Resolution No. 96231
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RESOLUTION NO. 9623
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A
PROPOSAL FOR CREDIT SCORING MODEL AND CONSULTING
SERVICES AGREEMENT BY AND BETWEEN THE CITY OF
VERNON AND RMG FINANCIAL CONSULTING, INC. TO
PROVIDE A CREDIT SCORING MODEL AND CREDIT AND
COUNTERPARTY CREDIT ANALYSIS FOR THE LIGHT & POWER
DEPARTMENT
WHEREAS, the Light & Power Department desires to retain the
consulting services relating to the design, development and
implementation of credit scoring to aid in the evaluation of companies
with which the City conducts energy trading transactions for the
approximate sum of Thirty Thousand Dollars and No Cents ($30,000.00),
which represents the cost of the model, documentation, training,
installation and first year maintenance fees, with additional support
services, as needed, provided on an hourly basis and updates and
reports each year thereafter invoiced at a guaranteed rate of Five
(Thousand Dollars and No Cents ($5,000.00) per year through the year
12010; and
WHEREAS, the Light & Power Department also desires to retain
the services of a consultant to provide credit and risk management
consulting support to the City for an approximate cost of Fifteen
Thousand Three Hundred Fifty Dollars and No Cents ($15,350.00) for
counterparty reviews for 2008 with additional services, as needed,
provided at an additional hourly rate; and
WHEREAS, the services relating to the credit scoring model
and the services relating to the counterparty credit analysis shall
collectively be referred to herein as the "Services;" and
1 WHEREAS, the City and RMG Financial Consulting, Inc.
2 ("RMG")desire to enter into a Proposal for Credit Scoring Model and
3 Consulting Services Agreement setting forth the terms and conditions
4 under which RMG shall perform the Services requested by the Light &
5 Power Department; and
6 WHEREAS, the City Council of the City of Vernon has
7 determined that, pursuant to the provisions of subsection (a) of
8 Section 2.27 of the Vernon City Code, it'is in the public interest and
9 ne-ce-s-s-ity t_o enterint_oagreement with RMGf_o_r the --Services- to—enhance----
10 services provided to the Vernon Community.
11 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
12 CITY OF VERNON AS FOLLOWS:
13 SECTION 1: The City Council of the City of Vernon hereby
14 finds and determines that the recitals contained hereinabove are true
15 and correct.
16 SECTION 2: The City Council of the City of Vernon hereby
17 approves the Proposal for Credit Scoring Model and Consulting Services
18 Agreement (collectively, the "Agreement") with RMG, in substantially
19 the same form as the copies which are attached hereto as Exhibits A
20 and B, respectively, and incorporated by reference.
21 SECTION 3: The City Council of the City of Vernon hereby
22 authorizes the Mayor to execute said Agreements for, and on behalf of,
23 the City of Vernon and the City Clerk is hereby authorized to attest
24 thereto.
25 SECTION 4: The City Council of the City hereby authorizes
26 the City Administrator, or his designee, to make whatever non-
27 substantive, administrative and/or text changes, upon advice of
28 counsel, to the Agreements.
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1 SECTION 5: The City Council of the City of Vernon hereby
2 authorizes the City Administrator, or his designee, to execute any and
3 all documents necessary or required to implement and carry out the
4 Agreements consistent with the terms of the Agreements approved herein
5 for, and on behalf of, the City of Vernon and to perform such other
6 acts and deeds, as may be necessary or convenient to effect the
7 purposes of this Resolution and the transactions herein authorized.
8 SECTION 6: The City Council of the City of Vernon hereby
9 --direct-s t-h-e City Clerk,--o-r- h_e-r -des-i_gnee_, t-o send o-n-e— f-ully executed
10 Agreement to:
11 RMG Financial Consulting, Inc.
Attn. Reid Grossmann, President
12 813 E. Ballard
Colbert, WA 99005
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SECTION 7: The City Clerk of the City of Vernon shall
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certify to the passage of this resolution, and thereupon and
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thereafter the same shall be in full force and effect.
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APPROVED AND ADOPTED this 19th day of May, 2008.
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20 Name: Leonis C. Malburg
21 Title: Mayor / M
ATTEST:
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24 DVANUELA GIRON, Ci y Clerk
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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. 9623, was
duly adopted by the City Council of the City of Vernon at a regular
meeting of the City Council duly held on Monday, May 19, 2008, and
thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of
Vernon.
(SEAL)
MANUELA GIRON, Ci/y Cler
- 4 -
EXHIBIT A
Proposal for Credit Scoring Model
Monday, April 21, 2008
Mr. [Name]
The City of Vernon
4305 Santa Fe, Ave
Vernon, CA 90058
(Via Email)
Subject: Credit Scoring Modeling for City of Vernon.
Dear [Name] :
RMG Financial Consulting, Inc. ("RMG Financial") is pleased to submit this proposal to
provide a credit scoring model and consulting services relating to the design,
development and implementation of credit scoring for The City of Vernon ("City of
Vernon").
Scope
City of Vernon has requested that RMG Financial provide a credit scoring model to aid in
the evaluation of companies with which City of Vernon conducts energy trading
transactions. RMG Financial has developed a credit scoring model that allows for several
predetermined company -type classifications and is based on both objective financial and
subjective qualitative indicators, as well as a translation of the resulting scores into a
letter rating, estimate of default probability and an estimate of proposed credit limits. It
is our expectation that as deliverables related to this request RMG Financial will provide
City of Vernon with the following:
Credit Scoring Model:
(1) A copy of the RMG Financial credit scoring model in Excel.
(2) A copy of the user's manual relating to the credit scoring model, including
background information, a summary of the various indicators used, definitions of
the terms and methods employed, and other information describing the model and
its workings.
1
813 East Ballard, Colbert, Washington 99005 Phone: (509) 46812956
www.rmgfinancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model
(3) One day (up to eight consecutive hours) of training for your staff on the
installation and use of the model. If this training is to be performed at your
offices, travel and other related expenses are to be born by your company and will
be charged to you at their actual cost to RMG Financial. Time spent in excess of
the first eight hours is to be charged in accordance with the rate structure as noted
in the Rates section below.
Updates to the Model:
On -at least an-annual-basis-RMG Financial -will -re-evaluate the- parameters -of the model
in relation to the changing environment of energy markets and the companies that
transact in those markets. RMG Financial will provide City of Vernon with
documentation of this re -validation and any updates to this scoring model for an
additional annual fee as defined in the Rates section of this proposal.
Customization and Follow-ups:
RMG Financial can provide additional staff time to assist your company with loading
data on existing counterparties into the model, assessing model output from this data,
customizing the model to your company's existing customer base, and any other follow
up work related to the scoring model on a time and expense basis per the rates schedule
presented below.
Rates and Billing
Scoring Model and User's Manual:
RMG Financial will provide the scoring model, the documentation of the model, and
eight hours of staff time for training and installation of the model (as described above),
for the one-time flat rate of USD$25,000. All invoices are to be payable by City of
Vernon upon receipt.
Annual Maintenance Fee:
RMG Financial will provide City of Vernon with all updates to this scoring model and a
written report or the results of an annual re -validation of the model at a rate of
USD$5,000 per annum, to be billed in the first quarter of each year. The maintenance fee
for calendar year 2008 is to be prepaid upon receipt of the model and users manual and
will be included in our invoicing for the delivery of the model or billed separately per
your request. RMG Financial reserves the right to change the amount of the annual
2
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rmgfmancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model
maintenance fee and our billings rates upon 60 days notice, but agrees that the
maintenance fee will remain at $5,000 through at least calendar year 2010.
As part of its ongoing maintenance of the scoring model RMG Financial expects to
perform an annual re -validation of all ratios, weighting factors and scoring table data
used for each company type. It is RMG Financial's expectation that this re -validation
process will take place towards the end of each calendar year, but RMG Financial retains
the right to perform the re -validation process at whatever time during each year that it
deems to be appropriate. Additional maintenance items include, but are not limited to,
improvements in the overall _functionality _ of the model and the inclusion of addition
company types to_be-scored. - RMG Financial will -bill -maintenance- charges -in the -first- - ----
quarter of each year. City of Vernon agrees to pay for the annual maintenance fee when
invoiced, but may decline to continue annual maintenance for future years by providing
at least 60 days written notice to RMG Financial prior to the end of the then current
maintenance year.
RMG Financial will provide support services relating to the loading data on existing
counterparties into the model, assessing model output from this data, customizing the
model to your company's existing customer base, and any other follow up work related to
the scoring model as requested by City of Vernon on a time and expense basis. Hourly
billing rates under this proposal are as follows:
President ............................... $250 per hour
Project Manager ........................$200 per hour
Senior Analyst ......................... $175 per hour
Analyst...................................$150 per hour
Administrative Support ...............$100 per hour
Any out-of-pocket expenses incurred in conjunction with services provided will be billed
to City of Vernon at their cost to RMG Financial. All amounts billed will be due upon
receipt of invoicing. RMG Financial reserves the right to change its billing rates given
sixty days written notice.
