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Resolution No. 2012-240RESOLUTION NO 2012-240 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AND AUTHORIZING THE EXECUTION OF AN ENGAGEMENT LETTER AGREEMENT BY AND BETWEEN THE CITY OF VERNON AND LATHAM & WATKINS, LLP FOR LEGAL SERVICES REGARDING THE WIND ENERGY PROJECT WHEREAS, the City of Vernon ("City") is a chartered municipal corporation of the State of California that owns and operates a system for the generation, purchase, transmission, distribution and sale of electric capacity and energy; and WHEREAS, the City of Vernon (the "City") desires to retain the services of a law firm to provide legal services in connection with the wind energy project in Kern County (the "Services"); and WHEREAS, Latham & Watkins LLP ("Latham") is qualified and capable of providing the Services; and WHEREAS, by memo dated December 12, 2012, the City Administrator and the Director of Light & Power have recommended the City enter into an Engagement Letter Agreement setting forth the terms and conditions under which Latham will provide the Services (the "Agreement") and WHEREAS,. the City Council of the City of Vernon has determined that, pursuant to the provisions of Section 2.27(a) of the Vernon City Code, it is in the public interest and necessity to enter into an agreement with Latham; and WHERAS, pursuant to the newly adopted Competitive Bidding and Purchasing Ordinance, competitive bidding would not be and is not required (professional services exemption), and the City Council would grant and is granting an exemption from competitive selection on the basis that it is in the best interests of the City of Vernon to make direct award of this contract for the following reasons: this is a restructuring of a long term relationship, and the unique expertise of specific members of the firm of Latham &Watkins is required to assist in bringing essential business transactions of the City to a successful closure. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the above recitals are true and correct. SECTION 2: The City Council of the City of Vernon hereby approves the Engagement Letter (the "Agreement") with Latham & Watkins LLP, in substantially the same form as the copy which is attached hereto as Exhibit A. SECTION 3: The City Council of the City of Vernon hereby authorizes the Mayor or Mayor Pro Tem to execute the Agreement, for andonbehalf of the City; and the Interim City Clerk, or Deputy City Clerk, is hereby authorized to attest thereto. SECTION 4: The City Council of the City of Vernon hereby instructs the City Administrator, or his designee, to take whatever actions are deemed necessary or desirable for the purpose of implementing and carrying out the purposes of this Resolution and the transactions herein approved or authorized, including but not limited to, any non -substantive changes to the Agreement attached herein. SECTION 5: The City Council of the City of Vernon hereby directs the Interim City Clerk, or the Interim City Clerk's designee, to send one executed Agreement to Latham & Watkins LLP. SECTION 6: The City Council of the City of Vernon finds that this action is exempt under the California Environmental Quality _2_ Act (CEQA), in accordance with Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. SECTION 7: The Interim City Clerk of the City of Vernon shall certify to the passage, approval and adoption of this resolution, and the Interim City Clerk of the City of Vernon shall cause.this resolution and the Interim City Clerk's certification to be entered in the File of Resolutions of the Council of this City. APPROVED AND ADOPTED this 18th day of December, 2012. - 1 Name: William J. Davis Title : Mayor ATT T.: Dana :Reed, Interim City Clerk _3_ STATE_OF CALIFORNIA ) ss COUNTY OF LOS ANGELES ) I, Dana Reed, Interim City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 2012-240, was duly passed, approved and adopted by the City Council of the City of Vernon at a regular meeting of the City Council duly held on Tuesday, December 18, 2012, and thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of Vernon. Executed this day of December, 2012, at Vernon, California. 7 Da a Reed, Interim City Clerk (SEAL) - 4 - David B. Rogers Partner Direct Dial: +1.213.891.8236 David.Rogers@LW.com LATHAM&WATKINSLLP December 4, 2012 355 South Grand Avenue Los Angeles, California 90071-1560 Tel: +1.213.485.1234 Fax: +1.213.891.8763 www.lw.com FIRM / AFFILIATE OFFICES Abu Dhabi' Moscow Barcelona Munich Beijing New Jersey Boston New York Brussels Orange County Chicago Paris Doha Riyadh Dubai Rome Frankfurt San Diego Hamburg San Francisco Hong Kong Shanghai Houston Silicon Valley City of Vernon London Singapore Los Angeles Tokyo 4305 Santa Fe Avenue Madrid Washington, D.C. Vernon, CA 90058 Milan Attn: Nicholas George Rodriguez City Attorney File No. 037084-0000 Re: Engagement Letter —Kern County Land/ Wind Project Dear Nick: We are pleased to continue to serve the City of Vernon and to reflect some revised arrangements in this engagement letter. 1. Leeal Services: Term of Enaaaement. This engagement letter covers matters relating to the City's land in Kern County, California or the development of a wind energy project thereon. Our services will include (a) assistance in permitting and entitlements, (b) strategy relating to joint venturing the project, arranging offtakers, and financing or selling the project. This letter will apply to such services, unless superseded by another written agreement. In each case, before we can agree to provide additional services (such as services for Client across from a new party), we will need to perform a conflicts check and otherwise confirm our ability to provide these services. Our representation is limited to the specific services that you request and that we have agreed to undertake. The term of this engagement (including our attorney -client relationship with you) shall be three years unless renewed by a mutually -executed new engagement letter or written extension of the term of this letter; provided, however, that (a) the City may by written notice to us terminate this engagement at any time for any reason or no reason, (b) we may by written notice to City but subject to applicable ethical limitations terminate this engagement at any time and (c) our relationship with you will be deemed concluded when we have completed our agreed -upon services which presumptively shall have occurred at any time when we have performed no work on your behalf for six consecutive months. For the avoidance of doubt, your obligations for fees and charges accrued prior to termination shall survive termination of this engagement. 