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Resolution No. 2011-161 (2)M O R R I C K January 31, 2012 VIA FEDERAL EXPRESS Kristen Enomoto City of Vernon 4305 Santa Fe Avenue Vernon, California 90058 Re: Novation Transaction between the City of Vernon, Deutsche Bank and Morgan Stanley Dear Kristen: ORRICK, HERRINGTON & SUTCLIFFE LLP 777 SOUTH FIGUEROA STREET SUITE 3200 LOS ANGELES, CALIFORNIA 90017-5855 tel +2-213-629-2020 /Rx +1-213-612.2499 W W W.ORRICK.COM Sean I Baxter (213) 612-2171 sbaxter@orrick.com In connection with the above -referenced transaction, enclosed please find a full transcript of original documents for the City's records. I have also included two CD -Rom copies of the transcript for your records. We have retained copies of the documents in our records and have also provided BLX, Morgan Stanley and Deutsche Bank with full transcripts. Please do not hesitate to call me at (213) 612-2171 if you have any questions. Very truly yours, Sean J. Baxter Enclosures Oi-IS West.261526707.1 42797-2 NOVATION TRANSACTION BETWEEN THE CITY OF VERNON, DEUTSCHE BANK AG, NEW YORK BRANCH AND MORGAN STANLEY CAPITAL SERVICES LLC Novation Date: September 23, 2011 PARTIES City of Vernon (the "City") Morgan Stanley Capital Services LLC ("Morgan Stanley") Deutsche Bank AG, New York Branch ("Deutsche Bank") Mike Montgomery, Esq. ("City Attorney") Orrick, Herrington & Sutcliffe LLP ("Special Counsel") Cadwalader, Wickersham & Taft LLP and James J. Panella, Esq. ("Morgan Stanley Counsel') Kathleen A. Yohe, Esq. ("Deutsche Bank Counsel') SCHEDULE OF TRANSCRIPT DOCUMENTS 1. Resolution No. 2011-161 of the City, certified by the City Clerk of the City. 2. Signature and Incumbency Certificate of the City. 3. Novation Confirmation, dated October 11, 2010, executed by the City, Deutsche Bank and Morgan Stanley. 4. Opinion of City Attorney. 5. Opinion of Special Counsel. 6. Opinions of Morgan Stanley Counsel. 7. Opinion of Deutsche Bank Counsel. OHS Wcsc261381391.1 42797.2 CERTIFICATION OF CITY CLERK STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES) I, Willard G. Yamaguchi, City Clerk of the City of Vernon (the "City"), HEREBY CERTIFY that attached hereto as Exhibit A is a true and complete copy of Resolution No. 2011-161, duly adopted by the City Council of the City at a meeting duly called and duly held on September 22, 2011, at which meeting a quorum was present and acting throughout. Such resolution has not been modified, amended or repealed and is in full force and effect in the form attached hereto as Exhibit A. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the City this 23rd day of September, 2011. SEAL: Willard G: 7�ay�(ag�ch City Clerk ( / Exhibit A RESOLUTION NO. 2011-161 RESOLUTION NO. 2011-161 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON AUTHORIZING AND APPROVING THE TRANSFER OF THE RIGHTS AND OBLIGATIONS OF MORGAN STANLEY CAPITAL SERVICES INC. UNDER AN INTEREST RATE SWAP TRANSACTION WITH THE CITY OF VERNON; APPROVING A FORM OF NOVATION CONFIRMATION WITH RESPECT TO SUCH TRANSFER; AND AUTHORIZING AND RATIFYING 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 the provisions of its Charter, the City of Vernon Municipal Facilities Revenue Bond Law, constituting Article XI of the City Code of the City of Vernon, and the Indenture of Trust, dated as of December 1, 2004, between the City and The Bank of New York Trust Company, N.A., as amended and supple;.tented, the City issued,its Electric System Revenue Bonds, 2004 Series A (the "2004 Series A Bonds") and its Electric System Revenue Bonds, 2004 Series B (the "2004 Series B Bonds"); and WHEREAS, the City has entered into that certain ISDA Master Agreement, dated as of December 2, 2004 (as amended as of March 16, 2006, the "Master Agreement") with Morgan Stanley Capital Services Inc. ("Morgan Stanley"), including the Schedule to the Master Agreement, dated as of December 2, 2004 (as amended and restated as of April 14, 2008, the "Schedule") and the Credit Support Annex (as amended as of March 16, 2006 and as of April 14, 2008., the "Credit Annex" and, together with the Master Agreement and the Schedule, the "2004 Agreement"); and WHEREAS, in connection with the issuance of the 2004 Series A Bonds, the City and Morgan Stanley entered into an interest rate swap transaction (the "Series A Transaction") pursuant to the 2004 Agreement and a confirmation, dated as of December 2, 2004 (as amended and restated as of March 16, 2006 and as further amended and restated as of April 27, 2009, the "Series A Confirmation"); and WHEREAS, in connection with the issuance of the 2004 Series B Bonds, the City and Morgan Stanley entered into an interest rate swap transaction (the "Series B Transaction") pursuant to the 2004 Agreement and a confirmation, dated as of December 2, 2004 (as amended and restated as of March 16, 2006 and as further amended and restated as of April 27, 2009, the "Series B Confirmation"); and WHEREAS, notwithstanding the payment of the Series A Bonds and the Series B Bonds, the City has determined, due to market and other conditions, that it is in the best interests of the City not to terminate the Series A Transaction or the Series B Transaction; and WHEREAS, in accordance with the 2004 Agreement, Morgan Stanley has determined to transfer all of its rights, liabilities, duties and obligations under the Series B Transaction to Deutsche Bank AG, New York Branch (the "Bank") which transfer shall substitute the Bank for Morgan Stanley as the counterparty to the City with respect to the Series B Transaction (relieving Morgan Stanley of its rights, liabilities, duties and obligations with respect to the Series B Transaction arising on and after the effective date of such transfer); and WHEREAS, the City has determined to consent to such transfer of all of Morgan Stanley's rights, liabilities, duties and obligations under the Series B Transaction to the Bank which transfer shall - 2 - continue the Series B Transaction substituting the Bank for Morgan Stanley as the counterparty to the City with respect to the Series B Transaction on and after the effective date of such transfer; and WHEREAS, to evidence: (i) the transfer of all of Morgan Stanley's rights, liabilities, duties and obligations under the Series B Transaction to the Bank, (ii) the City's consent to such transfer, and (iii) that the Series B Transaction between the City and the Bank (after the transfer of Morgan Stanley's rights, liabilities, duties and obligations thereunder to'the Bank) shall continue on the terms and conditions of the 2004 Agreement, with only such changes thereto as are set forth therein, there has been prepared and presented to this meeting a form of Novation Confirmation among the City, Morgan Stanley and- the Sank (as the same may be modified and completed in accordance with this Resolution, being referred to as the "Novation Confirmation"); and WHEREAS, the Novation Confirmation includes by reference the 2004 ISDA Novation Definitions (the "Novation Definitions") which Novation Definitions include by reference the Novation Agreement (the "Novation Agreement") in the form attached to the Novation Definitions and which Novation Definitions and Novation Agreement have been presented to this meeting; and WHEREAS, after having reviewed and considered the proposal of Morgan Stanley to transfer all of its rights, liabilities, duties and obligations with respect to the Series B Transaction to the Bank as provided in the Novation Confirmation, and the proposal of the Bank to accept such transfer on such terms and conditions, this City Council now desires to authorize and approve such transfer of all of Morgan Stanley's rights, liabilities, duties and obligations with respect to - 3 - the Series B Transaction to the Bank as provided in the Novation Confirmation, including the execution of such documents and the performance of such acts as may be necessary or desirable to effect such transfer and the other actions contemplated by this Resolution. 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 does hereby find and determine that the recitals contained hereinabove are true and correct. SECTION 2: The transfer of all of Morgan Stanley's rights, liabilities, duties and obligations under the Series B Transaction to the Bank on the terms and conditions provided in the Novation Confirmation, including. the Novation Definitions and the Novation Agreement, are hereby authorized and approved. SECTION 3: The Novation Confirmation, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. Each of the Mayor and the City Administrator (each an "Authorized Officer"), acting singly, is hereby authorized to execute and deliver the Novation Confirmation, in the name of and on behalf of the City, in substantially the form presented to this meeting with such changes, insertions and deletions as may be approved by the Authorized Officer executing the Novation Confirmation, said execution being conclusive evidence of such approval, and the City Clerk of the City (the "City Clerk") is hereby authorized to attest thereto. SECTION 4: The Mayor, the City Administrator, the City Clerk, the Director of the Light and Power Department and any other proper official, officer or employee of the City, acting singly, be and - 4 - each of them hereby is authorized to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or convenient in carrying out the transactions contemplated by the documents and instruments approved or authorized by this Resolution, including, without limitation, making any determinations or submission of any documents or reports which are required by any rule or regulation of any governmental entity in connection with the transfer of all of Morgan Stanley's rights, liabilities, duties and obligations under the Series B Transaction to the Bank and the execution, delivery and performance by the City of its obligations under the documents and instruments approved or authorized by this Resolution. SECTION 5: All actions heretofore taken by any committee of the City Council, or any official, officer, employee, representative or agent of the City, in connection with the 2004 Agreement, the Novation Confirmation, the Series A Transaction and/or the Series B 'Transaction, including any amendments or supplements to the 2004 Agreement, the Series A Transaction and/or the Series B Transaction, and/or the authorization, execution, delivery, or performance of the City's obligations under the 2004 Agreement, the Novation Confirmation, the Series A Transaction and/or the Series B Transaction, including any amendments or supplements to the 2004 Agreement, the Series A Transaction and/or the Series B Transaction, are hereby ratified, approved and confirmed. SECTION 6: The City Council of the City of Vernon hereby authorizes and directs the City Administrator, or his designee, to take whatever action is deemed necessary or desirable for the purpose of implementing and carrying out the purposes of this Resolution and the - 5 - transactions herein approved or authorized. SECTION 7: 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 22Id day of September, 2011. TITLE: MAYOR / MAYOR PRO-TEM - 6 - STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, Willard G. Yamaguchi, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being. Resolution No. 2011-161, was duly passed, approved and adopted by the City Council of the City of Vernon at an adjourned regular meeting of the City Council duly held on Thursday, September 22, 2011, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this '� day of September, 2011, at Vernon, California. (SEAL) - 7 - SIGNATURE AND INCUMBENCY CERTIFICATE OF THE CITY I, Willard G. Yamaguchi, City Clerk of the City of Vernon (the "City"), HEREBY CERTIFY as follows: 1. that the members of the City Council of the City were on January 1, 2011, 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 January 1, 2011, and continue to hold such offices and positions as of the date hereof, as follows: Name Hilario Gonzales Mark C. Whitworth Willard G. Yamaguchi Office Mayor City Administrator City Clerk 3. that the signatures set forth opposite the respective names of the following designated officers of the City are manual specimens of their signature: Name Hilario Gonzales Mark C. Whitworth Willard G. Yamaguchi Office Mayor City Administrator City Clerk Signature IN WITNESS WHEREOF, I have hereunto set my hand this da day of 2011. September, Deutsche Bank Z Deutsche Bank AG New York Branch 60 wall Street New York, NY 10005 Telephone: 24250-9425 Facsimile: 212-787-0779 Date: October 11, 2011 Novation Confirmation To: City of Vernon Attn: Mark Whitworth, City Administrator Telephone: 323-583-8811 Facsimile: 323-826-1439 To: Morgan Stanley Capital Services LLC (formerly known as Morgan Stanley Capital Services Ann: NY Deriv Client Services Telephone: 212-761-2996 Facsimile: 646-202-9134 Global No.: N1359778N Ladies and Gentlemen: Thepurpose of this letter is to confirm the terms and conditions of the Novation Transaction entered into between the parties and effective from the Novation Date specified below. This Novation Confirmation constitutes a "Confirmation" as referred to in the Transferee ISDA Master Agreement specified below, 1. The definitions and provisions contained in the 20041SDA Novation Definitions (the "Definitions', and the terms and provisionsof the 2006 ISDA Definitions, as published by the International Swaps and Derivatives. Association; Inc. and amended from time to time, are incorporated in this Novation Confirmation, In the evgqnt of any inconsistency between (i) the Definitions, (il) the 2006 ISDA Definitions and/or (III) the Novation Agredinent (Exhibit A to the Definitions) and this Novation Confirmation, this Novation Confirmation will govern. 2. The terms of the Novation Transaction to which this Novation Confirmation relates are as follows: I Novation Trade Date: Novation Date: Novated Amount: Transferor: Transferee: Remaining Party: Chs4 d Ma 9uprdaoy Board CWrna cadip MWepampa a—& Jaad AaNW,w,n (Cbasman). Nupa sumig., Sldm K'WW'HW rsWosd Lambeµ Jorgen Nischm, Anfl,,m Jain. Raear Naaaa September 23, 2011 September 23, 2011 USD 83,575,000.00 Morgan Stanley Capital Services LLC (formerly as Morgan Stanley Capital Services Inc.) Deutsche Bank AG, New York Branch City of Vernon DMade ew As is .Medaed uMr Gann awing Lsv (cmgW Wn WMJdy eaFw - FMWW Fin W &u WNalna A M") and ,epdaW by Ma Fine si SqM A"V" rd pe mdid d UK bud : a MOMbar d ae London aerk Eadimpo, D%Ud* Bank AG is a josd nuk mpora m With smiled sabAdy WMWAed in ire Fed Rapublq d Gum" Ime N .. w t,, Dls,d Caul d Fr am IRsin; &ands Rpiaaatlm N EVp ire WWr eR00000S A Wx xkFau: YArcJrWw Hoar. ) OnW WMeald 91 M . Ld EC2N 209. GMarJla ew Gry der. h 46U .dsuts ee ma ISDA Master Agreement between Remaining Party mid Transferee N1759778N I This Novation Confirmation, together with all other documents referring to an ISDA Master Agreement (each a "Confirmation") confirming transactions (each a "Novation Transaction") entered into between the Transferee and the Remaining Party, shall supplement, form a part of, and be subject to, an ISDA Master Agreement in the form of a 1992 ISDA Master Agreement (Local Currency — Single Jurisdiction) as'if Remaining Party and Transferee had both executed An agreement in such form on the Trade Date of the fiat Transaction between the Transferee and t a Remaining Party (such agreement, the "Transferee ISDA Master Agreement" and for purpose of the Definitions such agreement is a New Agreement is such term is used in the Definitions) with the Schedule thereto and Credit Support Annex forming a p Irt thereof being in the form of the ISDA Master Agreement Schedule, as amended and restated as I April 14, 2008 (the "Morgan Stanley ISD Schedule"), and Credit Support Annex, as amended and restated on April 14, 2008, and further amended on September 22, 2011 (the "Morgan Stanley ISDA CSAI, agreed between Remaining Party a d Transferor attached hereto as Exhibit A (collectivel , the "Morgan Stanley ISDA Master Agreement), wih such modifications to the Morgan Stanley ISDP. Schedule and the Morgan Stanley ISDA CSA set to h in Exhibit B hereto. All provisions contained incorporated by referencein the Transferee: ISDP Master Agreement will govern the terms of each Novation Transaction. in theevent of any inconsistency between the provisions of that Transferee ISDA Master Agreement and this Novation Confirmation, thls Novation Confirmation will prevail for the purpose of this Novation Transaction. I I 3. The terms of the Old Transaction (as amended and restated as of April 27. 2009) to which this Novation Confirmation relates, for identification purposes, are as follows: Notional Amount ofOld Transaction: USD 83,575,000.00 amortizing according to Exhibit C Trade Date of Old Transaction: December 2, 2004 Effective Date of Old Transaction: December 22, 2004 Termination Date of Old Transaction: April I, 2029 Transferor Reference AUCTM 4. The terms of the transaction between the Transferee and the Remaining Party to which this Novation Confirmation relates (referred to as a "New Transactiod' for purposes of the Definitions) shall beds specified in Section 2 of the copy of the Old Confirmation attached hereto as Exhibit D . First Full Calculation Period: Applicable, commencing September 1, 2011 i I 5. Miscellaneous Provisions. Nan-Rellance. Applicable. In connection with this Novation Confirmation and the Novation Transapyon, the Remaining Party agrees that (a) the Transferor and the. Transferee are acting and have acted solely as a pridcipal and not as an agent, advisor or fiduciary of the Remaining Party, (6) the Transferor and the Transferee have not assumed a fiduciary responsibility In favor of the Remaining. Party with respect to this Novation Confirmation r the Novation Transaction and (c) nothing in this Novation Confirmation or in any prior relationship betweepi the Transferor or the Transferee and the Remaining Parry will be deemed to create an advisory, fiduciary or a ency relationship between Transferor or the Transferee and the Remaining Party in respect of this Novation Trans tion (whether or not the Transferor or the Transferee, or any affiliate of the Transferor or the Transferee, has provi d or is currently providing other services to the Remaining Party on related or other matters). In addition, the Rem ning Party acknowledges that it has (1) determined, without reliance upon the Transferor or the Transferee or any ad. their affiliates, the financial and economic risks and merits, as well as the legal, tax and accounting characterization and consequences, of this Novation Transaction and it is: capable of assuming such risks, (ii) consulted with its own legal, tax, accounting and financial advisors- to determine whether the Novation Transaction set forth it this Novation Confirmation is in its best interest and made an independent analysis and decision to enter into the Novation Transaction based on such advice, and (Ili) retained BLX Group LLC as Its financial advisor and has relied on BLX Group LLC to provide advice to it with respect to the Novation Transaction, including without limitation advice with respect to the structure, timing, terms and other similar matters concerning the Novation Transaction. 6. Documents to be Dellpered: (a) The following documents shall be delivered by the Remaining Party to the Transferor and the Transferee promptly upon execution of this Novation Confirmation: (i) an opinion of counsel to the Remaining Party with respect to the enforceability o�'this Novation Confirmation against the Remaining Party; i (ii) evidence reasonably satisfactory to the Transferor and the Transferee of (QI the authority of the Remaining Party to enter into this Novation Confirmation and (ij) the authority and genuine signature of the individual signing this Novation Confirmation on behalf of the Remaining Party to execute the same; and i (iii) a certified copy of the resolution or resolutions (or the equivalent thereof) of the governing body of the Remaining Party, certified by an appropriate official of the Remaining Party, pursuant to which the Remaining Party is authorized to enter into this Novation Confirmation. N1359778N (b) The following documents shall be delivered by the Transferor to the Remaining Patty and the Transferee promptly upon execution of this Novation Confirmation: (i) an opinion of counsel to the Transferor with respect to the enforceability of this Novation Confirmation against the Tmnsferor; (i1) evidence reasonably satisfactory to the Remaining Party and the Transferee authority and genuine signature of the individual signing this Novation Confirr on behalf of the Transferor to execute the same. (c) The following documents shall be delivered by the Transferee to the Remaining Party and the Transferor promptly upon execution of this Novation Confirmation: I (i) an opinion of counsel to the Transferee with respect to the enforceability of this Novation Confirmation against the Transferee; (il) evidence reasonably satisfactory to the Remaining Party and the Transferor of the authority and genuine signature of the individual signing this Novation Confirmation on behalf of the Transferee to execute the same. I N 1359778N The parties confirm their acceptance to be bound by this Novation Confirmation as of the Novation Date by executing a copy of this Novadon Confirmation and returning it to us. The Transferor, by id execution of a copy of this Notation Confirmation, agrees to the terms at the Novanon Confirmation as it relates to the Old Transaction, The Transferee, by its execution of a copy of this Novation Confirmation, agrees to the terms of the Novation Confirmation as it relojes to the Novation Transaction. Yours sincerely, Deutsche Dank AG New York By: DB Services New 1'ersey, 1 r. ent I I' BY: (p Yiuo) BY: ( flee tine & title) Confirmed as of the date first above writtenr Cily of Vernon By; Name: Mark Whitworth' Thlo: City Administrator Morgan Stanley Capital Services LLC. By: Name��(J Title:. Fobrlce Piluto t.k Sinraforu, 41 N1359778N The parties confirm their acceptance to be bound by this Novation Confirmation as of the Novation Date by executing a copy of this Novation Confirmation and returning it to us. The Transferor, by its execution of a copy of this Novation Confirmation, agrees to the terms of the Novation Confirmation as it relates to the Old Transaction. The Transferee, by its execution of a copy of this Novation Confirmation, agrees to the terms of the Novation Confirmation as it relates to the Novation Transaction. Yours sincerely, Deutsche Bank AG New York By: DB Services New Jersey, Inc., as Agent BY: (officer's name & title) BY: (officer's name & title) Confirmed as of the date first above written: City of Vernon p By, Name: Mark hitworth Title: City Administrator Morgan Stanley Capital Services LLC. By: Name: Title: Please attach Exhibit A N I359778N (Local Currency —Single Jurisdiction) ISDA. Intemational Sssap Dealers Association, Inc. MASTER AGREEMENT dated as of December 2, 2004 MORGAN STANLEY CAPITAL and CITY OF VERNON SERVICES INC. have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation') exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: Interpretation (a) Defnidans. The terms defined in Section 12 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purposes of the relevant Transaction. (c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement") andth...fl.t:ee...,...u__.-IL ___•_. . 2. Obligations (a) General Conditions. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the mannercustomary for payments in therequired currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (I) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. Copyright 9 1992 by International Swap Dealers Association, Inc. Second Printing Ii�6fa� (b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) Netting. If on any date amounts would otherwise be payable: — (1) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (h) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of branches or offices through which the parties make and receive payments or deliveries. (d) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. J. Representations Each party represents to the other parry (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into) that: — (a) Basic Representations (i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing; (ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance; (iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; ISDAzI992 Second Printing (iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a patty constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) Absence of Certain Events No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) Accuracy of Specified information. All applicable information that is famished in writing by or on behalf of it to the other party and is identified for the purpose :of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. 4. Agreements Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: — (a) Furnish Specified Information. It will deliver to the other party any forms, documents or certificates specified in the Schedule or any Confirmation by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) Comply with Laws. It will comply In all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. 5. Events of Default and Termination Events (a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:— (i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice of a Termination Event) to be complied with or performed ISDAoI992 Second Printing by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (tii) Credit Support Default. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or to part, or challenges the validity of, such Credit Support Document; (iv) Misrepresentation, A representation made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) Default under SpecUled Transaction, The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party,. any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:— (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its ISDAm1992 Second Printing winding -up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding -up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding -up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator; receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: — (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (ii) below or an Additional Termination Event if the event is specified pursuant to (iii) below:— (i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):— (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (d) Credit Event Upon Merger. If "Credit Event Upon Merger•• is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or ISDA®1992 Second Printing (ui)Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. Early Termination (a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non -defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination' is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an, Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) Right to Terminate Following Termination Event. (i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (if) Two Affected Parties. If an Illegality under Section 5(b)(i)(I) occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (ui) Right to Terminate. If: — (1) an agreement under Section 6(b)(ii) has not been effected with respect to all Affected Transactions within 30 days after an Affected Patty gives notice under Section 6(b)(i); or (2)an Illegality other than that referred to in Section 6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs, either party in the case of an Illegality, any Affected Party in the case of an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (e) Effect of Design anon. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. ISDAm1992 Second Printing (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(d) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) Calculations. (i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each,party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the parry obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment), from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) Payments,on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the.Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) Events of Default. If the Early Termination Date results from an Event of Default:— (1) First Method and Market Quotation. if the First Method and Market Quotation apply, the Defaulting Party will pay to the Non -defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non -defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non -defaulting Party over (B) the Unpaid Amounts owing to the Defaulting Party. (2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non -defaulting Party, if a positive number, the Non -defaulting Party's Loss in respect of this Agreement. (3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non -defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non -defaulting Party less (B) the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non -defaulting Party; if it is a negative number, the Non -defaulting Party will pay the absolute value of that amount to the Defaulting Party. - (4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non -defaulting Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non -defaulting Party; if it is a negative ISDA®1992 Second Printing number, the Non -defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) Termination Events If the Early Termination Date results from a Termination Event: — (I) One Affected Party, If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non -defaulting Party will be deemed to he references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) Two Affected Parties. If there are two Affected Parties: — (A) if Market Quotation applies, each patty will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Unpaid Amounts owing to X less (Ip the Unpaid Amounts owing to Y: and (E) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and, permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) Pre -Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre -estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. Transfer Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether. by way of security or otherwise) by either party without the prior written consent of the other party, except that: — (a) a party may make such a transfer of this Agreement pursuant to a consolidation amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void ISDAe1992 Second Printing 8. Miscellaneous (a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) Counterparts and Confirmation& (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (Q No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 9. Expenses A Defaulting Party will, on demand, indemnity and hold harmless the other party for and against all reasonable Out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which th Defaulting party is a party or by reason of the early termination of any Transactione , including, but not limited to, costs of collection. 