Use and Access by Company Personnel
The signed acceptance of this proposal and payment by City of Vernon for the delivery of
the credit scoring model as outlined in the scoping section of this proposal will constitute
the licensing of the credit scoring model to City of Vernon for use within City of Vernon
and by City of Vernon personnel only. Distribution and/or use by subsidiaries or related
companies or by other third parties without the written consent of RMG Financial
Consulting, Inc. is expressly prohibited.
3
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.nngfinancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model
Confidentiality
RM�T
Financial
V Consulting
The use of the RMG Financial scoring model is intended for licensed users only. Our
scoring model contains intellectual property that is proprietary and confidential, the
disclosure of which would provide a competitive advantage to others. In particular we
view our approaches and insights as proprietary and therefore look to our clients to
protect RMG Financial's interests in our presentations, methodologies and analytical
techniques. City of Vernon agrees to keep confidential all materials relating to the RMG
Financial credit scoring_model-and that -under _no _circumstances- _will -this _material be __-
shared with any third party without the express written consent of RMG Financial
Consulting, Inc.
Assignment
This agreement and the rights and duties hereunder will not be assigned of transferred by
either party without the prior written approval of the other party, with such consent not to
be unreasonably withheld.
No Warranty
Credit scoring models are tools used to provide a consistent level of evaluation of a
company's trading counterparties. However, credit scoring models are not infallible and
rely on, among other things, the accuracy and completeness of the information input into
the models. Further, credit scores and other model outputs must be reviewed in all cases
for reasonableness, which implies a knowledge by the user of the company being scored,
its financial information, the general environment of the industry within which the
company being scored operates and the workings of the model itself. No credit scoring
model should be expected to be 100% accurate and false positive and negative results
will occur. As such, RMG Financial does not warranty the results of its scoring model,
and by accepting this proposal and taking possession of the model, City of Vernon agrees
to indemnify and hold harmless RMG Financial from any and all uses of this and all
future versions of its credit scoring model. RMG Financial does not warranty the
creditworthiness of any company scored through the use of this model.
4
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rmgfinancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model
RMG Financial appreciates the opportunity to provide City of Vernon with services in
support of the evaluation of its trading counterparties. Please don't hesitate to call if you
should have any questions or comments.
Best regards,
Reid Grossmann
-President— -- ------ -
RMG Financial Consulting, Inc.
Having read this proposal, I agree to the
description, scope of services and other
terms and conditions as described above.
Date:
Name:
Title:
Signature:
5
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rmgfinancial.com Fax: (509) 468-3217
CONSULTING SERVICES AGREEMENT
RMG FINANCIAL CONSULTING, INC.
Billing Address
813 E. Ballard
Colbert, WA 99005
Phone (509) 468-2956
This Consulting Services Agreement is made between RMG Financial Consulting, Inc., (hereinafter
"RMG FINANCIAL CONSULTING") and f J, whose place of business is located at I 1
(hereinafter "CLIENT") for a Project generally described as f I.
I. SCOPE AND QUALITY OF CONSULTING SERVICES
RMG FINANCIAL CONSULTING will provide the services described in Exhibit _Aof this Agreement._
RMG FINANCIAL CONSULTING shall render its services in accordance with generally accepted professional
practices. RMG FINANCIAL CONSULTING shall, to the best of its knowledge and belief, comply with applicable
laws, ordinances, codes, rules, regulations, permits and other published requirements in effect on the date this
Agreement is signed.
II. COMPENSATION AND REIMBURSEMENT OF COSTS
Services provided and costs incurred (with the exception of travel, food and lodging expenses) by RMG
FINANCIAL CONSULTING under this Agreement will be compensated according to the provisions in Exhibit A of this
agreement.
RMG FINANCIAL CONSULTING will submit monthly invoices to CLIENT for work completed and reasonable
expenses incurred, to the date of the invoice. All invoices will be itemized to reflect the employees performing the
requested tasks, the billing rate for each employee and the hours worked.
CLIENT shall pay all out-of-pocket travel, food, lodging and incidental expenses incurred by RMG FINANCIAL
CONSULTING that are reasonably associated with the provision of services under this Agreement. These expenses
will be compensated for by the CLIENT at their cost to RMG FINANCIAL CONSULTING. RMG FINANCIAL
CONSULTING will keep receipts for such expenses in compliance with IRS requirements. These receipts will be
available to CLIENT for inspection upon request.
All invoices sent by RMG FINANCIAL CONSULTING to CLIENT shall be paid within ten (10) days of receipt. All
billings that remain unpaid after thirty (30) days shall bear interest until paid at the rate of twelve percent (12%) per
annum. If CLIENT fails to pay any invoice within thirty (30) days and such failure continues ten (10) days after RMG
FINANCIAL CONSULTING gives CLIENT notice of such failure, RMG FINANCIAL CONSULTING shall have the right
to terminate this Agreement immediately without liability to CLIENT. The right to terminate under the terms of this
section shall be in addition to all other legal, equitable, or contractual remedies available to RMG FINANCIAL
CONSULTING.
III. TERMS & CONDITIONS OF CONSULTING SERVICES AGREEMENT
1. Timing of Work. RMG FINANCIAL CONSULTING shall commence work as described in Exhibit A of this
Agreement.
2. Access to Facilities and Property. The CLIENT will make its facilities accessible to RMG FINANCIAL
CONSULTING as required for RMG FINANCIAL CONSULTING's performance of its services and will provide labor
and safety equipment as required by RMG FINANCIAL CONSULTING for such access. CLIENT will be responsible
for all acts of CLIENT's agents or personnel.
Page 1 of 3
3. Relationship of Parties, No Third -Party Beneficiaries. RMG FINANCIAL CONSULTING is an independent
contractor under this Agreement. This Agreement gives no rights or benefits to anyone not named as a party to this
Agreement, and there are no third party beneficiaries to this Agreement.
4. Subcontracts. RMG FINANCIAL CONSULTING may use the services of independent contractors to perform a
portion of its obligations under this Agreement with prior approval by CLIENT.
5. Insurance.
a. Insurance of RMG FINANCIAL CONSULTING. RMG FINANCIAL CONSULTING will maintain throughout
the performance of this Agreement the following types and amounts of insurance:
i. Worker's Compensation and Employer's Liability Insurance as required by applicable state or federal law.
ii. Professional Liability (Errors and Omissions, on a claims -made basis) Insurance with limits of $1,000,000.
b. Interpretation. Notwithstanding any other provision(s) in this Agreement, -nothing shall be construed or
enforced-so-as-to-void,--negate-or--adversely--affect-any-otherwise-applicable- insurance -held -by any -party to -this
Agreement.
6. Mutual Indemnification. RMG FINANCIAL CONSULTING agrees to indemnify and hold harmless CLIENT and
its employees from and against any and all loss, cost, damage, or expense of any kind and nature (including, without
limitation, court costs, expenses, and reasonable attorneys' fees) arising out of injury to persons or damage to
property (including, without limitation, property of CLIENT, RMG FINANCIAL CONSULTING, and their respective
employees, agents, licensees, and representatives) in any manner caused by the negligent acts or omissions of RMG
FINANCIAL CONSULTING in the performance of its work pursuant to or in connection with this Agreement to the
extent of RMG FINANCIAL CONSULTING's proportionate negligence, if any.
CLIENT agrees to indemnify and hold harmless RMG FINANCIAL CONSULTING and its employees from and
against any and all loss, cost, damage, or expense of any kind and nature (including without limitation, court costs,
expenses and reasonable attorneys' fees) arising out of injury to person(s) or damage to property (including, without
limitation, property of CLIENT, RMG FINANCIAL CONSULTING, and their respective employees, agents, licensees
and representatives) in any manner caused by the negligent acts or omissions of CLIENT or other(s) with whom
CLIENT contracts ("CLIENT's agents") to perform work pursuant to or in connection with this Agreement, to the extent
of CLIENT's or CLIENT's agents proportionate negligence, if any.
7. Limitation of Liability. RMG FINANCIAL CONSULTING's' liability hereunder shall be limited as follows: (a) for
insured liabilities arising out of RMG FINANCIAL CONSULTING's negligence, to the amount of insurance then
available to fund any settlement, award, or verdict; (b) for uninsured liabilities, to 50 percent (50%) of the fee earned
by RMG FINANCIAL CONSULTING under this Agreement. In no event shall RMG FINANCIAL CONSULTING's
liabilities exceed the aforementioned limits of liability.
