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Resolution No. 9510
1 RESOLUTION NO. 9510 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF 3 VERNON AMENDING RESOLUTION NO. 9431 AND APPROVING AND RATIFYING THE EXECUTION OF AN AMENDED AND 4 RESTATED PURCHASE AND SALE AGREEMENT AND RELATED DOCUMENTS BY AND BETWEEN THE CITY OF VERNON AND 5 BICENT (CALIFORNIA) POWER, LLC, FORMERLY KNOWN.AS 6 BEOWULF (VERNON) POWER LLC, REGARDING THE MALBURG GENERATING STATION AND OTHER POWER GENERATION 7 ASSETS 8 WHEREAS, the City of Vernon (the "City") is a municipal 9 corporation and a chartered city of the State of California organized 10 and existing under its Charter and the Constitution of the State of 11 California; and 12 WHEREAS, the City owns and operates a system for the 13 generation, purchase, transmission, distribution and sale of electric 14 capacity and energy; and 15 WHEREAS, on October 2, 2007, the City Council of the City of 16 Vernon adopted Resolution No. 9431 approving the sale of the Malburg 17 Generation Station ("MGS"), an 11 megawatt entitlement interest in the 18 output of the Palo Verde Nuclear Generating Station, a 22 megawatt 19 entitlement to energy from the Hoover Uprating Project ("Hoover") and 20 participation interest in the Mead -Phoenix and Mead-Adelanto 21 transmission projects to Beowulf (Vernon) Power Company LLC 22 ("Beowulf"); and 23 WHEREAS, Beowulf has recently changed its name to Bicent 24 (California) Power LLC ("Bicent"); and 25 WHEREAS, the City desires to amend Resolution No. 9431 and 26 the Purchase and Sale Agreement and related documents as it is no 27 longer selling its entitlement interest in the output of the Palo 28 Verde Nuclear Generating Station, and it desires to sell its 1 participation interest in the Mead -Phoenix and Mead-Adelanto 2 transmission projects to Starwood Energy Infrastructure Fund, LP; and j 3 WHEREAS, the City is the owner of the Malburg Generating 4 Station and has a 22 megawatt entitlement to energy from the Hoover 5 Uprating Project ("Hoover") (collectively, the "Assets"); and 6 WHEREAS, the City desires to sell its entitlement, right, 7 title and interest in the Assets to Bicent (California) Power LLC 8 ("Bicent"), formerly known as Beowulf, under the terms and conditions 9 of an Amended and Restated Purchase and Sale Agreement and other 10 related documents including, but not limited to, the Power Purchase 11 Tolling Agreement, the Ground Lease and other related documents; and 12 WHEREAS, in order to meet the urgent need to facilitate the 13 purchase and sale, the City Administrator signed the Amended and 14 -Restated Purchase and Sale Agreement and related documents on 15 December 13, 2007, subject to ratification by the City Council; and 16 WHEREAS, the City Council of the City of Vernon has 17 determined that, pursuant to the provisions of subsection (a) of 18 Section 2.27 of the Vernon City Code, it was in the public interest 19 and necessity to enter into the Amended and Restated Purchase and Sale 20 Agreement and other related documents including, but not limited to, 21 the Power Purchase Tolling Agreement, the Ground Lease and other 22 related documents, with Bicent. 23 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE 24 CITY OF VERNON AS FOLLOWS: 25 SECTION 1: The City Council of the City of Vernon hereby 26 finds and determines that the recitals contained hereinabove are true 27 and correct. 28 SECTION 2: The City Council of the City of Vernon hereby - 2 - 1 approves and ratifies the execution of the Amended and Restated 2 Purchase and Sale Agreement with Bicent at a sale price of not less 3 than $287,500,000 and other related documents including, but not 4 limited to, the Power Purchase Tolling Agreement, the Ground Lease and 5 other related documents (collectively, the "Purchase Documents"), a 6 copy of which are being presented to the City Council concurrently 7 with this Resolution, and the City Council hereby orders said Purchase 8 Documents to be received and filed by the City Clerk. 9 SECTION 3: The City Council of the City of Vernon hereby 10 approves and authorizes the City Administrator, or his designee, to 11 perform such acts and deeds as may be necessary or convenient to 12 effect the purposes of this Resolution and the transactions herein 13 approved, ratified or authorized and to execute any and all documents 14 as shall be required to complete the sale of the Assets and to 15 accomplish the close of escrow consistent with the terms of the 16 Purchase Documents herein. 17 SECTION 6: The provisions of Resolution No. 9431 not 18 consistent with or in conflict with this Resolution are hereby 19 repealed; in all other respects, Resolution No. 9431 shall remain in 20 full force and effect. 21 22 23 24 25 26 27 28 - 3 - 1 SECTION 7: The City Clerk of the City of Vernon shall 2 certify to the passage of this resolution, and thereupon and 3 thereafter the same shall be in full force and effect. 4 APPROVED AND ADOPTED this 17th day of December, 2007. 5 6 7 Name: Loonis C. Malburg 8 Title: Mayor / A TEST: 9 10 MANUELA GIROIT, dity Clerk 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - 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 W:1 STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, MANUELA GIRON City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 9510, was duly adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Monday, December 17, 2007, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. MANUELA GIftON,City Clerk (SEAL) tilf T(Al 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 January 14, 2008 Mr. John W. Schumann, Chairman Mead-Adelanto Project Coordinating Committee Los Angeles Department of Water and Power Room 1255, JFB P.O. Box 51111 Los Angeles, CA 90051-0100 Mr. Gary Harper, Chairman Mead -Phoenix Project Management Committee Salt River Project P.O. Box 52025-POB009 Phoenix, AZ 85072-2025 NOTICE OF ASSIGNMENT PLEASE TAKE NOTICE that, effective December 13, 2007, the City of Vernon (the "City") has entered into an agreement to transfer all of its rights, title and interests in the Mead-Adelanto Project (the "Project" as defined in the Mead-Adelanto Project Joint Ownership Agreement) and the Mead -Phoenix Project (the "Project" as defined in the Mead -Phoenix Project Joint Ownership Agreement) (collectively the "Mead Transmission Interests"), including its proportionate share of the rights, title and interests of the City under the Project Agreements (as defined, respectively, in the Mead-Adelanto Project Joint Ownership Agreement and the.Mead-Phoenix Project Joint Ownership Agreement) to Starwood Energy Infrastructure Fund, L.P. or one of its subsidiaries or affiliates ("Starwood"). The transfer of the City's Mead Transmission Interests to Starwood is effective upon the Closing Date, as defined in the Mr. John W. Schumann Mr. Gary Harper January 14, 2008 Page 2 Purchase and Sale Agreement between the City and Starwood, and is conditioned upon, among other things, the consent of the California Independent System Operator Corporation ("CAISO"). The City and Starwood anticipate completing the transfer as soon as practicable. Please direct any inquiries relating to this Notice to each of the following: Starwood Energy Infrastructure Fund, L.P. Attention: Madison Grose 591 West Putnam Avenue Greenwich, CT 06830 Facsimile: 203-422-7814 And to: City of Vernon Attention: Director of Light and Power Department 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: 323-826-1438 Thank you for your cooperation. CITY OF VERNON e!�' -- -A By: Eric T. Fresch Title: City Administrator ETF: j 1 cc: Mr. Son Hoang, Chairman Mead-Adelanto Project Engineering and Operations Committee Los Angeles Department of Water and Power Room 1141, GOB P.O. Box 51111 Los Angeles, CA 90051-0100 Mr. Gary Harper January 14, 2008 Page 3 Mr. Roberts Kondziolka, Chairman Mead -Phoenix Project Engineering and Operations Committee Salt River Project P.O. Box 52025-POB100 Phoenix, AZ 85072-2025 Salt River Project Mead -Phoenix Project Engineering and Operations Committee ATTN: Mr. Gary Frere, SEP007 E&O Committee Secretary P.O. Box 52025 Phoenix, AZ 85072-2025 Western Area Power Administration Desert Southwest Region ATTN: Brenda McKissack, G6211 P.O. Box 6457 Phoenix, AZ 85005-6457 Dennis M.P. Ehling, Esq. Kirkpatrick & Lockhart Preston Gates Ellis LLP 10100 Santa Monica Blvd. 7th Floor Los Angeles, CA 90067 CITY ATTORNEY'S OFFICE INTER -DEPARTMENT MEMORANDUM DATE: January 17,-2008 TO: Nelly Giron, City Clerk FROM: Jeff A. Harrison, City Attorney RE: Project Coldwater Signing -December k2007 Dear Nelly: Enclosed, please one (1) signing set and CD for each of the following Purchase and Sale Agreements: Starwood Energy Transmission Agency, and Bicent Holdings JH:em Enclosures Project Coldwater — Bicent Signing Set Dated as of December 13, 2007 DOCUMENTS Guaranty of Bicent Holdings LLC..............................................................I.............................. TAB 1 First Amendment to Guaranty of Bicent Holdings LLC........................................................... 2 Amended and Restated Purchase and Sale Agreement, by and between City of Vernon and Bicent (California) Power LLC, dated as of December 13, 2007..................................... 3 Exhibits . Exhibit A Form of Contract for Differences (Hoover) ....................................... Ex. A Exhibit B Form of Seller Subordinate Deed of Trust ......................................... Ex. B Exhibit C Form of Subordination Agreement .................................................. I Ex. C Exhibit D Form of Lease................................................................................... Ex. D Exhibit E-1 Form of Lender Consent(PPTA)....................................................... Ex. E-1 Exhibit E-2 Form of Lender Consent (Lease)....................................................... Ex. E-2 Exhibit F Form of Memorandum of Lease and Easements ................................ Ex. F Exhibit G Form of Power Purchase Tolling Agreement ..................................... Ex. G Exhibit H Form of Interconnection and Transmission Services Agreement ...... Ex. H Exhibit I Form of Bill of Sale........................................................................... Ex. I Exhibit J Form of Deed of Transfer.................................................................. Ex. J Exhibit K Form of Assignment and Assumption Agreement ............................. Ex. K Exhibit L Form of Opinion................................................................................ Ex. L Schedules-.,=..:::..............................::...................................................................................... Schedules Schedule 1.1-FS Facility Site Schedule 1.1-111) Hoover Dam Uprating Project Schedule 1.1-PE Permitted Encumbrances Schedule 2.1(b) Electrical Interconnection Facilities Schedule 2.1(c) Pre -Ordered Equipment Schedule 2.1(d) Spare Parts Schedule 2.1(e) Permits Schedule 2.1(g) Assigned Agreements LA\1814151.1 037484-0012 DOCUMENTS Schedule 2.1(m) Miscellaneous Assets Schedule 2.2(k) Seller Marks Schedule 2.2(m) Rights to Recovery Schedule 2.2(o) Other Excluded Assets Schedule 2.3(a) Other Assumed Liabilities Schedule 2.4(b)(1) Prepaid Expenses Schedule 3.1(a) Purchaser Required Governmental Approvals Schedule 3.1(b) Required Consents Schedule 3.1(k) Performance Criteria Schedule 4.1(c) Seller Required Governmental Approvals Schedule 5.1(c) Violations and Required Filings Schedule 5.1(d) Seller Required Other Consents, Approvals and Notices Schedule 5.1(e) Financial Information Schedule 5.1(f) Affiliated Transactions Schedule 5.1(g) Litigation Schedule 5.1(h) Tax Liabilities Schedule 5.2(a)(1) Compliance with Governmental Rules and Permits Schedule 5.2(a)(2) Environmental Legal Compliance Schedule 5.2(b) Zoning and Land Use Schedule 5.2(c) Condemnation and Other Proceedings; Outstanding Collateral Schedule 5.2(e) Sufficiency of Assets Schedule 5.2(f) Facility Contracts Schedule 5.2(i) Taxes Schedule 5.20) Seller's Employees Schedule 5.2(k) Absence of Changes Schedule 5.2(1) Insurance Schedule 5.2(m) Outage Schedule 5.3 Hoover Interest Schedule 5.3(b) Hoover Contracts Schedule 5.3(c) CFD (Hoover) Consents, Approvals and Notices Schedule 6.1(d) Purchaser's Required Consents, Approvals and Notices Schedule 8.6 Collateral, Letters of Credit or Bonds LA\1814151.1 037484-0012 EXHIBIT 1 GUARANTY OF BICENT HOLDINGS LLC BICENT HOLDINGS LLC, a Delaware limited liability company ("Guarantor") hereby, by execution of this Guaranty (this "Guaranty"), unconditionally and irrevocably guarantees to the City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City" or "Seller") as follows: RECITALS A. Seller and Beowulf (Vernon) Power LLC, a Delaware limited liability company ("Beowulf' or "Purchaser"), are entering into a Purchase and Sale Agreement between Seller and Beowulf, dated as of October 8, 2007 (as amended, supplemented or otherwise modified from time to time, the "PSA!). B. Guarantor and Beowulf are affiliated. Guarantor expects to derive direct and indirect benefits from Beowulf s acquisition of the assets under the PSA. Guarantor acknowledges that Seller is relying on this Guaranty and would not enter into the PSA without this Guaranty. C. Capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the PSA. NOW THEREFORE, Guarantor agrees as follows: 1. Guaranty. Subject to Paragraph 2 below, Guarantor hereby unconditionally and irrevocably guarantees to Seller as primary obligor and not merely as surety, the due and immediate payment of any and all amounts of damages, whether now in existence of hereafter arising (including without limitation all amounts that would become due but for the operation of the automatic stay under Section 362(a) of the U.S.. Bankruptcy Code of 1978, as amended (the "Code")), payable under the PSA by Purchaser following the termination of the PSA arising solely as a result of the breach by Purchaser of its obligations under the PSA (all such amounts, as applicable and without `duplication, being the "Obligations") when and as the same shall become due and payable according to the terms thereof, it being understood that in no event shall the Guarantor be required to pay,to any person under, in respect of, or in connection with this Guaranty more than the Cap Amount and that the Guarantor shall not have any obligation or liability to any person relating to, arising ,out of or in connection with this Guaranty or the PSA other than as expressly set forth herein. In case of the failure of Beowulf punctually to make any such payment, Guarantor hereby agrees to make such payment, or cause such payment to be made, promptly upon demand made by Seller to Guarantor; provided, however that delay by Seller in giving such demand shall in no event affect Guarantor's obligations under this Guaranty. Guarantor's obligations under this Guaranty are separate and independent from the Obligations, and Seller may make demand under and enforce this Guaranty notwithstanding the fact that no demand is made on and no action is taken against Beowulf or any other party and notwithstanding that any such demand or action is stayed or enjoyed in a proceeding under the Code or otherwise. Guarantor shall make all payments due under this Guaranty without set-off, LA\1777081.9 LA\1777081:9 LA1TT770819 12. Repwohtattow- atid War,,;ah(le$. :Guarantor represelits, to Soller. that-, W17770.8:1 9 ].A,11777Q81,;8 � i EXHIBIT 2 FIRST AMENDMENT TO GUARANTY This FIRST AMENDMENT TO GUARANTY (this "Amendment") is entered into as of December , 2007, by and between the City of Vernon, California, a municipal corporationand a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City" or "Seller"), and Bicent Holdings LLC, a Delaware limited liability company ("Guarantor'). Seller and Guarantor are referred to herein sometimes individually as a "Party" and collectively as the "Parties." RECITALS A. The City and Bicent (California) Power LLC (formerly known as Beowulf (Vernon) Power LLC) ("Purchaser.') entered into that certain Purchase and Sale Agreement, dated as of October 8, 2007 (the "Purchase Agreement"). B. Pursuant to Section 8.6(b) of the Purchase Agreement, the City and Guarantor entered into that certain Guaranty, dated as. of October 8, 2007 (the "Guaranty"), pursuant to which Guarantor unconditionally and irrevocably guaranteed the payment of any damages payable under the Purchase Agreement -by Purchaser following the termination of the Purchase Agreement as a result of the breach by Purchaser of its obligations under the Purchase Agreement. C. The City and Purchaser' intend to enter into that certain Amended and Restated Purchase Agreement, dated as of even date herewith (the "A&R Purchase Agreement"). D. In connection with the transactions contemplated by the A&R Purchase Agreement, the Parties desire to amend the Guaranty pursuant to the terms and conditions set forth in this Amendment. E. Capitalized terms used but not defined herein shall have the meanings given to them in the Guaranty. AGREEMENT NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: ARTICLE 1. AMENDMENTS AND AGREEMENTS 1.1 Amendment of Guaranty. The Parties hereby agree to increase the Cap Amount and the amount of the Letter of Credit by $2,000,000 by replacing Section 2 of the Guaranty in its entirety and replacing it with the following: 2. Limitation on Liability; Letter of Credit. LA\1803641.2 (a) Notwithstanding any other provision of this Guaranty, Guarantor's obligations under this Guaranty shall not exceed the sum of the Cap Amount and the amounts, if any, that become due and payable under Paragraph 9. The "Cap Amount" is equal to $19.5 million; provided, however, that if the Letter of Credit (as defined below) is provided in accordance with Paragraph 2(b), the Cap Amount shall automatically be reduced to $17 million and the amounts, if any, that are drawn by Seller against the Letter of Credit shall further reduce the Cap Amount on a dollar for dollar basis. (b)- Not later than December 14, 2007, Guarantor agrees that it will deliver to Seller an irrevocable standby letter of credit in a stated amount equal to $17 million issued substantially in the form attached hereto as Annex A (the "Letter of Credit"). The Letter of Credit shall be issued by a bank of recognized standing located in the United States. (c) In the event that the senior, unsecured long-term debt rating of the bank issuing the Letter of Credit falls below A2 from Moody's Investor. Services, Inc. or A from Standard & Poor's Rating Group, Guarantor shall deliver to Seller a replacement letter of credit ` (the "Replacement Letter of Credit") reasonably acceptable to Seller no later, than ten (10) Business Days after such event. The Replacement Letter of Credit shall be issued by a bank of recognized standing with requisite ratings located in the United States. ARTICLE 2. MISCELLANEOUS 2.1 Governing Law. The validity, interpretation and effect of this Amendment is governed by and shall be construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines except to the extent that certain matters are preempted by Federal law or are governed by the law of the jurisdiction of organization of the respective Parties. 2.2 Counterparts. This Amendment may be executed in one or. more counterparts, each of which is an original, but all of which together constitute one and the same instrument: 2 LA\1803641.2 2.3 Limited Effect. This Amendment is intended to be a part of, and will serve as a valid, written amendment to, the Guaranty as required by Section 16(a) thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by implication or otherwise alter, modify, amend . or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Guaranty, all of which are ratified and affirmed in all respects and shall continue in full force and effect, and this Amendment will not operate as an extension or waiver by the Parties of any other condition, covenant, obligation, right, power or privilege under the Guaranty. This Amendment relates only to the specific matters covered herein, and shall not be considered to create a course of dealing or to otherwise obligate either Party to execute similar amendments or grant any waivers under the same or similar circumstances in the future. [Signature pages follow] 3 LA\1803641.2 IN WITNESS WHEREOF, the Parties have executed this First Amendment to Guaranty as of the date first above written. SELLER: CITY OF VERNON By: Name: Eric T. Fresch Title: City Administrator GUARANTOR: BICENT HOLDINGS LLC By: Name: Paul B. Prager Title: Manager S=1 IN WITNESS WHEREOF, the Parties have executed this First Amendment to Guaranty as of the date first above written. SELLER: CITY OF VERNON By: Name: Eric T. Fresch Title: City Administrator GUARANTOR: BICENT HOLDINGS LLC By: 7 .jt.kga::� Name: Paul B. Prag Title: Manager S-1 { The execution of this First Amendment to Guaranty by the City of Vernon is hereby affirmed and attested to by: CITY OF VERNON By: Name: �tANUE ! 0 Title: City Clerk S-2 EXHIBIT 3 EXECUTION VERSION AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT BY AND BETWEEN CITY OF VERNON, AND BICENT (CALIFORNIA) POWER LLC DATED AS OF , 2007 Dock US1:5108131A LA\1803500.5 TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS.......:.................................................................................................I 1.1 Defined Terms......................................................................................................... 1 1.2 Interpretation......................................................................................................... 11 ARTICLE 2 PURCHASE AND SALE......................................................................................12 2.1 Purchase and Sale of Assets..............................::................................................. 12 2.2 Excluded Assets.................................................................................................... 13 2.3 Liabilities.............................................................................................................. 15 2.4 Deposits, Purchase Price and Payment................................................................. 17 2.5 Closing ............ .................. ........................................................................ 19 2.6 Deliveries at Closing.................................................................. .................. 19 2.7 Recordation ................. ..........................................................................:........... 23 2.8 Non -Assignable Assets ....................... ........ 23 ARTICLE 3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER AT CLOSING ..................................... .............24 ............................. 3.1 Conditions Precedent to Closing........................................................................... 24 ARTICLE 4 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AT CLOSING ........................ 4.1 Conditions Precedent to Closing........................................................................... 25 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER................................26 5..1 Representations and Warranties with Respect to Seller ........................................ 27 5.2 Representations and Warranties with Respect to the Facility ............................... 30 5.3 Representations and Warranties with Respect to the Hoover Interest .................. 35 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER .......................36 6.1 Transaction Representations . .................. :............................................................. 37 6.2 Litigation...............................................................................................................37 6.3 Availability of Funds ................... 6.4 Acknowledgement of Passive Interests.....................................................: .......... 38 6.5 Brokers..................................................................................................................38 ARTICLE 7 COVENANTS OF SELLER................................................................................:.38 7.1 Access and Investigation....................................................................................... 38 7.2 Preservation of Assets....:...................................................................................... 39 7.3 Governmental Approvals, Assigned Agreement Consents and Agreements........ 39 7.4 Notifications to Purchaser........................................................................I............. 40 7.5 Commercially Reasonable Efforts...................................................................:.... 40 7.6 Insurance............................................................................................................... 40 7.7 Further Assurances; Post -Closing Assignments................................................... 41 7.8 Title....................................................................................................................... 41 i LA\1803500.5 7.9 Information Sharing ........................ 7.10 Financing Cooperation .................. 7.11 Certain Seller Repair Obligations.. .................................... .... ........ 41 ........................................................ 41 ........................................................ 42 ARTICLE 8 PURCHASER COVENANTS................................................................:..............43 8.1 Actions Before Closing Date................................................................................ 43 8.2 Assigned Agreement Consents, Approvals and Notifications ........I ...................... 43 8.3 Availability of Facility Records ..................................................... 8.4 Seller Marks.......................................................................................................... 44 8.5 Commercially Reasonable Efforts........................................................................ 44 8.6 Further Assurances; Post -Closing Assignments................................................... 44 ARTICLE 9 CERTAIN AGREEMENTS...................................................................................45 9.1 Regulatory Matters................................................................................................ 45 9.2 Taxes...............................................................................:....... ............................ 46 9.3 - Employment Matters..............:.............................................................................. 48 ARTICLE 10 TERMINATION; SURVIVAL............................................................................50 10.1 Rights to Terminate............................................................................................. 50 10.2 Effect of Termination.......................................................................................... 51 10.3 Survival................................................................................................................52 ARTICLE 11 LIMITED INDEMNITY......................................................................................52 11.1 Limited Indemnity............................................................................................... 52 11.2 No Recourse Against Third Parties..................................................................... 54 11.3 Defense of Claims............................................................................................... 54 ARTICLE 12 DISPUTE RESOLUTION 12.1 Dispute Resolution ........... 12.2 Informal Resolution.......... 12.3 Arbitration ........................ 12.4 Waiver of Jury Trial ......... ...............................................................56 ............................................................ 56 ............................................................ 56 ............................................................ 56 ............................................................ 57 ARTICLE 13 MISCELLANEOUS AGREEMENTS AND ACKNOWLEDGEMENTS .........57 13.1 Expenses.............................................................................................................. 57 13.2 Representations and Warranties Exclusive.......................................................... 57 13.3 Entire Document............................. ...:................................. 57 13.4 Schedules.............................................................................................................57 13.5 Counterparts.........................................................................................................58 13.6 Severability..........................................................................................................58 13.7 Assignability........................................................................................................58 13.8 Consents...............................................................................................................59 13.9 Captions............................................................................................................... 59 13.10 Governing Law..................................................................................................... 59 13.11 Limitations on Liability....................................................................................... 59 13.12 Notices................................................................................................................. 59 13.13 Liquidated Damages............................................................................................ 60 LA\1803500.5 13.14 Time is of the Essence.......................................................................................... 61 13.15 No Third Party Beneficiaries............................................................................... 61 13.16 No Joint Venture.................................................................................................. 62 13.17 Construction of Agreement................................................................................. 62 13.18 Conflicts, ....................................................................... ........ ......... .............. 62 13.19 Waiver of Sovereign Immunity ......................................................................... 62 LA\1803500.5 Exhibits Exhibit A Form of CFD (Hoover) Exhibit Form of Seller Subordinate Deed of Trust Exhibit C Form of Subordination Agreement Exhibit D Form of Lease Exhibit E-1 Form of Lender Consent (PPTA) Exhibit E-2 Form of Lender Consent (Lease) Exhibit F Form of Memorandum of Lease and Easements Exhibit G Form of PPTA Exhibit H Form of Interconnection and Transmission Services Agreement Exhibit I Form of Bill of Sale Exhibit J Form of Deed of Transfer Exhibit K Form of Assignment and Assumption Agreement Exhibit L Form of Opinion Schedules Schedule 1.1-FS Facility Site Schedule 1.1-HD Hoover Dam Uprating Project Schedule 1.1-PE Permitted Encumbrances Schedule 2.1(b) Electrical Interconnection Facilities Schedule 2.1(c) Pre -Ordered Equipment Schedule 2.1(d) Spare Parts Schedule 2.1(e) Permits Schedule 2.1(g) Assigned Agreements Schedule 2.1(1) Miscellaneous Assets Schedule 2.2(k) Seller Marks Schedule 2.2(m) Rights to Recovery Schedule 2.2(o) Other Excluded Assets Schedule 2.3(a) Other Assumed. Liabilities Schedule 2.4(b)(1) Prepaid Expenses Schedule 3.1(a) Purchaser Required Governmental Approvals Schedule 3.1(b) Required Consents Schedule 3.1(k) Performance Criteria Schedule 4.1(c) Seller Required Governmental Approvals Schedule 5.1(c) Violations and Required Filings Schedule 5.1(d) Seller Required Other Consents, Approvals and Notices Schedule 5.1(e) Financial Information Schedule 5.1(f) Affiliated Transactions Schedule 5.1(g) Litigation Schedule 5.1(h) Tax Liabilities Schedule 5.2(a)(1) Compliance with Governmental Rules and Permits Schedule 5.2(a)(2) Environmental Legal Compliance Schedule 5.2(b) Zoning and Land Use Schedule 5.2(c) Condemnation and Other Proceedings; Outstanding Collateral iv LA\1803500.5 Schedule 5.2(e) Sufficiency of Assets Schedule 5.2(f) Facility Contracts_ Schedule 5.2(i) Taxes Schedule 5.20) Seller's Employees Schedule 5.2(k) Absence of Changes Schedule 5.2(1) Insurance Schedule 5.2(m) Outage Schedule 5.3 Hoover Interest Schedule 5.3(b) Hoover Contracts Schedule 5.3(c) CFD (Hoover) Consents, Approvals and Notices Schedule 6.1(d) Purchaser's Required Consents, Approvals and Notices Schedule 8.6 Collateral, Letters of Credit or Bonds LA\1803500.5 PURCHASE AND SALE AGREEMENT This AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (this "Agreement') is made, as of , 2007, by and between the City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City" or "Seller"), and Bicent (California) Power LLC, a Delaware limited liability company ("Purchaser"). Seller and Purchaser are referred to herein sometimes individually as a "Party" and collectively as the "Parties." RECITALS A. Capitalized terms are defined in Article 1. B. The City owns that certain 134-megawatt natural gas -fired generating facility known as the Malburg Generating Station (as more particularly defined below; the "Facility") C. The City owns that certain 22-megawatt entitlement to energy from the Hoover Uprating Project pursuant to a power purchase agreement with the Western Area Power Administration (as more particularly defined below, the "Hoover Interest"). D. On October 8, 2007, Purchaser (formerly known as Beowulf (Vernon) Power LLC) and the City entered into a Purchase and Sale Agreement (the "Original Agreement") for the purchase of (i) the Facility, (ii) the economic benefits and burdens associated with the Hoover Interest, (iii) the economic benefits and burdens associated with the City's 11 megawatt interest in the Southern California Public Power Authority's ownership interest in the Palo Verde Nuclear Generating Station through December 31, 2030 (the "Palo Verde Interest") and (iv) the City's interests in each of the Mead -Phoenix Transmission Project and the Mead-Adelanto Transmission Project (collectively, the "Mead Transmission Interests"). E. Purchaser and the City desire to amend and restate the Original Agreement to terminate the obligation of the Purchaser to purchase from the City the Mead Transmission Interests and the Palo Verde Interest. F. Purchaser, desires to purchase, and Seller desires to sell the Facility, pursuant to the terms and conditions set forth in this Agreement. G. In connection with such purchase and sale, Purchaser, as lessee, and Seller, as lessor, desire to enter into a lease of the Facility Site and certain office space_ and' Purchaser and Seller desire to enter into the Related Agreements. H. Purchaser desires to acquire the economic benefits and burdens associated with the Hoover Interest pursuant to the CFD (Hoover), substantially in the form attached hereto as Exhibit A. NOW, THEREFORE, in consideration of the respective covenants and promises LA\1803500.5 contained herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows: ARTICLE 1 DEFINITIONS 1.1 Defined Terms. The following terms when used in this Agreement (or in the Schedules and Exhibits) with initial letters capitalized have the meanings set forth below: "Accounting Firm" has the meaning set forth in Section 9.2(j). "Affiliate" of a Person means any other Person that (a) directly or indirectly controls the specified Person; or (b) is controlled by or is under direct or indirect common control with the specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management or policies of the specified Person, directly or indirectly, whether through the ownership of voting securities, partnership or limited liability company interests, by contract or otherwise. "Agreement" means this Purchase and Sale Agreement, together with the Exhibits and Schedules. "Allocation Schedule" has the meaning set forth in Section 9.2(g). "Alternative Agreement" has the meaning set forth in Section 2.8(c). "Arbitrator" has the meaning set forth in Section 12.3. "Assets" has the meaning set forth in Section 2.1. "Assign" and "Assi" have the meaning set forth in Section 13.7. "Assigned Agreement Consent" means, with respect to any Assigned Agreement,. one or more letters, resolutions, consents or agreements sufficient to evidence the granting of all consent(s) required under such Assigned Agreement for the assignment to Purchaser of such Assigned Agreement in accordance with its terms. "Assigned Agreements" has the meaning set forth in Section 2.1O. - "Assignment and Assumption Agreement" has the meaning set forth in Section 2.6(a)(2). "Assumed Liabilities" has the meaning set forth in Section 2.3(a). "Benefit Plans" has the meaning set forth in Section 2.3(c)(10). "Bicent Hoover" means Bicent (California) Hoover LLC, a Delaware limited liability company and wholly -owned subsidiary of Purchaser. 1 LA\1803500.5 "Bill of Sale" has the meaning set forth in Section 2.6(a)(1). "Business Day" means a day other than Saturday, Sunday or a day on which banks are legally closed for business in the State of California. "CAISO" means the California Independent System Operator, a state chartered, nonprofit, public benefit corporation that controls the transmission facilities of all transmission owners that have released operational control of their transmission facilities to the CAISO and dispatches certain electric generation units and loads, or any successor entity performing the same functions. "CAISO Grid" means the system of transmission lines and associated facilities placed under the CAISO's operational control. "Capital Expenditures" means, for any period being measured hereunder, the aggregate of all expenditures (whether paid in cash or other assets or accrued as a liability (but without duplication)) during such period that, in conformity with GAAP; are required to be included in or reflected in a fixed asset account; provided, however, that Capital Expenditures shall include, whether or not such a designation would be in conformity with GAAP, any amounts characterized as capital expenditures under the Assigned Agreements. "CEC means the California Energy Commission. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§9601 et seq.). "CFD Hoover)" means that certain contract for differences, by and between Seller and Bicent Hoover, with respect to the Hoover Interest, substantially in the form attached hereto as Exhibit A. "City" has the meaning set forth in the Preamble "City Approval" means a final order or orders of the City that approves this Agreement in its entirety, and deems the City's, entry into and performance under the Agreement to be reasonable. "Claims" has the meaning set forth in Section 2.2(fl. "Closing" has the meaning set forth in Section 2.5. "Closing Conditions" has the meaning set forth in Section 3.1. "Closing Date" means the date on which the Closing takes place. "COBRA Continuation Coverage" has the meaning setforth in Section 9.3(h). "Code" means the Internal Revenue Code of 1986, as amended. 2 LA\1803500.5 "Commercially Reasonable Efforts means efforts which are reasonably within the contemplation of the Parties at the time of executing this Agreement and which do not require the performing Party to expend any funds other than expenditures which are customary and reasonable in transactions of the kind and nature contemplated by this Agreement in order for the performing Party to satisfy its obligations hereunder. For purposes of this Agreement, "Commercially Reasonable Efforts" 'include incremental costs incurred by the performing Party to cause its employees and advisors to take any actions which are reasonably necessary in respect of the required matter, including, without limitation, incremental payroll costs and other related expenses. "Confidentiality Aweement" has the meaning set forth in Section 7.1(b). "Deed of Transfer" has the meaning set forth in Section 2.6(a)(1). "Direct Claim" has the meaning set forth in Section 11.3(c). "Dispute' has the meaning set forth in Section 12:1: "Effects" has the meaning set forth in the definition of Material Adverse Effect. "Electrical Interconnection. Facilities" means the electric interconnection and transmission facilities on the Facility's side of the fence line as depicted in Schedule 2.1(b). "Emissions Rights" means allowances, emission reduction credits, offsets or other authorizations to emit air pollutants with respect to the Facility. "Environmental Laws" means any Governmental Rules relating to or imposing liability or standards of conduct with respect to the protection of human health, safety or the environment (including ambient air, soil, surface water; ground water, wetlands, land or subsurface strata), including Governmental Rules relating to (a) emissions, discharges, releases or threatened releases of Hazardous Substances into the environment, (b) manufacture, generation, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, and (b) human exposure to Hazardous Substances or conditions, including CERCLA, the Hazardous Materials Transportation Act (49 U.S.C. §§ 5101 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601 et seq.), the Oil Pollution Act (33 U.S.C. §§ 2701 et seq.), the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.), the Emergency Planning and Community Right -to -Know Act (42 U.S.C. §§ 11001 et seq.), the Endangered Species Act (16 U.S.C. §§ 1531 et seq.), the Porter -Cologne Water Quality Control Act (Cal. Water Code §§ 13000 et seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code §§ 25249.5 et seq.), the Hazardous Substance Account Act (Cal. Health & Safety Code §§ 25300 et seq.), the Hazardous Waste Control Act (Cal. Health & Safety Code §§ 25100 et seq.), the California Clean Air Act (Cal. Health & Safety Code §§ 39000 et seq.), the California Endangered Species Act (Cal. Fish & Game Code §§ 2050 et seq.), the Warren-Alquist Act (Cal. Public Resources Code §§ 25410 et seq.) and the California Native Plant Protection. Act (Cal, Fish & Game Code § § 1900 et seq.). 3 LA\1803500.5 "Environmental Permit" means any Permit required under 'applicable Environmental Laws. "Equipment" has the meaning set forth in Section 2.1(0. "ERISA Affiliate" and "ERISA Affiliate Plans" have the respective meanings set forth in Section 2.3(c)(10). "Excluded Assets" has the meaning set forth in Section 2.2. "Excluded Liabilities" has the meaning set forth in Section 2.3(c). "Facility" means that certain 134 MW full load combined cycle, natural gas -fired, electric power plant located at 2715 East 50'h Street in the City. "Facility Assets" means all assets set forth in Sections 2.1(a)-(f) and (h)-(k). "Facility Contracts" has the meaning set forth in Section 5.2(f). "Facility Contract Employees" means, as of any time, the employees then employed by PLG pursuant to the PLG Agreement who are dedicated to the Facility. "Facility Direct Employees" means, as of any time, the employees then employed by Seller who are dedicated to the Facility. "Facility Employees' means the individuals regularly performing services at or in connection with the Facility, listed on Schedule 5.2(i). Lease. "Facility Records" has the meaning set forth in Section 2.1(h). "Facility Site" means the land described on Schedule 1.1-FS that is subject to the "FERC" means the Federal Energy Regulatory Commission. "Final Closing Statement" has the meaning set forth in Section 2.4(b)(3). "Final, Purchase Price Adjustment has the meaning set forth in Section 2.4(b)(4). "Financial Statements" has the meaning set forth in Section 5.1(e). "CJAAP" means generally accepted accounting principles set forth in the opinions and pronouncements I of the Accounting Principles Board and the American Institute of Certified Public Accountants and the Financial Accounting Standards Board or in such other statements by such other entity as may be in general use by significant segments of the accounting profession as in effect from time to time. "Governing Documents" means, with respect to any Person, the documents under which such Person is organized and existing, including, in the case of a Person that is a 4 LA\1803500.5 corporation, its articles of incorporation and bylaws, in the case of a Person that is a limited liability company, the certificate filed with the jurisdiction in which it was organized and any, applicable limited liability company agreement, or in the caseof a Person that is a partnership, the certificate filed with the jurisdiction in which it was organized and any applicable partnership agreement. In the case of the City, it means the City's charter. "Governmental Approval" means any action, approval, consent, waiver, exemption, variance, franchise, order, Permit, authorization, right or license of or from a Governmental Authority. "Governmental Authority" means any federal, state, local,tribal or other governmental, quasi -governmental, regulatory or administrative agency, authority, commission, department, board, subdivision, court, tribunal, official, arbitrator, arbitral body or other body. "Governmental Rules" means all applicable laws (including the common law), statutes, treaties, rules, regulations, ordinances, codes, judgments, enactments, decrees, injunctions, writs and orders, decisions, directives and agreements, authorizations or other restrictions of or enacted by any Governmental Authority, or any binding interpretation or administration of any of the foregoing, "Hazardous Substance" means, collectively, (a) any chemical, material or substance that is listed or regulated under applicable Governmental , Rules as a "hazardous" or toxic substance or waste, or as a contaminant or pollutant or, words of similar import, (b) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls and (c) any other chemical or other material or substance, exposure to which is prohibited, limited or regulated by any Governmental Rules, including but not limited to Environmental Laws. "Hoover Contracts" has the meaning set forth in Section 5.3(b). "Hoover Dam Uprating Project" means the Hoover Dam Uprating Project, as described more particularly on Schedule 1.1-HD. "Hoover Interest" means Seller's interests consisting of that certain 22-megawatt entitlement to energy from the Hoover Dam Uprating Project pursuant to an electric services contract with the Western Area Power Administration: "HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Independent Engineer" means R.W. Beck, Inc., or such other independent engineer as may be mutually agreed upon by the Parties. "IE's Report" means that certain Independent Engineer's Report by R.W. Beck, Inc. dated May 31, 2007 regarding the Facility. "Indemnifiable Loss" has the meaning set forth in Section 1 1.1 (a). 5 LA\1803500.5 "Indemnifying Party" has the meaning set forth in Section 11.1(d). "Independent Accountant" has the meaning set forth in Section 2.4(b)(3). "Interconnection and Transmission Services Agreement" means that certain Interconnection and Transmission Service Agreement to be entered into as of the Closing Date by and between Seller and Purchaser, substantially in the form attached hereto as Exhibit H. `.`JAMS" means Judicial Arbitration and Mediation Services, Inc. "Knowledge" means the actual knowledge after reasonable investigation, with respect to Seller each of Eric Fresch, Donal O'Callaghan, Abraham Alemu and Mark Thompson, and with respect to Purchaser each of Douglas Halliday and Nazar Khan. "Lease" means the lease to be entered into as of the Closing Date between the City, as Lessor, and Purchaser, as Lessee, substantially in the form attached hereto as Exhibit D. "Lender" means one or more financial institutions providing debt, mezzanine or subordinated financing in one or more tranches for the financing or refinancing of the transaction contemplated by this Agreement for Purchaser. "Lender Consent" means the consents to be entered into as of the Closing Date by and among Seller, Purchaser and the applicable lender with respect to the collateral assignment of the rights and obligations under the Related Agreements to such applicable lender, substantially in the form of Exhibit E-1 and Exhibit E-2. "Liens" means (i) with respect to real property, liens, charges, pledges, options, mortgages, deeds of trust, security interests, claims, easements, and other encumbrances affecting title to or possession of real property and (ii) with respect to personal property, liens, charges, pledges, options and security interests, in the case of (i) or (ii), whether imposed by law, agreement, understanding or otherwise. "Losses" has the meaning set forth in Section 11.2. "LTSA" means that certain Services Agreement between Siemens Demag Delaval Turbomachinery, Inc., a Delaware corporation, and Seller, dated September 26, 2007. A"Material Adverse` Effect" means any adverse event, condition, effect, change, event, development or circumstance (each, an "Effect") that, individually or when considered together with all other Effects, has had or would reasonably be expected to have a material adverse effect on the business, assets, condition (financial or otherwise) or results of operations of the Assets (taken as a whole); provided, however, that, in no event shall any of the following, alone or in combination, be deemed to constitute, nor shall any of the following be taken into account in determining whether there has occurred, a Material Adverse Effect: (i) Effects resulting from conditions generally affecting the electric power generation industry or the U.S. or global economy or capital markets as a whole, to the extent that such conditions do not have a disproportionate adverse impact on the Assets; (ii) Effects resulting from changes in Governmental Rules to the extent that such changes do not have a disproportionate adverse 6 LA\I803500.5 impact on the Assets; (iii) Effects of any war, act of terrorism, civil unrest or similar event to the extent that such conditions do not have a disproportionate adverse impact on the Assets; (iv) Effects of any action taken; or any omission to act, by Purchaser or any of its Affiliates that constitutes a breach of this Agreement or any Related Agreement; and (v) Effects resulting from any adverseruling in the City's TRR Case. "Memorandum of Lease and Easements" means that certain Memorandum of Lease and Easements to be entered into as of the Closing Date between the City and Purchaser, substantially in the form of Exhibit F. "Miscellaneous Assets" means those assets set forth on Schedule 2.1(1). "Module" has the meaning set forth in .Section 7.11(a)(2). "Non -Recourse Person" has the meaning set forth in Section 11.2. "Notice of Claim" has the meaning set forth in Section 11.1(h). "Objection Statement" has the meaning set forth in Section 2.4(b)(4). "Party" and "Parties" have the meanings set forth in the introductory paragraph hereto. "Party Group", has the meaning set forth in Section 11.2. "Per Diem Taxes" has the meaning set forth in Section 9.2(a)(i). "Permits" means any material permit, authorization, certification, license, order, exemption or plan required under applicable Governmental Rules for the ownership or operation of the Facility, including consents and approvals relating to Emissions Rights to the extent granted, approved or consented to by a Governmental Authority. "Permitted Encumbrances" means with -respect to the Assets: (i) all encumbrances set forth on Schedule 1.1-PE, and in addition thereto, encumbrances or liens constituting Assumed Liabilities; (ii) inchoate mechanics', materialmen's, warehouseman's and similar liens for sums not yet due; (iii) zoning, building codes and other land use laws regulating the use or occupancy of the Facility Site or the activities conducted thereon which are imposed by any Governmental Authority having jurisdiction over the Tacility Site but solely to the extent same do not impair the ability of Purchaser to use and operate the Facility in accordance with the Permits consistent with past practice; '(iv) the City's fee interest in the property underlying the Lease; (v) Liens for Taxes not yet due and payable or being contested in good faith, for which adequate reserves' or collateral have been provided; (vi) any Lien on or affecting the City's interest in the property underlying the Lease but only to the extent such Lien is subordinate to the Lease as evidenced by the Subordination Agreement or the Title Report; (vii) any Lien on the Assets granted by Purchaser or its; Affiliates, including to the Lender; (viii) the Lien under the Seller Subordinate Deed of Trust; (ix) the Memorandum of Lease and Easements; and (x) any other encumbrances, if any, to be recorded pursuant to this Agreement against the Assets. 7 LA\1803500.5 "Person" means an individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization or any Governmental Authority. "Petition" has the meaning set forth in Section 5.2(a)(1)(ii). "Phase I Report" means that certain ASTM-1527 Phase I Environmental Assessment Report dated as of August 2, 2007, respecting the Facility, and prepared by R.W. Beck, Inc. "PLG" means Project Labor Group, a California corporation. "PLG Agreement" means that certain Amended and Restated Services Agreement, dated July 1, 2005, by and between the City and PLG, as amended by that certain Amendment No. One to Amended and Restated Services Agreement, dated May 7, 2007. "Post -Closing Tax Period" means any Tax period beginning after the Closing Date and the portion of any Straddle Period beginning after the Closing Date. "PPTA" means that certain Power Purchase Tolling Agreement to be entered into as of the Closing Date between the City and Purchaser, substantially in the form of Exhibit G. "Pre -Closing Tax Period" shall mean any Tax period ending on or before the Closing Date and the portion of any Straddle Period ending on the Closing Date. "Preliminary Closing Statement" has the meaning set forth in Section 2.4(b)(2). "Prudent Industry Practices" means any of the practices, methods and acts recommended by equipment manufacturers or generally engaged in or approved by the electric generation industry in the State of California during the relevant time period for natural gas fired electric generating facilities consistent with Governmental Rules or Permits. Prudent Industry Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be a spectrum of reasonableand prudent practices, methods, standards and procedures. "Purchase Price" means $287,500,000. "Purchase Price Adjustment" has the meaning set forth in Section 2.4(b)(1). "Purchaser" has the meaning set forth in the Preamble. "Purchaser Group" has the meaning set forth in Section 11.2. "Purchaser Indemnitee" has the meaning set forth in Section 11.1(b). "Purchaser Required Governmental Approvals" has the meaning set forth in Section 3.1(a). 8 LA\1803500.5 "Related Agreements" means, individually or collectively, as the context may so require: (i) the PPTA, (ii) the Assignment and Assumption Agreement, (iii) the CFD (Hoover), (iv) the Interconnection and Transmission Services Agreement, (v) the Lease, (vi) the Subordination Agreement, (vii) the Lender Consents, (viii) the Seller Subordinate Deed of Trust and (ix) the Memorandum of Lease and Easements. "Release" means any releasing,disposing, discharging, injecting, spilling, leaking, leaching, pumping; dumping, emitting,. escaping, ' emptying, seeping, dispersal, migration, transporting or placing of Hazardous Substances, including without limitation, the moving of Hazardous Substances through, into or upon, any land, soil, surface water, ground water or air, or otherwiseentering into the environment.' "Required Consents" has the meaning set forth in Section 3.l(b). "Retained Books and Records" means (a) all official seals, minute books, resolutions, charter documents, and financial records of Seller, (b) such files, books and records, including original tax records, to the extent they relate primarily to (i). any of the Excluded Assets, (ii) Excluded Liabilities or (iii) the organization, existence, capitalization or debt financing of Seller, (c) such books, files and records (or to the extent reasonable, only such portions thereof that could be redacted) that would otherwise constitute a Facility Record but for the fact that disclosure of such books, files or records (or unredacted portions thereof) could (i) waive any attorney client, work product or like privilege, (ii) disclose information about Seller that is unrelated to the Assets, '(iii) disclose information about Seller pertaining to energy or project evaluation methodologies, economic evaluation of the Assets, energy or natural gas price curves or projections or other economic predictive models or (iv) all books and records prepared in connection with or related to any transactions with other Persons relating to a potential sale of the Assets, including bids received from other Persons prior to (but not after) the date hereof with respect to and economic evaluations relating- to the Assets or the Assumed Liabilities, provided that the documents in this subsection (c) related to the development, ownership or operation of the Facility shall be provided upon written notice by Purchaser, to .the extent permitted by Governmental Rules or applicable privileges or (d) all personnel files and medical records relating to the Facility Employees ,(except such files and records as may be transferred to Purchaser without violating Governmental Rules or applicable employer -employee privileges). "Seller" has the meaning set forth in the Preamble. "Seller Indemnitee" has the meaning set forth :in,Section 11.1(a). "Seller Marks" has the meaning set forth in Section 2.2(k). "Seller Required Governmental Approvals' has the meaning set forth in Section "Seller Subordinate Deed of Trust means that certain subordinate deed of trust, assignment of rents, security agreement and fixture filing to be entered into as of the Closing Date by Purchaser in favor of the City substantially in the form of Exhibit C. to secure Purchaser's obligations under the PPTA. 9 LA\1803500.5 "Seller's Account" means the bank account designated by Seller in writing to Purchaser. "Spare Parts" has the meaning set forth in Section 2.1(d). "Straddle Period" means any Tax period beginning before the Closing Date and ending after the Closing Date. "Subordination Agreement" means that certain Subordination of Deed of Trust Agreement to be entered into as of the Closing Date, by and among Seller, Purchaser and the Lender, substantially in the form attached hereto as Exhibit C. "Supplemental IE's Report" means that certain Supplement Independent Engineer's Report by the Independent Engineer addressed to Seller and Purchaser, as described in greater detail in Section 3.1(k). "Tax" means any federal; state, : local or foreign income, gross receipts, license, payroll, employment, excise, , severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property (including assessments, fees or other charges based on the use or ownership of real property), personal property, sales, use, transfer, registration, value added, alternative or add -on minimum, estimated tax, or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not, including, without limitation, any item for which liability arises as a transferee or successor -in -interest. "Tax Claim" has the meaning set forth in Section 9.2(e). "Tax Return" means any return, report, information return, schedule, certificate, statement or other document (including any related or supporting information) filed or required to be filed with, or, where none is required to be filed with a Governmental Authority, the statement or other document issued by, a Governmental Authority in connection with any Tax. "Third Party Claim" has the meaning set forth in Section 11.3(a). "Title Report" means a title report, dated as of the Closing Date, from First American , Title Company, or. another title insurance company reasonably acceptable to Purchaser, with respect to the real property interests subject to the Lease. "Transferred Employee" has the meaning set forth in Section 9.3(c). "Treasury Regulation" means the temporary and final Treasury regulations promulgated under the Code. "TRR" means the City's Transmission Revenue Requirement which reflects the City's costs associated with all transmission interests that the City has placed under operational control of the CAISO, as filed with FERC on November 9,. 2000, or any subsequent filing by Vernon with FERC after the Effective Date. 10 LA\1803500.5 "TRR Case" means, collectively, Case No. , EL00-105 before. FERC, and Case Nos. 05-1402 and 06-1246 before the United States Court of Appeals for the District of Columbia Circuit, or any subsequent proceeding before a Governmental Authority relating to the same subject matter. "UCC Financing Statement" means one or moreUCC-1 financing statements in a form reasonably acceptable to Seller to perfect the liens asserted pursuant to the Seller Subordinate Deed of Trust. "Union" has the meaning set forth in Section 5.2(i)(3). 1.2 Interpretation. In this Agreement, unless a clear contrary intention appears: (a) the singular number includes the plural number and vice versa; (b) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in .any other capacity; (c) reference to any gender includes the other gender; (d) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended: or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; (e) reference to any Article, Section, Schedule or Exhibit means such Article, Section, Schedule or Exhibit to this Agreement, and references in any Article, Section, Schedule, Exhibit or definition to any clause means such clause. of such Article, Section, Schedule, Exhibit or definition; (f) "hereunder," "hereof," "hereto" and words of similar import are references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof, unless otherwise specified; (g) "including" (and correlative terms) means "including without limitation" and "including, but not limited to;" (h) relative to the determination of any period of time, "from" means "from and including," "to" means "to but excluding" and "through" means "through and including;" (i) examples shall not be construed to limit, expressly or by implication, the matter they illustrate; (j) reference to any law (including statutes and ordinances) means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; 11 LA\1803500.5 (k) except where the context otherwise requires, "or" shall have the inclusive meaning frequently designated by "and/or' and (1) references to Exhibits that are "substantially in the form" shall mean that the Parties may make conforming changes as necessary to reflect the nature of the transaction or make other reasonable accommodations to facilitate the Closing but shall not require the Parties to accept changes that materially affect the agreement of the Parties as. evidenced in such Exhibit. ARTICLE 2 PURCHASE AND SALE 2.1 Purchase and Sale of Assets. At the Closing, subject to the terms and conditions of this Agreement, including satisfaction (or waiver by the Party entitled thereto) of the Closing Conditions and the closing conditions set forth in Article 4, Seller will sell, convey, assign;: transfer and deliver, and Purchaser will purchase and acquire from Seller, free and clear of any Liens other than Permitted Encumbrances, all of Seller's right, title and interest in and to the Assets; including the Assets identified below, but excluding the Excluded Assets (collectively, the "Assets'): (a) (i) all buildings, improvements, structures and fixtures located at the Facility Site, and (ii) easements, privileges, rights -of -way, licenses and other rights pertaining to or accruing for the benefit of the Facility Site, in each case, except as expressly granted pursuant to the Lease; (b) the Electrical Interconnection Facilities set forth on Schedule 2.1(b); (c) other than the fixtures identified on Schedule 2.1(c), all equipment and materials including turbines, generators, transformers, tractors, trailers, vehicles (to the extent dedicated to the ongoing operation of the Facility), communications equipment, facilities, inventory (other than spare parts), machinery, engines, goods, supplies, furniture, fixtures, keys, furnishings, tools, software and hardware integrated with other Equipment (but not. including the personal computers identified on Schedule 2.2(n) and any software thereon that is not specific to the Facility Assets) and other tangible personal property owned by Seller and. related primarily to the development, engineering, procurement, construction, ownership and ,:operation of the Facility and located at the Facility Site or stored off -site, and including all contracts for equipment and materials which have been paid for and not yet delivered, including those set forth in Schedule 2.1(c) (collectively, the "Equipment"), and, all warranties and guarantees, express or implied, existing for the benefit of Seller in connection with the foregoing; (d) the spare parts listed on Schedule 2.1(d) (the "Spare Parts"); (e) to the extent assignable, the Permits listed on Schedule 2.1(e), including all Emissions Rights, and all other Permits, if any, primarily related to the. Facility and all pending applications therefor or renewals thereof; 12 LA\1803500.5 (f) the rights to the name "Malburg Generating Station," and a nonexclusive, royalty -free, transferable and perpetual right and license to use Seller's intellectual property, licenses, patents, trademarks, copyrighted materials, know-how, trade secrets, confidential or proprietary information, technical information, blueprints, software and process technology in connection with the development, engineering, procurement, construction, ownership or operation of the Facility; provided, however, that any confidential or proprietary information of Siemens shall be transferred only upon, and subject to, obtaining the consent of Siemens, which Seller shall use Commercially Reasonable Efforts to obtain; . (g) (i) the assigned agreements set forth on Schedule 2.1(g), and (ii) at Purchaser's option, any or all of Seller's right, title and interest in and to the other contracts, agreements, purchase commitments; for materials, supplies, storage or other services and personal property leases, whether or not entered into in the ordinary course of business; relating principally to the Facility, to the extent that such may be assigned (collectively, the "Assigned Agreements"); (h) subject to Section 7.9, all 'owned information, files, books, records; correspondence (including with Governmental Authorities), data, plans, specifications, procedures, contracts, addresses and recorded knowledge relating primarily to the Facility (in each case whether in electronic or paper form, but if in electronic form only to the extent reasonably retrievable and not including e-mails), including all construction and development, operation, generation and hydrological records, service and repair records, equipment logs, operating documents, specifications, operating guides, service and warranty records, insurance claims and reports, safety, compliance and maintenance manuals, studies, reports, diagrams and other similar documents relating primarily to the development, construction, operation, and maintenance of the Facility (the "Facility Records"); provided, however, that Purchaser shall not acquire or obtain the Retained Books and Records; (i) insurance proceeds received or to be received in connection with the Facility Assets, and all pending insurance claims, if any, by Seller in respect thereof, .in each case for any perio& arising after the date of this Agreement;' (j) warranty claims against manufacturers and other suppliers in connection with the Assets; (k) all other claims against third parties, if any, with respect to the Facility or the Assets; and (1) the Miscellaneous Assets identified on Schedule 2.1(1). 2.2 Excluded Assets. Nothing in this Agreement shall constitute or be construed as conferring on Purchaser, and Purchaser is not hereby acquiring the properties and assets of Seller listed or described in this Section 2.2 (all such properties and assets not being acquired by Purchaser are herein referred to as the "Excluded Assets"): (a) all of Seller's cash and cash equivalents, marketable securities, prepaid expenses, advance "payments, surety accounts, deposits and other similar prepaid items (including for the purchase of natural gas), checks in transit and undeposited checks; 13 LA\1803500.5 (b) any assets, property and other rights held or owned by Seller not related primarily to the Assets and not otherwise reasonably required for the ownership or operation of the Facility consistent with past practice; (c) all of Seller's accounts and notes receivable relating to the Assets, or any of them (as the case may be) as of 11:59 P.M. on the Closing Date; (d) forecasts and other proprietary information of Seller that do not relate solely to the operation and maintenance of the Facility, provided that nothing in this Section 2.2 U shall limit Purchaser's rights and license to use certain proprietary information as provided in Section 2.1(f); (e) all of Seller's rights under contracts that are not Assigned Agreements; (f) any and all rights, demands, claims, credits, allowances, rebates, causes of action, known or unknown, pending or threatened, including fraudulent conveyance claims, or rights of set-off (collectively, "Claims"), of Seller; provided; however, that Excluded Assets shall not include Claims described in this paragraph (f) against counterparties to any Assigned Agreement in their capacities as such or any Assets transferred under Sections 2.1(i), 0) or (k); (g) notwithstanding anything in Section 2.2(D above, any Claims or defenses against Siemens arising prior to the Closing Date including any claims or defenses attributable to the outage on September 27, 2007 or the circumstances related thereto; (h) all rights to Claims, refunds or adjustments with respect to Excluded Assets, all other refunds or adjustments relating to any proceeding before any Governmental Authority relating to the period prior to the Closing Date and all rights to insurance proceeds or other insurance recoveries to the extent relating to Excluded Liabilities; (i) all office supplies and other consumables used in the ordinary course of business of Seller that would constitute a Facility Asset (if owned by Seller on the Closing Date) that are used in the ordinary course of business during the period from the date hereof until the Closing Date; - 0) all rights of Seller arising under this Agreement and under any other agreement between Seller and Purchaser entered into in connection with this Agreement;' (k) all rights to or goodwill .represented by or pertaining to all names, marks, trade names, trademarks and service marks incorporating the name Seller or any other name set forth on Schedule 2.2(k) (but not including the rights to or goodwill represented by the name "Malburg Generating Station") (the "Seller Marks") and any brand names or derivatives thereof no matter how used, whether as a corporate name, domain name, or otherwise and including the corporate design logo associated with Seller Mark or variant of Seller Mark; (1) all Retained Books and Records; (m) all of Seller's rights to recovery of collateral posted as bond or given to obtain letters of credit and rights to recover amounts drawn or paid on letters of credit related to 14 LA\1803500.5 the relevant Assets to the extent disclosed on Schedule 2.2(m), provided that Seller shall provide 30 days notice prior to any recovery thereof; (n) the personal computers at the Facility Site set forth on Schedule 2.2(n), any software on the personal computers of the Facility Site that is not specific to .the Facility Assets and any software licensed by third parties to Seller unless the license agreement for such software is assignable by Seller to Purchaser; (o) any assets set forth on Schedule 2.2(o); and (p) any interest in Seller's real property located adjacent to or outside of the Facility Site, except as expressly set forth in the Lease. 2.3 Liabilities. (a) Assumed Liabilities. At the Closing, subject to the terms and conditions of this Agreement; including satisfaction (or waiver by the Party entitled thereto) of the Closing Conditions and the closing conditions set forth in Article 4, Purchaser shall assume, and shall be solely and exclusively liable for, the liabilities set forth below, the liabilities set forth in Schedule 2.3(a) and no others (collectively, the "Assumed Liabilities"). (1) all liabilities and obligations of Seller under the Assigned Agreements, to the extent arising or occurring after the Closing Date; (2) all liabilities and obligations of Seller under the Permits assigned to Purchaser hereunder to the extent arising or occurring after the Closing Date;, (3) all liabilities and obligations relating to the Assets to the extent arising or occurring after the Closing Date except to the extent specifically provided otherwise elsewhere in this Agreement; (4) all liabilities and obligations for the remediation or cleanup of the Facility Site under applicable Environmental. Laws attributable to Releases arising or occurring after the Closing Date; except for (i) the Excluded Liability set forth in Section 2.3(c)(9) or (ii) any applicable Release not otherwise later shown by Seller (with the burden of proof on Seller, if prior to the third anniversary of the Closing) or Purchaser (with the burden of proof on Purchaser, on or after the third anniversary of the Closing) to have predated the Closing Date; and (5) all liabilities and obligations of Seller relating to the Facility Employees who accept Purchaser's offer of employment, to the extent arising or occurring after the Closing Date. (b) Limitation. Nothing contained in this Section 2.3 or in any instrument of assumption executed by Purchaser at the Closings shall _release or relieve Seller from its respective representations, warranties, covenants and agreements contained in this Agreement or any certificate, schedule, instrument, agreement or document executed pursuant hereto or in connection herewith. 15 LA\1803500.5 (c) ExcludedLiabilities. Except as otherwise expressly set forth in this Agreement, Purchaser does not assume or agree to pay, satisfy, discharge or perform, and shall not be deemed by virtue of the execution and delivery of this Agreement or any document delivered in connection with this Agreement, or as a result of the consummation of the transactions contemplated by this Agreement, to have assumed, or to have agreed to pay, satisfy, discharge or perform, any liability, obligation or indebtedness of Seller, whether primary or secondary, direct or indirect, known or unknown, contingent or absolute, determined or indeterminable (all such liabilities and obligations not assumed by Purchaser being referred to herein as the "Excluded Liabilities"). Without limiting' the generality of the foregoing, the following shall be Excluded Liabilities: (1) all liabilities and obligations with respect to trade accounts payable (other than those under Assigned Agreements). arising in connection with the Assets and in existence on the Closing Date; (2) liabilities or obligations associated with or arising from the Excluded Assets and the 'ownership, operation and conduct of any business by Seller, its Affiliates or any of its successors in interest in connection therewith;: (3) liabilities or obligations of Seller associated with or arising under any agreement other than an Assigned Agreement; (4) liabilities or obligations of Seller resulting from entering into, performing its respective obligations pursuant to or consummating the transactions contemplated by this Agreement or in connection with Seller's obtaining any consent, authorization or approval necessary for it to sell, convey, assign, transfer or deliver the Assets to Purchaser hereunder; (5) liabilities or obligations of Seller with respect to Taxes and liabilities or obligations of Seller for Taxes attributable to the Assets for any Pre -Closing Tax Period (including, without limitation, any liabilities or obligations pursuant to any Tax sharing, Tax indemnification or similar agreement);, (6) , except for any liabilities or obligations arising under or relating to Assigned Agreements, liabilities or obligations of Seller representing indebtedness for money borrowed or the deferred portion of the purchase price for any asset (and any refinancing thereof); (7) except as otherwise provided in this Agreement, liabilities or obligations arising from any injury to or death of any person or damage to or destruction of any property relating to the Assets (including, without limitation, workers' compensation claims, discrimination, wrongful discharge, or unfair labor practice), whether based on negligence, breach of warranty, strict liability, enterprise liability or any other legal or equitable theory arising from actions by, for, or on behalf of Seller or any other person or entity, and to the extent arising, pending or threatened on or before the Closing Date; 16 LA\1803500.5 (8) except as otherwise provided in this Agreement, liabilities or obligations of Seller relating to the Facility Employees, to the extent arising or occurring on or before the Closing; (9) liabilities, or obligations of Seller (i) for civil fines or.penalties to the extent arising from any noncompliance or violation of any applicable Environmental Law relating to the Assets or the activities of Seller prior to the Closing Date, and (ii) remediation or cleanup of the Facility Site under applicable Environmental Laws attributable to Releases arising or occurring prior to the Closing Date, includingfrom from the Historical Recognized . Environmental Condition relating to the prior underground storage tanks as described in the Phase I Report, but only to the extent any such liabilities or obligations, or the applicable Release, is otherwise later shown by Seller (with the burden of proof on Seller, if prior to the third anniversary of the Closing) or Purchaser (with the burden of proof on Purchaser, on or after the third anniversary of the Closing) to have predated the Closing Date; (10) any liabilities, obligations or responsibilities (whether contingent or otherwise) relating to any "employee benefit plan" (as defined in Section 3(3) of ERISA) maintained by Seller, and any trade or business (whether or not incorporated) which are or have ever been under common control, or which are or have ever been treated as a single employer, with Seller under Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") or to which Seller and any ERISA Affiliate contributed thereunder (the "ERISA Affiliate Plans"), including any multiemployer plan, maintained by, contributed to, or obligated to contribute to, at any time, by Seller or any ERISA Affiliate (hereinafter referred to as "Benefit Plans"), including without limitation any liability (i) to the Pension Benefit Guaranty Corporation under Title IV of ERISA; (ii) with respect to non-compliance with the notice and benefit continuation requirements of COBRA; (iii) with respect to any non compliance with ERISA; or (iv) with respect to any suit, proceeding or claim which is brought against any Benefit Plan, ERISA Affiliate Plan, any fiduciary or former fiduciary of any such Benefit Plan or ERISA Affiliate; and (11) all liabilities and obligations of Seller relating to the TRR Case; including any obligation to pay refunds for monies collected pursuant to the TRR or any other liability or obligation to pay refunds to customers for any period prior to the Closing Date. 2.4 Deposits, Purchase Price and Payment. The Purchase Price shall be payable by Purchaser at such time and in accordance with the followingterms: (a) Payment of Purchase Price. On the Closing Date, Purchaser shall deliver the Purchase Price, as adjusted by the Purchase Price Adjustment, by wire transfer of immediately available funds to Seller'.s Account: (b) Purchase Price Adjustments. (1) ' For purposes of this Section 2.4, the "Purchase Price Adjustment" shall mean the amount set forth in the Preliminary Closing Statement, whether positive or negative, that is the sum of: (i) all amounts paid or to be paid directly or indirectly by Seller for Capital Expenditures (including, without limitation, amounts withheld from distributions made 17 LA\1803500.5 to Seller) with respect to any of the Assets between the date hereof and the Closing Date, except for Seller's expenses contemplated in Section 7.11; (ii) the expenses prepaid by Seller with respect to the :Assets for any period after the Closing Date, to the extent set forth in Section 2.4 Uc (other than periodic charges prorated pursuant to Section 2.4(c) or as set forth in Schedule 2,4(b)(1)); and (iii) the amount, if any, by which the acquisition of spare parts and inventory with respect to the Facility is greater than the consumption of the same by Seller between the date hereof and the Closing Date, but only to the extent such amount exceeds $250,000 in the aggregate, provided that the cost of any spare parts purchased to satisfy Seller's obligations under Section 7.11 shall not be into account for purposes of a price adjustment under this Section 2.4(b)(1); minus the sum of. (A) any revenuereceived by Seller in respect of the Assets for periods after the Closing Date; (B) any liability for expenses assumed or satisfied by Purchaser with respect to the Assets for any period before the Closing Date, including the expenses set forth in Section 2.4(c); and (C) the amount, if any, by which the consumption of.. spare parts and inventory with respect to the Facility is greater than the acquisition of the same by Seller between the date hereof and the Closing Date, but only to the extent such amount exceeds-$250,000 in the aggregate. Notwithstanding anything herein to the contrary, except as set forth in Section 7.11, the aggregate of the amounts or expenses paid by Seller in connection with Section 2.4(b)(1)(i) above shall not exceed $500,000 without the prior written consent of Purchaser, and shall not, in any event, exceed $1,000,000. Notwithstanding anything herein to the contrary, any amounts paid by Seller prior to the Closing with respect to the LTSA shall not be deemed a prepaid expense and shall not otherwise increase the Purchase Price. The Purchase Price Adjustment shall also reflect any prorations pursuant to Section 2.4(c). (2) As promptly as possible, but in any event no later than ten (10) days prior to the Closing Date, Seller shall prepare and deliver to Purchaser a reasonably detailed statement (the "Preliminary Closing Statement") setting forth Seller's reasonable good faith estimate of the Purchase Price Adjustment. As set forth in Section 2.4(a), the Purchase Price shall be adjusted to reflect the Purchase Price Adjustment as calculated in the Preliminary Closing Statement. (3) No later than ninety (90) days after the Closing Date, Purchaser shall prepare and deliver to Seller a reasonably detailed statement (the "Final 'Closing Statement") setting forth Purchaser's reasonable good faith calculation of the Purchase Price Adjustment dated as of the close of business on.the Closing Date. Upon receipt of the Final Closing Statement, and for a period of thirty (30) days thereafter, Seller shall have on -site access at all reasonable times to the personnel, properties, books and records of Purchaser to the extent reasonably required to complete its review of the Final Closing Statement. Either Party and its accountants may make inquiries of the other Party and its respective accountants and employees regarding questions concerning or disagreements with the Final Closing Statement arising in the course of their review thereof, and both Parties shall use Commercially Reasonable Efforts to share information with respect to such inquiries and to cause any such accountants and employees to cooperate with and respond to such inquiries. (4) If Seller has any objections to the Final Closing Statement, Seller shall deliver to Purchaser a statement setting forth its objections thereto (the "Objections. Statement") within thirty (30) days after receipt thereof. If Seller does not have any objections,. or if the Objections Statement is not delivered to Purchaser within such thirty (30) day period, 18 LA\1803500.5 the Final Closing Statement shall be final, binding and non -appealable by the Parties, and the amounts as calculated in the Final Closing Statement shall constitute the "Final Purchase Price Adjustment." If Seller delivers the Objections Statement within such thirty (30) day period, Seller and Purchaser agree ,to use their reasonable efforts to negotiate in good faith any objections set forth in the Objections Statement. In the event any dispute is not resolved within sixty (60) days of the delivery of the Objections Statement, either Party may elect to have the dispute resolved by a nationally recognized accounting firm that is independent of each of Seller and Purchaser, and which shall be selected by the mutual agreement of Seller and Purchaser (the "Independent Accountant"). If any dispute is submitted to the Independent Accountant, each Party will furnish to the Independent Accountant such work papers and other documents and information relating to the disputed issues as the Independent Accountant may request and are available to that Party or its independent accountants and each Party shall be afforded the opportunity to present to the Independent Accountant material relating to the determination and to discuss the determination with the Independent Accountant. The results of the resolution of the Independent Accountant shall be conclusive and binding on Seller and Purchaser, and the final determination of the Independent Accountant shall constitute the "Final Purchase Price Adjustment." Each of Seller and Purchaser shall be responsible for fifty percent (50%) of all fees and disbursements of such Independent Accountant. (5) If the Final Purchase Price Adjustment is greater than the Purchase Price Adjustment, then Purchaser shall pay the amount of the excess to Seller. If the Final Purchase Price Adjustment is less than. the Purchase Price Adjustment, then Seller shall pay such difference back to Purchaser. The relevant payment shall be due within thirty (30) days after the date of the final determination of the Final Purchase Price Adjustment. (c) Prorations. The .personal property taxes, water, gas, electricity and other utilities, local business or other similar license fees or taxes, dues, rent on leases, and other similar periodic charges payable with respect to the Facility or the Assets shall be prorated by Purchaser as between Purchaser and Seller effective as of 11:59 P.M. Pacific Time on the Closing Date. 2.5 Closing. The consummation of the purchase of Seller's right, title and interest in and to the Assets shall take place at the offices of Latham & Watkins LLP in Los Angeles, California, as soon as practicable following the satisfaction or waiver of all of the Closing Conditions (the "Closing"). The Closing 'shall be deemed to take place at 11:59 P.M. Pacific. Time on the Closing Date. Notwithstanding anything herein to the contrary, Purchaser shall not be required to consummate the transaction earlier than eighteen (18) Business Days following the receipt of Purchaser Required Governmental Approvals, provided that Purchaser shall nevertheless be obligated to consummate the transaction on or prior to February 29, 2008. 2.6 Deliveries at Closing. (a) Deliveries by Selle . At the Closing, Seller shall deliver the following to Purchaser: (1) a fully executed bill of sale, substantially in the form of Exhibit I (the "Bill of Sale") and a fully executed deed of transfer, substantially, in the form of Exhibit J 19 LA\1803500.5 (the "Deed of Transfer"), with respect to the Facility Assets and the Miscellaneous Assets to be conveyed by Seller; (2) a fully executed assignment and assumption agreement, substantially in the form of Exhibit K (an "Assignment and Assumption Agreement"), with respect to the Assigned Agreements, duly executed by Seller; (3) the information and documents comprising the Facility Assets; (4) a certificate executed on behalf of Seller by an authorized official of Seller, dated as of the Closing Date, representing and certifying in such detail as Purchaser may reasonably request that (i) all representations and warranties of Seller contained in Section 5 were true and correct in all material respects without regard to any qualification by "materiality", "Material Adverse Effect" or words of similar import as of the date hereof and as of the Closing Date, with the same effect as though those representations and warranties had been made again at and as of that time (except to the extent that any such representation or warranty is made as of a specified date, in which case as of such specified date), except insofar as any failures to be true and correct, individually or in the aggregate, do not constitute, and could not reasonably be expected to have, a Material Adverse Effect and (ii) all of the terms, covenants and conditions to be complied with and performed by Seller on or prior to the Closing Date have been complied with or performed in all material respects; (5) the fully :executed Lease for the Facility Site and the fully executed and acknowledged Memorandum of Lease and Easements; Agreement; (6) the fully executed CFD (Hoover); (7) the fully executed PPTA; (8) the fully executed Interconnection and Transmission Services (9) the fully executed and acknowledged Subordination Agreement; (10) the fully executed Lender Consent; (11) instruments of transfer and assignment, if any, sufficient to transfer personal property included in the Assets but not otherwise transferred by the assigmnents and agreements specified in this Section 2.6(a), as required by California law; (12) possession of the Assets (including keys, codes, passcodes and passwords and/or combinations to all locks and vehicles); (13) copies (certified by an authorized official or other representative of Seller) of Seller's charter, and a certificate of such official or representative that such copy is true and correct as of the date thereof, 20 LA\1803500.5 (14) copies (certified by an authorized official or other representative of Seller) of such resolutions (or other authorizations) of the City Council of Seller as may be required to authorize the transactions contemplated by this Agreement and the Related Agreements and authorizing officials of Seller to execute and deliver this Agreement, the Related Agreements and any and all other documents or instruments which they deem necessary and appropriate in connection with this Agreement; (15) a certificate from an authorized official or other representative of Seller certifying in such detail as Purchaser may reasonably request that the officer(s) or representative(s) of Seller executing and delivering this Agreement, the Related Agreements and the other documents delivered by Seller in connection with the Closing have been duly authorized to execute and deliver such documents on behalf of Seller; (16) will -serve letters from the appropriate City agency for electric service and potable and reclaimed water service; (17) the Title Report, together with an ALTA survey of the Facility Site; (18) an opinion of Jeff A. Harrison, City Attorney of Seller, substantially in the form of Exhibit L; (19) such other documents from Seller as Purchaser may reasonably request .for facilitating the consummation or performance of any of the transactions contemplated by this Agreement; and (20) the Supplemental IE's Report. (b) Deliveries by Purchaser. At the Closing, Purchaser shall deliver the following to Seller: (1) the Purchase Price in accordance with Section 2.4; (2) an Assignment and Assumption Agreement with respect to the Assigned Agreements, duly executed by Purchaser; (3) an instrument of assumption of liabilities with respect to the Assumed Liabilities, reasonably satisfactory in form and substance to Seller and Purchaser;. (4) the fully executed Lease, the first year's rent thereunder, and the fully executed Memorandum of Lease and Easements; (5) the fully executed CFD (Hoover); (6) the fully executed PPTA; (7) the fully executed Interconnection and Transmission Services Agreement; 21 LA\1803500.5 (8) the fully executed and acknowledged Subordination Agreement; (9) the fully executed Lender Consent; (10) the fully executed Seller Subordinate Deed of Trust; (11) one or more UCC-1 Financing Statements; (12) a receipt acknowledging delivery and possession of the Assets in accordance with this Agreement; (13) . a certificate executed on behalf of Purchaser by an authorized officer or representative of Purchaser,_ dated as of the Closing Date, representing and certifying in such detail as Seller may reasonably request that (i) all representations and warranties of Purchaser contained in Section 6 were true and correct in all material respects without regard to any qualification by "materiality", "Material Adverse Effect" or words of similar import as of the date hereof and as of the Closing Date, with the same effect as though those representations and warranties had been made again at and as of that time (except to the extent that any such representation or warranty is made as of a specified date, in which case as of such specified date), except insofar as any failures to be true and correct, individually or in the aggregate, do not constitute, and could not reasonably be expected to have, a'Material Adverse Effect and (ii) all of the terms, covenants and conditions to be complied with and performed by Purchaser on or prior to the Closing Date have been complied with or performed in all material respects; (14) copies (certified by an authorized officer or representative of Purchaser) of the Governing Documents of Purchaser, and certificates of good standing of Purchaser issued by the state in which Purchaser is organized dated within three (3) Business Days of the respective Closing Date; (15) copies (certified by a responsible officer of Purchaser) of such resolutions (or other authorizations) of the board of directors (or equivalent governing authority) of Purchaser as may be required to authorize the transactions contemplated by this Agreement and the Related Agreements and authorizing officers of Purchaser to execute and deliver this Agreement, the Related Agreements and any and all other documents or instruments which they deem necessary and appropriate in connection with this Agreement; (16) a certificate of Purchaser's secretary (or other authorized officer or representative) certifying in such detail as Seller may reasonably request that (i) the Governing Documents of Purchaser delivered to Sellerpursuant to Section 2.6(b)(14) are true and complete and in full force and effect, (ii) the resolutions (or other authorizations) of the board of directors (or equivalent governing authority) of Purchaser delivered to Seller pursuant to Section 2.6(b)(15)'are true and complete and in full force and effect, and (iii) the officer(s) or representative(s) of Purchaser executing and delivering this Agreement, the Related Agreements and the other documents delivered by Purchaser in connection with the Closing have been duly authorized to execute and deliver such documents on behalf of Purchaser; and 22 LA\1803500.5 (17) such other documents from Purchaser as Seller may reasonably request for facilitating the consummation or performance of any of the transactions contemplated by this Agreement. 2.7 Recordation. At the Closing, the Parties shall cause the recordation of the following documents in the Office of the County Recorder for Los Angeles County in the following order: (a) First, the Memorandum of Lease and Easements; (b) Second, the Deed of Transfer; (c) Third, the deed of trust in favor of the Lender, if any; (d) Fourth, the Seller Subordinate Deed of Trust; and (e). Fifth, the Subordination Agreement. 2.8 Non -Assignable Assets. (a) To the extent that any of the Assets (including, without limitation, any Assigned Agreements) are not capable of being assigned to Purchaser at the Closing without the consent of any Person who is not a Party or its Affiliates, or if such assignment or attempted assignment would constitute a breach of the agreement to be assigned, or a violation of any Governmental Rule, this Agreement shall not constitute an assignment thereof, or an attempted assignment; unless and until such consent has been obtained. (b) In the event that any Consent referred to in Section2.8(a) has not been obtained prior to the Closing, Seller and Purchaser shall use reasonable efforts and shall cooperate after the Closing, to obtain each and every such consent or otherwise cause the transition of the rights and obligations under the affected Assets to Purchaser. Notwithstanding the references herein to cooperation or use of reasonable efforts to obtain the Consents, nothing herein shall obligate any party to agree to a material modification or amendment to the terms of the Assigned Agreements or take actions other than Commercially Reasonable Efforts in order to obtain the consents. (c) To the extent any consents referred to in Section 2.8(a) have not been obtained by Seller prior to the Closing whether due to impracticalities of assignment or agreement of the parties, at Closing the Purchaser and Seller shall enter into subcontracting, subleasing, transition services or other arrangements that, subject to applicable Laws entitles the Purchaser to the claims, rights and benefits of Seller in accordance with such Assets and, to the extent possible, causes Purchaser to assume the thereunder in accordance with this Agreement (each, an "Alternative Agreement"), and Seller will enforce at the request of and for the benefit of Purchaser, with Purchaser .assuming Seller's obligations, any and all claims, rights and benefits of Seller against any third party thereto. Seller shall pay to Purchaser all. amounts received with respect to such Alternative Agreements. (d) To the extent that Purchaser is provided the benefits pursuant to Section 2.8(c) of any Assets, Purchaser shall perform, on behalf of Seller, for the benefit of all 23 LA\1803500.5 other parties thereto and/or any other Person, the obligations of Seller thereunder or in connection therewith, but only to the extent that (i) such action by Purchaser would not result in a material default thereunder or in connection therewith and (ii) such obligation would have been an Assumed Liability but for the non -assignability or non -transferability thereof. ARTIVI N Z CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER AT CLOSING 3.1 Conditions Precedent to Closing. The obligations of Purchaser under this Agreement to=pay the Purchase Price, purchase the Assets and to take the other actions required to be taken by Purchaser at the Closing are subject to the satisfaction (or waiver in writing by Purchaser in the exercise of its sole and absolute discretion), on or prior to the Closing Date, of each of the following conditions precedent in this Section 3.1 (collectively, the "Closing Conditions"): (a) Receipt of Governmental Approvals. Purchaser shall have received (or made, as the case may be), in form and substance reasonably satisfactory to Purchaser, all Governmental Approvals required under Governmental Rules and as set forth in Schedule 3.1 a hereto, for the consummation of the transactions contemplated by this Agreement with respect to the Assets and the Related Agreements, and for Purchaser's lawful ownership of the Assets and operation of the Facility (the "Purchaser Required Governmental Approvals"), and such Purchaser Required Governmental Approvals shall be in full force and effect. (b) Receipt of Assigned Agreement Consents. Purchaser shall have received in form and substance reasonably satisfactory to Purchaser an Assigned Agreement Consent for each of the Assigned Agreements, as listed on Schedule 3.1(b) (the "Require Consents"). (c) Additional Agreements. Seller shall have entered into each of the Related. Agreements. (d) ` Representations and Warranties. Except insofar as there has not been and could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, all representations and warranties of Seller contained herein (without regard to any qualification by "materiality", "Material Adverse Effect" or words of similar import) - shall have been true and correct as of the date hereof, and shall be true and correct as of the - - Closing Date, with the same effect as though those representations and warranties had been made again at and as of that time, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been. true and correct as of such specified date. (e) Liens. The Assets shall be free of Liens other than Permitted Encumbrances. (f) Compliance with Provisions. Seller shall have performed or complied in all material respects with all covenants, agreements and conditions contained in this Agreement on its part required to be performed or complied with by the Closing Date and 24 LA\1803500.5 shall not otherwise be in breach in any material respect of any of its covenants and agreements contained herein as of the Closing. Date. (g) No Adverse Proceedings or Events. No injunction or restraining order shall have issued by, and no suit, action or other proceeding brought before any Governmental Authority against any Party or its Affiliates is pending before any court or Governmental Authority (including administrative proceedings) which seeks to restrain or prohibit one or more of the transactions contemplated by this Agreement or to obtain material damages or other material relief in connection with this Agreement or the transactions contemplated hereby or the Assigned Agreements. (h) Deliveries. Seller shall have delivered, or caused to be delivered; to Purchaser at Closing the documents, payments and other deliverables listed in Section 2.6(a). (i) No Material Adverse Affect. Since the date hereof, there has not occurred any event or circumstance having a Material Adverse Effect or any event or circumstance that:individuallyor in the aggregate, could reasonably be expected to result in a Material Adverse Effect. (j) No Termination. Neither Party shall have exercised_ any termination right to which such Party was entitled to exercise pursuant.to Article 10. (k) Supplemental IE. Report. Seller shall have delivered the Supplemental IE's Report to Purchaser, which shall conclude that the Facility has achieved not less than the performance criteria shown on Schedule 3.1(k) and as. demonstrated by a PTC 46 performance test as administered and managed by the, Independent Engineer. ARTICLE 4 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AT CLOSING 4.1 Conditions Precedent to Closing. The obligations of Seller under this Agreement to complete the sale of the Assets to Purchaser and to take the other actions required to be taken by Seller at the Closing are subject to the satisfaction (or waiver in writing by Seller in its sole discretion), on or prior to the Closing Date; of each of the following conditions precedent in this Section 4.1: (a) Representations and Warranties. Except insofar as there could not individually or in the aggregate reasonably be expected to have a Material Adverse Effect, all representations and warranties of Purchaser contained herein (without regard to any qualification by "materiality", "Material Adverse Effect or words of similar import) shall have been true and correct as of the date hereof, and shall be true and correct as of the Closing. Date, with the same effect as though those representations and warranties had been made again at and as of that time, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and correct as of such specified date. 25 LA\1803500.5 (b) Compliance with Provisions. Purchaser shall have performed or complied in all material respects with all covenants, agreements and conditions contained in this Agreement on its part required to be performed or complied with by the Closing Date and shall not otherwise be in breach in any material respect of any of its covenants and agreements contained herein as of the Closing Date. (c) Receipt of Governmental Approvals. Seller shall have received (or made, as the case may be), in form and substance reasonably satisfactory to Seller, all Governmental Approvals required by Seller under Governmental Rules and as set forth in Schedule 4.1(c) hereto, for the consummation of the transactions contemplated by this Agreement with respect to the Assets and the Related Agreements (the "Seller Required Governmental Approvals"), and such Seller Required Governmental Approvals shall be in full force and effect. (d) Additional Agreements. Purchaser shall have entered into each of the Related Agreements. (e) No Adverse Proceedings or Events. No injunction or restraining order shall have issued and no. suit, action or other proceeding brought by any Governmental Authority (other than Seller or any official of Seller) against any Party or its Affiliates is pending before any court or Governmental Authority (including administrative. proceedings) which seeks to restrain or prohibit one or more of the transactions contemplated by this Agreement or to obtain material damages or other material relief in connection with this Agreement or the transactions contemplated hereby or the Assigned Agreements. (f) Purchaser Deliveries. Purchaser shall have delivered, and Seller shall have received, all of the items set forth in Section 2.6(b). (g) No Termination. Neither Party shall have exercised any termination right to which such Party was entitled to exercise pursuant to Article 10. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Purchaser as of the date hereof and as of the Closing, Date as=follows in this Article 5: NOTWITHSTANDING ANYTHING CONTAINED IN THIS ARTICLE 5 OR ANY OTHER PROVISION OF THIS AGREEMENT TO THE CONTRARY, IT IS THE EXPRESS INTENT OF THE PARTIES THAT SELLER MAKE NO REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY IN RESPECT OF THE ASSETS OR ANY OTHER MATTER BEYOND THOSE EXPRESSLY GIVEN IN THIS AGREEMENT, AND ANY SUCH REPRESENTATIONS OR WARRANTIES ARE EXPRESSLY DISCLAIMED. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE 5 OR ANY OTHER PROVISION OF THIS AGREEMENT, IT IS UNDERSTOOD AND AGREED THAT PURCHASER IS PURCHASING THE ASSETS ON AN "AS IS" AND "WHERE IS" BASIS. rIm LA\1803500.5 5.1 Representations and Warranties with Respect to Seller. (a) Organization and Existence. Seller is a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its charter. Seller has made available to Purchaser copies of the Governing Documents of Seller as currently in effect. (b), Execution, Delivery and Enforceability. Seller has full power and authority to carry on its business and governmental functions as now conducted, and to enter into, and, carry out its obligations under, this Agreement and the Related Agreements. The execution, delivery and performance by Seller of this Agreement and the Related Agreements, and the consummation of the transactions contemplated hereby :and thereby, have been duly authorized by all necessary corporate or governmental action required on the part of Seller. , This Agreement has, and as of the Closing Date each of the Related Agreements will have been, duly and validly executed and delivered by Seller and constitute, or will constitute, as applicable, the valid and legally binding obligations of Seller, enforceable against Seller in accordance with its and their respective terms, except as such enforceability may be limited by .bankruptcy, insolvency; reorganization, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors' rights and by general equitable principles. (c) No Violation. Except as set forth on Schedule 5.1(c), subject to the receipt of the Seller Required Governmental Approvals, none of the execution and delivery of this Agreement or any of the Related Agreements, the performance of or compliance with any provision hereof_ or thereof, or the consummation of the transactions contemplated hereby or thereby will: (1) violate, or conflict with, or result in a breach of any. provisions of the Governing Documents of Seller; (2) violate any Governmental Rule or Permit applicable to Seller or the Facility Assets, or result in the suspension or termination of, or require the material modification of, any Permit; (3) except for the Permitted Encumbrances, result in the creation or imposition of any material Lien upon the Facility Assets, or a breach of, or constitute a default under, or give to any other Persons any rights of termination, amendment, acceleration or cancellation of any material .agreement to which Seller is a party or by which any of its respective properties is bound or affected; or (4) violate, or conflict with, or result in a breach of any note, deed of trust, security interest, lease, contract or `agreement to which Seller is a party or by which it or any of its properties or assets may be bound or affected, the effect of which violation, conflict or breach would reasonably be expected to result in a material adverse effect on the financial condition of Seller. (d) No Approvals. Except as set forth on Schedule 5.1(d), and other than the Seller Required Governmental Approvals and the Required Consents, no material consent or approval of, filing with or notice to (i) any Person or (ii) any Governmental Authority is required 27 LA\1803500.5 to be obtained or made in connection with Seller's execution, delivery and performance of this Agreement or the Related Agreements or the consummation of the transactions contemplated hereby or thereby, which, if not obtained or made, will prevent Seller from performing its obligations hereunder or thereunder. (e) Financial Information. Except as set forth on Schedule 5.1(e): (1) Seller has furnished Purchaser with copies of its audited financial statements as of and for the fiscal years ended June 30, 2005 and June 30, 2006, and the related notes thereto, accompanied by reports thereon of Macias Gini & O'Connell LLP, independent public accountants and (b) the unaudited financial statements of Seller as of June 30, 2007 (such audited and unaudited financial statements collectively being referred to herein as the "Financial Statements"). Such Financial Statements have been based upon the information concerning Seller contained in Seller's books and records, have been prepared in accordance with GAAP (except that the unaudited financial statements do not contain all notes required by GAAP and are subject to normal year-end audit adjustments) applied on a consistent basis for the periods covered thereby and present fairly in all material respects the financial condition and results of operations of Seller as of the times and for the periods referred to therein in accordance with GAAP. (2) The projections, assumptions and pro forma financial information contained in the Confidential Information Memorandum, dated April 2007, are based on good faithestimates and assumptions believed by management of Seller to be reasonable. at the time made, it being recognized by Purchaser that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. (3) Seller has no material liabilities that, in accordance with GAAP, would be required to be recorded in the Financial Statements, except for (i) liabilities set forth on the face of the Financial Statements (rather than in any notes thereto) or (ii) liabilities which have arisen after June 30, 2006 in the ordinary course of business of Seller (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract; breach of warranty, tort, environmental matter, infringement or violation of Government Rules). (f) Affiliated Transactions. Except as set forth on Schedule 5.1(f), (i) none of Eric Fresch, Donal O'Callaghan or Jeff Harrison, or, to 'their knowledge, any sibling descendant or spouse of any of such persons, or any trust, partnership, corporation or other entity . in which any of such persons has a greater than ten percent (10%) interest is a party to any material agreement, contract, commitment or transaction with Seller outside of the ordinary course . of business or has any material interest in any material property or equipment used by Seller, except in such person's capacity as an officer or employee of Seller or undertaken in accordance with applicable Governmental Rules or (ii) to the knowledge of Eric Fresch, Donal O'Callaghan or Jeff Harrison only, as of the date hereof, no officer or employee of Seller required to submit statements of economic interests pursuant to Form 700 as required by the regulations of the California Fair Political Practices Commission and Section 87200 et seq. of the California Government Code has undisclosed any material agreement, contract, commitment. or 28 LA\1803500.5 transaction with Seller outside of the ordinary course of business or has any material interest in any material property or equipment used by Seller that should be disclosed consistent, with the breadth and scope of the disclosure required pursuant to such regulations. (g) Liti ag tion. Except as set forth on Schedule 5.1(g): (1) As of the date hereof, there are no pending or to Seller's Knowledge, threatened, actions, suits or proceedings by any Person (i) seeking to prohibit or restrain the performance of this Agreement or any of the Related Agreements or the consummation of the transactions contemplated hereby or thereby, or (ii) asserting a claim for any material damages as a result of this Agreement or any of the Related Agreements, the ownership or operation of the Assets or any portion thereof, or the consummation of the transactions contemplated hereby or thereby. (2) As of the Closing Date, there are . no pending or, to Seller's Knowledge, threatened, actions, suitsor proceedings by any Person as described in Section 5.1 1 above, the assertion of which could result in the failure to satisfy the Closing Condition set forth in Section 3.1(g), .or be reasonably be expected to result in damages in excess of $2,500,000. (h) Taxes Except as disclosed on Schedule 5.1(h) and except as could not reasonably be expected to result in a material adverse effect on Seller: (1) Seller has duly and timely filed, or will duly and timely file, all Tax Returns required to be filed on or prior to the Closing Date. All such Tax Returns are true, correct and complete in all material respects. All Taxes (whether or not shown as due on such Tax Returns) have been or will be timely paid. (2) Seller is not a foreign person within the meaning of Section 1445 of the Code; (3) Seller has not executed or filed with any taxing authority (whether federal, state, local or foreign) any agreement or other document extending or having the effect of extending the period for assessment of any Tax that is due with respect to a material Tax return that Seller is required to file with respect to the Assets; (4) There is no Tax deficiency outstanding, assessed or proposed in writing against Seller. There are no pending or, to the Knowledge of Seller, threatened, audits, administrative proceedings, discussions, court proceedings or other examinations in respect of any Tax Return of Seller.. No federal, state, local or foreign action, suit, investigation, claim or assessment is pending or, to the knowledge of such Seller, threatened, in respect of .Taxes of Seller, nor has Seller received. any written notice from any Governmental Authority that any such action, suit, investigation, audit, claim or assessment is threatened or contemplated. There are no Tax rulings, requests for rulings, or closing agreements relating to Seller which affect its liability for Taxes for any period (or portion of a period) after the date hereof, and 29 LA\1803500.5 (5) Seller does not have currently in effect a waiver of any statute of limitations in respect of the assessment and collection of Taxes or any extension of time with respect to a Tax assessment or deficiency. Seller is not party to any Tax allocation or sharing agreement. No power of attorney on behalf of Seller with respect to any Tax matter is currently in force. (6) Seller has providedtoPurchaser. copies of all Tax audit reports affecting the Assets that have been issued with respect to the previous three (3) taxable years of Seller; and (7) None of the Assets constitute "tax exempt use property" within the meaning of section 168(h)(1) of the Code. (i) Brokers. Other than with respect to Lehman Brothers, the fees and expenses of whom are the responsibility of the Seller, no Person is entitled to receive any brokerage commission, finder's fee or other similar payment. 5.2 Representations and Warranties with Respect to the Facility. (a) Compliance with Laws. (1) Compliance with Governmental Rules and Permits. Except as set forth on Schedule 5.2(a)(1) .(other than with respect to Environmental Laws and Environmental Permits, as to which the only representations and warranties made by Seller are exclusively those contained in Section 5.2(a)(2)) (i) Seller is in compliance in all material respects with all Governmental Rules and with all Permits applicable to the conduct of its business and activities relating to the Facility, and the ownership, operation, maintenance and use of the Facility. (ii) Each of the Permits held by Seller with respect to the Facility is valid, in full force and effect, and final and non -appealable by any third party. (iii) Assuming Purchaser promptly on the Closing Date files with the CEC a complete petition for approval for a transfer of ownership or operational control under Title 20 the Code of California Regulations, Section 1769(b) (the "Petition"), Purchaser shall have the benefit of Seller's rights under CEC Final Decision for Malburg Generating Station, dated May 2003. The CEC's issuance of an approval under such Section 1769(b) is administrative and, assuming diligent prosecution of the Petition, the Petition shall be approved by the CEC in the ordinary course. (2) Environmental Legal Compliance. Except as set forth on Schedule 5.2(a)(2): . (i) Seller is in compliance in all material respects with applicable Environmental Laws, and any Environmental Permits (including Emissions Rights) issued thereunder, with respect to the Facility and holds all Environmental Permits (including Emissions Rights) required to own and operate the Facility as currently operated; 30 LA\1803500.5 (ii) Seller has not received any written notice or claim from any Person alleging any material liability for personal injury or property damage relating to the Facility, or any notice of any violation under Environmental Law, any request for information pursuant to CERCLA, or any notice of any ;order, penalty, investigation, action, suit, claim, proceeding or other action from any Governmental Authority or any other Person with respect to the actual or alleged violation by Seller at the Facility Site, or liability of any Person with respect to the Facility Assets or the Facility Site under any Environmental Law or Environmental Permit and to Seller's Knowledge, there are no circumstances, events or conditions that could result in such a notice of material liability; (iii) Neither the Facility Site nor the Facility is the subject of any material administrative or judicial actions, claims, demands, complaints, suits, proceedings or investigations pursuant to any Environmental Law, and no such action, complaint, suit, proceeding or investigation is pending, or to the Knowledge of Seller, threatened; (iv) To Seller's Knowledge, neither the Facility ' Site nor the Facility (including any above -ground or underground storage tanks located on or a part thereof) contains any Hazardous Substance (including polychlorinated biphenyls, asbestos, lead or urea formaldehyde) that, under any Environmental Law, (1) imposes or could reasonably be expected to impose as of the date hereof on any Person owning or operating the Facility. a liability for material fines or penalties for non-compliance with Environmental. Law, or for the performance. or reimbursement of any material costs of removal, remediation, or other cleanup, or liability for or obligation to reimburse damages to natural resources; (2) has had or could reasonably be expected to result in a Material Adverse Effect; or (3) could reasonably be expected to result in the imposition of a Lien under applicable Environmental Laws on the Facility Site or the Facility; (v) Seller has not caused any Release at the Facility Site, or has arranged for the disposal of any Hazardous Substance to, at or from the Facility Site or at any other location in connection ;with the Facility; other than in compliance in all material respects with applicable Environmental Laws; (vi) Seller has not made, nor is it currently obligated to make, file or give any report or notification to any Governmental Authority regarding any Release at the Facility Site; (vii) Other than Permitted Encumbrances, no material Lien in favor of any Person imposed under any Environmental Laws relating to or in connection with any claim under an Environmental Law has been filed or has been attached to the Facility and, to Seller's Knowledge, no response action or other remediation by any Governmental Authority has taken place that could form the basis for such a Lien under any Environmental Laws; (viii) Seller has provided to Purchaser each material environmental investigation, study, report and other analysis in its possession and conducted within the past five (5) years with respect to all or any portion of the Facility Site; and (ix) Each of the Environmental Permits held by Seller is: (A) 31 LA\1803500.5 valid, in fullforce and effect, and final and non -appealable by any third party and (B) to Seller's Knowledge, not subject to any pending suit, action, investigation, proceeding or appeal (whether judicial, administrative or otherwise), and no such suit, action, investigation, proceeding or appeal is threatened which could reasonably be expected to result in a Material Adverse Effect. (3) Without regard to Seller's Knowledge, the representations and warranties contained in this Section 5.2(a)(2) are the only and exclusive representations and warranties made by Seller with respect to matters relating to Hazardous Substances and Environmental Laws. (b) Zoning and Land Use. Except as set forth on Schedule 5.2(b), there are no requirements under any applicable zoning or land use laws or regulations or building codes of Seller, or to Seller's Knowledge those of any other Governmental Authority, that would impose a restraint or restriction on, the operation of the Facility with the design and operating characteristics as set forth in the Permits or as it has operated consistent with past practice. (c) Condemnation or Other Proceedings; Bonds. Except as set forth on Schedule 5.2(d), there is no pending or, to Seller's Knowledge, threatened condemnation.or other similar proceeding of any part of the Facility Site. Except as set forth on Schedule 5.2(c), there is no outstanding collateral (whether as surety bonds, letters of credit, cash deposits or otherwise) given by Seller in connection with the operation of the Facility. (d) Title to Assets. Seller has good, marketable and insurable fee title to the Facility Site; free and clear of all Liens (other than Permitted Encumbrances and any existing Liens on the Assets that .will be removed prior to Closing); and has good and marketable title in the remainder of the Facility Assets free and clear of all Liens (other than Permitted Encumbrances). (e) Sufficiency of Assets. To the Knowledge of Seller, except as set forth on Schedule 5.2(e), there are no material facts or circumstances that would render the conclusions set forth in the IE Report with respect to the Facility Assets untrue in any material respect, and there are no facts or conditions affecting the Facility Assets which could, individually or in the aggregate, interfere in any material respect with the use of such Facility Assets as currently used. Except as set forth on Schedule 5.2(e) (and except as the aggregate value of such assets would not exceed $50,000), as of the Closing Date, the Facility Assets constitute all of the assets located at the Facility Site and all of the Facility Assets not located at the Facility Site that are reasonably required for the operation and maintenance of the Facility by Purchaser as now being conducted. (f) Contracts. Schedule 5.2(f) sets forth each material contract necessary for or primarily related to the City's ownership or operation of the Facility ("Facility Contracts"). Except as set forth on Schedule 5.2(D: (1) True and complete copies of each Facility Contract, together with all amendments thereto, have been provided to Purchaser. 32 LA\1803500.5 (2) None of the Facility Contracts has been modified, supplemented or amended in any material respect, or terminated, in any such case whether orally or in writing, except as otherwise provided by the Facility Contracts. (3) Each Facility Contract is a legal, valid and binding obligation of Seller. To the Knowledge of Seller, each Facility Contract is a legal, valid and binding obligation of each of the other parties thereto. (4) Each of the Facility Contracts has been duly authorized, executed and delivered by Seller and by each of the other parties thereto and, except to the extent fully performed in accordance with its terms, is in full force and effect and is valid and enforceable in accordance with its terms except as enforceability may be limited by :applicable bankruptcy, insolvency, reorganization, moratorium or similar laws ' affecting creditors' rights and the .enforcement of debtors' obligations generally and by general principles of equity, regardless of whether enforcement is pursuant to a proceeding in equity or at law. (5) No. default or event of default on the part of Seller has occurred and is continuing under any Facility Contract, and Seller has not received any notice, oral or written, or has Knowledge, that a default or event of default on the part of any other party thereto has occurred and is continuing or that any other Person has alleged or asserted any such default or event of default by any other party thereto. (6) All of the deliverables under any of the Facility Contracts made by any counterparty to a Facility Contract are included in the Facility Assets and none of such deliverables have been loaned to any other project or facility other than the Facility. (g) Utilities and Laterals. The Facility Site has the water, sewer and telephone service reasonably required to serve the needs of the Facility consistent with past practice. (h) No Third PqM Options. There, are no existing agreements, options or commitments granting to any Person the right to acquire Seller's right, title or interest in or to the Facility Assets or any interest therein. (i) Taxes. Except as disclosed on Schedule 5.2(i): (1) There are no Liens 'for Taxes upon the Facility Assets, except for Permitted Encumbrances; (2) None of the Facility Assets is an interest (other than indebtedness within the meaning of Section 163 of the Code) in an entity taxable as a corporation, partnership, trust, or real estate mortgage investment conduit for federal income tax purposes; and (3) None of the Facility Assets are tax-exempt bond financed property within the meaning of Code section 168(g)(1) that are secured by a Lien on the Facility. 33 LA\1803500.5 (j) Employees and Labor Matters. Except asset forth on Schedule 5.2(j): (1) The individuals regularly performing services at or in connection with the Facility Assets, all of whom are assigned to the Facility as of the date hereof, are listed on Schedule 5.2(j). Since the commencement of commercial operations, the number of Facility Employees has not been materially inconsistent with the list set forth in Schedule 5.2(j). (2) As of the date hereof, the Facility Direct Employees are designated by an asterisk next to their name on Schedule 5.2(j) and the Facility Contract Employees, which comprise the remaining employees on Schedule 5.2(j), are employed by PLG pursuant to the PLG Agreement (the "Facility Contract Employ'). (3) No Facility Employees are now or in the past two years have been represented by a labor union or labor organization ("Union"), or covered by or subject to a collective bargaining agreement or union contract with any Union, and to Seller's Knowledge no union organizing activities are currently underway at the Facility. (4) There has not occurred, nor, to Seller's Knowledge has there been threatened, a labor strike, request for representation, organizing campaign, work stoppage; slowdown, or lockout or other labor dispute by or involving any of the Facility Employees in the past two years. (5) Seller has not received written notice of any unfair labor practice charge against Seller regarding practices or acts at the Facility Assets pending before the National Labor Relations Board, and Seller has not received notice that any petition respecting any Facility Employees has been filed with the National Labor Relations Board. (6) Seller has not received any notice with respect to the Facility Employees of any charges before any Governmental Authority responsible for the prevention of unlawful employment practices and Seller is in compliance with all applicable Governmental Rules respecting employment` practices, occupational health and safety, labor relations, terms and conditions of employment. (7) Seller has not received notice of any investigation related to the Facility Employees by a Governmental Authority responsible for the enforcement of labor or employment laws and regulations and, to Seller's Knowledge, no such investigation is threatened. - - (k) Absence of Changes. Except as set forth in Schedule 5.2(k), since June 30, 2006, Seller has operated the Facility Assets only in the ordinary course of business con- sistent with past practices and has not (solely in connection with or relating to the Facility Assets): (J) suffered any Material Adverse Effect; (2) incurred any material obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, except current liabilities incurred in the ordinary course of business consistent with past practices; 34 LA\1803500.5 (3) mortgaged, pledged or subjected to Lien, any property or assets, tangible or intangible, used in connection with the operation or maintenance of the Facility Assets; (4) sold, transferred, leased to others or otherwise disposed of any of the Facility Assets, or cancelled or compromised any debt or claim, or waived or released any right of substantial value; (5) transferred or granted any material rights or licenses under, or entered into any settlement regarding the material breach or infringement of any intellectual property included in the Facility Assets, or materially modified any existing rights with respect thereto or entered into any licensing or similar agreements or arrangements; (6) failed to maintain any of the Facility Assets in a normal and customary manner consistent with past practices and Prudent Industry Practices; (7) made any change in any respect in its accounting practices, policies or principles; or (8) taken any action or omitted to take any action that would result in the occurrence of any of the foregoing. (1) Insurance. Except as set forth on Schedule 5.2Q, the Facility Assets are insured with reputable insurers in accordance with Prudent Industry Practices. All policies and bonds providing for such insurance are in full force and effect. Seller has not received any notice or other indication from any insurer or agent of any intent to cancel or not renew any of such insurance policies or bonds. (m) Outage. Notwithstanding anything in this Section 5.2 to the contrary, the Parties hereto recognize that the Facility suffered an outage on September 27, 2007, as described in further detail in .Schedule 5.2(m). Seller shall have no further liabilities or obligations with respect to such outage beyond its liabilities and obligations expressly set forth in this Agreement. 5.3 Representations and Warranties with Respect to the Hoover Interest. Except as set forth in Schedule 5.3: (a) Valid Right in Hoover Interest. Seller has a valid right to the Hoover Interest, free and clear of all Liens other than Permitted Encumbrances. (b) Contracts. Schedule 5.3(b) sets forth each material contract evidencing the City's entitlement to the Hoover Interest and the delivery of energy therefrom to the CAISO Grid ("Hoover Contracts"). Except as set forth on Schedule 5.3&: (1) True and complete copies of each Hoover Contract, together with all amendments thereto, have been provided to Purchaser. 35 LA\1803500.5 (2) None of the Hoover Contracts have been modified, supplemented or amended in any material respect, or terminated, in any such case whether orally or in writing, except as set forth on Schedule 5.3(b). (3) Assuming that each Hoover Contract is a legal, valid and binding obligation of each of the other parties thereto, each such Hoover Contract is a legal, valid and binding obligation of Seller. (4) Each of the Hoover Contracts has been duly authorized, executed and delivered by Seller and, to the Knowledge of Seller, by each of the other parties thereto and, except to the extent fully performed in accordance with its terms, is in full force and effect and is valid and enforceable in accordance with its terms except as enforceability may be limited by applicable bankruptcy; insolvency, reorganization, moratorium or similar laws affecting creditors' rights and the enforcement of debtors' obligations generally and by general principles of equity, regardless of whether `enforcement is pursuant to a proceeding in equity or at law. (5) Except as set forth on Schedule 5.3(b), no defaultor event of default on the part of Seller has occurred and is continuing under any Hoover Contract, and Seller has not received any notice, oral or written, or has Knowledge, that a default or event of default on the part of any other party thereto has occurred and is continuing or that any other Person has alleged or asserted any such default or event of default by any other party thereto. (c) No Approvals. Except as set forth on Schedule 5.3(c), and other than the Seller Required Governmental Approvals and the Required Consents, and except as would not reasonably be expected to result in a Material Adverse Effect, no consent or approval of, filing with or notice to (i) any Person or (ii) any Governmental Authority is required to be obtained or made in connection with execution, delivery and performance of the CFD (Hoover). (d) Employees and Labor Matters. Seller does not employ, and does not contract with. any third -party vendor to provide, any employees in connection with the operation of the Hoover Interest. (e) No Other Representations. Except for the representations and warranties contained in Section 5.3, neither of Seller nor any other Person makes any express or implied representation or warranty in respect or on behalf of Seller, and Seller hereby disclaims any such representation or warranty, whether by Seller or any of its respective officers, directors, employees, agents or representatives or any other Person, with respect to the Hoover Interest or the consummation of the transactions related thereto, notwithstanding the delivery or disclosure to Purchaser or any of its officers, directors, employees, agents or representatives or any other Person of any documentation' or other information with respect to the foregoing. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Seller of the date hereof and as of the Closing Date as follows in this Article 6: 36 LA\1803500.5 6.1 Transaction Representations. (a) Organization and Existence. Purchaser is a duly organized and validly existing limited liability company in good standing under the laws of the State of Delaware and is qualified to transact business in all jurisdictions (including California) where the ownership of its properties or its operations require such qualification, except where the failure to so qualify would not have a Material Adverse Effect on its financial condition, its ability to own its properties or transact its business, or to carry out the transactions contemplated hereby. Purchaser has made available to Seller copies of the Governing Documents of Purchaser as currently in effect. (b) Execution, Delivery and Enforceability. Purchaser has full power and authority to carry on its business as now conducted, and to enter into, and carry out its obligations under, this Agreement and the Related Agreements. The execution, delivery and performance by Purchaser of this Agreement and I the Related Agreements, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate or company action required on the part of Purchaser. This Agreement has, and as of the Closing Date each of the Related Agreements will have been, duly and validly executed and delivered by Purchaser and constitute, or will constitute, as applicable, the valid and legally binding obligations of Purchaser,, enforceable against Purchaser in accordance with its and their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws of general application relating to or affecting the enforcement of creditors' rights and by general equitable principles. (c) No Violation. Subject to the receipt of all Purchaser Required Governmental Approvals, none of the execution and delivery of this Agreement or any of the Related Agreements executed by Purchaser, the compliance with any provision hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby will: (1) violate or conflict with, or result in a breach of any provisions of the Articles of Incorporation or Bylaws of Purchaser; or (2) violate any Governmental Rule, or Permit, or result in the suspension or termination of, or require the material modification of any Permit, in each case applicable to Purchaser as of the date hereof. (d) No Approvals. Except as set forth on Schedule 6.1(d), and subject to the receipt of all Purchaser: Required Governmental Approvals, no consent or approval of, filing with or notice to any Person is required to, be obtained or made by Purchaser in connection with Purchaser's execution, delivery and performance of any .of this Agreement or the Related Agreements, or the consummation of the transactions contemplated hereby or thereby, which, if not obtained or made, will prevent Purchaser from performing its obligations hereunder or thereunder. 6.2 Litigation. There is no pending or, to Purchaser's Knowledge, threatened action, suit, proceeding, investigation or request for information by any Governmental Authority or other 37 LA\1803500.5 Person to which Purchaser is subject or is a party which could result, or has resulted, in (a) the institution of legal proceedings to prohibit or restrain the performance of this Agreement or any of the Related Agreements, or the consummation of the transactions contemplated hereby or thereby, or (b) a claim for material damages as a result of this Agreement or any of the Related Agreements, or the consummation of the transactions contemplated hereby or thereby. Purchaser has no Knowledge of any pending or threatened litigation, claim, investigation or proceeding, private or governmental, or the existence of a reasonable basis for such a material litigation, claim, investigation or proceeding, which directly and specifically relates to the Facility. 6.3 Availability of Funds. Purchaser is fully capable of consummating the transactions contemplated by this Agreement and has sufficient available funds and/or existing committed credit facilities or equity commitments in amounts sufficient to perform its obligations under this Agreement. 6.4 Acknowledgement of PassiveInterests. PURCHASER ACKNOWLEDGES THAT (A) SELLER IS A MINORITY PARTICIPANT IN THE OWNERSHIP OR INDIRECT OWNERSHIP OF THE HOOVER DAM UPRATING PROJECT, (B) SELLER DOES NOT OPERATE OR CONTROL SUCH PROJECT, (C) SELLER HAS MADE AVAILABLE TO PURCHASER THE _RECORDS, REPORTS, FILES AND OTHER INFORMATION REGARDING SUCH "PROJECT THAT ARE AVAILABLE TO SELLER FROM THE OPERATORS OF SUCH PROJECT (WHICH ITEMS ARE MORE EXTENSIVE THAT WHAT SELLER HAS POSTED IN ITS DATA ROOM), AND (D) PURCHASER WILL MAKE ITS OWN EVALUATION WITHOUT RELIANCE ON SELLER REGARDING THE SUFFICIENCY, ADEQUACY AND ACCEPTABILITY OF THE .INFORMATION AVAILABLE TO PURCHASER REGARDING SUCH PROJECT. 6.5 Brokers. All negotiations relating to this Agreement and the transactions contemplated hereby have been carried on by Purchaser without the intervention of any other Person and in such a manner as not to give rise to any valid claim against Seller (by reason of Purchaser's actions) for a brokerage commission, finder's fee or other like payment to any Person. ARTICLE 7 COVENANTS OF SELLER Seller covenants and agrees for the benefit of Purchaser as follows: 7.1 Access and Investi ag tion. (a) Subject to the limitations set forth in Section 7.1(b), upon reasonable advance notice received from Purchaser, Seller shall (i) afford Purchaser and its representatives full and free access, during regular business hours to the Facility Site, Assigned Agreements, Permits and Assigned Agreement Consents, books and records and other documents and data, (ii) furnish Purchaser and its representatives with such additional financial, operating and.other relevant data and information related to the Facility Assets as Purchaser may reasonably request; and (iii) otherwise cooperate and assist, to the extent reasonably requested by Purchaser, with Purchaser's investigation of the Facility Assets. In 38 LA\1803500.5 addition, Purchaser shall have the right to have the Facility Site and any tangible personal property comprising any part of the Facility Assets inspected by Purchaser or its representatives, at Purchaser's sole cost and expense, for purposes of determining the physical condition and legal characteristics of the Facility Site and any relevant tangible personal property; provided, that, such investigation shall not include physical testing, geotechnical testing or sampling (including environmental- sampling). Seller shall cooperate with Purchaser and make available the Facility Employees to Purchaser during regular business hours upon reasonable. advance notice. (b) Notwithstanding the provisions of Section 7.1(a) above, the rights of access contained in this Section 7.1 are subject to, and on, the following terms and conditions: (i) any such investigation shall be exercised in such a manner as not to interfere unreasonably with the operation of Seller's business; (ii) during the period from the date hereof to the Closing Date, all information provided to Purchaser or its agents or representatives by or on behalf of Seller or their agents or representatives (whether pursuant to this Section 7.1 or otherwise) shall be governed by and.subjectto the confidentiality agreement, dated as of April 9, 2007,by and between Purchaser and Seller (the "ConfidentialityAgreement"); (iii) such rights of access shall not affect or modify the conditions set forth in Articles 3 and Article 4 in any way; and (iv) subject to Section 7.9, Purchasers shall not have access to copies of books and records if (y) such access is not permitted under Law or (z) such books and records are Retained Books and Records. 7.2 Preservation of Assets. Except as provided in this Agreement, and unless otherwise consented to in writing by Purchaser, until the Closing Date, Seller shall: (i) preserve, maintain and protect the assets; rights and properties of the Facility Assets; (ii) maintain the books and records relating to the Facility in the ordinary course of business and consistent with past practice; (iii) comply in all material respects with all Governmental Rules, Permits and Assigned Agreement Consents insofar as they relate to the Facility Assets taking into account the current status of the Facility; (iv) not encumber the Facility with any Liens (other than Permitted Liens), other than in the ordinary course _ of business consistent with past practice or as required by applicable law and (v) operate and maintain the Facility Assets in all material respects in accordance with Prudent Industry Practices, taking' into account the current status of the Facility and consistent with past practice; (vi) not increase the compensation of any Facility Employee by more than ten percent (10%) to the extent the same is necessary in order to retain him or her as an employee and so long as all such increases granted to all such employees do not exceed US$100,000 in the aggregate; (vii) except as otherwise provided in this Agreement, not make any material adverse change in the business, assets, liabilities or operations of the Facility; (viii) dispose of any of the Assets other than in the ordinary course of business; and (ix) except in the ordinary course of business, not enter into, amend or terminate any Benefit Plans (or any new plan, program, policy, arrangement or agreement which would constitute a Benefit Plan) respecting any Facility Employee or any collective bargaining agreement or other labor agreement covering the Facility Employees. Without the consent of Purchaser, which shall not be unreasonably withheld, Seller shall not vote or consent to amend in any material respect the terms of any Assigned Agreements or the Hoover Contracts, or enter into any material agreement respecting the Facility, other than in the ordinary course of business consistent with past practice. 