HomeMy WebLinkAboutAgenda Report - October 22, 2002 B-01 SMCOUNCIL COMMUNICATION
AGENDA TITLE: Adopt resolutions authorizing the approval of certain documents related to the financing of the
amended power sales agreement between Calpine Corporation and the City of Lodi (EUD)
MEETING DATE: October 22, 2002
PREPARED BY: Electric Utility Director
RECOMMENDED ACTION: That the City Council adopt the attached resolutions authorizing the approval
of certain documents related to the financing of the amended power sales
agreement between Calpine Corporation and the City of Lodi.
BACKGROUND INFORMATION: At the City Council meeting of September 4, 2002, the City Council approved
Amendment No.1 to the Power Sales Agreement between Calpine
Corporation and the City of Lodi. In that amendment, the ten year contract
for delivery of power was amended to halt the delivery of power in exchange for a stream of monthly payments
representing the difference between the contract price and the forward power markets.
We now have an opportunity to refinance the payment stream to lower cost to the City. The total amount for proposed
Electric Revenue Bonds, Series 2002C and D is $44,045,000. The two series represent a non-taxable and a taxable
portion to better match load and debt. Electric Utility Department staff and the City's Financial advisor will present
savings figures and are prepared to answer all questions pertaining to the proposed financing.
FUNDING: Coming from the new certificates of participation
Funding Approval:'`'`'
Vicky Athie, Finance Director
Alan N. Vallow
Electric Utility Director
ANV/Ist
City Attomey
APPROVED:
H. Dixon Flynn - City Manager
AMENDED AND RESTATED ELECTRIC ENERGY PURCHASE AGREEMENT
by and between
CITY OF LODI
and
LODI PUBLIC IMPROVEMENT CORPORATION
Dated as of November 1, 2002
Relating to
Electric System Revenue
Certificates of Participation
2002 Series C
and
2002 Taxable Series D
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AMENDED AND RESTATED ELECTRIC ENERGY PURCHASE AGREEMENT
This Amended and Restated Electric Energy Purchase Agreement (the "Agreement"),
dated as of November 1, 2002, by and between the City of Lodi, California, a municipal
corporation duly organized and existing under and by virtue of the Constitution and laws of the
State of California (the "City"), and the Lodi Public Improvement Corporation, a nonprofit,
public benefit corporation duly organized and existing under and by virtue of the laws of the
State of California (the "Corporation"),
WITNESSETH:
WHEREAS, the City has established the Electric System (capitalized terms used in this
Agreement and not otherwise defined shall have the meanings given such terms pursuant to
Section 1.01 hereof ) to serve the inhabitants of the City; and
WHEREAS, pursuant to the Public Utilities Code of the State, the City is authorized to
acquire, own, control, sell or exchange rights of every nature for the purpose of operating the
Electric System; and
WHEREAS, in order to assure adequate electricity to satisfy the expected load
requirements of the inhabitants of the City, the City entered into the Original Agreement with
Calpine providing for the purchase by the City of the Energy for the term of the Original
Agreement; and
WHEREAS, pursuant to the Original Agreement, the City was obligated to take and pay
for the Energy as delivered, resulting in the City's obligation to make installment purchase
payments to Calpine in the amounts and at the times determined pursuant to the Original
Agreement; and
WHEREAS, the City and Calpine have entered into the Amendment (the Original
Agreement as amended and supplemented by the Amendment being herein referred to as the
"Amended Agreement") pursuant to which the Original Agreement has been amended and
supplemented to provide for three Parts, with the Original Agreement constituting Part II; and
WHEREAS, the City has sold its interests in the Energy to Calpine, and Calpine
purchased the City's interests in the Energy, on the terms and conditions set forth in the Part III
of the Amended Agreement; and
WHEREAS, pursuant to Part III of the Amended Agreement, the City and Calpine agreed
upon the purchase price for the City's interests in the Energy and also agreed to net the payments
due from the City for its purchase of the Energy from Calpine pursuant to the Original
Agreement against the payments due from Calpine for its purchase of the City's interests in the
Energy pursuant to, Part III of the Amended Agreement, resulting in an obligation of the City to
make certain installment payments to Calpine (the "Original Installment Payments"); and
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WHEREAS, the City and Calpine agreed in Part III of the Amended Agreement that the
Original Installment Payments were to be paid from Net Revenues of the City's Electric System;
and
WHEREAS, Part I of the Amended Agreement provided the Corporation with the option
to purchase all of Calpine's r ghts ,,, dez parts rright. title and interest in and to Part III
thereof, including the right to collect the Original Installment Payments; and
WHEREAS, the Corporation has exercised said option and has acquired all of Calpine's
rightsriXht, title and interest in and to F Part III to the Amended Agreement, including
the right to collect the Original Installment Payments; and
WHEREAS, in order to facilitate the Corporation's financing of its acquisition of
Calpine's righ4sright, title and interest in and to _P Part III of the Amended
Agreement, to modify the Original Installment Payments as requested by the City, to conform
the covenants and agreements of the City with respect to the Electric System and the Revenues
with outstanding Parity Obligations of the City and to simplify the agreement between the City
and the Corporation with respect to Part III of the Amended Agreement; the City and
the Corporation have determined to amend and restate pr I andPart III of the Amended
Agreement as provided in this Agreement; and
WHEREAS, the City and the Corporation have determined that all acts, conditions and
things required by law to exist, to have happened and to have been performed precedent to and in
connection with the execution and delivery of this Agreement do exist, have happened and have
been performed in regular and due time, form and manner as required by law, and the parties
hereto are now duly authorized to execute and enter into this Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND OF THE
MUTUAL AGREEMENTS AND COVENANTS CONTAINED HEREIN AND FOR OTHER
VALUABLE CONSIDERATION, THE PARTIES HERETO DO HEREBY AGREE AS
FOLLOWS:
ARTICLE I
DEFINITIONS; RESTATEMENT
Section 1.01. Trust Agreement. Unless the context otherwise requires, the terms defined
in that certain Trust Agreement, dated as of November 1, 2002, between the Corporation and
BNY Western Trust Company, as trustee, shall for all purposes hereof and of any opinion or
report or other document mentioned herein have the meanings given such terms pursuant to said
Trust Agreement.
Section 1.02. Amendment and Restatement. The City and the Corporation hereby agree
that, solely as between such parties and their successors and assigns, and from and after the
execution and delivery hereof, this Agreement amends and restates Parts I andPart III of the
Amended Agreement in tits entirety. Nothing in this Agreement shall be construed to affect
the rights of Calpine or any assignee of Calnine under Part I or Part II of the Amended
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Agreement , or to affect the obligations
of the City, under the Amended Agreement as it existed prior to the execution and delivery
hereof.
ARTICLE II
TRANSFER OF CALPINE'S RIGHTS UNDER AMENDMENT; RESTATEMENT OF
AMENDED AGREEMENT
Section 2.01. Sale of City's Interest in Energy. The City hereby sells, assigns and
transfers to Calpine, and Calpine hereby purchases from the City, all of the City's right, title and
interest in and to the Energy and to enforce any rights or obligations related to the purchase or
delivery of the Energy. Such right, title and interest of the City in and to the Energy shall be
fully vested in Calpine on and as of September 10, 2002. The sale, assignment and transfer by
the City of its right, title and interest in and to the Energy is made without recourse and no
warranties, either express or implied, as to the availability of the Energy or otherwise is made by
the City in connection with such sale, assignment and transfer other than the City represents and
warrants that it has taken no action which would encumber its title to the Energy, or the rights
and obligations related thereto or the proceeds thereof, or otherwise create a lien on, or security
or other interest in, the Energy, or the rights and obligations related thereto or the proceeds
thereof, or which would in any way prevent or impair the City's ability to make such sale,
assignment or transfer.
Section 2.02. Purchase Price of Energy. In consideration of the sale, assignment and
transfer of all of the City's right, title and interest in and to the Energy, Calpine agrees to pay
$34.96 per MV -1h based on the scheduled amount of Energy to be made available to the City
pursuant to the Original Agreement. The Parties agree that such payments are to be made at such
times and in such amounts that the payment obligations of the respective Parties are properly
netted against each other as provided in Article IV of this Agreement.
Section 2.03. Netting of Payments. Each of the parties agree that the City's obligation
to make payments for the Energy to be delivered pursuant to the Original Agreement and
Calpine's obligations to pay for the purchase of the City's right, title and interest in and to the
Energy pursuant to Section 2.01 of this Agreement shall be netted against each other for
purposes of determining the respective payment obligations of the City and Calpine with respect
to the Energy. Each of the City and the Corporation agree that the City's obligation to make the
Installment Payments as provided in Section 4.01 of this Agreement, while not merely a
deduction of the amounts payable by Calpine against the amounts payable by the City in
connection with their respective purchases of the Energy, properly reflects the economic results
of the netting of such payment obligations as agreed to by the City and the Corporation.
Section 2.04. Acknowledgement of Transfer. The City hereby agrees and acknowledges
that the Corporation has succeeded to all of Calpine's rights and obligations under Parts I and III
of the Amended Agreement.
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ARTICLE III
INSTALLMENT PAYMENTS AND PREPAYMENTS
Section 3.01. Installment Payments. The City shall, subject to any rights of prepayment
provided in Section 3.02 hereof and the exercise of any remedies under Section 8.01 hereof, pay
the Corporation the Installment Payments at the times and in the amounts hereinafter set forth.
The Installment Payments consist of the Principal Installments and the Interest Installments. The
Interest Installments constitute interest on the unpaid balance of the Principal Installments.
The Principal Installments and the Interest Installments for the Series C Installment
Payments shall be in the amounts set forth in Exhibit A hereto and shall be payable on the dates
set forth in Section 4.01(b)(1) hereof. The Principal Installments and the Interest Installments for
the Series D Installment Payments shall be in the amounts set forth hereto and shall be payable
on the dates set forth in Section 4.01(b)(1) hereof.
The obligation of the City to pay the Installment Payments is, subject to Section 10.01
hereof, absolute and unconditional, and until such time as the Installment Payments shall have
been paid in full (or provision for the payment thereof shall have been made pursuant to Article
IX hereof), the City will not discontinue or suspend any Installment Payments required to be paid
by it under this Section when due, whether or not the Electric System or any part thereof is
operating or operable, or its use is suspended, interfered with, reduced, curtailed or terminated in
whole or in part, and such Installment Payments shall not be subject to reduction whether by
offset, abatement or otherwise and shall not be conditional upon the performance or
nonperformance by any party to any agreement or for any other cause whatsoever.