Each party's liability for damages provided under this Agreement shall be limited to liability for direct damages and
shall in no event include liability for the other party's or their respective agents or employees remote, punitive,
consequential or indirect damages for lost profits, loss of use, lost opportunity, financing, interest expense, business
interruption or productivity or production loss, regardless of the breach of contract, breach of warranty, tort (including
negligence), strict liability, or otherwise.
8. Delays. RMG FINANCIAL CONSULTING will not be liable to CLIENT for delays in performance under this
Agreement or for the direct or indirect cost resulting from delays that may result from labor strikes, riots, war, acts of
governmental authorities, extraordinary weather conditions, natural catastrophes or other events or occurrences
beyond control of RMG FINANCIAL CONSULTING.
In the event CLIENT suspends or interrupts the services of RMG FINANCIAL CONSULTING for the convenience
of CLIENT, an equitable adjustment in the project's schedule and in compensation to RMG FINANCIAL
CONSULTING will be made.
Page 2 of 3
9. Data, Documents and Records. RMG FINANCIAL CONSULTING shall be entitled to rely upon the accuracy
and completeness of all data furnished by CLIENT to RMG FINANCIAL CONSULTING that is used by RMG
FINANCIAL CONSULTING in the providing of services under this Agreement. RMG FINANCIAL CONSULTING has
the right to retain and use all data furnished to it and all plans, designs, specifications and other work product created
by RMG FINANCIAL CONSULTING in providing services hereunder.
10. Ownership and Use of Documents and Electronic Media Deliverables. All completed reports and other data
or documents provided or prepared by RMG FINANCIAL CONSULTING in accordance with this Agreement are the
property of CLIENT, and may be used by CLIENT. Ownership shall transfer to CLIENT only if RMG FINANCIAL
CONSULTING has been paid in full for services under the terms of this Agreement. CLIENT shall release, defend,
indemnify and hold harmless RMG FINANCIAL CONSULTING from all claims, costs, expenses, damage, or liability
arising out of or resulting from the use or modification of any reports, data, documents, drawings, specifications, or
other work product prepared by RMG FINANCIAL CONSULTING except use by CLIENT on those portions of the
project for which such items were prepared.
- 11 Resolution of Disputes, Attorneys' Fees. The law of theStateof Washington shall govern the interpretation of
and -the -resolution -of -disputes -under -this -Agreement.- If any claim, -at -law -or otherwise,- is -made -by either -party to -this
Agreement, the prevailing party shall be entitled to its costs and reasonable attorneys'.fees.
12. Termination of Agreement. Either RMG FINANCIAL CONSULTING or CLIENT may terminate this Agreement
upon thirty (30) days written notice to the other sent to the addresses listed herein.
In the event CLIENT terminates this agreement, CLIENT specifically agrees to pay RMG FINANCIAL
CONSULTING for all services rendered through the termination date.
13. Integration, Modification and Severability. This Agreement, including all Addenda, shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns. This is the entire agreement between
the parties, there are no other agreements or representations not set forth herein, and this Agreement incorporates
and supersedes all prior negotiations, agreements, and representations. This Agreement may not be modified except
in writing signed by an authorized representative of each party.
If any provision of this Agreement is deemed by law to be void, invalid or inoperative for any reason, or any
phrase or clause within such provision is deemed by law to be void, invalid or inoperative, that phrase, clause or
provision shall be deemed modified to the extent necessary to make it valid and operative, or, if it cannot be so
modified, then such phrase, clause or provision shall be deemed severed from this Agreement with the remaining
phrases, clauses and provisions continuing in full force and effect as if the Agreement had been signed with the void,
invalid or inoperative portions so modified or eliminated. In addition, a phrase, clause or provision shall be substituted
which is consistent with the intent of this Agreement and the severed phrase, clause or provision.
14. Incorporated Documents. The following exhibits and attachments are incorporated in this agreement as if fully
set forth herein: _[ ADD REFERENCE TO EXHIBITA- Proposal Letter for consulting services ]
15. Notices. All notices, requests, demands, and other communications hereunder shall be deemed given only if in
writing signed by an authorized representative of the sender and delivered by facsimile (with a hard copy mailed), or,
when sent by a courier or express service guaranteeing overnight delivery to the receiving party.
Notices to RMG FINANCIAL CONSULTING shall be Notices to CLIENT shall be delivered to:
delivered to:
RMG FINANCIAL CONSULTING, INC.
813 E. Ballard
Colbert, Washington 99005
ATTN: Reid Grossmann, President
19. Headings, Assignment and Waiver. The headings in this Agreement are inserted for convenience only and
shall not constitute apart hereof. Neither party to this Agreement shall assign its duties and obligations hereunder
Page 3 of 3
without the prior written consent of the other party. A waiver by any party of any provision or a breach of this
Agreement must be provided in writing and shall not be construed as a waiver of any other provision or any
succeeding breach of the same or any other provisions herein.
20. Execution of Agreement. The parties agree that the language in this Agreement pertaining to
Indemnification, Limitations of Liability and Insurance are clear and unambiguous and were mutually negotiated by
the parties.
RMG FINANCIAL CONSULTING, INC.
Title: President
Date:
By
Title:
Date:
Page 4 of 3
Monday, April 21, 2008
Mr. [Name]
The City of Vernon
4305 Santa Fe, Ave
Vernon, CA 90058
(Via Email)
Subject: Proposal for Counterparty Credit Analysis for City of Vernon
Dear [Name]:
I appreciate your consideration of using RMG Financial Consulting, Inc. to provide
continued credit and risk management consulting support to City of Vernon.
Proposed Scope of Work:
Per our discussions it appears that City of Vernon may require RMG Financial to provide
consulting support to include the following:
Counterparty credit anal
RMG Financial will perform a basic credit review of specific trading counterparties
as per general standards in the energy trading industry. In performing this financial
and industry research RMG Financial will obtain and review company financial
statements and other information available in the public domain. In the event that
such information is not available publicly RMG Financial will contact the
counterparties directly to obtain information on behalf of City of Vernon. In the
event that a counterparty;does not release its financial statements but does provide
guarantees from a parent or affiliate company, RMG Financial will perform a credit
analysis of the proposed guarantor.
RMG Financial appreciates the opportunity to provide you with an analysis of your
trading counterparties. However, your company's credit policies, and the ultimate
use of any information provided to City of Vernon by RMG Financial is your own
and by accepting consulting products and services from RMG Financial you agree to
indemnify and hold RMG Financial harmless for any application you make in the
course of your business of any and all materials provided to you by RMG Financial.
L
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfmancial.com (509) 468-3217 (Fax)
RMG Financial does not warranty the creditworthiness or likelihood of default of any
company. In no event will RMG Financial be expected to provide,a specific opinion
as to the overall creditworthiness of a counterparty, either in fact or implied. A copy
of each credit review requested and performed will be provided to City of Vernon and
a copy of each review and any other information obtained during the course of our
analysis will be retained as RMG Financial files.
Rates and Initial Cost Estimates:
Our --billing rates- are --approximately--one=half -of- what is -normally -experienced from -
Deloitte & Touch and some of our other major competitors. Our current billing rates are
as follows:
President ............................... $250 per hour
Project Manager .........................$200 per hour
Senior Analyst ......................... $175 per hour
Analyst...................................$150 per hour
Administrative Support ............... $100 per hour
RMG Financial retains the right to change our billing rates given 60 days notice to our
clients, but we would agree, for this engagement, to maintain the rates noted above
through the end of December 2008. Non -labor expenses for this engagement are not
expected to exceed 10% to 15% of billed hours and would be made up, in large part, of
the cost of travel and lodging. We will bill all expenses related to this engagement to
City of Vernon at their actual cost, without markup. All invoices from RMG Financial
are to be payable upon receipt.
RMG Financial provides credit analysis of specific companies to the industry at large for
a set price per company review. In the event that we have at least five clients who are
willing to purchase a review on a specified company RMG Financial will bill City of
Vernon USD$350.00 for each of these reviews as requested and delivered. A review of a
company that is not expected to be purchases by at least four (4) clients is considered to
be a special request and will be billed on a time and expense basis at the rates noted
above.
Upon your request RMG Financial will also provide copies of any annual reports, 10-K's,
10-Q's and other information that may have been obtained and reviewed in the course of
preparing our analysis. If you should request copies of supporting documentation RMG
Financial will also bill City of Vernon for clerical support and out of pocket expenses to
cover the costs of making copies and for postage. Clerical support, if utilized, will be
2
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfmancial.com (509) 468-3217 (Fax)
billed at $100 per hour, and any out-of-pocket expenses incurred in conjunction with this
engagement will be billed to City of Vernon at their cost to RMG Financial.
Given your current counterparty list and our current requests for counterparty reviews for
2008 from our other clients I would expect that the overall costs of providing you with
counterparty reviews for 2008 would be as described in the table below. These amounts
are estimates given that City of Vernon may wish to add or remove counterparties
to/from its list of approved trading partners during the year or if we are able to find
additional clients for these counterparty reviews prior to their completion.