10. Notices (a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- 0) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answerback is received; ISDA®1992 Second Prin ing (ui) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 11.. Governing Law and Jurisdiction (a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably: — (i) submits to the jurisdiction of the English courta, if this Agreement is expressed to be governed by English law, or to the non-exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting Stales, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) Waiver of fmmunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, ttr relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 12. Deflnitlons As used in this Agreement: — "Additional Termination Event" has the meaning specified in Section 5(b). "Affected Party" has the meaning specified in Section 5(b). 10 ISDAm1992 Second Printing "Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control" of any entity or person means ownership. of a majority of the voting power of the entity or person. "Applicable Rate" means: — (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(axiii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non -defaulting Party, the Non -default Rate; and (d) in all other cases, the Termination Rate. "consent' includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent. "Credit Event Upon Merger" has the meaning specified in Section 5(b). "Credit Support Document' means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the meaning specified in the Schedule. "Default Rate" means a rateper annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1%per annum. "Defaulting Party" has the meaning specified in Section 6(a). "Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iii). "Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "Illegality" has the meaning specified in Section 5(b). "law" includes any treaty, law, rule or regulation and "lawful" and "unlawful" will be construed accordingly. "Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located, (c) in relation to any notice or other communication, including notice contemplated. under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction, "Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position ( or any gain I I ISDA®1992 Second Printing resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 9. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. " Afarket Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market -makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market -maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market -maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market -maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "Non -default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non -defaulting Party (as certified by it) if it were to fund the relevant amount. "Non -defaulting Parry" has the meaning specified in Section 6(a). "Potential Event of Default" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "Reference Market -makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the sane city. "Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "Set-off' means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under 12 ISDA®1992 Second Priming this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of. — (a) the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "Specified Entity, has the meaning specified in the Schedule. "Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "Specifted Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross -currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "Termination Event" means an Illegality or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. "Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such. amounts. "Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Dale and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined 13 - ISDA®1992 Second Printing by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the fair market values reasonably determined by both patties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document MORGAN STANLEY CAPITAL SERVICES INC./ C Hy:g, V C • `� Name: Title: NINA C. SIMMONS Date: VICE PRESIDENT CITY OF VERNON By Name: Leonia C. Malburg Title: Mayor Date: ATTEST: By: Name: Bruce V. Malkenhorst Title: City Clerk APPROVED AS TO FORM: By: Name: Eric T. Fresch Title: City Attorney bY the obliged to he tion under Section he average of the fair aarrkettvalues reason ably determined by (both parties. Party is so obliged, it shall be IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with cf ect from the date specified on the first page of this document. MORGAN STANLEY CAPITAL SERVICES INC. CITY OF VERNON Name: BY r.i e!!� N. e:' Leonia C. P lburg O Title: Title: Mayor Date: Date: ATTEST: A By: Name: Bruce V. Malkenhorat Title: City Clerk APPROVED AS TO FORM: By: Nama: Eric T. Pre Title: City Attorney 14 Ifodit9- EXECUTION COPY SCHEDULE TO THE MASTER AGREEMENT dated as of December 2, 2004 between MORGAN STANLEY CAPITAL SERVICES INC. ("Party A') and CITY OF VERNON ("Party B") Part 1. Termination Provisions (a) "Specified Entity" means in relation to Party A for the purpose of: - Section 5(a)(v), Affiliates Section 5(a)(vi), None Specified Section 5(a)(vii), None Specified Section 5(b)(ii), None Specified and in relation to Party B for the purpose of. - Section 5(a)(v), None Specified Section 5(a)(vi), None Specified Section 5(a)(vii), None Specified Section 5(b)(ii), None Specified (b) "Specified Transaction" means, in lieu of the meaning specified in Section 12, any contract or transaction, including an agreement with respect thereto (whether or not documented under or effected pursuant to a master agreement) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such parry) and which, in the case of Party B, is payable from the Net Revenues. (c) "Cross Default" applies to Party A and Party B. Section 5(a)(vi) will apply to Party A and will apply to Party B, provided that, with respect to any Specified Indebtedness that is not capable of being declared due and payable as a result of the occurrence or existence of a default, event of default or other similar condition or event (however described) under the agreement or instrument relating to such Specified Indebtedness, the words "which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable" shall be deleted from clause (1) of such Section 5(a)(vi) and the words "and the bondholders or trustee are permitted to exercise any remedies under the agreements and instruments" shall be added in its place. (d) "Specified Indebtedness" has the meaning specified in Section 12 with respect to Party A and, with respect to Party B, has the meaning specified in Section 12 with the following language added after "borrowed money" and before the period: "payable from the Net Revenues or supported by the faith and credit or taxing power of Party B." NYLI85 803578.6 (e) "Threshold Amount' means: (i) with respect to Party A, U.S. $10,000,000; and (ii) with respect to Party B, $5,000,000. (� Bankruptcy. Clause (6) of Section 5(axvii) of this Agreement is hereby amended to read in its entirety as follows:.. "(60) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets (or, in the case of a Government Entity, for the Project/Program) or (B) in the case of a Government Entity, any Credit Support Provider of such Government Entity or any applicable Specified Entity of such Government Entity, (1) there shall be appointed or designated with respect to it, an entity such as an organization, board, commission, authority, agency or body to monitor, review, oversee, recommend or declare a financial emergency or similar state of financial distress with respect to it or (11) there shall be declared or introduced or proposed for consideration by it or by any legislative or regulatory body with competent jurisdiction over it, the existence of a state of financial emergency or similar state of financial distress in respect of it;". (g) Merger Without Assumption. Section 5(a)(viii) of this Agreement is hereby amended to read in its entirety as follows:-- "(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets (or, in the case of Party 8, all or substantially all of the Project/Program) to, another entity (or, without limiting the foregoing, if such party is a Government Entity, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, such party, any Credit Support Provider of such party or any applicable Specified Entity generally or with respect to the Project/Program) and, at the time of such consolidation, amalgamation, merger, transfer, or succession:- (1) the resulting, surviving, transferee or successor entity fails to assume all the obligations of such party, such Credit Support Provider or such Specified Entity under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving, transferee or successor entity of its obligations under this Agreement; or (3) In the case of a Government Entity, the sources of payment for the obligations of such Government Entity as set forth in the Schedule are no longer available for the satisfaction of such resulting, surviving, transferee or successor entity's obligations to the other party hereto." (h) "Credit Event Upon Merger" applies to Party A and Party B. Section 5(bxii) is hereby deleted in its entirety and replaced by the following: "(ii) Credit Event Upon Merger. If "Credit Event UponMerger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets (or, in the case of a Government Entity, all or substantially all of the Project/Program) to, or reorganizes, incorporates, reincorporates, or reconstitutes into or as, NYLI95 803578.6 .2_ another entity, or another entity transfers all or substantially all its assets (or, in the case of a Government Entity, all or substantially all of the Project/Program) to, or reorganizes, incorporates, reincorporates, or reconstitutes into or as, X (or, without limiting the foregoing, if X is a Government Entity, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, X (or any applicable Specified Entity) generally or with respect to the Project/Program), and such action does not constitute an event described in Section 5(a)(viii) but, the creditworthiness of X or the resulting, surviving, transferee, or successor entity (which will be the Affected Party) is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action; or" (i) The "Automatic Early Termination" provisions of Section 6(a) will not apply to Party A and will not apply to Party B; provided, however, where the Event of Default is specified in Section 5(a)(vii)(1), (3), (4), (5), (6) or to the extent analogous thereto, (8) and is governed by a system of law which does not permit termination to take place upon or after the occurrence of the relevant Event of Default in accordance with the terms of this Agreement, then the Automatic Early Termination provisions of Section 6(a) will apply to Party A and Party B. In addition to, and notwithstanding anything to the contrary in the preceding sentence, if an Early Termination Date occurs under Section 6(a) as a result of Automatic Early Termination, the Defaulting Party hereby agrees to reimburse the Non -defaulting Party on demand against' all loss or damage that the Non -defaulting Party may sustain or incur (including in relation to terminating, liquidating, obtaining or reestablishing any hedge or related position to the extent not already taken into account in the calculation performed under Section 6(e)) in respect of each Transaction as a result of movements in relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data between the Early Termination Date and the Local Business Day upon which the Non -defaulting Party first becomes aware that the Early Termination Date has occurred under Section 6(a) provided however, that if the Non -defaulting Party determines that any such movements have actually resulted in a net, after tax, gain for the Non -defaulting Party, then the Non -defaulting Party agrees to pay to the Defaulting Party the sum of such gain, subject to any rights the Non -defaulting party may have under the Agreement or otherwise. Q) Payments on Early Termination. "Loss" and "Second Method" will apply for the purpose of Section 6(e) of this Agreement. (k) Additional Termination Event will apply. The following shall constitute an Additional Termination Event with respect to Party A and Party B: (i) with respect to Party A, if Party A's Credit Support Provider's senior, unsecured, unenhanced debt rating is withdrawn, suspended or reduced below "BBB-" in the case of S&P or below'Baa3" in the case of Moody's; and with respect to Party B, if the unenhanced rating on the Bonds is withdrawn, suspended or reduced below "BBB-" in the case of S&P or below "BaO" in the case of Moody's. For the purpose of Termination Event (i) above, the Affected Party shall be Party A and for the purpose of Termination Event (ti) above, the Affected Party shall be Party B. For the purpose of both Termination Events (i) and (ii) above, all Transactions shall be Affected Transactions. NyL1aS 803578.6 -3_ Part 2. Agreement to Deliver Documents For the purpose of Section 4, each parry agrees to deliver the following documents, as applicable:- Party required to Date by which Sec. 3(d) Covered by deliver document Form/Document/Certificate to be delivered Representation Party A and Either (1) a signature booklet The earlier of the fifth Party B containing secretary's certificate Business Day after the and resolutions ("authorizing Trade Date of the first resolutions") authorizing the party Transaction or upon to enter into derivatives execution of this transactions of the type Agreement and as contemplated by the parties or deemed necessary for (2) a secretary's certificate, any further authorizing resolutions and documentation. incumbency certificate, in either case, for such party and any Credit Support Provider of such party reasonably satisfactory in form and substance to the other party. Party A A written opinion of legal counsel Upon execution of this to Party A and its Credit Support Agreement and upon Provider in the forms attached the execution of each hereto as Exhibits A - I, A-2 and Confirmation A-3 Party B A written opinion of legal counsel Upon execution of this to Party B (and any Credit Support Agreement and upon Provider) reasonably satisfactory the execution of each in form and substance to Party A Confirmation Party A and A duly executed copy of the Credit Upon the execution of Party B Support Documents specified in this Agreement Part 3 of this Schedule Party A A copy of the annual report of As soon as practicable and Party B such party (in the case of Party A, in after the execution of respect of Morgan Stanley) this Agreement and containing audited consolidated also within 120 days financial statements for each such (or as soon thereafter as fiscal year, certified by practicable after independent certified public becoming publicly accountants and prepared in available) after the end accordance with generally of each of its fiscal accepted accounting principles in years while there are the country in which such parry is any obligations organized. outstanding under this NYLIBS 803S78.6 4- Yes No No No Yes Covered by Party required to Date by which Sec. 3(d) deliver document Form/Document/Certilicate to be delivered Representation Agreement. Party B Copies or, where available, Upon execution of this Yes certified copies of: (1) the charter Agreement and as and enabling statutes (or deemed necessary for comparable legislation) creating further documentation Party B and any Credit Support Provider of Party B and authorizing Party B and any Credit Support Provider of Party B to enter into this Agreement and any Credit Support Document, the exhibits, supplements, and attachments hereto, the documents incorporated by reference herein, and the Confirmations hereunder; (2) any constituent instruments of Party B and any Credit Support Provider of Party B, rules, regulations, investment policies, guidelines, resolutions, ordinances, or provisions affecting the authority of Party B or such Credit Support Provider of Party B to enter into this Agreement, any Credit Support Document, the exhibits, supplements, and attachments hereto, the documents incorporated by reference herein, and the Confirmations hereunder, and the performance of its obligations hereunder and thereunder; and (3) amendments to any of the foregoing. Party B Covered Agreement Upon execution of the Yes this Agreement Party B Evidence of creation and/or Upon execution of this Yes perfection of Party A's security Agreement interest in the pledged revenues set forth in Part 4(e) of this Schedule Party B Copy of Rating Confirmation from Upon execution of this Yes each Rating Agency with respect Agreement to this Agreement as required by NYLIB5 803579 6 _5_ Party required to Date by which deliver document Form/Document/Certificate to be delivered Section 2.07(a) of the Covered Agreement Party A and Party B Such other documents as the other Upon request party may reasonably request Part 3. Miscellaneous (a) Addresses for Notices. For the purpose of Section 10(a)r (i) Address for notices or communications to Party A:- MORGAN STANLEY CAPITAL SERVICES INC. Transaction Management Group 1585 Broadway New York, New York 10036-8293 Attention: CHIEF LEGAL OFFICER Fax No.: 001 212 507 4622 (ii) Address for notices or communications to Party B:- City of Vernon 4305 Santa Fe Vernon, California 90058 Attention: Eric T. Fresch, City Attorney Tel. No.: 323-583-8811, ext. 175 Fax No.: 323-8264439 with a copy to Bond Logistix LLC 777 South Figueroa Street, Suite 3200 Los Angeles, California 90017 Attention: A. Craig Underwood, President Tel. No.: 213-612-2463 Fax No.: 213-612-2499 Covered by Sec. 3(d) Representation 1W (b) Notices. Section 10(a) is amended by adding in the third line thereof after the phrase "messaging system" and before the ")" the words, "; provided, however, any such notice or other communication may be given by facsimile transmission if telex is unavailable, no telex number is supplied to the party providing notice, or if answer back confirmation is not received from the party to whom the telex is sent." (c) Calculation Agent means Party A, NYLIB5 803578.6 �- (d) Credit Support Document means with respect to each of Party A and Party B, the Credit Support Annex dated as of the date hereof (the provisions of which are incorporated by reference herein) and, with respect to Party A, the guarantee of Morgan Stanley in the form attached hereto as Exhibit B. (e) Credit Support Provider means in relation to Party A: Morgan Stanley. Credit Support Provider means in relation to Party B: Not Applicable. (f) Governing Law; Jurisdiction. This Agreement, each Credit Support Document and each Confirmation will be governed by and construed in accordance with the laws of the,State of New York; provided that the power, authority and capacity of Party B to enter into and perform its obligations under this Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 11(b) is amended by: (1) deleting "non-" in the second line of clause (i), (2) replacing the words "courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City" in the second and third lines of clause (i) with the words "United States District Court with jurisdiction over the location of the Government Entity" and (3) deleting the final paragraph. (9) Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT. (h) Netting of Payments. Clause (ii) of Section 2(c) will not apply to any amounts payable with respect to Transactions from the date of this Agreement. (i) "Affiliate" will have the meaning specified in Section 12, but excludes Morgan Stanley Derivative Products Inc. Q) Form of Agreement. The parties hereby agree that the text of the body of the Agreement is intended to be the printed form of 1992 ISDA Master Agreement (Local Currency -Single Jurisdiction) as published and copyrighted by the International Swaps and Derivatives Association, Inc. Part 4. Other Provisions (a) Deferral of Payments and Deliveries in Connection with Illegality and Incipient Illegality; Interest on Deferred Payments. Section 2(a)(iii) is hereby amended to read in its entirety as follows: (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default, Illegality, Potential Event of Default or Incipient Illegality with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. NYI.laS 803578.E _�_ (b) Representations. (i) The introductory clause of Section 3 of this Agreement is hereby amended to read in its entirety as follows: Each parry represents to the other party (which representations will be deemed to be repeated by each party on each. date on which a Transaction is entered into and, in the case of the representations in Section 3(a), at all times until the termination of this Agreement) that:- (ii) Section 3(a)(ii) of this Agreement is hereby amended to read in its entirety as follows: Powers. It has the power (in the case of a Government Entity, pursuant to the Authorizing Law) to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party, and has taken all necessary action and made all necessary determinations and findings to authorize such execution, delivery and performance;" (iii) Section 3(b) of this Agreement is hereby amended to read in its entirety as follows: "(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Incipient Illegality (in the case of a Government Entity) or Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party." (iv) For purposes of Section 3, the following shall be added, immediately following paragraph (d) thereof: (e) Eligible Contract Participant. Party A is an "eligible contract participant" as defined in Section la(12) of the Commodity Exchange Act (7 U.S.C. la), as amended by the Commodity Futures Modernization Act of 2000 (the "Commodity Exchange Act"). Party B (i) is a political subdivision (as such tens is used in the Commodity Exchange Act) of the State of California (ii) is acting for its own account hereunder and (iii)owns and invests on a discretionary basis $25,000,000 or more in investments. (t) This Agreement has been subject to individual negotiation by such party. (g) It has entered into this Agreement (including each Transaction evidenced hereby) in conjunction with its line of business (including financial intermediation services) or the financing of its business. (h) It is entering into this Agreement, any Credit Support Document to which it is a party, each Transaction and any other documentation relating to this Agreement or any NYLIDS 803578.6 _g_ Transaction as principal (and not as agent or in any other capacity, fiduciary or otherwise). (i) It acknowledges that, pursuant to the terms of this Agreement (including, without limitation, Section 6(e) hereof), it may owe a payment to the other party upon the designation of an Early Termination Date hereunder, even in the event such Early Termination Date is the result of an Event of Default with respect to such other party. G) It is not entitled to claim immunity on the grounds of sovereignty or other similar grounds with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) subject to Sections 970 through 970.8 of the California Government Code, attachment of its assets (whether before or after judgment) or (v) subject to Section 970 through 970.8 of the California Government Code, execution or enforcement of any judgment to which it or its revenues or assets might otherwise be made subject to in any Proceedings (as defined in Section 1 I(b)) in the courts of any jurisdiction and no such immunity (whether or not claimed) may be attributed to such party or its revenues or assets. (k) It continuously represents that it is not (i) an employee benefit plan (hereinafter an "ERISA Plan'), as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), subject to Title 1 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as amended, (ii) a person acting on behalf of an ERISA Plan or (iii) a person the assets of whom constitute assets of art ERISA Plan. It will provide notice to the other party in the event that it is aware that it is in breach of any aspect of this representation or is aware that with the passing of time, giving of notice or expiry of any applicable grace period it will breach this representation. (c) Additional Representations of Party B, Party B hereby further represents to Party A (which representations will be deemed to be repeated by Party B at all times until the termination of this Agreement) that: (i) This Agreement has been, and each Transaction hereunder will be (and, if applicable, has been), entered into for the purposes of managing its borrowings or investments and not for purposes of speculation. (ii) Party B has taken all steps necessary and has the authority to create and perfect the pledge and security interest created pursuant to Part 4(e) of this Schedule, and such pledge and security interest have been validly created and perfected. (iii) Any Transaction entered into pursuant to this Agreement does not and will not violate or exceed any limits or restrictions contained in any authorizations, approvals or resolutions of the City Council of Party B. (iv) The execution and delivery by Party B of this Agreement, each Confirmation and any other documentation relating hereto, and the performance of Party B of its obligations hereunder and thereunder are not in violation of the laws of the State of California or the Charter of Party B. (v) This Agreement and each Transaction hereunder do not constitute any kind of investment by Party B that is proscribed by any constitution, charter, law, rule, regulation, NYLIB5 801579.6 _9_ government code, constituent or governing instrument, resolution, guideline, ordinance, order, writ, judgment, decree, charge, or ruling to which Party B (or any of its officials in their respective capacities as such) or its property is subject. The obligations of Party B to make payments to Party A under this Agreement and each Transaction are not subject to appropriation or similar action. (vi) No Affiliate or other person, firm, corporation, entity, or association may liquidate, borrow, encumber or otherwise utilize the Net Revenues, other than Party B or as otherwise permitted by the Covered Agreement. (vii) Party B is a chartered city and municipal corporation under the laws of the State of California. - (d) Credit Support Default. Subparagraph (3) of Section 5(a)(iii) is hereby amended by adding the phrase "(or such action is taken by any person or entity appointed or empowered to operate or act on its behalf)' after the word "Document" in the.second line thereof. (e) Source of Payments. Party B agrees that its obligations hereunder are, and until the termination of this Agreement pursuant to the terms hereof shall remain, payable solely from the Net Revenues, and Party B hereby grants a lien on, security interest in and pledge of the Net Revenues to secure the payment of its obligations under this Agreement. Regularly scheduled payments shall constitute Parity Obligations pursuant to the Covered Agreement, payable from, and secured by, Net Revenues on a parity with the Bonds and other Parity Obligations. Termination payments shall constitute Termination Payments pursuant to the Covered Agreement payable from, and secured by, Net Revenues on a subordinated basis to Parity Obligations. (f) Negative Pledge. Party B shall not pledge or grant a security interest in the Net Revenues to secure any of its obligations under any interest rate swap or other derivative transaction (with the exception of providing for the collateralization of its obligations under such derivative transaction) without Party A's consent unless a parity pledge or security interest has been granted to Party A to secure Party B's comparable obligations (whether regularly scheduled payments or termination payments) under this Agreement. (g) Compliance with Covered Agreement. Party B will observe, perform and fulfill each covenant, term, and provision in the Covered Agreement applicable to PartyB and material to the performance of Party B's obligations under this Agreement or to Party B's covenants and representations in this Agreement, as any of those covenants, terms, and provisions may be amended, supplemented or modified for the purposes of this Agreement with the prior written consent of Party A (the "Incorporated Provisions"), with the effect, among other things, and without limiting the generality of the foregoing, that Party A will be a third -party beneficiary of the Incorporated Provisions. In the event the Covered Agreement ceases to be in effect for any reason, including, without limitation, defeasance of the Bonds issued in connection with such Covered Agreement, prior to the termination of this Agreement, the Incorporated Provisions (other than those provisions requiring payments in respect of bonds, notes, warrants or other similar instruments issued in connection with the relevant Covered Agreement) will remain in full force and effect for purposes of this Agreement as though set forth herein until such date on which all of the obligations of Party B under this Agreement have been fully satisfied. The Incorporated Provisions are hereby incorporated by reference and made a part of this Agreement