Section 3.02. Prepayments. The City shall have the right at any time or from time to
time from any available funds to prepay all or any part of the Installment Payments, and the
Corporation shall accept such prepayments when the same are tendered by the City. All
prepayments of Principal Installments made by the City pursuant to this subsection (a) shall be
deposited upon receipt with the Trustee in the appropriate account in the Debt Service Fund
specified by the City. All amounts in the Prepayment Account shall be applied to the
prepayment of Outstanding Certificates in the manner and subject to the terms and conditions set
forth in the Trust Agreement.
With respect to prepayments of Installment Payments pursuant to this subsection (a), the
City shall determine which Installment Payments are to be prepaid, the amount of each such
Principal Installment which is to be prepaid and, subject to the provisions of this Section, the
date on which each such prepayment is to be made. Before making any prepayment pursuant to
this subsection (a), the City shall give written notice to the Corporation specifying the date on
which the prepayment will be paid and the order thereof, which date shall be not less than fifty
(50) days from the date such notice is given;rop vided, that notwithstanding any such
prepayment, the City shall not be relieved of its obligations hereunder, including specifically its
obligations under this Article, until all Installment Payments shall have been fully paid (or
provision for payment thereof shall have been made pursuant to Article IX hereof).
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ARTICLE IV
ELECTRIC SYSTEM REVENUES; FUNDS
Section 4.01. Pledge of Net Revenues and Moneys in Electric Revenue Fund; Electric
Revenue Fund. (a) Subject to the application thereof on the terms and conditions herein
provided, all Net Revenues of the Electric System and all moneys on deposit in the Electric
Revenue Fund are hereby irrevocably pledged to the payment of the Installment Payments which
pledge shall be on a parity with any pledge of Net Revenues or of moneys in the Electric
Revenue Fund securing Parity Obligations. This pledge shall constitute a first pledge of and
charge and lien upon the Net Revenues of the Electric System and moneys in the Electric
Revenue Fund for the payment of amounts due with respect to this Agreement and all Parity
Obligations in accordance with the terms hereof and thereof.
The general fund of the City is not liable for, and neither the faith and credit nor the
taxing power of the City is pledged to, the payment of the Installment Payments.
(b) In order to carry out and effectuate the obligation of the City contained herein to
pay the Installment Payments, the City agrees and covenants that all Revenues received by it
shall be deposited when and as received in the Electric Revenue Fund which fund has heretofore
been established by the City and which fund the City agrees and covenants to maintain separate
and apart from other moneys of the City so long as any Installment Payment remains
Outstanding hereunder, and all money on deposit in the Electric Revenue Fund shall be applied
and used only as provided herein. The City shall pay all Maintenance and Operation Costs
(including amounts reasonably required to be set aside in contingency reserves for Maintenance
and Operation Costs the payment of which is not then immediately required) from the Electric
Revenue Fund as they become due and payable, and all remaining money on deposit in the
Electric Revenue Fund shall be set aside and deposited by the City at the following times in the
following order of priority:
(1) Debt Service Fund Deposits. On or before the fifth Business Day before
each Principal Payment Date and Interest Payment Date set forth in Schedule C or
Schedule D hereto, the City shall, from the money in the Electric Revenue Fund, deposit
in the Debt Service Fund a sum equal to the Installment Payment becoming due and
payable under this Agreement on such date. On each date other than a Principal Payment
Date or an Interest Payment Date set forth in Schedule C or Schedule D hereto on which
an Installment Payment becomes due and payable hereunder (whether by prepayment
pursuant to Section 3.02, acceleration pursuant to Section 8.01 or otherwise), the City
shall, from the money in the Electric Revenue Fund, deposit in the Debt Service Fund, in
immediately available funds, a sum equal to the Installment Payment due and payable on
such date. Notwithstanding the provisions of the immediately preceding two sentences,
no such deposits to the Debt Service Fund need be made by the City from the Electric
Revenue Fund to the extent the Trustee then holds money for such purpose in the Debt
Service Fund available to pay the Installment Payments to be paid with such deposit.
From such remaining moneys in the Electric Revenue Fund, the City shall also pay to the
party entitled thereto or transfer or cause to be transferred to any applicable debt service
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or other payment fund or account for any Parity Obligations, without preference or
priority between transfers made pursuant to this sentence and the preceding sentence, and
in the event of any insufficiency of such moneys ratably without any discrimination or
preference, on the dates specified in the proceedings relating to such Parity Obligations,
the sum or sums required to be paid or deposited in such debt service or other payment
fund or account with respect to principal, premium, if any, and interest on Parity
Obligations (or in the case of Parity Payment Agreements, the net payments due) in
accordance with the terms of such Parity Obligations.
(2) Reserve Fund Deposits. To the extent the Reserve Requirement is not
being satisfied with a Financial Guaranty or Financial Guarantees, on each Principal
Payment Date and Interest Payment Date, the City shall, from the money on deposit in
the Electric Revenue Fund, transfer to the Trustee for deposit in the Reserve Fund that
sum, if any, necessary to restore the Reserve Fund to an amount equal to the Reserve
Fund Requirement. Any amount transferred to the Trustee shall be applied first to pay
the issuer of each Financial Guaranty which had been drawn on pursuant to
Section 3.04(b) of the Trust Agreement (on a pro rata basis based on the amount drawn)
to restore each such Financial Guaranty to its full amount. The City shall also, from such
remaining moneys in the Electric Revenue Fund, transfer or cause to be transferred to any
applicable reserve fund or account for any Parity Obligations for which a separate reserve
has been funded pursuant to Section 6.01(e) hereof, without preference or priority
between transfers made pursuant to this sentence and the preceding sentence, and in the
event of any insufficiency of such moneys ratably without any discrimination or
preference, the sum or sums, if any, equal to the amount required to be deposited therein
in accordance with the terms of such Parity Obligations.
After making the foregoing deposits and transfers hereinabove required to be made, the
City shall apply any remaining money in the Electric Revenue Fund (i) first, to pay any payment
of interest then due on amounts drawn under the Financial Guaranties, on a pro rata basis and (ii)
second, for any lawful purpose of the City, including for the payment of any Subordinate
Obligations in accordance with the instruments authorizing such Subordinate Obligations;
provided, however, that no moneys in the Electric Revenue Fund shall be applied to any purpose
not related to the expansion of the facilities or business of the Electric System or replacement of
facilities thereof, including the payment of any Subordinate Obligations or City Transfers, in any
Fiscal Year unless amounts remaining on deposit in the Electric Revenue Fund shall be sufficient
to make the remaining transfers hereinabove required to be made in such Fiscal Year with
respect to Installment Payments and Parity Obligations.
Section 4.02. Investments. Any moneys held in the Electric Revenue Fund shall be
invested in Permitted Investments which will, as nearly as practicable, mature on or before the
dates when such moneys are anticipated to be needed for disbursement hereunder. All
investment earnings from moneys or deposits in the Electric Revenue Fund shall be credited in
such fund and applied only to the purposes permitted for such fund.
The City may commingle any of the moneys in the Electric Revenue Fund with the
moneys held in other funds or accounts (except for moneys held in any rebate fund, which shall
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be held separately) for investment purposes only; provided however, that all moneys in the
Electric Revenue Fund shall be accounted for separately notwithstanding such commingling.
ARTICLE V
CERTIFICATE INSURANCE POLICIES
Section 5.01. Provisions Relating to Certificate Insurance. For so long as, and only
during such time as the Certificate Insurer is not in default under a Certificate Policy, the
following provisions shall be in effect, and any conflict between the provisions of this Article V
and the provisions of any other Section hereof shall be governed by the provisions of this Article
V.
Section 5.02. Information and Reports. As soon as practicable after the filing thereof
with the Corporation, the City shall provide the Certificate Insurer a copy of any financial
statement of the City and a copy of any audit and annual report of the City delivered by the City
pursuant Section 7.10(b)(1) hereof and a copy of any report or notice required to be filed with a
National Repository and/or State Repository pursuant to the Continuing Disclosure Agreement to
be delivered by the City in connection with the execution and delivery of the Certificates (and as
such terms are defined in the Continuing Disclosure Agreement).
Section 5.03. Acceleration. Any acceleration of unpaid Installment Payments pursuant
to 8.01 hereof or any annulment thereof shall be subject to the prior written consent of the
Certificate Insurer.
Section 5.04. Installment Payments Not Discharged. Notwithstanding anything
contained herein to the contrary, in the event that any Interest Installment and/or Principal
Installment of the Installment Payments shall be paid by the Certificate Insurer pursuant to a
Certificate Insurance Policy, the Installment Payments shall remain unpaid hereunder for all
purposes, shall not be discharged or otherwise satisfied and shall not be considered paid by the
City, and the assignment and pledge thereof and all agreements, covenants and other obligations
of the City hereunder with respect thereto shall continue to exist and shall run to the benefit of
the Certificate Insurer.
Section 5.05. Parity Obligations. In connection with the execution and delivery of any
Parity Obligations under the terms of Article VI, the City shall deliver or caused to be delivered
to the Certificate Insurer a copy of the disclosure document, if any, circulated with respect to
such Parity Obligations.
ARTICLE VI
PARITY OBLIGATIONS AND SUBORDINATE OBLIGATIONS
Section 6.01. Conditions for the Execution of Parity Obligations. The City may at any
time execute and deliver any Parity Obligation, the payment of which is payable from and
secured by a lien and charge on the Net Revenues and amounts in the Electric Revenue Fund on
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a parity with the lien and charge on Net Revenues and amounts in the Electric Revenue Fund
securing the Installment Payments due under this Agreement, provided:
(a) Either -
(1) during any twelve (12) consecutive calendar months out of the
immediately preceding eighteen (18) calendar month period, the Adjusted Annual Net
Revenues were at least equal to one hundred ten percent (110%) of the Maximum Annual
Debt Service for all Outstanding Installment Payments and all Outstanding Parity
Obligations plus the Parity Obligation proposed to be executed; or
(2) as evidenced by a Certificate of the City or an Engineer's Report on file
with the City, the projected Adjusted Annual Net Revenues during each of the succeeding
five (5) complete Fiscal Years beginning with the first Fiscal Year following issuance of
such Parity Obligation in which interest is not capitalized in whole from the proceeds of
Parity Obligations, is at least equal to one hundred ten percent (110%) of the Maximum
Annual Debt Service for all Outstanding Installment Payments and all Outstanding Parity
Obligations plus the Parity Obligation proposed to be executed;
(b) If the Parity Obligation proposed to be executed is not a Parity Payment
Agreement, the proceeds of such Parity Obligation proposed to be executed shall be used solely
to finance or refinance (including reimbursement to the City of amounts advanced for such costs)
one or more additions, betterments or improvements to the Electric System as designated by the
City and to pay any incidental costs and expenses related thereto (including the costs of issuance,
execution or delivery of such proposed Parity Obligation);
(c) With respect to any Parity Obligation to be executed in connection with a
Payment Agreement, there shall have been delivered to the City evidence that the incurrence of
such Parity Obligation and Payment Agreement will not in and of itself cause a downgrade of the
rating issued by the Rating Agencies then rating the Certificates or any Parity Obligation;
(d) There shall have been delivered to the City an Opinion of Counsel substantially to
the effect that (1) the City has the right and power under applicable law to execute and deliver
the Parity Obligation, and the Parity Obligation has been duly and lawfully executed and
delivered by the City, is in full force and effect and is a valid and binding special obligation of
the City and enforceable in accordance with its terms (except as enforcement may be limited by
bankruptcy, moratorium, insolvency, reorganization, fraudulent conveyance and other similar
laws relating to the enforcement of creditors' rights), and (2) such Parity Obligation has been
duly and validly authorized, executed and delivered in accordance herewith; and
(e) If required by the terns of such Parity Obligation, a separate reserve has been
established for such Parity Obligation and that provision has been made to fund such reserve.
