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Resolution No. 83052 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 8305 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AND AUTHORIZING THE EXECUTION OF AN ENGAGEMENT LETTER AGREEMENT BY AND BETWEEN THE CITY OF VERNON AND LATHAM & WATKINS LLP FOR LEGAL SERVICES WHEREAS, the law firm of Latham & Watkins LLP ("Law Firm") specializes in Federal Energy Regulatory Commission ("FERC") matters; land WHEREAS, the Law Firm is willing to provide legal services to the City of Vernon on an as -needed basis; and WHEREAS, the City of Vernon desires to engage the Law Firm for legal consulting services in connection with FERC matters and to enter into an Engagement Letter Agreement that will set forth the terms and conditions of the Law Firm's engagement; and WHEREAS, on November 4, 2003, the Finance Committee 1considered the recommendation of Bruce V. Malkenhorst, the Director of Finance, dated October 30, 2003, that the City of Vernon approve and execute an Engagement Letter Agreement with the Law Firm to provide legal services for FERC matters. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained hereinabove are true and correct. SECTION 2: The City Council of the City of Vernon hereby approves the Engagement Letter Agreement with Latham & Watkins LLP, a copy of which is attached hereto as Exhibit "A" and made a part 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 hereof. SECTION 3: The City Council of the City of Vernon hereby authorizes the Mayor and the City Clerk to execute said Engagement Letter Agreement for, and on behalf of, the City of Vernon. SECTION 4: The City Council of the City of Vernon hereby directs the City Clerk, or his designee, to send one fully executed Engagement Letter Agreement to: Latham & Watkins LLP Attn. John Karns, Esq. 633 W. Fifth St., Suite 4000 Los Angeles, CA 90071-2007 SECTION 5: 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 5th day of November, 2003. ATTEST: BRUCE V. MALKENHORST, City Clerk EONIS C. MALB RG, Mayor - 2 - 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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. 8305, was duly adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Wednesday, November 5, 2003, and thereafter was duly signed by the Mayor of the City of Vernon. (SEAL) BRUCE V. MALKENHORST, City Clerk - 3 - EXHIBIT 0 Nov-04-03 03:51pm ' From-00000000000000 0000000000 T-419 P.002/008 F-149 LATHAM&WATKINSLLP October 30, 2003 John Karns, Esq. Karns & Karabian 900 Wilshire Boulevard Suite 530 Los Angeles, CA 90017-4706 Eric T. Fresch, Esq. City of Vernon Utilities Department 4305 Santa Fe Avenue Vernon, CA 90058 Re: Engagement Letter Dear John and Eric: W3 West Fifth Street, Suite 4000 Los Angeles, California 90671-2007 Tel: (213) 485-1234 Fax (213) 891.8763 www.tw.com FIRM / AFFILIATE OFFICES Boston New Jersey Brussels New York Chicago Northern Virginia Frankfurt Orange County Hamburg Paris Hong Kong San Diego London San Franc sco Los Angeles Silicon Valley Milan Singapore Moscow Tokyo Washington, D.C. We are pleased to welcome City of Vernon as a client of Latham & Watkins LLP ("Latham & Watkins" or "our firm'), This letter will confirm our discussions regarding your engagement of our firm. I. Legal Services. We appreciate the opportunity to serve you. Our goals are to provide you with legal services of the highest quality and efficiency and to help you accomplish your business objectives. Our relationship should begin with a mutual understanding of expectations and should continue with full and candid communications between us throughout the course of our representation. Please let me know promptly if you have questions at any time regarding any aspect of our firm's work for you. You have asked us to advise you on matters you have pending with other counsel before the Federal Energy Regulatory Commission ("FERC"). Our initial scope of work ("Phase One") will be to (a) review the portfolio of FERC proceedings in which Vernon is participating, (b) summarize the issues at stake in those proceedings, (c) assist you in making judgments about the relative importance or unimportance of such issues to Vernon particularly in comparison to Vernon's historical and likely future costs for participating in those proceedings and (d) assist Vernon in making decisions about whether and to what extent it wants to continue with active L.n\1139603.1 Nov-04-03 03:52pm• From-00000000000000 weber 30, 2003 Psge 2 0000000000 T-419 P!003/009 F-149 LATHAM&WATKiNS- roles in such proceedings. Phase One will not involve representing you at FERC in any proceedings. Following Phase One, we may at your request continue to represent you in providing general FERC advice which does not involve appearances in your behalf before FERC or another regulatory agency. We may also represent