to the same extent as if such provisions were set forth herein. Party B shall notify Party A in writing of any amendment, supplement (other than supplements adopted pursuant to Section 7.01(b) of the Covered Agreement) or modification of the Covered Agreement prior to the NYLIB5 903578.6 -10- adoption thereof. Any amendment, supplement, modification or waiver of any of the Incorporated Provisions without the prior written consent of Party A shall have no force and effect with respect to this Agreement. Any amendment, supplement or modification for which such consent is obtained shall be part of the Incorporated Provisions for purposes of this Agreement. (h) Notice of Incipient Illegality. If an Incipient Illegality occurs, the Government Entity will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Incipient Illegality and will also give such other information about that Incipient Illegality as the other party may reasonably require. (i) Export of Defaults. The occurrence or designation of an Early Termination Date on account of an Event of Default or Termination Event with respect to a party hereto ("X") (where X is the Defaulting Party or sole Affected Party) shall constitute a material breach and event of default (howsoever described) under all transactions between X and the other party ("Y") or any Affiliate of Y (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation) (together, the "Other Transactions") whereupon Y or any Affiliate of Y shall have the right to terminate, liquidate and otherwise close out any such Other Transactions (and X shall be liable for any damages suffered by Y and any Affiliate of Y as a result thereof). (j) Setoff. (i) In addition to any rights of set-off a party may have as a matter of law or otherwise, upon the occurrence of an Event of Default with respect to Party ("X") hereof (or a provision analogous thereto) or a Termination Event where X is the sole Affected Party, the other party ("Y") shall have the right (but shall not be obliged) without prior notice to X or any other person to set off any obligation of X owing to Y or any Affiliate of Y (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation) against any obligations of Y or any Affiliate of Y owing to X (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation); provided that if X is Party B, any obligation of X subject to set-off pursuant to this Part 40) shall be payable from Net Revenues. (ii) For the purpose of cross -currency set off, Y may convert any obligation to another currency at a market rate determined by Y. (ifi) If any obligation is unascertained, Y may in good faith estimate that obligation and set off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained. (iv) Nothing in this paragraph will have the effect of creating a charge or other security interest. This paragraph shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (k) Single Relationship. The parties and their Affiliates intend that all Transactions and all other obligations (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation) NYL105 803578.6 -If- shall be treated as mutual and part of a single, indivisible contractual and business relationship; provided that any such obligation of Party B so treated shall be payable from Net Revenues, (I) Confirmations. Party A will deliver to Party B a Confirmation relating to each Transaction. (m) Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):- (i) Non -Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. (iii) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction. (n) Additional Definitions. All capitalized terms used but not otherwise defined in this Agreement shall have the meanings given thereto in the Covered Agreement. As used in this Schedule, the following terms shall have the following meanings: "Authorizing Law" means Cal. Gov't Code § 5922(a). "Covered Agreement" means the Indenture of Trust, dated as of December 1, 2004, by and between Party B and Bank of New York Trust Company N.A., as amended. "Government Entity" means Party B. "Incipient Illegality" means (a) the enactment by any legislative body with competent jurisdiction over a Government Entity of legislation which, if adopted as law, would render unlawful (i) the performance by such Government Entity of any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of a Transaction or the compliance by such Government Entity with any other material provision of this Agreement relating to such Transaction or (ii) the performance by a Government Entity or a Specified Entity of such Government Entity of any contingent or other obligation which the Government Entity (or such Specified Entity) has under any Credit Support Document relating to such Transaction, (b) any assertion in any proceeding, forum or action by a Government Entity, in respect of such Government Entity or in respect of any entity located or organized under the laws of the state in which such Government Entity is located to the effect that performance under this Agreement or similar agreements is unlawful or (c) the occurrence with respect to a Government Entity or any Specified Entity of such Government Entity of any event that constitutes an Illegality. NYLIBS 803578.6 -12- "Project/Program" means the Electric System. "Related Bonds" shall have the meaning given thereto in a Confirmation. NYLIBS 803578.6 -13- IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of the dale hereof. MORGAN STANLEY CAPITAL SERVICES INC. By: uU� C • V.t Name: Title: NINA C. cl I,�LIpy� VICE P.9Esjp`NT . CITY OF VERNON By: Name: Leonia C. Malburg Title: Mayor ATTEST: By: Name: Bruce V. Malkenhorst Title: City Clerk APPROVED AS TO FORM: By: Name: Eric T. Fresch Title: City Attorney IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of the date hereof. MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Title: CITY OF VERNON By: e/"�. s r---3, N Leonia C. Ma burg Title: Mayor ATTEST: By. Name: Bruce V. Malkenhorst Title: City Clerk APPROVED AS TO FORM: By: Name: Eric T. Freach Title: City Attorney EXHIBIT A -I FORM OF OPINION OF OUTSIDE COUNSEL FOR PARTY A [LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT] [Date] [Name] [Address] Ladies and Gentlemen: We act as a counsel to Morgan Stanley Capital Services Inc. ("MSCS") in connection with certain matters. We have been requested by MSCS to review the documents referred to herein and to render the opinion expressed herein. In such connection, we have reviewed, (i) an ISDA Master Agreement dated as of 200 (including the Schedule thereto) and (ii) a Confirmation dated 200_ , (collectively, the "Agreement") between MSCS and (the "Counterparty"). In these regards, we have reviewed original, conformed, reproduction, or specimen copies, identified to our satisfaction, of the Agreement and other relevant documents, and have made such examination of applicable law as we have deemed necessary for the purpose of rendering the opinion expressed herein. Based upon the foregoing, we are of the opinion, subject to the qualifications expressed herein, that the Agreement constitutes the legal and binding agreement of MSCS and is enforceable against MSCS in accordance with its terms. The opinion expressed herein is subject to the following qualifications: (A) We are licensed to practice law in.the State of New York, for purposes of the opinion expressed herein we do not purport to be experts on any law other than the law of the State of New York and the federal law of the United States of America, and we do not express any opinion herein concerning any law other than the substantive law of the State of New York and of the United States of America (as applicable, without regard to conflict of law principles). (B) In our review of the documents referred to in the first paragraph of this letter, we have assumed and have not independently verified that all signatures are genuine, that all documents submitted to or obtained by us as originals are authentic, and that all documents submitted to or obtained by us as conformed, reproduction, or specimen copies conform to the original documents and all such originals are authentic. (C) As to certain matters of fact, we have relied upon and have not independently verified statements, representations, and warranties of MSCS and its representatives, including statements, representations, and warranties contained in the Agreement, and have assumed and have not NYLI058035786 A I 1 independently verified that all such statements, representations, and warranties are true, accurate, and complete. (D) In rendering the opinions expressed herein, we have assumed and have not independently verified under the law of any jurisdiction that the opinions expressed in the letter dated the date hereof of Mark Steffensen, Esq., Counsel to MSCS, addressed to the Counterparty in connection with the Agreement are valid, reasonable, true, accurate, and complete. (E) We have assumed and have not independently verified under the law of any jurisdiction the legal capacity, power, and authority of the Counterparty to execute, deliver, and perform its obligations under the Agreement, and of the individuals who executed and delivered the Agreement on behalf of the Counterparty to do so. We have also assumed and have not independently verified under the law of any jurisdiction that the Agreement constitutes the legal, valid, and binding agreement of the Counterparty and is enforceable against the Counterparty in accordance with its terms. In addition, we have relied upon and have not independently verified statements, representations, and warranties of the Counterparty and its representatives, including statements, representations, and warranties contained in the Agreement, and have assumed and have not independently verified that all such statements, representations, and warranties are true, accurate, and complete. (F) The enforceability of each of the Agreement and the rights and remedies thereunder are subject to, and may be limited by; (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, or other similar laws from time to time in effect relating to or affecting generally the enforcement of creditors' rights; (11) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith, and fair dealing (regardless of whether considered in a proceeding at law or in equity); (iii) the availability of equitable remedies; (iv) the discretion of a court or other authority or body to grant, impose, or render remedies tinder specific circumstances; (v) Sections 9-406 and 9-408 of the New York Uniform Commercial Code to the extent the Agreement purports to. prohibit, restrict, or require the consent of the other party for, the transfer of, or the creation, attachment or perfection of a security interest in, the Agreement or an interest therein; (vi) limitations imposed by public policy, although we are not aware of any such limitations that would be relevant to the enforceability of the Agreement; (vii) each party to the Agreement acting in a commercially reasonable manner and in good faith in performing its obligations and exercising its rights and remedies thereunder; and (viii) the discretion of a court or other authority or body to invalidate or decline to enforce any right, remedy, or provision of the Agreement (including without limitation the termination payment provisions of the Agreement) determined by it to be a penalty. (0) We express no opinion herein as to (i) whether a court or other authority or body located outside of the State of New York would enforce the governing law and submission to jurisdiction provisions of the Agreement and (ii) the creation, legality, validity, perfection, enforceability, or priority of any lien, security interest, or other encumbrance created or purported to be created pursuant to the agreement. We are furnishing this letter to you solely for your benefit in connection with the transactions referred to herein. Without our prior written consent, this letter is not to be relied upon, used, circulated, quoted or otherwise referred to by, or assigned to, any other person (including any person that seeks to assert your rights in respect of this letter (other than your successor in interest by means of merger, consolidation, transfer of a business or other similar transaction)) or for any other purpose. In addition, we disclaim any obligation to update this letter for changes in fact or law, or otherwise. Very truly yours, NYLIB5 803579.6 A-1-2 EXHIBIT A-2 FORM OF OPINION OF INTERNAL COUNSEL FOR PARTY A [DATE] [COUNTERPARTY] [ADDRESS] Ladies and Gentlemen: As Counsel to Morgan Stanley Capital Services Inc., a Delaware corporation ("Morgan Stanley' ), I advise you as follows in connection with the ISDA Master Agreement, the Schedule thereto dated as of [DATE], and the Confirmation thereunder dated [DATE] (the "Agreement") between Morgan Stanley and you. In arriving at the opinions expressed below, I have, or someone under my supervision has, examined an original or copy of: (i) the ISDA Master Agreement and (ii) the Schedule to the ISDA Master Agreement, and (iii) the Confirmation, each executed on behalf of Morgan Stanley. I have, or someone under my supervision has, also reviewed such corporate records of Morgan Stanley, certificates of public officials, officers of Morgan Stanley and other persons, and such other documents, agreements and instruments, and such matters of law, as 1 have deemed necessary as a basis for the opinions expressed in this letter. In such review, I have relied as to certain matters on information obtained from public officials, officers of Morgan Stanley and other sources believed by me to be reliable, and I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified, photostatic or reproduced copies and the authenticity of the originals of all such latter documents. Based upon the aforementioned examination and review, and subject to the foregoing and following comments and qualifications, it is my opinion that: (1) Morgan Stanley has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware. Stanley. (2) The Agreement has been duly authorized, executed and delivered by Morgan (3) The execution, delivery and performance of the Agreement by Morgan Stanley does not contravene any provision of the Certificate of Incorporation or By -Laws of Morgan Stanley. In connection with my opinion in paragraph (2) above, I note that, as of the date of this opinion, a judgment for money in an action based on the Agreement in a Federal or state court in the United States ordinarily would be enforced in the United States only in United States dollars. The date used to determine the rate of conversion of the foreign currency or currency unit in which an obligation under the Agreement is denominated into United States dollars will depend on various factors, including which court renders the judgment. Under Section 27 of the New York Judiciary Law, a state court in the State of New York rendering a judgment on a claim under the Agreement denominated in a foreign currency or currency unit would be required to render such judgment in the foreign currency or currency unit in which the claim is denominated, and that judgment would be converted into United States dollars at the exchange rate prevailing on the date of entry of the judgment. NYL105 807578-6 A-2 1 In rendering the foregoing opinions, I have assumed, with respect to all of the documents referred to in this opinion letter, that (except as to Morgan Stanley): (i) each party to such documents is duly organized and validly existing; (ii) each parry to such documents has the requisite power and authority (corporate or other) to execute and deliver such documents and perform its obligations under such documents; (iii) the execution, delivery and performance of such documents have been duly authorized by each party thereto; (iv) such documents have been duly executed and delivered by each party thereto; (v) such documents constitute the legal, valid and binding agreement of each of the parties thereto, enforceable against each such party in accordance with their respective terms; and (vi) each party to such documents has obtained all consents, approvals, authorizations, orders, licenses, registrations and qualifications (including any applicable foreign exchange licenses) from, and has made all filings and registrations with, all governmental or regulatory authorities or agencies required for the execution or delivery of, or for the performance or incurrence of any obligations or liabilities under, such documents. In rendering the foregoing opinions, I am not addressing any matters relating to any specific transactions entered into pursuant to the Master Agreement (other than the transactions evidenced by the Confirmations each dated [December 2, 20041 and bearing reference numbers [ ] and [ ]). Furthermore, 1 express no opinion as to the validity and enforceability of any provision of the Agreement that (i) purports to limit, condition or impose remedies for the exercise of either party's ability to transfer its rights under the Agreement or a Confirmation in a manner contrary to Section 9 406 or 9 408 of the New York Uniform Commercial Code;' (ii) requires any amendment or waiver to be in writing, to the extent that an oral agreement or waiver, or an implied agreement or waiver by trade practice or course of conduct, has been created that modifies any such provision; or (iii) is determined to be a penalty or a forfeiture, including by reason of a party being required or allowed to pay, deliver, receive or recover (or not to pay, deliver, receive or recover) any amount or item. In addition, I express no opinions as to any violation of, or any consent or approval required under, any law or regulation which may be applicable to Morgan Stanley as a result of the involvement of any other party to the Agreement. Any foregoing opinion relating to enforceability or performance by Morgan Stanley of its obligations are qualified by and subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and'I am expressing no opinion as to the effect of the laws of any other jurisdiction. I am furnishing this opinion to you solely for your benefit in connection with the above - referenced Agreement. Except for your own internal use, this opinion is not to be used or circulated, quoted or otherwise referred to, or relied upon without my express written consent. I do not undertake to update, revise or supplement any opinion or statement herein for any reason whatsoever. Very truly yours, Counsel NYLIBS 803578.6 A-2-2 EXHIBIT A-3 FORM OF OPINION OF INTERNAL COUNSEL FOR PARTY A [DATE] [COUNTERPARTY] [ADDRESS] Ladies and Gentlemen: As Counsel to Morgan Stanley, a Delaware corporation ("Morgan Stanley"), I advise you as follows in connection with the Guarantee issued by Morgan Stanley, dated [DATE] (the "Guarantee") in connection with the ISDA Master Agreement, dated as of [DATE] between Morgan Stanley Capital Services Inc. and [COUNTERPARTY] (the "Agreement"). In arriving at the opinions expressed below, I have, or someone under my supervision has, examined an original or copy of the Guarantee executed on behalf of Morgan Stanley. I have, or someone under my supervision has, also reviewed such corporate records of Morgan Stanley, certificates of public officials, officers of Morgan Stanley and other persons, and such other documents, agreements and instruments, and such matters of law, as 1 have deemed necessary as a basis for the opinions expressed in this letter. In such review, 1 have relied as to certain matters on information obtained from public officials, officers of Morgan Stanley and other sources believed by me to be reliable, and 1 have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified, photostatic or reproduced copies and the authenticity of the originals of all such latter documents. Based upon the aforementioned examination and review, and subject to the foregoing and following comments and qualifications, it is my opinion that: (1) Morgan Stanley has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware. (2) The Guarantee has been duly authorized, executed and delivered by Morgan Stanley and the Guarantee constitutes the valid and legally binding obligation of Morgan Stanley enforceable in accordance with its terms. (3) The execution, delivery and performance of the Guarantee by Morgan Stanley does not contravene any provision of the Certificate of Incorporation or By -Laws of Morgan Stanley. Any foregoing opinion relating to enforceability or performance by Morgan Stanley of its obligations are qualified by and subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. I am admitted to practice in the State of New York. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. NYLIBS 803578.6 A-3-1 I am furnishing this opinion to you solely for your benefit in connection with the above - referenced Guarantee. Except for your own internal use, this opinion is not to be used or circulated, quoted or otherwise referred to, or relied upon without my express written consent. I do not undertake to update, revise or supplement any opinion or statement herein for any reason whatsoever. Very truly yours, Counsel NYLIn5 803578.6 A-3-2 EXHIBIT B FORM OF GUARANTEE OF MORGAN STANLEY Dale [Address] Ladies and Gentlemen: In consideration of that certain ISDA Master Agreement dated as of [date] between Morgan Stanley Capital Services Inc., a Delaware corporation (hereinafter "MSCS") and [counterparty] (hereinafter "Counterparty") (such ISDA Master Agreement, together with each Confirmation exchanged between the parties pursuant thereto, hereinafter the "Agreement"), Morgan Stanley, a Delaware corporation (hereinafter "MS"), hereby irrevocably and unconditionally guarantees to Counterparty, with effect from the date of the Agreement, the due and punctual payment of all amounts payable by MSCS under the Agreement when the same shall become due and payable, whether on Scheduled Payment Dates, upon demand, upon declaration of termination or otherwise, in accordance with the terms of the Agreement and giving effect to any applicable grace period. Upon failure of MSCS punctually to pay any such amounts, and upon written demand by Counterparty to MS at its address set forth in the signature block of this Guarantee (or to such other address as MS may specify in writing), MS agrees to pay or cause to be paid such amounts; provided that, delay by Counterparty, in giving such demand shall in no event affect MS's obligations under this Guarantee. MS hereby agrees that its obligations hereunder shall be unconditional and will not be discharged except by complete payment of the amounts payable under the Agreement, irrespective of any claim as to the Agreement's validity, regularity or enforceability or the lack of authority of MSCS to execute or deliver the Agreement; or any change in or amendment to the Agreement; or any waiver or consent by Counterparty with respect to any provisions thereof; or the absence of any action to enforce the Agreement or the recovery of any judgment against MSCS or of any action to enforce a judgment against MSCS under the Agreement; or any similar circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor generally. MS hereby waives diligence, presentment, demand on MSCS for payment or otherwise (except as provided hereinabove), filing of claims, requirement of a prior proceeding against MSCS and protest or notice, except as notice is provided for in the Agreement with respect to amounts payable by MSCS. If at any time payment under the Agreement is rescinded or must be otherwise restored or returned by Counterparty upon the insolvency, bankruptcy or reorganization of MSCS or MS or otherwise, MS's obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by Counterparty. MS represents to Counterparty as of the date hereof, which representations will be deemed to be repeated by MS on each date on which a Transaction is entered into, that: (1) it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guarantee and to perform the provisions of this Guarantee on its part to be performed; (2) its execution, delivery and performance of this Guarantee have been and remain duly authorized by all necessary corporate action and do not contravene any provision of its NYLIa5803578.6 B-1 certificate of incorporation or by-laws or any law, regulation or contractual restriction binding on it or its assets; (3) all consents, authorizations, approvals and clearances (including, without limitation, any necessary exchange control approval) and notifications, reports and registrations requisite for its due execution, delivery and performance of this Guarantee have been obtained from or, as the case may be, filed with the relevant governmental authorities having jurisdiction and remain in full force and effect and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance; and (4) this Guarantee is its legal, valid and binding obligation enforceable against it in accordance with its terms except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights or by general equity principles. By accepting this Guarantee and entering into the Agreement, Counterparty agrees that MS shall be subrogated to all rights of Counterparty against MSCS in respect of any amounts paid by MS pursuant to this Guarantee, provided that MS shall be entitled to enforce or to receive any payment arising out of or based upon such right of subrogation only to the extent that it has paid all amounts payable by MSCS under the Agreement. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Agreement. MORGANSTANLEY 0 NYLIB5 803578.6 B-2 Name: Title: Address: 1585 Broadway 3rd Floor New York, NY 10036 Attention: Derivative Products Group Fax No.: (212) 761-0162 l5OT (Bilateral Form) (ISDA Agreements Subject to New York Law Only) ISDA8 International Swaps and Derivatives Association, Inc. CREDIT SUPPORT ANNEX to the Schedule to the ISDA MASTER AGREEMENT dated as of December 2, 2004 between MORGAN STANLEY CAPITAL and CITY OF VERNON SERVICES INC. ("Party A„) ("Party B") This Annex supplements, forms part of, and is subject to, the above -referenced Agreement, is part of its Schedule and is a Credit Support Document under this Agreement with respect to each party. Accordingly, the parties agree as follows: — Paragraph 1.Interpretation (a) DeJlnitions and inconsistency. Capitalized terms not otherwise defined herein or elsewhere in this Agreement have the meanings specified pursuant to Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of this Schedule, this Annex will prevail, and in the event of any inconsistency between Paragraph 13 and the other provisions of this Annex, Paragraph 13 will prevail. (b) Secured Party and Pledgor. All references in this Annex to the "Secured Party" will be to either party when acting in that capacity and all corresponding references to the "Pledgor" will be to the other party when acting in that capacity; provided, however, that if Other Posted Support is held by a party to this Annex, all references herein to that party as the Secured Party with respect to that Other Posted Support will be to that party as the beneficiary thereof and will not subject that support or that party as the beneficiary thereof to provisions of law generally relating to security interests and secured parties. Paragraph 2. Security interest Each party, as the Pledgor, hereby pledges to the other party, as the Secured Party, as security for its Obligations, and grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the security interest and lien granted hereunder on that Posted Collateral will be released immediately and, to the extent possible, without any further action by either party. Copyright 0 1994 by International Swaps and Derivatives Association, Inc. Paragraph 3. Credit Support Obligations (a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly following a Valuation Date, if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount, then the Pledger will Transfer to the Secured Party Eligible Credit Support having a Value as of the date of Transfer at least equal to the applicable Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "DeliveryAmount" applicable to the Pledger for any Valuation Date will equal the amount by which: (i) the Credit Support Amount exceeds 00 the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party (b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly following a Valuation Date, if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum Transfer Amount, then the Secured Party will Transfer to the Pledger Posted Credit Support specified by the Pledger in that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount (rounded pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the "Return Amount" applicable to the Secured Party for any Valuation Date will equal the amount by which: (i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party exceeds 00 the Credit Support Amount. "Credit Support Amount" means, unless otherwise specified in Paragraph 13, for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus (ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any, minus (iii) all Independent Amounts applicable to the Secured Party, if any, minus (iv) the Pledgor's Threshold; provided, however, that the Credit Support Amount will be deemed to be zero whenever the calculation of Credit Support Amount yields a number less than zero. Paragraph 4. Conditions Precedent, Transfer Timing, Calculations and Substitutions (a) Conditions Precedent. Each Transfer obligation of the Pledger under Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and 6(d) is subject to the conditions precedent that: .