Notwithstanding the foregoing provisions, neither clause (a) nor clause (b) above shall
limit the ability of the City to execute any Parity Obligations at any time to refund any
Outstanding Installment Payments and Outstanding Parity Obligations which results in a net
present value savings to the City, inclusive of all costs of such refunding.
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Section 6.02. Subordinate Obligations. The City may incur Subordinate Obligations
without meeting any of the tests set forth in Section 6.01.
ARTICLE VII
COVENANTS OF THE CITY
Section 7.01. Compliance with Agreement. The City will punctually pay the
Installment Payments in strict conformity with the terms hereof, and will faithfully observe and
perform all the agreements, conditions, covenants and terms contained herein required to be
observed and performed by it, and will not terminate this Agreement or fail to make any
Installment Payment required by this Agreement for any cause including, without limiting the
generality of the foregoing, any acts or circumstances that may constitute failure of
consideration, destruction of or damage to all or a portion of the Electric System, commercial
frustration of purpose, any change in the tax or other laws of the United States of America or of
the State or any political subdivision of either or any failure of the Corporation to observe or
perform any agreement, condition, covenant or term contained in this Agreement required to be
observed and performed by it, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement or the insolvency, or deemed insolvency, or
bankruptcy or liquidation of the Corporation or any force majeure, including acts of God,
tempest, storm, earthquake, war, rebellion, riot, civil disorder, acts of public enemies, blockade
or embargo, strikes, industrial disputes, lockouts, lack of transportation facilities, fire, explosion,
or acts or regulations of governmental authorities.
Section 7.02. Distribution of Net Revenues for Debt Service. The City hereby covenants
that the City will distribute Net Revenues available for Outstanding Installment Payments and
debt service on all Outstanding Parity Obligations on a pro rata basis without regard to whether
each such Parity Obligation has a funded debt service reserve or a surety bond or other similar
funding instrument.
Section 7.03. Tax Covenants. (a) The City hereby covenants it shall not take any
action, or fail to take any action, if any such action or failure to take action would adversely
affect the Tax-exempt status of the Interest Installments of the Series C Installment Payments
under Section 103 of the Code. Without limiting the generality of the foregoing, the City shall
comply with the requirements of the Tax Certificate, which is incorporated herein as if fully set
forth herein.
(b) In the event that at any time the City is of the opinion that, in order to comply
with its obligations under subsection (a) of this Section, it is necessary or helpful to restrict or
limit the yield on the investment of any moneys in any of the funds or accounts held by the
Trustee pursuant to the Trust Agreement, the City shall so instruct the Trustee in writing, and
cause the Trustee to take such action as may be necessary in accordance with such instructions.
(c) Notwithstanding any provisions of this Section, if the City shall provide to the
Trustee an Opinion of Counsel to the effect that any specified action required under this
Section is no longer required or that some further or different action is required to maintain the
exclusion from federal income tax of Interest Installments of the Series C Installment Payments
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under Section 103 of the Code, the City and the Trustee may conclusively rely on such opinion
in complying with the requirements of this Section and of the Tax Certificate, and the covenants
hereunder shall be deemed to be modified to that extent.
(d) The covenants in this Section shall survive payment in full or discharge of the
Certificates and the Installment Payments.
Section 7.04. Against Encumbrances. The City will pay or cause to be paid when due
all sums of money that may become due or purporting to be due for any labor, services,
materials, supplies or equipment furnished, or alleged to have been furnished, to or for the City
in, upon, about or relating to the Electric System and will keep the Electric System flee of any
and all liens against any portion of the Electric System. In the event any such lien attaches to or
is filed against any portion of the Electric System, the City will cause each such lien to be fully
discharged and released at the time the performance of any obligation secured by any such lien
matures or becomes due, except that if the City desires to contest any such lien it may do so if
contesting such lien will not materially impair operation of the Electric System. If any such lien
shall be reduced to final judgment and such judgment or any process as may be issued for the
enforcement thereof is not promptly stayed, or if so stayed and such stay thereafter expires, the
City will forthwith pay or cause to be paid and discharged such judgment. The City will, to the
maximum extent permitted by law, indemnify and hold the Corporation harmless from, and
defend it against, any claim, demand, loss, damage, liability or expense (including attorneys'
fees) as a result of any such lien or claim of lien against any portion of the Electric System.
Section 7.05. Sale or Other Disposition of Property. The City will not sell, transfer or
otherwise dispose of any of the works, plant, properties, facilities or other part or rights of the
Electric System or any real or personal property comprising a part of the Electric System if such
sale, transfer or disposition would cause the City to be unable to satisfy the requirements of
Section 7.13 hereof.
Section 7.06. City Obligations under Trust Agreement. The City agrees to comply with
all of the requirements of the Trust Agreement applicable to the City and to take all actions,
provide all documents and to otherwise satisfy and comply with all provisions of the Trust
Agreement applicable to the City.
Section 7.07. Maintenance and Operation of the Electric System; Budgets, The City
will maintain and preserve the Electric System in good repair and working order at all times and
will operate the Electric System in an efficient and economical manner and will pay all
Maintenance and Operation Costs as they become due and payable. The City will adopt and file
with the Corporation, not later than October 1 of each year, a cover letter, signed by an officer of
the City stating that all Installment Payments required by this Agreement have been included in
the budget for the then current Fiscal Year, and a budget approved by the City Council setting
forth the estimated Maintenance and Operation Costs for the then current Fiscal Year and will
take such action as may be necessary to include all Installment Payments required to be made
hereunder and all payments coming due in such Fiscal Year with respect to Parity Obligations
and Subordinate Obligations in its annual budget; provided, that any such budget may be
amended at any time during any Fiscal Year and such amended budget shall be filed by the City
with the Corporation. When filed with the Corporation, such budget shall include a cover letter
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from the City stating that all Installment Payments for the then current fiscal year required to be
made hereunder have been included in the attached annual budget.
Section 7.08. Compliance with Contracts for Use of the Electric System. The City will
comply with, keep, observe and perform all agreements, conditions, covenants and terms,
express or implied, required to be performed by it contained in all contracts for the use of the
Electric System and all other contracts affecting or involving the Electric System to the extent
that the City is a party thereto.
Section 7.09. Insurance. The City will procure and maintain such insurance relating to
the Electric System which it shall deem advisable or necessary to protect its interests and the
interests of the Corporation, which insurance shall afford protection in such amounts and against
such risks as are usually covered in connection with public electric utility systems similar to the
Electric System; provided, that any such insurance may be maintained under a self-insurance
program so long as such self-insurance is maintained in the amounts and manner as is, in the
opinion of an accredited actuary, actuarially sound. All policies of insurance required to be
maintained hereunder shall provide that the Corporation shall be given thirty (30) days' written
notice of any intended cancellation thereof or reduction of coverage provided thereby.
Section 7.10. Accounting Records; Financial Statements and Other Reports.
(a) The City will keep appropriate accounting records in which complete and correct
entries shall be made of all transactions relating to the Electric System, which records shall be
available for inspection by the Corporation at reasonable hours and under reasonable conditions.
(b) The City will prepare and file with the Corporation annually within one hundred
eighty (180) days after the close of each Fiscal Year (commencing with the Fiscal Year ending
June 30, 2002):
(1) financial statements of the City for such Fiscal Year prepared in
accordance with Generally Accepted Accounting Principles, together with an
Accountant's Report thereon; and
(2) a detailed report as to all insurance policies maintained and self-insurance
programs maintained by the City with respect to the Electric System as of the close of
such Fiscal Year, including the names of the insurers which have issued the policies and
the amounts thereof and the property or risks covered thereby.
Section 7.11. Protection of Security and Rights of the Corporation. The City will
preserve and protect the security of the Installment Payments under this Agreement and the
rights of the Corporation to the Installment Payments under this Agreement and will warrant and
defend such rights against all claims and demands of all persons.
Section 7.12. Payment of Taxes and Compliance with Governmental Regulations. The
City will pay and discharge all taxes, assessments and other governmental charges which may
hereafter be lawfully imposed upon the Electric System or any part thereof when the same shall
become due. The City will duly observe and conform with all valid regulations and requirements
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of any governmental authority relative to the operation of the Electric System or any part thereof,
but the City shall not be required to comply with any regulations or requirements so long as the
validity or application thereof shall be contested in good faith and contesting such validity or
application will not materially impair the operations or financial condition of the Electric
System.
Section 7.13. Amount of Rates and Charges. The City will at all times fix, prescribe and
collect rates and charges for the services, facilities and electricity of the Electric System during
each Fiscal Year which will be at least sufficient to yield: (a) Adjusted Annual Revenues for
such Fiscal Year at least equal to the sum of the following for such Fiscal Year: (i) Adjusted
Maintenance and Operation Costs; (ii) Adjusted Annual Debt Service with respect to the
Installment Payments and Parity Obligations, and (iii) all other payments required to meet any
other obligations of the City which are charges, liens or encumbrances upon or payable from the
Electric Revenue Fund, including all amounts owed to any issuer of a Financial Guaranty then in
effect and deposited in the Reserve Fund under the terms of such Financial Guaranty;
(b) Adjusted Annual Net Revenues for such Fiscal Year equal to at least one hundred ten percent
(110%) of Adjusted Annual Debt Service with respect to the Installment Payments and Parity
Obligations for such Fiscal Year. The City may make adjustments from time to time in such fees
and charges and may make such classification thereof as it deems necessary, but shall not reduce
the rates and charges then in effect unless the Adjusted Annual Revenues and the Adjusted
Annual Net Revenues from such reduced rates and charges will at all times be sufficient to meet
the requirements of this Section.
