certificate of Authentication hereon.
IN WITNESS WHEREOF, CITY OF VERNON has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of its [ ] and
the seal (or a facsimile thereof) to be hereunto affixed, imprinted, engraved or otherwise
reproduced and attested by the manual or facsimile signature of its City Clerk, as of the Dated
Date specified above.
[SEAL]
ATTEST:
CITY CLERK
CITY OF VERNON
DOCSLA1:440643.1
42797-2 EJC
A-15
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 2003 Series B Bonds delivered pursuant to the within
mentioned Indenture.
Date of Authentication BNY WESTERN TRUST COMPANY,
as Trustee
M.
AUTHORIZED SIGNATORY
DOCSLA1:440643.1
42797-2 EJC A-16
ASSIGNMENT
FOR VALUE RECEIVED the undersigned sells, assigns and transfers unto
(Name, Address and Tax Identification or
Social Security Number of Assignee)
the within Bond of the City of Vernon and does hereby irrevocably constitute and appoint
attorney to
transfer the said Bond on the books kept for registration thereof with full power of substitution in
the premises.
Dated:
Signature guaranteed by
Notice: The Signature of this assignment and
transfer must correspond with the name
as written upon the face of this Bond in
every particular, without alteration or
enlargement or any change whatsoever.
Notice: Signature must be guaranteed by a
member of the National Association of
Securities Dealers, a commercial bank, a
trust company or other eligible guarantor
institution.
DOCSLA1:440643.1
42797-2 EJC A-17
OH&S Draft
02/18/03
EXHIBIT B
AUCTION AND SETTLEMENT PROCEDURES
Section 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the
meanings given such terms pursuant to the Second Supplemental Indenture of Trust (the "Supplemental
Indenture") to which this Exhibit B is attached.
"Available ARBs" has the meaning set forth in Section 2(c)(i)(A) hereof.
"Bid' has the meaning set forth in Section 2(a)(i)(B) hereof.
"Bidder" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Buyer's Broker -Dealer" has the meaning set forth in Section 3(a)(iv) hereof.
"Hold Order" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Order" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Sell Order" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Seller's Broker -Dealer" has the meaning set forth in Section 3(a)(iii) hereof.
"Submission Deadline" has the meaning set forth in Section 2.4 of the Auction
Agreement.
"Submitted Bid" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Hold Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Sell Order" has the meaning set forth in Section 2(c)(i) hereof.
"Sufficient Clearing Bids" has the meaning set forth in Section 2(c)(i)(B) hereof.
"Winning Bid Rate" has the meaning set forth in Section 2(c)(i)(C) hereof.
Section 2. Auction Procedures. So long as the ownership of the ARBs is
maintained in book -entry form by the Securities Depository, an Existing Owner may sell,
transfer or otherwise dispose of ARB only pursuant to a Bid or Sell Order placed in an Auction
or through a Broker -Dealer, provided that, in the case of all transfers other than pursuant to
Auctions, such Existing Owner, its Broker -Dealer or its Participant advises the Auction Agent of
such transfer. Subject to the provisions of Section 2.09 of the Supplemental "First Supplemental
Indenture" means that certain First Supplemental Indenture of Trust, dated as of March 1, 2003,
between the City and the Trustee supplementing the Master Indenture, as the same may be
amended and supplemented in accordance with the provisions of the Master Indenture.
(1) Auctions shall be conducted on each Auction Date, if there is an
Auction Agent on such Auction Date, in the following manner:
(a) (i) Prior to the Submission Deadline on each Auction Date:
(A) each Existing Owner of ARB may submit to a Broker -Dealer by
telephone or otherwise any information as to:
(1) the principal amount of outstanding ARBs, if any, held by such
Existing Owner which such Existing Owner desires to continue to hold without regard to
the Auction Rate for the next succeeding ARB Interest Period;
(II) the principal amount of outstanding ARBs, if any, which such
Existing Owner offers to sell if the Auction Rate for the next succeeding ARB Interest
Period shall be less than the rate per annum specified by such Existing Owner; and/or
(III) the principal amount of outstanding ARBs, if any, held by such
Existing Owner which such Existing Owner offers to sell without regard to the Auction
Rate for the next succeeding ARB Interest Period; and
(B) one or more Broker -Dealers may contact Potential Owners to determine
the principal amount of ARBs which each Potential Owner offers to purchase, if the Auction Rate for the
next succeeding ARB Interest Period shall not be less than the rate per annum specified by such Potential
Owner.
The statement of an Existing Owner or a Potential Owner referred to in (A) or (B) of this
paragraph (i) is hereinafter referred to as an "Order," and each Existing Owner and each Potential Owner
placing an Order is hereinafter referred to as a "Bidder"; an Order described in clause (A)(1) is hereinafter
referred to as a "Hold Order"; an Order described in clause (A)(II) or (B) is hereinafter referred to as a
"Bid"; and an Order described in clause (a)(III) is hereinafter referred to as a "Sell Order."
(ii) (A) Subject to the provisions of Section 2(b) hereof, a Bid by an
Existing Owner shall constitute an irrevocable offer to sell (in each case for settlement in same day funds
on the next ARB Interest Payment Date therefor at a price equal to 100% of the principal amount thereof):
(1) the principal amount of outstanding ARBs specified in such Bid
if the Auction Rate determined as provided herein shall be less than the rate specified in
such Bid; or
(II) such principal amount or a lesser principal amount of
outstanding ARBs to be determined as set forth in Section 2(d)(ii)(D), if the Auction Rate
determined as provided herein shall be equal to the rate specified in such Bid; or
(III) such principal amount or a lesser principal amount of
outstanding ARBs to be determined as set forth in Section 2(d)(ii)(C) if the rate specified
therein shall be higher than the ARB Maximum Rate and Sufficient Clearing Bids have
not been made.
(B) Subject to the provisions of Section 2(b) hereof, a Sell Order by an
Existing Owner shall constitute an irrevocable offer to sell (in each case for settlement in same day funds
on the next ARB Interest Payment Date therefor at a price equal to 100% of the principal amount thereof):
(I) the principal amount of outstanding ARBs specified in such Sell
Order if Sufficient Clearing Bids exist; or
(II) such principal amount or a lesser principal amount of
outstanding ARBs set forth in Section 2(d)(ii)(C), if Sufficient Clearing Bids have not
been made.
DOCSLA1:440646.1
42797-2 EJC B-2
(C) Subject to the provisions of Section 2(b) hereof, a Bid by a Potential
Owner shall constitute an irrevocable offer to purchase (in each case for settlement in same day funds on
the next ARB Interest Payment Date therefor at a price equal to 100% of the principal amount thereof):
(I) the principal amount of outstanding ARBs specified in such Bid
if the Auction Rate determined as provided herein shall be higher than the rate specified
in such Bid; or
(II) such principal amount or a lesser principal amount of
outstanding ARBs set forth in Section 2(d)(i)(E), if the Auction Rate determined as
provided herein shall be equal to the rate specified in such Bid.
(b) (i) Each Broker -Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker -Dealer and
shall specify with respect to each such Order:
Order;
(A) the name of the Bidder placing such Order;
(B) the aggregate principal amount of ARBs that are the subject of such
(C) to the extent that such Bidder is an Existing Owner:
(1) the principal amount of ARBs, if any, subject to any Hold Order
placed by such Existing Owner;
(11) the principal amount of ARBs, if any, subject to any Bid placed
by such Existing Owner and the rate specified in such Bid; and
(III) the principal amount of ARBs, if any, subject to any Sell Order
placed by such Existing Owner; and
(D) to the extent such Bidder is a Potential Owner, the rate specified in such
Potential Owner's Bid.
(ii) If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Auction Agent shall round such rate up to the next higher one thousandth
(.001) of 1%.
(iii) If an Order or Orders covering all outstanding ARBs held by an Existing
Owner is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall
deem a Hold Order to have been submitted on behalf of such Existing Owner covering the principal
amount of outstanding ARBs held by such Existing Owner and not subject to an Order submitted to the
Auction Agent.
(iv) Neither the City, the 2003 Series B Credit Provider, the Trustee nor the
Auction Agent shall be responsible for any failure of a Broker -Dealer to submit an Order to the Auction
Agent on behalf of any Existing Owner or Potential Owner, nor shall any such party be responsible for
failure by any Securities Depository to effect any transfer or to provide the Auction Agent with current
information regarding registration of transfers.
(v) If any Existing Owner submits through a Broker -Dealer to the Auction
Agent one or more Orders covering in the aggregate more than the principal amount of outstanding ARBs
held by such Existing Owner, such Orders shall be considered valid as follows and in the following order
of priority:
(A) All Hold Orders shall be considered valid, but only up to and including
in the aggregate the principal amount of outstanding ARBs held by such Existing Owner, and if the
DOCSLA1:440646.1
42797-2 EJC B-3
aggregate principal amount of ARBs subject to such Hold Orders exceeds the aggregate principal amount
of ARBs held by such Existing Owner, the aggregate principal amount of ARBs subject to each such
Hold Order shall be reduced so that the aggregate principal amount of ARBs subject to such Hold Orders
equals the aggregate principal amount of outstanding ARBs held by such Existing Owner.
(B) (1) any Bid shall be considered valid up to and including the excess
of the principal amount of outstanding ARBs held by such Existing Owner over the aggregate principal
amount of ARBs subject to any Hold Order referred to in subsection (v)(A) above;
(I1) subject to subsection (v)(B)(I) above, if more than one Bid with
the same rate is submitted on behalf of such Existing Owner and the aggregate principal
amount of outstanding ARBs subject to such Bids is greater than such excess, such Bids
shall be considered valid up to and including the amount of such excess;
(III) subject to subsections (v)(B)(I) and (v)(B)(II) above, if more
than one Bid with different rates is submitted on behalf of such Existing Owner, such
Bids shall be considered valid first in the ascending order of their respective rates until
the highest rate is reached at which such excess exists and then at such rate up to and
including the amount of such excess; and
(IV) in any such event, the amount of outstanding ARBs, if any,
subject to Bids not valid under this subsection (B) shall be treated as the subject of a Bid
by a Potential Owner at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to and including the excess
of the principal amount of outstanding ARBs held by such Existing Owner over the aggregate principal
amount of ARBs subject to Hold Orders referred to in subsection (v)(A) and valid Bids referred to in
subsection (v)(B).
(vi) If more than one Bid for ARB is submitted on behalf of any Potential
Owner, each Bid submitted shall be a separate Bid with the rate and principal amount therein specified.
(vii) Any Bid or Sell Order submitted by an Existing Owner covering an
aggregate principal amount of ARBs not equal to an Authorized Denomination shall be rejected and shall
be deemed a Hold Order. Any Bid submitted by a Potential Owner covering an aggregate principal
amount of ARBs not equal to an Authorized Denomination shall be rejected.
(viii) Any Bid specifying a rate higher than the ARB Maximum Rate will be
treated as a Sell Order if submitted by an Existing Owner and will not be accepted if submitted by a
Potential Owner. Any Bid submitted by an Existing Owner or on behalf of a Potential Owner specifying
a rate lower than the All -Hold Rate shall be considered as valid and shall be selected in the ascending
order of their respective rates contained in the Submitted Bids.
(ix) Any Order submitted in an Auction by a Broker -Dealer to the Auction
Agent prior to the Submission Deadline on any Auction Date shall be irrevocable.
(c) (i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the Broker -Dealers
(each such Order as submitted or deemed submitted by a Broker -Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case
may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or
"Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine:
(A) the excess of the total principal amount of outstanding ARBs over the
sum of the aggregate principal amount of outstanding ARBs subject to Submitted Hold Orders (such
excess being hereinafter referred to as the "Available ARBs"), and
DOCSLA1:440646.1
42797-2 EJC B-4
(B) from the Submitted Orders whether:
(I) the aggregate principal amount of outstanding ARBs subject to
Submitted Bids by Potential Owners specifying one or more rates equal to or lower than
the ARB Maximum Rate exceeds or is equal to the sum of:
(II) the aggregate principal amount of outstanding ARBs subject to
Submitted Bids by Existing Owners specifying one or more rates higher than the ARB
Maximum Rate, and
(III) the aggregate principal amount of outstanding ARBs subject to
Submitted Sell Orders
(in the event such excess or such equality exists, other than because all of the outstanding ARBs are
subject to Submitted Hold Orders, such Submitted Bids described in subclause (I) above shall be referred
to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist; the lowest rate specified in such
Submitted Bids (the "Winning Bid Rate") such that if:
(1) (aa) each such Submitted Bid from Existing Owners specifying
such lowest rate and (bb) all other Submitted Bids from Existing Owners specifying
lower rates were rejected, thus entitling such Existing Owners to continue to hold the
principal amount of ARBs subject to such Submitted Bids, and
(II) (aa) each such Submitted Bid from Potential Owners specifying
such lowest rate and (bb) all other Submitted Bids from Potential Owners specifying
lower rates were accepted, the result would be that such Existing Owners described in
subsection (C)(I) above would continue to hold an aggregate principal amount of
outstanding ARBs which, when added to the aggregate principal amount of outstanding
ARBs to be purchased by such Potential Owners described in subsection (C)(II) above,
would equal not less than the Available ARBs.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to Section 2(c)(i) hereof, the Auction Agent shall advise the Broker -Dealer and the Trustee of the ARB
Maximum Rate and the All -Hold Rate and the components thereof on the Auction Date and, based on
such determinations, the Auction Rate for the next succeeding ARB Interest Period as follows:
(A) if Sufficient Clearing Bids exist, that the Auction Rate for the next
succeeding ARB Interest Period shall be equal to the Winning Bid Rate so determined;
(B) if Sufficient Clearing Bids do not exist (other than because all of the
outstanding ARBs are subject to Submitted Hold Orders), that the Auction Rate for the next succeeding
ARB Interest Period shall be equal to the ARB Maximum Rate; or
(C) if all outstanding ARBs are subject to Submitted Hold Orders, that the
Auction Rate for the next succeeding ARB Interest Period shall be equal to the All -Hold Rate.
(d) Existing Owners shall continue to hold the principal amount of ARBs that are
subject to Submitted Hold Orders, and, based on the determinations made pursuant to Section 2(c)(i)
hereof, Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent
shall take such other action as set forth below:
DOCSLA1:440646.1
42797-2 EJC B-$
(i) if Sufficient Clearing Bids have been made, all Submitted Sell Orders
shall be accepted and, subject to the provisions of Sections 2(d)(iv) and 2(d)(v), Submitted Bids shall be
accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be
rejected:
(A) Existing Owners' Submitted Bids specifying any rate that is higher than
the Winning Bid Rate shall be accepted, thus requiring each such Existing Owner to sell the aggregate
principal amount of ARBs subject to such Submitted Bids;
(B) Existing Owners' Submitted Bids specifying any rate that is lower than
the Winning Bid Rate shall be rejected, thus entitling each such Existing Owner to continue to hold the
aggregate principal amount of ARBs subject to such Submitted Bids;
(C) Potential Owners' Submitted Bids specifying any rate that is lower than
the Winning Bid Rate shall be accepted;
(D) each Existing Owner's Submitted Bid specifying a rate that is equal to
the Winning Bid Rate shall be rejected, thus entitling such Existing Owner to continue to hold the
aggregate principal amount of ARBs subject to such Submitted Bid, unless the aggregate principal
amount of outstanding ARBs subject to all such Submitted Bids shall be greater than the principal amount
of ARBs (the "remaining principal amount") equal to the excess of the Available ARBs over the
aggregate principal amount of ARBs subject to Submitted Bids described in subsections (B) and (C) of
this Section 2(d)(i), in which event such Submitted Bid of such Existing Owner shall be rejected in part,
and such Existing Owner shall be entitled to continue to hold the principal amount of ARBs subject to
such Submitted Bid, but only in an amount equal to the aggregate principal amount of ARBs obtained by
multiplying the remaining principal amount by a fraction, the numerator of which shall be the principal
amount of outstanding ARBs held by such Existing Owner subject to such Submitted Bid and the
denominator of which shall be the sum of the principal amount of outstanding ARBs subject to such
Submitted Bids made by all such Existing Owners that specified a rate equal to the Winning Bid Rate;
and
(E) Each Potential Owner's Submitted Bid specifying a rate that is equal to
the Winning Bid Rate shall be accepted, but only in an amount equal to the principal amount of ARBs
obtained by multiplying the excess of the aggregate principal amount of Available ARBs over the
aggregate principal amount of ARBs subject to Submitted Bids described in subsections (B), (C) and (D)
of this Section 2(d)(i) by a fraction the numerator of which shall be the aggregate principal amount of
outstanding ARBs subject to such Submitted Bid and the denominator of which shall be the sum of the
principal amount of outstanding ARBs subject to Submitted Bids made by all such Potential Owners that
specified a rate equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because all of
the outstanding ARBs are subject to submitted Hold Orders), subject to the provisions of Sections 2(d)(iv)
and (v), Submitted Orders shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(A) Existing Owners' Submitted Bids specifying any rate that is equal to or
lower than the ARB Maximum Rate shall be rejected, thus entitling such Existing Owners to continue to
hold the aggregate principal amount of ARBs subject to such Submitted Bids;
(B) Potential Owners' Submitted Bids specifying any rate that is equal to or
lower than the ARB Maximum Rate shall be accepted, and specifying any rate that is higher than the
ARB Maximum Rate shall be rejected; and
(C) each Existing Owner's Submitted Bid specifying any rate that is higher
than the ARB Maximum Rate and the Submitted Sell Order of each Existing Owner shall be accepted,
DOCSLA1:440646.1
42797-2 EJC B-(
thus entitling each Existing Owner that submitted any such Submitted Bid or Submitted Sell Order to sell
the ARBs subject to such Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the aggregate principal amount of ARBs obtained by multiplying the aggregate principal amount
of ARBs subject to Submitted Bids described in subsection (B) of this Section 2(d)(ii) which are accepted
by a fraction the numerator of which shall be the aggregate principal amount of outstanding ARBs held
by such Existing Owner subject to such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the aggregate principal amount of outstanding ARBs subject to all such Submitted Bids
and Submitted Sell Orders.
(iii) If all outstanding ARBs are subject to Submitted Hold Orders, all
Submitted Bids shall be rejected.
(iv) If, as a result of the procedures described in Section 2(d)(i) or 2(d)(ii),
any Existing Owner would be entitled or required to sell, or any Potential Owner would be entitled or
required to purchase, a principal amount of ARBs that is not equal to an Authorized Denomination the
Auction Agent shall, in such manner as in its sole discretion it shall determine, round up or down the
principal amount of ARBs to be purchased or sold by any Existing Owner or Potential Owner so that the
principal amount of ARBs purchased or sold by each Existing Owner or Potential Owner shall be equal to
an Authorized Denomination.
(v) If, as a result of the procedures described in Section 2(d)(ii), any
Potential Owner would be entitled or required to purchase less than an Authorized Denomination of
ARBs, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate ARBs
for purchase among Potential Owners so that only ARBs in Authorized Denominations are purchased by
any Potential Owner, even if such allocation results in one or more of such Potential Owners not
purchasing any ARBs.
(vi) The City, Trustee, Broker -Dealers and Auction Agent shall have no
liability in the event that there are not Sufficient Clearing Bids from time to time pursuant to the Auction
Procedures.
(e) Based on the result of each Auction, the Auction Agent shall determine the
aggregate principal amount of ARBs to be purchased and the aggregate principal amount of ARBs to be
sold by Potential Owners and Existing Owners on whose behalf each Broker -Dealer Submitted Bids or
Sell Orders and, with respect to each Broker -Dealer, to the extent that such aggregate principal amount of
ARBs to be sold differs from such aggregate principal amount of ARBs to be purchased, determine to
which other Broker -Dealer or Broker Dealers acting for one or more purchasers such Broker -Dealer shall
deliver, or from which other Broker -Dealer or Broker -Dealers acting for one or more sellers such Broker -
Dealer shall receive, as the case maybe, ARBs.
(f) Any calculation by the Auction Agent (or the Trustee, if applicable) of the
Applicable ARB Rate, the "AA Commercial Paper Rate", the ARB Maximum Rate, the All -Hold Rate
and the Non -Payment Rate shall, in the absence of manifest error, be binding on all ARB Beneficial
Owners and all other parties.
Section 3. Settlement Procedures.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the Auction
Agent shall notify by telephone each Broker -Dealer that participated in the Auction held on such Auction
Date and submitted an Order on behalf of an Existing Owner or Potential Owner of-
(i) the Auction Rate fixed for the next ARB Interest Period;
(ii) whether there were Sufficient Clearing Bids in such Auction;
DOCSLA1:440646.1
42797-2 EJC B-%
(iii) if such Broker -Dealer (a "Seller's Broker -Dealer") submitted a Bid or a
Sell Order on behalf of an Existing Owner, whether such Bid or Sell Order was accepted or rejected, in
whole or in part, and the principal amount of ARBs, if any, to be sold by such Existing Owner;
(iv) if such Broker -Dealer (a `Buyer's Broker -Dealer") submitted a Bid on
behalf of a Potential Owner, whether such Bid was accepted or rejected, in whole or in part, and the
principal amount of ARBs, if any, to be purchased by such Potential Owner;
(v) if the aggregate principal amount of ARBs to be sold by all Existing
Owners on whose behalf such Broker -Dealer submitted a Bid or a Sell Order exceeds the aggregate
principal amount of ARBs to be purchased by all Potential Owners on whose behalf such Broker -Dealer
submitted a Bid, the name or names of one or more Buyer's Broker -Dealers (and the name of the
Participant, if any, of each such Buyer's Broker -Dealer) acting for one or more purchasers of such excess
principal amount of ARBs and the principal amount of ARBs to be purchased from one or more Existing
Owners on whose behalf such Broker -Dealer acted by one or more Potential Owners on whose behalf
each of such Buyer's Broker -Dealers acted;
(vi) if the principal amount of ARBs to be purchased by all Potential Owners
on whose behalf such Broker -Dealer submitted a Bid exceeds the aggregate principal amount of ARBs to
be sold by all Existing Owners on whose behalf such Broker -Dealer submitted a Bid or a Sell Order, the
name or names of one or more Seller's Broker -Dealers (and the name of the Participant, if any, of each
such Seller's Broker -Dealer) acting for one or more sellers of such excess principal amount of ARBs and
the principal amount of ARBs to be sold to one or more Potential Owners on whose behalf such Broker -
Dealer acted by one or more Existing Owners on whose behalf each of such Seller's Broker -Dealers
acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker -Dealer that submitted an Order on behalf of
any Existing Owner or Potential Owner shall:
(i) advise each Existing Owner and Potential Owner on whose behalf such
Broker -Dealer submitted a Bid or Sell Order in the Auction on such Auction Date whether such Bid or
Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker -Dealer that is a Buyer's Broker -Dealer, advise
each Potential Owner on whose behalf such Broker -Dealer submitted a Bid that was accepted, in whole or
in part, to instruct such Potential Owner's Participant to pay to such Broker -Dealer (or its Participant)
through the Securities Depository the amount necessary to purchase the principal amount of ARBs to be
purchased pursuant to such Bid against receipt of such ARBs;
(iii) in the case of a Broker -Dealer that is a Seller's Broker -Dealer, instruct
each Existing Owner on whose behalf such Broker -Dealer submitted a Sell Order that was accepted, in
whole or in part, or a Bid that was accepted, in whole or in part, to instruct such Existing Owner's
Participant to deliver to such Broker -Dealer (or its Participant) through the Securities Depository the
principal amount of ARBs to be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order and each Potential Owner on whose behalf such Broker -Dealer submitted a Bid of the
Auction Rate for the next ARB Interest Period;
(v) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order of the next Auction Date; and
(vi) advise each Potential Owner on whose behalf such Broker -Dealer
submitted a Bid that was accepted, in whole or in part, of the next Auction Date.
DOCSLA1:440646.1
42797-2 EJC B-8
(c) On the basis of the information provided to it pursuant to Section 3(a), each
Broker -Dealer that submitted a Bid or Sell Order in an Auction is required to allocate any funds received
by it in connection with such Auction pursuant to Section 3(b)(ii), and any ARBs received by it in
connection with such Auction pursuant to Section 3(b)(iii) among the Potential Owners, if any, on whose
behalf such Broker -Dealer Submitted Bids, the Existing Owners, if any on whose behalf such Broker -
Dealer Submitted Bids or Sell Orders in such Auction, and any Broker -Dealers identified to it by the
Auction Agent following such Auction pursuant to Section 3(a)(v) or 3(a)(vi).
(d) On each Auction Date:
(i) each Potential Owner and Existing Owner with an Order in the Auction
on such Auction Date shall instruct its Participant as provided in Section 3(b)(ii) or 3(b)(iii), as the case
may be;
(ii) each Seller's Broker -Dealer that is not a Participant of the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to the Participant of
the Existing Owner delivering ARBs to such Broker -Dealer following such Auction pursuant to Section
3(b)(iii) the amount necessary to purchase such ARBs against receipt of such ARBs, and (B) deliver such
ARBs through the Securities Depository to a Buyer's Broker -Dealer (or its Participant) identified to such
Seller's Broker -Dealer pursuant to Section 3(a)(v) against payment therefor; and
(iii) each Buyer's Broker -Dealer that is not a Participant in the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to Seller's Broker -
Dealer (or its Participant) identified following such Auction pursuant to Section 3(a)(vi) the amount
necessary to purchase the ARBs to be purchased pursuant to Section 3(b)(ii) against receipt of such
ARBs, and (B) deliver such ARB through the Securities Depository to the Participant of the purchaser
thereof against payment therefor.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in Section 3(d)(i) shall instruct the Securities Depository to execute the transactions described
under Section 3(b)(ii) or 3(b)(iii) for such Auction, and the Securities Depository shall execute such
transactions;
(ii) each Seller's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in Section 3(d)(ii) for such Auction, and the Securities
Depository shall execute such transactions; and
(iii) each Buyer's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in Section 3(d)(iii) for such Auction, and the Securities
Depository shall execute such transactions.
(f) If an Existing Owner selling ARBs in an Auction fails to deliver such ARBs (by
authorized book -entry), a Broker -Dealer may deliver to the Potential Owner on behalf of which it
submitted a Bid that was accepted a principal amount of ARBs that is less than the principal amount of
ARBs that otherwise was to be purchased by such Potential Owner. In such event, the principal amount
of ARBs to be so delivered shall be determined solely by such Broker -Dealer. Delivery of such lesser
principal amount of ARBs shall constitute good delivery. Notwithstanding the foregoing terms of this
subsection, any delivery or nondelivery of ARB which shall represent any departure from the results of an
Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or nondelivery in accordance with the provisions of the Auction
Agent Agreement and the Broker -Dealer Agreements.
DOCSLA1:440646.1
42797-2 EJC B-9
EXHIBIT C
FORM OF NOTICE OF CURE OF ARB PAYMENT DEFAULT
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
NOTICE IS HEREBY GIVEN that the ARB Payment Default with respect to the 2003
Series B Bonds identified above has been waived or cured. The next ARB Interest Payment Date is
and the next scheduled Auction Date is
Dated:
BNY WESTERN TRUST COMPANY
DOCSLA1:440646.1
42797-2 EJC C- I
EXHIBIT D
FORM OF AUCTION AGENT AGREEMENT
This AUCTION AGENT AGREEMENT, dated as of (the "Agreement"), between
BNY Western Trust Company, as trustee (the "Trustee") under that certain Indenture of Trust (as from
time to time in effect, the "Master Indenture"), as supplemented by that certain Second Supplemental
Indenture of Trust (as from time to time in effect, the "Supplemental Indenture" and together with the
Master Indenture, the "Indenture"), each dated as of March 1, 2003, and each between the City of Vernon
(the "City") and the Trustee, and [Insert Name of Auction Agent], as auction agent (together with its
successors and assigns, the "Auction Agent"),
Bmet*36I0111IF
WHEREAS, the City has issued $ aggregate principal amount of its Malburg Generating
Station Project Electric System Revenue Bonds, 2003 Series B (the "2003 Series B Bonds") and has
caused the 2003 Series B Bonds to be in an ARB Interest Rate Period (while in such ARB Interest Rate
Period, the 2003 Series B Bonds are referred to as the "ARBs");
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the adequacy and sufficiency of which are hereby acknowledged, and intending to be legally
bound, the Trustee and the Auction Agent agree as follows:
Section 1. Definitions and Rules of Construction.
1.1. Terms Defined by Reference. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Indenture.
1.2. Terms Defined Herein. As used herein and in each Exhibit hereto, the following
terms shall have the following meanings, unless the context otherwise requires:
"ARB Beneficial Owner" shall mean the Person who is the beneficial owner of the ARBs
according to the records of (i) a Securities Depository while the ARBs are in book -entry form or (ii) the
Trustee while the ARBs are not in book -entry form.
"Auction" shall have the meaning specified in Section 2.1 hereof.
"Auction Agent Fee" shall have the meaning specified in Section 4.4(a) hereof.
"Auction and Settlement Procedures" shall mean those procedures set forth in Exhibit B hereto.
"Auction Procedures" shall mean the provisions that are set forth in Section 2 of the Auction and
Settlement Procedures.
"Authorized Broker -Dealer" shall mean each Person listed in Exhibit F hereto.
"Authorized Officer" shall mean each Vice President, Assistant Vice President, Associate and
Assistant Treasurer of the Auction Agent assigned to Group and every other officer or
employee of the Auction Agent designated as an "Authorized Officer" for purposes hereof in a
communication to the Trustee.
DOCSLA1:440646.1
42797-2 EJC D-1
"Authorized Trustee Representative" shall mean each Senior Vice President, Vice President,
Assistant Vice President, Assistant Secretary and Trust Officer of the Trustee and every other officer or
employee of the Trustee designated as an "Authorized Trustee Representative" for purposes hereof in a
communication to the Auction Agent.
"Broker -Dealer Agreement" shall mean each agreement between the Auction Agent and a
Broker -Dealer relating to the ARBs substantially in the form attached hereto as Exhibit A.
"Broker -Dealer Fee" shall have the meaning specified in Section 4.5(a) hereof.
"Existing Owner Registry" shall mean the register maintained by the Auction Agent pursuant to
Section 2.2(a)(i) hereof.
"Notice of ARB Payment Default" shall mean a notice substantially in the form of Exhibit E
hereto.
"Notice of Failure to Deliver" shall mean a notice substantially in the form of Exhibit C to the
Broker -Dealer Agreement.
"Notice of Failure to Receive Certificate" shall mean a notice substantially in the form of Exhibit
C hereto.
"Notice of Failure to Receive Opinion" shall mean a notice substantially in the form of Exhibit D
hereto.
"Notice of Transfer" shall mean a notice substantially in the form of Exhibit B to the Broker -
Dealer Agreement.
"Participant" shall mean a member of, or participant in, a Securities Depository.
"Regular Record Date" shall mean the second Business Day next preceding each ARB Interest
Payment Date.
"Representation Letter" shall mean the letter of representations from the City to The Depository
Trust Company.
"Settlement Procedures" shall mean the procedures that are set forth in Section 3 of the Auction
and Settlement Procedures.
1.3. Rules of Construction. Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of reference
and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
City time.
(d) All references herein to a particular time of day shall be to New York
DOCSLA1:440646.1
42797-2 EJC
D-2
Section 2. The Auction.
2.1. Auction Procedures and Settlement Procedures.
(a) The Indenture provides that the Applicable ARB Rate for each ARB
Interest Period after the first ARB Interest Period, except as provided in Section 2.09 of the Supplemental
Indenture, shall equal the rate per annum that the Auction Agent advises results from implementation of
the Auction and Settlement Procedures set forth herein. As directed in Section 2.09 of the Supplemental
Indenture, the Trustee hereby appoints [Insert Name of Auction Agent] as Auction Agent for purposes of
the Auction and Settlement Procedures and to perform such other obligations and duties as are herein set
forth. BNY Western Trust Company hereby accepts such appointment and agrees that it shall follow the
procedures set forth in this Section and the Auction and Settlement Procedures for the purpose of, among
other things, determining the Applicable ARB Rate for each ARB Interest Period after the first ARB
Interest Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction and Settlement Procedures
set forth in Exhibit B hereto are incorporated herein by reference in their entirety and shall be deemed to
be a part hereof to the same extent as if such provisions were fully set forth herein.
2.2. Preparation of Each Auction.
(a) (i) The Auction Agent shall maintain a current registry of Existing
Owners (such registry being herein called the "Existing Owner Registry"). Such Persons shall constitute
the Existing Owners for purposes of each Auction. The Auction Agent shall indicate in the Existing
Owner Registry the identity of the respective Broker -Dealer of each Existing Owner, if any, on whose
behalf such Broker -Dealer submitted the most recent Order in any Auction which resulted in such
Existing Owner continuing to hold or purchasing the ARBs. [Name of Initial Broker -Dealer], [initially as
the sole Broker -Dealer,] shall provide or cause to be provided to the Auction Agent on the Conversion
Date a list of the initial Existing Owners of ARB. The Auction Agent may conclusively rely upon, as
evidence of the identities of the Existing Owners, (A) such list, (B) the results of each Auction and (C)
notices from any Broker -Dealer of such Existing Owner, Participant of such Existing Owner or the
Existing Owner as described in the first sentence of Section 2.2(a)(iii) hereof.
(ii) The Trustee shall notify the Auction Agent when any notice of
redemption or mandatory tender of ARB is sent to the Securities Depository with respect to ARB not later
than 11:00 a.m., New York City time, on the date such notice is sent. In the event the Auction Agent
receives from the Trustee written notice of any partial prepayment or any mandatory tender of any ARB,
the Auction Agent shall, at least three Business Days prior to the Redemption Date or Tender Date with
respect to such ARB, request the Securities Depository to notify the Auction Agent of the identities of the
Participants (and the respective principal amounts) from the accounts of which ARB have been called for
redemption or mandatory tender and the person or department at such Participant to contact regarding
such redemption or mandatory tender and, at least two Business Days prior to the Redemption Date or
Tender Date with respect to ARB being partially redeemed or tendered, the Auction Agent shall request
each Participant so identified to disclose to the Auction Agent (upon selection by such Participant of the
Existing Owners whose ARB are to be redeemed or tendered) the aggregate principal amount of such
ARB of each such Existing Owner, if any, which are to be redeemed or tendered; provided the Auction
Agent has been furnished with the name and telephone number of a person or department at such
Participant from which it is to request such information. In the absence of receiving any such information
with respect to any Existing Owner from such Existing Owner's Participant or otherwise, the Auction
Agent may continue to treat such Existing Owner as the ARB Beneficial Owner of the principal amount
of ARBs shown in the Existing Owner Registry.
(iii) The Auction Agent shall register in the Existing Owner Registry a
transfer of ARB only if (A) such transfer is pursuant to an Auction or (B) if such transfer is made other
DOCSLA1:440646.1
42797-2 EJC D-3
than pursuant to an Auction, the Auction Agent has been notified in writing by a Notice of Transfer, by
the Broker -Dealer of such Existing Owner, the Participant of such Existing Owner or the Existing Owner
of such transfer. The Auction Agent is not required to accept any notice of transfer delivered prior to an
Auction unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the Business
Day next preceding the applicable Auction Date. The Auction Agent shall rescind a transfer made on the
Existing Owner Registry if the Auction Agent has been notified in writing by a Notice of a Failure to
Deliver by the Participant or the Broker -Dealer of any Person that (i) purchased any ARB or (ii) sold any
ARB and the purchaser failed to make payment to such Person upon delivery to the purchaser of such
ARB. The Auction Agent is not required to accept any notice of rescission to transfer delivered prior to
an Auction unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the Business
Day next preceding the applicable Auction Date.
(b) The Auction Agent may, but shall have no duty to, request that the Broker -
Dealers, as set forth in the Broker -Dealer Agreements, provide the Auction Agent with a list of their
respective customers that such Broker -Dealers believe are Existing Owners of ARB and the aggregate
amount held by such Broker -Dealer. The Auction Agent shall keep confidential any such information and
shall not disclose any such information so provided to any person other than the relevant Broker -Dealer,
the City and the Trustee, provided that the Auction Agent reserves the right to disclose any such
information if (i) it is ordered to do so by a court or regulatory judicial or quasi-judicial agency or
authority, or (ii) it is advised by its counsel that its failure to do so would be unlawful or would impose
upon it any actual or potential loss, claim, damage, liability, or expense for which it has not received
indemnity satisfactory to it.
(c) In the event that any day that is scheduled to be an Auction Date shall be changed
after the Auction Agent shall have given the notice referred to in Section 3(a)(vii) of the Auction and
Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall
give notice of such change to the Broker -Dealers not later than 9:15 a.m., New York City time, on the
earlier of the day prior to the new Auction Date or the old Auction Date.
2.3. All -Hold Rate and ARB Maximum Rate.
(a) On the date hereof the Applicable Percentage is 175%. If there is any
change in the ratings then assigned to the ARBs by Moody's or S&P (or substitute or successor rating
agencies) which results in a change to the Applicable Percentage after the date of this Agreement or if the
Applicable Percentage is adjusted by the Market Agent in accordance with Section 2.09(d) of the
Supplemental Indenture, the Trustee shall notify the Auction Agent in writing of such change in the
Applicable Percentage prior to 9:00 a.m., New York City time, on the Auction Date next succeeding such
change. In determining the ARB Maximum Rate on any Auction Date as set forth in Section 2.3(b)(i)
hereof, the Auction Agent shall be entitled to conclusively rely on the Applicable Percentage of which it
has most recently received notice from the Trustee or, in the absence of such notice, the Applicable
Percentage set forth in the first sentence of this subsection (a).
(b) (i) On each Auction Date, the Auction Agent shall determine the
"AA Commercial Paper Rate", the All -Hold Rate and the ARB Maximum Rate. Pursuant to the Market
Agent Agreement, not later than 9:00 a.m., New York City time, on each Auction Date, the Market Agent
shall make available to the Auction Agent the Index for use by the Auction Agent in connection with such
determination. Not later than 9:30 a.m., New York City time, on each Auction Date, the Auction Agent
shall notify the Trustee and the Broker -Dealers of the All -Hold Rate and the ARB Maximum Rate so
determined and the "AA Commercial Paper Rate" or the Index, as the case may be, used to make such
determination.
(ii) If, after delivery to the Auction Agent of the notice referred to in Section
2.09(d)(ii) of the Supplemental Indenture, the Auction Agent delivers to the Broker -Dealers either of the
DOCSLA1:440646.1
42797-2 EJC D-4
certificates referred to in Section 2.5(c) or (d) hereof, the next succeeding Auction will not be held and the
Auction Agent shall notify the Trustee of the ARB Maximum Rate determined for the next succeeding
ARB Interest Period on the first day of such ARB Interest Period pursuant to Section 2.3(b)(i) above.
(iii) Upon the occurrence of an ARB Payment Default, Auctions will be
suspended and the Applicable ARB Rate for each ARB Interest Period commencing after the occurrence
of such ARB Payment Default to and including the ARB Interest Period, if any, during which, or
commencing less than two Business Days after, such ARB Payment Default is cured or waived in
accordance with the Indenture will equal the Non -Payment Rate as determined by the Trustee in
accordance with the provisions of the Indenture on the first day of such ARB Interest Period as provided
in the Indenture; provided, however, that if an Auction occurred on the Business Day immediately
preceding any such ARB Interest Period (notwithstanding that a weekend may have passed between such
Auction and such ARB Interest Period), the Applicable ARB Rate for such ARB Interest Period shall be
the Non -Payment Rate. The Applicable ARB Rate for each ARB Interest Period commencing at least
two Business Days after any cure or waiver of an ARB Payment Default shall be determined through
implementation of the Auction Procedures.
(iv) If the ownership of the ARBs is no longer maintained in book -entry form
by a Securities Depository, no further Auctions will be held and the Applicable ARB Rate for each ARB
Interest Period commencing after the delivery of physical certificates pursuant to Section 3.05 of the
Master Indenture will equal the ARB Maximum Rate as determined by the Auction Agent on the
Business Day immediately preceding the first day of such ARB Interest Period as provided in the
Indenture.
(v) If any "AA Commercial Paper Rate" is not quoted on an interest basis
but is quoted on a discount basis, the Auction Agent shall convert the quoted rate to the interest
equivalent thereof, as set forth in the definition of "AA Commercial Paper Rate" in the Indenture; or, if
the rate obtained by the Auction Agent is not quoted on an interest or discount basis, the Auction Agent
shall convert the quoted rate to an interest rate after consultation with the Market Agent as to the method
of such conversion.
(vi) If the Federal Reserve Bank of New York has not made available its 30-
day commercial paper rate for purposes of determining the "AA Commercial Paper Rate", the Trustee
shall request that the City appoint by Officer's Certificate at least three commercial paper dealers to
provide commercial paper quotes for purposes of determining the "AA Commercial Paper Rate", as
further provided in Section 2.09(b)(ii) of the Supplemental Indenture.
2.4. Auction Schedule. The Auction Agent shall conduct Auctions in accordance
with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent
of the Trustee, each Broker -Dealer, the 2003 Series B Credit Provider and the Market Agent, which
consent shall not be unreasonably withheld or delayed. The Auction Agent shall give notice pursuant to
Section 5.2 hereof of any such change to each Broker -Dealer. Such notice shall be given prior to the first
Auction Date on which any such change shall be effective.
By 9:00 a.m. The Market Agent makes available to the Auction Agent the Index.
By 9:30 a.m. The Auction Agent advises the Trustee and the Broker -Dealers of the
ARB Maximum Rate, the All -Hold Rate and the "AA Commercial Paper
Rate" or the Index, as the case may be, used in determining such ARB
Maximum Rate and All -Hold Rate, as set forth in Section 2.3(b)(i)
hereof.
DOCSLA1:440646.1
42797-2 EJC D-5
9:30 a.m. -
1:00 P.M. The Auction Agent assembles information communicated to it by
Broker -Dealers as provided in Section 2(b)(i) of the Auction and
Settlement Procedures. The Submission Deadline is 1:00 p.m., New
York City time.
Not earlier than
1:00 P.M. The Auction Agent makes the determination pursuant to Section 2(c)(i)
of the Auction and Settlement Procedures.
By approximately
3:00 p.m. The Auction Agent advises the Trustee and the Broker -Dealers of the
Auction Rate for the next ARB Interest Period and the results of the
Auction as provided in Section 2(c)(ii) of the Auction and Settlement
Procedures. Submitted Bids and Submitted Sell Orders are accepted and
rejected in whole or in part and principal amount of ARBs is allocated as
provided in Section 2(d) of the Auction and Settlement Procedures.
The Auction Agent shall follow the notification procedures set forth in Section 3(a) of the
Auction and Settlement Procedures.
2.5. Changes in Applicable Percentage and Other Rates.
(a) The Auction Agent shall mail any notice delivered to it pursuant to
Section 2.09(d)(ii) of the Supplemental Indenture to the Existing Owners within two Business Days of its
receipt thereof.
(b) The Auction Agent shall deliver any notice delivered to it pursuant to
Section 2.09(d)(iii) of the Supplemental Indenture to the Broker -Dealers not later than 3:00 p.m., New
York City time, on the Business Day on which it receives such certificate. Any noticed received after
3:00 p.m. shall be deemed to have been delivered on the next succeeding Business Day.
(c) If, after delivery to the Auction Agent of the notice referred to in
subsection (a) of this Section, the Auction Agent fails to receive the certificate referred to in Section
2.09(d)(iii)(1) of the Supplemental Indenture by 11:00 a.m., New York City time, on the Business Day
immediately preceding the next succeeding Auction Date, the Auction Agent shall deliver a Notice of
Failure to Receive Certificate to the Broker -Dealers not later than 3:00 p.m., New York City time, on
such Business Day.
(d) If, after delivery to the Auction Agent of the notice referred to in
subsection (a) of this Section, the Auction Agent fails to receive the Opinion of nationally recognized
bond counsel referred to in Section 2.09(d)(iii)(2) of the Supplemental Indenture by 9:30 a.m. on the next
succeeding Auction Date, the Auction Agent shall deliver a Notice of .Failure to Receive Opinion to the
Broker -Dealers promptly by telecopy or other similar means.
2.6. Notices to Existing Owners. The Auction Agent shall be entitled to conclusively
rely upon the address of each Existing Owner as provided in writing by such Existing Owner or a Broker -
Dealer in connection with any notice to Existing Owners required to be given by the Auction Agent.
DOCSLAI :440646.1
42797-2 EJC D-6
2.7. ARB Payment Default.
(a) After delivery by the Trustee to the Auction Agent of a notice pursuant
to Section 2.O9(a)(vii) of the Supplemental Indenture that an ARB Payment Default shall have occurred,
the Auction Agent shall deliver a Notice of ARB Payment Default to the Broker -Dealers on the Business
Day following its receipt of the same by telecopy or other similar means.
(b) The Auction Agent shall deliver a copy of any notice received by it from
the Trustee to the effect that an ARB Payment Default has been cured to the Broker -Dealers on the
Business Day following its receipt of the same by telecopy or other similar means.
2.8. Broker -Dealers.
(a) If the Auction Agent is provided with a copy of a Broker -Dealer
Agreement, which has been manually signed, it shall enter into such Broker -Dealer Agreement with such
person.
(b) The Auction Agent may enter into a Broker -Dealer Agreement with any
other Person who requests to be selected to act as a Broker -Dealer. The Auction Agent shall enter into a
Broker -Dealer Agreement with each Broker -Dealer prior to the participation of any such Broker -Dealer in
any Auction; provided, however, that such Broker -Dealer Agreement may be effective with respect to an
Auction only if the Auction Agent shall have received a manually signed copy of such Broker -Dealer
Agreement at least seven days prior to such Auction.
(c) The Auction Agent shall terminate any Broker -Dealer Agreement as set
forth therein if so directed by the City.
2.9. Access to and Maintenance of Auction Records. The Auction Agent shall afford
to the Trustee, the 2003 Series B Credit Provider and the City, and their respective agents, independent
public accountants and counsel, access at reasonable times during normal business hours to review and
make extracts or copies (at no cost to the Auction Agent) of all books, records, documents and other
information concerning the conduct and results of Auctions, provided that any such agent, accountant, or
counsel shall furnish the Auction Agent with a letter from the Trustee or the City, as the case may be,
requesting that the Auction Agent afford such Person access. The Auction Agent shall not be responsible
or liable for any actions of the Trustee, City or their respective agents, accountants and counsel for
passing on confidential information as a result of access to such records and information. The Auction
Agent shall maintain records relating to any Auction for a period of two years after such Auction (unless
requested by the Trustee at the written direction of the City to maintain such records for such longer
period not in excess of four years, then for such longer period), and such records shall, in reasonable
detail, accurately and fairly reflect the actions taken by the Auction Agent hereunder. To the fullest
extent permitted by applicable law, the Trustee agrees to keep any information regarding the customers of
any Broker -Dealer received from the Auction Agent in connection with this Agreement or any Auction
confidential and shall not disclose such information or permit the disclosure of such information without
the prior written consent of the applicable Broker -Dealer to anyone except such agent, accountant or
counsel engaged to audit or review the results of Auctions as permitted by this Section. Any such agent,
accountant or counsel, before having access to such information, shall agree to keep such information
confidential and not to disclose such information or permit disclosure of such information without the
prior written consent of the applicable Broker -Dealer, except as may otherwise be required by law.
Section 3. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy
of this Agreement, the Broker -Dealer Agreements or the ARBs. The Trustee shall have no responsibility
for the Auction Agent or the Auction Agent's performance or conduct under this Agreement.
DOCSLA1:440646.1
42797-2 EJC D-7
Section 4. The Auction Agent.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trustee hereunder
(provided, however, that the Trustee shall have no responsibility for the Auction Agent or the Auction
Agent's performance or conduct under this Agreement) and owes no fiduciary duties to any person
whatsoever.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement by means of the provisions of the Indenture or otherwise against the Auction
Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent
shall not be liable for any action taken, suffered or omitted or for any error of judgment made by it in the
performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining the
pertinent facts.
(d) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control, including without limitation, acts of God
earthquakes; fires; floods; wars; civil or military disturbances; sabotage; epidemics; riots; labor disputes;
acts of civil or military authority or governmental actions; it being understood that the Auction Agent
shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely on and shall be fully protected
in acting or refraining from acting upon any communication authorized hereby and upon any written
instruction, notice, request, direction, consent, report, certificate, form or bond certificate or other
instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which the Auction Agent believes
in good faith to have been given by the Trustee or by a Broker -Dealer or by their designated or appointed
agents or representatives. The Auction Agent may record telephone communications with the Trustee or
with the Broker -Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the
advice of such counsel shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the performance of its duties
hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall be responsible for any material
misconduct or negligence on the part of any agent or attorney appointed by it hereunder.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no representation as to
the validity or adequacy of this Agreement, the Broker -Dealer Agreements or the ARBs.
DOCSLA1:440646.1
42797-2 EJC D-8
4.4. Compensation, Remedies and Indemnification.
(a) On the first ARB Interest Payment Date and each ARB Interest Payment
Date immediately following an Auction Date, for the period just elapsed, the Auction Agent shall be
entitled to receive a fee for all services rendered by it under this Agreement and the Broker -Dealer
Agreements with respect to the Auction held on such Auction Date in an amount equal initially to the
product of (i) [0.85] basis points, multiplied by (ii) (A) in the case of the first ARB Interest Payment Date,
the aggregate principal amount of outstanding ARBs on the Conversion Date or (B) in the case of each
ARB Interest Payment Date immediately following an Auction Date, the aggregate principal amount of
outstanding ARBs at the close of business on the Regular Record Date immediately preceding such
Auction Date, multiplied by (iii) the number of days in such ARB Interest Period, divided by (iv) 360 (the
"Auction Agent Fee"). The Auction Agent Fee shall be payable solely out of amounts paid by the City in
accordance with Section 4.5(b) hereof. The rate at which the Auction Agent Fee accrues shall be such
that the Auction Agent receives as compensation for all services rendered by it under this Agreement and
the Broker -Dealer Agreements an amount comparable to that received by the Auction Agent and other
institutions performing similar functions for rendering such services and which at least reflects the actual
costs to the Auction Agent for rendering comparable services to others. The Auction Agent and the City
shall negotiate in good faith from time to time to determine the appropriate rate at which the Auction
Agent Fee accrues. Any change in the rate at which the Auction Agent Fee accrues shall be effective on
the Auction Date next succeeding such change.
(b) The City shall indemnify and hold harmless the Auction Agent for and
against any loss, liability or expense incurred without negligence or bad faith on the Auction Agent's part,
arising out of or in connection with its agency under this Agreement and the Broker -Dealer Agreements,
including the reasonable costs and expenses (including the reasonable fees and expenses of its counsel) of
defending itself and its directors, officers, agents, and employees against any such claim or liability in
connection with its exercise or performance of any of its duties hereunder and thereunder and of enforcing
this indemnification provision; provided that the City shall not indemnify the Auction Agent pursuant to
this subsection (b) for any fees and expenses incurred by the Auction Agent in the normal course of
performing its duties hereunder and under the Broker -Dealer Agreements.
4.5. Compensation of the Broker -Dealers.
(a) On the first ARB Interest Payment Date and each ARB Interest Payment
Date immediately following an Auction Date, the Broker -Dealers shall be entitled to receive a fee for all
services rendered by them under the Broker -Dealer Agreements with respect to the Auction held on such
Auction Date in an amount equal to the product of (i) [0.25] of 1% per annum, multiplied by (ii) (A) in
the case of the first ARB Interest Payment Date, the aggregate principal amount of outstanding ARBs on
the Conversion Date or (B) in the case of each ARB Interest Payment Date immediately following an
Auction Date, the aggregate principal amount of outstanding ARBs at the close of business on the
Regular Record Date immediately preceding such Auction Date, multiplied by (iii) the number of days in
such ARB Interest Period, divided by (iv) 360 (the "Broker -Dealer Fee"). The Broker -Dealer Fee shall be
payable solely by the City, in accordance with Section 4.5(b) hereof.
(b) On the first ARB Interest Payment Date and each ARB Interest Payment
Date immediately following an Auction Date, the Trustee shall pay to the Auction Agent from amounts
made available by the City an amount in cash equal to the Auction Agent Fee and the Broker -Dealer Fee
payable pursuant to Sections 4.4(a) and 4.5(a) hereof. The Auction Agent shall pay itself an amount
equal to the Auction Agent Fee out of such moneys, and pay the remainder of such moneys to the Broker -
Dealers in payment of the Broker -Dealer Fee as set forth in Section 2.5(b) of each Broker -Dealer
Agreement.
4.6. Resignation and Removal. The Auction Agent may resign and shall be subject to
removal, in each case as provided in Section 2.09(f) of the Supplemental Indenture.
DOCSLA1:440646.1
42797-2 EJC D-9
Section 5. Miscellaneous.
5.1 Term of Agreement.
(a) This Agreement shall terminate on the earlier of (i) the satisfaction and
discharge of the 2003 Series B Bonds in accordance with the Indenture or this Agreement and (ii) the date
on which this Agreement is terminated in accordance with this Section. The Trustee may terminate this
Agreement in accordance with Section 2.09(f) of the Supplemental Indenture. The Auction Agent may
terminate this Agreement upon written notice to the Trustee, the City, the 2003 Series B Credit Provider,
each Broker -Dealer and the Market Agent on the date specified in such notice, which date shall be no
earlier than 90 days after the date of delivery of such notice. Notwithstanding the foregoing, the
provisions of Section 2 hereof shall terminate upon the delivery of Bond certificates representing the
ARBs pursuant to Section 3.05 of the Master Indenture. Notwithstanding the foregoing, the Auction
Agent may terminate this Agreement if, after notifying the Trustee, the City and the Market Agent that it
has not received payment of any Auction Agent Fee due it in accordance with the terms hereof, the
Auction Agent does not receive such payment within 45 days following notice to the 2003 Series B Credit
Provider, during which time the 2003 Series B Credit Provider shall have the option (but not the
obligation) to cure such payment default, and during which time the auction procedures may not be
suspended. Any resignation or termination of the Auction Agent, other than as described in the
immediately preceding sentence, shall not become effective until a successor auction agent has been
appointed and such successor auction agent has accepted such position.
(b) Except as otherwise provided in this subsection (b), the respective rights
and duties of the Trustee and the Auction Agent under this Agreement shall cease upon termination of
this Agreement. The Trustee's obligations to the Auction Agent under Section 4.4 hereof and to the
Broker -Dealer under Section 4.5 hereof shall survive the termination of this Agreement. Upon
termination of this Agreement, the Auction Agent upon request shall promptly deliver to the Trustee
copies of all books and records maintained by it with respect to the ARBs in connection with its duties
hereunder.
(c) Any successor Auction Agent shall be approved in writing by the 2003
Series B Credit Provider.
5.2. Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures or Settlement Procedures and (ii)
communications in connection with Auctions (other than those expressly required to be in writing), all
notices, requests and other communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party addressed to it at its address, or facsimile number set
below:
If to the Trustee, BNY Western Trust Company
addressed: c/o DB Services New Jersey, Inc.
100 Plaza One
Jersey City, NJ 07311
Attention: Corporate Trust & Agency Services Group
Telephone: (201) 593-6302
Facsimile: (201) 593-6528
DOCSLA1:440646.1
42797-2 EJC D-10
If to the City, addressed: City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Director of Utilities
Telephone: (323) 583-8811
Facsimile: (323) 826-1425
If to the Auction Agent,
addressed
Attention:
Telephone:
Facsimile:
If to 2003 Series B Credit
Provider:
Attention:
Telephone:
Facsimile:
or such other address, telephone or facsimile number as such party may hereafter specify for such purpose
by notice in writing to the other party. Each such notice, request or communication shall be effective
when delivered at the address specified herein. Communications shall be given on behalf of the Trustee
by an Authorized Trustee Representative and on behalf of the Auction Agent by an Authorized Officer.
5.3. Benefits. Nothing herein, express or implied, shall give to any person, other than
the Trustee, acting on behalf of the ARB Beneficial Owners, the 2003 Series B Credit Provider, the
Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
5.4. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a
duly authorized representative of each of the parties hereto and consented to in writing by the City and the
2003 Series B Credit Provider.
(b) Failure of either party hereto to exercise any right or remedy hereunder
in the event of a breach hereof by the other party shall not constitute a waiver of any such right or remedy
with respect to any subsequent breach.
5.5. Successors and Assigns. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors and assigns of each of the Trustee and the
Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written
consent of the other party and the 2003 Series B Credit Provider, which consents shall not be
unreasonably withheld.
5.6. Severability. If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any of the remaining clauses, provisions or sections hereof.
DOCSLA1:440646.1
42797-2 EJC D-11
5.7. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
5.8. Governing_Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made and to be performed in
said state, without giving effect to principles of conflicts of law thereof.
5.9. Trustee. All privileges, rights and immunities given to the Trustee in the
Indenture are hereby extended to and applicable to the Trustee's obligations hereunder.
5.10. Effective Date. This Agreement shall become effective on
DOCSLA1:440646.1
42797-2 EJC D-12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
and delivered under seal by their proper and duly authorized officers as of the date first above written.
BNY WESTERN TRUST COMPANY, as Trustee
am
Authorized Officer
as Auction Agent
:
Title:
DOCSLA1:440646.1
42797-2 EJC D-13
Exhibit A to
Auction Agent
Agreement
FORM OF BROKER -DEALER AGREEMENT
[see Exhibit E to Supplemental Indenture]
DOCSLA1:440646.1
42797-2 EJC D-14
Exhibit B to
Auction Agent
Agreement
AUCTION AND SETTLEMENT PROCEDURES
[see Exhibit B to Supplemental Indenture]
DOCSLAI :440646.1
42797-2 EJC D-15
Exhibit C to
Auction Agent
Agreement
NOTICE OF FAILURE TO RECEIVE CERTIFICATE
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
NOTICE IS HEREBY GIVEN that a condition to changing the percentage used to
determine the All -Hold Rate, the Applicable Percentage used to determine the ARB Maximum Rate and
the percentage of the Index used to determine the Non -Payment Rate has not been met. The existing
percentages and Applicable Percentage will be used to determine the All -Hold Rate, the ARB Maximum
Rate and the Non -Payment Rate, as the case may be. The interest rate on the ARBs for the next
succeeding ARB Interest Period will be equal to the ARB Maximum Rate on the Auction Date.
Terms used herein have the meanings set forth in the Indenture relating to the above -
referenced issue.
, as Auction Agent
By:
Title:
Date:
DOCSLA1:440646.1
42797-2 EX D-16
Exhibit D to
Auction Agent
Agreement
NOTICE OF FAILURE TO RECEIVE OPINION
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
NOTICE IS HEREBY GIVEN that a condition to changing the percentage used to
determine the All -Hold Rate, the Applicable Percentage used to determine the ARB Maximum Rate and
the percentage of the Index used to determine the Non -Payment Rate has not been met. The existing
percentages and Applicable Percentage will be used to determine the All -Hold Rate, the ARB Maximum
Rate and the Non -Payment Rate, as the case may be. The interest rate on the ARBs for the next
succeeding ARB Interest Period.will be equal to the ARB Maximum Rate on the Auction Date.
Terms used herein have the meanings set forth in the Indenture relating to the above -
referenced issue.
as Auction Agent
LI-A
Title:
Date:
DOCSLA1:440646.1
42797-2 EX D-17
Exhibit E to
Auction Agent
Agreement
NOTICE OF ARB PAYMENT DEFAULT
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
NOTICE IS HEREBY GIVEN that an ARB Payment Default has occurred and not been
cured. Determination of the interest rate on the ARBs pursuant to the Auction Procedures will be
suspended. The interest rate on the ARBs for each ARB Interest Period commencing after
will equal the Non -Payment Rate as it is determined by the Trustee on the
first day of such ARB Interest Period. All terms used herein and not otherwise defined shall have the
meanings given such terms in the Indenture of Trust, as supplemented by the Second Supplemental
Indenture of Trust, each dated as of March 1, 2003, and each between the City of Vernon and BNY
Western Trust Company, as trustee.
, as Auction Agent
LIN
Title:
Date:
DOCSLA1:440646.1
42797-2 EJC D-18
Exhibit F to
Auction Agent
Agreement
LIST OF AUTHORIZED BROKER -DEALERS
DOCSLA1:440646.1
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r*1r:1r;3Y80
FORM OF BROKER -DEALER AGREEMENT
This BROKER -DEALER AGREEMENT dated as of (the
"Agreement") by and between [Insert Name of Auction Agent] acting as auction agent (together with its
successors and assigns, the "Auction Agent") and [Insert Name of Broker -Dealer] (together with its
successor and assigns, hereinafter referred to as "[Insert Designation of Broker -Dealer]"),
WITNESSETH:
WHEREAS, the City of Vernon (the "City") has issued $ aggregate principal amount of its
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series B (the "2003 Series B
Bonds") and has caused the 2003 Series B Bonds to be in an ARB Interest Rate Period (while in such
ARB Interest Rate Period, the 2003 Series B Bonds are referred to as the "ARBs") under that certain
Indenture of Trust (as from time to time in effect, the "Master Indenture"), as supplemented by that
certain Second Supplemental Indenture of Trust (as from time to time in effect, the "Supplemental
Indenture" and together with the Master Indenture, the "Indenture"), each dated as of March 1, 2003, and
each between the City and the BNY Western Trust Company, as Trustee (the "Trustee"); and
WHEREAS, the Trustee has entered into that certain Auction Agent Agreement, dated as of
, with the Auction Agent with respect to the ARBs; and
WHEREAS, the Indenture provides that the interest rate with respect to the ARBs for
each ARB Interest Period after the initial ARB Interest Period shall, except under certain conditions,
equal the rate per annum that the Auction Agent advises results from implementation of the Auction
Procedures (the "Auction Rate").
WHEREAS, [Insert Designation of Broker -Dealer] is an Authorized Broker -Dealer listed
in the Auction Agent Agreement, and the Auction Agent is entering into this Agreement in connection
with the 2003 Series B Bonds pursuant to Section 2.8(a) of the Auction Agent Agreement.
WHEREAS, the Auction Procedures require the participation of one or more Broker -
Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Auction Agent, as agent of the Trustee, and [Insert Name of the Broker -Dealer] agree as follows:
Section 1. Definitions and Rules of Construction.
1.1. Terms Defined by Reference. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Indenture or the Auction Agent Agreement.
1.2. Terms Defined Herein. As used herein and in each Appendix hereto, the
following terms shall have the following meanings, unless the context otherwise requires:
"ARB Beneficial Owner" shall mean the Person who is the beneficial owner of ARB
according to the records of i) a Securities Depository while the ARBs are in book -entry form or ii) the
Trustee while the ARBs are not in book -entry form.
"Auction" shall have the meaning specified in Section 2.1 hereof.
DOCSLA1:440646.1
42797-2 EJC E-1
"Auction Agent Agreement" shall mean the Auction Agent Agreement dated as of
by and between the Trustee and the Auction Agent relating to the ARBs.
"Auction Procedures" shall mean the provisions that are set forth in Section 2 of Exhibit
B of the Auction Agent Agreement.
"Authorized Officer" shall mean each Vice President, Assistant Vice President, Associate
and Assistant Treasurer of the Auction Agent assigned to the Group and every
other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes of this
Agreement in a written communication to [Insert Designation of Broker -Dealer].
"[Insert Name of Broker -Dealer Officer" shall mean each officer or employee of [Insert
Designation of Broker -Dealer] designated as a "[Insert Designation of Broker -Dealer] Officer" for
purposes of this Agreement in a written communication to the Auction Agent.
hereto.
"Notice of Failure to Deliver" shall mean a notice substantially in the form of Exhibit C
"Notice of Transfer" shall mean a notice substantially in the form of Exhibit B hereto.
"Order Form" shall mean the form to be submitted by any Broker -Dealer on any Auction
Date in a form acceptable to the Auction Agent.
"Participant" shall mean a member of, or participant in, the Securities Depository.
"Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit
A.
1.3. Rules of Construction. Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of reference
and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
Section 2. The Auction.
2.1. Auction Procedures and Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable ARB Rate for the next
ARB Interest Period. Each periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were fully set forth herein.
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(c) [Insert Designation of Broker -Dealer] agrees to act as, and assumes the
obligations of and limitations and restrictions placed upon, a Broker -Dealer under the Indenture and as
otherwise set forth in this Agreement.
(d) [Insert Designation of Broker -Dealer] and other Broker -Dealers may
participate in Auctions for their own accounts. The Auction Agent shall have no duty or liability with
respect to monitoring or enforcing the requirements of this subsection (d).
2.2. Preuaration for Each Auction.
(a) Not later than 9:30 a.m., New York City time, on each Auction Date for
the ARBs, the Auction Agent shall advise [Insert Designation of Broker -Dealer] by telephone of the All -
Hold Rate, ARB Maximum Rate and the "AA Commercial Paper Rate" or the Index, as the case may be,
used in determining such rates.
(b) In the event the Auction Date for any Auction shall be changed after the
Auction Agent has given notice of such Auction Date pursuant to clause (vii) of paragraph (a) of the
Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall
give notice of such change to [Insert Designation of Broker -Dealer] not later than the earlier of 9:15 a.m.,
New York City time, on the day prior to the new Auction Date and 9:15 a.m., New York City time, on the
old Auction Date. Thereafter, [Insert Designation of Broker -Dealer] shall use its best efforts to promptly
notify its customers who are Existing Owners of such change in the Auction Date.
(c) The Auction Agent may, but shall have no duty to, request, from time to
time, [Insert Designation of Broker -Dealer] to provide it with a list of the respective customers [Insert
Designation of Broker -Dealer] believes are Existing Owners and the aggregate amount held by [Insert
Designation of Broker -Dealer]. The Broker -Dealer shall comply with any such request, and the Auction
Agent shall keep confidential any such information, including information received as to the identity of
Bidders in any Auction, and shall not disclose any such information so provided to any person other than
the Trustee, the City and [Insert Designation of Broker -Dealer], provided that the Auction Agent reserves
the right to disclose any such information if (i) it is ordered to do so by a court or regulatory judicial or
quasi-judicial agency or authority, or (ii) it is advised by its counsel that its failure to do so would be
unlawful or would impose upon it any actual or potential loss, claim, damage liability, or expense for
which it has not received indemnity satisfactory to it.
2.3. Auction Schedule. The Auction Agent shall conduct Auctions in accordance
with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent
of the Trustee and the Market Agent, which consent shall not be unreasonably withheld or delayed. The
Auction Agent shall give notice pursuant to Section 4.3 hereof of any such change to each Broker -Dealer.
Such notice shall be given prior to the first Auction Date on which any such change shall be effective.
By 9:00 a.m. The Market Agent makes available to the Auction Agent the Index.
By 9:30 a.m. The Auction Agent advises the Trustee and [Insert Designation of
Broker -Dealers of the ARB Maximum Rate, the All -Hold Rate and the
"AA Commercial Paper Rate" or the Index, as the case may be, used in
determining such ARB Maximum Rate and All -Hold Rate, as set forth in
Section 2.2(a) hereof.
9:30 a.m.-1:00 p.m. The Auction Agent assembles information communicated to it by
Broker -Dealers as provided in Section 2(b)(i) of the Auction Procedures.
The Submission Deadline is 1:00 p.m., New York City time.
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Not earlier than
1:00 P.M. The Auction Agent makes the determination pursuant to Section 2(c)(i)
of the Auction Procedures.
By approximately
3:00 p.m. The Auction Agent advises the Trustee and [Insert Designation of
Broker-Dealer]s of the Auction Rate for the next ARB Interest Period
and the results of the Auction as provided in Section 2(c)(ii) of the
Auction Procedures. Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and principal amount of ARBs
is allocated as provided in Section 2(d) of the Auction Procedures. The
Auction Agent gives notice of Auction results as set forth in paragraph
(a) of the Settlement Procedures.
(a) [Insert Designation of Broker -Dealer] shall submit Orders to the Auction
Agent pursuant to an Order Form. [Insert Designation of Broker -Dealer] shall submit separate Orders to
the Auction Agent for each Potential Owner or Existing Owner on whose behalf [Insert Designation of
Broker -Dealer] is submitting an Order and shall not net or aggregate the Orders of different Potential
Owners or Existing Owners on whose behalf [Insert Designation of Broker -Dealer] is submitting Orders.
(b) [Insert Designation of Broker -Dealer] shall deliver to the Auction Agent
(i) a Notice of Transfer in writing of any transfer of ARB made through [Insert Designation of Broker -
Dealer] by an Existing Owner to another person other than pursuant to an Auction, and (ii) a Notice of a
Failure to Deliver in writing of the failure of any ARB to be transferred to or by any person that
purchased or sold ARB through [Insert Designation of Broker -Dealer] pursuant to an Auction. The
Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing
sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 p.m., New York
City time, on the Business Day next preceding the applicable Auction Date.
(c) [Insert Designation of Broker -Dealer] and other Broker -Dealers may
submit Orders in Auctions for their own accounts; provided, however, that any Broker -Dealer that is an
affiliate of the City must submit at the next Auction therefor a Sell Order covering all ARB held for its
own account. The Auction Agent shall have no duty or liability with respect to monitoring or enforcing
the requirements of this subsection (c).
(d) [Insert Designation of Broker -Dealer] agrees to handle its customers'
Orders in accordance with its duties under applicable securities laws and rules.
2.4. Notices.
(a) On each Auction Date, the Auction Agent shall notify [Insert
Designation of Broker -Dealer] by telephone of the results of the Auction as set forth in paragraph (a) of
the Settlement Procedures. The Auction Agent shall by 10:30 a.m., New York City time, on the Business
Day next succeeding such Auction Date if previously requested by [Insert Designation of Broker -Dealer]
notify [Insert Designation of Broker -Dealer] in writing of the disposition of all Orders submitted by
[Insert Designation of Broker -Dealer] in the Auction held on such Auction Date.
(b) [Insert Designation of Broker -Dealer] shall notify each Existing Owner
or Potential Owner on whose behalf [Insert Designation of Broker -Dealer] has submitted an Order as set
forth in paragraph (b) of the Settlement Procedures and take such other action as is required by [Insert
Designation of Broker -Dealer] pursuant to the Settlement Procedures.
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42797-2 EJC E-4
(c) The Auction Agent shall deliver to [Insert Designation of Broker -Dealer]
all notices and certificates which the Auction Agent is required to deliver to [Insert Designation of
Broker -Dealer] pursuant to Section 2 of the Auction Agent Agreement after receipt of such notices and
certificates at the times and in the manner set forth in the Auction Agent Agreement.
2.5. Broker -Dealer Fee to Be Paid to [Insert Designation of Broker -Dealer]. On the
first ARB Interest Payment Date and each ARB Interest Payment Date immediately following an Auction
Date, the Auction Agent shall pay to [Insert Designation of Broker -Dealer] from moneys received from
the Trustee pursuant to Section 4.5(b) of the Auction Agent Agreement an amount equal to the product of
(i) [0.25] of 1% per annum, multiplied by (ii) (A) in the case of the first ARB Interest Payment Date, the
aggregate principal amount of outstanding ARBs on the Closing Date or (B) in the case of each ARB
Interest Payment Date immediately following an Auction Date, for the period just elapsed, the sum of (x)
the aggregate principal amount of the ARBs placed by [Insert Designation of Broker -Dealer] in such
Auction that were (1) the subject of Submitted Bids of Existing Owners submitted by [Insert Designation
of Broker -Dealer] and continued to be held as a result of such submission and (2) the subject of Submitted
Bids of Potential Owners submitted by [Insert Designation of Broker -Dealer] and purchased as a result of
such submission and (y) the aggregate principal amount of the ARBs subject to valid Hold Orders
(determined in accordance with the Indenture) that were acquired by such Existing Owners through
[Insert Designation of Broker -Dealer], or (C) if an Auction was not held on such Auction Date, the
aggregate principal amount of the ARBs that were acquired by Existing Owners through [Insert
Designation of Broker -Dealer], multiplied by (iii) the number of days in such ARB Interest Period
divided by (iv) 360. For purposes of subclauses (ii)(B)(x)(1) and (ii)(B)(y) of the foregoing sentence, if
any Existing Owner who acquired ARBs through [Insert Designation of Broker -Dealer] transfers those
ARBs to another person other than pursuant to an Auction, then [Insert Designation of Broker -Dealer]
shall continue to be the Broker -Dealer for such ARBs so transferred; provided, however, that if the
transfer was effected by, or if the transferee is a Broker -Dealer other than [Insert Designation of Broker -
Dealer], then such Broker -Dealer shall be the Broker -Dealer for such ARBs.
2.6. Settlement.
(a) If any Existing Owner on whose behalf [Insert Designation of Broker -
Dealer] has submitted a Bid or Sell Order for ARB that was accepted in whole or in part fails to instruct
its Participant to deliver the ARBs subject to such Bid or Sell Order against payment therefor, [Insert
Designation of Broker -Dealer] shall instruct such Participant to deliver such ARB against payment
therefor and [Insert Designation of Broker -Dealer] may deliver to the Potential Owner on whose behalf
[Insert Designation of Broker -Dealer] submitted a Bid that was accepted in whole or in part, a principal
amount of the ARBs that is less than the principal amount of the ARBs specified in such Bid to be
purchased by such Potential Owner. Notwithstanding the foregoing terms of this Section, any delivery or
nondelivery of ARBs which represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such
delivery or non -delivery in accordance with the terms of Section 2.3(b) hereof. The Auction Agent shall
have no duty or liability with respect to enforcement of this subsection (a).
(b) None of the Auction Agent, the Trustee, [Insert Designation of Broker -
Dealer] or the City shall have any responsibility or liability with respect to the failure of an Existing
Owner, a Potential Owner or its respective Participant to deliver ARBs or to pay for ARBs sold or
purchased pursuant to the Auction Procedures or otherwise.
Section 3. The Auction Agent.
3.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trustee hereunder
and owes no fiduciary duties to any other person by reason of this Agreement.
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(b) The Auction Agent undertakes hereunder to perform such duties and
only such duties as are specifically set forth in the Auction Agent Agreement against the Auction Agent.
(c) In the absence of bad faith or gross negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted or for any error of judgment made by it
in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error
of judgment made in good faith unless the Auction Agent shall have been grossly negligent in
ascertaining (or failing to ascertain) the pertinent facts.
3.2. Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely and shall be fully protected in
acting or refraining from acting upon any communication authorized by this Agreement and upon any
written instruction, notice, request, direction, consent, report, certificate or other instrument, paper,
document or communication reasonably believed by it to be genuine. The Auction Agent shall not be
liable for acting or refraining from acting upon any telephone communication authorized by this
Agreement which the Auction Agent believes in good faith to have been given by the Trustee or by a
Broker -Dealer. The Auction Agent may record telephone communications with [Insert Designation of
Broker -Dealer].
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the performance of its duties
hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall be responsible for any material
willful misconduct or gross negligence on the part of any agent or attorney appointed by it hereunder.
(e) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations hereunder arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including without limitation, acts of God; earthquakes; fires;
floods; wars; civil or military disturbances; sabotage; epidemics; riots; labor disputes; acts of civil or
military authority or governmental actions; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
Section 4. Furnishing of Offering; Materials.
(a) The City agrees to furnish, or cause to be furnished, [Insert Designation
of Broker -Dealer] with as many copies as [Insert Designation of Broker -Dealer] may reasonably request
of the Official Statement, dated , relating to the ARBs (the "Original Official Statement"),
as the same may be supplemented or amended from time to time, including the replacement of such
Official Statement with a separate reoffering memorandum or other disclosure document relating to the
ARBs (the Original Official Statement, as so supplemented and amended, and any such replacement
reoffering memorandum or other disclosure document being referred to herein as the "Official
Statement"), and such other information with respect to the City, the Indenture and the ARBs, as [Insert
Designation of Broker -Dealer] shall reasonably request from time to time.
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(b) If, at any time during the term of this Agreement, any event or condition
known to the City relating to or affecting the City, the Indenture, the ARBs, or the documents or
transactions contemplated thereby, shall occur which in the reasonable judgment of the City, might affect
the correctness or completeness of any representation or warranty of the City contained in this Agreement
or any statement of a material fact contained in the Official Statement, as it shall have been supplemented
or amended with the information furnished from time to time pursuant to this Section 4, or which in the
reasonable judgment of the City, might result in the Official Statement, as so supplemented or amended,
containing any untrue, incorrect or misleading statement of a material fact or omitting to state a material
fact necessary in order to make the statements made therein, in the light of the circumstances under which
they were made, not misleading, (i) the City will promptly notify [Insert Designation of Broker -Dealer] of
the circumstances and details of such event, and (ii) if, in the opinion of [Insert Designation of Broker -
Dealer] or the City, such event or condition requires the preparation and publication of an amendment or
supplement to the Official Statement, the City, at its expense, will promptly prepare or cause to be
prepared an appropriate amendment or supplement thereto so that the statements in the Official Statement
as so amended or supplemented will not contain any untrue, incorrect or misleading statement of a
material fact or omit to state a material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, in a form and manner approved
by [Insert Designation of Broker -Dealer] and the City.
(c) The City shall prepare, at its sole expense, any disclosure documents that
in the reasonable opinion of [Insert Designation of Broker -Dealer] and the City are necessary or desirable.
Such disclosure documents shall be in form and substance acceptable to [Insert Designation of Broker -
Dealer] and its counsel, if any. The City and [Insert Designation of Broker -Dealer] agree to cooperate
fully in the preparation of any such disclosure documents.
Section 5. Miscellaneous.
5.1. Termination. Any party may terminate this Agreement at any time upon five (5)
days' prior notice to the other party. The Broker -Dealer may be removed as provided by Section 3A07(b)
of the Indenture.
5.2. Participant. [Insert Designation of Broker -Dealer] is, and shall remain for the
term of this Agreement, a member of, or Participant in, the Securities Depository (or an affiliate of such a
member or Participant).
5.3. Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection
with the Auctions (other than those expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party, addressed to it, at its address or facsimile number set forth below:
If to [Insert Designation of Broker -Dealer],
addressed:
Attention:
Telephone:
Facsimile:
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If to the Auction Agent, addressed:
Attention:
Telephone:
Facsimile:
If to the Trustee, addressed: BNY Western Trust Company
c/o DB Services New Jersey, Inc.
100 Plaza One
Jersey City, New Jersey 07311
Attention: Corporate Trust & Agency Services
(Municipal Group)
Telephone: (201) 593-6302
Facsimile: (201) 593-6528
If to the City, addressed: City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Director of Utilities
Telephone: (323) 583-8811
Facsimile: (323) 826-1425
or such other address or facsimile number as such party may hereafter specify for such purpose by notice
to the other party. Each such notice, request or communication shall be effective when delivered at the
address specified herein. Communications shall be given on behalf of [Insert Designation of Broker -
Dealer] by a [Insert Designation of Broker -Dealer] Officer and on behalf of the Auction Agent by an
Authorized Officer. [Insert Designation of Broker -Dealer] may record telephone communications with
the Auction Agent.
5.4. Benefits. Nothing in this Agreement, express or implied, shall give to any
person, other than the Auction Agent, [Insert Designation of Broker -Dealer] and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.5. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a
duly authorized representative of each of the parties hereto.
(b) Failure of either party to this Agreement to exercise any right or remedy
hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of
any such right or remedy with respect to any subsequent breach.
5.6. Successors and Assigns. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors and permitted assigns of each of [Insert
Designation of Broker -Dealer] and the Auction Agent.
5.7. Severability. If any clause, provision or section of this Agreement shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such
clause, provision or section shall not affect any remaining clause, provision or sections hereof.
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5.8. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
5.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made and to be performed in
said State, without giving effect to principles of conflicts of law thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
and delivered under seal by their proper and duly authorized officer as of the date first above written.
[Insert Name of Auction Agent], as Auction Agent
By:
Name:
Title:
[Insert Name of Broker -Dealer], as Broker -Dealer
By:
Name:
Title:
DOCSLA1:440646.1
42797-2 EJC E-1 Q
Exhibit A to
Broker -Dealer
Agreement
SETTLEMENT PROCEDURES
Capitalized terms used herein shall have the meanings given such terms in the Indenture.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the Auction
Agent shall notify by telephone each Broker -Dealer that participated in the Auction held on such Auction
Date and submitted an Order on behalf of an Existing Owner or Potential Owner of:
(i) the Auction Rate fixed for the next ARB Interest Period;
(ii) whether there were Sufficient Clearing Bids in such Auction;
(iii) if such Broker -Dealer (a "Seller's Broker -Dealer") submitted a Bid or a
Sell Order on behalf of an Existing Owner, whether such Bid or Sell Order was accepted or rejected, in
whole or in part, and the principal amount of ARBs, if any, to be sold by such Existing Owner;
(iv) if such Broker -Dealer (a "Buyer's Broker -Dealer") submitted a Bid on
behalf of a Potential Owner, whether such Bid was accepted or rejected, in whole or in part, and the
principal amount of ARBs, if any, to be purchased by such Potential Owner;
(v) if the aggregate amount of ARB to be sold by all Existing Owners on
whose behalf such Broker -Dealer submitted a Bid or a Sell Order exceeds the aggregate principal amount
of ARBs to be purchased by all Potential Owners on whose behalf such Broker -Dealer submitted a Bid,
the name or names of one or more Buyer's Broker -Dealers (and the name of the Participant, if any, of
each such Buyer's Broker -Dealer) acting for one or more purchasers of such excess principal amount of
ARBs and the principal amount of ARBs to be purchased from one or more Existing Owners on whose
behalf such Broker -Dealer acted by one or more Potential Owners on whose behalf each of such Buyer's
Broker -Dealers acted;
(vi) if the principal amount of ARBs to be purchased by all Potential Owners
on whose behalf such Broker -Dealer submitted a Bid exceeds the amount of ARB to be sold by all
Existing Owners on whose behalf such Broker -Dealer submitted a Bid or a Sell Order, the name or names
of one or more Seller's Broker -Dealers (and the name of the Participant, if any, of each such Seller's
Broker -Dealer) acting for one or more sellers of such excess principal amount of ARBs and the principal
amount of ARBs to be sold to one or more Potential Owners on whose behalf such Broker -Dealer acted
by one or more Existing Owners on whose behalf each of such Seller's Broker -Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker -Dealer that submitted an Order on behalf of
any Existing Owner or Potential Owner shall:
(i) advise each Existing Owner and Potential Owner on whose behalf such
Broker -Dealer submitted a Bid or Sell Order in the Auction on such Auction Date whether such Bid or
Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker -Dealer that is a Buyer's Broker -Dealer, advise
each Potential Owner on whose behalf such Broker -Dealer submitted a Bid that was accepted, in whole or
in part, to instruct such Potential Owner's Participant to pay to such Broker -Dealer (or its Participant)
through the Securities Depository the amount necessary to purchase the principal amount of ARBs to be
purchased pursuant to such Bid against receipt of such ARB;
DOCSLA1:440646.1
42797-2 EJC E-11
(iii) in the case of a Broker -Dealer that is a Seller's Broker -Dealer, instruct
each Existing Owner on whose behalf such Broker -Dealer submitted a Sell Order that was accepted, in
whole or in part, or a Bid that was accepted, in whole or in part, to instruct such Existing Owner's
Participant to deliver to such Broker -Dealer (or its Participant) through the Securities Depository the
principal amount of ARBs to be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order and each Potential Owner on whose behalf such Broker -Dealer submitted a Bid of the
Auction Rate for the next ARB Interest Period;
(v) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order of the next Auction Date; and
(vi) advise each Potential Owner on whose behalf such Broker -Dealer
submitted a Bid that was accepted, in whole or in part, of the next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph (a) above,
each Broker -Dealer that submitted a Bid or Sell Order in an Auction is required to allocate any funds
received by it in connection with such Auction pursuant to paragraph (b)(ii) above, and any ARB received
by it in connection with such Auction pursuant to paragraph (b)(iii) above among the Potential Owners, if
any, on whose behalf such Broker -Dealer submitted Bids, the Existing Owners, if any on whose behalf
such Broker -Dealer submitted Bids or Sell Orders in such Auction, and any Broker -Dealers identified to it
by the Auction Agent following such Auction pursuant to paragraph (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Owner and Existing Owner with an Order in the Auction
on such Auction Date shall instruct its Participant as provided in (b)(ii) or (b)(iii) above, as the case may
be;
(ii) each Seller's Broker -Dealer that is not a Participant of the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to the Participant of
the Existing Owner delivering ARB to such Broker -Dealer following such Auction pursuant to (b)(iii)
above the amount necessary to purchase such ARB against receipt of such ARB, and (B) deliver such
ARB through the Securities Depository to a Buyer's Broker -Dealer (or its Participant) identified to such
Seller's Broker -Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker -Dealer that is not an Participant in the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to Seller's Broker -
Dealer (or its Participant) identified following such Auction pursuant to (a)(vi) above the amount
necessary to purchase the ARBs to be purchased pursuant to (b)(ii) above against receipt of such ARB,
and (B) deliver such ARB through the Securities Depository to the Participant of the purchaser thereof
against payment therefor.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d)(i) above shall instruct the Securities Depository to execute the transactions described
under (b)(ii) or (b)(iii) above for such Auction, and the Securities Depository shall execute such
transactions;
(ii) each Seller's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in (d)(ii) above for such Auction, and the Securities
Depository shall execute such transactions; and
DOCSLA1:440646.1
42797-2 EJC E- 12
(iii) each Buyer's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in (d)(iii) above for such Auction, and the Securities
Depository shall execute such transactions.
(f) If an Existing Owner selling ARB in an Auction fails to deliver such ARB (by
authorized book -entry), a Broker -Dealer may deliver to the Potential Owner on behalf of which it
submitted a Bid that was accepted a principal amount of ARBs that is less than the principal amount of
ARBs that otherwise was to be purchased by such Potential Owner. In such event, the principal amount
of ARBs to be so delivered shall be determined solely by such Broker -Dealer. Delivery of such lesser
principal amount of ARBs shall constitute good delivery. Notwithstanding the foregoing terms of this
paragraph (f), any delivery or nondelivery of ARB which shall represent any departure from the results of
an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or nondelivery in accordance with the provisions of the Auction
Agent Agreement and the Broker -Dealer Agreements.
DOCSLA1:440646.1
42797-2 EJC E-13
Exhibit B to
Broker -Dealer
Agreement
NOTICE OF TRANSFER
(To be used only for transfers made other than pursuant to an Auction)
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
We are (check one)
_ the Existing Owner named below; or
_ the Broker -Dealer for such Existing Owner; or
_ the Participant for such Existing Owner.
We hereby notify you that such Existing Owner has transferred $ (must be in
units of $25,000) of ARBs to
(Name of Existing Owner)
(Name of Broker -Dealer)
(Name of Participant)
Lo
Name:
Title:
DOCSLA1:440646.1
42797-2 EJC E-14
Exhibit C to
Broker -Dealer
Agreement
NOTICE OF FAILURE TO DELIVER
(To be used only for failure to deliver ARBs sold pursuant to an Auction)
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
We are (check one)
a Broker -Dealer for (the "Purchaser"), which purchased
$ (must be in units of $25,000) of the ARBs in the Auction held on
from the sale of such ARBs.
a Broker -Dealer for (the "Seller"), which sold
$ (must be in units of $25,000) of the ARBs in the Auction held on
We hereby notify you that (check one)
the Seller failed to deliver such ARBs to the Purchaser.
the Purchaser failed to make payment to the Seller upon delivery of such ARBs.
(Name of Broker -Dealer)
Name:
Title:
DOCSLA1:440646.1
42797-2 EJC E-15
EXHIBIT F
FORM OF MARKET AGENT AGREEMENT
DOCSLAI:440646.1 F-I
42797-2 EJC
MARKET AGENT AGREEMENT
This MARKET AGENT AGREEMENT, dated as of (the "Agreement"), by
and between BNY Western Trust Company, as trustee (the "Trustee") under that certain Indenture of
Trust (as from time to time in effect, the "Master Indenture"), as amended by that certain Second
Supplemental Indenture of Trust (as from time to time in effect, the "Supplemental Indenture" and
together with the Master Indenture, the "Indenture"), each dated as of March 1, 2003, and each between
the City of Vernon and the Trustee and [Insert Name of Marker Agent] (in its role as market agent
hereunder, the "Market Agent"),
WITNESSETH:
WHEREAS, the City has issued $ aggregate principal amount of its Malburg Generating
Station Project Electric System Revenue Bonds, 2003 Series B (the "2003 Series B Bonds") and has
caused the 2003 Series B Bonds to be in an ARB Interest Rate Period (while in such ARB Interest Rate
Period, the 2003 Series B Bonds are referred to as the "ARBs");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the adequacy and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the Trustee and the Market Agent agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the respective meanings given such terms in the Indenture.
Section 2. Appointment of Market Agent. As directed in Section 2.09 of the
Supplemental Indenture, the Trustee hereby appoints [Insert Name of Market Agent], as Market Agent
with respect to any ARB to be executed and delivered under and pursuant to the Indenture. The Market
Agent hereby accepts such appointment for the purpose of determining the Index and adjusting the
percentage used in determining the All -Hold Rate, the Applicable Percentage used in determining the
ARB Maximum Rate and the percentage of the Index used in determining the Non -Payment Rate, if any
such adjustment is necessary to reflect any Change of Tax Law or change in market convention such that
ARB paying the ARB Maximum Rate, ARB paying the All -Hold Rate and ARB paying the Non -Payment
Rate in each case shall have substantially equal market values before and after such Change of Tax Law
or change in market convention, upon the terms and conditions set forth herein.
Section 3. Determination of the Index.
(a) On the Business Day immediately preceding the first day of each ARB Interest
Period, other than an ARB Interest Period commencing after (i) the occurrence and during the
continuance of an ARB Payment Default or (ii) ownership of the ARBs is no longer maintained in book -
entry form by a Securities Depository, the Market Agent shall determine the Index and make the Index
available to the Auction Agent.
(b) On the first day of each ARB Interest Period commencing after (i) the occurrence
of an ARB Payment Default or (ii) ownership of the ARBs is no longer maintained in book -entry form by
a Securities Depository to and including the ARB Interest Period, if any, during which such ARB
Payment Default is cured in accordance with the Indenture, or ownership of the ARBs becomes
maintained in book -entry form by a Securities Depository, as the case may be, the Market Agent shall
determine the Index and make the Index available to the Trustee.
DOCSLA1:440646.1 F-2
42797-2 EJC
Section 4. Changes in Percentages Used to Determine the ARB Maximum Rate, the
All -Hold Rate and the Non -Payment Rate. The Market Agent agrees that it will comply with the
provisions set forth in Section 2.09(d) of the Supplemental Indenture with respect to its duties as Market
Agent in connection with adjusting the percentage used in determining the All -Hold Rate, the Applicable
Percentage used in determining the ARB Maximum Rate and the percentage of the Index used in
determining the Non -Payment Rate, including the preparation and delivery of such notices at the times
and containing such information as referred to therein. Any notices delivered in writing pursuant to this
Section 4 shall be substantially in the form of Exhibit B or Exhibit C, as the case may be, hereto.
Section 5. Changes in Statutory Corporate Tax Rate.
(a) The Market Agent agrees that it will notify the Trustee and the Auction Agent in
writing in the event of a change in the Statutory Corporate Tax Rate.
(b) Notices delivered pursuant to this Section 5 shall be substantially in the form of
Exhibit A hereto.
Section 6. Other Duties. The Market Agent agrees to perform such other duties in
accordance with the Indenture as are set forth therein to be performed by the Market Agent.
Section 7. Fees. The Market Agent agrees that it will receive no fees for its
services as Market Agent under this Agreement except as provided in an amendment to this Agreement in
accordance with Section 12(a) hereof approved in writing by the City and that any such fees shall be
payable solely from the City.
Section 8. Rights and Liabilities of the Market Agent.
(a) The Market Agent shall incur no liability for, or in respect of, any action taken or
omitted to be taken, or suffered by it in reliance upon the Indenture, any ARB, on any written instruction,
notice, request, direction, certificate, consent, report, affidavit, statement, order or other instrument, paper,
document or communication reasonably believed by it in good faith to be genuine and on which it
reasonably believed it is entitled to reply. Any instruction, notice, request, direction, certificate, consent,
report, affidavit, statement, order or other instrument, paper, document or communication from the
Trustee or given by it and sent, delivered or directed to the Market Agent under, pursuant to, or as
permitted by, any provision of this Agreement shall be sufficient for purposes of this Agreement if in
writing and signed by any officer or authorized agent of the Trustee. In the absence of bad faith or
negligence on its part, neither the Market Agent nor its officers or employees shall be liable for any action
taken, suffered or omitted or for any error of judgment made in the performance of its duties under this
Agreement. The Market Agent shall not be liable for any error of judgment made in good faith unless the
Market Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts. No
party shall be liable for any default resulting from force majeure, which shall be deemed to include any
circumstances beyond the reasonable control of the party affected. No action, regardless of form, arising
out of or pertaining to the role of the Market Agent hereunder may be brought by any party hereto or
beneficiary hereof more than twelve (12) months after the cause of action has occurred.
(b) In acting under this Agreement, and in connection with the ARBs, the Market
Agent is acting solely as agent of the Trustee (provided, however, that the Trustee shall have no
responsibility for the Market Agent or the Market Agent's performance or conduct hereunder) and does
not assume any obligation or relationship of agency or trust for or with any of the ARB Beneficial
Owners.
DOCSLA1:440646.1 F-3
42797-2 EJC
(c) The Market Agent may consult with counsel satisfactory to it, and the advice of
such counsel shall be full and complete authorization and protection in respect of any action taken or
omitted to be taken or suffered by it hereunder in good faith and in accordance with the advice of such
counsel.
(d) The Market Agent, its directors, officers and employees may become the owner
of, or acquire an interest in, any ARB, with the same rights that such Market Agent, director, officer or
employee would have if the Market Agent were not Market Agent hereunder, and the Market Agent, its
directors, officers and employees may engage or be interested in any financial or other transaction with
the City and may act on, or as depository, paying agent or agent for, any committee or body of holders of
ARB or other obligations of the City as freely as if the Market Agent were not a Market Agent hereunder.
(e) The Market Agent shall not incur any liability with respect to the validity of any
of the ARBs.
Section 9. Duties of the Market Agent. The Market Agent shall be obligated only
to perform such duties as are specifically set forth herein and no other duties or obligations on the part of
the Market Agent, in its capacity as such, shall be implied by this Agreement.
Section 10. Termination. This Agreement shall terminate upon the final payment on
account of the ARBs. The Market Agent may resign and may be discharged as provided for in Section
2.09 of the Supplemental Indenture. Any successor Market Agent shall be acceptable to the 2003 Series
B Credit Provider.
Section 11. Communications. Except for communications authorized to be made by
telephone by this Agreement, all notices, requests and other communications to the City, the Market
Agent, the Auction Agent or the Trustee shall be in writing (including facsimile or similar writing) and
shall be given to such entity, addressed to it, at its address or facsimile number set forth below:
If to the Market Agent, addressed:
If to the Auction Agent, addressed:
DOCSLAI :440646.1
42797-2 EJC
Attention:
Telephone:
Facsimile:
Attention:
Telephone:
Facsimile:
F-4
If to the Trustee, addressed: BNY Western Trust Company
c/o DB Services New Jersey, Inc.
100 Plaza One
Jersey City, New Jersey 07311
Attention: Corporate Trust & Agency
Services
(Municipal Group)
Telephone: (201) 593-6302
Facsimile: (201) 593-6528
If to the City, addressed: City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Director of Utilities
Telephone: (323) 583-8811
Facsimile: (323) 826-1425
Each entity listed above may change the address for service of notice upon it by a notice
in writing to the other entities named above. Each such notice, request or communication shall be
effective when delivered at the address specified herein.
The Market Agent may rely upon, and is authorized to honor, any telephonic requests or
directions which the Market Agent reasonably believes in good faith to emanate from an authorized
representative of the Trustee. Any telephonic request or direction to the Market Agent shall promptly be
confirmed in writing; provided, however, that failure to receive any such notice shall not affect the
authority of the Market Agent to rely and act upon such request or direction.
Section 12. Miscellaneous.
(a) The terms of this Market Agreement as set forth herein shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by written instrument
signed by the parties hereto and approved by the 2003 Series B Credit Provider.
(b) This Agreement shall be binding upon, and inure to the benefit of, the Trustee
and the Market Agent and their respective successors and assigns. The City and the 2003 Series B Credit
Provider are intended third -party beneficiaries of the obligations of the Trustee and the Market Agent
hereunder, and such obligations create a duty in the Trustee and the Market Agent to the City and the
2003 Series B Credit Provider to perform such obligations, and the City and the 2003 Series B Credit
Provider shall have the right to enforce such duty.
(c) If any clause, provision or section hereof shall be ruled invalid or unenforceable
by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any of the remaining clauses, provisions or sections hereof.
(d) This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same instrument.
(e) This Agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements executed and performed in such state.
DOCSLA1:440646.1 F-5
42797-2 EX
(f) This Agreement shall become effective on
(g) All privileges, rights and immunities given to the Trustee in the Indenture are
hereby extended to and applicable to the Trustee's obligations hereunder.
DOCSLA1:440646.1 F-6
42797-2 EJC
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered under seal by their respective proper and duly authorized officers as of the date
first above written.
LI-A
Name:
Title:
as Market Agent
BNY WESTERN TRUST COMPANY, as Trustee
In
Authorized Officer
DOCSLA1:440646.1 F_7
42797-2 EJC
Exhibit A to
Market Agent
Agreement
CHANGE IN STATUTORY CORPORATE TAX RATE
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
Pursuant to Section 5 of the Market Agent Agreement, please be advised that the
Statutory Corporate Tax Rate for all Auctions commencing after has been changed.
The new Statutory Corporate Tax Rate commencing on shall be %.
as Market Agent
By:_
Name:
Its:
DOCSLA1:440646.1 F_8
42797-2 EJC
Exhibit B to
Market Agent
Agreement
NOTICE OF PROPOSED PERCENTAGE CHANGE
[The Market Agent shall deliver this notice by 11:00 a.m., New York City time,
on the Business Day immediately preceding the Auction Date on which such
changes shall be effective, by telex, telecopy or similar means]
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
NOTICE IS HEREBY GIVEN to BNY Western Trust Company, as Trustee (the
"Trustee") and [Insert Name of Auction Agent], as Auction Agent, that [Insert Name of Market Agent],
as Market Agent for the above -captioned issue, proposes to change the percentages used to determine the
ARB Maximum Rate, the All -Hold Rate and/or the Non -Payment Rate to reflect a Change of Tax Law in
accordance with that certain Indenture of Trust (as from time to time in effect, the "Master Indenture"), as
amended by that certain Second Supplemental Indenture of Trust (as from time to time in effect, the
"Supplemental Indenture" and together with the Master Indenture, the "Indenture"), each dated as of
March 1, 2003, and each between the City of Vernon and the Trustee. Assuming the conditions set forth
in the Supplemental Indenture are met, such change will be effective on (the "Effective
Date").
[Insert a description of the changes in the All -Hold Rate, the Applicable
Percentages used to determine the ARB Maximum Rate and the percentage of the
Index used to determine the Non -Payment Rate, as the case may be]
The Market Agent hereby confirms that Bond Counsel expects to be able to give an
opinion on or prior to the Effective Date to the effect that the adjustment in the percentage used to
determine the All -Hold Rate, the Applicable Percentages used to determine the ARB Maximum Rate and
the percentage of the Index used to determine the Non -Payment Rate is authorized by the Indenture, is
permitted under the Code and will not have an adverse effect on the exclusion of interest on the ARBs
from gross income for federal income tax purposes.
If any of the conditions referred to in the paragraph above are not met, the existing
percentages used to determine the [_] shall remain in effect and the Applicable ARB Rate for the
next succeeding ARB Interest Period shall equal the ARB Maximum Rate on the Effective Date.
DOCSLA1:440646.1 F-9
42797-2 EJC
Capitalized terms used but not defined herein, shall have the meanings ascribed to them
in the Indenture.
