Resolution No. 97051
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RESOLUTION NO. 9705
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON AUTHORIZING AND APPROVING THE ISSUANCE OF
NOT TO EXCEED $100,000,000 AGGREGATE PRINCIPAL
AMOUNT OF ELECTRIC SYSTEM REVENUE BONDS; APPROVING
THE INDENTURE OF TRUST AND SUPPLEMENTAL INDENTURE
OF TRUST PURSUANT TO WHICH SUCH BONDS ARE TO BE
ISSUED; APPROVING A CONTRACT OF PURCHASE AND A
CONTINUING DISCLOSURE AGREEMENT; APPROVING A FORM
OF SWAP TERMINATION AGREEMENT; AUTHORIZING AND
APPROVING CERTAIN DOCUMENTS IN CONNECTION WITH THE
ISSUANCE, SECURING AND SALE OF SUCH BONDS; AND
AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO
WHEREAS, the City of Vernon (the "City") is a municipal
corporation and a chartered city of the State of California organized
and existing under its Charter and the Constitution of the State of
California; and
WHEREAS, the City is authorized pursuant to the provisions
of its Charter and the City of Vernon Municipal Facilities Revenue
Bond Law, constituting Article XI of the City Code of the City of
Vernon to issue bonds, notes and other obligations payable from the
INet Revenues of the Electric System (capitalized terms used herein and
Inot otherwise defined shall have the meanings given such terms in the
IIndenture mentioned below) to finance the costs of any land,
improvements, facilities, equipment and other property of any nature
whatsoever which are used in the Electric System and to refund such
(bonds, notes and other obligations; and
WHEREAS, pursuant to an Indenture of Trust (such Indenture
Iof Trust, in the form presented to this meeting with such changes,
insertions and deletions as are made pursuant to this Resolution,
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September 1, 2008, and to be entered into by the City and The Bank of
New York Mellon Trust Company, N.A., as trustee (the "Trustee"), the
City has provided the terms and conditions for the issuance and
securing of its Electric System Revenue Bonds to finance the costs of
any land, improvements, facilities, equipment and other property of
any nature whatsoever which are used in the Electric System or to
refund any outstanding bond or bonds; and
WHEREAS, the City desires to provide for the issuance of its
Electric System Revenue Bonds, 2008 Taxable Series A (the "2008
Revenue Bonds") to, among other things, finance the costs of certain
capital improvements to the City's Electric System and reimbursing the
Electric System for the payment of such costs, to fund a deposit to
the Debt Service Reserve Fund, and to pay costs of issuance of the
2008 Revenue Bonds; and
WHEREAS, the 2008 Revenue Bonds are to be issued under and
pursuant to the Master Indenture as supplemented by the First
Supplemental Indenture of Trust, to be dated as of September 1, 2008,
and to be entered into by the City and the Trustee (such First
Supplemental Indenture of Trust, in the form presented to this meeting
with such changes, insertions and deletions as are made pursuant to
this Resolution being referred to herein as the "First Supplemental
lIndenture"); and
WHEREAS, the 2008 Revenue Bonds are to be payable from and
secured by a pledge and assignment of the Trust Estate on a parity with
lall other Bonds issued and Outstanding under the Indenture; and
WHEREAS, RBC Capital Markets Corporation, as underwriter (the
"Underwriter"), has submitted a proposal to purchase the 2008 Revenue
Bonds in the form of a Contract of Purchase (such Contract of Purchase,
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in the form presented to this meeting with such changes, insertions and
deletions as are made pursuant to this Resolution, being referred to
herein as the "Purchase Contract"); and
WHEREAS, Rule 15c2-12 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule 15c2-12"), requires that, in
order to be able to purchase or sell the 2008 Revenue Bonds, the
Underwriter must have reasonably determined that an obligated person
has undertaken in a written agreement or contract for the benefit of
the owners of the 2008 Revenue Bonds to provide disclosure of certain
financial information and certain material events on an ongoing basis;
and
WHEREAS, in order to cause such requirement to be satisfied,
the City desires to enter into a Continuing Disclosure Agreement with
the Trustee (such Continuing Disclosure Agreement, in the form
presented to this meeting, with such changes, insertions and deletions
as are made pursuant to this Resolution, being referred to herein as
the "Continuing Disclosure Agreement"); and
WHEREAS, pursuant to an Indenture of Trust, dated as of
December 1, 2004 between the City and The Bank of New York Trust
Company, N.A., as trustee (the "Prior Trustee"), as amended by the
First Supplemental Indenture of Trust, the Second Supplemental
Indenture of Trust, the Third Supplemental Indenture of Trust and the
Fourth Supplemental Indenture of Trust, each dated as of December 1,
2004, and each between the City and the Prior Trustee, the City
previously issued its Electric System Revenue Bonds, 2004 Series A,
2004 Series B, 2004 Series C and 2004 Taxable Series D (collectively,
the "2004 Revenue Bonds"); and
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WHEREAS, the City and Morgan Stanley Capital Services Inc.
("Morgan Stanley") have entered into certain interest rate swap
transactions relating to the City's 2004 Revenue Bonds (the
"Transactions"); and
WHEREAS, the City has determined to terminate the
Transactions and in connection therewith may enter into a Termination
Agreement with Morgan Stanley (such Termination Agreement, in the form
presented to this meeting with such changes, insertions and deletions
as are made pursuant to this Resolution, being referred to herein as
the "Termination Agreement") and to make any payments due from the City
in connection with the Termination Agreement; and
WHEREAS, there have been prepared and submitted to this
meeting drafts of the following:
(1) the Master Indenture;
(2) the First Supplemental Indenture;
(3) the Continuing Disclosure Agreement;
(4) the Purchase Contract; and
(5) the Termination Agreement; and
WHEREAS, in connection with the Conversion of the Series B
Bonds and the after having reviewed and considered the proposal of the
Underwriter to purchase the 2008 Revenue Bonds on the terms and
conditions contained in the Purchase Contract, this City Council now
desires to authorize the issuance and sale of the 2008 Revenue Bonds,
including the execution of such documents and the performance of such
acts as may be necessary or desirable to effect such issuance and sale
and the other actions contemplated by this Resolution.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
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SECTION 1: The City Council of the City of Vernon hereby
(finds and determines that the recitals contained hereinabove are true
land correct.
SECTION 2: The Master Indenture, in substantially the form
presented concurrently herewith as Exhibit A and made a part hereof as
though set forth in full herein, be and the same is hereby approved.
Each of the Mayor, the Mayor Pro Tem, the City Administrator, the
Treasurer, the City Clerk and the City Attorney of the City (each an
"Authorized Officer"), acting singly, is hereby authorized to execute
and deliver the Master Indenture, in the name of and on behalf of the
City, in substantially the form presented to this meeting with such
changes, insertions and deletions as may be approved by the Authorized
(Officer executing the Master Indenture, said execution being
conclusive evidence of such approval, and the City Clerk of the City
is hereby authorized to attest thereto.
SECTION 3: The First Supplemental Indenture, in
substantially the form presented concurrently herewith as Exhibit B
and made a part hereof as though set forth in full herein, be and the
same is hereby approved. Each of the Authorized Officers, acting
singly, is hereby authorized to execute and deliver the First
Supplemental Indenture, in the name of and on behalf of the City, in
substantially the form presented to this meeting with such changes,
insertions and deletions as may be approved by the Authorized Officer
executing the First Supplemental Indenture, said execution being
conclusive evidence of such approval, and the City Clerk is hereby
authorized to attest thereto.
SECTION 4: The issuance of the 2008 Revenue Bonds on the
terms and conditions set forth in the First Supplemental Indenture,
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and subject to the limitations specified in this Resolution, is hereby
authorized and approved. The aggregate principal amount of the 2008
Revenue Bonds shall not exceed One Hundred Million Dollars. The 2008
Revenue Bonds will be dated as provided in, will bear interest at the
rates provided, will mature on the date or dates provided in, will be
issued in the form provided in, will have the Sinking Fund
Installments specified in, will be subject to redemption as provided
in, and will have such other terms as shall be provided in, the First
Supplemental Indenture as the same is completed as provided in this
Resolution, provided that no 2008 Revenue Bond shall bear a stated
rate of,interest in excess of nine percent per annum.
SECTION 5: The Authorized Officer executing the First
Supplemental Indenture is hereby authorized, subject to the
limitations set forth in Section 3 hereof, to determine the following:
(i) the maturity date or dates of the 2008 Revenue Bonds (but no 2008
Revenue Bond shall mature later than August 1, 2048); (ii) the
principal amount of the 2008 Revenue Bonds maturing on each maturity
date; (iii) the interest rate for the 2008 Revenue Bonds maturing on
each maturity date, (iv) the Sinking Fund Installments, if any, for
the 2008 Revenue Bonds; and (v) the redemption provisions for the 2008
Revenue Bonds.
SECTION 6: The proceeds of the sale of the 2008 Revenue
IBonds shall be applied as set forth in the First Supplemental
lIndenture.
SECTION 7: The Purchase Contract, in substantially the form
presented concurrently herewith as Exhibit C and made a part hereof as
though set forth in full herein, be and the same is hereby approved.
Each of the Authorized Officers, acting singly, is hereby authorized
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to execute and deliver the Purchase Contract, in the name of and on
behalf of the City, in substantially the form presented to this
meeting with such changes, insertions and deletions as may be approved
by the Authorized Officer executing said Purchase Contract and as are
consistent with the determinations of the terms of the 2008 Revenue
Bonds made pursuant to this Resolution, said execution being
conclusive evidence of such approval.
Each of the Authorized Officers, acting singly, is hereby
authorized to determine the purchase price to be paid for the 2008
Revenue Bonds under the Purchase Contract; provided, however, that the
aggregate Underwriter's discount (not including original issue
discount which shall not exceed five percent of the aggregate
principal amount of the 2008 Revenue Bonds) for the 2008 Revenue Bonds
shall be not more than two percent of the aggregate principal amount
of the 2008 Revenue Bonds. The sale of the 2008 Revenue Bonds to the
Underwriter on the terms and conditions contained in the Purchase
Contract, as the same may be completed in accordance with the
provisions of this Resolution, with such changes, insertions and
deletions as are authorized hereby, is hereby approved and authorized.
SECTION 8: The termination of the Transactions is hereby
Iauthorized and approved. The Termination Agreement, in substantially
Ithe form presented concurrently herewith as Exhibit D and made a part
Ihereof as though set forth in full herein, be and the same is hereby
approved. Each of the Authorized Officers, acting singly, is hereby
authorized to execute the Termination Agreement in the name of, and on
Ibehalf of, the City, and deliver the Termination Agreement to Morgan
Stanley in the form presented to the meeting with such changes,
insertions and deletions as may be approved by the Authorized City
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Representative executing the same, said execution being conclusive
evidence of such approval.
SECTION 9: Each of the Authorized Officers, acting singly,
is hereby authorized to cause the Vernon Natural Gas Financing
Authority ("VNGFA") to terminate the interest rate swap transaction
between VNGFA and Citigroup Financial Products Inc. relating to
VNGFA's Variable Rate Revenue Bonds (Vernon Gas Project) 2006 Series B
ind 2006 Series C and to apply amounts in the Light and Power
)epartment Fund to pay all costs, including termination payments
)ayable by VNGFA, in connection with such termination.
SECTION 10: The Continuing Disclosure Agreement, in
substantially the form presented concurrently herewith as Exhibit E
presented to this meeting and made a part hereof as though set forth
in full herein, be and the same is hereby approved. Each of the
Authorized Officers, acting singly, is hereby authorized to execute
and deliver the Continuing Disclosure Agreement, in the name of and on
behalf of the City, in substantially the form presented to this
meeting with such changes, insertions and deletions as may be approved
by the Authorized Officer executing the same, said execution being
conclusive evidence of such approval, and the City Clerk is hereby
lauthorized to attest thereto.
SECTION 11: The Mayor, the Mayor Pro Tem, the City
Administrator, the Treasurer, the City Clerk and the City Attorney of
the City, the Director of Light and Power and any other proper
official, officer or employee of the City, acting singly, be and each
of them hereby is authorized to execute and deliver any and all
documents and instruments and to do and cause to be done any and all
acts and things necessary or convenient in carrying out the actions
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1 authorized by this resolution and the transactions contemplated by the
2 documents and instruments approved or authorized by this Resolution,
3 including, without limitation, making any determinations or submission
4 of any documents or reports which are required by any rule or
5 regulation of any governmental entity in connection with the issuance
6 and sale of the 2008 Revenue Bonds and the authorization, execution,
7 delivery and performance by the City of its obligations under the
8 documents and instruments approved or authorized by this Resolution.
9 SECTION 12: All actions heretofore taken by any committee of
10 the City Council, or any official, officer, employee, representative
11 or agent of the City, in connection with the issuance and sale of the
12 2008 Revenue Bonds or the authorization, execution, delivery, or
13 performance of the City's obligations under the documents and
14 instruments approved or authorized by this Resolution and the other
15 actions contemplated by this Resolution are hereby ratified, approved
16 and confirmed.
17 SECTION 13: The City Clerk of the City of Vernon shall
18 certify to the passage of this resolution, and thereupon and
19 thereafter the same shall be in full force and effect.
20 APPROVED AND ADOPTED this 8th day of September, 2008.
21
22 Loonis . Malburg
Name:
23
Title: Mayor / 41aj^r�-Tom
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25 ATTEST:
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27 M UELA GIRON, Ci y Clerk
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9 _
1 STATE OF CALIFORNIA )
2 ) ss
COUNTY OF LOS ANGELES )
3
4 I, MANUELA GIRON, City Clerk of the City of Vernon, do hereby
5 certify that the foregoing Resolution, being Resolution No. 9705, was
6 duly adopted by the City Council of the City of Vernon at a regular
7 meeting of the City Council duly held on Monday, September 8, 2008, and
8 thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of
9 Vernon.
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12 )j��MANUELA G ON, City Clerk
13 (SEAL)
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INDEX OF EXHIBITS TO RESOLUTION NO.9705
(PRESENTED CONCURRENTLY WITH RESOLUTION AND A PART THEREOF)
EXHIBIT A FORM MASTER INDENTURE
EXHIBIT B FORM FIRST SUPPLEMENTAL INDENTURE
EXHIBIT C FORM PURCHASE CONTRACT
EXHIBIT D FORM TERMINATION AGREEMENT
EXHIBIT E FORM CONTINUING DISCLOSURE AGREEMENT
FORM MASTER INDENTURE EXHIBIT A
OH&S DRAFT 8/28/08
INDENTURE OF TRUST
by and between
CITY OF VERNON
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
Dated as of September 1, 2008
Relating to
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
OHS West:260486430.4
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND AUTHORITY............................................................... 2
Section1.01
Definitions............................................................................................2
Section 1.02
Rules of Construction.........................................................................25
Section 1.03
Authority for this Master Indenture........................I...........................26
ARTICLE II AUTHORIZATION AND ISSUANCE OF BONDS....................................26
Section 2.01
Authorization of Bonds.........................................................I.............26
Section 2.02
Bonds Constitute Special Obligations ................ :...............................
26
Section 2.03
Indenture to Constitute Contract........................................................
27
Section 2.04
General Provisions for Issuance of Bonds.........................................27
Section 2.05
Additional Bonds................................................................................29
Section 2.06
Refunding Bonds................................................................................29
Section 2.07
Conditions to Issuance of Parity Obligations.....................................30
Section 2.08
Conditions of Issuance of Subordinate Obligations ...........................31
Section 2.09
Credit Provider Bonds........................................................................34
ARTICLE III GENERAL TERMS AND PROVISIONS OF BONDS ................................
34
Section 3.01
Medium of Payment; Form and Date; Letters and Numbers .............
34
Section3.02
Legends..............................................................................................35
Section 3.03
Execution and Authentication............................................................
36
Section 3.04
Book -Entry Bonds..............................................................................36
Section 3.05
Transfers Outside Book -Entry Program.............................................38
Section3.06
Bond Register.....................................................................................38
Section 3.07
Interchangeability of Bonds...............................................................39
Section 3.08
Negotiability, Transfer and Registry..................................................39
Section 3.09
Regulations With Respect to Exchanges and Transfers .....................39
Section 3.10
Bonds Mutilated, Destroyed, Stolen or Lost......................................39
Section 3.11
Temporary Bonds...............................................................................40
Section 3.12
Cancellation and Destruction of Bonds..............................................40
ARTICLE IV REDEMPTION OF BONDS.........................................................................40
Section 4.01
Privilege of Redemption and Redemption Price................................40
Section 4.02
Redemption at the Direction of City..................................................41
Section 4.03
Redemption Otherwise Than at City's Direction...............................41
OHS West:260486430.4 i
�f
TABLE OF CONTENTS"
(continued)
Page
Section 4.04
Selection of Bonds to be Redeemed...................................................41
Section 4.05
Notice of Redemption........................................................................42
Section 4.06
Partial Redemption of Bonds.............................................................43
Section 4.07
Effect of Notice and Availability of Redemption Money ..................43
ARTICLE V ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF ...........
44
Section 5.01
Pledge of Trust Estate........................................................................44
Section5.02
Funds.................................................................................................44
Section 5.03
Payments by City .............................................................................45
Section 5.04
Debt Service Fund..............................................................................46
Section 5.05
Redemption Fund...............................................................................
47
Section 5.06
Debt Service Reserve Fund................................................................48
Section 5.07
Expense Stabilization Fund................................................................49
Section5.08
Rebate Fund........................................................................................
50
Section5.09
Depositories........................................................................................50
Section5.10
Deposits..............................................................................................50
Section 5.11
Investment of Certain Funds..............................................................50
Section 5.12
Valuation and Sale of Investments.....................................................51
ARTICLE VI COVENANTS AND OBLIGATIONS OF THE CITY.................................52
Section 6.01
Compliance with Indenture................................................................
52
Section 6.02
Rates for Electric Service...................................................................52
Section 6.03
Collection of Rates and Charges........................................................
52
Section 6.04
Deposit and Application of Revenues ................................................
53
Section 6.05
Creation of Prior Liens on Trust Estate ..............................................
53
Section 6.06
Against Encumbrances.......................................................................53
Section 6.07
Sale or Other Disposition of Property................................................54
Section 6.08
Operation and Maintenance of the Electric System; Budgets ............ 54
Section6.09
Insurance............................................................................................ 54
Section 6.10
Accounting Records; Financial Statements and Other Reports
......... 54
Section 6.11
Payment of Taxes and Compliance with Governmental
Regulations......................................................................................... 55
Section 6.12
Tax Covenants....................................................................................55
Section 6.13
Transfers to General Fund..................................................................56
OHS West:260486430.4 ii
TABLE OF CONTENTS
(continued)
Page
ARTICLE VII AMENDMENTS TO INDENTURE.............................................................
56
Section 7.01
Amendments Permitted......................................................................
56
Section 7.02
Effect of Supplemental Indenture......................................................
59
Section 7.03
Bonds Owned by City........................................................................
59
Section 7.04
Notation on Bonds..............................................................................60
ARTICLE VIII CONCERNING THE FIDUCIARIES...........................................................
60
Section 8.01
Trustee; Acceptance of Duties...........................................................60
Section 8.02
Paying Agents; Appointment and Acceptance of Duties...................60
Section 8.03
Responsibilities of Fiduciaries...........................................................60
Section 8.04
Evidence on Which Fiduciaries May Act .......................................... 63
Section 8.05
Compensation.....................................................................................63
Section 8.06
Certain Permitted Acts.......................................................................64
Section 8.07
Resignation of Trustee.......................................................................64
Section 8.08
Removal of Trustee............................................................................ 64
Section 8.09
Appointment of Successor Trustee; Financial Qualifications of
SuccessorTrustee...............................................................................64
Section 8.10
Transfer of Rights and Property to Successor Trustee .......................65
Section 8.11
Merger or Consolidation....................................................................66
Section 8.12
Adoption of Authentication................................................................66
Section 8.13
Resignation or Removal of Paying Agent and Appointment of
Successor.............................................................................1..............
66
ARTICLE IX DEFEASANCE..............................................................................................67
Section 9.01
Payment of Bonds..............................................................................
67
Section 9.02
Bonds Deemed Paid...........................................................................
67
Section 9.03
Defeasance of Portion of Bond..........................................................69
Section 9.04
Discharge of Liability on Bonds........................................................69
ARTICLE X EVENTS OF DEFAULT; REMEDIES.........................................................70
Section 10.01
Events of Default................................................................................70
Section 10.02
Accounting and Examination of Records After Default ....................
70
Section 10.03
Application of Revenues and Other Moneys After Default...............70
Section 10.04
Right to Accelerate Upon Default......................................................72
Section 10.05
Appointment of Receiver...................................................................
73
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J
TABLE OF CONTENTS
(continued)
Page
Section 10.06
Enforcement Proceedings...................................................................73
Section 10.07
Restriction on Owner's Action...........................................................74
Section 10.08
Remedies Not Exclusive............
........................................................74
Section 10.09
Effect of Waiver and Other Circumstances........................................75
Section 10.10
Notice of Default................................................................................75
ARTICLE XI MISCELLANEOUS.......................................................................................75
Section 11.01
Execution of Documents and Proof of Ownership .............................75
Section11.02
Severability.........................................................................................76
Section 11.03
General Authorization........................................................................
76
Section 11.04
Moneys Held for Particular Bonds.....................................................76
Section 11.05
Credit Providers..................................................................................76
Section 11.06
Reserve Financial Guaranty Providers...............................................77
Section 11.07
No Recourse on Bonds.......................................................................77
Section 11.08
Unclaimed Moneys............................................................................77
Section11.09
Holidays.............................................................................................78
Section 11.10
Governing Law...................................................................................78
Section 11.11
Headings Not Binding........................................................................78
Section 11.12
Preservation and Inspection of Documents........................................78
Section 11.13
Parties Interested................................................................................
78
OHS West:260486430.4 iv
INDENTURE OF TRUST
Relating to.
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
THIS INDENTURE OF TRUST, dated as of September 1, 2008, is entered into by and
between the City of Vernon, a municipal corporation and chartered city of the State of California
and The Bank of New York Mellon Trust Company, N.A., a national banking association duly
organized and existing under and by virtue of the laws of the United States of America,
authorized to accept and execute trusts of the character in the Indenture set forth,
WITNESSETH
WHEREAS, the City (capitalized terms used in this Master Indenture shall have the
meanings given such terms in Section 1.01) has been duly established and is duly existing as a
chartered city under its Charter and the Constitution of the State; and
WHEREAS, the City has established and operates the Electric System for supplying its
inhabitants and businesses and industries within the City with electricity; and
WHEREAS, the City is authorized under the Charter and the Bond Ordinance to issue
bonds, notes and other obligations payable from the Net Revenues and amounts in the Light and
Power Fund to finance the Costs of Capital Improvements and to refund any such bonds, notes or
other obligations; and
WHEREAS, the City has determined to provide for the issuance from time to time of
Bonds, including Refunding Bonds, secured by a pledge of the Trust Estate and payable from the
Net Revenues and amounts in the Light and Power Fund available for such payment in
accordance with this Master Indenture, and with respect to particular Bonds, from such Credit
Support Instrument or Instruments as may be provided for such Bonds pursuant to the
Supplemental Indenture authorizing such Bonds; and
WHEREAS, the City has determined that each Series of the Bonds should be issued on
the terms and conditions set forth in this Master Indenture as supplemented by a Supplemental
Indenture authorizing such Series of Bonds; and
WHEREAS, the Bonds shall be secured by a pledge of the Revenues and amounts in the
Light and Power Fund available for such payment in accordance with this Master Indenture on a
parity with the pledge of the Revenues and amounts in the Light and Power Fund securing other
Parity Obligations hereafter issued by the City in accordance with the Indenture; and
OHS West:260486430.4
WHEREAS, the City has determined all acts and things which are necessary in
connection with the authorization, execution and delivery this Master Indenture have been done
and performed in due time, form and manner; and
WHEREAS, the Trustee has accepted the trust created and established by the Indenture
and in evidence thereof has joined in the execution of this Master Indenture;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
INDENTURE OF TRUST WITNESSETH:
ARTICLE I
DEFINITIONS AND AUTHORITY
Section 1.01 Definitions. Unless the context otherwise requires, the following terms,
for all purposes of this Master Indenture and, unless otherwise provided therein with respect to
such Supplemental Indenture or any Series of Bonds authorized by such Supplemental Indenture,
any Supplemental Indenture, shall have the meanings set forth below:
"Accountant's Certificate" means a certificate signed by an Independent Certified Public
Accountant selected by the City.
"Accreted Value" means, with respect to any Capital Appreciation Obligation and as of
any date, the Initial Amount thereof plus the interest accrued thereon from its delivery date,
compounded at the approximate interest rate with respect to such Capital Appreciation
Obligation specified in or pursuant to the Issuing Instrument authorizing the issuance of such
Capital Appreciation Obligation on each date specified therein. The applicable Accreted Value
at any date shall be the amount set forth in the Accreted Value Table as of such date, if such date
is a compounding date, and if not, shall be determined by straight-line interpolation with
reference to such Accreted Value Table.
"Accreted Value Table" means, with respect to Capital Appreciation Obligations, the
table denominated as such in, and to which reference is made in, the Issuing Instrument
authorizing the issuance of such Capital Appreciation Obligations.
"Additional Bonds" means Bonds issued in accordance with the terms and conditions of
this Master Indenture for the purposes set forth in Section 2.05.
"Additional Parity Obligations" means Parity Obligations, including Additional Bonds,
issued for the purposes set forth in Section 2.05 and satisfying the conditions set forth in Section
2.07.
"Adjusted Debt Service" means, for any period of time, the Debt Service for such period
minus the sum of the amount of such Debt Service with respect to Outstanding Parity
Obligations to be paid during such period from the proceeds of Parity Obligations Subordinate
Obligations or other funds as set forth in a certificate of the City.
OHS West:260486430.4 2
"Adjusted 'Net Revenues" means, with respect to a certificate to be delivered in
connection with Additional Parity Obligations pursuant to Section 2.07(e), for any Calculation
Period, as calculated by the City or an Independent Engineer, the Adjusted Revenues for such
Calculation Period less the Operation and Maintenance Expenses for such Calculation Period,
plus at the option of the City, any or all of the following: (i) an allowance for any estimated
increase in Revenues from any additions or improvements to or extensions of the Electric
System, made but not in service during the applicable Calculation Period or to be made with the
proceeds of any Additional Parity Obligations with respect to which such certificate relates, with
the proceeds of other Obligations theretofore issued by the City and available for such purpose or
with other available funds of the City reserved by the City for such purpose, such allowance to
be in an amount equal to the estimated additional average annual Net Revenues to be derived
from such additions, improvements and extensions during the twelve month period after placing
each such addition, improvement or extension in service, all as shown by a certificate of the City
or an Independent Engineer; and, (ii) an allowance for any increases in rates and charges for the
Electric Service of the Electric System which have been approved by the City Council but which
during all or any part of the applicable Calculation Period were not in effect, such allowance to
be in an amount equal to seventy-five percent (75%) of the amount by which the Revenues for
the applicable Calculation Period would have increased if such increase in rates and charges had
been in effect for that portion of such Calculation Period during which such increase was not in
effect.
"Adjusted Revenues" means, for any period of time, the Revenues for such period less
the amount of such Revenues which have been deposited in the Expense Stabilization Fund
during such period plus the amount of withdrawals during such period from the Expense
Stabilization Fund.
"Advance Refunded Municipal Securities" means any bonds or other obligations of any
state of the United States of America or of any agency, instrumentality or local government unit
of any such state (a) which are rated "Aaa" by Moody's and "AAA" by S&P (provided,
however, if the issue is only rated by S&P (i.e., there is no Moody's rating), then the pre -
refunded bonds must have been pre -refunded with cash, direct U.S. or U.S. guaranteed
obligations, or "AAA" rated pre -refunded municipals to satisfy this condition), (b) which are not
callable prior to maturity or as to which irrevocable, instructions have been given to the trustee,
fiscal agent or other fiduciary for such bonds or other obligations by the obligor to give due
notice of redemption and to call such bonds or other obligations for redemption on the date or
dates specified in such instructions, (c) which are secured as to principal and interest and
redemption premium, if any, by a fund consisting only of cash or bonds or other obligations of
the character described in clause (i) of the definition of Defeasance Securities which fund may be
applied only to the payment of such principal of and interest and redemption premium, if any, on
such bonds or other obligations on the maturity date or dates thereof or the redemption date or
dates specified in the irrevocable instructions referred to in clause (b) above, as appropriate, and
(d) as to which the principal of and interest on the bonds and obligations of the character
described in clause (i) of the definition of Defeasance Securities which have been deposited in
such fund, along with any cash on deposit in such fund, have been verified by an Accountant's
Certificate as being sufficient to pay principal of and interest and redemption premium, if any, on
such bonds or other obligations on the maturity date or dates thereof or on the redemption date or
dates specified in the irrevocable instructions referred to in clause (b) above, as applicable.
OHS West:260486430.4 3
"Aggregate Adjusted Annual Debt Service" shall mean for any Fiscal Year the aggregate
amount of Adjusted Debt Service on all Outstanding Parity Obligations payable in such Fiscal
Year. For purposes of calculating Aggregate Adjusted Annual Debt Service, the determination of
Debt Service on the Outstanding Parity Obligations coming due in each Fiscal Year shall be
subject to the Debt Service Adjustments and Assumptions.
"Applicable Parity Obligations" means, with respect to a certificate to be delivered in
connection with Additional Parity Obligations pursuant to Section 2.07(e) and as of the date of
such certificate, all of the Parity Obligations Outstanding on such date plus the Additional Parity
Obligations proposed to be issued.
"Authorized Denominations" means, with respect to Bonds of any Series, the
denomination or denominations designated as such in the Supplemental Indenture authorizing
such Bonds.
"Authorized City Representative" means the City Administrator of the City, and any
other officer of the City duly authorized to act as an Authorized City Representative for purposes
of the Indenture by the City Council or written authorization of the City Administrator of the
City.
"Balloon Indebtedness" means, with respect to any Series of Obligations twenty-five
percent (25%) or more of the principal of which matures on the same date or within a 12-month
period (with Sinking Fund Installments on Term Obligations deemed to be payments of matured
principal), that portion of such Series of Obligations which matures on such date or within such
12-month period. For purposes of this definition, the principal amount maturing on any date
shall be reduced by the amount of such indebtedness which is required, by the documents
governing such indebtedness, to be amortized by prepayment or redemption prior to its stated
maturity date.
"Beneficial Owner" means, with respect any Book -Entry Bond, the beneficial owner of
such Bond as determined in accordance with the applicable rules of the Securities Depository for
such Book -Entry Bonds.
"Bond" means any of the City of Vernon Electric System Revenue Bonds authorized
pursuant to Article II of this Master Indenture and a Supplemental Indenture.
"Bond Counsel" means Orrick, Herrington & Sutcliffe LLP or another attorney or firm of
attorneys of recognized national standing in the field of law relating to municipal securities and
to exclusion of interest thereon from income for federal income tax purposes selected by the
City.
"Bond Debt Service" means, for any period of time, the sum of (a) the interest payable
during such period on all Outstanding Bonds, assuming that all Outstanding Bonds which are
Serial Obligations are retired as scheduled and that all Outstanding Bonds which are Term
Obligations are redeemed or paid from Sinking Fund Installments as scheduled, (b) that portion
of the principal amount of all Outstanding Bonds which are Serial Obligations maturing on each
principal payment date during such period, including the Final Compounded Amount of any
Bonds which are Capital Appreciation Obligations and Serial Obligations, (c) that portion of the
OHS West:260486430.4 4
principal amount of all Outstanding Bonds which are Term Obligations required to be redeemed
or paid from Sinking Fund Installments during such period (together with the redemption
premiums, if any, thereon).
"Bond Ordinance" means the City of Vernon Municipal Facilities Revenue Bond Law,
enacted as Ordinance No. 1004 of the City (codified as Article XI of the City Code of the City of
Vernon).
"Bond Register" means the registration books for the ownership of Bonds maintained by
the Trustee pursuant to Section 3.06.
"Bondowner" or "Owner" means, with respect to a Bond, the registered owner of such
Bond as set forth in the Bond Register.
"Book -Entry Bonds" means Bonds registered in the name of a nominee of DTC or any
successor Securities Depository for the Bonds, or a nominee thereof, as the registered owner
thereof pursuant to the terms and provisions of Section 3.04.
"Budget" means, as of any date, the budget for the Electric System prepared by the City
pursuant to Section 6.08 in effect as of such date.
"Business Day" means, with respect to each Series of Bonds, unless otherwise provided
with respect to a Series of Bonds in the Supplemental Indenture authorizing the issuance of such
Series, any day of the year other than (i) a Saturday, (ii) a Sunday, (iii) any day which shall be in
Los Angeles, California or New York, New York a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to close, and (v) any
day on which the banks are authorized or required by law or other government action to close in
the State of New York or State of California or any city in which the Principal Office of any
Paying Agent or any Credit Provider for such Series of Bonds is located.
"Calculation Period" means, with respect to any certificate to be provided pursuant to
Section 2.07(e), any twelve consecutive month period within the eighteen consecutive, months
ending immediately prior to the issuance of the Additional Parity Obligations to which such
certificate relates.
"Capital Appreciation Obligations" mean any Obligations the interest on which is
compounded and not scheduled to be paid until the maturity or prior redemption of such
Obligations.
"Capital Improvement" means, to the extent chargeable to a capital account of the
Electric System, or otherwise eligible for amortization, under Generally Accepted Accounting
Principles any land, improvement, facility, equipment and other property of any nature
whatsoever which is used in the Electric System including but not limited to: (i) any addition,
betterment, replacement, renewal, extension or improvement of or to the Electric System,
including, without limitation, capacity rights in electric generation resources, rights to the
transmission capability of electric transmission resources, acquisition of emission credits or other
environmental assets for facilities of the Electric System, land or any interests therein; and (ii)
capital costs for the extension, reinforcement, enlargement or other improvement of facilities or
OHS West:260486430.4 5
property, or the acquisition of interests therein, not included as part of the Electric System,
determined by the City to be necessary or convenient in connection with the utilization of the
Electric System.
"Charter" means the Charter of the City of Vernon.
"City" means the City of Vernon, California and its successors.
"City Administrative Code" means the Code of the City of Vernon.
"City Council" means the City Council of the City established pursuant to the Charter.
"Code" means the Internal Revenue Code of 1986, as amended from time to time. Each
reference to a section of the Code in the Indenture shall be deemed to include the applicable
United States Treasury Regulations thereunder and also includes all amendments and successor
provisions unless, the context clearly requires otherwise.
"Collateral Requirement" means, with respect to a Qualified Swap Agreement, that such
Qualified Swap Agreement includes provisions to the effect that: (i) if the counterparty's (or, if
applicable, the counterparty's guarantor's) ratings fall below "Aa" by Moody's or "AA" by S&P,
or are suspended or withdrawn, the counterparty shall provide collateral in the form of cash or
Defeasance Securities, or a combination thereof; (ii) that the collateral is to be held by the City or
a third party custodian acceptable to the City; (iii) that the City shall have a perfected security
interest in the collateral; (iv) that the amount of the collateral shall be at least equal to one
hundred percent of the amount, if any, that the counterparty would be obligated to pay the City in
the event of the early termination of the transactions under the Qualified Swap Agreement; (v)
that there may be deducted from the amount of the collateral a threshold amount of not more
than $1,000,000, except that if the counterparty's (or, if applicable, the counterparty's
guarantor's) ratings fall below "A" by Moody's or "A" by S&P, or are suspended or withdrawn,
the threshold amount shall be zero; and (vi) the amount of the required collateral and the value of
the collateral posted shall be valued no less frequently than monthly.
"Commercial Paper Program" means a program of short-term Obligations having the
characteristics of commercial paper in that such Obligations have a stated maturity not later than
270 days from their date of issue and that maturing Obligations of such program may be paid
with the proceeds of renewal short-term Obligations.
"Cost" means, with respect to any Capital Improvement, to the extent permitted under the
Bond Ordinance, all costs and expenses of planning, designing, acquiring, constructing,
installing and financing such Capital Improvement, placing such Capital Improvement in
operation, disposal of such Capital Improvement, and obtaining governmental approvals,
certificates, permits and licenses with respect to the applicable Capital Improvement, paid or
incurred by the City. Payment of Cost shall include the reimbursement to the City for any of the
costs included in this definition of Cost paid by the City and not previously reimbursed to the
City and which are not to be reimbursed from contributions in aid of construction. The term
Cost shall include, but shall not be limited to:
OHS West260486430.4 6
(a) Costs of preliminary investigation and development, the performance or
acquisition of feasibility and planning studies, and the securing of regulatory approvals,
as well as costs for land and land rights, engineering and contractors' fees, labor,
materials, equipment, utility services and supplies, legal fees and financing expenses.
(b) Working capital and reserves therefor in such amounts as shall be
determined by the City.
(c) Interest accruing in whole or in part on Parity Obligations prior to and
during the acquisition, construction and installation of a Capital Improvement, or any
portion thereof, and for such additional period as the City may determine.
(d) The deposit or deposits from the proceeds of the Bonds in any funds or
accounts required by this Master Indenture or any Supplemental Indenture.
(e) The payment of principal, premium, if any, and interest when due
(whether at the maturity of principal or at the due date of interest or upon redemption or
otherwise) of any note or other evidence of indebtedness the proceeds of which were
applied to any of the costs of the applicable Capital Improvement described in this
definition.
(f) Training and testing costs which are properly allocable to the acquisition,
placing in operation, or construction of a Capital Improvement.
(g) All costs of insurance applicable to the period of the acquisition,
construction, installation and placing the Capital Improvement in operation.
(h) All costs relating to injury and damage claims arising out of the
acquisition, construction, installation and placing the Capital Improvement in operation
less proceeds of insurance.
(i) Legally required or permitted federal, state and local taxes and payments
in lieu of taxes applicable to the, acquisition, construction, installation and placing the
Capital Improvement in operation, or any portion thereof;
(j) Amounts due the United States of America as rebate of investment
earnings with respect to the proceeds of Parity Obligations the proceeds of which were
applied, in whole or in part, to the Capital Improvement or as penalties in lieu thereof.
(k) Amounts payable with respect to capital costs for the expansion,
reinforcement, enlargement or other improvement of facilities, whether or not such
facilities constitute a part of the Electric System, determined by the City to be necessary
in connection with the utilization of the applicable Capital Improvement and the costs
associated with the removal from service or reductions in service of any facilities as a
result of the expansion, reinforcement, enlargement or other improvement of such
facilities or the acquisition, construction, installation or placing in service of the Capital
Improvement.
OHS West:260486430.4 7
(1) Costs of Issuance of any Parity Obligations the proceeds of which were
applied, in whole or in part, to the Capital Improvement.
(m) Fees and expenses pursuant to any lending or credit facility or agreement
applicable to the period of the acquisition, construction, installation and placing in
operation the Capital Improvement.
(n) To the extent chargeable to a capital account of the Electric System under
Generally Accepted Accounting Principles, all other costs incurred by the City, properly
allocable to the acquisition, construction, or installation of the Capital Improvement, or
any portion thereof, or the placing of the Capital Improvement or any portion thereof in
operation.
"Costs of Issuance" means, to the extent permitted by the Bond Ordinance, all items of
expense directly or indirectly payable by or reimbursable to the City and related to the original
authorization, execution, sale and delivery of Parity Obligations, including but not limited to
advertising and printing costs, costs of preparation and reproduction of documents, including
disclosure documents and documents relating to the sale of such Parity Obligations, initial fees
and charges (including counsel fees) of any fiscal agent, any paying agent and any Credit
Provider, legal fees and charges, financial advisor fees and expenses, fees and expenses of other
consultants and professionals, rating agency fees, fees and charges for preparation, execution,
transportation and safekeeping of Parity Obligations and any other cost, charge or fee in
connection with the authorization, issuance, sale or original delivery of Parity Obligations.
"Credit Provider" means any municipal bond insurance company, bank or other financial
institution or organization which is performing in all material respects its obligations under any
Credit Support Instrument for some or all of the Parity Obligations.
"Credit Provider Reimbursement Obligations" means obligations of the City to pay from
the Net Revenues and amounts in the Light and Power Fund available for such payment in
accordance with this Master Indenture amounts due under a Credit Support Agreement,
including without limitation amounts advanced by a Credit Provider pursuant to a Credit Support
Instrument as credit support or liquidity for Parity Obligations and the interest with respect
thereto.
"Credit Provider Bonds" means any Bonds paid as to principal, Redemption Price,
Purchase Price and/or interest with funds provided under a Credit Support Instrument for so long
as such Bonds are held by or for the account of, or are pledged to, the applicable Credit Provider
or any assignee thereof in accordance with the applicable Credit Support Agreement.
"Credit Support Agreement" means, with respect to any Credit Support Instrument, the
agreement or agreements (which may be the Credit Support Instrument itself) between the City
and the applicable Credit Provider, as originally executed or as it may from time to time be
replaced, supplemented or amended in accordance with the provisions thereof, ,providing for the
reimbursement to the Credit Provider for payments under such Credit Support' Instrument or for
extensions of credit made to the City by the Credit Provider, and the interest thereon, and
includes any subsequent agreement pursuant to which a substitute Credit Support Instrument is
OHS West:260486430.4 8
provided, together with any related pledge agreement, security agreement or other security
document.
"Credit Support Instrument" means a policy of insurance, a letter of credit, a stand-by
purchase agreement, revolving credit agreement or other credit arrangement pursuant to which a
Credit Provider provides credit and/or liquidity support with respect to the payment of interest,
principal, Redemption Price or Purchase Price of any Parity Obligations but shall not include a
Reserve Financial Guaranty.
"Debt Service" means, for any period of time, the sum of (a) the interest payable during
such period on all Outstanding Parity Obligations, assuming that all Outstanding Serial Parity
Obligations are retired as scheduled and that all Outstanding Term Parity Obligations are
redeemed or paid from Sinking Fund Installments as scheduled, (b) that portion of the principal
amount of all Outstanding Serial Parity Obligations maturing on each principal payment date
during such period, including the Final Compounded Amount of any Capital Appreciation
Obligations and (c) that portion of the principal amount of all Outstanding Term Parity
Obligations required to be redeemed or paid from Sinking Fund Installments becoming due
during such period (together with the premiums, if any, thereon).
"Debt Service Adjustments and Assumptions" means, for purposes of determining
Aggregate Adjusted Annual Debt Service and Maximum Adjusted Annual Debt Service, the
following adjustments and assumptions to be made with respect to Debt Service:
(a) in determining the amount of Debt Service constituting principal due in
each Fiscal Year, principal payments with respect to Parity Obligations which are or upon
issuance shall be, part of a Commercial Paper Program, but which would not constitute
Balloon Indebtedness, shall be treated as if such Parity Obligations were to be amortized
with substantially level annual Debt Service payments over a, term of 40 years
commencing on the date the calculation of Aggregate Adjusted Annual Debt Service or
Maximum Adjusted Annual Debt Service is made;
(b) if all or any portion or portions of the Parity Obligations constitute, or
upon issuance would constitute, Balloon Indebtedness, then, for purposes of determining
Aggregate Adjusted Annual Debt Service and Maximum Adjusted Annual Debt Service,
each maturity which constitutes, or upon issuance would constitute, Balloon Indebtedness
shall be treated as if it were to be amortized with substantially level annual Debt Service
payments over a term of 40 years commencing on the date which is the first anniversary
of the initial issuance of such Parity Obligations;
(c) if any Outstanding Parity Obligations constitute Tax -Exempt Variable
Rate Indebtedness (except to the extent paragraph (g) applies), the interest rate on such
Parity Obligations for any period as to which such interest rate has not been established
shall be assumed to be the ten year historical average of the SIFMA Index ending with
the week preceding the date of calculation;
(d) if any Outstanding Parity Obligations constitute Variable Rate
Indebtedness which is not Tax -Exempt (except to the extent paragraph i (g) applies), the
OHS West:260486430.4 9
interest rate on such Parity Obligations for any period as to which such interest rate has
not been established shall be assumed to be the ten year historical average of the One
Month USD LIBOR Rate ending with the month preceding the date the calculation of
Aggregate Adjusted Annual Debt Service or Maximum Adjusted Annual Debt Service is
made or if the One Month USD LIBOR Rate is not available for such period, another
similar rate or index selected by the City.
(e) if the Parity Obligations proposed to be issued shall be Tax -Exempt
Variable Rate Indebtedness (except to the extent subsection (h) applies), then the interest
rate on such Parity Obligations shall be assumed to be the ten year historical average of
the SIFMA Index ending with the week preceding the date the calculation of Aggregate
Adjusted Annual Debt Service or Maximum Adjusted Annual Debt Service is made;
(f) if the Parity Obligations proposed to be issued shall be Variable Rate
Indebtedness which is not Tax -Exempt (except to the extent subsection (h) applies) then
the interest rate on such Parity Obligations shall be assumed to be the ten year historical
average of the One Month USD LIBOR Rate ending with the month preceding the date
the calculation is made, or if the One Month USD LIBOR Rate is not available for such
period, another similar rate or index selected by the City;
(g) if a Qualified Swap Agreement has been entered into in connection with
any Outstanding Parity Obligations, the interest rate on such Outstanding Parity
Obligations for each Fiscal Year or portion thereof during which payments are to be
exchanged by the parties under such Qualified Swap Agreement shall be determined for
purposes of calculating Aggregate Adjusted Annual Debt Service and Maximum
Adjusted Annual Debt Service by adding: (1) the amount of Debt Service paid or to be
paid by the City as interest on the Outstanding Parity Obligations during such Fiscal Year
or portion thereof (determined as provided in paragraph (c) or (d), as applicable, if such
Outstanding Parity Obligations constitute Variable Rate Indebtedness) and (2) the net
amount (which may be a negative amount) paid or to be paid by the City under the
Qualified Swap Agreement (after giving effect to payments made and received, and to be
made and received, by the City under the Qualified Swap Agreement) during such Fiscal
Year or portion thereof, and for this purpose any variable rate of interest agreed to be
paid under the Qualified Swap Agreement shall be deemed to be the rate at which the
related Outstanding Parity Obligations constituting Variable Rate Indebtedness is
assumed to bear interest;
(h) if a Qualified Swap Agreement has been entered into, or upon issuance of
such Parity Obligation will be entered into, by the City with respect to any Parity
Obligations proposed to be issued, the interest on such proposed Parity Obligations for
each Fiscal Year or portion thereof during which payments are to be exchanged under the
Qualified Swap Agreement shall be determined for purposes of calculating Aggregate
Adjusted Annual Debt Service and Maximum Adjusted Annual Debt Service by adding:
(1) the amount of Debt Service to be paid by the City as interest on such Parity
Obligations during such Fiscal Year or portion thereof (determined as provided in
paragraph (e) or (f), as applicable, if such Parity Obligations are to constitute Variable
Rate Indebtedness) and (2) the net amount (which may be a negative amount) to be paid
OHS West:260486430.4 10
by the City under the Qualified Swap Agreement (after giving effect to payments to be
made and received by the City under the Qualified Swap Agreement) during such Fiscal
Year or portion thereof, and for this purpose any variable rate of interest agreed to be
paid under the Qualified Swap Agreement shall be deemed to be the rate at which the
related Parity Obligations which are to constitute Variable Rate Indebtedness shall be
assumed to bear interest; and
(i) if any of the Parity Obligations are, or upon issuance shall be, Paired
Obligations, the interest thereon shall be the resulting linked rate or effective fixed rate to
be paid with respect to such Paired Obligations.
