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Resolution No. 2010-049RESOLUTION 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 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, dated as of December 1, 2004 between the City and The Bank of New York Trust Company, N.A., as trustee (the "Prior Trustee"), as amended by the First Supplemental Indenture of Trust, the Second Supplemental Indenture of Trust, the Third Supplemental Indenture of Trust and the Fourth Supplemental Indenture of Trust, each dated as of December 1, 2004, and each between the City and the Prior Trustee, the City previously issued its Electric System Revenue Bonds, 2004 Series A, 2004 Series B, 2004 Series C and'2004 Taxable Series D (collectively, the 112004 Revenue Bonds"); and WHEREAS, the City and Morgan Stanley Capital Services Inc. ("Morgan Stanley") have entered into certain interest rate swap transactions relating to the City's 2004 Revenue Bonds and amendments thereto with respect to some of such transactions (the "Morgan Stanley Transactions") and WHEREAS, the City has determined that 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 WHEREAS, in connection with the termination of each Morgan Stanley Transaction, the City 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 Resolution, 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 City; and WHEREAS, pursuant to the Natural Gas Purchase Agreement, dated as of June 1, 2006, 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 "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 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 terminate a Citibank Transaction when requested to do so by the City; and 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 one 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 September 1, 2008, 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 112008 Revenue Bonds"); and WHEREAS, a portion of the proceeds of the 2008 Revenue Bonds were to be applied to make termination payments 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 of 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 shall not terminate any Morgan Stanley Transaction 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 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 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 and 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 authorized 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 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 5: The Citibank Termination Agreement, in substantially the form attached hereto as Exhibit B and made a part hereof as though set forth in full 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 performance of 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, and 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 Transactions as provided herein. Section 7: All moneys held pursuant 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 - 5 - 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. Section 9: The City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the City Clerk of the City of Vernon shall cause this resolution and the City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 6th day of April, 2010. Name: Hilario Gonzales Title: Mayor /-Waw-nZ pro-T n� ATT T: Willard G Y ch', City Clerk 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. 2010-49, 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, 2010, 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. killarG. a c i, City Clerk (SEAL) - 7 - EXHIBIT A Morgan Stan [e.1 Municipal Capital 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: 323-583-8811, ext 175 Tel: 212-761-2996 E-mail: E-mail: Municonfirms_In@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. 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 "Definitions") are incorporated into this Confirmation. In the event of any inconsistency between the Definitions 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 modified below. 2. The terms of the unwind of the Original Transaction to which this Confirmation relates are as follows: Party A: Party B: Original Transaction Trade Date: Original Transaction Termination Date: Unwind Trade Date: Party B Unwind Payment: Unwind Settlement Date: 3. Account Details: Payments to Party A: Morgan Stanley Capital Services Inc. City of Vernon March 16, 2006 April 1, 2018 April [_], 2010 Party B shall pay USD [ ] to Party A. Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 USActive 13982243.2 Morgan St a n [eJ 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: Tel: Fax: A. Craig Underwood, President BondLogistix, LLC Tel: 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 13982243.2 -2- Morgan Stanley Municipal 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 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: 1. Payment 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") (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 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 to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (e) it has obtained all governmental and other consents, if any, that it is required to obtain in connection with its execution and delivery of this Termination Agreement, all such consents are in full force and effect and all conditions of any such consents have been complied with; (f) its obligations under this Termination Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application, regardless of whether enforcement is sought in a proceeding in equity or in law); and (g) it has made its own independent decision to enter into this Termination Agreement based upon its own judgment and upon advice from such advisors as it has deemed necessary and no other party is acting as a fiduciary for or as an advisor to it in respect of this Termination Agreement. 