Dated:
DOCSLA1:440646.1
42797-2 EJC
[Insert Name of Market Agent], as Market Agent
By:_
Name:
Its:
F-10
Exhibit C to
Market Agent
Agreement
NOTICE OF PERCENTAGE CHANGE
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
NOTICE IS HEREBY GIVEN to BNY Western Trust Company, as Trustee (the
"Trustee"), and [Insert Name of Auction Agent], as Auction Agent, that [Insert Name of Market Agent],
as Market Agent for the above -captioned issue, hereby authorizes a change effective the date hereof in the
percentages used to determine the ARB Maximum Rate, the All -Hold Rate and/or the Non -Payment Rate
to reflect a Change of Tax Law in accordance with that certain Indenture of Trust (as from time to time in
effect, the "Master Indenture"), as amended by that certain Second Supplemental Indenture of Trust (as
from time to time in effect, the "Supplemental Indenture" and together with the Master Indenture, the
"Indenture"), each dated as of March 1, 2003, and each between the City of Vernon and the Trustee.
[Insert a description of the changes in the All -Hold Rate, the Applicable
Percentages used to determine the ARB Maximum Rate and the percentage of the
Index used to determine the Non -Payment Rate, as the case may be]
The Market Agent also confirms that Bond Counsel has delivered its opinion dated the
date hereof to the effect that the adjustment in the percentage used to determine the All -Hold Rate, the
Applicable Percentages used to determine the ARB Maximum Rate and the percentage of the Index used
to determine the Non -Payment Rate is authorized by the Indenture, is permitted under the Code and will
not have an adverse effect on the exclusion of interest on the ARBs from gross income for federal income
tax purposes.
Capitalized terms used but not defined herein, shall have the meanings ascribed to them
in the Indenture.
Dated: I [Insert Name of Market Agent], as Market Agent
By:_
Name:
Its:
DOCSLA1:440646.1 F-11
42797-2 EJC
SABW LLP
Draft of 2/18/2003
CITY OF VERNON
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B
REMARKETING AGREEMENT
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Ladies and Gentlemen:
, 2003
This is to confirm the agreement (the "Agreement") between the undersigned, Banc of
America Securities LLC (`Banc of America" or the "Remarketing Agent") and the City of
Vernon (the "City"), for Banc of America to act as exclusive remarketing agent in connection
with the offering and sale from time to time in the secondary market of the City's $
aggregate principal amount of Malburg Generating Station Project Electric System Revenue
Bonds, 2003 Series B (the "2003B Bonds") issued pursuant to an Indenture of Trust, dated as of
March 1, 2003, as supplemented by the Second Supplemental Indenture of Trust, dated as of
March 1, 2003 (collectively, the "Indenture"), by and between the City and BNY Western Trust
Company, as trustee (the "Trustee"). All capitalized terms used herein and not defined herein
shall have the meanings specified in the Indenture.
Concurrently with the issuance of the 2003B Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "Letter of Credit") pursuant to a Reimbursement Agreement,
dated as of March , 2003 (the "Reimbursement Agreement"), between the City and
(the `Bank").
1. Appointment of Remarketing Agent; Responsibilities of Remarketing Agent.
(A) Subject to the terms and conditions herein contained, Banc of America is hereby
appointed, and Banc of America hereby accepts such appointment and the duties and obligations
imposed on it hereunder and under the Indenture, as exclusive remarketing agent in connection
with the determination of interest rates, the offering and sale of the 2003B Bonds from time to
time in the secondary market subsequent to the initial offering, and the performance and
discharge of all other responsibilities stated to be that of the Remarketing Agent under the
Indenture. Banc of America agrees to perform the duties and obligations as remarketing agent as
set forth hereunder and under the Indenture. The principal office of the Remarketing Agent shall
be as set forth under Section 11 hereof.
LA1 4871630
(B) It is understood and agreed that the Remarketing Agent's responsibilities hereunder
and under the Indenture will include (i) exercising its best efforts in its sale of the 2003B Bonds,
(ii) effecting and processing such purchases, (iii) billing and receiving payment of Bond
purchases, (iv) causing the proceeds from the secondary sale of the 2003B Bonds to be
transferred to the Tender Agent or the Trustee as appropriate, (v) determining the Daily Interest
Rate, Weekly Interest Rate, Commercial Paper Term and Commercial Paper Term Rate and
Long Term Interest Rate, as applicable, and (vi) performing such other related functions as
provided in the Indenture of the Remarketing Agent or reasonably requested by the City and
agreed to by the Remarketing Agent.
(C) The obligations of the Remarketing Agent hereunder and under the Indenture, with
respect to the date on which the 2003B Bonds are to be remarketed pursuant to this Agreement,
are also subject to the further conditions that (i) the Indenture, this Agreement, the Liquidity
Facility and the Policy shall be in full force and effect and shall not have been amended,
modified or supplemented in any way which would materially and adversely affect the
remarketing of the 2003B Bonds, except as may have been agreed to in writing by the
Remarketing Agent, that no Events of Default under the Indenture shall have occurred and be
continuing and there shall be in full force and effect such additional resolutions, agreements,
certificates (including such certificates as may be required by regulations for the Internal
Revenue Service in order to establish or preserve the tax-exempt character of interest on the
2003B Bonds) and opinions, which resolutions, agreements, certificates and opinions shall be
reasonably satisfactory in form and substance to Bond Counsel and counsel for the Remarketing
Agent, and (ii) at or prior to the closing date for the 2003B Bonds, the Remarketing Agent shall
have received all closing documents required by, and delivered pursuant to the Contract of
Purchase relating to the 2003B Bonds (the "Purchase Contract").
2. The 2003B Bonds.
As more fully described in the Indenture, the 2003B Bonds will be issuable, subject to the
terms and conditions of the Indenture, in the form of fully registered 2003B Bonds in the
denominations, and having such tender, redemption, payment and other terms, as specified in the
Indenture.
3. Furnishing of Offering Materials.
(A) The City agrees to furnish the Remarketing Agent with as many copies as the
Remarketing Agent may reasonably request of the Official Statement, dated , 2003 (the
"Official Statement"), and such other information associated with the City, the Electric System
and the 2003B Bonds as the Remarketing Agent shall reasonably request from time to time,
including, without limitation, information deemed necessary by the Remarketing Agent to amend
or supplement the Official Statement or the preparation of any other similar disclosure document,
as well as receipt of a "comfort letter" or similar written information from the City's accountants
if deemed necessary by the Remarketing Agent.
(B) The City agrees to cooperate with the Remarketing Agent in the preparation of a new
Official Statement or other offering material for the 2003B Bonds if the Remarketing Agent
2
LA1 487163v1
determines that the preparation and distribution of such Official Statement or offering material is
necessary or desirable in connection with remarketing the 2003B Bonds.
(C) In connection with any remarketing of the 2003B Bonds that constitutes a "primary
offering" within the meaning of Rule 15c2-12 of the Securities and Exchange Commission
where an official statement is required to be delivered, the City will use its best efforts to provide
information to be used in such amendments or supplements, so that the Official Statement, as so
amended or supplemented, will not contain any untrue fact necessary in order to make the
statements made therein, in the light of the circumstances under which the Official Statement is
to be used, not misleading. In addition, the City, at its own expense and upon the request of the
Remarketing Agent, will (i) register the sale of the 2003B Bonds in the manner required under
any Federal or state securities law and take all action required to qualify the Indenture under the
Trust Indenture Act of 1939, as amended, if such shall become required under such laws, and
(ii) take all steps reasonably requested by the Remarketing Agent to enable the Remarketing
Agent to establish a "due diligence" defense to any action commenced against it, in respect of
the Official Statement or any document incorporated by reference therein.
(D) If, at any time during the term of this Remarketing Agreement, any event known to
the City shall occur which might affect the correctness or completeness of any statement of a
material fact contained in the Official Statement, the City will promptly notify the Remarketing
Agent in writing of the circumstances and details of such event. The City agrees to prepare an
amendment or supplement to the Official Statement, at its own expense, if in the judgement of
the City or the Remarketing Agent such amendment or supplement is necessary to ensure that at
all times the Official Statement, as amended or supplemented, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were made, not misleading.
(E) In connection with the remarketing of the 2003B Bonds as a result of, or in
anticipation of, (i) an expiration or termination of a Credit Support Instrument, (ii) the
Conversion of the 2003B Bonds from the Weekly Interest Rate Period to another Interest Rate
Period pursuant to the Indenture, or (iii) the establishment of a Long Term Interest Rate, the City
will prepare any disclosure documents, which in the reasonable opinion of the Remarketing
Agent or the City are necessary or desirable. The City hereby agrees to cooperate fully with the
Remarketing Agent in the preparation of such disclosure documents. All costs incurred in
connection with the preparation of such disclosure documents shall be borne by the City.
4. Representation, Warranties, Covenants and Agreements of the City.
The representations, warranties and agreements of the City set forth in the Purchase
Contract are hereby incorporated herein as being made as of the date hereof. The City shall
deliver to the Remarketing Agent such additional information concerning the business and
financial condition of the City and the Electric System as the Remarketing Agent may reasonably
request.
LAI 487163v1
5. Term and Termination of Remarketing Agreement.
The Remarketing Agent may be removed at the direction of the City at any time on 45
days prior written notice, by an instrument signed by the City, filed with the Remarketing Agent,
the Bank, the Trustee and the Tender Agent, and may resign at any time on 60 days' written
notice to the Tender Agent, the Trustee, the Bank and the City. Following termination, the
provisions of Sections 8, 9 and 10 will continue in effect as to transactions prior to the date of
termination, and each party will pay the other any amounts owing at the time of termination.
The Remarketing Agent (after prior consultation with the City) may cease remarketing and
selling the 2003B Bonds with immediate effect if it determines, in its reasonable judgment, that
for any reason, including without limitation, (i) a pending or proposed change in applicable tax
laws, (ii) a material adverse change in the financial condition of the City, (iii) a banking
moratorium, (iv) hostilities, (v) a downgrade or withdrawal of the rating of the 2003B Bonds,
(vi) the termination of a Credit Support Instrument, (vii) an imposition of material restrictions on
the 2003B Bonds or similar obligations, (viii) trading on the New York Stock Exchange or any
other major national stock exchange shall have been wholly suspended, (ix) an event, including,
without limitation, the bankruptcy or default of any other issuer of or obligor on obligations of
the general character of the 2003B Bonds or on similar commercial paper, shall have occurred or
(x) a material misstatement or omission in the Official Statement as then modified or
supplemented, that it is not advisable to attempt to remarket the 2003B Bonds.
6. Dealing in 2003B Bonds by Remarketing Agent.
The Remarketing Agent, in its individual capacity, either as principal or agent, may buy,
sell, own, hold and deal in any of the 2003B Bonds, and may join in any action which any owner
of any Bond may be entitled to take with the like effect as if it did not act in any capacity
hereunder. The Remarketing Agent, in its individual capacity, either as principal or agent, may
also engage in or be interested in any financial or other transaction with the City and may act as
depositary, trustee or agent for any committee or body of Bondholders or other obligations of the
City as freely as if it did not act in any capacity hereunder.
7. Payment of Fees and Expenses.
While the 2003B Bonds accrue interest at a Daily Interest Rate, a Weekly Interest Rate or
Commercial Paper Rates (as such terms are defined in the Indenture), the City shall pay the
Remarketing Agent directly, as compensation for its services hereunder, a fee equal to
of one percent (_%) per annum of the weighted average principal amount of the
2003B Bonds outstanding during each three-month period, or such other amount as may be
agreed upon from time to time by the City and the Remarketing Agent, payable quarterly in
arrears on each 1, 1, 1, and 1, commencing
1, 2003. The parties anticipate that separate arrangements will be made for the
remarketing of 2003B Bonds accruing interest at a Long Term Interest Rate.
8. Indemnity and Contribution.
(A) To the extent permitted by law, the City agrees to indemnify and hold harmless the
Remarketing Agent and each person who controls the Remarketing Agent within the meaning of
4
LAl 4871630
Section 15 of the Securities Act of 1933, from and against any and all losses, claims, damages or
liabilities, caused by (i) the failure to register any security under the Securities Act of 1933, as
amended, or to qualify any indenture under the Trust Indenture Act of 1939, as amended in
connection with the remarketing of the 2003B Bonds; or (ii) any untrue statement or alleged
untrue statement of a_material fact contained in any offering document used in connection with
the remarketing of the 2003B Bonds (which may include the Official Statement (the "Offering
Document") or any amendment thereof or supplement thereto, or caused by the omission or
alleged omission to state therein a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished under the heading
"UNDERWRITING" in the Offering Document.
(B) In case any action shall be brought against the Remarketing Agent or any person
controlling the Remarketing Agent, in respect of which indemnity may be sought against the
City, the Remarketing Agent shall, as a condition to the above indemnity, promptly notify the
City in writing, and the City shall assume the defense thereof, including the employment of
counsel and payment of all expenses. The Remarketing Agent or any such controlling person
shall have the right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the expense of the
Remarketing Agent or controlling person, as the case may be, unless (i) the employment of such
counsel has been specifically authorized by the City in writing prior to the employment of such
counsel or (ii) the named parties to any such action (including any impleaded parties) including
both the Remarketing Agent or such controlling person and the City, and the Remarketing Agent,
or such controlling person, as the case may be, shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from or additional to
those available to the City and that joint representation may be inappropriate under professional
standards, in which case the City shall not have the right to assume the defense of such action on
behalf of the Remarketing Agent or such controlling person, as the case may be, it being
understood, however, that the City shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for the Remarketing Agent (including controlling persons), and any
such firm shall be designated in writing by the Remarketing Agent. The City shall not be liable
for any settlement of any such action effected without its written consent, but if settled with the
prior written consent of the City, or if there be a final judgment for the plaintiff in any such
action, the City agrees to indemnify and hold harmless the Remarketing Agent and any such
controlling person from and against any loss or liability by reason of such settlement or
judgment.
(C) The Remarketing Agent agrees to indemnify and hold harmless the City, its directors
and officers and any person controlling the City to the same extent as the indemnity from the
City to the Remarketing Agent set forth in subsection 8(A)(ii), but only with reference to
information under the heading "UNDERWRITING" in the Offering Document. In case any
action shall be brought against the City, any of its directors or any such officer or controlling
person based on the Official Statement and in respect of which indemnity may be sought against
the Remarketing Agent, the Remarketing Agent shall have the rights and duties given to the City,
5
LA1 487163v1
and the City, its directors or any such officer or controlling persons shall have the rights and
duties given to the Remarketing Agent by subsection 8(B).
(D) If the indemnification provided for in this Section 8 is unavailable to or insufficient
to hold harmless an indemnified party under subsection (A) or (C) above in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the City on the one hand
and the Remarketing Agent on the other from the remarketing of the 2003B Bonds. If, however,
the allocation provided by the immediately preceding sentence is not permitted by applicable law
or if the indemnified party failed to give the notice required under subsection (B) above, then
each indemnifying party shall contribute to such amount paid or payable by such indemnified
party in such proportion as is appropriate to reflect not only such relative benefits but also the
relative fault of the City on the one hand and the Remarketing Agent on the other in connection
with the statements or omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable considerations. The relative
benefits received by the City on the one hand and the Remarketing Agent on the other shall be
deemed to be in the same proportion as the total net proceeds from the remarketing (before
deducting expenses) received by the City bear to the total underwriting discounts and
commissions received by the Remarketing Agent. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to information supplied by
the City on the one hand or the Remarketing Agent on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such statement or
omission. The City and the Remarketing Agent agree that it would not be just and equitable if
contribution pursuant to this subsection (D) were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable considerations referred
to above in this subsection (D). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this
subsection (D) shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (D), the Remarketing Agent shall not be
required to contribute any amount in excess of the amount by which the total price at which the
2003B Bonds were offered to the public exceeds the amount of any damages which the
Remarketing Agent has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation.
(E) The indemnity and contribution provisions of this Remarketing Agreement shall not
supersede any other indemnity in any other agreement or arising otherwise by law.
9. Remarketing Agent's Liabilities.
The Remarketing Agent shall incur no liability to the City, or any other party for its
actions as Remarketing Agent pursuant to the terms hereof and of the Indenture except for (i) the
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LA1 487163v1
liabilities for which the Remarketing Agent has agreed to indemnify the City and other pursuant
to Section 8(C) above and (ii) its gross negligence or willful misconduct. The obligation of the
Remarketing Agent to remarket bonds hereunder shall be on a best efforts basis.
10. Intention of Parties.
It is the express intention of the parties hereto that no purchase, sale or transfer of any
2003B Bonds, as herein provided, shall constitute or be construed to be the extinguishment of
any Bond or the indebtedness represented thereby or the reissuance of any Bond or the refunding
of any indebtedness represented thereby.
11. Miscellaneous.
(A) Except as otherwise specifically provided in this Agreement, all notices and formal
communications under this Agreement shall be in writing and mailed, telegraphed or delivered
to:
The Remarketing Agent:
Banc of America Securities LLC
Municipal Bond Department
300 South Grand Avenue, 19th Floor
Los Angeles, CA 90071
Attention:
Telephone:
Facsimile:
The City:
City of Vernon
4305 Sante Fe Avenue
Vernon, California 90058
Attention:
Telephone:
Facsimile:
The Remarketing Agent and City may, by notice given under this Agreement, designate
other addresses to which subsequent notices, requests, reports or other communications shall be
directed.
(B) The obligations of the respective parties hereto may not be assigned or delegated to
any other person without the consent of the other parties hereto. This Agreement will inure to
the benefit of and be binding upon the City and the Remarketing Agent and their respective
successors and assigns, and will not confer any rights upon any other person, partnership,
association or corporation other than persons, if any, controlling the Remarketing Agent within
the meaning of the Securities Act.
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LAl 487163vl
(C) All of the representations, warranties and agreements contained in this Agreement of
the City and the Remarketing Agent shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of the Remarketing Agent or the City,
(ii) delivery of and any payment for any 2003B Bonds hereunder or (iii) termination or
cancellation of this Agreement.
(D) Section headings have been inserted in this Agreement as a matter of convenience of
reference only, and it is agreed that such section headings are not a part this Agreement and will
not be used in the interpretation of any provision of this Agreement.
(E) If any provisions of this Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions because it conflicts with any provisions of any constitution,
statute, rule of public policy, or any other reason, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or unenforceable in any other case or
circumstances, or of rendering any other provisions inoperative or unenforceable to any extent
whatsoever.
(F) This Agreement constitutes the entire agreement between the parties hereto with
respect to the matters covered hereby, and supersedes all prior agreements and understandings
between the parties. This Agreement shall only be amended, supplemented or modified in a
writing signed by both of the parties hereto.
(G) This Agreement may be executed in several counterparts, each of which shall be
regarded as an original and all of which shall constitute one and the same document.
(H) This Agreement will be governed by and construed in accordance with the laws of
New York.
Very truly yours,
Banc of America Securities LLC
Accepted and agreed to as of the date first above
written:
City of Vernon
LAI 487163v1
OHS DRAFT 2/18/03
THIRD SUPPLEMENTAL
INDENTURE OF TRUST
between
CITY OF VERNON
and
BNY WESTERN TRUST COMPANY, as Trustee
Relating to
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series C
Dated as of March 1, 2003
DOCSLA1:438054.3
42797-2 EJC
TABLE OF CONTENTS
Page
ARTICLE I AUTHORITY AND DEFINITIONS............................................................... 1
Section 1.01.
Supplemental Indenture of Trust.......................................................... 1
Section 1.02.
Authority for the Third Supplemental Indenture of Trust .................... 2
Section1.03.
Definitions............................................................................................ 2
Section 1.04.
Interpretation........................................................................................ 3
ARTICLE II THE 2003 Series C BONDS............................................................................ 4
Section 2.01.
Principal Amount and Designation; Conditions to Issuance ............... 4
Section 2.02.
Terms of the 2003 Series C Bonds ...................................................... 4
Section 2.03.
Application of Proceeds of 2003 Series C Bonds ................................ 6
ARTICLE III CERTAIN TAX MATTERS ............................................. .......... 7
. ....................
Section3.01.
Tax Covenants..................................................................................... 7
Section3.02.
Rebate Fund......................................................................................... 8
ARTICLE IV MISCELLANEOUS........................................................................................ 8
Section 4.01.
Indenture to Remain in Effect.............................................................. 8
Section 4.02.
Continuing Disclosure .............................. .... 8
.......................................
Section4.03.
Counterparts................................................................ ......................... 8
EXHIBIT A FORM OF 2003 SERIES B BONDS........................................................... A-1
u
DOCSLA1:438054.3
42797-2 EJC
THIRD SUPPLEMENTAL INDENTURE OF TRUST
THIS THIRD SUPPLEMENTAL INDENTURE OF TRUST, dated as of
March 1, 2003, is entered into by and between the City of Vernon (the "City"), a municipal
corporation and chartered city of the State of California and BNY Western Trust Company, as
trustee (the "Trustee"), a banking corporation, duly established and existing under and pursuant
to the laws of the State of California, authorized to accept and execute trusts of the character set
forth in the Indenture of Trust, dated as of March 1, 2003 between the City and the Trustee;
WITNESSETH:
WHEREAS, the City has entered into the Indenture to provide for the issuance
from time to time by the City of Bonds to pay the Costs of Capital Improvements and to refund
Outstanding Parity Obligations (capitalized terms used herein shall have the meanings given such
terms pursuant to Section 1.03); and
WHEREAS, the Master Indenture authorizes the City and the Trustee to enter
into Supplemental Indentures to provide for the issuance of a Series of Bonds; and
WHEREAS, the City desires to issue $ aggregate principal
amount of its 2003 Series C Bonds in order to provide a portion of the moneys to finance the
Malburg Generating Station and to pay certain costs in connection with the issuance of the 2003
Series Bonds; and
WHEREAS, the City has determined that all acts and things have been done and
performed which are necessary to make the Indenture, as supplemented by this Third
Supplemental Indenture, a valid and binding agreement for the security of the 2003 Series C
Bonds authenticated and delivered hereunder;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
THIRD SUPPLEMENTAL INDENTURE OF TRUST WITNESSETH:
That, in consideration of the premises, the acceptance by the Trustee of the trusts
hereby created and originally created by the Master Indenture, the mutual covenants herein
contained and the purchase and acceptance of the 2003 Series C Bonds by the Owners thereof,
and for other valuable consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payment of the principal of, Redemption Price, if any, and interest on the 2003 Series
C Bonds according to their tenor and effect, and the performance and observance by the City of
all the covenants and conditions in the Indenture and in the 2003 Series C Bonds contained on its
part to be performed, it is agreed by and between the City and the Trustee as follows:
ARTICLE I
AUTHORITY AND DEFINITIONS
Section 1.01. Supplemental Indenture of Trust. This Third Supplemental Indenture is
supplemental to the Master Indenture as heretofore amended and supplemented.
DOCSLA1:438054.3
42797-2 EJC
Section 1.02. Authority for the Third Supplemental Indenture of Trust. This Third
Supplemental Indenture is entered into (a) pursuant to the Charter and Bond Ordinance and (b) in
accordance with Article II and Article VII of the Master Indenture.
Section 1.03. Definitions.
(a) Except as otherwise defined by this Third Supplemental Indenture, all
terms which are defined in Section 1.01 of the Master Indenture shall have the same meanings,
respectively, in this Third Supplemental Indenture as such terms are given in said Section 1.01 of
the Master Indenture.
(b) Additional Definitions. The following terms shall, with respect to the
2003 Series C Bonds and for all purposes of this Third Supplemental Indenture, have the
meanings set forth below:
"Authorized Denominations" means, with respect to the 2003 Series C Bonds,
$5,000 and any integral multiple thereof.
"Dated Date" means, with respect to the 2003 Series C Bonds, 1, 2003.
"First Supplemental Indenture" means that certain First Supplemental Indenture of
Trust, dated as of March 1, 2003, between the City and the Trustee supplementing the Master
Indenture, as the same may be amended and supplemented.
"Interest Payment Date" means, with respect to the 2003 Series C Bonds, each
1 and 1, commencing 1, 2003.
"Malburg Generating Station" means the approximately 134 megawatt electric
generating facility to be located at Substation A of the City's Electric System, consisting of two
gas combustion turbine generators and a steam turbine generator and related facilities and
equipment, including electric facilities necessary for the station to interconnect with the Electric
System and all rights, properties and improvements necessary therefor, including fuel and water
facilities and resources and rights thereto or therein, and capital improvements thereto (including
replacement of any generating unit presently included in the station) that may be constructed
from time to time, and interests in certain other property and rights relating thereto.
"Rebate Fund" means the fund designated as the "2003 Series C Rebate Fund"
established in Section 3.02.
"Rebate Instructions" means those calculations and written directions required to
be delivered to the Trustee by the City pursuant to Section 3.01.
"Rebate Requirement" means the Rebate Requirement as defined in the 2003
Series Tax Certificate.
"Record Date" means, with respect to each Interest Payment Date for 2003 Series
C Bonds, the fifteenth day of the month preceding the month in which such Interest Payment
Date falls.
DOCSLA1:438054.3
42797-2 EJC _2_
"Second Supplemental Indenture" means that certain Second Supplemental
Indenture of Trust, dated as of March 1, 2003, between the City and the Trustee supplementing
the Master Indenture, as the same may be amended and supplemented.
"Third Supplemental Indenture" shall mean this Third Supplemental Indenture of
Trust, supplementing the Master Indenture, as the same may be amended and supplemented.
"2003 Series C Continuing Disclosure Agreement" means the Continuing
Disclosure Agreement, dated as of March 1, 2003 between the City and the Trustee, as
dissemination agent, relating to the 2003 Series C Bonds, as the same may be amended and
supplemented.
"2003 Construction Fund" means the 2003 Construction Fund established
pursuant to the First Supplemental Indenture.
"2003 Costs of Issuance Fund" means the 2003 Costs of Issuance Fund
established pursuant to the First Supplemental Indenture.
"2003 Series A Bonds" means the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A authorized by Article H of the First Supplement
Indenture.
"2003 Series B Bonds" means the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B authorized by Article H of the Second
Supplement Indenture.
"2003 Series C Bonds" shall mean the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C authorized by Article lI.
"2003 Series Bonds" means the 2003 Series A Bonds, the 2003 Series B Bonds
and the 2003 Series C Bonds.
"2003 Series Tax Certificate" shall mean that certain Tax Certificate signed by the
City with respect to the 2003 Series Bonds.
Section 1.04. Interpretation.
(a) Unless the context otherwise indicates, defined terms shall include all
variants thereof, words expressed in the singular shall include the plural and vice versa and the
use of the neuter, masculine or feminine gender is for convenience only and shall be deemed to
mean and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof
are solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof.
DOCSLA1:438054.3
42797-2 EJC -3-
(c) References herein to the Securities Depository shall include both the
Securities Depository and any Nominee of the Securities Depository in whose name the 2003
Series C Bonds may be registered.
(d) Unless otherwise indicated, references herein to Articles and Sections shall
be to the Articles and Sections of this Third Supplemental Indenture. The words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this Third
Supplemental Indenture as a whole and not to any particular Article, Section or subdivision
hereof.
ARTICLE II
THE 2003 Series C BONDS
Section 2.01. Principal Amount and Designation; Conditions to Issuance. (a)
Pursuant to the provisions of the Master Indenture and this Third Supplemental Indenture and the
provisions of the Bond Ordinance, a Series of Bonds entitled to the benefit, protection and
security of such provisions is hereby authorized in the aggregate principal amount of
$ . Such Bonds shall be designated as, and shall be distinguished from the Bonds of
all other Series by the title, "City of Vernon Malburg Generating Station Project Electric System
Revenue Bonds, 2003 Series C." The 2003 Series C Bonds shall be in substantially the form
attached hereto as Exhibit A with such variations and omissions as are necessary to reflect the
particular terms of each 2003 Series C Bond.
(b) The 2003 Series C Bonds are issued for the purpose of providing a portion
of the moneys to finance the Costs of the Malburg Generating Station and to pay the Costs of
Issuance of the 2003 Series Bonds.
(c) All (but not less than all) of the 2003 Series C Bonds shall be executed by
the City for issuance under the Indenture and delivered to the Trustee and thereupon shall be
authenticated by the Trustee and by it delivered to the City or upon its order but only upon receipt
by the Trustee of the items required pursuant to Section 2.04 and Section 2.07 of the Master
Indenture with respect to the 2003 Series C Bonds.
Section 2.02. Terms of the 2003 Series C Bonds. (a) The 2003 Series C Bonds shall
be issued as fully registered Bonds without coupons in Authorized Denominations. The 2003
Series C Bonds shall be registered initially in the name of "Cede & Co.," as Nominee of DTC,
the initial Securities Depository, and shall be evidenced by one bond certificate for each maturity
of the 2003 Series C Bonds in the total aggregate principal amount of the 2003 Series C Bonds of
such maturity. Registered ownership of the 2003 Series C Bonds, or any portion thereof, may not
thereafter be transferred except as set forth in Section 3.04 of the Master Indenture.
(b) The 2003 Series C Bonds shall be dated the Dated Date.
(c) The 2003 Series C Bonds shall mature on I in the following
years in the following principal amounts and shall bear interest from the Dated Date at the
following rates per annum:
DOCSLA1:438054.3
42797-2 EJC _4_
Maturity Principal Interest
1 Amount Rate
(d) Interest on the 2003 Series C Bonds shall be payable on each Interest
Payment Date therefor as provided in Section 3.01 of the Master Indenture.
(e) The Trustee shall identify all payments (whether made by check or by wire
transfer) of interest, principal, and Redemption Price by CUSIP number of the 2003 Series C
Bonds.
(f) The 2003 Series C Bonds maturing on and after 1, _ are subject
to redemption prior to their stated maturity, at the option of the City, in whole or in part (in such
amounts as may be specified by the City) on any date on or after 1, at the
Redemption Prices (expressed as a percentage of principal amount of the 2003 Series C Bonds to
be redeemed) indicated below, plus unpaid accrued interest thereon to the date fixed for
redemption:
Period During Which Redeemed Redemption
(both dated inclusive Prices
1, to %
1, to %
1, and thereafter 100%
(g) The 2003 Series C Bonds are also subject to redemption prior to their
stated maturity, at the option of the City, in whole or in part (in such amounts as may be specified
by the City) on any date, from: (i) insurance or condemnation proceeds and (ii) from any source
DOCSLA1:438054.3
42797-2 EJC _5_
of money if all or substantially all of the Malburg Generating Station is damaged or destroyed,
taken by any public entity in the exercise of its powers of eminent domain or disposed of or
abandoned, at a Redemption Price equal to the principal amount of the 2003 Series C Bonds to
be redeemed, plus unpaid accrued interest thereon to the date fixed for redemption, without
premium.
(h) The 2003 Series C Bonds maturing on 1, are also subject to
mandatory redemption prior to their stated maturity in part from Sinking Fund Installments
established pursuant to subsection (i) of this Section on any 1 on or after 1, ,
at a Redemption Price equal to the principal amount of the 2003 Series C Bonds to be redeemed,
plus unpaid accrued interest thereon to the date fixed for redemption, without premium.
(i) The following shall be the Sinking Fund Installments for the 2003 Series C
Bonds maturing on 1,- . Such installments shall be due on 1 of each of the
years set forth in the following table in the respective amounts set forth opposite such years in
said table:
Year
( 1) Amount
Section 2.03. Application of Proceeds of 2003 Series C Bonds. In accordance with
Section 2.04 of the Master Indenture, the proceeds, including accrued interest, of the sale of the
2003 Series C Bonds shall be applied simultaneously with the delivery of the 2003 Series C
Bonds, as follows:
(a) There shall be deposited in the Interest Account in the Debt Service Fund
the sum of $ representing the accrued interest paid by the initial purchaser of the
2003 Series C Bonds;
(b) There shall be deposited in the Debt Service Reserve Fund the sum of
$ , representing the amount required so that the balance on deposit in such Fund shall
equal the Debt Service Reserve Requirement calculated immediately after the authentication and
delivery of the 2003 Series C Bonds;
(c) There shall be deposited in the 2003 Costs of Issuance Fund the sum of
(d) The remaining balance of the proceeds of the sale of the 2003 Series C
Bonds, in the amount of $ , shall be deposited in the 2003 Construction Fund.
DOCSLA1:438054.3
42797-2 EJC -6-
ARTICLE III
CERTAIN TAX MATTERS
Section 3.01. Tax Covenants.
(a) The City covenants that it shall not take any action, or fail to take any
action, if any such action or failure to take action would adversely affect the exclusion from gross
income of the interest on the 2003 Series C Bonds under Section 103 of the Code. The City shall
not directly or indirectly use or permit the use of any proceeds of the 2003 Series C Bonds in
such a manner as would adversely affect the exclusion of interest on any 2003 Series C Bonds
from gross income under Section 103 of the Code. The City shall not directly or indirectly use or
permit the use of any proceeds of any 2003 Series C Bonds, or of any facilities financed thereby,
or other funds of the City, or take or omit to take any action, that would cause any 2003 Series C
Bonds to be "arbitrage bonds" within the meaning of Section 148 of the Code. To that end, the
City shall comply with all requirements of Section 148 of the Code and all regulations of the
United States Department of the Treasury issued thereunder to the extent such requirements are,
at the time, in effect and applicable to the 2003 Series C Bonds. In the event that at any time the
City is of the opinion that for purposes of this Section it is necessary to restrict or to limit the
yield on the investment of any moneys held by the Trustee under the Indenture, the City shall so
instruct the Trustee in writing, and the Trustee shall take such action as may be directed in such
instructions.
(b) The City specifically covenants that:
(i) Except as approved in a Favorable Opinion of Bond Counsel, the
City shall not allow the amount of Gross Proceeds of the 2003 Series C Bonds invested
during any Bond Year in Nonpurpose Investments with a Yield in excess of the Yield on
the [2003 Series Bonds] to exceed the lesser of (a) one hundred fifty percent (150%) of
the scheduled debt service for that Bond Year or (b) the amounts on deposit in the Debt
Service Reserve Fund and attributed to the 2003 Series C Bonds (provided that such
amounts do not exceed ten percent (10%) of the proceeds of the 2003 Series C Bonds)
plus $100,000.
(ii) The City shall pay or cause to be paid the Rebate Requirement as
provided in the 2003 Series Tax Certificate.
(iii) The City shall determine the amount of and cause to be deposited
in the Rebate Fund the Rebate Requirement as provided in the 2003 Series Tax
Certificate (which is incorporated herein by reference). Subject to the provisions of this
Section, moneys held in the Rebate Fund are hereby pledged to secure payments to the
United States of America, and the City and the Owners of the 2003 Series CBonds shall
have no rights in or claim to such moneys. The Trustee shall invest all amounts held in
the Rebate Fund as directed in writing by an Authorized City Representative.
Upon receipt of the Rebate Instructions required to be delivered to the Trustee, the
Trustee shall remit part or all of the balance held in the Rebate Fund, together with any
DOCSLA1:438054.3
42797-2 EJC -7-
completed forms to be filed therewith prepared by the City and delivered with such Rebate
Instructions, to the United States of America to the extent so directed, including rebate due in
connection with any 2003 Series C Bonds. In addition, if the Rebate Instructions so direct, the
Trustee shall deposit moneys into or transfer moneys out of the Rebate Fund from or into such
Accounts or Funds as the Rebate Instructions direct.
The Trustee shall conclusively be deemed to have complied with the provisions of
this Section if it follows the directions of the City set forth in the Rebate Instructions and shall
not be required to take any actions thereunder in the absence of Rebate Instructions from an
Authorized City Representative.
(c) For purposes of this Section, capitalized terms not defined in Section 1.03
shall have the meanings ascribed to such terms in the 2003 Series Tax Certificate.
Section 3.02. Rebate Fund. For purposes of complying with tax covenants contained in
the Indenture, there is hereby established a fund designated the "2003 Series C Rebate Fund" to
be held by the Trustee. Amounts on deposit in the 2003 Series C Rebate Fund shall be applied as
provided in Section 3.01.
ARTICLE IV
MISCELLANEOUS
Section 4.01. Indenture to Remain in Effect. Save and except as heretofore amended
and supplemented, and as supplemented by this Third Supplemental Indenture, the Master
Indenture shall remain in full force and effect.
Section 4.02. Continuing Disclosure. The City hereby covenants and agrees to comply
with the 2003 Series C Continuing Disclosure Agreement as it may from time to time hereafter
be amended or supplemented. Notwithstanding any other provision of the Indenture, failure of
the City to comply with the requirements of the 2003 Series C Continuing Disclosure Agreement,
as it may from time to time hereafter be amended or supplemented, shall not be considered an
Event of Default and the Trustee shall have no right to accelerate amounts due under the
Indenture as a result thereof; provided, however, that the Trustee and the Owners of not less than
25% in principal amount of the Outstanding 2003 Series C Bonds may take such actions as may
be necessary and appropriate, including seeking mandate or specific performance by court order,
to cause the City to comply with its obligations in this Section with respect to the 2003 Series C`
Continuing Disclosure Agreement.
Section 4.03. Counterparts. This Third Supplemental Indenture may be executed in
any number of counterparts and by the different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original; but such counterparts shall together
constitute but one and the same instrument.
DOCSLA1:438054.3
42797-2 EJC _g_
IN WITNESS WHEREOF, City of Vernon has caused these presents to be signed
in its name and on its behalf by its City Administrator and attested by its City Clerk and to
evidence its acceptance of the trusts hereby created, the Trustee has caused these presents to be
signed in its name and on its behalf by one of its authorized officers, all as of the first day of
March, 2003.
CITY OF VERNON
By:_
Name:
Title:
Attest:
City Clerk
BNY WESTERN TRUST COMPANY, as Trustee
By:_
Name:
Title:
DOCSLAI :438054.3
42797-2 EJC
IWi:�:3�111:1
FORM OF 2003 SERIES B BONDS
[bracketed language applies only to 2003 Series C Bonds to be registered in the name of CEDE
& CO.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE CITY OF VERNON OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES B
No. R-
Interest Rate
Dated Date Maturity Date
, 2003 1,
Registered Owner: [CEDE & CO.]
Principal Amount:
CUSIP No.
CITY OF VERNON (herein called the "City"), a municipal corporation and
chartered city of the State of California, acknowledges itself indebted to, and for value received
hereby promises to pay (but only out of the Net Revenues (capitalized terms used herein shall
have the meanings given such terms pursuant to the Indenture mentioned below) and other assets
pledged therefor pursuant to the Indenture) to the Registered Owner specified above or registered
assigns, on the Maturity Date specified above (unless this Bond shall have been previously called
for redemption in whole or in part and payment of the Redemption Price shall have been duly
made), the Principal Amount specified above, in lawful money of the United States of America
and to pay interest thereon (but only from said the Net Revenues and other assets pledged
therefor pursuant to the Indenture) in like lawful money until payment of such principal sum
shall be discharged as provided in the Indenture, at the rate per annum set forth above, payable on
each Interest Payment Date.
This Bond shall bear interest from the Interest Payment Date next preceding the
date of authentication thereof unless: (i) this Bond is authenticated on an Interest Payment Date,
DOCSLA1:438054.3
42797-2 EJC A-1
in which event from such Interest Payment Date; and (ii) unless this Bond is authenticated after a
Record Date and before the next succeeding Interest Payment Date for this Bond, in which event
from such Interest Payment Date; provided, however, that if the date of authentication of this
Bond shall be prior to the Record Date for the first Interest Payment Date for this Bond, this
Bond shall bear interest from the Dated Date specified above. Notwithstanding the foregoing, if
the City shall default in the payment of interest, then this Bond shall bear interest from the date to
which interest has been paid or if no interest has been paid, from the Dated Date specified above.
The principal or, if applicable, the Redemption Price hereof is payable upon
surrender hereof at the designated corporate trust office of BNY Western Trust Company, in Los
Angeles, California (together with any successor Trustee as provided in the Indenture, the
"Trustee"). Interest hereon is payable by check mailed on each Interest Payment Date to the
Owner hereof as of the applicable Record Date at the address appearing on the Bond Register
maintained by the Trustee; provided Owners of at least $1,000,000 aggregate principal amount of
2003 Series C Bonds may, at any time prior to a Record Date, give the Trustee written
instructions for payment of such interest on each succeeding Interest Payment Date for such 2003
Series C Bonds by wire transfer or by deposit to any account.
This Bond is one of a duly authorized issue of bonds of the City designated as
"City of Vernon Electric System Revenue Bonds" (the "Bonds") and of a Series of the Bonds
designated as "City of Vernon Malburg Generating Station Project Electric System Revenue
Bonds, 2003 Series C" (the "2003 Series C Bonds"). The 2003 Series C Bonds are issued
pursuant to the Charter and the Bond Ordinance. The 2003 Series C Bonds have been issued in
the aggregate principal amount of $ . The 2003 Series C Bonds are issued under, and,
together with all other Bonds issued and outstanding thereunder, are equally and ratably secured
by the Trust Estate and entitled to the protection given by, the Indenture of Trust, dated as of
March 1, 2003 between the City and the Trustee, as amended and supplemented by the Third
Supplemental Indenture of Trust, dated as of March 1, 2003 between the City and the Trustee
(said Indenture of Trust, as amended and supplemented and as the same may be amended and
supplemented, is herein called the "Indenture").
As provided in the Indenture, Bonds of the City may be issued thereunder from
time to time pursuant to Supplemental Indentures in one or more Series, in various principal
amounts, may mature at different times, may bear interest at different rates and may otherwise
vary as in the Indenture provided. The aggregate principal amount of Bonds which may be
issued under the Indenture is not limited except as provided in the Indenture, and all Bonds
issued and to be issued under the Indenture are and will be equally secured by the pledge and
assignment and covenants made therein, except as otherwise expressly provided or permitted in
the Indenture.
Copies of the Indenture are on file at the City Hall of the City and at the Principal
Office of the Trustee and reference is hereby made to the Indenture and to all amendments and
supplements thereto for a description of the provisions, among others, with respect to the nature
and extent of the security, the rights, duties and obligations of the City, the Trustee and the
Owners of the Bonds and the terms upon which the Bonds are secured under the Indenture, the
rights and remedies of the Owners of the Bonds, the limitations on such rights and remedies and
the terms and conditions upon which Bonds are issued and may be issued thereunder. The
DOCSLA1:438054.3
42797-2 EJC A-2
Indenture provides that other Parity Obligations secured. by a pledge of the Net Revenues on a
parity with the Bonds may be issued or incurred by the City on the terms set forth therein. By
acceptance of this Bond, the Registered Owner accepts and agrees to the terms of the Indenture.
This Bond is a special obligation of the City and the principal of, Redemption
Price, if any, and interest on this Bond are payable solely from the Net Revenues and the other
funds pledged therefor under the Indenture and shall not constitute a charge against the general
credit of the City. This Bond is not secured by a legal or equitable pledge of, or lien or charge
upon, any property of the City or any of its income or receipts except the Net Revenues pledged
therefor pursuant to the Indenture which is subject to the provisions of the Indenture permitting
the application thereof for the purposes and on the terms and conditions set forth therein. Neither
the faith and credit nor the taxing power of the State of California, the City or any other public
agency is pledged to the payment of the principal or Redemption Price of, or interest on, this
Bond. The issuance of this Bond shall not directly, indirectly or contingently obligate the City
Council of the City to levy or pledge any form of taxation or to make any appropriation for the
payment of this Bond. The payment of the principal, Redemption Price or interest on this Bond
does not constitute a debt, liability or obligation of the State of California or any public agency
(other than the special obligation of the City as provided in the Indenture). Neither the members
of the City Council of the City, nor any person executing this Bond, nor any officer or employee
of the City shall be individually liable for the principal or Redemption Price or interest on this
Bond or be subject to any personal liability or accountability by reason of the issuance of this
Bond or in respect of any undertakings by the City under the Indenture.
The 2003 Series C Bonds were issued for the purpose of financing a portion of the
Costs of the Malburg Generating Station and related purposes.
The 2003 Series C Bonds maturing on and after 1, are subject to
redemption prior to their stated maturity, at the option of the City, in whole or in part (in such
amounts as may be specified by the City) on any date on and after 1, at the
Redemption Prices (expressed as a percentage of the principal amount of the 2003 Series C
Bonds to be redeemed) indicated below, plus unpaid accrued interest thereon to the date fixed for
redemption:
Period During Which Redeemed Redemption
(both dates inclusive) Prices
1, to %
1, to %
1, and thereafter 100%
The 2003 Series C Bonds are also subject to redemption prior to maturity, at the
option of the City, in whole or in part on any date, at a Redemption Price equal to the principal
amount of the 2003 Series C Bonds to be redeemed, plus unpaid accrued interest thereon to the
date fixed for redemption, without premium, (a) to the extent of money available from: (i) from
insurance or condemnation proceeds; or (ii) from any source of money if all or substantially all of
the Malburg Generating Station is damaged or destroyed, taken by any public entity in exercise
of its powers of eminent domain or disposed of or abandoned.
DOCSLA1:438054.3
42797-2 EJC A-3
The 2003 Series C Bonds maturing on 1, are also subject to
mandatory redemption prior to their stated maturity, in part, on any 1 on and after
1, , at a Redemption Price equal to the principal amount of the 2003 Series C Bonds
to be redeemed, plus unpaid accrued interest thereon to the date fixed for redemption, without
premium, from the Sinking Fund Installments established for such 2003 Series C Bonds in the
Indenture.
If less than all of the 2003 Series C Bonds are to be redeemed, the particular 2003
Series C Bonds to be redeemed shall be selected as provided in the Indenture.
(a) The 2003 Series C Bonds are payable upon redemption upon surrender
thereof at the Principal Office of the Trustee. The Trustee shall give notice, in the name of the
City, of the redemption of 2003 Series C Bonds, which notice shall be mailed, by first class mail,
postage prepaid, not more than sixty (60) nor less than thirty (30) days before the redemption
date to the Owners of any 2003 Series C Bonds to be redeemed (in whole or in part) at their
addresses appearing in the Bond Register. Such notice shall specify the Series and maturity date
of the Bonds to be redeemed, the redemption date and the place or places where amounts due
upon such redemption shall be payable and, if less than all of the 2003 Series C Bonds of any like
maturity are to be redeemed, the letters and numbers or other distinguishing marks of such 2003
Series C Bonds so to be redeemed, and, in the case of 2003 Series C Bonds to be redeemed in
part only, such notice shall also specify the respective portions of the principal amount thereof to
be redeemed. Such notice shall further state that on such redemption date there shall become due
and payable upon each 2003 Series C Bond to be redeemed the Redemption Price thereof (or the
Redemption Price of the specified portions of the principal amount thereof to be redeemed in the
case of 2003 Series C Bonds to be redeemed in part only) and that from and after such date
interest on such 2003 Series C Bond (or the portion of such 2003 Series C Bond to be redeemed)
shall cease to accrue and be payable.
Receipt of such notice of redemption shall not be a condition precedent to the
redemption of 2003 Series C Bonds and failure of any Owner of a 2003 Series C Bond to receive
any such notice or any insubstantial defect in such notice shall not affect the validity of the
proceedings for the redemption of 2003 Series C Bonds.
The notice with respect to the redemption of 2003 Series C Bonds at the option of
the City, may state that such redemption is conditional upon the receipt by the Trustee, on or
prior to the date fixed for such redemption, of moneys sufficient to pay the Redemption Price of
the 2003 Series C Bonds to be redeemed, and that if such moneys shall not have been so received
said notice shall be of no force and effect and the City shall not be required to redeem such 2003
Series C Bonds. In the event a notice of redemption of 2003 Series C Bonds contains such a
condition and such moneys are not so received, the redemption of 2003 Series C Bonds as
described in the conditional notice of redemption shall not be made and the Trustee shall, within
a reasonable time after the date on which such redemption was to occur, give notice to the
persons and in the manner in which the notice of redemption was given that such moneys were
not so received and that there shall be no redemption of 2003 Series C Bonds pursuant to the
conditional notice of redemption.
DOCSLAl :438054.3
42797-2 EJC A-4
To the extent and in the manner permitted by the terms of the Indenture, the
provisions of the Indenture, or any indenture amendatory thereof or supplemental thereto, may be
modified or amended by the City with, in certain cases, the written consent of the Owners of at
least a majority in principal amount of the Bonds then Outstanding under the Indenture; and, in
case less than all of the Bonds would be affected thereby, with such consent of the Owners of a
majority in principal amount of the affected Outstanding Bonds; provided, however, that, if such
modification or amendment will, by its terms, not take effect so long as any Bonds of any
specified like Series and maturity remain Outstanding, the consent of the Owners of such Bonds
shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of
the calculation of Outstanding Bonds for purposes of such consent. No such modification or
amendment shall permit a change in the terms of any Sinking Fund Installment or the terms of
redemption or maturity of the principal of any Bond or of any installment of interest thereon or a
reduction in the principal amount or Redemption Price thereof or in the rate of interest thereon
without the consent of the Owner of such Bond, or shall reduce the percentages or otherwise
affect the classes of Bonds the consent of the Owners of which is required to effect any such
modification or amendment, or shall change or modify any of the rights or obligations of the
Trustee or of any Paying Agent without its written assent thereto.
The Indenture may also be amended or supplemented without the necessity of the
consent of the Owners of the Bonds for any one or more of the purposes Trustee specified in the
Indenture.
This Bond is transferable, as provided in the Indenture, only upon the Bond
Register kept for that purpose at the Principal Office of the Trustee, by the Registered Owner
hereof, or by his duly authorized attorney, upon surrender of this Bond together with a written
instrument of transfer satisfactory to the Trustee duly executed by the Registered Owner or his
duly authorized attorney. Thereupon and upon payment of the charges prescribed in the
Indenture a new registered 2003 Series C Bond or 2003 Series C Bonds, without coupons, and
for the same aggregate principal amount, shall be issued to the transferee in exchange therefor as
provided in the Indenture. The City, the Trustee and any Paying Agent may deem and treat the
person in whose name this Bond is registered as the absolute owner hereof for the purpose of
receiving payment of, or on account of, the principal or Redemption Price hereof and interest due
hereon and for all other purposes.
The Registered Owner of this Bond shall have no right to enforce the provisions
of the Indenture or to institute action to enforce the covenants therein, or to take any action with
respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or
other proceedings with respect thereto, except as provided in the Indenture. In certain events, on
the conditions, in the manner and with the effect set forth in the Indenture, the principal of all the
Bonds issued under the Indenture and then Outstanding may become or may be declared due and
payable before the stated maturity thereof, together with interest accrued thereon.
It is hereby certified and recited that all conditions, acts and things required by
law, including the City Charter and the Bond Ordinance, and the Indenture to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond, exist, have
happened and have been performed in due time, form and manner and that the 2003 Series C
DOCSLA1:438054.3
42797-2 EJC A_5
Bonds, together with all other indebtedness of the City, comply in all respects with the applicable
laws of the State of California, including the City Charter and the Bond Ordinance.
This Bond shall not be entitled to any benefit under the Indenture or be valid or
become obligatory for any purpose until this Bond shall have been authenticated by the execution
by the Trustee of the Trustee's Certificate of Authentication hereon.
IN WITNESS WHEREOF, CITY OF VERNON has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of its [ I and
the seal (or a facsimile thereof) to be hereunto affixed, imprinted, engraved or otherwise
reproduced and attested by the manual or facsimile signature of its City Clerk, as of the Dated
Date specified above.
CITY OF VERNON
[SEAL]
ATTEST: BY:
CITY CLERK [ ]
DOCSLA1:438054.3
42797-2 EJC
A-6
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 2003 Series C Bonds delivered pursuant to the within
mentioned Indenture.
Date of Authentication BNY WESTERN TRUST COMPANY,
as Trustee
:•
DOCSLA1:438054.3
42797-2 EJC
AUTHORIZED SIGNATORY
A-7
ASSIGNMENT
FOR VALUE RECEIVED the undersigned sells, assigns and transfers unto
(Name, Address and Tax Identification or
Social Security Number of Assignee)
the within Bond of the City of Vernon and does hereby irrevocably constitute and appoint
attorney to
transfer the said Bond on the books kept for registration thereof with full power of substitution in
the premises.
Dated:
Notice: The Signature of this assignment and
transfer must correspond with the name
as written upon the face of this Bond in
every particular, without alteration or
enlargement or any change whatsoever.
Signature guaranteed by
Notice: Signature must be guaranteed by a
member of the National Association of
Securities Dealers, a commercial bank, a
trust company or other eligible guarantor
institution.
DOCSLA1:438054.3
42797-2 EJC A-8
SAB&W LLr
Draft of 02/18/03
CITY OF VERNON
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series A
(Variable Rate Demand Bonds)
CONTRACT OF PURCHASE
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Ladies and Gentlemen:
_, 2003
Banc of America Securities LLC, as underwriter (the "Underwriter"), hereby offers to
enter into this Contract of Purchase (this "2003A Contract of Purchase") with you, the City of
Vernon ("the City"). This offer is made subject to acceptance by the City prior to 11:00 P.M.,
California time, on the date hereof, and upon such acceptance this 2003A Contract of Purchase
shall be in full force and effect in accordance with its terms and shall be binding upon the City
and the Underwriter.
1. Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriter hereby agrees to purchase and the City hereby agrees to sell to such
Underwriter all (but not less than all) of the City's $ Malburg Generating Station
Project Electric System Revenue Bonds, 2003 Series A (the "2003A Bonds"), such 2003A
Bonds being more fully described in the Official Statement (defined in Section 3) at a purchase
price of $ (representing the $ aggregate principal amount of the
2003A Bonds less $ Underwriter's discount).
The 2003A Bonds are to be issued pursuant to Article XI of the Vernon City Code and an
Indenture of Trust, dated as of March 1, 2003, as supplemented by the First Supplemental
Indenture of Trust, dated as of March 1, 2003 (collectively, the "Indenture"), by and between the
City and BNY Western Trust Company, as trustee (the "Trustee"), substantially in the forms
previously submitted to the Underwriter, with only such changes therein as shall be mutually
agreed upon. Terms used herein and not defined shall have the meanings assigned to them in the
Official Statement.
Concurrently with the issuance of the 2003A Bonds, the City expects to issue $
aggregate principal amount of its Malburg Generating Station Project Electric System Revenue
Bonds, 2003 Series B (the "2003B Bonds"), which the Underwriter will purchase from the City
LAI 486706v6
pursuant to a Contract of Purchase dated , 2003 (the "2003B Contract of Purchase") and
$ aggregate principal amount of its Malburg Generating Station Project Electric System
Revenue Bonds, 2003 Series C (the "2003C Bonds"), which the Underwriter will purchase from
the City pursuant to a Contract of Purchase dated , 2003 (the "2003C Contract of
Purchase" and together with the 2003A Contract of Purchase and the 2003B Contract of
Purchase, the "Contracts of Purchase.")
Banc of America Securities LLC will act as remarketing agent for the 2003A Bonds and
the 2003B Bonds pursuant to Remarketing Agreements, each dated , 2003 (the
"Remarketing Agreements"), each between the City and Banc of America Securities LLC.
Concurrently with the issuance of the 2003A Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "2003A Letter of Credit") pursuant to a Reimbursement
Agreement, dated as of , 2003 (the "2003A Reimbursement
Agreement"), between the City and Bank of America, N.A. (the "2003A Bank").
Concurrently with the issuance of the 2003B Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "2003B Letter of Credit" and together with the 2003A Letter of
Credit, the "Letters of Credit") pursuant to a Reimbursement Agreement, dated as of
2003 (the "2003B Reimbursement Agreement"), between the City and
(the "2003B Bank" and together with the 2003A Bank, the "Banks").
With respect to the 2003C Bonds, the City will undertake, pursuant to a Continuing
Disclosure Agreement, dated , 2003 (the "Continuing Disclosure Agreement"), by and
between the City and the Trustee, to provide certain annual financial information and notices of
the occurrence of certain events, if material. A form of the Continuing Disclosure Agreement is
set forth in the Preliminary Official Statement (defined below) and will also be set forth in the
Official Statement (defined below).
Concurrently with the issuance of the 2003C Bonds, the City will enter into a swap
agreement (the "Swap Agreement"), with Bank of America, N.A. (the "Swap Provider") for the
purpose of converting the fixed rate interest payments the City is required to make on the 2003C
Bonds into floating rate payments.
The Indenture, the Remarketing Agreements, the Reimbursement Agreements, the
Continuing Disclosure Agreement, the Swap Agreement and the Contracts of Purchase are
hereinafter referred to as the "Legal Documents."
2. The Underwriter agrees to reoffer the 2003A Bonds in a bona fide public offering
at the initial offering prices or yields set forth in the Official Statement. After the initial offering,
the Underwriter reserves the right to change such public offering prices as the Underwriter shall
deem necessary in marketing the 2003A Bonds.
3. At 8:00 A.M., California time, on March _, 2003, or at such other time or on
such earlier or later business day as shall have been mutually agreed upon by the City and the
Underwriter, the City will deliver to the Underwriter at the offices of Orrick, Herrington &
Sutcliffe LLP, Los Angeles, California, the closing documents hereinafter mentioned. The 2003A
Bonds, registered to Cede & Co. and in definitive form, will be made available to the
2
LAI 486706v6
Underwriter one business day prior to the date of the Closing (hereinafter defined) at the offices
of Orrick, Herrington & Sutcliffe LLP, or at such other place as may be designated by the
Underwriter and shall be subsequently delivered on such date to The Depository Trust Company
("DTC") to be held in safe custody on behalf of the City until Closing. It is anticipated that
CUSIP identification numbers will be printed on the 2003A Bonds, but neither the failure to print
such number on any of the 2003A Bonds nor any error with respect thereto shall constitute cause
for a failure or refusal by the Underwriter to accept delivery of and pay for the 2003A Bonds in
accordance with the terms of this 2003A Contract of Purchase. Upon release of the 2003A
Bonds, the Underwriter will pay the purchase price of the 2003A Bonds as set forth in Section I
hereof, in immediately available funds to the order of the City. The releases and payments
referenced to in this Section 3 are herein called the "Closing" or "Closing Date."
4. The City ratifies, confirms and approves the use by the Underwriter of the official
statement of the City in preliminary form dated _, 2003 (which, including all appendices
thereto, is herein called the "Preliminary Official Statement"), in connection with the prospective
offering of the 2003A Bonds prior to the date hereof. The City hereby acknowledges that the
Preliminary Official Statement has been made available to investors on the internet at
http://www. . The City will deliver to the Underwriter copies of its official statement dated
_, 2003 (such official statement, including the cover page and all appendices included
therein or attached thereto, being herein called the "Official Statement"), signed on behalf of the
City by its Mayor or other appropriate official and, as promptly as practicable after acceptance
hereof (but in any event within seven business days after the City's acceptance hereof and in
sufficient time to accompany any order confirmation requesting payment from any customer), a
sufficient number of conformed copies to comply with the rules of the Securities and Exchange
Commission and the Municipal Securities Rulemaking Board. The City hereby approves the
Official Statement and authorizes the use of copies of the Official Statement and the documents
referred to therein in connection with the offering and sale of the 2003A Bonds by the
Underwriter. The Underwriter hereby agrees that it will not confirm the sale of any Bond unless
the confirmation requesting payment from the customer is accompanied or preceded by a copy of
the Official Statement.
5. The City represents to the Underwriter that, as of the date hereof and as of the
date of the Closing:
(a) The City is duly existing as a charter city organized under the laws of the
State of California (the "State");
(b) The City has full legal right, power and authority to cause the Bonds to be
authenticated and delivered, to execute and deliver the Legal Documents and to perform
its obligations contained herein and therein in accordance with the Act and other
applicable laws; and, by official action of the City prior to or concurrently with the
acceptance hereof, the City has duly authorized and approved the issuance and delivery
of the Bonds, the distribution of the Preliminary Official Statement, the execution,
delivery and distribution of the Official Statement, the execution and delivery of the
Legal Documents and the performance of its obligations contained herein and therein and
the consummation by it of all other transactions contemplated by the Official Statement
and the Legal Documents to have been performed or consummated at or prior to the date
LAI 486706v6
of the Closing, all in accordance with the Act and other applicable laws, and the City is
and will be in compliance with the provisions thereof in all material respects;
(c) The Official Statement is and at all times subsequent hereto up to and
including the date of the Closing will be, true and correct in all material respects; and the
Official Statement does not and will not omit any statement or information necessary to
make the statements therein, in the light of the circumstances under which they were
made, not misleading except that no representation is made as to any information
included in the Official Statement relating to DTC or its operations, the Banks or the
Letters of Credit or the Reimbursement Agreements relating to the 2003A Bonds and the
2003B Bonds;
(d) Between the date hereof and the date of the Closing, except as
contemplated by the Official Statement, the City will not have incurred any material
liabilities, direct or contingent, or entered into any material transaction in either case
other than in the ordinary course of business, and there shall not have been any material
adverse change in the financial condition or prospects of the Electric System;
(e) The performance of its obligations contained in the Bonds and the
execution and delivery of the Legal Documents and the performance of its obligations
contained herein and therein do not and will not in any material respect conflict with or
constitute a breach of or default under any law, administrative regulation, court decree,
resolution or agreement to which the City is subject or by which it is bound;
(f) Except as disclosed in the Official Statement, no litigation is, or at the date
of the Closing will be, pending or, to the knowledge of the City, threatened in any court
(i) in any way questioning the corporate existence of the City or the titles of the officers
of the City to their respective offices; (ii) seeking to restrain or enjoin the issuance or
delivery of any of the Bonds, or the collection of Net Revenues of the Electric System or
other amounts pledged or to be pledged to pay the principal of, premium, if any, and
interest on the Bonds, or in any way contesting or affecting the validity of the Bonds, the
Legal Documents or the collection of said Net Revenues, or the pledge thereof, or
contesting the powers of the City or any authority for the issuance and delivery of the
Bonds or the performance of its obligations contained therein or the execution and
delivery of the Legal Documents or the performance of its obligations contained herein or
therein, (iii) which would be likely to result in any material adverse change in the
business, properties, assets or financial condition of the Electric System or to have a
material adverse effect on the ability of the City to meet its obligations under the Bonds
or the Legal Documents or (iv) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that if the Underwriter accepts at the Closing any change
in the certificate referred to in Section 6(d)(3) hereof, the representations contained in this
Section 5(f) shall be deemed modified to a like extent;
(g) All material studies undertaken by or on behalf of the City with respect to
the Project have been disclosed and/or made available to the Underwriter;
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LA 14867060
(h) The Bonds, the Legal Documents and the other documents described in
the Official Statement conform in all material respects to the descriptions thereof
contained in the Official Statement, and the Bonds, when delivered as provided herein,
will be validly issued and outstanding obligations of the City entitled to the benefits of
the Indenture;
(i) The City will furnish such information, execute such instruments and take
such other action not inconsistent with law in cooperation with the Underwriter as the
Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale
under the Blue Sky or other securities laws and regulations of such states and other
jurisdictions of the United States as the Underwriter may designate and (ii) to determine
the eligibility of the Bonds for investment under the laws of such states and other
jurisdictions, and will use its best efforts to continue such qualification in effect so long
as required for the distribution of the Bonds; provided that the City shall not be obligated
to take any action that would subject it to the general service of process in any state or
jurisdiction where it is not now so subject;
0) If between the date hereof and the Closing Date, an event occurs which
might or would cause the information contained in the Official Statement, as then
supplemented or amended, to contain an untrue statement of a material fact or to omit to
state a material fact required to be stated therein or necessary to make such information
therein, in the light of the circumstances under which it was presented, not misleading,
the City will notify the Underwriter, and, if in the opinion of the City or the Underwriter,
or their respective counsel, such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the City will forthwith prepare and
furnish to the Underwriter (at the expense of the City) a reasonable number of copies of
an amendment of or supplement to the Official Statement (in form and substance
satisfactory to counsel for the Underwriter) which will amend or supplement the Official
Statement so that it will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Official Statement is delivered to prospective
purchasers, not misleading;
(k) If the information contained in the Official Statement is amended or
supplemented pursuant to paragraph 0) hereof, at the time of each supplement or
amendment thereto and (unless subsequently again supplemented or amended pursuant to
such subparagraph) at all times subsequent thereto up to and including the Closing Date,
the portions of the Official Statement so supplemented or amended (including any
financial and statistical data contained therein) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make such information therein, in the light of the circumstances under which it was
presented, not misleading;
(1) After the Closing, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished
with a copy, the Underwriter shall reasonably object in writing or which shall be
disapproved by counsel for the Underwriter; and
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LAI 486706v6
(m) The financial statements of the City contained as Appendix A to the
Official Statement do and will fairly present the financial position and results of
operations of the City as of the dates and for the periods therein set forth in accordance
with generally accepted accounting principles applied consistently.
6. The Underwriter has entered into this 2003A Contract of Purchase in reliance
upon the representations herein and the performance by the City of the City's obligations
hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter's
obligations under this 2003A Contract of Purchase are and shall be subject to the following
further conditions:
(a) The representations of the City contained herein shall be true and correct
in all material respects at the date hereof and on the date of the Closing;
(b) At the time of the Closing, the Legal Documents shall be in full force and
effect, and shall not have been amended, modified or supplemented (except as may be
agreed to in writing by the Underwriter); the ratings quoted in the Official Statement shall
be in effect; and the City shall perform or have performed its obligations required under
or specified in the Official Statement and the Legal Documents to be performed at or
prior to the Closing;
(c) The Underwriter may terminate this 2003A Contract of Purchase by
notification to the City if at any time after the date hereof and prior to the Closing
(i) legislation shall be enacted by the Congress of the United States or introduced and
pending in or adopted by either House thereof or a decision by a Court of the United
States or the Tax Court of the United States shall be rendered or a ruling, regulation or
official statement by or on behalf of the Treasury Department of the United States, the
Internal Revenue Service or other governmental agency shall be made with respect to
federal taxation upon revenues or other income of the general character expected to be
derived by the City or upon interest received on securities of the general character of the
2003A Bonds in the hands of the holders thereof which, in the reasonable judgment of the
Underwriter, materially adversely affects the market price of the 2003A Bonds or
(ii) there shall have occurred any new outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war, calamity or crisis, the effect of which
on financial markets is such as to make it, in the sole judgement of the Underwriter,
impracticable or inadvisable to proceed with the offering and delivery of the 2003A
Bonds, or (iii) there shall be in force a general suspension of trading on the New York
Stock Exchange or minimum or maximum prices for trading shall have been fixed and be
in force, or maximum ranges for prices for securities shall have been required and be in
force on the New York Stock Exchange, whether by virtue of a determination by that
Exchange or by order of the Securities and Exchange Commission or any other
governmental authority having jurisdiction, or (iv) a general banking moratorium shall
have been declared by Federal, New York or California authorities having jurisdiction
and shall be in force or (v) there shall exist any event which, in the sole judgment of the
Underwriter, either (A) makes untrue or incorrect in any material respect any statement or
information contained in the Official Statement or (B) is not reflected in the Official
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LAI 486706v6
Statement but should be reflected therein in order to make the statements and information
contained therein not misleading in any material respect;
(d) At or prior to the Closing, the Underwriter shall receive the following
documents:
(1) the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to
the City, dated the date of the Closing, substantially in the form attached as
Appendix G to the Official Statement;
(2) a certificate or certificates, dated the date of the Closing, of the
City executed by its City Administrator, its Director of Utilities Department, or
other appropriate official, to the effect that (A) on the date of the Official
Statement and on the date of the certificate (i) the descriptions and statements of
or pertaining to the City, the Electric System and the Project contained in the
Official Statement were and are true and correct in all material respects; (ii) the
Official Statement did not and does not contain an untrue statement of a material
fact or omit any statement or information which is necessary to make the
statements therein, in the light of the circumstances under which they were made,
not misleading (provided that no representation is made regarding information
relating to DTC and its operations, the Banks or the Letters of Credit or the
Reimbursement Agreements relating to the 2003A Bonds and the 2003B Bonds);
and (iii) insofar as the descriptions and statements, including financial data, of or
pertaining to entities other than the City and their activities contained in the
Official Statement are concerned, such descriptions, statements and data have
been obtained from sources which the City believes to be reliable and the City has
no reason to believe that they are untrue in any material respect; and (B) the
representations and warranties of the City in this 2003A Contract of Purchase are
true and correct on and as of the date of the Closing as if made on and as of the
date of the Closing, and the City has complied with and performed all of its
covenants and agreements in this 2003A Contract of Purchase to be complied
with and performed at or prior to the Closing;
(3) a certificate dated the date of the Closing, by the City
Administrator, or other appropriate official of the City, and by the City Attorney
to the effect that other than as described in the Official Statement, no litigation is
pending (with the City having received service of process) or, to their knowledge,
threatened in any court (i) in any way questioning the corporate existence of the
City or the titles of the officers of the City to their respective offices; (ii) seeking
to restrain or enjoin the delivery of the Bonds, or the collection of Net Revenues
of the Electric System or other amounts pledged or to be pledged to pay the
principal of, premium, if any, and interest on such Bonds; (iii) in any way
contesting or affecting the validity of the Bonds, the Legal Documents; (iv) in any
way contesting or affecting the collection of said Net Revenues or the pledge
thereof, or contesting the powers of the City or any authority for the issuance and
delivery of the Bonds and the performance of its obligations contained therein or
the execution and delivery of the Legal Documents and the performance of its
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LAI 486706v6
obligations contained therein or herein; (v) which would be likely to result in any
material adverse change in the business, properties, assets or the financial
condition of the Electric System or which would be likely to have a material
adverse effect on the ability of the City to meet its obligations under the
Indenture; or (vi) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, which certificate shall be in form and substance acceptable
to us (but in lieu of such certificate, the Underwriter may in their sole discretion
accept an opinion of Bond Counsel or Counsel to the City, acceptable to the
Underwriter in form and substance, that in their opinion the issues raised in any
such pending or threatened litigation are without substance or that the contentions
of any plaintiffs therein are without merit);
(4) an opinion of counsel to the Trustee, dated the date of the Closing
and addressed to the City and the Underwriter, to the effect that, the Trustee's
obligations under the Indenture and the Continuing Disclosure Agreement
constitute legal, valid and binding obligations of the Trustee, as applicable,
enforceable in accordance with their respective terms under California law except
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws in effect from time to time
affecting the rights of creditors generally and except to the extent that the
enforceability thereof may be limited by the application of general principles of
equity;
(5) a certificate of the Trustee, dated the date of the Closing, to the
effect that (i) the Trustee is a banking corporation duly organized and existing
under the laws of the State of California; (ii) the Trustee has full corporate trust
powers and authority to serve as Trustee under the Indenture and as
Dissemination Agent under the Continuing Disclosure Agreement; and (iii) the
Trustee acknowledges and accepts its obligations under the Indenture and the
Continuing Disclosure Agreement and that such acceptance is in full compliance
with, and does not conflict with, any applicable law or governmental regulation
currently in effect, and does not conflict with or violate any contract to which the
Trustee is a party or any administrative or judicial decision by which the Trustee
is bound;
(6) opinions of Orrick, Herrington & Sutcliffe LLP and the City
Attorney, dated the date of the Closing, substantially in the respective ` forms
attached hereto as Exhibits A and B, with such changes as Counsel to the
Underwriter may approve;
(7) copies of the documents referred to in Section 6(b);
(8) certified copies of all proceedings the Banks authorization and
issuance of the 2003A Bonds certified by the City Administrator or other
appropriate official of the City;
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LAI 486706v6
(9) evidence that any ratings on the 2003A Bonds are in full force and
effect as of the date of the Closing;
(10) the opinion(s) of counsel to the Banks, each dated the date of the
Closing, addressed to the City and the Underwriter, the Banks enforceability of
the Letters of Credit and the description of the Letters of Credit and the
Reimbursement Agreements contained in the Official Statement, in such form as
the Underwriter and Counsel to the Underwriter shall approve;
(11) a copy of each of the Letters of Credit and a certificate of each of
the Banks, dated the date of the Closing, to the effect that the information in the
Official Statement under the caption "THE BANK" is accurate in all material
respects and does not contain an untrue statement of material fact;
(12) a copy of any Blue Sky and Legal Investment Surveys with respect
to the 2003A Bonds, prepared by Underwriter's Counsel;
(13) a certificate of the Consulting Engineer, dated the Closing Date, in
substantially the form of Exhibit D hereto;
(14) an opinion of Sidley Austin Brown & Wood LLP, Counsel to the
Underwriter, dated the date of the Closing, substantially in the form attached
hereto as Exhibit C;
(15) the opinions of Bond Counsel and the City Attorney, dated the date
of the Closing, addressed to the Swap Provider, the Banks Swap Agreement, in
substantially the forms previously submitted to the Underwriter; and
(16) such additional certificates, instruments and other documents as
the Underwriter may reasonably deem necessary to evidence the truth and
accuracy as of the time of the Closing of the City's representations and warranties
contained in this 2003A Contract of Purchase and the due performance or
satisfaction by the City at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by the City pursuant to this
2003A Contract of Purchase.
The opinions and certificates and other material referred to above shall be in form and
substance satisfactory to the undersigned and to Sidley Austin Brown & Wood LLP, Counsel to
the Underwriter.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter
to purchase, accept delivery of and pay for the 2003A Bonds contained in this 2003A Contract of
Purchase or if the obligations of the Underwriter to purchase, accept delivery of and pay for the
2003A Bonds shall be terminated for any reason permitted by this 2003A Contract of Purchase,
this 2003A Contract of Purchase and all obligations of the Underwriter hereunder may be
terminated by the Underwriter at or at any time prior to the date of the Closing by written notice
to the City, and neither the Underwriter nor the City shall have any further obligations hereunder.
In the event that the Underwriter fail (other than for a reason permitted by this. 2003A Contract
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LAI 486706v6
of Purchase) to accept and pay for the 2003A Bonds at the Closing, the amount of one percent
(1%) of the principal amount of the 2003A Bonds shall be paid by the Underwriter, as liquidated
damages for such failure and for any and all defaults hereunder on the part of the Underwriter
and the acceptance of such amount shall constitute a full release and discharge of all claims and
rights of the City against the Underwriter as result of such failure and such default.
7. At the time of or prior to the Closing, the Underwriter shall file a copy of the
Official Statement with the Municipal Securities Rulemaking Board and with a nationally
recognized municipal securities information repository. The Underwriter shall advise the City of
the date and repository of such filing.
8. The Underwriter shall be under no obligation to pay, and the City shall pay, any
expenses incident to the performance of the City's obligations hereunder, including but not
limited to: (i) the cost of preparation, printing and distribution of the Legal Documents, the
Preliminary Official Statement, the Official Statement and any supplements or amendments
thereto (including the word processing costs of Underwriter's Counsel in preparing the
Preliminary Official Statement and the Official Statement); (ii) the cost of preparing and printing
the 2003A Bonds; (iii) the fees and disbursements of Bond Counsel and the fees and expenses of
counsel to the City; (iv) the fees and disbursements of the Banks and any engineers, accountants
and other experts, consultants or advisors retained by the City; (v) fees for bond ratings (which
include fees of rating agencies and travel expenses of the City); and (vi) expenses (included in
the expense component of the underwriting spread) incurred on behalf of the City's employees
which are incidental to implementing this agreement, including, but not limited to, meals,
transportation, and lodging of those employees, if any.
9. The Underwriter shall pay: (i) the cost of preparation and printing of this 2003A
Contract of Purchase, the Preliminary Blue Sky Survey and the Legal Investment Survey; (ii) all
advertising expenses and Blue Sky filing fees in connection with the public offering of the
2003A Bonds; (iii) fees, if any, payable to the California Debt Investment and Advisory
Commission in connection with the execution and delivery of the 2003A Bonds; and (iv) all
other expenses incurred by the Underwriter in connection with the public offering of the 2003A
Bonds, including the fees and disbursements of Underwriter's Counsel (except as provided
above).
10. Any notice or other communication to be given to the City under this 2003A
Contract of Purchase may be given by delivering the same in writing to the Commission, City of
Vernon, 4305 Santa Fe Avenue, Vernon, California 90058, Attention: Director of Public
Utilities; and any notice or other communication to be given to the Underwriter under this 2003A
Contract of Purchase may be given by delivering the same in writing to: Banc of America
Securities LLC, 300 South Grand Avenue, 19th Floor, Los Angeles, CA 90071, Attention:
Mr. David Johnson, Managing Director.
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11. This Contract, when accepted by the City in writing as heretofore specified, shall
constitute the entire agreement between the City and the Underwriter and is made solely for the
benefit of the City and the Underwriter (including any successor in business of the Underwriter).
No other person shall acquire or have any right hereunder or by virtue hereof. All the
representations and agreements in this 2003A Contract of Purchase shall remain operative and in
full force and effect, regardless of (a) any investigation made by or on behalf the Underwriter,
(b) delivery of and payment for the 2003A Bonds hereunder, and (c) any termination of this
2003A Contract of Purchase.
Accepted on _, 2003
City of Vernon
Director of Public Utilities
Very truly yours,
BANC OF AMERICA SECURITIES LLC
LA1 486706v6
11
SCHEDULEI
to the
Contract of Purchase
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A
Maturity
(March 1)
Principal Amount
I-1
LAI 486706v6
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT A
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
Ladies and Gentlemen:
This letter is being delivered pursuant to (i) Section 6(d)(6) of the Contract of Purchase,
dated _, 2003 (the "2003A Contract of Purchase"), between the City of Vernon (the
"City") and Banc of America Securities LLC (the "Underwriter"), providing for the purchase of
the City's $ Malburg Generating Station Project Electric System Revenue Bonds,
2003 Series A (the "2003A Bonds"), (ii) Section 6(d)(6) of the Contract of Purchase, dated
_, 2003 (the "2003B Contract of Purchase"), between the City and the Underwriter,
providing for the purchase of the City's $ Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and (iii) Section 6(d)(6) of
the Contract of Purchase, dated _, 2003 (the "2003C Contract of Purchase" and together
with the 2003A Contract of Purchase and the 2003B Contract of Purchase, the "Contracts of
Purchase"), between the City and the Underwriter, providing for the purchase of the City's
$ Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C
(the "2003C Bonds" and together with the 2003A Bonds and the 2003B Bonds, the "Bonds").
The Bonds are being issued pursuant to an Indenture of Trust, as supplemented by the First
Supplemental Indenture of Trust, the Second Supplemental Indenture of Trust and the Third
Supplemental Indenture of Trust, each dated as of March 1, 2003 (collectively, the "Indenture"),
each by and between the City and BNY Western Trust Company, as trustee. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not
defined in the Indenture, the Contract of Purchase.
In connection with our role as bond counsel, we have reviewed the Indenture, the Official
Statement, the Contracts of Purchase, certificates of the City, the Trustee, the Underwriter and
others, opinions of counsel to the City and others, and such other documents, opinions and
matters to the extent we deemed necessary to render the opinions and conclusions set forth
herein.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we
are of the following opinions or conclusions:
A-1
LAI 486706v6
1. The Official Statement has been duly authorized, executed and delivered by the
City and the Contracts of Purchase and the Continuing Disclosure Agreement have each been
duly authorized, executed and delivered by the City and, assuming due authorization, execution
and delivery by and validity against the other parties thereto, each is a valid and binding
agreement of the City, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement and other laws affecting creditors' rights, by the
application of equitable principles and the exercise of judicial discretion in appropriate cases, and
by the limitations on legal remedies against municipal corporations in the State of California.
We express no opinion with respect to any indemnification, contribution, choice of law, choice
of forum or waiver provisions contained therein.
2. The Bonds are not subject to the registration requirements of the Securities Act of
1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture
Act of 1939, as amended.
3. The statements contained in the Official Statement under the captions
"INTRODUCTION," "THE 2003 BONDS," "SECURITY AND SOURCES OF PAYMENT
FOR THE 2003 BONDS," "TAX MATTERS," "APPENDIX E — SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE," "APPENDIX F — PROPOSED FORM OF
CONTINUING DISCLOSURE AGREEMENT" and "APPENDIX G — PROPOSED FORM OF
OPINION OF BOND COUNSEL" insofar as the statements contained under such captions
expressly summarize certain provisions of the Bonds, the Indenture and the Continuing
Disclosure Agreement are accurate in all material respects; provided, however, that no opinion is
expressed with respect to any statements relating to The Depository Trust Company ("DTC") or
its operations or the Banks or the Letters of Credit or the Reimbursement Agreements relating to
the 2003A Bonds and the 2003B Bonds.
We are not passing upon and do not assume any responsibility for the accuracy (except as
explicitly stated in the previous paragraph), completeness or fairness of any of the statements
contained in the Official Statement. In our capacity as bond counsel in connection with the
issuance of the Bonds, we participated in conferences with your representatives, your counsel,
representatives of the City and its counsel, and other consultants to the City, during which
conferences the contents of the Official Statement and related matters were discussed. Based on
our participation in the above -referenced conferences (which did not extend beyond the date of
the Official Statement), and in reliance thereon and on the records, documents, certificates and
opinions herein mentioned (as set forth above), we advise you that during such conferences, no
information came to the attention of the attorneys in our firm rendering legal services in
connection with such issuance which caused us to believe that the Official Statement as of its
date (except for any financial, statistical or economic data or forecasts, numbers, charts, tables,
graphs, estimates, projections, assumptions or expression of opinions required to be stated
therein or information relating to the Banks and the Letters of Credit and the Reimbursement
Agreements, DTC, any investment agreement provider and the information contained in
Appendices B, D and H included therein as to which we express no opinion or view), contained
any untrue statement of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading.
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LAI 486706v6
This letter is furnished by us as bond counsel. No attorney -client relationship has existed
or exists between our firm and yourselves in connection with the Bonds or by virtue of this letter.
Our engagement with respect to the Bonds has concluded with their issuance. We disclaim any
obligation to update this letter. This letter is delivered to you as the Underwriter of the Bonds,
and is solely for the benefit of such Underwriter, and is not to be used, circulated, quoted or
otherwise referred to or relied upon for any other purpose or by any other person. This letter is
not intended to, and may not, be relied upon by owners of the Bonds.
Very truly yours,
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LAI 486706v6
FORM OF OPINION OF CITY ATTORNEY
_, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT B
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
Ladies and Gentlemen:
I am City Attorney of the City of Vernon (the "City") and as such I have served as
Counsel to the City in connection with the issuance of $ aggregate principal amount of
the City's Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A
(the "2003A Bonds"), $ aggregate principal amount of the City's Malburg
Generating Station Project Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds")
and $ aggregate principal amount of the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C (the "2003C Bonds" and together with the
2003A Bonds and the 2003B Bonds, the "Bonds"). As such counsel, I have examined and am
familiar with (i) those documents relating to the existence, organization and operation of the
City; (ii) all necessary documentation of the City relating to the authorization, execution and
delivery of (a) the Indenture of Trust, as supplemented by the First Supplemental Indenture of
Trust, the Second Supplemental Indenture of Trust and the Third Supplemental Indenture of
Trust, each dated as of March 1, 2003 (collectively, the "Indenture"), each by and between the
City and BNY Western Trust Company, as trustee thereunder (the "Trustee"), providing for the
issuance of the Bonds, (b) the Reimbursement Agreement, dated as of 1, 2003 (the
"2003A Reimbursement Agreement"), by and between the City and Bank of America, N.A.,
relating to the 2003A Bonds, (c) the Reimbursement Agreement, dated as of 1, 2003 (the
"2003B Reimbursement Agreement" and together with the 2003A Reimbursement Agreement,
the "Reimbursement Agreements"), by and between the City and , relating to the 2003B
Bonds; (d), the Remarketing Agreement related to the Series 2003A Bonds and the Remarketing
Agreement related to the Series 2003B Bonds, each dated , 2003 (collectively, the
"Remarketing Agreements"), each between the City and Banc of America Securities LLC, as
remarketing agent; (e) the Continuing Disclosure Agreement, dated , 2003 (the
"Continuing Disclosure Agreement"), between the City and the Trustee, as dissemination agent;
(f) the Contract of Purchase, dated , 2003 (the "2003A Purchase Contract"), between the
City and Banc of America Securities LLC, as underwriter (the "Underwriter"), the Contract of
Purchase, dated , 2003 (the "2003B Purchase Contract"), between the City and the
Underwriter, and the Contract of Purchase, dated , 2003 (the "2003C Contract of
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Purchase" and together with the 2003A Contract of Purchase and the 2003B Contract of
Purchase, the "Contracts of Purchase"), between the City and the Underwriter; and (iii) an
Official Statement of the City, dated 2003 (the "Official Statement"), relating to the
Bonds. The Indenture, the Reimbursement Agreements, the Remarketing Agreements, the
Continuing Disclosure Agreement and the Contracts of Purchase are collectively referred to
herein as the "Legal Documents."
I am of the opinion that:
1. The City is a charter city, duly created, organized and existing under the
Constitution and laws of the State of California and duly qualified to furnish electric service
within said City.
2. The City has the authority and right to execute, deliver and perform the Legal
Documents, and the City has complied with the provisions of applicable law in all matters
relating to the transactions contemplated by the Legal Documents.
3. The distribution of the Preliminary Official Statement, the execution and delivery
of the Official Statement and the Legal Documents have been duly authorized, executed and
delivered by the City and, assuming that the Legal Documents constitute the legal, valid and
binding agreements of the other respective parties thereto, the Legal Documents constitute the
legal, valid and binding agreements of the City enforceable against it in accordance with their
respective terms, except, in each case, as enforceability may be limited by laws relating to
bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and
by the application of equitable principles if equitable remedies are sought.
4. No approval, consent or authorization of any governmental or public agency,
authority or person is required for the execution and delivery by the City of the Legal Documents
or the performance by the City of its obligations thereunder or the execution and delivery, on the
part of the City, of the Bonds. Under the laws of the State of California, the City has the
authority to determine, fix, impose and collect rates and charges for electric service and is not
presently subject to the regulatory jurisdiction of any state, regional or local governmental
regulatory authority other than to the extent described in the Official Statement.
5. The execution and delivery of the Legal Documents by the City and compliance
with the provisions thereof will not conflict with or constitute a breach of or default under any
instrument relating to the organization, existence or operation of the City, or commitment,
agreement or other instrument to which the City is a party or by which it or its property is bound
or affected, or any ruling, regulation, ordinance, judgment, order or decree to which the City or
any of its officers in their respective capacities as such are subject or any provision of the laws of
the State of California relating to the City and its affairs.
6. There is no action, suit, proceeding, inquiry or investigation at law or in equity, or
before any court, public board or body, pending or, to the best of my knowledge, threatened
against or affecting the City or any entity affiliated with the City or any of its officers in their
respective capacities as such (nor to the best of my knowledge, is there any basis therefor) that
questions the powers of the City referred to in paragraph 2 above or in connection with the
transactions contemplated by the Official Statement, or the validity of the proceedings taken by
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the City in connection with the authorization, execution or delivery of the Legal Documents, or
wherein any unfavorable decision, ruling or finding would adversely affect the transactions
contemplated by the Legal Documents or the Official Statement, or that, in any way, would
adversely affect the validity or enforceability of the Legal Documents or, in any material respect,
the ability of the City to perform its obligations under the Legal Documents. Capitalized terms
used herein not otherwise defined shall have the meanings ascribed thereto in the Contracts of
Purchase.
Respectfully submitted,
Eduardo Olivo, Esq
City Attorney
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[Letterhead of Sidley Austin Brown & Wood LLP]
_, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT C
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
We have acted as counsel to you in your capacity as underwriter (the "Underwriter")
under the Contract of Purchase dated , 2003 (the "2003A Contract of Purchase"),
between you and the City of Vernon (the "City"), in connection with your purchase from the
City of its $ Malburg Generating Station Project Electric System Revenue Bonds,
2003 Series A (the "2003A Bonds"), the Underwriter under the Contract of Purchase dated
_, 2003 (the "2003B Contract of Purchase"), between you and the City, in connection
with your purchase from the City of its $ Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and the Underwriter under
the Contract of Purchase dated _, 2003 (the "2003C Contract of Purchase and together
with the 2003A Contract of Purchase and the 2003B Contract of Purchase, the "Contracts of
Purchase"), between you. and the City, in connection with your purchase from the City of its
$ Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C
(the "2003C Bonds" and together with the 2003A Bonds and the 2003B Bonds, the `Bonds").
Terms used herein which are not defined shall have the meanings assigned to them in the
Contract of Purchase or in the City's Official Statement dated _, 2003, relating to the
Bonds (the Official Statement, in the form prepared for use by the Underwriter in confirming
sales of the Bonds, being hereinafter referred to as the "Official Statement").
As such counsel, we have examined originals or copies certified or otherwise identified to
our satisfaction of such documents, records and other instruments as we deemed necessary or
appropriate for the purpose of this opinion, including the Indenture providing for the issuance of
the Bonds.
We are not expressing any opinion or view on the validity, accuracy or sufficiency of
documents, certificates or opinions that we have examined. Further, we have assumed but have
not independently verified that the signatures on all documents, certificates and opinions that we
have reviewed are genuine. In rendering this opinion, we are not expressing any opinion or view
on the authorization, execution, issuance, delivery or validity of the Bonds, nor the exclusion
from gross income for federal income tax purposes of interest on the Bonds or the exemption
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from State of California personal income taxes of interest on the Bonds. We understand you are
relying on the opinion of Orrick, Herrington & Sutcliffe LLP, as bond counsel, in that regard.
Based on and subject to the foregoing, we are of the opinion that the Bonds are not
subject to the registration requirements of the Securities Act of 1933, as amended, and the
Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended.
Because the primary purpose of our professional engagement was not to establish factual
matters and because of the wholly or partially non -legal character of many determinations
involved in the preparation of the Official Statement, we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of any of the statements contained
in the Official Statement and make no representation that we have independently verified the
accuracy, completeness or fairness of any such statements. However, in our capacity as your
counsel, during the course of preparation of the Official Statement, we participated in
conferences with representatives of the City, the City Attorney, legal counsel to the City, Orrick
Herrington & Sutcliffe LLP as bond counsel, Navigant Consulting, Inc. as consulting engineer to
the City, others, and you, at which conferences the contents of the Official Statement and related
matters were discussed. Based on our participation in such conferences and in reliance thereon
and on the certificates, opinions and other documents we have reviewed, we advise you that no
information has come to the attention of the lawyers in this firm rendering professional legal
services in connection with your purchase of the Bonds that would cause us to believe that the
Official Statement as of its date and as of the date hereof (except for any financial or statistical
data or forecasts and the information relating to the Banks, the Letters of Credit or the
Reimbursement Agreements, DTC and the book -entry system included therein, and Appendices
A, and C through F thereto, as to which we express no opinion or view), contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
The opinions expressed herein are based on an analysis of existing laws, regulations,
rulings and court decisions. Such opinions may be adversely affected by actions taken or events
occurring, including a change in law, regulation or ruling (or in the application of official
interpretation of any law, regulation or ruling) after the date hereof. We have not undertaken to
determine, or to inform any person, whether such actions are taken or such events occur, and we
have no obligation to update this opinion in light of such actions or events.
This opinion is being rendered to you solely for your benefit and may not be relied on by
anyone else without our prior written consent. This letter is not intended to and may not be
relied upon by the owners of the Bonds or by any other party to whom it is not specifically
addressed.
Respectfully submitted,
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LA1 486706v6
EXHIBIT D
FORM OF CONSULTING ENGINEER'S CERTIFICATE
The undersigned, an authorized officer of Navigant Consulting, Inc. (the "Consulting
Engineer"), hereby certifies that:
1. This Certificate is furnished pursuant to (i) Section 6(d)(13) of the Contract of
Purchase dated , 2003, between Banc of America Securities LLC (the "Underwriter") and
the City of Vernon (the "City") relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A (the "2003A
Bonds"); (ii) Section 6(d)(13) of the Contract of Purchase dated , 2003, between the
Underwriter and the relating to the sale of the City's $ principal amount of Malburg
Generating Station Project Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"),
and; (iii) Section 6(d)(13) of the Contract of Purchase dated , 2003, between the
Underwriter and the City relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C (the "2003C
Bonds" and together with the 2003A Bonds and the 2003B Bonds, the "Bonds"), and has been
prepared in connection with the sale of the Bonds.
2. The Consulting Engineer has been retained by the City to act as its consulting
engineer in connection with the City's Malburg Generating Station (the "Project") to be financed
with a portion of the proceeds of the Bonds.
3. In connection with the preparation of a consulting engineer's report dated
, 2003 (the "Report") on the Project, personnel of Navigant Consulting, Inc. have
participated in conversations with representatives of the City, consultants and advisors to the
City, Bond Counsel, the Underwriter, Underwriter's Counsel, and others in regard to the Project
and the Report, and nothing has come to the attention of the Consulting Engineer in connection
therewith which could cause it to believe that the Report was inaccurate in any material respect.
4. For purposes of this Certificate, the Consulting Engineer has carried out certain
limited procedures for the period commencing 2003, and ending ,
2003, consisting solely of the making of inquiries of the City as to whether there has been any
material change in the information provided by it, and upon which the Consulting Engineer
relied, for purposes of the Report, and nothing has come to the attention of the Consulting
Engineer as a result of the foregoing procedures that caused it to believe that, as of the date to
which the procedures were carried out, the opinions and conclusions of the Consulting Engineer
set forth in the Report were not correct.
5. The Consulting Engineer has reviewed the portions of the Official Statement
referencing the Consulting Engineer or the Report, and nothing has come to the attention of the
Consulting Engineer that has caused it to believe that, as of the date hereof, any such portions of
the Official Statement referencing the Consulting Engineer or the Report were not correct.
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6. The Consulting Engineer hereby consents to the use of the Report and all
references to the Consulting Engineer in the Official Statement.
Capitalized terms used in this Certificate shall have the meanings given to them in the
Official Statement.
Dated: , 2003 NAVIGANT CONSULTING, INC.
LIM
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SAB&W LLP
Draft of 02/18/03
CITY OF VERNON
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series B
(Variable Rate Demand Bonds)
CONTRACT OF PURCHASE
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Ladies and Gentlemen:
_, 2003
Banc of America Securities LLC, as underwriter (the "Underwriter"), hereby offers to
enter into this Contract of Purchase (this "2003B Contract of Purchase") with you, the City of
Vernon ("the City"). This offer is made subject to acceptance by the City prior to 11:00 P.M.,
California time, on the date hereof, and upon such acceptance this 2003B Contract of Purchase
shall be in full force and effect in accordance with its terms and shall be binding upon the City
and the Underwriter.
l . Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriter hereby agrees to purchase and the City hereby agrees to sell to such
Underwriter all (but not less than all) of the City's $ Malburg Generating Station
Project Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), such 2003B Bonds
being more fully described in the Official Statement (defined in Section 3) at a purchase price of
$ (representing the $ aggregate principal amount of the 2003B
Bonds less $ Underwriter's discount).
The 2003B Bonds are to be issued pursuant to Article XI of the Vernon City Code and an
Indenture of Trust, dated as of March 1, 2003, as supplemented by the Second Supplemental
Indenture of Trust, dated as of March 1, 2003 (collectively, the "Indenture"), by and between the
City and BNY Western Trust Company, as trustee (the "Trustee"), substantially in the forms
previously submitted to the Underwriter, with only such changes therein as shall be mutually
agreed upon. Terms used herein and not defined shall have the meanings assigned to them in the
Official Statement.
Concurrently with the issuance of the 2003B Bonds, the City expects to issue $
aggregate principal amount of its Malburg Generating Station Project Electric System Revenue
Bonds, 2003 Series A (the "2003A Bonds"), which the Underwriter will purchase from the City
LAI 4873120
pursuant to a Contract of Purchase dated , 2003 (the "2003A Contract of Purchase") and
$ aggregate principal amount of its Malburg Generating Station Project Electric System
Revenue Bonds, 2003 Series C (the "2003C Bonds"), which the Underwriter will purchase from
the City pursuant to a Contract of Purchase dated , 2003 (the "2003C Contract of
Purchase" and together with the 2003A Contract of Purchase and the 2003B Contract of
Purchase, the "Contracts of Purchase.")
Banc of America Securities LLC will act as remarketing agent for the 2003A Bonds and
the 2003B Bonds pursuant to Remarketing Agreements, each dated , 2003 (the
"Remarketing Agreements"), each between the City and Banc of America Securities LLC.
Concurrently with the issuance of the 2003A Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "2003A Letter of Credit") pursuant to a Reimbursement
Agreement, dated as of , 2003 (the "2003A Reimbursement
Agreement"), between the City and Bank of America, N.A. (the "2003A Bank').
Concurrently with the issuance of the 2003B Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "2003B Letter of Credit" and together with the 2003A Letter of
Credit, the "Letters of Credit") pursuant to a Reimbursement Agreement, dated as of
, 2003 (the "2003B Reimbursement Agreement"), between the City and
(the "2003B Bank" and together with the 2003A Bank, the "Banks").
With respect to the 2003C Bonds, the City will undertake, pursuant to a Continuing
Disclosure Agreement, dated , 2003 (the "Continuing Disclosure Agreement"), by and
between the City and the Trustee, to provide certain annual financial information and notices of
the occurrence of certain events, if material. A form of the Continuing Disclosure Agreement is
set forth in the Preliminary Official Statement (defined below) and will also be set forth in the
Official Statement (defined below).
Concurrently with the issuance of the 2003C Bonds, the City will enter into a swap
agreement (the "Swap Agreement"), with Bank of America, N.A. (the "Swap Provider") for the
purpose of converting the fixed rate interest payments the City is required to make on the 2003C
Bonds into floating rate payments.
The Indenture, the Remarketing Agreements, the Reimbursement Agreements, the
Continuing Disclosure Agreement, the Swap Agreement and the Contracts of Purchase are
hereinafter referred to as the "Legal Documents."
2. The Underwriter agrees to reoffer the 2003B Bonds in a bona fide public offering
at the initial offering prices or yields set forth in the Official Statement. After the initial offering,
the Underwriter reserves the right to change such public offering prices as the Underwriter shall
deem necessary in marketing the 2003B Bonds.
3. At 8:00 A.M., California time, on March 2003, or at such other time or on
such earlier or later business day as shall have been mutually agreed upon by the City and the
Underwriter, the City will deliver to the Underwriter at the offices of Orrick, Herrington &
Sutcliffe LLP, Los Angeles, California, the closing documents hereinafter mentioned. The 2003B
Bonds, registered to Cede & Co. and in definitive form, will be made available to the
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LA1 487312v1
Underwriter one business day prior to the date of the Closing (hereinafter defined) at the offices
of Orrick, Herrington & Sutcliffe LLP, or at such other place as may be designated by the
Underwriter and shall be subsequently delivered on such date to The Depository Trust Company
("DTC") to be held in safe custody on behalf of the City until Closing. It is anticipated that
CUSIP identification numbers will be printed on the 2003B Bonds, but neither the failure to print
such number on any of the 2003B Bonds nor any error with respect thereto shall constitute cause
for a failure or refusal by the Underwriter to accept delivery of and pay for the 2003B Bonds in
accordance with the terms of this 2003B Contract of Purchase. Upon release of the 2003B
Bonds, the Underwriter will pay the purchase price of the 2003B Bonds as set forth in Section l
hereof, in immediately available funds to the order of the City. The releases and payments
referenced to in this Section 3 are herein called the "Closing" or "Closing Date."
4. The City ratifies, confirms and approves the use by the Underwriter of the official
statement of the City in preliminary form dated _, 2003 (which, including all appendices
thereto, is herein called the "Preliminary Official Statement"), in connection with the prospective
offering of the 2003B Bonds prior to the date hereof. The City hereby acknowledges that the
Preliminary Official Statement has been made available to investors on the internet at
http://www. The City will deliver to the Underwriter copies of its official statement dated
_, 2003 (such official statement, including the cover page and all appendices included
therein or attached thereto, being herein called the "Official Statement"), signed on behalf of the
City by its Mayor or other appropriate official and, as promptly as practicable after acceptance
hereof (but in any event within seven business days after the City's acceptance hereof and in
sufficient time to accompany any order confirmation requesting payment from any customer), a
sufficient number of conformed copies to comply with the rules of the Securities and Exchange
Commission and the Municipal Securities Rulemaking Board. The City hereby approves the
Official Statement and authorizes the use of copies of the Official Statement and the documents
referred to therein in connection with the offering and sale of the 2003B Bonds by the
Underwriter. The Underwriter hereby agrees that it will not confirm the sale of any Bond unless
the confirmation requesting payment from the customer is accompanied or preceded by a copy of
the Official Statement.