"Debt Service Fund" means the City of Vernon Electric System Debt Service Fund
established pursuant to Section 5.02.
"Debt Service Reserve Fund" means the City of Vernon Electric System Debt Service
Reserve Fund established pursuant to Section 5.02.
"Debt Service Reserve Requirement" means, as of any date of calculation, an amount
equal to the least of (a) ten percent (10%) of the initial offering price to the public of the Bonds
as determined under the Code, or (b) the greatest amount of Bond Debt Service in any Fiscal
Year during the period commencing with the Fiscal Year in which the determination is being
made and terminating with the last Fiscal Year in which any Bond is due, or (c) one hundred
twenty-five percent (125%) of the sum of the Bond Debt Service for all Fiscal Years during the
period commencing with the Fiscal Year in which such calculation is made (or if appropriate, the
first full Fiscal Year following the execution and delivery of any Bonds) and terminating with
the last Fiscal Year in which any Bond Debt Service is due, divided by the number of such Fiscal
Years, all as computed and determined by the City and specified in writing to the Trustee;
provided, however that in determining Bond Debt Service with respect to any Bonds that
constitute Variable Rate Indebtedness, the interest rate on such Bonds for any period as to which
such interest rate has not been established shall be assumed to be (i) with respect to Bonds which
are Tax -Exempt, the ten year historical average of the SIFMA Index ending with the week
preceding the date of calculation, and (ii) with respect to Bonds which are not Tax -Exempt, the
ten year historical average of the One Month USD LIBOR Rate ending with the month preceding
the date the calculation is made or if the One Month USD LIBOR Rate is not available for such
period, another similar rate or index selected by the City.
"Debt Service Reserve Valuation Date" means the Business Day preceding each January
1 and July 1, commencing January 1, 2009.
"Defeasance Securities" means any of the following securities, if and to the extent the
same are at the time legal investments for funds of the City:
(i) U.S. Treasury Certificates, Notes and Bonds (including State and Local
Government Series — (SLGs));
(ii) Direct obligations of the U.S. Treasury which have been stripped by the U.S.
Treasury itself.
OHS West:260486430.4 11
(iii) Resolution Funding Corporation obligations ("REFCORP") (only the interest
component of REFCORP strips which have been stripped by request to the Federal Reserve
Bank of New York in book entry form are acceptable);
(iv) Obligations issued by the following agencies which are backed by the full faith
and credit of the United States:
a. U.S. Export -Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial ownership
b. Farmers Home Administration (FmHA)
C. Federal Financing Bank
d. General Services Administration
Participation Certificates
e. U.S. Maritime Administration
Guaranteed Title XI financing
f. U.S. Department of Housing and Urban Development (HUD)
Project Notes
Local Authority Bonds
New Communities Debentures — U.S. government guaranteed debentures
U.S. Public Housing Notes and Bonds — U.S. government guaranteed
public housing notes and bonds
(v) Advance Refunded Municipal Securities.
"Depository" means any bank or trust company organized under the laws of any state of
the United States (including the Trustee and its affiliates), or any national banking association
which is willing and able to accept the office on reasonable and customary terms, authorized by
law to act in accordance with the applicable provisions of the Indenture.
"DTC" means The Depository Trust Company, a limited purpose trust company
organized under the laws of the State of New York or its successors and assigns. References in
the Indenture to DTC shall include any Nominee of DTC in whose name any Bond is registered.
"Electric Service" means the services, commodities and products furnished, made
available or provided by the Electric System.
"Electric System" means the electrical energy generation, transmission and distribution
system of the City established pursuant to Ordinance No. 1022 of the City (codified as
Section 2.91 of the City Administrative Code) and referred to in the City Administrative Code as
the Vernon Electric System, comprising all electric generation, transmission and distribution
facilities and all general plant facilities related thereto now owned by the City and all other
facilities properties, structures or works for the generation, transmission or distribution of
electricity hereafter acquired by the City, including all contractual rights for electricity or the
OHS West:260486430.4 12
transmission thereof, together with all additions, betterments, extensions or improvements to
such facilities, properties, structures or works or any part thereof, and any additional contract
rights for electricity or the transmission thereof, hereafter acquired.
"Event of Default" means an event described as such in Section 8.01.
"Electronic" means, with respect to notice, notice through telecopy, telegraph, telex,
facsimile transmission, internet, e-mail, dedicated electronic link or other electronic means of
communication capable of producing a written record.
"Escrow Agent" means the Trustee or a bank or trust company organized under the laws
of any state of the United States, or a national banking association, appointed by the City to hold
in trust moneys set aside for the payment or redemption of, or interest installments on, a Bond or
Bonds, or any portion thereof, deemed paid and defeased pursuant to Article IX.
"Expense Stabilization Fund" means the City of Vernon Electric System Expense
Stabilization Fund established pursuant to Section 5.02.
"Event of Bankruptcy" means any of the following with respect to any Person: (a) the
commencement by such person of a voluntary case under the Federal Bankruptcy Code or any
other applicable federal or state bankruptcy, insolvency or similar laws; (b) failure by such
Person to timely controvert the filing of a petition with a court having jurisdiction over such
Person to commence an involuntary case against such person under the Federal Bankruptcy Code
or any other applicable federal or state bankruptcy, insolvency or similar laws; (c) such Person
shall admit in writing its inability to pay its debts generally as they become due; (d) a receiver,
trustee, custodian or liquidator of such Person or such Person's assets shall be appointed in any
proceeding brought against the Person or such Person's assets; (e) assignment of assets by such
person for the benefit of its creditors; or (f) the entry by such Person into an agreement of
composition with its creditors.
"Favorable Opinion of Bond Counsel" means, with respect to any action requiring such
an opinion, an Opinion of Bond Counsel to the effect that such action shall not, in and of itself,
adversely affect the Tax -Exempt status of interest on the Bonds or such portion thereof as shall
be specified in the provisions of this Master Indenture or the Supplemental Indenture requiring
such an opinion.
"Federal Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy," as the same may be amended and supplemented, and any successor statute.
"Fiduciary" means the Trustee and any Paying Agent for Bonds appointed as provided in
Section 8.02.
"Final Compounded Amount" means the Accreted Value of any Capital Appreciation
Obligation on its maturity date.
"First Supplemental Indenture" means the First Supplemental Indenture of Trust, dated
as of September 1, 2008, between the City and the Trustee supplementing this Master Indenture
and relating to the 2008 Series A Bonds.
OHS West:260486430.4, 13
"Fiscal Year" means the period beginning on July 1 of each year and ending on the next
succeeding June 30, or any other twelve-month period selected and designated as the official
Fiscal Year of the City.
"Franchise Payment" means the payment in lieu of franchise tax added to each Electric
System customer bill pursuant to [insert authority] to be paid to the City's General Fund and any
successor or replacement payment.
"Fund" means each of the funds established under the Indenture.
"Generally Accepted Accounting Principles" means generally accepted accounting
principles applied on a consistent basis set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public Accountants
applicable to a government -owned utility applying all statements and interpretations issued by
the Governmental Accounting Standards Board and statements and pronouncements of the
Financial Accounting Standards Board which are not in conflict with the statements and
interpretations issued by the Governmental Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of the accounting
profession, that are applicable to the circumstances as of the date of determination.
"Independent Certified Public Accountant" means a Person who is: (i) a certified public
accountant, or a firm of certified public accountants; (ii) appointed by the City to perform acts,
prepare certificates or otherwise carry out the duties provided for an Independent Certified
Public Accountant in this Master Indenture or any Supplemental Indenture; (iii) which is
independent pursuant to the Statement on Auditing Standards No. 1 of the American Institute of
Certified Public Accountants; (iv) which is of recognized standing with respect to accounting
matters for municipally -owned electric utilities; and (v) which is licensed to practice in the State
of California.
"Independent Engineer" means a Person who is: (i) a consulting engineer, or a firm of
consulting engineers; (ii) appointed by the City to perform acts, prepare certificates or otherwise
carry out the duties provided for an Independent Engineer in this Master Indenture or any
Supplemental Indenture; (iii) which is of national recognized standing with respect to
engineering matters for electric utilities; and (iv) which is licensed to practice in the State of
California.
"Indenture" means, this Master Indenture, as supplemented and amended from time to
time by Supplemental Indentures.
"Information Services" means any of the following services which has been designated in
a certificate of the City delivered to the Trustee: Financial Information, Inc.'s "Daily Called
Bond,Service," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention:
Editor; Kenny Information Services "Called Bond Service," 65 Broadway, 16th Floor, New
York, New York 10006; Moody's Investors Service "Municipal and Government," 99 Church
Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and
Standard and Poor's "Called Bond Record," 25 Broadway, 3rd Floor, New York, New York
OHS West:260486430.4 14
10004; or such other services providing information with respect to called bonds as the City may
designate in a certificate of the City delivered to the Trustee.
"Initial Amount" means the Accreted Value of a Capital Appreciation Obligation on its
date of issuance and delivery to the original purchaser thereof.
"Interest Account" means the account by that name in the Debt Service Fund established
pursuant to Section 5.02.
"Interest Payment Date" means, with respect to a Series of Bonds, each date on which
interest on Bonds of such Series is scheduled to be paid as set forth in, or determined in
accordance with, the Supplemental Indenture authorizing the issuance of such Series.
"Issuing Instrument" means any, indenture, trust agreement or other instrument or
agreement under which Obligations are issued.
"Light and Power Fund" means the Light and Power Department Fund established
pursuant to Ordinance No. 950 of the City (codified as Section 2.65 of the City Administrative
Code) and shall include any successor or replacement fund established by the City for the
collection of revenues and the payment of expenses of the Electric System.
"Master Indenture" means this Indenture of Trust, dated as of September 1, 2008
between the City and the Trustee, as the provisions hereof may be modified or amended from
time to time in accordance with Article VII.
"Maximum Adjusted Annual Debt Service" means, with respect to a certificate to be
delivered in connection with Additional Parity Obligations pursuant to Section 2.07(e), as of any
date and with respect to the Applicable Parity Obligations, the maximum amount of Adjusted
Debt Service becoming due on the Applicable Parity Obligations in the then current or any future
Fiscal Year, as adjusted as provided in this definition and calculated by the City or by an
Independent Engineer. For purposes of calculating Maximum Adjusted Annual Debt Service,
the determination of Debt Service on the Applicable Parity Obligations coming due in each
Fiscal Year shall be subject to the Debt Service Adjustments and Assumptions.
"Moody's" means Moody's Investors Service, Inc. and any successor entity rating Parity
Obligations at the request of the City.
"Net Payment" means with respect to a Qualified Swap Agreement, the amount payable
by the City on each scheduled payment date under such Qualified Swap Agreement net of the
amount payable by the counterparty under such Qualified Swap Agreement on such scheduled
payment date.
"Net Revenues" mean, for any period of time, the Revenues for such period less the
Operation and Maintenance Expenses for such period.
"Net Transferable Income" means, with respect to any Fiscal. Year, the Net Revenues for
such Fiscal Year less the Debt Service for such Fiscal Year.
OHS West:260486430.4 15
"Nominee" means the nominee of the Securities Depository for the Book -Entry Bonds in
whose name such Bonds are to be registered. The initial Nominee shall be Cede & Co., as the
nominee of DTC.
"Obligations" means (a) obligations with respect to borrowed money and includes bonds,
notes or other evidences of indebtedness, installment purchase payments under any contract, and
lease payments' under any financing or capital lease (determined to be such in accordance with
Generally Accepted Accounting Principles), which are payable from the Net Revenues and/or
amounts in the Light and Power Fund, (b) obligations to replenish any debt service reserve fund
with respect to obligations of the City described in (a) above; (c) obligations under any Public
Finance Contract payable from the Net Revenues and/or amounts in the Light and Power Fund;
and (d) Credit Provider Reimbursement Obligations.
"One Month USD LIBOR Rate" means the British Banker's Association average of
interbank offered rates in the London market for United States dollar deposits for a one month
period as reported in the Wall Street Journal or, if not reported in such newspaper, as reported in
such other source as may be selected by the City.
"Operation and Maintenance Expenses" mean the costs paid or incurred by the City for
operating and maintaining the Electric System including, but not limited to (a) all costs of
electric energy and power generated or purchased by the City for resale, costs of transmission,
fuel supply and water supply in connection with the foregoing; (b) all costs and expenses of
management of the Electric System; (c) all costs and expenses of maintenance and repair, and
other expenses necessary or appropriate in the judgment of the City to maintain and preserve, the
Electric System in good repair and working order; (d) all administrative costs of the several
departments of the City that are charged directly or apportioned to the operation or maintenance
of the Electric System, such as salaries and wages (including retirement benefits) of employees,
overhead, taxes (if any) and insurance premiums; (e) payments in -lieu of taxes to any public
agency other than the City in connection with the Electric System; (f) all costs, expenses and
charges of the City required to be paid by it to comply with the terms of any Issuing Instrument
authorizing the issuance of Parity Obligations, such as compensation, reimbursement and
indemnification of the trustee, remarketing agent, broker -dealer or auction agent or fees and
expenses of Independent Certified Public Accountants, Independent Engineers and other
consultants; (g) the fees, expenses and indemnification of Credit Providers and Reserve Financial
Guaranty Providers; (h) all amounts required to be paid by the City under contracts with a joint
powers agencies for the purchase of capacity, rights in an electric generating station or electric
transmission facilities, transmission capability or any other commodity right, or service in
connection with the Electric System, which contracts require payments to be made by the City
thereunder to be treated as operation and maintenance expenses of the Electric System; (i) all
deposits to be made to a rebate fund established with respect to Parity Obligations to provide for
any rebate to the United States _required to maintain the Tax -Exempt status of interest on such
Parity Obligations; 0) any cost or expense paid by the City to comply with requirements of law
applicable to the Electric System or the City's ownership or operation thereof or in any capacity
with respect thereto or any activity in connection therewith, including without limitation the
Public Benefits uses required by Section 385 of the California Public Utilities Code; and (k) any
other cost or expense which, in accordance with Generally Accepted Accounting Principles, is to
be treated as a cost of operating or maintaining the Electric System; but excluding in all cases
OHS West:260486430.4 16
depreciation, replacement and obsolescence charges or reserves therefor, amortization of
intangibles, Franchise Payments to the City and Unrealized Items. Except as provided in clause
(d) of this paragraph, no transfer of Revenues to the City, including the Franchise Payment, shall
constitute an Operation and Maintenance Expense.
"Opinion of Bond Counsel" means a written opinion signed by Bond Counsel.
"Outstanding" when used as of any particular time with respect to Obligations, means,
except as otherwise provided in Article VII, all Obligations theretofore or thereupon being issued
by the City, except (a) Obligations theretofore cancelled or surrendered for cancellation; (b)
Obligations paid or deemed to be paid within the meaning of any defeasance provisions of the
Issuing Instrument pursuant such Obligations were issued; and (c) Obligations in lieu of or in
substitution for which replacement Obligations have been issued.
"Paired Obligations" shall mean any Series (or portion thereof) of Parity Obligations
designated as Paired Obligations in the Issuing Instrument authorizing the issuance thereof,
which are simultaneously issued (a) the principal of which is of equal amount maturing and to be
redeemed (or cancelled after acquisition thereof) on the same dates and in the same amounts, and
(b) the interest rates which, taken together, result in an irrevocably fixed interest rate obligation
of the City for the terms of such Paired Obligations.
"Parity Obligations" means Bonds and any Obligations which are payable from the Net
Revenues and amounts in the Light and Power Fund available for such payment in accordance
with this Master Indenture on a parity with the payment of the Bonds and which satisfy the
applicable conditions of Section 2.07, including without limitation Credit Provider
Reimbursement Obligations and, with respect to Qualified Swap Agreements, the Net Payments,
but not the Termination Payments and other payments, due thereunder.
"Participants" means, with respect to a Securities Depository for Book -Entry Bonds,
those participants listed in such Securities Depository's book -entry system as having an interest
in such Bonds.
"Paying Agent" means, with respect to a Series of Bonds, the Trustee and any banking
corporation, banking association or trust company designated as paying agent for such Series of
Bonds pursuant to Section 8.01(b) or Section 8.02, and its successor or successors appointed in
the manner provided in the Indenture.
"Permitted Investments" means any of the following obligations if and to the extent that
they are permissible investments of funds of the City as stated in its current investment policy
(the Trustee may rely on the investment directions of the City that the investment is approved by
the City's investment policy) and to the extent then permitted by law:
(a) Direct obligations of the United States (including obligations issued or held
in book -entry form on the books of the Department of the Treasury, and CATS and TIGRS) or
obligations the principal of and interest on which are unconditionally guaranteed by the United
States.
OHS West:260486430.4 17
(b) Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following federal agencies and provided such obligations are backed
by the full faith and credit of the United States (stripped securities are only permitted if they
have been stripped by the agency itself):
(i) U.S. Export -Import Bank (Eximbank)
Direct obligations or fully guaranteed certificates of beneficial
ownership
(ii) Farmers Home Administration ("FmHA")
Certificates of beneficial ownership
(iii) Federal Financing Bank
(iv) Federal Housing Administration Debentures ("FHA")
(v) General Services Administration
Participation certificates
(A) Government National Mortgage Association ("GNMA")
GNMA - guaranteed mortgage -backed bonds
GNMA - guaranteed pass -through obligations (participation
certificates)
(vii) United States Maritime Administration
Guaranteed Title XI financing
(viii) United States Department of Housing and Urban Development
Project Notes
Local Authority Bonds
New Communities Debentures - U.S. government guaranteed
debentures
U.S. Public Housing Notes and Bonds - U.S. government
guaranteed public housing notes and bonds
(c) Bonds, debentures, notes or other evidence of indebtedness issued or
guaranteed by any of the following non -full faith and credit United States government agencies
(stripped securities are only permitted if they have been stripped by the agency itself):
(i) Federal Home Loan Bank System
Senior debt obligations
(ii) Federal Home Loan Mortgage Corporation ("FHLMC"or "Freddie
Mac") ,
Participation Certificates
Senior debt obligations
OHS West:260486430.4 18
(iii) Federal National Mortgage Association ("FNMA" or "Fannie
Mae")
Mortgage -backed securities and senior debt obligations
(iv) Student Loan Marketing Association ("SLMA" or "Sallie Mae")
Senior debt obligations
(v) Resolution Funding Corporation obligations
(vi) Farm Credit System
Consolidated system -wide bonds and notes
(d) Money market funds registered under the Federal Investment Company Act
of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a
" "
rating by S&P of "AAAm-G,AAA-m" or "AA-m" and if rated by Moody's rated "Aaa,"
"Aal" or "Aa2," including funds for which the Trustee or any of its affiliates (including any
holding company, subsidiaries, or other affiliates) provides investment advisory or other,
management services, provided such funds satisfy the criteria herein contained.
(e) Certificates of deposit secured at all times by collateral described in (a)
and/or (b) above. Such certificates must be issued by commercial banks (including affiliates of
the Trustee), savings and loan associations or mutual savings banks. The collateral must be
held by a third party and the City or the Trustee must have a perfected first security interest in
the collateral.
(f) Certificates of deposit, savings accounts, deposit accounts or money market
deposits (including those of the Trustee and its affiliates) which are fully insured by FDIC,
including BIF and SAIF.
(g) Investment agreements with, or guaranteed by, a domestic or foreign bank
or corporation (other than a life or property casualty insurance company) the long-term debt of
which is rated at least "AA" by S&P and "Aa" by Moody's, and which agreements are
acceptable to each Credit Provider whose acceptance is required by a Supplemental Indenture
or a Credit Support Agreement.
(h) Commercial paper rated, at the time of purchase, "Prime - 1" by Moody's
and "A-1" or better by S&P.
(i) Bonds or notes issued by any state or municipality which are rated by
Moody's and S&P in one of the two highest rating categories assigned by such agencies.
0) Federal funds or bankers acceptances with a maximum term of one year of
any bank (including those of the Trustee and its affiliates) which has an unsecured, uninsured
and unguaranteed obligation rating of "Prime - 1 or "A3" or better by Moody's and "A-1" or
"A" or better by S&P.
(k) Repurchase Agreements for 30 days or less must satisfy the following
criteria. Repurchase Agreements which exceed 30 days must be acceptable to each Credit
OHS West:260486430.4 19
Provider whose acceptance is required by a Supplemental Indenture or a Credit Support
Agreement.
(i) Repurchase agreements must be between the City or the Trustee
and a dealer bank or securities firm
(1) Primary dealers on the Federal Reserve reporting dealer list
must be rated "A" or better by S&P and "AT' or better by
Moody's, or
(2) Banks must be rated "A" or better by S&P and "AT' or
better by Moody's.
(ii) The written repurchase agreements contract must include the
following:
(1) Securities which are acceptable for transfer are:
(a) Securities described in subsection (a) or (b) of this
definition, or
(b) Securities of FNMA or FHLMC described in
subsection (c) of this definition.
(2) The collateral must be delivered to the City, the Trustee (if
the Trustee is not supplying the collateral) or third party
acting as agent for the Trustee (if the Trustee is supplying
the collateral) before/simultaneously with payment.
(3) Valuation of Collateral
(a) The securities must be valued weekly, marked -to -
market at current market price plus accrued interest
(i) The value of collateral in the case of securities
described in subsections (a) or (b) of this
definition must be equal to 104% of the amount
of cash transferred by the City or the Trustee to
the dealer bank or security firm under the
repurchase agreement plus accrued interest.
The value of collateral in the case of securities
of FNMA or FBLMC described in subsection
(c) of this definition must be equal to 105% of
the amount of cash transferred by the City or the
Trustee to the dealer bank or security firm under
the repurchase agreement plus accrued interest.
If the value of securities held as collateral falls
below the required percentage of the value of
OHS West:260486430.4 20
the cash transferred, then additional cash and/or
acceptable securities must be transferred.
(iii) Legal Opinion. An opinion of counsel selected by the City, which
may be the City Attorney or other counsel retained by the City, to
the effect that the repurchase agreement meets guidelines under
state law for legal investment of public funds must be received by
the City or the Trustee.
(1) Any state administered pool investment fund in which the City is statutorily
permitted or required to invest will be deemed a permitted investment, including, but not
limited to the Local Agency Investment Fund in the treasury of the State.
(m)Advance Refunded Municipal Securities.
"Person" means an individual, corporation, firm, association, partnership, trust or other
legal entity or group of entities, including a governmental entity or any agency or political
subdivision thereof.
"Principal Account" means the account by that name in the Debt Service Fund
established pursuant to Section 5.02.
"Prudent Utility Practice" means any of the practices, methods, and acts which, in the
exercise of reasonable judgment, in light of the facts, including but not limited to, the practices,
methods, and acts engaged in or approved by a significant portion of the electric utility industry
prior thereto, known at the time the decision was made, would have been expected to accomplish
the desired result consistent with cost-effectiveness, reliability, safety, and expedition. It is
recognized that Prudent Utility Practice is not intended to be limited to optimum practice,
method, or act to the exclusion of all others, but rather is a spectrum of possible practices,
methods, or act which could have been expected to accomplish the desired result at the lowest
reasonable cost consistent with cost-effectiveness, reliability, safety, and expedition.
"Principal Office" means, with respect to: (i) the Trustee, the principal office of such
Trustee in Los Angeles, California, or such other office of the Trustee designated thereby; and
(ii) a Paying Agent or a Credit Provider, the office designated as such in writing by such party to
the Trustee.
"Public Finance Contract" means (i) any contract providing for payments based on levels
of, or changes in, interest rates, currency exchange rates, stock or other indices, (ii) any contract
to exchange cash flows or a series of payments, or (iii) any contract to hedge payment, currency,
rate spread or similar exposure, including but not limited to interest, any interest rate swap
agreement, currency swap agreement, forward payment conversion agreement or futures
contract, any contract providing for payments based on levels of, or changes in, interest rates,
currency exchange rates, stock or other indices, any contract to exchange cash flows or a series
of payments, or any contract, including, without limitation, an interest rate floor or cap, or an
option, put or call, to hedge payment, currency, rate, spread or similar exposure, between the
City and a counterparty.
OHS West:260486430.4 21
"Purchase Price" means: (i) with respect to Bonds of any Series, the purchase price set
forth in or determined pursuant to the Supplemental Indenture authorizing the Bonds of such
Series to be paid to the Owners of such Bonds when such Bonds are tendered for purchase or
deemed tendered for purchase in accordance with the provisions of such Supplemental Indenture;
and (ii) with respect to other Parity Obligations, the purchase price set forth in the Issuing
Instrument authorizing such Parity Obligations to be paid to the owners of such Parity
Obligations when such Parity Obligations are tendered or deemed tendered for purchase in
accordance with the provisions of such Issuing Instrument.
"Qualified Swap Agreement" means a Public Finance Contract entered into by the City
and satisfying the conditions of Section 2.07(a).
"Rating Agency" means, as of any time and to the extent it is then providing or
maintaining a rating on Parity Obligations at the request of the City, each of Moody's or
Standard & Poor's, or in the event that neither Moody's or Standard & Poor's then maintains a
rating on Parity Obligations at the request of the City, any other nationally recognized rating
agency then providing or maintaining a rating on the Bonds at the request of the City.
"Rating Category" means (1) with respect to any long-term rating category, all ratings
designated by a particular letter or combination of letters, without regard to any numerical
modifier, plus or minus sign or other modifier and (2) with respect to any short-term or
commercial paper rating category, all ratings designated by a particular letter or combination of
letters and taking into account any numerical modifier, but not any plus or minus sign or other
modifier.
"Rating Confirmation" means written evidence from each Rating Agency then rating
Outstanding Parity Obligations at the request of the City to the effect that, following the event
which requires the Rating Confirmation, the then current rating for each Outstanding Parity
Obligation shall not be lowered or withdrawn solely as a result of the occurrence of such event.
"Rebate Fund" means the City of Vernon Electric System Rebate Fund established
pursuant to Section 5.02.
"Record Date" means, with respect to an Interest Payment Date for a Series of Bonds, the
date or dates specified as such in the Supplemental Indenture authorizing such Series of Bonds.
"Redemption Date" means, with respect to any Bonds to be redeemed in accordance with
this Master Indenture and the Supplemental Indenture authorizing such Bonds, the redemption
date set forth in notice of redemption of such Bonds given in accordance with the terms of the
Indenture.
"Redemption Fund" means the City of Vernon Electric System Redemption Fund
established pursuant to Section 5.02
"Redemption Price" means, with respect to any redemption of a Bond prior to its
maturity, the amount to be paid upon such redemption of the Bond as set forth in, or determined
in accordance with, the Supplemental Indenture authorizing such Bond.
OHS West:260486430.4 22
"Refunding Bonds" means Bonds issued in accordance with the terms and conditions of
this Master Indenture for the purposes, and satisfying the conditions of Section 2.06.
"Refunding Parity Obligations" means Parity Obligations, including Refunding Bonds,
issued for the purposes set forth in Section 2.06 and satisfying the conditions set forth in Section
2.07.
"Representation Letter" the letter or letters of representation from the City to, or other
instrument or agreement with, a Securities Depository for Book -Entry Bonds, in which the City,
among other things, makes certain representations to the Securities Depository with respect to
the Book -Entry Bonds, the payment thereof and delivery of notices with respect thereto.
"Reserve Financial Guaranty" means a policy of municipal bond insurance or surety bond
issued by a municipal bond insurer or a letter of credit issued by a bank or other institution if the
obligations insured by such insurer or issued by such bank or other institution, as the case may
be, have ratings at the time of issuance of such policy or surety bond or letter of credit in the
highest rating category (without regard to qualifiers) by S&P and Moody's and, if rated by A.M.
Best & Company, also in the highest rating category (without regard to qualifiers) by A.M. Best
& Company.
"Reserve Financial Guaranty Provider" means an issuer of a Reserve Financial Guaranty.
"Revenues" mean all gross income and revenue received or receivable by the City from
the ownership or operation of the Electric System, including all rates and charges for the Electric
Service and the other services and facilities of the Electric System, all proceeds of insurance
covering business interruption loss relating to the Electric System and all other income and
revenue howsoever derived by the City from the ownership or operation of the Electric System
or otherwise arising from the Electric System, including all net receipts pursuant to Public
Finance Contracts entered into in connection with any Obligations or program of investments
relating to the Electric System and all income from the deposit or investment of any money in
the Light and Power Fund, but excluding (i) proceeds of taxes, (ii) refundable deposits made to
establish credit and advances, (iii) contributions in aid of construction, and (iv) line extension
fees.
"Rule 15c2-12" means Rule 15c2-12 of the Securities and Exchange Commission
adopted pursuant to the Securities Exchange Act of 1934, as amended, as the same may be
amended and supplemented from time to time.
"Securities Depository" means a trust company or other entity which provides a book -
entry system for the registration of ownership interests of Participants in securities and which is
acting as security depository for Book -Entry Bonds.
"Serial Obligations" means Obligations for which no Sinking Fund Installments are
established.
"Serial Parity Obligations" means Serial Obligations which are Parity Obligations.
OHS West:260486430.4 23
"Series" means Obligations issued at the same time or sharing some other common term
or characteristic and designated in the Issuing Instrument pursuant to which such Obligations
were issued as a separate issue or series of Obligations.
"SIFMA Index" means, as of any date, The Securities Industry and Financial Markets
Association Municipal Swap Index as of the most recent date for which such index was
published or such other weekly, high-grade index comprised of seven-day, Tax -Exempt variable
rate demand notes produced by Municipal Market Data, Inc., or its successor, or as otherwise
designated by The Securities Industry and Financial Markets Association; provided, however,
that, if such index is no longer produced by Municipal Market Data, Inc. or its successors, then
"SIFMA Index" shall mean such other reasonably comparable index as may be selected by the
City.
"Sinking Fund Account" means the account by that name in the Debt Service Fund
established pursuant to Section 5.02.
"Sinking Fund Installment" means, with respect to any Term Parity Obligations, each
amount so designated for such Term Parity Obligations in the Issuing Instrument authorizing the
issuance of such Parity Obligations requiring payments by the City to be applied to the
retirement of such Parity Obligations on and prior to the stated maturity date thereof.
"Special Record Date" has the meaning set forth in Section 3.02(f).
"Standard & Poor's" or "S&P" means Standard & Poor's Rating Services and any
successor entity rating Parity Obligations at the request of the City.
"State" means the State of California.
"Subordinate Obligation" means any Obligation which is expressly made subordinate and
junior in right of payment from the Net Revenues and amounts in the Light and Power Fund
available for such payment in accordance with this Master Indenture to the payment of Parity
Obligations and which complies with the provisions of Section 2.08.
"Supplemental Indenture" means any supplemental indenture supplementing or amending
the Indenture as theretofore in effect, entered into by the City and the Trustee in accordance with
Article VII.
"Tax Certificate" means a certificate relating to the requirements of the Code signed on
behalf of the City and delivered in connection with the issuance of a Series of Bonds.
"Tax -Exempt" means, with respect to interest on any obligations of a state or local
government, including the Bonds, that such interest is excluded from the gross income of the
holders thereof (other than any holder who is a "substantial user" of facilities financed with such
obligations or a "related person" within the meaning of Section 147(a) of the Code) for federal
income tax purposes, whether or not such interest is includable as an item of tax preference or
otherwise includable directly or indirectly for purposes of calculating other tax liabilities,
including any alternative minimum tax or environmental tax under the Code.
OHS West:260486430.4 24
"Tax -Exempt Securities" means bonds, notes or other securities the interest on which is
Tax -Exempt.
"Tender Indebtedness" means any Parity Obligations or portions of Parity Obligations, a
feature of which is an option or obligation, on the part of the owners thereof under the terms of
such Parity Obligations, to tender all or a portion of such Parity Obligations to the City, a fiscal
agent, a paying agent, a tender agent or other agent for purchase and requiring that such Parity
Obligations or portions thereof be purchased at the applicable Purchase Price if properly
presented.
"Termination Payment" means with respect to a Qualified Swap Agreement, the amount
payable by the City as a result of the termination of such Qualified Swap Agreement prior to its
scheduled expiration date.
"Term Obligations" means Obligations which are payable on or before their specified
maturity dates from Sinking Fund Installments established for that purpose and calculated to
retire such Obligations on or before their specified maturity dates.
"Term Parity Obligations" means Term Obligations which are Parity Obligations.
"Trust Estate" means, subject to the provisions of the Indenture permitting the application
thereof for the purposes and on the terms and conditions set forth therein (i) the Revenues (ii) all
amounts on deposit in the Light and Power Fund, including the investments, if any, thereof; and
all amounts on deposit in the in the Funds, other than the Rebate Fund, held by the Trustee under
the Indenture, including the investments, if any, thereof.
"Trustee" means, The Bank of New York Mellon Trust Company, N.A., as trustee for the
Bonds under the Indenture and any successor satisfying the requirements of Section 8.09.
"2008 Series A Bonds" means the Bonds authorized by the First Supplemental Indenture.
"Unrealized Item" means each item of revenue or expense of the Electric System
recognized as a revenue or expense of the Electric System in accordance with Generally
Accepted Accounting Principles which are due to unrealized gains or losses caused by marking
assets or liabilities of the Electric System to market.
"Variable Rate Indebtedness" means any Obligation, other than Paired Obligations, the
interest rate on which to the maturity thereof is not established at a rate which is not subject to
fluctuation or subsequent adjustment, either at the time of issuance of such Obligation or some
subsequent date.
Section 1.02 Rules of Construction. Words of the masculine gender shall be deemed
and construed to include correlative words of the feminine and neutral genders. Except where
the context otherwise requires, words importing the singular number shall include the plural
number and vice versa, and words importing persons shall include corporations and associations,
including districts, agencies and other public bodies, as well as natural persons. Unless
otherwise indicated, references in this Master Indenture to subsections, Sections and Articles are
to such subsections, Sections and Articles of this Master Indenture. Unless the context requires
OHS West:260486430.4 25
otherwise, the terms "herein," "hereof," "hereunder" and any similar terms, as used in this
Master Indenture, shall refer to this Master Indenture as a whole and not to any particular
provisions of this Master Indenture. Defined terms shall include any variant of the terms set
forth in this Article.
The term "principal" when used with reference to a Capital Appreciation Obligation as of
its maturity date shall refer to the Final Compounded Amount of such Capital Appreciation
Obligation and as to any other date, the Accreted Value of such Capital Appreciation Obligation
as of such date. The term "principal" when used with reference to a Parity Obligation which is a
Qualified Swap Agreement shall refer to the Net Payments due under such Qualified Swap
Agreement. The term "principal" when used with reference to a Parity Obligation which is a
Credit Provider Reimbursement Obligation shall refer to the amount advanced by the Credit
Provider to the extent not included in Parity Obligations as Credit Provider Bonds.
The term "issue" shall include issuance, creation, incurrence, entering into an agreement
or any other act pursuant to which a party may become obligated with respect to an Obligation.
The term "include" shall not be construed to be limited to the items or the type of items listed
after such word, which items are by way of example and not limitation, but the term shall be
construed as meaning "including without limitation."
Section 1.03 Authority for this Master Indenture. This Master Indenture is entered
into by the City pursuant to the provisions of the Charter and the Bond Ordinance.
ARTICLE II
AUTHORIZATION AND ISSUANCE OF BONDS
Section 2.01 Authorization of Bonds.
(a) This Master Indenture provides certain terms and conditions upon which
Bonds of the City to be designated as "City of Vernon Electric System Revenue Bonds" may
be issued from time to time as authorized by Supplemental Indentures. The aggregate principal
amount of Bonds which may be executed, authenticated and delivered under the Indenture is
not limited except as may hereafter be provided in the Indenture or as may be limited by law.
(b) The Bonds may be issued in one or more Series, and the designation thereof,
in addition to the name "City of Vernon Electric System Revenue Bonds," shall include such
further appropriate particular designation added to or incorporated in such title for the Bonds of
any particular Series as the City may determine. Each Bond shall bear upon its face the
designation so determined for the Series to which it belongs.
Section 2.02 Bonds Constitute Special Obligations. The Bonds shall not constitute a
charge against the general credit of the City but shall constitute and evidence special obligations
of the City payable as to principal, Redemption Price, if any, and interest solely from the Net
Revenues and the other funds pledged therefor and available for such payment in accordance
with the Indenture and, with respect to any particular Bonds, from such other sources as shall be
specified in the Supplemental Indenture authorizing the issuance of such Bonds. The Purchase
Price for the Bonds of any Series which are Tender Indebtedness shall be payable from such
OHS West:260486430.4 26
sources, other than the Revenues and the other amounts in the Light and Power Fund, as are
specified in the Supplemental Indenture authorizing the issuance of such Series. The provisions
of this Section shall not preclude the payment, purchase or redemption of Bonds, at the election
of the City, from any other legally available funds. The Bonds are not secured by a legal or
equitable pledge of, or lien or charge upon, any property of the City or any of its income or
receipts except the Trust Estate pledged therefor pursuant to this Master Indenture which pledge
is subject to the provisions hereof permitting the application of the Trust Estate for the purposes
and on the terms and conditions set forth herein. Neither the faith and credit nor the taxing
power of the State of California, the City or any other public agency is pledged to the payment of
the principal or Redemption Price of or the interest on the Bonds. The issuance of the Bonds
shall not directly, indirectly or contingently obligate the City Council of the City to levy or
pledge any form of taxation or to make any appropriation for the payment of the Bonds. The
payment of the principal or Redemption Price of, or interest on, the Bonds does not constitute a
debt, liability or obligation of the State of California or any public agency (other than the special
obligation of the City as provided in the Indenture). Neither the members of the City Council of
the City, nor any person executing a Bond, nor any officer or employee of the City shall be liable
personally for the principal or Redemption Price of, or interest on, the Bonds or be subject to any
personal liability or accountability by reason of the issuance of the Bonds or in respect of any
undertakings by the City under the Indenture. The face of each Bond shall contain a legend to
the effect set forth in this Section.
Section 2.03 Indenture to Constitute Contract. In consideration of the purchase and
acceptance of each Bond issued under the Indenture by those who shall own the same from time
to time, the provisions of each Bond and the provisions of the Indenture applicable to such Bond
shall be deemed to be and shall constitute a contract between the City and the Owner of such
Bond.
Section 2.04 General Provisions for Issuance of Bonds.
(a) All (but not less than all) the Bonds of each Series shall be executed by the
City for issuance under the Indenture and delivered to the Trustee and thereupon shall be
authenticated by the Trustee and by it delivered to the City or upon its order, but only upon the
receipt by the Trustee of the following items (upon which the Trustee may conclusively rely in
determining whether the conditions precedent for the issuance and authentication of such
Series of Bonds have been satisfied):
(1) An executed counterpart of this Master Indenture, as
amended to the date of the initial delivery of such Series of
Bonds, and an executed counterpart of the Supplemental
Indenture authorizing the issuance of such Series of Bonds,
which Supplemental Indenture shall specify: (i) the sources
of payment for the Bonds of such Series other than the
Trust Estate, if any; (ii) the Series designation of such
Bonds; (iii) the authorized principal amount of the Bonds
of such Series; (iv) the purposes for which such Series of
Bonds are being issued, which, for Bonds other than the
2008 Series A Bonds, shall be one of the purposes specified
OHS West:260486430.4 27
in Section 2.05 or 2.06; (v) the date or manner of
determining the date of the Bonds of such Series; (vi) the
maturity date or dates of the Bonds of such Series and
either the principal amount of the Bonds of such Series
maturing on each such maturity date or the method for
determining such principal amount; (vii) which, if any, of
the Bonds of such Series shall constitute Serial Obligations
and which, if any, shall constitute Term Obligations; (viii)
the interest rate or rates on the Bonds of such Series or the
manner of determining such interest rate or rates; (ix) the
Interest Payment Dates for the Bonds of such Series or the
manner of establishing such Interest Payment Dates; (x) the
Authorized Denominations of the Bonds of such Series;
(xi) the Redemption Price or Prices, if any, and, subject to
Article IV, the redemption terms for the Bonds of such
Series; (xii) the Sinking Fund Installments, if any, for the
Bonds of such Series which constitute Term Obligations,
provided that each Sinking Fund Installment, if any, shall
fall upon an Interest Payment Date for the Bonds of such
Series; (xiii) if any of the Bonds of such Series constitute
Tender Indebtedness: (A) the source of payment of the
Purchase Price of such Bonds, (B) the terms and
conditions, including Purchase Price, for the exercise by the
Owners or Beneficial Owners of such Bonds of the
purchase, (C) any extension options granted with respect to
such Bonds and (D) the terms and conditions, including
Purchase Price, upon which the Bonds of such Series shall
be subject to mandatory tender for purchase; (xiv) if the
Bonds of such Series are not to be Book -Entry Bonds, a
statement to such effect; (xv) if the Bonds of such Series
are Tax -Exempt Securities, the account in the Rebate Fund
established for such Series and the terms and conditions
thereof; (xvi) the application of the proceeds of the sale of
such Series of Bonds including the amount, if any, to be
deposited in the funds and accounts under the Indenture;
(xvii) the forms of the Bonds of such Series and of the
certificate of authentication thereon; and (xviii) the
appropriate funds and accounts, if any, relating to such
Series of Bonds established under such Supplemental
Indenture;
(2) an Opinion of Bond Counsel, dated the date of the initial
delivery of such Series of Bonds, to the effect that this
Master Indenture, as amended to such date, as
supplemented by the Supplemental Indenture authorizing
the issuance of such Series of Bonds, constitutes the valid
and binding obligations of the City;
OHS West:260486430.4 28
(3) With respect to any Additional Bonds other than the 2008
Series A Bonds, the Trustee shall have received the
certificate referred to in Section 2.07(e);
(4) With respect to any Refunding Bonds, the Trustee shall
have received a copy of the Opinion of Bond Counsel
required in Section 2.06(b); and
(5) Such further documents, moneys and securities as are
required by the applicable provisions of Section 2.05 or
Section 2.06 or of the Supplemental Indenture authorizing
the issuance of such Series of Bonds.
(b) After the original issuance of Bonds of any Series, no Bonds of such Series
shall be issued except in lieu of or in substitution for other Bonds of such Series pursuant to the
Indenture.
Section 2.05 Additional Bonds. One or more Series of Additional Bonds may be
issued, authenticated and delivered upon original issuance for the purpose of paying all or a
portion of the Costs of any Capital Improvement. Additional Bonds may be issued in a principal
amount sufficient to pay such Costs, including making of any deposits into the funds or accounts
required by the provisions of the Indenture and providing amounts for Costs of Issuance of such
Additional Bonds.
Section 2.06 Refunding Bonds.
(a) One or more Series of Refunding Bonds may be issued, authenticated and
delivered upon, original issuance for the purpose of refunding all or any portion of the
Outstanding Parity Obligations. Refunding Bonds may be issued in a principal amount
sufficient to accomplish such refunding including providing amounts for the Costs of Issuance
of such Refunding Bonds, and the making of any deposits into the funds and accounts required
by the provisions of the Indenture.
(b) Refunding Bonds of each Series shall be authenticated and delivered by the
Trustee only upon receipt by the Trustee (in addition to the documents required by
Section 2.04) of an Opinion of Bond Counsel to the effect that the Parity Obligations (or the
portion thereof) to be refunded are deemed paid pursuant to the Issuing Instrument authorizing
such Parity Obligations, Such Opinion of Bond Counsel may rely upon an Accountant's
Certificate as to the sufficiency of available funds to pay such Parity Obligations. The Trustee
may conclusively rely on such Opinion of Bond Counsel in determining whether the conditions
precedent for the issuance and authentication of such Series of Refunding Bonds have been
satisfied.
(c) The proceeds, including accrued interest, of the Refunding Bonds of each
Series shall be applied simultaneously with the delivery of such Bonds as provided in the
Supplemental Indenture authorizing such Series of Refunding Bonds.
OHS West:260486430.4 29
Section 2.07 Conditions to Issuance of Parity Obligations.
(a) Without regard to subsection (e) of this Section, the City may, at any time
and from time to time, issue or enter into a transaction under a Qualified Swap Agreement, the
Net Payments under which shall constitute Parity Obligations, provided (i) the transaction shall
relate to a principal amount of Outstanding Parity Obligations or investments held under an
Issuing Instrument for Parity Obligations, in each case as specified by an Authorized City
Representative; (ii) the notional amount of the transaction shall not exceed the principal
amount of the related Parity Obligation or the amount of such investments, as applicable; and
(iii) either: (x) at the time of entering into the transaction, the counterparty (or a guarantor of
the counterparty's obligations under the transaction) shall be rated at least "Aa" by Moody's or
"AA" by S&P and the Qualified Swap Agreement shall include the Collateral Requirements; or
(y) the City has received a Rating Confirmation from each Rating Agency then rating Parity
Obligations at the request of the City with respect to such transaction.
(b) The City may, at any time and from time to time, issue Refunding Parity
Obligations provided that either: (i) the requirements set forth in subsection (e) of this Section
are satisfied upon the issuance of such Refunding Parity Obligations and the application of the
proceeds thereof; or (ii) the City has provided to the Trustee a certificate showing that the
Aggregate Adjusted Annual Debt Service for all Parity Obligations to be Outstanding after the
issuance of such Refunding Parity Obligations shall not exceed the Aggregate Adjusted Annual
Debt Service for all Parity Obligations Outstanding immediately prior to the issuance of such
Refunding Parity Obligations in each Fiscal Year from the date of issuance of such Refunding
Parity Obligations to the last Fiscal Year in which any Parity Obligations Outstanding
immediately prior to and subsequent to the issuance of such Refunding Parity Obligations are
scheduled to remain Outstanding.
(c) Without regard to subsection (e) of this Section, the City may issue the 2008
Series A Bonds.
(d) Without regard to subsection (e) of this Section, the City may, at any time
and from time to time, enter into Credit Support Agreements or otherwise become obligated for
Credit Provider Reimbursement Obligations with respect to Parity Obligations.
(e) The City may, at any time and from time to time, issue any Additional
Parity Obligations, provided the City obtains or provides either (x) a certificate or certificates,
prepared by the City or at the City's option by an Independent Engineer, showing: (i) that the
Adjusted Net Revenues for the applicable Calculation Period, which Calculation Period shall
be selected by the City in its sole discretion, shall have amounted to at least 1.25 times the
Maximum Adjusted Annual Debt Service on all Parity Obligations to be Outstanding
immediately after the issuance of the proposed Additional Parity Obligations; and (ii) that the
Net Revenues for such applicable Calculation Period shall have amounted to at least 1.00 times
the Maximum Adjusted Annual Debt Service on all Parity Obligations to be Outstanding
immediately after the issuance of the proposed Additional Parity Obligations; or (y) a
certificate or certificates, prepared by the City or at the City's option by an Independent
Engineer, showing: (i) that the projected Adjusted Net Revenues during each of the five
complete Fiscal Years beginning with the first Fiscal Year following the issuance of such
OHS West:260486430.4 30
Parity Obligations in which interest thereon is not capitalized, in whole or in part, shall have
amounted to at least 1.25 times the Maximum Adjusted Annual Debt Service on all Parity
Obligations to be Outstanding during the applicable Fiscal Year; and (ii) that the projected Net
Revenues during each of the five complete Fiscal Years beginning with the first Fiscal Year
following the issuance of such Parity Obligations in which interest thereon is not capitalized, in
whole or in part, shall have amounted to at least 1.00 times the Maximum Adjusted Annual
Debt Service on all Parity Obligations to be Outstanding during the applicable Fiscal Year.