Section 7.14. Collection of Rates and Charges. The City will have in effect at all times
rules and regulations requiring each consumer or customer located on any premises connected
with the Electric System to pay the rates and charges applicable to the Electric Service provided
to such premises and providing for the billing thereof and for a due date and a delinquency date
for each bill. The City will not permit any part of the Electric System or any facility thereof to
be used or taken advantage of free of charge by any corporation, firm or person, or by any public
agency (including the United States of America, the State of California and any city, county,
district, political subdivision, public corporation or agency of any thereof). Nothing herein shall
prevent the City, in its sole and exclusive discretion, from permitting other parties from selling
electricity to retail customers within the service area of the Electric System; provided, however,
that permitting such sales shall not relieve the City of its obligations hereunder.
Section 7.15. Eminent Domain and Insurance Proceeds. If all or any part of the Electric
System shall be taken by eminent domain proceedings, or if the City receives any insurance
proceeds resulting from a casualty loss to the Electric System, the Net Proceeds thereof, at the
option of the City, shall be applied either to the proportional prepayment of Outstanding
Installment Payments hereunder and Outstanding Parity Obligations or shall be used to substitute
other components for the condemned or destroyed components of the Electric System.
Section 7.16. Further Assurances. The City will adopt, deliver, execute and make any
and all further assurances, instruments and resolutions as may be reasonably necessary or proper
to carry out the intention or to facilitate the performance of this Agreement and for the better
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assuring and confirming unto the Corporation of the rights and benefits provided to it in this
Agreement.
Section 7.17. Continuing Disclosure. The City hereby covenants albagrees, wheneve
1 by Rule 15u2-12, to comply with the continuing disclosure requirements for the Series
C Certificates as promulgated under Rule 15c2-12, as it may from time to time hereafter be
amended or supplemented. The City hereby further covenants and agrees that it will comply
with and carry out all of its obligations under the Continuing Disclosure Agreement to be
delivered by the City in connection with the execution and delivery of the s -D --Certificates.
Notwithstanding any other provision of this Agreement, failure of the City to comply with the
requirements of Rule 15s2 12 applirable sethg Sgrie-s- C-(e-mrti€isates,as 4 may from tim-ete t
heroaftor l,o wrnen-d-ed or supplemented, or faduro of the, City to ^,,,,,1„ ,,,;rl, the Continuing
Disclosure Agreement shall not be considered an Agreement Event of Defaulter and the
Corporation shall have no right to accelerate amounts due hereunder as a result thereof,
provided, however, that any Owner may take such actions as may be necessary and appropriate,
including seeking mandate or specific performance by court order, to cause the City or the
Trustee, as the case may be, to comply with its obligations in this Section and the Continuing
Disclosure Agreement.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.01. Events of Default and Acceleration of Principal. if ^"p or. MA ach of
the following E*eatsshall constitute as Agreement Event of Default shall happe
&ay:
(a) if default shall be made in the due and punctual payment of any Installment
Payment or of any Parity Obligation when and as the same shall become due and payable;
(b) if default shall be made by the City in the performance of any of the agreements
or covenants contained herein required to be performed by it, other than as set forth in (a) above,
and such default shall have continued for a period of thirty (30) days after the City shall have
been given notice in writing of such default by the Corporation;
(c) if default shall be made by the City in the performance of any of the agreements
or covenants contained in any Parity Obligation required to be performed by it, other than as set
forth in (a) above, and such default shall have continued after any notice and grace period
provided by such Parity Obligation; or
(d) if the City shall file a petition or answer seeking arrangement or reorganization
under the federal bankruptcy laws or any other applicable law of the United States of America or
any state therein, or if a court of competent jurisdiction shall approve a petition filed with or
without the consent of the City seeking arrangement or reorganization under the federal
bankruptcy laws or any other applicable law of the United States of America or any state therein,
or if under the provisions of any other law for the relief or aid of debtors any court of competent
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jurisdiction shall assume custody or control of the City or of the whole or any substantial part of
its property;
then and in each and every such case during the continuance of such Event of Default specified
in clause (d) above, the Corporation shall, and for any other such Event of Default the
Corporation may, by notice in writing to the City, declare the entire amount of the unpaid
Principal Installments and those Interest Installments coming due to and including the date of
such declaration to be due and payable immediately, and upon any such declaration the same
shall become immediately due and payable, anything contained herein to the contrary
notwithstanding. This Section is subject to the condition, however, that if at any time after the
entire amount of the unpaid Principal Installments and Interest Installments coming due to and
including the date of such declaration shall have been so declared due and payable and before
any judgment or decree for the payment of the money due shall have been obtained or entered,
the City shall deposit in the Debt Service Fund a sum sufficient to pay the unpaid amount of the
Principal Installments and Interest Installment due otherwise then as a result of such declaration
and in the applicable debt service fund(s) the unpaid principal amount of any payments due
under any Parity Obligation referred to in clause (a) above due and payable prior to such
declaration and the accrued interest thereon, with interest on such overdue installments at the rate
or rates applicable to such unpaid Installment Payments if paid in accordance with their terms
and on the Parity Obligations in accordance with their terms, and the City shall have paid the
reasonable expenses of the Corporation, the Trustee and any fiduciaries for Parity Obligations
resulting from such declaration, and any and all other defaults known to the Corporation (other
than in the payment of the entire amount of the unpaid Principal Installments and Interest
Installments due and payable solely by reason of such declaration) shall have been made good or
cured to the satisfaction of the Corporation or provision deemed by the Corporation to be
adequate shall have been made therefor, then and in every such case the Corporation, by written
notice to the City, may rescind and annul such declaration and its consequences; but no such
rescission and annulment shall extend to or shall affect any subsequent default or shall impair or
exhaust any right or power consequent thereon.
Section 8.02. Application of Net Revenues upon Acceleration. All Net Revenues upon
the date of the declaration of acceleration by the Corporation as provided in Section 8.01 above
and all Net Revenues thereafter received shall be applied in the following order:
First, to the payment of the fees, costs and expenses of the Corporation and the Trustee, if
any, in carrying out the provisions of this Article, including reasonable compensation to their
agents, accountants and counsel and including any indemnification expenses;
Second, to the payment of the Interest Installments and interest then due and payable on
the entire principal amount of the unpaid Parity Obligations, and the unpaid Principal
Installments and the principal amount of the Parity Obligations which has become due and
payable, whether on the original due date or upon acceleration, with interest on the overdue
Principal Installment at the rate or rates applicable to the Installment Payments and the principal
and interest amounts of the unpaid Panty Obligations at the rate or rates of interest then
applicable to such Parity Obligations, and, if the amount available shall not be sufficient to pay
in full all the amounts due with respect to the Installment Payments and the Parity Obligations,
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together with such Interest Installments and interest on Parity Obligations, then to the payment
thereof ratably, according to the principal and interest due, without any discrimination or
preference.
Net Revenues may also be applied to make payments required under any Parity Payment
Agreement on a parity with the payments under paragraph Second above, to the extent and in the
manner provided by the terms of such Parity Payment Agreement.
Section 8.03. Other Remedies. The Corporation shall also have the right:
(a) by mandamus or other action or proceeding or suit at law or in equity to enforce
its rights against the City or any officer or employee thereof, and to compel the City or any such
officer or employee to perform and carry out its or his or her duties under the law and the
agreements and covenants required to be performed by it or him or her contained in this
Agreement;
(b) by suit in equity to enjoin any acts or things which are unlawful or violate the
rights of the Corporation; or
(c) by suit in equity upon the happening of an Event of Default to require the City
and its officers and employees to account as the trustee of an express trust.
Section 8.04. Non -Waiver. Nothing in this Article or in any other provision hereof shall
affect or impair the obligation of the City, which is absolute and unconditional, to pay the
Installment Payments from the Net Revenues to the Corporation at the respective due dates or
upon acceleration or prepayment, or shall affect or impair the right of the Corporation, which is
also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract
embodied in this Agreement.
A waiver of any default or breach of duty or contract by the Corporation shall not affect
any subsequent default or breach of duty or contract or impair any rights or remedies on any such
subsequent default or breach of duty or contract. No delay or omission by the Corporation to
exercise any right or remedy accruing upon any default or breach of duty or contract shall impair
any such right or remedy or shall be construed to be a waiver of any such default or breach of
duty or contract or an acquiescence therein, and every right or remedy conferred upon the
Corporation by law or by this article may be enforced and exercised from time to time and as
often as shall be deemed expedient by the Corporation.
If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned
or determined adversely to the Corporation, the City and the Corporation shall be restored to
their former positions, rights and remedies as if such action, proceeding or suit had not been
brought or taken.
Section 8.05. Remedies Not Exclusive. No remedy herein conferred upon or reserved to
the Corporation is intended to be exclusive of any other remedy, and each such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now or hereafter
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existing in law or in equity or by statute or otherwise and may be exercised without exhausting
and without regard to any other remedy conferred by law.
ARTICLE IX
DISCHARGE OF OBLIGATIONS
Section 9.01. Discharge of Obligations.
(a) If the City shall pay or cause to be paid all the Installment Payments at the times
and in the manner provided herein, the right, title and interest of the Corporation herein and the
obligations of the City under this Agreement shall cease, terminate, become void and be
completely discharged and satisfied.
(b) Any unpaid Installment Payment shall on its payment date or date of prepayment
be deemed to have been paid within the meaning of and with the effect expressed in subsection
(a) of this Section if the City makes payment of such Installment Payment and the prepayment
premium, if applicable, in the manner provided herein.
(c) All or any portion of an unpaid Principal Installment shall, prior to its payment
date or date of prepayment, be deemed to have been paid within the meaning of and with the
effect expressed in subsection (a) of this Section (except only that the right of the Corporation to
receive Installment Payments and the obligation of the City to pay such Installment Payments but
only out of the money and Defeasance Securities deposited with the Trustee for such payment)
if: (i) there shall have been deposited with the Trustee either money in an amount which shall be
sufficient, or Defeasance Securities which are not subject to redemption except by the holder
thereof prior to maturity (including any such securities issued or held in book -entry form), the
interest on and principal of which when paid will provide money which, together with money, if
any, deposited with the Trustee, shall be sufficient (as evidenced by a report of an Independent
Certified Public Accountant regarding such sufficiency) to pay when due the portion of the
Certificates evidenced by such Principal Installment or such portion thereof on its payment date
or its date of prepayment, as the case may be, the Interest Installments with respect to such
Principal Installment due on and prior to such payment date or date of prepayment, and the
prepayment premium, if any, on the portion of the Certificates evidenced by such Principal
Installment upon any prepayment thereof in accordance with the Trust Agreement; and (ii) an
Opinion of Counsel is filed with the Trustee to the effect that the action taken pursuant to this
subsection will not cause the Interest Installments of the Series C Installment Payments to be
includable in gross income under the Code for federal income tax purposes.