5. The City represents to the Underwriter that, as of the date hereof and as of the
date of the Closing:
(a) The City is duly existing as a charter city organized under the laws of the
State of California (the "State");
(b) The City has full legal right, power and authority to cause the Bonds to be
authenticated and delivered, to execute and deliver the Legal Documents and to perform
its obligations contained herein and therein in accordance with the Act and other
applicable laws; and, by official action of the City prior to or concurrently with the
acceptance hereof, the City has duly authorized and approved the issuance and delivery
of the Bonds, the distribution of the Preliminary Official Statement, the execution,
delivery and distribution of the Official Statement, the execution and delivery of the
Legal Documents and the performance of its obligations contained herein and therein and
the consummation by it of all other transactions contemplated by the Official Statement
and the Legal Documents to have been performed or consummated at or prior to the date
LAI 487312vi
of the Closing, all in accordance with the Act and other applicable laws, and the City is
and will be in compliance with the provisions thereof in all material respects;
(c) The Official Statement is and at all times subsequent hereto up to and
including the date of the Closing will be, true and correct in all material respects; and the
Official Statement does not and will not omit any statement or information necessary to
make the statements therein, in the light of the circumstances under which they were
made, not misleading except that no representation is made as to any information
included in the Official Statement relating to DTC or its operations, the Banks or the
Letters of Credit or the Reimbursement Agreements relating to the 2003A Bonds and the
2003B Bonds;
(d) Between the date hereof and the date of the Closing, except as
contemplated by the Official Statement, the City will not have incurred any material
liabilities, direct or contingent, or entered into any material transaction in either case
other than in the ordinary course of business, and there shall not have been any material
adverse change in the financial condition or prospects of the Electric System;
(e) The performance of its obligations contained in the Bonds and the
execution and delivery of the Legal Documents and the performance of its obligations
contained herein and therein do not and will not in any material respect conflict with or
constitute a breach of or default under any law, administrative regulation, court decree,
resolution or agreement to which the City is subject or by which it is bound;
(f) Except as disclosed in the Official Statement, no litigation is, or at the date
of the Closing will be, pending or, to the knowledge of the City, threatened in any court
(i) in any way questioning the corporate existence of the City or the titles of the officers
of the City to their respective offices; (ii) seeking to restrain or enjoin the issuance or
delivery of any of the Bonds, or the collection of Net Revenues of the Electric System or
other amounts pledged or to be pledged to pay the principal of, premium, if any, and
interest on the Bonds, or in any way contesting or affecting the validity of the Bonds, the
Legal Documents or the collection of said Net Revenues, or the pledge thereof, or
contesting the powers of the City or any authority for the issuance and delivery of the
Bonds or the performance of its obligations contained therein or the execution and
delivery of the Legal Documents or the performance of its obligations contained herein or
therein, (iii) which would be likely to result in any material adverse change in the
business, properties, assets or financial condition of the Electric System or to have a
material adverse effect on the ability of the City to meet its obligations under the Bonds
or the Legal Documents or (iv) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that if the Underwriter accepts at the Closing any change
in the certificate referred to in Section 6(d)(3) hereof, the representations contained in this
Section 5(f) shall be deemed modified to a like extent;
(g) All material studies undertaken by or on behalf of the City with respect to
the Project have been disclosed and/or made available to the Underwriter;
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(h) The Bonds, the Legal Documents and the other documents described in
the Official Statement conform in all material respects to the descriptions thereof
contained in the Official Statement, and the Bonds, when delivered as provided herein,
will be validly issued and outstanding obligations of the City entitled to the benefits of
the Indenture;
(i) The City will furnish such information, execute such instruments and take
such other action not inconsistent with law in cooperation with the Underwriter as the
Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale
under the Blue Sky or other securities laws and regulations of such states and other
jurisdictions of the United States as the Underwriter may designate and (ii) to determine
the eligibility of the Bonds for investment under the laws of such states and other
jurisdictions, and will use its best efforts to continue such qualification in effect so long
as required for the distribution of the Bonds; provided that the City shall not be obligated
to take any action that would subject it to the general service of process in any state or
jurisdiction where it is not now so subject;
0) If between the date hereof and the Closing Date, an event occurs which
might or would cause the information contained in the Official Statement, as then
supplemented or amended, to contain an untrue statement of a material fact or to omit to
state a material fact required to be stated therein or necessary to make such information
therein, in the light of the circumstances under which it was presented, not misleading,
the City will notify the Underwriter, and, if in the opinion of the City or the Underwriter,
or their respective counsel, such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the City will forthwith prepare and
furnish to the Underwriter (at the expense of the City) a reasonable number of copies of
an amendment of or supplement to the Official Statement (in form and substance
satisfactory to counsel for the Underwriter) which will amend or supplement the Official
Statement so that it will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Official Statement is delivered to prospective
purchasers, not misleading;
(k) If the information contained in the Official Statement is amended or
supplemented pursuant to paragraph 0) hereof, at the time of each supplement or
amendment thereto and (unless subsequently again supplemented or amended pursuant to
such subparagraph) at all times subsequent thereto up to and including the Closing Date,
the portions of the Official Statement so supplemented or amended (including any
financial and statistical data contained therein) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make such information therein, in the light of the circumstances under which it was
presented, not misleading;
(1) After the Closing, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished
with a copy, the Underwriter shall reasonably object in writing or which shall be
disapproved by counsel for the Underwriter; and
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LAI 487312v1
(in) The financial statements of the City contained as Appendix A to the
Official Statement do and will fairly present the financial position and results of
operations of the City as of the dates and for the periods therein set forth in accordance
with generally accepted accounting principles applied consistently.
6. The Underwriter has entered into this 2003B Contract of Purchase in reliance
upon the representations herein and the performance by the City of the City's obligations
hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter's
obligations under this 2003B Contract of Purchase are and shall be subject to the following
further conditions:
(a) The representations of the City contained herein shall be true and correct
in all material respects at the date hereof and on the date of the Closing;
(b) At the time of the Closing, the Legal Documents shall be in full force and
effect, and shall not have been amended, modified or supplemented (except as may be
agreed to in writing by the Underwriter); the ratings quoted in the Official Statement shall
be in effect; and the City shall perform or have performed its obligations required under
or specified in the Official Statement and the Legal Documents to be performed at or
prior to the Closing;
(c) The Underwriter may terminate this 2003B Contract of Purchase by
notification to the City if at any time after the date hereof and prior to the Closing
(i) legislation shall be enacted by the Congress of the United States or introduced and
pending in or adopted by either House thereof or a decision by a Court of the United
States or the Tax Court of the United States shall be rendered or a ruling, regulation or
official statement by or on behalf of the Treasury Department of the United States, the
Internal Revenue Service or other governmental agency shall be made with respect to
federal taxation upon revenues or other income of the general character expected to be
derived by the City or upon interest received on securities of the general character of the
2003B Bonds in the hands of the holders thereof which, in the reasonable judgment of the
Underwriter, materially adversely affects the market price of the 2003B Bonds or
(ii) there shall have occurred any new outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war, calamity or crisis, the effect of which
on financial markets is such as to make it, in the sole judgement of the Underwriter,
impracticable or inadvisable to proceed with the offering and delivery of the 2003B
Bonds, or (iii) there shall be in force a general suspension of trading on the New York
Stock Exchange or minimum or maximum prices for trading shall have been fixed and be
in force, or maximum ranges for prices for securities shall have been required and be in
force on the New York Stock Exchange, whether by virtue of a determination by that
Exchange or by order of the Securities and Exchange Commission or any other
governmental authority having jurisdiction, or (iv) a general banking moratorium shall
have been declared by Federal, New York or California authorities having jurisdiction
and shall be in force or (v) there shall exist any event which, in the sole judgment of the
Underwriter, either (A) makes untrue or incorrect in any material respect any statement or
information contained in the Official Statement or (B) is not reflected in the Official
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Statement but should be reflected therein in order to make the statements and information
contained therein not misleading in any material respect;
(d) At or prior to the Closing, the Underwriter shall receive the following
documents:
(1) the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to
the City, dated the date of the Closing, substantially in the form attached as
Appendix G to the Official Statement;
(2) a certificate or certificates, dated the date of the Closing, of the
City executed by its City Administrator, its Director of Utilities Department, or
other appropriate official, to the effect that (A) on the date of the Official
Statement and on the date of the certificate (i) the descriptions and statements of
or pertaining to the City, the Electric System and the Project contained in the
Official Statement were and are true and correct in all material respects; (ii) the
Official Statement did not and does not contain an untrue statement of a material
fact or omit any statement or information which is necessary to make the
statements therein, in the light of the circumstances under which they were made,
not misleading (provided that no representation is made regarding information
relating to DTC and its operations, the Banks or the Letters of Credit or the
Reimbursement Agreements relating to the 2003A Bonds and the 2003B Bonds);
and (iii) insofar as the descriptions and statements, including financial data, of or
pertaining to entities other than the City and their activities contained in the
Official Statement are concerned, such descriptions, statements and data have
been obtained from sources which the City believes to be reliable and the City has
no reason to believe that they are untrue in any material respect; and (B) the
representations and warranties of the City in this 2003B Contract of Purchase are
true and correct on and as of the date of the Closing as if made on and as of the
date of the Closing, and the City has complied with and performed all of its
covenants and agreements in this 2003B Contract of Purchase to be complied with
and performed at or prior to the Closing;
(3) a certificate dated the date of the Closing, by the City
Administrator, or other appropriate official of the City, and by the City Attorney
to the effect that other than as described in the Official Statement, no litigation is
pending (with the City having received service of process) or, to their knowledge,
threatened in any court (i) in any way questioning the corporate existence of the
City or the titles of the officers of the City to their respective offices; (ii) seeking
to restrain or enjoin the delivery of the Bonds, or the collection of Net Revenues
of the Electric System or other amounts pledged or to be pledged to pay the
principal of, premium, if any, and interest on such Bonds; (iii) in any way
contesting or affecting the validity of the Bonds, the Legal Documents; (iv) in any
way contesting or affecting the collection of said Net Revenues or the pledge
thereof, or contesting the powers of the City or any authority for the issuance and
delivery of the Bonds and the performance of its obligations contained therein or
the execution and delivery of the Legal Documents and the performance of its
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LAI 4873120
obligations contained therein or herein; (v) which would be likely to result in any
material adverse change in the business, properties, assets or the financial
condition of the Electric System or which would be likely to have a material
adverse effect on the ability of the City to meet its obligations under the
Indenture; or (vi) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, which certificate shall be in form and substance acceptable
to us (but in lieu of such certificate, the Underwriter may in their sole discretion
accept an opinion of Bond Counsel or Counsel to the City, acceptable to the
Underwriter in form and substance, that in their opinion the issues raised in any
such pending or threatened litigation are without substance or that the contentions
of any plaintiffs therein are without merit);
(4) an opinion of counsel to the Trustee, dated the date of the Closing
and addressed to the City and the Underwriter, to the effect that, the Trustee's
obligations under the Indenture and the Continuing Disclosure Agreement
constitute legal, valid and binding obligations of the Trustee, as applicable,
enforceable in accordance with their respective terms under California law except
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws in effect from time to time
affecting the rights of creditors generally and except to the extent that the
enforceability thereof may be limited by the application of general principles of
equity;
(5) a certificate of the Trustee, dated the date of the Closing, to the
effect that (i) the Trustee is a banking corporation duly organized and existing
under the laws of the State of California; (ii) the Trustee has full corporate trust
powers and authority to serve as Trustee under the Indenture and as
Dissemination Agent under the Continuing Disclosure Agreement; and (iii) the
Trustee acknowledges and accepts its obligations under the Indenture and the
Continuing Disclosure Agreement and that such acceptance is in full compliance
with, and does not conflict with, any applicable law or governmental regulation
currently in effect, and does not conflict with or violate any contract to which the
Trustee is a party or any administrative or judicial decision by which the Trustee
is bound;
(6) opinions of Orrick, Herrington & Sutcliffe LLP and the City
Attorney, dated the date of the Closing, substantially in the respective forms
attached hereto as Exhibits A and B, with such changes as Counsel to the
Underwriter may approve;
(7) copies of the documents referred to in Section 6(b);
(8) certified copies of all proceedings the Banks authorization and
issuance of the 2003B Bonds certified by the City Administrator or other
appropriate official of the City;
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LAI 487312v1
(9) evidence that any ratings on the 2003B Bonds are in full force and
effect as of the date of the Closing;
(10) the opinion(s) of counsel to the Banks, each dated the date of the
Closing, addressed to the City and the Underwriter, the Banks enforceability of
the Letters of Credit and the description of the Letters of Credit and the
Reimbursement Agreements contained in the Official Statement, in such form as
the Underwriter and Counsel to the Underwriter shall approve;
(11) a copy of each of the Letters of Credit and a certificate of each of
the Banks, dated the date of the Closing, to the effect that the information in the
Official Statement under the caption "THE BANK" is accurate in all material
respects and does not contain an untrue statement of material fact;
(12) a copy of any Blue Sky and Legal Investment Surveys with respect
to the 2003B Bonds, prepared by Underwriter's Counsel;
(13) a certificate of the Consulting Engineer, dated the Closing Date, in
substantially the form of Exhibit D hereto;
(14) an opinion of Sidley Austin Brown & Wood LLP, Counsel to the
Underwriter, dated the date of the Closing, substantially in the form attached
hereto as Exhibit C;
(15) the opinions of Bond Counsel and the City Attorney, dated the date
of the Closing, addressed to the Swap Provider, the Banks Swap Agreement, in
substantially the forms previously submitted to the Underwriter; and
(16) such additional certificates, instruments and other documents as
the Underwriter may reasonably deem necessary to evidence the truth and
accuracy as of the time of the Closing of the City's representations and warranties
contained in this 2003B Contract of Purchase and the due performance or
satisfaction by the City at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by the City pursuant to this
2003B Contract of Purchase.
The opinions and certificates and other material referred to above shall be in form and
substance satisfactory to the undersigned and to Sidley Austin Brown & Wood LLP, Counsel to
the Underwriter.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter
to purchase, accept delivery of and pay for the 2003B Bonds contained in this 2003B Contract of
Purchase or if the obligations of the Underwriter to purchase, accept delivery of and pay for the
2003B Bonds shall be terminated for any reason permitted by this 2003B Contract of Purchase,
this 2003B Contract of Purchase and all obligations of the Underwriter hereunder may be
terminated by the Underwriter at or at any time prior to the date of the Closing by written notice
to the City, and neither the Underwriter nor the City shall have any further obligations hereunder.
In the event that the Underwriter fail (other than for a reason permitted by this 2003B Contract of
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Purchase) to accept and pay for the 2003B Bonds at the Closing, the amount of one percent (1%)
of the principal amount of the 2003B Bonds shall be paid by the Underwriter, as liquidated
damages for such failure and for any and all defaults hereunder on the part of the Underwriter
and the acceptance of such amount shall constitute a full release and discharge of all claims and
rights of the City against the Underwriter as result of such failure and such default.
7. At the time of or prior to the Closing, the Underwriter shall file a copy of the
Official Statement with the Municipal Securities Rulemaking Board and with a nationally
recognized municipal securities information repository. The Underwriter shall advise the City of
the date and repository of such filing.
8. The Underwriter shall be under no obligation to pay, and the City shall pay, any
expenses incident to the performance of the City's obligations hereunder, including but not
limited to: (i) the cost of preparation, printing and distribution of the Legal Documents, the
Preliminary Official Statement, the Official Statement and any supplements or amendments
thereto (including the word processing costs of Underwriter's Counsel in preparing the
Preliminary Official Statement and the Official Statement); (ii) the cost of preparing and printing
the 2003B Bonds; (iii) the fees and disbursements of Bond Counsel and the fees and expenses of
counsel to the City; (iv) the fees and disbursements of the Banks and any engineers, accountants
and other experts, consultants or advisors retained by the City; (v) fees for bond ratings (which
include fees of rating agencies and travel expenses of the City); and (vi) expenses (included in
the expense component of the underwriting spread) incurred on behalf of the City's employees
which are incidental to implementing this agreement, including, but not limited to, meals,
transportation, and lodging of those employees, if any.
9. The Underwriter shall pay: (i) the cost of preparation and printing of this 2003B
Contract of Purchase, the Preliminary Blue Sky Survey and the Legal Investment Survey; (ii) all
advertising expenses and Blue Sky filing fees in connection with the public offering of the
2003B Bonds; (iii) fees, if any, payable to the California Debt Investment and Advisory
Commission in connection with the execution and delivery of the 2003B Bonds; and (iv) all
other expenses incurred by the Underwriter in connection with the public offering of the 2003B
Bonds, including the fees and disbursements of Underwriter's Counsel (except as provided
above).
10. Any notice or other communication to be given to the City under this 2003B
Contract of Purchase may be given by delivering the same in writing to the Commission, City of
Vernon, 4305 Santa Fe Avenue, Vernon, California 90058, Attention: Director of Public
Utilities; and any notice or other communication to be given to the Underwriter under this 2003B
Contract of Purchase may be given by delivering the same in writing to: Banc of America
Securities LLC, 300 South Grand Avenue, 19th Floor, Los Angeles, CA 90071, Attention:
Mr. David Johnson, Managing Director.
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11. This Contract, when accepted by the City in writing as heretofore specified, shall
constitute the entire agreement between the City and the Underwriter and is made solely for the
benefit of the City and the Underwriter (including any successor in business of the Underwriter).
No other person shall acquire or have any right hereunder or by virtue hereof. All the
representations and agreements in this 2003B Contract of Purchase shall remain operative and in
full force and effect, regardless of (a) any investigation made by or on behalf the Underwriter,
(b) delivery of and payment for the 2003B Bonds hereunder, and (c) any termination of this
2003B Contract of Purchase.
Accepted on _, 2003
City of Vernon
LIM
Director of Public Utilities
Very truly yours,
BANC OF AMERICA SECURITIES LLC
LA1 487312v1
11
SCHEDULEI
to the
Contract of Purchase
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B
Maturity
(March 1)
Principal Amount
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LAI 4873120
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
_, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT A
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
Ladies and Gentlemen:
This letter is being delivered pursuant to (i) Section 6(d)(6) of the Contract of Purchase,
dated _, 2003 (the "2003A Contract of Purchase"), between the City of Vernon (the
"City") and Banc of America Securities LLC (the "Underwriter"), providing for the purchase of
the City's $ Malburg Generating Station Project Electric System Revenue Bonds,
2003 Series A (the "2003A Bonds"), (ii) Section 6(d)(6) of the Contract of Purchase, dated
_, 2003 (the "2003B Contract of Purchase"), between the City and the Underwriter,
providing for the purchase of the City's $ Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and (iii) Section 6(d)(6) of
the Contract of Purchase, dated _, 2003 (the "2003C Contract of Purchase" and together
with the 2003A Contract of Purchase and the 2003B Contract of Purchase, the "Contracts of
Purchase"), between the City and the Underwriter, providing for the purchase of the City's
$ Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C
(the "2003C Bonds" and together with the 2003A Bonds and the 2003B Bonds, the "Bonds").
The Bonds are being issued pursuant to an Indenture of Trust, as supplemented by the First
Supplemental Indenture of Trust, the Second Supplemental Indenture of Trust and the Third
Supplemental Indenture of Trust, each dated as of March 1, 2003 (collectively, the "Indenture"),
each by and between the City and BNY Western Trust Company, as trustee. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not
defined in the Indenture, the Contract of Purchase.
In connection with our role as bond counsel, we have reviewed the Indenture, the Official
Statement, the Contracts of Purchase, certificates of the City, the Trustee, the Underwriter and
others, opinions of counsel to the City and others, and such other documents, opinions and
matters to the extent we deemed necessary to render the opinions and conclusions set forth
herein.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we
are of the following opinions or conclusions:
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1. The Official Statement has been duly authorized, executed and delivered by the
City and the Contracts of Purchase and the Continuing Disclosure Agreement have each been
duly authorized, executed and delivered by the City and, assuming due authorization, execution
and delivery by and validity against the other parties thereto, each is a valid and binding
agreement of the City, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement and other laws affecting creditors' rights, by the
application of equitable principles and the exercise of judicial discretion in appropriate cases, and
by the limitations on legal remedies against municipal corporations in the State of California.
We express no opinion with respect to any indemnification, contribution, choice of law, choice
of forum or waiver provisions contained therein.
2. The Bonds are not subject to the registration requirements of the Securities Act of
1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture
Act of 1939, as amended.
3. The statements contained in the Official Statement under the captions
"INTRODUCTION," "THE 2003 BONDS," "SECURITY AND SOURCES OF PAYMENT
FOR THE 2003 BONDS," "TAX MATTERS," "APPENDIX E — SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE," "APPENDIX F — PROPOSED FORM OF
CONTINUING DISCLOSURE AGREEMENT" and "APPENDIX G — PROPOSED FORM OF
OPINION OF BOND COUNSEL" insofar as the statements contained under such captions
expressly summarize certain provisions of the Bonds, the Indenture and the Continuing
Disclosure Agreement are accurate in all material respects; provided, however, that no opinion is
expressed with respect to any statements relating to The Depository Trust Company ("DTC") or
its operations or the Banks or the Letters of Credit or the Reimbursement Agreements relating to
the 2003A Bonds and the 2003B Bonds.
We are not passing upon and do not assume any responsibility for the accuracy (except as
explicitly stated in the previous paragraph), completeness or fairness of any of the statements
contained in the Official Statement. In our capacity as bond counsel in connection with the
issuance of the Bonds, we participated in conferences with your representatives, your counsel,
representatives of the City and its counsel, and other consultants to the City, during which
conferences the contents of the Official Statement and related matters were discussed. Based on
our participation in the above -referenced conferences (which did not extend beyond the date of
the Official Statement), and in reliance thereon and on the records, documents, certificates and
opinions herein mentioned (as set forth above), we advise you that during such conferences, no
information came to the attention of the attorneys in our firm rendering legal services in
connection with such issuance which caused us to believe that the Official Statement as of its
date (except for any financial, statistical or economic data or forecasts, numbers, charts, tables,
graphs, estimates, projections, assumptions or expression of opinions required to be stated
therein or information relating to the Banks and the Letters of Credit and the Reimbursement
Agreements, DTC, any investment agreement provider and the information contained in
Appendices B, D and H included therein as to which we express no opinion or view), contained
any untrue statement of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading.
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This letter is furnished by us as bond counsel. No attorney -client relationship has existed
or exists between our firm and yourselves in connection with the Bonds or by virtue of this letter.
Our engagement with respect to the Bonds has concluded with their issuance. We disclaim any
obligation to update this letter. This letter is delivered to you as the Underwriter of the Bonds,
and is solely for the benefit of such Underwriter, and is not to be used, circulated, quoted or
otherwise referred to or relied upon for any other purpose or by any other person. This letter is
not intended to, and may not, be relied upon by owners of the Bonds.
Very truly yours,
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LAI 487312v1
FORM OF OPINION OF CITY ATTORNEY
2003
Banc of America Securities LLC
As Underwriter
EXHIBIT B
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
Ladies and Gentlemen:
I am City Attorney of the City of Vernon (the "City") and as such I have served as
Counsel to the City in connection with the issuance of $ aggregate principal amount of
the City's Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A
(the "2003A Bonds"), $ aggregate principal amount of the City's Malburg
Generating Station Project Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds")
and $ aggregate principal amount of the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C (the "2003C Bonds" and together with the
2003A Bonds and the 2003B Bonds, the "Bonds"). As such counsel, I have examined and am
familiar with (i) those documents relating to the existence, organization and operation of the
City; (ii) all necessary documentation of the City relating to the authorization, execution and
delivery of (a) the Indenture of Trust, as supplemented by the First Supplemental Indenture of
Trust, the Second Supplemental Indenture of Trust and the Third Supplemental Indenture of
Trust, each dated as of March 1, 2003 (collectively, the "Indenture"), each by and between the
City and BNY Western Trust Company, as trustee thereunder (the "Trustee"), providing for the
issuance of the Bonds, (b) the Reimbursement Agreement, dated as of 1, 2003 (the
"2003A Reimbursement Agreement"), by and between the City and Bank of America, N.A.,
relating to the 2003A Bonds, (c) the Reimbursement Agreement, dated as of 1, 2003 (the
"2003B Reimbursement Agreement" and together with the 2003A Reimbursement Agreement,
the "Reimbursement Agreements"), by and between the City and , relating to the 2003B
Bonds; (d), the Remarketing Agreement related to the Series 2003A Bonds and the Remarketing
Agreement related to the Series 2003B Bonds, each dated , 2003 (collectively, the
"Remarketing Agreements"), each between the City and Banc of America Securities LLC, as
remarketing agent; (e) the Continuing Disclosure Agreement, dated , 2003 (the
"Continuing Disclosure Agreement"), between the City and the Trustee, as dissemination agent;
(f) the Contract of Purchase, dated , 2003 (the "2003A Purchase Contract"), between the
City and Banc of America Securities LLC, as underwriter (the "Underwriter"), the Contract of
Purchase, dated , 2003 (the "2003B Purchase Contract"), between the City and the
Underwriter, and the Contract of Purchase, dated 2003 (the "2003C Contract of
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LA1 487312v1
Purchase" and together with the 2003A Contract of Purchase and the 2003B Contract of
Purchase, the "Contracts of Purchase"), between the City and the Underwriter; and (iii) an
Official Statement of the City, dated , 2003 (the "Official Statement"), relating to the
Bonds. The Indenture, the Reimbursement Agreements, the Remarketing Agreements, the
Continuing Disclosure Agreement and the Contracts of Purchase are collectively referred to
herein as the "Legal Documents."
I am of the opinion that:
1. The City is a charter city, duly created, organized and existing under the
Constitution and laws of the State of California and duly qualified to furnish electric service
within said City.
2. The City has the authority and right to execute, deliver and perform the Legal
Documents, and the City has complied with the provisions of applicable law in all matters
relating to the transactions contemplated by the Legal Documents.
3. The distribution of the Preliminary Official Statement, the execution and delivery
of the Official Statement and the Legal Documents have been duly authorized, executed and
delivered by the City and, assuming that the Legal Documents constitute the legal, valid and
binding agreements of the other respective parties thereto, the Legal Documents constitute the
legal, valid and binding agreements of the City enforceable against it in accordance with their
respective terms, except, in each case, as enforceability may be limited by laws relating to
bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and
by the application of equitable principles if equitable remedies are sought.
4. No approval, consent or authorization of any governmental or public agency,
authority or person is required for the execution and delivery by the City of the Legal Documents
or the performance by the City of its obligations thereunder or the execution and delivery, on the
part of the City, of the Bonds. Under the laws of the State of California, the City has the
authority to determine, fix, impose and collect rates and charges for electric service and is not
presently subject to the regulatory jurisdiction of any state, regional or local governmental
regulatory authority other than to the extent described in the Official Statement.
5. The execution and delivery of the Legal Documents by the City and compliance
with the provisions thereof will not conflict with or constitute a breach of or default under any
instrument relating to the organization, existence or operation of the City, or commitment,
agreement or other instrument to which the City is a party or by which it or its property is bound
or affected, or any ruling, regulation, ordinance, judgment, order or decree to which the City or
any of its officers in their respective capacities as such are subject or any provision of the laws of
the State of California relating to the City and its affairs.
6. There is no action, suit, proceeding, inquiry or investigation at law or in equity, or
before any court, public board or body, pending or, to the best of my knowledge, threatened
against or affecting the City or any entity affiliated with the City or any of its officers in their
respective capacities as such (nor to the best of my knowledge, is there any basis therefor) that
questions the powers of the City referred to in paragraph 2 above or in connection with the
transactions contemplated by the Official Statement, or the validity of the proceedings taken by
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LAI 487312v1
the City in connection with the authorization, execution or delivery of the Legal Documents, or
wherein any unfavorable decision, ruling or finding would adversely affect the transactions
contemplated by the Legal Documents or the Official Statement, or that, in any way, would
adversely affect the validity or enforceability of the Legal Documents or, in any material respect,
the ability of the City to perform its obligations under the Legal Documents. Capitalized terms
used herein not otherwise defined shall have the meanings ascribed thereto in the Contracts of
Purchase.
Respectfully submitted,
Eduardo Olivo, Esq.
City Attorney
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LAI 4873120
[Letterhead of Sidley Austin Brown & Wood LLP]
_, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT C
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
We have acted as counsel to you in your capacity as underwriter (the "Underwriter")
under the Contract of Purchase dated _, 2003 (the "2003A Contract of Purchase"),
between you and the City of Vernon (the "City"), in connection with your purchase from the
City of its $ Malburg Generating Station Project Electric System Revenue Bonds,
2003 Series A (the "2003A Bonds"), the Underwriter under the Contract of Purchase dated
_, 2003 (the "2003B Contract of Purchase"), between you and the City, in connection
with your purchase from the City of its $ Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and the Underwriter under
the Contract of Purchase dated _, 2003 (the "2003C Contract of Purchase and together
with the 2003A Contract of Purchase and the 2003B Contract of Purchase, the "Contracts of
Purchase"), between you. and the City, in connection with your purchase from the City of its
$ Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C
(the "2003C Bonds" and together with the 2003A Bonds and the 2003B Bonds, the "Bonds").
Terms used herein which are not defined shall have the meanings assigned to them in the
Contract of Purchase or in the City's Official Statement dated , 2003, relating to the
Bonds (the Official Statement, in the form prepared for use by the Underwriter in confirming
sales of the Bonds, being hereinafter referred to as the "Official Statement").
As such counsel, we have examined originals or copies certified or otherwise identified to
our satisfaction of such documents, records and other instruments as we deemed necessary or
appropriate for the purpose of this opinion, including the Indenture providing for the issuance of
the Bonds.
We are not expressing any opinion or view on the validity, accuracy or sufficiency of
documents, certificates or opinions that we have examined. Further, we have assumed but have
not independently verified that the signatures on all documents, certificates and opinions that we
have reviewed are genuine. In rendering this opinion, we are not expressing any opinion or view
on the authorization, execution, issuance, delivery or validity of the Bonds, nor the exclusion
from gross income for federal income tax purposes of interest on the Bonds or the exemption
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LAI 487312v1
from State of California personal income taxes of interest on the Bonds. We understand you are
relying on the opinion of Orrick, Herrington & Sutcliffe LLP, as bond counsel, in that regard.
Based on and subject to the foregoing, we are of the opinion that the Bonds are not
subject to the registration requirements of the Securities Act of 1933, as amended, and the
Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended.
Because the primary purpose of our professional engagement was not to establish factual
matters and because of the wholly or partially non -legal character of many determinations
involved in the preparation of the Official Statement, we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of any of the statements contained
in the Official Statement and make no representation that we have independently verified the
accuracy, completeness or fairness of any such statements. However, in our capacity as your
counsel, during the course of preparation of the Official Statement, we participated in
conferences with representatives of the City, the City Attorney, legal counsel to the City, Orrick
Herrington & Sutcliffe LLP as bond counsel, Navigant Consulting, Inc. as consulting engineer to
the City, others, and you, at which conferences the contents of the Official Statement and related
matters were discussed. Based on our participation in such conferences and in reliance thereon
and on the certificates, opinions and other documents we have reviewed, we advise you that no
information has come to the attention of the lawyers in this firm rendering professional legal
services in connection with your purchase of the Bonds that would cause us to believe that the
Official Statement as of its date and as of the date hereof (except for any financial or statistical
data or forecasts and the information relating to the Banks, the Letters of Credit or the
Reimbursement Agreements, DTC and the book -entry system included therein, and Appendices
A, and C through F thereto, as to which we express no opinion or view), contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
The opinions expressed herein are based on an analysis of existing laws, regulations,
rulings and court decisions. Such opinions may be adversely affected by actions taken or events
occurring, including a change in law, regulation or ruling (or in the application of official
interpretation of any law, regulation or ruling) after the date hereof. We have not undertaken to
determine, or to inform any person, whether such actions are taken or such events occur, and we
have no obligation to update this opinion in light of such actions or events.
This opinion is being rendered to you solely for your benefit and may not be relied on by
anyone else without our prior written consent. This letter is not intended to and may not be
relied upon by the owners of the Bonds or by any other party to whom it is not specifically
addressed.
Respectfully submitted,
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LAI 487312v1
EXHIBIT D
FORM OF CONSULTING ENGINEER'S CERTIFICATE
The undersigned, an authorized officer of Navigant Consulting, Inc. (the "Consulting
Engineer"), hereby certifies that:
1. This Certificate is furnished pursuant to (i) Section 6(d)(13) of the Contract of
Purchase dated , 2003, between Banc of America Securities LLC (the "Underwriter") and
the City of Vernon (the "City") relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A (the "2003A
Bonds"); (ii) Section 6(d)(13) of the Contract of Purchase dated , 2003, between the
Underwriter and the relating to the sale of the City's $ principal amount of Malburg
Generating Station Project Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"),
and; (iii) Section 6(d)(13) of the Contract of Purchase dated , 2003, between the
Underwriter and the City relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C (the "2003C
Bonds" and together with the 2003A Bonds and the 2003B Bonds, the `Bonds"), and has been
prepared in connection with the sale of the Bonds.
2. The Consulting Engineer has been retained by the City to act as its consulting
engineer in connection with the City's Malburg Generating Station (the "Project") to be financed
with a portion of the proceeds of the Bonds.
3. In connection with the preparation of a consulting engineer's report dated
, 2003 (the "Report") on the Project, personnel of Navigant Consulting, Inc. have
participated in conversations with representatives of the City, consultants and advisors to the
City, Bond Counsel, the Underwriter, Underwriter's Counsel, and others in regard to the Project
and the Report, and nothing has come to the attention of the Consulting Engineer in connection
therewith which could cause it to believe that the Report was inaccurate in any material respect.
4. For purposes of this Certificate, the Consulting Engineer has carried out certain
limited procedures for the period commencing , 2003, and ending ,
2003, consisting solely of the making of inquiries of the City as to whether there has been any
material change in the information provided by it, and upon which the Consulting Engineer
relied, for purposes of the Report, and nothing has come to the attention of the Consulting
Engineer as a result of the foregoing procedures that caused it to believe that, as of the date to
which the procedures were carried out, the opinions and conclusions of the Consulting Engineer
set forth in the Report were not correct.
5. The Consulting Engineer has reviewed the portions of the Official Statement
referencing the Consulting Engineer or the Report, and nothing has come to the attention of the
Consulting Engineer that has caused it to believe that, as of the date hereof, any such portions of
the Official Statement referencing the Consulting Engineer or the Report were not correct.
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6. The Consulting Engineer hereby consents to the use of the Report and all
references to the Consulting Engineer in the Official Statement.
Capitalized terms used in this Certificate shall have the meanings given to them in the
Official Statement.
Dated: , 2003
NAVIGANT CONSULTING, INC.
D-2
LAI 4873120
CITY OF VERNON
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series C
(Fixed Rate Bonds)
CONTRACT OF PURCHASE
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Ladies and Gentlemen:
SAB&W LLP
Draft of 02/17/03
, 2003
Banc of America Securities LLC, as underwriter (the "Underwriter"), hereby offers to
enter into this Contract of Purchase (this "2003C Contract of Purchase") with you, the City of
Vernon ("the City"). This offer is made subject to acceptance by the City prior to 11:00 P.M.,
California time, on the date hereof, and upon such acceptance this 2003C Contract of Purchase
shall be in full force and effect in accordance with its terms and shall be binding upon the City
and the Underwriter.
1. Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriter hereby agrees to purchase and the City hereby agrees to sell to such
Underwriter all (but not less than all) of the City's $ Malburg Generating Station
Project Electric System Revenue Bonds, 2003 Series C (the "2003C Bonds"), such 2003C Bonds
being more fully described in the Official Statement (defined in Section 3) at a purchase price of
$ (representing the $ aggregate principal amount of the 2003C
Bonds less $ Underwriter's discount).
The 2003C Bonds are to be issued pursuant to Article XI of the Vernon City Code and an
Indenture of Trust, dated as of March 1, 2003, as supplemented by the Third Supplemental
Indenture of Trust, dated as of March 1, 2003 (collectively, the "Indenture"), by and between the
City and BNY Western Trust Company, as trustee (the "Trustee"), substantially in the forms
previously submitted to the Underwriter, with only such changes therein as shall be mutually
agreed upon. Terms used herein and not defined shall have the meanings assigned to them in the
Official Statement.
The City will undertake, pursuant to a Continuing Disclosure Agreement, dated
2003 (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, to
provide certain annual financial information and notices of the occurrence of certain events, if
LAI 486941 d2
material. A form of the Continuing Disclosure Agreement is set forth in the Preliminary Official
Statement (defined below) and will also be set forth in the Official Statement (defined below).
Concurrently with the issuance of the 2003C Bonds, the City will enter into a swap
agreement (the "Swap Agreement"), with Bank of America, N.A. (the "Swap Provider") for the
purpose of converting the fixed rate interest payments the City is required to make on the 2003C
Bonds into floating rate payments.
Concurrently with the issuance of the 2003C Bonds, the City expects to issue $
aggregate principal amount of its Malburg Generating Station Project Electric System Revenue
Bonds, 2003 Series A (the "2003A Bonds"), which the Underwriter will purchase from the City
pursuant to a Contract of Purchase dated , 2003 (the "2003A Contract of Purchase") and
$ aggregate principal amount of its Malburg Generating Station Project Electric System
Revenue Bonds, 2003 Series B (the "2003B Bonds" and together with the 2003A Bonds and the
2003C Bonds, the "Bonds"), which the Underwriter will purchase from the City pursuant to a
Contract of Purchase dated , 2003 (the "2003B Contract of Purchase" and together with
the 2003A Contract of Purchase and the 2003C Contract of Purchase, the "Contracts of
Purchase").
Banc of America Securities LLC will act as remarketing agent for the 2003A Bonds and
the 2003B Bonds pursuant to Remarketing Agreements, each dated , 2003 (the
"Remarketing Agreements"), each between the City and Banc of America Securities LLC.
Concurrently with the issuance of the 2003A Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "2003A Letter of Credit") pursuant to a Reimbursement
Agreement, dated as of , 2003 (the "2003A Reimbursement
Agreement"), between the City and Bank of America, N.A. (the "2003A Bank").
Concurrently with the issuance of the 2003B Bonds, the City will cause to be delivered to
the Trustee a letter of credit (the "2003B Letter of Credit' and together with the 2003A Letter of
Credit, the "Letters of Credit') pursuant to a Reimbursement Agreement, dated as of
, 2003 (the "2003B Reimbursement Agreement' and together with the
2003A Reimbursement Agreement, the "Reimbursement Agreements"), between the City and
(the "2003B Bank" and together with the 2003A Bank, the `Banks").
The Indenture, the Remarketing Agreements, the Reimbursement Agreements, the
Continuing Disclosure Agreement, the Swap Agreement and the Contracts of Purchase are
hereinafter referred to as the "Legal Documents."
2. The Underwriter agrees to reoffer the 2003C Bonds in a bona fide public offering
at the initial offering prices or yields set forth in the Official Statement. After the initial offering,
the Underwriter reserves the right to change such public offering prices as the Underwriter shall
deem necessary in marketing the 2003C Bonds.
3. At 8:00 A.M., California time, on March _, 2003, or at such other time or on
such earlier or later business day as shall have been mutually agreed upon by the City and the
Underwriter, the City will deliver to the Underwriter at the offices of Orrick, Herrington &
Sutcliffe LLP, Los Angeles, California, the closing documents hereinafter mentioned. The 2003C
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LAI 486941v2
Bonds, registered to Cede & Co. and in definitive form, will be made available to the
Underwriter one business day prior to the date of the Closing (hereinafter defined) at the offices
of Orrick, Herrington & Sutcliffe LLP, or at such other place as may be designated by the
Underwriter and shall be subsequently delivered on such date to The Depository Trust Company
("DTC") to be held in safe custody on behalf of the City until Closing. It is anticipated that
CUSIP identification numbers will be printed on the 2003C Bonds, but neither the failure to print
such number on any of the 2003C Bonds nor any error with respect thereto shall constitute cause
for a failure or refusal by the Underwriter to accept delivery of and pay for the 2003C Bonds in
accordance with the terms of this 2003C Contract of Purchase. Upon release of the 2003C
Bonds, the Underwriter will pay the purchase price of the 2003C Bonds as set forth in Section 1
hereof, in immediately available funds to the order of the City. The releases and payments
referenced to in this Section 3 are herein called the "Closing" or "Closing Date."
4. The City ratifies, confirms and approves the use by the Underwriter of the official
statement of the City in preliminary form dated _, 2003 (which, including all appendices
thereto, is herein called the "Preliminary Official Statement"), in connection with the prospective
offering of the 2003C Bonds prior to the date hereof. The City hereby acknowledges that the
Preliminary Official Statement has been made available to investors on the internet at
http://www. . The City will deliver to the Underwriter copies of its official statement dated
_, 2003 (such official statement, including the cover page and all appendices included
therein or attached thereto, being herein called the "Official Statement"), signed on behalf of the
City by its Mayor or other appropriate official and, as promptly as practicable after acceptance
hereof (but in any event within seven business days after the City's acceptance hereof and in
sufficient time to accompany any order confirmation requesting payment from any customer), a
sufficient number of conformed copies to comply with the rules of the Securities and Exchange
Commission and the Municipal Securities Rulemaking Board. The City hereby approves the
Official Statement and authorizes the use of copies of the Official Statement and the documents
referred to therein in connection with the offering and sale of the 2003C Bonds by the
Underwriter. The Underwriter hereby agrees that it will not confirm the sale of any Bond unless
the confirmation requesting payment from the customer is accompanied or preceded by a copy of
the Official Statement.
5. The City represents to the Underwriter that, as of the date hereof and as of the
date of the Closing:
(a) The City is duly existing as a charter city organized under the laws of the
State of California (the "State");
(b) The City has full legal right, power and authority to cause the Bonds to be
authenticated and delivered, to execute and deliver the Legal Documents and to perform
its obligations contained herein and therein in accordance with the Act and other
applicable laws; and, by official action of the City prior to or concurrently with the
acceptance hereof, the City has duly authorized and approved the issuance and delivery
of the Bonds, the distribution of the Preliminary Official Statement, the execution,
delivery and distribution of the Official Statement, the execution and delivery of the
Legal Documents and the performance of its obligations contained herein and therein and
the consummation by it of all other transactions contemplated by the Official Statement
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LAI 486941v2
and the Legal Documents to have been performed or consummated at or prior to the date
of the Closing, all in accordance with the Act and other applicable laws, and the City is
and will be in compliance with the provisions thereof in all material respects;
(c) The Official Statement is and at all times subsequent hereto up to and
including the date of the Closing will be, true and correct in all material respects; and the
Official Statement does not and will not omit any statement or information necessary to
make the statements therein, in the light of the circumstances under which they were
made, not misleading except that no representation is made as to any information
included in the Official Statement relating to DTC or its operations, the Banks or the
Letters of Credit or the Reimbursement Agreements relating to the 2003A and 2003B
Bonds;
(d) Between the date hereof and the date of the Closing, except as
contemplated by the Official Statement, the City will not have incurred any material
liabilities, direct or contingent, or entered into any material transaction in either case
other than in the ordinary course of business, and there shall not have been any material
adverse change in the financial condition or prospects of the Electric System;
(e) The performance of its obligations contained in the Bonds and the
execution and delivery of the Legal Documents and the performance of its obligations
contained herein and therein do not and will not in any material respect conflict with or
constitute a breach of or default under any law, administrative regulation, court decree,
resolution or agreement to which the City is subject or by which it is bound;
(f) Except as disclosed in the Official Statement, no litigation is, or at the date
of the Closing will be, pending or, to the knowledge of the City, threatened in any court
(i) in any way questioning the corporate existence of the City or the titles of the officers
of the City to their respective offices; (ii) seeking to restrain or enjoin the issuance or
delivery of any of the Bonds, or the collection of Net Revenues of the Electric System or
other amounts pledged or to be pledged to pay the principal of, premium, if any, and
interest on the Bonds, or in any way contesting or affecting the validity of the Bonds, the
Legal Documents or the collection of said Net Revenues, or the pledge thereof, or
contesting the powers of the City or any authority for the issuance and delivery of the
Bonds or the performance of its obligations contained therein or the execution and
delivery of the Legal Documents or the performance of its obligations contained herein or
therein, (iii) which would be likely to result in any material adverse change in the
business, properties, assets or financial condition of the Electric System or to have a
material adverse effect on the ability of the City to meet its obligations under the Bonds
or the Legal Documents or (iv) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading; provided, however, that if the Underwriter accepts at the Closing any change
in the certificate referred to in Section 6(d)(3) hereof, the representations contained in this
Section 5(f) shall be deemed modified to a like extent;
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LAI 486941v2
(g) All material studies undertaken by or on behalf of the City with respect to
the Project have been disclosed and/or made available to the Underwriter;
(h) The Bonds, the Legal Documents and the other documents described in
the Official Statement conform in all material respects to the descriptions thereof
contained in the Official Statement, and the Bonds, when delivered as provided herein,
will be validly issued and outstanding obligations of the City entitled to the benefits of
the Indenture;
(i) The City will furnish such information, execute such instruments and take
such other action not inconsistent with law in cooperation with the Underwriter as the
Underwriter may reasonably request in order (i) to qualify the Bonds for offer and sale
under the Blue Sky or other securities laws and regulations of such states and other
jurisdictions of the United States as the Underwriter may designate and (ii) to determine
the eligibility of the Bonds for investment under the laws of such states and other
jurisdictions, and will use its best efforts to continue such qualification in effect so long
as required for the distribution of the Bonds; provided that the City shall not be obligated
to take any action that would subject it to the general service of process in any state or
jurisdiction where it is not now so subject;
0) If between the date hereof and the Closing Date, an event occurs which
might or would cause the information contained in the Official Statement, as then
supplemented or amended, to contain an untrue statement of a material fact or to omit to
state a material fact required to be stated therein or necessary to make such information
therein, in the light of the circumstances under which it was presented, not misleading,
the City will notify the Underwriter, and, if in the opinion of the City or the Underwriter,
or their respective counsel, such event requires the preparation and publication of a
supplement or amendment to the Official Statement, the City will forthwith prepare and
furnish to the Underwriter (at the expense of the City) a reasonable number of copies of
an amendment of or supplement to the Official Statement (in form and substance
satisfactory to counsel for the Underwriter) which will amend or supplement the Official
Statement so that it will not contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time the Official Statement is delivered to prospective
purchasers, not misleading;
(k) If the information contained in the Official Statement is amended or
supplemented pursuant to paragraph 0) hereof, at the time of each supplement or
amendment thereto and (unless subsequently again supplemented or amended pursuant to
such subparagraph) at all times subsequent thereto up to and including the Closing Date,
the portions of the Official Statement so supplemented or amended (including any
financial and statistical data contained therein) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to
make such information therein, in the light of the circumstances under which it was
presented, not misleading;
5
LAl 486941t2
(1) After the Closing, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished
with a copy, the Underwriter shall reasonably object in writing or which shall be
disapproved by counsel for the Underwriter; and
(m) The financial statements of the City contained as Appendix A to the
Official Statement do and will fairly present the financial position and results of
operations of the City as of the dates and for the periods therein set forth in accordance
with generally accepted accounting principles applied consistently.
6. The Underwriter has entered into this 2003C Contract of Purchase in reliance
upon the representations herein and the performance by the City of the City's obligations
hereunder, both as of the date hereof and as of the date of the Closing. The Underwriter's
obligations under this 2003C Contract of Purchase are and shall be subject to the following
further conditions:
(a) The representations of the City contained herein shall be true and correct
in all material respects at the date hereof and on the date of the Closing;
(b) At the time of the Closing, the Legal Documents shall be in full force and
effect, and shall not have been amended, modified or supplemented (except as may be
agreed to in writing by the Underwriter); the ratings quoted in the Official Statement shall
be in effect; and the City shall perform or have performed its obligations required under
or specified in the Official Statement and the Legal Documents to be performed at or
prior to the Closing;
(c) The Underwriter may terminate this 2003C Contract of Purchase by
notification to the City if at any time after the date hereof and prior to the Closing
(i) legislation shall be enacted by the Congress of the United States or introduced and
pending in or adopted by either House thereof or a decision by a Court of the United
States or the Tax Court of the United States shall be rendered or a ruling, regulation or
official statement by or on behalf of the Treasury Department of the United States, the
Internal Revenue Service or other governmental agency shall be made with respect to
federal taxation upon revenues or other income of the general character expected to be
derived by the City or upon interest received on securities of the general character of the
2003C Bonds in the hands of the holders thereof which, in the reasonable judgment of the
Underwriter, materially adversely affects the market price of the 2003C Bonds or
(ii) there shall have occurred any new outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war, calamity or crisis, the effect of which
on financial markets is such as to make it, in the sole judgement of the Underwriter,
impracticable or inadvisable to proceed with the offering and delivery of the 2003C
Bonds, or (iii) there shall be in force a general suspension of trading on the New York
Stock Exchange or minimum or maximum prices for trading shall have been fixed and be
in force, or maximum ranges for prices for securities shall have been required and be in
force on the New York Stock Exchange, whether by virtue of a determination by that
Exchange or by order of the Securities and Exchange Commission or any other
governmental authority having jurisdiction, or (iv) a general banking moratorium shall
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LA 1486941 d2
have been declared by Federal, New York or California authorities having jurisdiction
and shall be in force or (v) there shall exist any event which, in the sole judgment of the
Underwriter, either (A) makes untrue or incorrect in any material respect any statement or
information contained in the Official Statement or (B) is not reflected in the Official
Statement but should be reflected therein in order to make the statements and information
contained therein not misleading in any material respect;
(d) At or prior to the Closing, the Underwriter shall receive the following
documents:
(1) the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to
the City, dated the date of the Closing, substantially in the form attached as
Appendix G to the Official Statement;
(2) a certificate or certificates, dated the date of the Closing, of the
City executed by its City Administrator, its Director of Utilities Department, or
other appropriate official, to the effect that (A) on the date of the Official
Statement and on the date of the certificate (i) the descriptions and statements of
or pertaining to the City, the Electric System and the Project contained in the
Official Statement were and are true and correct in all material respects; (ii) the
Official Statement did not and does not contain an untrue statement of a material
fact or omit any statement or information which is necessary to make the
statements therein, in the light of the circumstances under which they were made,
not misleading (provided that no representation is made regarding information
relating to DTC and its operations, the Banks or the Letters of Credit or the
Reimbursement Agreements relating to the 2003A Bonds and the 2003B Bonds);
and (iii) insofar as the descriptions and statements, including financial data, of or
pertaining to entities other than the City and their activities contained in the
Official Statement are concerned, such descriptions, statements and data have
been obtained from sources which the City believes to be reliable and the City has
no reason to believe that they are untrue in any material respect; and (B) the
representations and warranties of the City in this 2003C Contract of Purchase are
true and correct on and as of the date of the Closing as if made on and as of the
date of the Closing, and the City has complied with and performed all of its
covenants and agreements in this 2003C Contract of Purchase to be complied with
and performed at or prior to the Closing;
(3) a certificate dated the date of the Closing, by the City
Administrator, or other appropriate official of the City, and by the City Attorney
to the effect that other than as described in the Official Statement, no litigation is
pending (with the City having received service of process) or, to their knowledge,
threatened in any court (i) in any way questioning the corporate existence of the
City or the titles of the officers of the City to their respective offices; (ii) seeking
to restrain or enjoin the delivery of the Bonds, or the collection of Net Revenues
of the Electric System or other amounts pledged or to be pledged to pay the
principal of, premium, if any, and interest on such Bonds; (iii) in any way
contesting or affecting the validity of the Bonds, the Legal Documents; (iv) in any
7
LA1 48694M
way contesting or affecting the collection of said Net Revenues or the pledge
thereof, or contesting the powers of the City or any authority for the issuance and
delivery of the Bonds and the performance of its obligations contained therein or
the execution and delivery of the Legal Documents and the performance of its
obligations contained therein or herein; (v) which would be likely to result in any
material adverse change in the business, properties, assets or the financial
condition of the Electric System or which would be likely to have a material
adverse effect on the ability of the City to meet its obligations under the
Indenture; or (vi) asserting that the Official Statement contained any untrue
statement of a material fact or omitted to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, which certificate shall be in form and substance acceptable
to us (but in lieu of such certificate, the Underwriter may in their sole discretion
accept an opinion of Bond Counsel or Counsel to the City, acceptable to the
Underwriter in form and substance, that in their opinion the issues raised in any
such pending or threatened litigation are without substance or that the contentions
of any plaintiffs therein are without merit);
(4) an opinion of counsel to the Trustee, dated the date of the Closing
and addressed to the City and the Underwriter, to the effect that, the Trustee's
obligations under the Indenture and the Continuing Disclosure Agreement
constitute legal, valid and binding obligations of the Trustee, as applicable,
enforceable in accordance with their respective terms under California law except
that the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws in effect from time to time
affecting the rights of creditors generally and except to the extent that the
enforceability thereof may be limited by the application of general principles of
equity;
(5) a certificate of the Trustee, dated the date of the Closing, to the
effect that (i) the Trustee is a banking corporation duly organized and existing
under the laws of the State of California; (ii) the Trustee has full corporate trust
powers and authority to serve as Trustee under the Indenture and as
Dissemination Agent under the Continuing Disclosure Agreement; and (iii) the
Trustee acknowledges and accepts its obligations under the Indenture and the
Continuing Disclosure Agreement and that such acceptance is in full compliance
with, and does not conflict with, any applicable law or governmental regulation
currently in effect, and does not conflict with or violate any contract to which the
Trustee is a party or any administrative or judicial decision by which the Trustee
is bound;
(6) opinions of Orrick, Herrington & Sutcliffe LLP and the City
Attorney, dated the date of the Closing, substantially in the respective forms
attached hereto as Exhibits A and B, with such changes as Counsel to the
Underwriter may approve;
(7) copies of the documents referred to in Section 6(b);
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LA1 486941v2
(8) certified copies of all proceedings relating to the authorization and
issuance of the 2003C Bonds certified by the City Administrator or other
appropriate official of the City;
(9) evidence that any ratings on the 2003C Bonds are in full force and
effect as of the date of the Closing;
(10) the opinion(s) of counsel to the Banks, each dated the date of the
Closing, addressed to the City and the Underwriter, relating to the enforceability
of the Letters of Credit and the description of the Letters of Credit and the
Reimbursement Agreements contained in the Official Statement, in such form as
the Underwriter and Counsel to the Underwriter shall approve;
(11) a copy of each of the Letters of Credit and a certificate of the each
of the Banks, dated the date of the Closing, to the effect that the information in the
Official Statement under the caption "THE BANK" is accurate in all material
respects and does not contain an untrue statement of material fact;
(12) a copy of any Blue Sky and Legal Investment Surveys with respect
to the 2003C Bonds, prepared by Underwriter's Counsel;
(13) a certificate of the Consulting Engineer, dated the Closing Date, in
substantially the form of Exhibit D hereto;
(14) an opinion of Sidley Austin Brown & Wood LLP, Counsel to the
Underwriter, dated the date of the Closing, substantially in the form attached
hereto as Exhibit C;
(15) the opinions of Bond Counsel and the City Attorney, dated the date
of the Closing, addressed to the Swap Provider, relating to the Swap Agreement,
in substantially the forms previously submitted to the Underwriter; and
(16) such additional certificates, instruments and other documents as
the Underwriter may reasonably deem necessary to evidence the truth and
accuracy as of the time of the Closing of the City's representations and warranties
contained in this 2003C Contract of Purchase and the due performance or
satisfaction by the City at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by the City pursuant to this
2003C Contract of Purchase.
The opinions and certificates and other material referred to above shall be in form and
substance satisfactory to the undersigned and to Sidley Austin Brown & Wood LLP, Counsel to
the Underwriter.
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter
to purchase, accept delivery of and pay for the 2003C Bonds contained in this 2003C Contract of
Purchase or if the obligations of the Underwriter to purchase, accept delivery of and pay for the
2003C Bonds shall be terminated for any reason permitted by this 2003C Contract of Purchase,
9
LA 1 486941 W2
this 2003C Contract of Purchase and all obligations of the Underwriter hereunder may be
terminated by the Underwriter at or at any time prior to the date of the Closing by written notice
to the City, and neither the Underwriter nor the City shall have any further obligations hereunder.
In the event that the Underwriter fail (other than for a reason permitted by this 2003C Contract of
Purchase) to accept and pay for the 2003C Bonds at the Closing, the amount of one percent (1%)
of the principal amount of the 2003C Bonds shall be paid by the Underwriter, as liquidated
damages for such failure and for any and all defaults hereunder on the part of the Underwriter
and the acceptance of such amount shall constitute a full release and discharge of all claims and
rights of the City against the Underwriter as result of such failure and such default.
7. At the time of or prior to the Closing, the Underwriter shall file a copy of the
Official Statement with the Municipal Securities Rulemaking Board and with a nationally
recognized municipal securities information repository. The Underwriter shall advise the City of
the date and repository of such filing.
8. The Underwriter shall be under no obligation to pay, and the City shall pay, any
expenses incident to the performance of the City's obligations hereunder, including but not
limited to: (i) the cost of preparation, printing and distribution of the Legal Documents, the
Preliminary Official Statement, the Official Statement and any supplements or amendments
thereto (including the word processing costs of Underwriter's Counsel in preparing the
Preliminary Official Statement and the Official Statement); (ii) the cost of preparing and printing
the 2003C Bonds; (iii) the fees and disbursements of Bond Counsel and the fees and expenses of
counsel to the City; (iv) the fees and disbursements of the Banks and any engineers, accountants
and other experts, consultants or advisors retained by the City; (v) fees for bond ratings (which
include fees of rating agencies and travel expenses of the City); and (vi) expenses (included in
the expense component of the underwriting spread) incurred on behalf of the City's employees
which are incidental to implementing this agreement, including, but not limited to, meals,
transportation, and lodging of those employees, if any.
9. The Underwriter shall pay: (i) the cost of preparation and printing of this 2003C
Contract of Purchase, the Preliminary Blue Sky Survey and the Legal Investment Survey; (ii) all
advertising expenses and Blue Sky filing fees in connection with the public offering of the
2003C Bonds; (iii) fees, if any, payable to the California Debt Investment and Advisory
Commission in connection with the execution and delivery of the 2003C Bonds; and (iv) all
other expenses incurred by the Underwriter in connection with the public offering of the 2003C
Bonds, including the fees and disbursements of Underwriter's Counsel (except as provided
above).
10. Any notice or other communication to be given to the City under this 2003C
Contract of Purchase may be given by delivering the same in writing to the Commission, City of
Vernon, 4305 Santa Fe Avenue, Vernon, California 90058, Attention: Director of Public
Utilities; and any notice or other communication to be given to the Underwriter under this 2003C
Contract of Purchase may be given by delivering the same in writing to: Banc of America
Securities LLC, 300 South Grand Avenue, 19th Floor, Los Angeles, CA 90071, Attention:
Mr. David Johnson, Managing Director.
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11. This Contract, when accepted by the City in writing as heretofore specified, shall
constitute the entire agreement between the City and the Underwriter and is made solely for the
benefit of the City and the Underwriter (including any successor in business of the Underwriter).
No other person shall acquire or have any right hereunder or by virtue hereof. All the
representations and agreements in this 2003C Contract of Purchase shall remain operative and in
full force and effect, regardless of (a) any investigation made by or on behalf the Underwriter,
(b) delivery of and payment for the 2003C Bonds hereunder, and (c) any termination of this
2003C Contract of Purchase.
Accepted on _, 2003
City of Vernon
Lo
Director of Public Utilities
Very truly yours,
BANC OF AMERICA SECURITIES LLC
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LAI 486941v2
SCHEDULEI
to the
Contract of Purchase
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C
Maturity
(March 1) Principal Amount
Interest Rate
Price or Yield
I-1
LA 1 486941 d2
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
_, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT A
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
Ladies and Gentlemen:
This letter is being delivered pursuant to (i) Section 6(d)(6) of the Contract of Purchase,
dated _, 2003 (the "2003A Contract of Purchase"), between the City of Vernon (the
"City") and Banc of America Securities LLC (the "Underwriter"), providing for the purchase of
the City's $ Malburg Generating Station Project Electric System Revenue Bonds,
2003 Series A (the "2003A Bonds"), (ii) Section 6(d)(6) of the Contract of Purchase, dated
_, 2003 (the "2003B Contract of Purchase"), between the City and the Underwriter,
providing for the purchase of the City's $ Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and (iii) Section 6(d)(6) of
the Contract of Purchase, dated _, 2003 (the "2003C Contract of Purchase" and together
with the 2003A Contract of Purchase and the 2003B Contract of Purchase, the "Contracts of
Purchase"), between the City and the Underwriter, providing for the purchase of the City's
$ Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C
(the "2003C Bonds" and together with the 2003A Bonds and the 2003B Bonds, the "Bonds").
The Bonds are being issued pursuant to an Indenture of Trust, as supplemented by the First
Supplemental Indenture of Trust, the Second Supplemental Indenture of Trust and the Third
Supplemental Indenture of Trust, each dated as of March 1, 2003 (collectively, the "Indenture"),
each by and between the City and BNY Western Trust Company, as trustee. Capitalized terms
not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not
defined in the Indenture, the Contract of Purchase.
In connection with our role as bond counsel, we have reviewed the Indenture, the Official
Statement, the Contracts of Purchase, certificates of the City, the Trustee, the Underwriter and
others, opinions of counsel to the City and others, and such other documents, opinions and
matters to the extent we deemed necessary to render the opinions and conclusions set forth
herein.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we
are of the following opinions or conclusions:
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LA l 486941 d2
1. The Official Statement has been duly authorized, executed and delivered by the
City and the Contracts of Purchase and the Continuing Disclosure Agreement have each been
duly authorized, executed and delivered by the City and, assuming due authorization, execution
and delivery by and validity against the other parties thereto, each is a valid and binding
agreement of the City, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement and other laws affecting creditors' rights, by the
application of equitable principles and the exercise of judicial discretion in appropriate cases, and
by the limitations on legal remedies against municipal corporations in the State of California.
We express no opinion with respect to any indemnification, contribution, choice of law, choice
of forum or waiver provisions contained therein.
2. The Bonds are not subject to the registration requirements of the Securities Act of
1933, as amended, and the Indenture is exempt from qualification pursuant to the Trust Indenture
Act of 1939, as amended.
3. The statements contained in the Official Statement under the captions
"INTRODUCTION," "THE 2003 BONDS," "SECURITY AND SOURCES OF PAYMENT
FOR THE 2003 BONDS," "TAX MATTERS," "APPENDIX E — SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE," "APPENDIX F — PROPOSED FORM OF
CONTINUING DISCLOSURE AGREEMENT" and "APPENDIX G — PROPOSED FORM OF
OPINION OF BOND COUNSEL" insofar as the statements contained under such captions
expressly summarize certain provisions of the Bonds, the Indenture and the Continuing
Disclosure Agreement are accurate in all material respects; provided, however, that no opinion is
expressed with respect to any statements relating to The Depository Trust Company ("DTC") or
its operations or the Banks or the Letters of Credit or the Reimbursement Agreements relating to
the 2003A Bonds and 2003B Bonds.
We are not passing upon and do not assume any responsibility for the accuracy (except as
explicitly stated in the previous paragraph), completeness or fairness of any of the statements
contained in the Official Statement. In our capacity as bond counsel in connection with the
issuance of the Bonds, we participated in conferences with your representatives, your counsel,
representatives of the City and its counsel, and other consultants to the City, during which
conferences the contents of the Official Statement and related matters were discussed. Based on
our participation in the above -referenced conferences (which did not extend beyond the date of
the Official Statement), and in reliance thereon and on the records, documents, certificates and
opinions herein mentioned (as set forth above), we advise you that during such conferences, no
information came to the attention of the attorneys in our firm rendering legal services in
connection with such issuance which caused us to believe that the Official Statement as of its
date (except for any financial, statistical or economic data or forecasts, numbers, charts, tables,
graphs, estimates, projections, assumptions or expression of opinions required to be stated
therein or information relating to the Banks and the Letters of Credit and the Reimbursement
Agreements, DTC, any investment agreement provider and the information contained in
Appendices B, D and H included therein as to which we express no opinion or view), contained
any untrue statement of a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the circumstances under which
they were made, not misleading.
A-2
LAl 486941v2
This letter is furnished by us as bond counsel. No attorney -client relationship has existed
or exists between our firm and yourselves in connection with the Bonds or by virtue of this letter.
Our engagement with respect to the Bonds has concluded with their issuance. We disclaim any
obligation to update this letter. This letter is delivered to you as the Underwriter of the Bonds,
and is solely for the benefit of such Underwriter, and is not to be used, circulated, quoted or
otherwise referred to or relied upon for any other purpose or by any other person. This letter is
not intended to, and may not, be relied upon by owners of the Bonds.
Very truly yours,
A-3
LA l 486941 d2
FORM OF OPINION OF CITY ATTORNEY
_, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT B
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
Ladies and Gentlemen:
I am City Attorney of the City of Vernon (the "City") and as such I have served as
Counsel to the City in connection with the issuance of $ aggregate principal amount of
the City's Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A
(the "2003A Bonds"), $ aggregate principal amount of the City's Malburg Generating
Station Project Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and
$ aggregate principal amount of the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C (the "2003C Bonds" and together with the
2003A Bonds and the 2003B Bonds, the "Bonds"). As such counsel, I have examined and am
familiar with (i) those documents relating to the existence, organization and operation of the
City; (ii) all necessary documentation of the City relating to the authorization, execution and
delivery of (a) the Indenture of Trust, dated as of March 1, 2003, as supplemented by the First
Supplemental Indenture of Trust, the Second Supplemental Indenture of Trust and the Third
Supplemental Indenture of Trust, each dated as of March 1, 2002 (collectively, the "Indenture"),
each by and between the City and BNY Western Trust Company, as trustee thereunder (the
"Trustee"), providing for the issuance of the Bonds, (b) the Reimbursement Agreement, dated as
of 1, 2003 (the "2003A Reimbursement Agreement"), by and between the City and Bank
of America, N.A. relating to the 2003A Bonds, (c) the Reimbursement Agreement, dated as of
1, 2003 (the "2003B Reimbursement Agreement" and together with the 2003A
Reimbursement Agreement, the "Reimbursement Agreements"), by and between the City and
relating to the 2003B Bonds, (d) the Remarketing Agreement related to the 2003A
Bonds and the Remarketing Agreement related to the 2003B Bonds (collectively, the
"Remarketing Agreements"), each dated , 2003, each between the City and Banc of
America Securities LLC, as remarketing agent; (e) the Continuing Disclosure Agreement, dated
, 2003 (the "Continuing Disclosure Agreement"), between the City and the Trustee,
as dissemination agent; (f) the Contract of Purchase, dated , 2003 (the "2003A Purchase
Contract"), between the City and Banc of America Securities LLC, as underwriter (the
"Underwriter"), the Contract of Purchase, dated , 2003 (the "2003B Purchase Contract"),
between the City and the Underwriter, and the Contract of Purchase, dated , 2003 (the
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LA 1 486941 d2
"2003C Contract of Purchase" and together with the 2003A Contract of Purchase amd the 2003B
Contract of Purchase, the "Contracts of Purchase"), between the City and the Underwriter; and
(iii) an Official Statement of the City, dated , 2003 (the "Official Statement"), relating to
the Bonds. The Indenture, the Reimbursement Agreements, the Remarketing Agreements, the
Continuing Disclosure Agreement and the Contracts of Purchase are collectively referred to
herein as the "Legal Documents.
I am of the opinion that:
1. The City is a charter city, duly created, organized and existing under the
Constitution and laws of the State of California and duly qualified to furnish electric service
within said City.
2. The City has the authority and right to execute, deliver and perform the Legal
Documents, and the City has complied with the provisions of applicable law in all matters
relating to the transactions contemplated by the Legal Documents.
3. The distribution of the Preliminary Official Statement, the execution and delivery
of the Official Statement and the Legal Documents have been duly authorized, executed and
delivered by the City and, assuming that the Legal Documents constitute the legal, valid and
binding agreements of the other respective parties thereto, the Legal Documents constitute the
legal, valid and binding agreements of the City enforceable against it in accordance with their
respective terms, except, in each case, as enforceability may be limited by laws relating to
bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and
by the application of equitable principles if equitable remedies are sought.
4. No approval, consent or authorization of any governmental or public agency,
authority or person is required for the execution and delivery by the City of the Legal Documents
or the performance by the City of its obligations thereunder or the execution and delivery, on the
part of the City, of the Bonds. Under the laws of the State of California, the City has the
authority to determine, fix, impose and collect rates and charges for electric service and is not
presently subject to the regulatory jurisdiction of any state, regional or local governmental
regulatory authority other than to the extent described in the Official Statement.
5. The execution and delivery of the Legal Documents by the City and compliance
with the provisions thereof will not conflict with or constitute a breach of or default under any
instrument relating to the organization, existence or operation of the City, or commitment,
agreement or other instrument to which the City is a party or by which it or its property is bound
or affected, or any ruling, regulation, ordinance, judgment, order or decree to which the City or
any of its officers in their respective capacities as such are subject or any provision of the laws of
the State of California relating to the City and its affairs.
6. There is no action, suit, proceeding, inquiry or investigation at law or in equity, or
before any court, public board or body, pending or, to the best of my knowledge, threatened
against or affecting the City or any entity affiliated with the City or any of its officers in their
respective capacities as such (nor to the best of my knowledge, is there any basis therefor) that
questions the powers of the City referred to in paragraph 2 above or in connection with the
transactions contemplated by the Official Statement, or the validity of the proceedings taken by
B-2
LA 1486941 d2
the City in connection with the authorization, execution or delivery of the Legal Documents, or
wherein any unfavorable decision, ruling or finding would adversely affect the transactions
contemplated by the Legal Documents or the Official Statement, or that, in any way, would
adversely affect the validity or enforceability of the Legal Documents or, in any material respect,
the ability of the City to perform its obligations under the Legal Documents. Capitalized terms
used herein not otherwise defined shall have the meanings ascribed thereto in the Contracts of
Purchase.
Respectfully submitted,
Eduardo Olivo, Esq.
City Attorney
B-3
LA1 486941d2
[Letterhead of Sidley Austin Brown & Wood LLP]
, 2003
Banc of America Securities LLC
As Underwriter
EXHIBIT C
Re: $ City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A, 2003 Series B and
2003 Series C
We have acted as counsel to you in your capacity as underwriter (the "Underwriter")
under the Contract of Purchase dated _, 2003 (the "2003A Contract of Purchase"),
between you and the City of Vernon (the "City"), in connection with your purchase from the
City of its $ Malburg Generating Station Project Electric System Revenue Bonds,
2003 Series A (the "2003A Bonds"), the Underwriter under the Contract of Purchase dated
_, 2003 (the "2003B Contract of Purchase), between you and the City in connection
with your purchase from the City of its $ Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B (the "2003B Bonds"), and the Underwriter under
the Contract of Purchase dated _, 2003 (the "2003C Contract of Purchase" and
together with the 2003A Contract of Purchase and the 2003B Contract of Purchase, the
"Contracts of Purchase") between you and the City, in connection with your purchase from the
City of its $ Malburg Generating Station Project Electric System Revenue Bonds, 2003
Series C (the "2003C Bonds" and together with the 2003A Bonds and the 2003B Bonds, the
"Bonds"). Terms used herein which are not defined shall have the meanings assigned to them in
the Contracts of Purchase or in the City's Official Statement dated _, 2003 , relating to
the Bonds (the Official Statement, in the form prepared for use by the Underwriter in confirming
sales of the Bonds, being hereinafter referred to as the "Official Statement").
As such counsel, we have examined originals or copies certified or otherwise identified to
our satisfaction of such documents, records and other instruments as we deemed necessary or
appropriate for the purpose of this opinion, including the Indenture providing for the issuance of
the Bonds.
We are not expressing any opinion or view on the validity, accuracy or sufficiency of
documents, certificates or opinions that we have examined. Further, we have assumed but have
not independently verified that the signatures on all documents, certificates and opinions that we
have reviewed are genuine. In rendering this opinion, we are not expressing any opinion or view
on the authorization, execution, issuance, delivery or validity of the Bonds, nor the exclusion
from gross income for federal income tax purposes of interest on the Bonds or the exemption
C-1
LA1 486941v2
from State of California personal income taxes of interest on the Bonds. We understand you are
relying on the opinion of Orrick, Herrington & Sutcliffe LLP, as bond counsel, in that regard.
Based on and subject to the foregoing, we are of the opinion that the Bonds are not
subject to the registration requirements of the Securities Act of 1933, as amended, and the
Indenture is exempt from qualification under the Trust Indenture Act of 1939, as amended.
Because the primary purpose of our professional engagement was not to establish factual
matters and because of the wholly or partially non -legal character of many determinations
involved in the preparation of the Official Statement, we are not passing upon and do not assume
any responsibility for the accuracy, completeness or fairness of any of the statements contained
in the Official Statement and make no representation that we have independently verified the
accuracy, completeness or fairness of any such statements. However, in our capacity as your
counsel, during the course of preparation of the Official Statement, we participated in
conferences with representatives of the City, the City Attorney, legal counsel to the City, Orrick
Herrington & Sutcliffe LLP as bond counsel, Navigant Consulting, Inc. as consulting engineer to
the City, others, and you, at which conferences the contents of the Official Statement and related
matters were discussed. Based on our participation in such conferences and in reliance thereon
and on the certificates, opinions and other documents we have reviewed, we advise you that no
information has come to the attention of the lawyers in this firm rendering professional legal
services in connection with your purchase of the Bonds that would cause us to believe that the
Official Statement as of its date and as of the date hereof (except for any financial or statistical
data or forecasts and the information relating to the Banks, the Letters of Credit or the
Reimbursement Agreements, DTC and the book -entry system included therein, and Appendices
A, and C through F thereto, as to which we express no opinion or view), contains any untrue
statement of a material fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading.
The opinions expressed herein are based on an analysis of existing laws, regulations,
rulings and court decisions. Such opinions may be adversely affected by actions taken or events
occurring, including a change in law, regulation or ruling (or in the application of official
interpretation of any law, regulation or ruling) after the date hereof. We have not undertaken to
determine, or to inform any person, whether such actions are taken or such events occur, and we
have no obligation to update this opinion in light of such actions or events.
This opinion is being rendered to you solely for your benefit and may not be relied on by
anyone else without our prior written consent. This letter is not intended to and may not be
relied upon by the owners of the Bonds or by any other party to whom it is not specifically
addressed.
Respectfully submitted,
C-2
LA 1 486941 d2
EXHIBIT D
FORM OF CONSULTING ENGINEER'S CERTIFICATE
The undersigned, an authorized officer of Navigant Consulting, Inc. (the "Consulting
Engineer"), hereby certifies that:
1. This Certificate is furnished pursuant to (i) Section 6(d)(13) of the Contract of
Purchase dated , 2003, between Banc of America Securities LLC (the "Underwriter") and
the City of Vernon (the "City") relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A (the "2003A
Bonds"); (ii) Section 6(d)(13) of the Contract of Purchase dated , 2003, between the
Underwriter and the City relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series B (the "2003B
Bonds"), and; (iii) Section 6(d)(13) of the Contract of Purchase dated , 2003, between the
Underwriter and the City relating to the sale of the City's $ principal amount of
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series C (the "2003C
Bonds" and together with the 2003A Bonds and the 2003B Bonds, the "Bonds"), and has been
prepared in connection with the sale of the Bonds.
2. The Consulting Engineer has been retained by the City to act as its consulting
engineer in connection with the City's Malburg Generating Station (the "Project") to be financed
with a portion of the proceeds of the Bonds.
3. In connection with the preparation of a consulting engineer's report dated
, 2003 (the "Report") on the Project, personnel of Navigant Consulting, Inc. have
participated in conversations with representatives of the City, consultants and advisors to the
City, Bond Counsel, the Underwriter, Underwriter's Counsel, and others in regard to the Project
and the Report, and nothing has come to the attention of the Consulting Engineer in connection
therewith which could cause it to believe that the Report was inaccurate in any material respect.
4. For purposes of this Certificate, the Consulting Engineer has carried out certain
limited procedures for the period commencing , 2003, and ending ,
2003, consisting solely of the making of inquiries of the City as to whether there has been any
material change in the information provided by it, and upon which the Consulting Engineer
relied, for purposes of the Report, and nothing has come to the attention of the Consulting
Engineer as a result of the foregoing procedures that caused it to believe that, as of the date to
which the procedures were carried out, the opinions and conclusions of the Consulting Engineer
set forth in the Report were not correct.
5. The Consulting Engineer has reviewed the portions of the Official Statement
referencing the Consulting Engineer or the Report, and nothing has come to the attention of the
Consulting Engineer that has caused it to believe that, as of the date hereof, any such portions of
the Official Statement referencing the Consulting Engineer or the Report were not correct.
D-1
LA l 486941 dL
6. The Consulting Engineer hereby consents to the use of the Report and all
references to the Consulting Engineer in the Official Statement.
Capitalized terms used in this Certificate shall have the meanings given to them in the
Official Statement.
Dated: , 2003
NAVIGANT CONSULTING, INC.
D-2
LAl 486941v2
CITY COUNCIL
110?,oS L MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST CITY HALL
City Administrator/City Clerk 4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
FAX (323) 826-1438 TELEPHONE (323) 583-8811
February 13, 2003
City Council
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
KEVIN WILSON
Director of Communitv Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
CJ�
City of VernonX"16A
10
Honorable Members: ` .0
At this time it is necessary to approve the issuance of bonds to
finance the acquisition and construction of the Malburg Generating
Station Project. The bond financing documents, bond swap agreement,
and the amendment to the City's existing Investment. Policy, set forth
the approval and authorization to issue the bonds in the principal sum
of $1.65,000,000.00.
This has been reviewed by the City Attorney, our Finance
Administrator, and the Director of Utilitie It is hereby
recommended that the bond financing documents, bond swap agreement and
the amendment to the City's existing Investment Policy be approved and
executed. Submitted herewith is the following documents?
1. Indenture of Trust
2. First Supplement Indenture of Trust
3. Second Supplemental Indent -are of Trust
4. Preliminary Official. Statement.
5. Bond Purchase Contract, Series A
5. Bond Purchase Contract, Series B
7. Reimbursement Agreement
8, Series A Bcnd Remarketing Agreement
t r-�I y yours
r f
V '
Fr. ace V . Mal en_horst.
City Administrator/City Clerk
BI.TM/gm
CITY COUNCIL
LEONI4 C. MALBURG
Mayor
THOMAS A. YBARRA
Mayor Pro-Tem
WM. 'BILL" DAVIS
Councilman
H. "LARRY" GONZALES
Councilman
W. MICHAEL MCCORMICK
Councilman
BRUCE V. MALKENHORST
City Administrator / City Clerk
FAX (323) 581-7924
EDUARDO OLIVO
City Attorney
FAX: (562) 927-8722
V��,�, KEVIN WILSON
QOor of Community Services & Water
``��+/ FAX: (323) 588-2761
07
OFFjCE
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
February 13, 2003
Mr. Bruce V. Malkenhorst
City Administrator
City Of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
KENNETH J. DeDARIO
Director of Municipal Utilities
FAX: (323) 583-1983
STEVEN E. PARKER
Fire Chief
FAX: (323) 581-1385
BRUCE W. OLSON
Police Chief
FAX: (323) 583-5236
Re: Malburg Generating Station Project: Bond Financing
Documents for Approval by City Council
Dear Bruce:
The purpose of this letter is to recommend to you that the City
Council of the City of Vernon authorize the issuance of Bonds to
finance a portion of the cost of the acquisition and
construction of the Malburg Generating Station Project.
The bond financing documents and the resolutions approve the
issuance of the Bonds, the Bond Swap Agreement and revisions to
the City's existing Investment Policy. The City Council will
approve and authorize the issuance of Bonds in the principal sum
of $165 million pursuant to the financial structure outlined in
these documents. The structure of the proposed financing
represents the lowest cost available to the City given its
current credit ratings from Moody's (A2) and Standard & Poor's
(BBB+) .
The City will issue $50 million in Variable Rate Demand Note
(VRDN) obligations, or Series A Bonds, and $115 million in fixed
rate, or Series B Bonds. The VRDN obligations are very short-
term (7 days) tax-exempt notes that trade at an index rate (Bond
RESOLUTION NO. 8150
Documents to be presented per following Sections:
Section 2: Master Indenture
Section 3: First Supplemental Indenture
Section 7: 2003 Series A Reimbursement Agreement
Section 8: 2003 Series A Remarketing Agreement
Section 10: Second Supplemental Indenture
Section
14:
2003 Series
B ReiAkrse ent $sae
2003 Series
A Reimbursement A reement-'Its
modified)
F
Section
15:
s
B Remarketing Agreement
TRW1
Section
17:
Third Supplemental Indentaf&
Section
21:
2003 Series
A Purchase Contract
Section
22:
2003
Series
B
Purchase
Contra
Section
23:
2003
Series
C
Purchase
Contract
Section 24: Preliminary Official -Statement
Section 26: Continuing Disclosure Agreement (Appendix F
attached to Preliminary Official Statement)
M Y �NB�X RIINNETH OVER
i
ai�l9 a3
MASTER INDENTURE OF3RU&T
Y
by and between
CITY OF VERNON
and
BNY WESTERN TRUST COMPANY,
as Trustee
Dated as of March 1, 2003
Relating to
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
OHS DRAFT
2/17/03
DOCSLAI :438186.4
42797-2 EJC
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND AUTHORITY ............................................................... 2
...................
Section 1.01
Definitions............................................................................................2
Section 1.02
Rules of Construction........................................................................
25
Section 1.03
Authority for this Master Indenture ...................................................
25
ARTICLE II AUTHORIZATION AND ISSUANCE OF BONDS ....................................
26
Section 2.01
Authorization of Bonds......................................................................
26
Section 2.02
Bonds Constitute Special Obligations ...............................................
26
SECTION 2.02 BONDS CONSTITUTE SPECIAL OBLIGATIONS ....................................
26
Section 2.03
Indenture to Constitute Contract........................................................
27
Section 2.04
General Provisions for Issuance of Bonds .........................................
27
Section 2.05
Additional Bonds...............................................................................
29
Section 2.06
Refunding Bonds ................................................. ...................29
Section 2.07
Conditions to Issuance of Parity Obligations .....................................
29
Section 2.08
Conditions of Issuance of Subordinated Obligations .........................
30
Section 2.09
Credit Provider Bonds........................................................................
33
ARTICLE III GENERAL TERMS AND PROVISIONS OF BONDS ............. A .................
33
Section 3.01
Medium of Payment; Form and Date; Letters and Numbers .............
33
Section3.02
Legends..............................................................................................
34
Section 3.03
Execution and Authentication............................................................
34
Section3.04
Book -Entry Bonds..............................................................................
35
Section 3.05
Transfers Outside Book -Entry Program .............................................
36
Section3.06
Bond Register.....................................................................................
37
Section 3.07
Interchangeability of Bonds...............................................................
37
Section 3.08
Negotiability, Transfer and Registry ..................................................
37
Section 3.09
Regulations With Respect to Exchanges and Transfers .....................
37
Section 3.10
Bonds Mutilated, Destroyed, Stolen or Lost ......................................
38
Section 3.11
Temporary Bonds...............................................................................
38
Section 3.12
Cancellation and Destruction of Bonds .............................................
39
ARTICLE IV REDEMPTION OF BONDS.........................................................................
39
Section 4.01
Privilege of Redemption and Redemption Price ................................
39
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42797-2 EJC i
TABLE OF CONTENTS
(continued)
Page
Section 4.02
Redemption at the Direction of City ..................................................
39
Section 4.03
Redemption Otherwise Than at City's Direction ...............................
40
Section 4.04
Selection of Bonds to be Redeemed ..................................................
40
Section 4.05
Notice of Redemption........................................................................
40
Section 4.06
Partial Redemption of Bonds.............................................................
42
Section 4.07
Effect of Notice and Availability of Redemption Money ..................
42
ARTICLE V ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF ...........
42
Section 5.01
Pledge of Trust Estate........................................................................
42
Section5.02
Funds..................................................................................................
43
Section 5.03
Payments by City...............................................................................
43
Section 5.04
Debt Service Fund..............................................................................
45
Section 5.05
Redemption Fund...............................................................................
46
Section 5.06
Debt Service Reserve Fund................................................................
46
Section 5.07
Expense Stabilization Fund...............................................................
48
Section5.08
Depositories.......................................................................................
48
Section5.09
Deposits..............................................................................................
48
Section 5.10
Investment of Certain Funds..............................................................
49
Section 5.11
Valuation and Sale of Investments.....................................................
50
ARTICLE VI COVENANTS AND OBLIGATIONS OF THE CITY .................................
51
Section 6.01
Compliance with Indenture................................................................
51
Section 6.02
Rates for Electric Service...................................................................
51
Section 6.03
Collection of Rates and Charges........................................................
51
Section 6.04
Deposit and Application of Revenues ................................................
52
Section 6.05
Creation of Prior Liens on Trust Estate .............................................
52
Section 6.06
Against Encumbrances.......................................................................
52
Section 6.07
Sale or Other Disposition of Property ................................................
52
Section 6.08
Operation and Maintenance of the Electric System; Budgets............
53
Section 6.09
Insurance............................................................................................53
Section 6.10
Accounting Records; Financial Statements and Other Reports .........
53
Section 6.11
Payment of Taxes and Compliance with Governmental
Regulations........................................................................................
53
DOCSLA1:438186.4
42797-2 EJC 11
TABLE OF CONTENTS
(continued)
Page
Section 6.12
Tax Covenants...................................................................................
54
Section 6.13
Transfers to General Fund..................................................................
54
ARTICLE VII AMENDMENTS TO INDENTURE.............................................................
54
Section 7.01
Amendments Permitted......................................................................
54
Section 7.02
Effect of Supplemental Indenture......................................................
57
Section 7.03
Bonds Owned by City .................................................. .................
58
Section 7.04
Notation on Bonds.............................................................................
58
ARTICLE VIII CONCERNING THE FIDUCIARIES...........................................................
58
Section 8.01
Trustee; Acceptance of Duties...........................................................
58
Section 8.02
Paying Agents; Appointment and Acceptance of Duties...................
58
Section 8.03
Responsibilities of Fiduciaries...........................................................
59
Section 8.04
Evidence on Which Fiduciaries May Act ..........................................
61
Section 8.05
Compensation....................................................................................
61
Section 8.06
Certain Permitted Acts.......................................................................
62
Section 8.07
Resignation of Trustee.......................................................................
62
Section 8.08
Removal of Trustee............................................................................
62
Section 8.09
Appointment of Successor Trustee; Financial Qualifications of
Successor Trustee...............................................................................
62
Section 8.10
Transfer of Rights and Property to Successor Trustee.. .....................
63
Section 8.11
Merger or Consolidation....................................................................
64
Section 8.12
Adoption of Authentication ...............................................................
64
Section 8.13
Resignation or Removal of Paying Agent and Appointment of
Successor............................................................................................
64
ARTICLE IX DEFEASANCE..............................................................................................
65
Section 9.01
Payment of Bonds..............................................................................
65
Section 9.02
Bonds Deemed Paid...........................................................................
65
Section 9.03
Defeasance of Portion of Bond..........................................................
67
Section 9.04
Discharge of Liability on Bonds ........................................................
67
ARTICLE X EVENTS OF DEFAULT; REMEDIES .........................................................
.......................
67
Section 10.01
Events of Default...............................................................................
67
Section 10.02
Accounting and Examination of Records After Default ....................
68
Section 10.03
Application of Net Revenues and Other Moneys After Default ........
68
DOCSLA1:438186.4
42797-2 EJC 111
TABLE OF CONTENTS
(continued)
Page
Section 10.04
Right to Accelerate Upon Default ......................................................
70
Section 10.05
Appointment of Receiver....................................................................
70
Section 10.06
Enforcement Proceedings..................................................................
70
Section 10.07
Restriction on Owner's Action..........................................................
71
Section 10.08
Remedies Not Exclusive....................................................................
72
Section 10.09
Effect of Waiver and Other Circumstances .......................................
72
Section 10.10
Notice of Default................................................................................
72
ARTICLE XI MISCELLANEOUS......................................................................................
72
Section 11.01
Execution of Documents and Proof of Ownership ............................
72
Section 11.02
Severability........................................................................................
73
Section 11.03
General Authorization........................................................................
73
Section 11.04
Moneys Held for Particular Bonds .....................................................
73
Section 11.05
Credit Providers.................................................................................
73
Section 11.06
Reserve Financial Guaranty Providers ...............................................
74
Section 11.07
No Recourse on Bonds.......................................................................
75
Section 11.08
Unclaimed Moneys............................................................................
75
Section11.09
Holidays.............................................................................................
75
Section 11.10
Governing Law..................................................................................
75
Section 11.11
Headings Not Binding........................................................................
75
Section 11.12
Preservation and Inspection of Documents ........................................
75
Section 11.13
Parties Interested................................................................................
76
DOCSLA1:438186.4
42797-2 EJC iv
INDENTURE OF TRUST
Relating to
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
THIS INDENTURE OF TRUST, dated as of March 1, 2003, is entered into by and
between the City of Vernon, a municipal corporation and chartered city of the State of California
and BNY Western Trust Company, a banking corporation, duly established and existing under
and pursuant to the laws of the State of California, authorized to accept and execute trusts of the
character in the Indenture set forth,
WITNESSETH
WHEREAS, the City (capitalized terms used in this Master Indenture shall have the
meanings given such terms in Section 1.01) has been duly established and is duly existing as a
chartered city under its Charter and the Constitution of the State; and
WHEREAS, the City has established and operates the Electric System for supplying its
inhabitants and businesses and industries within the City with electricity; and
WHEREAS, the City is authorized under the Charter and the Bond Ordinance to issue
bonds, notes and other obligations payable from the Net Revenues of the Electric System to
finance the Costs of improvements and additions to the Electric System and to refund any such
bonds, notes or other obligations; and
WHEREAS, the City has determined to provide for the issuance from time to time of
Bonds, including Refunding Bonds, payable from the Net Revenues and amounts held in certain
Funds maintained under this Master Indenture and, with respect to each Series of Bonds, from
such Credit Support Instrument or Instruments as may be provided for such Series pursuant to the
Supplemental Indenture authorizing such Series of Bonds; and
WHEREAS, the City has determined that each Series of the Bonds should be issued on
the terms and conditions set forth in this Master Indenture as supplemented by a Supplemental
Indenture authorizing such Series of Bonds; and
WHEREAS, the Bonds of each Series shall be payable from the Net Revenues on a parity
with the payment of any other Parity Obligations hereafter issued by the City in accordance with
the Indenture; and
DOCSLA1:438186.4
42797-2 EJC 1
WHEREAS, the City has determined all acts and things which are necessary in
connection with the authorization, execution and delivery this Master Indenture have been done
and performed in due time, form and manner; and
WHEREAS, the Trustee has accepted the trust created and established by the Indenture
and in evidence thereof has joined in the execution of this Master Indenture;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
INDENTURE OF TRUST WITNESSETH:
ARTICLE I
DEFINITIONS AND AUTHORITY
Section 1.01 Definitions. Unless the context otherwise requires, the following terms,
for all purposes of this Master Indenture and, unless otherwise provided therein with respect to
such Supplemental Indenture or any Series of Bonds authorized by such Supplemental Indenture,
any Supplemental Indenture, shall have the meanings set forth below:
"Accountant's Certificate" means a certificate signed by an Independent Certified Public
Accountant selected by the City.
"Accreted Value" means, with respect to any Capital Appreciation Obligation and as of
any date, the Initial Amount thereof plus the interest accrued thereon from its delivery date,
compounded at the approximate interest rate with respect to such Capital Appreciation
Obligation specified in or pursuant to the Issuing Instrument authorizing the issuance of such
Capital Appreciation Obligation on each date specified therein. The applicable Accreted Value
at any date shall be the amount set forth in the Accreted Value Table as of such date, if such date
is a compounding date, and if not, shall be determined by straight-line interpolation with
reference to such Accreted Value Table.
"Accreted Value Table" means, with respect to Capital Appreciation Obligations, the
table denominated as such in, and to which reference is made in, the Issuing Instrument
authorizing the issuance of such Capital Appreciation Obligations.
"Additional Bonds" means Bonds issued in accordance with the terms and conditions of
this Master Indenture for the purposes set forth in Section 2.05.
"Additional Parity Obligations" means Parity Obligations, including Additional Bonds,
issued for the purposes set forth in Section 2.05 and satisfying the conditions set forth in Section
2.07.
"Adjusted Debt Service" means, for any period of time, the Debt Service for such period
minus the sum of the amount of such Debt Service with respect to Outstanding Parity
Obligations to be paid during such period from the proceeds of Parity Obligations as set forth in a
certificate of the City.
DOCSLA1:438186.4
42797-2 EJC 2
"Adjusted Net Revenues" means, with respect to a certificate to be delivered in
connection with Additional Parity Obligations pursuant to Section 2.07(e), for any Calculation
Period, as calculated by the City or a Consultant, the Adjusted Revenues for such Calculation
Period less the Operation and Maintenance Expenses for such Calculation Period, plus at the
option of the City, any or all of the following: (i) an allowance for any estimated increase in
Revenues from any additions or improvements to or extensions of the Electric System, made but
not in service during the applicable Calculation Period or to be made with the proceeds of any
Additional Parity Obligations with respect to which such certificate relates, with the proceeds of
other Obligations theretofore issued by the City and available for such purpose or with other
available funds of the City reserved by the City for such purpose, such allowance to be in an
amount equal to the estimated additional average annual Revenues to be derived from such
additions, improvements and extensions during the twelve month period after placing each such
addition, improvement or extension in service, all as shown by a certificate of the City or a
Consultant; and (ii) an allowance for any increases in rates and charges for the Electric Service of
the Electric System which have been approved by the City Council but which during all or any
part of the applicable Calculation Period were not in effect, such allowance to be in an amount
equal to seventy-five percent (75%) of the amount by which the Revenues for the applicable
Calculation Period would have increased if such increase in rates and charges had been in effect
for that portion of such Calculation Period during which such increase was not in effect.
"Adjusted Revenues" means, for any period of time, the Revenues for such period less
the amount of such Revenues which have been deposited in the Expense Stabilization Fund plus
the amount of withdrawals during such period from the Expense Stabilization Fund.
"Advance Refunded Municipal Securities" means any bonds or other obligations of any
state of the United States of America or of any agency, instrumentality or local government unit
of any such state (a) which are rated "AAA" by Standard and Poor's, "AAA" by Fitch or "Aaa"
by Moody's, (b) which are not callable prior to maturity or as to which irrevocable instructions
have been given to the trustee, fiscal agent or other fiduciary for such bonds or other obligations
by the obligor to give due notice of redemption and to call such bonds or other obligations for
redemption on the date or dates specified in such instructions, (c) which are secured as to
principal and interest and redemption premium, if any, by a fund consisting only of cash or bonds
or other obligations of the character described in clause (i) of the definition of Defeasance
Securities which fund may be applied only to the payment of such principal of and interest and
redemption premium, if any, on such bonds or other obligations on the maturity date or dates
thereof or the redemption date or dates specified in the irrevocable instructions referred to in
clause (b) above, as appropriate, and (d) as to which the principal of and interest on the bonds
and obligations of the character described in clause (i) of the definition of Defeasance Securities
which have been deposited in such fund, along with any cash on deposit in such fund, have been
verified by an Accountant's Certificate as being sufficient to pay principal of and interest and
redemption premium, if any, on such bonds or other obligations on the maturity date or dates
thereof or on the redemption date or dates specified in the irrevocable instructions referred to in
clause (b) above, as applicable.
"Applicable Parity Obligations" means, with respect to a certificate to be delivered in
connection with Additional Parity Obligations pursuant to Section 2.07(e) and as of the date of
DOCSLA1:438186.4
42797-2 EJC 3
such certificate, all of the Parity Obligations Outstanding on such date plus the Additional Parity
Obligations proposed to be issued.
"Authorized Denominations" means, with respect to Bonds of any Series, the
denomination or denominations designated as such in the Supplemental Indenture authorizing
such Bonds.
"Authorized City Representative" means the City Administrator of the City, and any other
officer of the City duly authorized to act as an Authorized City Representative for purposes of the
Indenture by the City Council or written authorization of the City Administrator of the City.
"Balloon Indebtedness" means, with respect to any Series of Obligations twenty-five
percent (25%) or more of the principal of which matures on the same date or within a 12-month
period (with Sinking Fund Installments on Term Obligations deemed to be payments of matured
principal), that portion of such Series of Obligations which matures on such date or within such
12-month period. For purposes of this definition, the principal amount maturing on any date
shall be reduced by the amount of such indebtedness which is required, by the documents
governing such indebtedness, to be amortized by prepayment or redemption prior to its stated
maturity date.
"Beneficial Owner" means, with respect any Book -Entry Bond, the beneficial owner of
such Bond as determined in accordance with the applicable rules of the Securities Depository for
such Book -Entry Bonds.
"Bond Ordinance" means the City of Vernon Municipal Facilities Revenue Bond Law,
constituting Article XI of the City Code of the City of Vernon.
"Bond" means any of the City of Vernon Electric System Revenue Bonds authorized
pursuant to Article II of this Master Indenture and a Supplemental Indenture.
"Bond Counsel" means Orrick, Herrington & Sutcliffe LLP or another attorney or firm of
attorneys of recognized national standing in the field of law relating to municipal securities and
to exclusion of interest thereon from income for federal income tax purposes selected by the City.
"Bond Debt Service" means, for any period of time, the sum of (a) the interest payable
during such period on all Outstanding Bonds, assuming that all Outstanding Bonds which are
Serial Obligations are retired as scheduled and that all Outstanding Bonds which are Term
Obligations are redeemed or paid from Sinking Fund Installment as scheduled, (b) that portion of
the principal amount of all Outstanding Bonds which are Serial Obligations maturing on each
principal payment date during such period, including the Final Compounded Amount of any
Bonds which are Capital Appreciation Obligations and Serial Obligations, (c) that portion of the
principal amount of all Outstanding Bonds which are Term Obligations required to be redeemed
or paid from Sinking Fund Installments during such period (together with the redemption
premiums, if any, thereon), including the Accreted Value of any Bonds which are Capital
Appreciation Obligations and Term Obligations.
DOCSLA1:438186.4
42797-2 EJC 4
"Bond Register" means the registration books for the ownership of Bonds maintained by
the Trustee pursuant to Section 3.06.
"Bondowner" or "Owner" means, with respect to a Bond, the registered owner of such
Bond as set forth in the Bond Register.
"Book -Entry Bonds" means Bonds registered in the name of a nominee of DTC or any
successor Securities Depository for the Bonds, or a nominee thereof, as the registered owner
thereof pursuant to the terms and provisions of Section 3.04.
"Business Day" means, with respect to each Series of Bonds, unless otherwise provided
with respect to a Series of Bonds in the Supplemental Indenture authorizing the issuance of such
Series, any day, other than a Saturday, Sunday or other day on which the New York Stock
Exchange or banks are authorized or obligated by law or executive order to close in the State of
New York or State of California or any city in which the Principal Office of any Paying Agent or
any Credit Provider for such Series of Bonds is located.
"Calculation Period" means, with respect to any certificate to be provided pursuant to
Section 2.07(e), any twelve consecutive month period within the eighteen consecutive months
ending immediately prior to the issuance of the Additional Parity Obligations to which such
certificate relates.
"Capital Appreciation Obligations" means any Obligations the interest on which is
compounded and not scheduled to be paid until the maturity or prior redemption of such
Obligations.