For purposes of preparing the certificate or certificates described in clause (x) of this
subsection, the City and any Independent Engineer shall utilize and rely on financial statements
prepared by the City which have been subject to audit by an Independent Certified Public
Accountant but may utilize and rely upon the books and records of the City or any financial
statements prepared by the City which have not been subject to audit by an Independent
Certified Public Accountant if audited financial statements for the particular Calculation Period
selected by the City are not available.
Section 2.08 Conditions of Issuance of Subordinate Obligations.
(a) The City may, at any time or from time to time, issue Subordinate
Obligations without satisfying the requirements of Section 2.07 for any purpose in connection
with the Electric System, including, without limitation, the financing of a part of the cost of
acquisition and construction of any Capital Improvement or the refunding of any Subordinate
Obligations or Outstanding Parity Obligations (or portions thereof). Such Subordinate
Obligations may be secured by a pledge of Revenues and amounts in the Light and Power
Fund, provided that any such pledge shall be, and shall be expressed to be, subordinate and
junior in all respects to the pledge of the Revenues and amounts in the Light and Power Fund
securing such Parity Obligations as may be Outstanding from time to time, including Parity
Obligations issued after the issuance of such Subordinate Obligations. Such Subordinate
Obligations may be payable from Net Revenues and amounts in the Light and Power Fund as
may from time to time be available for such payment in accordance with this Master Indenture,
provided that any such payment shall be, and shall be expressed to be, subordinate and junior
in all respects to the payment from such sources of such Parity Obligations as may be
Outstanding from time to time, including Parity Obligations issued after the issuance of such
Subordinate Obligations.
(b) The Issuing Instrument for Subordinate Obligations shall contain provisions
(which shall be binding on all owners of such Subordinate Obligations) not more favorable to
the owners of such Subordinate Obligations than the following:
(1) If an Event of Bankruptcy with respect to the City shall
occur and be continuing, the owners of all Outstanding
Parity Obligations shall be entitled to receive payment in
full in cash of all principal, interest and all other payments
due with respect to all such Parity Obligations, including
any Termination Payments, before the owners of the
Subordinate Obligations are entitled to receive any
payment from the Net Revenues and amounts in the Light
OHS West:260486430.4 31
and Power Fund with respect to the Subordinate
Obligations.
(2) In the event that any Subordinate Obligation is declared
due and payable before its expressed maturity because of
the occurrence of an event of default (under circumstances
when the provisions of (1) above shall not be applicable),
the owners of all Parity Obligations Outstanding at the time
such Subordinate Obligation so becomes due and payable
because of such event of default, shall be entitled to receive
payment in full in cash of all principal, interest and all other
payments due with respect to all such Parity Obligations
before the owners of such Subordinate Obligation are
entitled to receive any accelerated payment from Net
Revenues and amounts in the Light and Power Fund with
respect to such Subordinate Obligation. For purposes of
this subdivision (2), a termination payment with respect to
a Public Finance Contract which is not a Qualified Swap
Agreement shall not be considered a declaration of amounts
due and payable before expressed maturity even if declared
due and payable because of the occurrence of an event of
default.
(3) If any default with respect to any Outstanding Parity
Obligation shall have occurred and be continuing (under
circumstances when the provisions of (1) above shall not be
applicable), the owners of all Outstanding Parity
Obligations shall be entitled to receive payment in full in
cash of all principal, interest and all other payments due
with respect to all such Parity Obligations as the same
become due and payable in accordance with the provisions
of the Issuing Instrument authorizing the issuance of such
Parity Obligations before the owners of the Subordinate
Obligations are entitled to receive, subject to the provisions
of (5) below, any payment from the Net Revenues and
amounts in the Light and Power Fund with respect to the
Subordinate Obligations.
(4) No Bondowner or owner of other Outstanding Parity
Obligations shall be prejudiced in his right to enforce
subordination of the Subordinate Obligations by any act or
failure to act on the part of the City or the Trustee.
(5) The Subordinate Obligations may provide that the
provisions (1), (2), (3) and (4) above are solely for the
purpose of defining the relative rights of the Owners of the
Bonds and the owners of all other Outstanding Parity
OHS West:260486430.4 32
Obligations on the one hand, and the owners of Subordinate
Obligations on the other hand, and that nothing therein
shall impair, as between the City and the owners of the
Subordinate Obligations, the obligation of the City, which
may be unconditional and absolute, to pay to the owners of
such Subordinate Obligations the principal thereof and
premium, if any, and interest thereon in accordance with
their terms, nor shall anything in the Indenture prevent the
owners of the Subordinate Obligations from exercising all
remedies otherwise permitted by applicable law, or under
the Subordinate Obligations or the Issuing Instruments
authorizing the Subordinate Obligations, upon default
under such Subordinate Obligations or Issuing Instruments,
subject to the rights under (1), (2), (3) and (4) above of the
Owners of Outstanding Bonds and the owners of other
Outstanding Parity Obligations to receive payment from the
Net Revenues and amounts in the Light and Power Fund
otherwise payable or deliverable to the owners of the
Subordinate Obligations; and the Subordinate Obligations
may provide that, insofar as a trustee, fiscal agent or paying
agent for such Subordinate Obligations is concerned, the
foregoing provisions shall not prevent the application by
such trustee, fiscal agent or paying agent of any moneys
deposited with such trustee, fiscal agent or paying agent for
the purpose of the payment of or on account of the
principal (and premium, if any) and interest on such
Subordinate Obligations if such trustee, fiscal agent or
paying agent did not have knowledge at the time of such
application that such payment was prohibited by the
foregoing provisions.
(c) Any Subordinate Obligations may have such rank or priority with respect to
any other Subordinate Obligations as may be provided in the Issuing Instrument, authorizing
the issuance or securing of such Subordinate Obligations and may contain such other
provisions as are not in conflict with the provisions of the Indenture.
OHS West:260486430.4 33
Section 2.09 Credit Provider Bonds. Subject only to Section 2.02, notwithstanding
any other provision contained in the Indenture to the contrary, Bonds which are Credit Provider
Bonds shall have terms and conditions, including terms of maturity, payment, prepayment and
interest rate, as shall be specified in the applicable Credit Support Agreement.
ARTICLE III
GENERAL TERMS AND PROVISIONS OF BONDS
Section 3.01 Medium of Payment; Form and Date; Letters and Numbers.
(a) Unless otherwise provided with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series, the Bonds of each Series shall be payable,
with respect to principal, Redemption Price, if any, Purchase Price, if any, and interest in any
coin or currency of the United States of America which at the time of payment is legal tender
for the payment of public and private debts.
(b) The Bonds shall be issued in the form of fully registered bonds without
coupons in Authorized Denominations.
(c) Each Bond shall be lettered and numbered as determined by the Trustee so
as to be distinguished from every other Bond.
(d) The Bonds of each Series shall be dated as provided in or determined
pursuant to the Supplemental Indenture authorizing such Series. Unless otherwise provided
with respect to a Series of Bonds in the Supplemental Indenture authorizing such Series, the
Bonds of each Series shall bear interest from the Interest Payment Date next preceding the date
of authentication thereof unless: (i) such Bonds are authenticated on an Interest Payment Date,
in which event from such Interest Payment Date; and (ii) unless such Bonds are authenticated
after a Record Date and before the next succeeding Interest Payment Date for such Bonds, in
which event from such Interest Payment Date; provided, however, that if the date of
authentication of a Bond shall be prior to the Record Date for the first Interest Payment Date
for such Bond, such Bond shall bear interest from its original dated date. Notwithstanding the
foregoing, if the City shall default in the payment of interest, then the Bonds shall bear interest
from the date to which interest has been paid or if no interest has been paid, from their original
dated date.
(e) Unless otherwise provided with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series, the interest payable on Bonds shall be
calculated on the basis of a 360-day year of twelve, thirty day months.
(f) Except as otherwise provided in the Representation Letter with a Securities
Depository for Book -Entry Bonds (or, with respect to a Series of Bonds in the Supplemental
Indenture authorizing such Series), interest on each Bond shall be payable on each Interest
Payment Date for such Bond and shall be paid by check of the Trustee mailed on such Interest
Payment Date to the Owner of such Bond shown on the Bond Register as of the close of
business on the Record Date immediately preceding such Interest Payment Date. Owners of at
least $1,000,000 aggregate principal amount (or, with respect to a Series of the Bonds, such
OHS West:260486430.4 34
other principal amount as may be specified in the Supplemental Indenture authorizing such
Series), of Bonds of any Series may, at any time prior to a Record Date with respect to the
payment of interest on such Bonds, give the Trustee written instructions for payment of such
interest on each succeeding Interest Payment Date for such Bonds by wire transfer or by
deposit to an account within the United States of America. Notwithstanding the foregoing,
however, if the City shall default in the payment of interest due on Bonds on any Interest
Payment Date, such interest shall cease to be payable to the persons in whose name such Bonds
were registered in the Bond Register on the Record Date for such Interest Payment Date, and
shall be payable, when and if' paid by the City, to the persons in whose names such Bonds are
registered at the close of business on the record date fixed therefor by the Trustee (each a
"Special Record Date"), which shall not be more than 15 days and not less than 10 days prior
to the date of the proposed payment.
(g) Unless redeemed prior to such date, the principal of each Bond shall be
payable on its maturity date and the Redemption Price of each Bond called for redemption
prior to maturity, subject to the terms of Section 4.05(b), shall be payable on the applicable
redemption date. Except as otherwise provided in the Representation Letter with a Securities
Depository for Book -Entry Bonds, the principal and, if applicable, the Redemption Price of
each Bond shall be payable only upon presentation and surrender of such Bond at the Principal
Office of the Trustee or any other Paying Agent for such Bond for cancellation; provided that
the Trustee may agree with the Owner of any Bond that such Owner may, in lieu of
surrendering the same for a new Bond, endorse on such Bond a record of partial payment of
the principal of such Bond in the form set forth below (which shall be typed or printed on such
Bond):
PAYMENTS ON ACCOUNT OF PRINCIPAL
Principal Balance of Principal Signature
Payment Date Amount Paid Amount Unpaid of Owner
The Trustee shall maintain a record of each such partial payment made in
accordance with the foregoing agreement and such record of the Trustee shall be conclusive.
Such partial payment shall be valid upon payment of the amount thereof to the Owner of such
Bond, and the City and the Trustee shall be fully released and discharged from all liability to the
extent of such payment regardless of whether such endorsement shall or shall not have been
made upon such Bond by the Owner thereof and regardless of any error or omission in such
endorsement.
Section 3.02 Legends. Bonds may contain or have endorsed thereon such provisions,
specifications and descriptive words not inconsistent with the provisions of the Indenture as may
be necessary or desirable to comply with custom, the rules of any securities exchange,
OHS West:260486430.4 35
a'
commission or brokerage agent, or otherwise, as may be determined by the City prior to the
authentication and delivery thereof.
Section 3.03 Execution and Authentication.
(a) The Bonds shall be executed in the name of the City by the manual or
facsimile signature of the Mayor or City Administrator of the City and its seal (or a facsimile
thereof) shall be impressed, imprinted, engraved or otherwise reproduced thereon and attested
by the facsimile or manual signature of the City Clerk of the City, or in such other manner as
may be authorized by Supplemental Indenture or required by law. In case any one or more of
the officers who shall have signed or sealed any of the Bonds shall cease to be such officer
before the Bonds so signed and sealed shall have been authenticated and delivered by the
Trustee, such Bonds may, nevertheless, be authenticated and delivered as provided in the
Indenture, and may be issued as if the persons who signed or sealed such Bonds had not ceased
to hold such offices. Any Bond may be signed and sealed on behalf of the City by such
persons as at the time of the execution of such Bond shall be duly authorized or hold the proper
office in City, although at the date borne by such Bonds such persons may not have been so
authorized or have held such office.
(b) The Bonds of each Series shall bear thereon a certificate of authentication,
in the form set forth in the Supplemental Indenture authorizing such Series, executed manually
by the Trustee, including any Paying Agent appointed as agent for the Trustee pursuant to
Section 8.01(b). Only such Bonds as shall bear thereon such certificate of authentication shall
be entitled to any right or benefit under the Indenture and no Bond shall be valid or obligatory
for any purpose until such certificate of authentication shall have been duly executed by the
Trustee. Such certificate of the Trustee upon any Bond executed on behalf of the City shall be
conclusive evidence that the Bond so authenticated has been duly authenticated and delivered
under the Indenture and that the Owner thereof is entitled to the benefits of the Indenture.
Section 3.04 Book -Entry Bonds.
(a) Unless otherwise provided with respect to a Series of Bonds in the
Supplemental Indenture authorizing such Series, the Bonds of each Series shall be issued as
Book -Entry Bonds in fully registered form with no distribution of physical bonds made to the
public. Except as otherwise provided in Section 3.05, the Book -Entry Bonds of each Series
shall be registered in the name of the Securities Depository or its Nominee as directed by the
Securities Depository. The payment of Book -Entry Bonds and the giving of notices shall be
governed by the terms of the Representations Letter with the Securities Depository for the
Book -Entry Bonds. DTC shall act as the initial Securities Depository for the Book -Entry
Bonds and has designated Cede & Co. as its Nominee. DTC has represented to the City that it
shall maintain a book -entry program in recording ownership interests in the Book -Entry Bonds
of its Participants and the ownership interests of a Beneficial Owner of a Bond shall be
recorded through book entries on the records of the Participants.
(b) Bonds of each Series which are not Book -Entry Bonds shall be delivered to
the Owners thereof as fully registered Bonds in the form specified in the Supplemental
OHS West:260486430.4 36
Indenture authorizing the issuance of such Series of Bonds, with the ownership of such Bonds
being recorded in the Bond Register.
(c) In the event that the DTC or any successor Securities Depository ceases to
act as Securities Depository for Bonds of a Series, then Bonds of such Series in certificated
form shall be issued to the Owners in substantially the form of the Bond delivered to the
former Securities Depository or its Nominee with necessary changes to reflect non -book -entry
status as shall be approved by the officers of the City executing such Bonds. The issuance of
individual Bonds in certificated form shall be accomplished as provided in the Representation
Letter.
(d) With respect to Bonds registered in the Bond Register in the name of a
Securities Depository or a Nominee, the City, the Trustee -and each Paying Agent shall have no
responsibility or obligation to any Participant or to any Beneficial Owner. Without limiting the
immediately preceding sentence, none of the City, the Trustee or. any Paying Agent shall have
any responsibility or obligation with respect to (i) the accuracy of the records of a Securities
Depository, its Nominee or any Participant as to any ownership interest in the Bonds, (ii) the
delivery to any Participant, Beneficial Owner or any other person, other than an Owner as
shown in the Bond Register, of any notice with respect to the Bonds, or (iii) the payment to any
Participant, Beneficial Owner or any other person, other than an Owner as shown in the Bond
Register, of any amount with respect to principal and Purchase Price of, premium, if any, or
interest on the Bonds. The City, the Trustee and each Paying Agent may treat and consider the
person in whose name each Bond is registered in the Bond Register as the absolute Owner of
such Bond for the purpose of payment of principal and Purchase Price of, premium, if any, and
interest on such Bond, for the purpose of registering transfers with respect to such Bond, and
for all other purposes whatsoever. None of the City, the Trustee or any Paying Agent shall be
affected by any notice to the contrary. All principal and Purchase Price of, premium, if any,
and interest on the Bonds shall be paid only to or upon the order of the respective Owner, as
shown in the Bond Register, or their respective attorneys duly authorized in writing, and all
such payments shall be valid and effective to fully satisfy and discharge the City's obligations
with respect to payment of principal and Purchase Price of, Redemption Price, if any, and
interest on the Bonds to the extent of the sum or sums so paid, and none of the City, the
Trustee or any Paying Agent shall be affected by any notice to the contrary. No person other
than an Owner, as shown in the Bond Register, shall receive a Bond evidencing the obligation
of the City to make payments of principal and Purchase Price of, Redemption Price, if any, and
interest pursuant to the Indenture.
(e) Upon delivery by a Securities Depository to the City of written notice to the
effect that the Securities Depository has determined to substitute a new Nominee in place of its
current Nominee, and subject to the provisions in the Indenture with respect to Record Dates,
the word Nominee for purposes of the Indenture shall refer to such new Nominee of the
Securities Depository; and upon receipt of such a notice the City shall promptly deliver a copy
of the same to the Trustee.
(f) Notwithstanding any other provision of the Indenture and so long as Book -
Entry Bonds are registered in the name of a Nominee, the City and the Trustee shall cooperate
with the Securities Depository in effecting payment of the principal of, Redemption Price, if
OHS West:260486430.4 37
any, and interest on such Book -Entry Bonds by arranging for payment in such manner as the
Securities Depository may reasonably instruct in writing that funds for such, payments are
properly identified and are made available on the date they are due, all in accordance with the
Representation Letter, the provisions of which the, Trustee may rely upon to implement the
foregoing procedures.
(g) A Securities Depository for the Book -Entry Bonds may resign upon giving
30 days written notice of such resignation to the City and the Trustee. The City may terminate
the use of the book -entry system of a Securities Depository for Book -Entry Bonds upon giving
30 days written notice of such termination to the Securities Depository and the Trustee. Any
such resignation or termination shall become effective upon the earlier of the appointment of a
successor Securities Depository for Book -Entry Bonds by the City or the issuance of Bonds
which are not Book -Entry Bonds pursuant to Section 3.05.
Section 3.05 Transfers Outside Book -Entry Program.; In the event that the
resignation or removal of a Securities Depository has become effective pursuant to Section
3.04(g), then the City shall thereupon discontinue the current book -entry program for the Book -
Entry Bonds with such Securities Depository. In such event, the City shall cause the Trustee to
obtain from the former Securities Depository a list showing the interests of the Participants in the
Book -Entry Bonds and shall cause such Book -Entry Bonds to be surrendered to the Trustee on or
before the date any replacement Bonds are to be issued. Furthermore, in such event the City
determines to use a substitute Securities Depository, the City shall so notify the Trustee and each
Paying Agent for Book -Entry Bonds. If, prior to the termination of the current Securities
Depository's book -entry system for the Book -Entry Bonds, the City fails to identify another
qualified Securities Depository to replace the current Securities Depository, then the Book -Entry
Bonds shall no longer be required to be registered in the name of a Securities Depository or its
Nominee and the City shall issue, and the Trustee shall authenticate, replacement Bonds in the
appropriate amounts and in whatever name or names the Owners of the Book -Entry Bonds shall
designate pursuant to the Representation Letter with the former Securities Depository. In the
event the City determines that the Beneficial Owners of the Bonds shall be able to obtain
physical Bonds through a Securities Depository, the City may notify the Participants identified
by the Securities Depository as having an interest in the Bonds of the availability of such
physical Bonds and the Trustee shall authenticate, transfer and exchange Bonds as required by
the Securities Depository in the appropriate names and amounts, which shall be in Authorized
Denominations.
Section 3.06 Bond Register. The Trustee shall keep or cause to be kept, at its Principal
Office, the Bond Register for the registration and transfer of the Bonds of each Series which
shall at all times be open to inspection during regular business hours by the City' and, upon
presentation for such purpose, the Trustee shall, under such reasonable regulations as it may
prescribe, register or transfer or cause to be registered or transferred on said Bond Register,
Bonds of each Series as provided in the Indenture.
The City, the Trustee and each Paying Agent may rely on the address of the Owner of
each Bond as it appears on the Bond Register for any and all purposes. It shall be the duty of the
Owner of each Bond to give writtennoticeto the Trustee of any change in the Owner's address
so that the Bond Register may be revised accordingly.
OHS West:260486430.4 38
Section 3.07 Interchangeability of Bonds. Upon surrender of a Bond at the Principal
Office of the Trustee, together with a written instrument of transfer satisfactory to the Trustee
and duly executed by the Owner or the Owner's attorney duly authorized in writing, may, at the
option of the Owner thereof, and upon payment by such Owner of any charges which the Trustee
may make as provided in Section 3.09, be exchanged for an equal aggregate principal amount of
Bonds of the same Series, terms and maturity of any other Authorized Denominations.
Section 3.08 Negotiability, Transfer and Registry. Each Bond shall be transferable
only upon the Bond Register, upon surrender thereof, together with a written instrument of
transfer satisfactory to the Trustee, duly executed by the Owner or the Owner's duly authorized
attorney. Upon the transfer of any such Bond, the City shall execute and the Trustee shall
authenticate, deliver and register in the Bond Register in the name of the transferee a new Bond
or Bonds of the same aggregate principal amount, Series, terms and maturity as the surrendered
Bond.
Section 3.09 Regulations With Respect to Exchanges and Transfers. Subject to the
terms of a Representation Letter with a Securities Depository for Book -Entry Bonds, in all cases
in which the privilege of exchanging Bonds or transferring Bonds is exercised, the City shall
execute and the Trustee shall authenticate and deliver Bonds in accordance with the provisions of
the Indenture relating to such Bonds. All Bonds surrendered in any such exchanges or transfers
shall forthwith be delivered to the Trustee and cancelled by the Trustee. Unless the Indenture
relating to such Bonds provides that such transfer or exchange shall be made without charge to
the Owner, for every such exchange or transfer of Bonds, whether temporary or definitive, the
City or the Trustee may make a charge sufficient to reimburse it for any tax, fee or other
governmental charge required to be paid and any other cost incurred by the City or the Trustee
with respect to such exchange or transfer.
Section 3.10 Bonds Mutilated, Destroyed, Stolen or Lost. Subject to the terms of a
Representation Letter with a Securities Depository for Book -Entry Bonds, if any Bond becomes
mutilated or is lost, stolen or destroyed, the City may execute and the Trustee shall authenticate
and deliver a new Bond of like date of Series, maturity, principal amount and terms as the Bond
so mutilated, lost, stolen or destroyed; provided that (i) in the case of such mutilated Bond, such
Bond is first surrendered to City or the Trustee, (ii) in the case of any such lost, stolen or
destroyed Bond, there is first furnished evidence of such loss, theft or destruction satisfactory to
the Trustee together with indemnity satisfactory to the Trustee, (iii) all other reasonable
requirements of the City and the Trustee are complied with, and (iv) expenses in connection with
such transaction are paid by the Owner. Any Bond surrendered for exchange shall be cancelled.
Any such new Bond issued pursuant to this Section in substitution for a Bond alleged to be
destroyed, stolen or lost shall constitute original additional contractual obligations on the part of
the City, whether or not the Bond so alleged to be destroyed, stolen or lost be at any time
enforceable by anyone, and shall be equally payable from the Net Revenues and the other funds
pledged therefor and available under the Indenture on a parity with and entitled to equal and
proportionate benefits with, all other Bonds.
OHS West:260486430.4 39
Section 3.11 Temporary Bonds.
(a) Subject to the terms of a Representation Letter with a Securities Depository
for Book -Entry Bonds, until the definitive Bonds are prepared, the City may execute, in the
same manner as is provided in Section 3.03, and upon the request of the City, the Trustee shall
authenticate and deliver, in lieu of definitive Bonds, but subject to the same provisions,
limitations and conditions as the definitive Bonds except as to the exchangeability for Bonds,
one or more temporary Bonds substantially of the tenor of the definitive Bonds in lieu of which
such temporary Bond or Bonds are issued, in Authorized Denominations, and with such
omissions, insertions and variations as may be appropriate to temporary Bonds. The
installments of interest payable on such temporary Bonds shall be payable in the same manner
as interest is payable on the definitive Bonds in lieu of which such temporary Bonds were
issued. The City, at its own expense, shall prepare and execute and, upon the surrender of such
temporary Bonds for exchange and the cancellation of such surrendered temporary Bonds, the
Trustee shall authenticate and, without charge to the Owner thereof, deliver in exchange
therefor, definitive registered Bonds of the same aggregate Series, principal amount, terms,
maturity and date of issue as the temporary Bonds surrendered. Until so exchanged, the
temporary Bonds of a Series shall in all respects be entitled to the same benefits and security as
definitive Bonds authenticated and issued pursuant to the Indenture authorizing the issuance of
such Series of Bonds.
(b) Temporary Bonds authorized in more than one denomination, upon
surrender thereof at the Principal Office of the Trustee, may at the option of the Owner thereof,
and upon payment by such Owner of any charges which may be made as provided in Section
3.09 be exchanged for an equal aggregate principal amount of temporary Bonds of the same
Series, maturity, and containing the same terms, of any of the Authorized Denominations as
shall be requested by such Owner.
(c) All temporary Bonds surrendered in exchange either for another temporary
Bond or Bonds or for a definitive Bond or Bonds shall be forthwith cancelled by the Trustee.
Section 3.12 Cancellation and Destruction of Bonds. All Bonds paid or redeemed,
either at or before maturity, and all Bonds surrendered for transfer or exchange, shall be
delivered to the Trustee when such payment, redemption or surrender is made, and such Bonds,
together with all Bonds purchased by the Trustee, shall thereupon be promptly cancelled. Bonds
so cancelled may at any time be destroyed by the Trustee, who shall executea certificate of
destruction in duplicate by the signature of one of its authorized officers describing the Bonds so
destroyed, and one executed certificate shall be filed with the City and the other executed
certificate shall be retained by the Trustee.
ARTICLE IV
REDEMPTION OF BONDS
Section 4.01 'Privilege of Redemption and Redemption Price. Bonds of each Series
subject to redemption prior to maturity pursuant to the Supplemental Indenture authorizing such
Series shall be redeemable, upon giving notice as provided in this Article IV, at such times and at
OHS West:260486430.4 40
such redemption prices as shall be specified in or pursuant to the Supplemental Indenture
authorizing such Series and upon such terms as may be specified in this Article IV.
Section 4.02 Redemption at the Direction of City. In the case of a redemption of
Bonds of any Series at the option or direction of the City, the City shall give written notice to the
Trustee of the exercise of its option to redeem Bonds or of its direction to otherwise cause the
redemption of Bonds at its direction, and of the redemption date, principal amounts of the Bonds
of such Series and maturity to be redeemed (which Series, maturities and principal amounts shall
be determined by the City in its sole discretion, subject to any limitations with respect thereto
contained in the Supplemental Indenture authorizing such Series of Bonds and provided that,
with respect to any Bond to be redeemed in part, the portion of such Bond which is not to be
redeemed shall be in an Authorized Denomination). Such notice shall be given at least forty (40)
days prior to the redemption date or such shorter period as shall be acceptable to the Trustee. In
the event notice of redemption shall have been given as in Section 4.05 provided, other than a
conditional notice pursuant to Section 4.05(b), there shall be paid on or prior to the redemption
date to the Trustee an amount in cash which, in addition to other moneys, if any, available
therefor held by the Trustee, shall be sufficient to redeem on the applicable redemption date at
the Redemption Price, all of the Bonds to be redeemed.
Section 4.03 Redemption Otherwise Than at City's Direction. Whenever by the
terms of the Indenture, the Trustee is required or authorized to redeem Bonds otherwise than at
the option or direction of the City and the Indenture does not expressly set forth the principal
amount of Bonds of each Series and maturity so subject to redemption to be redeemed, the City
may select the principal amounts of the Bonds of each Series and maturity to be redeemed
(which Series, maturities and principal amounts to be redeemed shall be determined by the City
in its sole discretion, subject to any limitations with respect thereto contained in the Indenture
and provided that, with respect to any Bond to be redeemed in part, the portion of such Bond
which is not to be redeemed shall be in an Authorized Denomination) and in the event the City
does not notify the Trustee of such Series, maturities, and principal amounts, to be redeemed on
or before the forty-fifth (45th) day preceding the redemption date, the Trustee shall, in its sole
discretion, subject to any limitations with respect to the Series, maturity, or principal amount of
Bonds to be redeemed contained in the Indenture, select the Series, maturities and principal
amounts of Bonds to be redeemed, which selection shall be conclusive, give the notice of
redemption and pay out of moneys available therefor the Redemption Price thereof to the
Owners of the Bonds to be redeemed or to appropriate Paying Agents in accordance with the
terms of this Article IV.
Section 4.04 Selection of Bonds to be Redeemed. If less than all of the Outstanding
Bonds, or less than all of the Outstanding Bonds of like Series and maturity, shall be called for
prior redemption, except as otherwise provided with respect to Credit Provider Bonds in the
Supplemental Indenture authorizing such Credit Provider Bonds or in the applicable Credit
Support Agreement or except as otherwise provided with respect to Book -Entry Bonds in a
Representation Letter, the particular Bonds or portions of Bonds to be redeemed shall, subject to
any limitations with respect thereto contained in the Indenture, be selected at random by the
Trustee in such manner as the Trustee in its discretion may deem fair and appropriate; provided,
however, that the portion of any Bond of a denomination greater than the minimum Authorized
Denomination for the Bonds of a Series shall be redeemed in part only in a principal amount
OHS West:260486430.4 41
such that the portion of such Bond which is not redeemed shall be in an Authorized
Denomination for such Series and that, in selecting portions of Bonds of a Series for redemption,
the Trustee shall treat each Bond of each Series as representing that number of Bonds of the
minimum Authorized Denomination for such Series which is obtained by dividing the principal
amount of such Bond by the minimum Authorized Denomination for the Bonds of such Series.
Section 4.05 Notice of Redemption.
(a) When the Trustee shall receive notice from the City of the exercise of its
option to redeem Bonds or of its direction to otherwise cause the redemption of Bonds pursuant
to Section 4.02, and when redemption of Bonds of a Series is authorized or required pursuant
to Section 4.03, the Trustee shall give notice, in the name of the City, of the redemption of
such Bonds, which notice shall be mailed, by first class mail, postage prepaid, not more than
sixty (60) nor less than thirty (30) days before the redemption date to the Owners of any Bonds
to be redeemed (in whole or in part) at their addresses appearing in the Bond Register. Such
notice shall specify the Series and maturity date of the Bonds to be redeemed, the redemption
date and the place or places where amounts due upon such redemption shall be payable and, if
less than all of the Bonds of any like Series and maturity are to be redeemed, the letters and
numbers or other distinguishing marks of such Bonds so to be redeemed, and, in the case of
Bonds to be redeemed in part only, such notice shall also specify the respective portions of the
principal amount thereof to be redeemed. Such notice shall further state that, except as
provided in subsection (b) of this Section, on such date there shall become due and payable
upon each Bond to'be redeemed the Redemption Price thereof, or the Redemption Price of the
specified portions of the principal amount thereof to be redeemed in the case of Bonds to be
redeemed in part only, and that from and after such date interest on such Bond or the portion of
such Bond to be redeemed shall cease to accrue and be payable.
Receipt of such notice shall not be a condition precedent to the redemption of
Bonds and failure of any Owner of a Bond to receive any such notice or any insubstantial defect
in such notice shall not affect the validity of the proceedings for the redemption of Bonds. Any
defect in such notice given to the Owners of less than all of the Bonds to be redeemed shall not
affect the validity of the proceedings for the redemption of the Bonds as to which the notice of
redemption did not contain such defect.
(b) In the event that funds required to pay the Redemption Price of the Bonds
are not on deposit with the Trustee at the time the notice with respect to any redemption of
Bonds at the option of the City is given, such notice shall state that such redemption is
conditional upon the receipt by the Trustee, on or prior to the date fixed for such redemption,
of moneys sufficient to pay the Redemption Price of the Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no force and effect and the City
shall not be required to redeem such Bonds. In the event a notice of redemption of Bonds
contains such a condition and such moneys are not so received, the redemption of Bonds as
described in, the conditional notice of redemption shall not be made and the Trustee shall,
within a reasonable time after the date on which such redemption was to occur, give notice to
the persons and in the manner in which the notice of redemption was given that such moneys
were not so received and that there shall be no redemption of Bonds pursuant to the conditional
notice of redemption.
OHS West:260486430.4 42
(c) If upon the expiration of sixty (60) days succeeding any redemption date,
any Bonds called for redemption shall not have been presented to the Trustee for payment, the
Trustee shall no later than ninety (90) days following such redemption date, send written notice -
by first class mail to the Owner of each Bond not so presented. Failure to mail the notices
required by this subsection to any Owner, or any defect in any notice so mailed, shall not affect
the validity of the proceedings for redemption of any Bonds nor impose any liability on the
Trustee.
(d) In addition to the notice of redemption required pursuant to subsection (a) of
this Section, if any Bonds are to be redeemed, then at the written request of an Authorized City
Representative received at least forty-five (45) days before the redemption date, at least thirty
(30) days before the redemption date, the Trustee shall also give redemption notice by (i)
registered or certified mail, return receipt requested, postage prepaid, (ii) telephonically
confirmed facsimile transmission or (iii) overnight delivery service, to one of the Information
Services.
Failure to give the notices described in this subsection or any defects therein, shall
not in any manner affect the proceedings for redemption of any Bonds.
(e) Neither the City nor the Trustee shall have any responsibility for any defect
in the CUSIP number that appears on any Bonds or in any redemption notice or other notice
with respect thereto, and any such redemption notice or other notice may contain a statement to
the effect that CUSIP numbers have been assigned by an independent service for convenience
of reference and that neither the City nor the Trustee shall be liable for any inaccuracy in such
numbers.
Section 4.06/Partial Redemption of Bonds. Upon surrender of any Bond to be
redeemed in part only, the City shall execute, and the Trustee shall authenticate and deliver to the
Owner of such Bond, at the expense of the City, a new Bond or Bonds of Authorized
Denominations equal in aggregate principal amount to the unredeemed portion of the Bond
surrendered, of the same Series, maturity and terms as the surrendered Bond.
Section 4.07 Effect of Notice and Availability of Redemption Money. Subject to the
provisions of Section 3.01(g), notice of redemption having been duly mailed to the Owners of
the Bonds to be redeemed (in whole or in part), as provided in Section 4.05, and the amount
necessary for the redemption having been made available for that purpose and being available
therefor on the date fixed for such redemption:
(a) the Bonds, or portions thereof, designated for redemption shall, on the date
fixed for redemption, become due and payable at the applicable Redemption Price thereof, as
provided in the Indenture, anything in such Indenture or in the Bonds to the contrary
notwithstanding;
(b) except as otherwise provided in a Representation Letter, upon presentation
and surrender thereof at the Principal Office of the Trustee or another Paying Agent for such
Bonds, the Bonds to be redeemed shall be redeemed at the applicable Redemption Price;
OHS West:260486430.4 43
(c) the Bonds or portions thereof so designated for redemption shall be deemed
to be no longer Outstanding and such Bonds or portions thereof shall cease to bear further
interest; and
(d) after the date fixed for redemption no Owner of any of the Bonds or portions
thereof so designated for redemption shall be entitled to any of the benefits of the Indenture, or
to any other rights, except with respect to payment of the Redemption Price thereof from the
amounts so made available.
ARTICLE V
ESTABLISHMENT OF FUNDS AND APPLICATION THEREOF
Section 5.01 Pledge of Trust Estate. Subject to the application thereof on the terms
and conditions provided in the Indenture, to secure the payment of all the Outstanding Bonds,
including Credit Provider Bonds, and the interest payments becoming due thereon according to
their tenor, purport and effect, and to secure the performance and observance of all of the
covenants, agreements and conditions contained in the Outstanding Bonds, including Credit
Provider Bonds, and the Indenture, the City hereby irrevocably grants a lien on and a security
interest in, and pledges, the Trust Estate to the Trustee, for the benefit of the Owners of the
Outstanding Bonds, including Credit Provider Bonds, which lien on, security interest in and
pledge of the Revenues and amounts in the Light and Power Fund included in the Trust Estate
shall be on a parity with any pledge of Revenues and amounts in the Light and Power Fund
securing Parity Obligations, including Credit Support Agreements for Parity Obligations and
Qualified Swap Agreements. This lien on and security interest in and pledge of the Trust Estate
shall constitute a first pledge of and charge and lien upon the Trust Estate, shall immediately
attach and be effective, binding, and enforceable against the City, its successors, purchasers of
any of the Trust Estate, creditors, and all others asserting rights therein to the extent set forth in,
and in accordance with, the Indenture, irrespective of whether those parties have notice of the
lien on, security interest in and pledge of the Trust Estate and without the need for any physical
delivery, recordation, filing or further act. The grant of a lien on and security interest in, and
pledge of, the Trust Estate pursuant to this Section is made pursuant to the Bond Ordinance and
Chapter 5.5 of Division 6 of Title 1 (commencing with Section 5450) of the Government Code
of the State.
Section 5.02 Funds. To ensure the payment when due and payable, whether at maturity
or upon redemption or upon acceleration, of the principal of, Redemption Price, if any, and
interest on the Bonds, there are hereby established the following funds and accounts, to be held
and maintained by the Trustee and applied as provided in the Indenture for so long as any of the
Bonds are Outstanding:
(a) the City of Vernon Electric System Debt Service Fund, comprised of an
Interest Account, a Principal Account and a Sinking Fund Account;
(b) the City of Vernon Electric System Redemption Fund;
(c) the City of Vernon Electric System Debt Service Reserve Fund;
OHS West:260486430.4 44
(d) the City of Vernon Electric System Expense Stabilization Fund; and
(e) the City of Vernon Electric System Rebate Fund.
Section 5.03 Payments by City. During each Fiscal Year the City shall pay the Trustee,
from the Net Revenues of such Fiscal Year, the following amounts at the following times:
(a) on the fourth Business Day prior to each Interest Payment Date for any
Outstanding Bonds, an amount equal to the interest payable on the Outstanding Bonds on such
Interest Payment Date; provided, however, that such payments shall be reduced by any
available amounts on deposit in the Interest Account which are to be applied to such upcoming
interest payment;
(b) on the fourth Business Day prior to each date on which the principal of
Outstanding Bonds which are Serial Obligations mature, an amount equal to the principal of
such Outstanding Bonds maturing on such date; provided, however, that such payments shall
be reduced by any available amounts on deposit in the Principal Account which are to be
applied to the upcoming principal payment;
(c) on the fourth Business Day prior to each Sinking Fund Installment due date
for Outstanding Bonds which are Term Obligations, an amount equal to the Sinking Fund
Installments due with respect to all Outstanding Bonds which are Term Obligations on such
Sinking Fund Installment due date; provided, however, that such payments shall be reduced by
any available amounts on deposit in the Sinking Fund Account which are to be applied to the
redemption or payment of such Bonds on such Sinking Fund Installment due date and by the
amount by which the City's obligations to make payments with respect to such Sinking Fund
Installments have been satisfied pursuant Section 5.04(c);
(d) at least one Business Day prior to each date fixed for the redemption of
Outstanding Bonds (other than from Sinking Fund Installments or other than an optional
redemption of Bonds as to which a conditional notice of redemption has been sent to the
Owners pursuant to subsection (b) of Section 4.05), an amount equal to the 'Redemption Price
of the Bonds to be redeemed;
(e) on the date on which the principal of or interest on any Outstanding Bond
becomes due and payable, other than as provided in (a) through (d) above, the City shall pay an
amount in funds which are immediately available to the Trustee by 10:00 a.m. (Pacific Time)
on the due date, equal to the principal of and interest on the Outstanding Bonds due on such
date;
(t) in the event that on any date upon which the City is to make a payment
pursuant to subsections (a), (b), (c), (d), and/or (e) of this ,Section and the amount of Net
Revenues and amounts in the Light and Power Fund available therefor in accordance with this
Master Indenture is not sufficient to make such payment and any payment required to be made
on such date with respect to the principal and redemption premium of and interest on other
Parity Obligations (including, with respect to transactions under Qualified Swap Agreements,
the Net Payments due), then the City shall apply the Net Revenues and amounts in the Light
and Power Fund available therefor in accordance with this Master Indenture to the payments
OHS West:260486430.4 45
required by subsections (a), (b), (c), (d), and/or (e) of this Section and such payments with
respect to the other Parity Obligations ratably (based on the respective amounts to be paid),
without any discrimination or preferences;
(g) on each Debt Service Reserve Valuation Date, the City shall pay: (i) an
amount such that, after the deposit of such amount in the Debt Service Reserve Fund, the
amount on deposit in such Fund shall be at least equal to the Debt Service Reserve
Requirement, including the amount of any Reserve Financial Guaranties on deposit in the
Debt Service Reserve Fund;
(h) in the event that on any date upon which the City is to make a payment
pursuant to subsection (g) of this Section and the amount of Net Revenues and amounts in the
Light and Power Fund available therefor in accordance with this Master Indenture is not
sufficient to make such payment and any payment required to be made on such date with
respect debt service reserves for Parity Obligations, then the City, after making the payments
required by subsections (a), (b), (c), (d), (e), and (f) of this Section, shall apply the Net
Revenues and amounts in the Light and Power Fund available therefor in accordance with this
Master Indenture to the payments required by subsection (g) of this Section and such payments
with respect to debt service reserves for Parity Obligations ratably (based on the respective
amounts to be paid), without any discrimination or preferences;
(i) in the event that on any date all payments required to be made by this
Section are not made in full from Net Revenues, then the City shall make up any deficiency
from amounts in the Light and Power Fund after setting aside in the Light and Power Fund an
amount equal to the amount contained in the then current Budget for Operation and
Maintenance Expenses for the next succeeding four months; and
(j) in the event that on any date all payments required to be made by this
Section are not made in full, then no payment shall be made which has a priority under this,
Section lower than the delinquent payment until all delinquent payments with a higher priority
have been made in full.
Section 5.04 Debt Service Fund. (a) From the moneys paid by the City pursuant to
Section 5.03(a), (b) and (c), the Trustee, upon receipt of such moneys, shall deposit the following_
amounts in the following specified accounts within the Debt Service Fund:
(1) For deposit in the Interest Account, an amount equal to the
interest payable on the Outstanding Bonds on the
applicable Interest Payment Date;
(2) For deposit in the Principal Account, an amount equal to
the principal of the Outstanding Bonds maturing on the
applicable maturity date; and
(3) For deposit in the Sinking Fund Account, an amount equal
to the Sinking Fund Installment due on the applicable
Sinking Fund Installment due date.
OHS West:260486430.4 4.6
(b) From the moneys paid by the City pursuant to Section 5.03(e), the Trustee,
upon receipt of such moneys, shall deposit the following amounts in the following specified
accounts within the Debt Service Fund:
i
(i) For deposit in the Interest Account, an amount equal to the interest
on the Outstanding Bonds then payable; and
(ii) For deposit in the Principal Account, an amount equal to the
principal of the Outstanding Bonds then payable.
(c) In the event that Bonds which are Term Obligations purchased or redeemed
at the option of the City are deposited with the Trustee for the credit of the Sinking Fund
Account not less than forty-five (45) days prior to the due date for any Sinking Fund
Installment for such Bonds, such deposit shall satisfy (to the extent of 100% of the principal
amount of such Bonds) any obligation of the City to make a payment to the Trustee pursuant to
Section 5.03(c) with respect to such Sinking Fund Installments. Any Bond so deposited with
the Trustee shall be cancelled and shall no longer be deemed to be Outstanding for any
purpose. Upon making the deposit with the Trustee of Bonds which are Term Obligations as
provided in this subsection, the City may specify the dates and amounts of Sinking Fund
Installments for such Bonds as to which the City's obligations to make a payment to the
Trustee pursuant to Section 5.03(c) shall be satisfied.
(d) Except as hereafter in this subsection provided: (i) amounts deposited in the
Interest Account shall remain therein until expended for the payment of interest on the Bonds;
(ii) amounts deposited in the Principal Account shall remain therein until expended for the
payment of principal of the Bonds; and (iii) amounts deposited in the Sinking(Fund Account
shall remain therein until expended for the redemption or payment at maturity from Sinking
Fund Installments of Bonds which are Term Obligations.
(e) The Trustee shall apply amounts in the Interest Account to the payment
when due of interest on the Outstanding Bonds. The Trustee shall apply amounts in the
Principal Account to the payment when due of principal of the Outstanding Bonds. The
Trustee shall apply amounts in the Sinking Fund Account to the redemption (or payment at
maturity) of the Bonds which are Term Obligations.
In the event one or more Paying Agents have been appointed for the Bonds, moneys may
be transferred by the Trustee to such Paying Agents from the appropriate account in the Debt
Service Fund for deposit into a special trust account to ensure the payment when due of the
principal of, Redemption Price, if any, and interest on the Bonds. In the event that any principal
of, Redemption Price or interest on, any Bond has been paid from amounts made available
pursuant to a Credit Support Instrument, amounts in the appropriate accounts in the Debt Service
Fund with respect to such Bond, and any such amounts transferred by the Trustee from the Debt
Service Fund to a Paying Agent for such Bond pursuant to this Section, shall be paid to the
applicable Credit Provider as a reimbursement of the amounts so paid.
Section 5.05 Redemption Fund. From the moneys paid by the City pursuant to Section
5.03(d), the Trustee shall deposit in the Redemption Fund an amount equal to the Redemption
OHS West:260486430.4 47
Price of the Bonds to be redeemed. Said moneys shall be set aside in said Fund and shall be
applied on or after the redemption date to the payment of the Redemption Price of the Bonds to
be redeemed and, except as otherwise provided in this Section, shall be used only for that
purpose. In the event one or more Paying Agents have been appointed for the Bonds which are
to be redeemed with moneys in the Redemption Fund, amounts in the Redemption Fund may be
transferred from such Fund by the Trustee to the Paying Agent for the Bonds to be redeemed for
deposit into a special trust account held by such Paying Agent to ensure the payment when due
the Redemption Price of the Bonds to be redeemed. In the event that the Redemption Price of a
Bond has been paid by a Credit Provider pursuant to a Credit Support Instrument, amounts in the
Redemption Fund with respect to such Redemption Price, and any such amounts transferred by
the Trustee from the Redemption Fund to a Paying Agent for such Bonds pursuant to this
Section, shall be paid to such Credit Provider as a reimbursement of the amounts so paid. If,
afterall of the Bonds designated for redemption have been redeemed and cancelled or paid and
cancelled, there are moneys remaining in the Redemption Fund, said moneys shall be transferred
to the Interest Account; provided, however, that if said moneys are part of the proceeds of
Refunding Obligations said moneys shall be applied as provided in the Issuing Instrument
authorizing the issuance of such Refunding Obligations.
Section 5.06 Debt Service Reserve Fund.
(a) If on any date on which the principal or Redemption Price of, or interest on,
Bonds is due, the amount in the applicable account in the Debt Service Fund available for such
payment is less than the amount of the principal and Redemption Price of and interest on the
Bonds due on such date, the Trustee shall apply amounts from the Debt Service Reserve Fund
to the extent necessary to make good the deficiency.
(b) Except as provided in subsection (e) of this Section, if on the last Business
Day of any month the amount on deposit in any Debt Service Reserve Fund shall exceed the
Debt Service Reserve Requirement, such excess shall be applied to the reimbursement of each
drawing on a Reserve Financial Guaranty deposited in or credited to such Fund and to the
payment of interest or other amounts due with respect to such a Reserve Financial Guaranty
and any remaining moneys shall be deposited in the Interest Account.
