Loading...
Resolution No. 09923 1 RESOLUTION NO. 9923 2 3 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF 4 VERNON AUTHORIZING AND APPROVING DOCUMENTS IN CONNECTION WITH THE ISSUANCE OF ELECTRIC SYSTEM 5 REVENUE BONDS, AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO 6 7 WHEREAS, pursuant to Resolution No. VNGFA-0013, adopted by . 8 the Board of Directors of the Vernon Natural Gas Financing Authority. 9 (the "Authority") on April l3, 2009 (the "Original Resolution"), such 10 Board of Directors, among other things, approved the Restated ISDA 11 Agreement (capitalized terms used herein and not otherwise defined 1~2 shall have the meanings given such terms in the Original Resolution); 13 and 14 WHEREAS, the Restated ISDA Agreement has been changed from 15 the form attached to the Original Resolution; and 16 WHEREAS, there has been submitted to this meeting a draft of 17 an Authority Board of Directors resolution (the "Authority 18 Resolution") pursuant to which the Authority Board of Directors 19 approves the modified-form of the Restated ISDA Agreement, as attached 20 to the Authority Resolution (as such attached form may be modified in 21 accordance with the Authority Resolution, the "Modified Restated ISDA- . 22 Agreement"). 23 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE - 24 CITY OF VERNON AS FOLLOWS: 25 SECTION 1: The City Council of the City of Vernon hereby 26 finds and determines that the recitals contained hereinabove are true. 27 and correct. 28 / / / 1 SECTION 2: The City hereby requests .and directs the 2 Authority to adopt the Authority Resolution and to undertake the 3 actions authorized or approved by the Authority Resolution. The-City 4 hereby approves the Authority Resolution, a copy of which is attached 5 hereto as Exhibit A and incorporated by reference, and authorizes and 6 approves the actions, documents, .and transactions authorized and 7 approved by the Authority Resolution.- Each Authorized Officer is 8 hereby directed. to take such action and enter into such agreements and 9 to execute such certificates and instruments, in the name of and on 10 behalf of the City, as may be deemed necessary or appropriate by such 11 Authorized Officer to assist in the implementation of the actions, 12 documents, and transactions authori-zed or approved by the Authority 13 Resolution. 14 SECTION 3: The Mayor, the Mayor Pro Tem, the City 15 Administrator, the Treasurer, the City Clerk and the City Attorney of 16 the-City, the Director of Light and Power and any other proper 17 official, officer or employee of the City, acting singly, be and each 18 of .them hereby is authorized to execute-and deliver any-and all 19 documents and instruments-and to do and cause to be done any and all 20 acts and things necessary or convenient in carrying out the actions 21 authorized'by-this Resolution and the transactions contemplated by the 22 documents and instruments approved or authorized by this Resolution. 23 / / / 24 / / / 25 / / / 26 / / / 27 / / / 28 / / / - 2 - 1 SECTION 4: The City Clerk of the City of Vernon"shall 2 certify to the passage of this resolution, and thereupon and thereafter 3 the same shall be in full force and effect. 4 APPROVED AND ADOPTED this 27th day of April, 2009. 6 Hilario Gonzales Name: 7 Title: Mayor / Pro-Tem g ATTEST: 9 10 MANUELA GIRO Ci y Clerk 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ' _ 3 _ 1 STATE OF CALIFORNIA ) ss 2 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. 9923, 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, April 27,2009, and g thereafter was-duly signed by the Mayor or Mayor Pro-Tem of the City of g Vernon. 10 11 MANUELA G ON, City Cler 12 ..(SEAL) 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 4 - 1 Exhibit A 2 [Authority Resolution Attached] 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 _ 19 20 21 ' 22 23 24 25 26 27 28 A-1 EXHIBIT A 1 Exhibit A 2 [Authority Resolution Attached] 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1''7 18 19 20 21 22 23 24 25 26 27 28 A-1 1 RESOLUTION NO. VNGFA-0015 2 3 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE VERNON NATURAL GAS FINANCING AUTHORITY APPROVING 4 AMENDMENTS TO INTEREST RATE SWAP DOCUMENTS IN 5 CONNECTION WITH THE REDEMPTION OF AUTHORITY BONDS; AND AUTHORIZING CERTAIN OTHER MATTERS RELATING 6 .THERETO g WHEREAS, pursuant to Resolution No. VNGFA-0013, adopted by g this Board of Directors on April 13, 2009 (the."Original Resolution"), 10 this Board, among other things, approved the Restated ISDA Agreement 11 (capitalized terms used herein and not otherwise defined shall have the 12 meanings given such terms in the Original Resolution); and 13 WHEREAS., the Restated ISDA Agreement has been changed from 14 the form attached to the Original. Resolution; and 15 WHEREAS, this Board of Directors desires to approve the 16 modified form of the Restated ISDA Agreement., as attached to this 17 Resolution (as such. attached form may be modified in accordance with 18 this Resolution, the "Modified Restated ISDA Agreement"). 19 NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF 20 THE VERNON NATURAL GAS FINANCING AUTHORITY, AS FOLLOWS: 21 SECTION 1: The Board of Directors of the Authority hereby 22 finds and determines that the .recitals contained hereinabove are true 23 and correct. 24 SECTION 2: The list of Authorized Officers in Section 2 of 25 the Original Resolution, is hereby amended to include the Executive 26 Director of the Authority, so that .each of the Chairman, the. Vice 27 Chairman, the Secretary. and the Executive Director of the Authority are 28 Authorized Officers (each an "Authorized Officer"). 1 SECTION 3: The Modified Restated ISDA Agreement,.. in 2 substantially the~form attached hereto as Exhibit A and made a part 3 hereof as though set forth in full herein, be and the same is hereby 4 approved. Each of the Authorized Officers, acting singly, is hereby 5 authorized to execute-and deliver-the Modified Restated ISDA 6 Agreement, in the name of and on behalf of the Authority, in 7 substantially the form attached hereto-with such changes, insertions 8 and deletions as may be approved by the Authorized Officer-executing 9 the same,- said execution being conclusive evidence of-such approval, 10 and the Secretary is hereby authorized to attest thereto. 11 SECTION 4: Except for the changes-.pursuant to Section 2 and 12 Section 3 of this Resolution, the Original Resolution will remain in 13 full-force and effect in the form approved on April 13, 2009... 14 SECTION 5: The Chairman, the Vice Chairman, the Secretary 15 or the Executive Director of the Authority, and~any other proper 16 official, officer. or employee of the Authority, acting singly, be and 17 each of them hereby is authorized to execute and deliver any and all 18 documents and instruments and to do and cause to be done any and-all 19 acts and things necessary or convenient in carrying out the actions 20 authorized by this Resolution or the Original Resolution .and the 21 transactions contemplated by the documents and instruments approved or 22 authorized by this Resolution or tYie Original Resolution. 23 / / / 24 / / / - 25 / / / 26 / / / 27 / / / 28 / / / - 2 - 1 SECTION 6: The Secretary of the Authority .shall certify to 2 the passage of this resolution, and thereupon and thereafter the same 3 shall be in full force and effect. 4 APPROVED AND ADOPTED this 27th day of April, 2009. 5 6 Name . 8 Title: Chairman / Vice Chairman- . ATTEST:' 9 10 MANUELA GIRON, Acting Secretary • 11 12 13 14 15 16 17 18 19 20 21 22 '2 3 24 25 26 27 28 _ 3 1 STATE OF CALIFORNIA ) 2 ) ss COUNTY OF LOS ANGELES ) 3 4 I, MANUELA GIRON, Acting. Secretary of the Vernon Natural Gas 5 Financing Authority ("Authority"), do hereby certify that the foregoing 6 Resolution, being Resolution No. VNGFA-0015,-was duly adopted by the Board of Directors of the Authority at a special meeting of the Board 8 of Directors duly-held on Monday, April 27, 200.9, and thereafter was 9 duly signed by the Chairman or Vice Chairman of the Authority. 10 11 MANUELA GIRON, Acting Secretary 12 13 (SEAL) 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4 - 1 Exhibit A 2 3 [Modified Restated ISDA Agreement Attached] 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 . 24 25 26 27 28 'A-1 McDermott Draft 4/17/09 (Local Currency-Single Jurisdiction) International Swaps and Derivatives Association, Inc. • ~~Ji11V~l~i ~ ' dated as of Tune 27; 2006 Amended and Restated as of May 2009 CITIBANK, N.A. and VERNON NATURAL GAS FINANCING AUTHORITY have entered -and/or anticipate entering .into one or more transactions.. (each a "Transaction") that are or will 'be . governed by this Master Agreement (the: "Master Agreement"), which includes the .schedule (the "Schedule"), and .the documents and other confirming evidence (each a ~"Confirmation") exchanged between the. parties confirming those Transactions. Accordingly, the parties agree as follows:- 1. Interpretation - (a) De, finitions: The terms-defined in Section 12 and in the Schedule will have the meanings... . therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the .Schedule will prevail. • In he event of any inconsistency between. the provisions. of any Confhmation and this .Master Agreement (including the Schedule), such Confirmation u+ih prevail for the purpose of the relevant Transaction. (c) Single Agreement.. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations .form a, single agreement. between the parties .(collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. ®bligataons (a) General Conditions. (i) Each party will. make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this. Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery- (that is, other than by payment), such delivery NYK 1204585-6. 071371.0010 will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. .(iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the-other party. has occurred and is continuing,. (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been, effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) Change of Account. Either parry .may change. its accounts far receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the. scheduled date for the payment or delivery to which such cha.~ge applies<tulless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise bepayable:- (i) in the same currency;. and (ii) in respect 9f the same Transaction, by each. party to the other, then, on 'such date, each party's obligation to -make payment of any such amount will be automatically satisfied and discHarged and, if the aggregate amount that would otherwise have been payable by one party exceeds'the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party. the excess of the laxger aggregate amount over the smaller aggregate amount. The parties may elect in respect.of two or more Transactions that a net amount will be determined in respect of all amounts payable om the same date in the same currency in respect •of such Transactions, regardless of whether such amounts are payable in respect; of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the; .Transactions identified as being subject to .the election, .together with the starting' date (in which case subparagraph (ii), above will not, or wily cease to, apply. to such Transactions from such date). -This election may be made .separately for different groups of Transactions and will apply separately to each pairing of branches or offices through which the parties make and receive payments or deliveries. (d) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in tl?e performance of any payment obligation will, to the extent permitted by law aid subject to Section 6(c); be required topay interest (before as well as after judgYnentj .on -the overdue amount to the other party. on demand in the same currency as such overdue amount, for the period -from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on 'the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by~ delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. Representations.. Each party represents to the other party (which representations will be deemed to be repeated by each party on .each date on which a Transaction is entered into) that:- • 2 NYK 1204585-6.071371.0010 (a) Basic Representations. (i) Status. It is duly organized and validly existing underthe laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in goad standing; {ii) Powers. It has the power to execute this Agreement and any- other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorize sucli execution, .delivery and performance; (iii) ~ No Violation or Conflict. `Such execution, delivery. and performance 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. ariy contractual restriction binding on or affecting it or any of its assets; (iv) Consents. All govemmental and other consents.that are required to have been. obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect-and all conditions of any such consents have been complied with; and (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party 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 at law)). . (b) Absence`of Certain Events.. `No Event of Default or Potential Event ofDefault or, to its knowledge, Termination Event with respect to it has occurred and is continuing .and no such event or circumstance would occur as a result of its entering into ` or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There. is not pending or, to its knowledge, threatened against it or ' any of its Affiliates any ,action, suit or proceeding at lau+ or in equity or before any .court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect-the legality, validity or enforceability against it of-this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. 4. Agreements Each party agrees with the other that, so long as either parry has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:- - (a) Furnish Specified Information. It will deliver to the other party any forms, documents or certificates specified in the Schedule or any Confirmation by the date specified iri the Schedule or such Co>~fiimation or, if none is specified, as soon as reasonably, practicable. 3 NYK 1204585-6.071371.0010 (b) Maintain Authorizations. It will use all reasonable efforts to maintain. in-full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect: to this. Agreement or any Credit Support .Document. to which it' is a parry and will use all reasonable efforts to obtain. any that may become :necessary. in the future, (c) Comply with Laws. It will comply in :all material: respects with -all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit. Support Document to which it is a party. 5. Events. of Default and Termination Events (a) . F'vents of Default. The occurrence at ,any time with- respect to a party or, if .applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events .constitutes. an event of default, (an "Event of Default") with respect to such party:- O Failure to Pay or Deliver. Failure by tie party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) required to be made by it if such failure. is not remedied on or before the third,Local Business Day after. notice of such failure' is given to the party; (ii) Breach of Agreement. Failure by the party to comply, with or perform any agreement or .obligation (other than. an obligation to make any payment under. this Agreement or delivery under Section 2(a)(i) or 2(d) or to ;give. notice of a _Termnnation<Event) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is .given to the party; (iii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to .comply with or perform any ,agreement or obligation to be complied with or performed by it in accordance with any .Credit Suppprt Document if such failure is continuing after any applicable grace period has .elapsed; • (2) the expiration or termination of such Credit Support Document or the ' failing or ceasing of such Credit Support Document to be in full force and effect for-the purpose of this. Agreement (in either case other than in accordance with its terms) prior o the satisfaction of all, obligations of such party under each Transaction. to which. such • Credit Support.Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the- validity of, such Credit Support Document; • (iv) Misrepresentation. A representation made or repeated `or deemed to have been made or repeated by the parry or any Credit Support Provider of such party in this,Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) Default under Specified Transaction. -The party, any Credit Support Provider of such party or any applicable Specified Entity of -such party (1) defaults .under a Specified Transaction and, after giving effect to any applicable notice. requirement or grace period, there 4 NYK 1204585-6.071371.0010 ~ ' occurs aliquidation- of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any- applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any .payment on eazly termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period} or (3) disaffnms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken. by any person or entity appointed. or empowered to operate it - or act on its behalf); (vi) .Cross Default. If "Cross Default"• is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of suer party, any Credit Support Provider of such- party or any applicable Specified Entity of such party under one or more agreements; or instruments relating to Specified Indebtedness of any of them (individually ~ or collectively) in an aggregate . amount of not less than the applicable Threshold. Amount (as specified in the .Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared,-due and payable under such. agreements or instruments, before it would otherwise have been due and payable or (2) a default by such: party, such Credit Support. Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such .agreements or instruments (after giving- effect to any applicable notice requirement or grace period), (vii) Bankruptcy. The party, any Credit .Support Provider of such party or any applicable Specified Entity of such party:- (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger).; (2) becomes insolvent or is unable to pay its debts or fails or admits in writing .its inability generally `to pay .its .debts as they become due; (3j makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or -has instituted against it a. proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar • law affecting creditors' rights,. or a petition. is presented for its winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A} results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for-its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than ,pursuant to a consolidation, amalgamation or rrferger); (6} seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially . all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all: or substantially all its assets `and-such secured party-maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes- or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous . effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any • of the foregoing acts; or 5 NYK 1204585-6.071371.0010 . (viii) Merger Vl'ithoutAssumptwn. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges. with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation,..merger or transfer:- (1) the resulting, surviving or transferee entity fails. to assume all the obligations of such parry or such Credit Support Provider under this Agreement or any Credit "Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee . entity of its obligations under this Agreement. (bj Termination Events. The occurrence at any time with respect to a party or,. if applicable; any Credit Support Provider of such party or any Specked Entity of such party of any event specified below. constitutes an Illegality if the event is specified in (i) below, and; if specified to be applicable, a Credit Event ITpon Merger if the event is specified pursuant to (ii) below or an Additional.Termination Event if the event is specified pursuant to (iii) below:- - (i) Illegality. Due to theadoption of, or any change in; any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):=- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such parry to perform, any contingent or other obligation which the party (or such :Credit Support Provider) has- under any Credit Support Document relating to such Transaction; (ii) Credit Event Upon Merger, If "Credit-Event' Upon Merger" is ,specified in the Schedule as applying to the party, such party ("X") .any Credit. Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers'alTor substantially all- its assets to, another entity, and such.action does not constitute an event described in Section 5(a)(vii) but the creditworthiness of the resulting,. surviving or transferee .entity is materially weaker :than that • o~ X, such Credit Support. Provider or such Specified Entity, as the case maybe, immediately prior to such action (and, in such event, X or its successor or transferee; as appropriate, will be the Affected`Party) or (iii) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence.. of such event (and, in .such event,. the Affected Party or Affected Parties shall be as specified for such :Additional Termination Event in the.Schedule or such Confirmation). 6 NYK 17A4585-6.071371.0010 (c) Event of Default and Illegality. If 'an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. Early Texan$aaation (a) Right to Terminate Following Event of Default. If at any time an Event of Default with ' respect to a party (the "Defaulting Party") hasoccurred and is then continuing, the other parry (the "Non- defaulting Party'°) may, by not -more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as'an Early Termination Date in'respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in'respect of all outstanding Transactions will occur immediately upon. the. occurrence with respect to such' party of an Event of Default speeded in Section 5{a)(vii){l), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of.the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specked in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) ~ Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected. Party will, promptly- upon becoming aware of .it, notify the other party, specifying-the nature of that Termination Event and ..each Affected Transaction and'will also-give such other information about that Termination Event as the other party-may reasonably require. (ii) Two Affected Parties. Tf"an Illegality under Section 5(b)(i){1) occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iii) Right to Ternzinate. If:- (1) an agreement under Section 6(b)(i} has not been effected with respect to all' Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i)+ or (2) an' Illegality other than that referred to in Section b(b)(ii), a Credit Event Upon Merger or an Additional Termination Eventoccurs, either .party in the case of an Illegality, any Affected Party in the case of an Additional Termination Event if there is more than one Affected Party, or the parry which is not the Affected Party in the case of a Credit Event Upon. Merger or an Additional Termination Event if there is only one Affected Party-may, by not more than 20 days notice to the other. parry;and provided that . the relevant Termination Event is then continuing, designate a day not earlier.-than the day such n©tiee is effective as an Early Termination Date in respect of all Affected Transactions. (c) Effect. of Designation. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated,`whether or not the relevant Event of Default or Termination Event is then continuing. 7 NYK 1204585-6.071371.0010 • (ii) Upon the occurrence or,effective designation of an :Early Termination Date, no • further payments or deliveries under Section 2(a)(i) or 2(d) in respect of the Terminated Transactions will • be required to be made, but without prejudice to the other provisions of this • Agreement. The amount, if any, payable in respect of an Early. Termination Date shall be determined pursuant to Section 6(e). • (d) ' .Calculations, (i) Statement. On or as soon as: reasonably practicable. following. the occurrence. of an Early Termination Date, each party. will make the calculations on its :part, if any, contemplated. by Section 6(e) and will provide to the other party a statement (1) showing; in reasonable detail, such calculations (including all relevant quotations and specifyixlg any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be ,paid... In the absence of written. confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining. -such .quotation will. be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date.. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be,gayable on the day that notice of the amount payable • is effective (in'the case of an Early Termination Date which isdesignated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the, day on which notice of the amount payable is effective. {in the case of an Early. Termination Date. which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment),. from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the, Applicable Rate. Such interest will be calculated on the •basis of daily compounding and the actual number of days elapsed. (e) Payments on Early Termination. If'an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure,. either "Market Quotation" or "Loss," and a payment method, either the "First Method" or the "Second Method." If the parties fail. to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method," as the case. may be, shall .apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject, to any Set-off. • (i) ~ Events of Default. If .the Early Termination Date results from. an Event of Default:- (1) First Method and Market Quotation. If .the First Method and Market Quotation apply, the. Defaulting Party will pay to the Non-defaulting Party the. excess, if a positive number, of (A)-the sum of the •Seatement Amount (determined by the Non- defaulting Party) in respect of the Terminated Transactions. and the Unpaid Amounts caving to the Non-defaulting Party over (B) the Unpaid. Amounts owing to the Defaulting Party. (2) First Method and. Loss. ~ If the First Method and Loss apply, the • Defaulting Party will pay to the. Non-defaulting Party, if a :positive number, the Non- . defaulting Party's Loss in respect of this Agreement. _ 8 NYK 1204585-6.071371.0010 (3) Second Method 'and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to .(A) the sum of the • . Settlement Amount (determined by the Non-defaulting Party) in respect of -the Terminated Transactions-and the Unpaid Amounts.owing to the Non-defaulting Party less (B) the Unpaid .Amounts owing to the Defaulting Party. •1if 'that amount is a positive number, the Defaulting Parry will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will- pay the absolute value of that amount to the Defaulting Party. . • (4) Second: Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in respect of this Agreement.. If that amount is a positive., number, the Defaulting Parry will pay it to the Non-defaulting Party;, if it is a negative number, the Non-defaulting Party: will pay the absolute value of that amount to the. Defaulting Party.. (ii) .Termination Events.. If the Early- Termination Date results from a Termination Event:- (1) One Affected Party. If there is, one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market~Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references•to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and'the party which is note the Affected Party, respectively, and,.. if Loss applies and fewer than `all the Transactions are being terminated, Loss shall be calculated inrespect of all Terminated Transactions. (2) Two Affected Parties. If there aze two Affected Parties:- (A) if Market Quotation applies, each party -wilt determine a Settlement Amount in respect of the Terminated Transactions, and an amount ..will be payable equal to (n the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the. Settlement Amount of -the .party with the lower Settlement Amount ("Y") and (b) the Unpaid Amounts owing to X less (Il) the Unpaid Amounts owing to Y; and (B) if Loss applies, each party -will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount. will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the. amount. payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) Adjustment for Bankruptcy.: In circumstances where an-Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries.made. by one_ party to the other under this Agreement (and retained by such other party) during .the period from the relevant -Early Termination Date'to the date for payment determined under Section 6(d)(ii). 9 NYK 1204585-6.071371.0010 (iv) Fre-Estimate., The parties agree that if Market- Quotation applies an amount recoverable-under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the oss of bargain and the lossof protection against future risks and except as otherwise. provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. Transfer ' Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party,. except that:- . (a) a party may make such a transfer. of-this Agreement pursuant to a consolidation or amalgamation with, or merger, with or into, or transfer of all or substantially all of its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and: • (b) ~ a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is -not in compliance with this Section will be void. 8. Miscellaneous (a) Entire Agreement. This:Agreement constitutes the entire. agreement and understanding of the parties with respect to its subject matter and. supersedes all oral communication and prior writings with respect thereto. • (b) Arreendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the .parties or confirmed by an exchange.. of telexes or electronic messages on an electronic messaging system. (c) survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the • obligations of the parties under. this Agreement will survive the termination of any Transaction. (d) Remedies Cumulative. Except as provided in this Agreement; the rights, powers; remedies. and privileges provided in this Agreement are cumulative and not. exclusive of any rights, powers,. remedies :and privileges provided by law. (e) ~ Counterparts and Gonfirrnations. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts- (including by facsimile transmission), each of which will be deemed an original ' (ii) The parties intend that they are legally bound 6y the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A .Confirmation shall be entered into as soon as practicable and may be executed .and .delivered. in counterparts (including by facsimile transmission) or be created by an exchange. of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all •purposes to evidence a binding supplement to this Agreement. The parties will specify 10 NYK 1204555-6.071371.0010 therein or through another effective means that- any such counterpart, telex or electronic message constitutes a Confirmation. (f) . No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and. a single or partial exercise of any right, power or privilege -will not be presumed to preclude any subsequent or further exercise, of that• right, power or privilege or the exercise of any other right, power or privilege. (g) Headings. The headings. used in this Agreement are for convenience of reference only and are not to affect the constructionof or to betaken-.into consideration in interpreting this Agreement. 9. Enpe~~es A Defaulting Party will, on demand, indemnify and hold harmless the other party. for and against -all reasonable out-of-pocket expenses, including legal fees, incurred by such other parry by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction,. including, but not limited to, costs of collection. 10. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any. manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic .messaging system details .provided (see the Schedule) and will be deemed effective as indicated:.- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if -sent by telex, on the date the recipient's answerback is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated•by the sender's facsimile machine); . (iv) if sent by certified or registered. mail (airmail,.- if overseas) or the equivalent (return. receipt requested), on' the date that mail. is delivered or its delivery is attempted; or • (v) if .sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt,. as applicable, is not a Local Business: Day or that communication is delivered (or attempted) or received, ~as applicable, after the close of business on a Local Business Day, in which case that communication• shall be deemed given and effective on the first. following day that. is a Local Business Day. (b) .Change of Addresses. Either party may by notice to the other change. the address; telex or facsimile number or electronic messaging system details at which notices or other communications"are to be given to it. 11 NYI{ 1204585-6.071371.0010 11. Governing Law and Jurisdliction (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. ro) Jurisaiction. With respect to any suit, action or proceedings relating to this Agreement. ("Proceedings"), each party irrevocably:- (i) submits to. the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, onto the non-exclusive jurisdiction of the courts of the. State of New York and'the United States District Court located `in the Borough. of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) • waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought: in an inconvenient forum and further waives the right to object, •with respect to such Proceedings, that such court-does not have any jurisdiction over such party.. Nothing in this Agreement precludes either party from bringing .Proceedings in any other jurisdiction (outside, if this .Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil. Jurisdiction,and Judgments -Act 1982 or .any modification, extension- or re-enactment thereof for the -time being in force) nor will the `bringing of Proceedings in any one or more jurisdictions preclude thebringing of Proceedings in any other jurisdiction. (c) .Waiver of Immunities. Each .party irrevocably waives, to the fullest extent permitted by applicable law, with respect to' itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before. or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 12. Definitions As used in this Agreement:-~ "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). "Affected Transactions" means (a) with respect to any- Termination Event consisting of an Illegality, all Transactions affected by the occurrence of such Termination Event and (b)-with respect to any other Termination Event, all Transactions. "Affiliate" means,. subject to the Schedule, in relation to any person, any entity .controlled, , directly or indirectly, by the person, any entity thaf controls, directly 'or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership of a majority of the voting power of the entity or person. 