Counterparty Name Cost Est
1 Arizona Electric Power Cooperative, Inc.
$750
2 Bonneville Power Administration
$350
3 BP Corporation North America Inc.
$350
4 California Department of Water Resources
$550
5 Calpine Energy Services
$750
6 Citigroup Energy, Inc.
$350
7 City of Anaheim
$750
8 City of Azusa
$750
9 City of Banning
$750
10 City of Pasadena
$750
11 City of Riverside
$750
12 Conoco -Phillips Company
$550
13 Constellation Energy Commodities Group
$350
14 Coral Power LLC
$350
15 JP Morgan (as purchaser of Bear Energy)
$350
16 Morgan Stanley
$350
17 NRG Power Marketing Inc.
$750
18 Pacific Gas and Electric Co.
$550
19 PacifiCorp
$350
20 Portland General Electric Company
$350
21 Powerex
$350
22 Sacramento Municipal Utility District
$550
23 Salt River Project
$750
24 San Diego Gas & Electric
$550
25 Sempra Energy Trading Company
$350
26 Southern California Edison
$550
27 Transalta Energy Marketing Inc.
$350
28 Western Area Power Administration
$550
29 Williams Power Company, Inc.
$550
Total Cost Estimate
$15,350
3
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfmancial.com (509) 468-3217 (Fax)
If the City of Vernon is a licensed user of the RMG Financial credit scoring model and is
current in its annual maintenance fees for the scoring model RMG Financial will be
willing to provide scoring model runs at no additional charge for each credit report
purchased assuming that the company reviewed can be scored by the model as of the date
of the review and we have run the scoring model as a part of our process when
performing the review.
RMG Financial would be happy to provide additional consulting services incremental to
those presented above. The scope of this proposal may be amended upon the mutual
written consent of RMG Financial and City of Vernon.
We appreciate your continued consideration to use RMG Financial Consulting, Inc. to
provide credit and risk consulting support to City of Vernon and look forward to working
with you. If you should have any questions, please contact me directly at 509-468-2956.
Best regards,
-P-"Ejb 620_S.5-uAwO
Reid Grossmann
President
Having read this proposal, I agree to the
description, scope of services and other
terms and conditions as described above.
Date:
Name:
Title:
Signature:
4
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfmancial.com (509) 468-3217 (Fax)
CITY CLERK'S OFFICE
INTEROFFICE MEMORANDUM
DATE: June 2, 2008
TO: Donal O'Callaghan, Director of Light & Power
FROM: Nelly Giron, City Clerk
-------RE: Resolution No. 9623 - A Resolution of the City Council
--- --o fthe--Ci ty o-f -Vernon App
roving and -Authorizing--the --
Execution of a Proposal for Credit Scoring Model and
Consulting Services Agreement By and Between the City
of Vernon and RMG Financial Consulting, Inc. to
Provide a Credit Scoring Model and Credit and
Counterparty Credit Analysis for the Light & Power
Department
Transmitted herewith is a copy of Resolution No. 9623,
referenced above, which was approved by City Council on May 19,
2008, along with a fully executed copy of the consulting
services agreement and proposal for credit scoring model.
Thank you.
NG:dr
c: Dolores Jaunzemis
Resolution No. 9623
Agreement 08-047
Proposal for Credit Scoring Model Financial
RMGco
Monday, April 21, 2008
Mr. Donal O'Callaghan
The City of Vernon
4305 Santa Fe, Ave
Vernon, CA 90058
(Via Email)
Subject: Credit Scoring Modeling for City of Vernon.
Dear Donal:
RMG Financial Consulting, Inc. ("RMG Financial") is pleased to submit this proposal to
provide a credit scoring model and consulting services relating to the design,
development and implementation of credit scoring for The City of Vernon ("City of
Vernon").
Scope
City of Vernon has requested that RMG Financial provide a credit scoring model to aid in
the evaluation of companies with which City of Vernon conducts energy trading
transactions. RMG Financial has developed a credit scoring model that allows for several
predetermined company -type classifications and is based on both objective financial and
subjective qualitative indicators, as well as a translation of the resulting scores into a
letter rating, estimate of default probability and an estimate of proposed credit limits. It
is our expectation that as deliverables related to this request RMG Financial will provide
City of Vernon with the following:
Credit Scoring Model:
(1) A copy of the RMG Financial credit scoring model in Excel:
(2) A copy of the user's manual relating to the credit scoring model, including
background information, a summary of the various indicators used, definitions of
the terms and methods employed, and other information describing the model and
its workings.
1
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rmgfinancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model Financial
RMGC,
(3) One day (up to eight consecutive hours) of training for your staff on the
installation and use of the model. If this training is to be performed at your
offices, travel and other related expenses are to be born by your company and will
be charged to you at their actual cost to RMG Financial. Time spent in excess of
the first eight hours is to be charged in accordance with the rate structure as noted
in the Rates section below.
Updates to the Model:
On at least an annual basis RMG Financial will re-evaluate the parameters of the model
in relation to the changing environment of energy markets and the companies that
transact in those markets. RMG Financial will provide City of Vernon with
documentation of this re -validation and any updates to this scoring model for an
additional annual fee as defined in the Rates section of this proposal.
Customization and Follow-ups:
RMG Financial can provide additional staff time to assist your company with loading
data on existing counterparties into the model, assessing model output from this data,
customizing the model to your company's existing customer base, and any other follow
up work related to the scoring model on a time and expense basis per the rates schedule
presented below.
Rates and Billing
Scoring Model and User's Manual:
RMG Financial will provide the scoring model, the documentation of the model, and
eight hours of staff time for training and installation of the model (as described above),
for the one-time flat rate of USD$25,000. All invoices are to be payable by City of
Vernon upon receipt.
Annual Maintenance Fee:
RMG Financial will provide City of Vernon with all updates to this scoring model and a
written report or the results of an annual re -validation of the model at a rate of
USD$5,000'per annum, to be billed in the first quarter of each year. The maintenance fee
for calendar year 2008 is to be prepaid upon receipt of the model and users manual and
will be included in our invoicing for the delivery of the model or billed separately per
your request. RMG Financial reserves the right to change the amount of the annual
N
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rmgfmancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model Fiiiancial
maintenance fee and our billings rates upon 60 days notice, but agrees that the
maintenance fee will remain at $5,000 through at least calendar year 2010.
As part of its ongoing maintenance of the scoring model RMG Financial expects to
perform an annual re -validation of all ratios, weighting factors and scoring table data
used for each company type. It is RMG Financial's expectation that this re -validation
process will take place towards the end of each calendar year, but RMG Financial retains
the right to perform the re -validation process at whatever time during each year that it
deems to be appropriate. Additional maintenance items include, but are not limited to;
improvements in the overall functionality of the model and the inclusion' of addition
company types to be scored. RMG Financial will bill maintenance charges in the first
quarter of each year. City of Vernon agrees to pay for the annual maintenance fee when
invoiced, but may decline to continue annual maintenance for future years by providing
at least 60 days written notice to RMG Financial prior to the end of the then current
maintenance year.
RMG Financial will provide support services relating to the loading data on existing
counterparties into the model, assessing model output from this data, customizing the
model to your company's existing customer base, and any other follow up work related to
the scoring model as requested by City of Vernon on a time and expense basis. Hourly
billing rates under this proposal are as follows:
President.. ........................... $250 per hour
Project Manager ........................$200 per hour
Senior Analyst... .................. $175 per hour
Analyst..................................$150 per hour
Administrative Support ............... $100 per hour
Any out-of-pocket expenses incurred in conjunction with services provided will be billed
to City of Vernon at their, cost to RMG Financial. All amounts billed will be due upon
receipt of invoicing. RMG Financial reserves the right to change its billing rates given
sixty days written notice. `
Use and Access by Company Personnel
The signed acceptance of this proposal and payment by City of Vernon for the delivery of
the credit scoring model as outlined in the scoping section of this proposal will constitute
the licensing of the credit scoring model to City of Vernon for use within City of Vernon
and by City of Vernon personnel only. Distribution and/or use by subsidiaries or related
companies or by other third parties without the written consent of RMG Financial
Consulting, Inc. is expressly prohibited.
3
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.nugfinancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model Financial
Confidentiality
The use of the RMG Financial scoring model is intended for licensed users only. Our
scoring model contains intellectual property that is proprietary and confidential, the
disclosure of which would provide a competitive advantage to others. In particular we
view our approaches and insights as proprietary and therefore look to our clients to
protect RMG Financial's interests in our presentations, methodologies and analytical
techniques. City of Vernon agrees to keep confidential all materials relating to the RMG
Financial credit scoring model and that under no circumstances will this material be
shared with any third party without the express written consent of RMG Financial
Consulting, Inc.