2. Identity of the Client. Our client in this matter will be solely the City of Vernon, including where applicable, its Light and Power Department (collectively, "Client"). We do not represent and will not be LA\2949234.2 December 4, 2012 Page 2 LATHAM&WATKINS«P deemed to have an attorney -client relationship with any of Client's current or future parents, subsidiaries, shareholders, members, partners, employees, directors, venturers or other affiliates or constituents solely on account of our representation of Client in this matter or any future matters. 3. Roles of Attorney and Client. Our responsibilities under this agreement are to provide legal counsel and assistance to you in accordance with this letter, and to provide statements to you that clearly state the basis for our fees and charges. We will not disclose any confidential information of yours to any other client, even where that information might have some bearing on their interests. Likewise, we will not disclose the confidences of any other client to you, even where that information might have some bearing on your interests, and you agree that we are under no obligation to do so. You also agree to keep us informed of developments related to this representation and to pay our statements in 'a timely manner. To allow us to conduct a conflicts check, you represent that you have identified to us all persons and entities that are or may become involved in this matter, including all such persons or entities that are affiliated with you. You also agree to notify us if you become aware of any other persons or entities that are or may become involved in this matter. During the course of this engagement, we may express opinions or beliefs to you about the effectiveness of various courses of action or about the results that might be anticipated. Such statements are expressions of opinion only, and should not be construed as promises or guaranties. Please also be aware that Latham & Watkins LLP has internal ethics and professional responsibility counsel, who advise Latham attorneys regarding their ethical, professional and legal duties. From time to time, the attorneys working on your matter may consult these lawyers. You acknowledge that any such consultation is protected by Latham's own attorney - client privilege, and you waive any right to discovery of those communications. Should circumstances arise in which Latham & Watkins LLP faces a conflict of interest with respect to or by virtue of these communications, you agree to waive that conflict. You also agree that such communications are property of the firm and are not part of the Client File as defined in Section 4 of this letter. 4. Client Files and Retention. In the course of your representation, we shall maintain a file in which we may place correspondence, agreements, governmental filings, prospectuses, disclosures, pleadings, deposition transcripts, exhibits, physical evidence, expert reports, and other items reasonably necessary to your representation ("Client File'). The Client File shall be and remain your property. Upon completion of a specific project, your original Client File for that project shall be available to be taken by you. We will be entitled to make copies if we choose. You also agree at the conclusion of the project (whether or not you take possession of the Client File) to take possession of any and all original contracts, wills, stock certificates, and other such important documents that may be in the Client File and we shall have no further responsibility with regard to such documents. If you do not take possession of the Client File at the conclusion of the project, we will store such file for you for a period of seven years. If you do not take possession of the Client File during such seven-year storage period, you agree that we may dispose of it. You agree that the documents containing our attorney work product, mental impressions or notes and drafts of documents shall be and remain our property and shall not be considered part of your Client File. In addition, electronic documents such as e- LA\2949234.2 December 4, 2012 Page 3 LATHAM&WATKINS«P mail and documents prepared on our word processing system (but excluding printed copies thereof), and databases shall be, and remain our property and shall not be considered part of your Client File. You agree that we may enact and implement reasonable retention policies for such electronic documents and that our firm has discretion to delete such documents. 5. Conflicts of Interest. As relevant to the Light and Power Department or matters affecting the City as an operator of a utility, we inform you that our experience in the electric power industry arises from the fact that we represent many different companies and entities in the industry. Our clients include (a) investor -owned utilities (including Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E)), (b) non -utility power generation companies, (c) energy trading firms, (d) transmission owners, (e) investment banks, commercial banks and other providers of debt or equity capital, (f) non -utility affiliates of investor —owned utility companies (including affiliates of PG&E, SCE and SDG&E), (g) trade associations and (h) various other participants. As is the nature of the industry, depending on the particular issue, one individual client or one category of client may be aligned with the others or sharply at odds with the others. Accordingly, we expect that there could be substantial limitations imposed on matters we could undertake for you, particularly when such representation involves appearing as your counsel in proceedings. Without your consent, we will not represent any other party to the matter we undertake for you, nor any other matter substantially related to same. As with any other client and any other matter, you will have our complete loyalty with respect. to any such matter. We also note, however, that Latham & Watkins LLP is an international law firm with numerous attorneys and offices in many countries and. that we practice in