Resolution No. 9098s
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RESOLUTION NO. 9098
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION AND
DELIVERY OF A NATURAL GAS PURCHASE AND SALE
AGREEMENT BY AND BETWEEN THE CITY OF VERNON AND
CITIGROUP ENERGY, INC.
WHEREAS, the City of Vernon (the "City") owns and operates a
municipal natural gas distribution system (the "Gas System") for
supplying the City's municipal electric system (the "Electric System")
with natural gas and expects to expand the operations of the Gas System
to provide natural gas to businesses and industries within the City;
and
WHEREAS, pursuant to the Natural Gas Purchase Agreement,
dated as of June 1, 2006 between the City and the Vernon Natural Gas
Financing Authority (the "Authority"), commencing August 1, 2006, will
receive a portion of the natural gas required by the Gas Department
from Citigroup Energy Inc. ("CEI") under that certain Natural Gas
Purchase and Sale Agreement, dated June 27, 2006; and
WHEREAS, the City desires to provide for the purchase of the
balance of the natural gas required by the Gas Department commencing
August 1, 2006 through that certain Natural Gas Purchase and Sale
Agreement (the "Natural Gas Purchase and Sale Agreement"), dated
August 1, 2006, between the City and CEI; and
WHEREAS, the City has determined that it is to the City's
advantage, and in the public interest of the inhabitants of the City,
to enter into the Natural Gas Purchase and Sale Agreement.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1: The City Council of the City of Vernon hereby
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finds and determines that the recitals contained hereinabove are true
and correct.
SECTION 2: The City Council of the City hereby approves the
Natural Gas Purchase and Sale Agreement with CEI in substantially the
same form as the copy which is attached hereto as Exhibit A.
SECTION 3: The City Council of the City hereby authorizes
the Mayor and the Mayor Pro Tem, each acting singly (each an "Authorized
Officer"), to execute the Natural Gas Purchase and Sale Agreement for,
(and on behalf of, the City and the Acting City Clerk is hereby
authorized to attest thereto.
SECTION 4: The City Council of the City hereby authorizes
the Authorized Officer executing the Natural Gas Purchase and Sale
Agreement to make whatever nonsubstantive, administrative and/or text
changes to the Natural Gas Purchase and Sale Agreement which such
Authorized Officer, upon advice of counsel, shall approve, the execution
of the Natural Gas Purchase and Sale Agreement by such Authorized
Officer being conclusive evidence of such approval.
SECTION 5: The City Council of the City hereby authorizes
each Authorized Officer, the City Attorney, the Acting City Clerk and
all other proper officers and officials of the City to execute and
deliver such other agreements, documents and certificates, and to
perform such other acts and deeds, as may be necessary or convenient
to effect the purposes of this Resolution and the transactions herein
authorized.
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SECTION 6: The Acting City Clerk of the City of Vernon
shall certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 19th day of July, 2006.
11 LEONIS C.k,0ALBjRG, Mayor
ATTEST:
BRUCE V. WLKENHORST, JR.
Acting City Clerk
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STATE OF CALIFORNIA )
) ss
COUNTY OF LOS ANGELES )
I, BRUCE V. MALKENHORST, JR., Acting City Clerk of the City of
Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. 9098, was duly adopted by the City Council of the City
of Vernon at a regular meeting of the City Council duly held on
Wednesday, July 19, 2006, and thereafter was duly signed by the Mayor
of the City of Vernon.
(SEAL)
BRUCE V. MALKENHORST, JR.
Acting City Clerk
- 4 -
EXHIBIT
AV
Draft 07/11/06
NATURAL GAS PURCHASE AND SALE AGREEMENT
August 1, 2006
Seller:
Citigroup Energy Inc.