(c) Whenever the amount in the Debt Service Reserve Fund (excluding Reserve
Financial Guaranties), together with the amount in the Debt Service Fund, is sufficient to pay
in full all of the Outstanding Bonds in accordance with their terms (including principal or
Redemption Price and interest thereon), the funds on deposit in the Debt Service Reserve Fund
shall be transferred to the Debt Service Fund.
(d) In the event of the refunding of one or more Bonds (or portions thereof), the
Trustee shall, upon the written direction of an Authorized City Representative, withdraw from
the Debt Service Reserve Fund any or all of the amounts on deposit therein (excluding Reserve
Financial Guaranties) and deposit such amounts with itself as Trustee, or the Escrow Agent for
the Bonds to be refunded, to be held for the payment of the principal or Redemption Price, if
any, of, and interest on, the Bonds (or portions thereof) being refunded; provided that such
withdrawal shall not be made unless (a) immediately thereafter the Bonds (or portions thereof)
being refunded shall be deemed to have been paid pursuant to Section 9.02, and (b) the amount
OHS West:260486430.4 48
remaining in the Debt Service Reserve Fund after such withdrawal (including the amount of
any Reserve Financial Guaranties), taking into account any deposits to be made in the Debt
Service Reserve Fund in connection with such refunding, shall not be less than the Debt
Service Reserve Requirement.
(e) In lieu of the deposits and transfers to the Debt Service Reserve Fund
required by Section 5.03(g), the City may cause to be deposited in the Debt Service Reserve
Fund a Reserve Financial Guaranty or Reserve Financial Guaranties in an amount equal to the
difference between the Debt Service Reserve Requirement and the sums, if any, then on
deposit in the Debt Service Reserve Fund or being deposited in such Fund concurrently with
such Reserve Financial Guaranty or Guaranties. The Trustee shall draw upon or otherwise take
such action as is necessary in accordance with the terms of the Reserve Financial Guaranties to
receive payments with respect to the Reserve Financial Guaranties (including the giving of
notice as required thereunder): (i) on any date on which money's shall be required to be
withdrawn from the Debt Service Reserve Fund and applied to the payment of principal or
Redemption Price of, or interest on, any Bonds and such withdrawal cannot be met by amounts
on deposit in the applicable accounts in the Debt Service Reserve Fund; (ii) on the first
Business Day which is at least ten (10) days prior to the expiration date of each Reserve
Financial Guaranty, in an amount equal to the deficiency which would exist in the Debt
Service Reserve Fund if the Reserve Financial Guaranty expired, unless a substitute Reserve
Financial Guaranty with an expiration date not earlier than 180 days after the expiration date of
the expiring Reserve Financial Guaranty (or the earlier maturity of all then Outstanding Bonds)
is acquired prior to such date or the City deposits funds in the Debt Service Reserve Fund on or
before such date such that the amount in the Debt Service Reserve Fund on such date (without
regard to such expiring Reserve Financial Guaranty) is at least equal to the Debt Service
Reserve Requirement.
If, upon the deposit of a Reserve Financial Guaranty into the Debt Service
Reserve Fund pursuant to this subsection (e), there shall be any amount in the Debt Service
Reserve Fund in excess of the Debt Service Reserve Requirement, such excess amount may be
applied to the cost of acquiring such Reserve FinancialGuaranty and, to the extent not so
applied, shall be transferred to the Interest Account.
Section 5.07 Expense Stabilization Fund. Moneys shall be deposited in the Expense
Stabilization Fund in such amounts, at such times and from such sources as shall be determined
by the City in its sole discretion. Moneys on deposit in the Expense Stabilization Fund may be
withdrawn at any time no Event of Default exists upon the order of an Authorized City
Representative and applied to any lawful purpose in connection with the Electric System,
including without limitation, payment of Operation and Maintenance Expenses, payment of Debt
Service on Parity Obligations, payment of principal, premium or interest on Subordinate
Obligations, payment of Costs of Capital Improvements, payment of the Costs of Issuance of
Parity Obligations or payment of the costs of issuance of Subordinate Obligations, provided,
however, that if an Event of Default shall have occurred and is continuing, the Trustee shall
transfer all moneys in the Expense Stabilization Fund first to the Interest Account the amount by
which the accrued interest'on the Outstanding Bonds is greater than the amount then on deposit
in the Interest Account and second to the Principal Account, the balance of the amount then in
the Expense Stabilization Fund.
OHS West:260486430.4 49
Section 5.08 Rebate Fund. Each Supplemental Indenture authorizing a Series of Bonds
which are Tax -Exempt Securities shall establish an account in the Rebate Fund in connection
with such Series. Each such account in the Rebate Fund shall have such terms and conditions as
shall be provided in the Supplemental Indenture establishing such account.
Section 5.09 Depositories. The Trustee shall hold all moneys deposited with it pursuant
to the Indenture or may deposit such moneys with one or more Depositories in trust. All moneys
deposited under the provisions of the Indenture with the Trustee or any Depository shall be held
in trust and applied only in accordance with the provisions of the Indenture, and each of the
Funds established by the Indenture shall be a trust fund for the purposes hereof.
Section 5.10 Deposits.
(a) All moneys held by any Fiduciary under the Indenture may be placed on
demand or time deposit, if and as directed by the City, provided that such deposits shall permit
the moneys so held to be available for use at the time when reasonably expected to be needed.
No Fiduciary shall be liable for any loss or depreciation in value resulting from any investment
made pursuant to the Indenture. Any such deposit may be made in the commercial banking
department of any Fiduciary or its affiliates which may honor checks and drafts on such
deposit with the same force and effect as if it were not such Fiduciary. All moneys held by any
Fiduciary, as such, may be deposited by such Fiduciary in its banking department on demand
or, if and to the extent directed by the City and acceptable to such Fiduciary, on time deposit,
provided that such moneys on deposit be available for use at the time when reasonably
expected to be needed. Such Fiduciary shall allow and credit on such moneys such interest, if
any, as it customarily allows upon similar funds of similar size and under similar condition or
as required by law.
(b) All moneys held under the Indenture by any Fiduciary shall be (1) either (A)
continuously and fully insured by the Federal Deposit Insurance Corporation, or (B)
continuously and fully secured by lodging with the Trustee or any Federal Reserve Bank, as
custodian, as collateral security, such securities as are described in clauses (a) through (c),
inclusive, of the definition of "Permitted Investments" in Section 1.01 having a market value
(exclusive of accrued interest) not less than the amount of such moneys, or (2) held in such
other manner as may then be required by applicable Federal or State of California laws and
regulations and applicable state laws and regulations of the state in which such Fiduciary is
located, regarding security for, or granting a preference in the case of, the deposit of trust
funds; provided, however, that it shall not be necessary for the Fiduciaries to give security
under this subsection for the deposit of any moneys with them held in trust and set aside by
them for the payment of the principal amount or Redemption Price of, or interest on, any
Bonds or to give security for any moneys which shall be represented by obligations or
certificates of deposit purchased as an investment of such moneys.
(c) All moneys deposited with a Fiduciary shall be credited to the particular
Fund to which such moneys belong.
Section 5.11 Investment of Certain Funds. Moneys held in the Debt Service Fund and
the Redemption Fund shall be invested and reinvested by the Trustee to the fullest extent
OHS West:260486430.4 50
practicable in securities described in clauses (a) through (c) of the definition of "Permitted
Investments" in Section 1.01 which mature not later than such times as shall be necessary to
provide moneys when reasonably expected to be needed for payments to be made from such
Funds. Moneys held in the Debt Service Reserve Fund shall be invested and reinvested by the
Trustee to the fullest extent practicable in securities described in clauses (a), (b), (c), (g), 0) and
(m) of the definition of "Permitted Investments" in Section 1.01 which mature, or which may be
drawn upon without penalty at any time upon not more than two Business Days notice, not later
than five years from the time of such investment. Moneys held in the Expense Stabilization
Fund may be invested and reinvested in Permitted Investments which mature, or which may be
drawn upon without penalty at any time upom not more than two Business Days notice, not later
than ten years from the time of such investment. The Trustee shall make all such investments of
moneys held by it in accordance with directions of an Authorized City Representative, which
directions shall be consistent with the Indenture and applicable law, and which directions can
either be written or oral; provided that if such directions are oral they shall be promptly
confirmed in writing by such Authorized City Representative. In the absence of any such written
investment directions, the Trustee shall, unless otherwise provided in this Section 5.10, invest
such moneys in the money market funds described in clause (d) of the definition of "Permitted
Investments."
Interest or other income earned on any moneys or investments in any Fund
created under the Indenture shall be paid into such Fund.
In making any investment in any Permitted Investments with moneys in any Fund
established under the Indenture, the Trustee may combine such moneys with moneys in any
other Fund but solely for the purposes of making such investment in such Investments and
provided that any amount so combined shall be separately accounted for.
Nothing in the Indenture shall prevent any Permitted Investments acquired as
investments of moneys in any Fund from being issued or held in book -entry form on the books
of the Department of the Treasury or the Federal Reserve System of the United States.
Section 5.12 Valuation and Sale of Investments. Obligations purchased as an
investment of moneys in any Fund shall be deemed at all times to be a part of such Fund and any
profit realized from the liquidation of such investment shall be credited to such Fund and any
loss resulting from the liquidation of such investment shall be charged to the respective Fund.
In computing the amount in the Debt Service Reserve Fund for any purpose
hereunder, obligations purchased as an investment of moneys in the Debt Service Reserve Fund
are to be valued at the amortized cost thereof.
Except as otherwise provided in the Indenture, the Trustee may sell at the best
price reasonably obtainable, or present for redemption, or otherwise liquidate any security
purchased as an investment, and take all actions necessary to draw funds under any such
investment, whenever it shall be necessary in order to provide moneys to meet any payment or
transfer from any Fund held by it or in accordance with directories of an Authorized City
Representative, which directions shall be consistent with the Indenture and applicable law and
which directions can be either written or oral; provided that if such directions are, oral they shall
OHS West:260486430.4 51
be promptly confirmed in writing by such Authorized City Representative. Any security
purchased as an investment may be credited on a pro-rata basis to more than one Fund and need
not be sold in order to provide for the transfer of amounts from one Fund to another, provided
that such obligation is an appropriate, Permitted Investment for the purposes of the Fund to which
it is to be transferred. The Trustee shall not be liable or responsible for making any such
investment in the manner provided above or for any loss resulting from any such investment.
ARTICLE VI \
COVENANTS AND OBLIGATIONS OF THE CITY
The City covenants with the Owners of the Outstanding Bonds and with each Credit
Provider as set forth in this Article VI. Each of said covenants shall remain in full force and
effect so long as any of the Bonds shall be Outstanding and unpaid, any Credit Support
Instrument remains outstanding, and any Credit Provider Reimbursement Obligations remain
unpaid.
Section 6.01 Compliance with Indenture. The City shall punctually pay the Bonds in
strict conformity with the terms of the Indenture and the Bonds, and shall faithfully observe and
perform all the agreements, conditions, covenants and terms contained in the Indenture required
to be observed and performed by it, which obligations shall be absolute and unconditional but
which shall be "special obligations of the City as provided in Section 2.02.
Section 6.02 Rates for Electric Service. The City shall at all times fix, prescribe and
collect rates and charges for the Electric Service of the Electric System during each Fiscal Year
which shall be at least sufficient to yield: (a) Adjusted Revenues for such Fiscal Year at least
equal to the sum of the following for such Fiscal Year: (i) Operation and Maintenance Expenses;
(ii) Adjusted Debt Service, and (iii) all other payments required to be paid in such Fiscal Year to
meet any other obligations of the City which are charges, liens or encumbrances upon or payable
from the Revenues (including Net Revenues), including all amounts owed to a Credit Provider
under the terms of its Credit Support Agreement and amounts owed to a Reserve Financial
Guaranty Provider under the terms of its Reserve Financial Guaranty; and (b) Adjusted Revenues
less Operation and Maintenance Expenses for such Fiscal Year equal to at least one hundred ten
percent (110%) of Adjusted Debt Service for such Fiscal Year. The City may make adjustments
from time to time in such fees and charges and may make such classification thereof as it deems
necessary, but shall not reduce the rates and charges then in effect unless the Adjusted Revenues
and the Adjusted Net Revenues from such reduced rates and charges shall at all times be
sufficient to meet the requirements of this Section.
Section 6.03 Collection of Rates and Charges. The City shall have in effect at all
times rules and regulations requiring each consumer or customer located on any premises
connected with the Electric System to pay the rates and charges applicable to the Electric Service
provided to such premises and providing for the billing thereof and for a due date and a
delinquency date for each bill. The City shall not permit any part of the Electric System or any
facility thereof to be used or taken advantage of free of charge by any corporation, firm or
person, or by any public agency (including the United States of America, the State of California
and any city, county, district, political subdivision, public corporation or agency of any thereof).
OHS West:260486430:4 52
Nothing in the Indenture shall prevent the City, in its sole and exclusive discretion, from
permitting other parties from selling electricity to retail customers within the service area of the
Electric System; provided, however, that permitting such sales shall not relieve the City of its
obligations under the Indenture.
Section 6.04 Deposit and Application of Revenues. The City shall deposit or cause to
be deposited all Revenues into the Light and Power Fund upon receipt thereof. The City shall
apply Revenues for each Fiscal Year first to the payment of Operation and Maintenance
Expenses then due and payable. The City shall apply the remaining Revenues to the payment of
amounts required to be paid in Section 5.03 then due and payable, and with respect to Parity
Obligations other than Bonds, pursuant to the Issuing Instrument for such Parity Obligations.
The City may then apply any remaining Revenues to any lawful purpose in connection with the
Electric System, including the payment of amounts required to be paid pursuant to the Issuing
Instruments for any Subordinate Obligations, the payment of Costs of Capital Improvements and,
to the extent permitted by Section 6.13, to transfers to the City's General Fund.
During each Fiscal Year, and subject to the provisions of Section 5.03, the City may
apply amounts in the Light and Power Fund, other than the Revenues for such Fiscal Year, to
any lawful purpose as determined by the City; provided that so long as an Event of Default has
occurred and is continuing, or the Trustee otherwise has control of amounts in the Light and
Power Fund, no amounts may be paid from the Light and Power Fund except for Operation and
Maintenance Expenses, amounts required to be paid in such Fiscal Year pursuant to the
Indenture and the Issuing Instrument for any Parity Obligations or the Issuing Instruments for
Subordinate Obligations, or when such payment has been certified by an Independent Engineer
as being consistent with Prudent Utility Practice.
Section 6.05 Creation of Prior Liens on Trust Estate. The City shall not issue any
bond, note, or other evidence of indebtedness payable from or secured by the Trust Estate or any
part thereof on a basis which is in any manner prior or superior to the lien on, pledge of and
security interest in the Trust Estate securing the Outstanding Bonds pursuant to the Indenture; or
(ii) except for Parity Obligations with respect to the Revenues and/or amounts in the Light and
Power Fund, in any manner on a parity with the lien on, pledge of and security interest in the
Revenues and amounts in the Light and Power Fund securing the Outstanding Bonds pursuant to
the Indenture. Nothing in the Indenture shall prevent the City from issuing Subordinate
Obligations in accordance with Section 2.08.
Section 6.06 Against Encumbrances. The City shall pay or cause to be paid when due
all sums of money that may become due or purporting to be due for any labor, services,
materials, supplies or equipment furnished, or alleged to have been furnished, to or for the City
in, upon, about or relating to the Electric System and shall keep the Electric System free of any
and all liens against any portion of the Electric System. In the event any such lien attaches to or
is filed against any portion of the Electric System, the City shall cause each such lien to be fully
discharged and released at the time the performance of any obligation secured by any such lien
matures or becomes due, except that if the City desires to contest any such lien it may do so if
contesting such lien shall not materially impair operation of the Electric System. If any such lien
shall be reduced to final judgment and such judgment or any process as may be issued for the
OHS West:260486430.4 53
enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the
City shall forthwith pay or cause to be paid and discharged such judgment.
Section 6.07 Sale or Other Disposition of Property. The City shall not sell, transfer or
otherwise dispose of any of the works, plant, properties, facilities or other part or rights of the
Electric System or any real or personal property comprising a part of the Electric System if such
sale, transfer or disposition would cause the City to be unable to satisfy the requirements of
Section 6.02.
Section 6.08 Operation and Maintenance of the Electric System; Budgets. The City
shall maintain and preserve the Electric System in good repair and working order at all times and
shall operate the Electric System in an efficient and economical manner and shall pay all
Operation and Maintenance Expenses as they become due and payable.
The City shall prepare, not later than the last day of each Fiscal Year, a Budget for the
Electric System approved by the City Council setting forth the estimated Revenues, Operation
and Maintenance Expenses, scheduled Debt Service and other payments estimated to be paid
from the Revenues and amounts in the Light and Power Fund during the next succeeding Fiscal
Year. The Electric System Budget for any Fiscal Year may be amended at any time during such
Fiscal Year provided that such amended Budget shall include all payments -coming due in such
Fiscal Year with respect to Obligations payable from Revenues or amounts in the Light and
Power Fund. In the event the City fails to have a Budget approved by the City Council as
required by this Section with respect to any Fiscal Year, then references in the Indenture to the
amount of Operation and Maintenance Expenses included in the Budget as of any time shall be
deemed to be the Operation and Maintenance Expenses in the latest Budget approved by the City
Council as adjusted for an inflation factor equal to ten percent for each Fiscal Year from the
approval of such Budget by the City Council to the applicable time of determination of the
Operation and Maintenance Expenses included in the Budget.
Section 6.09 Insurance. The City shall procure and maintain such insurance relating to
the Electric System which it shall deem advisable or necessary to protect its interests and the
interests of the Trustee and the Owners of the Bonds, which insurance shall afford protection in
such amounts and against such risks as are usually covered in connection with public electric
utility systems similar to the Electric System; provided, that any such insurance may be
maintained under a self-insurance program so long as such self-insurance is maintained in the
amounts and manner as is, in the opinion of an accredited actuary, actuarially sound. All policies
of insurance required to be maintained under the Indenture shall provide that the Trustee shall be
given thirty (30) days' written notice of any intended cancellation thereof or reduction of
coverage provided thereby.
Section 6.10 Accounting Records; Financial Statements and Other Reports.
(a) The City shall keep appropriate accounting records in which complete and
correct entries shall be made of all transactions relating to the Electric System, which records
shall be available for inspection by the Trustee at reasonable hours and under reasonable
conditions.
OHS West:260486430.4 54
(b) The City shall prepare and file with the Trustee annually within one hundred
eighty (180) days after the close of each Fiscal Year (commencing with the Fiscal Year ending
June 30, 2008):
(i) financial statements of the City for such Fiscal Year prepared in
accordance 1, with Generally Accepted Accounting Principles, together with an
Accountant's Report thereon; and
(ii) a detailed report as to all insurance policies maintained and self-
insurance programs maintained by the City with respect to the Electric System as of the
close of such Fiscal Year, including the names of the insurers which have issued the
policies and the amounts thereof and the property or risks covered thereby.
Section 6.11 Payment of Taxes and Compliance with Governmental Regulations.
The City shall pay and discharge all taxes, assessments and other governmental charges which
may hereafter be lawfully imposed upon the Electric System or any part thereof when the same
shall become due. The City shall duly observe and conform with all valid regulations and
requirements of any governmental authority relative to the operation of the Electric System or
any part thereof, but the City shall not be required to comply with any regulations or
requirements so long as the validity or application thereof shall be contested in good faith and
contesting such validity or application shall not materially impair the operations or financial
condition of the Electric System or the performance of the City under the Indenture and all
Outstanding Bonds.
Section 6.12 Tax Covenants. (a) The City hereby covenants it shall not take any action,
or fail to take any action, if any such action or failure to take action would adversely affect the
Tax-exempt status of interest on any Bond under Section 103 of the Code. Without limiting the
generality of the foregoing, the City shall comply with the requirements of the Tax Certificate, if
any, delivered in connection with the issuance of each Series of Bonds.
In the event that at any time the City is of the opinion that, in order to comply with its
obligations under subsection (a) of this Section, it is necessary or helpful to restrict or limit the
yield on the investment of any moneys in any of the Funds held by the Trustee pursuant to the
Indenture, the City shall so instruct the Trustee in writing, and cause the Trustee to take such
action as may be necessary in accordance with such instructions.
(b) Notwithstanding any provisions of this Section, if the City shall provide to
the Trustee an Opinion of Bond Counsel to the effect that any specified action required under
this Section or a Tax Certificate is no longer required or that some further or different action is
required to maintain the Tax -Exempt status of the Bonds under Section 103 of the Code, the
City and the Trustee may conclusively rely on such opinion in complying with the
requirements of this Section and of the applicable Tax Certificate, and the covenants hereunder
shall be deemed to be modified to that extent.
(c) The covenants in this Section shall survive payment in full or discharge of
the Bonds.
OHS West:260486430.4 55
Section 6.13 Transfers to General Fund.. The City covenants that it shall not transfer
Net Revenues for any Fiscal Year to the City's General Fund in an amount exceeding the Net
Transferable Income for such Fiscal Year, which amount shall be determined at the end of such
Fiscal Year. Notwithstanding the preceding sentence, so long as an Event of Default has
occurred and is continuing, the City shall not transfer any Net Transferable Income to the City's
General Fund.
ARTICLE VII
AMENDMENTS TO INDENTURE
Section 7.01 Amendments Permitted.
(a) Subject to the provisions of subsection (d) of this Section, the provisions of
this Master Indenture or of any Supplemental Indenture and the rights and obligations of the
City and of the Owners of the Outstanding Bonds and of the Fiduciaries may be modified,
amended or supplemented from time to time and at any time by a Supplemental Indenture or
Supplemental Indentures, with the written consent of each Credit Provider whose consent is
required by a Supplemental Indenture or a Credit Support Agreement, when the written
consent of the Owners of at least a majority in aggregate principal amount of the Bonds then
Outstanding shall have been filed with the Trustee; or if less than all of the Outstanding Bonds
are affected, the written consent of the Owners of at least a majority in aggregate principal
amount of all affected Outstanding Bonds; provided that if such modification, amendment or
supplement shall, by its terms, not take effect so long as any Bonds of any particular Series and
maturity remain Outstanding, and, with respect to Bonds which are Tender Indebtedness if the
conditions of subsection (d) of this Section are satisfied, the consent of the Owners of such
Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for the
purpose of any the calculation of Outstanding Bonds for purposes of this Section. No such
modification, amendment or supplement shall (1) reduce the aforesaid percentage of Bonds the
consent of the Owners of which is required to effect any such modification, amendment or
supplement without the consent of the Owners of all of the Bonds then Outstanding; (2) extend
the fixed maturity of any Bond, or reduce the principal amount thereof, or reduce the amount
of any Sinking Fund Installment therefor, or extend the due date of any such Sinking Fund
Installment, or reduce the rate of interest on any Bond or extend the time of payment of interest
thereon, without the consent of the Owner of each Bond so affected; (3) except as otherwise
provided with respect to a Bond constituting Tender Indebtedness in the Supplemental
Indenture authorizing such Bond and subject to the satisfaction of the conditions of subsection
(g) of this Section, reduce the Redemption Price due on the redemption of any Bond or change
the date or dates when any Bond is subject to redemption; or (4) modify the rights or
obligations of any Fiduciary without the consent of such Fiduciary.
It shall not be necessary for the consent of the Owners to approve the particular form of
any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance
thereof.
Unless waived by the Owner of an affected Bond or Bonds, prior to the entry into any
Supplemental Indenture by the City and the Trustee for any of the purposes of this Section, the
OHS West:260486430.4 56
City shall cause notice of the proposed Supplemental Indenture to be mailed, by first class mail,
postage prepaid, to the Owners of all Outstanding Bonds (or the affected Outstanding Bonds) at
their addresses appearing on the Bond Register. Such notice shall briefly set forth the nature of
the proposed Supplemental Indenture and shall state that copies thereof are on file at the office of
the Trustee for inspection by each Owner of an Outstanding Bond.
Whenever, at any time after the date of the mailing -of notice of the proposed entry into a
Supplemental Indenture pursuant to this subsection, the City shall have received an instrument or
instruments in writing executed in accordance with Section 11.01 by or on behalf of the Owners
of not less than a majority in aggregate principal amount of the Bonds then Outstanding, or if
less than all of the Outstanding Bonds are affected, by the Owners of not less than a majority in
aggregate principal amount of the affected Outstanding Bonds, which instrument or instruments
shall refer to the proposed Supplemental Indenture described in the notice of the proposed
Supplemental Indenture and shall consent to such Supplemental Indenture in substantially the
form referred to in such notice, thereupon, but not otherwise, the City and the Trustee may enter
into such Supplemental Indenture in substantially such form, without liability or responsibility to
any Owner of any Bond, whether or not such Owner shall have consented thereto.
(b) This Master Indenture or any Supplemental Indenture may be supplemented
from time to time and at any time by a Supplemental Indenture or Supplemental Indentures,
which the City and the Trustee may enter into with the consent of each Credit Provider whose
consent is required by a Supplemental Indenture or a Credit Support Agreement but without
the consent of the Owner of any Bond, to provide for the issuance of a Series of Additional
Bonds or a Series of Refunding Bonds in accordance with the terms and conditions of Article
II, and establishing the terms and conditions thereof, including the rights of any Credit
Provider for such Additional Bonds or Refunding Bonds, which may include permitting such
Credit Provider to act for and on behalf of the Owners of such Additional Bonds or Refunding
Bonds for any or all purposes of the Indenture except that no such Credit Provider shall be
authorized to extend the fixed maturity of any Bond, or reduce the principal amount thereof, or
reduce the amount of any Sinking Fund Installment therefor, or extend the due date of any such
Sinking Fund Installment, or reduce the rate of interest on any Bond or extend the time of
payment of interest thereon, without the consent of the Owner of each Bond so affected; or
except as otherwise provided with respect to a Bond constituting Tender Indebtedness in the
Supplemental Indenture authorizing such Bond and subject to the satisfaction of the conditions
of subsection (g) of this Section, reduce the Redemption Price due on the redemption of any
Bond or change the date or dates when any Bond is subject to redemption.
(c) This Master Indenture and any Supplemental Indenture and the rights and
obligations of the City, the Fiduciaries and the Owners of the Outstanding Bonds may also be
modified, amended or supplemented from time to time and at any time by a Supplemental
Indenture or Supplemental Indentures, which the City and the Trustee may enter into with the
consent of each Credit Provider whose consent is required by a Supplemental Indenture or a
Credit Support Agreement but without the consent of any Owners of Bonds (but with the
consent of any affected Fiduciary), so long as such modification, amendment or supplement
shall not materially, adversely affect the interests of the Owners of the Outstanding Bonds,
including without limitation, for any one or more of the following purposes:
OHS West:260486430.4 57
(i) to add to the covenants and agreements of the City contained in
this Master Indenture or a Supplemental Indenture other covenants and agreements
thereafter to be observed, or to surrender any right or power in the Indenture reserved to
or conferred upon the City;
(ii) to ,pledge, provide or assign any additional security for the Bonds
(or any portion thereof), including transferring control of the amounts in the Light and
Power Fund to the Trustee; provided that if the City transfers control of the amounts in
the Light and Power Fund to the Trustee, the Trustee shall return such control at the
request of the City only if no Event of Default has occurred and is continuing and if such
return has been consented to by the Owners of a,majority in aggregate principal amount
of the Bonds then Outstanding and with the consent of each Credit Provider whose
consent is required by a Supplemental Indenture or a Credit Support Agreement;
(iii) to add to the covenants and agreements of the City contained in
this Master Indenture or, a Supplemental Indenture other covenants and agreements
thereafter to be observed, to pledge, provide or assign any security for the Bonds (or any
portion thereof), or to surrender any right or power in the Indenture reserved to or
conferred upon the City;
(iv) to make such provisions for the purpose of curing any ambiguity,
inconsistency or omission, or of curing or correcting any defective provision, contained
in this Master Indenture or a Supplemental Indenture, or in regard to matters or questions
arising under this Master Indenture or a Supplemental Indenture, as the City may deem
necessary or desirable; or
(v) to modify, amend or supplement this Master Indenture or a
Supplemental Indenture in such manner as to permit the qualification of the Indenture
under the Trust Indenture Act of 1939, as amended, or any similar federal statute
hereafter in effect, and to add such other terms, conditions and provisions as may be
permitted by said act or similar federal statute.
(d) Notwithstanding anything to the contrary in this Section, the provisions of
this Master Indenture or any Supplemental Indenture may also be modified, amended or
supplemented by a Supplemental Indenture or Supplemental Indentures, including amendments
which would otherwise be described in subsection (a) of this Section, without the consent of
the Owners of Bonds constituting Tender Indebtedness if either (i) the effective date of such
Supplemental Indenture is a date on which such Bonds are subject to mandatory tender for
purchase pursuant to the Indenture or (ii) the notice described in the third paragraph of
subsection (a) of this Section is given to Owners of such Bonds at least thirty (30) days before
the effective date of such Supplemental Indenture, and on or before such effective date, the
Owners of such Bonds have the right to demand purchase of such Bonds pursuant to the
Indenture.
(e) If the Supplemental Indenture authorizing the issuance of a Series of Bonds
provides that a Credit Provider for all or any portion of the Bonds of such Series shall have the
right to consent to Supplemental Indentures which require the consent of the Owners of the
OHS West:260486430.4 58
Bonds of such Series pursuant to this Section, then for the purposes of sending notice of any
proposed Supplemental Indenture and for determining whether the Owners of the requisite
percentage of Bonds have consented to such Supplemental Indenture, but subject to the
provisions of subsection (b) of this Section, references to the Owners of such Bonds shall be
deemed to be to the applicable Credit Provider.
(f) For purposes of this Section, it shall not be necessary that consents of the
Owners of any particular percentage of Outstanding Bonds of any affected Series be obtained
but it shall be sufficient for purposes of this Section if the consent of the Owners of a majority
in aggregate principal amount of the combination of affected Outstanding Bonds shall be
obtained.
(g) Notwithstanding anything to the contrary contained in this Section, if
authorized by the Supplemental Indenture authorizing the issuance of a Bond constituting
Tender Indebtedness, any premium due on the redemption of such Bond and the date or dates
when such Bond is subject to redemption may be modified or amended as provided in such
Supplemental Indenture if either: (i) the effective date of such modification or amendment is a
date on which such Bond is subject to mandatory tender for purchase pursuant to such
Supplemental Indenture; or (ii) notice of such modification or amendment has been mailed to
the Owner of such Bond at the address set forth in the Bond Register at least thirty (30) days
before the effective date of such modification or amendment and on or before such effective
date, the Owner of such Bond has the right to demand purchase of such Bond pursuant to such
Supplemental Indenture.
Section 7.02 Effect of Supplemental Indenture. Upon the City and the Trustee
entering into any Supplemental Indenture pursuant to this Article, the Indenture shall be deemed
to be modified, amended or supplemented in accordance therewith, and the respective rights,
duties and obligations under the Indenture of the City, the Fiduciaries and all Owners of
Outstanding Bonds shall thereafter be determined, exercised and enforced subject in all respects
to such modification, amendment and supplement, and all the terms and conditions of any such
Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture
for any and all purposes. Except for Supplemental Indentures requiring the consent of such
Owner pursuant to Section 7.01(a), upon the City and the Trustee entering into any Supplemental
Indenture pursuant to this Article, no Owner of any Bond shall have any right to object to the
entry into such Supplemental Indenture by the City and the Trustee, or to object to any of the
terms and provisions contained therein or the operation thereof or in any manner to question the
propriety of the entry into such Supplemental Indenture, or to enjoin or restrain the City or the
Trustee from entering into the same or to enjoin or restrain the City or the Trustee from taking
any action pursuant to the provisions thereof whether or not such Owner gave his consent to such
Supplemental Indenture.
Section 7.03 Bonds Owned by City . For purposes of this Article, Bonds owned or
held by or for the account of the City, or any funds of the City, shall not be deemed Outstanding
for the purpose of consent or other action or any calculation of Outstanding Bonds provided for
in this Article, and the City shall not be entitled with respect to such Bonds to give any consent
or take any other action provided for in this Article as an Owner of Bonds. At the time of any
consent or other action taken under this Article, the City shall furnish the Trustee 'a certificate of
OHS West:260486430.4 59
an Authorized City Representative upon which the Trustee may rely, describing all Bonds so to
be excluded.
Section 7.04 Notation on Bonds. Bonds authenticated and delivered after the effective
date of any Supplemental Indenture entered into by the City and the Trustee as in this Article
provided may bear a notation by endorsement or otherwise in a form approved by the City as to
such action, and in that case upon demand of the Owner of any Bond Outstanding on such
effective date and presentation of the Bond for the purpose at the Principal Office of the Trustee
or upon any transfer or exchange of any Bond Outstanding on such effective date, suitable
notation shall be made on such Bond or upon any Bond issued upon any such transfer or
exchange by the Trustee as to any such action.
ARTICLE VIII
CONCERNING THE FIDUCIARIES
Section 8.01 Trustee; Acceptance of Duties. The Trustee shall signify its acceptance
of the duties and obligations imposed upon it by the Indenture, including the duties of Paying
Agent for the Bonds, by the execution and the delivery of this Master Indenture to the City and
by such execution and delivery the Trustee shall be deemed to have accepted such duties and
obligations with respect to all the Bonds thereafter to be issued, but only, however, upon the
terms and conditions set forth in the Indenture and no implied covenants shall be read into the
Indenture against the Trustee.
Section 8.02 Paying Agents; Appointment and Acceptance of Duties.
(a) The City hereby appoints the Trustee as a Paying Agent for the Bonds of
each Series, and may at any time or from time to time appoint one or more other Paying Agents
having the qualifications set forth in Section 8.13 as an additional Paying Agent for the Bonds
of one or more Series.
(b) Each Paying Agent other than the Trustee shall signify its acceptance of the
duties and obligations imposed upon it by the Indenture by executing and delivering to the City
and to the Trustee a written acceptance thereof.
(c) The Principal Offices of the Paying Agents are designated as the respective
offices or agencies of the City for the payment of the principal and any applicable Redemption
Price of the Bonds.
Section 8.03 Responsibilities of Fiduciaries.
(a) Any recitals of fact in the Indenture and in the Bonds contained shall be
taken as the statements of the City and no Fiduciary assumes any responsibility for the
correctness of the same. No Fiduciary makes any representations as to the validity or
sufficiency of the Indenture or of any Bonds issued thereunder or as to the security afforded by
the Indenture, and no Fiduciary shall incur any liability in respect thereof. No Fiduciary shall
be responsible for or have any liability with respect to the Electric System or any act or
omission of the City with respect thereto. The Trustee shall, however, be responsible for its
OHS West:260486430.4 60
representation contained in its certificate of authentication on the Bonds. No Fiduciary shall be
under any responsibility or duty with respect to the application of any moneys paid by such
Fiduciary in accordance with the provisions of the Indenture. No Fiduciary shall be under any
obligation or duty to perform any act which would involve it in expense or liability or to
institute or defend any suit in respect thereof, or to advance any of its own moneys, unless
properly indemnified. Subject to the provisions of subsection (b) of this Section, no Fiduciary
shall be liable in connection with the performance of its duties under the Indenture except for
its own negligence, willful misconduct or default.
(b) The Trustee, prior to the occurrence of an Event of Default and after the
curing of all Events of Default which may have occurred, undertakes to perform such duties
and only such duties as are specifically set forth in the Indenture. In case an Event of Default
has occurred (which has not been cured) the Trustee shall exercise such of the rights and
powers vested in it by the Indenture, and use the same degree of care and. skill in their exercise,
as a prudent man would exercise or use under the circumstances in the conduct of his own
affairs. Any provision of the Indenture relating to action taken or to be taken by the Trustee or
to evidence upon which the Trustee may rely shall be subject to the provisions of this Section.
Without limiting the generality of the foregoing:
(1) the Trustee shall not be liable for any error of judgment
made in good faith by any officer of the Trustee, unless it
shall be proved that the Trustee was negligent in
ascertaining the pertinent facts;
(2) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in
accordance with the direction of a Credit Provider or a
Reserve Financial Guaranty Provider or the Owners of 25%
in aggregate principal amount of the Outstanding Bonds
relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee,
under the Indenture;
(3) no provision of the Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
under the Indenture, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it;
(4) the Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by the Indenture at the
request or direction of any of the Owners, a Credit Provider
or a Reserve Financial Guaranty Provider pursuant to the
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Indenture (except for declaring an acceleration of the
Bonds or requesting credit and/or liquidity support pursuant
to a Credit Support Instrument), unless such Owners, such
Credit Provider or such Reserve Financial Guaranty
Provider shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with
such request or direction;
(5) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, coupon,
facsimile transmission, electronic mail or other paper or
document but the Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the City,
personally or by agent or attorney;
(6) the Trustee shall not be required to take notice of and shall
not be deemed to have knowledge of any Event of Default
(other than an Event of Default specified in subsections (i)
or (ii) of Section 10.01) or any event which would, with the
passage of time, the giving of notice, or both, constitute an
Event of Default, unless the Trustee shall have been
notified of such Event of Default or other event by the City,
a Credit Provider or a Reserve Financial Guaranty
Provider, or the Owners of 10% in aggregate principal
amount of Bonds Outstanding;
(7) the Trustee shall not be responsible for any moneys or
funds held by the City), or for monitoring the accounting
and investment practices of the City, other than requiring
the delivery of the Annual Budget and annual financial
statements and reports pursuant to Section 6.10; and
(8) The Trustee may perform its duties under the Indenture
through agents and attorneys and the Trustee shall not be
liable for the negligence or misconduct on the part of any
agent or attorney appointed with due care by it under the
Indenture if the City has a right to proceed directly against
such agent or attorney for any such negligence or
misconduct.
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(9) In no event shall the Trustee be liable for any failure or
delay in the performance of its obligations hereunder
because of circumstances beyond its control, including, but
not limited to, acts of God, flood, war (whether declared or
undeclared), terrorism, fire, riot, embargo, government
action, including any laws, ordinances, regulations,
governmental action or the like which delay, restrict or
prohibit the providing of services contemplated by the
Indenture.
Whether or not therein expressly provided, every provision of the Indenture relating to
the conduct or affecting the liability of or affording protection to the Trustee shall be subject to
the provisions of this Article.
Section 8.04 Evidence on Which Fiduciaries May Act.
(a) Each Fiduciary, upon receipt of any notice, resolution, request, requisition,
consent, order, certificate, report, opinion, bond, or other paper or document furnished to it
pursuant to any provision of the Indenture, shall examine such instrument to determine whether
it conforms to the requirements, if any, of the Indenture and shall be protected in acting upon
any such instrument believed by it to be genuine and to have been signed or presented by the
proper party or parties. Each Fiduciary may consult with counsel, who may or may not be
Bond Counsel or counsel to the City, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or suffered by it under the
Indenture in good faith and in accordance therewith.
(b) Whenever any Fiduciary shall deem it necessary or desirable that a matter
be proved or established prior to taking or suffering any action under the Indenture, such
matter (unless other evidence in respect thereof be therein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate of an Authorized City
Representative, and such certificate shall be full warrant for any action taken or suffered in
good faith under the provisions of the Indenture upon the faith thereof; but in its discretion the
Fiduciary may in lieu thereof accept other evidence of such fact or matter or may require such
further or additional evidence as to it may seem reasonable.
(c) Except as otherwise expressly provided in the Indenture, any request,
requisition, order, notice or other direction required or permitted to be furnished pursuant to
any provision of the Indenture by the City to any Fiduciary shall be sufficiently executed in the
name of the City by an Authorized City Representative.
Section 8.05 Compensation. The City shall cause to be paid to each Fiduciary from
time to time reasonable compensation for all services rendered under the Indenture, and also all
reasonable expenses, charges, counsel fees and other disbursements, including those of its
attorneys, agents, and employees, incurred in and about the performance of their powers and
duties under the Indenture; provided, however, that so long as any Bonds remain Outstanding or
any amounts due to a Credit Provider under a Credit Support Agreement or a Reserve Financial
Guaranty Provider under a Reserve Financial Guaranty, no Fiduciary shall have a lien therefor
OHS West:260486430.4 63
on any and all funds'at any time held by it under the Indenture. Subject to the provisions of
Section 8.03, the City further agrees to indemnify and save each Fiduciary harmless against any
liabilities which it may incur in the exercise and performance of its powers and duties under the
Indenture or in any way arising out of the Electric System or the transactions contemplated by
the Indenture, and which are not due to its negligence, willful misconduct or default.
Section 8.06 Certain Permitted Acts. Any Fiduciary may become the Owner of any
Bonds, with the same rights it would have if it were not a Fiduciary. To the extent permitted by
law, any Fiduciary may act as depositary for, and permit any of its officers or directors to act as a
member of, or in any other capacity with respect to, any committee formed to protect the rights
of the Owners of the Bonds or to effect or aid in any reorganization growing out of the
enforcement of the Bonds or the Indenture, whether , or not any such committee shall represent
the Owners of a majority in principal amount of the Bonds then Outstanding.
Section 8.07 Resignation of Trustee. The Trustee may at any time resign and be
discharged of the duties and obligations created by the Indenture by giving not less than 60 days
written notice to the City, each Credit Provider and each Reserve Financial Guaranty Provider,
specifying the date when such resignation shall take effect; provided that no such resignation
shall take effect until a successor shall have been appointed in accordance with Section 8.09.
Section 8.08 Removal of Trustee. The Trustee may be removed (i) with the consent (to
the extent required by a Supplemental Indenture) of each Credit Provider and each Reserve
Financial Guaranty Provider, at any time when no Event of Default has occurred and is
continuing and when, no event has occurred which, with notice or the passage of time, would
become an Event of Default which has not been cured, by an instrument in writing signed by an
Authorized City Representative and filed with the Trustee or (ii) with the consent (to the extent
required by a Supplemental Indenture) of each Credit Provider and each Reserve Financial
Guaranty Provider, at any time by an instrument or concurrent instruments in writing, filed with
the Trustee, and signed by the Owners of a majority in principal amount of the Bonds then
Outstanding or their attorneys -in -fact duly authorized, excluding any Bonds held by or for the
account of the City or (iii) with the consent (to the extent required by a Supplemental Indenture,)
of each Credit Provider and each Reserve Financial Guaranty Provider, at any time by an
instrument in writing signed by an Authorized City Representative and filed with the Trustee, for
any breach of its fiduciary duties under the Indenture; provided that no such removal shall be
effective until 30 days have lapsed from the filing of such instrument with the Trustee and until a
successor shall have been appointed in accordance with Section 8.09 .
Section 8.09 Appointment of Successor Trustee; Financial Qualifications of
Successor Trustee.
(a) In case at any time the Trustee shall resign or shall be removed or, shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if,a receiver,
liquidator or conservator of the Trustee, or of its' property shall be appointed, or if any public
officer shall take charge or control of the Trustee or of its property or affairs, a successor may
be appointed by the Owners of a majority in principal amount of the Bonds then Outstanding,
excluding any Bonds held by or for the account of the City, with (to the extent required by a
Supplemental Indenture) the consent of each Credit Provider and each Reserve Financial
OHS West:260486430.4 64
Guaranty Provider, by an instrument or concurrent instruments in writing signed and
acknowledged by such Owners of the Bonds or by their attorneys -in -fact duly authorized and
delivered to such successor Trustee, notification thereof being given to the City and the
predecessor Trustee; provided, nevertheless, that unless a successor Trustee shall have been
appointed by the Owners of the Bonds as aforesaid, the City, by a duly executed written
instrument signed by an Authorized City Representative shall forthwith appoint a Trustee to
replace such resigning Trustee or to fill such vacancy until a successor Trustee shall be
appointed by the Owners of the Bonds as authorized in this Section. Any successor Trustee
appointed by the City shall, immediately and without further act, be superseded by the Trustee
appointed by the Owners of the Bonds. Any resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective only upon acceptance of
appointment by the successor Trustee.
(b) If in a proper case no appointment of a successor Trustee shall be made
pursuant to the foregoing provisions of this Section within 45 days after the Trustee shall have
given to the City written notice as provided in Section 8.07 or after a vacancy in the office of
the Trustee shall have occurred by reason of its inability to act, removal, or for any other
reason whatsoever, the Trustee (in the case of its resignation under Section 8.07) or the Owner
of any Bond (in any case) may apply to any court of competent jurisdiction to appoint a
successor Trustee. Said court may thereupon, after such notice, if any, as such court may deem
proper, appoint a successor Trustee.
(c) The Trustee appointed under the provisions of this Article or any successor
to the Trustee shall be a bank or trust company organized under the laws of any state of the
United States or national banking association, doing business and having its principal corporate
trust office in New York, New York, or Chicago, Illinois, or Los Angeles, California, or San
Francisco, California, duly authorized to exercise trust powers and subject to examination by
federal or state authority. Each successor Trustee shall have capital stock and surplus
aggregating at least $50,000,000, or have all of its obligations under the Indenture guaranteed
by a bank or trust company organized under the laws of the United States, or any state thereof,
with a capital stock and surplus or net worth of $50,000,000, if there be such a bank or trust
company or national banking association willing and able to accept the office on reasonable
and customary terms and authorized by law to perform all the duties imposed upon it by the
Indenture. If such bank, national banking association, or trust company publishes a report of
condition at least annually, pursuant to law or to the requirements of any supervising or
examining authority, then for the purposes of this Section the combined capital and surplus of
such bank, trust company, or national banking association shall be deemed to be its combined
capital and surplus set forth in its most recent report of condition so published.
Section 8.10 Transfer of Rights and Property to Successor Trustee. Any successor
Trustee appointed under the Indenture shall execute, acknowledge and deliver to its predecessor
Trustee and the City an instrument accepting such appointment, and thereupon such successor
Trustee, without any further act, deed or conveyance, shall become fully vested with all moneys,
estates, properties, rights, power, duties and obligations of such predecessor Trustee, with like
effect as if originally named as Trustee; but the Trustee ceasing to act shall nevertheless, at the
written request of the City, or of the successor Trustee, execute, acknowledge, deliver, file and
record such instrument of conveyance and further assurance and do such other things as may
OHS West260486430.4 65
reasonably be required for more fully and certainly vesting and confirming in such successor
Trustee all the right, title and interest of the predecessor Trustee in and to any property held by it
under the Indenture or covered by the pledge of the Indenture, and shall pay over, assign and
deliver to the successor Trustee any money or other property subject to the trust and conditions
in the Indenture set forth. Should any deed, conveyance or instrument in writing from the City
be required by such successor Trustee for more fully and certainly vesting in and confirming to
such successor Trustee any such lien, estates, rights, power and duties, any and all such deeds,
conveyances and instruments in writing shall, on request, and so far as may be authorized by
law, be executed, acknowledged and delivered by the City. Any such successor Trustee shall
promptly notify the Paying Agents of its appointment as Trustee.
Section 8.11 Merger or Consolidation. Any company into which a Fiduciary may be
merged or converted or with which it may be consolidated or any company resulting from any
merger, conversion or consolidation to which it shall be a party or any company to which any
Fiduciary may sell or transfer all or substantially all of its corporate trust business, provided such
company shall be a bank or trust company organized under the laws of any state of the United
States or a national banking association, shall satisfy the applicable standards of a successor set
forth in the Indenture, and shall be authorized by law to perform all the duties imposed upon it
by the Indenture, shall be the successor to such Fiduciary without the execution or filing of any
paper or the performance of any further act.