Assignment
This agreement and the rights and duties hereunder will not be assigned of transferred by
either party without the prior written approval of the other party, with such consent not to
be unreasonably withheld.
No Warranty
Credit scoring models are tools used to provide a consistent level of evaluation of a
company's trading counterparties. However, credit scoring models are not infallible and
rely on, among other things, the accuracy and completeness of the information input into
the models. Further, credit scores and other model outputs must be reviewed in all cases
for reasonableness, which implies a knowledge by the user of the company being scored,
its financial information, the general environment of the industry within which the
company being scored operates and the workings of the model itself. No credit scoring
model should be expected to be 100% accurate and false positive and negative results
will occur. As such, RMG Financial does not warranty the results of its scoring model,
and by accepting this proposal and taking possession of the model, City of Vernon agrees
to indemnify and hold harmless RMG Financial from any and all uses of this and all
future versions of its credit scoring model. RMG Financial does not warranty the
creditworthiness of any company scored through the use of this model.
4
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rmgfinancial.com Fax: (509) 468-3217
Proposal for Credit Scoring Model Fiiiancial
RMG Consulting
RMG Financial appreciates the opportunity to provide City of Vernon with services in
support of the evaluation of its trading counterparties. Please don't hesitate to call if you
should have any questions or comments.
Be regards,
Reid Grossmann
President
RMG Financial Consulting, Inc.
Having read this proposal, I agree to the description,
scope of services and other terms and conditions as
described above.
Date: May 19, 2008
Name: Leonis C. Malburg
Title: Mayor
Signature: �z��1-�j %��•�G,'
ATTES'
By:
anuela Giron, NY Cl rk
APPROVE S TO FORM:
Jlf/Har,t, City Attorney
5
813 East Ballard, Colbert, Washington 99005 Phone: (509) 468-2956
www.rtngfinancial.com Fax: (509) 468-3217
CONSULTING SERVICES AGREEMENT
RMG FINANCIAL CONSULTING, INC.
Billing Address
813 E. Ballard
Colbert, WA 99005
Phone (509) 468-2956
This Consulting Services Agreement is made between RMG Financial Consulting, Inc., (hereinafter
"RMG FINANCIAL CONSULTING") and City Of Vernon, whose place of business is located at 4305 Santa Fe
Avenue, Vernon, California 90058 (hereinafter "CLIENT") for a Project generally described as
l camp a. 1., b 4 *-,a44; K
_1.__SCOPE_AND_QUALITY OF CONSULTING SERVICES
RMG FINANCIAL CONSULTING will provide the services described in Exhibit A of this Agreement.
RMG FINANCIAL CONSULTING shall render its services in accordance with generally accepted professional
practices. RMG FINANCIAL CONSULTING shall, to the best of its knowledge and belief, comply with applicable
laws, ordinances, codes, rules, regulations, permits and other published requirements in effect on the date this
Agreement is signed.
II. COMPENSATION AND REIMBURSEMENT OF COSTS
Services provided and costs incurred (with the exception of travel, food and lodging expenses) by RMG
FINANCIAL CONSULTING under this Agreement will be compensated according to the provisions in Exhibit A of this
agreement.
RMG FINANCIAL CONSULTING will submit monthly invoices to CLIENT for work completed and reasonable
expenses incurred, to the date of the invoice. All invoices will be itemized to reflect the employees performing the
requested tasks, the billing rate for each employee and the hours worked.
CLIENT shall pay all out-of-pocket travel, food, lodging and incidental expenses incurred by RMG FINANCIAL
CONSULTING that are reasonably associated with the provision of services under this Agreement. These expenses
will be compensated for by the CLIENT at their cost to RMG FINANCIAL CONSULTING. RMG FINANCIAL
CONSULTING will keep receipts for such expenses in compliance with IRS requirements. These receipts will be
available to CLIENT for inspection upon request.
All invoices sent by RMG FINANCIAL CONSULTING to CLIENT shall be paid within ten (10) days of receipt. All
billings that remain unpaid after thirty (30) days shall bear interest until paid at the rate of twelve percent (12%) per
annum. If CLIENT fails to pay any invoice within thirty (30) days and such failure continues ten (10) days after RMG
FINANCIAL CONSULTING gives CLIENT notice of such failure, RMG FINANCIAL CONSULTING shall have the right
to terminate this Agreement immediately without liability to CLIENT. The right to terminate under the terms of this
section shall be in addition to all other legal, equitable, or contractual remedies available to RMG FINANCIAL
CONSULTING.
III. TERMS & CONDITIONS OF CONSULTING SERVICES AGREEMENT
1. Timing of Work. RMG FINANCIAL CONSULTING shall commence work as described in Exhibit A of this
Agreement.
2. Access to Facilities and Property. The CLIENT will make its facilities accessible to RMG FINANCIAL
CONSULTING as required for RMG FINANCIAL CONSULTING's performance of its services and will provide labor
Page 1 of 4
and safety equipment as required by RMG FINANCIAL CONSULTING for such access. CLIENT will be responsible
for all acts of CLIENT's agents or personnel.
3. Relationship of Parties, No Third -Party Beneficiaries. RMG FINANCIAL CONSULTING is an independent
contractor under this Agreement. This Agreement gives no rights or benefits to anyone not named as a party to this
Agreement, and there are no third party beneficiaries to this Agreement.
4. Subcontracts. RMG FINANCIAL CONSULTING may use the services of independent contractors to perform a
portion of its obligations under this Agreement with prior approval by CLIENT.
5. Insurance.
a. Insurance of RMG FINANCIAL CONSULTING. RMG FINANCIAL CONSULTING will maintain throughout
the performance of this Agreement the following types and amounts of insurance:
i. Worker's Compensation and Employer's Liability Insurance as required by applicable state or federal law.
ii._—Professional _Liability _(Errors _and _Omissions,_on_a claims-made_basis)_Insurance_with_limits_ of_$1_,0.00,0.00._
b. Interpretation. Notwithstanding any other provision(s) in this Agreement, nothing shall be construed or
enforced so as to void, negate or adversely affect any otherwise applicable insurance held by any party to this
Agreement.
6. Mutual Indemnification. RMG FINANCIAL CONSULTING agrees to indemnify and hold harmless CLIENT and
its employees from and against any and all loss, cost, damage, or expense of any kind and nature (including, without
limitation, court costs, expenses, and reasonable attorneys' fees) arising out of injury to persons or damage to
property (including, without limitation, property of CLIENT, RMG FINANCIAL CONSULTING, and their respective
employees, agents, licensees, and representatives) in any manner caused by the negligent acts or omissions of RMG
FINANCIAL CONSULTING in the performance of its work pursuant to or in connection with this Agreement to the
extent of RMG FINANCIAL CONSULTING's proportionate negligence, if any.
CLIENT agrees to indemnify and hold harmless RMG FINANCIAL CONSULTING and its employees from and
against any and all loss, cost, damage, or expense of any kind and nature (including without limitation, court costs,
expenses and reasonable attorneys' fees) arising out of injury to person(s) or damage to property (including, without
limitation, property of CLIENT, RMG FINANCIAL CONSULTING, and their respective employees, agents, licensees
and representatives) in any manner caused by the negligent acts or omissions of CLIENT or other(s) with whom
CLIENT contracts ("CLIENT's agents") to perform work pursuant to or in connection with this Agreement, to the extent
of CLIENT's or CLIENT's agents proportionate negligence, if any.
7. Limitation of Liability. RMG FINANCIAL CONSULTING's' liability hereunder shall be limited as follows: (a) for
insured liabilities arising out of RMG FINANCIAL CONSULTING's negligence, to the amount of insurance then
available to fund any settlement, award, or verdict; (b) for uninsured liabilities, to 50 percent (50%) of the fee earned
by RMG FINANCIAL CONSULTING under this Agreement. In no event shall RMG FINANCIAL CONSULTING's
liabilities exceed the aforementioned limits of liability.
Each party's liability for damages provided under this Agreement shall be limited to liability for direct damages and
shall in no event include liability for the other party's or their respective agents or employees remote, punitive,
consequential or indirect damages for lost profits, loss of use, lost opportunity, financing, interest expense, business
interruption or productivity or production loss, regardless of the breach of contract, breach of warranty, tort (including
negligence), strict liability, or otherwise.
8. Delays. RMG FINANCIAL CONSULTING will not be liable to CLIENT for delays in performance under this
Agreement or for the direct or indirect cost resulting from delays that may result from labor strikes, riots, war, acts of
governmental authorities, extraordinary weather conditions, natural catastrophes or other events or occurrences
beyond control of RMG FINANCIAL CONSULTING. .
Page 2 of 4
In the event CLIENT suspends or interrupts the services of RMG FINANCIAL CONSULTING for the convenience
of CLIENT, an equitable adjustment in the projects schedule and in compensation to RMG FINANCIAL
CONSULTING will be made.