4. Documents to be Delivered. (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. MS06713 NYK 1172756-6.071371.0010 IN WITNESS WHEREOF, the parties have executed this Termination Agreement as of the date first above written. CITIBANK, N.A. VERNON NATURAL GAS FINANCING AUTHORITY I: Acknowledged and Agreed: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION, as agent for MBIA Insurance Corporation WE 3 Ref. MS06713 NYK 1172756-6.071371.0010 CITY CLERK'S OFFICE INTEROFFICE MEMORANDUM DATE: April 22, 2010 TO: Donal O'Callaghan, City Administrator/Director of Light & Power FROM: Willard Yamaguchi, City Clerk - RE: 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 Transmitted herewith is a copy of the original agreement and Resolution No. 2010-49 referenced above, which was approved by City Council on April 6, 2010. Thank you. WY:dj c: Rory Burnett Masami Higa Alex Kung Joaquin Leon Resolution No. 2010-49, 9915, 9923, VNGFA-0002 VNGFA-0013, VNGFA-0015, VNGFA-0021 Agreement File No. 10-025, 09-062, 09-070 CERTIFICATE STATE OF CALIFORNIA ) ) ss COUNTY OF 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: P Willard Y g ch' City Cler :•i April 8, 2010 Jeffrey R. Higgins Managing Director Bond Logistix LLC 777 South Figueroa Street, Suite 3200 Los Angeles, CA 90017 Re: SWAP Termination Documents— Morgan Stanley and Citibank Dear Mr. Higgins: Please find enclosed the following original documents, approved by the City Council of the City of Vernon and the Board of Directors of the Vernon Natural Gas Financing Authority on April 6, 2010, through Resolution Nos. VNGFA-0021 and 2010-49: 1. Letter Agreement Confirmation of Unwind of Original Transaction between the City of Vernon and Morgan Stanley. 2. Termination Agreement between Citibank and Vernon Natural Gas Financing Authority. 3. Certificates in connection with the VNGFA Termination Agreement as follows: a. Signature and Incumbency Certificate of Authority b. Certificate of the City Administrator C. Certificate of the City Clerk d. Certificate of the Secretary As discussed with Sean Baxter, he will compile a transcript for the City with the remaining originals once everything is complete. Please ensure that the transcript is returned to the attention of the undersigned. If you have any questions regarding this matter, please call Mr. Donal O'Callaghan at (323) 583-8811 ext. 834. Surs,. Y AUC I WY:dj c: Donal O'Callaghan Resolution Nos. 2010-49, VNGFA-0021 SIGMA 'VRK AND JNC1 MBU%N CYXYHXATEOF TBt AUTHOJUTY 1, Wiffiwd G. Yamagmbi, Executime Dimtzorr ofthe Vdmmorm Nat weal Gas, Financing Authority (d* "Au mity )� HEREBY CERTIFY as fo s L. that the nwtnmlvrs of tlh%- Bourd of Victors: of dw Authority wem on AprHl D, 2011, 0and contme as sutr, h mmiemmirurs as of tby—, date bucef'as fogows Hilaariio Gouaa es WillDii@= Y- Datvi2 lRid wd Y- Maimm ref D- Nowmrdure 2- that the Msons Mdhng &e• folllowni g offices and Wsihocts and dltw y a oinn>1ted1 tboeto and' aefin tb=einl were cc Ap6l 1 r 201 K and eovvftm ac to hold such offices and positions as oaf ttbe "e hereof, as, fol ows:: Namw frndre Hda rio, Gowa�hes Chainum w.. huc l McCormick Vice Cbekmum a Wig Eam L DlQviis ' Secretary Wi+lllwd G. Yamagudhi Execu ivo l]&eettor 3.. that tide signaftwes set forth owe ice res} tivre names of the following d'osigmatedl offers of dike Aud�miity aw nnrarnnwaall speemmeas of ti ww signalize. Namw dire Si Ube Hill wio, Ales Cam 'illphainnm A IDbwviis Sec re t2sy WiNardi G eeuw ivr Hyinreetorr Y=nlhn) ON& Wes;260892aa A IN WITNESS WHEREOF, I have hereunto set my hand this I2th day of Awl 2011k CMIUMICATIE: OF THIS CITY ADMINISTRATOR I,. ]Db,> I Off alll � City Adimmuimriist rateir oft Ake City oaf . V im (dw "City"), HEREBY CERTIFY as fob s : k that I bwe dineted Hiillamw Cioszaks�, Chairram of dw Vernon Natural Gas Fia Bing Au6orky ,(tom '.A ") Va smgnm ammd enter iamfto dDe Temimtiiomm Agreement, dated a& of Alumidl ?„ a i1@1 (tke "Temaimtiws Apee ") hem Ciibiltramnik, N.A. and the Authority, a9a bedtl lbmto,,aam� 2.. ; that temnfimfioim Faym=bs dww mder the Tenmirmfion Agreement, made by the City on bekaff of tFw Ai &@ff*, together wiibb any ammmmhs poid as, a resallh of the termination of iinterest raft- swalp,.+ wiffi Morgan ftmley Cwpiiball Services. I=., do wt exceed the sum of Sixty' WNW•_ll JIWI. 11 ffivs- lit Wd:: ApriM IZ Z@3b@j Dorona f'Calllla City Administrator, City of Vernon CERTIFICATE OF" CYTY CLERK 1, WilTaardi G. Yamaguchi, City Clerk of the. City of-`Vemnon ( «City» )�. M EREBY CERTIFY that attacked'hereto, its a trw and eomWllet<e copy of Resollf¢onmt No,.. Z041049), ' adopted by the City Couumeil oafl'tt he City at a meeting dim eaMedl, miottieedl aamdl lied on A016. 2010," at whit meeting a qqm was as: present and, aefing throughout chi nresolbo1n1 has, notbeen mmodifiedl, amen&d or, repealed and is in fivuffl force and, , effect in ffir %mist aduc hedf hereto,.. IN NESS WHEREOF, I haute hereunto) set my hwd and affniedl the seall ofl hey City this b2h day of Ap iI 20lk :. $a rdl" .. Y City CbffIL o, City of velmoml E SIEAL11 ONS West260992411.1 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. d4vis Secretary of the Vernon Natural Gas Financing Authority [SEAL] OHS West:260892411.1 Morgan Stan ley Municipal Capital Markets Date: April 7, 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: Municonfmns_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 "Definitions") are incorporated into this Confirmation. In the event of any inconsistency between the Definitions 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 modified below. 