7.3 _ Governmental Approvals, Assigned Agreement Consents and Agreements. 39 LA11803500.5 Seller shall use Commercially Reasonable Efforts to cooperate with Purchaser in obtaining all Purchaser Required Governmental Approvals, all Required Consents, and other agreements required to consummate the transactions contemplated by this Agreement, including maintaining and renewing the same, and make all filings required by Governmental Rules to be made by Seller in order to consummate the transactions contemplated by this Agreement. Seller shall cooperate with Purchaser and its representatives with respect to all filingsthat Purchaser elects to make or, pursuant to Governmental Rules, shall be required to make in connection with the transactions contemplated by this Agreement. Seller shall keep Purchaser informed on a current basis regarding its communications with any Governmental Authority that has jurisdiction over a Governmental Approval or a Permit. Subject to keeping Seller informed on a current basis, Purchaser is authorized to communicate with Governmental Authorities with respect to the Facility. 7.4 Notifications to Purchaser. (a) Seller shall promptly notify Purchaser of any proceedings, actions, claims, suits or investigations pending or, threatened relating to the Assets, as well as, any thereof commenced or, to the Knowledge of Seller, threatened against Seller that could affect the Assets or challenges the transactions contemplated hereby. (b) Seller shall provide prompt written notice to Purchaser of any material change in any of the information contained in the representations and warranties made in Article 5 or any Exhibits or Schedules and shall promptly furnish any information which Purchaser may reasonably_ request in relation to such change; provided, however, that such. notice shall not operate to cure any breach of the representations and warranties made in Article 5 or any Exhibits or Schedules referred to herein or attached hereto. (c) Seller shall promptly, and in any event within three (3) Business Days after receipt thereof, provide to Purchaser (i) all material notices; correspondence and other communications from any Governmental Authority with respect to the Assets, and (ii) all material notices, correspondence and other communications from any contractor or counterparty to an Assigned Agreement with respect to such Assigned Agreement. (d) Seller shall promptly notify Purchaser of the occurrence of any event that has had or could reasonably be expected to result in a Material Adverse Effect. 7.5. ' Commercially Reasonable' Efforts. In addition to the undertakings in Section 7.3, upon the terms and subject to the conditions of this Agreement, Seller shall use Commercially Reasonable Efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable consistent with Governmental Rules to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including satisfying the conditions precedent to the consummation of such transactions as set forth herein. 7.6 Insurance. Seller shall, subject to continuing availability on commercially reasonable terms, maintain all existing insurance policies related to the Facility Assets through the Closing Date. 40 LA\1803500.5 7.7 Further Assurances; Post -Closing Assignments. From time to time following the Closing, Seller shall execute, acknowledge and deliver such additional documents, instruments of conveyance, transfer and assignment or assurances and take such other action as Purchaser may reasonably request to more effectively assign, convey and transfer to Purchaser, and fully vest title in Purchaser, with respect to the Assets. Without limiting the generality of the foregoing, after the Closing Date and upon the discovery by Seller of any items included within. the definitions of the Assets or the Assigned Agreements, but not transferred, conveyed or assigned to or assumed by ,Purchaser in the Bill of Sale, an Assignment and Assumption Agreement or any other applicable instrument of conveyance, Seller shall: (i) immediately deliver written notice to Purchaser of the existence and non -transfer or non -assumption of such item and provide Purchaser with all the information about and with access to such item as Purchaser may reasonably request; and (ii) if notified in writing by Purchaser within thirty (30) days after the delivery of such notice by Seller, transfer, convey or assign to Purchaser such item in the manner and on the terms and conditions consistent with this Agreement as if it were a part of assets transferred under the Agreement as of the Closing Date. If, after the Closing, Seller (or any Affiliate or creditor of 'Seller) shall receive any payment or revenue that belongs to Purchaser pursuant to this Agreement, Seller shall remit or caused to be remitted the same to Purchaser. 7.8 Title. Seller shall deliver such documents, affidavits, or other instruments reasonably requested by the Title Insurance Company in order to issue an ALTA standard coverage policy of title insurance for the leasehold interest at the Closing. 7.9 Information Sharing. Notwithstanding any other provision of this Agreement (except for this Section 7.9), Seller's sole obligation with regard to the transfer of Facility Records shall be to use Commercially Reasonable Efforts to transfer such records to Purchaser. In the event that Purchaser reasonably determines that Seller did not deliver a Facility Record at Closing or that it requires access to any Retained Books and Records, Seller shall use Commercially Reasonable Efforts to provide to Purchaser (after advance written notice and during normal business hours and without charge to Purchaser)' reasonable access to all Facility Records and/or Retained Books and Records, provided, that such access does not interfere unreasonably` with the operation of Seller's business. With respect to any litigation and claims that involve Assumed Liabilities, Seller shall render reasonable assistance that Purchaser may reasonably request in defending such litigation or claim, and shall make available, upon advance written notice and during normal business hours, the personnel that are most knowledgeable about the matter in question. For avoidance of doubt, the Facility Records and/or Retained Books and Records to which Purchaser shall have access pursuant to the terms of this Section 7.9 shall include a -mails or electronic records, notwithstanding that e-mails will not have been transferred under Section 7.10 Financing Cooperation. Seller shall reasonably cooperate with Purchaser and Purchaser's lenders in connection with Purchaser obtaining debt financing necessary for the consummation of the transactions contemplated hereby, including providing such information as Purchaser and Purchaser's lenders may reasonably require and making representatives of such parties available at reasonable times in connection with the syndication of such debt financing. and related activities. 41 LA\1803500.5 7.11 Certain Seller Repair Obligations. (a) Prior to the Closing Date, Seller shall at it sole cost and expense (other than as provided in clause (1) below to the extent applied to the LTSA) undertake each of the following actions in a manner consistent with Prudent Industry Practices as reasonably approved by the Independent Engineer: (1) inspect and perform a "B Outage" on the Unit 2; provided, however, that such work will not include the replacement of the combustor and nozzles in Unit 2. The cost.of such B Outage shall be applied against the LTSA; (2) purchase from Siemens a new complete STG 800 Power Turbine Module (the "Module"). The purchase order shall provide for a customary one year warranty from initial start and shall be assignable to Purchaser (and its lenders for collateral purposes); (3) install such new Module into Unit 1 and, other than with respect to such Module, refurbish Unit 1 in accordance with the standard "C Outage" procedures and components; provided, however, that such work will not include the replacement of the combustor and nozzles in Unit. 1; (4) restart units and have Siemens "tune" the Facility in accordance with its customary post -outage procedures; and (5) complete a PTC 46 test of the Facility. (b) As and if necessary, Seller shall obtain any requisite Governmental Approval to implement the foregoing, including obtaining any requisite variance of stipulated order or abatement from the South Coast Air Quality Management District. (c) Seller shall update and consult with Purchaser on a reasonable basis from time to time regarding the status of the foregoing repairs; provided, however, that Seller shall have sole discretion (subject to being consistent with Prudent Industry Practices as reasonably approved by the Independent Engineer) in the implementation of the same. Purchaser shall have the right, at its sole cost and expense and without unreasonably interfering with the operation of Seller's business, to .observe the implementation of the foregoing and to provide input to Seller and the Independent Engineer regarding the same. (d) If, contrary to the Parties' expectations, there is some repair or replacement that is identified prior to close out of the work described in Section 7.11(a) and that consistent with Prudent Industry Practices as reasonably approved by the Independent Engineer will need to be undertaken after the Closing Date, then the Parties shall make reasonable arrangements for such repairs or replacements to be undertaken by Purchaser, but at Seller's sole cost and expense. Provided that prior to the Closing Date the Facility achieves, as demonstrated by the PTC 46 test under Section 7.11(a)(4),' the performance standards set forth in Schedule 3 jf ), the identification of any such repair or replacement shall not be a basis for either Party not to close the transactions contemplated by this Agreement. 42 LA\1803500.5 Any outage necessary to implement the work described in this Section 7.11(d) will be a Scheduled Outage under the PPTA. (e) There is a scheduled outage for the Facility in March, 2008. (1) During such . outage, the combustor and nozzles in Unit. 2 will need to be replaced. The cost of the parts will be provided for under the LTSA. As between Seller and Purchaser, Seller shall reimburse Purchaser for the reasonable cost of the Siemens technical advisory services and the labor, for such work; and (2) During such outage, the combustor and nozzles in Unit 1 ,will need to be replaced. The cost of the parts and the Siemens technical advisory services will be provided for under the LTSA. As , between Seller and Purchaser, Seller shall reimburse Purchaser for the reasonable cost of the labor for such work. (f) Prior to the Closing, other than the B Outage for Unit 2, none of the parts or services provided, or the amounts or timing of payments under, the LTSA will be changed. (g) The Parties agree that Appendices B and C to the PPTA attached as Exhibit H to the PSA shall be revised to reflect the results of the PTC 46 test contemplated by this Section 7.11. For purposes of clarity, the effect of such revisions would be that the Adjusted Contract Capacity and the HR (as those terms are defined in the PPTA) would be set at the levels indicated by the PTC 46 test on the Service Commencement Date of the PPTA, taking into account the Equivalent Operating Hours (as that term is defined in the PPTA) of the Facility from the time of completion of the PTC 46 test to the Service Commencement Date. These revisions shall be.made prior to Closing and, if applicable, after the performance of any material work under Section 7.11(d). (h) Nothing in this Agreement that requires Seller to pay or reimburse costs shall be read to diminish the freedom of ,Seller to negotiate other arrangements with Siemens. In so doing, Seller shall not modify the LTSA or otherwise create any liabilities or, obligations for Purchaser. ARTICLE 8 PURCHASER COVENANTS 8.1 Actions Before Closing Date. Purchaser shall use all Commercially Reasonable Efforts to perform and satisfy all conditions precedent to Seller's obligations to consummate the transactions contemplated by this Agreement that are to be performed or satisfied by Purchaser under this Agreement. 8.2 Assigned Agreement Consents, Approvals and Notifications. Purchaser shall use Commercially Reasonable Efforts to cooperate with Seller in obtaining all Seller Required Governmental Approvals and, other agreements required to consummate the transactions contemplated by this Agreement, including maintaining and renewing the same, and make all filings required by Governmental Rules to be made by Purchaser in order to consummate the 43 LA\1803500.5 transactions contemplated by this Agreement. Purchaser shall use all Commercially Reasonable Efforts to obtain the Purchaser Required Governmental Approvals, all consents and approvals of all other Persons, required to be obtained by Purchaser and provide notifications to all Persons required to be ;notified by Purchaser to effect the transactions contemplated by this Agreement. Purchaser shall keep Seller informed on a current basis regarding its communications regarding all such Purchaser Required Governmental Approvals, consents and approvals. Purchaser shall promptly take all actions as are reasonably requested by Seller to assist in obtaining any consents and approvals sought by 'Seller, including any Seller Required Governmental Approvals and Required Consents, and with respect to all filings that 'Seller elects to make or, 'pursuant to Governmental Rules, shall be required to make in connection with the transactions contemplated by this Agreement. 8.3 Availability of Facility Records. After the Closing Date, Purchaser shallprovide to Seller, (after advance' written notice and during normal business hours and without charge to Seller) reasonable access to all Facility Records for periods prior to the Closing, provided, that such access does not interfere unreasonably with the operation of Purchaser's business, and shall preserve such Facility Records until the later of (a) three (3) years after the Closing Date or (b) the required retention period for all government contract information, records or documents. In addition, Purchaser acknowledges that Seller has the right to retain originals or copies of Facility Records for periods prior to the Closing, provided, that copies of Facility Records are made and provided to Purchaser in the event originals are retained. With respect to any litigation and claims that involve Excluded Liabilities, Purchaser shall render reasonable assistance that Seller may reasonably request in defending such litigation or claim, and shall make available, upon advance written notice and during normal business hours, the ' personnel . that are most knowledgeable about the matter in question. If, after the Closing, Purchaser (or any Affiliate or creditor of Purchaser) shall receive Iany payment or revenue that belongs to Seller pursuant to this Agreement, Purchaser shall remit or caused to be remitted the same to Seller. 8.4 Seller Marks. The Seller Marks may appear on some of the Facility Assets, including on signage. Purchaser acknowledges and agrees that it does not have and, upon consummation of the transactions contemplated by this Agreement, will not have, any right, title, interest, license or other right to use the Seller Marks. After the Closing Date, Purchaser shall promptly use Commercially Reasonable Efforts to remove the Seller Marks from, or cover or conceal the Seller Marks on, the Facility Assets. 8.5 Commercially Reasonable Efforts. In addition to the undertakings in Section 8.2, upon the terms and subject to the conditions of this Agreement; Purchaser shall use Commercially Reasonable. Efforts to take, or cause to be taken, all actions, and to . do, or cause to be done, all things necessary, proper or advisable consistent with Governmental Rules to consummate and make effective in the most expeditious manner practicable the transactions contemplated hereby, including satisfying the conditions precedent to the consummation of such transactions as set forth herein. 8.6 Further Assurances; Post -Closing Assignments. (a) From time to time following the Closing,` Purchaser shall execute, acknowledge and deliver such additional documents, instruments of conveyance, transfer and 44 LA\1803500.5 assignment or assurances and take such other action as Seller may reasonably request to return any assets inadvertently conveyed to Purchaser and to release Seller from any, ongoing obligations with respect to the Facility Assets or the Assumed Liabilities. Without limiting the generality of the foregoing, after the Closing Date, Purchaser shall use its, Commercially Reasonable Efforts to post substitute collateral, letters of credit or bonds in the place of the collateral, letters of credit or bonds posted by Seller and listed on Schedule 8.6 with respect to any of the Assets; and, upon the discovery by Purchaser of any items not included within the definitions of the Facility Assets, but transferred, conveyed or assigned to or assumed to. Purchaser in the Bill of Sale, an Assignment and Assumption Agreement or any other applicable instrument of conveyance, or the failure to transfer any items included in the definition of Assumed Liabilities, Purchaser shall (i) deliver written notice to Seller of the existence and transfer or assumption of such item and provide Seller with all the information about and access to such item as Seller may reasonably request and (ii) if notified in writing by Seller within thirty (30) days after the delivery of such notice by Purchaser, transfer, convey or assign to Seller such item in the manner and on the terms and conditions consistent with this Agreement. If, ,after the Closing, Purchaser (or any Affiliate or creditor of Purchaser) shall , receive any payment or revenue that I belongs to Seller pursuant to this Agreement, Purchaser shall remit or caused to be remitted the same to Seller. (b) Purchaser shall have caused a letter of credit required by that certain Guaranty Agreement, by,,and between Bicent Holdings LLC and Seller, dated as of even date herewith, to be delivered to Seller by December 14, 2007. In the event that the senior unsecured long-term debt rating of the bank issuing the Letter of Credit falls below A2 from Moody's Investor Services, Inc. or A from Standard & Poor's Rating Group, Purchaser shall . cause Bicent Holdings LLC to deliver to Seller a replacement letter of credit reasonably, acceptable to Seller no later than ten (10) Business Days after such event. Seller shall return the original letter of credit or the replacement letter of credit, as applicable, to Purchaser at the Closing. ARTICLE 9 CERTAIN AGREEMENTS 9.1 Regulatory Matters. Purchaser hereby covenants to Seller, and Seller hereby covenants to .Purchaser, as follows: (a) Cooperation; Confidentiality Agreement. In connection with any Governmental Approval, each of the Parties shall use Commercially Reasonable Efforts to (a) cooperate with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party; (b) keep the other Parties informed in all material respects of any material communication. received by such Party from, or given by such Party to, any Governmental Authority and of any material communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated hereby; and (c) subject to restrictions of applicable Governmental Rules, permit the other Party to review any material 45 LAV 803500.5 communication given to it by, and consult with each other in advance of any meeting or conference with any Governmental Authority, including in connection with any proceeding by a private party. The foregoing obligations in this Section 9.1(a) shall be subject to the Confidentiality Agreement and any attorney -client, work product or other privilege, and each of the Parties shall coordinate and cooperate fully with the other Parties in exchanging such information and providing such assistance as such other Parties may reasonably request in connection with the foregoing. The Parties will not knowingly take any action that will have the effect of delaying, impairing or impeding the receipt of any required Governmental Approvals, including the Seller Required Governmental Approvals or the Purchaser Required Governmental Approvals. 9.2 Taxes (a) Allocation of Taxes. Seller shall be liable for all Taxes attributable to the Facility Assets for any Pre -Closing Tax Period. Purchaser shall ,be liable for all Taxes attributable to the Facility Assets for any Post -Closing Tax Period. In the case of any Straddle Period: (i) Real, personal and intangible property Taxes or other Taxes levied on a per diem basis (collectively, "Per Diem Taxes") for a Pre -Closing Tax Period _shall be equal to the amount of such Per Diem Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days during the Straddle Period that are in the Pre -Closing Tax Period and the denominator of which is the total number of days in the Straddle Period; and (ii) Taxes other. than Per Diem Taxes for any Pre - Closing Tax Period shall be computed as if such Tax Period ended on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis, such as deductions for depreciation, shall be apportioned on a pro rata basis. (b) Transfer and Sales Taxes. Each of Purchaser and Seller shall be responsible for fifty percent (50%) of the payment of any sales, use, transfer, documentary and other similar, Taxes arising in connection with the sale of the Facility Assets by Seller to Purchaser. (c) Tax Refunds. Seller shall be entitled to any refunds or credits of Taxes attributable to the Facility Assets for any Pre -Closing Tax Period:. Purchaser shall promptly notify and forward to Seller the amounts of any such refunds or credits to Seller within twenty (20) days after receipt thereof. (d) Pending or Threatened Actions. After the Closing Date, Purchaser shall notify Seller in writing, within fifteen (15) days after its receipt of any correspondence, notice or other communication from a taxing authority or any representative thereof, of any pending or threatened tax audit, or any pending or threatened judicial or administrative proceeding that involves Taxes attributable to the Facility Assets for any Pre -Closing Tax Period, and furnish Seller with copies of all correspondence received from any taxing authority in - 46 LA\1803500.5 connection with any audit or information request with respect to any such Taxes attributable to the Facility Assets, for any Pre -Closing Tax Period. (e) Cooperation and Defense of Tax Claims. Notwithstanding any provision of this Agreement to the contrary, with respect to any claim for refund, audit, examination, notice of deficiency or assessment or any judicial or administrative proceeding that involves Taxes attributable to the Assets for either a Pre -Closing Tax Period or a Straddle Period (collectively, "Tax Claim'), Purchaser and Seller shall reasonably cooperate with each other in contesting any Tax Claim, including making available original books, records, documents and information for inspection, copying and, if necessary, introduction as evidence at any such Tax Claim contest and making employees available on a mutually convenient basis to provide additional information or explanation of any material provided hereunder. with respect to such Tax Claim or to testify at proceedings relating to such Tax Claim. Seller will control all proceedings taken in connection with any Tax Claim that pertains entirely to a Pre -Closing Tax Period that does not include a Straddle Period, and Seller and Purchaser will jointly control all proceedings taken in connection with any Tax Claim pertaining to any Straddle Period. Purchaser has no right to settle or otherwise compromise any Tax Claim which pertains to a Pre Closing Tax Period; and neither Party has the right to settle or otherwise compromise any Tax Claim which pertains to a Straddle Period without the other Party's prior written consent. (f) Retention of Tax Records. After the Closing Date and until the seventh anniversary of the Closing Date, Purchaser shall retain possession of all material accounting, business, financial and Tax records and information that (a)relate to the Facility Assets and are in existence on the Closing Date and (b) come into existence after the 'Closing Date but relate to the Facility Assets before the Closing Date, and Purchaser shall give Seller reasonable notice and an opportunity to retain. any such records in the event that Purchaser determines to destroy or dispose of them during such period. In addition, from and after the Closing Date, Purchaser shall provide to Seller (after reasonable notice and during normal business,hours and without charge to Seller) access to the books, records, documents and other information relating to the Facility Assets as Seller may reasonably deem necessary to (i) properly prepare for, file, prove, answer, prosecute and defend any Tax Return, claim, filing, tax audit,: tax protest, suit, proceeding or answer or (ii) administer or complete any cases under Chapter 11 of the Bankruptcy Code of or including. Seller. Such access shall include access to any computerized information systems that contain data regarding the Facility Assets. Any information obtained under this Section 9.2(f) and this Article 9 shall .be kept strictly confidential, except as may be otherwise necessary in connection with the filing of Tax Returns, claims for a Tax refund or in conducting any audit, examination or other proceeding in respeet'of Taxes. (g) Allocation of Purchase Price and Purchase Price Allocation Forms. The Facility Purchase Price, the Assumed Liabilities and other relevant items shall be allocated among the Facility Assets in accordance with Section 1060 of the Code. Purchaser shall prepare and deliver to Seller an allocation schedule setting forth Purchaser's determination of the allocation (the "Allocation ` Schedule") within thirty (30) days after the date hereof, which Allocation Schedule shall be subject to the approval of Seller, which shall not be unreasonably withheld or delayed. Seller shall have a reasonable opportunity to review and comment on the Allocation Schedule before granting such approval. The Allocation Schedule shall identify the 47 LA\1803500.5 transferor and transferee thereof, and shall be prepared in accordance with Treasury Regulation Section 1.1060-1 (or any comparable provision of state or local Tax Law) or any successor provision. The Parties agree that they will report the federal, state, local and other Tax consequences of the purchase and sale hereunder (including in filings on IRS Form 8594) in a manner consistent with such allocation and that they will not take any position inconsistent therewith in connection with any Tax Return, refund claim, litigation or otherwise, unless and to the extent required to do so pursuant to a final determination within the meaning of Code Section 1313(a)(1). Seller and Purchaser shall cooperate in the filing of any forms (including Form 8594) with respect to . such allocation. Notwithstanding any other provision of this Agreement, this Section 9.2(a) shall survive any termination or expiration of this Agreement. (h) Tax Returns. Seller shall prepare; in the ordinary course of business and consistent with past practice, all Tax Returns for Taxes attributable to the Facility Assets for any Pre -Closing Tax Period. Purchaser shall prepare all Tax Returns for Taxes attributable to the Facility Assets for any Post -Closing Tax Period, but if such Tax Return is for a Straddle Period, Purchaser shall present a draft of the Tax Return to Seller at least thirty (30) days before'such Tax Return is due for Seller's review and approval, and shall refrain from filing such Tax Return unless and until such approval is granted, which shall not be unreasonably withheld or delayed: (i) Tax Indemnity. If a Tax assessment is levied upon any Party byan authorized tax jurisdiction for Taxes that are the obligation of another Party under. this Agreement, then the non -assessed Party shall reimburse the assessed Party for those Taxes including any interest and penalty within thirty (30) days after notice and proof of the payment of such Tax assessment. If a Party files a Tax Return and pays Tax due therewith, but part or all of that Tax is the obligation of another Party under'this. Agreement, then the non-paying Party shall reimburse the assessed Party for those Taxes including any interest and penalty within thirty (30) days after notice and proof of the payment of such Tax. (j) Disputes Regarding Taxes. Notwithstanding anything to the contrary in this Agreement, any dispute, controversy; or claim between Seller, on the one hand, and Purchaser, on the other hand, arising out of or relating to the provisions of this Agreement that relates to Taxes that cannot be resolved by negotiations between Seller and Purchaser shall be submitted to an accounting firm mutually agreed upon` by Seller and Purchaser (the "Accounting. Firm") for resolution. The Accounting Firm shall control the proceedings related to the dispute resolution and may request. such evidence and information as it deems necessary. The resolution reached by the Accounting Firm shall be binding on Seller and Purchaser and their respective affiliates. The expenses of the Accounting Firm shall be borne equally by Seller, on the one hand, and Purchaser, on the other hand. 9.3 Employment Matters. (a) Purchaser shall, no later than thirty (30) days after the date hereof or fifteen (15) days prior, to the Closing, whichever occurs first, offer employment, effective as of the Closing, to all of Facility Direct Employees on the terms described in Section 9.3(c). No later than thirty (30) days prior to the Closing, Purchaser shall use its Commercially Reasonable Efforts to either (i) enter into a services agreement with PLG covering the Facility on terms 48 LA\1803500.5 substantially similar to the existing PLG Agreement, continuing without interruption after the Closing the services of the Facility Contract Employees with compensation and benefits that are, in the aggregate, substantially equivalent to the compensation and benefits being provided to such employees prior to the Closing, or (ii) offer employment to all Facility Contract Employees effective as of the Closing, on the terms described.in Section 9.3(c). (b) Seller shall, effective as of the Closing, terminate the employment of the Facility Direct Employees and be responsible (and pay) for all compensation (including salaries, wages, overtime, bonuses, severance and accrued but unused vacation pay) and benefits earned or due on or prior to the Closing. Seller shall also, effective as of the Closing, terminate the PLG Agreement with respect to the Facility and be responsible (and pay) for all payments due to PLG as a result of such termination. (c) Immediately following the Closing Date and for a period of at least one (1) year after the Closing, each Facility Direct Employee who accepts Purchaser's offer of employment (each, a "Transferred Employee") shall (i) be paid an annual rate of salary or an hourly wage and a bonus that is the. same or greater than that being paid to such Transferred Employee on the date hereof, (ii) have the same (or better) terms and conditions of employment; including vacation and paid time -off policies, as in effect on the Closing Date and (iii) immediately participate in employee benefit plans of Purchaser that are substantially equivalent in the aggregate to the employee benefit plans as similarly situated employees of Purchaser's operating companies. (d) Without limiting the generality of Section 9.3(c), Purchaser agrees that (i) Purchaser shall cause its benefit. plans to recognize all previous service principally dedicated to the Facility Assets for the purpose of determining eligibility for and entitlement to benefits, including vesting and benefit accrual (except with respect to defined benefit pension plans or as would result in a duplication of benefits); (ii) Purchaser shall use Commercially Reasonable Efforts to cause one or more group health plans offered to Transferred Employees to recognize all deductibles and coinsurance payments accrued by the Transferred Employees prior to the 1 Closing Date and to waive any preexisting condition limitations, actively at work exclusions and waiting > periods for the Transferred Employees; (iii) for the remainder, of the calendar year in which the Closing occurs and for the one (1) succeeding year, the vacation and paid time -off offered to the Transferred Employees shall be equal to or greater than the vacation. and paid time -off offered to such Transferred Employees on the Closing Date; (iv) Purchaser shall maintain for at least one (1) year after the Closing the same or better severance -arrangements applicable to the Transferred Employees that were in effect on the Closing Date; and (v) after, the first anniversary of the. Closing, subject to applicable Law, Purchaser shall provide the Transferred Employees with base salary and overall benefits (including retiree benefits, if any) that are no less favorable, in the aggregate, than those then provided to similarly situated employees of Purchaser. Notwithstanding anything in this Agreement to the contrary, no provision of this Section 9.3 shall create any third party beneficiary or other rights in any current or former employee of Seller, or Purchaser (including any dependent or beneficiary thereof) or any other Person. Purchaser or any of its Affiliates, as applicable; shall have the right in its sole discretion to amend, modify, terminate or adjust benefit levels under any and all employee benefit plans and arrangements' after the Closing Date, and nothing in this Section 9.3 shall be construed to limit any rights that Purchaser or any of its Affiliates may have under any .n LA\1803500.5 such plan or arrangement to amend, modify, terminate or adjust such plan or arrangement. Nothing in this Agreement prevents Purchaser from terminating the employment of any. Transferred Employee after the Closing Date. (e) Purchaser shall take the necessary action to cause Purchaser's defined contribution plan or plans to accept the rollovers of any "eligible rollover distributions" (as defined in the Code) of Transferred Employees from any tax -qualified defined contribution plans of the Seller in which Transferred Employees are participating immediately prior to Closing. (f) Purchaser assumes no liability with respect to, and receives no right or interest in, any Benefit Plan. At the close of business on the Closing Date, all Facility Direct Employees shall cease participation in all Benefit Plans, except with respect to benefits accrued as of, or claims incurredonor prior to, the Closing Date,except that each Seller's Facility Employee who is on long-term disability leave immediately prior to the Closing shall continue to be covered by the long-term disability plan maintained for the benefit of such Seller's Facility Employee as of the Closing Date for such covered disability. (g) All Facility Direct. Employees shall become fully vested in their benefits accrued in any Benefit Plan as of the Closing Date in accordance with the terms of such Benefit Plan. (h) Purchaser shall be a "successor employer" (as described in the regulations under Section 4980B of the Code) for purposes of providing continuation group health plan coverage as required under Section 4980B of the Code ("COBRA Continuation Coverage") and shall provide COBRA Continuation Coverage for the Facility Direct. Employees and their "qualified beneficiaries" (as defined in Section 4980B of the Code) with respect to "qualifying events" (as defined in Section 4980B of the Code) that occur on, prior to, or after the Closing Date. (i), Within thirty days following the date, hereof, Seller shall provide Purchaser with such pertinent data or information as Purchaser shall reasonably require to determine each Seller's Facility Employee's service, compensation or any other information related to. benefits necessary to implement the requirements of this Section 9.3 on the Closing Date. To the extent the consent of a Seller's Facility Employee is required in order for Seller to deliver any such pertinent data, records or information to Purchaser, Seller agrees to use its Commercially Reasonable Efforts to secure such consent. rSeller shall use its best efforts. to obtain comparable information from PLG regarding the Facility Contract Employees. 0) Purchaser shall have the right to use a third party vendor to hire Facility Employees and to perform certain actions on behalf of Purchaser under this Section 9.3, but no such use or designation shall release Buyer from its obligations hereunder. ARTICLE 10 TERMINATION; SURVIVAL 10.1 Rights to Terminate. 50 LA\I803500.5 The obligations of the Parties with respect to the Assets may, by written notice given on or prior to the Closing Date, in the manner provided in this Section 10.1, be terminated at any time prior to the Closing Date as provided below: (a) by Purchaser or Seller, if the Closing has not occurred on or before February 29, 2008; (b) by Purchaser if there has been a misrepresentation or a material default or breach by Seller with respect to any of Seller's representations and warranties in this Agreement or in any Related Agreement or the due and timely performance of any of Seller's covenants and agreements contained in this Agreement or in any Related Agreement and such misrepresentation, breach or material default has not been cured using Commercially Reasonable Efforts and cannot reasonably be expected to be cured within sixty (60) days of written notice from Purchaser specifying particularly such misrepresentation, breach or default by Seller; provided, however, no right of termination shall arise under this subsection (b) if such misrepresentation, default or breach is not able to be cured using Commercially Reasonable Efforts in such sixty day period, and Seller is in the process of curing the misrepresentation, default or breach and shall have cured the misrepresentation, default or breach by Seller using Commercially Reasonable Efforts on or before the date set forth in Section 10.1 (a); (c) except as set forth in Section 10.1(d) below, by Seller if there has been a misrepresentation or a material default or breach by Purchaser with respect to any of Purchaser's representations and warranties in this Agreement or in any Related Agreement or the due and timely performance of any of Purchaser's covenants and agreements contained in this Agreement or in any Related Agreement, and such misrepresentation, breach or material default is not cured: (i) within ten (10) days of written notice from Seller specifying'' particularly such misrepresentation, default or breach in the case of any of Purchaser's payment obligations; or (ii) and cannot reasonably be expected to be cured using Commercially Reasonable Efforts within sixty (60) days of written notice from Seller specifying particularly such misrepresentation, default or breach in all other cases; provided, however, no right of termination shall arise under this subsection (c)(ii) if such misrepresentation, default or breach is not able to be cured using Commercially Reasonable Efforts in such sixty day period, and Purchaser is in the process of - curing the misrepresentation, default or breach in such sixty day period and shall have cured the misrepresentation, default or breach by Purchaser using Commercially Reasonable Efforts on or before the date set forth in Section 10.1(a); (d) by Seller, for any failure by Purchaser to perform its obligations set forth in Section 8.5(b). For avoidance of doubt, Purchaser shall have no cure rights with respect to any breach of its obligations set forth in Section' 8.5(b); and (e) by mutual agreement of Seller and Purchaser; 10.2 Effect of Termination. Any termination of this Agreement, including any termination pursuant to Section 10.1 above, shall not limit or affect either Purchaser's or Seller's right to 51 LA\1803500.5 seek to recover damages by reason of any breach hereof by the other(s) occurring prior to such termination. 10.3 Survival. (a) Except as set forth in Section 10.3(c), none of the representations and warranties of Seller under Section 5 or in any instrument delivered in connection with the Closing shall survive the Closing Date. (b) Except as set forth in Section 10.3(c), none of the representations and warranties of Purchaser contained in this Agreement or in any instrument delivered in connection herewith shall survive the Closing Date. . (c) The following sections shall survive the Closing only for the time periods hereby specified: (i) for a period of eighteen (18) months after the Closing Date; Article 5, except for Sections 5.1(h), 5.2 a 2 , 5.2 e and 5.2 i ; (ii) for a period of three (3) years, (A) Sections 5.2(a)(2), 7_7, .8.3-8.6 and 9.1(a); and (iii) for the length of applicable limitations periods, Sections 5.1(b), 5.1 c 1 and c 2 , 5.1(h); 5.1 i , 5.2(d); 5.2 e , 5.2(h), 5.2(i), 9_2 and Article 12. ARTICLE 11 LIMITED INDEMNITY 11.1 Limited Indemnity. (a) Purchaser shall indemnify, defend and hold harmless Seller, its authorized representatives, appointed or elected officials, employees, shareholders, and agents (each, a "Seller Indemnitee") from and against any and all claims, demands, suits, losses; liabilities, damages, obligations, payments, costs and expenses (including,. without limitation, the costs and expenses of any and all actions, suits, proceedings, assessments, judgments, settlements and compromises relating thereto and reasonable attorneys' fees and reasonable disbursements in connection therewith) (each, an "Indem-nifiable Loss"), asserted against or suffered by any Seller Indemnitee relating to, resulting from or arising out of (i) any breach by Purchaser of any representation, warranty, covenant or agreement of Purchaser contained in this Agreement, (ii) any loss or damages directly resulting from or arising out of any negligent actor omission or willful misconduct of Purchaser. or Purchaser's,,;Representatives in connection with Purchaser's inspections of the Facility, and (iii) any Assumed Liabilities.. Except with respect to claims arising out of fraud and except for rights to equitable remedies, this Article 11 constitutes each Seller Indemnitee's sole and exclusive remedy, for any and all Indemnifiable Losses or other claims relating to or arising from this Agreement. (b) Seller shall indemnify, defend and hold harmless Purchaser, its officers, directors, employees, shareholders, Affiliates and agents (each, a "Purchaser Indemnitee") from and against any and all Indemnifiable Losses asserted against or suffered by any Purchaser Indemnitee relating to, resulting from or arising out of (i) any breach by Seller of any representation, warranty, covenant or agreement of Seller contained in this Agreement, (ii) the Excluded Liabilities, except as otherwise set forth in this Agreement. Except with respect to 52 LA\1803500.5 claims arising out of fraud and except for rights to equitable remedies, this Article 11 constitutes each Purchaser Indemnitee's sole and exclusive remedy for any and all Indemnifiable Losses or other claims relating to or arising from this Agreement. (c) Notwithstanding anything to the contrary contained herein, any Indemnifiable Loss shall be net of the dollar amount of any, insurance or other proceeds actually received by the Indemnitee or any of its Affiliates with respect to the Indemnifiable Loss. Any Party seeking indemnity hereunder shall use Commercially Reasonable Efforts to seek. coverage (including both costs of defense and indemnity) under applicable insurance policies with respect to any such Indemnifiable Loss.. (d) The expiration or termination of any representation or warranty shall not affect the Parties' obligations under this Section 11.1 if the Indemnitee provided the Person required to provide indemnification under this Agreement (the "Indemnifying Party") with written notice of the claim or event for which indemnification is sought prior to such expiration, termination or extinguishment. (e) Except to the extent otherwise provided expressly herein, and except for fraud and intentional misconduct, the rights and remedies of Seller and Purchaser under this Article 11 are exclusive and in lieu of any and all other rights and remedies which Seller and Purchaser may have under. this Agreement, applicable laws (including Environmental Laws) or otherwise for monetary or equitable relief, with respect to (i) any breach of or failure to perform any covenant, agreement, or representation or warranty set forth in this Agreement, after the occurrence of the Closing, or (ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be. Notwithstanding anything in this Article 11 to the contrary, each Party shall have the right to seek equitable remedies including specific performance, to the extent such remedy is available under applicable Governmental Rules. (f) Purchaser and Seller hereby waive any right to recover punitive, incidental, special, exemplary and consequential damages arising in connection with or with respect to this Agreement. The provisions of this Section 11.1(f) shall not apply to indemnification for a Third Party Claim to the extent such third party seeks or is awarded such damages. (g) Notwithstanding anything to the contrary herein, (i) except as set forth in clause (ii) of this Section 11.1(g), each Party's liability and obligation to the other Party for an Indemnifiable Loss relating to, resulting from or arising out of a breach of the representations or i warranties shall be the amount thereof in excess of $500,000 and shall not exceed in the aggregate fifteen percent (15%) of the Purchase Price; (ii) each Party's liability and obligation the other Party for an Indemnifiable Loss relating to, resulting from or arising out of fraud or intentional misconduct or out of a breach of the representations and warranties in Sections -5.1(b), 5.1 c 1 and c 2 , 5.1 h , 5.1 i , 5.2 d , 5.2 e , 5.2 h and 5.2 i shall be the amount of such Indemnifiable Loss; (iii) any ` claims 'for an Indemnifiable Loss as related to breaches of representations or warranties must be. asserted by the claiming Party within the applicable survival period specified in Section 10.3; and (iv) the amount of any Indemnifiable Loss shall be calculated without regard to any qualification of Material Adverse Effect, materiality or words of similar import. 53 LA\1803500.5 (h) Each Party seeking indemnification shall promptly notify the other Party in writing of any damage, claim, loss, liability or expense which the Party seeking indemnification has determined has given or could give rise to a claim (a "Notice of Claim"). A Notice of Claim shall specify, in reasonable detail, the facts known by the notifying Party regarding the claim. Subject to the terms of this Agreement, the failure to provide (or timely provide) a Notice of Claim will not affect the notifying Party's rights to indemnification, provided, however, the Indemnifying Party is not obligated to indemnify the other Party for the increased amount of any claim which would otherwise have .been payable to the extent that the increase resulted from the failure to deliver promptly a Notice of Claim. 11.2 No Recourse Against Third Parties. Each Party hereby ;agrees for itself and for all of its officers, directors, shareholders, Affiliates, attorneys,; agents and any other parties making any. claim by, through or under the rights of such persons (collectively, a "PgAy Group") that no member of a Party Group shall have any rights against any appointed or elected official, employee, officer, director, shareholder, Affiliate, attorney, agent, or other representative of the other Party (each, individually, a "Non -Recourse Person") for any damages, suits, claims, proceedings, fines, judgments, costs or expenses (including attorneys' fees and incidental, consequential or punitive damages) (collectively, "Losses") that such Party may suffer in connection with this Agreement, but in no event will any party to an Assigned Agreement be deemed an agent of Seller for -purposes of this Section 11.2. 11.3 Defense of Claims. (a) If any Indemnitee receives notice of the assertion of any claim or of the commencement of any claim, action, or proceeding, made or brought by any Person who is not a Party or any Affiliate of a Party (a "Third Party Claim") with respect to which indemnification is to be sought from an Indemnifying Party; the Indemnitee shall give such Indemnifying Party reasonably prompt written notice thereof, but in any event such notice shall not be given later than ten ;(10) calendar days after the Indemnitee's receipt of notice of such Third Party Claim. Such notice shall describe the nature of the Third Party Claim in reasonable detail and shall indicate the estimated amount, if practicable, of the. Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in or, by giving written notice to the Indemnitee, to elect to assume the defense of any Third Party Claim at such Indemnifying Party's expense and by such Indemnifying Party's own counsel, provided, that the counsel for the Indemnifying Party who shall conduct the defenseofsuch Third Party Claim. shall be reasonably satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith in such defense at such Ind6Imitee's "own expense': If an Indemnifying Party elects not. to assume the defense of any Third Party Claim, the Indemnitee may compromise or settle such Third Party Claim over the objection of the Indemnifying Party, which settlement or compromise shall conclusively establish the Indemnifying Party's liability pursuant to this Agreement. (b) If, within ten (10) calendar days after an Indemnitee provides written notice to the Indemnifying Party of any Third Party Claims, the Indemnitee receives written notice from the Indemnifying Party that such Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in Section 11.3(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection 54 LA\1803500.5 with the defense thereof except as set forth herein. Without the prior written consent of the other Party, no Partyshall enter into any settlement of any .Third Party Claim which would lead to liability or create any financial or other obligation on the part of the other Party. If a firm offer is made to settle a Third Party Claim without leading to liability orthecreation of a financial or other obligation on the part of the Indemnitee and the Indemnifying Party desires to accept and agree to such offer; the Indemnifying Party shall give written notice to the Indemnitee to that effect: If the Indemnitee unreasonably fails to consent to such firm offer within ten (10) calendar days after its receipt of suchnotice, the Indemnifying Party shall be relieved of its obligations to defend such Third Party Claim and the Indemnitee may contest or defend such Third Party Claim. In such event, the maximum .liability of the Indemnifying Party as to such .Third Party Claim will be the amount of such settlement offer plus reasonable costs and expenses paid or incurred by Indemnitee up' to the date of said notice. Notwithstanding anything else to the contrary set forth in this Agreement, to the extent the Indemnitee is entitled to indemnification hereunder, the Indemnitee shall not be obligated to take any other action in connection with a settlement other than the execution of a customary mutual release. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") shall be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, stating the nature of such claim in reasonable detail and indicating the estimated amount, if practicable, but in any event such notice shall not be given later than ten (10) calendar days after the Indemnitee has actual knowledge of such Direct Claim, and the Indemnifying Party shall have a period of thirty (30) calendar days within which to respond to such Direct Claim. If the Indemnifying Party does not respond within such thirty (30) calendar day period, the Indemnifying Party shall be deemed to have accepted such claim. If the Indemnifying Party rejects such, claim, the Indemnitee will be free to seek enforcement of its right to indemnification under this Agreement. (d) If the amount of any Indemnifiable Loss, at -any time subsequent to the making of an indemnity payment in respect thereof, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement or payment by, from or against any other entity, the amount of such reduction, less any costs, expenses or premiums incurred in connection therewith (together with interest thereon from the date of payment thereof at the publicly announced prime rate then in effect as published in The Wall Street Journal shall promptly be repaid by the Indemnitee to the Indemnifying Party. (e) A failure to give timely notice or respond timely to notice as provided in this Section 11.3-shall not affect the rights or obligations of any Party hereunder except if, and only to the extent that, as a result of such failure, the Party which was entitled to receive such notice was actually prejudiced as a result of such failure. M Notwithstanding the foregoing, the Parties agree and acknowledge that (i) Seller shall be entitled exclusively to control, defend and settle any litigation, administrative or regulatory proceeding arising out of or related to any Excluded Liabilities, and Purchaser agrees to cooperate reasonably, at the Indemnifying Party's expense, in connection therewith and (ii) Purchaser shall be entitled exclusively to control, defend and settle any litigation, administrative or regulatory proceeding, arising out of or related to any Assumed Liabilities, and Seller agrees to cooperate reasonably, at the Indemnifying Party's expense, in connection therewith. 55 LA\1803500.5 ARTICLE 12 DISPUTE RESOLUTION 12.1 Dispute Resolution. Any and all disputes, claims or controversies arising out of, relating to, concerning or pertaining to the terms of this Agreement, or to either Party's performance or failure of performance under this Agreement ("Dispute"), which Dispute the Parties have been unable to resolve by informal methods after undertaking a good faith effort to do so, shall first be submitted to an informal dispute resolution under the procedure described in Section 12.2 below; if the matter is not resolved through such procedures, it shall be referred for final and binding arbitration under the procedures described in Section 12.3. 12.2 . Informal Resolution. Any unresolved Disputes shall initially be referred to Seller's City Administrator, or designee, and the President of Purchaser for resolution. Such executives or their respective designees shall meet at least once, and shall negotiate in a commercially reasonable manner for a period of fifteen (15) Business Days in an effort to resolve the Dispute. Neither Party shall seek to commence any litigation or arbitration proceeding without first satisfying this Section 12.2 and any failure of a Party to do so shall constitute a sufficient basis for termination without prejudice any proceeding so attempted. 12.3 Arbitration. Either Party may initiate binding arbitration with respect to the Dispute by making a written demand for binding arbitration before an arbitrator that is a former judge or attorney with experience resolving major commercial disputes within the electric industry with JAMS, its successor, or any other mutually agreeable arbitrator (the "Arbitrator") at any time following the unsuccessful conclusion of the informal resolution provided for in Section 12.2. . The Parties shall cooperate with one another in; promptly selecting the Arbitrator and in scheduling the arbitration to commence no later than one hundred eighty (180) Days from the date of the initial written demand for binding arbitration. If, notwithstanding their good faith efforts, the Parties are unable to agree upon a mutually acceptable Arbitrator, the Arbitrator shall be appointed as provided for in California Code of Civil Procedure Section.1281.6. Upon a Party's .written demand for binding arbitration, such Dispute, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration before.the Arbitrator, in accordance with the laws of the State of California, without regard to principles of conflicts of laws. Except as provided for herein, the arbitration shall be conducted by the Arbitrator in accordance with the rules and procedures for arbitration of complex business disputes for the organization with which the Arbitrator is associated;absent the existence of such rules and procedures, the arbitration: shall be conducted in accordance with the California Arbitration Act, California Code of Civil Procedure Section 1280 et seq. However, notwithstanding the rules and procedures that would otherwise apply to the arbitration, and unless the Parties agree to a different arrangement, the place of the arbitration shall be in Los Angeles County, California; each side in the arbitration shall be entitled to take up to three depositions, and all direct testimony in the arbitration shall be submitted in the form of affidavits or declarations under' penalty of perjury. Each Party shall cooperate in making available for cross-examination at the arbitration hearing its witnesses whose direct testimony has been so submitted. Judgment on the award may be entered in any court having jurisdiction. The Arbitrator shall, in any award, allocate all of the costs of the binding arbitration (other than each Party's individual attorneys' fees and costs related to the Party's participation in the 56 LA\1803500.5 arbitration, which fees and costs shall be borne by such Party), including the fees of the Arbitrator, in such manner as the Arbitrator shall determine. Until such award is made, however, the Parties shall share equally in paying the costs of the arbitration. 12.4 Waiver of Jury Trial. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING UNDER THIS AGREEMENT. ARTICLE 13 MISCELLANEOUS. AGREEMENTS AND ACKNOWLEDGEMENTS 13.1 Expenses. Except as otherwise provided herein, each Party is responsible for its own costs and expenses (including attorneys' and consultants' fees, costs and expenses) incurred in connection with this Agreement and the consummation of the transactions contemplatedby this Agreement. 13.2 Representations and Warranties Exclusive. The representations and warranties contained in this Agreement are. the: only representations or warranties given by Seller and all other express or implied warranties are disclaimed. Except as otherwise set forth in this Agreement, including the representations and warranties contained herein, Purchaser acknowledges that (i) the Assets are conveyed "AS IS," "WHERE IS" and "WITH ALL FAULTS",and that all warranties of merchantability, usage or suitability or fitness for a particular purpose are disclaimed and (ii) no material or information provided by or communications made by Seller or its agents will create any representation or warranty of any kind, whether express or implied, with respect to the Assets and the titles.thereto, the operation of the Assets, or the prospects (financial and otherwise), risks and other incidents of the Assets, including the actual or rated generating capability of the Facility, the Hoover Dam Uprating Project and the ability of Purchaser to generate or sell electrical energy from the Facility. 13.3 Entire Document. Other than the Confidentiality Agreement, this Agreement (including the Exhibits and Schedules) and the Related Agreements contain the entire agreement. between the Parties with respect to the transactions contemplated hereby, and supersede all negotiations, representations, warranties, commitments, offers, contracts and writings prior to the execution date of this Agreement, written or, oral. No waiver and no modification or amendment of any provision of this Agreement is effective unless made in writing and duly signed by the Parties referring specifically to this,Agreement, and then only to the specific purpose, extent and interest so provided. y 13.4 Schedules. (a) The Schedules delivered pursuant to the terms of this Agreement are an integral part of this Agreement to the same extent as if they were set forth verbatim herein. In addition to the obligations of Seller in Section 7.5, Seller shall have the right to update the Schedules in advance of the Closing (an "Update"). Seller shall furnish a .copy thereof to Purchaser not later than 10 Business Days prior to the Closing Date. No Update shall affect the determinations to be made under Section 3.1(d). If any Update shall result in a failure of the Closing Condition set forth in Section 3.1(d), Purchaser may elect either (i) not to proceed to 57 LA\1803500.5 Closing or (ii) to proceed to Closing and accept the representations and warranties set forth herein as being qualified by the Updates, provided that Purchaser shall retain the rights and remedies set forth in Section 13.4(b) below. (b) - If any Update results in a breach of the representations and warranties set forth in this Agreement, Purchaser will have all rights and remedies under this Agreement with respect to such breach without regard to the Updates. For avoidance of doubt, Purchaser does not waive any claim for any other remedy or indemnification with respect to breach of representation, warranty, covenant, or any other claim under this Agreement by reason of facts .or circumstances Purchaser was aware of as of the Closing Date, but that were not reflected in the Schedules (as modified by any Updates). Seller may "over disclose" information on the Schedules and the inclusion of any item on a Schedule that is less material than the materiality standard in the provisions of this Agreement that make reference to such Schedule shall not be used to interpret or alter such materiality standard. 13.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which is an original, but all of which together constitute one and the same instrument. 13.6 Severability. If any provision hereof is held invalid or unenforceable by any arbitrator or as a result of future legislative action, this holding or action shallbe strictly construed and shall not affect the validity or effect of any other provision hereof. To the extent permitted by law, the Parties waive, to the maximum extent permissible, any provision of law that renders any provision hereof prohibited or unenforceable in any respect. 13.7 Assignability. This Agreement is binding upon and inures to the benefit of the successors and .assigns of the Parties. However, neither Party shall Assign this Agreement without the prior written consent of the other Party, which consent shall not .be unreasonably withheld, except that Purchaser may Assign this Agreement, in whole or in part, to a wholly owned Affiliate or to its financing .sources for collateral purposes or, after the Closing, to a third party purchaser in connection with any sale of the Facility, without the prior written consent of Seller, provided that such Assignment shall not relieve Purchaser of its obligations asset forth in this Agreement. For avoidance of doubt, nothing in this Section 13.7 shall limit or otherwise modify the assignment provisions in any of the Related Agreements. Any such Assignment is conditioned on the assignee's agreement in writing to assume the assigning Parry's duties and obligations under this Agreement and the Related Agreements. - Any assignmenteffected in accordance with this Section 13.7 shall, not relieve the assigning Party of its obligations and liabilities under this Agreement and the Related Agreements Far purposes of this Section 13.7, prior to the Closing, "Assign" or "Assignment" means any direct or indirect assignment, subcontracting or other transfer of this Agreement including with respect to Purchaser any change of control of Purchaser. Notwithstanding anything to the contrary set forth in this Section 13.7, the Purchaser may prior to the Closing assign its right to purchase the Facility Assets to a subsidiary of Purchaser and if it does so such subsidiary shall, in lieu of the Purchaser, purchase the Facility Assets, assume the Assumed Liabilities and enter into the agreements and deliver the certificates and other closing documents and the Exhibits shall be amended to reflect the substitution of such subsidiary for the Purchaser hereunder. 58 LA\1803500.5 13.8 Consents. Except as otherwise set forth in this Agreement, any consent required by either Party to take any action shall not be unreasonably withheld, delayed or conditioned. 13.9 Captions. The captions of the various Articles, Sections, Exhibits and Schedules of this Agreement have been inserted only for convenience of reference and do not modify, explain, enlarge or restrict any of the provisions of this Agreement. 13.10 Governing Law. The validity, interpretation and effect of this Agreement are governed by and shall be construed .in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines except to the extent that certain matters are preempted by Federal law or are governed by the law of the jurisdiction of organization of the respective Parties. 13.11 Limitations on Liability. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE, EXCEPT UNDER ARTICLE 11, TO ONE ANOTHER OR ;IN RESPECT OF THIRD -PARTY CLAIMS FOR DAMAGE TO OR DESTRUCTION OF PROPERTY OF, OR DEATH OF OR BODILY INJURY TO, ANY PERSON. _UNLESS EXPRESSLY HEREIN PROVIDED, AND SUBJECT TO THE PROVISIONS OF ARTICLE .11, IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES, INCLUDING THE LIMITATIONS OF LIABILITY AND THE EXCLUSION OF CONSEQUENTIAL DAMAGES, BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED ` THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE, AND SHALL APPLY IRRESPECTIVE OF WHETHER A PARTY OR ANY AFFILIATE THEREOF, OR ANY PARTNER, MEMBER, SHAREHOLDER, OFFICER, DIRECTOR OR EMPLOYEE OF A .PARTY OR AN AFFILIATE THEREOF, ASSERTS A THEORY OF LIABILITY IN CONTRACT, TORT, NEGLIGENCE, MISREPRESENTATION (INCLUDING NEGLIGENT MISREPRESENTATION), STRICT LIABILITY, STATUTORY LIABILITY, OR ANY THEORY OF LIABILITY OTHER THAN IN THE CASE OF FRAUD. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED!-- HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. 13.12 Notices. All notices, requests, demands and other communications under this Agreement must be in writing and must be delivered in person or sent by overnight delivery using a nationally recognized delivery service, and properly addressed as follows:: 59 LA\1803500.5 If to Seller: City of Vernon Attn: Director of Light and Power Department 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 With copies to: Latham & Watkins LLP Attention: David B. Rogers, Esq. 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Facsimile: (213) 891-8763 City of Vernon Attn: City Attorney 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 If to Purchaser: Bicent (California) Power LLC Attn: President 103 North Washington Street Easton, MD 21601 Facsimile: (410) 770-9705 With copies to: Paul, Weiss, Rifkind, Wharton & Garrison LLP Attn: Carl L. Reisner, Esq. 1285 Avenue of the Americas New York, NY 10019 Facsimile: (212) 757-3990 Any Party may from time to time change its address for the purpose of notices to that Party by a similar notice specifying a new address, but no such change is effective until it is actually received by the Party sought to be charged with its contents. All notices and other communications required or permitted under this Agreement that are addressed as provided in this Section 13.12 are effective upon delivery. 13.13 Liquidated Damages. 60 LA\1803500.5 (a) If the Closing does not occur, whether or not this Agreement shall have been terminated, in no event shall Purchaser or any of its respective current, former or future directors, officers, employees, agents, partners, managers, members, stockholders, assignees, representatives or Affiliates (collectively, the "Purchaser Parties") be liable for any loss or damage suffered for failure of the transactions contemplated hereby to be consummated or for any breach of this Agreement by Purchaser in excess of $19,500,000 (or $17,000,000 after delivery of the letter of credit contemplated in Section 8.6(b)), it being agreed that payment of such amount shall constitute liquidated damages and be the sole and exclusive legal or equitable remedy available to Seller in the event that the Closing does not occur, and none of Purchaser or any Purchaser Party shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby. Seller's right to receive payment of the amount set forth above from Purchaser shall be the sole and exclusive remedy of Seller against any of the Purchaser Parties for the loss suffered as a result of the failure of the transactions contemplated hereby to be consummated or for a breach or failure to perform hereunder or otherwise, and upon payment of such amount" none of the Purchaser Parties shall have any further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby. (b) If the Closing does not occur, whether or not this Agreement shall have been terminated, in no event shall Seller be liable for any loss or damage suffered for failure of the transactions contemplated hereby to be consummated or for any breach of this Agreement by Seller in excess of an amount equal to $19,500,000 (or $17,000,000 after delivery of the letter of credit contemplated in Section 8.6(b)), it being agreed that payment of such amount shall constitute liquidated damages and be the sole and exclusive legal or equitable remedy available to Purchaser in the event that the Closing does not occur, and Seller shall have no further liability or obligation relating to or arising out of this Agreement or the transactions contemplated hereby. (c) The parties to this Agreement acknowledge and agree that (i) the agreements contained in Sections 13.13(a) and 13.13(b) are an integral part of the transactions contemplated by this Agreement, (ii) without these agreements, none of the parties would have entered into this Agreement and (iii) the damages resulting from termination of this Agreement are uncertain and incapable of accurate calculation and the amounts payable pursuant to paragraphs (a) and (b) of this Section 13.13 are reasonable forecasts of the actual damages which may be incurred and constitute liquidated damages and not a'penalty. 13.14 Time is of the Essence. Time is of the essence for each term of this Agreement. Without limiting the generality of the foregoing, all times provided for in this Agreement for the performance of any act shall be strictly construed. 13.15 No Third Party' Beneficiaries. Except as may be specifically set forth in this Agreement, nothing in this Agreement, whether express or implied, is intended to confer any rights or remedies under or by reason of this Agreement on any Persons other than the Parties and their respective permitted successors and assigns, nor is anything in this Agreement intended to relieve or discharge the obligation or liability of any third Persons to any Party, nor give any third Persons any right of subrogation or action against any Party. 61 LA\1803500.5 13.16 No Joint Venture. Nothing contained in this Agreement creates or is intended to create an association, trust, partnership, or joint venture or impose a trust or partnership duty, obligation, or liability on or with regard to. any Party. 13.17 Construction of Agreement. Ambiguities or uncertainties in the wording of this Agreement shall not be construed for or against any Party either on account of such Party having drafted or provided any language in this Agreement or otherwise, and shall be construed in accordance with the fair meaning of this Agreement. 13.18 Conflicts. In the event of any conflicts or inconsistencies between the terms of this Agreement and the terms of any of the Related Agreements, the terms of this Agreement shall govern and prevail. 13.19 Waiver of Sovereign Immunity. Seller warrants and covenants that with respect to its contractual obligations hereunder and performance thereof, it will not claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from (a) suit, (b) jurisdiction or court (including a court located outside the jurisdiction of its organization), (c) relief by way of injunction, order for specific performance or recovery of property, (d) attachment of assets, or (e) execution or enforcement of any judgment. [Remainder of Page Intentionally Left Blank] 62 LA\1803500.5 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. SELLER: CITY OF VERNON By: Name: Eric T. Fresch Title: City Administrator PURCHASER: BICENT (CALIFORNIA) POWER LLC By: Name: Paul B. Prager Title: President IN WITNESS WHEREOF. the Parties have executed this Agreement as of the date first above written. SELLER: CITY OF VERNON By: Name: Eric T. Fresch Title: City Administrator PURCHASER: BICENT (CALIFORNIA) POWER LLC By: Name: Paul B. Prage Title: President The execution of this Agreement by the City of Vernon is hereby affirmed and attested to by: CITY OF VERNON 1 By: Name: 1'1,gA)U6G (� 611i Title: City Clerk EXHIBIT A L&W DRAFT 12/5/07 CONFIDENTIAL HOOVER CONTRACT FOR DIFFERENCES BETWEEN BICENT (CA) HOOVER LLC AND THE CITY OF VERNON AS OF 1 1, 2008 L & W DRAFT 1215107 CONFIDENTIAL TABLE OF CONTENTS ARTICLE I DEFINITIONS; INTERPRETATION.................................................................. I Section 1.1 General Definitions ............................................ .............................. I Section 1.2 Interpretation.................................................................................................5 ARTICLE II TERM AND SWAP PERIOD.............................................................................6 ARTICLE III MONTHLY SWAP PAYMENT.........................................................................6 Section 3.1 Monthly Swap Payment ............................................................................ 6 Section 3.2 Energy Price Difference................................................................................6 Section 3.3 Capacity Price Difference.............................................................................7 Section 3.4 Escalation................................................................................................. 7 Section3.5 Settlement ..................................................................................................7 Section 3.6 Calculation Agent and Adjustments..............................................................7 Section 3.7 Commercially Reasonable Actions............................................................... 7 ARTICLEIV PAYMENT AND BILLING.................................................................................8 Section 4.1 Billing Period ........ ....... .... ... .............................................. ..8 Section 4.2 Timeliness of Payment..................................................................................8 Section 4.3 Disputes and Adjustments of Invoices..........................................................8 Section 4.4 Netting of Payments .............. Section 4.5 Payment Obligations Absent Netting............................................................ 8 ARTICLE V EVENTS OF DEFAULT; REMEDIES................................................................9 Section 5.1 Events of Default...........................................................................................9 Section 5.2 Vernon Event of Default...............................................................................9 Section 5.3 Automatic Termination of CES....................................................................9 Section 5.4 Declaration of an Early Termination Date .................................................... 9 Section 5.5 Termination Payment .... .................................................................. 10 Section 5.6 Notice of Payment of Termination Payment...............................................10 Section 5.7 Disputes With Respect to Termination Payment........................................10 Section 5.8 Suspension of Performance and Other Remedies.......................................10 ARTICLE VI LIMITATIONS...................................................................................................11 Section 6.1 Limitation of Remedies, Liability and Damages 11= - ARTICLE VII FINANCIAL INFORMATION........................................................................11 Section 7.1 Financial Information.................................................................................. I I Section 7.2 Other Information........................................................................................12. ARTICLE VIII DISPUTE RESOLUTION..............................................................................12 Section8.1 Dispute Resolution .................... .................................................................. 12 Section 8.2 Informal Resolution..................................................................................12 Section8.3 Arbitration...................................................................................................12 Section 8.4 Waiver of Jury Trial....................................................................................13 i L&W DRAFT 1215107 CONFIDENTIAL ARTICLE IX MISCELLANEOUS....................................... .:...........:...................................... 13 Section 9.1 Representations and Warranties..................................................................13 Section 9.2 Financial Transaction..................................................................................14 Section9.3 Cooperation ........................ ......................................::................................. 14 Section 9.4 ;Indemnity .......................... .........14 Section 9.5 -Assignment ..... ............................ .......................................................14 Section 9.6 Governing Law ........:........................................ ......... ......... ................15 Section 9.7 Notices.................................................:,..................:...........:.........:....:........ 15 Section 9.8 Entire Agreement ................................. .......................................................15 Section 9.9 Obligations Surviving Termination......................................................... 16 Section 9.10 Amendment....................... .........................................16 Section 9.11 No Waiver .. ....... ....................................................... .......16 Section 9.12 Regulatory Review.:. ...... ........................................... ......:.....16 Section 9.13 Headings and Captions .......................................... :................................... 17 Section 9.14 No Immunity Claim .. ....... ....................................................................... 17 Section 9.15 No Third Party Beneficiaries ....... ..............................................17 Section 9.16 Audit ...................... ............................................... ...........................17 Section 9.17 Forward Contract :..................................................................................... 18 Section 9.18 Confidentiality...........................................................................................18 Section 9.19 Counterparts .................. ... ...... .............18 ii L&W DRAFT 12/5/07 CONFIDENTIAL HOOVER CONTRACT FOR DIFFERENCES This Hoover Contract for Differences ("Agreement.') is made and entered into on this _ day of , 2008 (the "Effective Date"), between Bicent (CA) Hoover LLC, a Delaware limited liability company (`Bicent') and the City of Vernon, an incorporated city within the County of Los Angeles, California that is a local, publicly -owned electric utility as defined in Section 9604 of the California Public Utilities Code ("Vernon"). Each of Bicent and Vernon are referred to herein individually as a "Party" and jointly as the "Parties." RECITALS A. Pursuant to that certain Contract for Electrical Services between Vernon and Western Area Power Administration ("WAPA"), dated as of February 6, 1987 (the "CES"), Vernon has the rights to certain energy and capacity from the Hoover Uprating Project (as defined below). B. Bicent and Vernon desire to engage in a financial swap for Contract Energy and Contract Capacity based on the costs incurred by Vernon pursuant to the CES and certain fixed prices, as described in further detail herein; NOW, THEREFORE, and in consideration of the foregoing, and of the mutual promises, covenants and conditions set forth herein, and other good and valuable consideration, the Parties hereto, intending to be legally bound by the terms and conditions set forth in this Agreement, hereby agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION Section 1.1 General Definitions. "Actual MonthlyUprating Credit" means the actual uprating credit applied to Vernon's account in a given month pursuant to Section 6.5 of the CES. "Affiliate" means, with respect to a Person, any other Person that (a) directly or indirectly controls the specified Person; or (b) is controlled by or is under direct or indirect common control with the specified Person: For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management or policies of the specified Person, directly or indirectly, whether through the ownership of voting securities, partnership or limited liability company interests, by contract or otherwise. "Agreement" has the meaning set forth in the introductory paragraph hereto. "Applicable Law" means all applicable statutes, laws, court decisions, ordinances, rules, order, writ, subpoena or regulations of Governmental Authority, or the rules or regulations of any exchange or control grid operator or market administrator. 1 L&W DRAFT 12/5/07 CONFIDENTIAL "Arbitrator" has the meaning set forth in Section 8.3: "Assign' or "Assignine "has the meaning set forth in Section 9.5.1. "Bankrupt" means with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced); (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due. "Bankruptcy Event" has the meaning set forth in Section 5.1.4. "Bicent" has the meaning set forth in the introductory paragraph hereto. "Business Day" means any day except a Saturday, Sunday, or a legal holiday in the State of California. A Business Day shall open at 8:OO am and close at 5:00 pm PPT. "Calendar Day" means the period of twenty-four (24) consecutive hours, beginning at 12:00 am PPT. "Calculation Agent" has the meaning set forth in Section 3.6. "Capacity Price Difference" has the meaning set forth in Section 3.3. "CES" has the meaning set forth in the recitals hereto. "CES Costs" means, for a given month; any costs paid to WAPA by Vernon in connection with Vernon's rights and obligations under the CES; provided, however, that such costs shall not include payment for Energy or capacity pursuant to the CES. "CES Energy Price" has the meaning set forth„in Section 3.2.1. "CES Cgpacity Price" has the meaning set forth in Section 3.3.1. "Claims" means all third party claims or actions; threatened -or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. "Closing Date" has the meaning set forth in Article II: "Contract Capacity" means 22 MW, subject to (i) downward adjustment in the event of a permanent derating to the existing installed capacity of the Hoover Uprating Project; such adjustment shall be equal to the percentage decrease in such installed capacity, or (ii) reduction 2 L&W DRAFT 12/5/07 CONFIDENTIAL in the event a generating unit of the Hoover Uprating Project is unavailable for a period of greater than twelve (12) consecutive months, such reduction to be equal to the resulting percentage decrease in the available capacity of the Hoover Uprating Project in each subsequent month until such generating unit returns to operation. "Contract Energy" means, for a given month, the energy delivered to and received by Vernon under the CES, as expressed in MWh. "Costs" means, with respect to the Non -Defaulting Party, brokerage fees, commissions and other: similar third party transaction costs and expenses reasonably incurred by the Non -Defaulting Party either in terminating any arrangement pursuant to which it has hedged its obligations under the Agreement, or entering into new arrangements which replace this Agreement, and all reasonable attorneys' fees and expenses incurred by the Non -Defaulting Party in connection with the termination of the Agreement. "Defaulting Party" has the meaning set forth in Section 5.1. "Dispute" has the meaning set forth in Section 8.1. "Early Termination Date" has the meaning set forth in Section 5.4.1. "Effective Date" has the meaning set forth in the introductory paragraph hereto. "Energy Price Difference" has the meaning set forth in Section 3.2. "Equitable Defenses" means any bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending. "Escalation Percentage" means the annual percentage change (rounded to four (4) decimal places) in the Gross Domestic Product Implicit Price Deflator, as reported in the Survey of Current Business published in January of each year, and revised thereafter, by the Bureau of Economic Analysis, United States Department of Commerce, Washington, D.C., or any other replacement index reasonably agreed upon by the Parties if such index is no longer available. "Event of Default" has the meaning set forth in Section 5.1. "Failure to Pay" has the meaning set forth in Section 5.1.1. "FERC" means the Federal Energy Regulatory Commission or any successor government agency. "Gains" means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination or liquidation of the Agreement, determined in a commercially reasonable manner. 3 L&W DRAFT 12/5/07 CONFIDENTIAL "Governmental Authority" means any federal, state, local, municipal, or other governmental, executive, administrative, judicial or regulatory entity or any independent transmission grid operator or market administrator having or asserting jurisdiction over a Party or this Agreement. "Hoover Uprating Project" means the project consisting principally of the uprating of the capacity of 17 generating units at the hydroelectric power plant of the Hoover Dam, located approximately 25 miles from Las Vegas, Nevada. "Indemnifying Party" has the meaning set forth in Section 9.3. "Interest Rate" means, for any date, the lesser of (a) the per annum rate of interest equal to the prime lending rate as may from time to time be published in The Wall Street Journal under "Money Rates" on such Calendar Day (or if not published on such Calendar Day on the most recent preceding Calendar Day on which published), plus two percent (2%) and (b) the maximum rate permitted by Applicable Law. "JAMS" means Judicial Arbitration and Mediation Services, Inc.` "kW" means kilowatt(s). "Losses" means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from termination or liquidation of the Agreement, determined in a commercially reasonable manner; provided, however, that such Party shall be required to mitigate its Losses in a commercially reasonable manner. "Monthly Swap Payment" has the meaning set forth in Section 3.1. "MWh means megawatt-hour(s). "NERC" means the North American Reliability Council, or any successor thereto. "NGP" means any limited partnership, limited liability company or other Person for which NGP Energy Capital Management or any other fund management company that is a successor to, an Affiliate of, or under common control with NGP Energy Capital Management acts as investment .manager. "NGP Energy Capital Management" means NGP Energy Capital Management,, L.L.C., a "Non -Defaulting Party" has the meaning set forth in Section 5.4.1. "Party" has the meaning set forth in the introductory paragraph hereto. "Person" means an individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization, or any Governmental Authority. "PPT" means Pacific Standard Time or Pacific Daylight Time, whichever is in effect on the relevant date. 4 L&W DRAFT 12/5/07 CONFIDENTIAL "PSA" means that certain Purchase and Sale Agreement by and among Vernon and Bicent dated as of 2007. "Swap Cgpacity Price" has the meaning set forth in Section 3.3.2. "Swap Energy Price" has the meaning set forth in Section 3.2.2. "Swap Period" has the meaning set forth in Article IL "Term" has the meaning set forth in Article II. "Termination Payment" has the meaning set forth in Section 5.5. "Transaction" means Bicent's acquisition of Vernon's interest in the Malburg Generating Facility. "Vernon" has the meaning set forth in the introductory paragraph hereto. "Waived Claims" has the meaning set forth in Section 9.12.1. "WAPA" has the meaning set forth in the recitals hereto. Section 1.2 Interpretation. In this Agreement, unless a clear contrary intention appears: Section 1.2.1 The singular number includes the plural number and vice -versa; Section 1.2.2 Reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; Section 1.2.3 Reference to any gender includes the other gender; Section 1.2.4 Reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; Section 1.2.5 Reference to any Article, Section, Schedule or Exhibit means such Article, Section, Schedule or Exhibit to this Agreement, and references in any Article, Section, Schedule, Exhibit or definition to any clause means such clause of such Article, Section, Schedule, Exhibit or definition; Section 1.2.6 "Hereunder," "hereof," "hereto" and words of similar import are references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof, unless otherwise specified; Section 1.2.7 "Including" (and correlative terms) means "including without limitation" and "including, but not limited to;" 5 L&W DRAFT 1215107 CONFIDENTIAL Section 1.2.8 Relative to the determination of any period of time, "from" means "from and including," "to" means "to but excluding" and "through" means "through and including;" Section 1.2.9 Examples shall not be construed to limit, expressly or by implication, the matter they illustrate; Section 1.2.10 Reference to any law (including statutes and ordinances) means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; Section 1.2.11 Except where the context otherwise requires, "or" shall have the inclusive meaning frequently designated by "and/or" and Section 1.2.12 All capitalized terms used but not defined herein shall have the meaning set forth in the PSA. ARTICLE II TERM AND SWAP PERIOD The term of this Agreement shall commence on the Effective Date and shall terminate on September 30, 2017, unless terminated earlier in accordance with the terms and conditions of this Agreement (the "Term"). The "Swap Period" shall commence on the date on which the Transaction is consummated (the "Closing Date"), and shall terminate at the end of the Term. ARTICLE III MONTHLY SWAP PAYMENT Section 3.1 Monthly Swap Payment. For each calendar month during the Swap Period, the "Monthly Swap Payment" under this Agreement shall be equal to (i) the Energy Price Difference; plus (ii) the Capacity Price Difference; plus (iii) the Actual Monthly Uprating Credit applied to Vernon pursuant to Section 6.5 of the CES; minus (v) any CES Costs. Section 3.2 Energy Price Difference. The Energy Price Difference for a given month shall be equal to the Swap Energy Price, minus the CES Energy Price (the "Energy Price Difference"). The Parties acknowledge and agree that the Energy Price Difference may be a negative number in the event that the CES Energy Price is greater than the Swap Energy Price. Section 3.2.1 The "CES Energy" shall equal the total amount paid by Vernon in a given month to WAPA pursuant to Section 6.3 of the CES, including the Lower Colorado River Basin Contribution Fund Charge. Section 3.2.2 The "Swap Energy Price" shall equal the product of (i) the Contract Energy; and (ii) $3.00/MWh, escalated annually pursuant to Section 3.4. G L&W DRAFT 12/5/07 CONFIDENTIAL Section 3.3 Capacity Price Difference. The Capacity Price Difference for a given month shall be equal to the Swap Capacity Price minus the CES Capacity Price (the "Capacity Difference"). The Parties acknowledge and agree that the Capacity Price Difference may be a negative number in the event that the CES Capacity Price is greater than the Swap Capacity Price. Section 3.3.1 The "CES Capacity Price" shall equal the total amount paid by Vernon in a given month to WAPA pursuant to Section 6.2 of the CES. Section 3.3.2 The "Swap Capacity Price" shall equal the product of (i) the Contract Capacity; and (ii) thesum of: (a) $5.00/kW-month from the Closing Date until September 30, 2017, escalated annually starting on January 1, 2009 pursuant to Section 3.4; plus (b) $3.00/kW-month from July 1, 2010 until September 30, 2017, escalated annually starting on July 1, 2011 pursuant to Section 3.4; plus (c) $3.00/kW-month from July 1, 2011 until September 30, 2017, escalated annually starting on July 1, 2012 pursuant to Section 3.4. Section 3.4 Escalation. The price components of the Swap Energy Price and the Swap Capacity. Price shall be escalated annually by the Escalation Percentage. Section 3.5 Settlement. Section 3.5.1 If the Monthly Swap Payment is a positive number, then Vernon shall pay to Bicent the value of the Monthly Swap Payment. Section 3.5.2 If the Monthly Swap Payment is a negative number, then Bicent shall pay to Vernon the absolute value of the Monthly Swap Payment. Section 3.6 Calculation Agent and Adjustments. Vernon shall be the calculation agent for all payments made pursuant to this Agreement ("Calculation Agent'); provided that Vernon shall have a duty to act fairly and objectively in the conduct of its activities as Calculation Agent. In the event that there is a retroactive change to the CES Energy Price or the CES Capacity Price for a given.mpnth, Vernon shall notify Bicent of such change and apply the appropriate debit or credit, as applicable,.to the calculation of the next Monthly Swap Payment. Section 3.7 Commercially Reasonable Actions. Vernon agrees and covenants that, during the Swap Period, it shall act in a commercially reasonably manner in the performance of its obligations and prosecution of its rights under the CES without giving consideration to the commercial terms and conditions of this Agreement. Additionally, during the Swap Period, Vernon will not vote or seek to amend or modify the CES, or waive in any material respect any other party's performance under the CES, without the prior written consent of Bicent, which consent shall not be unreasonably withheld, conditioned or delayed; provided, however, that the Parties acknowledge and agree that an amendment, modification or waiver may occur with respect to the CES that is outside of Vernon's control. 7 L&W DRAFT 12/5/07 CONFIDENTIAL ARTICLE IV PAYMENT AND BILLING Section 4.1 BillingPeriod. eriod. The calendar month shall be the standard period for all payments under this Agreement (other than a Termination Payment). Vernon (as Calculation Agent) shall render an invoice for the Monthly Swap Payment within thirty (30) Calendar Days of Vernon's receipt of its invoice from WAPA pursuant to the CES for such month. Section 4.2 Timeliness of Payment. All invoices under this Agreement shall be due and payable in accordance with each Party's invoice instructions on or before the twentieth (20th) Calendar Day after receipt of the invoice or, if such Calendar Day is not a Business Day, then on the next Business Day.Each Party will make payments by electronic funds transfer, or by other mutually agreeable method(s), to the account designated by the other Party. Any amounts not paid by the due date will. be deemed delinquent and will accrue interest at the Interest Rate, such interest to be calculated from and including the due date to but excluding the date the delinquent amount is paid in full. Section 4.3 Disputes and Adjustments of Invoices. A Party may, in good faith, dispute the correctness of any invoice or any adjustment to an invoice, rendered under this Agreement or adjust any invoice for any arithmetic or computational error within twelve (12) months of the date the invoice, or adjustment to an invoice, was rendered. In the event an invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the undisputed portion of the invoice shall be required to be made when due, with notice of the objection given to the other Party. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment shall be made within five (5) Business Days of such resolution along with interest accrued at the Interest Rate from and including the due date to but excluding the date paid. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued at the Interest Rate from and including the date of such overpayment to but excluding the date repaid or deducted by the Party receiving such overpayment. Any dispute with respect to an invoice is waived unless the other Party is notified in accordance with this Section 43within twelve (12) months after the invoice is rendered or any specific adjustment to the invoice is made. Section 4.4 Netting of Pam. The Parties hereby agree that they shall discharge debts and payment obligations due and owing to each other under this Agreement on the same date through netting, in which case all amounts owed by each Party to the other Party during the monthly billing period under this Agreement, interest, and payments or credits, shall be netted so that only the excess amount remaining due shall be paid by the Party who owes it. Section 4.5 Payment Obligations Absent Netting. If no mutual debts or payments obligations exist and only one Party owes a debt or obligation to the other during the monthly billing period, including interest and payments or credits, that Party shall pay such sum in full when due. 8 L&W DRAFT 1215107 CONFIDENTIAL ARTICLE V EVENTS OF DEFAULT; REMEDIES Section 5.1 Events of Default. An "Event of Default" shall mean, with respect to a Party (a "Defaulting Party"), the occurrence of any of the following: Section 5.1.1 The failure by such Party to make, when due, any payment required pursuant to this Agreement if such failure is not remedied within ten (10) Business Days after written notice from the other Party ("Failure to Pay"); Section 5.1.2 Any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made or repeated and has a material adverse effect on the Party and has a material adverse effect on the other Party; Section 5.1.3 The failure to perform any material covenant or obligation set forth in this Agreement (except to the extent constituting a separate Event of Default) if such failure is not remedied within fifteen (15) Business Days after written notice; Section 5.1.4 Such Party becomes Bankrupt (`Bankruptcy Section 5.1.5 Such Party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all of its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee entity fails to assume all the obligations of such Party under this Agreement to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other Party. Section 5.2 Vernon Event of Default. An Event of Default shall also mean, with respect to Vernon (as the "Defaulting Party"), any Event of Default of Vernon under the CES that results in the termination of the CES. Section 5.3 Automatic Termination of CES. Section 5.3.1 In the event that the CES is terminated by WAPA for any reason without being replaced with an equivalent agreement (other than as the result of an Event of Default of Vernon as described in Section 5.2), this Agreement shall automatically terminate; provided, :however, that the effective date of such automatic termination under this Section 5.3.1 shall not constitute an Early Termination Date and no Termination Payment shall apply. Section 5.3.2 In the event that Vernon terminates the CES for any reason, or the CES is terminated as to Vernon due to an action by Vernon, such termination shall be considered a Vernon Event of Default and this Agreement shall automatically terminate and the effective date of such automatic termination under this Section 5.3.2 shall constitute an Early Termination Date, and a Termination Payment shall apply in accordance with Section 5.5. Section 5.4 Declaration of an Early Termination Date. 0 L&W DRAFT 12/5/07 CONFIDENTIAL Section 5.4.1 If a Failure to Pay or a Bankruptcy Event with respect to a Defaulting Party shall have occurred and is continuing, the other Party (the "Non -Defaulting Party") shall have the right to designate an early termination date ("Early Termination Date"), . upon twenty (20) Calendar Days written notice to the Defaulting Party. Section 5.4.2 If an Event of Default with respect to aDefaulting Party other than a Failure to Pay or a Bankruptcy Event shall have occurred and be continuing, the Non - Defaulting Party shall have the right to declare an Early Termination Date, upon 120 Calendar Days prior notice to the DefaultingParty; provided, however, that such prior notice period shall be extended by an additional sixty (60) Calendar Days if and to the extent that the Defaulting Party (or, in the case of Bicent, a lender acting on behalf of Bicent) is diligently attempting to cure such Event of Default. If an Event of Default is cured prior to the Early Termination Date, then such Early Termination Date shall expire, and no associated Termination Payment shall be owed. Section 5.5 Termination Payment. As of the Early Termination Date, the Agreement shall terminate and the Non -Defaulting Party shall calculate the amounts owing. between the Parties as of the Early Termination Date (the "Termination Payment"). The Termination Payment shall equal the Non -Defaulting Party's Gains (less its Costs) or Losses (plus its Costs), as applicable, with respect to this Agreement and shall be owed and paid to the Defaulting Party if there is a Gain, and owed and paid to the Non -Defaulting Party if there is a Loss. Section 5.6 Notice of Payment of Termination Payment. As soon as practicable after the Early Termination Date, notice shall be given by the Non -Defaulting Party to the Defaulting Party of the amount of the Termination Payment and whether the Termination Payment is due to or due from the Non -Defaulting Party. The notice shall include a written statement explaining in reasonable detail the calculation of such amount. The Termination Payment shall be made by the Party that owes it within ten (10) Business Days after such notice. is effective. Section 5.7 Disputes With Respect to Termination Payment. If the Defaulting Party disputes the Non -Defaulting Party's calculation of the Termination Payment, in whole or in part, the Defaulting Party shall, within ten (10) Business Days of receipt of Non -Defaulting Party's calculation of the Termination Payment, provide to the Non -Defaulting Party a detailed written . explanation of the basis for such dispute; provided, however, that the undisputed portion of the Termination Payment shall be paid in accordance with Section 5.6. Section 5.8 Suspension of Performance and -Other Remedies. Nofwithstanding any "other provision of this Agreement, if an Event of Default shall have occurred and be continuing, the Non -Defaulting Party, upon written notice to the Defaulting Party, shall have the right (i) to withhold any payments due to the Defaulting Party under this Agreement; provided, however, in no event shall any such withholding continue for longer than ten (10) Business Days unless an Early Termination Date has been declared and notice thereof pursuant to Section 5.4.1 given; and (ii) to the extent an Event of Default shall have occurred and be continuing, to exercise any remedy available. at law or in equity. 10 L&W DRAFT 12/S/07 CONFIDENTIAL ARTICLE VI LIMITATIONS Section 6.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES ;HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS . REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. ` UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR. OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. ARTICLE VII FINANCIAL INFORMATION Section 7.1 Financial Information. If requested by a Party, the other Party shall deliver: (a) within 180 Calendar Days following the end of each fiscal year, a copy of its annual report containing audited consolidated financial statements for such fiscal year; and (b) within 120 Calendar Days after the end of each of its first three fiscal quarters of each fiscal year (or its fiscal half -year, if applicable), a copy of its quarterly (or half -yearly, if applicable) report containing unaudited consolidated financial statements for such fiscal quarter (or half -yearly, if applicable). In all cases the statements shall be for the most recent accounting period and prepared in accordance with generally accepted accounting principles; provided, however, that should any such statements not be available on a timely basis due to a delay in preparation or L&W DRAFT 1215107 CONFIDENTIAL certification, such delay shall not be an Event of Default so long as the producing Party diligently pursues the preparation, certification and delivery of the statements. Section 7.2 Other Information. Within ten (10) Business Days of the receipt or delivery (as applicable) by Vernon thereof, Vernon shall furnish to Bicent copies of all records, documents, notices and related writings received or delivered by Vernon under the CES that relate to the products or payments which are the subject of this Agreement. ARTICLE VIII DISPUTE RESOLUTION Section 8.1 Dispute Resolution. Any and all disputes, claims or controversies arising out of, relating to, concerning or pertaining to the terms of this Agreement, or to either Party's performance or failure of performance under this Agreement ("Dispute"), which Dispute the Parties have been unable to resolve by informal methods after undertaking a good faith effort to do so, shall first be submitted to an informal dispute resolution under the procedure described in Section 8.2 below; if the matter is not resolved through such procedures, it shall be referred for final and binding arbitration under the procedures described in Section 8.3. Section 8.2 Informal Resolution. Any unresolved Disputes shall initially be referred to Vernon's City Administrator, or designee, and the President of Bicent for resolution. Such executives or their respective designees shall meet at least once, and shall negotiate in a commerciallyreasonable manner for a period of fifteen (15).Business Days in an effort to resolve the Dispute. Neither Party shall seek to commence any litigation or arbitration proceeding without first satisfying this Section 8.2, and any failure of a Party to do so shall constitute a sufficient basis for termination without prejudice to any proceeding so attempted. Section 8.3 Arbitration. Either Party may initiate binding arbitration with respect to the 'Dispute by making a written demand for binding arbitration beforean arbitrator that is a former judge or attorney with experience resolving major commercial disputes within the electric industry with JAMS, its successor, or any other mutually agreeable arbitrator (the "Arbitrator") at any time following the unsuccessful conclusion of the informal resolution provided for in Section 8.2. The Parties will cooperate with one another in promptly selecting the Arbitrator and in schedulingthe arbitration to commence no later than 180 Calendar Days from the date of the initialwritten demand for binding arbitration. If; notwithstanding their good faith efforts, the Parties are unable to agree upon a mutually acceptable Arbitrator, the Arbitrator shall be appointed as provided for in California Code of Civil Procedure Section 1281.6. Upon a Party's written demand for binding arbitration, such Dispute, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration before the Arbitrator, in accordance with the laws of the State of California, without regards to principles of conflicts of laws. Except as provided for herein, the arbitration shall be conducted by the Arbitrator in accordance with the rules and procedures for arbitration of complex business disputes for the organization with which the Arbitrator is associated; absent the existence of such rules and procedures, the arbitration shall be conducted in accordance with the California Arbitration Act, California Code of Civil Procedure Section 1280 et seq. However, 12 L&W DRAFT 12/S/07 CONFIDENTIAL notwithstanding the rules and procedures that would otherwise apply to the arbitration, and unless the Parties agree to a different arrangement, the place of the arbitration shall be in Los Angeles County, California, each side in the arbitration shall be entitled to take up to three depositions, and all direct testimony in the arbitration shall be submitted in the form of affidavits or declarations under penalty of perjury. Each Party shall cooperate in making available for cross-examination at the arbitration hearing its witnesses whose direct testimony has been so submitted. Judgment on the award may be entered in any court having jurisdiction. The Arbitrator shall, in any award, allocate all of the costs of the binding arbitration (other than each Party's individual attorneys' fees and costs related to the Party's participation in the arbitration, which fees and costs shall be borne by such Party), including the fees of the Arbitrator, against the Party who did not prevail. Until such award is made, however, the Parties shall share equally in paying the costs of the arbitration. Section 8.4 Waiver of Jury Trial. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING UNDER THIS AGREEMENT. ARTICLE IX MISCELLANEOUS Section 9.1 Representations and Warranties. Each Party represents and warrants to the other Party that: Section 9.1.1 It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; Section 9.1.2 The execution, delivery and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; Section 9.1.3 This Agreement, and each other document executed and delivered in accordance with this Agreement, constitutes its legally valid and binding obligation enforceable against it in accordance with its terms, subject to any Equitable Defenses; Section 9.1.4 It is not Bankrupt and there are no proceedings pending or being._ contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming Bankrupt; Section 9.1.5 There is not pending or, to its knowledge, threatened against it or any of its Affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement; Section 9.1.6 No Event of Default with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement; 13 L&W DRAFT 12/5/07 CONFIDENTIAL Section 9.1.7 It is acting for its own account, has made its own independent decision to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment; is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Agreement; Section 9.1.8 It is a "forwardcontract merchant' and/or a "swap "participant" within the meaning of the United States Bankruptcy Code; and Section 9.1.9 No consent of, approval of, or notice to any Person is required in connection with such Party's execution, delivery and performance under this Agreement. Section 9.2 Financial Transaction. The Parties acknowledge and agree that this Agreement and the transactions described herein are purely financial and do not involve the purchase, sale or delivery of energy or capacity. Nothing in this Agreement shall affect Vemon's.rights or obligations under the. CES and Bicent will not be liable to Vernon for any failure by WAPA or any other person to deliver energy from the Hoover Uprating Project to Vernon. This Agreement does not constitute any assignment to Bicent of any of Vernon's rights or obligations under the CES between Vernon and WAPA. Section 9.3 Cooperation. Each Party shall use reasonable efforts to implement the provisions of and to administer this Agreement in accordance with the intent of the parties to minimize all taxes, so long as neither Party is materially adversely affected by such efforts. Section 9.4 Indemnity. Each Party (an "Indemnifying Party") shall indemnify, defend and hold harmless the other Party from and against any Claims arising from (i) the Indemnifying Party's breach of any representation or warranty under this Agreement (ii) the failure of the Indemnifying Party to perform its obligations under this Agreement; (iii) any gross negligence, willful misconduct or breach of Applicable Law by the Indemnifying Party. Section 9.5 Assignment. Section 9.5.1 This Agreement is binding upon and inures to the benefit of the successors and assigns of the Parties. However, neither Party shall Assign this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, except that Bicent may Assign this Agreement to an Affiliate or to its financing sources for collateral purposes without the prior written consent of Vernon: - Any such Assignment is conditioned on the assignee's agreement in writing to assume the assigning Party's duties and obligations under this Agreement. Any Assignment to an Affiliate effected in accordance with this Section 9.5.1 shall not relieve the assigning Party of its obligations and liabilities under this Agreement. For purposes of this Section 9.5.1, "Assign" or "Assignment" means any direct or indirect assignment, subcontracting or other transfer of this Agreement, including, with respect to Bicent, any change of control of Bicent; provided, however, that "Assign" or "Assignment" shall not include any transaction if after giving. effect to such transaction NGP and/or Paul B. Prager directly or indirectly control the Facility. 14 L&W DRAFT 12/5/07 CONFIDENTIAL Section 9.5.2 Bicent shall have the right to assign this Agreement to a lender as collateral for any financing relating to the Closing. Vernon shall execute a consent to collateral assignment substantially in the form attached as Exhibit F-1 to the PSA. Section 9.6 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY WAIVES ITS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT. Section 9.7 Notices. Notices (other than scheduling requests) shall; unless otherwise specified herein, be in writing and may be delivered by hand delivery, United States mail, overnight courier service or facsimile. Notice by facsimile or hand delivery shall be effective at the close of business if received during business hours on a Business Day, and otherwise shall be effective at the close of business on the next Business Day. Notice by overnight United States mail or courier shall be effective on the next Business Day after it was sent. A Party may change its notice information by providing notice of same in accordance herewith. If to Vernon: City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: 323-826-143 8 Attn: Director of Light & Power Department With a copy to; City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: 323-826-143 8 Attn: City Attorney and Latham & Watkins LLP 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Attn: David B. Rogers, Esq. Facsimile: 213-891-8763 If to Bicent: Bicent (Vernon) Power LLC Attn: President 15 L&W DRAFT 1215107 CONFIDENTIAL 103 North Washington Street Easton, MD 21601 Facsimile: 410-770-9705 With a copy to: Chadbourne & Parke LLE Attn: Robert Shapiro 1200 New Hampshire Ave., N.W. Washington, DC 20036 Facsimile: 202-974-5602 Section 9.8 Entire Agreement. This Agreement (including the appendices and any written supplements hereto), any designated credit support or similar arrangement between the Parties constitute the entire agreement between the Parties relating to the subject matter. Notwithstanding the foregoing, any credit support or similar arrangement between the Parties shall, upon designation by the Parties, be deemed part of this Agreement and shall be incorporated herein by reference. Section 9.9 Obligations Surviving Termination. Except as may be provided or limited by this Agreement, the obligations which by their nature are intended to survive termination of this Agreement, including representations, warranties, covenants and rights and obligations with respect to audits; indemnification, payment and settlement and confidentiality, shall so survive. Section 9:10 Amendment. This Agreement shall be considered for all purposes as prepared through the joint efforts of the parties and shall not be construed against one party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof. Except to the extent herein provided for, no amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by both Parties. Each Party agrees if it seeks to amend any applicable wholesale power sales tariff during the Term, such amendment will not in any way affect this Agreement without the prior written consent of the other Party. Each Party further agrees that it will not assert, or defend itself, on the basis that any applicable tariff is inconsistent with this Agreement. Section 9.11 No Waiver. No waiver of any of the terms and conditions of this Agreement shall be effective unless in writing and signed by the Party against whom such waiver is sought to be enforced. Any waiver of the 'terms hereof shall be effective only in the specific instance and for the specific purpose given. The failure of a Party to insist, in any instance, on the strict performance of any of the terms and conditions hereof shall not be construed as a waiver of such Party's right in the future to insist on such strict performance. Section 9.12 Re ug latory Review. The Parties acknowledge and agree that this Agreement and the transactions described herein are not subject to FERC's jurisdiction under the Federal Power Act. However, to the extent that FERC asserts, or attempts to assert, jurisdiction over this Agreement or the transactions described herein, the Parties agree that the following provisions shall apply to this Agreement and the transactions described herein: 16 L&W DRAFT 12/5/07 CONFIDENTIAL Section 9.12.1 To the fullest extent permitted by Applicable Law, each Party, for itself and its successors and assigns, hereby knowingly, voluntarily, expressly, completely and irrevocably waives any rights it has or may have, now or in the future, whether under Sections 205 or 206 of the Federal Power Act or otherwise, notwithstanding any subsequent changes in Applicable Law or market conditions that may occur, to seek or support by any means, directly or indirectly (through complaint, claim, suit, investigation or otherwise), and each Party hereby . covenants and agrees that it will not seek unilaterally from the FERC or any other authority an order or relief of any kind amending or changing any provision of this Agreement (including any transaction hereunder) specifying the rate, charge, classification, or other term or condition agreed to by the Parties, or granting any refunds with respect to a change or proposed change: (i) under any standard of review, including the "just and reasonable" standard; or (ii) based upon a contention that: (x) the wholesale market in which this Agreement was made was not competitive or appropriately functional; (y) either Party had the ability to compel the other Party to agree to or otherwise accept a rate, term or condition that did not reflect the then -current market rate, term or condition for this Agreement; and/or (z) that it was not just and reasonable (collectively, "Waived Claims"). Section 9.12.2 Notwithstanding the foregoing, in the event that a standard of review is undertaken by the FERC or any other authority in respect of any unilateral request for a change to any rate, charge, classification, term or condition of this Agreement or any part thereof or any individual purchase and sale transaction hereunder, whether proposed by a Party, a non-party or the FERC acting sua sponte, the Parties stipulate and agree that the applicable standard of review shall be the strictest standard of review permissible to preserve the intent of the Parties pursuant to this Section 9.12 to uphold the sanctity of this Agreement and each of its terms to the maximum extent possible under Applicable Law: Section 9.13 Headings and Captions. The headings and captions used herein are for convenience and reference purposes only. This Agreement shall be binding on each Party's successors and permitted assigns. Section 9.14 No Immunity Claim. Vernon warrants and covenants that with respect to its contractual obligations hereunder and performance thereof, it will not claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from (a) suit, (b) jurisdiction or court (including a court located outside the jurisdiction of its organization), (c) relief byway of injunction, order for specific performance or recovery of property, (d) attachment of assets, or (e) execution or enforcement of any judgment. Section 9.15 No Third Party Beneficiaries. This Agreement shall not impart any rights enforceable by any third party (other than a permitted successor or assignee bound by this Agreement). Section 9.16 Audit. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Agreement. If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be made promptly and shall bear interest calculated at the Interest Rate from the date the overpayment or underpayment was made until paid; provided, 17 L&W DRAFT 12/S/07 CONFIDENTIAL however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of twelve (12) months from the rendition thereof, and thereafter any objection shall be deemed waived. Section 9.17 Forward Contract. The Parties acknowledge and agree that this Agreement constitutes a "forward contract" and/or a "swap agreement" within the meaning of the United States Bankruptcy Code. Section 9.18 Confidentiality. Neither Party shall disclose the terms or conditions of this Agreement to a third parry (other than the Party's employees, lenders, counsel, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential) except in order to comply with any Applicable Law, or any exchange, control area or independent system operator rule or in connection with any court or regulatory proceeding; provided, however, each Party shall, to the extent practicable, use reasonable efforts to prevent or limit the disclosure. The Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with, this confidentiality obligation. Section 9.19 Counterparts. This Agreement may be executed and delivered by the Parties in any number of counterparts, each of which when. so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. [Signature page follows] 18 L&W DRAFT 12/S/07 CONFIDENTIAL IN WITNESS WHEREOF, the duly authorized representatives of the Parties each have executed this Agreement, effective as of the date first above written. BICENT (CA) HOOVER LLC, as Bicent By: Name: Title: THE CITY OF VERNON, as Vernon By: Name: Title: 19 EXHIBIT B RECORDING REQUESTED BY FIRST AMERICAN TITLE INSURANCE COMPANY AND WHEN RECORDED, RETURN TO: City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Attention: City Attomey Recording Fee: Exempt pursuant to California Government Code § 27383 i DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING Dated as of 2007 by BEOWULF (VERNON) POWER LLC, a Delaware limited liability company, as Trustor to FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee for the benefit of CITY OF VERNON, as Beneficiary i ATTENTION: COUNTY CLERK --THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF THE TRUSTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN THIS INSTRUMENT. LA\1777398.9 TALE OF'GONTENTS ARTICLE 1 DEFINITIONS: ........:.......::. ,... ...................., , .,.., . ............4 141 Defined Ternxs ,.>.. ,.,,......,.... ,..... ..............4 . • ,4 '1.:2 Accounting Terms,:>: .., , •.,.. .::,, r,. 7' 1.3 The Rules of Construction.:,..< ...:.:..................... ..............7 ARTICLE 2 GENERAL COVENANTS .AND PROVISIONS ::....... :............ .................... ......8 2A Trustor Performance of Secured Obligation Provisions ........................ ............8: 2.2 Expenses..... :. _.... r.... 2.3 Beneficiary Assumes No Secured Obligations..,:.....f............::. .......... .........:Y9' 214 Further Assur_,.. ances..,:........ .. ....,...... 9 25 Acts ofTrustor ,.... ,,,. . ,.........,: . ................. 9 - A.fter-Acquired.Property.,,_ ... ' 2.7 lvlortgaged I'raperty`.. 10 2,$ Covenant to Day Al 2:9 Security Agreement 110 Subordination,.,..r........::::......::...+..,..<,� ,. , ...£;. :12 ARTICLE 3. ASSIGNMENT OF RENT$�ANTa LEASES. .. 12 ,,_. s, 33 Assigniiient. of Rents; .................... ......... .......................... ....... ..............12 3,2 Assignment of Leases , ,..,, .13 3:•.3 . Election to Proceed Under Section 2 $ of California Civil Cpcle , .4 Effect of Assignment ......:.:, 3,51No Merger of;Leasehold .......... ARTICLE 4 REMEDIES 14, ..:.. „ _ F,.. ,. 4.1 Protective Advances._,..... ........:, ....... ;: ........ ....,,,........ .;.:.....;.::....,..;.;,....14 4,2 Institution of Equity Proccedmgs.:.::......::: ....::.: .....:;:.:......:....14 4;3 Beneficiary's Power of Enforcement ....................................................................14 4A Beneficiary's Right to Enter and Take Possession, Operate and Apply. Income. ....... ....... .,.....,,..... ..., ....:,. ...,, ..,. .,: : .l:f 45 Separate Sales , . s• ;<, .17 4.6 Waiver of Appralserrient, Moratorium; Valuation-, Stay; Extension. and Redemption.La s ..,:....... ..:................, .. ....,.... <.:,....... ,,........,........ .. ,...,17 4.7 Receiver,. .. , .,r.::, ....,,..,,::.,R,;, ,• , G. ;,,...,1.7 . 4:8 Suits to'Protect thelylortgaged Propexty .,,:.,..:.........:. ..........I8 49 Proofs of Claim .,.. .... .... .......... 18 4.10 Trustor to ray Amounts Secured Hereby.oh Any I7on Paynn ent Application of Monies by'Benefioiary 1& 4.11 Delay or Omission; hTo Waiver...,, ,. ,.. ............ ............ ......... 1 LA11777398,9 � 4.12 No Waiver of One Default to Affect Another ........................... :,.................::,.19 4,13 Discontcc of Proceedings, :Potion of Parties Restored 20 4:14 Rem 1 " ' 2d ecles Cumu ative 4:15 Interest After Event of Default ....:...... .... ....... . ...{..:: ..;.::.0 4:16 Foreclosure; Expenses of Litigation .................. .............::::, .....::.............20 4.17 Deficiency Judgments,,,,,.,,,..... , . 4.18 WAIVER OF`.JURYTRIAL:. 4:1.9 Exculpation of Beneficiary ............................................................................... ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER j PROVISIONSRELATING TO MSTEE........ ,........... ,................ .................... I .......... 21 5.1 Exercise of Remedies by Trustee-- 5.2 Rights and Privileges of Trustee .......................... .......... ................. ...........22 5.3 Resignatioo or Replacement, of Trustee...... ..... 2 ,. 5,4 Authority ofeneficaty...,,,...r..,...:... .................. ... ..... . ..E.22. 5,5 Effect ofAppointment ofSuccessor Trustee ...................... ............... .23 5:,6 onfirrraation of Transfergntl S [cc ssron, 23 53 Exculpation. ,., ..,,..,. .... :.23 5.8 Endorsement .and. E-k"on of 1]o` unlents 23 5:.9 Multiple Trusfces t ,• 5:10 No R.quired .. -. 5,..1,1 Term Of Trustee's Acceptaxce ..,... ;... ....._..: 24 ARTICLE-6 GENERAL .. 24 6.1. Diseharge ....:.:.. 24> , 6:2 No Waiver. 24 -J, Extension, Rearrangement or Renewal of Secured Obli'gatioras: 6:4 Forcible Detainer ...;;.. ,_ ,. .4 ..,.f.:. ......:.. . ...... < ......::........,.< . ..,.,,.r25 6:5 Waiver of Stay, or Extensiom:, 25 6:.6 Notices, 5 6.1 Severability ,,,....2G 6.8 Application of Payments ,,. 6:9 Governing 6,:10 Entire Agreement 6`:1 l Amendments ........:...... ....: ,....a::<:, ..........:..... .26 6:12 Successors and.Assigns........ . ................. ................. ......... ...r.,,2G 6.13 Renewal, Etc ............................ 6 14 Non- ecourse 7 6.15 Severab lity and Cow anee Witit Usury Law , :A„ .:.:........... ,..:..27 6;6 Waiver:: ..,,.. 6.17 .Release ofCollateralT ;:t _„w ,< , ,,.28 '619 Counterpart. Execution ; Z8` 620 Regiaesf'for: Notice, 29 ,T....xT ,., LA117713:09.9 RECITALS coiiecnyeiy UltaT,ea ED nerein as the tceai.ER)ROy J, {c) all. builiings, strictures, #fixtures and other improvements now or hereafter erected on the Real Property; including= theft' ed `arid the Fad lYty (as Hereinafter defined (collectively, the "llnprovernentsx'); t. I J, 1:A\177739$,9 provided, however, that in each .case; :notwithstanding the foregoing, in no event,shall, "Mortgaged Property" include any Excluded Mortgaged Property, (as hereinafter defined). "Authenticate" theahs "authenticate°' as: defined in Article 9, of the UCC. "Bankruptcy Law" means Title 11, United States'Code, and any other :state or federal insolvency,.; reorganizations moratori-um or similar iaw,for, the relief of debtors?, or any successor statute: "'Benefciary fias the`meaning ascrityed to;t in. the Preamble. 'Teed of Trust" has il a meaning ascribed to it in-Afie l?reamMe �LA11777398�9 1.1.7 'ine1u ftg7.(and correlative to oans "including withoutI nitation" and "including, but not limited to",- 1.3.8 relative to the, determination of any period: of time, "from" means "from: :and including;" "to" meats "to'butexcluding' and f"through'l meats "through and ineWding"I 2.2 Expenses. Tfustor shall.indema*'Benefidary with respect to any transaction or matter in any way connected with .an" portion Otho Mortgaged Propelly, this Deed of Timst, or - '8- LAV77739S.9 whenever from time to time Trustor shall hereafter acquire any property or interest therein which by the terms of'this.Deed of Trust shall be,; or is intended to be,subject to the lien and: security interest created hereby, Trustor shall promptly give .notice: thereof to Beneficiary, and Trustor Shall forthwith execute, acknowledge and deliver to Beneficiary, and record and f le; all and: every such furthermortgages security agreements; financing statements, assignments and assurances (including, as. maybe appropriate, a supplement to this Deed of Trust) in, form and substance ,reasonably satisfactory to Beneficiary subjecting the property or interest so acquired to the lien of this Deed of Trust. 10 LA\1777318.9 2.7.5 No release orforbearatice of any of Trustor's obligations under the 13' LAU337398 9 14' LAV, 7.M98 9` 15 L AU 177398 9 reinstatement under Section 2924c of the California Civil Code or any successor statute, shall, in accordance with the terms of UCC Section 9-604, not prohibit the Beneficiary .from conducting a s. ale or other disposition of ,any personal property or from.otherwise proceeding against or continuing to proceed against: any personal. property in. any manner permitted by the UCC, nor shall any such rcinstatemen# nvalidate,.resctnd or ntllerwse.affect any sale, disposition or other proceeding held, conducted �or instituted with .respec# to any personal property prior to such reinstatement. Any sums paid .to Benefclary, in effecting any reinstatement pursuant to Section. 2924e, of the=California Civil ICo'de,. shall be applied to the Secured Obligations and to Benefi'ciary's and 'l rustee's .reasonable costs and expenses in the manner.required by Section 2924c 4.4 B.enef`oarv's'Rihto Enter end Talce.Possession, berate aid Apply Income; 1'7 CAi1777398Q: 19 LA\0,77398'9 Secured Obligations, "conferred upozu or received, to Beneficrary by this Deed. of Trust or any other Secure d abligation:Provision is excle save Qf dny otlier fight,. power or.remedy, but each arid, ovety such rig fit, and.remedy sha' be comutarive and:concurrent anti sba l be in:. addition to any other right; power and remedy given berounder or under any other.S.ecrired Obligation Provision, now or hereafter existing at law, inequity or by statute, and Bet! fioi"ary. shall be entitled to resort to such rights, powers, remedies or security as Beneficiary shall in its sole and absolute dis. tjory deem advisable: LAU 777398;Q LA11777398.I LAll 777398.9 23 LRU177398.9 25 LA\17773g8; 6.9 Governina Law. THIS DEED OFTRUST IS GOVERNED BY AND SHALL 26 LA11777398,9 27 LA\ 1777398;9 to. be paid to Beneficiary fO the use, forbearance or detention. of the Secured Obligations shall, to the wctertt pernxitted by applicable law, be ,amortized; prorated, .allocated and spread dwoughQut the full term* of the °Secured Obligations until the secured Obligations are repaid in full so that the. rate or amount of interest on account of the Secured Obligations :does not exceed the applicable usury ceiling 6.16 Waiver.. To the extent pern'Utte-d liy.law; and wifh respect to the period after an Event of:Default and during the continuance thereof, Trustor waives and releases any:riis or; defenses "which 'Txustot might otherwise have(i) under -California Code of Civil Procedures Sections,76, 725a, 580a, 580b, 580c or 580d and. California Civil Code Section 2889; which statutes. might otherwise. limit,or condition Beneficiary's exercise of certaih of Beneficiary's rights and remedies in °connec'ti,on with the enforcement of obligations secured by a lien on reap, property or (0 under any laws xiow existing or hereafter enacted: providing foroay appraisal before sale of as portion of the. Mortgaged Property and (iii) to all rights: of redemption, valuation, appraisal, stay:of executio� notice. of 4ection to mature or to de..Glare due the,S'eeureu Obligations and marshalling°in the event of the foreclosure of tho lien's created under this Deed of Trust or the :exercise of the power of sale granted hereunder. To the eitentif any; which: such. laws,may be.applicable and to the extent permitted, by Aaw, Trustor-wa ves and releases any right. or Aeftst whioh.Trustoi-might otherwise have°wdw such piovfsiwand under.anyotlw law of any applicable„sdiction which might limitor, restrict the effectiveness or scope, of'any of Trustor'& waivers. or releases;hereunder. . IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be. duly executed and delivered as of the day and year first above written. BEOWULF (VERNON) POWER LLC, a Delaware limited liability company By: Name: Title: LA\1777398.9 LAUT173W9 EXHIBIT A DESCRIPTION OF SITE I DAVIV T; ROSELL EV. 9-30-08 No.. 6281 LAM7773989' EXHIBIT C Recording Requested By: City of Vernon When Recorded Mail To: [LENDER] I tapace Aoove ror xecoraer-s use) Recording Fee: Exempt pursuant to California Government Code § 27383 SUBORDINATION OF DEED OF TRUST NOTICE: THIS SUBORDINATION, CONSENT AND ESTOPPEL AGREEMENT RESULTS IN YOUR - SECURITY INTEREST IN THE PROPERTY .BECOMING SUBJECT TO AND Of LOWER PRIORITY. THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION OF DEED OF TRUST (this "Agreement"), dated as of [ 1, 200_ is made and executed by and among [LENDER], a ,[_ 1, in its capacity as the Collateral Agent under the 1 ("Lender"), City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter ("Vernon"), and [PURCHASER], a [_ 1 ("Purchaser"). RECITALS A. WHEREAS, Vernon owns that certain 134-megawatt natural gas -fired two -on - one combined cycle electric generating station known as Malburg Generating Station (the "Facilit ') located at 2715 East 50t1i Street on land described in Exhibit A2 (the "Prot) '). Vernon owns certain other generation and transmission assets (collectively, but not including the Facility or the Property, the "Other Assets"). The Facility and the Other Assets are collectively called the "Assets" B. WHEREAS, Purchaser and Vernon have entered into that certain Purchase and Sale Agreement dated as of [] (the "PSA") pursuant to which on the date hereof. (i) Purchaser will purchase from Vernon, and Vernon will sell to Purchaser, the Assets and (ii) Purchaser and Vernon will enter into that certain Lease and Grant of Easements of even date herewith (the "Lease") pursuant to Insert name of applicable agreement. Z Note that Exhibit A should include just the property to be leased and not the greater site owned by -the City. LA\1777436.2 F. WHEREAS, Lender is willing to enter into Wider's,Loan -Documents provided Lcbder's Deed of Trust is a lien or charge upon the Trust Estate prior and superior to the lien or;oharge;of the Vernon Deed of Trust: -and.p�oyided that :Vernon will specifcally and uncondltianally ;subordinate the Jim;'Or charge of the uernon, -2- LA\1777436,7 _4_ L kX1777436;2 any or all of the assets of the Purchaser to any other person or entity. 4. Priority of Fee Interest. Vernon's fee interest, in the Property shall unconditionally be and remain at all times an interest that is, prior and superior to the Lender's Deed of Trust and the estate and interests created thereby. 5. Debt Limitation. Section 17.3 of the PPTA provides for a limitation on the amount of Purchaser's indebtedness. Notwithstanding anything to the contrary contained in this Agreement, Lender agrees not to cause a violation of such section and agrees that any Seller's Debt (as defined in the PPTA) in excess of such limitation shall be subordinate to the obligations of Purchaser to Vernon under the PPTA. 6. Events of Default. Upon the occurrence of an "Event of Default" under the Credit Agreement, the Lender (in its capacity as Administrative.Agent or Collateral Agent under the Lender's Loan Documents) shall be permitted and hereby is authorized to take any and all actions and to exercise any and all rights, remedies and options which the Lender may have under the Lender's Loan Documents and at law or in equity to (a) cause all of the Obligations under the Lender's Loan Documents to be performed and (b) sell or otherwise realize upon the collateral secured by the Lender's Deed of Trust, all without notice to or consent by anyone; provided, that Lender shall give to Vernon (i) concurrently with the delivery thereof to Purchaser, a copy of any notice of default or event of default given to Purchaser under the Lender's Loan Documents (provided that failure to deliver any such notice shall not invalidate any notice delivered to Purchaser under the Financing Documents nor shall such failure by the Lender acting in good faith give rise to any liability of the Lender) and (ii) a copy of any statutory notice upon any recording of 'a notice of default or a notice of foreclosure with respect to the Lender's Deed of Trust in the Official Records of Los Angeles County. 7. Continuing Obligation. This Agreement constitutes a continuing agreement of subordination, even though at times Purchaser may not be indebted to Lender. Lender may continue, in reliance on this Agreement, without notice to Vernon, to lend monies, extend credit, modify, renew or make other financial accommodations, to or for the account of Purchaser. 8. Binding Ems. This Agreement shall bind and be for the benefit of Vernon and Lender, and their respective successors and assigns (subject to limits on assignability set forth in this Agreement): 9. Waiver of Marshalling. Vernon waives all rights to require Lender to marshal Lender's collateral or any other property Lender may at any time have as security for the Obligations secured by Lender's Deed of Trust and waives all right to require Lender to first proceed against Purchaser or any guarantor or other person before proceeding against any security secured by Lender's Deed of Trust. 10. Waivers, Remedies Cumulative. No waiver shall be deemed to be made by any party of any of its rights hereunder unless it is in writing signed by such party. Each such waiver shall be a waiver only with respect to the specific instances involved and shall in no way impair the rights of such party or the obligations of such party to the other party in any other respect at. any other time. The remedies herein provided are cumulative and not -6- LA11777436.2 W1771436.2 ......_. . hA\1717434.2 LAti 777436 2. STATE OF COUNTY OF } WJTNE.SS riiy hand wi o fidW seal. SYgtiatut'e STATE. OF 1 CONTAINING 3.10. ACRES MORE OR LESS-. AS SH'OWN' ON EXHIBi'T B"' ATTACHED HERETO AND ;BY THIS REFEKRC',E MADE, APART HEREOF;: DAVI'D T. R°OSELE P.L.S. 6.281 EXP. `0/30/08 * (DAVID" T. RgSf��4. 'EXP.9=30-oe EXHIBIT D ` RECORDING REQUESTED BY FIRST AMERICAN TITLE INSURANCE COMPANY AND WHEN RECORDED, RETURN TO: City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Attention: City Attorney Recording Fee: Exempt pursuant to California Government Code § 27383 DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING Dated as of _, 2007 by BEOWULF (VERNON) POWER LLC, a Delaware limited liability company, as Trustor to I FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee for the benefit of CITY OF VERNON, as Beneficiary ATTENTION: COUNTY CLERK --THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF THE TRUSTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN THIS INSTRUMENT. LA\I 777398.9 TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS............................................................................................................4 1.1 Defined Terms.........................................................................................................4 1.2 Accounting Terms.....................................................................................................7 1.3 The Rules of Construction.......................................................................................7 ARTICLE 2 GENERAL COVENANTS AND PROVISIONS......................................................8 2.1 Trustor Performance of Secured Obligation Provisions..........................................8 2.2 Expenses..................................................................................................................8 2.3 Beneficiary Assumes No Secured Obligations........................................................9 2.4 Further Assurances .. ....................... ..... ...........................................................9 2.5 Acts of Trustor .........................................................................................................9 2.6 After -Acquired Property..........................................................................................9 2.7 Mortgaged Property................................................................ ................. 