"Capital Improvement" means, to the extent chargeable to a capital account of the
Electric System under Generally Accepted Accounting Principles: (i) any addition, betterment,
replacement, renewal, extension or improvement of or to the Electric System, including, without
limitation, capacity rights in electric generation resources, rights to the transmission capability of
electric transmission resources, acquisition of emission credits or other environmental assets for
facilities of the Electric System, land or any interests therein; and (ii) capital costs for the
extension, reinforcement, enlargement or other improvement of facilities or property, or the
acquisition of interests therein, not included as part of the Electric System, determined by the
City to be necessary or convenient in connection with the utilization of the Electric System.
"Charter" means the Charter of the City of Vernon approved by the electorate of the City
on April 12, 1988.
"City" means the City of Vernon, California and its successors.
"City Administrative Code" means the Code of the City of Vernon.
"City Council" means the City Council of the City established pursuant to the Charter
"Code" means the Internal Revenue Code of 1986, as amended from time to time. Each
reference to a section of the Code in the Indenture shall be deemed to include the applicable
DOCSLA1:438186.4
42797-2 EJC 5
United States Treasury Regulations thereunder and also includes all amendments and successor
provisions unless the context clearly requires otherwise.
"Commercial Paper Program" means a program of short-term Obligations having the
characteristics of commercial paper in that such Parity Obligations have a stated maturity not
later than 270 days from their date of issue and that maturing Obligations of such program may
be paid with the proceeds of renewal short-term Obligations.
"Consultant" means a consultant, consulting firm, engineer, architect, engineering firm,
architectural firm, accountant or accounting firm retained by the City to perform acts, prepare
certificates or otherwise carry out the duties provided for a Consultant in this Master Indenture or
any Supplemental Indenture. Such consultant, consulting firm, engineer, architect, engineering
firm or architectural firm shall be nationally recognized within its profession for works of the
character required. Such accountants or accounting firm shall be Independent Certified Public
Accountants licensed to practice in the State of California.
"Cost" means, with respect to any Capital Improvement, to the extent permitted under the
Bond Ordinance, all costs and expenses of planning, designing, acquiring, constructing, installing
and financing such Capital Improvement, placing such Capital Improvement in operation,
disposal of such Capital Improvement, and obtaining governmental approvals, certificates,
permits and licenses with respect thereto, heretofore or hereafter paid or incurred by the City.
Payment of Cost shall include the reimbursement to the City for any of the costs included in this
definition of Cost paid by the City and not previously reimbursed to the City and which are not to
be reimbursed from contributions in aid of construction. The term Cost shall include, but shall
not be limited to, funds required for:
(a) Costs of preliminary investigation and development, the performance or
acquisition of feasibility and planning studies, and the securing of regulatory approvals,
as well as costs for land and land rights, engineering and contractors' fees, labor,
materials, equipment, utility services and supplies, legal fees and financing expenses.
(b) Working capital and reserves therefor in such amounts as shall be
determined by the City.
(c) Interest accruing in whole or in part on Parity Obligations prior to and
during construction of a Capital Improvement or any portion thereof, and for such
additional period as the City may determine.
(d) The deposit or deposits from the proceeds of the Bonds in any funds or
accounts which deposit or deposits are required by this Master Indenture or any
Supplemental Indenture.
(e) The payment of principal, premium, if any, and interest when due (whether
at the maturity of principal or at the due date of interest or upon redemption or otherwise)
of any note or other evidence of indebtedness the proceeds of which were applied to any
of the costs of a Capital Improvement described in the Indenture.
DOCSLAI :438186.4
42797-2 EJC
(f) Training and testing costs which are properly allocable to the acquisition,
placing in operation, or construction of a Capital Improvement.
(g) All costs of insurance applicable to the period of construction and placing
a Capital Improvement in operation.
(h) All costs relating to injury and damage claims arising out of the
acquisition or construction of a Capital Improvement less proceeds of insurance.
(i) Legally required or permitted federal, state and local taxes and payments
in lieu of taxes applicable to: (i) the acquisition or construction of the Capital
Improvement or any portion thereof or materials in connection therewith; and (ii) the
period of construction and placing a Capital Improvement in operation.
0) Amounts due the United States of America as rebate of investment
earnings with respect to the proceeds of Parity Obligations or as penalties in lieu thereof.
(k) Amounts payable with respect to capital costs for the expansion,
reinforcement, enlargement or other improvement of facilities determined by the City to
be necessary in connection with the utilization of a Capital Improvement and the costs
associated with the removal from service or reductions in service of any facilities as a
result of the expansion, reinforcement, enlargement or other improvement of such
facilities or the construction of a Capital Improvement.
(1) Costs of Issuance of any Parity Obligations.
(m) Fees and expenses pursuant to any lending or credit facility or agreement
applicable to the period for construction and placing a Capital Improvement in operation.
(n) To the extent chargeable to a capital account of the Electric System under
Generally Accepted Accounting Principles, all other costs incurred by the City, properly
allocable to the acquisition, construction, or placing a Capital Improvement or any
portion thereof in operation and.
"Costs of Issuance" means, to the extent permitted by the Bond Ordinance, all items of
expense directly or indirectly payable by or reimbursable to the City and related to the original
authorization, execution, sale and delivery of Parity Obligations, including but not limited to
advertising and printing costs, costs of preparation and reproduction of documents, including
disclosure documents and documents relating to the sale of such Parity Obligations, initial fees
and charges (including counsel fees) of any fiscal agent, any paying agent and any Credit
Provider, legal fees and charges, financial advisor fees and expenses, fees and expenses of other
consultants and professionals, rating agency fees, fees and charges for preparation, execution,
transportation and safekeeping of Parity Obligations and any other cost, charge or fee in
connection with the authorization, issuance, sale or original delivery of Parity Obligations.
DOCSLA1:438186.4
42797-2 EJC 7
"Credit Provider" means any municipal bond insurance company, bank or other financial
institution or organization which is performing in all material respects its obligations under any
Credit Support Instrument for some or all of the Parity Obligations.
"Credit Provider Reimbursement Obligations" means obligations of the City to pay from
the Net Revenues amounts due under a Credit Support Agreement, including without limitation
amounts advanced by a Credit Provider pursuant to a Credit Support Instrument as credit support
or liquidity for Parity Obligations and the interest with respect thereto.
"Credit Provider Bonds" means any Bonds paid as to principal, Redemption Price,
Purchase Price and/or interest with funds provided under a Credit Support Instrument for so long
as such Bonds are held by or for the account of, or are pledged to, the applicable Credit Provider
in accordance with the applicable Credit Support Agreement.
"Credit Support Agreement" means, with respect to any Credit Support Instrument, the
agreement or agreements (which may be the Credit Support Instrument itself) between the City
and the applicable Credit Provider, as originally executed or as it may from time to time be
replaced, supplemented or amended in accordance with the provisions thereof, providing for the
reimbursement to the Credit Provider for payments under such Credit Support Instrument, and
the interest thereon, and includes any subsequent agreement pursuant to which a substitute Credit
Support Instrument is provided, together with any related pledge agreement, security agreement
or other security document.
"Credit Support Instrument" means a policy of insurance, a letter of credit, a stand-by
purchase agreement, revolving credit agreement or other credit arrangement pursuant to which a
Credit Provider provides credit and/or liquidity support with respect to the payment of interest,
principal, Redemption Price or Purchase Price of any Parity Obligations but shall not include a
Reserve Financial Guaranty.
"Crossover Date" means, with respect to a Series of Refunding Parity Obligations
constituting Crossover Refunding Obligations, the date on which the proceeds of the sale of such
Refunding Parity Obligations are to be applied to the payment of the principal of and premium, if
any, on the Parity Obligations to be refunded with the proceeds of such Refunding Parity
Obligations in accordance with the applicable Crossover Refunding Instructions.
"Crossover Refunding Escrow" means, with respect to any Series of Refunding Parity
Obligations constituting Crossover Refunding Obligations, a trust or escrow fund or account
established with an Escrow Agent into which proceeds of the sale of such Series of Refunding
Parity Obligations and, if necessary, other available funds have been deposited in an amount
sufficient to pay when due, or to purchase bonds, notes or other evidences of indebtedness the
scheduled payments of principal of and interest on which shall provide moneys at the times and
in amounts sufficient to pay when due, the applicable Crossover Refunding Requirements in
accordance with the applicable Crossover Refunding Instructions.
"Crossover Refunding Instructions" means, with respect to a Series of Refunding Parity
Obligations which constitute Crossover Refunding Obligations, a certificate, order, escrow
DOCSLA1:438186.4
42797-2 EJC 8
deposit agreement, or other direction from an Authorized City Representative to the Escrow
Agent for the applicable Crossover Refunding Escrow to apply amounts in the applicable
Crossover Refunding Escrow to the payments of principal and interest scheduled to be made on
the Crossover Refunding Obligations to and including the applicable Crossover Date and on such
Crossover Date to apply moneys in the applicable Crossover Refunding Escrow to the payment
or redemption of the Parity Obligations to be refunded or, in the event that the conditions to such
payment or redemption contained in the Issuing Instrument authorizing the issuance of such
Crossover Refunding Obligations are not satisfied, to the payment or redemption of the
Crossover Refunding Obligations on the terms and conditions set forth in such Issuing
Instrument.
"Crossover Refunding Obligations" means Refunding Parity Obligations as to which a
Crossover Refunding Escrow has been established and which are payable, prior to the application
of moneys in the applicable Crossover Refunding Escrow to the payment or redemption of the
Parity Obligations to be refunded, only from amounts in such Crossover Refunding Escrow.
"Crossover Refunding Requirements" means, with respect to a Series of Parity Refunding
Obligations constituting Crossover Refunding Obligations and the Parity Obligations to be
refunded with the proceeds of the sale of such Refunding Parity Obligations, moneys sufficient to
pay when due: (i) the scheduled principal of and interest on the Series of Parity Refunding
Obligations coming due on and before the applicable Crossover Date (other than as a result of the
failure to apply moneys in the applicable Crossover Refunding Escrow to the refunding of the
Parity Obligations to be refunded with the proceeds of the sale of such Refunding Parity
Obligations on the Crossover Date); (ii) the principal of, premium, if any, and interest on such
Refunding Parity Obligations which are payable in accordance with the applicable Crossover
Refunding Instructions in the event the amounts in the applicable Crossover Refunding Escrow
are not applied to the payment or redemption of the Parity Obligations to be refunded with the
proceeds of the sale of such Refunding Parity Obligations; and (iii) the principal of and premium,
if any, on the Parity Obligations to be refunded with the proceeds of the sale of the Refunding
Parity Obligations coming due in accordance with the applicable Crossover Refunding
Instructions.
"Debt Service" means, for any period of time, the sum of (a) the interest payable during
such period on all Outstanding Parity Obligations, assuming that all Outstanding Serial Parity
Obligations are retired as scheduled and that all Outstanding Term Parity Obligations are
redeemed or paid from Sinking Fund Installments as scheduled, (b) that portion of the principal
amount of all Outstanding Serial Parity Obligations maturing on each principal payment date
during such period, including the Final Compounded Amount of any Capital Appreciation
Obligations which are Serial Parity Obligations, (c) that portion of the principal amount of all
Outstanding Term Parity Obligations required to be redeemed or paid from Sinking Fund
Installments becoming due during such period (together with the premiums, if any, thereon),
including the Accreted Value of any Capital Appreciation Obligations which are Term Parity
Obligations, and (d) the Parity Purchase Price of Parity Obligations which are Tender
Indebtedness.
DOCSLA1:438186.4
42797-2 EJC 9
"Debt Service Fund" means the City of Vernon Electric System Debt Service Fund
established pursuant to Section 5.02.
"Debt Service Reserve Fund" means the City of Vernon Electric System Debt Service
Reserve Fund established pursuant to Section 5.02.
"Debt Service Reserve Requirement" means, as of any date of calculation, an amount
equal to the least of (i) ten percent (10%) of the initial offering price to the public of the Bonds as
determined under the Code, or (b) the greatest amount of Bond Debt Service in any Fiscal Year
during the period commencing with the Fiscal Year in which the determination is being made
and terminating with the last Fiscal Year in which any Bond is due, or (c) one hundred twenty-
five percent (125%) of the sum of the Bond Debt Service for all Fiscal Years during the period
commencing with the Fiscal Year in which such calculation is made (or if appropriate, the first
full Fiscal Year following the execution and delivery of any Bonds) and terminating with the last
Fiscal Year in which any Bond Debt Service is due, divided by the number of such Fiscal Years,
all as computed and determined by the City and specified in writing to the Trustee; provided,
however that in determining Bond Debt Service with respect to any Bonds that constitute
Variable Rate Indebtedness, the interest rate on such Bonds for any period as to which such
interest rate has not been established shall be assumed to be 110% of the daily average interest
rate on such Bonds during the 12 months ending with the month preceding the date of
calculation, or such shorter period that such Bonds shall have been Outstanding.
"Debt Service Reserve Valuation Date" means the Business Day preceding each July 1,
commencing July 1, 2003.
"Defeasance Securities means any of the following securities, if and to the extent the
same are at the time legal investments for funds of the City: (i) any bonds or other obligations
which as to principal and interest constitute direct obligations of, or obligations unconditionally
guaranteed by, the United States of America, including obligations of any agency or corporation
which has been or may hereafter be created pursuant to an Act of Congress as an agency or
instrumentality of the United States of America to the extent unconditionally guaranteed by the
United States of America; and (ii) Advance Refunded Municipal Securities.
"Depository" means any bank or trust company organized under the laws of any state of
the United States (including the Trustee and its affiliates), or any national banking association
which is willing and able to accept the office on reasonable and customary terms, authorized by
law to act in accordance with the provisions of this Indenture.
"DTC" means The Depository Trust Company, a limited purpose trust company
organized under the laws of the State of New York or its successors and assigns. References in
the Indenture to DTC shall include any Nominee of DTC in whose name any Bond is registered.
"Electric Service" means the services, commodities and products furnished, made
available or provided by the Electric System.
DOCSLA1:438186.4
42797-2 EJC 10
"Electric System" means the electrical energy generation, transmission and distribution
system of the City established pursuant to Ordinance No. 1022 of the City (codified as
Section 2.91 of the City Administrative Code) and referred to in the City Administrative Code as
the Vernon Electric System, comprising all electric generation, transmission and distribution
facilities and all general plant facilities related thereto now owned by the City and all other
facilities properties, structures or works for the generation, transmission or distribution of
electricity hereafter acquired by the City, including all contractual rights for electricity or the
transmission thereof, together with all additions, betterments, extensions or improvements to
such facilities, properties, structures or works or any part thereof, and any additional contract
rights for electricity or the transmission thereof, hereafter acquired.
"Event of Default" means an event described as such in Section 8.01.
"Electronic" means, with respect to notice, notice through telecopy, telegraph, telex,
facsimile transmission, internet, e-mail, dedicated electronic link or other electronic means of
communication capable of producing a written record.
"Escrow Agent" means the Trustee or a bank or trust company organized under the laws
of any state of the United States, or a national banking association, appointed by the City to hold
in trust moneys set aside for either: (i) the payment or redemption of, or interest installments on,
a Bond or Bonds, or any portion thereof, deemed paid and defeased pursuant to Article IX ; or
(ii) the payment of the principal, premium, if any, or interest on Crossover Refunding Bonds or
the Parity Obligations to be refunded with the proceeds of the sale of such Crossover Refunding
Bonds.
"Expense Stabilization Fund" means the City of Vernon Electric System Expense
Stabilization Fund established pursuant to Section 5.02.
"Event of Bankruptcy" means any of the following with respect to any Person: (a) the
commencement by such person of a voluntary case under the Federal Bankruptcy Code or any
other applicable federal or state bankruptcy, insolvency or similar laws; (b) failure by such
Person to timely controvert the filing of a petition with a court having jurisdiction over such
Person to commence an involuntary case against such person under the Federal Bankruptcy Code
or any other applicable federal or state bankruptcy, insolvency or similar laws; (c) such Person
shall admit in writing its inability to pay its debts generally as they become due; (d) a receiver,
trustee, custodian or liquidator of such Person or such Person's assets shall be appointed in any
proceeding brought against the Person or such Person's assets; (e) assignment of assets by such
person for the benefit of its creditors; or (f) the entry by such Person into an agreement of
composition with its creditors.
"Favorable Opinion of Bond Counsel" means, with respect to any action requiring such
an opinion, an Opinion of Bond Counsel to the effect that such action shall not, in and of itself,
adversely affect the Tax -Exempt status of interest on the Bonds or such portion thereof as shall
be specified in the provisions of this Master Indenture or the Supplemental Indenture requiring
such an opinion.
DOCSLA1:438186.4
42797-2 EJC 11
"Federal Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as the same may be amended and supplemented, and any successor statute.
"Fiduciary" means the Trustee and each Paying Agent for the Bonds appointed as
provided in Section 8.02.
"Final Compounded Amount" means the Accreted Value of any Capital Appreciation
Obligation on its maturity date.
"First Supplemental Indenture means the First Supplemental Indenture of Trust, dated
as of March 1, 2003, between the City and the Trustee supplementing this Master Indenture.
"Fiscal Year" means the period beginning on July 1 of each year and ending on the next
succeeding June 30, or any other twelve-month period selected and designated as the official
Fiscal Year of the City.
"Generally Accepted Accounting Principles" means generally accepted accounting
principles applied on a consistent basis set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public Accountants
applicable to a government -owned utility applying all statements and interpretations issued by
the Governmental Accounting Standards Board and statements and pronouncements of the
Financial Accounting Standards Board which are not in conflict with the statements and
interpretations issued by the Governmental Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of the accounting
profession, that are applicable to the circumstances as of the date of determination.
"Independent Certified Public Accountant" means any firm of certified public
accountants appointed by the City, and each of whom is independent pursuant to the Statement
on Auditing Standards No. 1 of the American Institute of Certified Public Accountants.
"Indenture" means, the Indenture of Trust, as supplemented and amended from time to
time by Supplemental Indentures.
"Information Services" means any of the following services which has been designated
in a certificate of the City delivered to the Trustee: Financial Information, Inc.'s "Daily Called
Bond Service," 30 Montgomery Street, loth Floor, Jersey City, New Jersey 07302, Attention:
Editor; Kenny Information Services "Called Bond Service," 65 Broadway, 16th Floor, New
York, New York 10006; Moody's Investors Service "Municipal and Government," 99 Church
Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and
Standard and Poor's "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York
10004; or such other services providing information with respect to called bonds as the City may
designate in a certificate of the City delivered to the Trustee.
"Initial Amount" means the Accreted Value of a Capital Appreciation Obligation on its
date of issuance and delivery to the original purchaser thereof.
DOCSLA1:438186.4
42797-2 EX 12
"Interest Account" means the account by that name in the Debt Service Fund established
pursuant to Section 5.02.
"Interest Payment Date" means, with respect to a Series of Bonds, each date on which
interest on Bonds of such Series is scheduled to be paid as set forth in, or determined in
accordance with, the Supplemental Indenture authorizing the issuance of such Series.
"Issuing Instrument" means any, indenture, trust agreement or other instrument or
agreement under which Obligations are issued.
"Light and Power Department Fund" means the Light and Power Department Fund
established pursuant to Ordinance No. 950 of the City (codified as Section 2.65 of the City
Administrative Code) and shall include any successor or replacement fund established by the
City for the collection of revenues and the payment of expenses of the Electric System.
"Master Indenture" means this Indenture of Trust, dated as of March 1, 2003 between the
City and the Trustee, as the provisions hereof may be modified or amended from time to time in
accordance with Article VH.
"Maximum Adjusted Annual Debt Service" means, with respect to a certificate to be
delivered in connection with Additional Parity Obligations pursuant to Section 2.07(e), as of any
date and with respect to the Applicable Parity Obligations, the maximum amount of Adjusted
Debt Service becoming due on the Applicable Parity Obligations in the then current or any future
Fiscal Year, as adjusted as provided in this definition and calculated by the City or by a
Consultant. For purposes of calculating Maximum Adjusted Annual Debt Service, the following
adjustments and assumptions shall be made with respect to Debt Service on the Applicable Parity
Obligations coming due in each Fiscal Year:
(a) in determining the amount of Debt Service constituting principal due in
each Fiscal Year, principal payments with respect to Applicable Parity Obligations which
are or upon issuance shall be, part of a Commercial Paper Program, but which would not
constitute Balloon Indebtedness, shall be treated as if such Applicable Parity Obligations
were to be amortized with substantially level annual Debt Service payments over a term
of 40 years commencing on the date the calculation of Maximum Adjusted Annual Debt
Service is made:
(b) if all or any portion or portions of the Applicable Parity Obligations
constitute, or upon issuance would constitute, Balloon Indebtedness, then, for purposes of
determining Maximum Adjusted Annual Debt Service, each maturity which constitutes,
or upon issuance would constitute, Balloon Indebtedness shall be treated as if it were to
be amortized with substantially level annual Debt Service payments over a term of 40
years commencing on the date which is the first anniversary of the initial issuance of such
Applicable Parity Obligations;
(c) if any Outstanding Parity Obligations constitute Tax -Exempt Variable
Rate Indebtedness (except to the extent paragraph (g) applies), the interest rate on such
DOCSLA1:438186.4
42797-2 EJC 13
Parity Obligations for any period as to which such interest rate has not been established
shall be assumed to be 110% of the daily average interest rate on such Parity Obligations
during the 12 months ending with the month preceding the date of calculation, or such
shorter period that such Parity Obligations shall have been Outstanding;
(d) if any Outstanding Parity Obligations constitute Variable Rate
Indebtedness which is not Tax -Exempt (except to the extent paragraph (g) applies), the
interest rate on such Parity Obligations for any period as to which such interest rate has
not been established shall be assumed to be 110% of the average One Month USD
LIBOR Rate during the calendar quarter preceding the calendar quarter in which the
calculation of Maximum Adjusted Annual Debt Service is made or if the One Month
USD LIBOR Rate is not available for such period, another similar rate or index selected
by the City.
(e) if the Additional Parity Obligations proposed to be issued shall be Tax -
Exempt Variable Rate Indebtedness (except to the extent subsection (h) applies), then the
interest rate on such Additional Parity Obligations shall be assumed to be 110% of the
average TBMA Index during the calendar quarter preceding the calendar quarter in which
the calculation of Maximum Adjusted Annual Debt Service is made, or if that index is no
longer published, seventy-five percent (75%) of the One Month USD LIBOR Rate, or if
the One Month USD LIBOR Rate is not available, another similar rate or index selected
by the City;
(f) if the Additional Parity Obligations proposed to be issued shall be
Variable Rate Indebtedness which is not Tax -Exempt (except to the extent subsection (h)
applies) then the interest rate on such Additional Parity Obligations shall be assumed to
be 110%0 of the average One Month USD LIBOR Rate during the calendar quarter
preceding the calendar quarter in which the calculation is made, or if the One Month USD
LIBOR Rate is not available for such period, another similar rate or index selected by the
City;
(g) if a Qualified Swap Agreement has been entered into in connection with
any Outstanding Parity Obligations, the interest rate on such Outstanding Parity
Obligations for each Fiscal Year or portion thereof during which payments are to be
exchanged by the parties under such Qualified Swap Agreement shall be determined for
purposes of calculating Maximum Adjusted Annual Debt Service by adding: (1) the
amount of Debt Service paid or to be paid by the City as interest on the Outstanding
Parity Obligations during such Fiscal Year or portion thereof (determined as provided in
paragraph (c) or (d), as applicable, if such Outstanding Parity Obligations constitute
Variable Rate Indebtedness) and (2) the net amount (which may be a negative amount)
paid or to be paid by the City under the Qualified Swap Agreement (after giving effect to
payments made and received, and to be made and received, by the City under the
Qualified Swap Agreement) during such Fiscal Year or portion thereof, and for this
purpose any variable rate of interest agreed to be paid under the Qualified Swap
Agreement shall be deemed to be the rate at which the related Outstanding Parity
Obligations constituting Variable Rate Indebtedness is assumed to bear interest;
DOCSLA1:438186.4
42797-2 EJC 14
(h) if a Qualified Swap Agreement has been entered into by the City with
respect to any Additional Parity Obligations proposed to be issued, the interest on such
proposed Additional Parity Obligations for each Fiscal Year or portion thereof during
which payments are to be exchanged under the Qualified Swap Agreement shall be
determined for purposes of calculating Maximum Adjusted Annual Debt service by
adding: (1) the amount of Debt Service to be paid by the City as interest on such
Additional Parity Obligations during such Fiscal Year or portion thereof (determined as
provided in paragraph (e) or (f), as applicable, if such Additional Parity Obligations are to
constitute Variable Rate Indebtedness) and (2) the net amount (which may be a negative
amount) to be paid by the City under the Qualified Swap Agreement (after giving effect
to payments to be made and received by the City under the Qualified Swap Agreement)
during such Fiscal Year or portion thereof, and for this purpose any variable rate of
interest agreed to be paid under the Qualified Swap Agreement shall be deemed to be the
rate at which the related Additional Parity Obligations which are to constitute Variable
Rate Indebtedness shall be assumed to bear interest; and
(i) if any of the Applicable Parity Obligations are, or upon issuance shall be,
Paired Obligations, the interest thereon shall be the resulting linked rate or effective fixed
rate to be paid with respect to such Paired Obligations.
"Moody's" means Moody's Investors Service, Inc. and any successor entity rating Parity
Obligations at the request of the City.
"Net Payment" means with respect to a Qualified Swap Agreement, the amount payable
by the City on each scheduled payment date under such Qualified Swap Agreement net of the
amount payable by the counterparty under such Qualified Swap Agreement on such scheduled
payment date.
"Net Revenues" mean, for any period of time, the Revenues for such period less the
Operation and Maintenance Expenses for such period.
"Net Transferable Income means, with respect to any Fiscal Year, the Net Revenues for
such Fiscal Year less the Debt Service for such Fiscal Year.
"Nominee" means the nominee of the Securities Depository for the Book -Entry Bonds in
whose name such Bonds are to be registered. The initial Nominee shall be Cede & Co., as the
nominee of DTC.
"Obligations" means (a) obligations with respect to borrowed money and includes bonds,
notes or other evidences of indebtedness, installment purchase payments under any contract, and
lease payments under any financing or capital lease (determined to be such in accordance with
Generally Accepted Accounting Principles), which are payable from the Net Revenues, (b)
obligations to replenish any debt service reserve fund with respect to obligations of the City
described in (a) above; (c) obligations secured by or payable from any of obligations of the City
described in (a) above; (d) obligations payable from the Net Revenues and entered into in
connection with, relating to, or otherwise serving as a hedge with respect to, an obligation
DOCSLA1:438186.4
42797-2 EJC 15
described in (a), (b) or (c) above under any Public Finance Contract; and (e) Credit Provider
Reimbursement Obligations.
"One Month USD LIBOR Rate" means the British Banker's Association average of
interbank offered rates in the London market for United States dollar deposits for a one month
period as reported in the Wall Street Journal or, if not reported in such newspaper, as reported in
such other source as may be selected by the City.
"Operation and Maintenance Expenses" mean the costs paid or incurred by the City for
operating and maintaining the Electric System including, but not limited to (a) all costs of
electric energy and power generated or purchased by the City for resale, costs of transmission,
fuel supply and water supply in connection with the foregoing; (b) all costs and expenses of
management of the Electric System; (c) all costs and expenses of maintenance and repair, and
other expenses necessary or appropriate in the judgment of the City to maintain and preserve, the
Electric System in good repair and working order; (d) all administrative costs of the several
departments of the City that are charged directly or apportioned to the operation or maintenance
of the Electric System, such as salaries and wages (including retirement benefits) of employees,
overhead, taxes (if any) and insurance premiums; (e) payments in -lieu of taxes to the City or any
other public agency in connection with the Electric System; (f) all costs, expenses and charges of
the City required to be paid by it to comply with the terms of any Issuing Instrument authorizing
the issuance of Parity Obligations, such as compensation, reimbursement and indemnification of
the trustee, remarketing agent or fees and expenses of Independent Certified Public Accountants
and other Consultants; (g) the fees, expenses and indemnification of Credit Providers and
Reserve Financial Guaranty Providers; (h) all amounts required to be paid by the City under
contracts with a joint powers agencies for the purchase of capacity, rights in an electric
generating station or electric transmission facilities, transmission capability or any other
commodity right, or service in connection with the Electric System, which contracts require
payments to be made by the City thereunder to be treated as operation and maintenance expenses
of the Electric System; (i) all deposits to be made to a rebate fund established with respect to
Parity Obligations to provide for any rebate to the United States required to maintain the Tax -
Exempt status of interest on such Parity Obligations; 0) any cost or expense paid by the City to
comply with requirements of law applicable to the Electric System or the City's ownership or
operation thereof or in any capacity with respect thereto or any activity in connection therewith,
including without limitation the Public Benefits uses required by Section 385 of the California
Public Utilities Code; and (k) any other cost or expense which, in accordance with Generally
Accepted Accounting Principles, is to be treated as a cost of operating or maintaining the Electric
System; but excluding in all cases depreciation, replacement and obsolescence charges or
reserves therefor, and amortization of intangibles. Except as provided in clause (d) or clause (e)
of this paragraph, no transfer of Revenues to the City shall constitute an Operation and
Maintenance Expense.
"Opinion of Bond Counsel" means a written opinion signed by Bond Counsel.
"Outstanding" when used as of any particular time with respect to Obligations, means,
except as otherwise provided in Article VII, all Obligations theretofore or thereupon being issued
by the City, except (a) Obligations theretofore cancelled or surrendered for cancellation; (b)
DOCSLAI :438186.4
42797-2 EJC 16
Obligations paid or deemed to be paid within the meaning of any defeasance provisions of the
Issuing Instrument pursuant such Obligations were issued; (c) Obligations in lieu of or in
substitution for which replacement Obligations have been issued; and (d) prior to the applicable
Crossover Date, Refunding Parity Obligations which are Crossover Refunding Obligations.
"Paired Obligations" shall mean any Series (or portion thereof) of Parity Obligations
designated as Paired Obligations in the Issuing Instrument authorizing the issuance thereof,
which are simultaneously issued (a) the principal of which is of equal amount maturing and to be
redeemed (or cancelled after acquisition thereof) on the same dates and in the same amounts, and
(b) the interest rates which, taken together, result in an irrevocably fixed interest rate obligation
of the City for the terms of such Paired Obligations.
"Parity Obligations" means Bonds and any Obligations which are payable from the Net
Revenues on a parity with the payment of the Bonds and which satisfy the applicable conditions
of Section 2.07, including without limitation Credit Provider Reimbursement Obligations and
Net Payments due under Qualified Swap Agreements.
"Parity Purchase Price" means with respect to Parity Obligations which are Tender
Indebtedness, the Purchase Price of such Parity Obligations if and to the extent payable from Net
Revenues on a parity with the payment of principal of and interest on the Bonds.
"Participants" means, with respect to a Securities Depository for Book -Entry Bonds,
those participants listed in such Securities Depository's book -entry system as having an interest
in such Bonds.
"Paying Agent" means, with respect to a Series of Bonds, the Trustee and any banking
corporation, banking association or trust company designated as paying agent for such Series of
Bonds pursuant to Section 8.01(b) or Section 8.02, and its successor or successors appointed in
the manner provided in the Indenture.
"Permitted Investments" means any of the following obligations if and to the extent that
they are permissible investments of funds of the City as stated in its current investment policy
(the Trustee may rely on the investment directions of the City that the investment is approved by
the City's investment policy) and to the extent then permitted by law:
(a) Direct obligations of the United States (including obligations issued or
held in book -entry form on the books of the Department of the Treasury, and CATS and TIGRS)
or obligations the principal of and interest on which are unconditionally guaranteed by the United
States.
(b) Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are backed by
the full faith and credit of the United States (stripped securities are only permitted if they have
been stripped by the agency itself):
(i) Farmers Home Administration ("FmHA")
Certificates of beneficial ownership
DOCSLA1:438186.4
42797-2 EJC 17
(ii) Federal Housing Administration Debentures ("FHA")
(iii) General Services Administration
Participation certificates
(iv) Government National Mortgage Association ("GNMA")
GNMA - guaranteed mortgage -backed bonds
GNMA guaranteed pass -through obligations (participation
certificates)
(v) United States Maritime Administration
Guaranteed Title XI financing
(vi) United States Department of Housing and Urban Development
Project Notes
Local Authority Bonds
(c) Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following non -full faith and credit United States government agencies
(stripped securities are only permitted if they have been stripped by the agency itself):
(i) Federal Home Loan Bank System
Senior debt obligations
(ii) Federal Home Loan Mortgage Corporation ("FHLMC")
Participation Certificates
Senior debt obligations
(iii) Federal National Mortgage Association ("FNMA")
Mortgage -backed securities and senior debt obligations (excluded
are stripped mortgage securities which are valued greater than par
on the portion of unpaid principal)
(iv) Student Loan Marketing Association
Senior debt obligations
(v) Resolution Funding Corporation obligations (only the interest
component of REFCORP strips which have been stripped by
request to the Federal Reserve Bank of New York in book entry
form are acceptable)
(A) Farm Credit System
Consolidated system -wide bonds and notes
(d) Money market funds registered under the Federal Investment Company
Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a
rating by S&P of "AAAm-G," "AAA-m" or "AA-m" and if rated by Moody's rated "Aaa,"
DOCSLA1:438186.4
42797-2 EJC 18
"Aal" or "Aa2," including funds for which the Trustee or any of its affiliates (including any
holding company, subsidiaries, or other affiliates) provides investment advisory or other
management services, provided such funds satisfy the criteria herein contained.
(e) Certificates of deposit secured at all times by collateral described in (a)
and/or (b) above. Such certificates must be issued by commercial banks (including affiliates of
the Trustee), savings and loan associations or mutual savings banks. The collateral must be held
by a third party and the City or the Trustee must have a perfected first security interest in the
collateral.
(f) Certificates of deposit, savings accounts, deposit accounts or money
market deposits (including those of the Trustee and its affiliates) which are fully insured by the
Federal Deposit Insurance Corporation.
(g) Investment agreements, including guaranteed investment contracts,
acceptable to each Credit Provider whose consent is required by a Supplemental Indenture.
(h) Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's
and "A-1" or better by S&P.
(i) Bonds or notes issued by any state or municipality which are rated by
Moody's and S&P in one of the two highest rating categories assigned by such agencies.
(j) Federal funds or bankers acceptances with a maximum term of one year of
any bank (including those of the Trustee and its affiliates) which has an unsecured, uninsured and
unguaranteed obligation rating of "Prime - 1" or "A3" or better by Moody's and "A-1" or "A" or
better by S&P.
(k) Repurchase Agreements for 30 days or less must satisfy the following
criteria. Repurchase Agreements which exceed 30 days must be acceptable to each Credit
Provider whose consent is required by a Supplemental Indenture.
(i) Repurchase agreements must be between the City or the Trustee
and a dealer bank or securities firm
(1) Primary dealers on the Federal Reserve reporting dealer list
must be rated "A" or better by S&P and Moody's, or
(2) Banks must be rated "A" or above by S&P and Moody's.
(ii) The written repurchase agreements contract must include the
following:
(1) Securities which are acceptable for transfer are:
(a) Securities described in subsection (a) or (b) of this
definition, or
DOCSLA1:438186.4
42797-2 EJC 19
(b) Securities of FNMA or FHLMC described in
subsection (c) of this definition.
(2) The collateral must be delivered to the City, the Trustee (if
the Trustee is not supplying the collateral) or third party
acting as agent for the Trustee (if the Trustee is supplying
the collateral) before/simultaneously with payment.
(3) Valuation of Collateral
(a) The securities must be valued weekly, marked -to -
market at current market price plus accrued interest
(i) The value of collateral in the case of securities
described in subsections (a) or (b) of this
definition must be equal to 104% of the amount
of cash transferred by the City or the Trustee to
the dealer bank or security firm under the
repurchase agreement plus accrued interest. The
value of collateral in the case of securities of
FNMA or FHLMC described in subsection (c)
of this definition must be equal to 105% of the
amount of cash transferred by the City or the
Trustee to the dealer bank or security firm under
the repurchase agreement plus accrued interest.
If the value of securities held as collateral falls
below the required percentage of the value of
the cash transferred, then additional cash and/or
acceptable securities must be transferred.
(W) Legal _pinion. An opinion of counsel selected by the City, which
may be the City Attorney or other counsel retained by the City, to
the effect that the repurchase agreement meets guidelines under
state law for legal investment of public funds must be received by
the City or the Trustee.
(1) Any state administered pool investment fund in which the City is
statutorily permitted or required to invest will be deemed a permitted investment, including, but
not limited to the Local Agency Investment Fund in the treasury of the State.
(m) Advance Refunded Municipal Securities.
"Person" means an individual, corporation, firm, association, partnership, trust or other
legal entity or group of entities, including a governmental entity or any agency or political
subdivision thereof.
DOCSLA1:438186.4
42797-2 EJC 20
"Principal Account" means the account by that name in the Debt Service Fund
established pursuant to Section 5.02.
"Principal Office" means, with respect to: (i) the Trustee, the principal office of such
Trustee in Los Angeles, California; and (ii) a Paying Agent or a Credit Provider, the office
designated as such in writing by such party to the Trustee.
"Public Finance Contract" means (i) any contract providing for payments based on levels
of, or changes in, interest rates, currency exchange rates, stock or other indices, (ii) any contract
to exchange cash flows or a series of payments, or (iii) any contract to hedge payment, currency,
rate spread or similar exposure, including but not limited to interest any interest rate swap
agreement, currency swap agreement, forward payment conversion agreement or futures contract,
any contract providing for payments based on levels of, or changes in, interest rates, currency
exchange rates, stock or other indices, any contract to exchange cash flows or a series of
payments, or any contract, including, without limitation, an interest rate floor or cap, or an
option, put or call, to hedge payment, currency, rate, spread or similar exposure, between the City
and a counterparty.
"Purchase Price" means: (i) with respect to Bonds of any Series, the purchase price set
forth in the Supplemental Indenture authorizing the Bonds of such Series to be paid to the
Owners of such Bonds when such Bonds are tendered for purchase or deemed tendered for
purchase in accordance with the provisions of such Supplemental Indenture; and (ii) with respect
to other Parity Obligations, the purchase price set forth in the Issuance Instrument authorizing
such Parity Obligations to be paid to the owners of such Parity Obligations when such Parity
Obligations are tendered or deemed tendered for purchase in accordance with the provisions of
such Issuing Instrument.
"Qualified Swap Agreement" means a Public Finance Contract, the City's obligations to
make Net Payments under which are payable from the Net Revenues on a parity with the
payment of other Parity Obligations and satisfying the conditions of Section 2.07(a), intended to
place Parity Obligations or the applicable investments on the interest rate, currency, cash flow or
other basis desired by the City.
"Rating Agency" means, as of any time and to the extent it is then providing or
maintaining a rating on Parity Obligations at the request of the City, each of Moody's or Standard
& Poor's, or in the event that neither Moody's or Standard & Poor's then maintains a rating on
Parity Obligations at the request of the City, any other nationally recognized rating agency then
providing or maintaining a rating on the Bonds at the request of the City.
"Rating Category" means (1) with respect to any long-term rating category, all ratings
designated by a particular letter or combination of letters, without regard to any numerical
modifier, plus or minus sign or other modifier and (2) with respect to any short-term or
commercial paper rating category, all ratings designated by a particular letter or combination of
letters and taking into account any numerical modifier, but not any plus or minus sign or other
modifier.
DOCSLA1:438186.4
42797-2 EJC 21
"Rating Confirmation" means written evidence from each Rating Agency then rating
Outstanding Parity Obligations at the request of the City to the effect that, following the event
which requires the Rating Confirmation, the then current rating for each Outstanding Parity
Obligation shall not be lowered or withdrawn solely as a result of the occurrence of such event.
"Record Date" means, with respect to an Interest Payment Date for a Series of Bonds, the
date or dates specified as such in the Supplemental Indenture authorizing such Series of Bonds.
"Redemption Fund" means the City of Vernon Electric System Redemption Fund
established pursuant to Section 5.02
"Redemption Price means, with respect to any redemption of a Bond prior to its
maturity, the amount to be paid upon such redemption of the Bond as set forth in, or determined
in accordance with, the Supplemental Indenture authorizing such Bond.
"Refunding Bonds" means Bonds issued in accordance with the terms and conditions of
this Master Indenture for the purposes, and satisfying the conditions of Section 2.06.
"Refunding Parity Obligations" means Parity Obligations, including Refunding Bonds,
issued for the purposes set forth in Section 2.06 and satisfying the conditions set forth in Section
2.07.
"Representation Letter" the letter or letters of representation from the City to, or other
instrument or agreement with, a Securities Depository for Book -Entry Bonds, in which the City,
among other things, makes certain representations to the Securities Depository with respect to the
Book -Entry Bonds, the payment thereof and delivery of notices with respect thereto.
"Reserve Financial Guaranty" means a policy of municipal bond insurance or surety bond
issued by a municipal bond insurer or a letter of credit issued by a bank or other institution if the
obligations insured by such insurer or issued by such bank or other institution, as the case may
be, have ratings at the time of issuance of such policy or surety bond or letter of credit in the
highest rating category (without regard to qualifiers) by S&P and Moody's and, if rated by A.M.
Best & Company, also in the highest rating category (without regard to qualifiers) by A.M. Best
& Company.
"Reserve Financial Guaranty Provider" means an issuer of a Reserve Financial Guaranty.
"Revenues" mean all gross income and revenue received or receivable by the City from
the ownership or operation of the Electric System, including all rates and charges for the Electric
Service and the other services and facilities of the Electric System, all proceeds of insurance
covering business interruption loss relating to the Electric System and all other income and
revenue howsoever derived by the City from the ownership or operation of the Electric System or
otherwise arising from the Electric System, including all receipts and payments pursuant to
Public Finance Contracts entered into in connection with any Obligations or program of
investments relating to the Electric System and all income from the deposit or investment of any
money in the Light and Power Department Fund, but excluding (i) proceeds of taxes and (ii)
DOCSLA1:438186.4
42797-2 EJC 22
refundable deposits made to establish credit and advances or contributions in aid of construction
and line extension fees.
"Rule 15c2-12" means Rule 15c2-12 of the Securities and Exchange Commission
adopted pursuant to the Securities Exchange Act of 1934, as amended, as the same may be
amended and supplemented from time to time.
"Second Supplemental Indenture" means the Second Supplemental Indenture of Trust,
dated as of March 1, 2003, between the City and the Trustee supplementing this Master
Indenture.
"Securities Depository" means a trust company or other entity which provides a book -
entry system for the registration of ownership interests of Participants in securities and which is
acting as security depository for Book -Entry Bonds.
"Serial Obligations" means Obligations for which no Sinking Fund Installments are
established.
"Serial Parity Obligations" means Serial Obligations which are Parity Obligations.
"Series" means Obligations issued at the same time or sharing some other common term
or characteristic and designated in the Issuing Instrument pursuant to which such Obligations
were issued as a separate issue or series of Obligations.
"Sinking Fund Account" means the account by that name in the Debt Service Fund
established pursuant to Section 5.02.
"Sinking Fund Installment" means, with respect to any Term Parity Obligations, each
amount so designated for such Term Parity Obligations in the Issuing Instrument authorizing the
issuance of such Parity Obligations requiring payments by the City from the Net Revenues to be
applied to the retirement of such Parity Obligations on and prior to the stated maturity date
thereof.
"Special Record Date" has the meaning set forth in Section 3.02(f).
"Standard & Poor's" means Standard & Poor's Rating Services and any successor entity
rating Parity Obligations at the request of the City.
"State" means the State of California.
"Subordinated Obligation" means any Obligation which is expressly made subordinate
and junior in right of payment from the Net Revenues to the payment of Parity Obligations and
which complies with the provisions of Section 2.08.
"Supplemental Indenture" means any supplemental indenture supplementing or amending
the Indenture as theretofore in effect, entered into by the City and the Trustee in accordance with
Article VII.
DOCSLA1:438186.4
42797-2 EJC 23
"Tax Certificate" means a certificate relating to the requirements of the Code signed on
behalf of the City and delivered in connection with the issuance of a Series of Bonds.
"Tax -Exempt" means, with respect to interest on any obligations of a state or local
government, including the Bonds, that such interest is excluded from the gross income of the
holders thereof (other than any holder who is a "substantial user" of facilities financed with such
obligations or a "related person" within the meaning of Section 147(a) of the Code) for federal
income tax purposes, whether or not such interest is includable as an item of tax preference or
otherwise includable directly or indirectly for purposes of calculating other tax liabilities,
including any alternative minimum tax or environmental tax under the Code.
"Tax -Exempt Securities" means bonds, notes or other securities the interest on which is
Tax -Exempt.
"TBMA Index" means The Bond Market Association Municipal Index as of the most
recent date for which such index was published or such other weekly, high-grade index
comprised of seven-day, Tax -Exempt variable rate demand notes produced by Municipal Market
Data, Inc., or its successor, or as otherwise designated by The Bond Market Association;
provided, however, that, if such index is no longer produced by Municipal Market Data, Inc. or
its successors, then "TBMA Index" shall mean such other reasonably comparable index selected
by the City.
"Tender Indebtedness" means any Parity Obligations or portions of Parity Obligations, a
feature of which is an option or obligation, on the part of the owners thereof under the terms of
such Parity Obligations, to tender all or a portion of such Parity Obligations to the City, a fiscal
agent, a paying agent, a tender agent or other agent for purchase and requiring that such Parity
Obligations or portions thereof be purchased at the applicable Purchase Price if properly
presented.
"Termination Payment" means with respect to a Qualified Swap Agreement, the amount
payable by the City as a result of the termination of such Qualified Swap Agreement prior to its
scheduled expiration date.
"Term Obligations" means Obligations which are payable on or before their specified
maturity dates from Sinking Fund Installments established for that purpose and calculated to
retire such Obligations on or before their specified maturity dates.
"Term Parity Obligations" means Term Obligations which are Parity Obligations.
"Trust Estate" means, subject to the provisions of the Indenture permitting the application
thereof for the purposes and on the terms and conditions set forth therein (i) the Net Revenues
and (ii) all amounts on deposit in the Debt Service Fund, the Debt Service Reserve Fund, the
Redemption Fund and the Expense Stabilization Fund, including the investments, if any, thereof.
"Trustee" means, BNY Western Trust Company, as trustee for the Bonds under the
Indenture and any successor satisfying the requirements of Section 8.09.
DOCSLAI :438186.4
42797-2 EJC 24
"2003 Series A Bonds" means the Bonds authorized by the First Supplemental Indenture.
"2003 Series B Bonds" means the Bonds authorized by the Second Supplemental
Indenture.
"Variable Rate Indebtedness means any Obligation, other than Paired Obligations, the
interest rate on which to the maturity thereof is not established at a rate which is not subject to
fluctuation or subsequent adjustment, either at the time of issuance of such Obligation or some
subsequent date,.
Section 1.02 Rules of Construction. Words of the masculine gender shall be deemed
and construed to include correlative words of the feminine and neutral genders. Except where
the context otherwise requires, words importing the singular number shall include the plural
number and vice versa, and words importing persons shall include corporations and associations,
including districts, agencies and other public bodies, as well as natural persons. Unless
otherwise indicated, references in this Master Indenture to subsections, Sections and Articles are
to such subsections, Sections and Articles of this Master Indenture. Unless the context requires
otherwise, the terms "herein," "hereof," "hereunder" and any similar terms, as used in this Master
Indenture, shall refer to this Master Indenture as a whole and not to any particular provisions of
this Master Indenture. Defined terms shall include any variant of the terms set forth in this
Article.
The term "principal" when used with reference to a Capital Appreciation Obligation as of
its maturity date shall refer to the Final Compounded Amount of such Capital Appreciation
Obligation and as to any other date, the Accreted Value of such Capital Appreciation Obligation
as of such date. The term "principal" when used with reference to a Parity Obligation which is a
Qualified Swap Agreement shall refer to the Net Payments due under such Qualified Swap
Agreement. The term "principal" when used with reference to a Parity Obligation which is a
Credit Provider Reimbursement Obligation shall refer to the amount of such Credit Provider
Reimbursement Obligation not represented by Credit Provider Bonds.
The term "issue" shall include issuance, creation, incurrence, entering into an agreement
or any other act pursuant to which a party may become obligated with respect to an Obligation.
The term "include" shall not be construed to be limited to the items or the type of items listed
after such word, which items are by way of example and not limitation, but the term shall be
construed as meaning "including without limitation."
Section 1.03 Authority for this Indenture of Trust. This Master Indenture is entered
into by the City pursuant to the provisions of the Charter and the Bond Ordinance.
DOCSLA1:438186.4
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ARTICLE II
AUTHORIZATION AND ISSUANCE OF BONDS
Section 2.01 Authorization of Bonds.
(a) This Master Indenture provides certain terms and conditions upon which
Bonds of the City to be designated as "City of Vernon Electric System Revenue Bonds" may be
issued from time to time as authorized by Supplemental Indentures. The aggregate principal
amount of Bonds which may be executed, authenticated and delivered under the Indenture is not
limited except as may hereafter be provided in the Indenture or as may be limited by law.
(b) The Bonds may be issued in one or more Series, and the designation
thereof, in addition to the name "City of Vernon Electric System Revenue Bonds," shall include
such further appropriate particular designation added to or incorporated in such title for the
Bonds of any particular Series as the City may determine. Each Bond shall bear upon its face the
designation so determined for the Series to which it belongs.
Section 2.02 Bonds Constitute Special Obligations. The Bonds shall not constitute a
charge against the general credit of the City but shall constitute and evidence special obligations
of the City payable as to principal, Redemption Price, if any, and interest solely from the Net
Revenues and the other funds pledged therefor under this Master Indenture and, with respect to
any particular Series of Bonds, from such other sources as shall be specified in the Supplemental
Indenture authorizing the issuance of such Series. The Purchase Price for the Bonds of any
Series which are Tender Indebtedness shall be payable from such sources as are specified in the
Supplemental Indenture authorizing the issuance of such Series. The provisions of this Section
shall not preclude the payment or redemption of Bonds, at the election of the City, from any other
legally available funds. The Bonds are not secured by a legal or equitable pledge of, or lien or
charge upon, any property of the City or any of its income or receipts except the Net Revenues
pledged therefor pursuant to this Master Indenture which pledge is subject to the provisions
hereof permitting the application of the Net Revenues for the purposes and on the terms and
conditions set forth herein. Neither the faith and credit nor the taxing power of the State of
California, the City or any other public agency is pledged to the payment of the principal or
Redemption Price of or the interest on the Bonds. The issuance of the Bonds shall not directly,
indirectly or contingently obligate the City Council of the City to levy or pledge any form of
taxation or to make any appropriation for the payment of the Bonds. The payment of the
principal or Redemption Price of or interest on the Bonds does not constitute a debt, liability or
obligation of the State of California or any public agency (other than the special obligation of the
City as provided in this Master Indenture). Neither the members of the City Council of the City,
nor any person executing a Bond, nor any officer or employee of the City shall be liable
personally for the principal or Redemption Price of or interest on the Bonds or be subject to any
personal liability or accountability by reason of the issuance of the Bonds or in respect of any
undertakings by the City under the Indenture. The face of each Bond shall contain a legend to
the effect set forth in this Section.
DOCSLAI :438186.4
42797-2 EJC 26
Section 2.03 Indenture to Constitute Contract. In consideration of the purchase and
acceptance of each Bond issued under the Indenture by those who shall own the same from time
to time, the provisions of each Bond and the provisions of the Indenture applicable to such Bond,
and unless otherwise provided in the Supplemental Indenture authorizing such Bond, the
provisions of the State Constitution, the Charter, the City Administrative Code and any general
laws of the State applicable to such Bond, the Light and Power Department Fund and the Electric
System, shall be deemed to be and shall constitute a contract between the City and the Owner of
such Bond.
Section 2.04 General Provisions for Issuance of Bonds.
(a) All (but not less than all) the Bonds of each Series shall be executed by the
City for issuance under the Indenture and delivered to the Trustee and thereupon shall be
authenticated by the Trustee and by it delivered to the City or upon its order, but only upon the
receipt by the Trustee of the following items (upon which the Trustee may conclusively rely in
determining whether the conditions precedent for the issuance and authentication of such Series
of Bonds have been satisfied):
(1) A copy of the Indenture, as amended to the date of the
initial delivery of such Series of Bonds, and a copy of the
Supplemental Indenture authorizing the issuance of such
Series of Bonds, each certified by an Authorized City
Representative to be in full force and effect, which
Supplemental Indenture shall specify: (i) the sources of
payment for the Bonds of such Series other than the Trust
Estate, if any; (ii) the Series designation of such Bonds;
(iii) the authorized principal amount of the Bonds of such
Series; (iv) the purposes for which such Series of Bonds are
being issued, which shall be one of the purposes specified
in Section 2.05 or 2.06; (v) the date or manner of
determining the date of the Bonds of such Series; (vi) the
maturity date or dates of the Bonds of such Series and the
principal amount of the Bonds of such Series maturing on
each such maturity date; (vii) which, if any, of the Bonds of
such Series shall constitute Serial Obligations and which, if
any, shall constitute Term Obligations; (viii) the interest
rate or rates on the Bonds of such Series or the manner of
determining such interest rate or rates; (ix) the Interest
Payment Dates for the Bonds of such Series or the manner
of establishing such Interest Payment Dates; (x) the
Authorized Denominations of, and the manner of
numbering and lettering, the Bonds of such Series; (xi) the
Redemption Price or Prices, if any, and, subject to Article
IV, the redemption terms for the Bonds of such Series; (xii)
the Sinking Fund Installments, if any, for the Bonds of such
Series which constitute Term Obligations, provided that
DOCSLA1:438186.4
42797-2 EJC 27
each Sinking Fund Installment, if any, shall fall upon an
Interest Payment Date for the Bonds of such Series; (xiii) if
any of the Bonds of such Series constitute Tender
Indebtedness, the terms and conditions, including Purchase
Price, for the exercise by the Owners or Beneficial Owners
of such Bonds of the purchase and extension options
granted with respect to such Bonds and the terms and
conditions, including Purchase Price, upon which the
Bonds of such Series shall be subject to mandatory tender
for purchase; (xiv) if the Bonds of such Series are not to be
Book -Entry Bonds, a statement to such effect; (xv) the
application of the proceeds of the sale of such Series of
Bonds including the amount, if any, to be deposited in the
funds and accounts under the Indenture; (xvi) the forms of
the Bonds of such Series and of the certificate of
authentication thereon; and (xvii) the appropriate funds and
accounts, if any, relating to such Series of Bonds
established under such Supplemental Indenture;
(2) an Opinion of Bond Counsel, dated the date of the initial
delivery of such Series of Bonds, to the effect that the
Indenture, as amended to such date, including the
Supplemental Indenture authorizing the issuance of such
Series of Bonds, constitutes the valid and binding
obligation of the City;
(3) With respect to any Additional Bonds, the Trustee shall
have received the certificate referred to in Section 2.07(e);
(4) With respect to any Refunding Bonds which are not
Crossover Refunding Obligations, the Trustee shall have
received a copy of the Opinion of Bond Counsel required in
Section 2.06(b) or with respect to Refunding Bonds
constituting Crossover Refunding Obligations, the
Accountant's Certificate and Crossover Escrow Instructions
required by Section 2.06(c), as applicable; and
(5) Such further documents, moneys and securities as are
required by the applicable provisions of Section 2.05 or
Section 2.06 or of the Supplemental Indenture authorizing
the issuance of such Series of Bonds.
(b) After the original issuance of Bonds of any Series, no Bonds of such
Series shall be issued except in lieu of or in substitution for other Bonds of such Series pursuant
to the Indenture.
DOCSLA1:438186.4
42797-2 EJC 28
Section 2.05 Additional Bonds. One or more Series of Additional Bonds may be
issued, authenticated and delivered upon original issuance for the purpose of paying all or a
portion of the Costs of any Capital Improvement. Additional Bonds may be issued in a principal
amount sufficient to pay such Costs, including making of any deposits into the funds or accounts
required by the provisions of the Indenture.
Section 2.06 Refunding Bonds.
(a) One or more Series of Refunding Bonds may be issued, authenticated and
delivered upon original issuance for the purpose of refunding all or any portion of the
Outstanding Parity Obligations. Refunding Bonds may be issued in a principal amount sufficient
to accomplish such refunding including providing amounts for the Costs of Issuance of such
Refunding Bonds, and the making of any deposits into the funds and accounts required by the
provisions of the Indenture.
(b) Refunding Bonds of each Series shall be authenticated and delivered by
the Trustee only upon receipt by the Trustee (in addition to the documents required by
Section 2.04 and except as otherwise provided in subsection (c) of this Section with respect to
Refunding Bonds constituting Crossover Refunding Obligations) of an Opinion of Bond Counsel
to the effect that the Parity Obligations (or the portion thereof) to be refunded are deemed paid
pursuant to the Issuing Instrument authorizing such Parity Obligations. Such Opinion of Bond
Counsel may rely upon an Accountant's Certificate as to the sufficiency of available funds to pay
such Parity Obligations. The Trustee may conclusively rely on such Opinion of Bond Counsel in
determining whether the conditions precedent for the issuance and authentication of such Series
of Refunding Bonds have been satisfied.
(c) A Series of Refunding Bonds which constitute Crossover Refunding
Obligations shall be authenticated and delivered by the Trustee upon the receipt of the Trustee (in
addition to the documents required by Section 2.04) of. (i) an Accountant's Certificate to the
effect that the moneys scheduled to be available in the applicable Crossover Refunding Escrow
are sufficient to pay the applicable Crossover Escrow Requirements when due; and (ii) a copy of
the Crossover Escrow Instructions relating to such Series of Refunding Bonds and the Parity
Obligations to be refunded.
(d) The proceeds, including accrued interest, of the Refunding Bonds of each
Series shall be applied simultaneously with the delivery of such Bonds as provided in the
Supplemental Indenture authorizing such Series of Refunding Bonds.
Section 2.07 Conditions to Issuance of Parity Obligations.
(a) Without regard to subsection (e) of this Section, the City may, at any time
and from time to time, issue or enter into an obligation or commitment which is a Qualified
Swap Agreement, the Net Payments under which shall constitute Parity Obligations, provided
(i) the Qualified Swap Agreement shall relate to a principal amount of Outstanding Parity
Obligations or investments held under an Issuing Instrument for Parity Obligations, in each case
specified by an Authorized City Representative; (ii) the notional amount of the Qualified Swap
DOCSLA1:438186.4
42797-2 EJC 29
Agreement shall not exceed the principal amount of the related Parity Obligation or the amount
of such investments, as applicable; and (iii) the City has received a Rating Confirmation from
each Rating Agency with respect to such Qualified Swap Agreement.
(b) Without regard to subsection (e) of this Section, the City may, at any time
and from time to time, issue Refunding Parity Obligations provided that the Trustee receives an
Opinion of Bond Counsel to the effect that the Parity Obligations to be refunded are deemed paid
pursuant to the Issuing Instrument authorizing such Parity Obligations; except that, with respect
to Refunding Parity Obligations which constitute Crossover Refunding Obligations, in lieu of
such Opinion of Bond Counsel, the Trustee shall have received an Accountant's Certificate to the
effect that the moneys scheduled to be available in the applicable Crossover Refunding Escrow
are sufficient to pay the applicable Crossover Escrow Requirements when due and a copy of the
Crossover Escrow Instructions relating to such Refunding Parity Obligations and the Parity
Obligations to be refunded.
(c) Without regard to subsection (e) of this Section, the City may issue the
2003 Series A Bonds and the 2003 Series B Bonds.
(d) Without regard to subsection (e) of this Section, the City may, at any time
and from time to time, enter into Credit Support Agreements or otherwise become obligated for
Credit Provider Reimbursement Obligations with respect to Parity Obligations.
(e) The City may, at any time and from time to time, issue any Additional
Parity Obligations, provided the City obtains or provides a certificate or certificates, prepared by
the City or at the City's option by a Consultant, showing: (i) that the Adjusted Net Revenues for
the applicable Calculation Period, which Calculation Period shall be selected by the City in its
sole discretion, shall have amounted to at least 1.25 times the Maximum Adjusted Annual Debt
Service on all Parity Obligations to be Outstanding immediately after the issuance of the
proposed Additional Parity Obligations; and (ii) that the Net Revenues for such applicable
Calculation Period shall have amounted to at least 1.00 times the Maximum Adjusted Annual
Debt Service on all Parity Obligations to be Outstanding immediately after the issuance of the
proposed Additional Parity Obligations. For purposes of preparing the certificate or certificates
described in this subsection, the City and any Consultant shall utilize and rely on financial
statements prepared by the City which have been subject to audit by an Independent Certified
Public Accountant but may utilize and rely upon the books and records of the City or any
financial statements prepared by the City which have not been subject to audit by an Independent
Certified Public Accountant if audited financial statements for the particular Calculation Period
selected by the City are not available.
Section 2.08 Conditions of Issuance of Subordinated Obligations.
(a) The City may, at any time or from time to time, issue Subordinated
Obligations without satisfying the requirements of Section 2.07(e) for any purpose in connection
with the Electric System, including, without limitation, the financing of a part of the cost of
acquisition and construction of any additions to or improvements of the Electric System or the
refunding of any Subordinated Obligations or Outstanding Parity Obligations (or portions
DOCSLA1:438186.4
42797-2 EJC 30
thereof). Such Subordinated Obligations shall be payable out of amounts in the Net Revenues as
may from time to time be available therefor, provided that any such payment shall be, and shall
be expressed to be, subordinate and junior in all respects to the payment of such Parity
Obligations as may be Outstanding from time to time, including Parity Obligations issued after
the issuance of such Subordinated Obligations.
(b) The indenture or other instrument authorizing the issuance of
Subordinated Obligations shall contain provisions (which shall be binding on all owners of such
Subordinated Obligations) not more favorable to the owners of such Subordinated Obligations
than the following:
(1) In the event of any insolvency or bankruptcy proceedings,
and any receivership, liquidation, reorganization or other
similar proceedings in connection therewith, relative to the
City or to its creditors, as such, or to its property, and in the
event of any proceedings for voluntary liquidation,
dissolution or other winding up of the City, whether or not
involving insolvency or bankruptcy, the owners of all
Outstanding Parity Obligations shall be entitled to receive
payment in full of all principal and interest on all such
Parity Obligations before the owners of the Subordinated
Obligations are entitled to receive any payment from the
Net Revenues with respect to the Subordinated Obligations,
including Termination Payments.
(2) In the event that any Subordinated Obligation is declared
due and payable before its expressed maturity because of
the occurrence of an event of default (under circumstances
when the provisions of (1) above shall not be applicable),
the owners of all Parity Obligations Outstanding at the time
such Subordinated Obligation so becomes due and payable
because of such event of default, shall be entitled to receive
payment in full of all principal and interest on all such
Parity Obligations before the owners of such Subordinated
Obligation are entitled to receive any accelerated payment
with respect to such Subordinated Obligation. For purposes
of this subdivision (2), a Termination Payment shall not be
considered a declaration of amounts due and payable before
expressed maturity even if declared due and payable
because of the occurrence of an event of default.
(3) If any default with respect to any Outstanding Parity
Obligation shall have occurred and be continuing (under
circumstances when the provisions of (1) above shall not be
applicable), the owners of all Outstanding Parity
Obligations shall be entitled to receive payment in full of
DOCSLA1:438186.4
42797-2 EJC 31
all principal and interest on all such Parity Obligations as
the same become due and payable in accordance with the
provisions of the Issuing Instrument authorizing the
issuance of such Parity Obligations before the owners of the
Subordinated Obligations are entitled to receive, subject to
the provisions of (5) below, any payment from the Net
Revenues with respect to the Subordinated Obligations.
(4) No Bondowner shall be prejudiced in his right to enforce
subordination of the Subordinated Obligations by any act or
failure to act on the part of the City or the Trustee.
(5) The Subordinated Obligations may provide that the
provisions (1), (2), (3) and (4) above are solely for the
purpose of defining the relative rights of the Owners of the
Bonds and the owners of all other Outstanding Parity
Obligations on the one hand, and the owners of
Subordinated Obligations on the other hand, and that
nothing therein shall impair, as between the City and the
owners of the Subordinated Obligations, the obligation of
the City, which may be unconditional and absolute, to pay
to the owners of such Subordinated Obligations the
principal thereof and premium, if any, and interest thereon
in accordance with their terms, nor shall anything therein
prevent the owners of the Subordinated Obligations from
exercising all remedies otherwise permitted by applicable
law or thereunder upon default thereunder, subject to the
rights under (1), (2), (3) and (4) above of the Owners of
Outstanding Bonds and the owners of other Outstanding
Parity Obligations to receive payment from the Net
Revenues otherwise payable or deliverable to the owners of
the Subordinated Obligations; and the Subordinated
Obligations may provide that, insofar as a trustee, fiscal
agent or paying agent for such Subordinated Obligations is
concerned, the foregoing provisions shall not prevent the
application by such trustee, fiscal agent or paying agent of
any moneys deposited with such trustee, fiscal agent or
paying agent for the purpose of the payment of or on
account of the principal (and premium, if any) and interest
on such Subordinated Obligations if such trustee, fiscal
agent or paying agent did not have knowledge at the time of
such application that such payment was prohibited by the
foregoing provisions.
(c) Any Subordinated Obligations may have such rank or priority with respect
to any other Subordinated Obligations as may be provided in the Indenture, indenture or other
DOCSLAl :438186.4
42797-2 EJC 32
instrument, authorizing the issuance or incurrence, or securing of such Subordinated Obligations
and may contain such other provisions as are not in conflict with the provisions of the Indenture.
Section 2.09 Credit Provider Bonds. Subject only to Section 2.02, notwithstanding any
other provision contained in the Indenture to the contrary, Bonds which are Credit Provider
Bonds shall have terms and conditions, including terms of maturity, payment, prepayment and
interest rate, as shall be specified in the applicable Credit Support Agreement.
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
Section 3.01 Medium of Payment; Form and Date; Letters and Numbers.
(a) Unless otherwise provided with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series, the Bonds of each Series shall be payable, with
respect to principal, Redemption Price, if any, Purchase Price, if any, and interest in any coin or
currency of the United States of America which at the time of payment is legal tender for the
payment of public and private debts.
(b) The Bonds shall be issued in the form of fully registered bonds without
coupons in Authorized Denominations.
(c) Each Bond shall be lettered and numbered as determined by the Trustee so
as to be distinguished from every other Bond.
(d) The Bonds of each Series shall be dated as provided in or determined
pursuant to the Supplemental Indenture authorizing such Series. Unless otherwise provided with
respect to a Series of Bonds in the Supplemental Indenture authorizing such Series, the Bonds of
each Series shall bear interest from the Interest Payment Date next preceding the date of
authentication thereof unless: (i) such Bonds are authenticated on an Interest Payment Date, in
which event from such Interest Payment Date; and (ii) unless such Bonds are authenticated after
a Record Date and before the next succeeding Interest Payment Date for such Bonds, in which
event from such Interest Payment Date; provided, however, that if the date of authentication of a
Bond shall be prior to the Record Date for the first Interest Payment Date for such Bond, such
Bond shall bear interest from its original dated date. Notwithstanding the foregoing, if the City
shall default in the payment of interest, then the Bonds shall bear interest from the date to which
interest has been paid or if no interest has been paid, from their original dated date.
(e) Unless otherwise provided with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series, the interest payable on Bonds shall be
calculated on the basis of a 360-day year of twelve, thirty day months.
(f) Except as otherwise provided in the Representation Letter with a
Securities Depository for Book -Entry Bonds, (or, with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series), interest on each Bond shall be payable on each
Interest Payment Date for such Bond and shall be paid by check of the Trustee mailed on such
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Interest Payment Date to the Owner of such Bond shown on the Bond Register as of the close of
business on the Record Date immediately preceding such Interest Payment Date. Owners of at
least $1,000,000 aggregate principal amount (or, with respect to a Series of the Bonds, such other
principal amount as may be specified in the Supplemental Indenture authorizing such Series), of
Bonds of any Series may, at any time prior to a Record Date with respect to the payment of
interest on such Bonds, give the Trustee written instructions for payment of such interest on each
succeeding Interest Payment Date for such Bonds by wire transfer or by deposit to an account.
Notwithstanding the foregoing, however, if the City shall default in the payment of interest due
on Bonds on any Interest Payment Date, such interest shall cease to be payable to the persons in
whose name such Bonds were registered in the Bond Register on the Record Date for such
Interest Payment Date, and shall be payable, when and if paid by the City, to the persons in
whose names such Bonds are registered at the close of business on the record date fixed therefor
by the Trustee (each a "Special Record Date"), which shall not be more than 15 days and not less
than 10 days prior to the date of the proposed payment.
Unless redeemed prior to such date, the principal of each Bond shall be payable on its
maturity date and the Redemption Price of each Bond called for redemption prior to maturity,
subject to the terms of Section 4.05(b), shall be payable on the applicable redemption date.
Except as otherwise provided in the Representation Letter with a Securities Depository for Book -
Entry Bonds, the principal and, if applicable, the Redemption Price of each Bond shall be
payable only upon presentation and surrender of such Bond at the Principal Office of the Trustee
or any other Paying Agent for such Bond.
Section 3.02 Legends. Bonds may contain or have endorsed thereon such provisions,
specifications and descriptive words not inconsistent with the provisions of the Indenture as may
be necessary or desirable to comply with custom, the rules of any securities exchange,
commission or brokerage agent, or otherwise, as may be determined by the City prior to the
authentication and delivery thereof.
Section 3.03 Execution and Authentication.
(a) The Bonds shall be executed in the name of the City by the manual or
facsimile signature of the [Mayor or City Administrator of the City] and its seal (or a facsimile
thereof) shall be impressed, imprinted, engraved or otherwise reproduced thereon and attested by
the facsimile or manual signature of the City Clerk of the City, or in such other manner as may be
authorized by Supplemental Indenture or required by law. In case any one or more of the officers
who shall have signed or sealed any of the Bonds shall cease to be such officer before the Bonds
so signed and sealed shall have been authenticated and delivered by the Trustee, such Bonds
may, nevertheless, be authenticated and delivered as provided in the Indenture, and may be
issued as if the persons who signed or sealed such Bonds had not ceased to hold such offices.
Any Bond may be signed and sealed on behalf of the City by such persons as at the time of the
execution of such Bond shall be duly authorized or hold the proper office in City, although at the
date borne by such Bonds such persons may not have been so authorized or have held such
office.
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(b) The Bonds of each Series shall bear thereon a certificate of authentication,
in the form set forth in the Supplemental Indenture authorizing such Series, executed manually
by the Trustee, including any Paying Agent appointed as agent for the Trustee pursuant to
Section 8.01(b). Only such Bonds as shall bear thereon such certificate of authentication shall be
entitled to any right or benefit under the Indenture and no Bond shall be valid or obligatory for
any purpose until such certificate of authentication shall have been duly executed by the Trustee.
Such certificate of the Trustee upon any Bond executed on behalf of the City shall be conclusive
evidence that the Bond so authenticated has been duly authenticated and delivered under the
Indenture and that the Owner thereof is entitled to the benefits of the Indenture.
Section 3.04 Book -Entry Bonds.
(a) Unless otherwise provided with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series, the Bonds of each Series shall be issued as
Book -Entry Bonds in fully registered form with no distribution of physical bonds made to the
public. Except as otherwise provided in Section 3.05, the Book -Entry Bonds of each Series shall
be registered in the name of the Securities Depository or its Nominee as directed by the
Securities Depository. The payment of Book -Entry Bonds and the giving of notices shall be
governed by the terms of the Representations Letter with the Securities Depository for the Book -
Entry Bonds. DTC shall act as the initial Securities Depository for the Book -Entry Bonds and
has designated Cede & Co. as its Nominee. DTC has represented to the City that it shall
maintain a book -entry program in recording ownership interests in the Book -Entry Bonds of its
Participants and the ownership interests of a Beneficial Owner of a Bond shall be recorded
through book entries on the records of the Participants.
(b) Bonds of each Series which are not Book -Entry Bonds shall be delivered
to the Owners thereof as fully registered Bonds in the form specified in the Supplemental
Indenture authorizing the issuance of such Series of Bonds, with the ownership of such Bonds
being recorded in the Bond Register.
(c) In the event that the DTC or any successor Securities Depository ceases to
act as Securities Depository for Bonds of a Series, then Bonds of such Series in certificated form
shall be issued to the Owners in substantially the form of the Bond delivered to the former
Securities Depository or its Nominee with necessary changes to reflect non -book -entry status as
shall be approved by the officers of the City executing such Bonds. The issuance of individual
Bonds in certificated form shall be accomplished as provided in the Representation Letter.
(d) With respect to Bonds registered in the Bond Register in the name of a
Securities Depository or a Nominee, the City, the Trustee and each Paying Agent shall have no
responsibility or obligation to any Participant or to any Beneficial Owner. Without limiting the
immediately preceding sentence, none of the City, the Trustee or any Paying Agent shall have
any responsibility or obligation with respect to (i) the accuracy of the records of a Securities
Depository, its Nominee or any Participant as to any ownership interest in the Bonds, (ii) the
delivery to any Participant, Beneficial Owner or any other person, other than an Owner as. shown
in the Bond Register, of any notice with respect to the Bonds, or (iii) the payment to any
Participant, Beneficial Owner or any other person, other than an Owner as shown in the Bond
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Register, of any amount with respect to principal and Purchase Price of, premium, if any, or
interest on the Bonds. The City, the Trustee and each Paying Agent may treat and consider the
person in whose name each Bond is registered in the Bond Register as the absolute Owner of
such Bond for the purpose of payment of principal and Purchase Price of, premium, if any, and
interest on such Bond, for the purpose of registering transfers with respect to such Bond, and for
all other purposes whatsoever. None of the City, the Trustee or any Paying Agent shall be
affected by any notice to the contrary. All principal and Purchase Price of, premium, if any, and
interest on the Bonds shall be paid only to or upon the order of the respective Owner, as shown in
the Bond Register, or their respective attorneys duly authorized in writing, and all such payments
shall be valid and effective to fully satisfy and discharge the City's obligations with respect to
payment of principal and Purchase Price of, Redemption Price, if any, and interest on the Bonds
to the extent of the sum or sums so paid, and none of the City, the Trustee or any Paying Agent
shall be affected by any notice to the contrary. No person other than an Owner, as shown in the
Bond Register, shall receive a Bond evidencing the obligation of the City to make payments of
principal and Purchase Price of, Redemption Price, if any, and interest pursuant to a Indenture.
(e) Upon delivery by a Securities Depository to the City of written notice to
the effect that the Securities Depository has determined to substitute a new Nominee in place of
its current Nominee, and subject to the provisions in the Indenture with respect to Record Dates,
the word Nominee for purposes of the Indenture shall refer to such new Nominee of the
Securities Depository; and upon receipt of such a notice the City shall promptly deliver a copy of
the same to the Trustee.
(f) Notwithstanding any other provision of a Indenture and so long as Book -
Entry Bonds are registered in the name of a Nominee, the City and the Trustee shall cooperate
with the Securities Depository in effecting payment of the principal of, Redemption Price, if any,
and interest on such Book -Entry Bonds by arranging for payment in such manner as the
Securities Depository may reasonably instruct in writing that funds for such payments are
properly identified and are made available on the date they are due, all in accordance with the
Representation Letter, the provisions of which the Trustee may rely upon to implement the
foregoing procedures.
(g) A Securities Depository for the Book -Entry Bonds may resign upon giving
30 days written notice of such resignation to the City and the Trustee. The City may terminate
the use of the book -entry system of a Securities Depository for Book -Entry Bonds upon giving 30
days written notice of such termination to the Securities Depository and the Trustee. Any such
resignation or termination shall become effective upon the earlier of the appointment of a
successor Securities Depository for Book -Entry Bonds by the City or the issuance of Bonds
which are not Book -Entry Bonds pursuant to Section 3.05.
Section 3.05 Transfers Outside Book -Entry Program. In the event that the
resignation or removal of a Securities Depository has become effective pursuant to Section
3.04(g), then the City shall thereupon discontinue the current book -entry program for the Book
Entry Bonds with such Securities Depository. In such event, the City shall cause the Trustee to
obtain from the former Securities Depository a list showing the interests of the Participants in the
Book -Entry Bonds and shall cause such Book -Entry Bonds to be surrendered to the Trustee on or
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before the date any replacement Bonds are to be issued. Furthermore, in such event the City
determines to use a substitute Securities Depository, the City shall so notify the Trustee and each
Paying Agent for Book -Entry Bonds. If, prior to the termination of the current Securities
Depository's book -entry system for the Book -Entry Bonds, the City fails to identify another
qualified Securities Depository to replace the current Securities Depository, then the Book -Entry
Bonds shall no longer be required to be registered in the name of a Securities Depository or its
Nominee and the City shall issue, and the Trustee shall authenticate, replacement Bonds in the
appropriate amounts and in whatever name or names the Owners of the Book -Entry Bonds shall
designate pursuant to the Representation Letter with the former Securities Depository. In the
event the City determines that the Beneficial Owners of the Bonds shall be able to obtain
physical Bonds through a Securities Depository, the City may notify the Participants identified by
the Securities Depository as having an interest in the Bonds of the availability of such physical
Bonds and the Trustee shall authenticate, transfer and exchange Bonds as required by the
Securities Depository in the appropriate names and amounts, which shall be in Authorized
Denominations.
Section 3.06 Bond Register. The Trustee shall keep or cause to be kept, at its Principal
Office, the Bond Register for the registration and transfer of the Bonds of each Series which shall
at all times be open to inspection during regular business hours by the City, and, upon
presentation for such purpose, the Trustee shall, under such reasonable regulations as it may
prescribe, register or transfer or cause to be registered or transferred on said Bond Register,
Bonds of each Series as provided in the Indenture.
The City, the Trustee and each Paying Agent may rely on the address of the Owner of
each Bond as it appears on the Bond Register for any and all purposes. It shall be the duty of the
Owner of each Bond to give written notice to the Trustee of any change in the Owner's address
so that the Bond Register may be revised accordingly.
Section 3.07 Interchangeability of Bonds. Upon surrender of a Bond at the Principal
Office of the Trustee, together with a written instrument of transfer satisfactory to the Trustee
and duly executed by the Owner or the Owner's attorney duly authorized in writing, may, at the
option of the Owner thereof, and upon payment by such Owner of any charges which the Trustee
may make as provided in Section 3.09, be exchanged for an equal aggregate principal amount of
Bonds of the same Series, terms and maturity of any other Authorized Denominations.
Section 3.08 Negotiability, Transfer and Registry. Each Bond shall be transferable
only upon the Bond Register, upon surrender thereof, together with a written instrument of
transfer satisfactory to the Trustee, duly executed by the Owner or the Owner's duly authorized
attorney. Upon the transfer of any such Bond, the City shall execute and the Trustee shall
authenticate, deliver and register in the Bond Register in the name of the transferee a new Bond
or Bonds of the same aggregate principal amount, Series, terms and maturity as the surrendered
Bond.
Section 3.09 Regulations With Respect to Exchanges and Transfers. Subject to the
terms of a Representation Letter with a Securities Depository for Book -Entry Bonds, in all cases
in which the privilege of exchanging Bonds or transferring Bonds is exercised, the City shall
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execute and the Trustee shall authenticate and deliver Bonds in accordance with the provisions of
the Indenture relating to such Bonds. All Bonds surrendered in any such exchanges or transfers
shall forthwith be delivered to the Trustee and cancelled by the Trustee. Unless the Indenture
relating to such Bonds provides that such transfer or exchange shall be made without charge to
the Owner, for every such exchange or transfer of Bonds, whether temporary or definitive, the
City or the Trustee may make a charge sufficient to reimburse it for any tax, fee or other
governmental charge required to be paid and any other cost incurred by the City or the Trustee
with respect to such exchange or transfer.
Section 3.10 Bonds Mutilated, Destroyed, Stolen or Lost. Subject to the terms of a
Representation Letter with a Securities Depository for Book -Entry Bonds, if any Bond becomes
mutilated or is lost, stolen or destroyed, the City may execute and the Trustee shall authenticate
and deliver a new Bond of like date of Series, maturity, principal amount and terms as the Bond
so mutilated, lost, stolen or destroyed; provided that (i) in the case of such mutilated Bond, such
Bond is first surrendered to City or the Trustee, (ii) in the case of any such lost, stolen or
destroyed Bond, there is first furnished evidence of such loss, theft or destruction satisfactory to
the Trustee together with indemnity satisfactory to the Trustee, (iii) all other reasonable
requirements of the City and the Trustee are complied with, and (iv) expenses in connection with
such transaction are paid by the Owner. Any Bond surrendered for exchange shall be cancelled.
Any such new Bond issued pursuant to this Section in substitution for a Bond alleged to be
destroyed, stolen or lost shall constitute original additional contractual obligations on the part of
the City, whether or not the Bond so alleged to be destroyed, stolen or lost be at any time
enforceable by anyone, and shall be equally payable from the Net Revenues on a parity with and
entitled to equal and proportionate benefits with, all other Bonds.
Section 3.11 Temporary Bonds.
(a) Subject to the terms of a Representation Letter with a Securities
Depository for Book -Entry Bonds, until the definitive Bonds are prepared, the City may execute,
in the same manner as is provided in Section 3.03, and upon the request of the City, the Trustee
shall authenticate and deliver, in lieu of definitive Bonds, but subject to the same provisions,
limitations and conditions as the definitive Bonds except as to the exchangeability for Bonds, one
or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which such
temporary Bond or Bonds are issued, in Authorized Denominations, and with such omissions,
insertions and variations as may be appropriate to temporary Bonds. The installments of interest
payable on such temporary Bonds shall be payable in the same manner as interest is payable on
the definitive Bonds in lieu of which such temporary Bonds were issued. The City, at its own
expense, shall prepare and execute and, upon the surrender of such temporary Bonds for
exchange and the cancellation of such surrendered temporary Bonds, the Trustee shall
authenticate and, without charge to the Owner thereof, deliver in exchange therefor, definitive
registered Bonds of the same aggregate Series, principal amount, terms, maturity and date of
issue as the temporary Bonds surrendered. Until so exchanged, the temporary Bonds of a Series
shall in all respects be entitled to the same benefits and security as definitive Bonds authenticated
and issued pursuant to the Indenture authorizing the issuance of such Series of Bonds.
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(b) Temporary Bonds authorized in more than one denomination, upon
surrender thereof at the Principal Office of the Trustee, may at the option of the Owner thereof,
and upon payment by such Owner of any charges which may be made as provided in Section
3.09 be exchanged for an equal aggregate principal amount of temporary Bonds of the same
Series, maturity, and containing the same terms, of any of the Authorized Denominations as shall
be requested by such Owner.
(c) All temporary Bonds surrendered in exchange either for another temporary
Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee.
Section 3.12 Cancellation and Destruction of Bonds. All Bonds paid or redeemed,
either at or before maturity, and all Bonds surrendered for transfer or exchange, shall be delivered
to the Trustee when such payment, redemption or surrender is made, and such Bonds, together
with all Bonds purchased by the Trustee, shall thereupon be promptly cancelled. Bonds so
cancelled may at any time be destroyed by the Trustee, who shall execute a certificate of
destruction in duplicate by the signature of one of its authorized officers describing the Bonds so
destroyed, and one executed certificate shall be filed with the City and the other executed
certificate shall be retained by the Trustee.
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 Privilege of Redemption and Redemption Price. Bonds of each Series
subject to redemption prior to maturity pursuant to the Supplemental Indenture authorizing such
Series shall be redeemable, upon giving notice as provided in this Article IV, at such times and at
such redemption prices as shall be specified in or pursuant to the Supplemental Indenture
authorizing such Series and upon such terms as may be specified in this Article IV.
Section 4.02 Redemption at the Direction of City. In the case of a redemption of
Bonds of any Series at the option or direction of the City, the City shall give written notice to the
Trustee of the exercise of its option to redeem Bonds or of its direction to otherwise cause the
redemption of Bonds at its direction, and of the redemption date, principal amounts of the Bonds
of such Series and maturity to be redeemed (which Series, maturities and principal amounts shall
be determined by the City in its sole discretion, subject to any limitations with respect thereto
contained in the Supplemental Indenture authorizing such Series of Bonds and provided that,
with respect to any Bond to be redeemed in part, the portion of such Bond which is not to be
redeemed shall be in an Authorized Denomination). Such notice shall be given at least forty (40)
days prior to the redemption date or such shorter period as shall be acceptable to the Trustee. In
the event notice of redemption shall have been given as in Section 4.05 provided, other than a
conditional notice pursuant to Section 4.05(b), there shall be paid on or prior to the redemption
date to the Trustee an amount in cash which, in addition to other moneys, if any, available
therefor held by the Trustee, shall be sufficient to redeem on the applicable redemption date at
the Redemption Price, all of the Bonds to be redeemed.
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Section 4.03 Redemption Otherwise Than at City's Direction. Whenever by the
terms of the Indenture, the Trustee is required or authorized to redeem Bonds otherwise than at
the option or direction of the City and the Indenture does not expressly set forth the principal
amount of Bonds of each Series and maturity so subject to redemption to be redeemed, the City
may select the principal amounts of the Bonds of each Series and maturity to be redeemed (which
Series, maturities and principal amounts to be redeemed shall be determined by the City in its
sole discretion, subject to any limitations with respect thereto contained in the Indenture and
provided that, with respect to any Bond to be redeemed in part, the portion of such Bond which is
not to be redeemed shall be in an Authorized Denomination) and in the event the City does not
notify the Trustee of such Series, maturities, and principal amounts, to be redeemed on or before
the fortieth (40th) day preceding the redemption date, the Trustee shall, in its sole discretion,
subject to any limitations with respect to the Series, maturity, or principal amount of Bonds to be
redeemed contained in the Indenture, select the Series, maturities and principal amounts of Bonds
to be redeemed, give the notice of redemption and pay out of moneys available therefor the
Redemption Price thereof to the Owners of the Bonds to be redeemed or to appropriate Paying
Agents in accordance with the terms of this Article IV.
Section 4.04 Selection of Bonds to be Redeemed. If less than all of the Outstanding
Bonds, or less than all of the Outstanding Bonds of like Series and maturity, shall be called for
prior redemption, except as otherwise provided with respect to Credit Provider Bonds in the
Supplemental Indenture authorizing such Credit Provider Bonds or in the applicable Credit
Support Agreement or except as otherwise provided with respect to Book -Entry Bonds in a
Representation Letter, the particular Bonds or portions of Bonds to be redeemed shall, subject to
any limitations with respect thereto contained in the Indenture, be selected at random by the
Trustee in such manner as the Trustee in its discretion may deem fair and appropriate; provided,
however, that the portion of any Bond of a denomination greater than the minimum Authorized
Denomination for the Bonds of a Series shall be redeemed in part only in a principal amount such
that the portion of such Bond which is not redeemed shall be in an Authorized Denomination for
such Series and that, in selecting portions of Bonds of a Series for redemption, the Trustee shall
treat each Bond of each Series as representing that number of Bonds of the minimum Authorized
Denomination for such Series which is obtained by dividing the principal amount of such Bond
by the minimum Authorized Denomination for the Bonds of such Series.
Section 4.05 Notice of Redemption.
(a) When the Trustee shall receive notice from the City of the exercise of its
option to redeem Bonds or of its direction to otherwise cause the redemption of Bonds pursuant
to Section 4.02, and when redemption of Bonds of a Series is authorized or required pursuant to
Section 4.03, the Trustee shall give notice, in the name of the City, of the redemption of such
Bonds, which notice shall be mailed, by first class mail, postage prepaid, not more than sixty (60)
nor less than thirty (30) days before the redemption date to the Owners of any Bonds to be
redeemed (in whole or in part) at their addresses appearing in the Bond Register. Such notice
shall specify the Series and maturity date of the Bonds to be redeemed, the redemption date and
the place or places where amounts due upon such redemption shall be payable and, if less than all
of the Bonds of any like Series and maturity are to be redeemed, the letters and numbers or other
distinguishing marks of such Bonds so to be redeemed, and, in the case of Bonds to be redeemed
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in part only, such notice shall also specify the respective portions of the principal amount thereof
to be redeemed. Such notice shall further state that on such date there shall become due and
payable upon each Bond to be redeemed the Redemption Price thereof, or the Redemption Price
of the specified portions of the principal amount thereof to be redeemed in the case of Bonds to
be redeemed in part only, and that from and after such date interest on such Bond or the portion
of such Bond to be redeemed shall cease to accrue and be payable.
Receipt of such notice shall not be a condition precedent to the redemption of
Bonds and failure of any Owner of a Bond to receive any such notice or any insubstantial defect
in such notice shall not affect the validity of the proceedings for the redemption of Bonds. Any
defect in such notice given to the Owners of less than all of the Bonds to be redeemed shall not
affect the validity of the proceedings for the redemption of the Bonds as to which the notice of
redemption did not contain such defect.
(b) The notice with respect to any redemption of Bonds at the option of the
City, unless at the time of giving of notice the Bonds to be redeemed shall be deemed to have
been paid within the meaning of Section 9.01, may state that such redemption is conditional upon
the receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys sufficient
to pay the Redemption Price of the Bonds to be redeemed, and that if such moneys shall not have
been so received said notice shall be of no force and effect and the City shall not be required to
redeem such Bonds. In the event a notice of redemption of Bonds contains such a condition and
such moneys are not so received, the redemption of Bonds as described in the conditional notice
of redemption shall not be made and the Trustee shall, within a reasonable time after the date on
which such redemption was to occur, give notice to the persons and in the manner in which the
notice of redemption was given that such moneys were not so received and that there shall be no
redemption of Bonds pursuant to the conditional notice of redemption.
(c) If upon the expiration of sixty (60) days succeeding any redemption date,
any Bonds called for redemption shall not have been presented to the Trustee for payment, the
Trustee shall no later than ninety (90) days following such redemption date, send written notice
by first class mail to the Owner of each Bond not so presented. Failure to mail the notices
required by this subsection to any Owner, or any defect in any notice so mailed, shall not affect
the validity of the proceedings for redemption of any Bonds nor impose any liability on the
Trustee.
(d) In addition to the notice of redemption required pursuant to subsection (a)
of this Section, if any Bonds that are to be redeemed, then at the written request of an Authorized
City Representative received at least forty (40) days before the redemption date, at least thirty
(30) days before the redemption date, the Trustee shall also give redemption notice by (i)
registered or certified mail, return receipt requested, postage prepaid, (ii) telephonically
confirmed facsimile transmission or (iii) overnight delivery service, to one of the Information
Services.
Failure to give the notices described in this subsection or any defects therein, shall
not in any manner affect the proceedings for redemption of any Bonds.
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(e) Neither the City nor the Trustee shall have any responsibility for any
defect in the CUSIP number that appears on any Bonds or in any redemption notice or other
notice with respect thereto, and any such redemption notice or other notice may contain a
statement to the effect that CUSIP numbers have been assigned by an independent service for
convenience of reference and that neither the City nor the Trustee shall be liable for any
inaccuracy in such numbers.
Section 4.06 Partial Redemption of Bonds. Upon surrender of any Bond to be
redeemed in part only, the City shall execute, and the Trustee shall authenticate and deliver to the
Owner of such Bond, at the expense of the City, a new Bond or Bonds of Authorized
Denominations equal in aggregate principal amount to the unredeemed portion of the Bond
surrendered, of the same Series, maturity and terms as the surrendered Bond.
Section 4.07 Effect of Notice and Availability of Redemption Money. Notice of
redemption having been duly mailed to the Owners of the Bonds to be redeemed (in whole or in
part), as provided in Section 4.05, and the amount necessary for the redemption having been
made available for that purpose and being available therefor on the date fixed for such
redemption:
(a) the Bonds, or portions thereof, designated for redemption shall, on the date
fixed for redemption, become due and payable at the applicable Redemption Price thereof, as
provided in the Indenture, anything in such Indenture or in the Bonds to the contrary
notwithstanding;
(b) except as otherwise provided in a Representation Letter, upon presentation
and surrender thereof at the Principal Office of the Trustee or another Paying Agent for such
Bonds, the Bonds to be redeemed shall be redeemed at the applicable Redemption Price;
(c) the Bonds or portions thereof so designated for redemption shall be
deemed to be no longer Outstanding and such Bonds or portions thereof shall cease to bear
further interest; and
(d) after the date fixed for redemption no Owner of any of the Bonds or
portions thereof so designated for redemption shall be entitled to any of the benefits of the
Indenture, or to any other rights, except with respect to payment of the Redemption Price thereof
from the amounts so made available.
ARTICLE V
ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF
Section 5.01 Pledge of Trust Estate. Subject to the application thereof on the terms and
conditions provided in the Indenture, to secure the payment of all the Outstanding Bonds,
including without limitation Credit Provider Bonds, and the interest and Parity Purchase Price
payments becoming due thereon according to their tenor, purport and effect, and to secure the
performance and observance of all of the covenants, agreements and conditions contained in the
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Outstanding Bonds, including without limitation Credit Provider Bonds, and the Indenture, the
City hereby irrevocably grants a lien on and a security interest in, and pledges, the Trust Estate to
the Trustee, for the benefit of the Owners of the Outstanding Bonds, including without limitation
Credit Provider Bonds, which lien on, security interest in and pledge of the Net Revenues
included in the Trust Estate shall be on a parity with any pledge of Net Revenues securing Parity
Obligations, including without limitation Credit Support Agreements for Parity Obligations and
Qualified Swap Agreements. This lien on and security interest in and pledge of the Trust Estate
shall constitute a first pledge of and charge and lien upon the Trust Estate, shall immediately
attach and be effective, binding, and enforceable against the City, its successors, purchasers of
any of the Trust Estate, creditors, and all others asserting rights therein to the extent set forth in,
and in accordance with, the Indenture, irrespective of whether those parties have notice of the
lien on, security interest in and pledge of the Trust Estate and without the need for any physical
delivery, recordation, filing or further act.
Section 5.02 Funds. To ensure the payment when due and payable, whether at maturity
or upon redemption or upon acceleration, of the principal of, Redemption Price, if any, and
interest on the Bonds, there are hereby established the following funds and accounts, to be held
and maintained by the Trustee and applied as provided in the Indenture for so long as any of the
Bonds are Outstanding:
(a) the City of Vernon Electric System Debt Service Fund, comprised of an
Interest Account, a Principal Account and a Sinking Fund Account;
(b) the City of Vernon Electric System Redemption Fund;
(c) the City of Vernon Electric System Debt Service Reserve Fund; and
(d) the City of Vernon Electric System Expense Stabilization Fund.
Section 5.03 Payments by City. The City shall pay the Trustee, but only from the Net
Revenues, the following amounts, in funds which are immediately available to the Trustee by
10:00 a.m. (Pacific Time) on the due date, at the following times:
(a) on the first Business Day prior to each Interest Payment Date for any
Outstanding Bonds, an amount equal to the interest payable on the Outstanding Bonds on such
Interest Payment Date; provided, however, that such payments shall be reduced by any available
amounts on deposit in the Interest Account which are to be applied to such upcoming interest
payment;
(b) on the first Business Day prior to each date on which the principal of
Outstanding Bonds which are Serial Obligations mature, an amount equal to the principal of such
Outstanding Bonds maturing on such date; provided, however, that such payments shall be
reduced by any available amounts on deposit in the Principal Account which are to be applied to
the upcoming principal payment;
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(c) on the first Business Day prior to each Sinking Fund Installment due date
for Outstanding Bonds which are Term Obligations, an amount equal to the Sinking Fund
Installments due with respect to all Outstanding Bonds which are Term Obligations on such
Sinking Fund Installment due date; provided, however, that such payments shall be reduced by
any available amounts on deposit in the Sinking Fund Account which are to be applied to the
redemption or payment of such Bonds on such Sinking Fund Installment due date and by the
amount by which the City's obligations to make payments with respect to such Sinking Fund
Installments have been satisfied pursuant Section 5.04(c);
(d) at least one Business Day prior to each date fixed for the redemption of
Outstanding Bonds (other than from Sinking Fund Installments or other than an optional
redemption of Bonds as to which a conditional notice of redemption has been sent to the Owners
pursuant to subsection (b) of Section 4.05), an amount equal to the Redemption Price the Bonds
to be redeemed;
(e) On any date when the Parity Purchase Price of Bonds which are Tender
Indebtedness becomes due and payable, an amount equal to the Parity Purchase Price of such
Bonds to the extent not paid from the remarketing of such Bonds or a Credit Support Instrument
relating to such Bonds. The Trustee shall apply amounts reserved pursuant to this subsection as
provided in the Supplemental Indenture or Supplemental Indentures pursuant to which the Bonds
to which such Parity Purchase Price is payable have been authorized.
(f) On any date on which the principal of or interest on any Outstanding Bond
becomes due and payable, other than as provided in (a) through (d) above, the City shall pay an
amount equal to the principal of and interest on the Outstanding Bonds due on such date; and
(g) Within two (2) Business Days after a withdrawal of moneys from the Debt
Service Reserve Fund and on each Debt Service Reserve Valuation Date, the City shall pay: (i)
an amount such that, after the deposit of such amount in the Debt Service Reserve Fund, the
amount on deposit in such Fund shall be at least equal to the Debt Service Reserve Requirement,
including amounts necessary to reinstate any Reserve Financial Guaranties on deposit in the Debt
Service Reserve Fund.
(h) In the event that on any date upon which the City is to make a payment
from Net Revenues pursuant to subsection (a), (b), (c), (d), (e) and/or (f) of this Section and the
amount of available Net Revenues is not sufficient to make such payment and any payment
required to be made on such date with respect to the principal, Parity Purchase Price and
premium of and interest on other Parity Obligations (including, with respect to Qualified Swap
Agreements, the Net Payments due), then the City shall apply the available Net Revenues to the
payments required by subsection (a), (b), (c), (d), (e) and/or (f) of this Section and such payments
with respect to the other Parity Obligations ratably (based on the respective amounts to be paid),
without any discrimination or preferences.
(i) In the event that on any date upon which the City is to make a payment
from Net Revenues pursuant to subsection (g) of this Section and the amount of available Net
Revenues is not sufficient to make such payment and any payment required to be made on such
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date with respect debt service reserves for Parity Obligations, then the City, after making the
payments required by subsections (a), (b), (c), (d), (e), (f) and (h) of this Section, shall apply the
available Net Revenues to the payments required by subsection (g) of this Section and such
payments with respect to debt service reserves for Parity Obligations ratably (based on the
respective amounts to be paid), without any discrimination or preferences.
Section 5.04 Debt Service Fund. (a) From the moneys paid by the City pursuant to
Section 5.03(a), (b) and (c), the Trustee, upon receipt of such moneys, shall deposit the following
amounts in the following specified accounts within the Debt Service Fund:
(1) For deposit in the Interest Account, an amount equal to the
interest payable on the Outstanding Bonds on the applicable
Interest Payment Date;
(2) For deposit in the Principal Account, an amount equal to
the principal of the Outstanding Bonds maturing on the
applicable maturity date; and
(3) For deposit in the Sinking Fund Account, an amount equal
to the Sinking Fund Installment due on the applicable
Sinking Fund Installment due date.
(b) From the moneys paid by the City pursuant to Section 5.03(g), the Trustee,
upon receipt of such moneys, shall deposit the following amounts in the following specified
accounts within the Debt Service Fund:
(i) For deposit in the Interest Account, an amount equal to the interest
on the Outstanding Bonds then payable; and
(ii) For deposit in the Principal Account, an amount equal to the
principal of the Outstanding Bonds then payable.
(c) In the event that Bonds which are Term Obligations purchased or
redeemed at the option of the City are deposited with the Trustee for the credit of the Sinking
Fund Account not less than forty-five 45 days prior to the due date for any Sinking Fund
Installment for such Bonds, such deposit shall satisfy (to the extent of 100% of the principal
amount of such Bonds) any obligation of the City to make a payment to the Trustee pursuant to
Section 5.03(c) with respect to such Sinking Fund Installments. Any Bond so deposited with the
Trustee shall be cancelled and shall no longer be deemed to be Outstanding for any purpose.