(d) After the payment, or provision for the payment as provided in subsection (c) of
this Section, of all Installment Payments and prepayment premiums, if any, and payment in full
of all fees and expenses of the Corporation, the Corporation, upon request of the City, shall cause
an accounting for such period or periods as may be requested by the City to be prepared and filed
with the City and the Corporation shall execute and deliver to the City all such instruments as
may be necessary or desirable to evidence such total discharge and satisfaction of this
Agreement.
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ARTICLE X
MISCELLANEOUS
Section 10.01. Liability of City Limited to Net Revenues. Notwithstanding anything
contained herein, the City shall not be required to advance any moneys derived from any source
of income other than the Net Revenues for the payment of the Installment Payments or for the
performance of any agreements or covenants required to be performed by it contained herein.
The City may, however, advance moneys for any such purpose so long as such moneys are
derived from a source legally available for such purpose and may be legally used by the City for
such purpose.
The obligation of the City to make the Installment Payments is a special obligation of the
City payable solely from the Net Revenues as provided herein. The general fund of the City is
not liable, and neither the faith and credit nor the taxing power of the City is pledged, for the
payment of the Installment Payments or the performance or satisfaction of any other obligations
of the City hereunder.
Section 10.02. Other Provisions Relating to Financial Guaranties.
(a) In the event that a draw is made on any Financial Guaranty, the City shall not
make any prepayments of Installment Payments pursuant to Section 3.02 hereof unless all
amounts owed by the City to the issuer of each Financial Guaranty so drawn upon have paid in
full pursuant to the terms of such Financial Guaranty.
(b) This Agreement may not be terminated unless provisions have been made to pay
all amounts owed to the issuer of each Financial Guaranty then in effect under the terms of such
Financial Guaranty.
Section 10.03. Amendments. The Corporation and the City shall not supplement, amend,
modify or terminate any of the terms of this Agreement unless the conditions set forth in Section
5.06 of the Trust Agreement have been satisfied.
Section 10.04. Assignment of Agreement. The City hereby acknowledges that the
Corporation, for good and valuable consideration, has transferred, assigned and sent over to the
Trustee, pursuant to the provisions of the Trust Agreement, all of the Installment Payments and
any and all rights and privileges it has hereunder with respect to the Installment Payments and
references to the Corporation herein to the Corporation's rights with respect to the Installment
Payments (but not the obligations of the Corporation hereunder, it being understood that the
Trustee shall not assume any responsibility for any duties or covenants or warranties of the
Corporation hereunder) shall be construed to be references to the Trustee.
Section 10.05. Benefits of Agreement Limited to Parties. Nothing contained in this
Agreement, expressed or implied, is intended to give to any person other than the Corporation,
the Trustee (with respect to its rights pursuant to Sections 4.01(b) and 10.12 hereof and as the
assignee of the Corporation's rights hereunder), the City, or the Certificate Insurer (so long as the
Certificate Insurer is not in default under a Certificate Policy) any right, remedy or claim under
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or pursuant thereto, and any agreement or covenant required herein to be performed by or on
behalf of the Corporation (and the Trustee, as the assignee of the Corporation's rights hereunder)
or the City shall be for the sole and exclusive benefit of the other party.
Section 10.06. Successor Is Deemed Included in all References to Predecessor.
Whenever either the Corporation or the City is named or referred to herein, such reference shall
be deemed to include the successor to the powers, duties and functions that are presently vested
in the Corporation or the City, and all agreements and covenants required hereby to be performed
by or on behalf of the Corporation or the City shall bind and inure to the benefit of the respective
successors thereof whether so expressed or not.
Section 10.07. Waiver of Personal Liability_. No officer or employee of the City shall be
individually or personally liable for the payment of the Installment Payments or the performance
or satisfaction of any other obligation of the City hereunder, but nothing contained herein shall
relieve any officer or employee of the City from the performance of any official duty provided
by any applicable provisions of law or by the terms of this Agreement.
Section 10.08. Article and Section Headings, Gender and References. The headings or
titles of the several articles and sections hereof and the table of contents appended hereto shall be
solely for convenience of reference and shall not affect the meaning, construction or effect
hereof, and words of any gender shall be deemed and construed to include all genders. All
references herein to "Articles," "Sections," "Exhibits" and other subdivisions or clauses are to
the corresponding articles, sections, exhibits, subdivisions or clauses hereof; and the words
"hereby," "herein," "hereof," "hereto," "herewith" and other words of similar import refer to this
Agreement as a whole and not to any particular article, section, exhibit, subdivision or clause
hereof.
Section 10.09. Partial Invalidity. If any one or more of the agreements or covenants or
portions thereof required hereby to be performed by or on the part of the Corporation or the City
shall be contrary to law, then such agreement or agreements, such covenant or covenants or such
portions thereof shall be null and void and shall be deemed separable from the remaining
agreements and covenants or portions thereof and shall in no way affect the validity hereof. The
Corporation and the City hereby declare that they would have executed this Agreement, and each
and every other article, section, paragraph, subdivision, sentence, clause and phrase hereof
irrespective of the fact that any one or more articles, sections, paragraphs, subdivisions,
sentences, clauses or phrases hereof or the application thereof to any person or circumstance may
be held to be unconstitutional, unenforceable or invalid.
Section 10.10. Net Contract. This Agreement shall be deemed and construed to be a net
contract, and the City shall pay absolutely net during the term hereof the Installment Payments
and all other payments required under this Agreement, free of any deductions and without
abatement, diminution or set-off whatsoever.
Section 10.11. California Law. This Agreement shall be construed and governed in
accordance with the laws of the State of California.
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Section 10.12. Indemnification. The City shall, to the full extent then permitted by law,
indemnify, protect, hold harmless, save and keep harmless the Corporation and the Trustee and
their directors, officers and employees from and against any and all liability, obligations, losses,
claims and damages whatsoever, regardless of the cause thereof, and expenses in connection
therewith, including, without limitation, counsel fees and expenses, penalties and interest arising
out of or as the result of (i) the entering into of this Agreement, (ii) any claim for patent,
trademark or copyright infringement, (iii) any claim arising out of strict liability in tort, (iv)
without negligence or willful misconduct, the Trustee's acceptance or administration of the trust
under the Trust Agreement, or the exercise or performance of any of its powers or duties
thereunder or hereunder; or (v) any untrue statement or alleged untrue statement of any material
fact or omission or alleged omission to state a material fact necessary to make the statements
made, in light of the circumstances under which they were made, not misleading in any official
statement or other offering circular utilized in connection with the sale of any Certificates
executed and delivered under the Trust Agreement. The indemnification arising under this
Section shall continue in full force and effect notwithstanding the full payment of all obligations
hereunder or the termination of the other provisions hereof for any reason. The City and the
Corporation mutually agree to promptly give notice to each other of any claim or liability hereby
indemnified against following either's learning thereof. The rights to indemnification from the
City hereunder shall survive the termination hereof or the resignation or removal of the Trustee.
Section 10.13. Funds. Any fund required to be established and maintained herein by the
City may be established and maintained in the accounting records of the City either as an account
or a fund and may, for the purpose of such accounting records, any audits thereof and any reports
or statements with respect thereto, be treated either as an account or a fund; but all such records
with respect to any such fund shall at all times be maintained in accordance with sound
accounting practice.
Section 10.14. Notices. All notices, certificates or other communications hereunder shall
be deemed sufficiently given upon actual receipt thereof when received by the City, the
Corporation, the Trustee, the Certificate Insurer, and the Rating Agencies, as the case may be, at
the respective address provided pursuant to Section 11.08 of the Trust Agreement or, if mailed
by first class mail, postage prepaid, addressed to the appropriate address provided pursuant to
Section 11.08 of the Trust Agreement, six Business Days after deposit in the United States mail.
Unless otherwise requested by the City, the Corporation, the Trustee, the Certificate
Insurer or a Rating Agency, any notice required to be given hereunder in writing may be given
by any form of telephonic or electronic transmission capable of making a written record. Each
such party shall file with the Trustee information appropriate to receiving such form of
telephonic or electronic transmission. Any of the parties noted above may, by notice given
hereunder, designate any different addresses to which subsequent notices, certificates or other
communications shall be sent.
Section 10.15. Effective Date. This Agreement shall become effective upon its execution
and delivery, and, except as otherwise specifically provided with respect to particular terms
hereof, shall terminate when the Installment Payments provided herein shall have been fully paid
(or provision for the payment thereof shall have been made pursuant to Article IX hereof).
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Section 10. 16. Execution in Counterpart. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and all of which shall constitute but one
and the same instrument.
[Remainder of Page Intentionally Left Blank.]
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IN WITNESS WHEREOF, the parties hereto have executed and attested this Agreement
by their respective officers thereunto duly authorized, as of the day and year first written above.
Attest:
City Clerk
APPROVED:
City Attorney
Attest;
Secretary for the Corporation
APPROVED:
Attorney for the Corporation
DOCSLAI 4294W ?^',?4Z9401,4
40490-7 FJCMPP
CITY OF LODI
City Manager
LODI PUBLIC IMPROVEMENT
CORPORATION
President
F,XHTBIT A
SERIES C INSTALLMENT PAYMENTS
Payment Principal Interest Total
Date Installment Installment Payments
DOCSLAI 4294W°' ?"' ?4294014
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EXHIBIT B
SERIES D INSTALLMENT PAYMENTS
Payment Principal Interest Total
Date Installment Installment Payments
DOCSLA 1:4294001.'429401.4
40490-7-F- MPP B-1
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; RESTATEMENT...........................................................2
Section 1.01.
Trust Agreement.......................................................................................2
Section 1.02.
Amendment and Restatement...................................................................2
ARTICLE II
TRANSFER OF CALPINE' S RIGHTS UNDER THE FIRST
AMENDMENT; RESTATEMENT OF AGREEMENT ..........................3
Section 2.01.
Sale of City's Interest in Energy...............................................................3
Section 2.02.
Purchase Price of Energy..........................................................................3
Section 2.03.
Netting of Payments..................................................................................3
Section 2.04.
Acknowledgement of Transfer.................................................................3
ARTICLE III
INSTALLMENT PAYMENTS AND PREPAYMENTS ........................4
Section 3.01.
Installment Payments................................................................................4
Section3.02.
Prepayments..............................................................................................4
ARTICLE IV
ELECTRIC SYSTEM REVENUES; FUNDS..........................................5
Section 4.01.
Pledge of Net Revenues and Moneys in Electric Revenue Fund; Electric
RevenueFund...........................................................................................5
Section4.02.
Investments...............................................................................................6
ARTICLE V
CERTIFICATE INSURANCE POLICIES...............................................7
Section 5.01.
Provisions Relating to Certificate Insurance.............................................7
Section 5.02.