many diverse areas of law. It is possible that during the time we are representing you, some of our current or future clients may ask us to represent them in matters in which you are involved as another party. Both our own prudent business conduct, and the interests of our other clients, call for us to seek to retain the ability to take unrelated matters for all of our clients. We thus ask you in connection with this engagement to consent in advance to our acceptance of future matters (including litigation matters) adverse to Client, provided that those matters are not substantially related to the work that we have done for you. By entering into this agreement, you consent to such adverse representations. Thus, for example, you agree that we would be able to take a new lawsuit or transactional matter for one of our current or future clients, adverse to Client so long as the adverse matter is not substantially related to the work we have done for you. This consent also includes being adverse to you in any bankruptcy, regulatory, administrative, legislative or rulemaking proceeding. In addition, by entering into this agreement you agree that if we represent you in a matter across from another person or entity, we may represent such person or entity on matters not substantially related to our work for you. We take very seriously our obligations to maintain the confidentiality of information we receive from all of our clients, including Client and any other clients covered by this consent. Accordingly, we will continue to maintain the confidences of both Client and our other clients. LA\2949234.2 December 4, 2012 Page 4 LATHAM&WATKINS«P You should feel completely free to consult other counsel concerning these matters and we encourage you to do so. By signing this letter, you acknowledge that you have had an opportunity.to consult with other counsel.. 6. Rates, Fees and Charges. We are willing to offer Client an arrangement whereby we would accept a 50% discount for all attorney and paralegal rates on a current monthly -pay basis with an opportunity for us to receive a further two -tiered contingent payment as described below: (a) The base tier contingent payment would require Client to pay us (without interest) the aggregate amount of discounts previously given to Client. Such amount would be owing if Client sells all or portions of the Kern property for consideration that gives it a return of its capital at a breakeven position (ignoring any 10% per annum or other return to Client) in the manner calculated for purposes of the deferred purchase price pursuant to the purchase and sale agreement by which the City bought the Kern County land (the "PSA Calculation Methodologv". (b) The higher tier contingent payment would require Client to pay us (without interest) a catchup payment to reach 125% of our standard rates (inclusive of the 50% previously paid on a monthly basis). Such amount would be owing if. a. Client sells all or portions of the Kern property for consideration that gives it a return of its capital together with 10% per annum or greater return on its capital in the manner calculated in under the PSA Calculation Methodology; or b. Client (on its own, through a joint powers authority or through some other mechanism) participates in the development of a wind energy project on the Kern county land for project which a notice to proceed is given to a contractor. Payments (a) and (b) above would not be subject to duplication. In either case, the contingent payment will be based upon the rates that were in effect for the years in which the applicable services were performed (in other words, the delay in payment to a later year will not be a basis have later -year higher rates apply to the calculation of the amount of the contingent payment ). In addition, even though the current fees would be heavily discounted, we would have burden of keeping Client informed on a current basis of our time spent on the wind project. If we expect to be spending in any given month professional time greater than $20,000 (gross / prior to giving effect to the 50% discount), we would need to inform you of same on a current basis. Our fees are based primarily on the amount of time spent by our lawyers, paralegals and other professionals on your behalf. Each lawyer, paralegal and other professional assigned to this matter will have individual hourly billing rates, and the applicable rate multiplied by the number of hours spent, measured in tenths of an hour, will be the initial basis for determining our fee. The rates for attorneys and paralegals will reflect our base rates less 10%. In addition to fees, you agree to pay for disbursements and other charges. These will include such items as photocopying ($0.17 per page); color prints/copies ($0.25 per page); LA\2949234.2 December 4, 2012 Page 5 LATHAM&WATKINS«P scanning documents ($0.15 per page); use of fee -based research databases (90% of the third - party vendor rate or 1.25 times our volume -discounted cost depending on vendor); long- distance telephone charges (AT&T standard rates); couriers and air freight (1.10 times our volume -discounted cost); messengers (at third -party vendor rate); client -specific work by staff, staff overtime and meals (as defined by federal or local law); transportation (where dictated by safety reasons, and which may include a transaction fee); word processing ($60.00 per hour); postage, at cost; supplies (for large volume only); and other, reasonable costs and expenses. For disbursements over $1,500, we may ask that billings be sent directly to you or that advances be provided. When our personnel travel, we generally utilize business class for international flights. Through a third -party travel management company, in-house travel services are provided for our U.S. offices. A ticketing fee of $30 will be charged for fares up to $300, and $75 will be charged for fares over $300. There are no additional charges for changes to reservations or for reimbursement of unused tickets. Our personnel bill for travel time, but if they work on another matter while traveling for you, you will not be billed for that time. We intend to provide statements to you on a monthly basis. They will show our time logged in tenth -of -an -hour increments and will separate fees from disbursements and other charges. Payment of our statements is due