you in one or more proceedings ("Phase Two"), but would not anticipate doing so without first evaluating and discussing with you the conflicts issues that any such further role may present. In addition, you may seek to have us undertake a review similar to Phase One with respect to future FERC proceedings and, if appropriate and subject to conflicts issues, to represent you in such proceedings. The scope of our work may evolve in accordance with discussions or correspondence with you from time to time. To the extent that additional services are requested by you and agreed upon by us, the terms in this letter will apply to such additional services, unless superseded by another written agreement between us_ Our representation will be deemed concluded when we have completed the services contemplated by this agreement. 2. Persons Responsible. Within our firm, I will be primarily responsible for managing this engagement. Michael Gergen, a partner its our Washington, D.C_ office and David Tewksbury, an associate in our Washington, D.C. office will have the primary role in the matter. We will also utilize the experience and expertise of John Light as appropriate, and he will be available to you also. My direct dial number here at the office is 213-891-8236. Mike Gergen's direct dial is 202-637-2188. There may be occasions when your interests would be best served by involving other attorneys within our firm. We will advise you of proposed staffing assignments involving other attorneys and will work with you to decide on the staffing most appropriate to meet your needs and expectations. Please let me know promptly if any questions arise about the services provided to you by anyone at our firm, or about any billing that you receive from us, so that we can act appropriately. In addition, if you need to talk to an attorney other than me about any mutter for any reason, please do not hesitate to call John Light_ His direct dial number is 213-891-8240. 3. Rates, Fees and Charges. Our fees are based primarily on the amount of time spent by our lawyers and paralegals on your behalf Each lawyer and paralegal assigned to this matter will have an hourly billing rate, and the rate multiplied by the number of hours spent, measured in tenths of an hour, will be the initial basis for determining our fee. LAM 139603.1 Nov-04-03 ,03:52prtr October so, 2003 Page 3 From-00000000000000 0000000000 T-419 P:004/006 F-149 LATHAM&WATKINS— In general, our attorneys' billing rates applicable to this engagement will range from $590 per hour to $240 per hour, depending upon the seniority and expertise of the attorney involved. Other factors may be taken into account in determining our fees and may result in an increase over the rates specified above, including the novelty or difficulty of the legal problems involved, the risks and responsibilities assumed by us, the extent to which unforeseen circumstances arise, the time limitations imposed by you or by circumstances, the seriousness of the consequences of the matter, the results obtained, and other considerations permitted by applicable rules of professional conduct. In addition to fees, you agree to pay for disbursements and other charges. Our disbursements and other charges will include such items as photocopying ($0.17 per page); fax charges ($1.25 per page for outgoing documents only); scanning documents to electronic databases ($0.25 per page); computerized legal research charges (90% of the third -party vendor rate or 1.25 times our volume- discounted cost depending on vendor); long-distance telephone charges (AT&T standard rates); courier and air freight charges (1.10 times our volume - discounted cost); messenger charges (at third -parry vendor rate); travel expenses (for domestic flights, coach fare only, unless you authorize upgraded travel, plus reasonable meal and lodging charges); secretarial overtime, meal and transportation costs (for night or weekend work only); word processing charges ($55.00 per hour); postage costs, at cost; supply costs (for large volume only); and other reasonable costs and expenses. For larger disbursements, we may ask that billings be sent directly to you or that advances be provided_ We intend to provide statements to you on a monthly basis. They will show our time logged in tenth -of -an -hour increments and will separate fees from disbursements and other charges. Payment of our statements is due promptly upon receipt. Our rates are based on our receiving payment within 30 days. Our billing rates and charges are usually revised annually, but we reserve the right to revise them at other times during the course of our representation. Following any such revision, our new rates and charges will be applied to your account, and this letter constitutes written notice to you of our right to make such revisions. 