1301 Fannin, Suite 2300
Houston, Texas 77565
Notices & Correspondence:
1301 Fannin, Suite 2300
Houston, Texas 77565
Attn: Global Commodities
Phone: (713) 752-5267
Fax: (713) 582-4675
With a Copy to:
1301 Fannin, Suite 2300
Houston, Texas 77565
Attn: Legal Department
Invoices & Payments:
1301 Fannin, Suite 2300
Houston, Texas 77565
Attn: Operations
Phone: (713) 752-5401
Fax: (713) 752-5237
Federal Tax ID Number: 27-0069674
Duns Number: 14-518-4631
Email: ceisettlementsgciti roup.com
Operating Communications:
1301 Fannin, Suite 2300
Houston, Texas 77565
Attn: Global Commodities
Phone: (713) 752-5267
Fax:(713)582-4675
E-mail: michael.keen@citigroup.com
Seller Wire Transfer Information:
BANK: CITRJS33
ABA: 021000089
ACCT: 3056-9329
Buyer:
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Notices & Correspondence:
4305 Santa Fe Avenue
Vernon, CA 90058
Attn:
Phone:
Fax:
Invoices & Payments:
4305 Santa Fe Avenue
Vernon, CA 90058
Attn:
Phone:
Fax:
Federal Tax ID Number: 956000808
Duns Number:
Operating Communications:
Attn:
Phone:
Fax:
E-mail
CITIGROUP ENERGY INC., a Delaware corporation ("Seller"), and CITY OF VERNON,
CALIFORNIA, a municipal corporation and a chartered city duly organized and existing under and by
US WEST:260051690.2
virtue of the Constitution and laws of the State of California and its Charter ("Buyer" with the Seller, the
"Parties" and either of which may be referred to as a "Party") enter into this Natural Gas Purchase and
Sale Agreement (the "Agreement") effective as of the date set forth above.
WITNESSETH:
Whereas, the Seller owns or controls quantities of natural gas it desires to sell pursuant to the terms
of this Agreement ("Gas"); and
Whereas, Buyer desires to purchase the Gas.
Now, therefore, in consideration of the mutual promises and agreements herein and for other for
good and valuable consideration, the adequacy of which is hereby acknowledged, the Parties agree as
follows:
1. Term. This Agreement shall govern all Gas sold by Seller to Purchaser, and shall
continue in effect until either of the Parties provides the other with thirty (30) days written notice of
termination (a "Termination Notice").
2. Price, Quantity and Delivery Point. The following shall apply to all Gas sold hereunder:
Contract Price: Midpoint Price plus one-half of one cent ($.005) per
MMBtu, subject to Para aph 4
Delivery Point: All Southern California border receipt points into the
SoCalGas pipeline
DCQ:
As specified pursuant to Paragraph 3
MaxDCQ: 10,000 MMBtu
"Btu" shall mean the amount of energy required to raise the temperature of one pound of pure
water one degree Fahrenheit from 59 Fahrenheit degrees to 60 degrees Fahrenheit.
"DCQ" shall mean the quantity of Gas to be Scheduled on any day hereunder.
"MaxDCQ" shall mean the maximum quantity of Gas that Seller is required to Schedule per day
pursuant hereto.
"Midpoint Price" shall mean for any day, the price per MMBtu designated as the "Midpoint"
price for SoCal gas for such day under the heading "Others" in the table "Daily Price Survey"
($/MMBtu) in Gas Daily, currently published by the McGraw-Hill Companies, Inc. If Gas Daily
ceases to publish such Midpoint Price, the Midpoint Price shall mean the arithmetic mean of the
prices per MMBtu designated as the "Absolute" prices for SoCal gas for such Day under the
heading "Others" in the table "Daily price survey ($/MMBtu)" in Gas Daily, or if Gas Daily
ceases to be published, the Midpoint Price shall mean the price per MMBtu for Gas to be
delivered for the applicable Day to Transporter's system at the geographic location or locations
closest to the Delivery Point, as set forth in an alternative index as reasonably agreed to by
Purchaser and Seller most closely tracking the methodology used for establishing either of the
foregoing published prices.
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"MMBtu" means one million Btus.
"Scheduled" or "Scheduling" shall mean when used in reference to the Seller, to make Gas
available or cause Gas to be made available, at the Delivery Point for delivery to or for the
account of Buyer, including making all pipeline nominations, and when used in reference to
Buyer, means notifying Seller, in accordance with Paragraph 3, of the quantity of Gas to be
delivered. Except as provided in Paragraph 10, Gas shall be deemed delivered when Scheduled.