2.8 Covenant to Pay.....................................................................................................11 2.9 Security Agreement...............................................................................................11 2.10 Subordination.........................................................................................................12 ARTICLE 3 ASSIGNMENT OF RENTS AND LEASES............................................................12 3.1 Assignment of Rents..............................................................................................12 3.2 Assignment of Leases............................................................................................13 3.3 Election to Proceed Under Section 2938 of California Civil Code.......................13 3.4 Effect of Assignments............................................................................................13 3.5 No Merger of Leasehold Estates............................................................................14 ARTICLE 4 REMEDIES...............................................................................................................14 4.1 Protective Advances...............................................................................................14 4.2 Institution of Equity Proceedings....................................................... ................14 4.3 Beneficiary's Power of Enforcement.....................................................................14 4.4 Beneficiary's Right to Enter and Take Possession, Operate and Apply Income....................................................................................................................16 4.5 Separate Sales........................................................................................................17 4.6 Waiver of Appraisement, Moratorium, Valuation, Stay, Extension and RedemptionLaws..................................................................................................17 4.7 Receiver.................................................................................................................17 4.8 Suits to Protect the Mortgaged Property................................................................18 4.9 Proofs of Claim.......................................................................................................18 4.10 Trustor to Pay Amounts Secured Hereby on Any Default in Payment; Application of Monies by Beneficiary...................................................................18 4.11 Delay or Omission; No Waiver..........................................._..................................19 ii LA11777398.9 4.12 No Waiver of One Default to Affect Another.......................................................19 4.13 Discontinuance of Proceedings; Position of Parties Restored...............................20 4.14 Remedies Cumulative............................................................................................20 4.15 Interest After Event of Default..............................................................................20 4.16 Foreclosure; Expenses of Litigation......................................................................20 4.17 Deficiency Judgments............................................................................................21 4.18 WAIVER OF JURY TRIAL..................................................................................21 4.19 Exculpation of Beneficiary....................................................................................21 ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER PROVISIONS RELATING TO TRUSTEE......................................................................21 5.1 Exercise of Remedies by Trustee...........................................................................22 5.2 Rights and Privileges of Trustee............................................................................22 5.3 Resignation or Replacement of Trustee.................................................................22 5.4 Authority of Beneficiary........................................................................................22 5.5 Effect of Appointment of Successor Trustee.........................................................23 5.6 Confirmation of Transfer and Succession..............................................................23 5.7 Exculpation............................................................................................................23 5.8 Endorsement and Execution of Documents...........................................................23 5.9 Multiple Trustees...................................................................................................24 5.10 No Required Action...............................................................................................24 5.11 Terms of Trustee's Acceptance.............................................................................24 ARTICLE6 GENERAL................................................................................................................24 6.1 Discharge...............................................................................................................24 6.2 No Waiver..............................................................................................................24 6.3 Extension, Rearrangement or Renewal of Secured Obligations ............................25 6.4 Forcible Detainer...................................................................................................25 6.5 Waiver of Stay or Extension..................................................................................25 6.6 Notices...................................................................................................................25 6.7 Severability............................................................................................................26 6.8 Application of Payments........................................................................................26 6.9 Governing Law......................................................................................................26 6.10 Entire Agreement...................................................................................................26 6.11 Amendments ....................................... .................... ............26 6.12 Successors and Assigns..........................................................................................26 6.13 Renewal, Etc..........................................................................................................27 6.14 Non-Recourse........................................................................................................27 6.15 Severability and Compliance With Usury Law.....................................................27 6.16 Waiver....................................................................................................................28 6.17 Release of Collateral..............................................................................................28 6.18 Time of the Essence...........................................................................................28 6.19 Counterpart Execution...........................................................................................28 6.20 Request for Notice.................................................................................................29 LA\1777398.9 r Exhibit List Exhibit A: Description of Site Exhibit B: Description of Easements i iv LAB 1777398.9 This DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING, dated as of 2007 (this "Deed of Trust"), is executed by BEOWULF (VERNON) POWER LLC, a Delaware limited liability company ("Trustor") with an address of 103 North Washington Street, Easton, MD 21601, to FIRST AMERICAN TITLE INSURANCE COMPANY, as trustee ("Trustee") with an address of One First American Way, Santa Ana, CA 92707, Attn: National Default Services, for the use and benefit of the CITY OF VERNON, a Municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its charter (`Beneficiary") with an address of 4305 Santa Fe Avenue, Vernon, CA 90058, Attn: City Attorney. RECITALS A: Capitalized terms are defined in Article 1. B. Trustor owns various existing permits, equipment, leasehold interests and certain other assets associated with the maintenance; operation and repair of a combined cycle, natural gas -tired, electric power plant facility in the City of Vernon, California (as more particularly defined below, the "Facility'). C. Trustor and Beneficiary have entered into that certain Power Purchase Tolling Agreement, dated as of the date hereof (the "PPTA"), pursuant to which Trustor will sell to Beneficiaryunit-specific capacity and energy generated from the Facility. D: Trustor, as lessee ("Lessee"), and Beneficiary, as lessor ("Lessor"), . entered into that certain Lease and Grant of Easements, dated as of the date hereof; a memorandum of which has been recorded on the date hereof in the Los Angeles. County Recorder's Office, pursuant to which Lessee agreed to lease the Facility Site (as hereinafter defined) from Lessor, and Lessor agreed to lease the Facility Site to Lessee (the "Ground Lease"). E. Trustor, as grantor, has executed and delivered to Beneficiary, as grantee, that certain Deed of Transfer dated as of the date.hereof, which Deed of Transfer has been recorded on the date hereof in the Los Angeles County Recorder's Office. Pursuant to the Deed of Transfer, Trustor conveyed to Beneficiary the Facility. F. Trustor is executing and delivering this Deed of Trust, pursuant to which Trustor will secure its obligations under the PPTA (the "Secured Obligations') with a lien and security interest in the Mortgaged Property, on the terms and conditions set forth below. G. This Deed of Trust sets forth the terms on which the Beneficiary, will accept, hold and enforce the security interests granted hereunder and all related rights, interests and powers. j Agreement NOW, THEREFORE, to secure the prompt and complete performance in full when due of the Secured Obligations, and in consideration of the covenants contained herein, LAU 777398.9 Trustor, intending to be legally bound, does_ hereby grant, bargain, sell, convey, warrant, assign, transfer, mortgage, pledge, set over and confirm unto Trustee in trust for Beneficiary asset forth in this Deed of Trust, for the benefit of Beneficiary, all of . Trustor's estate, right, title, interest, property, claim and demand, now or hereafter arising, in and to the following property and rights (herein collectively called the "Mortgaged Property"): (a) Trustor's interest under the Ground Lease and the leasehold estate created thereby in and to the lands and premises more particularly described in Exhibit A hereto (the "Site"); (b) any and all easements, leases, licenses, option rights, rights -of -way and other rights used in connection with the Site or as a means of access thereto (including, without limitation, solely after an Event of Default, all rights of Trustor to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the. Ground Lease, but expressly reserving unto Trustor, prior to any Event of Default, all rights to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease that, in each case, does not violate an express prohibition set forth in the Secured Obligation Provisions), all easements for ingress and egress and easements for water, transmission lines, telephone lines, natural gas and sewage pipelines, and all other such rights running in favor of Trustor or appurtenant to the Site (or arising under the Ground Lease), and any and all sidewalks, alleys, strips and. gores of land adjacent thereto or used in connection therewith, together with all and singular the tenements, hereditaments and appurtenances thereto, and with any land lying within the right-of-way of any streets, open or proposed, adjoining the same (including, without limitation, the easements; leases, licenses and other instruments described in Exhibit B hereto) (collectively, the "Easements'"; and the Site and the Easements collectively referred to herein as the "Real Propert (c) all buildings, structures, fixtures and other improvements now or hereafter erected on the Real Property, including the Project and the Facility (as hereinafter defined) (collectively, the "Improvements'); (d) all machinery, apparatus, equipment, fittings, fixtures, boilers, turbines and other articles of personal property, including all goods and all goods which become fixtures, now owned or hereafter acquired by Trustor and now or hereafter located on, attached to or used in the operation of or in connection with the Real Property and/or the Improvements, and all replacements thereof, additions thereto and substitutions therefor, to the fullest extent permitted by applicable law (all of the foregoing being hereinafter collectively called the "Equipment'); (e) all inventory, raw materials, works in process and other materials used or consumed in the construction, operation or maintenance of, or now or hereafter located on or used in connection with, the Real Property, the Improvements and/or the Equipment, including, without limitation, fuel and fuel deposits, now or hereafter located on the Real Property or elsewhere or otherwise owned by Trustor (the above items, 2 LA11777398.9 together with the Equipment, being hereinafter collectively called the "Tangible ble Collateral"); (f) all rights, powers, privileges and other benefits of Trustor (to the extent assignable) now or hereafter obtained by Trustor under the Ground Lease (but expressly reserving unto Trustor, prior to any Event of Default, all rights to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease that, in each case, does not violate an express prohibition set forth in the Secured Obligation Provisions) and/or from any Governmental Authority, including, without limitation, permits issued in the name of Trustor and governmental actions relating to (i) the ownership, operation, management and use of the Real Property, Improvements, Equipment or Tangible Collateral, (h) the development and financing of the Project, the Improvements and the Equipment, and (iii) any improvements, modifications or additions thereto; (g) any right of Trustor to elect to terminate the Ground Lease or remain in possession of the Real Property and/or' Improvements pursuant to 11 U.S.C. section 365(h) or any similar provision of applicable law and any possessory rights of Trustor in the Real Property and/or Improvements pursuant to 11 U.S.C. section 365(h) or any other similar provision of applicable law; and all right, title and interest of Trustor in, to and under the PPTA; (h) all the lands and interests in lands, tenements and hereditaments hereafter acquired by Trustor in connection with or appurtenant to the Real Property and/or any other property or rights subject to the lien hereof, including (without limitation) all interests of Trustor, whether as lessor or lessee, in any leases of land hereafter made and all rights of Trustor thereunder; , (i) any and all other property and interests in any way associated or used in connection with or appurtenant to the Real Property, Improvements, Equipment or Tangible Collateral that may from time to time be acquired by Trustor or be subjected to the lien hereof by Trustor or by anyone on its behalf or with its consent, or which may come into the possession or be subject to the control of Trustee or Beneficiary pursuant to this Deed of Trust, being hereby collaterally assigned to Beneficiary (or in the case of Rents, directly assigned pursuant to Section 2.2) and subjected or added to the lien or estate created by this Deed of Trust forthwith upon the acquisition thereof by Trustor, as fully as if such :property were now owned by Trustor and were specifically described in this Deed of Trust and subjected to the lien and security, interest hereof; and each of Trustee and Beneficiary is hereby authorized to receive any and all such property and interests as and for.additional security hereunder; and 0) all the remainder or remainders, reversion or reversions, and, to the extent arising after an Event of Default, rents, revenues, issues, profits, royalties, income and other benefits derived from any of the foregoing, all of which are hereby assigned to Beneficiary, who is hereby authorized, after an Event of Default, to collect and receive the same, to give proper receipts and acquittances therefor and to apply the same in accordance with the provisions of this Deed of Trust; LAU 777398.9 provided, however, that, in each case, notwithstanding the foregoing, in no event shall "Mortgaged Property" include any Excluded Mortgaged Property (as hereinafter defined). TO HAVE AND TO HOLD the said Mortgaged Property, whether now owned or held or hereafter acquired, unto Beneficiary, its successors and assigns, pursuant to the provisions of this Deed of Trust. IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security interest or estate created by this Deed of Trust to secure the Secured Obligations, shall initially be second priority Lien subject only to the lien of the Financing Documents and the other Liens expressly permitted by the terms hereof or the other Secured Obligation Provisions to be prior hereto or pari passu herewith, and that the Mortgaged Property is to be held, dealt with and disposed of by Beneficiary, upon and subject to the terms, covenants, conditions, uses and agreements set forth in this Deed of Trust. PROVIDED ALWAYS, that upon the termination date of the Secured Obligations and the observance and performance by Trustor of its covenants and agreements set forth herein, then this Deed of Trust and the estate hereby and therein granted shall cease and be void and shall be reconveyed as provided herein below. ARTICLE 1 DEFINITIONS 1.1 Defined Terms. Capitalized terms used in this Deed of Trust and not otherwise defined herein shall have the meanings assigned to them in the PPTA. Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such document is in effect. In addition, for purposes of this Deed of Trust, the following definitions shall apply: "Affiliate" of a Person means any other Person that (a) directly or indirectly controls the specified Person; (b) is controlled by or is under direct or indirect common control with the specified Person; or (c) is an officer, director, employee, representative or agent or subsidiary of the Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management or policies of the specified Person, directly or indirectly, whether through the ownership of voting securities, partnership or limited liability company interests, by contract or otherwise. "Assignment" means the assignment, contained in Article 3 of this Deed of Trust, from Trustor to Beneficiary, of all of Trustor's right, title and interest in and to the Leases and the Rents. "Authenticate" means "authenticate" as defined in Article 9 of the UCC. "Bankruptcy Event" shall be deemed to occur, with respect to any Person, if that Person shall institute a voluntary case seeking liquidation or reorganization under the Bankruptcy Law, or shall consent to the institution of an involuntary case thereunder against it; or such Person shall file a petition or consent or otherwiseinstitute any similar proceeding under any 4 LAV 777398.9 other applicable Federal or state law, or shall consent thereto; or such Person shall apply for, or consent or acquiesce to, the appointment of, a receiver, administrator, administrative receiver, liquidator, sequestrator, trustee or other officer with similar powers for itself or any substantial part of its assets; or such Person shall make a general assignment for the benefit of its creditors; or such Person shall admit in writing its inability to pay its debts generally as they become due; or if an involuntary case shall be commenced seeking liquidation or reorganization of such Person under the Bankruptcy Law or any similar proceedings shall be commenced against such Person under any other applicable Federal or state law and (a) the petition commencing the involuntary case is not timely controverted, (b) the petition commencing the.involuntary case is not dismissed within 90 days of its filing, (c) an interim trustee is appointed to take possession of all or a portion of the property, and/or to operate all or any part of the business of such Person and such appointment is not vacated within 90 days, or. (d)'an order for relief shall have been issued or entered therein; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, administrator, administrative receiver, liquidator, sequestrator, trustee or other officer having similar powers, over such Person or all or a part of its property shall have been entered; or any other similar relief shall be granted against such Person under any applicable Bankruptcy Law. "Bankruptcy Law" means Title 11, United States Code, and any other state or federal insolvency, reorganization, moratorium or similar law for the relief of debtors, or any successor statute. `Beneficiary" has the meaning ascribed to it in the Preamble. "Deed of Trust" has the meaning ascribed to it in the Preamble. "Easements" has the meaning ascribed to it in the granting clauses of this Deed of Trust ("Granting. Clauses"). "Equipment" has the meaning ascribed to it in the Granting Clauses. "Event of Default" means an "Event of Default" (as defined in the PPTA) with respect to the "Seller" (as defined in the PPTA) under the PPTA. "Excluded Mortgaged Property" means (i) with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for so long as the grant of a lien and security interest under this Deed of Trust constitutes or would result in the abandonment, invalidationor unenforceability of such lease, license, permit, franchise, power, authority or right or the termination of or a default under the instrument or agreement by which such lease, license, permit, franchise, power, authority or right is governed; provided, that such lease, license, permit, franchise, power, authority or right will be an Excluded Mortgaged Property only to the extent and,for so long as the condition set forth above is and remains satisfied and, to the extent such property otherwise constitute Mortgaged Property, will cease to be an Excluded Mortgaged Property, and will become subject to the lien and security_ interests granted to the Beneficiary under this Deed of Trust, except as such proceeds are applied and used in the ordinary course of business and in accordance with the Secured Obligation Provisions, and (ii) prior to any Event of Default, all rights to exercise any election or option, to make any LA\ 1777398.9 determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease that, in each case, does not violate an express prohibition set forth in the Secured Obligation Provisions. "Facility" has the meaning ascribed to it in the Recitals. "Facility Site" means the land described on Exhibit A. "Financing Documents" means those documents reasonably required by a Trustor Financing Party with respect to debt financing or refinancing for the Facility. "Governmental Authority' means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Governmental Rule" means any law, rule, regulation, ordinance, order, code interpretation, treaty, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Granting Clauses' has the meaning ascribed to it in these definitions. "Ground Lease" has the meaning ascribed to it in the Recitals. "Improvements" has the meaning ascribed to it in the Granting Clauses. "Leases" means any and all leases, subleases, occupancy agreements, licenses, concessions or grants of other possessory interests now or hereafter in force, oral or written, covering or affecting the use and enjoyment of the Mortgaged Property, or any part thereof, including any and all extensions, renewals, modifications or replacements thereof, and together with all rights, powers, privileges, options and other benefits of Trustor thereunder. "Legal Requirements" means, as to any Person, the articles of incorporation, bylaws or other organizational or governing documents of such Person, and any requirement under a permit, and any Governmental Rule in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property.is subject. "Lied" means (i) with respect to real property, liens, charges, pledges, options, mortgages; deeds of trust, security interests, claims, easements, and other encumbrances affecting title to real property and (ii) with respect to personal property, liens, charges, pledges, options and security interests, in the case of (i) or (ii), whether imposed by law, agreement, understanding or otherwise, including by a bankruptcy court. "Mortgaged Property" has the meaning ascribed to it in the Granting Clauses. 6 LA\1777393.9 "Person" means an individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization, or any Governmental Authority. "PPTA" has the meaning ascribed to it in the Recitals. "Proiect" means that certain 134 MW (approximately) power generating Facility located in the City of Vernon, California, commonly known as the Malburg Generation Station. "Protective Advances" has the meaning ascribed to it in Section 4.11. "Real Property" has the meaning ascribed to it in the Granting Clauses. "Rents" means all of Trustor's right, title and interest in and to all of the rents, royalties, issues, profits, revenue, income and other benefits under any Leases and under any and all guaranties of the obligations of the lessees, sublessees, occupants and licensees thereunder, Whether now due, past due, or to become due, and including all prepaid rents and security deposits. "Secured Obligations" has the meaning ascribed to it in the Recitals. "Secured Obligation Provisions" has the meaning ascribed to it in Section 2.1 below. "Secured Obligations Termination Date" means the date on which all of Trustor's obligations under the PPTA have been satisfied and/or terminated or expired. "Site" has the meaning ascribed to it in the Granting Clauses. "Tangible Collateral" has the meaning ascribed to it in the Granting Clauses. "Trustee" has the meaning ascribed to it in the Preamble. "Trustor" has the meaning ascribed to it in the Preamble. "Trustor's Financing, Parties" means any financial institution that provides debt financing or refinancing to Trustor for the Facility. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of California i "UCC Collateral" has the meaning ascribed to it in Section 2.9.1 below. 1.2 Accounting Terms. As used herein and in any.certificate or other document made or delivered pursuant hereto, accounting terms not defined herein shall have the respective meanings given to them under GAAP. j 1.3 The Rules of Construction. In this Deed of Trust, unless a clear contrary intention appears: 7 LAV 777398.9 1.3.1 the singular number includes the plural number and vice versa; 1.3.2 reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; 1.3.3 reference to any gender includes the other gender; 1.3.4 reference to any agreement (including this Deed of Trust), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; 1.3.5 reference to any Article, Section, Schedule or Exhibit means such Article, Section, Schedule or Exhibit to this Deed of Trust, and references in any Article, Section; Schedule, Exhibit or definition to any clause means such clause of such Article, Section, Schedule, Exhibit or defmition; 1.3.6 "hereunder," "hereof," "hereto" and words of similar import are references to this Deed of Trust as a whole and not to any particular Section or other provision hereof or thereof, unless otherwise specified; 1.3.7 "including" (and correlative terms) means "including without limitation" and "including, but not limited to"; 1.3.8 relative to the determination of any period of time, "from" means "from and including, "to" means to but excluding and .through" means through and including"; 1.3.9 examples shall not be construed to limit, expressly or by implication, the matter they illustrate; 1.3.10 reference to any law (including statutes and ordinances) means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; and 1.3.11 except where the context otherwise requires, "or" shall have the inclusive meaning frequently designated by "and/or". ARTICLE 2 GENERAL COVENANTS AND PROVISIONS 2.1 Trustor Performance of Secured Obligation Provisions. Trustor shall pay, perform, observe and comply with each and every provision hereof, and with each and every provision applicable to Trustor in the PPTA (collectively, the "Secured Obligation Provisions") at the time and in the manner provided in the Secured Obligation Provisions. 2.2 Expenses. Trustor shall indemnify Beneficiary with respect to any transaction or matter in any way connected with any portion of the Mortgaged Property, this Deed of Trust, or 8 LAU 777398.9 Trustor's use, occupancy, or operation of the Mortgaged Property in each case only if and to the extent required pursuant to the Secured Obligation Provisions. 2.3 Beneficiary Assumes No Secured Obligations. It is expressly agreed that, anything herein contained to the contrary notwithstanding, except (in each case below) as may otherwise be provided in the Secured Obligation Provisions or any other written agreement between Beneficiary and Trustor, Beneficiary shall not have any obligation or liability with respect to any obligations of Trustor with respect to the Mortgaged Property, nor shall Beneficiary be required or obligated in any manner to (a) perform or fulfill any obligations or duties of Trustor under any agreements with respect to the Mortgaged Property, (b) make any payment or make any inquiry as to the nature or sufficiency of any payment received by it, or (c) I present or file any claim or take any action to collect or enforce the payment of any amounts which have been assigned to Beneficiary hereunder or to which Beneficiary may be entitled at any time or times. 2.4 Further Assurances. Subject to Section 2.10 below, Trustor shall, from time to time, at its expense, promptly Authenticate, execute and deliver all further instruments and documents, and take all further action, as may be reasonably requested by Trustee or Beneficiary in order to create and/or maintain the validity, perfection or priority of and protect the lien and security interest granted or purported to be granted hereby or to enable Beneficiary to obtain the full benefits of the lien and security interest granted or intended to be granted hereby. Without limiting the generality of the foregoing, Trustor shall execute and record or file this Deed of Trust and each amendment hereto, file such financing or continuation statements, or amendments thereto, and, subject to Section 2.10 below, execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices as may be reasonably necessary in. order to perfect and preserve the lien and security interest granted or purported to be granted hereby. Trustor hereby authorizes the tiling of any,financing statements or continuation statements, and amendments to financing statements, or any similar document in any jurisdictions and with any filing offices as Beneficiary may determine, in its sole discretion, are necessary or advisable to perfect or otherwise protect the lien and security interest granted to Beneficiary herein. 2.5 Acts of Trustor. Trustor hereby covenants that it will not mortgage, hypothecate, assign or pledge, so long as this Deed of Trust shall remain in effect, any of its right, title or interest in and to the Mortgaged Property or any part thereof to anyone other than Beneficiary in any manner if to do so would violate an express prohibition against such mortgage, hypothecation, assignment or pledge as set forth in the Secured Obligation Provisions. 2.6 After -Acquired Property. Subject to any contrary provision of any Secured Obligation Provision, any and all property or interest acquired by Trustor after the date of this Deed of Trust, which by the terms of this Deed of Trust shall be, or is intended to be, subject to the lien and security interest created hereby, shall immediately, without any ftirther conveyance, assignment or act on the part of Trustor or Beneficiary, become and be subject to the lien and security interest of this Deed of Trust as fully and completely as though specifically described herein, but nothing contained in this Section 2.6 shall be deemed to modify or change the obligations of Trustor under Section 2.4 hereof or the obligations of Beneficiary under Section 2.10. Subject to any contrary provision of any Secured Obligation Provision, if and 9 LA\1777398.9 whenever from time to time Trustor shall hereafter acquire any property or interest therein which by the terms of this Deed of Trust shall be, or is intended to be, subject to the lien and security interest created hereby, Trustor shall promptly give notice thereof to Beneficiary, and Trustor shall forthwith execute, acknowledge and deliver to Beneficiary, and record and file, all and every such further mortgages, security agreements, financing statements, assignments and assurances (including, as. may be. appropriate, a supplement to this Deed of Trust) in form and substance reasonably satisfactory to Beneficiary subjecting the property or interest so acquired to the lien of this Deed of Trust. 2.7 Mortgaged Property. 2.7.1 The Mortgaged Property shall not be removed, demolished or materially altered in any manner that would violate an express prohibition against such removal, demolition or material alteration as set forth in the Secured Obligation Provisions without the consent of Beneficiary. 2.7.2 Trustor will not, and will not permit any of its Subsidiaries to, directly or 'indirectly, create, incur, assume or suffer to exist any Lien of any kind on the Mortgaged Property, whether now owned or hereafter acquired, if such Lien would violate an express prohibition against Liens as set forth in the Secured Obligation Provisions without the consent of Beneficiary. Trustor shall not sell, transfer, assign or convey any part of the Mortgaged Property in any manner that would violate an express prohibition against such sale, transfer, assignment or conveyance as set forth in the Secured Obligation Provisions without the prior consent of Beneficiary. The provisions of the foregoing sentence of this paragraph shall apply to each and every such further encumbrance, sale, transfer, assignment or conveyance, regardless of whether or not Beneficiary has consented to, or waived by its action or inaction its rights hereunder with respect to, any such previous further encumbrance, sale, transfer, assignment or conveyance, and, irrespective of whether such further encumbrance, sale, transfer, assignment or conveyance is voluntary, byreason of operation of law or is otherwise made. 2.7.3 If any action or proceeding shall be instituted to evict Trustor or to recover possession of the Mortgaged Property or any part thereof or interest therein from Trustor or any action or proceeding otherwise affecting the Mortgaged Property or this Deed of Trust shall be instituted, then Trustor shall, immediately after receipt, deliver to Beneficiary a true and complete copy of each petition, summons, complaint, notice of motion, order to show cause and all other pleadings and papers, however designated, served in any such action or proceeding. . 2.7.4 Trustor covenants -and agrees that the fee `f tle to the Real Property and Improvements and the leasehold estate created under the Ground Lease shall not merge but shall always remain separate and distinct, notwithstanding the union of said estates either in Trustor or a third party by purchase or otherwise, and, in the event Trustor acquires the fee title or any other estate, title or interest in and to the Real Property and Improvements, the lien of this Deed of Trust shall; without farther conveyance, simultaneously with such acquisition, be spread to cover and attach to such acquired estate and as so spread and attached shall have the same priority as prior to such spread and attachment. 10 LA\1777398.9 2.7.5 No release or forbearance of any of Trustor's obligations under the Ground Lease by the Beneficiary or its heirs and assigns shall release Trustor from any of its obligations under this Deed of Trust. 2.7.6 The lien of this Deed of Trust shall attach to all of Trustor's rights and remedies at any time arising under or pursuant to section 365(h) of the Bankruptcy Law, including, without limitation, all of Trustor's rights to remain in possession of the Mortgaged Property. Trustor shall not elect to treat the Ground Lease as terminated under section 365(h)(1) of the Bankruptcy Law, and any such election shall be void. 2.8 Covenant to Pay. If an Event of Default has occurred and is continuing and such Event of Default could reasonably be expected to materially and adversely affect Beneficiary's. interest hereunder in the Mortgaged Property or result in personal injury, then Beneficiary, among its other rights and remedies, shall have the right, but not the obligation, to pay, observe or perform the same, in whole or in part, and with such modifications as Beneficiary reasonably shall deem advisable. To the extent provided in the Secured Obligation Provisions and without limiting any of the provisions contained therein, all sums, including, without limitation, reasonable attorneys' fees, so expended or incurred by Beneficiary by reason of the default of Trustor, or by reason of the bankruptcy or insolvency of Trustor, as well as, without limitation, sums expended or incurred to sustain the lien or estate of this Deed of Trust or its priority, or to protect or enforce any rights of Beneficiary hereunder, or to recover any of the Secured Obligations, or for real estate taxes or other governmental assessments or charges against any part of the Mortgaged Property, or premiums for insurance of the Mortgaged Property that Trustor is required to maintain pursuant to the Secured Obligation Provisions, shall be entitled to the benefit of the lien on the Mortgaged Property as of the date of the recording of this Deed of Trust, shall be deemed to be added to and be part of the Secured Obligations secured hereby, and shall be repaid by Trustor as provided in the Secured Obligation Provisions. 2.9 Security Agreement. 2.9.1 This Deed of Trust shall -also be a security agreement between Trustor and Beneficiary covering the Mortgaged Property constituting personal property or fixtures (hereinafter collectively called "UCC Collateral") governed by the UCC, as the same may be more specifically set forth in any financing statement delivered in connection with this Deed of Trust, and as further security for the payment and performance of the Secured Obligations, , Trustor hereby grants to Beneficiary a security interest in such portion of the Mortgaged Property that constitutes UCC;.,Collateral to the full extent that such UCC Collateral maybe subject to the UCC. In addition to Beneficiary's other rights hereunder, Beneficiary shall have all rights of a secured party under the UCC. Trustor shall Authenticate, execute and deliver all financing statements and such further assurances that may be reasonably requested by Beneficiary to establish, create, perfect (to the extent the same can be achieved by the filing of a financing statement) and maintain the validity and, subject to Section 2.10 below, priority of Beneficiary's security interests; and Trustor shall bear all reasonable costs thereof, including all UCC searches. Except as otherwise provided in the Secured Obligation Provisions, if Beneficiary should dispose of any of the Mortgaged Property comprising the UCC Collateral pursuant to the UCC, then ten (10) days' prior written notice by Beneficiary to Trustor shall be deemed to be reasonable notice; provided, however, Beneficiary may dispose of such property in accordance with the foreclosure 1I LA\1777398.9 procedures of this Deed of Trust in lieu of proceeding under the UCC. Beneficiary may from time to time execute, file and/or deliver at Trustor's expense all continuation statements, termination statements, amendments, partial releases, or other instruments relating to all financing statements by and between Trustor and Beneficiary. Except as otherwise provided in the Secured Obligation Provisions, if an Event of Default shall occur and is continuing, (a) Beneficiary, in addition to any other rights and remedies which it may have, may exercise, immediately and without demand to the extent permitted by law, any and all rights and remedies granted to a secured party under the UCC including, without limiting the generality of the foregoing, the right to take possession of the UCC Collateral or any part thereof and the right to take such other measures as Beneficiary may deem necessary for the care, protection and . preservation of such collateral and (b) upon request or demand of Beneficiary; Trustor shall at its expense assemble the UCC Collateral and make it available to Beneficiary at a convenient place acceptable to Beneficiary. Trustor shall pay to Beneficiary on demand any and all expenses, including reasonable attorneys' fees and disbursements incurred or paid by Beneficiary in protecting the interest in the UCC Collateral and in enforcing the rights hereunder with respect to such UCC Collateral. 2.9.2 Trustor agrees, to the extent permitted bylaw, that: (i) this Deed of Trust upon recording or registration in the real estate records of the proper office shall constitute a financing. statement filed as a "fixture filing" within the meaning of Sections 9-334 and 9-502 of the UCC;. (ii) all or a part of the Mortgaged Property are or are to become fixtures; and (iii) the addresses of Trustor and. Beneficiary are as set forth in the Preamble of this Deed of Trust. Trustor's organizational identification number is 2.10 Subordination. Subject to the terms and conditions of the Secured Obligation Provisions, Beneficiary has agreed, that upon Trustor's request, Beneficiary shall, from time to time, without any additional consideration paid to Beneficiary, execute a lien subordination agreement (the "Lien Subordination Agreement") substantially in the form attached hereto as Exhibit C to effectuate the subordination of the lien of this Deed of Trust to the lien of Trustor's Financing Parties pursuant to any Financing Documents. Subject to the terms and conditions of the Secured Obligation Provisions, Beneficiary shall, from time to time, at its expense, promptly Authenticate, execute and deliver all further instruments and documents, and take all further action, as may reasonably requested by Trustor or its Financing Parties in order to effectuate any such subordination and/or establish the validity, perfection or priority of any Financing Parties' lien pursuant to any Financing Document. ARTICLE 3 r ASSIGNMENT OF RENTS AND LEASES 3.1 Assignment of Rents. Trustor's right, title and interest in and to the Rents are hereby absolutely and irrevocably assigned to Beneficiary to be applied against the Secured Obligations. Trustor hereby appoints Beneficiary its true and lawful attorney -in -fact, with the right, at Beneficiary's option at any time, to demand, receive and enforce Payment of, to give receipts, releases and satisfactions for, and to sue, either in Trustor's or Beneficiary's name for, all Rents. Notwithstanding the foregoing Assignment of Rents, so long as no Event of Default has occurred which remains uncured, Trustor may collect, receive, take, use and enjoy such Rents, as they become due and payable. The foregoing assignment shall be fully operative 12 LAU 777398.9 without any further action on the part of either party; and specifically Beneficiary shall be entitled at its option, upon the occurrence of an Event of Default hereunder and for so long as such Event of Default is continuing, to collect all Rents from the Mortgaged Property whether or not Beneficiary takes possession of the Mortgaged Property. Upon the occurrence of an Event of Default hereunder, the permission hereby given to Trustor to collect the Rents from the . Mortgaged Property shall terminate. The permission given by Beneficiary to Trustor shall be reinstated upon the cure of such Event of Default with Beneficiary's specific consent which shall not be unreasonably withheld. This Assignment shall not be deemed or construed to constitute Beneficiary or Trustee as a mortgagee in possession nor obligate Beneficiary or Trustee to take any action or to incur expense or perform or discharge any obligation, duty or liability. Exercise of any rights under this Section and the application of the Rents to the Secured Obligations shall not cure or waive any Event of Default but shall be cumulative of all other rights and remedies of Beneficiary. 3.2 Assignment of Leases. Trustor hereby assigns to Beneficiary all right, title and interest of Trustor in and to all Leases, together with all security therefor and all monies payable. thereunder, subject, however, to the conditional permission given to Trustor above to collect the rentals under any such Lease as provided in Section 3.1 above. ,The foregoing assignment of any Lease shall not be deemed to impose upon Beneficiary any of the obligations, or duties of Trustor provided in any such Lease; and Trustor agrees to fully perform all obligations of the lessor under all such Leases. Upon Beneficiary's request, Trustor shall deliver to any new lessee,a notice of this assignment.in form satisfactory to Beneficiary in its sole discretion. Beneficiary , may deliver such a notice to new lessees if Trustor fails to do so within a reasonable time after - Beneficiary's request. From time to time, upon request of Beneficiary, Trustor shall specifically assign to Beneficiary, by an assignment in writing in form approved by Beneficiary, all right, title and interest of Trustor in and to any and all Leases, together with all security therefor and all monies payable thereunder, subject to the conditional permission given to Trustor above to collect and use the rentals under any such Lease. Trustor shall from time to time within thirty (30) days after written request by Beneficiary, execute, acknowledge and deliver any instrument as Beneficiary may reasonably request to further evidence the assignment and transfer to Beneficiary of Trustor's interest in any Lease. 3.3 Election to Proceed Under Section 2938 of California Civil Code. Without limiting any other rights or remedies of Beneficiary set forth in this Assignment or under this Deed of Trust, or available at law or in equity, Beneficiary shall have the right to enforce all of the rights and remedies of an assignee under Section 2938 of the California Civil Code. 3.4 Effect of AssigMents. This instrument constitutes an absolute and present assignment of the rents, royalties, issues, profits, revenue, income and other benefits from the Mortgaged Property; subject, however, to, the conditional permission given to Trustor to collect, receive, take, use and enjoy the same as provided above; provided, further, that the existence or exercise of such right of Trustor shall not operate to subordinate. this assignment to any subsequent assignment by Trustor, in whole or in part, and any such subsequent assignment by Trustor shall be subject to the rights of Beneficiary hereunder; provided, however, that (notwithstanding any provision of this Article 3 to the contrary) this Assignment and the rights of Beneficiary under this Article 3 shall be subordinated as and to the extent that the lien of this Deed of Trust is subordinated to the Financing Documents (and to the rights of Trustor's 13 LA\ 1777398.9 Financing Parties with respect to the Leases and Rents under such Financing Documents). and to the other Liens expressly permitted by the terms hereof: 3.5 No Merger of Leasehold Estates. If both. the lessor's and lessee's estate under any Lease, or any portion thereof,becomes vested at any time in one owner, this Deed of Trust and the lien created hereby shall not be adversely affected by the application of the doctrine of merger unless Beneficiary so elects in writing by recording a written declaration so stating. Unless and until Beneficiary so elects, Beneficiary and any lessor and lessee shall continue to have and enjoy all of the rights and privileges to.the separate estates. In addition, upon the foreclosure of the lien created by this Deed of Trust on the Mortgaged Property, any Leases then existing and affecting all or any portion of the Mortgaged Property shall not be destroyed or terminated by merger or by the foreclosure unless Beneficiary or any purchaser at the sale so elects. No act by or on behalf of Beneficiary or such purchaser shall constitute a termination of any Lease unless Beneficiary gives written notice thereof to the tenant or subtenant affected. ARTICLE 4 REMEDIES 4.1 Protective Advances. If an Event of Default shall have occurred and is continuing, then, without thereby limiting Beneficiary's other rights or remedies, waiving or releasing any of Trustor's obligations, or imposing any obligation on Beneficiary, Beneficiary shall have the right, but not the obligation, to either advance any amount owing or perform any or all actions that Beneficiary considers necessary or appropriate to cure such default. All such advances shall constitute "Protective Advances." No sums advanced or performance rendered by Beneficiary shall cure or be deemed a waiver of any Event of Default. 4.2 Institution of Equity Proceedings. If an Event of Default occurs and is continuing, Beneficiary may institute an action, suit or proceeding in equity for specific performance of this Deed of Trust or any other Secured Obligation Provision, all of which shall be specifically enforceable by injunction or other equitable remedy. 4.3 Beneficiary's Power of Enforcement. 4.3.1 If an Event of Default occurs and is continuing, Beneficiary shall be entitled, at its option and in its sole and absolute discretion, to prepare and record on its own behalf, or to deliver to Trustee for recording, if appropriate, written declaration of default and demand for sale andwritten notice of breach and election to sell (or other statutory notice) to cause the Mortgaged Property to be sold -to satisfy the obligations hereof, and in the case of delivery.to Trustee, Trustee shall cause said notice to be filed for record. 4.3.2 After the lapse of such time as may then be required by law following the recordation of said notice of breach and election to sell, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Mortgaged Property or any portion thereof at the time .and place fixed by it in said notice, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee may, for any cause it deems expedient, postpone the sale of all or any portion of said property until it shall be 14 LA11777398.9 completed, and, in every case, notice of postponement shall be given by public announcement thereof at the time and place last appointed for the sale. From time to time thereafter Trustee may postpone such sale by public announcement at the time fixed by the preceding postponement; provided that Trustee shall give Trustor notice of such postponement to the extent required by law. Trustee shall execute and deliver to the purchaser its deed, bill of sale, or other instrument conveying said property so sold, but without any covenant or warranty, express or implied. The recitals in such instrument of conveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Beneficiary, may bid at the sale. 4.3.3 After deducting all costs, fees and expenses of Trustee and of this Deed of Trust, including, without limitation, costs of evidence of title and reasonable attorneys' fees of Trustee or Beneficiary in connection with a sale, Trustee shall apply the proceeds of such sale to payment of all sums expended under the terms hereof not then repaid, then to the payment of all other sums then secured hereby, and the remainder, if any, to the person or persons legally entitled thereto. 4.3.4 If any Event of Default occurs and is continuing, Beneficiary may, to the extent permitted by law, either with or without entry or taking possession of the Mortgaged Property, and without regard to whether or not the indebtedness and other sums secured hereby shall be due and without prejudice to the right of Beneficiary thereafter to bring an action or proceeding to foreclose or any other action for any other Event of Default existing at the time such earlier action was commenced, proceed by any appropriate action or proceeding: (a) to enforce payment of the Secured Obligations, to the extent permitted by law, or the performance of any term hereof or any other right; (b) to foreclose this Deed of Trust in any manner provided by law for the foreclosure of mortgages or deeds of trust on real property and to sell, as an entirety or in separate lots or parcels, the Mortgaged Property or any portion thereof pursuant to the applicable law or under the judgment or decree of a court or courts of competent jurisdiction, and Beneficiary shall be entitled to recover in any such proceeding all costs and expenses incident thereto, including reasonable attorneys' fees in such amount as shall be awarded by the court; (c) to exercise any or all of the rights and remedies available to it under the Secured Obligation Provisions; and (d) to pursue any other remedy available to it. Beneficiary shall take action either by such proceedings or by the exercise of its powers with respect to entry or taking possession, or both, as Beneficiary may determine. 4.3.5 The remedies described in this section may be exercised with respect to all or any —portion of the UCC Collateral, either simultaneously with the sale of any real property encumbered hereby or independent thereof. Beneficiary shall at any time be permitted to proceed with respect to all or any portion of the UCC Collateral in any manner permitted by the UCC. Trustor agrees that Beneficiary's inclusion of all or any portion of the UCC Collateral in a sale or other remedy exercised with respect to the real property encumbered hereby, as permitted by the UCC, is a commercially reasonable disposition of such property. 4.3.6 Where the Mortgaged Property consists of real property and personal property, any reinstatement of the. Secured Obligations, following the occurrence of an Event of Default and an election by the Beneficiary to accelerate the maturity of the Secured Obligations, which is made by Trustor or any other person or entity permitted to exercise any right of 15 LAU 777398.9 reinstatement under Section 2924c of the California Civil Code or any successor statute, shall, in accordance with the terms of UCC Section 9-604, not prohibit the Beneficiary from conducting a sale or other disposition of any personal property or from otherwise proceeding against or continuing to proceed against any personal property in any manner permitted by the UCC, nor shall any such reinstatement invalidate, rescind or otherwise affect any sale, disposition or other proceeding held, conducted or instituted with respect to any personal property prior to such reinstatement. Any sums paid to Beneficiary, in effecting any reinstatement pursuant to Section 2924c of the California Civil Code, shall be applied to the Secured Obligations and to Beneficiary's and Trustee's reasonable costs and expenses in the manner required by Section 2924c. 4.4 Beneficiary's Right to Enter and Take Possession, Operate and Apply Income. 4.4.1 If an Event of Default occurs and is continuing, Trustor, upon demand of Beneficiary, shall forthwith surrender to Beneficiary the actual possession and, if and to the extent permitted by law, Beneficiary itself, or by such officers or agents as it may appoint, may enter and take possession of all of the Mortgaged Property, including the Tangible Collateral, without liability for trespass, damages or otherwise, and may exclude Trustor and its agents and employees wholly therefrom and may have joint access with Trustor to the books, papers and. accounts of Trustor. 4.4.2 If an Event of Default has occurred and is continuing and Trustor shall for any reason fail to surrender or deliver the Mortgaged Property or any part thereof after Beneficiary's demand, Beneficiary may obtain a judgment or decree conferring on Beneficiary or Trustee the right to immediate possession or requiring Trustor to deliver immediate possession of all or pail of such property to Beneficiary or Trustee, and Trustor hereby specifically consents to the entry of such judgment or decree. Trustor shall pay to Beneficiary and Trustee, upon demand, all of their respective costs and expenses of obtaining such judgment or decree and reasonable compensation to Beneficiary or Trustee, their attorneys and agents, and all such costs, expenses and compensation shall, until paid, be secured by the lien of this Deed of Trust. 4.4.3 Upon every such entering upon or taking of possession, Beneficiary or Trustee may hold, store, use, operate, manage and control the Mortgaged Property and conduct the business thereof, and, from time to time in its sole and absolute discretion and without being under any duty to so act: (a) make all necessary and proper maintenance, repairs, renewals and replacements theretoand thereon, and all necessary additions, betterments and improvements thereto and thereon, and purchase or otherwise acquire fixtures, personalty and other property in connection therewith; (b) insure or keep the Mortgaged Property insured; (c) manage and operate the Mortgaged Property and exercise all the rights and powers of Trustor in their name or otherwise with respect to the same; (d) enter into agreements with others to exercise the powers herein granted Beneficiary or Trustee; all as Beneficiary or Trustee from time to time may 16 LA\1777398.9 determine, and shall apply the monies so received by Beneficiary or Trustee in such priority as provided by the Secured Obligation Provisions to (i) the payment of interest and principal due and payable to the Beneficiary, (ii) the deposits for taxes and assessments and insurance premiums due, (iii) the cost of insurance, taxes, assessments and other proper charges upon the Mortgaged Property or any part thereof, (iv) the compensation, expenses and' disbursements of the agents, attorneys and other representatives of Beneficiary or Trustee as allowed under this Deed of Trust, and (v) any other charges or costs required to be paid by Trustor under the terms of the Secured Obligation Provisions; and (e) rent or sublet the Mortgaged Property or any portion thereof for any purpose permitted by this Deed of Trust. 4.4.4 Beneficiary or Trustee shall surrender possession of the Mortgaged Property to Trustor (a) as.may be required by law or court order, or (b) when all amounts under any of the terms of the Secured Obligation Provisions, including this Deed of Trust, shall have been paid current and all Events of Default have been cured or waived. The same right of taking possession, however, shall exist if any subsequent Event of Default shall occur.and be continuing. 4.5 Separate Sales. To the extent permitted by law or Governmental Rule, the Mortgaged Property may be sold in one or more parcels and in such manner and order as Trustee, in. its sole discretion, may elect, it being expressly understood and agreed that the right of sale arising out of any Event of Default shall not be exhausted by any one or more sales. 4.6 Waiver of AnDraisement, Moratorium, Valuation. Stay. Extension and Redemption Laws. Trustor agrees to the full extent pennitted by law that, if an Event of Default occurs and is continuing, neither Trustor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, moratorium, valuation, stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Deed of Trust or the absolute sale of the Mortgaged Property or any portion thereof or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereof, and Trustor for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may lawfully so do, the benefit of all such laws, and any and all right to have the assets comprising the Mortgaged Property marshalled upon any foreclosure of the lien hereof and agrees that Trustee or any court having jurisdiction to foreclose _. such.lien may sell the Mortgaged Property in part or as an entirety. 4.7 Receiver. If an Event of Default occurs and is continuing, Beneficiary, to the extent permitted by law, and without regard to the value, adequacy or occupancy of the security for the indebtedness and other sums secured hereby, shall be entitled as a matter of right if it so elects to the appointment of a receiver to enter upon and take possession ofthe Mortgaged Property and to collect all earnings, revenues and receipts and apply the same as the court may direct, and such receiver may be appointed by any court of competent jurisdiction upon j application by Beneficiary. To the extent permitted by law or Governmental Rule, Beneficiary may have a receiver appointed without notice to Trustor or any third party, and Beneficiary may waive any requirement that the receiver post a bond. To the extent pennitted by law or 17 LA\1777398.9 Governmental Rule, Beneficiary shall have the power to designate and select the Person who shall serve as the receiver and to negotiate all terms and conditions under which such receiver shall serve. To the extent permitted by law or Governmental Rule, any receiver appointed on Beneficiary's behalf may an Affiliate of Beneficiary. The reasonable fees, costs and expenses, including receiver's fees, reasonable attorneys' fees, costs and agents' compensation, incurred pursuant to the powers herein contained shall be secured by this Deed of Trust. The right to enter and take possession of and to manage and operate the Mortgaged Property and to collect all earnings, revenues and receipts, whether by a'receiver or otherwise, shall be cumulative to any other right or remedy available to Beneficiary under this Deed of Trust, the other Secured Obligation Provisions or otherwise available to Beneficiary and may be exercised concurrently therewith or independently thereof, but such rights shall be exercised in a manner which is otherwise in accordance with and consistent with the Secured Obligation Provisions. Beneficiary shall be liable to account only for such earnings, revenues and receipts (including, without limitation, security deposits) actually received by Beneficiary, whether received pursuant to this section or any other provision hereof. Notwithstanding the appointment of any receiver or other custodian, Beneficiary shall be entitled as pledgee to the possession and control of any cash, deposits, or instruments at the time held by, or payable or deliverable under the terms of this Deed of Trust to, Beneficiary. 4.8 Suits to Protect the Mortgaged Property. Beneficiary shall have the power and authority to institute and maintain any suits and proceedings as Beneficiary, in its sole and absolute discretion, may deem advisable (a) to prevent any impairment of the Mortgaged Property by any acts which may be unlawful or in violation of this Deed of Trust, (b) to preserve or protect its interest in the Mortgaged Property, or (c) to restrain the enforcement of or compliance with any legislation or other Legal Requirement that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Beneficiary's interest. 4.9 Proofs of Claim. In the case of any receivership, insolvency, Bankruptcy Event, reorganization, arrangement, adjustment, composition or other judicial proceedings affecting Trustor, any Affiliate or any guarantor, co -maker or endorser of any of Trustor's obligations, its creditors or its property, Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim or other documents as it may deem be necessary or advisable in order to have its claims allowed in such proceedings for the entire amount due and payable by Trustor under the Secured Obligation Provisions, at the date of the institution of such proceedings, and for any additional amounts which may become due and payable by Trustor after such date. . 4.10 Trustor to Pay Amounts Secured Hereby on Any Default in Payment; Application of Monies byBeneficiary. 4.10.1 In case of a foreclosure sale. of all or any part of the Mortgaged Property and of the application of the proceeds of sale to the payment of the sums secured hereby, to the extent permitted by law, and subject to the provisions of Section 6.14 below, Beneficiary shall be entitled to enforce payment from Trustor of any additional amounts then remaining due and unpaid and to recover judgment against Trustor for any portion thereof remaining unpaid. 18 LA11777398.9 4.10.2 Trustor hereby agrees, to the extent permitted by law, that no recovery of any such judgment by Beneficiary or other action by Beneficiary and no attachment or levy of any execution upon any of the Mortgaged Property or any other property shall in any way affect the Lien and security interest of this Deed of Trust upon the Mortgaged Property or any part thereof or any Lien, rights, powers or remedies of Beneficiary hereunder, but such Lien, rights, powers and remedies shall continue unimpaired as before. 4.10.3 Any monies collected or received by Beneficiary under this section shall be applied in accordance with the terms of the Secured Obligation Provisions. 4.11 Delay or Omission; No Waiver. No delay or omission of Beneficiary to exercise any right, power or remedy upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to waive any such Event of Default or to constitute acquiescence therein'. Every right, power and remedy given to Beneficiary whether contained herein or in the other Secured Obligation Provisions or otherwise available to Beneficiary may be exercised from time to time and as often as may be deemed expedient by Beneficiary. 4.12 No Waiver of One Default to Affect Another. No waiver of any Event of Default hereunder shall extend to or affect any subsequent or any other Event of Default then existing or impair any rights; powers or remedies consequent thereon. If Beneficiary (a) grants forbearance or an extension of time for the payment of any sums secured hereby, (b) takes other or additional i security for the payment thereof, (c) waives or does not exercise any right granted in this Deed of Trust or any other Secured Obligation Provision, (d) releases any part of the Mortgaged Property from the lien or security interest of this Deed of Trustor any other instrument securing the Secured Obligations, (e) consents to the filing of any map, plat or replat of the Real Property or any part thereof, (f) consents to the granting of any easement on the Real Property, or (g) makes or consents to any agreement changing the terms of this Deed of Trust or any other Secured Obligation Provision subordinating the lien or any charge hereof, then no such act or omission shall release, discharge, modify, change or affect the liability under this Deed of Trust or any other Secured Obligation Provision or otherwise of Trustor, or any subsequent purchaser of the Mortgaged Property or any part thereof or any maker, co-signer, surety or guarantor, with respect to any other matters not addressed by such act or omission. No such act or omission shall preclude Beneficiary from exercising any right; power or privilege herein granted or intended to be granted in case of any Event of Default then existing or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by Beneficiary, shall the lien or security interest of this Deed of Trust be altered thereby, except to the extent expressly provided in such acts or omissions. In the event of the, sale or transfer by operation of law or otherwise of all or any part of the Mortgaged Property, Beneficiary, without notice to any person, firm or corporation, is hereby authorized and empowered to deal with any such vendee or transferee with reference to the Mortgaged Property or the indebtedness' secured hereby, or with reference to any of the terms or conditions hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging j any of the liabilities or`undertakings hereunder, or waiving its right to declare such sale or transfer an Event of Default as provided herein. Notwithstanding anything to the contrary contained in this Deed of Trust or any other Secured Obligation Provision, (i) in the case of any non -monetary Event of Default, Beneficiary may continue to accept payments due hereunder' without thereby waiving the existence of such or any other Event of Default and (ii) in the case 19 ' LA\1777398.9 of any monetary Event of Default, Beneficiary may accept partial payments of any sums due hereunder without thereby waiving the existence of such Event of Default if the partial payment is not sufficient to completely cure such Event of Default. 4.13 Discontinuance of Proceedings; Position of Parties Restored. If Beneficiary shall have proceeded to enforce any right or remedy under this Deed of Trust by foreclosure, entry of judgment or otherwise and such proceedings shall have been discontinued or abandoned for any reason, or such proceedings shall have resulted in a final determination adverse to Beneficiary, then in every such case Trustor and Beneficiary shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Beneficiary shall continue as if no such proceedings had occurred or had been taken. 4.14 Remedies Cumulative. Subject to the provisions of Section 6.14 hereof, no right, power or remedy, including without limitation remedies. with respect to any security for the Secured Obligations, conferred upon or reserved to Beneficiary by this Deed of Trust or any other Secured Obligation Provision is exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or under any other Secured Obligation Provision, now or hereafter existing at law, in equity or by statute, and Beneficiary shall be entitled to resort to such rights, powers, remedies or security as, Beneficiary shall in its sole and absolute discretion deem advisable. 4.15 Interest After Event of Default. If an Event of Default shall have occurred and is continuing, all sums outstanding and unpaid under the Secured Obligation Provisions, including this Deed of Trust, shall bear interest at the applicable interest rate therefor under the applicable Secured Obligation Provision until such Event of Default has been cured. Trustor's obligation to pay such interest shall be secured by this Deed of Trust. 4.16 Foreclosure; Expenses of Litigation. If Trustee forecloses, reasonable attorneys' fees, costs and expenses for services in the supervision of said foreclosure proceeding shall be allowed to the Trustee and Beneficiary as part of the foreclosure costs. In the event of foreclosure of the lien hereof, there shall be allowed and included as additional indebtedness all reasonable expenditures, fees, costs and expenses which, may be paid or incurred by or on behalf of Beneficiary for attorneys' fees, appraisers' fees, outlays for documentary and expert evidence, stenographers' charges, publication costs, and costs (which may be estimated as to items to be expended after foreclosure sale or entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies and guarantees, and similar data and assurances with respect to title as Beneficiary may deem reasonably necessary either to prosecute such suit or to evidence to a bidder at any sale which may be had pursuant to such decree the true condition of the title to or the value of the Mortgaged Property or any portion thereof. All reasonable expenditures, fees, costs and expenses of the nature in this section mentioned, and such reasonable expenses, costs and fees as may be incurred in the protection of the Mortgaged Property and the maintenance of the lien and security interest of this Deed of Trust, including the reasonable fees of any attorney engaged by Beneficiary in any litigation or proceeding affecting this Deed of Trust.or any other Secured Obligation Provision, the Mortgaged Property or any portion thereof, including, without limitation, civil, probate, appellate and bankruptcy proceedings, or in preparation for the commencement or defense of any proceeding or threatened 20 LA11777398.9 . i J suit or proceeding, shall be immediately due and payable by Trustor, with interest thereon at the interest rate under Section 4.15 above, and shall be secured by this Deed of Trust. Trustee waives its right to any statutory fee in connection with any judicial or nonjudicial foreclosure of the lien hereof and agrees to accept a reasonable fee for such services. 4.17 Deficiency Judgments. Subject to the provisions of Section 6.14, if after foreclosure of this Deed of Trust or Trustee's sale hereunder there shall remain any deficiency with respect to any amounts payable under the Secured Obligation Provisions, including hereunder, or any amounts secured hereby, and Beneficiary shall institute any proceedings to recover such deficiency or deficiencies, then, to the extent permitted by law, all such amounts that remain payable shall continue to bear interest at the interest rate applicable thereto under the Secured Obligation Provisions applicable thereto. Subject to the provisions of Section 6.14, Trustor waives any defense to Beneficiary's recovery against Trustor of any deficiency after any foreclosure sale of the Mortgaged Property. Subject to the provisions of Section 6.14, to the extent permitted bylaw, Trustor expressly waives any defense or benefits that may be derived from any statute granting Trustor any defense to any such recovery by Beneficiary. Subject to the provisions of Section 6.14, in addition, Beneficiary and Trustee shall be entitled to recovery of all of their reasonable costs and expenditures (including without limitation any court imposed costs) in connection with such proceedings, including their reasonable attorneys'. fees, appraisal fees and the other costs, fees and expenditures referred to in Section 4.16 above. This provision shall survive any foreclosure or sale of the Mortgaged Property or any portion thereof and/or the extinguishment of the lien hereof. 4.18 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY LAW, BENEFICIARY AND TRUSTOR EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS DEED OF TRUST. ANY SUCH DISPUTES SHALL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. 4.19 Exculpation of Beneficiary. The acceptance by Beneficiary of the assignment contained herein with all of the rights, powers, privileges and authority created hereby shall not, prior to entry upon and taking possession :of the Mortgaged Property by Beneficiary, be deemed or construed to make Beneficiary a "mortgagee in possession" nor thereafter or at any time or in any event obligate Beneficiary to appear in or defend any action or proceeding relating to the Mortgaged Property, nor shall Beneficiary, prior to such entry and taking, be liable in any Way. ; for any injuryor damage to person or property sustained by any Person in or about the Mortgaged Property. ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER PROVISIONS RELATING TO TRUSTEE Notwithstanding anything to the contrary in this Deed of Trust, Trustor and Beneficiary agree as follows. 21 LA11777398.9 5.1 Exercise of Remedies by Trustee. To the extent that this Deed of Trust and applicable law authorizes or empowers Beneficiary to exercise any remedies set forth in Article 3 hereof or otherwise, or perform any acts in connection therewith, Trustee (but not to the exclusion of Beneficiary unless so required under applicable law) shall have the power to exercise any or all such remedies, and to perform any acts provided for in this Deed of Trust in connection therewith, all for the benefit of Beneficiary and on Beneficiary's behalf in accordance with applicable law. In connection therewith, Trustee: (a) shall not exercise, or waive the exercise of, any Beneficiary's remedies (other than any rights of Trustee to any indemnity or reimbursement), except at Beneficiary's request, and (b) shall exercise, or waive the exercise of, any or all of Beneficiary's remedies at Beneficiary's request, and in accordance with Beneficiary's directions as to the manner of such exercise or waiver. Trustee may, however, decline to follow Beneficiary's request or direction if Trustee shall be advised by counsel that the action or proceeding, or manner thereof, so directed may not lawfully be taken or waived. 5.2 Rights and Privileges of Trustee. To the extent that this Deed of Trust requires Trustor to indemnify Beneficiary or reimburse Beneficiary for any expenditures Beneficiary may incur, Trustee shall be entitled to the same indemnity and the same rights to reimbursement of. expenses as Beneficiary, subject to such limitations and conditions as would apply in the case of Beneficiary. To the extent that this Deed of Trust negates or limits Beneficiary's liability as to any matter, Trustee shall be entitled to the same negation or limitation of liability. To the extent that Trustor, pursuant to this Deed of Trust, appoints Beneficiary as Trustor's attorney in fact for any purpose, Beneficiary or (when so instructed by Beneficiary) Trustee shall be entitled to act on Trustor's behalf without joinder or confirmation by the other. 5.3 Resignation or Replacement of Trustee. Trustee may resign by an instrument in writing addressed to Beneficiary, and Trustee may be removed at any time with or without cause (i.e., in Beneficiary's sole and absolute discretion) by an instrument in writing executed by Beneficiary. In case of the death, resignation, removal or disqualification of Trustee or if for any reason Beneficiary shall deem it desirable to appoint a substitute, successor or replacement Trustee to act instead of Trustee originally named (or in place of any substitute, successor or replacement Trustee), then Beneficiary shall have the right and is hereby authorized and empowered to appoint a successor, substitute or replacement Trustee, and, if preferred, several substitute trustees in succession, without any formality other than appointment and designation in writing executed by Beneficiary, which instrument shall be recorded if required by the law of the State of California. The law of the State of California shall govern the qualifications of any Trustee. The authority conferred upon Trustee by this Deed of Trust shall automatically extend to any and all other successor, substitute and replacement Trustee(s) successively until the Secured Obligations Termination Date or the Mortgaged Property has been sold hereunder or released in accordance with the provisions of the Secured Obligation Provisions. Beneficiary's written appointment and designation of any Trustee shall be full evidence of Beneficiary's right and authority to make the same and of all facts therein recited. No confirmation, authorization, approval or other action by Trustor shall be required in connection with any resignation or other replacement of Trustee. 5.4 Authority of Beneficiary. If Beneficiary is a corporation, state banking corporation or a national banking association, and the instrument of appointment of any successor or replacement Trustee is executed on Beneficiary's behalf by an officer of such 22 LA117773989 corporation, state banking corporation or national banking association, then such appointment may executed by any authorized officer or agent of Beneficiary,and such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of Beneficiary. 5.5 Effect of Appointment of Successor Trustee. Upon the appointment and designation of any successor, substitute or replacement Trustee, Trustee's entire estate and title in the Mortgaged Property shall vest in the designated successor, substitute or replacement Trustee. Such successor, substitute or replacement Trustee shall thereupon succeed to and shall hold, possess' and execute all the rights, powers, privileges,' immunities and duties herein conferred upon Trustee. All references herein to Trustee shall be deemed to refer to Trustee (including any successor or substitute appointed and designated as herein provided) from time to time acting hereunder. 5.6 Confirmation of Transfer and Succession.. Any new Trustee appointed pursuant to any of the provisions hereof shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of his predecessor in the rights hereunder with like effect as if originally named as Trustee herein. Nevertheless, upon the written request of Beneficiary or of any successor, substitute or replacement Trustee, any former Trustee ceasing to act shall execute and deliver an instrument transferring to such successor, substitute or replacement Trustee all of the right, title, estate and interest in the Mortgaged Property of Trustee so ceasing to act, together with all the rights, powers, privileges, immunities and duties herein conferred upon Trustee, and shall duly assign, transfer and deliver all properties and moneys held by said Trustee hereunder to said successor, substitute or replacement Trustee. 5.7 Exculpation. Trustee shall not be liable for any error of judgment or act done by Trustee in good faith, or otherwise be responsible or accountable under any circumstances whatsoever, except for Trustee's bad faith, gross negligence, willful misconduct or knowing violation of law. Trustee shall not be personally liable in case of entry by it, or anyone entering by virtue of the powers herein granted it, upon the Mortgaged Property for debts contracted or liability or damages incurred in the management or operation of the Mortgaged Property. Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by it hereunder believed by it in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received but need not be segregated in any manner from. any other moneys (except to the extent required by law). Trustee shall be under no liability for interest on any moneys received by it hereunder. 5.8 Endorsement and Execution of Documents. Upon Beneficiary's written request, Trustee shall, without liability or notice to Trustor, execute, consent to, or join in any instrument or agreement in connection with or necessary to effectuate the purposes of the Secured ` Obligation Provisions. Trustor hereby irrevocably designates Trustee as its attorney in fact to execute, acknowledge and deliver, on Trustor's behalf and in Trustor's name, all instruments or agreements necessary to implement any provision(s) of this Deed of Trust or to further perfect the lien created by this Deed of Trust on the Mortgaged Property. This power of attorney shall be deemed to be coupled with an interest and shall survive any disability of Trustor. 23 1.A11777398.9 5.9 Multiple Trustees. If Beneficiary appoints multiple trustees, then any Trustee, individually, may exercise all powers granted to Trustee under this instrument without the need for action by any other Trustee(s). 5.10 No Required Action. Trustee shall not be required to take any action under this Deed of Trust or to institute, appear in or defend any action, suit or other proceeding in connection therewith where in its opinion such action will be likely to involve it in expense or liability, unless requested so to do by a written instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is tendered security and indemnity satisfactory to it against any and all costs, expense and liabilities arising therefrom. Trustee shall not be responsible for the execution, acknowledgment or validity of the Secured Obligation Provisions, or. for the proper authorization thereof, or for the sufficiency of the lien and security interest purported to be created hereby, and makes no representation in respect thereof or in respect of the rights, remedies and recourses of Beneficiary. 5.11 Terms of Trustee's Acceptance. Trustee accepts the trust created by this Deed of Trust upon the following terms and conditions: (a) Trustee may exercise any of its powers through appointment of attomey(s) in fact or agents._ (b) Trustee shall be under no obligation to take any action upon any Event of Default unless furnished security or indemnity, in form satisfactory to Trustee, against costs, expenses, and liabilities that Trustee may incur. (c) Trustor shall reimburse Trustee; as part of the Secured Obligations secured hereunder, for all reasonable disbursements and expenses (including reasonable legal fees and expenses) incurred by reason of or arising from an Event of Default and as provided for in this Deed of Trust, including any of the foregoing incurred in Trustee's administering and executing the trust created by this Deed of Trust and performing Trustee's duties and exercising Trustee's powers under this Deed of Trust. ARTICLE 6 GENERAL 6.1. Discharge. Upon the Secured Obligations Termination Date, (a) this Deed of Trust and the lien and security interest created hereby shall be of no further force and effect, (b) Trustor shall be released from the covenants, agreements and obligations of Trustor contained in this Deed of Trust, and (c) all right, title and interest in and to the Mortgaged Property shall revert to Trustor. Beneficiary and Trustee, at the request and the expense of Trustor, shall promptly execute a deed of reconveyance and such other documents as may be reasonably requested by Trustor to evidence the discharge and satisfaction of this Deed of Trust and the release of Trustor from its obligations hereunder. 6.2 No Waiver. The exercise of the privileges granted in this Deed of Trust or in any other agreement to perform Trustor's obligations under the agreements which constitute the Mortgaged Property shall in no event be considered or constitute a waiver of any right which Beneficiary may have at any time, after an Event of Default shall have occurred and be 24 LA\1777398.9 continuing, to declare the Secured Obligations to be immediately due and payable. No delay or omission to exercise any right, remedy or power accruing upon any default shall impair any such right, remedy or power or shall be construed to be a waiver of any such default or acquiescence therein, and every such right, remedy and power maybe exercised from time to time and as often as may be deemed expedient. 6.3 Extension, Rearrangement or Renewal of Secured Obligations. It is expressly agreed that any of the Secured Obligations at any time secured hereby may be from time to time extended for any period, or with the consent of Trustor rearranged or renewed, and that any part of the security herein described, or any other security for the Secured Obligations, may be waived or released, without altering, varying or diminishing the force, effect or lien or security interest of this Deed of Trust. The lien and security interest granted by this Deed of Trust shall continue as a prior lien and security interest on all of the Mortgaged Property not expressly so released until the date the Secured Obligations have terminated. No other security now existing or hereafter taken to secure the payment of the Secured Obligations or any part thereof or the performance of any obligation or liability of Trustor whatever shall in any manner impair or affect the security given by this Deed of Trust. All security for the payment of the Secured Obligations or any part thereof and the performance of any obligation or liability shall be taken, considered and held as cumulative. 6.4 Forcible Detainer. Trustor agrees for itself and all Persons claiming by, through or under it that, subsequent to foreclosure hereunder in accordance with this Deed of Trust and applicable law if Trustor shall hold possession of the Mortgaged Property or any part thereof, Trustor or the Persons so holding possession shall be guilty of trespass, and any such Person (including Trustor) failing or refusing to surrender possession upon demand shall be (a) guilty of forcible detainer, (b) liable to Beneficiary or any purchaser in foreclosure, as applicable, for reasonable rental on said premises, and (c) subject to eviction and removal in accordance with law. 6.5 Waiver of Stay or Extension. To the extent permitted to be waived by law, after an Event of Default and during the continuance thereof, Trustor shall not at anytime insist upon or plead or in any manner, whatever claim the benefit or advantage of any stay, extension or moratorium law now or at any hereafter in force in any locality where the Mortgaged Property or any part thereof may or shall be situated, nor shall Trustor claim any benefit or advantage from any law now or hereafter in force providing for the valuation or appraisement of the Mortgaged Property or any part thereof prior to any sale thereof to be made pursuant to any provision of this Deed of Trust or to a decree of any court of competent jurisdiction,;:nor after any such sale shall Trustor claim or exercise any right conferred by any law now or at any time hereafter in force to redeem the Mortgaged Property so sold or any part thereof. Trustor hereby expressly waives, with respect to the period after an Event of Default and during the continuance thereof, all benefit or advantage of any such law or laws and the appraisement ,of the Mortgaged Property or any part thereof and covenants that Trustor shall not hinder or delay the execution of any power herein granted and delegated to Beneficiary but that Trustor shall permit the execution of every such power as though no such law had been made. 6.6 Notices. Except where certified or registered mail notice is required by applicable law, any notice to Trustor or Beneficiary required or permitted hereunder shall be deemed to be 25 LA\1777398.9 given when given in the manner prescribed in the PPTA. All notices to Trustee required or permitted hereunder shall be deemed given when given in the manner prescribed in the PPTA to the following address: First American Title Insurance Company Attn: National Default Services One First American Way Santa Ana, CA 92707 6.7 Severability. All rights, powers and.remedies provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable law and are intended to be limited to the extent necessary so that they will not render this Deed of Trust invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. In the event any term or provision contained in this Deed of Trust is in conflict, or may hereafter be held to be in conflict, (a) with applicable law governing such term or provision as set forth in Section 6.9, (b) with the laws of the United States of America, (c) or as otherwise set forth herein, then this Deed of Trust shall be affected only as to such particular term or provision and shall in all other respects remain in full force and effect. 6.8 Application of Payments. In the event that any part of the Secured Obligations cannot lawfully be secured hereby, or in the event that the lien and security interest hereof cannot be lawfidly enforced to pay any part of the Secured Obligations, or in the event that the lien or security interest created by this Deed of Trust shall be invalid or unenforceable as to any part of the Secured Obligations, then all payments on the Secured Obligations shall be deemed to have been first applied to the complete payment and liquidation of that part of the Secured Obligations which is not secured by this Deed of Trust, and the unsecured portion of the Secured Obligations shall be completely paid and liquidated prior to the payment and liquidation of the remaining secured portion of the Secured Obligations. 6.9 Governing Law. THIS DEED OF TRUST IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. 6.10 Entire Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. AS OF THE DATE HEREOF, THERE ARE NO UNWRITTEN`ORAL AGREEMENTS BETWEEN THE PARTIES. 6.11 Amendments. This Deed of Trust may be amended, supplemented or otherwise modified only by an instrument in writing signed by Trustor and Beneficiary. 6.12 Successors and Assigns. All terms of this Deed of Trust shall run with the land and bind each of Trustor and Beneficiary and their respective successors and assigns, and all Persons claiming under or through Trustor or Beneficiary, as the case may be, or any such successor or assign, and shall inure to the benefit of Beneficiary and Trustor and their respective successors and assigns. 26 LA\1777398.9 6.13 Renewal, Etc. Beneficiary may at any time and from time to time (a) renew or extend this Deed of Trust, (b) alter or modify the same in any way, (c) waive any of the terms, covenants or conditions hereof in whole or in part, (d) release any portion of the Mortgaged Property or any other security, or (e) grant such extensions and indulgences in relation to the Secured Obligations as Beneficiary may determine, in each case without the consent of any junior lienor or encumbrancer and without any obligation to give notice of any kind thereto and without in any manner affecting the priority of the lien and security interest hereof on any part of the Mortgaged Property; provided that nothing in this Section 6.13 shall grant Beneficiary the right to alter or modify the Deed of Trust without the consent of the Trustor unless otherwise specifically permitted in this Deed of Trust. 6.14 Non -Recourse. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS DEED OF TRUST OR ANY OTHER SECURED OBLIGATION PROVISION, THE OBLIGATIONS UNDER THIS DEED OF TRUST ARE NON -RECOURSE OBLIGATIONS OF THE TRUSTOR. THE ONLY RECOURSE A SECURED PARTY WILL HAVE WITH RESPECT TO THE OBLIGATIONS UNDER THIS DEED OF TRUST WILL BE ENFORCEMENT OF ITS RIGHTS AGAINST THE COLLATERAL PURSUANT TO THIS DEED OF TRUST. NOTHING IN THIS SECTION'6.14 SHALL BE READ TO LIMIT THE RECOURSE UNDER THE PPTA OR THE OTHER RELATED DOCUMENTS. 6.15 Severability and Compliance With Usury Law. The Secured Obligation Provisions are intended to be perfonned in accordance with, and only to the extent permitted by, all applicable Governmental Rules and Legal Requirements. If any provision of any of the Secured Obligation Provisions or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, then neither the remainder of the instrument in which such provision is contained, nor the application of such provision to other persons or circumstances, nor the other instruments referred to hereinabove, shall be affected thereby, but rather shall be enforceable to the greatest extent permitted by law. It is expressly stipulated and agreed to be the intent of Trustor and Beneficiary at all times to comply with applicable law governing the maximum rate or amount of interest payable on or in connection with the Secured Obligations (or applicable United States federal law to the extent that it permits Beneficiary to contract for, charge, take, reserve or receive a greater amount of interest than under applicable law). If the applicable law is ever judicially interpreted so as to render usurious any amount called for under the Secured Obligation Provisions or contracted for, charged, taken, reserved or received with respect to the extension of credit evidenced by the Secured Obligation. Provisions, or if acceleration of the maturity of the Secured Obligations or if any prepayment by Trustor results in Trustor having paid any interest in excess of that pennitted,by law, then it is Trustor's and Beneficiary's express intent that (a) all excess amounts theretofore collected by Beneficiary be credited on the principal balance due under the Secured Obligation Provisions (or, if the Secured Obligation Provisions have been or would thereby be paid in full, refunded to Trustor), (b) the provisions of the Secured Obligation Provisions immediately be deemed reformed, and (c) the amounts thereafter collectible thereunder reduced, in each case without the necessity of the execution of any new document. and so as to comply with the applicable law and permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate maturity of Secured. Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Beneficiary does not intend to collect any unearned interest in the event of acceleration. All sums .paid or agreed 27 LA\1777398.9 to be paid to Beneficiary for the use, forbearance or detention of the Secured Obligations shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Secured Obligations until the Secured Obligations are repaid in full so that the rate or, amount of interest on account of the Secured Obligations does not.exceed the applicable usury ceiling, 6.16 Waiver. To the extent permitted by law, and with respect to the period after an Event of Default and during the continuance thereof, Trustor waives and releases any rights or defenses which Trustor might otherwise have (i) under California Code of Civil Procedures Sections 726, 725a, 580a, 580b, 580c or 580d and California Civil Code Section 2889, which . statutes might otherwise limit or condition Beneficiary's exercise of certain of Beneficiary's rights and remedies in connection with the enforcement of obligations secured by a lien on real property or (ii) under any laws now existing or hereafter enacted providing for any appraisal before sale of a portion of the Mortgaged Property and (iii) to all rights of redemption, valuation, appraisal, stay of execution, notice of election to mature or to declare due the Secured_ Obligations and marshalling in the event of the foreclosure of the liens created under this Deed of Trust or the exercise of the power of sale granted hereunder. To the extent, if any, which such laws may be applicable and to the extent permitted by law, Trustor waives and releases any right or defense which Trustor might otherwise have under such provisions and under any other law of any applicable jurisdiction which might limit or restrict the effectiveness or scope of any of Trustor's waivers or releases hereunder. 6.17 Release of Collateral. 6.17.1 Notwithstanding any provision herein to the contrary, the Mortgaged Property or any part thereof shall be released from the security interest created by this Deed of Trust at any time or from time to time upon the request of the Trustor; provided that the requirements therefor of the Secured Obligation Provisions have been satisfied and/or the PPTA has expired or terminated (other than a termination resulting from a default by Trustor thereunder). Upon satisfaction of such requirements or such expiration or termination of the PPTA, a duly authorized officer of the Beneficiary shall instruct the Trustee to promptly execute, deliver and acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of any Mortgaged Property permitted to be released pursuant to this Deed of Trust. 6.17.2 The Beneficiary may instruct the Trustee to release Mortgaged Property from the security interest created hereunder upon the sale or disposition of such Mortgaged Property pursuant to the Beneficiary's powers, rights and duties with respect to remedies provided herein. 6.18 Time of the Essence. Trustor acknowledges that time is of the essence in performing all of Trustor's obligations set forth herein. 6.19 Counterpart Execution. This Deed of Trust may be executed by the parties hereto in any number of counterparts (and by each of the parties hereto on separate counterparts), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument: 28 LA'S. f 77739R.9 6.20 Request for Notice. Pursuant to California Government Code § 27321.5, Trustor hereby requests that a copy of any notice of default and notice of sale as may be required bylaw be mailed to Trustor at its address hereinabove stated. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 29 LA\1777398,9 IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be. duly executed and delivered as of the day and year first above written. BEOWULF (VERNON) POWER LLC, a Delaware limited liability company Name: Title: LA\1777398.9 STATE OF ) ) ss COUNTY OF ) On 2007 before me, , Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. > Witness my hand and official seal. Notary Public, State of My Commission Expires: Printed Name of Notary LA\1777398.9 EXHIBIT A DESCRIPTION OF SITE LAU 777398.9 A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST NORTHERLY CORNER OF SAID LOT 7, SAID CORNER ALSO BEING THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 367.83 FEET, A RADIAL LINE PASSING THROUGH SAID CORNER BEAR SOUTH 58°03'33 WEST; . THENCE SOUTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 59`37'38" AN ARC DISTANCE OF 382.79 FEET; THENCE NORTH 88°25'55 EAST 323.79 FEET ALONG THE NORTHERLY LINE OF SAID LOT 7 TO A POINT ON THE SOUTHERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF THE LOS ANGELES JUNCTION RAILROAD RIGHT-OF-WAY AS SHOWN ON LOS ANGELES COUNTY FIELD MAP NUMBER 10287 PAGE A3, RECORDS OF SAID COUNT, SAID POINT ALSO BEING THE BEGINNING OF A CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 906.21 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL. ANGLE OF 4°45'51" AN ARC DISTANCE OF 75.35 FEET TO THE BEGINNING OF A COMPOUND CURVE HAVING A RADIUS OF 294.44 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13`28'39" AN ARC DISTANCE OF 69.26 FEET TO A POINT ON THE EASTERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF SOTO STREET AS SHOWN ON SAID LOS ANGELES COUNTY FIELD MAP; THENCE SOUTH 1"37'37" EAST 186.27 FEET ALONG SAID EASTERLY LINE; THENCE SOUTH 88'10'26" WEST 33.20 FEET; THENCE NORTH 01'49'34" WEST 6.00 FEET; THENCE SOUTH 88"10'26 WEST 6.00 FEET; THENCE SOUTH 01°49'34" EAST 6.00 FEET; THENCE SOUTH 88"10'26" WEST 439.07 FEET; THENCE NORTH 01"27'57" WEST 115.24 FEET; THENCE SOUTH 89'10'17" WEST 193.60 FEET; THENCE NORTH 02°51'27". WEST 42.65 FEET; THENCE NORTH 87'47'00" EAST 11.55 FEET; THENCE THENCE NORTH 01"54'17" WEST 24.22 FEET; THENCE SOUTH 87°28'16" WEST 10.26 FEET; THENCE NORTH 01 °06'15" WEST 13.30 FEET; THENCE SOUTH 88°48'42" WEST 81.59 FEET; THENCE SOUTH 01"26'34" EAST 79.61 FEET; THENCE SOUTH 89'10'17" .WEST 37.82 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT 7; THENCE NORTH 00°09'03" WEST 267.99 FEET ALONG SAID WESTERLY LINE TO THE POINT OF BEGINNING. CONTAINING 3.10 ACRES MORE OR LESS. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. ROSELL EXP. 9-30-08 No. 6281 EXHIBIT B DESCRIPTION OF EASEMENTS LAU 777398.9 A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WEST LINE OF SAID LOT 7, SAID POINT BEING NORTH 00`09'03" WEST 194.65 FROM THE SOUTHWESTERLY CORNER OF SAID LOT 7, THENCE NORTH 88°22'12" EAST 238.52 FEET; THENCE SOUTH 01°37'48" EAST 18.06 FEET; THENCE NORTH 88'22'12" EAST 42.43 FEET; THENCE SOUTH 01°23'22" EAST 176.85 FEET TO A POINT ON .THE SOUTHERLY LINE OF SAID LOT 7; THENCE NORTH 88°26'12" EAST 32.59 FEET ALONG SAID SOUTHERLY LINE; THENCE NORTH 01"27'57" WEST 211.35 FEET; THENCE SOUTH 89"10'17" WEST 312.89 FEET TO A POINT ON SAID WESTERLY LINE; THENCE SOUTH 00°09'03" EAST 20.76 FEET ALONG SAID EASTERLY LINE TO THE POINT .OF BEGINNING. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. ROSELL. EXP. 9-30-08 ,No. 6281, A 10' WIDE STRIP OF LAND BEING A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER :MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, THE CENTERLINE IS DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WEST LINE OF SAID LOT 7, SAID POINT BEING NORTH 00'09'03" WEST 245.99 FROM THE SOUTHWESTERLY CORNER OF SAID LOT 7, THENCE NORTH 88`36'21" EAST 117.81 FEET TO THE POINT OF TERMINUS. THE SIDELINES OF SAID 10' STRIP OF LAND, SHALL BE SHORTENED OR PROLONGATED SO AS TO TERMINATE WESTERLY AT THE WESTERLY LINE OF SAID LOT 7 AND EASTERLY AT A LINE THAT PASSES THROUGH SAID POINT OF TERMINUS BEARING SOUTH 02°51'27" EAST. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T, ROSELL EXP. 9-30-09 No. 6281 EXHIBIT C FORM OF LIEN SUBORDINATION [ SEE EXHIBIT D TO THE PSA ] LA'•,1777398.9 EXHIBIT E CONSENT TO ASSIGNMENT (PPTA) This CONSENT TO ASSIGNMENT (PPTA) ("Consent") is entered into as of [ 1 200_ among the City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter ("Vernon"), [PURCHASER], a [ ] (the "Assi ` nor"), and [LENDER], as Collateral Agent for the Secured Parties defined in the Credit Agreement referred to below (the "Assignee"). RECITALS WHEREAS, pursuant to the Power Purchase Agreement made as of the date hereof between the Assignor and Vernon (the "Assigned Agreement"), Vernon has agreed to purchase certain products; WHEREAS, pursuant to a Security Agreement dated as of the date hereof (the "Security Agreement"), the Assignor has granted to the Assignee alien on and a security interest in, to and under all of its right, title and interest in the Assigned Agreement, as collateral security for the Assignor's obligations under that certain [Credit Agreement]' dated as of the date hereof and the related financing documents (the "Credit Agreement" and collectively, the "Financing Documents"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: Section 1. Definitions. Any capitalized term used but not defined herein shall have the meaning specified for such term in the Assigned Agreement, except that the terms "Obligations", "Secured Parties" and "Lender" shall have the meanings specified for such terms in the Credit Agreement as it exists on the date hereof and the term "Seller Subordinate Deed of Trust" shall have the meaning set forth in the PSA. Section 2. Consent to Assignment. (a) Under the terms and conditions set forth in this Consent, Vernon hereby consents to: - - - (i) the assignment by the Assignor of all its right, title and interest in, to and under the Assigned Agreement to the Assignee, as collateral security for the obligations as and to the extent provided in the Security Agreement; and (ii) the transfer ' of the Assigned Agreement to any Qualified Person (including any Qualified Person Controlled by the Secured Parties) in connection with the Assignee's or any successor transferee's exercise of its rights and remedies under the Credit Agreement and Financing Documents following the occurrence of an event of default by the Assignor under the Credit Agreement, including any public or private sale or any deed in lieu of ' Provisions of this Consent may need to be conformed as necessary to the type of financing. For example, a bond deal may refer instead to an Indenture. LA\1760417.5 1 foreclosure, and including any transfer from a Qualified Person that is Controlled by the Secured Parties to another Qualified Person. Such Qualified Person shall be the "Seller" under, and shall be entitled to all of the benefits of, the Assigned Agreement. "Control" shall mean, with respect to any Person, a direct or indirect interest in at least half of the ownership interest having ordinary voting power in such Person. "Qualified Person" shall mean a Person with the requisite experience and financial capability to reliably own and operate the Facility. (b) The Assignor agrees that it shall remain liable to Vernon for all obligations of the Assignor under the Assigned Agreement, notwithstanding the collateral assignment contemplated in the Security Agreement. (c) If the Assignee elects to exercise its remedies under the Security Agreement to foreclose on its lien on the Assigned Agreement, the Assignee shall notify Vernon pursuant to Section 8(f) of this Consent. Subject to the rights of Vernon under Section 5 of this Consent, upon completion of such foreclosure, the Assignee (or its assignee or transferee or successor thereof) (i) shall be the "Seller" under, and shall be entitled to all of the benefits of, the Assigned Agreement, (ii) shall .assume in writing and be liable for each and every duty, obligation and liability of "Seller" under the Assigned Agreement from and after the date of such assumption, and shall cure any and all then existing Seller Events of Default that have arisen prior to the date of the assumption of the Assigned Agreement by Assignee except for any Seller Events of Default that, by their. nature, are not capable of being cured by Assignee, and (iii) shall execute a deed of trust on substantially the same terms as the Seller Subordinate Deed of Trust. (d) The consent given by Vernon under Section 2(a) will only be effective with respect to a Qualified Person that is not controlled by the Secured Parties if (i) such Qualified Person executes a written assumption of the Assigned Agreement whereby it agrees to assume and be liable for each and every duty, obligation and liability of "Seller" under the Assigned Agreement from and after the date of such assumption, and cures any and all then existing Seller Events of Default that have arisen prior to the date of the assumption of the Assigned Agreement by such Qualified Person except for any Seller Events of Default that, by their nature, are not capable of being cured by such Qualified Person and (ii) upon Vernon's written request, such Qualified Person shall promptly execute a deed of trust on, substantially the same terms.as the Seller Subordinate Deed of Trust. Section 3. Representations and Warranties. Vernon hereby represents and warrants to the Assignee that, as of the date of this Consent: (a) The execution and delivery by Vernon of the Assigned Agreement and this Consent, and the performance by Vernon of its obligations under the Assigned Agreement and this Consent, have been duly authorized by all necessary corporate action, and do not and will not require any further consents or approvals which have not been obtained, or violate any provision of any law, regulation, order, judgment, injunction or similar matters or breach any material agreement presently in effect with respect to or binding upon Vernon. (b) All government approvals necessary for the execution and delivery by Vernon of the Assigned Agreement and this Consent, and the performance by Vernon of its 2 LA\1760417.5 obligations under the Assigned Agreement and this Consent, have been obtained and are in full force and effect. (c) Each of this Consent and the Assigned Agreement has been duly executed and constitutes legal, valid and binding obligations of Vernon, enforceable against it in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights generally or by general principles of equity; regardless of whether such enforceability is considered in a proceeding in equity or at law, or by principles of public policy. (d) To the knowledge of Vernon, the Assignor is not in default under any material covenant or obligation under the Assigned Agreement, and the Assigned Agreement is in full .force and effect and has not been amended. Section 4. Consent and Agreement. Vernon and the Assignor hereby. agree that, so long as any obligations of the Assignor under the Credit Agreement and the Security Agreement remain outstanding: (a) Notice of Material Amendments. Vernon and the Assignor will not enter into any amendment, supplement or other modification of the Assigned. Agreement other than ministerial amendments, supplements and modifications (an "Amendment") until after the Assignee has been given at least twenty (20) days' prior written notice of the proposed Amendment by the Assignor (a copy of which notice will be provided to Vernon by the Assignor). (b) Notices of Default and Right to Cure. (i)Vernon shall deliver to the Assignee at the address set forth on Section 8(f), ,or at such other address as the Assignee may designate in writing from time to time to Vernon, concurrently with the delivery thereof to the Assignor, a copy of each notice of default under the Assigned Agreement. Notwithstanding anything to the contrary contained in the Assigned Agreement, Assignee shall have the right, but not the obligation, without thereby assuming Assignor's obligations under the Assigned Agreement (except upon completion of a foreclosure of its security interest in the Assigned Agreement to the extent provided in Section 2 c ), to cure any such default within sixty (60) days after the later of the date of such notice or the., last day of the cure period available to the Assignor in the Assigned Agreement (except with respect to payment defaults, which cure must be made within thirty (30) days after the later of the date of such notice or the last day of the cure period.available to the Assignor in the Assigned Agreement with respect to payment defaults). If possession of the Facility is necessary to cure any non-payment Seller Event of Default by the Assignor under the Assigned Agreement, and the Assignee commences foreclosure proceedings against the Assignor within sixty (60) days after the occurrence of such .Seller Event of Default, the Assignee will be allowed an additional one hundred twenty (120) days after such sixty (60) day period to complete such proceedings; provided, however, that the aggregate cure period available to the Assignee under this Section 4Lb), in addition to the cure period available to the Assignor in the Assigned Agreement for such non-payment Seller Event of Default, shall not exceed one hundred eighty (180) days after notice 3 LA\1760417.5 is given to the Assignee); provided, further, that if the Assignee is prohibited by court order or bankruptcy, insolvency or similar proceedings from curing any default under the Assigned Agreement, the foregoing time periods will be extended by the period of such prohibition, but in no event more than an additional twelve (12) month period. (ii) No cancellation, suspension or termination or the Assigned Agreement by Vernon shall be binding upon the Assignee without such notice and the opportunity to cure during the applicable extended cure periods specified in this Section 4(b). If the Assignee fails to cure a default to the extent provided in Section 2(c) within the extended. cure periods specified in this Section 4(b), Vernon .shall have all its rights and remedies with respect to such default, action or omission as set forth in the Assigned Agreement. (e) New Agreement upon a Rejection or Termination of the Assigned Agreement. In the event the Assigned Agreement is rejected or terminated as a result of any, bankruptcy or insolvency proceeding with respect to the Assignor, Vernon will, at the option of the Assignee (or its transferee or designee), exercised within forty-five (45) days after such rejection or termination, enter into a new agreement with the Assignee (or its transferee or designee) having identical terms as the Assigned Agreement (subject to any conforming changes necessitated by the substitution of parties and other changes as the parties may mutually agree); provided, that (i) the term under such new agreement shall be no longer than the remaining balance of the term specified in the Assigned Agreement, (ii) the Assignee (or its transferee or designee) agree to perform all of the duties and obligations of "Seller" under the new agreement and execute a deed of trust on substantially the same terms as the Seller Subordinate Deed of Trust, and (iii) the Assignee (or its transferee or designee) shall be required to cure any and all Seller Events of Default under the Assigned Agreement that was terminated (except for any such Seller Events of Default that, by their nature, are not capable of being cured by Assignee or its transferee or designee, as applicable) as promptly as possible after the execution of the new agreement, but no later than sixty (60) days after the execution of such new agreement. (d) Right to Terminate as a Forward Contract Merchant. Assignor acknowledges and agrees that the Assigned Agreement constitutes a "forward contract" and that Vernon and Assignor are each "forward contract merchants" within the meaning of the United States Bankruptcy Code. As such, under current applicable law, if an Event of Bankruptcy occurs with respect to Assignor, Vernon may be entitled to exercise certain remedies, including, but not limited to, termination of the assigned agreement, without regard to an automatic stay imposed under the Bankruptcy Code. Vernon agrees that if an Event of Bankruptcy occurs with respect to Assignor, Vernon will not exercise its right to terminate the Assigned Agreement if (i) within forty-five (45) days of the initiation or commencement of such Event of I Bankruptcy, Assignor files a motion with the Bankruptcy Court to assume the Assigned Agreement and (ii) such motion is granted within one hundred twenty (120) days of such Event of Bankruptcy. Nothing in this Section 4(d) shall affect the remedies of the Assignee under Section 4(c) above. (e) Payments to Designated Account. The Assignor and Vernon acknowledge and agree that all payments to be made by Vernon to the Assignor (if any) under the Assigned Agreement shall be made in lawful money of the United States of America in immediately available funds, to the following account: 4 LA\1760417.5 [LENDER TO PROVIDE] or to such other account and/or such other person or entity and/or at .such other address as the Assignee may from time to time specify in writing to Vernon. In making such payments, Vernon shall be entitled to rely conclusively on instructions that it may receive from time to time from the Assignee without any duty to make inquiry into the authority of the Assignee to give such instructions or the authenticity of any signatures placed upon such instructions. Section 5. Damages Limitation. NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY UNDER THIS CONSENT FOR ANY CONSEQUENTIAL, EXEMPLARY, PUNITIVE, REMOTE, OR SPECULATIVE DAMAGES OR LOST PROFITS. Section 6. Seller's Debt. Vernon agrees that, prior to the termination of this Consent pursuant to Section 7(g), for purposes of calculating the ratio of Seller's Debt to Seller's Equity under the Assigned Agreement, Seller's Debt shall not include any amounts advanced by Assignee to cure any breach or default by Assignor under the Assigned Agreement. Section 7. Miscellaneous. (a) This Consent shall be binding upon the successors and permitted. assigns of each party and shall inure, together with the rights and remedies of the Assignee hereunder, to the benefit of the successors and permitted assigns of the parties hereto, including, without limitation, any entity that refinances all or any portion of the obligations, under or secured by, the Financing Documents. Vernon agrees to confirm such continuing obligation in writing upon the reasonable request of Assignor, Assignee or any of their respective successors, transferees or assigns. (b) No amendment or waiver of any provisions of this Consent or consent to any departure by any party hereto from any provisions of ,this Consent shall in any event be effective unless the same shall be in writing and signed by the Assignee and Vernon. (c) (i) This Consent shall be governed by, and construed under, the laws of the.. State of California applicable to contracts made and to be performed in such State and without reference to conflicts of laws. The parties hereto agree that any legal action or proceeding arising out of this Consent may be brought in the courts of the State of California, in and for the County of LosAngeles, or of the United States of America for the Central District of California. By execution and delivery of this Consent, the parties hereto accept, for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, to the Assignee, Vernon and the Assignor, as the case may be, at their respective addresses for notices in Section 8(f) below and that such service shall be effective five (5) Business Days after such mailing. Nothing herein shall affect the right to serve process in any other manner permitted by law or the right of the Assignee or Vernon to 5 LA11760417.5 bring legal action or proceedings in any other competent jurisdiction. The parties hereto hereby waive any right to stay or dismiss any action or proceeding under or in connection with any or all of this Consent or the transactions contemplated hereby brought before the foregoing courts on the basis of forum non-conveniens. (ii) Notwithstanding anything to the contrary in clause (i) of this Section 8(c), the parties hereto acknowledge and agree that any disputes that arise out of the Assigned Agreement (as distinct from disputes that arise out of this Consent) shall be resolved pursuant to the procedures set forth in Article 18 of the Assigned Agreement. Vernon and the Assignor acknowledge that the Assignee may have an interest in the outcome of such disputes and agree that the Assignee is entitled to participate in the resolution of such disputes. The parties hereto acknowledge and agree that the outcome of any dispute resolution under the Assigned Agreement shall be binding upon all of the parties hereto. (d) EACH OF VERNON, THE ASSIGNEE AND THE ASSIGNOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY; IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS CONSENT AND AGREEMENT. (e) This Consent may be executed in one or more counterparts with the same effect as if such signatures were upon the same instrument. This Consent may be delivered by facsimile transmission. (f) All notices to be given under this Consent shall be in writing and shall be delivered personally, sent by certified mail return receipt requested or registered first-class mail, postage prepaid, or sent by facsimile, or courier to the intended recipient at its address as set forth below, and all payments to be made under this Consent shall be made by wire transfer of immediately available funds or check representing immediately collectible funds to the account or address of the intended recipient as set forth below (subject to Section 4(e)), unless the recipient has given notice of another address or account for receipt of notices or payments. All such notices and other communications required or permitted under this Consent are effective upon delivery. If to Vernon: With copies to: City of Vernon Attn: Director of Light and Power Department 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 Latham & Watkins LLP 6 LA\1760417.5 Attention: David B. Rogers, Esq. 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Facsimile: (213) 891-8763 City of Vernon Attn: City Attorney 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 If to Assignor: Facsimile: With copies to: Facsimile: If to Assignee: Facsimile: With copies to: Facsimile: (g) This Consent shall terminate in its entirety upon written notice by the Assignee to the Assignor and Vernon of the earlier of (i) the indefeasible payment in full in cash of all obligations of_ the Assignor under the Credit Agreement and other Financing Documents and the termination of all commitments thereunder and in respect of any indebtedness incurred in respect of any refinancing thereof, and (ii) the termination of the Assigned Agreement in accordance with the terms thereof and the terms of this Consent. (h) The captions or headings at the beginning of each Section of this Consent are for convenience only and are not a part of this Consent. 7 LA\1760417.5 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, each of Vernon, the Assignee and the Assignor has duly executed this Consent and Agreement (PPTA) as of the date first above written. VERNON THE CITY OF VERNON By: _ Name: Title: ASSIGNOR [PURCHASER] By: _ Name: Title: ASSIGNEE [LENDER] By: Name: Title: By: Name: Title: LA\1760417.5 CONSENT TO ASSIGNMENT (Lease) This CONSENT TO ASSIGNMENT (Lease) ("Consent") is entered into as of [ 1, 200_ among the City of Vernon, California, a municipal corporation and a chartered' city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter ("Vernon"), [PURCHASER], a [ (the "Assignor"), and [LENDER], as Collateral Agent for the Secured Parties defined in the Credit Agreement referred to below (the "Assignee"). RECITALS WHEREAS, pursuant to the Lease and Grant of Easements made as of the date hereof between the Assignor and Vernon (the "Assigned Agreement"), Vernon leased certain property to Assignor. WHEREAS, pursuant to a.Security Agreement. dated as of the date hereof (the "Security Agreement"), the Assignor has granted to the Assignee a lien on and a security interest in, to and under all of its right, title and interest in the Assigned Agreement, as collateral security for the Assignor's obligations under that certain [Credit Agreement]' dated as of the date hereof and the related financing documents (the "Credit Agreement" and collectively, the "Financing Documents"). NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: Section 1. Definitions Any capitalized term used but not defined herein shall have the meaning specified for such term in the Assigned Agreement, except that the terms "Obligations", "Secured Parties" and "Lender" shall have the meanings specified for such terms in the Credit Agreement as it exists on the date hereof and the term "Seller Subordinate Deed of Trust" shall have the meaning set forth in the PSA. Section 2. Consent to Assignment. (a) Under the terms, and conditions set forth in this Consent, Vernon hereby consents to: (i) the assignment by the Assignor of all its right, title and interest in, to and under the Assigned Agreement to the Assignee, as collateral security for the obligations as and to the extent provided in the Security Agreement; and (ii) the transfer of the Assigned Agreement to any Qualified Person (including any Qualified Person, Controlled by the Secured Parties) in connection with the Assignee's or any successor transferee's exercise of its rights and remedies under the Credit Agreement and Financing Documents following the occurrence of an event of default by the Assignor under the Credit Agreement, including any public or private sale or any deed in lieu of ' Provisions of this Consent may need to be conform_ ed as necessary to the type of financing. For example, a bond deal may refer instead to an Indenture. 1 LA\1777423.3 foreclosure, and including any transfer from a Qualified Person that is Controlled by the Secured Parties to another Qualified Person. Such Qualified Person shall be the "Seller" under, and shall be entitled to all of the benefits of, the Assigned Agreement. "Control" shall mean, with respect to any Person, a direct or indirect interest in at least half of the ownership interest having ordinary voting power in such Person. "Qualified Person" shall mean a Person with the requisite experience and financial capability to reliably own and operate the Facility. (b) The Assignor agrees that it shall remain liable to Vernon for all obligations of the Assignor under the Assigned Agreement, notwithstanding the collateral assignment contemplated in the Security Agreement. (c) If the Assignee elects to exercise its remedies under the Security Agreement to foreclose on its lien on the Assigned Agreement, the Assignee shall notify Vernon pursuant to Section 8(fl of this Consent. Subject to the rights of Vernon under Section 5 of this Consent, upon completion of such foreclosure, the Assignee (or its assignee or transferee or successor thereof) (i) shall be the "Seller" under, and shall be entitled to all of the benefits of, the Assigned Agreement, and (ii) shall assume in writing and be liable for each and every duty, obligation and liability of "Seller" under the Assigned Agreement from and after the date of such assumption, and shall cure any and all then existing Seller Events of Default that have arisen prior to the date of the assumption of the Assigned Agreement by Assignee except for any Seller Events of Default that, by their nature, are not capable of being cured by Assignee. (d) The consent given by Vernon under Section 2(a) will only be effective with respect to a Qualified Person that is not controlled by the Secured Parties if such Qualified Person executes a written assumption of the Assigned Agreement whereby it agrees to assume and. be liable for each and every duty, .obligation and liability of "Seller" under the Assigned Agreement from and after the date of such assumption, and cures any and all then existing Seller Events, of Default that have arisen prior to the date of the assumption of the Assigned Agreement by such Qualified Person except for any Seller Events of Default that, by their nature, are not capable of being cured by such Qualified Person. Section 3. Representations and Warranties. Vernon hereby represents and warrants to the Assignee that, as of the date of this Consent: (a) The execution and delivery by Vernon of the Assigned Agreement and this Consent, and the performance by Vernon of its obligations under the Assigned Agreement and this Consent, have been duly authorized by all necessary corporate action, and do not and will not require any further consents or approvals whichhave not been obtained, or violate any provision of any law, regulation, order, judgment, injunction or similar matters or breach any material agreement presently in effect with respect to or binding upon Vernon. (b) All government approvals necessary for the execution and delivery by Vernon of the Assigned Agreement and this Consent, and the performance by Vernon of its obligations under the Assigned Agreement and this Consent, have been obtained and are in full force and effect. 2 LA\1777423.3 (c) Each of this Consent and the Assigned Agreement has been duly executed and constitutes legal, valid and binding obligations of Vernon, enforceable against it in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency or similar laws of general application relating to the enforcement of creditors' rights generally or by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law, or by principlesof public policy. (d). To the knowledge of Vernon, the Assignor is not in default under any material covenant or obligation under the Assigned Agreement, and the Assigned Agreement is in full force and effect and has not been amended. Section 4. Consent and Aareement. Vernon and the Assignor hereby agree that, so long as any obligations of the Assignor under the Credit Agreement and the Security Agreement remain outstanding: (a) Notice of Material Amendments. Vernon and the Assignor will not enter into any amendment, supplement or other modification of the Assigned Agreement other than ministerial amendments, supplements and modifications (an "Amendment") until after the Assignee has been given at least twenty (20) days' prior written notice of the proposed Amendment by the Assignor (a copy of which notice will be provided to Vernon by the Assignor). (b) Notices of Default and Right to Cure. (i) Vernon shall deliver to the Assignee at the address set forth on Section 8(fl, or at such other address as the Assignee may designate in writing from time to time to Vernon, concurrently with the delivery thereof to the Assignor, a copy of each notice of default under the Assigned Agreement. Notwithstanding anything to the contrary contained in the Assigned Agreement, Assignee shall have the right, but not the obligation, without thereby assuming Assignor's obligations under the Assigned Agreement (except upon completion of,a foreclosure of its security interest in the Assigned Agreement to the extent provided in Section 2 c ), to cure any such default within sixty (60) days after the later of the date of such notice or the last day of the cure period available to the Assignor in the Assigned Agreement (except with respect to payment defaults, which cure must be made within thirty (30) days after the later of the date of such notice or the last day of the cure period available to the Assignor in the Assigned Agreement with respect to payment defaults). If possession of the Facility is necessary to cure any non-payment Seller Event of Default by the Assignor under the Assigned Agreement, and the Assignee commences foreclosure proceedings against the Assignor within sixty (60) days after the occurrence of such Seller 'Event of Default, the Assignee will be allowed an additional one hundred twenty (120) days after such sixty (60) day period to complete such proceedings; provided, however, that the aggregate cure period available to the Assignee under this Section 44b , in addition to the cure period available to the Assignor in the. Assigned Agreement for such non-payment Seller Event of Default, shall not exceed one hundred eighty (180) days after notice is given to the Assignee); provided, further, that if the Assignee is prohibited by court order or bankruptcy, insolvency or similar proceedings from curing any default under the Assigned 3 LA\1777423.3 Agreement, the foregoing time periods will be extended by the period of such prohibition, but in no event more than an additional twelve (12) month period. (ii) No cancellation, suspension or termination of the Assigned Agreement by Vernon shall be binding upon the Assignee without such notice and the opportunity to cure during the applicable extended cure periods specified in this'Section 4(b). If the Assignee fails to cure a default to the extent provided in Section 2(c) within the extended cure periods specified in this Section 4(b), Vernon shall have all its rights and remedies with respect to such default, action or omission as set forth in the Assigned Agreement, (c) New Agreement upon a Rejection or Termination of the Assigned Agreement. In the event the Assigned Agreement is rejected or terminated as a result of any bankruptcy or insolvency proceeding with respect to the Assignor, Vernon will, at the option of the Assignee (or its transferee or designee), exercised within forty-five (45) days after such rejection or termination, enter into a new agreement with the Assignee. (or its transferee or designee) having identical terms as the Assigned Agreement (subject to any conforming changes necessitated by the substitution of parties and other changes as the parties may mutually agree); provided, that (i) the term under such new agreement shall be no longer than the remaining balance of the term specified in the Assigned Agreement, (ii) the Assignee (or its transferee or designee) agree to perform all of the duties and obligations of "Seller" under the new agreement and execute a deed of trust on substantially the ` same terms as the Seller Subordinate Deed of Trust, and (iii) the Assignee (or its transferee or designee) shall be required to cure any and all Seller Events of Default under the Assigned Agreement that was terminated (except for any such Seller Events of Default that, by their nature, are not capable of being cured by Assignee or its transferee or designee, as applicable) as promptly as possible after the execution of the new agreement, but no later than sixty (60) days after the execution of such new agreement. (e) Payments to Designated Account. The Assignor and Vernon acknowledge and agree that all payments to be made by Vernon to the Assignor (if any) under the Assigned Agreement shall be made in lawful money of the United States of America in immediately available funds, to the following account: [LENDER TO PROVIDE] or to such other account and/or such other person or entity and/or at such other, address as the Assignee may from time to time specify in writing to Vernon. In making such payments, Vernon shall be entitled to rely conclusively on instructions that it may receive from time to time from the Assignee without any duty to make inquiry into the authority of the Assignee to give such instructions, or the authenticity of any signatures placed upon such instructions. Section 5. Damages Limitation. NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY UNDER THIS CONSENT FOR ANY CONSEQUENTIAL, EXEMPLARY, PUNITIVE, REMOTE, OR SPECULATIVE DAMAGES OR LOST PROFITS. 4 LA\1777423.3 Section 6. Omitted. Section 7. Miscellaneous. (a) This Consent shall be binding upon the successors and permitted assigns of each party and shall inure, together with the rights and remedies of the Assignee hereunder, to the benefit of the successors and permitted assigns of the parties hereto, including, without limitation, any entity that refinances all or any portion of the obligations, under or secured by, the Financing Documents. Vernon agrees to confirm such continuing obligation in writing upon the reasonable request of Assignor, Assignee or any of their respective successors, transferees or assigns. (b) No amendment or waiver of any provisions of this Consent or consent to any departure by any party hereto from any provisions of this Consent shall in any event be effective unless the same shall be in writing and signed by the Assignee and Vernon. (c) (i) This Consent shall be governed by, and construed under, the laws of the State of California applicable to contracts made and to be performed in such State and without reference to conflicts of laws. The parties hereto agree that any legal action or proceeding arising out of this Consent may be brought in the courts of the State of California, in and for the County of Los Angeles, or of the United States of America for the Central District of California. By execution and delivery of this Consent, the parties hereto accept, for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, to the Assignee, Vernon and the Assignor, as the case may be, at their respective addresses for notices in Section 8(f) below and that such service' shall be effective five (5) Business Days after such mailing. Nothing herein shall affect the right to serve process in any other manner permitted by law or the right of the Assignee or Vernon to bring legal action or proceedings in any other competent jurisdiction. The parties hereto hereby waive any right to stay or dismiss any action or proceeding under or in connection with any or all of this Consent or the transactions contemplated hereby brought before the foregoing courts on the basis of forum non-conveniens. (ii) Notwithstanding anything to the contraryin clause (i) of this Section 8(c), the parties hereto acknowledge and agree that any disputes that arise out of the Assigned Agreement (as distinct from disputes that arise out of this Consent) shall be resolved pursuant to the procedures set forth in Section 12.06 of the Assigned Agreement. Vernon and the Assignor acknowledge that the Assignee may have an interest in the outcome of such disputes and agree that the Assignee is entitled to participate in the resolution of such disputes. The parties hereto acknowledge and agree that the outcome of any dispute resolution under the Assigned Agreement shall be binding upon all of the parties hereto. 5 LA\1777423.3 (d) EACH OF VERNON, THE ASSIGNEE AND THE ASSIGNOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS CONSENT AND AGREEMENT. (e) This Consent may. be executed in one or more counterparts with the same effect as if such signatures were upon the same instrument. This Consent may be delivered by facsimile transmission. (f) All notices to be given under this Consent shall ,be in writing and shall be delivered personally, sent by certified mail return receipt requested or registered first-class mail, postage prepaid, or sent by facsimile, or courier to the intended recipient at its address as set forth below, and all payments to be made under this Consent shall be made by wire transfer of immediately available funds or check representing immediately collectible funds to the account or address of the intended recipient as set forth below (subject to Section 4(e)), unless the recipient has given notice of another address or account for receipt of notices or payments. All such notices and other communications required or permitted under this Consent are effective upon delivery. If to Vernon: City of Vernon With copies to: If to Assignor: Attn: Director of Light and Power Department 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 Latham & Watkins LLP Attention: David B. Rogers, Esq. 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Facsimile: (213) 891-8763 City of Vernon Attn: City Attorney 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 Facsimile: 6 LA\1777423.3 With copies to: Facsimile: If to Assignee: Facsimile: With copies to: Facsimile: (g) This Consent shall terminate in its entirety upon written notice by the Assignee to the Assignor and Vernon of the earlier of (i) the indefeasible payment in full in cash of all obligations of the Assignor under the Credit Agreement and other Financing Documents and the termination of all commitments thereunder and in respect of any indebtedness incurred in respect of any refinancing thereof, and (ii) the termination of the Assigned Agreement in accordance with the terms thereof and the terms of this Consent. (h) The captions or headings at the beginning of each Section of this Consent are for convenience only and are not a part of this Consent. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 7 LA\1777423.3 IN WITNESS WHEREOF, each of Vernon, the Assignee and the Assignor has duly executed this Consent and Agreement (Lease) as of the date first above written. VERNON THE CITY OF VERNON By: Name: Title: ASSIGNOR [PURCHASER] By: Name: Title: ASSIGNEE [LENDER] By: Name: Title: By: Name: Title: LA\1777423.3 EXHIBIT F Recording Requested by City of Vernon and when recorded, mail to: Attn: SPACE ABOVE FOR RECORDER'S USE Recording Fee: Exempt pursuant to California Government Code § 27383 MEMORANDUM,OF.LEASE AND EASEMENTS THIS LEASE HEREINIS FOR A PERIOD' LESS THAN 99 YEARS. A.P.N. A.P.N. The City of Vernon, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California ("Landlord'), hereby leases to , a {"Tenant"), that certain, real property located in the City of Vernon, California (the "City''), and more particularly described on Exhibit "A" attached hereto (the "Premises"). l . The rent payable by Tenant and the other terms of the tenancy are set forth in a certain- unrecorded Lease and Grant of Easements between Landlord and Tenant dated 2007 (the "Lease"), the provisions of which Lease are incorporated herein by this reference, and covering the Premises. Unless otherwise ,defined herein, any term with initial capitalization herein shall have the definition set forth in the Lease. 2. The Initial Term of this Lease commences on the Commencement Date (as defined in the Lease) and expires thirty (30) full Lease Years (as defined in the Lease) E-1 LA\1780236.1 thereafter. In addition, Tenant has two (2) options to extend this Lease for five (5) Lease Years each. 3. Pursuant to the Lease, Landlord has also granted to Tenant non-exclusive Easements (as defined in the Lease) appurtenant to the leasehold estate created by this Lease in, on, over, under and across that portion of adjacent property owned by Landlord in the City as more particularly described on Exhibit "B". and depicted on Exhibit "C", each attached hereto and incorporated herein by this reference (the "Easement Area") ,for the purpose of (i) the construction, installation (including the right to connect to existing public facilities), maintenance and use of electric, gas, cable, telephone, water, sewer, drainage and other utility facilities as necessary to serve the Premises for Tenant's use thereof (including overhead transmission of electricity), and (ii) vehicular and pedestrian ingress and egress over the Easement Area to , and from the Premises as reasonably necessary for Tenant's use of the. Premises, including, without limitation, for the construction, installation, maintenance and use of all improvements and other property of Tenant constructed, installed, placed or located from time to time on the Premises. 4. Landlord has reserved unto itself any easements in, on, over, across and under the Premises reasonably necessary for the construction, replacement, repair, maintenance and operation of any facilities on the Retained Property, so Tong as such easements shall not. materially interfere with Tenant's operations on the Land Premises, and for the delivery of emergency services to the Retained Property. Landlord further has reserved unto itself, and any City owned and/or operated utility service provider, easements in, on, over, across -and under the Premises for the construction, replacement, repair, maintenance and operation of existing dry and wet utilities over certain portions of the Premises, including but not limited to the existing water E-2 LA\1780236.1 pipelines and gas lines under the Premises, the locations of which are more particularly described on Exhibit "D" and shown on Exhibit "E" attached hereto and incorporated herein by this reference. 3. Landlord and Tenant have further agreed that in the event that that certain power purchase tolling agreement between Landlord and Tenant (the "PPTA") of even date herewith is terminated in connection with any bankruptcy or insolvency proceedings with respect to the Tenant, anysuccessor in interest to the Tenant shall be obligated to enter into a new power purchase tolling agreement with Landlord on substantially the same terms as the PPTA. 6. This instrument is executed solely for recording purposes and nothing herein shall be deemed or construed to modify or vary the terms of the Lease or .the easements granted therein. In the event of any conflict between the Lease and this memorandum, the terms and conditions of the Lease shall prevail. E-3 LA\1780236.1 IN WITNESS WHEREOF, the undersigned have executed this Memorandum of Lease as of the — day of , 2007. "Landlord" THE CITY OF VERNON, a California Charter City By: Print Name: Title: "Tenant" - 'a By: Print Name: Title: By: Print Name: Title: E-4 LA\1780236.1 STATE OF COUNTY OF [ On , before me, , Notary Public, personally appeared and ❑ ,personally known to me OR O proved to me on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary STATE OF COUNTY OF [ On , before me, Notary Public, personally appeared and ❑ personally known to me OR 0 proved tome on the basis of satisfactory evidence to be the persons whose names are subscribed to the within instrument and acknowledged to me that they executed the same in their authorized capacities, and that by their signatures on the instrument the persons, or the entity upon behalf of which the persons acted, executed the instrument. WITNESS my hand and official seal. Signature of Notary E-5 LMI 780236.1 Exhibit "A" to Memorandum of Lease and Easements LA\ 1780236.1 A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST NORTHERLY CORNER OF SAID LOT 7, SAID CORNER ALSO BEING THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 367.33 FEET, A RADIAL LINE PASSING THROUGH SAID CORNER BEAR SOUTH 58'03'33 WEST; THENCE SOUTHEASTERLY ALONG SAID CURVE .THROUGH A CENTRAL ANGLE OF 59'37'38" AN ARC DISTANCE OF 382.79 FEET; THENCE NORTH 88'25'55" EAST 323.79 FEET ALONG THE NORTHERLY LINE OF SAID LOT 7 TO A POINT ON THE SOUTHERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF THE LOS ANGELES JUNCTION RAILROAD RIGHT-OF-WAY AS SHOWN ON LOS ANGELES COUNTY .FIELD MAP NUMBER 10287 PAGE A3, RECORDS OF SAID COUNT, SAID POINT ALSO BEING THE BEGINNING OF A CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 906.21 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 4'45'51" AN ARC DISTANCE OF 75.35 FEET TO THE BEGINNING OF A COMPOUND CURVE HAVING A RADIUS OF 294.44 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13'28'39" AN ARC DISTANCE OF 69.26 FEET TO A POINT ON THE EASTERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF SOTO STREET AS SHOWN ON SAID LOS ANGELES COUNTY FIELD MAP; THENCE SOUTH 1'37'37" EAST 186.27 FEET ALONG SAID EASTERLY LINE; THENCE SOUTH 88'10'26" WEST 33.20 FEET; THENCE NORTH 01'49'34" WEST 6.00 FEET; THENCE SOUTH 88'10'26" WEST 6.00 FEET; THENCE SOUTH 01'49'34" EAST 6.00 FEET; THENCE SOUTH 88'10'26" WEST 439.07 FEET; THENCE NORTH 01'27'57" WEST 115.24 FEET; THENCE SOUTH 89'10'17" WEST 193.60 FEET; THENCE NORTH 02'51'27" WEST 42.65 FEET; THENCE NORTH 87'47'00" EAST 11.55 FEET; THENCE THENCE NORTH 01'54'17" WEST 24.22 FEET; THENCE SOUTH 87'28'16" WEST 10.26 FEET; THENCE NORTH 01'06'15" WEST 13.30 FEET; THENCE SOUTH 88'48'42 WEST 81.59 FEET; THENCE SOUTH 01'26'34" EAST 79.61 FEET; THENCE SOUTH 89'10'17" WEST 37.82 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT 7; THENCE NORTH 00'09'03" WEST 267.99 FEET ALONG SAID WESTERLY LINE TO THE POINT OF BEGINNING. CONTAINING 3.10 ACRES MORE OR LESS. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO . AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. ROSELL EXP. 9-30-W No, 6281 i EXHIBIT `B" TO MEMORANDUM OF LEASE AND EASEMENTS LEGAL DESCRIPTION OF EASEMENT AREA [Attached Hereto Exhibit `B". to Memorandum of Lease and Easements LA\1780236.1 A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 7.7 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WEST LINE OF SAID LOT 7, SAID POINT BEING NORTH 00'09'03" WEST 194.65 FROM THE SOUTHWESTERLY CORNER OF SAID LOT 7, THENCE NORTH 88'22'12" EAST 238.52 FEET; THENCE SOUTH 01'37'48" EAST 18.06 FEET; THENCE NORTH 88'22'12 EAST 42.43 FEET; THENCE SOUTH 01'23'22" EAST 176.85-FEET TO A POINT ON THE SOUTHERLY LINE OF SAID LOT 7: THENCE NORTH 88'26'12" EAST 32.59 FEET ALONG SAID SOUTHERLY LINE; THENCE NORTH 01'27'57" WEST 211.35 FEET; THENCE SOUTH 89'10'17" WEST 312.89 FEET TO A POINT ON SAID WESTERLY LINE; THENCE SOUTH 00'09'03" EAST 20.76 FEET ALONG SAID EASTERLY LINE TO THE POINT OF BEGINNING. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. ROSELL * KEXP' 9-30-oe No. 6281, :� i -} ,, . � � �� ;. ,;, .._ ,, -��, ,� .J . J 1 � J I� EXHIBIT "C" TO MEMORANDUM OF LEASE AND EASEMENTS DEPICTION OF EASEMENT AREA [Attached Hereto.] Exhibit "C" to Memorandum of Lease and Easements LA\I 780236.1 OT r 20' - rr--fir NO, b4' I W � a I i z o S89'10' 17"W 312.89' > = I S00'09'03"E 20.76' ACCESS EASEMENT Q N88'22'12"E 238.52' N88'22'12"E W J S01'37'48"E 18.06' -42.43''i J m POINT OF BEGINNING _j Ln — W > 0 W co u) co N O0 W L r O N N N M N I 0) i� (V W N O z p O z O cv SOUTHWEST CORNER, LOT 7, 20' No. 6452, M.B. 94/77-78 °z° ZTRACT O o Imo-- E A S T 5 0 T H ST R E E T (40' WIDE PUBLIC RIGHT-OF-WAY) EXHIBIT "D" TO MEMORANDUM OF LEASE AND EASEMENTS LEGAL DESCRIPTION OF CITY RETAINED UTILITY EASEMENT AREA [Attached Hereto.] Exhibit "D" to Memorandum of Lease and Easements LA\ 1780236.1 A 10' WIDE STRIP OF LAND BEING A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, THE CENTERLINE. IS DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WEST LINE OF SAID LOT 7, SAID POINT BEING NORTH 00'09'03" WEST 245.99 FROM THE SOUTHWESTERLY CORNER OF SAID LOT 7, THENCE NORTH 88'36'21" EAST 117.81 FEET TO THE POINT OF TERMINUS. THE SIDELINES OF SAID 10' STRIP OF LAND, SHALL BE SHORTENED OR PROLONGATED SO AS TO TERMINATE WESTERLY AT THE WESTERLY LINE OF SAID LOT 7 AND EASTERLY AT A LINE THAT PASSES THROUGH SAID POINT OF TERMINUS BEARING SOUTH 02'51'27" EAST. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. ROSELL EXP. 9-30-08 No. 6281 /_ EXHIBIT "E" TO MEMORANDUM OF LEASE AND EASEMENTS SITE PLAN DEPICTING CITY RETAINED UTILITY EASEMENT AREA [Attached Hereto] F-1 LA\1780236.1 ► 20' 1 "= 30' OT No, 64 NO, J 1,111-1 c W � Q, z o PIPELINE EASEMENT POINT OF TERMINUS --'N88'36'21"E_— --- _117:81' S02'S1'27"E a>>------------------- W J POINT OF BEGINNING J m J d 0 - W � W N U) O O O O O Z SOUTHWEST CORNER, LOT 7 TRACT No. 6452, M.B. 94/77-78 20 0 p N N E A S T 5 0 T H S T R E E T (40' WIDE PUBLIC RIGHT-OF-WAY) EXHIBIT G POWER PURCHASE TOLLING AGREEMENT BETWEEN BEOWULF (VERNON) POWER LLC AND THE CITY OF VERNON AS OF 200_ TABLE OF CONTENTS ARTICLE I DEFINITIONS; INTERPRETATION...................................................................I Section 1.1 General Definitions . ...................................................................................... I Section 1.2 Interpretation ..........I............................................................................I 1 ARTICLE II TERM; SERVICE COMMENCEMENT DATE..............................................12 Section 2.1 Service Term...............................................................................................12 Section 2.2 Service Commencement Date.....................................................................13 ARTICLE III OBLIGATIONS AND PRODUCT DELIVERIES..........................................13 Section 3.1 Purchase and Sale Generally.......................................................................13 Section 3.2 Contract Energy...........................................................................................13 Section 3.3 Adjusted Contract Capacity.........................................................................13 Section 3.4 Ancillary Services.......................................................................................13 Section 3.5 Resource Adequacy Benefits.......................................................................14 Section 3.6 Exclusivity and Priority...............................................................................15 Section 3.7 Compliance with Applicable Law...............................................................15 Section 3.8 Transmission................................................................................................15 ARTICLEIV PRODUCT PRICE..............................................................................................15 Section 4.1 Contract Price..............................................................................................15 Section 4.2 Energy Payment...........................................................................................16 Section 4.3 Capacity Payment........................................................................................17 Section 4.4 Escalation.....................................................................................................17 Section 4.5 Costs and Charges.......................................................................................18 ARTICLE V REMEDIES FOR FAILURE TO DELIVER OR RECEIVE ..........................18 Section 5.1 Failure to Deliver Contract Energy.............................................................18 Section 5.2 Failure to Receive Contract Energy............................................................18 Section 5.3 Failure to Deliver Adjusted Contract Capacity...........................................18 ARTICLE VI FORCE MAJEURE............................................................................................19 Section 6.1 Force Majeure..............................................................................................19 Section6.2 Termination.................................................................................................19 ARTICLEVII TESTING...........................................................................................................20 Section7.1 Testing ...............................................................................................20 Section 7.2 Adjusted Contract Capacity Test.................................................................20 Section 7.3 Effect of Adjusted Contract Capacity Test..................................................20 ARTICLE VIII OPERATIONS AND MAINTENANCE........................................................20 Section 8.1 Seller's Operation Obligations....................................................................20 Section 8.2 Seller's Maintenance and Repair Obligations.............................................21 Section8.3 Records..................................................................................................21 i ARTICLE IX TOLLING AND FUEL.......................................................................................21 Section9.1 Tolling.......................................................................................................21 Section 9.2 Title and Risk of Loss.................................................................................22 Section 9.3 Seller's Gas Events...::.................................................................................22 ARTICLE X SCHEDULING COORDINATOR......................................................................22 Section 10.1 Buyer Scheduling Coordinator..................................................................22 Section 10.2 Scheduling Coordinator Obligations.........................................................22 Section 10.3 CAISO Costs and Revenues......................................................................22 Section 10.4 Terminating Buyer's Designation as Scheduling Coordinatorr..................23 Section 10.5 CAISO Sanctions.......................................................................................23 ARTICLE XI DISPATCH NOTICES AND OPERATING LIMITATIONS ........................23 Section 11.1 Availability Notice..........:.........................................................................23 Section 11.2 Dispatch Notice ................................. ............................... ...................24, Section 11.3 Dispatch Notice Updates..........................................................................24 Section 11.4 Operating Limitations:..........................................................................24 Section 11.5 Writing Requirements...............................................................................24 Section 11.6 Communications Protocols........................................................................24 Section 11.7 Operating Records.....................................................................................24 ARTICLEXII METERING ....................... :............................................................................... 25 Section 12.1 Ownership, Operation and Maintenance of Meters...................................25 Section12.2 Meter Reading...........................................................................................25 Section 12.3 Alternatives in Event of Non-Operability.................................................25 Section 12.4 Calibration .......:. ......:................ .... ..... ....::........................................ .......... 25 Section 12.5 Shared Access and Meter Data..................................................................26 ARTICLEXIII OUTAGES........................................................................................................26 Section 13.1 Scheduled Outages...........................................:........................................26 Section 13.2 Affect of Scheduled Outages on Delivery Obligations .............................26 Section 13.3 No Scheduled Outages During Summer Months......................................26 Section 13.4 Notice of Unscheduled Outages................................................................27 Section 13.5 Inspection.......................................................................................... ...27 Section 13.6 Reports of Outages....................................................................................27 ARTICLE XIV EVENTS OF DEFAULT; REMEDIES..........................................................27 Section14.1 Events of Default ..... ..............................................................................27 Section 14.2 Seller Events of Default.............................................................................28 Section 14.3 Declaration of an Early Termination Date................................................28 Section 14.4 Termination Payment................................................................................28 Section 14.5 Notice of Payment of Termination Payment.............................................28 Section 14.6 Disputes With Respect to Termination Payment.......................................29 Section 14.7 Suspension of Performance and Other Remedies.....................................29 ARTICLE XV PAYMENT AND BILLING.............................................................................29 Section15.1 Billing Period.............................................................................................29 ii Section 15.2 Timeliness of Payment..............................................................................29 Section 15.3 Disputes and Adjustments of Invoices......................................................29 Section 15.4 Netting of Payments..................................................................................30 Section 15.5 Payment Obligations Absent Netting.........................................................30 ARTICLE XVI LIMITATIONS...............................................................................................30 Section 16.1 Limitation of Remedies, Liability and Damages.......................................30 ARTICLE XVII CREDIT SUPPORT.......................................................................................31 Section 17.1 Financial Information................................................................................31 Section 17.2 Subordinated Security Interest and Mortgage ................. ......... ............31 Section 17.3 Debt Covenant...........................................................................................32 ARTICLE XVIII GOVERNMENTAL CHARGES............................................................32 Section 18.1 Cooperation ................................... .....................................................32 Section 18.2 Governmental Charges ........ .. ... ... .........32 Section 18.3 Greenhouse Gas Charges ............... ......... ......... ......... ......... ............32 ARTICLE XIX DISPUTE RESOLUTION...............................................................................33 Section 19.1 Dispute Resolution ....................... .......... . ....... .......33 Section 19.2 Informal Resolution...................................................................................33 Section19.3 Arbitration.................................................................................................33 Section 19.4 Waiver of Jury Trial .................,.............................................................34 ARTICLE XX MISCELLANEOUS..........................................................................................34 Section 20.1 Representations and Warranties................................................................34 Section 20.2 Title and Risk of Loss.......... ........... ................. ........ .......35 Section 20.3 Indemnity...................................................................................................35 Section 20.4 Assignment.. ........ .. .. .......... ...... ...... .......... .35 Section 20.5 Governing Law..........................................................................................36 Section 20.6 Notices ... ....................... .... .............. ....... ..................36 Section 20.7 Entire Agreement........ ... .... ......... .... .......... .. ..37 Section 20.8 Obligations Surviving Termination ......... ......... ......... ......... ............37 Section 20.9 Amendment ....... ............... .............. ........ .... ........ .. ..37 Section 20.10 No Waiver...............................................................................................37 Section 20.11 Regulatory Review..................................................................................37 Section 20.12 Insurance.... .. .. ............ ...................... .......... .......... ..38 Section 20.13 .... ... ....... .. .... .... Headings and Captions. ........•••••.••.... ....... . .......38 Section 20.14 No Third Party Beneficiaries...................................................................38 Section 20.15 Audit ................... ............... ........................... ............ .......... .39 Section 20.16 Forward Contract.....................................................................................39 Section 20.17 Construction of Agreement.....................................................................39 Section 20.18 Counterparts ..................... . ................ ... ... .............................39 Section 20.19 Confidentiality.........................................................................................39 Section 20.20 No Immunity Claim.................................................................................39 iii { Appendices: Appendix A (Operating Limitations) Appendix B (Degradation Schedule) Appendix C (Heat Rate) . Appendix D (Form of Availability Notice) Appendix E (Form of Dispatch Notice) iv POWER PURCHASE TOLLING AGREEMENT This Power.Purchase Tolling Agreement (this "Ageement") is made and entered into on this _ day of , 200 (the "Effective Date"), between Beowulf (Vernon) Power LLC, a Delaware limited liability company ("Seller"), and the City of Vernon, a municipal corporation and chartered city duly organized and existing under and - by virtue of the Constitution and laws of the State of California that is also a local publicly -owned electric utility as defined in Section 9604 of the California Public Utilities Code (`Buyer"). Each of Seller and Buyer are referred to herein individually as a "Party" and jointly as the "Parties." RECITALS A. Seller has acquired Buyer's interest in the Malburg Generating Station (as more particularly defined below, the "Facility") located at 2715 East 50`h Street, Vernon, California 90058 (the "Transaction"). B. Upon consummation of the Transaction, Seller wishes to sell and deliver exclusively to Buyer, and Buyer wishes to purchase and receive, on a tolling basis, Contract Capacity, Contract Energy, Ancillary Services and Resource Adequacy Benefits from the Facility under the terms and conditions set forth in this Agreement. NOW, THEREFORE, and in consideration of the foregoing, and of the mutual promises, covenants and conditions set forth herein, and other good and valuable consideration, the Parties hereto, intending to be legally bound by the terms and conditions set forth in.this Agreement, hereby agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION Section 1.1 General Definitions. "Adjusted Contract Capacity" means, for any Contract Year, the number derived from Appendix B based upon the cumulative number of Equivalent Operating Hours of the Facility as of the end of the prior Contract Year, as may be adjusted by the results of an Adjusted Contract Capacity Test pursuant to Section 7.2 of this Agreement. "Adjusted Contract Capacity Test" has the meaning set forth in Section 7.2. "Affiliate" means, with respect to a Person, any other Person that (a) directly or indirectly controls the specified Person; or (b) is controlled by or is under direct or.indirect common control with the specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management or policies of the specified Person, directly or indirectly, whether through the ownership of voting securities, partnership or limited liability company interests, by contract or otherwise. "Agreement" has the meaning set forth in the introductory paragraph hereto, together with all appendices attached hereto. "Ancillary Services" means any of the services identified in the CAISO Tariff as "ancillary services" including, but not limited to, Regulation, Spinning Reserve, Non -Spinning Reserve, Replacement Reserve, Voltage Support, and Black Start, as each such term is defined in the CAISO Tariff. "Ancillary Services Notice" has the meaning set forth in Section 3.4. "Applicable Law" means all applicable statutes, laws, court decisions, ordinances, rules, order, writ, subpoena or regulations of a Governmental Authority, or the rules or regulations of any exchange or regional transmission entity that has operational control over high voltage transmission facilities within the State of California. As of the Effective Date, this regional transmission entity is the CAISO. "Applicable Standards" means all legal, regulatory or industry standards applicable to owners, operators and the ownership and/or operation of generating facilities within the State of California, including the applicable NERC mandatory reliability standards as in effect from time to time. "Arbitrator" has the meaning set forth in Section 19.3. "Assign" or "Assignment" has the meaning set forth in Section 20.4.1. "Availability Notice has the meaning set forth in Section 11.1. "Available Capacity" means the maximum (subject to Operating Limitations) amount of Capacity that is available on average during a given hour from the Facility when the Facility is not unavailable as a result of a Scheduled. Outage. For purposes of clarity, the Available Capacity may exceed the Adjusted Contract Capacity. "Average Energy Replacement Price" means the average Energy Replacement Price as calculated by the summation of each MWh of replacement Energy for Contract Energy not delivered by Seller multiplied by its respective Energy Replacement Price, divided by the total amount of MWh of replacement Energy for Contract Energy not delivered by Seller. `Bankrupt' means with respect to any entity, such entity (i) files a petition or otherwise commences, authorizes or acquiesces in the commencement of a proceeding or cause of action under any bankruptcy, insolvency, reorganization or similar law, or has any such petition filed or commenced against it and such involuntary petition is not dismissed within sixty (60) Calendar Days, (ii) makes an assignment or any general arrangement for the benefit of creditors, (iii) otherwise becomes bankrupt or insolvent (however evidenced), (iv) has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with respect to it or any substantial portion of its property or assets, or (v) is generally unable to pay its debts as they fall due. "Bankruptcy Event" has the meaning set forth in Section 14.1.4. "Base Load" means the steady state operation of the Facility at its Available Capacity, excluding duct firing and with evaporative coolers on, in accordance with the Operating Limitations and Good Utility Practice. "Business Day" means any Calendar Day except a Saturday, Sunday, or a legal holiday in the State of California. A Business Day shall open at 8:00 am and close at 5:00 pm PPT. "DIWer" has the meaning set forth in the introductory paragraph hereto. `Buyer Resource Adequacy Rulings' means any Resource Adequacy rules or provisions established by Buyer as a local publicly -owned electric utility serving end use customers. pursuant to California Assembly Bill 380, and/or as a Local Regulatory Authority within the meaning of the CAISO Tariff. "CAISO" means the California Independent System Operator, a state chartered, nonprofit, public benefit corporation that controls certain transmission facilities of all participating transmission owners and dispatches certain electric generation units and loads, or any successor entity performing the same functions. "CAISO Tariff' means the tariff and protocol provisions, as amended or supplemented from time to time, of the CAISO. "Calendar Day" means the period of twenty-four (24) consecutive hours, beginning at 12:00 am PPT. "Capacity' means the maximum net dependable operating capability of a generating resource to produce or generate Energy or Ancillary Services. "Capacity Delivery Point" means the connection on the switchyard side of the generator transformer high voltage air isolator located on the Facility site. "Claiming Party' has the meaning set forth in Section 6.1. "Claims" means all third party claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to.the subject matter of an indemnity, and the resulting losses, damages, expenses, attorneys' fees and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement. "Commodity Reference Point" means "the "Midpoint" price for the day the gas flows as published by Gas Daily or any successor publication reasonably agreed to by the Parties, for "Natural Gas —California Southern Border SoCal — NGI" per MMBtu. "Contract Capacity" means the 134 MW aggregate Capacity of the Generating Units. "Contract Energy" means the Energy associated with the Available Capacity dispatched by Buyer and required to be delivered by Seller to Buyer either as Net Facility Output or as Substitute Energy pursuant to Section 3.2. 3 "ContractPrice" means the price in United States dollars (unless otherwise expressly provided for) to be paid by Buyer to Seller for the purchase of the Product pursuant to this Agreement. "Contract Year" means each of the successive twelve (12) month periods commencing with the Service Commencement Date. "Costs" means, with respect to the Non -Defaulting Party, brokerage fees, commissions and other similar third party transaction costs and expenses reasonably ` incurred' by the Non - Defaulting Party either in terminating any arrangement pursuant to which it has hedged its obligations under the Agreement, or entering into new arrangements which replace the Product, including any costs or penalties imposed upon Buyer as Non -Defaulting Party .for the loss of Capacity required to meet Buyer's Resource Adequacy obligations or for replacing such Capacity to fulfill Buyer's Resource Adequacy obligations; and all reasonable attorneys' fees and expenses incurred by the Non -Defaulting Party in connection with the termination of the Agreement. "CPUC" means the California Public Utilities Commission or any successor thereto. "Day -Ahead Market" has the meaning set forth in the CAISO Tariff. "Defaulting Party" has the meaning set forth in Section 14.1. "Delivered Fuel Quantity" has the meaning set forth in Error! Reference source not found.. "Delivery Point" means the Energy Delivery Point and the Capacity Delivery Point. ',Differential" has the meaning set forth in Section 4.2.2. "Dispatch Notice" means the operating instruction, and any subsequent updates, given by Buyer to Seller, directing the Facility to operate a specified megawatt output. Dispatch Notices may be communicated electronically, via facsimile, telephonically or through other verbal means. Telephonic or other verbal communication shall be documented (either recorded by tape, electronically or in writing) and such recordings shall be made available to both Buyer and Seller upon request for settlement purposes. "Dispute ' has the meaning set forth in Section 19.1. "Disqualified Stock" means any capital stock that, by its terms (or by the term of any security instrument into which it is convertible, or for which it is exchangeable, in each case at the option of the holder of the capital stock), or upon the happening of any event, matures or its mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the capital stock, in whole or in part, on or prior to the date that is ninety- one (91) Calendar Days after the last Calendar Day of the Service Term. "Early Termination Date" has the meaning set forth in Section 14.3.1. 4 "Effective Date" has the meaning set forth in the introductory paragraph hereto. "Energy" means three-phase, 60-cycle alternating current electric energy, expressed in MWh. "Energy Delivery Point' means, for Net Facility Output, the connection on the switchyard side of the generator transformer high voltage air isolator located on the Facility site, and for Substitute Energy, SP-15 or, after the implementation of .the Market Redesign and Technology Upgrade, the load aggregation point(s) for the area in which Buyer serves load, or in each case, such other delivery point as the Parties may agree. In the event that there is a change in Applicable Law that.causes the Energy Delivery Point for Substitute Energy to be inapplicable to Buyer, the Parties shall negotiate in good faith to determine an appropriate replacement Energy Delivery Point for Substitute Energy. "Energy Replacement Price" means the price at which Buyer, acting in a commercially reasonable manner, obtains delivery at the Energy Delivery Point of replacement Energy for any Contract Energy not delivered by Seller, plus (i) costs reasonably incurred by Buyer in purchasing such replacement Energy, including CAISO charges, and (ii) additional transmission charges, if any, reasonably incurred by Buyer to receive such replacement Energy at the Energy Delivery Point, or at Buyer's option, the market price ,at the Energy Delivery Point for such replacement Energy as determined by Buyer in a commercially reasonable manner, less Buyer's avoided cost of fuel (but including costs reasonably incurred by Buyer in connection with reselling or remarketing such fuel); provided however, that in no event shall such price include any penalties, ratcheted demand or similar charges; nor shall Buyer be required to utilize or change its utilization of its owned or controlled assets or market positions to minimize Seller's liability; and provided further that nothing in this Agreement shall diminish any duty to mitigate damages applicable to Buyer under common law: "Equitable Defenses" means any bankruptcy, insolvency, reorganization and other laws affecting creditors' rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending. "Equivalent OperatingHours" has the meaning set forth in the Services Agreement between SiemensDemag Delaval Turbomachinery, Inc., a Delaware corporation, and Buyer, dated September 26, 2007. "Escalation Percentage" means the annual percentage change (rounded to four (4) decimal places) in the Gross Domestic Product Implicit Price Deflator, as reported in the Survey of Current Business published in January of each year, and revised thereafter, by the Bureau of Economic Analysis, United States Department of Commerce, Washington, D.C., ` or any replacement index reasonably agreed upon by the Parties if such index is no longer available; provided, however, that the Escalation Percentage shall not be less then zero. "Event of Default" has the meaning set forth in Section 14.1. "Excess Differential" has the meaning set forth in Section 4.2.2. "Facility" means that certain 134 MW (nominal) gas Fred 2 x 1 combined cycle generating facility located in Vernon, California known as the Malburg Generation Station that is interconnected to Buyer's 66 kV transmission system. "Failure to Pay" has the meaning set forth in Section 14.1.1. "FC" has the meaning set forth in Section 4.2.2. "FERC" means the Federal Energy Regulatory Commission or any successor government agency. "Fixed Energy Price" has the meaning set forth in Section 4.2.1. "Force Majeure" means an event or circumstance which prevents one Party from performing its obligations under this Agreement, which is not within the reasonable control of, or the result of the negligence of, the Claiming Party, and which, by the exercise of due diligence, the Claiming Party is unable to overcome or avoid or cause to be avoided. Force Majeure shall' not be based on (i) the loss of Buyer's markets; (ii) Buyer's inability economically to use or resell the Product purchased hereunder; (iii) Seller's ability to sell the Product at a price greater .than the Contract Price; or (iv) financial hardship. With respect to Net Facility Output, Seller may not raise a claim of Force Majeure based in whole or in part on curtailment by Buyer unless such curtailment is due to an event on Buyer's 66 kV transmission system which, if it occurred under this Agreement, would constitute a Force Majeure. With respect to Substitute Energy, Seller may not raise a claim of Force Majeure based in whole or in part on curtailment by a Transmission Provider unless (i) such Party has contracted for firm transmission with a Transmission Provider for the Product to be delivered to or received at the Delivery Point and (ii) such curtailment is due to "force majeure" or "uncontrollable force" or a similar term as defined under the Transmission Provider's tariff. The existence of the factors set forth in the previous two sentences shall not be sufficient to conclusively or presumptively prove the existence of a Force Majeure absent a showing of other facts and circumstances which in the aggregate with such factors establish that a Force Majeure as defined in the first sentence hereof has occurred. "Fuel Delivery Point" means the first metered control valve located on the west side of the Facility. "Generating Unit" means each of the two combustion turbines and the steam turbine generator comprising the combined -cycle power plant at the Facility. "Good Utility Practice" means the practices, methods and acts engaged in or approved by a significant portion of the energy industry, including Applicable Standards, that, at a particular time, in the exercise of reasonable judgment in light of the facts known or that reasonably should have been known at the time a decision was made, would have been expected to accomplish the desired result in a.manner consistent with law, regulation, reliability,safety, environmental protection,, economy and expedition. "Governmental Authority' means any federal, state, local, municipal, or other governmental, executive, administrative, judicial or regulatory entity, and the CAISO or any M other transmission authority having or asserting jurisdiction over a Party, the Facility or this Agreement. "Governmental Charges" has the meaning set forth in Section 18.2. "Greenhouse Gas" means emissions into the atmosphere of carbon dioxide (CO2), nitrous oxide (N20) and methane (CH4), which are produced as the result of combustion or transport of fossil fuels. Other greenhouse gases may include hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulfur hexafluoride (SF6), which are generated in a variety of industrial processes. Greenhouse gases may be defined, or expressed, in terms of a ton of CO2-equivalent, in order to allow comparison between the different effects of gases on the environment. "Heat Rate Payment/Bonus" has the meaning set forth in Error! Reference source not found.. "HR Ratio" has the meaning set forth in Section 4.2.2. "Initial Term" has the meaning set forth in Section 2.1. "Interest Rate" means, for any date, the lesser of (a) the per annum rate of interest equal to the prime lending rate as may from, time to time be published in The Wall Street. Journal under "Money Rates" on such Calendar Day (or if not published on such Calendar Day on the most recent preceding Calendar Day on which published), plus two percent (2%) and (b) the maximum rate permitted by Applicable Law. "JAMS" means Judicial Arbitration and Mediation Services, Inc, "Laguna Bell Substation" means the 230/66/16 W substation owned by Southern California Edison Company located at the intersection of Gage and Garfield Avenues in the City of Commerce, California. "Lease" means that certain Lease and Grant of Easements dated as of the Effective Date by and between Buyer, as lessor, and Seller, as lessee. "Lender" means any financial institution that provides debt financing or refinancing for the Facility. "Local Reaulatory Authority" has the meaning set forth in the CAISO Tariff. "Losses" means, with respect to any Party, an amount equal to the present value of the economic loss to it, if any (exclusive of Costs), resulting from termination or liquidation of the Agreement, determined in a commercially reasonable manner. "Market Quotation" means an amount, determined on the basis of quotations from Reference Market -Makers, that would be paid to a Non -Defaulting Party, in consideration of an agreement between such Non -Defaulting Party and the quoting Reference Market -Maker for the amount in MWh of the Product delivered at -the Delivery Point for what would have been the remainder of the Service Term, but for the occurrence of the Early Termination Date. 7 "Measured HR" has the meaning set forth in Section 4.2.2. "Meter" means all of the standard instruments(s) and equipment used to measure and record (i) the Energy delivered to Buyer at the Energy Delivery Point, (ii) the Energy delivered to the Facility to serve its own load and (iii) fuel delivered to the Facility at -the Fuel Delivery Point. "Moody's ' means Moody's Investor Services, Inc. or its successor. "MW" means megawatt(s). "MWh" means megawatt-hour(s). "NERC" means of the North American Electric Reliability Council, or any successor organization thereto. "Net Facility Output" means Energy from the Facility delivered to Buyer at the Energy Delivery Point, minus Energy delivered to Seller from the Vernon distribution system to serve internal Facility load. "NGP means any limited partnership, limited liability company or other Person for which NGP Energy Capital Management or any other fund management company that is a successor to, an Affiliate of, or under common control with NGP Energy Capital Management acts as investment manager. "NGP Energy Capital Management" means NGP Energy Capital Management, L.LC., a I. "Non -Defaulting Party" has the meaning -set forth in Section 14.3.1. "Operating Limitations" means the operating limitations of the Facility that are identified on Appendix A to this Agreement. "Option Term" has the meaning set forth in Section 2.1. "Outage Schedule" has the meaning set forth in Section 13.1 "Party" has the meaning set forth in the introductory paragraph hereto. "Person" means an individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization or any Governmental Authority. "PPT" or "Pacific Prevailing Time" means Pacific Standard Time or Pacific Daylight Time, whichever is in effect on the relevant date. "Product" means Adjusted Contract Capacity, Contract Energy, Ancillary Services and Resource Adequacy Benefits. "PSA" means that certain Purchase and Sale Agreement by and among Buyer and Seller dated as of October , 2007. "Real Time Market" has the meaning set forth in the CAISO Tariff. "Reference Conditions" means ambient air temperature of 75 degrees F and relative humidity of 50%. "Reference Market -Makers" means four leading dealers in the relevant market selected by the Non -Defaulting Party in good faith. "Regulatory Event" has the meaning set forth in Section 20.11.1. "Requested Ancillary Services" has the meaning set forth in Section 3.4. . "Required Permits" means all permits, licenses and approvals necessary for the construction, operation and maintenance of each Generating Unit. "Resource Adequacy" has the meaning set forth in California Assembly Bill 380. "Resource Adequacy Benefits" means the rights and privileges attached to any generating resource that satisfy any entity's Resource Adequacy Requirements under any Resource Adequacy Rules. "Resource Adequacy_ Requirements" or "RAR" means. the Resource Adequacy obligations applicable to an entity as set forth in the Resource Adequacy Rules. "Resource Adequacy Rules" means (a) the provisions of CAISO Tariff relating to Resource Adequacy; and/or (b) the Buyer Resource Adequacy Rulings; provided, however, that in the event of any conflict between the terms of the CAISO Tariff provisions and the terms of Buyer Resource Adequacy Rulings, the CAISO Tariff provisions shall govern. "S&P" means the Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.) or its successor. "Scheduling Coordinator" means an entity certified_ by the CAISO for the purposes of undertaking the functions specified in Article X. "Scheduled .Outage'. means a period during which any Generating Unit is not capable of providing service due to planned maintenance that has been scheduled in advance in accordance with the terms and conditions of this Agreement. "SC Replacement Date" has the meaning set forth in Section 10.4. "Section 1368 Requirements" means that Substitute Energy shall comprise no more than. fifteen percent (15%) of the Energy associated with Adjusted Contract Capacity during the Service Term, and shall be procured only (i) if the Facility is unavailable due to a forced outage, scheduled maintenance or other temporary unavailability for operational or efficiency reasons, or M (ii) to meet operating conditions of the Facility such as provisions for the number of start-ups, ramp rates, or minimum operation hours. "Security Documents" means those agreements, documents, instruments or certifications in a form reasonably acceptable to Buyer that grant and perfect Buyer's Subordinated Security Interest. "Seller" has the meaning set forth in the introductory paragraph hereto. "Seller's Debt" means, without duplication, each of the following: (i) all indebtedness of Seller for borrowed money; (ii) all obligations of Seller for the deferred purchase price of property or service, which purchase price is due more than six (6) months after the date of placing such property in service or taking delivery or title thereto or the completion of such services (other than trade payables not overdue by more than ninety (90) Calendar Days incurred in the ordinary course of Seller's business); (iii) all obligations of Seller evidenced by notes, bonds, debentures, Disqualified Stock or other similar instruments; (iv) all obligations of Seller created or arising under any conditional sale or other title retention agreement with respect to property acquired by Seller (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property); (v) all monetary obligations of Seller under (a) a lease of any property (whether, real, personal, or mixed) by Seller as lessee that, in conformity with Generally Acceptable Accounting Principles, is accounted for as a capital lease on the balance sheet of Seller, (b) a so-called synthetic, off - balance sheet or tax retention lease, or (c) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of Seller but which, upon the insolvency or bankruptcy of Seller, would be characterized as indebtedness of Seller (without regard to accounting treatment); (vi) all obligations, contingent or otherwise, of Seller under acceptance, letter of guaranty, letter of credit or similar facilities; (vii) all obligations of Seller with respect to any redeemable equity interests in Seller, including in the case of preferred stock, at the greater of the voluntary or involuntary liquidation preference plus accrued and _unpaid dividends; (viii) all indebtedness of others referred to in clauses (i) through (vii) above guaranteed by Seller, or in effect guaranteed by Seller through an agreement (a) to pay or purchase such indebtedness or to advance or supply funds for the payment or purchase of such indebtedness, (b) to purchase, sell or lease (as lessee or lessor) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such indebtedness or to assure the holder of such indebtedness against loss; (c) to supply funds to or invest in the debtor (including any agreement to pay for property or services irrespective of whether such property is received or such services are rendered), or (d) otherwise to assure a creditor against loss; and (ix) without duplication of the foregoing, all indebtedness referred to in clauses (i) through (viii) above secured by any lien on property (including amounts and contract rights) owned by Seller. The outstanding amount of indebtedness as described above at any date shall be the outstanding balance at such date of all unconditional obligations as described above and, with respect to contingent obligations as described above, the maximum liability upon the occurrence of the contingency giving rise to the obligation. Notwithstanding the foregoing, the term "Seller's Debt" as used herein shall not include (a) Seller's obligations under this Agreement, (b) interest rate hedges entered into by Seller solely for the purposes of hedging and not speculation and (c) debt of a Person other than Seller that (X) is secured by a pledge of the equity interests in Seller and (Y.) is not otherwise an obligation of Seller described in any of clauses (i) through (ix) above. "Seller's Gas Event" means any event, circumstance, change or condition related to the Facility, whether by reason of Force Majeure or otherwise, including, an Unscheduled Outage that may affect the availability of the Facility, or any other operational constraint affecting the Facility that may increase or decrease the fuel requirements of the Facility. A Seller's Gas Event shall not include any event, circumstance, change or condition not related to the Facility or due to any action of the Buyer. "Service Commencement Date" has the meaning set forth in Section 2.2. "Service Term" means the Initial Term and the Option Term, if applicable. "Subordinated Security Interest" has the meaning set forth in Section 17.2. "Substitute Energy" means Contract Energy not produced at the Facility, but delivered to the Buyer at the Energy Delivery Point, which is compliance with the Section 1368 Requirements. . "Tax" means any (i) local tax with respect to: income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property (including assessments, fees or other charges based on the use or ownership of real property), personal property, sales, use, transfer, registration, value added, alternative or add -on minimum, estimated tax, or other tax of any kind whatsoever, including any interest, penalty or addition thereto or (ii) local licensing fees in the nature of taxes. "Termination Payment" has'the meaning set forth in Section 14.4. "Threshold Capacity" has the meaning set forth in Section 5.3. "Transaction" has the meaning set forth in the recitals hereto. "Unscheduled Outage" means a period during which all or part of a Generating Unit is not capable of providing service due to the need to maintain or repair a component thereof,. which period has not been scheduled in advance in accordance with Section 13.1. "Vernon Gas Transportation Tariff' means Schedule G-MGS, Electric Generation Gas Transportation Tariff of the City of Vernon Gas Municipal Utilities Department, or any successor tariff thereto. i "Waived Claims" has the meaning set forth in Section 20.11.2. Section 1.2 Interpretation. In this Agreement, unless a clear contrary intention appears: 11_ Section 1.2.1 The singular number includes the plural number and vice versa; Section 1.2.2 Reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; Section 1.2.3 Reference to any gender includes the other gender; Section 1.2.4 Reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof; Section 1.2.5 Reference to any Article, Section, Schedule or Exhibit means such Article, Section, Schedule or Exhibit to this Agreement, and references in any Article, Section, Schedule, Exhibit or definition to any clause means such clause of such Article, Section, Schedule, Exhibit or definition; Section 1.2.6 "Hereunder," "hereof," ..hereto" and words of similar import are references to this Agreement as a whole and not to any particular Section or other provision hereof or thereof, unless otherwise specified; Section 1.2.7 "Including" (and correlative terms) means "including without limitation" and "including, but not limited to;" Section 1.2.8 Relative to the determination of any period of time, "from" means from and including, to means to but .excluding and through means through and including;" Section 1.2.9 Examples shall not be construedto limit, expressly or by implication, the matter they illustrate; Section 1.2.10 Reference to any law (including statutes and ordinances) means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; Section 1.2.11 Except where the context otherwise requires, "or" shall have the inclusive meaning frequently designated by "and/or" and Section 1.2.12 All capitalized terms used but not defined herein shall have the meaning set forth in the PSA. ARTICLE II TERM; SERVICE COMMENCEMENT DATE Section 2.1 Service Term. The initial term of this Agreement shall commence on the Effective Date and shall terminate fifteen (15) years' following the Service Commencement Date, unless terminated earlier in accordance with the terms and conditions of this Agreement (the "Initial Term"). Seller shall have the option, of its sole and absolute discretion, to extend the 12 term of this Agreement (the "Option Term"); provided, that Seller must give written notice to Buyer of its intent to exercise such option no less than thirty (30) months prior to the expiration of the Initial Term. The Option Term shall commence on the day immediately following the expiration of the Initial Term and shall terminate twenty (20) years following the Service Commencement Date, unless terminated earlier in accordance with the terms and conditions of this Agreement. Section 2.2 Service Commencement Date. Commencement of delivery of the Products under this Agreement shall occur on the date on which the Transaction is consummated (the ""Service Commencement Date"). ARTICLE III OBLIGATIONS AND PRODUCT DELIVERIES Section 3.1 Purchase and Sale Generally. During the Service Term, Seller shall sell and deliver, or cause to be delivered, and Buyer shall purchase and receive, or cause to be received, the Product pursuant to the terms and conditions of this Agreement. Seller represents and warrants that it will deliver the Product to Buyer free and clear of all liens, security interests, claims and encumbrances. Section 3.2 Contract Energy. Seller shall sell and deliver, or cause to be delivered, and Buyer shall purchase and receive, or cause to be received, the Contract Energy dispatched by Buyer pursuant to a Dispatch Notice at the Energy Delivery Point. Section 3.2.1 The amount of Contract Energy under this Agreement shall be equal to, for each Calendar Day during the Service Term, the amount of Energy to be delivered by Seller to the Energy Delivery Point pursuant to the Dispatch Notice for such Calendar Day; provided, however, that Seller shall not be required to deliver Energy to Buyer to the extent any Dispatch Notice would require Seller to exceed or otherwise violate the Operating Limitations. Section 3.2.2 Seller may provide Contract Energy to Buyer through the delivery of Substitute Energy from any source of supply in the market that meets all legal requirements applicable to Buyer and Seller, including the Section 1368 Requirements. Section 3.3 Adjusted Contract Capacity. During the Service Term, Seller shall deliver, or cause to be delivered, to Buyer all of the Capacity of the Facility at the Capacity Delivery Point. If within three (3) years of the Effective Date, Seller successfully implements` the "Prod Mod" by Siemens, as evidenced to Buyer's reasonable satisfaction by an Adjusted Contract Capacity Test pursuant to Section 7.2 of this Agreement, Buyer shall. purchase from Seller any additional Energy and Capacity resulting from the "Prod Mod" implementation at the Contract Price described herein for the remainder of the Service Term, and the Contract Capacity and Adjusted Contract Capacity under this Agreement shall be increased to reflect the results of such Adjusted Contract Capacity Test. Section 3.4 Ancillary Services. By 8:00 am PPT each Business Day, Buyer shall deliver to Seller a notice (the "Ancillary Services Notice") indicating any Ancillary Services requested by Buyer ("Requested Ancillary Services") for each hour of the time period 13 commencing on the next Calendar Day and extending through and including the next Business Day. Seller shall provide to Buyer any Requested Ancillary Services to the extent that no violation of the Operating Limitations of the Generating Units would result therefrom. Seller shall promptly notify Buyer to the extent that the Requested Ancillary Services cannot be provided without violating the Operating Limitations of the Generating Units. Section 3.5 Resource Adeauacv Benefits. Section 3.5.1 Seller grants, pledges, assigns and otherwise commits to Buyer the Adjusted Contract Capacity of the Generating Units in order for Buyer to meet its Resource Adequacy Requirements and, if applicable, local RAR under any Resource Adequacy Rulings. For avoidance of doubt, the Parties acknowledge and agree that Buyer is entitled to all rights, entitlements and benefits that are related to the RAR, including capacity tags, capacity credits, and all Capacity -related products. Section 35.2 Seller represents, warrants and covenants to Buyer that Seller (i) has not used, granted, pledged, assigned or otherwise committed,and (ii) will not use, grant, pledge, assign or otherwise commit any Capacity of the Generating Units to meet the Resource Adequacy Requirements or local RAR of, or confer Resource Adequacy Benefits upon, any entity other than Buyer during the Service Term. Section 3.5.3 Throughout the Service Term, Seller shall take all commercially reasonable actions to execute any and all documents or instruments reasonably necessary to ensure the availability and qualification of each Generating Unit and the Adjusted Contract Capacity to meet Buyer's Resource Adequacy Requirements and Buyer's or CAISO's right to the use each Generating Unit for the benefit of Buyer's Resource Adequacy Requirements. Section 3.5.4 Seller shall be required to implement any change or improvement, including to its operations, a Generating Unit, or the Facility, on or after the Service Commencement Date in order to provide Resource Adequacy Benefits to Buyer pursuant to this Section 3.5.4; provided, however, that, to the extent that capital costs and operating expenses for such change or improvement exceeds $500,000 Buyer shall reimburse Seller for the percentage of the net present value of such costs and expenses equal to: Remaining Contract Years in the Service Term (or fraction thereof) Expected life in years of change or improvement (or fraction thereof) * 100 provided further, that (a) the expected life in years of any change or improvement shall not exceed ten (10) years, (b) Buyer shall have the right to delay, in its sole discretion, such change or improvement, and (c) Buyer shall only be required to make such reimbursement if, in its sole discretion, it agrees that such change or improvement is necessary to provide Resource Adequacy Benefits. Subject to the preceding sentence, the commercially reasonable actions required of Seller pursuant to this Section 3.5.4 may include the following: (a) Cooperating with Buyer, and cooperating with and encouraging the entity or entities responsible for resource adequacy administration, to certify or qualify each Generating 14 Unit and all of the Adjusted Contract Capacity of the Generating Units for Resource Adequacy Requirements purposes, (b) Meeting requirements established in the Resource Adequacy Rules, including demonstration of the ability to deliver all of the Adjusted Contract Capacity over all hours required for full Resource Adequacy Requirements eligibility, and demonstrating that all of the Adjusted Contract Capacity can be delivered pursuant to any deliverability standards established by the Resource Adequacy Rules or other regional entity or entities responsible for Resource Adequacy Requirements administration; (c) Negotiating in good faith to make necessary amendments, if any, to this Agreement to conform this Agreement to subsequent clarifications, revisions or decisions rendered by the entity or entities responsible for Resource Adequacy Requirements administration, so as to maintain the benefits of the bargain struck by the Parties; and (d) Taking all commercially reasonable measures necessary to comply with any applicable requirements for meeting Resource Adequacy Requirements, including by way of example, complying with all requirements associated with the Resource Adequacy Requirements that are imposed through the Resource Adequacy Rules, including, for example, requirements related to bidding and/or dispatch including those imposed for the day -ahead, hour -ahead and real-time markets, installing communication equipment, complying with communication protocols (provided that nothing herein shall require or permit Seller to undertake communications that are the responsibility of the Scheduling Coordinator), making capital improvements and incurring operating expenses, and changing operations. Section 3.6 Exclusivity and Priority. During the Service Term, the relationship between Buyer and Seller with respect to the Products is exclusive. Seller shall not offer, sell or make available any Products to any person other than Buyer or its successors or permitted assigns. Section 3.7 Compliance with Applicable Law. Throughout the Service Term, in order to ensure that Seller is able to -meets it obligations to provide Contract Energy, Adjusted Contract Capacity, Ancillary Services and Resource Adequacy Benefits to Buyer under this Agreement, Seller shall take all actions necessary to remain in compliance with Applicable Law, including compliance with the requirements of Seller's FERC market -based rate authorization. Section 3.8 Transmission, Transmission service for any sales by Seller of Energy or Ancillary Services from --the Facility into the CAISO markets shall be supplied by Vernon pursuant to and consistent with the terms and conditions of that certain Interconnection and Transmission Services Agreement between Seller and Buyer dated as of even date herewith. ARTICLE IV PRODUCT PRICE Section 4.1 Contract Price. The Contract Price paid to Seller for the Product shall consist o£ (a) the Energy Payment calculated in accordance with this Article IV; and (b) the Monthly Capacity Payment calculated in accordance with this Article IV. These charges shall be 15 paid monthly, in arrears, for each month of the Service Term. The Parties acknowledge and agree that the Resource Adequacy Benefits and any Requested Ancillary Services shall be provided at no additional charge to Buyer.' Section 4.1.1 For purposes of Buyer's applicable indentures, the payments made by Buyer to Seller under this Agreement shall, during the term of the applicable indenture agreements and any modifications, renewals, amendments or extensions thereof, constitute operation and maintenance expenses of Buyer, as such term is defined in Buyer's applicable indenture agreements, and Buyer shall be obligated during the terms of the applicable indenture agreements to include in the budget for each fiscal year the costs under this Agreement as operation and maintenance expenses of Buyer, as such term is defined in the applicable indenture agreements. Section 4.2 Energy Payment. The Energy Payment for any period shall mean, for each MWh of Contract Energy delivered to the Energy Delivery Point during such period, the Fixed Energy Price for such period plus the Heat Rate Payment/Bonus for such period, where: Section 4.2.1 The "Fixed Energy Price shall mean $4.37/MWh, which shall be escalated annually starting on January 1, 2009 pursuant to Section 4.4. Section 4.2.2 The "Heat Rate Payment/Bonus" for any period means an amount calculated as follows: Heat Rate Payment/Bonus = the Excess Differential for such period multiplied by the FC for such period. (a) "Differential" means for any period the amount, if any, by which either (i) the HR Ratio for such period exceeds 1.00 or (ii) 1.00 exceeds the HR Ratio for such period. (b) "Delivered Fuel Quantit " means for any period the actual quantity of fuel (in MMBTu) delivered to Seller by Buyer at the Fuel Delivery Point during such period. (c) "Excess Differential" means the amount, if any, by which the Differential exceeds .01 in the event of a Heat Rate Payment or .02 in the event of a Heat Rate Bonus. (d) "FC" means for any period a fuel charge equal to: (i) The total cost of fuel, calculated by multiplying the Delivered Fuel ' Quantity by the average cost of fuel during such period as measured at the Commodity Reference Point; plus (ii) The cost of fuel transportation per MMBtu pursuant to the Vernon Gas Transportation Tariff (or any applicable replacement) multiplied by the Delivered Fuel Quantity during such period. FC shall exclude the cost of fuel necessary for any testing requested by either Party pursuant to Article VII. W41 (e) "HR" means for any period the assumed Base Load heat rate (HHV) of the Generating Units, as set forth in Appendix C; provided, that Appendix C shall be read by the Parties to take into account whether major maintenance actually occurs at the Equivalent Operating Hours projected in Appendix C. If major maintenance occurs at a time other than as projected in Appendix C, the Parties shall reasonably approximate the effects of such timing on the value of HR; and, provided, further that after 120,000 Equivalent Operating Hours Appendix C shall be updated to reflect any additional major maintenance to be performed in a manner reasonably agreed upon by the Parties. (0 "HR Ratio" means for any period an amount equal to Measured HR for such period divided by the HR for such period. "Measured HR" means for any period the Base Load heat rate (HHV) determined pursuant to the most recent Adjusted Contract Capacity Test; provided, however, that if one Party gives the other a notice calling for an Adjusted Contract Capacity Test, then Measured HR from and after the date of such notice shall be the Base Load heat rate (HHV) as determined pursuant to the next following Adjusted Contract Capacity Test. Until such Adjusted Contract Capacity Test is completed, the Measured HR for such period shall equal the prior Measured HR for purposes of calculating the Heat Rate Payment/Bonus; provided, however, that after such Adjusted Contract Capacity Test is completed, any payments made for such period based upon the prior Measured HR for such period shall be adjusted to reflect the Measured HR from such Adjusted Contract Capacity Test. Section 4.3 Capacity Payent The Monthly Capacity Payment shall mean, for the Contract Capacity: Section 4.3.1 $5.00/kW-month from the Service Commencement Date until the end of the Service Term, escalated annually pursuant to Section 4.4.plus Section 4.3.2 $4.00/kW-month from July. 1, 2010 until the end of the Service Term, escalated annually pursuant to Section 4.4; .plus Section 4.3.3 $5.00/kW-month from July 1, 2011 until the end of the Service Term, escalated annually pursuant to Section 4.4; plus Section 4.3.4 $10.00/kW-month from July 1, 2016 until the end of the Service Term, escalated annually pursuant to Section 4.4; plus Section 4.3.5 From the Service Commencement Date until > June 30, 2008, an amount per kW -month of up to $11,250,000 for 134,000 kW, paid per kW -month in equal , monthly installments commencing with the first calendar month after the Service Commencement Date, plus Section 4.3.6 $5.60/kW-month from July 1, 2008 until June 30, 2009; plus Section 4.3.7 $7.46/kW-month from July 1, 2009 .until June 30, 2010; plus Section 4.3.8 $4.35/kW-month from July 1, 2010 until June 30, 2011. 17 Section 4.4 Escalation. The Fixed Energy Price and the Monthly Capacity Payment shall be escalated annually by the Escalation Percentage. Section 4.5 Costs and Charges. Seller shall be responsible for any costs or charges imposed on or associated with the Contract Energy (including any Substitute Energy) or Adjusted Contract Capacity, or delivery thereof, 'including transmission and congestion costs, up to the applicable Delivery Point. Buyer shall be responsible for any costs or charges imposed on or associated with the Contract Energy (including any Substitute Energy) or Adjusted Contract Capacity, or the receipt thereof, including transmission and congestion costs, at and from the applicable Delivery Point. ARTICLE V REMEDIES, FOR FAILURE TO DELIVER OR RECEIVE Section 5.1 Failure to Deliver Contract Energy. If during any calendar month Seller fails to deliver the Contract Energy (or to the extent Seller's Availability Notices are less than the Available Capacity) after taking into account Scheduled Outages and any other failure to deliver Contract Energy otherwise excused under the terms of this Agreement or by Buyer's failure to perform, then Seller shall pay Buyer, on the date payment would otherwise be due in respect of the month in which the failure occurred, an amount equal to the positive difference, if any, obtained by subtracting the Energy Payment from the Average Energy Replacement Price, multiplied by the MWh of Contract Energy not delivered in such month; provided, however; that during any period that Seller delivers Ancillary Services to Buyer at Buyer's request that reduce the Facility's ability to provide the full amount of Contract Energy, Seller shall be excused from delivering that portion of the Contract Energy that Seller was not able to deliver as a result of its delivery of such Ancillary Services. Notwithstanding the foregoing, Seller shall not be required to make such payment to Buyer if Seller has provided Buyer in such calendar month at least 97% of the Energy associated with the Adjusted Contract Capacity as long as the Threshold Capacity is at least 97% of the Adjusted Contract Capacity for such month. The invoice for such amount shall include a written statement explaining in reasonable detail the calculation of such amount. Section 5.2 Failure to Receive Contract Energy. If Buyer fails to accept all or part of the Contract_ Energy, and such failure is not excused under the terms of this Agreement or by Seller's failure to perform, then Buyer shall pay Seller, on the date payment would otherwise be due in respect of the month in which the failure occurred, within five (5) Business Days of invoice receipt, an amount equal to the Energy Payment, multipliedby the MWh of Contract Energy not accepted in such month. Section 5.3 Failure to Deliver Adjusted Contract Capacity. If the average Available Capacity in Seller's Availability Notices (as adjusted to Available Capacity at Reference Conditions) in a given month '(the "Threshold Capacity") falls below 97% of the Adjusted Contract Capacity, the following provisions shall apply: Section 5.3.1 If Seller's Threshold Capacity for the month prior to such month was not below 97% of the Adjusted Contract Capacity, then Seller shall be subject to a 1% reduction in its Monthly Capacity Payment for such month for each percent (or fraction thereof) below the 97% threshold; 18 Section 5.3.2 If Seller's Threshold Capacity for the month prior to such. month was below 97% of the Adjusted Contract Capacity, then Seller shall be subject to a 1.5% reduction in its Monthly Capacity Payment for such month for each percent (or fraction thereof) below the 97% threshold; and Section 5.3.3 If Seller's. Threshold Capacity for the two consecutive months prior to such month was below 97% of the Adjusted Contract Capacity, then, beginning with the following month, Seller's obligation to deliver Adjusted Contract Capacity and the Contract Capacity for which Seller is paid, each shall be reduced on a pro, rata basis for each unavailable MW (or fraction thereof) below the 97% threshold. Section 5.3.4 Pursuant to Section 7.2, Seller may request an Adjusted Contract Capacity Test at any time following the reductions set forth in Section 5.3.3, and Seller's obligation to deliver Adjusted Contract Capacity, and the Contract Capacity for which Seller is paid, each may be increased on a pro rata basis to the extent that such an Adjusted Contract Capacity Test demonstrates that Seller can achieve such increased levels; provided, however, that, subject to the provisions in Section 3.3 regarding the "Prod Mod,"Adjusted Contract Capacity shall not be increased above the degradation schedule set forth in Appendix B, and Contract Capacity shall not be increased above 134 MW.' ARTICLE VI FORCE MAJEURE Section 6.1 Force Majeure. To the extent either Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under this Agreement (except failure to pay any sums due under this Agreement) with respect to a Product, and such Party (the "Claiming Party") gives notice and details of the Force Majeure to the other Party as soon as practicable, then, unless the terms of the Product specify otherwise, the Claiming Party shall be excused from the performance of its obligations under this Agreement with respect to such Product (other than the obligation to make payments then due or becoming due with respect to performance prior to the Force Majeure). The Claiming Party shall remedy the Force Majeure with all reasonable dispatch. The non -Claiming Party shall not be required to perform its obligations to the Claiming Party corresponding to the obligations of the Claiming Party excused by. Force Majeure. If and when the. Facility is restored, it shall: undergo an Adjusted Contract Capacity Test and the Parties shall be subject to Section 7.3. For the avoidance of doubt, in the event of a Force Majeure that prevents Seller from performing its obligations under this Agreement with respect to the Product, Buyer shall not be obligated to make any payments to Seller with respect to such Product. Section 6.2 Termination. If and to the extent that the Claiming Party is unable to overcome a Force Majeure and resume performance of its obligations under this Agreement within six (6) months after such performance is interrupted, the non -Claiming Party may terminate this Agreement without any further obligation (other than the obligation to make payment in respect of performance rendered prior to such termination and any other obligation that survives in accordance with Section 20.8). 19 ARTICLE VII TESTING Section 7.1 Testing. The Parties may, at their own expense, including all fuel costs, and at times and for durations reasonably agreed to by Buyer, conduct testing of the Facility, including the Adjusted Contract Capacity Tests discussed below, subject_ to Section 7.2. Seller shall provide Buyer with reasonable notice no later than three (3) Business Days before any such testing, and Buyer shall be entitled to witness any such testing. Section 7.2 Adjusted Contract Capacity Test. On an annual basis during the Service Term, Seller shall schedule and complete a test of the Facility's Capacity in order to determine whether the Facility is operating at Reference Conditions in accordance with PTC 46 and the schedule set forth on Appendix B and to determine the Measured HR ("Adjusted Contract Capacity Tesf'). Such annual Adjusted Contract Capacity Test shall be conducted at Seller's expense. In addition to the annual Adjusted Contract Capacity Test, each Party, at its expense; shall have the right to request one (1) additional Adjusted Contract Capacity Test per year at a' time to be reasonably agreed upon by the Parties. Each Party shall be entitled, at their own expense, to hire an independent engineer mutually agreed upon by the Parties to witness and oversee any Adjusted Contract Capacity Test to confirm the accuracy of the results. For purposes of this Section 7.2, it shall not be unreasonable for Buyer to withhold its consent to any testing from June 1 through October 31 in any given year, unless otherwise required by. a Governmental Authority. Section 7.3 Effect of Adjusted Contract Capacity Test. As the result of an Adjusted Contract Capacity Test, the Adjusted Contract Capacity then in effect shall be adjusted to reflect the demonstrated Capacity of the Facility, and the Contract Capacity for which Seller is paid shall be adjusted on a pro rata basis; provided, however, that, subject to the provisions in Section 3_3 regarding the "Prod Mod," Adjusted Contract Capacity shall not be increased above the degradation schedule set forth in Appendix B, and Contract Capacity shall not be increased above 134 MW. ARTICLE VIII OPERATIONS AND MAINTENANCE Section 8.1 Seller's Operation Obligations. Section 8.1.1 Seller shall operate the. Facility in accordance with Applicable Law, Required Permits and Good Utility Practice. Section 8.1.2 Seller shall maintain a daily operations log for the Facility which shall include information on power production, fuel consumption and efficiency, availability, maintenance ` performed, outages, changes in operating status, inspections and any other significant events related to the maintenance and operation of the Facility. In addition, Seller shall maintain all records applicable to the Facility, including the electrical characteristics of the generators and settings or adjustments of the generator control equipment and protective devices. Information maintained pursuant to this Section 8.1.2 shall be provided to Buyer within fifteen (15) Calendar Days of Buyer's request for such information. KIM Section 8.1.3 Seller shall comply with all reporting requirements and permit on - site audits, investigations, tests and inspections permitted or required under any Applicable Law. Section 8.1.4 Seller shall comply with all Applicable Standards and shall be responsible for all costs and charges. relating to the implementation of, or penalties for the failure to comply with, the same. Section 8.1.5 During the Service_ Term, Seller shall employ only appropriately - qualified (determined in Seller's reasonable opinion consistent with applicable industry standards) personnel for the purposes of operating and maintaining the Facility. Section 8.2 Seller's Maintenance and Repair Obligations. Section 8.2.1 Seller shall inspect, maintain and repair the Facility, and any ` portion thereof, in accordance with Applicable Law, the Required Permits and Good Utility Practice. Section 8.2.2 Seller shall promptly make all necessary repairs to each Generating Unit, and any portion thereof, and take all commercially reasonable actions necessary in order to provide the Contract Energy, Adjusted Contract Capacity, Ancillary Services and Resource Adequacy Benefits to Buyer in accordance with the terms of this Agreement. Section 8.3 Records. In addition to the daily operating logs required pursuant to Section 8.2.1, Seller shall keep and maintain accurate and complete records for the Generating Units and the Facility during the Service Term and for a period of two (2) years thereafter in a manner consistent with Good Utility Practice, Applicable Law, and standards and guidelines adopted from time to time by Governmental Authorities, NERC or the CAISO, including information documenting or relating to the operation and maintenance of the Generating Units and the Facility and all associated equipment and each Generating Unit's Adjusted Contract Capacity Tests. Information maintained pursuant to this Section 8.3 shall be provided to Buyer within fifteen (15) Calendar Days of Buyer's request for such information. ARTICLE IX TOLLING AND FUEL Section 9.1 Tollin . Seller's obligation to deliver Products dispatched by Buyer shall be contingent upon Buyer delivering and paying for fuel sufficient to provide such Products ,-to Seller, including providing and paying for start-up fuel, and fuel required for the annual test contemplated by Section 7.2; ,provided, however, that Seller shall reimburse Buyer for Buyer's actual cost of fuel used in connection with failed start-ups. During any period in which the average Available Capacity in .a given month is less than the Adjusted Contract Capacity due to derating or shutdown necessitated by low fuel pressure in Buyer's fuel distribution system or Buyer fails to deliver fuel, there shall be no reduction in Seller's Monthly Capacity Payment or any other charge to Seller, nor shall Seller be subject to Section 5.1 with respect to any Energy that cannot be delivered as a result of such derating or shutdown. At the request of Buyer, Seller shall provide Buyer with written evidence of the operational procedures to be followed by Seller 21 in accordance with Good Utility Practice to avoid any damage to the Facility or reduction of the average Available Capacity in the event of low fuel pressure or Buyer's failure to provide fuel. Section 9.2 Title and Risk of Loss. As between the Parties, Buyer will be deemed to have exclusive control and possession of the fuel delivered under this Agreement and be responsible for any damage or injury caused thereby before the fuel is delivered to the Fuel Delivery Point. At and after delivery of the fuel to the Fuel Delivery Point, as between the Parties, Seller will be deemed to have exclusive control and possession of the fuel and be responsible for any damage or injury caused thereby. Each Party shall indemnify, defend and . hold harmless the other Party from and against any claims arising from or out of any event, circumstance, act or incident first occurring or existing during the period when control and title to the natural fuel is vested in such Party in accordance with the foregoing. Section 9.3 Seller's Gas Events. Seller shall notify Buyer immediately upon learning of the occurrence of a Seller's Gas Event.. Upon receiving such notification, Buyer shall use commercially reasonable efforts to manage its gas supply and transportation arrangements for the purpose of minimizing daily or monthly pipeline or system pool imbalance charges or penalties resulting from such Seller's Gas Event. Subject to the foregoing, Seller shall pay to Buyer the amount of any imbalance penalties incurred by Buyer, as reasonably determined by Buyer, as a result of any Seller's Gas Events. ARTICLE X SCHEDULING COORDINATOR Section 10.1 Buyer Scheduling Coordinator. Prior to the beginning of the Service Term, Seller shall take all actions to execute and deliver to Buyer and the CAISO all documents necessary to authorize or designate Buyer as Seller's Scheduling Coordinator for all Energy and Ancillary Services from the Facility effective as of the Service Commencement Date in accordance with the requirements of the CAISO Tariff. During the Service Term, Seller shall. not authorize or designate any other party to act as Seller's Scheduling Coordinator, nor shall Seller perform for its own benefit the duties of Scheduling Coordinator, and Seller shall not revoke Buyer's authorization to act as Scheduling Coordinate unless agreed to . in writing by Buyer; provided, however, that Seller may designate an alternate Scheduling Coordinator for the Facility in the event that the CAISO terminates CAISO's SchedulingCoordinator Agreement with Vernon as a result of Vernon's default under such Scheduling Coordinator Agreement. Buyer shall submit schedules and bids to the CAISO in accordance with CAISO Tariff protocols for each Generating Unit, and provide such other services described in this Article X. Section 10.2 Scheduling Coordinator Obligations. Buyer shall submit all required notices and updates regarding each Generating Unit's status to the CAISO, including outage reports, and shall perform all other obligations required of a Scheduling Coordinator, pursuant to the CAISO Tariff. Seller shall cooperate with Buyer to provide all such notices and updates and otherwise perform its obligations as Scheduling Coordinator under the CAISO Tariff. Section 10.3 CAISO Costs and Revenues. Except as set forth in this Agreement, Buyer shall be responsible for CAISO costs (including penalties and other charges) and receive CAISO revenues (including credits and other . payments) incurred as a result of providing 22 Scheduling Coordinator services, including costs and revenues associated with CAISO dispatches. Except in the event of a Force Majeure, Seller shall be responsible for all CAISO charges incurred as a consequence of the Generating Units not being available as scheduled or Seller not notifying Buyer of outages in a timely manner. Section 10.4 Terminating Buyer's Designation as Scheduling Coordinator. At least thirty (30) Calendar Days prior to the earlier of (i) the expiration of the Service Term, or (ii),an. Early Termination Date, regardless of which Party designated it, the Parties will take all actions necessary to terminate the designation of Buyer as Scheduling Coordinator for the Generating Units as of 11:59 p.m. on such date ("SC Replacement Date"). The necessary actions include the following: (a) Seller shall (i) submit to the CAISO a designation. of. a new Scheduling Coordinator for the Facility to replace Buyer effective as of the SC Replacement Date and (ii) cause its newly -designated Scheduling Coordinator to submit a letter to the CAISO accepting the designation; and (b) Buyer shall submit a letter to the CAISO resigning as Scheduling Coordinator for the Facility effective as of the SC Replacement Date. Seller bears sole responsibility for locating, selectingand reaching agreement about terms with any replacement Scheduling Coordinator. , Section 10.5 CAISO Sanctions. If during the Service Term, the CAISO implements or has implemented any sanction or penalty related to scheduling, metering, outage reporting, or generator operation, and any such sanctions or penalties imposed on the Generating Unit or on Buyer as Scheduling Coordinator are due to the actions or inactions of Seller, the cost of the sanctions or penalties shall be the Seller's responsibility. ARTICLE XI DISPATCH NOTICES AND OPERATING LIMITATIONS Section 11.1 Availability Notice. During the Service Term, no later than two (2) Business Days before each schedule date for the Day -Ahead Market in accordance with CAISO scheduling practices, Seller shall provide Buyer with an hourly schedule of the Available Capacity that the Facility is expected to have for each hour of such Calendar Day, which may be updated pursuant to this Agreement and, if the Facility is not fully available, Seller shall state whether it will provide, and in, what amount, Substitute Energy that meets all legal requirements applicable to both Parties' from the .CAISO market (the "Availability Notice'). The Availability Notice shall include the Available Capacity for the relevant period and the ambient conditions (i.e., temperature and relative humidity) projected for such Calendar Day by an independent, verifiable.,, third party source mutually agreed upon by the Parties. Seller will notify Buyer immediately if the Available Capacity of the Facility may change after Buyer's receipt of an Availability Notice. To the extent that, in any hour, there is a variation of actual ambient conditions in such hour from the projected ambient conditions, there shall be no reduction in the Monthly Capacity Payment -solely as a result of such variation due to ambient. conditions.. Seller shall accommodate Buyer's reasonable requests for changes in the time of delivery of Availability Notices. Seller shall provide Availability Notices using the form attached hereto as Appendix D by (in order of preference) electronic mail, facsimile transmission or, telephonically to Buyer's personnel designated to receive such communications. Each Party shall provide written notices to the other Party of the contact information for such Party's personnel' designated to send and receive such communications, as such designated personnel may change from time 23 to time. In the event that Seller provides Contract Energy through the delivery of Substitute Energy, the Parties shall take all steps necessary to schedule and confirm such,sale. Section 11.2 Dispatch Notice. Buyer shall have the right to direct Seller to dispatch the Facility in the Day Ahead Energy Market by providing Dispatch Notices to Seller electronically (in the forms attached hereto as Appendix E) by 8:00 am PPT for each hour of the time period commencing on the next Calendar Day and extending through and including the next Business Day, subject to the Availability Notice and the Operating Limitations. Subject to Section 10.3, each Dispatch Notice will be effective unless and until Buyer modifies such Dispatch Notice by providing Seller with an updated Dispatch Notice. if an electronic submittal is not possible for reasons beyond Buyer's control,Buyer may provide Dispatch Notices by (in order of preference) electronic mail, facsimile transmission, or telephonically to Seller's personnel designated to receive such communications, as provided. by Seller in writing. In addition to any other requirements set forth or referred to in this Agreement, all Dispatch Notices will be made in accordance with the CAISO Tariff. Section 11.3 Dispatch Notice Updates. Buyer shall have the right to update its Dispatch Notice to dispatch the Facility in the Real Time Market no later than three (3) hours and fifteen (15) minutes prior to a given operating hour, consistent with the CAISO Tariff. Section I f.4 Operating Limitations. If Buyer submits a Dispatch Notice that does not conform with the Operating Limitations or the Availability Notice, then Seller shall notify Buyer of the non -conformity and Buyer will modify its Dispatch Notice to conform to the applicable Operating Limitation and Availability Notice. Until such time as Buyer submits a modified Dispatch Notice, Seller shall deliver the Contract Energy in accordance with the Operating Limitations, and the Availability Notice. Any charges, costs or penalties incurred until such time as Buyer submits a modified Dispatch Notice shall be the responsibility of Buyer. Section 11.5 Writing Requirements. Both Parties hereby consent to the recording by tape or other electronic means of conversations between the Parties' personnel and contractors for the purposes of documenting and confirming Dispatch Notices, which recording the Parties agree will satisfy any "writing" requirement under Applicable Law. Section 11.6 Communications Protocols. The Parties shall coordinate and develop mutually -agreeable communication protocols to facilitate exchange of information between the Parties with respect to Availability Notices, Dispatch Notices and operations. Section 11.7 Operating Records. Seller shall, for five (5) years or such longer period as and to the extent required by any Applicable Law, keep and maintain accurate and detailed records relating to the Facility's hourly Available Capacity and the scheduling and delivery of Energy and Ancillary Services. Information maintained pursuant to this Section 11.7 shall be provided to Buyer within fifteen (15) Calendar Days of Buyer's request for such information. 24 ARTICLE XII - METERING Section 12.1 Ownership, Operation and Maintenance of Meters. Seller shall own, and at its sole expense, operate and maintain the Meter during the Service Term. Seller shall exercise reasonable care in the operation and maintenance of the Meter so as to assure to the maximum extent reasonably practical an accurate determination of such quantities. , Section 12.2 Meter Reading. Seller shall read the Meter at the end of each calendar month, and shall record the Net Facility Output and the Delivered Fuel Quantity. The Meter shall be used as the basis for calculating the Energy Payment for Net Facility Output and Delivered Fuel Quantity for the Heat Rate Payment/Bonus under this Agreement. The records from each Meter shall be made available to Buyer on a monthly basis by the tenth (10`h) Calendar Day of the next month so that Buyer may reconcile its monthly invoice with the Meter reading. Section 12.3 Alternatives in Event of Non -Operability. In the event the Meter is out of service or registers inaccurately, the measurement of the Meter shall be determined by the following alternatives, in the following order: (a) any alternative or back-up meter that Seller may have installed, if registering accurately; (b). a mathematical calculation if upon a calibration test of such Meter a percentage error is ascertainable; or (c) estimates of deliveries of Net Facility Output or fuel by reference to quantities measured during periods of similar conditions when such Meter was registering accurately. Section 12.4 Calibration. Seller shall provide calibration testing of the Meter, by an independent third party consultant retained by the Seller, at least annually to ensure the accuracy of such Meter. Buyer may request that Seller perform more frequent testing; any such testing in excess of the minimum once -per -year tests shall be at Buyer's expense. Buyer shall be entitled to witness all such calibration tests. Section 12.4.1 If upon testing, any Meter is found to be accurate or in error by not more than plus or minus one quarter of one percent (.25%) for electricity meters and three -tenths of one percent (0.3%) for gas meters, then previous recordings of such Meter shall be considered accurate in computing deliveries of Net Facility Output or Delivered Fuel Quantity, as applicable, hereunder, but such Meter shall be promptly adjusted to record correctly. Section 12.4.2 If, upon testing, any Meter shall be found to be inaccurate by an amount exceedingplus or minus one quarter of one percent (.25%) for electricity meters and three -tenths of one percent (0.3%) for gas meters, then such Meter shall be promptly adjusted to record properly and any previous recordings by such Meter, shall be corrected to zero error as set forth.. If no reliable information exists as to the period over which such Meter registered inaccurately, it shall be assumed for correction purposes hereunder that such inaccuracy began at a point in time midway between the testing date and the last previous date on which such Meter was tested and found to be accurate. Section 12.4.3 If upon testing, any Meter is found to be in error by more than plus or minus one quarter of one percent (.25%) for electricity meters and three -tenths of one percent 25 (0.3%) for gas meters, then the payments for Net Facility Output or Heat Rate Payment/Bonus, as applicable, made since the previous test of such Meter shall be adjusted to reflect the corrected measurements determined and the next invoice sent to Buyer shall be corrected to reflect such adjustment. Section 12.5 Shared Access and Meter Data. The Parties shall each have shared access to Meter data and all other Facility data available through the distributed controls system, the continuous emissions monitoring system or other such systems, including, with respect to fuel, data regarding fuel nominations, confirmation, allocations and usage, and with respect to Product, data regarding Net Facility Output, gross output to the Energy Delivery Point and Energy used to serve internal Facility load. Seller shall take all actions and execute all documents reasonably necessary to 'grant Buyer access to such information,such as confirmations and meter readings. The cost of any improvements necessary to facilitate such access shall be borne by Buyer. Additionally, prior to the fifth day of each month, Seller shall provide to Buyer copies of the Net Facility Output and Delivered Fuel Quantity for the previous month. ARTICLE XIII OUTAGES Section 13.1 Scheduled Outages. Not later than April 1 and October 1 of each Contract Year during the Service Term, Seller shall submit to Buyer Seller's schedule of proposed Scheduled Outages ("Outage Schedule") for the following twenty-four (24)-month period, in a form reasonably agreed to by Buyer. Within twenty (20) Business Days after its receipt of the Outage Schedule, Buyer shall notify Seller in writing of any reasonable request for changes to the Outage Schedule, and Seller shall, consistent with Good Utility Practice, accommodate Buyer's requests regarding the timing of any Scheduled Outage. Seller shall cooperate with Buyer to arrange and coordinate all Outage Schedules with the CAISO. Seller shall. communicate to Buyer all changes to a Scheduled Outage and estimated time of return of each Generating Unit as soon as practicable after the condition causing the change becomes known to Seller. Scheduled Outages that will equal more than 168 hours in any calendar month must be agreed to and coordinated in advance between the Parties. In no event shall Scheduled Outages exceed 336 hours during any Contract Year; provided, however, that the Facility may schedule a major overhaul every 20,000 Equivalent Operating Hours, during which Contract Year Scheduled Outages shall not exceed 672 hours. Section 13.2 Affect of Scheduled Outages on Delive.;;r�bligations. Seller shall be excused from the obligation to sell and deliver, or cause to be delivered, Contract Energy, Adjusted Contract Capacity and/or Ancillary Services for time periods in which the Facility is subject to a Scheduled Outage. Section 13.3 No Scheduled Outages During Summer Months. Except as otherwise explicitly permitted herein, no outages shall be scheduled or planned from each June 1 through October31 during the Service Term.. In the event that Seller has a previously Scheduled Outage that : becomes coincident with a CAISO-declared system emergency, Seller shall make all reasonable efforts to reschedule such Scheduled Outage. Section 13.4 Notice of Unscheduled Outages. Seller shall notify Buyer by telephoning Buyer's operations center no later than ten (10) minutes following the occurrence of an Unscheduled Outage, or if Seller has knowledge that an Unscheduled Outage will occur, within twenty (20) minutes of determining that such Unscheduled Outage will occur. Seller shall communicate to Buyer the estimated time of return of each Generating Unit as soon as practicable after Seller has knowledge thereof.. Any sanctions, charges or penalties imposed on Buyer as Seller's Scheduling Coordinator due to Seller's failure to timely provide Buyer with a report of a Scheduled Outage or Unscheduled Outage, shall be the responsibility of Seller. Section 13.5 Inspection. In the event of an Unscheduled Outage, Buyer shall have the option to inspect any Generating Unit and all records relating thereto on any Business Day and at a reasonable time, and Seller shall reasonably cooperate with Buyer during any such inspection. Buyer shall comply with Seller's safety and security rules and instructions during any inspection, and shall not interfere with work on or operation of the Generating Unit. Section 13.6 Reports of Outages. Seller shall promptly prepare and provide to Buyer all reports of Scheduled Outages and Unscheduled Outages that Buyer may reasonably require, including for the purpose of enabling Buyer to comply with CAISO requirements or any Applicable Law. ARTICLE XIV EVENTS OF DEFAULT; REMEDIES Section 14.1 Events of Default. An "Event of Default" shall mean, with respect to a Party (a "Defaulting Party"); the occurrence of any of the following: Section 14.1.1 The failure by such Party to make, when due, any payment required pursuant to this Agreement if such failure is not remedied within ten (10) Business Days after written notice from the other Party ("Failure to Pav"); Section 14.1.2 Any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made or repeated; Section 14.1.3 The unexcused failure to perform. any material covenant or obligation set forth in this Agreement (except to the extent constituting a separate Event of Default, and except for such Party's obligations to deliver or receive the Product, the exclusive remedy for which is provided in Article V and Section 14.2.1 and its implementing provisions) if such failure is not remedied within fifteen (15) Business Days after written notice Section 14.1.4 Such Party becomes Bankrupt ("Bankruptcy Event"); or Section 14.1.5 Such Party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all of its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee entity fails to assume all the obligations of such Party under this Agreement to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other Party. 27 Section 14.2 Seller Events of Default. An Event of Default shall also mean, with respect to Seller (as the "Defaulting Party"), the occurrence of any of the following: Section 14.2.1 Unless otherwise excused by the terms of this Agreement, the failure of the Generating Units to maintain a Capacity rating of at least 75% of the Contract Capacity on average for a period of twenty-four (24) consecutive months for any reason; provided, however, that the Seller shall continue to be subject to the provisions governing the failure to delivery Adjusted Contract Capacity, in Section 5.3; . Section 14.2.2 The failure to provide and maintain credit support pursuant to the terms of this Agreement; or Section 14.2.3 Seller sells Products, or enters into a contract to sell Products, to any entity other, than Buyer. Section 14.2.4 Seller assigns this Agreement in violation of Error! Reference source not found.. Section 14.3 Declaration of an Early Termination Date. Section 14.3.1 If a Failure to Pay or a Bankruptcy Event with respect to a Defaulting Party shall have occurred and is continuing,' the other Party (the "Non -Defaulting Party") shall have the right to designate an early termination date (`Early Termination Date"), upon twenty (20) Calendar Days written notice to the Defaulting Party. Section 14.3.2 If an Event of Default with respect to a Defaulting Party other than a Failure to Pay or a Bankruptcy Event shall have occurred and be continuing, the Non - Defaulting Party shall have the right to declare an Early Termination Date, upon 120 Calendar Days prior notice to the Defaulting Party; provided, however, that such prior notice period shall. be extended by an additional sixty (60) Calendar Days if and to the extent that the Defaulting Party (or, in the case of Seller, a Lender acting on behalf of Seller) is diligently attempting to cure such Event of Default. If an Event of Default is cured prior to the Early Termination Date, then such Early Termination Date shall expire, and no associated Termination Payment shall be owed. Section 14.4 Termination Payment. As of the Early Termination Date, the Agreement shall terminate and the Non -Defaulting Party shall calculate the amounts owing between the Parties as of the Early Termination Date (the "Termination'` -Pument"). The Termination Payment shall equal the Non -Defaulting Party's Losses (plus its Costs) (as defined below), -with respect to the Product and shall be owed and paid to the Non -Defaulting Party; provided, however, that the Non -Defaulting Party's Losses shall be calculated, in relevant part, based upon a Market Quotation. - Section 14.5 Notice of Payment of Termination Payment. As soon as practicable after the Early Termination Date, notice shall be given by the Non -Defaulting Party to the Defaulting Party of the amount of the Termination Payment. The notice shall include a written statement explaining in reasonable detail the calculation of such amount. The Termination Payment shall be made by the Defaulting Party within ten (10) Business Days after such notice is effective. 28 Section 14.6 Disputes With Respect to Termination Payment. If the Defaulting Party disputes the Non -Defaulting Party's calculation of the Termination Payment, in whole or in part, the Defaulting Party shall, within ten (10) Business Days of receipt of Non -Defaulting Party's calculation of the Termination Payment, provide to the Non -Defaulting Party a detailed written explanation of the basis for such dispute; provided, however, that the undisputed portion of the Termination Payment shall be paid in accordance with Section 14.5. Section 14.7 Suspension of Performance and Other Remedies. Notwithstanding any other provision of this Agreement, if an Event of Default shall have occurred and be continuing, the Non -Defaulting Party, upon written notice to the Defaulting Party, shall have the right (i) to suspend performance under this Agreement (including but not limited to any withholding any payments due to the Defaulting Party under this Agreement); provided, however, in no event shall any such suspension continue for longer than ten (10) Business Days unless an Early Termination Date has been declared and notice thereof pursuant to Section 14.3.1 given; and (ii) to the extent an Event of Default shall have occurred and be continuing, to exercise any remedy available at law or in equity. ARTICLE XV PAYMENT AND BILLING Section 15.1 BillingPeriod. The calendar month shall be the standard period for all payments under this Agreement (other than a Termination Payment). As soon as practicable after the end of each month, each Party.will render to the other Party an invoice for the payment obligations, if any, incurred hereunder during the preceding month. Section 15.2 Timeliness of Pa pent. All invoices under this Agreement shall be due and payable in accordance with each Party's invoice instructions on. or before the later of the twentieth (20th) Calendar Day of each month, or tenth (loth) Calendar Day after receipt of the invoice or, if such Calendar Day is not a Business Day, then on the next Business Day. Each Party will make payments by electronic funds transfer, or by other mutually agreeable method(s), to the account designated by the other Party. Any amounts not paid by the due date will be deemed delinquent and will accrue interest at the Interest Rate, such interest to be calculated from and including the due date to but excluding the date the delinquent amount is paid in full. Section 15.3 Disputes and Adjustments of Invoices..A Party may, in good faith,. dispute the correctness of any invoice or any adjustment to an invoice, rendered under this Agreement or adjust any invoice for any arithmetic or computational error within twelve (12) months of the date the invoice, or adjustment to an invoice, was rendered. In the event an ' invoice or portion thereof, or any other claim or adjustment arising hereunder, is disputed, payment of the. undisputed portion of the invoice shall be required to be made when due, with notice of the objection given to the other Party. Any invoice dispute or invoice adjustment shall be in writing and shall state the basis for the dispute or adjustment. Payment of the disputed amount shall not be required until the dispute is resolved. Upon resolution of the dispute, any required payment shall be made within two (2) Business Days of such resolution along with interest accrued at the Interest Rate from and including the due date to but excluding the date paid. Inadvertent overpayments shall be returned upon request or deducted by the Party receiving such overpayment from subsequent payments, with interest accrued at the Interest Rate WE from and including the date of such overpayment to but excluding the date repaid or deducted by the Party receiving such overpayment. Any dispute with respect to an invoice is waived unless the other Party is notified in accordance with this Section 15.3 within twelve (12) months after the invoice is rendered or any specific adjustment to the invoice is made. If an invoice is not rendered within twelve (12) months after the close of the month during which performance occurred, the right to payment for such performance is waived. Section 15.4. Netting of Payments: The Parties hereby agree that they shall discharge debts and payment obligations due and owing to each other under this Agreement on the same date through netting, in which case all amount& owed by each Party to the other Party for the purchase and sale of Product during the monthly billing period under this Agreement, interest, and payments or credits, shall be netted so that only the excess amount remaining due shall be paid by the Party who owes it. Section 15.5 Payment Obligations Absent Netting. If no mutual debts or payment obligations exist and only one Party owes a debtor obligation; to the other during the monthly billing period, including interest and payments or credits, that Party shall pay such sum in full when due. ARTICLE XVI LIMITATIONS Section 16.1 Limitation of Remedies, Liability and Damages. EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR R BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR'S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND. ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN, THE OBLIGOR'S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED; NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST. PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO 30 DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. ARTICLE XVII CREDIT SUPPORT Section 17.1 Financial Information. If requested by a Party, the other Party shall deliver: (a) within 180 Calendar Days following the end of each fiscal year, a copy of its (and, if applicable, its Guarantor's) annual report containing audited consolidated financial. statements for such fiscal year; and (b) within 120 Calendar Days after the end of each of its first three fiscal quarters (or half -year, if applicable) of each fiscal year, a copy of its (and, if applicable, its Guarantor's) quarterly (or half -yearly, if applicable) report containing unaudited consolidated financial statements for such fiscal quarter (or half -year, if applicable). In all cases the statements shall be for the most recent accounting period and prepared in 'accordance with generally accepted accounting principles; provided, however, that should any such statements not be available on a timely basis due to a delay in preparation or certification, such delay shall not be an Event of Default so long as the producing Party diligently pursues the preparation, certification and delivery of the statements. Section 17.2 Subordinated Security Interest and Mortgage. Section 17.2.1 Grant of Subordinated Security Interest. Prior to the Service Commencement Date, to secure Seller's performance of its obligations under this Agreement, Seller and Buyer, as the case may be, shall each execute, deliver, file and record, as appropriate, separate agreements, documents, or instruments under which Seller will grant to Buyer, in a form reasonably acceptable to Buyer, fully perfected security interests and/or mortgage liens in the Facility and in any and all real and personal property rights, contractual rights, or other rights that Seller requires in order to own and operate the Facility (collectively, the "Subordinated Security Interest'). The lien of the Subordinated Security Interest shall be subordinate only to the senior lien of the Lenders and upon request of Seller, Buyer will execute a subordination agreement in favor of Lender(s) on terms consistent with this Section 17.2.1, which subordination agreement may, if so requested, be in a form appropriate for recording or filing; provided, however, that nothing contained therein shall limit Buyer's rights and remedies in respect of Buyer's right to receive the payment of money or other performance in accordance with this Agreement and Buyer may exercise its rights and remedies in accordance with the terms hereof (other than through the exercise of any remedy relating to any Subordinated Security Interest). The Subordinated Security Interest shall not include the pledge or assignment of any ownership interest in Seller. Section 17.2.2 Other Actions By Seller. All costs of executing,. delivering, filing, and recording the Security Documents shall be at Buyer's expense. The Security Documents in respect of the Subordinated Security. Interest shall contain financial and operating covenants intended to preserve and maintain the value of the Subordinated Security Interest substantially similar to those in favor of Lender. In addition, Seller authorizes Buyer to file such Uniform Commercial Code financing statements and to take such further action and execute such further instruments as shall reasonably be required by Buyer to confirm and continue the validity, 31 priority, and perfection of the Subordinated Security Interest. The granting of the Subordinated Security Interest shall not be to the exclusion of, nor be construed to limit the amount of any further claims, causes of action or other rights accruing to Buyer by reason of any Event of Default by Seller or Early Termination Date. The Subordinated Security Interest shall be discharged and released, and Buyer shall take any steps reasonably required by Seller to effect and record such discharge and release, upon the expiration of the Term and satisfaction by Seller of all of its obligations hereunder. Seller shall reimburse Buyer for its reasonable costs associated with the discharge and release of the Subordinated Security Interest. Section 17.2.3 Transfer of Required Permits. The Security Documents with respect to the Subordinated Security Interest shall provide that, subject to the prior senior lien of Lenders, if Buyer acts to obtain title to the Facility pursuant to the exercise of remedies thereunder, Seller shall take all steps necessary, to legally transfer all authority to dispatch the operations of each Generating Unit as required by its Required Permits to Buyer as necessary for Buyer to operate the Facility, and shall. diligently prosecute and cooperate in such transfers. Section 17.3 Debt Covenant. Seller shall not create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable for, contingently or otherwise, any Seller's Debt in excess of (i) as of the Effective Date, $273,600,000; (ii) for the period commencing with the fifth anniversary, through the tenth anniversary of the Service Commencement Date $290,700,000; (iii) for the final five (5) years of the Service Term, excluding the Option Term, $307,800,000, and (iv) for the Option Term, $324,900,000. ARTICLE XVIII GOVERNMENTAL CHARGES Section 18.1 Cooperation. Each Party shall use reasonable efforts to implement the provisions of and to administer this Agreement in accordance with the intent of the Parties to minimize all taxes, so long as neither Party is materially adversely affected by such efforts. Section 18.2 Governmental Charges. Seller shall pay or cause to be paid all taxes imposed by any Governmental Authority ("Governmental Charges") on or with respect to the Product arising prior to the Delivery Point. Buyer shall pay or cause to be paid all Governmental Charges on or with respect to the Product at and from the Delivery Point (other than franchise or income taxes which are related to the sale of the Product and are, therefore; the responsibility of the Seller, but including any sales and use taxes, if any, which are the responsibility of Buyer). In the event Seller is required by Applicable.Law. to remit or pay Governmental Charges which are Buyer's responsibility hereunder, Buyer shall promptly reimburse Seller for such Governmental Charges. If Buyer is required by Applicable Law to remit or pay Governmental Charges which are Seller's responsibility hereunder, Buyer may deduct the amount of any such Governmental Charges from the sums due to Seller under Article XV of this Agreement. Nothing shall obligate or cause a Party to pay or be liable to pay any Governmental Charges for which it is exempt under Applicable Law. Section 18.3 Greenhouse Gas Charges. Notwithstanding anything to the contrary in Section 18.2, Buyer shall reimburse Seller for newly -imposed taxes, charges or fees (which shall include the costs of any carbon, Greenhouse Gas or similar emissions credits) for Greenhouse 32 Gas attributable to Energy supplied to Buyer from the Generating Units, within forty-five (45) Calendar Days of Buyer's receipt: from Seller of documentation establishing to Buyer's reasonable satisfaction: (i) that Seller is actually liable for the tax, charge or fee for Greenhouse Gas attributed to the operation of the Generating Units during the Service Term; (ii) that the tax, .charge, or fee was not effective or scheduled to become effective as of the Effective Date; (iii) the. specific amount of the tax, charge, or fee; (iv) that the tax, charge or fee was imposed upon Seller by an authorized Governmental Authority in which: the Generating Units are located, or which otherwise has jurisdiction over Seller or the Generating Units; (v) that Seller has paid such tax, charge or fee; (iv) the full amount of the tax, charge or fee for which Seller seeks reimbursement from Buyer under this Section 18.3;'and (vi) that Seller took all reasonable steps to mitigate the cost or amount of such tax, charge or fee, provided, however, that such reasonable steps shall not be deemed to require Seller to make capital improvements to the Generating Unit. ARTICLE XIX DISPUTE RESOLUTION Section 19.1 Dispute Resolution. Any and all disputes, claims or controversies arising out of, relating to, concerning or pertaining to the terms of this Agreement,or to either Party's performance or failure of performance under. this Agreement ("Dispute'), which Dispute the Parties have been unable to resolve by informal methods after undertaking a good faith effort to do so, shall first be submitted to an informal dispute resolution under the procedure described in Section 19.2 below; if the matter is not resolved through' such procedures, it shall be referred for final and binding arbitration under the procedures described in Section 19.3. Section 19.2 Informal Resolution. Any unresolved Disputes shall initially be referred to Buyer's City Administrator, or designee, and President of Seller for resolution. Such executives or their respective designees shall meet at least once; and shall negotiate -in a commercially reasonable manner for a period of fifteen (15)- Business Days in an effort to resolve the Dispute. Neither Party shall seek to commence any litigation or arbitration proceeding without first satisfying this Section 19.2. and any failure of a Party to do so shall constitute a sufficient basis for termination without prejudice to any proceeding so attempted. Section 19.3 Arbitration. Either Party may initiate binding arbitration with respect to the Dispute by making a written demand for binding arbitration before an arbitrator that is a former judge or attorney with experience resolving major commercial disputes within the electric industry with JAMS, its successor, or any other mutually agreeable arbitrator (the "Arbitrator") at any time following the unsuccessful conclusion of the informal resolution provided for in Section 19.2. The Parties will cooperate with one another in promptly selecting the Arbitrator and in scheduling the arbitration to commence no later than 180 Calendar Days from the date of the initial written demand for binding arbitration. If, notwithstanding their good faith efforts, the. Parties are unable to agree upon a mutually acceptable Arbitrator, the Arbitrator shall be appointed as provided for in California Code of Civil Procedure Section 1281.6. Upon a Party's written demand for binding arbitration, such Dispute, including the determination of the scope or applicability of this agreement to arbitrate, shall be determined by binding arbitration before the Arbitrator, in accordance with the laws of the State of California, without regards to principles of conflicts of laws. Except as provided for herein; the arbitration shall be conducted by the Arbitrator, in accordance with the rules and procedures for arbitration of complex business 33 disputes for the organization with which the Arbitrator is associated; absent the existence of such rules ,and procedures, the arbitration shall be conducted in accordance with the California Arbitration Act, California Code of Civil Procedure Section 1280 et seq. However, notwithstanding the rules and procedures that would otherwise apply to the arbitration, and unless the Parties agree to a different arrangement, the place of the arbitration shall be in Los Angeles County, California, each side in the arbitration shall be entitled to take up to three depositions, and all direct testimony in the arbitration shall be submitted in the form of affidavits or declarations under penalty of perjury. Each Party shall cooperate in making available for cross-examination at the arbitration hearing its witnesses whose direct testimony has been so submitted. Judgment on the award may be entered in any court having jurisdiction. The Arbitrator shall, in any award, allocate all of the costs of the binding arbitration (other than each Party's individual attorneys' fees and costs related to the Party's participation in the arbitration, which fees and costs shall be borne by such Party), including the fees of the Arbitrator, against the Party who did not prevail. Until such award is made, however, the Parties shall share equally in paying the costs of the arbitration. Section 19.4 Waiver of Jury Trial. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LITIGATION ARISING UNDER THIS AGREEMENT. ARTICLE XX MISCELLANEOUS' Section 20.1 . Representations and Warranties. Each Party represents and warrants to the other Party that: Section 20.1.1 It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; Section 20.1.2 As of the Service Commencement Date, it has all regulatory authorizations necessary for it to legally perform its obligations under this Agreement; Section 20.1.3 The execution, delivery .and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; Section 20.1.4 This Agreement, and each other document executed and delivered in accordance with this Agreement, constitutes its legally valid and binding obligation enforceable against it in accordance with its terms, subject to any Equitable Defenses; Section 20.1.5 It is not Bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would resultin it being or becoming Bankrupt; Section 20.1.6 There is not pending or, to its knowledge, threatened against it or any of its Affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement; 34 Section 20.1.7 No Event of Default with respect to it has occurred and is continuing, and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement; Section 20.1.8 It is acting for its own account, has made its own independent decision to enter into this Agreement and as to whether this Agreement is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Agreement; Section 20.1.9 It is a "forward contract merchant" within the meaning of the United States Bankruptcy Code; and Section'20.1.10 It has entered into this Agreement in connection with the conduct of its business and it has the capacity or ability to make or take delivery of the Product. Section 20.2 Title and Risk of Loss. Title to and risk of loss for Contract Energy shall pass from Seller to Buyer at the Energy Delivery Point, and title to and risk of loss for Adjusted Contract Capacity shall pass from Seller to Buyer at the Capacity Delivery Point. Section 20.3 Indemnity. Each Party shall indemnify, defend and hold harmless the other Party from and against any Claims arising from or out, of any event, circumstance, act or incident first occurring or existing during the period when control and title to Product is vested in such Party as provided in Section 20.2. Each Party shall indemnify, defend and hold harmless the other Party against any Governmental Charges for which such Party is responsible under Article XVIII. Section 20.4 Assignment. Section 20.4.1 This Agreement is binding upon and inures to the benefit of the successors and assigns of the Parties. However, neither Party shall Assign this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, except that Seller may Assign this Agreement to an Affiliate or to its financing sources for collateral purposes without the prior written consent of Buyer. Any such Assignment is conditioned on the assignee's agreement in writing to assume the assigning Party's duties and obligations under this Agreement.. Any Assignment to an Affiliate effected in accordance with this Section 20.4.1 shall not relieve the assigning Party of its obligations and liabilities under this Agreement. For purposes of this Section 20.4.1. "Assign" or "Assignment" means any .direct or indirect assignment, subcontracting or other transfer of this Agreement, including, with respect to Seller, any change of control of Seller; provided, however, that "Assign" or "Assignment" shall not include any transaction if after giving effect to such transaction NGP and/or Paul B. Prager directly or indirectly control the Facility. Section 20.4.2 Seller shall have the right to assign this Agreement to a Lender as collateral for any debt financing or refinancing relating to the Facility. Buyer shall execute a consent to collateral assignment substantially in the form attached as Exhibit F to the PSA. 35 Section 20.5 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH PARTY WAIVES I.TS RESPECTIVE RIGHT TO ANY JURY TRIAL WITH RESPECT TO ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT. Section 20.6 Notices. Notices (other than scheduling requests) shall, unless otherwise specified herein, be in writing and may be delivered by hand delivery, United States mail, overnight courier service or facsimile. Notice by facsimile or hand delivery shall be effective at the close of business on the Calendar Day actually received, if received during business hours on a Business Day, and otherwise shall be effective at the close of business on the next Business Day. Notice by overnight United States mail or courier shall be effective on the next Business . Day after it was sent. A Party may change its notice information by providing notice of same in accordance herewith. If to Buyer: City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 Attn: Director of Light & Power Department With a copy to: City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: .(323) 826-1438 Attn: City Attorney and Latham & Watkins LLP 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Attn: David B. Rogers, Esq. Facsimile: (213) 891-8163 36 If to Purchaser: Beowulf (Vernon) Power, LLC Attn: President 103 North Washington Street Easton, MD 21601 Facsimile: 410-770-9705 With copies to Chadbourne & Parke LLP Attn: Robert Shapiro 1200 New Hampshire Ave., N.W. Washington, DC 20036 Facsimile: (202) 974-5602 Section 20.7 Entire Agreement. This Agreement (including the appendices and any written supplements hereto), any designated credit support or similar arrangement between the Parties constitute the entire agreement between the Parties relating to the subject matter of this Agreement. Section 20.8 Obligations Surviving Termination. Except as may be provided or limited by this Agreement, the obligations which by their nature are intended to survive termination of this Agreement, including representations, warranties, covenants and rights and obligations with respect to audits, indemnification, payment and settlement and confidentiality, shall so survive. Section 20.9 Amendment. This Agreement shall be considered for all purposes as prepared through the joint efforts of the parties and shall not be construed against one party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof. Except to the extent herein provided for, no amendment or modification to this Agreement shall be enforceable unless reduced to writing and executed by both Parties. Each Party agrees if it seeks to amend any applicable wholesale power sales tariff during the term of this Agreement, such amendment will not in any way affect this Agreement without the prior written consent of the other Party. Each Party further agrees that it will not assert, or defend itself, on the basis that any applicable tariff is inconsistent with this Agreement. Section 20.10 No Waiver. No waiver of any of the terms and conditions of this Agreement shall be effective unless in writing and signed by the Party against whom such waiver is sought to be enforced. Any waiver of the terms hereof shall be effective only in the specific instance and for the specific purpose given. The failure of a Party to insist, in any instance, on the strict performance of any of the terms and conditions hereof shall not be construed as a waiver of such Party's right in the future to insist on such strict performance. Section 20.11 Regulatory Review. 37 Section 20.11.1 Any provision declared or rendered unlawful by any applicable court of law or regulatory agency or deemed unlawful because of a statutory change (individually or collectively, such events referred to as "Regulatory Event") will not otherwise affect the remaining lawful obligations that arise under this Agreement; provided, however, that if a Regulatory Event occurs, the Parties shall use their best efforts to reform this Agreement in order to give effect to the original intention of the Parties. Section 20.11.2 To the fullest extent permittedby Applicable Law, each Party, for itself and its successors and assigns, hereby knowingly, voluntarily, expressly, completely and irrevocably waives any rights it has or may have, now or in the future, whether under Sections 205 or 206 of the Federal Power Act or otherwise, notwithstanding any subsequent changes in Applicable Law or market conditions that may occur, to seek or support by any means, directly or indirectly (through complaint, claim, suit, investigation or otherwise), and each Party hereby covenants and agrees that it will not seek unilaterally from the FERC or any other authority an order or relief of any kind amending or changing' any provision of this Agreement (including any transaction hereunder) specifying the rate, charge, classification, or other term or condition agreed to by the Parties, or granting any refunds with respect to a change or proposed change: (i) under any standard of review, including the "just and reasonable" standard; or.(ii) based upon a contention that: (x) the wholesale market in which this Agreement was made was not competitive or appropriately functional, (y) either Party had the ability to compel the other Party, to agree to or otherwise accept a rate, term or condition that did not reflect the then -current market rate, term or condition for this Agreement; and/or (z) that it was not just and reasonable (collectively, "Waived Claims"). Section 20.11.3 Notwithstanding the foregoing, in the event that a standard of review is undertaken by the FERC or any other authority in respect of any unilateral request for a change to any rate, charge, classification, term or condition of this Agreement or any part thereof or any individual purchase and sale transaction hereunder, whether proposed by a Party, -a non- party or the FERC acting sua sponte, the Parties stipulate and agree that the applicable standard of review shall be the strictest standard of review permissible to preserve the intent of the Parties pursuant to this Section 20.11 to uphold the sanctity of this Agreement and each of its terms to the maximum extent possible under Applicable Law, Section 20.12 Insurance. Seller shall procure at its own expense and maintain in full force and effect, with responsible insurance carriers authorized to do business in the State of California, insurance policies in at least the minimum amounts, and in accordance with the terms and conditions, specified in the Lease. Section 20.13 Headings and Captions. The headings and captions used herein are for convenience and reference- purposes only. This Agreement shall be binding on each Party's successors and permitted assigns. Section 20.14 No Third Party Beneficiaries. This Agreement shall not impart any rights enforceable by any third party (other than a permitted successor or assignee bound by this Agreement). 38 Section 20.15 Audit. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Agreement. If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payment thereof will be made promptly and shall bear interest calculated at the Interest Rate from the date the overpayment or underpayment was made until paid; provided, however, that no adjustment for any statement or payment will be made unless objection to the accuracy thereof was made prior to the lapse of twelve (12) months from the rendition thereof, and thereafter any objection shall be deemed waived. Section 20.16 Forward Contract, The Parties acknowledge and agree that this Agreement constitutes a "forward contract" within the meaning of the United States Bankruptcy, Code. Section 20.17 Construction of Agreement. Ambiguities or uncertainties in the wording of this Agreement shall not be construed for or against any Party either, on account of such Party having drafted or provided any language in this Agreement or otherwise, and shall be construed in accordance with the fair meaning of this Agreement. Section 20.18 Counterparts. This Agreement maybe executed and delivered by the Parties in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. Section 20.19 Confidentiality. Neither Party shall disclose the terms or conditions of this Agreement to a third party (other than the Party's employees, lenders, counsel, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential) except in order to comply with any Applicable Law (including the California Public Records Act and any law of similar effect), or any exchange, control area or independent system operator rule or in connection with any court or regulatory proceeding; provided, however, each Party shall, to the extent practicable, use reasonable efforts to prevent or limit the disclosure. The Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with, this confidentiality obligation. Section 20.20 No Immunity Claim. Buyer warrants and covenants that with respect to its contractual obligations hereunder and performance thereof, it will not claim immunity on the grounds of sovereignty or similar grounds with respect to itself or its revenues or assets from (a) suit, (b) jurisdiction or court (including a court located outside the jurisdiction of its organization), (c) relief by way of injunction, order for specific performance or recovery of property, (d) attachment of assets, or (e) execution or enforcement of any judgment. [Signature page follows] 30 IN WITNESS WHEREOF, the duly authorized representatives of the Parties each have executed this Agreement, effective as of the date first above written. BEOWULF (VERNON) POWER, LLC, as Seller I: Name: Title: THE CITY OF VERNON, as Buyer Name: Title: 40 APPENDIX A OPERATING LIMITS Start-ups: Maximum: Each CT is limited to one start per Calendar Day Start-up Notification Lead Time: 12 minutes for CT purge Startup Time: Cold Startup from: 2 hours to emissions compliance Hot Startup: 1 hour to emissions compliance Ramp Rate: 3 MW/min for CT Operations Heat Input: 520.62 mmBtu/hr HHV per each unit (CT and duct burner) Heat Input: 73.4 mmBtu/hr LHV per each duct burner MGS is limited to 330 mmscf per month per unit Minimum Dispatch Level: Minimum Dispatch Level: 95 MW Appendix B Output Degradation Schedule EVAP EVAP on DF on DF on off Power Power Output Output EOH MW S MW's 0 134.00 120.00 5000 132.66 118.80 10000 131.99 118.20 15000 131.05 117.36 20000 130.65 117.00 20001 131.32 117.60 30000 130.65 . 117.00 40000 129.98 116.40 40001 131.32 117.60 50000 129.98 116.40 60000 128.64 115.20 60001 129.98 116.40 70000 128.77 115.32 80000 127.57 114.24 80001 129.31 115.80 90000 127.97 114.60 100000 127.03 113.76 100001 127.57 114.24 110000 126.36 113.16 120000 125.96 112.80 LAU 782698A Appendix C Heat Rate Degradation Schedule EVAP EVAP on DF on no on Heat DF Heat Rate Rate HHV HHV EOH BTUAW BTU1kW 0 7689 7343 5000 7743 7394 10000 7797 7446 15000 7827 7475 20000 7843 7490 20001 7804 7453 30000 7843 7490 40000 7881 7527 40001 7804 7453 50000 7858 7505 60000 7920 7563 60001 7843 7490 70000 7881 7527 80000 7958 7600 80001 7881 7527 90000 7943 7585 100000 7997 7637 100001 7958 7600 110000 8012 7651 120000 8035 7673 APPENDIX D FORM OF AVAILABILITY NOTICE Operating Day: Station: Unit: Unit 100% Available No Restrictions: Issued By: Issued At: Hour Ending Available Capacity Temperature / RH Minimum Output AGC Available AGC Min Limit ACC Max Limit Comments (Mµ') (MW)(aonAGC) YES/NO (MW) (MW) 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00 Comments: Operating Day: Station: Unit: APPENDIX E FORM OF DISPATCH NOTICE Issued By: Issued At: Hour Ending Scheduled Energy AGC Scheduled Regulation Up Regulation Down Spinning Reserve Non -Spinning Reserves Comments (MW) YES/NO (MW) (MW) (MW) (MW) 1:00 2:00 3:00 4M 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 0:00 Comments: r� EXHIBIT H INTERCONNECTION AND TRANSMISSION SERVICES AGREEMENT BETWEEN THE CITY OF VERNON AND BEOWULF (VERNON) POWER LLC TABLE OF CONTENTS ARTICLE1. DEFINITIONS.....................................................................................................................2 ARTICLE 2. EFFECTIVE DATE, TERM AND TERMINATION.......................................................6 2.1 Effective Date...................................::.:...............:....:........:..............:..:...................... ......... 6 2.2 ................... Term of Agreement........................................................................... ...............6 2.3 Termination Procedures......................................................................................................6 2.3.1 Written Notice........................................................................................................6 2.3.2 Default...................................................................................................................6 2.4 Termination Costs...............................................................................................................6 2.5 Disconnection......................................................................................................................7 2.6 .............................................................................. Survival .............................. ...................7 ARTICLE 3. SCOPE OF SERVICE.........................................................................................................7 3.1 Interconnection Service.......................................................................................................7 3.2 Commencement of Interconnection Service.......................................................................7 3.3 Performance Standards........................................................................................................7 3.4 Transmission Service..........................................................................................................7 3.4.1 Rate for Service.......................................................................................................8 , 3.4.2 Modification of Service..........................................................................................8 3.4.3 Daily Schedules......................................................................................................8 3.4.4 Output.....................................................................................................................8 3.5 Station Power ..................... :................................................................................................ 8 3.6 MGS Owner Provided Services..........................................................................................8 ARTICLE 4. TESTING AND INSPECTION...........................................................................................9 4.1 Testing and Modifications.......................................................................................I...........9 4.2 Right to Observe 'Testing......................................................................................................9 4.3 Right to Inspect...................................................................................................................9 ARTICLE5. METERING..................................................................................... ............................9 5.1 General.................................................................................. ........................9 5.2 Check Meters.......................................................................................................................9 5.3 Vernon Retail Metering.......................................................................................................9 5.4 Products.............................................................................................................................10 5.5 Adjustments.......................................................................................................................10 ARTICLE6. COMMUNICATIONS.......................................................................................................10 6.1 MGS Owner Obligations...................................................................................................10 6.2 Remote Terminal Unit....................................................................:..................................10 6.3 No Annexation..................................................................................................................10 ARTICLE 7.OPERATIONS...................................................................................................................11 7.1 General...................:.................................................................................I........................ II 7.2 Vernon Obligations...........................................................................................................11 7.3 MGS Owner Obligations...................................................................................................11 7.4 Reactive Power...............................................:..................................................................11 7.4.1 Power Factor Criteria...........................................................................................11 7.4.2 Voltage Schedules................................................................................................11 7.5 Outages and Interruptions.................................................................................................12 7.5.1 Outages.................................................................................................................12 7.5.2 Interruption of Service.........::..............................................................................12 7.5.3 Under -Frequency and Over Frequency Conditions..............................................13 7.5.4 System Protection and Other Control Requirements............................................13 7.5.5 Requirements for Protection.................................................................................14 7.5.6 Power Quality.......................................................................................................14 7.6 Switching and Tagging Rules .............................................: ............... 7.7 Purpose of Interconnection Facilities................................................................................15 7.8 Disturbance Analysis Data Exchange...............................................................................15 ARTICLE 8. MAINTENANCE...............................................................................................................15 8.1 Vernon Obligations...........................................................................................................15 8.2 MGS Owner Obligations...................................................................................................15 8.3 Coordination......................................................................................................................15 .8.4 Secondary Systems............................................................................................................15 8.5 Operating and Maintenance Expenses...............................................................................15 ARTICLE 9. PERFORMANCE OBLIGATION...................................................................................15 9.1 MGS Owner's Interconnection Facilities..........................................................................15 9.2 Vernon's Interconnection Facilities..................................................................................15 ARTICLE10. INVOICE..........................................................................................................................15 10.1 General ................... ...........................................................................................................15 10.2 Losses................................................................................................................................16 10.3 Payment.............................................................................................................................16 10.3.1 Nonpayment.........................................................................................................16 10.4 Disputes.............................................................................................................................16 ARTICLE 11. EMERGENCIES.......................................................................:......................................16 11.1 Obligations........................................................................................................................16 11.2 Notice..................................................................................... 11.3 Immediate Action...............................................................:..............................................17 11.4 Vernon Authority..............................................................................................................17 11.4.1 General17 11.4.2 Reduction and Disconnection ... :........................................................................... 17 11.5 MGS Owner Authority................................................................... ......................17 11.6 Limited Liability................................................................................................................18 ARTICLE 12. REGULATORY REQUIREMENTS AND GOVERNING LAW...............................18 12.1 Regulatory Requirements..................................................................................................18 12.2 Governing Law..................................................................................................................18 ARTICLE13. NOTICES..........................................................................................................................18 13.1 General..............................................................................................................................18 112 Billings and Payments.......................................................................................................18 13.3 Alternative Forms of Notice..............................................................................................18 13.4 Operations and Maintenance Notice......................................:..........................................18 ARTICLE 14. FORCE MAJEURE.........................................................................................................19 14.1 Force Majeure.....................................................................................:..............................19 ARTICLE 15. DEFAULT.........................................................................................................................19 15.1 Default .................. :...................... ....................................................................... I .............. 19 15.1.1 General19 15.1.2 Right to Terminate........................................................................................ ..19 ARTICLE 16. INDEMNITY, CONSEQUENTIAL DAMAGES AND INSURANCE .......................19 16.1 Indemnity...............................................................................................19 16.1.1 Indemnified Party.................................................................................................20 16.1.2 Indemnifying Party...............................................................................................20 16.1.3 Indemnity Procedures...........................................................................................20 16.2 Consequential Damages....................................................................................................20 16.3 Insurance............................................................................................................21 ARTICLE17. ASSIGNMENT.................................................................................................................21 17.1 Assignment........................................................................................................................21 ARTICLE 18. SEVERABILITY..............................................................................................................21 18.1 Severability...............................................................................................I............ .........21 ARTICLE 19. CONFIDENTIALITY.....................................................................................................21 19.1 Confidentiality ........... ........................................... ......... ......... ..........................21 19.1.1 Term 22 19.1.2 Scope 22 19.1.3 Release of Confidential Information....................................................................22 19.1.4 Rights 22 19.1.5 No Warranties......................................................................................................22 19.1.6 Standard of Care....................................................:..............................................22 19.1.7 Order of Disclosure ...................................... .....`.... ....23 19.1.8 Termination of Agreement...................................................................................23 19.1.9 Remedies.................................:.................:..........................................................23 19.1.10 Disclosure to Governmental Authority, its Staff, or a State.................................23 ARTICLE 20. ENVIRONMENTAL RELEASES..................................................................................24 ARTICLE 21. INFORMATION REQUIREMENTS............................................................................24 21.1 Information Acquisition....................................................................................................24 21.2 Information Submission by Vernon..................................................................................24 21.3 Information Supplementation............................................................................................24 ARTICLE 22. INFORMATION ACCESS AND AUDIT RIGHTS.....................................................25 22.1 Information Access............................................................................................................25 22.2 Reporting of Non -Force Majeure Events ..........................................................................25 22.3 Audit Rights......................................................................................................................25 22.4 Audit Rights Periods.........................................................................................................25 22.5 Audit Results.....................................................................................................................25 ARTICLE 23. SUBCONTRACTORS.....................................................................................................25 23.1 General............................................................................................................... ...........25 23.2 Responsibility of Principal................................................................................................26 23.3 No Limitation by Insurance...............................................................................................26 ARTICLE24. DISPUTES........................................................................................................................26 24.1 Submission........................................................................................................................26 24.2 External Arbitration Procedures........................................................................................26 24.3 Arbitration Decisions........................................................................................................26 24.4 Costs..................................................................................................................................27 ARTICLE 25. REPRESENTATIONS, WARRANTIES AND COVENANTS 27 25.1 General..............................................................................................................................27 25.1.1 Good Standing ........................... :........................................................................... 