4. holes of Attorney and Client. Our responsibilities under this agreement are to provide legal counsel and assistance to you in accordance with this letter, and to provide statements to you that clearly state the basis for our fees and charges. During the course of this engagement, we may express opinions or beliefs to you about the effectiveness of various courses of action or about the results that might be anticipated_ Such statements are expressions of opinion only, and should not be construed as promises or guaranties. We hope you will be clear and complete in your communications with us and will extend your reasonable assistance and cooperation to us. You also agree to keep us informed of developments related to this representation and to pay our statements in a timely manner. LAM 139603.1 Nov-04-03 03:52pm From-00000000000000 0000000000 T-419 P'005f008 F-149 October 30, 2003 Page 4 LATHAM&WATKINS«P We take very seriously the obligations of confidentiality that we owe to you and to every other client of the firm. Naturally we will not disclose any confidential information of yours to any other client, even where that information might have some bearing on their interests. Likewise, we will not disclose the confidences of any other client to you, even where that information might have some bearing on your interests, and you agree that we are under no obligation to do so. 5. Client Files and Retention. In the course of your representation, we shall maintain a file. In such file we may place correspondence, pleadings, deposition transcripts, exhibits, physical evidence, expert's reports, and other items reasonably necessary to your representation ("Client File"). The Client File shall be and remain your property. We may also place in such file documents containing our attorney work product, mental impressions or notes ("Work Product"). You agree that the Work Product shall be and remain our property. At the conclusion of our representation (which sball be defined as the time that our work on the project specified in this letter has been completed), your Client File (but not including the Work Product) shall be made available to you, and you shall have the right to take possession of the original file as your property_ We will be entitled to make copies if we choose. You also agree at the conclusion of your representation (whether or not you take possession of the Client File) to take possession of any and all original contracts, wills, stockholders certificates, and other such important documents that may be in the Client File and we shall have no further responsibility with regard to such documents. If you do not take possession of the Client File at the conclusion of the representation, we shall store such file for you for a period of seven (7) years. During the entire time that we store your Client File for you, you shall have the right to take possession of it at any time that you choose. At the conclusion of such seven (7) year period, we shall send you a notice by First Class or equivalent mail to the last address that you have provided us advising of our intention to dispose of the Client File. You shall have sixty (60) days from the date of such notice to take possession of your Client File. If you do not take possession of the Client File during such time, you agree that we may dispose of the Client File without further notice to you. 6. Conflicts of Interest. As we have discussed with you, our experience in the electric power industry arises from the fact that we represent many different companies and entities in the industry. Our clients include (a) investor -owned utilities (including Pacific Gas & Electric Company (PG&E), Southem California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E)), (b) non -utility power generation companies, (c) energy trading firms, (d) transmission owners, (e) investment banks, commercial banks and other providers of debt or equity capital, (f) non -utility affiliates of investor —owned utility companies (including affiliates of PG&E, SCE and SDG&E), (g) trade associations and (h) various other participants. As is the nature of the industry, depending on the particular issue, one individual client or one category of client may be aligned with the others or sharply at odds with the others. Accordingly, we expect LA\1139603.1 Nov-04-03 03:52por From-00000000000000 0000000000 T-419 P'006/008 F-149 October 30, 2003 Page 5 LATHAM&WATKINS-P that there could be substantial limitations imposed on matters we will be able to undertake for you, particularly when such representation involves appearing as your counsel in proceedings. In asking us to undertake the Phase One work, you consent to the existing and future representations of these other clients. Should you wish to have us undertake roles beyond the Phase One, we will discuss with you the particular issues, if any, such representation would present. We also ask Vernon°s agreement in advance that we may accept future matters (including regulatory proceedings or litigation relating thereto) adverse to Vernon, provided that those matters are not substantially related to any Phase Two work that we have done for you. You should feel completely free to consult other counsel concerning these matters. 