(i) no Event of Default, Potential Event of Default or Specified Condition has occurred and is continuing with respect to the other party; and (H) no Early Termination Date for which any unsatisfied payment obligations exist has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the other party. (b) Transfer Timing. Subject to Paragraphs 4(a) and 5 and unless otherwise specified, if a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time, then the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the second Local Business Day thereafter. (c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation Time. The Valuation Agent will notify each party (or the other party, if the Valuation Agent is a party) of its calculations not later than the Notification Time on the Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(d), following the date of calculation). ISDAO 1994 (d) Substitutions. (i) Unless otherwise specified in Paragraph 13, upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged, the Pledgor may, on any Local Business Day, Transfer to the Secured Party substitute Eligible Credit Support (the "Substitute Credit Support"); and (ii) subject to Paragraph 4(a), the Secured Party will Transfer to the Pledgor the items of Posted Credit Support specified by the Pledger in its notice not later than the Local Business Day following the date on which the Secured Party receives the Substitute Credit Support, unless otherwise specified in Paragraph 13 (the "Substitution Date"); provided that the Secured Party will only be obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit Support equal to the Value as of that date of the Substitute Credit Support. Paragraph 5. Dispute Resolution If a party (a "Disputing Party") disputes (1) the Valuation Agent's calculation of a Delivery Amount or a Return Amount or (11) the Value of any Transfer of Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in case of (1) above or (Y) the date of Transfer in the case of (11) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day following (X) the date that the demand is made under Paragraph 3 in the case of (1) above or (Y) the date of Transfer in the case of (11) above, (3) the parties will consult with each other in an attempt to resolve the dispute and (4) if they fail to resolve the dispute by the Resolution Time, then: (i) In the case of a dispute involving a Delivery Amount or Return Amount, unless otherwise specified in Paragraph 13, the Valuation Agent will recalculate the Exposure and the Value as of the Recalculation Date by: (A) utilizing any calculations of Exposure for the Transactions (or Swap Transactions) that the parties have agreed are not in dispute; (B) calculating the Exposure for the Transactions (or Swap Transactions) in dispute by seeking four actual quotations at mid -market from Reference Market -makers for purposes of calculating Market Quotation, and taking the arithmetic average of those obtained; provided that if four quotations are not available for a particular Transaction (or Swap Transaction), then fewer than four quotations may be used for that Transaction (or Swap Transaction); and if no quotations are available for a particular Transaction (or Swap Transaction), then the Valuation Agent's original calculations will be used for that Transaction (or Swap Transaction); and (C) utilizing the procedures specified in Paragraph 13 for calculating the Value, if disputed, of Posted Credit Support. (ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted Credit Support, the Valuation Agent will recalculate the Value as of the date of Transfer pursuant to Paragraph 13. Following a recalculation pursuant to this Paragraph, the Valuation Agent will notify each party (or the other party, if the Valuation Agent is a parry) not later than the Notification Time on the Local Business Day following the Resolution Time. The appropriate party will, upon demand following that notice by the Valuation Agent or a resolution pursuant to (3) above and subject to Paragraphs 4(a) and 4(b), make the appropriate Transfer. ISDA® 1994 Paragraph 6. Holding and Using Posted Collateral (a) Care of Posted Collateral. Without limiting the Secured Party's rights under Paragraph 6(c), the Secured Party will exercise reasonable care to assure the safe custody of all Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own property. Except as specified in the preceding sentence, the Secured Party will have no duly with respect to Posted Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights pertaining thcrcto. (b) Eligibility to Hold Posted Collateral, Custodians. (i) General. Subject to the satisfaction of any conditions specified in Paragraph 13 for holding Posted Collateral, the Secured Party will be entitled to hold Posted Collateral or to appoint an agent (a "Custodian") to hold Posted Collateral for the Secured Party. Upon notice by the Secured Party to the Pledgor of the appointment of a Custodian, the Pledgor's obligations to make any Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party for which the Custodian is acting. (ii) Failure to Satisfy Conditions. If the Secured Party or its Custodian fails to satisfy any conditions for holding Posted Collateral, then upon a demand made by the Ple than five Local Business Days after the demand, Transfepony will, not later r cause its Custodiandgor, the Secured ed Transfer all Posted those conditions, Collateral held by it to a Custodian that satisfies those conditions or to the Secured Party if it satisfies (iii) Liability. The Secured Party will be liable for the acts or omissions of its Custodian to the same extent that the Secured Party would be liable hereunder for its own acts or omissions. (c) Use of Posted Collateral. Unless otherwise specified in Paragraph 13 and without limiting the rights and obligations of the parties under Paragraphs, 3, 4(d)(ii), 5, 6(d) and 8, if the Secured Party is not a Defaulting Party or an Affected Party with respect to a Specified Condition and no Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then the Secured Party will, notwithstanding Section 9.207 of the New York Uniform Commercial Code, have the right to; (i) sell, pledge, rehypothecate, assign, invest, use, commingle or otherwise dispose of, or otherwise use in its business any Posted Collateral it holds, free from any claim or right of any nature whatsoever of the Pledgor, including any equity or right of redemption by the Pledgor; and (ii) register any Posted Collateral in the name of the Secured Party, its Custodian or a nominee for either. For purposes of the obligation to Transfer Eligible Credit Support or Posted Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies authorized under this Agreement, the Secured Party will be deemed to continue to hold all Posted Collateral and to receive Distributions made thereon, regardless of whether the Secured Party has exercised any rights with respect to any Posted Collateral pursuant to (i) or (ii) above. (d) Distributions and Interest Amount. (i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). ISDAS 1994 (ti) Interest Amount Unless otherwise specified in Paragraph 13 and subject to Paragraph 4(a), in lieu of any interest, dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in the form of Cash (all of which may be retained by the Secured Party), the Secured Party will Transfer to the Plcdgor at the times specified in Paragraph 13 the Interest Amount to the extent that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the form of Cash and will be subject to the security interest granted under Paragraph 2. Paragraph 7. Events of Default For purposes of Section 5(a)(iii)(1) of this Agreement, an Event of Default will exist with respect to a party if. (i) that party fails (or fails to cause its Custodian) to make, when due, any Transfer of Eligible Collateral, Posted Collateral or the Interest Amount, as applicable, required to be made by it and that failure continues for two Local Business Days after notice of that failure is given to that party; (ii) that party fails to comply with any restriction or prohibition specified in this Annex with respect to any of the rights specified in Paragraph 6(c) and that failure continues for five Local Business Days after notice of that failure is given to that party; or _ (iii) that party fails to comply with or perform any agreement or obligation other than those specified in Paragraphs 7(i) and 7(ii) and that failure continues for 30 days after notice of that failure is given to that party. Paragraph 8. Certain Rights and Remedies (a) Secured Party's Rights and Remedies. If at any time (1) an Event of Default or Specified Condition with respect to the Pledger has occurred and is continuing or (2) an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Pledgor, then, unless. the Plcdgor has paid in full all of its Obligations that are then due, the Secured Party may exercise one or more of the following rights and remedies: (i) all rights and remedies available to a secured party under applicable law with respect to Posted Collateral held by the Secured Party; (ii) any other rights and remedies.available to the Secured Party under the terms of Other Posted Support, if any; (iii) the right to Set-off any amounts payable by the Pledger with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or private sales or other dispositions with such notice, if any, as may be required under applicable law, free from any claim or right of any nature whatsoever of the Pledger, including any equity or right of redemption by the Pledger (with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold),and to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect. Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and is of a type customarily sold on a recognized market, and, accordingly, the Pledger is not entitled to prior notice of any sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot be waived. ISDA® 1994 (b) Pledgor's Rights and Remedies. If at any time an Early Termination Date has occurred or been designated as the result of an Event of Default or Specified Condition with respect to the Secured Party, then (except in the case of an Early Termination Date relating to less than all Transactions (or Swap Transactions) where the Secured Party has paid in full all of its obligations that are then due under Section 6(e) of this Agreement): (I) the Pledgor may exercise all rights and remedies available to a Pledger under applicable law with respect to Posted Collateral held by the Secured Party; 00 the Pledgor may exercise any other rights and remedies available to the Pledgor under the terns of Other Posted Support, if any; (iii) the Secured Party will be obligated immediately to Transfer all Posted Collateral and the Interest Amount to the Pledgor; and (iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii) above, the Pledgor may: (A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party (or any obligation of the Secured Party to Transfer that Posted Collateral); and (B) to the extent that the Pledgor does not Set-off under (iv)(A) above, withhold payment of any remaining amounts payable by the Pledgor with respect to any Obligations, up to the Value of any remaining Posted Collateral held by the Secured Party, until that Posted Collateral is Transferred to the Pledgor. (c) Deficiencies and Excess Proceeds, The Secured Party will Transfer to the Pledgor any proceeds and Posted Credit Support remaining after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts remaining unpaid after any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b). (d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any Obligations (except for any potential liability under Section 2(d) of this Agreement), the Secured Party will Transfer to the Pledger all Posted Credit Support and the Interest Amount, if any. Paragraph 9. Representations Each party represents to theotherparty (which representations will be deemed to be repeated as of each data on which it, as the Pledgor, Transfers Eligible Collateral) that; W it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien; (ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest and lien granted under Paragraph 2; (iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terns of this Annex, the Secured Party will have a valid and perfected first priority security interest therein (assuming that any central clearing corporation or any third -party financial intermediary or other entity not within the control of the Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it under applicable law for perfection of that interest); and (iv) the performance by it of its obligations under this Annex will not result in the creation of any security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien granted under Paragraph 2. ISDA® 1994 Paragraph 10. Expenses (a) General Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its own costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for any costs and expenses incurred by the other party in connection herewith. (b) Posted Credit Support The Pledgor will promptly pay when due all taxes, assessments or charges of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware of the same, regardless of whether any portion of that Posted Credit Support is subsequently disposed of under Paragraph 6(c), except for those taxes, assessments and charges that result from the exercise of the Secured Party's rights under Paragraph 6(c). (c) Liquidation/Application of Posted Credit Support All reasonable costs and expenses incurred by or on behalf of the Secured Party or the Pledgor in connection with the liquidation and/or application of any Posted Credit Support under Paragraph 8 will be payable, on demand and pursuant to the Expenses Section of this Agreement, by the Defaulting Party or, if there is no Defaulting Party, equally by the parties. Paragraph If. Miscellaneous (a) Default Interest A Secured Party that fails to make, when due, any Transfer of Posted Collateral or the Interest Amount will be obliged to pay the Pledgor (to the extent permitted under applicable law) an amount equal to interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred, from (and including) the date that the Posted Collateral or Interest Amount was required to be Transferred to (but excluding) the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (b) Further Assurances. Promptly following a demand made by a party, the other party will execute, deliver, file and record any financing statement, specific assignment or other document and take any other action that may be necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on Posted Collateral or an Interest Amount. (c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against, any suit, action, proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely affect the security interest and lien granted by it under Paragraph 2, unless that suit, action, proceeding or lien results from the exercise of the Secured Party's rights under Paragraph 6(c). (d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex, including, but not limited to, all calculations, valuations and determinations made by either party, will be made in good faith and in a commercially reasonable manner. (e) Demands and Notices All demands and notices made by a party under this Annex will be made as specified in the Notices Section of this Agreement, except as otherwise provided in Paragraph 13. (0 SpecJfrcarions ofCartain Matters. Anything referred to in this Annex as being specified in Paragraph 13 also may be specified in one or more Confirmations or other documents and this Annex will be construed accordingly. ISDA® 1994 Paragraph 12. Definition, As used in this Annex: — "Cash" means the lawful currency of the United States of America. "Credit Supporl Amount" has the meaning specified in Paragraph 3. "Custodian" has the meaning specified in Paragraphs 6(b)(i) and 13. "Delivery Amount" has the meaning specified in Paragraph 3(a). "Disputing Party" has the meaning specified in Paragraph 5. "Distributions" means with respect to Pasted Collateral other than Cash, all principal, interest and other payments and distributions of cash or other property with respect thereto, regardless of whether the Secured Party has disposed of that Posted Collateral under Paragraph 6(c). Distributions will not include any item of property acquired by the Secured Party upon any disposition or liquidation of Posted Collateral or, with respect to any Posted Collateral in the form of Cash, any distributions on that collateral, unless otherwise specified herein. "Eligible Collateral" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "Eligible Credit Supporl" means Eligible Collateral and Other Eligible Support. "Exposure" means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in the case of a dispute, the amount, if any, that would be payable to a party that is the Secured Party by the other party (expressed as a positive number) or by a party that is the Secured Party to the other party (expressed as a negative number) pursuant to Section 6(c)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions) were being terminated as of the relevant Valuation Time; provided that Market Quotation will be determined by the Valuation Agent using its estimates at mid -market of the amounts that would be paid for Replacement Transactions (as that tern is defined in the definition of"Market Quotation'). "Independent Amount" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Interest Amount" means, with respect to an Interest Period, the aggregate sum of the amounts of interest calculated for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured Party on that day, determined by the Secured Party for each such day as follows: (x) the amount of Cash on that day; multiplied by (y) the Interest Rate in effect for that day; divided by (z) 360. "Interest Period" means the period from (and including) the last Local Business Day on which an Interest Amount was Transferred (or, if no Interest Amount has yet been Transferred, the Local Business Day on which Posted Collateral in the form of Cash was Transferred to or received by the Secured Party) to (but excluding) the Local Business Day on which the current Interest Amount is to be Transferred. "interest Rate" means the rate specified in Paragraph 13. "Local Business Day", unless otherwise specified in Paragraph 13, has the meaning specified in the Definitions Section of this Agreement, except that references to a payment in clause (b) thereof will be deemed to include a Transfer under this Annex. ISDAS 1994 "Minimum Transfer Amount" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Notification Time" has the meaning specified in Paragraph 13. "Obligations" means, with respect to a party, all present and future obligations of that party under this Agreement and any additional obligations specified for that party in Paragraph 13. "Other Eligible Support" means, with respect to a party, the items, if any, specified as such for that party in Paragraph 13. "Other Posted Support" means all Other Eligible Support Transferred to the Seemed Party that remains in effect for the benefit of that Secured Party. "Pledgor" means either party, when that party (i) receives a demand for or is required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has Transferred Eligible Credit Support under Paragraph 3(a). "Posted Collateral" means all Eligible Collateral, other property, Distributions, and all proceeds thereof that have been Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledger pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the Secured Party under Paragraph S. Any Interest Amount or portion thereof not Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in the form of Cash. "Posted Credit Support" means Posted Collateral and Other Posted Support. "Recalculation Date" means the Valuation Date that gives rise to the dispute under Paragraph 5; provided, however, that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the "Recalculation Date" means the most recent Valuation Date under Paragraph 3. "Resolution Time" has the meaning specified in Paragraph 13. "Return Amount" has the meaning specified in Paragraph 3(b). "Secured Party" means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds or is deemed to hold Posted Credit Support. "Specified Condition" means, with respect to a party, any event specified as such for that party in Paragraph 13. "Substitute Credit Support" has the meaning specified in Paragraph 4(d)(i). "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). "Threshold" means, with respect to a party, the amount specified as such for that party in Paragraph 13; if no amount is specified, zero. "Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in accordance with the instructions of the Secured Party, Pledgor or Custodian, as applicable: (i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified by the recipient; (ii) in the case of certificated securities that cannot be paid or delivered by book -entry, payment or delivery in appropriate physical form to the recipient or its account accompanied by any duly executed instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to constitute a legally valid transfer to the recipient; (iii) in the case of securities that can be paid or delivered by book -entry, the giving of written instructions to the relevant depository institution or other entity specified by the recipient, together with a written copy thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant interest to the recipient; and (iv) in the case of Other Eligible Support or Other Posted Support, as spocified in Paragraph 13 ISDA® 1994 "Valuation Agent" has the meaning specified in Paragraph 13. "Valuation Date" means each date specified in or otherwise determined pursuant to Paragraph 13, "Valuation Percentage' means, for any item of Eligible Collateral, the percentage specified in Paragraph 13, "Valuation Time" has the meaning specified in Paragraph 13, "Value" means for any Valuation Date or other date for which Value is calculated and subject to Paragraph 5 in the case of a dispute, with respect to: (i) Eligible Collateral or Posted Collateral that is: (A) Cash, the amount thereof; and (B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable Valuation Percentage, if any; (ii) Posted Collateral that consists of items that are not specified as Eligible Collateral, zero; and (iii) Other Eligible Support and Other Posted Support, as specified in Paragraph 13, 10 ISDA® 1994 EXECUTION COPY Paragraph 13. Elections and Variables (a) Security Interest for "Obligations". The term "Obligations" as used in this Annex includes the following additional obligations with respect to Party A Party B: and None. (b) Credit Support Obligations. 0) "Delivery Amount', "Return Amount' and "Credit Support Amount' each has the meaning specified in Paragraph 3. (ii) Eligible Collateral. The following items will qualify as "Eligible Collateral'' for Party A and Party B: Valuation (A) Cash Percentage (B) Treasury Securities and Agency Notes having a remaining 100% maturity of: Not more than I year 100% More than 1 year but not more than 2 years 99% More than 2 years but not more than 5 years 98% More than 5 years but not more than 10 years 97% More than 10 years 95% (C) Any other item agreed upon in writing from time to time by As agreed the parties by the parties (iii) Other Eligible Support: Not applicable. (iv) Thresholds. (A) "Independent Amount' means, with respect to a party, at any time the aggregate of any Independent Amounts specified with respect to such party in the Confirmations of all Transactions outstanding at that time. (B) "Threshold"and "Minimum Transjer Amount'respectivelymean: W with respect to Party A, at any time the amount specified in the table below under the relevant heading opposite whatever is the lower of the ratings at that time assigned by Standard & Poor's Ratings Group ("S&P') and Moody's Investors Services, Inc. ("Moody Is") to the senior, unsecured, unenhanced debt of Morgan Stanley ("MYJ or, 00 with respect to Parry B, at any time the amount specified in the table below under the relevant heading opposite whatever is the lower of the unenhanced ratings at that time assigned by S&P and Moody's to the Bonds. provided that (a) if the senior, unsecured, unenhanced debt of MS or the Bonds of Party B are rated by only one of S&P or Moody's, the Threshold and the Minimum Transfer Amount with respect to Party A or Party B, as the case may NYI.mS 803577.3 be, will be the amount specified in the table below under the relevant heading opposite that rating and (b) if an Event of Default or Potential Event of Default with respect to Party A or Party B has occurred and is continuing, the Threshold and the Minimum Transfer Amount with respect to such party shall each be zero. Ratings Table Min......... w unrawu to previously rated) by previously rated) by S&P and Moody's S&P and Moody's (C) Rounding. The Delivery Amount and the Return Amount will not be rounded up or down. (c) Valuation and Timiog. 0) "Valuation Agent" means for purposes of Paragraphs 3 and 5, the party making the demand under Paragraph 3, and, for purposes of Paragraph 6(d), the Secured Party receiving or deemed to receive the Distributions or the Interest Amount, as applicable. (li) "Valuation Date" means each New York Banking Day (as defined in the 2000 ISDA Definitions as published by the International Swaps and Derivatives Association, Inc. ("lSDA") without regard to any amendment after the dale hereof) (the "JSDA Definitions"). (iii) "Valuation Time" means the close of business in New York on the New York Banking Day before the Valuation Date or date of calculation, as applicable, or any time on the Valuation Date or date of calculation, as applicable; provided that the calculations of Value and Exposure will be made as of approximately the same time on the same date. (iv) "Nottfication Time" means 10:00 a. in., New York time, on a Local Business Day. (v) "Transfer Timing" Paragraph 4(b) is amended by (A)deleting the word "next" in the third line thereof and replacing it with the word "same"; and (B) deleting the words "second Local Business Day thereafter" in the fifth line thereof and replacing them with the words "next Local Business Day". (d) Conditions Precedent and Secured Party's Rights and Remedies. For the purposes of Paragraph 8(a), each Termination Event will constitute a Specified Condition with respect to a Pledgor, if the Pledgor fails to pay when due any amount payable by it in connection with an Early Termination Date designated in connection with that Termination Event. For all other NYUBS 803577.3 .2 purposes of this Annex, each Additional Termination Event will be a Specified Condition with respect to the relevant party. (e) Substitution. (i) "Substitution Date" has the meaning specified in Paragraph 4(d)(ii). Consent. The Pledgor need not obtain the Secured Party's consent for any substitution pursuant to Paragraph 4(d). (1) Dispute Resolution. (i) "Resolution Time" means 1:00 p.m., New York time, on the Local Business Day following the date on which the notice is given that gives rise to a dispute under Paragraph 5. (ii) Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit Support or of any Transfer of Eligible Credit Support or Posted Credit Support, as the case may be, will be calculated by the Valuation Agent in accordance with standard market practice using third party sources (such as, by way of example only, Bloomberg or Reuters) where available. (ill) Alternative. Paragraph 5 is amended by substituting the following for subclauses (1) and (2): "(1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day (X) that the Transfer otherwise would have been due if no dispute had existed in the case of ([) above, or (Y) following the date of Transfer in the case of (11) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day (X) that the Transfer otherwise would have been due if no dispute had existed in the case of (1) above, or (Y) following the date of Transfer in the case of (11) above," (g) Holding and Using Posted Collateral. (i) Eligibility to Hold Posted Collateral; Custodians. Party A and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied: (A) Party A is not a Defaulting Party. (B) Posted Collateral may be held only in the following jurisdictions: the United States of America. Initially, the Custodian for Party A is, with respect to Cash in the form of USD, Citibank, New York and, with respect to all other Posted Collateral, Bank of New York, New York, a/c Morgan Stanley & Co. Incorporated. NYLI115 803577.3 _3_ Party B and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied: (A) Party B is not a Defaulting Party. (B) Posted Collateral may be held only in the following jurisdictions: the United States of America. Initially, the Custodian for Party B is The Bank of New York. (ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will apply, (h) Distributions and Interest Amount. form of Cash, for any day, the rate equal to the rate opposite the caption "Federal (i) "Interest Rate". The "Interest Rate" will be, with respect to Eligible Collateral in the Funds (Effective)' for such day as published for such day in Federal Reserve Publication H.15(519) (or any successor publication) as published by the Board of Governors of the U.S. Federal Reserve System. (ii) Transfer of Interest Amount. The Transfer of the Interest Amount will be made on the last Local Business Day of each calendar month and on any Local Business Day that Posted Collateral in the form of cash in the relevant currency is Transferred to the Pledgor pursuant to Paragraph 3(b). (iii) Alternative to Interest Amount. The provisions of Paragraph 6(d)(ii) will apply. (i) Additional Representation(s). Each of Party A and Party B represents that it is not a U.S. bank or thrift institution subject to the Federal Deposit Insurance Act as amended (including amendments effected by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989). 