Section 8.12 Adoption of Authentication. In case any of the Bonds contemplated to be
issued under the Indenture shall have been authenticated but not delivered, any successor Trustee
may adopt the certificate of authentication of any predecessor Trustee so authenticating such
Bonds apd deliver such Bonds so authenticated; and in case any of the said Bonds shall not have
been authenticated, any successor Trustee may authenticate such Bonds in the name of the
predecessor Trustee, or in the name of the successor Trustee, and in all such cases such
certificate shall have the full force which it is anywhere in said Bonds or provided in the
Indenture that the certificate of the Trustee shall have.
Section 8.13 Resignation or Removal of Paying Agent and Appointment of
Successor.
(a) Any Paying Agent may at any time resign and be discharged of the duties
and obligations created by the Indenture by giving at least 60 days written notice to the City,
the Trustee, each Credit Provider, each Reserve Financial Guaranty Provider and the other
Paying Agents. Any Paying Agent may be removed at any time by an instrument filed with
such Paying Agent and the Trustee and signed by an Authorized City Representative. Any
successor Paying Agent shall be appointed by the City with the approval of the Trustee (and
each Credit Provider and each Reserve Financial Guaranty Provider required by a
Supplemental Indenture) and shall be a commercial bank or trust company organized under
the laws of any state of the United States or a national banking association, having capital stock
and surplus aggregating at least $25,000,000, and willing and able to accept the office on
reasonable and customary terms and authorized by law to perform all the duties imposed upon
it by the Indenture. If such bank, national banking association, or trust company publishes a
report of condition at least annually, pursuant to law or to the requirements of any supervising
or examining authority, then for the purposes of this Section the combined capital and surplus
OHS West:260486430.4 66
of such bank, trust company, or national banking association shall be deemed to be its
combined capital and surplus set forth in its most recent report of condition so published.
(b) In the event of the resignation or removal of any Paying Agent, such Paying
Agent shall pay over, assign and deliver any moneys held by it as Paying Agent to its
successor, or if there be no successor, to the Trustee. In the event that for any reason there
shall be a vacancy in the office of any Paying Agent, the Trustee shall act as such Paying
Agent.
ARTICLE IX
DEI+EASANCE
Section 9.01 Payment of Bonds. If the City shall pay, or cause to be paid, or there shall
otherwise be paid, to the Owners of all Bonds the principal amount or any redemption premium,
if applicable, of the Bonds, and interest due or to become due on the Bonds, at the times and in
the manner stipulated therein and in the Indenture, together with all other sums payable by the
City under the Indenture, including all fees and expenses of the Trustee, then and in that case,
subject to the provisions of subsection (b) of this Section, the Indenture, and the pledge of and
lien on the Trust Estate hereunder and all covenants, agreements and obligations of the City
contained herein, shall cease and terminate and shall be completely discharged and satisfied and
the City shall be released therefrom and the Trustee shall assign and transfer to or upon the order
of the City all property (in excess of the amounts required for the foregoing) then held by the
Trustee hereunder free and clear of any liens or encumbrances hereon pursuant to the Indenture
and shall execute such documents as may be reasonably required by the City in this regard.
(b) Notwithstanding the termination, satisfaction and discharge of the
Indenture or the satisfaction discharge of this Indenture in respect of any Bonds, those provisions
of the Indenture relating to the maturity of the Bonds, interest payments and dates thereof, tender
and exchange provisions, exchange and transfer of Bonds, replacement of mutilated, destroyed,
lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds,
compliance by the City of the covenants contained in Section 6.12 hereof and the duties of the
Trustee in connection with all of the foregoing, shall remain in effect and shall be binding upon
the City, the Trustee and the Owners and the Trustee shall continue to be obligated to hold in
trust any monies and investments then held by the Trustee for the payment of the principal or
Redemption Price of, and interest on, the Bonds, to pay to the Owners, but only from the monies
and investments so held by the Trustee, the principal or Redemption Price of, and interest on, the
Bonds as and when such payment becomes due. Notwithstanding the satisfaction and discharge
of the Indenture or the satisfaction discharge of the Indenture in respect of any Bonds, those
provisions of this Indenture contained in Section 8.05 hereof relating to the compensation of the
Trustee shall remain in effect and shall be binding upon the Trustee and the City.
Section 9.02 Bonds Deemed Paid. Bonds (or portions of Bonds) for the payment or
redemption of which moneys shall have been set aside and shall be held in trust by an Escrow
Agent at the maturity date redemption date or other date when the Owner is entitled to receive
the principal thereof, as applicable, shall be deemed to have been paid within the meaning and
with the effect expressed in Section 9.01. Any Outstanding Bond (or any portion thereof such
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that both the portion thereof which is deemed paid and the portion which is not deemed paid
pursuant to this Section shall be in an Authorized Denomination) shall prior to the maturity,
redemption date or other payment date thereof, be deemed to have been paid within the meaning
and with the effect expressed in Section 9.01 (except that the obligations under the Indenture set
forth in Section 9.01 (b) and the giving of the notices of the redemption of Bonds to be redeemed
as provided in Article IV shall continue) if (1) in case said Bond (or portion thereof) is to be
redeemed on any date prior to maturity, the City shall have given the Trustee irrevocable
instructions to give notice of redemption of such Bond (or portion thereof) on said date as
provided in Article IV, (2) there shall have been deposited with an Escrow Agent either moneys
in an amount which shall be sufficient, or Defeasance Securities, the principal of and the interest
on which when due shall provide moneys which, together with the moneys, if any, held by such
Escrow Agent for such purpose, shall be sufficient, in each case as evidenced by an Accountant's
Certificate, to pay when due the principal amount of, and any redemption premiums on, said
Bond (or portion thereof) and interest due and to become due on said Bond (or portion thereof)
on and prior to the redemption date, maturity date or other payment date thereof, as the case may
be, and (3) if such Bond (or portion thereof) is not to be paid or redeemed within 60 days of the
date of the deposit required by (2) above, the City shall have given the Trustee, in form
satisfactory to it, instructions to mail, as soon as practicable, by first class mail, postage prepaid,
to the Owner of such Bond, at the last address, if any, appearing upon the Bond Register, a notice
that the deposit required by (2) above has been made with an Escrow Agent and that said Bond
(or the applicable portion thereof) is deemed to have been paid in accordance with this Section
and stating such date upon which moneys are to be available for the payment of the principal
amount of, and any redemption premiums on, said Bond. Any notice given pursuant to clause
(3) of this Section with respect to Bonds which constitute less than all of the Outstanding Bonds
of any Series and maturity shall specify the letter and number or other distinguishing mark of
each such Bond. Any notice given pursuant to clause (3) of this Section with respect to less than
the full principal amount of a Bond shall specify the principal amount of such Bond which shall
be deemed paid pursuant to this Section and notify the Owner of such Bond that such Bond must
be surrendered as provided in Section 9.03. The receipt of any notice required by this Section
shall not be a condition precedent to any Bond being deemed paid in accordance with this
Section and the failure of any Owner to receive any such notice shall not affect the validity of the
proceedings for the payment of Bonds in accordance with this Section. Neither Defeasance
Securities nor moneys deposited with an Escrow Agent pursuant to this Section, nor principal or
interest payments on any such Defeasance Securities, shall be withdrawn or used for any purpose
other than, and shall be held in trust for, the payment of the principal amount of, and any
redemption premiums on, said Bonds and the interest thereon; provided that any cash received
from principal or interest payments on such Defeasance Securities deposited with an Escrow
Agent, (A) to the extent such cash shall not be required at any time for such payment, as
evidenced by an Accountant's Certificate, shall be paid over upon the written direction of an
Authorized City Representative, including a transfer to the City free and clear of any trust, lien,
pledge or assignment securing said Bonds, and (B) to the extent such cash shall be required for
such payment at a later date, shall, to the extent practicable, at the written direction of an
Authorized City Representative, be reinvested in Defeasance Securities maturing at times and in
amounts, which together with the other funds to be available to the Escrow Agent for such
purpose, shall be sufficient to pay when due the principal amount of, and any redemption
premiums on, said Bonds and the interest to become due on said Bonds on and prior to such
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redemption date, maturity date or other payment thereof, as the case may be, as evidenced by an
Accountant's Certificate.
Nothing in the Indenture shall prevent the City from substituting for the Defeasance
Securities held for the payment or redemption of Bonds (or portions thereof) other Defeasance
Securities which, together with the moneys held by the Escrow Agent for such purpose, as
evidenced by an Accountant's Certificate, shall be sufficient to pay when due the principal
amount of, and any redemption premiums on, the Bonds (or portions thereof) to be paid or
redeemed, and the interest due on the Bonds (or portions thereof) to be paid or redeemed at the
times. established with the initial deposit of Defeasance Securities for such purpose provided that
the City shall deliver to the Escrow Agent a Favorable Opinion of Bond Counsel with respect to
such substitution.
Prior to the defeasance of any Bonds bearing interest at a variable rate becoming
effective under this Section, the Trustee shall have received a Rating Confirmation from each
Rating Agency.
Section 9.03 Defeasance of Portion of Bond. Subject to the provisions of Section
3.01(g), if there shall be deemed paid pursuant to Section 9.02 less than all of the full principal
amount of a Bond, the City shall execute and the Trustee shall authenticate and deliver, upon the
surrender of such Bond, without charge to the Owner of such Bond, a new Bond or Bonds for the
principal amount of the Bond so surrendered which is deemed paid pursuant to Section 9.02 and
another new Bond or Bonds for the balance of the principal amount of the Bond so surrendered,
in each case of like Series, maturity and other terms, and in any of the Authorized
Denominations.
Section 9.04 Discharge of Liability on Bonds. Upon the deposit with an Escrow
Agent, in trust, at or before maturity or the applicable redemption date, of money or Defeasance
Securities in the necessary amount (as provided in Section 9.01 or Section 9.02, as applicable) to
pay or redeem Outstanding Bonds (or portions thereof), and to pay the interest thereto to such
maturity or redemption date, as applicable, (provided that, if such Bonds are to be redeemed
prior to the maturity thereof, notice of such redemption shall have been given as in Article IV
provided or provision satisfactory to the Trustee shall have been made for giving such notice), all
liability of the City in respect of such Bonds shall cease, terminate and be completely discharged,
except that the City shall remain liable for such payment but only from, and the Bondowners
shall thereafter be entitled only to payment (without interest accrued thereon after such
redemption date or maturity date, as applicable) out of, the money and Defeasance Securities
deposited with the Escrow Agent as aforesaid for their payment, subject, however, to the
provisions of Sections 6.12 and 9.02; provided that no Bond which constitutes Tender
Indebtedness shall be deemed to be paid within the meaning of the Indenture unless the Purchase
Price of such Bond, if tendered for purchase in accordance with the Indenture, could be paid
when due from such moneys or Defeasance Securities (as evidenced by an Accountant's
Certificate) or a Credit Support Instrument is provided in connection with such Purchase Price.
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ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. Each of the following shall constitute an Event of
Default under the Indenture:
(i) if default shall be made in the payment of the principal or
Redemption Price of or Sinking Fund Installment for, or interest on, any Outstanding
Bond when and as the same shall become due and payable, whether on an Interest
Payment Date, at maturity, by call for redemption, or otherwise;
(ii) if default shall be made by the City in the performance or
observance of any other of the covenants, agreements or conditions on its part in the
Indenture or in the Outstanding Bonds contained, and such default shall continue for a
period of 120 days after written notice thereof to the City by the Trustee or to the City
and to the Trustee by the Owners of not less than 10% in principal amount of the Bonds
Outstanding; provided, however, if such default is such that it can be corrected by the
City but not within the applicable period specified above, it shall not constitute an Event
of Default if corrective action is instituted by the City within thirty (30) days of the City's
receipt of the notice of the default required by this paragraph and diligently pursued until
the default is corrected;
(iii) an Event of Bankruptcy shall have occurred and be continuing with
respect to the City; or
(iv) if an event of default (as defined in the applicable Issuing
Instrument) shall have occurred and be continuing with respect to any Parity Obligation.
Section 10.02 Accounting and Examination of Records After Default.
(a) The City covenants that if an Event of Default shall have happened and shall
not have been remedied, the books of record and accounts of the City and all other records
relating to the Electric System shall at all times be subject to the inspection and use of the
Trustee and of its agents and attorneys.
(b) The City covenants that if an Event of Default shall have happened and shall
not have been remedied, the City, upon demand of the Trustee, shall account, as if it were the
trustee of an express trust, for all Revenues and other moneys, securities and funds pledged or
held under the Indenture for such period as shall be stated in such demand.
Section 10.03 Application of Revenues and Other Moneys After Default.
(a) Notwithstanding anything to the contrary contained in the Indenture,
including Article V of this Indenture, the City covenants that if an Event of Default shall
happen and shall not have been remedied, the City, upon the demand of the Trustee, shall cause
control of amounts in the Light and Power Fund to be transferred to the Trustee and shall cause
to be paid over to the Trustee by the first Business Day of each month, all Revenues received
by the City with respect to the preceding month.
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(b) During the continuance of an Event of Default, the Trustee shall apply all
Revenues and amounts in the Light and Power Fund received by or available to the Trustee
pursuant to any right given or action taken under the provisions of this Article, in the following
order of priority:
First: To the payment of the reasonable and proper charges, expenses and
liabilities of the Fiduciaries, including reasonable fees of counsel, and the
payment of the reasonable and proper charges, expenses and liabilities of the
fiduciaries for Parity Obligations, including reasonable fees of counsel.
Second: To the payment of the Operationand Maintenance Expenses.
Third: To the payment of the principal and Redemption Price of and
interest on the Outstanding Bonds, and the principal and redemption price of and
interest on the other Outstanding Parity Obligations, then due and payable;
provided however, that in the event the amount of Net Revenues and amounts in
the Light and Power Fund available for such payment are not sufficient to make
all the payments required by this clause, the Trustee shall apply the Net Revenues
and available amounts in the Light and Power Fund to the payment of the
principal and Redemption Price of and interest on all Outstanding Parity
Obligations then due and payable ratably (based on the respective amounts to be
paid), without any discrimination on preferences.
Fourth: To the payment of any Termination Payments due and payable
under the Qualified Swap Agreements; provided however, that in the event the
amount of Net Revenues and available amounts in the Light and Power Fund are
not sufficient to make all the payments required by this clause with respect to all
Qualified Swap Agreements, the Trustee shall apply the Net Revenues and
available amounts in the Light and Power Fund to the payment of the Termination
Payments then due and payable under all Qualified Swap Agreements ratably
(based on the respective amounts to be paid), without any discrimination on
preferences.
Fifth: To the transfer to the Debt Service Reserve Fund for the Bonds and
to each debt service reserve fund for other Outstanding Parity Obligations, the
amount, if any, necessary so that the amount on deposit in the Debt Service
Reserve Fund shall equal the Debt Service Reserve Requirement and the amount
in each debt service reserve fund for other Outstanding Parity Obligations shall
equal the amount required to be on deposit in such debt service reserve fund under
the applicable Issuing Instrument; provided that that in the event the amount of
Net Revenues and amounts in the Light and Power Fund available for such
payment are not sufficient to make all the payments`' required by this clause, the
Trustee shall apply the Net Revenues and available amounts in the Light and
Power Fund to the transfer to the Debt Service Reserve Fund and each debt
service reserve fund for other Outstanding Parity Obligations ratably (based on
the respective amounts to be paid), without any discrimination or preferences.
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Sixth: To the payment of amounts due with respect to outstanding
Subordinate Obligations (which shall not include Termination Payments for
Qualified Swap Agreements) in accordance with the provisions of the Issuing
Instrument pursuant to which such Subordinate Obligations have been issued.
(c) In the event that on any date all payments required to be made from Net
Revenues and amounts in the Light and Power Fund available for such payment are not made
in full as required by this Section, then no payment shall be made which has a priority under
this Section lower than the delinquent payment until all delinquent payments with a higher
priority have been made in full.
(d) If and whenever all overdue installments of interest on all Outstanding
Bonds and Outstanding Parity Obligations, together with the reasonable and proper fees,
charges, expenses and liabilities of the Trustee and any other fiduciary for Parity Obligations,
including reasonable fees of counsel, and all other sums payable for the account of the City
under the Indenture, including the principal and Redemption Price of all Outstanding Bonds
and Outstanding Parity Obligations and unpaid interest on all Outstanding Bonds and
Outstanding Parity Obligations which shall then be payable, shall be paid for by the account of
the City, or provision satisfactory to the Trustee shall be made for such payment, and all
defaults under the Indenture, the Outstanding Bonds and the Outstanding Parity Obligation
shall be made good or secured to the satisfaction of the Trustee or provision deemed by the
Trustee to be adequate shall be made therefor, the Trustee, at the request of the City and with
the consent of the Owners of a majority in aggregate principal of the Bonds then Outstanding
and with the consent of each Credit Provider whose consent is required by a Supplemental
Indenture or a Credit Support Agreement, shall transfer control of amounts in the Light and
Power Fund to the City and pay over all unexpended Revenues in the hands of the Trustee
(except Revenues deposited or pledged, or required by the terms of the Indenture to be
deposited or pledged, with the Trustee), and thereupon the City and the Trustee shall be
restored, respectively, to their former positions and rights under the Indenture. No such
payment by the Trustee nor such restoration of the City ' and the Trustee to their former
positions and rights shall extend to or affect any subsequent default under the Indenture or
impair any right consequent thereon.
(e) The Trustee may in its discretion establish special record dates for the
determination of the Owners of Bonds for various purposes hereof, including without
limitation, payment of defaulted interest and giving direction or consent to the Trustee.
Section 10.04 Right to Accelerate Upon Default. Notwithstanding anything contrary
in the Indenture or in the Bonds, upon the occurrence of an Event of Default, the Trustee may,
with the consent of each Credit Provider whose consent is required by a Supplemental Indenture
or a Credit Support Agreement, and shall, at the direction of the Owners of a majority in
principal amount of Outstanding Bonds` (other'than Bonds owned by or on behalf of the City) by
written notice to the City, declare the principal of the Outstanding Bonds and the interest thereon
to be immediately due and payable, whereupon such principal and interest shall, without further
action, become and be immediately due and payable.
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Section 10.05 Appointment of Receiver. If an Event of Default shall happen and shall
not have been remedied, and upon the filing of a suit or other commencement of judicial
proceedings to enforce the rights of the Trustee and of the Owners of the Bonds under the
Indenture, the Trustee shall be entitled to make application for the appointment of a receiver or
custodian of the Revenues and amounts in the Light and Power Fund, pending such proceedings,
with such power as the court making such appointment shall confer.
Section 10.06 Enforcement Proceedings.
(a) If an Event of Default shall happen and shall not have been remedied, then
and in every such case, the Trustee, by its agents and attorneys, may, with the consent of each
Credit Provider whose consent is required by a Supplemental Indenture or a Credit Support
Agreement, proceed, and upon the written request of the Owners of not less than a majority in
principal amount of the Bonds at the time Outstanding (other than Bonds owned by or on
behalf of the City), with the consent of each Credit Provider whose consent is required by a
Supplemental Indenture or a Credit Support Agreement, shall proceed to protect and enforce its
rights and the rights of the Owners of the Outstanding Bonds by a suit or suits in equity or at
law, whether for damages or the specific performance of any covenant contained in the
Indenture, to enforce the security interest in, pledge of and lien on the Trust Estate granted
pursuant to the Indenture, or in aid of the execution of any power granted in the Indenture or
any remedy granted under applicable provisions of the laws of the State of California, or for an
accounting by the City as if the City were the trustee of an express trust, or in the enforcement
of any other legal or equitable right as the Trustee, being advised by counsel, shall deem most
effectual to enforce any of its rights or to require the City to perform any of its duties under the
Indenture.
(b) All rights of action under the Indenture may be prosecuted and enforced by
the Trustee without the possession of any of the Bonds or the production thereof in the trial or
other proceedings, and any such suit or proceedings instituted by the Trustee shall be brought
in its own name as trustee of an express trust.
(c) If an Event of Default shall occur and be continuing, upon commencing a
suit in equity or upon other commencement of judicial proceedings by the Trustee to enforce
any right under the Indenture, the Trustee shall be entitled to exercise any and all rights and
powers conferred in the Indenture and otherwise provided by law to be exercised by the
Trustee as the trustee of an express trust.
(d) Regardless of the happening of an Event of Default, the Trustee shall have
power to, but unless requested in writing by the Owners of a majority in principal amount of
the Bonds then Outstanding and furnished with reasonable security and indemnity, shall be
under no obligation to, institute and maintain such suits and proceedings as it may be advised
shall be necessary or expedient to prevent any impairment of the security under the Indenture
by any acts which may be unlawful or in violation of the Indenture, and such suits and
proceedings as the Trustee may be advised shall be necessary or expedient to preserve or
protect its interests and the interests of the Owners of the Bonds.
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(e) If the Trustee or any Owner or Owners of Outstanding Bonds have instituted
any proceeding to enforce any right or remedy under the Indenture and such proceeding has
been discontinued or abandoned for any reason, or has been determined adversely to the
Trustee or to such Owner or Owners, then and in every such case the City, the Trustee and the
Owners shall, subject to any determination in such proceeding, be restored severally and
respectively to their former positions under the Indenture, and thereafter all rights and remedies
of the Trustee and the Owners shall continue as though no such proceeding had been instituted.
Section 10.07 Restriction on Owner's Action.
(a) Except as otherwise provided in paragraph (b) of this Section, no Owner of
any Bond shall have any right to institute any suit, action or proceeding at law or in equity for
the enforcement of any provision of the Indenture or the execution of any trust under the
Indenture or for any remedy given under the Indenture or existing at law or in equity or by
statute unless such Owner shall have previously given to the Trustee written notice of the
happening of an Event of Default, as provided in this Article, and the Owners of at least
twenty-five percent in principal amount of the Bonds then Outstanding shall have filed a
written request with the Trustee, and shall have offered it reasonable opportunity, either to
exercise the powers granted in the Indenture or by the applicable laws of the State of California
or to institute such action, suit or proceeding in its own name, and unless such Owners shall
have offered to the Trustee adequate security and indemnity against the costs, expenses and
liabilities to be incurred therein or thereby, and the Trustee shall have refused to comply with
such request for a period of 60 days after receipt by it of such notice, request and offer of
indemnity, it being understood and intended that no one or more Owners of Bonds shall have
any right in any manner whatever by his or their action to affect, disturb or prejudice the
pledge created by the Indenture, or to enforce any right under the Indenture, except in the
manner therein provided; and that all proceedings at law or in equity to enforce any provision
of the Indenture shall be instituted, had and maintained in the manner provided in the Indenture
and for the ratable benefit of all Owners of the Outstanding Bonds, subject only to the
provisions of Section 11.04.
(b) Nothing in the Indenture or in the Bonds contained shall affect or impair the
obligation of the City, which is absolute and unconditional, to pay on the respective due dates
thereof and at the places therein expressed, but solely from the Net Revenues, amounts in the
Light and Power Fund available for such payment in accordance with this Master Indenture
and the amounts in the Funds, other than the Rebate Fund, held by the Trustee under the
Indenture, the principal amount, or Redemption Price if applicable, of the Bonds, and the
interest thereon, to the respective Owners thereof, or affect or impair the right, which is also
absolute and unconditional, of any Owner to institute suit for the enforcement of any such
payment from such sources.
Section 10.08 Remedies Not Exclusive. No remedy by the terms of the Indenture
conferred upon or reserved to the Trustee or the Owners of the Bonds is intended to be exclusive
of any other remedy, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under the Indenture or existing at law or in equity or by
statute whether effective on or after the effective date of this Master Indenture. The assertion or
OHS West:260486430.4 74
employment of any right or remedy, under the Indenture or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Section 10.09 Effect of Waiver and Other Circumstances.
(a) No delay or omission of the Trustee or any Owner of a Bond to exercise any
right or power arising upon the happening of an Event of Default shall impair any right or
power or shall be construed to be a waiver of any such Event of Default or be an acquiescence
therein; and every power and remedy given by this Article to the Trustee or to the Owners of
the Bonds may be exercised from time to time and as often as may be deemed expedient by the
Trustee or by the Owners of the Bonds.
(b) The Owners of not less than sixty percent in principal amount of the Bonds
at the time Outstanding, or their attorneys -in -fact duly authorized, may on behalf of the
Owners of all of the Bonds, waive any Event of Default and its consequences. No such waiver
shall extend to any subsequent or Event of Default or impair any right consequent thereon
unless the provisions of this subsection (b) have been satisfied with respect to such subsequent
Event of Default.
Section 10.10 Notice of Default.
The Trustee shall, within thirty (30) days after obtaining knowledge thereof, mail written
notice of the occurrence of any Event of Default to each Credit Provider, each Reserve Financial
Guaranty Provider and each Owner of Bonds then Outstanding at such Owner's address
appearing in the Bond Register.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Execution of Documents and Proof of Ownership. Any request,
direction, consent, or other instrument in writing required or permitted by the Indenture to be
signed or executed by Owners of Bonds may be in any number of concurrent instruments of
similar tenor, and may be signed or executed by such Owners in person or by their attorneys
appointed by an instrument in writing for that purpose, or by any bank, trust company or other
depository for such Bonds. Proof of the execution of any such instrument, or of any instrument
appointing any such attorney, and of the ownership of Bonds shall be sufficient for any purpose
of the Indenture (except as otherwise provided in the Indenture), if made in the following
manner:
(a) The fact and date of the execution by any Owner or his or her attorney of
any such instrument and of any instrument appointing any such attorney, may be provided by a
signature guarantee of any bank or trust company located within the United States of America.
Where any such instrument is executed by an officer of a corporation or association or a
member of a partnership on behalf of such corporation, association or partnership, such
signature guarantee shall also constitute sufficient proof of his authority.
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(b) As to any Bond, the Person in whose name the same shall be registered in
the Bond Register shall be deemed and regarded as the absolute owner for all purposes. None
of the City, the Trustee or any Paying Agent shall be affected by any notice to the contrary.
(e) Nothing contained in the Indenture shall be construed as limiting the City or
the Trustee to such proof, it being intended that the City or the Trustee may accept any other
evidence of the matters stated in this Section which the City or the Trustee may deem
sufficient. Any request or consent of the Owner of any Bond shall bind every future Owner of
the same Bond in respect to anything done or suffered to be done by the City or the Trustee in
pursuance of such request or consent.
Section 11.02 Severability. If any covenant, agreement or provision, or any portion
thereof, contained in the Indenture, or the application thereof to any Person or circumstance, is
held to be unconstitutional, invalid or unenforceable, the remainder of the Indenture, and the
application of any such covenant, agreement or provision, or portion thereof, to other Persons or
circumstances, shall be deemed severable and shall not be affected thereby, and the Indenture
and the Bonds shall remain valid, and the Owners of the Bonds shall retain all valid rights and
benefits accorded to them under the Indenture, the Charter, and the Constitution and statutes of
the State.
Section 11.03 General Authorization. The Authorized City Representatives, each
acting singly, are hereby respectively authorized to do and perform from time to time any and all
acts and things consistent with the Indenture necessary or appropriate to carry the same into
effect.
Section 11.04 Moneys Held for Particular Bonds. Except as otherwise provided in the
Supplemental Indenture authorizing a Series of Bonds, the amounts held by the Trustee, any
Paying Agent or any Escrow Agent for the payment of principal, premium if any, Purchase Price
or interest due on any date with respect to particular Bonds of such Series shall, on and after such
date and pending such payment, be set aside on its books and held in trust by it for the Owners of
the Bonds entitled thereto. None of the City, the Trustee, any Paying Agent or any Escrow
Agent shall be liable to any Owner for interest on amounts so held in trust.
Section 11.05 Credit Providers. (a) Except as limited by Section 7.01(b), a
Supplemental Indenture authorizing a Series of Bonds may provide that any Credit Provider
providing a Credit Support Instrument with respect to Bonds of such Series may exercise any
right under this Master Indenture or the Supplemental Indenture authorizing the issuance of such
Series of Bonds given to the Owners of the Bonds to which such Credit Support Instrument
relates in lieu of such Owners.
(b) All provisions under this Master Indenture or a Supplemental Indenture
authorizing the exercise of rights by a Credit Provider with respect to Bonds of a Series,
including without limitation actions relating to consents, approvals, directions, waivers,
appointments and requests, shall be deemed not to require or permit such consents, approvals,
directions, waivers, appointments, requests or other actions and shall be read as if the Credit
Provider were not mentioned therein (i) during any period during which there is a default by
such Credit Provider under the applicable Credit Support Instrument or (ii) after the applicable
OHS West:260486430.4 76
Credit Support Instrument shall for any reason cease to be valid and binding on the Credit
Provider, or shall be declared to be null and void by final judgment of a court of competent
jurisdiction, or after the Credit Support Instrument has been rescinded, repudiated or
terminated (other than in accordance with its terms), or after a receiver, conservator or
liquidator has been appointed for the Credit Provider; provided, however, that the payment of
amounts due or that may become due (including without limitation all indemnity payments) to
the Credit Provider or any other person identified under such Credit Provider's Credit Support
Agreement pursuant to the terms of this Master Indenture, any Supplemental Indenture and/or
such Credit Support Agreement shall continue in full force and effect. The foregoing shall not
affect any other rights of a Credit Provider, including rights as the Owner of a Credit Provider
Bond.
(c) All provisions in the Indenture relating to the rights of a Credit Provider
shall be of no force and effect if there is no Credit Support Instrument in effect and all amounts
owing to the Credit Provider under the Credit Support Agreement have been paid.
Section 11.06 Reserve Financial Guaranty Providers. (a) All provisions under this
Master Indenture or a Supplemental Indenture authorizing the exercise of rights by a Reserve
Financial Guaranty Provider with respect to Bonds of a Series, including without limitation
actions relating to consents, approvals, directions, waivers, appointments and requests, shall be
deemed not to require or permit such consents, approvals, directions, waivers, appointments,
requests or other actions and shall be read as if the Reserve Financial Guaranty Provider were not
mentioned therein (i) during any period during which there is a default by such Reserve
Financial Guaranty Provider under the applicable Reserve Financial Guaranty or (ii) after the
applicable Reserve Financial Guaranty shall for any reason cease to be valid and binding on the
Reserve Financial Guaranty Provider, or shall be declared to be null and void by final judgment
of .a court of competent jurisdiction, or after the Reserve Financial Guaranty has been rescinded,
repudiated or terminated, or after a receiver, conservator or liquidator has been appointed for the
Reserve Financial Guaranty Provider; provided, however, that the payment of amounts due
(including without limitation all indemnity payments) to the Reserve Financial Guaranty
Provider pursuant to the terms of this Master Indenture, any Supplemental Indenture, and/or any
Reserve Financial Guaranty shall continue in full force and effect. The foregoing shall not affect
any other rights of a Reserve Financial Guaranty Provider.
(b) All provisions in the Indenture relating to the rights of a Reserve Financial
Guaranty Provider shall be of no force and effect if there is no Reserve Financial Guaranty in
effect issued by such Reserve Financial Guaranty Provider and all amounts owing to such
Reserve Financial Guaranty Provider under the Reserve Financial Guaranty have been paid.
Section 11.07 No Recourse on Bonds. Neither the members of the City nor the officers
or employees of the City shall be individually liable on the Bonds or in respect of any
undertakings by the City under this Master Indenture, any Supplemental Indenture or any Bond.
Section 11.08 Unclaimed Moneys. Anything in this Master Indenture or any
Supplemental Indenture to the contrary notwithstanding, any moneys held by the Trustee, an
Escrow Agent or any Paying Agent in trust for the payment and discharge of any of the Bonds
which remain unclaimed for two years after the date when such Bonds have become due and
OHS West:260486430.4 77
payable, either at their stated maturity dates, tender for purchase or by call for redemption, if
such moneys were held by the Trustee, an Escrow Agent or a Paying Agent at such date, or for
two years after the date of deposit of such moneys if deposited with the Trustee, an Escrow
Agent or a Paying Agent after the date when such Bonds or the Purchase Price thereof became
due and payable, shall, at the written request of an Authorized 'City Representative be repaid by
such Trustee, Escrow Agent or Paying Agent to the City, as its absolute property and free and
clear of any trust, lien, pledge or assignment securing said Bonds, and such Trustee, Escrow
Agent or Paying Agent shall thereupon be released and discharged with respect thereto and the
Owners of such Bonds shall look only to the City for the payment of such Bonds; provided,
however, that before being required to make any such payment to the City, the Trustee, the
Escrow Agent or the Paying Agent, as applicable, shall, at the expense of the City, mail, postage
prepaid to the Owners of such Bonds, at the last address appearing upon the Bond Register a
notice that said moneys remain unclaimed and that, after a date named in said notice, which date
shall be not less than 30 days after the date of the mailing of such notice, the balance of such
moneys then unclaimed shall be returned to the City.
Section 11.09 Holidays. If the date for making any payment or the last date for
performance of any act or the exercising of any right, as provided in any Indenture, shall not be a
Business Day, such payment may be made or act performed or right exercised on the next
succeeding Business Day, with the same force and effect as if done on the nominal date provided
in the Indenture, and, unless otherwise specifically provided in a Supplemental Indenture, no
interest shall accrue for the period after such nominal date.
Section 11.10 Governing Law. The Indenture and each Bond shall be interpreted,
governed by and construed for all purposes in accordance with the laws of the State for contracts
executed and to be performed in the State.
Section 11.11 Headings Not Binding. The headings in this Master Indenture are for
convenience only and in no way define, limit or describe the scope or intent of any provisions or
sections of this Master Indenture.
Section 11.12 Preservation and Inspection of Documents. All documents received by
the Trustee, any Paying Agent or any Escrow Agent under the provisions of the Indenture shall
be retained in its possession and shall be subject at all reasonable times to the inspection by the
City, the Trustee, any Credit Provider and any Owner of an Outstanding Bond and their agents
and their representatives, any of whom may make copies thereof.
Section 11.13 Parties Interested. Nothing in the Indenture expressed or implied is
intended or shall be construed to confer upon, or to give to, any Person, other than the City, the
Trustee, each Paying Agent, each Escrow Agent, the Credit Providers, the Reserve Financial
Guaranty Providers and the Owners of the Bonds, any right, remedy or claim under or by reason
of the Indenture or any covenant, condition or stipulation thereof; and all the covenants,
stipulations, promises and agreements in the Indenture contained by the City shall be for the sole
and exclusive benefit of the City, the Trustee, each Paying Agent, each Escrow Agent, the Credit
Providers, the Reserve Financial Guaranty Providers and the Owners of the Bonds.
OHS West.260486430.4 78
[Remainder of Page Intentionally Left Blank]
OHS West:260486430.4 79
IN WITNESS WHEREOF, the City of Vernon has caused these presents to be signed in
its name and on its behalf by its Mayor and attested by its City Clerk, and to evidence its
acceptance of the trust hereby created, The Bank of New York Mellon Trust Company, N.A. has
caused these presents to be signed in its name and on its behalf by an authorized officer, in each
case all as of the date first above written.
ATTEST:
LIM
Manuela Giron, City Clerk
APPROVED AS TO FORM:
LE
Jeff A. Harrison, City Attorney
CITY OF VERNON
:
Leonis C. Malburg, Mayor
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
In
Authorized Officer
OHS West:260486430.4 80
FORM FIRST SUPPLEMENTAL INDENTURE EXHIBIT B
OH&S DRAFT 8/28/08
FIRST SUPPLEMENTAL
INDENTURE OF TRUST
between
CITY OF VERNON
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
Relating to
City of Vernon
Electric System Revenue Bonds,
2008 Taxable Series A
Dated as of September 1, 2008
OHS West:260486435.2
FIRST SUPPLEMENTAL INDENTURE OF TRUST
THIS FIRST SUPPLEMENTAL INDENTURE OF TRUST, dated as of
September 1, 2008, is entered into by and between the City of Vernon (the "City"), a municipal
corporation and chartered city of the State of California and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"), a national banking association duly organized
and existing under and by virtue of the laws of the United States of America, authorized to
accept and execute trusts of the character in the Indenture set forth;
WITNESSETH:
WHEREAS, the City has entered into the Indenture of Trust, dated as of
September 1, 2008 (the "Master Indenture") by and between the City and the Trustee to provide
for the issuance from time to time by the City of Bonds to, among other things, pay the Costs of
Capital Improvements (capitalized terms used herein shall have the meanings given such terms
pursuant to Section 1.03), including reimbursing the City for its payment of such Costs; and
WHEREAS, the Master Indenture authorizes the City and the Trustee to enter
into Supplemental Indentures to provide for the issuance of Bonds; and
WHEREAS, the City desires to issue its 2008 Series A Bonds in order to provide
moneys to finance the Costs of Capital Improvements by reimbursing the Electric System for
amounts previously paid from the Light and Power Fund, to fund the Debt Service Reserve Fund
and to pay the Costs of Issuance of the 2008 Series A Bonds; and
WHEREAS, the City has determined that all acts and things have been done and
performed which are necessary to make the Indenture, as supplemented by this First
Supplemental Indenture, a valid and binding agreement for the security of the 2008 Series A
Bonds authenticated and delivered hereunder;
NOW, THEREFORE, KNOW ALL PERSONS BY THESE PRESENTS, THIS
FIRST SUPPLEMENTAL INDENTURE OF TRUST WITNESSETH:
That, in consideration of the premises, the acceptance by the Trustee of the trusts
hereby created and originally created by the Master Indenture, the mutual covenants herein
contained and the purchase and acceptance of the 2008 Series A Bonds by the Owners thereof,
and for other valuable consideration, the receipt whereof is hereby acknowledged, and in order to
secure the payment of the principal of, Redemption Price, if any, and interest on the 2008 Series
A Bonds according to their tenor and effect, and the performance and observance by the City of
all the covenants and conditions in the Indenture and in the 2008 Series A Bonds contained on its
part to be performed, it is agreed by and between the City and the Trustee as follows:
OHS West260486435.2
V
ARTICLE I
AUTHORITY AND DEFINITIONS
Section 1.01. Supplemental Indenture of Trust. This First Supplemental Indenture is
supplemental to the Master Indenture.
Section 1.02. Authority for the First Supplemental Indenture of Trust. 'This First
Supplemental Indenture is entered into (a) pursuant to the Charter and Bond Ordinance and (b)
in accordance with Article II and Article VII of the Master Indenture.
Section 1.03. Definitions.
(a) Except as otherwise defined by this First Supplemental Indenture, all
terms which are defined in Section 1.01 of the Master Indenture shall have the same meanings,
respectively, in this First Supplemental Indenture as such terms are given in said Section 1.01 of
the Master Indenture.
(b) Additional Definitions. The following terms shall, with respect to the
2008 Series A Bonds and for all purposes hereof, have the meanings set forth below:
"Authority" means the Vernon Natural Gas Financing Authority.
"Authorized Denominations" means with respect to the 2008 Series A Bonds
$5,000 and any integral multiple thereof.
"Business Day" means any day of the year other than (a) a Saturday, (b) a
Sunday, (c) any day which shall be in Los Angeles, California or New York, New York a legal
holiday or a day on which banking institutions are authorized or required by law or other
government action to close, and (d) any day the city or cities in which the principal or other
designated corporate office of the Trustee, is located are required or authorized to close.
"Citibank Swap Agreement" means the ISDA Master Agreement, dated as of July
27, 2006, between the Authority and Citibank, N.A. New York, together with the Schedule to
ISDA Master Agreement, the Credit Support Annex to the Schedule to ISDA Master Agreement
and the Confirmation relating to the 2006 Bonds.
"Comparable Treasury Issue" means, with respect to any redemption date for a
particular 2008 Series A Bond, the US Treasury security or securities selected by the
Independent Investment Banker which has an actual or interpolated maturity comparable to the
remaining average life of the applicable 2008 Series A Bond to be redeemed, and that would be
utilized in accordance with customary financial practice in pricing new issues of debt securities
of comparable maturity to the remaining average life of the 2008 Series A Bond to be redeemed.
"Comparable Treasury Price" means, with respect to any redemption date for a
2008 Series A Bond, (1) the average of the Reference Treasury Deal Quotations for such
redemption date, after excluding the highest and lowest Reference Treasury Deal Quotations, or
OHS West:260486435.2 -2-
(2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the
average of all such quotations.
"Continuing Disclosure Agreement" means the Continuing Disclosure
Agreement, dated as of September 1, 2008, between the City and the Trustee relating to the 2008
Series A Bonds.
"Conversion Costs" means costs incurred by the City or the Authority in
connection with the conversion of the 2006 Bonds to bonds bearing a fixed rate to maturity.
"Delivery Date" means September 24, 2008.
"First Supplemental Indenture" shall mean this First Supplemental Indenture of
Trust, supplementing the Master Indenture, as the same may be amended and supplemented in
accordance with the provisions of the Master Indenture.
"Independent Investment Banker" means one of the Reference Treasury Dealers
appointed by the Trustee in consultation with the City.
"Interest Payment Date" each January 1 and July 1 commencing January 1, 2009.
"Make Whole Redemption Price" means a redemption price equal to the greater
of (i) one hundred percent (100%) of the principal amount of the 2008 Series A Bonds to be
redeemed; or (ii) the sum of the present values of the remaining scheduled payments of principal
and interest on the 2008 Series A Bonds to be redeemed (exclusive of interest accrued to the date
fixed for redemption) discounted to the date of redemption on a semiannual basis (assuming a
360-day year consisting of twelve 30-day months) at the Treasury Rate plus [12.5] basis points),
plus in each case, accrued and unpaid interest on the 2008 Series A Bonds being redeemed to the
date fixed for redemption.
"Morgan Stanley Swap Agreement" means the ISDA Master Agreement, dated as
of July 2, 2004, between the City and Morgan Stanley Financial Services Inc., together with the
Schedule to ISDA Master Agreement, the Credit Support Annex to the Schedule to ISDA Master
Agreement and the Confirmations relating to the 2004 Bonds.
"Principal Office" means, with respect to the Trustee, the designated corporate
trust office of the Trustee in Los Angeles, which as of the date hereof is located at 700 South
Flower Street, Suite 500, Los Angeles, CA 90017-4104, Attention: Corporate Trust Department.
"Record Date" means, with respect to an Interest Payment Date, the fifteenth day
of the month preceding the month in which such Interest Payment Date falls.
"Reference Treasury Dealer" means RBC Capital Markets Corporation and its
successor and three other firms, specified by the City from time to time, that are primary U.S.
Government securities dealers in the City of New York (each a "Primary Treasury Dealer");
provided, however, that if any of them ceases to be a Primary Treasury Dealer, the City will
substitute another Primary Treasury Dealer.
OHS West260486435.2 _3_
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer and any redemption date for a particular 2008 Series A Bond, the average, as
determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee
by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third business day
preceding such redemption date.
"Sinking Fund Installment" means, with respect to the 2008 Series A Bonds
maturing on July 1, the amount required by Section 3.01(c) hereof to be, paid by the City on
any single' date for the retirement of such 2008 Series A Bonds.
"Termination Payments" means: (i) the payments required to be made by the City
in connection with the termination of the interest rate swap transactions entered into between the
City and Morgan Stanley Financial Services Inc. in connection with the 2004 Bonds under the
Morgan Stanley Swap Agreement; and (ii) the payments required to be made by the Authority in
connection with the termination of the interest rate swap transactions entered into between the
Authority and Citibank, N.A. New York. in connection with the 2006 Bonds under the Citibank.
Swap Agreement.
"Treasury Rate" means, with respect to any redemption date for a particular 2008
Series A Bond, the rate per annum equal to the semiannual equivalent yield to maturity or
interpolated maturity of the Comparable Treasury Issue, assuming that the Comparable Treasury
Issue is purchased on the redemption date for a price equal to the Comparable Treasury Price.
"2004 Bonds" means the City's Electric System Revenue Bonds, 2004 Series A,
the City's Electric System Revenue Bonds, 2004 Series B and the City's Electric System
Revenue Bonds, 2004 Series D.
"2006 Bonds" means the Vernon Natural Gas Financing Authority Variable Rate
Revenue Bonds, 2006 Series B and the Vernon Natural Gas Financing Authority Variable Rate
Revenue Bonds, 2006 Series C.
"2008 Capital Improvements Fund" shall mean the 2008 Series A Bonds Capital
Improvements Fund established pursuant to Section 4.05 hereof.
"2008 Conversion Costs Fund" shall mean the 2008 Series A Bonds Conversion
Costs Fund established pursuant to Section 4.04 hereof.
"2008 Costs of Issuance Fund" shall mean the 2008 Series A Bonds Costs of
Issuance Fund established pursuant to Section 4.02 hereof.
"2008 Series A Bonds" shall mean the City's Electric System Revenue Bonds,
2008 Taxable Series A Bonds authorized by Article II hereof.
"2008 Termination Payments Fund" shall mean the 2008 Series A Bonds
Termination Payments Fund established pursuant to Section 4.03 hereof.
OHS West260486435.2 _q_
Section 1.04. Interpretation.
(a) Unless the context otherwise indicates, defined terms shall include all
variants thereof, words expressed in the singular shall include the plural and vice versa and the
use of the neuter, masculine or feminine gender is for convenience only and shall be deemed to
mean and include the neuter, masculine or feminine gender, as appropriate.
(b) Headings of articles and sections herein and the table of contents hereof
are solely for convenience of reference, do not constitute a part hereof and shall not affect the
meaning, construction or effect hereof.
(c) References herein to the Securities Depository shall include both the
Securities Depository and any nominee of the Securities Depository in whose name the 2008
Series A Bonds may be registered.
(d) Unless otherwise indicated, references herein to Articles and Sections
shall be to the Articles and Sections of this First Supplemental Indenture. The words "herein,"
"hereof," "hereby," "hereunder" and other words of similar import refer to this First
Supplemental Indenture as a whole and not to any particular Article, Section or subdivision
hereof.
ARTICLE II
THE 2008 SERIES A BONDS
Section 2.01. Principal Amount and Designation; Conditions to Issuance.
(a) Pursuant to the provisions of the Master Indenture and this First
Supplemental Indenture and the provisions of the Charter and the Bond Ordinance, a Series of
Bonds entitled to the benefit, protection and security of such provisions are hereby authorized in
the aggregate principal amount of $ . Such Bonds shall be designated as, and shall be
distinguished from the Bonds of all other Series by, the title, "City of Vernon Electric System
Revenue Bonds, 2008 Taxable Series A Bonds." The 2008 Series A Bonds shall be in
substantially the form attached hereto as Exhibit A with such variations and omissions as are
necessary to reflect the particular terms of each 2008 Series A Bond.
(b) The 2008 Series A Bonds are issued for the purpose of providing moneys
to finance the Costs of Capital Improvements by reimbursing the Electric System for amounts
previously paid from the Light and Power Fund, to fund the Debt Service Reserve Fund and to
pay the Costs of Issuance of the 2008 Series A Bonds.
(c) All (but not less than all) of the 2008 Series A Bonds shall be executed by
the City for issuance under the Indenture and delivered to the Trustee and thereupon shall be
authenticated by the Trustee and delivered to the City or upon its order but only upon receipt by
the Trustee of the applicable items required pursuant to Section 2.04 and Section 2.07 of the
Master Indenture with respect to the 2008 Series A Bonds.