12 NYK 1204585-6.071371.0010 "Applicable Rate" means: (a) in respect of obligations. payable or deliverable (or which would have been but for Section 2(a)(iii)).by. a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section $(d)(ii)) on which. that amount. is: payable, the Default Rate; (c) in respect of all other obligations payable or; deliverable (or .which would have been but for ~ . Section 2(a)(iii)) by aNon-defaulting Party, the Non-default Rate; and (d) in all other cases, -the Termination Rate. "consent" includes a consent, approval, action, authorization, exemption, notice, filing, registration or exchange control consent. "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document" means,any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule: "Default Rate" means a-rate per annum equal to the cost (without proof or:evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1 per annum. . "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iii).~. "Event of Default" has the meaning specified in Section S(a) and, if •applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). `taw":includes ariy.treaty,-law, rule or regulation and `~wfzsl" and "unlawful" will be construed accordingly.. . "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for•:business (including dealing`s in foreign exchange and foreign currency. deposits) (a) in relation to any obligation under Section 2(a)(i); in the place(s) specified in the relevant Confnmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or .incorporated by reference, in this Agreement, (b) in:relaton to any other payment, in the place where the relevant account is located, (c) in relation to any notice or other communication, including notice contemplated under Section S(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where. the, relevant new account is to be located -and (d} `~in •relation to Section 5(a)(q)(2), in the relevant locations for performance with respect to such Specified Transaction. "Loss" means, with respect o this Agreement or one or more Tenniriated Transactions,., as the case may be; and a party, an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number). in connection -with-this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss 13 NYK 1204585-6.071371.0010 of bazgain, 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 (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery. required to have-been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Eazly Termination Date and not made; except, so as to avoid duplication, if Section 6(e)(i)(1) or {3) or: 6(e)(ii)(2){A) applies.. -Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 9. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter. as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "Market-:Quotation" means, with respect to one~or more Terminated Transactions and a parry making the determination, an amount determined on-the. basis of quotations from Reference Market- - makers. Each quotation will be for an amount, if any, that would be paid to suchparty (expressed as a negative number) or by such party (expressed as a:,positive .number) in consideration of an agreement between such party (taking into- account any existing Credit Support Document` with respect to the , obligations of such party). and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery. (whether the: underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated' Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but; .without limitation, any payment or delivery that would, but for "the relevant Early. Termination Date, have been required (assuming satisfaction of each applicable condition precedent} after. that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Mazket-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day acid time (without regard fo different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are. to be obtained will be selected in good faith by the party obliged to make. a determination under Section. 6(e), and, if each party is so obliged, after consultation with the other. If -more than. three quotations aze provided, the Market .Quotation will be the arithmetic mean of the quotations, without regazd to the quotations having the highest and .lowest values. If exactly three such quotations are provided, the Market ,Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded: If .fewer than three quotations are provided, twill be deemed that.the Market Quotation in respect of such~Terminated Transaction or group of Terminated Transactions cannot be determined. "Non-default Rate" means a rate. per annum equal to-the cost (without proof or evidence of any actual cost) to the Non-defaultingParty (as certified by it) if it were to fund the relevant amount. "Non-defaulting Party" has the meaning specified in Section 6(a}. "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good `faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such: party applies generally at the tune in deciding whether to offer or to make an extension: of credit and (b) to the extent practicable, from among such dealers having an office in the same city. 14 NYK 1204585-6.071371.0010 "Scheduled Payment Date" -means a date on which a payment' or delivery is to be made under Section 2(a)(i) with respect to a Transaction: • "Set-o, ff" means set-off, offset, combination of accounts, right of retention or withholding or similar ±ight or requirement to which the payer of an amount: under Section 6 is entitled or subject (whether arising under this Agreement, another contact,-applicable law or otherwise) that is exercised by, or imposed on,.such,payer.. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of:- (a) the Market Quotations (whether positive or negative) for each Terminated Tran$action or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any - Unpaid Amounts) for each Terminated Transaction or group of .Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the. Party making the determination) produce a commercially reasonable result. "Specified Entity" has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specified Transaction" means, subject to the .Schedule, (a) -any transaction. (including. an agreement with respect thereto) now existing or hereafter. entered into between one party to this Agreement (or-any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement- (or any Credit Support Provider of such other party or any applicable Specified Entity of such other parry) which is a rate swap transaction, basis swap, forwardrate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other. similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confnmation. "Terminated Transactions" means with .respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that -Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Event" means an Illegality or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidcnce of any actual cost) to each party (as certified by such party) if it were to fund or of • funding such amounts.' "Unpaid Amounts" owing to any party means, with respect to an Eazly Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2{a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Eazly Termination Date and (b) in NYK 1204585-6.071371.0010 15 respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the. fair market value of that which was (or would have been) equired to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable. law) interest, in~the currency of such amounts, from (and including) the date'such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will. be calculated on the basis of daily compounding and the actual number of days elapsed. ..The fair market value of any obligation referred .to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each parry is so obliged, it shall be -the average of the fair market values reasonably determined by fioil-i parties. 16 1VYK 1204585-6.071371.0010 ~ ' IN WITNESS WI~REOF the parties have .executed this document on the respective dates specified below with effect from the date specified on the first page of this document. CITIBANIi, N.A. ~JERNON NATURAL GAS FINANCING . ~iUT~ORIT~i' By: By: Name:. Name: Title: Title: ..Date: ~ Date: • Consented to and. agreed to: ]YIBIA INSURANCE CORPORATION By: Name: . Title: Date: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: Name: Title: Date: S-1 Vernon Master Agreement NYK 1204585-fi.071371.0010 SCHEDULE to the ISDA I~iaster Agreement dated as of June 27, 2006, Amended and Restated. as of .May 2009, between C'IT1rEANI~, N.A. a national banking association organized and existing under the laws of the United States of America ("Party A„~ and VERNON NATURAL GAS FINANCING AUTHORITg', a joint powers agency established and existing under the laws of the State of California Part A. Scope of Agreement. This Agreement relates only to the five Transactions dated June 27, 2006 as evidenced by the five Amended and Restated Confirmations, each dated June 27, 2006, as amended and restafed as of May 2009, as such .Transactions may be amended from time to time (the "Initial, Transactions"), and. any: reference herein to "Transaction" shall mean and include only the Initial Transactions between the parties. The .parties hereby acknowledge and agree that no other. Transactions may be entered into-under-this Agreement. Part 2. Termination Provisions. In this Agreement:- , (a) "Specified Entity" means in relation to Party A for the purpose of:- Section 5(a)(v) (Default under Specified Transaction), Citigroup Global Markets Limited, Citigroup Global Markets Inc., . Citigroup. Forex Inc., Citigroup Global Markets Commercial Corp., Citicorp Securities Services, Inc. and Citigroup Financial Products . Inc. (individually a "Section 5(a)(v) Affiliate"). Section 5(a)(vi) (Cross Default), ~ Not applicable. Nl'K 1204585-6.071371.0010 Section 5{a)(vii) (Bankruptcy), Not applicable. Section 5(b)(i) (Credit Event Upon Merger), Not applicable. and in relation to Party B .for the purpose of:- Section 5(a)(v)(Default under Specified Transaction), Not applicable. Section 5(a)(vi) (Cross Default), ' Not. applicable. Section 5(a)(vi) (Bankruptcy) Not applicable. ,Section 5(b)(ii) (Credit Event Upon Merger) Not applicable. (b) "Speci,~ed Transaction" will have the meaning specified in Section 12 of this Agreement; provided, however, with respect to Party B, such teen shall only include any Specified Transaction under which the obligations of Party B are payable .from Revenues or the. Light .and Power and Fund (each as .defined in the Electric System Indenture). (c) The "Cross Default" provisions of Section 5(a)(vi) will apply to Party A and will apply to Party B. The following provisions apply:-- • "Specified .Indebtedness" has the meaning. specified in Section 12 of this Agreement, provided„ however, that (i) with respect to Party A Specified. Indebtedness shall not include deposits received in the course of Party A's ordinary banking business, and (ii) with respect to Party B, Specified Indebtedness. shall only include obligations of Party B or-its Credit Support Provider payable from-Revenues or the Light and Power and Fund • (each as defined in the Electric System Indenture). "Threshold Amount" means (i) in -the case of Party A, ~ the lesser of (A) USD 250,Q00,000 and (B) three percent (3%) of Stockholder's Equity of Party A, (ii) in the case of Party B, USD 0, and (iii) in the. case of the City, as Credit Support Provider of ..Party B, .USD 20,000,000. For purposes of (ii) above, Stockholder's Equity shall be determined by reference to the relevant party's most recent consolidated (quarterly, in the case of a U.S.; incorporated parry)...balance sheet and shall include, in the case of a U.S. incorporated party, legal. capital,.. paid-in .capital, .retained eanungs and cumulative • translation adjustments. Such balance sheet shall be prepared in accordance with accounting principles that are generally accepted in such party's country of organization. The following proviso is hereby inserted at the end of Section 5(a)(vi) of this Agreement: "provided, however, that notwithstanding the foregoing, an Event of Default shall not • occur under either {1) or {2) above if (a) if the event or condition referred to in (1) or the failure to .pay referred to in (2) is a failure. to pay caused by an error or omission of an administrative or operational nature; and. (b) funds. were available to such party to enable • it to make the relevant payment when due; and (c) such relevant payment is made within Schedule -Page 2 NYK 1204585-6.071371.0010 three Business Days following receipt of written notice from an interested parry of such failure to pay." (d) The "Credit Event Upon 1Vlerger" provisions. of Section 5(b)(ii) will not apply to either parry. (e) .The "Automatic Early Termination" provisions of Section. 6(a) will not apply to Party A and will not apply to Party B; provided, however, that with respect to a party, where the Event of Default specified in Section 5(a)(vii)(1), (3), (4), (5), (6) or .to the extent analogous thereto, (8) is governed by a .system of law which does not permit termination to take place after the occurrence of the relevant Event of Default, then the Automatic Early Termination provisions of Section 6(a) will apply to such party with respect to such specified Events of Default. (f) Payments on Early Termination. For the purpose of Section,6(e) of this Agreement, Market Quotation and the Second Method will apply. (g) Events of Default. . (i) Bankruptcy. Clause (6) of Section 5(a)(vii) of .this. Agreement is .hereby amended to read in its entirety as follows: "(6)(A) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets or (8) in the case of Party B, (n there shall be appointed or designated with respect to it, an entity'such as an organization, board, commission, authority,. agency or body to monitor, review, oversee, recorrimend or declare, in each case, a financial emergency or similar state of financial distress with respect to it or (I)) there shall be declared by it or by any .legislative or regulatory body with competent jurisdiction oven it, the existence of a state of financial emergency or .similar state of financial distress in respect of it;". J (ii) Merger Without Assumption. Section S(a)(viii) of this Agreement. is hereby amended by inserting after the phrase "another entity" on line 3 thereof the parenthetical "(or without limiting the foregoing, with respect to Party B, an entity such as an organization, board, commission, authority, agency, or body succeeds to the principal functions of Party B, or powers and duties granted to Party B)". (h) Impossibility. Section 5(b) of the Agreement is modified by adding at the end thereof the following subsection (iv):- (iv} Impossibility.. Due to the occurrence of a natural or man-made disaster, armed conflict, act of terrorism, riot, labor disruption or any other circumstance beyond its control after the date on which.. a Transaction is entered-into, it becomes impossible (other than as a result of its . own misconduct) for such a party: . (1) to perform any absolute or contingent obligation, to make. a payment or , delivery or to receive a payment. or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation. which the party (of such Credit Support Provider) has underany Credit Support Document relating to such Transaction. . Schedule -Page 3 NYK 1204585-6.071371.0010 For the purposes of Section 6, in the event of an Impossibility, both parties shall be Affected .Parties. An Impossibility shall be treated' as ' an Illegality :for purposes of Section 5(c) of the Agreement (i) Additional. Termination Event will apply. The following shall .constitute Additional Ternination Events for all purposes:- • (i) (A) The Credit Rating of Party B is withdrawn, suspended or falls below :(y) "Baal" as determined by Moody's and (z) `BBB" as determined by S&P or (B) Party B fails o have a • Credit .Rating by at least one of Moody's and S&P. For the purpose of the foregoing Termination Event, Party B shall be the Affected Party. (ii) (A) The Credit Rating of Party A is withdrawn, suspended. or falls below (y) "A3" as - determined.. by Moody's and (z) "A--" as determined by S&P or (B) Party A fails to have a . Credit Rating by at least- one of Moody°s and S&R. For. the purpose of the .foregoing Termination Event, Party A shall be the Affected Party. (iii)If there occurs an early termination of the Agreement for Purchase and.Sale of Natural • Gas, dated as of June 27, 2006, between Party B and Citigroup Energy, Inc. (as amended and . supplemented from time to time, the "Gas Purchase .Agreement") in accordance with its terms. 'Irl such event, Party B may terminate this Agreement by providing notice. to Party A in accordance with this Part . 2(i)(iii) (the "Termination Notice"). In the event the Gas Purchase. Agreement is terminated upon notice by Party B or its assignee,. Party B shall deliver the Termination Notice to Party A at the same time notice of termination of the. Gas Purchase Agreement is given. In the event-the Gas Purchase Agreement is terminated as a result of a Bankruptcy of the Seller or Guarantor (as each such -term is defined in the Gas Purchase Agreement), Party B shall deliver the Termination Notice to Party A no laterthan the 10th day following the date. of termination of the Gas,Purchase Agreement. - In the event Party B so elects to terminate this Agreement, (A) all Transactions shall be Affected Transactions, {B) Party A shall be .the ,'sole Affected Party, and (C) the Early Termination Date of .all .such Transactions shall be the effective date of termination of the .Gas Purchase- Agreement. Notwithstanding: Section 6(e) of this Agreement, there shall be no amount payable to or from. either Party A or Party B in connection with the early termination of any Transaction as a result of the Additional Termination Event described in this Part 2(i)(iii), other than any Unpaid Amounts in respect of such Transaction'dtie from either party as of the-Early Termination Date of such Transaction. In -the event Party B does not elect to terminate the Agreement pursuant to the Additional Termination Event described in thin Part 2(i)(ii), ,this Additional Termination .Event shall expire and be of no further force and effect from and after the last date on which Party B is required to deliver the Termination Notice to Party A pursuant to this Part 2(i)(iii). (j) Party 1.4 mptional IVdid-Maa°ket Tei°tnina~®n. Party A may, on or after December 31, .2011 (the "Optional Mid-Market. Termination Date"), terminate and. cash settle• all (but not less than all) of the Transactions hereunder by providing at least five (5) Business Days prior written notice (an "Optional Termination Notice") to Party B . The amount -due .with respect to any such termination shall, be determined by Party A in its sole discretion. Tf Party B disputes such amount, the amount due with respect to such termination shall-bean amount determined pursuant • to Section 6 0~ this Agreement as if (i) the Optional Mid-Market Termination Date is the Early • Termination Date, (ii) each party shall be an Affected Party (for all purposes other than the election to terminate), (iii) all Transactions hereunder are the Affected Transactions, and (iv) Schedule -Page 4 NYK 1204585-6.071371.0010 Market Quotation and Second Method are selected for. purposes of Payments on Early Termination. • >n addition, on the. Optional Mid=Market. Termination Date, the parties will be obligated to pay any accrued amounts under the Transactions that accrued to the Optional Mid- Market Termination Date but are, except for this provision, payable after the Optional Mid- Market Termination Date.- Notwithstanding-anything: herein to the. contrary, upon receipt of an Optional Termination Notice, Party B may elect, by written notice (the "Collateral Election Notice") delivered to Party A prior to the Optional Mid-Market Termination Date, to deliver collateral to Party A to secure .its obligations with respect to all Transactions under this Agreement. Upon receipt of such Collateral Election Notice, (Y) Party B shall be obligated to deliver collateral to Parry A in accordance with the Credit Support Annex.'and (Z) Party A's Optional Termination .Notice shall. be deemed cancelled and Party A shall not be entitled to exercise its optional termination rights under this Part 2(j): (k) Delivery of Collateral. `:Party A, and, upon the delivery by Party B of the Collateral Election Notice, Party shall.. deliver collateral ' in order to secure its `obligations under this Agreement in accordance with the terms and provisions of the Credit Support Annex. Part 3. Agreement to Deliver Documents. For the purpose. of Section 4(a) of this Agreement, each party agrees to deliver the following documents, as applicable: Party required _ Covered by to deliver Section 3(d) of document Form/llocumentlCertificate Date by which to be Delivered ~ the Agreement 1. Party A Annual audited consolidated `Upon request Yes financial statements certified by `independent certified public .accountants for each fiscal year. • 2. Party A and A duly executed. copy of the On or prior to -[May ~ Yes 'Party B Credit Support Annex relating to 2009][Amended Agreement this- Agreement. Effective Date] 3. Party A An opinion of counsel to Party A On or prior to [May No substantially in the form of 2009] [Amended Agreement Exhibit A to this Schedule. Effective Date] Schedule.- Page 5 NYIC 1204585-6.071371.0010 ~ • Party required Covered by to deliver Section 3(d) of document Form/DocamentlCertificate Date by which to be Delivered the Aareerl~ent 4. Party B A certified copy of the resolution Prior to [May 2009] [Amended Yes or resolutions (or the equivalent Agreement Effective Date] . 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 the Agreement and each Transaction, and. evidence reasonably satisfactory to .Party A and the Insurer of the authority and ' genuine signature of the individual • or individuals . signing the Agreement on behalf pf Parry B to • execute the same.. 5. Party B A certified copy ofthe Indenture.. • On or prior to [May 2009] Yes [Amended Agreement Effective Date] 6. Party B Copies of any reports, statements Upon request Yes • • or other information required to be provided to any party by Party B or the Trustee under the terms of ' the Indenture. 7. Party B An opinion of counsel to Party B On or prior to • [May .2009] No substantially in ,the form of [Amended Agreement .Effective Exhibit B to this Schedule. Date]- • S. Party B A certified copy of the resolution On or prior to .[May 2009] Yes ' or resolutions (or the equivalent [Amended Agreement Effective thereof) of the governing body of Date] the City, certified by an appropriate official of the City, • pursuant to which the City is authorized to enter into the Joint Powers Agreement and the Gas Supply Agreement, and evidence reasonably satisfactory to Party A 'of the authority ..and. genuine • signature of the individual or individuals signing the Joint Powers Agreement and the Gas Supply Agreement on behalf of the City to execute the same. Schedule -Page 6 NYK 1204585-6.071371.0010 Purty required Covered. by to deliver Section 3(d) of document FormLDocument/Certificate Date by which to be Delivered , the Aereement 9. Party. B Annual audited consolidated As soon as available and in ,any Yes financial statements of the .City event within 180days after the end certified by independent certified of each of its .fiscal years; public accountants for each fiscal. provided, however, that if such Ye~'~ audited fmancial statements are not available by such 180' day, .,the unaudited financial statements of the. City shall be provided and the . audited. financial• statements shall be provided as soon. as publicly available thereafter. 10. Party B Unaudited consolidated .financial As soon as avahable and in any Yes statements, the consolidated event within 60 days (or as soon as balance sheet and related practicable after becoming publicly statements of .income of the City available) after the end of each of for each fiscal quarter, its fiscal quarters. 11. Party B Opinion. of counsel to the.: City in On or prior to [Nlay 2009] No form and substance satisfactory to {Amended Agreement Effective Party A and Insurer, including... ,Date] opinions as to the enforceability of this •Agreement, each Transaction hereunder. and the Credit Support Documents. 12. Party B A certified copy, of the Joint On or -prior to . [May 2009] Yes Powers Agreement. [Amended Agreement ~ Effective Date] 13. Party B A certified copy of the Gas Supply On or prior to [May 2009] Yes Agreement.. [Amended Agreement .Effective Date] 14. Party B A certificate of the City On or prior to [Nlay .2009] Yes evidencing the City's. approval and [Amended Agreement Effective ratification of this Agreement and- Date] each Transaction hereunder, 'in form and substance satisfactory to Party A. Schedule -Page 7 NYK 1204585-6.071371.0010 Party required Covered by to deliver ~ Section 3(d) of document FormlDocument/Certificate Date by which to be Delivered fhe ll~reement 15. Parry B A Certificate of the Ciry directing On or prior to [May 2009] Yes the Trustee under'the Indenture to [Amended Agreement Effective. follow the direction of Party A .Date] with respect to any direction or election of remedies under '-the Covered Documents provided that; for so long as the Swap Insurance • Policy is in effect and has not been relinquished pursuant to Part 7 of the •Schedule to this Agreement, directing the Trustee to follow the direction of Party A and -the Insurer collectively with respect to - any direction or election of remedies under the Covered Documents. Each of Party A and Insurer acknowledges that ' under the Covered Documents , the Trustee has no basis or obligation to follow such direction. Schedule -Page 8 NYK 1204585-6.071371.0010 Party required Covered by to deliver Section 3(d) of document Form/DocumentJCertificate Date by which to be Delivered the Agreement 16. Party B A Certificate of Party B directing On or prior to [May 2009] Yes the Trustee under the Indenture to [Amended Agreement Effective follow the direction of Party A Date] with respect to any direction or election of remedies under the Covered Documents provided that, for so long as the Swap Insurance Policy is in effect and has not been relinquished pursuant to Part 7 of the Schedule to this .Agreement,. directing the Trustee to follow the- direction of Party A and.. the • Insurer collectively. with respect to any • direction or election of remedies .under the Covered . Documents. Each of Party A and Insurer acknowledges that under :the Covered Documents the Trustee has no basis or obligation to follow such direction. 17. MBIA An endorsement to the Swap On or prior to [May 2009] Yes Insurance Policy confirming that [Amended Agreement Effective the policy continues to insure the Date] Initial Transactions, as amended and restated as of May 2009 .(the "Endorsement"). 18. Insurer A certificate of Insurer confirming On or prior to [May 2009] ~ Yes that the Swap Insurance Policy is a [Amended Agreement Effective Covered Policy under the Date] Reinsurance Agreement and the Second to Pay Policy (each as defined in Part 6 below). . 19. MBIA Opinion of Counsel to MBIA in On or prior to [May 2009] ~ No .form and substance satisfactory to [Amended Agreement Effective Party A with respect to MBIA's Date] ' obligations under the Swap Insurance Policy as endorsed by , the Endorsement and the ~ • Reinsurance Agreement. Schedule -Page 9 . NYK 1204585-6.071371.0010 -Party required Covered by to deliver.. Section 3(d) of do~ FormlDocnment/Certificaite Date bv=s~hach to be Delivered the Agreement 20. Insurer Opinion of Counsel to Insurer in On or prior to [May 2009] No form and substance satisfactory to [Amended Agreement Effective ' Party A with .respect to Insurer's Date] obligations under the Swap Insurance Policy, the Endorsement, the Reinsurance • Agreement and the Second to Pay. Policy.. Part 4. Miscellaneous. (a) Addresses for Notices.' For the purpose of Section 10(a) to this Agreement:- Address for notices or communications to Party A:- • Address: 390 Greenwich Street, New-York, New York 10013. Attention: Director Derivatives Operations; with an additional copy addressed to the attention of the Law Department. Facsimile No.: (212) 615-8295 Telephone No.: (212) 615-8605/06 With a copy to Insurer for only so long as .any Transaction hereunder is an Insured Transaction: Address: ~ National Public Finance Guarantee Corporation 113 King Street, Armonk, New York 10504 Attention: IPM-Global Utilities Facsimile No.: (914) 765-3799 . Telephone No.: (914) 273-4545 Address for notices or communications toParty B:-- • Address:. Version Natural .Gas Financing Authority 4305 Santa Fe Avenue, Vernon, California 90058 Attention:. Authority Attorney • Facsimile No.: (323) 826-1439 Telephone No.: (323) 583-8811 Schedule -Page 10 NYK 1204585-6.071371.0010 With d copy to Insurer for only so long as any Transaction hereunder is an Insured Transaction: Address: - National Public Finance Guarantee-Corporation 1.13 King Street, Armonk, New York 10504 Attention: IPM-Global Utilities Facsimile No.: (914) 765-3799 Telephone No.: (914) 273-4545 _ (b) Calculation Agent. The Calculation Agent is Party A, unless an Event of Default or Termination Event has occurred with respect to which Parry A is the Defaulting Party_or the sole, Affected Party, in. which case Party B -may appoint a Calculation Agent meeting the requirements of a Reference Market-maker. . (c) Credit Support Document. In the case of Party A, with respect to this Agreement, including all Transactions made a part hereof, "Credit Support Document" means the CreditSupport Annex. In the case of Party B, with respect to this Agreement, including all Transactions made. a part hereof, "Credit .Support Document" means the Covered Documents and the Credit Support Annex. (d) Credit Support Provider. "Credit Support Provider" means (i) in relation to Party A, none, and (ii) in relation to Party B, the City. (e) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO CHOICE OF LAW DOCTR1hlE, EXCEPT THAT THE POWERS AND .AUTHORITY OF PARTY B WILL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. (f) Netting of .Payments. Subparagraph (ii) of Section 2(c) of this Agreement will not apply to all Transactions. Part 5. Other Provisions. (a) Representations. (i) The introductory clause of Section 3 of .this Agreement is hereby amended to read in its entirety as follows:- "Each party represents to the other party (which representations will be deemed to be .repeated by each party on each date on which a Transaction is entered into and, in the, -case of the representations in Section. 3(ej, ,at all times until the termination of this Agreement) that:" (ii) Section 3(aj(ii) of this Agreement is hereby. amended to read- in its entirety as follows: "(ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a-party, to deliver this Agreement and any other documentation relating to this Agreement that it is required ~by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Schedule -Page 11 NYK 1204585-6.071371.0010 Credit Support Document to which it is a party and has taken all necessary action and made all necessary determinations and findings to authorizeauch execution, delivery and performance;" , (iii) Section 3(b) of this Agreement ~is hereby. amended to read in its entirety as follows:- "(b) Absence of Certain Events. t~To Event of Default or Potential Event of Default or, - to its knowledge, Incipient- Illegality (in the case of .Party. B) or Termination Event with respect to it has occurred and is continuing -and no such event or circumstance would occur as a result of its entering into or performing its. obligations under this•Agreement or any Credit Support Document to which. it is a party" (iv) Section 3 of this Agreement is hereby amended by adding the following. subsection "(e)" and "(f)" thereto, which subsections shall only apply to Party B:- "(e) Non-Speculation. This Agreement has been,. and each Transaction hereu>Zder will . be (and, if applicable, has been), entered into for purposes of managing its borrowings or investments and not for purposes of speculation. (f) No Immunity. Party B is not entitled- to claim immunity on the grounds of sovereignty or other similar. grounds with respect to itseif or its revenues or assets (irrespective of .their-use or intended use) from (i) suit, (ii) jurisdiction of any court or arbitral tribunal or (iii). relief by way of injunction; order for.. specific performance or recovery of property, and except for the limitations set -forth in Section 970 et seq. of the California .Government Code and the procedures set forth therein -with respect to the presentation of claims against governmental entities, Party B is not entitled to claim any such immunity with respect to (A) attachment of its assets (whether before pr after judgment), or (B) execution or enforcement of any award or judgment to which it or its revenues or assets .might .otherwise be made subject in any suit, action. or proceedings relating to thin Agreement in the courts of any jurisdiction or any arbitral tribunal, and in .any such case, except. as -set forth above, no such immunity .(whether or not claimed) may be attributed to Party B or its revenues or assets." (b) Agreements. . (i) The introductory clause of Section 4 of this Agreement is hereby amended to read in its enfvrety as follows:.-- "Each party agrees with the other (or, in the case of Section 4(d), (e), (fj, (g), (h) ..and (i), Party B agrees with Party A) that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to 'which it is a party:.