2. The terms of the unwind of the Original Transaction to which this Confirmation relates are as follows: Party A: Party B: Original Transaction Trade Date: Original Transaction Termination Date: Unwind Trade Date: Party B Unwind Payment: Unwind Settlement Date: 3. Account Details: Morgan Stanley Capital Services Inc. City of Vernon March 16, 2006 April 1, 2018 April 7, 2010 Party B shall pay USD 4,700,000 to Party A. April 12, 2010 Payments to Party A: Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 USActive 13982243.3 Morgan Stan le J 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 Tel: 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- Morgan Stanley Municipal Capital Markets 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. L-5 Name: Title: ACKNOWLEDGED AND AGREED as of the date first written: CITY OF VERNON Name: Donal O'Callaghan Title: City Administrator Att t: W' lard G. famaKryity C r USActive 13982243.3 -3- Execution Copy TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of April 7, 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 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 Date of August 1, 2021 ("Transaction 4"); and (v) a Confirmation (Reference No. MS067,13), 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. 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 April 6, 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 ►A 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. CounteEparts. This Termination Agreement may be executed in counterparts, each of which shall be deemed an original. 3 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. LE VERNON NATURAL GAS FINANCING AUTHORITY By: 94 I�_ ` ZL"74 Hilario Gonzales, Chairman ATTEST: r e William Davis, Secretary 4 Ref. MS06709, MS06710., MS06711, MS06712, and MS06713 NYK 1172756-8.071371.0010 RESOLUTION NO. VNGFA-0021 A RESOLUTION OF THE BOARD 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, 2006, 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 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 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 terminate 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. NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE VERNON NATURAL GAS FINANCING AUTHORITY, AS FOLLOWS: Section 1: This Board of Directors hereby finds and determines that the recitals contained hereinabove are true and correct. Section 2: The termination of each of the Transactions, on a single date or on 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 Representative executing the same as consistent with the intent of the Authority Board, said execution being conclusive 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 Authorized 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 out 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 of the 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 AC-7IPJC sr-*Cr�6-r-A(?-y Name: Hilario Gonzales Title: Chair IMAN 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•rE► day of Apr' , 2010, at Vernon, California. Iry i t. t. A 0 !� i^� A v era i /�C-T-IM G S5-cifC-FA1?-y (SEAL) 1.7C 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 ("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: 1. Payment 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") (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 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 to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; (e) it has obtained all governmental and other consents, if any, that it is required to obtain in connection with its execution and delivery of this Termination Agreement, all such consents are in full force and effect and all conditions of any such consents have been complied with; (f) its obligations under this Termination Agreement constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application, regardless of whether enforcement is sought in a proceeding in equity or in law); and (g) it has made its own independent decision to enter into this Termination Agreement based upon its own judgment and upon advice from such advisors as it has deemed necessary and no other party is acting as a fiduciary for or as an advisor to it in respect of this Termination Agreement. 4. Documents to be Delivered. (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: G) 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. GoverninLaw. 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 1172756-6.071371.0010 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 LIM Acknowledged and Agreed: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION, as agent for MBIA Insurance Corporation M. 3 Ref. MS06713 NYK 1172756-6.071371.0010 CITY CLERK'S OFFICE INTEROFFICE MEMORANDUM DATE: April 22, 2010 TO: Donal O'Callaghan, City Administrator/Director of Light & Power FROM: Willard Yamaguchi, City Clerk I ,,jh RE: Resolution No. VNGFA-0021 — A Resolution of the Board 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 Transmitted herewith is a copy of the original agreement and Resolution No. VNGFA-0021 referenced above, which was approved by City Council on April 6, 2010. Thank you. WY:dj c: Rory Burnett Masami Higa Alex Kung Joaquin Leon Resolution No. 2010-49, 9915, 9923, VNGFA-0002 VNGFA-0013, VNGFA-0015, VNGFA-0021 Agreement File No. 10-025, 09-062, 09-070 CERTIFICATE STATE OF CALIFORNIA ) ) ss COUNTY OF 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. VNGFA-0021 - A Resolution of the Board 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 IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official Seal of the City of Vernon, County of Los Angeles, State of California, on this ? day of April 2010. SEAL: w WillarA Yama u i City Clerk V ORRICK April 20, 2010 VIA FEDERAL EXPRESS Donal O'Callaghan, City Administrator City of Vernon 4305 Santa Fe Avenue Vernon, California 90058 Re: Termination of Interest Rate Swap Transactions Dear Donal: ORRICK, HERRINGTON & SUTCLIFFE LLP 777 SOUTH FIGUEROA STREET SUITE 3200 LOS ANGELES, CALIFORNIA 90017-5855 tel +1-213-629.2020 fax +1-213-612-2499 WWW.ORRICK.COM Sean J. Baxter (213) 612-2171 sbaxter@orrick.com In connection with the above -referenced transactions, enclosed please find a full transcript of original documents for the City's records. We have retained copies of the documents in our records and have also provided BLX with a full transcript. Please do not hesitate to call me at (213) 612-2171 if you have any questions. Very truly yours, J,&� aa�4- Sean J. Baxter Enclosures OHS West:260900184.1 42797-2 E " ° A P P 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 Clerk of the City. 2. Resolution No. VNGFA-0021 of the Authority, certified by the Secretary of the Authority. 