Upon making the deposit with the Trustee of Bonds which are Term Obligations as provided in
this subsection, the City may specify the dates and amounts of Sinking Fund Installments for
such Bonds as to which the City's obligations to make a payment to the Trustee pursuant to
Section 5.03(c) with respect to Sinking Fund Installments for such Bonds shall be satisfied.
(d) Except as hereafter in this subsection provided: (i) amounts deposited in
the Interest Account shall remain therein until expended for the payment of interest on the
Bonds; (ii) amounts deposited in the Principal Account shall remain therein until expended for
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the payment of principal of the Bonds; and (iii) amounts deposited in the Sinking Fund Account
shall remain therein until expended for the redemption or payment at maturity from Sinking Fund
Installments of Bonds which are Term Obligations.
(e) The Trustee shall apply amounts in the Interest Account to the payment
when due of interest on the Outstanding Bonds. The Trustee shall apply amounts in the Principal
Account to the payment when due of principal of the Outstanding Bonds. The Trustee shall
apply amounts in the Sinking Fund Account to the redemption (or payment at maturity) of the
Bonds which are Term Obligations.
In the event one or more Paying Agents have been appointed for the Bonds, moneys may
be transferred by the Trustee to such Paying Agents from the appropriate account in the Debt
Service Fund for deposit into a special trust account to ensure the payment when due of the
principal of, Redemption Price, if any, and interest on the Bonds. In the event that any principal
of, Redemption Price or interest on, any Bond has been paid by a Credit Provider pursuant to a
Credit Support Instrument, amounts in the appropriate accounts in the Debt Service Fund with
respect to such Bond, and any such amounts transferred by the Trustee from the Debt Service
Fund to a Paying Agent for such Bond pursuant to this Section, shall be paid to such Credit
Provider as a reimbursement of the amounts so paid.
Section 5.05 Redemption Fund. From the moneys paid by the City pursuant to Section
5.03(d), the Trustee shall deposit in the Redemption Fund an amount equal to the Redemption
Price of the Bonds to be redeemed. Said moneys shall be set aside in said Fund and shall be
applied on or after the redemption date to the payment of the Redemption Price of the Bonds to
be redeemed and, except as otherwise provided in this Section, shall be used only for that
purpose. In the event one or more Paying Agents have been appointed for the Bonds which are
to be redeemed with moneys in the Redemption Fund, amounts in the Redemption Fund may be
transferred from such Fund by the Trustee to the Paying Agent for the Bonds to be redeemed for
deposit into a special trust account held by such Paying Agent to ensure the payment when due
the Redemption Price of the Bonds to be redeemed. In the event that the Redemption Price of a
Bond has been paid by a Credit Provider pursuant to a Credit Support Instrument, amounts in the
Redemption Fund with respect to such Redemption Price, and any such amounts transferred by
the Trustee from the Redemption Fund to a Paying Agent for such Bonds pursuant to this
Section, shall be paid to such Credit Provider as a reimbursement of the amounts so paid. If,
after all of the Bonds designated for redemption have been redeemed and cancelled or paid and
cancelled, there are moneys remaining in the Redemption Fund, said moneys shall be transferred
to the Interest Account; provided, however, that if said moneys are part of the proceeds of
Refunding Obligations said moneys shall be applied as provided in the Issuing Instrument
authorizing the issuance of such Refunding Obligations.
Section 5.06 Debt Service Reserve Fund.
(a) If on any date on which the principal or Redemption Price of, or interest
on, Bonds is due, the amount in the applicable account in the Debt Service Fund available for
such payment is less than the amount of the principal and Redemption Price of and interest on
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the Bonds due on such date, the Trustee shall apply amounts from the Debt Service Reserve Fund
to the extent necessary to make good the deficiency.
(b) Except as provided in subsection (e) of this Section, if on the last Business
Day of any month the amount on deposit in any Debt Service Reserve Fund shall exceed the Debt
Service Reserve Requirement, such excess shall be applied to the reimbursement of each drawing
on a Reserve Financial Guaranty deposited in or credited to such Fund and to the payment of
interest or other amounts due with respect to such a Reserve Financial Guaranty and any
remaining moneys shall be deposited in the Interest Account.
(c) Whenever the amount in the Debt Service Reserve Fund (excluding
Reserve Financial Guaranties), together with the amount in the Debt Service Fund, is sufficient
to pay in full all of the Outstanding Bonds in accordance with their terms (including principal or
Redemption Price and interest thereon), the funds on deposit in the Debt Service Reserve Fund
shall be transferred to the Debt Service Fund.
(d) In the event of the refunding of one or more Bonds (or portions thereof),
the Trustee shall, upon the written direction of an Authorized City Representative, withdraw
from the Debt Service Reserve Fund any or all of the amounts on deposit therein (excluding
Reserve Financial Guaranties) and deposit such amounts with itself as Trustee, or the Escrow
Agent for the Bonds to be refunded, to be held for the payment of the principal or Redemption
Price, if any, of, and interest on, the Bonds (or portions thereof) being refunded; provided that
such withdrawal shall not be made unless (a) immediately thereafter the Bonds (or portions
thereof) being refunded shall be deemed to have been paid pursuant to Section 9.02, and (b) the
amount remaining in the Debt Service Reserve Fund after such withdrawal, taking into account
any deposits to be made in the Debt Service Reserve Fund in connection with such refunding,
shall not be less than the Debt Service Reserve Requirement.
(e) In lieu of the deposits and transfers to the Debt Service Reserve Fund
required by Section 5.03(e), the City may cause to be deposited in the Debt Service Reserve Fund
a Reserve Financial Guaranty or Reserve Financial Guaranties in an amount equal to the
difference between the Debt Service Reserve Requirement and the sums, if any, then on deposit
in the Debt Service Reserve Fund or being deposited in such Fund concurrently with such
Reserve Financial Guaranty or Guaranties. The Trustee shall draw upon or otherwise take such
action as is necessary in accordance with the terms of the Reserve Financial Guaranties to receive
payments with respect to the Reserve Financial Guaranties (including the giving of notice as
required thereunder): (i) on any date on which moneys shall be required to be withdrawn from
the Debt Service Reserve Fund and applied to the payment of principal or Redemption Price of,
or interest on, any Bonds and such withdrawal cannot be met by amounts on deposit in the
applicable accounts in the Debt Service Reserve Fund; (ii) on the first Business Day which is at
least ten (10) days prior to the expiration date of each Reserve Financial Guaranty, in an amount
equal to the deficiency which would exist in the Debt Service Reserve Fund if the Reserve
Financial Guaranty expired, unless a substitute Reserve Financial Guaranty with an expiration
date not earlier than 180 days after the expiration date of the expiring Reserve Financial Guaranty
is acquired prior to such date or the City deposits funds in the Debt Service Reserve Fund on or
before such date such that the amount in the Debt Service Reserve Fund on such date (without
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regard to such expiring Reserve Financial Guaranty) is at least equal to the Debt Service Reserve
Requirement.
If, upon the deposit of a Reserve Financial Guaranty into the Debt Service
Reserve Fund pursuant to this subsection (e), there shall be any amount in the Debt Service
Reserve Fund in excess of the Debt Service Reserve Requirement, such excess amount may be
applied to the cost of acquiring such Reserve Financial Guaranty and, to the extent not so
applied, shall be transferred to the Interest Account.
If at any time obligations insured or issued by the issuer of a Financial Guaranty
shall no longer maintain the required ratings set forth in the definition of "Reserve Financial
Guaranty" in Section 1.01, the City shall provide or cause to be provided cash or a substitute
Reserve Financial Guaranty meeting such requirements to the extent necessary to satisfy the Debt
Service Reserve Requirement with either cash, qualified Reserve Financial Guaranties or a
combination thereof.
Section 5.07 Expense Stabilization Fund. Moneys shall be deposited in the Expense
Stabilization Fund in such amounts, at such times and from such sources as shall be determined
by the City in its sole discretion. Moneys on deposit in the Expense Stabilization Fund may be
withdrawn at any time no Event of Default exists upon the order of an Authorized City
Representative and applied to any lawful purpose in connection with the Electric System,
including without limitation, payment of Operation and Maintenance Expenses, payment of Debt
Service on Parity Obligations, payment of principal, premium or interest on Subordinated
Obligations, payment of Costs of Capital Improvements, payment of the Costs of Issuance of
Parity Obligations or payment of the costs of issuance of Subordinated Obligations.
Section 5.08 Depositories. The Trustee shall hold all moneys deposited with it pursuant
to the Indenture or may deposit such moneys with one or more Depositories in trust. All moneys
deposited under the provisions of the Indenture with the Trustee or any Depository shall be held
in trust and applied only in accordance with the provisions of the Indenture, and each of the
Funds established by the Indenture shall be a trust fund for the purposes hereof.
Section 5.09 Deposits.
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(a) All moneys held by any Fiduciary under the Indenture maybe placed on
demand or time deposit, if and as directed by the City, provided that such deposits shall permit
the moneys so held to be available for use at the time when reasonably expected to be needed.
No Fiduciary shall be liable for any loss or depreciation in value resulting from any investment
made pursuant to the Indenture. Any such deposit may be made in the commercial banking
department of any Fiduciary or its affiliates which may honor checks and drafts on such deposit
with the same force and effect as if it were not such Fiduciary. All moneys held by any
Fiduciary, as such, may be deposited by such Fiduciary in its banking department on demand or,
if and to the extent directed by the City and acceptable to such Fiduciary, on time deposit,
provided that such moneys on deposit be available for use at the time when reasonably expected
to be needed. Such Fiduciary shall allow and credit on such moneys such interest, if any, as it
customarily allows upon similar funds of similar size and under similar condition or as required
by law.
(b) All moneys held under the Indenture by any Fiduciary shall be (1) either
(A) continuously and fully insured by the Federal Deposit Insurance Corporation, or (B)
continuously and fully secured by lodging with the Trustee or any Federal Reserve Bank, as
custodian, as collateral security, such securities as are described in clauses (a) through (c),
inclusive, of the definition of "Permitted Investments" in Section 1.01 having a market value
(exclusive of accrued interest) not less than the amount of such moneys, or (2) held in such other
manner as may then be required by applicable Federal or State of California laws and regulations
and applicable state laws and regulations of the state in which such Fiduciary is located,
regarding security for, or granting a preference in the case of, the deposit of trust funds; provided,
however, that it shall not be necessary for the Fiduciaries to give security under this subsection
for the deposit of any moneys with them held in trust and set aside by them for the payment of
the principal amount or Redemption Price of, or interest on, any Bonds or to give security for any
moneys which shall be represented by obligations or certificates of deposit purchased as an
investment of such moneys.
(c) All moneys deposited with a Fiduciary shall be credited to the particular
Fund to which such moneys belong.
Section 5.10 Investment of Certain Funds. Moneys held in the Debt Service Fund and
the Redemption Fund shall be invested and reinvested by the Trustee to the fullest extent
practicable in securities described in clauses (a) through (c) of the definition of "Permitted
Investments" in Section 1.01 which mature not later than such times as shall be necessary to
provide moneys when reasonably expected to be needed for payments to be made from such
Funds. Moneys held in the Debt Service Reserve Fund shall be invested and reinvested by the
Trustee to the fullest extent practicable in securities described in clauses (a), (b), (c), 0) and (m)
of the definition of "Permitted Investments" in Section 1.01 which mature or which may be
drawn upon not later than such times as shall be necessary to provide moneys when reasonably
expected to be needed for payments to be made from such Fund, but in any event not later than
five years from the time of such investment. Moneys held in the Expense Stabilization Fund may
be invested and reinvested in Permitted Investments which mature or which may be drawn upon
not later than such times as shall be necessary to provide moneys when reasonably expected to be
needed for payments to be made from such Fund. The Trustee shall make all such investments
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of moneys held by it and shall sell or otherwise liquidate any such investment and take all actions
necessary to draw funds under any such investment, including the giving of necessary notices of
the drawing of any moneys under any investment, in each case in accordance with directions of
an Authorized City Representative, which directions shall be consistent with the Indenture and
applicable law, and which directions can either be written or oral; provided that if such directions
are oral they shall be promptly confirmed in writing by such Authorized City Representative.
Interest or other income (net of that which (i) represents a return of accrued
interest paid in connection with the purchase of any investment or (ii) is required to effect the
amortization of any premium paid in connection with the purchase of any investment) earned on
any moneys or investments in the Funds created under the Indenture shall be paid into the Interest
Account.
In making any investment in any Permitted Investments with moneys in any Fund
established under the Indenture, any Fiduciary may combine such moneys with moneys in any
other Fund but solely for the purposes of making such investment in such Investments and
provided that any amount so combined shall be separately accounted for.
Nothing in the Indenture shall prevent any Permitted Investments Securities
acquired as investments of moneys in any Fund from being issued or held in book -entry form on
the books of the Department of the Treasury or the Federal Reserve System of the United States.
Section 5.11 Valuation and Sale of Investments. Obligations purchased as an
investment of moneys in any Fund shall be deemed at all times to be a part of such Fund and any
profit realized from the liquidation of such investment shall be credited to such Fund and any
loss resulting from the liquidation of such investment shall be charged to the respective Fund.
In computing the amount in the Debt Service Reserve Fund for any purpose
hereunder, obligations purchased as an investment of moneys in the Debt Service Reserve Fund
are to be valued at the amortized cost thereof.
Except as otherwise provided in the Indenture, the Trustee may sell at the best
price reasonably obtainable, or present for redemption, any obligation purchased as an
investment whenever it shall be directed by the City so to do or whenever it shall be necessary in
order to provide moneys to meet any payment or transfer from any Fund held by it. Any
obligation purchased as an investment may be credited on a pro-rata basis to more than one Fund
and need not be sold in order to provide for the transfer of amounts from one Fund to another,
provided that such obligation is an appropriate Permitted Investment for the purposes of the Fund
to which it is to be transferred. The Trustee shall not be liable or responsible for making any
such investment in the manner provided above or for any loss resulting from any such
investment.
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ARTICLE VI
COVENANTS AND OBLIGATIONS OF THE CITY
The City covenants with the Owners of the Outstanding Bonds and with each Credit
Provider as set forth in this Article VI. Each of said covenants shall remain in full force and
effect so long as any of the Bonds shall be Outstanding and unpaid and any Credit Provider
Reimbursement Obligations remain unpaid.
Section 6.01 Compliance with Indenture. The City shall punctually pay the Bonds in
strict conformity with the terms of the Indenture and the Bonds, and shall faithfully observe and
perform all the agreements, conditions, covenants and terms contained in the Indenture required
to be observed and performed by it, and shall not fail to make any payment required by the
Indenture for any cause including, without limiting the generality of the foregoing, any acts or
circumstances that may constitute failure of consideration, destruction of or damage to all or a
portion of the Electric System, commercial frustration of purpose, any change in the tax or other
laws of the United States of America or of the State or any political subdivision of either or any
failure of any party to observe or perform any agreement, condition, covenant or term contained
in any contractor agreement required to be observed and performed by it, whether express or
implied, or any duty, liability or obligation arising out of or connected with any such contract or
agreement or the insolvency, or deemed insolvency, or bankruptcy or liquidation of any party or
any force majeure, including acts of God, tempest, storm, earthquake, war, rebellion, riot, civil
disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lockouts, lack
of transportation facilities, fire, explosion, or acts or regulations of governmental authorities.
Section 6.02 Rates for Electric Service. The City shall at all times fix, prescribe and
collect rates and charges for the Electric Service of the Electric System during each Fiscal Year
which shall be at least sufficient to yield: (a) Adjusted Revenues for such Fiscal Year at least
equal to the sum of the following for such Fiscal Year: (i) Operation and Maintenance Expenses;
(ii) Adjusted Debt Service, and (iii) all other payments required to be paid in such Fiscal Year to
meet any other obligations of the City which are charges, liens or encumbrances upon or payable
from the Revenues, including all amounts owed to a Credit Provider under the terms of its Credit
Support Agreement and amounts owed to a Reserve Financial Guaranty Provider under the terms
of its Reserve Financial Guaranty; and (b) Adjusted Revenues less Operation and Maintenance
Expenses for such Fiscal Year equal to at least one hundred ten percent (110%) of Adjusted Debt
Service for such Fiscal Year. The City may make adjustments from time to time in such fees and
charges and may make such classification thereof as it deems necessary, but shall not reduce the
rates and charges then in effect unless the Adjusted Revenues and the Adjusted Net Revenues
from such reduced rates and charges shall at all times be sufficient to meet the requirements of
this Section.
Section 6.03 Collection of Rates and Charges. The City shall have in effect at all
times rules and regulations requiring each consumer or customer located on any premises
connected with the Electric System to pay the rates and charges applicable to the Electric Service
provided to such premises and providing for the billing thereof and for a due date and a
delinquency date for each bill. The City shall not permit any part of the Electric System or any
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facility thereof to be used or taken advantage of free of charge by any corporation, firm or person,
or by any public agency (including the United States of America, the State of California and any
city, county, district, political subdivision, public corporation or agency of any thereof). Nothing
in the Indenture shall prevent the City, in its sole and exclusive discretion, from permitting other
parties from selling electricity to retail customers within the service area of the Electric System;
provided, however, that permitting such sales shall not relieve the City of its obligations under
the Indenture.
Section 6.04 Deposit and Application of Revenues. The City shall deposit or cause to
be deposited all Revenues into the Light and Power Department Fund upon receipt thereof.
Without limiting the provisions of Section 5.10, the City shall apply moneys in the Light and
Power Department Fund to the payment of Operation and Maintenance Expenses, payment of
amounts required to be paid pursuant to the Indenture or the Issuing Instrument for any Parity
Obligations, payment of amounts required to be paid pursuant to the Issuing Instrument for any
Subordinated Obligations, payment of Costs of Capital Improvements, or to any other lawful
purpose in connection with the Electric System, and to the extent permitted by Section 6.13, to
transfers to the City's General Fund.
Section 6.05 Creation of Prior Liens on Trust Estate. The City shall not issue any
bond, note, or other evidence of indebtedness payable from or secured by the Trust Estate on a
basis which is: (i) in any manner prior or superior to the lien on, pledge of and security interest in
the Trust Estate securing the Outstanding Bonds pursuant to the Indenture; (ii) except for Parity
Obligations with respect to the Net Revenues, in any manner on a parity with the lien on, pledge
of and security interest in the Trust Estate securing the Outstanding Bonds pursuant to the
Indenture; or (iii) except for Subordinate Obligations, in any manner subordinate to the lien on,
pledge of and security interest in the Trust Estate securing the Outstanding Bonds pursuant to the
Indenture.
Section 6.06 Against Encumbrances. The City shall pay or cause to be paid when due
all sums of money that may become due or purporting to be due for any labor, services, materials,
supplies or equipment furnished, or alleged to have been furnished, to or for the City in, upon,
about or relating to the Electric System and shall keep the Electric System free of any and all
liens against any portion of the Electric System. In the event any such lien attaches to or is filed
against any portion of the Electric System, the City shall cause each such lien to be fully
discharged and released at the time the performance of any obligation secured by any such lien
matures or becomes due, except that if the City desires to contest any such lien it may do so if
contesting such lien shall not materially impair operation of the Electric System. If any such lien
shall be reduced to final judgment and such judgment or any process as may be issued for the
enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the
City shall forthwith pay or cause to be paid and discharged such judgment.
Section 6.07 Sale or Other Disposition of Property. The City shall not sell, transfer or
otherwise dispose of any of the works, plant, properties, facilities or other part or rights of the
Electric System or any real or personal property comprising a part of the Electric System if such
sale, transfer or disposition would cause the City to be unable to satisfy the requirements of
Section 6.02.
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Section 6.08 Operation and Maintenance of the Electric System; Budgets. The City
shall maintain and preserve the Electric System in good repair and working order at all times and
shall operate the Electric System in an efficient and economical manner and shall pay all
Operation and Maintenance Expenses as they become due and payable. The City shall prepare,
not later than July 30 of each Fiscal Year, a budget for the Electric System approved by the City
Council setting forth the estimated Operation and Maintenance Expenses and scheduled Debt
Service for such Fiscal Year and shall take such action as may be necessary to include all Debt
Service payments and all other payments required to be made under the Indenture coming due in
such Fiscal Year with respect to Obligations payable from Revenues in the budget for the
Electric System. Any such budget may be amended at any time during any Fiscal Year provided
that such amended budget shall include all payments coming due in such Fiscal Year with respect
to Obligations payable from Revenues.
Section 6.09 Insurance. The City shall procure and maintain such insurance relating to
the Electric System which it shall deem advisable or necessary to protect its interests and the
interests of the Trustee and the Owners of the Bonds, which insurance shall afford protection in
such amounts and against such risks as are usually covered in connection with public electric
utility systems similar to the Electric System; provided, that any such insurance may be
maintained under a self-insurance program so long as such self-insurance is maintained in the
amounts and manner as is, in the opinion of an accredited actuary, actuarially sound. All policies
of insurance required to be maintained under the Indenture shall provide that the Trustee shall be
given thirty (30) days' written notice of any intended cancellation thereof or reduction of
coverage provided thereby.
Section 6.10 Accounting Records; Financial Statements and Other Reports.
(a) The City shall keep appropriate accounting records in which complete and
correct entries shall be made of all transactions relating to the Electric System, which records
shall be available for inspection by the Trustee at reasonable hours and under reasonable
conditions.
(b) The City shall prepare and file with the Trustee annually within one
hundred eighty (180) days after the close of each Fiscal Year (commencing with the Fiscal Year
ending June 30, 2003):
(i) financial statements of the City for such Fiscal Year prepared in
accordance with Generally Accepted Accounting Principles, together with an
Accountant's Report thereon; and
(ii) a detailed report as to all insurance policies maintained and self-
insurance programs maintained by the City with respect to the Electric System as of the
close of such Fiscal Year, including the names of the insurers which have issued the
policies and the amounts thereof and the property or risks covered thereby.
Section 6.11 Payment of Taxes and Compliance with Governmental Regulations.
The City shall pay and discharge all taxes, assessments and other governmental charges which
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may hereafter be lawfully imposed upon the Electric System or any part thereof when the same
shall become due. The City shall duly observe and conform with all valid regulations and
requirements of any governmental authority relative to the operation of the Electric System or
any part thereof, but the City shall not be required to comply with any regulations or
requirements so long as the validity or application thereof shall be contested in good faith and
contesting such validity or application shall not materially impair the operations or financial
condition of the Electric System.
Section 6.12 Tax Covenants. The City hereby covenants it shall not take any action, or
fail to take any action, if any such action or failure to take action would adversely affect the Tax-
exempt status of interest on any Bond under Section 103 of the Code. Without limiting the
generality of the foregoing, the City shall comply with the requirements of the Tax Certificate, if
any, delivered in connection with the issuance of each Series of Bonds.
In the event that at any time the City is of the opinion that, in order to comply with its
obligations under subsection (a) of this Section, it is necessary or helpful to restrict or limit the
yield on the investment of any moneys in any of the Funds held by the Trustee pursuant to the
Indenture, the City shall so instruct the Trustee in writing, and cause the Trustee to take such
action as may be necessary in accordance with such instructions.
(a) Notwithstanding any provisions of this Section, if the City shall provide to
the Trustee an Opinion of Bond Counsel to the effect that any specified action required under this
Section or a Tax Certificate is no longer required or that some further or different action is
required to maintain the exclusion from federal income tax of interest on the Bonds under
Section 103 of the Code, the City and the Trustee may conclusively rely on such opinion in
complying with the requirements of this Section and of the applicable Tax Certificate, and the
covenants hereunder shall be deemed to be modified to that extent.
(b) The covenants in this Section shall survive payment in full or discharge of
the Bonds.
Section 6.13 Transfers to General Fund. The City covenants that it shall not transfer
Net Revenues for any Fiscal Year to the City's General Fund in an amount exceeding the Net
Transferable Income for such Fiscal Year.
ARTICLE VII
AMENDMENTS TO INDENTURE
Section 7.01 Amendments Permitted.
(a) Subject to the provisions of subsection (d) of this Section, the provisions
of this Master Indenture or of any Supplemental Indenture and the rights and obligations of the
City and of the Owners of the Outstanding Bonds and of the Fiduciaries may be modified,
amended or supplemented from time to time and at any time by a Supplemental Indenture or
Supplemental Indentures, with the written consent of each Credit Provider whose consent is
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required by a Supplemental Indenture or a Credit Support Agreement, when the written consent
of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding
shall have been filed with the Trustee; or if less than all of the Outstanding Bonds are affected,
the written consent of the Owners of at least a majority in aggregate principal amount of all
affected Outstanding Bonds; provided that if such modification, amendment or supplement shall,
by its terms, not take effect so long as any Bonds of any particular Series and maturity remain
Outstanding, and, with respect to Bonds which are Tender Indebtedness if the conditions of
subsection (d) of this Section are satisfied, the consent of the Owners of such Bonds shall not be
required and such Bonds shall not be deemed to be Outstanding for the purpose of any the
calculation of Outstanding Bonds for purposes of this Section. No such modification,
amendment or supplement shall (1) reduce the aforesaid percentage of Bonds the consent of the
Owners of which is required to effect any such modification, amendment or supplement without
the consent of the Owners of all of the Bonds then Outstanding; or (2) modify the rights or
obligations of any Fiduciary without the consent of such Fiduciary.
It shall not be necessary for the consent of the Owners to approve the particular form of
any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance
thereof.
Prior to the entry into any Supplemental Indenture by the City and the Trustee for any of
the purposes of this Section, the City shall cause notice of the proposed Supplemental Indenture
to be mailed, by first class mail, postage prepaid, to the Owners of all Outstanding Bonds (or the
affected Outstanding Bonds) at their addresses appearing on the Bond Register. Such notice shall
briefly set forth the nature of the proposed Supplemental Indenture and shall state that copies
thereof are on file at the office of the Trustee for inspection by each Owner of an Outstanding
Bond.
Whenever, at any time after the date of the mailing of notice of the proposed entry into a
Supplemental Indenture pursuant to this subsection, the City shall have received an instrument or
instruments in writing executed in accordance with Section 11.01 by or on behalf of the Owners
of not less than a majority in aggregate principal amount of the Bonds then Outstanding, or if less
than all of the Outstanding Bonds are affected, by the Owners of not less than a majority in
aggregate principal amount of the affected Outstanding Bonds, which instrument or instruments
shall refer to the proposed Supplemental Indenture described in the notice of the proposed
Supplemental Indenture and shall consent to such Supplemental Indenture in substantially the
form referred to in such notice, thereupon, but not otherwise, the City and the Trustee may enter
into such Supplemental Indenture in substantially such form, without liability or responsibility to
any Owner of any Bond, whether or not such Owner shall have consented thereto.
(b) This Master Indenture or any Supplemental Indenture may be
supplemented from time to time and at any time by a Supplemental Indenture or Supplemental
Indentures, which the City and the Trustee may enter into with the consent of each Credit
Provider whose consent is required by a Supplemental Indenture or a Credit Support Agreement
but without the consent of the Owner of any Bond, to provide for the issuance of a Series of
Additional Bonds or a Series of Refunding Bonds in accordance with the terms and conditions of
Article II, and establishing the terms and conditions thereof, including the rights of any Credit
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Provider for such Additional Bonds or Refunding Bonds, which may include permitting such
Credit Provider to act for and on behalf of the Owners of such Additional Bonds or Refunding
Bonds for any or all purposes of the Indenture except that no such Credit Provider shall be
authorized to extend the fixed maturity of any Bond, or reduce the principal amount thereof, or
reduce the amount of any Sinking Fund Installment therefor, or extend the due date of any such
Sinking Fund Installment, or reduce the rate of interest on any Bond or extend the time of
payment of interest thereon, without the consent of the Owner of each Bond so affected; or
except as otherwise provided with respect to a Bond constituting Tender Indebtedness in the
Supplemental Indenture authorizing such Bond and subject to the satisfaction of the conditions of
subsection (f) of this Section, reduce the Redemption Price due on the redemption of any Bond or
change the date or dates when any Bond is subject to redemption.
(e) This Master Indenture and any Supplemental Indenture and the rights and
obligations of the City, the Fiduciaries and the Owners of the Outstanding Bonds may also be
modified, amended or supplemented from time to time and at any time by a Supplemental
Indenture or Supplemental Indentures, which the City and the Trustee may enter into with the
consent of each Credit Provider whose consent is required by a Supplemental Indenture or a
Credit Support Agreement but without the consent of any Owners of Bonds (but with the consent
of any affected Fiduciary), so long as such modification, amendment or supplement shall not
materially, adversely affect the interests of the Owners of the Outstanding Bonds, including
without limitation, for any one or more of the following purposes:
(i) to add to the covenants and agreements of the City contained in
this Master Indenture or a Supplemental Indenture other covenants and agreements
thereafter to be observed, to pledge, provide or assign any security for the Bonds (or any
portion thereof), or to surrender any right or power in the Indenture reserved to or
conferred upon the City;
(ii) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision, contained in
this Master Indenture or a Supplemental Indenture, or in regard to matters or questions
arising under this Master Indenture or a Supplemental Indenture, as the City may deem
necessary or desirable; or
(iii) to modify, amend or supplement this Master Indenture or a
Supplemental Indenture in such manner as to permit the qualification of the Indenture
under the Trust Indenture Act of 1939, as amended, or any similar federal statute
hereafter in effect, and to add such other terms, conditions and provisions as may be
permitted by said actor similar federal statute.
(d) Notwithstanding anything to the contrary in this Section, the provisions of
the this Master Indenture or any Supplemental Indenture may also be modified, amended or
supplemented by a Supplemental Indenture or Supplemental Indentures, including amendments
which would otherwise be described in subsection (a) of this Section, without the consent of the
Owners of Bonds constituting Tender Indebtedness if either (i) the effective date of such
Supplemental Indenture is a date on which such Bonds are subject to mandatory tender for
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purchase pursuant to the Indenture or (ii) the notice described in the third paragraph of subsection
(a) of this Section is given to Owners of such Bonds at least thirty (30) days before the effective
date of such Supplemental Indenture, and on or before such effective date, the Owners of such
Bonds have the right to demand purchase of such Bonds pursuant to the Indenture.
(e) If the Supplemental Indenture authorizing the issuance of a Series of
Bonds provides that a Credit Provider for all or any portion of the Bonds of such Series shall
have the right to consent to Supplemental Indentures which require the consent of the Owners of
the Bonds of such Series pursuant to this Section, then for the purposes of sending notice of any
proposed Supplemental Indenture and for determining whether the Owners of the requisite
percentage of Bonds have consented to such Supplemental Indenture, but subject to the
provisions of subsection (b) of this Section, references to the Owners of such Bonds shall be
deemed to be to the applicable Credit Provider.
(f) For purposes of this Section, it shall not be necessary that consents of the
Owners of any particular percentage of Outstanding Bonds of any affected Series be obtained but
it shall be sufficient for purposes of this Section if the consent of the Owners of a majority in
aggregate principal amount of the combination of affected Outstanding Bonds shall be obtained.
(g) Notwithstanding anything to the contrary contained in this Section, if
authorized by the Supplemental Indenture authorizing the issuance of a Bond constituting Tender
Indebtedness, any premium due on the redemption of such Bond and the date or dates when such
Bond is subject to redemption may be modified or amended as provided in such Supplemental
Indenture if either: (i) the effective date of such modification or amendment is a date on which
such Bond is subject to mandatory tender for purchase pursuant to such Supplemental Indenture;
or (ii) notice of such modification or amendment has been mailed to the Owner of such Bond at
the address set forth in the Bond Register at least thirty (30) days before the effective date of such
modification or amendment and on or before such effective date, the Owner of such Bond has the
right to demand purchase of such Bond pursuant to such Supplemental Indenture.
Section 7.02 Effect of Supplemental Indenture. Upon the City and the Trustee entering
into any Supplemental Indenture pursuant to this Article, the Indenture shall be deemed to be
modified, amended or supplemented in accordance therewith, and the respective rights, duties
and obligations under the Indenture of the City, the Fiduciaries and all Owners of Outstanding
Bonds shall thereafter be determined, exercised and enforced subject in all respects to such
modification, amendment and supplement, and all the terms and conditions of any such
Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture
for any and all purposes. . Upon the City and the Trustee entering into any Supplemental
Indenture pursuant to this Article, no Owner of any Bond shall have any right to object to the
entry into such Supplemental Indenture by the City and the Trustee, or to object to any of the
terms and provisions contained therein or the operation thereof or in any manner to question the
propriety of the entry into such Supplemental Indenture, or to enjoin or restrain the City or the
Trustee from entering into the same or to enjoin or restrain the City or the Trustee from taking
any action pursuant to the provisions thereof whether or not such Owner gave his consent to such
Supplemental Indenture.
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Section 7.03 Bonds Owned by City. For purposes of this Article, Bonds owned or held
by or for the account of the City, or any funds of the City, shall not be deemed Outstanding for
the purpose of consent or other action or any calculation of Outstanding Bonds provided for in
this Article, and the City shall not be entitled with respect to such Bonds to give any consent or
take any other action provided for in this Article as an Owner of Bonds. At the time of any
consent or other action taken under this Article, the City shall furnish the Trustee a certificate of
an Authorized City Representative upon which the Trustee may rely, describing all Bonds so to
be excluded.
Section 7.04 Notation on Bonds. Bonds authenticated and delivered after the effective
date of any Supplemental Indenture entered into by the City and the Trustee as in this Article
provided may bear a notation by endorsement or otherwise in a form approved by the City as to
such action, and in that case upon demand of the Owner of any Bond Outstanding on such
effective date and presentation of the Bond for the purpose at the Principal Office of the Trustee
or upon any transfer or exchange of any Bond Outstanding on such effective date, suitable
notation shall be made on such Bond or upon any Bond issued upon any such transfer or
exchange by the Trustee as to any such action.
ARTICLE VIII
CONCERNING THE FIDUCIARIES
Section 8.01 Trustee; Acceptance of Duties. The Trustee shall signify its acceptance of
the duties and obligations imposed upon it by the Indenture, including the duties of Paying
Agent for the Bonds, by the execution and the delivery of this Master Indenture to the City and
by such execution and delivery the Trustee shall be deemed to have accepted such duties and
obligations with respect to all the Bonds thereafter to be issued, but only, however, upon the
terms and conditions set forth in the Indenture and no implied covenants shall be read into the
Indenture against the Trustee.
Section 8.02 Paying Agents; Appointment and Acceptance of Duties.
(a) The City hereby appoints the Trustee as a Paying Agent for the Bonds of
each Series, and may at any time or from time to time appoint one or more other Paying Agents
having the qualifications set forth in Section 8.13 as an additional Paying Agent for the Bonds of
one or more Series.
(b) Each Paying Agent other than the Trustee shall signify its acceptance of
the duties and obligations imposed upon it by the Indenture by executing and delivering to the
City and to the Trustee a written acceptance thereof.
(c) The Principal Offices of the Paying Agents are designated as the
respective offices or agencies of the City for the payment of the principal and any applicable
Redemption Price of the Bonds.
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Section 8.03 Responsibilities of Fiduciaries.
(a) Any recitals of fact in the Indenture and in the Bonds contained shall be
taken as the statements of the City and no Fiduciary assumes any responsibility for the
correctness of the same. No Fiduciary makes any representations as to the validity or sufficiency
of the Indenture or of any Bonds issued thereunder or as to the security afforded by the Indenture,
and no Fiduciary shall incur any liability in respect thereof. No Fiduciary shall be responsible for
or have any liability with respect to the Electric System or any act or omission of the City with
respect thereto. The Trustee shall, however, be responsible for its representation contained in its
certificate of authentication on the Bonds. No Fiduciary shall be under any responsibility or duty
with respect to the application of any moneys paid by such Fiduciary in accordance with the
provisions of the Indenture. No Fiduciary shall be under any obligation or duty to perform any
act which would involve it in expense or liability or to institute or defend any suit in respect
thereof, or to advance any of its own moneys, unless properly indemnified. Subject to the
provisions of subsection (b) of this Section, no Fiduciary shall be liable in connection with the
performance of its duties under the Indenture except for its own negligence, willful misconduct
or default.
(b) The Trustee, prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in the Indenture. In case an Event of Default has
occurred (which has not been cured) the Trustee shall exercise such of the rights and powers
vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his own affairs.
Any provision of the Indenture relating to action taken or to be taken by the Trustee or to
evidence upon which the Trustee may rely shall be subject to the provisions of this Section.
Without limiting the generality of the foregoing:
(1) the Trustee shall not be liable for any error of judgment
made in good faith by any officer of the Trustee, unless it
shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(2) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in
accordance with the direction of a Credit Provider or a
Reserve Financial Guaranty Provider or the Owners of 25%
in aggregate principal amount of the Outstanding Bonds
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under the Indenture;
(3) no provision of the Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any
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financial liability in the performance of any of its duties
under the Indenture, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it;
(4) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by the Indenture at the
request or direction of any of the Owners, a Credit Provider
or a Reserve Financial Guaranty Provider pursuant to the
Indenture, unless such Owners, such Credit Provider or
such Reserve Financial Guaranty Provider shall have
offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(5) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, coupon,
facsimile transmission, electronic mail or other paper or
document but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the City,
personally or by agent or attorney;
(6) the Trustee shall not be required to take notice of and shall
not be deemed to have knowledge of any Event of Default
(other than an Event of Default specified in subsections (i)
or (ii) of Section 10.01) or any event which would, with the
passage of time, the giving of notice, or both, constitute an
Event of Default, unless the Trustee shall have been
notified of such Event of Default or other event by the City,
a Credit Provider or a Reserve Financial Guaranty Provider,
or the Owners of 10% in aggregate principal amount of
Bonds Outstanding;
(7) the Trustee shall not be responsible for any moneys or
funds held by the City), or for monitoring the accounting
and investment practices of the City, other than requiring
the delivery of the Annual Budget and annual financial
statements and reports pursuant to Section 6.10; and
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(8) The Trustee may perform its duties under the Indenture
through agents and attorneys and the Trustee shall not be
liable for the negligence or misconduct on the part of any
agent or attorney appointed with due care by it under the
Indenture if the City has a right to proceed directly against
such agent or attorney for any such negligence or
misconduct.
Whether or not therein expressly provided, every provision of the Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee shall be subject to the
provisions of this Article.
Section 8.04 Evidence on Which Fiduciaries May Act.
(a) Each Fiduciary, upon receipt of any notice, resolution, request, requisition,
consent, order, certificate, report, opinion, bond, or other paper or document furnished to it
pursuant to any provision of the Indenture, shall examine such instrument to determine whether it
conforms to the requirements, if any, of the Indenture and shall be protected in acting upon any
such instrument believed by it to be genuine and to have been signed or presented by the proper
party or parties. Each Fiduciary may consult with counsel, who may or may not be Bond
Counsel or counsel to the City, and the opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken or suffered by it under the Indenture in
good faith and in accordance therewith.
(b) Whenever any Fiduciary shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering any action under the Indenture, such matter
(unless other evidence in respect thereof be therein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate of an Authorized City Representative, and
such certificate shall be full warrant for any action taken or suffered in good faith under the
provisions of the Indenture upon the faith thereof; but in its discretion the Fiduciary may in lieu
thereof accept other evidence of such fact or matter or may require such further or additional
evidence as to it may seem reasonable.
(c) Except as otherwise expressly provided in the Indenture, any request,
requisition, order, notice or other direction required or permitted to be furnished pursuant to any
provision of the Indenture by the City to any Fiduciary shall be sufficiently executed in the name
of the City by an Authorized City Representative.
Section 8.05 Compensation. The City shall cause to be paid to each Fiduciary from
time to time reasonable compensation for all services rendered under the Indenture, and also all
reasonable expenses, charges, counsel fees and other disbursements, including those of its
attorneys, agents, and employees, incurred in and about the performance of their powers and
duties under the Indenture; provided, however, that so long as any Bonds remain Outstanding or
any amounts due to a Credit Provider under a Credit Support Agreement or a Reserve Financial
Guaranty Provider under a Reserve Financial Guaranty, no Fiduciary shall have a lien therefor on
any and all funds at any time held by it under the Indenture. Subject to the provisions of
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42797-2 EJC 61
Section 8.03, the City further agrees to indemnify and save each Fiduciary harmless against any
liabilities which it may incur in the exercise and performance of its powers and duties under the
Indenture or in any way arising out of the Electric System or the transactions contemplated by the
Indenture, and which are not due to its negligence, willful misconduct or default.
Section 8.06 Certain Permitted Acts. Any Fiduciary may become the Owner of any
Bonds, with the same rights it would have if it were not a Fiduciary. To the extent permitted by
law, any Fiduciary may act as depositary for, and permit any of its officers or directors to act as a
member of, or in any other capacity with respect to, any committee formed to protect the rights of
the Owners of the Bonds or to effect or aid in any reorganization growing out of the enforcement
of the Bonds or the Indenture, whether or not any such committee shall represent the Owners of a
majority in principal amount of the Bonds then Outstanding.
Section 8.07 Resignation of Trustee. The Trustee may at any time resign and be
discharged of the duties and obligations created by the Indenture by giving not less than 60 days
written notice to the City, each Credit Provider and each Reserve Financial Guaranty Provider,
specifying the date when such resignation shall take effect; provided that no such resignation
shall take effect until a successor shall have been appointed in accordance with Section 8.09.
Section 8.08 Removal of Trustee. The Trustee may be removed (i) with the consent (to
the extent required by a Supplemental Indenture) of each Credit Provider and each Reserve
Financial Guaranty Provider, at any time when no Event of Default has occurred and is
continuing and when no event has occurred which, with notice or the passage of time, would
become an Event of Default which has not been cured, by an instrument in writing signed by an
Authorized City Representative and filed with the Trustee or (ii) with the consent (to the extent
required by a Supplemental Indenture) of each Credit Provider and each Reserve Financial
Guaranty Provider, at any time by an instrument or concurrent instruments in writing, filed with
the Trustee, and signed by the Owners of a majority in principal amount of the Bonds then
Outstanding or their attorneys -in -fact duly authorized, excluding any Bonds held by or for the
account of the City or (iii) with the consent (to the extent required by a Supplemental Indenture,)
of each Credit Provider and each Reserve Financial Guaranty Provider, at any time by an
instrument in writing signed by an Authorized City Representative and filed with the Trustee, for
any breach of its fiduciary duties under the Indenture; provided that no such removal shall be
effective until 30 days have lapsed from the filing of such instrument with the Trustee and until a
successor shall have been appointed in accordance with Section 8.09.
Section 8.09 Appointment of Successor Trustee; Financial Qualifications of
Successor Trustee.
(a) In case at any time the Trustee shall resign or shall be removed or shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver,
liquidator or conservator of the Trustee, or of its property shall be appointed, or if any public
officer shall take charge or control of the Trustee or of its property or affairs, a successor may be
appointed by the Owners of a majority in principal amount of the Bonds then Outstanding,
excluding any Bonds held by or for the account of the City, with (to the extent required by a
Supplemental Indenture) the consent of each Credit Provider and each Reserve Financial
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Guaranty Provider, by an instrument or concurrent instruments in writing signed and
acknowledged by such Owners of the Bonds or by their attorneys -in -fact duly authorized and
delivered to such successor Trustee, notification thereof being given to the City and the
predecessor Trustee; provided, nevertheless, that unless a successor Trustee shall have been
appointed by the Owners of the Bonds as aforesaid, the City, by a duly executed written
instrument signed by an Authorized City Representative shall forthwith appoint a Trustee to
replace such resigning Trustee or to fill such vacancy until a successor Trustee shall be appointed
by the Owners of the Bonds as authorized in this Section. Any successor Trustee appointed by
the City shall, immediately and without further act, be superseded by the Trustee appointed by
the Owners of the Bonds.
(b) If in a proper case no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have
given to the City written notice as provided in Section 8.07 or after a vacancy in the office of the
Trustee shall have occurred by reason of its inability to act, removal, or for any other reason
whatsoever, the Trustee (in the case of its resignation under Section 8.07) or the Owner of any
Bond (in any case) may apply to any court of competent jurisdiction to appoint a successor
Trustee. Said court may thereupon, after such notice, if any, as such court may deem proper,
appoint a successor Trustee.
(c) The Trustee appointed under the provisions of this Article or any successor
to the Trustee shall be a bank or trust company organized under the laws of any state of the
United States or national banking association, doing business and having its principal corporate
trust office in New York, New York, or Chicago, Illinois, or Los Angeles, California, or San
Francisco, California, duly authorized to exercise trust powers and subject to examination by
federal or state authority. Each successor Trustee shall have capital stock and surplus
aggregating at least $50,000,000, or have all of its obligations under the Indenture guaranteed by
a bank or trust company organized under the laws of the United States, or any state thereof, with
a capital stock and surplus or net worth of $50,000,000, if there be such a bank or trust company
or national banking association willing and able to accept the office on reasonable and customary
terms and authorized by law to perform all the duties imposed upon it by the Indenture. If such
bank, national banking association, or trust company publishes a report of condition at least
annually, pursuant to law or to the requirements of any supervising or examining authority, then
for the purposes of this Section the combined capital and surplus of such bank, trust company, or
national banking association shall be deemed to be its combined capital and surplus set forth in
its most recent report of condition so published.
Section 8.10 Transfer of Rights and Property to Successor Trustee. Any successor
Trustee appointed under the Indenture shall execute, acknowledge and deliver to its predecessor
Trustee and the City an instrument accepting such appointment, and thereupon such successor
Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys,
estates, properties, rights, power, duties and obligations of such predecessor Trustee, with like
effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, at the
written request of the City, or of the successor Trustee, execute, acknowledge, deliver, file and
record such instrument of conveyance and further assurance and do such other things as may
reasonably be required for more fully and certainly vesting and confirming in such successor
DOCSLA1:438186.4
42797-2 EJC C3
Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it
under the Indenture or covered by the pledge of the Indenture, and shall pay over, assign and
deliver to the successor Trustee any money or other property subject to the trust and conditions in
the Indenture set forth. Should any deed, conveyance or instrument in writing from the City be
required by such successor Trustee for more fully and certainly vesting in and confirming to such
successor Trustee any such lien, estates, rights, power and duties, any and all such deeds,
conveyances and instruments in writing shall, on request, and so far as may be authorized by law,
be executed, acknowledged and delivered by the City. Any such successor Trustee shall
promptly notify the Paying Agents of its appointment as Trustee.
Section 8.11 Merger or Consolidation. Any company into which a Fiduciary may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which any
Fiduciary may sell or transfer all or substantially all of its corporate trust business, provided such
company shall be a bank or trust company organized under the laws of any state of the United
States or a national banking association, shall satisfy the applicable standards of a successor set
forth in the Indenture, and shall be authorized by law to perform all the duties imposed upon it by
the Indenture, shall be the successor to such Fiduciary without the execution or filing of any
paper or the performance of any further act.
Section 8.12 Adoption of Authentication. In case any of the Bonds contemplated to be
issued under the Indenture shall have been authenticated but not delivered, any successor Trustee
may adopt the certificate of authentication of any predecessor Trustee so authenticating such
Bonds and deliver such Bonds so authenticated; and in case any of the said Bonds shall not have
been authenticated, any successor Trustee may authenticate such Bonds in the name of the
predecessor Trustee, or in the name of the successor Trustee, and in all such cases such certificate
shall have the full force which it is anywhere in said Bonds or provided in the Indenture that the
certificate of the Trustee shall have.
Section 8.13 Resignation or Removal of Paying Agent and Appointment of
Successor.
(a) Any Paying Agent may at any time resign and be discharged of the duties
and obligations created by the Indenture by giving at least 60 days written notice to the City, the
Trustee, each Credit Provider, each Reserve Financial Guaranty Provider and the other Paying
Agents. Any Paying Agent may be removed at any time by an instrument filed with such Paying
Agent and the Trustee and signed by an Authorized City Representative. Any successor Paying
Agent shall be appointed by the City with the approval of the Trustee(and each Credit Provider
and each Reserve Financial Guaranty Provider required by a Supplemental Indenture) and shall
be a commercial bank or trust company organized under the laws of any state of the United States
or a national banking association, having capital stock and surplus aggregating at least
$25,000,000, and willing and able to accept the office on reasonable and customary terms and
authorized by law to perform all the duties imposed upon it by the Indenture. If such bank,
national banking association, or trust company publishes a report of condition at least annually,
pursuant to law or to the requirements of any supervising or examining authority, then for the
purposes of this Section the combined capital and surplus of such bank, trust company, or
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national banking association shall be deemed to be its combined capital and surplus set forth in
its most recent report of condition so published.
(b) In the event of the resignation or removal of any Paying Agent, such
Paying Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its
successor, or if there be no successor, to the Trustee. In the event that for any reason there shall
be a vacancy in the office of any Paying Agent, the Trustee shall act as such Paying Agent.
ARTICLE IX
DEFEASANCE
Section 9.01 Payment of Bonds. If the City shall pay, or cause to be paid, or there shall
otherwise be paid, to the Owners of all Bonds the principal amount or Redemption Price, if
applicable, of the Bonds, and interest due or to become due on the Bonds, at the times and in the
manner stipulated therein and in the Indenture, together with all other sums payable by the City
under the Indenture, including all fees and expenses of the Trustee, then and in that case, subject
to the provisions of subsection (b) of this Section, the Indenture, and the pledge of and lien on the
Trust Estate hereunder and all covenants, agreements and obligations of the City contained
herein, shall cease and terminate and shall be completely discharged and satisfied and the City
shall be released therefrom and the Trustee shall assign and transfer to or upon the order of the
City all property (in excess of the amounts required for the foregoing) then held by the Trustee
hereunder free and clear of any liens or encumbrances hereon pursuant to the Indenture and shall
execute such documents as may be reasonably required by the City in this regard.
(b) Notwithstanding the termination, satisfaction and discharge of the
Indenture or the satisfaction discharge of this Indenture in respect of any Bonds, those provisions
of the Indenture relating to the maturity of the Bonds, interest payments and dates thereof, tender
and exchange provisions, exchange and transfer of Bonds, replacement of mutilated, destroyed,
lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds,
compliance by the City of the covenants contained in Section 6.12 hereof and the duties of the
Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon
the City, the Trustee and the Owners and the Trustee shall continue to be obligated to hold in
trust any monies and investments then held by the Trustee for the payment of the principal or
Redemption Price of, and interest on, the Bonds, to pay to the Owners, but only from the monies
and investments so held by the Trustee, the principal or Redemption Price of, and interest on, the
Bonds as and when such payment becomes due. Notwithstanding the satisfaction and discharge
of the Indenture or the satisfaction discharge of the Indenture in respect of any Bonds, those
provisions of this Indenture contained in Section 8.05 hereof relating to the compensation of the
Trustee shall remain in effect and shall be binding upon the Trustee and the City.
Section 9.02 Bonds Deemed Paid. Bonds (or portions of Bonds) for the payment or
redemption of which moneys shall have been set aside and shall be held in trust by an Escrow
Agent (through deposit pursuant to a deposit of funds for such payment or redemption or
otherwise) at the maturity or redemption date thereof, as applicable, shall be deemed to have
been paid within the meaning and with the effect expressed in Section 9.01. Any Outstanding
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Bond (or any portion thereof such that both the portion thereof which is deemed paid and the
portion which is not deemed paid pursuant to this Section shall be in an Authorized
Denomination) shall prior to the maturity or redemption date thereof be deemed to have been
paid within the meaning and with the effect expressed in Section 9.01 (except that the obligations
under the Indenture set forth in Section 9.01 (b) and the giving of the notices of the redemption
of Bonds to be redeemed as provided in Article IV shall continue) if (1) in case said Bond (or
portion thereof) is to be redeemed on any date prior to maturity, the City shall have given the
Trustee irrevocable instructions to give notice of redemption of such Bond (or portion thereof) on
said date as provided in Article IV, (2) there shall have been deposited with an Escrow Agent
either moneys in an amount which shall be sufficient, or Defeasance Securities, the principal of
and the interest on which when due shall provide moneys which, together with the moneys, if
any, held by such Escrow Agent for such purpose, shall be sufficient, in each case as evidenced
by an Accountant's Certificate, to pay when due the principal amount of, and any redemption
premiums on, said Bond (or portion thereof) and interest due and to become due on said Bond (or
portion thereof) on and prior to the redemption date or maturity date thereof, as the case may be,
and (3) if such Bond (or portion thereof) is not to be paid or redeemed within 60 days of the date
of the deposit required by (2) above, the City shall have given the Trustee, in form satisfactory to
it, instructions to mail, as soon as practicable, by first class mail, postage prepaid, to the Owner
of such Bond, at the last address, if any, appearing upon the Bond Register, a notice that the
deposit required by (2) above has been made with an Escrow Agent and that said Bond (or the
applicable portion thereof) is deemed to have been paid in accordance with this Section and
stating such maturity or redemption date upon which moneys are to be available for the payment
of the principal amount of, and any redemption premiums on, said Bond. Any notice given
pursuant to clause (3) of this Section with respect to Bonds which constitute less than all of the
Outstanding Bonds of any Series and maturity shall specify the letter and number or other
distinguishing mark of each such Bond. Any notice given pursuant to clause (3) of this Section
with respect to less than the full principal amount of a Bond shall specify the principal amount of
such Bond which shall be deemed paid pursuant to this Section and notify the Owner of such
Bond that such Bond must be surrendered as provided in Section 9.03. The receipt of any notice
required by this Section shall not be a condition precedent. to any Bond being deemed paid in
accordance with this Section and the failure of any Owner to receive any such notice shall not
affect the validity of the proceedings for the payment of Bonds in accordance with this Section.
Neither Defeasance Securities nor moneys deposited with an Escrow Agent pursuant to this
Section, nor principal or interest payments on any such Defeasance Securities, shall be
withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the
principal amount of, and any redemption premiums on, said Bonds and the interest thereon;
provided that any cash received from principal or interest payments on such Defeasance
Securities deposited with an Escrow Agent, (A) to the extent such cash shall not be required at
any time for such payment, as evidenced by an Accountant's Certificate, shall be paid over upon
the written direction of an Authorized City Representative, including a transfer to the City free
and clear of any trust, lien, pledge or assignment securing said Bonds, and (B) to the extent such
cash shall be required for such payment at a later date, shall, to the extent practicable, at the
written direction of an Authorized City Representative, be reinvested in Defeasance Securities
maturing at times and in amounts, which together with the other funds to be available to the
Escrow Agent for such purpose, shall be sufficient to pay when due the principal amount of, and
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any redemption premiums on, said Bonds and the interest to become due on said Bonds on and
prior to such redemption date or maturity date thereof, as the case may be, as evidenced by an
Accountant's Certificate.
Nothing in the Indenture shall prevent the City from substituting for the Defeasance
Securities held for the payment or redemption of Bonds (or portions thereof) other Defeasance
Securities which, together with the moneys held by the Escrow Agent for such purpose, as
evidenced by an Accountant's Certificate, shall be sufficient to pay when due the principal
amount of, and any redemption premiums on, the Bonds (or portions thereof) to be paid or
redeemed, and the interest due on the Bonds (or portions thereof) to be paid or redeemed at the
times established with the initial deposit of Defeasance Securities for such purpose provided that
the City shall deliver to the Escrow Agent a Favorable Opinion of Bond Counsel with respect to
such substitution.
Section 9.03 Defeasance of Portion of Bond. If there shall be deemed paid pursuant to
Section 9.02 less than all of the full principal amount of a Bond, the City shall execute and the
Trustee shall authenticate and deliver, upon the surrender of such Bond, without charge to the
Owner of such Bond, a new Bond or Bonds for the principal amount of the Bond so surrendered
which is deemed paid pursuant to Section 9.02 and another new Bond or Bonds for the balance
of the principal amount of the Bond so surrendered, in each case of like Series, maturity and
other terms, and in any of the Authorized Denominations.
Section 9.04 Discharge of Liability on Bonds. Upon the deposit with an Escrow
Agent, in trust, at or before maturity or the applicable redemption date, of money or Defeasance
Securities in the necessary amount (as provided in Section 9.01 or Section 9.02, as applicable) to
pay or redeem Outstanding Bonds (or portions thereof), and to pay the interest thereto to such
maturity or redemption date, as applicable, (provided that, if such Bonds are to be redeemed prior
to the maturity thereof, notice of such redemption shall have been given as in Article IV provided
or provision satisfactory to the Trustee shall have been made for giving such notice), all liability
of the City in respect of such Bonds shall cease, terminate and be completely discharged, except
that the City shall remain liable for such payment but only from, and the Bondowners shall
thereafter be entitled only to payment (without interest accrued thereon after such redemption
date or maturity date, as applicable) out of, the money and Defeasance Securities deposited with
the Escrow Agent as aforesaid for their payment, subject, however, to the provisions of Sections
6.12 and 9.02; provided that no Bond which constitutes Tender Indebtedness shall be deemed to
be paid within the meaning of the Indenture unless the Purchase Price of such Bond, if tendered
for purchase in accordance with the Indenture, could be paid when due from such moneys or
Defeasance Securities (as evidenced by an Accountant's Certificate) or a Credit Support
Instrument is provided in connection with such Purchase Price.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. Each of the following shall constitute an Event of
Default under the Indenture:
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(i) if default shall be made in the payment of the principal or
Redemption Price of or Sinking Fund Installment for, or interest on, any Outstanding
Bond or other Parity Obligations, when and as the same shall become due and payable,
whether on an Interest Payment Date, at maturity, by call for redemption, or otherwise;
(ii) if default shall be made in the payment of the Parity Purchase Price
of any Bonds or other Parity Obligations which are Tender Indebtedness;
(iii) if default shall be made by the City in the performance or
observance of any other of the covenants, agreements or conditions on its part in the
Indenture or in the Outstanding Bonds contained, and such default shall continue for a
period of 120 days after written notice thereof to the City by the Trustee or to the City and
to the Trustee by the Owners of not less than 10% in principal amount of the Bonds
Outstanding; provided, however, if such default is such that it can be corrected by the
City but not within the applicable period specified above, it shall not constitute an Event
of Default if corrective action is instituted by the City within thirty (30) days of the City's
receipt of the notice of the default required by this paragraph and diligently pursued until
the default is correct; or
(iv) an Event of Bankruptcy shall have occurred and be continuing with
respect to the City.
Section 10.02 Accounting and Examination of Records After Default.
(a) The City covenants that if an Event of Default shall have happened and
shall not have been remedied, the books of record and accounts of the City and all other records
relating to the Electric System shall at all times be subject to the inspection and use of the
Trustee and of its agents and attorneys.
(b) The City covenants that if an Event of Default shall have happened and
shall not have been remedied, the City, upon demand of the Trustee, shall account, as if it were
the trustee of an express trust, for all Net Revenues and other moneys, securities and funds
pledged or held under the Indenture for such period as shall be stated in such demand.
Section 10.03 Application of Net Revenues and Other Moneys After Default.
(a) Notwithstanding anything to the contrary contained in the Indenture,
including Article V of this Indenture, the City covenants that if an Event of Default shall happen
and shall not have been remedied, the City, upon the demand of the Trustee, shall cause to be
paid over to the Trustee by the first Business Day of each month, all Net Revenues with respect
to the preceding month.
(b) During the continuance of an Event of Default, the Trustee shall apply all
Net Revenues received by the Trustee pursuant to any right given or action taken under the
provisions of this Article which are held by the Trustee pursuant and subject to the terms and
conditions of the Indenture, as follows and in the following order of priority:
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First: To the payment of the reasonable and proper charges, expenses and
liabilities of the Fiduciaries and the payment of the reasonable and proper charges,
expenses and liabilities of the fiduciaries for Parity Obligations.
Second To the payment of the principal, Redemption Price and Parity
Purchase Price of and interest on the Outstanding Bonds, and the principal,
redemption price and Parity Purchase Price of and interest on the other
Outstanding Parity Obligations then due and payable; provided however, that in
the event the amount of Net Revenues available to the Trustee is not sufficient to
make all the payments required by this clause, the Trustee shall apply the
available Net Revenues to the payment of the principal, redemption price and
Parity Purchase Price of and interest on all Outstanding Parity Obligations then
due and payable ratably (based on the respective amounts to be paid), without any
discrimination on preferences.
Third: Subject to the provisions of subsection (b) of Section 2.08, to the
payment of any Termination Amounts due and payable under the Qualified Swap
Agreements; provided however, that in the event the amount of Net Revenues
available to the Trustee is not sufficient to make all the payments required by this
clause with respect to all Qualified Swap Agreements, the Trustee shall apply the
available Net Revenues to the payment of the Termination Payments then due and
payable under all Qualified Swap Agreements ratably (based on the respective
amounts to be paid), without any discrimination on preferences.
Fourth: To the transfer to the Debt Service Reserve Fund for the Bonds
and to each debt service reserve fund for other Outstanding Parity Obligations, the
amount, if any, necessary so that the amount on deposit in the Debt Service
Reserve Fund shall equal the Debt Service Reserve Requirement and the amount
in each debt service reserve fund for other Outstanding Parity Obligations shall
equal the amount required to be on deposit in such debt service reserve fund under
the applicable Issuing Instrument; provided that that in the event the amount of
Net Revenues available to the Trustee is not sufficient to make all the payments
required by this clause, the Trustee shall apply the available Net Revenues to the
transfer to the Debt Service Reserve Fund and each debt service reserve fund for
other Outstanding Parity Obligations ratably (based on the respective amounts to
be paid), without any discrimination on preferences.
Fifth: Subject to the provisions of subsection (b) of Section 2.08, to the
payment of amounts due with respect to outstanding Subordinated Obligations
(other than Termination Payments) in accordance with the provisions of the
Issuing Instrument pursuant to which such Subordinated Obligations have been
issued; provided that that in the event the amount of Net Revenues available to the
Trustee is not sufficient to make all the payments required by this clause, the
Trustee shall apply the available Net Revenues to the payments of amounts due
with respect to all Subordinated Obligations ratably (based on the respective
amounts to be paid), without any discrimination on preferences except as
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otherwise provided in the Issuing Instruments pursuant to which such
Subordinated Obligations have been issued.
(c) If and whenever all overdue instalhnents of interest on all Outstanding
Bonds, together with the reasonable and proper charges, expenses and liabilities of the Trustee,
and all other sums payable for the account of the City under the Indenture, including the principal
and Redemption Price of all Outstanding Bonds and unpaid interest on all Outstanding Bonds
which shall then be payable, shall be paid for by the account of the City, or provision satisfactory
to the Trustee shall be made for such payment, and all defaults under the Indenture or the
Outstanding Bonds shall be made good or secured to the satisfaction of the Trustee or provision
deemed by the Trustee to be adequate shall be made therefor, the Trustee shall pay over all
unexpended Net Revenues in the hands of the Trustee (except Net Revenues deposited or
pledged, or required by the terms of the Indenture to be deposited or pledged, with the Trustee),
and thereupon the City and the Trustee shall be restored, respectively, to their former positions
and rights under the Indenture. No such payment by the Trustee nor such restoration of the City
and the Trustee to their former positions and rights shall extend to or affect any subsequent
default under the Indenture or impair any right consequent thereon.
(d) The Trustee may in its discretion establish special record dates for the
determination of the Owners of Bonds for various purposes hereof, including without limitation,
payment of defaulted interest and giving direction to the Trustee.
Section 10.04 Right to Accelerate Upon Default. Notwithstanding anything contrary in
the Indenture or in the Bonds, upon the occurrence of an Event of Default, the Trustee may, with
the consent of each Credit Provider whose consent is required by a Supplemental Indenture or a
Credit Support Agreement, and shall, at the direction of the Owners of a majority in principal
amount of Outstanding Bonds (other than Bonds owned by or on behalf of the City) by written
notice to the City, declare the principal of the Outstanding Bonds to be immediately due and
payable, whereupon the principal of the Bonds thereby coming due and the interest thereon
accrued to the date of payment shall, without further action, become and be immediately due and
payable.
Section 10.05 Appointment of Receiver. If an Event of Default shall happen and shall
not have been remedied, and upon the filing of a suit or other commencement of judicial
proceedings to enforce the rights of the Trustee and of the Owners of the Bonds under the
Indenture, the Trustee shall be entitled to make application for the appointment of a receiver or
custodian of the Net Revenues, pending such proceedings, with such power as the court making
such appointment shall confer.
Section 10.06 Enforcement Proceedings.
(a) If an Event of Default shall happen and shall not have been remedied, then
and in every such case, the Trustee, by its agents and attorneys, may proceed, and upon the
written request of the Owners of not less than a majority in principal amount of the Bonds at the
time Outstanding shall proceed, to protect and enforce its rights and the rights of the Owners of
the Outstanding Bonds by a suit or suits in equity or at law, whether for damages or the specific
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performance of any covenant contained in the Indenture, to enforce the security interest in,
pledge of and lien on the Net Revenues granted pursuant to the Indenture, or in aid of the
execution of any power granted in the Indenture or any remedy granted under applicable
provisions of the laws of the State of California, or for an accounting by the City as if the City
were the trustee of an express trust, or in the enforcement of any other legal or equitable right as
the Trustee, being advised by counsel, shall deem most effectual to enforce any of its rights or to
perform any of its duties under the Indenture.
(b) All rights of action under the Indenture may be prosecuted and enforced by
the Trustee without the possession of any of the Bonds or the production thereof in the trial or
other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought in
its own name as trustee of an express trust.
(c) Upon commencing a suit in equity or upon other commencement of
judicial proceedings by the Trustee to enforce any right under the Indenture, the Trustee shall be
entitled to exercise any and all rights and powers conferred in the Indenture and provided to be
exercised by the Trustee upon the occurrence of any Event of Default.
(d) Regardless of the happening of an Event of Default, the Trustee shall have
power to, but unless requested in writing by the Owners of a majority in principal amount of the
Bonds then Outstanding and furnished with reasonable security and indemnity, shall be under no
obligation to, institute and maintain such suits and proceedings as it may be advised shall be
necessary or expedient to prevent any impairment of the security under the Indenture by any acts
which may be unlawful or in violation of the Indenture, and such suits and proceedings as the
Trustee may be advised shall be necessary or expedient to preserve or protect its interests and the
interests of the Owners of the Bonds.
(e) If the Trustee or any Owner or Owners of Outstanding Bonds have
instituted any proceeding to enforce any right or remedy under the Indenture and such proceeding
has been discontinued or abandoned for any reason, or has been determined adversely to the
Trustee or to such Owner or Owners, then and in every such case the City, the Trustee and the
Owners shall, subject to any determination in such proceeding, be restored severally and
respectively to their former positions under the Indenture, and thereafter all rights and remedies
of the Trustee and the Owners shall continue as though no such proceeding had been instituted.
Section 10.07 Restriction on Owner's Action.
(a) Except as otherwise provided in paragraph (b) of this Section, no Owner
of any Bond shall have any right to institute any suit, action or proceeding at law or in equity for
the enforcement of any provision of the Indenture or the execution of any trust under the
Indenture or for any remedy under the Indenture unless such Owner shall have previously given
to the Trustee written notice of the happening of an Event of Default, as provided in this Article,
and the Owners of at least 25% in principal amount of the Bonds then Outstanding shall have
filed a written request with the Trustee, and shall have offered it reasonable opportunity, either to
exercise the powers granted in the Indenture or by the applicable laws of the State of California
or to institute such action, suit or proceeding in its own name, and unless such Owners shall have
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offered to the Trustee adequate security and indemnity against the costs, expenses and liabilities
to be incurred therein or thereby, and the Trustee shall have refused to comply with such request
for a period of 60 days after receipt by it of such notice, request and offer of indemnity, it being
understood and intended that no one or more Owners of Bonds shall have any right in any
manner whatever by his or their action to affect, disturb or prejudice the pledge created by the
Indenture, or to enforce any right under the Indenture, except in the manner therein provided; and
that all proceedings at law or in equity to enforce any provision of the Indenture shall be
instituted, had and maintained in the manner provided in the Indenture and for the ratable benefit
of all Owners of the Outstanding Bonds, subject only to the provisions of Section 11.05.
(b) Nothing in the Indenture or in the Bonds contained shall affect or impair
the obligation of the City, which is absolute and unconditional, to pay on the respective due dates
thereof and at the places therein expressed, but solely from the Net Revenues and the other
moneys pledged under the Indenture, the principal amount, or Redemption Price if applicable, of
the Bonds, and the interest thereon, to the respective Owners thereof, or affect or impair the right,
which is also absolute and unconditional, of any Owner to institute suit for the enforcement of
any such payment.
Section 10.08 Remedies Not Exclusive. No remedy by the terms of the Indenture
conferred upon or reserved to the Trustee or the Owners of the Bonds is intended to be exclusive
of any other remedy, but each and every such remedy shall be cumulative and shall be in addition
to every other remedy given under the Indenture or existing at law or in equity or by statute
whether effective on or after the effective date of this Master Indenture. The assertion or
employment of any right or remedy, under the Indenture or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 10.09 Effect of Waiver and Other Circumstances.
(a) No delay or omission of the Trustee or any Owner of a Bond to exercise
any right or power arising upon the happening of an Event of Default shall impair any right or
power or shall be construed to be a waiver of any such Event of Default or be an acquiescence
therein; and every power and remedy given by this Article to the Trustee or to the Owners of the
Bonds may be exercised from time to time and as often as may be deemed expedient by the
Trustee or by the Owners of the Bonds.
(b) The Owners of not less than sixty percent in principal amount of the
Bonds at the time Outstanding, or their attorneys -in -fact duly authorized, may on behalf of the
Owners of all of the Bonds, waive any Event of Default and its consequences. No such waiver
shall extend to any subsequent or Event of Default or impair any right consequent thereon unless
the provisions of this subsection (b) have been satisfied with respect to such subsequent Event of
Default.
Section 10.10 Notice of Default.
The Trustee shall, within thirty (30) days after obtaining knowledge thereof, mail written
notice of the occurrence of any Event of Default of which the Trustee has knowledge to each
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Credit Provider, each Reserve Financial Guaranty Provider and each Owner of Bonds then
Outstanding of such Owner's address, if any, appearing in the Bond Register.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Execution of Documents and Proof of Ownership. Any request,
direction, consent, or other instrument in writing required or permitted by the Indenture to be
signed or executed by Bondowners may be in any number of concurrent instruments of similar
tenor, and may be signed or executed by such Owners in person or by their attorneys appointed
by an instrument in writing for that purpose, or by any bank, trust company or other depository
for such Bonds. Proof of the execution of any such instrument, or of any instrument appointing
any such attorney, and of the ownership of Bonds shall be sufficient for any purpose of the
Indenture (except as otherwise provided in the Indenture), if made in the following manner:
(a) The fact and date of the execution by any Owner or his or her attorney of
any such instrument and of any instrument appointing any such attorney, may be provided by a
signature guarantee of any bank or trust company located within the United States of America.
Where any such instrument is executed by an officer of a corporation or association or a member
of a partnership on behalf of such corporation, association or partnership, such signature
guarantee shall also constitute sufficient proof of his authority.
(b) As to any Bond, the person in whose name the same shall be registered in
the Bond Register shall be deemed and regarded as the absolute owner for all purposes. None of
the City, the Trustee or any Paying Agent shall be affected by any notice to the contrary.
(c) Nothing contained in the Indenture shall be construed as limiting the City
or the Trustee to such proof, it being intended that the City or the Trustee may accept any other
evidence of the matters stated in this Section which the City or the Trustee may deem sufficient.
Any request or consent of the Owner of any Bond shall bind every future Owner of the same
Bond in respect to anything done or suffered to be done by the City or the Trustee in pursuance
of such request or consent.
Section 11.02 Severability. If any covenant, agreement or provision, or any portion
thereof, contained in the Indenture, or the application thereof to any person or circumstance, is
held to be unconstitutional, invalid or unenforceable, the remainder of the Indenture, and the
application of any such covenant, agreement or provision, or portion thereof, to other persons or
circumstances, shall be deemed severable and shall not be affected thereby, and the Indenture and
the Bonds shall remain valid, and the Bondowners shall retain all valid rights and benefits
accorded to them under the Indenture, the Charter, and the Constitution and statutes of the State.
Section 11.03 General Authorization. The Authorized City Representatives, each
acting singly, are hereby respectively authorized to do and perform from time to time any and all
acts and things consistent with the Indenture necessary or appropriate to carry the same into
effect.
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Section 11.04 Moneys Held for Particular Bonds. Except as otherwise provided in the
Supplemental Indenture authorizing a Series of Bonds, the amounts held by the Trustee, any
Paying Agent or any Escrow Agent for the payment of principal, premium if any, Purchase Price
or interest due on any date with respect to particular Bonds of such Series shall, on and after such
date and pending such payment, be set aside on its books and held in trust by it for the Owners of
the Bonds entitled thereto. None of the City, the Trustee, any Paying Agent or any Escrow Agent
shall be liable to any Owner for interest on amounts so held in trust.
Section 11.05 Credit Providers. (a) Except as limited by Section 7.01(b), a
Supplemental Indenture authorizing a Series of Bonds may provide that any Credit Provider
providing a Credit Support Instrument with respect to Bonds of such Series may exercise any
right under this Master Indenture or the Supplemental Indenture authorizing the issuance of such
Series of Bonds given to the Owners of the Bonds to which such Credit Support Instrument
relates in lieu of such Owners.
(b) All provisions under this Master Indenture or a Supplemental Indenture
authorizing the exercise of rights by a Credit Provider with respect to Bonds of a Series,
including without limitation actions relating to consents, approvals, directions, waivers,
appointments and requests, shall be deemed not to require or permit such consents, approvals,
directions, waivers, appointments, requests or other actions and shall be read as if the Credit
Provider were not mentioned therein (i) during any period during which there is a default by such
Credit Provider under the applicable Credit Support Instrument or (ii) after the applicable Credit
Support Instrument shall at any time for any reason cease to be valid and binding on the Credit
Provider, or shall be declared to be null and void by final judgment of a court of competent
jurisdiction, or after the Credit Support Instrument has been rescinded, repudiated or terminated,
or after a receiver, conservator or liquidator has been appointed for the Credit Provider; provided,
however, that the payment of amounts due (including without limitation all indemnity payments)
to the Credit Provider pursuant to the terms of this Master Indenture, any Supplemental
Indenture, any Credit Support Agreement shall continue in full force and effect. The foregoing
shall not affect any other rights of a Credit Provider.
(c) All provisions in the Indenture relating to the rights of a Credit Provider
shall be of no force and effect if there is no Credit Support Instrument in effect and all amounts
owing to the Credit Provider under the Credit Support Instrument have been paid.
Section 11.06 Reserve Financial Guaranty Providers. (a)All provisions under this
Master Indenture or a Supplemental Indenture authorizing the exercise of rights by a Reserve
Financial Guaranty Provider with respect to Bonds of a Series, including without limitation
actions relating to consents, approvals, directions, waivers, appointments and requests, shall be
deemed not to require or permit such consents, approvals, directions, waivers, appointments,
requests or other actions and shall be read as if the Reserve Financial Guaranty Provider were not
mentioned therein (i) during any period during which there is a default by such Reserve Financial
Guaranty Provider under the applicable Reserve Financial Guaranty or (ii) after the applicable
Reserve Financial Guaranty shall at any time for any reason cease to be valid and binding on the
Reserve Financial Guaranty Provider, or shall be declared to be null and void by final judgment
of a court of competent jurisdiction, or after the Reserve Financial Guaranty has been rescinded,
DOCSLA1:438186.4
42797-2 EJC 74
repudiated or terminated, or after a receiver, conservator or liquidator has been appointed for the
Reserve Financial Guaranty Provider; provided, however, that the payment of amounts due
(including without limitation all indemnity payments) to the Reserve Financial Guaranty
Provider pursuant to the terms of this Master Indenture, any Supplemental Indenture, any
Reserve Financial Guaranty shall continue in full force and effect. The foregoing shall not affect
any other rights of a Reserve Financial Guaranty Provider.
(b) All provisions in the Indenture relating to the rights of a Reserve Financial
Guaranty Provider shall be of no force and effect if there is no Reserve Financial Guaranty
Provider in effect issued by such Reserve Financial Guaranty Provider and all amounts owing to
such Reserve Financial Guaranty Provider Credit Provider under the Reserve Financial Guaranty
have been paid.
Section 11.07 No Recourse on Bonds. Neither the members of the City nor the officers
or employees of the City shall be individually liable on the Bonds or in respect of any
undertakings by the City under this Master Indenture, any Supplemental Indenture or any Bond.
Section 11.08 Unclaimed Moneys. Anything in this Master Indenture or any
Supplemental Indenture to the contrary notwithstanding, any moneys held by the Trustee, an
Escrow Agent or any Paying Agent in trust for the payment and discharge of any of the Bonds
which remain unclaimed for two years after the date when such Bonds have become due and
payable, either at their stated maturity dates, tender for purchase or by call for redemption, if such
moneys were held by the Trustee, an Escrow Agent or a Paying Agent at such date, or for two
years after the date of deposit of such moneys if deposited with the Trustee, an Escrow Agent or
a Paying Agent after the date when such Bonds or the Purchase Price thereof became due and
payable, shall, at the written request of an Authorized City Representative be repaid by such
Trustee, Escrow Agent or Paying Agent to the City, as its absolute property and free and clear of
any trust, lien, pledge or assignment securing said Bonds, and such Trustee, Escrow Agent or
Paying Agent shall thereupon be released and discharged with respect thereto and the Owners of
such Bonds shall look only to the City for the payment of such Bonds; provided, however, that
before being required to make any such payment to the City, the Trustee, the Escrow Agent or
the Paying Agent, as applicable, shall, at the expense of the City, mail, postage prepaid to the
Owners of such Bonds, at the last address, if any, appearing upon the Bond Register a notice that
said moneys remain unclaimed and that, after a date named in said notice, which date shall be not
less than 30 days after the date of the mailing of such notice, the balance of such moneys then
unclaimed shall be returned to the City.
Section 11.09 Holidays. If the date for making any payment or the last date for
performance of any act or the exercising of any right, as provided in any Indenture, shall not be a
Business Day, such payment may be made or act performed or right exercised on the next
succeeding Business Day, with the same force and effect as if done on the nominal date provided
in the Indenture, and, unless otherwise specifically provided in a Supplemental Indenture, no
interest shall accrue for the period after such nominal date.
DOCSLA1:438186.4
42797-2 EJC 75
Section 11.10 Governing Law. The Indenture and each Bond shall be interpreted,
governed by and construed for all purposes in accordance with the laws of the State for contracts
executed and to be performed in the State.
Section 11.11 Headings Not Binding. The headings in this Master Indenture are for
convenience only and in no way define, limit or describe the scope or intent of any provisions or
sections of this Master Indenture.
Section 11.12 Preservation and Inspection of Documents. All documents received by
the Trustee, any Paying Agent or any Escrow Agent under the provisions of the Indenture shall
be retained in its possession and shall be subject at all reasonable times to the inspection by the
City, the Trustee, any Credit Provider and any Owner of an Outstanding Bond and their agents
and their representatives, any of whom may make copies thereof.
Section 11.13 Parties Interested. Nothing in the Indenture expressed or implied is
intended or shall be construed to confer upon, or to give to, any person or entity, other than the
City, the Trustee, each Paying Agent, each Escrow Agent, the Credit Providers, the Reserve
Financial Guaranty Providers and the Owners of the Bonds, any right, remedy or claim under or
by reason of the Indenture or any covenant, condition or stipulation thereof; and all the
covenants, stipulations, promises and agreements in the Indenture contained by and on behalf of
the City shall be for the sole and exclusive benefit of the City, the Trustee, each Paying Agent,
each Escrow Agent, the Credit Providers, the Reserve Financial Guaranty Providers and the
Owners of the Bonds.
DOCSLA1:438186.4
42797-2 EJC 76
IN WITNESS WHEREOF, the City of Vernon has caused these presents to be signed in
its name and on its behalf by its [ ] and attested by its City Clerk, and to evidence its
acceptance of the trust hereby created, BNY Western Trust Company has caused these presents
to be signed in its name and on its behalf by an authorized officer, in each case all as of the date
first above written.
Attest:
City Clerk
CITY OF VERNON
By —
Name:
Title:
BNY WESTERN TRUST COMPANY, as Trustee
Authorized Officer
DOCSLA1:438186.4
42797-2 EJC 77
0
OHS DRAFT 2/18/03
FIRST SUPPLEMENTAL
INDENTURE OF TRUST
between
CITY OF VERNON
and
BNY WESTERN TRUST COMPANY, as Trustee
Relating to
City of Vernon
Malburg Generating Station Project
Electric System Revenue Bonds,
2003 Series A
Dated as of March 1, 2003
DOCSLA1:413600.10
42797-2 SAH
TABLE OF CONTENTS
Page
ARTICLE I AUTHORITY AND DEFINITIONS............................................................... 1
Section 1.01.
Supplemental Indenture of Trust..........................................................
1
Section 1.02.
Authority for the First Supplemental Indenture of Trust .....................
2
Section1.03.
Definitions............................................................................................
2
Section1.04.
Interpretation......................................................................................
16
ARTICLE H THE 2003 Series A BONDS..........................................................................
16
Section 2.01.
Principal Amount and Designation; Conditions to Issuance .............
16
Section 2.02.
Terms of the 2003 Series A Bonds; Registration;
Denominations; Payment of Principal and Interest ............................
17
Section 2.03.
Payment of Principal and Interest ....................................................
18
Section 2.04.
Daily Interest Rate Period..................................................................
20
Section 2.05.
Weekly Interest Rate Period...............................................................
22
Section 2.06.
Long -Term Interest Rate Period.........................................................
23
Section 2.07.
Commercial Paper Interest Rate Period .............................................
25
Section 2.08.
Rescission of Conversion; Conditions to Conversion .......................
28
Section 2.09.
ARB Provisions.................................................................................
30
ARTICLE III REDEMPTION OF 2003 SERIES A BONDS ..............................................
38
Section 3.01.
Terms of Redemption........................................................................
38
Section 3.02.
Selection of 2003 Series A Bonds for Redemption ...........................
40
ARTICLE IV TENDER OF BONDS...................................................................................
40
Section 4.01.
Optional Tender During Daily Interest Rate Period or Weekly
InterestRate Period............................................................................
40
Section 4.02.
Mandatory Tender Following Commercial Paper Term ....................
41
Section 4.03.
Mandatory Tender on First Day of Interest Rate Period ....................
42
Section 4.04.
Mandatory Tender Upon Termination or Expiration of 2003
Series A Credit Support Instrument ...................................................
42
Section 4.05.
Notice to Owners of Mandatory Tender ............................................
42
Section 4.06.
Undelivered Bonds.............................................................................
43
Section 4.07.
General Provisions Relating to Tenders .............................................
44
Section 4.08.
Remarketing of 2003 Series A Bonds; Notice of Interest Rates........
48
Section 4.09.
2003 Series A Credit Support Instrument; Alternate 2003
Series A Credit Support Instruments .................................................
49
DOCSLA 1:413600.10
42797-2 SAH
TABLE OF CONTENTS
(continued)
Page
Section 4.10. Termination of 2003 Series A Credit Support Instrument;
Purchase by 2003 Series A Credit Provider; Notices .........................
50
ARTICLE V APPLICATION OF PROCEEDS..................................................................
51
Section 5.01. Application of Proceeds of 2003 Series A Bonds ..............................
51
Section 5.02. 2003 Series Costs of Issuance Fund ...................................................
52
Section 5.03. 2003 Construction Fund.....................................................................
52
ARTICLE VI CERTAIN TAX MATTERS.........................................................................
54
Section 6.01. Tax Covenants...................................................................................
54
Section6.02. Rebate Fund.......................................................................................
55
ARTICLE VII MISCELLANEOUS......................................................................................
55
Section 7.01. Indenture to Remain in Effect............................................................
55
Section 7.02. Provisions Relating to 2003 Series A Credit Provider .......................
55
Section 7.03. Continuing Disclosure.......................................................................
56
Section 7.04. Counterparts.......................................................................................
56
EXHIBIT A FORM OF 2003 SERIES A BONDS ..........................................................
A-1
EXHIBIT B AUCTION AND SETTLEMENT PROCEDURES ....................................
B-1
EXHIBIT C FORM OF NOTICE OF CURE OF ARB PAYMENT DEFAULT............
C-1
EXHIBIT D FORM OF AUCTION AGENT AGREEMENT .........................................
D-1
EXHIBIT E FORM OF BROKER -DEALER AGREEMENT .........................................E-1
EXHIBIT F FORM OF MARKET AGENT AGREEMENT ...........................................
F-1
EXHIBIT G FORM OF REQUISITION FOR MONEY FROM THE 2003
CONSTRUCTIONFUND...........................................................................
G-1
DOCSLA1:413600.10 -li-
42797-2 SAH
FIRST SUPPLEMENTAL INDENTURE OF TRUST
THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST, dated as of
March 1, 2003, is entered into by and between the City of Vernon (the "City"), a municipal
corporation and chartered city of the State of California and BNY Western Trust Company, as
trustee (the "Trustee"), a banking corporation, duly established and existing under and pursuant
to the laws of the State of California, authorized to accept and execute trusts of the character in
the Indenture set forth;
WITNESSETH:
WHEREAS, the City has entered into the Indenture of Trust, dated as of March 1,
2003 (the "Master Indenture") by and between the City and the Trustee to provide for the
issuance from time to time by the City of Bonds to pay the Costs of Capital Improvements and to
refund Outstanding Parity Obligations (capitalized terms used herein shall have the meanings
given such terms pursuant to Section 1.03); and
WHEREAS, the Master Indenture authorizes the City and the Trustee to enter
into Supplemental Indentures to provide for the issuance of Bonds; and
WHEREAS, the City desires to issue $ aggregate principal
amount of its 2003 Series A Bonds in order to provide a portion of the moneys to finance the
Malburg Generating Station and to pay certain costs in connection with the issuance of the 2003
Series Bonds; and
WHEREAS, the City has determined that all acts and things have been done and
performed which are necessary to make the Indenture, as supplemented by this First
Supplemental Indenture, a valid and binding agreement for the security of the 2003 Series A
Bonds authenticated and delivered hereunder;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
FIRST SUPPLEMENTAL INDENTURE OF TRUST WITNESSETH:
That, in consideration of the premises, the acceptance by the Trustee of the trusts
hereby created and originally created by the Master Indenture, the mutual covenants herein
contained and the purchase and acceptance of the 2003 Series A Bonds by the Owners thereof,
and for other valuable consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payment of the principal of, Redemption Price, if any, and interest on the 2003 Series
A Bonds according to their tenor and effect, and the performance and observance by the City of
all the covenants and conditions in the Indenture and in the 2003 Series A Bonds contained on its
part to be performed, it is agreed by and between the City and the Trustee as follows:
DOCSLA1:413600.10
42797-2 SAH
ARTICLE I
AUTHORITY AND DEFINITIONS
Section 1.01. Supplemental Indenture of Trust. This First Supplemental Indenture is
supplemental to the Master Indenture.
Section 1.02. Authority for the First Supplemental Indenture of Trust. This First
Supplemental Indenture is entered into (a) pursuant to the Charter and Bond Ordinance and (b) in
accordance with Article II and Article VII of the Master Indenture.
Section 1.03. Definitions.
(a) Except as otherwise defined by this First Supplemental Indenture, all terms
which are defined in Section 1.01 of the Master Indenture shall have the same meanings,
respectively, in this First Supplemental Indenture as such terms are given in said Section 1.01 of
the Master Indenture.
(b) Additional Definitions. The following terms shall, with respect to the
2003 Series A Bonds and for all purposes hereof, have the meanings set forth below:
"AA Composite Commercial Paper Rate" means, as of any date of determination,
the interest equivalent of the 30-day rate on financial commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA." by S&P, or the equivalent of such rating by S&P
or another nationally recognized securities rating agency, as such 30-day rate is made available
on a discount basis or otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date of determination. If, however, the Federal Reserve Bank of
New York does not make available any such rate, then the arithmetic average of the interest
equivalent of the 30-day rate on commercial paper placed on behalf of such issuers, as quoted to
the Auction Agent on a discount basis or otherwise, by the Commercial Paper Dealers, as of the
close of business on the Business Day immediately preceding such date of determination. If any
Commercial Paper Dealer does not quote a commercial paper rate required to determine the
"AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper Rate shall be
determined on the basis of the quotation or quotations furnished by the remaining Commercial
Paper Dealer or Commercial Paper Dealers. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for commercial paper of a
given day's maturity shall be equal to the product of (i) 100 multiplied by (ii) the quotient
(rounded upward to the next higher one thousandth (.001) of 1%) of (x) the discount rate
(expressed in decimals) divided by (y) the difference between (1) 1.00 and (2) a fraction, the
numerator of which shall be the product of the discount rate (expressed in decimals) multiplied
by the number of days from (and including) the date of determination to (but excluding) the date
on which such commercial paper matures and the denominator of which shall be 360.
hereof.
"Additional Funding Amount" has the meaning ascribed to it in Section 4.07(e)(ii)
DOCSLA1:413600.10
42797-2 SAH
-2-
"After -Tax Equivalent Rate" means, on any date of determination, the interest rate
per annum equal to the product of (i) the "AA" Composite Commercial Paper Rate on such date
and (ii) 1.00 minus the Statutory Corporate Tax Rate on such date.
"All -Hold Rate" means, on any date of determination, the interest rate per annum
equal to 85% (as such percentage may be adjusted pursuant to Section 2.09(d) hereof) of the
lesser of (i) the After -Tax Equivalent Rate on such date and (ii) the Index on such date; provided,
that in no event shall the All -Hold Rate be more than the ARB Maximum Rate.
"Alternate 2003 Series A Credit Support Instrument" means a line of credit,
standby purchase agreement or similar 2003 Series A Credit Support Instrument issued by a
commercial bank or other financial institution and delivered to the Tender Agent in accordance
with Section 4.09 hereof which replaces the 2003 Series A Credit Support Instrument then in
effect.
"Applicable ARB Rate" means, while the 2003 Series A Bonds are in an ARB
Interest Rate Period, the rate per annum at which interest accrues with respect to the 2003 Series
A Bonds for any ARB Interest Period.
"Applicable Percentage" means, with respect to any 2003 Series A Bonds which
are ARBs on any date of determination, the percentage determined (as such percentage may be
adjusted pursuant to Section 2.09(d) hereof), based on Moody's or S&P ratings of such 2003
Series A Bonds in effect at the close of business on the Business Day immediately preceding
such date, or, if such 2003 Series A Bonds are then rated by both Moody's and S&P, based on
the lower of such ratings on such Business Day, as set forth below:
Credit Ratings
Moody Standard & Poor's
"Aaa" "AAA"
"Aa„ «,NA„
«A„ «A„
"Baa" "BBB"
Below `Baa" Below "BBB"
Applicable Percentage
[175%
175%
175%
200%
265%]
provided, that if any ARBs are not then rated by an ARB Rating Agency, the
Applicable Percentage with respect to such ARBs shall be 265% of the Index on such date. For
purposes of this definition, S&P Rating Categories of "AAA", "AA", "A" and "BBB," and
Moody's Rating Categories of "Aaa," "Aa," "A" and "Baa" shall refer to and include the
respective Rating Categories correlative thereto if either or both of such rating agencies shall
have changed or modified their generic Rating Categories or if Moody's or S&P shall not rate, or
no longer rate, the ARBs or shall have been replaced.
"ARBs" means, on any date, the 2003 Series A Bonds in an ARB Interest Rate
Period as to which interest accrues on such date as auction rate securities as provided in Section
2.09 hereof and the Auction Procedures applicable thereto.
DOCSLA1:413600.10
42797-2 SAH -3-
"ARB Beneficial Owner" means the Person who is the beneficial owner of an
ARB according to the records of (i) the Securities Depository or its participants while such ARB
is a Book -Entry Bond or (ii) the Trustee while the ARBs are not Book -Entry Bonds.
"ARB Defaulted Interest" means interest on any ARB which is payable but is not
punctually paid or duly provided for on any ARB Interest Payment Date.
"ARB Interest Payment Date" means, with respect to ARBs, the Business Day
immediately following each Auction Period for such ARBs.
"ARB Interest Period" means the period commencing on and including an ARB
Interest Payment Date and ending on and including the day immediately preceding the next
succeeding ARB Interest Payment Date; provided, that the first ARB Interest Period within each
ARB Interest Rate Period shall commence on and include the applicable Conversion Date.
"ARB Interest Rate" means the interest rate with respect to ARBs determined as
provided in Section 2.09 hereof and the Auction Procedures.
"ARB Interest Rate Period" means each Interest Rate Period during which the
2003 Series A Bonds are ARBs.
"ARB Maximum Rate" means, on any date of determination, the interest rate per
annum equal to the lesser of (i) the Applicable Percentage of the higher of (A) the After -Tax
Equivalent Rate on such date and (B) the Index on such date, and (ii) 15% per annum; provided,
that in no event shall the ARB Maximum Rate be more than the Maximum Lawful Rate.
"ARB Payment Default" means (i) a default in the due and punctual payment of
any installment of interest on ARBs or (ii) a default in the due and punctual payment of any
principal of or premium, if any, on ARBs at stated maturity or pursuant to a mandatory
redemption.
"ARB Rating Agency" means Moody's or S&P, or if either Moody's or S&P
discontinues its securities rating service, then such other nationally recognized securities rating
agency as may be specified by the Market Agent with the consent of the City.
"Auction" means the implementation of the Auction Procedures on an Auction
Date.
"Auction Agent" means a Person meeting the requirements of Section 2.09(f)
hereof which is a party to an Auction Agent Agreement and agrees with the Trustee to perform
the duties of the Auction Agent herein with respect to ARBs.
"Auction Agent Agreement" means, on any date, an auction agent agreement in
substantially the form of Exhibit D attached hereto, as from time to time in effect.
"Auction Agent Fee" has the meaning provided in each Auction Agent
Agreement.
DOCSLA1:413600.10
42797-2 SAH -4-
"Auction Date" means, with respect to ARBs, the Business Day immediately
preceding the first day of each Auction Period, other than
(i) each Auction Period commencing after the ARBs are no longer Book -
Entry Bonds;
(ii) each Auction Period commencing after the occurrence and during the
continuance of an ARB Payment Default; or
(iii) any Auction Period commencing less than two Business Days after the
cure or waiver of an ARB Payment Default.
The Auction Date determined as provided in this definition may be adjusted as
provided in Section 2.096) hereof.
"Auction Period" means (i) with respect to ARBs in a seven-day mode, any of (A)
a period, generally of seven days, beginning on and including a Monday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a Sunday) and
ending on and including the Sunday thereafter (unless such Sunday is not followed by a Business
Day, in which case ending on and including the next succeeding day which is followed by a
Business Day), (B) a period, generally of seven days, beginning on and including a Tuesday (or
the day following the last day of the prior Auction Period if the prior Auction Period does not end
on a Monday) and ending on and including the Monday thereafter (unless such Monday is not
followed by a Business Day, in which case ending on and including the next succeeding day
which is followed by a Business Day), (C) a period, generally of seven days, beginning on and
including a Wednesday (or the day following the last day of the prior Auction Period if the prior
Auction Period does not end on a Tuesday) and ending on and including the Tuesday thereafter
(unless such Tuesday is not followed by a Business Day, in which case ending on and including
the next succeeding day which is followed by a Business Day), (D) a period, generally of seven
days, beginning on and including a Thursday (or the day following the last day of the prior
Auction Period if the prior Auction Period does not end on a Wednesday) and ending on and
including the Wednesday thereafter (unless such Wednesday is not followed by a Business Day,
in which case ending on and including the next succeeding day which is followed by a Business
Day) or (E) a period, generally of seven days, beginning on and including a Friday (or the day
following the last day of the prior Auction Period if the prior Auction Period does not end on a
Thursday) and ending on and including the Thursday thereafter (unless such Thursday is not
followed by a Business Day, in which case ending on and including the next succeeding day
which is followed by a Business Day) and (ii) with respect to ARBs in a 35-day mode, any of (A)
a period, generally of 35 days, beginning on and including a Monday (or the day following the
last day of the prior Auction Period if the prior Auction Period does not end on a Sunday) and
ending on and including the fifth Sunday thereafter (unless such Sunday is not followed by a
Business Day, in which case ending on and including the next succeeding day which is followed
by a Business Day), (B) a period, generally of 35 days, beginning on and including a Tuesday (or
the day following the last day of the prior Auction Period if the prior Auction Period does not end
on a Monday) and ending on and including the fifth Monday thereafter (unless such Monday is
not followed by a Business Day, in which case ending on and including the next succeeding day
followed by a Business Day), (C) a period, generally of 35 days, beginning on and including a
DOCSLA1:413600.10
42797-2 SAH _5_
Wednesday (or the day following the last day of the prior Auction Period if the prior Auction
Period does not end on a Tuesday) and ending on and including the fifth Tuesday thereafter
(unless such Tuesday is not followed by a Business Day, in which case ending on and including
the next succeeding day followed by a Business Day), (D) a period, generally of 35 days,
beginning on and including a Thursday (or the day following the last day of the prior Auction
Period if the prior Auction Period does not end on a Wednesday) and ending on and including the
fifth Wednesday thereafter (unless such Wednesday is not followed by a Business Day, in which
case ending on and including the next succeeding day followed by a Business Day) or (E) a
period, generally of 35 days, beginning on and including a Friday (or the day following the last
day of the prior Auction Period if the prior Auction Period does not end on a Thursday) and
ending on and including the fifth Thursday thereafter (unless such Thursday is not followed by a
Business Day, in which case ending on and including the next succeeding day which is followed
by a Business Day); provided, however, that in the event of a Conversion of the 2003 Series A
Bonds from another Interest Rate Period to an ARB Interest Rate Period the initial Auction
Period with respect to such ARBs following such Conversion shall begin on and include the
Conversion Date.
"Auction Procedures" means, with respect ARBs, the provisions set forth in
Section 2 of the Auction and Settlement Procedures set forth in Exhibit B attached hereto.
"Auction Rate" means, with respect to the interest rate on ARBS, the rate of
interest per annum that results from implementation of the Auction Procedures, and determined
as described in Section 2(c)(ii) of the Auction Procedures; provided, however, that the Auction
Rate shall not exceed the ARB Maximum Rate.
"Authorized Denominations" means with respect to the 2003 Series A Bonds in
any (i) Long -Term Interest Rate Period, $5,000 and any integral multiple thereof, (ii)
Commercial Paper Interest Rate Period, Daily Interest Rate Period or Weekly Interest Rate
Period, $100,000 and any integral multiple of $5,000 in excess of $100,000, and (iii) ARB
Interest Rate Period, $25,000 and any integral multiple thereof.
"Available Moneys" means (a) during any period in which a 2003 Series A Credit
Support Instrument is in effect with respect to the Outstanding 2003 Series A Bonds, (i) funds
received by the Trustee pursuant to any 2003 Series A Credit Support Instrument; (ii)
remarketing proceeds received by the Tender Agent from the Remarketing Agent or any
purchaser of 2003 Series A Bonds (other than funds provided by the City or any affiliate of the
City); (iii) moneys which have been continuously on deposit with the Trustee (A) held in any
separate and segregated fund, account or subaccount established hereunder in which no other
moneys which are not Available Moneys are held, and (B) which have so been on deposit with
the Trustee for at least 124 consecutive days from their receipt by the Trustee and not
commingled with any moneys so held for less than said period and during and prior to which
period, and as of the date of the application thereof to a payment with respect to the 2003 Series
A Bonds, no Event of Bankruptcy has occurred with respect to the City; (iv) any other moneys if
there is delivered to the Trustee at the time such moneys are deposited with the Trustee an
opinion of counsel (which may assume that no Owner of 2003 Series A Bonds is an "insider"
within the meaning of the Federal Bankruptcy Code) from a firm experienced in bankruptcy
matters to the effect that the use of such moneys to pay amounts due on 2003 Series A Bonds
DOCSLA1:413600.10
42797-2 SAH -6-
would not be recoverable from the Owners thereof pursuant to Section 550 of the Federal
Bankruptcy Code as avoidable preferential payments under Section 547 of the Federal
Bankruptcy Code in the event of the occurrence of an Event of Bankruptcy with respect to the
City; or (v) proceeds of the investment of funds qualifying as Available Moneys under the
foregoing clauses; (b) during any period in which no 2003 Series A Credit Support Instrument is
in effect with respect to the Outstanding 2003 Series A Bonds, any moneys deposited with the
Trustee.