7. Arbitration of Disputes. Any controversy or claim arising out of or relating to the client relationship between (Client], its affiliates or successors (the "CliezitArbitration Parties") and Latham & Watkins, its attorneys and staff or any of their successors (the "Latham Arbitration Parties") or the services provided by the Latham Arbitration Parties pursuant to this engagement letter or otherwise to the Client Arbitration Parties shall be submitted to binding arbitration_ By agreeing to arbitrate, you are agreeing to waive your right to a jury trial. The arbitration will be conducted in accordance with this document, the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association, as in effect on the date of this engagement letter ("AAA Rules'). In the event of a conflict, the provisions of the AAA Rules will control, except where those Mules conflict with this document, in which case this document will control. The arbitration shall be conducted before a panel of three arbitrators (all of whor n shall be former state or federal judges, with at least five years judicial experience), regardless of the size of the dispute, to be selected as provided in the AAA Rules_ The arbitration shall be commenced and held in the city and state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Any issue concerning the location of the arbitration, the extent to which any dispute is subject to arbitration, the applicability, interpretation, or enforceability of these procedures, including any contention that all or part of these procedures are invalid or unenforceable, and any discovery disputes, shall be resolved by all of the arbitrators. No potential arbitrator may serve on the panel unless he or she has agreed in writing to be bound by these procedures. To the extent state law is applicable, the arbitrators shall apply the substantive law of the state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Each party will, upon the written request of the other party, promptly provide the other with copies of all documents on which the producing party may rely in support of or in opposition to any claim or defense and a report of any expert whom the producing party may call as a witness in the arbitration hearing. At the request of a party, and upon the showing of good cause, the arbitrators shall have the discretion to order production by the other party or by a third party of other documents relevant to any claim or defense. Each parry will be entitled to depose a maximum of three witnesses, plus all experts designated to be witnesses at the arbitration. The depositions shall be held within thirty (30) days of the making of a request and shall be limited to a maximum of six hours per deposition. All objections are reserved for the arbitration hearing, except for objections based on LAV 139603.1 Nov-04-03 03:52pm' From-00000000000000 0000000000 T-419 P.007/008 F-149 October 3a, 2b03 Paso e 'LATH AM&WATKI N S-P privilege and proprietary or confidential information. Additional depositions or deposition hours may be ordered by the arbitrators upon a showing of good cause. All aspects of the arbitration shall be treated as confidential and neither the parties nor the arbitrators may disclose the existence, content or results of the arbitration, except as necessary to comply with legal or regulatory requirements. Before making any such disclosure, a parry shall give written notice to all other parties and shall afford such parties a reasonable opportunity to protect their interests. The result of the arbitration shall be binding on the parties and judgment on the arbitrators' award may be, entered in any court having jurisdiction. S. Limited Liability Partnership. Latham & Watkins LLP is a limited liability partnership (LLP). Similar to the corporate form of business organization, the LLP form generally limits the liability of the individual partners of the firm to the capital they have invested in the firm for claims arising from services performed by the firm. The LLP format has become the norm for U.S.-based law firms. Our form of organization as an LLP will not diminish the ability of plaintiffs to recover damages from the firm or from any individuals who directly caused the loss. 9. Reportable Transactions Vernon acknowledges that, under certain circumstances, L&W may be required to maintain certain information about our representation, including client identification information, in compliance with applicable Treasury Regulations, and to supply such infornnation to the IRS upon lawful demand. Vernon agrees that compliance with these requirements will not, in and of itself, be deemed to constitute a continuing attorney -client relationship. 