Information and Reports...........................................................................7
Section5.03.
Acceleration..............................................................................................7
Section 5.04.
Installment Payments Not Discharged......................................................7
Section 5.05.
Parity Obligations.....................................................................................7
ARTICLE VI
PARITY OBLIGATIONS AND SUBORDINATE OBLIGATIONS
.....7
Section 6.01.
Conditions for the Execution of Parity Obligations..................................7
Section 6.02.
Subordinate Obligations............................................................................9
ARTICLE VII
COVENANTS OF THE CITY.................................................................9
Section 7.01.
Compliance with Agreement....................................................................9
Section 7.02.
Distribution of Net Revenues for Debt Service........................................9
Section 7.03.
Tax Covenants..........................................................................................9
Section 7.04.
Against Encumbrances............................................................................10
Section 7.05.
Sale or Other Disposition of Property.....................................................10
DOCSLAI :439401. 429401.4 -1-
40490-7 fJCMPP
TABLE OF CONTENTS
(continued)
Page
Section 7.06.
City Obligations under Trust Agreement................................................10
Section 7.07.
Maintenance and Operation of the Electric System; Budgets ................10
Section 7.08.
Compliance with Contracts for Use of the Electric System ...................11
Section7.09.
Insurance.................................................................................................11
Section 7.10.
Accounting Records; Financial Statements and Other Reports..............11
Section 7.11.
Protection of Security and Rights of the Corporation .............................1
l
Section 7.12.
Payment of Taxes and Compliance with Governmental Regulations ....11
Section 7.13.
Amount of Rates and Charges................................................................12
Section 7.14.
Collection of Rates and Charges.............................................................12
Section 7.15.
Eminent Domain and Insurance Proceeds..............................................12
Section 7.16.
Further Assurances..................................................................................12
Section 7.17.
Continuing Disclosure............................................................................13
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES.........................................13
Section 8.01.
Events of Default and Acceleration of Principal....................................13
Section 8.02.
Application of Net Revenues upon Acceleration....................................14
Section8.03.
Other Remedies.......................................................................................15
Section8.04.
Non-Waiver.............................................................................................15
Section 8.05.
Remedies Not Exclusive.........................................................................15
ARTICLE IX
DISCHARGE OF OBLIGATIONS........................................................16
Section 9.01.
Discharge of Obligations........................................................................16
ARTICLEX
MISCELLANEOUS...............................................................................17
Section 10.01.
Liability of City Limited to Net Revenues.............................................17
Section 10.02.
Other Provisions Relating to Financial Guaranties.................................17
Section10.03.
Amendments...........................................................................................17
Section 10.04.
Assignment of Agreement......................................................................17
Section 10.05.
Benefits of Agreement Limited to Parties..............................................17
Section 10.06.
Successor Is Deemed Included in all References to Predecessor ...........18
Section 10.07.
Waiver of Personal Liability...................................................................18
Section 10.08.
Article and Section Headings, Gender and References ..........................18
Section 10.09.
Partial Invalidity......................................................................................18
Section 10.10.
Net Contract............................................................................................18
DOCSLAI :429401 242.94.01.4_ -11-
40490-7 f4CMPP
TABLE OF CONTENTS
(continued)
Page
Section 10.11. California Law........................................................................................18
Section 10.12. Indemnification.......................................................................................19
Section10.13. Funds...................................................................................................19
Section10.14. Notices...................................................................................................19
Section10.15. Effective Date.........................................................................................19
Section 10.16. Execution in Counterpart ........................................................................20
EXHIBIT A — SERIES C INSTALLMENT PAYMENTS........................................................... A-1
EXHIBIT B — SERIES D INSTALLMENT PAYMENTS...........................................................B-1
DOCSLAI :42940.° 1.'429401.4 -111-
40490-7faCMPP --
RESOLUTION NO. 2002-212
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LODI RELATING
TO ELECTRIC SYSTEM REVENUE CERTIFICATES OF PARTICIPATION;
APPROVING THE FORMS OF AND AUTHORIZING THE EXECUTION AND
DELIVERY OF AN AMENDED AND RESTATED ELECTRIC ENERGY
PURCHASE AGREEMENT, A CONTINUING DISCLOSURE AGREEMENT,
A CERTIFICATE PURCHASE CONTRACT, A PRELIMINARY OFFICIAL
STATEMENT AND AN OFFICIAL STATEMENT, AND APPROVING AND
AUTHORIZING CERTAIN OTHER MATTERS RELATING THERETO
WHEREAS, the City of Lodi, a municipal corporation duly organized and existing under
and by virtue of the Constitution and laws of the State of California (the "City"), has established
the Electric System (capitalized terms used herein and not otherwise defined shall have the
meanings given such terms pursuant to Section 1.01 of the Trust Agreement referred to below)
to serve the inhabitants of the City; and
WHEREAS, pursuant to the Public Utilities Code of the State, the City is authorized to
acquire, own, control, sell or exchange rights of every nature for the purpose of operating the
Electric System; and
WHEREAS, in order to assure adequate electricity to satisfy the expected load
requirements of the inhabitants of the City, the City entered into the Original Agreement with
Calpine providing for the purchase by the City of the Energy for the term of the Original
Agreement; and
WHEREAS, pursuant to the Original Agreement, the City was obligated to take and pay
for the Energy as delivered, resulting in the City's obligation to make installment purchase
payments to Calpine in the amounts and at the times determined pursuant to the Original
Agreement; and
WHEREAS, the City and Calpine have entered into the Amendment (the Original
Agreement as amended and supplemented by the Amendment being herein referred to as the
"Amended Agreement") pursuant to which the Original Agreement has been amended and
supplemented to provide for three Parts, with the Original Agreement constituting Part II; and
WHEREAS, the City has sold its interests in the Energy to Calpine, and Calpine
purchased the City's interests in the Energy, on the terms and conditions set forth in the Part III
of the Amended Agreement; and
WHEREAS, pursuant to Part III of the Amended Agreement, the City and Calpine
agreed upon the purchase price for the City's interests in the Energy and also agreed to net the
payments due from the City for its purchase of the Energy from Calpine pursuant to the Original
Agreement against the payments due from Calpine for its purchase of the City's interests in the
Energy pursuant to Part III of the Amended Agreement, resulting in an obligation of the City to
make certain installment payments to Calpine (the "Original Installment Payments"); and
WHEREAS, the City and Calpine agreed in Part III of the Amended Agreement that the
Original Installment Payments were to be paid from Net Revenues of the City's Electric System;
and
WHEREAS, Part I of the Amended Agreement provided the Lodi Public Improvement
Corporation, a nonprofit, public benefit corporation duly organized and existing under and by virtue
of the laws of the State of California (the "Corporation") with the option to purchase all of
Calpine's right, title and interest in and to Part III thereof, including the right to collect the
Original Installment Payments; and
WHEREAS, the Corporation intends to exercise said option and acquire all of Calpine's
right, title and interest in and to Part III of the Amended Agreement, including the right to collect
the Original Installment Payments; and
WHEREAS, in order to facilitate the Corporation's financing of its acquisition of
Calpine's right, title and interest in and to Part III of the Amended Agreement, to modify the
Original Installment Payments as requested by the City, to conform the covenants and
agreements of the City with respect to the Electric System and the Revenues with outstanding
Parity Obligations of the City and to simplify the agreement between the City and the
Corporation with respect to Part III of the Amended Agreement, the City and the Corporation
have determined to amend and restate Part III of the Amended Agreement as provided in the
Amended and Restated Electric Energy Purchase Agreement (the "Agreement"), dated as of
November 1, 2002, between the City and the Corporation; and
WHEREAS, pursuant to the Agreement, the City will be obligated to make the Installment
Payments to the Corporation from Net Revenues in the amounts, on the dates and on the terms
and conditions set forth in the Agreement; and
WHEREAS, the City desires to approve the Corporation's acquisition of Calpine's rights in
and to Part III of the Amended Agreement with the proceeds of the sale of the Electric System
Revenue Certificates of Participation, 2002 Series C (the "Series C Certificates") and Electric
System Revenue Certificates of Participation, 2002 Taxable Series D (the "Series D Certificates"
and collectively with the Series C Certificates, the "Certificates"), evidencing and representing
proportionate interests of the owners thereof in the Installment Payments to be made by the City
pursuant to the Agreement; and
WHEREAS, the Certificates are to be executed and delivered pursuant to a Trust
Agreement (the "Trust Agreement"), proposed to be executed by the Corporation and BNY
Western Trust Company (the "Trustee"); and
WHEREAS, the City has been advised by bond counsel that the interest installments
evidenced and represented by the Series D Certificates will not be excludable from gross income
for purposes of federal income taxes by the owners thereof under the Internal Revenue Code of
1986, as amended, and the regulations thereunder; and
WHEREAS, the City proposes to execute and deliver a Certificate Purchase Contract (the
"Certificate Purchase Contract") with Salomon Smith Barney Inc. (the "Underwriter"), pursuant to
which the Underwriter will purchase the Certificates for reoffering to the public, and to authorize
the distribution of a Preliminary Official Statement, and the execution and delivery of an Official
Statement and a Continuing Disclosure Agreement pertaining to the Certificates; and
WHEREAS, all acts, conditions and things required by the laws of the State of California to
exist, to have happened and to have been performed precedent to and in connection with the
consummation of the transactions authorized hereby do exist, have happened and have been
performed in regular and due time, form and manner as required by law, and the City is now duly
authorized and empowered, pursuant to each and every requirement of law, to consummate such
transactions for the purpose, in the manner and upon the terms herein provided.
2
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
LODI, AS FOLLOWS:
Section 1. (a) The City Council hereby specifically -finds and determines that the actions
authorized hereby constitute and are with respect to the public affairs of the City and that the
statements, findings and determinations of the City set forth above and in the preambles of the
documents approved herein are true and correct and that the consummation of the transactions
contemplated therein shall result in significant public benefits to the City in that the City expects to
improve the operation of the City's Electric System as a result of the Corporation's acquisition of
Calpine's rights in and to Parts I and III of the Amended Agreement and the execution and
delivery of the Agreement by the City and the Corporation. The City Council hereby specifically
further finds and determines that the interest installments evidenced and represented by the
Series D Certificates will be subject to federal income taxation under current law.
(b) The Corporation's acquisition from Calpine assignee of all of Calpine's right, title and
interest in and to Part III of the Amended Agreement with the proceeds of the sale of the
Certificates is hereby approved. The Trust Agreement, including without limitation, the
assignment and transfer by the Corporation of its rights in and to the Agreement to the Trustee as
provided in the Trust Agreement, are hereby consented to and approved.