27 25.1.2 Authority..............................................................................................................27 25.1.3 No Conflict...........................................................................................................27 25.1.4 Consent and Approval..........................................................................................27 ARTICLE 26. MISCELLANEOUS.........................................................................................................27 26.1 Binding Effect...................................................................................................................27 26.2 Conflicts............................................................................................................................27 26.3 Rules of Interpretation.......................................................................................................27 26.4 Entire Agreement..............................................................................................................28 26.5 No Third Party Beneficiaries.............................................................................................28 26.6 Waiver...............................................................................................................................28 26.7 Headings............................................................................................................................28 26.8 Multiple Counterparts........................................................................................................28 26.9 Amendment.......................................................................................................................28 26.10 Modification by the Parties .................. :............................................................................ 29 26.11 No Partnership....................................................................................................................29 26.12 Joint and Several Obligations............................................................................................29 Appendices.............................................................................................................................................30 Part A Interconnection Facilities Part B Addresses for Delivery of Notices and Billings INTERCONNECTION AND TRANSMISSION SERVICES AGREEMENT BETWEEN CITY OF VERNON AND BEOWULF (VERNON) POWER LLC THIS INTERCONNECTION AND TRANSMISSION SERVICES AGREEMENT (this "ITSA") is made and entered into this day of , 20_ (the "Effective Date"), by and between Beowulf (Vernon) Power LLC, a Delaware limited liability corporation ("MGS Owner"), and the City of Vernon, a municipal corporation and chartered city duly organized and existing under and by virtue of the Constitution and the laws of the State of California ("Vernon'). MGS Owner and Vernon each may be referred to as a "Party" or collectively as the "Parties. RECITALS A. Pursuant to that certain Purchase and Sale Agreement dated September _, 2007 ("PSA"), MGS Owner intends to acquire, own and operate the 134 MW (nominal) gas Fired 2 x 1 combined cycle generating facility located in Vernon, California known as the Malburg Generating Station (the "GeneratingFacility'). acility'). B. Vernon and MGS Owner are parties to that certain Lease and Grant of Easements dated as of the date hereof, as may be amended or extended from time to time ("Lease"), for certain realproperty associated with the Generating Facility. C. Vernon and MGS Owner are parties to a Power Purchase and Tolling Agreement dated as of the date hereof, as it may be amended from time to time (the "PPTA"), and upon consummation of Vernon's sale, and MGS Owner's acquisition, of the Generating Facility, MGS Owner will provide for the sale and delivery of certain products to Vernon from the Generating Facility: D. After the PPTA Termination Date, MGS Owner may desire to sell Products to a third party through the ISO Grid. E. Vernon operates the Distribution System and has contractual rights to deliver energy to the ISO Grid at the Receiving Point. F. MGS Owner and Vernon have agreedto enter into this ITSA for the purpose of interconnecting the Generating Facility with the Distribution System and to set forth the terms and conditions pursuant to which Vernon will provide firm transmission service to MGS Owner for the transmission of Products from the Generating Facility to the Receiving Point after the PPTA Termination Date. NOW THEREFORE, in consideration of the mutual obligations and undertakings set forth herein, the parties to this ITSA covenant and agree as follows: ARTICLE 1. DEFINITIONS When used in this ITSA with initial capitalization, the following terms shall have the meanings specified in this Article 1. When used in this ITSA, terms with initial capitalization that are not defined in this Article 1 shall have the meanings specified in the Article in which they are used. Affiliate shall mean, with respect to a Person, any other Person that (a) directly or indirectly controls the specified Person; or (b) is controlled by or is under direct or indirect common control with the specified Person. For the purposes of this definition, "control," when used with respect to any specified Person, means the power to direct the management or policies of the specified Person, directly or indirectly; whether, through the ownership of voting securities, partnership or limited liability company interests, by contract or otherwise. Ancillary Services shall have the meaning set forth in the ISO Tariff. Applicable Laws and Regulations shall mean all duly promulgated and applicable federal, state and local laws, regulations, rules, ordinances, codes, decrees, judgments, directives, or judicial or administrative orders, permits and other duly authorized and applicable actions of any Governmental Authority. Applicable Reliability Council shall mean the Western Electricity Coordinating Council or its successor. Applicable Reliability Standards shall mean the requirements and guidelines of NERC, the Applicable Reliability Council, and the ISO. Breach shall mean the failure of a Party to perform or observe any material term or condition of this ITSA. Breaching Party shall mean a Party that is in Breach of this ITSA. Business Day shall mean any Calendar Day except a Saturday, Sunday, or legal holiday in the State of California. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. PPT. Calendar Day shall mean the period of twenty-four (24) consecutive hours, beginning at 12:00 midnight PPT. Capacity shall mean the maximum dependable operating capability of a generating resource to produce or generate Energy or Ancillary Services. Confidential Information shall mean any confidential, proprietary or trade secret information of a plan; specification, pattern, procedure, design, device, list, concept, policy or compilation relating to the present or planned business of a Party, which is designated as. confidential by the Party supplying the information, whether conveyed orally, electronically, in writing, through inspection, or otherwise, subject to Article 19.1.2. Default shall mean the failure of a Breaching Party to cure its Breach in accordance with Article 15 of this ITSA. Distribution System shall mean those non -ISO -controlled transmission and distribution facilities owned, controlled, and operated by Vernon. 2 Emergency Condition shall mean a condition or situation: (1) that, in the judgment of the Party making the claim, is imminently likely to endanger life or property; (2) that, in the case of Vernon, is imminently likely (as determined in a non-discriminatory manner) to cause a material adverse effect on the security of, or damage to, the Distribution System, Vernon's Interconnection Facilities, or the electric systems of others to which Vernon's electric system is directly connected; or (3) that, in the case of MGS Owner, is imminently likely (as determined in a non-discriminatory manner) to cause a material adverse effect on the security of, or damage to, the Generating Facility or MGS Owner's Interconnection Facilities. System restoration and black start shall be considered Emergency Conditions; provided, that MGS Owner is not obligated by this ITSA to possess black start capability. Energy shall mean three-phase, 60 cycle alternating current electric energy. Environmental Law shall mean any Governmental Rules relating to or imposing liability or standards of conduct with respect to the protection of human health, safety or the environment (including ambient air, soil, surface water, ground water, wetlands, land or subsurface strata), including Governmental Rules relating to (a) emissions, discharges, releases or threatened releases of Hazardous Substances into the environment, (b) manufacture, generation, processing, distribution,' use, treatment, storage, disposal, transport or handling of Hazardous Substances, and (b) human exposure to Hazardous Substances or conditions, including CERCLA, the Hazardous Materials Transportation Act (49 U.S.C. §§ 5101 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601, et seq.), the Oil Pollution Act (33 U.S.C. §§ 2701 et seq.), the. Occupational Safety and Health Act (29U.S.C. §§ 651 et seq.), the Emergency Planning and Community Right -to -Know Act (42 U.S.C. §§ 11001 et seq.), the Endangered Species Act (16 U.S.C.' §§ 1531 et seq.), the Porter -Cologne Water Quality Control Act (Cal. Water Code §§ 13000 et seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986 (Cal. Health & Safety Code §§ 25249.5 et seq.), the Hazardous Substance Account Act (Cal. Health & Safety Code §§ 25300 et seq.), the Hazardous Waste Control Act (Cal Health & Safety Code §§ 25100 ei seq.), the California Clean Air, Act (Cal. Health & Safety Code §§ 39000 et seq.), the California Endangered Species Act (Cal. Fish & Game Code §§ 2050 et seq.), the Warren-Alquist Act (Cal. Public Resources Code §§ 25410 et seq.) and the California_.Native Plant Protection Act (Cal. Fish & Game Code §§ 1900 et seq.). Federal Power Act shall mean the Federal Power Act, as amended, 16 U.S.C. §§ 791a et seq. FERC shall mean the Federal Energy. Regulatory Commission or its successor. Force Majeure shall mean any act of God, labor disturbance, act of the public enemy, war, insurrection, riot, fire, storm or flood, explosion, breakage or accident to machinery or equipment, any order, regulation or restriction imposed by governmental, military or lawfully established civilian authorities, or any other cause beyond a Party's control. A Force Majeure event does not include acts of negligence or intentional wrongdoing by the Party claiming Force Majeure. Good Utility Practice shall mean any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practice is not intended to be any one of a number of the optimum practices, methods, or acts to the exclusion of all others, but rather to be acceptable practices, methods, or acts generally accepted in the region. 3' Governmental Authority shall mean any federal, state, local or other governmental, regulatory or administrative agency, court, commission, department, board, or other governmental subdivision, legislature, rulemaking board, tribunal, or other governmental authority having jurisdiction over the Parties, their respective facilities, or the respective services they provide, and exercising or entitled to exercise any administrative, executive, police, or taxing authority or power. Governmental Rules shall mean all applicable laws (including the common law), statutes, treaties, rules, regulations, ordinances, codes, judgments, enactments, decrees, injunctions, writs and. orders, decisions, directives and agreements, authorizations or other restrictions of or enacted by any Governmental Authority, or any binding interpretation or administration of any of the foregoing. Hazardous Substances shall mean collectively, (a) any chemical, material or substance that is listed or regulated under applicable Governmental Rules as a "hazardous" or "toxic" substance or waste, or as a "contaminant" or "pollutant" or words of similar import, (b) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls and (c) any other chemical or other material or substance, exposure to which is prohibited, limited or regulated by any Governmental Rules, including but not limited to Environmental Laws. Interconnection Facilities shall mean Vernon's Interconnection Facilities and MGS Owner's Interconnection Facilities. Collectively, Interconnection Facilities include all facilities and equipment' between the Generating Facility and the Point of Interconnection, including any modification, additions or upgrades that are necessary to physically and electrically interconnect the Generating Facility to the Distribution System. Interconnection Service shall mean the service ` provided by Vernon associated with interconnecting MGS Owner's Generating Facility to the Distribution System and enabling it to receive electric energy and capacity from the Generating Facility at the Point of Interconnection, pursuant to the terms of this ITSA. ISO shall mean the California Independent System Operator Corporation, a state -chartered, not - for -profit corporation that controls certain transmission facilities of all Participating Transmission Owners (as defined in the ISO Tariff) and dispatches certain generating units and loads. ISO Grid shall mean the system of transmission lines and associated facilities of the parties of the parties to the Transmission Control Agreement that have been placed under the ISO's Operational Control. ISO Tariff shall mean the California Independent System Operator Corporation Operating Agreement and Tariff, as filed with FERC, and as amended or supplemented from time to time, or any successor tariff. Laguna Bell shall mean the 230/66/16 kV substation owned by Southern California Edison Company located at the intersection of Gage and Garfield Avenues in the City of Commerce, California. Laguna Bell Agreement shall mean that certain Laguna Bell — Vernon Interconnection Service Agreement, dated as September 16, 1997, by and between Southern California Edison Company and the City of Vernon, as may be amended or supplemented at any time. Lease Effective Date shall mean the Effective Date, as such term is defined in the Lease. Lease Termination Date shall mean the Termination Date, as such term is defined in the Lease. Loss shall mean any and all damages, losses, and claims; including claims and actions relating to injury to or death of any person or damage to property, demand, suits, recoveries, costs and expenses, court costs, attorney fees, and all other obligations by or to third parties. Metering Equipment shall mean all metering equipment installed or to be installed for measuring the output of the Generating Facility pursuant to this ITSA at the metering points, including but not limited to instrument transformers, MWh-meters, data acquisition equipment, transducers, remote terniinal unit, communications equipment, phone lines, and fiber optics. MGS Owner's Interconnection Facilities shall mean all facilities and equipment, as identified in Appendix A of the ITSA, that are located between the Generating Facility and the Point of Change of Ownership, including any modification, addition, or upgrades to such facilities and equipment necessary to physically and electrically interconnect the Generating Facility to the Distribution System. MGS Owner's InterconnectionFacilities are sole use facilities. NERC shall mean the North American Electric Reliability Council or its successor organization. NGP shall mean any limited partnership, limited liability company or other Person for which NGP Energy Capital Management or any other fund management company that is a successor to, an Affiliate of, or under common control with NGP Energy Capital Management acts as investment manager. NGP Energy Capital Management shall mean NGP Energy Capital Management, L.L.C., a Operational Control shall mean the rights of the ISO under the Transmission Control Agreement and the ISO Tariff to direct how the parties to the Transmission Control Agreement operate their transmission lines and facilities and other electric plant affecting the reliability of those lines and facilities for the purpose of affording comparable non-discriminatory transmission access and meeting applicable reliability criteria. Party or Parties shall mean Vernon and/or MGS Owner. Person shall mean an individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization, or any Governmental Authority. Point of Change of Ownership shall mean the point between the high side of the transformer and Vernon's air -breaker, as set forth in Part A to this ITSA, where MGS Owner's Interconnection Facilities connect to Vernon's Interconnection Facilities. Point of Interconnection shall mean the point, as set forth in Part A to this ITSA, where the Interconnection Facilities connect to the Distribution System. PPTA Termination Date shall mean the date on which the PPTA expires or terminates. PPT shall mean Pacific Standard Time or Pacific Daylight Time, whichever is in effect on the relevant date. Product(s) shall mean Energy and/or Ancillary Services. 5 Reasonable Efforts shall mean, with respect to an action required to be attempted or taken by a Party under this ITSA, efforts that are timely and consistent with Good Utility Practice and are otherwise substantially equivalent to those a Party would use to protect its own interests. Receiving Point shall mean the 220 kV bus at Southern California Edison Company's Laguna Bell substation. Station Power shall have the meaning set forth in the ISO Tariff. System Protection Facilities shall mean the equipment, including necessary protection signal communications equipment, that protects (1) the Distribution System and ISO Grid from faults or other electrical disturbances occurring at the Generating Facility and (2) the Generating Facility from faults or other electrical system disturbances occurring on the ISO Grid and the Distribution System or on other delivery systems or other generating systems to which the Distribution System is directly connected. Transmission Control Agreement shall mean ISO FERC Electric Tariff No. 7. Vernon's Interconnection Facilities shall mean all facilities and equipment owned, controlled or operated by Vernon from the Point of Change of Ownership to the Point of Interconnection as identified in Part A to this ITSA, including any modifications, additions or upgrades to such facilities and equipment. Vernon's Interconnection Facilities are sole use facilities. ARTICLE 2. EFFECTIVE DATE, TERM AND TERMINATION 2.1 Effective Date. This ITSA shall become effective upon the Lease Effective Date. 2.2 Term of Agreement. Subject to the provisions of Article 2.3, this ITSA shall remain in effect during the term of the Lease, and shall terminate without any further notice upon the Lease Termination Date, or otherwise by mutual agreement of the Parties. 2.3 Termination Procedures. 2.3.1 Written Notice. This ITSA may be terminated by MGS Owner after giving Vernon ninety (90) Calendar Days advance written notice, or after the Generating Facility permanently ceases generating electricity, by Vernon after giving MGS Owner ninety (90) Calendar Days advance written notice. 2.3.2 Default. A Party may terminate this ITSA in accordance with Article 15. 2.4 Termination Costs. If this ITSA terminates pursuant to Article 2..3 above, MGS Owner shall pay all costs incurred or irrevocably committed to be incurred in association with MGS Owner's interconnection and other expenses as of the date of the other Parties' receipt of the notice of termination, subject to the limitations set forth in this Article 2.4., Nothing in this Article 2.4 shall limit the Parties' rights under Article 15. 2.4.1 Notwithstanding the foregoing, in the event of termination by a Party, all Parties shall use commercially Reasonable Efforts to mitigate the costs, damages and charges arising as a consequence of termination. 6 2.4.2 Vernon may, at its option, retain any portion of materials, equipment, or facilities that MGS Owner chooses not to accept delivery of, in which case Vernon shall be responsible for all costs associated with procuring such materials, equipment, or facilities. 2.4.3 MGS Owner shall be responsible for all costs associated with the removal, relocation or other disposition or retirement of materials; equipment, or facilities. 2.5 Disconnection. Upon termination of this ITSA, the Parties will take all appropriate steps to disconnect the Generating Facility from the Distribution System. All costs required to effectuate such disconnection shall be borne by the terminating Party, unless such termination resulted from. the non -terminating Party's Default of this ITSA or such non -terminating Party otherwise is responsible for these costs under this ITSA. 2.6 Survival. This ITSA shall continue in effect after termination to the extent necessary to provide for final billings and payments and for costs incurred hereunder, including billings and payments pursuant to this ITSA; to permit the determination and enforcement of liability and indemnification obligations arising from acts or events that occurred while this ITSA was in effect; and to permit each Party to have access to the lands of the other Parties pursuant to this ITSA or other applicable agreements, to disconnect, remove or salvage its own facilities and equipment. ARTICLE 3. SCOPE OF SERVICE 3.1 Interconnection Service. Vernon shall provide at the Point of Interconnection, Interconnection Service to enable MGS Owner to connect the Generating Facility to the Distribution System and be eligible to deliver the Generating Facility's output using the available capacity of the Distribution System thereto. Interconnection Service does not necessarily provide MGS Owner with the capability to physically deliver the output of its Generating Facility to any particular load on the Distribution System or the ISO Grid without incurring congestion costs. .In the event of transmission constraints on the Distribution System or the ISO Grid, MGS Owner's.Generating Facility shall be subject to the applicable congestion, management procedures with respect to the Distribution System or in the ISO Tariff in the same manner as all other resources. The MGS Owner shall be solely responsible for completing all of the necessary arrangements required under the ISO Tariff to be eligible to schedule the output of its resource. 3.2 Commencement of Interconnection Service. Interconnection Service under this Agreement shall continence on the Effective Date, and shall continue throughout the term of this Agreement. 3.3 Performance Standards. Each Party shall perform all of its obligations under this ITSA in accordance with Applicable Laws and Regulations, Applicable Reliability Standards, and Good Utility Practice, and to the extent a Party is required or prevented or limited in taking any action by such regulations and standards, such Party shall not be deemed to be in Breach of this ITSA for its compliance therewith. 3.4 Transmission Service. Auer the PPTA Termination Date, Vernon shall, in accordance with Good Utility Practice, any ISO agreements and the Laguna Bell Agreement, provide firm wholesale transmission services for Products as adjusted for losses, in accordance with Article 10.2, from the Generating Facility to the Receiving Point subject to the provisions of this ITSA at the rate specified in Article 3.4.1 (the "Rate"). Products shall be delivered to the Receiving Point at voltages to be agreed to by Vernon and MGS Owner. 3.4.1 Rate for Service. Vernon shall set the Rate to equal a reasonable approximation of Vernon's costs to transmit Products on behalf of MGS Owner to the Receiving Point. Vernon's first invoice to MGS Owner shall contain statement setting forth in reasonable detail the basis for Vernon's calculation of the Rate. From time to time, Vernon shall have the right, in its reasonable discretion, to revise the Rate. The first invoice sent to MGS Owner reflecting the revised Rate shall 'contain a statement setting forth in reasonable detail the basis for Vernon's calculation of the Rate. In the event that MGS Owner disputes Vernon's calculation of the Rate, MGS Owner shall resolve such dispute using the procedures set forth in Article 24; 3.4.2 Modification of Service. Vernon's obligation to provide MGS Owner with transmission services after the PPTA Termination Date as described in Article 3.4 is subordinate to and subject to Vernon's obligations to serve its own retail customers, its obligations to its firm wholesale and transmission customers under agreements entered into prior to the date of this ITSA, its obligations under any ISO agreements and its obligations under all Applicable Laws and Regulation and Applicable Reliability Standards, all as may be amended from time to time. Vernon shall have the right, in its sole discretion, to modify the level of service under agreements entered into prior to the date of this ITSA, provided that Vernon's ability to provide MGS Owner with the level of transmission services described in this ITSA is not reduced in any way. In addition, Vernon shall have the right in its sole discretion to take such actions, including curtailment of services to MGS Owner under this ITSA prior to the implementation of voltage reduction, or any other actions necessary to maintain reliable electric service in accordance with Vernon's operating policies and Good Utility Practice. In the event of such curtailment Vernon shall not be held liable for any losses or damages that MGS Owner may incur as a result; provided such curtailment shall continue only for so long as it is reasonably necessary under Vernon's operating policies and Good Utility Practice. 3.4.3 Daily Schedules. The daily schedules of Products to be transmitted under this ITSA will be supplied by MGS Owner to Vernon scheduling personnel no later than 08:00 PPT for each hour of the time period commencing on the nextCalendar Day and extending through and including the next Business Day ("Output Schedule"). 3.4.4 Output. MGS Owner shall make commercially reasonable efforts to match the Output Schedule provided to Vernon. If for any hour there is a difference between the actual output of the Generating ,Facility and the Output Schedule, MGS Owner will be responsible for making the appropriate adjustments in like hours within the next succeeding five (5) Calendar Days to balance the output to compensate for any deficiencies or excesses which occurred in previous hours. If for any hour the actual output of the Generating Facility deviates from the scheduled output by greater than plus or minus two percent (2%), Vernon reserves the right to unilaterally adjust MGS Owner's schedule to accommodate such deviation. 3.5 Station Power. Prior to and including the PPTA Termination Date, Vernon shall provide Station Power to MGS Owner's Generating Facility at no additional cost. 3.6 MGS Owner Provided Services. The services provided by MGS Owner under this ITSA are set forth in Article 7.4. ARTICLE 4. TESTING AND INSPECTION 4.1 Testing and Modifications. Each Party shall at its own expense perform routine inspection and testing of its facilities and equipment in accordance with Good Utility Practice as may be necessary to ensure the continued interconnection of the Generating Facility with the Distribution System in a safe and reliable manner. Each Party shall have the right, upon advance written notice, to require reasonable additional testing of the other-Party's facilities, at the requesting Party's expense, as maybe in accordance with Good Utility Practice. 4.2 Right to Observe Testing. Each Party shall notify the other Parties at least fourteen (14) days in advance of its performance of tests of its Interconnection Facilities or Generating Facility. The other Parties have the right; at their own expense, to observe such testing. 4.3 Right to Inspect. Each Party shall have the right, but shall have no obligation to: (i) observe another Party's tests and/or inspection of any of its System Protection Facilities and other protective equipment, including Power System Stabilizers; (ii) review the settings of another Party's System ProtectionFacilities and other protective equipment; and (iii) review another Party's maintenance records relative to the Interconnection Facilities, the System Protection Facilities and other protective equipment. -A Party may exercise these rights from time to time as it deems necessary upon reasonable notice to the other Party. The exercise or non -exercise by a Party of any such rights shall not be construed as an endorsement or confirmation of any element or condition of the Interconnection Facilities or the System Protection Facilities or other protective equipment or the operation thereof, or as a warranty as to the fitness, safety, desirability, or reliability of same. Any information that a Party obtains through the exercise of any of its rights under this Article 4.3 shall be deemed to be Confidential Information and treated pursuant to Article 19 of this ITSA. ARTICLE 5. METERING 5.1 General. Each Party shall comply with the Applicable Reliability Council requirements. MGS Owner shall comply with the provisions of the ISO Tariff regarding metering, including Section 10 and the Metering Protocol of the ISO Tariff. Unless otherwise agreed by the Parties, Vernon may install additional Metering Equipment at the Point of Interconnection prior to any operation of the Generating Facility by MGS Owner and shall own, operate, test and maintain such Metering Equipment. Power flows to and from the Generating Facility shall be measured at or, at Vernon's option for its respective Metering Equipment, compensated to, the Point of Interconnection. MGS Owner's access to meter data shall be provided in accordance with the ISO Tariff. MGS Owner shall bear all reasonable documented costs associated with the purchase, installation, operation, testing and maintenance of the Metering Equipment. 5.2 Check Meters. MGS Owner, at its option and expense, may install and operate, on its premises and on its side of the Point of Interconnection, one or more check meters to check the ISO -polled meters or Vernon's meters. Such check meters shall be for check purposes onlyand shall not be used for the measurement of power flows for purposes of this ITSA, except in the case that no other means are available on a temporary basis at the option of Vernon. The check meters shall be subject at all reasonable times to inspection and examination by Vernon or its designees. The installation, operation and maintenance thereof shall be performed entirely by MGS Owner in accordance with Good Utility Practice. 5.3 Vernon Retail Metering. Vernon may install retail revenue quality meters and associated equipment, pursuant to Vernon's applicable retail tariffs. 0 5.4 Products. The transmission of MGS Owner's Products by Vernon after the PPTA Termination Date pursuant to the terms and conditions of this ITSA shall be measured by the Generating Facility's Metering Equipment and the ISO's metering equipment. / 5.5 Adjustments. If a meter fails to register, or if the measurement made by a meter is found to be inaccurate, then an adjustment shall be made correcting all measurements made by the inaccurate or defective meter for (a) the actual period during which inaccurate measurements were made, if that period can be determined to the satisfaction of the parties; or (b) if the actual period cannot be determined to the mutual satisfaction of the parties, one-half of the period from the date of the last previous test of the meter. Any revisions to scheduled deliveries to MGS Owner necessitated by correcting adjustments shall be made as soon as possible but no later than the twenty-fifth (25th) 'day of the month following the month in which the failure or inaccuracy is identified. MGS Owner may elect to install its own Metering Equipment in addition to Vernon's Metering Equipment.. Such metering equipment shall meet the requirements of the ISO. Should any Metering Equipment installed by Vernon fail to register during the term of this ITSA, the parties shall .use MGS Owner's Metering Equipment, if installed, to determine the amount of the Products delivered to Vernon. On any Calendar Day in which neither Vernon's nor MGS Owner's Metering Equipment is in service, the Products delivered shall be determined in such manner as the parties shall agree. ARTICLE 6. COMMUNICATIONS 6.1 MGS Owner Obligations., MGS Owner shall maintain satisfactory operating communications with Vernon's dispatcher or representative designated by Vernon. MGS Owner shall provide standard voice line, dedicated voice line and facsimile communications at its Generating Facility control room or central dispatch facility through use of either the public telephone system, or a voice communications system that does not rely on the public telephone system. MGS Owner shall also provide the dedicated.data circuit(s) necessary to provide MGS Owner data to Vernon. The data circuit(s) shall extend from the Generating Facility to the location(s) specified by Vernon. Any required maintenance of such communications equipment shall be performed by MGS Owner. Operational communications shall be activated and maintained under, but not be limited to, the following events: system paralleling or separation, scheduled and unscheduled shutdowns, equipment clearances, and hourly and daily load data. 6.2 Remote Terminal Unit. Prior to the Effective Date of the Generating Facility, a Remote Terminal Unit, or equivalent data collection and transfer equipment acceptable to the Parties, shall be installed by MGS Owner, or by Vernon at MGS Owner's expense, to gather accumulated and instantaneous data to be telemetered to the location(s) designated by the ISO and by Vernon through use of a dedicated point-to-point data circuit(s) as indicated in Article ,6.1. The communication protocol for the data circuits(s) shall be specified by Vernon. Instantaneous bi- directional real power and reactive power flow and any other required information must be telemetered directly to the location(s) specified by Vernon. Each Party will promptly advise the other Parties if it detects or otherwise learns of any metering, telemetry or communications equipment errors or malfunctions that require the attention and/or correction by another Party. The Party owning such equipment shall correct such error or malfunction as soon as reasonably feasible. 6.3 No Annexation. Any and all equipment placed on the premises of a Party shall be and remain the property of the Party providing such equipment regardless of the mode and manner of annexation or attachment to real property, unless otherwise mutually agreed by the Parties. 10 ARTICLE 7. OPERATIONS 7.1 General. Each Party shall comply with the Applicable Reliability Council requirements. Each Party shall provide to the other Party all information that may reasonably be required by the other Party to comply with Applicable Laws and Regulations and Applicable Reliability Standards. 7.2 Vernon Obligations. Vernon shall cause its Distribution System to be operated and controlled in a safe and reliable manner and in accordance with this ITSA. Vernon at MGS Owner's expense shall cause Vernon's Interconnection Facilities to be operated, maintained and controlled in a safe and reliable manner and in accordance with this ITSA. Vernon may provide operating instructions to MGS Owner consistent with this ITSA and Vernon's operating protocols and procedures as they may change from time to time. Vernon will consider changes to its operating protocols and procedures proposed by MGS Owner. 7.3 MGS Owner Obligations. MGS Owner shall at its own expense operate, maintain and control the Generating Facility and MGS Owner's Interconnection Facilities in a safe and reliable manner and in accordance with this ITSA. MGS Owner shall operate the Generating Facility and MGS Owner's Interconnection Facilities in accordance with all applicable requirements of the ISO and Applicable Reliability Standards. 7.4 Reactive Power. 7.4.1 Power Factor Criteria. MGS Owner's Generating Facility shall maintain a composite power delivery at continuous rated power output at the terminals of the Generating Facility at a power factor within the range of 0.95 leading to 0.90 lagging. 7.4.2 Voltage Schedules. Vernon shall require MGS Owner to maintain a voltage schedule by operating the Generating Facility to produce or absorb reactive power within the design limitations of the Generating Facility set forth in Article 7.4.1 (Power Factor Criteria). Vernon's voltage schedules shall treat all sources of reactive power in the Distribution System in an equitable and not unduly discriminatory manner. Vernon shall exercise Reasonable Efforts to provide MGS Owner with such schedules at least one (1) day in advance, and Vernon may make changes to such schedules as necessary to maintain the reliability of the Distribution System. MGS Owner shall operate the Generating Facility to maintain the specified output voltage or power factor within the design limitations of the Generating Facility set forth in Article 7.4.1 (Power Factor Criteria). -If MGS Owner is unable to maintain the specified voltage or power factor, it shall promptly notify Vernon. 7.4.2.1 Governors and Regulators. Whenever the Generating Facility is operated in parallel with the Distribution System and the speed governors (if installed on the Generating Facility pursuant to Good Utility Practice) and voltage regulators are capable of operation, MGS Owner shall operate the Generating Facility with its speed governors and voltage regulators in automatic operation. If the Generating Facility's speed governors and voltage regulators are not capable of such automatic operation, MGS Owner shall immediately notify Vernon and ensure that the Generating Facility operates as specified in Article 7.4.2 through manual operation and that the Generating Facility's reactive power production or absorption (measured in MVARs) are withinthe design capability of the Generating Facility and steady state stability limits. MGS Owner shall restore the speed governors 11 and voltage regulators to automatic operation as soon as possible. MGS Owner shall not cause its Generating Facility to disconnect automatically or instantaneously from the Distribution System or trip the Generating Facility for an under or over frequency condition unless the abnormal frequency condition persists for a time period beyond the limits set forth in ANSMEEE Standard C37.106. 7.5 Outages and Interruptions. 7.5.1 Outages. 7.5.1.1 Outage Authority and Coordination. Each Party may in accordance with Good Utility Practice in coordination with the other Parties remove from service any of its respective Interconnection Facilities that may impact . another Party's facilities as necessary to perform maintenance or testing or to install or replace equipment. Absent an Emergency Condition, the Party scheduling a removal of such facility(ies) from service will use Reasonable Efforts to schedule such removal on a date and time mutually acceptable to all Parties. In all circumstances any Party planning to remove such facility(ies) from service shall use Reasonable Efforts to minimize the effect on the other Parties of such removal. 7.5.1.2 Outage Schedules. MGS Owner shall submit its planned maintenance schedules for the Generating Facility to Vernon for a minimum of a rolling twenty-four month period. MGS Owner shall update its planned maintenance schedules as necessary,., Vernon may request MGS Owner to reschedule its maintenance as necessary to maintain the reliability of the Distribution System. Vernon shall compensate MGS Owner for any additional direct costs that MGS Owner incurs as a result of having to reschedule maintenance. MGS Owner will not be eligible to receive compensation, if during the ,twelve-(12) months prior to the date of the scheduled maintenance; MGS Owner had modified its schedule of maintenance activities. Vernon shall have no obligation to pay MGS Owner any costs MGS Owner incurs as a result of .being directed by the ISO to reschedule maintenance. 7.5.1.3 Outage Restoration. If an outage on a Party's Interconnection Facilities adversely affects another Party's operations or facilities, the Party that owns or controls the facility that is out of service shall use Reasonable Efforts to promptly restore such facility(ies) to a normal operating condition consistent with the nature of the outage. The Party that owns or controls the facility that is out of service shall provide the other Parties, to the extent such information is known, information on the nature of the Emergency Condition, if the outage is caused by an Emergency Condition, an estimated time of restoration, and any corrective actions required. Initial verbal notice shall be followed up as soon as practicable with.written notice explaining the nature of the outage, if requested by a Party, which may be provided by e- mail or facsimile. 7.5.2 Interruption of Service. If required by Good Utility, Practice to do so, Vernon may require MGS Owner to interrupt or reduce deliveries of electricity if such delivery of electricity could adversely affect Vernon's ability to perform such activities as are necessary to safely and reliably operate and maintain the Distribution System. The 12 7.5.3 following provisions shall apply to any interruption or reduction permitted under this Article 7.5.2: 7.5.2.1 The interruption or reduction shall continue only for so long as reasonably necessary under Good Utility Practice; 7.5.2.2 Any such interruption or reduction shall be made on an equitable, non- discriminatory basis with respectto all generating facilities directly connected to the Distribution System; 7.5.2.3 7.5.2.4 7.5.2.5 When the interruption or reduction must be made under circumstances which do not allow for advance notice, Vernon shall notify MGS Owner by telephone as soon as practicable of the reasons for the curtailment, interruption, or reduction, and, if known, its expected duration. Telephone notification shall be followed by written notification, if requested by MGS Owner, as soon as practicable; Except during the existence of an Emergency Condition, Vernon shall notify MGS Owner in advance regarding the timing of such interruption or reduction and further notify. MGS Owner of the expected duration. Vernon shall coordinate with MGS Owner using Good Utility Practice to schedule the interruption or reduction during periods of least impact to MGS Owner and Vernon; The Parties shall cooperate and coordinate with each other to the extent necessary in order to restore the Generating Facility, Interconnection Facilities, and the Distribution System to their normal operating state, consistent with system conditions and Good Utility Practice. Under -Frequency and Over Frequency Conditions. MGS Owner shall implement under -frequency and over -frequency protection set points for the Generating Facility as required by the Applicable Reliability Council to ensure "ride through". capability. Generating Facility response to frequency deviations of pre -determined magnitudes, both under -frequency and over -frequency deviations, shall be studied and coordinated with Vernon in accordance with Good Utility Practice. The term "ride through" as used herein shall mean the ability of a Generating Facility to stay connected to and synchronized with the Distribution System during system disturbances within a range of under -frequency and over -frequency conditions, in accordance with Good Utility Practice. 7.5.4 System Protection and Other Control Requirements. 7.5.4.1 System Protection Facilities. MGS Owner shall, at its expense, install, operate and maintain System' Protection Facilities as a part of the Generating Facility or MGS Owner's Interconnection Facilities. Vernon shall install at MGS Owner's expense any System Protection Facilities that may be required on Vernon's Interconnection Facilities or the Distribution System as a result of the interconnection of the Generating Facility and MGS Owner's Interconnection Facilities. 7.5.4.2 Vernon's and MGS Owner's protection facilities shall be designed and coordinated with other systems in accordance with Applicable Reliability Council criteria and Good Utility Practice. 7.5.4.3 Vernon and MGS Owner shall each be responsible for protection of its facilities consistent with Good Utility Practice. 13 7.5.4.4 Vernon's and MGS Owner's protective relay design shall incorporate the necessary test switches to perform the tests required in Article 6. The required test switches will be placed such that they allow operation of lockout relays while preventing breaker failure schemes from operating and causing unnecessary breaker operations and/or the tripping of MGS Owner's Generating Facility. 7.5.4.5 Vernon and MGS Owner will test, operate and maintain System Protection Facilities in accordance with Good Utility Practice. 7.5.4.6 Prior to the in-service date, Vernon and MGS Owner or their agents shall perform a complete calibration test and functional trip test of the System Protection Facilities. At intervals suggested by Good Utility Practice, the standards and procedures of Vernon, and following any apparent malfunction of the System Protection Facilities,..each,Party shall perform both calibration and functional trip tests of its System Protection Facilities. These tests do not require the tripping of any in-service generation unit. These tests do, however, require that all protective relays and lockout contacts be activated. 7.5.5 Requirements for Protection. In compliance with Good Utility Practice, MGS Owner shall provide, install,..own, and maintain relays, circuit breakers and all other devices necessary to remove any fault contribution of the Generating Facility to any short circuit occurring on the Distribution System not otherwise isolated by Vernon's equipment, such that the removal of the fault contribution shall be coordinated with the protective requirements of the Distribution System. Such protective equipment shall include, without limitation, a disconnecting device, with fault current -interrupting capability located between the Generating Facility and the Distribution System at a site selected upon mutual agreement (not to be unreasonably withheld, conditioned or delayed) of the Parties. MGS Owner shall be responsible for protection of the Generating Facility and MGS Owner's other equipment from such conditions as negative sequence currents, over- or under -frequency, sudden load rejection, over- or under -voltage, and generator loss -of -field. MGS Owner shall be solely responsible to disconnect the Generating Facility and .MGS Owner's other equipment if conditions on the Distribution System could adversely affect the Generating Facility. ; 7.5.6 Power Quality. Neither Vernon's nor MGS Owner's facilities shall cause excessive voltage flicker nor introduce excessive distortion to the sinusoidal voltage or current waves as defined by ANSI Standard C84.1-1989, in accordance with IEEE Standard 519, any applicable superseding; electric industry, standard, or any alternative Applicable Reliability Council standard. In the event of a conflict between ANSI Standard C84.1- 1989, any applicable superseding electric industry standard, or any alternative Applicable Reliability Council standard, the alternative Applicable Reliability Council standard shall control. 7.6 Switching and Tagging Rules. Each Party shall provide the other Parties a copy of its switching and ,tagging rules that are applicable to the other Parties' activities. Such switching and tagging rules shall be developed on a non-discriminatory basis. The Parties shall comply with applicable switching and tagging rules, as amended from time to time, in obtaining clearances for work or for switching operations on equipment. 14 7.7 Purpose of Interconnection Facilities. Except as may be required by Applicable Laws and Regulations, or as otherwise agreed to among the Parties, the Interconnection Facilities shall be used for the sole purpose of interconnecting the Generating Facility to the Distribution System. 7.8 Disturbance Analysis Data Exchange. The Parties will cooperate with one another in the analysis of disturbances to either the Generating Facility or the Distribution System by gathering and providing access to any information relating to any disturbance, including information from oscillography, protective relay targets, breaker operations and sequence of events records, and any disturbance information required by Good Utility Practice. ARTICLE 8. MAINTENANCE 8.1 Vernon Obligations. Vernon shall maintainthe Distribution System and Vernon's Interconnection Facilities in a safe and reliable manner and in accordance with this ITSA: 8.2 MGS Owner Obligations. MGS Owner shall maintain the Generating Facility and MGS Owner's Interconnection Facilities in a safe and reliable manner and in accordance with this ITSA: 8.3 Coordination. The Parties shall confer regularly to coordinate the planning, scheduling and performance of preventive and corrective maintenance on the Generating Facility and the Interconnection Facilities. 8.4 Secondary Systems. The Parties shall cooperate in the inspection, maintenance, and testing of control or power circuits that operate below 600 volts, AC or DC, including, but not limited to, any hardware, control or protective devices, cables, conductors, electric raceways, secondary equipment panels, transducers, batteries, chargers, and voltage and current transformers that directly affect the operation of a Party's facilities and equipment which may reasonably be expected to impact the other Parties. Each Party shall provide advance notice to the other Parties before' undertaking any work on such circuits, especially on electrical circuits involving circuit breaker trip and close contacts, current transformers, or potential transformers. 8.5 Operating and Maintenance Expenses. MGS Owner shall be responsible for all reasonable expenses including overheads, associated with: (1) owning, operating, maintaining, repairing, and replacing MGS Owner's Interconnection Facilities; and (2) operation, maintenance, repair and replacement of Vernon's Interconnection Facilities. ARTICLE 9. PERFORMANCE OBLIGATION 9.1 MGS Owner's Interconnection Facilities. MGS Owner shall own and/or control MGS Owner's Interconnection Facilities described in Part A at its sole expense. 9.2 Vernon's Interconnection Facilities. Vernon shall own and/or control Vernon's Interconnection Facilities described in Part A at the sole expense of MGS Owner. ARTICLE 10. INVOICE 10.1 General. Each Party shall submit to the other Party, on a monthly basis, invoices of amounts due pursuant to this ITSA for the preceding month. Each invoice shall state the month to which the invoice applies and fully describe the services and equipment provided. The Parties may discharge mutual debts and payment obligations due and owing to each other on the same date 15 through ,netting, in which case all amounts a Party owes to the other Party under this ITSA, including interest payments or credits, shall be netted so that only the net amount remaining due shall be paid by the owing Party. 10.2 Losses. MGS Owner shall compensate Vernon for losses incurred by Vernon in its control area as a result of Vernon's provision of transmission services hereunder. The determination of such losses and the procedure for compensation thereof shall be determined by the Engineering Division of Vernon's Light & Power Department in accordance with Vernon's practices relating to other similar transactions and in accordance with Good Utility Practice. 10.3 Payment. Invoices shall be rendered to the paying Party at the address specified in Part B. The Party receiving the invoice shall pay the invoice within thirty (30) Calendar Days of receipt. All payments shall be made in immediately available funds payable to the other Party, or by wire transfer to a bank named and account designated by the invoicing Party. Payment of invoices by any Party will not constitute a waiver of any rights or claims any Party may have under this ITSA. 10.3.1 Nonpayment. Except as otherwise provided in Article 10.4, if any amount billed MGS Owner by Vernon remains unpaid for a period of sixty (60) days or more after the date due under this ITSA, Vernon shall, have the right upon no less than thirty (30) days' prior written notice to MGS Owner to discontinue providing service to MGS Owner for nonpayment of bills and to refuse to resume provision of service so long as any part of the amount due; including interest, remains unpaid. 10.4 Disputes. In the event of a billing dispute between the Parties, .Vemon shall continue to provide Interconnection Service under this ITSA as long as MGS Owner: _(i) continues to make all payments not in dispute; and (ii) pays to Vernon or into an independent escrow account the portion of the invoice in dispute, pending resolution of such dispute. If MGS Owner fails to meet these two requirements for continuation of service, then Vernon may provide notice to MGS Owner of a Default pursuant to Article 15. Within thirty (30) Calendar Days after the resolution of the dispute, the Party that owes money to the other Party shall pay the amount due with interest calculated in accordance with the methodology set forth in FERC's Regulations at 18 C.F.R. § 35.19a(a)(2)(iii). ARTICLE 11. EMERGENCIES 11.1 Obligations. Each Party shall comply with the Emergency Condition procedures of the ISO, NERC, the Applicable Reliability Council, Applicable Laws and Regulations, and any emergency procedures set forth in this ITSA. 11.2 Notice. Vernon shall notify MGS Owner promptly when it becomes aware of an Emergency Condition that affects Vernon's Interconnection Facilities or the Distribution System that may reasonably be expected to affect MGS Owner's operation of the Generating Facility or MGS Owner's Interconnection Facilities. MGS Owner shall notify Vernon promptly when it becomes aware of an Emergency Condition that affects the Generating Facility or MGS Owner's Interconnection Facilities that may reasonably be expected to affect the Distribution System or Vernon's Interconnection Facilities. To the extent information is known, the notification shall describe the Emergency Condition, the extent of the damage or deficiency, the expected effect on the operation of MGS Owner's or Vernon's facilities and operations, its anticipated duration and the corrective action taken and/or to be taken. The initial notice shall be followed as soon as 16 practicable with written notice, if requested by a Party, which may be provided by electronic mail or facsimile. 11.3 Immediate Action. Unless, in MGS Owner's reasonable judgment, immediate action is required, MGS Owner shall obtain the consent of Vernon, such consent to not be unreasonably withheld, prior to performing any manual switching operations at the Generating Facility or MGS Owner's Interconnection Facilities in response to an Emergency Condition declared by Vernon or in response to any other emergency condition. 11.4 Vernon Authority. 11.4.1 General. Vernon may take whatever actions or inactions, including issuance of dispatch instructions, with regard to Vernon's Interconnection Facilities or Distribution System it deems necessary during an Emergency Condition in order to (i) preserve public health and safety, (ii) preserve the reliability of Vernon's Interconnection Facilities or Distribution System, or MGS Owner's Generating Facility, and (iii) limit or prevent damage, and (iv) expedite restoration of service. Vernon shall use Reasonable Efforts to minimize the effect of such actions or inactions on the Generating Facility or MGS Owner's Interconnection Facilities. Vernon may, on the basisof technical considerations, require the Generating Facility to mitigate an Emergency Condition by taking actions necessary and limited in scope to remedy the . Emergency Condition, including, but not limited to, directing MGS Owner to shut -down, start-up, increase or decrease the real or reactive power output of the Generating Facility; implementing a reduction or disconnection pursuant to Article 11.5.2; directing MGS Owner to assist with black start (if available) or restoration efforts; or altering the outage schedules of the Generating Facility and MGS Owner's Interconnection Facilities. MGS Owner shall comply with all of Vernon's operating instructions concerning Generating Facility real power and reactive power output within the manufacturer's design limitations of the Generating Facility's equipment that is in service and physically available for operation at the time, in compliance with Applicable Laws and Regulations." 11.4.2 Reduction and Disconnection. Vernon may reduce Interconnection Service or disconnect the Generating Facility or MGS Owner's Interconnection Facilities when such reduction or disconnection is necessary under Good Utility Practice due to Emergency Conditions. These rights are separate and distinct from any right of curtailment of the ISO pursuant to the ISO Tariff. When Vernon can schedule the reduction or disconnection in advance, Vernon shall notify MGS Owner of the reasons, timing and expected duration of the reduction or disconnection. Vernon shall coordinate with MGS Owner using Good Utility Practice to schedule the reduction or disconnection during periods of least impact to MGS Owner and Vernon. Any reduction or disconnection shall continue only for so long as reasonably necessary under Good Utility Practice. The Parties shall cooperate with each other to restore the Generating Facility, the Interconnection Facilities, and the Distribution System to their normal operating state as soon as practicable consistent with Good Utility Practice. 11.5 MGS Owner Authority. Consistent with Good Utility Practice and the ITSA, MGS Owner may take actions or inactions with regard to the Generating Facility or MGS Owner's Interconnection Facilities during an Emergency Condition in order to (i) preserve public health and safety, (ii) preserve the reliability of the Generating Facility or MGS Owner's Interconnection Facilities, (iii) limit or prevent damage, and (iv) expedite restoration of service. MGS Owner shall use 17 Reasonable Efforts to minimize the effect: of such actions or inactions on the Distribution System and Vernon's Interconnection Facilities. Vernon shall use Reasonable Efforts to assist MGS Owner in such actions. 11.6 Limited Liability. Except as otherwise provided in Article 11.6. of this ITSA, no Party shall be liable to any other Party for any action it takes in responding to an Emergency Condition so long as such action is made in good faith and is consistent with Good Utility Practice. ARTICLE 12. REGULATORY REQUIREMENTS AND GOVERNING LAW 12.1 Regulatory Requirements. Each Party's obligations under this ITSA shall be subject to its receipt of any required approval or certificate from one or more Governmental Authorities in the form and substance satisfactory to the applying Party, or the Party making any required filings with, or providing notice to, such Governmental Authorities, and the expiration of any time period associated therewith. Each Party shall in good faith seek and use its Reasonable Efforts to. obtain such other approvals. 12.2 Governing Law. 12.2.1 The validity, interpretation and performance of this ITSA and each of its provisions shall be governed by the laws of the State of California, without regard to its conflicts of law principles. 12.2.2 This ITSA is subject to all Applicable Laws and Regulations. 12.2.3 Each Party expressly reserves the right to seek changes in, appeal, or otherwise contest any laws, orders, rules, or regulations of a Governmental Authority. ARTICLE 13. NOTICES 13.1 General. Unless otherwise provided in this ITSA, any notice, demand or request required or permitted to be given by a Party to another and any instrument required or permitted to be tendered or delivered by a Party in writing to another shall be effective when delivered and may be so given, tendered or delivered, by recognized national courier, or by depositing the same with the United States Postal Service with postage prepaid, for delivery by certified or registered mail, addressed to the Party, or personally delivered to the Party, at the address set out in Part B, Addresses for Delivery of Notices and Billings. A Party must update the information in Part B as information changes. A Party may change the notice information in this ITSA by giving five (5) Business Days written notice prior to the effective date of the change. Such changes shall not constitute an amendment to this ITSA. 13.2 Billings and Payments. Billings and payments shall be sent to the addresses set out in Part B. 13.3 Alternative Forms of Notice. Any notice or request required or permitted to be given by a Party to another and not required by this ITSA to be given in writing may be so given by telephone, facsimile or e-mail to the telephone numbers and e-mail addresses set out in Part B. 13.4 Operations and Maintenance Notice. Each Party shall notify the other Parties in writing of the identity of the person(s) that it designates as the point(s) . of contact with respect to the implementation of Articles 7 and 8. 18 ARTICLE 14. FORCE MAJEURE 14.1 Force Majeure.' 14.1.1 Economic hardship is not considered a Force Majeure event. 14.1.2 No Party shall be considered to be in Default with respect to any obligation hereunder, (including obligations under Article 3), other than the obligation to pay money when due, if prevented from fulfilling such obligation by Force Majeure. A Party unable to fulfill any obligation hereunder (other than an obligation to pay money when due) by reason of Force Majeure shall give notice and the full particulars of such Force Majeure to the other Party in writing or by telephone as soon as reasonably possible after the occurrence of the cause relied upon. Telephone notices given pursuant to this Article shall be .confirmed in writing as soon as reasonably possible and shall specifically state full particulars of the Force Majeure, the time and date when the Force Majeure occurred and when the Force Majeure is reasonably expected to cease. The Party affected shall exercise due diligence to remove such disability with reasonable dispatch, but shall not be required to accede or agree to any provision not satisfactory to it in order to settle and terminate a strike or other labor disturbance. ARTICLE 15. DEFAULT 15.1 Default 15.1.1 General No Default shall exist where such failure to discharge an obligation (other than the payment of money) is the result of Force Majeure as defined in this ITSA or the result of an act or omission of the other Party. Upon a Breach, the affected non -Breaching Party(ies) shall give written notice of such Breach to the Breaching Party. Except as provided in Article 15.1.2, the Breaching Party shall have thirty (30) Calendar Days from receipt of the Default notice within which to cure such Breach; provided however, if such Breach is not capable of cure within thirty (30) Calendar Days, the Breaching Party shall commence such cure within thirty (30) Calendar Days after notice and continuously and diligently complete such cure within ninety (90) Calendar Days from receipt of the Default notice; and, if cured within such time, the Breach specified in such notice shall cease to exist. 15.1.2 Right to Terminate. If a Breach is not cured as provided in this Article, or if a Breach is not capable of being cured within the period provided for herein, the affected non - Breaching Party(ies) shall have the right to declare a Default and terminate this ITSA by written notice at any time until cure occurs, and be relieved of any further obligation hereunder and, whether or not such Party(ies) terminates this ITSA, to recover from the Breaching Party all amounts due hereunder, plus all other damages and remedies to which it is entitled at law or in equity. The provisions of thisArticlewill survive termination of this ITSA. ARTICLE 16. INDEMNITY, CONSEQUENTIAL DAMAGES AND INSURANCE 16.1 Indemnity. Each Party shall at all times indemnify, defend, and hold the other Parties harmless from, any and all Losses arising out of or resulting from another Party's action or inactions of its obligations under this ITSA on behalf of the indemnifying Party, except in cases of gross negligence or intentional wrongdoing by the Indemnified Party. 19 16.1.1 Indemnified Party. If an, Indemnified Party is entitled to indemnification under this Article 16 as a result of a claim by a third party, and the Indemnifying Party fails, after notice and reasonable opportunity to proceed under Article 16.1, to assume the defense of such claim, such Indemnified Party may at the expense of the Indemnifying Party contest, settle or consent to the entry of any judgment with respect to, or pay in full, such claim. 16.1.2 Indemnifying Party. If an Indemnifying Party is obligated to indemnify and hold any Indemnified Party harmless under this Article 16, the amount owing to the Indemnified Party shall be the amount of such Indemnified Party's actual Loss, net of any insurance or other recovery.. 16.1.3 Indemnity Procedures. Promptly after receipt by an Indemnified Party of any claim or notice of the commencement of any action or administrative or legal proceeding or investigation as to which the indemnity provided for in Article 16.1 may apply, the Indemnified Party shall notify the Indemnifying Party of such fact. Any failure of or delay in such notification shall not affect a Party's indemnification obligation unless such failure or delay is materially prejudicial to the indemnifying Party. The Indemnifying Party shall have the right to assume the defense thereof with counsel designated by such Indemnifying Party and reasonably satisfactory to the Indemnified Party. If the defendants in any such action include one or more Indemnified Parties and the Indemnifying Party and if the Indemnified Party reasonably concludes that there may. be legal defenses available to it and/or other Indemnified Parties which are different from or additional to those available to the Indemnifying Party, the Indemnified Party shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such 'action on its own behalf. In such instances, the Indemnifying Party shall only be required to pay the fees and expenses of one additional attorney to represent an Indemnified Party or Indemnified Parties having such differing or additional legal defenses. The Indemnified Party shall be entitled, at its expense, to participate in any such action, suit or proceeding, the defense of which has been assumed by the Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party (i) shall not be entitled to assume and control the defense of any such action, suit or proceedings if and to the extent that, in the opinion of the Indemnified Party and its counsel, such action, suit or proceeding involves the potential imposition of criminal liability on the Indemnified Party, or there exists a conflict or adversity of interest between the Indemnified Party and the Indemnifying Party, in such event the Indemnifying Party shall pay the reasonable expenses of the Indemnified Party, and (ii) shall not settle or consent to the entry of any judgment in any action, suit or proceeding without the consent of the Indemnified Party, which shall not be unreasonably withheld, conditioned or delayed. 16.2 Consequential Damages. In no event shall any Party be liable under any provision of this ITSA for any losses, damages, costs or expenses for any special, indirect, incidental, consequential, or punitive damages, including but not limited to loss of profit or revenue, loss of the use of equipment, cost of capital, cost of temporary equipment or services, whether based in whole or in part in contract, in tort, including negligence, strict liability, or any other theory of liability; provided, however, that damages for which a Party may be liable to another Party under another agreement will not be considered to be special, indirect, incidental, or consequential damages hereunder. 20 16.3 Insurance. MGS Owner shall procure at its own expense and maintain in full force and effect, with responsible insurance carriers authorized to do business in the State of California, insurance policies in at least the minimum amount, and in accordance with the terms and conditions, specified in the Lease. 16.3.1 The Parties agree to report to each other in writing as soon as practical all accidents or occurrences resulting in injuries to any person, including death, and any property damage arising out of this ITSA. ARTICLE 17. ASSIGNMENT 17.1 Assignment. 17.1.1 This Agreement is binding upon and inures to the benefit of the successors and assigns of the Parties. However, neither Party shall Assign this Agreement without the prior written consent of the other Party; which consent shall not be unreasonably withheld, except that MGS Owner may Assign this Agreement to an Affiliate or to its financing sources for collateral purposes without the prior written consent of Vernon. Any such Assignment is conditioned on the assignee's agreement in writing to assume the assigning Party's duties and obligations under this Agreement. Any Assignment to an Affiliate effected in accordance with this Section 17.1shall not relieve the assigning Party of its obligations and liabilities under this Agreement. For purposes of this Section 17.1, "Assign" or "Assignment" means any direct or indirect assignment, subcontracting or other transfer of this Agreement, including, with respect to MGS Owner, any change of control of MGS Owner; provided, however, that"Assign" or "Assignment" shall not include any transaction if after giving effect to `such NGP and/or Paul B. Prager directly or indirectly control the Facility 17.1.2 MGS Owner shall have the right to assign this ITSA to a lender as collateral for any debt financing or refinancing relating to the Facility. Vernon shall execute a consent to collateral assignment substantially in the form attached as Exhibit F-1 to the PSA ARTICLE 18. SEVERABILITY 18.1 Severability. If any provision in this ITSA is finally detemuned to be invalid, void or unenforceable by any court or other Governmental Authority having jurisdiction, such determination shall not invalidate, void or make unenforceable any other provision, agreement or covenant of this ITSA. ARTICLE 19. CONFIDENTIALITY 19.1 Confidentiality. Confidential Information shall include, without limitation, all information relating to a Party's technology, research and development, business affairs, and pricing, and any information supplied by any of the Parties to the other Parties prior to the execution of this ITSA. Information is Confidential Information only if it is clearly designated or marked in writing as confidential on the face of the document, or, if the information is conveyed orally or by inspection, if the Party providing the information orally informs the Parties receiving the information that the information is confidential 21 If requested by any Party, the other Parties shall provide in writing, the basis for asserting that the information referred to in this Article 19 warrants confidential treatment, and the requesting Party may disclose such writing to the appropriate Governmental Authority. Each Party shall be responsible for the costs associated with affording confidential treatment to its information. 19.1.1 Term. During the term of this ITSA, and for a period of three (3) years after the expiration or termination of this ITSA, except as otherwise provided in this Article 19, each Party shall hold in confidence and shall not disclose to any person Confidential Information. 19.1.2 Scope. Confidential Information shall not include information that the receiving Party can demonstrate: (1) is generally available to the public other than as a result of a disclosure by the receiving Party; (2) was in the lawful possession of the receiving Party on a non -confidential basis before receiving it from the disclosing Party; (3) was supplied to the receiving Party without restriction by a third party, who, to the knowledge of the receiving Party after due inquiry, was under no obligation to the disclosing Party to keep such information confidential; (4) was independently developed by the receiving Party without reference to Confidential Information of the disclosing Party; (5) is, or becomes, publicly known, through no wrongful act or omission of the receiving Party or Breach of this ITSA; or (6) is required, in accordance with Article 19.1.7 of this ITSA, Order of Disclosure, to be disclosed by any Governmental Authority or is otherwise required to be disclosed by law or subpoena, or is necessary in any legal proceeding establishing rights and obligations under this ITSA. Information designated as Confidential Information will no longer be deemed confidential if the Party that designated the information as confidential notifies the other Parties that it no longer is confidential. 19.1.3 Release of Confidential Information. No Party shall release or disclose Confidential Information to any other person, except to its employees, consultants, Affiliates, subcontractors, or to parties who may be or considering providing financing to or equity participation with MGS Owner, or to potential purchasers or assignees of.MGS Owner, on a need -to -know basis in connection with this ITSA, unless such person has first been advised of the confidentiality provisions of this Article 19 and has agreed to comply with such provisions. Notwithstanding the foregoing, a Party providing Confidential Information to any person shall remain primarily responsible for any release of Confidential Information in contravention of this Article 19. 19.1.4 Rights. Each Party retains all rights, title, and interest in the Confidential Information that each Party discloses to the other Parties. The disclosure by each Party to the other Parties of Confidential Information shall not be deemed a waiver by a Party or any other person or entity of the right to protect the Confidential Information from public disclosure. 19.1.5 No Warranties. The mere fact that a Party has provided Confidential Information does not constitute a warranty or _representation as to its accuracy or completeness. In addition, by supplying Confidential Information, no Party obligates itself to provide any particular information or Confidential Information to the other Parties nor to enter into any further agreements or proceed with any other relationship or joint venture. 19.1.6 Standard of Care. Each Party shall use at least the same standard of care to protect Confidential Information it receives as it uses to protect its own Confidential Information from unauthorized disclosure, publication or dissemination. Each Party may use 22 Confidential Information solely to fulfill its obligations to the other Parties under this ITSA or its regulatory requirements. 19.1.7 Order of Disclosure. If a court or a Government Authority or entity with the right, power, and apparent authority to do so requests or requires any Party, by subpoena, oral deposition, interrogatories, requests for production of documents, administrative order, or otherwise, to disclose Confidential Information, that Party shall provide the other Parties with prompt notice of such request(s) or requirement(s) so that the other Parties may seek an appropriate protective order- or waive compliance with the terms of this ITSA. Notwithstanding the absence of a protective order or waiver, the Party may disclose such Confidential Information which, in the opinion of its counsel, the Party is legally compelled to disclose. Each Party will use Reasonable Efforts to obtain reliable assurance that confidential treatment will be accorded any Confidential Information so furnished. 19.1.8 Termination of Agreement. Upon termination of this ITSA for any reason, each Party shall, within ten (10) Calendar Days of receipt of a written request from another Party, use Reasonable Efforts to destroy, erase, or delete (with such destruction, erasure, and deletion certified in writing to the other Party) or return to the other Party, without retaining copies thereof, any and all written or electronic Confidential Information received from the other Party. 19.1.9 Remedies. The Parties agree that monetary damages would be inadequate to compensate a Party for another Party's Breach of its obligations under this Article 19. Each Party accordingly agrees that the other Parties shall be entitled to equitable relief, by way of injunction or otherwise, if the first Party Breaches or threatens to Breach its obligations under this Article 19, which equitable relief shall be granted without bond or proof of damages, and the receiving Party shall not plead in defense that there would be an adequate remedy at law. Such remedy shall not be deemed an exclusive remedy for the Breach of this Article 19, but shall be in addition to all other remedies available at law or in equity. The Parties further acknowledge and agree that the covenants contained herein are necessary for the protection of legitimate business interests and are reasonable in scope. No Party, however, shall be liable for indirect, incidental, or consequential or punitive damages of any nature or kind resulting from or arising in connection with this Article 19. 19.1.10 Disclosure to Governmental Authority, its Staff, or a State. Notwithstanding anything in this Article 19 to the contrary, during the course of an investigation or otherwise, requests information from one of the Parties that is otherwise required to be maintained in confidence pursuant to this ITSA, the Party shall provide the requested information to the requesting Governmental Authority or its staff, within the time provided for in the request for information. In providing the information to such Governmental Authority or its staff, the Party must request that the information be treated as confidential and non-public by such Governmental Authority and its staff and that the information be withheld from public disclosure. Parties are prohibited from notifying the other Parties to this ITSA prior to the release of the Confidential Information to such Governmental Authority or its staff. The Party shall notify the other Parties to the ITSA when it is notified by such Governmental Authority or its staff that a request to release Confidential Information has been received by such Governmental Authority, at which time any of the Parties may respond before such information would be made public. 23 19.1.11 Subject ,to. the exception in Article 19.1.10, Confidential Information .shall not be disclosed by the other Parties to any person not employed or retained by the other Parties, except to the extent disclosure is (i) required by law; (ii) reasonably deemed by the disclosing Party to be required to be disclosed in connection with a dispute between or among the Parties, or the defense of litigation or dispute; (iii) otherwise permitted by consent of the other Parties, such consent not to be unreasonably withheld; or (iv) necessary to fulfill its obligations under this ITSA or as a transmission service provider, including disclosing the Confidential Information to an RTO or ISO or to a regional or national reliability organization. The Party asserting confidentiality shall notify the other Parties in writing of the information it claims is confidential. Prior to any disclosures of another Party's Confidential Information under this subparagraph, or if any third party or Governmental Authority makes any request or demand for any of the information described in this subparagraph, the disclosing Party agrees to promptly notify the other Party in writing and agrees to assert confidentiality and cooperate with the other Party in seeking to protect the Confidential Information from public disclosure by confidentiality agreement, protective order or other reasonable measures. ARTICLE 20. ENVIRONMENTAL RELEASES 20.1 Each Party shall notify the other Parties, first orally and then in writing, of the release of any Hazardous Substances, or any type of remediation activities related to the Generating Facility or the Interconnection Facilities, each of which may reasonably be expected to affect materially the other Parties. The notifying Party shall: (i) provide the notice as soon as practicable, provided such Party makes a good faith effort to provide the notice no later than twenty-four hours after such Party becomes aware of the occurrence; and (ii) promptly furnish to the other Parties copies of any publicly available reports filed with any Governmental Authorities addressing such events. ARTICLE 21. INFORMATION REQUIREMENTS 21.1 Information Acquisition. The Parties shall submit specific information regarding the electrical characteristics of their respective facilities to each other as described below and in accordance with Applicable Reliability Standards. 21.2 Information Submission by Vernon. The initial information submission by Vernon shall include the Distribution System information necessary to allow MGS Owner to select equipment and meet any system protection and stability requirements, unless otherwise agreed to by the Parties. 21.3 Information Supplementation. MGS Owner shall provide Vernon any information changes due to equipment replacement, repair, or adjustment. Vernon shall provide MGS Owner any information changes due to equipment replacement, repair or adjustment in the directly connected substation or any adjacent Vernon -owned substation that may affect MGS Owner's Interconnection Facilities equipment ratings, protection or operating requirements. 24 ARTICLE 22. INFORMATION ACCESS AND AUDIT RIGHTS 22.1 Information Access. Each Party (the "Disclosing Party") shall make available to the other Party information that is in the possession of the Disclosing Party and is necessary in order for the other Party to: (i) verify the costs incurred by the Disclosing Party for which the other Party is responsible under this ITSA; and (ii) carry out its obligations and responsibilities under this ITSA. The Parties shall not use such information for purposes other than those set forth in this Article 22.1 and to enforce their rights under this ITSA. 22.2 Reporting of Non -Force Majeure Events. Each Party (the "Notifying Party") shall notify the other Parties when the Notifying Party becomes aware of its inability to comply with the provisions of this ITSA for a reason other than a Force Majeure event. The Parties agree to cooperate with each other and provide necessary information regarding such inability to comply, including the date, duration, reason for the inability to comply, and corrective actions taken or planned to be taken with respect to such inability to comply. Notwithstanding the foregoing, notification, cooperation or information provided under this Article shall not entitle the Party receiving such notification to allege a cause for anticipatory breach of this ITSA. 22.3 Audit Rights. Subject to the requirements of confidentiality under Article 19 of this ITSA, the Parties' audit rights shall include audits of the other Party's costs, calculation of invoiced amounts, Vernon's efforts to allocate responsibility for interruption or reduction of generation on the Distribution System, and each such Party's actions in an Emergency Condition. 22.3.1 The Parties shall each have the right, during normal business hours, and upon prior reasonable notice to the other Party, to audit at its own expense the other Party's accounts and records pertaining to either such Party's performance or either such Party's satisfaction of obligations owed to the other Party under this ITSA. Any audit authorized by this Article shall be performed at the offices where such accounts and records are maintained and shall be limited to those portions of such accounts and records that relate to each such Party's performance and satisfaction of obligations under this ITSA. Each such Party shall keep such accounts .and records for a period equivalent to the audit rights periods described in Article 22.4, 22.4 Audit Rights Periods. Accounts and records related to a Party's performance or satisfaction of all obligations under this ITSA shall be subject to audit as follows: (i) for an audit relating to cost obligations, the applicable audit rights period shall be twenty-four months after the auditing Party's receipt of an invoice giving rise to such cost obligations; and (ii) for an audit relating to all other obligations, the applicable audit rights period shall be twenty-four months after the event for which the audit is sought. 22.5 Audit Results. If an audit by MGS Owner or Vernon determines that an overpayment or an underpayment has occurred with respect to the other Party, a notice of such overpayment or underpayment shall be given to the other Party together with those records from the audit which support such determination. The Party that is owed payment shall render an invoice to the other Party and such invoice shall be paid pursuant to Article 10 hereof. ARTICLE 23. SUBCONTRACTORS 23.1 General. Nothing in this ITSA shall prevent a Party from utilizing the services of any subcontractor as it deems appropriate to perform its obligations under this ITSA; provided, however, that each Party shall require its subcontractors to comply with all applicable terms and 25 conditions of this ITSA in providing such services and each Party shall remain primarily liable to the other Party for the performance of such subcontractor. 23.2 Responsibility of Principal. The creation of any subcontract relationship shall not relieve the hiring Party of any of its obligations under this ITSA. The hiring Party shall be fully responsible to the other Party for the acts or omissions of any subcontractor the hiring Party hires as if no subcontract had been made. Any applicable obligation imposed by this ITSA upon the hiring Party shall be equally binding upon, and shall be construed as having application to, any subcontractor of such Party. 23.3 No Limitation by Insurance. The obligations under this Article 23 will not be limited in any way by any limitation of subcontractor's insurance. ARTICLE 24. DISPUTES 24.1 Submission. In the event either Party has a dispute, or asserts a claim, that arises out of or in connection with this ITSA or its performance, such Party, shall provide the other Party with written notice of the dispute or claim ("Notice of Dispute"). Such dispute or claim shall be referred to a designated senior representative of each Party for resolution on an informal basis as promptly as practicable after receipt of the Notice of Dispute by the other Party. In the event the designated representatives are unable to resolve the claim or dispute through unassisted or assisted negotiations within thirty (30) Calendar Days of the other Party's receipt of the Notice of Dispute, such claim or dispute may, upon mutual agreement of the Parties, be submitted to arbitration and resolved in accordance with the arbitration procedures set forth below. In the event the Parties do not agree to submit such claim or dispute to arbitration, each Party may exercise whatever rights and remedies it may have in equity or at law consistent with the terms of this ITSA. 24.2 External Arbitration Procedures. Either Party may initiate binding arbitration with respect to a Dispute by making a written demand for binding arbitration before Judicial Arbitration and Mediation Services, Inc., its successor, or any other mutually agreeable arbitrator. If the Parties fail to agree upon a single arbitrator within ten (10) Calendar Days of the submission of the dispute to arbitration, each Party shall choose one arbitrator who shall sit on a three -member arbitration panel. The two arbitrators so chosen shall within twenty (20) Calendar Days select a third arbitrator to chair the arbitration panel. In either case, the arbitrators shall be knowledgeable in electric utility matters, including electric, transmission and bulk power issues, and shall not have any current or past substantial business or financial relationships with any party to the arbitration (except prior arbitration). The arbitrator(s) shall provide each of the Parties an opportunity to be heard and, except as otherwise provided herein, shall conduct the arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("Arbitration Rules"); provided, however, in the event of a conflict between the Arbitration Rules and the terms of this Article 24, the terms of this Article 24 shall prevail. 24.3 Arbitration Decisions. Unless otherwise agreed by the Parties, the arbitrator(s) shall render a decision within ninety (90) Calendar Days of appointment and shall notify the Parties in writing of such decision and the reasons therefor. The arbitrator(s) shall be authorized only to interpret and apply the provisions of this ITSA and shall have no power to modify or change any provision of this Agreement in any manner. The decision of the arbitrator(s) shall be final and binding upon the Parties, and judgment on the award may be entered in any court having jurisdiction. The decision of the arbitrator(s) may be appealed solely on the grounds that the conduct of the 26 arbitrator(s), or the decision itself, violated the standards set forth in the Federal Arbitration Act or the Administrative Dispute Resolution Act. 24.4 Costs. Each Party shall be responsible for its own costs incurred during the arbitration process and for the following costs, if applicable: (1) the cost of the arbitrator chosen by the Party to sit on the three member panel and one half of the cost of the third arbitrator chosen; or (2) one half the cost of the single arbitrator jointly chosen by the Parties. ARTICLE 25. REPRESENTATIONS, WARRANTIES AND COVENANTS 25.1 General. Each Party makes the following representations, warranties and covenants: 25.1.1 Good Standing.Such Party is duly organized, validly existing and in good standing under the laws of the state in which it is organized, formed, or incorporated, as applicable; that it is qualified to do business in the state or states in which the Generating Facility, Interconnection Facilities owned by such Party, as applicable, are located; and that it has the corporate power and authority to own its properties, to carry on its business as now being conducted and to enter into this ITSA and carry out the transactions contemplated hereby and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this ITSA. 25.1.2 Authority. Such Party has the right, power and authority to enter into this ITSA, to become a Party hereto and to perform its obligations hereunder. This ITSA is a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors' rights generally and by general equitable principles (regardless of whether enforceability is sought in a proceeding in equity or at law). 25.1.3 No Conflict. The execution, delivery and performance of this ITSA does not violate or conflict with the organizational or formation documents, or bylaws or operating agreement, of such Party, or any judgment, license, material permit, order, material agreement or instrument applicable to or binding upon such Party or any of its assets. 25.1.4 Consent and Approval. Such Party has sought or obtained, or, in accordance with this ITSA will seek or obtain, each consent, approval, authorization, order, or acceptance by any Governmental Authority in connection with the execution, delivery and performance of this ITSA, and it will provide to any Governmental Authority notice of any actions under this ITSA that are required by Applicable Laws and Regulations. ARTICLE 26. MISCELLANEOUS 26.1 Binding Effect. This ITSA and the rights and obligations hereof, shall be binding upon and shall inure to the benefit of the successors and assigns of the Parties hereto. 26.2 Conflicts. In the event of a conflict between the body of this ITSA and any attachment; appendices or exhibits hereto; the terms and provisions of the body of this ITSA shall prevail and be deemed the final intent of the Parties. 26.3 Rules of Interpretation. This ITSA, unless a clear contrary intention appears, shall be construed and interpreted as follows: (1) the singular number includes the plural number and vice versa; (2) 27 reference to any person includes such person's successors and assigns but, in the case of a Party, only if such successors and assigns are permitted by this ITSA, and reference to a person in a particular capacity excludes such person in any other capacity or individually; (3) reference to any agreement (including this ITSA), document, instrument or tariff means such agreement, document, instrument, or tariff as amended.or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, (4) reference to any Applicable Laws and Regulations means such Applicable Laws and Regulations as amended, modified, codified, or reenacted, in whole or in part, and in effect from time to time, including, if applicable, rules and regulations promulgated thereunder; (5) unless expressly stated otherwise, reference to any Article, Section or Appendix means such Article of this ITSA or such Appendix ,� to this ITSA; (6) hereunder„"hereof", hereof , "herein", , hereto and words of similar import shall be deemed references to this ITSA as a whole and not to any particular Article or other provision hereof or thereof; (7) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and (8) relative to the determination of any period of time, "from" means "from and including", "to" means "to but excluding" and "through" means "through and including". 26.4 Entire Agreement. This ITSA, including all Appendices and Schedules attached hereto, constitutes the entire agreement among the Parties with reference to the subject matter hereof, and supersedes all prior and contemporaneous understandings or agreements, oral or written, between or among the Parties with respect to the subject matter of this ITSA. There are no other agreements, representations, warranties, or covenants which constitute any part of the consideration for, or any condition to, any Party's compliance with its obligations under this ITSA. 26.5 No Third_ Party Beneficiaries. This ITSA is not intended to and does not create rights, remedies, or benefits of any character whatsoever in favor of any persons, corporations, associations, or entities other than the Parties, and the obligations herein assumed are solely for the use and benefit of the Parties, their successors in interest and, where permitted, their assigns. 26.6 Waiver. The failure of a; Party to this ITSA to insist, on any occasion, upon strict performance of any provision of this ITSA will not be considered a waiver of any obligation, right, or duty of, or imposed upon, such Party. Any waiver at any time by either Party of its rights with respect to this ITSA shall not be deemed a continuing waiver or a waiver with respect to any other failure to comply with any other obligation, right, duty of this ITSA. Termination or Default of this ITSA for any reason by MGS Owner shall not constitute a waiver of MGS Owner's legal rights to obtain an interconnection from Vernon. Any waiver of this ITSA shall, if requested, be provided in writing. 26.7 Headings. The descriptive headings of the various Articles of this ITSA have been inserted for convenience of reference only and are of no significance in the interpretation or construction of this ITSA. 26.8 Multiple Counterparts. This ITSA maybe executed in two or more counterparts, each of which is deemed an original but all constitute one and the same instrument. 26.9 Amendment. The Parties may by mutual agreement amend this ITSA by a written instrument duly executed by all of the Parties. Such amendment shall become. effective and a part of this ITSA upon satisfaction of all Applicable Laws and Regulations. 28 26.10 Modification by the Parties. The Parties may by mutual agreement amend the Appendices to this ITSA by a written instrument duty executed by all of the Parties. Such amendment shall become effective and a part of this ITSA upon satisfaction of all Applicable Laws and Regulations. 26.11 No Partnership. This ITSA shall not be interpreted or construed to create an association, joint venture, agency relationship, or partnership among the Parties or to impose any partnership obligation or partnership liability upon any Party. No Party shall have any right, power or authority to enter into any agreement or undertaking for, or act on behalf of, or to act as or be an agent or representative of, or to otherwise bind, another Party. 26.12 Joint and Several Obligations. Except as otherwise provided in this ITSA, the obligations of Vernon and MGS Owner are several, and are neither joint nor joint and several. 29 IN WITNESS WHEREOF, the Parties have executed this ITSA in multiple originals, each of which shall constitute and be an original effective agreement among the Parties. BEOWULF (VERNON) POWER LLC By: Title: Date: City of Vernon By: Title: Date: 30 Part A to ITSA Interconnection Facilities Li Part B to ITSA Addresses for Delivery of Notices and Billings Notices: . Vernon: 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323).826-1438 Attn:. Director of Light & Power Department With a, copy to: City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 Attn: City Attorney and Latham & Watkins LLP 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Attn: David B. Rogers, Esq. Fax No: (213) 891-8763 MGS Owner: Beowulf (Vernon) Power LLC Attn: President 103 North Washington Street Easton, MD 21601 Facsimile: 410-770-9705 With copies to: Chadbourne & Parke LLP Attn: Robert Shapiro 1200 New Hampshire Ave., N.W. Washington, DC 20036 Facsimile: 202-974-5602 Billings and Payments: Vemon: [To be supplied.] MGS Owner: [To be supplied.] Alternative Forms of Delivery of Notices (telephone, facsimile or e-mail): Vernon: [To be supplied.] MGS Owner: [To be supplied.] EXHIBIT I Bill of Sale This BILL OF SALE (this "Bill of Sale") is made as of [ ], 2007, by the City of Vernon, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California ("Seller'), for the benefit of Beowulf (Vernon) Power LLC, a Delaware limited liability company ("Purchaser"). RECITALS A. Pursuant to that certain Purchase and Sale Agreement, dated as of [ ], 2007 (the "Purchase and Sale Agreement'), by and between Seller and Purchaser, Seller has agreed to sell, assign, convey, transfer and deliver all of its right title and interest in and to the Facility Assets and the Miscellaneous Assets (collectively the "Transferred Items") to Purchaser, and Purchaser has agreed to purchase, assume and acquire the Transferred Items from Seller. B. Pursuant to Section 2.6(a)(1) of the Purchase and Sale Agreement, Seller is entering into this Bill of Sale for purpose of selling, assigning, transferring to,. conveying to, and vesting in, the Purchaser the Transferred Items. NOW THEREFORE, in consideration of the premises and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows: 1. Defined Terms. Unless the context hereof shall otherwise require, capitalized terms used in this Bill of Sale, including those in the recitals hereto, and not otherwise defined herein, shall have the respective meanings as defined in the Purchase and Sale Agreement. 2. - Sale and Assignment. Effective as of 11:59 p.m., Los Angeles time, on the date hereof (the "Effective Time"), Seller, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby grant, sell, assign, convey, transfer and deliver to Purchaser all of Seller's right, title and interest in and to the Transferred Items, including, but not limited to, the real property, personal property and other interests set forth on Schedule I hereto, 3. Title. Seller does hereby warrant and covenant that (i)'it is the true and lawful owner of the Transferred Items and has good right to sell the Transferred Items, and that except for Permitted Encumbrances, title to the Transferred Items is on the date of execution hereof free and clear of all Liens of any nature and (ii) good, record and marketable title to the Transferred Items is hereby conveyed to Purchaser free and clear of all Liens of any nature, except for any existing Permitted Encumbrances. 4. Warranty. Except as otherwise set forth in the Purchase and Sale Agreement: LAU 777310.5 (a) it is understood and agreed that Seller sells and transfers and Purchaser acquires and accepts the Transferred Items on an "as is" and "where is" basis; (b) Purchaser, by its acceptance of this Bill of Sale, acknowledges and agrees that, except as expressly set forth in the Purchase and Sale Agreement, Seller has not made and will not make, nor shall Seller be deemed to have made, any warranty or representation of any kind, express or implied, with respect to any of the Transferred Items, including any warranty or representation as to their fitness for any use or purpose, design or condition for any particular use or purpose, as to the quality of the material or workmanship therein, latent or patent, or as to value, compliance with legal requirements, insurance requirements, specifications, location, use, condition, merchantability, quality, description, durability or operation, it being agreed that all risks incident to all of these matters are to be borne by the Purchaser; and (c) in the event of any defect or deficiency in any of the Transferred Items of any nature, whether patent or latent, Seller shall not have any responsibility or liability with respect thereto or for any incidental, consequential or other damages (including strict liability in tort). The provisions of this paragraph 4 have been negotiated, and except as otherwise set forth in the Purchase and Sale Agreement, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Seller, express or implied; with respect to any of the Transferred Items arising pursuant to the Uniform Commercial Code as adopted by the State of California or any other law or regulation now or hereafter in effector otherwise. 5. Binding Effect; Assi ment. This Bill of Sale and all of the provisions hereof shall be binding upon Seller and its respective successors and assigns and shall inure to the benefit of Purchaser and its successors and assigns. 6. Further Action. Seller covenants and agrees that it will, from time to time, execute and deliver such further instruments of conveyance and transfer as may be reasonably required to implement and effectuate the sale set forth in the Purchase and Sale Agreement. 7. Effectiveness. This Assignment shall become effective as of the. Effective Time. 8. No Third Party Beneficiarx. Nothing in this Bill of Sale is intended to confer upon any other person except Purchaser any rights or remedies hereunder or shall create any third party beneficiary rights in any person. 9. Goveriiing Law. This Bill of Sale shall be governed by and construed in accordance with the laws of the State of California (regardless of the laws that might otherwise govern under applicable principles of conflicts of law). 10. Construction. This Bill of Sale is delivered pursuant to and is subject to the terms of the Purchase and Sale Agreement. The terms of the Purchase Agreement, including but not limited to Seller's representations, warranties, covenants, agreements and indemnities 2 LA\ 1777310.5 relating to the Transferred Items, are incorporated herein by this reference. Seller acknowledges and agrees that the representations, warranties, covenants, agreements and indemnities contained in the Purchase Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or ambiguity between the terms of the Purchase and Sale Agreement and the terms of this Bill of Sale, the terms of the Purchase and Sale Agreement shall control. 11. Severability. If one or more of the provisions of this Bill of Sale shall be deemed invalid, illegal or unenforceable in any respect, such provisions shall be deemed to be severed from this Bill of Sale, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired in any way thereby. 12. Counterparts. This Bill of Sale may be executed in any number of counterparts, all such counterparts together constituting but one and the same instrument. [Remainder of Page Intentionally Left Blank] 3 LA\ 1777310.5 IN WITNESS WHEREOF,, the parties hereto, by their duly authorized officers, have executed and delivered this Bill of Sale as of the day and year first above set forth. CITY OF VERNON By: Name: Title: ACCEPTED AND AGREED TO THIS DAY OF [ 1, 2007 BEOWULF (VERNON) POWER LLC By: Name: Title: Signature Page to Bill of Sale LA\1777310.5 Schedule I Transferred Items LA\ 1777310.5 EXHIBIT J RECORDING REQUESTED BY CITY OF VERNON AND WHEN RECORDED MAIL TO AND MAIL TAX STATEMENTS TO: [Purchaser] Attn: (Above Space for Recorder's Use Only) Recording Fee: Exempt Pursuant to California Government Code Section 27383 GRANT DEED The undersigned declares that the DOCUMENTARY TRANSFER TAX is APNs: 6308-002-900 $ and is T computed on the full value of the interest or property conveyed; OR IS _computed on the full value less value of liens or encumbrances remaining thereon at the time of sale. Signature of Declarant FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, City of Vernon, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "Grantor"), hereby grants to , a (the "Grantee"), all of Grantor's right, title and interest in and to the fixtures and improvements (the "PrpertY") located on the real property ("Land") described in Exhibit "A" attached hereto and incorporated herein by this reference, but expressly excluding the Land. Said grant is made subject to all covenants, conditions, restrictions; easements, encumbrances, circumstances and other matters of record that. currently exist and affect the Property and/or the Land, and Grantee's reconveyance obligations as set forth in that certain Lease and Grant of Easements dated by and between Grantor, as Landlord, and Grantee, as Tenant. LA\l778118.2 IN WITNESS WHEREOF, this Grant Deed shall be effective as of 2007. GRANTOR: CITY OF VERNON, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California By: Name: Title: LA\17781 18.2 EXHIBIT "A" DESCRIPTION OF PROPERTY [MGS Legal Description to be added:] A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST.NORTHERLY CORNER OF SAID LOT 7, SAID CORNER ALSO BEING THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 367.83 FEET, A RADIAL LINE PASSING THROUGH SAID CORNER BEAR SOUTH 58'03'33 WEST; THENCE SOUTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 59,37-38" AN ARC DISTANCE OF 382.79 FEET; THENCE NORTH 88'25'55" EAST 323.79 FEET ALONG THE NORTHERLY LINE OF SAID LOT 7 TO A POINT ON THE SOUTHERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF THE LOS ANGELES JUNCTION RAILROAD RIGHT—OF—WAY AS SHOWN ON LOS ANGELES COUNTY FIELD MAP NUMBER 10287 PAGE A3, RECORDS OF SAID COUNT, SAID POINT ALSO BEING THE BEGINNING OF A CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 906.21 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 4'45'51" AN ARC DISTANCE OF 75.35 FEET TO THE BEGINNING OF A COMPOUND CURVE HAVING A RADIUS OF 294.44 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13'28'39" AN ARC DISTANCE OF 69.26 FEET TO A POINT ON THE EASTERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF SOTO STREET AS SHOWN ON SAID LOS ANGELES COUNTY FIELD MAP; THENCE SOUTH 1'37'37" EAST 186.27 FEET ALONG SAID EASTERLY LINE; THENCE SOUTH 88'10'26" WEST 33.20 FEET; THENCE NORTH 01'49'34" WEST 6.00 FEET; THENCE SOUTH 88'10'26" WEST 6.00 FEET; THENCE SOUTH 01'49'34" EAST 6.00 FEET; THENCE SOUTH 88'10'26" WEST 439.07 FEET; THENCE NORTH 01'27:'57" WEST 115.24 FEET; THENCE SOUTH 89'10'17" WEST 193.60 FEET; THENCE NORTH 02'51'27" WEST 42.65 FEET; THENCE NORTH 87'47'00" EAST 11.55 FEET; THENCE THENCE NORTH 01'54'17" WEST 24.22 FEET; THENCE SOUTH 87'28'16" WEST 10,26 FEET; THENCE NORTH 01'06'15" WEST 13.30 FEET; THENCE SOUTH 88'48'42" WEST 81.59 FEET; THENCE SOUTH 01'26'34" EAST 79.61 FEET; THENCE SOUTH 89'10'17" WEST 37.82 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT 7; THENCE NORTH 00*09'03" WEST 267.99 FEET ALONG SAID WESTERLY LINE TO THE POINT OF BEGINNING. CONTAINING 3.10 ACRES MORE OR LESS. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. ROSELL EXP. 9-30-M No. 6281 EXHIBIT K Assignment and Assumption Agreement This ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment'), is made as of [ ], 2007 (the "EffectiveDate"), by and between the City of Vernon, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California ("Assignor"), and Beowulf (Vernon) Power LLC, a Delaware limited liability company ("Assignee"). WITNESSETH: WHEREAS, Assignor has entered into or possesses rights under certain contracts, agreements, leases, warranties, guarantees and other agreements as set forth in Schedule I hereto (the "Assigned Agreements") in connection with that certain Purchase and Sale Agreement, dated as of [ J, 2007, by and between. Assignor and Assignee (the "Purchase and Sale Agreement'); and WHEREAS, pursuant to Section 2.1(g) and Section 2.6(a)(2) of the Purchase and Sale Agreement, Assignor desires to assign and transfer to Assignee, and Assignee desires to assume and accept, all of Assignor's rights and duties under the Assigned Agreements and all of Assignor's obligations under the Assigned Agreements arising after the Closing Date. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows: 1. Definitions. Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the Purchase and Sale Agreement. 2. Assignment. Effective as of 11:59 p.m., Los Angeles time, on the date hereof (the "Effective Time"), Assignor hereby irrevocably assigns and transfers to Assignee all of its right, title and interest in, to and under, and all of its duties, liabilities and obligations under or pursuant to, the Assigned Agreements and, to the extent assignable, the firm transmission rights and other congestion credits related to the Mead Transmission Interest, except for any liabilities under the Assigned Agreements resulting from Assignor's performance or failure to perform its obligations under the Assigned Agreements on or prior to the Closing Date, which liabilities are retained by and remain the responsibility of Assignor (the "Retained Liabilities"). 3. Assumption. Assignee shall assume and accept all of Assignor's right, title and interest in, to and under, and all of Assignor's duties, liabilities and obligations under or pursuant to, the Assigned Agreements on the Closing Date, except for the Retained Liabilities, and agrees to perform under and be bound by the terms of the Assigned Agreements. For the LA\ 1777322.5 avoidance of doubt, Assignee assumes no Excluded Liabilities, and the parties hereto agree that all such Excluded Liabilities shall remain the sole responsibility of the Assignor. 4. Non -Interference. Each of Assignor and Assignee agrees that the assignment and assumption of the assigned rights and responsibilities hereunder is irrevocable and that neither party shall take any action or make any other assignment or direction which could prejudice the other's rights hereunder, and that any such action or assignment shall be void. 5. Representations and Warranties. Assignor hereby represents and warrants to Assignee that neither its execution, delivery or performance of this Agreement, nor the consummation by it of the transactions contemplated hereby will (a) require any consent, agreement or acknowledgement of any Person that has not been obtained, (b) require any' Governmental Approval that it has not obtained, or (c) violate- any Governmental Rules applicable to Assignor. 6. Effectiveness. This Assignment shall become effective as of the Effective Time. 7. Further Assurances. Each of the parties will, from time to time and at all times hereafter, at its own expense, upon every reasonable request to do so by another party hereto, promptly make, do, execute and deliver, or cause to ,be, made, done, executed and delivered, all such further acts, deeds, assurances and things as may be legally required or reasonably necessary in order to further implement and carry out the assignments and assumptions contemplated by this Assignment. 8. Successor and Assigns. The provisions of this Assignment are binding upon, and will inure to the benefit of, the successors and assigns of Assignor and Assignee, respectively. 9. Governing Law. The validity, interpretation and effect of this Assignment shall be governed by and will be construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines except to the extent that certain matters are preempted by Federal law or are governed. by the law of the jurisdiction of organization of the respective parties. 10. Severability. If one or more of the provisions of this Assignment shall be deemed invalid, illegal or unenforceable in any respect, such provisions shall be deemed to be severed from this Assignment, and the validity, legality and enforceability of the remaining provisions contained herein shall not be affected or impaired in any way thereby. 1 Please note that under Section 4.4.1.2 of the TCA, Assignee will need to assume Vernon's obligations under the TCA. While we can address this issue in this Agreement, it may be more appropriate to create a separate Assignment and Assumption Agreement with respect to the TCA in order to simplify CAISO's review of such assignment. 2 LA\ 1777322.5 11 Construction. This Assignment is delivered pursuant to and is subject to the terms of the Purchase and Sale Agreement. The terms of the Purchase Agreement, including but not limited to Assignor's representations, warranties, covenants, agreements and indemnities relating to the Assumed Liabilities, are incorporated herein by this reference. Assignor. acknowledges and agrees that the representations, warranties, covenants, agreements and indemnities contained in the Purchase Agreement shall not be superseded hereby but shall remain in full force and effect to the full extent provided therein. In the event of any conflict or ambiguity between the terms of the Purchase and Sale Agreement and the terms of this Assignment, the terms of the Purchase and Sale Agreement shall control. 12. Counterparts: This Assignment may be executed in any number of counterparts, all such counterparts together constituting but one and the same instrument. [Remainder of Page Intentionally Left Blank] LA\1777322.5 IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers, have executed and delivered this Assignment as of the day and year first above set forth. CITY OF VERNON By: Name: Title: BEOWULF (VERNON) POWER LLC By: Name: Title: Signature Page to Assignment and Assumption Agreement LA\I777322.5 Schedule I Assigned Agreements LAM 777322.5 EXHIBIT L Exhibit L Form of Opinion [City of Vernon Letterhead] [DATE] [PURCHASER] Re: Transaction for certain power assets Ladies and Gentlemen: Pursuant to Section 2.6(a)(18) of that certain Purchase and Sale Agreement dated [ ], 2007 (the "PSA") by and between the City of Vernon, California, a municipal corporation and chartered city duly organized and existing under and by virtue of the Constitution and laws of the state of California (the "City") and [_�, I hereby advise you as of the date hereof that I am of the opinion that: A. The City is duly organized and validly existing as a chartered city under the Constitution and laws of the State of California and its Charter. B. The members of the Council of the City (the "City Council") are duly invested in office with full power and authority under the City's Charter to act on behalf of the City. C. The City has the full legal right, power and authority to enter into and perform its obligations under the PSA and the Related Agreements. D. The PSA and the Related Agreements constitute valid and binding obligations of the City, enforceable against the City in accordance with their respective terms. Each of the PSA and the Related Agreements has been duly executed and delivered by the City. E. The City Council has duly and validly adopted Resolution " authorizing the transaction contemplated by the PSA and the Related Agreements at meetings of the City Council that were called and held pursuant to law and the City's Charter and with all public notice required and at which a quorum was present and acting throughout, and Resolution is now in full force and effect, and has not been amended. F. All action necessary for the authorization, execution, delivery of the PSA and the Related Agreements by the City and the performance of by the City of the obligations to be performed by the City as of the date hereof under the PSA and the Related Agreements has been taken on the part of the City. LA\1803500.5 Respectfully submitted LA\1803500.5 EXECUTION VERSION SCHEDULES TO THE CITY OF VERNON PURCHASE AND SALE AGREEMENT Schedule 1.1-FS Facility Site [Separately provided] 1.1-FS-1 EXHIBIT "A" A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF. VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST NORTHERLY CORNER OF SAID LOT 7, SAID CORNER ALSO BEING THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 367.83 FEET, A RADIAL LINE PASSING THROUGH SAID CORNER .BEAR SOUTH 58.03-33 WEST; THENCE SOUTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 59'37'38" AN ARC DISTANCE OF 382.79 FEET; THENCE NORTH 88'25'55" EAST 323.79 FEET ALONG THE NORTHERLY LINE OF SAID LOT 7 TO A POINT ON THE SOUTHERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF THE LOS ANGELES JUNCTION RAILROAD RIGHT-OF-WAY AS SHOWN ON LOS ANGELES COUNTY FIELD MAP NUMBER 10287 PAGE A3, RECORDS OF SAID COUNT, SAID POINT ALSO BEING THE BEGINNING OF A CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 906.21 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 4'45'51" AN ARC DISTANCE OF 75.35 FEET TO THE BEGINNING OF A COMPOUND CURVE HAVING A RADIUS OF 294.44 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13°28'39" AN ARC DISTANCE OF 69.26 FEET TO A POINT ON THE EASTERLY LINE OF'A PORTION DEEDED FOR THE WIDENING OF SOTO STREET AS SHOWN ON SAID LOS ANGELES COUNTY FIELD MAP; THENCE SOUTH 1'37'37" EAST 186.27 FEET ALONG SAID EASTERLY LINE; THENCE SOUTH 88'10'26" WEST 33.20 FEET; THENCE NORTH 01'49'34" WEST 6.00 FEET; THENCE SOUTH 88'10'26" WEST 6.00 FEET; THENCE SOUTH 01'49'34" EAST 6.00 FEET; THENCE SOUTH 88'10'26" WEST 439.07 FEET; THENCE NORTH 01'27'57" WEST 115.24 FEET; THENCE SOUTH 89'10'17" WEST 193.60 FEET; THENCE NORTH 02'51'27" WEST 42.65 FEET; THENCE NORTH 87'47'00" EAST 11.55 FEET; THENCE THENCE NORTH 01'54'17" WEST 24.22 FEET; THENCE SOUTH 87'28'16" WEST 10.26 FEET; THENCE NORTH 01'06'15" WEST 13.30 FEET; THENCE SOUTH 88'48'42" WEST 81.59 FEET; THENCE SOUTH 01'26'34" EAST 7.9.61 FEET; THENCE SOUTH 89'10'17" WEST 37.82 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT 7; THENCE NORTH 00'09'03" WEST 267.99 FEET ALONG SAID WESTERLY LINE TO THE POINT OF BEGINNING. CONTAINING 3.10 ACRES MORE OR LESS. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 / DAVID T. ROSELL EXP. 9-30-08 No. 6281 EXHIBIT "B" s 1 "=140' �5$O POINT OF BEGINNING MORTH N'LY CORNER LOT 7 SOUTHERLY LINE AND WESTERLY LINE OF THE PORTIONS DEEDED FOR THE W Q WIDENING OF SOTO STREET AND LOS ANGELES JUNCTION RAILWAY CO. AS n SHOWN ON F.M. 10287/A3 N z I U) W Oj 3 C� LA JUNCTION RY CO W -C2 > _ o Q C9 o L10 L8 _ N88'25'55"E 323.79' 3- 0 o L9 r 1 W T U o L6 -j w W d L12 S89'10'17"W 1 ^ LEASE AREA 7 00 Q W N,n O 1n Jr L J-r -r N L3 "(n , LI . W TRACT NO. 64 14 Lt 1 I\ILJJ�i . /71 -i0 S88'10'26,"W 439.07' H .� VARIES O tY 20' U J m E A S T 5 0 T H S T R E E TJ a (40' WIDE PUBLIC RIGHT—OF—WAY) 20' LINE TABLE LINE LENGTH BEARING LJ 33.20 S88'10'26"W L2 6.00 N01'49'34"W L3 6.00 S88'10'26"W L4 6.00 S01'49'34" E L5 42.65 S02'51'27"E L6 11.55 S87'47'00"W L7 24.22 S01'54'17"E L8 10.26 S87'28'16"W L9 - 13:30 S01'06'15"E L10 81.59 S88'48142..W 1-11 79.61 SOl'26'34"E L12t 37.82 S89'10'17"W CURVE TABLE CURVE DELTA RADIUS LENGTH Cl 59'37'38" 367.83 382.79' C2 4'45'51" 906.21 75.35' C3 13*28*39" 294.44 69.26' Schedule 1.1-HD Hoover Dam Uprating Project The Hoover Dam Uprating Project consists principally of the uprating of the capacity of 17 generating units at the hydroelectric power plant of the Hoover Dam, located approximately 25 miles from Las Vegas, Nevada. 1.1-PV-1 None. Schedule 1.1-PE Permitted Encumbrances 1.1-TI-1 Schedule jjfjjj Electrical Interconnection Facilities [Separately provided] 2.1(b)-1 �° � FYI Y\ �; � ,� F"q �� i ��� � � \ `, �- ,, J 1 �``'\ �• G <: c �� ., 4 �; ��: �i �fi i Schedule 2.1(c) Pre -Ordered Equipment [Separately provided] 2.1(d) SIEMENS Quotation Copy Wednesday, January 10, 2007 -- - -- "' -- --- -- _ City Of Vernon L & P L� Malburg Generating Station. Vernon, CA Attn: Mark Thompson Phone: 323-826.3610 Fax 323-585.5074 Subject: Your Inquiry ('8' Inspection Parts - One Unit) Quotation Number 40042.06T-1 Revision 1 for City Of Vernon L a P Siemens Demag Delaval Turbomachinery Inc. is pleased to offer the following for your consideration: unit Lead Time Item Qty Part Number Description Serial No. (weeks) Unit Price Extended Price 001 �0 242356(3-C Burner 60531 $37,925.00 $1 00 002 -2 2423699-D Combustor B0531 $1,816,326.00 $1,818 328:00�,- 003 j7,pf 2423470•C Turbine blade 80631 $11,605.00 $1 .7o ,— 2,019,2 004) yo 56 2423483-A Guide vane Vane 1 Complete D0531 $19,289.00 $964 4 f W1 q u 9 o u 2 ui 005 qe sW 2422964-A Guide vane Turb.guide vane2 130531 $12.542.00 $614,%B Q0) 22 006 -2 2420018-D Guide vane No 2, boroscope B0631 $12,961.00 $1g�9&1:00�- 007 � 2 2423682-A Guide vane No 2, Temp B0531 $13,263.00 $26.,526:00. y 0m.-•t 008 11,,8' 1CSA10225-1 Braided packing BM31 $1.00 $&-.W Wo•'r` 009424X T3907.178 Lock washer B0531 $5.00 $1,$a80:00 Z,`] b 0 • 010 1 ZBr 21517002.197 Washer 80531 $19.00 $114M 2.28- - 011 $0 ¢d T3904478 Locking washer 80531 $3.00 $120..00 2 012 1fd,14 T3910-185 Lock washer (folded) B0531 $5.00 $120.00 'Z ff a 013 Z�4 T3907-_178 Lock washer B0531 $5.00 $Bb:06- 13 0 "= 014 1k 2423623-2 Sealing ring C-seal 80531 $223.00 $A4S:90 "2.= 015 2 1 2423623-1 Sealing ring C-seal 80531 $470.00 $-420-. CJ`+6 �. 016 1,- T3712-317 Sheet gasket acc. to EN B0531 $8.00 &,&..00 3 -d-• = 017 3 T3712-318 Sheet gasket acc. to EN B0531 $16.00 $4.&W 018 ,3 T3712-224 Sheet gasket 80531 $32.00 $9&00 019 T3712-222 Sheet gasket acc. to EN B0531 $32.00 $&W-W 020 .i T3712-220 Sheet gasket acc. to EN B0531 $14.00 $5frw Siemens Demag Delave! Turbomachinery Inc. 640 Nottingham Way Tel:- (609) 890.5000 www.pg.slemom.com Hamilton, New Jersey 08638 USA Fax: (609) 587-7790 SIEMENS CO Py Quotation Quotation 40042.06T-1 sonlinued, page 2 of 9 021 V "e 2421466-1 Gasket 80531 $99.00 $-awo0 __ 022 I 1 2422868.7 Gasket Armco B0531 $16.00 $18 00 2, - 023 kpt& T3907-186 Lock washer B0531 $8.00 $gs--m 024 2ij 12' T3905.186 Lock washer Stainless steel B0531 $9.00 $108.00 025 2,1 T3711.315 Sheet gasket B0531 $2.00 $2.00 020 %p 2' T3711.319 Sheet gasket 80531 $4.00 $8.00 027 ,Z.Y T3711.315 Sheetgaskel B0531 $2.00 $2.00 028 2 Y T3712-222 Sheet gasket ace, to EN 80531 $32.00 $32.00 029 f >f T3711-319 Sheet gasket - B0531 $4.00 $8.00 030 21/ T3712-225 031 6214' T3907-166 Sheet gasket according to EN Lock washer 80531 80531 $73.00 $8.00 $73.00 $128.00 l l 032 19 24 T3907-178 033 2 Y 2422868.3 Lock washer Gasket Armco B0531 B0531 $5.00 $62.00 $120.00 $62.00 034 J,7 2422668-1 Gasket Armco B0531 $84.00 $128.00 035 8 A' 242286�2 Gasket Armco 00531 $12.00 $48.00 038 8,4 T3910-173 Lock washer (folded) B0531 $4.00 $16.00 037, 8X T1253-239 Split pin 90531, $4.00 $16.00 038 )2,d 2422868-6 Gasket Armco 80531 $22.00 $132.00 039 1�0 2422808-5 Gasket Armco 80531 $21.00 $168.00 040 2 Y T3712-314 Gasket B0531 $5.00 $5.00 041 �j sY T3905-178 Lock washer (folded) B0631 $8.00 S32.00 042 2Y 2420212-1 Sealing E-3ealing 80531 $13.739.00 $13,739.00 043 t(jZ 1.-T3907-178 Lock washer : B0531 $5.00 $80.00 044vft T3907-186 Lock washer B0631 $e.00 $992.00 045 y2,,4 T3907,179 Lock washer Nordlock B0631 $9.00 $144.00 046 5j1 T3905.178 Lock washer (folded) B0531 $8.00 $400.00 0t) Slemens Demag Delaval Turbomachinery Inc: 840 Nottingham Way Tel: (609) 890-5000 www.pg.siemens.com Hamilton, New Jersey 08638 USA Fax: (609) 587.7790 SIEMENS Quotation Quotation 40042.OBT-1 continued, page 3 of 9 047 '4-2 2421514.2 Gasket B0531 $13.00 $26.00 048 1 2- 2421614.1 Gasket B0531 -$13.00 $26.00 049 4 - T3907-165 Lock washer B0531 $3.00 $6.100 050�43907-179 Lock washer Nordlock 130531 $9.00 $1,188.00 051 .3z W T3907-186 Lock washer B0531 $8.00 $128.00 052 i f 2' 2421263-1 Gasket Square gasket 130531 $13.00 $26.00 053 (< K 21517002-175 Lock washer 80531 $26.00 $208.00 054 4 2' 2421284-1 Gasket Square gasket 60531 $15.00 $30.00 055 ((� 8- 21517002-175 Lock washer 00531 $26.00 $208.00 056 W 2420792-1 Gasket 00531 $78.00 $2,340.00 0570 16 T3907.186 Look washer 130531 $8.00 $1,440.00 058 e f .2 2415046.2 Gasket 90531 $39.00 $78.00 059�2111 T3907-160 Lock washer B0531 $8.00 $128.00' 060 2 k 2416046-2 Gasket 80531 $39.00 $39.00 061 -8' T3907-186 Lock washer B0531 $8.00 $64.00 7) 062 Le W" T3910-185 Look washer (folded) B0631 $6.00 $50.00 063 Z T3706-133 Gasket metal sheeted B0631 $16.00 $48.00 064 ' 3' T3910-204 Lock washer (folded) 00531 $6.00 $18.00 065 {eQ �O 21517002.195 Washer B0631 $11.00 $550.00 066 & o .80- 2421910.1 . Specer ring 80531 $13.00 $390.00 Ot 7 (,o3t1`2421910.2 Spacer ring 80531 $18.00 $540.00 068 Go V-2421910.3' Spacer ring 80631 $19.00 $570.00 069 60 W- 2421910-4 Spacer ring B0531 $22.00 $660.00 070(A830' 2420792-1 Gasket B0531 $78.00 $2,340.00 071 1-4-T3910-179 Lock washer (folded) B0531 $3.00 $12.00 J 072 2 4-T3706.138 Gasket B0531 $71.00 $71,00 ' Siemens Demag Delaval Turbomachinery Inc. 940 Nottingham Way Tel: (609) 8t10-5000 www.pg,siemens.com Hamilton. New Jersey 06638 USA Fax: (609) 587.7790 SIEMENS Quotation C()PY Quotation 40042-06T-1 continued, page 4 of 9 i 073 2 T3712-314 $5.00 $5.00 Gasket 80531 I, !; 074 W-2420702-1 Lock washer (folded) 00531 $38.00 $1,140.00 ;. 075 29" T3910=185 Lock washer (folded) B0531 $5.00 $125.00 076 T3907-186 Look washer B0531 $8.00 $680.00 r 12L I 0775-0 45- 2420476.1 Sealing Outer seal strip 80531 $25.00 $625.00 078P .28 2420476-1 Sealing Inner seal strip 80531 $67.60 $1,675.00 079166 ET 2420708-1 Lock washer 80631 $12.00 $600.00 060 2i W 13408044.139 Wire round, stainless 80531 $3.00 $36.00 061164 W 2420703-2 Retaining ring Internal 80631 $18.00 $900.00 082 100 60- T3905-165 Lock washer (folded) B0531 $8.00 $400.00 083 5d -25 2420475-1, �J Sealing Outer seat strip 80531 $25.00 $625.00 . 084 5023 2420476-1 Sealing Inner seal strip 90531 $67.00 $1,675.00 085 57025 2420477-1 Sealing Seal strip 80531 $67.00 $1,675.00 088 S() 2� 2423340-1 Sealing Rear seal strip 80531 $75.00 $1,875.00 087(8o K 2420703-1 Relainingring Internal B0531 $34.00 $1,700.00 088 W 2420702.2 Lock washer (folded) 00531 $37.00 $925.00 089 20 4T 2420490-1 Lock nut Of steel 80531 $2.00 $20.00 090 1748?' 2423585-1 Sealing blade 1 B0531 $120.00 $10,440.00 091 (p 2-2424155.1 Sealing B0531 $1.00 $3.00 (0 2' 2420131-1 r'j 10 Lock plate blade l B0531 $629.00 $1,887.00, 0931,7489-2423582-2 Sealing Blade 1 80531 $38.00 $3,306.00 094 .yLt W T3905.178 Look washer (folded) 80531 $8.00 $136.00 09511 jj 8'T3907-178 Lock washer B0531 $5.00 $740.00 096W T3905.178 Lock washer (folded) 80631 $8.00 $88.00 097) 2 S- 21517002-162 Lock washer B0531 $18.00 $1081.00 098 2-o W 2420211.1 Sealing Seal strip 130531 $237.00 $2,3 0.00 Siemens Demag Delaval Turbomachinery Inc. 1340 Nottingham Way Tel: (6091 890.5000 www,pg.siemens.corn Hamilton. New Jersey 08638 USA Fax: (009) 587.7790 SIEMENS Quotation Quotation 46042.06T-1 oontinued, page 5 of 099 ) a52' 2420534.1 Sealing Outer sealsMp 80531 $74.00 $3,848.00 1001a�Lr 2423255 1 Sealing Inner seal strip B0531 $75.00 $3,900.00 101 2 4-A155168O-1 Plastic loll 80531 $47.00 $47.00 102 s f 2-'A0721170-185 / Paste lubricant 80631 $137.00 $274.00 J 103 efp -20- 13408044-139 Wire round, stainless B0531 $3.00 $60.00 104 cf •2- A0721230.55 Thread sealing Locate 542 00531 $61.00 $122.00 105 r4-A1551160.14 Tape B0531 $13.00 $52.00 106 2 y A0721236.62 Threadlocker Locilte 275 80531 $77.00 $77.00 107 Z Y A0721230-61 Loctite 243 " 80631 $77.00 $77.00 108 4fo W A1656846.35 Emery cloth, no. 100 130531 $3.00 $60.00 109 Zola, A16SU46-36 Emerypaper 60531 $3.00 $30.00 110 ;Zov W A 15,56U6.37 Emery cloth B0531 $3.00 $30.00 1111fo 20' A3496860.41 Cleaning cloth 80631 $4.00 $80.00 '2 112 j0 6 A1556860.12 Wall brush moitler BO531 $2.00 $10.00 113 . � 2- A1551160-12 Masking tape 80531 $4.00 $8.00 114 80,1& A8212962-21 Deposit box 80631 $9.00 $135.00 115 70 W A8212962-22 Deposit box 80531 $5.00 $175.00 116 o 45 A8212962-23 Deposit box 80531 $7.00 $105.00 117 9 Pr Al556990.472 Assembly glove B0531 $11.00 $528.00 118 Z .Y A1551176.31 Marking paint Styimark 80531 $21.00 $21.00 119 10 -5' A2441176-48 Marking pen AHline 400-XF B0531 $10.00 $50.00 120 2X 13108011-2 Gasket sheet B0531 $812.00 $612.00 121 iA 3-17108001-143 Gasket sheet 80531 $81.00 $243.00 y; 122 b 0 25 Al551160.11 Cleaning tissue B0531 $25.00 $625.00 123 at0 20- A1556960-38 Refuse sack 80531 $2.00 $40.00 124 0 tT A1554944.3 Battery B0531 $1.00 $10.00 Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way Tel: (609) 890-5000 www.pg.stemens.com Hamilton, New Jersey 08W8 USA Fax: (608) 587.7790 SIEMENS Quotation Quotation 40042.06T-1 continued, page 6 of 9 125 70* A1554944.8 Battery B0531 $1.00 $10.00 126 2,UW A606E1516082 WIRE BUNDLERS 390X4,7 T50L B0531 $1.00 $100.00 127 2' A606EO764113 Electrical tape B0531 $3.00 $6.00 128 `o-&' T3704.108 Point gasket B0531 $3.00 $15.00 129 . IL 8' T3725.179 Gasket B0531 $2.00 $16.00 130 10 .5-T6102.1D1 Union nut B0531 $1.00 $5.00 - - ---._. - 131 2-T6313101 Plug for pipe coupling 60531 $2.00 $4.00 132 J2- T6815102 Coupling B0531 $5.00 $10.00 133 T T8815-802 Coupling d 8, 1/4 npt 80531 $6.00 $12.00 134 Y 76820.102 Pipe coupling, straight B0531 $11.00 $22.00 135 24-- T6830-101 Union B0531 $7.00 $7.00 136 Z4- T6870.101 Tee coupling B0531 $18.00 $18.00 137 p T7021-101 Ferrule 80531 $1.00 $5.00 138 9 1CSA8138-1 Nut 80531 $90.00 $270.00 139 1CSA8135.1 Nipple B0531 $28.00 $84.00 140 Q .i 1CSA8133.1 Coupling B0531 $12.00 $12.00' 141 (� 3. 1851523-1 Nipple 80531 $16.00 $48.00 142 8 4- 1852416.1 Adapter M12 x 1,5 -R114' B0531 $31.00 $124.00 $28.00 143 A� 2' 1852417-1 Nipple 80531 $56.00 1" 4.•-2 2035928-6 Quick goupling male 80531 $107.00 $214.00 145 q 2- 2035929-2 Adapter female -male, BSPP-NPT B0531 $29.00 $58.00 146 't a 70006131-A Pipe connector B0531 $21.00 $42.00 147 �'2. 70006131-B Pipe connector B0531 $21.00 $42.00 148 2 j- 70006131-C Pipe connector B0531 $21.00 $21.00 149 24- Mom 131-E Pipe connector B0531 $21.00 $21.00 150 H•2' 70006131-D Pipe connector 00531 $19.00 $38.00 Siemens Demag Delaval Turbomachinery Inc. 840 Notl"am Way Tet:.(609)890-5000 www.pg.siemena.corn Hamilton, New Jersey 08638 USA Fax: (609) 687-7790 SIEMENS Quotation PY Quotation 40042.06T-1 continued, page 7 of 9 151 9 A' 1CSA8259-1 Hose B0531 $6.00 $24.00 (( 152 Lf 2' 1CSA8263.1 Coupling B0531 $6.00 $12.00 163 1CSA8261-1 Coupling 80531 $5.00 $10:00 154 L' 1CSA8262.1 Coupling B0531 $4.00 $8.00 155 ,fo 29- 1CSA8130.1 Sleeve B0531 $7.00 $140.00 156 (� -r 1C$A7988-1 Hose B0531 " $6.00 $30.00 " 157' g 1' ICSA8257-1 Gasket B0531 $16.00 $64.00 158 1 8-- 1 CSA8258-1 Gasket 80531 $22.00 $176.00 159 it) 8-242362" Sealing ring C-seal B0531 $166.00 $775.00 160 K T1873.538 22 Hexagon sookethead screw large B0531 $42.00 $588.00 clearance 161 �b %* T1665.542 Hexagon head bolt B0631 $156.00 $5,304.00 162 go W T3907.178 Loch washer B0531 - $5,00 $200.00 163 12_ A- 2021278-3 Gasket for flange connection B0531 $51.00 $306.00 164 12. - 2021278-2 Gasket for flange connection B0531 $29.00 $174.00 165 8' T2804-126 Hexagon nut B0531 $2.00 $16.00 166 (e 8-T1624.695 Screw, steel B0531 $17.00 $136.00 167 ["B- T2804-124 Hexagon nut B0531 $4.00 $32.00 168 1 l� 8' T1624.644 Hexagon head screw B0531 $9.00 $72.00 169 -4- T3717-316 Gasket B0531 $86.00 $344.00 170 f (, -W" T1622.630 Hexagon head screw B0531 $3.00 $24.00 171 8 4-T3717.465 Gasket 80531 $99.00 $396.00 -CG �172 1 � ,& T1622-676 Hexagon head screw galvanized 80531 $5.00 $40.00 173 2 x A0721170-185 Paste lubricant B0631 $137.00 $137.00 174 2 1- A4431160.63 Teflon band B0531 $2.00 $2.00 175 2 4 W6861110-3 Wire brush B0531 $4.00 $4.00 176 24- A1551160.12 Masking tape 80531 $4.00 $4.00 Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way Tel: (609) ago-5000 www.pg.siemerts.com Hamilton, New Jersey 08638 USA Fax: (609) 587.7790 SIEMENS Quotation Ouotatlon 40042.06T-1 continued, page 8 of 9 177 2-4-A1551160.14 Tape B0531 $13.00 $13.00 178 21 A606E0754113 Electrical tape 80531 $3.00 $3.00 179 .A-"T6815-802 Coupling d 8, 114 np1 B0531 $8.00 $24.00 160 4-1852417.1 Nipple U0531 $28.00 $112.00 181 L,4 1852416.1 Adapter M12 x 1,5 -R1/4' B0531 $31.00 $93.00 I p 1 IJ 182 �, 8- 2035928.6 Quick goupling male 80531 $107.00 S321.00 Ui 183 0' 2035929-2 Adapter female -male. BSPP-NPT 80531 $29.00 $87.00 184 2' T3725-179 Gasket 80531 $2.00 $6.00 1856-0 28' ICSA8386-1 Teflon hose 80531 $5.00 $126.00 186 p 23- 1CSAS263-1 Spring B0531 $3.00 $75.00 167 20` T6102.101 Union nut B0531 $1.00 $20.00 188 20 70005795.8 Adapter 80531 $39.00 $780.00 189 4-A6831260.4 Bycotest C5 Cleaner Dangerous 80531 $25.00 $100,00 Goods 190 J5 A1551170-68 Rust ail WD 40 Dangerous B0531 $21.00 $105.00 i0 Goods 191 8 A-A6831260.2 Bycotest RP20 Peneir. coloured B0531 $25.00 $100.00 Dangerous 192 A6831260-3 Sycotest WO Developer B0531 $25.00 $100.00 Dangerous G 193 2At A1551170-190 Rust preventive Dangerous G 130531 $19.00 $19.00 Total- Exworks: Finspong, 9E US Dollars $5,670,925.00 Price Is for one unit. Price does not include sales & use taxes that may apply to the state of California. Price does not Include frelght/duty/related charges to ship from Finspong, SE to the City of Vernon. SDDTI offers to coordinate such acfivRiea at our cost plus 10% and then invoice to City of Vernon. This pricing Is at an exchange rate of 6,77 SEK / $1.00 USD. Siemens reserves the right to adjust the pricing should the exchange rate move by more than 5% at the time of order. Progress payments (see cover letter dated 01110/2007) otherwise: 40% of order amount to be invoiced when PO is received. 50% of order amount to be invoiced 120 days allot receipt of PO. 10% of order amount to be invoiced upon final shipment. Slemens Demag Delaval Turbomachinery Inc. 540 Nottingham Way Tel: (609) 890.SM www.pg.slemens.com Hamilton, New Jersey 08638 USA Fax: W09) 587.7790 SIEMENS Quotation Duotation 40042.06T-1 continued, page 9 of 9 Lead limes for individual line items are shown in weeks after receipt of order, subject to prior sale, Prices are firm through shipment and valid 30 days from the date of this letter. Please note that there is a $500 minimum order value. Payment will be progress payments (see notes). Siemens Demag Delaval Turbomachinery Inc. Selling Policy 1200 (dated W1/2005) shall apply to any resultant order. All purchase orders are to be made out In the name of: Siemens Demag Delaval Turbomachinery Inc. 840 Nouingham Way Hamilton, New Jersey 08838 USA If you have any -questions, please feel free to contact me or. Best Regards, �C��/ /`V'w'�n"'��--✓tom Scou Hutchinson Customer Service Representative — Tel: (281) 856-4428 Fax: (281) 856-4499 e-mEdl:scoU.hLdchinson@siernens.com Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way Tel: (609) 090.5000 www.pg.aiemens.com Hamilton. New Jersey 08M8 USA Fax: (609) 567.7790 CJTYQbF VERNON, CALIFORNIA® PURCHASE RE SITION LIGHT & P(R LP No. 4996 DEPARTMENT T�REQUESTOR NAME: DATE: SUGGESTED VENDOR. PHONE NO.: ( _ -------Stt•NtCjd3'�'— --- VENDOR ADDRESS: aazu ._—._..._......--.,_—e40 NOTTINGHAM WAY HAMIL-TflN; EW-dERSE�-8 — FAX /: CONTACT PERSON: REQUIRED DELIV Y OR SERVICE DATE DELIVERY OR SERVICE LOCATION SOTO ST. NO.: ITEMS BUDGETED YES A - _-_X:_. 7t NO EUNT NTi%YEXTENDED UNIT PR AMOUNT. (CoMlaasd RGM p(ttnrtpUs M41) $11341612 $11,341,612 0 .00 0 ice' /W12W 8yootist 030 De"10 at 02n9wous G $25.0 $200.00 3 $ "Ch A061170• Rust V*\WUkthn 0engefous G $19.0 $38.00 190 ` 8.2596 Sales tax $935702.6 $935,702.63 See attached Quote# 40042-08T-1 Page 20 of 20 SUbTOtal: $12,277,552.63 Taii Shippin SCHEDULED DELIVERY DATE: Tots k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department\ Department Head or Authorized Person -a FOR PURCHASING DEPAHTMENT U$E ONLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER r r:PAP-rAAFA1T Pit G CITY.f VERNON, CALIFORNIA PURCHASE RE SITION LIGHT & P R LP No. 4 917 DEPARTMENT: REQUESTOR NAME: DONAL O'CALLAGHAN I IMC DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 6091890.5000 SIEMENS VENDOR ADDRESS: FAX #: CONTACT PERSON: SCOTT HUTQHINSON REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: 8- 8590 ITEMS BUDGETED YES X *NO QUANTfIYr UNITOF SUE 00 ' DESCRIPTION UNIT PRICE EXTENDED AMOUNT 60 each 2423560-C Bumdr $37925.00 $2,275,500. 00 2 each 2423699-0 Combustor $1816328.0 $3,632,656. 0 00 174 each 2423470-C Turbine blade $11605.0 $2.019,270. 00 100 each 2423483-A Guide vane Vane 1 Complete $19289,OC $1,928,900. 00 98 each 2422954-A Guide vane Turb. guide vane2 $12542.00 $1,229,116. 00 2 each 2420018-D Guide vane No. 2 boroscope $12961.0 $25,922.00 4 each 2423682-A Guide vane No. 2 Temp $13263.0 $53,052.00 16 each 1CSA1022 Braided packing $1.00 $16.00 5-1 552 each T3907-178 Lock Washer $5.00 $2,760.00 12 each 21517002- Washer $19.00 $228.00 197 80 each T3904-178 Locking Washer $3.0 $240.00 Page 1 of 20 (Continued on next page) SubTota $11,167,660.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota �k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER npr)ApT11ArmiTCrt t: t CITY OF VERNON, CALIFORNIA DEF4RTMENT: PURCHASE RECUSITION LP No. LIGHT & P R 4978 NAME: DONAI DATE: 1/16/2007 SUGGESTED VENDOR; PHONE NO.: ( 60V/890-5000 SIEMENS VENDOR ADDRESS: FAX #: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: RI ISH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES _X * NO QUANTITY UMTOFlssue arlx �'tWf" . DE$CRIP�TION� UNffPRICE. EXTENDEOAMOM (Continued from previous page) $11167660 0 $11,167,660 .00 48 each T3910-185 Lock Washer (tolded) $5.0 $240.00 ' 26 each T3907-178 Lock Washer $5.0 $130.00 4 each 2423623-2 Sealing ring C-seal $223.00 $892.00 2 each 2423623-1 Sealing ring C-seal $470.00 $940.00 4 each T3712-317 Sheet gasket acc. to EN $8.0 $32.00 6 each ' T3712-318 Sheet gasket acc. to EN $16.00 $96.00 6 each T3712-224 Sheet gasket $32.0 $192.00 i 14 each T3712-222 Sheet gasket acc. to EN $32.00 $448.00 1. 8 each T3712-220 Sheet gasket acc. to EN $14.0 $112.00 8 each 2421466-1 Gasket $99.0 $792.00 Page 2 of 20 (Continued on next page) r. SubTota : $11,171,534.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEP - MENT'USE ONLY. ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY•QF VERNON, CALIFORNIA PURCHASE RE SITION LP No. LIGHT & PR 4979 'DEPARTMENT: REQUESTOR NAME: ALLAGHAN / IMC DATE: 1/16/2007 SUGGESTEDVENDOR: PHONE NO.:( 6091890-5000 VENDOR ADDRESS: _ FAX M: CONTACT PERSON: SQQTT HUTCHINSON REQUIRED DELIVERY OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.. ITEMS BUDGETED YES X NO QUg1YT(Id( tirHioFisstie DESCRIPTION `} UNIT PRICE ExTEEISQI AMOUNT 1 (Continued from previous page) $11171534. $11,171,534 0 .00 2 each 2422868-7 Gasket Armco $16.0c $32.00 44 each T3907-186 Lock washer $8.0 $352.00 24 each T3905-186 Lock washer Stainless sleet $9.0 $216.00 2 each T3711-315 Sheet gasket $2.0 $4.00 4 each T3711-319 Sheet gasket $4.0 $16.00 2 each T3711-315 Sheet gasket $2.0 $4.00 2 each T3712-222 Sheet gasket acc. to EN $32.00 $64.00 4 each T3711-319 Sheet gasket $4.00 $16.00 2 each T3712-225 Sheet gasket acc. to EN $73.0 $146.00 32 each T3907-186 Lock Washer $8.0 $256.00 Page 3 of 20 (Continued on nett page) SubTota : $11,172,640.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEM l hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER 11F0A l7TA A CP1T Ulf C CITY OF VERNON, CALIFORNIA PURCHASE REqULSITION LIGHT & P R LP No. 4980 4pEPARTMENT: REQUESTORNAME:nnNAI LAGHANIIMC DATE: 1/16/2007 1413 SUGGESTED VENDOR: PHONE NO.: (6091890-5000 VENDOR ADDRESS: FAX #: CONTACT PERSON; SCOTT HUTCHINSON REQUIRED DELIVERY OR SERVICE DATE: RIISH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X_ * NO QUANTITY unrr or ISSue DESCRIpTlO ? A UNIT PRICE EXTENDEDAMOUNT 1 (Continued from previous page) $11172640. $11,172,640 00 .00 48 each T3907-178 Lock Washer $5.00 $240.00 2 each ` 2422868-3 Gasket Armco $62.00 $124.00 4 each 2422868-1 Gasket Armco $64.00 $256.00 8 each 2422868-2 Gasket Armco $12.00 $96.00 8 each T3910-173 Lock Washer (folded) $4.00 $32.00 8 each T1253-239 Split pin $4.00 $32.00 12 each 2422868-6 Gasket Armco $22.00 $264.00 16 each 2422868-5 Gasket Armco $21.00 $336.00 2 each T3712-314 Gasket $5.00 $10.00 8 each T3905-178 Lock Washer (folded) $8.00 $64.00 Page 4 of 20 (Continued on next page) SubTotal: $11,174,094.00 Tax: Shipping: SCHEDULED DELIVERY DATE: Total �r IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. i o I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMEIri'USE QNLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY OF VERNON,. CALIFORNIA PURCHASE RESITION LIGHT & PqrR LP No. 4981 DEPARTMENT: REQUESTOR NAME: 0'CALLAGHAN / IMC DATE: 1/16/2007 SUGGESTED VENDOR PHONE NO.: ( 6097890-5000 SIEMENS VENDOR ADDRESS: JERSEY FAX #: CONTACT PERSON: SCQTT HUTCHINSON REQUIRED DELIVERY OR SERVICE DATE:_ RIISH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES --X_ NO O WNTI—rf UNtTOF'&'WE DESCRIPTION UNIT PRICE EXTENDED: AMOUNT .1 (Continued from previous page) $11174094. $11,174,094 p .00 2 each 2420212-1 Sealing E-sealing $13739.00 $27,478.00 32 each T3907-178 Lock washer $5.0 $160.00 248 each T3907-186 Lock Washer $8.0c $1,984.00 32 each T3907-179 Lock washer Nordlock $9.0 $288.00 100 each T3905-178 Lock washer (folded) $8.0 $800.00 4 each 2421514-2 Gasket $13.00 $52.00 4 each 2421514-1 Gasket $13.00 $52.00 4 each 13907-165 Lock W asher $3.0 $12.00 264 each T3907-179 Lock Washer Nordtock $9.00 $2,376.00 32 each T3907-186 Lock Washer $8.0 $266.00 Page 5 of 20 (Continued on next page) SubTota : $11,207,552.