-". (ii) Section 4 of this Agreement iS hereby amended by 'adding the following subsections "(d)", "(e)", «(g)", "(11)" and "{i)" thereto•- , "(d) Compliance with Covered Documents. Party B will observe, perform and. fulfill each- provision of the Covered Documents on -its part to be observed, performed or fulfilled,. including all defined terms related to, used or included within any such provision as the same are in effect 'on the Covered Documents Schedule -Page 12 . Nl'K 1204585-6.071371.0010 Incorporation Date, as any of those provisions may be amended, supplemented or modified for purposes of this Agreement with the prior written consent. of Party A (the "Incorporated Provisions"), with the effect that Party A will have the . benefit of each of the Incorporated Provisions (including without limitation, covenants .and- delivery of financial statements and- other notices and information); provided, however, that, for so long as the Swap Insurance Policy (as defined herein) is in effect and has not been relinquished pursuant to Part 7 of the Schedule to .this Agreement, Party A shall. not be entitled to exercise any of the rights and .remedies granted to the, Insurer under... the Incorporated Provisions except to the extent such rights and remedies .are also specifically granted to Party A therein, nor shall. tarty A's rights hereunder be construed to limit the Insurer's rights and remedies under the incorporated Provisions- (or to require Party A's consent to any action taken or consent provided by the Insurer in accordance with the terms of the Incorporated Provisions; except to the extent -such right of consent is also specifically granted to Party A therein). In the event that any of the Covered Documents cease to be in effect prior to the termination of this Agreement, the Incorporated. Provisions. (other than. those provisions requiring payments in respect of bonds, notes, warrants or .other instruments or agreements payable from amounts held under the .Covered Documents (other than this Agreement))- will remain. in full force and effect for purposes of this - .Agreement as though set forth herein .until such date on .which all: of the obligations of Party B under this Agreement and any. obligations of Party B or any Credit Support Provider of Party B .under a Credit Support Document have been fully satisfied; provided, however, that; for so long as the, Swap Insurance Policy is in effect and has. not .been .relinquished pursuant to Part 7 of the Schedule to this Agreement, Party A shall not be entitled toexercise any of the rights and remedies granted to the. Insurer under the Incorporated Provisions except to the extent such .rights .and remedies are also .specifically granted to Party A therein, nor shall Party A's .rights hereunder be construed to limit the . Insurer's- rights and remedies under the incorporated Provisions (or to require Parry A's consent to any action aken or consent provided by the Insurer in accordance with the terms of the Incorporated Provisions,. except to the extent such right of .consent is .also specifically granted to Party A therein). The Incorporated Provisions are .hereby incorporated by reference and made:a part of this Agreement to the same extent as if such provisions were set forth herein. For purposes of this Agreement, the Incorporated Provisions shall be construed as though O all references therein to any party making loans, extensions of credit or financial accommodations thereunder or commitments therefor (the "Financings"), .except with respect to making payments with respect to Financings, were to Party. A and (ii) to the extent .that such Incorporated Provisions are conditioned on or relate to the existence.- of such Financings or Party B having any obligations in .connection therewith, all .references to such Financings or obligations were, to the obligations of Party B under thin Agreement. Any amendment, .supplement, modification or waiver of any of the Incorporated Provisions without the prior written consent of Parry A shall have no force and effect with respect to this Agreement; provided,- however, that, for so long as the Swap Insurance Policy is in effect-and has not been relinquished pursuant to Part 7 of the Schedule to-this Agreement,`Party Ashall not be entitled to exercise any of .the rights and remedies granted to the Insurer under the Incorporated Provisions except to the extent such. rights and remedies are also Schedule.- Page 13 NYK 1204585-6.071371.0010 specific. ally granted to Party A therein, nor-shall Party A's rights. hereunder be . construed to limit the Insurer's rights and remedies under the incorporated Provisions (or to require Party A's consent to any action taken or consent provided by the Insurer in accordance with the terms ~ of the incorporated Provisions, except to the extent.such right of consent is also specifically granted to Party A therein). Notwithstanding the foregoing, any amendment, supplement or' modification for which such consent is obtained shall be part of the Incorporated' Provisions for purposes of this Agreement. (e) Security and Source of Payment of Party B's Obligations. This Agreement is a "Qualified Swap Agreement" as defined in the indenture. Net Payments and any .Termination Payment (each as defined in the Indenture) required to be -made by Party B hereunder shall be payable from Revenues deposited `to the Qualified Swap 'Fund as described. in Section 5.03 of the Indenture for distribution in accordaince with Section 5.09 of the Indenture. The obligation of Party B to make Net Payments is secured by a lien on and security • interest in the Trust Estate on a parity with the -lien thereon- securing the Bonds, - and the obligation of Party B to make any Termination Payment is secured by a • lien on and security interest in the Trust Estate immediately subordinate to .the lien thereon securing the Bonds and any `other obligations secured on a parity therewith under the Indenture, all. as provided for in Section 5.01 of the Indenture. . Pursuant to the Gas Supply Agreement, the City has covenanted -and agreed to pay all-amounts payable by Party B, including Net Payments and any Termination Payment, on any date required under each Qualified Swap Agreement, including this Agreement and the Initial Transactions. All amounts payable by the City are payable from amounts in the Light and Power Fund as an Operation and Maintenance Expense of the Electric System.. , For purposes of this subsection (e) of Section 4, capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to . them in the Covered Documents: (f) Notice of Incipient Illegality. If an Incipient Illegality occurs, Party B will, promptly upon becoming -aware of it, notify Parry A, specifying the nature of that Incipient Illegality and will also give such other information about that Incipient Illegality as Parry A may reasonably require. . (g) Additional. Bonds. Party B hereby covenants. and agrees that it shall not issue any additional Bonds or other obligations under the Indenture. (h) Amendment of the Covered Documents. Parry B .hereby covenants and agrees that it shall not amend or consent to the amendment, supplement, modification or waiver. of any term or provision bf the Covered Documents, which amendment, supplement, modification or waiver could adversely affect the security, priority of payments or the rights and obligations of Party A thereunder or under this Agreement or which could impair Party B's ability to perform. its obligations to Party A hereunder." Schedule -Page 14 NYK 1204585-6.071371.0010 (c) Jurisdiction. Section 11(b) of this Agreement.is hereby amended to read in its entirety as follows:- : "(b) fursdiction. with respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits, to the fullest extent permitted by applicable law, to the exclusive jurisdiction of each of the courts. of the State of New. York, and the United States District Court located in the Borough of Manhattan in New -York City; and . - (ii) waives; to the fullest extent permitted by applicable law, (1) any - objection which it may have at any time. to the laying of venue of any Proceedings ..brought in any such court, (2) any claim that such Proceedings have been brought in an inconvenient forum and (3) the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party." ,(d) De, finitions. Section 12 of this Agreement is hereby amended. to add or amend the following definitions in their appropriate alphabetical order:- "Affiliate" will have the meaning specified in Section 12 of this. Agreement, provided, however that with regard to Party A, the term "Affiliate" shall not include any entity that controls or is under common control with Citibank, N.A. "Amended Agreement Effective Date" will have the meaning specified in Part 8 of the Schedule to this Agreement.. "Bonds" means any bonds or other obligations issued by Party B from time to time under ' the Indenture which are secured by~ a lien on-and security interest in the Trust Estate on a parity with the lien thereon granted to any senior .bonds issued in accordance with the terms of the Indenture. "City" means the City of Vernon, California; a municipal corporation organized and existing under the laws of the State of California.. "Collateral Election Notice".has the meaning set forth in Part 2(j) of this Schedule. "Covered Documents" means, collectively, the Indenture andahe Gas Supply Agreement. "Covered.. Documents Incorporation .Date" means [May 2009][Amended Agreement Effective Date]. "Credit Rating" means, as of any ,date, (i) with respect to Party A, any public rating in effect on such date -with respect to .the. long-term, senior,. unsecured, unenhanced indebtedness or. deposits . of Party A; and (ii) with respect to Party B, any public, underlying (i. e„ unenhanced) rating in effect on such date with respect to any of the City's .outstanding Electric System Revenue Bonds issued pursuant to the Electric System ' Indenture-or, if no Electric System Revenue Bonds are outstanding as of such date, any such-rating then in effect with respect to the Electric'System (as defined in the Electric .System Indenture) generally, provided such rating represents the credit worthiness of Schedule -Page 15 NYK 1204585-6.071371.0010 obligations secured by and payable from the Electric System Revenues (as defined in the • Electric System Indenture) in the same manner and with -the same priority as is provided for Electric System Revenue Bonds as of [May 2009][Amended Agreement Effective Date]. "Credit Support Annex" means .the ISDA Credit Support Annex, including the supplementary. Paragraph 13 thereto, attached to this Schedule as Exhibit C and. incorporated by reference herein. "Electric System Indenture" means the ~ Indenture of Trust, -dated as of September 1, 2005, by and between the- City and The Bank of New- York Mellon Trust Company, N.A., as trustee, as heretofore or hereafter amended and supplemented in accordance with its -terms and the terms hereof. "Gas Furclzase Agreement" has the meaning set forth in Part 2(i)(iii) of this Schedule. "Gas Supply Agreement" means the Natural Gas Purchase Agreement, dated as of June 1, 2006, by and between Party. $ and the City. . "Incipient Illegality' means (a) the enactment by any legislative body-with competent jurisdiction over Party B or the City, as .Credit Support Provider of Parry B, of legislation which, if adopted as law, would render unlawful (i) the performance by Party B of any absolute or contingent obligation to make a payment or delivery onto receive a payment or delivery in respect of a Transaction or the compliance by Party B with any other material provision of this Agreement relating to such Transaction or (ii) the performance by Party B or the City, as Credit Support Provider of such. Party B, of any contingent or other obligation which Party B (or such Credit-Support Provider) has under any Credit Support Document relating to such Transaction, (b) any. assertion in any proceeding, -forum or action by Party B or the. City, as. Credit Support Provider of Party B, in respect of: Parry B or such Credit Support Provider, to the effect that performance under this Agreement or similar agreements is unlawful, or (c) the occurrence with respect to Party B' or the City,, as Credit Support Provider of -Parry B, of any event that constitutes an Illegality.. • "Indenture" means the Indenture of Trust, dated as of June 1, 2006, between Party B and The Bank of New York Trust Company, N.A., as trustee, under which the Bonds are .issued and secured, as the same may be amended and supplemented from time to tune in accordance,with its terms-and the terms hereof. "Initial ~'ransactions" has the meaning set forth in Part l of this Schedule. "Insurance Agreement" :means the.Insurance -and Reimbursement Agreement, dated as of Tune 1; 2006, by and among Party B, the. City, and MBIA. "Insurer" has the meaning set forth in Part 6 of this Schedule. "Insured transaction" has the meaning set forth in Part 6 of this Schedule. - "MBIA" has the meaning set forth in Part b of this Schedule. "Moody's" means Moody's Investors Service, Inc., or any successor thereto, • Schedule -Page 16 NYK 1204585-6.071371.0010 "Non-Relinquishment Event" has the meaning set forth in Part 7 of•this Schedule. "Optional Mid-Market Termination Date'' has the meaning set forth in Part 2(j) of this Schedule. "Optional Termination Notice" has the meaning set forth in Part 2(j) of this Schedule. "Reinsurance Agt~eement" has the meaning set forth in Part 6 of this Schedule. "Revenues" shall have the meaning set forth in the Indenture. • "Second to Pay Policy" has the meaning set forth in Part 6 of this Schedule. "S&P" means Standard and Poor's Ratings Services, a .division of The McGraw-Hill Companies, Inc., or any successor thereto. "Swap Insurance Policy" has the meaning set forth in Part 6 of this- Schedule. "Termination Notice" has the meaning-set forth in Part 2(i)(iii) of this Schedule. (e) Addition of Section 13 to the Agreement. This Agreement is hereby amended by adding-the following Section "13" hereto:- - "13. Relationship Between Parties. Each party will. be deemed to represent. to the other party on the. date on which it enters into: a Transaction that (absent a written agreement between the parties that expressly imposes affirmative :obligations to the contrary for that Transaction):- {i) Non-Reliance..: Its decision to .enter :into that Transaction has been based solely on the independent..: evaluation of itself and its representatives. and upon advice from such independent professional advisers and. such information as it has deemed necessary. or appropriate, and .not upon.. any advice, view, ' recommendation, counsel or representations of the other parry hereto except as expressly set forth in this Agreement, in any Credit Support Document or in any Confirmation. Any advice (written or oral) given by the other party hereto under or in connection with this Agreement or any Transaction is and will be merely incidental to the provision of such other party's services hereunder and does not and will not serve as'a primary-basis of any investment decision by it. It has not received from the other parry any assurance or guarantee as to the expected results of that Transaction. The other party hereto has not given to it (directly or .indirectly) any assurance, guaranty, yr representation whatsoever as to the expected or projected success, profitability, return, performance, result, effect, consequence or benefit (either economic, legal, regulatory, tax, financial, .accounting or otherwise) of-this Agreement, any Credit Support Document, any Transaction, or such other documentation. (ii)Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and. accepts, the terms, conditions and risks of-that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. Schedule -Page 17 • NYK 1204585-6.071371.0010 {iii) Status of Parties. The other party is not acting as a fiduciary for or as an advisor to it in respect of that Transaction." • {f) Set--off. .Each party to this Agreement (such -party, "Party X°') agrees that, upon the insolvency of Party, X or any of its Affiliates; or the default of Party X or any of .its Affiliates under any transaction.. with the other party hereto or any of such other party's Affiliates {such other parry or any of its Affiliates, a "Non-Defaulting Parry"),`each Non-Defaulting Party may, without prior notice to Party X: (a) liquidate any transaction between Party X and any Non-Defaulting Party (which. liquidation may include the conversion of amounts denominated in multiple currencies into a single currency if deemed necessary or desirable. by the Non-Defaulting Party), (b) reduce: any amounts ~ due and owing to Party X under-any-transaction between Party X and any ivon-Defaulting Party by setting off against such amounts any amounts due and owing to aNon-Defaulting Parry by Party X or any of Party X's Affiliates, and (c) treat all security for, and all amounts due and owing to Party X under, any transaction between Party X and any Non-Defaulting Party as security for all transactions between Party X •or -any of Party X's Affiliates and any Non=Defaulting Party; provided, hoyvever, .that (i) the exercise of the remedies described in clauses (a), {b) and (c) above. (or in any other similar provision in any agreement between the parties) shall (subject in .any .case to the provisions of Part 6 of this Schedule) be deemed to occur immediately subsequent: to, but independent of, the exercise of any netting, .liquidation, set-off or other similar provision. contained in any master agreement .between the parties; {ii) each provision and • agreement hereof shall be treated as independent from any other provision or agreement herein (other - than 'the, provisions of Part 6 of this Schedule, which shall remain fully- applicable) and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement, and (iii) the foregoing provisions- shall 'not apply to -the Gas Purchase Agreement (as defined in Party 2(i) of this Schedule). (g) Waiver of Right to Trial by Jury... Each party hereby irrevocably waives, to the fullest extent. • permitted by applicable law, any right it may have to a-trial by jury in respect of any suit, action or proceeding relating to this Agreement or any Credit Support Document. Each party {i) certifies that no representative, agent or attorney of the other party or any Credit Support Provider has represented, expressly or otherwise, that such other party -would not, in .the event of such a suit, action or proceeding, seek to enforce the foregoing waiver.-and (ii) acknowledges that it and-the other party have been induced to enter into this Agreement and provide for any Credtt Support Document, 'as applicable, by, among other things, the mutual waivers and certifications in this section. (h) Severability. In the event that any one or more of the provisions contained in this Agreement • should be held invalid,, illegal, or unenforceable in any respect; the validity, legality and enforceability of • the remaining provision"s contained herein shall not it any way be affected or impaired thereby; provided, however, that this severability provision will not be applicable if any provision'of Section 1(c), 2, 5, or 6 is held to be invalid or unenforceable. The parties shall endeavor, in_ good faith negotiations, to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which on the parties comes as close as possible to that of the invalid; illegal or unenforceable provisions; provided -that, for so Tong as the Swap Insurance Policy is in effect and has not' been relinquished pursuant to Part 7 of the Schedule to this Agreement, such provisions shall be acceptable to the Insurer. . (i) Acdcditi®rcal•R~presentations. For purposes of Section 3 of this Agreement, the following shall be added; inunediately following paragraph (e) thereof: "(f) No A ency. It is entering into this Agreement, any Credit Support Document to which it is a party, .each Transaction, and any other documentation relating Schedule -Page 18 • NYK 1204585-6.071371.OD10 to this Agreement. as principal (and not as agent or in any. other capacity, fiduciary or • otherwise). • (g) Due Execution. The individual(s) executing and delivering this Agreement .and any other documentation {including any Credit Support Document and each Confirmation) relating to' this Agreement to which it is a party or that it is required ` to deliver are duly empowered and authorized to do so, and it has duly executed.-and delivered this Agreement, each Confirmation and any Credit Support Document to which it is a party. (h) Swap. Agreement. This. Agreement and each Transaction is intended to constitute a "swap agreement" within the meaning of Ch!`C .Regulations Section 35.1(b)(1). O Eligible Contract Participant. It is an "eligible contract participant" within,the meaning Section 1(a)(12)`of the Commodity Exchange Act (7 U.S.C. 1a) as amended by the Commodity Futures Modernization Act of 2000. (j) Agreement not Standardized. Neither ~ thin Agreement .nor any Transaction is one of a fungible class ' of agreements that are standardized as to their material economic terms, within the meaning of CFTC Regulations Section 35.2(b): (k) -Creditworthiness aConsideration. The creditworthiness of the other party was or will be a material consideration in entering- into .or determining the terms of this Agreement and each Transaction, including pricing, cost or credit enhancement terms of the Agreement .or Transaction, within the meaning of CFTC Regulations Section . 35.2(c). (1) -Line of Business or Operations. It has entered ,into this Agreement (including each Transaction evidenced hereby) in conjunction with its line of business or the management of its financial' operations. (m) No Representations: It is not relying upon any representations (whether- - written or oral) of the. other party- other than the representations expressly set forth herein, in any Credit Support Document of in any Confhmation." (j) Acknowledgments.. Each parry acknowledges that: (i) the proprietary trading and .other activities and transactions of the other ,party .and ifs AfFiliates, including risk management transactions entered into: or to be entered:into in connection with, or in anticipation. of, the. establishment, maintenance or termination of a particular Transaction, may affect the level of a rrlarket price, rate or index underlying a Transaction, the price and terms on which such other party or other dealers are willing fo enter into or unwind or terminate a Transaction and the valuations provided by such other panty;. (ii) the "indicative" or "midmarket" valuations •of a Transaction provided to it by he other party from time to time may not represent (1) the price at which a new Transaction maybe entered. into, (2) the price at which the Transaction may be iquidated or unwound, (3) the price at which the Transaction is or would be carried on such other party's books;. (4) the, price at which a similar Transaction might 6e available from another dealer in the market or (5) the calculation or estimate of an amount that would be Schedule -Page 19 . NYK 1204585-6.071371.0010 payable following the designation of an Early Termination Date under Section 6(e) or otherwise of this Agreement;' • (iii) (I) absent an express written agreement to the contrary, neither party has undertaken an obligation to unwind or terminate a Transaction prior. to its scheduled termination date and (2) the provision. by a party of a valuation or indicative unwind price does not constitute an undertaking to unwind or terminate any Transaction at that price .unless the party providing such- price expressly so indicates in connection with the provision of such;price; (iv) (1) neither party has undertaken an obligation to quote a price or terms for entering into or unwinding or terminating a Transaction prior to its scheduled termination date, (2) if a party provides such a quote, the price or other terms. provided may not be the most favorable price or terms available in the market and (3) except as expressly agreed. in writing, the price and terms on which a Transaction is entered into or unwound or terminated have been or will be individually ,negotiated and no representations or warranties-are given with respect to such price or terms; (v) the parties are. dealing at arm's-length and .neither party is acting as a fiduciary or financial, investment, trading or other adviser for the other party; • (vi) it assumes sole responsibility for (1) evaluating and understanding all of the terms, conditions and risks (economic and otherwise) of this Agreement, any Credit Support Document, each Transaction and any other. documentation relating to this Agreement and (2) determining (x)-the suitability or appropriateness thereof in-light of its circumstances, (y) the extent to which it is necessary. or appropriate to consult with its own legal, regulatory, ,tax, business, .investment, financial, and accounting advisers or to .obtain additional information or analyses, and (z) whether the rates, prices or amounts and other terms of each Transaction and the indicative quotations (if any) provided by the other party are acceptable to it in light of relevant factors, including rates, prices, amounts or other terms available in the relevant market; and (vii) each party is entering- into, and determining its responsibilities in connection with, this. Agreement, any Credit Support Document and each Transaction. in reliance upon the accuracy of the representations and acknowledgments of the other parry contained in this Agreement, any Credit Support Document, each Confirmation and any other documentation relating to this Agreement.: (k) ~ Amendment to Section fi(e)(iii) of he Agreement. Section 6(e)(ii) of this Agreement shall be amended to include the following sentences after the existing sentence; "In addition to and notwithstanding anything. to the contrary in the preceding sentence of this Section 6(e)(iii), if an• Early Termination Date is deemed to have. occurred under Section 6(a) as a result of Automatic Early Termination, the Defaulting Party hereby agrees to indemnify the Non-Defaulting Party on demand against all loss or damage that the Non-Defaulting Parry may sustain or incur in respect of each Transaction as a result of movement in interest rates, currency exchange rates or market quotations between the Early Termination Date and the date (the `Determination Date") upon which the Non-Defaulting Party obtains, the information. confirming the existence of the Event of Default leading to the deemed Early Termination Date under Section 6(a) that has been Schedule -Page 20 NYK 1204585-6.071371.0010 derived from reasonably reliable sources of information, including publicly available information, such as Telerate, Reuters, Financial Times and The Wall. Street 7oumal. If the Non-Defaulting Party shall determine that it would gain or benefit from the movement in interest rates, currency exchange rates.. or market quotations between the Early Termination Date and the Determination Date, the amount of such gain or benefit shall be deducted from the amount payable by the -Defaulting- Party .pursuant to Section 6(e)(i)(4)~ The Determination .Date shall be a date -not later .than the date upon which creditors generally of the Defaulting Party are notified of the occurrence of the Event of Default leading to the deemed Early Termination Date: ' (1) Breach of Agreement. Section 5(a)(ii) of the Agreement is hereby amended in its entirety to read. as follows: . "(ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make .any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice of a Termination Event or, for so long as the Swap Insurance. Policy (as defined herein) is in effect and has not been relinquished pursuant to Part 7 of the Schedule to .this Agreement, any agreement or obligation under Section 4(a)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is .given to the parry; ' (m) Confirmation Procedures. For each Transaction that Party A and.. Party. B enter into hereunder, Party A shall promptly send to Party B a Confirmation setting forth the terms of such Transaction. Party B shall execute and. return the Confirmation to Party A, or request correction of any error within five Business Days of receipt. Failure of Party S to respond within such period shall not affect the validity or enforceability of such Transaction and shall. be deemed to be an affirmation and acceptance of such terms. (n) Amended and Restated Agreement. This Agreement amends and restates the ISDA Master Agreement, Schedule and Credit Support Annex, each dated as of Tune 27, 2006 (collectively, the "Original Agreement"), entered into:- between -the parties hereto, which shall be of no further force or effect, and all Transactions executed under the Original Agreement shall automatically, without any other or further action by the parties hereto, be deemed to be governed by and be apart of this Agreement. Part 6. Insurer Provisions. Notwithstanding anything in this Agreement to the contrary, the following provisions shall apply to the Initial Transactions (the "Insured Transactions") to which the Interest Rate Swap Insurance Policy bearing Policy No. 48199 as endorsed by (the "Swap Insurance Policy") and issued by MBIA Insurance Corporation ("MBIA") relates, which Swap Insurance Policy has been reinsured by National Public Finance Guarantee Corporation.. ("Insurer") pursuant to the Amended and Restated Quota Shaze Reinsurance Agreement, dated as of March 11, 2009 and effective as of January 1, 2009, by arid between MBIA and Insurer (the "Reinsurance Agreement") and the Financial Guaranty Insurance Policy Master Policy No. MBNA-0001, dated: as of ~ebrttary 17, .2009, issued by Insurer (the "Second to Pay Policy") unless and until such Swap Insurance Policy shall be deemed relinquished by the parties to this Agreement pursuant to Part 7 of this Schedule: (a) Insurer-directed termination. If any Event of Default under this Agreement occurs with respect to Party B as the Defaulting Party, then Insurer (so long as it has not failed to pay any payment Schedule -Page 21 NYK 1204585-6.071371.0010 ' due to Party A under the -terms of the. Swap Insurance Policy) shall have the right (but not: the obligation) upon notice: to Party A to designate, an Early Termination Date with respect to Party B in the same manner . and to the same extent•as Party A and with the same effect as if such designation were made by Parry A. For purposes of the foregoing sentence, an Event of Default with respect to Parry B shall be considered to be continuing, notwithstanding any payment by Insurer under the Swap Insurance Policy. The parties acknowledge that, except as the Swap Insurance Policy may be otherwise endorsed, unless Insurer designates an Early Termination Date (as opposed to merely consenting to such designation by one of the parties), ,payments due- from-Party B because an Early Termination Date has been designated will not be insured.. (b) Nr~ suspension..r~f payments. Notwithstanding Section 2(a)(iii) of this Agreement, Party A shall not suspend any payments due under an Insured Transaction under Section 2(a)(iii) unless: (i) Insurer is in default in respect of any payment obligations under the Swap Insurance Policy; or • (ii) Insurer has not provided Party A, in accordance with the terms of-this Agreement; wire: instructions for .payments. required by this Agreement. to be provided by Party B to . Party A, which notices Party B has .failed to provide, and,-Parry Ahas -given .three (3) Business Days' notice to Insurer of such failure. (c) Representations and agreements. Each party agrees that each of its representations and agreements in this Agreement is expressly made to and for the benefit of Insurer. (d) Third party beneficiary. Parry A .and Party B .hereby each acknowledge and agree that Insurer shall be an expressthird-party beneficiary (and not merely an incidental third-parry beneficiary) of this Agreement, any Credit. Support Document of Party A, and the .obligations of such party under any Insured Transaction, and as such, entitled to enforce the Agreement,-any such Credit Support Document, and the terms of any such.Insured Transaction against such party on its own behalf and otherwise shall be afforded a.ll remedies available hereunder or otherwise afforded by law against: the parties hereto to redress any damage or loss incurred by Insurer including, but not limited to fees (including professional fees), costs and expenses incurred by Insurer which are related to, or resulting from any breach by such party of its obligations hereunder or underany Credit Support Document.. (e) ~ Policy coverage. Party: A and Parry B hereby each acknowledge and agree, that Insurer's obligation with respect: to an Insured Transaction shall be limited to the terms of the Swap Insurance Policy. Notwithstanding Section 2(d) and any other provision of-this Agreement, Insurer shall not have • any obligation to pay: interest on any amount payable by Party B under this Agreement. (f) Subrogation. Party A and Parry B hereby acknowledge that to the- extent of payments . made by Insurer to Party A under the Swap Insurance Policy, Insurer shall be fully subrogated to the .rights of Party A against Party. B under the Insured Transaction to which such payments relate, including, but not limited to, the right to receive`payment from Party B and the enforcement of any remedies. Party- A hereby agrees to assign to Insurer its right to receive payment from Party B -under any Insured Transaction to the extent of any payment thereunder by Insurer to Party A. Parry B hereby acknowledges - and consents to the assigrunent by Party A to Insurer of any rights and remedies that Party A has under any Insured Transaction or any other document executed in connection herewith. . (g) Expenses. Party B agrees to reimburse Insurer inunediateiy and unconditionally upon demand for all reasonable expenses 'incurred by Insurer in connection with the enforcement by Insurer of • Schedule -Page 22 NYK 12Q4585-6.071371.0010 Party B's obligations under this. Agreement -and any other documents executed in connection. with the execution and delivery of this- Agreement, including; but not limited. to, fees (including professional fees), costs and expenses incurred by Insurer which are related to, or resulting from any breach by Party B of its obligations hereunder. (h) Assignments: Notwithstanding Section 7 of -this Agreement, no Insured. Transaction may. be assigned by either Party A or Party B without the prior written consent of Insurer,., provided that Party A may assign and delegate its: rights and obligations under this Agreement. or any Transaction to any Affiliate of Party A without the consent of Insurer if Party A provides a guaranty of such assignee's. , obligations in a form acceptable to Party B and Insurer. (i) Amendments/waivers, Section 8(b) of this Agreement is hereby. amended by (A) adding the phase "and Insurer" following the word "parties" in the third line thereof.and (B) adding the following sentence at the end of Section 8(b); "No amendment; modification or waiver in ;respect: of the Credit .Support. Documents will be effective unless in writing (including a writing evidenced by a facsimile transmission) and consented to in writing by Insurer or confirmed by an exchange of telexes or electronic messages on an electronic messaging system and consented to _in writing by Insurer." (j) , Notices. A copy of each notice or :other communication .between the. parties with respect to this Agreement must be forwarded to Insurer. For. the purposes of Section 10(a) of this. Agreement, for each Insured Transaction, a copy of all notices or communications to Party A or Party B shad also be sent to Insurer at: Address: 113 King Street, Armonk, NY 10504 Attention: Insured Portfolio Management -Global Utilities Facsimile No.: (914) 765-3799 _ Telephone No.: (914) 273-4545 (k) Reference Market-Makers. The definition of "Reference Market-makers" set forth in Section 12 of this Agreement shall be amended in its. entirety to read as follows: "Reference Market-makers" means four (4) leading dealers in the relevant swap market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among dealers having an office in .the same city. The. rating classification assigned to any outstanding long-term senior debt securities issued by such dealers shall beat least (1) Aa3 or higher as determined.by 1Vloody's, (2) AA- or higher as determined by 5&P or (3) an equivalent investment grade rating determined by anationally-recognized rating service acceptable to both parEies, provided,,however, that, in any case, if Market. Quotations cannot be determiaed by four . (4) such dealers, the party making the determination of the Market Quotation_may designate,. with the consent of the other party and Insurer, one (1) or more leading dealers whose long-term senior debt bears a lower investment.grade rating; provided, however, thatParty A is acceptable if it is rated at least at A3 by Moody's and A- by S&P. (1) Opinions: All opinions delivered with respect to an Insured Transaction pursuant to . Section 4(a) of this Agreement shall also be delivered to Insurer at -the address set forth in Section 10(a) of this Agreement. Schedule -Page 23 NYK 1204585-6.071371.0010 (m) Termination of .Reinsurance Agreement or Second to ,Pay Policy. , If either the Reinsurance Agreement or the Second to Pay. Policy is no longer in full force and effect or has been terminated for any reason, MBIA-Insurance Corporation shall be deemed to be the Insurer hereunder for all purposes and Natior3al Public Finance Guarantee Corporation shall have no further rights hereunder. ~aa t 7. Relinquishment of the Swap Insurance Policy. Provided that (I) no Event of Default under Section 5(a)(i) of this- Agreement. with Party B as a Defaulting Party shall have. occurred prior to December 31, ~ 2010 and shall be, continuing (any such Event of Default shall be deemed not to be continuing if either MBIA or Insurer has made a payment to Party A pursuant to the Swap Insurance Policy and Party B has reimbursed MBIA or Insurer, as applicable, for any such amount-paid by IVlBIA or Insurer), (II) no Event of Default under Section 5(a)(i) of this Agreement with Party B as a Defaulting Party shall have occurred on or after,December 31, 201.0, (III) no Event of Default with Party B as a Defaulting Party under any of clauses (ii) through and including (viii) of Section 5(a) of this Agreement shall have occurred and be continuing and (IV) no Termination Event. with Party B as an Affected Party shall have occurred and be continuing (any such Event of Default or Termination Event in clauses (II) through (IV) of this Part 7 shall be deemed to have occurred without regard to ~MBIA's or Insurer's payment under the Swap.Insurance Policy or other cure thereof, each, a "Non-Relinquishment Event"), Party A and Party B hereby agree that on December 31,'-2011, (w) the Swap Insurance Policy shall be deemed cancelled, (x) Party A shall be deemed to irrevocably. waive any and all rights it has under or in respect of the Swap Insurance Policy including, without limitation, any right to submit or make any claim for payment under the Swap Insurance Policy, (y) the Swap Insurance Policy shall no longer insure Party B's payment obligations to Party A under this Agreement and (z) the Transactions executed under-this Agreement shall no longer be Insured Transactions anal the provisions of Part 6 of this Schedule shall no longer apply to the Transactions. Each of Insurer and NIBIA agrees that upon such relinquishment of the Swap Insurance Policy: (a) each Transaction executed hereunder shall no longer constitute an Insured Transaction and (b) Insurer and MBIA have no further rights under the Transactions or this Agreement including without limitation any right to consent to any amendments to the Transactions or this Agreement. In the: event that aNon-Relinquishment Event exists on .December 30, 2011, .the Swap Insurance Policy shall not be cancelled or relinquished and shall continue to insure Party B's payment obligations to Party A~under this Agreement with.respect to the Transactions. In the event that aNon- Relinquishment Event exists on December 23, 2011, Party A hereby agrees to deliver written notice to Insurer and IVIBIA of the existence of such Non-Relinquishment Event. Parry B hereby agrees to deliver to Parry A, Insurer and MBIA notice of any Event of.Default with Party B as the Defaulting Party or Termination Event with Party B as the Affected Party immediately upon the occurrence of such Event of Default or Termination Event. .