OHS West:260486435.2 -5-
Section 2.02. Terms of the 2008 Series A Bonds; Registration; Denominations;
Payment of Principal and Interest
(a) The 2008 Series A Bonds shall be issued as fully registered Bonds without
coupons in Authorized Denominations. The 2008 Series A Bonds shall be registered initially in
the name of "Cede & Co.," as nominee of DTC, the initial Securities Depository, and shall be
evidenced by one bond certificate in the total aggregate principal amount of the 2008 Series A
Bonds of each maturity. Registered ownership of the 2008 Series A Bonds, or any portion
thereof, may not thereafter be transferred except as set forth in Section 3.04 of the Master
Indenture
(b) The 2008 Series A Bonds shall be dated the Delivery Date.
(c) The 2008 Series A Bonds shall mature on July 1 of the years, in the
principal amounts, and shall bear interest at the rates, in each case as set forth below:
Maturity Date
(July 1) Principal Amount Interest Rate
ARTICLE III
REDEMPTION OF 2008 SERIES A BONDS
Section 3.01. Terms of Redemption.
(a) The 2008 Series A Bonds maturing on and after July 1, are subject to
redemption prior to their stated maturity, at the option of the City and from any source of
available funds, in whole or in part (in such amounts as may be specified by the City), on any
date on and after July 1, at a Redemption Price equal to the Make Whole Redemption
Price, plus accrued but unpaid interest to the date fixed for redemption.
(b) The 2008 Series A Bonds maturing on July 1, are also subject to
redemption in part prior to their stated maturity from Sinking Fund Installments established
pursuant to subsection (c) of this Section on any July 1 on or after July 1, , at a Redemption
Price equal to the principal amount of the 2008 Series A Bonds to be redeemed, without
premium.
(c) The following shall be the Sinking Fund Installments for the 2008 Series
A Bonds maturing on July 1, . Such installments shall be due on July 1 of each of the years
OHS West:260486435.2 _(_
set forth in the following table in the respective amounts set forth opposite such years in said
table:
Year Amount Year Amount
ARTICLE IV
APPLICATION OF PROCEEDS
Section 4.01. Application of Proceeds of 2008 Series A Bonds. The proceeds of the
sale of the 2008 Series A Bonds (equal to the principal amount thereof less underwriter's
discount of $ ) shall be applied simultaneously with the delivery of the 2008 ' Series A
Bonds, as follows:
(a) There shall be deposited in the Debt Service Reserve Fund the sum of
$ , representing the amount required so that the balance on deposit in such Fund shall
equal the Debt Service Reserve Requirement calculated immediately after the authentication and
delivery of the 2008 Series A Bonds;
(b) There shall be deposited in the 2008 Costs of Issuance Fund the sum of
$ ;
(c) The City represents and warrants that there has, previously been expended
from the Light and Power Fund an amount not less than $ which has not been financed
or otherwise reimbursed for the Costs of Capital Improvements to distribution and
interconnection facilities of the Electric System. The City further represents and warrants that
such facilities have a book value to the Electric System of not less than such amount. The
remaining $ net proceeds of the 2008 Series A Bonds are hereby deemed to be applied as a
reimbursement to the Electric System for the previous payment of the Costs of such Capital
Improvements to distribution and interconnection facilities of the Electric System. The City
hereby directs that such reimbursement be applied as follows:
(i) There shall be deposited in the 2008 Termination Payments Fund
the sum of $ ;
(ii) There shall be deposited in the 2008 Conversion Costs Fund the
sum of $ ; and
OHS West:260486435.2 _ ]_
sum of $ (iii) There shall be deposited in the Capital Improvements Fund the
Section 4.02. 2008 Costs of Issuance Fund.
(a) The Trustee shall establish and maintain in trust a separate fund
designated as the "2008 Series A Bonds Costs of Issuance Fund." Money deposited in said fund
shall be used to pay Costs of Issuance with respect to the 2008 Series A Bonds as provided in
this Section.
(b) The Trustee shall make payments from the 2008 Costs of Issuance Fund,
except payments and withdrawals pursuant to subsection (e) of this Section, in the amounts, at
the times, in the manner and on the other terms and conditions set forth in this subsection.
Before any such payment from the 2008 Costs of Issuance Fund shall be made, there shall be
filed with the Trustee a requisition therefor, signed by an Authorized City Representative. Each
such requisition shall state, in respect of the payment to be made (a) the name and address of the
person, firm or corporation to whom payment is due, (b) the amount of such payment, and (c) the
particular item of the cost to be paid and that such payment in the stated amount is a proper
charge against the 2008 Costs of Issuance Fund and that no part of such payment shall be applied
to any item which has previously been paid as a Costs of Issuance of the 2008 Series A Bonds.
The Trustee shall promptly issue its check to the City or to the Person identified in , the
requisition in the amount or amounts specified in each such requisition or, if requested pursuant
to any such requisition, shall by wire transfer, interbank transfer or other method arrange to
promptly make each payment required by such requisition. The City shall apply, or cause to be
applied, all such moneys received from the 2008 Costs of Issuance Fund to the payment of the
Costs of Issuance of the 2008 Series A Bonds identified in the requisition relating to such
moneys.
Each such requisition shall be sufficient evidence to the Trustee of the facts stated
therein and the Trustee shall have no duty to confirm the accuracy of such facts. Upon receipt of
each such requisition, signed by an Authorized City Representative, the Trustee shall pay the
amount set forth therein as directed by the terms thereof.
(c) Upon the receipt by the Trustee of a certificate of an Authorized City
Representative requesting the Trustee to close the 2008 Costs of Issuance Fund, and after
payment from the 2008 Costs of Issuance Fund of all amounts included in requisitions submitted
by the City pursuant to Section 4.02(b) hereof, the Trustee shall transfer any moneys remaining
in the 2008 Costs of Issuance Fund to such account or accounts in the Debt Service Fund as
directed by an Authorized City Representative. Upon such transfer the Trustee shall close the
2008 Costs of Issuance Fund.
(d) Moneys held in the 2008 Costs of Issuance Fund may, be invested and
reinvested to the fullest extent practicable in any investment in which the City can legally invest
its funds, which mature not later than such times as shall be necessary to provide moneys when
needed for payments to be made from the 2008 Costs of Issuance Fund. Any investment
earnings on moneys on deposit in the 2008 Costs of Issuance Fund shall be deposited in the 2008
OHS West:260486435.2 _g_
Costs of Issuance Fund and be used in the same manner as other amounts on deposit in the 2008
Costs of Issuance Fund.
(e) Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the 2008 Costs of Issuance Fund shall be
applied to the payment of Bond debt service when due.
Section 4.03. 2008 Termination Payments Fund.
(a) The Trustee shall establish and maintain in trust a separate fund
designated as the "2008 Series A Bonds Termination Payments Fund." Money deposited in said
fund shall be used to pay Termination Payments as provided in this Section.
(b) The Trustee shall make payments from the 2008 Termination Payments
Fund, except payments and withdrawals pursuant to subsection (e) of this Section, in the
amounts, at the times, in the manner and on the other terms and conditions set forth in this
subsection. Before any such payment from the 2008 Termination Payments Fund shall be made,
there shall be filed with the Trustee a requisition therefor, signed by an Authorized City
Representative. Each such requisition shall state, in respect of the payment to be made (a) the
name and address of the person, firm or corporation to whom payment is due, (b) the amount of
such payment, and (c) the particular item of the cost to be paid and that such payment in the
stated amount is a proper charge against the 2008 Termination Payments Fund and that no part of
such payment shall be applied to any item which has previously been paid as a Termination
Payment. The Trustee shall promptly issue its check to the City or to the Person identified in the
requisition in the amount or amounts specified in each such requisition or, if requested pursuant
to any such requisition, shall by wire transfer, interbank transfer or other method arrange to
promptly make each payment required by such requisition. The City shall apply, or cause to be
applied, all such moneys received from the 2008 Termination Payments Fund to the payment of
the Termination Payments identified in the requisition relating to such moneys.
Each such requisition shall be sufficient evidence to the Trustee of the facts stated
therein and the Trustee shall have no duty to confirm the accuracy of such facts. Upon receipt of
each such requisition, signed by an Authorized City Representative, the Trustee shall pay the
amount set forth therein as directed by the terms thereof.
(c) Upon the receipt by the Trustee of a certificate of an Authorized City
Representative requesting the Trustee to close the 2008 Termination Payments Fund, and after
payment from the 2008 Termination Payments Fund of all amounts included in requisitions
submitted by the City pursuant to Section 4.O3(b) hereof, the Trustee shall transfer any moneys
remaining in the 2008 Termination Payments Fund to such account or accounts in the Debt
Service Fund as directed by an Authorized City Representative. Upon such transfer the Trustee
shall close the 2008 Termination Payments Fund.
(d) Moneys held in the 2008 Termination Payments Fund may, be invested
and reinvested to the fullest extent practicable in any investment in which the City can legally
invest its funds, which mature not later than such times as shall be necessary to provide moneys
when needed for payments to be made from the 2008 Termination Payments Fund. Any
OHS West:260486435.2 -9-
investment earnings on moneys on deposit in the 2008 Termination Payments Fund shall be
deposited in the 2008 Termination Payments Fund and be used in the same manner as other
amounts on deposit in the 2008 Termination Payments Fund.
(e) Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the 2008 Termination Payments Fund
shall be applied to the payment of Bond debt service when due.
Section 4.04. 2008 Conversion Costs Fund.
(a) The Trustee shall establish and maintain in trust a separate fund
designated as the "2008 Series A Bonds Conversion Costs Fund." Money deposited in said fund
shall be used to pay Conversion Costs as provided in this Section.
(b) The Trustee shall make payments from the 2008 Conversion Costs Fund,
except payments and withdrawals pursuant to subsection (e) of this Section, in the amounts, at
the times, in the manner and on the other terms and conditions set forth in this subsection.
Before any such payment from the 2008 Conversion Costs Fund shall be made, there shall be
filed with the Trustee a requisition therefor, signed by an Authorized City Representative. Each
such requisition shall state, in respect of the payment to be made (a) the name and address of the
person, firm or corporation to whom payment is due, (b) the amount of such payment, and (c) the
particular item of the cost to be paid and that such payment in the stated amount is a proper
charge against the 2008 Conversion Costs Fund and that no part of such payment shall be applied
to any item which has previously been paid as a Conversion Cost. The Trustee shall promptly
issue its check to the City or to the Person identified in the requisition in the amount or amounts
specified in each such requisition or, if requested pursuant to any such requisition, shall by wire
transfer, interbank transfer or other method arrange to promptly make each payment required by
such requisition. The City shall apply, or cause to be applied, all such moneys received from the
2008 Conversion Costs Fund to the payment of the Conversion Costs identified in the requisition
relating to such moneys.
Each such requisition shall be sufficient evidence to the Trustee of the facts stated
therein and the Trustee shall have no duty to confirm the accuracy of such facts. Upon receipt of
each such requisition, signed by an Authorized City Representative, the Trustee shall pay the
amount set forth therein as directed by the terms thereof.
(c) Upon the receipt by the Trustee of a certificate of an Authorized City
Representative requesting the Trustee to close the 2008 Conversion Costs Fund, and after
payment from the 2008 Conversion Costs Fund of all amounts included in requisitions submitted
by the City pursuant to Section 4.04(b) hereof, the Trustee shall transfer any moneys remaining
in the 2008 Conversion Costs Fund to such account or accounts in the Debt Service Fund as
directed by an Authorized City Representative. Upon such transfer the Trustee shall close the
2008 Conversion Costs Fund.
(d) Moneys held in the 2008 Conversion Costs Fund may, be invested and
reinvested to the fullest extent practicable in any investment in which the City can legally invest
its funds, which mature not later than such times as shall be necessary to provide moneys when
OHS West:260486435.2 _10_
needed for payments to be made from the 2008 Conversion Costs Fund. Any investment
earnings on moneys on deposit in the 2008 Conversion Costs Fund shall be deposited in the 2008
Conversion Costs Fund and be used in the same manner as other amounts on deposit in the 2008
Conversion Costs Fund.
(e) Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the 2008 Conversion Costs Fund shall
be applied to the payment of Bond debt service when due.
Section 4.05. 2008 Capital Improvements Fund.
(a) The Trustee shall establish and maintain in trust a separate fund
designated as the "2008 Series A Bonds Capital Improvements Fund." Money deposited in said
fund shall be used to pay the Costs of Capital Improvements as provided in this Section.
(b) The Trustee shall make payments from the 2008 Capital Improvements
Fund, except payments and withdrawals pursuant to subsection (e) of this Section, in the
amounts, at the times, in the manner and on the other terms and conditions set forth in this
subsection. Before any such payment from the 2008 Capital Improvements Fund shall be made,
there shall be filed with the Trustee a requisition therefor, signed by an Authorized City
Representative. Each such requisition shall state, in respect of the payment to be made (a) the
name and address of the person, firm or corporation to whom payment is due, (b) the amount of
such payment, and (c) the particular item of the cost to be paid and that such payment in the
stated amount is a proper charge against the 2008 Capital Improvements Fund and that no part of
such payment shall be applied to any item which has previously been paid as a Cost of a Capital
Improvement. The Trustee shall promptly issue its check to the City or to the Person identified
in the requisition in the amount or amounts specified in each such requisition or, if requested
pursuant to any such requisition, shall by wire transfer, interbank transfer or other method
arrange to promptly make each payment required by such requisition. The City shall apply, or
cause to be applied, all such moneys received from the 2008 Capital Improvements Fund to the
payment of the Costs of the Capital Improvements identified in the requisition relating to such
moneys.
Each such requisition shall be sufficient evidence to the Trustee of the facts stated
therein and the Trustee shall have no duty to confirm the accuracy of such facts. Upon receipt of
each such requisition, signed by an Authorized City Representative, the Trustee shall pay the
amount set forth therein as directed by the terms thereof.
(c) Upon the receipt by the Trustee of a certificate of an Authorized City
Representative requesting the Trustee to close the 2008 Capital Improvements Fund, and after
payment from the 2008 Capital Improvements Fund of all amounts included in requisitions
submitted by the City pursuant to Section 4.05(b) hereof, the Trustee shall transfer any moneys
remaining in the 2008 Capital Improvements Fund to such account or accounts in the Debt
Service Fund as directed by an Authorized City Representative. Upon such transfer the Trustee
shall close the 2008 Capital Improvements Fund.
OHS West:260486435.2 -11-
(d) Moneys held in the 2008 Capital Improvements Fund may, be invested
and reinvested to the fullest extent practicable in any investment in which the City can legally
invest its funds, which mature not later than such times as shall be necessary to provide moneys
when needed for payments to' be made from the 2008 Capital Improvements Fund. Any
investment earnings on moneys on deposit in the 2008 Capital Improvements Fund shall be
deposited in the 2008 Capital Improvements Fund and be used in the same manner as other
amounts on deposit in the 2008 Capital Improvements Fund.
(e) Notwithstanding any of the other provisions of this Section, to the extent
that other moneys are not available therefor, amounts in the 2008 Capital Improvements Fund
shall be applied to the payment of Bond debt service when due.
ARTICLE V
MISCELLANEOUS
Section 5.01. Indenture to Remain in Effect. Save and except as supplemented by this
First Supplemental Indenture, the Master Indenture shall remain in full force and effect.
Section 5.02. Continuing Disclosure. The City hereby covenants and agrees to comply
with and carry out all the provisions of the Continuing Disclosure Agreement. Notwithstanding
any other provision of the Indenture, failure of the City to comply with the Continuing
Disclosure Agreement shall not be considered an Event of Default and the Trustee shall have no
right to accelerate amounts due under the Indenture as a result thereof; provided, however, that
the Trustee and the Owners of not less than 25% in principal amount of the Outstanding 2008
Series A Bonds may take such actions as may be necessary and appropriate, including seeking
mandate or specific performance by court order, to cause the City to comply with its obligations
in this Section and the Continuing Disclosure Agreement.
Section 5.03. Notice to Rating Agencies. The Trustee or the City, as appropriate, shall
provide each Rating Agency with prompt written notice of (a) the appointment of any successor
Trustee, (b) the date no 2008 Series A Bonds are Outstanding, (c) any material amendments to
the Master Indenture or this First Supplemental Indenture, (d) any acceleration of the 2008 Series
A Bonds pursuant to Section 10.04 of the Indenture, (g) any redemption in whole of the 2008
Series A Bonds.
Section 5.04. Notices. Unless otherwise provided herein, all notices, certificates or
other communications hereunder shall be deemed sufficiently given upon actual receipt thereof
when received by the City, the Trustee, and the Rating Agencies, as the case may be, at the
respective address provided pursuant to this Section or, if mailed by first class mail, postage
prepaid, addressed to the appropriate address provided pursuant to this Section, six Business
Days after deposit in the United States mail, the initial address for notices, counterparts and other
communications hereunder is as follows:
OHS West:260486435.2 -12-
If to the City:
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: City Attorney
If to the Trustee:
The Bank of New York Mellon Trust Company,
N.A.
700 South Flower Street, Suite 500
Los Angeles, CA 90017
Attention: Corporate Trust Department
If to S&P, to:
Standard & Poor's Ratings Services
55 Water Street, 38th Floor
New York, New York 10041
Attention: Municipal Structured Group
If to Moody's, to:
Moody's Investors Service, Inc.
7 World Trade Center
at 250 Greenwich Street
New York, NY 10007
Attn: Public Finance Municipal Structure Group
The City, the Trustee, and the Rating Agencies may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates or other
communications shall be sent. Unless otherwise requested by the City, the Trustee or the Rating
Agencies, any notice required to be given hereunder in writing may be given by any form of
Electronic Notice capable of making a written record. Each such party shall file with the Trustee
information appropriate to receiving such form of Electronic Notice.
Section 5.05. Counterparts. This First Supplemental Indenture may be executed in any
number of counterparts and by the different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original; but such counterparts shall together
constitute but one and the same instrument.
OHS West:260486435.2 -13-
IN WITNESS WHEREOF, City of Vernon has caused these presents to be signed
in its name and on its behalf by its Mayor and attested by its City Clerk and to evidence its
acceptance of the trusts hereby created, the Trustee has caused these presents to be signed in its
name and on its behalf by one of its authorized officers, all as of the first day of September,
2008.
CITY OF VERNON
Leonis C. Malburg, Mayor
ATTEST:
By:
Manuela Giron, City Clerk
APPROVED AS TO FORM:
Jeff A.Harrison, City Attorney
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
Ulm
OHS West:260486435.2
Authorized Officer
EXHIBIT A
FORM OF 2008 SERIES A BONDS
[bracketed language applies only to 2008 Series A Bonds to be registered in the name of CEDE
& CO.]
[UNLESS THIS BOND IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE CITY OF VERNON OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY BOND
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
No. R-
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS,
2008 TAXABLE SERIES A
Interest Rate Dated Date
September
2008
Registered Owner: CEDE & CO.
Principal Amount:
Maturity Date
July 1, 20_
CUSIP No.
CITY OF VERNON (herein called the "City"), a municipal corporation and
chartered city of the State of California, acknowledges itself indebted to, and for value received
hereby promises to pay (but only out of the Net Revenues (capitalized terms used herein shall
have the meanings given such terms pursuant to the Indenture mentioned below) and other assets
pledged therefor and available for such payment pursuant to the Indenture) to the Registered
Owner specified above or registered assigns, on the Maturity Date specified above (unless this
Bond shall have been previously called for redemption in whole or in part and payment of the
Redemption ' Price shall have been duly made), the Principal Amount specified above, in lawful
money of the United States of America and to pay interest thereon (but only from said Net
Revenues and other pledged assets available for such payment pursuant to the Indenture) in like
lawful money until payment of such principal sum shall be discharged as provided in the
Indenture, at the rate set forth above.
OHS West260486435.2 A-1
The principal or, if applicable, the Redemption Price hereof is payable upon
surrender hereof at the designated corporate trust office of The Bank of New York Mellon Trust
Company, N.A., in Los Angeles, California (together with any successor Trustee as provided in
the Indenture the "Trustee"). Interest hereon is payable by check mailed on each Interest
Payment Date to the Owner hereof as of the applicable Record Date at the address appearing on
the Bond Register maintained by the Trustee; provided Owners of at least $1,000,000 aggregate
principal amount of 2008 Series A Bonds may, at any time prior to a Record Date, give the
Trustee written instructions for payment of such interest on each succeeding Interest Payment
Date for such 2008 Series A Bonds by wire transfer or by deposit to an account within the United
States of America.
This Bond is one of a duly authorized issue of bonds of the City designated as
"City of Vernon, Electric System Revenue Bonds" (the "Bonds") and of a Series of the Bonds
designated as "Electric System Revenue Bonds, 2008 Taxable Series A Bonds" (the "2008 Series
A Bonds"). The 2008 Series A Bonds are issued pursuant to the Charter and the Bond
Ordinance. The 2008 Series A Bonds have been issued in the aggregate principal amount of
$ . The 2008 Series A Bonds are issued under, and, together with all other Bonds
issued and outstanding thereunder, are equally and ratably secured by a pledge of the Trust
Estate under, and entitled to the protection given by, the Indenture of Trust, dated as of
September 1, 2008 between the City and the Trustee, as amended and supplemented by the First
Supplemental Indenture of Trust, dated as of September 1, 2008 between the City and the
Trustee (said Indenture of Trust, as amended and supplemented and as the same may be amended
and supplemented, is herein called the "Indenture").
As provided in the Indenture, Bonds of the City may be issued thereunder from
time to time pursuant to Supplemental Indentures in one or more Series, in various principal
amounts, may mature at different times, may bear interest at different rates and may otherwise
vary as in the Indenture provided. The aggregate principal amount of Bonds which may be
issued under the Indenture is not limited except as provided in the Indenture, and all Bonds
issued and to be issued under the Indenture are and will be equally secured by the pledge and
covenants made therein, except as otherwise expressly provided or permitted in the Indenture.
Copies of the Indenture are on file at the City Hall of the City and at the Principal
Office of the Trustee and reference is hereby made to the Indenture and to all amendments and
supplements thereto for a description of the provisions, among others, with respect to the nature
and extent of the security, the rights, duties and obligations of the City, the Trustee and the
Owners of the Bonds and the terms upon which the Bondsare secured under the Indenture, the
rights and remedies of the Owners of the 2008 Series A Bonds, the limitations on such rights and
remedies and the terms and conditions upon which Bonds are issued and may be issued
thereunder. The Indenture provides that other Parity Obligations secured by a pledge of
Revenues and amounts in the Light and Power Fund on a parity with the Bonds may be issued or
incurred by the City on the terms set forth therein. By acceptance of this Bond, the Registered
Owner accepts and agrees to the terms of the Indenture.
This Bond is a special obligation of the City and the principal of, Redemption
Price, if any, and interest on this Bond are payable solely from the Net Revenues, the amounts in
the Light and Power Fund available for such payment pursuant to the Indenture, and the amounts
OHS West:260486435.2 A-2
in the Funds held by the Trustee under the Indenture other than the Rebate Fund. The City's
obligation to pay and the principal of, Redemption Price, if any, and interest on this Bond shall
not constitute a charge against the general credit of the City. This Bond is not secured by a legal
or equitable pledge of, or lien or charge upon, any property of the City or any of its income or
receipts except the Trust Estate pledged pursuant to the Indenture which is subject to the
provisions of the Indenture permitting the application of the Trust Estate for the purposes and on
the terms and conditions set forth therein. Neither the faith and credit nor the taxing power of
the State of California, the City or any other public agency is pledged to the payment of the
principal or Redemption Price of or the interest on this Bond. The issuance of this Bond shall
not directly, indirectly or contingently obligate the City Council of the City to levy or pledge any
form of taxation or to make any appropriation for the payment of this Bond. The payment of the
principal or Redemption Price of or interest on this Bond does not constitute a debt, liability or
obligation of the State of California or any public agency (other than the special obligation of the
City as provided in the Indenture). Neither the members of the City Council of the City, nor any
person executing this Bond, nor any officer or employee of the City shall be in liable
for the principal or Redemption Price of or interest on this Bond or be subject to any personal
liability or accountability by reason of the issuance of this Bond or in respect of any undertakings
by the City under the Indenture.
The 2008 Series A Bonds were issued for the purpose of providing moneys to
finance the Costs of Capital Improvements by reimbursing the Electric System for amounts
previously paid from the Light and Power Fund, to fund the Debt Service Reserve Fund and to
pay the Costs of Issuance of the 2008 Series A Bonds.
Interest on the 2008 Series A Bonds shall be computed on the basis of a 360-day
year consisting of twelve 30-day months.
The term "Interest Payment Date" means each January 1 and July 1, commencing
January 1, 2009.
The term "Record Date" means, with respect to an interest Payment Date, the
fifteenth day of the month preceding the month in which such Interest Payment Date falls.
The 2008 Series A Bonds maturing on and after July 1, are subject to
redemption at the option of the City and from any source of available funds, in whole or in part
(in such amounts as may be specified by the City), on any date on and after July 1, at a
Redemption Price equal to the Make Whole Redemption Price, plus accrued but unpaid interest
to the date fixed for redemption.
The 2008 Series A Bonds maturing on July 1, are subject to mandatory
redemption, in part, on any July I on and after July 1, , at a Redemption Price equal to the
principal amount of such 2008 Series A Bonds to be redeemed, without premium, from the
Sinking Fund Installments established for such 2008 Series A Bonds in the Indenture.
If less than all of the 2008 Series A Bonds of a maturity are to be redeemed, the
particular 2008 Series A Bonds of such maturity to be redeemed shall be selected as provided in
the Indenture.
OHS West:260486435.2 A-3
The 2008 Series A Bonds are payable upon redemption upon surrender thereof at
the Principal Office of the Trustee. The Trustee shall give notice, in the name of the City, of the
redemption of 2008 Series A Bonds, which notice shall be mailed, by first class mail, postage
prepaid, not more than sixty (60) nor less than thirty (30) days before the Redemption Date to the
Owners of any 2008 Series A Bonds to be redeemed (in whole or in part) at their addresses
appearing in the Bond Register. Such notice shall specify the Series and maturity of the Bonds
to be redeemed, the redemption date and the place or places where amounts due upon such
redemption shall be payable and, if less than all of the 2008 Series A Bonds of a maturity are to
be redeemed, the letters and numbers or other distinguishing marks of such 2008 Series A Bonds
so to be redeemed, and, in the case of 2008 Series A Bonds to be redeemed in part only, such
notice shall also specify the respective portions of the principal amount thereof to be redeemed.
Subject to the provisions of the next paragraph, such notice shall further state that on such
redemption date there shall become due and payable upon each 2008 Series A Bond to be
redeemed the Redemption Price thereof (or the Redemption Price of the specified portions of the
principal amount thereof to be redeemed in the case of 2008 Series A Bonds to be redeemed in
part only) and that from and after such date interest on such 2008 Series A Bond (or the portion
of such 2008 Series A Bond to be redeemed) shall cease to accrue and be payable.
In the event that funds required to pay the Redemption Price of the 2008 Series A
Bonds are not on deposit with the Trustee at the time the notice with respect to the redemption of
2008 Series A Bonds at the option of the City is given, such notice shall state that such
redemption is conditional upon the receipt by the Trustee, on or prior to the date fixed for such
redemption, of moneys sufficient to pay the Redemption Price of the 2008 Series A Bonds to be
redeemed, and that if such moneys shall not have been so received said notice shall be of no
force and effect and the City shall not be required to redeem such 2008 Series A Bonds. In the
event a notice of redemption of 2008 Series A Bonds contains such a condition and such moneys
are not so received, the redemption of 2008 Series A Bonds as described in the conditional notice
of redemption shall not be made and the Trustee shall, within a reasonable time after the date on
which such redemption was to occur, give notice to the Persons and in the manner in which the
notice of redemption was given that such moneys were not so received and that there shall be no
redemption of 2008 Series A Bonds pursuant to the conditional notice of redemption.
Receipt of such notice of redemption shall not be a condition precedent to the
redemption of 2008 Series A Bonds and failure of any Owner of a 2008 Series A Bond to receive
any such notice or any insubstantial defect in such notice shall not affect the validity of the
proceedings for the redemption of 2008 Series A Bonds.
To the extent and in the manner permitted by the terms of the Indenture, the
provisions of the Indenture, or any indenture amendatory thereof or supplemental thereto, may
be modified or amended by the City with, in certain cases, the written consent of the Owners of
at least a majority in principal amount of the Bonds then Outstanding under the Indenture; and,
in case less than all of the Bonds would be affected thereby, with such consent of the Owners of
a majority in principal amount of the affected Outstanding Bonds; provided, however, that, if
such modification or amendment will, by its terms, not take effect so long as any Bonds of any
specified like Series and maturity remain Outstanding, the consent of the owners of such Bonds
shall not be required and such Bonds shall not be deemed to be Outstanding for the purpose of
the calculation of Outstanding Bonds for purposes of such consent. No such modification or
OHS West:260486435.2 A-4
amendment shall permit a change in the terms of any Sinking Fund Installment or the terms of
redemption or maturity of the principal of any Bond or of any installment of interest thereon or a
reduction in the principal amount or Redemption Price thereof or in the rate of interest thereon
without the consent of the Owner of such Bond, or shall reduce the percentages or otherwise
affect the classes of Bonds the consent of the Owners of which is required to effect any such
modification or amendment, or shall change or modify any of the rights or obligations of the
Trustee or of any Paying Agent without its written assent thereto.
The Indenture may also be amended or supplemented without the necessity of the
consent of the Owners of the 2008 Series A Bonds for any one or more of the purposes specified
in the Indenture.
This Bond is transferable, as provided in the Indenture, only upon the Bond
Register kept for that purpose at the Principal Office of the Trustee, by the registered owner
hereof, or by his duly authorized attorney, upon surrender of this Bond together with a written
instrument of transfer satisfactory to the Trustee duly executed by the registered owner or his
duly authorized attorney. Thereupon and upon payment of the -charges prescribed in the
Indenture a new registered 2008 Series A Bond or 2008 Series A Bonds, without coupons, and
for the same maturity and aggregate,principal amount, shall be issued to the transferee in
exchange therefor as provided in the Indenture. The City, the Trustee and any Paying Agent may
deem and treat the Person in whose name this Bond is registered as the absolute owner hereof for
the purpose of receiving payment of, or on account of, the principal or Redemption Price hereof
and interest due hereon and for all other purposes.
The Registered Owner of this Bond shall have no right to enforce the provisions
of the Indenture or to institute action to enforce the covenants therein, or to take any action with
respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit
or other proceedings with respect thereto, except as provided in the Indenture. In certain events,
on the conditions, in the manner and with the effect set forth in the Indenture, the principal of all
the Bonds issued under the Indenture and then Outstanding may become or may be declared due
and payable before the stated maturity thereof, together with interest accrued thereon.
It is hereby certified and recited that all conditions, acts and things required by
law, including the City Charter and the Bond Ordinance, and the Indenture to exist, to have
happened and to have been performed precedent to and in the issuance of this Bond, exist, have
happened and have been performed in due time, form and manner and that the 2008 Series A
Bonds, together with all other indebtedness of the City, comply in all respects with the applicable
laws of the State of California, including the City Charter and the Bond Ordinance.
This Bond shall not be entitled to any benefit under the Indenture or be valid or
become obligatory for any purpose until this Bond shall have been authenticated by the
execution by the Trustee of the Trustee's Certificate of Authentication hereon.
OHS West:260486435.2 A-5
IN WITNESS WHEREOF, CITY OF VERNON has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of its Mayor and the
seal (or a facsimile thereof) to be hereunto affixed, imprinted, engraved or otherwise reproduced
and attested by the manual or facsimile signature of its City Clerk, as of the Dated Date specified
above.
CITY OF VERNON
[SEAL]
ATTEST: BY:
CITY CLERK MAYOR
OHS West:260486435.2 A-6
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 2008 Series A Bonds delivered pursuant to the within
mentioned Indenture.
Date of Authentication THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
BY:
AUTHORIZED SIGNATORY
OHS West:260486435.2 A-%
ASSIGNMENT
FOR VALUE RECEIVED the undersigned sells, assigns and transfers unto
(Name, Address and Tax Identification or
Social Security Number of Assignee)
the within Bond of the City of Vernon and does hereby irrevocably constitute and appoint
attorney to
transfer the said Bond on the books kept for registration thereof with full power of substitution in
the premises.
Dated:
Signature guaranteed by
Notice: The Signature of this assignment and
transfer must correspond with the name
as written upon the face of this Bond in
every particular, without alteration or
enlargement or any change whatsoever.
Notice: Signature must be guaranteed by a
member of the National Association of
Securities Dealers, a commercial bank, a
trust company or other eligible guarantor
institution.
OHS West:260486435.2 A-8
TABLE OF CONTENTS
Page
ARTICLE I AUTHORITY AND DEFINITIONS............................................................... 2
Section 1.01.
Supplemental Indenture of Trust......................................................... 2
Section 1.02.
Authority for the First Supplemental Indenture of Trust ..................... 2
Section 1.03.
Definitions............................................................................................ 2
Section 1.04.
Interpretation........................................................................................ 5
ARTICLE II THE 2008 SERIES A BONDS........................................................................ 5
Section 2.01.
Principal Amount and Designation; Conditions to Issuance ............... 5
Section 2.02.
Terms of the 2008 Series A Bonds; Registration;
Denominations; Payment of Principal and Interest ............................. 6
ARTICLE III REDEMPTION OF 2008 SERIES A BONDS ................................................ 6
Section 3.01.
Terms of Redemption.......................................................................... 6
ARTICLE IV APPLICATION
OF PROCEEDS.................................................................... 7
Section 4.01.
Application of Proceeds of 2008 Series A Bonds ................................ 7
Section 4.02.
2008 Costs of Issuance Fund............................................................... 8
Section 4.03.
2008 Termination Payments Fund ....................................................... 9
Section 4.04.
2008 Conversion Costs Fund.............................................................
10
Section 4.05.
2008 Capital Improvements Fund ......................................................
11
ARTICLE V MISCELLANEOUS......................................................................................
12
Section 5.01.
Indenture to Remain in Effect............................................................
12
Section 5.02.
Continuing Disclosure.......................................................................
12
Section 5.03.
Notice to Rating Agencies.................................................................
12
Section5.04.
Notices...............................................................................................
12
Section5.05.
Counterparts.......................................................................................
13
EXHIBIT A —FORM OF 2008 SERIES A BONDS................................................................. A-1
OHS West:260486435.2 -i-
An extra section break has been inserted above this paragraph. Do not delete this section break if
you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table
of Contents/Authorities headers and footers to appear on any pages following the Table of
Contents/Authorities.
OHS West:260486435.2
FORM PURCHASE CONTRACT EXHIBIT C
CITY OF VERNON
Electric System Revenue Bonds
2008 Taxable Series A
September _, 2008
CONTRACT OF PURCHASE
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
Ladies and Gentlemen:
RBC Dain Rauscher, Inc., as underwriter (the "Underwriter"), hereby offers to enter into this
Contract of Purchase (this "Purchase Contract") with you, the City of Vernon ("the City"). This
offer is made subject to acceptance by the City prior to 11:00 P.M., California time, on the date
hereof, and upon such acceptance this Purchase Contract shall be in full force and effect in
accordance with its terms and shall be binding upon the City and the Underwriter.
1. Upon the terms and conditions and upon the basis of the representations herein set
forth, the Underwriter hereby agrees to purchase and the City hereby agrees to sell to the Underwriter
all (but not less than all) of the City's $ Electric System Revenue Bonds, 2008
Taxable Series A (the "Bonds"). The purchase price for the Bonds shall be $
(representing the $ aggregate principal amount of the Bonds less $
Underwriter's discount and [plus/less] a net original issue [discount/premium] of $ ).
The Bonds are to be issued pursuant to Article XI of the Vernon City Code and an Indenture
of Trust, as supplemented by the First Supplemental Indenture of Trust providing for the issuance of
the Borids each dated as of September 1, 2008 (the "Indenture"), each by and between the City and
The Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), substantially in the
form previously submitted to the Underwriter, with only such changes therein as shall be mutually
agreed upon. Terms used herein and not defined shall have the meanings assigned to them in the
Official Statement.
Proceeds of the Bonds will be used (i) to pay the conversion costs for the conversion to fixed
rate bonds of $207,495,000 aggregate principal amount of variable rate bonds (the "2006B and C
Bonds") of the Vernon Natural Gas Financing Authority (the "Authority"), (ii) to make the
termination payments associated with terminating four interest rate swap transactions (the "Swap
Agreements"), including three transactions between the City and Morgan Stanley Capital Services
Inc. related to electric revenue bonds issued by the City in 2004 (the "2004 Bonds") and a fourth
transaction between the Authority and Citibank, N.A. New York, (iii) to finance certain anticipated
land acquisitions by the City, (iv) to fund a deposit to the Debt Service Reserve Fund, and (v) to pay
costs of issuing the Bonds.
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The City will undertake, pursuant to a Continuing Disclosure Agreement, dated as of
,September 1, 2008 (the "Continuing Disclosure Agreement"), by and between the City and the
Trustee, to provide certain annual financial information and notices of the occurrence of certain
events, if material. A form of the Continuing Disclosure Agreement is set forth in the Official
Statement (defined below).
The Indenture, the Continuing Disclosure Agreement and the Purchase Contracts are
hereinafter referred to as the "Legal Documents."
2. The Bonds shall be dated the date of their delivery and shall mature on the dates and
in the principal amounts and shall bear interest at the rates per annum shown on Schedule 1 hereto.
3. At 8:00 A.M., California time, on September 24, 2008, or at such other time or on
such earlier or later business day as shall have been mutually agreed upon by the City and the
Underwriter, the City will deliver to the Underwriter at the offices of Orrick, Herrington & Sutcliffe
LLP, Los Angeles, California, the closing documents hereinafter mentioned. The Bonds, registered
to Cede & Co. and in definitive form, will be made available to the Underwriter one business day
prior to the Closing Date (hereinafter defined) at the offices of Orrick, Herrington & Sutcliffe LLP,
or at such other place as may be designated by the Underwriter and shall be subsequently delivered
on such date to The Depository Trust Company ("DTC") or to the Trustee for DTC. It is anticipated
that CUSIP identification numbers will be printed on the Bonds, but neither the failure to print such
number on any of the Bonds nor any error with respect thereto shall constitute cause for a failure or
refusal by the Underwriter to accept delivery of and pay for the Bonds in accordance with the terms
of this Purchase Contract. Upon release of the Bonds, the Underwriter will pay the purchase price of
the Bonds as set forth in Section 1 hereof, in immediately available funds to the order of the City.
The releases and payments referenced to in this Section 3 are herein called the "Closing" or "Closing
Date."
4. The City hereby ratifies, confirms and approves of the distribution and use by the
Underwriter prior to the date hereof of the preliminary official statement dated September _, 2008,
relating to the Bonds (the "Preliminary Official Statement") and the making available of the
Preliminary Official Statement to investors prior to the date hereof on the internet. The City has
deemed final the Preliminary Official Statement as of the date thereof for purposes of Rule 15c2-12
promulgated under the Securities Exchange Act of 1934 ("Rule 15c2-12"), except for information
permitted to be omitted therefrom in accordance with paragraph (b)(1) of Rule 15c2-12. The City
hereby agrees to deliver or cause to be delivered to the Underwriter, within seven (7) business days
of the date hereof, copies of the final Official Statement relating to the Bonds, dated the date hereof,
in the form of the Preliminary Official Statement, with such changes thereto, as may be approved by
the Underwriter (including the appendices thereto and any amendments or supplements as have been
approved by the City and the Underwriter, the "Official Statement"), in such quantity as the
Underwriter shall reasonably request. The City hereby approves of the distribution and use by the
Underwriter of the Official Statement in connection with the offer and sale of the Bonds. The
Underwriter hereby agrees to deliver a copy of the Official Statement to a national repository on or
before the Closing Date and the Underwriter agrees to deliver a copy of the Official Statement to
each investor that purchases any of the Bonds, and otherwise to comply with all applicable statutes
and regulations in connection with the offering and sale of the Bonds, including, without limitation,
MSRB Rule G-32.
DOC SOC/ 1298934v3/024450-0012
5. The City represents to the Underwriter that, as of the date hereof and as of the
Closing Date:
(a) The City is duly existing as a charter city organized under the laws of the
State of California (the "State");
(b) The City has full legal right, power and authority to cause the Bonds to be
authenticated and delivered, to execute and deliver or acknowledge, as applicable, the Legal
Documents and to perform its obligations contained herein and therein in accordance with the Act
and other applicable laws; and, by official action of the City prior to or concurrently with the
acceptance hereof, the City has duly authorized and approved the issuance and delivery of the Bonds,
the execution, delivery and distribution of the Official Statement, the execution and delivery or
acknowledgement, as applicable, of the Legal Documents and the performance of its obligations
contained herein and therein and the consummation by it of all other transactions contemplated by
the Official Statement and the Legal Documents to have been performed or consummated at or prior
to the Closing Date, all in accordance with the Act and other applicable laws, and the City is and will
be in compliance with the provisions thereof in all material respects;
(c) The information in the Official Statement is and at all times subsequent
hereto up to and including the date that is 25 days after the End of the Underwriting Period (as
hereinafter defined) for the Bonds will be, true and correct in all material respects; and the Official
Statement does not and will not omit any statement or information necessary to make the statements
therein, in the light of the circumstances under which they were made, not misleading except that no
representation is made as to any information included in the Official Statement relating to DTC or its
operations;
(d) Between the date hereof and the date that is 25 days after the End of the
Underwriting Period (as hereinafter defined) for the Bonds, except as contemplated by the Official
Statement, the City will not have incurred any material liabilities, direct or contingent, payable from
Electric System Revenues or entered into any material transaction in connection with the Electric
System in either case other than in the ordinary course of business, and there shall not have been any
material adverse change in the financial condition or prospects of the Electric System;
(e) The performance of its obligations contained in the Bonds and the execution
and delivery or acknowledgement, as applicable, of the Legal Documents and the performance of its
obligations contained herein and therein do not and will not in any material respect conflict with or
constitute a breach of or default under any law, administrative regulation, court decree, resolution or
agreement to which the City is subject or by which it is bound;
(f) Except as disclosed in the Official Statement, no litigation is, or at the date
that is 25 days after the End of the Underwriting Period (as hereinafter defined) for the Bonds, will
be, pending or, to the knowledge of the City, threatened in any court (i) in any way questioning the
corporate existence of the City or the titles of the officers of the City to their respective offices;
(ii) seeking to restrain or enjoin the issuance or delivery of any of the Bonds, or the collection of Net
Revenues of the Electric System or other amounts pledged or to be pledged to pay the principal of,
premium, if any, and interest on the Bonds, or in any way contesting or affecting the validity of the
Bonds, the Legal Documents or the collection of said Net Revenues, or the pledge thereof, or
contesting the powers of the City or any authority for the issuance and delivery of the Bonds or the
performance of its obligations contained therein or the execution and delivery or acknowledgement,
DOCSOC/ 1298934v3/024450-0012
as applicable, of the Legal Documents or the performance of its obligations contained herein or
therein, (iii) which would be likely to result in any material adverse change in the business,
properties, assets or financial condition of the Electric System or to have a material adverse effect on
the ability of the City to ' meet its obligations under the Bonds or the Legal Documents or
(iv) asserting that the Official Statement contained any untrue statement of a material fact or omitted
to state any material fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that if the Underwriter accepts at
the Closing any change in the certificate referred to in Section 6(d)(3) hereof, the representations
contained in this Section 5(f) shall be deemed modified to a like extent;
(g) The Bonds, the Legal Documents and the other documents described in the
Official Statement conform in all material respects to the descriptions thereof contained in the
Official Statement, and the Bonds, when delivered as provided herein, will be validly issued and
outstanding obligations of the City entitled to the benefits of the Indenture;
(h) The City will furnish such information, execute such instruments and take
such other action not inconsistent with law in cooperation with the Underwriter as the Underwriter
may reasonably request in order (i) to qualify the Bonds for offer and sale under the Blue Sky or
other securities laws and regulations of such states and other jurisdictions of the United States as the
Underwriter may designate and (ii) to determine the eligibility of the Bonds for investment under the
laws of such states and other jurisdictions, and will use its best efforts to continue such qualification
in effect so long as required for the distribution of the Bonds; provided that the City shall not be
obligated to take any action that would subject it to the general service of process in any state or
jurisdiction where it is not now sq'subject;
(i) If between the date hereof and the date that is 25 days after the End of the
Underwriting Period (as hereinafter defined) for the Bonds, an event occurs which might or would
cause the information contained in the Official Statement, as then supplemented or amended, to
contain an untrue statement of a material fact or to omit to state a material fact required to be stated
therein or necessary to make such information therein, in the light of the circumstances under which
it was presented, not misleading, the City will notify the Underwriter, and, if in the opinion of the
City or the Underwriter, or their respective counsel, such event requires the preparation and
publication of a supplement or amendment to the Official Statement, the City will forthwith prepare
and furnish to the Underwriter (at the expense of the City) a reasonable number of copies of an
amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel
for the Underwriter) which will amend or supplement the Official Statement so that it will not
contain an untrue statement of a material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances existing at the time the Official
Statement is delivered to prospective purchasers, not misleading;
0) If the information contained in the Official Statement is amended or
supplemented pursuant to paragraph 0) hereof, at the time of each supplement or amendment thereto
and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times
subsequent thereto up to and including the date that is 25 days after the End of the Underwriting
Period (as hereinafter defined) for the Bonds, the portions of the Official Statement so supplemented
or amended (including any financial and statistical data contained therein) will not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make such information therein, in the light of the circumstances under which it was presented, not
misleading;
DOC SOC/ 1298934v3/024450-0012
(k) After the Closing, the City will not participate in the issuance of any
amendment of or supplement to the Official Statement to which, after being furnished with a copy,
the Underwriter shall reasonably object in writing or which shall be disapproved by counsel for the
Underwriter;
(t) The financial statements of the City contained as Appendix A to the Official
Statement do and will fairly present the financial position and results of operations of the City as of
the dates and for the periods therein set forth in accordance with the accounting principles described
in Appendix A to the Official Statement applied consistently, and there has not been a material
adverse change in the business, properties or financial condition of the City or the Electrical System
from that set forth in or contemplated by the Official Statement; and
(m) The City (i) has all necessary licenses and permits required to carry on and
operate all of the facilities, equipment and other property comprising the Electric System, and (ii) has
not received any notice of an alleged violation and, to the best knowledge of the City, the City is not
in violation of any zoning, land use or other similar law or regulation applicable to any of its property
comprising the Electric System that would materially adversely affect its operations or financial
condition.
(n) Any certificate signed by an authorized officer of the City and delivered to
the Underwriter shall be deemed a representation and warranty by the City to the Underwriter as to
the statements made therein.
(o) The City has not -previously been in default and is not currently in default
with respect to any undertaking entered into under Securities and Exchange Commission Rule 15c2-
12.
(p) All consents, approvals, authorizations and orders of governmental or
regulatory authorities which are required for the consummation by the City of the transactions
contemplated on the part of the City by the Indenture, the Official Statement, the Bonds and this
Purchase Contract have been obtained.