Section 2. The Agreement proposed to be executed and entered into by and between the
City and the Corporation, in the forrn presented at this meeting and on file with the City Clerk, and
the performance by the City of its obligations under the Agreement as executed and delivered in
accordance with this Resolution are hereby approved. The City Manager and the Finance
Director, each acting singly, are hereby authorized and directed, for and in the name and on
behalf of the City, to execute and deliver to the Corporation the Agreement in substantially said
form, with such changes therein as the officer executing such document may approve, such
approval to be conclusively evidenced by the execution and delivery thereof; provided, that the
schedule of the installment payments to be contained in the Agreement and to be attached as
exhibits thereto shall be determined by the City Manager or the Finance Director of the City upon
the sale of the Certificates, but shall not exceed $45,000,000 in aggregate principal amount, shall
provide for installment payments not later than 35 years from the date of delivery of the
Certificates, and shall result in a net interest cost not in excess of eight percent per annum.
Section 3. The Certificate Purchase Contract, proposed to be executed and entered into
by and between the City and the Underwriter, in the form presented at this meeting and on file
with the City Clerk, and the performance of the City of its obligation under the Certificate Purchase
Contract as executed and delivered in accordance with this Resolution are hereby approved. The
City Manager and the Finance Director, each acting singly, are hereby authorized and directed,
for and in the name and on behalf of the City, to execute and deliver to the Underwriter the
Certificate Purchase Contract in substantially said form, with such changes therein as the officer
executing such document may approve, such approval to be conclusively evidenced by the
execution and delivery thereof.
Section 4. The Preliminary Official Statement, in the form presented at this meeting and
on file with the City Clerk, is hereby approved. The City Manager and the Finance Director, each
acting singly, are hereby authorized and directed to cause the Preliminary Official Statement to be
deemed final for purposes of Rule 15c2-12 of the Securities and Exchange Act of 1934 (the
"Rule") and to be distributed to potential purchasers of the Certificates in substantially the form
presented to this meeting with such changes therein as the officer deeming the Preliminary
Official Statement final for purposes of the Rule may approve, such approval to be conclusively
evidenced by deeming the Preliminary Official Statement final for purposes of the Rule.
lc]
Section 5. The preparation and delivery of an Official Statement, and its use by the
Underwriter in connection with the offering and sale of the Certificates are hereby approved. The
Official Statement shall be substantially in the form of the Preliminary Official Statement with such
changes therein as the officer executing the Official Statement may approve, which approval to be
conclusively evidenced by such officer's execution and delivery thereof. The City Manager and
the Finance Director, each acting singly, are hereby authorized and directed, for and in the name
and on behalf of the City, to execute and deliver the Official Statement and any amendment or
supplement thereto contemplated by the Certificate Purchase Contract, in the name and on behalf
of the' City, and thereupon to cause the final Official Statement and any such amendment or
supplement to be delivered to the Underwriter.
Section 6. The Continuing Disclosure Agreement, proposed to be executed and entered
by the City and the Trustee, in the form presented at this meeting and on file with the City Clerk,
and the performance by the City of its obligations under the Continuing Disclosure Agreement as
executed and delivered in accordance with this Resolution are hereby approved. The City
Manager and the Finance Director, each acting singly, are hereby authorized and directed for and
in the name and,on behalf of the City to execute and deliver the Continuing Disclosure Agreement
in substantially said form, with such changes therein as the officer executing such document may
require or approve, such approval to be conclusively evidenced by the execution and delivery
thereof.
Section 7. The City Clerk is hereby authorized and directed to attest the signature of the
City Manager or the Finance Director and to affix and attest the seal of the City, as may be
required or appropriate, in connection with the execution and delivery of the Certificates and the
documents approved by this Resolution.
Section 8. The officers of the City are hereby severally authorized and directed to do any
and all things (including the negotiating and obtaining of a municipal bond insurance policy or
reserve fund surety bond with respect to the Certificates if the City Manager or Finance Director
determine that such insurance policy or surety bond will result in savings to the City) and to
execute and deliver any and all documents which they may deem necessary or desirable in order
to consummate the transactions authorized hereby and to consummate the sale, execution and
delivery of the Certificates and otherwise to carry out, give effect to and comply with the terms and
intent of this Resolution, the Agreement, the Continuing Disclosure Agreement, the Certificate
Purchase Contract, the Preliminary Official Statement, the Official Statement and the Certificates;
and all such actions heretofore taken by such officers are hereby ratified, confirmed and
approved.
Section 9. This Resolution shall take effect immediately upon its passage.
Date: October 22, 2002
---------------------------------------------------------
---------------------------------------------------------
4
I hereby certify that Resolution 2002-212 was passed and adopted by the City Council of
the City of Lodi in a special meeting held October 22, 2002 by the following votes:
AYES: COUNCIL MEMBERS — Hitchcock, Howard, Land, Nakanishi, and Mayor
Pennino
NOES: COUNCIL MEMBERS — None
ABSENT: COUNCIL MEMBERS — None
ABSTAIN: COUNCIL MEMBERS — None
Susan J. Blackston
City Clerk
Approved As'to Form:
��
Randall A. Hays
City Attorney
f4- A�
Electric System Operrting Pro Forma - (Debt Service on 1/1 and 7/1 Fiecal Year)
Electric System Caehflowl0 - Calpine replace Equal Series 2002C and D
Actual Actual Actual I Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected Projected
OPERATING REVENUES:
1 Investment/Property Ftvenucs('
$2,896,347 $4,916,476
$1,501,105
$93,555
$236,852
$269,705
$316,411
$378,405
5.128,825
$477,079
5505,656
$519,809
$557,623
$614,036
$632,800
5640,971_
2 Rate Revenue
38,643,042 39,859,072
39,638,239
41,641,210
42,890,447
43,426,577
43,969,410
45,632,003
46,201,403
46,779,933
47,364,682
49,156,145
49,770,596
50,392,729
51,022,638
51,660,421
3 Market Cost Adjustment
256,009
R,480,410
8,800,000
8,600,Ik10
8,000,000
7,600,000
7,400,000
7,200,000
7,000,000
6,800,000
6,600,000
6,400,000
6,200,000
6,000,000
5,800,m
4 Transfers from Reserves
5,670,000
8,550,000
5 Other Revta ms
1,213 14.415
763,456
500,000
6 Total Revenues
41,540,602 50,715,972
58,933,210
51,034,766
51,727,299
51,696,283
51,885,821
S3,410,407
53,831,228
54,257,012
54,670,338
56,275,953
56,728,219
57,206,765
57,655,438
58,101,39(
OPERATING EXPENSES -
7 OpeaatingExpenditures
8,395,120 7,268,261
4,640,521
4,925,000
5,100,000
5,400,000
6,100,000
6,973,351
7,112,818
7,255,075
7,400,176
7,548,180
7,699,143
7,853,126
8,010,188
8,170,39,
8 City Administration ChasBts
1,398,735 1,697,136
2,259,303
2,253,035
2,331,891
2,413,507
2,497,980
2,585,409
2,675,899
2,769,555
2,866,490
2,966,817
3,070,655
3,178,128
3,289,363
3,404,491
9 Bulk Power
27,722,088 40 58176
49.657,797
33,278,974
30,069 57
30,446,369
29,940,297
30 460,659
28,409,192
31639,246
32,282,934
31,380,537
29,485,229
30,991,476
31,539 446
32,235P8
10 Total Operating Expenses
37,515,943 49,323,573
56,557,622
40,457,009
37,501,848
78,259,877
38,538,277
40,019,418
38,197,909
41,663,876
42,349,399
41,895,533
40,255,027
42,022,731
42,838,998
43,809,971
li Net Operating Revenues (a)
S4, 51,392,399 $1,392,399
75 89
$10 77757 $14 5451
$13,436,406 $13 47543 $13 90989 $15,633,319 $12,593136 $12120739 $143020
$16,473192 815184034 $14816,440
$14 9142?
12 Direct Debt Service
13 1999 COPA
1,329,593 1,391,435
695,718
-
-
_
14 2002A COPS
- -
519,105
1,170,403
1,170,403
1,170,403
1,461,718
1,753,032
1,753,032
1,753,032
1,753,032
3,207,657
3,494,178
3,491,860
3,503,328
3,505,33-
15 2002BCOPs
-
1,244,555
3,865,570
2,752,530
1,149,830-
16 Calpine replace 2002C and D COPsO)
3 75 000
6 000
6 0 000
6,300,0N
6,300,00
0,000
6,300,000
430,W0
6^00
3,15010W
17 Total Direct Debt Service
1,329,593 1,391,435
2,459,377
8,710,973
10,222,933
8,620,233
7,761,718
8,053,032
8,053,032
9,053,032
8,053,032
9,507,657
6,644,178
3,497,860
3,503,328
3,505,33-
18 Less: 1999 Pns ect Fund Earrings
;'r., an
!,!- ,,.4 ;
!r 4 k
3h f, ' .
1 ; ;•P7.
19 Net Direct Debt Service & Calpine (b)
1,329,593 1,391,435
2,132,608
7,540,570
9,529,962
8,235,463
7,628,439
8,053,032
8,053,032
8,053,032
8,053,032
9,507,657
6,644,178
3,497,860
3,503,328
3,505,33 -
FUND BALANCE:
24 Beginning Balance (d)
14,308,527 15,895,762
6,787,089
2,425,629
1,733,939
728,033
182,899
143,479
4,14"!
1,505,901
247,963
, I: +'+r:,1 i',
].1; .:+t'•:.
1,538,034
7,367,903
12,809,051
25 Net Revenues less Direct Debt Sewice
2,695,066 964
242,981
3,037,187
4,695,489
5,2700,943
5,719,105
5,337,957
7,580,287
4,540,204
4,067,706
4,872,763
9,829,013
11,686,174
11,313,112
10,786,091
26 Other Rcvenucsl')
2,855,663
2,532,D48
-
-
27 Bond Proceeds
6,000,000
8,250,000
a8 Change in Receivables(')
i 1,467,695
! -, 7 ,1.
29 Change in Payables('
563,239
30 OperatingTmnsferOut
3-0,;^!. ._ .V-
.!1H.S "
,_],tv.+
l'!•
:'•li.L1.'-
..�.__-
,. ,.-_
.;v ^.t;.:,
, t!,
I_'f.]os.
.�;!,i!-.
:.;;.t.,+tc•,
.-1-;+.;:•;
:-sr;7;c
31 Public Benefits_
.! !-4.c -
-..
-,•
-- .--
, ,J;I
-•,s,_,
.,I L.
..,�1'1.._
'+!],1�
._ _
,_ -r„.
s:• ;I.
.s�;•!!'.