"SoCal" "SoCalGas" or "Transporter" shall mean Southern California Gas Company, including
any successors or assigns thereof.
3. Operations and Delivery Scheduling Requests. Not later than 7:30 a.m. Central
Prevailing Time ("CPT") on the Business Day preceding the day Gas is to flow, Buyer shall provide
Seller with facsimile or e-mail notice of the quantity of Gas Buyer desires Seller to Schedule the next day,
provided that notices, with respect to Gas to flow on Saturday, Sunday or Monday, shall be given not later
than 7:30 a.m. CPT on the Friday before such flow days. In the event the nomination or Scheduling
deadline of the Transporter conflicts with the foregoing notification dates, Buyer and Seller shall modify
the notification dates accordingly. Scheduling requests to Seller will be accepted at the facsimile number
or e-mail address for Seller set forth on the first page hereof under "Operations" and will be confirmed by
Seller at the facsimile number or e-mail address for Buyer set forth on the first page hereof under
"Operations."
"Business Day" shall mean any day other than Saturday, Sunday and Federal Reserve Bank
holidays.
4. Contract Price Adjustments. Buyer may request a price for Gas other than the Contract
Price by contacting Seller during Pricing Hours requesting a Fixed Price for a specified volume of Gas for
a period of a Month or longer, provided that such request is made prior to 1:30 p.m. CPT of the third
trading day prior to the last trading day of the NYMEX Gas Futures contract for the selected Month or
such longer period.
"Fixed Price" shall mean a fixed dollar amount agreed to by the Parties.
"Month" shall mean a period of time beginning at midnight CPT on the first day of any calendar
month and ending immediately prior to the commencement of the first day of the following
calendar month.
"NYMEX" shall mean The New York Mercantile Exchange.
"Pricing Hours" shall mean the hours 8:00 a.m. CPT to 5:00 p.m. CPT on any Business Day.
5. Firm Delivery Seller shall Schedule or cause to be Scheduled that quantity of Gas
requested by Buyer as the DCQ for such day pursuant to Para agr ph 3, up to the MaxDCQ on a Firm basis.
"Firm" shall mean that Seller's obligation to sell and deliver and Buyer's obligation to purchase
and receive Gas shall only be excused by an event of Force Majeure, defined below.
6. Full Requirements. Buyer acknowledges and agrees that the Gas, together with the gas
sold by Seller to Buyer (as assignee of the Authority) pursuant to the Prepay Agreement, shall constitute
the full gas requirements for Buyer with respect to the Delivery Point.
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"Authority" shall mean Vernon Natural Gas Financing Authority.
"Prepay Agreement" shall mean the Agreement for Purchase and Sale of Natural Gas between
Seller and the Authority dated as of June 27, 2006.
7. Invoices and Payments.
(a) Seller shall invoice Buyer on or before the fifteenth (15`h) day of the Month for deliveries
of Gas made in the prior Month, which shall not include any amount for gas delivered under the
Prepay Agreement. Buyer shall pay Seller on the later of (a) the 25t' day of the Month following
the Month in which the Gas was delivered or (b) ten (10) days after Buyer's receipt, via facsimile,
United States first-class mail, or courier, of Seller's invoice or if such date is not a Business Day,
on the next Business Day. Payments shall be made by wire transfer of immediately available
U.S. Dollars to Seller's account set forth on the first page hereof.
(b) Amounts invoiced by Seller shall be based upon Buyer's actual usage of Gas as reflected
by the Metered Usage less that quantity of gas delivered under the Prepay Agreement. In the
event telemeter readings on Gas Select are not available, Buyer shall provide SoCal's meter
statements to Seller as requested by Seller. Buyer at its sole cost and expense shall be responsible
for installing and maintaining telemetry at Buyer's facility. Metered Usage of gas shall be
determined for all purposes of this Agreement in the following priority: first, gas delivered
pursuant to the Prepay Agreement; second, Fixed Price Gas; and third, Gas other than Fixed Price
Gas.
Seller, in its sole discretion, may suspend deliveries of Gas, in whole or in part, whenever any
payment on an invoice hereunder is two (2) Business Days or more past due after notice of such
failure to pay from Seller to Buyer.