1 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 April 7, 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. 201049, 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. LM [SEAL] OHS West:260892411.1 CERTIFICATE 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 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 dated as of December 1, 2004 between the City and The Bank of New York Trust Company, N.A., as trustee (the "Prior Trustee"), as amended by the First Supplemental Indenture of Trust, the Second Supplemental 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, 2004 Series A, 2004 Series B, 2004 Series C and 2004 Taxable Series D (collectively, the 112004 Revenue Bonds"); and WHEREAS, the City and Morgan Stanley Capital Services Inc ("Morgan Stanley") have entered into certain interest rate swap transactions relating to the City's 2004 Revenue -Bonds and amendments thereto with respect to some of such transactions (the "Morgan Stanley Transactions"); and WHEREAS, the City has determined that it is in the public interesttoterminate each of the Morgan Stanley Transactions; which' terminations may be executed on one date or on different dates; and CWHEREAS, in connection with the termination of each Morgan Stanley Transaction, the City 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 Resolution, 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 City; and WHEREAS, pursuant to the Natural Gas Purchase Agreement, dated as of June 1, 2006, 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 "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 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 terminate a Citibank Transaction when requested to do so by the City; and 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 one 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 September 1, 20G8, 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 112008 Revenue Bonds"); and WHEREAS, a portion of the proceeds of the 2008 Revenue Bonds were to be applied.to make termination payments 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 of 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, shall not terminate any Morgan Stanley Transaction 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 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 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 and 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 authorized 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 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 5: The Citibank Termination Agreement, in substantially the form attached hereto as Exhibit B and made a part hereof as though set forth in full 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 performance of 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, and 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 Transactionsas provided herein. Section'7: All moneys held pursuant 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- 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: 323-583-8811, ext 175 Tel: 212-761-2996 E-mail: E-mail: Municonfirms_In@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. 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 "Definitions") are incorporated into this Confirmation. In the event of any inconsistency between the Definitions 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 Cmodified 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 USActive 13982243.2 M o rg a n Stan ley al Munici Capital 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 BondLogistix, LLC Tel: 213-612-2463 Fax:213-612-2499 E-mail: cunderwood@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. l USActive 13982243.2 -2- J Morgan Stanley Municipal 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: 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:: 1. Payment 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") (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 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 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," imilar. laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application, regardless of whether enforcement is sought in 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 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. MS06713 NYK 1172756-6.071371.00IO C 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: ` Acknowledged and Agreed: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION, as agent for MBIA Insurance Corporation By: 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. Ix William J. Davi Secretary of the Vernon Natural Gas Financing Authority [SEAL] OHS West:260892411.1 RESOLUTION NO. VNGFA-0021 A RESOLUTION OF THE BOARD 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, 2006, 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 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 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 terminate 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 1: This Board of Directors hereby.finds and determines