0) Other Eligible Support and Other Posted Support. "Value" and "Transfer" with respect to Other Eligible Support and Other Posted Support each means: Not applicable. (k) Demands and Notices All demands, specifications and notices to Party A under this Annex will be made to: Morgan Stanley Capital Services Inc. 1585 Broadway 3rd Floor New York, NY 10036 Attn: F1D Collateral Manager Phone: 212-761-0877 Fax: 212.507-4949 email: nyfidcoll@morganstanley.com NYLIBS 803577.3 and all demands, specifications and notices to Party B under this Annex will be made to: City of Vernon 4305 Santa Fe Vernon, California 90058 Attention: Eric T. Fresch, City Attorney Tel. No.: 323-583-8811, ext. 175 Fax No.: 323-826.1439 with a copy to Bond Logistix LLC 777 South Figueroa Street, Suite 3200 Los Angeles, California 90017 Attention: A. Craig Underwood, President Tel. No.: 213-612.2463 Fax No.: 213-612-2499 provided that any demand, specification or notice may be made by telephone ("Telephone Notice") between employees of each party if such Telephone Notice is confirmed by a subsequent written instruction (which may be delivered via facsimile or email) by the close of business on the same day that such Telephone Notice is given. (1) Addresses for Transfers. Party A: Cash; CITIBANK, New York ABA No.: 021 000 089 Account No.: 3053 - 9883 Treasury Securities and Agency Notes: Bank of New York, New York/Morgan Stanley & Co. Incorporated ABA No.: 021000018 Party B: The Bank of New York ABA No.: 021 0000I8 Credit: The Bank of New York Acct No.; GLA 111-565 Reference: Custody Escrow account TASk800452 (m) Other Provisions. (i) Notwithstanding any other provision in this Agreement to the contrary, no full or partial failure to exercise and no delay in exercising, on the part of Party A or Party B, any right, remedy, power or privilege permitted hereunder shall operate in any way as a waiver thereof by such party, including without limitation any failure to exercise or any delay in exercising to any or to the full extent of such party's rights with respect to transfer timing pursuant to Paragraph 4(b), regardless of the frequency of such failure or delay. NYL135 803577.3 -5- (ii) In all cases, in order to facilitate calculation of the Delivery Amount and the Return Amount for a particular Valuation Date in accordance with Paragraph 3 of this Annex: (A) Eligible Collateral; (B) Exposure; and (C) Posted Collateral shall each be expressed in US Dollars. If any of these items are expressed in a currency other than US Dollars, then they shall be converted into US Dollar amounts at the spot exchange rate determined by the Valuation Agent on that Valuation Date. 00 Form of Annex. The parties hereby agree that the text of the body of this Annex is intended to be the printed forth of 1994 ISDA Credit Support Annex (Bilateral Form — ISDA Agreements Subject to New York Law Only version) as published and copyrighted by the International Swaps and Derivatives Association, Inc. (n) Additional Definitions 0) "Agency Notes" means U.S. Dollar -denominated fixed rate, non -amortising, non - mortgage -backed, senior debt securities of fixed maturity, rated Aaa by Moody's and AAA by S&P and issued by any of the Federal Home Loan Banks (including their consolidated obligations issued through the Office of Finance of the Federal Home Loan Bank System), the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal Farm Credit Bank. "Treasury Securities" means U.S. Dollar -denominated senior debt securities of the United States of America issued by the U.S. Treasury Department and backed by the full faith and credit of the United States of America. NYLm5 803577 3 -6_ IN WITNESS WHEREOF, the parties have executed this Credit Support Annex by their duly authorized ofiicen as of the date hereof. ATTEST: By: Name: Bruce V. Malkenhorat Title: City Clerk APPROVED AS TO FORM: By: Name: Eric T. Fresch Title: City Attorney MORGAN STANLEY CAPITAL SERVICES INC. By: Nan"le: NINA C. SWIMS VICE PR17311DENT CITY OF VERNON By: Name: Leonia C. Malburg Title: Mayor IN WITNESS WHEREOF, the parties have executed this Credit Support Annex by their duly authorized officers as of the date hereof. MORGAN STANLEY CAPITAL SERVICES INC. By:._ Name: Title: CITY OF VERNON "%Iamis�Leonis C. burg Title: Mayor ATTEST: By: Name: Bruce V. Malkenhorst Title: City Clerk APPROVED AS TO FORM: By: Name: Eric Pre Title: City Attorney NYL185 803377.3 EXECUTION COPY AMENDED AND RESTATED SCHEDULE TO THE MASTER AGREEMENT originally dated as of December 2, 2004 and amended and restated as of April 14, 2008 between MORGAN STANLEY CAPITAL SERVICES INC. ("Party A') and CITY OF VERNON ("Party B') THIS AMENDED AND RESTATED SCHEDULE AMENDS AND RESTATES IN ITS ENTIRETY THE ORIGINAL SCHEDULE DATED DECEMBER 2, 2004. THE CHANGES CONTEMPLATED BY THIS AMENDED AND RESTATED SCHEDULE SHALL BE EFFECTIVE UPON EXECUTION HEREOF. Part 1. Termination Provisions (a) "Specified Entity" means in relation to Party A for the purpose of. - Section 5(a)(v), Affiliates Section 5(a)(vi), None Specified Section 5(a)(vii), None Specified Section 5(b)(ii), None Specified and in relation to Party B for the purpose of: - Section 5(a)(v), None Specified Section 5(a)(vi), None Specified Section 5(a)(vii), None Specified Section 5(b)(ii), None Specified (b) "Specified Transaction" means, in lieu of the meaning specified in Section 12, any contract or transaction, including an agreement with respect thereto (whether or not documented under or effected pursuant to a master agreement) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provide payable from the Net Revenues. r of such party or any applicable Specified Entity of such party) and which, in the case of Party a is (c) "Cross Default" applies to Party A and Party B. Section 5(a)(vi) will apply to Party A and will apply to Party B, provided that, with respect to any Specified Indebtedness that is not capable of being declared due and payable as a result of the occurrence or existence of a default, event of default or other similar condition or event (however described) under the agreement or instrument relating to such Specified Indebtedness, the words "which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable" shall be deleted from clause (1) of such Section 5(a)(vi) and the words "and the bondholders or USAcave 125e0284.2 bwtee are permitted to exercise any remedies under the agreements and instruments" shall be added in its place. (d) "Specified Indebtedness" has the meaning specified in Section 12 with respect to Party A and, with respect to Party B, has the meaning specified in Section 12 with the following language added after `borrowed money" and before the period: "payable from the Net Revenues or supported by the faith and credit or taxing power of Party B." (e) "Threshold Amount" means: (i) with respect to Party A, U.S. $10,000,000; and (ii) with respect to Party B, $5,000,000, (t) Bankruptcy. Clause (6) of Section 5(a)(vii) of this Agreement is hereby amended to read in its entirety as follows:-- (6)(A) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets (or, in the case of a Government Entity, for the Project/Program) or (13) in the case of a Government Entity, any Credit Support Provider of such Government Entity or any applicable Specified Entity of such Government Entity, (I) there shall be appointed or designated with respect to it, an entity such as an organization, board, commission, authority, agency or body to monitor, review, oversee, recommend or declare a financial emergency or similar state of financial distress with respect to it or (Il) there shall be declared or introduced or proposed for consideration by it or by any legislative or regulatory body with competent jurisdiction over it, the existence of a state of financial emergency or similar state of financial distress in respect of it;". (g) Merger Without Assumption. Section 5(a)(viii) of this Agreement is hereby amended to read in its entirety as follows: - "(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets (or, in the case of Party B, all or substantially all of the Project/Program) to, another entity (or, without limiting the foregoing, if such party is a Government Entity, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, such party, any Credit Support Provider of such party or any applicable Specified Entity generally or with respect to the Project/Program) and, at the time of such consolidation, amalgamation, merger, transfer, or succession: (1) the resulting, surviving, transferee or successor entity fails to assume all the obligations of such party, such Credit Support Provider or such Specified Entity under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving, transferee or successor entity of its obligations under this Agreement; or (3) In the case of a Government Entity, the sources of payment for the obligations of such Government Entity as set forth in the Schedule are no longer available for the satisfaction of such resulting, surviving, transferee or successor entity's obligations to the other party hereto." USActive 12560264.2 -2- (h) "Credit Event Upon Merger" applies to Party A and Party B. Section 5(b)(ii) is hereby deleted in its entirety and replaced by the following: "00 Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X'), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets (or, in the case of a Government Entity, all or substantially all of the Project/Program) to, or reorganizes, incorporates, reincorporates, or reconstitutes into or as, another entity, or another entity transfers all or substantially all its assets (or, in the case of a Government Entity, all or substantially all of the Project/Program) to, or reorganizes, incorporates, reincorporates, or reconstitutes into or as, X (or, without limiting the foregoing, if X is a Government Entity, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or powers and duties granted to, X (or any applicable Specified Entity) generally or with respect to the Project/Program), and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of X or the resulting, surviving, transferee, or successor entity (which will be the Affected Party) is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action; or" (i) The "Automatic Early Termination" provisions of Section 6(a) will not apply to Party A and will not apply to Party B; provided, however, where the Event of Default is specified in Section 5(a)(vii)(1), (3), (4), (5), (6) or to the extent analogous thereto, (8) and is governed by a system of law which does not permit termination to take place upon or after the occurrence of the relevant Event of Default in accordance with the terms of this Agreement, then the Automatic Early Termination provisions of Section 6(a) will apply to Party A and Party B. In addition to, and notwithstanding anything to the contrary in the preceding sentence, if an Early Termination Date occurs under Section 6(a) as a result of Automatic Early Termination, the Defaulting Party hereby agrees to reimburse the Non -defaulting Party on demand against' all loss or damage that the Non -defaulting Party may sustain or incur (including in relation to terminating, liquidating, obtaining or reestablishing any hedge or related position to the extent not already taken into account in the calculation performed under Section 6(e)) in respect of each Transaction as a result of movements in relevant rates, prices, yields, yield curves, volatilities, spreads or other relevant market data between the Early Termination Date and the Local Business Day upon which the Non -defaulting Party first becomes aware that the Early Termination Date has occurred under Section 6(a) provided however, that if the Non -defaulting Party determines that any such movements have actually resulted in a net, after tax, gain for the Non -defaulting Party, then the Non -defaulting Party agrees to pay to the Defaulting Party the sum of such gain, subject to any rights the Non -defaulting party may have under the Agreement or otherwise. (j) Payments on Early Termination. "Loss" and "Second Method" will apply for the purpose of Section 6(e) of this Agreement. (k) Additional Termination Event will apply. The following shall constitute an Additional Termination Event with respect to Party A and Party B: (i) with respect to Party A, if Party A's Credit Support Provider's senior, unsecured unenhanced debt rating is withdrawn, suspended or reduced below "BBB in the case of S&P or below "Baa3" in the case of Moody's; USAelive 12560264.2 -3- (ii) with respect to Party B, if, on or before the earlier to occur of (A) October 15, 2008, (B) the occurrence of an Issuance Event (as defined below), and (C) the occurrence of a Rating Event (as defined below), the unenhanced rating on the Vernon Natural Gas Financing Authority Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series A is withdrawn, suspended or reduced below "BBB-" in the case of S&P or below "Baa3" in the case of Moody's;, (iii) with respect to Party B, on or prior to October 15, 2008, (A) an Issuance Event (as defined below) has not occurred and (B) a Rating Event (as defined below) has not occurred. "Issuance Event" means that Party B has issued, since the date of this Amended and Restated Schedule, additional unsubordinated bonds (the 'New Bonds") pursuant to the Covered Agreement and has obtained an unenhanced rating with respect to such New Bonds from S&P of "BBB-" or higher and from Moody's of "Baa3" or higher. "Rating Event" means that Party B has obtained, since the date of this Amended and Restated Schedule, an issuer credit rating for unenhanced, senior obligations payable from Net Revenues from S&P of "BBB" or higher and from Moody's of "Baa3" or higher; and (iv) with respect to Party B, as applicable, (A) following the occurrence of an Issuance Event, the rating on the New Bonds is withdrawn, suspended or reduced below "BBB-" in the case of S&P or below "Baa3" in the case of Moody's or (B) following the occurrence of a Rating Event, Party B's issuer credit rating is withdrawn suspended or reduced below "BBB-" in the case of S&P or below "Baa3" in the case of Moody's. For the purpose of Termination Event (i) above, the Affected Party shall be Party A and for the purpose of Termination Events (ii), (iii) and (iv) above, the Affected Party shall be Party B. For the purpose of all Termination Events above, all Transactions shall be Affected Transactions. Part 2. Agreement to Deliver Documents For the purpose of Section 4, each party agrees to deliver the following documents, as applicable:. Party required to Covered by Date by which Sec. 3(d) deliver document Form/Document/Certifleate to be delivered Representation Party A Either (1) a signature booklet and containing secretary's certificate Part' B and resolutions ("authorizing resolutions") authorizing the party to enter into derivatives transactions of the type contemplated by the parties or (2) a secretary's certificate, authorizing resolutions and incumbency certificate, in either case, for such party and any Credit Support Provider of such party reasonably satisfactory in form and substance to the other party. usAoave 12560264.2 ¢ The earlier of the fifth yes Business Day after the Trade Date of the first Transaction or upon execution of this Agreement and as deemed necessary for any further documentation. Party required to deliver document Form/Document/Cerdflcate Patty A A written opinion of legal counsel to Party A and its Credit Support Provider in the foams attached hereto as Exhibits A-1, A-2 and A-3 Party B A written opinion of legal counsel to Party B (and any Credit Support Provider) reasonably satisfactory in form and substance to Party A Party A A duly executed copy of the Credit and Support Documents specified in Party B Part 3 of this Schedule Party A A copy of the annual report of and such party (in the case of Party A, Party B in respect of Morgan Stanley) containing audited consolidated financial statements for each such fiscal year, certified by independent certified public accountants and prepared in accordance with generally accepted accounting principles in the country in which such party is organized. Party B Copies or, where available, . certified copies of (1) the charter and enabling statutes (or comparable legislation) creating Party B and any Credit Support Provider of Party B and authorizing Party B and any Credit Support Provider of Party B to enter into this Agreement and any Credit Support Document, the exhibits, supplements, and attachments hereto, the documents incorporated by reference herein, and the Confirmations hereunder, (2) any constituent instruments of Party B and any Credit Support Provider of Parry B, rules, USAdve 125e0264.2 -5- Date by which to be delivered Upon execution of this Agreement and upon the execution of each Confirmation Upon execution of this Agreement and upon the execution of each Confirmation Upon the execution of this Agreement As soon as practicable after the execution of this Agreement and also within 120 days (or as soon thereafter as practicable after becoming publicly available) after the end of each of its fiscal years while there are any obligations outstanding under this Agreement. Upon execution of this Agreement and as deemed necessary for further documentation Covered by See. 3(d) Representation No No 0. Yes Yes Party required to deliver document Form/Documen t/Cerdflcate regulations, investment policies, guidelines, resolutions, ordinances, or provisions affecting the authority of Party B or such Credit Support Provider of Party B to enter into this Agreement, any Credit Support Document, the exhibits, supplements, and attachments hereto, the documents incorporated by reference herein, and the Confumations hereunder, and the performance of its obligations hereunder and thereunder, and (3) amendments to any of the foregoing. Date by which to be delivered Covered by Sec. 3(d) Representation Party B Covered Agreement Upon execution of the yes this Agreement Party B Evidence of creation and/or Upon execution of this Yes perfection of Party A's security Agreement interest in the pledged revenues set forth in Part 4(c) of this Schedule Party B Copy of Rating Confirmation from Upon execution of this Yes each Rating Agency with respect Agreement to this Agreement as required by Section 2.07(a) of the Covered Agreement Party A and Party B Such other documents as the other Upon request No party may reasonably request Part 3. Miscellaneous (a) Addresses for Notices. For the purpose of Section 10(a): (i) Address for notices or communications to Party A: - For the purpose of Section 10(a) of this Agreement and for notices and communications with respect to Sections 5 and 6 only: Morgan Stanley Capital Services Inc 1585 Broadway New York, New York 10036-8293 USAcove 12560284.2 -6- Attention: Close-out Notices With a mandatory copy to: Facsimile No.: (212) 507-4622 For the purpose of Section 10(a) of this Agreement and for notices and communications with respect to all purposes other than Sections 5 and 6: Morgan Stanley Capital Services Inc 1585 Broadway New York, New York 10036-8293 Attention: Miscellaneous Notices Facsimile No: (212) 404-9899 (ii) Address for notices or communications to Party B:- City of Vernon 4305 Santa Fe Vernon, California 90058 Attention: Eric T. Fresch, City Administrator Tel. No.: 323-583-8811, ext. 175 Fax No.: 323-826-1439 with a copy to Bond Logistix LLC 777 South Figueroa Street, Suite 3200 Los Angeles, California 90017 Attention: A. Craig Underwood, President Tel. No.: 213-612-2463 Fax No.: 213-612-2499 (b) Notices. Section 10(a) is amended by adding in the third line thereof after the phrase "messaging system" and before the ')' the words, '; provided, however, any such notice or other communication may be given by facsimile transmission if telex is unavailable, no telex number is supplied to the party providing notice, or if answer back confirmation is not received from the party to whom the telex is sent." (c) Calculation Agent means Party A. (d) Credit Support Document means with respect to each of Party A and Party B, the Credit Support Annex dated as of the date hereof (the provisions of which are incorporated by reference herein) and, with respect to Party A, the guarantee of Morgan Stanley in the form attached hereto as Exhibit B. (e) Credit Support Provider means in relation to Party A: Morgan Stanley. Credit Support Provider means in relation to Party B: Not Applicable, USAcays 12660264.2 -7- (f) Governing Law; Jurisdiction. This Agreement, each Credit Support Document and each Confimiation will be governed by and construed in accordance with the laws of the State of New York; provided that the power, authority and capacity of Party B to enter into and perform its obligations under this Agreement shall be governed by and construed in accordance with the laws of the State of California. Section 1 I(b) is amended by: (1) deleting "non-" in the second line of clause (i), (2) replacing the words "courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City" in the second and third lines of clause (i) with the words "United States District Court with jurisdiction over the location of the Government Entity" and (3) deleting the final paragraph. (g) Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THIS AGREEMENT OR ANY CREDIT SUPPORT DOCUMENT. (h) Netting of Payments. Clause (ii) of Section 2(c) will not apply to.any amounts payable with respect to Transactions from the date of this Agreement. (i) "Affiliate" will have the meaning specified in Section 12, but excludes Morgan Stanley Derivative Products Inc. (j) Form of Agreement. The parties hereby agree that the text of the body of the Agreement is intended to be the printed form of 1992 ISDA Master Agreement (Local Currency -Single Jurisdiction) as published and copyrighted by the International Swaps and Derivatives Association, Inc. Part 4. Other Provisions (a) Deferral of Payments and Deliveries in Connection with Illegality and Incipient Illegality; Interest on Deferred Payments. Section 2(a)(iii) is hereby amended to read in its entirety as follows: (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default, Illegality, Potential Event of Default or Incipient Illegality with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) Representations. (i) The introductory clause of Section 3 of this Agreement is hereby amended to read in its entirety as follows: Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section3(a), at all times until the termination of this Agreement) that:- (ii) Section 3(a)(ii) of this Agreement is hereby amended to read in its entirety as follows: USAcave 12580284.2 -8- Powers. It has the power (in the case of a Government Entity, pursuant to the Authorizing Law) to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party, and has taken all necessary action and made all necessary determinations and findings to authorize such execution, delivery and performance;". (iii) Section 3(b) of this Agreement is hereby amended to read in its entirety as follows: "(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Incipient Illegality (in the case of a Government Entity) or Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party." (iv) For purposes of Section 3, the following shall be added, immediately following paragraph (d) thereof: (e) Eligible Contract Participant. Party A is an "eligible contract participant' as defined in Section Ia(12) of the Commodity Exchange Act (7 U.S,C. la), as amended by the Commodity Futures Modernization Act of 2000 (the "Commodity Exchange Act'). Party B (i) is a political subdivision (as such term is used in the Commodity Exchange Act) of the State of California (ii) is acting for its own account hereunder and (iii) owns and invests on a discretionary basis $25,000,000 or more in investments. (t) This Agreement has been subject to individual negotiation by such party. (9) It has entered into this Agreement (including each Transaction evidenced hereby) in conjunction with its line of business (including financial intermediation services) or the financing of its business. (h) It is entering into this Agreement, any Credit Support Document to which it is a party, each Transaction and any other documentation relating to this Agreement or any Transaction as principal (and not as agent or in any other capacity, fiduciary or nthnn"icnl (i) It acknowledges that, pursuant to the terns of this Agreement (including, without limitation, Section 6(e) hereof), it may owe a payment to the other party upon the designation of an Early Termination Date hereunder, even in the event such Early Termination Date is the result of an Event of Default with respect to such other party. Q) It is not entitled to claim immunity on the grounds of sovereignty or other similar grounds with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) subject to Sections 970 USAd1ve 12502e4.2 . -9- through 970.8 of the California Government Code, attachment of its assets (whether before or after judgment) or (v) subject to Section 970 through 970.8 of the California Government Code, execution or enforcement of any judgment to which it or its revenues or assets might otherwise be made subject to in any Proceedings (as defined in Section l l(b)) in the courts of any jurisdiction and no such immunity (whether or not claimed) may be attributed to such party or its revenues or assets. (k) It continuously represents that it is not (i) an employee benefit plan (hereinafter an "ERISA Plan"), as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), subject to Title I of ERISA or a plan subject to Section 4975 of the Internal Revenue Code of 1986, as amended, or subject to any other statute, regulation, procedure or restriction that is materially similar to Section 406 of ERISA or Section 4975 of the Code (together with ERISA Plans, "Plans"), (ii) a person acting on behalf of a Plan or (iii) a person the assets of whom constitute assets of a Plan. It will provide notice to the other party in the event that it is aware that it is in breacb of any aspect of this representation or is aware that with the passing of time, giving of notice or expiry of any applicable grace period it will breach this representation. (c) Additional Representations of Party B. Party B hereby further represents to Party A (which representations will be deemed to be repeated by Party B at all times until the termination of this Agreement) that: (i) This Agreement has been, and each Transaction hereunder will be (and, if applicable, has been), entered into for the purposes of managing its borrowings or investments and not for purposes of speculation. (ii) Party B has taken all steps necessary and has the authority to create and perfect the pledge and security interest created pursuant to Part 4(e) of this Schedule, and such pledge and security interest have been validly created and perfected. (iii) Any Transaction entered into pursuant to this Agreement does not and will not violate or exceed any limits or restrictions contained in any authorizations, approvals or resolutions of the City Council of Party B. (iv) The execution and delivery by Party B of this Agreement, each Confirmation and any other documentation relating hereto, and the performance of Party B of its obligations hereunder and thereunder are not in violation of the laws of the State of Califomia or the Charter of Party B. (v) This Agreement and each Transaction hereunder do not constitute any kind of investment by Party B that is proscribed by any constitution, charter, law, rule, regulation, government code, constituent or governing instrument, resolution, guideline, ordinance, order, writ, judgment, decree, charge, or ruling to which Party B (or any of its officials in their respective capacities as such) or its property is subject. The obligations of Party B to make payments to Party A under this Agreement and each Transaction are not subject to appropriation or similar action. (vi) No Affiliate or other person, firm, corporation, entity, or association may liquidate, borrow, encumber or otherwise utilize the Net Revenues, other than Party B or as otherwise permitted by the Covered Agreement. ` USAcave 125e0264.2 -10- (vii) Party B is a chartered city and municipal corporation under the laws of the State of California. (d) Credit Support Default. Subparagraph (3) of Section 5(a)(iii) is hereby amended by adding the phrase "(or such action is taken by any person or entity appointed or empowered to operate or act on its behalf)" after the word "Document" in the second line thereof. (e) Source of Payments. Party B agrees that its obligations hereunder are, and until the termination of this Agreement pursuant to the terms hereof shall remain, payable solely from the Net Revenues, and Party B hereby grants a lien on, security interest in and pledge of the Net Revenues to secure the payment of its obligations under this Agreement. Regularly scheduled payments shall constitute Parity Obligations pursuant to the Covered Agreement, payable from, and secured by, Net Revenues on a parity with the Bonds and other Parity Obligations. Termination payments shall constitute Termination Payments pursuant to the Covered Agreement payable from, and secured by, Net Revenues on a subordinated basis to Parity Obligations. (t) Negative Pledge. Party B shall not pledge or grant a security interest in the Net Revenues to secure any of its obligations under any interest rate swap or other derivative transaction (with the exception of providing for the collateralization of its obligations under such derivative transaction) without Party A's consent unless a parity pledge or security interest has been granted to Party A to secure Party B's comparable obligations (whether regularly scheduled payments or termination payments) under this Agreement. (g) Compliance with Covered Agreement. Party B will observe, perform and fulfill each covenant, term, and provision in the Covered Agreement applicable. to Party B and material to the performance of Party B's obligations under this Agreement or to Party B's covenants and representations in this Agreement, as any of those covenants, terms, and provisions may be amended, supplemented or modified for the purposes of this Agreement with the prior written consent of Party A (the "Incorporated Provisions"), with the effect, among other things, and without limiting the generality of the foregoing, that Party A will be a third -party beneficiary of the Incorporated Provisions. In the event the Covered Agreement ceases to be in effect for any reason, including, without limitation, defeasance of the Bonds issued in connection with such Covered Agreement, prior to the termination of this Agreement, the Incorporated Provisions (other than those provisions requiring payments in respect of bonds, notes, warrants or other similar instruments issued in connection with the relevant Covered Agreement) will remain in full force and effect for purposes of this Agreement as though set forth herein until such date on which all of the obligations of Party B under this Agreement have been fully satisfied. The Incorporated Provisions