promptly upon receipt. Our rates are based on our receiving payment within thirty (30) days. Our billing rates and charges are usually revised annually, but we reserve the right to revise them at other times. Following any such revision, our new rates and charges will be applied to your account, and this letter constitutes written notice to you of our right to make such revisions. Any funds that you deposit with us as an advance against our fees and charges will be treated as property of the firm. Any unused portion of such advance after our services are concluded will be returned to you. From time to time, you may request estimates of the fees and charges that we anticipate incurring on your behalf. These estimates are subject to unforeseen circumstances and are by their nature inexact. While we may provide estimates for your general planning purposes, such estimates are subordinate to our regular billing procedures, absent an express written agreement to the contrary. 7. Arbitration of Disputes. Any controversy or claim, whether in tort, contract or otherwise, arising out of or relating to the relationship between Client, its affiliates or successors (the "Client Arbitration Parties") and Latham & Watkins LLP, its affiliated partnerships, attorneys or staff or any of their successors (the "Latham Arbitration Parties") or the services provided by the Latham Arbitration Parties pursuant to this engagement letter or otherwise to the Client Arbitration Parties shall be submitted to binding arbitration. By agreeing to arbitrate, you are agreeing to waive your right to a jury trial. The arbitration will be conducted in accordance with this document, the Federal Arbitration Act and CPR Rules for Non -Administered Arbitration, as in effect on the date of this engagement letter. The arbitration shall be conducted before a panel of three neutral arbitrators. The arbitration shall be commenced and held in the city and state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Any issue concerning the location of the arbitration, the extent to which any dispute is subject to arbitration, the applicability, interpretation, or enforceability LA\2949234.2 December 4, 2012 Page 6 LATHAM&WATKINSLLP of this agreement shall be resolved by all of the arbitrators. To the extent state law is applicable, the arbitrators shall apply the substantive law of the state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Each parry will be entitled to depose a maximum of six witnesses, plus all experts designated to be witnesses at the arbitration. The depositions shall be limited to a maximum of six hours per deposition. All aspects of the arbitration shall be treated as confidential and neither the parties nor the arbitrators may disclose the content or results of the arbitration, except as necessary to comply with legal or regulatory requirements. The result of the arbitration shall be binding on the parties and judgment on the arbitrators' award may be entered in any court having jurisdiction. 8. Limited Liability Partnership. Latham & Watkins LLP is a limited liability partnership (LLP). Similar to the corporate form of business organization, the LLP form generally limits the liability of the individual partners of the firm to, the capital they have invested in the firm for claims arising from services performed by the firm. Our form of organization as an LLP will not diminish the ability to recover damages from the firm or from any individuals who directly caused the loss. Because of legal requirements in those countries, work done out of our offices in England, France, Hong Kong, Japan, Singapore, Saudi Arabia, and Italy will be carried out through affiliated partnerships registered locally, but the distinction will be largely transparent to you as a client. 9. Entire Agreement and Miscellaneous. You and we understand that this letter constitutes the entire agreement pertaining to the engagement of Latham & Watkins LLP, and that it shall not be modified by any policies, procedures, guidelines or correspondence from you or your representative unless agreed to in writing by Latham & Watkins LLP. 10. Approval and Return of Letter. If this letter meets with your approval, please sign and return the enclosed copy. We look forward to continuing our relationship with you. Very truly yours, David B. Rogers of LATHAM & WATKINS LLP Approval of Engagement LA\2949234.2 December 4, 2012 Page 7 LATHAM&WATKINS«P Client has read the enclosed letter and agrees to its terms, effective as of the date hereof. BY SIGNING THIS LETTER, CLIENT AGREES TO HAVE ANY ISSUE ARISING OUT OF OR RELATING TO THE SERVICES OF THE LATHAM ARBITRATION PARTIES (INCLUDING ANY CLAIM FOR PROFESSIONAL LIABILITY) DECIDED IN ARBITRATION AND CLIENT GIVES UP ITS RIGHT TO A JURY OR COURT TRIAL AND ACKNOWLEDGES THE ARBITRATION PROVISION IN SECTION 7 ABOVE. Date: , 2012. The City of Vernon, a California charter city and municipal corporation By: William Davis, Mayor ATTEST: Dana Reed, Interim City Clerk APPROVED AS TO FORM: Nicholas George Rodriguez, City Attorney LA\2949234.2 r[a J ziN -< OFFICE OF THE CITY CLERK 4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 December 19, 2012 David B. Rogers, Esq. Latham & Watkins LLP 355 S. Grand Avenue Los Angeles, CA 90071-1560 Re: Engagement Letter for Legal Services Regarding the Kern County Land/ Wind Energy Project Dear Mr. Rogers: Please find enclosed a fully executed original of the above -referenced document. If you have any questions regarding this matter, please contact Carlos Fandino at (323) 583-8811 ext. 834. Very truly yours, Deborah R. Juarez Records Management Assistant Enclosure c: Carlos Fandino Mark Whitworth Purchasing Department Resolution No. 2012-240 Agreement File No. 12-132 E#fusive6j IndustriaC David B. Rogers Partner Direct Dial: +1.213.891.8236 David.Rogers@LW.com LATHAM&WATKI NSLLP December 4, 2012 City of Vernon 4305 Santa Fe Avenue Vernon, CA 90058 Attn: Nicholas George Rodriguez City Attorney 355 South Grand Avenue Los Angeles, California 90071-1560 Tel: +1.213.485.1234 Fax: +1.213.891.8763 www.lw.com FIRM / AFFILIATE OFFICES Abu Dhabi Moscow Barcelona Munich Beijing New Jersey Boston New York Brussels Orange County Chicago Paris Doha Riyadh Dubai Rome Frankfurt San Diego Hamburg San Francisco Hong.Kong Shanghai Houston Silicon Valley London Singapore Los Angeles Tokyo . Madrid Washington, D.C. Milan File No. 037084-0000 Re: Engagement Letter —Kern County Land / Wind Project Dear Nick: We are pleased to continue to serve the City of Vernon and to reflect some revised arrangements in this engagement letter. 