(q) As used herein and for the purposes of the foregoing, the term "End of the
Underwriting Period" for the Bonds shall mean the earlier of (i) the Closing Date unless the City
shall have been notified in writing to the contrary by the Underwriter on or prior to the Closing Date,
or (ii) the date on which the End of the Underwriting Period for the Bonds has occurred under Rule
15c2-12; provided, however, that the City may treat as the End of the Underwriting Period for the
Bonds the date specified as such in a notice from the Underwriter stating the date which is the End of
the Underwriting Period;
6. The Underwriter has entered into this Purchase Contract in reliance upon the
representations herein and the performance by the City of the City's obligations hereunder, both as of
the date hereof and as of the Closing Date. The Underwriter's obligations under this Purchase
Contract are and shall be subject to the following further conditions:
(a) The representations of the City contained herein shall be true and correct in
all material respects at the date hereof and on the Closing Date;
DOCSOC/ 1298934v3/024450-0012
(b) At the time of the Closing, the Legal Documents shall be in full force and
effect, and shall not have been amended, modified or supplemented (except as may be agreed to in
writing by the Underwriter); the ratings quoted in the Official Statement shall be in effect; and the
City shall perform or have performed its obligations required under or specified in the Legal
Documents to be performed at or prior to the Closing;
(c) The Underwriter may terminate this Purchase Contract by notification to the
City, if at any time after the date hereof and prior to the Closing (i) legislation shall be enacted by the
Congress of the United States or introduced and pending in or adopted by either House thereof or a
decision by a Court of the United States or the Tax Court of the United States shall be rendered or a
ruling, regulation or official statement by or on behalf of the Treasury Department of the United
States, the Internal Revenue Service or other governmental agency shall be made with respect to
federal taxation upon revenues or other income of the general character expected to be derived by the
City or upon interest received on securities of the general character of the Bonds in the hands of the
holders thereof which, in the reasonable judgment of the Underwriter, materially adversely affects
the market price of the Bonds or (ii) there shall have occurred any new outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war, calamity or crisis, the
effect of which on financial markets is such as to make it, in the sole judgement of the Underwriter,
impracticable or inadvisable to proceed with the offering and delivery of the Bonds, or (iii) there
shall be in force a general suspension of trading on the New York Stock Exchange or minimum or
maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for
securities shall have been required and be in force on the New York Stock Exchange, whether by
virtue of a determination by that Exchange or by order of the Securities and Exchange Commission
or any other governmental authority having jurisdiction, or (iv) a general banking moratorium shall
have been declared by Federal, New York or California authorities having jurisdiction and shall be in
force or (v) there shall exist any event which, in the sole judgment of the Underwriter, either
(A) makes untrue or incorrect in any material respect any statement or information contained in the
Official Statement or (B) is not reflected in the Official Statement but should be reflected therein in
order to make the statements and information contained therein not misleading in any material
respect;
(d) At or ' prior to the Closing, the Underwriter shall receive the following
documents:
(1) the opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel to
the City, dated the Closing Date, substantially in the form attached as Appendix E to the Official
Statement;
(2) a certificate or certificates, dated the Closing Date, of the City
executed by its City Administrator or other appropriate official, to the effect that (A) on the date of
the Official Statement and on the date of the certificate (i) the descriptions and statements of or
pertaining to the City, the Electric System contained in the Official Statement were and are true and
correct in all material respects; and (ii) the Official Statement did not and does not contain an untrue
statement of a material fact or omit any statement or information which is necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading
(provided that no representation is made regarding information relating to DTC and its operations);
and (B) the representations and warranties of the City in this Purchase Contract are true and correct
on and as of the Closing Date as if made on and as of the Closing Date, and the City has complied
DOCSOC/ 1298934v3/024450-0012
with and performed all of its covenants and agreements in this Purchase Contract to be complied with
and performed at or prior to the Closing;
(3) a certificate dated the Closing Date, by the City Administrator or
other appropriate official of the City, and by the City Attorney to the effect that other than as
described in the Official Statement, no litigation is pending (with the City having received service of
process) or, to their knowledge, threatened in any court (i) in any way questioning the corporate
existence of the City or the titles of the officers of the City to their respective offices; (ii) seeking to
restrain or enjoin the delivery of the Bonds, or the collection of Net Revenues of the Electric System
or other amounts pledged or to be pledged to pay the principal of, premium, if any, and interest on
such Bonds; (iii) in any way contesting or affecting the validity of the Bonds or the Legal
Documents; (iv) in any way contesting or affecting the collection of said Net Revenues or the pledge
thereof, or contesting the powers of the City or any authority for the issuance and delivery of the
Bonds and the performance of its obligations contained therein or the execution and delivery or
acknowledgement, as applicable, of the Legal Documents and the performance of its obligations
contained therein or herein; (v) which would be likely to result in any material adverse change in the
business, properties, assets or the financial condition of the Electric System or which would be likely
to have a material adverse effect on the ability of the City to meet its obligations under the Indenture;
or (vi) asserting that the Official Statement contained any untrue statement of a material fact or
omitted to state any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, which certificate shall be in form and
substance acceptable to the Underwriter (but in lieu of such certificate, the Underwriter may in its
sole discretion accept an opinion of Bond Counsel or Counsel to the City, acceptable to the
Underwriter in form and substance, that in their opinion the issues raised in any such pending or
threatened litigation are without substance or that the contentions of any plaintiffs therein are without
merit);
(4) an opinion of counsel to the Trustee, dated the Closing Date and
addressed to the City and the Underwriter, to the effect that: (i) the Trustee is a national banking
association duly organized and validly existing under the laws of the United States of America;
(ii) the Trustee is duly eligible and qualified to act as Trustee under the Indenture; (iii) the Trustee
has all requisite power, authority and legal right to execute and deliver the Indenture and the
Continuing Disclosure Agreement and to perform its obligations under such documents; and (iv) the
Trustee has duly executed and delivered the Indenture and the Continuing Disclosure Agreement and
assuming the due authorization, execution and delivery thereof by the other parties thereto, such
documents are the legal, valid and binding agreements of the Trustee, enforceable in accordance with
their terms, except to the extent enforceability thereof may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors' rights
and remedies heretofore or hereafter enacted, and (b) the application of equitable principles and the
exercise of judicial discretion in appropriate cases.
(5) a certificate of the Trustee, dated the Closing Date, to the effect that
(i) the Trustee is a national banking association duly organized and existing under the laws of the
United States of America; (ii) the Trustee have full corporate trust powers and authority to serve as
Trustee under the Indenture, and as Dissemination Agent under the Continuing Disclosure
Agreement; and (iii) the Trustee has full power and authority to carry out its respective; obligations
under the Indenture and the Continuing Disclosure Agreement, as applicable, and that such
acceptance is in full compliance with, and does not conflict with, any applicable law or governmental
DOCSOC/ 1298934v3/024450-0012
regulation currently in effect, and does not conflict with or violate any contract to which the Trustee
is a party or any administrative or judicial decision by which the Trustee is bound;
(6) an opinion of Orrick, Herrington & Sutcliffe LLP, Bond Counsel,
dated the Closing Date, substantially in the form attached hereto as Exhibit A;
(7) an opinion of the City Attorney or other counsel to the City
acceptable to the Underwriter, dated the Closing Date, substantially in the form attached hereto as
Exhibit B;
(8) an opinion of Stradling Yocca Carlson & Rauth, Counsel to the
Underwriter, dated the Closing Date, to the effect that,,(a) the Bonds are exempt from registration
under the Securities Act of 1933, as amended, and the Indenture is exempt from qualifications under
the Trust Indenture Act of 1939, as amended, and the Continuing Disclosure Agreement complies
with paragraph (b) (5) of Rule 15c2-12; and (b) without having undertaken to determine
independently the accuracy, completeness or fairness of the statements contained in the Official
Statement and based upon the information made available to them in the course of their participation
in the preparation of the Official Statement as counsel for the Underwriter, nothing has come to their
attention which would cause them to believe that the Official Statement (excluding therefrom the
financial statements and the statistical data included in the Official Statement, and the appendices
thereto, and information regarding DTC and its book -entry only system, as to which no opinion need
be expressed), as of the date thereof and the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were made, not misleading;
(9) copies of the documents referred to in Section 6(b);
(10) certified copies of all proceedings relating to the authorization and
issuance of the Bonds certified by the City Administrator or other appropriate official of the City;
(11) evidence that the ratings on the Bonds of " " from Moody's
Investor Services and " " from Standard and Poors Rating Services are in full force and effect
as of the Closing Date,
(12) the Blanket Issuer Letter of Representations of the City;
(13) a copy of any Preliminary Blue Sky Survey with respect to the Bonds,
prepared by Counsel to the Underwriter;
(14) evidence that the Swap Agreements have been terminated; and
(15) such additional certificates, instruments and other documents as the
Underwriter may reasonably deem necessary, to evidence the truth and accuracy as of the Closing
Date of the City's representations and warranties contained in this Purchase Contract and the due
performance or satisfaction by the City at or prior to such time of all agreements then to be
performed and all conditions then to be satisfied by the City pursuant to this Purchase Contract.
The opinions and certificates and other material referred to above shall be in form and
substance satisfactory to the undersigned and to Stradling Yocca Carlson & Rauth, a Professional
Corporation, Counsel to the Underwriter.
DOCSOC/ 1298934v3/024450-0012
If the City shall be unable to satisfy the conditions to the obligations of the Underwriter to
purchase, accept delivery of and pay for the Bonds contained in this Purchase Contract or if the
obligations of the Underwriter to purchase, accept delivery of and pay for the Bonds shall be
terminated for any reason permitted by this Purchase Contract, this Purchase Contract and all
obligations of the Underwriter hereunder may be terminated by the Underwriter at, or at any time
prior to, the Closing Date by written notice to the City, and neither the Underwriter nor the City shall
have any further obligations hereunder. [In the event that the Underwriter fails (other than for a
reason permitted by this Purchase Contract) to accept and pay for the Bonds at the Closing, the
amount of one percent (1 %) of the principal amount of the Bonds shall be paid by the Underwriter, as
liquidated damages for such failure and for any and all defaults hereunder on the part of the
Underwriter and the acceptance of such amount shall constitute a full release and discharge of all
claims and rights of the City against the Underwriter as result of such failure and such default.]
7. The Underwriter shall be under no obligation to pay, and the City shall pay, any
expenses incident to the performance of the City's obligations hereunder, including but not limited
to: (i) the cost of preparation, printing and distribution of the Legal Documents, the Official
Statement and any supplements or amendments thereto; (ii) the cost of preparing and printing the
Bonds; (iii) the fees and disbursements of Bond Counsel and the fees and expenses of counsel to the
City; (iv) the'fees and disbursements of any engineers, accountants and other experts, consultants or
advisors retained by the City; (v) fees for bond ratings (which include fees of rating agencies and
travel expenses of the City); and (vi) expenses (included in the expense component of the
underwriting spread) incurred on behalf of the City's employees which are incidental to
implementing this agreement, including, but not limited to, meals, transportation, and lodging of
those employees, if any.
8. The Underwriter shall pay: (i) the cost of preparation and printing of this Purchase
Contract and the Preliminary Blue Sky Survey; (ii) all advertising expenses and Blue Sky filing fees
in connection with the public offering of the Bonds; (iii) fees, if any, payable to the California Debt
and Investment Advisory Commission in connection with the execution and delivery of the Bonds;
and (iv) all other expenses incurred by the Underwriter in connection with the public offering of the
Bonds, including the fees and disbursements of Underwriter's Counsel (except as provided above).
9. Any notice or other communication to be given to the City under this Purchase
Contract may be given by delivering the same in writing to: City of Vernon, 4305 Santa Fe Avenue,
Vernon, California 90058, Attention: City Attorney; and any notice or other communication to be
given to the Underwriter under this Purchase Contract may be given by delivering the same in
writing to: RBC Capital Markets, 345 California Street, Suite 2800, San Francisco, CA 94104,
Attention: Celeste Davis, Executive Director.
10. This Purchase Contract shall be construed in accordance with and governed by the
Constitution and laws of the State of California applicable to contracts made and performed in the
State.
11. This Purchase Contract may be executed in several counterparts, each of which shall
be an original, and all of which shall constitute but one and the same instrument. ,
12. This Purchase Contract, when accepted by the City in writing as heretofore specified,
shall constitute the entire agreement between the City and the Underwriter in connection with the
subject matter hereof and is made solely for the benefit of the City and the Underwriter (including
DOCSOC/ 1298934v3/024450-0012
any successor in business of the Underwriter). No other person shall acquire or have any right
hereunder or by virtue hereof. All the representations and agreements in this Purchase Contract shall
remain operative and in full force and effect, regardless of (a) any investigation made by or on behalf
the Underwriter, (b) delivery of and payment for the Bonds hereunder, and (c) any termination of this
Purchase Contract.
Very truly yours,
RBC DAIN RAUSCHER, INC.
Managing Director
Accepted on September _, 2008
CITY OF VERNON
Mayor
ATTEST:
By:
City Clerk
DOCSOC/ l 298934v3/024450-0012
SCHEDULEI
CITY OF VERNON
Electric System Revenue Bonds
2008 Taxable Series A
Maturity Date
(June 1) Principal Amount Interest Rate Yield
DOC S OC/ 1298934v3/024450-0012
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
[Closing Date]
RBC Dain Rauscher, Inc., as underwriter
345 California Street
San Francisco, CA 94104
Re: City of Vernon
Electric System Revenue Bonds,
2008 Taxable Series A,
(Supplemental Opinion)
Ladies and Gentlemen:
EXHIBIT A
This letter is addressed to you, as Underwriter, pursuant to (i) Section 6(d)(6) of the
Contract of Purchase, dated September _, 2008 (the "Contract of Purchase"), between you and the
City of Vernon, California (the "City"), providing for the purchase of the City's $
Electric System Revenue Bonds, 2008 Taxable Series A (the "Bonds"). The Bonds are being issued
pursuant to the City of Vernon Municipal Facilities Revenue Bond Law, constituting Article XI of
the Vernon City Code, and an Indenture of Trust, as supplemented by the First Supplemental
Indenture of Trust (collectively, the "Indenture"), each dated as of September 1, 2008 and each
between the City and The Bank of New York Mellon Trust Company, N.A., as trustee. Capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in the Indenture or, if not
defined in the Indenture, the Contracts of Purchase.
We have delivered our final legal opinion (the "Bond Opinion") as bond counsel
concerning the validity of the Bonds and certain other matters, dated the date hereof and addressed to
the City. You may rely on such opinion as though the same were addressed to you.
In connection with our role as bond counsel, we have reviewed the Contract of
Purchase, the printed version of the Official Statement, dated September , 2008, relating to the
Bonds (the "Official Statement"), the Continuing Disclosure Agreement, the documents, certificates,
opinions and matters mentioned in the second paragraph of our Bond Opinion, and such other
documents, opinions and matters to the extent we deemed necessary to express the opinions set forth
in the numbered paragraphs below.
The opinions expressed herein are based on an analysis of existing laws, regulations,
rulings and court decisions and cover certain matters not directly addressed by such authorities. Such
opinions may be affected by actions taken or omitted or events occurring after the date hereof. We
have not undertaken to determine, or to inform any person, whether any such actions are taken or
omitted or events do occur or any other matters come to our attention after the date hereof. We have
not reviewed any electronic version of the Official Statement, and assume that any such version is
identical in all respects to the printed version. We have assumed the genuineness of all documents
and signatures presented to us (whether as originals or as copies) and the due and legal execution and
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delivery thereof by, and validity against, any parties other than the City. We have assumed, without
undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the
documents, and of the legal conclusions contained in the opinions, referred to in the third paragraph
hereof. We have further assumed compliance with all covenants and agreements contained in such
documents. In addition, we call attention to the fact that the rights and obligations under the Bonds,
the Indenture and the Contract of Purchase and their enforceability may be subject to bankruptcy,
insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating
to or affecting creditors' rights, to the application of equitable principles, to the exercise of judicial
discretion in appropriate cases and to the limitations on legal remedies against cities in the State of
California. We express no opinion with respect to any indemnification, contribution, penalty, choice
of law, choice of forum or waiver provisions contained in the foregoing documents, nor do we
express any opinions with respect to the state or quality of title to or interest in any real or personal
property described in or as subject to the lien of the Indenture or the accuracy or sufficiency of the
description contained therein of, or the remedies available to enforce liens on, any such property.
Finally, we undertake no responsibility for the accuracy, completeness or fairness of the Official
Statement or other offering material relating to the Bonds and express no opinion relating thereto
except as expressly set forth in numbered paragraph 3 below.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof,
we are of the following opinions:
1. The Bonds are not subject to the registration requirements of the Securities
Act of 1933, as amended, and the, Indenture is exempt from qualification pursuant to the Trust
Indenture Act of 1939, as amended.
2. The Official Statement has been duly authorized, executed and delivered by
the City and the Contract of Purchase and the Continuing Disclosure Agreement have each been duly
authorized, executed and delivered by the City and each of the Contract of Purchase and the
Continuing Disclosure Agreement is a valid and binding agreement of the City.
3. The statements contained in the Official Statement under the captions
"INTRODUCTION," "THE 2008 Bonds," "SECURITY AND SOURCES OF PAYMENT FOR
THE 2008 Bonds," and "TAX MATTERS," and in "APPENDIX C—SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE," "APPENDIX F — PROPOSED FORM OF CONTINUING
DISCLOSURE AGREEMENT " and "APPENDIX E — PROPOSED FORM OF OPINION OF
BOND COUNSEL," excluding any material that may be treated as included under such captions by
cross-reference, insofar as such statements expressly summarize certain provisions of the Indenture,
the Continuing Disclosure Agreement and our Bond Opinion concerning certain federal tax matters
relating to the Bonds, are accurate in all material respects; provided, however, that no opinion is
expressed with respect to any statements relating to The Depository Trust Company ("DTC") or its
operations.
We are not passing upon and do not assume any responsibility for the accuracy
(except as explicitly stated in numbered paragraph 3 above), completeness or fairness of any of the
statements contained in the Official Statement and make no representation that we have
independently verified the accuracy, completeness or fairness of any such statements. In our
capacity as bond counsel in connection with issuance of the Bonds, we participated in conferences
with your representatives, your counsel, representatives of certain consultants to the City, the City
and counsel to the City, during which conferences the contents of the Official Statement and related
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Error! Unknown document property name.
matters were discussed. Based on our participation in the above -referenced conferences (which did
not extend beyond the date of the Official Statement), and in reliance thereon and on the records,
documents, certificates, opinions and matters mentioned in the Bond Opinion and herein, subject to
the limitations on our role as bond counsel, we advise you that no facts came to the attention of the
attorneys in our firm rendering legal services in connection with such issuance which caused us to
believe that the Official Statement as of its date (except for any CUSIP numbers, financial, statistical
or economic data or forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or
expressions of opinion, or any information about book -entry, DTC, and the information contained in
Appendices A and B, or referred to therein, which we expressly exclude from the scope of this
paragraph and as to which we express no opinion or view), contained any untrue statement of a
material fact or omitted to state any material fact.required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were made, not misleading.
This letter is furnished by us as bond counsel. No attorney -client relationship has
existed or exists between our firm and you in connection with the Bonds or by virtue of this letter.
Our engagement with respect to the Bonds has concluded with their issuance. We disclaim any
obligation to update this letter. This letter is delivered to you as the Underwriter of the Bonds, is
solely for your benefit as such Underwriter and is not to be used, circulated, quoted or otherwise
referred to or relied upon for any other purpose or by any other person. This letter is not intended to,
and may not, be relied upon by owners of the Bonds or by any other party to whom it is not
specifically addressed.
Very truly yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
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EXHIBIT B
FORM OF OPINION OF CITY ATTORNEY
[Closing Date]
RBC Dain Rauscher,. Inc.
As Underwriter
Re: $ City of Vernon Electric System Revenue Bonds
2008 Taxable Series A
Ladies and Gentlemen:
I am [City Attorney][counsel to] the City of Vernon (the "City") and as such I have served as
counsel to the City in connection with the issuance of the City's $ Electric System
Revenue Bonds, 2008 Series A (the "Bonds"). As such counsel, I have examined and am familiar
with (i) those documents relating to the existence, organization and operation of the City; (ii) all
necessary documentation of the City relating to the authorization, execution and delivery of (a) the
Indenture of Trust, as supplemented by the First Supplemental Indenture of Trust, each dated as of
September 1, 2008 (collectively, the "Indenture"), each by and between the City and The Bank of
New York Mellon Trust Company, N.A., as trustee thereunder (the "Trustee"), providing for the
issuance of the Bonds, (b) the Continuing Disclosure Agreement, dated as of September 1, 2008 (the
"Continuing Disclosure Agreement"), between the City and the Trustee, as dissemination agent; and
(c) the Contract of Purchase, dated September 2008 with respect to the Bonds (the "Purchase
Contract"), between the City and the Underwriter; (iii) an Official Statement of the City, dated
September _, 2008 (the "Official Statement"), relating to the Bonds. The Indenture, the
Continuing Disclosure Agreement and the Purchase Contract are collectively referred to herein as the
"Legal Documents."
I am of the opinion that:
1. The City is a charter city, duly created, organized and existing under the Constitution
and laws of the State of California and duly qualified to furnish electric service within said City.
2. The City has the authority and right to execute, deliver and perform the Legal
Documents, and the City has complied with the provisions of applicable law in all matters relating to
the transactions contemplated by the Legal Documents.
3. The execution and delivery of the Official Statement and the Legal Documents have
been duly authorized, executed and delivered by the City and, assuming that the Legal Documents
constitute the legal, valid and binding agreements of the other respective parties thereto, the Legal
Documents constitute the legal, valid and binding agreements of the City enforceable against it in
accordance with their respective terms, except, in each case, as enforceability may be limited by laws
C-1
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relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights
generally and by the application of equitable principles if equitable remedies are sought.
4. No approval, consent or authorization of any governmental or public agency,
authority or person is required for the execution and delivery by the City of the Legal Documents or
the performance by the City of its obligations thereunder or the execution and delivery, on the part of
the City, of the Bonds. Under the laws of the State of California, the City has the authority to
determine, fix, impose and collect rates and charges for electric service and is not presently subject to
the regulatory jurisdiction of any state, regional or local governmental regulatory authority other than
to the extent described in the Official Statement.
5. The execution and delivery of the Legal Documents by the City and compliance with
the provisions thereof will not conflict with or constitute a breach 'of or default under any instrument
relating to the organization, existence or operation of the City, or commitment, agreement or other
instrument to which the City is a party or by which it or its property is bound or affected, or any
ruling, regulation, ordinance, judgment, order or decree to which the City or any of its officers in
their respective capacities as such are subject or any provision of the laws of the State of California
relating to the City and its affairs.
6. There is no action, suit, proceeding, inquiry or investigation at law or in equity, or
before any court, public board or body, pending or, to the best of my knowledge, threatened against
or affecting the City or any entity affiliated with the City or any of its officers in their respective
capacities as such (nor to the best of my knowledge, is there any basis therefor) that questions the
powers of the City referred to in paragraph 2 above or in connection with the transactions
contemplated by the Official Statement, or the validity of the proceedings taken by the City in
connection with the authorization, execution or delivery of the Legal Documents, or wherein any
unfavorable decision, ruling or fmding would adversely affect the transactions contemplated by the
Legal Documents or the Official Statement, or that, in any way, would adversely affect the validity or
enforceability of the Legal Documents or, in any material respect, the ability of the City to perform
its obligations under the Legal Documents. Capitalized terms used herein not otherwise defined shall
have the meanings ascribed thereto in the Purchase Contract.
Respectfully submitted,
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FORM TERMINATION AGREEMENT EXHIBIT D
TERMINATION AGREEMENT
Termination Agreement (this "Termination Agreement") dated as of September " ]
2008 between MORGAN STANLEY CAPITAL SERVICES INC. ("Party A") and CITY OF
VERNON ("Party B").
WHEREAS, Party A and Party B are parties to an ISDA Master Agreement, dated as of
December 2, 2004 (the "Master Agreement"), a Schedule to the Master Agreement and an ISDA
Credit Support Annex thereto, each dated as of December 2; 2004 (the "Schedule" and
collectively with the Master Agreement, the "Agreement");
WHEREAS, in accordance with the terms of the Master Agreement, Party A and Party B
have heretofore entered into a Transaction pursuant to two Confirmation (Reference Nos.
AUCTK and AUCTM), dated December 2, 2004 (the "Confirmations"), with initial Notional
Amounts equal to USD 90,150,000 and USD 83,575,000, respectively, and Termination Dates of
April 1, 2037 and April 1, 2029, respectively (the "Transactions"); and
WHEREAS, the parties have agreed to terminate their obligations under the Transactions;
NOW, THEREFORE, in consideration of the foregoing and other valuable consideration,
it is hereby agreed as follows:
1. Payment and Termination. (a) The Transactions are hereby terminated as of
August L_], 2008 (the "Termination Date"), and neither Party A nor Party B shall have any
obligations thereunder following the Termination Date; provided that neither Party A nor Party B
shall be obligated to make regularly scheduled payments thereunder from and including
I ] (the "Pricing Date") nor shall any such payment obligations accrue from the Pricing
Date. In full consideration of this Termination Agreement and in complete satisfaction of all
obligations of all of the parties in respect of the Transactions, Party L] shall pay to Party L_]
on the Termination Date the amount of USD [ (the "Termination Amount") (which
includes all accrued but unpaid regularly scheduled payments under the Transaction). The
parties hereby acknowledge and agree that Party [_] shall pay the Termination Amount to Party
[] notwithstanding Paragraph 5 of the Confirmation, which states that the Termination Amount
shall be determined pursuant to Section 6 of the Agreement.
(b) In the event that Party B does not issue its �_] (collectively, the "Bonds")
on or prior to the Termination Date, (i) Party L] shall not be required to make the payment
specified in Section 1(a) of this Termination Agreement, (ii) the termination of the Transactions
shall be cancelled, (iii) the terms of the Transactions as set forth in the Confirmations shall
continue in full force and effect, (iv) Party A will determine its Loss, if any, in connection with
continuing the terms of the Transactions evidenced by the Confirmations, and (v) an amount
equal to the Loss will be payable by Party B to Party A on the Termination Date. "Loss" shall
mean an amount that Party A reasonably determines in good faith to be its total losses and costs
in connection with continuing the terms of the Transactions evidenced by the Confirmations,
including any loss of bargain, cost of funding or, at the election of such party but without
duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position and including any accrued but unpaid
regularly scheduled payments from the Pricing Date.
OHS West:260491062.1
2. Insurer Consent. By its execution hereof, XL Capital Assurance consents to the
termination of the Transactions on the terms and conditions set forth herein and acknowledges
that if the Bonds are not issued on or prior to the Termination Date, the Transactions shall
continue in full force and effect and the Interest Rate Swap Insurance Policy bearing Policy No.
f 1 shall remain in full force and effect with respect to the Transactions,.
3. Representations. Each party hereto represents to the other party hereto that:
(a) it is duly organized and validly existing under the laws of the jurisdiction
of its organization or incorporation;
(b) it has the power and authority to execute and deliver this Termination
Agreement;
(c) the person executing this Termination Agreement on its behalf is duly
authorized to do so;
(d) its execution, delivery and performance of this Termination Agreement.do
not violate or conflict with any law applicable to it, any provision of its constitutional
documents, any order or judgment of any court or other agency of government applicable to it or
any of its assets or any contractual restriction binding on or affecting it or any of its assets;
(e) it has obtained all governmental and other consents, if any, that it is
required to obtain in connection with its execution and delivery of this Termination Agreement,
all such consents are in full force and effect and all conditions of any such consents have been
complied with;
(f) its obligations under this Termination Agreement constitute its legal, valid
and binding obligations, enforceable in accordance with their respective terms (subject to
applicable bankruptcy, reorganization, insolvency, moratorium or similar laws _affecting
creditors' rights generally and subject, as to enforceability, to equitable principles of general
application, regardless of whether enforcement is sought in a proceeding in equity or in law); and
(g) it has made its own independent decision to enter into this Termination
Agreement based upon its own judgment and upon advice from such advisors as it has deemed
necessary and no other party is acting as a fiduciary for or as an advisor to it in respect of this
Termination Agreement.
4. Documents to be Delivered. The following documents shall be delivered by Party
B to Party A promptly upon execution of this Termination Agreement:
(a) an opinion of counsel to Party B with respect to the enforceability of this
Termination Agreement against Party B;
(b) evidence reasonably satisfactory to Party A of the (i) authority of Party B
to enter into this Termination Agreement and (ii) the authority and genuine signature of the
individual signing this Termination Agreement on behalf of Party B to execute the same; and
(c) a certified copy of the resolution or resolutions (or the equivalent thereof)
of the governing body of Party B, certified by an appropriate official of Party B, pursuant to
which Party B is authorized to enter into this Termination Agreement.
2
OHS West: 260491062. 1
5. Governing Law. This Termination Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without reference to choice of law
doctrine.
6. - Counterparts. This Termination Agreement may be executed in counterparts,
each of which shall be deemed an original.
3
OHS West:260491062.1
IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of
the date first above written.
MORGAN STANLEY CAPITAL SERVICES INC..
LI-A
CITY OF VERNON
LN
Acknowledged and Agreed:
XL CAPITAL ASSURANCE
LIM
OHS West:260491062.1
4
FORM CONTINUING DISCLOSURE AGREEMENT EXHIBIT E
THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement"),
executed and entered into as of September 1, 2008, is by and between The Bank of New York
Mellon Trust Company, N.A., a national banking association duly organized and existing under
and by virtue of the laws of the United States of America, as Trustee (the "Trustee"), and the
City of Vernon, a municipal corporation and chartered city organized and existing under and by
virtue of the Constitution of the State of California and its Charter (the "City").
WITNESSETH:
WHEREAS, the City has issued $ aggregate principal amount of its Electric
System Revenue Bonds, 2008 Taxable Series A (the "Bonds") pursuant to an Indenture of Trust,
as supplemented by a First Supplemental Indenture of Trust (the "Indenture"), each dated as of
September 1, 2008 and each between the Authority and the Trustee; and
WHEREAS, this Disclosure Agreement is being executed and delivered by the City and
the Trustee for the benefit of the Owners and Beneficial Owners of the Bonds and in order to
assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2-12(b)(5);
NOW, THEREFORE, for and in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" means any Annual Report provided by the City pursuant to, and as
described in, Sections 2 and 3 hereof.
"Disclosure Representative" means the City Clerk, the Acting City Clerk, the City
Administrator of the City, or such other officer or employee of the City as the City shall
designate in writing to the Trustee from time to time.
"Dissemination Agent" means any Dissemination Agent, including any successor
Dissemination Agent, appointed or engaged in writing by the City pursuant to Section 6 hereof
and which has filed with the Trustee a written acceptance of such designation.
"Listed Events" means any of the events listed in subsection (a) of Section 4 hereof.
"National Repository" means any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule.
"Official Statement" means the Official Statement, dated [September _, 20081, relating
to the Bonds.
"Participating Underwriter" means any original underwriter of the Bonds required to
comply with the Rule in connection with the Bonds.
"Repository" means each National Repository and each State Repository.
OHS West:260500906.1
"Rule" means Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as the same may be amended from time to time.
"State Repository" means any public or private repository or entity designated by the
State of California as a state repository for the purpose of the Rule and recognized by the
Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is no
State Repository.
Section 2. Provision of Annual Reports. (a) The City shall, or shall cause the
Dissemination Agent to, not later than 180 days following the end of each Fiscal Year of the City
(which Fiscal Year ends on June 30), commencing with the report for the 2008-09 Fiscal Year,
provide- to each Repository an Annual Report which is consistent with the requirements of
Section 3 hereof. The Annual Report may be submitted as a single document or as separate
documents comprising a package, and may include by reference other information as provided in
Section 3 hereof; provided that the audited financial statements of the City may be submitted
separately from the balance of the Annual Report, and later than the date required above for the
filing of the Annual Report if not available by that date. If the City's Fiscal Year changes, it
shall give notice of such change in the same manner as for a Listed Event under subsection (f) of
Section 4 hereof.
(b) Not later than 15 Business Days prior to the date specified in subsection (a) of this
Section for the providing of the Annual Report to the Repositories, the City shall provide the
Annual Report to the Dissemination Agent, if any, and the Trustee (if the Trustee is not the
Dissemination Agent). If by such date, the Trustee has not received a copy of the Annual
Report, the Trustee shall contact the City and the Dissemination Agent, if any, (if the Trustee is
not the Dissemination Agent) to determine if the City is in compliance with the first sentence of
this subsection (b).
(c) If the Trustee is unable to confirm that an Annual Report has been provided to
Repositories by the date required in subsection (a) of this Section, the Trustee shall send a notice
to the Municipal Securities Rulemaking Board and each State Repository, if any, in substantially
the form attached as Exhibit A.
(d) The Dissemination Agent shall:
(i) determine each year prior to the date for providing the Annual Report the
name and address of each National Repository and each State Repository, if any; and
(ii) file a report with the City and (if the Dissemination Agent is not the
Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this
Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it
was provided.
Section 3. Content of Annual Reports. The City's Annual Report shall contain or
incorporate by reference the following:
(a) Audited financial statements of the City's Electric System including a
balance sheet, a statement of revenues, expenses and changes in retained earnings, and a
OHS West:260500906.1 2
statement of cash flows relating to the City's Light and Power Fund prepared on the
accrual basis of accounting. Such financial statements may be included as part of the
City's general purpose financial statements. If the Electric System's audited financial
statements are not available by the time the Annual Report is required to be filed pursuant
to subsection (a) of Section 2 hereof, the Annual Report shall contain unaudited financial
statements in a format similar to the financial statements contained in the Official
Statement, and the audited financial statements shall be filed in the same manner as the
Annual Report when they become available.
(b) An update of the information contained in the tables with the following
headings in the Official Statement for the most recently ended Fiscal Year:
(i) "CITY OF VERNON ELECTRIC SYSTEM. POWER SUPPLY
RESOURCES";
(ii) "CITY OF VERNON ELECTRIC SYSTEM CUSTOMERS,
RETAIL SALES, REVENUES AND DEMAND";
(iii) "AVERAGE BILLING PRICE";
(iv) "CITY OF VERNON ELECTRIC SYSTEM HISTORICAL
REVENUE, EXPENSES AND DEBT SERVICE COVERAGE UNDER BOND
INDENTURE"; and
(v) "CITY OF VERNON ELECTRIC SYSTEM PROJECTED
REVENUE, EXPENSES AND DEBT SERVICE COVERAGE UNDER BOND
INDENTURE".
(c) In addition to any of the information expressly required to be provided
under subsections (a) and (b) of this Section, the City shall provide such further
information, if any, as may be necessary" to make the specifically required statements, in
the light of the circumstances under which they are made, not misleading.
Any or -all of the items listed above may be included by specific reference to other
documents, including official statements of debt issues of the City or related public entities,
which have been submitted to each of the Repositories or the Securities and Exchange
Commission. If the document included by reference is a final official statement, it must be
available from the Municipal Securities Rulemaking Board. The City shall clearly identify each
such other document so included by reference.
Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this
Section, the City shall give, or cause to be given, notice of the occurrence of any of the following
events with respect to the Bonds, if material:
(1) Principal and interest payment delinquencies.
(2) Non-payment related defaults.
OHS West:260500906.1 3
(3) Unscheduled draws on debt service reserves reflecting financial
difficulties.
(4) Unscheduled draws on credit enhancements reflecting financial
difficulties.
(5) Substitution of credit or liquidity providers, or their failure to
perform.
(6) Adverse tax opinions or events affecting the tax-exempt status of
the security.
(7) Modifications to rights of the Owners of the Bonds.
(8) Contingent or unscheduled Bond calls.
(9) Defeasances.
(10) Release, substitution, or sale of property securing repayment of the
securities.
(11) Rating changes.
(b) The Trustee shall, within one Business Day of obtaining actual knowledge of the
occurrence of any of the Listed Events, contact the Disclosure Representative, inform such
person of the event, and request that the City promptly notify the Trustee in writing whether or
not to report the event pursuant to subsection (f) of this Section. For purposes of this subsection
(b), "obtaining actual knowledge means receipt of actual notice of any of such Listed Events
by a responsible officer of the Trustee's Corporate Trust Department.
(c) Whenever the City obtains knowledge of the occurrence of a Listed Event,
whether because of a notice from the Trustee pursuant to subsection (b) of this Section or
otherwise, the City shall as soon as possible determine if such event would be material under
applicable Federal securities law.
(d) If the City has determined that knowledge of the occurrence of a Listed Event
would be material under applicable Federal securities law, the City shall promptly notify the
Trustee in writing. Such notice shall instruct the Trustee to report the occurrence .pursuant to
subsection (f) of this Section.
(e) If in response to a request under subsection (b) of this Section, the City
determines that the Listed Event would not be material under applicable Federal securities law,
the City shall so notify the Trustee in writing and instruct the Trustee not to report the occurrence
pursuant to subsection (f) of this Section.
(f) If the Trustee has been instructed by the City to report the occurrence of a Listed
Event, the Trustee shall file a notice of such occurrence with the Municipal Securities
Rulemaking Board and each State Repository. Notwithstanding the foregoing, notice of Listed
OHS West:260500906.1 4
Events described in paragraphs (8) and (9) of subsection (a) of this Section need not be given
under this subsection any earlier than the notice (if any) of the underlying event is given to
Owners of affected Bonds pursuant to the Indenture.
Section 5. Termination of Reporting Obligation. The City's obligations under this
Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in
full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the
City shall give notice of such termination in the same manner as for a Listed Event under
subsection (f) of Section 4 hereof.
Section 6. Dissemination Agent. The City may, from time to time, appoint or
engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure
Agreement and may discharge any such Dissemination Agent, with or without appointing a
successor Dissemination Agent; provided the Trustee shall receive written notice of such
appointment, engagement and discharge at the time thereof. The Dissemination Agent may
resign by providing thirty days written notice to the City.
Section 7. Amendment; Waiver. Notwithstanding any other provision of this
Disclosure Agreement, the City and the Trustee may amend this Disclosure Agreement (and the
Trustee shall agree to any amendment so requested by. the City to the extent that such
amendment does not adversely affect the Trustee), and any provision of this Disclosure
Agreement may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to the provisions of subsection (a) of
Section 2 hereof, Section 3 hereof or subsection (a) of Section 4 hereof, it may only be
made in connection with a change in circumstances that arises from a change in legal
requirements, change in law, or change in the identity, nature or status of an obligated
person with respect to the Bonds, or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in
the opinion of Bond Counsel, have complied with the requirements of the Rule at the
time of the primary offering of the Bonds, after taking into account any amendments or
interpretations of the Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver (i) is approved by Owners of the
Bonds in the manner provided in the Indenture for amendments to the Indenture with the
consent of Owners, or (ii) does not, in the opinion of the Trustee or Bond Counsel,
materially impair the interests of the Owners or Beneficial Owners.
If the annual financial information or operating data to be provided in the Annual Report
is amended pursuant to the provisions hereof, the annual financial information containing the
amended operating data or financial information shall explain, in narrative form, the reasons for
the amendment and the impact of the change in the type of operating data or financial
information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be
followed in preparing financial statements, the annual financial information for the year in which
the change is made shall present a comparison between the financial statements or information
OHS West: 260500906. 1 5
prepared on the basis of the new accounting principles and those prepared on the basis of the
former accounting principles. The comparison shall include a qualitative discussion of the
differences in the accounting principles and the impact of the change in the accounting principles
on the presentation of the financial information, in order to provide information to investors to
enable them to evaluate the ability of the City to meet its obligations. To the extent reasonably
feasible, the comparison shall be quantitative. A notice of the change in the accounting
principles shall be sent to the Repositories.
Section 8. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other -information in any Annual Report or notice of occurrence of a Listed Event,
in addition to that which is required by this Disclosure Agreement. If the City chooses to include
any information in any Annual Report or notice of occurrence of a Listed Event in addition to
that which is specifically required by this Disclosure Agreement, the City shall have no
obligation under this Disclosure Agreement to update such information or include it in any future
Annual Report or notice of occurrence of a Listed Event.
Section 9. Default. In the event of a failure of the City, the Trustee or the
Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee
may (and, at the written direction of any Participating Underwriter or the Owners of at least 25%
of the aggregate principal amount of the Outstanding Bonds, shall with indemnification
satisfactory to it), or any Owner or Beneficial Owner of the Bonds may, take such actions as may
be necessary and appropriate, including seeking mandate or specific performance by court order,
to cause the City, Trustee or the Dissemination Agent, as the case may be, to comply with its
obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall
not be deemed an Event of Default under the Indenture, and the sole remedy under this
Disclosure Agreement in the event of any failure of the City, the Trustee or the Dissemination
Agent to comply with this Disclosure Agreement shall be an action to compel performance.
Section 10. Duties, Immunities and Liabilities of Trustee and Dissemination
Agent. Article VIII of the Indenture is hereby made applicable to this Disclosure Agreement as
if this Disclosure Agreement were (solely for this purpose) contained in the Indenture. The
Dissemination Agent shall be entitled to the protections and limitations from liability afforded to
the Trustee thereunder. Neither the Trustee nor the Dissemination Agent shall be responsible for
the form or content of any Annual Report or notice of Listed Event. The Trustee and
Dissemination Agent shall receive reasonable compensation for its services provided under this
Disclosure Agreement. The Dissemination Agent (if other than the Trustee) shall have only such
duties pursuant to this Disclosure as are specifically set forth herein, and the City agrees'Ao
indemnify and save the Dissemination Agent, its officers, directors, employees and agents,
harmless against any loss, expense and liabilities which it may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs and expenses
(including attorneys fees) of defending against any claim of liability, but excluding liabilities due
to the Dissemination Agent's gross negligence or willful misconduct. The obligations of the
City under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Bonds. Any company succeeding to all or substantially all of the Dissemination
OHS West:260500906.1 6
Agent's corporate trust business shall be the successor to the Dissemination Agent hereunder
without the execution or filing of any paper or any further act.
Section 11. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit
of the City, the Trustee, the Dissemination Agent, the Participating Underwriter and Owners and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person
or entity.
Section 12. Governing Law. This Disclosure Agreement shall be interpreted
governed by and construed for all purposes in accordance with the laws of the State for contracts
executed and to be performed in the State.
Section 13. Counterparts. This Disclosure Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall constitute but one and the
same instrument.
OHS West:260500906.1
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement
as of the date first above written.
CITY OF VERNON
Leonis C. Malburg, Mayor
ATTEST:
Manuela Giron,
City Clerk
APPROVED AS TO FORM:
am
Jeff A. Harrison, City Attorney
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., AS TRUSTEE
an
OHS West: 260500906. 1
Authorized Signatory
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO
FILE ANNUAL REPORT
Name of Issuer: City of Vernon
Name of Issue: City of Vernon Electric System Revenue Bonds, 2008 Taxable Series A
(the "Bonds")
Date of Issuance: September_, 2008
NOTICE IS HEREBY GIVEN that the City of Vernon (the "City") has not provided the
Bank of New York Mellon Trust Company, N.A., as trustee (the "Trustee") under an Indenture
of Trust, as supplemented by a First Supplemental Indenture of Trust, each dated as of
September 1, 2008, each between the Issuer and the Trustee, an Annual Report with respect to
the above -named Bonds as required Section 5.02 of such First Supplemental Indenture of Trust.
[The City anticipates that the Annual Report will be filed by .]
Dated:
The Bank of New York Mellon Trust
Company, N.A., as Trustee, on behalf of the
City of Vernon
By: _
Name:
Title:
cc: City of Vernon
OHS West:260500906.1 9
AUTHORIZATION AND DIRECTION TO
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
TO INVEST CASH BALANCES IN MONEY MARKET MUTUAL FUNDS
THROUGH THE BANK OF NEW YORK
CUSTOMER NAME (the "Customer"): City of Vernon
ACCOUNT (the "Account"): Electric System Revenue Bonds 2008
AGREEMENT (Description) City of Vernon Electric System Revenue Bonds 2008A Taxable
ACCOUNT NUMBER: 800872-800879, 800884
FUND CHOICE (the "Fund"): Fidelity Instit Govt
SHARE CLASS: Class T
These instructions supersede any previous instructions which pertain to the investment of cash in
the Account.
AUTHORIZATION AND DIRECTION
The Bank of New York Mellon Trust Company, N.A. (`BNYMNA"), through its affiliate, The
Bank of New York Mellon (`BNYM"), is hereby authorized and directed to invest any available
cash in the Account in shares of the Fund and to redeem shares of the Fund to meet the cash
requirements of the Account. Customer may, from time to time, direct BNYMNA in writing to
redeem and exchange shares of the Fund for shares of, or to invest available cash or the proceeds
from any redemption in, another eligible investment and BNYMNA shall comply with such
direction. Customer represents and warrants to BNYMNA that it is authorized and empowered
to direct BNYMNA to make the investment specified herein through BNYM and that the
investment authorized herein is an authorized investment.
PROSPECTUS: Customer has read the Prospectus of the Fund and has independently made the
determination to direct BNYMNA, through BNYM, to invest available cash in the Account in
shares of the Fund. Customer understands that the Fund is not an obligation of, or
recommended; endorsed or guaranteed in any way by, BNYMNA or BNYM or their affiliates or
any other bank; that the Fund is not insured by an agency or instrumentality of the United States,
such as the Federal Deposit Insurance Corporation; and that investments in the Fund may be
subject to investment risks, including possible loss of the principal amount invested. Customer
further understands that, other than with respect to the BNYM Hamilton Funds and the Dreyfus
Funds, neither BNYM nor its affiliates has participated in the preparation of the Prospectus or is
responsible for its content. With respect to the BNYM Hamilton Funds and the Dreyfus Funds,
Customer understands, and hereby acknowledges, that BNYM and/or its affiliates provide
investment advisory and other services to the BNYM Hamilton Funds and the Dreyfus Funds,
and are compensated for such services.
PERIODIC STATEMENTS: Customer agrees that transactions in the Fund will be reported
only in BNYMNA's regular periodic account statements.
VOTING SHARES: Customer assumes the obligation and retains the right to vote all shares of
the Fund held hereunder for the benefit of the Account.
SHAREHOLDER SUPPORT SERVICES FEES: Customer acknowledges that BNYM
performs certain shareholder support services for the Fund and is currently compensated, and
hereby consents to such compensation, for such services by the Fund, the Fund's adviser and/or
the Fund's distributor at an annual rate of 0.1 % of the Account's average net assets invested in
the Fund. BNYM may share all or a portion of the Shareholder Support Service Fees with
BNYMNA. Such shareholder support services may include, without limitation, answering
client's inquiries regarding the Fund,_ processing dividend payments for the Fund and providing
assistance to clients in changing dividend options, account designations and addresses,
aggregating and processing purchase and redemption transactions, providing periodic statements
showing a client's account balance and showing their purchases, sales and positions in the Fund,
arranging for BNYM wires, providing sub -accounting services to the Fund for shares held by BNYM
clients and forwarding communications from the Fund to BNYM clients and such other information
and services as the Fund, the Fund's distributor or Customer reasonably may request. Customer
further acknowledges that the Fund may purchase securities from or through BNYM or its
affiliates, may engage in repurchase transactions with BNYM or its affiliates, may place funds
on deposit in accounts with BNYM or its affiliates and receive interest income thereon and may
obtain other services from BNYM for which BNYM is paid a.fee.