9. Data, Documents and Records. RMG FINANCIAL CONSULTING shall be entitled to rely upon the accuracy
and completeness of all data furnished by CLIENT to RMG FINANCIAL CONSULTING that is used by RMG
FINANCIAL CONSULTING in the providing of services under this Agreement. RMG FINANCIAL CONSULTING has
the right to retain and use all data furnished to it and all plans, designs, specifications and other work product created
by RMG FINANCIAL CONSULTING in providing services hereunder.
10. Ownership and Use of Documents and Electronic Media Deliverables. All completed reports and other data
or documents provided or prepared by RMG FINANCIAL CONSULTING in accordance with this Agreement are the
property of CLIENT, and may be used by CLIENT. Ownership shall transfer to CLIENT only if RMG FINANCIAL
CONSULTING has been paid in full for services under the terms of this Agreement. CLIENT shall release, defend,
indemnify and hold harmless RMG FINANCIAL CONSULTING from all claims, costs, expenses, damage, or liability
- arising out -of -or resulting from the use or modification of any reports, data, documents, drawings, specifications, or
other -work -product -prepared. by_RMG_FINANCIAL_CONSULT_ING_except_use_by__ CLIENT_ on__those_portions_of_the
project for which such items were prepared.
11. Resolution of Disputes, Attorneys' Fees. The law of the State of Washington shall govern the interpretation of
and the resolution of disputes under this Agreement. If any claim, at law or otherwise, is made by either party to this
Agreement, the prevailing party shall be entitled to its costs and reasonable attorneys' fees.
12. Termination of Agreement. Either RMG FINANCIAL CONSULTING or CLIENT may terminate this Agreement
upon thirty (30) days written notice to the other sent to the addresses listed herein.
In the event CLIENT terminates this agreement, CLIENT specifically agrees to pay RMG FINANCIAL
CONSULTING for all services rendered through the termination date.
13. Integration, Modification and Severability. This Agreement, including all Addenda, shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns. This is the entire agreement between
the parties, there are no other agreements or representations not set forth herein, and this Agreement incorporates
and supersedes all prior negotiations, agreements, and representations. This Agreement may not be modified except
in writing signed by an authorized representative of each party.
If any provision of this Agreement is deemed by law to be void, invalid or inoperative for any reason, or any
phrase or clause within such provision is deemed by law to be void, invalid or inoperative, that phrase, clause or
provision shall be deemed modified to the extent necessary to make it valid and operative, or, if it cannot be so
modified, then such phrase, clause or provision shall be deemed severed from this Agreement with the remaining
phrases, clauses and provisions continuing in full force and effect as if the Agreement had been signed with the void,
invalid or inoperative portions so modified or eliminated. In addition, a phrase, clause or provision shall be substituted
which is consistent with the intent of this Agreement and the severed phrase, clause or provision.
14. Incorporated Documents. The following exhibits and attachments are incorporated in this agreement as if fully
set forth herein: Exhibit A- Proposal for Counterparty Credit Analysis for the City of Vernon.
15. Notices. All notices, requests, demands, and other communications hereunder shall be deemed given only if in
writing signed by an authorized representative of the sender and delivered by facsimile (with a hard copy mailed), or,
when sent by a courier or express service guaranteeing overnight delivery to the receiving party.
Notices to RMG FINANCIAL CONSULTING shall
be delivered to:
RMG FINANCIAL CONSULTING, INC.
813 E. Ballard
Colbert, Washington 99005
ATTN: Reid Grossmann, President
Notices to CLIENT shall be delivered to:
City f Vernon, Light & Power Department
4305 Santa Fe Avenue
Vernon, California 90058
ATTN: Donal O'Callaghan, Director of Light and Power
Page 3 of 4
19. Headings, Assignment and Waiver. The headings in this Agreement are inserted for convenience only and
shall not constitute a part hereof. Neither party to this Agreement shall assign its duties and obligations hereunder
without the prior written consent of the other party. A waiver by any party of any provision or a breach of this
Agreement must be provided in writing and shall not be construed as a waiver of any other provision or any
succeeding breach of the same or any other provisions herein.
20. Execution of Agreement. The parties agree that the language in this Agreement pertaining to
Indemnification, Limitations of Liability and Insurance are clear and unambiguous and were mutually negotiated by
the parties.
R G =INANCIALCONSULTING, INC.
CITY OF VERNON
- i - -- - - By: Q Z 4b5 S e*41-r✓J By: Leonis C. Malburg
Title: President Title: Mayor
Date: �jJ,�,I�/ Date:.. May 19, 2008
ATTE T:
By:
anuela Giron, ity, erk
ROV1STO FORM:
.
icyAttorneyw
Page 4 of 4
EXHIBIT A
Financial
RMG•o
Monday, April 21, 2008
Mr. Donal O'Callaghan
The City of Vernon
4305 Santa Fe, Ave
Vernon; CA 90058
(Via Email)
Subject: Eroposal-for_Counterparty_Cr_edit Analysis -for City of Vernon
Dear Donal:
I appreciate your consideration of using RMG Financial Consulting, Inc. to provide
continued credit and risk management consulting support to City of Vernon.
Proposed Scope of Work:
Per our discussions it appears that City of Vernon may require RMG Financial to provide
consulting support to include the following:
Counterparty Credit Analysis:
RMG Financial will perform a basic credit review of specific trading counterparties
as per general standards in the energy trading industry. In performing this financial
and industry research RMG Financial will obtain and review company financial
statements and other information available in the public domain. In the event that
such information is not available publicly RMG Financial will contact the
counterparties directly to obtain information on behalf of City of Vernon. In the
event that a counterparty does not release its financial statements but does provide
guarantees from a parent or affiliate company, RMG Financial will perform a credit
analysis of the proposed guarantor.
RMG Financial appreciates the opportunity to provide you with an analysis of your
trading counterparties. However, your company's credit policies, and the ultimate
use of anyinformation provided to City of Vernon by RMG Financial is your own
and by accepting consulting products and services from RMG Financial you agree to
indemnify and hold RMG Financial harmless for any application you make in the
course of your business of any and all materials provided to you by RMG Financial.
RMG Financial does not warranty the creditworthiness or likelihood of default of any
1
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfinancial.com (509) 468-3217 (Fax)
EXHIBIT A
EXHIBIT A
Financial
RMGco
company. In no event will RMG Financial be expected to provide a specific opinion
as to the overall creditworthiness of a counterparty, either in fact or implied. A copy
of each credit review requested and performed will be provided to City of Vernon and
a copy of each review and any other information obtained during the course of our
analysis will be retained as RMG Financial files.
Rates and Initial Cost Estimates:
_ Our billing rates are approximately one-half of what is normally experienced from
Deloitte & Touch and some of our other major competitors. Our current billing rates are
as follows:
President ............................... $250 per hour
Project Manager ........................ $200 per hour
Senior Analyst .......................... $175 per hour
Analyst... ... . .... .....................$150 per hour
Administrative Support ................ $100 per hour
RMG Financial retains the right to change our billing rates given 60 days notice to our
clients, but we would agree, for this engagement, to maintain the rates noted above
through the end of December 2008. Non -labor expenses for this engagement are not
expected to exceed 10% to 15% of billed hours and would be made up, in large part, of
the cost of travel and lodging. We will bill all expenses related to this engagement to
City of Vernon at their actual cost, without markup. All invoices from RMG Financial
are to be payable upon receipt.
RMG Financial provides credit analysis of specific companies to the industry at large for
a set price per company review. In the event that we have at least five clients who are
willing to purchase a review on a specified company RMG Financial will bill City of
Vernon USD$350.00 for each of these reviews as requested and delivered. A review of a
company that is not expected to be purchases by at least four (4) clients is considered to
be a special request and will be billed on a time and expense basis at the rates noted
above.
Upon your request RMG Financial will also provide copies of any annual reports, 10-K's,
10-Q's and other information that may have been obtained and reviewed in the course of
preparing our analysis. If you should request copies of supporting documentation RMG
Financial will also bill City of Vernon for clerical support and out of pocket expenses to
cover the costs of making copies and for postage. Clerical support, if utilized, will be
billed at $100 per hour; and any out-of-pocket expenses incurred in conjunction with this
engagement will be billed to City of Vernon at their cost to RMG Financial.
2
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfinancial.com (509) 468-3217 (Fax)
EXHIBIT A
Financial
RMGCO
Given your current counterparty list and our current requests for counterparty reviews for
2008 from our other clients I would expect that the overall costs of providing you with
counterparty reviews for 2008 would be as described in the table below. These amounts
are estimates given that City of Vernon may wish to add or remove counterparties
to/from its list of approved trading partners during the year or if we are able to find
additional clients for these counterparty reviews
prior to their completion:
Counterparty Name
Cost Est
-- 1-Arizona -Electric Power Cooperative,- Inc.