are hereby incorporated by reference and made a part of this Agreement to the same extent as if such provisions were set forth herein. Party B shall notify Party A in writing of any amendment, supplement (other than supplements adopted pursuant to Section 7.01(b) of the Covered Agreement) or modification of the Covered Agreement prior to the adoption thereof. Any amendment, supplement, modification or waiver of any of the Incorporated Provisions without the prior written consent of Party A shall have no force and effect with respect to this Agreement. Any amendment, supplement or modification for which such consent is obtained shall be part of the Incorporated Provisions for purposes of this Agreement. (h) Notice of Incipient Illegality. If an Incipient Illegality occurs, the Government Entity win, promptly upon becoming aware of it, notify the other party, specifying the nature of that Incipient Illegality and will also give such other information about that Incipient Illegality as the other party may reasonably require. USACave 128ee2e4.2 -11- (i) Export of Defaults. The occurrence or designation of an Early Termination Date on account of an Event of Default or Termination Event with respect to a party hereto ("X'7 (where X is the Defaulting Party or sole Affected Party) shall constitute a material breach and event of default (howsoever described) under all transactions between X and the other party ('Y) or any Affiliate of Y (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation) (together, the "Other Transactions"), whereupon Y or any Affiliate of Y shall have the right to terminate, liquidate and otherwise close out any such Other Transactions (and X shall be liable for any damages suffered by Y and any Affiliate of Y as a result thereof). (j) Setoff. (i) In addition to any rights of set-off a patty may have as a matter of law or otherwise, upon the occurrence of an Event of Default with respect to Patty ("X'7 hereof (or a provision analogous thereto) or a Termination Event where X is the sole Affected Party, the other party CY') shall have the right (but shall not be obliged) without prior notice to X or any other person to set off any obligation of X owing to Y or any Affiliate of Y (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation) against any obligations of Y or any Affiliate of Y owing to X (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation); provided that if X is Party B, any obligation of X subject to set-off pursuant to this Part 40) shall be payable from Net Revenues. (ii) For the purpose of cross -currency set off, Y may convert any obligation to another currency at a market rate determined by Y. (iii) If any obligation is unascertained, Y may in good faith estimate that obligation and set off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained (iv) Nothing in this paragraph will have the effect of creating a charge or other security interest. This paragraph shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise). (k) Single Relationship. The parties and their Affiliates intend that all Transactions and all other obligations (whether or not arising under this Agreement, whether or not matured, whether or not contingent and regardless of the currency, place of payment or booking office of the obligation) shall be treated as mutual and part of a single, indivisible contractual and business relationship; provided that any such obligation of Party B so treated shall be payable from Net Revenues. (1) Confirmations. Party A will deliver to Party B a Confirmation relating to each Transaction. (m) Relationship Between Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):- (i) Non-Rellance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate USActive 12560264.2 -12- or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction al ll not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction. (ii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction. (iii) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction. (n) Additional Definitions. All capitalized terms used but not otherwise defined in this Agreement shall have the meanings given thereto in the Covered Agreement. As used in this Schedule, the following terms shall have the following meanings: "Authorizing Law" means Cal. Gov't Code § 5922(a) "Covered Agreement" means the Indenture of Trust, dated as of December 1, 2004, by and between Party B and Bank of New York Trust Company N.A., as amended. "Government Entity" means Party B. "Incipient Dlegality" means (a) the enactment by any legislative body with competent jurisdiction over a Government Entity of legislation which, if adopted as law, would render unlawful (i) the performance by such Government Entity of any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of a Transaction or the compliance by such Government Entity with any other material provision of this Agreement relating to such Transaction or (ii) the performance by a Government Entity or a Specified Entity of such Government Entity of any contingent or other obligation which the Government Entity (or such Specified Entity) has under any Credit Support Document relating to such Transaction, (b) any assertion in any proceeding, forum or action by a Government Entity, in respect of such Government Entity or in respect of any entity located or organized under the laws of the state in which such Government Entity is located to the effect that performance under this Agreement or similar agreements is unlawful or (c) the occurrence with respect to a Government Entity or any Specified Entity of such Government Entity of any event that constitutes an Illegality. "Project/Program" means the Electric System. usAdve 125e0264.2 -13- IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of the date hereof, MORGAN STANLEY CAPITAL SERVICES INC. '1v" BY: l,/fnr - 40Z�— Name: Charmalne Fearon Title: Authorized Signatory CITY OF VERNON Name: Title: USAO6 a 12560264.2 IN WITNI ESS WHEREOF, the parties have executed this Schedule by their duly authorized officers as of the date hereof. MORGAN STANLEY CAPITAL SERVICES INC. 0 Name: Title: CITY OF VERNON By: — % i Name: Eric Fresc - Title: City Administrator Manuela Giron, City USAetWs 12580264.2 EX131111IT A-1 FORM OF OPINION OF OUTSIDE COUNSEL FOR PARTY A [LETTERHEAD OF CADWALADER, WICKERSHAM & TAFT] [Date] [Name] [Address] Ladies and Gentlemen: We act as a counsel to Morgan Stanley Capital Services Inc. ("MSCS") in connection with certain matters. We have been requested by MSCS to review the documents referred to herein and to render the opinion expressed herein. In such connection, we have reviewed, (i) an ISDA Master Agreement dated as of 200_ (including the Schedule thereto) and (ii) a Confirmation dated . 200_ , (collectively, the "Agreement'? between MSCS and (the "Counterparty"). In these regards, we have reviewed original, conformed, reproduction, or specimen copies, identified to our satisfaction, of the Agreement and other relevant documents, and have made such examination of applicable law as we have deemed necessary for the purpose of rendering the opinion expressed herein. Based upon the foregoing, we are of the opinion, subject to the qualifications expressed herein, that the Agreement constitutes the legal and binding agreement of MSCS and is enforceable against MSCS in accordance with its terms. The opinion expressed herein is subject to the following qualifications: (A) We are licensed to practice law in the State of New York, for purposes of the opinion expressed herein we do not purport to be experts on any law other than the law of the State of New York and the federal law of the United States of America, and we do not express any opinion herein concerning any law other than the substantive law of the State of New York and of the United States of America (as applicable, without regard to conflict of law principles). (B) In our review of the documents referred to in the first paragraph of this letter, we have assumed and have not independently verified that all signatures are genuine, that all documents submitted to or obtained by us as originals are authentic, and that all documents submitted to or obtained by us as conformed, reproduction, or specimen copies conform to the original documents and all such originals are authentic. (C) As to certain matters of fact, we have relied upon and have not independently verged statements, representations, and warranties of MSCS and its representatives, including statements, representations, and warranties contained in the Agreement, and have assumed and have not USAcave 12560264.2 A-1-1 independently verified that all such statements, representations, and warranties are true, accurate, and complete. (D) In rendering the opinions expressed herein, we have assumed and have not independently verified under the law of any jurisdiction that the opinions expressed in the letter dated the date hereof of Mark Steffensen, Esq., Counsel to MSCS, addressed to the Counterparty in connection with the Agreement are valid, reasonable, true, accurate, and complete. (E) We have assumed and have not independently verified under the law of any jurisdiction the legal capacity, power, and authority of the Counterparty to execute, deliver, and perform its obligations under the Agreement, and of the individuals who executed and delivered the Agreement on behalf of the Counterparty to do so. We have also assumed and have not independently verified under the law of any jurisdiction that the Agreement constitutes the legal, valid, and binding agreement of the Counterparty and is enforceable against the Counterparty in accordance with its terms. In addition, we have relied upon and have not independently verified statements, representations, and warranties of the Counterparty and its representatives, including statements, representations, and warranties contained in the Agreement, and have assumed and have not independently verified that all such statements, representations, and warranties are true, accurate, and complete. (I) The enforceability of each of the Agreement and the rights and remedies thereunder are subject to, and may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship, or other similar laws from time to time in effect relating to or affecting generally the enforcement of creditors' rights; (ii) general principles of equity, including without limitation concepts of materiality, reasonableness, good faith, and fair dealing (regardless of whether considered in a proceeding at law or in equity); (iii) the availability of equitable remedies; (iv) the discretion of a court or other authority or body to grant, impose, or render remedies under specific circumstances; (v) Sections 9-406 and 9-408 of the New York Uniform Commercial Code to the extent the Agreement purports to prohibit, restrict, or require the consent of the other party for, the transfer of, or the creation, attachment or perfection of a security interest in, the Agreement or an interest therein; (vi) limitations imposed by public policy, although we are not aware of any such limitations that would be relevant to the enforceability of the Agreement; (vii) each party to the Agreement acting in a commercially reasonable manner and in good faith in performing its obligations and exercising its rights and remedies thereunder; and (viii) the discretion of a court or other authority or body to invalidate or decline to enforce any right, remedy, or provision of the Agreement (including without limitation the termination payment provisions of the Agreement) determined by it to be a penalty. (0) We express no opinion herein as to (i) whether a court or other authority or body located outside of the State of New York would enforce the governing law and submission to jurisdiction provisions of the Agreement and (ii) the creation, legality, validity, perfection, enforceability, or priority of any lien, security interest, or other encumbrance created or purported to be created pursuant to the agreement. We are furnishing this letter to you solely for your benefit in connection with the transactions referred to herein. Without our prior written consent, this letter is not to be relied upon, used, circulated, quoted or otherwise referred to by, or assigned to, any other person (including any person that seeks to assert your rights in respect of this letter (other than your successor in interest by means of merger, consolidation, transfer of a business or other similar ttammion)) or for any other purpose. In addition, we disclaim any obligation to update this letter for changes in fact or law, or otherwise. Very truly yours, USActive 12560264.2 A-1-2 EXIMIT A-2 FORM OF OPINION OF INTERNAL COUNSEL FOR PARTY A [DATE] [COUNTERPARTY] [ADDRESS] Ladies and Gentlemen: As Counsel to Morgan Stanley Capital Services Inc., a Delaware corporation ("Morgan Stanley"), I advise you as follows in connection with the ISDA Master Agreement, the Schedule thereto dated as of [DATE], and the Confirmation thereunder dated [DATE] (the "Agreement") between Morgan Stanley and you. In arriving at the opinions expressed below, I have, or someone under my supervision has, examined an original or copy of: (i) the ISDA Master Agreement and (ii) the Schedule to the ISDA Master Agreement, and (iii) the Confirmation, each executed on behalf of Morgan Stanley. I have, or someone under my supervision has, also reviewed such corporate records of Morgan Stanley, certificates of public officials, officers of Morgan Stanley and other persons, and such other documents, agreements and instruments, and such matters of law, as I have deemed necessary as a basis for the opinions expressed in this letter. In such review, I have relied as to certain matters on information obtained from public officials, officers of Morgan Stanley and other sources believed by me to be reliable, and I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified, photostatic or reproduced copies and the authenticity of the originals of all such latter documents. Based upon the aforementioned examination and review, and subject to the foregoing and following comments and qualifications, it is my opinion that: (1) Morgan Stanley has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware. Stanley. (2) The Agreement has been duly authorized, executed and delivered by Morgan (3) The execution, delivery and performance of the Agreement by Morgan Stanley does not contravene any provision of the Certificate of Incorporation or By -Laws of Morgan Stanley. In connection with my opinion in paragraph (2) above, I note that, as of the date of this opinion, a judgment for money in an action based on the Agreement in a Federal or state court in the United States ordinarily would be enforced in the United States only in United States dollars. The date used to determine the rate of conversion of the foreign currency or currency unit in which an obligation under the Agreement is denominated into United States dollars will depend on various factors, including which court renders the judgment. Under Section 27 of the New York Judiciary Law, a state court in the State of New York rendering a judgment on a claim under the Agreement denominated in a foreign currency or currency unit would be required to render such judgment in the foreign currency or currency unit in which the claim is denominated, and that judgment would be converted into United States dollars at the exchange rate prevailingon the date of entry of the judgment. U6Activ9 12560264.2 A-2-1 In rendering the foregoing opinions, I have assumed, with respect to all of the documents referred to in this opinion letter, that (except as to Morgan Stanley): (i) each party to such documents is duly organized and validly existing; (ii) each party to such documents has the requisite power and authority (corporate or other) to execute and deliver such documents and perform its obligations under such documents; (iii) the execution, delivery and performance of such documents have been duly authorized by each party thereto; (iv) such documents have been duly executed and delivered by each party thereto; (v) such documents constitute the legal, valid and binding agreement of each of the parties thereto, enforceable against each such party in accordance with their respective terms; and (vi) each party to such documents has obtained all consents, approvals, authorizations, orders, licenses, registrations and qualifications (including any applicable foreign exchange licenses) from, and has made all filings and registrations with, all governmental or regulatory authorities or agencies required for the execution or delivery of, or for the performance or incurrence of any obligations or liabilities under, such documents. In rendering the foregoing opinions, I am not addressing any matters relating to any specific transactions entered into pursuant to the Master Agreement (other than the transactions evidenced by the Confirmations each dated [December 2, 2004] and bearing reference numbers [ ]and Furthermore, I express no opinion as to the validity and enforceability of any provision of the Agreement that (i) purports to limit, condition or impose remedies for the exercise of either party's ability to transfer its rights under the Agreement or a Confirmation in a manner contrary to Section 9 406 or 9 408 of the New York Uniform Commercial Code; (ii) requires any amendment or waiver to be in writing, to the extent that an oral agreement or waiver, or an implied agreement or waiver by trade practice or course of conduct, has been created that modifies any such provision, or rim is determined to be a penalty or a forfeiture, includingb reason of a ( ) Y party being required or allowed to pay, deliver, receive or recover (or not to pay, deliver, receive or recover) any amount or item. In addition, I express no opinions as to any violation of, or any consent or approval. required under, any law or regulation which may be applicable to Morgan Stanley as a result of the involvement of any other party to the Agreement. Any foregoing opinion relating to enforceability or performance by Morgan Stanley of its obligations are qualified by and subject to bankmptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general'applicability relating to or affecting creditors' rights and to general equity principles. The foregoing opinion is limited to the Federal laws of the United States, the'laws of the State of New York and the General Corporation Law of the State of Delaware, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. I am furnishing this opinion to you solely for your benefit in connection with the above - referenced Agreement. Except for your own internal use, this opinion is' not to be used or circulated, quoted or otherwise referred to, or relied upon without my express written consent. I do not undertake to update, revise or supplement any opinion or statement herein for any reason whatsoever. Very truly yours, Counsel USAcave 12560264,2 A_2-2 EXHIBIT A-3 FORM OF OPINION OF INTERNAL COUNSEL FOR PARTY A [DATE] [COUNTERPARTY] [ADDRESS] Ladies and Gentlemen: As Counsel to Morgan Stanley, a Delaware corporation ("Morgan Stanley"), I advise you as follows in connection with the Guarantee issued by Morgan Stanley, dated [DATE] (the "Guarantce'I in connection with the ISDA Master Agreement, dated as of [DATE] between Morgan Stanley Capital Services Inc. and [COUNTERPARTY] (the "Agreement'I. In arriving at the opinions expressed below, I have, or someone under my supervision has, examined an original or copy of the Guarantee executed on behalf of Morgan Stanley. I have, or someone under my. supervision has, also reviewed such corporate records of Morgan Stanley, certificates of public officials, officers of Morgan Stanley and other persons, and such other documents, agreements and instruments, and such matters of law, as I have deemed necessary as a basis for the opinions expressed in this letter. In such review, I have relied as to certain matters on information obtained from public officials, officers of Morgan Stanley and other sources believed by me to be reliable, and I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified, photostatic or reproduced copies and the authenticity of the originals of all such latter documents. Based upon the aforementioned examination and review, and subject to the foregoing and following comments and qualifications, it is my opinion that: (1) Morgan Stanley has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware. (2) The Guarantee has been duly authorized, executed and delivered by Morgan Stanley and the Guarantee constitutes the valid and legally binding obligation of Morgan Stanley enforceable in accordance with its terms. (3) The execution, delivery and performance of the Guarantee by Morgan Stanley does not contravene any provision of the Certificate of Incorporation or By -Laws of Morgan Stanley. Any foregoing opinion relating to enforceability or performance by Morgan Stanley of its obligations are qualified by and subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. I am admitted to practice in the State of New York The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. Usaoave 126e0284.2 A-3-1 I am fiunisbing this opinion to you solely for your benefit in connection with the above. referenced Guarantee. Except for your own internal use, this opinion is not to be used or circulated, quoted or otherwise referred to, or relied upon without my express written consent. I do not undertake to update, revise or supplement any opinion or statement herein for any reason whatsoever. Very truly yours, Counsel UUMve 12500264.2 A-3-2 EXHIBIT B FORM OF GUARANTEE OF MORGAN STANLEY Date [Address] Ladies and Gentlemen: In consideration of that certain ISDA Master Agreement dated as of [date) between Morgan Stanley Capital Services Inc., a Delaware corporation (hereinafter "MSCS') and [counterparty] (hereinafter "Counterparty) (such ISDA Master Agreement, together with each Confirmation exchanged between the parties pursuant thereto, hereinafter the "Agreement"), Morgan Stanley, a Delaware corporation (hereinafter "MS"), hereby irrevocably and unconditionally guarantees to Counterparty, with effect from the date of the Agreement, the due and punctual payment of all amounts payable by MSCS under the Agreement when the same shall become due and payable, whether on Scheduled Payment Dates, upon demand, upon declaration of termination or otherwise, in accordance with the terms of the Agreement and giving effect to any applicable grace period. Upon failure of MSCS punctually to pay any such amounts, and upon written demand by Counterparty to MS at its address set forth in the signature block of this Guarantee (or to such other address as MS may specify in writing), MS agrees to pay or cause to be paid such amounts; provided that delay by Counterparty in giving such demand shall in no event affect MS's obligations under this Guarantee. MS hereby agrees that its obligations hereunder shall be unconditional and will not be discharged except by complete payment of the amounts payable under the Agreement, irrespective of any claim as to the Agreement's validity, regularity or enforceability or the lack of authority of MSCS to execute or deliver the Agreement; or any change in or amendment to the Agreement; or any waiver or consent by Counterparty with respect to any provisions thereof; or the absence of any action to enforce the Agreement or the recovery of any judgment against MSCS or of any action to enforce a judgment against MSCS under the Agreement; or any similar circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor generally. MS hereby waives diligence, presentment, demand on MSCS for payment or otherwise (except as provided hereinabove), filing of claims, requirement of a prior proceeding against MSCS and protest or notice, except as notice is provided for in the Agreement with respect to amounts payable by MSCS. If at any time payment under the Agreement j is rescinded or must be otherwise restored or returned by Counterparty upon the insolvency, bankruptcy or reorganization of MSCS or MS or otherwise, MS's obligations hereunder with respect to such payment shall be reinstated upon such restoration or return being made by Counterparty. MS represents to Counterparty as of the date hereof, which representations will be deemed to be repeated by MS on each date on which a Transaction is entered into, that: (1) it is duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full power and legal right to execute and deliver this Guarantee and to perform the provisions of this Guarantee on its part to be performed; (2) its execution, delivery and performance of this Guarantee have been and remain duly authorized by all necessary corporate action and do not contravene any provision of its USAdve 12560294.2 B-I certificate of incorporation or by-laws or any law, regulation or contractual restriction binding on it or its assets; (3) all consents, authorizations, approvals and clearances (including, without limitation, any necessary exchange control approval) and notifications, reports and registrations requisite for its due execution, delivery and performance of this Guarantee have been obtained from or, as the case may be, filed with the relevant governmental authorities having jurisdiction and remain in full force and effect and all conditions thereof have been duly complied with and no other action by, and no notice to or filing with, any governmental authority having jurisdiction is required for such execution, delivery or performance; and (4) this Guarantee is its legal, valid and binding obligation enforceable against it in accordance with its terms except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights or by general equity principles. By accepting this Guarantee and entering into the Agreement, Counterparty agrees that MS shall be subrogated to all rights of Counterparty against MSCS in respect of any amounts paid by MS pursuant to this Guarantee, provided that MS shall be entitled to enforce or to receive any payment arising out of or based upon such right of subrogation only to the extent that it has paid all amounts payable by MSCS under the Agreement. This Guarantee shall be governed by and construed in accordance with the laws of the State of New York. All capitalized terms not otherwise defined herein shall have the respective meanings assigned to them in the Agreement. MORGAN STANLEY By: Name: Title: Address: 1585 Broadway 3rd Floor New York, NY 10036 Attention: Derivative Products Group Fax No.: (212) 761-0162 USAcave 12560264.2 B-2 Paragraph 13. Elections and Variables (a) (b) EXECUTION COPY Security Interest for "Obligations". The term "Obligations" as used in this Annex includes the following additional obligations with respect to Party A and Party B: None. Credit Support Obligation& (i) "Delivery Amount', "Return Amount' and "Credit Support Amount' each has the meaning specified in Paragraph 3. (ii) Eligible Collateral. The following items will qualify as "Eligible Copateral" for Party A and Party B: Valuation Percentage (A) Cash 100% (B) Treasury Securities and Agency Notes having a remaining maturity of: Not more than 1 year 1000/0 More than 1 year but not more than 2 years 99% More than 2 years but not more than 5 years 98% More than 5 years but not more than 10 years 97% More than 10 years 95% (C) Any other item agreed upon in writing from time to time by As agreed the parties by the parties (iii) Other Eligible Support: Not applicable (iv) Thresholds. (A) "Independent Amount' means, with respect to a party, at any time the aggregate Of any Independent Amounts specified with respect to such party in the Confirmations of all Transactions outstanding at that time. (B) "Threshold" and "Minimum Transfer Amount'respectively mean: (i) with respect to Party A, at any time the amount specified in the table below under the relevant heading opposite whatever is the lower of the ratings at that time assigned by Standard & Poor's Ratings Group ("S&P') and Moody's Investors Services, Inc. ("Moody's'5 to the senior, unsecured, unenhanced debt of Morgan Stanley ("MS') or, (ii) with respect to Party B, at any time the amount specified in the table below under the relevant heading opposite whatever is the lower of (aa) if no Issuance Event or Rating Event has occurred, the unenhanced ratings at that time assigned by S&P and Moody's to the Vernon Natural Gas Financing Authority Variable Rate Revenue Bonds (Vernon Gas Project), 2006 Series A; USAceve 12564455.2 (bb) following the occurrence of an Issuance Event (if any), the unenhanced ratings at that time assigned by S&P and Moody's to New Bonds; or (cc) following the occurrence of a Rating Event (if any), the issuer credit ratings at that time assigned by S&P and Moody's. provided that (a) if the senior, unsecured, unenhanced debt of MS or the New Bonds of Party B are rated by only one of S&P or Moody's, or Part B has only obtained an issuer credit rating from one of S&P and Moody's, the Threshold and the Minimum Transfer Amount with respect to Party A or Party B, as the case may be, will be the amount specified in the table below under the relevant heading opposite that rating and (b) if an Event of Default or Potential Event of Default with respect to Party A or Patty B has occurred and is continuing, the Threshold and the Minimum Transfer Amount with respect to such party shall each be zero. Ratings Table Minimum umarea trr unrated (it previously rated) by previously rated) by S&P and Moody's S&P and Moody's (C) Rounding. The Delivery Amount and the Return Amount will not be rounded up or down. (c) Valuation and Timing. (i) "Valuadon Agent' means for purposes of Paragraphs 3 and 5, the party making the demand under Paragraph 3, and, for purposes of Paragraph 6(d), the Secured Party receiving or deemed to receive the Distributions or the Interest Amount, as applicable. "Valuadon Date" means each New York Banking Day (as defined in the 2000 ISDA Definitions as published by the International Swaps and Derivatives Association, Inc. ("ISDA'l without regard to any amendment after the date hereof) (the "ISDA Definidons'). (M) "Valuadon Time" means the close of business in New York on the New York Banking Day before the