[Part Effectiveness of this Amended-and Restated. Agreement. This Agreement shall become effective, without -any, other or further action by the parties hereto, MBIA or Insurer, only upon the redemption in full prior to December 31, 2011, of all of the Vernon Natural Gas Financing. Authority Revenue Bonds (Vernon Gas Project), 2006 Variable Rate Series A, 2006. Variable Rate Series B and 2006 Variable Rate Series C Bonds in accordance with the Indenture. The date of any. such redemption shall be referred to herein as the "Amended Agreement Effective Date". Party B shall deliver written notice to Party A, Insurer and IViBTA of its intention to effect any such redemption after the Amended Agreement Effective Date at least thirty (30) days prior to the occurrence thereof and shall deliver notice to Party A, Insurer and MBA on the date of the occurrence thereof.] , Schedule - Page. 24 NYK 1204585-6.071371.0010 - A ' The parties executing this Schedule have executed the Master Agreement and have agreed as to the contents of this Schedule. CITIB~£, hT.h`.. By: Name: . Title: Date: VERN~N NATURAL GAS FINANCING AUTHORITY - _ By: Name: Title: Date: Consentedto and agreed to: MBIA INSURANCE CORPORATION By: Name: Title: Date: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: Name: Title: Date: S-1 NYK 1204585-6.071371.Q010 E7~IIBIT A to Schedule ' [FORM OF OPINION OF COUNSEL TO CTTIi~g l~~A Vernon Natural Gas Financing Authority 4305 Santa Fe Avenue Vernon, California 90058 MBIA Insurance Corporation . 113 King Street Armonk, New. York 10504 . National. Public Finance Guarantee Corporation 113 Icing Street Armonk, New York 10504 "Dear Sir:or Madam: I have acted as counsel to Citibank, N.A. ("Party A") in connection with the execution and delivery by (i) Party A of the ISDA Master Agreement dated as of June 27, 2006, as amended and restated as of May 2009, including the Schedule. and Credit Support Annex thereto (the "Master. Agreement"), between Vernon Natural Gas Financing Authority (the "Counterparty") and party A, as supplemented by five separate Amended and Restated Confirmations, each dated June 27, 2006,- as amended and restated as of May 2009 (the "Confirmations") entered into by the Counterparty and Party A (the Master Agreement, as supplemented by the Confirmations, the "Agreement"). ITl such capacity I have examined a copy of the Agreement. I. have also reviewed certain corporate proceedings of Party A and I have examined originals, or copies certified or otherwise identified to my satisfaction, of such corporate records of Party A, certificates of public officials and of officers and representatives of Party A, and such other documents as I have deemed necessary as a basis for the opinions hereinafter .expressed. In such examination, I have assumed the authenticity of all documents submitted to me as originals and the conformity with_the originals of all documents submitted to me as certified or otherwise satisfactorily identified copies.. I have also assumed that the Agreement has been duly executed- and delivered by Counterparty pursuant to appropriate corporate authority. The opinions`given below are limited to matters concerning the laws of the United States of America and the State of New York. Based upon the foregoing and having regard for such Legal considerations as I deem relevant, I am of the opinion that: 1. Parry A is a national banking association duly existing under the. laws of the United States of America. NYK 1204585-6.071371.0010 2. Party A has full corporate power to execute and deliver the Agreement and to perform its obligations thereunder. 3. Such actions have been duly authorized by a1T necessary corporate action and. do not violate, and are not in conflict with, any provision of law or of the articles of association of Party A. 4. No authorizations of, exemptions by or filings with any governmental or other authority are required to be obtained or made in connection vrith Party A's execution, delivery and performance of the Agreement. S. The Agreement has been duly executed and delivered by Party A and constitute legal,-valid and binding obligations of Party A enforceable against Parry A in accordance with their respective terms (subject to applicable banl~uptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws affecting creditors' rights generally from time to time in effect).. The enforceability of Party.A's obligations is also subject to general principles of equity. (regardless. of whether such enforceability is considered in a proceeding in equity or at law). -Very truly yours, Exhibit A -Page 2 NYK 1204585-6.071371.0010 EDIT B to 5chednle [FORM OF OPllVION OF COUNSEL TO PARTY B] [1Vlay 2009] [Amended Agreement Effective Date]. Citibank; N.A. 390 Greenwich Street New York, NY.10013 MBIA Insurance Corporation , Armonk, New York National Public'Finance Guarantee Corporation 113 King Street Armonk, New York 10504 Re: ISDA Master Agreement and related Schedule and Confirmations, each dated June 27, 2006, as amended and restated as' of May 2009 Ladies and Gentlemen: We have acted as .special counsel. to the Vernon Natural Gas Financing Authority (the "Authority") in connection wifh the ISDA Master Agreement, dated as of June 27, 2006 as amended and restated as of May 2009 ("Master Agreement"), between Citibank, N.A..(the "Counterparty") and the- Authority, as supplemented by the Schedule, dated as of June 27, 2006 as amended and restated as of May 2009 (the "Schedule") and'the confirmations. of five transactions entered into on June 27, 2006 each as amended and restated as of May 2009, between the Counterparty and the Authority (the "Confirmations"). The Master Agreement,. the Schedule and the- Confirmations (but not any other documents incorporated or referred to in any thereof) are collectively refer ed to herein as the "Agreement°'. . We understand that the Agreement was entered into by the Authority pursuant to Resolution No. adopted "on 'June 7, 2006 (the "Resolution"), in connection with issuance of [$200,000,000 aggregate principal amount of -its Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series A, $ aggregate principal amount of-its Variable Rate Revenue Bonds .(Vernon Gas Project), 2006 Series B, and $ aggregate principal amount of-its Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series C] (collectively, the "Bonds") under an Indenture of Trust, as supplemented by the First Supplemental Indenture of Trust (collectively, the "Indenture"), each dated as of June 1, 2006 and each between the Authority and The B ark of New York Trust Company,. N.A., asarustee. It is further our understanding that the Agreement was entered into by the Authority in order to, and based on a determination by its Board of Directors that-the Agreement is designed to, reduce the amount or duration of interest rate risk and result in an overall lower cost of borrowing in combination with the Bonds, and after due consideration of the creditworthiness of the Counterparty including its unsecured, long-term credit ratings from [three] nationally recognized rating agencies.. VTe have reviewed the Agreement,-the Resolution, an opinion of counsel to the Authority and . such-other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth herein. Nl'K 1204585-6.071371.0010 The opinion expressed herein is based on an analysis of existing laws, including Section 5922 of the California Government Code, 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, ar 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, and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal execution and delivery thereof by all parties and validity against -any parties other than the Authority. 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 opinion, referred to: in the. third paragraph. hereof. Furthermore, we have assumed, without undertaking to verify, compliance with all-covenants and agreements contained in the Agreement,. the Indenture and other relevant documents. In addition, we call attention to the fact that the rights and obligations. under the Agreement, the Indenture and other relevant documents and their enforceability may be subject to bankruptcy, insolvency, reorganization, .fraudulent conveyance, arrangement, moratorium and other laws relating to or affecting creditors' rights, to the. application of equitable principles (including without limitation concepts of mutuality,. reasonableness, good faith and fair dealing, and the possibYe unavailability of specific performance~or injunctive relief), to the exercise of judicial discretion in appropriate cases and to limitations- on legal remedies against. public entities in the State of California. We express no opinion with respect to any. indemnification, contribution, forfeiture,- set off, late payment charge, penalty, choice of law, choice of forum or waiver provisions .contained in the documents described herein, nor do we express any opinion with respect to the state or quality of title to or interest in any property. described in or as subject to the lien of the Agreement or any incorporated or related document or the accuracy or sufficiency of the description therein of, or ' the remedies available to enforce liens on, any such property. Based on and subject to the foregoing, and in reliance thereon; as of the date hereof; we are of the opinion that the Agreement is the valid-and binding obligation of the Authority. ` This opinion is furnished by us as special-counsel to the Authority and is limited to the laws of the State of California and applies only to the- swap transactions established 6y the Confirmations and not to any other swap or other transactions whether entered into pursuant to the Master ' Agreement and Schedule or .otherwise: No attorney-client relationship has existed. or exists. between our firm and the Counterparty (or any related. entity) in connection. with the Agreement. or by virtue of this opinion. -This opinion is delivered to the Counterparty solely -for its benefit in connection with - the Agreement and is not to be used,. circulated, quoted or otherwise referred o or relied upon by he Counterparty for any other purpose or by any other person.. Very truly yours, ' ORRICK, NF:RRINGTON & SUTCLIFFE LLP Exhibit B -Page 2 NYK 1204585-6.071371.0010 [FORM OF CITY ATTORNEY OPIl~TION] • [TO COME] Exhibit B -Page 3 NYK 1204585-6.071371.0010 EXHIBIT C to Schedule d~® International Swaps and Derivatives Association, Inc. " to the Schedule to the ISIIA MASTER AGREEMENT dated as of June 27, 2006 Amended and Restated as of~May 2009 betweer. VERNON NATURAL GA5 CITIBANK, N.A. and FINANCING. AUTHORITY' ("Party A") ("Party B") This Annex supplements, forms part of, and is subject to, the above-referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows: Paragraph 1. Interpretation " (a) De,~initions and Inconsistency.. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule,. this Annex will prevail, and, in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. (b) Secured Party and Pledgor. All references in this Annex to the "Secured Parry" will be to either party when acting in that capacity and all corresponding references to the Pledgor will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a parry to this Annex, all references herein to that party as the Secured Party. with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security- interests. and secured parties. Paragraph 2. Security Interest Each party, as the Pledgor, hereby pledges to the other parry, as the Secured Party, as security for its Obligations and grants to the Secured Party a first priority continuing security. interest in, lien on and right of Set-off against all Posted- Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security. interest .and .lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party. NYK 1204585-6.071371.0010 Paragrapli 3. Credit Support Obligations (a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made. by the Secured Parry on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer .Amount, then the Pledgor will Transfer to the Secured Party Eligible Credit.Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph i3}. Unless otherwise specified in •Paragraph 13, the "Delivery Amount" applicable to the Pledgor for any Valuation.Date will equal the amount by which:. (i) the Credit Support Amount exceeds (ii) ~ the. Value as of that Valuation Date of all Posted Credit Support held by the Secured Party. (b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following. a Valuation Date, if the Retum Amount for that Valuation Date equals. or exceeds Secured Party's Minimum Transfer Amount, then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in that demand having a Value as of the-date of Transfer as close as practicable to the applicable Return Amount. (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "Return Amount" applicable to the Secured Parry for`any Valuation Date will equal the amount by which: (i) the Value as of .that Valuation Date of all Posted... Credit Support held bythe Secured Parry exceeds (ii) the Credit Support Amount. "Credit Support Amount" means, unless otherwise .specified iri Paragraph 13, for .any Valuation Date (i) the Secured Party's Exposure for that Valuation. Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor's Threshold; provided,. however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero. Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and Substitutions (a) Conditions Precedent.. Each Transfer obligation of the Pledgor under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that: (i) no Event of Default, Potential -Event of Default or Specified Condition has occurred and is continuing with respect to the other .party; .and (ii) no Early Termination Date for which any unsatisfied payment obligations exist has .occurred or been designated as the result. of an Event of Default or $pecified Condition with respect to the other party. Exhibit C -Page 2 NYK 1204585-6.071371.0010 (b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support. or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made -not later than the. close of business on the next Local Business Day; if a•demand is made after the Notification Time, then the relevant Transfer will. be made not later than the close of business on the sectnd Local Business Day thereafter. (c) Calculations. All calculations of Value and. Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. ,The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of .its calculations. not-later than the Notification Time on-the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation). (d) Substitutions. (i) Unless otherwise specified in Paragraph 13, upon notice to the, Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the "Substitute Credit Support"); :and (ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the. Pledgor in its notice not later than the Local Business Day. following .the date on which. the Secured. Party .receives the Substitute. Credit Support, unless otherwise. specified in:Paragraph 13:(the "Substitution Date"); provided that the Secured Partywill only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support: Paragraph 5: Dispute Resolution If a party (a "Disputing Party") disputes (n the Valuation Agent's calculation of a Delivery Amount or a Return Amount or (Il) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, " then (1) the Disputing Parry will notify the other party and the Valuation Agent (if the Valuation Agent is -not the other .party) not later than the close of business on .the Local Business Day following (X) the date that the demand is made under Paragraph 3 in case of (n above or the date of Transfer in the case of (Il) above,. (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not ater than the. close of business on the Local-Business Day following (X) the date that the demand is made under~Paragraph 3 in the case of (1) above or (Y) the date of Transfer in the case of (I)) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the Resolution Time, then: " (i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure. and the Value as of the Recalculation "Date by: (A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not. in dispute; (B) calculating the Exposure for the.. Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid-marketfromReferenceMarket-makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provaded that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be .used for that Transaction (or Exhibit C -Page 3 NYK 1204585-6.071371.0010 . • Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent's original calculations will be used .for that Transaction (or Swap Transaction); (C) utilizing the procedures specified in Paragraph 13 for calculating the Value,~if disputed, of Posted Credit Support. (ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13. Following a recalculation pursuant to -this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) not later than the Notification~Time on the Local Business Day following the Resolution Time. The appropriate party -will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3)'above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer. Paragraph' 6. ~ Uolding and Using Posted Collateral (a) Care of Posted Colldteral Without. limiting the Secured Party's ,rights -under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the` safe. custody of all Posted Collateral-to the extent required by .applicable law, and in any: event the Secured Party will be deemed to . have exercised reasonable care if it exercises at least the same degree. of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thereto. (b) eligibility to Hold Posted Collateral; Custodians. (i) General Subject to the satisfaction of any conditions specked in Paragraph 13 for holding Posted. Collateral, the Secured. Parry. will. be entitled to hold Posted .Collateral or to appoint an agent (a "Custodian") to hold Posted Collateral for .the Secured Party. TJpon notice by the Secured Parry to the Pledgor of the appointment of a Custodian; the Pledgor's obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting. (ii) Failure to Satisfv Conditions. If the Secured Party or its Custodian fails to satisfy conditions for holding. Posted Collateral;-then upon a demand made. by the Pledgor, the Secured Party will, not later than five Local Business Days after the demand, Transfer or cause its Custodian . to Transfer all Posted Collateral held by it to a Custodian that satisfies those conditions.or to the Secured Party if it satisfies those conditions. (iii) Liabili The Secured Party will be .liable for the acts or .omissions of its- Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions. (c) Use of.Posted Collateraii Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs 3, 4(d)(ii), 5, 6(d) and 8 if the Secured Party is not a Defaulting Party' or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to Exhibit C -Page 4 NYiC 1204585-6.071371.0010 the Secured Party, then the Secured Party -will, notwithstanding Section 9-207 of. the New ;York Uniform . Commercial Code, have the right to: • (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Forted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including. any equity or right of redemption by the Pledgor; .and (ii) register any Posted- Collateral in the-name of the Secured Parry, its Custodian or a nominee for either. For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3~ and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold. all Posted Collateral and to receive Distributions made thereon; regardless of . whether the Secured Party has`exercised any rights with respect to any Posted :Collateral pursuant to (i) or (ii) above. (d) Distributions and Interest Amount. (i) Distributions.. Subject to Paragraph 4(a),'the Secured Party receives or is deemed to receive Distributions. on a Local Business Day, it will Transfer to the Pledgor not later. than the following Business Day any Distributions it receives or is deemed to receive to the extent-that a Delivery'Amount would not be created or :increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). (ii) 'Interest Amount, Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends orother-amounts paid`or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Parry will Transfer to the Pledgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be: created or increased by that Transfers as calculated. by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose}. The Interest Amount or portion thereof not Transferred pursuant - to this Paragraph-will constitute Posted Collateral.in the form of Cash and will be subject to the security interest granted under Paragraph 2.. Paragraph 7. Events of Default For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect to a party if: " (i) ` that party fails (or fails to cause its Custodian) to make, when: due, any.Transfer of Eligible Collateral, Posted Collateral or the Interest Arriount, as applicable,. required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that Party; (ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any. of the rights specked in Paragraph 6(c) and that failure continues for five Local ]3usiness Days after notice of that failure is given to that party; or (iii) " that party. fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure-continues for 30 days.-after notice of that failure is given to thatparty. Exhibit C -Page 5 • NYK 1204585-6.071371.0010 Paragraph 8. Certain Rights and Remedies (a) Secured Party's Rights and Remedies. If at any time (1) an Event of Default or Specified Condition with respect to the Pledgor has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless the Pledgor has paid in full-all of its Obligations that-are then due, "the Secured Parry may exercise one or more of the following rights and remedies: (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party; (ii) any other rights and remedies available to the Secured Party under the terms of Other Posted Support, if any; (iii) the right to Set-off any amounts payable by the Pledgor with .respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured .Parry to Transfer that Posted Collateral); and (iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or• private sales or other dispositions with such notice; if any, as may be required under applicable law, free -from any claim or right. of any nature .whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor (with the Secured Party having the right . to purchase any or all of the Posted Collateral to be sold) and to apply the proceeds (or the Cash equivalent thereof) from. the liquidation of the Posted Collateral to arty- amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may. elect. . Each party acknowledges and agrees. that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized. market, and, accordingly, the Pledgor is not entitled to prior notice of any sale. of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be•waived. (b) ' Pledgor's Rights-and Remedies. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or-Specified Condition with respect to the Secured Parry, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its. obligations that are then due under Section 6(e) of this Agreement): (i) the Pledgor may exercise all rights and remedies. available to a Pledgor- under applicable law with respect to Posted Collateral held by the Secured Parry; (ii) the Pledgor may exercise. any other. rights and remedies available to the Pledgor under the terms of Other Posted Support, if any; (iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and (iv) to the extent that Posted Collateral or the .Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may: Exhibit C -Page 6 NYK 1204585-6.071371.0010 (A) Set-off any amounts payable- by the Pledgor with respect to -any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party- (or any obligation of the Secured Party to Transfer that Posted .Collateral); and (B) to the extent that the Pledgor does not-Set-off under (iv)(A) .above, withhold payment of any remaining. amounts payable by the Pledgor with respect to any .Obligations, up to the Value of any remaining Posted Collateral held by the Secured Parry, until that Posted Collateral is Transferred to the Pledgor. (c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds., and .Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and. 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for -any .amounts. remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b): (d) Final Returns. When no amounts are or thereafter may become payable.:by the Pledgor with respect to any. Obligations (except for any potential liability under Section 2(d) of this Agreement), the . Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount, if any. Paragraph 9. Representations Each party represents to the other party: (which representation will be deemed to be repeated as of each date: on which it, as the Pledgor, Transfers Eligible Collateral) that: (i) it has-the power to grant a security interest in and lien>on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien; (ii) it,is the sole owner of or otherwise has the right to Transfer all Eligible: Collateral it Transfers to the Secured Party hereunder, free and clear. of any security interest, lien, .encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2; (iii) upon the Transfer of any Eligible Collateral to the Secured Farty under the terms of this Annex, the Secured Parry will. have a valid and perfected. first priority security interest therein (assuming that .any central clearing corporation. or any .third-parry financial intermediary or other entity not within the control of the Pledgor involved in-the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and (iv) the ,performance by it of its obligations under this Annex will not result in the creation of any se~uriry interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2. Paragraph 10. Expenses (a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its,own costsand expenses in connection with performing'its obligations under this Annex and neither.-party will be liable for any costs and expenses incurred by the other party in connection herewith. Exhibit C -Page 7 NYK 1204585-6.071371.0010 (b) .Posted Credit Support The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit support held by the Secured Parry upon becoming. aware of the same, regardless of whether any portion of that Posted Credit. Support is. subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and- charges that result from -the exercise of the Secured Party's rights under Paragraph 6(c). (c) Liquidation/Application of Posted Credit Support. All reasonable -costs and expenses incurred ~ by or on behalf of the Secured Party or the Pledgor- in connection .with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. Paragraph 11. Miscellaneous (a) Default Interest. A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obliged to pay the Pledgor (to .the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by file Value of the items of property that were required to be Transferred, from (and including) the date that the Posted Collateral or Interest Amount was required to be .Transferred to (but excluding) the date of Transfer of that. Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily-compounding and the. actual number of days elapsed. . (b) Further Assurances Promptly following a demand made by a party, the other party will execute, deliver, file -and record any financing ;statement, specific assignment or other document and take any othex action that may be necessary or desirable and reasonably requested by -that party `to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, ,to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a. release of a security interest on Posted- Collateral or an InterestAmount. - (c) Further Protection. The Pledgor will. promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted, by it under Paragraph 2, unless that. suit, action, .proceeding or lien.. results from the exercise of the Secured Party's. rights under Paragraph 6(c). (d) ~ Good Faith and Commercially Reasonable Manner Performance of all obligations under - this Annex, including, but not limited to, all calculations, valuations and. determinations made by either parry, will be made in good faith and in a commercially. reasonable manner. (e) I)errrunds and Notices All demands and notices given by a party under this.Annex will be made as specified in the Notices Section of .this Agreement, except as otherwise provided in Paragraph 13. (f) Sped, fications of Certain Matters. Anything referred to in this Annex as being specified in Paragraph. l3 also may be specked in one or more Confirmations or other documents and this Annex will 'be construed accordingly. Paragraph 12. De~nitioris . , As used in this Annex: "Cash" means the lawful currency of the United States of America. Exhibit C -Page 8 NYK 1204585-6.071371.0010 ~ "Credit Support Amount" has the meaning specified in Paragraph 3. "Custodian" has the meaning specked in Pazagraphs 6(b)(i) and 13. "Delivery Amount" has the meaning specified in Paragraph 3(a). "Disputing Party" has the meaning. specified in Paragraph 5. • "Distributions'.' means, with respect to Posted Collateral other than Cash,. all principal, interest and • other payments •and distributions of cash or other property with respect thereto, regardless of whether the- Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral. . or, with respect to any Posted Collateral in the form of Cash, arty .distributions on•that collateral, unless .otherwise specified herein. • "Eligible Collateral".means, with respect. to a parry, the items,- if any, specified as such for that party in Paragraph 13. - "Eligible Credit Support" means Eligible Collateral and Other Eligible Support. "Exposure" means for any. Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed.as a negative number) pursuant to Section 6(e)(u)(2)(A) of this Agreement as if all Transactions (or Swap Transactions). were being terminated as of the relevant Valuation Time;. provided that Market Quotation will be determined by the Valuation Agent using. its estimates at mid-market of the amounts that would be ,paid -for Replacement Transactions (as that term, is defined in a .definition of "Mazket Quotation"). "Independent Amount" `means, with respect to. party, the amount specified as such for that party in Pazagraph 13; if no amount is specified, zero. "Interest Amoufzt" means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows: (x) the amount of Cash on that day; multiplied by (y) the Interest Rate in effect for that day; divided by (z) 360. • "Interest Period" means the period from (and including) the 1astLocal Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local- Business. Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Parry) to (but excluding), the Local Business Day on which the current Interest Amount is to be Transferred. "Interest Rate" means the rate specified in Paragraph 13. • Exhibit C --Page 9 NYK 1204585.6.071371.0010 "Local Busisiess Day,"unless otherwise specked in Paragraph 13, has .the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to .include a Transfer under this Annex. "l?linimum Transfer Amount" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero.. "Notification Time" has the meaning specified in Paragraph 13. • "Obligations" means, with respect to a party, all present- and- future obligations of that parry under this Agreement and any additional obligations specified for that party in Paragraph 13. "Other Eligible Siepport" means, with respect to a .parry, the items, if any, specified as such for that Party in Paragraph 13. "Other Posted Support" means all Other Eligible Support Transferred to the Secured Party that remains in effect for the benefit of that Secured Party. "Pledgor" means either .parry, when that party (i) receives, a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii)'has Transferred Eligible Credit Support under Paragraph 3(a). "Posted Collateral" means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Parry under this Annex and not Transferred to the Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph 8. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph. 6(d)(ii) will constitute Posted Collateral in the form of Cash. • "Posted Credit Support" means Posted Collateral and Other Posted Support. - "Recalculation Date" means the Valuation Date that gii~es rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to-the resolution of the dispute, then the "Recalculation Date" means the most recent Valuation Date. under Paragraph 3. "Resolution Time" has the meaning specified in Paragraph 13. "Return Amount" has the meaning specified in Paragraph 3(b). "Secured Party" lrleans either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support. "Specified Condition" means, with respect to a-party, any event specified as such for that party in Paragraph 13. . "Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i). "Substitution Date"has the meaning specified in Paragraph 4(d)(ii). "Threshold" .means, with respect to a party, the amount specified as such for that party in Paragraph 13; if nv amount is specified, zero. Exhibit C -.Page 10 NYK 1204585-6.071371.0010 "Transfer" means, with. respect to any Eligible Credit, Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable: (i) in the case of Cash, payment or delivery by wire transfer into one or more bank. accounts specified by the recipient; (ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute: a legally valid transfer to the recipient; (iii) in the cast; of securities' that can be paid or delivered in book-entry, the giving of written instruments to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient. if complied with o result in a legally effective transfer of the relevant interest to the recipient; and (iv) in the case of Other Eligible. Support or Other Posted Support, as specified ,in Paragraph 13. "Valuation Agent" has the meaning. specified in Paragraph 13. "Valuation Date" means each date specified in or otherwise determined. pursuant to Paragraph 13. "Valuation Percentage" means, for any item of Eligible Collateral, the percentage specified in Paragraph 13. "Valuation Time" has the meaning specified in Paragraph 13. "Value" means for any Valuation Date or other date for which Value is calculated, and subject to Paragraph 5 in the case of a dispute, with respect to: (i) Eligible Collateral or Posted Collateral that is: (A)' Cash, the amount thereof; and (B) . a security, the bid price obtained `by the Valuation Agent multiplied by the applicable Valuation Percentage, if any; (ii) Posted Collateral that consists of -items that are not specified as Eligible Collateral, zero; and (iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13. Exhibit C -Page 11 NYK 1204585-6.071371.0010 Paragraph 13.: Elections and Variables ' (a) Security Interest for "®bligations". The term "Obligations" 'as used in this Annex means, with respect to a party, all present and future obligations under this Agreement. (b) Credit Support Obligations.- (i) Deliverv Amount. Return Amount and Credit Support Amount• Addition to Paragra hp_3. (A) "Delivery Amount" has the'meaning set forth in Paragraph 3(a). (B). "Return Amount" means, -for any Valuation Date,. an amount equal to the amount by which (i) the Value as ofthat Valuation Date of all Posted Credit Support held by the. Secured Party :exceeds (ii) the Credit Support Amount; provided, however, that following .such return, the Value of all Posted Credit Support -held by the :Secured. Party must at least equal the Credit Support Amount. (C) "Credit Support Amount" means for any Valuation Date (i) the Secured. Party's Exposure -for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable.. to the Pledgor, if any,. minus (iii) the Pledgor's Threshold, if any; provided, however, that (x) in the-case where the sum. of .the Independent Amounts ' applicable to the Pledgor exceeds zero, the .Credit .Support Amount will. not be less than the sum of all Independent Amounts applicable.to the Pledgor and (y) in all other cases, the Credit Support Amount will be deemed to be zero whenever the calculation of the Credit Support Amount yields an amount less than zero. (ii) Eligible Collateral. The items set forth on Schedule Thereto -will qualify as "Eligible Collateral" for the party specified.. (iii) Other Eli ibg le Support: There shall be no "Other Eligible Support" for either parry for purposes of this Annex. - (iv) Thresholds. (A) `Independent Amount" shall mean, with respect to Party A and Party B, zero ('CTSD 0.00). . (E) "Threshold" as of any date shall be the amount set forth in Schedule II hereto under the caption "Threshold" opposite -the Credit Rating of a party by S&P and Moody's. If at any time either Parry A or Party B shall not have a Credit Rating from either SBzP or•Moody's, .the Threshold for such party- shall. be zero (USD 0.00). In the . event of a split Credit'Rating by. S&P and Moody's, the Threshold shall be the amount opposite the lower of the Credit Ratings on Schedule II hereto. Notwithstanding the foregoing, the Threshold with respect to both Parry A and Party B shall be zero upon and at all times after the delivery of a Collateral Election Notice by Parry B pursuant to Part 2(j) of the Schedule to the Agreement. (C) "Minimum Transfer Amount" as of any date shall be the amount set forth in Schedule II hereto under the caption "Minimum Transfer Amount" opposite the Exhibit C -Page 12 NYK 1204585-6.071371.0010 ' Credit Rating of a party by S&P and Moody's. If at any time either Party. A or Party B shall not have a Credit Rating from either S&P or Moody's, the Minimum Transfer Amount for such party shall be zero- (USD 0.00). In the event of a split Credit Rating by S&P and Moody's, .the Minimum Transfer Amount shall be the amount opposite the lower of the Credit Ratings on Schedule II hereto.. "Minimum Transfer Amount" means, with respect to Party B, as Secured Party prior to -the- delivery of: a Collateral Election Notice, $100,000. Notwithstanding the foregoing, the Minimum Transfer Amount with respect to both Party A and Party B shall be zero. upon and at all times after the delivery of a Collateral Election Notice by Party B pursuant to-Part 2(j) of the Schedule to the .Agreement. {D) Rounding. The Delivery Amount and the Return Amount will not be rounded.. (c) Valuation and Timing. (i) _ "Valuation Agent" means, for purposes of Paragraphs 3 and 5, the party making the demand under Paragraph .3, and,. for purposes of Paragraphs 4(d)(ii) and 6(d), the Secured Parry receiving or deemed to receive: the Substitute. Credit Support or the Distributions of the Interest Amount, as applicable, provided, however, that. for purposes of calculating- the Value of Eligible Credit Support or Posted Credit Support, Party A shall be the Valuation Agent. (ii) "Valuation Date" means, with respect to the determination of Exposure, the first Local Business Day of each month or any other Local Business Day upon. the reasonable request of either party, and with respect to the determination of ,Value of Eligible Credit Support or .Posted Credit Support, the first Local Business Day of each. week or any other Local Business Day upon the reasonable-request ofeither-party. (iii) ~ "Valuation Tyme".means, with respect to the determination of Exposure, Value of Eligible Credit Support-and Posted Credit Support,. the. close of business on the Local Business Day immediately before the Valuation Date or date of calculation,:as~applicable. (iv) "Noti, fication .Time" means -10:00 a.m., New York .time on a Valuation Date; provided, however, that, .notwithstanding Paragraph 4(b), (x) with regard to Transfers of Eligible Credit Support or.Posted Credit Support in the form of Cash, if a request for Transfer is made by the Notification Time, then the relevant Transfer shall be made not later than the close of business on the day on .which such request is received, or, if such day is not a Local Business Day or, if .such request. is received after the Notification Time, not later than the close of business on the next Local Business Day, and (y) with regard to Transfers of other forms of Eligible. Credit Support or Posted Credit Support,. the relevant Transfer. shall be made in accordance with Paragraph 4(b). Notwithstanding anything herein to the contrary, with regard to Transfers of Independent Amounts, the relevant Transfer shall be made by the close of business on the second Local Business Day following the Trade Date of the applicable Transaction. (d) Conditions Precedent and Secured Party's Rights and Remedies. There shall be no "Specified Condition" with respect to Party A or Parry B. (e) Substitution. (i) "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). Exhibit C -Page 13 NYK 1204585-6.071371.0010 (ii) The following provision shall be inserted at the end of Paragraph 4(d) {ii): provided, further however, that-any request to substitute must seek the substitution of Eligible Credit'Support or Posted Credit Support in an amount in excess of the Pledgor's Minimum Transfer Amount". {f) Dispute IPesolution. (i) "Idesotution ~'ime" means 1:00 p.m., New York time, on the Local Business Day following the date on which notice is given that gives rise to a dispute under Paragraph 5. . (ii) Value. • For the purpose of Paragraphs 5(i)(C) and S(ii), Parry A will determine the Value of Eligible Credit Support. or Posted Credit Support consisting of securities based upon the bid quotations of any generally recognized dealer (which may include an affiliate of Party A); and adding thereto any interest accrued but not paid to any person with respect to such securities through the day. on which the. determination is made and multiplying the sum by the .applicable Valuation Percentage,. if any. (iii) Alternative. The provisions of Paragraph 5 will apply, provided, however, that in the event of a dispute regarding the Value of securities which constitute Eligible Credit Support or Posted Credit Support, Party B may submit bid quotations from two other recognized dealers in which case the Value of such securities shall be the mean of the two quotations submitted by Party B. (g) ~ Holding and Using Posted Collateral. (i) Eli ibility to Hold Posted Collaterah Custodian. A party or its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b) provided that such party is not a Defaulting Parry. The •Custodiari for Party B shall be as set forth in a written notice delivered to Party A to the address and in the manner as set forth in Paragraph 13(k). The Custodian for Party A shall be as set forth in a written notice delivered to Party B to the.address and in the manner as set forth in Paragraph 13(k). (ii) ~ Use of Posted Collateral. The provisions of Section 6(c) will apply to both parties. (h) ..Distributions and dnterest Amount. (i) InterestRate. The "Interest Rate"•-will be the overnight. ask rate in effect for such day, as set forthopposite the caption "ON" under the heading "EURO-DOLLAR" on Telerate .Page 4756 or any successor page thereto on or about 11:00 a.m., New York time, on such. day, or, if no successor page is quoted, any page agreed to.by the parties. (ii) Transfer of Interest Amount. Transfers of the Interest Amount will be made in arrears on the last Local Business Day of each calendar month. (iii) Alternative to Interest Amount. The provisions of Paragraph 6(d){ii) will apply, provided, however, that •the Interest Amount will compound daily. (i) Additional Representations. Party A and Parry B each represent to the other (which representation"-will be • deemed to be repeated as of each date on which it, as the Pledgor, Transfers Eligible Collateral) that: Exhibit C -Page 14 . NYK 1204585-6.071371.0010 (i) No consent, approval or other authorization of any governmental authority is "required in connection with the Transfer of Eligible Collateral hereunder. (ii) Its assets exceed its liabilities. (j) Other Eligible Support and Other Posted Support. (i) "Value" with .respect to Other: Eligible Support and Other Posted Support shall not be applicable.• (ii) • ~ "Transfer" with respect to Other Eligible Support and Other Posted Support shall not be applicable. (k) Demands and Notices:. All demands, specifications and notices. under this Annex will be made pursuant to the Notices Section of this. Annex, provided, that the address: for Party. A for such purposes shall be: Citibank, N.A. Collateral. Management Group 333 West 34~' Street, 2°a FL New York, NY 10001 Telephone no. (212) 615-8589 Facsimile no. (212) 615-8595; and, the address for Party B for such purposes shall be: Vernon Natural Gas Financing Authority . 4305 Santa Fe Avenue .Vernon, California. 90058 - Attention: Authority Attorney Telephone No.: (323) 583-8811 Facsimile No.: (323) .826-1439 (1) Other Provisions. - (i) Form of Collateral. All non-Cash Eligible Credit Support or Posted Credit " Support .Transferred to either party shall be recorded in book entry form by a Federal Reserve Bank, as fiscal agent, and Pledgor shall (i) deliver to Secured Party a listing of such credit support by title (or series), unpaid principal amount and maturity date and (ii) cause a Federal Reserve bank to hold such credit support for the account. of ..the .Secured.. Party or .the Custodian (in a custody account), as applicable, in the name of the Secured Party or Custodian, as applicable. (ii) Care of Posted Collateral, .Supplementing--the. provisions of Paragraph 6(a), the Secured Party shall also be deemed to have exercised reasonable care if it takes such- action for that purpose as the Pledgor shall reasonably request in writing (but..no omission to comply with. any such request shall of itself be deemed a failure to exercise reasonable care). (iii) Use of Posted-Credit Support. , Supplementing the provisions of Pazagraph 6(c), the Secured Party may notify the obligors on any Posted Collateral to make payment to the Exhibit C -Page 15 NYK 1204585-6.071371.0010 .Secured Party or its nominee or transferee of any amounts due thereon and to take control or grant its nominee the right to take control of any proceeds of any,Posted Collateral. (iv) .Collateral Account; Place of Transfers. Transfers of Eligible Credit Support by the Pledger to the Secured Parry shall be made for credit to an acGOUnt of the Secured Party at such commercial • bank in New York 'City as shall be designated by the Secured Parry. The Pledgor agrees that the Secured Party shall have absolute control over the Pledgor's' Collateral Account and that the Pledgor shall have no right to make any withdrawal from the Pledgor's Collateral. Account. Upon request of the Secured Party,. the Pledgor shall use. its best efforts to cause such hank to deliver a `letter to the Secured .Party, in form and substance reasonably satisfactory to the'Secured Party, in which such bank agrees to waive or acknowledges its waiver, with respect to such account, of any general lien and any right of setoff against the Pledgor. (v) U:S. Bankruptcy Code Provisions.- (x) All Transfers of Posted Collateral hereunder (including the .grant of a security interest in Posted Collateral hereunder) are "transfers" "under" the .Agreement within the meaning of Section 546(g) of the United States Bankuptcy Code, and (y) to the extent any Transaction constitutes a "forward contract" within the meaning of the United States Bankruptcy Code, transfers of'Posted Collateral under the Annex. are intended to be "margin payments" within the meaning of Section 1.01(38) of the United States Banlmzptey Code.: (vi) Notices. Notwithstanding Section 12 of'the Agreement, any communication by a party ("X") to the• other party ("Y") requesting the delivery or return of Eligible Credit Support or Posted Credit Support. pursuant to Section 3 of this Annex may be given orally (including telephonically •to the telephone number of Y set forth an subparagraph. (k) above, or any other telephone number Y may notify X of in writing) during normal business hours in the .city in which Y is located on any Local Business Day to any officer, employee or agent of Y which identifies himself or herself as being permitted to receive oral. communications on behalf of Y .with respect to this Annex. Any such oral communication will be deemed received and effective when actually received by any. such officer, employee or agent of Y. X shall deliver to Y, within one-Local Business Day following receipt of an oral request by Y, a writEen confirmation of any such oral communication. (vii) ' Secured Parfv's Rights and Remedies. , (a) Supplementing the provisions. of Paragraph 8(a), the Pledgor irrevocably appoints the Secured Party its attorney-in-fact,- with full- authority in its place and stead and in its name or otherwise, from time to time in the Secured Parry's discretion, to take any action and to execute any instrument which the Secured Parry. may deem necessary or advisable to accomplish the purposes of than Annex, including without, limitation: (i) to ask, demand, collect, sue for, recover, compromise, receive • and give acquittance and receipts for moneys due and to become due under or in respect of any Posted Collateral and to perform all other acts as fully as though the Secured Party were the absolute owner of the Posted Collateral for all purposes, (ii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper, in connection with clause (i) above, and (iii) to file any claims or take any action or institute any proceedings which the Secured Party may deem- necessary or desirable for the collection of any of the Exhibit C -Page 16 NYK 1204585-6.071371.0010 Posted Collateral or otherwise to .enforce •the rights of the Secured. Party... with ;respect to • any Posted: Collateral. (b) Further supplementing the,provisions of Paragraph 8(a) and 13(a), the Secured Party may apply Eligible Credit Support or Posted Credit Support to pay any amounts due by Pledgor to Secured Party pursuant to this Agreement, including any Transaction, and any other amounts then due by Pledgor to Secured Party or its Affiliates under any other contractual arrangements between them.. (viii) Actions Hereunder. Either party.. may, take any actions hereunder, including liquidation rights; through its Custodian;.. and, in the case of Party A, through Citigroup Global Markets Inc. or any~successor Yo either, as agent for Party A. (ix) Severability. Any .provision of this Annex which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of-such prohibition or unenforceability ,without invalidating the remaining provisions. hereof, and, any such .prohibition or unenforceabiliry in any jurisdiction shall not invalidate or rend. er unenforceable such provision in any other jurisdiction. (x) Successors. This Annex and all obligations of the Pledgor hereunder, shall be binding upon the successors and assigns of the Pledgor and shall, together with the rights and remedies of the Secured .Party hereunder, inure. to the benefit of the .Secured Party and its respective successors and assigns. (xi) No -Third Party. Riuhts. This Annex has been and is made. solely for the benefit of Party A and Party B and their respective assigns, and no other person, partnership, association, corporation or other entity shall.-acquire or have any right under or by virtue of this Annex.. (xii) Agreement as to .Single. Secured Party and Pledgor. Prior to the delivery by Party B of a Collateral Election Notice, Party A and Party B agree that, notwithstanding anything to the contrary. in the recital to this Annex, Paragraph 1(b) or Paragraph 2 or the definitions in Paragraph 12, (a) the -term "Secured Party" as .used in this Annex means only Party B, (b) -the .term "Pledgor" as used in this Annex means only Party A, (c) only Party A makes the pledge and grant in Paragraph: 2, the acknowledgment in the final... sentence of .Paragraph 8(a) and the representations in Paragraph 9, and (d) only Party A will be required to make Transfers of Eligible Credit Support hereunder. Upon delivery of a Collateral Election Notice, Party B shall be obligated to deliver collateral pursuant to this Annex and the first two'. sentences of this clause -(xii) shall be deemed deleted. • • Exhibit C -Page 17 NYK 1204585-6.071371.0010 IN WITNESS WI~REOF, the parties hereto have executed this Annex as of the date. first above written. CITIBANI~, N.A. and VERNON NATURAL GAS FINANCING AUTIIORI'd'Y By: By: Name:. Name: Title: Title: Date: ~ Dater Consented to and agreed to: MBIA INSURA1~tCE CORPORATION By: Name: Title: Date: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: Name: Title: Date: • S-1 NYK 1204585-6.071371.0010 Schedule I Valuation party A percentage and • party B (A) Cash [X] 100% (B) (x) Negotiable debt obligations issued by the U.S. Treasury Department. or the Government National Mortgage. Association ("Ginnie- Mae"), or (y) mortgage backed securities issued by Ginnie Mae (but with respect to either. (x) or (y) excluding interest only or principal only stripped securities, securities , representing residual interests in mortgage pools, or securities that are not listed on a national securities exchange or regularly quoted in a national quotation service) and in each case having a remaining maturity of: (i) less than one year jX] 100% ' (ii) one year or greater but less than 10 years [X] 98% (iii) 10 years or greater [X] 95% (C) (x) Negotiable debt obligations issued by the [XJ 95% Federal Home. Loan Mortgage Association ("Freddie Mac") or the .Federal National Mortgage Association {"Fannie Mae") or (y) mortgage-backed securities issued by Freddie Mac or Fannie Mae but excluding interest only or principal only stripped securities, securities representing residual interests in mortgage pools, or securities that are not listed on a national securities exchange or regularly quoted in a national quotation service. (D) Any other collateral acceptable to the [X] Secured Party. in its sole discretion. * The Valuation Percentage shall be agreed upon by Party A and Party B upon the delivery of any such collateral Schedule I -Page 1 NYK 1204585-6.071371.0010 Schedule II 1Vloodv's 5&P ~reshtsld Ndanarnum transfer eta®uiii A2 or above A or above Infinite Not applicable A3 or below A3 or below $0 $0 Schedule II -Page 1 NYK 1204585-6.071371.0010 Citibank, N.A. 333 West 34th Street, 2nd Floor New York, NY 10001 McDermott Draft 4/16/09 AMEI~ED AND ItESTAT~D CONFIRMATION Vernon Natural Gas Financing Authority 4305 Santa Fe Avenue Vernon, California 90058 Attention: Manuela Giron Facsimile No.: (323) 826-1438 Telephone No.: (323) 583-8811 x39.8 Tax ID: 65-1282734 June 27, 2006 TRAI~ISACTIOI~ Ladies and Gentlemen: The purpose of this letter agreement (this "Confirmation") is to amend and restate the terms and conditions of the Transaction. entered into between Vernon Natural Gas Financing Authority ("Parry B") and Citibank, N.A. ("Party A") on the Trade Date referred to below (the "Original Transaction," as amended .and restated as of May 2009, the "Transaction"). This Transaction is an "Insured Transaction" and as such is subject to the provisions of Part 6 of the Schedule hereinafter referred to, provided that if the Swap Insurance Policy is relinquished pursuant to Part 7 of the Schedule to the Agreement (as defined below), this Transaction shall no longer be an Insured Transaction and shall no longer be subject to the provisions of Part 6 of the Schedule to the Agreement. The defmitions and provisions contained in the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc., the "Definitions") -are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions. and this Confirmation, this Confirmation will govern. 1. This Confirmation supplements, forms part of, and is subject to, the Master Agreement dated as of June. 27, 2006, as supplemented and amended. by the Schedule and the Credit Support Annex relating thereto (each as amended and restated as of -May 2009, the "Agreement"), between Parry A and Party B. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. Reference No.: MS06709, as amended and restated as of May 2009 h1YIC 1204605-5.071371.0010 2. .The terms of the particular Transaction to which this Confirmation relates are as follows: Notional Amount:. $50,000,000, subject to reduction as set forth in Annex I attached hereto, Trade Date: June 27, 2006 Effective Date: June 27, 2006 Termination Date: August 1, 2021 Business Days: ~ New.York, London FIND AMOUNTS: Fixed Rate Payer: ply B Fixed Rate Payer Payment The first Wednesday of each calendar month, Dates: commencing on August 2, 2006, and terminating on the Termination Date, subject. to adjustment in accordance with the Following Business Day Convention. Fixed Rate Payer Period The first Wednesday of .each calendar- month, End Dates: commencing on August. 2, 2006, and terminating on the Termination Date, subject to adjustment in accordance with the Following Business Day Convention. Fixed Rate: 3.683% Fixed Rate Day Count.. 30/360 Fraction: FLOATING AMOUNTS: Floating Rate Payer: Parry A Floating Rate Payer. Weekly, on each Wednesday, commencing on July Payment Dates: 12, 2006, and terminating on the Termination Date, subject to adjustment in accordance with the Following.Business Day Convention. Reference No.: MS06709, as amended and .restated as of May 2009 _2_ NYIC 1204605-5.071371.0010 Floating Rate Payer Weekly, on each Wednesday, commencing on July Period End Dates: 12, 2006, and terminating on -the Termination Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate: 62.6% ofUSD-LIBOR-BBA Designated Maturity: One Month Reset Dates: The Effective Date and. .thereafter on each ~Iednesday, subject to adjustment in accordance with the Following Business -Dag- Convention. Notwithstanding anything in the Definitions to the contrary, the .Floating Rate for each Reset Date shall be determined based on USD-LIBOR-BBA appearing on the lZeuters Screen I.IBOROI as of 11:00 a.m., London time, on the day that is one London Banking Day preceding that Reset Date. Floating Rate Day Count Fraction: Actual/360 Compounding: Inapplicable Method of Averaging: Inapplicable 3. Relationship Between Parties. Each parry represents to the other party that: (a) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Transaction. and as to whether this Transaction is appropriate or proper for it based upon its own judgment :and upon. advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction; it being understood. that information and explanations related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction. It has not received from the other party any assurance or guarantee as to the expected results of this Transaction. (b) Evaluation and Understanding. It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of thin Transaction. It is also capable of assuming, and assumes, the fuiancial and other risks of this Transaction. Reference No.: MS06709, as amended and. restated as of May 2009 -3- NI'IC 1204605-5.071371.0010 (c) Status of Parties. The- other party is not eating as a fiduciary or an advisor for it in respect of this Transaction. (d) Risk :Management. It has entered into thin Transaction for the purpose of (i) managing its borrowings or investments, (ii) hedging its'underlying assets or liabilities or (iii) in connection with its line of business. 4. Account Details Payments to Party A: Citibank, N.A. ABA # 021000089 Account No. 00167679 Financial Futures .Reference: IvIS06709 Payments to Party B: Vernon Natural Gas Financing Authority The Bank of New York Trust Company, N.A. ABA# 021000018 GLA# 111-565 Acct# 800457 Reference: Vernon Citi-Gas Account Attn:, Aurora Quiazon 5. Optional Termination. Party B may, on any Business Day, terminate this Transaction in whole or in part, by providing prior written notice to Party A designating a day not earlier than the thirtieth (30th) day following the day on which such notice is effective as the "Optional Termination Date". In the case of a partial termination, the notice shall also state the portion of the Notional Amount of the Transaction to be terminated. The amount due with respect to any such-termination in whole or in part shall be determined pursuant to Section 6 of the Agreement as if (a) the Optional Termination Date is the Early Termination Date for this Transaction (or the portion of the Notional Amount being terminated), (b) Party B is the sole Affected Party (for all purposes other than the election to terminate), (c) this Transaction (or the portion of the Notional Amount being terminated) is the sole Affected Transaction, (d) Market Quotation and Second Method are selected for purposes ofPayments on Early Termination, and (e) in the case of a partial termination, the. portion of the Notional Amount to be terminated on the Early Termination Date shall be the amount so designated in the aforementioned notice from Party B, and -the parties shall execute an amendment to the Confirmation relating to this Transaction to amend the Notional Amount and any other terms necessary to reflect the terms of such reduction.. Notwithstanding anything herein to the contrary, the parties will be obligated to pay any accrued amounts that would otherwise be due on the Optional Termination Date. Party B agrees that it shall not optionally terminate this Transaction in whole or in part unless it shall have sufficient. funds to pay any amount which may be payable to Party A in connection with such optional termination as provided herein, and as a .condition to such optional termination, Reference No.: 1VIS06709, as amended and restated as ofMay 2009 -4- NYK 1204605-5.071371.0010 Party A may request written evidence .from Parry B in the .form of a certificate of an authorized officer of Party B certifying as to the availability of such funds. 6. Fee. At .the request of -Party B, -Party A has paid to Bond Logistix LLC, as financial advisor to Party B, a fee in the amount of US $41,157.50 for its services to Party B in connection with the Original Transaction. 7. Amended and Restated Transaction. This .Confirmation .amends and restates the Original .Transaction, which shall be of no further force or effect, and neither Party A nor Party ~ shall owe and amounts or have any other obligation thereunder except f®r any unpaid accroa<ed amounts. 8. Swap Insurance Policy. Party A, Party B, MBIA Insurance Corporation ("NiBIA") and National' Public Finance Guarantee Corporation ("Insurer") hereby agree that the Swap Insurance Policy issued by MBIA with respect to the Original Transaction shall, apply to this Transaction, as amended and restated herein. 1~IA and Insurer further acknowledge .that all references in the Swap Insurance.- Policy to (a) the "Confiirmations" shall be deemed to include this Confirmation .evidencing this Transaction as amended and restated herein and (b) the "Agreement" shall be deemed to include this Confirmation evidencing this Transaction as amended and restated herein. If you have any questions regarding this letter agreement, please contact the Swap Opea-ations Department in New York at'212-723-6320, Reference No.: MS06709, as amended and restated as of May 2009 -5- NYIC 1204605-5.07]371.0010 Please confirm that the foregoing correctly sets forth the terms of our agreement by executing the copy of this Confirmation enclosed: for that purpose and returning it to us. Yours sincerely, CITTBANK, N.A. By: Authorized Signatory Name: Accepted and confix~ned as of the trade date: tJEP~TON 1.A1UI2AI~ GAS FINANCING AUTgI®I~1;~ By: Name: Manuela Giron Title: Executive Director The undersigned hereby consents and agrees to the amendments made herein (including, without limitation, Paragraph ~ hereof). 'The undersigned also hereby affirms that the validity and enforceability of the Swap Insurance Policy is not affected by the amendments contained herein and that the Swap Insurance Policy remains in full force and effect. . MBIA INSURANCE CORPORATION By: Name: Title: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: Name: Title; Reference No.: MS06709, as amended and restated as of May 2009 S-1 Vernon Confirmation-2006 A-1 NYK 1204605-5.071371.0010 ANNEXI to Confirmation.