$750 - --- -- - -- -----
2 Bonneville Power Administration
$350
3 BP Corporation North America Inc.
$350
4 California Department of Water Resources
$550
5 Calpine Energy Services
$750
6 Citigroup Energy, Inc.
$350
7 City of Anaheim
$750
8 City of Azusa
$750
9 City of Banning
$750
10 City of Pasadena
$750
11 City of Riverside
$750
12 Conoco -Phillips Company
$550
13 Constellation Energy Commodities Group
$350
14 Coral Power LLC
$350
15 JP Morgan (as purchaser of Bear Energy)
$350
16 Morgan Stanley
$350
17 NRG Power Marketing Inc.
$750
18 Pacific Gas and Electric Co.
$550
19 PacifiCorp
$350
20 Portland General Electric Company
$350
21 Powerex
$350
22 Sacramento Municipal Utility District
$550
23 Salt River Project
$750
24 San Diego Gas & Electric
$550
25 Sempra Energy Trading Company
$350
26 Southern California Edison
$550
27 Transalta Energy Marketing Inc.
$350
28 Western Area Power Administration
$550
29 Williams Power Company, Inc.
$550
Total Cost Estimate
$15
If the City of Vernon is a licensed user of the RMG
Financial credit scoring model and is
current in its annual maintenance fees for the scoring model RMG Financial will be
willing to provide scoring model runs at no
additional charge for each credit report
3
813 E. Ballard, Colbert, WA 99005
(509) 468-2956 (Phone)
www.nngfinaficial.com
(509) 468-3217 (Fax)
i
EXHIBIT A
Financial
RIMGConsulting
purchased assuming that the company reviewed can be scored by the model as of the date
of the review and we have run the scoring model as a part of our process when
performing the review.
RMG Financial would be happy to provide additional consulting services incremental to
those presented above. The scope of this proposal may be amended upon the mutual
written consent of RMG Financial and City of Vernon.
We appreciate your continued consideration to use RMG Financial Consulting, Inc. to
_provide credit and risk_ consulting_ support to, City of Vernon and look forward to working_
with you. If you should have any questions, please contact me directly at 509-468-2956.
Best regards,
�1D �l�os�M.h^rnl
Reid Grossmann
President
Having read this proposal, I agree to the description,
scope of services and other terms and conditions as
described above.
Date: May, 19, 2008
Name: Leonis C. Malburg_
Title: Mayor
Signature:
ATTES
By:
anuela Giron, City C erk
APPROVE S TO FORM:
J . Ha on, City Attorney
4
813 E. Ballard, Colbert, WA 99005 (509) 468-2956 (Phone)
www.rmgfinancial.com (509) 468-3217 (Fax)
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811
May 19, 2008
RMG Financial Consulting, Inc.
813 E. Ballard
Colbert, WA 99005
Attn: Reid Grossmann, President
Re: Consulting Services Agreement and Proposal for Credit Scoring Model
Submitted herewith are two originals of each of the documents referenced
above for your signature.
Upon the full execution of the documents, please mail one original of
each of the documents to my attention.
Sincerely,
elly Gi n
City Clerk
:ng
c: Resolution No. 9623
enclosures
Excfusivefy Industriaf
EI
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811
May 22, 2008
RMG Financial Consulting, Inc.
Attn: Reid Grossmann, President
813 E. Ballard
Colbert, WA 99005
Re: Consulting Services Agreement
Dear Mr. Grossmann:
In accordance with Section 5 of said agreement, you are to furnish the
City with proof of insurance.
Please submit your insurance documents to Willard Yamaguchi, Risk
Manager, for review and approval. Upon approval of said
documentation, this office will forward to you a fully executed
duplicate original agreement.
If you have any questions, please contact Willard Yamaguchi at
323/583-8811 ext. 175.
e y truly yours,
Nelly Gi o6�-�
n
City Clerk
NG:dr
c: Willard Yamaguchi
Donal O'Callaghan
Resolution No. 9623
Agreement File No. 08-047
E.-,Cclusivefy industfid
3. Relationship of Parties, No Third -Party Beneficiaries. RMG FINANCIAL CONSULTING is an independent
contractor under this Agreement. This Agreement gives no rights or benefits to anyone not named as a party to this
Agreement, and there are no third party beneficiaries to this Agreement.
4. Subcontracts. RMG FINANCIAL CONSULTING may use the services of independent contractors to perform a
portion of its obligations under this Agreement with prior approval by CLIENT.
5. Insurance.
a. Insurance of RMG FINANCIAL CONSULTING. RMG FINANCIAL CONSULTING will maintain throughout
the performance of this Agreement the following types and amounts of insurance:
i. Worker's Compensation and Employer's Liability Insurance as required by applicable state or federal law.
ii. Professional Liability (Errors and Omissions, on a claims -made basis) Insurance with limits of $1,000,000.
b. Interpretation. Notwithstanding any other provision(s) in this Agreement, nothing shall be construed or
- -enforced so as to void, negate or adversely affect any otherwise applicable insurance held by any party to this
Agreement. -- ---- - -- -- - - - - ---- -
6. Mutual Indemnification. RMG FINANCIAL CONSULTING agrees to indemnify and hold harmless CLIENT and
its employees from and against any and all loss, cost, damage, or expense of any kind and nature (including, without
limitation, court costs, expenses, and reasonable attorneys' fees) arising out of injury to persons or damage to
property (including, without limitation, property of CLIENT, RMG FINANCIAL CONSULTING, and their respective
employees, agents, licensees, and representatives) in any manner caused by the negligent acts or omissions of RMG
FINANCIAL CONSULTING in the performance of its work pursuant to or in connection with this Agreement to the
extent of RMG FINANCIAL CONSULTING's proportionate negligence, if any.
CLIENT agrees to indemnify and hold harmless RMG FINANCIAL CONSULTING and its employees from and
against any and all loss, cost, damage, or expense of any kind and nature (including without limitation, court costs,
expenses and reasonable attorneys' fees) arising out of injury to person(s) or damage to property (including, without
limitation, property of CLIENT, RMG FINANCIAL CONSULTING, and their respective employees, agents, licensees
and representatives) in any manner caused by the negligent acts or omissions of CLIENT or other(s) with whom
CLIENT contracts ("CLIENT's agents") to perform work pursuant to or in connection with this Agreement, to the extent
of CLIENT's or CLIENT's agents proportionate negligence, if any.
7. Limitation of Liability. RMG FINANCIAL CONSULTING's' liability hereunder shall be limited as follows: (a) for
insured liabilities arising out of RMG FINANCIAL CONSULTING's negligence, to the amount of insurance then
available to fund any settlement, award, or verdict; (b) for uninsured liabilities, to 50 percent (50%) of the fee earned
by RMG FINANCIAL CONSULTING under this Agreement. In no event shall RMG FINANCIAL CONSULTING's
liabilities exceed the aforementioned limits of liability.
Each party's liability for damages provided under this Agreement shall be limited to liability for direct damages and
shall in no event include liability for the other party's or their respective agents or employees remote, punitive,
consequential or indirect damages for lost profits, loss of use, lost opportunity, financing, interest expense, business
interruption or productivity or production loss, regardless of the breach of contract, breach of warranty, tort (including
negligence), strict liability, or otherwise.
8. Delays. RMG FINANCIAL CONSULTING will not be liable to CLIENT for delays in performance under this
Agreement or for the direct or indirect cost resulting from delays that may result from labor strikes, riots, war, acts of
governmental authorities, extraordinary weather conditions, natural catastrophes or other events or occurrences
beyond control of RMG FINANCIAL CONSULTING.
In the event CLIENT suspends or interrupts the services of RMG FINANCIAL CONSULTING for the convenience
of CLIENT, an equitable adjustment in the projects schedule and in compensation to RMG FINANCIAL
CONSULTING will be made.
Page 2 of 3
RISK MANAGEMENT OFFICE
INTER -DEPARTMENT MEMORANDUM
DATE: June 4th, 2008
Y'
TO: Nelly Giron, City Clerk
FROM: Willard G. Yamaguchi, Risk Manage �jt
RE: RMG Financial Consulting, Inc.
Please be advised that the above referenced has provided
acceptable insurance.
Attached for your retention are insurance certificates and
related policies, declarations and/or endorsements for the
above -referenced insured that were issued by:
Continental Casualty Company (Professional)
This concerns insurance coverage for:
Resolution No. 9623
Agreement File No. 08-047
WY/ab
Jun 04 2008 8:31AM
J'UN-04-2008 11:42
HP LASERJET FAX
AFFINITY INS SPPUICFS
5094GB3217 p.2
RML71 R11:17 S?';)7 P M1 /nl
CERTIFICATE OF INSURANCE
Date 614108
ProdueBr; Affmity Insurance Services, Inc.