Valuation Date or date of calculation, as applicable, or any time on the Valuation Date or date of calculation, as applicable; provided that the calculations of Value and Exposure will be made as of approximately the same time on the same date. USActive 126W55.2 _2_ (iv) "Nodflcadon Time" means 10:00 a.m., New York time, on a Local Business Day. (v) "Transfer Timing" Paragraph 4(b) is amended by (A) deleting the word "next" in the third line thereof and replacing it with the word "same"; and (B) deleting the words second Local Business Day thereafter" in the fifth line thereof and, replacing them with the words "next Local Business Day". A Conditions Precedent and Secured Party's Rights and Remedies. For the purposes of Paragraph S(a), each Termination Event will constitute a Specified Condition with respect to a Pledgor, if the Pledgor fails to pay when due any amount payable by it in connection with an Early Termination Date designated in connection with that Termination Event. For all other purposes of this Annex, each Additional Termination Event will be a Specified Condition with respect to the relevant party. (a) Substitution. (i) "Substitudon Date" has the, meaning specified in Paragraph 4(d)(ii). (ii) Consent. The Pledgor need not obtain the Secured Party's consent for any substitution pursuant to Paragraph 4(d). (fj Dispute Resolution. (i) "Resolution Time" means 1:00 p.m., New 'York time, on the Local Business Day following the date on which the notice is given that gives rise to a dispute under Paragraph 5. (ii) Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit Support or of any Transfer of Eligible Credit Support or Posted Credit Support, as the case may be, will be calculated by the Valuation Agent in accordance with standard market practice using third party sources (such as, by way of example only, Bloomberg or Reuters) where available. (iii) Alternative. Paragraph 5 is amended by substituting the following for subclauses (1) and (2): "(1) the Disputing Party will notify the other party and the Valuation Agent (if the Valuation Agent is not the other party) not later than the close of business on the Local Business Day (X) that the Transfer otherwise would have been due if no dispute had existed in the case of (1) above, or (Y) following the date of Transfer in the case of (II) above, (2) subject to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business Day (X) that the Transfer otherwise would have been due if no dispute had existed in the case of (1) above, or m following the date of Transfer in the case of (If) above," (g) Holding and Using Posted Collateral. (i) Eligibility to Hold Posted Collateral; Custodians. Party A and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied: USAdlve 12664455.2 -3- (A) Party A is not a Defaulting Party. (B) Posted Collateral may be held only in the following jurisdictions: the United States of America. Initially, the Custodian for Party A is, with respect to Cash in the form of USD, Citibank, New York and, with respect to all other Posted Collateral, Bank of New York, New York, a/c Morgan Stanley & Co. Incorporated. Party B and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied: (A). Party B is not a Defaulting Party. (B) Posted Collateral may held only in the following jurisdictions: the United States of America. Initially, the Custodian for Party B is The Bank of New York (ii) Use of Posted Collateral. The provisions of Paragraph 6(c) will apply. (h) Distributions and Interest AmounL (i) "Interest Rate". The "Interest Rate" will be, with respect to Eligible Collateral in the form of Cash, for any day, the rate equal to the rate opposite the caption "Federal Funds (Effective)" for such day as published for such day in Federal Reserve Publication H.15(519) (or any successor publication) as published by the Board of Governors of the U.S. Federal Reserve System. (ii) Transfer of Interest Amount The Transfer of the Interest Amount will be made on the last Local Business Day of each calendar mouth and on any Local Business Day that Posted Collateral in the form of cash in the relevant currency is Transferred to the Pledgor pursuant to Paragraph 3(b), (iii) Alternative to Interest Amount. The provisions of Paragraph 6(d)(ii) will apply (i) Additional Representation(s). Each of Party A and Party B represents that it is not a U.S. bank or thrift institution subject to the Federal Deposit Insurance Act as amended (including amendments effected by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989). (j) Other Eligible Support and Other Posted Support. "Value" and "Transfer" with respect to Other Eligible Support and Other Posted Support each means: Not applicable. (k) Demands and Notices All demands, specifications and notices to Party A under this Annex will be made to: USAraive 12584466.2 -4- (1) Morgan Stanley Capital Services Inc. 1585 Broadway 3rd Floor New York, NY 10036 Attu: FID Collateral Manager Phone: 212-761-0877 Fax: 212-507-4949 email: nyfidcoll@morganstanley.com and all demands, specifications and notices to Party B under this Annex will be made to: City of Vernon 4305 Santa Fe Vernon, California 90058 Attention: Eric T. Fresch, City Administrator Tel. No.: 323-583-8811, ext. 175 Fax No.: 323-826-1439 with a copy to Bond Logistix LLC 777 South Figueroa Street, Suite 3200 Los Angeles, California 90017 Attention: A. Craig Underwood, President Tel, No.: 213-612-2463 Fax No.: 213-612-2499 provided that any demand, specification or notice may be made by telephone ("Telephone Notice') between employees of each party if such Telephone Notice is confirmed by a subsequent written instruction (which may be delivered via facsimile or email) by the close of business on the same day that such Telephone Notice is given. Addresses for Transfers. Party A: Cash: CITIBANK, New York ABA No.: 021 000 089 Account No.: 3053 - 9883 Treasury Securities and Agency Notes: Bank of New York, New York/Morgan Stanley & Co. Incorporated ABA No.: 021000018 Party B: The Bank of New York ABA No.: 021 000 018 Credit: The Bank of New York Acct No.: GLA111-565 Reference: Custody Escrow account TAS#800452 USAcSve 12564455.2 -5- (m) Other Provisions. (i) Notwithstanding any other provision in this Agreement to the contrary, no full or partial failure to exercise and no delay in exercising, on the part of Party A or Patty B, any right, remedy, power or privilege permitted hereunder shall operate in any way as a waiver thereof by such party, including without limitation any failure to exercise or any delay in exercising to any or to the full extent of such parry's rights with respect to transfer timing pursuant to Paragraph 4(b), regardless of the frequency of such failure or delay. (ii) In all cases, in order to facilitate calculation of the Delivery Amount and the Return Amount for a particular Valuation Date in accordance with Paragraph 3 of this Annex: (A) Eligible Collateral; (B) Exposure; and (C) Posted Collateral shall each be expressed in US Dollars. If any of these items are expressed in a currency other than US Dollars, then they shall be converted into US Dollar amounts at the spot exchange rate determined by the Valuation Agent on that Valuation Date. (iii) Form of Annex. The parties hereby agree that the text of the body of this Annex is intended to be the printed form of 1994 ISDA Credit Support Annex (Bilateral Form — ISDA Agreements Subject to New York Law Only version) as published and copyrighted by the International Swaps and Derivatives Association, Inc. (n) Additional Definitions (i) "Agency Notes" means U.S. Dollar -denominated fixed rate, non -amortising, non - mortgage -backed, senior debt securities of.fixed maturity, rated Aaa by Moody's and AAA by S&P and issued by any of the Federal Home Loan Banks (including their consolidated obligations issued through the Office of Finance of the Federal Home Loan Bank System), the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation or the Federal Farm Credit Bank. (ii) "Treasury Securities" means U.S. Dollar -denominated senior debt securities of the United States of America issued by the U.S. Treasury Department and backed by the full faith and credit of the United States of America. USAcave 12564465.2 -(- IN WITNESS WHEREOF, the parties have executed this Credit Support Annex by their duly authorized officers as of the dale hereof. MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Charmalne Fearon Title: Authodzed Signatory CITY OF VERNON By: Name: Title: USActive 12564455.2 IN WITNESS WHEREOF, the parties have executed this Credit Support Amex by their duly authorized officers as of the date hereof. MORGAN STANLEY CAPITAL SERVICES INC. Lm Name: Title: CITY OF VERNON By: Name: Eric Fresch Title: City Administrator ATTEST: anuela Giron, City Cler USActive 125e"55.2 THIRD AMENDMENT dated as of September 22, 2011 to the CREDIT SUPPORT ANNEX to the ISDA MASTER AGREEMENT dated as of December 2, 2004 between MORGAN STANLEY CAPITAL SERVICES LLC (Me Morgan Stanley Capital Services Inc.) C'Party A") And CITY OF VERNON ("Party B") The parties have previously entered into. that certain ISDA Master Agreement dated as of December 2, 2004 (the "Agreement"), which Agreement includes the Schedule and the Credit Support Annex (the "Annex") attached thereto (as previously amended as of March 16, 2006 and April 14, 2008) and all Confirmations exchanged between the parties confirming the Transactions (or Swap Transactions) thereunder. The parties have agreed to amend the Annex in accordance with the terms of this Amendment (the "Third Amendment"). NOW THEREFORE, in consideration of the mutual agreements contained herein, the parties agree as follows: 1. Amendment of the Annex Upon execution of this Third Amendment by both parties, the Annex shall be and hereby is amended as follows: (a) Demands and Nofces With respect to Party A only, Paragraph 13(k) of the Annex shall be deleted in its entirely and replaced with the following: "All demands, specifications and notices to Party A under this Annex shall be made to: FiD Collateral Department 1221 Avenue of the Americas, 28th Floor New York, New York Ioo2o Tel: 212-762.5670 Fax: 212-507.4949 Email: nytidcoll@jnorganstaaley.com" (d) The Ratings Table in Paragraph 13(b)(iv)(B) of the Annex is hereby amended to read in its entirety as follows: Moody's Raring Aaa Aal Aa2 Aa3 Al A2 A3 Baal Baa2 Baa3 and below or unrated (if previously rated) by S&P and Moody's S&P Raring AAA AA+ AA AA- A+ A A - BBB+ BBB BBB- and below or unrated (if previously rated) by S&P and Moody's Threshold USD 25,000,000 USD 25,000,000 USD 25,000,000 USD 25,000,000 USD 20,000,000 USD 20,000,000 USD 20,000,000 USD 20,000,000 USD 10,000,000 Zero Minimum Transfer Amount USD 1,000,000 USD 1,000,000 USD 1,000,000 USD 1,000,000 USD 1,000,000 USD 1,000,000 USD 1,000,000 USD 1,000,000 USD 100,000 USD 100,000 2. RepresemadonL Each party represents to the other party that all representations contained in the Agreement, as amended, are true and accurate as of the date of this Third Amendment and that such representations are deemed to be given or repeated by each party, as the case may be, on the date of this Third Amendment. 3. Miscellaneous (a) Definitions. Capitalized temrs used in this Third Amendment and not otherwise defined herein shall have the meanings specified for such terms in the Agreement. As used in the Agreement (including any Confirmation relating thereto), as amended by this Third Amendment, the terms "ISDA Master Agreement", "Agreement", "this Agreemenf', "herein", "hereinafter", "hereof', "hereto" and other words of similar import, shall mean the Agreement as amended hereby, unless the context otherwise specifically requires. (b) Entire Agreement This Third Amendment constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings (except as otherwise provided herein) with respect thereto. (c) Counterparts. This Third Amendment may be executed and delivered in counterparts (including by facsimile transmission) each of which will be deemed an original. (d) Headings. The headings used in this Third Amendment are for convenience of reference only and are not to affect the construction of or to be taken into. consideration in interpreting this Third Amendment. (e) Governing Law. This Third Amendment shall be governed by and construed in accordance with the applicable law governing the Agreement IN WITNESS WHEREOF, the parties have executed this Third Amendment on the respective dates specified below with etlbct from the date specified in this Third Amendment. MORGAN STANLEY CAPITAL SERVICES LLC CITY OF VERNON By: By: Name: Name: Hilario Gonz Title: Title: Mayor Date: Date: September 22, 2011 IN WITNESS WHEREOF, the parties have executed this Third Amendment on the respective dates specified below with effect from the date specified in this Third Amendment. MORCAN STANLyrLY ")1f)TAL SERVICES LLC CITY OF VERNON By: Name: I/SteveKT. N�gpL Title: Authorized Signatory Date` SEP 2'2 2011 Name: Title: Date: EXHIBIT B AMENDMENTS AND MODIFICATIONS TO THE SCHEDULE AND CREDIT SUPPORT ANNEX I. Notwithstanding anything in the contrary in the Morgan Stanley ISDA Master Agreement all refer Morgan Stanley Capital Services Inc., Morgan Stanley, Party A and MS in the Schedule and Credit Support shall be a reference to Deutsche Bank AG, New York Branch. 2. The following amendments and modifications are made to the Morgan Stanley ISDA Schedule Morgan Stanley ISDA Master Agreement: (a) The reference to "Affiliates" of Party A as aSpecyled Entity in Part l(a) is deleted. (b) Part I(c), "Crow Default" is further amended to add the following words " Section 5(a)(vi) shall be amended to add the following provisions at the end thereof "provided, however, that; notwithstanding the foregoing, an Event of Default shall not occur either (1) or (2) above if (A) (1) the default, or other similar event or condition referred to in (1) failure to pay referred to in (2) is a failure to pay or deliver caused by an error or omission administrative or operational nature, and (11) funds or the asset to be delivered were available 4 party to enable it to make the relevant payment or delivery when due and (111) such paym delivery is made within three (3). Local Business Days following receipt of written notice fm Interested party of such failure to pay, or (B) such party was precluded from paying, or was una pay, using reasonable means, through the office of the party through which it was acting for pis of the relevant. Specified Indebtedness; by reason of force majeure, act of State, illegali impossibility." to the the an or an or (c) Part I(c)(i), "Threshold.", is amended and restated in its entirety to read: "(i) with regard to party A, three percent (3%) of its shareholders' equity (i.e., the sum of its capital and disclosed reserves). (d) Part 1(i), the "Automatic Early Termination" provision, is amended to add the following words to the end of the first.paragmph immediately before' :", : "provided, however, that with respect to an Event of D fault specified in Section 5(a)(vii)(4)(B) or, to the extent analogous thereto, (8), the second sentence of this Section 6(a) will only apply if the relevant proceeding Is instituted by, or the relevant petition is presented to, a court or authority in thejurisdiction where the Defaulting Party Is incorporated." (e) Part l(k), "Additional Termination Event" is amended to (x) amend and restate the Additional Termination Event set forth in subsection (ii) as set forth below, and (y) delete Additional Termination Eventl{{ (ill) and ((iv) from the Morgan Stanley ISDA Schedule and in lieu thereof add the new Additional Termination Ejcnts (III) and (iv) set forth below; and (z) amend and restate the final paragraph ofpart I(k): i (ii) the unrnhanced rating on any Series of the City of Vernon Electric System Revenue Bonds, Series 2009 is withdrawn, suspended or reduced below "BBB." in the case of S&P or below "Baa3" In the case of Moody's. I I (III) Party B will have the right to terminate one or more Transactions hereunder without Sausc ("Optional Termination") in whole or in pan at any time by giving not less than five business days prior written notice designating a Termination Date to Party A. Party B will be thti sole Affected Party (for all purposes other than the right to designate an Early Termination Date in respect of such Transaction) and all Transactions terminated (in whole or in part) pursuant to this paragraph will be Affected Transactions. Party B may not optionally terminate a Transaction unless Parry B also provides evidence reasonably satisfactory to Party A that Party B has or will have on the termination date available funds with which to pay, any amount due to Party A as a result of such termination. i N1359778N i (iv) • Party A or Party B may, on October I, 2016 (such date, the "Optional Mid -Market Termination Date"), or if such date is not a Local Business Day, the next following Local Businessbay, terminate and cash settle this Transaction by providing at least five (5) Business Days ipnor written notice to the other party. The amount due with respect to such termination sh� l be determined by Party A. If Party B disputes such amount, the amount due with respect to such termination shall be an amount determined pursuant to 6 of the Master Agreem�nt as if (a) the Optional Mid -Market Termination Data is the Early Termination Date, (b) each party shall be an Affected Parry (for all purposes other than the election to terminate), (c)ieach such Transaction terminated shall be an Affected Transaction; provided, however, that tat in. lieu of each party obtaining Market Quotations and determining a Settlement AmoW�t as required by Section 6(exii)(2) (A) of the Agreement Party A will calculate thas ettla ant Amount by seeking Market Quotations from Reference Market -markers and request that such Reference Market -makers provide a "mid -market" Market Quotation which shall be without regard to the credit rating, credit quality or other attributes specific to either Party A orarty B. Party A agrees that if the market conditions in effect on the Optional Mid -Market Termination Date am not substantially different, as determined in Party A's discretion, as they am on the Novation Trade Date, it will, to the extent permitted by its credit and bus ness procedures In efFect on such data, provide and/or request, as applicable, that the mid-m irket quotation be determined using discount factors computed from the LIBOR swap curve, .' For the purpose of Termination Event (i) above,. the Affected Party shall be Party A and For the pure a of Termination Events (ii) and (iii) above, the Affected Party shall be Party B and for purpose of Terrain tion Event (iv) above both parties shall be Affected Parties with the modification as described in that provis on, (f) Part 3(a) Address for Natices of Party A and Party B shall read as follows: All notices to Party A under Sections 5 or (other than notices under Section 5(a)(1)) shall be sent to; Deutsche Bank AC 60 Well Street New York, New York 10005 Attention: Legal Department All other notices to Party A shall be sent to the address and contact particulars specified i� the Confirmation of that Transaction or otherwise notified. , N1359778N (n) The definition of Covered Agreement in Part 4(n) shall be amended follows, "Covered Agreement' means the Indenture of Trust, Relating to the System Revenue Bonds, dated as of September I, 2008, between Party B and Mellon Trust Company, N.A., and any supplements relating thereto. N 1359778N All notices to Party B under Sections 5 or 6 (other than notices under Section 5(a)(i)) shall be sent to: City of Vernon 4305 Santa Fe Vernon, California 90058 Attn: Mark Whitworth, City Administrator Telephone: 323-583-8811 Facsimile: 323-826.1439 BLX Group LLC 777 S Figueora St Los Angeles, CA 90017 Attn: Craig Underwood Telephone: 213 612 2463 Facsimile: 213 612 2499 (g) Part 3(b) Is deleted in it Is entirety. (h), Credit Support Documents, the requirement for a Guarantee of Party A -shall bedeleted in it is en#itety and as amended this provision shall be amended to insert a `." Immediately after "reference herein)" and delete the reminder of theprovision. i (i) Part 3(e), Credit Support Provider, in relation to Party.A, shall be amended to delete Stanley and insert "Not: Applicable 0) Part 3(i), Affiliate, shall be amended to delete the following provision, "but excludes Stanley Derivative Products Inc." (k) ThenewSection 3(e) which is added in Part 4(b)(Iv), shall be amended inits entirety to read as follows: "(e) Eligible Contract Participant. Each party represents to the other party on and as of thel date hereaf and on each date on which a Transaction is entered into between them that such parVb an "eligible contract participant' within the meaning of the Commodity Exchange Act." (1) The now Section 30) which is added in Part 4(bxlv), shall be amended to add the phrase case of a Government Entity) immediate after each of "(iv)", and "(v)". (m) Part 4(i) , Fxport of Defaults, shall be deleted in its entirety and in lieu thereof, the provision shall be inserted. ,,(i) Consent to Recording. Each party (I) consents to the recording of the telephone conver trading and marketing andfor other personnel of the parties and their Affiliates in connection Agreement or any potential Transaction (ii) agrees to obtain any necessary consent of and give such recording to such personnel of it and its Affiliates; and (III) agrees that recordings may be sul evidence in any Proceedings relating to this Agreement" ; and restated to read as City of Vernon Electric the Bank of Now York the I s of this s of d in I I (o) All references to Exhibits A -I, A-2 and A-3 shall be deleted and in lieu thereof "Exhibit A"Ishall be in the form attached hereto. i (p) All references to Exhibit B shall be deleted.. j 3. The following amendments and modifications are made to the Morgan Stanley CSA: j i (a) The Valuation Percentage set forth in Paragraph 13(b)(iixB) are deleted and replaced with the following:: i Not more than one year 97% More than Iyear but not more than10 years 95% More than 10 years 90% (b) Paragraph 13(b)(iv)(B)(ii) is amended to delete (aa), bb) and (cc) in their entirety and restate the first paragraph of (ii) to read as follows: and "(ii) with respect to Party B, at any time the amount specified in the table below under the relevant heading opposite whatever is the lower of the unenhanced ratings at the lime assigned by S& and Moody's to any Series of the City of Vernon Electric System Revenue Bonds, Series 2009," I and further amend the paragraph appearing. immediately after (ii) to add immediately "Potential Event of Default" the terms, "or Termination Event", or "Specified Condition". (c) "Valuation Date" set forth in Paragraph 13(cxii) is amended and restated in its entirety to reald as follows: "Valuation Date" means: Any Local Business Day." (d) "Valuation Time' "set forth in Paragraph 13(c)(iii) is amended and restated in its entirety to;readas follows: "Valuation Time" means: the close of business on the Local Business Day befO)e the Valuation Date or date of calculation, as applicable; provided that the calculations of Valli g and Exposure will be made as of approximately the same time on the same date." I (e) Paragraph 13(g)(i)(B) is amended to add the following language immediately after the end If the. first sentence, If Party A transfers Cash to a jurisdiction outside the US to earn interest onlsuch Cash, it will not be in violation of this provision because the parties acknowledge that this would be an exercise of Party A's rights under Paragraph 6(c). (f) Paragraph 13(h)(ii) shall be amended and restated in it is entirety to read as follows:, "Transfer of Interest Amount. The Transfer of the Interest Amount will be made on the first Local Business Day of each calendar month." i N1359778N (g) Paragraph 13(k) is amended to change the Party A notice address to: Party A: Deutsche Bank AG 60 Well Street New York, NY 10005 Attention: Collateral Management Telephone No.: (212) 250-6200 Fax No.: (212) 797-5922 (h) Paragraph 13(l) is amended to change the Party A Address for Transfers to: Party A: Cash Settlements: The Bank of New York ABA M: 021-000.018 Account If: 8900603658 Account name: Deutsche Bank AG NY CM Further credit: Account Number (12 digit acct N) Account Name: For Eligible Collateral: Fed Eligible Settlements: Bk of NYC/Cusd604000 Acct: Deutsche Bank AG CMV Group N1359778N Please attach Exhibit C N 1359778N SCHEDULE to Amended and Restated Confumation, dated as of Apr1127, 2009, between Morgan Stanley Capital Services Inc. and City of Vernon FROM (and Including) Effective Date I-Apr-2018 I-Apr-2019 I-Apr-2020 1-Apr-2021 I-Apr-2022 I-Apr-2023 I-Apr-2024 1-Apr-2025 1-Apr-2026 1-Apr-2027 I-Apr-2028 USAcsve 15948467.7 MSCS Ref. No. AUCTM TO (but excluding) I-Apr-2018 1-Apr-2019 1-Apr-2020 1-Apr-2021 I-Apr-2022 I -Apr-2023 I-Apr-2024 I-Apr-2025 I -Apr-2026 I-Apr-2027 . I-Apr-2028 Termination Dale AMOUNT 62,350,000 54,750,000 46,850,000 38,650,000 30,125,000 21,275,000 12,100.000 2,575,000 Please attach Exhibit D N1359779N i I i Morgan Stanley Municipal Capital Markets Date: December 2, 2004, as amended and EXECUTION COPY restated as of March 16, 2006 and April 27, 2009 i To: City of Vernon From: Morgan Stanley Capital Services Inc. I Attn: Eric T. Fresch, City Administrator Contact: NY Deriv Client Services Fax: 323-826-1439 Fax: 646-202.9134 Tel: 323-583-88I1,exl175 Tel: 212-761-2996 E-mail. Munlconfirms Inamoraamtantev-cal Re: Interest Rate Swap MSCS-Ref No. AUCTM THIS AMENDED AND RESTATED CONFIRMATION SUPERSEDES ANY CONFIRMATION OF THIS TRANSACTION, INCLUDING AS AMENDED AND RESTATED MARCH 16, 2006. THE CHANGES TO THE TRANSACTION CONTEMPLATED BY THIS AM AND RESTATED CONFIRMATION SHALL BE EFFECTIVE AS OF APRIL 27, 2009, AS The purpose of this letter agreement is 10- conrum the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the "Transaction"). This letter agre constitutes a "Confirmation" es referred to in the ISDA Master Agreement below. The definitions and provisions contained in the 2000 ISDA Definitions and the 1992 ISDA I Municipal Counterpart Definitions (each as published by the International Swaps and Derivatives Associal Inc.) (the "DeMltions") are incorporated Into this Amended and Restated Confirmation, In the event of inconsistency between the Definitions: and this Amended and Restated Confirmation, this Amended and Restm Confmation will govem. 1. This Amended and Restated Confirmation supplements, forms pan of, and is subject the ISDA Master Agreement dated as of December 2, 2004, as amended and supplemented from time to time ( "Agreement") between you and us. All provisions contained in the Agreement govern Ibis Amended a Restated Confirmation except as expressly modified below. 2. The termsof the particular Transaction to which this Amended and Confirmation relates are as follows: Party A: Morgan Stanley Capital Services Inc. Party D; City of Vernon Trade Date! December 2, 2004 Notional Amount: USD 83,575,000 amortizing according to Schedule I (with ; Adjustment); provided, that for any Calculation Period during which there is an amortization that does not occur on a Fixed Rste Payer Period End Date, a Floating Rare Payer Period End Dale br the Termination Date, the Fixed Amounts or Floating Amounts, gas the case may be, shall be calculated for each portion of such Calculation Period for which a different Notional Amount is in effect, based on the Notional Amount in effect during each such portion. USAcnve 15948467.7 Morgan Stanley MunICIDalCeoit Related Bonds: City of Vernon Electric Revenue Bonds, Series 2004 B Effective Date:. December 22, 2004 Amendment Effective Date: May 1, 2009 Termination Dale: April I, 2029 Fixed Amounts Fixed Rate Payer: Party B i Fixed Rate Payer Payment Dates: (i) From and including the Effective Date to but excluding Aprill I 2006, each April l and October 1, commencing on. April 1, 2* subject to adjustment in accordance with the Following Busines Day Convention. (ti) From and including April 1, 2006 to and including tht Termination Dale, the first calendar day of each monih commencing. on April 1, 2006, subject to adjustment in accordarict with the Following Business Day Convention. Fixed Rate Payer Period End Dates: (i) From and including the Effective Date to but excluding, Aprilll, 2006; each April I and October 1, commencing on April 1, 2095, • subject to adjustment in accordance with the Following Busies ss Day Convention. (it) From and including April 1, 2006 to and including tl e Termination .Date, die first calendar day of each, month, commencing on April 1, 2006, subject to adjustment in accordance with the Following Business Day Convention. Fixed Rate: I (i) From and including the Effective Dale to but excluding. April] 1, 2006 (subject to adjustment in accordance with the Following Business Day Convention), 3.572%. 1 (ii) From and including. April I, 2006 (subject to adjustmentiin accordance with the Following Business Day Convention) to and including the Termination Date, 3.542%. Fined Rate Day Count Fraction: 3O/360 j I Flostine Amounts 1: Floating Rate 1 Payer: Party A - I Floating Rate 1 Payer Payment Dates: January 7, 2005 and thereafter each Friday up to and including the Amendment Effective Dale, subject to adjustment in accordance with the Following Business Day Convention. FloatingRate i Paye Period End Dates: y Jan t nary 7, 2005 and thereafter each Friday up to but excluding the Amendment Effective Date, subject to adjustment in accordarce with the Following Business Day Convention. Floating Rate I Option: 62.87%of USD-LIBOR-BBA, provided that the words "on the day that is two London Banking Days preceding that Reset Date" i usacuve 15948467.7 -2- Morgan Stanley Municipal Capital Markets I� contained in the defuitions of USD-LIBOR-BBA and USD. LIBOR -Reference Banks in Section 7.1 of the Definitions shalli be replaced with "on the first day preceding that Floating Rate R l t Date that is both a London Banking Day and a Business Day". 