1. Legal Services; Term of Engagement. This engagement letter covers matters relating to the City's land in Kern County, California or the development of a wind energy project thereon. Our services will include (a) assistance in permitting and entitlements, (b) strategy relating to joint venturing the project, arranging offtakers, and financing or selling the project. This letter will apply to such services, unless superseded by another written agreement. In each case, before we can agree to provide additional services (such as services for Client across from a new party), we will need to perform a conflicts check and otherwise confirm our ability to provide these services. Our representation is limited to the specific services that you request and that we have agreed to undertake. The term of this engagement (including our attorney -client relationship with you) shall be three years unless renewed by a mutually -executed new engagement letter or written extension of the term of this letter; provided, however, that (a) the City may by written notice to us terminate this engagement at any time for any reason or no reason, (b) we may by written notice to City but subject to applicable ethical limitations terminate this engagement at any time and (c) our relationship with you will be deemed concluded when we have completed our agreed -upon services which presumptively shall have occurred at any time when we have performed no work on your behalf for six consecutive months. For the avoidance of doubt, your obligations for fees and charges accrued prior to termination shall survive termination of this engagement. 2. Identity of the Client. Our client in this matter will be solely the City of Vernon, including where applicable, its Light and Power Department (collectively, "Client"). We do not represent and will not be deemed to have an attorney -client relationship with any of Client's current or future parents, subsidiaries; shareholders, members, partners, employees, directors, venturers or other affiliates LA\2949234.2 December 4, 2012 Page 2 LATHAM&WATKINS«P or constituents solely on account of our representation of Client in this matter or any future matters. 3. Roles of Attorney and Client. Our responsibilities under this agreement are to provide legal counsel and assistance to you in accordance with this letter, and to provide statements to you that clearly state the basis for our fees and charges. We will not disclose any confidential information of yours to any other client, even where that information might have some bearing on their interests. Likewise, we will not disclose the confidences of any other client to you, even where that information might have some bearing on your interests, and you agree that we are under no obligation to do so. You also agree to keep us informed of developments related to this representation and to pay our statements in a timely manner. To allow us to conduct a conflicts check, you represent that you have identified to us all persons and entities that are or may become involved in this matter, including all such persons or entities that are affiliated with you. You also agree to notify us if you become aware of any other persons or entities that are or may become involved in this matter. During the course of this engagement, we may express opinions or beliefs to you about the effectiveness of various courses of action or about the results that might be anticipated. Such statements are expressions of opinion only, and should not be construed as promises or guaranties. Please also be aware that Latham & Watkins LLP has internal ethics and professional responsibility counsel, who advise Latham attorneys regarding their ethical, professional and legal duties. From time to time, the attorneys working on your matter may consult these lawyers. You acknowledge that any such consultation is protected by Latham's own attorney -client privilege, and you waive any right to discovery of those communications. Should circumstances arise in which Latham & Watkins LLP faces a conflict of interest with respect to or by virtue of these communications, you agree to waive that conflict. You also agree that such communications are property of the firm and are not part of the Client File as defined in Section 4 of this letter. 4. Client Files and Retention. In the course of your representation, we shall maintain a file in which we may place correspondence, agreements, governmental filings, prospectuses, disclosures, pleadings, deposition transcripts, exhibits, physical evidence, expert reports, and other items reasonably necessary to your representation ("Client File"). The Client File shall be and remain your property. Upon completion of a specific project, your original Client File for that project shall be available to be taken by you. We will be entitled to make copies if we choose. You also agree at the conclusion of the project (whether or not you take possession of the Client File) to take possession of any and all original contracts, wills, stock certificates, and other such important documents that may be in the Client File and we shall have no further responsibility with regard to such documents. If you do not take possession of the Client File at the conclusion of the project, we will store such file for you for a period of seven years. If you do not take possession of the Client File during such seven-year storage period, you agree that we may dispose of it. You agree that the documents containing our attorney work product, mental impressions or notes and drafts of documents shall be and remain our property and shall not be considered part of your Client File. In addition, electronic documents such as e-mail and documents prepared on our word processing system (but excluding printed copies thereof), and databases shall be and remain our property and shall not be considered part of your Client File. You agree that we may LA\2949234.2 December 4, 2012 Page 3 LATHAM&WATKI NSLLI enact and implement reasonable retention policies for such electronic documents and that our firm has discretion to delete such documents. 