"Beneficial Owner" means any Person which has or shares the power, directly or
indirectly, to make investment decisions concerning ownership of any of the 2003 Series A
Bonds (including any Person holding 2003 Series A Bonds through nominees, depositories or
other intermediaries).
"Bid" has the meaning provided in Section 2(a)(i) of the Auction Procedures.
"BMA Index" means the "BMA Municipal Swap Index" (such index previously
known as the "PSA Municipal Swap Index") announced by Municipal Market Data on the rate
determination date and based upon the weekly interest rate resets of Tax -Exempt variable rate
issues included in a database maintained by Municipal Market Data which meets specified
criteria established by the Bond Market Association. The BMA Index shall be based upon
current yields of high -quality weekly adjustable variable rate demand bonds which are subject to
tender upon seven days notice, the interest on which is Tax -Exempt and not subject to any
personal "alternative minimum tax" or similar tax under the Code unless all Tax -Exempt
securities are subject to such tax.
"Bond Purchase Fund" means the "2003 Series A Bond Purchase Fund"
established pursuant to Section 4.07 hereof.
"Broker -Dealer" means any broker or dealer (each as defined in the Securities
Exchange Act of 1934), commercial bank or other entity permitted by law to perform the
functions required of a Broker -Dealer set forth in the Auction Procedures which (i) is a
participant in or member of the Securities Depository as determined by the rules or bylaws of the
Securities Depository (or an affiliate of such a participant or member), (ii) has been appointed as
such by the City pursuant to Section 2.09(g) hereof, and (iii) has entered into a Broker -Dealer
Agreement that is in effect on the date of reference.
"Broker -Dealer Agreement" means, on any date, the agreement in substantially
the form of Exhibit E attached hereto between the Auction Agent and a Broker -Dealer pursuant
to which the Broker -Dealer agrees to participate in Auctions as set forth in the Auction
Procedures, as from time to time amended or supplemented.
"Business Day" means a day which is not (a) a Saturday, Sunday or any other day
bank institutions located in New York, New York, or the city or cities in which the principal or
other designated corporate office of the Trustee, the Tender Agent, the 2003 Series A Credit
Provider, the Remarketing Agent or the 2003 Series A Credit Provider (if any) is located are
required or authorized to close, or (b) a day on which The New York Stock Exchange is closed.
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"Calendar Week" means with respect to the 2003 Series A Bonds in a Weekly
Interest Rate Period the period during which interest accrues with respect to the 2003 Series A
Bonds at a particular Weekly Interest Rate and will be the period from Wednesday of one week
(whether or not a Business Day) to and including the Tuesday of the following week (whether or
not a Business Day); provided that the initial Calendar Week for each Weekly Interest Rate
Period shall be the period from the first day of such Weekly Interest Rate Period to the next
succeeding Tuesday (whether or not a Business Day); and provided further that the final Calendar
Week for a Weekly Interest Rate Period which ends on a day other than a Tuesday shall be the
period from the Wednesday (whether or not a Business Day) preceding the last day of such
Weekly Interest Rate Period to the last day of such Weekly Interest Rate Period.
"Change of Tax Law" means, with respect to any ARB Beneficial Owner, any
amendment to the Code or other statute enacted by the Congress of the United States or any
temporary, proposed or final regulation promulgated by the United States Treasury after the
Delivery Date, which (i) changes or would change any deduction, credit or other allowance
allowable in computing liability for any federal tax with respect to, or (ii) imposes or would
impose or reduces or would reduce or increases or would increase any federal tax (including, but
not limited to, preference or excise taxes) upon, any interest earned by any holder of Tax -Exempt
securities.
"Commercial Paper Dealer" means each of Banc of America Securities, LLC, its
successors and assigns, and any other commercial paper dealer appointed as provided in Section
2.09(b)(ii) hereof.
"Commercial Paper Interest Rate Period" means each Interest Rate Period,
comprised of Commercial Paper Terms, during which Commercial Paper Term Rates are in
effect with respect to the 2003 Series A Bonds.
"Commercial Paper Rate" means, with respect to each 2003 Series A in a
Commercial Paper Interest Rate Period, an interest rate with respect to such 2003 Series A Bond
established for a Commercial Paper Term in accordance with Section 2.07 hereof.
"Commercial Paper Term" means, with respect to any 2003 Series A Bond in a
Commercial Paper Interest Rate Period, each period established in accordance with Section 2.07
hereof during which such 2003 Series A Bond shall bear interest at a particular Commercial
Paper Rate.
"Conversion" means a conversion of the 2003 Series A Bonds from one Interest
Rate Period to another Interest Rate Period.
"Conversion Date" means the effective date of a Conversion.
"Daily Interest Rate" means an interest rate with respect to the 2003 Series A
Bonds in a Daily Interest Rate Period established in accordance with Section 2.04 hereof.
"Daily Interest Rate Period" shall mean each Interest Rate Period during which
Daily Interest Rates are in effect.
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"Delivery Date" means , 2003.
"Differential Interest Amount" shall have the meaning ascribed to such term in the
Initial 2003 Series A Credit Support Instrument, or if an Alternate 2003 Series A Credit Support
Instrument is in place, the meaning ascribed to the equivalent term in such Alternate 2003 Series
A Credit Support Instrument.
"Drawing Time" means, with respect to the Initial 2003 Series A Credit Support
Instrument, 1:00 p.m., New York City time, and with respect to each Alternate 2003 Series A
Credit Support Instrument, the time specified therein by which the Tender Agent must submit a
draw request in order to receive immediately available funds on the date such draw request is
made.
"Existing Owner" means, with respect to any Auction, a Person who was listed as
the ARBs Beneficial Owner in the applicable Existing Owner Registry at the close of business on
the Business Day immediately preceding such Auction.
"Existing Owner Registry" means, with respect to ARBs, the registry of Persons
who are the ARB Beneficial Owners of the ARBs, maintained by the Auction Agent as provided
in the Auction Agent Agreement.
"Expiration Date" means (i) the date upon which a 2003 Series A Credit Support
Instrument is scheduled to expire (taking into account any extensions of such Expiration Date by
virtue of extensions of a particular 2003 Series A Credit Support Instrument, from time to time)
in accordance with its terms, including without limitation, termination upon delivery of an
Alternate 2003 Series A Credit Support Instrument to the Trustee and (ii) the date upon which a
2003 Series A Credit Support Instrument terminates following voluntary termination by the City
pursuant to Section 4.10 hereof.
"First Supplemental Indenture" shall mean this First Supplemental Indenture of
Trust, supplementing the Master Indenture, as the same may be amended and supplemented in
accordance with the provisions of the Master Indenture.
"Fixed Rate Conversion Date" means the Conversion Date for the 2003 Series A
Bonds to a Long -Term Interest Rate for a Long -Term Interest Rate Period ending on the day
immediately preceding the Maturity Date.
"Hold Order" has the meaning provided in Section 2(a)(i) of the Auction
Procedures.
"Index" means, with respect ARBs, on any date of determination, the BMA Index
or, if the BMA Index is not available, the Index so determined by the Market Agent for ARBs,
which shall equal the prevailing rate for bonds rated in the highest short-term Rating Category by
Moody's and S&P that are subject to tender by the holders thereof for purchase on not more than
seven (7) days notice and the interest on which is (i) variable on a weekly basis, (ii) Tax -Exempt,
and (iii) not subject to an "alternative minimum tax" or similar tax under the Code, unless all
Tax -Exempt securities are subject to such tax.
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"Initial 2003 Series A Credit Support Agreement" means that certain
Reimbursement Agreement, dated as of March 1, 2002, between the City and the Initial 2003
Series A Credit Support Provider, as the same may be amended and supplemented in accordance
with its terms.
"Initial 2003 Series A Credit Support Instrument" means that certain irrevocable,
direct -pay letter of credit issued by the Initial 2003 Series A Credit Support Provider and
delivered to the Trustee on the Delivery Date, or any extension or renewal thereof.
"Initial 2003 Series A Credit Support Provider" means Bank of America, N.A.
"Interest Accrual Date" means (i) with respect to each Daily Interest Rate Period,
the first day thereof and, thereafter, the first day of each calendar month, (ii) with respect to each
Weekly Interest Rate Period, the first day thereof and, thereafter, the first Wednesday of each
calendar month, (iii) with respect to each Long -Term Interest Rate Period, the first day thereof,
and thereafter, each 1, and 1, (iv) with respect to each any ARB Interest Rate
Period, the first day thereof and, thereafter, [the last day of each Auction Period], and (v) with
respect to each Commercial Paper Term within a Commercial Paper Interest Rate Period, the first
day thereof.
"Interest Payment Date" means (i) with respect to each Daily Interest Rate Period,
the fifth Business Day of each calendar month, (ii) with respect to each Weekly Interest Rate
Period, the first Wednesday of each calendar month (or the next succeeding Business Day if such
Wednesday is not a Business Day); (iii) with respect to each Long -Term Interest Rate Period,
each 1 and 1 or if any such 1 or 1 is not a Business Day, the
next succeeding Business Day; provided that the first interest payment made for any Long -Term
Interest Rate Period shall be at least ninety (90) days from the first day of such period; (iv) with
respect to each 2003 Series A Bond in each Commercial Paper Interest Rate Period, the day next
succeeding the last day of each Commercial Paper Term for such 2003 Series A Bond; (v) with
respect to each ARB Interest Rate Period, each ARB Interest Payment Date; (vi) with respect to
each Interest Rate Period, the day next succeeding the last day thereof; and (vii) with respect to
2003 Series A Credit Provider Bonds, the dates set forth in the applicable 2003 Series A Credit
Support Agreement.
"Interest Rate Period" means a Daily Interest Rate Period, a Weekly Interest Rate
Period, a Commercial Paper Interest Rate Period, a Long -Term Interest Rate Period or an ARB
Interest Rate Period.
"Long -Term Conversion Date" means the date on which the 2003 Series A Bonds
begin to bear interest at a Long -Term Interest Rate pursuant to the provisions of Section 2.06
hereof and such term shall include the Fixed Rate Conversion Date for the 2003 Series A Bonds.
"Long -Term Interest Rate" means an interest rate with respect to the 2003 Series
A Bonds during a Long -Term Interest Rate Period established in accordance with Section 2.06
hereof.
"Long -Term Interest Rate Period" means each Interest Rate Period during which a
Long -Term Interest Rate is in effect with respect to the 2003 Series A Bonds.
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"Malburg Generating Station" means an approximately 134 megawatt electric
generating facility to be located at Substation A of the City's Electric System, consisting of two
gas combustion turbine generators and a steam turbine generator and related facilities and
equipment, including electric facilities necessary for the station to interconnect with the Electric
System and all rights, properties and improvements necessary therefor, including fuel and water
facilities and resources and rights thereto or therein, and capital improvements thereto (including
replacement of any generating unit presently included in the station) that may be constructed
from time to time, and interests in certain other property and rights relating thereto.
"Market Agent" means a Person meeting the requirements of Section 2.09(e)
hereof which is a party to a Market Agent Agreement and agrees with the Trustee to perform the
duties of the Market Agent herein with respect to ARBs.
"Market Agent Agreement" means, on any date, a market agent agreement in
substantially the form of Exhibit F attached hereto, in each case as from time to time in effect.
"Maturity Date" means
"Maximum Interest Rate" means: (i) with respect to 2003 Series A Bonds other
than ARBs and 2003 Series A Credit Provider Bonds, twelve percent (12%) per annum; (ii) with
respect to ARBs, the ARB Maximum Rate; and (iii) with respect to 2003 Series A Credit
Provider Bonds, twenty-five percent (25%) per annum; provided, however, that the Maximum
Interest Rate for any 2003 Series A Bond shall not exceed the Maximum Lawful Rate.
"Maximum Lawful Rate" means the maximum rate of interest on the relevant
obligation permitted by applicable law which, as of the date of this Trust Agreement, is twelve
percent (12%) per annum for all 2003 Series A Bonds other than 2003 Series A Credit Provider
Bonds.
"Non -Payment Rate" means, on any date of determination, the interest rate per
annum equal to the lesser of (i) 265% of the Index on such date (as such percentage may be
adjusted pursuant to Section 2.09(d) hereof) or (ii) 15% per annum; provided, that in no event
shall the Non -Payment Rate be more than the Maximum Lawful Rate.
"Notice of ARB Payment Default" means a notice substantially in the form of
Exhibit C to the Auction Agent Agreement.
"Notice of Cure of ARB Payment Default" means a notice substantially in the
form of Exhibit C attached hereto.
"Notice of Percentage Change" means a notice to the Trustee and the Auction
Agent substantially in the form provided as Exhibit D to the Market Agent Agreement.
"Notice of Proposed Percentage Change" means a notice to the Trustee and the
Auction Agent substantially in the form provided as Exhibit C to the Market Agent Agreement.
"Notice of Termination" means the notice provided in the 2003 Series A Credit
Support Agreement relating to a 2003 Series A Credit Support Instrument to the effect that 2003
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Series A Credit Provider's obligation to advance funds to purchase 2003 Series A Bonds under a
2003 Series A Credit Support Instrument terminates as of the date specified in such notice due to
a default under specified sections of such 2003 Series A Credit Support Agreement, which date
of termination shall be fifteen (15) days (or such longer period as is specified in the 2003 Series
A Credit Support Agreement) after the date of receipt by the Trustee of such notice.
"Order" has the meaning set forth in Section 2(a)(i) of the Auction Procedures.
"Participant" means an entity which is recognized as a participant in the book -
entry system of maintaining records with respect to the ownership of 2003 Series A Bonds by the
Securities Depository.
"Potential Owner means, with respect to any Auction, any Person, including any
Existing Owner, who may be interested in acquiring a beneficial interest in ARBs subject to such
Auction in addition to the ARBs, if any, currently owned by such Person.
"Principal Office" means, (i) with respect to the Tender Agent, the designated
corporate trust office of the Tender Agent in Los Angeles, which as of the date hereof is located
at 700 South Flower Street, Suite 500, Los Angeles, CA 90017-4104, Attention: Corporate Trust
Department; and (ii) with respect to the Remarketing Agent, the address for the Remarketing
Agent designated in the Remarketing Agreement with such Remarketing Agent.
"Proper Delivery" means, with respect to the delivery of a Tendered Bond to the
Tender Agent to receive the Purchase Price thereof in connection with any optional or mandatory
tender of such Tendered Bond for purchase pursuant to Section 4.01, 4.02, 4.03 or 4.04 hereof:
(a) if such Tendered Bond is a Book -Entry Bond, the making of, or the irrevocable authorization
to make, by 10:00 a.m., New York City time, on the applicable Purchase Date, entries on the
books of the Securities Depository or a Participant of such Securities Depository as provided by
such Securities Depository; and (2) if such Tendered Bond is not a Book -Entry Bond, the
delivery of such Tendered Bond to the Tender Agent at its Principal Office, by 10:00 a.m., New
York City time, on the applicable Purchase Date, accompanied by an instrument of transfer
thereof in form satisfactory to the Tender Agent, executed in blank by the Owner thereof or by
the Owner's duly authorized attorney, with such signature guaranteed by a commercial bank,
trust company or member firm of the New York Stock Exchange.
"Purchase Date" means, with respect to each Tendered Bond, the date on which
such Tendered Bond is tendered or deemed tendered for purchase pursuant to Section 4.01, 4.02,
4.03 or 4.04.
"Purchase Price" means, with respect to any Tendered Bond (or portion thereof),
an amount, payable in funds immediately available on the applicable Purchase Date, equal to the
principal amount thereof plus accrued interest from and including the Interest Accrual Date
immediately preceding the applicable Purchase Date but not including the applicable Purchase
Date; provided, however, that (1) if the Purchase Date for any Tendered Bond is on or after the
Record Date for an Interest Payment Date and on or prior to such Interest Payment Date, the
Purchase Price thereof shall be the principal amount thereof, and interest on such Tendered Bond
shall be paid to the Owner of such Tendered Bond as of the applicable Record Date as provided
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for the payment of interest on 2003 Series A Bonds herein and (2) in the case of a Purchase Date
which is the first day of an Interest Rate Period which is preceded by a Long -Term Interest Rate
Period and which commences prior to the day originally established as the last day of such
preceding Long -Term Interest Rate Period, "Purchase Price" of any Tendered Bond means the
optional redemption price determined pursuant to Section 4.01(c) hereof which would have been
applicable to the redemption of such Tendered Bond on such Purchase Date pursuant to
Section 4.01(c) hereof if the preceding Long -Term Interest Rate Period had continued to the day
originally established as its last day.
"Rebate Fund" means the fund designated as the "2003 Series A Rebate Fund"
established in Section 5.02.
"Rebate Instructions" means those calculations and written directions required to
be delivered to the Trustee by the City pursuant to Section 5.01 hereof.
"Rebate Requirement" means the Rebate Requirement as defined in the 2003
Series Tax Certificate.
"Record Date" means (i) with respect to each Interest Payment Date for 2003
Series A Bonds in a Daily Interest Rate Period, the last day of the calendar month preceding the
month in which such Interest Payment Date falls, (ii) with respect to each Interest Payment Date
for 2003 Series A Bonds in a Weekly Interest Rate Period or a Commercial Paper Interest Rate
Period, the Business Day immediately preceding the such Interest Payment Date, (iii) with
respect to each Interest Payment Date for 2003 Series A Bonds in a Long -Term Interest Rate
Period, the fifteenth day of the month preceding the month in which such Interest Payment Date
falls, and (iv) with respect to each Interest Payment Date for 2003 Series A Bonds which are
ARBs, the second Business Day next preceding the applicable ARB Interest Payment Date.
"Redemption Date" means, with respect to the 2003 Series A Bonds, the date
fixed for redemption of 2003 Series A Bonds subject to redemption in any notice of redemption
given in accordance with the terms of the Indenture.
"Remarketing Agent" means Banc of America Securities LLC or any successor or
additional Remarketing Agent appointed in accordance with Section 8.07 hereof with respect to
the 2003 Series A Bonds.
"Remarketing Agreement" shall mean the Remarketing Agreement dated as of
March 1, 2003, between the City and the Banc of America Securities LLC or the agreement or
instrument pursuant to which a successor or additional Remarketing Agent for the 2003 Series A
Bonds shall perform its services.
"Remarketing Proceeds Account" means the account by that name within the
Bond Purchase Fund established pursuant to Section 4.07 hereof.
"Required Stated Amount" means with respect to a 2003 Series A Credit Support
Instrument, at any time of calculation, an amount equal to the aggregate principal amount of all
Outstanding 2003 Series A Bonds as to which the Purchase Price is payable pursuant to
Section 4.09(d)(ii) hereof from the proceeds of a drawing on 2003 such 2003 Series A Credit
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Support Instrument, together with interest accruing thereon (assuming an annual rate of interest
equal to the Maximum Interest Rate) for the period specified in a Certificate of an Authorized
City Representative to be the minimum period specified by each Rating Agency then rating such
Eligible 2003 Series A Bonds as necessary to obtain (or maintain) a specified short-term rating of
the 2003 Series A Bonds.
"Second Supplemental Indenture" means that certain Second Supplemental
Indenture of Trust, dated as of March 1, 2003, between the City and the Trustee supplementing
the Master Indenture, as the same may be supplemented and amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Sell Order" has the meaning set forth in Section 2(a)(i) of the Auction
Procedures
"Sinking Fund Installment" means, with respect to the 2003 Series A Bonds, the
amount required by Section 4.01(g) hereof to be paid by the City on any single date for the
retirement of 2003 Series A Bonds.
"State" means the State of California.
"Statutory Corporate Tax Rate" means, as of any date of determination, the
highest tax rate bracket (expressed in decimals) now or hereafter applicable in each taxable year
on the taxable income of every corporation as set forth in section 11 of the Code or any successor
section, without regard to any minimum additional tax provision or provisions regarding changes
in rates during a taxable year. The Statutory Corporate Tax Rate as of the date hereof is [35]%.
"Submitted Hold Orders" has the meaning provided in Section 2(c)(i) of the
Auction Procedures.
"Sufficient Clearing Bids" has the meaning provided in Section 2(c)(i) of the
Auction Procedures.
"Tender Agent" shall mean the Trustee, or any successor tender agent appointed
pursuant to Section 8.09 hereof.
"Tendered Bond" means any 2003 Series A Bond (or the portion of any 2003
Series A Bond) tendered or deemed tendered for purchase pursuant to Section 4.01, 4.02, 4.03 or
4.04.
"Third Supplemental Indenture" means that certain Third Supplemental Indenture
of Trust, dated as of March 1, 2003, between the City and the Trustee supplementing the Master
Indenture, as the same may be supplemented and amended.
"2003 Construction Fund" shall mean the 2003 Construction Fund established
pursuant to Section 5.03.
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"2003 Cost of Issuance Fund" shall mean the 2003 Cost of Issuance Fund
established pursuant to Section 5.02.
"2003 Series A Credit Provider" means the Initial 2003 Series A Credit Provider
and the commercial bank or other financial institution issuing (or having primary obligation, or
acting as agent for the financial institutions obligated, under) an Alternate 2003 Series A Credit
Support Instrument.
"2003 Series A Credit Provider Bonds" means 2003 Series A Bonds which are
Credit Provider Bonds.
"2003 Series A Credit Support Agreement" means the Initial 2003 Series A Credit
Support Agreement, and any other agreement entered into in connection with any Alternate 2003
Series A Credit Support Instrument and serving the same function.
"2003 Series A Credit Support Instrument" means the Initial 2003 Series A Credit
Support Instrument and, in the event of the delivery of an Alternate 2003 Series A Credit Support
Instrument, such Alternate 2003 Series A Credit Support Instrument.
"2003 Series A Credit Support Instrument Account" means the account by that
name in the Bond Purchase Fund established pursuant to Section 4.07 hereof.
"2003 Series A Credit Support Instrument Rate" means, collectively, the rates per
annum, if any, specified as applicable to 2003 Series A Credit Provider Bonds in the related 2003
Series A Credit Support Agreement.
"2003 Series A Bonds" shall mean the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series A authorized by Article II.
"2003 Series B Bonds" means the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series B authorized by Article H of the Second
Supplemental Indenture.
"2003 Series Bonds" means the 2003 Series A Bonds, the 2003 Series B Bonds
and the 21003 Series C Bonds.
"2003 Series C Bonds" means the City's Malburg Generating Station Project
Electric System Revenue Bonds, 2003 Series C authorized by Article H of the Third
Supplemental Indenture.
"2003 Series Tax Certificate" shall mean that certain Tax Certificate and
Agreement signed by the City on the Delivery Date and relating to the requirements of Section
148 of the Code.
"Undelivered Bond means, with respect to each Purchase Date, each Tendered
Bond subject to purchase on such Purchase Date as to which Proper Delivery of such Tendered
Bond to the Tender Agent is not made on such Purchase Date; provided, however, no such
Tendered Bond shall be considered an Undelivered Bond on such Purchase Date unless the
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Tender Agent holds sufficient available moneys in trust for the Owners of the Tendered Bonds to
pay in full the applicable Purchase Price of all Tendered Bonds due on such Purchase Date.
"Variable Index" means the BMA Index. If for any reason the BMA Index for any
rate determination date is not announced or is otherwise unavailable or is held to be invalid or
unenforceable by a court of law, except as otherwise provided with respect to ARBs in the
definition of "Index", the Variable Index for such rate determination date shall be an index
selected by the Remarketing Agent which is a composite of bid -side yields of obligations (a)
which (i) provide for a weekly adjustment of the interest rate, and (ii) which (A) must be
purchased on demand of the owner thereof at any time upon notice of up to seven (7) days or (B)
are payable in full not later than seven (7) days after the date of evaluation and (b) the interest on
which is Tax -Exempt and not subject to any personal "alternative minimum tax" or similar tax
under the Code unless all Tax -Exempt bonds are subject to such tax. If no such index is so
selected by the Remarketing Agent or if any such index is held to be invalid or unenforceable by
a court of law, except as otherwise provided with respect to ARBs in the definition of "Index,"
the Variable Index for such rate determination date shall be an index computed by the
Remarketing Agent and shall be equal to 95% of the yield applicable to 91-day United States
Treasury bills, such yield to be computed on the basis of the coupon equivalent of the average per
annum discount rate at which such Treasury bills shall have been sold at the most recent Treasury
auction conducted prior to such rate determination date.
"Weekly Interest Rate" means a variable interest rate with respect to the 2003
Series A Bonds in a Weekly Interest Rate Period established in accordance with Section 2.05
hereof.
"Weekly Interest Rate Period" shall mean each Interest Rate Period during which
Weekly Interest Rates are in effect.
Section 1.04. Interpretation.
(a) Unless the context otherwise indicates, defined terms shall include all
variants thereof, words expressed in the singular shall include the plural and vice versa and the
use of the neuter, masculine or feminine gender is for convenience only and shall be deemed to
mean and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof
are solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof.
(c) References herein to the Securities Depository shall include both the
Securities Depository and any nominee of the Securities Depository in whose name the 2003
Series A Bonds may be registered.
(d) Unless otherwise indicated, references herein to Articles and Sections shall
be to the Articles and Sections of this First Supplemental Indenture. The words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this First
Supplemental Indenture as a whole and not to any particular Article, Section or subdivision
hereof.
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(e) References herein to the Owner of an Undelivered Bond shall refer to the
Person listed as the registered owner of such Undelivered Bond at the commencement of the
applicable Purchase Date and not the Person listed as the registered owner of the 2003 Series A
Bond sold to the Person purchasing such Undelivered Bond on the applicable Purchase Date.
ARTICLE II
THE 2003 SERIES A BONDS
Section 2.01. Principal Amount and Designation; Conditions to Issuance. (a)
Pursuant to the provisions of the Master Indenture and this First Supplemental Indenture and the
provisions of the Charter and the Bond Ordinance, Bonds entitled to the benefit, protection and
security of such provisions is hereby authorized in the aggregate principal amount of
$ . Such Bonds shall be designated as, and shall be distinguished from the Bonds of
all other Series by the title, "City of Vernon Malburg Generating Station Project Electric System
Revenue Bonds, 2003 Series A." The 2003 Series A Bonds shall be in substantially the form
attached hereto as Exhibit A with such variations and omissions as are necessary to reflect the
particular terms of each 2003 Series A Bond.
(b) The 2003 Series A Bonds are issued for the purpose of providing a portion
of the moneys to finance the Costs of the Malburg Generating Station Project and to pay the
Costs of Issuance of the 2003 Series Bonds.
(c) All (but not less than all) of the 2003 Series A Bonds shall be executed by
the City for issuance under the Indenture and delivered to the Trustee and thereupon shall be
authenticated by the Trustee and by it delivered to the City or upon its order but only upon receipt
by the Trustee of the items required pursuant to Section 2.04 and Section 2.07 of the Master
Indenture with respect to the 2003 Series A Bonds and the receipt by the Trustee of the Initial
2003 Series A Credit Support Instrument.
Section 2.02. Terms of the 2003 Series A Bonds; Registration; Denominations;
Payment of Principal and Interest. (a) The 2003 Series A Bonds shall be issued as fully
registered Bonds without coupons in Authorized Denominations. The 2003 Series A Bonds shall
be registered initially in the name of "Cede & Co.," as nominee of DTC, the initial Securities
Depository, and shall be evidenced by one bond certificate in the total aggregate principal
amount of the 2003 Series A Bonds. Registered ownership of the 2003 Series A Bonds, or any
portion thereof, may not thereafter be transferred except as set forth in Section 3.04 of the Master
Indenture.
(b) The 2003 Series A Bonds shall be dated the Delivery Date.
(c) Except as otherwise provided in the 2003 Series A Credit Support
Instrument with respect to 2003 Series A Credit Provider Bonds, the 2003 Series A Bonds shall
mature on the Maturity Date.
(i) The Sinking Fund Installments established for the 2003 Series A
Bonds pursuant to Section 3.01(g) hereof shall be redesignated as maturity dates and
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Sinking Fund Installments for the 2003 Series A Bonds on the Fixed Rate Conversion
Date for the 2003 Series A Bonds as follows:
(1) If the Fixed Rate Conversion Date is on or before
principal of the 2003 Series A Bonds shall mature (i) in serial maturities
in amounts equal to the Sinking Fund Installments established for such dates pursuant to
Section 3.01(g) hereof commencing on the 1 immediately succeeding the Fixed
Rate Conversion Date, and on 1 of each of the succeeding years, and (ii) in a
term maturity on the Maturity Date for the remaining 2003 Series A Bonds.
(2) If the Fixed Rate Conversion Date is after ,
principal of the 2003 Series A Bonds shall mature in serial maturities in principal
amounts equal to the Sinking Fund Installments established for such dates pursuant to
Section 3.01(g) hereof commencing on the 1 immediately succeeding the Fixed
Rate Conversion Date and on 1 of each of the succeeding years.
(3) Sinking Fund Installments for the 2003 Series A Bonds
established pursuant to subparagraph (1) above shall be in principal amounts equal to the
Sinking Fund Installments established for such dates pursuant to Section 3.01(g) hereof
and be payable on 1 of each year, commencing on 1 of the year
immediately following the final serial maturity established for the 2003 Series A Bonds
pursuant to subparagraph (1) above and ending on Maturity Date.
(4) Notwithstanding anything above to the contrary, if, due to
the serialization of the 2003 Series A Bonds pursuant to this subsection (c)(ii), a
Favorable Opinion of Bond Counsel cannot be delivered, then no such serialization shall
occur.
(d) The 2003 Series A Bonds shall be subject to redemption as provided in
Article III and optional and mandatory tender for purchase as provided in Article IV.
(e) The Trustee shall identify all payments (whether made by check or by wire
transfer) of interest, principal, Purchase Price and Redemption Price by CUSIP number of the
2003 Series A Bonds.
(f) The first Interest Rate Period for the 2003 Series A Bonds shall be a
Weekly Interest Rate Period commencing on the Delivery Date with an initial Weekly Interest
Rate of _ percent (_%) per annum.
Section 2.03. Payment of Principal and Interest.
(a) The Purchase Price of the 2003 Series A Bonds shall be payable in lawful
money of the United States of America.
(b) The term of the 2003 Series A Bonds will be divided into consecutive
Interest Rate Periods, each of which will be one of the following: (i) a Daily Interest Rate Period
during which interest on the 2003 Series A Bonds will accrue at Daily Rates; (ii) a Weekly
Interest Rate Period during which interest on the 2003 Series A Bonds will accrue at Weekly
DOCSLA1:413600.10
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Interest Rates; (iii) a Long -Term Interest Rate Period, during which interest on the 2003 Series A
Bonds will accrue at a Long -Term Interest Rate; (iv) a Commercial Paper Interest Rate Period
during which interest on the 2003 Series A Bonds will accrue at Commercial Paper Interest
Rates; or (v) an ARB Interest Rate Period during which interest on the 2003 Series A Bonds will
accrue at ARB Interest Rates.
(c) Interest on the 2003 Series A Bonds will accrue at the rates determined
pursuant to this Article H; provided, however, that in no event shall the rate of interest on any
2003 Series A Bond exceed at any time the applicable Maximum Interest Rate. If an Event of
Default shall have occurred prior to the Fixed Rate Conversion Date and shall be continuing, the
interest rate with respect to the 2003 Series A Bonds during the period such Event of Default
continues shall be the Maximum Interest Rate.
(d) Interest on each 2003 Series A Bond shall accrue from and including the
Interest Accrual Date immediately preceding the date of authentication thereof, or, if such date of
authentication shall be an Interest Payment Date to which interest on the 2003 Series A Bonds
has been paid in full or duly provided for, from such Interest Payment Date or if such date of
authentication shall be prior to the second Interest Accrual Date, from the Delivery Date;
provided, however, that if, as shown by the Bond Register, interest on the 2003 Series A Bonds
shall be in default, interest on 2003 Series A Bonds issued in exchange for 2003 Series A Bonds
surrendered for registration of transfer or exchange shall accrue from the date to which interest
has been paid in full on the 2003 Series A Bonds or, if no interest has been paid on the 2003
Series A Bonds, from the Delivery Date. For each Daily Interest Rate Period, interest on the
2003 Series A Bonds shall be payable on each Interest Payment Date for the period commencing
on (and including) the, Interest Accrual Date in the preceding calendar month and ending on (and
including) the last day in the preceding calendar month, unless the Interest Payment Date shall be
the day next succeeding the last day of a Daily Interest Rate Period, in which case interest shall
be payable on such Interest Payment Date for the period commencing on (and including) the
Interest Accrual Date to which interest shall have been paid in full and ending on (and including)
the day immediately preceding such Interest Payment Date. For each Weekly Interest Rate
Period, interest on the 2003 Series A Bonds shall be payable on each Interest Payment Date for
the period commencing on (and including) the immediately preceding Interest Accrual Date (or,
if any Interest Payment Date is not a Wednesday, commencing on (and including) the second
preceding Interest Accrual Date) and ending on (and including) the Tuesday immediately
preceding the Interest Payment Date (or, if sooner, the last day of such Weekly Interest Rate
Period). For each Commercial Paper Interest Rate period interest on each 2003 Series A Bond
shall be payable on each Interest Payment Date for such 2003 Series A Bond for the period
commencing on (and including) the immediately preceding Interest Accrual Date for such 2003
Series A Bond and ending on the day immediately preceding such Interest Payment Date. For
each Long -Term Interest Rate Period, interest on the 2003 Series A Bonds shall be payable on
each Interest Payment Date for the period commencing on (and including) the immediately
preceding Interest Accrual Date and ending on the day immediately preceding such Interest
Payment Date. For each ARB Interest Rate Period, interest on the 2003 Series A Bonds shall be
payable on each ARB Interest Payment Date for the period commencing on (and including) the
immediately preceding Interest Accrual Date and ending on the day immediately preceding such
Interest Payment Date. In any event, interest on the 2003 Series A Bonds shall be payable for the
DOCSLA1;413600.10
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final Interest Rate Period to but not including the date on which the 2003 Series A Bonds shall
have been paid in full.
(e) Interest shall be computed, in the case of a Long -Term Interest Rate
Period, on the basis of a 360-day year consisting of twelve 30-day months, in the case of an ARB
Interest Rate Period,on the basis of a 360-day year for the actual number of days elapsed, and in
the case of any other Interest Rate Period, on the basis of a 365 or 366-day year, as appropriate,
for the actual number of days elapsed.
(f) The principal or Redemption Price of the 2003 Series A Bonds shall be
payable in lawful money of the United States of America at the Principal Office of the Trustee
upon surrender of the 2003 Series A Bonds to the Trustee for cancellation; provided that the
Trustee may agree with the Owner of any 2003 Series A Bond that such Owner may, in lieu of
surrendering the same for a new 2003 Series A Bond, endorse on such 2003 Series A Bond a
record of partial payment of the principal of such 2003 Series A Bond in the form set forth below
(which shall be typed or printed on such 2003 Series A Bond):
PAYMENTS ON ACCOUNT OF PRINCIPAL
Principal Balance of Principal Signature
Payment Date Amount Paid Amount Unpaid of Owner
The Trustee shall maintain a record of each such partial payment made in
accordance with the foregoing agreement and such record of the Trustee shall be conclusive.
Such partial payment shall be valid upon payment of the amount thereof to the Owner of such
2003 Series A Bond, and the City and the Trustee shall be fully released and discharged from all
liability to the extent of such payment regardless of whether such endorsement shall or shall not
have been made upon such 2003 Series A Bond by the Owner thereof and regardless of any error
or omission in such endorsement.
(g) Notwithstanding the foregoing provisions of this Section, (1) the interest
rate and payment terms of 2003 Series A Credit Provider Bonds shall be governed by the
provisions of the 2003 Series A Credit Support Agreement and (2) the interest rate and payment
terms of ARBs shall be governed by the provisions of Section 2.09 hereof.
Section 2.04. Daily Interest Rate Period.
(a) Determination of Daily Interest Rates. During each Daily Interest Rate
Period, the 2003 Series A Bonds shall bear interest at Daily Interest Rates, which, except as
otherwise provided herein, shall be determined by the Remarketing Agent by no later than 9:30
a.m., New York City time, on each Business Day during such Daily Interest Rate Period. The
Daily Interest Rate shall be the rate of interest per annum determined by the Remarketing Agent
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(based on market conditions) to be the minimum interest rate which, if borne by the 2003 Series
A Bonds, would enable the Remarketing Agent to sell the 2003 Series A Bonds on the effective
date of such rate at a price (without regarding accrued interest) equal to the principal amount
thereof. In the event that the Remarketing Agent fails to establish a Daily Interest Rate for any
day, then the Daily Interest Rate for such day shall be the same as the Daily Interest Rate for the
immediately preceding day if the Daily Interest Rate for such preceding day was determined by
the Remarketing Agent. In the event that the Daily Interest Rate for the immediately preceding
day was not determined by the Remarketing Agent, or in the event that the Daily Interest Rate
determined by the Remarketing Agent shall be held to be invalid or unenforceable by a court of
law, then the interest rate for such day shall be equal to 110% of the BMA Index made available
for the week preceding the date of determination, or if such index is no longer available, or no
such index was so made available for the week preceding the date of determination, 75% of the
interest rate on 30-day high grade unsecured commercial paper notes sold through dealers by
major corporations as reported in The Wall Street Journal on the day the Daily Interest Rate
would otherwise be determined as provided herein for such Daily Interest Rate Period.
(b) Conversion to Daily Interest Rate Period. Subject to Section 2.08
hereof, at any time, the City, by written direction to the Trustee (with copies to the Tender Agent
(if any), the 2003 Series A Credit Provider (if any), the Remarketing Agent (if any), the Auction
Agent (if any) and the Broker -Dealer (if any)), may elect that the Interest Rate Period for the
2003 Series A Bonds be Converted to a Daily Interest Rate Period. Such direction of the City
shall specify (i) the proposed Conversion Date of such Conversion to a Daily Interest Rate
Period, which shall be (1) a Business Day not earlier than the twelfth day (or the fifteenth day if
the then current Interest Rate Period shall be a Long -Term Interest Rate Period) following the
second Business Day after receipt by the Trustee of such direction, (2) in the case of a
Conversion from a Weekly Interest Rate Period, the Interest Payment Date which is not less than
30 days following the second Business Day after receipt by the Trustee of such direction, (3) in
the case of a Conversion from a Long -Term Interest Rate Period, the day immediately following
the last day of the then -current Long -Term Interest Rate Period or a day on which the 2003 Series
A Bonds otherwise would be subject to optional redemption pursuant to Section 4.01(c) if such
Conversion did not occur, (4) in the case of a Conversion from a Commercial Paper Interest Rate
Period, the day immediately following the last day of the Commercial Paper Interest Rate Period
and (5) in the case of a Conversion from an ARB Interest Rate Period, an ARB Interest Payment
Date; and (ii) if the Conversion is not from a Weekly Interest Rate Period, the Purchase Date for
the 2003 Series A Bonds in connection with the mandatory tender of 2003 Series A Bonds for
purchase as a result of such Conversion to a Daily Interest Rate Period. In addition, such
direction shall be accompanied by (1) a letter of Bond Counsel that it expects to be able to give a
Favorable Opinion of Bond Counsel on the proposed Conversion Date to the Daily Interest Rate
Period and (2) a form of the notice to be mailed by the Trustee to the Owners of the 2003 Series
A Bonds as provided in Section 2.04(c).
(c) _Notice of Conversion to Daily Interest Rate Period. The Trustee shall
give notice (by registered or certified mail, or by telecopy, confirmed by registered or certified
mail) to the Owners of the 2003 Series A Bonds of a Conversion of the 2003 Series A Bonds to a
Daily Interest Rate Period not less than [ten] days (or [twelve] days if the then current Interest
Rate Period shall be a Long -Term Interest Rate Period) prior to the proposed Conversion Date to
such Daily Interest Rate Period. Such notice shall state: (i) that, subject to the satisfaction of the
DOCSLA1:413600.10
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conditions to such Conversion contained in Section 2.08(b) hereof, the Interest Rate Period for
the 2003 Series A Bonds shall be Converted to a Daily Interest Rate Period unless the City
rescinds its election to Convert the Interest Rate Period for the 2003 Series A Bonds pursuant to
Section 2.08(a) hereof; (ii) the proposed Conversion Date to a Daily Interest Rate Period; and
(iii) except for the Conversion of the 2003 Series A Bonds to a Daily Interest Rate Period from a
Weekly Interest Rate Period that: (A) all 2003 Series A Bonds are subject to mandatory tender
for purchase on the Conversion Date to the Daily Interest Rate Period, (B) that the 2003 Series A
Bonds (other than ARBs) are subject to mandatory tender for purchase on the proposed
Conversion Date even if the proposed Conversion to a Daily Interest Rate Period does not occur,
(C) the applicable Purchase Price and the place of Proper Delivery for the tender of 2003 Series
A Bonds for purchase in connection with such Conversion, and (D) that the Purchase Price of
2003 Series A Bonds tendered or deemed tendered shall be payable only from the sources
specified in Section 4.07(f) hereof, specifying such sources.
Section 2.05. Weekly Interest Rate Period.
(a) Determination of Weekly Interest Rates. During each Weekly Interest
Rate Period, the 2003 Series A Bonds shall bear interest at Weekly Interest Rates, which, except
as otherwise provided herein, shall be determined for each Calendar Week by the Remarketing
Agent by no later than 5:00 p.m., New York City time, on the Tuesday immediately preceding
each Calendar Week, or if such day shall not be a Business Day, then by 12:00 noon, New York
City time, on the next succeeding Business Day; provided, however, that if the 2003 Series A
Bonds are to be Converted to a Weekly Interest Rate Period from another Interest Rate Period,
the Weekly Interest Rate for the initial Calendar Week of such Weekly Interest Rate Period shall
be determined not later than the Business Day next preceding the effective date of such Weekly
Interest Rate Period. The Weekly Interest Rate shall be the rate of interest per annum determined
by the Remarketing Agent to be the minimum interest rate which, if borne by the 2003 Series A
Bonds, would enable the Remarketing Agent (based on then -prevailing market conditions) to sell
the 2003 Series A Bonds on the effective date of such rate at a price (without regarding accrued
interest) equal to the principal amount thereof. In the event that the Remarketing Agent fails to
establish a Weekly Interest Rate for any Calendar Week, then the Weekly Interest Rate for such
Calendar Week shall be the same as the Weekly Interest Rate for the immediately preceding
Calendar Week if the Weekly Interest Rate for such preceding week was determined by the
Remarketing Agent. In the event that the Weekly Interest Rate for the immediately preceding
Calendar Week was not determined by the Remarketing Agent, or in the event that the Weekly
Interest Rate determined by the Remarketing Agent shall be held to be invalid or unenforceable
by a court of law, then the interest rate for such Calendar Week shall be equal to the Variable
Index on the day such Weekly Interest Rate would otherwise be determined as provided herein.
(b) Conversion to Weekly Interest Rate Period. Subject to Section 2.08, at
any time, the City, by written direction to the Trustee (with copies to the Tender Agent (if any),
the 2003 Series A Credit Provider (if any), the Remarketing Agent (if any), the Auction Agent (if
any) and the Broker -Dealer (if any)), may elect that the Interest Rate Period for the 2003 Series A
Bonds be Converted to a Weekly Interest Rate Period. Such direction of the City shall specify (i)
the proposed Conversion Date of such Conversion to a Weekly Interest Rate Period, which shall
be (1) a Business Day not earlier than the thirtieth (30th) day following the second Business Day
after receipt by the Trustee of such direction, (2) in the case of a Conversion from a Daily Interest
DOCSLA1:413600.10
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Rate Period, the Interest Payment Date which is not less than 30 days following the second
Business Day after receipt by the Trustee of such direction (3) in the case of a Conversion from a
Long -Term Interest Rate Period, the day immediately following the last day of the then -current
Long -Term Interest Rate Period or a day on which the 2003 Series A Bonds otherwise would be
subject to optional redemption pursuant to Section 4.01(c) if such Conversion did not occur, (4)
in the case of a Conversion from a Commercial Paper Interest Rate Period, the day immediately
following the last day of the Commercial Paper Interest Rate Period and (5) in the case of a
Conversion from an ARB Interest Rate Period, an ARB Interest Payment Date; and (ii) if the
Conversion is not from a Daily Interest Rate Period, the Purchase Date for the 2003 Series A
Bonds in connection with the mandatory tender of 2003 Series A Bonds for purchase as a result
of such Conversion to a Weekly Interest Rate Period. In addition, such direction shall be
accompanied by (1) a letter of Bond Counsel that it expects to be able to give a Favorable
Opinion of Bond Counsel on the proposed Conversion Date to the Weekly Interest Rate Period
and (2) a form of the notice to be mailed by the Trustee to the Owners of the 2003 Series A
Bonds as provided in Section 2.05(c) hereof.
(c) Notice of Conversion to Weekly Interest Rate Period. The Trustee
shall give notice (by registered or certified mail, or by telecopy, confirmed by registered or
certified mail) to the Owners of the 2003 Series A Bonds of a Conversion of the 2003 Series A
Bonds to a Weekly Interest Rate Period not less than thirty (30) days prior to the proposed
Conversion Date to such Weekly Interest Rate Period. Such notice shall state: (i) that, subject to
the satisfaction of the conditions to such Conversion contained in Section 2.08(b) hereof, the
Interest Rate Period for the 2003 Series A Bonds shall be Converted to a Weekly Interest Rate
Period unless the City rescinds its election to Convert the Interest Rate Period for the 2003 Series
A Bonds pursuant to Section 2.08(a) hereof; (ii) the proposed Conversion Date to a Weekly
Interest Rate Period, and (iii) except for the Conversion of the 2003 Series A Bonds to a Weekly
Interest Rate Period from a Daily Interest Rate Period that: (A) all 2003 Series A Bonds are
subject to mandatory tender for purchase on the Conversion Date, (B) that all 2003 Series A
Bonds (other than ARBs) are subject to such mandatory tender for purchase on the proposed
Conversion Date even if the proposed Conversion to a Weekly Interest Rate Period does not
occur, (C) the applicable Purchase Price and the place of Proper Delivery for the tender of 2003
Series A Bonds for purchase in connection with such Conversion, and (D) that the Purchase Price
of 2003 Series A Bonds tendered or deemed tendered shall be payable only from the sources
specified in Section 4.07(f) hereof, specifying such sources.
Section 2.06. Long -Term Interest Rate Period.
(a) Determination of Long -Term Interest Rate. During each Long -Term
Interest Rate Period with respect to the 2003 Series A Bonds, the 2003 Series A Bonds shall bear
interest at the Long -Term Interest Rate. The Long -Term Interest Rate for each Long -Term
Interest Rate Period shall not exceed the Maximum Interest Rate and shall be determined by the
Remarketing Agent on a Business Day no later than the Long -Term Conversion Date to such
Long -Term Interest Rate Period. Subject to the provisions of Section 2.06(d) hereof, the Long -
Term Interest Rate shall be the rate of interest per annum determined by the Remarketing Agent
(based on then -prevailing market conditions) to be the minimum interest rate which, if borne by
the 2003 Series A Bonds, would enable the Remarketing Agent to sell the 2003 Series A Bonds
on such date at a price (without regarding accrued interest) equal to the principal amount thereof.
DOCSLA1:413600.10
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(b) Conversion to or Establishment of Another Long -Term Interest Rate
Period.
(i) Subject to Section 2.08 hereof, at any time, the City, by written
direction to the Trustee (with copies sent to the Tender Agent (if any), the 2003 Series A
Credit Provider (if any), the Remarketing Agent (if any), the Auction Agent (if any) and
the Broker -Dealer (if any)), may elect that the Interest Rate Period for the 2003 Series A
Bonds shall be Converted to a Long -Term Interest Rate Period. Such direction of the
City (1) shall specify the duration of the Long -Term Interest Rate Period; (2) shall specify
the proposed Conversion Date to the Long -Term Interest Rate Period, which date shall be
(a) a Business Day not earlier than the thirtieth (30th) day following the second Business
Day following receipt by the Trustee of such direction, (b) in the case of a Conversion
from a Commercial Paper Interest Rate Period to a Long -Term Interest Rate Period, the
day immediately following the last day of the Commercial Paper Interest Rate Period, (c)
in the case of the establishment of a Long -Term Interest Rate Period following a Long -
Term Interest Rate Period, the day immediately following the last day of the then -current
Long -Term Interest Rate Period or a day on which the 2003 Series A Bonds otherwise
would be subject to optional redemption pursuant to Section 4.01(c) if such Conversion
did not occur, and (d) in the case of a Conversion from an ARB Interest Rate Period, an
ARB Interest Payment Date; (3) shall specify the last day of such Long -Term Interest
Rate Period (which last day shall be either the day immediately prior to the Maturity Date,
or a day which both immediately precedes a Business Day and is at least one hundred
eighty-one (181) days after the proposed Conversion Date); and (4) with respect to any
such Long -Term Interest Rate Period, may specify redemption prices and Redemption
Dates which are different than those set forth in Section 4.01(c) hereof, if approved by
Bond Counsel as provided in Section 2.05(b)(ii) hereof.
(ii) The direction of the City described in Section 2.06(b)(i) hereof
shall be accompanied by a letter of Bond Counsel that it expects to be able to give a
Favorable Opinion of Bond Counsel on the proposed Long -Term Conversion Date and by
a form of the notice to be mailed by the Trustee to the Owners of the 2003 Series A
Bonds as provided in Section 2.06(c) hereof.
(iii) If, by the twenty-ninth (29th) day prior to the last day of any Long -
Term Interest Rate Period for the 2003 Series A Bonds which ends on a day other than
the day immediately preceding the Maturity Date, the Trustee shall not have received
notice of the City's election that, during the next succeeding Interest Rate Period, the
Interest Rate Period for the 2003 Series A Bonds shall be Converted to another Interest
Rate Period or that another Long -Term Interest Rate Period, is to be established for the
2003 Series A Bonds, the Interest Rate Period for the 2003 Series A Bonds shall
automatically Convert to a Weekly Interest Rate Period with a Conversion Date of the
day following such Long -Term Interest Rate Period.
(iv) After the Fixed Rate Conversion Date, the 2003 Series A Bonds
shall no longer be subject to or have the benefit of the provisions of Article IV hereof.
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(c) Notice of Conversion to or Establishment of Another Long -Term
Interest Rate Period. The Trustee shall give notice (by registered or certified mail, or by
telecopy, confirmed by registered or certified mail) of a Conversion to a (or the establishment of
another) Long -Term Interest Rate Period to the Owners of the 2003 Series A Bonds not less than
thirty (30) days prior to the proposed Long -Term Conversion Date to such Long -Term Interest
Rate Period. Such notice shall state: (i) that, subject to the satisfaction of the conditions to such
Conversion contained in Section 2.08(b) hereof, the Interest Rate Period for the 2003 Series A
Bonds shall be Converted to a Long -Term Interest Rate Period or to a new Long -Term Interest
Rate Period unless the City rescinds its election to Convert the Interest Rate Period for the 2003
Series A Bonds pursuant to Section 2.08(a) hereof; (ii) the duration of such Long -Term Interest
Rate Period; (iii) the proposed Long -Term Conversion Date to such Long -Term Interest Rate
Period; (iv) that all 2003 Series A Bonds are subject to mandatory tender for purchase on the
Conversion Date; (v) that all 2003 Series A Bonds (other than ARBs) are subject to such
mandatory tender for purchase on the proposed Conversion Date even if the proposed
Conversion to (or establishment of another) Long -Term Interest Rate Period does not occur;
(vi) the applicable Purchase Price and the place of Proper Delivery for the tender of 2003 Series
A Bonds for purchase in connection with such Conversion, and (vii) that the Purchase Price of
2003 Series A Bonds tendered or deemed tendered shall be payable only from the sources
specified in Section 4.07(f) hereof, specifying such sources.
(d) Remarketing at Premium or Discount. Notwithstanding the provisions
of Section 2.06(a), the Long -Term Interest Rate for a Long -Term Interest Rate Period shall be the
rate of interest per annum determined by the Remarketing Agent (based on then -prevailing
market conditions) to be the interest rate which, if borne by the 2003 Series A Bonds, would
enable the Remarketing Agent to sell the 2003 Series A Bonds at a price (without regarding
accrued interest) which will result in the lowest net interest cost for the 2003 Series A Bonds,
after taking into account any premium or discount at which the 2003 Series A Bonds are sold by
the Remarketing Agent, provided that:
(i) The Remarketing Agent certifies to the Trustee, the Tender Agent,
the 2003 Series A Credit Provider (if any) and the City that the sale of the 2003 Series A
Bonds at the interest rate and premium or discount specified by the Remarketing Agent is
expected to result in the lowest net interest cost for the 2003 Series A Bonds on the Long -
Term Conversion Date;
(ii) the City consents in writing to the sale of the 2003 Series A Bonds
by the Remarketing Agent at such premium or discount;
(iii) The remarketing proceeds available on the Conversion Date and
the amount made available under the 2003 Series A Credit Support Instrument (if any) on
the proposed Long -Term Conversion Date shall not be less than the amount required to
purchase all of the Tendered Bonds at the applicable Purchase Price (unless the City, in
its sole discretion, transfers, or cause to be transferred, to the Tender Agent for
application to such Purchase Price Available Moneys in the amount of such deficiency on
or before the Long -Term Conversion Date in funds which will be immediately available
on the Long -Term Conversion Date);
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(iv) On or before the date of the determination of the Long -Term
Interest Rate, the City delivers to the Trustee and the Remarketing Agent a letter of Bond
Counsel to the effect that Bond Counsel expects to be able to give a Favorable Opinion of
Bond Counsel on the Long -Term Conversion Date; and
(v) On or before the Long -Term Conversion Date, a Favorable
Opinion of Bond Counsel shall have been received by the Trustee.
Section 2.07. Commercial Paper Interest Rate Period.
(a) Determination of Commercial Paper Terms and Commercial Paper
Term Rates. During each Commercial Paper Interest Rate Period, each 2003 Series A Bond
shall bear interest during each Commercial Paper Term for such 2003 Series A Bond at the
Commercial Paper Term Rate for such 2003 Series A Bonds determined as provided in this
Section 2.07. The Commercial Paper Term and the Commercial Paper Term Rate need not be
the same for all the 2003 Series A Bonds, even if determined on the same date. Each of such
Commercial Paper Terms and Commercial Paper Term Rates for each 2003 Series A Bond shall
be determined by the Remarketing Agent no later than the first day of each Commercial Paper
Term. Each Commercial Paper Term shall be for a period of days within the range or ranges
announced as possible Commercial Paper Terms no later than 9:30 a.m., New York City time, on
the first day of each Commercial Paper Term by the Remarketing Agent. Each Commercial
Paper Term for each 2003 Series A Bond shall be a period of not more than one hundred eighty
(180) days, shall end not later than twenty (20) Business Days prior to the Expiration Date of the
2003 Series A Credit Support Instrument, and shall be determined by the Remarketing Agent to
be the period, except as provided by Section 2.07(d) hereof, which, together with all other
Commercial Paper Terms for all 2003 Series A Bonds then Outstanding, will result in the lowest
overall interest expense on the 2003 Series A Bonds over the next succeeding one hundred eighty
(180) days. Each Commercial Paper Term shall end on either a day which immediately precedes
a Business Day or on the day immediately preceding the Maturity Date. If, for any reason, a
Commercial Paper Term for any 2003 Series A Bond cannot be so determined by the
Remarketing Agent, or if the determination of such Commercial Paper Term is held by a court of
law to be invalid or unenforceable, then such Commercial Paper Term shall be thirty (30) days,
but if the last day so determined shall not be a day immediately preceding a Business Day, shall
end on the first day immediately preceding the Business Day next succeeding such last day, or if
such last day would be after the day immediately preceding the Maturity Date, shall end on the
day immediately preceding the Maturity Date. In determining the number of days in each
Commercial Paper Term, the Remarketing Agent shall take into account the following factors:
(i) existing short-term, tax-exempt market rates and indices of such short-term rates; (ii) the
existing market supply and demand for short-term Tax -Exempt securities; (iii) existing yield
curves for short-term and long-term Tax -Exempt securities of credit quality comparable to the
2003 Series A Bonds; (iv) general economic conditions; (v) industry economic and financial
conditions that may affect or be relevant to the 2003 Series A Bonds; (vi) the Commercial Paper
Terms of other 2003 Series A Bonds; and (vii) such other facts, circumstances and conditions
pertaining to financial markets as the Remarketing Agent, in its sole discretion, shall determine
to be relevant.
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The Commercial Paper Term Rate for each Commercial Paper Term for each
2003 Series A Bond during a Commercial Paper Interest Rate Period shall be the rate of interest
per annum determined by the Remarketing Agent to be the minimum interest rate which, if borne
by such 2003 Series A Bond, would enable the Remarketing Agent (based on then -prevailing
market conditions) to sell such 2003 Series A Bond on the effective date of such rate at a price
equal to the principal amount thereof. If, for any reason, a Commercial Paper Term Rate for any
2003 Series A Bond is not so established by the Remarketing Agent for any Commercial Paper
Term, or if such Commercial Paper Term Rate is determined by a court of law to be invalid or
unenforceable, then the Commercial Paper Term Rate for such Commercial Paper Term shall be
the rate per annum equal to the Variable Index on the first day of such Commercial Paper Term.
(b) Conversion to Commercial Paper Interest Rate Period. Subject to
Section 2.08 hereof, at any time, the City, by written direction to the Trustee (with a copy to the
Tender Agent (if any), the 2003 Series A Credit Provider (if any), the Remarketing Agent (if
any), the Auction Agent (if any) and the Broker -Dealer (if any)), may elect to Convert the Interest
Rate Period for the 2003 Series A Bonds to a Commercial Paper Interest Rate Period. Such
direction of the City shall specify (i) the proposed Conversion Date to the Commercial Paper
Interest Rate Period (during which the 2003 Series A Bonds shall bear interest at Commercial
Paper Term Rates) which shall be (1) a Business Day not earlier than the thirtieth (30th) day
following the second Business Day after receipt by the Trustee of such direction, (2) in the case
of a Conversion from a Long -Term Interest Rate Period, the day immediately following the last
day of the then -current Long -Term Interest Rate Period or a day on which the 2003 Series A
Bonds otherwise would be subject to optional redemption pursuant to Section 4.01(c) hereof if
such Conversion did not occur, (3) in the case of a Conversion from a Daily Interest Rate Period,
the Interest Payment Date which is not less than 30 days following the second Business Day after
receipt by the Trustee of such direction, (4) in the case of a Conversion from a Weekly Interest
Rate Period, the Interest Payment Date which is not less than thirty days following the second
Business Day after receipt by the Trustee of such direction, and (5) in the case of a Conversion
from an ARB Interest Rate Period, an ARB Interest Payment Date; and (ii) the Purchase Date for
the 2003 Series A Bonds in connection with the mandatory tender of the 2003 Series A Bonds for
purchase as a result of the Conversion to Commercial Paper Interest Rate Period. In addition, the
direction of the City shall be accompanied by (1) a letter of Bond Counsel that it expects to be
able to give a Favorable Opinion of Bond Counsel on the proposed Conversion Date to the
Commercial Paper Interest Rate Period and (2) a form of the notice to be mailed by the Trustee to
the Owners of the 2003 Series A Bonds as provided in Section 2.08(c) hereof. During each
Commercial Paper Interest Rate Period for the 2003 Series A Bonds commencing on the date so
specified and ending, with respect to each 2003 Series A Bond, on the day immediately
preceding the effective date of the next succeeding Interest Rate Period with respect to such 2003
Series A Bond, each 2003 Series A Bond shall bear interest at a Commercial Paper Term Rate
during each 2003 Series A Bond Interest Term for such 2003 Series A Bond.
(c) Notice of Conversion to Commercial Paper Interest Rate Period. The
Trustee shall give notice (by registered or certified mail, or by telecopy, confirmed by registered
or certified mail) to the Owners of the 2003 Series A Bonds of a Conversion to a Commercial
Paper Interest Rate Period not less than thirty (30) days prior to the proposed Conversion Date to
such Commercial Paper Interest Rate Period. Such notice shall state: (i) that, subject to the
satisfaction of the conditions to such Conversion contained in Section 2.08(b) hereof, the Interest
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Rate Period for the 2003 Series A Bonds shall be Converted to a Commercial Paper Interest Rate
Period unless the City rescinds its election to Convert the Interest Rate Period for the 2003 Series
A Bonds pursuant to Section 2.08(a) hereof; (ii) the proposed Conversion Date to such
Commercial Paper Interest Rate Period; (iii) that all 2003 Series A Bonds are subject to
mandatory tender for purchase on the Conversion Date; (iv) that all 2003 Series A Bonds (other
than ARBs) are subject to such mandatory tender for purchase if the proposed Conversion to a
Commercial Paper Interest Rate Period does not occur; (v) the applicable Purchase Price and the
place of Proper Delivery for the tender of 2603 Series A Bonds for purchase in connection with
such Conversion; and (vi) that the Purchase Price of 2003 Series A Bonds tendered or deemed
tendered shall be payable only from the sources specified in Section 4.07(f) hereof, specifying
such sources.
(d) Conversion from Commercial Paper Interest Rate Period. Subject to
Section 2.08(b), at any time during a Commercial Paper Interest Rate Period for the 2003 Series
A Bonds, the City may elect, pursuant to Sections 2.04(b), 2.05(b), 2.06(b) or 2.09(k) hereof, to
Convert the Interest Rate Period for the 2003 Series A Bonds from a Commercial Paper Interest
Rate Period to another Interest Rate Period. The latest date on which Commercial Paper Terms
for the 2003 Series A Bonds in effect on the date the Remarketing Agent receives a copy of the
direction of the City to Convert the 2003 Series A Bonds to another Interest Rate Period ends
shall be the last day of the then -current Commercial Paper Interest Rate Period and the day next
succeeding such date shall be the Conversion Date to the Interest Rate Period for the 2003 Series
A Bonds elected by the City. Notwithstanding the provisions of Section 2.07(a) hereof, upon
receipt of a copy of the direction of the City to Convert the 2003 Series A Bonds from a
Commercial Paper Interest Rate Period to another Interest Rate Period, the Remarketing Agent
shall not establish a Commercial Paper Term during such Commercial Paper Interest Rate Period
which ends on or after the proposed Conversion Date to the new Interest Rate Period.
Section 2.08. Rescission of Conversion; Conditions to Conversion.
(a) Notwithstanding anything in this Article H to the contrary, in connection
with any Conversion of the Interest Rate Period for the 2003 Series A Bonds, the City shall have
the right to deliver to the Trustee (with a copy to Remarketing Agent (if any), the Tender Agent
(if any), the 2003 Series A Credit Provider (if any), the Auction Agent (if any) and the Broker -
Dealer (if any)), on or prior to 10:00 a.m. on the second Business Day preceding the proposed
Conversion Date of any such Conversion a notice to the effect that the City elects to rescind its
election to make such Conversion. If the City delivers a notice of rescission of election to
Convert the 2003 Series A Bonds to the Trustee prior to the time a notice of such Conversion has
been mailed to the Owners of the 2003 Series A Bonds as provided in Section 2.04(c), 2.05(c),
2.06(c) or 2.09(k)(ii) hereof, as applicable, then the Interest Rate Period shall not be Converted
and the 2003 Series A Bonds shall continue to bear interest in the Interest Rate Period in effect
immediately prior to such proposed Conversion. In any event, if notice of a Conversion has been
mailed to the Owners of the 2003 Series A Bonds as provided in Section 2.04(c), 2.05(c),
2.06(c), 2.07(c) or 2.09(k)(ii) hereof, as applicable, and the City rescinds its election to make
such Conversion, then (i) the 2003 Series A Bonds (except ARBs, which shall not be subject to
mandatory tender) shall continue to be subject to mandatory tender for purchase on the date
which would have been the Conversion Date of the Conversion to a new Interest Rate Period as
provided in Section 4.05 hereof, and (ii) the Interest Rate Period shall not be Converted and the
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2003 Series A Bonds shall continue to bear interest in the Interest Rate Period in effect
immediately prior to the proposed Conversion (provided, that the period of any such Long -Term
Interest Rate Period shall be one year). In the case of the ARBs, the ARBs shall bear interest at
the ARB Maximum Rate until the next succeeding Auction Period and then at the Applicable
ARB Rate.
(b) No Conversion from one Interest Rate Period to another shall take effect
under this Indenture unless each of the following conditions, to the extent applicable, shall have
been satisfied.
(i) The Trustee shall have received a Favorable Opinion of Bond
Counsel with respect to such Conversion on the Conversion Date.
(ii) The remarketing proceeds available on the Conversion Date and
the amount made available under the 2003 Series A Credit Support Instrument (if any)
shall not be less than the amount required to purchase all of the Tendered Bonds at the
applicable Purchase Price (unless the City, in its sole discretion, transfers or causes to be
transferred, to the Tender Agent for application to the payment of such Purchase Price
Available Moneys in the amount of such deficiency on or before the Conversion Date in
funds which are immediately available on the Conversion Date).
(iii) In the case of any Conversion of the 2003 Series A Bonds from an
ARB Interest Rate Period to any other Interest Rate Period (except a Long -Term Interest
Rate Period effective to the day immediately preceding the Maturity Date), prior to the
Conversion Date the City shall have appointed a Tender Agent and a Remarketing Agent
with respect to the 2003 Series A Bonds, there shall have been executed and delivered
with respect to the 2003 Series A Bonds a Tender Agent Agreement and a Remarketing
Agreement and the City has caused a 2003 Series A Credit Support Instrument in the
Required Stated Amount to be delivered to the Tender Agent.
(iv) In the case of any Conversion of the 2003 Series A Bonds to an
ARB Interest Rate Period from another Interest Rate Period, prior to the Conversion Date
the City shall have appointed an Auction Agent, a Market Agent and a Broker -Dealer
with respect to the 2003 Series A Bonds and there shall have been executed and delivered
with respect to the 2003 Series A Bonds, a Market Agent Agreement, an Auction Agent
Agreement and a Broker -Dealer Agreement.
(v) Prior to any Conversion into an ARB Interest Rate Period, the City
shall receive a firm underwriting commitment or contract to purchase from an investment
bank or other purchaser.
(vi) In the case of any Conversion of the 2003 Series A Bonds to a
Long -Term Interest Rate Period, the Remarketing Agent shall have determined the Long -
Term Interest Rate for such Long -Term Interest Rate Period on or prior to the proposed
Conversion Date to such Long -Term Interest Rate Period.
(c) If any condition to the Conversion of the 2003 Series A Bonds to another
Interest Rate Period shall not have been satisfied, then the current Interest Rate Period shall not
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be Converted and the 2003 Series A Bonds shall continue to bear interest in the Interest Rate
Period in effect immediately prior to such proposed Conversion, and the 2003 Series A Bonds
(except ARBs) shall continue to be subject to mandatory tender for purchase on the date which
would have been the Conversion Date as provided in Section 4.07 hereof. If the Interest Rate
Period in effect immediately prior to such proposed Conversion is a Long -Term Interest Rate
Period, then the Long -Term Interest Rate Period commencing on such proposed Conversion Date
shall be for one year. In the case of ARBs, the ARBs shall continue to be owned by the Owners
thereof and shall bear interest at the ARB Maximum Rate until the next succeeding Auction
Period following such proposed Conversion Date, then at the Applicable ARB Rate.
(d) Notwithstanding anything in this Article II to the contrary, in connection
with the Conversion from a Long -Term Interest Rate Period that would require the mandatory
tender for purchase of 2003 Series A Bonds at a Purchase Price greater than the principal amount
thereof plus unpaid accrued interest thereon as provided in Section 4.07 hereof, the City, as a
condition to exercising its option to cause a Conversion of the Interest Rate Period, shall deliver
or cause to be delivered to the Tender Agent prior to the mailing of notice of such Conversion,
Available Moneys in an amount which is sufficient to pay such premium, unless the 2003 Series
A Credit Support Instrument, if any, then in effect with respect to such 2003 Series A Bonds
provides for the payment of such premium.
(e) The Trustee shall send a copy of each notice of a Conversion sent to the
Owners of the 2003 Series A Bonds to the 2003 Series A Credit Provider and each Rating
Agency promptly after sending such notice to such Owners.
Section 2.09. ARB Provisions.
This Section 2.09 governs the interest rates and payment terms of 2003 Series A
Bonds which are ARBs. With respect to 2603 Series A Bonds when not in an ARB Interest Rate
Period, such matters are governed by Sections 2.04 through 2.08 hereof.
(a) Payments with Respect to ARBs.
(i) Interest with respect to ARBs shall accrue from and including, as
applicable, the Conversion Date or the most recent Interest Accrual Date to which interest
has been paid or duly provided for.
(ii) The Trustee shall determine the aggregate amount of interest
payable in accordance with subsection (vi) below with respect ARBs on each ARB
Interest Payment Date. The Trustee shall promptly notify the Securities Depository of its
calculations, as provided in Section 2.09(c) hereof.
(iii) Interest on ARBs shall be computed on the basis of a 360-day year
for the actual number of days elapsed. The applicable ARB Interest Rate Period shall be
determined by the Auction Agent. The Applicable ARB Interest Rate for the initial ARB
Interest Rate Period shall be determined by the Broker -Dealer. The Applicable ARB Rate
for each ARB Interest Period after the first ARB Interest Period shall be the Auction
Rate; provided that:
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(1) if a notice of a proposed adjustment in the percentages used
to determine the ARB Maximum Rate, the All -Hold Rate and the Non -Payment Rate
shall have been given by the Market Agent in accordance with Section 2.09(d)(ii) hereof
with respect to the ARBs and because of a failure to satisfy either of the conditions set
forth in clause (1) or (2) of Section 2.09(d)(iii) hereof such Conversion shall not have
taken effect, then an Auction with respect to the ARBs shall not be held on the Auction
Date immediately preceding the next succeeding ARB Interest Payment Date and the
Applicable ARB Rate with respect to the ARBs for such next succeeding ARB Interest
Period shall equal the ARB Maximum Rate on such Auction Date; and
(2) if, on any Auction Date for the ARBs, an Auction is not
held for any reason then the Applicable ARB Rate for the ARBs for the next succeeding
ARB Interest Period shall equal the ARB Interest Rate in effect on the day immediately
preceding such Auction Date.
(iv) Notwithstanding the foregoing:
(1) if the ARBs are no longer Book -Entry Bonds, the
Applicable ARB Rate for any ARB Interest Period commencing after the delivery of
certificates representing the ARBs pursuant to Section 2.02 hereof shall equal the ARB
Maximum Rate; or
(2) if an ARB Payment Default shall have occurred, the
Applicable ARB Rate for the ARB Interest Period commencing on or immediately after
such ARB Payment Default and for each ARB Interest Period thereafter, to and including
the ARB Interest Period, if any, during which, or commencing less than two Business
Days after, such ARB Payment Default is cured in accordance with this Indenture, shall
equal the Non -Payment Rate on the first day of each such ARB Interest Period, provided
that if an Auction occurred on the Business Day immediately preceding any such ARB
Interest Period, the Applicable ARB Rate for such ARB Interest Period shall be the Non -
Payment Rate.
(v) Medium of Payment.
(1) The principal of and premium, if any, and interest on ARBs
shall be payable in any currency of the United States of America which on the respective
dates for payment thereof is legal tender for the payment of public and private debts. The
principal of and premium, if any, and interest on ARBs (other than at maturity) shall be
payable by check mailed to the registered owner thereof on the Record Date at the address
of such registered owner as it appears on the Bond Register.
(2) The principal of each ARB at maturity will be paid upon
presentation and surrender thereof at the Principal Office of the Trustee.
(3) Unless otherwise requested by the Securities Depository,
payments of the principal of ARBs, at maturity or upon redemption, and payments of
interest on ARBs made by wire transfer, shall be made by the Trustee in immediately
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available funds, provided, however, that such method of payment may be modified by
written agreement among the Trustee, the Securities Depository and the Auction Agent.
(vi) Computation of Interest Distributable on ARBs. The amount of
interest distributable to ARB Beneficial Owners, in respect of each $25,000 in principal
amount thereof for any ARB Interest Period or part thereof, shall be calculated by the
Trustee by applying the Applicable ARB Rate, for such ARB Interest Period or part
thereof, to the principal amount of $25,000, multiplying such sum by the actual number
of days in such ARB Interest Period or part thereof divided by 360 and rounding the
resultant figure to the nearest cent (half a cent being rounded upward).
(vii) ARB Defaulted Interest.
(1) The Trustee shall determine not later than 2:00 p.m., New
York City time, on each ARB Interest Payment Date, whether an ARB Payment Default
has occurred. If an ARB Payment Default has occurred, the Trustee shall, not later than
2:30 p.m. New York City time on such Business Day, send a Notice of ARB Payment
Default to the Auction Agent and each Broker -Dealer by telecopy or similar means and, if
such ARB Payment Default is cured, the Trustee shall immediately send a Notice of Cure
of ARB Payment Default to the Auction Agent and each Broker -Dealer by telecopy or
similar means.
(2) ARB Defaulted Interest shall forthwith cease to be payable
to the ARB Beneficial Owner on the relevant Record Date by virtue of having been such
ARB Beneficial Owner and such ARB Defaulted Interest shall be payable to the Person in
whose name the ARBs with respect to such ARB Payment Default occurred are registered
at the close of business on a special Record Date fixed therefor by the Trustee, which
shall not be more than fifteen days and not less than ten days prior to the date of the
proposed payment of ARB Defaulted Interest. The Trustee shall promptly notify the City
of the special Record Date and at the City's expense mail to each ARB Beneficial Owner
of ARBs as to which ARB Defaulted Interest is payable, not less than ten days before the
special Record Date, notice of the date of the proposed payment of such ARB Defaulted
Interest.
(b) Calculation of ARB Maximum Rate, All -Hold Rate and Non -Payment
Rate.
(i) The Auction Agent shall calculate the ARB Maximum Rate and
the All -Hold Rate on each Auction Date. If the ARBs are no longer Book -Entry Bonds,
the Auction Agent shall calculate the ARB Maximum Rate on the Business Day
immediately preceding each ARB Interest Payment Date after the delivery of certificates
representing the ARBs pursuant to Section 2.02 hereof. If an ARB Payment Default shall
have occurred, the Trustee shall calculate the Non -Payment Rate on the first day of (i)
each ARB Interest Period commencing on or after the date of the occurrence and during
the continuance of such ARB Payment Default and (ii) any ARB Interest Period
commencing less than two Business Days after the cure of any ARB Payment Default.
The Auction Agent shall determine the "AA" Composite Commercial Paper Rate for each
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ARB Interest Period other than the first ARB Interest Period, provided, that if the ARB
are no longer Book -Entry Bonds, or if an ARB Payment Default has occurred, then the
Trustee shall determine the "AA" Composite Commercial Paper Rate for each such ARB
Interest Period. The determination by the Trustee or the Auction Agent, as the case may
be, of the "AA" Composite Commercial Paper Rate, ARB Maximum Rate, All -Hold Rate
and Non -Payment Rate shall (in the absence of manifest error) be final and binding upon
all ARB Beneficial Owners and all other parties. If calculated or determined by the
Auction Agent, the Auction Agent shall promptly advise the Trustee of the "AA"
Composite Commercial Paper Rate, ARB Maximum Rate, All -Hold Rate and Non -
Payment Rate.
(ii) If the Federal Reserve Bank of New York has not made available
its 30-day commercial paper rate for purposes of determining the "AA" Composite
Commercial Paper Rate, the Auction Agent or the Trustee, as the case may be, shall
request that the City appoint at least three commercial paper dealers to provide
commercial paper quotes for purposes of determining the "AA" Composite Commercial
Paper Rate; and if the City shall fail to make any such appointment within three Business
Days following such request, the Trustee shall appoint such commercial paper dealers and
notify the City of such appointment.
(c) Notification of Rates, Amounts and Payment Dates. On the Business
Day preceding each ARB Interest Payment Date with respect to the ARBs, the Trustee shall
advise the Securities Depository, so long as the ARBs are Book -Entry Bonds, of the amount of
interest distributable in respect of each $25,000 in principal amount (taken without rounding to
the nearest .000001) of ARBs for any ARB Interest Period or part thereof, calculated in
accordance with Section 2.09(a)(ii) hereof.
If any day scheduled to be an ARB Interest Payment Date shall be changed after
the Trustee shall have given the notice referred to in the preceding sentence, the Trustee shall, not
later than 9:15 a.m., New York City time, on the Business Day next preceding the earlier of the
day immediately preceding the new ARB Interest Payment Date or the old ARB Interest Payment
Date, by such means as the Trustee deems practicable, give notice of such change to the Auction
Agent, so long as no ARB Payment Default has occurred and is continuing and the ownership of
the ARB is maintained in book entry form by the Securities Depository. ARBs are Book -Entry
Bonds.
(d) Adjustment in Percentages.
(i) The Market Agent shall adjust the percentage used in determining
the All -Hold Rate, the Applicable Percentages used in determining the ARB Maximum
Rate and the percentage of the Index used in calculating the Non -Payment Rate, if any
such adjustment is necessary, in the judgment of the Market Agent, to reflect any Change
of Tax Law or change in Financial Conditions such that an ARB bearing interest at the
ARB Maximum Rate, an ARB bearing interest at the All -Hold Rate and an ARB bearing
interest at the Non -Payment Rate in each case shall have substantially the same market
value after such Change of Tax Law or change in Financial Conditions, as applicable, as
before such Change of Tax Law or change in Financial Conditions, as applicable. In
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making any such adjustment, the Market Agent shall take into account the following
factors, as in existence both before and after such Change of Tax Law: (i) short-term
taxable and Tax -Exempt market rates and indices of such short-term rates; (ii) the market
supply and demand for short-term Tax -Exempt securities; (iii) yield curves for short-term
and long-term Tax -Exempt securities or obligations having a credit rating that is
comparable to the ARBs; (iv) general economic conditions; and (v) economic and
financial factors present in the securities industry that may affect, or that may be relevant
to, the ARBs.
(ii) The Market Agent shall communicate its determination to adjust
the percentage used in determining the All -Hold Rate, the Applicable Percentages used in
determining the ARB Maximum Rate and the percentage of the Index used in calculating
the Non -Payment Rate pursuant to subsection (i) above by means of a Notice of Proposed
Percentage Change delivered in writing at least 10 days prior to the Auction Date on
which the Market Agent desires to effect the change to the City, the Trustee, the Broker -
Dealer and the Auction Agent. Such notice shall be effective only if it is accompanied by
a letter of Bond Counsel that it expects to be able to deliver a Favorable Opinion of Bond
Counsel in connection with such adjustment.
(iii) An adjustment in the percentage used to determine the All -Hold
Rate, the Applicable Percentage used in determining the ARB Maximum Rate and the
percentage of the Index used in calculating the Non -Payment Rate shall take effect on an
Auction Date only if:
(1) The Trustee, the City, the Broker -Dealer, the 2003 Series A
Credit Provider (if any) and the Auction Agent receive, by 11:00 a.m., New York City
time, on the Business Day immediately preceding such Auction Date, a Notice of
Percentage Change from the Market Agent by telecopy or similar means, (i) authorizing
the adjustment of the percentage used to determine the All -Hold Rate, the Applicable
Percentages used to determine the ARB Maximum Rate and the percentage of the Index
used to determine the Non -Payment Rate which shall be specified in such authorization,
and (ii) confirming that Bond Counsel expects to be able to deliver a Favorable Opinion
of Bond Counsel in connection with such adjustment on or prior to such Auction Date;
and
(2) The Trustee receives by 9:30 a.m., New York City time, on
such Auction Date, a Favorable Opinion of Bond Counsel.
If any of the conditions referred to in (1) or (2) above are not met, the existing
percentage used in determining the All -Hold Rate, the percentage of the Index used in
determining the Non -Payment Rate and the Applicable Percentages used in determining the ARB
Maximum Rate shall remain in effect and the rate of interest for each succeeding ARB Interest
Period until each such condition is met shall equal the ARB Maximum Rate on the Auction Date
for such succeeding ARB Interest Period.
(e) Market Agent.
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(i) The Market Agent shall serve as such under the terms and
provisions hereof and of the Market Agent Agreement. The Market Agent shall be a
member of the National Association of Securities Dealers, Inc. having capitalization of at
least $25,000,000, and be authorized by law to perform all the duties imposed upon it by
this Indenture and the Market Agent Agreement. The Market Agent may be removed by
the Trustee at any time upon and pursuant to the written direction of (1) the City or (2) the
ARB Beneficial Owners of 66-2/3% of the aggregate principal amount of the ARBs then
Outstanding, by an instrument signed by the Trustee and filed with the Market Agent, the
Auction Agent and the City; provided that such removal shall not take effect until the
appointment by the ARB Beneficial Owners or the Trustee of a substitute Market Agent.
The Market Agent may resign upon 30 days' written notice delivered to the Trustee,
provided that such resignation shall not take effect until the appointment by the ARB
Beneficial Owners or the Trustee of a substitute Market Agent. If the Trustee is unable to
appoint a substitute Market Agent within 30 days following receipt of such written notice
of resignation, the Market Agent may petition the appropriate court having jurisdiction to
appoint a substitute Market Agent.
(ii) The Market Agent may be removed at any time, at the written
request of the City, for any breach of its obligations hereunder or under the Market Agent
Agreement.
(f) Auction Agent.
(i) Any Auction Agent shall be (i) subject to the written approval of
each Broker -Dealer, (ii) a bank or trust company duly organized under the laws of the
United States of America or any state or territory thereof having its principal place of
business in the Borough of Manhattan, New York, or such other location as approved by
the Trustee and the Market Agent in writing and having a combined capital stock or
surplus of at least $15,000,000, or (iii) a member of the National Association of
Securities Dealers, Inc., having a capitalization of at least $15,000,000, and, in either
case, authorized bylaw to perform all the duties imposed upon it hereunder and under the
Auction Agent Agreement. The Auction Agent may at any time resign and be discharged
of the duties and obligations created by this Indenture by giving at least 90 days' notice to
the Trustee, the Broker -Dealer, the City and the Market Agent. The Auction Agent may
be removed at any time by the Trustee, upon the written direction of (1) the City or (2) the
ARB Beneficial Owners of 66-2/3% of the aggregate principal amount of the ARBs then
Outstanding, by an instrument signed by the Trustee and filed with the Auction Agent, the
2003 Series A Credit Provider (if any), the Market Agent and the City upon at least 30
days' notice. Neither the resignation nor the removal of the Auction Agent pursuant to the
preceding two sentences shall be effective until and unless a substitute Auction Agent has
been appointed and has accepted such appointment. If required by the Market Agent, a
substitute Auction Agent Agreement shall be entered into with a substitute Auction
Agent. Notwithstanding the foregoing, the Auction Agent may terminate the Auction
Agent Agreement if, within 45 days after notifying the Trustee, the City and the Market
Agent in writing that it has not received payment of any Auction Agent Fee due it in
accordance with the terms of the Auction Agent Agreement, the Auction Agent does not
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receive such payment. The Trustee shall not be liable for any action taken, suffered or
omitted by the Auction Agent.
(ii) If the Auction Agent shall resign or be removed or be dissolved, or
if the property or affairs of the Auction Agent shall be taken under the control of any state
or federal court or administrative body because of bankruptcy or insolvency, or for any
other reason, the Trustee, at the direction of the City, shall use its best efforts to appoint a
substitute Auction Agent.
(iii) The Auction Agent is acting as agent for the Trustee in connection
with Auctions. In the absence of bad faith, negligent failure to act or negligence on its
part, the Auction Agent shall not be liable for any action taken, suffered or omitted or any
error of judgment made by it in the performance of its duties under the Auction Agent
Agreement and shall not be liable for any error of judgment made in good faith unless the
Auction Agent shall have been negligent in ascertaining (or failing to ascertain) the
pertinent facts.
(iv) The Auction Agent may be removed at any time, at the written
request of the City, for any breach of its obligations hereunder or under the Auction
Agent Agreement.
(v) The Auction Agent shall not be responsible or liable for any failure
or delay in the performance of its obligations under this Indenture arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control, including
without limitation, acts of God; earthquakes; fires; floods; wars; civil or military
disturbances; sabotage; epidemics; riots; labor disputes; acts of civil or military authority
or governmental actions; it being understood that the Auction Agent shall use reasonable
efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
(g) Broker -Dealers.
(i) the City may, from time to time, appoint one or more Persons to
serve as Broker -Dealers under Broker -Dealer Agreements and shall be responsible for
providing such Broker -Dealer Agreements to the Trustee and the Auction Agent.
(ii) Any Broker -Dealer may be removed at any time at the written
request of the City.
(h) Provisions Relating to Auctions. None of the City, the Trustee or the
Auction Agent shall be responsible for any failure of a Broker -Dealer to submit an Order to the
Auction Agent on behalf of any Existing Owner or Potential Owner, nor shall any of the City, the
Trustee or the Auction Agent be responsible for failure by any Securities Depository to effect any
transfer or to provide the Auction Agent with current information regarding registration of
transfers. None of the City, the Trustee, the Broker -Dealer or the Auction Agent shall have any
liability in the event that there are not Sufficient Clearing Bids from time to time pursuant to the
Auction Procedures.
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(i) Agreement of Owners. By purchasing ARBs, whether in an Auction or
otherwise, each prospective purchaser of ARBs or its Broker -Dealer will be deemed to have
agreed to the provisions for the replacement of the Auction Agent, each Broker -Dealer and the
Market Agent as provided in this Indenture, and relevant agreements among the City, the Trustee,
the Auction Agent, the Market Agent and the Broker -Dealer, as appropriate.
0) Changes in Auction Period or Auction Date.
(i) Changes in Auction Period.
(1) The Auction Period for the 2003 Series A Bonds with
respect to each ARB Interest Rate Period, if any, initially shall be either a seven-day
period or a thirty-five day period commencing generally on a Monday, generally on a
Tuesday, generally on a Wednesday, generally on a Thursday or generally on a Friday, in
each case as announced by the City in its notice of the proposed Conversion of the 2003
Series A Bonds to such subsequent ARB Interest Rate Period as provided in Section
2.09(k) hereof.
(2) During any ARB Interest Rate Period, the City may from
time to time on any ARB Interest Payment Date change the length of the Auction Period
with respect to all of the ARBs between 7 days and 35 days or change the first day of
each Auction Period, or both, in each case in order to accommodate economic and
financial factors that may affect or be relevant to the length of the Auction Period and the
interest rate borne by the 2003 Series A Bonds. The City shall initiate the change in the
length or day of commencement of the Auction Period, or both, by giving written notice
to the Trustee, the Auction Agent, the 2003 Series A Credit Provider (if any), the Broker -
Dealer and the Securities Depository that the Auction Period shall change if the
conditions described herein are satisfied and the proposed effective date of the change, at
least thirty (30) days prior to the Auction Date for such Auction Period.
(3) Any such changed Auction Period shall be for a period of 7
days or 35 days and shall be for all of the ARBs.
(4) No change in the length or the day of commencement of the
Auction Period for the ARBs shall be allowed unless Sufficient Clearing Bids existed at
both the Auction before the date on which the notice of the proposed change was given as
provided in clause (2) of this subsection 0) and the Auction immediately preceding the
proposed change.
(5) The change in length of the Auction Period for the ARBs
shall take effect only if Sufficient Clearing Bids exist at the Auction on the Auction Date
for the first such Auction Period. For purposes of the Auction for such first Auction
Period only, each Existing Owner shall be deemed to have submitted Sell Orders with
respect to all of its ARBs except to the extent such Existing Owner submits a Hold Order
with respect to such ARBs. If the condition referred to in the first sentence of this clause
(v) is not met, the Auction Rate for the next Auction Period shall be the ARB Maximum
Rate, and the Auction Period shall be the Auction Period already in effect.
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(ii) Changes in Auction Date. During any ARB Interest Rate Period,
the City may specify an earlier Auction Date for any Business Day earlier (but in no event
more than five Business Days earlier) than the Auction Date that would otherwise be
determined in accordance with the definition of "Auction Date" in order to conform with
then current market practice with respect to similar securities or to accommodate
economic and financial factors that may affect or be relevant to the day of the week
constituting an Auction Date and the interest rate borne on the ARBs. The City shall
provide notice of its determination to specify an earlier Auction Date for an Auction
Period by means of a written notice delivered at least thirty (30) days prior to the
proposed changed Auction Date to the Trustee, the 2003 Series A Credit Provider (if
any), the Broker -Dealer and the Securities Depository.
(k) Conversion to ARB Interest Rate Period.
(i) Conversion to ARB Interest Rate Period. Subject to Section 2.08
hereof, the City, from time to time, by written direction to the Trustee(with a copy to the
Tender Agent (if any), the 2003 Series A Credit Provider (if any), the Remarketing Agent
(if any), the Auction Agent (if any) and each Broker -Dealer (if any)), may elect that the
Interest Rate Period for 2003 Series A Bonds shall be converted to an ARB Interest Rate
Period. The direction of the City shall specify (A) the proposed Conversion Date to the
ARB Interest Rate Period, which shall be (1) in each case, a Business Day not earlier than
the 30th day following the second Business Day after receipt by the Trustee of such
direction, (2) in the case of a Conversion from a Long -Term Interest Rate Period, the day
immediately following the last day of the then -current Long Term Interest Rate Period or
a day on which the 2003 Series A Bonds would otherwise be subject to optional
redemption pursuant to Section 4.01(c) hereof if such Conversion did not occur, and (3)
in the case of a Conversion from a Commercial Paper Interest Rate Period, the day
determined pursuant to Section 2.07(d) hereof, (B) the Purchase Date for the 2003 Series
A Bonds subject to mandatory tender for purchase in connection with the Conversion of
the 2003 Series A Bonds to an ARB Interest Rate Period, which shall be the proposed
Conversion Date to the ARB Interest Rate Period and (C) the initial Auction Period for
the 2003 Series A Bonds during such ARB Interest Rate Period. In addition, the direction
of the City shall be accompanied by a form of notice to be mailed to the Owners of the
2003 Series A Bonds by the Trustee as provided in Section 2.09(k)(ii) hereof.
(ii) Notice of Conversion to ARB Interest Rate Period. The Trustee
shall give notice (by registered or certified mail, or by telecopy, confirmed by registered
or certified mail) of a Conversion to an ARB Interest Rate Period to the Owners of the
2003 Series A Bonds not less than 30 days prior to the proposed Conversion Date to such
ARB Interest Rate Period. Such notice shall state (i) that, subject to the satisfaction of the
conditions to such Conversion contained in Section 2.08(b) hereof, the Interest Rate
Period for the 2003 Series A Bonds shall be converted to an ARB Interest Rate Period
unless the City rescinds its election to Convert the 2003 Series A Bonds to such Interest
Rate Period pursuant to Section 2.08 hereof, (ii) the proposed Conversion Date to the
ARB Interest Rate Period; (iii) that the 2003 Series A Bonds are subject to mandatory
tender for purchase on the Conversion Date to the Daily Interest Rate Period; (iv) that the
2003 Series A Bonds are subject to mandatory tender for purchase on the proposed
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Conversion Date whether or not the Conversion to an ARB Interest Rate Period occurs;
(v) the Purchase Price and the place of Proper Delivery for the tender of 2003 Series A
Bonds for purchase in connection with such Conversion; and (vi) that the Purchase Price
of 2003 Series A Bonds tendered or deemed tendered shall be payable only from the
sources specified in Section 4.07(f) hereof, specifying such sources.
ARTICLE III
REDEMPTION OF 2003 SERIES A BONDS
Section 3.01. Terms of Redemption.
(a) The 2003 Series A Bonds are subject to redemption prior to their stated
maturity, at the option of the City in whole or in part (in such amounts as may be specified by the
City) on any date, from: (i) insurance or condemnation proceeds and (ii) from any source of
money if all or substantially all of the Malburg Generating Station is damaged or destroyed, taken
by any public entity in the exercise of its powers of eminent domain or disposed of or abandoned,
at a Redemption Price equal to the principal amount of the 2003 Series A Bonds to be redeemed,
plus unpaid accrued interest to the date fixed for redemption, without premium.
(b) While any Daily Interest Rate Period or any Weekly Interest Rate Period is
in effect, the 2003 Series A Bonds are also subject to redemption prior to their stated maturity, at
the option of the City, in whole or in part (in such amounts as may be specified by the City), on
any date at a Redemption Price equal to the principal amount of 2003 Series A Bonds to be
redeemed, plus unpaid accrued interest to the date fixed for redemption, without premium.
(c) While any Long -Term Interest Rate Period is in effect, the 2003 Series A
Bonds are also subject to redemption prior to their stated maturity, at the option of the City, in
whole or in part (in such amounts as may be specified by the City) on the first day of such Long -
Term Interest Rate Period at a Redemption Price equal to the principal amount of 2003 Series A
Bonds to be redeemed, plus accrued interest to the date fixed for redemption, without premium,
and thereafter, during the periods specified below (or if approved in a Favorable Opinion of Bond
Counsel, during the periods and at the Redemption Prices specified in a notice of the City to the
Trustee) in whole or in part (in such amounts as may be specified by the City) on any date at the
Redemption Prices (expressed as a percentage of principal amount of the 2003 Series A Bonds to
be redeemed) hereinafter indicated (or specified in the notice of the City to the Trustee
mentioned above), plus unpaid accrued interest to the date fixed for redemption:
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Length of Long -Term
Interest Rate Period Redemption
(expressed in years) Price
greater than 15 after 10 years at 101 %
declining by 1 % every year
to 100%
less than or equal to 15 after 7 years at 101 %
and greater than 10 declining by 1 % every year
to 100%
less than or equal to 10 after 5 years at 101 %
and greater than 7 declining by 1 % every year
to 100%
less than or equal to 7 after 3 years at 101 %
and greater than 4 declining by 1 % every year
to 100%
less than or equal to 4 after 2 years at 100%
(d) While any Commercial Paper Interest Rate Period is in effect, each 2003
Series A Bond is also subject to redemption prior to its stated maturity, at the option of the City,
in whole or in part (in such amounts as may be specified by the City), on the day succeeding the
last day of each Commercial Paper Term for such 2003 Series A Bond at a Redemption Price
equal to the principal amount of the 2003 Series A Bond to be redeemed, plus unpaid accrued
interest thereon to the date fixed for redemption, without premium.
(e) While any ARB Interest Rate Period is in effect, the 2003 Series A Bonds
are also subject to redemption prior to their stated maturity, at the option of the City, in whole or
in part (in such amounts as may be specified by the City), on any ARB Interest Payment Date at a
Redemption Price equal to the principal amount of 2003 Series A Bonds to be redeemed, plus
unpaid accrued interest thereon to the date fixed for redemption, without premium.
(f) The 2003 Series A Bonds are also subject to redemption in part prior to
their stated maturity from Sinking Fund Installments established pursuant to subsection (g) of
this Section on any 1 on or after 1, , at a Redemption Price equal to the
principal amount of the 2003 Series A Bonds to be redeemed together with interest unpaid
accrued thereon to the date fixed for redemption, without premium. Notwithstanding the
foregoing, when any 2003 Series A Bond to be redeemed pursuant to this subsection (f) is subject
to an ARB Interest Rate Period, if such 1 is not an ARB Interest Payment Date, the
redemption from Sinking Fund Installments shall occur on the ARB Interest Payment Date
immediately preceding such 1.
(g) The following shall be the Sinking Fund Installments for the 2003 Series
A Bonds. Such installments shall be due on 1 of each of the years set forth in the
following table in the respective amounts set forth opposite such years in said table; except that
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if, pursuant to subsection (f) of this Section, any Redemption Date from Sinking Fund
Installments is an ARB Interest Payment Date preceding a 1 listed below, the applicable
Sinking Fund Installment shall be due on such ARB Interest Payment Date:
Year Amount
(h) Notwithstanding the foregoing provisions of this Section, the terms of
redemption of 2003 Series A Credit Provider Bonds (including mandatory redemption) shall be
governed by the 2003 Series A Credit Support Instrument. Notwithstanding the foregoing
provisions of this Section, the terms of redemption of 2003 Series A Credit Provider Bonds
(including mandatory redemption) shall be governed by the 2003 Series A Credit Support
Instrument.
Section 3.02. Selection of 2003 Series A Bonds for Redemption. Whenever provision
is made in this First Supplemental Indenture for the redemption of less than all of the 2003 Series
A Bonds, the Trustee shall select the 2003 Series A Bonds to be redeemed, from all 2003 Series
A Bonds subject to redemption and not previously called for redemption, by lot in any manner
which the Trustee in its sole discretion shall deem appropriate and fair; provided, however, that
2003 Series A Bonds shall be redeemed in the following order of priority (and by lot within each
priority):
Bonds; and
FIRST: Any 2003 Series A Bonds which are 2003 Series A Credit Provider
SECOND: Any other 2003 Series A Bonds.
ARTICLE IV
TENDER OF BONDS
Section 4.01. Optional Tender During Daily Interest Rate Period or Weekly
Interest Rate Period. (a) During each Daily Interest Rate Period, the Owner (or with respect to
a Book -Entry Bond, the Beneficial Owner through its direct Participant in the Securities
Depository) of a 2003 Series A Bond may tender such 2003 Series A Bond (or with respect to a
Book -Entry Bond, its interests in such 2003 Series A Bond), or a portion thereof as provided
below, on any Business Day, for purchase at the applicable Purchase Price, upon delivery to the
Tender Agent at its Principal Office for delivery of notices, with a copy to the Remarketing
Agent, of an irrevocable written notice, or telephone notice promptly confirmed in writing, which
states the principal amount of such 2003 Series A Bond (or the portion thereof) that is being
irrevocably tendered for purchase. The Purchase Date for any 2003 Series A Bond (or portion
thereof) for which the Owner (or Beneficial Owner, as applicable) has given such notice of
tender for purchase shall be the date of delivery of such notice to the Tender Agent. Any notice
of tender for purchase given pursuant to this subsection delivered to the Tender Agent after 11:00
a.m., New York City time, shall be deemed to have been received on the next succeeding
Business Day. In the case of a tender for purchase of less than the full principal amount of a
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2003 Series A Bond, both the portion of the 2003 Series A Bond being tendered for purchase and
the portion not so tendered shall be in an Authorized Denomination.
(b) During each Weekly Interest Rate Period the Owner (or with respect to a
Book -Entry Bond, the Beneficial Owner through its direct Participant in the Securities
Depository) of a 2003 Series A Bond may tender such 2003 Series A Bond (or with respect to a
Book -Entry Bond, its interest in such 2003 Series A Bond), or a portion thereof as provided
below, on any Business Day, for purchase at the applicable Purchase Price, upon delivery to the
Tender Agent at its Principal Office for delivery of notices, with a copy to the Remarketing
Agent, of an irrevocable written notice which states the principal amount of such 2003 Series A
Bond (or the portion thereof) that is being irrevocably tendered for purchase and the date on
which the same shall be purchased, which date shall be a Business Day not prior to the seventh
day next succeeding the date of the delivery of such notice to the Tender Agent. Any notice
delivered to the Tender Agent after 4:00 p.m., New York City time, shall be deemed to have been
received on the next succeeding Business Day. In the case of a tender for purchase of less than
the full principal amount of a 2003 Series A Bond, both the portion of the 2003 Series A Bond
tendered for purchase and the portion not so tendered shall be in an Authorized Denomination.
(c) The giving of notice by an Owner or Beneficial Owner of a 2003 Series A
Bond to have such 2003 Series A Bond purchased as provided in this Section shall constitute the
irrevocable tender for purchase of such 2003 Series A Bond, regardless of whether Proper
Delivery of such 2003 Series A Bond is made to the Tender Agent on the applicable Purchase
Date.