-dated June 27, 2006, as amended and restated as of May 2009, . between. Citibank, N.A. and the Vernon Natural Gas Financing Authority ~ Motional Motionall2eductioxl From ~i Including To But Egcludan~ Amount (USD) Amount (USD) Effective Date 08/01/2007 50,000,000 2,500,000: 08/01/2007 08/06/2008 47,500,000 2,600,000 ~a . • 08/06/2008 08!05/2009 44;900,000 2,700,000 08/05/2009 08/04/2010 42,200,000 2,800,000 08/04/2010 .08/03/2011 39;400,000 2,900,000 08/03/2011 08/01/2012 36,500,000 3,050,000 '08/01/2012 08/07/2013 33;450,000 .3,.150,000 08/07/2013 08/06/2014 30,300,000 3,275,000 08/06/2014 08/05/2015 27,025,000 3,425,000 08/05/2015 08/03/2016 23,600,000 3,550,000 08/03/201.6 08/02/2017 20,050,000. 3,700,000 08/02/2017 08/01/2018 16,350,000. 3,550,000 08/01/2018 08/07/2019. 12,500,000 4,000;000 08/07/2019 08/05/2020 8,500,000 4,1.75,000 08/05/2020 Termination Date 4,325,000 .4,325,000 Reference No.: MS06709, as amended and restated as of May 2009 NYK 1204605-5.071371.0010 ~ xh~~~ a~~ 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 May 13, 2009 VIl-~ U.S. MAIL I~r. Sewn J. Baiter Proj er_t Manager Orrick, Herrington & Sutcliffe LLP 777 S. Figueroa St.,.Suite 3200 Los Angeles, CA 90017-5855 Re: Vernon and Vernon. Natural Gas Financir;g Authority 2009 Bonds Dear Sean: Enclosed please find the following regarding the:.above- rzferenced matter: 1. Five (5) signed original Certificates Regarding Insurance- . Agreement with the-City seal. 2. Five (5) signed City Attorney Opinion Letters to Citgroup Global Markets Inc, and E.J. De LaRosa & Cam., Inc. 3. Five (5) signed City Attorney Gpnion Letters to MBIA Insurance Corporation and National Public Finance guarantee .Corporation. 4. Five (5) signed Legal Counsel Opinion.. Letters to MBIA Insurance Corporation and National Publi.^_ ~itlance Guarantee Corporation. _5. Five. (5) signed Legal-Counsel Opinion Letters to Citibank, N.A. Ea~cCusiveCy Indust~iaC Mr. Sean J: Baxter May 13, 2009 Page 2 6. -Five (5) signed Legal Counsel Opinion Letters to Orrick, Herrington & Sutcliffe.LLP. If you have any questions, please contact me. Very tr y Yours, f Harrison City Attorney JH:j1 Enclosures cc: Ms. Nelly Giron, City Clerk (w/original opinion letters of City Attorney and. Legal Counsel.). - Resolution Nos. VNGFA- 0013/0015 and Resolution Nos.. 9915 and 9923)_ $419,400,000 CITY OF VERNON ELECTRIC SYSTEM REVENUE BONDS 2009 SERIES A . CERTIFICATE REGARDING INSURANCE AGREEMENT I, Manuela Giron, City Clerk of the City of Vernon (the "City"), HEREBY CERTIFY. that attached hereto is a true, complete and correct .copy of -the Insurance and Reimbursement Agreement, dated as of June 1, 2006, by and among the Vernon Natural Gas Financing Authority (the "Authority"), the City and MBIA Insurance Corporation .MBIA") (the "Insurance Agreement") and that the Insurance Agreement has not .been amended, modified, supplemented. (except pursuant to the Amendment.Number One to Insurance and Reimbursement Agreement, dated as of May 1, 2009 ("Amendment Number One")), or rescinded, and the Insurance Agreement, as amended by Amendment Number One is in full force and effect as of the date hereof. IN WITNESS WHEREOF, I have hereunto set my hand this 13th day of May, 2009. CITY OF VERNON . \ By: ~ . Manu ron City Clerk [SEAL] OHS West:260651338.2 ~ ~ ~ ~ ~ ~ r 1 tl4f~ `~~i t l L t i ,J 1 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 May 13, 2009 Citigroup Global Markets Inc. E.J. De La Rosa & Co., Inc. One Sansome Street 10866 Wilshire Boulevard .San Francisco, California 94104 Los Angeles, CA 90024 City of Vernon Electric System Revenue Bonds, 2009 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 by the City of its $41.9,400,000 Electric System Revenue Bonds, 2009 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) Resolution No. 9915, adopted by the City Council of the City on April 13, 2009 and Resolution No. 9923, adopted by the City Council of the City on April 27, 2009 (collectively, the "Resolutions"), (b) the Indenture of Trust, dated as of September 1, 2008, as supplemented, including as supplemented by the Second Supplemental Indenture of Trust providing for the issuance of the Bonds, dated as of May 1, 2009 (as so supplemented, the "Indenture"), by and between the City and The Bank of New York Mellon Trust Company, N.A. (the "Trustee"), (c) the Continuing Disclosure Agreement, dated as of May 1, 2009 (the "Continuing Disclosure Agreement"), by and between the City and the Trustee, and (d) the Contract of Purchase, dated May- 6, 2009 with respect to the Bonds (the "Purchase Contract"), between the City and Citigroup Global Markets. Inc., acting on behalf of itself and as representative of E.J. De La Rosa & Co., Inc.; and (iii) the Official Statement of the City, dated May 6, 2009 (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." Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Indenture. E.xcCusiveCy IndustriaC Citigroup Global Markets Inc. E.J. De La Rosa & Co., Inc. May 13, 2009 Page 2 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 its charter and duly qualified to furnish electric service within the City. 2, The Resolutions were duly adopted at meetings of the City Council of the City, which were .called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Resolutions are in full force and effect and have not been amended, modified or supplemented (except as they amend, modify or supplement each other). 3. 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.. 4. The Official Statement and the Legal Documents have been duly authorized, executed and delivered by the City and, assuming that the Legal Documents constitute the legal, valid and binding agreements of the other respective parties thereto, the Legal Documents constitute the legal, valid and binding agreements of the City enforceable against it_in accordance with their respective terms, except, in each case, as enforceability may be limited by laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles if equitable remedies are sought. 5. No approval, consent or authorization of any governmental or public agency, authority or person is required for the execution and deliveryby 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. 6. 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. 7. .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 3 above or in connection with the transactions contemplated by the Official Statement, or the validity of the proceedings taken by City of Vernon; 4305 Santa Fe Avenue, Vemon, California 90058 -Telephone (323) 583-8811 Citgroup Global Markets Inca E.J. De La Rosa & Co., Inc. May 13, 2009 Page 3 the City in connection with the authorization, execution or delivery of the Legal Documents; or wherein any unfavorable decision, ruling or finding would adversely affect the transactions contemplated by any of .the Legal Documents or the Official Statement, or that, in any way, would adversely affect the. validity or enforceability of any of the Legal Documents or, in any material respect, the ability of the City to perform its obligations under any of the Legal Documents. Based on my participation in the preparation of the Official Statement, I advise -you that no facts came. to my,attention which caused me to believe that the Official Statement as of its date, and as of the date hereof (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 or DTC which I expressly exclude from the scope of this paragraph .and as to which I 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. Respectfull submitted, t J rrison rty Att rney JH:jI City of Vernon, 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 l ~ ~a ~ ~ , } _ p4~Y[ 1F YN-1Y ~ ~ ~ ~5 ~ ~ ~~J~( ~ MXLT.~r~ 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 May 13, 2009 MBIA Insurance Corporation -113 King Street Armonk,. New York 10504 National Public Finance- Guarantee Corporation 113 King Street Armonk, New York 10504 City of Vernon Electric System Revenue Bonds, 2009"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 by the City of its. $419,400,000 Electric System Revenue Bonds, 2009 Series A. As such counsel, I have examined and am familiar with all necessary documentation of the City relating to the authorization, execution and delivery of the Insurance and Reimbursement Agreement, dated as of June 1, 2006, by and among the Vernon Natural Gas Financing Authority (the "Authority"), 'the City and MBIA Insurance Corporation ("MBIA"), as amended by Amendment Number One to Insurance and Reimbursement Agreement, dated as of May 1, 2009 (as so amended, .the "Insurance Agreement"), by and among the Authority, the City, MBIA and National Public Finance Guarantee Corporation. I am of the opinion that: 1. The- City has the authority and right to execute, deliver and perform the Insurance Agreement, and the City has complied with the provisions of applicable law in all matters relating to the transactions contemplated by the Insurance Agreement. 2. The Insurance Agreement has been duly authorized, executed and delivered by the City and, assuming that the Insurance Agreement constitutes the legal, valid and binding Ea~cCusiveCy IndustriaC MBIA Insurance Corporation National Public Finance Guarantee Corporation May 13, 2009 Page 2 agreement of the other respective parties thereto, the Insurance Agreement constitutes the legal, valid and binding agreement of the City enforceable against it in accordance with its respective terms, except as enforceability may be limited by laws. relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights .generally. and by the application of equitable principles if equitable remedies are sought. . 3. 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 Insurance. _ Agreement or the performance by the City of its obligations thereunder. 4. The execution and delivery of the Insurance Agreement 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. 5. 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 1 above or the validity of the proceedings taken by the City in connection with the authorization, execution or delivery of the Insurance Agreement, or wherein any unfavorable decision, ruling or finding would adversely affect the transactions contemplated by the Insurance Agreement, or that, in any way, would adversely affect the validity or enforceability of the Insurance Agreement or, in any material respect, the ability of the City to perform its obligations under the Insurance Agreement. Respectfull submitted, Q J A. 'son ty Att ey JH:jI City of Vernon, 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 yy ~rIA1V~ ~ ~ w curwu Vernon Natural Gas Financing Authority 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 May 13, 2009 Orrick, Herrington & Sutcliffe LLP 777 South Figueroa Street, Suite 3200 Los Angeles, California 90017 City of Vernon Electric System Revenue Bonds, 2009 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 Vernon Natural Gas Financing Authority (the "Authority") in connection with the Indenture of Trust, dated as of June 1, 2006, as supplemented, including as supplemented by the ,Second Supplemental Indenture of Trust, dated as of May 1, 2009 (as so supplemented, the "Indenture"), by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as successor trustee (the "Trustee"). As such counsel, I have examined and am familiar with (i) those documents relating to the existence, organization and operation of the Authority; and (ii) all necessary documentation of the Authority relating to the authorization, execution-and delivery of (a) Resolution No. VNGFA-0013, adopted by the Board of Directors of the Authority on April 13, 2009 and Resolution No. VNGFA-0015, adopted by the Board of Directors of the Authority on April 27, 2009 (collectively, the "Resolutions"), (b) the Indenture, (c) the Escrow Agreement, dated as of May 1, 2009 (the "Escrow Agreement"), by and between the City and the Trustee, (d) .the Insurance and Reimbursement Agreement, .dated as of June 1, 2006, as amended by the Amendment Number One to Insurance and Reimbursement Agreement, dated as of May 1, 2009 (as so amended, the "Insurance Agreement"), each by and among the Authority, the City and MBIA Insurance Corporation relating to the financial guaranty insurance policies for the Vernon Natural Gas Financing Authority Variable Rate Revenue Bonds- (Vernon Gas Project), 2006 Series A, 2006 Series B and 2006 Series C (the "Authority Bonds") and certain interest rate swap transactions entered into by .the Authority in connection with the Authority Bonds and (e) the ISDA Master Agreement, dated as of June 27, 2006, as amended and restated as of May. 13, 2009, between the Authority and Citibank, N.A., as supplemented by the Schedule thereto, a .Credit Support Annex and five Confirmations, each dated June 27, 2006,. each as amended and restated as of May 13, 2009 (such ISDA Master Agreement, as supplemented by such Schedule, such Credit Support Annex and such Confirmations being collectively referred to as the "Interest Rate Swap Agreement"). The Indenture, the Escrow Agreement, the Insurance Agreement and the Interest Rate Swap Agreement are collectively referred to herein as the "Legal Documents." Orrick, Herrington & Sutcliffe LLP May 13, 2009 Page 2 Capitalized terms used herein and not otherwise defined shall have the meanings given such terms in the Indenture. I am of the opinion that: 1. The Authority is a joint exercise of powers agency, duly created, organized and existing under the Act and the Joint Powers Agreement. 2. The Resolutions were duly adopted at meetings of the Board of Directors of the Authority, which were called and held pursuant to law and with all public notice required bylaw and at which a quorum was present and acting throughout and the Resolutions are in full force and effect and have. not been amended, modified or supplemented (except as they amend, modify or supplement each other).. 3. The Authority has the authority and right to execute, deliver and perform the Legal Documents, and the. Authority has complied with the provisions of applicable law in all matters relating to the transactions contemplated by the Legal Documents. 4. The Legal Documents have been. duly authorized, executed and- delivered by the Authority 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 Authority enforceable againsf it in accordance with their respective terms, except, in .each case, as enforceability may be limited by -laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' .rights- generally and by the application of equitable principles if equitable remedies are sought. 5. No approval, consent or authorization of any governmental or public agency, authority or person is required for the execution and delivery by the Authority of the Legal Documents or the performance by the Authority of its obligations thereunder. 6. The execution and delivery of the Legal Documents by the Authority 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 Authority, or commitment, agreement or other instrument to which the Authority. 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 Authority 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 Authority and its affairs. 7. 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 Authority or any entity affiliated with the Authority 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 Authority referred to in paragraph 3 above, or the validity of the proceedings taken by the Authority in connection with the authorization, execution or delivery of any of the Legal Documents, or wherein any unfavorable decision, ruling or finding would adversely affect the transactions contemplated by any of the Legal Documents, or that, in any way, would adversely affect the validity or enforceability of any of 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 Orrick, Herrington & Sutcliffe LLP May 13, 2009 Page 3 the Legal Documents or, in any material respect, the ability of the Authority to perform its obligations under any of the Legal Documents. Respectfu y submitted, J 'son L gal Co nsel to the Authority 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 oN rwr~~ ~o ~.e~'.,AO~6 , s~~ Vernon Natural Gas Financing Authority 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 May 13, 2009 Citibank, N.A. 390 Greenwich Street New York, New York 10013 City of Vernon Electric System Revenue Bonds, 2009 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 Vernon Natural Gas Financing Authority (the "Authority") in connection with the Indenture of Trust, dated as of June 1, 2006, as supplemented; including as supplemented by the Second Supplemental Indenture of Trust, dated as of May 1, 2009, by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as successor trustee (the "Second Supplemental Indenture"). As such counsel, I .have examined and am familiar with all necessary documentation of the Authority relating to the authorization, execution and delivery of the Second Supplemental Indenture and the ISDA Master Agreement, dated as of June 27, 2006, as amended and restated as of May 13, 2009, between the Authority and Citibank, N.A., as supplemented bythe Schedule thereto, a Credit Support Annex and five Confrmations, each dated June 27, 2006, each as amended and restated as of May 13, 2009 (such ISDA Master Agreement,- as supplemented by such Schedule, such Credit Support Annex and such Confirmations being collectively referred to as the "Interest Rate Swap Agreement" and, together with the Second Supplemental Indenture, 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 its charter and duly qualified to furnish electric service within the City. 2. The Authority has the authority and right to execute, deliver and perform the Legal Documents, and the Authority has complied with the provisions of applicable law in all matters relating to the transactions contemplated by the Legal Documents. Citibank, N.A. May 13, 2009 Page 2 3. -The Legal Documents have been duly authorized, executed and delivered by the Authority 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 Authority enforceable against it in accordance with their respective terms, except as .enforceability may be limited by laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' .rights generally and by the application of equitable principles if equitable remedies are sought. 4. No approval, consent or authorization of any governmental or public agency, - authority or person is required for the execution and delivery by the Authority of the Legal Documents or the performance by the Authority of its obligations thereunder. 5. The execution and delivery of the Legal Documents by the Authority .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 Authority, or commitment, agreement or other instrument to which the Authority. 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 Authority 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 Authority 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 Authority or any entity affiliated with the Authority 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 Authority referred to in paragraph 1 above, or the validity of the proceedings taken by the Authority in connection with the authorization, .execution or delivery of any of the Legal Documents, or wherein any unfavorable decision, ruling or finding would adversely affect the transactions contemplated by any of the Legal Documents, or that, in any way, would adversely affect the validity or enforceability of any of the Legal Documents or, in any .material respect, the ability of the Authority to perform its obligations under the Legal Documents. Respectfully submitted, "1 J . H 'son L 1 Co sel to the Authority JH:jI 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 M N,9 W~ ~ 4 ,~9 6 , o~'=~ Vernon Natural Gas Financing Authority .4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 May 13, 2009 MBIA Insurance Corporation 113 King Street Armonk, New York 10504 National Public Finance Guarantee Corporation 113 King Street Armonk, New. York 10504 City. of Vernon Electric System Revenue Bonds, 2009 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 Vernon Natural Gas Financing Authority (the "Authority") in connection with the Indenture of Trust, dated as of June 1, 2006,: as supplemented, including as supplemented by the Second Supplemental Indenture of Trust, dated as of May 1, 2009, by and between the Authority and The Bank of New -York Mellon Trust Company, N.A., as successor trustee (the "Second Supplemental. Indenture"). As such counsel, I have examined and am familiar with all necessary documentation of the Authority relating to the authorization, execution and delivery of the Second Supplemental Indenture and the Insurance and Reimbursement Agreement, dated as of June 1, 2006, by and among the Authority, the City and MBIA Insurance Corporation ("MBIA"), as amended by Amendment Number One to Insurance and Reimbursement Agreement, dated as of May 1, 2009 (as so amended; the "Insurance Agreement" and, together with the Second Supplemental Indenture, the "Legal Documents"), by and among the Authority, the- City, MBIA and National .Public Finance Guarantee Corporation. I am of the opinion that: 1. The Authority has the authority and right to execute, deliver and perform the Legal Documents, and the Authority has complied with the provisions of applicable law in all . matters relating to the transactions contemplated by the Legal Documents.. 2. -The Legal Documents have been duly authorized, executed and delivered by the Authority and, assuming- that the Legal Documents constitute the legal, valid and binding MBIA Insurance Corporation National Public Finance Guarantee Corporation May 13, 2009 Page 2 agreements of the other respective parties thereto, the Legal Documents constitute the legal, -valid and binding agreements of the Authority enforceable against it in accordance with their respective terms, except as enforceability may be limited by laws relating to bankruptcy, insolvency or other laws affecting the enforcement of creditors' rights generally and by the application of equitable principles if equitable remedies are sought. 3. No approval, consent or authorization of any governmental or public agency, authority or person is required for the execution and delivery by the Authority of the Legal Documents or the performance. by the Authority of its obligations thereunder. 4. The execution -and delivery of the Legal Documents by the Authority 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 Authority, or commitment, agreement or other instrument to which the Authority is a partyor by which it or its property is bound or affected, or any ruling, regulation, ordinance, judgment, order or decree to which the Authority 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 Authority and its affairs. 5. 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 Authority or any entity affiliated with the Authority 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 Authority referred to in paragraph 1 above, or the validity of the proceedings taken by the Authority in .connection with the. authorization, execution or delivery of any of the Legal Documents, or wherein arty unfavorable decision, ruling or finding would adversely affect the. transactions contemplated by the Legal Documents, or that, in any way, would adversely affect the validity or enforceability of any of the Legal Documents or, in any material respect, the ability of the Authority to perform its obligations under any of the. Legal Documents. Respectfully submitted, J . Ha ' on L 1 Coun 1 to the Authority JH:jI 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 o~ ~Eq `,~A ~~.e.x ~ ~ . ; ~s~ur.~x ~aa°y MEMORANDUM FROM THE CITY ATTORNEY INTER-DEPARTMENT MEMORANDUM DATE: May 13, 2009 ' TO: Manuela Giron, City Clerk FROM: Jeff A. Harrison,. City Attorney RE: Amended and Restated Confirmations for 2009 Bond Swaps Dear Nelly: Attached please find a copy of the signed confirmations for Interest. Rate-Swap MSCS; Ref. Nos. AUCTK and AUCTM respecting the above- referenced mattex.. JH:em ' Attachments (Resolution Nos. 9923 and VNGFA-0015) Margan Stanley Municipal Capital Markets Date: December 2, 2004, as amended and EXECUTION COPY restated as of March 16, 2006-and Apri127, 2009 To: City of Vernon From: Morgan Stanley Capital Services Inc. Attn: Eric T. Fresch, City Administrator Contact: NY Deriv Client Services Fax: 323-826-1439 Fax: 646-202-9134 Tel: 323-583-8811, ext. 175 Tel: 212-761-2996 E-mail: Municonlirms_In@morganstanley.com Re: Interest Rate Swap MSCS Ref. No. AUCTK THIS AMENDED AND RESTATED CONFIRMATION SUPERSEDES ANY PRIOR CONFIRMATION OF THIS TRANSACTION, INCLUDING AS AMENDED AND RESTATED AS OF MARCH 16, 2006. THE CHANGES TO THE TRANSACTION CONTEMPLATED BY THIS AMENDED AND RESTATED CONFIRMATION SHALL BE EFFECTIVE AS OF APRIL 27, 2009. The purpose of Ehis letter agreement is to confirm the terms and conditions of the .Swap Transaction entered into between us on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement below. The definitions and provisions contained in the 2000 ISDA Definitions and the 1992 ISDA U.S. Municipal Counterparty Definitions (each as published, by the International Swaps and Derivatives Association, Inc.) (the "Definitions") are incorporated into this Amended and Restated Confirmation.. In the event of any inconsistency between the Definitions and this Amended and Restated Confirmation, this Amended and Restated Confirmation will govern. L This Amended and Restated Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of December 2, 2004, as amended and supplemented from time to time (the "Agreement") between you and us. All provisions contained in the Agreement. govern this Amended. and Restated Confirmation except as expressly modified below. 2. -The terms of the- particular Transaction to which this Amended and Restated Confirmation relates are as follows: Party A: Morgan Stanley Capital Services Inc. - Party B: City of Vernon' Trade Date: ~ December 2, 2004 Notional Amount: USD 90,150,000 amortizing according to Schedule 1 (with No Adjustment); provided, that for any Calculation Period during which there is an amortization that does not occur on a Fixed Rate Payer Period End Date, a Floating Rate Payer Period End Date or the Termination Date; the Fixed Amounts or Floating Amounts, as the case may be, shall be calculated -for each portion of such Calculation Period for which a different Notional Amount is in effect, based on the Notional Amount in effect during each such portion.. Morgan~tar~ley Municipal Capital Markets Related Bonds: City of Vernon Electric Revenue Bonds, Series 2004 A Effective Date: December 22, 2004 Amendment Effective Dater May 1, 2009 Termination Date: April 1, 2037- . Fixed Amounts: Fixed Rate Payer: Party B Fixed Rate Payer Payment Dates: (i) From and including the Effective Date to but excluding April 1, 2006, each April 1 and October 1, commencing on April 1, 2005, subject to adjustment in accordance with. the Following Business Day Convention. (ii) From and including April 1, 2006 to and including the Termination Date, the first calendar day of each month, commencing on April 1, 2006, subject to adjustment in accordance with the Following Business Day Convention. Fixed Rate Payer Period End Dates: (i) From and including the Effective Date. to but excluding April 1, 2006, each April 1 and October 1, commencing on April 1, 2005, subject to adjustment in accordance with-the Following Business Day Convention. (ii) From and including April 1, 2006 to and including the Termination Date, the fast calendar day of each month, commencing on April 1, 2006, subject to adjustment in accordance with-the Following Business Day Convention. Fixed Rate: (i}From and including the Effective Date to but excluding April 1, 2006 (subject to adjustment in accordance with the- Following Business Day Convention), 3.637%. (ii) From and including April 1, 2006 (subject to adjustment in accordance with the Following Business. Day Convention) to and including the Termination Date, 3.607%. ' Fixed Rate Day Count Fraction: 30/360 Floating Amounts I: Floating Rate I Payer: Party A _ Floating Rate I Payer Payment Dates: January 4, 2005 and thereafter each Tuesday up to 'and including .the Amendment- Effective Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate I Payer Period End Dates: January 4, 2005 and thereafter each Tuesday up to, but excluding, the Amendment Effective Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate I Option: 62.87% of USD-LIBOR-BBA, provided that the words "on the day that is two .London Banking Days preceding that Reset Date" -2- ~ MorganStanloy Municipal Capital Markets contained in the definitions of USD-LIBOR-B$A and USD- LIBOR-Reference Banks in Section 7.1 of the Definitions shall be replaced with "on the first- day preceding that Floating Rate Reset Date that is both a London Banking Day and a Business Day". Floating Rate I Designated Maturity: One month Floating Rate I Spread: 0.1 190% (11.90 basis points) Floating Rate I Reset Dates: The Effective Date -and thereafter -each Tuesday up to and including the Tuesday preceding the Amendment Effective - Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Amounts II: Floating Rate II Payer: Party A Floating Rate II Payer Payment Dates: The first calendar day of each month, commencing on June 1, 2009, up to and including the Termination. Date, subject to adjustment in accordance with the .Following ,Business Day Convention. Floating Rate II Payer Period End Dates: The Amendment Effective Date and thereafter, first calendar day of each month up to and including the Termination Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate II Option: 62.87% of USD-LIBOR-BBA, provided that the words "on the day that is two London Banking Days preceding that Reset Date" contained in the definitions of USD-LIBOR-BBA and USD-LIBOR-Reference Banks in Section 7.1 of the Definitions shall be replaced with. "on the first. day preceding that Floating - Rate Reset Date that is both a London Banking Day and a Business Day". Floating Rate II Designated Maturity: One month Floating Rate II Spread: 0.1190% (11.90 basis points) Floating Rate II Reset Dates: The Amendment Effective Date and thereafter monthly, on the first calendar day of each month, up to and including the Termination Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate Day Count Fraction: ActuaU360 Compounding:. Inapplicable Method of Averaging: Inapplicable Business Days: New York Calculation Agent: Party A -3- MorganStanl~y Municipal Capital Markets 3. Account Details. Payments to Party A: Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 Payments to Party B: The Bank of New York ABA No. 02l .000 018 Credit: The Bank of New York Acct No. GLAI l 1-565 Reference: Custody Escrow account TAS#800452 Party A Operations Contact: Municipal Operations Tel: 410-534-1436 -Fax: 410-522-5487 E-mail: MuniOperations@MorganStanley.com Party B Operations Contacts: Eric T. Fresch, City Administrator Tel: 323-583-8811, ext. 175 Fax: 323-826-1439 A. Craig Underwood, President BondLogistix, LLC ' Tel: 213-612-2463 Fax: 213-612-2499 E-mail: cnderwood@bondlogistix.com 4. Optional Early Termination. Party B has the option to terminate this Transaction, in whole or in part, (provided that no Event of Default, Potential Event of Default or Termination Event has occurred) by providing (i) at least five- (5) Business Days' prior written notice to Party A of its election to terminate this Transaction and (ii) evidence reasonably satisfactory to Party A that any and all amounts owed to Party A in connection with such early termination shall be paid on the due date thereof (the effective date of such optional early termination, hereinafter the "Optional Early Termination Date"); provided, however, that the option to designate an Optional Early Termination Date under this Paragraph 4 shall not prevent either party from designating an Early Termination Date in accordance with the provisions of Section 6 of this Agreement (as a result of the occurrence of an Event of Default or Termination Event); to be effective on any date prior to the Optional Early Termination Date designated hereunder. Such termination shall constitute an Additional Termination Event under Section 6(e) of the Agreement with Party B as the sole Affected Party, and this Transaction as the sole Affected Transaction. In the event of such termination, the Calculation Agent. shall determine the amount owed in connection with such termination using its commercially reasonable judgment. If Party 13 disputes such calculation, the Calculation Agent shall seek bids from Reference Market-makers consistent with the provisions of Section 6 of the Agreement. 5. Notwithstanding anything contained herein or in the Agreement, to the contrary, the parties shall have no rights or obligations with respect to this Transaction, and any representations or agreements of the parties contained herein (other than the representation and agreement by Party B in the following sentence) and in the Agreement shall not be deemed to be made until the Related Bonds have been duly issued by Party B and in the event that the Related Bonds are not issued on or prior to the Effective Date, this Transaction shall automatically terminate and shall be of no further force or effect and the parties shall have no further obligations hereunder. Party B represents and warrants that it intends and expects to-issue the Related Bonds, agrees to use its best efforts to issue the Related Bonds on or before the Effective Date and acknowledges that Party A is entering into this Transaction in reliance upon the foregoing. -4- MarganStanlay . Municipal Capital Markets 6. Amendment to Schedule. The definition of "Covered Agreement" in Part 4(n) is hereby amended. by adding the following to the end thereof. "From and after the .date of this amendment, Section 2.07(e) of the Covered Agreement shall be deemed to be modified-for purposes of this Agreement to read the same as Section 2.07(e) of the Indenture of Trust, dated as of September 1, 2008, between Party B . and the Bank of New York Mellon Trust Company, N.A., as such section 2.07(e) appears on the date of delivery of such Indenture. The definition of Covered Agreement shall in all other respects remain unchanged.- It is the intention of the parties that the changes to .Part 4(n) made by this paragraph 6 shall apply to all Transactions under the Agreement and shall continue in full force and effect notwithstanding the termination of the Transaction evidenced by this Confirmation." -5- ~G' ,j 4~ ~ ~ ~ a v.~ J ~ ~ - ~ i - ~ ~ur~!f.;i,r,~i ~~pi~~l IU1~~k~i5 Please Coil! irm t}7at t',he f'orir~~c,na~ corrccth~ sets ii?rtia-tfac icruis c>`~ur a~~~reen7en~_Iv1~CS E~cf. ~E): A(~C;°I'I~ uyt;xeC.utin~.-t] .,_~n~t~ti .a~a€~ ~Z~ t~ie~~ :'onlirc,tatio,7;arid rctiir;~izag_itE«us prf;ii~pih,~. Wd ai•c di::~htcc; z« t~~'.`, e, e~,te~ G ci ~<ta dais '1"ransactit~i~ tL ~ caa sand Ipnk tcr~~rarc to serving you further in ttae ttit~are. t3cst re;~aE~ds,; i~wr~:a~~: fi"?'~1i~~.~?"