that the recitals contained hereinabove are true and correct. Section 2 The termination ,of each of the Transactions, on a single date or on 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 Representative executing the same as consistent with the intent of the Authority Board, said execution being conclusive 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 Authorized 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 out the .actions contemplated by this Resolution and the documents and instruments approved or authorized bythisResolution. Section 4: All actions heretofore taken by any committee of this Board of Directors, or any official, officer, employee, representative or agent of the 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 l 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: 1. Payment 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") (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 authorized to do so; Ref. MS06713 NYK 1172756-6,071371.0010 1 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 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 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 NYK 1172756-6.071371.0010 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 By: Acknowledged and Agreed: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION By: NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION, as agent for MBIA Insurance Corporation By: 3 Ref. MS06713 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 Willard G. Yamaguchi Executive Director 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 Signature Hilario Gonzales Chairman 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 April 2010. 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. William J. Davis Secretary 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. 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, NA., duly constituted as such, and that the specimen signature set below is a true and genuine signature: Abrahams, Jerrold Vice President In WITNESS WHEREOF, I have hereunto affixed my official signature and seal of the said Bank in the City of New York on this 91" day of April, 2010. Paula F. nes C(77BAMOW i 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 Donal O' Callag City Administrator, City of on Execution Copy TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of April 7, 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 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 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 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. 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 Inca 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 April 6, 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 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 in counterparts, each of which shall be deemed an original. 3. 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: 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 4 B y: Hilario Gonzales, hairman ATTEST: r William Davis, Secretary 4 Ref. MS06709, MS06710, MS06711, MS06712, and MS06713 NYK 1172756-8.071371.0010 Morgan Stan ley Municipal Capital Markets Date: April 7, 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.vemon.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 "Definitions") are incorporated into this Confirmation. In the event of any inconsistency between the Definitions 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 modified below. 2. The terms of the unwind of the Original Transaction to which this Confirmation relates are as follows: Party A: Party B: Original Transaction Trade Date: Original Transaction Termination Date: Unwind Trade Date: Party B Unwind Payment: Unwind Settlement Date: 3. Account Details: Payments to Party A: Morgan Stanley Capital Services Inc. City of Vernon March 16, 2006 April 1, 2018 April 7, 2010 Party B shall pay USD 4,700,000 to Party A. April 12, 2010 Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 USActive 13982243.3 Morgan Stanley Municipal Capital Markets Party A Operations Contact: Party B Operations Contact: Municipal Operations Tel: 410-534-1436 Fax: 410-534-1990 E-mail: MuniOperations@MorganStanley.com 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 Tel: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- Morgan Stanley Municipal Capital Markets 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: 9— � Name: Title: Kevin Schwartz Vice President 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 USActive 13982243.3 -3- Morgan S `a n 1e.1 Municipal Capital Markets i 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: 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- Execution Copy TERMINATION AGREEMENT Termination Agreement (this "Termination Agreement") dated as of April 7, 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 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 April 6, 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, MS0671.2, 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 in 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, MS0671 1, MS06712, and MS06713 NYK 1172756-8.071371.0010 (' O ORRICK April 12, 2010 Citibank, N.A. New York, New York Ladies and Gentlemen: ORRICK, HERRINGTON & SUTCLIFFE LLP 777 SOUTH FIGUEROA STREET SUITE 3200 LOS ANGELES, CALIFORNIA 90017-5855 tel +1-213-6292020 fax +1-213-612-2499 WWW.ORRICK.COM 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, C/✓GCCC� � •Gca '4' G�" CCIJ ORRICK, HERRINGTON & SUTCLIFFE LLP OHS West: 260892172. 1 April 7, 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, (the "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 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 Page 2 of 2 Express bCEX. 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