10. Approval and Return of Letter. If this letter meets with your approval, please sign and return the enclosed copy_ We look forward to working with you. Very truly yours, DAVID B. ROGERS of LATHAM & WATK.INS LLP Approval of En agent We have read the enclosed letter and we agree to its terms, affective as of the datc on which Latham & Watkins first provided services to us. BY SIGNING THE RETAINER AGREEMENT, YOU ARE AGREEING TO HAVE ANY ISSUE ARISING OUT OF OR RELATING TO OUR SERVICES (INCLUDING ANY CLAIM FOR PROFESSIONAL LIABILITY) DECIDED IN ARBITRATION AND YOU ARE LAM 139603.1 Nov-04-03 03:53pm' From-00000000000000 0000000000 T-419 P'008/008 F-149 october 30, 2003 Page 7 LATH AM&WATKI N 51- GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE THE AR13TTIRATION PROVISION IN SECTION 7 ABOVE. Date: October----., 2003 CITY OF VERNON, a California charter city By, Name: Title: LAM 139603.1 SUPPORTING DOCUMENTS CITY ADMINISTRATOR/CITY CLERK'S INTER -OFFICE MEMORANDUM DATE: November 18, 2003 TO: Eric Fresch, Acting City Attorney FROM: Gloria J. Orosco Chief Deputy City erk RE: Engagement Letter with Latham & Watkins, LLP Per your request, transmitted herewith is an original of the above referenced agreement approved by the Vernon City Council on November 5, 2003. Please forward agreement to John Karns, Esq., of Latham & Watkins, LLP. Thank you. gm cc: tiara No. 8305 Agreement No. 03-093 LATHAM&WATKI NSLLP October 30, 2003 John Karns, Esq. Karns & Karabian 900 Wilshire Boulevard Suite 530 Los Angeles, CA 90017-4706 Eric T. Fresch, Esq. City of Vernon Utilities Department 4305 Santa Fe Avenue Vernon, CA 90058 Re: Engagement Letter Dear John and Eric: 633 West Fifth Street, Suite 4000 Los Angeles, California 90071-2007 Tel: (213)485-1234 Fax: (213) 891-8763 www.lw.com FIRM / AFFILIATE OFFICES Boston New Jersey Brussels New York Chicago Northern Virginia Frankfurt Orange County Hamburg Paris Hong Kong San Diego London San Francisco Los Angeles Silicon Valley Milan Singapore Moscow Tokyo Washington, D.C. We are pleased to welcome City of Vernon as a client of Latham & Watkins LLP ("Latham & Watkins" or `bur firm"). This letter will confirm our discussions regarding your engagement of our firm. 1. Le2al Services. We appreciate the opportunity to serve you. Our goals are to provide you with legal services of the highest quality and efficiency and to help you accomplish your business objectives. Our relationship should begin with a mutual understanding of expectations and should continue with full and candid communications between us throughout the course of our representation. Please let me know promptly if you have questions at anytime regarding any aspect of our firm's work for you. You have asked us to advise you on matters you have pending with other counsel before the Federal Energy Regulatory Commission ("FERC"). Our initial scope of work ("Phase One") will be to (a) review the portfolio of FERC proceedings in which Vernon is participating, (b) summarize the issues at stake in those proceedings, (c) assist you in making judgments about the relative importance or unimportance of such issues to Vernon particularly in comparison to Vernon's historical and likely future costs for participating in those proceedings and (d) assist Vernon in making decisions about whether and to what extent it wants to continue with active LA\1139603.1 �©dober 30, 2003 Page 2 LATHAM&WATKINSLLP roles in such proceedings. Phase One will not involve representing you at FERC in any proceedings. Following Phase One, we may at your request continue to represent you in providing general FERC advice which does not involve appearances in your behalf before FERC or another regulatory agency. We may also represent you in one or more proceedings ("Phase Two"), but would not anticipate doing so without first evaluating and discussing with you the conflicts issues that any such further role may present. In addition, you may seek to have us undertake a review similar to Phase One with respect to future FERC proceedings and, if appropriate and subject to conflicts issues, to represent you in such proceedings. The scope of our work may evolve in accordance with discussions or correspondence with you from time to time. To the extent that additional services are requested by you and agreed upon by us, the terms in this letter will apply to such additional services, unless superseded by another written agreement between us. Our representation will be deemed concluded when we have completed the services contemplated by this agreement. 