MS CERTIFICATE 19 ISSUED A9 A MATTLIR OF INFORMATION ONLY
ISO East County Line Rd.
Hatboro PA 19040-1218
ANO CONFERS NO OUGHTS UPON THE CERTIFICATE HOLDER. THIS
CERTIFICATE DOES NOT ANENA, MEND OR ALTER THE COVERAGE
AFFORDED BY THE POLICIES BELOW.
COMPANIES AFFORDING COVERAGE
Imo: RMG Flnanclal Consulting, Inc
813 E. Ballard Road
Colbert, WA 99005-9116
COMPAW
A Continental Casualty Company
COMPANY
B
COMPANY
C
COMPANY
THIS is TO Cwi TIFY THAT THE POLICIES OF INSURANCE LISTED BELOW NAVE BEEN ISSUED TO THE NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NUTWR}ISrANDNG
ANY RECNIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTMUR DOCUMENT WrrH RESPECT TO WHICH THIS CERTIFICATE MAY BE LUUEID OR WAY PERTAIN, THE
INSURANCE AFROROED BY THE POLICIES DESCRIBED HEREIN IB SLJ%JECT To ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN aaY HAVE
ARRJ oP,'L inns ■v MAI- r, i,uc
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TYPE OF INSURANCE
POLICY NUMBER
POLICY
EFFECTIVE DATE
(MMDDirv)
POLICY
EXPIRATION
DATE
0
LIMITA
GENERAL LIAPAITY
COMMERCIAL GENERAI,LIABILITY
CAIMSMADE ❑ OCCUR
OWNER'S COW.PROT.
GENERAL AOISREGIITE
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EXIC101VEIOFFICERS ARE: 2ACL
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Professional Liability / Errors and
Omission Inanswe
Polley Number
APL 168180024
ER, Date
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Exp. Date
1-1-2009
Li
$1,
't Dedoctibie
0.00042.000.D00. S5,0DD
PR OR AC jj DATE: 1.1-2003
CERTIFICATE BOLDER
CANCELLATION
Evidence or
tE111rBifce:
City of Vernon
4305 Santa Fe Avenue
Vernon CA 90058
SHOULD ANY OF THE ABOVE V"CRIBEC
e)(PIRATION OAT! THRREOP, THE ISSUING C
WRITTEN NOTICE TO THE CEIITMICATE HOL
MAIL SUCH NOTICE $HALL IMPOSE NO Or
THE COWANY, ITS AQENTiOR REPRESENT
POLICIES sE CANCILLCC BiFORE THE
IMPAW HALL eNDEAVOR TO MAIL =811
eR HUED TO THR LEFT, BUT FAILURE TO
T1pN ON LIABILITY OF ANY KIND UPOM
TNEa.
AUTHORS REPRESENTATING
AT
TOTAL P.01
May 21 2008 10:29AM HP LRSERJET FAX 5094683217 p.2
DECLARATIONS
ACCOUNTANTS PROFESSIONAL LIABILITY POLICY
PRODUCER BRANCH PREFIX POLICY NUMBER INSURANCE IS PROVIDED BY
00316'f3 9�D QPL 18$980024 CONTINENTAL CASUALTY COMPANY
CNA PLAZA, CHICAGO, IL 60665
A STOCK INSURANCE COMPANY
REFERRED TO AS WE, US, OR OUR.
1, Named Insured and Mailing Address
x * * NOTICE * x ■ *
RMG Financial Consulting, Inc. THIS IS A CLAIMS -MADE POLICY AND COVERS
813 E Ballard Rd ONLY CLAIMS FIRST MADE AGAINST THE INSURED
Colbert, WA 99005-9116 DURING THE POLICY PERIOD. PLEASE READ
THIS POLICY CAREFULLY AND DISCUSS THE
COVERAGE WITH YOUR INSURANCE AGENT.
2, POLICY PERIOD: FROM: 1/01/08 TO: 1/01/09 at 12:01 A.M. standard time at your address shown above.
3. PRIOR ACTS DATE: 1/01/03
4. $5, 000 PROFESSIONAL LIABILITY PER CLAIM/AGGREGATE DEDUCTIBLE
5. LIMITS OF LIABILITY: (INCLUDES CLAIM EXPENSES UNLESS AMENDED BY ENDORSEMENT)
41,000,D00 PER CLAIM
$2,000,000 AGGREGATE
6. FOR NON -RENEWAL : 30 days notice will be given you in accordance with policy conditions.
7. PRINTED ENDORSEMENTS ATTACHED AT POLICY ISSUANCE INCLUDE:
G-127136-A(1/03) Policy
G-127137-A(6/97) Declarations Page
G-127157-A(6/97) Nuclear Energy & Pollution Excl
G-127164-A46(6/97) Amend Termination Provisions - WA
G-127165-A46(5/00) Amendatory Endorsement - WA
G-127160-A(3/D3) Sole Own/Disabil Ext Clms Rptg Per
G-141584-A(6/03) Policyholder Notice
G-127152-A(6/97) Claim Expenses Outside Limits
G-127137-A (Ed.5/00)
Jun 03 2008 8:52AM HP LASERJET FAX 5094683217 p.2
DECLARATIONS
ACCOUNTANTS PROFESSIONAL LIABILITY POLICY
PRODUCER BRANCH PREFIX
003613 970 APL
1. Named Insured and Mailing Address
RMG Financial Consulting, Inc.
813 E Ballard Rd
Colbert, WA 99005-9116
2. POLICY PERIOD
3. PRIOR ACTS DATE:
F2
$5,000
5. LIMITS OF LIABILITY:
POLICY NUMBER
1681180024
FROM: 1/01/08 TO: 1/01/09
1/01/03
INSURANCE IS PROVIDED BY
CONTINENTAL CASUALTY COMPANY
CNA PLAZA, CHICAGO, IL 60685
A STOCK INSURANCE COMPANY
REFERRED TO AS WE, US, OR OUR.
" * * NOTICE " * * *
THIS IS A CLAI MS -MADE POLICY AND COVERS
ONLY CLAIMS FIRST MADE AGAINST THE INSUREI
DURING THE POLICY PERIOD. PLEASE READ
THIS POLICY CAREFULLY AND DISCUSS THE
COVERAGE WITH YOUR INSURANCE AGENT.
at 12.01 A.M. Standard time at your address shown above.
PROFESSIONAL LIABILITY PER CLAIM/AGGREGATE DEDUCTIBLE
(INCLUDES CLAIM EXPENSES UNLESS AMENDED BY ENDORSEMENT)
$1, 000 , 000 PER CLAIM
$2,000,000 AGGREGATE
6. FOR NON -RENEWAL: 30 days notice will be given you in accordance with policy conditions,
7. PRINTED ENDORSEMENTS ATTACHED AT POLICY ISSUANCE INCLUDE:
G-127136-A(1/03) Policy
G-127137-A(6/97) Declarations Page
G-127157-A(6/97) Nuclear Energy & Pollution Excl
G-127164-A46(6/97) Amend Termination Provisions - WA
G-127165-A46(5/00) Amendatory Endorsement - WA
G-127160-A(3/03) Sole Own/Disabil Ext Clms Rptg Per
G-141584-A(6/03) Policyholder Notice
G-127152-A(6/97) Claim Expenses Outside Limits
G-127137-A (Ed.5/00)
Best's Rating Center - Company Information for Continental Casualty Company Page 1 of 2
t�View Ratings: Financial Strength Issuer Credit Securities Advanced Search Other web Centel
Continental Casualty Company
(a member of CNA Insurance Companies) This rating is assigned to p'
A.M.Best #: 02128 NAIC #: 20443 FEIN #: 362114646 companies that have, in our
Stock Ticker: New York Stock Exchange NYSE CNA opinion, an excellent in
to
Address; 333 South Wabash Avenue Phone: 312-822-5000 meet their ongoing obligationsto policyholders. --
Chicago, IL 60604 Fax: 312-822-6419
Web: www.cna.com
Beat's Ratings
Financial Strength Ratings viewDefinitions
Rating: A (Excellent)
Affiliation Code: g (Group)
Financial Size Category: XV ($2 Billion or greater)
Outlook: Stable
Action: Affirmed
Effective Date: December 18, 2007
* Denotes Under Review Best's Ratings
Issuer Credit Ratings View Definitio
Long-Term:a
Outlook: Stable
Action: Affirmed
Date: December 18, 2007
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Visit our Newsroom for the latest news and press releases for this company and its A.M. Best Grour
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^7 7( Best's Financial Strength Rating and rationale along with comprehensive analytical comment
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a.. Report Revision Date: 01/09/2008 (represents the latest significant change).
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Data Status: Contains data compiled as of 5/29/2008 (Quality Cross Checked),
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http://www3.ambest.comlratingsIFullProfile.asp?B1=0&AMBNum=2128&A1tSrc=l &A1tN... 6/3/2008