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota ; / tk IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. r) I hereby certity that the above items are necessary for the operationof this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT USE_.ONLY ISSUED BY DATE RECEIVED BY r)FDADTIIACKM CII C DATE PURCHASE ORDER NUMBER CITY:OF VERNON, CALIFORNIA* PURCHASE REG1juSITION LIGHT & P R LP NO. 4982 DEPARTMENT: REQUESTOR NAME: DATE: 6I2007 SUGGESTED VENDOR: PHONE NO.: ( 609Y890_5Q00 SIEMENS VENDOR ADDRESS: FAX N: CONTACT PERSON: 6091587-7790 REQUIRED DELIVERY OR SERVICE DATE: RI ISH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X_ *NO QUANTITY UNIT oFISSUE DESCRIPTO -- UNIT.PAICE.: Ei(TENDEI).AINOUNT 1 (Continued from previous page) $11207552 $11,207,552 0 .00 4 each 2421283-1 Gasket Square gasket $13.0 $52.00 16 each 21517002- Lock Washer $26.0 $416.00 175 4 each 2421284-1 Gasket Square gasket $15.0 $00.00 16 each 21517002- Lock Washer $26.0 $416.00 175 60 each 2420792-1 Gasket $78.00 $4,680.00 360 each T3907-186 Lock washer $8.0 $2,880.00 4 each 2416046-2 Gasket $39.0 $156.00 32 each T3907-186 Lock washer $8.0 $256.00 2 each 2415046-2 Gasket $39.0 $78.00 16 each T3907-186 Lock Washer $8.0 $128.00 Page 6 of 20 (Continued on next page) SubTota : $11,216,674.00 Ta Shippin : SCHEDULED DELIVERY DATE: Tota * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER OF VERNON, CALIFORNIA PURCHASE RE SITION LP No, LIGHT & P(M CITY R 4983 DEPARTMENT: REQUESTOR NAME: DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( g 890_5000 VENDOR ADDRESS: SIEMENS FAX #: CONTACT PERSON: REQUIRED DELIV Y SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.. ITEMS BUDGETED YES _ X _ * NO QUANTITY' UNITOFIssue 8200--8500 DESCRIPTION z` UNRPRICE> EXTHhIt)ED,AMOUtYI _ 1 (Continued from previous page) $11216674. $11,216,674 00 .00 20 each T3910-185 Lock washer (folded) $5.0 $100.00 6 each T3706-133 Gasket metal sheeted $116.0c $96.00 6 each T3910-204 . Lock washer (folded) $6. $36.00 100 each 21517002- Washer $11.0 $1,100.00 195 60 each 242191D-1 Spacerring $13.0 $780.00 60 each 2421910-2 Spacerring $18.0 $1,080.00 60 each 2421910-3 Spacerring $19.0 $1,140.00 60 each 24219104 Spacerring $22.0 $1,320.00 60 each 2420792-1 Gasket $78.00 $4,680.00 8 each T3910-179 Lock washer (folded) $3.0 $24.00 Page 7 of 20 (Continued on next page) SubTota : $11,227,030.00 Ta Shippin SCHEDULED DELIVERY DATE: Total: W IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. r I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT Udif"' LY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER nr-PAPTAAMKIT C 1 C CITY ,OF VERNON, CALIFORNIA PURCHASE REQ SITION LIGHT & P*R LP No. ,4 9 8 4 DEPARTMENT: REOUESTOR NAME: DONAL OICALLAGHAN 1 IMC DATE: SUGGEST ENDOR: PHONE NO.: j VENDOR ADDRESS: N NEW JERSEY 08638 FAX #: CONTACT PERSON: SCOTT HUTCHI REQUIRED OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: ACCOUNT NO.: X ITEMS BUDGETED YES '* NO QUANTITY uNi lUk o6r3stJff 13500 - DESCRIPTfON5 UNIT:PRICE EXTENDED AMOUNT' $11227030. (Continued from previous page) 00 .00 1 $71.00 $142.00 2 each T370ti-138 Gasket $5.00 $10.00 2 each T3712-314 Gasket $38.00 $2,280.00 each 2420702-1 Lock washer (folded) 60 $5.00 $250.00 each T3910-185 Lock washer (folded) 50 $8.00 $1,360.00 170 each T3907-186 Lock washer $25.00 $1,250.00 each 2420475-1 Sealing Outer seal strip 50 $67.00 $3,350.00 each 242047&1 Sealing Inner seal strip 50 $12,00 $1,200.00 100 each 2420708-1 Lock washer $3.00 $72.00 each 13408044- Wire round, stainless 24 139 $18.00 $1,800.00 each 2420703-2 Retaining ring internal 100 Page 8 of 20 (Continued on next page) SubTotal $11,238,744.00 Tax Shipping SCHEDULED DELIVERY DATE: Total: * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. t hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PUR ISSUED BY DATE RECEIVED BY ; DATE PURCHASE ORDER NUMBER CITY-bF VERNON, CALIFORNIA PURCHASE RE SITION LIGHT & PqPR LP No. 4985 DEPARTMENT. REQUESTOR NAME: DATE: 1/16I2007 SUGGESTED VENDOR: PHONE NO.: ( 09)890-5000 VENDOR ADDRESS: SIEMENS EW-J FAX #: CONTACT PERSON: REQUIRED DELIV RRUMV22 DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES _�(_ * NO OUANTITY' UITOFISSUE DESCRIPTION • air:, : � nxk a . UNITPRICE EXTENDEOAMOUNT (Continued from previous page) $11238744. $11,238,744 00 .00 100 each T3905-165 Lock washer (folded) $8.0 $800.00 50 each 2420475-1 Sealing Outer seal strip $25.00 $1,250.00 50 each 2420476-1 Sealing Inner seal strip' $67.00 $3,350.00 50 each 2420477-1.., Sealing Seal strip $67.00 $3,350.00 50 each 2423340-1 Sealing Rear seal strip $75.0 $3,750.00 100 each 2420703-1 Retaining ring internal $34.0 $3,400.00 50 each 2420702-2 Lock washer (folded) $37.0 $1,850.00 20 each 2420490-1 Lock nut of steel $2.0 $40.00 174 each 2423585-1 Sealing blade 1 $120.0 $20,680.00 6 each 2424155-1 Sealing $1.0 $6.00 Page 9 of 20 (Continued on next page) SubTota : $11.277,420.00 Ta : Shippin : SCHEDULED DELIVERY DATE: Total: I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized FOR PURCHASING DEPARTMENT USEoONLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER f11-DAR'1'11ACA1T Ct1 C r crftF VERNON, CALIFORNIA � 'PURCHASE RE SITION LIGHT & P R LP No. 49810 DEPARTMENT: REOUESTOR NAME: DATE: 111612007 SUGGESTED VENDOR: PHONE NO.: ( VENDOR ADDRESS: FAX tt: CONTACT PERSON: REQUIRED DELI E VI DATE: DELIVERY OR SERVICE LOCATION: ACCOUNT NO.: ITEMS BUDGETED YES - x * NO QUANTITY unrroFtssUE DESCfi1P . UNIT PRICE FXrENDEDAMOUNT "'" 1 (Continued from previous page) $11277420 $11,277,420 0 .00 6 each 2420137-1 Lock plate blade 1 $629.00 $3,774.00 174 each 2423582-2 Sealing Blade 1 $38.0 $6,612.00 34 each 73905-178 Lock washer (folded) $8.0 $272.00 296 each T3907-178 Lock washer $5.0 $1,480.00 22 each T3905-178 Lock washer (folded) $8.0 $176.00 12 each 21517002- Lock washer $18.0 $216.00 162 20 each 2420211-1 Sealing Seal strip $237.0 $4,740.00 104 each 2420534-1 Sealing Outer sealstrip $74.0 $7,696.00 104 each 2423255-1 Sealing Inner seal strip $75.0 $7,800.00 2 each A1551660- Plastic foil $47.0 $94.00 1 Page 10 of 20 (Continued on next page) SubTota : $11,310,280.00 Ta : Shippin : SCHEDULED DELIVERY DATE: Tota :r IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER l��e1 AIr\ IT r-11 r- CITY flF VERNON, CALIFORNIA PURCHASE RE SITION LIGHT & PR LP No. 4967 DEPARTMENT: REQUESTOR NAME: ,,. %Al , nn_uent r IRUe DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 609/890_50Q0 SIEMENS VENDOR ADDRESS: FAX N: CONTACT PERSON: SCOTT HUTCHINSON REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.. 1 ITEMS BUDGETED YES X * NO QUANn. . r, COFISSUE, DESCRIPTION UNIT PRICE EXTENDEPAMOUNT 1 (Continue d from previous page) $11310280. $11,310,280 00 .00 4 each A0721170- Paste lubricant $137.00 $548.00 185 40 each 13408044- Wire round, stainless $3.00 $120.00 139 4- each A0721230- Thread sealing Loctite 542 $61.00 $244.00 55 8 each A1551160- Tape $13.00 $104.00 14 2 each - A0721230- Threadlocker Loctite 275 $77-00 $154.00 62 2 each. A0721230- Loctite 243 $77.00 $154.00 61 40 each, A1556846- Emery cloth, no. 100 $3. $120.00 35 20 each A1556846- Emerypaper $3.0. $60.00 36 20 each A1556846- Emery cloth $3.01 $60.00 37 I th $4.0 $160.00 40 each A34Now- Cleaning c o 41 Page 11 of 20 (Continued on next page) SubTotaft $11,312,004.00 Tax: Shipping: SCHEDULED DELIVERY DATE: Total �k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. ao \ - V I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT USE ONLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER . nl=ver7rnn�ntr �o e CITY bF VERNON, CALIFORNIA PURCHASE REa StTION LIGHT & PC1 R LP No. ` 4988 DEPARTMENT, REQUESTOR NAME: DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 90-5000 VENDOR ADDRESS: SIEMENS FAX #: CONTACT PERSON: REQUIRED DELI E VI DATE: PI 'Aw DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES _X_ * NO QUANTITY UNrfOF UE DESCRIP1IOlV `yam � .'` UNIT i?RICE . EXTENDEDAMOUW 1 (Continued from previous page) $11312004, $11,312,004 - 0 .00 10 each A1556860• Wall brush mottler $2.00 $20.00 12 4 each A1551160- Masking tape $4.11C $16.00 12 30 each A8212962- Deposit box $9.0 $270.00 21 70 each A8212962- Deposit box $5.0 $350.00 22 30 each A8212962- Deposit box $7.0 $210.00 23 96 each A1556990- Assembly glove $11.0 $1,056.00 . 472 2 each A1551176- Marking paint Stylmark $21.0 $42.00 31 10 each A2441176- Marking pen Artline 400-XF $10.0 $100.00 48 2 each 13108011- Gasket sheet $612.0 $1,224.00 2 6 each 17108001- Gasket sheet $81.0 $486.00 143 Page 12 of 20 (Continued on next page) SubTota : $11,315,778.00 Ta Shippin SCHEDULED DELIVERY DATE: Tot : * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. J I hereby cenity that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PUR ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY. OF VERNON, CAL.IFORNIA� PURCHASE RE SITION LIGHT &PCWR LP No. 4989 DEPARTMENT:`eip REQUESTOR NAME: DONAI DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 09)890-5000 SIEMENS VENDOR ADDRESS: FAX Jf. CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES. X * NO QUAfJ fiYn "'UWTOFISSUE DESCRIPTION rFT. - UNIT PRICE E1(TEM 6E *Uw 1 (Continued from previous page) $11315778. $11,315,778 00 .00 50 each A1551160- Cleaning tissue $25.00 $1,250.00 11 40 each A1556950- Refuse sack $2.00 $80.00 38 20 each A1554944- Battery $1.0c $20.00 3 20 each A1554944- Battery $1.0 $20.00 8 200 each A606E151 Wire Bundlers 390 x 4,7 T50L $1.0 $200.00 6062 4 each A606EO75 Electrical tape $3.0 $12.00 4113 10 each T3704-108 Point gasket $3.0 $30.00 16 each T3725-179 Gasket $2.0 $32.00 10 each T6102-101 Union nut $1.0 $10.00 4 each T6313-101 Plug for pipe coupling $2.0 $8.00 Page 13 of 20 (Continued on next page) SubTota : $11,317,440.00 Taw Shtppin : SCHEDULED DELIVERY DATE: Tota 7k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. t V " hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT USEM&I " ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER nrPAt7T1UIGKIT Gtr C CITY OF VERNON, CALIFORNIA PURCHASE, REQ SITION LIGHT & PR LP No. 4990 DEPARTMENT: REQUESTOR NAME:DONAL N / IMC DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 6097894-5000 ENS VENDOR ADDRESS: FAX #: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X_ NO QUANTITY UNIT OF ISSUE DESCHIPTIQN�g ° - , UNIT PRICE WENDEDAMOUNT. 1 (Continued from previous page) $11317440 $11,317,440 p .00 4 each T6815-102 Coupling .$5.0 $20.00 4 each T6815-802 Coupling d 8, 1/4 npt $6.0 $24.00 4 each T6820-102 Pipe coupling, Straight $11.0 $44.00 2 each T6830-101 Union $7.0 $14.00 2 each T6870-101 Tee coupling $18.0 $36.00 10 each: T7021-101 Ferrule 6 each 1CSA8136- Nut $90.0 $540.00 1 6 each 1CSA8135- Nipple $28.0 $168.00. 1 2 each 1CSA8133- Coupling $12.0 $24.00 1 I 6 each 1851523.-1 Nipple $16.03 $96.00 Page 14 of 20 (Continued on next page) SubTola : $11,318,416.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota tk IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I here6y'certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER --- .—. --rn � CITY OF VERNON, CALIFORNIA� PURCHASE RESITION LIGHT & P 6 LP No. 4 9 S 1 •r DEPARTMENT: REQUESTOR NAME: NALO'CALLAGHAN7IMC I DATE: 1/16/2007 L&P SUGGESTED VENDOR: PHONE NO.:( 609h89Q-5000 SIEMENS VENDOR ADDRESS: FAX#: CONTACT PERSON: SCOTT HUTCHINSON REQUIRED DELIVERY OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X NO QUAIVTRYt IM.WOFtssUt OESCRIPTION .' UNIT PRICE ExTENnEonMaUr!T 1 (Continued from previous page) $11318416. $11,318,416 00 .00 8 each 1852416-1 Adapter M12 x 1,5 -R114' $31.00 $248.00 4 each 1852417-1 Nipple $28.00 $112.00 4 each 2035928-6 Quick goupling mate $107.00 $428.00 4 each 2035929-2 Adapter female -male, BSPP-NPT $29.0 $116.00 4 each 70006131- Pipe Connector $21.00 $84.00 A 4 each 70006131- Pipe Connector $21.0 $84.00 B 2 each 70006131- Pipe Connector $21.0 $42.00 C 2 each 70006131- Pipe Connector $21.00 $42.00 E 4 each 70006131- Pipe Connector $19.0 $76.00 D g each 1CSA8259= Hose $6.0 $48.00 1 Page 15 of 20 (Continued on next page) SubTota : $11,319,696.00 Ta : Shippin SCHEDULED DELIVERY DATE: Tota k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certity that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT U5� ' ' � .,: Z ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER t'1713AOTRAr-KITCII C CITY ,OF.NERNON, CALIFORNIA PURCHASE RE SlT10N LIGHT & PR LP No• 4992 DEPARTMENT: REQUESTOR NAME: DATE: 11 612007 SUGGESTED VENDOR: PHONENO.: ( 0 VENDOR ADDRESS: FAX N: CONTACT PERSON: REQUIRED DELIMP ERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X * NO QUANTITY u,urroF issue zvtj-ouuv DE&GFIIPTK1 UNIT PRICE EXTENDED AMOUNT 'WiaP (Continued from previous page) $113196 06 $11,319,696 1 .00 4 each 1CSA8263-Coupling $6.00 $24.00 1 4 each, 1CSA8261- Coupling $5.0 $20.00 1 4 each 1CSA8262- Coupling $4,0 $16.00 1 40 each 1CSA8130- Sleeve $7.0 $280.00 1 10 each 1CSA7988- Hose $60 $60.00 1 8 each 1CSA8257- Gasket $16.0 $128.00 1 16 each 1CSA8258- Gasket $22.00 $352.00 1 10 each 2423623-3 Sealing ring C-seal $155.0e $1,550.00 28 each T1673-538 Hexagon sockethead screw large clearance $42.0 $1,176.00 B8 each T1665-542 Hexagon head bolt $156.0 $10,608.00 Page 16 of 20 (Continued on next page) SubTota : $11,333,910.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota : �r IF ITEMS ARE NOT BUDGETED,..EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM.. 14ji L` by bertify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING tlEPARTMENT USE OOf ,'V' ` ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER r- CITY,OF VERNON, CALIFORNIA PURCHASE RE SITION ® LIGHT & PqFR LP No. 4 9 � 3 DEPARTMENT; REQUESTOR NAME:DONAL GHAN / IMC DATE: 1 /16/2007 SUGGESTED VENDOR: PHONE NO.: ( 6091890-5000 ENS VENDOR ADDRESS: 9 NOTTINGHAM-V{IAY-4AM FAX p: CONTACT PERSON:SCOTT TCHINSON REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES �C _ ylr NO QUANTrfY tJNIToFissue DESCRIPTION tINITPRICIR D(1END6AMOUNf 1 (Continued from previous page) $11333910. $11,333,910 00 .00 80 each T3907-178 Lock washer $5.00 $400.00 12 each 2021278-3 Gasket for flange connection $51.00 $612.00 12 each 2021278-2 Gasket for flange connection $29.00 $348.00 16 each T2804-126 Hexagon nut $2400 $32.00 16 each T1624-695 Screw, steel $17.010 $272.00 16 each T2804-124 Hexagon nut $4.010 $64.00 16 each T1624-644 Hexagon head screw $9.0 $144.00 g each T3717-316 Gasket $86.0 $688.00 16 each T1622-630 Hexagon head screw $3.0 $48.00 g each T3717465 Gasket $99.0 $792.00 Page 17 of 20 (Continued on next page) SubTotal $11,337,310.00 Tax Shipping SCHEDULED DELIVERY DATE: Total 1ft' IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. .91 I hereby cerfify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT USE R� a. ISSUED BY DATE RECEIVED BY , DATE PURCHASE ORDER NUMBER 11PPAIDTAAMr!"C71 C CITY OF VERNON, CALIFORNIA.10 PURCHASE REO ITION LIGHT & PCWR LP NO- 4 9 9 4. -DEPARTMENT: REQUESTOR NAME: nONAI DATE: 1/16/2007 LAID SUGGESTED VENDOR: PHONE NO.: 9/$90-55000 VENDOR ADDRESS: SIEMENS FAX N: PERSON: 609/587-7790 -CONTACT REQUIRED DELIVERY OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES x * NO QUANTITY UNIT OF WUE DESCRIPTIQ11 X UNIT PRICE EXTENDED AMOUNT 1 (Continued from previous page) $11337310. 00 $11,337,310 .00 16 each T1622-676 Hexagon head screw galvanized $5.00 $60.00 2 each A0721170- Paste lubricant $137.00 $274.00 185 2 each A4431160- Teflon band $2.00 $4.00 63 2 each W6861110 Wire brush $4.00 $8.00 -3. 2 each A1551160- Masking tape $4.00 $8.00 12 2 each A1551160- Tape $13.00 $26.00 14 2 each A606E075 Electrical tape $3.00 $6.00 4113 8 each T6815-802 Coupling d 8, 114 npt $6.00 $48.00 8 each 1852417-1 Nipple $28.00 $224.00 6 each 1852416-1 Adapter M12 x 1,5-R1I4" $31.00 $186.00 Page 18 of 20 (Continued on next page) SubTotal: $11,338,174.00 Tax: Shipping: SCHEDULED DELIVERY DATE: Total: W IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. i I hereby certify that the above items are necessary for the operation of this Department _ Department Head or Authorized Person FOR PURCHASING ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER ne-nen'r�ar�n-ru r CI14f OF VERNON, CALIFORNIA ® PURCHASE RESITION LIGHT & P R LP No. 5 DEPARTMENT: REQUESTOR NAME: 6I2007 SUGGESTED VENDOR: PHONE NO.:( 609)890-5000 SIEMENS VENDOR ADDRESS: FAX#: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES �_ 7k NO QUANTITY (MF uearoF�ssus •. DESCRIPTION rIil1�'�s'• UNITPRIGE EXTENDEDAtAOUNT 1 (Continued from previous page) $11336174. $11,338,174 00 . .00 6 each 2035928-6 Quick goupling male $107.00 $642.00 6 each 2D35929-2 Adapter female-male,BSPP-NPT $29.00 $174.00 6 each T3725-179 Gasket $2.00 $12.00 50 each 1CSA8386- Teflon hose $5.0 $250.00 1 50 each 1CSA8253- Spring $3.0 $150.00 1 40 each T6102-101 Union nut $10 $40.00 ' 40 each 70005795- Adapter $39.0 $1,560.00 B 8 each A6831260- Bycotest C5 Cleaner Dangerous Goods $25.0 $200.00 4 10 each A1551170- Rust oil W D 40 Dangerous Goods $21.0 $210.00 68 8 each A6831260- Bycotest RP20 Penetr, coloured Dangerous $25.0 $200.00 2 . Page 19 of 20 (Continued on next page) SubTotal $11,341,612.00 Tax: Shipping: SCHEDULED DELIVERY DATE: Total k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR -PURCHASING DEPARTMENT USirONLY., ; •.- xs>s.,- ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER I�FPAl7TAACAIT Cfl C j PLEASE INVOICE IN DUPLIC :}i j r11), NS,, Lt IF \I v!11 j { I EB 0 7 2007 T O ATTN: E•:!Ilrr +fit' lti,. i.I /./ 0 1 .. R 0 p? oo CL FOB VERNON. CALIFORNIA UNLESS OTHERWISE SPECIFIED RE_OW. I .a'AnGl.11-1 r— M nczrt rim &MMAV¢ �#4��d�A��ls�u� !rY+nwa► C119Q 41 ' wJ.10W oft ool-m1) ITEM NO: QUANTIEDTY ORDER . UNIT ISSUE STOCK NO: DESCRIPTION OTY. REC'D TAX UNIT PRICE EXTENDED AMOUNT 21 } �•' I f'f . ' �. -. }���. .. t i .. •: )- it: ,.:i•1`.�. 4. !....-t i {. C.r t. .(/ .. •!.i %'..i.♦ _. S!A !}. �. .. il.. . '. '... r .'�!::. _ _. .. 1-t i. ls'r; r,tCti: � i,!'�f: I .. ., .... .. 4�'i>1 , ;.: •'• ;""- `::.i : '. ';. ,... .. a. is . S � .., •.tee.. - . li � r �^' .. i. '1 r 1' i�. �. .`4..i i' 1 1-i'C I:. %.i l.11i � .•p�s f.iiJ 1. t'i .. .. .. .. ... ♦s. .. a f.�. -. .... ... j.. .,_.1 i �" .. a.' . r S?.• C. i .. CONFIRMING ORDER: - ACCOUNT NUMBER PROJECT AMOUNT P3- - CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY:: DATE DEPT HEAD OR AUTHORIZED REPRESENTATIVE DATE PURCHASING AGENT 4' pp Cf I HGA I I 1'()Nvw 4MISUAla 14 Avenue * Vernon, (A 90058 23)1834411 VENDOR NO;:! 1 I PLEASE INVOICE IN DUPLIC N INI H T 0 ATTN: v VJ2 E N Qri T' i qi le-il 0:::' 0 !1c.it" At f7' R A FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED WAREHOUSE (-.10SED ON FRIDAYS REQUISITION T.- - ... ........ -.1-1-- i 1- ... .... ..... DEPARTMENT ; TION NO. DELIVERY DATE TERMS PLUS FREIGHT F.O.B. . . . ...................... .. ........ ........... . .. . ........ ..... ... . . ..... ... ..... ....... . .............. 'ITEM NO, QUANTITY ORDERED UNIT ISSUE STOCK NO. OdC'RIPTION OTY. RFC-0 TAX UNIT PRICE EXTENDED AMOUNT X. F it, tTZ I A ii— ? I!, 7.1 D� 00 C" A E J v CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT po- a cr6 CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY:: DATE DEPT. HEAD OR AUTHORIZED REPRESENIA71Yt. ia PURCHASIN6 AO(IN 1 ry n Y PLEASE INVOICE IN DUPLIC rT i�J (� � ® S I , tUS tit [A I I, :VL.ti, 1.. 1 t lN0"kf, t ?U'I',., .14305 SMoa W Avenue • Vernon, CA 90058 :""MMµ�IFSA 't--j� :.:''�` a i $ , y .H •1 -i, r 1.< t ?.._,.It - ., % , ,-cY(i '� 1 : i T 4 -- P •:.:; ._ j"OATII's""fFP�j/rig VENDOR NO.: 0 ATiN:t1 •. i E •fisi;.rtrltiFail1]P1]:t°," s;',I= :r - FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED BELOW. WAFIF_HOUSE L (xSE D GIN FRIDAYS _. _ ----- .—�_. _. —__ _ ....... - _.. `s DEPARTMENT I REQUISITION NO. ' DELIVERY DATE TERMS PLUS FREIGHT— I—., O.B.F —---.—._ _- - .— - - ..�.- _---_. - _ !_ liCiFl•3 F''i!i•il''F't `irv�r-- f j:�` - F'.era _.._ ......J..._..__......_...... ....._._.._.. - ITEM ' NO. QUANTITY ORDERED UNIT ISSUE - '� STOCK NO, DESCRIPTION CITY. REC'D TAX UNIT PRICE EXTENDED AMOUNT - lr.; .: t' .,.. >.... j. �1�:• L.t�;^I:. ixl:_y: _;j..11-•i:; .i ;:,"u': - .1 i��f ... ..,. �L �%:•:t... .. ;3?!?:S H:i: i :�L. _r`i%^:1:=. I'�� �':.-, . ,._ r - ' y. ": -,. i is , F't-: . � +. .c.i.aa.,.ti:+<.'1 _. ;...tJr.".k: hJt'iitis'i;=.P't _ ;{': .r_,,ii,• ..`15I _ ir+Y'.1 c: i. 1,'+:fe 4.?jr'• !..i3C,K %-1:1:riI: _F' - . . . r•.', y: A . 4 6 1,:;, t<ic T r:'" F: i'1 ..` i;' 1 (3•- s ., !_ il±<, t: � 1 € ;t-il;. " ^ ili.. 5?� �'' _ ,. :,Y�t � , :. _:+_` r:.. .... .c'tp�..; `r.'. ti:,,•:_:va•�-T f .F>:. � �!_...iK :. _, is L.. 'ii'$• _ .1_,' ,.;t,: iti .. ,s`:{) i .7ir .. - - O,: x (C; I _..i. , e it "r• 1 '. 4.11'i`. �:-ifL HER �... :.++:J�., i, i, t.o,, , , tr;. •" 1 I. tl .,. t �f "1 i:' 1 1 ". ... r. =e1'"', yl..I:: ]S {` 1''ir,i 1 : ,.`� I��t,i , !:J�.+. (.}i1 ■� C. .. +7!��f tc.I'.1- i-!l: I•NI'v i�'� .. i.:�, .,-A.`• J. ci 1 r i•' : r-1"'Af .i R R 1 I''8]]I i 1•� ...'-,� } i �:�.1 •.. :i1'•'.�31••E_.,.; i',•'1 1,fl;.Y ._. .. %�: J .. ' .'+ r'. i... t"1 .. "1�.., ... � (;7j.I, f. 1: ) . , .:r y .. i'T •.I ., l./i,. .t ryry _r..,. .., .l . 14 G/2::'si'-.C. 1 DC:,1 _ CONFIRMING ORDER: ` ACCOUNT NUMBER PROJECT AMOUNT U BY:' CITY OF VERNON, CALIFORNIA DEPT. HEAD OR AUTHORIZED DArz PURCHASINO AOBNT � Y�4 YI 4303 Santa fe Avenue • Vernon, CA 90058 i` (321) 5834011 VENDOR NO.:. E r .I 1 R .... . PLEASE INVOICE IN DUPLIC TIA No H •''#i'IS ? a it t I !.#J. I • 0 ATTN:1 FOB VERNON. CALIFORNIA LINLESS OTHERWISE SPECIFIED RELiA" 7 it AREHZ57--sf_ C70SED ON FRIDAYS DEPARTMENT REQUISITION NO DELIVERY OAtE TERMS ?PLUS FREIGHT I FO B �: , is • i., � T ;� : •, Ell.#•n- ITEM N0. -OUANT- ORDERED UNIT ISSUE - STOCK NO.. DESCRIPTION. OTY. RECT) - TAX - UNIT PRICE EXTENDED AMOUNT �:{ .�! ..'�,'('i '%. '. 'l f'a. .;1:_ {e.il`-t •�r .. F, .F... - - •r'.. - .. ,'tit: fi.; .-., .. .t .[ ar. ._ r'•I.�I rr,. ).##is:i fr{f•.iFi j!jti•t-';;f�= - 'r - .. .'.'rj �. .t/' �:: ICI .. .... 'i t_/ •. _.t:a e{... �`1"T . hi:cdL :, :C.. ;Vi_ ..i 1.{ s : ..: .':I��• ., , _ - i •: J :i"i i' 1.::.•� , i `'•r :... .. 'E-' t; .1 :.1 .r` ..# I'.t.. •Ir i E'a t't ._i..,,. it J:1 if 5-.{.Sy-.F11-. ..' Ic'7 a . , -'r'• ii 1. .:: 'l.I �^1_f.!1. /..;,\ 1 ! I�il .:• :i... - �-t _ ( •i, Ll,' /i/. 1 �:17 ..<,' 1 '.tt. )'.. I i_I^t I I• .'''.I [!'l.Jr: _. ... -. ! 1i .. I, . •t _ .... .:..... .. .:. �:. 1'4L. '. I�#V'J �';\\. �: I.�:_. � � ,- -:t:'i ..Ir �. . .a.'.:. .����' •' i.. t.. �=i: ., { [.... �. �[.i.. a-il Yid. .._-.�', 1 �. LY.. ;..yl�'„ i{. - �:1 .. ., r,r �1 .. .. . - rrr,t F'it�[f:.�L.{:_ {:; - .. S./!?' •[ tli:�i i t-tt;= t..r.r •'[' l.a -.. .... +.i~'' #' .- ./t.., { t t.l ... , CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENTAPPROVED 1 DATE DEPT. HEAD OR AUTHORIZED REPRESENTATiv(!.. PURCHASING40I.I. .R I'll 1"^1 lw l+tP ll� r•,rn-r ..,�...`.'t :..:: 2= ir %N IJ(J IT & ll()\Nll T, .4305 Santo Fe Avenue 0 Vernon, (A 90058 77 VENDOR NO.:. _71 V s3 W E O N kill! ..). TNGi�l:wl lt?"'a 0 R rwyTP� PLEASE INVOICE INDUPLIC I-P No LA F' V �Nl 'I 'Ifill -A S H I • p T 1� . j 0 ATTN: FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED BELOW. ITEM NO. OLIANTITY ORDERED UNIT ISSUE STOCK NO. DESCRIPTION On' PIFC'D TAX UNIT PRICE EXTENDED AMOUNT j, V Ct.y ['41- 1 r R J'k I A J. :1 a I 1. 51 B IS E N [�L. J J. 6 "1 Fl, I -! I hi {a: F�fl I vl— H A I "' I ". T 1,143 FlJ I A 1 t FTEI-t- e:.f J CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT c� o ( E o CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY:: DATE DEPT. HEAD OR AUTHORIZED REPRESENTATOVIll PURCHASING AGENT' BIOS Somid I'C AV nun • Vernon, CA 90058 (32M 583-PR11 y _...� 70AT�1;'.'t)f %+. VENDOR NO. N R •: FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPLCIF•IED RG.I_.{ i PLEASE INVOICE IN DUPLIC , s • SsSil •4 l },;3 s-\:'t S ),,• r F. T�'• L , ,F i, 1, a 1 t, 0 ATTN: rl/sftEH0USE C L0SED ONt st{DAr'$ _.. .. . ...... - DEPARTMENT REOUISITION NO j DELIVERY DATE TERMS PLUS FREIGHT FO S --- - - — .. _ -_. _...... ITEM NO: OUANTITY ORDERED UNIT ISSUE STOCK NO. - DESCRIPTION OTY. REC'D TA% UNIT PRICE EXTENDEDAMOUNT .. i.t • ! i',, . 1. i,..l_',-'* �. ... ... r,I. 1 j. ...i1 _.�,-. ,,•,[..... .. 1:)ti 1.2 ;1•. t.r li)•-'1.. �. I'!17 !`fhit..,.. J..!,.}., .'f,f .. _1 _ . I,,,; ,�<'1 ..,z..,, ,... a••.11lit.,, ._f' ,-c.:!:•,",i..T7 -ivtAli .. - .. •�'-•.i' `I.. �?a) :f-, rl_ �3 '1_ Y: I'•. {IF,Si-i�C: i_. j:.. f , -...�,«, if CONFIRMING ORDER: - ACCOUNT NUMBER PROJECT- AMOUNT S_J - CITY OF VERNON, CALIFORNIA PAYMENT APPROVED 1 BY:: DATE DEPT, HEAD OR AUTHORIZED REPRESENTATIVD: DAT _ F ' PURCHASING AGEh1 .-�.. �.. ... .-...,-... n,r. ra, n nrrr,nU i•� .ir ,rin,rnnn,n .. rr.� .. �``•;j� .. a, Cl ITY Ck I N/ R LIGI i Sonia N Avenue • Vernon, CA 90058 i7 j, VENDOR NO.: I V N Re . ......... W PLEASE INVOICE IN DUPLICIIW: il 'i '} 1A; NO.',: 1'1.! . A[A I!::., wl H P T ATTN: FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED ffEL0'W. �,,VA,'aVHDUSE CLO4ED CIN FRIPAYS DEPARTMENT ! REQUISITION NO. DELIVERY DATE j TERMS PLUS FREIGHT -7-K& 13. a .......... .......... . . ........... ..... . . ...... . .. .... ...... .. ...... .. ITEM 0. QUANTITY ORDERED UNII ISSUE STOCK NO. DESCRIPTION ary. REG'D TAX UNIT PRICE EXTENDED AMOUNT -!i A. F IJ H! 1.i IZ: Y C!`,m 3 r. 3 0 CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY:: DATE DEPT. HEAD OR AUTHORIZED REPRESWATIVe i13 i4 DATR PURCHASING AQLNT •s.�+R y�`, 1*R+�'7: c1. @ .tl 0f: Try+�.c i (F& i'()W1:.K I + y -4305 Santa Fc Avenue • Vernon, CA 90058 (323) 583.8811 l DATE:t PLEASE INVOICE INDUPLIC _ ~�""_ 1 sip ` n $ +d �!; �!! �a_•'i; i.;i.-:. tl,: p. i !',ji , i�:l : =4iil O ATTN: E ND (•.Ili': 7 1 fd::;i i,.`}! : O R• FOB VERNON, CALIFORNIA ,UNLESS OTHERWISE SPECIFIED BEI.OW. ;YAP;EH,A SF.. CLCSE13 ON FRI©1YS — — DEPARTMENT ! REOUlsmoN NO DELIVERY DATE TERMS PLUS FREIGHT ! FOB I 1.1'r.it,i `. i''sJlat•.t, �! ,a. 1 s. Il.fi1..._ -I ITEM NO. OUANTITV ORpERED UNIT -ISSUE STOCK NO. DESCRIPTION - Qry' REC'D TAX UNIT PRICE EXTENDED AMOUNT 5. �. ,1. .t,�). l+.. e. A'I:�,-'•�' 1. i'Ii I!,. .. _ :f. '.f :li.. •. i . i--•`a 1;.:1:.. t..:....;; , �: c..: :� is : ?: �. >i�s..' - . .. ,. ;:,•., <r��t>>--pit,.:, r•I'ittr>. ,..— r.. ->.�. .... ... .•, :).::..�.. ,. I:i ('c p. `.i'v. + 1.. ... >'•I 1. r "I";.r�_ .. _ .. .'i_ . .. .. ... r+ : )`; �>,S.: 1, 1 '..f:['il'•r .-s': i''.1 .. .. F; :.:y. ..}.:1 ,.I - 7 !..'r . .. .... +.' l'1 r :. ,-+I:1i ) - p. I'fy,k...L::......1`i•---'.i t_.. -r: ; . ail" ..I V- .. a s1! T_'r`i- .�_4.. �wr:�..'T.-_ ! `: i^'1-1 I_!'•f�:y � ... .. J. '.�. f:"�: ;.: s'."I a::.;:, •.!..;._•..: .. ; F;. C:r 71 t Fr r:i-?... Iali.. i,)l, iil i�•7Ki`=.[y7s7fJti`:. .... ...'1,'./"!l.% '_Pa- . 1 : ... - .s, T IF CONFIRMING ORDER: ACCOUNT NUMBER p (;�- �/O� q PROJECT AMOUNT CITY OFVERNON, CALIFORNIA PAYMENT APPROVED I DEPT. HEAD OR AUTHORIZED PURCHASING ("ITY OF -VF-'RJ#N . �—&' "i - - -'- 'n" & ll()Wilk 6305 Santa Fc Avcnuv - Vernon, CA 90058 (323) 5R3.9911 ( - DATEID VET NDOR NO.: PLEASE INVOICE IN DUPLICAIMP: 0 P T 0 ATTN: FOB VERNON. CALIFORNIA UNLESS OTHERWISE SPE7171FIED SELO'N. 'WAREHOUSE'. CLOSED ON FRIDAYS . . . ........ .. . . . ..... . ................ . . . ...... . . ... . ........ ------------ ..... ... .. . ............... . . . . ............ REOUISIVON NO. DELIVERY DATE TERMS PLUS FREIGHT -P-O.Ei . ... .. DEPARTMENT . . ........ . ...... iT .................... . . ...... ....... . .. . ...... ......... ...... . . . .................. ............ .. ITEM NO.ORDERED QUANTITY UNIT ISSUE STOCK NO. DESCRIPTION OTY. TAX UNIT PRICE EXTENDED AMOUNT ,"J 1. -j T h: 'j CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT APPROVED DATE DEPT. 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O it N 0 O v O a 1Z a O dq,ddC)� UU # O V) wa: ;J #a ¢ co()`r2 ¢ Q 2 Wluo 2JU2 A= s `} c + c } c + E m n N m ON N N N¢ N V! r N N N N N M V M UOl N YO' i U) M N llV�� J J J J J J 00 C) V) poo Map fn O O (n oo E m oo �Aamoa^oo 0 0 0 0 Ni U_- U U U) a. , ai U a a N v m x m? m E A}� N N m 0 Z 0 Y O U o y o J y N 7 y PJ t E � Z W 3 _ C C= R r N r N 7 ao A m E �a E E c � o ^ « E H N. O m U ' .0 7 m O j E u m d E Z E m `o b C m d � m jlcZ W x a °1 c t 7 W ' O 0 m u U a m a E m e o a m t m0 a a r a n — m �•-mUmU N N luq o >O O O v , n E v m c v a jZoomom N O C C j N tp N. �p (.9 W WN W. E N y `m U E moo N 000 0 ao W N N TV U U Schedule 2.1(e) Permits 1. Hazardous Materials Business Plan, dated March 2005 (Revised March 2007) 2. Hazardous Materials Management Program 3. South Coast Air Quality Management District RECLAIM/Title V Facility Permit (Facility ID 14502), dated July 1, 2007 [includes only relevant sections; complete facility permit available in version dated July 1, 2006] 4. Monitoring Plan— Gas Turbine/HRSG Units 1 and 2, dated November 1, 2005 5. Storm Water Pollution Prevention Plan/Monitoring Program, dated June 24, 2003 6. Flood Control District Permit No. PCFL 200501950, dated September 12, 2005 7. Industrial Wastewater Discharge Permit No. 16237, dated July 15, 2005 8. Storm Water Pollution Prevention Plan Updated Drawings, dated 11-3-04 9. Cooling Water Management Plan, revised July 2005 10. Storm Water Pollution Prevention Plan Addendum, dated 12-4-03 and 12-22-03 11. Cultural Resources Inventory Report, dated July 2003 12. Verification Statements from Responsible Design Engineers 13. Permits to Operate Air Pressure Tank, various dates 14. Construction Storm Water Pollution Prevention Plan, dated June 2003 15. Letter from City of Vernon to State of California, Department of Industrial Relations re Preliminary Order for Unit 1 Pressure Vessel, dated February 14, 2007 16. Revised Industrial Storm Water Pollution Prevention Plan/ Monitoring Program, revised date March 2007 17. CEC Final Decision for Malburg Generating Station, dated May 2003 18. Risk Management Plan, dated February 2005 19. Radio Station Authorization effective as of February 15, 2006 20. Storm Water Pollution Prevention Plan, revised March 2007 21. Hazardous Materials Business Plan, revised March 2007 22. Storm Water Permit (Industrial), Receipt of Notice of Intent letter dated March 28, 2002 23. Noise Measurement Results for CEC Conditions of Certification, revised February 6, 2006 24. Air Quality Construction Mitigation Plan — Ambient Air Quality Monitoring Plan, dated May 2003 2.1(e)-1 Emissions Rights 1. Any NO,, RECLAIM Trading Credits (RTCs) held by the City specifically for the Facility; see Section B of South Coast. Air Quality Management District RECLAIM/Title V Facility Permit (Facility ID 14502), dated July 1, 2006 . 2. Any SO2 Acid Rain Program allowances held by the City specifically for the Facility; see Appendix B, at pages 9 - 13, of South Coast Air Quality Management District RECLAIM/Title V Facility Permit (Facility ID 14502), dated July 1, 2006. 3. Seller will obtain any variance or stipulated order of abatement from the South Coast Air Quality Management District required in connection with the start-up and/or testing of the Facility after the repairs associated with the outage described in Section.5.2(m). 2.1(e)-2 Schedule 2.1(g) Assigned Agreements 1. Services Agreement between Vernon and NALCO Company, dated September 5, 2006 2. Services Agreement between Vernon and Thomason Mechanical Corporation, dated March, 2006 3. First Amendment to Services Agreement between Vernon and Thomason. Mechanical Corporation, dated July, 2006 4. Second Amendment to Services Agreement between Vernon and Wood Group Field Services, Inc. (FKA Thomason Mechanical Corporation), dated October 4, 2006 5. Ammonia Delivery Purchase Contract between Vernon and Hill Brothers Chemical Company dated December 3, 2004 6. Amendment to Ammonia Delivery Purchase Contract between Vernon and Hill Brothers Chemical Company dated August 28, 2006 7. Services Agreement for the Malburg Generating Station, MP Contract Number I1-COV-06, dated as of September 25, 2007, between Siemens Demag Delaval Turbomachinery, Inc. and the City of Vernon 8. Purchase order for new Module described in Section 7.11(a)(2). 2.1(g)-1 Schedule 2.10) Miscellaneous Assets 1. New Module described in Section 7.11(a)(2). 2.1(1)-1 None. Schedule 2.2(k) Seller Marks 2.2(k)-1 None. Schedule 2.2(m) Rights to Recovery 2.2(m)-1 Schedule 2.2(o) Other Excluded Assets Any damaged or replaced parts from Unit 1, including the damaged Module from Unit 1. 2.2(o)-1 None. Schedule 2.3(a) Other Assumed Liabilities 2.3 (a)-1 2.4(b)(1)-1 SIEMENS Copy Quotation Wednesday, January 10, 2007 City Of Vernon L& P Melburg Generating Station Vernon, CA Attn: Mark Thompson Phone: 323-826-3610 Fax 323-685.5074 Subject: Your Inquiry ('B' Inspootion Parts - One Unit) Ouotation Number 40042-06T-1 Revision 1 for City Of Vernon L & P Siemens Demag Defaval Turbomachinery Inc. is pleased to offer the following for your consideration: Item Oty Part Number Description Unit Serial No. Lead Time (weeks) Unit Price Extended Price 001 �o 2423560-C Burner B0531 $37,925.00 $1y37;75600 002 2423699-0 Combustor B0531 $1,816,328.00 $1,81632805�lt.?i -r 00317'�Of 2423470-C Turbine blade 80531 $11,605.00 $1 2 0101,2-70 004 j 56 2423483-A Guide vane .Vane 1 Complete B0531 $19.289.00 $9644Sff.001 q 2 g 0 o • = 005 qg gV 2422954-A Guide vane Turb.guide vane2 B0531 $12.542.00 $614-968-.00 006 -2 e 2420018-D Guide vane No 2, boroscope. B0531 $12.961.00 $1 2, 12 007 1,9 2423682-A Guide vane No 2. Temp BO531 $13,263.00 $26,526:00, pt ."- 008 1(� ,X 1 CSA'10225-1 Braided packing B0531 $1.00 $8:0T 009d.IX T3907-178 Lock washer B0531 $5.00 $1,680:00 2,71 0 1 01012 ,9 21517002.197 Washer B0531 $19.00 $1j*-W 228 011 P 31d T3904-178 Lacking washer B0531 $3.00 $129r00 24}o "- 012 lfdX T3910-185 Lock washer (folded) B0531 $5.00 $a20.00 24f •a = 013 2[,j3 T3907-176 Lock washer 80531 $5.00 $68Ob Ia0 014 i�, 2423623-2 Searing ring C-seal B0531 $223.00 $946, 015 2 2423623-1 Sealing ring C-seal 80531 $470.00 $-470:00 f 0 016 L�Z T3712-317 Sheet gasket ace. to EN 80531 $8.00 $t6:00 S 2 017 3' T3712-318 Sheet gasket aoc. to EN 80531 $16.00 $48.00- l e • '= 018 ,3' T3712-224 Sheet gasket 80531 $32.00 $96 00 019 T3712-222 Sheet gasket acc. to EN B0531 $32.00 $224:60 z f 020 T3712-220 Sheet gasket acc. to EN B0531 $14.00 $5&00 1 i 2• Siemens Demag Deiaval Turbomach)nery Inc. 840 Nottingham Way Tel: (609) 890.5000 www.pg.slemeru.Com Hamilton, New Jersey 08638 USA Fax (609) 587-7790 SIEMENS Quotation Quotation 40042.06T1 continued, page 2 of 9 copy 021 VA' 2421466.1 Gasket B0531 $99.00 W-1500 - 1-2- „ 022 2 2422868-7 (,►PJt Gasket Armco B0531 $16.00 616" 023 lfff22 T3907-186 Lock washer B0531 $8.00 $tom 024 21f12' T3905.166 Lock washer Stainless steel 130531 $9.00 $108.00 025 2a'' T3711.315 Sheet gasket 80531 $2.00 $2.00 026 '-P 2• T3711.319 Sheet gasket B0531 $4.00 $8.00 027 ` Z.Y T3711.315 Sheet gasket 00531 $2.00 $2.00 028 2 Y T3712-222 Sheet gasket aoc. to EN 80531 $32.00 $32.00 029 T3711-319 Sheet gasket B0531 $4.00 $8.00 030 21` T3712-225 Sheet gasket according to EN 00531 $73.00 $73.00 031 6210 T3907.186 Lock washer B0531 $8.00 $1211M 1 1 032 Ig 24 T3901-178 Lock washer 00531 $5.00 $120.00 033 2 Y 2422868.3 Gasket Armco 80631 $62.00 $62.00 034 d f Z 2422868-1 Gasket Armco 80531 $64.00 $128.00 035 Q A' 2422868-2 Gasket Armco B0531 $12.00 ' $48.00 - 036 e X T3910.173 Lock washer (folded) B0531 $4.00 $16.00 037 g,#' T1253.239 Split pin 80531 $4.00 $16.00 ; 038 J2,e 2422868-6 Gaaket Armco B0531 $22.00 $132.00 039 11,0 2422868-5 Gasket Armco B0531 $21.00 $166.00 040 2 y T3712-314 Gasket B0531 $5.00 $5.00 041 a 0' T3905-178 Lock washer (folded) B0631 $8.00 $32.00 042` 2.Y 2420212.1 Sealing E-sealing 'B0531 $13.739.00 $13.739.00 043 tj2-W- T3907-178 Lock washer B0531 $5.00 $80.00 04424FC T3907-186 Lock washer B0531 $8.00 $992.00 045 32A T3907-179 Lock washer.Nordlock 80631 $9.00 $144.00 0461 T3905.178 Lock washer (folded) Slemens Demag Delaval Turbomachinery Inc. 840 Nottingham way Tel: (609) B90-5000 Hamilton. New Jersey 08638 USA Fax: (609) 587.7790 B0531 www.pg.siamens.com $8.00 $400.00 SIEMENS Quotation Quotation 40042.OST-1 continued, page 3 of 9 047 4 `2 2421514.2 Gasket B0531 $13.00 $26.00 048 1 2 2421514.1 Gasket B0531 $13.00 $26.00 049 +2' T3907-165 Lock washer B0531 $3.00 $6.00 05 (�6t}r3907-179 Lock washer Nordlock B0531 $9.00 $1.188.00 051 .3z W T3907-166 Lock washer 130531 $8.00 $128.00 /ULppL `}I 052 if 7 2421283.1 Gasket Square gasket 80531 $13.00 $26.00 \J 053 11, X 21517002.175 Lock washer 80531 $26.00 $208.00 054 4 ,2' 2421284.1 Gasket Square gasket 80531 $15.00 $30.00 055 L 8- 21517002-175 Lock washer 130531 $26.00 $208.00 056 30' 2420792-1 Gasket B0531 $18.00 $2.340.00 _ 0570�:06 T3907-186 Look washer 80531 $8.00 $1,440.00 058 e f ,2 2416046-2 Gasket 80531 $39.00 $78.00 059 �214 T3901-186 Lock washer 80531 $8.00 $128.00 060 2 A- 2416046.2 Gasket B0531 $39.00 $39.00 061 -e- T3907-186 Lock washer 80531 $8.00 $64.00 7) 062 1,V T3910-185 Lock washer (folded) 80631 $6.00 $60.00 l 063 3" T3706-133 Gasket metal sheeted 130631 $16.00 $48.00 064 3' T3910-204 Lock washer (folded) B0531 $6.00 $18.00 065 �O 2151700Z 195 Washer B0531 $11.00 $550.00 066 in 0 20' 2421910-1 Spacer ring B0531 $13.00 $300.00 067 (,030-2421910.2 Spacer ring B0531 $10.00 $540.00 068 G(j 30-2421910-3 Spacer ring 80531 $19.00 $570.00 069 60 W 24219104 Spacer ring B0531 $22.00 $660.00 070 (� G 30- 2420792.1 Gasket B0531 $78.00 $2,340.00 071 'r4-T3910-179 Lock washer (folded) B0531 $3.00 $12.00 ^ l 072 2.--T3706.136 Gasket B0531 $71.00 $71.00 Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way Tel: (609) 800.6000 www.pg.siemens.com Hamilton. New Jersey 00638 USA Fax. (609) 587.7790 SIEMENS Quotation Quotation 40042.06T-1 continued, page 4 of 9. 073 2 T3712-314 Gasket B0531 $5.00 $5.00 074 ( 4) X-2420702.1 Lock washer (folded) 00531 $38.00 $1,140.00 075 �e LIT T3910-185 Lock washer (folded) 80531 $5.00 $125.00 076�7 KT3907-186 Lock washer 80531 $8.00 $680.00 077s Q 2T 2420476-1 Seating Outer seal strip 80531 $25.00 $625,00 0786j28 2420476-1 Sealing Inner seal strip B0531 $67.00 $1,675.00 i 079106 W 2420708-1 Lock washer B0531 $12.00 $600.00 080 �I Q- 13408044.139 Me round, stainless 80531 $3.00 $36.00 081(0050- 2420703-2 Retaining ring Internal B0631 $18.00 $900.00 Jt. 082 Ito W T3905-165 Lock washer (folded) 80531 Woo $400.00 063 Ord-25 2420475 1 Sealing Outer seat strip 80531 $25.00 $625.00 084 p25 2420476-1 Sealing Inner seal strip 80531 $67.00 $1,675.00 085 6;oZ 2420477-1 Sealing Seal strip U0531 $67.00 $1,675.00 0866709 2423340.1 Sealing Rear heal strip 80631 $75.00 $1,875.00 087160 SIT 2420703-1 Retaining ring internal B0531 $34.00 $1,700.00 088 6 W 2420702-2 Lock washer (folded) B0531 $37.00 $925.00 0 a 9 --W 2420490-1 Lock nut Of steel 80531 $2.06 $20.00 09017 a?-2423585.1 Sealing blade 1 80531 $120.00 $10.440.00 091 3-2424155-1 Sealing 00531 $1.00 $3.00 0 (o a- 2420137-1 Lock plate blade 1 80531 $629.00 $1,887.00 09317f&T'2423582-2 Sealing Blade 1 80531 $38.00 $3,306.00 ' 0941174t ' T3905-178 Lock washer (folded) B0531 $8.00 $136.00 ' 0952g1� it T3907-178 Lack washer B0531 $5.00 $740.00 096�zz W T3905.178 Lode washer (folded) 80531 $8.00 $88.00 09712 6-21517002.162 Lock washer B0531 $18.00 $108.00 098 2 W 2420211.1 Sealing Seal strip 80531 $237.00 $2,3 0.00 Siemens Demag Delaval Turbomachlnery Inc. 840 Nottingham Way Tel: (6091 890-5000 www•pg.siemens.cem Hamilton, New Jersey 08638 USA Fax: (609) 587-7790 SIEMENS Quotation COPY/ Ouotatlon 40042-06T-1 continued, page 5 of 9 a452' 2420534-1 699.104 100'alj Q 2423255.1 101 /L 4-A1551860-1 Sealing Outer sealstrip Sealing Inner seal strip Plastic foil 80531 B0531 00631 $74.00 $75.00 $47.00 $3,848.00 $3,900.00 $47.00 111 102 s Y A0721170-185 Paste lubricant B0531 $137.00 $274.00 103 j0 20' 13408044-139 Wire round, stainless B0531 $3.00 $60.00 104 e f - ' A0721230-55 Thread sealing Loctlte 542 80531 $61.00 $122.00 105 rA"A1551160.14 Tape 80531 $13.00 $52.00 106 2-y A0721230.62 Threadlocker Loclite 275 80531 $77.00 $77.00 107 2- 1- A0721230.61 Loctile 243 80531 $77.00 $77.00 108 1.f020' A1556846.35 Emery cloth, no. 100 130531 $3.00 $60.00 109 Zo 10- A15SM46-36 Emerypaper 80531 $3,00 $30.00 110 2-I&16-A1556846.37 Emery cloth B0531 $3.00 $30.00 111 q 26' A3496860-41 Cleaning cloth 80531 $4.00 $60.00 112 to -6- A1556860.12 �2 Wall brush mottler 80531 $2.00 $10.00. 113 1 2- Ai551160-12 Masking tape 80531 $4.00 $8.00 114 a0.a&- A8212962-21. Deposit box : 80531 $9.00 $135.00 115 70 W A8212962-22 Deposit box 80531 $5.00 $175.00 116 R 0 45 A8212062-23 DeposA box B0531 $7.00 $105.00 117 q Al556990-472 Assembly glove 80531 $11.00 $528.00 118 A- A1551116.31 Marking paint Stylmark B0531 $21.00 $21.00 119 Q -5" A2441176,A8 Marking pen Artline 400-XF B0531 $10.00 $50.00 120 2�4- 13108011-2 Gsaketsheet B0531 $612.00 $612.00 121 1 3--17108001.143 Gasket sheet 80531 $81.00 $243.00 122 Co 2S At 551160.11 Cleaning tissue 80531 $25.00 $626.00 123 A0 20- A1556960.38 Refuse sack 00531 - $2.00 $40.00 124 :?b W A1554944.3 Battery B0631 $1.00 $10.00 Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way Tel: (609) 890.50W www.pg.3[emens.com Hamilton, New Jersey 08638 USA Fax: (W9) 587-7790 SIEMENS Quotation Cuotation 40042.06T-1 continued, page 6 of 9 Imm 125 2.DWA1554944.8 Battery 80531 $1.00 $10.00 126 2' LW A606E1516082 WIRE BUNDLERS 390X4,7 T50L B0531 $1.00 $100.00 127 2- A6D6E0754113 Electrical tape B0531 $3,D0 $6.00 .128 1 0-6' T3704.108 Point gasket B0531 $3.00 $15.00 129 If, 8- T378.179 Gasket 60531 $2.00 $16.00 130 10 4-'T6102-101 Union nut B0531 $1.00 $5.00 -731 i�-T6313-101 Plug for pipe coupling BD531 $2.00 $4.00 132 2- T6816-102 Coupling 80531 $5.00 $10.00 133 2- T6815-802 Coupling d 8,114 npt B0531 $6.00 $12.00 134 Y T6820=102 Pipe coupling, straight 80531 $11.00 $22.00 135 Z a' T6830-101 Union B0631 $7.00 $7.00 136 Zfi T6870-101 Tee coupling B0531 $18.00 $18.00 137 10 g T7021.101 Ferrule B0531 $1.00 $5.00 138 g 1CSA8136-1 Nul 80531 $90.00 $270.00 139 1CSA8135.1 Nipple 80531 $28.00 $84.00 140 12 1CSA8,133.1 Coupling 80531 $12.00 $12.00 141 (� .& 1851523-1 Nipple B0531 $16.00 $48.00 142 8 -4- 1852416.1 Adapter M12 x 1,5 -R1/4' B0531 $31.00 $124.00. 1852417.1 143 2- Nipple B0531 $28.00 $56.00 144 N 2 2035928-6 Oulck goupling mate 80531 $107.00 $214.00 145 `f 2- 2035929-2 Adapter tamale -male, BSPP-NPT B0531 $29.00 $58.00 146 a 70W6131-A Pipe connector 80531 $21.00 $42.00 147 Z 7DO06131-13 Pipe connector B0531 $21.00 $42.00 148 2 k 70006131-C Pipe connector 80531 $21.00 $21.00 149 24- 70006131-E Pipe connector B0531 $21.00' $21.00 150 At2' 70006131-D Pipe connector 80531 $19.00 $38.00 Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way Tel: (609) 890.5000 www.pq.siemens.com Hamllton, New Jersey 08638 USA Fax: (609) 587-7790 SIEMENS Quotation Quotation 40042-06T-1 continued, page 7 of 9 151 g A- 1CSA8259-1 Hose B0531 $6.00 $24.00 h`( 152 [f Y 1CSA8263-1 163 1CSA8261-1 Coupling Coupling -80531 $6.00 $12.00 ,c.p2' 80531 $5.00 $10.00 154 � f' 1CSA9262-1 Coupling 80531 $4.00 $8.00 . 155 * 29" iCSA8130.1 Sleeve B0531 $7.00 $140.00 156 I0 'S'1CSA7988-1 Hose B0531 $6,00; $30.00 157 8 4' 1CSA8257.1 Gasket 80531 $16.00 $64.00 158 8-1CSA8258-1 Gasket B0531 $22.00 $176.00 159 0 9-2423623-3 Sealing ring C-seal 80531 $166.00 $776.00 160 fir T1873-538 �i Hexagon eockethead screw B0531 $42.00 $588.00 large clearance 161 34- T1665-542 Hexagon head bolt B0631 $156.00 $5,304.00 kj`r-162 �� 90 40' T3907-.178 Lock washer 80531 $5.00 $200.00 163 12-A- 2021278-3 Gasket for flange connection 80531 $51.00 $306.00 164 12-Er 2021278-2 Gasket for flange connection B0531 $29.00 $174.00 165 (� T2604.126 Hexagon nut B0531 $2.00 $16.00 166 B-T7624-695 Screw, steel B0531 $17.00 $136.00 167 I (.-B- T2804-124 Hexagon nut B0531 $4.00 $32.00 106 (� 4- T1624.644 Hexagon head screw 50531 $9.00 $72.00 169 -4- T3717-316 Gasket 60531 $86.00 $344.00 170 (0 41' T1622.630 Hexagon head screw B0531 $3.00 $24,00 171 a 4-T3717•466 Gasket B0531 $99.00 $396.60 -7 ^G 1� 72 I a 173 i � A T1622.678 Hexagon head screw galvanized 80531 $5.00 $40.0f0 2 Y A0721170.185 Paste lubricant 80631 $137.00 $137.00 174 2 1- A4431160-63 Teflon band 60531 $2.00 $2.00 175 24 W6861110-3 Wire brush 80531 $4.00 $4.00 176 2 4-A7551160-12 Masking tape 00631 $4.00 $4.00 Siemens Demag Delaval Turbomachinery Inc. 840 Nottingham Way TO (609) 090.5000 www.pg.siemens.com Hamilton, New Jersey 0663B USA Fax: (609) 507.7790 SIEMENS Quotation 177 2 .4- A1551160-14 Quotation 40D42-OBT-1 Continued, page 8 of 9 Tape 80531 178 2 k A606E0754113 Electrical tape B0531 $3.00 $3.00 179 6 .A-T6816-802 Coupling d 8, 1/4 npt B0531 $6.00 $24.00 180 8 4'1852417 1 Nipple B0531 $28.00 $112.00 181 l0 4 1852416.1 Adapter M12 x 1,5 -R1/4" B0531 $31.00 $93.00 I I� 182 8' 2035928-6 Quick goupling male B0531 $107.00 $321.00 183 8r 2035929-2 Adapter lemale-male, BSPP-NPT 00531 $29.00 $87.00 184 4- T3725.179 Gasket 80531 $2.00 $6.00 185,1`0 28' 1CSA8386-1 i Teflon hose \ B0531 $5.00 $126.00 166 p 25` 1CSA8253-1 Spring U0531 $3.00 $75.00 187 W T6102.-101 Union nut B0531 $1.00 $20.00 188 A f 0 20 70005795-B Adapter 80531 $39.00 $700.00 189 g -4--A6831260-4 Bycotest C5 Cleaner Dangerous B0531 $25.00 $100.00 Goods 190 5 A1551170.68 Rust oil WD 40 Dangerous B0531 $21.00 $106.00 10 Goods 191 S A-A6831260-2 Bycotest RP20 Penetr. coloured B0531 $25.00 $100.00 Dangerous 192 JY A6831260-3 Bycotest D30 Developer 80531 $25.00 $100.00 Dangerous G 193 2_AY A1651170-190 Rust preventive Dangerous G B0531 $19.00 $19.00 Total - Exworks: Finspong, 9E US Dollars $5,670,925.00 Price Is for one unit, Price does not include safes & use taxes that may apply to the state of California. Price does not Include freight/duty/related charges to ship from Finspong, SE to the City of Vernon. SDDTI offers to coordinate such activities at our cost plus 10% and then invoice to City of Vernon. This pricing is at an exchange rate of 6.77 SEK / $1.00 USD. Siemens reserves the right to adjust the pricing should the exchange rate move by more than 6% at the time.of order. Progress payments (see cover letter dated 01/10/2007) otherwise- 40% of order amount to be Invoiced when PO is received. 50% of order amount to be invoiced 120 days after receipt of PO. 10% of order amount to be invoiced upon final shipment. Siemens Demag Delaval Turbomachinery Inc. B40 Nottingham Way Tel: (609) 890-5000 www.pg,siomens.com Hamilton, New Jersey 086H USA Fax: (609) 587-7790 SIEMENS COPY Quotation Quotation 40042.06T-1 continued, page 9 of 9 Lead times for individual line items are shown in weeks after receipt of order, subject to prior sale. Prices are firm through shipment and valld 30 days from the date of this letter. Please note that there is a $500 minimum order value. Payment will be progress payments (see notes). Siemens Demag Delaval Turbomachinery Inc. Selling Policy 1200 (dated 511/2005) shall apply to any resultant order. All purchase orders are to be made out in the name of: Siemens Dernag Delaval Turbomachinery Inc. 840 Nottingham Way Hamilton, New Jersey 08638 USA If you have any.questions, please. feel free to contact me or. Best Regards, �/ Scott Hutchinson Customer Service Representative Tel: (281)'U56-4428 Fax: (281) 856-4499 a -mall: scott.hutchinson®siemens.com Siemens Demag Delaval Turbomachinery Inc. W Nottingham Way Tel: (609) 890-5M www.pg.siemens.com Hamilton, New Jersey 0863E USA Fax: (609) 587.7790 QTY-bF VERNON, CALIFORNIA® PURCHASE RE SITION LP No I - LIGHT & P(R . 4990 DEPARTMENT- REOUESTOR NAME: DONAI n'CA DATE:0007 SUGGESTED VENDOR: PHONE NO.: ( _ ----- VENDOR ADDRESS: NOTTINGHAM WAY .HAMIL-T0N-, . ElAME FAX M: CONTACT PERSON: H T.CHI SmIT OR SERVICE LOCATION:SOTS REQUIRED DELI VL'NY OR t311AVICE DATE DELIVERY ST. ACCOUNT NO-; ITEMS BUDGETED YES _._X— �k NO trlitr►g T, x,- UNIT PRit%E EXTENDED AMOUNT . r (Continued from previous IMIS) $11341612 $11,341,612 0 .00 A, duel . A 31M 8yo6t"t D30 D*vWper Dangerous 0 $25.0 $200.00 3 Z "` «oh M661170• Rust pnwntative Dangerous G $19,0 $38.00 100 . 8.2596 Sales tax $935702.6 $935,702.63 See attached Quote# 40042-06T-1 Page 20 of 20 SubTota : $12,277,552,63 Tax: Shipptn : SCHEDULED DELIVERY DATE: Tota W IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM.' I hereby certify that the above items are necessary for the operation of this Department` - : ` - Department Head.or'Authorized Person FOR PURCHASING ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER IIKPARTRAGMT CII t= CITY.UF VERNON, CALIFORNIA® PURCHASE RESITION LIGHT & P R LP No. 4 9 j 7 DEPARTMENT: REQUESTOR NAME: DONAL LLAGHAN I IMC DATE: 1116/2007 SUGGESTED VENDOR: PHONE NO.: ( 609I890-5000 VENDOR ADDRESS: FAX p: CONTACT PERSON: SCOTT HUTCHINSON SERVICE DATE: REQUIRED DELIVERY OR RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X * NO QUANTITY UNITOF'i$8UE. MCI 8500 i DESCRIPTION i .. o,jk2t t UNIT PRICE ExTENDED AMOUNT 60 each 2423560=C Bumdr $37925.00 $2.275,500. 00 2 each 2423699-0 Combustor $1816328.0 0 $3,632,656. 00 174 each 2423470-C Turbine blade $1,1605.00 $2,019,270. 00 100 each 2423483-A Guide vane Vane 1 Complete $19289.0C $1,928,900. 00 98 each 2422954-A Guide vane Turb. guide vane2 $12542.00 $1,229,116. 00 2 each 2420018-D Guide vane No. 2 boroscope $12961-OC $25,922.00 4 each 2423682-A Guide vane No. 2 Temp $13263.0 $53,052.00 16 each 1CSA1022 Braided packing $1.0 $16.00 5-1 552 each T3907-178 Lock Washer $5.0 $2,760.00 12 each 21517002- Washer $19A $228.00 197 80 each T3904-178 Locking Washer $3.0 $240.00 Page 1 of 20 (Continued on next page) SubTota $11,167,660.00 To): Shippin : SCHEDULED DELIVERY. DATE: Tota * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person i FOR PURCHASING DEPARTMENT USE ON Y ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER nt=17APTAfir* r t:u m CITY OF'VERNON, CALIFORNIA , D04RTMENT: PURCHASE REG SITION ...,..� a- m LP Nn_ A n 7 0 NAME: DATE: 1 /16/2007 SUGGESTED VENDOR: PHONE NO.:1 609/890-5000 SIEMENS VENDOR ADDRESS: FAX A: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES —x *NO QUANTITY UNITOFissue _... OE CRIPTION I # UNrr. PRIM- .. EXTENDEDAMOUW 1 (Continued from previous page) $11167660 $11,167,660 p .00 48 each T3910-185 Lock Washer (folded) $5.0 $240.00 26 each T3907-178 Lock Washer $5.0 $130.00 4 each 2423623-2 Sealing ring C-seal $223.0 $892.00 2 each 2423623.1 Sealing ring C-seal $470.0 $940.00 4 each T3712-317 Sheet gasket acc. to EN $8,0 $32.00 6 each T3712-318 Sheet gasket acc. to EN $'16.00 $96.00 6 each T3712-224 Sheet gasket $32.0 $192.00 I 14 each T3712-222 Sheet gasket acc. to EN $32.0 $448.00 8 each T3712-220 Sheet gasket acc. to EN $14.03 $112.00 8 each 2421466-1 Gasket $99.0 $792.00 Page 2 of 20 (Continued on next page) SubTota : $11,171,534.00 Ta I I SCHEDULED DELIVERY DATE: Tota * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPA TIIAENT US.E ONLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY-Q VERNON, CALWORNIAS PURCHASE RE SITION LIGHT & PfR LP No. 4979 DEPARTMENT: REOUESTOR NAME: CALLAGHAN / IMC DATE: 1I16/2007 SUGGESTED VENDOR: PHONE NO.: ( 609I890-5000 VENDOR ADDRESS: FAX M: CONTACT PERSON: OTT HUTCHINSON.. REQUIRED DELIVERY OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.. ITEMS BUDGETED YES X *NO QUAW rY inures; ! DESCRIPTION UNIT PRICE e. EXTENDEDAMOI. 1. 1 (Continued from previous page) $11171534 $11,171,534 - 0 .00 2 each 2422868-7 Gasket Armco $16.0c $32.00 44 each T3907-186 Lock washer $8.0 $352.00 24 each T3905-186 Lock washer Stainless steel $9.0 $216.00 2 each T3711-315 Sheet gasket $2.0 $4.00 4 each T3711-319 Sheet gasket $4.0 $16.00 2 each T3711-315 Sheet gasket $2.0 $4.00 2 each T3712-222 Sheet gasket acc. to EN $32.0 $64.00 4 each T3711-319 Sheet gasket $4.00 $16.00 2 each T3712-225 Sheet gasket acc. to EN $73.0 $146.00 32 each T3907-166 Lock Washer $8.0 $256.00 Page 3 of 20 (Continued on next page) SubTota : $11,172,640.00 Ta Shippin : SCHEDULED DELIVERY DATE: Tota 7k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. r I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person i �r�n e�un�iu n�unnrn en�ue�ur anr�����„v - e - - • ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER ni=mbPTIIAMITCIO C PURCHASE RE SITION CITY OF VERNON, CALIFORNIA* LIGHT & PqrR LP NO- 4980 'DEPARTMENT: REQUESTORNAME:DONAL ALLAGHANIIMC DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: (6091690_5000 VENDOR ADDRESS: FAX #: CONTACT PERSON: SCOTT HUTCHINSON 6091587-7790 REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. UNT NO.: ITEMS BUDGETED YES �_ *NO FOU'ANTITY7,Nrr 655-190-1200-8600 OP ISSUE DESCRIPtgO[j UNIT PRICE EXTENDED AMOUNT (Continued from previous page) $11172640. $11,172,640 1 00 .00 48 each T3907-178 Lock Washer $5.00 $240.00 2 each 2422868-3 Gasket Armco $62.00 $124.00 4 each 2422868-1 Gasket Armco $64.00 $256.00 8 each 2422868-2 Gasket Armco $12.00 $96.00 8 each T3910-173 Lock Washer (folded) $4,00 $32.00 8 each T1253-239 Split pin $4.00 $32.00 12 each 2422868-6 Gasket Armco $22.00 $264.00 16 each 2422868-5 Gasket Armco $21.00 $336.00 2 each T3712-314 Gasket $5.00 $10.00 8 each T3905-178 Lock Washer (folded) $8.00 $64.00 Page 4 of 20 (Continued on next page) SubTotal: $11,174,094.00 Tax: Shipping: SCHEDULED DELIVERY DATE: Total' IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING` ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY OF VERNON, CALIFORNIA PURCHASE RE SITION LIGHT &POWR LP No- 4981 DEPARTMENT: REQUESTOR NAME-. DONAL 0' ALLAGHAN 1 IMC DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 6091890-5000 SIEMENS VENDOR ADDRESS: SE"RR3R _ FAX #: CONTACT PERSON: SCQTT HUTCHINSON REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X * NO WANT" UWOf"up DESCRIPTION UNIT PRICE EXTENDEI).AMOUNT 1 (Continued from previous page) $11174094. 0 $11,174,094 .00 2 each 2420212-1 Sealing E-sealing $13739.010 $27,478.00 32 each T3907-178 Lock washer $5.O $160.00 248 each- T3907-186 Lock Washer $8.0 $1,984.00 32 each T3907-179 Lock washer Nordlock $9.0 $288.00 100 each T3905-178 Lock washer (folded) $8.0 $800.00 4 each 2421514-2 Gasket $13.0 $52.00 4 each 2421514-1 Gasket $13.0 $52.00 4 each T3907-165 Lock Washer $3-00 $12.00 264 each T3907-179 Lock Washer Nordlock $9.00 $2,376.60 32 each T3907-186 Lock Washer $8.0 $256.00 Page 5 of 20 (Continued on next page) SUbTota : $11,207.552.00 Ta Shfppin SCHEDULED DELIVERY DATE: Tota �k IF ITEMS ARE NOT BUDGETED. EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT US.,OMLY ISSUED BY DATE RECEIVED BY DATE' PU�ORDERNUMBER M=A0TAACKIT CII C _ CITY.OF VERNON, CALIFORNIA PURCHASE RE SITION LIGHT & KWR LP No. 4982 DEPARTMENT: REQUESTOR NAME: DATE;' 16I2007 SUGGESTED VENDOR: PHONE NO.:( 00 VENDOR ADDRESS: FAX N: CONTACT PERSON: REOUIRED DELIVERY OR SERVICE DATE: RI IS DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES �� *NO QUANTITY uruTOFISSUE DESCflIPT v ` ' ':ONIT PRICE::" WENDED AMOUNT . 1 (Continued from previous page) $11207552 $11,207,552 0 .00 4 each 2421283-1 Gasket Square gasket $13.0 $52.00 16 each 21517002- Lock Washer $26.0 $416.00 175 4 each 2421284-1 Gasket Square gasket $15.0 $60.00 i ' 16 each 21517002- Lock Washer $26.0 $416.00 175 60 each 2420792-1 Gasket $78.0 $4,680.00 360 each T3907-186 Lock washer $8.() $2,880.00 4 each 2415046-2 Gasket $39-00 $156.00 32 each T3907-186 Lock washer $8.0 $256.00 2 each 2415046-2 Gasket $39.00 $78.00 16 each T3907-186 Lock Washer $8.0 $128.00 Page 6 of 20 (Continued on next page) SubTota : $11,216,674.00 Ta Shippin SCHEDULED DELIVERY DATE: �k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. tu I hereby certify that the above items are necessary for the operation Of this Department Department Head or Authorized Person FOR PUR ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY O,F VERNON, CALIFORNIA PURCHASE RE SITION LIGHT & P(R LP No. [� 3 DEPARTMENT: IREQUESTOR. NAME: 1. ,,,,,, , —fl DATE: 111RON) r SUGGESTED VENDOR: PHONE NO.:( 9)890-5000 VENDOR ADDRESS: FAX p: CONTACT PERSON: 7--7790 REQUIRED DELIV Y R SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: I ITEMS BUDGETED YES _X_ tfr NO QUANTGTY' 055-100-8200-8500 urlrcoF�suE DESCRIPTION; UNIT PRICE EXTENDEDAfhOUNT 1 (Continued from previous page) $11216674. $11,216,674 00 .00 20 each T3910-185 Lock washer (folded) $5.0 $100.00 - 6 each T3706-133 Gasket metal sheeted $16.00 $96.00 6 each T3910-204 Lock washer (folded) $6.0C $36.00 100 each. 21517002- Washer $11.0 $1,100.00 195 60 each 2421910-1 Spacerring $13.0 $780.00 60 each 2421910-2 Spacer ring $18.0 $1,080.00 60 each 2421910-3 Spacerrtng $19.0 $1,140.00 60 each 2421910-4 Spacer ring $22.0 $1,320.00 60 each 2420792-1 Gasket $78.0 $4,680.00 8 each T3910-179 Lock washer (folded) $3.0 $24.00 Page 7 of 20 (Continued on next page) SubTata : $11,227,030.00 To): Shippin : SCHEDULED DELIVERY DATE: Tota �tr IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. f r I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT US :ONLI ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER I1�PAgT11ACC,ITCt1 C CITY.QF VERNON, CALIFORNIA PURCHASE REQ SITIQN ® LIGHT & PCR LP No. 4984 DEPARTMENT: REOUESTOR NAME: DONAL O'CALLAGHAN 1 IMC DATE: SUGGEST ENDOR: PHONE NO.: ) VENDOR ADDRESS: N NEW JERSEY 08638 FAX k: CONTACT PERSON: SCOTT 4SON REOUIREO DW SERVICE DATE: — RUSH DELIVERY OR SERVICE LOCATION: ACCOUNT NO.: - ITEMS BUDGETED YES �k NO0-200-6500 QUANTITY Urn tSSUL OESCR�PTI a�� .~ UNIT PRICE EXTENOEO AMOUNT (Continued from previous page) $11227030. $11,227,030 00 $71.00 $142.00 2 each - T3706-138 Gasket $5.00 $10.00 2 each T3712-314 Gasket I $38.00 $2,280.00 60 each 2420702-1 Lock washer (folded) $5.00 $250.00 50 each T3910-185 Lock washer (folded) $8.00 $1,360.00 170 each T3907-186 Lock washer $25.00 $1,250.00 50 each 2420475-1 Sealing Outer seal strip $67.00 $3,350.00 50 each 2420476-1 Sealing Inner seal strip $12.00 $1,200.00 100 each 2420706-1 Lock washer $3.00 $72.00 24 each 13408044- wire round, stainless 139 $18.00 $1s00.00 100 each 2420703-2 Retaining ring internal Page 8 of 20 (Continued on next page) SubTotal $11,238,744.00 Tax Shipping SCHEDULED DELIVERY DATE: Tota 7C IF ITEMS ARE NOT BUDGETED. EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. Lr ; A -' C) I hereby certify that the above items are necessary lot the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPA*ENTUSE ONLY' ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY,1DF VERNON, CALIFORNIA® PURCHASE REQUISITION LIGHT & P( R LP No. 4985 DEPARTMENT. REOUESTOR NAME: DATE: 1 /16IZO07 SUGGESTED VENDOR: PHONE NO.: ( 09)890.5000 VENDOR ADDRESS: SEMENS FAX #: CONTACT PERSON: REQUIRED DELI SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES —X * NO QUANTITY' uNITOFts9UE DESCRIPTION. r ;- UNIT PRICE EXTENDEOAMOt1NT ' 1 (Continued from previous page) $11238744. $11,238,744 00 .00 100 each T3905-165 Lock washer (folded) $8.0 $800.00 50 each 2420475-1 Sealing Outer seal strip $25.00 $1,250.00 50 each 2420476-1 Searing Inner seal strip $67.00 $3,350.00 50 each . 2420477-1.. Sealing Seal strip $67.00 $3,350.00 50 each 2423340-1 Sealing Rear seal strip $75.0 $3,750.00 100 each 2420703-1 Retaining ring internal $34.0 $3,400.00 50 each 2420702-2 Lock washer (folded) $37.0 $1,850.00 20 each 2420490-1 Lock nut of steel $2.0 $40.00 174 each 2423585-1 Sealing blade 1 $120.0 $20,880.00 6 each 2424155-1 Sealing $1.0 $6.00 Page 9 of 20 (Continued on next page) SubTota : $11,277,420.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota �c IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REOUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above Items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT U$E 0�lLY, ISSUED BY DATE RECEIVED BY {1r-DAP1 11ACAfTcil F DATE PURCHASE ORDER NUMBER i CITY'OF VERNON, CALIFORNIA � PURCHASE REQ�SITION *. LIGHT & P R LP No. 4 9 8 DEPARTMENT: REQUESTOR NAME: DATE: 1/16001717 SUGGESTED VENDOR: PHONE NO.: VENDOR ADDRESS: FAX #: CONTACT PERSON: REQUIRED DELI E VI E DATE: DELIVERY OR SERVICE LOCATION: ACCOUNT NO.: ITEMS BUDGETED YES --x_ * NO QUANTITY UNtTORSSUE 71 D.ESCRIPTION? UNIT PRICE EXTENDED'AMOUNVT 1 (Continued from previous page) $11277420 $11,277,420 0 .00 6 each 2420137-1 Lock plate blade 1 $629.0 $3,774.00 174 each 2423582-2 Sealing Blade 1 $38.0 $6,612.00 34 each T3905-178 Lock washer (folded) $8.0 $272.00 296 each T3907-178 Lock washer $5.00 $1,480.00 22 each T3905-176 Lock washer (folded) $8.0 $176.00 12 each 21517002- Lock washer $18.0 $216.00 . 162 20 each . 2420211-1 Sealing Seal strip $237.00 $4,740.00 104 each 2420534-1 Sealing Outer sealstrip $74.0 $7,696.00 104 each 2423255-1 Sealing Inner seal strip $75.0 $7,800.00 2 each A1551860- Plastic roll $47.0 $94.00 1 Page 10 of 20 (Continued on next page) SubTota : $11,310,280.00 Ta Shippin : SCHEDULED DELIVERY DATE: Tota * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARiMNT USE ONLY ISSUED BY• DATE RECEIVED BY DATE PURCHASE ORDER NUMBER CITY OF VERNON, CALIFORNIA* PURCHASE RESI.TION r' LIGHT & PqFR LP NO. 4987 ,DEPARTMENT: REQUESTOR NAME: �ni rVr•et 1 er_unni r teen DATE: 1/16/2007 Loa - SUGGESTED VENDOR: PHONE NO.: ( 609/690-5000SIEMENS VENDOR ADDRESS: FAX #: CONTACT PERSON: SCOTT UTCHINSON REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X # NO (3UAM7TY: UtaroFrsStlE _ DESCRIPTION UNIT PRICE F.xTENC,EOAMOt1NT 1 (Continued from previous page) $11310280. . $11.310,280 00 .00 4 each A0721170- Paste lubricant $137.00 $548.00 185 40 each 13408044- Wire round, stainless $3.00 $120.00 139 4 each A0721230- Thread sealing Loctite 542 $61.00 $244.00 55 8 each A1551160- Tape $13.00 $104.00 14 2 each A0721230- Threadlocker Loctite 275 $77.00 $154.00 62 2 each A0721230- Loctite 243 $77.00 $154.00 61 40 each A1556846- Emery cloth, no. 100 $3.0 $120.00 35 20 each A1556846- Emerypaper $3.0 $60.00 36 20 each A1556846- Emery cloth $3.0 $60.00 37 40 each A3496860- Cleaning cloth $4.0 $160.00 41 Page 11 of 20 (Continued on next page) SubTotal $11,312,004.00 Ta �mppur SCHEDULED DELIVERY DATE: Tote �r IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. ` I U U J I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person ` FOR PURCHASING DEPARTMENT USE ONLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER 11PPAOTARMIT Clr F~ CIT)rbF VERNON, CALIFORNIA PURCHASE REQ SITION ® LIGHT & PI R LP No. 4 9 g q DEPARTMENT: REQUESTOR NAME: DATE: 1 /16/2007 SUGGESTED VENDOR:SIEWNS PHONE NO.: ( sl 9a-5ooa VENDOR ADDRESS: FAX #: CONTACT PERSON: REQUIRED DELI E VI DATE: RUSI DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES _ X tk NO QUANTITY• uw1lOF i)E - OESGRIPTItNV �� � TM a UNfiPH1Gl Ex1END.EnnMOUNr 1 (Continued from previous page) $11312004 $11,312,004 0 .00 10 each A1556860- Wall brush mottler $2.0 $20.00 12 q each A1551160- Masking tape $4.0 $16.00 12 30 each A8212962- Deposit box $9.0 $270.00 21 70 each A8212962- Deposit box $5.0 $350.00 22 30 each A8212962- Deposkbox $7.0 $210.00 23 96 each A1556990- Assembly glove $11.0 $1,056.00 472 2 each A1551176- Marking paint Stylmark $21.0 $42.00 31 10 each A2441176- Marking pen Artline 400-XF $10.0 $100.00 48 2 each 13108011- Gasket sheet $612.0 $1,224.00 2 6 each 17108001- Gasket sheet - $81.0 $486.00 143 Page 12 of 20 (Continued on next page) SubTota : $11.315,778.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. Q � I hereby cenity that the above items are necessary for (he operation of this Department Department Head or Authorized Person FOR ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER ---A -- 0111T P#I 1 CITY. OF VERNON, CALIFORNIA* r PURCHASE RESITION LIGHT & PqrR LP No. 4989 DEPARTMENT: REQUESTOR NAME: DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 609)890-5000 VENDOR ADORESS: FAX M: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: RI ISH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X_ *NO Ql1ANfL1TY .. ur+mol rssuE DESCRIPTION UNIT PRICE F�(TENDED AMOtdT i a:- 1 (Continued from previous page) $11315778. $11,315,778 . 00 .00 50 each A1551160- Cleaning tissue $25.00 $1,250.00 11 40 each A1556950- Refuse sack $2.00 $80.00 38 20 each A1554944- Battery $11.0c $20.00 3 20 each A1554944- Battery $1.0 $20.00 8 200 each A606EI61 Wire Bundlers 390 x4,7 T50L $1.0 $200.00 6082 4 each A606E075 Electrical tape $3.0 $12.00 4113 10 each T3704-108 Polnl gasket $3.0 $30.00 16 each T3725-179 Gasket $2.00 $32.00 10 each T6102-101 Union nut $1.0 $10.00 4 each T6313-101 Plug for pipe coupling $2.0 $8.00 Page 13 of 20 (Continued on next page) SubTota : $11,317,440.00 Ta : Shippin SCHEDULED DELIVERY DATE: Tota 7k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. ,.i I hereby ceitity that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT USEi' LY y' ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER nr:0A RTAA FA1T Cf I C CITY OF VERNON, CALIFORNIA PURCHASE REO SITION LIGHT & PCWR LP No. 4990 DEPARTMENT: REQUESTOR NAME: N / IMC DATE: �/16/2007 SUGGESTED VENDOR: SIEMENS PHONE NO.: ( 6OV/890-5000 VENDOR ADDRESS: FAX N: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: I RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES �(_ �Ir NO - QUANTITY uNITOF issue 'DESCRIPT(10qIVy UNIT PRIG - WENDED AMOUNT. 1 (Continued from previous page) $11317440 $11,317,440 0 .00 4 each T6815-102 Coupling $5.0 $20.00 4 each T6815-802 Coupling d 8, 1/4 npt $6.0 $24.00 4 each T6820-102 Pipe coupling, straight $11.0 $44.00 2 each T6830-101 Union $7.0 $14.00 2 each T6870-101 Tee coupling $18.0 $36.00 10 each. T7021-101 Ferrule $1.00 $10.00 6 each iCSA8136- Nut $90.0 $540.00 1 6 each 1CSA8135- Nipple $28.0 $168.00 1 2 each 1CSA8133- Coupling $12.0 $24.00 1 6 each 1851523-1 Nipple $16.0 $96.00 Page 14 of 20 (Continued on next page) SubTota : $11,318,416.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota ' * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. 1 here6y"certity that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENrt USf= QNLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER !\r�111 nT��r♦IT YID r CITY OF VERNON, CALIFORNIA PURCHASE RE SITION LIGHT & PCqFR LP No, 4 9 y I :�DEPARTMENT: REQUESTOR NAME: D-ONAL O'CALLAGHAN / IMC DATE: 1 /16/2007 SUGGESTED VENDOR: PHONE NO.:( 609A8 J0-5000 SIEMENS VENDOR ADDRESS: FAX #: CONTACT PERSON: SCOTT HUTCHINSON 6091587-7790 REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: IITEMSBUDGETED YES X * NO WANT", tunroF Issue DESCRIPTION UNIT PRICE . ExTEt�EO AINOt1NT. .. 1 (Continued from previous page) $11318416. $11.318,416 00 .00 8 each 1852416-1 Adapter M12 x 1,5 -13114" $31.00 $248.00. 4 each 1852417-1 Nipple $28.0 $112.00 4 each 2035928-6 Quick goupling male $107.00 $428.00 q each 2035929-2 Adapter female -male, BSPP-NPT $29.00 $116.00 4 each 70006131- Pipe Connector $21.00 $84.00 A 4 each 70006131- Pipe Connector $21.00 $84.00 B 2 each 70006131- Pipe Connector $21.00 $42.00 C 2 each 70006131- Pipe Connector $21.00 $42.00 E 4 each 70006131- Pipe Connector $19.0 $76.00 D 8 each 1CSA8259- Hose $6.0 $48.00 1 Page 15 of 20 (Continued on next page) SubTota : $11,319,696.00 Ta Shippin SCHEDULED DELIVERY DATE: Tota . W IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. r 17 I hereby cenity thal the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEP.ARTMtNT USE Ok'�Yr : � >. ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER n9=PAMTAAt=hIT CII C , CITY,OF,VERMON, CALIFORNIA. PURCHASE REr NITION . LIGHT & Pk - R LP No. 4 q 9 ? DEPARTMENT: REQUESTOR NAME: DATE: SUGGESTED VENDOR: PHONE NO.: ( 0 VENDOR ADDRESS: 0-NOTTiN FAX 8: CONTACT PERSON: REQUIRED DELI R ERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES *NO QUANTITY UNIT OF ISSUE DESCRI UNIT PRICE EXTENDEDAMOUNT 1 (Continued from previous page) $11319696 $11,319,696 0 .00 4 each 1CSA8263- Coupling $6.00 $24.00 1 4 each 1CSA8261- Coupling $5.0 $20.00 1_ 4 each 1CSA8262- Coupling $4.0 $16.00 1 40 each 1CSA6130- Sleeve $7.0 $280.00 1 10 each 1CSA7988- Hose $6.0 $60.00 1 g each 1CSA8257- Gasket $16.0 $128.00 1 16 each 1CSA6258- Gasket $22.0 $352.00 1 10 each 2423623-3 Sealing ring C-seal $155.0 . $1,550.00 28 each T1873-538 Hexagon sockethead screw large clearance $42.0 $1,176.00 68 each T1666-542 Hexagon head bolt $156.0 $10.608.00 Page 16 of 20 (Continued on next page) SubTota : $11,333,910.00 Ta : Shippin SCHEDULED DELIVERY DATE: Tota - * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW. OR SUBMIT MEMORANDUM. r•14 .i _ he by berlity that the above items are necessary for the operation of this Department Department Head or Authorized Person t FOR PURCHASING 06i4RTMENT USE bNLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER nrn�rrr��r►rr �n '- CIT-rDF'VERNON, CALIFORNIA® PURCHASE RECUSITION LIGHT & PdVR LP No. 4993 DEPARTMENT. REQUESTOR NAME: DONAL GHAN / IMC DATE: 1 /16/2007 SUGGESTED VENDOR: PHONE NO.: ( 609JJ690-5000 VENDOR ADDRESS: SIEMENS 8_10 NeTT- FAX III: CONTACT PERSON:SCOTT UTCHINSON 609/507-7790 REQUIRED DELIVERY OR SERVICE DATE: DELIVERY.OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES X_ NO QUANTITY UNIT OF ISSUE DESCRIPTION UNIT PRICE" EXTENDFDAIADtR[r 1 (Continued from previous page) $11333910. 00 $11,333,910 .00 80 - each T3907-178 Lock washer $5.00 $400.00 12 each 2021276-3 Gasket for flange connection $51.00 $612.00 12 each 2021278-2 Gasket for flange connection $29.00 $348.00 16 each T2804-126 Hexagon nut $2.00 $32.00 16 each T1624-695 Screw, steel $17.00 $272.00 16 each T2804-124 Hexagon nut $4.00 $64.00 16 each T1624-644 Hexagon head screw $9.0 $144.00 8 each T3717-316 Gasket $86.0 $688.00 16 each T1622-630 Hexagon head screw $3.0 $48.00 8 each T3717-465 Gasket $99.0 $792.00 Page 17 of 20 (Continued on next page) SubTotal $11,337,310.00 Tax Shipping SCHEDULED DELIVERY DATE: Total: 1k IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. 1 I hereby certify that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT US0*0. ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER nt=paP-rAA=Km rm CITY OF VERNON, CALIFORNIA® PURL AS & p TION L4 P No. -DEPARTMENT: REQUESTDR NAME:nnhIAI DATE: 1r16/2007 SUGGESTED VENDOR: PHONE NO.: 890.5000 _ VENDOR ADDRESS: FAX b: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: RUSH DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES �— * NO QUANTITY uwroF Issue DESCRIPTIO.y .6,. k'va UNIT PRICE ExTENDED AMOUNT 1 (Continued from previous page) $11337310. $11,337,310 00 .00 16 each T1622-676 Hexagon head screw galvanized $5.00 $80.00 2 each A0721170- Paste lubricant $137.00 $274.00 185 2 each A4431160- Teflon band $2.00- $4.00 63 2 each W6861110 Wire brush $4.00 $8.00 -3 2 each A1551160- Masking tape $4.00 $8.00 12 2 each A1551160- Tape $13.00 $26.00 14 2 each A606EO75 Electrical tape $3.00 $6.00 4113 8 each T6815-802 Coupling d 8, 1/4 npt $6.00 $48.00 8 each 1852417-1 Nipple $28.00 $224.00 6 each 1852416-1 Adapter M12 x 1,5-R1I4" $31.00 $186.00 Page 18 of 20 (Continued on next page) SubTotal: $11,338,174.00 Tax: Shipping: SCHEDULED DELIVERY DATE: Total: * IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. !;! it I,.. V iereby certify that the above items are necessary for the operation of This Department Department Head or Authorized Person FOR :PURCHASING DEPAATMENI`.USE ONLY ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER n rr.n nr��r�r-rn r- CITE OF VERNON, CALIFORNIA PURCHASE RE019SITION LIGHT & PdwR LIP No. 4 9 j 5 DEPARTMENT: REQUESTOR NAME: DATE: 1/16/2007 SUGGESTED VENDOR: PHONE NO.: ( 60090-5000 -- SIEMENS - VENDOR ADDRESS: FAX B: CONTACT PERSON: REQUIRED DELIVERY OR SERVICE DATE: DELIVERY OR SERVICE LOCATION: 4963 SOTO ST. ACCOUNT NO.: ITEMS BUDGETED YES x NO QUAM fiY: t"T OF "UE; I" DESCRIPTION 'k e{` tl s .:. UNIT PRICE EX EhIDEtl AtNOUt T. 1 (Continued from previous page) $11338174. $11,338,174 00 .00 6 each 2035928-6 Quick goupling male $107.00 $642.00 6 each 2035929-2 Adapter female -male, E10P-NPT $29.00 $174.00 6 each T3725-179 Gasket $2.00 $12.00 50 each 1CSA8386- Teflon hose 1 $5.0 $250.00 50 each 1CSA8253- Spring $3.0 $150.00 1 40 each T6102-101 Union nut $1.0c $40.00 40 each, 70005795- Adapter $39.0 $1,560.00 B 8 each A6831260- Sycotest C5 Cleaner Dangerous Goods $25.0 $200.00 4 10 each A1551170- Rust oil WD 40 Dangerous Goods $21.0 $210.00 68 8 each A6831260- BycotestRP20 Penetr, coloured Dangerous $25.0 $200.00 2 Page 19 of 20 (Continued on next page) SubTotal $11,341,612.00 Tax Shipping. SCHEDULED DELIVERY DATE: Total: IF ITEMS ARE NOT BUDGETED, EXPLAIN NATURE OF REQUEST BELOW, OR SUBMIT MEMORANDUM. 1 hereby ter ity that the above items are necessary for the operation of this Department Department Head or Authorized Person FOR PURCHASING DEPARTMENT USEON ISSUED BY DATE RECEIVED BY DATE PURCHASE ORDER NUMBER I1FP�pT11AGAIT CII C �R{ i F lATY 011-1, VtlAf*-N k YirnnnCA9a PLEASE INVOICE IN DUPLIC � h o " $ � i r Y (Ir t l l •.(Jiv • I'I'I.t 1i Lol IA. Lk I IAVI , I-. I I I F' `i , ' t, :- 1 B 07 2007 T • r, ,i. r - .. ..,.., O ATTN: - BY R� FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED BELOW. _ _ WAREHOUIISE CLOSED ON FfUDA_Y_ S DEPARTMENT^ I REQUISITION NO DELIVERY DATE I TERMS ' PLU9 FREIGHT F.O.B. 1 ITEM NO. QUANTITY ORDERED- - UNIT ISSUE - STOCK NO: DESCRIPTION OTY. REC'D TAX UNIT PRICE EXTENDED AMOUNT E0i i'. r-; .'t. '..,. .:4:^�. .. .. ls. ... .3r.;1• -r-jai?�, t J s_t;'.: 'I- :I .."r ° �'..'�t. r. s. 1'.. ... , _ 1 i .':I..; l I.Ji: �. •�Vt �f1:., •;',�i ,.. Y i:.:•lY.� .. -.- si ,1 •, i 1.� �'..rr 1f...':',',.' _.._' l:girl{f.'1•.�' S'`iif„t'i':.i<.r i t... j.�:....ia `i�: i`. �•F i - .:J�. }._�?I, 1", r•r,. .l'7E:.,'!' { V--I I4. (S�—'�i .r �. ! E. t , tf ;! 1 i`s n.-t.Ci.�i l,r t,'... .,..J� '1•.iJ Fr s ... ,rf;.; =`i::.''s�. CONFIRMING ORDER: - ACCOUNT NUMBER PROJECT AMOUNT T CITY OF VERNON, CALIFORNIA PAYMENT APPROVED DEPT HEAD OR AUTHORIZED REPRESENTATIVE DATE PURCHASING AGENT I+pA 'i/ '($ PLEASE INVOICE IN DUPLIC iNP F'- I Y i '.. v 1 K L I. -C 1a .f�1. �i 1 r i I- .. A%I Ni i'I:I:If ..i j . I e. j � f 1� 1� 1» ��� :. , • 1 5t t �1 i?f !''11 1 _ -,' 1LV�.A�J(.I#'�`,�wrt'+ . •7 r l30S �IMr I'e Awnuc Yornon, (.:A )S►OiR _� '�,ti , .. ,t- .rr•�•',�:r.. Yi M •itl ,I \ + !f t r_�i. i•i! I Fi 1 ; � ':; , 7 . I ' 43',j • I ",� V[N00RNO.:I I, .. 1 P •. a "I I,r 1 r R T•.II ,. O ATTN:' N•i! t i.is,'P-i• a ,,if., D •': ?'.' Idt'i"r"'1 i':'•i[.?lri'ai"! i�;:a'! is S FOB VERNON, CALIFORNIA UNLIESS OT`;E-.RWISE_SPECIF;ED FIELO'.N. y s. I WARE410USE..: .O S _ii ON FRIDAYS DEPARTMENT REOUtSIT... N0. DELIVERY DATE i TERMS - PLUS FREIGHT '- .____-------_--............�_.....___....____ ___..:...- -- ITEM NO. GUANTITY ORDERED UNIT ISSUE 9TOCKNO. DE�'CRIPTION OTY. REC'D TAX UNIT -PRICE EXTENDED AMOUNT Cw .'.,:' .Fl. ! I F t . r. _ .,.... •., ... .. ._ T.I. v... _ .. ..�.,i ..?,{.,. l .. ..:..E :e.. �('.i i^. •.. '(".�: f�il.� .'�Y'f-l'4. .:1� 7:,\ �:i .. .. .Di:'t. l4tit{`•; •I'I' '...i .. _ 'Lj..r .. ..l :IF,l ... ,:Ii , !_if /' S \. �4 .\,!• `•"Art 7r.(;' 1.1 .. .: .'v.: CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT �0& a CITY OF VERNON, CALIFORNIA PAYMENT APPROVED DEPT. HEAD OR AUTHORIZED ... �. �.. ....� i•. i•. �.♦ �I�•1 A •'1 r-TI fr,wl •f•/"� n11��1 Iw.+,•.n �r�T PURCHASING ATE SENiAYtVR� i w + ;E i,..tN.i�raS ki �y� 4} Ly 'a `{ ti 1 A (; 1. T 8-' I r(AV I?ITt {E � a 430S Siou Fe Awnue • Vemon, CA 90058 dw I OATS 1 i 0el/ 0 ! VENDOR NO V •.1 f ;: i,'.: I I.•S i`fi`8l'i I.i::a. i'vr'}!. N p •:;. rl ,) nii'f .1 1 ji l,f '.•il"ri'i �,`.rrr'r q�lt=;}'iFi.I;tl1i. 1'•!t:hi [_.F }:, t.'.....,_._.. • PLEASE INVOICE IN DUPLIC ' I UI VE W,:O 1 141 1 i!- S f , I I: �l I - I;I., l I tt J!.lhk�l 1 �U IZt i I"� No 5 '' 97 HI ,t r .,I ;-1 > i (A': I • T •, , O ATTN: 71 FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED BELOW. DEPARTMENT REQUISITION NO. WARiEHOUSE CLOSED ON FRIDAYS DELIVERY DATE r TERMS r PLUS FREIGHT F.O.B. c htf t ; ITEM 'NO. QUANTITY ORDERED UNIT ISSUE STOCK NO - - OE3CRIPTION , ATY. REC'D TA)( UNIT PRICE EXTENDED. AMOUNT - r'.i. r— �. i1. f, t�i`.4:. I'}i'9 ,;i iF:l•; f,a i, _. Cf., I E .. � /� :1)s, l . f.11-k: 1.} i aiia}'; •;,'.. I t"- . I't� ,. � %�:: !:..i, �,_'1 ... ''i i 01','S"lz 17. T 1<T!.i `,t''}_ s.:i:^i ii .,_ "; .. .. '.' fr :r ,• F.:.. �1".iL-'i: a�'. l..i�rM': u:1S•;'=;S••_:!;' -.':. •',:'r `i ,.1�' i::F'', _�I _`. ':c,. =i i> ,. j�;;,a=1:f_ 7: : +l.;i�!r y. 1 ;'>•� ::,I.;• +..13 i..0 II 1", J)!-,: les.F_ f c ,4 E E'a . d}i-nL+ f E '1'.: L c ,', . t? c•r:"Ii_ .i'�i: C'.i�', .-.'..L.".i L ,_;i.r' 1': _ s..ii��,.-;H��'r•: _.0 .. ;�1:�t_�.- -i , l.!:'i.f _'>� : ! !:' 1 ,''t :i. ''• ' . a !:R IN' I 'IFS !, o _ f`—r .. tit... e ! i.' ._ r.�i..d:..�., 5°:.1` '={ � I',i l:: .} -, ,. .. .`:1':' ' :,t •_yt' . t,tii} F.? NeCi ic 00 • r_. .... ;,. . ,::.1 �,, •,.. 1 •':' L.. t.tl.'�:. �'li�?'_���i'Y''. �'(.}:..'�r-1) .. Ia4;,r ;l i{. ..'.� ... .1 ``, I yli•iY.` 1`.. I 1e'4.. 1', +I+:f ;;'..ell f ' ' 1 CONFIRMING ORDER: F `I , CITY OF VERNON, CALIFORNIA ACCOUNT NUMBER' PROJECT AMOUNT - - PAYMENT APPROVED BY:: DATE'.,::., - DEPT, HEAD OR AUTHORIZED REPRE9fMhjJj _ �' PURCHASINO AUNT C F IT OF 1:40S Santa Fe Avenue • Vernun, CA 90058 iJz1) SN�•NNI VENDOR NO.:,' I ` .... ........ PLEASE INVOICE IN DUPLIC?., ,tom I et-- CI+1 S i lac.' I�t�_,r,t .eJ�u{'�: ��-� 2 — c i. ". •���i N•'lil ;"A: I • ' i 3:I.. .:i:.I IfQV I ATTN: 7 D•'. '4:. a i3 ,•e...l .#. i•Ii=:2 f#.'`.i .-%i� 1 R ... . FOB VERNON, CALIFORNIA UNLESS OTHERWISE. SPECIFiEf3 CiEl. JJ? %'A. ? HC1E.F" i CLOSE[) Ci?d 'ii7At S DEPARTMENT ' REQUISITION NO. DELIVERY DATE r TERMS PLUS FREIGHT F.O.B. 1.. 1 CiF•Il' .. €� i.'l''1: ;.: ,. _ I, a is ITEM NO, WANTITY ORDERED UNIT ISSUE STOCK NO. DESCRIPTION OTM' REC'D TAX - UNIT PRICE EXTENDED AMOUNT ' Ii i� .�.f� '� - fi.,✓, t•3::.y c^•• I 'I'-. .iti,l :,ri .I�;r+r;.,,t i� r•t, � I Ir4i . � r + C :._ .. .a.ri„ - . . i 7 r': r: i'i -r �r t „z�... 1 I . jt; Ir •.,ll�: r.l-tc .i-` , I � tSi.. _I,. :. ' _' li , , .. _ 'ii i ,.I" �-.�l ,.. �.t, -I '.I .. t... �._ tIII: ': !.f r+.'•' "�.':-i- 1'eT !•: 1•> i _ .. � . -.. �`+.' .'' ':';(s ..'1 _. L., �:i.i �.. ,: _ �_: i::.9e1_t�•�`.' ,�'.�7�11_ iY-�. .... r!' :. ..t .. :1 , _,I I[. t .t i r_ ifij' ,•F..:•':{'; �..i`<I }Ir t7 .. '. E'.1 ... '-R :..'_t•:r'. _-•.t i�. ...i r,it ilia r'1htt ,. is 1'3;'-j'I'•1 r,`• ..� .:i :7 i.ic Sf• }, .. I:. .� _._.r;:.. jt.,s_, ,c:•{._•:CIS < -;t_: ,ri 5. .. I:.•' .. . -. �:. 1 r1-�Y.. s ., ft.:-r } l.'i.. 2. 4: II .. ". ' .. ..I:-. : CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY% DATE DEPT. HEAD OR AUTHORIZED REPRESENTATIVIII:. - k I F � pp 4 •••.�rt33-' r s- .+�.. �.. ....r. nnrnr n,r.•ro nrTl in�r 7n nl rn/+s rnnr�rn nrn-r � -• � .. CITY OF VE m 1,1(;l IT & 110WIT -4305 &nim Fe Avenue 0 Vernon, (A 90058 � 0 N( 6 /r VENDOR 0.:. PLEASE INVOICE IN DUPLIC 'I'M da �i';M W', 1:11AVEN) •F.VIANON-f-CA VVIVOi LP No 5 H P T 0 ATTN: FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED BELOW. DEPARTMENT -- I REOUISITION NO. DATE WAREHOUSfz CLOSED ON FRIDAYS AS I;c HT 77 F.O.S. .. .... - --------- ... . ........ . . . . ........... ...... ftM I'DESCRIPTION NO.. QUANTITY ORDERED UNIT ISSUE ) STOCK NO; 1, ESCnlPTlON aFY. REC'D TAX UNIT PRICE EXTENDED AMOUNT ut ea rl fA A 2, Y'l A, u 14. 'I 4.t 1 ALI- t '11—f P, t -'i t-'6i k 1. 5%;k 6! +`)'v i. '4 2, L. ��L'.)VE r (IJ. i.:' ;tli K1, ';' F A0 kN Ov.".." CA CONFIRMING ORDER: ACCOUNT NUMBER: ---'FROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY;: DATE DEPT. HEAD OR AUTHORIZED REPRE8ENT T"I PURCHASING A(WNT, Ot w 61A 1 .1 ( I F F �., P )"Ni I "ll �k, k� s 111345 Sonts k Avainc * Vinson, CA 90058 (313) SA3-0811 V E j.:3 • 0 R PLEASE INVOICE IN DUPLIC*: s H p T 0 A F06 VERNON, CALIFORNIA UNLESS OTHERWISE F5PLcimDerLovi. WARE�HOIJST CLOSEO ON FRInKYS ...... . .. .. ... . ..... .. .. .. ..... REQUISITION ,_,-, ' -N'O'-. DELIVERY DATE TERMS -PLUS -_FREIGHT ... ..... .. ... . ... ........ .. .... ....... . . .. .. ........ . .. . . ...... ITEM M NO. O UANTITY ORDERED UNITSSUE I STOCK NO. DESCRIPTION REOTY. O CT TAX UNIT PRICE EXTENDEDAMOUNT 13 -4 1 f 1 0 t 1, If I jo T I A: P It tA. fl ? N. 59::•its ,c CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT APPROVED BY:: -DATE DEPT. HEAD OR AUTHORIZED REPRESENTAINC, o6 7 RAT A. PURCHASING AGE I C -l"YOF"VER' N Y 11(M 1.11 vg.q 4305,Santi Fe Avenue a Vernon, CA 90058 1 023) 583-811111 CpAi/l,l�-', r ��➢ i r r°T VINDOR NO.t I : '. , : ' _ _-__._..J E I I N ........... PLEASE INVOICE IN DUPLIC W.,: . 'a H P T 0 ATTN': FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED BELOw. "WARIEKOUSE- CLOSED ON FRIDA'I'S . ............ -bEPAi;�TMENT I REQUISITION NO. DELIVERY DATE TERMS PLUS FREIGHT F.O.B. . ...... ... ..... ...... . ....... . . . .............. ......... . ... . .... ...... . .. .... .. . .... ......... ......... . . ..... ... (ITEM I NO. QUANTITY ORDERED JUNIT SSUE STOCK NO. DESCRIPTION an FIEC'D TAX UNIT PRICE EXTENDED AMOUNT 2 L W 34 7 3! % CONFIRMING ORDER: I J ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT BY:; DATE DEPT. HEAD 08 AUTHORIZED REPAESENIVATIVU DATA PURCHASING AGENT 111-YOF"VEM., .'N 1R'11T& 11OW111t i" .4305 Santa rc Avenue v Vernon, CA 90058 (323)583.8811 ATE" VENDOR NO.:.: E N D R, PLEASE INVOICE, IN DUPLIC 4, =iuu IT m, A P 0 ATTN: FOB VERNON, CALIFORNIA UNLESS OTHERWISE SPECIFIED 13 E I. (AY. WAREHOUSE C',GSED 014 FRIDAYS DEPARTMENT I REQUISITION NO. DELIVERY DATE TERMS PLUS FREIGHT F.O.G. .... .. ....... ... .. . ................ . . . - ------- -- - . . . .. . . .. ..... ................. ........... . . ...... ... . ..... .... . . ...... ..... ......... . ITEM 1 1, 'TY J QUANTITY DEFIED UNIT ISSUE STOCK NO. DESCRIPTION OTY. RECIO TAX UNIT PRICE EXTENDED AMOUNT 2- NV�3K I :Di I.: uotxrf, 1;.w', ".1 -p 41 2, C3 Cd. 13 r K- �W SPO 4" fWtp.l�`TUR 1, ?3 1,7;0 F SS cf 14,14,1 01i, W 1 1 41 �l 0 GQi 001"I"t" CONFIRMING ORDER: CITY OF VERNON, CALIFORNIA PAYMENT APPROVE BY;: DATE DEPT. HEAD OR AUTHORIZED REPRESENTATIV0.0 PURCHASING AGON17 6305 Santa Fc Avcnuc - Vernon, CA 90058 (323).SH3481 1 VENDOR NO.: v IN 0 o J: R PLEASE INVOICE IN IDLIPLICMMO: ME �A S H I • P T 0 ATTN: FOB VERNON, CALIFORNIA UNLESS OTHERWIS,' SPECIFIED BRI-016'. . ....... ...... .. . ------- .. ..... . .. . .................. . .. .. . . . ............. . ..... DEPARTMENT REQUISITION NO, DELIVERY DATE . . . . . . ................ ........ .... .. ...... ..... .... ... .... .... . .... .. ......... ......... ... .. . ........ . . .......... ......... . - V� . ...... . .... . ... .... . ......... TERMS PLUS FREIGHT F.O.B. ............... ITEM NO, QUANTITY ORDERED UNIT ISSUE STOCK NO. DESCRIPTION OTY. REC-D TAX UNIT PRICE EXTENDED AMOUNT CONFIRMING ORDER: ACCOUNT NUMBER PROJECT AMOUNT CITY OF VERNON, CALIFORNIA PAYMENT APPROVED - BY:: -DATE DEPT HEAD OR AUTHORIZED REPRESENTATIVE DATE PURCHASING AGENT y� � I ��� �� Schedule 3.1(a) Purchaser Required Governmental Approvals l . Authorization by the FERC pursuant to Section 203 of the Federal Power Act of Purchaser's acquisition of the Malburg Generating Station. 2. Authorization from the FERC pursuant to Section 205 of the Federal Power Act to sell capacity, energy and ancillary services at market -based rates. 3. Issuance by the South Coast Air Quality Management District of a South Coast Air Quality Management District RECLAIM/Title V Facility Permit — Facility ID 14502 to/in the name of Purchaser for Malburg Generating Station air emissions equipment. 4. Approval by the FCC of Purchaser's application(s) to transfer Radio Station Authorization effective as of February 15, 2006. 5. Approval from the California Energy Commission ("CEC").to transfer ownership of the Malburg Generating Station to Purchaser, pursuant to the CEC's May 2003 Certification of the Malburg Generating Station and Section 1769(b) of the CEC's Power Plant Site Certificate Regulations, l In addition to Purchaser Required Governmental Approvals, Purchaser is required to provide notice with respect to the following permits: Industrial Wastewater Discharge Permit No. 16237. 2. Notice of Intent (NOI) for coverage under General Permit No. CAS000001 (Discharges of Storm Water Associated with Industrial Activities Excluding Construction Activities). 1 The approval from the CEC to transfer ownership of the Malburg Generating Station to Purchaser may be obtained post closing. 3.1(a) Schedule Required Consents MALBURG GENERATING STATION Vernon Agreement between City of Vernon and NALCO Company, dated I NALCO Company September 5, 2006 Ammonia Delivery Purchase Contract between Vernon and Hill Brothers Chemical Company dated December 3, 2004 Hill Brothers Chemical Company Amendment to Ammonia Delivery Purchase Contract between Vernon and Hill Brothers Chemical Company dated August 28, 2006 3.1(b)-1 Schedule 3.1(k) Performance. Criteria NOTE: When using this table, the results should be adjusted to reflect the expected performance degradation of the Facility based upon the Equivalent Operating Hours (as that term is defined in the LTSA) as of the PTC 46 test date. The Corrected net power values shall be within 98% +1%/-2% and adjusted to the Siemens new and clean guarantee conditions as set forth in the performance guarantee test procedures. Corrected Net Power with Uncertainty Applied 134 MW (duct firing) Corrected Net Power with Uncertainty Applied 120 MW (base) 3.1(k)-1 Schedule 4.1(c) Seller Required Governmental Approvals City Approval 2. Issuance by the South Coast Air Quality Management District of a South Coast Air Quality Management District RECLAIM/Title V Facility Permit — Facility ID 14502 to/in the name of Purchaser for City of Vernon air emissions equipment. In addition to Seller Required Governmental Approvals, Seller is required to provide notice with respect to the following permit: 1. Notice of Intent (NOI) for coverage under General Permit No. CAS000001 (Discharges of Storm Water Associated with Industrial Activities Excluding Construction Activities). 5.1(c)-1 �; C .�' i �'A� ,1 \ � � �`! � t ti�J' � \ � `. ��f e l r �.. Ja: i i ,.� C i �_ ,�' c ,` S„ � \.�� Schedule 5.1(e) Financial Statements [Separately provided] 5.1(e)-1 Schedule 5.1(d) Seller Required Other Consents, Approvals and Notices l . Seller to provide notice to Thomason Mechanical Corporation Services of assignment to Purchaser of Agreement between Vernon and Thomason Mechanical Corporation, dated March, 2006, as amended by First Amendment to Services Agreement between Vernon and Thomason Mechanical Corporation, dated July, 2006 and Second Amendment to Services Agreement between Vernon and Wood Group Field Services, Inc. (FKA Thomason Mechanical Corporation), dated October 4, 2006. 5.1(d)-1 o In the current year, program expenses of the general government increased $6,276,338 from the prior year. The key components of the increases were as follows: • Administration costs increased $1,050,749 from the prior year due to an administrative reorganization, legal and consultant fees and the installation of 9- 11 security measures, including personnel, at the City's new power plant facility. • Finance costs increased $1,058,715 from the prior year due to the additional consulting cost related with the implementation of a new finance system. ■ Insurance costs increased $956,965 from the prior year due to additional property being insured. • Legal costs increased $1,001,928 from the prior year due to various legal matters of the City. ■ Personnel costs related to the City Clerk, Elections, Treasurer, and Personnel increased in total $1,068,848 from the prior year due management reorganization and various legal matters of the City. • The City earned a higher return on its investments as compared to the prior year due to additional debt proceeds invested in the current year. However, this higher return was offset with the higher interest expense associated with the debt. Expenses and Program Revenues - Governmental Activities For the Fiscal Years Ended June 30, 2006 and 2005 $24,000,000 $20,000,000 $16,000,000 $12,000,000 $8,000,000 $4,000,000 $0 E W, V. ���Ge, 5a �e � � �O �.�o roc -6 02006 Program Revenues OM 2006 Expenses ❑ 2005 Program Revenues ❑ 2005 Expenses Revenues by Source — Governmental Activities For the Fiscal Years Ended June 30, 2006 and 2005 Charges for Services 31% Property Taxes 20% -7- 2005 Governmental Activities Revenues Transfers - - 67 &? b Charges for Services E M1O% _ Other Taxes & Revenues Property Taxes 4% 7% Franchise Taxes Sales and Use Taxes toy 4% Parcel Taxes 7/ Business -type activities. Business -type activities decreased the City's net assets by $14,523,634 before transfers. The key reasons for this decrease and change in net assets are as follows: • Light and Power's operating revenue was $132,565,018 for the current year which is $22,080,123 higher than the previous year. This increase in revenue was mainly due to the Malburg Generating Station becoming operational on October 17, 2005. However, the cost of sales was $127,551,769 which is $38,959,701 higher than the previous year. The increase in cost of sales was mainly due to the unfavorable cost of fuel and wholesale energy market. • Light and Power's depreciation expense was $7,203,894 for the current year which is $2,972,874 higher than the previous year. This increase was due to the Malburg Generating Station becoming operational on October 17, 2005. • Light and Power's interest expense was $9,179,326 for the current year which is $7,868,491 higher than the previous year. The main reason for this increase is that the interest expense related to the Light and Power 2004 Taxable Series A, Series B, and Series C Bonds are no longer being capitalized since October 17, 2005 when Malburg Generating Station became operational. • Light and Power's net legal settlement loss was $5,257,580 for the current year. In July 2006, Light and Power settled a dispute over wholesale power purchase contracts with Mirant Americas Energy Marketing, LP for incurring a loss of $15,000,000, and in November 2006, Light and Power settled a dispute over contract obligations with its former electric distribution system maintenance provider, Resource Management International, Inc:, for a gain of $7,400,000. • The Gas Fund became operational in the current year with its main customer being the Light and Power Fund. The Gas Fund generated operating revenue of $36,509,697 with a cost of sales of $36,671,275. Services were provided primarily to the Light &'Power fund. -8- Expenses and Program Revenues —Business-type Activities For the Fiscal Years Ended June 30, 2006 and 2005 $160,000,000 $140,000,000 ,P Revenues by Source — Business -type Activities For the Fiscal Years Ended June 30, 2006 and 2005 2006 Business -type Activities Revenues 2005 Business -type Activities Revenues Investment Investment Earnings Earnings 1 ado 4% Program Program Revenues Revenues 99% 96% Financial Analysis of the Governmental Funds As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance - related legal requirements. Governmental funds. The focus of the City's governmental funds is to provide information on near -term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City's financing requirements. In particular, unreserved find balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. -9- At of the end of the current fiscal year, the City's governmental funds reported combined ending fund balances of $59,741,236, a decrease of $4,554,758 in comparison with the prior year. Approximately 21% of total fund balance amount, $12,808,623, constitutes unreserved fund balance, which is available for spending at the City's discretion. The remainder of fund balance, $46,932,613, is reserved to indicate that it is not available for newspendingbecause it has already been committed 1) to; liquidate contracts and purchase orders of the current period ($1,812,002), 2) advances and loans receivable in the event of a default by other funds ($4,975,646), 3) to be used for debt service ($2,984,715), 4) to be used for special purpose ($36,007,050), and 5) fora variety of other purposes ($1,153,200). The General Fund is the operating fund of the City. At the end of the current fiscal year, the total fund . balance was $20,960,762 of which $14,019,385 (67%) is unreserved. Proprietary funds. The City's proprietary funds provide the same type of information found in the government -wide financial statements, but in more detail. Unrestricted net assets for the Light and Power Fund at the end of the year amounted to $69,763,390. Unrestricted net assets of the Gas Fund at the end of the year amounted to a deficit of $27,725,222. Unrestricted net assets of the non -major enterprise funds (Water and Fiber Optic Funds) amounted to a deficit of $477,760. This deficit balance in unrestricted net assets for the Gas Fund is primarily due to the Gas Fund heavily invested in capital assets for which it has not yet recovered the cost of capital invested. The natural gas lines are currently operational and the Gas Fund expects to eliminate this deficit balance through increased revenues from customers on future gas sales, including the Light & Power fund. Total increase(decrease) in net assets for the Light and Power Fund, Gas Fund, and the non -major enterprise funds was $7,027,023, ($444,000), and $338,947, respectively. Other factors concerning the finances of these funds have already been addressed in the discussion of the City's business -type activities. Governmental Funds Budgetary Highlights For the current year, the City's original and final budget for general fundexpenditures was $46,456,421. The General Fund's total variance' between the final budgeted amount and actual amount was $6,530,042. The key reason for this variance was excess expenditures over appropriations for capital outlay expenditures of $7,274,739 incurred by the City in its current industrial development programs. The excess expenditures over appropriations in the general government were $6,338,061. However, these excess expenditures over appropriations were offset by the under expenditures of $3,615,057-in public safety and $3205,155 in public works. Capital Asset and Debt Administration Capital assets. The City's investment in capital assets for its governmental and business -type activities as of June 30, 2006, amounts to $405,636,628 (net of accumulated depreciation). This investment in capital assets includes land, buildings, utilities system improvements, machinery and equipment, and infrastructure such as roads. The total increase in the City's investment in capital assets for the current fiscal year was $48,884,943 (net of depreciation). Major capital asset events during the current fiscal year included the following: • Construction on the Malburg Generating Station and City's electric system; construction in progress costs for the fiscal year were $17,836,584. On October 17, 2005, the Malburg Generating Station -10= became operational and its entire construction cost of '$208,352,126 was reclassified from construction in progress to a utility plant in service. • Construction in progress costs related to a variety of construction projects were $36,339,669. • In the current year, the Redevelopment Agency Fund has elected to reclassify $8,401,673 of its land to land held for resale. • As of June 30, 2006, there were no significant construction commitments outstanding. Additional information on the City's capital assets can be found in Note 5 on pages35-37 of this report. Outstanding Debt During the fiscal year 2006, the City issued a total of $480,265,000 in long-term obligations consisting of the following: • $49,420,000 Redevelopment Agency of the City of Vernon Industrial Redevelopment Project Tax Allocation Bonds, 2005 Series • $200,000,000 Vernon Gas Project Variable Rate Revenue Bonds, 2006 Series A $115,440,000 Vernon Gas Project Variable Rate Revenue Bonds, 2006 Series B, and • $115,405,000 Vernon Gas Project Variable Rate Revenue Bonds, 2006 Series C The Industrial Redevelopment Project Tax Allocation Bonds, Series 2005 were issued to provide funds to (i) finance various redevelopment projects in or benefiting the Agency's Industrial Redevelopment Project area, (ii) fund the reserve requirement for the Series 2005 Bonds, and (iii) pay the costs of issuance related to the Series 2005 Bonds. On April 1, 2006, the City and the RDA created the Vernon Natural Gas .Financing Authority (Authority) pursuant to the Joint Powers Agreement, for the express purpose of undertaking projects and programs that promote economic development within the City. Such projects and programs include assisting the City in procuring natural gas for use as fuel for electric generating units that are part of the City's Electric System, which is accounted for in the City's Light and Power fund. During the year ended June 30i 2006, the Authority issued $430,845,000 in variable rate bonds and subsequently purchased natural gas in accordance with the Natural Gas Agreement between the Authority and the City. As a result of this financing arrangement, the debt and related asset (prepaid natural gas) associated with the Authority have been blended with the City's Light and Power fund for financial reporting purposes. Bonds outstanding at June 30, 2006 and issued in the prior year consist of $90,150,000, 2004 Series A, $83,575,000, 2004 Series B, $39,875,000, 2004 Series C, and $61,825,000, 2004 Series D, Electric System Revenue Bonds. The 2004 Bonds were issued to provide funds (i) to refund $162,610,000 of outstanding Electric System Revenue Bonds of the City; (ii) to finance the costs of improvements to the City's substation and distribution facilities and certain costs of completion of the City's Malburg Generating Station (iii) to finance the reimbursement to the City of certain costs incurred in connection with the City's electric system facilities; (iv) to fund a deposit to the Debt Service Reserve Fund; and (v) to pay the costs of issuance of the 2004 Bonds. As of June 30, 2006, all bonds issued by the City, Vernon Redevelopment Agency, and Authority had a. rating of "Aaa" by Moody's. Additional information on the City's long-term debt can be found in Notes 6 and 7 on pages 38-50 of this report. Economic Factors and Next Year's Budgets and Rates These factors were considered in preparing the City's budget for the 2007 fiscal year. • The unemployment rate for the City and adjacent communities is currently 2.2%. This compares favorably to the state's average unemployment rate of 4.9% and the national average rate of 4.6%. • The occupancy rate of the City's central business district has remained at 98% for the current year. • Inflationary trends in the region compare favorably to national indices. Requests for Information This financial report is designed to provide a general overview of the City's finances for all those with an interest in the City's finances. Questions concerning any of the information provided in this report of requests for additional financial information should be addressed to the Office of the Finance Director, 4305 Santa Fe Avenue, Vernon, California 90058. -12- CITV OF VERNON, CALIFORNIA Statement of Net Assets June 30, 2006 Governmental Business -type Activities Activities Total ASSETS: Cash and investments $ 55,722,859 $ 50,806,818 $ 106,529,677 Receivables, net of allowances of $1,400,000 4,317,781 13,852,228 18,170,009 Legal settlement receivable - 7,400,000 7,400,000 Accrued unbilled revenue - 7,737,303 7,737,303 Accrued interest receivable 226,988 1,431,950 1,658,938 , Inventories 773,684 81,480 855,164 Internal balances _ - (21,212,306) 21,212,306 - - Prepaid natural gas 423,374,475 423,374,475 Deposits and prepaid expenses 672,815 471,698 1,144,513 Restricted cash and investments 40,015,669 47,550,737 87,566,406 Note receivable - 4,113,951 4,113,951 Bond issuance costs 2,451,418 13,836,974 16,288,392 Other assets - 16,777,982 16,777,982 Land held for resale 8,401,673 - 8,401,673 Capital assets: Nondepreciable 65,422,758 16,743,478 82,166,236 Depreciable, net 23,920,279 299,550,113 323,470,392 Total assets 180,713,618 924,941,493 1,105,655,111 LIABILITIES: Accounts payable 6,696,563 14,048,501 20,745,064 Accrued wages and benefits 1,397,177 283,574 1,680,751 Customer deposits and funds held for others 261,993 776,754 1,038,747 Unearned revenue 932,844 - 932,944 Long-term liabilities: Due within one year: Legal settlement payable 9,666,667 9,666,667 Bonds payable, net 44,345 3,567,547 3,611,892 Bond interest 663,800 985,445 1,649,245 Claims payable 2,452,858 2,452,858 Compensated absences 928,525 200,168 1,128,693 Due in more than one year: Legal settlement payable 5,333,333 5,333,333 Bonds payable, net 50,277,701 693,422,746 743,700,447 Claims payable 4,905,715 - 4,905,715 Total liabilities 68,561,521 728,284,735 796,846,256 NET ASSETS: Invested in capital assets, net of related debt 81,488,078 124,086,207 205,574,285 - Restricted for: Grants 312,202 - 312,202 Alternative energy - 16,532,956 16,532,856 Debt service 2,984,715 13,742,839 16,727,554 Unrestricted 27,367,102 42,294,856 69,661,958 Total net assets $ 112,152,097 $ 196,656,758 $ 308,808,855 See accompanying notes to the basic financial statements 13- CITY OF VERNON, CALIFORNIA Statement of Activities For the Fiscal Year Ended June 30, 2006 Net (Expenses) Revenues and Program Revenues - Change in Net Assets Operating Business - Charges for Grants and Govemmcntal type - 1'sxpenses Services Contributions Activities Activities Total FUNCTION/PROGRAM ACTIVITIES: Governmental activities: General government S 19,944,193 S 2,450,172 S 290,414 S (17,203,607) S - $ (17,203,607) Public safety 19,613,951 5,008,884 - (14,605,067) - (14,605,067) Public works 5,542,660 2.064,894 - (3,477,766) - (3,477.766) Health services - 1,397,083 1,326,143 - (70,940) - (70,940) Interest on long-term debt 1,724,513 (1,724,513) (1,724.513) Total governmental activities 48,222,400 10,850,093 290,414 (37,081,993) .(37,081,893) Business -type activities: Light and power 149,424,972 132,565,018 (16,959,954) (16,959,954) Gus- - -36,953,697 36,509,697 (444,000) (444,000) Other - .6,010,948 6,536,832 525,884 525,884 Total business -type activities 192,389,617 175,611,547 - .(16,778,070) - (16,778,070) Total .: $ 240,612,017 S 186,461,640 S 290,414 (37,081,893) (16,778,070) (53,859,963) General Revenues: property taxes - 7,270,383 - - 7,270,383 Parcel taxes 7,001,828 7,001,828 Franchise taxes 1,479,619 - - 1,479,619 Business license taxes 1,159,618 - 1,159,618 Other license taxes 109,573 - 109,573 Investment income - 2,631,641 4,128,341 6,759,982 Net decrease in fair value of investments (7,163) (1,873,905) (1,881.068) State contribution - sales and use lazes 4,685,752 - 4,685,752 Gain on sale of property 43,985 43,985 - Otherrcvcnues 406,334 - 406,334 Transfers (21,445,604) 21,445,604 Total general revenues and transfers 3,335,966 - 23,700,040 27,036,006 - Change in net assets (33,745,927) 6,921,970 (26,823,957) NET ASSETS, BEGINNING OF YEAR 145,898,024 189,734,788 335,632,812 NET ASSETS, END OF YEAR S 112,152,097 S 196,656,758 S 308,808,855 See accompanying notes to the basic financial statements. 14_ CITY OF VERNON, CALIFORNIA Balance Sheet Governmental Funds June 30, 2006 Redevelopment Other Total General Agency Governmental Governmental Fund Fund Funds Funds ASSETS: Cash and investments $ 27,136,100 $ 521,925 $ 17,605,525 $ 45,263,550 Receivables 1,424,205 889,126 2,004,450 4,317,781 Accrued interest receivable 9,129 217,859 - 226,988 Advances to other funds 4,975,646 - 4,975,646 Inventories 773,684 773,684 Restricted cash and investments 360,104 39,655,565 40,015,669 Other assets 115,815 557,000 672,815 Land held for resale - 8,401,673 8,401,673 Total assets $ 34,794,683 $ 50,243,148 $ 19,609,975 $ 104,647,806 LIABILITIES AND FUND BALANCES: Liabilities: Accounts payable $ 4,715,489 $ 1,071,149 $ 836,151 $ 6,622,789 Accrued wages and benefits 1,391,554 269 5,355 1,397,177 Advances from other funds - 16,860 19,739,433 19,756,293 Due to other funds 6,314,779 8,665 34,100 6,357,544 Customer deposits and funds held for others 261,993 - - 261,993 Deferred revenue 1,150,106 8,401,673 958,995 10,510,774 Total liabilities 13,833,921 9,498,615 21,574,034 44,906,570 Fund balances: Reserved for: Federal forfeiture funds 312,202 - 312,202 Advances to other funds 4,975,646 - 4,975,646 Inventories 773,684 - - 773,684 Encumbrances 812,531 806,742 192,729 1,812,002 Employee loans receivable 67,314 - - 67,314 Debt service - 2,984,715 - 2,984,715 Redevelopment projects - 36,607,050 - 36,007,050 Unreserved 14,019,385 946,026 - 14,965,411 Unreserved, reported in nonmajor: Special revenue funds - 15,528,565 15,528,565 Capital projects funds - (17,685,353) (17,685,353) Total fund balances 20,960,762 40,744,533 (1,964,059) 59,741,236 Total liabilities and fund balances $ 34,794,683 $ 50,243,148 $ 19,609,975 $ 104,647,806 See accompanying notes to the basic financial statements. -15- CITY OF VERNON, CALIFORNIA Reconciliation of the Governmental Funds Balance Sheet to Statement of Net Assets -Governmental Activities June 30, 2006 Fund balances - total governmental funds (page 15) $ 59,741,236 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the governmental funds. 89,343,037 Because the focus of governmental funds is on short-term financing, some assets will not be available to pay for current period expenditures. Those assets are offset by deferred revenue in the governmental funds. 8,401,673 Other assets used in governmental activities do not consume current financial resources and therefore are not reported in the governmental fund, Unamortized bond issuance costs 2,451,418 Compensated absences are not due and payable in the current period and therefore, are not reported in the funds. (928,525) Internal service funds are used by management to charge the costs of employee benefits for health insurance, workers compensation, etc., to individual funds. The assets and liabilities of these funds are included in governmental activities in the statement of net assets 2,952,947 Long-term liabilities are not due and payable in the current period and therefore are not reported in the governmental fund. Bonds payable (49,420,000) Bond interest payable (663,800) Unamortized bond premium (902,046) The City recognized uncollected property taxes that were earned but unavailable as of June 30, 2006. 1,176,257 Net assets of governmental activities (page 13) $ 112,152,097 See accompanying notes to the basic financial statements. - 16. CITY OF VERNON, CALIFORNIA Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Fiscal Year Ended June 30, 2006 Redevelopment Other Total General Agency Governmental Governmental Fund Fund Funds Funds REVENUES: 'faxes $ 8,943,668 $ 6,469,211 $ 6,509,334 $ 21,922,213 Special assessments 736,221 - - 736,221 Licenses and permits 1,161,188 518,260 1,679,448 Fincs, forfeitures and penalties 1.88,988 - - 188,988 Investment income 1,725,347 906,066 228 2,631,641 Net (decrease) increase in fair value of investments (24,546) 17,383 - (7,163) Intergovernmental revenues 290,414 - 290,414 Charges for services to enterprise funds 8,674,077 9,674,077 Other revenues 697,254 118,780 383,878 1,199,912 Total revenues 22,392,611 7,511,440 7,411,700 37,315,751 EXPENDITURES: General government 15,754,912 556,609 197,604 16,509,125 Public safety 18,657,690 - 71,585 18,729,275 Public works 5,010,187 282,475 5,292,662 Health services 1,246,963 - 87,106 1,334,069 Capital outlay 11,504,180 3,595,389 13,406,141 28,505,710 Interest on advances - 213,603 - 213,603 Interest on bonds 878,522 878,522 Bond issuance cost - 2,536,782 - 2,536,782 Total expenditures 52,173,932'' 7,780,905 14,044,911 73,999,748 Deficiency ofrevenucs under expenditures (29,781,321) (269,465) (6,633,211) (36,683,997) Other financing sources (uses): Sale of land - 3,267,400 3,267,400 Sale of property 43,985 - 43,985 Proceeds from long-term debt - 49,420,000 49,420,000 Bond premium - 933,458 - 933,458 Transfers in 2,975,870 - 624,824 3,600,694 Transfers out (24,511,474) (624,824) (25,136,298) Total other financing sources (uses) (21,491,619) 52,996,034 624,824 32,129,239 NET CHANGE IN FUND BALANCES (51,272,940) 52,726,569 (6,008,387) (4,554,758) FUND BALANCES, BEGINNING OF YEAR 72,233,702 (11,982,036) 4,044,328 64,295,994 FUND BALANCES, END OF YEAR $ 20,960,762 $ 40,744,533 $ (1,964,059) $ 59,741,236 See accompanying notes to the basic financial statements. -17- CITY OF VERNON, CALIFORNIA Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities - Governmental Activities For the Fiscal Year Ended June 30, 2006 Net change in fund balances - total. governmental funds (page 17) $ (4,554,758) Amounts reported for. governmental activities in the statement of activities are different because: Expenditures for capital assets $ 28,505,710 Less current year depreciation (2,092,732) 26,412,978 Change in long-term compensated absences 16,243 The effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to decrease net assets. Sale of and loss on capital assets (3,282,440) Internal service funds are used by management to charge the costs of certain activities to individual funds. The net loss of the internal service funds is reported with governmental activities.: (2,349,622) Other assets used in governmental activities do not consume current financial resources and therefore, are not reported in the governmental fund: Unamortized bond issuance costs 2,451,418 Long-term debt proceeds provide current financial resources to governmental funds, but issuing debt increases long -tern liabilities in the statement of net assets. Accrued interest expense on bond payable (663,800) Bond issuance (49,420,000) Unamortized bond premium (902,046) Revenue timing differences result in less revenue in government -wide statements. (1,453,900) Change in net assets of governmental activities (page 14) $ (33,745,927) See accompanying notes to the basic financial statements. -l8 CITY OF VERNON, CALIFORNIA Statement of Fund Net Assets (Deficit) Proprietary Funds June 30, 2006 Business -type Governmental Activities Activities - Enterprise.Funds Internal Light and Power Other Service Fund Gas Fund Enterprise Funds Totals Funds ASSETS: Current assets: Cash and investments S 43,415,460 S 829,395 $ 6,561,963 S 50,806,818 S 10,459,309 Receivable, net ofallowances ofS1,400,000 13,775,644 - 76,584 13,852,228 - Legal settlement receivable 7,400,000 - 7,400,000 Accrued unbillcd revenue 7,318,063 419,240 7,737,303 Accrued interest receivable 1,431,950 1,431,950 Bond issuance costs 232,403 232,403 Due from other funds 6,760,148 - 6,760,148 - Inventories 81,480 81,480 Prepaid natural gas 423,374,475 423,3.74,475 Deposits and prepaid expenses 471,699 471,699 Restricted cash and investments 31,017,881 31,017,881 Other assets 16,777,982 16,177,982 Total current assets 552,057,184 829,395 7,057,787 559,944,366 10,459,309 Noncurrent assets: Restricted cash and investments 16,532,856 16,532,856 Advances to other funds 45,307,418 45,307,418 Note receivable 4,113,951 4,113,951 Bond issuance costs 13,604,571 - 13,604,571 Capital assets: Nondepreciablc 13,580,995 - 3,162,483 16,743,478 Depreciable, net 273,342,132 21,200,011 5,007,970 299,550,113 Total noncurrent assets 366,481,923 21,200,011 8,170,453 395,852,387 Total assets 918,539,107 22,029,406 15,228,240 955,796,753 10,459,309 LIABILITIES: Accounts payable 9,344,599 3,322,164 1,381,738 14,048,501 73,774 Accrued wages and benefits 214,296 5,970 63,308 283,574 - Customer deposits 372,276 - 404,478 776,754 - Due to other funds - 328,489 328,489 74,115 Long-term liabilities: Due within one year. Claims payable 2,452,859 Legal settlement payable 9,666,667 9,666,667 - Bonds payable, net 3,567,547 3,567,547 Bond interest 985,445 985,445 Compensated absences 142,922 1,569 55,677 200,168 Total current liabilities 24,293,752 3,329,703 2,233,690 29,857,145 2,600,747. Due in more than one year: Claims payable - 4,905,715 Advances from other funds 25,224,914 5,301,857 30,526,771 Legal settlement payable 5,333,333 - - 5,333,333 - Bonds payable, net 693,422,746 693,422,746 - Total noncurrent liabilities 698,756,079 25,224,914 5,301,857 729,292,850 4,905,715 Total liabilities 723,049,831 28,554,617 7,535,547 759,139,995 7,506,462 NET ASSETS: Invested in capital assets, net of related debt 95,450,191 21,200,011 8,170,453 124,820,655 - Restricted for alternative energy 16,532,856 - - 16,532,856 Restricted for debt service 13,742,839 13,742,839 - Unrestricted (deficit) 69,763,390 (27,725,222) (477,760) 41,560,408 2,952,847 Total net assets (deficit) S 195,489,276 S (6,525,2.11) S 7,692,693 S 196,656,758 S 2,952,847 See accompanying notes to the basic financial statements. - 19. CITY OF VERNON, CALIFORNIA Statement of Revenues, Expenses and Changes in Fund Net Assets (Deficit) Proprietary Funds For the Fiscal Year Ended June 30, 2006 Business -type Governmental Activities Activities - Enterprise Funds Internal Light and Power Other Service Fund Gas Fund Enterprise Funds Totals Funds OPERATING REVENUES: Charges for services $ 132,565,018 $ 36,509,697 $ 6,536,832 $ 175,611,547 $ 10,262,058 Total operating revenues 132,565,018 36,509,697 6,536,832 175,611,547 10,262,058 OPERATING EXPENSES: Cost of sales 127,551,769 36,671,275 5,649,885 169,872,929 Depreciation and amortization 7,436,297 282,422 361,063 8,079,782 - Claims expense - - - - 3,157,196 Employee benefits - - - 9,544,484 Total operating expenses 134,988,066 36,953,697 6,010,948 177,952,711 12,701,680 Operating (loss) income (2,423,048) (444,000) 525,884 (2,341,164) - (2,439,622) NONOPERATING REVENUE (EXPENSES): Investment income . 4,128,341 - 4,129,341 Net decrease in fair value of investments (1,873,905) (1,873,905) Bond interest expense (9,179,326) (9,179,326) Legal settlements, net (5,257,580) (5,257,580) Total nonoperating expenses (12,182,470) - (12,182,470) Income before transfers (14,605,518) (444,000) 525,884 (14,523,634) (2,439,622) Transfers in 24,421,474 24,421,474 90,000 Transfers out (2,788,933) (186,937) (2,975,870) Change in net assets 7,027,023 (444,000) 338,947 6,921,970 (2,349,622) Net assets (deficit), beginning of the year 188,462,253 (6,081,211) 7,353,746 189,734,788 5,302,469 Net assets (deficit), end of the year $ 195,489,276 $ (6,525,211) $ 7,692,693 $ 196,656,758 $ 2,952,847 See accompanying notes to the basic financial statements. -20- CITY OF VERNON Statement of Cash Flows Proprietary Funds For the Fiscal Year Ended June 30, 2006 Govemm<mal Business -type A ctwities - Activities - Enterprise Funds haemal Light & Power Other Service Fund Gas Fund Enterprise Funds Total Funds Cash Bows fmm operating activities: Cash n.csved fmm cuslomers/ollter funds S 129,032.121 S 36.509.697 5 6.615.562 5 171,157,380 S 10,262,058 Cash paid to suppliers for goods and service (140,183,714) (33.725.691) (4374,533) (178,2113,938) - Cash paid to City geneses fund far services (11,911.194) (460.665) (12,371,8.19) Cash paid forprepaid rulural gas (423,374,475) - (423.374,475) - Casit paid for claims exp—eand employ. benefits - - - - (10,350,924) Net Gish provided by(..d in) opmling adMlies (447,437,262) 2,784.006 1,780,364 (442,872.892) (88,866) Cash flows Dom no.apital fluncing activities: Tm.fers muivcd(paid) 21.632,541 - (186.937)- 21.445,604 90,000 Proceeds from 2006 Bonds 430,845.000 - - 430.845,000 - Advancesfrom(to)otherfunds (4,781,504) 459,966 - - (135,165) (4,456,703) - Bondrelatedcosts (6,910,536) - (6,970,536) - Coll.lion of oom receivable 237,045 237.045 Net cash provided by. —piled financing activities 440,962,546 459.966 (321,102) 441,100,410 90,000 Cash flows from capital and reatod d®ncing w6vilim: Repayment of2004 bonds. (3,800,000) - - (3,800,000) Bond interest paid (9,213,377) - - (8,213,377) - Acquisitionandaulructionofupilalas W 08,235,888) (2,414,577) (1,360,933) (42,011,398) Net ash used in capital and related financing activities (50.249,265) - (2,414,577) (1,360,933) (54.024,773) Cash flows from lnvaling aefiAlies: - - Pundwes and salaofinvestments,net - (69.124,268) - - (68,124.268) Invcalmcnl income 4,847.915 4.847,915 Netash used in investing adivilies (63.276,353) (63.276,353) Net incrpse(decrease) in ash and cash equivalents (120,000,334) 829,395 97,329 (119.073,610) 1.134 Cash and ashequivalen6, beginningofyear 140,199,903 6,464,634 146,664.537 10,459,175 Cash and ash equivalents, end ofyar - S 10,199,11, S 119,195 S 6,561,961 S 27,50,927 S 10,459.309' Reconcilialion ofoperaling income to net ash provided by(ated in)operaling activities: - - - Opentiagincome(loss) S (2,423,048) S (444.000) $ 525.884 S (2,341,164) S (2,439,622) Adjustments to rea Bile operating income to ncs ash provided by (used in) operating activities: - Depreeiationandamon'vation 7,436,297 282.422 - 361,063 6,079,762 Provision for doubtful accounts 1,400.000 - - . 1,400,0f10 - - Changes in operating usess and liabilities: D.reu. (increase) in; Receivables - (3,933,391) - (44.626) (3,978.017) - - - hrventories (78,913) - (78,823) Prepaid cxpcmm and deposits - (272,251) - - (272,251) - Prepaid Natural Gas (423.374.475) - - (423,374,475) other..- (12,213,112) - (12,233.112) Ineroase (decceue) in: Accounts payable (6,327.279) 2,965.889 156.973 (3,204.417) (14.860) Claims payable - 2,365,616 Armed wages and benefits - (308,801) (20,305) 10.294 (118,818)_ Due (to) from other funds (6,760,198) - 647,420 (6,112.728) Customer deposits (599,507) .- 123,356 (476.151) - Compensated oWences 17.776 - - 17,776 - Otherpayables 19,496 19,496 Net cash provided by (used in) operating activilie5 S - (447,437,262) S 2,794,006 S 1,780,364 S (442,972.892) S (98.866) Reconciliation ofash and cub equivalents to Statement of Net Assess - Cash and investments S 43.415,460 S 829,195 5 6,561.963 $ 50.806,818 S t0.459,309 Current rasldctcd cash and irwalmaus 31.017,881 31,017.881 - Noncvrtent restriclod ash and investments 16,532;856 16,512,956 Total S 90,966,197 S 829.195 S 6,561,961 S 98,357,555 5 10,439,309 L¢s: lnves0nent with maturites of mart than 90 days S (70,166,628) S (70,766,62%) Total ash and cub equivalents S 20.199,569 S 829,395 $ 6.561,963 S 27,590,927 S 10.459,309 Noncuh Capital. Invnsliag and Financing Adivilies Acquisition ofcapital uses in accounts payable S 422,845 S - 5 - $ 422.845 S D.,.. in fair value ofinvestmenls (1,381,619) - - (1,381.619) See accompanying notes to the basic financial statements. 21 CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements June 30, 2006 NOTE l —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the City of Vernon, California (City) have been prepared in conformity with U.S. generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard -setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. Reporting Entity The City was incorporated on September 16, 1905 as a General Law City. Effective July 1, 1988, the City became a Charter City. The City operates under a Council -City Administrator form of government. As required by generally accepted accounting principles, the accompanying basic financial statements present the City of Vernon (primary government) and its component units, entities for which the primary government is considered to be financially accountable. In accordance with GASB Statement No. 14, the City's component units are considered blended component units. Although legally separate entities, they are, in substance, part of the City's operations, and therefore, data from these units are combined with data of the primary government. Blended Component Units Vernon Redevelopment Agency (RDA). The governing body of the RDA is comprised of members of the City Council and the Mayor. Among its duties, it approves the RDA's budget and appoints the management. Separately issued financial statements for the RDA may be obtained through the City of Vernon, 4305 Santa Fe Avenue, Vernon, California, 90058. Vernon Natural Gas Financine Authorit On April 1, 2006, the City and the RDA created the Vernon Natural Gas Financing Authority (Authority) pursuant to the Joint Powers Agreement, for the express purpose of undertaking projects and programs that promote economic development within the City. Such projects and programs include assisting the City in procuring natural gas for use as fuel for electric generating units that are part of the City's Electric System, which is accounted for in the City's Light and Power fund. During the year ended June 30, 2006, the Authority issued $430,845,000 in variable rate bonds and subsequently purchased natural gas in accordance with the Natural Gas Agreement between the Authority and the City. As a result of this financing arrangement, the debt and related asset (prepaid natural gas) associated with the Authority have been blended with the City's Light and Power fund for financial reporting purposes. Basis of Presentation Government -wide Financial Statements The statement of net assets and statement of activities display information about the primary government (the City) and its component units. These statements include the financial activities of the overall government. It is the City's policy to make eliminations to minimize the double counting of internal activities, except for services rendered by governmental activities to business -type activities as well as charges from the Gas Fund to the Light & Power Fund. These statements distinguish between the governmental and business -type activities of the City. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business -type activities, which rely to a significant extent on fees charged to external parties. -22- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation (Continued) The statement of activities presents a comparison between direct expenses and program revenues for each segment of the business -type activities of the City and for each function oftheCity's governmental activities. Direct expenses are those that are specifically associated with a program or function; and therefore, are clearly identifiable to a particular function. Expenses by function have been adjusted for, any internal service profit/loss existing at fiscal year-end. Program revenues include (1) charges paid by the recipients of goods or services offered by the programs and (2) grants and contributions that are restricted to meeting the operational or capital requirements of.a particular program. Revenues that are not classified as program revenues, including all taxes, are presented instead as general revenues. Fund Financial Statements The fund financial statements provide information about the City's funds and blended component units. Separate statements for each fund category - governmental and proprietary —'are presented. The emphasis of fund financial statements is on major governmental and enterprise funds, each displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Proprietaryfund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. Operating expenses include -the cost of sales and services, administrative expenses and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses. The City reports the following major governmental funds: The General Fund is the City's primary operating fund. It is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the City -that are not accounted for through other funds. For the City, the General Fund includes such activities as general government, public safety, and public works. The Vernon Redevelopment Agency was activated September 16, 1986, by .action of the Vernon City Council pursuant to the Community Redevelopment Law of California. The Agency has the broad authority to acquire, rehabilitate, develop, administer, and sell or lease property. Additionally, the Agency has the right of eminent domain to facilitate acquisition of property. The principal objectives of the Agency are to improve the commercial environment, provide new public improvements, strengthen the City of Vernon's (City) economic base, generate added employment opportunities, and expand the City's industrial base. The City reports the following major enterprise funds: • The Light and Power Fund accounts for the maintenance and operations of the City's electric utility plant. Revenue for this fund is primarily from charges for services. • The Gas Fund accounts for maintenance and operations of the City's gas utility system. Revenue for this fund is primarily from charges for services. Natural gas is provided primarily to the Light & Power Fund at wholesale cost. In addition, the Gas Fund provides natural gas to several outside companies. Additionally, the City reports the following fund types: • The City's Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specific purposes. - 23 CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation (Continued) • The City's Capital Projects Funds are used to account for financial resources designated for the acquisition or construction of major capital facilities other.than those financed by proprietary fund types. • The City's Internal Service Funds are specifically designed to account for goods and services that are provided on a cost -reimbursement basis. That is, the goal of an internal service fund should be to measure the full cost of providing goods and services for the purpose of fully recovering that cost through fees or charges. Some examples of the City's services accounted for in the internal service funds are self-insurance activities for worker's compensation, general liability, group medical and dental, and vehicle replacement. The Internal Service Funds are presented in summary form as part of the proprietary fund financial statements. In the government -wide financial statements, the changes in net assets at the end of the fiscal year, as presented in the statements of activities, were allocated to the user functions of the governmental activities, to reflect the entire activity for the year. Since the predominant users of the internal services are the City's governmental activities, the asset and liability balances of the Internal Service Funds are consolidated into the governmental activities column at the government -wide level. The government -wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales taxes are recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligible requirements have been satisfied. Governmental fund type financial statements are reported ,using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues and other governmental fund type financial resources are recognized when they become susceptible to accrual that is, when they become both measurable and available. Revenues are considered to be availablewhen they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. Property, sales, and other taxes are considered available and are accrued when received within sixty days after fiscal year-end. Additionally, all other revenue sources are considered available and are accrued when received within 60 days of year-end. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. General capital assets acquisitions are reported as expenditures in governmental fund statements. For the govemment-wide financial statements and proprietary fund financial statements, the City has elected under GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, to apply all applicable GASB pronouncements as well as any applicable pronouncements of the Financial Accounting Standards Board, the Accounting Principles Board or any Accounting Research Bulletins issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The City has elected not to adopt FASB pronouncements issued after November 30, 1989 for its govemment-wide and enterprise fund financial statements. Because the governmental fund financial statements are presented on a different measurement focus and basis of accounting than the government -wide financial statements for governmental activities, reconciliations are presented which briefly explain the adjustments necessary to reconcile the fund financial statements to the governmental -wide statements. When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, and then unrestricted resources, as they are needed. -24- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 1 —SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash Deposits and Investments The City follows the practice of pooling cash and investments of all funds to maximize returns for all funds, except for funds held by trustee or fiscal agents. For purposes of the statement of cash flows, the City considers all highly liquid investments (including restricted cash and investments) with an original maturity of three months or less when purchased to be cash equivalents. Investment transactions are recorded on the trade date. Investments in nonparticipating interest -earning investment contracts are reported at cost, and all other investments are reported at fair value. Fair value is defined as the amount that the City could reasonably expect to receive for an investment in a current sale between a willing buyer and a seller and is generally measured by quoted market prices. Interfund Receivables/Pavables Short-term interfund receivables and payables are classified as "due from other funds" and "due to other funds" respectively on the balance sheet/statement of fund net assets. Long-term interfund receivables and payables are classified as "advances to/from other funds," respectively, on the balance sheet/statement of fund net assets. Inventories " Inventories consist of consumable supplies and fuel stock, which are stated at cost on a first -in, first -out basis. The cost of inventories is recorded as an expenditures/expense when the items are used. Capital Assets Capital assets (including infrastructure) are recorded at historical cost or at estimated historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair market value on the date contributed. Capital assets include public domain (infrastructure) general capital assets consisting of certain improvements including roads and bridges, sidewalks, curbs and gutters, and traffic light system. The capitalization threshold for all capital assets is $5,000. Capital assets used in operations are depreciated using the straight-line method over their estimated useful lives in the government -wide statements and proprietary funds. The estimated useful lives are as follows: Infrastructure 10 to 50 years Utility plant and buildings 25 to 50 years Improvements 10 to 20 years Machinery and equipment 3 to 35 years Maintenance and repairs are charged to operations when incurred. Betterments and major improvements, which significantly increase values, change capacities or extend useful lives, are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the 'respective accounts and any resulting gain or loss is included in the changes in financial position. For tax-exempt securities, interest income and expense associated with construction of capital assets is capitalized during the construction phase up until the capital asset is substantially complete and ready for its intended use. -25- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE I -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Compensated Absences Accumulatedvacation is accrued when incurred in the government -wide and proprietary fund financial statements. A liability for accrued vacation is recorded in the governmental funds only to the extent that such amounts have matured (i.e., as a result of employee resignations and retirements). Upon termination of employment, the City will pay the employee all accumulated vacation leave at 100% of the employee's base hourly rate. Deferred Revenue Deferred revenue arises when a potential revenue transaction does not meet the "available" criteria for recognition in the current period. Deferred revenue also arises when resources are received before the City has a legal claim to them, as when grant monies are received in advance of incurring qualified expenditures. Long-term Obligations Certain of the City's governmental fund obligations not currently due and payable at year-end are reported in the government -wide statement of net assets. Long -tern debt and other obligations financed by proprietary funds are reported as liabilities in the appropriate proprietary fund and government -wide statement of net assets. Bond issuance costs, discounts and premiums and deferred amounts on refunding are amortized over the life of the bonds using the straight-line method,' Net Assets The government -wide financial statements and proprietary fund financial statements utilize a net assets presentation. Net assets are categorized as invested in capital assets (net of related debt), restricted and unrestricted. ❑ Invested In Capital Assets, Net of Related Debt — This category groups all capital 'assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category. ❑ Restricted Net Assets This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. 13 Unrestricted Net Assets - This category represents net assets of the City, not restricted for any project or other purpose. Fund Equity In the fund financial statements, governmental funds report reservations of fund balance for amounts that are not appropriable or legally restricted for a specific purpose. Designations of fund balance represent tentative management plans that are subject to change. Use of Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. -26- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property Taxes The. County of Los Angeles (County) levies, collects and apportions property taxes for all taxing jurisdictions with the County. Property taxes are determined by applying approved rates to the properties' assessed values. The County remits property taxes applicable to the City less an administrative fee throughout the year. Article XIIIA of the State of California Constitution limits the property tax levy to support general government services of the various taxing jurisdictions to $1.00 per $100 of assessed value. Taxes levied to service voter - approved debt prior to June 30, 1978 are excluded from this limitation. Secured property taxes are levied in two installments, November 1 and February 1. They become delinquent with penalties on December 10 and April 10, respectively. The lien date is January `I of each year for secured and unsecured property taxes and the levy date occurs on the 41h Monday of September of the tax year. Unsecured property taxes on the tax roll as of July 31 become delinquent with penalties on August 31. GASB Pronouncements In November 2003, GASB issued Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries. This statement establishes accounting and financial reporting standards for impairment of capital assets. A capital asset is considered impaired when its service utility has declined significantly and unexpectedly. This statement also clarifies and establishes accounting requirements for insurance recoveries. This statement had no impact on the City. In December 2004, GASB issued Statement No. 46, Net Assets Restricted Enabling Legislation — An amendment of GASB Statement No. 34. This Statement establishes and modifies requirements related to restrictions of net assets resulting from enabling legislation. It amends GASB Statement No. 34, Basic Financial Statements —and Management's Discussion and Analysis —for State and Local Governments, paragraph 34. GASB Statement No. 34, Basic Financial Statements —and Management's Discussion and Analysis for State and Local Governments, requires that limitations on the use of net assets imposed by enabling legislation be reported as restricted net assets. This Statement clarifies that a legally enforceable enabling legislation restriction is one that a party external to a government —such as citizens, public interest groups, or the judiciary —can compel a government to honor. The Statement states that the legal enforceability of an enabling legislation restriction should be reevaluated if any of the resources raised by the enabling legislation are used for a purpose not specified by the enabling legislation or if a government has other cause for reconsideration. Although the determination that a particular restriction is not legally enforceable may cause a government to review the enforceability of other restrictions, it should not necessarily lead a government to the same conclusion for all enabling legislation restrictions. This Statement also specifies the accounting and financial reporting requirements if new enabling legislation replaces existing enabling legislation or if legal enforceability is reevaluated. Finally, this Statement requires governments to disclose the portion of total net assets that is restricted by enabling legislation. This statement had no impact on the City. In June 2005, GASB issued Statement No. 47, Accounting for Termination Benefits. This Statement provides guidance to governmental employers for measuring, recognizing, and reporting liabilities and expense/expenditures related to all termination benefits, including voluntary tennination benefits, without limitation as to the period of time during which the benefits are offered, and involuntary termination benefits. This statement had no impact on the City. -27- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 2 —CASH AND INVESTMENTS Cash and Investments Cash and investments as of June 30, 2006 are classified in the accompanying financial statements as follows: Statement of net assets: Cash and investments $ 106,529,677 Restricted cash and investments 87,566,406 Total cash and investments $ 194,096,083 , Cash and investments as of June 30, 2006 consist of the following: Cash on hand $ 1,300 Deposits with financial institutions 18,950,714 Investments 175,144,069 Total cash and investments $ 194,096,083 The City's Investment Policy The City's Investment Policy sets forth the investment guidelines for. all funds of the City. The Investment Policy conforms to the California Government Code Section 53600 et. seq. The authority to manage the City's investment program is derived from the City Council. Pursuant to Section 53607 of the California Government Code, the City Council annually appoints the City Treasurer and approves the City's investment policy. The Treasurer is authorized to delegate this authority. as deemed appropriate. No person may engage in investment transactions except as provided under the terms of the Investment Policy and the procedures established by the Treasurer. This Policy requires that the investments be made with the prudent person standard, that is, when investing, reinvesting, purchasing, acquiring, exchanging selling or managing public funds, the trustee (Treasurer and staff) will act with care, skill, prudence, and diligence under the circumstances then prevailing, including but not limited to, the general economic conditions and the anticipated needs of the City. The Investment Policy also requires that when following the investing actions cited above, that the primary objective of the trustee be to safeguard the principal, secondarily meet the liquidity needs of depositors, and then achieve a return on the funds under the trustee's control. Further, the intent of the Investment Policy is to minimize risk of loss on the City's held investments from: A. Credit risk B. Custodial credit risk C. Concentration of credit risk D. Interest rate risk _28_ CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 2 —CASH AND INVESTMENTS (CONTINUED) Investments Authorized by the California Government Code and the City Is Investment Policy The table below identifies the investment types that are authorized for the City by the California Government Code and the City's Investment Policy. The table also identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentration of credit risk. This table does not address investment of debt proceeds held by bond trustee that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's Investment Policy. Maximum Maximum Authorized Maximum Percentage Investment Investment Type Maturity of *Portfolio in One Issuer Securities of the U.S. Government, or it agencies None None None Certain Asset -Backed Securities None None None Certificate of Deposit None 30% None Bankers Acceptances 180 days 40% 30% Commercial Paper 270 days 25% 10% Repurchase Agreements I year None None Reverse Repurchase Agreements 92 days 20% of base value None Medium -Term Notes None 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass -Through Securities 5 years 20% None State Administered Pool Investment N/A None None * Excluding amounts held by bond trustee that are not subject to California Government Code restrictions. Investments Authorized by Debt Agreements Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's Investment Policy. The table below identifies the investment types that are authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. . Maximum Maximum 'Authorized Maximum Percentage Investment Investment Type Maturity of Portfolio in One Issuer Securities of the U.S. Government, or it agencies None None None Certain Asset -Backed Securities None None None Certificate of Deposit None None None Bankers Acceptances I year None None Commercial Paper None None None Money Market Mutual Funds N/A None None State Administered Pool Investment N/A None None Investment Contracts None None None -29- 0 CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 2 — CASH AND INVESTMENTS (CONTINUED) Disclosure Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter tern and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. The City monitors the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. The City has no specific limitations with respect to this metric. Weighted Average Maturity % of Investment Type Amount (in years) Total Commercial Paper $ 5,397,750 0.01 3.08% Local Agency Investment Fund 529,038 0.42 0.30% United States Treasury Notes 9,818,750 3.16 5.61 % Federal Farm Credit Bank 8,305,250 3.27 4.74% Federal Home Loan Bank 33,111,250 1.68 18.91% Federal National Mortgage Association 26,757,180 0.88 15.29% Federal Home Loan Mortgage Corporation 40,837,533 1.09 23.32% Medium -Term Corporate Notes 18,007,669 0.36 10.28% Money Market Mutual Fund 19,848,921 - 11.33% Investment Contracts 12,530,728 27.77 7.15% $ 175,144,069 3.06 100.00% -30- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 2 —CASH AND INVESTMENTS (CONTINUED) Disclosures Relating to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the City's Investment Policy, or debt agreements, and the actual rating as of the year end for each investment type. Minimum Actual Fain % Required Credit Rating Value as of of Rating Moody's / S&P June 30, 2006 Total In custody of Treasurer: Cash on hand Not Rated Not Rated $ 1,300 0.00% Deposits with financial institutions Not Rated Not Rated 18,950,714 9.76% Investments held by Treasurer: Commercial Paper P-1 /A-1+ P-1 /A-1+ 5,397,750 2.78% Local Agency Investment Fund Not Rated Not Rated 529,038 0.27%0 Total in custody of Treasurer 24,878,802 12.82% In custody of Trustee: Investments held by Trustee: United States Treasury Notes Federal Farm Credit Bank Federal Home Loan Bank Federal National Mortgage Association Federal Home Loan Mortgage Corporation Medium -Term Corporate Notes Money Market Mutual Fund Investment Contracts Not Rated Not Rated 9,818,750 5.06% Aaa / AAA Aaa / AAA 8,305,250 4.28% Aaa / AAA Aaa / AAA 33,111,250 17.06% Aaa / AAA Aaa / AAA 26,757,180 13.79% Aaa / AAA Aaa / AAA 40,837,533 21.04% P-1 / A-1+ P-1 / A-1+ 18,007,669 9.28% Aaa / AAA Aaa / AAA 19,848,921 10.23% Not Rated Not Rated 12,530,728 6.46% Total in custody of Trustee 169,217,281 87.18% Total cash and investments held by Treasurer and Trustee $ 194,096,083 100.00% -31 - CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 2 — CASH AND INVESTMENTS (CONTINUED) Concentration of Credit Risk The City's Investment Policy places no limit on the amount the City may invest in any one issuer excluding a 10% limitation on commercial paper, mutual funds, and money market mutual funds. As of June 30, 2006, there was no investment in any one issuer that represented 10% or more of the City's total investments. As of June 30, 2006, the City's investments in any one issuer exceeding 5% were as follows: Minimum Actual Fair % Required Credit Rating Value as of - of. Rating Mood 's / S&P June 30 2006 Total Federal Home Loan Bank Aaa / AAA Aaa / AAA $ 33,1 11,250 17.06% Federal National Mortgage Association Aaa / AAA Aaa / AAA 26,757,180 13.79% Federal Home Loan Mortgage Corporation Aaa / AAA Aaa / AAA 40,837,533 21.04% Medium -Teri Corporate Notes P-1 / A-1+ P-1 / A-1+ 18,007,669 9.28% Money Market Mutual Fund Aaa / AAA Aaa / AAA 19,848,921 10.23% Investment Contracts Not Rated Not Rated 12,530,728 6.46% Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party,- The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Goverment Code and the City's Investment Policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments. At year-end, the carrying amount of the City's deposits,was $18,950,714 and the bank balance was $19,424,101. The difference between the bank balance and the carrying amount represents outstanding checks and deposits in transit. .Of the bank. balance, $200,000 was covered by federal depository insurance and $19,224,101 was collateralized by the pledging financial institution as required by Section 53652 of. the California Goverment Code. Under the California Government Code, a financial institution is required to secure deposits in excess of $100,000 made by state or local governmental units by pledging government securities held in the form of an undivided collateral pool. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Such collateral is held by the pledging financial institution's trust department or agent in the City's name. As of June 30, 2006, the City had some risk in this area. Local Arency Investment Fund (LAIF) The Agency also maintained cash balances with .the State of Califomia Local Agency Investment Fund (LAIF) amounting to $529,038 at June 30, 2006. LAIF is an external investment pool sponsored by the State of Califomia. These pooled funds approximate fair value. The administration of LAIF is provided by the Califomia State Treasurer and regulatory oversight is provided by the Pooled Money Investment Board and the Local Investment Advisory Board. The value of the pool shares in LAIF, which may be withdrawn, is determined on an amortized cost basis, which is different than the fair value of the Agency's position in the pool. -32- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 2 — CASH AND INVESTMENTS (CONTINUED) The total amount invested by all public agencies in LAW at June 30, 2006 was $16,392,047,241. LAIF is part of the State of California Pooled Money Investment Account (PMIA) whose balance was $63,616,592,927 at June 30, 2006. Of this amount, 2.567% was invested in structures notes and asset -backed securities. PMIA is not.SEC- registered, but is required to invest according to California State Code. The average maturity of PMIA investments was 0.42 years as of June 30, 2006. LAIF does not maintain a credit rating. NOTE 3 - RECEIVABLES The City's receivables at June 30, 2006 are as follows: Redevelopment Other Total Receivables - General Agency Governmental Governmental Governmental Activities: Fund Fund Funds Activities. Accounts $ 536,223 $ - $ 204,228 $ 740,451 Taxes 820,668 889,126 1,800,222 3,510,016 Notes or loans 67,314 - - 67,314 Total receivables $ 1,424,205 $ 889,126 $ 2,004,450 $ 4,317,781 Other Total Receivables - Light and Power Enterprise Business -type Business -type Activities: Fund Funds Activities Accounts $ 15,175,644 $ 76,584 $ 15,252,228 Allowances (1,400,000) - (1,400,000) Total receivables $ 13,775,644 $ 76,584 $ 13,852,228 The business -type activities allowances for doubtful accounts consists of $1,000,000 reserved for the California Power Exchange (See Note 13) and $400,000 reserved for all other doubtful accounts of Light and Power Fund's retail utility customers. NOTE 4 — INTERFUND TRANSACTIONS The following tables summarize the City's interfund balances and transactions at June 30, 2006: Due To/From Other Funds Receivable Fund Payable Fund Amount Light and Power Fund General Fund $ 6,314,779 Redevelopment Agency Fund 8,665 Other Governmental Funds 34,100 Other Enterprise Funds 328,489 Internal Service Funds 74,115 $ 6,760,148 The above balances represent interfund borrowings payable due within one year. -.33 - CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 4—1NTERFUND TRANSACTIONS (CONTINUED) Advances to�rom other funds Receivable Fund Payable Fund Amount General Fund Redevelopment Agency Fund $ 16,860 Other Governmental Funds 5,979 Other Enterprise Funds 4,952,807 $ 4,975,646 Light and Power Fund Other Governmental Funds $ 19,733,454 Gas Fund 25,224,914 Other Enterprise Funds 349,050 $ 45,307,418 The above balances represent interfund borrowings payable beyond one year. These borrowings were for purchase of land and capital improvements. Transfers Transfers In Transfer Out Amount General Fund Light and Power Fund $ 2,788,933 Other Enterprise Funds 186,937 $ 2,975,870 Light and Power Fund General Fund $ 24,421,474 $ 24,421,474 Other Governmental Funds Redevelopment Agency Fund $ 624,824 $ 624,824 Internal Service Funds General Fund $ 90,000 $ 90,000 Transfers are used to move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, or move revenues collected in certain enterprise funds to the General Fund to cover overhead costs provided by the General Fund and for the payment of in -lieu franchise taxes. For the current year, the Light and Power Fund and the Other Enterprise Funds transferred a total of $2,975,870 in in -lieu franchise taxes. For the current year, the General Fund transferred $24,421,474 to the Light and Power Fund. The main reason for this transfer was to complete the construction of the Malburg Generating Station and to upgrade the City's electric transmission and distribution systems. For the current year, the City elected to have the Redevelopment Agency Fund transfer $624,824 to the Parcel Tax Fund (Other Governmental Fund) to reimburse the Parcel Tax Fund for capital expenditures related with the construction of new fire stations. -34- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 5 — CAPITAL ASSETS Capital asset activity of governmental activities for the year ended lane 30, 2006 was as follows: Governmental activities: Capital assets, not being depreciated: Land - General Fund Land - Redevelopment Agency Fund (RDA) Total land Construction in progress - General Fund Construction in progress - RDA Total construction in progress Total capital assets, not being depreciated Capital assets, being depreciated infastructure - General Fund Building and Improvements - General Fund Building and Improvements - RDA Machinery and Equipment - General Fund Total capital assets, being depreciated Less accumulated depreciation for: lnfastructure - General Fund Building and Improvements - General Fund Building and Improvements - RDA Machinery and Equipment - General Fund Total accumulated depreciation Balance Transfers & Balance July 1, 2005 Additions Deletions Adjustments June 30, 2006 $ 28,502,457 $ 20,180,836 $ $ - $ 48,683,293 23,172,030 864,485 (3,282,440) (8,401,673) 12,352,402 51,674,487 21,045,321 (3,282,440) .