2. Persons Responsible. Within our firm, I will be primarily responsible for managing this engagement. Michael Gergen, a partner in our Washington, D.C. office and David Tewksbury, an associate in our Washington, D.C. office will have the primary role in the matter. We will also utilize the experience and expertise of John Light as appropriate, and he will be available to you also. My direct dial number here at the office is 213-891-8236. Mike Gergen's direct dial is 202-637-2188. There may be occasions when your interests would be best served by involving other attorneys within our firm. We will advise you of proposed staffing assignments involving other attorneys and will work with you to decide on the staffmg most appropriate to meet your needs and expectations. Please let me know promptly if any questions arise about the services provided to you by anyone at our firm, or about any billing that you receive from us, so that we can act appropriately. In addition, if you need to talk to an attorney other than me about any matter for any reason, please do not hesitate to call John Light. His direct dial number is 213-891-8240. 3. Rates, Fees and Charges. Our fees are based primarily on the amount of time spent by our lawyers and paralegals on your behalf. Each lawyer and paralegal assigned to this matter will have an hourly billing rate, and the rate multiplied by the number of hours spent, measured in tenths of an hour, will be the initial basis for determining our fee. LA\I 139603.1 'October30,2003 Page 3 LATHAM&WATKINSLLP In general, our attorneys' billing rates applicable to this engagement will range from $590 per hour to $240 per hour, depending upon the seniority and expertise of the attorney involved. Other factors may be taken into account in determining our fees and may result in an increase over the rates specified above, including the novelty or difficulty of the legal problems involved, the risks and responsibilities assumed by us, the extent to which unforeseen circumstances arise, the time limitations imposed by you or by circumstances, the seriousness of the consequences of the matter, the results obtained, and other considerations permitted by applicable rules of professional conduct. In addition to fees, you agree to pay for disbursements and other charges. Our disbursements and other charges will include such items as photocopying ($0.17 per page); fax charges ($1.25 per page for outgoing documents only); scanning documents to electronic databases ($0.25 per page); computerized legal research charges (90% of the third -party vendor rate or 1.25 times our volume- discounted cost depending on vendor); long-distance telephone charges (AT&T standard rates); courier and air freight charges (1.10 times our volume - discounted cost); messenger charges (at third -party vendor rate); travel expenses (for domestic Rights, coach fare only, unless you authorize upgraded travel, plus reasonable meal and lodging charges); secretarial overtime, meal and transportation costs (for night or weekend work only); word processing charges ($55.00 per hour); postage costs, at cost; supply costs (for large volume only); and other reasonable costs and expenses. For larger disbursements, we may ask that billings be sent directly to you or that advances be provided. We intend to provide statements to you on a monthly basis. They will show our time logged in tenth -of -an -hour increments and will separate fees from disbursements and other charges. Payment of our statements is due promptly upon receipt. Our rates are based on our receiving payment within 30 days. Our billing rates and charges are usually revised annually, but we reserve the right to revise them at other times during the course of our representation. Following any such revision, our new rates and charges will be applied to your account, and this letter constitutes written notice to you of our right to make such revisions. 4. Roles of Attorney and Client. Our responsibilities under this agreement are to provide legal counsel and assistance to you in accordance with this letter, and to provide statements to you that clearly state the basis for our fees and charges. During the course of this engagement, we may express opinions or beliefs to you about the effectiveness of various courses of action or about the results that might be anticipated.. Such statements are expressions of opinion only, and should not be construed as promises or guaranties. We hope you will be clear and complete in your communications with us and will extend your reasonable assistance and cooperation to us. You also agree to keep us informed of developments related to this representation and to pay our statements in a timely manner. LA\1139603.1 •October 30,2003 Page 4 LATHAM&WATKINSLLP We take very seriously the obligations of confidentiality that we owe to you and to every other client of the firm. Naturally we