~' ~'~1vG"1 t~ i_. g T~~'[~:.j X41 Nstme: Titie: ~ _ ~~.C,T~N(~WE,1'.I)C~I;1.~ ~a~~l~ i~C~'Z~'~~-mss ©f`tl~~datciist writ€~~~~ f3i~ ~zu~~r: 'I' iGle; I V I ~ r~ a n J l ~ n Munici al Ca ital Market p p s Please confirm that the foregoing correctly sets forth the terms of our agreement MSCS Ref. No. AUCTK by executing this Amended and Restated Confirmation and returning it to us promptly. We are delighted to have entered into this Transaction with you and look forward to serving you further in the future. Best regards, MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Title: ACKNOWLEDGED AND AGREED as of the date firsf written: CITY OF VERNON By: Na .1~ lS~r~ Tit C 17'`~ AT~aQ~ -6- SCHEDULE 1 to Amended and Restated Confirmation, dated Apri127, 2009, between Morgan Stanley Capital Services Tnc. and City of Vernon MSCS Ref. No. AUCTK FROM (and including) TO (but excluding) NOTIONAL AMOUNT Effective Date 1-Apr-2029 USD 90,150,000 1-Apr-2029 1-Apr-2030 82,825,000 1-Apr-2030 1-Apr-2031 72,550,000 1-Apr-2031 1-Apr-2032 61,875,000 1-Apr-2032 1-Apr-2033 50,775,000 1-Apr-203 3 1-Apr-2034 3 9,250,000 1-Apr-2034 1-Apr-203 5 27,375,000 1-Apr-2035 1-Apr-2036 14,925,000 1-Apr-2036 Termination Date 2,000,000 1 V I d rg C~ n J~C~ n Munici al Ca ital Markets p p Date: December 2, 2004, as amended and EXECUTION COPY restated as of March 16, 2006 and Apri127, 2009 To: City of Vernon From: Morgan Stanley Capital Services Iric. Attn: Eric T. Fresch, City Administrator Contact: NY Deriv Client Services Fax: 323-826-1439 Fax: 646-202-.9134 Tel: 323-583-8811, ext 175 Tel: 212-761-2996 E-mail Municoiifirms^In@morganstanley.com Re: Interest Rate Swap MSCS Ref. No. AUCTM THIS AMENDED AND RESTATED CONFIRMATION SUPERSEDES ANY PRIOR CONFIRMATION OF THIS TRANSACTION, INCLUDING AS AMENDED AND RESTATED AS OF MARCH 16, 2006. THE CHANGES TO THE TRANSACTION CONTEMPLATED BY THIS AMENDED AND RESTATED CONFIRMATION SHALL BE EFFECTIVE AS OF APRIL 27, 2009. The purpose of this letter agreement is to confirm the terms and conditions of the Swap Transaction entered into between us on the Trade Date specified below (the "Transaction"). This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement below. The definitions and provisions contained in the 2000 ISDA Definitions and the 1992 ISDA U.S. Municipal Counterparty Definitions (each as published by the International Swaps and Derivatives Association, Inc.) (the "Definitions") are incorporated into this Amended and Restated Confirmation. In the event of any. inconsistency between the Definitions and this Amended and Restated Confirmation, this Amended and Restated Confirmation will govern. 1. This Amended and Restated. Confirmation supplements, forms part of; and is subject to, the ISDA Master Agreement dated as of December 2, 2004, as amended and supplemented from time to time (the "Agreement") between you and us. All provisions contained in the Agreement govern this Amended and Restated Confirmation except as expressly modified below. 2. The terms of the particular Transaction to which this Amended and Restated Confirmation relates are as follows: . Party A: Morgan Stanley Capital Services Inc, Party B: City of Vernon Trade Date: December 2, 2004 Notional Amount: USD 83,575,000 amortizing according to Schedule. 1 (with No Adjustment); provided, that .for any Calculation Period during - which there is an amortization that does not occur on a Fixed Rate Payer Period End Date, a Floating Rate Payer Period End Date or -the Termination Date, the Fixed Amounts or Floating Amounts, as . the case may be, shall be calculated for each portion of such Calculation Period for which a different Notional Amount is in effect, based on-the Notional Amount in effect during each such portion. USActive 15948467.7 Q ~ ~ ~ "a ~ `~1 Municipal Capital Markets Related fonds: ~ City of Vernon Electric Revenue Bonds, Series 2004 B Effective Date: December 22, 2004 Amendment Effective Date: May 1, 2009 Termination Date: April 1,-2029 Fixed Amounts: Fixed Rate Payer: Party B Fixed Rate Payer Payment Dates: (i) From and including the Effective Date to but excluding April 1, 2006, each .April 1 and October 1, commencing on April 1, 200, subject to adjustment in accordance with the Following Business Day Convention. (ii) From and including April 1, 2006 to and including the Termination Date, the first calendar day of each month, commencing on April 1,-2006, subject to adjustment in accordance with the Following Business Day Convention. Fixed Rate Payer Period End Dates: (i) From and including the Effective Date to but excluding April 1, 2006, each April 1 and October 1, commencing on April 1, 2005, subject to adjustment. in accordance with the Following Business Day Convention. (ii) From and including April 1, 2006 to and including. the Termination Date, the first calendar day of each month, commencing on April 1, 2006, subject to adjustment in accordance with the Following Business Day Convention. Fixed Rate: (i) From and including the Effective Date to but excluding April 1, 2006 (subject to adjustment in accordance with the Following Business Day Convention), 3.572%°. (ii) From and including April t, 2006 (subject to adjustment in accordance with the Following Business Day Convention) to and including the Termination Date, 3.542%. Fixed Rate. Day Count Fraction: 3.0/360 Floating Amounts L Floating Rate I Payer: Party A Floating Rate I Payer Payment Dates: January 7, 2005 and thereafter each Friday up to and including the Amendment Effective Date, subject to adjustment in accordance .with the Following Business Day Convention. Floating Rate I Payer Period End Dates: January 7, 2005 and thereafter each Friday up to but excluding the Amendment Effective Date, subject to adjustment in accordance with the Following Business Day' Convention. Floating Rate I Option: 62.87% of USD-LIBOR-BBA, provided that the words "on the. day that is .two London Banking Days preceding that Reset Date" USActive 15948467.7 -2- " ' "a rga n S lt~ ~ ~~y Munici al Ca ital Markets p P contained. in the definitions of USD-LIBOR-BBA and U5D- LIBOR-Reference Banks in Section 7. l of the Definitions shall be replaced with "on the first day preceding that Floating Rate Reset Date that is both a London Banking Day and a Business Day". Floating Rate I Designated Maturity: One month Floating Rate I Spread: 0.1190% (11.90 basis points) Floating Rate I Reset Dates: The Effective Date and thereafter each Friday up to and including the Friday preceding the Amendment Effective-Date, subject to adjustment in accordance with the Following Business Day Convention. Floatint Amounts II: Floating Rate II Payer: Party A Floating Rate II Payer Payment Dates: June 1, 2009 and thereafter, the first calendar day of each month, up to and including the Termination Date, subject to ` adjustment in accordance with .the Following Business Day Convention. Floating Rate II Payer Period End Dates: The Amendment Effective Date and thereafter, -the first calendar day of each month up to and including the Termination Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate II Option: 62.87% of USD-LIBOR-BBA, provided that the words "on the day that is two London Banking Days preceding that Reset Date" contained in the definitions of USD-LIBOR-BBA and USD-LIBOR-Reference Banks in Section 7.1 of the Definitions shall be replaced with "on the first day preceding that Floating Rate Reset Date that is both a London Banking Day and a Business Day". Floating Rate II Designated Maturity: One month Floating Rate II Spread: 0.1190% (11.90 basis points) Floating Rate II Reset Dates: The Amendment. Effective Date and thereafter monthly, on the first calendar day of each month, up to and including the Termination- Date, subject to adjustment in accordance with the Following Business Day Convention. Floating Rate Day Count Fraction: ActuaU360 Compounding: Inapplicable Method of Averaging: Inapplicable Business Days: New York Calculation Agent: Party A USActive 15948467.7 _3_ M ~ rg a n~ `C~ n ~e J Municipal Capital Markets 3. Account Details. Payments to Party A: Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 Payments to Party B; The Bank of New York ABA No. 021 000 018 .Credit: The Bank of New York Acct No. GLA111-565 Reference: Custody Escrow account. TAS#800452 Party A Operations Contact: Municipal Operations Tel: 410-534-1436 Fax: 410-522-5487 E-mail: MuniOperations@MorganStanley.com Party B Operations Contacts: Eric T. Fresch, City Administrator -Tel: 323-583-8811, ext. 175 Fax: 323-826-].439 A. Craig Underwood, President BondLogistix, LLC TeL 213-612-2463 Fax: 213-612-2499 E-mail: cunderwood@bondlogistix.com 4. Optional Early Termination. Party B has the option to terminate this Transaction, in whole or in part, (provided that no Event of Default, Potential Event of Default or Termination Event has occurred) by providing (i) at least five (5) Business Days' prior written notice to Party A of its election to terminate this Transaction and (ii) evidence reasonably satisfactory to Party A that any and all amounts owed to Party A in connection with such early termination shall be paid on the due date thereof (the effective date of such optional early termination, hereinafter the "Optional Early Termination Date"); provided, however, that the option to designate an Optional Early Termination Date under this Paragraph 4 shall not prevent either party from designating an Early Termination Date in accordance with the provisions of Section 6 of this Agreement (as a result of the occurrence. of an Event of Default or Termination Event), to be effective on any date prior to the Optional Early Termination Date designated hereunder. Such termination shall constitute an Additional Termination Event under Section 6(e) of the Agreement with Party B as the sole Affected Party, and this Transaction as the sole Affected Transaction. In the event of such .termination, the Calculation Agent shall determine the amount owed in connection with such termination using its commercially reasonable judgment. If Party B disputes such calculation, the Calculation Agent shall seek bids from Reference Market-makers consistent with the provisions of Section 6 of the Agreement. 5. Notwithstanding anything contained herein or in the Agreement to the contrary, the parties shall have no rights or obligations with respect to this Transaction, and any representations or agreements of the parties contained herein (other than the representation and agreement by Party B in the following sentence) and in the Agreement shall not be deemed to be made until the Related Bonds have been duly issued by Party B and in the event that. the Related Bonds are not issued on or prior. to the Effective Date, this Transaction shall automatically terminate and shall be of no further-force or effect and the parties shall have no further obligations hereunder, Party B represents and warrants that it intends and expects to issue the Related Bonds, agrees to use its best efforts to issue the Related Bonds on or before the Effective Date and acknowledges that Party A is entering into this Transaction in reliance upon the foregoing. USActive 15948467.7 -4- t lease c€~ui€z•it? t.at the fo;e~~ciit<., c~trr4ct]ysets ;c~r::Y, ,ite i:ec~nts of c~uz~ as~reenex~t ~;~CS Ref. Nt~. A~J~'"T~A>f h}'~exectt;n~~, t,ts R,~:~~s~t,;..~~ ,ttt€€ ~3:;s3. i~Et Z;onfinuation-:and r~~~u~•ni;tt~ it t« Eas prc~n~~~tlg:~ c.cli hCcc :o Its ~°e et~.t~rG~d !~3tt~ the t:t~ts«ctit~~t u~~al? y oa at~d l~a~k~ fore-~tru .o se~•vng yoti_ #u,~thec• in the future. E3est retards; 13 'r N _ a Vii`. - ~f AGKRc_)',~'fi,~pGG[:3 f~ND ACat~3.~;;~) sts c~fthe date. first written: C'~~'Y`Q~' z `~;w~`~t~f' ~y. "''itic USf~ctiv~ 1594847:1 ms_ 1 V I ~ rg C~ n .J lt~ n ~~y Munici al Ca ital Markets P P Please confirm that the foregoing correctly sets forth the terms of our agreement MSCS Ref. No. AUCTM by executing this Amended and Restated Confirmation and returning it to us promptly. We are delighted to have entered into this Transaction with you and look forward to serving you further in the future. .Best regards, MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Title: ACKNOWLEDGED AND AGREED as of the date first written: CITY OF VERNON By: Na ~ EG A~ /SiJ~ Tit Ct~ A'1?'Oeer~~`~ USActive 15948467.7 SCHEDULE] to Amended and Restated Confirmation, dated as of Apri127, 2009, between Morgan Stanley. Capital Services Inc. and City of Vernon MSCS Ref. No. AUCTM FROM (and including) TO (but excluding) NOTIONAL AMOUNT Effective Date 1-Apr2018 USD 83,575,000 I -Apr-2018 1-Apr-2019 83,525,000 1-Apr-2019 1-Apr-2020 76,725,000 1-Apr-2020 1-Apr-2021 69,675,000 1-Apr-2021 1-Apr-2022 62,350,000 1-Apr-2022 1-Apr-2023 54;750,000 1-Apr-2023 1-Apr-2024 46, 850,000 1-Apr-2024 1-Apr-2025 38,650,000 1-Apr-2025 1-Apr-2026 30,125,000 1-Apr-2026 1-Apr-2027 21,275,000. 1-Apr-2027 1-Apr-2028 12,100,000 1-Apr-2028 Termination Date 2,575,000 Y USActive 15948467.7 _ MFnt,q~l^ , ipP C8~4RLY IM0~5 APR 2 3 2009 CITY ATTORNEY'S OFFICE C9~YCLERK"~C~F~6~~ STAFF REPORT DATE: April 23, 2009 APPf;0UE0 APB `09 Ci~Y COO~ui~. TO: Honorable City Council FROM: Jeff A. Harrison, City Attorne~ RE: 2009 Series A Electric System Revenue Bonds. On April 13, 2009, the City Council adopted Resolution No. 9915 approving Vernon Natural Gas Financing Authority (the "Authority") Resolution No. VNGFA-0013 that approved and authorized the issuance. of Electric System Revenue Bonds in an amount not to exceed $430,000,000.00 and approved and authorized the execution of all documents relating to the Bonds including, but not limited to, the Supplemental Indenture of Trust, a Contract of Purchase and a Continuing Disclosure Agreement. The Authority wishes to amend the form International Swaps and Derivative Association, .Inc..(~~ISDA") Master Agreement and other interest rate swap documents approved on April 13, 2009, subject to-the City Council's. approval and authorization. Recommendations: I recommend that the-City adopt a resolution approving and authorizing the. actions authorized or approved in the Authority resolution, approving the Authority Resolution No. VNGFA-0015, and approving-and authorizing the execution of any document to carry out the actions authorized in the Resolution. Fiscal Impact The approximate par amount of the 2009 Series A Bonds will be $424,775,000.00. The-Bond issuance allows for the release of $37,700,000.00 Debt Service Reserve Fund. cc: Eric Fresch CITY OF VERNON AND VERNON NATURAL GAS FINANCING AUTHORITY C TERMINATION OF INTEREST RATE SWAP TRANSACTIONS Termination Date: April 12,.2010 PARTIES City of Vernon (the "City") Vernon Natural Gas Financing Authority (the "Authority") Morgan Stanley Capital Services Inc. ("Morgan-Stanley") Citibank, N.A. ("Citibank") Orrick, Herrington. & Sutcliffe LLP ("Authority Counsel") Eugene Kwon, Esq. ("Citibank Counsel") SCHEDULE OF TRANSCRIPT DOCUMENTS 1. Resolution No. 2010-49 of the City, certified by the City Clerlc of the City. 2. Resolution No. VNGFA-0021 of the Authority, certified by the Secretary of the Authority. 3: Signature and Incumbency Certificate of the Authority. 4. Certificate of Incumbency of Citibank. 5. Certificate of the. City Administrator. 6. Letter Agreement Confirmation of Unwind of Morgan Stanley Transaction, dated April 7, 2010, executed by Morgan Stanley and the City.. - 7. Termination Agreement, dated as of Apri17, 2010, between Citibank and the Authority. 8. Opinion of Authority Counsel. 9. ~ Opinion. of Citibank Counsel. - OHS West:260900148.1 42797-2 CERTIFICATE OF CITY CLERK I, Willard G. Yamaguchi, City Clerk of the City of Vernon. (the "City"), HEREBY CERTIFY that attached hereto is a true and complete copy of Resolution No. 2010-49, duly adopted by the City Council of the City at a meeting duly called, noticed and held on April 6, 2010, 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. IN WITNESS WHEREOF, I have hereunto .set my hand and affixed the seal of the City . this 12th day of April, 2010. By: Wil and agu h' City Clerk of t e ity of ernon [SEAL] C C OHS West:260892411.i C_ CERTIFICATE STATE OF CALIFORNIA ) ss COUNTY OS' LOS ANGELES) I, Willard Yamaguchi, City Clerk of the. City of Vernon, County of Los Angeles, State of California, hereby certify that the attached is a full and complete copy of: RESOLUTION NO. 2010-49 - A Resolution of the City Council of the City of Vernon Authorizing. and Approving the Termination of Interest Rate Swap Transactions; Approving the Related Termination Agreements; and Authorizing Certain Other Matters Relating Thereto IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official Seal of the City o ~~Vernon, County of Los Angeles, State of California, on this ~ day of April 2010. =SEAL : r'~ jj~~,, t..r,,, ~ W~11ard Yr~tt~ g ~ch:~ City C1erJ C RESOLUTION NO. 20.0-9,9 R RESOLUTION OF .THE CITY COUNCIL OF THE CITY OF VERNON AUTHORIZING AND APPROVING THE TERMINATION OF: INTEREST RATE SWAP TRANSACTIONS; APPROVING THE RELATED TERMINATION AGREEMENTS; 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,. pursuant to an Indenture of Trust, datedas 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 r 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, 200:4 Series- . A, 2004 Series B, 2004 Series C and 2004 Taxable Series D (collectively, the "2004. Revenue Bonds"); and WHEREAS, the City and Morgan Stanley Capital Services Ine. ("Morgan Stanley.") have entered into certain interest rate swap transactions relating to the City's 2004 Revenue.BOnds and amendments thereto with respect to some of such. transactions (the "Morgan Stanley ~'ransactions"); and. WHEREAS, the City-.has determinedthat it is in the .public interest-to terminate each of the Morgan Stanley Transactions; which' terminations may be executed on one date or on different dates; and C WHEREAS, in connection with the termination of each Morgan Stanley Transaction, the C:ity may enter into a Termination Agreement with Morgan Stanley (each such Termination Agreement, in substantially the form attached as Exhibit A, with such changes, insertions and deletions as are-made. pursuant to this Resole ion, being referred to herein as a "Morgan Stanley Termination Agreement"); and WHEREAS, the Vernon Natural Gas Financing Authority {the ".Authority") has been established as a separate entity under the California Joint Exercise of Powers Act to undertake projects and programs that promote economic development within the Ci y; and WHEREAS, pursuant to the Natural Gas Purchase Agreement,. dated as of June 1, 20b6, between the Authority and the City (the "Supply Agreement"), the Authority-has sold a supply of natural gas to the City; and WHEREAS, in connection withthe financing of the gas to be supplied under the Supply Agreement, the Authority and Citibank, N.A. ("Citibank") have entered into five interest rate'swap transactions (the "Citibank: Transactions") under the ISDA Master Agreement, the Schedule to the ISDA Master Agreement, the ISDA Credit Support Annex and-five Amended-and Restated Confirmations, .each between the Authority and Citibank, each originally dated as of ~'une 27, 2006 and each amended and restated as of May 13, 2009; and WHEREAS, pursuant;to the. Supply. Agreement all payment obligations of the Authority under the traxisactions are to be paid by the City and the Authority has agreed to terminate a Citibank Transaction .when requested to do so by the .City; .anal WHEREAS, the City has.. determined. that it is in the public interest to-terminate each of the Citibank Transactions as provided herein, which terminations may be made on ane date or on different -2= ~ dates; and WHEREAS., in connection with the termination of each Citibank Transaction the. Authority may :.enter into a Termination Agreement with Citibank (each such Termination Agreement being referred to herein as a "Citibank Termination. Agreement"); and WHEREAS, pursuant to an Indenture of Trust,- dated as of September 1, 2008 between the City and The Bank of New York Mellon Trust Company, N.A., as supplemented by the First Supplemental Indenture of -Trust (the "First Supplemental Indenture"), dated as of Septembear 1, 200.8, between the City and The Bank of New York. Mellon Trust Company, N.A.; the City has issued its Electric System Revenue Bonds, 2008 Taxable Series A (the "2008 Revenue Bonds"}; and WHEREAS, a portion of the proceeds of the .20.08 Revenue .Bonds ~ were to be. applied to make termination paymen s in connection-with the termination of interest rate swap transactions; ,and WHEREAS, there have been prepared and submitted to the-City Council drafts of the :following;. (1) the Morgan Stanley Termination Agreement; and (2) the Citibank Termination Agreement. NOW, .THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON, AS FOLLOWS: Section 1: The. City Council o~ the City of Vernon hereby finds. and determines that the recitals Contained hereinabove are true `and correct... Section 2: The termination of-.each of the Morgan.Stanley Transactions is hereby approved and authorized. The City. Administrator of the City (the "City Administrator"), is hereby authorized, in the name of and on behalf of the City, to terminate.. ~3_ each of the Morgan Stanley Transactions, on a single date or on different dates; on the terms and conditions deemed by the City Administrator to be in the best interest of the City and to make any payments due from the City in connection with such terminations; provided .that the: City Administrator,shal,l not terminate any Morgan Stanley Transact-ion or request the Authority to terminate any Citibank Transaction if the termination payment required to be paid as a result of such termination, plus the termination payments (which .shall not include any amounts accrued to the date on which the termination payments are determined). paid in connection with prior terminations of Morgan Stanley Transactions and Citibank Transactions, would be in excess of Sixty-Million Dollars. Section 3: The Morgan Stanley Termination Agreement, in substantially. the farm attached hereto as Exhibit A and made a part hereof as though set forth in full herein; is herebyapproved. In connection with the termination of each Morgan Stanley Transaction, the City Administrator is hereby authorized, in the name of and on behalf of the City, to execute and deliver a Morgan Stanley Termination Agreement, in substantially the form attached hereto -with such changes, insertions anal deletions as-may be approved by the City Administrator, as consistent with the intent of the City Council; his execution thereof being conclusive evidence of such approval, and the City Clerk is hereby authori-zed to attest thereto. Section 4: The termination of-each of the Citibank Transactions is hereby approved and authorized. The Authority is hereby requested to take such 'action as may be necessary or ..convenient to terminate each of the Citibank Transactions; on a single date or on. different dates,..when requested to do so by the _4_ City Administrator; provided that the City Administrator shall not terminate any Morgan Stanley Transaction or request the Authority to terminate any Citibank Transaction if the termination. payment xequred to be paid as a result of such termination, plus the termination payments (which shall not include-any amounts accrued to the date on which the termination payments are determined) paid in connection with prior terminations of Morgan Stanley Transactions and Citibank Transactions, would be in excess of Sixty Million Dollars. 'Section 5: The Citibank Termination Agreement, in substantially. the form attached hereto as Exhibit B and made. a-part hereof. as though set forth in fu11 herein, is hereby approved. Section 6: VNGFA Resolution No. VNGFA-0021 (the "VNGFA Resolution''), and all transactions, documents and actions approved or authorized by the VNGFA Resolution, and the erformance of p VNGFA's obligations under, the transactions, documents and instruments approved or authorized by the VNGFA Resolution and the other actions contemplated by the VNGFA Resolution are hereby authorized, approved, ratified, anal confirmed. The City Administrator is hereby authorized. to request the VNGFA and its officers to take whatever action is necessary or convenient to terminate the Citibank Transactons'as provided herein: Section'7: Al 1. moneys. heldpursuant to the First Supplemental Indenture shall be applied as provided in the First Supplemental Indenture and any moneys withdrawn. from-the 2008 .Capital Improvements Fund established under the First Supplemental Indenture as a reimbursement to the City for capital improvements paid for by-the City and not previously reimbursed from bond -s- C _proceeds may be applied to termination payments in connection with - the termination of one or more Morgan Stanley Transactions and/or Citibank Transactions.. Section 8: The Mayor, the Mayor Pro Tem, the City Administrator, the Treasurer, the City Clerk and the City Attorney of the City, and any other proper official, officer or employee of the City, acting singly, is hereby authorized to execute and deliver any and all documents. and instruments (except that only the City Administrator is authorized to execute and deliver a Morgan Stanley Termination Agreement) and to do and cause to be done any. and all acts and things necessary or convenient in carrying out the actions authorized by this Resolution and the transactions contemplated by the documents and instruments approved or authorized by this Resolution. C Section 9: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and he City Clerk of the City of Vernon sha11 cause this resolution and the-City Clerk's certification to be entered in the File of Resoluaions of the Council of this City. APPROVED AND ADOPTED this 6th day of April, 2010: Name: Hilario Gonzales - Title. Mayor / ~~,T Wi Hard G . ~!amag c}~ii , y Clerk 6 _ STATE OF CALIFORNIA ) ss COUNTY OF LOS ANGELES ) I, Willard G. Yamaguchi, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2Q10-~9, was duly passed, approved and adopted by the City Council of the City of Vernon at a special meeting of the City Council duly held on Tuesday, April 6, 2.010, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this ~ day of April, 2010, at Vernon, California. a .i r~ [nIs'~llard ~r. °~r-w~'E~af~u~rhi, City Clerk«~~. l,.:~~j (SEAL) _ 7 _ EXHIBIT A M Q f g C~ n-. ~.l `a n J Munici al Ca ital Markets p p ~ Date:. April 2010 To: City of Vernon From: Morgan Stanley Capital Services Inc. Attn: Contact: NY Deriv Client Services Fax: 323-826-1439 Fax: 212-404-4726 Tel: 323-583-8$11, ext 175 Tel; 212-761-2996 E-mail: E-mail Municonfirm _InC morganstanley.com Re: Unwind of Transaction MSCS Ref. No. (the "Original Transaction") The purpose of this letter agreement is to confirm the terms and conditions of the unwind. of the Original Transaction. Thin letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement. below.. The. definitions and provisions contained in the 2006 ISDA Definitions (as .published, by the International Swaps. and Derivatives Association, Inc.) (the "Definitions") -are incorporated into this Confirmation, In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern.. . L This Confirmation supplements, forms part of; and is subject to, the ISDA Master. Agreement dated as of December 2, 2004, as amended and supplemented from time to -time (the "Agreement") between you and us. .All. provisions contained in the Agreement govern this Confirmation except as expressly C modified below., 2. The terms of the unwind of the Original Transaction to which this Confirmation relates are as follows: Party A: Morgan Stanley Capital Services Inc. Party B: City of Vernon Original Transaction Trade Date: March 16, 2006 Original Transaction Termination Date: April 1, 2018 Unwind Trade Date: April 2010 Party B Unwind Payment: Party B shall pay USD [ ] to Party.A. Unwind Settlement Date: 3. Account Details: Payments to Party A: Citibank, New York ABA No. 021.-000 089 For: Morgan Stanley Capital Services Inc.: Account No. 4072 4601 USActlve 13992243.2 IVY Q f'~ a Cl S `a n ley Munici al Ca ital Markets , p p Party A Operations Contact: Municipal Operations Tel: 410-534-1436 Fax; 410-534-1990 E-mail: MuniOperations@MorganStanley.com Party B Operations Contact: Tel: • Fax: A. Craig Underwood, President BondL,ogistix, LLC Tel: 213-612-2463. Fax:213-612-2499 E-mail: cunderwood@bondlogistx.com 4. Each of Party A and Party B hereby confirms .that (i) with effect from and including the Unwind Trade Date, the Original Transaction is unwound, and (ii) upon payment of the Party B Unwind Payment on the Unwind Settlement Date, Party A and Party B each will be released and :discharged from further obligations to each other under the Original Transaction and their respective rights. against each other under the ..Original Transaction. are terminated; provided, that. such release and discharge will not affect any obligations or rights of Party A or Party B under the Original Transaction with respect to payments or other obligations due and payable or due to be performed on or-prior fo the Unwind Trade Date and all such payments and obligations -shall be paid or performed by Party A or Party B in accordance with the terms of the Original Transaction. - 5. Each of Party A and.Party B hereby agrees that each representation made by Party A or Party B in the Agreement as of the Original Transaction Trade Data will be deemed repeated by such party as of the date of this Confirmation as if such representation were set forth in this Confirmation. l USActive 139822432 -2- J M o rg a n St a n ley Muni c pa Capital Markets Please confirm that the foregoing correctly. sets forth the terms of our agreement MSCS Ref. No, by executing this Confirmation and returning it to us promptly. Best regards, MORGAN STANLEY CAPITAL SERVICES INC.. By: Name: - Title: ACKNOWLEDGED AND AGREED as of the date first written:. CITY OF VERNON By: Name: / Title: USActive 13982243.2 -3- EXHIBIT B r1 - - _ .TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of April 2010 among CITIBANK, N.A. ("Party. A"} and VERNON NATURAL GAS FINANCING AUTHORITY ("Party B"), WHEREAS,. Party A and. Party B .are parties to an .ISDA Master- Agreement, dated as of June 27, 2006 and amended and restated as of May 13, 2009 (the "Master Agreement"), a Schedule to the Master Agreement and an ISDA Credit.Support Annex thereto, each dated as of .June 27, 2006 and amended and restated as of May 13, 2009 (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 a Confirmation (Reference . No. MS06713), dated June. 27, 2006, as amended... and .restated as of : May 13, 2009 (the "Confirmation"), with an initial Notional Amount equal to USD 230,845,000 and a Termination Date of August 1, 2021 (the "Transaction"); and WHEREAS, the parties-have. agreed to terminate their obligations under the Transaction; NOW, THEREFORE, in consideration of the foregoing and other valuable consideration, it is hereby agreed as follows:: C 1. Patent and Termination. The Transaction is hereby terminated as of April ..2010. (the "Termination Date"), and. neither Party A nor, Party B shall have any.: obligations thereunder following the Termination. Date except for the obligation of .Party B to pay the .Termination Amount to Party A as specified herein. In full consideration of this Termination Agreement and in complete. satisfaction of all- obligations of all of the parties in respect of the Transaction, Party B-shall pay to Party A on April [_],.2010 the amount of USD [ ] . (the "Termination Amount") (whrh includes all accrued but unpaid regularly scheduled payments under the Transaction). The parties hereby acknowledge and- agree that the Transaction is hereby terminated and Party B shall pay the Termination Amount to Party A notwithstanding Paragraph 5 of .the Confirmation, which .provides that the Termination Amount shall be determined pursuant to Section 6 of the Agreement. 2, Insurer Consent.- By its execution hereof, National Public Finance Guarantee Corporation,. on behalf of itself and as agent for MBIA Insurance Corporation, consents to .the termination of the Transactionon the terms and conditions-set forth herein. 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; 1 Ref. MS06713 NYK 1172756-6.071371.0010 / (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 o 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. (a) The. following documents shall be delivered by Party B to Party A promptly upon execution of this Termination Agreement: ` (i) an opinion of counsel to Party B with .respect to the enforceability of this Termination Agreement againstParty B; and (ii) evidence reasonably satisfactory to .Party A of the authority and genuine signature of the individual signing this Termination Agreement on behalf of Party B to execute the same. (b) The following documents shall be delivered by Party A to Party B promptly upon execution of this Termination Agreement: (i) an opinion. of counsel to Party A with respect to the enforceability of this Termination Agreement against Party A; and (ii) evidence reasonably satisfactory to Party B of the authority and .genuine. signature of the individual. signing this Termination Agreement on behalf of Party A to execute the same 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. 2 Ref. MS06713 NYK 1172756-6.07137L.OOlO C IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first above written. CITIBANK, N.A. B y: VERNON NATURAL GAS FINANCING AUTHORITY B y: ` Acknowledged and Agreed: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION B y: NATIONAL PUBLIC .FINANCE GUARANTEE CORPORATION, as agent for MBIA Insurance Corporation B y: . - - ~ 1j - \ - - - - - 3 Ref: MS06713 NYK 1172756-6.071371.0010 CERTIFICATE OF SECRETARY. I, William J. Davis, Secretary of the Vernon Natural Gas Financing Authority (the "Authority"), HEREBY CERTIFY that attached hereto. is a true and complete copy of Resolution No. VNGFA-0021, duly adopted by the Board of Directors of the Authority at a meeting duly called, noticed and held on April 6, 2010, 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. . IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Authority this 12th day of April, 2010. By;~'" William J. Davi Secretary of the Vernon Natural Gas Financing Authority [SEAL] C OHS West:2608924ll.1 RESOLUTION NO. VNGFA-0.021 i A RESOLUTION OF THE BpARD OF DIRECTORS OF THE VERNON NATURAL GAS FINANCING AUTHORITY AUTHORIZING _ AND APPROVING THE TERMINATION OF INTEREST RATE.. SWAP TRANSACTIONS.; APPROVING THE RELATED TERMINATION AGREEMENTS; AND AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO WHEREAS, the Vernon Natural Gas Financing Authority (-the "Authority") has been established as a separate entity under the California Joint Exercise of Powers Act to undertake projects and programs that promote economic development within the City of Vernon (the "City;,) ~ and WHEREAS, pursuant to the Natural Gas Purchase Agreement, dated as of June 1, 2Q06, between the Authority and the City (the "Supply Agreement."), the Authority has sold a supply of natural. gas to the City; and WHEREAS, in connection with .the .financing of the gas to be supplied under. the Supply Agreement.,. the Authority: and Citibank,- N.A. ("Citibank") have entered into five interest rate-swap transactions (the "Transactions") under the ISDA Master_Agreement, the Schedule to the TSDA Mastex' Agreement, the ISDA Credit Support Annex and five Amended and Restated Confirmations, each between the Authority and .Citibank, each originally dated as of June 27, 2006 and each amended . -and restated as of May 13, 2009; and WHEREAS, pursuant to the Supply Agreement, all payment obligations of-the Authority under the transactions are. to be paid by the City and the Authority has agreed to teriminate the Transactions when requested to do so by the City; and WHEREAS, pursuant to a resolution adopted by the .City Council of the-City on the date hereof (the "City Resolution"), the City has requested the actions authorized 'and approved by this Resolution; and WHEREAS, pursuant to the Supply Agreement: and the City.. Resolution, the Authority will terminate the Transactions as requested by the City Administrator of the City (the "City Administrator") and in connection therewith. enter into one or more Termination Agreements with.