(8,401,673) 61,035,695 1,266,211 2,446,579 - 962,883 (288,610) 3,424,190 962,883 1,266,211 3,409,462 (288,610) 4,387,063 52,940,698 24,454,783 (3,282,440) (8,690,283) 65,422,758 23,684,060 312,068 288,610 24,284,738 15,836,515 - - 15,816,515 - 1,768,021 1,768,021 11,372,970 1,970,838 - 13,343,808 _ 50,893,545 4,050,927 288,610 55,233,082 (17,685,205) (595,703) (19,280,908) (5,556,719) (353,579) (5,910,298) - (22,100) (22,100) (5,978,147) (1,121,350) (7,099,497) (29,220,071) (2,092,732) (31,312,803) Total capital assets, being depreciated, net Infastruclure - General Fund 5,998,855 (283,635) 288,610 6,003,830 Building and Improvements - General Fund 10,279,796 (353,579) - 9,926,217 Building and Improvements - RDA - 1,745,921 1,745,921 Machinery and Equipment- General Fund 5,394,823 849,488 6,244,311 Total 21,673,474 1,958,195 288,610 23,920,279 Governmental activities capital assets, net $ 74,614,172 $ 26,412,978 $ (3,282,440) $ (8,401,673) $ 89,343,037 In the current year, the Redevelopment Agency Fund has elected to reclassify $8,401,673 of its land to land held for resale. Depreciation Depreciation expense was charged to governmental functions as follows: General government $ 850,722 Public safety 923,748 Public works 253,970 Health services 64,292 Total depreciation expense - governmental functions $ 2,092,732 -35- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 5—CAPITAL ASSETS (CONTINUED) Capital asset activity of business -type activities for the year ended June 30, 2006 was as follows: Balance Transfers & Balance July I, 2005 Additions Deletions Adjustments June 30, 2006 Business -type activities: Capital assets, riot being depreciated: Land $ 45,000 $ - $ $ $ 45,000 Construction in progress - Light and Power 190,514,579 31,417,580 (208,351,163) 13,580,996 Construction in progress - Water 839,848 - (2,586) 837,262 Construction in progress - Gas 19,023,822 1,300,849 (20,324,671) - Construction in progress - Fiber Optic 2,068,442 211,778 2,280,220 Total capital assets, not being depreciated 212,491,691 32,930,207 (229,679,420) 16,743,478 Capital assets, being depreciated Production plant - Light and Power 10,015,455 684,659 10,700,114 Transmission plant- Light and Power 61,448,019 4,212,884 65,660,903 Distribution plant- Light and Power 49,652,505 1,015,173 50,667,678 General plant- Light and Power 3,976,419 897,651 4,874,070 Malburg Generating Station plant - Light and Power - 208,352,126 208,352,126 Buildings - Light and Power 481,800 - 481,800 Water utility plant 14,434,164 397,499 - 14,831,662 Gas utility plant 46,970 1,113;728 20,324,671 21,485,369 Fiber Optic utility plant - 753,280 753,280 Total capital assets, being depreciated 140,055,332 9,074,873 228,676,797 377,807,002 Less accumulated depreciation for: Production plant - Light and Power (5,495,705) (372,027) (5,867,732) Transmission plant - Light and Power (34,446,396) (2,282,919) (36,729,315) Distribution plant - Light and Power (17,891,311) (1,761,630) (19,652,941) General plant • Light and Power (2,091,419) (169,464) (2,260,882) Malburg Generating Station plant Light and Power (2,604,402) (2,604,402) Buildings - Light and Power (265,836) (13,452) (279,288) Water utility plant (10,215,908) (342,231) (10,558,139) Gas utility plant (2,936) (282,422) (285,358) Fiber Optic utility plant (18,932) (19,832) Total accumulated depreciation (70,409,510) (7,847,379) (78,256,889) Total capital assets, being depreciated, net Production plant - Light and Power 4,519,750 312,632 4,832,382 Transmission plant - Light and Power 27,001,623 1,9291965 28,931,588 Distribution plant - Light and Power 31,761,194 (746,457) 31,014,737 General plant - Light and Power 1,885,001 728,187 2,613,188 Malburg Generating Station plant - Light and Power - (2,604,402) 208,352,126 205,747,724 Buildings - Light and Power 215,964 (13,452) - 202,512 Water utility plant 4,218,256 55,267 - .4,273,523 Gas utility plant 44,034 831,306 20,324,671 21,200,011 Fiber Optic utility plant 734,448 - 734,448 Total 69,645,822 1,227,494 228,676,797 299,550,113 Business -type activities capital assets, net $ 282,137,513 $ 34,157,701 $ $ (1,623) $ 316,293,591 -36- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June30, 2006 NOTE 5 —CAPITAL ASSETS (CONTINUED) Depreciation Depreciation expense was charged to the business -type functions as follows: Light and Power depreciation $ 7,203,894 Gas Fund depreciation 282,422 Other Enterprise Fund depreciation 361,063 Total depreciation expense - business -type functions $ 7,847,379 Capitalized bond interest For the period July 1, 2005 through October 17, 2005 the City capitalized interest paid in relation to the Series 2004A, 2004B, and 2004C bonds. These bonds were issued in 2004 in order to finance the construction of the Malburg Generating Station which became operational on October 17, 2005. City incurred $1,659,254 of interest expense that was capitalized during the year ended June 30, 2006 net of tax exempt investment income. NOTE 6 — LONG-TERM OBLIGATIONS During the fiscal year 2006, a total of $480,265,000 in long-term obligations consisting of the following: • $49,420,000 Redevelopment Agency of the City of Vernon Industrial Redevelopment Project Tax. Allocation Bonds, Series 2005 • $200,000,000 Vernon Natural Gas Financing Authority Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series A • $115,440,000 Vernon Gas Project Variable Rate Revenue Bonds, 2006 Series B, and • $115,405,000 Vernon Gas Project Variable Rate Revenue Bonds, 2006 Series C The Industrial Redevelopment Project Tax Allocation Bonds, Series 2005 were issued to provide funds to (i) finance various redevelopment projects in or benefiting the Agency's Industrial Redevelopment Project area, (ii) fund the reserve requirement for the Series 2005 Bonds, and (iii) pay the costs of issuance related to the Series 2005 Bonds. The Vernon Gas Project 2006 Variable Rate Revenue Bonds were issued to provide funds to (i) finance a portion of the purchase by the City of a fifteen -year, prepaid supply of natural gas from Citigroup Energy Inc. pursuant to an Agreement for Purchase and Sale of Natural Gas, between the City and Citigroup Energy Inc.; and (ii) pay the costs of issuing the 2006 Bonds. During the fiscal year 2005, the City issued $90,150,000, 2004 Series A, $83,575,000, 2004 Series B, $39,875,000, 2004 Series C, and $69,100,000, 2004 Series D, Electric System Revenue Bonds. The 2004 Bonds were issued to provide funds (i) to refund $162,610,000 of outstanding Electric System Revenue Bonds of the City; (ii) to finance the costs of improvements to the City's substation and distribution facilities and certain costs of completion of the City's Malburg Generating Station; (iii) to finance the reimbursement to the City of certain costs incurred in connection with the City's electric system facilities; (iv) to fund a deposit to the Debt Service Reserve Fund; and (v) to pay the costs of issuance of the 2004 Bonds. -37_ CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 6 —LONG-TERM OBLIGATIONS (CONTINUED) A summary of bonds payable for governmental and business -type activities is as follows: Annual Interest Principal Original Issue Outstanding at Bonds Maturity Rates Installments Amount June 30, 2006 Electric System Revenue 04/01/37 Variable To begin 04/01/29: $ 90,150,000 $ 90,150,000 Bonds, 2004 Series A $2,000,000 - $12,925,000 Electric System Revenue 04/01/29 Variable To begin 04/01/18: 83,575,000 83,575,000 Bonds, 2004 Series B $50,000 - $9,525,000 Electric System Revenue 04/01/39 Variable To begin 04/01/37; 39,875,000 39,875,000 Bonds, 2004 Series C $11,500,000 - $14,400,000 E lectric System Revenue 04/01/18 Variable $3,800,000- 69,100,000 61,825,000 Bonds, 2004 Series D $6,525,000 RDA Industrial 09/01/35 Fixed To begin 09/01/09: 49,420,000 49,420,000 Redevelopment Project Tax $1,160,000 - Allocation Bonds, 2005 Series $3,460,000 Variable Rate Revenue Bonds ' 08/01/21 Variable To begin 08/01/07: 200,000,000 200,000,000 (Vernon Gas Project), 2006 $9,950,000 - Series A $17,300,000 Variable Rate Revenue Bonds 08/01/21 Variable To begin 08/01/07: 115,440,000 115,440,000 (Vernon Gas Project), 2006 $5,710,000 - Series B. $10,070,000 Variable.Rate Revenue Bands 08/01/21 Variable To begin 08/01/07: 115,405,000 115,405,000 (Vernon Gas Project), 200E $5,710,000 - Series C $10,070,000 Premium 902,046 Discount (1,559,893) Deferred amount on refunding (7,719,814) Total Revenue Bonds $ 762,965,000 $ 747,312,339 *The Series 2004 Bonds variable rate is set periodically through an auction process. Ratcs on the 2004A and 2004B bonds are reset through an auction process every 7 days. Rates on the 2004C and 2004D bonds are reset through an auction process every 28 days. Rates on the Series 2005 Bonds are fixed rates ranging from 3.25% to 5.25%. Rates on the 2006A Bonds are based on 7-day Auction Periods. Rates on the 2006B and 2006C Bonds are based on a Weekly Interest Rate determined by Citigroup Global Markets, Inc. utilizing best efforts to remarket the 2006B and 2006C Bonds which are subject to optional and mandatory tender. -38- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) .Tune 30, 2006 NOTE 6 — LONG-TERM OBLIGATIONS (CONTINUED) As of June 30, 2006, annual debt service requirements of business -type activities to maturity are as follows: Electric System Revenue Bonds Payable Year ending June 30: Principal Interest* 2007 $ 3,975,000 $ 11,999,551 2008 4,175,000 11,784,176 2009 4,350,000 11,558,277 2010 4,550,000 11,322,752 2011 4,775,000 11,076,256 2012-2016 27,200,000 51,304,143 2017-2021 34,025,000 43,490,707 2022-2026 41,075,000 35,685,826 2027-2031 49,550,000 26,528,703 2032-2036 59,875,000 15,476,094 2037-2039 41,875,000 — 3,085,770 Total requirements $ 275,425,000 $ 233,312,255 * As of June 30, 2006, interest on the 2004 Series A, B, and C was calculated at the June 30, 2006 BMA rate of 3.970%. Interest on the 2004 Series D was calculated at the June 30, 2006 one month LIBOR rate of 5.3344%. For additional disclosure on interest rate swaps see Note 7. Industrial Redevelopment Project Tax Allocation Bonds Payable Year ending June 30: Principal Interest* 2007 $ $ 2,175,093 2008 2,175,093 2009 2,175,093 2010 •1,160,000 2,157,419 2011 1,285,000 2,120,167 2012-2016 6,720,000 9,928,127' 2017-2021 7,720,000 8,452,644 2022-2026 7,300,000 6,679,092 2027-2031 10,020,000 4,937,959 2032-2036 15,215,000 1,931,242 $ 49,420,000 $ 42,631,929 * As of June 30, 2006, debt service was calculated based upon the fixed coupon rates of the bonds ranging from 3.25% to 5.25%. For additional disclosure on basis swap see Note 7. -39- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 6 — LONG-TERM OBLIGATIONS (CONTINUED) . Variable Rate Revenue Bonds Payable Year ending June 30: Principal- Interest' 2007 $ $ 18,475,892 2008 21,370,000 17,712,207 2009 22,330,000 16,761,476 2010 23,135,000 15,775,117 2011 24,055,000 14,750,127 2012-2016 136,020,000 56,842,086 2017-2021 166,495,000 24,079,795 2022 37,440,000 267,583 Total requirements $ 430,845,000 $ 164,664,283 * As of June 30, 2006, debt service for 2006 Series A, B, and C was calculated at the June 30, 2006 BMA rate of 3.970%. For additional disclosure on interest rate swaps see Note 7. Changes in long-term liabilities The following is a summary of long-term liabilities transactions for the fiscal year ended June 30, 2006: . Amounts Balance Balance Due Within July J, 2005 Additions Reductions June 30, 2006 One Year Governmental activities: Bonds payable Bond premium, Claims payable Compensated absences Business -tune activities: Bonds payable Bond discount Deferred amount on refunding Compensated absences $ $ 49,420,000 $ $ 49,420,000 $ 933,457 (31,411) 902,046 44,345 4,992,957 2,998,117 (632,501) 7,358,573 2,452,858 944,768 928,525 (944,768) 928,525 928,525 $ 5,937,725 $. 54,280,099 $ (1,608,680) $ 58,609,144 $ 3,425,728- $ 279,225,000 $ 430,845,000 $ (3,800,000) $ '706,270,000 $ 3,975,000 (1,634,532) - 74,639 (1,559,893) (74,639) (8,052,628) - 332,814 (7,719,814) (332,914) 125,146 . _ 200,168 (125,146) 200,168 200,168 $ 269,662,986 $ 431,045,168 $ (3,517,693) $ 697,190,461 $ 3,767,715 -40- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS Basis Swap — 2003 Series A and B Bonds Objective of the interest rate swap: As a means to mitigate its exposure to interest rate risk, the City entered into an interest basis swap in connection with its $87.5 million 2003 Electric System Series A and Series B bonds (the "2003 Series AB Bonds"). Terms: As originally structured, the 2003 Series AB Bonds and the related swap agreement were scheduled to mature on April 1, 2033, and the swap's aggregate notional amount of $87.5 million matched the par amount of the 2003 Series AB Bonds. The swap was entered into in July 2003. Under the swap, the City pays the counterparty payments equal to the average of the weekly Bond Market Association (BMA) variable rate index and receives payments equal to 80.2%, the London Interbank Offered Rate (LIBOR) one -month index. Fair value: Because the differential between the BMA index and LIBOR index has increased since execution of the swaps, the swap has an aggregate positive fair value of $1,521,441 as of June 30, 2006. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June 30, 2006 is positive, the City has credit exposure to the counterparty equal to the fair value amount. The swap counterparty Bank of America, was rated AA by Standard & Poor's and Aa by Moody's Investors Service as of June 30, 2005. To mitigate the potential for credit risk, if the counterparties credit quality falls below A+/Aa2, the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Basis risk: The swap exposes the City to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than that stated in the swap. If a change occurs that results in the rates moving to a convergence ratio greater than that stated in the swap, the swap may not provide the expected interest rate risk mitigation. Termination risk: The City or its counterparty may terminate the swap if the other party fails to perform under the terms of the contract. The swap may be terminated by the City if the counterparly's credit quality rating falls below "A—" as issued by Standard & Poor's or"AY as issued by Moody's Investors Service. If at the time of termination, the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap's fair value. Swap payments and associated debt: In December 2004, the City defeased the 2003 Series AB Bonds with proceeds of its 2004 Series A bonds. Because interest payments on the 2004 Series A bonds are determined based on a variable rate short term basis, the City elected to retain the swap. The City expects that as interest rates rise, the difference, or spread, between short-term tax-exempt rates and short-term taxable rates will increase. Under this expectation, the City will receive payments under the swap greater than its payments to the counterparty. As a net receiver on the swap, the City would then have such monies available to offset higher debt service requirements on its 2004 Series A bonds. -41 - CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Basis Swap — 2003 Series C Bonds Objective of the interest rate swap: As a means to reduce its bond interest cost, the City entered into an interest basis swap in connection with its $75.11 million 2003 Electric System Series C bonds (the "2003 Series C Bonds"). Terms: As originally structured, the 2003 Series C Bonds and the related swap agreement mature on April 1, 2033, and the swap's aggregate notional amount of $75.11 million matches the par amount of the 2003 Series C Bonds. The swap was entered into in August 2003. Under the swap, the City pays the counterparty payments equal to the average of the weekly Bond Market Association (BMA) variable rate index and receives payments equal to 78.6% of the London Interbank Offered Rate (LIBOR) one -month index. Fair value: Because the differential between the BMA index and LIBOR index has increased since execution of the swaps, the swaps have an aggregate positive fair value of $624,884 as of June 30, 2006. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swftp, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot. rates implied by the current yield curve for hypothetical zero -coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June 30, 2006 is positive, the City has credit exposure to the counterparty equal to the fair value amount. The swap counterparty, Wachovia, was rated AA- by Standard & Poor's and Aa2 by Moody's Investors Service as of June 30, 2005.' To mitigate the potential for credit risk, if the counterparty's credit quality falls below A+/Aa2, the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Basis risk: The swap exposes the City to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than that stated in the swap. If a change occurs that results in the rates moving to a convergence ratio greater than that stated in the swap, the swap may not provide the expected interest cost savings. Termination risk: The City or its counterparty may terminate the swap if the other party fails to perform under the terns of the contract. The swap may be terminated by the City if the counterparty's credit quality rating falls below "A—" as issued by Standard & Poor's or "A3" as issued by Moody's Investors Service. If at the time of termination, the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap's fair value. Swap payments and associated debt: In December 2004, the City defeased the 2003 Series C with proceeds of its 2004 Series B bonds. Because interest payments on the 2004 Series B bonds are determined based on variable rate short tern basis, the City elected to retain the swap. The City expects that as interest rates rise the difference, or spread, between short-term tax-exempt rates and short-term taxable rates will increase. Under this expectation, the City will receive payments under the swap greater than its payments to the counterparty; As a net receiver on the swap, the City would then have such monies available to offset higher debt service requirements on its 2004 Series B bonds. -42- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Fixed to Variable Swap — 2003 Series C Bonds Objective of the interest rate swap: For this bond issuance the City's asset/liability strategy is to have variable rate debt exposure consistent with its variable rate asset exposure; the result being that as interest rates increase, the City's investment income will offset its increased variable rate debt costs. Terms: In April 2003, the City entered into a pay -variable, receive -fixed interest rate swap for the term of its $75,110,000 2003 Series C Electric System revenue bonds. The notional amountof the swap was $75,110,000. In June 2003, the City elected to terminate the portion of the swap through April 2008 in exchange for a payment of $4,170,000 from the swap counterparty. Under the remaining terms of the swap, the swap becomes effective in April 2008 and terminates in April 2033; the City pays a variable rate equal to the Bond Market Association Municipal Swap Index (BMA), which was 3.97 percent at June 30, 2006, plus 0.84% and receives fixed-rate payments equal to the actual semi-annual interest payments due on the Series C bonds. In December 2004, the City defeased the 2003 Series C Bonds with proceeds of its 2004 Series B bonds. The City expects to terminate this swap prior to its effective date of April 2008. Fair value: As of June 30, 2006, the swap had a negative fair value of $3,023,394. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June 30, 2006 is negative, the City does not have any credit exposure to the counterparty. Should the swap'•s fair value become positive, the City would have credit exposure to the counterparty equal to the fair value amount. As of June 30, 2006, the swap counterparty, Bank of America, was rated AA by. Standard & Poor's and Aa by Moody's Investors Service. To mitigate the potential for credit risk, if the counterparty's credit quality falls below A+/Aa2, the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Interest rate risk: Beginning in April 2008, if the swap is not,previously terminated, the swap increases the City's exposure to interest rate risk. As BMA increases, the City's net payment on the swap increases. Termination risk: The City or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. In addition, the City may optionally terminate the agreement on any date. If at the time of termination the swap has a negative fair value, the City would be liable to the counterparty for an amount equal to the negative fair value. Swap payments and associated debt: The debt associated with the swap, 2003 C Bonds, has been defeased. The City expects to terminate this swap prior to its effective date of April 2008. - 43 - CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Variable to Fixed Swap - 2004 Series A Bonds Objective of the interest rate swap: As a means to reducing its overall exposure to interest rate risk and achieving a lower cost of capital relative to long term fixed rate bonds, the City elected to issue its $90,150,000 2004 Series A Electric System revenue bonds (the "2004 Series A Bonds") in a variable rate mode and enter to a fixed payer swap to achieve synthetic fixed debt. Terms: In December 2004, the City entered into a pay -fixed, receive -variable interest rate swap for the term of the 2004 Series A Bonds. The notional amount of the swap is $90,150,000. Under the original terms of the swap, the City pays the counterparty a fixed rate of 3.637% and receives from the counterparty variable -rate payments equal to 62.87% of the London Interbank Offered Rate (LIBOR) one -month index plus 0.119%. On March 16, 2006, the City amended its fixed payment to 3.607% to the counterparty. The City expects that the variable -rate payments from the swap will approximate the interest payments on the 2004 Series A Bonds, thereby creating synthetic fixed rate debt. The notional amount of the swap and the amortization of the principal of the 2004 A Bonds are exactly matched. Fair value: As of June 30, 2006, the swap had a positive fair value of $1;305,648. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June 30, 2006 is positive, the City has credit exposure to the counterparty equal to the fair value amount. As of June 30, 2006, the swap counterparty, Morgan Stanley was rated A+ by Standard & Poor's and Aa3 by Moody's Investors Service. To mitigate the potential for credit risk, if the counterparty's credit quality falls below"(BBB/Baal), the fair value of the swap will be fully collateralized by the counterparty with U.S, government securities. Collateral would be posted with a third -party custodian. Interest rate risk: The swap is structured to reduce the City's exposure to interest rate risk. Basis risk: The swap exposes the City to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than variable leg of the swap. Termination risk: The City or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. In addition, the City may optionally terminate the agreement on any date. if at the time of termination the swap has a negative fair value, the City would be liable to the counterparty for an amount equal to the negative fair value. Swap payments and associated debt: It is expected that the variable payments received by the City on the swap will approximate the variable interest payments on the 2004 Series A Bonds, resulting in the City's net interest exposure being equaled to the fixed payment on the swap to the counterparty. Because the variable payments on the 2004 Series A Bonds and the swap are on different bases, some basis differential is expected from time to time. -44- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) The following summarizes the expected net debt service if BMA remains constant 3.970% and 1 Month LIBOR remains constant at 5.334% (actual rates as of June 30, 2006). Year Ending Principal Interest Rate Total June 30 Amount Interest Swap, Net Debt Service 2007 $ $ 3,578,955 $ 121,038 $ 3,699,993 2008 3,578,955 121,039 3,699,993 2009 3,578,955 121,038 3,699,993 2010 3,578,955 121,038 3,699,993 2011 3,578,955 121,038 3,699,993 2012-2016 17,894,775 605,189 18,499,964 2017.2021 17,894,775 605,189 18,499,964 ' 2022-2026 17,894,775 605,189 18,499,964 2027-2031 28,275,000 16,718,166 565,397 45,558,563 2032-2036 59,875,000 7,313,567 247,340 67,435,907 2037 2,000,000 66,167 2,238 2,068,404 $ 90,150,000 $ 95,677,000 $ 3,235,732 $ 189,062,732 Variable to Fixed Swap — 2004 Series B Bonds Objective of the interest rate swap: As a means to reducing its overall exposure to interest rate risk and achieving a lower cost of capital relative to long term fixed rate bonds, the City elected to issue its $83,575,000 2004 Series B Electric System revenue bonds (the "2004 Series B Bonds") in a variable rate mode and enter to a fixed payer swap, to achieve synthetic fixed debt. Terms: In December 2004, the City entered into a pay -fixed, receive -variable interest rate swap for the tenn.of its 2004 Series B Bonds. The notional amount of the swap is $83,575,000. Under the terms of the swap, the City pays a fixed rate of 3.572% and receives variable -rate payments equal to 62.87% of the London Interbank Offered Rate (LIBOR) one -month index plus .119%. On March 16, 2006, the City revised its fixed payment to 3.542% to the counterparty. The City expects that the variable -rate payments from the swap will approximate the interest payments on the 2004 Series B Bonds. The notional amount of the swap and the amortization of the principal of the 2004 Series B Bonds are exactly matched. Fair value: As of June 30, 2006, the swap had a positive fair value of $1,455,922. The fair value was estimated using the zero -coupon metliod.'This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June 30, 2006 is positive, the City has credit exposure to the counterparty equal to the fair value amount. As of June 30, 2006, the swap counterparty, Morgan Stanley was rated A+ by Standard & Poor's and Aa3 by Moody's Investors Service. To mitigate the potential for credit risk, if the counterparty's credit quality falls below (BBB/Baal), the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Interest rate risk: The swap is structured to reduce the City's exposure to interest rate risk. Basis risk: The swap exposes the City to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than variable leg of the swap. - 45 - CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Termination risk: The City or the counterparty may terminate the swap if the other party fails to perform under the terns of the contract. In addition, the City may optionally terminate the agreement on any date. if at the time of termination the swap has a negative fair value, the City would be liable to the counterparty for an amount equal to the negative fair value. Swap payments and associated debt: It is expected that the variable payments received by the City on the swap will approximate the variable interest payments on the 2004 Series B Bonds, resulting in the City's net interest exposure being equal to the fixed payment on the swap to the counterparty. Because the variable payments on the 2004 Series B Bonds and the swap are on different bases, some basis differential is expected from time to time. The following summarizes the expected net debt service if BMA remains constant 3.970% and I Month LIBOR remains constant at. 5.334% (actual rates as of June 30, 2006). Year Ending Principal Interest Rate Total June 30 Amount Interest Swap, Net Debt Service 2007 $ $ 3,317,928 $ 112,210' $ 3,430,138 2008 3,317,928 112,210 3,430,138 2009 3,317,928 112,210 3,430,138 2010 3,317,928 .112,210 3,430,138_ 2011 3,317,928 112,210 3,430,138 2012-2016 - 16,589,638 561,050 17,150,688 2017-2021 21,225,000 15,623,439 528,374 37,376,813 2022-2026 41,075,000 8,967,403 303,272 50,345,674 2027-2029 21,275,000 1,286,445 43,507 22,604,952 ' $ 83,575,000 $ 59,056,562 $ 1,997,253 $ 144,628,815 Variable to Fixed Swap — 2004 Taxable Series D Bonds Objective of the interest rate swap: As a means to reducing its overall exposure to interest rate risk, the City elected to enter into a fixed payer swap to achieve synthetic fixed debt with respect to its $69,100,000 2004 Taxable Series D Electric System revenue bonds (the "2004 Taxable Series D Bonds") issued in a variable rate mode. Terms: On March 16, 2006, the City entered into a pay -fixed, receive -variable interest rate swap for the term of its 2004 Taxable Series D Bonds. The notional amount of the swap is $61,825,000. Under the terms of the swap, the City pays a fixed rate of 5.227% and receives variable -rate payments equal to 100.00% of the London Interbank Offered Rate (LIBOR) three-month index. The City expects that the variable -rate payments from the swap will approximate the interest payments on the 2004 Taxable Series D Bonds. The notional amount of the swap and the amortization of the principal of the 2004 Taxable Series D Bonds are exactly matched. Fair value: As of June 30, 2006, the swap had a positive fair value of $1,364,979. The fair value was estimated using the zero -coupon method This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June A, 2006 is positive, the City has credit exposure to the counterparty equal to the fair value amount. As of June 30, 2006, the swap counterparty, Morgan Stanley was rated A+ by Standard & Poor's and Aa3 by Moody's Investors Service. To mitigate the potential for credit risk, if the counterparty's credit quality falls below (BBB/Baal), the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Interest rate risk: The swap is structured to reduce the City's exposure to interest rate risk. -46- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Basis risk: The swap exposes the City to basis risk should the three month LIBOR rate be less than the rate on the 2004 Taxable Series D Bonds. Termination risk: The City or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. In addition, the City may optionally terminate the agreement on any date. If at the time of termination the swap has a negative fair value, the City would be liable to the counterparty for an amount equal to the negative fair value. Swap payments and associated debt: It is expected that the variable payments received by the City on the swap will approximate the variable interest payments on the 2004 Taxable Series D Bonds, resulting in the City's net interest exposure being equaled to the fixed payment on the swap to the counterparty. Because the variable payments on the 2004 Taxable Series D Bonds and the swap are on different bases, some basis differential is expected from time to time. The following summarizes the expected net debt service if I Month LIBOR remains constant at 5.3344% and the 3 Month LIBOR remains constant at 5.4806% (actual rates as of June 30, 2006). Year Ending Principal Interest Rate Total June 30 Amount Interest Swap, Net Debt Service 2007 $ 3,975,000 $ 3,352,072 $ (65,689) $ 7,261,383 2008 4,175,000 3,132,391 (61,384) 7,246,007 2009 4,350,000 2,901,978 (56,868) 7,195,110 2010 4,550,000 2,661,745 (52,161) 7,159,584 2011 4,775,000 2,410,322 (47,234) 7,138,088 2012-2016 27,200,000 7,892,977 (154,674) 34,938,303 2017-2018 12,800,000 942,206 (18,464) 13,723,742 $ 61,825,000 $ 23,293,691 $ (456,472) $ 84,662,219 Basis Swap — Series 2005 Objective of the interest rate swap: As a means to reduce its bond interest cost, the RDA entered into an interest basis swap in connection with its $49,420,000 Industrial Redevelopment Project Tax Allocation Bonds, Series 2005 (the "Series 2005 Bonds"). Terms: As originally structured, the Series 2005 Bonds and the related swap agreement mature on September 1, 2035, and the swap's aggregate notional amount of $49,420,000 million matches the par amount of the Series 2005 Bonds. The swap was entered into on February 16, 2006. Under the swap, the RDA pays the counterparty payments equal to the average of the weekly Bond Market Association (BMA) variable rate index and receives payments equal to 63.0% plus 0.72% of the London Interbank Offered Rate (LIBOR) three-month index. Fair value: Because the differential between the BMA index and LIBOR index has decreased since execution of the swaps, the swaps have an aggregate negative fair value of $231,699 as of June 30, 2006. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero -coupon bonds due on the date of each future net settlement on the swap. -47- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Credit risk: As the swap's fair value as of June 30, 2006 was negative, the RDA does not have credit exposure to the counterparty. Should the RDA's fair value become positive, the RDA would have credit exposure to the counterparty equal to the fair value amount. The swap counterparty, Lehman Brothers, was rated At by Standard & Poor's and Al by Moody's Investors Service as of June 30, 2006. To mitigate the potential for credit risk, if the counterparty's credit quality falls below "A-" or "AY, the fair value of the swap will be fully collateralized by the counterparty, with U.S. government securities. Collateral would be posted with a third -party custodian. Basis risk: The swap exposes the RDA to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than that stated in the swap. If a change occurs that results in the rates moving to a convergence ratio greater than that stated in the swap, the swap may not provide the expected interest cost savings. Termination risk: The RDA or its counterparty may terminate the swap if the other party fails to perform under the terns of the contract. The swap may be terminated by the RDA at any time. If at the time of termination, the swap has a negative fair value, the RDA would be liable to the counterparty for a payment equal to the swap's fair value. The following summarizes the expected net debt service if BMA remains constant 3.970% and 3 Month LIBOR remains constant at 5.4806% (actual rates as of June 30, 2006). YearBnding Principal Basis Total June 30 Amount Interest Swap, Net Debt Service 2007 $ - $ 2,275,306 $ (100,213) $ 12,175,093 2008 2,275,306 (100,213) 2,175,093 2009 2,275,306 (100,213) 2,175,093 2010 1,160,000 2,256,456 (99,037) 3,317,419 2011 1,285,000 2,216,725 (96,558) 3,405,167 2012-2016 6,720,000. 10,371,369 (443,242) 16,648,126 2017-2021 7,720,000 81822,491 (369,847) 16,172,644 2022-2026 7,300,000 6,972,025 (292,933) 13,979,092 2027-2031 10,020,000 5,046,719 (208,760). 14,857,959 2032-2036 15,215,000 2,012,875 (81,633) 17,146,242 $ 49,420,000 $ 44,524,578 $ (1,892,649) S. 92,051,929 Variable to Fixed Swap — 2006 Series A Gas Bonds Objective of the interest rate swap: As a means to reducing its overall exposure to interest rate risk, the Vernon Natural Gas Financing Authority elected to enter into a fixed payer swap to achieve synthetic fixed debt with respect to its $200,000,000 Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series A (the "2006 Series. A Gas Bonds") issued in a variable rate mode. Terms: The City entered into four (4) pay -fixed, receive -variable interest rate swaps for the term of its 2006 Series A Gas Bonds. The notional amounts of each of the four (4) swaps is $50,000,000. Under the terms of the swaps, the City pays a fixed rate of 3.683% and receives variable -rate payments equal to 62.6% of the London Interbank Offered Rate (LIBOR) one month index. The City expects that the variable -rate payments from the swaps will approximate the interest payments on the 2006 Series A Gas Bonds. The notional amount of the swaps and the amortization of the principal of the 2006 Series A Gas Bonds are exactly matched. Fair value: As of June 30, 2006, the swaps had a negative fair value of $1,929,994. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. - 48 - CITY OF VERNON,.CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Credit risk: As the swap's fair value as of June 30, 2006 is negative, the City does not have credit exposure to the counterparty. Should the City's fair value become positive, the City would have credit exposure to the counterparty equal to the fair value amount. As of June 30, 2006, the swap counterparty, Citibank, N.A. was rated AA by Standard & Poor's and Aal by Moody's Investors Service. To mitigate the potential for credit risk, if the counterparty's credit quality falls below (A-/A3), the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Interest rate risk: The swap is structured to reduce the City's exposure to interest rate risk. Basis risk: The swap exposes the City to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than variable leg of the swap. Termination risk: The City or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. In addition, the City may optionally terminate the agreement on any date. If at the time of termination the swap has a negative fair value, the City would be liable to the counterparty for an amount equal to the negative fair value.. Swap payments and associated debt: It is expected that the variable payments received by the City on the swap will approximate the variable interest payments on the 2006 Series A Gas Bonds, resulting in the City's net interest exposure being equaled to the fixed payment on the swap to the counterparty. Because the variable payments on the 2006 Series A Gas Bonds and the swap are on different bases, some basis differential is expected from time to time. The following summarizes the expected net debt. service if BMA remains constant 3.970% and I Month LIBOR remains constant at 5.3344% (actual rates as of June 30, 2006). Year Ending Principal Interest Rate Total June 30 Amount Interest Swap, Net Debt Service 2007 7,940,000 687,331 8,627,331 2008 9,950,000 7,610,821 658,836 18,219,656 2009 10,400,000 7,200,918 623,352 19,224,270 2010 10,775,000 6,775,632 586,537 18,137,169 2011 11,200,000 6,333,804 549,290 18,082,094 2012-2016 63,225,000 24,385,229 2,110,923 89,721,152 2017-2021 77,150,000 10,312,406 892,700 88,355,106 2022 17,300,000 114,468 9,909 17,424,377 $ 200,000,000 $ 70,673,278 $ 6,117,878 $ 276,791,156 Variable to Fixed Swap — 2006 Series B and C Gas Bonds Objective of the interest rate swap: As a means to reducing its overall exposure to interest rate risk, the Vernon Natural Gas Financing Authority elected to enter into a fixed payer swap to achieve synthetic fixed debt with respect to its $115,440,000 Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series B and $115,405,000 Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series C (the "2006 Series B and C Gas Bonds") issued in a variable rate mode. Terms: The City entered into a pay -Fixed, receive -variable interest rate swap for the term of its 2006 Series B and Series C Gas Bonds. The notional amount for the swap is $230,845,000. Under the terms of the swaps, the City pays a fixed rate of 3.753% and receives variable -rate payments equal to 64.8% of the London Interbank Offered Rate (LIBOR) one month index. The City expects that the variable -rate payments from the swaps will approximate the interest payments on the 2006 Series B and C Gas Bonds. The notional amount of the swaps and the amortization of the principal of the 2006 Series BC Gas Bonds are exactly matched. -49- CITY OF VERNON, CALIFORNIA Notes 'toBasic Financial Statements (Continued) June 30, 2006 NOTE 7 — BOND INTEREST RATE SWAP AGREEMENTS (CONTINUED) Fair value: As of June 30, 2006, the swaps had a negative fair value of $1,341,639. The fair value was estimated using the zero -coupon method. This method calculates the future net settlement payments required by the swap, assuming that the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero - coupon bonds due on the date of each future net settlement on the swap. Credit risk: As the swap's fair value as of June 30, 2006 is negative, the City does not have credit exposure to the counterparty. Should the City's fair market value become positive, the City would have credit exposure to the counterparty equal to the fair value amount. As of June 30, 2006, the swap counterparty, Citibank, N.A. was rated AA by Standard & Poor's and Aal by Moody's Investors Service. To mitigate the potential for credit risk, if the counterparty's credit quality falls below (A-/A3), the fair value of the swap will be fully collateralized by the counterparty with U.S. government securities. Collateral would be posted with a third -party custodian. Interest rate risk: The swap is structured to reduce the City's exposure to interest rate risk. Basis risk: The swap exposes the City to basis risk should the relationship between LIBOR and BMA converge to a ratio higher than variable leg of the swap. Termination risk: The City or the counterparty may terminate the swap if.the other party fails to perform under the terms of the contract. In addition, the City may optionally terminate the agreement on any date. If at the time of termination the swap has a negative fair value, the City would be liable to the counterparty for an amount equal to the negative fair value. Swap payments and associated debt: It is expected that the variable payments received by the City on the swap will approximate the variable interest payments on the 2006 Series B and Series C Gas Bonds, resulting in the City's net interest exposure being equaled to the fixed payment on the swap to the counterparty. Because the variable payments on the 2006 Series BC Gas Bonds and the swap are on different bases, some basis differential is expected from time to time. The following summarizes the expected net debt service if BMA remains constant 3.970% and I Month LIBOR remains constant at 5.3344% (actual rates as of June 30, 2006). Year Ending Principal Interest Rate Total June 30 Amount Interest Swap, Net Debt Service 2007 $ - $ 9,164,547 $ 684,014 $ 9,848,561 2008 11,420,000 8,786,735 655,815 20,862,550 2009 11,930,000 8,316,499 620,719 20,967,206 2010 . 12,360,000 7,828,642 584,306 20,772,948 2011 12,855,000 7,321,573 546,460 20,723,033 2012-2016 72,795,000 28,238,312 2,107,622 103,140,935 2017-2021 89,345,000 11,980,501 894,188 102,219,689 2022 20,140,000 133,260 9,946 20,283,206 $ 230,845,000 $ 81,770,057 $ 6,103,070 $ 318,718,127 -50- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 8 —OTHER DERIVATIVE FINANCIAL INSTRUMENTS The City's Light and Power Fund (Fund), which accounts for the maintenance and operations of the City's electric utility plant, enters into contracts for electricity and natural gas to meet the expected needs of its retail customers. The Fund also sells excess electricity capacity during periods when it is, not needed to meet its retail requirements. Derivative contracts (futures and options) designated as cash flow hedges are entered into by the Fund to hedge variable price risk associated with the purchase and sale of commodities and extend out to March30, 2007. At June 30, 2006, the Fund's derivative contracts totaled $6,109,607 and are recorded at cost in the Fund's financial statements and are included with other assets. For the year ended June 30, 2006, the City realized a net loss of $3,433,453 on closed derivative contracts. The fair value of the derivative instruments at June 30, 2006 totaled $937,615. Unrealized gains and losses on the derivative instruments are not recognized in the accompanying financial statements since the Fund does not apply FASB statements issued after November f, 1989. NOTE 9 — RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; natural disasters; unemployment coverage, and providing health benefits to employees, retirees, and their dependents. The City is self -insured for its general liability, workers' compensation, and property liability. The City has chosen to establish risk financing Internal Service Funds, whereby assets are set aside for claim settlements associated with the above risks of loss up to certain limits. The City has obtained various insurance policies that provide coverage for "Special Form Perils" against direct physical loss or damage, including earthquake and flood, to all real and personal property of the City, including equipment, business and revenue interruption, errors and omissions, boiler and machinery and pollution legal liability. The earthquake and flood portion of the policies have a 5% deductible of the total insurable values per building, structure or covered item at the time and place of loss. In the most recent "Statement of Values" for the City, real and personal property total insured values equaled $293,136,673. Crime (Employee Theft and, Depositors Forgery and Alteration, and Computer and Funds Transfer Fraud) coverage in also in force with a limit $100,000 for each line of coverage. The City is self insured for the first $300,000 of workers' compensation claims and for the first $2,000,000 of its general liability coverage. Excess coverage is provided by the Independent Cities Risk Management Authority (the "ICRMA"), a joint powers authority whose purpose is to develop and fund programs of excess insurance for its member cities. The ICRMA is governed by a board of directors consisting of representatives of its member cities. Excess coverage is provided by ICRMA. Self-insurance and ICRMA limits are as follows: Type of Coverage Self -Insurance General Liability Up to $2,000,000 Workers' Compensation Up to $300,000 Property Up to $ 10,000 -51- ICRMA Not Applicable $300,000 to $10,000,000 Not Applicable CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 9 — RISK MANAGEMENT (CONTINUED) Insured limits are: Type of Coverage Limits Excess General Liability $10,000,000 excess of $2,000,000 (self insured) Excess General Liability $10,000,000 excess of $10,000,000 Amounts in excess of these limits are self -insured. There have been no significant reductions of coverage from the prior year. There have been no settlements exceeding insurance coverage For each of the past three fiscal years. The unpaid claims liabilities included in each of the self-insurance Internal Service Funds are based on the results of actuarial studies and third -party administrator claim reports and include amounts for claims incurred but not reported, including loss adjustment expenses. Claims liabilities are calculated considering the effects of inflation and recent claim settlement trends, including frequency and amount of payouts.and other economic and social factors. Changes in the balances of claims liabilities during the past two fiscal years for all self-insurance funds combined are as follows: Fiscal Year Ended June 30 2006 2005 Claims payable, beginning of fiscal year $ 4,992,957 $ 5,252,825 Incurred claims 2,998,117 409,603 Claims payments (632,501) (669,471) Claims payable, end of fiscal year $ 7,358,573 $ 4,992,957 NOTE 10 —PENSION PLAN The City contributes to the California Public Employees' Retirement System (PERS), an agent multiple -employer retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. All full-time safety (police and fire personnel) and miscellaneous personnel and temporary or part-time employees who have worked 1,000 hours in a fiscal year are eligible to participate in the PERS. Benefits vest after five years of service. Employees who retire at, age 50 with five years of credited service are entitled to retirement benefits. Monthly retirement benefits are based on an employee's average compensation for his or her single highest year of compensation, for each year of credited service. Miscellaneous members with five years of credited service may retire at age 55 with full benefits based on a benefit factor derived from the "2% at 55 Miscellaneous Factor" benefit factor table and between age 50 and 54 with reduced retirement benefits. Safety members may retire at age 50 with full benefits based on a benefit factor derived from the "3% at 50 Safety Factor" for Police Department Employees and "2% at 50 Safety Factor" for Fire Department Employees benefit factor table with five years of credited service. The PERS also provides death and disability benefits. These benefit provisions and all other requirements are established by State statute and City ordinance. The City's plan does not issue a stand-alone financial report but is included in the PERS report, which can be obtained from PERS at Lincoln Plaza, 400 P Street, Sacramento, California 95814. -52- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 10—PENSION PLAN (CONTINUED) The State -required City employee salary contributions of 7% for miscellaneous employees and 9% for safety members are subsidized by the City. The City is required to contribute the remaining amounts necessary to fund the benefits for its members, using the actuarial basis adopted by the PERS Board of Administration. The City's total contribution to the PERS for the year ended June 30, 2006 was $5,792,468. City contribution rates as a percentage of covered payroll were 8.605% for miscellaneous plan members and 25.426% for safety plan members. The City's contribution was made in accordance with actuarially determined requirements based on an actuarial valuation performed as of June 30, 2003. The PERS uses the entry age normal actuarial cost method; which is a projected benefit cost method that takes into account those benefits expected to be earned in the future as well as those already accrued. According to this cost method, the normal cost for an employee is the level amount that would fund the projected benefit if it were paid annually from the date of employment until retirement. The PERS uses a modification of the entry age normal cost method whereby the employer's total normal cost is expressed as a level percentage of payroll. Unfunded liabilities are amortized over a closed, 20-year period. Significant actuarial assumptions used in the valuation included (a) a rate of return on, the investment of present and future assets of 7.75% a year, compounded annually; (b) overall payroll growth of 3.25%, compounded annually; and (c) a merit scale varying by duration of employment coupled with an assumed annual inflation growth of 3.00% and an annual production growth of 0.25%. The actuarial value of assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a 15 year period. Trend information for the current and two preceding fiscal years is as follows: Percentage Fiscal Year Annual Pension of Ended Cost (APC) Amount APC Net Pension June 30 Contributed Contributed Obligation 2006 $ 5,792,468 $ 5,792,468 100% - 2005 4,610,702 4,610,702 100% - 2004 2,742,685 2,742,685 100% The following schedule represents the required supplemental information for the three most recent actuarial valuations. This schedule provides information about progress made in accumulating sufficient assets to pay benefits when due (dollar amounts in millions) (unaudited): Actuarial Actuarial Actuarial Unfunded Funded Annual UAAL Valuation Accrued Value of (Overfunded) Ratio Covered (OAAL) As a Date June 30 Liability Assets' UAAL Payroll % of Covered (AAL) (OAAL) Payroll (a) (b) (a)-(b) (b)/(a) (c) [(a)-(b)]/(c) 2004 $ 180.3 $ 170.5 $ 9.8 94.5% $ 22.0 44.6% 2003 172.2 164.8 7.4 95.7% 21.6 34.1 % 2002 161.6 166.3 (4.6) 102.9 19.9. (23.3) -53- CITY OF VERNON, CALIFORNIA . Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 11 — LEGAL SETTLEMENT In July 2006, the City settled a dispute over a wholesale power purchase contract, with Mirant Americas Energy Marketing, LP ("MAEM") for $15,000,000. This sum shall be paid to MAEM in installments, beginning in August 2006, over 30 months, plus interest at 7% per annum. The controversy arose in connection with the delivery of power under the contract and the filing by MAEM of a petition in bankruptcy court. In November 2006, the City settled a dispute over contract obligations with its former electric distribution system maintenance provider, Resource Management International, Inc. ("RMl"). RMI has paid the sum of $7,400,000 to the City in order to settle all disputes between the parties. NOTE 12 — DEFICITS IN FUND EQUITY The Gas Enterprise Fund has negative net assets of $6,525,211 at June 30, 2006, which will be recovered from future operating revenues from customers. The Equipment Replacement Internal Service Fund has negative net assets of $149,848 at June 30, 2006. To the extent such deficit is attributed to shortfalls in charges to other funds, such deficit will be recovered through future rate increases. A deficit arising from decreases in fair value of pooled investments will not be recovered through charges to other funds. NOTE 13— EXCESS OF EXPENDITURES OVER APPROPRIATIONS For the current year, the City's excess expenditures over appropriations in the general government were $6,338,061. However, these excess expenditures over appropriations were offset by the under expenditures of S3,615,057 in public safety and $3,205,155 in public works. The City's excess expenditures over appropriations for capital outlay were $7,274,739. These expenditures were incurred by the City in its current industrial development programs and were funded by available fund balance in the general fund. NOTE 14 — LIGHT AND POWER OPERATIONS AND COMMITMENTS Deregulation Effective April 1, 1998, competition was introduced into California's electric utility market, and customers of the slate's investor -owned utilities (IOUs) became eligible for direct access. The implementation of competition in accordance with State Assembly Bill 1890 (AB 1890) resulted in significant structural changes to the electric power industry, including mandated direct access for IOU customers, energy sales through the California Power Exchange ("CPX"), and management of transmission assets through an Independent System Operator (ISO). AB 1890 also legislated the recovery of stranded investment through the assessment of a non -by passable competition transition change (CTC). The original deregulation legislation applied to the State's IOUs and did not compel participation by publicly owned utilities, such as the City's electric utility. During the fiscal year 2001, the City made sales of energy to CPX. CPX made minimal payments on these sales and filed for protection under Chapter 1 1 of the Federal Bankruptcy Statue in January 2001. As of June 30, 2006 a total of $3,061,069 was due the City from CPX. The City has recorded a $1,000,000 reserve for uncollectible accounts against this $3,061,069 receivable at June 30, 2006. Particinaline Transmission Owner On August 30, 2000, the City filed a. petition for declaratory order with the Federal Energy Regulatory Commission (FERC) requesting a determination by the FERC that the City's Transmission Revenue Requirement (TRR), as approved by its rate setting body, the City Council, is proper for purposes of the City becoming a Participating Transmission Owner (PTO) in the California ISO. The FERC issued its order accepting the City's petition, with certain modification, on October 27, 2000. Certain aspects of the FERC order were challenged by some of the State's other PTOs. Recently, a federal appeals court ruled that the way the. FERC arrived at its decision was improper and remanded the case back to the FERC for further proceedings. The City's expected outcome of these proceedings is discussed in Note 15. As a PTO, the City has turned over operational control of its transmission entitlements to the ISO effective January 1, 2001 and shall be reimbursed based upon its TRR by the ISO through the ISO's collection of a transmission access charge (TAC). -54- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 14 — LIGHT AND POWER OPERATIONS AND COMMITMENTS (CONTINUED) On December 21, 2000, the. [SO filed, on behalf of itself and the Participating Transmission Owners (PTO),, a number of changes to its Transmission Control Agreement (TCA) to recognize Vernon's application to become a Participating Transmission Owner. The ISO also filed revisions to identify, the transmission interests that the City will be turning over to the ISO's operational control and the inclusion of an explicit contract provision to ensure that all PTOs, including an entity such as the City, which is not subject to the rate jurisdiction or refund jurisdiction of FERC under section 205 and 206 of the Federal Power Act (FPA), make appropriate refunds or payment' adjustments to implement any relevant FERC order. Project Conimilynents A. Southern California Public Power Authority In 1980, the City entered into a joint powers agreement with nine (9) Southern California cities and an irrigation district to form the Southern California Public Power Authority (the "Authority"). The Authority's_ purpose is the planning, financing, acquiring, constructing and operating of projects that generate or transmit electric energy. The Authority purchased a 5.91% interest in the Palo Verde Nuclear Generating Station (the "Station"), a nuclear -fired generating station near Phoenix, Arizona, from the Salt River Project Agricultural Improvement and Power District, and a 6:55% share of the right to use certain portions of the Arizona Nuclear Power Project Valley Transmission System. The City has a 4.9% entitlement share of the Authority's interest in the station. Between 1983 and 2002, the Authority issued $3.166 billion of Power Project Revenue Bonds to finance the purchase of the Authority's share of the Station and related transmission rights. The bonds are not obligations of any member of the Authority or public agency other than the Authority. Under a power sales contract with the Authority, the City is obligated on a "take or pay" basis for its proportionate share of power generated, as well as to make payments for its proportionate share of the operating and maintenance expenses of the Station, debt service on the bonds and any other debt, whether or not the project or any part thereof or its output is suspended, reduced or terminated. The City's proportionate share of costs during Fiscal year 2006 was $2,300,256. B. Hoover Dam Power Plant Upgrade Program In January 1987, the City entered into a contract with the Federal Bureau of Reclamation to fund part of an upgrading program of the Hoover Dam power plant to increase the plant's generating capacity. In exchange, the City will receive its pro rats share of the additional power produced. Total program costs are estimated to be $155 million. As of June 30, 2006, the City's total advances were $6,736,123 for the upgrading program. At June 30, 2006, the outstanding note receivable was $4,113,951. The City has no obligation to advance funds in the future. The note is being repaid with interest over aperiod of 30 years. The City must also make payments for its pro rata share of operating and maintenance costs not recovered by the plant through revenues. The amount paid during the current year for purchased power was reduced by principal and interest amounts totaling $489,356 due the City on the outstanding note receivable. The contract expires in June 2017. C. California -Oregon Transmission Project In 1991, the City entered into the Interim Participation Agreement with several Northern California entities and the Western Area Power Administration. This agreement calls for the construction and operation of the project. Each party in the agreement has been allocated a respective share of the construction costs. The City'.s share is 8.05%. As of June 30, 2006, the City's share of total costs incurred for the project's planning and construction was $37,316,527. -55- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 14 — LIGHT AND POWER OPERATIONS AND COMMITMENTS (CONTINUED) Power Purchase Commitments As of June 30, 2006, the City has entered into long-term commitments to purchase power subject to certain conditions. The following table summarizes the value of the commitments at June 30, 2006 (in thousands): Fiscal Year Amount 2006-07 $ 14,091 2007-08 14,091 2008-09 10,358 2009-10 6,600 2010-11 3,311 $ 48,451 Electric Rate Increase Effective November 1, 2006, the City increased its electric rates 5% charged for electrical energy distributed and supplied by the City within its boundaries. NOTE 15- POST -EMPLOYMENT BENEFITS The City Council approved a post -employment benefit plan for all employees with 20 years of service who retire at 60 or 30 years or more of service to the City. The plan pays for qualified employees' medical and dental insurance premiums and claims from age 60 to 65. Funding of the plan is on a pay-as-you-go basis. During the year ended June 30, 2006, approximately 105 (including HMO and PPO participants, City paid and non -City paid) employees were eligible to receive benefits. Amounts paid for premiums for the year ended June 30, 2006 totaled $161,421. NOTE 16 —CONTINGENCIES At June 30, 2006, a number of lawsuits and claims were pending against the City that arose in. the normal course of operations. Management estimates that certain pending lawsuits and claims may result in additional liabilities of approximately $500,000. The City is currently in proceedings with the FERC and certain other utilities and agencies regarding, the appropriate. Transmission Revenue Requirement ("TRR") for the City. The City is currently receiving revenue from the ISO based on a TRR of approximately $10.6 million annually. In addition, the City is involved in litigation over the market price charged by the City for certain electric energy sales made during the period October 2, 2000 through June 20, 200E FERC has ordered reductions in certain of the market prices for electric energy during that period, and the legitimacy of that order and its impact on entities such as the City is being litigated before the United States Court of Appeals and other courts. The City cannot predict the outcome of either of these proceedings, but it is possible that those outcomes could affect the level of the City's TRR and/or cause the City to be subject to one or more refund obligations. The ultimate loss related to these matters, if any, is unknown at this time and no amount has been accrued in the accompanying financial statements. -56- CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE.17 — FUTURE GASB PRONOUNCEMENTS The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB Statements: In April 2004, GASB issued Statement No. 43, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans. This statement establishes uniform financial reporting standards for other postemployment benefits (OPEB) plans: The approach followed in this statement generally is consistent with the approach adopted for defined benefit pension plans with modifications to reflect differences between pension plans and OPEB plans. The statement applies for OPEB trust funds included in the financial reports of plan sponsors or employers, as well as for the stand-alone financial reports of OPEB plans or the public employee retirement systems, or other third parties, that administer them. This statement also provides requirements for reporting of OPEB funds by administrators of multiple -employer OPEB plans, when the fund used to accumulate assets and pay benefits or premiums when due is not a trust fund. This statement is effective for the City's fiscal year ending June 30, 2007. In June_ 2004, GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, which addresses how state and local governments should account for and report their costs and obligations related to postemployment healthcare and other nonpension benefits. Collectively, these benefits are commonly referred to as other postemployment benefits, or OPEB. The statement generally requires that employers account for and report the annual cost of OPEB and the outstanding obligations and commitments related to OPEB in essentially the same manner as they currently do for pensions. Annual OPEB cost for most employers will be based on actuarially determined amounts that, if paid on an ongoing basis, generally would provide sufficient resources to pay benefits as they come due. This statement's provisions may be applied prospectively and do not require governments to fund their OPEB plans. An employer may establish its OPEB liability at zero as of the beginning of the initial year of implementation; however, the unfunded actuarial liability is required to be amortized over future periods. This statement also establishes disclosure requirements for information about the plans in which an employer participates, the funding policy followed, the actuarial valuation process and assumptions, and, for certain employers, the extent to which the plan has been funded over time. This statement is effective for the City's fiscal year ending June 30, 2008. In June 2005, GASB issued Statement No. 47, Accounting for Termination Benefits. This statement provides guidance to governmental employers for measuring, recognizing, and reporting liabilities and expense/expenditures related to all termination benefits, including voluntary termination benefits, without limitation as to the period of time during which the benefits are offered, and involuntary termination benefits. The requirements of this Statement are effective in two parts. For termination benefits provided through an existing defined benefit OPEB plan, the provisions should be implemented simultaneously with GASB Statement No. 45. For all other termination benefits, this Statement is effective for fiscal periods beginning after June 15, 2005. There was no impact on the financial statements for the fiscal year ended June 30, 2006, as a result of implementing this Statement. In September 2006, GASB issued Statement No. 48, Sales and Pledges of Receivables and Future Revenues and Intra-Enlity Transfers ofAssels and Future Revenues. This Statement establishes criteria that governments will use to ascertain whether the proceeds received should be reported as revenue or as a liability and provides additional guidance for sales of receivables and future revenues within the same financial reporting entity. This Statement includes a provision that stipulates that governments should not revalue assets that are transferred between financial reporting entity components. This Statement also includes guidance to be used for recognizing other assets and liabilities arising from a sale of specific receivables or future revenues, including residual interests and recourse provisions. The disclosures pertaining to future revenues that have been pledged or sold are intended to provide financial statement users with information about which revenues will be unavailable for other purposes and how long they will continue to be so. This Statement is effective for the City's fiscal year ending June 30, 2008. MWE CITY OF VERNON, CALIFORNIA Notes to Basic Financial Statements (Continued) June 30, 2006 NOTE 17 — FUTURE GASB PRONOUNCEMENTS (CONTINUED) In December 2006, GASB issued Statement No. 49, Accounting and Financial Reporling for Pollution Rmmediation Obligations. This statement requires state and local governments to provide the public with better information about the financial impact of environmental cleanup and identifies the.circumstances under which a governmental entity would be required to report a liability related to pollution remediation and how to measure that liability. The statement also requires governments to disclose information about their pollution obligations associated with clean up efforts in the notes to the financial statements. GASB Statement No. 49 will be effective for financial statements for periods beginning after December 15, 2007, but liabilities will be measured at the beginning of that period so that beginning net assets can be restated: The City has not determined the impact on the City of the adoption of these statements. -58- REQUIRED SUPPLEMENTARY INFORMATION CITY OF VERNON, CALIFORNIA Required Supplementary Information Budgetary Comparison Schedule General Fund For the Fiscal Year Ended June 30, 2006 Variance with Final Budget. Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: - -. Taxes $ 10,109,600 $ 10,108,Wo $ 8,943,668 $ (1,164,932) Special assessments 650,000 650,000 736,221 86,221 Licenses and permits - 1,225,000 - - 1,225,000 1,161,188 (63,812) Fines, forfeitures and penalties 267,000 267,000 188,988 (78,012) Revenues from use of monies and properties - - 1,725,347 - 1,725,347 Net decrease in fair value of investments - (24,546) (24,546) Intergovernmental revenues - 290,414 290,414 Charges for services .. 9,000,000 9,000,000 8,674,077 (325,923) Otherrevenues - ' 1,552,680 1,552,680 - 697,754 - (855,426) Total revenues 22,803,280 22,803,280 22,392,611 (410.669) EXPENDITURES: General government - 10,229,382 10,229,382 16,567,443 (6,338,061) Public safety 22,272,747 22.272,747 . 18,657,690 3,615,057 Public works - 9,215,342 8,215,342 5,010,187 --3,205,155 Health services 1,509,509 1.509,509 1,246,963 262,546 Capital outlay 4,229,441 4,229,441 11,504,180 (7,274,739) Total expenditures 46,456,421 46,456,421 52,986,463 (6,530,042) Deficiency ofrevenues under expenditures (23,653,141) (23,653,141) (30,593,852) (6,940,711) Other financing sources: _ Transfers in/(out) - - 8,320,505 8,320,505 (21,491,619) (29.812,124) Net change _ $ (15,332,636) $ (J 5,332,636)' Reconciliation ofGAAP basis fund balance Current year encumbrances 812,531 812,531 NET CHANGE IN FUND BALANCE - (51,272,940) (35,940,304) FUND BALANCE, BEGINNING OF YEAR 72,233,702 82,900,733 FUND BALANCE, END OF YEAR S 20.960,762 S 46,960,429 See accompanying note to the required supplementary information. -59. CITY OF VERNON, CALIFORNIA Notes to Required Supplementary Information June 30, 2006 NOTE 1— BUDGET The City adheres to the following general procedures in establishing its annual budget, which is reflected in the accompanying General Fund budgetary comparison schedule. • An annual budget is adopted by the City Council that provides for the general operation of the City. The budget includes authorized expenditures and estimated revenues of the General Fund, Special Revenue Funds and Capital Projects Funds; • The budget is formally integrated into the accounting system and employed as a management control device during the year; • Encumbrances, which are commitments related to executory contracts for goods and services, are recorded to assure effective budgetary control and accountability; • Encumbrances outstanding at year-end do not constitute expenditures or liabilities under GAAP. Encumbrances outstanding at year-end are reported as reservations of fund balance for subsequent year expenditures. Unencumbered appropriations lapse at year-end; • The budget is adopted on a modifiedaccrual basis, except that encumbrances are treated as budgetary basis expenditures in the year of incurrence of the commitment to purchase; • The City Administrator is authorized to transfer appropriations between activities within any fund. Expenditures may not exceed appropriations at the fund level. Excess expenditures over appropriations are financed by beginning fund balances. The final budgeted amounts used in the accompanying general fund budgetary comparison schedule include any amendments made during fiscal year 2006. Encumbrances carried forward from the prior year are reflected in the original budget. -60- None. Schedule 5.1(f) Affiliated Transactions 5.1(fl-1 None. Section 5.1(Lr) Litigation 5.1(g)-1 None. Section 5.1(h) Tax Liabilities 5.1(h)-1 None. Schedule 5.2(a)(1) Compliance with Governmental Rules and Permits 5.2(a)(1)-1 Schedule 5.2(a)(2) Environmental Legal Compliance The Historical Recognized Environmental Conditions set forth in the Phase I Report. The area surrounding the Facility Site, and the Facility Site itself, has a very long history of industrial operations, potential Releases from which may have affected (or may affect in the future) the Facility Site. 2. Seller will obtain any variance or stipulated order of abatement from the South Coast Air Quality Management District required in connection with the start-up and/or testing of the Facility after the repairs associated with the outage described in Section 5.2(m). 5.2(a)(2)-1 None. Schedule falll Zoning and Land Use 5.2(b)-1 None. Schedule 5j 2 Condemnation and Other Proceedings; Outstanding Collateral 5.2(c)-1 Schedule 5.2(e) Sufficiency of Assets Spare Parts — Any spare parts consumed in the ordinary course between the date of the Agreement and the Closing. 2. Insurance policies — Except to the extent respecting the rights and claims made after the date of the Agreement as set forth in the Agreement. Annually renewable emission rights credits need to be renewed and are only valid for the period set forth therein 4. With respect to the first sentence of Section 5.2(e), all matters described in Schedule 5.2m. 5. With respect to the last sentence of Section 5.2(e), all matters described in Schedule 2.2(o). 5.2(e)-1 Schedule 5.2(f) Facility Contracts Services Agreement between Vernon and NALCO Company, dated September 5, 2006 2. Services Agreement between Vernon and Thomason Mechanical Corporation, dated March, 2006 First Amendment to Services Agreement between Vernon and Thomason Mechanical Corporation, dated July, 2006 4. Second Amendment to Services Agreement between Vernon and Wood Group Field Services, Inc. (FKA Thomason Mechanical Corporation), dated October 4, 2006 5. Ammonia Delivery Purchase Contract between Vernon and Hill Brothers Chemical Company dated December 3, 2004 6. Amendment to Ammonia Delivery Purchase Contract between Vernon and Hill Brothers Chemical Company dated August 28, 2006 7. Services Agreement for the Malburg Generating Station, MP Contract Number I1-COV-06, dated as of September 25, 2007, between Siemens Demag Delaval Turbomachinery, Inc. and the City of Vernon 8. Such agreements as Seller may enter into to perform its obligations under Section 7.11 5.2(f)-1 Schedule 5.2(i) Taxes None. Schedule fg.W Seller's Employees Facility Contract Employees 1. Michael Bonfiglio Power Plant Manager 2. Ken Moe Power Plant O&M Manager 3. Laura Noguera Power Plant Operations, Compliance Manager 4. Dave Richards Power Plant Operator 5. Matthew Richards Power Plant Operations 6. Jeff Smith Power Plant Lead Operations 7. Yolanda Taylor Power Plant Clerical 8. Mark Thompson Manager, Power Plant Operations 9. Serafin Tinoco Power Plant Operations Facility Direct Employees: 1. 2. 3. 4. 5. 6. Rudy Valdez Adriano Marki Sal Delgadio Jesse Palomarez Erik Knutson Rich Recano Power Plant Operations DCS / I&C Electrical Outside Operator Plant Engineer Warehouseman 5.20)-1 Schedule 5.2(k) Absence of Changes 1. All matters described in Schedule 5.2(m). 5.2(k)-1 Schedule 5,M Insurance None. Schedule 5.2(m) September 27, 2007 Outage On September 27, 2007, Unit 1 at the Facility suffered an unscheduled outage (the "Outage"). All power turbine blades and guide vanes in Unit 1 have been severely damaged or are missing. After the Outage, Unit 2 at the Facility was shut down as a precautionary measure per instructions from the OEM (Siemens). 5.2(m)-1 None. Schedule 5.3 Hoover Interest 5.3-1 Schedule 5.3(b) Hoover Contracts Contract for Electric Service between United States Department of Energy, Western Area Power Administration, Boulder Canyon Project and Vernon, dated January 6, 1987 5.3(b)-1 None. Schedule 5.3(c) CFD (Hoover) Consents, Approvals and Notices 5.5(c)-1 Schedule 6.1(d) Purchaser's Required Consents, Approvals and Notices None. r Schedule 8.6 Substitute Collateral 8.6-1 Issuing Bank Letterhead Address Date: [ ], 2007 Irrevocable Standby Letter of Credit Number: [ ] Beneficiary: City of Vernon Applicant: [address] Address: [Advising Bank, if applicable] [Confirming Bank, if applicable] Amount: USD: $17,000,000 US Dollars: Seventeen Million Dollars We hereby issue our Frrevocable Standby Letter of Credit at this office in your favor for the account of [insert the appropriate party: ] ("Account Party") and at the request of the Account Party by sight payment against the following documents: 1. Your sight draft drawn on us marked "drawn under [Issuing Bank] [Letter of Credit Number] dated [Date]"; AND 2. Beneficiary's signed statement certifying as follows: "Account Party and/or Bicent (California) Power LLC (f/k/a Beowulf (Vernon) Power LLC) ("Bicent California") has failed to close the transactions under the Purchase and Sale Agreement (the "PSA"), dated as of October 8, 2007, as amended as of December _, 2007, between City of Vernon, as Seller, and Bicent California, as Purchaser in breach of the PSA." The Expiration Date shall be the earlier of. (i) March 31, 2008; and (ii) the date on which the Beneficiary returns the original of this Letter of Credit or any replacement letter of credit, as applicable, to the Account Party. Special Conditions: 1. Partial drawing(s) are permitted. 2. All banking charges associated with this Letter of Credit are for the account of the Account Party. 3. Documents are to be presented to this office no later than the Expiration Date. 4. This Letter of Credit is not transferable. We hereby engage with you that draft(s) drawn under and in compliance with the terms of this Letter of Credit will be duly honored if drawn and presented for payment at any time before the LA\1806194.3 close of business [Time] at our counters located at [address] on or before the Expiration Date or in the event of Force Majeure, as defined under Article 17 of the Uniform Customs and Practice for Documentary Credits (1993 Revision) International Chamber of Commerce Publication No. 500 ("UCP"), interrupting our business, within fifteen (15) days after resumption of our business, whichever is later. Except as otherwise stated herein, this credit is subject to the UCP and, with respect to matters not so covered, this Letter of Credit is subject to and governed by the laws of the State of New York. If you have any questions regarding this Letter of Credit, please call [Telephone No.]. Authorized Signature Name: Title: LA\1806194.3 OFFICE OF THE CITY ATTORNEY Jeff A. Harrison, City Attorney 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1438 February 12, 2008 VIA FEDERAL EXPRESS Christopher E.J. Yang, Esq. Latham & Watkins, LLP 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Re: First Amendment to the Amended and Restated Purchase and Sale Agreement with Bicent Dear Chris: Enclosed please find three (3) signed signature pages regarding the above -reference matter. If you have any questions, please contact me. Very truly yours, Jeff A. Harrison City Attorney JH:em Enclosures cc: Ms. Nelly Giron, City Clerk (w/ encls.) Exclusivefy Industrial IN WITNESS WHEREOF, the Parties have executed this First Amendment to the Amended and Restated Purchase and Sale Agreement as of the date first above written. SELLER: CITY OF VERNON P By. Name: Eric T. Fresc Title: City Administrator PURCHASER: BICENT (CALIFORNIA) POWER LLC Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) MALBURG LLC LIM Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) HOOVER LLC Name: Paul B. Prager Title: Chairman S-1 The execution of this First Amendment to the Amended and Restated Purchase and Sale Agreement by the City of Vernon is hereby affirmed and attested to by: CITY OF VERNON By: N me: Title: City Clerk S-2 BARCLAYS BANK PLC 5 The North Colonnade, Canary Wharf London E14 SBB, England Irrevocable Standby Letter of Credit Number: BCGLBC1 Date of Issuance: December 14, 2007 Beneficiary: CITY OF VERNON We hereby establish, at the request of and for the account of BICENT (CALIFORNIA) POWER LLC (the "Account Party"), in favor of you, CITY OF VERNON (the "Beneficiary"), our Irrevocable Standby Letter of Credit (this "Letter of Credit") in the amount of USD $17,000,000 (SEVENTEEN MILLION and 00/100 United States Dollars) as such amount may be reduced from time to time by partial draws hereunder (the "Stated Amount"). This Letter of Credit,is being issued pursuant to Section 8.6(b) of the Purchase and Sale Agreement, dated as of October 8, 2007 (as amended to date, the "Agreement"), between Beneficiary and the Account Party. This Letter of Credit is issued, presentable and payable only at our offices at 200 Park Avenue, New York, NY 10166, Attention: US Bank Debt Management,.and expires with our close of business on the Expiration Date (as defined below). Funds under this Letter of Credit are available to the Beneficiary at sight against the Beneficiary's draft drawn on us bearing reference to this Letter of Credit number and accompanied by the following documents: The original of this Letter of Credit and all subsequent amendments, if any; and 2. A Drawing Certificate purportedly signed by an authorized officer of the Beneficiary in the form of Annex A hereto. Partial drawings under this Letter of Credit are permitted; however, (i) no more than three drawings on this Letter of Credit are permitted and (ii) the aggregate amount of drawings shall not exceed the Stated Amount. We hereby engage with you that drafts drawn under and in compliance with the terms and conditions of this Letter of Credit will be duly honored by us if presented at our offices specified above by courier or in -hand on or before the Expiration Date. Upon the Expiration Date, this Letter of Credit shall automatically terminate and be cancelled. Demand for payment may be made by you under this ,Letter of Credit prior to the Expiration Date hereof at any time prior to 5:00 p.m., New York time, at our address set NY 12530:276420.4 forth above on any Business Day. As used herein the term "Business Day" means (a) a day on which we (at our above address) are open for the purpose of conducting a commercial banking business and (b) a day on which banking institutions in New York, New York, generally are open for the purpose of conducting a commercial banking business. If Demand for payment is made by you hereunder on a Business Day on or prior to 10:00 a.m., New York time, and your Drawing Certificate conforms to the terms and conditions hereof, payment shall be made to you on such Business Day. If Demand for Payment is made by you hereunder on a Business Day after 10:00 a.m., New York time, and your Drawing Certificate conforms to the terms and conditions hereof, payment shall be made to you on the immediately succeeding Business Day. Payments made in accordance with this paragraph shall be made in immediately available funds by Federal Reserve wire transfer. All costs and banking charges pertaining to this credit are for the account of the Account Party. This Letter of Credit shall terminate and be of no further force or effect upon the earlier of (a) March 31, 2008 or (b) the receipt by Barclays Bank PLC of a notice of termination signed by an authorized officer of each of the Account Party and the Beneficiary in the form of Annex B hereto (the "Expiration Date"). This Letter of Credit shall be governed by, and construed in accordance with, the terms of the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as amended (the "UCP"), including, but not limited to, any provisions relating to force majeure. As to matters not governed by the UCP, this Letter of Credit shall be governed by and construed in accordance with the laws of the State of New York. This Letter of Credit sets forth in full the terms of our undertaking and such undertaking shall not in any way be modified, amended or amplified by reference to any document, instrument or agreement referred to herein other than the UCP, and such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement other than the UCP. This Letter of Credit is not transferable or assignable by you. BARCLAYS BANK PLC Name: Douglas Bernegger� Title: Director NY12530:276420.4 Annex A DRAWING CERTIFICATE Barclays Bank PLC 200 Park Avenue New York, New York 10166 Ladies and Gentlemen: City of Vernon (the `Beneficiary") hereby certifies to Barclays Bank PLC (the "Bank"), with reference to the Bank's Irrevocable Standby Letter of Credit No. BCGLBC1 (the "Letter of Credit"; capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to such terms in the Letter of Credit) that: 1. The Beneficiary is making a demand for payment under the Letter of Credit of the sum of $[ which amount does not exceed the current Stated Amount of the Letter of Credit. 2. Account Party has failed to close the transactions under the Agreement in breach of the Agreement and, as a result, the demanded sum is due and payable to the Beneficiary under Section 13.13(a) of the Agreement and such sum has not been paid by the Account Party. 3. The Expiration Date has not occurred and the Beneficiary is entitled to make the requested draw under the Agreement. 4. You are hereby directed to pay the amount so demanded to: [Insert wire transfer instruction]. IN WITNESS WHEREOF, the Beneficiary has executed and delivered this Drawing Certificate as of the [_] day of [month], [year]. Very truly yours, CITY OF VERNON Name: Title: NY12530:276420.4 Annex B NOTICE OF TERMINATION Barclays Bank PLC 200 Park Avenue New York, New York 10166 Ladies and Gentlemen: City of Vernon (the "Beneficiary") and Bicent (California) Power LLC (the "Account Party") hereby notify Barclays Bank PLC (the "Bank"), with reference to the Bank's Irrevocable Standby Letter of Credit No. BCGLBCI (the "Letter of Credit", that the Letter of Credit is to be terminated, effective as of the date hereof. IN WITNESS WHEREOF, the Beneficiary and Account Party have executed and delivered this Notice of Termination as of the [j day of [month], [year]. Very truly yours, CITY OF VERNON Name: Title: BICENT (CALIFORNIA) POWER LLC Name: Title: 4 NY12530:276420.4 OFFICE OF THE CITY ATTORNEY Jeff A. Harrison, City Attorney 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1438 April 3, 2008 Via Federal Express Neeraj Arora, Esq. Latham & Watkins LLP 633 W. Fifth St., Suite 4000 Los Angeles, CA 90071-2007 Re: Purchase and Sale of Vernon's Entitlements Dear Neeraj: Enclosed please find the following signed documents: 1. TANC - COTP Entitlement. a. April 3, 2008 Opinion Letter regarding purchase and sale of City of Vernon's COTP Entitlement Interest together with signed copy of Resolution No. 9420. b. Officer's Certificate regarding TANC. C. Secretary's Certificate regarding TANC. d. Disbursement letter to U.S. Bank National Association regarding TANC escrow. e. Designation by City Administrator under Resolution No. 9420. f. Instrument of Assignment and Transfer. Ea c(usivefy Inddustfiaf Neeraj Arora, Esq. April 3, 2008 Page 2 2. Starwood - Mead Transmission Interests. a. Notice of Extension and Agreement. If you have any questions, please contact me. Very Auly yours, arrison ity ttorney JH:jl Enclosures cc: Manuela Giron, City Clerk (w/Encls.) - Resolution Nos. 9420 and 9510 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 April 3, 2008 Transmission Agency of Northern California Re: Purchase and Sale of City of Vernon's COTP Entitlement Tntara.qt Ladies and Gentlemen: Pursuant to Section 5.3(c) of that certain Purchase and Sale Agreement dated September 28, 2007 (the "PSA") by and between the City of Vernon, California, a municipal corporation and chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "City") and the Transmission Agency of Northern California, a California joint powers agency ("TANC"), I hereby advise you as of the date hereof that I am of the opinion that: A. The City is duly organized and validly existing as a chartered city under the Constitution and laws of the State of California and its Charter. B. The members of. the Council of the City (the "City Council") are duly invested in office with full power and authority under the City's Charter to act on behalf of the City. C. The City has the full legal right, power and authority to enter into and perform its obligations under the PSA. Transmission Agency of Northern California April 3, 2008 Page 2 D. The City Council has duly and validly adopted Resolution No. 9420 authorizing the transaction contemplated by the PSA at meetings of the City Council that were called and held pursuant to law and the City's Charter and with all public notice required and at which a quorum was present and acting throughout, and Resolution No. 9420 is now in full force and effect, and has not been amended. Respect lly submitted, r yA. Harrison Attorney JH : j 1 CITY OF VERNON OFFICER'S CERTIFICATE This Certificate is delivered pursuant to Section 5.3(b) of that certain Purchase and Sale Agreement (as amended, supplemented, or otherwise modified, the "Purchase Agreement"), dated as of September 28, 2007, by and between the City of Vernon , a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "City"), and Transmission Agency of Northern California, a joint powers agency ("TANC"). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement. The undersigned, Eric T. Fresch, hereby certifies in his capacity as the City Administrator of the City and on behalf of the City and not in his individual capacity as follows: 1. Except as otherwise provided in Section 5.1(12) of the Purchase Agreement, all representations and warranties of the City contained in Section 6.1 of the Purchase Agreement were true and correct in all material respects as of the date of the Purchase Agreement, and are true and correct in all material respects as of the date hereof, with the same effect as though those representations and warranties had been made again at and as of that time, except to the extent that any such representation or warranty is made as of a specified date, in which case such representation or warranty . shall have been true and correct in all material respects as of such specified date. [Signature Page Follows] LA\I833719.1 IN WITNESS WHEREOF, the City has caused this Certificate to be executed, in its name and on its behalf, by the undersigned on and as of this day of , 2008. CITY OF VERNON By: Name: Eric T. 17resch Title: City Administrator 2 LA\1833719.1 CITY OF VERNON SECRETARY'S CERTIFICATE This Certificate is delivered pursuant to Section 5.3 of that certain Purchase and Sale Agreement (as amended, supplemented, or otherwise modified, the "Purchase Agreement"), dated as of September 28, 2007, by and between the City of Vernon , a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "C"), and Transmission Agency of Northern California, a joint powers agency ("TANC"). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement. . The undersigned, Manuela Giron, hereby certifies in her capacity as the City Clerk of the City and on behalf of the City and not in her individual capacity as follows: 1. the City's charter, delivered to TANC pursuant to Section 5.3(d) and attached hereto as Exhibit A, is true and complete and in full force and effect as of the date thereof; 2. the resolutions of the City Council of the City, delivered to TANC pursuant to Section 5.3(e) and attached hereto as Exhibit B, are true and complete and in full force and effect; and 3. the officer(s) or representative(s) of the City executing and delivering the Purchase Agreement and any other documents delivered by the City in connection with the Closing have been duly authorized to execute and deliver such document on behalf of the City. [Signature Page Follows] LA\1833933.1 IN WITNESS WHEREOF, the City has caused this Certificate to be executed, in its name and on its behalf, by the undersigned on and as of this _ day of , 2008. CITY OF VERNON By: Manuela Giron City Clerk 2 LA\1833933.1 EXHIBIT A Charter [See Attached] LA\1833933.1 EXHIBIT B Resolutions [See Attached] LA\1833933.1 Sheila K. Soares Vice President U.S. Bank National Association One California Street, Suite 2100 San Francisco, Ca 94111 RE: Escrow by and among the City of Vernon, the Transmission Agency of Northern California and U.S. Bank National Association, made and entered into as of the 3rd day of October 2007 (Account Number 118372000) Dear Sheila: Please disburse the funds in the above referenced escrow upon receipt of this letter, signed by both City of Vernon and the Transmission Agency of Northern California, as follows: • $10,000,000.00 to the City of Vernon, to the following account: ABA Routing #: .021000018 Bank: The Bank of New York Address: 700 South Flower Street, Ste. 500, Los Angeles, CA Phone: 213-630-6236 Fax: 213/630-6215 Bank Contact: Aurora Quizon Account #: GLA#111-565; TAS #800452 Account Name: Vernon Light & Power Custody Escrow Account the remaining balance (representing interest) to the Transmission Agency of Northern California, to the following account: ABA Routing #: 026 009 593 Bank: Bank of America Address: 555 Capital Mall, Suite 1555, Sacramento, CA Phone: 916-321-4812 Fax: 916-321-4822 Bank Contact: Maureen Ellis Account #: 01488-80163 Sincerely, AuWize I gnatory, City of Vernon Authorized Signatory, Transmission Agency of Northern California CITY OF VERNON DESIGNATION BY CITY ADMINISTRATOR UNDER RESOLUTION NO.9420 I, Eric Fresch, hereby certify in connection with that certain Purchase and Sale Agreement (as amended, supplemented, or otherwise modified, the "Purchase Agreement"), dated as of September 28, 2007, by and between the City of Vernon, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California (the "Lily"), and Transmission Agency of Northern California, a joint powers agency ("TANC") as follows. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement. 1. I am the City Administrator of the City of Vernon; 2. City of Vernon Resolution No. 9420 by the Council of the City of Vernon (the "Resolution") authorized the transaction contemplated by the Purchase Agreement (the "Transaction") and allows me and my designee to take all actions necessary to consummate the Transaction; 3. - In connection with the Transaction, Jeff Harrison is and was acting as my designee, as that term is defined in the Resolution; IN WITNESS WHEREOF, I have hereunto signed my name this �� day of , 2008. Eric Fresch City Administrator LA\1840899.1 EXECUTION VERSION INSTRUMENT OF ASSIGNMENT AND TRANSFER This INSTRUMENT OF ASSIGNMENT AND TRANSFER (this "Assi nment"), is made as of April , 2008 (the "Closing Date"), by and between the City of Vernon, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California ("Assignor'), and the Transmission Agency of Northern California, a California Joint Powers Agency ("Assignee'). RECITALS A. Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the that certain Purchase and Sale Agreement, dated as of September 28, 2007, by and between Assignor and Assignee, as amended by that certain First Amendment to Purchase and Sale Agreement; dated as of March 26, 2008, by and between Assignor and Assignee; B. Assignor holds an ownership interest in, and entitlement to transfer capability on, the COTP; and C. Assignor desires to assign and transfer to Assignee, and Assignee desires to assume and accept, all of Assignor's rights and duties under the COTP Interest Assigned Agreements. NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, do hereby covenant and agree as follows: 1) Assignment and Assumption of COTP Interest. a) Assignor hereby irrevocably assigns and transfers to Assignee all of its right, title and interest in, to and under, and all of its duties, liabilities and obligations under or pursuant to, the COTP Interest Assigned Agreements on the Closing Date, except for any rights or liabilities under the COTP Interest Assigned Agreements resulting from Assignor's performance or failure to perform its obligations under the COTP Interest Assigned Agreements on or prior to the Closing Date, which rights and liabilities are retained by and remain the responsibility of Assignor (the "COTP Interest Retained -Rights and Liabilities"). b) Assignee hereby assumes and accepts all of Assignor's right, title and interest in, to and under, and all of Assignor's duties, liabilities and obligations under or pursuant to, the COTP Interest Assigned Agreements on the Closing Date, except for the COTP Interest Retained Rights and Liabilities 2) Non -Interference. Each of Assignor and Assignee agrees that the assignment and assumption of the assigned rights and responsibilities hereunder is irrevocable and that neither party shall take any action or make any other assignment or direction which could prejudice the other's rights hereunder, and that any such action or assignment shall be void. 3) Effectiveness. This Assignment shall become effective on the Closing as of the Closing Date. 4) Further Assurances. Each of the Parties will, from time to time and at all times hereafter, upon every reasonable request to do so by another Party hereto, promptly make, do, execute and deliver, or cause to be made, done, executed and delivered, all such further acts, deeds, assurances and things as may be legally required or reasonably necessary in order to further implement and carry out the intent and purposes of this Agreement. 5) Incorporation by Reference. The following provisions of the PSA are incorporated by reference as if they were fully set forth herein: 8.1 (Expenses), 8.2 (Entire Document), 8.5 (Counterparts), 8.6 (Severability), 8.8 (Captions), 8.9 (Governing Law), 8.10 (Waiver of Jury Trial), 8.16 (Construction) and the rules of interpretation set forth in Annex A. 6) Successors and Assigns. The provisions of this Assignment are binding upon, and will inure to the benefit of, the successors and assigns of Assignor and Assignee, respectively. [Remainder of Page Left Intentionally Blank] 2 IN WITNESS WHEREOF, the parties hereto, by their duly authorized officers, have executed and delivered this Assignment as of the day and year first above set forth. CITY OF VERNON By: Eric Fresch . City Administrator TRANSMISSION AGENCY OF NORTHERN CALIFORNIA By: James W. Beck General Manager an Dennis W. De Cuir General Counsel TTEST: By: M uela Giron City Clerk APPROVED AS TO FORM: r0"A Signature Page to COTP Assignment and Assumption Agreement NOTICE OF EXTENSION AND AGREEMENT This NOTICE OF EXTENSION AND AGREEMENT (this "Agreement") is entered into as of March 31, 2008, by and among the City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City"), and Starwood Energy Infrastructure Fund, L.P., a limited partnership ("Starwood"). The City and Starwood are referred to herein sometimes individually as a "Party" and collectively as the "Parties." Capitalized terms used herein and not otherwise defined herein shall have the respective meanings ascribed to them in the Purchase Agreement. RECITALS A. The City owns interests and rights in certain transmission assets, including the Mead Transmission Interests. B. On December 13, 2007, the City and Starwood entered into that certain Purchase and Sale Agreement (the "Purchase Agreement") for the purchase of the City's Entitlement, right, title, and interest in the Mead Transmission Interests, pursuant to the terms and conditions set forth in the Purchase Agreement. C. The City and Starwood desire to. extend a certain termination date as set forth in the Purchase Agreement and make such other agreements asset forth in this Agreement. NOW, THEREFORE, in consideration of the respective covenants and promises contained herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows: AGREEMENT ARTICLE 1. EXTENSION 1.1 Extension of ClosingL Date. The Parties hereby agree to replace, and hereby replace, the reference to "March 31, 2008" set forth in Section 10.1(a) of the Purchase Agreement .with "April 18, 2008." ARTICLE 2. MISCELLANEOUS 2.1 Reference to Agreement. Any and all other agreements, documents or instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of the Purchase Agreement are hereby amended so that any reference in such agreement, document or instrument to the Purchase Agreement, whether direct or indirect, shall mean a reference to the Purchase Agreement as amended by this Agreement. 2.2 Governing Law. The validity, interpretation and effect of this Agreement are governed by and shall be construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law LA\1840526.1 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. CITY OF VER N By: C._ Jef4Ha Cittorne ,PURCHASER: STARWOOD ENERGY INFRASTRUCTURE FUND, L.P., By SEI MANAGEMENT, L.P., Its General Partner By SEI MANAGEMENT HOLDINGS, L.L.C., Its General Partner By STARWOOD ENERGY GROUP GLOBAL, L.L.C., Its General Manager LOW Madison Grose, Senior Managing Director LA\ 1840526.1 The execution of this Agreement by the City of Vernon is hereby affirmed and attested to by: CITY OF VERNON LIM Name: Title: City Clerk 4 LA\ 1840526.1 EXECUTION VERSION SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT This SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (this "Amendment") is entered into as of April 7, 2008, by and among the City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City" or "Seller"), and Bicent (California) Power LLC, a Delaware limited liability company ("Purchaser"), Bicent (California) Malburg LLC, a Delaware limited liability company ("BCM") and Bicent (California) Hoover LLC, a Delaware limited liability company ("BCH"). Seller, Purchaser, BCM and BCH are referred to herein sometimes individually as a "Party" and collectively as the "Parties." RECITALS A. The City owns that certain 134-megawatt natural gas -fired generating facility known as the Malburg Generating Station (the "Facility"). B. The City owns that certain 22-megawatt entitlement to energy from the Hoover Uprating Project pursuant to a power purchase agreement with the Western Area Power Administration (the "Hoover Interest"). C. On October 8, 2007, Purchaser (formerly known as Beowulf (Vernon) Power LLC) and the City entered into that certain Purchase and Sale Agreement (the "Ordinal Agreement") for the purchase of (i) the Facility, (ii) the economic benefits and burdens associated with the Hoover Interest, (iii) the economic benefits and burdens associated with the City's 11 megawatt interest in the Southern California Public Power Authority's ownership interest in the Palo Verde Nuclear Generating Station through December 31, 2030 (the "Palo Verde Interest") and (iv) the City's interests in each of the Mead -Phoenix Transmission Project and the Mead-Adelanto Transmission Project (collectively, the "Mead Transmission Interests"). D. On December 13, 2007, Purchaser and the City entered into that certain Amended and Restated Purchase and Sale Agreement to amend and restate the Original Agreement (as amended by the First Amendment (defined below), the "A&R Purchase Agreement"). Among other changes, the A&R Purchase Agreement terminated the respective obligations of the City and Purchaser to sell or purchase (as applicable) the Mead Transmission Interests and the Palo Verde Interest. E. On February 8, 2008, the Parties entered into that certain First Amendment to Purchase and Sale Agreement (the "First Amendment") to 1) amend the A&R Purchase Agreement to extend the outside closing date as set forth in Section 10.1 of 1 LA\1842975.611 the A&R Purchase Agreement; 2) modify the option to extend the PPTA; and 3) make such other amendments and agreements as set forth in the First Amendment. F. Purchaser has requested an additional extension of the A&R Purchase Agreement in order to permit Purchaser to finalize its financing of the transactions contemplated by the A&R Purchase Agreement G. As more particularly set forth below, Purchaser and the City desire to 1) amend the A&R Purchase Agreement to extend the outside closing date as set forth in Section 10.1 of the A&R Purchase Agreement; 2) agree upon the amount of Capital Expenditures for purposes of Section 2.4 of the A&R Purchase Agreement; and 3) make such other amendments and agreements as set forth in this Amendment. H. Capitalized terms used but not defined herein shall have the meanings given to them in the A&R Purchase Agreement. NOW, THEREFORE, in consideration of the respective covenants and promises contained herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows: AGREEMENT ARTICLE 1. AMENDMENTS AND AGREEMENTS 1.1 Extension of Closing Date. In order to permit Purchaser to finalize its financing in connection with the transactions contemplated by the A&R Purchase Agreement, the Parties hereby agree to extend the outside closing date provided in the A&R Purchase Agreement by replacing Section 10.1(a) of the A&R Purchase Agreement in its entirety and replacing it with the following: (a) by Purchaser or Seller, if the Closing has not occurred on or before April 10, 2008 (the "Outside Closing Date"); For avoidance of doubt, nothing in this Amendment or the A&R Purchase Agreement gives Purchaser a condition precedent to its obligations to close under the A&R Purchase Agreement that it shall have obtained financing. 1.2 Capital Expenditures. The Parties hereby agree that the amount of Capital Expenditures to be used -for purposes of calculating the Purchase Price Adjustment pursuant to Section 2.4(b) of the A&R Purchase Agreement is $731,850.19. The Parties hereby waive any and all requirements for prior written consent set forth in Section 2.4(b)(1) of the A&R Purchase Agreement. 1.3 Emissions Rights. The City hereby agrees that the number of NOx RECLAIM Trading Credits held specifically for the Facility pursuant to Schedule 2.1(e) to the A&R Purchase Agreement is 53,733 pounds per year. 2 LA\1842975.611 1.4 Amendment to Terms of PPTA. (a) Notwithstanding the terms set forth in Section 1.2(1) of the A&R Purchase Agreement, the Parties hereby agree to add the following new definitions and Section 3.9 to the PPTA: "CEC" means the California Energy Commission. "License" means that certain license issued for the Facility by the CEC on May 20, 2003. "Petition" means that certain petition filed by the City with the California Energy Commission on December 19, 2007 to amend the License. Section 3.9 CEC Petition The Parties shall use commercially reasonable efforts to support the approval of the Petition. Until such time as the Petition is approved, Buyer shall, subject to availability, dispatch the Facility continuously between the minimum and maximum load of the Facility, except: (i) as otherwise directed by CAISO; (ii) in an emergency situation or (iii) as other dispatch instructions would not violate Applicable Law. 1.5 Satisfaction of Closing Conditions by the City. The Parties hereby agree that as of the date hereof the statements set forth in Annex A are true and correct in all respects. 1.6 Liquidated Damages_ Upon Failure to Close. Notwithstanding anything to the contrary in the A&R Purchase Agreement, in the event that the Closing Date does not occur by April 10, 2008 other than as a result of a failure of the City to deliver to Purchaser the items set forth in Section 2.6(a) of the A&R Purchase Agreement or a Material Adverse Effect, Purchaser shall be in breach of the A&R Purchase Agreement and shall owe the City liquidated damages in the maximum amount specified in Section 13.13 of the A&R Purchase Agreement. ARTICLE 2. MISCELLANEOUS 2.1 Reference to Agreement. Each of the Related Agreements, and any and all other agreements, documents or instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of the A&R Purchase Agreement are hereby amended so that any reference in such Related Agreement to the A&R Purchase Agreement, whether direct or indirect, shall mean a reference to the A&R Purchase Agreement as amended by this Amendment. 2.2 Governing. The validity, interpretation and effect of this Amendment are governed by and shall be construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines except to the extent that certain matters are preempted by Federal law or are governed by the law of the jurisdiction of organization of the respective Parties. 3 LA\1842975.611 2.3 Counterparts. This Amendment may be executed in one or more counterparts, each of which is an original, but all of which together constitute one and the same instrument. 2.4 Full Force and Effect. Each Party confirms that the A&R Purchase Agreement is in full force and effect and remains a binding obligation of the Parties. 2.5 No Obligation for Other Amendments. This Amendment is intended to be a part of, and will serve as a valid, written amendment to, the A&R Purchase Agreement as required by Section 13.3 thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the A&R Purchase Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect, and this Amendment will not operate as an extension or waiver by the Parties of any other condition, covenant, obligation, right, power or privilege under the A&R Purchase Agreement or any of the other Related Agreements. This Amendment relates only to the specific matters covered herein, and shall not be considered to create a course of dealing or to otherwise obligate either Party to execute similar amendments or grant any waivers under the, same or similar circumstances in the future. [Signature pages follows] M LA\1842975.611 IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the Amended and Restated Purchase and Sale Agreement as of the date first above written. THIS SECOND AMENDMENT IS BEING SUBMITTED TO PURCHASER EXECUTED BY SELLER. IT SHALL BE VALID ONLY IF EXECUTED AND DELIVERED WITHOUT ALTERATION BY ALL SIGNATORIES BELOW NOT LATER THAN 5:00 PM PDT ON APRIL 8, 2008. SELLER: CITY OF VERNON By: _�� ;�� — Name: Eric T. Fresch Title: City Administrator PURCHASER: BICENT (CALIFORNIA) POWER LLC By: Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) MALBURG LLC By: Name: Paul B. Prager Title: President BICENT (CALIFORNIA) HOOVER LLC By: Name: Paul B. Prager Title: President 5 APPROVING THIS SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT AND AGREEING AS TO SECTION 1.5: GUARANTOR: BICENT HOLDINGS LLC Name: Paul B. Prager Title: Chairman LA\1842975.611 The execution of this Second Amendment to the Amended and Restated Purchase and Sale Agreement by the City of Vernon is hereby affirmed and attested to by: 0 CITY OF VERNON By: 4ov�� ame: Manuela Gir Title: City Clerk LAU 842975.611 Annex A Statements The Parties agree that the following statements are true and correct in all respects as of the date hereof. All section references are made with respect to the A&R Purchase Agreement. (i) The following conditions precedent to the obligations of Purchaser have been satisfied: Section 3.1(a) (Receipt of Governmental Approvals), Section 3.1(b) (Receipt of Assigned Agreement Consents), Section 3.1(d) (Representations and Warranties), Section 3.1(e) (Liens), Section 3.1(f) (Compliance with Provisions), Section 3.1(g) (No Adverse Proceedings or Events), Section 3.1 @ (No Termination) and Section 3.1(k) (Supplemental IE Report). (ii) To the Knowledge of Purchaser, there has not occurred any event or circumstance having a Material Adverse Effect or any event or circumstance that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. (iii) The information and documents at the Facility are sufficient to provide the Purchaser with the information and documents comprising the Facility Assets pursuant to Section 2.6(a)(3). (iv) The City has provided the following closing deliverables to the Purchaser, or the Purchaser has waived the right to receive the following at the Closing: instruments of transfer and assignment sufficient to transfer personal property included in the Assets but not otherwise transferred by the assignments and agreements specified in Section 2.6(a) of the A&R Purchase Agreement, as required by California law (Section 2.6(al(11)), the Title Report, together with an ALTA survey of the Facility Site (Section 2.6(akl7)) and the Supplemental IE's Report (Section 2.6(a)(20)). (v) The Bill of Sale, Assignment and Assumption Agreement, the Lease, the CFD (Hoover), the PPTA, the Interconnection and Transmission Services Agreement, the Subordination Agreement, the Lender Consent have been conformed and reviewed by the Parties and are all in substantially final form. (vi) The certificates sent by Chris Yang in an e-mail to Stephen Nichols and Xun Zeng on April 1, 2008 at 11:32 pm PST are in a form acceptable to Purchaser for purposes of satisfying Section 2.6(a)(13), Section 2.6(a)(14) and Section 2.6(a (15). (vii) The Purchaser has received a copy of the City's charter. (viii) The form of will -serve letters provided in an e-mail from Jocelyn E. Leary to Neeraj Arora at 2:23 pm on April 1, 2008 are acceptable to Purchaser and the City for purposes of Section 2.6a 16. LA\1842975.61I OFFICE OF THE CITY ATTORNEY Jeff A. Harrison, City Attorney 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1438 April 7, 2008 VIA FEDERAL EXPRESS Mr. Obianuju Enendu Latham & Watkins, LLP 885 Third Avenue, Suite 1000 New York, NY 10022 Re: Irrevocable Standby Letter of Credit Number: BCGLBCI Dear Obianuju: Enclosed please find an originally signed Letter of Credit regarding the above -reference matter. If you have any questions, please contact me. Very truly yours, f A. Harrison ty Attorney JH:em Enclosures cc: Ms. Nelly Giron, City Clerk (w/ original) (Resolution No. 9510) E.,cfusivefy Industfiaf BARCLAYS BANK PLC 5 The North Colonnade, Canary Wharf London E14 5BB, England Irrevocable Standby Letter of Credit Number: BCGLBCI Date of Issuance: December 14, 2007 Beneficiary: CITY OF VERNON We hereby establish, at the request of and for the account of BICENT (CALIFORNIA) POWER LLC (the "Account Party"), in favor of your CITY OF VERNON (the "Beneficiary"), our Irrevocable Standby Letter of Credit (this "Letter of Credit") in the amount of USD $17,000,000 (SEVENTEEN MILLION and 00/100 United States Dollars) as such amount may be reduced from time to time by partial draws hereunder (the "Stated Amount"). This Letter of Credit is being issued pursuant to Section 8.6(b) of the Purchase and Sale Agreement, dated as of October 8, 2007 (as amended to date, the "Agreement"), between Beneficiary and the Account Party. This Letter of Credit is issued, presentable and payable only at our offices at 200 Park Avenue, New York, NY 10166, Attention: US Bank Debt Management, and expires with our close of business on the Expiration Date (as defined below). Funds under this Letter of Credit are available to the Beneficiary at sight against the Beneficiary's draft drawn on us bearing reference to this Letter of Credit number and accompanied by the following documents: The original of this Letter of Credit and all subsequent amendments, if any; and 2. A Drawing Certificate purportedly signed by an authorized officer of the Beneficiary in the form of Annex A hereto. Partial drawings under this Letter of Credit are permitted; however, (i) no more than three drawings on this Letter of Credit are permitted and (ii) the aggregate amount of drawings shall not exceed the Stated Amount. We hereby engage with you that drafts drawn under and in compliance with the terms and conditions of this Letter of Credit will be duly honored by us if presented at our offices specified above by courier or in -hand on or before the Expiration Date. Upon the Expiration Date, this Letter of Credit shall automatically terminate and be cancelled. Demand for payment may be made by you under this Letter of Credit prior to the Expiration Date hereof at any time prior to 5:00 p.m., New York time, at our address set NY12530:276420.4 forth above on any Business Day. As used herein the term "Business Day" means (a) a day on which we (at our above address) are open for the purpose of conducting a commercial banking business and (b) a day on which banking institutions in New York, New York, generally are open for the purpose of conducting a commercial banking business. If Demand for payment is made by you hereunder on a Business Day on or prior to 10:00 a.m., New York time, and your Drawing Certificate conforms to the terms and conditions hereof, payment shall be made to you on such Business Day. If Demand for Payment is made by you hereunder on a Business Day after 10:00 a.m., New York time, and your Drawing Certificate conforms to the terms and conditions hereof, payment shall be made to you on the immediately succeeding Business Day. Payments made in accordance with this paragraph shall be made in immediately available funds by Federal Reserve wire transfer. All costs and banking charges pertaining to this credit are for the account of the Account Party. This Letter of Credit shall terminate and be of no further force or effect upon the earlier of (a) March 31, 2008 or (b) the receipt by Barclays Bank PLC of a notice of termination signed by an authorized officer of each of the Account Party and the Beneficiary in the form of Annex B hereto (the "Expiration Date"). This Letter of Credit shall be governed by, and construed in accordance with, the terms of the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as amended (the "UCP"), including, but not limited to, any provisions relating to force majeure. As to matters not governed by the UCP, this Letter of Credit shall be governed by and construed in accordance with the laws of the State of New York. This Letter of Credit sets forth in full the terms of our undertaking and such undertaking shall not in any way be modified, amended or amplified by reference to any document, instrument or agreement referred to herein other than the UCP, and such reference shall not be deemed to incorporate herein by reference any document, instrument or agreement other than the UCP. This Letter of Credit is not transferable or assignable by you. BARCLAYS BANK PLC Name: Douglas Bernegger Title: Director 2 NY12530:276420.4 Annex A DRAWING CERTIFICATE Barclays Bank PLC 200 Park Avenue New York, New York 10166 Ladies and Gentlemen: City of Vernon (the "Beneficiary") hereby certifies to Barclays Bank PLC (the "Bank"), with reference to the Bank's Irrevocable Standby Letter of Credit No. BCGLBCI (the "Letter of Credit"; capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to such terms in the Letter of Credit) that: 1. The Beneficiary is making a demand for payment under the Letter of Credit of the sum of $[ which amount does not exceed the current Stated Amount of the Letter of Credit. 2. Account Party has failed to close the transactions under the Agreement in breach of the Agreement and, as a result, the demanded sum is due and payable to the Beneficiary under Section 13.13(a) of the Agreement and such sum has not been paid by the Account Party. 3. The Expiration Date has not occurred and the Beneficiary is entitled to make the requested draw under the Agreement. 4. You are hereby directed to pay the amount so demanded to: [Insert wire transfer instruction]. IN WITNESS WHEREOF, the Beneficiary has executed and delivered this Drawing Certificate as of the [_j day of [month], [year]. Very truly yours, CITY OF VERNON Name: Title: NY l 2530:276420.4 Annex B NOTICE OF TERMINATION Barclays Bank PLC 200 Park Avenue New York, New York 10166 Ladies and Gentlemen: City of Vernon (the "Beneficiary") and Bicent (California) Power LLC (the "Account Party") hereby notify Barclays Bank PLC (the "Bank"), with reference to the Bank's Irrevocable Standby Letter of Credit No. BCGLBCI (the "Letter of Credit", that the Letter of Credit is to be terminated, effective as of the date hereof. IN WITNESS WHEREOF, the Beneficiary and Account Party have executed and delivered this Notice of Termination as of the L_] day of [month], [year]. Very truly yours, CITY OF VERNON Name: Title: BICENT (CALIFORNIA) POWER LLC Name: Title: 4 NY12530:276420.4 COPY 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 April 7, 2008 Via email Prager@beowulfenergy. com and FedEx Bicent (California) Power LLC Bicent (California) Malburg LLC Bicent (California) Hoover LLC Attn: President 103 North Washington Street Easton, MD 21601 Bicent Power LLC Attn: President 575 Broadway, 3rd floor New York, NY 10012 Dear Paul: This letter is in response to your latest request for an extension of the closing date. The City has been more than accommodating to your requests in the past. After the transaction was signed in October of 2007, the City granted you an amendment in November to clarify certain features of the definitive documents for your benefit. In December, the City, knowing full well you would profit by doing so, allowed you to restructure the transaction to flip a portion of the assets to a third party. In January, the City accommodated your request for an extension until February. In February, the City accommodated your request for an extension until April 8 so that you could explore a leveraged lease financing that offered better economics. At that time, we both agreed that April 8 would be the last extension. Bicent (California) Bicent (California) Bicent (California) Bicent Power LLC April 7, 2008 Page 2 Power LLC Malburg LLC Hoover LLC Notwithstanding that fact, the City is willing to grant you one final extension to April 10 pursuant to the terms of the definitive amendment coming to you under separate e-mail. I want to make clear to you that this is the City's final extension. The delays in closing have cost the City millions of dollars because of the collapse of the auction rate bond market. As I explained to you when last we met, the City is planning to use the proceeds of the sale to redeem outstanding auction rate bonds. The redemption is set for April 11. The City will face severe consequences -both financially and in its reputation in the bond market —if it does not honor the bond redemption. As such, this letter constitutes notice pursuant to Section 13,12 of that certain Amended and Restated Purchase and Sale Agreement by and between the City, your company and various subsidiaries, as amended, that if you do not close by April 10, assuming that the above referenced amendment is executed, or April 8 otherwise, the City is hereby terminating such agreement pursuant to Section 10.1(a) of such agreement. Following any such termination, the City will seek all available remedies against the buyer and guarantor. The City has been a generous and flexible party. We desire to have a mutually beneficial relationship with you and your organization. It needs to start with you fulfilling your obligations to the City. Yours Truly, Eric T. Fresch City Administrator ETF:j1 cc: Carl Reisner, Esq. Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, NY 10019 BICENT (CALIFORNIA) POWER LLC 103 North Washington Street Easton, MD 21601 City of Vernon Attn: Eric T. Fresch City Administrator 4305 Santa Fe Avenue Vernon, California 90058 April 7, 2008 Dear Eric: Thank you for your letter of even date. We fully expect to close the transaction on Thursday, April 10, 2008. We do not agree that we are obliged to close on Apri18 because, among other reasons, we do not believe that the City is in compliance with Section 5.2(a) of the Purchase and Sale Agreement and the City failed to deliver the Preliminary Working Capital Statement ten days prior to April 8, as it was required to do under Section 2.4(b). We do not think it is productive to engage in an extended exchange of letters regarding our mutual obligations as it is our very firm intention to fulfill ours on April 10. We understood from our telephone conversations last week that the additional two days did not present any significant issues for the City. So that is what we are going to do assuming the City can fulfill its obligations as well. Our confidence that the April 10 closing date was acceptable to the City was based in part on the draft of the amendment to the purchase agreement that your counsel tendered to us last week. The draft you submitted to us this morning was quite different. We are willing, however, to enter into an amendment in the form attached. We too look forward to a mutually beneficial relationship between Bicent and the City and to the continuation of our cordial relationship. That said , we do not believe the City has the right to terminate the Agreement on April 8, but even assuming that the City does have that right, we respectfully request that it refrain from doing so at least until April 10. Please do not hesitate to call me if you wish to discuss. Yours truly, Paul B. Prager, Pri5sident Bicent (California) Power LLC ® This page is part of your document - DO NOT DISCARD 20080629752 Pages: • �ti,oM,.•. 056 I III II IIIII II II II II IIIII IIIII II IIIIIII II I II - __ I III IIIII IIII IIII Recorded/Filed in Official Records Recorder's Office, Los Angeles County, Fee: 0.00 California Tax: 0.00 Other: 0.00 04/11/08 AT 08:OOAM Total: 0.00 Title Company TITLE(S) r� IIIIIIIIIIIIIIIII�IIVIIIIIIIIIInI�IIIN Assessor's Identification Number (AIN) To be completed by Examiner OR Title Company in black ink. ___ S E400070 THIS FORM IS NOT TO BE DUPLICATES A& Number of AIN's Shown Z RECORDING REQUESTED BY FIRST AMERICAN TITLE INSURANCE COMPANY 04/11/08 AND WHEN RECORDED, RETURN TO: III I III II ll II II II illy I III I III IIII II l IIII ll City of Vernon 2(]�$®6297rJ2 4305 Santa Fe Avenue Vernon, CA 90058 Attention: City Attorney W6S-2-72551-LA2 Recording Fee: Exempt pursuant to California Government Code § 27383 DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING Dated as of April 10 , 2008 by BICENT (CALIFORNIA) MALBURG LLC, a Delaware limited liability company, as Trustor to FIRST AMERICAN TITLE INSURANCE COMPANY, as Trustee for the benefit of CITY OF VERNON, as Beneficiary ATTENTION: COUNTY CLERK --THIS INSTRUMENT COVERS GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE DEEDS OF TRUST ON REAL ESTATE ARE RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT ONLY AS A DEED OF TRUST, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF THE TRUSTOR (DEBTOR) AND BENEFICIARY (SECURED PARTY) ARE SET FORTH IN THIS INSTRUMENT. LA\1777398.11 TABLE OF CONTENTS Page ARTICLE1 DEFINITIONS............................................................................................................4 1.1 Defined Terms..................,....................................................................................4 . 1.2 Accounting Terms....................................................................................................7 1.3 The Rules of Construction.......................................................................................8 ARTICLE 2 GENERAL COVENANTS AND PROVISIONS ...................................................8 2.1 Trustor Performance of Secured Obligation Provisions..........................................8 2.2 Expenses..................................................................................................................9 2.3 Beneficiary Assumes No Secured Obligations.........................................................9 2.4 Further Assurances...................................................................................................9 2.5 Acts of Trustor .........................................................................................................9 2.6 After -Acquired Property...........................................................................................9 2.7 Mortgaged Property...............................................................................................10 2.8 Covenant to Pay.....................................................................................................11 2.9 Security Agreement................................................................................................11 2.10 Subordination.........................................................................................................12 ARTICLE 3 ASSIGNMENT OF RENTS AND LEASES............................................................12 3.1 Assignment of Rents..............................................................................................12 3.2 Assignment of Leases............................................................................................13 3.3 Election to Proceed Under Section 2938 of California Civil Code.......................13 3.4 Effect of Assignments............................................................................................13 3.5 No Merger of Leasehold Estates............................................................................14 ARTICLE4 REMEDIES...............................................................................................................14 4.1 Protective Advances...............................................................................................14 4.2 Institution of Equity Proceedings...........................................................................14 4.3 Beneficiary's Power of Enforcement.....................................................................14 4.4 Beneficiary's Right to Enter and. Take Possession, Operate and Apply Income....................................................................................................................16 4.5 Separate Sales 4.6 ........................................................................................................17 Waiver of Appraisement, Moratorium, Valuation, Stay, Extension and RedemptionLaws..................................................................................................17 4.7 Receiver 4.8 .................................................................................................................17 Suits to Protect the Mortgaged Property ................................................................18 4.9 Proofs of Claim......................................................................................................18 4.10 Trustor to Pay Amounts Secured Hereby on Any Default in Payment; Application of Monies by Beneficiary...................................................................18 4.11 Delay or Omission; No Waiver..............................................................................19 ii LA\1777398.11 4.12 No Waiver of One Default to Affect Another ........................ .............................19 4.13 Discontinuance of Proceedings; Position of Parties Restored...............................20 4.14 Remedies Cumulative............................................................................................20 4.15 Interest After Event of Default..............................................................................20 4.16 Foreclosure; Expenses of Litigation......................................................................20 4.17 Deficiency Judgments ................ ...21 .......................................................................... 4.18 WAIVER OF JURY TRIAL..................................................................................21 4.19 Exculpation of Beneficiary....................................................................................21 ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER PROVISIONS RELATING TO TRUSTEE......................................................................21 5.1 Exercise of Remedies by Trustee...........................................................................22 5.2 Rights and Privileges of Trustee............................................................................22 5.3 Resignation or Replacement of Trustee ........ I. ........................ 5.4 Authority of Beneficiary........................................................................................22 5.5 Effect of Appointment of Successor Trustee.........................................................23 5.6 Confirmation of Transfer and Succession..............................................................23 5.7 Exculpation............................................................................................................23 5.8 Endorsement and Execution of Documents...........................................................23 5.9 Multiple Trustees....................................................................................................24 5.10 No Required Action...............................................................................................24 5.11 Terms of Trustee's Acceptance ................ ............................................................. 24 ARTICLE6 GENERAL................................................................................................................24 6.1 Discharge...............................................................................................................24 6.2 No Waiver..............................................................................................................24 6.3 Extension, Rearrangement or Renewal of Secured Obligations ............................25 6.4 Forcible Detainer...................................................................................................25 6.5 Waiver of Stay or Extension..................................................................................25 6.6 Notices...................................................................................................................25 6.7 Severability............,...............................................................................................26 6.8 Application of Payments........................................................................................26 6.9 Governing Law......................................................................................................26 6.10 Entire Agreement...................................................................................................26 6.11 Amendments..........................................................................................................26 6.12 Successors and Assigns..........................................................................................26 6.13 Renewal, Etc..........................................................................................................27 6.14 Non-Recourse........................................................................................................27 6.15 Severability and Compliance With Usury Law.....................................................27 6.16 Waiver....................................................................................................................28 6.17 Release of Collateral..............................................................................................28 6.18 Time of the Essence...............................................................................................28 6.19 Counterpart Execution...........................................................................................28 6.20 Request for Notice.................................................................................................29 iii LA\1177398.11 S Exhibit List Exhibit A: Description of Site Exhibit B: Description of Easements Exhibit C: Description of Reserved Easement Exhibit D: Form of Subordination Agreement iv LA\1777398.11 This DEED OF TRUST, LEASEHOLD DEED OF TRUST, ASSIGNMENT OF RENTS, SECURITY AGREEMENT, AND FIXTURE FILING, dated as of April , 2008 (this "Deed of Trust"), is executed byBICENT (CALIFORNIA) MALBURG LLC, a Delaware limited liability company ("Trustor") with an address of 103 North Washington Street, Easton, MD 21601, to FIRST AMERICAN TITLE INSURANCE COMPANY, as trustee ("Trustee") with an address of One First American Way, Santa Ana, CA 92707, Attn: National Default Services, for the use and benefit of the CITY OF VERNON, a Municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its charter ("Beneficiary") with an address of 4305 Santa Fe Avenue, Vernon, CA 90058, Attn: City Attorney. RECITALS A. Capitalized terms are defined in Article 1. B. Trustor owns various existing permits, equipment, leasehold interests and certain other assets associated with the maintenance, operation and repair of a combined cycle, natural gas -fired, electric power plant facility in the City of Vernon, California (as more particularly defined below, the "Facility'). C. Trustor and Beneficiary have entered into that certain Power Purchase Tolling Agreement, dated as of the date hereof (the "PPTA"), pursuant to which Trustor will sell to Beneficiary unit -specific capacity and energy generated from the Facility. D. Trustor, as lessee ("Lessee"), and Beneficiary, as lessor ("Lessor"), entered into that certain Lease and Grant of Easements, dated as of the date hereof, a memorandum of which has been recorded on the date hereof in the Los Angeles County Recorder's Office, pursuant to which Lessee agreed to lease the Facility Site (as hereinafter defined) from Lessor, and Lessor agreed to lease the Facility Site to Lessee (the "Ground Lease"). E. Trustor, as grantor, has executed and delivered to Beneficiary, as grantee, that certain Deed of Transfer dated as of the date hereof, which Deed of Transfer has been recorded on the date hereof in the Los Angeles County Recorder's Office. Pursuant to the Deed of Transfer, Trustor conveyed to Beneficiary the Facility. F. Trustor is executing and delivering this Deed of Trust, pursuant to which Trustor will secure its obligations under the PPTA (the "Secured Obligations") with a lien and security interest in the Mortgaged Property, on the terms and conditions set forth below. „S G. This Deed of Trust sets forth the terms on which the Beneficiary will ar.cPnt hnlrl and anfnrra tha carnrity intaraete rwov,4ar1 1-,oro,,,-,Ao,- .,,-,A .,11 ,-(.1.,+,,,7 and powers. 