will not disclose any confidential information of yours to any other client, even where that information might have some bearing on their interests. Likewise, we will not disclose the confidences of any other client to you, even where that information might have some bearing on your interests, and you agree that we are under no obligation to do so. 5. Client Files and Retention. In the course of your representation, we shall maintain a file. In such file we may place correspondence, pleadings, deposition transcripts, exhibits, physical evidence, expert's reports, and other items reasonably necessary to your representation ("Client File"). The Client File shall be and remain your property. We may also place in such file documents containing our attorney work product, mental impressions or notes ("Work Product"). You agree that the Work Product shall be and remain our property. At the conclusion of our representation (which shall be defined as the time that our work on the project specified in this letter has been completed), your Client File (but not including the Work Product) shall be made available to you, and you shall have the right to take possession of the original file as your property. We will be entitled to make copies if we choose. You also agree at the conclusion of your representation (whether or not you take possession of the Client File) to take possession of any and all original contracts, wills, stockholders certificates, and other such important documents that may be in the Client File and we shall have no further responsibility with regard to such documents. If you do not take possession of the Client File at the conclusion of the representation, we shall store such file for you for a period of seven (7) years. During the entire time that we store your Client File for you, you shall have the right to take possession of it at any time that you choose. At the conclusion of such seven (7) year period, we shall send you a notice by First Class or equivalent mail to the last address that you have provided us advising of our intention to dispose of the Client File. You shall have sixty (60) days from the date of such notice to take possession of your Client File. If you do not take possession of the Client File during such time, you agree that we may dispose of the Client File without further notice to you. 6. Conflicts of Interest. As we have discussed with you, our experience in the electric power industry arises from the fact that we represent many different companies and entities in the industry. Our clients include (a) investor -owned utilities (including Pacific Gas & Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E)), (b) non -utility power generation companies, (c) energy trading firms, (d) transmission owners, (e) investment banks, commercial banks and other providers of debt or equity capital, (f) non -utility affiliates of investor —owned utility companies (including affiliates of PG&E, SCE and SDG&E), (g) trade associations and (h) various other participants. As is the nature of the industry, depending on the particular issue, one individual client or one category of client may be aligned with the others or sharply at odds with the others. Accordingly, we expect LA\1139603.1 October 30, 2003 Page 5 LATHAM&WATKINS«P that there could be substantial limitations imposed on matters we will be able to undertake for you, particularly when such representation involves appearing as your counsel in proceedings. In asking us to undertake the Phase One work, you consent to the existing and future representations of these other clients. Should you wish to have us undertake roles beyond the Phase One, we will discuss with you the particular issues, if any, such representation would present. We also ask Vernon's agreement in advance that we may accept future matters (including regulatory proceedings or litigation relating thereto) adverse to Vernon, provided that those matters are not substantially related to any Phase Two work that we have done for you. You should feel completely free to consult other counsel concerning these matters. 7. Arbitration of Disputes. Any controversy or claim arising out of or relating to the client relationship between [Client], its affiliates or successors (the "Client Arbitration Parties") and Latham & Watkins, its attorneys and staff or any of their successors (the "Latham Arbitration Parties") or the services provided by the Latham Arbitration Parties pursuant to this engagement letter or otherwise to the Client Arbitration Parties shall be submitted to binding arbitration. By agreeing to arbitrate, you are agreeing to waive your right to a jury trial. The arbitration will be conducted in accordance with this document, the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association, as in effect on the date of this engagement letter ("AAA Rules"). In the event of a conflict, the provisions of the AAA Rules will control, except where those Rules conflict with this document, in which case this document will control. The arbitration shall be conducted before a panel of three arbitrators (all of whom shall be former state or federal judges, with at least five years judicial experience), regardless of the size of the dispute, to be selected as provided in the AAA Rules. The arbitration shall be commenced and held in the city and state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Any issue concerning the location of the arbitration, the extent to which any dispute is subject to arbitration, the applicability, interpretation, or enforceability of these procedures, including any contention that all or part of these procedures are invalid or unenforceable, and any discovery disputes, shall be resolved by all of the arbitrators. No potential arbitrator may serve on the panel unless he or she has agreed in writing to be bound by these procedures. To the extent state law is applicable, the arbitrators shall apply the substantive law of the state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Each party will, upon the written request of the other party, promptly provide the other with copies of all documents on which the producing party may rely in support of or in opposition to any claim or defense and a report of any expert whom the producing party may call as a witness in the arbitration hearing. At the request of a party, and upon the showing of good cause, the arbitrators shall have the discretion to order. production by the other party or by a third party of other documents relevant to any claim or defense. Each party will be entitled to depose a maximum of three witnesses, plus all experts designated to be witnesses at the arbitration. The depositions shall be held within thirty (30) days of the making of a request and shall be limited to a maximum of six hours per deposition. All objections are reserved for the arbitration hearing, except for objections based on LA\1139603.1 October 30, 2003 Page 6 LATHAM&WATKINS«P privilege and proprietary or confidential information. Additional depositions or deposition hours may be ordered by the arbitrators upon a showing of good cause. All aspects of the arbitration shall be treated as confidential and neither the parties nor the arbitrators may disclose the existence, content or results of the arbitration, except as necessary to comply with legal or regulatory requirements. Before making any such disclosure, a party shall give written notice to all other parties and shall afford such parties a reasonable opportunity to protect their interests. The result of the arbitration shall be binding on the parties and judgment on the arbitrators' award may be entered in any court having jurisdiction. 8. Limited Liability Partnership. Latham & Watkins LLP is a limited liability partnership (LLP). Similar to the corporate form of business organization, the LLP form generally limits the liability of the individual partners of the firm to the capital they have invested in the firm for claims arising from services performed by the firm. The LLP format has become the norm for U.S.-based law firms. Our form of organization as an LLP will not diminish the ability of plaintiffs to recover damages from the firm or from any individuals who directly caused the loss. 9. Reportable Transactions Vernon acknowledges that, under certain circumstances, L&W may be required to maintain certain information about our representation, including client identification information, in compliance with applicable Treasury Regulations, and to supply such information to the IRS upon lawful demand. Vernon agrees that compliance with these requirements will not, in and of itself, be deemed to constitute a continuing attorney -client relationship. 10. Approval and Return of Letter. If this letter meets with your approval, please sign and return the enclosed copy. We look forward to working with you. Very truly yours, 4641110 /.S, /e DAVID B. ROGERS of LATHAM & WATKINS LLP Approval of Engagement We have read the enclosed letter and we agree to its terms, effective as of the date on which Latham & Watkins first provided services to us. BY SIGNING THE RETAINER AGREEMENT, YOU ARE AGREEING TO HAVE ANY ISSUE ARISING OUT OF OR RELATING TO OUR SERVICES (INCLUDING ANY CLAIM FOR PROFESSIONAL LIABILITY) DECIDED IN ARBITRATION AND YOU ARE LA\1139603.1 October 30, 2003 Page 7 LATHAM&WATKI NS«P GIVING UP YOUR RIGHT TO A JURY OR COURT TRIAL. SEE THE ARBITRATION PROVISION IN SECTION 7 ABOVE. Date bmtr , 2003 APPROVED AS TO FORM. CITY OF VERNON, a California charter city Name: mggx x gK$ EONIS C: MALBURG Title: gx=xA8KjXZSMT@R Mayor ATTEST: By: 1% BRUCE V. MALKENHORST, City Clerk G G ERIC T. FRESCIJ, CITY ATTORNEY LAU 139603.1