7 Floating Rate 1 Designated Maturity: One month Floating Rate I Spread: 0.1190% (11.90 basis points) Floating Rate i Reset Dates: The Effective Date and thereafter each Friday up to and including the Friday preceding the Amendment Effective Date, subjeci to adjustment In accordance with the Following Business ony Convention. Floatine Amounts If: Floating Rate 11 Payer. Party A Floating Rate 11 Payer Payment Detest June 1, 2009 and thereafter, the first calendar day of s month, up to and including the Termination Date, sublet adjustment inaccordance with the Following Business Convention. Floating Rate It Payer Period End Dates: The Amendment Effective Date and thereafter, the i calendar day of each month up to and Including Termination Date, subject to adjustment In accordance t the Following Business Day Convention. Floating Rate 11 Option: 62.97% of USD-LIBOR-BBA, provided that the words "on day that is two London Banking Days preceding that R Data^ contained In the definitions of USD-LIBOR-BBA USD-LIBOR-Reference Banks In Section 7.1 of the Deft ld shall be replaced with "on the first day preceding that Float Rate Reset Date that Is both a London Banking Day an Business Day". Floating Rate 11 Designated Maturity: One month Floating Rate If Spreads 0.1190% (11.90 basis points) Floating Rate 11 Reset Dates: The Amendment Effective Date and thereafter monthly, on first calendar day of each month, up to and Including Termination Date,subject to adjustment in accordance w the Following Business Day Convention. Floating Rate Day Count Fraction: Actual/360 Compounding: Inapplicable Method of Averaging: Inapplicable Business Days: New York Calculation Agent: Party A USAcave 15948467.7 .3- Morgan Stanley Municipal Capit 3. Account Details. Payments to Parry A: Citibank, New York ABA No. 021 000 089 For: Morgan Stanley Capital Services Inc. Account No. 4072 4601 Payments to Party B: The Bank of New York ABA No. 021 000 018 Credit: The Bank of New York Acct No. GLAI 1I-565 Reference: Custody Escrow account TASN800452 Party A Operations Contact: Municipal Operations Tel: 410-534-1436 Fax: 410-522-5487 E-mail: MtmiOpenUons@MorgmStanley.com Party B Operations Contacts: Eric T. Fresch, City Administrator Tel: 323.583-8811, ext. 175 Fax: 323.826.1439 A. Craig Underwood, President BondLogistix, LLC ' Tel: 213-612.2463 Fax: 213-612.2499 E-mail: cunderwood@bondlogislix.com I i Markets 4. Optional Early Termination. Party 8 has the option to terminate this TransactiondIIn� whole or in part, (provided that no Event of Default, Potential Event of Default or Termination Event has occuff ) by providing. (i) at least five (5) Business Days' prior written notice to Party A of its election to terminate this Transaction and (h) evidence reasonably satisfactory to Party A that any andall amounts owed to -Party Alin connection with such early termination shall be paid on the due date thereof (the effective date of such optional early termination, hereinafter the "Optional Early Termination Date'); provided, however, that the option to designate an Optional Early Termination Date under this Paragraph 4 shall not prevent either party from designating an Eakly Termination Dale in accordance with the provisions of Section 6 of this Agreement (as a result of the occurrence! of an Event of Default or Termination Event), to be effective on any date prior to the Optional Early Termination Date designated hereunder. Such. termination shall constitute an Additional Termination Event under Section 6(e) of the Agreement with Party B as the sole Affected Party, and this Transaction as the sole Affected Transaction. In fhe event of such termination, the Calculation Agent shall determine the amount owed in connection with such termination using its commercially reasonable judgment. If Party B disputes such calculation, the Calculation Agent shall seek bids from Reference Market -makers consistent with the provisions of Section 6 of the Agreement.. j 5. Notwithstanding anything contained herein or in the Agreement to the contrary, the parties shall have no rights or obligations with respect to this Transaction, and any representations or agreementsol the parties contained herein (other than the representation and agreement by Party B in the following sentence) and in the Agreement shall not be deemed to be made until the Related Bonds have been duly issued by Party B and, in the event thahthe Related Bonds are not issued on or prior to the Effective Date, this Transaction shall automatically terminate and shall be of no further force or effect and The parties shall have no further obligations hereunder. Party B represents and warrants that it intends and expects to issue the Related Bonds, agrees to use its best efforts to issue the Related Bonds on or before the Effective Date and acknowledges that Party A is entering into this Transaction in reliance upon the foregoing. USActive 15948467.1 4- Morgan Stanle. Markets Please confirm that the foregoing correctly sets forth the terms of our agreement MSCS Ref, No AUCTM by executing this Amended and Restated Confirmation and returning it to us promptly. We are delighted to have entered into this Transaction with you and look forward to serving yot further in the future. Bost regards, MORGAN STANLEY CAPITAL SERVICES INC. By: Nam �• ePd...o Tite: '—� ---"-� Authorized Signatory ACKNOWLEDGED AND AGREED as of the, date first written: CITY OF VERNON By: Name: Title: USActi" 15948467.7 -5. Morgan Stan le, Please confirm that the foregoing correctly sets forth the terms of our agreement MSCS Ref, AUCTM by executing this Amended and Restated Confirmation and returning it to us promptly, We are delighted to have entered into this Transaction with you and look forward to serving further in the future. Best regards, MORGAN STANLEY CAPITAL SERVICES INC. By: Name: Title: ACKNOWLEDGED AND AGREED as of the date first written: CITY OF VERNON USAcBve 15948487.7 _S_ SCHEDULEI to Amended and Restated Confirmation, doted u of April 27, 2009, between Morgan Stanley Capital Services Inc. and City of Vernon FROM (and Including) Effective Dale 1-Apr-2018 1-Apr-2019 I-Apr-2020 1-Apr-2021 1-Apr-2022 1-Apr-2023 I-Apr-2024 1-Apr-2025 1-Apr-2026 I-Apr-2027 -Apr-2028. USAoeve 18948467.7 MSCS ReE No. AUCTM TO (but excluding) I-Apr-2018 _ 1-Apr-2019 I-Apr-2020 I-Apr-2021 1-Apr-2022 1-Apr-2023 I-Apr-2024 I-Apr-2025 I-Apr-2026 i-Apr-2027 I-Apr-2028 Termination Date NOTIONAL AMOUNT 69,675,000 62,350,000 54,750,000 46,850,000 38,650,000 30,125,000 21.275,000 12,100,000 2,575.000 %)It �� n, 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 September 23, 2011 Morgan Stanley Capital Services LLC Orrick, Herrington & Sutcliffe LLP New York, New York 777 South Figueroa Street, Suite 3200 Los Angeles, CA 90017-5855 Ladies and Gentlemen: I am the Interim City Attorney of the City of Vernon (the "City") and as such I have served as counsel to the City in connection with the issuance by the City of its Novation Confirmation of new transaction ("Novation"). As such counsel, I have examined and am familiar with (i) those documents relating to the existence, organization and operation of the City; (ii) all necessary documentation of the City relating to the authorization, execution and delivery of (a) Resolution No. 2011-161, adopted by the City Council of the City on September 22, 2011, and (b) the Novation Transaction among the City, Morgan Stanley Capital Services LLC, and Deutsche Bank AG New York, collectively referred to herein as the "Legal Documents." I am of the opinion that: 1. The City is a chartered city, duly created, organized and existing under the Constitution and laws of the State of California and its charter and duly qualified to furnish municipal services within the City. 2. The Resolution was duly adopted at a meeting of the City Council of the City, which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout and the Resolution is in full force and effect and has not been amended, modified or supplemented. 3. The City has the authority and right to execute, deliver and perform the Legal Documents, and the City has complied with the provisions of applicable law in all matters relating to the transactions contemplated by the Legal Documents. 4. No approval, consent or authorization of any other governmental or public agency, authority or person is required for the execution and delivery by the City of the Legal Documents or the performance by the City of its obligations thereunder or the execution and delivery, on the part of the City, of the Legal Documents. E�xcfusivefy Industfiaf City Attorney Opinion September 23, 2011 Page 2 The execution and delivery of the Legal Documents by the City and compliance with the provisions thereof will not conflict with or constitute a breach of or default under any instrument relating to the organization, existence or operation of the City, or commitment, agreement or other instrument to which the City is a party or by which it or its property is bound or affected, or any ruling, regulation, ordinance, judgment, order or decree to which the City or any of its officers in their respective capacities as such are subject or any provision of the laws of the State of California relating to the City and its affairs. 6. There is no action, suit, proceeding, inquiry or investigation at law or in equity, or before any court, public board or body, pending or, to the best of my knowledge, threatened against or affecting the City or any entity affiliated with the City or any of its officers in their respective capacities as such (nor to the best of my knowledge, is there any basis therefor) that questions the powers of the City referred to in paragraph 3 above or in connection with the transactions contemplated by the Legal Documents, or the validity of the proceedings taken by the City in connection with the authorization, execution or delivery of the Legal Documents, or wherein any unfavorable decision, ruling or finding would adversely affect the transactions contemplated by any of the Legal Documents, or that, in any way, would adversely affect the validity or enforceability of any of the Legal Documents or, in any material respect, the ability of the City to perform its obligations under any of the Legal Documents. Based on my participation in the preparation of the Legal Documents, I advise you that no, facts came to my attention which caused me to believe that any expression of opinion contain any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Respectfully submitted, lvii�cliel on gomery Interim City Attorney City of Vernon, 4305 Santa Fe Avenue, Vernon, California 90058 -Telephone (323) 583-8811 ORRICK September 23, 2011 Deutsche Bank AG, New York Branch New York, New York Morgan Stanley Capital Services LLC New York, New York ORRICK, HERRINGTON 6 SUTCLIFFE LLe 777 SOUTH FIGUEROA STREET SUITE 3200 LOS ANGELES, CALIFORNIA 90017.5855 tel ♦1.213.629-2020 fax +1-213-622-2499 W W W.DRRICK.COM Re: Novation Confirmation Among the City of Vernon, Deutsche Bank AG, New York Branch and Morgan Stanley Capital Services LLC Ladies and Gentlemen: We acted as special counsel to the City of Vernon, California (the "City") in connection with the Novation Confirmation (the "Novation Confirmation"), dated September 23, 2011, among the City, Deutsche Bank AG, New York Branch ("Deutsche Bank") and Morgan Stanley Capital Services LLC (formerly known as Morgan Stanley Capital Services Inc.) ("Morgan Stanley"). This letter is being delivered pursuant to Section 6(a)(i) of the Novation Confirmation. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto pursuant to the Novation Confirmation. Pursuant to the Novation Confirmation, Morgan Stanley is transferring to Deutsche Bank all of its rights, liabilities, duties and obligations, as of the effective date of the Novation Confirmation, with respect to an interest rate swap transaction (the "Series B Transaction") entered into between Morgan Stanley and the City the terms of which are described in a Confirmation, dated December 2, 2004, referring to Interest Rate Swap MSCS Ref. No. AUCTM (as amended and restated, the "2004 Swap Agreement'). The Novation Confirmation includes the terms and conditions of the ISDA Master Agreement, including the Schedule thereto and the Credit Support Annex that forms a part of such Schedule, between the City and Deutsche Bank (the "Transferee ISDA Master Agreement'). The Transferee ISDA Master Agreement evidences the rights, liabilities, duties and obligations of the City and Deutsche Bank with respect to the Series B Transaction under the 2004 Swap Agreement resulting from the transfer of Morgan Stanley's rights, liabilities, duties and obligations to Deutsche Bank pursuant to the Novation Confirmation, with the modifications thereto specified in the Novation Confirmation and, except with respect to such modifications, a continuation of the 2004 Swap Agreement with respect to the Series B Transaction replacing 01 IS WtsF:261343909.4 ORRICK Deutsche Bank AG, New York Branch Morgan Stanley Capital Services LLC September 23, 2011 Page 2 Morgan Stanley with Deutsche Bank as the counterparty to the City, and does not constitute a new interest rate swap transaction by the City. The City entered into the Series B Transaction in connection with the issuance of the City's Electric System Revenue Bonds, 2004 Series B. In connection with this opinion, we have reviewed the Novation Confirmation, resolutions of the City, certificates of the City, opinions of counsel to the City 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 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. Our engagement with respect to the Novation Confirmation has concluded with its delivery by the City and we disclaim any obligation to update this letter. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or copies) and the due and legal execution and delivery thereof by, and validity against, any parties other than the City. We have assumed without undertaking to verify the accuracy of the factual matters represented, warranted or certified in the documents, and of the legal conclusions contained in the opinions, referred to in the third paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements contained in the 2004 Swap Agreement and the Novation Confirmation. We call attention to the fact that the rights and obligations under the Novation Confirmation, 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 municipal corporations in the State of California. We express no opinion with respect to any indemnification, contribution, penalty, choice of law, choice of forum, choice of venue, waiver or severability provisions contained in the Novation Confirmation, nor do we express any opinion with respect to the state or quality of title to or interest in any of the assets described in or as subject to the lien of the Novation Confirmation or the accuracy or sufficiency of the description contained therein of, or the remedies available to enforce liens on, any such assets. The opinion expressed herein is limited to matters of the laws of the State of California, the State of New York and federal laws and does not cover any other laws. OHS WFs .261343909.4 O R R I C K Deutsche Bank AG, New York Branch Morgan Stanley Capital Services LLC September 23, 2011 Page 3 Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the opinion that the Novation Confirmation is a valid and binding agreement of the City. This letter is furnished by us as special counsel to the City in connection with the Novation Confirmation. No attorney client relationship has existed or exists between our firm and yourselves in connection with the Novation Confirmation or by reason of this letter. This letter is delivered to you solely for your benefit in connection with the Novation Confirmation and is not to be relied upon by you for any other purpose or by any other person. Very truly yours,74 ORRICK, HERRINGTON/& SUTCLIFFE LLP OHS WmT:261343909.4 CADWALADER City of Vernon 4305 Santa Fe Vernon, California 90058 Ladies and Gentlemew Cadwallader, Wickersham & Taft LLP One World Financial Center, New York, NY 10261 Tel +1 212 504 6000 Fax +1 212 504 6666 www.cadwaladeccom New York London Charlotte Washington Houston Beijing Hong Kong Brussels October 24, 2011 We have acted as special counsel to Morgan Stanley Capital Services LLC ("MSCS") in connection with the Novation Confirmation dated 'October 11, 2011 (the "Confirmation") among MSCS; Deutsche Bank AG, New York Branch and the City of Vernon, California (the "Counterparty"), We are rendering this opinion letter to you at the request of MSCS pursuant to Paragraph 6(b)(1) ofthe Confirmation. In rendering the opinion set forth below, we haveexamined and relied upon. the originals, copies or specimens, certified or otherwise identified to our satisfaction, of the Confirmation and such certificates, corporate and public records, agreements and instruments and other documents, including, among other things, the documents delivered on the date hereof, as we have deemed appropriate as a basis: for the opinion expressed below, In such examination we have assumed the genuineness of all signatures; the authenticity of all documents, agreements and instruments submitted to us as originals; the conformity to original documents, agreements and instruments of all documents, agreements and instruments submitted to us as copies or specimens, the authenticity of the originals of :such documents, agreements and instruments submitted to us as copies or specimens, the accuracy of the matters set forth in the documents, agreements and instruments we reviewed, and that such documents, agreements and instruments evidence the entire understanding between the parties thereto and have not been amended, modified or supplemented in any manner material to the opinions expressed herein. As to matters of fact relevant to the opinion expressed herein, we have relied upon, and assumed the accuracy of, the representations and warranties contained in the Confirmation and we have relied upon certificates and oral or written statements and other information obtained from MSCS, the other parties to the transaction referenced herein, and public officials. Except as expressly set forth herein, we have not undertaken any independent investigation (including, without limitation, conducting any review, search or investigation of any public files, records or dockets) to determine the existence or absence of the facts that are material to our opinion, and no inference as to our knowledge concerning such facts should be drawn from our reliance on the representations of MSCS and others in connection with the preparation and delivery of this letter. USAQive 24261865.2 We have also assumed (x) the legal capacity of all natural persons and (y) (except to the extent expressly opined on herein) that the Confirmation has been duly authorized, executed and delivered by all parties thereto, that all such parties are validly existing and in good standing under the laws of their respective jurisdictions of organization, that all such parties had the power and legal right to execute and deliver the, Confirmation, and that the Confirmation constitutes the legal, valid and binding obligation of such parties, enforceable against such parties in accordance with its terms. We have further assumed that the Confirmation we have reviewed evidences the entire agreement between the parties, and has not been amended, modified or supplemented in writing or otherwise by any other agreement or understanding of the parties or by waiver of any material provision thereof. We have also assumed that the Confirmation is in consideration of or relates to an obligation arising out of a transaction covering in the aggregate not less than U.S. $1,000,000. We express no opinion conceming the laws of any jurisdiction other than the laws of the State of New York and, .to the extent expressly referred to in this letter, the federal laws of the United States of America. We express no opinion herein as to the effect of the Wall Street. Transparency and Accountability Act of 2010 on the legality, validity, binding effect, or enforceability of the Confirmation Based upon and subject to the foregoing, we are of the opinion that the Confirmation constitutes a legal; valid and binding agreement of MSCS and is enforceable against MSCS in accordance with its terms, (i) subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership or other laws relating to or affecting creditors' rights generally, general principles of. equity (regardless of whether enforcement is sought in a proceeding at law or in equity), and to the discretion of a court or other authority or body to invalidate or decline to enforce any right, remedy or provision of She Confirmation (including without limitation the termination payment provisions thereof) determined by it to be a penalty, and (ii) except that the enforcement of rights with respect to indemnification and contribution -obligations, provisions relating, to severability, provisions. purporting to waive or limit rights to trial by jury, oral amendments to written agreements or rights of set-off, provisions relating to submission to jurisdiction, venue or service of process, or provisions purporting to prohibit; restrict or require the consent of the other party for the transfer of, or the creation, attachment or perfection of a security interest in, the Confirmation or any interest therein, may be limited by applicable law or considerations of public policy. We are furnishing this letter to you solely for your benefit in connection with the Confirmation. Without our prior written consent, this letter is not to be relied upon, used, circulated, quoted or otherwise referred to by, or assigned to, any other person (including any person that seeks to assert your rights in respect of this letter (other than your successor in interest by means of merger, consolidation, transfer of a business or other similar transaction)) or for any other purpose. In addition, we disclaim any obligation to update this letter for changes in fact or law, or otherwise. USAotive 24261855.2 -2- Very truly yours, walade�r, wvck.er5vvAw% & TaTk L-l'c' USActive 24261855.2 .3_ 1221 Awnuc of the Anwrim New York, NY 10020 Morgan Stanley October 24, 2011 City of Vernon 4305 Santa Fe Vernon; California 90058 Ladies and Gentlemen; As Counsel to Morgan Stanley Capital zgervices LLC; a Delaware limited liability company ("Morgan Stanley'), I advise you as follows in connection with the Novation Confirmation dated October 11, 2011 (the "Confirmation") between Morgan Stanley, Deutsche Bank. A;G, New York Branch and ttte City'of Vernon,. California, This letter is:leitrg delivered pursuant fo Section 6(b)(i) of the Novation Confirmation. In arriving at: the opinions expressed below, 1 have, or someone under my supervision has, examined an original or copy of the. Confirmation, executed on behalf of Morgan Stanley. I have, or someone under my supervision has, also reviewed such records of Morgan Stanley, certificates of public officials, officers of Morgan Stanley and other persons; and such other documents, agreements and .instrurn s,.and such matters of law, as I'have deemed necessary as a basis: for the opinions expressed in this letter. In such review, l have relied as to -certain matters on information obtained from public officials, officers of Morgan Stanley and other sources believed by me to be. reliable„ and I have assumed the genuineness of all signatures, the authenticity of all documents submitted to me as originals; the conformity to original documents of all documents submitted to me as certified, photostatic or reproduced copies and the authenticity of the originals of all such latter documents. Based upon the aforementioned examination and review; and subject to the foregoing and following. comments and qualifications, it is my opinion that: (1) Morgan Stanley is an existing limited liability company in good standing under the laws of the State of Delaware. (2) The Confirmation has been duly authorized, executed and delivered by Morgan Stanley. (3) The execution, delivery and performance of the Confirmation by Morgan Stanley does not contravene any provision of the Certificate of Formation or the Limited Liability Company Agreement of Morgan Stanley. USAdve 24261703.2 In rendering the foregoing opinions, I am not addressing any matters relating to any specific transactions entered into pursuant to the Confirmation. Furthermore, I express no opinion as to the validity and enforceability of any provision of the Confirmation. In addition, I express no opinions as to any violation of, or any consent or approval required under, any law or regulation which may be applicable to Morgan Stanley as a result of its execution ;delivery or performance of the Confirmation. Any foregoing opinion relating to performance by Morgan Stanley of its obligations is qualified by and subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State. of New York and the Limited liability Company Law of the State of Delaware, and I am expressing no opinion as to the effect of the laws of any other jurisdiction. I am furnishing this opinion to you solely for your benefit in connection with the above - referenced. Confirmation. Except for your own internal use, this opinion is not to be used or circulated,. quoted or otherwise referred to, or relied upon without my express written consent. I do not undertake -to update, revise or supplement. any opinion or statement herein for any reason whatsoever. Very truly yours;. amen J. anella: G Coull -2- USActive 24261703.2 City of Vernon 4305 Santa Fe Vernon, California 40058 Deutsche Bank IZI Deutsche Bank AG Legal Department New York. Branch 60 Wall Street New York, New York 10005 Kathleen A. Yohe Telelon +212-250-5022 Kethleenyohe0db.com October 11, 2011 Re: Novation Confirmation; dated as. of October 11, 2011, among City of Vernon, Deutsebe Bank AG, New York Branch and.Morgan Stanley Capital Services line. Ladies and.Gentlemen: I am Director and Counsel of.Deutsche'Bank AG -(the "Bank");New York Branch (tlie "Branch..") AM so acted in .connection with the Novation Coftfirtrtation ;entered into among the City of Vernon ("Counterparty"), the. Bank, acting, through the Branch and Morgan "Stanley Capital. Setviees Inc. ("MoVil Will'py") (tlie"NoVatforr Cimfinn9tion"j,which inEhldes (i) the terms of the ISDA Master Agreement,:the Schedule (as defined in the.ISDA+Master Agreement) And the Credit Support,Aniaex sttpitleineuting and:formih a partof fhe ISDA Master Agre'enletlt between Counteipaity and tfie Branch and'(ii) sets :forth the terms of the New 'ri-ansaction agreed between Counterparty and the Branch (collectively, the Novation Confirmation, the ISDA Master. Agreement, the Schedule and. the Credit Support Annex referred to herein as the "Agreement'): Capitalized terms used herein and not otherwise defined shall have the meaning given to them in the Novation. Conflanation. In -connection with my opinion expressed below, I have examined originals or copies certified to my'satisfaction of such agreements, documents, eenificates-and other'statements of government officials and corporate officers of the Bank and such other papers as I liave deemed relevant and necessary as a basis for such opinion. As to any facts material to my opinion, I have relied, to the extent that I deem such reliance proper, upon certificates of public officials and of officers ofthe Bank. In rendering such opinion, 1 have assumed the genuineness of all signatures of Counterparty and Morgan Stanley, the authenticity of all documents submitted to us as originals and the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies. in connection with my opinion expressed in paragraph (iii) below, I have assumed that the Agreement constitutes the valid, binding and enforceable obligations of Cotmterparty, and Morgan Stanley. Except as expressly stated below, I express no opinion as to Section I 1 of the Master Agreement and part 3(f) of the Schedule to the ISDA Master Agreement or on the creation, perfection or priority of any security interest, pledge, lien, hypothecation or similar interest. Based upon the foregoing, it is my opinion that: (i) The Bank is duly licensed by the Superintendent of Banks ofihe State of New York to maintain the Branch and to carry on a banking business through the Branch in accordance with the provisions of Article V of the Banking Law of the State of New York and has full power and authority to so engage in such business in the State of New York. The Branch is a branch of Deutsche. Bank AG, a corporation duly organized and validly existing under the laws of the Federal Republic of Germany. (ii) The Bank, acting through the Branch, has all requisite power and authority under the federal laws of the United States and the laws of the State of New York to execute and deliver, and to perform its obligations under, the Agreement; and the Agreement has been duly authorized, executed and delivered by the Bank, acting through the Branch. (iii) The -Agreement constitutes the valid and binding obligations of the Bank; and is enforceable against the Bank in accordance with its ferns, under the laws of the State of New York, except.as enforcement thereof may be limited by applicable bankruptcy; insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general equitable Principles (regardless of whether the issue -.of enforceability is considered in a proceeding in equity or at law); (iv) No. consent;, approval, authorization, order, registration or qualification of or with any court or any regulatory authority or other governmental ageney;orbody in the United States it. required in order to constitute the obligations of the Bank under the.Agreeiients its valid, bidding and enforceable obligations. l am admitted to. the Bar of the State of New York. I express no opinion as to the • laws of any jurisdiction other than (a) the.laws ottlie'State of N w York (b)United $rates Federal laws.and (c) the: laws of the Federal Republic of Germany solely in reliance on consultations with, opinions of and information: from the :Central legal bepartment of Deutsche Batik. I am furnishing this opinion to you solely for.your bonefit and this opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose without my prior written approval in each instance; Very truly yours, DEUTSCHE BANK. AG, NEW YORK BRANCH By'- 4j -'�u - -Name. Kath een A. Yohe Title: Director and Counsel