(d) In the event that an Owner of a 2003 Series A Bond has delivered a tender
notice pursuant to this Section with a Purchase Date on or prior to the Purchase Date on which
such 2003 Series A Bond is subject to mandatory tender for purchase pursuant to Section 4.04
hereof as a result of the delivery of a Notice of Termination with respect to, or as a result of the
Expiration Date of, or in connection with the delivery of an Alternate 2003 Series A Credit
Support Instrument for, a 2003 Series A Credit Support Instrument, such 2003 Series A Bond
shall be subject to purchase in accordance with this Section on the Purchase Date determined
pursuant to this Section.
Section 4.02. Mandatory Tender Following Commercial Paper Term. During each
Commercial Paper Interest Rate Period, each 2003 Series A Bond shall be subject to mandatory
tender for purchase, at the applicable Purchase Price, on the day next succeeding the last day of
each Commercial Paper Term for such 2003 Series A Bond, unless such day is the first day of a
new Interest Rate Period for such 2003 Series A Bond (in which event such 2003 Series A Bond
shall be subject to mandatory tender for purchase pursuant to Section 4.03 hereof).
Section 4.03. Mandatory Tender on First Day of Interest Rate Period. The 2003
Series A Bonds shall be subject to mandatory tender for purchase, at the applicable Purchase
Price, on the first day of each Interest Rate Period (other than upon the Conversion from a Daily
Interest Rate Period to a Weekly Interest Rate Period or the Conversion from a Weekly Interest
Rate Period to a Daily Interest Rate Period) and (except for any Conversion from an ARB
Interest Rate Period) on the proposed Conversion Date specified in the notice of the Conversion
to an alternate Interest Rate Period given to the Owners pursuant to Section 4.05(b) hereof).
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Section 4.04. Mandatory Tender Upon Termination or Expiration of 2003 Series A
Credit Support Instrument. The 2003 Series A Bonds shall be subject to mandatory tender for
purchase, at the applicable Purchase Price, on the date which is the first Business Day which is
not less than five (5) days prior to each of the following with respect to the 2003 Series A Credit
Support Instrument then in effect with respect to the 2003 Series A Bonds: (a) termination of
such 2003 Series A Credit Support Instrument upon the delivery of an Alternate 2003 Series A
Credit Support Instrument; (b) the termination date set forth in a Notice of Termination of such
2003 Series A Credit Support Instrument; or (c) the Expiration Date for such 2003 Series A
Credit Support Instrument.
Section 4.05. Notice to Owners of Mandatory Tender. (a) In connection with the
mandatory tender of 2003 Series A Bonds for purchase in accordance with Section 4.02 hereof,
no notice need be given to Owners of 2003 Series A Bonds.
(b) In connection with any mandatory tender of 2003 Series A Bonds for
purchase in accordance with Section 4.03 hereof, the Tender Agent shall give the notice provided
herein as a part of the notice given to the Owners pursuant to Section 2.04(c), 2.05(c), 2.06(c),
2.07(c) or 2.09(k)(ii) hereof, as applicable. Such notice shall state: (i) that, the Purchase Price of
each 2003 Series A Bond so subject to mandatory tender for purchase shall be payable only upon
Proper Delivery of such 2003 Series A Bond to the Tender Agent at its Principal Office, and
describing the actions and document necessary to make such Proper Delivery; (ii) that all 2003
Series A Bonds so subject to mandatory tender for purchase are to be purchased (but only from
the funds available for such purchase pursuant to Section 4.07(f) hereof, describing such funds)
on the Purchase Date which shall be explicitly stated; and (iii) that if on such Purchase Date, the
Tender Agent holds in trust for the Owners of the Tendered Bonds the Purchase Price for all
Tendered Bonds to be purchased on such Purchase Date, any such Tendered Bond as to which
Proper Delivery is not made to the Tender Agent on the Purchase Date shall be deemed to be an
Undelivered Bond and to have been tendered for purchase on such Purchase Date and purchased
as herein provided and the Owner of such Undelivered Bond shall thereafter have no rights with
respect to such Undelivered Bond except to receive payment of the Purchase Price thereof from
the funds held for such purpose by the Tender Agent and only upon Proper Delivery of such 2003
Series A Bond to the Tender Agent. Any notice given substantially as provided in this
subsection (b) shall be conclusively presumed to have been duly given, whether or not actually
received by each Owner of a 2003 Series A Bond.
(c) In connection with the mandatory tender of 2003 Series A Bonds for
purchase in accordance with Section 4.04 hereof, the Tender Agent shall give notice (by
registered or certified mail, or by telecopy, confirmed by registered or certified mail) to the
Owners of the mandatory tender of the 2003 Series A Bonds for purchase as a result of the
occurrence of any event specified in Section 4.06 hereof not less than five (5) days prior to the
applicable Purchase Date. Such notice shall state: (i) that the Purchase Price of each 2003 Series
A Bond so subject to mandatory tender for purchase shall be payable only upon Proper Delivery
of such 2003 Series A Bond to the Tender Agent at its Principal Office; (ii) that all 2003 Series A
Bonds so subject to mandatory tender for purchase are to be purchased (but only from the funds
available for such purchase pursuant to Section 4.09(f) hereof, describing such funds) on the
Purchase Date which shall be explicitly stated; and (iii) that, if on such Purchase Date, the
Tender Agent holds in trust for the Owners of the Tendered Bonds sufficient available moneys to
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pay the Purchase Price for all Tendered Bonds to be purchased on such Purchase Date, any such
Tendered Bond as to which Proper Delivery is not made to the Tender Agent on the Purchase
Date shall be deemed to be an Undelivered Bond and to have been tendered for purchase on such
Purchase Date and purchased as herein provided and the Owner of such Undelivered Bond shall
thereafter have no rights with respect to the Undelivered Bond except to receive payment of the
Purchase Price thereof from the funds held for such purpose by Tender Agent and only upon
Proper Delivery of such 2003 Series A Bond to the Tender Agent. Any notice given substantially
as provided in this subsection (c) shall be conclusively presumed to have been duly given,
whether or not actually received by each Owner of a 2003 Series A Bond. Upon giving the
notice specified in this subsection (c), all Owners of 2003 Series A Bonds shall be required to
make Proper Delivery of their 2003 Series A Bonds to the Tender Agent for purchase on the
Purchase Date specified in such notice
Section 4.06. Undelivered Bonds. The Tender Agent may refuse to accept delivery of
any Tendered Bond as to which Proper Delivery has not been made; such refusal, however, shall
not affect the validity of the purchase of such Tendered Bond either upon the remarketing thereof
as herein provided or upon the purchase of such 2003 Series A Bond from a draw on a 2003
Series A Credit Support Instrument. For all purposes of this Indenture, the Tender Agent shall
determine whether there has been Proper Delivery of Tendered Bonds. Such determination shall
be binding on the Owners of the 2003 Series A Bonds, the City and the Remarketing Agent,
absent manifest error. If the Owner or Beneficial Owner of a 2003 Series A Bond who has given
notice of tender for purchase pursuant to Section 4.01 hereof, or any Owner of a 2003 Series A
Bond subject to mandatory tender for purchase pursuant to Section 4.02, 4.03 or 4.04 hereof,
fails to make Proper Delivery of such 2003 Series A Bond to the Tender Agent by 10:00 a.m.
New York City time on the applicable Purchase Date and if moneys equal to the Purchase Price
of all 2003 Series A Bonds to be purchased on such Purchase Date in accordance with this
Indenture shall be available to the Tender Agent for the payment thereof, such Tendered Bond
shall constitute an Undelivered Bond. From and after the applicable Purchase Date, (1) each
Undelivered Bond shall be deemed to be purchased and shall no longer be deemed to be
Outstanding under this Indenture; (2) interest shall no longer accrue with respect to such
Undelivered Bond; and (3) funds in the amount of the Purchase Price of the Undelivered Bond
shall be held by the Tender Agent in the Bond Purchase Fund for the benefit of the Owner of
such Undelivered Bond, to be paid when Proper Delivery of such Undelivered Bond is made to
the Tender Agent. Any funds held by the Tender Agent as described in clause (3) of the
preceding sentence shall be held uninvested.
Section 4.07. General Provisions Relating to Tenders.
(a) Creation of Bond Purchase Fund. (i) There shall be created and
established hereunder with the Tender Agent a fund to be designated the 2003 Series A Bonds of
Irvine Ranch Water District Consolidated Series 2003 Bond Purchase Fund to be held in trust
only for the benefit of the Owners of Tendered Bonds who shall thereafter be restricted
exclusively to the moneys held in such fund for the satisfaction of any claim for the Purchase
Price of such Tendered Bonds. Amounts in the Bond Purchase Fund constitutes the price paid
for Tendered Bonds whether upon the remarketing thereof or upon draws on the 2003 Series A
Credit Support Instrument and shall constitute amounts held for such Tendered Bonds for
purposes of Section 10.03 hereof. Neither the City nor any other Person (other than the Owner of
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a Tendered Bond, the purchaser of a Tendered Bond upon the remarketing thereof and the
Liquidity Provider) shall have any right, title or interest in any of the funds held on deposit in any
account in the Bond Purchase Fund nor any remarketing proceeds held for any period of time by
the Remarketing Agent.
(ii) There shall be created and designated the following accounts
within the Bond Purchase Fund: the "Remarketing Proceeds Account" and the "2003
Series A Credit Support Instrument Account." Moneys paid to the Tender Agent for the
purchase of Tendered Bonds received from (1) the Remarketing Agent shall be deposited
in the Remarketing Proceeds Account in accordance with the provisions of Section
4.07(e)(i) hereof, and (2) payments pursuant to a 2003 Series A Credit Support
Instrument, if any, shall be deposited in the 2003 Series A Credit Support Instrument
Account in accordance with the provisions of Section 4.07(e)(ii) hereof. Payments under
a 2003 Series A Credit Support Instrument not required to shall be returned to the 2003
Series A Credit Provider in accordance with Section 4.07(e) (iii) hereof.
(iii) Moneys in the 2003 Series A Credit Support Instrument Account
and the Remarketing Proceeds Account shall not be commingled with other funds held by
the Tender Agent and shall remain uninvested.
(b) Deposit of Tendered Bonds. The Tender Agent agrees to hold all
Tendered Bonds delivered to it in trust for the benefit of the respective Owners (including, if
applicable, the 2003 Series A Credit Provider) which shall have so delivered such Tendered
Bonds for purchase until moneys representing the Purchase Price of such Tendered Bonds have
been delivered to or for the account of such Owner in accordance with the provisions hereof.
Bonds.
(c) Information Regarding Tender and Remarketing of 2003 Series A
(i) Immediately upon its receipt, but not later than 11:00 a.m., New
York City time, in the case of 2003 Series A Bonds in a Daily Interest Rate Period, or no
later then 12:00 noon, New York City time on the following Business Day in the case of
2003 Series A Bonds in a Weekly Interest Rate Period, of a notice of optional tender of
2003 Series A Bonds for purchase pursuant to Section 4.01 hereof, the Tender Agent
shall notify the Remarketing Agent, the 2003 Series A Credit Provider, and the City by
telephone, promptly confirmed in writing, or by telecopy, of receipt of such notice,
specifying the principal amount of 2003 Series A Bonds for which it has received a notice
pursuant to Section 4.01 hereof, the names of the Owners thereof and the date on which
such 2003 Series A Bonds are to be purchased in accordance with Section 4.01 hereof.
(ii) As soon as practicable, but in no event later than 45 minutes prior
to the Drawing Time on the Purchase Date in the case of 2003 Series A Bonds to be
purchased pursuant to Section 4.01(a) or Section 4.02 hereof and by no later than 4:00
p.m. New York City time on the last Business Day prior to the Purchase Date in the case
of 2003 Series A Bonds to be purchased pursuant to Section 4.01(b), 4.03 or 4.04, the
Remarketing Agent shall inform the Tender Agent (and, if the 2003 Series A Bonds are
not Book -Entry Bonds, the City and the Trustee) by telephone, promptly confirmed in
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writing, of the principal amount of Tendered Bonds for which the Remarketing Agent has
identified prospective purchasers and, if the 2003 Series A Bonds are not Book -Entry
Bonds, of the name, address and taxpayer identification number of each such purchaser,
the principal amount of Tendered Bonds to be purchased by each prospective purchaser
and the Authorized Denominations in which such Tendered Bonds are to be delivered to
each such prospective purchaser. If the 2003 Series A Bonds are not Book -Entry Bonds,
the City shall cause to be prepared and executed, and the Trustee shall authenticate, or
cause the Tender Agent to authenticate, replacement 2003 Series A Bonds for the
Tendered Bonds as follows: (1) for delivery to the Remarketing Agent pursuant to
Section 4.07(g) hereof, a principal amount of 2003 Series A Bonds equal to the principal
amount of Tendered Bonds purchased with moneys from the Remarketing Proceeds
Account, in such Authorized Denominations and registered in such names as indicated in
the information provided by the Remarketing Agent pursuant to this Section 4.07(c)(ii);
and (2) for delivery to the Liquidity Provider pursuant to Section 4.07(g) hereof, a
principal amount of 2003 Series A Bonds equal to the principal amount of Tendered
Bonds purchased from moneys on deposit in the 2003 Series A Credit Support Instrument
Account in such Authorized Denominations and registered in the name of the 2003 Series
A Credit Provider or as otherwise provided in the 2003 Series A Credit Support
Agreement.
(d) Transfer of Remarketing Proceeds. Not later than 12:30 p.m., New
York City time, on each Purchase Date, the Remarketing Agent shall transfer all proceeds
received in connection with the remarketing of Tendered Bonds to the Tender Agent for deposit
in the Remarketing Proceeds Account. Until so transferred to the Tender Agent, the
Remarketing Agent shall hold all amounts received by it in connection with any remarketing of
2003 Series A Bonds intrust only for the benefit of the purchasers of the Tendered Bonds on the
remarketing thereof and shall not commingle such amounts with any other moneys.
(e) Deposits of Funds.
(i) The Tender Agent shall deposit into the Remarketing Proceeds
Account any amounts received by it from the Remarketing Agent as the proceeds of the
remarketing of Tendered Bonds and shall apply such amounts as provided in Section
4.07(f) hereof.
(ii) At least twenty minutes prior to the Drawing Time on each
Purchase Date, the Tender Agent shall notify the 2003 Series A Credit Provider (if any)
for the Tendered Bonds and the City by telephone, immediately confirmed in writing, of
the additional amount of funds, if any, required to be transferred to the Tender Agent (the
"Additional Funding Amount") which shall be the amount, if any, by which the total
Purchase Price of the Tendered Bonds exceeds the sum of the amounts then on deposit in
the Remarketing Proceeds Account pursuant to Section 4.07(d). Neither the failure of the
Tender Agent to give the notice required by the preceding sentence nor any defect or
inaccuracy therein shall affect the obligation of the 2003 Series A Credit Provider to
honor draws on the 2003 Series A Credit Support Instrument in accordance with its
terms. The Tender Agent shall, not less than five minutes prior to the Drawing Time on
each Purchase Date, take such action, including presenting drafts, as shall be necessary to
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receive payment under the 2003 Series A Credit Support Instrument on such Purchase
Date in an amount equal to the Additional Funding Amount. The Tender Agent shall
deposit such amounts in the 2003 Series A Credit Support Instrument Account.
(iii) The Tender Agent shall hold all moneys received from the
Remarketing Agent pursuant to this Section 4.07(e) in trust for the benefit of the
purchasers upon the remarketing of the Tendered Bonds until such Tendered Bonds shall
have been registered in the names of or on behalf of such purchasers and, if such
Tendered Bonds are not Book -Entry Bonds, such Tendered Bonds (or, if applicable,
replacement 2003 Series A Bonds therefor) shall have been delivered to the Remarketing
Agent on behalf of such purchasers, subject to application as provided in Section 4.07(e)
hereof. The Tender Agent shall hold all moneys received from the 2003 Series A Credit
Provider pursuant to this Section 4.07(e) in trust for the Owners of the Tendered Bonds
who have tendered or are deemed to have tendered such Tendered Bonds for purchase
pursuant hereto, subject to application as provided in this Section 4.07(e) and Section
4.07(f) hereof. In holding such moneys, the Tender Agent will be acting on behalf of
such Owners by facilitating purchase of the Tendered Bonds and not on behalf of the City
and will not be subject to the control of the City. Subject to the provisions of Section
4.07(f) hereof, following payment in full of the Purchase Price of the Tendered Bonds as
to, which Proper Delivery has been made to the Tender Agent on the Purchase Date and
the setting aside in segregated accounts in the Bond Purchase Fund of moneys sufficient
to, pay the Purchase Price of Undelivered Bonds, the Tender Agent shall pay any moneys
remaining in the 2003 Series A Credit Support Instrument Account directly to the
Liquidity Provider. If for any reason the amount available in the Bond Purchase Fund on
any Purchase Date, and any Available Moneys paid by the City to the Tender Agent
pursuant to Section 2.06(d)(iii) hereof or Section 2.08(b)(ii) hereof, is not sufficient to
pay in full the Purchase Price of all Tendered Bonds to be purchased on such Purchase
Date, then moneys in the Remarketing Proceeds Account shall be returned to the potential
purchasers of the Tendered Bonds identified in the remarketing thereof.
(f) Disbursements; Payment of Purchase Price. Moneys in the Bond
Purchase' Fund on a Purchase Date (other than moneys held by the Tender Agent to pay the
Purchase (Price of Undelivered Bonds with respect to a prior Purchase Date) shall be applied at or
before 3:00 p.m. New York City time on such Purchase Date to pay, in funds immediately
availableon such Purchase Date, the Purchase Price of Tendered Bonds as to which Proper
Delivery has been made in the following order of application and, to the extent not so applied on
such Purchase Date, an amount equal to the Purchase Price of Undelivered Bonds shall be held in
separate and segregated accounts in the Bond Purchase Fund for the benefit of the Owners of the
Undelivered Bonds which were to have been purchased on such Purchase Date:
FIRST: Moneys deposited in the Remarketing Proceeds Account.
SECOND: Moneys deposited in the 2003 Series A Credit Support Instrument
Account.
THIRD: Moneys made available by the City pursuant to Section 2.06(d)(iii)
hereof or Section 2.08(b)(ii) hereof.
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(g) Transfer of Tendered Bonds.
(i) The Remarketing Agent shall give notice with respect to the
Tendered Bonds, if any, sold by it pursuant to Section 4.08(a) hereof and Section 4.08(b)
hereof as provided in Section 4.07(c)(ii) hereof. If the 2003 Series A Bonds are Book -
Entry Bonds, the Tender Agent shall cause a principal amount of 2003 Series A Bonds
equal to the principal amount of Tendered Bonds purchased on each Purchase Date with
moneys in the Remarketing Proceeds Account to be transferred to such Participant or
Participants of the Securities Depository as shall be directed by the Remarketing Agent.
If the 2003 Series A Bonds are not Book -Entry Bonds, by 1:30 p.m. New York City time
on the Purchase Date in the case of Tendered Bonds to be purchased pursuant to Section
4.02 hereof and by 12:00 noon New York City time in the case of Tendered Bonds to be
purchased pursuant to Section 4.01, 4.03 or 4.04 hereof, a principal amount of 2003
Series A Bonds equal to the principal amount of Tendered Bonds purchased on each
Purchase Date with moneys from the Remarketing Proceeds Account shall be made
available by the Tender Agent to the Remarketing Agent against payment therefor in
immediately available funds. The Tender Agent shall deliver 2003 Series A Bonds
received by it pursuant to Section 4.07(c)(ii) hereof as directed by the Remarketing
Agent.
(ii) If the 2003 Series A Bonds are Book -Entry Bonds, the Tender
Agent shall cause a principal amount of 2003 Series A Bonds equal to the principal
amount of Tendered Bonds purchased from moneys on deposit in the Liquidity Provider
Account to be transferred to the 2003 Series A Credit Provider or such Participant or
Participants of the Securities Depository on behalf of the 2003 Series A Credit Provider,
and in such respective Authorized Denominations, as shall be directed by the 2003 Series
A Credit Provider. If the 2003 Series A Bonds are not Book -Entry Bonds, a principal
amount of 2003 Series A Bonds equal to the principal amount of Tendered Bonds
purchased on each Purchase Date from moneys on deposit in the 2003 Series A Credit
Support Instrument Account shall be delivered on the Purchase Date by the Tender Agent
to or as directed by the 2003 Series A Credit Provider. The Trustee shall register such
2003 Series A Bonds in the Bond Register in the name of the 2003 Series A Credit
Provider or as otherwise provided in the 2003 Series A Credit Support Instrument.
(h) Payment of Purchase Price. The Purchase Price of any Tendered Bond
purchased pursuant to Section 4.01, 4.02, 4.03 or 4.04 hereof shall be payable only upon Proper
Delivery of such Tendered Bond to the Tender Agent. If Proper Delivery of any Tendered Bond
is made by 10:00 a.m., New York City time, on the applicable Purchase Date or any Business
Day thereafter, the Purchase Price therefor shall be paid (but only from the funds provided
therefor pursuant to Section 4.07(f) hereof) in immediately available funds on the date such
Proper Delivery is made and if such Proper Delivery is made after 10:00 a.m., New York City
time, on such Purchase Date or any Business Day thereafter, the Purchase Price therefor shall be
paid (but only from the funds provided therefor pursuant to Section 4.07(f) hereof) in
immediately available funds on the Business Day immediately succeeding such date of Proper
Delivery.
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(i) Payment of Premiums and Discounts. Notwithstanding the provisions
of Section 4.07(f) hereof, if the Purchase Price of any Tendered Bond includes a premium, the
Tender Agent shall apply moneys provided by the City in accordance with Section 2.06(d)(iii)
hereof to pay such premium. Notwithstanding the provisions of Section 4.07(f) hereof, if any
Tendered Bond is to be remarketed at a price below the principal amount thereof and, if
applicable, unpaid accrued interest thereon, pursuant to Section 2.06(d) hereof, the Tender Agent
shall apply moneys provided to the Tender Agent by the City in accordance with Section 2.06(d)
(iii) hereof to the payment of the Purchase Price of such Tendered Bonds as part of the Purchase
Price of such Tendered Bonds. Any moneys provided by the City in accordance with Section
2.06(d)(iii) hereof not applied to the payment of such Purchase Price shall be returned to the City
by the Tender Agent not later than the Business Day next succeeding the applicable Purchase
Date.
Section 4.08. RemarketinLy of 2003 Series A Bonds; Notice of Interest Rates.
(a) Upon each Purchase Date for Tendered Bonds, other than 2003 Series A
Credit Provider Bonds, the Remarketing Agent shall offer for sale and use its best efforts to sell
such Tendered Bonds, any such sale to be made on the applicable Purchase Date in accordance
with this Article IV at a price equal to (except as otherwise provided in Section 2.06(d) hereof)
the applicable Purchase Price of the Tendered Bonds. The Remarketing Agent agrees that it shall
not sell any 2003 Series A Bonds purchased pursuant to this Article IV to the City or to any
Person who controls, is controlled by, or is under common control with, the City.
(b) The Remarketing Agent shall offer for sale and use its best efforts to sell
2003 Series A Credit Provider Bonds at a price equal to the principal amount thereof plus, if
applicable, unpaid accrued interest to the date of purchase (based on the rate per annum which
would have been applicable to such 2003 Series A Bonds if they were not 2003 Series A Credit
Provider Bonds). 2003 Series A Credit Provider Bonds shall not be delivered upon remarketing
unless the Tender Agent shall have received a written confirmation from the 2003 Series A
Credit Provider that the 2003 Series A Credit Support Instrument is reinstated in accordance with
its terms by an amount equal to that portion of the Required Stated Amount relating to such 2003
Series A Credit Provider Bonds.
(c) The Remarketing Agent shall determine the rate of interest on the 2003
Series A Bonds during each Daily Interest Rate Period, Weekly Interest Rate Period and Long -
Term Interest Rate Period, the interest rate with respect to each 2003 Series A Bond during each
Commercial Paper Term for such 2003 Series A Bond and the Commercial Paper Terms for each
2003 Series A Bond during each Commercial Paper Interest Rate Period as provided in Article H
hereof and shall furnish to the Tender Agent and, upon request to the City, on the date of
determination, each such rate of interest and Commercial Paper Term so determined by
telephone, telecopy, electronic mail or readily accessible electronic means, promptly confirmed
in writing.
(d) The Remarketing Agent shall transfer the proceeds of the remarketing of
Tendered Bonds as provided in Section 4.07(d).
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Section 4.09. 2003 Series A Credit Support Instrument; Alternate 2003 Series A
Credit Support Instruments. (a) The City has, concurrently with the issuance of the 2003
Series A Bonds, caused the Initial 2003 Series A Credit Support Instrument to be delivered to the
Tender Agent.
(b) Unless the 2003 Series A Bonds are ARBs or the Fixed Rate Conversion
Date shall have occurred, the City shall maintain a 2003 Series A Credit Support Instrument for
the 2003 Series A Bonds with the Tender Agent in the Required Stated Amount. At least forty
(40) days prior to the Expiration Date of the existing 2003 Series A Credit Support Instrument,
including any renewals or extensions thereof (which shall not be considered the delivery of an
Alternate 2003 Series A Credit Support Instrument), the City shall cause to be delivered to the
Tender Agent notice that the City expects the Liquidity Provider for the existing 2003 Series A
Credit Support Instrument to renew or extend of the term of such 2003 Series A Credit Support
Instrument or that the City expects to provide an Alternate 2003 Series A Credit Support
Instrument for the 2003 Series A Bonds satisfying the requirements of subsection (c) of this
Section. At least fifteen (15) days prior to the Expiration Date of the existing 2003 Series A
Credit Support Instrument, including any renewals or extensions thereof, the City shall cause to
be delivered to the Tender Agent a renewal or extension of the term of such 2003 Series A Credit
Support Instrument or an Alternate 2003 Series A Credit Support Instrument for the 2003 Series
A Bonds satisfying the requirements of subsection (c) of this Section.
(c) the City may, at any time at its sole option, furnish an Alternate 2003
Series A Credit Support Instrument to the Tender Agent in substitution for the 2003 Series A
Credit Support Instrument then in effect to provide for the purchase of Tendered Bonds upon
their optional or mandatory tender for purchase in accordance with Section 4.01, 4.02, 4.03 or
4.04 hereof, as applicable, if such Alternate 2003 Series A Credit Support Instrument satisfies the
following conditions and the City causes the documents and opinions specified in subsection (d)
of this Section to be delivered to the Tender Agent:
(i) The Alternate 2003 Series A Credit Support Instrument shall be
issued by, or shall otherwise be an obligation of, a commercial bank, insurance company
or other financial institution;
(ii) The term of the Alternate 2003 Series A Credit Support Instrument
shall be not less than one hundred eighty (180) days or such shorter period to the later of
the Maturity Date or the final Redemption Date for any Outstanding 2003 Series A
Bonds;
(iii) The obligations of the Liquidity Provider under the Alternate 2003
Series A Credit Support Instrument to provide funds to pay the Purchase Price of
Tendered Bonds shall not be subject to termination or suspension on less than fifteen (15)
days notice to the City and the Tender Agent; provided, however, that the obligations of
the Liquidity Provider to provide funds to pay the Purchase Price of Tendered Bonds,
may be immediately terminated or suspended without such notice upon the occurrence of
such events as may be provided in the Alternate 2003 Series A Credit Support Instrument
and which are disclosed to the purchasers of the Tendered Bonds in connection with the
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remarketing of the Tendered Bonds upon the mandatory tender for purchase pursuant to
the provisions of Section 4.04;
(iv) The Alternate 2003 Series A Credit Support Instrument must take
effect upon or prior to the remarketing of the Tendered Bonds upon the mandatory tender
thereof for purchase pursuant to the provisions of Section 4.04 as a result of the delivery
of such Alternate 2003 Series A Credit Support Instrument; provided that the Purchase
Price of Tendered Bonds so subject to mandatory tender for purchase pursuant to Section
4.04 hereof shall be payable from the then -current 2003 Series A Credit Support
Instrument and not such Alternate 2003 Series A Credit Support Instrument; and
(v) The Alternate 2003 Series A Credit Support Instrument must
provide for payments thereunder in an amount not less than the Required Stated Amount.
(d) On or prior to the date of delivery of an Alternate 2003 Series A Credit
Support Instrument to the Tender Agent pursuant to this Section, the City shall cause to be
furnished to the Tender Agent: (i) a Favorable Opinion of Bond Counsel with respect to such
delivery, (ii) an opinion of counsel to the Liquidity Provider of such Alternate 2003 Series A
Credit Support Instrument to the effect that such Alternate 2003 Series A Credit Support
Instrument has been duly authorized, executed and delivered by such Liquidity Provider and
constitutes the valid, legal and binding obligation of such Liquidity Provider enforceable against
such Liquidity Provider in accordance with its terms; provided, however, that such opinions may
be subject to such limitations and exceptions as are customarily taken in transactions such as the
delivery of the Alternate 2003 Series A Credit Support Instrument.
Section 4.10. Termination of 2003 Series A Credit Support Instrument; Purchase
by 2003 Series A Credit Provider; Notices. (a) The obligation of the 2003 Series A Credit
Provider to provide funds pursuant to a 2003 Series A Credit Support Instrument to pay the
Purchase Price of Tendered Bonds may expire or be suspended automatically and without prior
notice upon the occurrence of certain defaults as shall be set forth in the 2003 Series A Credit
Support Agreement relating to such 2003 Series A Credit Support Instrument subject, however,
to the provisions of Section 4.09(c)(iii).
(b) If automatic termination or suspension of the 2003 Series A Credit
Support Instrument occurs, the Tender Agent shall, immediately upon receiving written notice
thereof, notify the City, the Trustee, each Rating Agency, the 2003 Series A Credit Provider (if
any), the Remarketing Agent and the Owners of all Outstanding 2003 Series A Bonds that the
2003 Series A Credit Support Instrument has been terminated or suspended and the reasons
therefor, that the Tender Agent will no longer be able to draw on such 2003 Series A Credit
Support Instrument to pay the Purchase Price of Tendered Bonds and the 2003 Series A Credit
Provider will be under no obligation to advance funds under such 2003 Series A Credit Support
Instrument to pay the Purchase Price of Tendered Bonds.
(c) (i) On the date set forth in a Notice of Termination, the Tender Agent
will no longer be able to draw on the 2003 Series A Credit Support Instrument to pay the
Purchase Price of Tendered Bonds. Promptly upon the receipt of a Notice of Termination from
the 2003 Series A Credit Provider, but in no event more than two (2) Business Days after receipt
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thereof, the Tender Agent shall give notice to the City, the Trustee, the Remarketing Agent, and
each Rating Agency of the receipt of the Notice of Termination, the date of termination of the
2003 Series A Credit Support Instrument as a result of the receipt of such Notice of Termination
and the Purchase Date on which, pursuant to Section 4.04 hereof, the 2003 Series A Bonds are
subject to mandatory tender for purchase as a result of such termination. Notice of such
mandatory tender of 2003 Series A Bonds for purchase shall be given to the Owners as provided
in Section 4.05(c) hereof.
(ii) At least twenty (20) days prior to the Expiration Date of the 2003
Series A Credit Support Instrument then in effect with respect to 2003 Series A Bonds,
the Tender Agent shall give notice to the City, the Trustee, the Remarketing Agent, each
Rating Agency of the scheduled Expiration Date for the 2003 Series A Credit Support
Instrument and the Purchase Date on which, pursuant to Section 4.04 hereof, the 2003
Series A Bonds are subject to mandatory tender for purchase as a result of such
Expiration Date. Notice of such mandatory tender for purchase shall be given to the
Owners of the 2003 Series A Bonds as provided in Section 4.05(c) hereof.
(iii) At least twenty (20) days prior to the substitution of an Alternate
2003 Series A Credit Support Instrument for the 2003 Series A Credit Support Instrument
then in effect with respect to the 2003 Series A Bonds, the Trustee shall give notice to the
City, the Trustee, the Remarketing Agent and each Rating Agency of the scheduled
substitution of an Alternate 2003 Series A Credit Support Instrument for the 2003 Series
A Credit Support Instrument then in effect and the Purchase Date on which, pursuant to
Section 4.04 hereof, the 2003 Series A Bonds are subject to mandatory tender for
purchase as a result of such substitution. Notice of such mandatory tender for purchase
shall be given to the Owners of the 2003 Series A Bonds as provided in Section 4.05(c)
hereof.
(iv) Each notice given pursuant to this subsection (c) shall be given by
registered or certified mail, or by telecopy, confirmed by registered or certified mail, and
shall (1) state that the Tender Agent may no longer draw on the 2003 Series A Credit
Support Instrument (and the 2003 Series A Credit Provider will have no obligation) to
pay (or provide funds for the payment of) the Purchase Price of Tendered Bonds after the
termination date set forth in the Notice of Termination, the Expiration Date or
substitution of an Alternate 2003 Series A Credit Support Instrument, as applicable, (2)
specify the termination date established pursuant to the Notice of Termination, the
Expiration Date or the date of substitution of an Alternate 2003 Series A Credit Support
Instrument, as applicable, (3) state that the 2003 Series A Bonds are subject to mandatory
tender for purchase on the Purchase Date determined pursuant to Section 4.04 hereof,
which Purchase Date shall be explicitly stated, and (4) state, if applicable, the name of the
provider of the proposed Alternate 2003 Series A Credit Support Instrument and the
terms thereof.
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ARTICLE V
APPLICATION OF PROCEEDS
Section 5.01. Application of Proceeds of 2003 Series A Bonds. The proceeds of the
sale (less underwriter's discount) of the 2003 Series A Bonds shall be applied simultaneously
with the delivery of the 2003 Series A Bonds, as follows:
(a) The City shall cause the initial purchaser of the 2003 Series A Bonds to
wire transfer $ of the purchase price of the 2003 Series A Bonds to the Initial 2003
Series A Credit Provider as payment of the initial fees for the Initial 2003 Series A Credit
Support Instrument;
(b) There shall be deposited in the Debt Service Reserve Fund the sum of
$ representing the amount required so that the balance on deposit in such Fund shall
equal the Debt Service Reserve Requirement calculated immediately after the authentication and
delivery of the 2003 Series A Bonds;
(c) There shall be deposited in the 2003 Series Costs of Issuance Fund the
sum of $
(d) The remaining balance of the proceeds of the sale of the 2003 Series A
Bonds, in the amount of $ , shall be deposited in the 2003 Construction Fund.
Section 5.02. 2003 Series Costs of Issuance Fund.
(a) The Trustee shall establish and maintain in trust a separate fund designated
as the "2003 Cost of Issuance Fund." Money deposited in said fund shall be used to pay Costs of
Issuance with respect to the 2003 Series Bonds. At the end of one year from the date of initial
delivery of the 2003 Series A Bonds, or upon earlier receipt of a statement of a City Authorized
Representative that amounts in said fund are no longer required for the payment of such Costs of
Issuance, said fund shall be terminated and any amounts then remaining in said fund shall be
transferred to such accounts in Debt Service Fund or to the Redemption Fund, in each case as
directed by an Authorized City Representative.
(b) The Trustee shall make payments from the 2003 Series Costs of Issuance
Fund, except payments and withdrawals pursuant to subsection (c) of this Section, in the
amounts, at the times, in the manner and on the other terms and conditions set forth in this
subsection. Before any such payment from the 2003 Series Costs of Issuance Fund shall be
made, there shall be filed with the Trustee a requisition therefor, signed by an Authorized City
Representative. Each such requisition shall state, in respect of the payment to be made (a) the
name and address of the person, firm or corporation to whom payment is due, (b) the amount of
such payment, and (c) the particular item of the cost to be paid and that such payment in the
stated amount is a proper charge against the 2003 Costs of Issuance Fund and that no part of such
payment shall be applied to any item which has previously been paid as a Cost of Issuance of the
2003 Series Bonds. The Trustee shall promptly issue its check to the City or to the Person
identified in the requisition in the amount or amounts specified in each such requisition or, if
requested pursuant to any such requisition, shall by interbank transfer or other method arrange to
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promptly make each payment required by such requisition. The City shall apply, or cause to be
applied, all such moneys received from the 2003 Costs of Issuance Fund to the payment of the
Costs of Issuance of the 2003 Series Bonds identified in the requisition relating to such moneys.
(c) Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the 2003 Series Costs of Issuance Fund
shall be applied to the payment of Bond debt service when due.
Section 5.03. 2003 Construction Fund.
(a) The Trustee shall establish and maintain in trust a separate fund designated
as the "2003 Construction Fund." Money deposited in said fund shall be used to pay Costs of the
Malburg Generating Station as provided in this Section.
(b) The Trustee shall make payments from the 2003 Construction Fund,
except payments and withdrawals pursuant to subsection (d) of this Section, in the amounts, at
the times, in the manner and on the other terms and conditions set forth in this subsection.
Before any such payment from the 2003 Construction Fund shall be made, there shall be filed
with the Trustee a requisition therefor, signed by an Authorized City Representative substantially
in the form of Exhibit G hereto. Each such requisition shall state, in respect of the payment to be
made (a) the name and address of the person, firm or corporation to whom payment is due, (b)
the amount of such payment, and (c) the particular item of the Cost of the Malburg Generating
Station to be paid and that such payment in the stated amount is a proper charge against the 2003
Construction Fund and that no part of such payment shall be applied to any item which has
previously been paid as a Cost of the Malburg Generating Station. The Trustee shall promptly
issue its check to the City or to the Person identified in the requisition in the amount or amounts
specified in each such requisition or, if requested pursuant to any such requisition, shall by
interbank transfer or other method arrange to promptly make each payment required by such
requisition. The City shall apply, or cause to be applied, all such moneys received by it from the
2003 Construction Fund to the payment of the Costs of the Malburg Generating Station identified
in the requisition relating to such moneys.
Each such requisition shall be sufficient evidence to the Trustee of the facts stated therein
and the Trustee shall have no duty to confirm the accuracy of such facts. Upon receipt of each
such requisition, signed by an Authorized City Representative, the Trustee shall pay the amount
set forth therein as directed by the terms thereof.
(c) Upon the receipt by the Trustee of a certificate of an Authorized City
Representative requesting the Trustee to close the 2003 Construction Fund, and after payment of
Costs payable from the 2003 Construction Fund or provision having been made for payment of
such Costs not yet due by retaining sufficient amounts to pay such Costs in the 2003
Construction Fund or otherwise as directed in such certificate, the Trustee shall transfer any
remaining balance in the 2003 Construction Fund into a separate account within the Fund, which
the Trustee shall establish and hold in trust, and which shall be entitled the "Surplus Account."
The moneys in the Surplus Account shall be used and applied, subject to the provisions of
Section 5.04 of the Master Indenture, at the written direction of an Authorized City
Representative (unless some other application of such moneys is requested by an Authorized City
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Representative and there is delivered to the Trustee a Favorable Opinion of Bond Counsel to the
effect that such application would not, in and of itself, adversely affect the Tax -Exempt status of
interest on the Outstanding Bonds) to the payment when due of principal, sinking fund payments
or interest on the 2003 Series Bonds, to the purchase of 2003 Series Bonds for cancellation or to
the redemption of 2003 Series Bonds, in each case as designated by an Authorized City
Representative. Moneys held in the 2003 Construction Fund may, subject to the 2003 Series Tax
Certificate, be invested and reinvested to the fullest extent practicable in any investment in which
the City can legally invest its funds, which mature not later than such times as shall be necessary
to provide moneys when needed for payments to be made from the 2003 Construction Fund.
Any investment earnings on moneys on deposit in the 2003 Construction Fund shall be deposited
in the 2003 Construction Fund and be used in the same manner as other amounts on deposit in
the 2003 Construction Fund. Notwithstanding the foregoing sentence, the moneys in the Surplus
Account shall be invested at a yield no higher than the yield on the Outstanding 2003 Series
Bonds (unless there is delivered to the Trustee a Favorable Opinion of Bond Counsel to the effect
that investment at a higher yield would not, in and of itself, adversely affect the Tax -Exempt
status of interest on the 2003 Series Bonds), and all such investment income shall be deposited in
the Surplus Account and expended or reinvested as provided above.
(d) In the event of redemption of all the 2003 Series Bonds or an Event of
Default which causes acceleration of the Bonds, any moneys then remaining in the 2003
Construction Fund shall be transferred to the Debt Service Fund.
ARTICLE VI
CERTAIN TAX MATTERS
Section 6.01. Tax Covenants.
(1) The City covenants that it shall not take any action, or fail to take any
action, if any such action or failure to take action would adversely affect the exclusion from gross
income of the interest on the 2003 Series A Bonds under Section 103 of the Code. The City shall
not directly or indirectly use or permit the use of any proceeds of the 2003 Series A Bonds in
such a manner as would adversely affect the exclusion of interest on any 2003 Series A Bonds
from gross income under Section 103 of the Code. The City shall not directly or indirectly use or
permit the use of any proceeds of any 2003 Series A Bonds, or of any facilities financed thereby,
or other funds of the City, or take or omit to take any action, that would cause any 2003 Series A
Bonds to be "arbitrage bonds within the meaning of Section 148 of the Code. To that end, the
City shall comply with all requirements of Section 148 of the Code and all regulations of the
United States Department of the Treasury issued thereunder to the extent such requirements are,
at the time, in effect and applicable to the 2003 Series A Bonds. In the event that at any time the
City is of the opinion that for purposes of this Section it is necessary to restrict or to limit the
yield on the investment of any moneys held by the Trustee under the Indenture, the City shall so
instruct the Trustee in writing, and the Trustee shall take such action as may be directed in such
instructions.
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(2) The City specifically covenants that:
(a) Except as approved in a Favorable Opinion of Bond Counsel, the
City shall not allow the amount of Gross Proceeds of the 2003 Series A Bonds invested during
any Bond Year in Nonpurpose Investments with a Yield in excess of the Yield on the 2003 Series
A Bonds to exceed the lesser of (a) one hundred fifty percent (150%) of the scheduled debt
service for that Bond Year or (b) the amounts on deposit in the Debt Service Reserve Account
and attributed to the 2003 Series A Bonds (provided that such amounts do not exceed ten percent
(10%) of the proceeds of the 2003 Series A Bonds) plus $100,000.
(b) The City shall pay or cause to be paid the Rebate Requirement as
provided in the 2003 Series Tax Certificate.
(c) The City shall determine the amount of and cause to be deposited
in the Rebate Fund the Rebate Requirement as provided in the 2003 Series Tax Certificate
(which is incorporated herein by reference). Subject to the provisions of this Section, moneys
held in the Rebate Fund are hereby pledged to secure payments to the United States of America,
and the City and the Owners of the 2003 Series A Bonds shall have no rights in or claim to such
moneys. The Trustee shall invest all amounts held in the Rebate Fund as directed in writing by
an Authorized City Representative.
Upon receipt of the Rebate Instructions required to be delivered to the Trustee, the
Trustee shall remit part or all of the balance held in the Rebate Fund, together with any
completed forms to be filed therewith prepared by the City and delivered with such Rebate
Instructions, to the United States of America to the extent so directed, including rebate due in
connection with any Series of 2003 Series A Bonds. In addition, if the Rebate Instructions so
direct, the Trustee shall deposit moneys into or transfer moneys out of the Rebate Fund from or
into such Accounts or Funds as the Rebate Instructions direct.
The Trustee shall conclusively be deemed to have complied with the provisions of
this Section if it follows the directions of the City set forth in the Rebate Instructions and shall
not be required to take any actions thereunder in the absence of Rebate Instructions from an
Authorized City Representative.
(3) For purposes of this Section, capitalized terms not defined in Section 1.03
shall have the meanings ascribed to such terms in the 2003 Series Tax Certificate.
Section 6.02. Rebate Fund. For purposes of complying with tax covenants contained in
the Indenture, there is hereby established a fund designated the "2003 Series A Rebate Fund" to
be held by the Trustee. Amounts on deposit in the 2003 Series A Rebate Fund shall be applied as
provided in Section 6.01.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Indenture to Remain in Effect. Save and except as supplemented by this
First Supplemental Indenture, the Master Indenture shall remain in full force and effect.
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Section 7.02. Provisions Relating to 2003 Series A Credit Provider. All provisions
hereof regarding consents, approvals, directions, appointments or requests by the 2003 Series A
Credit Provider shall be deemed not to require or permit such consents, approvals, directions,
appointments or requests by the 2003 Series A Credit Provider during any time in which no 2003
Series A Credit Support Instrument is in effect and no amounts are owing to the 2003 Series A
Credit Provider, or such 2003 Series A Credit Provider has failed to honor a demand for payment
presented to it in strict conformance with the applicable provisions of the 2003 Series A Credit
Support Instrument, or after the 2003 Series A Credit Support Instrument shall at any time for
any reason cease to be valid and binding on the 2003 Series A Credit Provider, or while such
2003 Series A Credit Provider is denying further liability or obligation under the 2003 Series A
Credit Support Instrument (unless such 2003 Series A Credit Support Instrument has been fully
drawn or to the extent that the conditions to payment thereunder have not been fully satisfied) or
after such 2003 Series A Credit Provider has rescinded, repudiated or terminated the 2003 Series
A Credit Support Instrument and no amounts are owing to the 2003 Series A Credit Provider;
provided, however, that nothing contained in this Section shall limit the rights of the 2003 Series
A Credit Provider as a Holder of 2003 Series A Credit Provider 2003 Series A Bonds.
All provisions herein relating to the 2003 Series A Credit Provider shall be of no
force and effect with respect to a particular 2003 Series A Credit Provider if the applicable 2003
Series A Credit Support Instrument is not in effect, there are no related 2003 Series A Credit
Provider 2003 Series A Bonds and all amounts owing to such 2003 Series A Credit Provider
under the applicable 2003 Series A Credit Support Instrument have been paid.
Section 7.03. Continuing Disclosure. The City hereby covenants and agrees, whenever
a Long -Term Interest Rate Period is in effect with respect to the 2003 Series A Bonds, or if
otherwise required by Rule 15c2-12, to comply with the continuing disclosure requirements for
the 2003 Series A Bonds as promulgated under Rule 15c2-12, as it may from time to time
hereafter be amended or supplemented. Notwithstanding any other provision of the Indenture,
failure of the City to comply with the requirements of Rule 15c2-12 applicable to the 2003 Series
A Bonds, as it may from time to time hereafter be amended or supplemented, or failure of the
City to comply with any continuing disclosure agreement entered into in connection with the
2003 Series A Bonds shall not be considered an Event of Default and the Trustee shall have no
right to accelerate amounts due hereunder as a result thereof; provided, however, that the Trustee
and the Owners of not less than 25% in principal amount of the Outstanding 2003 Series A
Bonds may take such actions as may be necessary and appropriate, including seeking mandate or
specific performance by court order, to cause the City to comply with its obligations in this
Section and such continuing disclosure agreement.
Section 7.04. Counterparts. This First Supplemental Indenture may be executed in any
number of counterparts and by the different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original; but such counterparts shall together
constitute but one and the same instrument.
DOCSLA1:413600.10
42797-2 SAH -57-
IN WITNESS WHEREOF, City of Vernon has caused these presents to be signed
in its name and on its behalf by its [ 1 and attested by its City Clerk and to evidence
its acceptance of the trusts hereby created, the Trustee has caused these presents to be signed in
its name and on its behalf by one of its authorized officers, all as of the first day of March, 2003.
CITY OF VERNON
By:_
Name:
Title:
Attest:
City Clerk
BNY WESTERN TRUST COMPANY, as Trustee
By:_
Name:
Title:
DOCSLA1:413600.10
42797-2 SAH
EXHIBIT A
FORM OF 2003 SERIES A BONDS
[bracketed language applies only to 2003 Series A Bonds to be registered in the name of CEDE
& CO.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE CITY OF VERNON OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
CITY OF VERNON
MALBURG GENERATING STATION PROJECT,
ELECTRIC SYSTEM REVENUE BONDS,
2003 SERIES A
No. R-
Interest Rate
Variable
Dated Date Maturity Date
, 2003 1,
Registered Owner: [CEDE & CO.]
Principal Amount:
CUSIP No.
Ea
CITY OF VERNON (herein called the "City"), a municipal corporation and
chartered city of the State of California, acknowledges itself indebted to, and for value received
hereby promises to pay (but only out of the Net Revenues (capitalized terms used herein shall
have the meanings given such terms pursuant to the Indenture mentioned below) and other assets
pledged therefor pursuant to the Indenture) to the Registered Owner specified above or registered
assigns, on the Maturity Date specified above (unless this Bond shall have been previously called
for redemption in whole or in part and payment of the Redemption Price shall have been duly
made), the Principal Amount specified above, in lawful money of the United States of America
and to pay interest thereon (but only from said the Net Revenues and other assets pledged
therefor pursuant to the Indenture) in like lawful money until payment of such principal sum
shall be discharged as provided in the Indenture, at the rates determined as described below,
payable on each Interest Payment Date.
DOCSLA1:413600.10
42797-2 SAH A-1
This Bond shall bear interest from the Interest Payment Date next preceding the
date of authentication thereof unless: (i) this Bond is authenticated on an Interest Payment Date,
in which event from such Interest Payment Date; and (ii) unless this Bond is authenticated after a
Record Date and before the next succeeding Interest Payment Date for this Bond, in which event
from such Interest Payment Date; provided, however, that if the date of authentication of this
Bond shall be prior to the Record Date for the first Interest Payment Date for this Bond, this
Bond shall bear interest from the Dated Date specified above. Notwithstanding the foregoing, if
the City shall default in the payment of interest, then this Bond shall bear interest from the date to
which interest has been paid or if no interest has been paid, from the Dated Date specified above.
The principal or, if applicable, the Redemption Price hereof is payable upon
surrender hereof at the designated corporate trust office of BNY Western Trust Company, in Los
Angeles, California (together with any successor Trustee as provided in the Indenture the
"Trustee"). Interest hereon is payable by check mailed on each Interest Payment Date to the
Owner hereof as of the applicable Record Date at the address appearing on the Bond Register
maintained by the Trustee; provided Owners of at least $1,000,000 aggregate principal amount of
2003 Series A Bonds may, at any time prior to a Record Date, give the Trustee written
instructions for payment of such interest on each succeeding Interest Payment Date for such 2003
Series A Bonds by wire transfer or by deposit to an account; and provide further that in the case
of 2003 Series A Bonds bearing interest at Commercial Paper Rates (as hereinafter described), if
the Trustee shall have been provided written wire transfer instructions, by wire transfer, provided
that while the 2003 Series A Bonds bear interest at Commercial Paper Rates, except for 2003
Series A Bonds registered in the name of the Securities Depository (as defined in the Indenture
mentioned below), interest payable hereon is payable only upon presentation hereof to the
Trustee, at its Principal Office (hereinafter identified).
This Bond is one of a duly authorized issue of bonds of the City designated as
"City of Vernon, Electric System Revenue Bonds" (the "Bonds") and of a Series of the Bonds
designated as "Malburg Generating Station Electric System Revenue Bonds, 2003 Series A" (the
"2003 Series A Bonds"). The 2003 Series A Bonds are issued pursuant to the Charter and the
Bond Ordinance. The 2003 Series A Bonds have been issued in the aggregate principal amount
of $ . The 2003 Series A Bonds are issued under, and, together with all other Bonds
issued and outstanding thereunder, are equally and ratably secured by the Trust Estate and
entitled to the protection given by, the Indenture of Trust, dated as of March 1, 2003 between the
City and the Trustee, as amended and supplemented by the First Supplemental Indenture of
Trust, dated as of March 1, 2003 between the City and the Trustee (said Indenture of Trust, as
amended and supplemented and as the same may be amended and supplemented, is herein called
the "Indenture").
As provided in the Indenture, Bonds of the City may be issued thereunder from
time to time pursuant to Supplemental Indentures in one or more Series, in various principal
amounts, may mature at different times, may bear interest at different rates and may otherwise
vary as in the Indenture provided. The aggregate principal amount of Bonds which may be
issued under the Indenture is not limited except as provided in the Indenture, and all Bonds
issued and to be issued under the Indenture are and will be equally secured by the pledge and
assignment and covenants made therein, except as otherwise expressly provided or permitted in
the Indenture.
DOCSLA1:413600.10
42797-2 SAH A_2
Copies of the Indenture are on file at the City Hall of the City and at the Principal
Office of the Trustee and reference is hereby made to the Indenture and to all amendments and
supplements thereto for a description of the provisions, among others, with respect to the nature
and extent of the security, the rights, duties and obligations of the City, the Trustee and the
Owners of the Bonds and the terms upon which the Bonds are secured under the Indenture, the
rights and remedies of the Owners of the 2003 Series A Bonds, the limitations on such rights and
remedies and the terms and conditions upon which Bonds are issued and may be issued
thereunder. The Indenture provides that other Parity Obligations secured by a pledge of the Net
Revenues on a parity with the Bonds may be issued or incurred by the City on the terms set forth
therein. By acceptance of this Bond, the Registered Owner accepts and agrees to the terms of the
Indenture.
This Bond is a special obligation of the City and the principal of, Redemption
Price, if any, and interest on this Bond are payable solely from the Net Revenues and the other
funds pledged therefor under the Indenture and shall not constitute a charge against the general
credit of the City. This Bond is not secured by a legal or equitable pledge of, or lien or charge
upon, any property of the City or any of its income or receipts except the Net Revenues pledged
pursuant to the Indenture which is subject to the provisions of the Indenture permitting the
application of the Net Revenues for the purposes and on the terms and conditions set forth
therein. Neither the faith and credit nor the taxing power of the State of California, the City or
any other public agency is pledged to the payment of the principal or Redemption Price of or the
interest on this Bond. The issuance of this Bond shall not directly, indirectly or contingently
obligate the City Council of the City to levy or pledge any form of taxation or to make any
appropriation for the payment of this Bond. The payment of the principal or Redemption Price
of or interest on this Bond does not constitute a debt, liability or obligation of the State of
California or any public agency (other than the special obligation of the City as provided in the
Indenture). Neither the members of the City Council of the City, nor any person executing this
Bond, nor any officer or employee of the City shall be individually liable for the principal or
Redemption Price of or interest on this Bond or be subject to any personal liability or
accountability by reason of the issuance of this Bond or in respect of any undertakings by the
City under the Indenture.
The 2003 Series A Bonds were issued for the purpose of financing a portion of the
Costs of the Malburg Generating Station and related purposes.
Credit Provider Bonds
2003 Series A Bonds purchased or otherwise paid with funds made available
under a 2003 Series A Credit Support Instrument constitute Credit Provider Bonds for purposes
of the Indenture. The terms of Credit Provider Bonds, including the interest rates thereon, the
Interest Payment Dates therefor, the redemption, including mandatory redemption, thereof and
certain other terms may be different from 2003 Series A Bonds which are not Credit Provider
Bonds.
Interest on the 2003 Series A Bonds
DOCSLA1:413600.10
42797-2 SAH A-3
The term of the 2003 Series A Bonds will be divided into consecutive Interest
Rate Periods each of which will be one of the following: (i) a Daily Interest Rate Period during
which the 2003 Series A Bonds will accrue at Daily Interest Rates; (ii) a Weekly Interest Rate
Period during which interest on the 2003 Series A Bonds will bear interest at Weekly Interest
Rates; (iii) a Long -Term Interest Rate Period, during which interest on the 2003 Series A Bonds
will bear interest at a Long -Term Interest Rate; (iv) a Commercial Paper Interest Rate Period
during which interest on the 2003 Series A Bonds will bear interest at Commercial Paper Interest
Rates; or (v) an ARB Interest Rate Period during which the 2003 Series A Bonds will bear
interest at ARB Interest Rates. The initial Interest Rate Period for the 2003 Series A Bonds shall
be a [Weekly Interest Rate Period] commencing on and including the Delivery Date. The Interest
Rate Period for the 2003 Series A Bonds thereafter may be Converted from time to time to a
Weekly Interest Rate Period, a Commercial Paper Interest Rate Period, a Long -Term Interest
Rate Period or an ARB Interest Rate Period and thereafter again Converted as described in the
Indenture.
Interest on each 2003 Series A Bond shall accrue from and including the Interest
Accrual Date immediately preceding the date of authentication thereof, or, if such date of
authentication shall be an Interest Accrual Date from such Interest Accrual Date or if such date of
authentication shall be prior to the second Interest Accrual Date, from the Delivery Date;
provided, however, that if, as shown by the Bond Register, interest on the 2003 Series A Bonds
shall be in default, interest on 2003 Series A Bonds issued in exchange for 2003 Series A Bonds
surrendered for registration of transfer or exchange shall accrue from the Interest Accrual Date to
which interest has been paid in full on the 2003 Series A Bonds or, if no interest has been paid on
the 2003 Series A Bonds, from the Delivery Date.
For each Daily Interest Rate Period, interest on the 2003 Series A Bonds shall be
payable on each Interest Payment Date for the period commencing on (and including) the Interest
Accrual Date in the preceding calendar month and ending on (and including) the last day in the
preceding calendar month, unless the Interest Payment Date shall be the day next succeeding the
last day of a Daily Interest Rate Period, in which case interest shall be payable on such Interest
Payment Date for the period commencing on (and including) the Interest Accrual Date to which
interest shall have been paid in full and ending on (and including) the day immediately preceding
such Interest Payment Date. For each Weekly Interest Rate Period, interest on the 2003 Series A
Bonds shall be payable on each Interest Payment Date for the period commencing on (and
including) the immediately preceding Interest Accrual Date (or, if any Interest Payment Date is
not a Wednesday, commencing on (and including) the second preceding Interest Accrual Date)
and ending on (and including) the Tuesday immediately preceding the Interest Payment Date (or,
if sooner, the last day of such Weekly Interest Rate Period). For each Commercial Paper Interest
Rate period interest on each 2003 Series A Bond shall be payable on each Interest Payment Date
for such 2003 Series A Bond for the period commencing on (and including) the immediately
preceding Interest Accrual Date for such 2003 Series A Bond and ending on the day immediately
preceding such Interest Payment Date. For each Long -Term Interest Rate Period, interest on the
2003 Series A Bonds shall be payable on each Interest Payment Date for the period commencing
on (and including) the immediately preceding Interest Accrual Date and ending on the day
immediately preceding such Interest Payment Date. For each ARB Interest Rate Period, interest
on the 2003 Series A Bonds shall be payable on each ARB Interest Payment Date for the period
commencing on (and including) the immediately preceding Interest Accrual Date and ending on
DOCSLA1:413600.10
42797-2 SAH A-4
the day immediately preceding such Interest Payment Date. In any event, interest on the 2003
Series A Bonds shall be payable for the final Interest Rate Period to but not including the date on
which the 2003 Series A Bonds shall have been paid in full. In any event, interest on the 2003
Series A Bonds shall be payable for the final Interest Rate Period but not including to the date on
which the 2003 Series A Bonds shall have been paid in full
Interest on the 2003 Series A Bonds shall be computed, in the case of a Long -
Term Interest Rate Period, on the basis of a 360-day year consisting of twelve 30-day months, in
the case of an ARB Interest Rate Period, on the basis of a 360-day year for actual days elapsed,
and in the case of any other Interest Rate Period, on the basis of a 365- or 366- day year, as the
case may be, for the actual number of days elapsed.
The term "Interest Accrual Date" (i) with respect to each Daily Interest Rate
Period, the first day thereof and, thereafter, the first day of each calendar month, (ii) with respect
to each Weekly Interest Rate Period, the first day thereof and, thereafter, the first Wednesday of
each calendar month, (iii) with respect to each Long -Term Interest Rate Period, the first day
thereof, and thereafter, each 1, and 1, (iv) with respect to each any ARB
Interest Rate Period, the first day thereof and, thereafter, [the last day of each Auction Period],
and (v) with respect to each Commercial Paper Term within a Commercial Paper Interest Rate
Period, the first day thereof.
The term "Interest Payment Date" means (i) with respect to each Daily Interest
Rate Period, the fifth Business Day of each calendar month, (ii) with respect to each Weekly
Interest Rate Period, the first Wednesday of each calendar month (or the next succeeding
Business Day if such Wednesday is not a Business Day); (iii) with respect to each Long -Term
Interest Rate Period, each 1 and 1 or if any such 1 or 1 is not a
Business Day, the next succeeding Business Day; provided that the first interest payment made
for any Long -Term Interest Rate Period shall be at least ninety (90) days from the first day of
such period; (iv) with respect to each 2003 Series A Bond in each Commercial Paper Interest
Rate Period, the day next succeeding the last day of each Commercial Paper Term for such 2003
Series A Bond; (v) with respect to each ARB Interest Rate Period, each ARB Interest Payment
Date; (vi) with respect to each Interest Rate Period, the day next succeeding the last day thereof;
and (vii) with respect to 2003 Series A Credit Provider Bonds, the dates set forth in the
applicable 2003 Series A Credit Support Agreement.
The term "Record Date" means (i) with respect to each Interest Payment Date for
2003 Series A Bonds in a Daily Interest Rate Period, the last day of the calendar month preceding
the month in which such Interest Payment Date falls, (ii) with respect to each Interest Payment
Date for 2003 Series A Bonds in a Weekly Interest Rate Period or a Commercial Paper Interest
Rate Period, the Business Day immediately preceding the such Interest Payment Date, (iii) with
respect to each Interest Payment Date for 2003 Series A Bonds in a Long -Term Interest Rate
Period, the fifteenth day of the month preceding the month in which such Interest Payment Date
falls, and (iv) with respect to each Interest Payment Date for 2003 Series A Bonds which are
ARBs, the second Business Day next preceding the applicable ARB Interest Payment Date.
DOCSLA1:413600.10
42797-2 SAH A-5
The interest rates on the 2003 Series A Bonds shall be determined as described
below provided that no interest rate or any 2003 Series A Bond may exceed the Maximum
Interest Rate:
(1) Daily Interest Rate. During each Daily Interest Rate Period, the 2003
Series A Bonds shall bear interest at Daily Interest Rates, which, except as otherwise
provided in the Indenture, shall be determined by the Remarketing Agent by no later than
9:30 a.m., New York City time, on each Business Day during such Daily Interest Rate
Period. The Daily Interest Rate shall be the rate of interest per annum determined by the
Remarketing Agent (based on then -prevailing market conditions) to be the minimum
interest rate which, if borne by the 2003 Series A Bonds, would enable the Remarketing
Agent to sell the 2003 Series A Bonds on the effective date of such rate at a price
(without regarding accrued interest) equal to the principal amount thereof. In the event
that the Remarketing Agent fails to establish a Daily Interest Rate for any day, then the
Daily Interest Rate for such day shall be the same as the Daily Interest Rate for the
immediately preceding day if the Daily Interest Rate for such preceding day was
determined by the Remarketing Agent. In the event that the Daily Interest Rate for the
immediately preceding day was not determined by the Remarketing Agent, or in the event
that the Daily Interest Rate determined by the Remarketing Agent shall be held to be
invalid or unenforceable by a court of law, then the interest rate for such day shall be
equal to 110% of the BMA Index made available for the week preceding the date of
determination, or if such index is no longer available, or no such index was so made
available for the week preceding the date of determination, 75% of the interest rate on 30-
day high grade unsecured commercial paper notes sold through dealers by major
corporations as reported in The Wall Street Journal on the day the Daily Interest Rate
would otherwise be determined as provided in the debenture.
(2) Weekly Interest Rate. During each Weekly Interest Rate Period, the 2003
Series A Bonds shall bear interest at Weekly Interest Rates, which, except as otherwise
provided in the Indenture, shall be determined for each Calendar Week by the
Remarketing Agent by no later than 5:00 p.m., New York City time, on the Tuesday
immediately preceding each Calendar Week, or if such day shall not be a Business Day,
then by 12:00 noon, New York City time, on the next succeeding Business Day;
provided, however, that if the 2003 Series A Bonds are to be Converted to a Weekly
Interest Rate Period from another Interest Rate Period, the Weekly Interest Rate for the
initial Calendar Week of such Weekly Interest Rate Period shall be determined not later
than the Business Day next preceding the effective date of such Weekly Interest Rate
Period. The Weekly Interest Rate shall be the rate of interest per annum determined by
the Remarketing Agent to be the minimum interest rate which, if borne by the 2003
Series A Bonds, would enable the Remarketing Agent (based on then -prevailing market
conditions) to sell the 2003 Series A Bonds on the effective date of such rate at a price
(without regarding accrued interest) equal to the principal amount thereof. In the event
that the Remarketing Agent fails to establish a Weekly Interest Rate for any Calendar
Week, then the Weekly Interest Rate for such Calendar Week shall be the same as the
Weekly Interest Rate for the immediately preceding week if the Weekly Interest Rate for
such preceding Calendar Week was determined by the Remarketing Agent. In the event
that the Weekly Interest Rate for the immediately preceding Calendar Week was not
DOCSLA1:413600.10
42797-2 SAH A-6
determined by the Remarketing Agent, or in the event that the Weekly Interest Rate
determined by the Remarketing Agent shall be held to be invalid or unenforceable by a
court of law, then the interest rate for such Calendar Week shall be equal to the Variable
Index on the day such Weekly Interest Rate would otherwise be determined as provided
in the Indenture.
The term "Calendar Week" means with respect to the 2003 Series A Bonds in a
Weekly Interest Rate Period the period during which the 2003 Series A Bonds bear interest at a
particular Weekly Interest Rate and will be the period from Wednesday of one week (whether or
not a Business Day) to and including the Tuesday of the following week (whether or not a
Business Day); provided that the initial Calendar Week for each Weekly Interest Rate Period
shall be the period from the first day of such Weekly Interest Rate Period to the next succeeding
Tuesday (whether or not a Business Day); and provided further that the final Calendar Week for
a Weekly Interest Rate Period which ends on a day other than a Tuesday shall be the period from
the Wednesday (whether or not a Business Day) preceding the last day of such Weekly Interest
Rate Period to the last day of such Weekly Interest Rate Period.
(3) Long -Term Interest Rate. During each Long -Term Interest Rate Period,
the 2003 Series A Bonds shall bear interest at the Long -Term Interest Rate determined by
the Remarketing Agent on a Business Day no later than the effective date of such Long -
Term Interest Rate Period. The Long -Term Interest Rate shall be the rate of interest per
annum determined by the Remarketing Agent (based on then prevailing market
conditions) to be the minimum interest rate which, if borne by the 2003 Series A Bonds,
would enable the Remarketing Agent to sell the 2003 Series A Bonds at a price (without
regarding accrued interest) equal to the principal amount thereof (or at a discount below
or premium above par if Bond Counsel delivers a Favorable Opinion of Bond Counsel to
the Trustee). If, for any reason, the Long -Term Interest Rate is not so determined for the
Long -Term Interest Period by the Remarketing Agent on or prior to the first day of such
Long -Term Interest Period, then a Weekly Interest Rate Period shall automatically
commence on the proposed Conversion Date to the Long -Term Interest Rate Period and
the 2003 Series A Bonds shall bear interest at Weekly Interest Rates and shall continue to
bear interest at Weekly Interest Rates until such time as the Interest Rate Period for the
2003 Series A Bonds shall have been Converted to another Interest Rate Period as
provided in the Indenture.
(4) Commercial Paper Term Rates. During each Commercial Paper Interest
Rate Period, each 2003 Series A Bond shall bear interest during each Commercial Paper
Term for such 2003 Series A Bond at the Commercial Paper Term Rate. The
Commercial Paper Term and the Commercial Paper Term Rate need not be the same for
all the 2003 Series A Bonds, even if determined on the same date. Each of such
Commercial Paper Terms and Commercial Paper Term Rates for each 2003 Series A
Bond shall be determined by the Remarketing Agent no later than the first day of each
Commercial Paper Term. Each Commercial Paper Term shall be for a period of days
within the range or ranges announced as possible Commercial Paper Terms no later than
9:30 a.m., New York City time, on the first day of each Commercial Paper Term by the
Remarketing Agent. Each Commercial Paper Term for each 2003 Series A Bond shall be
a period of not more than one hundred eighty (180) days, shall end not later than five
DOCSLA1:413600.10
42797-2 SAH A-7
Business Days prior to the Expiration Date of the 2003 Series A Credit Support
Instrument, shall be determined by the Remarketing Agent to be the period, except as
provided in the Indenture with respect to a Conversion of the Interest Rate Period for the
2003 Series A Bonds, which, together with all other Commercial Paper Terms for all
2003 Series A Bonds then Outstanding, will result in the lowest overall interest expense
on the 2003 Series A Bonds over the next succeeding one hundred eighty (180) days. If,
for any reason, a Commercial Paper Term for any 2003 Series A Bond is not so
determined by the Remarketing Agent, then such Commercial Paper Term shall be [seven
(7)] days, but if the last day so determined shall not be a day immediately preceding a
Business Day, shall end on the first day immediately preceding the Business Day next
succeeding such last day, or if such last day would be after the day immediately preceding
the Maturity Date, shall end on the day immediately preceding the Maturity Date.
The Commercial Paper Term Rate for each Commercial Paper Term for each
2003 Series A Bond during a Commercial Paper Interest Rate Period shall be the rate of interest
per annum determined by the Remarketing Agent (based on then -prevailing market conditions) to
be the minimum interest rate which, if borne by such 2003 Series A Bond, would enable the
Remarketing Agent to sell such 2003 Series A Bond on the effective date of such rate at a price
equal to the principal amount thereof. If, for any reason, a Commercial Paper Term Rate for any
2003 Series A Bond is not so established by the Remarketing Agent for any Commercial Paper
Term, or if such Commercial Paper Term Rate is determined by a court of law to be invalid or
unenforceable, then the Commercial Paper Term Rate for such Commercial Paper Term shall be
the rate per annum equal to the Variable Index on the first day of such Commercial Paper Term.
(5) ARB Interest Rates. During each ARB Interest Rate Period, the 2003
Series A Bonds shall bear interest at rates determined by the periodic application of the
Auction Procedures, as provided in the Indenture.
The Trustee shall give notice to the Owners of the 2003 Series A Bonds by first
class mail of a Conversion in the Interest Rate Period prior to the effective date of such Interest
Rate Period as provided in the Indenture.
Tender of 2003 Series A Bonds for Purchase at Option of Owner. During each
Daily Interest Rate Period, the Owner (or with respect to a Book -Entry Bond, the Beneficial
Owner through its direct Participant in the Securities Depository) of a 2003 Series A Bond may
tender such 2003 Series A Bond (or with respect to a Book -Entry Bond, its interests in such 2003
Series A Bond), or a portion thereof as described below, on any Business Day, for purchase at the
applicable Purchase Price, upon delivery to the Tender Agent at its Principal Office for delivery
of notices, with a copy to the Remarketing Agent, of an irrevocable written notice, or telephone
notice promptly confirmed in writing, which states the principal amount of such 2003 Series A
Bond (or the portion thereof) that is being irrevocably tendered for purchase. The Purchase Date
for any 2003 Series A Bond (or portion thereof) for which the Owner (or Beneficial Owner, as
applicable) has given such notice of tender for purchase shall be the date of delivery of such
notice to the Tender Agent. Any such notice of tender for purchase delivered to the Tender
Agent after 11:00 a.m., New York City time, shall be deemed to have been received on the next
succeeding Business Day. In the case of a tender for purchase of less than the full principal
DOCSLA1:413600.10
42797-2 SAH A-8
amount of a 2003 Series A Bond, both the portion of the 2003 Series A Bond being tendered for
purchase and the portion not so tendered shall be in an Authorized Denomination.
During each Weekly Interest Rate Period the Owner (or with respect to a Book -
Entry Bond, the Beneficial Owner through its direct Participant in the Securities Depository) of a
2003 Series A Bond may tender such 2003 Series A Bond (or with respect to a Book -Entry Bond,
its interest in such 2003 Series A Bond), or a portion thereof as described below, on any Business
Day, for purchase at the applicable Purchase Price, upon delivery to the Tender Agent at its
Principal Office for delivery of notices, with a copy to the Remarketing Agent, of an irrevocable
written notice which states the principal amount of such 2003 Series A Bond (or the portion
thereof) that is being irrevocably tendered for purchase and the date on which the same shall be
purchased, which date shall be a Business Day not prior to the seventh day next succeeding the
date of the delivery of such notice to the Tender Agent. Any notice delivered to the Tender
Agent after 4:00 p.m., New York City time, shall be deemed to have been received on the next
succeeding Business Day. In the case of a tender for purchase of less than the full principal
amount of a Bond, both the portion of the 2003 Series A Bond tendered for purchase and the
portion not so tendered shall be in an Authorized Denomination.
The giving of notice by an Owner or Beneficial Owner of a 2003 Series A Bond to
have such 2003 Series A Bond purchased shall constitute the irrevocable tender for purchase of
such 2003 Series A Bond, regardless of whether Proper Delivery of such 2003 Series A Bond is
made to the Tender Agent on the applicable Purchase Date.
Mandatory Tender Following Commercial Paper Term. During each Commercial
Paper Interest Rate Period, each 2003 Series A Bond shall be subject to mandatory tender for
purchase, at the applicable Purchase Price, on the day next succeeding the last day of each
Commercial Paper Term for such 2003 Series A Bond.
Mandatory Tender on First Day of Interest Rate Period. The 2003 Series A Bonds
shall be subject to mandatory tender for purchase, at the applicable Purchase Price, on the first
day of each Interest Rate Period (other than upon the Conversion from a Daily Interest Rate
Period to a Weekly Interest Rate Period or the Conversion from a Weekly Interest Rate Period to
a Daily Interest Rate Period) and (except for any Conversion from an ARB Interest Rate Period),
on the proposed Conversion Date specified in the notice of the Conversion to an alternate Interest
Rate Period given to the Owners.
Mandatory Tender Upon Termination or Expiration of 2003 Series A Credit
Support Instrument. The 2003 Series A Bonds shall be subject to mandatory tender for purchase,
at the applicable Purchase Price, on the date which is the first Business Day which is not less
than five (5) days prior to each of the following with respect to the 2003 Series A Credit Support
Instrument then in effect with respect to the 2003 Series A Bonds: (a) termination of such 2003
Series A Credit Support Instrument upon the delivery of an Alternate 2003 Series A Credit
Support Instrument; (b) the termination date set forth in a Notice of Termination of such 2003
Series A Credit Support Instrument; or (c) the Expiration Date for such 2003 Series A Credit
Support Instrument.
DOCSLA1:413600.10
42797-2 SAH A-9
Notice of Mandatory Tender. Notice of each mandatory tender of the 2003 Series
A Bonds for purchase (other than following each Commercial Paper Term as to which no notice
will be given) shall be given as provided in the Indenture.
Purchase Price.
The term "Purchase Price" means, with respect to any Tendered Bond (or portion
thereof), an amount, payable in funds immediately available on the applicable Purchase Date,
equal to the principal amount thereof plus accrued interest from and including the Interest
Accrual Date immediately preceding the applicable Purchase Date but not including the
applicable Purchase Date; provided, however, that (1) if the Purchase Date for any Tendered
Bond is on or after the Record Date for an Interest Payment Date and on or prior to such Interest
Payment Date, the Purchase Price thereof shall be the principal amount thereof, and interest on
such Tendered Bond shall be paid to the Owner of such Tendered Bond as of the applicable
Record Date and (2) in the case of a Purchase Date which is the first day of an Interest Rate
Period which is preceded by a Long -Term Interest Rate Period and which commences prior to the
day originally established as the last day of such preceding Long -Term Interest Rate Period,
"Purchase Price" of any Tendered Bond means the optional redemption price which would have
been applicable to the redemption of such Tendered Bond on such Purchase Date if the preceding
Long -Term Interest Rate Period had continued to the day originally established as its last day.
Sources of Payment of Purchase Price.
The Purchase Price of 2003 Series A Bonds payable upon optional or mandatory
tender for purchase is payable solely from the proceeds of the remarketing of such 2003 Series A
Bonds and amounts provided pursuant to a 2003 Series A Credit Support Instrument for the 2003
Series A Bonds. The City has no obligation to provide any funds for the payment of such
Purchase Price.
Purchase Price Payable Only on Proper Delivery.
The Purchase Price of any Tendered Bond purchased pursuant to the Indenture
shall be payable only upon Proper Delivery of such Tendered Bond to the Tender Agent. If
Proper Delivery of any Tendered Bond is made by 10:00 a.m., New York City time, on the
applicable Purchase Date or any Business Day thereafter, the Purchase Price therefor shall be
paid (but only from the funds provided therefor pursuant to the Indenture) in immediately
available funds on the date such Proper Delivery is made and if such Proper Delivery is made
after 10:00 a.m., New York City time, on such Purchase Date or any Business Day thereafter, the
Purchase Price therefor shall be paid (but only from the funds provided therefor pursuant to the
Indenture) in immediately available funds on the Business Day immediately succeeding such date
of Proper Delivery.
The term "Proper Delivery" means, with respect to the delivery of a Tendered
Bond to the Tender Agent to receive the Purchase Price thereof. (a) if such Tendered Bond is a
Book -Entry Bond, the making of, or the irrevocable authorization to make, by 10:00 a.m., New
York City time, on the applicable Purchase Date, entries on the books of the Securities
Depository or a Participant of such Securities Depository as provided by such Securities
DOCSLAI :413600.10
42797-2 SAH A-10
Depository; and (2) if such Tendered Bond is not a Book -Entry Bond, the delivery of such
Tendered Bond to the Tender Agent at its Principal Office, by 10:00 a.m., New York City time,
on the applicable Purchase Date, accompanied by an instrument of transfer thereof in form
satisfactory to the Tender Agent, executed in blank by the Owner thereof or by the Owner's duly
authorized attorney, with such signature guaranteed by a commercial bank, trust company or
member firm of the New York Stock Exchange.
Undelivered Bonds. The Tender Agent may refuse to accept delivery of any
Tendered Bond as to which Proper Delivery has not been made; such refusal, however, shall not
affect the validity of the purchase of such Tendered Bond either upon the remarketing thereof as
herein provided or upon the purchase of such Tendered Bond from a draw on a 2003 Series A
Credit Support Instrument. For all purposes of this Indenture, the Tender Agent shall determine
whether there has been Proper Delivery of Tendered Bonds. Such determination shall be binding
on the Owners of the 2003 Series A Bonds, the City and the Remarketing Agent, absent manifest
error. If the Owner or Beneficial Owner of a 2003 Series A Bond who has given notice of
optional tender for purchase, or any Owner of a 2003 Series A Bond subject to mandatory tender
for purchase, fails to make Proper Delivery of such 2003 Series A Bond to the Tender Agent by
10:00 a.m. New York City time on the applicable Purchase Date and if moneys equal to the
Purchase Price of all 2003 Series A Bonds to be purchased on such Purchase Date in accordance
with the Indenture shall be available to the Tender Agent for the payment thereof, such Tendered
Bond shall constitute an Undelivered Bond. From and after the applicable Purchase Date, (1)
each Undelivered Bond shall be deemed to be purchased and shall no longer be deemed to be
Outstanding under the Indenture; (2) interest shall no longer accrue with respect to such
Undelivered Bond; and (3) funds in the amount of the Purchase Price of the Undelivered Bond
shall be held by the Tender Agent in the Bond Purchase Fund for the benefit of the Owner of
such Undelivered Bond, to be paid when Proper Delivery of such Undelivered Bond is made to
the Tender Agent.
The above -described provisions for the optional and mandatory tender of the 2003
Series A Bonds for purchase shall not apply at any time this Bond is a Pledged 2003 Series A
Bond or this Bond is owned by, for the account of, or on behalf of, the City.
BY ACCEPTANCE OF THIS BOND, EACH OWNER IRREVOCABLY
AGREES THAT, IF THIS BOND IS TO BE PURCHASED ON ANY DATE AND
SUFFICIENT FUNDS ARE ON DEPOSIT WITH THE TENDER AGENT FOR ALL
PURCHASES TO BE MADE ON SUCH DATE AS AFORESAID, THIS BOND SHALL BE
DEEMED TO HAVE BEEN PURCHASED FOR ALL PURPOSES UNDER THE
INDENTURE AND, THEREAFTER, THE OWNER SHALL HAVE NO FURTHER RIGHTS
HEREUNDER OR UNDER THE INDENTURE WITH RESPECT TO THIS BOND, EXCEPT
TO RECEIVE THE PURCHASE PRICE FOR THIS BOND FROM THE FUNDS SO
DEPOSITED UPON PROPER DELIVERY HEREOF AS AFORESAID.
The Purchase Price of any 2003 Series A Bonds payable upon optional or
mandatory tender is payable solely from the proceeds of the remarketing of such 2003 Series A
Bonds and amounts provided pursuant to a 2003 Series A Credit Support Instrument for the 2003
Series A Bonds. The City has no obligation to provide any funds for the payment of such
Purchase Price.
DOCSLA1:413600.10
42797-2 SAH A-11
Optional Redem tp ion. While any Daily Interest Rate Period or Weekly Interest
Rate Period is in effect, the 2003 Series A Bonds are subject to redemption, at the option of the
City in whole or in part on any date at a Redemption Price equal to the principal amount of the
2003 Series A Bonds to be redeemed, plus unpaid accrued interest thereon date fixed for
redemption, without premium. While any Commercial Paper Rate Commercial Paper Interest
Rate Period is in effect, the 2003 Series A Bonds are also subject to optional redemption by the
City, in whole or in part, on the day succeeding the last day of each Commercial Paper Term at a
Redemption Price equal to the principal amount of the 2003 Series A Bonds to be redeemed, plus
unpaid accrued interest date fixed for redemption, without premium. While any Long -Term
Interest Rate Period is in effect, the 2003 Series A Bonds are subject to redemption at the option
of the City in whole or in part in such amounts as may be specified by the City on the first day of
such Long -Term Interest Rate Period at a Redemption Price equal to the principal amount of
such 2003 Series A Bonds to be redeemed, plus unpaid accrued interest thereon fixed date for
redemption without premium, and thereafter, during the periods specified below (or, if approved
by a Favorable Opinion of Bond Counsel, during the periods and at the Redemption Prices
specified in a notice of the City to the Trustee) in whole or in part on any date, at the Redemption
Prices (expressed as a percentage of principal amount of the 2003 Series A Bonds to be
redeemed) hereinafter indicated or specified in the notice of the City to the Trustee, plus unpaid
accrued interest thereon, to the date fixed for redemption:
Length of Long -Term
Interest Rate Period Redemption
(expressed in years) Price
greater than 15 after 10 years at 102%
declining by 1 %o every year
to 100%
less than or equal to 15 after 7 years at 102%
and greater than 10 declining by 1 % every year
to 100%
less than or equal to 10 after 5 years at 102%
and greater than 7 declining by 1 % every year
to 100%
less than or equal to 7 after 3 years at 101 %
and greater than 4 declining by 1 % every year
to 100%
less than or equal to 4 after 2 years at 100%
While an ARB Interest Rate Period is in effect, the 2003 Series A Bonds are
subject to redemption, at the option of the City, in whole or in part (in such amounts as may be
specified by the City), on any ARB Interest Payment Date at a Redemption Price equal to the
principal amount of 2003 Series A Bonds called for redemption, plus unpaid accrued interest
thereon to the redemption date, without premium.
DOCSLA1:413600.10
42797-2 SAH A-12
Extraordinary Optional Redemption. The 2003 Series A Bonds are subject to
redemption prior to their stated maturity, at the option of the City, in whole or in part on any date,
at a Redemption Price equal to the principal amount of the 2003 Series A Bonds to be redeemed,
plus unpaid accrued interest thereon to the date fixed for redemption, without premium (a) to the
extent of money available from: (i) from insurance or condemnation proceeds; or (ii) from any
source of money if all or substantially all of the Malburg Generating Station is damaged or
destroyed, taken by any public entity in exercise of its powers of eminent domain or disposed of
or abandoned.
Mandatory Redem tp ion. The 2003 Series A Bonds are subject to mandatory
redemption, in part, on any on and after 1, , at a
Redemption Price equal to the principal amount of the 2003 Series A Bonds to be redeemed, plus
unpaid accrued interest thereon to the date fixed for redemption, without premium, from the
Sinking Fund Installments established for the 2003 Series A Bonds in the Indenture.
Terms of Redem tp ion. If less than all of the 2003 Series A Bonds are to be
redeemed, the particular 2003 Series A Bonds to be redeemed shall be selected as provided in the
Indenture.
The 2003 Series A Bonds are payable upon redemption upon surrender thereof at
the Principal Office of the Trustee. The Trustee shall give notice, in the name of the City, of the
redemption of 2003 Series A Bonds, which notice shall be mailed, by first class mail, postage
prepaid, not more than sixty (60) nor less than thirty (30) days before the Redemption Date to the
Owners of any 2003 Series A Bonds to be redeemed (in whole or in part) at their addresses
appearing in the Bond Register. Such notice shall specify the Series and maturity of the Bonds to
be redeemed, the Redemption Date and the place or places where amounts due upon such
redemption shall be payable and, if less than all of the 2003 Series A Bonds are to be redeemed,
the letters and numbers or other distinguishing marks of such 2003 Series A Bonds so to be
redeemed, and, in the case of 2003 Series A Bonds to be redeemed in part only, such notice shall
also specify the respective portions of the principal amount thereof to be redeemed. Such notice
shall further state that on such redemption date there shall become due and payable upon each
2003 Series A Bond to be redeemed the Redemption Price thereof (or the Redemption Price of
the specified portions of the principal amount thereof to be redeemed in the case of 2003 Series
A Bonds to be redeemed in part only) and that from and after such date interest on such 2003
Series A Bond (or the portion of such 2003 Series A Bond to be redeemed) shall cease to accrue
and be payable.
Receipt of such notice of redemption shall not be a condition precedent to the
redemption of 2003 Series A Bonds and failure of any Owner of a 2003 Series A Bond to receive
any such notice or any insubstantial defect in such notice shall not affect the validity of the
proceedings for the redemption of 2003 Series A Bonds.
The notice with respect to the redemption of 2003 Series A Bonds at the option of
the City may state that such redemption is conditional upon the receipt by the Trustee, on or prior
to the date fixed for such redemption, of moneys sufficient to pay the Redemption Price of the
2003 Series A Bonds to be redeemed, and that if such moneys shall not have been so received
said notice shall be of no force and effect and the City shall not be required to redeem such 2003
DOCSLA1:413600.10
42797-2 SAH A-13
Series A Bonds. In the event a notice of redemption of 2003 Series A Bonds contains such a
condition and such moneys are not so received, the redemption of 2003 Series A Bonds as
described in the conditional notice of redemption shall not be made and the Trustee shall, within
a reasonable time after the date on which such redemption was to occur, give notice to the
persons and in the manner in which the notice of redemption was given that such moneys were
not so received and that there shall be no redemption of 2003 Series A Bonds pursuant to the
conditional notice of redemption.
Amendment of Indenture. To the extent and in the manner permitted by the terms
of the Indenture, the provisions of the Indenture, or any indenture amendatory thereof or
supplemental thereto, may be modified or amended by the City with, in certain cases, the written
consent of the Owners of at least a majority in principal amount of the Bonds then Outstanding
under the Indenture; and, in case less than all of the Bonds would be affected thereby, with such
consent of the Owners of a majority in principal amount of the affected Outstanding Bonds;
provided, however, that, if such modification or amendment will, by its terms, not take effect so
long as any Bonds of any specified like Series and maturity remain Outstanding, the consent of
the owners of such Bonds shall not be required and such Bonds shall not be deemed to be
Outstanding for the purpose of the calculation of Outstanding Bonds for purposes of such
consent. While the 2003 Series A Bonds are Tender Indebtedness, the consent of the Owners of
such 2003 Series A Bonds shall not be required for any amendment to the Indenture upon giving
such Owners notice of the amendment while such Owners may tender their 2003 Series A Bonds
for purchase as provided in the Indenture. No such modification or amendment shall permit a
change in the terms of any Sinking Fund Installment or the terms of redemption or maturity of
the principal of any Bond or of any installment of interest thereon or a reduction in the principal
amount or Redemption Price thereof or in the rate of interest thereon without the consent of the
Owner of such Bond, or shall reduce the percentages or otherwise affect the classes of Bonds the
consent of the Owners of which is required to effect any such modification or amendment, or
shall change or modify any of the rights or obligations of the Trustee or of any Paying Agent
without its written assent thereto.
The Indenture may also be amended or supplemented without the necessity of the
consent of the Owners of the 2003 Series A Bonds for any one or more of the purposes specified
in the Indenture.
Transfer of Bond. This Bond is transferable, as provided in the Indenture, only
upon the Bond Register kept for that purpose at the Principal Office of the Trustee, by the
registered owner hereof, or by his duly authorized attorney, upon surrender of this Bond together
with a written instrument of transfer satisfactory to the Trustee duly executed by the registered
owner or his duly authorized attorney. Thereupon and upon payment of the charges prescribed in
the Indenture a new registered 2003 Series A Bond or 2003 Series A Bonds, without coupons,
and for the same aggregate principal amount, shall be issued to the transferee in exchange
therefor as provided in the Indenture. The City, the Trustee and any Paying Agent may deem and
treat the person in whose name this Bond is registered as the absolute owner hereof for the
purpose of receiving payment of, or on account of, the principal or Redemption Price hereof and
interest due hereon and for all other purposes.
DOCSLA1:413600.10
42797-2 SAx A-14
Enforcement of Bond and Indenture. The Registered Owner of this Bond shall
have no right to enforce the provisions of the Indenture or to institute action to enforce the
covenants therein, or to take any action with respect to any Event of Default under the Indenture,
or to institute, appear in or defend any suit or other proceedings with respect thereto, except as
provided in the Indenture. In certain events, on the conditions, in the manner and with the effect
set forth in the Indenture, the principal of all the Bonds issued under the Indenture and then
Outstanding may become or may be declared due and payable before the stated maturity thereof,
together with interest accrued thereon.
It is hereby certified and recited that all conditions, acts and things required by
law, including the City Charter and the Bond Ordinance and the Indenture to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond, exist, have
happened and have been performed in due time, form and manner and that the 2003 Series A
Bonds, together with all other indebtedness of the City, comply in all respects with the applicable
laws of the State of California, including the City Charter and the Bond Ordinance.
This Bond shall not be entitled to any benefit under the Indenture or be valid or
become obligatory for any purpose until this Bond shall have been authenticated by the execution
by the Trustee of the Trustee's Certificate of Authentication hereon.
IN WITNESS WHEREOF, CITY OF VERNON has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of its [ ] and
the seal (or a facsimile thereof) to be hereunto affixed, imprinted, engraved or otherwise
reproduced and attested by the manual or facsimile signature of its City Clerk, as of the Dated
Date specified above.
CITY OF VERNON
[SEAL]
ATTEST: BY:
CITY CLERK [ I
DOCSLA1:413600.10
42797-2 SAH A-15
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 2003 Series A Bonds delivered pursuant to the within
mentioned Indenture.
Date of Authentication BNY WESTERN TRUST COMPANY,
as Trustee
BY:
AUTHORIZED SIGNATORY
DOCSLAI :413600.10
42797-2 SAH A-16
ASSIGNMENT
FOR VALUE RECEIVED the undersigned sells, assigns and transfers unto
(Name, Address and Tax Identification or
Social Security Number of Assignee)
the within Bond of the City of Vernon and does hereby irrevocably constitute and appoint
attorney to
transfer the said Bond on the books kept for registration thereof with full power of substitution in
the premises.
Dated:
Signature guaranteed by
Notice: The Signature of this assignment and
transfer must correspond with the name
as written upon the face of this Bond in
every particular, without alteration or
enlargement or any change whatsoever.
Notice: Signature must be guaranteed by a
member of the National Association of
Securities Dealers, a commercial bank, a
trust company or other eligible guarantor
institution.
DOCSLA1:413600.10
42797-2 SAH A-17
OH&S Draft
02/18/03
AUCTION AND SETTLEMENT PROCEDURES
Section 1. Definitions. Capitalized terms used herein and not otherwise defined shall have the
meanings given such terms pursuant to the First Supplemental Indenture of Trust (the "Supplemental
Indenture") to which this Exhibit B is attached.
"Available ARBs" has the meaning set forth in Section 2(c)(i)(A) hereof.
"Bid" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Bidder" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Buyer's Broker -Dealer" has the meaning set forth in Section 3(a)(iv) hereof.
"Hold Order" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Order" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Sell Order" has the meaning set forth in Section 2(a)(i)(B) hereof.
"Seller's Broker -Dealer" has the meaning set forth in Section 3(a)(iii) hereof.
"Submission Deadline" has the meaning set forth in Section 2.4 of the Auction
Agreement.
"Submitted Bid" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Hold Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Order" has the meaning set forth in Section 2(c)(i) hereof.
"Submitted Sell Order" has the meaning set forth in Section 2(c)(i) hereof.
"Sufficient Clearing Bids" has the meaning set forth in Section 2(c)(i)(B) hereof.
"Winning Bid Rate" has the meaning set forth in Section 2(c)(i)(C) hereof.
Section 2. Auction Procedures. So long as the ownership of the ARBs is maintained in book -entry
form by the Securities Depository, an Existing Owner may sell, transfer or otherwise dispose of ARB
only pursuant to a Bid or Sell Order placed in an Auction or through a Broker -Dealer, provided that, in
the case of all transfers other than pursuant to Auctions, such Existing Owner, its Broker -Dealer or its
Participant advises the Auction Agent of such transfer. Subject to the provisions of Section 2.09 of the
Supplemental Indenture, Auctions shall be conducted on each Auction Date, if there is an Auction Agent
on such Auction Date, in the following manner:
(a) (i) Prior to the Submission Deadline on each Auction Date:
(A) each Existing Owner of ARB may submit to a Broker -Dealer by
telephone or otherwise any information as to:
(I) the principal amount of outstanding ARBs, if any, held by such
Existing Owner which such Existing Owner desires to continue to hold without regard to
the Auction Rate for the next succeeding ARB Interest Period;
DOCSLA1:440092.2
42797-2 EJC B-1
(II) the principal amount of outstanding ARBs, if any, which such
Existing Owner offers to sell if the Auction Rate for the next succeeding ARB Interest
Period shall be less than the rate per annum specified by such Existing Owner; and/or
(III) the principal amount of outstanding ARBs, if any, held by such
Existing Owner which such Existing Owner offers to sell without regard to the Auction
Rate for the next succeeding ARB Interest Period; and
(B) one or more Broker -Dealers may contact Potential Owners to determine
the principal amount of ARBs which each Potential Owner offers to purchase, if the Auction Rate for the
next succeeding ARB Interest Period shall not be less than the rate per annum specified by such Potential
Owner.
The statement of an Existing Owner or a Potential Owner referred to in (A) or (B) of this
paragraph (i) is hereinafter referred to as an "Order, and each Existing Owner and each Potential Owner
placing an Order is hereinafter referred to as a "Bidder"; an Order described in clause (A)(I) is hereinafter
referred to as a "Hold Order"; an Order described in clause (A)(II) or (B) is hereinafter referred to as a
"Bid"; and an Order described in clause (a)(III) is hereinafter referred to as a "Sell Order."
(ii) (A) Subject to the provisions of Section 2(b) hereof, a Bid by an
Existing Owner shall constitute an irrevocable offer to sell (in each case for settlement in same day funds
on the next ARB Interest Payment Date therefor at a price equal to 100% of the principal amount thereof):
(I) the principal amount of outstanding ARBs specified in such Bid
if the Auction Rate determined as provided herein shall be less than the rate specified in
such Bid; or
(II) such principal amount or a lesser principal amount of
outstanding ARBs to be determined as set forth in Section 2(d)(ii)(D), if the Auction Rate
determined as provided herein shall be equal to the rate specified in such Bid; or
(III) such principal amount or a lesser principal amount of
outstanding ARBs to be determined as set forth in Section 2(d)(ii)(C) if the rate specified
therein shall be higher than the ARB Maximum Rate and Sufficient Clearing Bids have
not been made.
(B) Subject to the provisions of Section 2(b) hereof, a Sell Order by an
Existing Owner shall constitute an irrevocable offer to sell (in each case for settlement in same day funds
on the next ARB Interest Payment Date therefor at a price equal to 100% of the principal amount thereof):
(1) the principal amount of outstanding ARBs specified in such Sell
Order if Sufficient Clearing Bids exist; or
(II) such principal amount or a lesser principal amount of
outstanding ARBs set forth in Section 2(d)(ii)(C), if Sufficient Clearing Bids have not
been made.
(C) Subject to the provisions of Section 2(b) hereof, a Bid by a Potential
Owner shall constitute an irrevocable offer to purchase (in each case for settlement in same day funds on
the next ARB Interest Payment Date therefor at a price equal to 100% of the principal amount thereof):
(I) the principal amount of outstanding ARBs specified in such Bid
if the Auction Rate determined as provided herein shall be higher than the rate specified
in such Bid; or
DOCSLA1:440092.2
42797-2 EJC B-2
(II) such principal amount or a lesser principal amount of
outstanding ARBs set forth in Section 2(d)(i)(E), if the Auction Rate determined as
provided herein shall be equal to the rate specified in such Bid.
(b) (i) Each Broker -Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date all Orders obtained by such Broker -Dealer and
shall specify with respect to each such Order:
Order;
(A) the name of the Bidder placing such Order;
(B) the aggregate principal amount of ARBs that are the subject of such
(C) to the extent that such Bidder is an Existing Owner:
(I) the principal amount of ARBs, if any, subject to any Hold Order
placed by such Existing Owner;
(II) the principal amount of ARBs, if any, subject to any Bid placed
by such Existing Owner and the rate specified in such Bid; and
(III) the principal amount of ARBs, if any, subject to any Sell Order
placed by such Existing Owner; and
(D) to the extent such Bidder is a Potential Owner, the rate specified in such
Potential Owner's Bid.
(ii) If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Auction Agent shall round such rate up to the next higher one thousandth
(.001) of 1%.
(iii) If an Order or Orders covering all outstanding ARBs held by an Existing
Owner is not submitted to the Auction Agent prior to the Submission Deadline, the Auction Agent shall
deem a Hold Order to have been submitted on behalf of such Existing Owner covering the principal
amount of outstanding ARBs held by such Existing Owner and not subject to an Order submitted to the
Auction Agent.
(iv) Neither the City, the 2003 Series A Credit Provider, the Trustee nor the
Auction Agent shall be responsible for any failure of a Broker -Dealer to submit an Order to the Auction
Agent on behalf of any Existing Owner or Potential Owner, nor shall any such party be responsible for
failure by any Securities Depository to effect any transfer or to provide the Auction Agent with current
information regarding registration of transfers.
(v) If any Existing Owner submits through a Broker -Dealer to the Auction
Agent one or more Orders covering in the aggregate more than the principal amount of outstanding ARBs
held by such Existing Owner, such Orders shall be considered valid as follows and in the following order
of priority:
(A) All Hold Orders shall be considered valid, but only up to and including
in the aggregate the principal amount of outstanding ARBs held by such Existing Owner, and if the
aggregate principal amount of ARBs subject to such Hold Orders exceeds the aggregate principal amount
of ARBs held by such Existing Owner, the aggregate principal amount of ARBs subject to each such
Hold Order shall be reduced so that the aggregate principal amount of ARBs subject to such Hold Orders
equals the aggregate principal amount of outstanding ARBs held by such Existing Owner.
DOCSLA1:440092.2
42797-2 EJC B-3
(B) (1) any Bid shall be considered valid up to and including the excess
of the principal amount of outstanding ARBs held by such Existing Owner over the aggregate principal
amount of ARBs subject to any Hold Order referred to in subsection (v)(A) above;
(II) subject to subsection (v)(B)(I) above, if more than one Bid with
the same rate is submitted on behalf of such Existing Owner and the aggregate principal
amount of outstanding ARBs subject to such Bids is greater than such excess, such Bids
shall be considered valid up to and including the amount of such excess;
(III) subject to subsections (v)(B)(I) and (v)(B)(II) above, if more
than one Bid with different rates is submitted on behalf of such Existing Owner, such
Bids shall be considered valid first in the ascending order of their respective rates until
the highest rate is reached at which such excess exists and then at such rate up to and
including the amount of such excess; and
(IV) in any such event, the amount of outstanding ARBs, if any,
subject to Bids not valid under this subsection (B) shall be treated as the subject of a Bid
by a Potential Owner at the rate therein specified; and
(C) All Sell Orders shall be considered valid up to and including the excess
of the principal amount of outstanding ARBs held by such Existing Owner over the aggregate principal
amount of ARBs subject to Hold Orders referred to in subsection (v)(A) and valid Bids referred to in
subsection (v)(B).