5. Conflicts of Interest. As relevant to the Light and Power Department or matters affecting the City as an operator of a utility, we inform you that our experience in the electric power industry arises from the fact that we represent many different companies and entities in the industry. Our clients include (a) investor -owned utilities (including Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE) and San Diego Gas & Electric Company (SDG&E)), (b) non -utility power generation companies, (c) energy trading firms, (d) transmission owners, (e) investment banks, commercial banks and other providers of debtor equity capital, (f) non -utility affiliates of investor —owned utility companies (including affiliates of PG&E, SCE and SDG&E), (g) trade associations and (h) various other participants. As is the nature of the industry, depending on the particular issue, one individual client or one category of client may be aligned with the others or sharply at odds with the others. Accordingly, we expect that there could be substantial limitations imposed on matters we could undertake for you, particularly when such representation involves appearing as your counsel in proceedings. Without your consent, we will not represent any other party to the matter we undertake for you, nor any other matter substantially related to same. As with any other client and any other matter, you will have our complete loyalty with respect to any such matter. We also note, however, that Latham & Watkins LLP is an international law firm with numerous attorneys and offices in many countries and that we practice in many diverse areas of law. It is possible that during the time we are representing you, some of our current or future clients may ask us to represent them in matters in which you are involved as another party. Both our own prudent business conduct, and the interests of our other clients, call for us to seek to retain the ability to take unrelated matters for all of our clients. We thus ask you in connection with this engagement to consent in advance to our acceptance of future matters (including litigation matters) adverse to Client, provided that those matters are not substantially related to the work that we have done for you. By entering into this agreement, you consent to such adverse representations. Thus, for example, you agree that we would be able to take a new lawsuit or transactional matter for one of our current or future clients, adverse to Client so long as the adverse matter is not substantially related to the work we have done for you. This consent also includes being adverse to you in any bankruptcy, regulatory, administrative, legislative or rulemaking proceeding. In addition, by entering into this agreement you agree that if we represent you in a matter across from another person or entity, we may represent such person or entity on matters not substantially related to our work for you. We take very seriously our obligations to maintain the confidentiality of information we receive from all of our clients, including Client and any other clients covered by this consent. Accordingly, we will continue to maintain the confidences of both Client and our other clients. You should feel completely free to consult other counsel concerning these matters and we encourage you to do so. By signing this letter, you acknowledge that you have had an opportunity to consult with other counsel. 6. Rates, Fees and Charges. LA\2949234.2 December 4, 2012 Page 4 LATHAM&WATKI NSLLP We are willing to offer Client an arrangement whereby we would accept a 50% discount for all attorney and paralegal rates on a current monthly -pay basis with an opportunity for us to receive a further two -tiered contingent payment as described below: (a) The base tier contingent payment would require Client to pay us (without interest) the aggregate amount of discounts previously given to Client. Such amount would be owing if Client sells all or portions of the Kern property for consideration that gives it a return of its capital at a breakeven position (ignoring any 10% per annum or other return to Client) in the manner calculated for purposes of the deferred purchase price pursuant to the purchase and sale agreement by which the City bought the Kern County land (the "PSA Calculation Methodology". (b) The higher tier contingent payment would require Client to pay us (without interest) a catch up payment to reach 125% of our standard rates (inclusive of the 50% previously paid on a monthly basis). Such amount would be owing if: a. Client sells all or portions of the Kern property for consideration that gives it a return of its capital together with 10% per annum or greater return on its capital in the manner calculated in under the PSA Calculation Methodology; or b. Client (on its own, through a joint powers authority or through some other mechanism) participates in the development of a wind energy project on the Kern county land for project which a notice to proceed is given to a contractor. Payments (a) and (b) above would not be subject to duplication. In either case, the contingent payment will be based upon the rates that were in effect for the years in which the applicable services were performed (in other words, the delay in payment to a later year will not be a basis have later -year higher rates apply to the calculation of the amount of the contingent payment ). In addition, even though the current fees would be heavily discounted, we would have burden of keeping Client informed on a current basis of our time spent on the wind project. If we expect to be spending in any given month professional time greater than $20,000 (gross / prior to giving effect to the 50% discount), we would need to inform you of same on a current basis. Our fees are based primarily on the amount of time spent by our lawyers, paralegals and other professionals on your behalf. Each lawyer, paralegal and other professional assigned to this matter will have individual hourly billing rates, and the applicable rate multiplied by the number of hours spent, measured in tenths of an hour, will be the initial basis for determining our fee. The rates for attorneys and paralegals will reflect our base rates less 10%. In addition to fees, you agree to pay for disbursements and other charges. These will include such items as photocopying ($0.17 per page); color prints/copies ($0.25 per page); scanning documents ($0.15 per page); use of fee -based research databases (90% of the third - party vendor rate or 1.25 times our volume -discounted cost depending on vendor); long-distance telephone charges•(AT&T standard rates); couriers and air freight (1.10 times our volume - discounted cost); messengers (at third -party vendor rate); client -specific work by staff; staff overtime and meals (as defined by federal or local law); transportation (where dictated by safety reasons, and which may include a transaction fee); word processing ($60.00 per hour); postage, at cost; supplies (for large volume only); and other reasonable costs and expenses. For LA\2949234.2 December 4, 2012 Page 5 LATHAM&WATKINSLLP disbursements over $1,500, we may ask that billings be sent directly to you or that advances be provided. When our personnel travel, we generally utilize business class for international flights. Through a third -party travel management company, in-house travel services are provided for our U.S. offices. A ticketing fee of $30 will be charged for fares up to $300, and $75 will be charged for fares over $300. There are no additional charges for changes to reservations or for reimbursement of unused tickets. Our personnel bill for travel time, but if they work on another matter while traveling for you, you will not be billed for that time. We intend to provide statements to you on a monthly, basis. They will show our time logged in tenth -of -an -hour increments and will separate fees from disbursements and other charges. Payment of our statements is due promptly upon receipt. Our rates are based on our receiving payment within thirty (30) days. Our billing rates and charges are usually revised annually, but we reserve the right to revise them at other times. Following any such revision, our new rates and charges will be applied to your account, and this letter constitutes written notice to you of our right to make such revisions. Any funds that you deposit with us as an advance against our fees and charges will be treated as property of the firm. Any unused portion of such advance after our services are concluded will be returned to you. From time to time, you may request estimates of the fees and charges that we anticipate incurring on your behalf. These estimates are subject to unforeseen circumstances and are by their nature inexact. While we may provide estimates for your general planning purposes, such estimates are subordinate to our regular billing procedures, absent an express written agreement to the contrary. 7. Arbitration of Disputes. Any controversy or claim, whether in tort, contract or otherwise, arising out of or relating to the relationship between Client, its affiliates or successors (the "Client Arbitration Parties") and Latham & Watkins LLP, its affiliated partnerships, attorneys or staff or any of their successors (the "Latham Arbitration Parties") or the services provided by the Latham Arbitration Parties pursuant to this engagement letter or otherwise to the Client Arbitration Parties shall be submitted to binding arbitration. By agreeing to arbitrate, you are agreeing to waive your right to a jury trial. The arbitration will be conducted in accordance with this document, the Federal Arbitration Act and CPR Rules for Non -Administered Arbitration, as in effect on the date of this engagement letter. The arbitration shall be conducted before a panel of three neutral arbitrators. The arbitration shall be commenced and held in the city and state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Any issue concerning the location of the arbitration, the extent to which any dispute is subject to arbitration, the applicability, interpretation, or enforceability of this agreement shall be resolved by all of the arbitrators. To the extent state law is applicable, the arbitrators shall apply the substantive law of the state in which the Latham & Watkins office is located whose attorneys spent the most amount of time on the matter in dispute. Each party will be entitled to depose a maximum of six witnesses, plus all experts designated to be witnesses at the arbitration. The depositions shall be limited to a maximum of six hours per deposition. All aspects of the arbitration shall be treated as confidential and neither the parties nor the arbitrators may disclose the content or, results of the arbitration, except as necessary to comply with legal or regulatory LA\2949234.2 December 4, 2012 Page 6 LATHAM&WATKINS«P requirements. The result of the arbitration shall be binding on the parties and judgment on the arbitrators' award may be entered in any court having jurisdiction. 8. Limited Liability Partnership. Latham & Watkins LLP is a limited liability partnership (LLP). Similar to the corporate form of business organization, the LLP form generally limits the liability of the individual partners of the firm to the capital they have invested in the firm for claims arising from services performed by the firm. Our form of organization as an LLP will not diminish the ability to recover damages from the firm or from any individuals who directly caused the loss. Because of legal requirements in those countries, work done out of our offices in England, France, Hong Kong, Japan, Singapore, Saudi Arabia, and Italy will be carried out through affiliated partnerships registered locally, but the distinction will be largely transparent to you as a client. 