The annual rate for the Shareholder Support Services Fees that is paid to BNYM by the Fund
may change in the future. To obtain any future revised Shareholder Support Service Fee rate
paid to BNYM, Customer should contact the BNYMNA officer responsible for the Account. To
arrange to automatically receive any future revised Shareholder Support Service Fee rate,
Customer must send a request by e-mail to GCTPRR@BNYMellon.com.
INVESTMENT MAINTENANCE FEE: BNYMNA will charge an investment maintenance
fee with respect to investments in the Fund, calculated at an annual rate of up to o.00 basis
points on average total monthly account balances. The investment maintenance fee will be
charged [monthly/quarterly/yearly].
CUSTOMER ACKNOWLEDGEMENT: The Customer acknowledges and represents to
BNYMNA that it has made its own decision to invest available cash in the Account in shares of
the Fund, and that neither BNYMNA nor BNYM or their respective representatives have
recommended or endorsed the Fund or required that the Fund be utilized for this purpose. The
Customer further acknowledges that it has the right to direct BNYMNA to invest available cash
in a different investment option selected by the Customer from time to time, subject to any
operational and legal requirements related to such investment option.
Securities Servicing
The Bank of New York Mellon
Trust Company, N.A.
700 South Flower Street'
Suite Soo THE BANK OF NEW YORK ME'LLON
Los Angeles, CA 900.17
FACSIMILE/E-MAIL INSTRUCTIONS: AUTHORIZATION
Re: The City of VernonElectric System Revenue Bonds 2008 Taxable Series A '
(the "Agreement")
Date: September 24, 2008
Customer Authorization, Limitation of Liability andIndemunity:
The City of Vernon ("Customer") hereby authorizes The Bank of New York Mellon (the "Bank") to rely
upon and comply with instructions and directions sent by e-mail, facsimile and other sinular unsecured
electronic methods (but excluding on-line communications systems covered by a separate agreement
(such as the Bank's Inform or CASH -Register Plus system) {"On Line Communications Systems)
("Electronic Methods") by persons believed by the Bank to be authorized to give instructions and
directions on behalf of Customer. Except as set forth below with respect to funds transfers, the Bank
shall have no duty or obligation to verify or confirm that the person who sent such instructions or
directions is, in fact, a person authorized to give instructions or directions on behalf of Customer (other
than to verify that the signature on a facsimile is the signature of a person authorized to give instructions
and directions on behalf of Customer); and the Bank shall have no liability for any losses, liabilities,
costs or expenses incurred or sustained by Customer as a result of such reliance upon or compliance with
such instructions or directions. Customer agrees to assume all risks arising out of the use of Electronic
Methods to submit instructions and directions to the Bank, including without limitation the risk of the
Bank acting on unauthorized instructions, and the risk of interception and misuse by third parties.
Funds Transfers. With respect to any "funds transfer, as defined in Article 4-A of the Uniform
Commercial Code, the following security procedure will apply: Customer's payment instruction is to
include the name and (in the case of a facsimile) signature of the person initiating the funds transfer
request. If the name is listed as an authorized signer on the relevant account, the Bank will confirm the
instructions by telephone call to any person listed as an authorized signer on the account, who may be the
same person who initiated the instruction. When calling back, the Bank will request from Customer's
staff member his or her name. If the name is listed in the Bank's records as an authorized signer, the
Bank will confirm the instructions with respect to amount, names and numbers of accounts to be charged
or credited and other relevant reference information. Customer acknowledges that the Bank has offered
to Customer other security procedures that are more secure and are commercially reasonable for
Customer, and that Customer has nonetheless chosen the procedures described in this paragraph.
Customer agrees to be bound by any payment order issued in its 'name, whether or not authorized, that is
accepted by the Bank in accordance with the above procedures. When instructed to credit or pay a party
by both name and a unique numeric or alpha -numeric identifier (e.g. ABA number or account number),
the Bank, and any other bank participating in the funds transfer, may rely solely on the unique identifier,
even if it identifies a party different than the party named. This applies to beneficiaries as well as any
intermediary bank. Customer agrees to be bound by the rules of any funds transfer network used in
connection with any payment order accepted by the Bank hereunder.
This authorization shall remain in full force and effect until canceled, revolted or amended by written
notice received by the Bank; and replaces and supersedes any previous authorization from Customer to
the Bank relating to the giving of instructions by facsimile, e-mail or other similar Electronic Methods
(but excluding On -Line Communications Systems) and is in addition t.o all other authorizations.
Notwithstanding any revocation, cancellation or amendment of this authorization, any action taken by the
Bank pursuant to this authorization prior to the Bank's actual receipt and acknowledgement of a notice of
revocation, cancellation or amendment shall not be affected by such notice.
Customer agrees to indemnify and hold harmless the Bank against any and all claims, losses, damages
liabilities, judgments, costs and expenses (including reasonable attorneys' fees) (collectively, "Losses")
incurred or sustained by the Bank as a result of or in connection with the Bank's reliance upon and
compliance with instructions or directions given. by Electronic Methods, provided, however, that such
Losses have not arisen from the negligence or willful misconduct of the Bank, it being understood that
the failure of the Bank to: verify or confirm that the person giving the instructions or directions, is, in fact,
an authorized person does. not constitute negligence or willful misconduct.
This document shall be governed by, and shall be construed in accordance with, the substantive laws
(and not the choice of law rules) of the jurisdiction governing the Agreement.
Customer .hereby represents and warrants to the Bank that this authorization is properly given and has
been duly approved by a resolution of its Board of Directors.
Nothing contained herein shall, or be. deemed to, alter or :modify the rights and remedies of the. Bank as
set forth in the Agreement.
The execution of this document by Customer constitutes acceptance of the foregoing.
Yours faithfully,
THE BANK `OF NEW YORK MELLON TRUST COMPANY, N. A.
By:
Name: Auro a Y uiazon
Title --Assistant Vice President
Customer hereby accepts and agrees to
the terms and conditions set forth herein.
The City of Vernon
By;.
Name: Rory I nett
Title: Finance Director
C�7
O R R I C K
September 22, 2008
VIA MESSENGER
Kristen Enomoto
City of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
ORRICK, HERRINGTON & SUTCLIFFE LLP
777 SOUTH FIGUEROA STREET
SUITE 3200
LOS ANGELES, CALIFORNIA 90017-5855
tel +1-213-629-2020
faX +1-213-612-2499
WWW.ORRICK.COM
Sean J. Baxter
(213) 612-2171
sbaxter@orrick.com
Re: City of Vernon Electric System Revenue Bonds 2008 Taxable Series A
Dear Kristen:
Per our recent conversations, enclosed please find for execution by the City the following
documents in connection with the above -referenced financing. I have enclosed five (5) counterpart
signature pages to each document.
1. Indenture of Trust;
2. First Supplemental Indenture of Trust;
3. 15c2-12 Certificate;
4. Official Statement;
5. Continuing Disclosure Agreement;
6. Certificate of the City Clerk;
7. Signature and Incumbency Certificate of the City;
8. Order of the City;
9. Certificate of the City;
10. Certificate of the City Attorney; and
11. Requisition No. 1 for Moneys from the 2008 Costs of Issuance Fund.
Please use the following color key to assist in obtaining the appropriate signatures:
Green - Leonis C. Malburg;
Yellow — Manuela Giron;
Blue — Jeff Harrison; and
Red - City Seal.
OHS West:260517232.1
42797-2
O
O R R I C K
Kristen Enomoto
September 22, 2008
Page 2
In addition to the enclosed documents, please arrange for delivery of the following:
1. Five (5) executed original opinions from the City Attorney.
Once the enclosed documents have been executed, please return them in the provided Federal
Express envelope to my attention for receipt tomorrow, Tuesday, September 23. If you need to
have documents signed tomorrow morning, please just let me know and I can arrange for a
messenger to come pick them up at the City's offices. If you have any questions please do not
hesitate to call me at (213) 612-2171. Thank you for your assistance with coordinating the execution
of the documents.
Very truly yours,
-,Z� 1-,-r64a�
Sean J. Baxter
Project Manager
Enclosures
OHS West:260517232.1
42797-2
INDENTURE OF TRUST
by and between
CITY OF VERNON
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
as Trustee
Dated as of September 1, 2008
Relating to
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
OHS West:260486430.6
IN WITNESS WHEREOF, the City of Vernon has caused these presents to be signed in
its name and on its behalf by its Mayor and attested by its City Clerk, and to evidence its
acceptance of the trust hereby created, The Bank of New York Mellon Trust Company, N.A. has
caused these presents to be signed in its name and on its behalf by an authorized officer, in each
case all as of the date first above written.
CITY OF VERNON
By: CGS
Leonis C. Malburg, Mayor
ATTEST:
By:
Manuela Giro , C'ty Clerk
APPROVED AS TO FORM:
Lo
A. Nrrison, City Attorney
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
Authorized Officer
OHS West:260486430.6
FIRST SUPPLEMENTAL
INDENTURE OF TRUST
between
CITY OF VERNON
and
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., as Trustee
Relating to
City of Vernon
Electric System Revenue Bonds,
2008 Taxable Series A
Dated as of September 1, 2008
OHS West:260486435.4
IN WITNESS WHEREOF, City of Vernon has caused these presents to be signed
in its name and on its behalf by its Mayor and attested by its City Clerk and to evidence its
acceptance of the trusts hereby created, the Trustee has caused these presents to be signed in its
name and on its behalf by one of its authorized officers, all as of the first day of September,
2008.
CITY OF VERNON
By: G
Leonis C. Mallburg, Mayor
ATTEST:
By:
Manuela Giron,*City Clerk
APPROVED AS TO FORM:
By.
Je . H son, City Attorney .
THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A., as Trustee
Authorized Officer
OHS West:260486435.4
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
CERTIFICATE OF CITY AS TO FINALITY OF
PRELIMINARY OFFICIAL STATEMENT
I,' Jeff A. Harrison, hereby certify that I am the City Attorney and Director of Industrial
Development of the City of Vernon (the "City"), and as such I am authorized to execute this
certificate on behalf of the City.
I hereby further certify that there has been delivered to RBC Capital Markets Corporation,
the underwriter of the City of Vernon, Electric System Revenue Bonds 2008 Taxable Series A (the
"Bonds"), a preliminary official statement relating to the Bonds, dated September 4, 2008 (including
the cover page and all appendices thereto, the "Preliminary Official Statement"), which the City
deems final as of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange
Act of 1934 ("Rule 15c2-12"), except for information permitted to be omitted therefrom by Rule
15c2-12.
IN WITNESS WHEREOF, I hereunto set my hand this 4th day of September, 2008.
CITY OF VERNON
Director of Industrial Development
DOCSOC/ 13 01333v2/024450-0012
EXECUTION AND DELIVERY
The execution and delivery of this Official Statement has been duly authorized by the City.
CITY OF VERNON, CALIFORNIA
By: /s/ Leonis C. Malburg
Leonis C. Malburg
Mayor
47
CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement"),
executed and entered into as of September 1, 2008, is by and between The Bank of New York
Mellon Trust Company, N.A., a national banking association duly organized and existing under
and by virtue of the laws of the United States of America, as Trustee (the "Trustee"), and the
City of Vernon, a municipal corporation and chartered city organized and existing under and by
virtue of the Constitution of the State of California and its Charter (the "City").
WITNESSETH:
WHEREAS, the City has issued $43,675,000 aggregate principal amount of its Electric
System Revenue Bonds, 2008 Taxable Series A (the "Bonds") pursuant to an Indenture of Trust,
as supplemented by a First Supplemental Indenture of Trust (the "Indenture"), each dated as of
September 1, 2008 and each between the City and the Trustee; and
WHEREAS, this Disclosure Agreement is being executed and delivered by the City and
the Trustee for the benefit of the Owners and Beneficial Owners of the Bonds and in order to
assist the underwriter of the Bonds in complying with S.E.C. Rule 15c2-12(b)(5);
NOW, THEREFORE, for and in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
Section 1. Definitions. In addition to the definitions set forth in the Indenture, which
apply to any capitalized term used in this Disclosure Agreement unless otherwise defined in this
Section, the following capitalized terms shall have the following meanings:
"Annual Report" means any Annual Report provided by the City pursuant to, and as
described in, Sections 2 and 3 hereof.
"Disclosure Representative" means the City Clerk, the Acting City Clerk, the City
Administrator of the City, or such other officer or employee of the City as the City shall
designate in writing to the Trustee from time to time.
"Dissemination Agent" means any Dissemination Agent, including any successor
Dissemination Agent, appointed or engaged in writing by the City pursuant to Section 6 hereof
and which has filed with the Trustee a written acceptance of such designation.
"Listed Events" means any of the events listed in subsection (a) of Section 4 hereof.
"National Repository" means any Nationally Recognized Municipal Securities
Information Repository for purposes of the Rule.
"Official Statement" means the Official Statement, dated September 17, 2008, relating
to the Bonds.
"Participating Underwriter" means any original underwriter of the Bonds required to
comply with the Rule in connection with the Bonds.
OHS West:260500906.2
IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement
as of the date first above written.
CITY OF VERNON
By:
Leonis C. Mal urg, Mayor
ATTEST:
N-Lan auldGi on,
City Clerk
APPROVED AS TO FORM:
By: C Al�
tef4. Harrison,
City Attorney
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
LI-A
Authorized Signatory
OHS West:260500906.2
$43,765,000
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
CERTIFICATE OF CITY CLERK
I, Manuela Giron, City Clerk of the City of Vernon (the "City"), HEREBY CERTIFY as
follows:
1. that attached hereto as Exhibit A is a true and complete copy of Resolution
No. 9695, duly -adopted by the City Council of the City at a meeting duly called and duly held on
August 18, 2008, at which meeting a quorum was present and acting throughout. Such
resolution has not been modified, amended or repealed and is in full force and effect in the form
attached hereto as Exhibit A;
2. that attached hereto as Exhibit B is a true and complete copy of Resolution
No. 9705, duly adopted by the City Council of the City at a meeting duly called and duly held on
September 8, 2008, at which meeting a quorum was present and acting throughout. Such
resolution has not been modified, amended or repealed and is in full force and effect in the form
attached hereto as Exhibit B;
3. that attached hereto as Exhibit C is a copy of the Charter of the City of Vernon.
Said copy is a true, complete and correct copy of said Charter and said Charter has not been
modified, amended or repealed and is in full force and effect in the form attached hereto as
Exhibit C;
4. that attached hereto as Exhibit D is a copy of the City of Vernon Municipal
Facilities Revenue Bond Law, enacted as Ordinance No. 1004 of the City of Vernon and
constituting Article XI of the City Code of the City of Vernon. Said copy is a true, complete and
correct copy of said Vernon Municipal Facilities Revenue Bond Law and said Vernon Municipal
Facilities Revenue Bond Law has not been supplemented, modified or amended and is in full
force and effect iri the form attached hereto as Exhibit D;
5. that attached hereto as Exhibit E is a copy of those portions of the City of Vernon
Administrative Code relating to the Vernon Electric System. Said copy is a true, complete and
correct copy of such portions of the City of Vernon Administrative Code, are all provisions of
the City of Vernon Administrative Code relating to the Vernon Electric System and such
provisions have not been supplemented, modified or amended and are in full force and effect in
the form attached hereto as Exhibit E; and
6. that attached hereto as Exhibit F is a copy of the Investment Policy of the City of
Vernon. Said copy is a true, complete and correct copy of said Investment Policy and said
Investment Policy has not been modified, amended or repealed and is in full force and effect in
the form attached hereto as Exhibit F.
OHS West:260509861.2
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the City
this 24th day of September, 2008.
CITY OF VERNON
By:
Manuela iro
[SEAL] City Clerk
OHS West:260509861.2 -2-
$43,765,000
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
SIGNATURE AND INCUMBENCY CERTIFICATE OF THE CITY
I, Jeff A. Harrison, Esq., City Attorney of the City of Vernon (the "City"), HEREBY
CERTIFY as follows:
1. that the members of the City Council of the City were on January 1, 2008, and
continue as such members as of the date hereof as follows:
Leonis C. Malburg
Mayor
Hilario Gonzales
Mayor Pro Term
William J. Davis
Councilmember
W. Michael McCormick
Councilmember
Thomas A. Ybarra
Councilmember
2. that the persons holding the following offices and positions and duly appointed
thereto and acting therein were on January 1, 2008, and continue to hold such offices and
positions as of the date hereof, as follows:
Name
Leonis C. Malburg
Eric T. Fresch
Manuela Giron
Jeff A. Harrison, Esq.
Office
Mayor
City Administrator
City Clerk
City Attorney
3. that the signatures set forth opposite the respective names of the following
designated officers of the City are manual specimens of their signature:
Name Office Signature
Leonis C. Malburg Mayor
Manuela Giron City Clerk 1n
Jeff A. Harrison, Esq. City Attorney
OHS West:260509861.2
4. that Leonis C. Malburg, as Mayor and Manuela Giron, as City Clerk have caused
their facsimile signatures to be printed on the City's Electric System Revenue Bonds, 2008
Taxable Series A (the "2008 Series A Bonds"), and said signatures on the 2008 Series A Bonds
constitute their true and lawful signatures. The said officers also caused a facsimile of the
official seal of the City, an impression of which is applied to this certificate, to be printed or
reproduced on the 2008 Series A Bonds.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of September,
11:
Q,h � -
fe I
f . Harrison, Esq.
y Attorney
[SEAL]
The undersigned hereby certifies that the above signature of Jeff A. Harrison is the true
and lawful specimen signature of Jeff A. Harrison, City Attorney of the City.
1
Mahuela diron
City Clerk
OHS West: 260509861.2 2
$43,765,000
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
ORDER OF THE CITY
The Bank of New York Mellon Trust Company, N.A., as Trustee
700 South Flower Street, Suite 500
Los Angeles, CA 90017
Ladies and Gentlemen:
There has been heretofore delivered to you duly executed, $43,765,000 aggregate
principal amount of Electric System Revenue Bonds, 2008 Taxable Series A (the "2008 Series. A
Bonds") of the City of Vernon (the "City"), issued under and pursuant to the Indenture of Trust
(the "Master Indenture"), dated as of September 1, 2008, by and between, the City and The Bank
of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), as supplemented by the
First Supplemental Indenture of Trust (the "First Supplemental Indenture"), dated as of
September 1, 2008, by and between the City and the Trustee;
In addition, the following are being delivered to you simultaneously with the delivery of
this order so as to meet the conditions precedent to the authentication and delivery of the 2008
Series A Bonds set forth in Section 2.04 of the Master Indenture:
1. executed counterparts of the Master Indenture and the First Supplemental
Indenture;
2. the Opinion of Bond Counsel as to the due execution, delivery and validity of the
Master Indenture and the First Supplemental Indenture; and
3. a written order as to the delivery of the 2008 Series A Bonds (this letter
constitutes such order).
Other than the receipt of the purchase price of the 2008 Series A Bonds, such documents
constitute all of the conditions precedent to the authentication and delivery of the 2008 Series A
Bonds by you as Trustee under the Master Indenture. Upon confirmation of receipt of the
purchase price of the 2008 Series A Bonds as such purchase price is set forth below, you are
hereby requested and directed to authenticate the 2008 Series A Bonds and to deliver the 2008
Series A Bonds to or upon the order of RBC Capital Markets Corporation, as Underwriter (the
"Underwriter") under that certain Contract of Purchase, dated September 17, 2008, by and
between the City and the Underwriter.
Upon receipt from the Underwriter of $43,414,294.03, which is the purchase price of the
Bonds payable to the Trustee (representing the total principal amount of the 2008 Series A
Bonds of $43,765,000, less an original issue discount in the amount of $4,146.55, less
Underwriter's discount of $346,559.42), you are hereby further authorized and directed to apply
the purchase price of the 2008 Series A Bonds as set forth below:
OHS West:260509861.2
$36,806,436.44
Deposited into the 2008 Termination Payments Fund
1,867,089.34
Deposited into the 2008 Conversion. Costs Fund
4,240,768.25
Deposited into the Debt Service Reserve Fund
500,000.00
Deposited into the Costs of Issuance Fund
$43,414,294.03
TOTAL PURCHASE PRICE
[Remainder of page left intentionally blank.]
OHS West:260509861.2 2
Capitalized terms used herein not otherwise defined shall have the meanings given such
terms under the Master Indenture, as amended and supplemented by the First Supplemental
Indenture.
Dated: September 24, 2008.
Accepted:
THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as Trustee
I' M
Authorized Officer
CITY OF VERNON
By:
Je1-ty
Harrison, Esq.
Attorney
OHS West:260509861.2 3
$43,765,000
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
CERTIFICATE OF THE CITY
1, Jeff A. Harrison, Esq., City Attorney of the City of Vernon (the "City"), HEREBY
CERTIFY as follows:
1. that, on September 17 2008 and on the date hereof, (a) the descriptions and
statements of or pertaining to the City and its Electric System contained in the Official
Statement, dated September 17, 2008 (the "Official Statement"), relating to the City's Electric
System Revenue Bonds, 2008 Taxable Series A (the "2008 Series A Bonds") were and are true
and correct in- all material respects; (b) the Official Statement did not and as of the date hereof
does not contain any untrue statement of a material fact or omit to state a material fact which is
necessary to make the statements made therein, in the light of the circumstances under which
they were made, not misleading (provided that no representation is made regarding information
relating to the Depository Trust Company and its operations), and insofar as the descriptions and
statements, including financial data, of or pertaining to, entities other than the City and their
activities contained in the Official Statement are concerned, such descriptions, statements and
data have been obtained from sources which the City believes to be reliable and the City has no
reason to believe that they are untrue in any material respect;
2. that the representations and warranties of the City in the Contract of Purchase,
dated September 17, 2008 (the "Contract of Purchase"), by and between RBC Capital Markets
Corporation and the City, are true and correct as of the date hereof as if made on and as of the
date hereof, and the City has complied with and performed all of its covenants and agreements in
the Contract of Purchase to be complied with and performed at or prior to the date hereof, and
3. that the Adjusted Net Revenues for the Fiscal Year ended June 30, 2008 (the
"Applicable Calculation Period") amounted to at least 1.25 times the Maximum Adjusted Annual
Debt Service on all Parity Obligations to be Outstanding immediately after the issuance of the
2008 Series A Bonds; and (ii) that the Net Revenues for, such Applicable Calculation Period
amounted to at least 1.00 times the Maximum Adjusted Annual Debt Service on all Parity
Obligations to be Outstanding immediately after the issuance of the 2008 Series A Bonds,
including the 2008 Series A Bonds as Parity Obligations. Capitalized terms used in this
paragraph and not otherwise defined in this Certificate shall have the meanings given such terms
pursuant to that certain Indenture of Trust, dated as of December 1, 2004, between the City and
The Bank of New York Trust Company, N.A., as trustee.
OHS West:260509861.2
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of September,
CITY OF VERNON
By: (�,
Je A. Harrison, Esq.
City Attorney
OHS West:260509861.2 2
$43,765,000
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
CERTIFICATE OF THE CITY ATTORNEY
I, Jeff A. Harrison, Esq., City Attorney of the City of Vernon (the "City"), in connection
with the issuance by the City of its Electric System Revenue Bonds, 2008 Taxable Series A (the
"2008 Series A Bonds"), HEREBY CERTIFY that, other than as described in the Official
Statement, dated September 17, 2008, relating to the 2008 Series A Bonds (the "Official
Statement"), no litigation is pending (with the City having received service of process) or, to my
knowledge, threatened in any court (i) in any way questioning the corporate existence of the City
or, except for criminal charges with respect to the Mayor's residency, the titles of the officers of
the City to their respective offices; (ii) seeking to restrain or enjoin the delivery of the 2008
Series A Bonds, or the collection of Net Revenues of the Electric System or other amounts
pledged to pay the principal of, premium, if any, and interest on such 2008 Series A Bonds; (iii)
in any way contesting or affecting the validity of the 2008 Series A Bonds, the Indenture of
Trust, as supplemented by the First Supplemental Indenture of Trust, each dated as of September
1, 2008 (the "Indenture"), each by and between the City and The Bank of New York Mellon
Trust Company, N.A., as trustee (the "Trustee"), the Continuing Disclosure Agreement, dated as
of September 1, 2008 (the "Continuing Disclosure Agreement"), by and between the City and the
Trustee or the Contract of Purchase, dated September 17, 2008, by and between the City and
RBC Capital Markets Corporation (the "Contract of Purchase"); (iv) in any way contesting or
affecting the collection of said Net Revenues or the pledge thereof, or contesting the powers of
the City or any authority for the issuance and delivery of the 2008 Series A Bonds and the
performance of its obligations contained therein or the execution and delivery of the Indenture,
the Continuing Disclosure Agreement or the Contract of Purchase, and the performance of its
obligations contained therein; (v) which would be likely to result in any material adverse change
in the business, properties, assets or the financial condition of the Electric System or which
would likely have a material adverse affect on the ability of the City to meet its obligations under
the Indenture; or (vi) asserting that the Official Statement contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the statements made therein,
in light of the circumstances under which they were made', not misleading.
Capitalized terms used herein and not otherwise defined shall have the respective
meanings herein as are given such terms in the Contract of Purchase, or if not defined therein, in
the Indenture.
OHS West:260509861.2
11:
IN WITNESS WHEREOF, I have hereunder set my hand this 24th day of September,
•CITY OF VERNON
By
t'of . Harrison, Esq.
ity Attorney
OHS West:260509861.2 2
$43,765,000
CITY OF VERNON
ELECTRIC SYSTEM REVENUE BONDS
2008 TAXABLE SERIES A
REQUISITION NO. I FOR MONEYS
FROM THE 2008A COSTS OF ISSUANCE FUND
To: The Bank of New York Mellon Trust Company, N.A., as Trustee
Attn: Corporate Trust Services
Re: City of Vernon Electric System Revenue Bonds 2008 Taxable Series A
The undersigned, on behalf of the City of Vernon (the "City"), hereby requests The Bank
of New York Mellon Trust Company, N.A., as trustee (the "Trustee"), pursuant to that certain
Indenture of Trust (the "Master Indenture"), as supplemented by the First Supplemental
Indenture of Trust (the "First Supplemental Indenture" and, together with the Master Indenture,
the "Indenture"), each dated as of September 1, 2008, and each by and between the City and the
Trustee, to pay from the moneys in the 2008A Costs of Issuance Fund established pursuant to
Section 4.02 of the First Supplemental Indenture (the "2008A Costs of Issuance Fund"), the
amounts shown on Schedule A attached hereto to the order of the payee or payees named on, and
for the purposes specified in, such Schedule A.
The undersigned hereby certifies that (a) each of the items for which payment is
requested is a proper charge against the 2008A Costs of Issuance Fund and (b) no part of such
payment shall be applied to any item which has previously been paid as a Costs of Issuance of
the 2008 Series A Bonds.
Capitalized terms not otherwise defined herein shall have the meanings ascribed thereto
in the Indenture.
Dated: September 24, 2008.
CITY OF VERNON
By:
Manu a iron
City Clerk
OHS West:260509861.2
t ./._
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
September 24, 2008
RBC Capital Markets Corporation,
as Underwriter
Re: $43,675,000 City of Vernon Electric System Revenue Bonds
2008 Taxable Series A
Ladies and Gentlemen:
I am the City Attorney of the City of Vernon (the "City") and
as such I have served as counsel to the City in connection with the
issuance of the City's $43,675,000 Electric System Revenue Bonds,
2008 Series A (the "Bonds"). As such counsel, I have examined and
am familiar with (i) those documents relating to the existence,
organization and operation of the City; (ii) all necessary
documentation of the City relating to the authorization, execution
and delivery of (a) the Indenture of Trust, as supplemented by the
First Supplemental Indenture of Trust, each dated as of
September 1, 2008 (collectively, the "Indenture"), each by and
between the City and The Bank of New York Mellon Trust Company,
N.A., as trustee thereunder (the "Trustee"), providing for the
issuance of the Bonds, (b) the Continuing Disclosure Agreement,
dated as of September 1, 2008 (the "Continuing Disclosure
Agreement"), between the City and the Trustee, as dissemination
agent; and (c) the Contract of Purchase, dated September 17, 2008
with respect to the Bonds (the "Purchase Contract"), between the
City and the Underwriter; (iii) an Official Statement of the City,
dated September 17, 2008 (the "Official Statement"), relating to
the Bonds. The Indenture, the Continuing Disclosure Agreement and
the Purchase Contract are collectively referred to herein as the
"Legal Documents."
I am of the opinion that:
1. The City is a chartered city, duly created, organized and
existing under the Constitution and laws of the State of California
and duly qualified to furnish electric service within said City.
EXclusivefy Industfiaf
RBC Capital Markets Corporation
September 24, 2008
Page 2
2. The City has the authority and right to execute, deliver
and perform the Legal Documents, and the City has complied with the
provisions of applicable law in all matters relating to the
transactions contemplated by the Legal Documents.
3. The Official Statement and the Legal Documents have been
duly authorized, executed and delivered by the City and, assuming
that the Legal Documents constitute the legal, valid and binding
agreements of the other respective parties thereto, the Legal
Documents constitute the legal, valid and binding agreements of the
City enforceable against it in accordance with their respective
terms, except, in each case, as enforceability maybe limited by
laws relating to bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally and by the application
of equitable principles if equitable remedies are sought.
4. Except as heretofore obtained, no approval, consent or
authorization of any governmental or public agency, authority or
person is required for the execution and delivery by the City of
the Legal Documents or the performance by the City of its
obligations thereunder or the execution and delivery, on the part
of the City, of the Bonds. Under the laws of the State of
California, the City has the authority to determine, fix, impose
and collect rates and charges for electric service and is not
presently subject to the regulatory jurisdiction of any state,
regional or local governmental regulatory authority other than to
the extent described in the Official Statement.
5. The execution and delivery of the Legal Documents by the
City and compliance with the provisions thereof will not conflict
with or constitute a breach of or default under any instrument
relating to the organization, existence or operation of the City,
or commitment, agreement or other instrument to which the City is a
party or by which it or its property is bound or affected, or any
ruling, regulation, ordinance, judgment, order or decree to which
the City or any of its officers in their respective capacities as
such are subject or any provision of the laws of the State of
California relating to the City and its affairs.
6. There is no action, suit, proceeding, inquiry or
investigation at law or in equity,' or before any court, public
board or body, pending or, to the best of my knowledge, threatened
against or affecting the City or any entity affiliated with the
City or any of its officers in their respective capacities as such
(nor to the best of my knowledge, is there any basis therefor) that
questions the powers of the City referred to in paragraph 2 above
or in connection with the transactions contemplated by the Official
Statement, or the validity of the proceedings taken by the City in
connection with the authorization, execution or delivery of the
RBC Capital Markets Corporation
September 24, 2008
Page 3
Legal Documents, or wherein any unfavorable decision, ruling or
finding would adversely affect the transactions contemplated by the
Legal Documents or the Official Statement, or that, in any way,
would adversely affect the validity or enforceability of the Legal
Documents or, in any material respect, the ability of the City to
perform its obligations under the Legal Documents.
Capitalized terms used herein not otherwise defined shall have
the meanings ascribed thereto in the Purchase Contract.
Respect ully submitted,
OItyf
i A Harrison
Attorney
JH j 1
Page 1 of 3
Enomoto, Kristen
From:
Enomoto, Kristen
Sent:
Tuesday, September 02, 2008 8:44 AM
To:
'Underwood, Craig'
Cc:
'ERIC FRESCH'; covefresch@sprint.blackberry.net; Harrison, Jeff; O'Callaghan, Donal; Higgins, Jeffrey
Subject:
S&P Engagement Letter for 2008 Bonds - SIGNED
Attachments: S&P Rating Agreement for 2008 Taxable Series A (SIGNED).pdf
Tracking:
Recipient Read
'Underwood, Craig'
'ERIC FRESCH'
covefresch@sprint.blackberry.net
Harrison, Jeff Read: 9/2/2008 9:01 AM
O'Callaghan, Donal
Higgins, Jeffrey
Good Morning
Craig,
Attached is the signed S&P Engagement Letter for the 2008 Bonds.
Thanks,
Kristen
From: covefresch@sprint.blackberry.net [mailto:covefresch@sprint.blackberry.net]
Sent: Friday, August 29, 2008 5:02 AM
To: Enomoto, Kristen
Subject: Engagement letter
Jeff signed
Ok
Eric
From: "Enomoto, Kristen" <Kenomoto@ci.vernon.ca.us>
Date: Thu, 28 Aug 2008 14:41:40 -0700
To: Underwood, Craig<cunderwood@bondlogistix.com>; ERIC FRESCH<e.fresch@sbcglobal.n&t>;
<covefresch@sprint.blackberry.net>
CC: Harrison, Jeff<JHarrison@ci.vernon.ca.us>; O'Callaghan, Donal<docallaghan@ci.vernon.ca.us>; Higgins,
Jeffrey<j higgins@bondlogistix. com>
Subject: Engagement letter
Thanks, Craig. We did receive this one by fax yesterday, so I forwarded it to Eric yesterday to see if he wanted to sign and
fax it back or if he wanted Harrison to sign it so we could just e-mail if back, but we haven't heard back from him yet.
Eric: If you would prefer to sign the engagement letter yourself, please use this one as it is much better and cleaner than the
faxed version I sent you yesterday.
Thanks,
9/11/2008
Page 2 of 3
Kristen
From: Underwood, Craig [mailto:cunderwood@bondlogistix.com]
Sent: Thursday, August 28, 2008 2:20 PM
To: covefresch@sprint.blackberry.net; Enomoto, Kristen
Cc: Harrison, Jeff; donal o'callaghan; Higgins, Jeffrey
Subject: FW: Engagement letter
This should have come via fax yesterday. In any event, this is different from Gas Bonds engagement letter, so this one
also needs to be signed and returned. Thx.
From: Berkowitz, Pamela [mailto:Pamela_berkowitz@standardandpoors.com]
Sent: Thursday, August 28,``2008 2:08 PM
To: Underwood, Craig
Subject: RE: Engagement fetter
Thanks Craig. It looks like it was sent yesterday via fax. To ensure your receipt of the engagement I have attached as
a pdf.
Please let me know if I can be of further assistance.
Regards,
Pam.
Pamela Berkowitz
Director
Client Business Management
Standard & Poor's Ratings Services
One Market
Steuart Tower, 15th Floor
San Francisco, CA 94105
415.371.5012 Tel
415.371.5062 Fax
pamela berkowitz(aD_sandp.com
From: Underwood, Craig[mailto:cunderwood@bondlogistix.com]
Sent: Thursday, August 28, 2008 1:28 PM
To: Berkowitz, Pamela
Cc: covefresch@sprint:blackberry.net; Jeff Harrison
Subject: Engagement letter
See attached. Still have not seen anything on Electric deal. Realize you said its coming from a different group but
would like it hand by tomorrow if possible. We plan on mailing POS next Wed or Thur and would like as many details
as possible nailed down.
L
A. CRAIG UNDERWOOD I President
777 South Figueroa Street I Suite 3200 1 Los Angeles, CA 90017-5855
cunderwood@bondogistix.com I PH 213.612.2463 1 Fax 213.612.2499 1 M 310.721.7755
www.blxgroup.com
The information contained in this message is intended only for the recipient, and may be a confidential attorney -client communication or
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9/11/2008
Issue no.: 892399
August 27, 2008 t
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Attention: Mr. Eric T. Fresch, City, Administrator
Re: US$90,130,000 City of Vernon, California, Electric System Revenue, 2008 Taxable Series
A, dated. Date of Delivery, due: July 1, 2038
Dear Mr. Fresch:
Thank you for your request for a Standard & Poor's rating for the above -referenced obligations.
In accepting a Standard & Poor's rating, you agree to accept and comply with this letter and the
enclosed Terms and Conditions.
We will make every effort to provide you with the high level of analytical performance and
knowledgeable service for which we've become known worldwide. The analytic team from
Standard & Poor's is Paul Dyson and Peter Murphy. If you have any questions at any time, please
feel free to contact Paul at 415-371-5079 or by email at paul dyson @standardandpoors.com.
Peter can be reached at 212-438-2065 or by email at peter muEphy@standardandpoors.com.
If you have not already done so, please forward a set of all pertinent information to each analyst at
the followingaddress:
Standard & Poor's Ratings Services
Public Finance Department
One Market
Steuart Tower, 15th Floor
San Francisco, CA 94105-1000
In consideration of our analytic review and issuance of the rating, you agree to pay us the
following fees:
Rating Fee of $35,000. Standard & Poor's reserves the right to adjust the rating fee if the proposed
par amount changes. Payment of the fee is not conditioned on Standard & Poor's issuance of any
particular rating.'
Annual surveillance fee of $10,000 will be charged for so long as we maintain the rating. The
annual surveillance fees will commence twelve months after the initial rating date.
Mr. Eric T. Fresch
Page 2
August 27, 2008
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Please sign below to indicate your acceptance of this letter and the enclosed terms and conditions
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Standard & Poor's Ratings Services
a division of The McGraw-Hill Companies, Inc.
'f r
By: Morna Lebron
Manager Fee Administration
sb
cc: Mr. Craig Underwood, President
Bond Logistix
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&POOKS
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Applicable To
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THE BANK OF NEW YORK MELLON
September 2, 2008
Mr. Jeff R. Higgins
Managing Director
BondLogistix LLC
777 S. Figueroa Street, Suite 3200
Los Angeles, CA 90017
jhiggins@,bondloizistix.com
Re: City of Vernon Electric System Revenue Bonds 2008 Taxable Series A
Dear Jeff:
On behalf of The Bank of New York Trust Mellon Trust Company, N. A. (`BNYM") we greatly
appreciate the opportunity to present our proposal to provide trustee services for the above referenced
transaction. Attached is our Fee Schedule, but please read on to discover more about the differences
that BNYM offers.
Inherent in the process of identifying the financing team to bring an important debt financing to market
is selecting a Trustee who can assist the issuer in the on -going administrative process throughout the
life of the engagement and is committed, professional and experienced. No other institution can
demonstrate their commitment to providing trustee services to the public finance marketplace better
than BNYM. Through our enhanced systems and experienced professionals dedicated to serving the
needs of the municipal finance market, we provide our clientele industry leading services for today and
the future.
The Bank of New York Mellon is one of the largest bank holding companies in the US, which has been
ranked the number one overall trustee in terms of new debt issuance for three consecutive years, and is
one of the leading Corporate Trust banks with over $11 trillion in outstanding debt.
A Difference through Our People and Service
The City will be serviced locally by their existing administrative team from our Los Angeles office, led
by Ms. Aurora Quiazon. Aurora's professional profile is included below, for your review.
Aurora Quiazon
Assistant Vice President
(213) 630-6236
ag uiazongbanko fny. com
Aurora has over twenty-five years banking experience, with the last thirteen years being in
Corporate Trust administration, she is knowledgeable in the administration and management of
municipal and corporate debt issues.
too-
R
THE BANK OF NEW YORK MELLON
Aurora holds a Bachelor of Science degree in Education from Philippine Normal College, and
has completed the Cannon Financial Institute Corporate Trust School.
PLEASE NOTE:
As a standard procedure upon closing a bond issue, each administrator is prepared to deliver a
detailed account synopsis including all information relating to investments, debt service, compliance,
and requisition payments (as applicable), for use by the issuer and financing team. This synopsis is
not only an aid for our clients, but for our administrators as well, as it enables them to thoroughly
review the governing documents and establish useful ticklers and procedures. This subsequently serves
as a great tool to assist our clients in our long-term relationship between the Issuer and The Bank of
New York Mellon Trust Company.
A Difference Through Our Level of Experience
As an experienced member of your financing team, we provide the qualifications you require to ensure
that, with your other financing team members, you have assembled the finest professionals in their
field, thereby making your financing both attractive and successful.
Attached you will find our complete Fee Schedule for this engagement detailing related fees and
expenses associated with our appointment.
Should you have any questions regarding our proposal or attached fee schedule, please feel free to
contact me at (213) 630-6457.
Very truly yours,
Jose Matamoros
Vice President
lop,
THE BANK OF NEW YORK MELLON
City of Vernon Electric System Revenue Bonds 2008 Taxable Series A
Fee Schedule
September 2, 2008
Upon appointment of BNYM as trustee, the Issuer shall be responsible for the payment of the fees,
expenses and charges as set forth in this Fee Schedule.
ACCEPTANCE FEE $250
This one time charge is payable at the time of the closing and includes the review and execution of the
Indenture and all documents submitted in support thereof, acceptance of the trust, establishment of
procedures and controls and set-up of trust accounts.
ANNUAL ADMINISTRATIVE FEE $2,000
The annual fee covers the duties and responsibilities related to account administration and bondholder
services, which may include maintenance of accounts on various systems, collection and payment of
principal and interest to bondholders, the preparation and distribution of any sinking fund redemption
notices and the monitoring of issuer compliance. This fee is payable in advance for the year and shall
not be prorated.
INVESTMENT COMPENSATION
With respect to investments in money market mutual funds, the investment maintenance fee will be
calculated at an annual rate of -0- basis points on average total monthly account balances. With respect
to investments in money market mutual funds for which BNYM provides shareholder services BNYM
(or its affiliates) may also receive and retain additional fees from the mutual funds (or their affiliates)
for shareholder services as set forth in the Authorization and Direction to BNYM to Invest Cash
Balances in Money Market Mutual Funds.
BNYM will charge a $35 transaction fee for the purchase, sale, or maturity of commercial paper and
U.S. treasuries and agencies.
REQUISITION / DISBURSEMENT FEE (check or wire) /per transaction $35
INVESTMENT AGREEMENT, OR REPURCHASE/ FORWARD PURCHASE AGREEMENT
(if applicable)
BNYM will charge a one-time fee in the amount of $500 for review and acceptance of any investment
agreement or repurchase agreement. Counsel Fees (if any) associated with the review and acceptance
of the above will be billed at cost not to exceed $500. BNYM will charge a $35 transaction fee for
principal adjustments to the Investment Agreement.
`I
THE BANK OF NEW YORK MELLON
COUNSEL FEE $2,000
A fee covering the fees and expenses of Counsel for its services, including review of governing
documents, communication with members of the closing party (including representatives of the issuer,
investment banker(s), attorney(s) and BNYM), attendance at meetings and the closing, and such other
services as BNYM may deem necessary. The Counsel fee will be the actual amount of the fees and
expenses charged by Counsel and is payable at closing. Counsel fees will be capped at the above price
but may be increased if all documentation required for this financing is not in substantially good order,
numerous drafts or extensive negotiations are required, or the closing is delayed. Should closing not
occur, you shall still be responsible for payment of Counsel fees and expenses.
MISCELLANEOUS FEES
The fees for performing extraordinary or other services not contemplated at the time of the execution of
the _transaction or not specifically covered elsewhere in this schedule will be commensurate with the
service to be provided and will be charged in BNYM's sole discretion. These extraordinary services
may include, but are not limited to, supplemental agreements, consent operations, unusual releases,
tenders or sinking fund redemptions, the preparation of special or interim reports, custody of collateral,
a one-time fee to be charged upon termination of an engagement. Counsel, accountants, special agents
and others will be charged at the actual amount of fees and expenses billed.
OUT-OF-POCKET EXPENSES 6% of Billed Fees
Additional out-of-pocket expenses may include, but are not limited to, telephone; facsimile; courier;
copying; postage; supplies; statutory filing charges, including UCC amendments, continuations, and
termination fees; and expenses of BNYM's representative(s) and Counsel for attending special
meetings. Fees and expenses of BNYM's representatives and Counsel will be charged at the actual
amount of fees and expenses charged and all other expenses will be charged at cost or in an amount
equal to 6% of all expenses billed for the year, in BNYM's discretion, and BNYM may charge certain
expenses at cost and others on a percentage basis.
THE BANK OF NEW YORK MELLON
TERMS AND DISCLOSURES
TERMS OF PROPOSAL
Final acceptance of the appointment as trustee under the Indenture is subject to approval of authorized
officers of BNYM and full review and execution of all documentation related hereto. Please note that
if this transaction does not close, you will be responsible for paying any expenses incurred, including
Counsel fees. We reserve the right to terminate this offer if we do not enter into final written
documents within three monthsfrom the date this document is first transmitted to you. Fees may be
subject to adjustment during the life of the engagement.
MISCELLANEOUS
The terms of this Fee Schedule shall govern the matters set forth herein and shall not be superseded or
modified by the terms of the Indenture. This Fee Schedule shall be governed by the laws of the State
of California without reference to laws governing conflicts. BNYM and the undersigned agree to
jurisdiction of the federal and state courts located in the City/County of San Francisco, State of
California.
CUSTOMER NOTICE REQUIRED BY THE USA PATRIOT ACT
To help the US government fight the funding of terrorism and money laundering activities, US Federal
law requires all financial institutions to obtain, verify, and record information that identifies each
person (whether an individual or organization) for which a relationship is established.
What this means to you: When you establish a relationship with BNYM, we will ask you to provide
certain information (and documents) that will help us to identify you. We will ask for your
organization's name, physical address, tax identification or other government registration number and
other information that will help us to identify you. We may also ask for a Certificate of Incorporation
or similar document or other pertinent identifying documentation for your type of organization.
We thank you for your assistance.
Accepted By: For BNYMTC:
Signature
Date: Aq (O`
Name: Leonis C. Malburg
Title Mayor
TTEST:
Manuela Giron
City Clerk
September 2, 2008
Jose Matamoros
Vice President
THE BANK OF NEW YORK MELLON
FEE SUMMARY
Fees due at Closing are as follows:
Acceptance Fee: $ 250.00
Legal Counsel Fee: $2,000.00
Annual Administration Fee: $2,000.00
Total Due at Closing: $4,250.00
Please note the above anticipated fees due at closing include certain assumptions
including one fixed rate series of bonds with no investment agreements.
Trustee Counsel
Sam Waldman, Esq.
Davis Wright Tremaine LLP
64 Oak Knoll Drive
San Anselmo, CA 94960
Phone: (415) 459-4535
Fax: (415) 459-4747
E-mail: waldmansl3@comcast.net
6
Page 1 of 1
Romero, Debbie d
From: Romero, Debbie
Sent: Wednesday, September 10, 2008 9:08 AM
To: 'sbaxter@orrick.com'
Cc: Enomoto, Kristen
Subject: Vernon Resolution 9705 Vernon Electric 2008 Revenue Bonds
Attachments: Resolution No. 9705.pdf
From: Baxter, Sean [mailto:sbaxter@orrick.com]
Sent: Tuesday, September 09, 2008 5:45 PM
To: Enomoto, Kristen
Cc: Harrison, Jeff
Subject: Vernon Resolution
Hi Kristen:
Can you have someone in the City Clerk's office forward me the signed City Resolution in connection with the
Electric Bonds (attached for your reference) tomorrow? . --
Also, thanks for sending the audited financials again to Jeff Higgins at BLX. I'm not sure what the issue was, but
those are the versions we have had all along, so sorry they made you go to any trouble. They just needed to let
us know they wanted them printed in color and the printer can do that very easily.
Thanks as always!
Sean
f C
PUBLIC NANCE
Sean J. Baxter
Project Manager
Orrick, Herrington & Sutcliffe LLP
777 South Figueroa Street
Suite 3200
Los Angeles, CA 90017-5855
tel 213-612-2171
fax 213-612-2499
sbaxter@orrick.com
www.orrick.com
9/10/2008