7�1 Agreement ';, NOW, THEREFORE, to secure the prompt and complete performance in full when due 1,i}l of the Secured Obligations, and in consideration of the covenants contained herein, 4q: LA\1777398.11 Trustor, intending to be legally bound, does hereby grant, bargain, sell, convey, warrant, assign, transfer, mortgage, pledge, set over and confirm unto Trustee in trust for Beneficiary as set forth in this Deed of Trust, for the benefit of Beneficiary, all of Trustor's estate, right, title, interest, property, claim and demand, now or hereafter arising, in and to the following property and rights (herein collectively called the "Mortgaged Property"): (a) Trustor's interest under the Ground Lease and the leasehold estate created thereby in and to the lands and premises more particularly described in Exhibit A hereto (the "Site") but excepting the easement reserved by the Beneficiary under the Ground Lease in the property more particularly described in Exhibit C; (b) any and all easements, leases, licenses, option rights, rights -of -way and other rights used in connection with the Site or as a means of access thereto (including, without limitation, solely after an Event of Default, all rights of Trustor to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease, but expressly reserving unto Trustor, prior to any Event of Default, all rights to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease that, in each case, does not violate an express prohibition set forth in the Secured Obligation Provisions), all easements for ingress and egress and easements for water, transmission lines, telephone lines, natural gas and sewage pipelines, and all other such rights running in favor of Trustor or appurtenant to the Site (or arising under the Ground Lease), and any and all sidewalks, alleys, strips and gores of land adjacent thereto or used in connection therewith, together with all and singular the tenements, hereditaments and appurtenances thereto, and with any land lying within the right-of-way of any streets, open or proposed, adjoining the same (including, without limitation, the easements, leases, licenses and other instruments described in Exhibit B hereto) (collectively, the "Easements"; and the Site and the Easements collectively referred to herein as the "Real Property"); (c) all buildings, structures, fixtures and other improvements now or hereafter erected on the Real Property, including the Project and the Facility (as hereinafter defined) (collectively, the "Improvements"); (d) all machinery, apparatus, equipment, fittings, fixtures, boilers, turbines and other articles of personal property, including all goods and all goods which become fixtures, now owned or hereafter acquired by Trustor and now or hereafter located on, attached to or used in the operation of or in connection with the Real Property and/or the Improvements, and all replacements thereof, additions thereto and substitutions therefor, " to the fullest extent permitted by applicable law (all of the foregoing being hereinafter collectively called the "Equipment"); a �{b fill r) (e) all inventory, raw materials, works in process and other materials used or 4rk consumed in the construction, operation or maintenance of, or now or hereafter located I on or used in connection with, the Real Property, the Improvements and/or the y` Equipment, including, without limitation, fuel and fuel deposits, now or hereafter located 2 LA\1777398.11 am on the Real Property or elsewhere or otherwise owned by Trustor (the above items, together with the Equipment, being hereinafter collectively called the "Tangible Collateral"); (f) all rights, powers, privileges and other benefits of Trustor (to the extent assignable) now or hereafter obtained by Trustor under the Ground Lease (but expressly reserving unto Trustor, prior to any Event of Default, all rights to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease that, in each case, does not violate an express prohibition set forth in the Secured Obligation Provisions) and/or from any Governmental Authority, including, without limitation, permits issued in the name of Trustor and governmental actions relating to (i) the ownership, operation, management and use of the Real Property, Improvements, Equipment or Tangible Collateral, (ii) the development and financing of the Project, the Improvements and the Equipment, and (iii) any improvements, modifications or additions thereto; (g) any right of Trustor to elect to terminate the Ground Lease or remain in possession of the Real Property and/or Improvements pursuant to 11 U.S.C. section 365(h) or any similar provision of applicable law and any possessory rights of Trustor in the Real Property and/or Improvements pursuant to 11 U.S.C. section 365(h) or any other similar provision of applicable law; and all right, title and interest of Trustor in, to and under the PPTA; (h) all the lands and interests in lands, tenements and hereditaments hereafter acquired by Trustor in connection with or appurtenant to the Real Property and/or any other property or rights subject to the lien hereof, including (without limitation) all interests of Trustor, whether as lessor or lessee, in any leases of land hereafter made and all rights of Trustor thereunder; (i) any and all other property and interests in any way associated or used in connection with or appurtenant to the Real Property, Improvements, Equipment or Tangible Collateral that may from time to time be acquired by Trustor or be subjected to the lien hereof by Trustor or by anyone on its behalf or with its consent, or which may come into the possession or be subject to the control of Trustee or Beneficiary pursuant to this Deed of Trust, being hereby collaterally assigned to Beneficiary (or in the case of Rents, directly assigned pursuant to Section 2.2) and subjected or added to the lien or estate created by this Deed of Trust forthwith upon the acquisition thereof by Trustor, as fully as if such property were now owned by Trustor and were specifically described in this Deed of Trust and subjected to the lien and security interest hereof, and each of Trustee and Beneficiary is hereby authorized to receive any and all such property and interests as and for additional security hereunder; and tGE) 0) all the remainder or remainders, reversion or reversions, and, to the extent 17h.arising after an Event of Default, rents, revenues, issues, profits, royalties, income and other benefits derived from any of the foregoing, all of which are hereby assigned to Beneficiary, who is hereby authorized, after an Event of Default, to collect and receive 3 LA\1777398.11 the same, to give proper receipts and acquittances therefor and to apply the same in accordance with the provisions of this Deed of Trust; provided, however, that, in each case, notwithstanding the foregoing, in no event shall "Mortgaged Property" include any Excluded Mortgaged Property (as hereinafter defined). TO HAVE AND TO HOLD the said Mortgaged Property, whether now owned or held or hereafter acquired, unto Beneficiary, its successors and assigns, pursuant to the provisions of this Deed of Trust. IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security interest or estate created by this Deed of Trust to secure the Secured Obligations, shall initially be second priority Lien subject only to the lien of the Financing Documents and the other Liens expressly permitted by the terms hereof or the other Secured Obligation Provisions to be prior hereto or pari passu herewith, and that the Mortgaged Property is to be held, dealt with and disposed of by Beneficiary, upon and subject to the terms, covenants, conditions, uses and agreements set forth in this Deed of Trust. PROVIDED ALWAYS, that upon the termination date of the Secured Obligations and the observance and performance by Trustor of its covenants and agreements set forth herein, then this Deed of Trust and the estate hereby and therein granted shall cease and be void and shall be reconveyed as provided herein below. ARTICLE 1 DEFINITIONS 1.1 Defined Terms. Capitalized terms used in this Deed of Trust and not otherwise defined herein shall have the meanings assigned to them in the PPTA. Any term defined by reference to an agreement, instrument or other document shall have the meaning so assigned to it whether or not such document is in effect. In addition, for purposes of this Deed of Trust, the following definitions shall apply: "Affiliate" of a Person means any other Person that (a) directly or indirectly controls the specified Person; (b) is controlled by or is under direct or indirect common control with the specified Person; or (c) is an officer, director, employee, representative or agent or subsidiary of the Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management or policies of the specified Person, directly or indirectly, whether through the ownership of voting securities, partnership or limited liability company interests, by contract or otherwise. "Assignment" means the assignment, contained in Article 3 of this Deed of Trust, from Trustor to Beneficiary, of all of Trustor's right, title and interest in and to the Leases and the Rents. Pk "Authenticate" means "authenticate" as defined in Article 9 of the UCC. 4 LA\1777398.11 0 "Bankruptcy Event" shall be deemed to occur, with respect to any Person, if that Person shall institute a voluntary case seeking liquidation or reorganization under the Bankruptcy Law, or shall consent to the institution of an involuntary case thereunder against it; or such Person shall file a petition or consent or otherwise institute any similar proceeding under any other applicable Federal or state law, or shall consent thereto; or such Person shall apply for, or consent or acquiesce to, the appointment of, a receiver, administrator, administrative receiver, . liquidator, sequestrator, trustee or other officer with similar powers for itself or any substantial part of its assets; or such Person shall make a general assignment for the benefit of its creditors; or such Person shall admit in writing its inability to pay its debts generally as they become due; or if an involuntary case shall be commenced seeking liquidation or reorganization of such Person under the Bankruptcy Law or any similar proceedings shall be commenced against such Person under any other applicable Federal or state law and (a) the petition commencing the involuntary case is not timely controverted, (b) the petition commencing the involuntary case is not dismissed within 90 days of its filing, (c) an interim trustee is appointed to take possession of all or a portion of the property, and/or to operate all or any part of the business of such Person and such appointment is not vacated within 90 days, or (d) an order for relief shall have been issued or entered therein; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver; administrator, administrative receiver, liquidator, sequestrator, trustee or other officer having similar powers, over such Person or all or a part of its property shall have been entered; or any other similar relief shall be granted against such Person under any applicable Bankruptcy Law. "Bankruptcy Law" means Title 11, United States Code, and any other state or federal insolvency, reorganization, moratorium or similar law for the relief of debtors, or any successor statute. "Beneficiary" has the meaning ascribed to it in the Preamble. "Deed of Trust" has the meaning ascribed to it in the Preamble. "Easements" has the meaning ascribed to it in the granting clauses of this Deed of Trust ("Granting Clauses"). "Equipment" has the meaning ascribed to it in the Granting Clauses. "Event of Default" means an "Event of Default" (as defined in the PPTA) with respect to the "Seller" (as defined in the PPTA) under the PPTA. "Excluded Mortgaged Property" means (i) with respect to any real property, any lease, license, permit, franchise, power, authority or right if, to the extent that and for so long as t'w). the grant of a lien and security interest under this Deed of Trust constitutes or would result in the !, abandonment, invalidation or unenforceability of such lease, license, permit, franchise, power, 'i authority or right or the termination of or a default under the instrument or agreement by which such lease, license, permit, franchise, power, authority or right is governed; provided, that such :w lease, license, permit, franchise, power, authority or right will be an Excluded Mortgaged Property only to the extent and for so long as the condition set forth above is and remains satisfied and, to the extent such property otherwise constitute Mortgaged Property, will cease to 1e�+i �6, LA\1777398.11 be an Excluded Mortgaged Property, and will become subject to the lien and security interests granted to the Beneficiary under this Deed of Trust, except as such proceeds are applied and used in the ordinary course of business and in accordance with the Secured Obligation Provisions, and (ii) prior to any Event of Default, all rights to exercise any election or option, to make any determination or to give any notice, consent, waiver or approval, or to take any other action under the Ground Lease that, in each case, does not violate an express prohibition set forth in the Secured Obligation Provisions. "Facility' has the meaning ascribed to it in the Recitals. "Facility Site" means the land described on Exhibit A. "Financing Documents" means those documents reasonably required by a Trustor Financing Party with respect to debt financing or refinancing for the Facility. "Governmental Authority" means any federal, state, municipal, national or other government, governmental department, commission, board, bureau, court, agency or instrumentality or political subdivision thereof or any entity or officer exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case whether associated with a state of the United States, the United States, or a foreign entity or government. "Governmental Rule" means any law, rule, regulation, ordinance, order, code interpretation, treaty, judgment, decree, directive, guidelines, policy or similar form of decision of any Governmental Authority. "Granting Clauses" has the meaning ascribed to it in these definitions. "Ground Lease" has the meaning ascribed to it in the Recitals. "Improvements" has the meaning ascribed to it in the Granting Clauses. "Leases" means any and all leases, subleases, occupancy agreements, licenses, concessions or grants of other possessory interests now or hereafter in force, oral or written, covering or affecting the use and enjoyment of the Mortgaged Property, or any part thereof, including any and all extensions, renewals, modifications or replacements thereof, and together with all rights, powers, privileges, options and other benefits of Trustor thereunder. "Legal Requirements" means, as to any Person, the articles of incorporation, bylaws or other organizational or governing documents of such Person, and any requirement under a permit, and any Governmental Rule in each case applicable to or binding upon such Person or any of its properties or to which such Person or any of its property is subject. "Lien" means (i) with respect to real property, liens, charges, pledges, options, rd mortgages, deeds of trust, security interests, claims, easements, and other encumbrances affecting title to real property and (ii) with respect to personal property, liens, charges, pledges, options and security interests, in the case of (i) or (ii), whether imposed by law, agreement, understanding or otherwise, including by a bankruptcy court. 6 LA\1777398.11 "Mortgaged Property" has the meaning ascribed to it in the Granting Clauses. "Person" means an individual, partnership, joint venture, corporation, limited liability company, trust, association or unincorporated organization, or any Governmental Authority. "PPTA" has the meaning ascribed to it in the Recitals. "Project" means that certain 134 MW (approximately) power generating Facility located in the City of Vernon, California, commonly known as the Malburg Generation Station. "Protective Advances" has the meaning ascribed to it in Section 4.11. "Real Property" has the meaning ascribed to it in the Granting Clauses. "Rents" means all of Trustor's right, title and interest in and to all of the rents, royalties, issues, profits, revenue, income and other benefits under any Leases and under any and all guaranties of the obligations of the lessees, sublessees, occupants and licensees thereunder, whether now due, past due, or to become due, and including all prepaid rents and security deposits. "Secured Obligations" has the meaning ascribed to it in the Recitals. "Secured Obligation Provisions" has the meaning ascribed to it in Section 2.1 below. "Secured Obligations Termination Date" means the date on which all of Trustor's obligations under the PPTA have been satisfied and/or terminated or expired. "Site" has the meaning ascribed to it in the Granting Clauses. "Tangible Collateral" has the meaning ascribed to it in the Granting Clauses. "Trustee" has the meaning ascribed to it in the Preamble. "Trustor" has the meaning ascribed to it in the Preamble. "Trustor's FinancingParties" means any financial institution that provides debt financing or refinancing to Trustor for the Facility. "UCC" means the Uniform Commercial Code as in effect from time to time in the State of California "UCC Collateral" has the meaning ascribed to it in Section2.9.1 below. 1,g1`'s 1.2 AccountingTerms. erms. As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined herein shall have the respective meanings given to them under GAAP. u ��p 7 LA\1777398.11 13 1.3 The Rules of Construction. In this Deed of Trust, unless a clear contrary intention appears: 1.3.1 the singular number includes the plural number and vice versa; 1.3.2 reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity; 1.3.3 reference to any gender includes the other gender; 1.3.4 reference to any agreement (including this Deed of Trust), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms hereof, 1.3.5 reference to any Article, Section; Schedule or Exhibit means such Article, Section, Schedule or Exhibit to this Deed of Trust, and references in any Article, Section, Schedule, Exhibit or definition to any clause means such clause of such Article, Section, Schedule, Exhibit or definition; 1.3.6 "hereunder," "hereof," "hereto" and words of similar import are references to this Deed of Trust as a whole and not to any particular Section or other provision hereof or thereof, unless otherwise specified; 1.3.7 "including" (and correlative terms) means "including without limitation" and "including, but not limited to"; 1.3.8 relative to -the determination of any period of time, "from" means "from and including," "to" means "to but excluding" and "through" means "through and including"; 1.3.9 examples shall not be construed to limit, expressly or by implication, the matter they illustrate; 1.3.10 reference to any law (including statutes and ordinances) means such law as amended, modified codified or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder; and 1.3.11 except where the context otherwise requires, "or" shall have the inclusive meaning frequently designated by "and/or". ARTICLE 2 GENERAL COVENANTS AND PROVISIONS 2.1 Trustor Performance of Secured Obligation Provisions. Trustor shall pay, perform, observe and comply with each and every provision hereof, and with each and every provision applicable to Trustor in the PPTA (collectively, the "Secured Obligation Provisions") at the time and in the manner provided in the Secured Obligation Provisions. 8 LA\1777398.11 2.2 Expenses. Trustor shall indemnify Beneficiary with respect to any transaction or matter in any way connected with any portion of the Mortgaged Property, this Deed of Trust, or Trustor's use, occupancy, or operation of the Mortgaged Property in each case only if and to the extent required pursuant to the Secured Obligation Provisions. 2.3 Beneficiary Assumes No Secured Obligations. It is expressly agreed that, anything herein contained to the contrary notwithstanding, except (in each case below) as may otherwise be provided in the Secured Obligation Provisions or any other written agreement between Beneficiary and Trustor, Beneficiary shall not have any obligation or liability with respect to any obligations of Trustor with respect to the Mortgaged Property, nor shall Beneficiary be required or obligated in any manner to (a) perform or fulfill any obligations or duties of Trustor under any agreements with respect to the Mortgaged Property, (b) make any payment or make any inquiry as to the nature or sufficiency of any payment received by it, or (c) present or file any claim or take any action to collect or enforce the payment of any amounts which have been assigned to Beneficiary hereunder or to which Beneficiary may be entitled at any time or times. 2.4 Further Assurances. Subject to Section 2.10 below, Trustor shall, from time to time, at its expense, promptly Authenticate, execute and deliver all further instruments and documents, and take all further action, as may be reasonably requested by Trustee or Beneficiary in order to create and/or maintain the validity, perfection or priority of and protect the lien and security interest granted or purported to be granted hereby or to enable Beneficiary to obtain the full benefits of the lien and security interest granted or intended to be granted hereby. Without limiting the generality of the foregoing, Trustor shall execute and record or file this Deed of Trust and each amendment hereto, file such financing or continuation statements, or amendments thereto, and, subject to Section 2.10 below, execute and deliver such other agreements, instruments, endorsements, powers of attorney or notices as may be reasonably necessary in order to perfect and preserve the lien and security interest granted or purported to be granted .hereby. Trustor hereby authorizes the filing of any financing statements or continuation statements, and amendments to financing statements, or any similar document in any jurisdictions and with any filing offices as Beneficiary may determine, in its. sole discretion, are necessary or advisable to perfect or otherwise protect the lien and security interest granted to Beneficiary herein. 2.5 Acts of Trustor. Trustor hereby covenants that it will not mortgage, hypothecate, assign or pledge, so long as this Deed of Trust shall remain in effect, any of its right, title or interest in and to the Mortgaged Property or any part thereof to anyone other than Beneficiary in any manner if to do so would violate an express prohibition against such mortgage, hypothecation, assignment or pledge as set forth in the Secured Obligation Provisions. 2.6 After -Acquired Pro ertX• Subject to any contrary provision of any Secured Obligation Provision, any and all property or interest acquired by Trustor after the date of this Deed of Trust, which by the terms of this Deed of Trust shall be, or is intended to be, subject to the lien and security interest created hereby, shall immediately, without any further conveyance, assignment or act on the part of Trustor or Beneficiary, become and be subject to the lien and a F' security interest of this Deed of Trust as fully and completely as though specifically described herein, but nothing contained in this Section 2.6 shall be deemed to modify or change the 9 LA\1777398.11 obligations of Trustor under Section 2.4 hereof or the obligations of Beneficiary under Section 2.10. Subject to any contrary provision of any Secured Obligation Provision, if and whenever from time to time Trustor shall hereafter acquire any property or interest therein which by the terms of this Deed of Trust shall be, or is intended to be, subject to the lien and security interest created hereby, Trustor shall promptly give notice thereof to Beneficiary, and Trustor shall forthwith execute, acknowledge and deliver to Beneficiary, and record and file, all and every such further mortgages, security agreements, financing statements, assignments and assurances (including, as may be appropriate, a supplement to this Deed of Trust) in form and substance reasonably satisfactory to Beneficiary subjecting the property or interest so acquired to the lien of this Deed of Trust. 2.7 Mortgaged Property. 2.7.1 The Mortgaged Property shall not be removed, demolished or materially altered in any manner that would violate an express prohibition against such removal, demolition or material alteration as set forth in the Secured Obligation Provisions without the consent of Beneficiary. 2.7.2 Trustor will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind on the Mortgaged Property, whether now owned or hereafter acquired, if such Lien would violate an express prohibition against Liens as set forth in the Secured Obligation Provisions without the consent of Beneficiary. Trustor shall not sell, transfer, assign or convey any part of the Mortgaged Property in any manner that would violate an express prohibition against such sale, transfer, assignment or conveyance as set forth in the Secured Obligation Provisions without the prior consent of Beneficiary. The provisions of the foregoing sentence of this paragraph shall apply to each and every such further encumbrance, sale, transfer, assignment or conveyance, regardless of whether or not Beneficiary has consented to, or waived by its action or inaction its rights hereunder with respect to, any such previous further encumbrance, sale, transfer, assignment or conveyance, and, irrespective of whether such further encumbrance, sale, transfer, assignment or conveyance is voluntary, by reason of operation of law or is otherwise made. 2.7.3 If any action or proceeding shall be instituted to evict Trustor or to recover possession of the Mortgaged Property or any part thereof or interest therein from Trustor or any action or proceeding otherwise affecting the Mortgaged Property or this Deed of Trust shall be instituted, then Trustor shall, immediately after receipt, deliver to Beneficiary a true and complete copy of each petition, summons, complaint, notice of motion, order to show cause and all other pleadings and papers, however designated, served in any such action or proceeding. 2.7.4 Trustor covenants and agrees that the fee title to the Real Property and Improvements and the leasehold estate created under the Ground Lease shall not merge but shall always remain separate and distinct, notwithstanding the union of said estates either in Trustor or Fif a third party by purchase or otherwise, and, in the event Trustor acquires the fee title or any other s.p1 estate, title or interest in and to the Real Property and Improvements, the lien of this Deed of F? Trust shall, without further conveyance, simultaneously with such acquisition, be spread to cover and attach to such acquired estate and as so spread and attached shall have the same priority as prior to such spread and attachment. V 10 LA\1777398.11 2.7.5 No release or forbearance of any of Trustor's obligations under the Ground Lease by the Beneficiary or its heirs and assigns shall release Trustor from any of its obligations under this Deed of Trust. 2.7.6 The lien of this Deed of Trust shall attach to all of Trustor's rights and remedies at any time arising under or pursuant to section 365(h) of the Bankruptcy Law, including, without limitation, all of Trustor's rights to remain in possession of the Mortgaged Property. Trustor shall not elect to treat the Ground Lease as terminated under section 365(h)(1) of the Bankruptcy Law, and any such election shall be void. 2.8 Covenant to Pay. If an Event of Default has occurred and is continuing and such Event of Default could reasonably be expected to materially and adversely affect Beneficiary's interest hereunder in the Mortgaged Property or result in personal injury, then Beneficiary, among its other rights and remedies, shall have the right, but not the obligation, to pay, observe or perform the same, in whole or in part, and with such modifications as Beneficiary reasonably shall deem advisable. To the extent provided in the Secured Obligation Provisions and without limiting any of the provisions contained therein, all sums, including, without limitation, reasonable attorneys' fees, so expended or incurred by Beneficiary by reason of the default of Trustor, or by reason of the bankruptcy or insolvency of Trustor, as well as, without limitation, sums expended or incurred to sustain the lien or estate of this Deed of Trust or its priority, or to protect or enforce any rights of Beneficiary hereunder, or to recover any of the Secured Obligations,;or for real estate taxes or other governmental assessments or charges against any part of the Mortgaged Property, or premiums for insurance of the Mortgaged Property that Trustor is required to maintain pursuant to the Secured Obligation Provisions, shall be entitled to the benefit of the lien on the Mortgaged Property as of the date of the recording of this Deed of Trust, shall be deemed to be added to and be part of the Secured Obligations secured hereby, and shall be repaid by Trustor as provided in the Secured Obligation Provisions. 2.9 Security Agreement. 2.9.1 This Deed of Trust shall also be a security agreement between Trustor and Beneficiary covering the Mortgaged Property constituting personal property or fixtures (hereinafter collectively called "UCC Collateral") governed by the UCC, as the same may be more specifically set forth in any financing statement delivered in connection with this Deed of Trust, and as further security for the payment and performance of the Secured Obligations, Trustor hereby grants to Beneficiary a security interest in such portion of the Mortgaged Property that "constitutes UCC Collateral to the full extent that such UCC Collateral may be subject to the UCC. In addition to Beneficiary's other rights hereunder, Beneficiary shall have all rights of a secured party under the UCC. Trustor shall Authenticate, execute and deliver all financing statements and such further assurances that may be reasonably requested by Beneficiary to �+ t establish, create, perfect (to the extent the same can be achieved by the filing of a financing statement) and maintain the validity and, subject to Section 2.1.0 below, priority of Beneficiary's security interests, and Trustor shall bear all reasonable costs thereof, including all UCC searches. Except as otherwise provided in the Secured Obligation Provisions, if Beneficiary should dispose of any of the Mortgaged Property comprising the UCC Collateral pursuant to the UCC, then ten 10 days' prior written notice b Beneficiary to Trustor shall be deemed to be reasonable notice; ( ) Y P Y Y u provided, however, Beneficiary may dispose of such property in accordance with the foreclosure 1 11 LA\1777398.11 procedures of this Deed of Trust in lieu of proceeding under the UCC. Beneficiary may from time to time execute, file and/or deliver at Trustor's expense all continuation statements, termination statements, amendments, partial releases, or other instruments relating to all financing statements by and between Trustor and Beneficiary. Except as otherwise provided in the Secured Obligation Provisions, if an Event of Default shall occur and is continuing, (a) Beneficiary, in addition to any other rights and remedies which it may have, may exercise, immediately and without demand to the extent permitted by law, any and all rights and remedies granted to a secured party under the UCC including, without limiting the generality of the foregoing, the right to take possession of the UCC Collateral or any part thereof and the right to take such other measures as Beneficiary may deem necessary for the care, protection and preservation of such collateral and (b) upon request or demand of Beneficiary, Trustor shall at its expense assemble the UCC Collateral and make it available to Beneficiary at a convenient place acceptable to Beneficiary. Trustor shall pay to Beneficiary on demand any and all expenses, including reasonable attorneys' fees and disbursements incurred or paid by Beneficiary in protecting the interest in the UCC Collateral and in enforcing the rights hereunder with respect to such UCC Collateral. 2.9.2 Trustor agrees, to the extent permitted by law, that: (i) this Deed of Trust upon recording or registration in the real estate records of the proper office shall constitute a financing statement filed as a "fixture filing" within the meaning of Sections 9-334 and 9-502 of the UCC; (ii) all or a part of the Mortgaged Property are or are to become fixtures; and (iii) the addresses of Trustor and Beneficiary are as set forth in the Preamble of this Deed of Trust. Trustor's organizational identification number is 83-0505414. 2.10 Subordination. Subject to the terms and conditions of the Secured Obligation Provisions, Beneficiary has agreed, that upon Trustor's request, Beneficiary shall, from time to time, without any additional consideration paid to Beneficiary, execute a lien subordination agreement (the "Lien Subordination Agreement") substantially in the form attached hereto as Exhibit D to effectuate the subordination of the lien of this Deed of Trust to the lien of Trustor's Financing Parties pursuant to any Financing Documents. Subject to the terms and conditions of the Secured Obligation Provisions, Beneficiary shall, from time to time, at its expense, promptly Authenticate, execute and deliver all further instruments and documents, and take all further action, as may be reasonably requested by Trustor or its Financing Parties in order to effectuate any such subordination and/or establish the validity, perfection or priority of any Financing Parties' lien pursuant to any Financing Document. ARTICLE 3 ASSIGNMENT OF RENTS AND LEASES 3.1 Assignment of Rents. Trustor's right, title and interest in and to the Rents are hereby absolutely and irrevocably assigned to Beneficiary to be applied against the Secured Obligations. Trustor hereby appoints Beneficiary its true and lawful attorney -in -fact, with the lfi right, at Beneficiary's option at any time, to demand, receive and enforce payment of, to give receipts, releases and satisfactions for, and to sue, either in Trustor's or Beneficiary's name for, all Rents. Notwithstanding the foregoing Assignment of Rents, so long as no Event of Default abet has occurred which remains uncured Trustor may collect receive take use and enjoy such Rents, as they become due and payable. The foregoing assignment shall be fully operative 12 LA\1777398.11 without any further action on the part of either party; and specifically Beneficiary shall be entitled at its option, upon the occurrence of an Event of Default hereunder and for so long as such Event of Default is continuing, to collect all Rents from the Mortgaged Property whether or not Beneficiary takes possession of the Mortgaged Property. Upon the occurrence of an Event of Default hereunder, the permission hereby given to Trustor to collect the Rents from the Mortgaged Property shall terminate. The permission given by Beneficiary to Trustor shall be reinstated upon the cure of such Event of Default with Beneficiary's specific consent which shall not be unreasonably withheld. This Assignment shall not be deemed or construed to constitute Beneficiary or Trustee as a mortgagee in possession nor obligate Beneficiary or Trustee to take any action or to incur expense or perform or discharge any obligation, duty or liability. Exercise of any rights under this Section and the application of the Rents to the Secured Obligations shall not cure or waive any Event of Default but shall be cumulative of all other rights and remedies of Beneficiary. 3.2 Assignment of Leases. Trustor hereby assigns to Beneficiary all right, title and interest of Trustor in and to all Leases, together with all security therefor and all monies payable thereunder, subject, however, to the conditional permission given to Trustor above to collect the rentals under any such Lease as provided in Section 3.1 above. The foregoing assignment of any Lease shall not be deemed to impose upon Beneficiary any of the obligations or duties of Trustor provided in any such Lease; and Trustor agrees to fully perform all obligations of the lessor under all such Leases. Upon Beneficiary's request, Trustor shall deliver to any new lessee a notice of this assignment in form satisfactory to Beneficiary in its sole discretion. Beneficiary may deliver such a notice to new lessees if Trustor fails to do so within a reasonable time after Beneficiary's request. From time to time, upon request of Beneficiary, Trustor shall specifically assign to Beneficiary, by an assignment in writing in form approved by Beneficiary, all right, title and interest of Trustor in and to any and all Leases, together with all security therefor and all monies payable thereunder, subject to the conditional permission given to Trustor above to collect and use the rentals under any such Lease. Trustor shall from time to time within thirty (30) days after written request by Beneficiary, execute, acknowledge and deliver any instrument as Beneficiary may reasonably request to further evidence the assignment and transfer to Beneficiary of Trustor's interest in any Lease. 3.3 Election to Proceed Under Section 2938 of California Civil Code. Without limiting any other rights or remedies of Beneficiary set forth in this Assignment or under this Deed of Trust, or available at law or in equity, Beneficiary shall have the right to enforce all of the rights and remedies of an assignee under Section 2938 of the California Civil Code. 3.4 Effect of Assignments. This instrument constitutes an absolute and present assignment of the rents, royalties, issues, profits, revenue, income and other benefits from the m Mortgaged Property; subject, however, to, the conditional permission given to Trustor to collect, as;a] receive, take, use and enjoy the same as provided above; provided, further, that the existence or exercise of such right of Trustor shall not operate to subordinate this assignment to any r subsequent assignment by Trustor, in whole or in part, and any such subsequent assignment by 'a Trustor shall be subject to the rights of Beneficiary hereunder provided, however, that (notwithstanding any provision of this Article 3 to the contrary) this Assignment and the rights of 4t,,l Beneficiary under this Article 3 shall be subordinated as and to the extent that the lien of this Deed of Trust is subordinated to the Financing Documents (and to the rights of Trustor's 13 LA\1777398.11 Financing Parties with respect to the Leases and Rents under such Financing Documents) and to the other Liens expressly permitted by the terms hereof 3.5 No Merger of Leasehold Estates. If both the lessor's and lessee's estate under any Lease, or any portion thereof, becomes vested at any time in one owner, this Deed of Trust and the lien created hereby shall not be adversely affected by the application of the doctrine of merger unless Beneficiary so elects in writing by recording a written declaration so stating. Unless and until Beneficiary so elects, Beneficiary and any lessor and lessee shall continue to have and enjoy all of the rights and privileges to the separate estates. In addition, upon the foreclosure of the lien created by this Deed of Trust on the Mortgaged Property, any Leases then existing and affecting all or any portion of the Mortgaged Property shall not be destroyed or terminated by merger or by the foreclosure unless Beneficiary or any purchaser at the sale so elects. No act by or on behalf of Beneficiary or such purchaser shall constitute a termination of any Lease unless Beneficiary gives written notice thereof to the tenant or subtenant affected. ARTICLE 4 REMEDIES 4.1 Protective Advances. If an Event of Default shall have occurred and is continuing, then, without thereby limiting Beneficiary's other rights or remedies, waiving or releasing any of Trustor's obligations, or imposing any obligation on Beneficiary, Beneficiary shall have the right, but not the obligation, to either advance any amount owing or perform any or all actions that Beneficiary considers necessary or appropriate to cure such default. All such advances shall constitute "Protective Advances." No sums advanced or performance rendered by Beneficiary shall cure or be deemed a waiver of any Event of Default. 4.2 Institution of Equity Proceedings. If an Event of Default occurs and is continuing, Beneficiary may institute an action, suit or proceeding in equity for specific performance of this Deed of Trust or any other Secured Obligation Provision, all of which shall be specifically enforceable by injunction or other equitable remedy. 4.3 Beneficiary's Power of Enforcement. 4.3.1 If an Event of Default occurs and is continuing, Beneficiary shall be entitled, at its option and in its sole and absolute discretion, to prepare and record on its own behalf, or to deliver to Trustee for recording, if appropriate, written declaration of default and demand for sale and written notice of breach and election to sell (or other statutory notice) to cause the Mortgaged Property to be sold to satisfy the obligations hereof, and in the case of delivery to Trustee, Trustee shall cause said notice to be filed for record. 4.3.2 After the lapse of such time as may then be required by law following the recordation of said notice of breach and election to sell, and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Mortgaged Property or any portion thereof at the time and place fixed by it in said notice, either as a whole or in separate parcels, and in such order as it may determine, at public auction to the highest bidder, for cash in lawful money of the United States payable at the time of sale. Trustee may, for any cause it deems expedient, postpone the sale of all or any portion of said property until it shall be 14 LA\1777398.11 E completed, and, in every case, notice of postponement shall be given by public announcement thereof at the time and place last appointed for the sale. From time to time thereafter Trustee may postpone such sale by public announcement at the time fixed by the preceding postponement; provided that Trustee shall give Trustor notice of such postponement to the extent required by law. Trustee shall execute and deliver to the purchaser its deed, bill of sale, or other instrument conveying said property so sold, but without any covenant or warranty, express or implied. The recitals in such instrument of conveyance of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Beneficiary, may bid at the sale. 4.3.3 After deducting all costs, fees and expenses of Trustee and of this Deed of Trust, including, without limitation, costs of evidence of title and reasonable attorneys' fees of Trustee or Beneficiary in connection with a sale, Trustee shall apply the proceeds of such sale to payment of all sums expended under the terms hereof not then repaid, then to the payment of all other sums then secured hereby, and the remainder, if any, to the person or persons legally entitled thereto. 4.3.4 If any Event of Default occurs and is continuing, Beneficiary may, to the extent permitted by law, either with or without entry or taking possession of the Mortgaged Property, and without regard to whether or not the indebtedness and other sums secured hereby shall be due and without prejudice to the right of Beneficiary thereafter to bring an action or proceeding to foreclose or any other action for any other Event of Default existing at the time such earlier action was commenced, proceed by any appropriate action or proceeding: (a) to enforce payment of the Secured Obligations, to the extent permitted by law, or the performance of any term hereof or any other right; (b) to foreclose this Deed of Trust in any manner provided by law for the foreclosure of mortgages or deeds of trust on real property and to sell, as an entirety or in separate lots or parcels, the Mortgaged Property or any portion thereof pursuant to the applicable law or under the judgment or decree of a court or courts of competent jurisdiction, and Beneficiary shall be entitled to recover in any such proceeding all costs and expenses incident thereto, including reasonable attorneys' fees in such amount as shall be awarded by the court; (c) to exercise any or all of the rights and remedies available to it under the Secured Obligation Provisions; and (d) to pursue any other remedy available to it. Beneficiary shall take action either by such proceedings or by the exercise of its powers with respect to entry or taking possession, or both, as Beneficiary may determine. 4.3.5 The remedies described in this section may be exercised with respect to all or any portion of the UCC Collateral, either simultaneously with the sale of any real property encumbered hereby or independent thereof. Beneficiary shall at any time be permitted to proceed with respect to all or any portion of the UCC Collateral in any manner permitted by the UCC. Trustor agrees that Beneficiary's inclusion of all or any portion of the UCC Collateral in a sale or other remedy exercised with respect to the real property encumbered hereby, as permitted by the UCC, is a commercially reasonable disposition of such property. �x!t 4.3.6 Where the Mortgaged Property consists of real property and personal property, any reinstatement of the Secured Obligations, following the occurrence of an Event of w� Default and an election by the Beneficiary to accelerate the maturity of the Secured Obligations, which is made by Trustor or any other person or entity permitted to exercise any right of I� kr� 15 LA\1777398.11 reinstatement under Section 2924c of the California Civil Code or any successor statute, shall, in accordance with the terms of UCC Section 9-604, not prohibit the Beneficiary from conducting a sale or other disposition of any personal property or from otherwise proceeding against or continuing to proceed against any personal property in any manner permitted by the UCC, nor shall any such reinstatement invalidate, rescind or otherwise affect any sale, disposition or other proceeding held, conducted or instituted with respect to any personal property prior to such reinstatement. Any sums paid to Beneficiary, in effecting any reinstatement pursuant to Section 2924c of the California Civil Code, shall be applied to the Secured Obligations and to Beneficiary's and Trustee's reasonable costs and expenses in the manner required by Section 2924c. 4.4 Beneficiary's Right to Enter and Take Possession, Operate and Apply Income. 4.4.1 If an Event of Default occurs and is continuing, Trustor, upon demand of Beneficiary, shall forthwith surrender to Beneficiary the actual possession and, if and to the extent permitted by law, Beneficiary itself, or by such officers or agents as it may appoint, may enter and take possession of all of the Mortgaged Property, including the Tangible Collateral, without liability for trespass, damages or otherwise, and may exclude Trustor and its agents and employees wholly therefrom and may have joint access with Trustor to the books, papers and accounts of Trustor. 4.4.2 If an Event of Default has occurred and is continuing and Trustor shall for any reason fail to surrender or deliver the Mortgaged Property or any part thereof after Beneficiary's demand, Beneficiary may obtain a judgment or decree conferring on Beneficiary or Trustee the right to immediate possession or requiring Trustor to deliver immediate possession of all or part of such property to Beneficiary or Trustee, and Trustor hereby specifically consents to the entry of such judgment or decree. Trustor shall pay. to Beneficiary and Trustee, upon demand, all of their respective costs and expenses of obtaining such judgment or decree and reasonable compensation to Beneficiary or Trustee, their attorneys and agents, and all such costs, expenses and compensation shall, until paid, be secured by the lien of this Deed of Trust. 4.4.3 Upon every such entering upon or taking of possession, Beneficiary or Trustee may hold, store, use, operate, manage and control the Mortgaged Property and conduct the business thereof, and, from time to time in its sole and absolute discretion and without being under any duty to so act: (a) make all necessary and proper maintenance, repairs, renewals and replacements thereto and thereon, and all necessary additions, betterments and improvements thereto and thereon, and purchase or otherwise acquire fixtures, personalty and other property in connection therewith; (b) insure or keep the Mortgaged Property insured; (c) manage and operate the Mortgaged Property and exercise all the rights and powers of Trustor in their name or otherwise with respect to the same; (d) enter into agreements with others to exercise the powers herein granted Beneficiary or Trustee, all as Beneficiary or Trustee from time to time may 16 LA\1777398.11 2,000e determine, and shall apply the monies so received by Beneficiary or Trustee in such priority as provided by the Secured Obligation Provisions to (i) the payment of interest and principal due and payable to the Beneficiary, (ii) the deposits for taxes and assessments and insurance premiums due, (iii) the cost of insurance, taxes, assessments and other proper charges upon the Mortgaged Property or any part thereof, (iv) the compensation, expenses and disbursements of the agents, attorneys and other representatives of Beneficiary or Trustee as allowed under this Deed of Trust, and (v) any other charges or costs required to be paid by Trustor under the terms of the Secured Obligation Provisions; and (e) rent or sublet the Mortgaged Property or any portion thereof for any purpose permitted by this Deed of Trust. 4.4.4 Beneficiary or Trustee shall surrender possession of the Mortgaged Property to Trustor (a) as may be required by law or court order, or (b) when all amounts under any of the terms of the Secured Obligation Provisions, including this Deed of Trust, shall have been paid current and all Events of Default have been cured or waived. The same right of taking possession, however, shall exist if any subsequent Event of Default shall occur and be continuing. 4.5 Separate Sales. To the extent permitted by law or Governmental Rule, the Mortgaged Property may be sold in one or more parcels and in such manner and order as Trustee, in its sole discretion, may elect, it being expressly understood and agreed that the right of sale arising out of any Event of Default shall not be exhausted by any one or more sales. 4.6 Waiver of Appraisement, Moratorium, Valuation, Stay, Extension and Redemption Laws. Trustor agrees to the full extent permitted by law that, if an Event of Default occurs and is continuing; neither Trustor nor anyone claiming through or under it shall or will set up, claim or seek to take advantage of any appraisement, moratorium, valuation, stay, extension or redemption laws now or hereafter in force, in order to prevent or hinder the enforcement or foreclosure of this Deed of Trust or the absolute sale of the Mortgaged Property or any portion thereof or the final and absolute putting into possession thereof, immediately after such sale, of the purchasers thereof, and Trustor for itself and all who may at any time claim through or under it, hereby waives, to the full extent that it may lawfully so do, the benefit of all such laws, and any and all right to have the assets comprising the Mortgaged Property marshalled upon any foreclosure of the lien hereof and agrees that Trustee or any court having jurisdiction to foreclose such lien may sell the Mortgaged Property in part or as an entirety. 4.7 Receiver. If an Event of Default occurs and is continuing, Beneficiary, to the extent permitted by law, and without regard to the value, adequacy or occupancy of the security nP 441) for the indebtedness and other sums secured hereby, shall be entitled as a matter of right if it so elects to the appointment of a receiver to enter upon and take possession of the Mortgaged CAP Property and to collect all earnings, revenues and receipts and apply the same as the court may direct, and such receiver may be appointed by any court of competent jurisdiction upon application by Beneficiary. To the extent permitted by law or Governmental Rule, Beneficiary may have a receiver appointed without notice to Trustor or any third party, and Beneficiary may 1jr. waive any requirement that the receiver post a bond. To the extent permitted bylaw or 17 LA\1777398.11 Governmental Rule, Beneficiary shall have the power to designate and select the Person who shall serve as the receiver and to negotiate all terms and conditions under which such receiver shall serve. To the extent permitted by law or Governmental Rule, any receiver appointed on Beneficiary's behalf may be an Affiliate of Beneficiary. The reasonable fees, costs and expenses, including receiver's fees, reasonable attorneys' fees, costs and agents' compensation, incurred pursuant to the powers herein contained shall be secured by this Deed of Trust. The right to enter and take possession of and to manage and operate the Mortgaged Property and to collect all earnings, revenues and receipts, whether by a receiver or otherwise, shall be cumulative to any other right or remedy available to Beneficiary under this Deed of Trust, the other Secured Obligation Provisions or otherwise available to Beneficiary and may be exercised concurrently therewith or independently thereof, but such rights shall be exercised in a manner which is otherwise in accordance with and consistent with the Secured Obligation Provisions. Beneficiary shall be liable to account only for such earnings, revenues and receipts (including, without limitation, security deposits) actually received by Beneficiary, whether received pursuant to this section or any other provision hereof. Notwithstanding the appointment of any receiver or other custodian, Beneficiary shall be entitled as pledgee to the possession and control of any cash, deposits, or instruments at the time held by, or payable or deliverable under the terms of this Deed of Trust to, Beneficiary. 4.8 Suits to Protect the Mortgaged Property. Beneficiary shall have the power and authority to institute and maintain any suits and proceedings as Beneficiary, in its sole and absolute discretion, may deem advisable (a) to prevent any impairment of the Mortgaged Property by any acts which may be unlawful or in violation of this Deed of Trust, (b) to preserve or protect its interest in the Mortgaged Property, or (c) to restrain the enforcement of or compliance with any legislation or other Legal Requirement that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Beneficiary's interest. 4.9 Proofs of Claim. In the case of any receivership, insolvency, Bankruptcy Event, reorganization, arrangement, adjustment, composition or other judicial proceedings affecting Trustor, any Affiliate or any guarantor, co -maker or endorser of any of Trustor's obligations, its creditors or its property, Beneficiary, to the extent permitted by law, shall be entitled to file such proofs of claim or other documents as it may deem be necessary or advisable in order to have its claims allowed in such proceedings for the entire amount due and payable by Trustor under the Secured Obligation Provisions, at the date of the institution of such proceedings, and for any additional amounts which may become due and payable by Trustor after such date. 4.10 Trustor to Pay Amounts Secured Hereby on Any Default in Payment; Application of Monies by Beneficiary. Ayep 4.10.1 In case of a foreclosure sale of all or any part of the Mortgaged Property and of the application of the proceeds of sale to the payment of the sums secured hereby, to the i extent permitted bylaw, and subject to the provisions of Section 6.14 below, Beneficiary shall be `'P entitled to enforce payment from Trustor of any additional amounts then, remaining due and unpaid and to recover judgment against Trustor for any portion thereof remaining unpaid. 18 LA\1777398.11 4.10.2 Trustor hereby agrees, to the extent permitted by law, that no recovery of any such judgment by Beneficiary or other action by Beneficiary and no attachment or levy of any execution upon any of the Mortgaged Property or any other property shall in any way affect the Lien and security interest of this Deed of Trust upon the Mortgaged Property or any part thereof or any Lien, rights, powers or remedies of Beneficiary hereunder, but such Lien, rights,_ powers and remedies shall continue unimpaired as before. 4.10.3 Any monies collected or received by Beneficiary under this section shall be applied in accordance with the terms of the Secured Obligation Provisions. 4.11 Delay or Omission; No Waiver. No delay or omission of Beneficiary to exercise any right, power or remedy upon any Event of Default shall exhaust or impair any such right, power or remedy or shall be construed to waive any such Event of Default or to constitute acquiescence therein. Every right, power and remedy given to Beneficiary whether contained herein or in the other Secured Obligation Provisions or otherwise available to Beneficiary may be exercised from time to time and as often as may be deemed expedient by Beneficiary. 4.12 No Waiver of One Default to Affect Another. No waiver of any Event of Default hereunder shall extend to or affect any subsequent or any other Event of Default then existing or impair any rights, powers or remedies consequent thereon. If Beneficiary (a) grants forbearance or an extension of time for the payment of any sums secured hereby, (b) takes other or additional security for the payment thereof, (c) waives or does not exercise any right granted in this Deed of Trust or any other Secured Obligation Provision, (d) releases any part of the Mortgaged Property from the lien or security interest of this Deed of Trust or any other instrument securing the Secured Obligations, (e) consents to the filing of any map, plat or replat of the Real Property or any part thereof, (f) consents to the granting of any easement on the Real Property, or (g) makes or consents to any agreement changing the terms of this Deed of Trust or any other Secured Obligation Provision subordinating the lien or any charge hereof, then no such act or omission shall release, discharge, modify, change or affect the liability under this Deed of Trust or any other Secured Obligation Provision or otherwise of Trustor, or any subsequent purchaser of the Mortgaged Property or any part thereof or any maker, co-signer, surety or guarantor, with respect to any other matters not addressed by such act or omission. No such actor omission shall preclude Beneficiary from exercising any right, power or privilege herein granted or intended to be granted in case of any Event of Default then existing or of any subsequent Event of Default, nor, except as otherwise expressly provided in an instrument or instruments executed by Beneficiary, shall the lien or security interest of this Deed of Trust be altered thereby, except to the extent expressly provided in such acts or omissions. In the event of the sale or transfer by operation of law or otherwise of all or any part of the Mortgaged Property, Beneficiary, without notice to any person, firm or corporation, is hereby authorized and empowered to deal with any .R� such vendee or transferee with reference to the Mortgaged Property or the indebtedness secured a hereby, or with reference to any of the terms or conditions hereof, as fully and to the same extent as it might deal with the original parties hereto and without in any way releasing or discharging `t? any of the liabilities or undertakings hereunder, or waiving its right to declare such sale or transfer an Event of Default as provided herein. Notwithstanding anything to the contrary contained in this Deed of Trust or any other Secured Obligation Provision, (i) in the case of any .:: non -monetary Event of Default, Beneficiary may continue to accept payments due hereunder �yl without thereby waiving the existence of such or any other Event of Default and (ii) in the case 19 LA\1777398.11 0 of any monetary Event of Default, Beneficiary may accept partial payments of any sums due hereunder without thereby waiving the existence of such Event of Default if the partial payment is not sufficient to completely.cure such Event of Default. 4.13 Discontinuance of Proceedings; Position of Parties Restored. If Beneficiary shall have proceeded to enforce any right or remedy under this Deed of Trust by foreclosure, entry of judgment or otherwise and such proceedings shall have been discontinued or abandoned for any reason, or such proceedings shall have resulted in a final determination adverse to Beneficiary, then in every such case Trustor and Beneficiary shall be restored to their former positions and rights hereunder, and all rights, powers and remedies of Beneficiary shall continue as if no such proceedings had occurred or had been taken. 4.14 Remedies Cumulative. Subject to the provisions of Section 6.14 hereof, no right, power or remedy, including without limitation remedies with respect to any security for the Secured Obligations, conferred upon or reserved to Beneficiary by this Deed of Trust or any other Secured Obligation Provision is exclusive of any other right, power or remedy, but each and every such right, power and remedy shall be cumulative and concurrent and shall be in addition to any other right, power and remedy given hereunder or under any other Secured Obligation Provision, now or hereafter existing at law, in equity or by statute, and Beneficiary shall be entitled to resort to such rights, powers, remedies or security as Beneficiary shall in its sole and absolute discretion deem advisable. 4.1.5 Interest After Event of Default. If an Event of Default shall have occurred and is continuing, all sums outstanding and unpaid under the Secured Obligation Provisions, including this Deed of Trust, shall bear interest at the applicable interest rate therefor under the applicable Secured Obligation Provision until such Event of Default has been cured. Trustor's obligation to pay such interest shall be secured by this Deed of Trust.' 4.16 Foreclosure; Expenses of Litigation. If Trustee forecloses, reasonable attorneys' fees, costs and expenses for services in the supervision of said foreclosure proceeding shall be allowed to the Trustee and Beneficiary as part of the foreclosure costs. In the event of foreclosure of the lien hereof; there shall be allowed and included as additional indebtedness all reasonable expenditures, fees, costs and expenses which may be paid or incurred by or on behalf of Beneficiary for attorneys' fees, appraisers' fees, outlays for documentary and expert evidence, stenographers' charges, publication costs, and costs (which may be estimated as to items to be expended after foreclosure sale or entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance policies and guarantees, and similar data and assurances with respect to title as Beneficiary may deem reasonably necessary either to prosecute such suit or to evidence to a bidder at any sale which may be had pursuant to such decree the true condition of the title to or the value of the Mortgaged Property or any portion thereof. All reasonable expenditures, fees, costs and expenses of the nature in this section mentioned, and such reasonable expenses, costs and fees as may be incurred in the protection of the Mortgaged Property and the maintenance of the lien and security interest of this Deed of Trust including the reasonable fees of any attorney engaged by Beneficiary in any litigation or proceeding affecting this Deed of Trust or any other Secured Obligation Provision, the Mortgaged Property or any "3 portion thereof, including, without limitation, civil, probate, appellate and bankruptcy proceedings, or in preparation for the commencement or defense of any proceeding or threatened 20 LA\1777398.11 suit or proceeding, shall be immediately due and payable by Trustor, with interest thereon at the interest rate under Section 4.15 above, and shall be secured by this Deed of Trust. Trustee waives its right to any statutory fee in connection with any judicial or nonjudicial foreclosure of the lien hereof and agrees to accept a reasonable fee for such services. 4.17 Deficiency Judi. Subject to the provisions of Section 6.14, if after foreclosure of this Deed of Trust or Trustee's sale hereunder there shall remain any deficiency with respect to any amounts payable under the Secured Obligation Provisions, including hereunder, or any amounts secured hereby, and Beneficiary shall institute any proceedings to recover such deficiency or deficiencies, then, to the extent permitted by law, all such amounts that remain payable shall continue to bear interest at the interest rate applicable thereto under the Secured Obligation Provisions applicable thereto. Subject to the provisions of Section 6.14, Trustor waives any defense to Beneficiary's recovery against Trustor of any deficiency after any foreclosure sale of the Mortgaged Property. Subject to the provisions of Section 6.1.4, to the extent permitted by law, Trustor expressly waives any defense or benefits that may be derived from any statute granting Trustor any defense to any such recovery by Beneficiary. Subject to the provisions of Section 6.14, in addition, Beneficiary and Trustee shall be entitled to recovery of all of their reasonable costs and. expenditures (including without limitation any court imposed costs) in connection with such proceedings, including their reasonable attorneys' fees, appraisal fees and the other costs, fees and expenditures referred to in Section 4.16 above. This provision shall survive any foreclosure or sale of the Mortgaged Property or any portion thereof and/or the extinguishment of the lien hereof. 4.18 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY LAW, BENEFICIARY AND TRUSTOR EACH WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR - INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS DEED OF TRUST. ANY SUCH DISPUTES SHALL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. 4.19 Exculpation of Beneficiary. The acceptance by Beneficiary of the assignment contained herein with all of the rights, powers, privileges and authority created hereby shall not, prior to entry upon and taking possession of the Mortgaged Property by Beneficiary, be deemed or construed to make Beneficiary a "mortgagee in possession" nor thereafter or at any time or in any event obligate Beneficiary to appear in or defend any action or proceeding relating to the Mortgaged Property, nor shall Beneficiary, prior to such entry and taking, be liable in any way for any injury or damage to person or property sustained by any Person in or about the Mortgaged Property. ARTICLE 5 RIGHTS AND RESPONSIBILITIES OF TRUSTEE; OTHER PROVISIONS RELATING TO TRUSTEE Notwithstanding anything to the contrary in this Deed of Trust, Trustor and Beneficiary agree as follows. 21 LA\1777398.11 ffa 5.1 Exercise of Remedies by Trustee. To the extent that this Deed of Trust and applicable law authorizes or empowers Beneficiary to exercise any remedies set forth in Article 3 hereof or otherwise, or perform any acts in connection therewith, Trustee (but not to the exclusion of Beneficiary unless so required under applicable law) shall have the power to exercise any or all such remedies, and to perform any acts provided for in this Deed of Trust in connection therewith, all for the benefit of Beneficiary and on Beneficiary's behalf in accordance with applicable law. In connection therewith, Trustee: (a) shall not exercise, or waive the exercise of, any Beneficiary's remedies (other than any rights of Trustee to any indemnity or reimbursement), except at Beneficiary's request, and (b) shall exercise, or waive the exercise of, any or all of Beneficiary's remedies at Beneficiary's request, and in accordance with Beneficiary's directions as to the manner of such exercise or waiver. Trustee may, however, decline to follow Beneficiary's request or direction if Trustee shall be advised by counsel that the action or proceeding, or manner thereof, so directed may not lawfully be taken or waived. 5.2 Rights and Privileges of Trustee. To the extent that this Deed of Trust requires Trustor to indemnify Beneficiary or reimburse Beneficiary for any expenditures Beneficiary may incur, Trustee shall be entitled to the same indemnity and the same rights to reimbursement of expenses as Beneficiary, subject to such limitations and conditions as would apply in the case of Beneficiary. To the extent that this Deed of Trust negates or limits Beneficiary's liability as to any matter, Trustee shall be entitled to the same negation or limitation of liability. To the -extent that Trustor, pursuant to this Deed of Trust, appoints Beneficiary as Trustor's attorney in fact for any purpose, Beneficiary or (when so instructed by Beneficiary) Trustee shall be entitled to act on Trustor's behalf without joinder or confirmation by the other. 5,3 Resignation or Replacement of Trustee. Trustee may resign by an instrument in writing addressed to Beneficiary, and Trustee may be removed at any time with or without cause (i.e., in Beneficiary's sole and absolute discretion) by an instrument in writing executed by Beneficiary. Incase of the death, resignation, removal or disqualification of Trustee or if for any reason Beneficiary shall deem it desirable to appoint a substitute, successor or replacement Trustee to act instead of Trustee originally named (or in place of any substitute, successor or replacement Trustee), then Beneficiary shall have the right and is hereby authorized and empowered to appoint a successor, substitute or replacement Trustee, and, if preferred, several substitute trustees in succession, without any formality other than appointment and designation in writing executed by Beneficiary, which instrument shall be recorded if required by the law of the State of California. The law of the State of California shall govern the qualifications of any Trustee. The authority conferred upon Trustee by this Deed of Trust shall automatically extend to any and all other successor, substitute and replacement Trustee(s) successively until the Secured Obligations Termination Date or the Mortgaged Property has been sold hereunder or released in accordance with the provisions of the Secured Obligation Provisions. Beneficiary's written appointment and designation of any Trustee shall be full evidence of Beneficiary's right and authority to make the same and of all facts therein recited. No confirmation, authorization, approval or other action by Trustor shall be required in connection with any resignation or other replacement of Trustee. 5.4 Authority of Beneficiary. If Beneficiary is a corporation, state banking corporation or a national banking association, and the instrument of appointment of any successor or replacement Trustee is executed on Beneficiary's behalf by an officer of such 22 LA\1777398.11 corporation, state banking corporation or national banking association, then such appointment may be executed by any authorized officer or agent of Beneficiary, and such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of Beneficiary. 5.5 Effect of Appointment of Successor Trustee. Upon the appointment and designation of any successor, substitute or replacement Trustee, Trustee's entire estate and title in the Mortgaged Property shall vest in the designated successor, substitute or replacement Trustee. Such successor, substitute or replacement Trustee shall thereupon succeed to and shall hold, possess and execute all the rights, powers, privileges, immunities and duties herein conferred upon Trustee. All references herein to Trustee shall be deemed to refer to Trustee (including any successor or substitute appointed and designated as herein provided) from time to time acting hereunder. 5.6 Confirmation of Transfer and Succession. Any new Trustee appointed pursuant to any of the provisions hereof shall, without any further act, deed or conveyance, become vested with all the estates, properties, rights, powers and trusts of his predecessor in the rights hereunder with like effect as if originally named as Trustee herein. Nevertheless, upon the written request of Beneficiary or of any successor, substitute or replacement Trustee, any former Trustee ceasing to act shall execute and deliver an instrument transferring to such successor, substitute or replacement Trustee all of the right, title, estate and interest in the Mortgaged Property of Trustee so ceasing to act, together with all the rights, powers, privileges, immunities and duties herein conferred upon Trustee, and shall duly assign, transfer and deliver all properties and moneys held by said Trustee hereunder to said successor, substitute or replacement Trustee. 5.7 Exculpation. Trustee shall not be liable for any error of judgment or act done by Trustee in good faith, or otherwise be responsible or accountable under any circumstances whatsoever, except for Trustee's bad faith, gross negligence, willful misconduct or knowing violation of law. Trustee shall not be personally liable in case of entry by it, or anyone entering by virtue of the powers herein granted it, upon the Mortgaged Property for debts contracted or liability or damages incurred in the management or operation of the Mortgaged Property. Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by it hereunder believed.by it in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received but need not be segregated in any manner from any other moneys (except to the extent required by law). Trustee shall be under no liability for interest on any moneys received by it hereunder. 5.8 Endorsement and Execution of Documents. Upon Beneficiary's written request, o Trustee shall, without liability or notice to Trustor, execute, consent to, or join in any instrument or agreement in connection with or necessary to effectuate the purposes of the Secured Obligation Provisions. Trustor hereby irrevocably designates Trustee as its attorney in fact to P execute, acknowledge and deliver, on Trustor's behalf and in Trustor's name, all instruments or 1° agreements necessary to implement any provision(s) of this Deed of Trust or to further perfect 6 of the lien created by this Deed of Trust on the Mortgaged Property. This power of attorney shall be deemed to be coupled with an interest and shall survive an disability of Trustor. p Y Y 23 LA\1777398.11 0 5.9 Multiple Trustees. If Beneficiary appoints multiple trustees, then any Trustee, individually, may exercise all powers granted to Trustee under this instrument without the need for action by any other Trustee(s). 5.10 No Required Action. Trustee shall not be required to take any action under this Deed of Trust or to institute, appear in or defend any action, suit or other proceeding in connection therewith where in its opinion such action will be likely to involve it in expense or liability, unless requested so to do by a written instrument signed by Beneficiary and, if Trustee so requests, unless Trustee is tendered security and indemnity satisfactory to it against any and all costs, expense and liabilities arising therefrom. Trustee shall not be responsible for the execution, acknowledgment or validity of the Secured Obligation Provisions, or for the proper authorization thereof, or for the sufficiency of the lien and security interest purported to be created hereby, and makes no representation in respect thereof or in respect of the rights, remedies and recourses of Beneficiary. 5.11 Terms of Trustee's Acceptance. Trustee accepts the trust created by this Deed of Trust upon the following terms and conditions: (a) Trustee may exercise any of its powers through appointment of attorney(s) in factor agents. (b) Trustee shall be under no obligation to take any action upon any Event of Default unless furnished security or indemnity, in form satisfactory to Trustee, against costs, expenses, and liabilities that Trustee may incur. (c) Trustor shall reimburse Trustee, as part of the Secured Obligations secured hereunder, for all reasonable disbursements and expenses (including reasonable legal fees and expenses) incurred by reason of or arising from an Event of Default and as provided for in this Deed of Trust, including any of the foregoing incurred in Trustee's administering and executing the trust created by this Deed of Trust and performing Trustee's duties and exercising Trustee's powers under this Deed of Trust. ARTICLE 6 GENERAL 6.1 Discharge. Upon the Secured Obligations Termination Date, (a) this Deed of Trust and the lien and security interest created hereby shall be of no further force and effect, (b) Trustor shall be released from the covenants, agreements and obligations of Trustor contained in this Deed of Trust, and (c) all right, title and interest in and to the Mortgaged Property shall revert to Trustor. Beneficiary and Trustee, at the request and the expense of Trustor, shall promptly execute a deed of reconveyance and such other documents as may be reasonably requested by Trustor to evidence the discharge and satisfaction of this Deed of Trust and the release of Trustor from its obligations hereunder. del 6.2 No Waiver. The exercise of the privileges ranted in this Deed of Trust or in an P g g Y other agreement to perform Trustor's obligations under the agreements which constitute the .fi Mortgaged Property shall in no event be considered or constitute a waiver of any right which Beneficiary may have at any time, after an Event of Default shall have occurred and be 24 LA\1777398.11 continuing, to declare the Secured Obligations to be immediately due and payable. No delay or omission to exercise any right, remedy or power accruing upon any default shall impair any such right, remedy or power or shall be construed to be a waiver of any such default or acquiescence therein, and every such right, remedy and power may be exercised from time to time and as often as may be deemed expedient. 6.3 Extension, Rearrangement or Renewal of Secured Obligations. It is expressly agreed that any of the Secured Obligations at any time secured hereby may be from time to time extended for any period, or with the consent of Trustor rearranged or renewed, and that any part of the security herein described, or any other security for the Secured Obligations, may be waived or released, without altering, varying or diminishing the force, effect or lien or security interest of this Deed of Trust. The lien and security interest granted by this Deed of Trust shall continue as a prior lien and security interest on all of the Mortgaged. Property not expressly so released until the date the Secured Obligations have terminated. No other security now existing or hereafter taken to secure the payment of the Secured Obligations or any part thereof or the performance of any obligation or liability of Trustor whatever shall in any manner impair or affect the security given by this Deed of Trust. All security for the payment of the Secured Obligations or any part thereof and the performance of any obligation or liability shall be taken, considered and held as cumulative. 6.4 Forcible Detainer. Trustor agrees for itself and all Persons claiming by, through or under it that, subsequent to foreclosure hereunder in accordance with this Deed of Trust and applicable law if Trustor shall hold possession of the Mortgaged Property or any part thereof, Trustor or the Persons so holding possession shall be guilty of trespass, and any such Person (including Trustor) failing or refusing to surrender possession upon demand shall be (a) guilty of forcible detainer, (b) liable to Beneficiary or any purchaser in foreclosure, as applicable, for reasonable rental on said premises, and (c) subject to eviction and removal in accordance with law. 6.5 Waiver of Stay or Extension. To the extent permitted to be waived by law, after an Event of Default and during the continuance thereof, Trustor shall not at any time insist upon or plead or in any manner whatever claim the benefit or advantage of any stay, extension or moratorium law now or at any time hereafter in force in any locality where the Mortgaged Property or any part thereof may or shall be situated, nor shall Trustor claim any benefit or advantage from any law now or hereafter in force providing for the valuation or appraisement of the Mortgaged Property or any part thereof prior to any sale thereof to be made pursuant to any provision of this Deed of Trust or to a decree of any court of competent jurisdiction, nor after any such sale shall Trustor claim or exercise any right conferred by any law now or at any time hereafter in force to redeem the Mortgaged Property so sold or any part thereof. Trustor hereby expressly waives, with respect to the period after an Event of Default and during the continuance thereof, all benefit or advantage of any such law or laws and the appraisement of the Mortgaged Property or any part thereof and covenants that Trustor shall not hinder or delay the execution of any power herein granted and delegated to Beneficiary but that Trustor shall permit the execution of every such power as though no such law had been made. 6.6 Notices. Except where certified or registered mail notice is required by applicable law, any notice to Trustor or Beneficiary required or permitted hereunder shall be deemed to be 25 LA\1777398.11 1�1 given when given in the manner prescribed in the PPTA. All notices to Trustee required or permitted hereunder shall be deemed given when given in the manner prescribed in the PPTA to the following address: First American Title Insurance Company Attn: National Default Services One First American Way Santa Ana, CA 92707 6.7 Severability. All rights, powers and remedies provided herein may be exercised only to the extent that the exercise thereof does not violate any applicable law and are intended to be limited to the extent necessary so that they will not render this Deed of Trust invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. In the event.any term or provision contained in this Deed of Trust is in conflict, or may hereafter be held to be in conflict, (a) with applicable law governing such term or provision as set forth in Section 6.9, (b) with the laws of the United States of America, (c) or as otherwise set forth herein, then this Deed of Trust shall be affected only as to such particular term or provision and shall in all other respects remain in full force and effect. 6.8 Application of Payments. In the event that any part of the Secured Obligations cannot lawfully be secured hereby, or in the event that the lien and security interest hereof cannot be lawfully enforced to pay any part of the Secured Obligations, or in the event that the lien or security interest created by this Deed of Trust shall be invalid or unenforceable as to any part of the Secured Obligations, then all payments on the Secured Obligations shall be deemed to have been first applied to the complete payment and liquidation of that part of the Secured Obligations which is not secured by this Deed of Trust, and the unsecured portion of the Secured Obligations shall be completely paid and liquidated prior to the payment and liquidation of the remaining secured portion of the Secured Obligations. 6.9 Governing Law. THIS DEED OF TRUST IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. 6.10 Entire Agreement. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES, AS OF THE DATE HEREOF, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. 6.11 Amendments. This Deed of Trust may be amended, supplemented or otherwise modified only by an instrument in writing signed by Trustor and Beneficiary. 6.12 Successors and Assigns. All terms of this Deed of Trust shall run with the land and bind each of Trustor and Beneficiary and their respective successors and assigns, and all 15; Persons claiming under or through Trustor or Beneficiary, as the case may be, or any such I: successor or assign, and shall inure to the benefit of Beneficiary and Trustor and their respective successors and assigns. 26 LA\1777398.11 6.13 Renewal, Etc. Beneficiary may at any time and from time to time (a) renew or extend this Deed of Trust, (b) alter or modify the same in any way, (c) waive any of the terms, covenants or conditions hereof in whole or in part, (d) release any portion of the Mortgaged Property or any other security, or (e) grant such extensions and indulgences in relation to the Secured Obligations as Beneficiary may determine, in each case without the consent of any junior lienor or encumbrancer and without any obligation to give notice of any kind thereto and without in any manner affecting the priority of the lien and security interest hereof on any part of the Mortgaged Property; provided that nothing in this Section 6.13 shall grant Beneficiary the right to alter or modify the Deed of Trust without the consent of the Trustor unless otherwise specifically permitted in this Deed of Trust. 6.14 Non -Recourse. NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THIS DEED OF TRUST OR ANY OTHER SECURED OBLIGATION PROVISION, THE OBLIGATIONS UNDER THIS DEED OF TRUST ARE NON -RECOURSE OBLIGATIONS OF THE TRUSTOR. THE ONLY RECOURSE A SECURED PARTY WILL HAVE WITH RESPECT TO THE OBLIGATIONS UNDER THIS DEED OF TRUST WILL BE ENFORCEMENT OF ITS RIGHTS AGAINST THE COLLATERAL PURSUANT TO THIS DEED OF TRUST. NOTHING IN THIS SECTION 6.14 SHALL BE READ TO LIMIT THE RECOURSE UNDER THE PPTA OR THE OTHER RELATED DOCUMENTS. 6.15 Severability and Compliance With Usurer. The Secured Obligation Provisions are intended to be performed in accordance with, and only to the extent permitted by, all applicable Governmental Rules and Legal Requirements. If any provision of any of the Secured Obligation Provisions or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, then neither the remainder of the instrument in which such provision is contained, nor the application of such provision to other persons or circumstances, nor the other instruments referred to hereinabove, shall be affected thereby, but rather shall be enforceable to the greatest extent permitted by law. It is expressly stipulated and agreed to be the intent of Trustor and Beneficiary at all times to comply with applicable law governing the maximum rate or amount of interest payable on or in connection with the Secured Obligations (or applicable United States federal law to the extent that it permits Beneficiary to contract for, charge, take, reserve or receive a greater amount of interest than under applicable law). If the applicable law is ever judicially interpreted so as to render usurious any amount called for under the Secured Obligation Provisions or contracted for, charged, taken, reserved or received with respect to the extension of credit evidenced by the Secured Obligation Provisions, or if acceleration of the maturity of the Secured Obligations or if any prepayment by Trustor results in Trustor having paid any interest in excess of that permitted by law, then it is Trustor's and Beneficiary's express intent that (a) all excess amounts theretofore collected by Beneficiary be credited on the principal balance due under the Secured Obligation Provisions (or, if the Secured Obligation Provisions have been or would thereby be paid in full, refunded to Trustor), (b) the provisions of the Secured Obligation Provisions immediately be deemed reformed, and (c) the amounts thereafter collectible thereunder reduced, in each case without the necessity of the execution of any new document and so as to comply with the applicable law and permit the recovery of the fullest amount otherwise called for hereunder and thereunder. The right to accelerate maturity of Secured Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of such acceleration, and Beneficiary does not intend to collect any unearned interest in the event of acceleration. All sums paid or agreed 0 27 LA\1777398.11 to be paid to Beneficiary for the use, forbearance or detention of the Secured Obligations shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Secured Obligations until the Secured Obligations are repaid in full so that the rate or amount of interest on account of the Secured Obligations does not exceed the applicable usury ceiling. 6.16 Waiver. To the extent permitted by law, and with respect to the period after an Event of Default and during the continuance thereof, Trustor waives and releases any rights or defenses which Trustor might otherwise have (i) under California Code of Civil Procedures Sections 726, 725a, 580a, 580b, 580c or 580d and California Civil Code Section 2889, which statutes might otherwise limit or condition Beneficiary's exercise of certain of Beneficiary's rights and remedies in connection with the enforcement of obligations secured by a lien on real property or (ii) under any laws now existing or hereafter enacted providing for any appraisal before sale of a portion of the Mortgaged Property and (iii) to all rights of redemption, valuation, appraisal, stay of execution, notice of election to mature or to declare due the Secured Obligations and marshalling in the event of the foreclosure of the liens created under this Deed of Trust or the exercise of the power of sale granted hereunder. To the extent, if any, which such laws may be applicable and to the extent permitted by law, Trustor waives and releases any right or defense which Trustor might otherwise have under such provisions and under any other law of any applicable jurisdiction which might limit or restrict the effectiveness or scope of any of Trustor's waivers or releases hereunder. 6.17 Release of Collateral. 6.17.1 Notwithstanding any provision herein to the contrary, the Mortgaged :Property or any part thereof shall be released from the security interest created by this Deed of Trust at any time or from time to time upon the request of the Trustor; provided that the requirements therefor of the Secured Obligation Provisions have been satisfied and/or the PPTA has expired or terminated (other than a termination resulting from a default by Trustor thereunder). Upon satisfaction of such requirements or such expiration or termination of the PPTA, a duly authorized officer of the Beneficiary shall instruct the Trustee to promptly execute, deliver and acknowledge any necessary or proper instruments of termination, satisfaction or release to evidence the release of any Mortgaged Property permitted to be released pursuant to this Deed of Trust. 6.17.2 The Beneficiary may instruct the Trustee to release Mortgaged Property from the security interest created hereunder upon the sale or disposition of such Mortgaged Property pursuant to the Beneficiary's powers, rights and duties with respect to remedies provided herein. 6.18 Time of the Essence. Trustor acknowledges that time is of the essence in performing all of Trustor's obligations set forth herein. 6.19 Counterpart Execution. This Deed of Trust may be executed by the parties hereto in any number of counterparts (and by each of the parties hereto on separate counterparts), each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 28 LA\1777398.11 6.20 Request for Notice. Pursuant to California Government Code § 27321.5, Trustor 3q hereby requests that a copy of any notice of default and notice of sale as may be required by law be mailed to Trustor at its address hereinabove stated. . [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] r�r K 29 LA\1777398.11 IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be duly executed and delivered as of the day and year first above written. BICENT (CALIFORNIA) MALBURG LLC, a Delaware limited liability company By: Naive: Paul Prager Title: President [Signature Page to Deed of Trust — Bicent (California) Malburg LLC] State of New York !I County of � — On the J+K day of i , 2008, before me, the undersigned, personally appeared F�, personally known to me or proved to me on the basis of satisfactory vidence to be the individual(s) whosename(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person on behalf of which the individual(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (Seal) BROOKE SPIEL Notary Public, Staff® of Now York' No. 09 SP4964267 Qualified in New York County { Commission Expires Aug. 7, 2t1W 1 i [Notary Page to Deed of Trust — Bicent (California) Malburg LLC] EXECUTION VERSIO EXHIBIT A DESCRIPTION OF SITE LA\1777398.11 A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE MOST NORTHERLY CORNER OF SAID LOT 7, SAID CORNER ALSO BEING THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF 367.83 FEET, A RADIAL LINE PASSING THROUGH SAID CORNER BEAR SOUTH 58°03'33 WEST; THENCE SOUTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 59°37'38" AN ARC DISTANCE OF 382.79 FEET; THENCE NORTH 88°25'55" EAST 323.79 FEET ALONG THE NORTHERLY LINE OF SAID LOT 7 TO A POINT ON THE SOUTHERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF THE LOS ANGELES JUNCTION RAILROAD RIGHT-OF-WAY AS SHOWN ON LOS ANGELES COUNTY FIELD MAP NUMBER 10287 PAGE A3, 'RECORDS OF SAID COUNT, SAID POINT ALSO BEING THE BEGINNING. OF A CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 906.21 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 4°45'51" AN ARC DISTANCE OF 75.35 FEET TO THE BEGINNING OF A COMPOUND CURVE HAVING A RADIUS OF 294.44 FEET; THENCE EASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 13°28'39" AN ARC DISTANCE OF 69.26 FEET TO A POINT ON THE EASTERLY LINE OF A PORTION DEEDED FOR THE WIDENING OF SOTO STREET AS SHOWN ON SAID LOS ANGELES COUNTY FIELD MAP; THENCE SOUTH 1"37'37" EAST 186.27 FEET ALONG SAID EASTERLY LINE; THENCE SOUTH 88°10'26" WEST 33.20 FEET; THENCE NORTH 01 °49'34 WEST 6.00 FEET; THENCE SOUTH 88°10'26" WEST 6.00 FEET; THENCE SOUTH 01 °49'34" EAST 6.00 FEET; THENCE SOUTH 88°10'26" WEST 439.07 FEET; THENCE NORTH 01 °27'57 WEST 115.24 FEET; THENCE SOUTH 89°10'17" WEST 193.60 FEET; THENCE NORTH 02`51'27" WEST 42.65 FEET; THENCE. NORTH 87°47'00" EAST 11.55 FEET; THENCE THENCE NORTH 01 °54'17" WEST 24.22 FEET; THENCE SOUTH 87,28,16" WEST 10.26 FEET; THENCE NORTH 01 *06'15" WEST 13.30 FEET; THENCE SOUTH 88°48'42" WEST 81.59 FEET; THENCE SOUTH 01°26'34" EAST 79.61 FEET; THENCE SOUTH 89°10'17" WEST 37.82 FEET TO A POINT ON THE WESTERLY LINE OF SAID LOT 7; THENCE NORTH 00°09'03" WEST 267.99. FEET ALONG SAID WESTERLY LINE TO THE POINT OF BEGINNING. CONTAINING 3.10 ACRES MORE OR LESS. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 m EXP. 9/30/08 DAVID T. ROSELL EXP. 9-30-08 No. 6281 f EXECUTION VERSION A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WEST LINE OF SAID LOT 7, SAID POINT BEING NORTH 00'09'03" WEST 194.65 FROM THE SOUTHWESTERLY CORNER OF SAID LOT 7, THENCE NORTH 88'22'12" EAST 238.52 FEET; THENCE SOUTH 01'37'48" EAST 18.06 FEET; THENCE NORTH 88'22'12" EAST 42.43 FEET; THENCE SOUTH 01'23'22" EAST 176.85 FEET TO A POINT ON THE SOUTHERLY LINE OF SAID LOT 7; THENCE NORTH 88'26'12" EAST 32.59 FEET ALONG SAID SOUTHERLY LINE; THENCE NORTH 01'27'57" WEST 211.35 FEET; THENCE SOUTH 89'10'17" WEST 312.89 FEET TO A POINT ON SAID WESTERLY LINE; THENCE SOUTH 00'09'03" EAST 20.76 FEET ALONG SAID EASTERLY LINE TO THE POINT OF BEGINNING. AS SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF. DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 DAVID T. `f ROSELL M. 9-30-08 No. 6281 �D EXECUTION VERSION EXHIBIT C DESCRIPTION OF RESERVED EASEMENT LA\1777398.11 A 10' WIDE STRIP OF LAND BEING A PORTION OF LOT 7, TRACT NUMBER 6452 IN THE CITY OF VERNON, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 94 PAGES 77 AND 78 OF MAPS, RECORDS OF SAID COUNTY, THE CENTERLINE IS DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE WEST LINE OF SAID LOT 7, SAID POINT BEING NORTH 00'09'03" WEST 245.99 FROM THE SOUTHWESTERLY CORNER OF SAID LOT 7, THENCE NORTH 88'36'21" EAST 117,81 FEET TO THE POINT OF TERMINUS. THE SIDELINES OF SAID 10' STRIP OF LAND, SHALL BE SHORTENED OR PROLONGATED SO AS TO TERMINATE WESTERLY AT THE WESTERLY LINE OF SAID LOT 7 AND EASTERLY AT A LINE THAT PASSES THROUGH SAID POINT OF TERMINUS BEARING SOUTH 02,51'27" EAST. AS .SHOWN ON EXHIBIT "B", ATTACHED HERETO AND BY THIS REFERENCE MADE APART HEREOF, DAVID T. ROSELL P.L.S. 6281 EXP. 9/30/08 N DAVID T. ROSELL * EXR. 9--30-M No. 6281 q EXHIBIT D FORM OF LIEN SUBORDINATION LA\I777398.11 Recording Requested By: City of Vernon When Recorded Mail To: [LENDER] (Space Above For Recorder's Use) Recording Fee: Exempt pursuant to California Government Code § 27383 SUBORDINATION OF DEED OF TRUST NOTICE: THIS SUBORDINATION, CONSENT AND ESTOPPEL 'AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT. THIS SUBORDINATION OF DEED OF TRUST (this "Agreement"), dated as of [ ], 200_ is made and executed by and among [LENDER], a [ ], in its capacity as the Collateral Agent under the 1 ("Lender"), City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter ("Vernon"), and [PURCHASER], a [ ] ("Purchaser"). RECITALS A. WHEREAS, Vernon owns that certain 134-megawatt natural gas -fired two -on - one combined cycle electric generating station known as Malburg Generating Station (the "Facility") located at 2715 East 501h Street on land described in Exhibit A2 (the "Property"). Vernon owns certain other generation and transmission assets (collectively, but not including the Facility or the Property, the "Other Assets"). The Facility and the Other Assets are collectively called the "Assets". B. WHEREAS, Purchaser and Vernon have entered into that certain Purchase and Sale Agreement dated as of [ ] (the "PSA") pursuant to which on the date ,N6 hereof: (i) Purchaser will purchase from Vernon, and Vernon will sell to yGgr Purchaser, the Assets and (ii) Purchaser and Vernon will enter into that certain Lease and Grant of Easements of even date herewith (the "Lease") pursuant to 4 �zJr Insert name of applicable agreement. 2 Note that Exhibit A should include just the property to be leased and not the greater site owned by the City. LA\1777436.2 �lS which Purchaser will lease from Vernon, and Vernon will lease to Purchaser, the Premises, consisting of the Land Premises and the Historical Premises (each as defined in the Lease); C. WHEREAS, Lender is financing the purchase of the Assets by Purchaser pursuant to that certain Credit Agreement of even date herewith by and among Purchaser, Lender (in its capacity as [Collateral Agent and Administrative Agent]) and the financial institutions from time to time party thereto (including any and all modifications, extensions or renewals thereof, whether hereafter evidenced by promissory notes or otherwise, the "Credit Agreement"); D. WHEREAS, in connection with such financing, Purchaser has executed a [Deed of Trust, Security Agreement and Fixture Filing] dated as of the date hereof ("Lender's Deed of Trust', and, together with the Credit Agreement, the "Lender's Loan Documents"), in favor of Lender which Lender's Deed of Trust will be recorded concurrently herewith in the Los Angeles County Recorder's Office covering the Property, in order to secure all "Obligations" (as defined in the Credit Agreement), including payment of all indebtedness incurred pursuant to the terms of the Credit Agreement. The Lender's Deed of Trust is secured by a lien on the ["Trust Estate" (as defined in the Lender's Deed of Trust, the "Trust Estate")]; E. WHEREAS, concurrently with the execution and delivery of this Agreement (a) Vernon and Purchaser are entering into that certain Power- Purchase Tolling Agreement of even date herewith (the "PPTA") pursuant to which Purchaser will. sell, and Vernon will purchase, capacity and energy from the Facility, and (b) Purchaser is granting to Vernon a [Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing dated as of the date hereof (the "Vernon Deed of Trust")]. The Vernon Deed of Trust secures Purchaser's obligations to Vernon under the PPTA. The Vernon Deed of Trust will be recorded after the recording of the Lender's Deed of Trust and, as evidenced by this Agreement, is intended to be junior to the Lender's Deed of Trust. The Vernon Deed of Trust encumbers the Facility and Purchaser's leasehold interest in the Property (all as more particularly set forth therein, the "Vernon Collateral"; together with the Trust Estate, the "Collateral"), F. WHEREAS, Lender is willing to enter into Lender's Loan Documents provided Lender's Deed of Trust is a lien or charge upon the Trust Estate prior and superior to the lien or charge of the Vernon Deed of Trust and provided that Vernon will specifically and unconditionally subordinate the lien or charge of the Vernon Deed of Trust to the lien or charge of Lender's Deed of Trust; and r 3 Provisions of this Agreement may need to be conformed as necessary to the type of financing. For example, a bond deal may refer instead to an Indenture -2- LA\1777436.2 G. WHEREAS, it is to the mutual benefit of the parties hereto that Lender enter into the Lender's Loan Documents with Purchaser; and Vernon is willing that the Lender's Deed of Trust shall constitute a lien or charge upon the Trust Estate which is unconditionally prior and superior to the Vernon Deed of Trust. NOW, THEREFORE, in accordance with the foregoing recitals and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, Lender, Vernon and Purchaser hereby agree as follows: 1. Representations and Warranties. Vernon hereby represents and warrants as follows: (a) Vernon is duly organized and is validly existing under the laws of the jurisdiction under which it was organized with full power to execute, deliver, and perform this Agreement and consummate the transactions contemplated hereby; (b) All actions necessary to authorize the execution, delivery, and performance of this Agreement on behalf of Vernon have been duly taken, and all such actions continue in full force and effect as of the date hereof; (c) Vernon has duly executed and delivered this Agreement and this Agreement constitutes the legal, valid, and binding agreement of Vernon enforceable against Vernon in accordance with its terms subject to (i) applicable bankruptcy, reorganization, insolvency and moratorium laws, and (ii) general principles of equity which may apply regardless of whether a proceeding is brought in law or in equity; (d) Except as contemplated by Section 1(b), no consent of any other person and no consent, license, approval, or authorization of, or exemption by, or registration or declaration or filing with, any governmental authority, bureau or agency is required in connection with the execution, delivery or performance by Vernon of this Agreement; and (e) None of the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated by this Agreement will (i) violate or conflict with any provision of the organizational or governing documents of Vernon; (ii) to Vernon's knowledge, violate, conflict with, or result in the breach or termination of, otherwise give any other person the right to terminate, or constitute (or with the giving of notice or lapse of time, or both, would constitute) a default under the terms of any contract, mortgage, lease, bond, indenture, agreement, or other instrument to which Vernon is a party or to which any of its y° properties is subject; (iii) to Vernon's knowledge, result in the creation of any h7p., lien, charge, encumbrance, mortgage, lease, claim, security interest, or other right or interest upon the properties or assets of Vernon pursuant to the terms of any xa' such contract, mortgage, lease, bond, indenture, agreement, franchise, or other instrument iv violate an ud ent order, injunction decree or award of an � (•) Y J � J Y court, arbitrator, administrative agency or governmental or regulatory body of which Vernon has knowledge against, or binding upon, Vernon or upon any of the u.a`a securities, properties, assets, or business of Vernon; or (v) to Vernon's -3- LA\1777436.2 knowledge, constitute a violation by Vernon of any statute, law or regulation that is applicable to Vernon: 2. Subordination of Obligations and Liabilities. The Lender's Deed of Trust, and any modifications, renewals, extensions, replacements or refinancings thereof shall at all times be superior and senior to the Vernon Deed of Trust, which is hereby expressly subordinated to the Lender's Deed of Trust. 3. Subordination of Liens and Security Interests. (a) The Lender's Deed of Trust, as evidenced by the Lender's Loan Documents, shall unconditionally be and remain at all times a lien and charge upon the Trust Estate prior and superior to the Vernon Deed of Trust and the estate and interests created thereby and such estate and interests are hereby subjected and made subordinate to the lien and charge of the Lender's Deed of Trust. (b) Notwithstanding anything to the contrary contained in the Lender's Loan Documents or the Vernon Deed of Trust , and irrespective of: (i) the time, order or method of attachment or perfection of the security interests and other liens created by any Lender Loan Document or the Vernon Deed of Trust; (ii) the time or order of filing or recording of any mortgage, deed of trust, financing statements or other documents filed or recorded to perfect security interests in any Collateral, (iii) anything contained in any filing or agreement to which the Lender, Vernon or any other person or entity now or hereafter may be a party; and (iv) the rules for determining priority under local law, the Uniform Commercial Code or any other law governing the relative priorities of secured creditors, any security interest or other lien in any Collateral pursuant to any Lender Loan Document has and shall have priority over any security interest or other lien in such Collateral in favor or Vernon pursuant to the Vernon Deed of Trust. (c) So long as the obligations of the Purchaser under the Credit Agreements or any Lender Loan Document (the "Senior Obligations") shall remain outstanding, whether or not any (i) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation (total or partial), reorganization or other similar case or proceeding in connection therewith, relative to the Purchaser or to its creditors, as such, or to its assets, whether voluntary or involuntary, (ii) any total or partial liquidation, dissolution or other winding up of the Purchaser, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (iii) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of the Purchaser, whether voluntary or involuntary (any such case or tir proceeding described in clause (i), liquidation, dissolution or other winding up described in clause (ii) or assignment or marshalling described in clause (iii), a il..i -4- LA\1777436.2 "Bankruptcy") has been commenced, (i) Vernon will not (A) exercise any rights or exercise any remedies with respect to any Collateral or institute any action or proceeding with respect to such rights or remedies, or take any action under the Vernon Deed of Trust to foreclose or sell or otherwise realize upon any of the Collateral, or enforce or exercise any other right, remedy or power available to it with respect to the Collateral or otherwise under applicable law in respect of the Collateral, or (B) contest, protest or object to any foreclosure proceeding, sale or other action brought by Lender or any other exercise by Lender of any rights and remedies under any Lender Loan Document; (ii) the Lender shall have the exclusive right to enforce rights and exercise remedies with respect to the Collateral. provided, however, that for avoidance of doubt nothing in this Agreement (as distinct from the applicable Consent Agreements) shall be read to limit the remedies of Vernon under the PPTA, the Lease or the other Related Agreements. (d) In exercising rights and remedies with respect to the Collateral, the Lender may enforce the provisions of the Lender Loan Documents and exercise remedies thereunder and under any other Lender Loan Documents, all in such order and in such manner as they may determine in the exercise of their sole business judgment. Such exercise and enforcement shall include the rights to foreclose upon, sell or otherwise dispose of Collateral, to incur expenses in connection with such sale or disposition and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code of any applicable jurisdiction. (e) The provisions of this Agreement shall continue in full force and effect notwithstanding the occurrence of any Bankruptcy. (f) The provisions contained in this Agreement, the subordination effected hereby, and the rights of the Lender hereunder shall not be affected by: (i) any amendment, modification or supplement to the Credit Agreement or any other Lender Loan Document, any instrument or agreement relating thereto or to the Senior Obligations, (ii) any exercise or non -exercise of any right, power or remedy under or in respect of the Credit Agreement or any other Lender Loan Document or any of the Collateral or any instrument or agreement relating thereto or to the Senior Obligations, (iii) any waiver, consent, release, indulgence, extension, renewal, modification, delay, non -perfection or other action, inaction or omission in respect of the Credit Agreement or any other Lender Loan Document or any of the Collateral or any instrument or agreement relating thereto or to any of the Senior Obligations, (iv) any deferral, extension, renewal, modification, refinancing or refunding of the Senior Obligations or (v) any sale of. the Purchaser or any interest therein or any merger or consolidation of the Purchaser into or with another person or entity, or any sale, lease or transfer of -5- LA\1777436.2 any or all of the assets of the Purchaser to any other person or entity. 4. Priority of Fee Interest. Vernon's fee interest in the Property shall unconditionally be and remain at all times an interest that is prior and superior to the Lender's Deed of Trust and the estate and interests created thereby. Debt Limitation. Section 17.3 of the PPTA provides for a limitation on the amount of Purchaser's indebtedness. Notwithstanding anything to the contrary contained in this Agreement, Lender agrees not to cause a violation of such section and agrees that any Seller's Debt (as defined in the PPTA) in excess of such limitation shall be subordinate to the obligations of Purchaser to Vernon under the PPTA. 6. Events of Default. Upon the occurrence of an `Event of Default" under the Credit Agreement, the Lender (in its capacity as Administrative Agent or Collateral Agent under the Lender's Loan Documents) shall be permitted and hereby is authorized to take any and all actions and to exercise any and all rights, remedies and options which the Lender may have under the Lender's Loan Documents and at law or in equity to (a) cause all of the Obligations under the Lender's Loan Documents to be performed and (b) sell or otherwise realize upon the collateral secured by the Lender's Deed of Trust, all without notice to or consent by anyone; provided, that Lender shall give to Vernon (i) concurrently with the delivery thereof to Purchaser, a copy of any notice of default or event of default given to Purchaser under, the Lender's Loan Documents (provided that failure to deliver any such notice shall not invalidate any notice delivered to Purchaser under the Financing Documents nor shall such failure by the Lender acting in good faith give rise to any liability of the Lender) and (ii) a copy of any statutory notice upon any recording of a notice of default or a notice of foreclosure with respect to the Lender's Deed of Trust in the Official Records of Los Angeles County. 7. Continuing Obli ag tion. This Agreement constitutes a continuing agreement of subordination, even though at times Purchaser may not be indebted to Lender. Lender may continue, in reliance on this Agreement, without notice to Vernon, to lend monies, extend credit, modify, renew or make other financial accommodations, to or for the account of Purchaser. 8. BindingEffect. ffect. This Agreement shall bind and be for the benefit of Vernon and Lender, and their respective successors and assigns (subject to limits on assignability set forth in this Agreement). 9. Waiver of Marshalling. Vernon waives all rights to require Lender to marshal Lender's collateral or any other property Lender may at any time have as security for the Obligations secured by Lender's Deed of Trust and waives all right to require Lender to first proceed against Purchaser or any guarantor or other person before proceeding F' against any security secured by Lender's Deed of Trust. 10. Waivers; Remedies Cumulative. No waiver shall be deemed to be made by any party of -r@ any of its rights hereunder unless it is in writing signed by such party. Each such waiver �. shall be a waiver only with respect to the specific instances involved and shall in no way impair the rights of such party or the obligations of such party to the other party in any other respect at any other time.. The remedies herein provided are cumulative and not -6- LA\1777436.2 exclusive of any remedies provided by law. 11. Counterparts. This Agreement may be signed in any number of counterparts, and by different parties on separate counterparts, with the same effect as if the signature to each such counterpart were on a single instrument. All counterparts shall be deemed an original of this Agreement. 12. Disputes; Jury Trial Waiver. (a) This Agreement shall be governed by, and construed under, the laws of the State of California applicable to contracts made and to be performed in such State and without reference to conflicts of laws. The parties hereto agree that any legal action or proceeding arising out of this Agreement may be brought in the courts of the State of California, in and for the County of Los Angeles, or of the United States of America for the Central District of California. By execution and delivery of this Agreement, the parties hereto accept, for themselves and in respect of their property, generally and unconditionally, the jurisdiction of the aforesaid courts. The parties hereto irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, to Lender, Vernon and Purchaser, as the case may be, at their respective addresses for notices 'set forth in Section 12 and that such service shall be effective five (5) Business Days after such mailing. Nothing herein shall affect the right to serve process in any other manner permitted by law or the right of Lender or Vernon to bring legal action or proceedings in any other competent jurisdiction. The parties hereto hereby waive any right to stay or dismiss any action or proceeding under or in connection with any or all of this Agreement or the transactions contemplated hereby brought before the foregoing courts on the basis of forum non conveniens. (b) Notwithstanding anything to the contrary in Section 11(a) above, the parties hereto acknowledge and agree that any disputes that arise out of the PPTA, the PSA or the Lease (as distinct from this Agreement) shall be resolved pursuant to the procedures set forth therein. Vernon and Purchaser acknowledge that Lender may have an interest in the outcome of such disputes and agree that Lender is entitled to participate in the resolution of such disputes. The parties hereto acknowledge and agree that the outcome of any dispute resolution under such agreements shall be binding upon all of the parties hereto. (c) VERNON, LENDER AND PURCHASER ACKNOWLEDGE AND AGREE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVE ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT, ONLY TO THE EXTENT SUCH -7- LA\1777436.2 WAIVER IS ENFORCEABLE UNDER APPLICABLE LAW. 13. Notices. All notices to be given under this Agreement shall be in writing and shall be delivered personally, sent by certified mail return receipt requested or registered first- class mail, postage prepaid, or sent by facsimile, or courier to the intended recipient at its address as set forth below, unless the recipient has given notice of another address or account for receipt of notices or payments. Except as provided in Section I I(a), all such notices and other communications required or permitted under this Agreement are effective upon delivery. If to Vernon: City of Vernon Attn: Director of Light and Power Department 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 With copies to: Latham & Watkins LLP Attention: David B. Rogers, Esq. 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Facsimile: (213) 891-8763 City of Vernon Attn: City Attorney 4305 Santa Fe Avenue Vernon, CA 90058 Facsimile: (323) 826-1438 If to Lender: Facsimile: With copies to: Facsimile: If to Purchaser: Facsimile: LA\1777436.2 i With copies to: Facsimile: 14. Failure to Act. In the event that Lender elects to waive any rights or remedies hereunder, or compliance with any of the terms hereof, or delays or fails to pursue or enforce any term, such waiver delay or failure to pursue or enforce shall only be effective with respect to that single act and shall not be construed to effect any subsequent transactions or Lender's right to later pursue such rights and remedies. NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -9- LA\1777436.2 IN WITNESS WHEREOF, Vernon, Lender and Purchaser have caused this Agreement to be executed as of the date set forth above. VERNON CITY OF VERNON By: Name: Its: LENDER [LENDER] By: Name: Title: By: Name: Title: THE UNDERSIGNED HEREBY ACKNOWLEDGES THE TERMS AND CONDITIONS OF THE FOREGOING AGREEMENT AND AGREES THAT IT SHALL NOT ACT OR FAIL TO ACT IN A MANNER WHICH WOULD GIVE RISE TO A VIOLATION OF ANY OF THE TERMS AND CONDITIONS THEREOF. PURCHASER [PURCHASER] By: Name: Title: Signature Page to Subordination of Deed of Trust LA\1777436.2 STATE OF ) COUNTY OF ) On before me, , a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed. to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature STATE OF ) COUNTY OF ) On before me, , a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature LA\1777436.2 STATE OF ) COUNTY OF ) On before me, , a Notary Public, personally appeared , personally known to me (or 'proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature STATE OF ) COUNTY OF ) On before me, , a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature LA\1777436.2 0! 5� STATE OF ) COUNTY OF ) On before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the, same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature STATE OF ) COUNTY OF ) On before me, a Notary Public, personally appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature _ LA\1777436.2 Page 1 of 3 Juarez, Debbie From: Lehr, Judy Sent: Tuesday, September 01, 2009 10:32 AM To: Giron, Nelly Cc: Juarez, Debbie Subject: RE: Copy of First Amendment to the Amended and Restated Purchase Agreement dated February 8, 2008 Nelly, did Jeff give you the documents you needed? Resolution 9510 gave City Administrator authority to sign any documents in Section 3 so there were no resolutions approving first and second amendments. Judy Lehr City Attorney Dept., City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Work: (323) 583-8811 x 368 Fax: (323) 826-1438 CONFIDENTIALITY NOTICE: This e-mail transmission, and any documents, files or previous e- mail messages attached to it may contain confidential information that is legally privileged. If you are not the intended recipient, or a person responsible for delivering it to the intended recipient, you are hereby notified that any disclosure, copying, distribution or use of any of the information contained in or attached to this transmission is STRICTLY. PROHIBITED. If you have received this transmission in error, please immediately notify the sender. Please destroy the original transmission and its attachments without reading or saving in any manner. From: Giron, Nelly Sent: Tuesday, July 07, 2009 2:30 PM To: Harrison, Jeff; Lehr, Judy Cc: Juarez, Debbie Subject: FW: Copy of First Amendment to the Amended and Restated Purchase Agreement dated February 8, 2008 Jeff/Judy, In looking for the document that Robin is asking for, First Amendment to the purchase and Sale of the MGS - request at the beginning of this email, it has been discovered that the file regarding the sale of the MGS is missing some documents. The city's file has the following: Resolution 9431 authorizing the purchase and sale of the Malburg Generating Station to Beowulf. A copy of the Purchase and Sale Agreement, with signatures Resolution 9510 ratifying the execution of an amended and restated Purchase and sale agreement. A copy of the Amended and Restated agreement, with signatures. The Second Amendment to Amended and Restated Purchase and Sale Agreement, without signatures. The file is missing the following: Resolution approving the First Amendment to the Amended and Restated Agreement. 9/2/2009 Page 2 of 3 The Signed first Amendment to the Amended and Restated Agreement. Resolution approving the Second Amendment The Second Amendment to the Amended and Restated ..... Would you have copies of the documents we are missing? If you do, would you provide with me with copies for my file? Thanks.. From: Medina, Krystal Sent: Tuesday, July 07, 2009 10:32 AM To: Giron, Nelly Subject: RE: Copy of First Amendment to the Amended and Restated Purchase Agreement dated February 8, 2008 Hi Nelly, I looked in all our files and records including: Laser Fiche (Resolutions & Minutes), our 2008 City Council Files (Agendas & Minutes), and the Agreement file for the Amendment in question. I also did a search for Amendments to Resolution No. 9510, as well as a separate search for any Resolutions that may have involved the companies mentioned below. Resolution No. 9510 is the First Amendment to the Agreement that Robin is looking for. Resolution No. 9431 is the originating Resolution. There is also a Second Amendment to this Agreement, but I was unable to find any Resolution approving it. (There was not a Council Meeting held on Feb. 8, 2008, but there was a meeting on Feb. 4, 2008 & Feb. 19, 2008, but again there is no mention of Amendments pertaining to what we are looking for.) (FYI:We only have an unsigned Blue back of the Second Amendment. We also do not have the Original First Amendment. ) As to whether or not something.was misfiled, we can't be sure because the Resolutions that are normally kept in the Vault are temporarily unavailable for us to review the files. The copies of the documents you requested to be copied from the Agreement file are in your In -Box. Sorry, Krystal Medina From: Giron, Nelly Sent: Tuesday, July 07, 2009 8:21 AM To: Medina, Krystal Subject: FW: Copy of First Amendment to the Amended and Restated Purchase Agreement dated February 8, 2008 Importance: High See what you can find. Before you send anything, discuss with me. Thanks. Nelly 9/2/2009 Page 3 of 3 From: Tolmasoff, Robin Sent: Tuesday, July 07, 2009 8:06 AM To: Giron, Nelly Subject: Copy of First Amendment to the Amended and Restated Purchase Agreement dated February 8, 2008 Importance: High Hi Nelly, I have looked in L&P's Doc. Control and they do not have a copy of a resolution that came after the sale of MGS to Bicent. What I have is Resolution No. 9510-Amended and Related Documents by and between the City of Vernon and Bicent Power, LLC, Formerly Known as Beowulf (Vernon) Power LLC, Regarding the Malburg Generating Station and Other Power Generation Assets. Signed on Dec. 17, 2007. What I am looking for is the resolution signed on February.8, 2008. It may be titled First Amendment to the Amended and Restated Purchase Agreement. This one I believe may have been an amendment to Resolution 9510. Can I please get an electronic copy of this one? Thank you. Robin M. Tolmasoff Executive Secretary to the City Administrator City of Vernon (323)' S83-8811, Ext. 561 9/2/2009 Execution Copy FIRST AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT This FIRST AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (this "Amendment") is entered into as of February 8, 2008, by and among the City of Vernon, California, a municipal corporation and a ,chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City" or "Seller"), and Bicent (California) Power LLC, a Delaware limited liability company ("Purchaser'), Bicent (California) Malburg LLC, a Delaware limited liability company ("BCM") and Bicent (California) Hoover, LLC a Delaware limited liability company ("BCH"). Seller and Purchaser are referred to herein sometimes individually as a "Party" and collectively as the "Parties." RECITALS A. The City owns that certain_134-megawatt natural gas -fired generating facility known as the Malburg Generating Station (the "Facility"). B. The City owns that certain 22-megawatt entitlement to energy from the Hoover Uprating Project pursuant to a power purchase agreement with the Western Area Power Administration (the "Hoover Interest"). C. On October 8, 2007, Purchaser (formerly known as Beowulf (Vernon) Power LLC) and the City entered into`a Purchase and Sale Agreement (the "Ori ing al Agreement") for the purchase of (i) the Facility, (ii) the economic benefits and burdens associated with the Hoover Interest, (iii) the economic benefits and burdens associated with the City's 11 megawatt interest in the Southern California Public Power Authority's ownership interest. in the Palo Verde Nuclear Generating Station through December 31, 2030 (the "Palo Verde Interest") and (iv) the City's interests in each of the Mead - Phoenix Transmission Project and the Mead-Adelanto Transmission 'Project (collectively, the "Mead Transmission Interests"). D. On December 13, 2007, Purchaser and the City entered into that certain Amended and Restated Purchase and -Sale Agreement (the "A&R Purchase Agreement") to amend and restate the Original Agreement (as so amended, the "Purchase Aareement"). Among other changes, the ;A&R Purchase Agreement terminated the respective obligations of the City and Purchaser to sell or purchase (as applicable) the Mead Transmission Interests and the Palo. Verde Interest. Purchaser is proposing to implement a leveraged lease transaction to finance its purchase under -the Purchase Agreement. E. City desires to have the ability to assign the PPTA to another party, if the City determines to pursue an alternative source of power for its electric systems. SD\619696.1 F. As more particularly set forth below, Purchaser and the City desire to 1) amend the A&R Purchase Agreement to extend the outside closing date as set forth in Section 10.1 of the A&R Purchase Agreement; 2) modify the option to extend the PPTA; and 3) make such other amendments and agreements as set forth in this Amendment. G. Capitalized terms used but not defined herein shall have the meanings given to them in the A&R Purchase Agreement. NOW, 'THEREFORE, in consideration of the respective covenants and promises containedherein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged; the Parties agree as follows: AGREEMENT ARTICLE 1. AMENDMENTS AND AGREEMENTS 1.1 Extension of Closing Date. In order to. permit Purchaser to proceed with its leveraged lease transaction to finance the transactions contemplated by the A&R Purchase Agreement, the Parties hereby agree to extend the outside closing date provided in the A&R Purchase Agreement by replacing Section 10.1(a) of the A&R Purchase Agreement in its entirety and replacing it with the following: (a) by Purchaser or Seller, if the Closing has not occurred on or before April 8, 2008 (the "Outside Closing Date"); For avoidance of doubt, nothing in this Amendment or the A&R Purchase Agreement gives Purchaser a condition precedent to its obligations to close under the Purchase Agreement that it shall have obtained financing. 1.2 Amendments to Facilitate Proposed Leveraged Lease Transaction. If Purchaser determines to undertake a leveraged lease transaction, the City agrees to accept reasonable requests by Purchaser for modifications' to the Related Agreements that (i) do not adversely affect the City's economics in any way not fully compensated and are not otherwise in any material respect adverse to the City and (ii) are reasonably necessary for such leveraged lease transaction. 1.3 Amendment to Terms of Related Agreements. (a) Notwithstanding the terms set forth in Section 1.2(1) of the A&R Purchase Agreement, the Parties `hereby agree to replace Section 2.1 of the PPTA in its entirety and replace it with the following; provided, however, that this provision shall only apply if Purchaser uses a leveraged lease for its acquisition under the A&R Purchase Agreement: Section 2.1 Service Term. The initial term of this Agreement shall commence on the Effective Date and shall terminate fifteen (15) years following the Service Commencement Date, unless terminated earlier in 2 SD\619696.5 accordance with the terms and conditions of this Agreement (the "Initial Term"). Either Seller or Buyer shall have the option, at its sole and absolute discretion, to extend the 'term of this Agreement (the "motion Term") at any time after the Effective Date; provided, that the exercising Party must give written notice to the other Party of its intent to exercise such option no less than thirty (30) months prior to the expiration of the Initial Term. The Option Term shall commence on the day immediately following the expiration of the Initial Term and shall terminate twenty (20) years following the Service Commencement. Date, unless :terminated earlier in accordance with the terms and conditions of this Agreement. - (b) The following new Section 20.21 shall be'added to the PPTA: Section 20.21 Cooperation Regarding Possible Future Alternative Power Source. If Buyer determines to obtain an alternative source of power for its electric system, Seller agrees (a) to enter into a ;consent agreement (with substantially similar rights to . those contained in the forms of the Lender Consents attached to the PSA as-. Exhibits F-1 and F-2) for the benefit of transaction participants who are not in. direct privity with Seller and (b) to accept reasonable requests by Buyer for modifications to the Related Agreements -(as defined in the PSA) that (i) do not adversely affect Seller's economics in any way not fully compensated or otherwise in any material respect adverse to Seller and (ii) are reasonably necessary to acquire an alternative source of power for the Buyer's electric system. ' Notwithstanding anything to the contrary in this Agreement' but subject to this Section 20.21, Seller further agrees that if Buyer determines to obtain an alternative source of power for its electric system, Buyer, may novate its obligations under this Agreement to a counterparty (x) that either has or is irrevocably and unconditionally guaranteed by an entity (i) that has a credit rating from S&P of not lower than AA- and from Moody's of not lower than Aa3, and is not on a negative creditwatch by S&P or negative ratings watch by Moody's -to be downgraded below such rating; and (ii) if such counterparty or its guarantor has (or has a banking affiliate with) a `Bank Financial Strength" rating from Moody's, then such rating shall not be less than B+, and such counterparty or its guarantor shall not be on a negative ratings watch by Moody's to be downgraded below such rating; and (iii) if such counterparty or its guarantor has an "Insurance Financial Strength" rating from Moody"s, then such rating' shall not be less than Aa2, or .(y) that is acceptable to Seller's lenders (and leveraged lease lessor, if applicable) that has (or whose guarantor has) a credit rating from S&P of not lower than A and from Moody's of not lower than A2 or (z) that is, or is guaranteed by, Goldman Sachs or Lehman Brothers. Notwithstanding the foregoing, Buyer may not novate its obligations under this Agreement if such novation would cause the notes issued by Seller or any of its Affiliates or its leveraged lease lessor,, if applicable, to finance or 3 SD\619696.5 refinance the acquisition of the Facility to be rated less than Investment Grade with a stable outlook by Fitch Ratings by reaffirmation or otherwise. 1.4 Consent to Assignment. Pursuant to Section 13.7 of the A&R Purchase Agreement, the City hereby consents to the following assignments of Purchaser's rights under the A&R Purchase Agreement: (a) Malburg Generating Station. Purchaser hereby Assigns all of its rights to purchase the Facility Assets and the Miscellaneous Assets to BCM'. BCM shall purchase the Facility Assets and the Miscellaneous Assets, assume the Assumed Liabilities with respect to the Facility `Assets and the Miscellaneous Assets and enter into the agreements and deliver certain certificates. and other closing documents, together with Purchaser, as may be required by the Purchase Agreement. (b) Hoover. Purchaser hereby Assigns all of its rights to the economic benefits and burdens associated with the Hoover Interest- to BCH. BCH shall enter into the CFD (Hoover), assume the Assumed Liabilities with respect to the Hoover Interest and enter into the agreements and deliver certain certificates and other closing documents, together with Purchaser, as may required by the Purchase Agreement. ARTICLE 2. MISCELLANEOUS 2.1 Reference to Agreement. Each of the Related Agreements, and any and all other agreements, documents or instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of .the Purchase Agreement , are hereby amended so that any reference in .such Related Agreement to the A&R,Purchase Agreement, whether direct or indirect, shall mean a reference to the Purchase Agreement. 2.2 Governing Law. The validity, interpretation and effect of this Amendment are governed by and shallbe construed in , accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law doctrines except to the extent that certain matters are preempted by Federal law or are governed by the law of the jurisdiction of organization of the respective Parties. 2.3 Counterparts. This Amendment may be executed in one or more counterparts, each of which is an original, but all of which together constitute one and the same instrument. 2.4 Full Force and Effect. Each Party confirms to the other its obligations under the Purchase Agreement and confirms that it is not aware of any material breach or default by the other. 2.5 No Obligation for Other Amendments. This Amendment is intended to be a part of, and will serve as a valid, written amendment to, the A&R Purchase Agreement as required by Section 13.3 thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the A&R Purchase Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect, and 4 SD\619696.5 this Amendment will not operate as an extension or waiver by the Parties of any other condition, covenant, obligation, right, power or privilege under the A&R Purchase Agreement or any of the other Related Agreements. This Amendment relates only to the specific matters covered herein, and shall not be considered to create a course of dealing or to otherwise obligate either Party to execute similar amendments or grant any waivers under the same or similar circumstances in the future. [Signature pages follow] 5 SD\619696.5 IN WITNESS WHEREOF, the Parties have executed this First Amendment to the Amended and Restated Purchase and Sale Agreement as of the date first above written. SELLER: CITY OF VERNON B Y: Name: Eric T. Fresc Title: City Administrator PURCHASER: BICENT (CALIFORNIA) POWER LLC By: Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) MALBURG LLC By: Name.: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) HOOVER LLC By: Name: Paul B. Prager Title: Chairman S-1 IN WITNESS WHEREOF, the Parties have executed this First Amendment to the Amended and Restated Purchase and Sale Agreement as of the date first above written. SELLER: CITY OF VERNON By: Name: Eric T. Fresch Title: City Administrator PURCHASER: BICENT (CALIFORNIA) POWER LLC By: Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) MALBURG LLC By: Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) HOOVER LLC By: Y Name: Paul B. Prager Title: Chairman S-1 The execution of this First Amendment to the Amended and Restated Purchase and Sale Agreement by the City of Vernon is hereby affirmed and attested to by: CITY OF VERNON By: me: Title: City Clerk S-2 EXECUTION VERSION SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT This SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (this "Amendment") is entered into as of April 8, 2008, by and among the City of Vernon, California, a municipal corporation and a chartered city duly organized and existing under and by virtue of the Constitution and laws of the State of California and its Charter (the "City" or "Seller"), and Bicent (California) Power LLC, a Delaware limited liability company ("Purchaser'), Bicent (California) Malburg LLC, a Delaware limited liability company ("BCM") and Bicent (California) Hoover LLC, a Delaware limited liability company ("BCH"), Seller, Purchaser, BCM and BCH are referred to herein sometimes individually as a "Party" and collectively as the "Parties." RECITALS A. The City owns that certain 134-megawatt natural gas -fired generating facility known as the Malburg Generating Station (the "Facility'). B. The City owns that certain 22-megawatt entitlement to energy from the Hoover Uprating Project pursuant. to a power .purchase agreement with the Western Area Power Administration (the "Hoover Interest'). C. On October 8, 2007, Purchaser (formerly known as Beowulf (Vernon) Power LLC) and the City entered into that certain Purchase and Sale Agreement (the "Original Agreement") for the purchase of (i) the Facility, (ii) the economic benefits and burdens associated with the Hoover Interest, (iii) the economic benefits and burdens associated with the City's 11 megawatt interest in the Southern California Public Power Authority's ownership interest in the Palo Verde Nuclear Generating Station through December 31, 2030 (the "Palo Verde Interest") and (iv) the City's interests in each of the Mead -Phoenix Transmission Project .and the Mead-Adelanto Transmission Project (collectively, the "Mead Transmission Interests"). D. On December 13, 2007, Purchaser and the City entered into that certain Amended and Restated Purchase and Sale Agreement to amend and restate the Original Agreement (as amended by the First Amendment (defined below), the "A&R Purchase Agreement"). Among other changes, the 1 A&R Purchase Agreement terminated the respective obligations of the City and Purchaser to sell or purchase (as applicable) the Mead Transmission Interests and the Palo Verde Interest. E. On February 8, 2008, the Parties entered into that certain FirstAmendment to Purchase and Sale Agreement (the "First Amendment") to 1) amend the A&R Purchase Agreement to extend the outside closing date as set forth in Section 10.1 of the A&R Purchase Agreement; 2) modify the option to extend the PPTA; and 3) make such other amendments and agreements as set forth in the First Amendment. LA\1845466.3 F. Purchaser has requested an additional extension of the A&.R Purchase Agreement in order to permit Purchaser to finalize documentation of its financing of the transactions contemplated by the A&R Purchase Agreement. G. As more particularly set forth below, Purchaser and the City desire to 1) amend the A&R Purchase Agreement to extend the outside closing date as set forth in Section 10.1 of the A&R Purchase Agreement; 2) agree upon the amount of Capital Expenditures for purposes of Section 2.4 of the A&R Purchase Agreement; and 3) make such other amendments and agreements as set forth in this Amendment. H. Capitalized terms. used but not defined herein shall have the meanings given to them in the A&RPurchase Agreement. NOW, THEREFORE, in consideration of the respective, covenants and promises contained herein and for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Parties agree as follows: AGREEMENT ARTICLE 1. AMENDMENTS AND AGREEMENTS 1.1 Extension of Closing Date. In. order to permit Purchaser 'to finalize its financing in connection with the transactions contemplated by the A&R Purchase Agreement, the Parties hereby agree to extend the outside closing date provided in the A&R Purchase Agreement by replacing Section 10.1(a) of the A&R Purchase Agreement in its entirety and replacing it with the following: (a) by Purchaser or Seller, if the Closing has not occurred on or before 3:00 p.m. Eastern Daylight Time on April 10, 2008 (the "Outside Closing Date"); For avoidance of doubt, nothing in this Amendment or the A&R Purchase Agreement gives Purchaser a condition precedent to its obligations to close under the A&R Purchase Agreement that it shall have obtained financing. 1.2 Capital Expenditures. The Parties hereby agree that the amount of Capital Expenditures to be used for purposes of calculating the Purchase Price Adjustment pursuant to Section 2.4(b) of the A&R Purchase Agreement is $731,850.19. The Parties hereby waive any and all requirements for prior written consent respecting such amount of Capital Expenditures as set forth in Section 2.4(b)(1) of the A&R Purchase Agreement. 1.3 Emissions Rights: (a) Notwithstanding any other provision of this Amendment, the A&R Purchase Agreement or the Related Agreements, including, without limitation, Section 2.1(e) of the A&R Purchase Agreement, Seller hereby represents that (i) the number of "perpetuity" 2 LA\1845466.3 NOx RECLAIM Trading Credits ("NOx RTCs") held specifically for the Facility as set forth in Schedule 2.1(e) to the A&R Purchase Agreement is,53,733 pounds per year (the "Facility RTCs") and (ii) the Facility RTCs are all of the NOx RTCs required to operate the Facility in accordance with past practice when the Facility wasownedby Seller. The Purchaser agrees to execute and deliver on the Closing Date all necessary or appropriate documents to transfer the Facility RTCs to Purchaser in satisfaction of Section 2.1(e) of the A&R Purchase Agreement. (b) On the first anniversary of the Closing Date, Seller hereby agrees to transfer to Purchaser such amountof additional NOx RTCs as are required under applicable Governmental Rules and Governmental Approvals for the operation and use of the Facility, so long as Purchaser has operated the Facility consistent with Prudent Industry Practices, Governmental Rules,, Governmental Approvals and. SCAQMD RECLAIM program rules and regulations (including reporting obligations), and such required additional NOx RTCs are not attributable . to any changes after the Closing Date in such Governmental' Rules or Governmental Approvals. Notwithstanding the foregoing, the additional NOx RTCs' shall not exceed 10% of the Facility RTCs or a maximum of 5373 pounds per year. 1.4 Amendment to Terms of PPTA. (a) , Notwithstanding the. terms, set forth in Section 1.20) of the A&R Purchase Agreement, the Parties hereby agree to add the following new definitions and Section 3.9 to the PPTA: "CEC" means the California Energy Commission. "License" means that certain license issued for the. Facility by the CEC on May 20, 2003. "Petition" means that certain petition filed by the City with the California Energy Commission on December 19, 2007 to amend the License. Section 3.9 CEC Petition. The Parties shall use commercially reasonable efforts to support the approval of the Petition. Until such time as the Petition is approved, Buyer shall, subject to the Availability Notice, dispatch the Facility continuously between the minimum and maximum load of the Facility, except: (i) as otherwise directed by CAISO; (ii) in an emergency situation or (iii) as other dispatch instructions would not violate Applicable Law. In the event that the Petition is not approved, Buyer shall use commercially reasonable efforts to continuously dispatch the Facility between the minimum and maximum load of the Facility on a daily basis and shall work with Seller to seek a substantially similar amendment to the License. 3 LA\1845466.3 (b) Notwithstanding the terms set forth in Section 1.2(1) of the A&R Purchase Agreement, the Parties hereby agree to add the following new definitions, renumber Section 11.1 (Availability Notice) into Section 11.1.1 and insert a new Section 11.1.2 to the PPTA: "Applicable Limitations" means Operating Limitations and/or Permit Limitations. "Permit Limitations" in limitations imposed on, or applicable to, the operation of the Facility as a result of Applicable Law or Required Permits. Section 11.1.2. In determining the availability of the Facility and preparing an Availability Notice, Seller may take into account Applicable Limitations. Seller shall inform Buyer when it becomes aware of any, Applicable Limitations as early as commercially reasonable, even if,prior to the deadline for an Availability Notice. Seller shall make available to Buyer for inspection any records of Seller pertinent to Facility operations or Applicable Limitations upon reasonable notice during normal business hours. To the extent an Availability Notice is being limited by Permit Limitations, Seller shall indicate the specifics of the Permit Limitations thereon and the reduction,of capacity as reflected on such Availability Notice as a result of such Permit Limitations shall be treated as an Unscheduled Outage unless Seller has operated the Facility consistent with Applicable Standards, Applicable Law, Required Permits and SCAQMD RECLAIM program rules and regulations (including reporting obligations), and such reduction is not attributable to any changes after the Effective Date in such Applicable Law or Required Permits. 1.5 Liquidated Damages Upon Failure to Close. Notwithstanding anything to the contrary in the A&R Purchase Agreement, in the event that the Closing does not occur by 100 p.m. Eastern Daylight Time on April 10, 2008, other than as a result of a failure of a Closing Condition set forth in Section 3.'1 of the A&R Purchase Agreement, Purchaser shall be in breach of the A&R Purchase Agreement and Purchaser and Guarantor shall owe the City $17,000,000 in liquidated damages as specified in Section 13.13 of the A&R Purchase Agreement or the Guaranty, as applicable. ARTICLE 2. MISCELLANEOUS 2.1 Reference to Agreement. Each of the Related Agreements, and any and all other agreements, documents or instruments now or hereafter executed and/or delivered pursuant to the terms hereof or pursuant to the terms of the A&R Purchase Agreement are hereby amended so that any reference in. such Related Agreementto the A&R Purchase Agreement, whether direct or indirect, shall mean a reference to the A&R Purchase Agreement as amended by this Amendment. 2.2 Governing Law. The validity, interpretation and effect of this Amendment are governed by and shall be construed in accordance with the laws of the State of California applicable to contracts made and performed in such State and without regard to conflicts of law 4 LA\1845466.3 doctrines except to the extent that certain matters are preempted by Federal law or are governed by the law of the jurisdiction of organization of the respective Parties. 2.3 Counterparts. This Amendment may be executed in one or more counterparts, each of which is an original, but all of which together constitute one and the same instrument. 2.4 Full Force and Effect. Each Party confirms that the A&R Purchase Agreement is in full force and effect and remains a binding obligation of the Parties. 2.5 No Obligation for Other Amendments. This Amendment is intended to be a part of, and will serve as a valid, written amendment to, the A&R Purchase Agreement as required by Section 13.3 thereof. Except as otherwise set forth in this Amendment, this Amendment shall not by implication or otherwise alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the A&R Purchase Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect, and this Amendment will not operate as an extension or waiver by the Parties of any other condition, covenant, obligation, right, power or privilege under the A&R Purchase Agreement or any of the other Related Agreements. This Amendment relates only to the specific matters covered herein, and shall not be considered to create a course of dealing or to otherwise obligate either Party to execute similar amendments or grant any waivers under the same or similar circumstances in the future. [Signature pages follows] 5 LA\ 1845466.3 IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the Amended and Restated Purchase and Sale Agreement as of the date first above written. SELLER: CITY OF VERNON By: "\. .� Nat Jeff jHaffison TitP ity Aorney APPROVING THIS SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT AND AGREEING AS TO SECTION 1.5: .PURCHASER: GUARANTOR: BICENT (CALIFORNIA) POWER LLC BICENT HOLDINGS LLC By: Name: Paul B. Prager Title: Chairman BICENT (CALIFORNIA) MALBURG LLC By: Name: Paul B. Prager Title: President BICENT (CALIFORNIA) HOOVER LLC By: Name: Paul B. Prager Title: President By: Name: +Paul B. Prager Title: Chairman [Signature Page to Second Amendment to Amended and Restated Purchase and Sale Agreement] IN WITNESS WHEREOF, the Parties have executed this Second Amendment to the Amended and Restated Purcltrtseand Sale Agreement as of the date: first above written. SELLER: CITY Of VERNON By: Name: Jeff A. Harrison Title: City Attorney PURCHASER: I3ICF (CALL i A) .POW ER LLC 3 y: Name: Paul B. Pra r Title: President BICEN' A:LIFOI2NI ALBURGLI—C 3y: A Naive: Paul B. Prager Title: President BICEN_T(e I ORNIA) HOOVER LLC 3 y. ..4. Name: Paul B. Pragei Title: President S-1 LAU 4.15466 3 APPROVINGTHIS SECOND AMENDMENT TO AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT AND AGREEING AS TO SECTION 1.5: GUARANTOR: BI:CENT HOLDINGS LLC The execution of this Second Amendment to the Amended and Restated Purchase and Sale Agreement by the City of Vernon is hereby affirmed and attested to by: CITY OF VERNON i By:C�- Name: Title: City Clerk LA\1845466.2 Page 2 of 4 Judy. Lehr City Attorney Dept., City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Work: (323) 583-6811 x �368 Fax: (323) 826-1438 CONFIDENTIALITY NOTICE: This e-mail transmission, and any documents, files or previous e- mail messages attached to it may contain confidential information that is legally privileged. If you are not the intended recipient, or a person responsible for delivering it to the intended recipient, you are hereby notified that any disclosure, copying, distribution or use of any of the information contained in or attached to this transmission is STRICTLY PROHIBITED. If you have received this transmission in error, please immediately notify the sender. Please destroy the original transmission and its attachments without reading or saving in any manner. From: Giron, Nelly Sent: Tuesday, July 07, 2009 2:30 PM To: Harrison, Jeff; Lehr, Judy Cc: Juarez, Debbie Subject: FW: Copy of First Amendment to the Amended and Restated Purchase Agreement dated February 8, 2008 Jeff/Judy, In looking for the document that Robin is asking for, First Amendment to the purchase and Sale of the MGS - request at the beginning of this email, it has been discovered that the file regarding the sale of the MGS is missing some documents. The city's file has the following: Resolution 9431 authorizing the purchase and sale of the Malburg Generating Station to Beowulf. A copy of the Purchase and Sale Agreement, with signatures Resolution 9510 ratifying the execution of an amended and restated Purchase and sale agreement. A copy of the Amended and Restated agreement, with signatures. The Second Amendment to Amended and Restated Purchase and Sale Agreement, without signatures. The file is missing the following: �-. Resolution approving the First Amendment to the Amended and Restated Agreement. The Signed first Amendment to the Amended and Restated Agreement. Resolution approving the Second Amendment The Second Amendment to the Amended and Restated ... Would you have copies of the documents we are missing? If you do, would you provide with me with copies for my file? Thanks. From: Medina, Krystal Sent: Tuesday, July 07, 2009 10:32 AM To: Giron, Nelly 9/22/2009