(vi) If more than one Bid for ARB is submitted on behalf of any Potential
Owner, each Bid submitted shall be a separate Bid with the rate and principal amount therein specified.
(vii) Any Bid or Sell Order submitted by an Existing Owner covering an
aggregate principal amount of ARBs not equal to an Authorized Denomination shall be rejected and shall
be deemed a Hold Order. Any Bid submitted by a Potential Owner covering an aggregate principal
amount of ARBs not equal to an Authorized Denomination shall be rejected.
(viii) Any Bid specifying a rate higher than the ARB Maximum Rate will be
treated as a Sell Order if submitted by an Existing Owner and will not be accepted if submitted by a
Potential Owner. Any Bid submitted by an Existing Owner or on behalf of a Potential Owner specifying
a rate lower than the All -Hold Rate shall be considered as valid and shall be selected in the ascending
order of their respective rates contained in the Submitted Bids.
(ix) Any Order submitted in an Auction by a Broker -Dealer to the Auction
Agent prior to the Submission Deadline on any Auction Date shall be irrevocable.
(c) (i) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent shall assemble all valid Orders submitted or deemed submitted to it by the Broker -Dealers
(each such Order as submitted or deemed submitted by a Broker -Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the case
may be, or as a "Submitted Order" and collectively as "Submitted Hold Orders," "Submitted Bids" or
"Submitted Sell Orders," as the case may be, or as "Submitted Orders") and shall determine:
(A) the excess of the total principal amount of outstanding ARBs over the
sum of the aggregate principal amount of outstanding ARBs subject to Submitted Hold Orders (such
excess being hereinafter referred to as the "Available ARBs"), and
(B) from the Submitted Orders whether:
DOCSLA1:440092.2
42797-2 EJC B-4
(I) the aggregate principal amount of outstanding ARBs subject to
Submitted Bids by Potential Owners specifying one or more rates equal to or lower than
the ARB Maximum Rate exceeds or is equal to the sum of:
(II) the aggregate principal amount of outstanding ARBs subject to
Submitted Bids by Existing Owners specifying one or more rates higher than the ARB
Maximum Rate, and
(III) the aggregate principal amount of outstanding ARBs subject to
Submitted Sell Orders
(in the event such excess or such equality exists, other than because all of the outstanding ARBs are
subject to Submitted Hold Orders, such Submitted Bids described in subclause (1) above shall be referred
to collectively as "Sufficient Clearing Bids"); and
(C) if Sufficient Clearing Bids exist, the lowest rate specified in such
Submitted Bids (the "Winning Bid Rate") such that if:
(I) (aa) each such Submitted Bid from Existing Owners specifying
such lowest rate and (bb) all other Submitted Bids from Existing Owners specifying
lower rates were rejected, thus entitling such Existing Owners to continue to hold the
principal amount of ARBs subject to such Submitted Bids, and
(II) (aa) each such Submitted Bid from Potential Owners specifying
such lowest rate and (bb) all other Submitted Bids from Potential Owners specifying
lower rates were accepted, the result would be that such Existing Owners described in
subsection (C)(I) above would continue to hold an aggregate principal amount of
outstanding ARBs which, when added to the aggregate principal amount of outstanding
ARBs to be purchased by such Potential Owners described in subsection (C)(II) above,
would equal not less than the Available ARBs.
(ii) Promptly after the Auction Agent has made the determinations pursuant
to Section 2(c)(i) hereof, the Auction Agent shall advise the Broker -Dealer and the Trustee of the ARB
Maximum Rate and the All -Hold Rate and the components thereof on the Auction Date and, based on
such determinations, the Auction Rate for the next succeeding ARB Interest Period as follows:
(A) if Sufficient Clearing Bids exist, that the Auction Rate for the next
succeeding ARB Interest Period shall be equal to the Winning Bid Rate so determined;
(B) if Sufficient Clearing Bids do not exist (other than because all of the
outstanding ARBs are subject to Submitted Hold Orders), that the Auction Rate for the next succeeding
ARB Interest Period shall be equal to the ARB Maximum Rate; or
(C) if all outstanding ARBs are subject to Submitted Hold Orders, that the
Auction Rate for the next succeeding ARB Interest Period shall be equal to the All -Hold Rate.
(d) Existing Owners shall continue to hold the principal amount of ARBs that are
subject to Submitted Hold Orders, and, based on the determinations made pursuant to Section 2(c)(i)
hereof, Submitted Bids and Submitted Sell Orders shall be accepted or rejected and the Auction Agent
shall take such other action as set forth below:
(i) if Sufficient Clearing Bids have been made, all Submitted Sell Orders
shall be accepted and, subject to the provisions of Sections 2(d)(iv) and 2(d)(v), Submitted Bids shall be
accepted or rejected as follows in the following order of priority and all other Submitted Bids shall be
rejected:
DOCSLA1:440092.2
42797-2 EJC B-5
(A) Existing Owners' Submitted Bids specifying any rate that is higher than
the Winning Bid Rate shall be accepted, thus requiring each such Existing Owner to sell the aggregate
principal amount of ARBs subject to such Submitted Bids;
(B) Existing Owners' Submitted Bids specifying any rate that is lower than
the Winning Bid Rate shall be rejected, thus entitling each such Existing Owner to continue to hold the
aggregate principal amount of ARBs subject to such Submitted Bids;
(C) Potential Owners' Submitted Bids specifying any rate that is lower than
the Winning Bid Rate shall be accepted;
(D) each Existing Owner's Submitted Bid specifying a rate that is equal to
the Winning Bid Rate shall be rejected, thus entitling such Existing Owner to continue to hold the
aggregate principal amount of ARBs subject to such Submitted Bid, unless the aggregate principal
amount of outstanding ARBs subject to all such Submitted Bids shall be greater than the principal amount
of ARBs (the "remaining principal amount") equal to the excess of the Available ARBs over the
aggregate principal amount of ARBs subject to Submitted Bids described in subsections (B) and (C) of
this Section 2(d)(i), in which event such Submitted Bid of such Existing Owner shall be rejected in part,
and such Existing Owner shall be entitled to continue to hold the principal amount of ARBs subject to
such Submitted Bid, but only in an amount equal to the aggregate principal amount of ARBs obtained by
multiplying the remaining principal amount by a fraction, the numerator of which shall be the principal
amount of outstanding ARBs held by such Existing Owner subject to such Submitted Bid and the
denominator of which shall be the sum of the principal amount of outstanding ARBs subject to such
Submitted Bids made by all such Existing Owners that specified a rate equal to the Winning Bid Rate;
and
(E) Each Potential Owner's Submitted Bid specifying a rate that is equal to
the Winning Bid Rate shall be accepted, but only in an amount equal to the principal amount of ARBs
obtained by multiplying the excess of the aggregate principal amount of Available ARBs over the
aggregate principal amount of ARBs subject to Submitted Bids described in subsections (B), (C) and (D)
of this Section 2(d)(i) by a fraction the numerator of which shall be the aggregate principal amount of
outstanding ARBs subject to such Submitted Bid and the denominator of which shall be the sum of the
principal amount of outstanding ARBs subject to Submitted Bids made by all such Potential Owners that
specified a rate equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other than because all of
the outstanding ARBs are subject to submitted Hold Orders), subject to the provisions of Sections 2(d)(iv)
and (v), Submitted Orders shall be accepted or rejected as follows in the following order of priority and
all other Submitted Bids shall be rejected:
(A) Existing Owners' Submitted Bids specifying any rate that is equal to or
lower than the ARB Maximum Rate shall be rejected, thus entitling such Existing Owners to continue to
hold the aggregate principal amount of ARBs subject to such Submitted Bids;
(B) Potential Owners' Submitted Bids specifying any rate that is equal to or
lower than the ARB Maximum Rate shall be accepted, and specifying any rate that is higher than the
ARB Maximum Rate shall be rejected; and
(C) each Existing Owner's Submitted Bid specifying any rate that is higher
than the ARB Maximum Rate and the Submitted Sell Order of each Existing Owner shall be accepted,
thus entitling each Existing Owner that submitted any such Submitted Bid or Submitted Sell Order to sell
the ARBs subject to such Submitted Bid or Submitted Sell Order, but in both cases only in an amount
equal to the aggregate principal amount of ARBs obtained by multiplying the aggregate principal amount
of ARBs subject to Submitted Bids described in subsection (B) of this Section 2(d)(ii) which are accepted
by a fraction the numerator of which shall be the aggregate principal amount of outstanding ARBs held
DOCSLA1:440092.2
42797-2 EJC B-(
by such Existing Owner subject to such Submitted Bid or Submitted Sell Order and the denominator of
which shall be the aggregate principal amount of outstanding ARBs subject to all such Submitted Bids
and Submitted Sell Orders.
(iii) If all outstanding ARBs are subject to Submitted Hold Orders, all
Submitted Bids shall be rejected.
(iv) If, as a result of the procedures described in Section 2(d)(i) or 2(d)(ii),
any Existing Owner would be entitled or required to sell, or any Potential Owner would be entitled or
required to purchase, a principal amount of ARBs that is not equal to an Authorized Denomination the
Auction Agent shall, in such manner as in its sole discretion it shall determine, round up or down the
principal amount of ARBs to be purchased or sold by any Existing Owner or Potential Owner so that the
principal amount of ARBs purchased or sold by each Existing Owner or Potential Owner shall be equal to
an Authorized Denomination.
(v) If, as a result of the procedures described in Section 2(d)(ii), any
Potential Owner would be entitled or required to purchase less than an Authorized Denomination of
ARBs, the Auction Agent shall, in such manner as in its sole discretion it shall determine, allocate ARBs
for purchase among Potential Owners so that only ARBs in Authorized Denominations are purchased by
any Potential Owner, even if such allocation results in one or more of such Potential Owners not
purchasing any ARBs.
(vi) The City, Trustee, Broker -Dealers and Auction Agent shall have no
liability in the event that there are not Sufficient Clearing Bids from time to time pursuant to the Auction
Procedures.
(e) Based on the result of each Auction, the Auction Agent shall determine the
aggregate principal amount of ARBs to be purchased and the aggregate principal amount of ARBs to be
sold by Potential Owners and Existing Owners on whose behalf each Broker -Dealer Submitted Bids or
Sell Orders and, with respect to each Broker -Dealer, to the extent that such aggregate principal amount of
ARBs to be sold differs from such aggregate principal amount of ARBs to be purchased, determine to
which other Broker -Dealer or Broker Dealers acting for one or more purchasers such Broker -Dealer shall
deliver, or from which other Broker -Dealer or Broker -Dealers acting for one or more sellers such Broker -
Dealer shall receive, as the case may be, ARBs.
(f) Any calculation by the Auction Agent (or the Trustee, if applicable) of the
Applicable ARB Rate, the "AA Commercial Paper Rate", the ARB Maximum Rate, the All -Hold Rate
and the Non -Payment Rate shall, in the absence of manifest error, be binding on all ARB Beneficial
Owners and all other parties.
Section 3. Settlement Procedures.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the Auction
Agent shall notify by telephone each Broker -Dealer that participated in the Auction held on such Auction
Date and submitted an Order on behalf of an Existing Owner or Potential Owner of-
(i) the Auction Rate fixed for the next ARB Interest Period;
(ii) whether there were Sufficient Clearing Bids in such Auction;
(iii) if such Broker -Dealer (a "Seller's Broker -Dealer") submitted a Bid or a
Sell Order on behalf of an Existing Owner, whether such Bid or Sell Order was accepted or rejected, in
whole or in part, and the principal amount of ARBs, if any, to be sold by such Existing Owner;
DOCSLA1:440092.2
42797-2 EJC B-%
(iv) if such Broker -Dealer (a "Buyer's Broker -Dealer") submitted a Bid on
behalf of a Potential Owner, whether such Bid was accepted or rejected, in whole or in part, and the
principal amount of ARBs, if any, to be purchased by such Potential Owner;
(v) if the aggregate principal amount of ARBs to be sold by all Existing
Owners on whose behalf such Broker -Dealer submitted a Bid or a Sell Order exceeds the aggregate
principal amount of ARBs to be purchased by all Potential Owners on whose behalf such Broker -Dealer
submitted a Bid, the name or names of one or more Buyer's Broker -Dealers (and the name of the
Participant, if any, of each such Buyer's Broker -Dealer) acting for one or more purchasers of such excess
principal amount of ARBs and the principal amount of ARBs to be purchased from one or more Existing
Owners on whose behalf such Broker -Dealer acted by one or more Potential Owners on whose behalf
each of such Buyer's Broker -Dealers acted;
(vi) if the principal amount of ARBs to be purchased by all Potential Owners
on whose behalf such Broker -Dealer submitted a Bid exceeds the aggregate principal amount of ARBs to
be sold by all Existing Owners on whose behalf such Broker -Dealer submitted a Bid or a Sell Order, the
name or names of one or more Seller's Broker -Dealers (and the name of the Participant, if any, of each
such Seller's Broker -Dealer) acting for one or more sellers of such excess principal amount of ARBs and
the principal amount of ARBs to be sold to one or more Potential Owners on whose behalf such Broker -
Dealer acted by one or more Existing Owners on whose behalf each of such Seller's Broker -Dealers
acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker -Dealer that submitted an Order on behalf of
any Existing Owner or Potential Owner shall:
(i) advise each Existing Owner and Potential Owner on whose behalf such
Broker -Dealer submitted a Bid or Sell Order in the Auction on such Auction Date whether such Bid or
Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker -Dealer that is a Buyer's Broker -Dealer, advise
each Potential Owner on whose behalf such Broker -Dealer submitted a Bid that was accepted, in whole or
in part, to instruct such Potential Owner's Participant to pay to such Broker -Dealer (or its Participant)
through the Securities Depository the amount necessary to purchase the principal amount of ARBs to be
purchased pursuant to such Bid against receipt of such ARBs;
(iii) in the case of a Broker -Dealer that is a Seller's Broker -Dealer, instruct
each Existing Owner on whose behalf such Broker -Dealer submitted a Sell Order that was accepted, in
whole or in part, or a Bid that was accepted, in whole or in part, to instruct such Existing Owner's
Participant to deliver to such Broker -Dealer (or its Participant) through the Securities Depository the
principal amount of ARBs to be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order and each Potential Owner on whose behalf such Broker -Dealer submitted a Bid of the
Auction Rate for the next ARB Interest Period;
(v) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order of the next Auction Date; and
(vi) advise each Potential Owner on whose behalf such Broker -Dealer
submitted a Bid that was accepted, in whole or in part, of the next Auction Date.
(c) On the basis of the information provided to it pursuant to Section 3(a), each
Broker -Dealer that submitted a Bid or Sell Order in an Auction is required to allocate any funds received
by it in connection with such Auction pursuant to Section 3(b)(ii), and any ARBs received by it in
DOCSLAI :440092.2
42797-2 EJC B-8
connection with such Auction pursuant to Section 3(b)(iii) among the Potential Owners, if any, on whose
behalf such Broker -Dealer Submitted Bids, the Existing Owners, if any on whose behalf such Broker -
Dealer Submitted Bids or Sell Orders in such Auction, and any Broker -Dealers identified to it by the
Auction Agent following such Auction pursuant to Section 3(a)(v) or 3(a)(vi).
(d) On each Auction Date:
(i) each Potential Owner and Existing Owner with an Order in the Auction
on such Auction Date shall instruct its Participant as provided in Section 3(b)(ii) or 3(b)(iii), as the case
may be;
(ii) each Seller's Broker -Dealer that is not a Participant of the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to the Participant of
the Existing Owner delivering ARBs to such Broker -Dealer following such Auction pursuant to Section
3(b)(iii) the amount necessary to purchase such ARBs against receipt of such ARBs, and (B) deliver such
ARBs through the Securities Depository to a Buyer's Broker -Dealer (or its Participant) identified to such
Seller's Broker -Dealer pursuant to Section 3(a)(v) against payment therefor; and
(iii) each Buyer's Broker -Dealer that is not a Participant in the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to Seller's Broker -
Dealer (or its Participant) identified following such Auction pursuant to Section 3(a)(vi) the amount
necessary to purchase the ARBs to be purchased pursuant to Section 3(b)(ii) against receipt of such
ARBs, and (B) deliver such ARB through the Securities Depository to the Participant of the purchaser
thereof against payment therefor.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in Section 3(d)(i) shall instruct the Securities Depository to execute the transactions described
under Section 3(b)(ii) or 3(b)(iii) for such Auction, and the Securities Depository shall execute such
transactions;
(ii) each Seller's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in Section 3(d)(ii) for such Auction, and the Securities
Depository shall execute such transactions; and
(iii) each Buyer's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in Section 3(d)(iii) for such Auction, and the Securities
Depository shall execute such transactions.
(f) If an Existing Owner selling ARBs in an Auction fails to deliver such ARBs (by
authorized book -entry), a Broker -Dealer may deliver to the Potential Owner on behalf of which it
submitted a Bid that was accepted a principal amount of ARBs that is less than the principal amount of
ARBs that otherwise was to be purchased by such Potential Owner. In such event, the principal amount
of ARBs to be so delivered shall be determined solely by such Broker -Dealer. Delivery of such lesser
principal amount of ARBs shall constitute good delivery. Notwithstanding the foregoing terms of this
subsection, any delivery or nondelivery of ARB which shall represent any departure from the results of an
Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or nondelivery in accordance with the provisions of the Auction
Agent Agreement and the Broker -Dealer Agreements.
DOCSLA1:440092.2
42797-2 EJC B-9
EXHIBIT C
FORM OF NOTICE OF CURE OF ARB PAYMENT DEFAULT
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
NOTICE IS HEREBY GIVEN that the ARB Payment Default with respect to the 2003
Series A Bonds identified above has been waived or cured. The next ARB Interest Payment Date is
and the next scheduled Auction Date is
Dated:
BNY WESTERN TRUST COMPANY
DOCSLA1:440092.2
42797-2 EX C- I
EXHIBIT D
FORM OF AUCTION AGENT AGREEMENT
This AUCTION AGENT AGREEMENT, dated as of (the "Agreement"), between
BNY Western Trust Company, as trustee (the "Trustee") under that certain Indenture of Trust (as from
time to time in effect, the "Master Indenture"), as supplemented by that certain First Supplemental
Indenture of Trust (as from time to time in effect, the "Supplemental Indenture" and together with the
Master Indenture, the "Indenture"), each dated as of March 1, 2003, and each between the City of Vernon
(the "City") and the Trustee, and [Insert Name of Auction Agent], as auction agent (together with its
successors and assigns, the "Auction Agent"),
WITNESSETH:
WHEREAS, the City has issued $ aggregate principal amount of its Malburg Generating
Station Project Electric System Revenue Bonds, 2003 Series A (the "2003 Series A Bonds") and has
caused the 2003 Series A Bonds to be in an ARB Interest Rate Period (while in such ARB Interest Rate
Period, the 2003 Series A Bonds are referred to as the "ARBs");
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained
herein, the adequacy and sufficiency of which are hereby acknowledged, and intending to be legally
bound, the Trustee and the Auction Agent agree as follows:
Section 1. Definitions and Rules of Construction.
1.1. Terms Defined by Reference. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Indenture.
1.2. Terms Defined Herein. As used herein and in each Exhibit hereto, the following
terms shall have the following meanings, unless the context otherwise requires:
"ARB Beneficial Owner" shall mean the Person who is the beneficial owner of the ARBs
according to the records of (i) a Securities Depository while the ARBs are in book -entry form or (ii) the
Trustee while the ARBs are not in book -entry form.
"Auction" shall have the meaning specified in Section 2.1 hereof.
"Auction Agent Fee" shall have the meaning specified in Section 4.4(a) hereof.
"Auction and Settlement Procedures" shall mean those procedures set forth in Exhibit B hereto.
"Auction Procedures" shall mean the provisions that are set forth in Section 2 of the Auction and
Settlement Procedures.
"Authorized Broker -Dealer" shall mean each Person listed in Exhibit F hereto.
"Authorized Officer" shall mean each Vice President, Assistant Vice President, Associate and
Assistant Treasurer of the Auction Agent assigned to Group and every other officer or
employee of the Auction Agent designated as an "Authorized Officer" for purposes hereof in a
communication to the Trustee.
DOCSLA1:440092.2
42797-2 EJC D-1
"Authorized Trustee Representative" shall mean each Senior Vice President, Vice President,
Assistant Vice President, Assistant Secretary and Trust Officer of the Trustee and every other officer or
employee of the Trustee designated as an "Authorized Trustee Representative" for purposes hereof in a
communication to the Auction Agent.
"Broker -Dealer Agreement" shall mean each agreement between the Auction Agent and a
Broker -Dealer relating to the ARBs substantially in the form attached hereto as Exhibit A.
"Broker -Dealer Fee" shall have the meaning specified in Section 4.5(a) hereof.
"Existing Owner Registry" shall mean the register maintained by the Auction Agent pursuant to
Section 2.2(a)(i) hereof.
"Notice of ARB Payment Default" shall mean a notice substantially in the form of Exhibit E
hereto.
"Notice of Failure to Deliver" shall mean a notice substantially in the form of Exhibit C to the
Broker -Dealer Agreement.
"Notice of Failure to Receive Certificate" shall mean a notice substantially in the form of Exhibit
C hereto.
"Notice of Failure to Receive Opinion" shall mean a notice substantially in the form of Exhibit D
hereto.
"Notice of Transfer" shall mean a notice substantially in the form of Exhibit B to the Broker -
Dealer Agreement.
"Participant" shall mean a member of, or participant in, a Securities Depository.
"Regular Record Date" shall mean the second Business Day next preceding each ARB Interest
Payment Date.
"Representation Letter" shall mean the letter of representations from the City to The Depository
Trust Company.
"Settlement Procedures" shall mean the procedures that are set forth in Section 3 of the Auction
and Settlement Procedures.
1.3. Rules of Construction. Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of reference
and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
City time.
(d) All references herein to a particular time of day shall be to New York
DOCSLA1:440092.2
42797-2 EJC
D-2
Section 2. The Auction.
2.1. Auction Procedures and Settlement Procedures.
(a) The Indenture provides that the Applicable ARB Rate for each ARB
Interest Period after the first ARB Interest Period, except as provided in Section 2.09 of the Supplemental
Indenture, shall equal the rate per annum that the Auction Agent advises results from implementation of
the Auction and Settlement Procedures set forth herein. As directed in Section 2.09 of the Supplemental
Indenture, the Trustee hereby appoints [Insert Name of Auction Agent] as Auction Agent for purposes of
the Auction and Settlement Procedures and to perform such other obligations and duties as are herein set
forth. BNY Western Trust Company hereby accepts such appointment and agrees that it shall follow the
procedures set forth in this Section and the Auction and Settlement Procedures for the purpose of, among
other things, determining the Applicable ARB Rate for each ARB Interest Period after the first ARB
Interest Period. Each periodic operation of such procedures is hereinafter referred to as an "Auction."
(b) All of the provisions contained in the Auction and Settlement Procedures
set forth in Exhibit B hereto are incorporated herein by reference in their entirety and shall be deemed to
be a part hereof to the same extent as if such provisions were fully set forth herein.
2.2. Preparation of Each Auction.
(a) (i) The Auction Agent shall maintain a current registry of Existing
Owners (such registry being herein called the "Existing Owner Registry"). Such Persons shall constitute
the Existing Owners for purposes of each Auction. The Auction Agent shall indicate in the Existing
Owner Registry the identity of the respective Broker -Dealer of each Existing Owner, if any, on whose
behalf such Broker -Dealer submitted the most recent Order in any Auction which resulted in such
Existing Owner continuing to hold or purchasing the ARBs. [Name of Initial Broker -Dealer], [initially as
the sole Broker -Dealer,] shall provide or cause to be provided to the Auction Agent on the Conversion
Date a list of the initial Existing Owners of ARB. The Auction Agent may conclusively rely upon, as
evidence of the identities of the Existing Owners, (A) such list, (B) the results of each Auction and (C)
notices from any Broker -Dealer of such Existing Owner, Participant of such Existing Owner or the
Existing Owner as described in the first sentence of Section 2.2(a)(iii) hereof.
(ii) The Trustee shall notify the Auction Agent when any notice of
redemption or mandatory tender of ARB is sent to the Securities Depository with respect to ARB not later
than 11:00 a.m., New York City time, on the date such notice is sent. In the event the Auction Agent
receives from the Trustee written notice of any partial prepayment or any mandatory tender of any ARB,
the Auction Agent shall, at least three Business Days prior to the Redemption Date or Tender Date with
respect to such ARB, request the Securities Depository to notify the Auction Agent of the identities of the
Participants (and the respective principal amounts) from the accounts of which ARB have been called for
redemption or mandatory tender and the person or department at such Participant to contact regarding
such redemption or mandatory tender and, at least two Business Days prior to the Redemption Date or
Tender Date with respect to ARB being partially redeemed or tendered, the Auction Agent shall request
each Participant so identified to disclose to the Auction Agent (upon selection by such Participant of the
Existing Owners whose ARB are to be redeemed or tendered) the aggregate principal amount of such
ARB of each such Existing Owner, if any, which are to be redeemed or tendered; provided the Auction
Agent has been furnished with the name and telephone number of a person or department at such
Participant from which it is to request such information. In the absence of receiving any such information
with respect to any Existing Owner from such Existing Owner's Participant or otherwise, the Auction
Agent may continue to treat such Existing Owner as the ARB Beneficial Owner of the principal amount
of ARBs shown in the Existing Owner Registry.
(iii) The Auction Agent shall register in the Existing Owner Registry a
transfer of ARB only if (A) such transfer is pursuant to an Auction or (B) if such transfer is made other
DOCSLA1:440092.2
42797-2 EJC D-3
than pursuant to an Auction, the Auction Agent has been notified in writing by a Notice of Transfer, by
the Broker -Dealer of such Existing Owner, the Participant of such Existing Owner or the Existing Owner
of such transfer. The Auction Agent is not required to accept any notice of transfer delivered prior to an
Auction unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the Business
Day next preceding the applicable Auction Date. The Auction Agent shall rescind a transfer made on the
Existing Owner Registry if the Auction Agent has been notified in writing by a Notice of a Failure to
Deliver by the Participant or the Broker -Dealer of any Person that (i) purchased any ARB or (ii) sold any
ARB and the purchaser failed to make payment to such Person upon delivery to the purchaser of such
ARB. The Auction Agent is not required to accept any notice of rescission to transfer delivered prior to
an Auction unless it is received by the Auction Agent by 3:00 p.m., New York City time, on the Business
Day next preceding the applicable Auction Date.
(b) The Auction Agent may, but shall have no duty to, request that the Broker -
Dealers, as set forth in the Broker -Dealer Agreements, provide the Auction Agent with a list of their
respective customers that such Broker -Dealers believe are Existing Owners of ARB and the aggregate
amount held by such Broker -Dealer. The Auction Agent shall keep confidential any such information and
shall not disclose any such information so provided to any person other than the relevant Broker -Dealer,
the City and the Trustee, provided that the Auction Agent reserves the right to disclose any such
information if (i) it is ordered to do so by a court or regulatory judicial or quasi-judicial agency or
authority, or (ii) it is advised by its counsel that its failure to do so would be unlawful or would impose
upon it any actual or potential loss, claim, damage, liability, or expense for which it has not received
indemnity satisfactory to it.
(c) In the event that any day that is scheduled to be an Auction Date shall be changed
after the Auction Agent shall have given the notice referred to in Section 3(a)(vii) of the Auction and
Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall
give notice of such change to the Broker -Dealers not later than 9:15 a.m., New York City time, on the
earlier of the day prior to the new Auction Date or the old Auction Date.
2.3. All -Hold Rate and ARB Maximum Rate.
(a) On the date hereof the Applicable Percentage is 175%. If there is any
change in the ratings then assigned to the ARBs by Moody's or S&P (or substitute or successor rating
agencies) which results in a change to the Applicable Percentage after the date of this Agreement or if the
Applicable Percentage is adjusted by the Market Agent in accordance with Section 2.09(d) of the
Supplemental Indenture, the Trustee shall notify the Auction Agent in writing of such change in the
Applicable Percentage prior to 9:00 a.m., New York City time, on the Auction Date next succeeding such
change. In determining the ARB Maximum Rate on any Auction Date as set forth in Section 2.3(b)(i)
hereof, the Auction Agent shall be entitled to conclusively rely on the Applicable Percentage of which it
has most recently received notice from the Trustee or, in the absence of such notice, the Applicable
Percentage set forth in the first sentence of this subsection (a).
(b) (i) On each Auction Date, the Auction Agent shall determine the
"AA Commercial Paper Rate", the All -Hold Rate and the ARB Maximum Rate. Pursuant to the Market
Agent Agreement, not later than 9:00 a.m., New York City time, on each Auction Date, the Market Agent
shall make available to the Auction Agent the Index for use by the Auction Agent in connection with such
determination. Not later than 9:30 a.m., New York City time, on each Auction Date, the Auction Agent
shall notify the Trustee and the Broker -Dealers of the All -Hold Rate and the ARB Maximum Rate so
determined and the "AA Commercial Paper Rate" or the Index, as the case may be, used to make such
determination.
(ii) If, after delivery to the Auction Agent of the notice referred to in Section
2.09(d)(ii) of the Supplemental Indenture, the Auction Agent delivers to the Broker -Dealers either of the
DOCSLA1:440092.2
42797-2 EJC D-4
certificates referred to in Section 2.5(c) or (d) hereof, the next succeeding Auction will not be held and the
Auction Agent shall notify the Trustee of the ARB Maximum Rate determined for the next succeeding
ARB Interest Period on the first day of such ARB Interest Period pursuant to Section 2.3(b)(i) above.
(iii) Upon the occurrence of an ARB Payment Default, Auctions will be
suspended and the Applicable ARB Rate for each ARB Interest Period commencing after the occurrence
of such ARB Payment Default to and including the ARB Interest Period, if any, during which, or
commencing less than two Business Days after, such ARB Payment Default is cured or waived in
accordance with the Indenture will equal the Non -Payment Rate as determined by the Trustee in
accordance with the provisions of the Indenture on the first day of such ARB Interest Period as provided
in the Indenture; provided, however, that if an Auction occurred on the Business Day immediately
preceding any such ARB Interest Period (notwithstanding that a weekend may have passed between such
Auction and such ARB Interest Period), the Applicable ARB Rate for such ARB Interest Period shall be
the Non -Payment Rate. The Applicable ARB Rate for each ARB Interest Period commencing at least
two Business Days after any cure or waiver of an ARB Payment Default shall be determined through
implementation of the Auction Procedures.
(iv) If the ownership of the ARBs is no longer maintained in book -entry form
by a Securities Depository, no further Auctions will be held and the Applicable ARB Rate for each ARB
Interest Period commencing after the delivery of physical certificates pursuant to Section 3.05 of the
Master Indenture will equal the ARB Maximum Rate as determined by the Auction Agent on the
Business Day immediately preceding the first day of such ARB Interest Period as provided in the
Indenture.
(v) If any "AA Commercial Paper Rate" is not quoted on an interest basis
but is quoted on a discount basis, the Auction Agent shall convert the quoted rate to the interest
equivalent thereof, as set forth in the definition of "AA Commercial Paper Rate" in the Indenture; or, if
the rate obtained by the Auction Agent is not quoted on an interest or discount basis, the Auction Agent
shall convert the quoted rate to an interest rate after consultation with the Market Agent as to the method
of such conversion.
(vi) If the Federal Reserve Bank of New York has not made available its 30-
day commercial paper rate for purposes of determining the "AA Commercial Paper Rate", the Trustee
shall request that the City appoint by Officer's Certificate at least three commercial paper dealers to
provide commercial paper quotes for purposes of determining the "AA Commercial Paper Rate", as
further provided in Section 2.09(b)(ii) of the Supplemental Indenture.
2.4. Auction Schedule. The Auction Agent shall conduct Auctions in accordance
with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent
of the Trustee, each Broker -Dealer, the 2003 Series A Credit Provider and the Market Agent, which
consent shall not be unreasonably withheld or delayed. The Auction Agent shall give notice pursuant to
Section 5.2 hereof of any such change to each Broker -Dealer. Such notice shall be given prior to the first
Auction Date on which any such change shall be effective.
By 9:00 a.m. The Market Agent makes available to the Auction Agent the Index.
By 9:30 a.m. The Auction Agent advises the Trustee and the Broker -Dealers of the
ARB Maximum Rate, the All -Hold Rate and the "AA Commercial Paper
Rate" or the Index, as the case may be, used in determining such ARB
Maximum Rate and All -Hold Rate, as set forth in Section 2.3(b)(i)
hereof.
DOCSLAI :440092.2
42797-2 EJC D-5
9:30 a.m. -
1:00 P.M. The Auction Agent assembles information communicated to it by
Broker -Dealers as provided in Section 2(b)(i) of the Auction and
Settlement Procedures. The Submission Deadline is 1:00 p.m., New
York City time.
Not earlier than
1:00 P.M. The Auction Agent makes the determination pursuant to Section 2(c)(i)
of the Auction and Settlement Procedures.
By approximately
3:00 p.m. The Auction Agent advises the Trustee and the Broker -Dealers of the
Auction Rate for the next ARB Interest Period and the results of the
Auction as provided in Section 2(c)(ii) of the Auction and Settlement
Procedures. Submitted Bids and Submitted Sell Orders are accepted and
rejected in whole or in part and principal amount of ARBs is allocated as
provided in Section 2(d) of the Auction and Settlement Procedures.
The Auction Agent shall follow the notification procedures set forth in Section 3(a) of the
Auction and Settlement Procedures.
2.5. Changes in Applicable Percentage and Other Rates.
(a) The Auction Agent shall mail any notice delivered to it pursuant to
Section 2.09(d)(ii) of the Supplemental Indenture to the Existing Owners within two Business Days of its
receipt thereof.
(b) The Auction Agent shall deliver any notice delivered to it pursuant to
Section 2.09(d)(iii) of the Supplemental Indenture to the Broker -Dealers not later than 3:00 p.m., New
York City time, on the Business Day on which it receives such certificate. Any noticed received after
3:00 p.m. shall be deemed to have been delivered on the next succeeding Business Day.
(c) If, after delivery to the Auction Agent of the notice referred to in
subsection (a) of this Section, the Auction Agent fails to receive the certificate referred to in Section
2.09(d)(iii)(1) of the Supplemental Indenture by 11:00 a.m., New York City time, on the Business Day
immediately preceding the next succeeding Auction Date, the Auction Agent shall deliver a Notice of
Failure to Receive Certificate to the Broker -Dealers not later than 3:00 p.m., New York City time, on
such Business Day.
(d) If, after delivery to the Auction Agent of the notice referred to in
subsection (a) of this Section, the Auction Agent fails to receive the Opinion of nationally recognized
bond counsel referred to in Section 2.09(d)(iii)(2) of the Supplemental Indenture by 9:30 a.m. on the next
succeeding Auction Date, the Auction Agent shall deliver a Notice of Failure to Receive Opinion to the
Broker -Dealers promptly by telecopy or other similar means.
2.6. Notices to Existing Owners. The Auction Agent shall be entitled to conclusively
rely upon the address of each Existing Owner as provided in writing by such Existing Owner or a Broker -
Dealer in connection with any notice to Existing Owners required to be given by the Auction Agent.
DOCSLA1:440092.2
42797-2 EJC D-6
2.7. ARB Payment Default.
(a) After delivery by the Trustee to the Auction Agent of a notice pursuant
to Section 2.09(a)(vii) of the Supplemental Indenture that an ARB Payment Default shall have occurred,
the Auction Agent shall deliver a Notice of ARB Payment Default to the Broker -Dealers on the Business
Day following its receipt of the same by telecopy or other similar means.
(b) The Auction Agent shall deliver a copy of any notice received by it from
the Trustee to the effect that an ARB Payment Default has been cured to the Broker -Dealers on the
Business Day following its receipt of the same by telecopy or other similar means.
2.8. Broker -Dealers.
(a) If the Auction Agent is provided with a copy of a Broker -Dealer
Agreement, which has been manually signed, it shall enter into such Broker -Dealer Agreement with such
person.
(b) The Auction Agent may enter into a Broker -Dealer Agreement with any
other Person who requests to be selected to act as a Broker -Dealer. The Auction Agent shall enter into a
Broker -Dealer Agreement with each Broker -Dealer prior to the participation of any such Broker -Dealer in
any Auction; provided, however, that such Broker -Dealer Agreement may be effective with respect to an
Auction only if the Auction Agent shall have received a manually signed copy of such Broker -Dealer
Agreement at least seven days prior to such Auction.
(c) The Auction Agent shall terminate any Broker -Dealer Agreement as set
forth therein if so directed by the City.
2.9. Access to and Maintenance of Auction Records. The Auction Agent shall afford
to the Trustee, the 2003 Series A Credit Provider and the City, and their respective agents, independent
public accountants and counsel, access at reasonable times during normal business hours to review and
make extracts or copies (at no cost to the Auction Agent) of all books, records, documents and other
information concerning the conduct and results of Auctions, provided that any such agent, accountant, or
counsel shall furnish the Auction Agent with a letter from the Trustee or the City, as the case may be,
requesting that the Auction Agent afford such Person access. The Auction Agent shall not be responsible
or liable for any actions of the Trustee, City or their respective agents, accountants and counsel for
passing on confidential information as a result of access to such records and information. The Auction
Agent shall maintain records relating to any Auction for a period of two years after such Auction (unless
requested by the Trustee at the written direction of the City to maintain such records for such longer
period not in excess of four years, then for such longer period), and such records shall, in reasonable
detail, accurately and fairly reflect the actions taken by the Auction Agent hereunder. To the fullest
extent permitted by applicable law, the Trustee agrees to keep any information regarding the customers of
any Broker -Dealer received from the Auction Agent in connection with this Agreement or any Auction
confidential and shall not disclose such information or permit the disclosure of such information without
the prior written consent of the applicable Broker -Dealer to anyone except such agent, accountant or
counsel engaged to audit or review the results of Auctions as permitted by this Section. Any such agent,
accountant or counsel, before having access to such information, shall agree to keep such information
confidential and not to disclose such information or permit disclosure of such information without the
prior written consent of the applicable Broker -Dealer, except as may otherwise be required by law.
Section 3. Trustee's Disclaimer. The Trustee makes no representation as to the validity or adequacy
of this Agreement, the Broker -Dealer Agreements or the ARBs. The Trustee shall have no responsibility
for the Auction Agent or the Auction Agent's performance or conduct under this Agreement.
DOCSLA1:440092.2
42797-2 EJC D-7
Section 4. The Auction Agent.
4.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trustee hereunder
(provided, however, that the Trustee shall have no responsibility for the Auction Agent or the Auction
Agent's performance or conduct under this Agreement) and owes no fiduciary duties to any person
whatsoever.
(b) The Auction Agent undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be
read into this Agreement by means of the provisions of the Indenture or otherwise against the Auction
Agent.
(c) In the absence of bad faith or negligence on its part, the Auction Agent
shall not be liable for any action taken, suffered or omitted or for any error of judgment made by it in the
performance of its duties under this Agreement. The Auction Agent shall not be liable for any error of
judgment made in good faith unless the Auction Agent shall have been negligent in ascertaining the
pertinent facts.
(d) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control, including without limitation, acts of God;
earthquakes; fires; floods; wars; civil or military disturbances; sabotage; epidemics; riots; labor disputes;
acts of civil or military authority or governmental actions; it being understood that the Auction Agent
shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
4.2. Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely on and shall be fully protected
in acting or refraining from acting upon any communication authorized hereby and upon any written
instruction, notice, request, direction, consent, report, certificate, form or bond certificate or other
instrument, paper or document reasonably believed by it to be genuine. The Auction Agent shall not be
liable for acting upon any telephone communication authorized hereby which the Auction Agent believes
in good faith to have been given by the Trustee or by a Broker -Dealer or by their designated or appointed
agents or representatives. The Auction Agent may record telephone communications with the Trustee or
with the Broker -Dealers or both.
(b) The Auction Agent may consult with counsel of its choice, and the
advice of such counsel shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the performance of its duties
hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall be responsible for any material
misconduct or negligence on the part of any agent or attorney appointed by it hereunder.
4.3. Auction Agent's Disclaimer. The Auction Agent makes no representation as to
the validity or adequacy of this Agreement, the Broker -Dealer Agreements or the ARBs.
DOCSLA1:440092.2
42797-2 EJC D-8
4.4. Compensation, Remedies and Indemnification.
(a) On the first ARB Interest Payment Date and each ARB Interest Payment
Date immediately following an Auction Date, for the period just elapsed, the Auction Agent shall be
entitled to receive a fee for all services rendered by it under this Agreement and the Broker -Dealer
Agreements with respect to the Auction held on such Auction Date in an amount equal initially to the
product of (i) [0.85] basis points, multiplied by (ii) (A) in the case of the first ARB Interest Payment Date,
the aggregate principal amount of outstanding ARBs on the Conversion Date or (B) in the case of each
ARB Interest Payment Date immediately following an Auction Date, the aggregate principal amount of
outstanding ARBs at the close of business on the Regular Record Date immediately preceding such
Auction Date, multiplied by (iii) the number of days in such ARB Interest Period, divided by (iv) 360 (the
"Auction Agent Fee"). The Auction Agent Fee shall be payable solely out of amounts paid by the City in
accordance with Section 4.5(b) hereof. The rate at which the Auction Agent Fee accrues shall be such
that the Auction Agent receives as compensation for all services rendered by it under this Agreement and
the Broker -Dealer Agreements an amount comparable to that received by the Auction Agent and other
institutions performing similar functions for rendering such services and which at least reflects the actual
costs to the Auction Agent for rendering comparable services to others. The Auction Agent and the City
shall negotiate in good faith from time to time to determine the appropriate rate at which the Auction
Agent Fee accrues. Any change in the rate at which the Auction Agent Fee accrues shall be effective on
the Auction Date next succeeding such change.
(b) The City shall indemnify and hold harmless the Auction Agent for and
against any loss, liability or expense incurred without negligence or bad faith on the Auction Agent's part,
arising out of or in connection with its agency under this Agreement and the Broker -Dealer Agreements,
including the reasonable costs and expenses (including the reasonable fees and expenses of its counsel) of
defending itself and its directors, officers, agents, and employees against any such claim or liability in
connection with its exercise or performance of any of its duties hereunder and thereunder and of enforcing
this indemnification provision; provided that the City shall not indemnify the Auction Agent pursuant to
this subsection (b) for any fees and expenses incurred by the Auction Agent in the normal course of
performing its duties hereunder and under the Broker -Dealer Agreements.
4.5. Compensation of the Broker -Dealers.
(a) On the first ARB Interest Payment Date and each ARB Interest Payment
Date immediately following an Auction Date, the Broker -Dealers shall be entitled to receive a fee for all
services rendered by them under the Broker -Dealer Agreements with respect to the Auction held on such
Auction Date in an amount equal to the product of (i) [0.25] of 1% per annum, multiplied by (ii) (A) in
the case of the first ARB Interest Payment Date, the aggregate principal amount of outstanding ARBs on
the Conversion Date or (B) in the case of each ARB Interest Payment Date immediately following an
Auction Date, the aggregate principal amount of outstanding ARBs at the close of business on the
Regular Record Date immediately preceding such Auction Date, multiplied by (iii) the number of days in
such ARB Interest Period, divided by (iv) 360 (the "Broker -Dealer Fee"). The Broker -Dealer Fee shall be
payable solely by the City, in accordance with Section 4.5(b) hereof.
(b) On the first ARB Interest Payment Date and each ARB Interest Payment
Date immediately following an Auction Date, the Trustee shall pay to the Auction Agent from amounts
made available by the City an amount in cash equal to the Auction Agent Fee and the Broker -Dealer Fee
payable pursuant to Sections 4.4(a) and 4.5(a) hereof. The Auction Agent shall pay itself an amount
equal to the Auction Agent Fee out of such moneys, and pay the remainder of such moneys to the Broker -
Dealers in payment of the Broker -Dealer Fee as set forth in Section 2.5(b) of each Broker -Dealer
Agreement.
4.6. Resignation and Removal. The Auction Agent may resign and shall be subject to
removal, in each case as provided in Section 2.09(f) of the Supplemental Indenture.
DOCSLAI :440092.2
42797-2 EJC D-9
Section 5. Miscellaneous.
5.1 Term of Agreement.
(a) This Agreement shall terminate on the earlier of (i) the satisfaction and
discharge of the 2003 Series A Bonds in accordance with the Indenture or this Agreement and (ii) the date
on which this Agreement is terminated in accordance with this Section. The Trustee may terminate this
Agreement in accordance with Section 2.09(f) of the Supplemental Indenture. The Auction Agent may
terminate this Agreement upon written notice to the Trustee, the City, the 2003 Series A Credit Provider,
each Broker -Dealer and the Market Agent on the date specified in such notice, which date shall be no
earlier than 90 days after the date of delivery of such notice. Notwithstanding the foregoing, the
provisions of Section 2 hereof shall terminate upon the delivery of Bond certificates representing the
ARBs pursuant to Section 3.05 of the Master Indenture. Notwithstanding the foregoing, the Auction
Agent may terminate this Agreement if, after notifying the Trustee, the City and the Market Agent that it
has not received payment of any Auction Agent Fee due it in accordance with the terms hereof, the
Auction Agent does not receive such payment within 45 days following notice to the 2003 Series A
Credit Provider, during which time the 2003 Series A Credit Provider shall have the option (but not the
obligation) to cure such payment default, and during which time the auction procedures may not be
suspended. Any resignation or termination of the Auction Agent, other than as described in the
immediately preceding sentence, shall not become effective until a successor auction agent has been
appointed and such successor auction agent has accepted such position.
(b) Except as otherwise provided in this subsection (b), the respective rights
and duties of the Trustee and the Auction Agent under this Agreement shall cease upon termination of
this Agreement. The Trustee's obligations to the Auction Agent under Section 4.4 hereof and to the
Broker -Dealer under Section 4.5 hereof shall survive the termination of this Agreement. Upon
termination of this Agreement, the Auction Agent upon request shall promptly deliver to the Trustee
copies of all books and records maintained by it with respect to the ARBs in connection with its duties
hereunder.
(c) Any successor Auction Agent shall be approved in writing by the 2003
Series A Credit Provider.
5.2. Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures or Settlement Procedures and (ii)
communications in connection with Auctions (other than those expressly required to be in writing), all
notices, requests and other communications to any party hereunder shall be in writing (including facsimile
or similar writing) and shall be given to such party addressed to it at its address, or facsimile number set
below:
If to the Trustee, BNY Western Trust Company
addressed: c/o DB Services New Jersey, Inc.
100 Plaza One
Jersey City, NJ 07311
Attention: Corporate Trust & Agency Services Group
Telephone: (201) 593-6302
Facsimile: (201) 593-6528
DOCSLA1:440092.2
42797-2 EJC D-10
If to the City, addressed: City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Director of Utilities
Telephone: (323) 583-8811
Facsimile: (323) 826-1425
If to the Auction Agent,
addressed
If to 2003 Series A Credit
Provider:
Attention:
Telephone:
Facsimile:
Attention:
Telephone:
Facsimile:
or such other address, telephone or facsimile number as such party may hereafter specify for such purpose
by notice in writing to the other party. Each such notice, request or communication shall be effective
when delivered at the address specified herein. Communications shall be given on behalf of the Trustee
by an Authorized Trustee Representative and on behalf of the Auction Agent by an Authorized Officer.
5.3. Benefits. Nothing herein, express or implied, shall give to any person, other than
the Trustee, acting on behalf of the ARB Beneficial Owners, the 2003 Series A Credit Provider, the
Auction Agent and their respective successors and assigns, any benefit of any legal or equitable right,
remedy or claim hereunder.
5.4. Amendment; Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a
duly authorized representative of each of the parties hereto and consented to in writing by the City and the
2003 Series A Credit Provider.
(b) Failure of either party hereto to exercise any right or remedy hereunder
in the event of a breach hereof by the other party shall not constitute a waiver of any such right or remedy
with respect to any subsequent breach.
5.5. Successors and Assigns. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors and assigns of each of the Trustee and the
Auction Agent. This Agreement may not be assigned by either party hereto absent the prior written
consent of the other party and the 2003 Series A Credit Provider, which consents shall not be
unreasonably withheld.
5.6. Severability. If any clause, provision or section hereof shall be ruled invalid or
unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such clause,
provision or section shall not affect any of the remaining clauses, provisions or sections hereof.
DOCSLA1:440092.2
42797-2 EJC D-11
5.7. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
5.8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made and to be performed in
said state, without giving effect to principles of conflicts of law thereof.
5.9. Trustee. All privileges, rights and immunities given to the Trustee in the
Indenture are hereby extended to and applicable to the Trustee's obligations hereunder.
5.10. Effective Date. This Agreement shall become effective on
DOCSLA1:440092.2
42797-2 EJC D-12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
and delivered under seal by their proper and duly authorized officers as of the date first above written.
BNY WESTERN TRUST COMPANY, as Trustee
By:
Authorized Officer
as Auction Agent
Title:
DOCSLA1:440092.2
42797-2 EJC D-13
Exhibit A to
Auction Agent
Agreement
FORM OF BROKER -DEALER AGREEMENT
[see Exhibit E to Supplemental Indenture]
DOCSLA1:440092.2
42797-2 EJC D-I4
Exhibit B to
Auction Agent
Agreement
AUCTION AND SETTLEMENT PROCEDURES
[see Exhibit B to Supplemental Indenture]
DOCSLA1:440092.2
42797-2 EJC D- l 5
Exhibit C to
Auction Agent
Agreement
NOTICE OF FAILURE TO RECEIVE CERTIFICATE
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
NOTICE IS HEREBY GIVEN that a condition to changing the percentage used to
determine the All -Hold Rate, the Applicable Percentage used to determine the ARB Maximum Rate and
the percentage of the Index used to determine the Non -Payment Rate has not been met. The existing
percentages and Applicable Percentage will be used to determine the All -Hold Rate, the ARB Maximum
Rate and the Non -Payment Rate, as the case may be. The interest rate on the ARBs for the next
succeeding ARB Interest Period will be equal to the ARB Maximum Rate on the Auction Date.
Terms used herein have the meanings set forth in the Indenture relating to the above -
referenced issue.
as Auction Agent
LN
Title:
Date:
DOCSLA1:440092.2
42797-2 EX D-16
Exhibit D to
Auction Agent
Agreement
NOTICE OF FAILURE TO RECEIVE OPINION
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
NOTICE IS HEREBY GIVEN that a condition to changing the percentage used to
determine the All -Hold Rate, the Applicable Percentage used to determine the ARB Maximum Rate and
the percentage of the Index used to determine the Non -Payment Rate has not been met. The existing
percentages and Applicable Percentage will be used to determine the All -Hold Rate, the ARB Maximum
Rate and the Non -Payment Rate, as the case may be. The interest rate on the ARBs for the next
succeeding ARB Interest Period will be equal to the ARB Maximum Rate on the Auction Date.
Terms used herein have the meanings set forth in the Indenture relating to the above -
referenced issue.
, as Auction Agent
go
Title:
Date:
DOCSLA1:440092.2
42797-2 EJC D-17
Exhibit E to
Auction Agent
Agreement
NOTICE OF ARB PAYMENT DEFAULT
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
NOTICE IS HEREBY GIVEN that an ARB Payment Default has occurred and not been
cured. Determination of the interest rate on the ARBs pursuant to the Auction Procedures will be
suspended. The interest rate on the ARBs for each ARB Interest Period commencing after
will equal the Non -Payment Rate as it is determined by the Trustee on the
first day of such ARB Interest Period. All terms used herein and not otherwise defined shall have the
meanings given such terms in the Indenture of Trust, as supplemented by the First Supplemental
Indenture of Trust, each dated as of March 1, 2003, and each between the City of Vernon and BNY
Western Trust Company, as trustee.
as Auction Agent
Title:
Date:
DOCSLA1:440092.2
42797-2 EX D-18
Exhibit F to
Auction Agent
Agreement
LIST OF AUTHORIZED BROKER -DEALERS
DOCSLA1:440092.2
42797-2 EJC D-19
EXHIBIT E
FORM OF BROKER -DEALER AGREEMENT
This BROKER -DEALER AGREEMENT dated as of (the
"Agreement") by and between [Insert Name of Auction Agent] acting as auction agent (together with its
successors and assigns, the "Auction Agent") and [Insert Name of Broker -Dealer] (together with its
successor and assigns, hereinafter referred to as "[Insert Designation of Broker -Dealer]"),
WITNESSETH:
WHEREAS, the City of Vernon (the "City") has issued $ aggregate principal amount of its
Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series A (the "2003 Series A
Bonds") and has caused the 2003 Series A Bonds to be in an ARB Interest Rate Period (while in such
ARB Interest Rate Period, the 2003 Series A Bonds are referred to as the "ARBs") under that certain
Indenture of Trust (as from time to time in effect, the "Master Indenture"), as supplemented by that
certain First Supplemental Indenture of Trust (as from time to time in effect, the "Supplemental
Indenture" and together with the Master Indenture, the "Indenture"), each dated as of March 1, 2003, and
each between the City and the BNY Western Trust Company, as Trustee (the "Trustee"); and
WHEREAS, the Trustee has entered into that certain Auction Agent Agreement, dated as of
, with the Auction Agent with respect to the ARBs; and
WHEREAS, the Indenture provides that the interest rate with respect to the ARBs for
each ARB Interest Period after the initial ARB Interest Period shall, except under certain conditions,
equal the rate per annum that the Auction Agent advises results from implementation of the Auction
Procedures (the "Auction Rate").
WHEREAS, [Insert Designation of Broker -Dealer] is an Authorized Broker -Dealer listed
in the Auction Agent Agreement, and the Auction Agent is entering into this Agreement in connection
with the 2003 Series A Bonds pursuant to Section 2.8(a) of the Auction Agent Agreement.
WHEREAS, the Auction Procedures require the participation of one or more Broker -
Dealers.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
Auction Agent, as agent of the Trustee, and [Insert Name of the Broker -Dealer] agree as follows:
Section 1. Definitions and Rules of Construction.
1.1. Terms Defined by Reference. Capitalized terms used herein and not otherwise
defined shall have the meanings given such terms in the Indenture or the Auction Agent Agreement.
1.2. Terms Defined Herein. As used herein and in each Appendix hereto, the
following terms shall have the following meanings, unless the context otherwise requires:
"ARB Beneficial Owner" shall mean the Person who is the beneficial owner of ARB
according to the records of i) a Securities Depository while the ARBs are in book -entry form or ii) the
Trustee while the ARBs are not in book -entry form.
"Auction" shall have the meaning specified in Section 2.1 hereof.
DOCSLA1:440092.2
42797-2 EJC E-1
"Auction Agent Agreement" shall mean the Auction Agent Agreement dated as of
by and between the Trustee and the Auction Agent relating to the ARBs.
"Auction Procedures" shall mean the provisions that are set forth in Section 2 of Exhibit
B of the Auction Agent Agreement.
"Authorized Off cer" shall mean each Vice President, Assistant Vice President, Associate
and Assistant Treasurer of the Auction Agent assigned to the Group and every
other officer or employee of the Auction Agent designated as an "Authorized Officer" for purposes of this
Agreement in a written communication to [Insert Designation of Broker -Dealer].
"[Insert Name of Broker -Dealer Officer" shall mean each officer or employee of [Insert
Designation of Broker -Dealer] designated as a "[Insert Designation of Broker -Dealer] Officer" for
purposes of this Agreement in a written communication to the Auction Agent.
hereto.
"Notice of Failure to Deliver" shall mean a notice substantially in the form of Exhibit C
"Notice of Transfer shall mean a notice substantially in the form of Exhibit B hereto.
"Order Form" shall mean the form to be submitted by any Broker -Dealer on any Auction
Date in a form acceptable to the Auction Agent.
"Participant" shall mean a member of, or participant in, the Securities Depository.
"Settlement Procedures" shall mean the Settlement Procedures attached hereto as Exhibit
/:11
1.3. Rules of Construction. Unless the context or use indicates another or different
meaning or intent, the following rules shall apply to the construction of this Agreement:
(a) Words importing the singular number shall include the plural number
and vice versa.
(b) The captions and headings herein are solely for convenience of reference
and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.
(c) The words "hereof," "herein," "hereto," and other words of similar
import refer to this Agreement as a whole.
(d) All references herein to a particular time of day shall be to New York
City time.
Section 2. The Auction.
2.1. Auction Procedures and Settlement Procedures.
(a) On each Auction Date, the provisions of the Auction Procedures will be
followed by the Auction Agent for the purpose of determining the Applicable ARB Rate for the next
ARB Interest Period. Each periodic operation of such procedures is hereinafter referred to as an
"Auction."
(b) All of the provisions contained in the Auction Procedures and the
Settlement Procedures are incorporated herein by reference in their entirety and shall be deemed to be a
part of this Agreement to the same extent as if such provisions were fully set forth herein.
DOCSLAI :440092.2
42797-2 EJC E-2
(c) [Insert Designation of Broker -Dealer] agrees to act as, and assumes the
obligations of and limitations and restrictions placed upon, a Broker -Dealer under the Indenture and as
otherwise set forth in this Agreement.
(d) [Insert Designation of Broker -Dealer] and other Broker -Dealers may
participate in Auctions for their own accounts. The Auction Agent shall have no duty or liability with
respect to monitoring or enforcing the requirements of this subsection (d).
2.2. Preparation for Each Auction.
(a) Not later than 9:30 a.m., New York City time, on each Auction Date for
the ARBs, the Auction Agent shall advise [Insert Designation of Broker -Dealer] by telephone of the All -
Hold Rate, ARB Maximum Rate and the "AA Commercial Paper Rate" or the Index, as the case may be,
used in determining such rates.
(b) In the event the Auction Date for any Auction shall be changed after the
Auction Agent has given notice of such Auction Date pursuant to clause (vii) of paragraph (a) of the
Settlement Procedures, the Auction Agent, by such means as the Auction Agent deems practicable, shall
give notice of such change to [Insert Designation of Broker -Dealer] not later than the earlier of 9:15 a.m.,
New York City time, on the day prior to the new Auction Date and 9:15 a.m., New York City time, on the
old Auction Date. Thereafter, [Insert Designation of Broker -Dealer] shall use its best efforts to promptly
notify its customers who are Existing Owners of such change in the Auction Date.
(c) The Auction Agent may, but shall have no duty to, request, from time to
time, [Insert Designation of Broker -Dealer] to provide it with a list of the respective customers [Insert
Designation of Broker -Dealer] believes are Existing Owners and the aggregate amount held by [Insert
Designation of Broker -Dealer]. The Broker -Dealer shall comply with any such request, and the Auction
Agent shall keep confidential any such information, including information received as to the identity of
Bidders in any Auction, and shall not disclose any such information so provided to any person other than
the Trustee, the City and [Insert Designation of Broker -Dealer], provided that the Auction Agent reserves
the right to disclose any such information if (i) it is ordered to do so by a court or regulatory judicial or
quasi-judicial agency or authority, or (ii) it is advised by its counsel that its failure to do so would be
unlawful or would impose upon it any actual or potential loss, claim, damage liability, or expense for
which it has not received indemnity satisfactory to it.
2.3. Auction Schedule. The Auction Agent shall conduct Auctions in accordance
with the schedule set forth below. Such schedule may be changed by the Auction Agent with the consent
of the Trustee and the Market Agent, which consent shall not be unreasonably withheld or delayed. The
Auction Agent shall give notice pursuant to Section 4.3 hereof of any such change to each Broker -Dealer.
Such notice shall be given prior to the first Auction Date on which any such change shall be effective.
By 9:00 a.m. The Market Agent makes available to the Auction Agent the Index.
By 9:30 a.m. The Auction Agent advises the Trustee and [Insert Designation of
Broker -Dealers of the ARB Maximum Rate, the All -Hold Rate and the
"AA Commercial Paper Rate" or the Index, as the case may be, used in
determining such ARB Maximum Rate and All -Hold Rate, as set forth in
Section 2.2(a) hereof.
9:30 a.m.-1:00 p.m. The Auction Agent assembles information communicated to it by
Broker -Dealers as provided in Section 2(b)(i) of the Auction Procedures.
The Submission Deadline is 1:00 p.m., New York City time.
DOCSLA1:440092.2
42797-2 EJC E-3
Not earlier than
1:00 P.M. The Auction Agent makes the determination pursuant to Section 2(c)(i)
of the Auction Procedures.
By approximately
3:00 p.m. The Auction Agent advises the Trustee and [Insert Designation of
Broker-Dealer]s of the Auction Rate for the next ARB Interest Period
and the results of the Auction as provided in Section 2(c)(ii) of the
Auction Procedures. Submitted Bids and Submitted Sell Orders are
accepted and rejected in whole or in part and principal amount of ARBs
is allocated as provided in Section 2(d) of the Auction Procedures. The
Auction Agent gives notice of Auction results as set forth in paragraph
(a) of the Settlement Procedures.
(a) [Insert Designation of Broker -Dealer] shall submit Orders to the Auction
Agent pursuant to an Order Form. [Insert Designation of Broker -Dealer] shall submit separate Orders to
the Auction Agent for each Potential Owner or Existing Owner on whose behalf [Insert Designation of
Broker -Dealer] is submitting an Order and shall not net or aggregate the Orders of different Potential
Owners or Existing Owners on whose behalf [Insert Designation of Broker -Dealer] is submitting Orders.
(b) [Insert Designation of Broker -Dealer] shall deliver to the Auction Agent
(i) a Notice of Transfer in writing of any transfer of ARB made through [Insert Designation of Broker -
Dealer] by an Existing Owner to another person other than pursuant to an Auction, and (ii) a Notice of a
Failure to Deliver in writing of the failure of any ARB to be transferred to or by any person that
purchased or sold ARB through [Insert Designation of Broker -Dealer] pursuant to an Auction. The
Auction Agent is not required to accept any notice delivered pursuant to the terms of the foregoing
sentence with respect to an Auction unless it is received by the Auction Agent by 3:00 p.m., New York
City time, on the Business Day next preceding the applicable Auction Date.
(c) [Insert Designation of Broker -Dealer] and other Broker -Dealers may
submit Orders in Auctions for their own accounts; provided, however, that any Broker -Dealer that is an
affiliate of the City must submit at the next Auction therefor a Sell Order covering all ARB held for its
own account. The Auction Agent shall have no duty or liability with respect to monitoring or enforcing
the requirements of this subsection (c).
(d) [Insert Designation of Broker -Dealer] agrees to handle its customers'
Orders in accordance with its duties under applicable securities laws and rules.
2.4. Notices.
(a) On each Auction Date, the Auction Agent shall notify [Insert
Designation of Broker -Dealer] by telephone of the results of the Auction as set forth in paragraph (a) of
the Settlement Procedures. The Auction Agent shall by 10:30 a.m., New York City time, on the Business
Day next succeeding such Auction Date if previously requested by [Insert Designation of Broker -Dealer]
notify [Insert Designation of Broker -Dealer] in writing of the disposition of all Orders submitted by
[Insert Designation of Broker -Dealer] in the Auction held on such Auction Date.
(b) [Insert Designation of Broker -Dealer] shall notify each Existing Owner
or Potential Owner on whose behalf [Insert Designation of Broker -Dealer] has submitted an Order as set
forth in paragraph (b) of the Settlement Procedures and take such other action as is required by [Insert
Designation of Broker -Dealer] pursuant to the Settlement Procedures.
DOCSLA1:440092.2
42797-2 EJC E-4
(c) The Auction Agent shall deliver to [Insert Designation of Broker -Dealer]
all notices and certificates which the Auction Agent is required to deliver to [Insert Designation of
Broker -Dealer] pursuant to Section 2 of the Auction Agent Agreement after receipt of such notices and
certificates at the times and in the manner set forth in the Auction Agent Agreement.
2.5. Broker -Dealer Fee to Be Paid to [Insert Designation of Broker -Dealer]. On the
first ARB Interest Payment Date and each ARB Interest Payment Date immediately following an Auction
Date, the Auction Agent shall pay to [Insert Designation of Broker -Dealer] from moneys received from
the Trustee pursuant to Section 4.5(b) of the Auction Agent Agreement an amount equal to the product of
(i) [0.25] of 1% per annum, multiplied by (ii) (A) in the case of the first ARB Interest Payment Date, the
aggregate principal amount of outstanding ARBs on the Closing Date or (B) in the case of each ARB
Interest Payment Date immediately following an Auction Date, for the period just elapsed, the sum of (x)
the aggregate principal amount of the ARBs placed by [Insert Designation of Broker -Dealer] in such
Auction that were (1) the subject of Submitted Bids of Existing Owners submitted by [Insert Designation
of Broker -Dealer] and continued to be held as a result of such submission and (2) the subject of Submitted
Bids of Potential Owners submitted by [Insert Designation of Broker -Dealer] and purchased as a result of
such submission and (y) the aggregate principal amount of the ARBs subject to valid Hold Orders
(determined in accordance with the Indenture) that were acquired by such Existing Owners through
[Insert Designation of Broker -Dealer], or (C) if an Auction was not held on such Auction Date, the
aggregate principal amount of the ARBs that were acquired by Existing Owners through [Insert
Designation of Broker -Dealer], multiplied by (iii) the number of days in such ARB Interest Period
divided by (iv) 360. For purposes of subclauses (ii)(B)(x)(1) and (ii)(B)(y) of the foregoing sentence, if
any Existing Owner who acquired ARBs through [Insert Designation of Broker -Dealer] transfers those
ARBs to another person other than pursuant to an Auction, then [Insert Designation of Broker -Dealer]
shall continue to be the Broker -Dealer for such ARBs so transferred; provided, however, that if the
transfer was effected by, or if the transferee is a Broker -Dealer other than [Insert Designation of Broker -
Dealer], then such Broker -Dealer shall be the Broker -Dealer for such ARBs.
2.6. Settlement.
(a) If any Existing Owner on whose behalf [Insert Designation of Broker -
Dealer] has submitted a Bid or Sell Order for ARB that was accepted in whole or in part fails to instruct
its Participant to deliver the ARBs subject to such Bid or Sell Order against payment therefor, [Insert
Designation of Broker -Dealer] shall instruct such Participant to deliver such ARB against payment
therefor and [Insert Designation of Broker -Dealer] may deliver to the Potential Owner on whose behalf
[Insert Designation of Broker -Dealer] submitted a Bid that was accepted in whole or in part, a principal
amount of the ARBs that is less than the principal amount of the ARBs specified in such Bid to be
purchased by such Potential Owner. Notwithstanding the foregoing terms of this Section, any delivery or
nondelivery of ARBs which represents any departure from the results of an Auction, as determined by the
Auction Agent, shall be of no effect unless and until the Auction Agent shall have been notified of such
delivery or non -delivery in accordance with the terms of Section 2.3(b) hereof. The Auction Agent shall
have no duty or liability with respect to enforcement of this subsection (a).
(b) None of the Auction Agent, the Trustee, [Insert Designation of Broker
Dealer] or the City shall have any responsibility or liability with respect to the failure of an Existing
Owner, a Potential Owner or its respective Participant to deliver ARBs or to pay for ARBs sold or
purchased pursuant to the Auction Procedures or otherwise.
Section 3. The Auction Agent.
3.1. Duties and Responsibilities.
(a) The Auction Agent is acting solely as agent for the Trustee hereunder
and owes no fiduciary duties to any other person by reason of this Agreement.
DOCSLA1:440092.2
42797-2 EJC E-5
(b) The Auction Agent undertakes hereunder to perform such duties and
only such duties as are specifically set forth in the Auction Agent Agreement against the Auction Agent.
(c) In the absence of bad faith or gross negligence on its part, the Auction
Agent shall not be liable for any action taken, suffered or omitted or for any error of judgment made by it
in the performance of its duties under this Agreement. The Auction Agent shall not be liable for any error
of judgment made in good faith unless the Auction Agent shall have been grossly negligent in
ascertaining (or failing to ascertain) the pertinent facts.
3.2. Rights of the Auction Agent.
(a) The Auction Agent may conclusively rely and shall be fully protected in
acting or refraining from acting upon any communication authorized by this Agreement and upon any
written instruction, notice, request, direction, consent, report, certificate or other instrument, paper,
document or communication reasonably believed by it to be genuine. The Auction Agent shall not be
liable for acting or refraining from acting upon any telephone communication authorized by this
Agreement which the Auction Agent believes in good faith to have been given by the Trustee or by a
Broker -Dealer. The Auction Agent may record telephone communications with [Insert Designation of
Broker -Dealer].
(b) The Auction Agent may consult with counsel of its own choice, and the
advice of such counsel shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(c) The Auction Agent shall not be required to advance, expend or risk its
own funds or otherwise incur or become exposed to financial liability in the performance of its duties
hereunder.
(d) The Auction Agent may perform its duties and exercise its rights
hereunder either directly or by or through agents or attorneys and shall be responsible for any material
willful misconduct or gross negligence on the part of any agent or attorney appointed by it hereunder.
(e) The Auction Agent shall not be responsible or liable for any failure or
delay in the performance of its obligations hereunder arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including without limitation, acts of God; earthquakes; fires;
floods; wars; civil or military disturbances; sabotage; epidemics; riots; labor disputes; acts of civil or
military authority or governmental actions; it being understood that the Auction Agent shall use
reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
Section 4. Furnishing of Offering Materials.
(a) The City agrees to furnish, or cause to be furnished, [Insert Designation
of Broker -Dealer] with as many copies as [Insert Designation of Broker -Dealer] may reasonably request
of the Official Statement, dated , relating to the ARBs (the "Original Official Statement"),
as the same may be supplemented or amended from time to time, including the replacement of such
Official Statement with a separate reoffering memorandum or other disclosure document relating to the
ARBs (the Original Official Statement, as so supplemented and amended, and any such replacement
reoffering memorandum or other disclosure document being referred to herein as the "Official
Statement"), and such other information with respect to the City, the Indenture and the ARBs, as [Insert
Designation of Broker -Dealer] shall reasonably request from time to time.
DOCSLA1:440092.2
42797-2 EJC E-6
(b) If, at any time during the term of this Agreement, any event or condition
known to the City relating to or affecting the City, the Indenture, the ARBs, or the documents or
transactions contemplated thereby, shall occur which in the reasonable judgment of the City, might affect
the correctness or completeness of any representation or warranty of the City contained in this Agreement
or any statement of a material fact contained in the Official Statement, as it shall have been supplemented
or amended with the information furnished from time to time pursuant to this Section 4, or which in the
reasonable judgment of the City, might result in the Official Statement, as so supplemented or amended,
containing any untrue, incorrect or misleading statement of a material fact or omitting to state a material
fact necessary in order to make the statements made therein, in the light of the circumstances under which
they were made, not misleading, (i) the City will promptly notify [Insert Designation of Broker -Dealer] of
the circumstances and details of such event, and (ii) if, in the opinion of [Insert Designation of Broker -
Dealer] or the City, such event or condition requires the preparation and publication of an amendment or
supplement to the Official Statement, the City, at its expense, will promptly prepare or cause to be
prepared an appropriate amendment or supplement thereto so that the statements in the Official Statement
as so amended or supplemented will not contain any untrue, incorrect or misleading statement of a
material fact or omit to state a material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading, in a form and manner approved
by [Insert Designation of Broker -Dealer] and the City.
(c) The City shall prepare, at its sole expense, any disclosure documents that
in the reasonable opinion of [Insert Designation of Broker -Dealer] and the City are necessary or desirable.
Such disclosure documents shall be in form and substance acceptable to [Insert Designation of Broker -
Dealer] and its counsel, if any. The City and [Insert Designation of Broker -Dealer] agree to cooperate
fully in the preparation of any such disclosure documents.
Section 5. Miscellaneous.
5.1. Termination. Any party may terminate this Agreement at any time upon five (5)
days' prior. notice to the other party. The Broker -Dealer may be removed as provided by Section 3A07(b)
of the Indenture.
5.2. Participant. [Insert Designation of Broker -Dealer] is, and shall remain for the
term of this Agreement, a member of, or Participant in, the Securities Depository (or an affiliate of such a
member or Participant).
5.3. Communications. Except for (i) communications authorized to be made by
telephone pursuant to this Agreement or the Auction Procedures and (ii) communications in connection
with the Auctions (other than those expressly required to be in writing), all notices, requests and other
communications to any party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party, addressed to it, at its address or facsimile number set forth below:
If to [Insert Designation of Broker -Dealer],
addressed:
Attention:
Telephone:
Facsimile:
DOCSLA1:440092.2
42797-2 EJC E-7
If to the Auction Agent, addressed:
Attention:
Telephone:
Facsimile:
If to the Trustee, addressed: BNY Western Trust Company
c/o DB Services New Jersey, Inc.
100 Plaza One
Jersey City, New Jersey 07311
Attention: Corporate Trust & Agency Services
(Municipal Group)
Telephone: (201) 593-6302
Facsimile: (201) 593-6528
If to the City, addressed: City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Director of Utilities
Telephone: (323) 583-8811
Facsimile: (323) 826-1425
or such other address or facsimile number as such party may hereafter specify for such purpose by notice
to the other party. Each such notice, request or communication shall be effective when delivered at the
address specified herein. Communications shall be given on behalf of [Insert Designation of Broker -
Dealer] by a [Insert Designation of Broker -Dealer] Officer and on behalf of the Auction Agent by an
Authorized Officer. [Insert Designation of Broker -Dealer] may record telephone communications with
the Auction Agent.
5.4. Benefits. Nothing in this Agreement, express or implied, shall give to any
person, other than the Auction Agent, [Insert Designation of Broker -Dealer] and their respective
successors and assigns, any benefit of any legal or equitable right, remedy or claim under this Agreement.
5.5. Amendment: Waiver.
(a) This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by a written instrument signed by a
duly authorized representative of each of the parties hereto.
(b) Failure of either party to this Agreement to exercise any right or remedy
hereunder in the event of a breach of this Agreement by the other party shall not constitute a waiver of
any such right or remedy with respect to any subsequent breach.
5.6. Successors and Assigns. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the respective successors and permitted assigns of each of [Insert
Designation of Broker -Dealer] and the Auction Agent.
5.7. Severability. If any clause, provision or section of this Agreement shall be ruled
invalid or unenforceable by any court of competent jurisdiction, the invalidity or unenforceability of such
clause, provision or section shall not affect any remaining clause, provision or sections hereof.
DOCSLA1:440092.2
42797-2 FdC B-8
5.8. Execution in Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the same
instrument.
5.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made and to be performed in
said State, without giving effect to principles of conflicts of law thereof.
DOCSLA1:440092.2
42797-2 EJC E-9
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed
and delivered under seal by their proper and duly authorized officer as of the date first above written.
[Insert Name of Auction Agent], as Auction Agent
By:
Name:
Title:
[Insert Name of Broker -Dealer], as Broker -Dealer
By:
Name:
Title:
DOCSLA1:440092.2
42797-2 EJC E-1 U
Exhibit A to
Broker -Dealer
Agreement
SETTLEMENT PROCEDURES
Capitalized terms used herein shall have the meanings given such terms in the Indenture.
(a) Not later than 3:00 p.m., New York City time, on each Auction Date, the Auction
Agent shall notify by telephone each Broker -Dealer that participated in the Auction held on such Auction
Date and submitted an Order on behalf of an Existing Owner or Potential Owner of:
(i) the Auction Rate fixed for the next ARB Interest Period;
(ii) whether there were Sufficient Clearing Bids in such Auction;
(iii) if such Broker -Dealer (a "Seller's Broker -Dealer") submitted a Bid or a
Sell Order on behalf of an Existing Owner, whether such Bid or Sell Order was accepted or rejected, in
whole or in part, and the principal amount of ARBs, if any, to be sold by such Existing Owner;
(iv) if such Broker -Dealer (a "Buyer's Broker -Dealer") submitted a Bid on
behalf of a Potential Owner, whether such Bid was accepted or rejected, in whole or in part, and the
principal amount of ARBs, if any, to be purchased by such Potential Owner;
(v) if the aggregate amount of ARB to be sold by all Existing Owners on
whose behalf such Broker -Dealer submitted a Bid or a Sell Order exceeds the aggregate principal amount
of ARBs to be purchased by all Potential Owners on whose behalf such Broker -Dealer submitted a Bid,
the name or names of one or more Buyer's Broker -Dealers (and the name of the Participant, if any, of
each such Buyer's Broker -Dealer) acting for one or more purchasers of such excess principal amount of
ARBs and the principal amount of ARBs to be purchased from one or more Existing Owners on whose
behalf such Broker -Dealer acted by one or more Potential Owners on whose behalf each of such Buyer's
Broker -Dealers acted;
(vi) if the principal amount of ARBs to be purchased by all Potential Owners
on whose behalf such Broker -Dealer submitted a Bid exceeds the amount of ARB to be sold by all
Existing Owners on whose behalf such Broker -Dealer submitted a Bid or a Sell Order, the name or names
of one or more Seller's Broker -Dealers (and the name of the Participant, if any, of each such Seller's
Broker -Dealer) acting for one or more sellers of such excess principal amount of ARBs and the principal
amount of ARBs to be sold to one or more Potential Owners on whose behalf such Broker -Dealer acted
by one or more Existing Owners on whose behalf each of such Seller's Broker -Dealers acted; and
(vii) the Auction Date for the next succeeding Auction.
(b) On each Auction Date, each Broker -Dealer that submitted an Order on behalf of
any Existing Owner or Potential Owner shall:
(i) advise each Existing Owner and Potential Owner on whose behalf such
Broker -Dealer submitted a Bid or Sell Order in the Auction on such Auction Date whether such Bid or
Sell Order was accepted or rejected, in whole or in part;
(ii) in the case of a Broker -Dealer that is a Buyer's Broker -Dealer, advise
each Potential Owner on whose behalf such Broker -Dealer submitted a Bid that was accepted, in whole or
in part, to instruct such Potential Owner's Participant to pay to such Broker -Dealer (or its Participant)
through the Securities Depository the amount necessary to purchase the principal amount of ARBs to be
purchased pursuant to such Bid against receipt of such ARB;
DOCSLA1:440092.2
42797-2 EJC E-11
(iii) in the case of a Broker -Dealer that is a Seller's Broker -Dealer, instruct
each Existing Owner on whose behalf such Broker -Dealer submitted a Sell Order that was accepted, in
whole or in part, or a Bid that was accepted, in whole or in part, to instruct such Existing Owner's
Participant to deliver to such Broker -Dealer (or its Participant) through the Securities Depository the
principal amount of ARBs to be sold pursuant to such Order against payment therefor;
(iv) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order and each Potential Owner on whose behalf such Broker -Dealer submitted a Bid of the
Auction Rate for the next ARB Interest Period;
(v) advise each Existing Owner on whose behalf such Broker -Dealer
submitted an Order of the next Auction Date; and
(vi) advise each Potential Owner on whose behalf such Broker -Dealer
submitted a Bid that was accepted, in whole or in part, of the next Auction Date.
(c) On the basis of the information provided to it pursuant to paragraph (a) above,
each Broker -Dealer that submitted a Bid or Sell Order in an Auction is required to allocate any funds
received by it in connection with such Auction pursuant to paragraph (b)(ii) above, and any ARB received
by it in connection with such Auction pursuant to paragraph (b)(iii) above among the Potential Owners, if
any, on whose behalf such Broker -Dealer submitted Bids, the Existing Owners, if any on whose behalf
such Broker -Dealer submitted Bids or Sell Orders in such Auction, and any Broker -Dealers identified to it
by the Auction Agent following such Auction pursuant to paragraph (a)(v) or (a)(vi) above.
(d) On each Auction Date:
(i) each Potential Owner and Existing Owner with an Order in the Auction
on such Auction Date shall instruct its Participant as provided in (b)(ii) or (b)(iii) above, as the case may
be;
(ii) each Seller's Broker -Dealer that is not a Participant of the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to the Participant of
the Existing Owner delivering ARB to such Broker -Dealer following such Auction pursuant to (b)(iii)
above the amount necessary to purchase such ARB against receipt of such ARB, and (B) deliver such
ARB through the Securities Depository to a Buyer's Broker -Dealer (or its Participant) identified to such
Seller's Broker -Dealer pursuant to (a)(v) above against payment therefor; and
(iii) each Buyer's Broker -Dealer that is not an Participant in the Securities
Depository shall instruct its Participant to (A) pay through the Securities Depository to Seller's Broker -
Dealer (or its Participant) identified following such Auction pursuant to (a)(vi) above the amount
necessary to purchase the ARBs to be purchased pursuant to (b)(ii) above against receipt of such ARB,
and (B) deliver such ARB through the Securities Depository to the Participant of the purchaser thereof
against payment therefor.
(e) On the Business Day following each Auction Date:
(i) each Participant for a Bidder in the Auction on such Auction Date
referred to in (d)(i) above shall instruct the Securities Depository to execute the transactions described
under (b)(ii) or (b)(iii) above for such Auction, and the Securities Depository shall execute such
transactions;
(ii) each Seller's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in (d)(ii) above for such Auction, and the Securities
Depository shall execute such transactions; and
DOCSLAI :440092.2
42797-2 EJC E-12
(iii) each Buyer's Broker -Dealer or its Participant shall instruct the Securities
Depository to execute the transactions described in (d)(iii) above for such Auction, and the Securities
Depository shall execute such transactions.
(f) If an Existing Owner selling ARB in an Auction fails to deliver such ARB (by
authorized book -entry), a Broker -Dealer may deliver to the Potential Owner on behalf of which it
submitted a Bid that was accepted a principal amount of ARBs that is less than the principal amount of
ARBs that otherwise was to be purchased by such Potential Owner. In such event, the principal amount
of ARBs to be so delivered shall be determined solely by such Broker -Dealer. Delivery of such lesser
principal amount of ARBs shall constitute good delivery. Notwithstanding the foregoing terms of this
paragraph (f), any delivery or nondelivery of ARB which shall represent any departure from the results of
an Auction, as determined by the Auction Agent, shall be of no effect unless and until the Auction Agent
shall have been notified of such delivery or nondelivery in accordance with the provisions of the Auction
Agent Agreement and the Broker -Dealer Agreements.
DOCSLA1:440092.2
42797-2 EJC E-13
NOTICE OF TRANSFER
(To be used only for transfers made other than pursuant to an Auction)
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
We are (check one)
- the Existing Owner named below; or
- the Broker -Dealer for such Existing Owner; or
_ the Participant for such Existing Owner.
We hereby notify you that such Existing Owner has transferred $
units of $25,000) of ARBs to
(Name of Existing Owner)
(Name of Broker -Dealer)
(Name of Participant)
Name:
Title:
Exhibit B to
Broker -Dealer
Agreement
(must be in
DOCSLA1:440092.2
42797-2 EJC E-14
NOTICE OF FAILURE TO DELIVER
(To be used only for failure to deliver ARBs sold pursuant to an Auction)
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
We are (check one)
Exhibit C to
Broker -Dealer
Agreement
a Broker -Dealer for (the "Purchaser"), which purchased
$ (must be in units of $25,000) of the ARBs in the Auction held on
from the sale of such ARBs.
a Broker -Dealer for (the "Seller"), which sold
$ (must be in units of $25,000) of the ARBs in the Auction held on
We hereby notify you that (check one)
the Seller failed to deliver such ARBs to the Purchaser.
the Purchaser failed to make payment to the Seller upon delivery of such ARBs.
(Name of Broker -Dealer)
I0
Name:
Title:
DOCSLA1:440092.2
42797 2 EX E-15
EXHIBIT F
FORM OF MARKET AGENT AGREEMENT
DOCSLA1:440092.2 F- I
42797-2 EJC
MARKET AGENT AGREEMENT
This MARKET AGENT AGREEMENT, dated as of (the "Agreement"), by
and between BNY Western Trust Company, as trustee (the "Trustee") under that certain Indenture of
Trust (as from time to time in effect, the "Master Indenture"), as amended by that certain First
Supplemental Indenture of Trust (as from time to time in effect, the "Supplemental Indenture" and
together with the Master Indenture, the "Indenture"), each dated as of March 1, 2003, and each between
the City of Vernon and the Trustee and [Insert Name of Marker Agent] (in its role as market agent
hereunder, the "Market Agent"),
WITNESSETH:
WHEREAS, the City has issued $ aggregate principal amount of its Malburg Generating
Station Project Electric System Revenue Bonds, 2003 Series A (the "2003 Series A Bonds") and has
caused the 2003 Series A Bonds to be in an ARB Interest Rate Period (while in such ARB Interest Rate
Period, the 2003 Series ABonds are referred to as the "ARBs");
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the adequacy and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the Trustee and the Market Agent agree as follows:
Section 1. Definitions. Capitalized terms used herein and not otherwise defined
shall have the respective meanings given such terms in the Indenture.
Section 2. Appointment of Market Agent. As directed in Section 2.09 of the
Supplemental Indenture, the Trustee hereby appoints [Insert Name of Market Agent], as Market Agent
with respect to any ARB to be executed and delivered under and pursuant to the Indenture. The Market
Agent hereby accepts such appointment for the purpose of determining the Index and adjusting the
percentage used in determining the All -Hold Rate, the Applicable Percentage used in determining the
ARB Maximum Rate and the percentage of the Index used in determining the Non -Payment Rate, if any
such adjustment is necessary to reflect any Change of Tax Law or change in market convention such that
ARB paying the ARB Maximum Rate, ARB paying the All -Hold Rate and ARB paying the Non -Payment
Rate in each case shall have substantially equal market values before and after such Change of Tax Law
or change in market convention, upon the terms and conditions set forth herein.
Section 3. Determination of the Index.
(a) On the Business Day immediately preceding the first day of each ARB Interest
Period, other than an ARB Interest Period commencing after (i) the occurrence and during the
continuance of an ARB Payment Default or (ii) ownership of the ARBs is no longer maintained in book -
entry form by a Securities Depository, the Market Agent shall determine the Index and make the Index
available to the Auction Agent.
(b) On the first day of each ARB Interest Period commencing after (i) the occurrence
of an ARB Payment Default or (ii) ownership of the ARBs is no longer maintained in book -entry form by
a Securities Depository to and including the ARB Interest Period, if any, during which such ARB
Payment Default is cured in accordance with the Indenture, or ownership of the ARBs becomes
maintained in book -entry form by a Securities Depository, as the case may be, the Market Agent shall
determine the Index and make the Index available to the Trustee.
DOCSLA1:440092.2 F-2
42797-2 EJC
Section 4. Changes in Percentages Used to Determine the ARB Maximum Rate, the
All -Hold Rate and the Non -Payment Rate. The Market Agent agrees that it will comply with the
provisions set forth in Section 2.09(d) of the Supplemental Indenture with respect to its duties as Market
Agent in connection with adjusting the percentage used in determining the All -Hold Rate, the Applicable
Percentage used in determining the ARB Maximum Rate and the percentage of the Index used in
determining the Non -Payment Rate, including the preparation and delivery of such notices at the times
and containing such information as referred to therein. Any notices delivered in writing pursuant to this
Section 4 shall be substantially in the form of Exhibit B or Exhibit C, as the case may be, hereto.
Section 5. Changes in Statutory Corporate Tax Rate.
(a) The Market Agent agrees that it will notify the Trustee and the Auction Agent in
writing in the event of a change in the Statutory Corporate Tax Rate.
(b) Notices delivered pursuant to this Section 5 shall be substantially in the form of
Exhibit A hereto.
Section 6. Other Duties. The Market Agent agrees to perform such other duties in
accordance with the Indenture as are set forth therein to be performed by the Market Agent.
Section 7. Fees. The Market Agent agrees that it will receive no fees for its
services as Market Agent under this Agreement except as provided in an amendment to this Agreement in
accordance with Section 12(a) hereof approved in writing by the City and that any such fees shall be
payable solely from the City.
Section 8. Rights and Liabilities of the Market Agent.
(a) The Market Agent shall incur no liability for, or in respect of, any action taken or
omitted to be taken, or suffered by it in reliance upon the Indenture, any ARB, on any written instruction,
notice, request, direction, certificate, consent, report, affidavit, statement, order or other instrument, paper,
document or communication reasonably believed by it in good faith to be genuine and on which it
reasonably believed it is entitled to reply. Any instruction, notice, request, direction, certificate, consent,
report, affidavit, statement, order or other instrument, paper, document or communication from the
Trustee or given by it and sent, delivered or directed to the Market Agent under, pursuant to, or as
permitted by, any provision of this Agreement shall be sufficient for purposes of this Agreement if in
writing and signed by any officer or authorized agent of the Trustee. In the absence of bad faith or
negligence on its part, neither the Market Agent nor its officers or employees shall be liable for any action
taken, suffered or omitted or for any error of judgment made in the performance of its duties under this
Agreement. The Market Agent shall not be liable for any error of judgment made in good faith unless the
Market Agent shall have been negligent in ascertaining (or failing to ascertain) the pertinent facts. No
party shall be liable for any default resulting from force majeure, which shall be deemed to include any
circumstances beyond the reasonable control of the party affected. No action, regardless of form, arising
out of or pertaining to the role of the Market Agent hereunder may be brought by any party hereto or
beneficiary hereof more than twelve (12) months after the cause of action has occurred.
(b) In acting under this Agreement, and in connection with the ARBs, the Market
Agent is acting solely as agent of the Trustee (provided, however, that the Trustee shall have no
responsibility for the Market Agent or the Market Agent's performance or conduct hereunder) and does
not assume any obligation or relationship of agency or trust for or with any of the ARB Beneficial
Owners.
DOCSLA1:440092.2 F-3
42797-2 EJC
(c) The Market Agent may consult with counsel satisfactory to it, and the advice of
such counsel shall be full and complete authorization and protection in respect of any action taken or
omitted to be taken or suffered by it hereunder in good faith and in accordance with the advice of such
counsel.
(d) The Market Agent, its directors, officers and employees may become the owner
of, or acquire an interest in, any ARB, with the same rights that such Market Agent, director, officer or
employee would have if the Market Agent were not Market Agent hereunder, and the Market Agent, its
directors, officers and employees may engage or be interested in any financial or other transaction with
the City and may act on, or as depository, paying agent or agent for, any committee or body of holders of
ARB or other obligations of the City as freely as if the Market Agent were not a Market Agent hereunder.
(e) The Market Agent shall not incur any liability with respect to the validity of any
of the ARBs.
Section 9. Duties of the Market Agent. The Market Agent shall be obligated only
to perform such duties as are specifically set forth herein and no other duties or obligations on the part of
the Market Agent, in its capacity as such, shall be implied by this Agreement.
Section 10. Termination. This Agreement shall terminate upon the final payment on
account of the ARBs. The Market Agent may resign and may be discharged as provided for in Section
2.09 of the Supplemental Indenture. Any successor Market Agent shall be acceptable to the 2003 Series
A Credit Provider.
Section 11. Communications. Except for communications authorized to be made by
telephone by this Agreement, all notices, requests and other communications to the City, the Market
Agent, the Auction Agent or the Trustee shall be in writing (including facsimile or similar writing) and
shall be given to such entity, addressed to it, at its address or facsimile number set forth below:
If to the Market Agent, addressed:
If to the Auction Agent, addressed:
DOCSLA1:440092.2
42797-2 EJC
Attention:
Telephone:
Facsimile:
Attention:
Telephone:
Facsimile:
F-4
If to the Trustee, addressed:
If to the City, addressed:
BNY Western Trust Company
c/o DB Services New Jersey, Inc.
100 Plaza One
Jersey City, New Jersey 07311
Attention: Corporate Trust &
Services
(Municipal Group)
Telephone: (201) 593-6302
Facsimile: (201) 593-6528
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Director of Utilities
Telephone: (323) 583-8811
Facsimile:. (323) 826-1425
Agency
Each entity listed above may change the address for service of notice upon it by a notice
in writing to the other entities named above. Each such notice, request or communication shall be
effective when delivered at the address specified herein.
The Market Agent may rely upon, and is authorized to honor, any telephonic requests or
directions which the Market Agent reasonably believes in good faith to emanate from an authorized
representative of the Trustee. Any telephonic request or direction to the Market Agent shall promptly be
confirmed in writing; provided, however, that failure to receive any such notice shall not affect the
authority of the Market Agent to rely and act upon such request or direction.
Section 12. Miscellaneous.
(a) The terms of this Market Agreement as set forth herein shall not be waived,
altered, modified, amended or supplemented in any manner whatsoever except by written instrument
signed by the parties hereto and approved by the 2003 Series A Credit Provider.
(b) This Agreement shall be binding upon, and inure to the benefit of, the Trustee
and the Market Agent and their respective successors and assigns. The City and the 2003 Series A Credit
Provider are intended third -party beneficiaries of the obligations of the Trustee and the Market Agent
hereunder, and such obligations create a duty in the Trustee and the Market Agent to the City and the
2003 Series A Credit Provider to perform such obligations, and the City and the 2003 Series A Credit
Provider shall have the right to enforce such duty.
(c) If any clause, provision or section hereof shall be ruled invalid or unenforceable
by any court of competent jurisdiction, the invalidity or unenforceability of such clause, provision or
section shall not affect any of the remaining clauses, provisions or sections hereof.
(d) This Agreement may be executed in several counterparts, each of which shall be
an original and all of which shall constitute but one and the same instrument.
(e) This Agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements executed and performed in such state.
DOCSLA1:440092.2 F-5
42797-2 EJC
(f) This Agreement shall become effective on
(g) All privileges, rights and immunities given to the Trustee in the Indenture are
hereby extended to and applicable to the Trustee's obligations hereunder.
DOCSLA1:440092.2 F-6
42797-2 EJC
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered under seal by their respective proper and duly authorized officers as of the date
first above written.
as Market Agent
By:
Name:
Title:
BNY WESTERN TRUST COMPANY, as Trustee
IM
Authorized Officer
DOCSLA1:440092.2 F_7
42797-2 EJC
Exhibit A to
Market Agent
Agreement
CHANGE IN STATUTORY CORPORATE TAX RATE
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
Pursuant to Section 5 of the Market Agent Agreement, please be advised that the
Statutory Corporate Tax Rate for all Auctions commencing after has been changed.
The new Statutory Corporate Tax Rate commencing on shall be %.
as Market Agent
By:_
Name:
Its:
DOCSLA1:440092.2 F_8
42797-2 EJC
Exhibit B to
Market Agent
Agreement
NOTICE OF PROPOSED PERCENTAGE CHANGE
[The Market Agent shall deliver this notice by 11:00 a.m., New York City time,
on the Business Day immediately preceding the Auction Date on which such
changes shall be effective, by telex, telecopy or similar means]
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
NOTICE IS HEREBY GIVEN to BNY Western Trust Company, as Trustee (the
"Trustee") and [Insert Name of Auction Agent], as Auction Agent, that [Insert Name of Market Agent],
as Market Agent for the above -captioned issue, proposes to change the percentages used to determine the
ARB Maximum Rate, the All -Hold Rate and/or the Non -Payment Rate to reflect a Change of Tax Law in
accordance with that certain Indenture of Trust (as from time to time in effect, the "Master Indenture"), as
amended by that certain First Supplemental Indenture of Trust (as from time to time in effect, the
"Supplemental Indenture and together with the Master Indenture, the "Indenture"), each dated as of
March 1, 2003, and each between the City of Vernon and the Trustee. Assuming the conditions set forth
in the Supplemental Indenture are met, such change will be effective on (the "Effective
Date").
[Insert a description of the changes in the All -Hold Rate, the Applicable
Percentages used to determine the ARB Maximum Rate and the percentage of the
Index used to determine the Non -Payment Rate, as the case may be]
The Market Agent hereby confirms that Bond Counsel expects to be able to give an
opinion on or prior to the Effective Date to the effect that the adjustment in the percentage used to
determine the All -Hold Rate, the Applicable Percentages used to determine the ARB Maximum Rate and
the percentage of the Index used to determine the Non -Payment Rate is authorized by the Indenture, is
permitted under the Code and will not have an adverse effect on the exclusion of interest on the ARBs
from gross income for federal income tax purposes.
If any of the conditions referred to in the paragraph above are not met, the existing
percentages used to determine the [ shall remain in effect and the Applicable ARB Rate for the
next succeeding ARB Interest Period shall equal the ARB Maximum Rate on the Effective Date.
DOCSLAI :440092.2 F-9
42797-2 EX
Capitalized terms used but not defined herein, shall have the meanings ascribed to them
in the Indenture.
Dated: [Insert Name of Market Agent], as Market Agent
By:_
Name:
Its:
DOCSLA1:440092.2 F-10
42797-2 EJC
Exhibit C to
Market Agent
Agreement
NOTICE OF PERCENTAGE CHANGE
CITY OF VERNON
MALBURG GENERATING STATION PROJECT
ELECTRIC SYSTEM REVENUE BONDS, 2003 SERIES A
NOTICE IS HEREBY GIVEN to BNY Western Trust Company, as Trustee (the
"Trustee"), and [Insert Name of Auction Agent], as Auction Agent, that [Insert Name of Market Agent],
as Market Agent for the above -captioned issue, hereby authorizes a change effective the date hereof in the
percentages used to determine the ARB Maximum Rate, the All -Hold Rate and/or the Non -Payment Rate
to reflect a Change of Tax Law in accordance with that certain Indenture of Trust (as from time to time in
effect, the "Master Indenture"), as amended by that certain First Supplemental Indenture of Trust (as from
time to time in effect, the "Supplemental Indenture" and together with the Master Indenture, the
"Indenture"), each dated as of March 1, 2003, and each between the City of Vernon and the Trustee.
[Insert a description of the changes in the All -Hold Rate, the Applicable
Percentages used to determine the ARB Maximum Rate and the percentage of the
Index used to determine the Non -Payment Rate, as the case may be]
The Market Agent also confirms that Bond Counsel has delivered its opinion dated the
date hereof to the effect that the adjustment in the percentage used to determine the All -Hold Rate, the
Applicable Percentages used to determine the ARB Maximum Rate and the percentage of the Index used
to determine the Non -Payment Rate is authorized by the Indenture, is permitted under the Code and will
not have an adverse effect on the exclusion of interest on the ARBs from gross income for federal income
tax purposes.
Capitalized terms used but not defined herein, shall have the meanings ascribed to them
in the Indenture.
Dated: [Insert Name of Market Agent], as Market Agent
By:
Name:
DOCSLAI :440092.2 F-11
42797-2 EX
EXHIBIT G
FORM OF REQUISITION FOR MONEY
FROM THE 2003 CONSTRUCTION FUND
To: BNY Western Trust Company, as Trustee
Re: City of Vernon Malburg Generating Station Project Electric System Revenue Bonds, 2003 Series
A and 2003 Series B
The undersigned, on behalf of City of Vernon (the "City"), hereby requests payment, from the
2003 Series Construction Fund established pursuant to that certain First Supplemental Indenture of Trust,
dated as of March 1, 2003, between the City and BNY Western Trust Company, as trustee (the "First
Supplemental Indenture"), of the total amount shown [below] [on the attachment hereto] to the order of
the payee or payees named [below] [on the attachment]. [The payee(s), the purpose and the amount of the
disbursement requested are as follows:
Payee PgMose Amount
[Name and Address]
Total
All capitalized terms used herein shall have the meanings given such terms pursuant to the First
Supplemental Indenture. The undersigned hereby certifies as follows:
1. Each of the items for which payment is requested is a Cost of the Malburg Generating
Station, is a proper charge against the 2003 Series Construction Fund, and is or was necessary in
connection with the Malburg Generating Station.
2. None of the items for which payment is requested has been reimbursed previously from
the 2003 Series Construction Fund.
Tax Certificate.
Dated:
All of the amounts requisitioned hereby will be used in a manner consistent with the 2003
CITY OF VERNON
Authorized City Representative
DOCSLA1:440092.2 G-1
42797-2 EJC