9. Entire Asreement and Miscellaneous. You and we understand that this letter constitutes the entire agreement pertaining to the engagement of Latham & Watkins LLP, and that it shall not be modified by any policies, procedures, guidelines or correspondence from you or your representative unless agreed to in writing by Latham & Watkins LLP. 10. Approval and Return of Letter. If this letter meets with your approval, please sign and return the enclosed copy. We look forward to continuing our relationship with you. Very truly yours, David B. Rogers of LATHAM & WATKINS LLP LA\2949234.2 December 4, 2012 Page 7 LATHAM&WATKINSLLP Approval of Engagement Client has read the enclosed letter and agrees to its terms, effective as of the date hereof. BY SIGNING THIS LETTER, CLIENT AGREES TO HAVE ANY ISSUE ARISING OUT OF OR RELATING TO THE SERVICES OF THE LATHAM ARBITRATION PARTIES (INCLUDING ANY CLAIM FOR PROFESSIONAL LIABILITY) DECIDED IN ARBITRATION AND CLIENT GIVES UP ITS RIGHT TO A JURY OR COURT TRIAL AND ACKNOWLEDGES THE ARBITRATION PROVISION IN SECTION 7 ABOVE. Date• v✓! �6, 2012. CITY OF VERNON P By. William Davis, May r Interim City Clerk APPROVED AS T FORM: Nicholas George Rodriguez, City Attorney LA\2949234.2 RE „i DEC 1 '� 2012 CITY CLERK'S 111E JOINT STAFF REPORT CITY ADMINISTRATION AND LIGHT & POWER DATE: December 12, 2012 TO: Honorable Mayor and City Council FROM: Mark C. Whitworth, City Administrator Carlos R. Fandino Jr., Director of Light & Po6 1 z,a-12 RE: Approval of Latham & Watkins Engagement Letters for General and Kern County Land/Wind Project Matters to Restructure Existing Relationship and Significantly Reduce Associated Costs Recommendation It is recommended that the City Council find that approval of the proposed engagement letters in this staff report are exempt under the California Environmental Quality Act (CEQA) in accordance with Section 15061(b)(3), the general rule that CEQA only applies to projects that may have an effect on the environment. It is recommended that the City Council approve the attached engagement letters with Latham & Watkins in order to structure a more cost-effective approach to utilizing their services for general and Kern County Land/Wind Project matters in accordance with the recommendation of the Independent Reform Monitor that professional service contracts be reviewed on a regular basis and negotiated for best financial arrangements Under the new Competitive Bidding and Purchasing Ordinance, competitive bidding is not required (professional services exemption). In addition, the City Council is asked to grant an exemption from competitive selection on the basis that it is in the best interests of the City of Vernon to make direct award of this contract for the following reasons: this is a restructuring of a long term relationship, and the unique expertise of specific members of the firm of Latham & Watkins is required to assist in bringing essential business transactions of the City to a successful closure. Background The City of Vernon has had a long and successful relationship with Latham & Watkins and specific members of the firm were an integral part of the City's success in preventing disincorporation. The City wishes to continue a relationship with Latham & Watkins for certain matters, and the City Attorney has negotiated the attached engagement letters as further detailed below.. Both engagement letters are for a term of three years, but can be terminated by the City at any time for any reason or no reason. 1. Engagement Letter — General Scope: General matters to include (a) follow-up work to provide continuity on prior matters, (b) political strategy and (c) other matters from time to time requested by the City or the City's Light and Power Department. Costs: For the aforementioned services, (not to include those related to the Kern County Land/Wind Project, which is addressed under a separate engagement letter) a professional monthly retainer fee of $10,000 will be billed to the City plus normal other non-professional fee charges for applicable services under this engagement letter. Latham & Watkins would not earn the monthly retainer if the underlying professional fees (reflecting a 10% discount on rates for attorneys and paralegals) did not warrant the retainer amount, and Latham & Watkins would carry over a credit. Similarly, projects projected to exceed the retainer amount would need to be pre -approved by the City. Should the unexpended retainer amount exceed $30,000, Latham & Watkins would cease billing the monthly retainer until the unexpended amount fell below $10,000. 2. Engagement Letter — Kern County Land/Wind Project Scope: Matters relating to the City's land in Kern County, California or the development of a wind energy project thereon, including (a) assistance in permitting and entitlements and (b) strategy relating to joint venturing the project, arranging offtakers, and financing or selling the project. Costs: Latham & Watkins has offered an arrangement whereby the firm would accept a 50% discount for all attorney and paralegal rates on a current monthly -pay basis with an opportunity for a further two -tiered contingent payment as described below: (a) The base tier contingent payment would require the City to pay Latham (without interest) the aggregate amount of discounts previously y given to the City. Such amount would be owing if the City sells all or portions of the Kern property for consideration that gives it a return of its capital at a breakeven position (ignoring any 10% per annum or other return to City) in the manner calculated for purposes of the deferred purchase price pursuant to the purchase and sale agreement by which the City bought the Kern County land (the "PSA Calculation Methodology"). (b) The higher tier contingent payment would require the City to pay Latham (without interest) a catch up payment to reach 125% of their standard rates (inclusive of the 50% previously paid on a monthly basis). Such amount would be owing if: a. City sells all or portions of the Kern property for consideration that gives it a return of its capital together with 10% per annum or greater return on its capital in the manner calculated in under the PSA Calculation Methodology; or b. City (on its own, through a joint powers authority or through some other mechanism) participates in the development of a wind energy project on the Kern county land for project which a notice to proceed is given to a contractor. Payments (a) and (b) above would not be subject to duplication. In either case, the contingent payment will be based upon the rates that were in effect for the years in which the applicable services were performed (in other words, the delay in payment to a later year will not be a basis to have later -year higher rates apply to the calculation of the amount of the contingent payment ). In addition, even though the current fees would be heavily discounted, Latham & Watkins would have burden of keeping the City and the City's Light & Power Department informed on a current basis of their time spent on the wind project. If Latham expects to be spending in any given month professional time greater than $20,000 (gross / prior to giving effect to the 50% discount), they would need to inform the City of the same on a current basis.