32 DS Cuvenge Transfer
33 Transfer inm
- -
508,433
350,000
357,000
364,140
371,423
378,851
386,428
394,157
402,040
410,081
418,282
426,648
435,181
443,895
34 P11.0T
.i tr' +i•'",it;
_ :89:
,182,899,
..143,479
,•2.••,..•,
.,, •..
.. .........
',•,..,;
,.67.90
35 Ending Balance
15,895,762 6,787,099
2,425,19
1,733,939
728.033
;'ao, ,!.
1505.901
47,963
-1,;•'�..;t'�;
=,l�hr.kx:••
1.538,034
7367,903
.809;,•",
12,809.052
7.707.•.,
]7,707,051
Prepared by Public Financial Management 10/21/20()2 3:52 Phi Pagc I of I
Energy Portfolio
Restructure Bond Sale
City Council Meeting
October 22, 2002
■ Shape resource portfolio to more closely
follow load profile
■ Shape bulk power cost to more closely
match load/revenue growth
■ Accelerate growth of cash reserves
■ Maintain regional advantage in terms of
rates
Proposal
■ Defease ("blowup") existing contract by paying "mark -
to -market" difference discounted at Calpine's cost of
capital (Part I finished
■ Finance present value of "mark -to -market" at our cost of
capital (Part II under consideration now)
■ Replace power contract with contracts which are better
suited to our resource needs
■ Structure repayment stream to smooth out annual bulk
power costs
Termination Contract Part
■ Integrated planning indicates net surplus position,
particularly in low priced shoulder months
■ Calpine contract resource is the only resource Lodi can
easily restructure to reduce surplus energy price risk
■ Counter party credit deterioration created both a
concern and an opportunity
Bond Sale Part II
■ On September 10, 2002, Lodi and Calpine amended the contract to
provide:
✓ Termination of energy deliveries from Calpine to Lodi
✓ Lodi is obligated to pay Calpine $525,000 per month for remaining
term
✓ Lodi has option to purchase contract from Calpine for $42 million
Lodi will use Taxable and Tax Exempt Bond (half and half) proceeds to
purchase amended Calpine contract:
✓ PV savings of $4,600,000 compared to not proceeding with
financing
• Lodi achieves:
✓ Immediate end to above -market power purchases
✓ Increased cash flow flexibility
(� i,�e- kt 6', -�- T-�)
City of IM4 California
Electric System Operating Pro Forma - (Debt Service on 1/1 and 7/1 Fiscal Year)
Electric System Cashflow(1) - Equal Series 2002C and D
Actual Actual Actual I Projected Projected Pfc4ected Projected Pnueeted Projected Projrxted Projected Projected Projected Pmjecttd Pruiected Projected
i'1l 2000 FY 2001 IN 2002 FY 2003 [Y 2004 by 2005 YY.2006 l71: 2247 a 20 111.042 by 261n FY 2011 AY 2012 FY 2013 1X2014 FY 2015.
OPERATING REVENUES:
OPERATING EXPENSES:
1 Investment/Property Revenueso
$2,896,3.47 $4,916,476
$1,501,105
$93,555
$236,852
$269,705
$316,411
$378,405
$428,825
$477,079
$505,656
$519,809
$557,623
$614,036
$632,800
$640,97:
2 Rate Revenue
38,643,042 39,859,072
39,638,239
41,641,210
42,890,447
43,426,577
43,969,410
45,632,003
46,202,403
46,779,933
47,364,682
49,156,145
49,770,596
50,392,729
51,022,638
51,660,42.
3 hluketCost Adjustment
256,009
8,480,410
8,800,000
8,600,000
8,000,000
7,600,000
7,400,000
7,200,000
7,000,000
6,800,000
6,600,000
6,400,000
6,200,000
6,000,000
5,8001001
4 Transfers from Reserves
5,670,000
8,550,000
30,460 658
-
31639 46
32A2,934
31,380,537
29,485,229
30,991,476
31539,446
32 5,081
10
Total Operating Expenses
37$15,943 49523,573
5 Other Revenues
1,213 14,415
763.156
500 000
38,538,277
40,019,418
38,197,909
41,663,876
42,549,599
41,895,533
40,255,027
42,022,731
42,838,998
43,809,97.
11
6 Total Revenues
41,540,602 50,715,972
58,933,210
51,034,766
51,727,299
51,696,283
51,885,821
53,410,407
53,831,228
54,257,012
54,670,338
56,275,953
56,728,219
57,206,765
57,655,438
58,101,394
Prepared by Public Financial Management 10/21/1002 3:13 PM Inge I of I
OPERATING EXPENSES:
7
Operating Expenditures
8,395,120
7,268,261
4,640,521
4,925,000
5,100,000
5,400,000
6,100,000
6,973,351
7,112,818
7,255,075
7,400,176
7,548,180
7,699,143
7,853,126
8,010,188
8,170,39:
8
City Administration Charges
098,735
1,697,136
2,259,303
2,253,035
2,331,891
2,413,507
2,497,980
2585,409
2,675,899
2,769,555
2,866,490
2,966,817
3,070,655
3,178,128
3,289,363
3,404,49
9
Bulk Prnvee
27,722,098
40,358,176
49,637,797
33,278,974
30,D69,957
30,446 69
29,940 97
30,460 658
28 409192
31639 46
32A2,934
31,380,537
29,485,229
30,991,476
31539,446
32 5,081
10
Total Operating Expenses
37$15,943 49523,573
56,557,621
40,457,009
37,501,848
38,259,877
38,538,277
40,019,418
38,197,909
41,663,876
42,549,599
41,895,533
40,255,027
42,022,731
42,838,998
43,809,97.
11
Net OpetatiagRevenues (a)
44,024659 $1392 99
$2,375589
$10577757 $14225451 $1343640( $13347 3 $13190,989 $15633319 $12 93136 $1110739 514 80,420
$16473192 $15184,034 $14816,440
$14 9142!
12
Direct Debt Service
13
1999 COPS
1,329,593
1,391,435
695,718
14
2002A COPs
519,105
1,170,403
1,170,403
1,170,403
1,461,718
1,753,032
1,753,032
1,753,032
1,753,032
3,207,657
3,494,178
3,497,860
3,503,328
3,505,33•
15
20028 COPS
1,244555
3,865,570
2,752,530
1,149,830
-
16
2002C and D COPs(�)
456,970
4199 000
4198 001
4,194,134
4,1&5,M
6,487 16
4,099,518
4,083,960
4085 965
5,257,473
5,204,397
5168 651
5,154,03-
5,492,943
8,121,933
6,518,233
5,655,851
3,938,976
8,240,348
5,842,550
5,836,992
7,293,622
8,751,651
8,702,257
8,671,979
8,659361
17 Total Direct Debt Service 1,329,593 1391,435 2,459,377
18
Less: 1999Ptujec[Fund Earnings
"26,769)
!.1- ,t:';tr•7_v:
;S4.:vn
;-,_-m,
19
Net Direct Debt Service (b)
1,329593
1391,435
2,132,608
4,322,540
7,428,962
6,133,463
5.522,572
5,938,978
8,240,348
5,842,550
5,836,992
7,293,622
8,751,651
8,702,257
8,671,979
8,659,361
20
Direct Debt Service Coverage (a/b)
3.03X
I-=
IAIX
2.45X
1.91X
2119X
2.42X
2.25X
1.90X
2.16X
2.08X
1.97X
1.88X
1.74X
1.71X
1.65X
21
Indirect Net Debt Service (c)
13,885,630
13,254,423
11,164,502
10,861,114
10,908,627
10,982,985
9,971,435
9,770,867
6,930,177
9,436,552
9,394,461
7,875,482
6,417,730
6,466,271
6,493,420
6,508,391
22
Adj. Net Operating Revenues (b+c)
17,910,2B9
14,646,822
13,540,091
21,438,872
25,134,078
24,419,391
23,318,979
23,161,856
22,563,497
22,029,688
21,515,199
22,255,902
22,890,922
21,650,305
21,309,860
20,799,81:
23
OveroUDebt Service Covernge
1.18X
1.00x
IM
IAIX
1.37X
1.43X
1.StX
1.47X
1.49X
1.44X
1AIX
1.47X
IS1X
1.43X
1.41X
137X
FUND BALANCE:
24
Beginning Balance (d)
14,308,527
13,895,762
6,787,089
2,425,629
4,951,969
6,047,063
7,603,928
9,670,375
11,351 A59
12,959,536
13,912,080
14,383,844
15,644,312
17,524,753
18,150,225
18,422,72:
25
Net Revenues less Direct Debt Service
2,695,066
964
242,981
6,255,217
6,796,489
7,302,943
7,824,971
7,452,011
7,392,972
6,730,586
6,283,747
7,086,797
7,721,540
6,481,777
6,144,462
5,632.05-
26
Other Reve-nutslh
2,855,663
2,532,048
27
Bond Proceeds
6,000,000
8,250,000
18
Change in Reeeivabhs()
: t
1,40,695
29
Change in Payables()
-
-
563,239
-
-
-
-
-
-
-
-
-
-
-
30
Operating Transfer Out
,'.'.1.
;,.}-1.
;4.1.1'.
.___
:;,.:�;,
.;ti=t..,;
;`.f.; •,,
49.921,
-424_1.'
.'!.11
.4i-1,-1+!.;
1-,;'r;
44f :A;
31
Public Benefits
-
-
r:i. -�.
-
."_-_t.
-,,{ ;H'.,
,<S.'...
.14
., '.
1.1 _
<1_.:
32
DS Coverage Transfer
-
33
Transfer Inm
508,4331
350,000
357,000
364,140
371,423
378,851
386,428
394,157
402,040
410,081
418,282
426,648
435,181
443,88.
34
PILOT
' 4.; -
4 r; -,!'
.4.7h ; W)
�, ;8.-' 1'
1,76-,424;
-
35
Ending Balance
15,895,762
6,787,089
2,425,629
4,951,9691
6,047,06'5
7,603,928
9,670,375
11,351,059
12,959,536
13,912,080
14,383,844,
15,644,312
17,524,753
18,150,225
18,422,723
18,166,(8'
Prepared by Public Financial Management 10/21/1002 3:13 PM Inge I of I
Projected Debt Service Current Estimate
$8,000,000
$7,000,000
$6,000,000
$5,000,000
y
0 $4,000,000
sa
F
ds $3,000,000
$2,000,000
$1,000,000
so
00Ib h, X06 �O� �O4b DOS Ohm �hh Ohf' �h0
M Series 2002C M Series 2002D (Taxable)
■ Series 2002C&D debt service is structured to smooth out Lodi Electric's overall
fixed operating costs
■ Net of capitalized interest and reserve earnings, if any
Summary
■ Bond Sale on track to meet schedule
■ Pro Forma demonstrates need for
restructure
■ Reducing Credit Risk achieved
■ Rating Agency due soon