-Citibank, N.A. (each such Termination Agreement, in substantially the form attached as Exhibit A with such changes, insertions and deletions as are made. pursuant to this Resolution, being referred to herein as a "Termination Agreement'') and to-make any payments due from the Authority in. connection with the Termination Agreement with funds provided by the City pursuant to the Supply Agreement. Ii NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE VERNON NATURAL GAS FINANCING AUTHORITY, AS FOLLOWS: Section This Board of Directors hereby finds and :determines-that the recitals contained herein.above are true and correct. Section 2:, The termination ,of -each of the Transactions, on a single date or an different dates, is hereby authorized and approved when requested by the City Administrator. The Termination Agreement, in substantially the form attached hereto as Exhibit A and made a part hereof as though set forth in full-herein, is hereby approved. In connection with the termination of-each Transaction; when requested by the City Administrator, the Chairman of this-Board .and the Executive Director of the Authority (each an "Authorized Authority Representative"), acting singly, is hereby authorized to \ execute a Termination Agreement:, in the name-of and on behalf of the ,2^ Authority, and deliver such. Termination Agreement to Citibank in substantially the form attached as Exhibit A with such changes, insertions and deletions, including the details of the Transaction or Transactions being. terminated. and the amount of any termination payments to be made by the Authority in connection with. such terminations(s), as may be approved. by the Authorized Authority.- Representativeexecuting the. same as consistent with the intent of-the Authority Board, said execution being conclusi e evidence of such approval. Any payments required to be paid by the Authority in connection with the termination of the Transactions and the -.Termination Agreements entered into by the Authority shall be .special obligations payable only from amounts made available to the Authority -for such payments by the funds supplied by the-.City pursuant to the ( Supply Agreement. Section 3: The Chairman of this Board of Directors,.the Executive Director of .the Authority, the Attorney for the Authority, the Secretary, and any other proper official, officer or employee of -the Authority, acting singly, is hereby authorized to execute and deliver-any and all documents and instruments (except that only an AutY~orized Authority Representative is authorized to execute and deliver a Termination Agreement.). and to do and cause to be done any and all acts and things necessary or convenient in carrying oua the :.actions contemplated by this Resolution and the documents and instruments approved or authorized by-this Resolution.. Section 4: All actions heretofore taken by any.committee of this Board. of Directors, or any official, officer, employee, ( representative or agent ofthe Authority, in connection with the actions, documents and instruments approved or authorized by this _3_ Resolution and the other actions contemplated by this Resolution, are hereby ratified, approved and confirmed. Section 5: The Secretary of the Authority 'shall. certify to the passage, approval and adoption of this Resolution, and'the Secretary of the Authority shall cause this Resolution and the Secretary's certification to be entered in the File of Resolutions of the Board of the Authority. APPROVED AND ADOPTED this 6th day of April, 2010. r s~ `f r Name: Tithe: Chair / Vice. Chair. j' 1 ~ t c -r i ti G 5~~~,~ r'~r a y ~4_ STATE OF CALIFORNIA ) ss COUNTY OF LOS ANGELES ) I, William Davis, Secretary of the Vernon Natural Gas Financing Authority, do hereby certify that the foregoing Resolution, being Resolution No. VNGFA-0021, was duly passed, approved and adopted by the Board of Directors of the Vernon Natural Gas Financing Authority at a special meeting of the Board of Directors duly held on Tuesday, April 6, 2010, and thereafter was duly signed by the Chair or Vice Chair of the Authority. Executed this ~1 day of Ap.ryi,:<[~, 2010, at Vernon, California. i f ' r, n i, i. , ~ ~ ~ t i~a S ~y ~ fit" f (SEAL) C -5- EXHIBIT A TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of April 2010 among CITIBANK, N.A. ("Party A") and =VERNON NATURAL GAS FINANCING AUTHORITY.("PartyB„) WHEREAS, Party A and Party B are parties to an ISDA Master Agreement, dated as of June 27, 2006 .and amended and restated. as of May 13, 2009 (the "Master Agreement"), a Schedule to the Master Agreement and an ISDA Credit Support Annex thereto, each dated as of - June 27, 2006 and amended and restated as of May 13, 2009- (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: a Confirmation.: (Reference No. MS06713), dated June 27, 2006, as amended. and restated as of May 13, 2009 (the "Confirmation"), with an initial Notional: Amount equal to USD 230,845,000 and a Termination Date of August 1, 2021 (the "Transaction"); and .WHEREAS, the parties have agreed to terminate their obligations under. the Transaction; NOW, THEREFORE, inconsideration of the foregoing and other valuable consideration, it is hereby agreed as follows: L Payment and Termination.- The Transaction is hereby terminated as of April 2010 (the "Termination .Date"), and neither Party. Anor -Party. B shall have any obligations .thereunder following .the Termination Date. except for the obligation of Party B to pay the- Termination Amount to Party A as specified herein. In full consideration of this Termination Agreement and in complete satisfaction of all obligations of all of the parties in respect of the. Transaction, Party B-shall pay to Party A on April [_],-2010 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 the Transaction is hereby terminated and Party B shall pay-the Termination Amount to Party A notwithstanding Paragraph 5 of .the .Confirmation, which provides that the Termination Amount shall be determined pursuant to Section 6 of the Agreement. 2. Insurer Consent. By its execution hereof, National .Public Finance Guarantee Corporation, on behalf of itself and as agent for MBIA Insurance Corporation, consents to the termination of -the Transaction on the terms and conditions set forth herein. 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 l\, authorized to do so; 1 Ref.1VIS06713 NYK 1172756-6.071371.0010 C' (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 is 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. (a) The following documents shall be delivered by Party B to Party A promptly. upon execution of this Termination Agreement:.. . (i) an opinion of counsel to Party B with respect to the enforceability of this Termination Agreement against Party B; and (ii) evidence reasonably satisfactory to Party A of the authority and genuine signature of 'the individual signing this. Termination Agreement on behalf of Party B to execute the same. (b) The following documents shall be delivered by Party A to Party B promptly upon .execution of this Termination Agreement: (i) an opinion of counsel to Party A with respect. to the enforceability of this Termination Agreement against Party A; and (ii) evidence reasonably: satisfactory. to Party B of the authority and genuine signature of the individual signing. this Termination Agreement on behalf of Party A to execute the same. 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. 2 Ref. MS0671.3 IVYK 1 1727 56-6.071371.0010 ~ IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first above written. CITIBANK, N.A. ' By: VERNON NATURAL GAS FINANCING AUTHORITY B y: Acknowledged and Agreed:. . NATIONAL PUBLIC. FINANCE GUARANTEE CORPORATION By: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION, as .agent. for MB IA Insurance Corporation- By: 3 Ref. MSOb713 NYK 1172756-6.071371.0010 SIGNATURE AND INCUMBENCY CERTIFICATE OF THE AUTHORITY I, Willard G. Yamaguchi, Executive Director of the Vernon Natural Gas Financing Authority (the "Authority"), HEREBY CERTIFY as follows: 1. that the members of the Board of Directors of the Authority were on April 1, 2010, and continue as such members as of the date hereof as follows: Hilario Gonzales W. Michael McCormick William J. Davis Richard J. Maisano Daniel D. Newmire 2. that the persons holding the following offices and positions and duly appointed thereto and acting therein were on April 1, 2010, and continue to hold such offices and positions as of the date hereof, as follows: Name Office Hilario Gonzales Chairman W. Michael McCormick Vice Chairman William J. Davis Secretary f Willard G. Yamaguchi Executive Director 1 3. that the signatures set forth opposite .the respective names of the following designated officers of the Authority are manual specimens of their signature: Name Office Si ature Hilario Gonzales Chairman e ` William J. Davis Secretary - Willard G. Executive Director Yamaguchi OHS West:260892411.1 IN WITNESS WHEREOF, I have hereunto set my hand this 12th day of Apri12010. W rd . Y aguchi xe tive irector The undersigned hereby certifies that the above signature of Willard G. Yamaguchi is the true and lawful specimen signature of Willard G. Yamaguchi, Executive Director of the Authority. f William J. Davis ~ Secretary C OHS West:260892411.1 CERTIFICATE OF INCUMBENCY CITIBANK, N.A. I, Paula F. Jones, Assistant Secretary of Citibank, N.A. having its main office at 3900 Paradise Road, Las Vegas, Nevada and its principal place of business at 399 Park Avenue, New York, NY, DO HEREBY CERTIFY that the following is a true and correct copy of Section 2 of Article X of the existing By-Laws of CITIBANK, N.A. in full force and effect as of the date hereof: "Execution of Instruments. All agreements, indentures, mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, proxies and other instruments or documents, may be signed executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman, the Chief Executive Officer, the President, any Vice Chairman, or any Executive Vice President, or the Chairman Credit Policy Committee, or any Senior Vice President, or the Secretary, or the Chief Auditor, or any Vice President, or anyone holding a position equivalent to the foregoing pursuant to provisions of these By-Laws, or, if in connection with the exercise of any of the fiduciary powers of the Association, by any of said officers or by any Senior Trust Officer. -Any such instruments may also be executed, acknowledged, verified, delivered or accepted in behalf of the Association in such other manner and by such other officers as the Board of Directors may from time to time direct. C The provisions of this Section 2 are supplementary to any other provisions of these By-Laws." I FURTHER CERTIFY that Jerrold Abrahams is a Vice President of CITIBANK, N,A., duly constituted as such, and that the specimen signature set below is a true and genuine signature: Abrahams, Jerrold Vice President ~ LAG'-~-z2~ In WITNESS WHEREOF, I have hereunto affixed my official signature and seal of the said Bank in the City of New York on this 9t" day of April, 2010. Paula F. nes C(77BAN(©" r C CERTIFICATE OF THE CITY ADMINISTRATOR I, Donal O'Callaghan, City Administrator of the City of Vernon (the "City"), HEREBY CERTIFY as follows: 1. that I have directed Hilario Gonzales, Chairman of the Vernon Natural Gas Financing Authority (the "Authority") to sign and enter into the Termination Agreement, dated as of April 7, 2010 (the "Termination Agreement") between Citibank, N.A. and the Authority, attached hereto; and 2. that termination payments due under the Termination Agreement, made by the City on behalf of the Authority, together with any amounts .paid as a result of the termination of interest rate swaps with Morgan Stanley Capital Services Inc., do not exceed the sum of Sixty Million Dollars ($60,000,000). Dated: April 12, 2010 `°.~.~.~..Y Donal 0' Callag City Administrator, City of on • + S C Execution Copy TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of Apri17, 2010 among CITIBANK, N.A. ("Party. A") and VERNON NATURAL GAS FINANCING AUTHORITY ("Party B"). WHEREAS, Party A and Party B -are parties to an ISDA Master Agreement, dated as of June. 27, 2006 and amended and restated as of May 13, 2009 (the "Master Agreement"), a Schedule to the Master Agreement. and an ISDA Credit Support Annex thereto, each dated as of June 27, 2006 and amended and restated as of May 13; 2009 (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 five Transactions pursuant to (i) a Confirmation (Reference No. MS06709), dated- June 27; 2006, as amended and restated as of May 13, 2009 ("Confirmation 1"), with an initial Notional Amount equal to USD 50,000,000 and a Termination Date of August 1, 2021 ("Transaction 1"); (ii) a Confirmation (Reference No. MS06710), dated June 27, 2006, as .amended -and restated as of May 13, 2009 ("Confirmation 2"), with an initial Notional Amount equal to USD 50,000,000 and a Termination Date of'August 1; 2021 ("Transaction 2"); (iii.) a Confirmation (Reference No. MS06711); dated June 27, 2006, as amended and restated as of May 13, 2009 ("Confirmation 3"), with an initial Notional Amount equal to USD 50,000,000- and aTermination Date of August 1, -2021 ("Transaction 3"); (iv) a Confirmation (Reference No. MS06712), dated June 27, 2006, as amended and restated as of May 13, 2009 ("Confirmation 4"), with an initial Notional Amount equal to USD 50,000;000 and a Termination Date. of August 1; 2021 ("Transaction 4"); and (v) a Confirmation (Reference No. MS06713), dated June 27, 2006, as amended and restated as of May 13, 2009 ("Confirmation 5" and,. collectively with Confirmation 1, Confirmation 2, Confirmation 3 and Confirmation 4, the "Confirmations"), with an initial Notional Amount equal to USD 230,845,000 and a Termination Date of August 1,-2021 "Transaction 5" and, collectively with Transaction 1, Transaction 2, .Transaction 3 and Transaction 4, the "Transactions"); 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. The Transactions are hereby terminated as of April 7, 2010 (the "Termination Date"), and neither Party A nor Party B shall .have any obligations thereunder following the Termination Date except for the obligation of Party B to -pay the Termination Amount to Party A as specified herein. In full consideration of this Termination Agreement and incomplete satisfaction of all obligations of all of the parties in respect of the Transactions, Party B shall pay to Party A on April 12, 2010 the amount of USD 33,406,000 (the "Termination Amount") (which. includes all .accrued but unpaid regularly scheduled payments under the Transactions). .The parties hereby acknowledge and agree that the Transactions. are hereby terminated and Party B shall pay the Termination Amount to Party A notwithstanding Paragraph 5 of the Confirmations, which provides that the Termination Amount shall be determined pursuant to Section 6 of the Agreement. 1 Ref. MS06709, MS06710, MS067ll, M506712, and MS06713 NYK 1172756-8.071371.0010 2. 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. 3, Additional Representation of Part~B. Party B hereby represents and warrants to Party A that the -sum of (a) the Termination Amount required to be paid by Party B to Party A hereunder (less any accrued but unpaid regularly scheduled payments under the Transactions included therein), plus (b) the termination payment or termination payments required to be paid by Party B to ,Morgan Stanley Capital Services Inca in connection with the termination of the Morgaa Stanley Transactions (as such term is defined in Resolution No. 2010-49 of the City Council of the City of Vernon adopted Apri16; 2010) (not including accrued but unpaid regularly scheduled payments under the Morgan Stanley Transactions) shall not exceed USD 60,000,000. 4. Documents tote Delivered. (a) The following documents shall be.delivered by Party B to Party A promptly upon. execution of this Termination Agreement: (i) an opinion of counsel- to Party B with respect to the enforceability of this Termination Agreement against Party B; and, C 2 Ref. MS06709; MS06710, MS06711, MS06712, and MS06713 NYK 1172756-8.071371.0010 `r ; (ii) evidence reasonably satisfactory to Party A of the authority and .genuine C signature of the individual signing this Termination Agreement on behalf of-Party B to execute the same. (b) The following documents shall be delivered by Party A to Party B promptly upon. execution of this Termination Agreement: (i) an opinion of counsel to Party A with respect to the enforceability of this Termination Agreement against Party A; and (ii) evidence reasonably satisfactory to Party B of -the authority and genuine .signature of the individual signing this Termination Agreement on behalf of Party A to execute the same.. . 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. C 3 Ref. MS06709, MS06710, MS06711, MS06712, and MS06713 NYK ! 172756-8.071371.0010 IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first above written. CITIBANK, N.A. By: VERNON NATURAL GAS FINANCING AUTHORITY By: I~ilario Gonzales, Chairman ATTEST: William Davis, Secretary 4 Ref. MS06709, MS06710, MS06711, MS06712; and MS06713 NYK 1172756-8.071371.0010 IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first above written. CITIBANK, N.A. B y: VERNON NATURAL GAS FINANCING AUTHORITY 4 B y: Hilario Gonzales, hairman ATTEST: r l , William Davis, Secretary _ 4 Ref. MS06709, MS06710, MS06711, MS06712, and M506713 NYK 1172756-8.071371.0010 M o rg a n Sta n ley Municipal Capital Markets Date: Apri17, 2010 EXECUTION COPY To: City of Vernon From: Morgan Stanley Capital Services Inc. Attn: Donal O'Callaghan, City Administrator Contact: NY Deriv Client Services Fax: 323-826-1408 Fax: 212-404-4726 Tel: 323-583-8811 x561 Tel: 212-761-2996 E-mail: docallaghan@ci.vernon.ca.us E-mail: Municonfirms_In@morganstanley.com Re: Unwind of Transaction MSCS Ref. No. AUE37 (the "Original Transaction") The purpose of this letter agreement is to confirm the terms and conditions of the unwind of the Original Transaction. This letter agreement constitutes a "Confirmation" as referred to in the ISDA Master Agreement below. The definitions and provisions contained in the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc.) (the "Defmitions") are incorporated into this Confirmation. In the event of any inconsistency between the Defmitions and this Confirmation, this Confirmation will govern. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of December 2, 2004, as amended and supplemented from time to time (the "Agreement") between you and us. All provisions contained in the Agreement govern this Confirmation except as expressly C modified below. 2. The terms of the unwind of the Original Transaction to which this Confirmation relates are as follows: Party A: Morgan Stanley Capital Services Inc. Party B: City of Vernon Original Transaction Trade Date: March 16, 2006 Original Transaction Termination Date: April 1, 2018 Unwind Trade Date: Apri17, 2010 Party B Unwind Payment: Party B shall pay USD 4,700,000 to Party A. Unwind SettlementDate: April 12, 2010 3. Account Details: Payments to Party A: Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 C USActive 13982243.3 M ~ rg a n S `a n'ley Municipal Capital Markets Party A Operations Contact: Municipal Operations Tel: 410-534-1436 Fax: 410-534-1990 E-mail MuniOperations@MorganStanley.com Party B Operations Contact: Donal O'Callaghan, City Administrator Tel: 323-583-8811 x561 Fax:323-826-1408 E-mail: docallaghan@ci.vernon.ca.us A. Craig Underwood, President BondLogistix, LLC Te1:213-612-2463 Fax:213-612-2499 E-mail: cnderwood@bondlogistix.com 4. Each of Party A and Party B hereby confirms that (i) with effect from and including the Unwind Trade Date, the Original Transaction is unwound, and (ii) upon payment of the Party B Unwind Payment on the Unwind Settlement Date, Party A and Party B each will be released and discharged from further obligations to each other under the Original Transaction and their respective rights against each other under the Original Transaction are terminated; provided, that such release and discharge will not affect any obligations or rights of Party A or Party B under the Original Transaction with respect to payments or other obligations due and payable or due to be performed on or prior to the Unwind Trade Date and all such payments and obligations shall be paid or performed by Party A or Party B in accordance with the terms of the Original Transaction. ( 5. Each of Party A and Party B hereby agrees that each representation made by Party A or Party B in the Agreement as of the Original Transaction Trade Date will be deemed repeated by such party as of the date of this Confirmation as if such representation were set forth in this Confirmation. USActive 13982243.3 -2- M o rg a n Sta n ley Municipal Capital Markets C Please confirm that the foregoing correctly sets forth the terms of our agreement MSCS Ref. No, AUE37 by executing this Confirmation and returning it to us promptly. Best regards, MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Title: ~~1/ill SC~a~~~~t~ ~/1C~ F'i'~Sl~t~i~l~' ACKNOWLEDGED AND AGREED as of the date first written: CITY OF VERNON By: Name: Donal O'Callaghan Title: City Administrator Attest: Willard G. Yamaguchi; City Clerk C USActive 13982243.3 -3- M o rg a n S `a n 1e.1 Municipal Capital Markets i Please confirm that the foregoing correctly sets forth the terms of our agreement MSGS Ref. No. ALTE37 by executing this Confirmation and returning it to us promptly. Best regards,.. MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Title: ACKNOWLEDGED AND AGREED as of the date first written: CITY OF VERNON By: Name: Donal O'Callaghan Title: City Administrator Atte ill rd G. Yamaguc ity ler l USActive 13982243.3 -3- C Execution Copy TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of Apri17, 2010 among CITIBANK, N.A. ("Party A") and VERNON NATURAL GAS FINANCING AUTHORITY ("Party B"). WHEREAS, Party A and Party B are parties to an ISDA Master Agreement, dated as of June 27, 2006 and amended and restated as of May 13, 2009 (the "Master Agreement"), a Schedule to the. Master Agreement and an ISDA Credit Support Annex thereto, each dated as of June 27, 2006 and amended .and restated as of May 13, 2009 (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 five Transactions pursuant to (i) a Confirmation (Reference No. MS06709), dated June 27, 2006, as amended and restated as of May 13, 2009 ("Confirmation 1"), with an initial Notional Amount equal to USD 50,000,000 and a Termination Date ofAugust 1; 2021 ("Transaction 1"); (ii) a Confirmation (Reference No. MS06710), dated June 27, 2006, as amended ° and restated as of May 13, 2009 ("Confirmation 2"), with an initial Notional Amount equal to USD 50,000,000 and a Termination Date of August 1, 2021 ("Transaction 2"); (iii) a Confirmation (Reference No. MS06711), dated June 27, 2006, as amended and restated as of May 13, 2009 ("Confirmation 3"), with an initial Notional Amount equal to USD 50,000,000 and a Termination Date of August 1, 2021 ("Transaction 3"); (iv) a Confirmation (Reference No. MS06712), dated June 27, 2006, as amended and restated as of May 13, 2009 ("Confirmation 4"), with an initial Notional Amount equal to USD 50,000,000 and a Termination bate of August 1, 2021 ("Transaction 4"); and (v) a Confirmation (Reference No. MS06713), dated June 27, 2006, as amended and restated. as of May 13, 2009 ("Confirmation 5" and, collectively with Confirmation 1, Confirmation 2, Confirmation 3 and Confirmation 4, the "Confirmations"), with an initial Notional Amount equal to USD 230,845,000 and a Termination Date of August 1, 2021 ("Transaction 5" and, collectively with Transaction. 1, Transaction 2, Transaction 3 and Transaction 4, the "Transactions"); 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. The Transactions. are hereby terminated as of April 7, 2010 (the "Termination Date"), and neither Party A nor Party B shall have any obligations thereunder following the Termination Date except for the obligation of Party B to pay the Termination Amount to Party. A as specified herein. 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 B shall pay to Party A on April 12, 2010 the amount of USD 33,406,000 (the "Termination Amount") (which includes all accrued but unpaid regularly scheduled payments under the Transactions). The parties hereby acknowledge and agree that the Transactions are hereby terminated .and Party B shall pay the Termination Amount to Party A ~ notwithstanding Paragraph 5 of the Confirmations, which provides that the Termination Amount shall be determined pursuant to Section 6 of the Agreement. 1 Ref. MS06709, MS06710, MS06711, MS06712, and MS06713 NYK 1172756-8.071371.0010 2. 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. ` 3. Additional Representation of Party B. Party B hereby represents and warrants to Party A that the sum of (a) the.Termination Amount required to be paid by Party B to Party A hereunder (less any accrued but unpaid regularly scheduled payments under the Transactions included therein), plus (b) the termination payment or termination payments required to be paid by Party B to Morgan Stanley Capital Services Inc. in connection with the termination of the Morgan Stanley Transactions (as such term is defined in Resolution No. 2010-49 of the City Council of the City of Vernon adopted Apri16; 2010) (not including accrued but unpaid regularly scheduled payments under the Morgan Stanley Transactions) shall not exceed USD 60,000,000. 4. Documents to be Delivered. (a) The following documents shall be delivered by Party B to Party A promptly upon execution of this Termination Agreement: (i) an opinion of counsel to Party B with respect to the enforceability of this Termination Agreement against Party B; and 2 Ref. MS06709, MS06710, MS06711, MS06712, and MS06713 NYK 1172756-8.071371.0010 (ii) evidence reasonably satisfactory to Party A of the authority and genuine signature of the individual signing this Termination Agreement on behalf of Party B to execute the same. (b) The following documents shall be delivered by Party A to Party B promptly upon execution of this Termination Agreement: (i) an opinion of counsel to Party A with respect to the enforceability of this Termination Agreement against Party A; and (ii) evidence reasonably satisfactory to Party B of the authority and genuine signature of the individual signing this Termination Agreement on behalf of Party A to execute the same. 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 iri counterparts, each of which shall be deemed an original. 3 Ref. MS06709, MS06710, MS06711, MS06712, and MS06713 NYK 1172756-8.071371.0010 j" IN WITNESS WHEREOF,.the parties have executed this Termination Agreement as of ~ the date first above written. CITIBANK, N.A. By: VERNON NATURAL GAS FINANCING. AUTHORITY By: Hilario Gonzales, Chairman ATTEST: William Davis, Secretary 4 Ref. MS06709, MS06710, MS06711,-MS06712, and MS06713 NYK 1172756-8.071371.0010 IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first above written. CITIBANK, N.A. By; VERNON NATURAL GAS FINANCING AUTHORITY By: Hlaro Gonzales, hairman ATTEST: r _ ? ! William Davis, Secretary 4 Ref:. MS06709,-MS06710, MS0671 1, MS06712 and MS06713 - NYK 1172756-8.071.371,0010 ORRICK, HERRINGTON & SUTCLIFFE uP - 777 SOUTH FIGUEROA STREET sulrE 3200 LOS ANGELES, CALIFORNIA 90017-58SS tel +i-zi3-6zg2o2o O R R I C K .fax +s-zsg-612-2499 WWW.ORRICK.COM April 12, 2010 Citibank, N.A. New York, New York Ladies and Gentlemen: We have acted as counsel to the Vernon Natural Gas Financing Authority (the "Authority") in connection with the execution and delivery of the Termination Agreement, dated as of April 7, 2010, between the Authority and Citibank, N.A. (the "Termination Agreement"). This letter is being delivered pursuant to Section 4(a)(i) of the Termination Agreement. Capitalized terms .not otherwise defined herein shall have the meanings ascribed thereto in the Termination Agreement. In such connection, we have reviewed the. Termination Agreement, certificates of the C- Authority, and such other documents, opinions and matters to the extent we deemed necessary to render the opinion set forth herein. The opinion expressed herein is based on an analysis of existing laws, regulations, rulings and court decisions and covers certain matters not directly addressed by such authorities. Such opinion 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. Accordingly, this opinion speaks only as of its date and is not intended to, and may not, be relied upon in connection with any such actions, events or matters. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the Authority. We have assumed without undertaking to verify the accuracy of the factual matters represented, warranted or certified in the documents referred to in the second paragraph hereof. We call attention to the fact that the rights and obligations under the Termination Agreement, and its 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 public entities in the State of California. We express no opinion with .respect to choice of law provisions contained in the Termination Agreement. OHS West:260892172.1 O O R R I C K Citibank, N.A. April 12, 2010 Page 2 Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the opinion that the Termination Agreement has been duly executed and delivered by, and constitutes the valid and binding obligation of, the Authority. This letter is furnished by us as counsel to the Authority. No attorney-client relationship has existed or exists between our firm and you in connection with the Termination Agreement or by virtue of this letter. Our engagement with respect to the Termination Agreement has concluded with its execution and delivery. We disclaim any obligation to update this letter. This letter is delivered to the you as the counterparty to the Termination Agreement, is solely for your benefit as such, and is not to be used, circulated, quoted or otherwise referred to or relied upon by you for any other purpose or by any person to whom it is not specifically addressed. Very truly yours, ~ ORRICK, HERRINGTON & SUTCLIFFE LLP C OHS West260892172.1 ~ Apri17, 2010 Vernon Natural Gas Financing Authority 4305 Santa Fe Avenue Vernon, CA 90058 Ladies and Gentlemen: I have acted as counsel to Citibank, N.A. ("Citibank") in connection with the execution and delivery by Citibank of the Termination Agreement dated as of April 7, 2010, (the "Termination Agreement") relating to the Confirmations of Transaction, Reference Nos. MS06709, MS06710, MS06711, MS06712 and MS06713 dated June 27, 2006, as amended and restated as of May 13, 2009, (t`lre "Confirmations"), entered into pursuant to an ISDA Master Agreement dated as of June 27, 2006 and amended and restated as of May 13, 2009 (the "Master Agreement"), each between Vernon Natural Gas Financing Authority (the "Counterparty") and Citibank. In such capacity I have examined a copy of the Termination Agreement, the Master Agreement and the Confirmations. I have also reviewed certain corporate proceedings of Citibank and I have examined originals, or copies certified or otherwise identified to my satisfaction, of such corporate / records of Citibank, certificates of public officials and of officers and representatives of Citibank, and such other documents as I have deemed necessary as a basis for the opinions hereinafter expressed. In such examination, I have assumed the authenticity of all documents submitted to me as originals and the conformity with the originals of all documents submitted to me as certified or otherwise satisfactorily identified copies. I have also assumed that the Agreement and the Confirmations have been duly executed and delivered by Counterparty pursuant to appropriate corporate authority. The opinions given below are limited to matters concerning the laws of the United States of America and the State of New York and the General Corporation Law of the State of Delaware. Based upon the foregoing and having regard for such legal considerations as I deem relevant, I am of the opinion that: 1. Citibank is a corporation duly existing under the laws of the State of Delaware. 2. Citibank has full corporate power to execute and deliver the Termination Agreement and to perform its obligations thereunder. 3. Such actions have been duly authorized by all necessary corporate action and do not violate, and are not in conflict with, any provision of law or of the Restated Certificate of Incorporation or By-laws of Citibank. 4. No authorizations of, exemptions by or filings with any governmental or other authority are required to be obtained. or made in connection with Citibank's execution, delivery and performance of the Termination Agreement. 5. The Termination Agreement has been duly executed and delivered by Citibank, and constitutes a legal, valid and binding obligation of Citibank, enforceable against Citibank in accordance Page 1 of 2 C with its terms (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, ~ moratorium or other laws affecting creditors' rights generally from time to time in effect). The enforceability of Citibank's obligations is also subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). I am furnishing this opinion to you, solely for your benefit and no other person is entitled to rely hereon. This opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose. Very truly yours, Eugene Kwon C Page 2 of 2