(c) Any amount not paid when due shall accrue, and Buyer shall pay, interest at the lesser of
(i) the prime interest rate per annum on corporate loans at large U.S. money center commercial
banks (as reported in the first edition of Wall Street Journal "Money Rates" table for the
calendar month in which payment is due) plus 2% per annum, compounded daily from the due
date through but not including the date paid, or (ii) the maximum rate of interest permitted by
applicable law compounded daily from the due date through but not including the date paid.
(d) All payment obligations hereunder shall be special obligations of Buyer payable from
Buyer's Light and Power Department Fund.
"Metered Usage" means, for any period, the actual amount of gas taken off Transporter's
pipeline system by Buyer during such period, as reflected by telemeter reading on Gas Select via
SoCal Gas or, in the event that telemetry readings are not available, as reflected in SoCal's meter
statements to Buyer.
8. Credit Assurances. In the event that Seller has reasonable grounds for insecurity, Seller
may upon ten (10) Business Days notice to Buyer demand adequate assurance (in accordance with
Exhibit A hereto) of Buyer's ability to pay amounts becoming due hereunder and/or different terms of
payment. If Buyer fails to provide assurance Seller may, in its sole discretion, immediately cancel this
Agreement in accordance with the provisions of Paragraph 14 by giving written notice to Buyer.
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9. Title and Possession. Risk of loss and title to the Gas shall transfer from Seller to Buyer
at the Delivery Point. Seller shall be solely liable and responsible for, and shall indemnify and hold
harmless Buyer from and against, all claims, losses, liabilities, or damages (including attorneys' fees and
other reasonable litigation costs) (collectively, "Claims") arising out of or related to, directly or
indirectly, the Gas, personal injury (including bodily injury or death) or property damage related to the
Gas prior to delivery at the Delivery Point, and Buyer shall be solely liable and responsible for, and shall
indemnify and hold harmless Seller from and against, Claims arising out of or related to, directly or
indirectly, the Gas, personal injury (including bodily injury or death) or property damage related to the
Gas at and after its delivery at the Delivery Point, provided that Buyer shall have no liability with respect
to Seller's actions, or failure to act, as Contracted Marketer hereunder.
10. Qualily. All Gas shall be merchantable and shall conform to all of the specifications
promulgated or otherwise required by the Transporter. Buyer may refuse to accept Gas pending
correction of any quality deficiency. Seller and Buyer shall accept Transporter's determination of the
quality, quantity and heating value of Gas at Buyer's meter location, provided that such determination is
made in accordance with Transporter's procedures for measurement. Notwithstanding anything in this
Agreement to the contrary, Gas which does not conform to the Transporter's requirements shall not be
considered delivered.
11. Contracted Marketer Status. At least ten (10) Business Days prior to the beginning of the
Month in which any purchase and sale is to occur hereunder, Buyer will designate Seller as its Contracted
Marketer, as defined in, and in accordance with, the applicable SoCal tariff. Seller will take those actions
which are necessary and proper to maintain such status and will nominate and balance all Gas purchased
by Buyer under this Agreement and all gas purchased under the Prepay Agreement, including in each case
replacement gas. Subject to Seller's obligations under this Agreement, the Prepay Agreement and the
Remarketing Agreement, Buyer acknowledges that Seller, as Contracted Marketer, shall manage
Imbalances as it deems necessary and appropriate in its sole discretion.
"Remarketing Agreement" shall mean the Natural Gas Remarketing Agreement between the
Seller and the Buyer (as assignee of the Authority), dated as of June 27, 2006.
12. Liquidated Damaees.
(a) Seller's sole and exclusive remedy for the failure by Buyer to Schedule Gas hereunder,
when the circumstances of subparagraph (c) below are not applicable, shall be recovery of an
amount equal to the positive difference, if any, between the Contract Price (which for these
purposes shall include any adjustment made pursuant to Para aaph 4) and the price received by
Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially
reasonable differences in transportation costs to or from the Delivery Point, multiplied by the
difference between the DCQ and the quantity actually taken by Buyer for such day(s).
(b) Buyer's sole and exclusive remedy for the failure by Seller to Schedule Gas hereunder,
when the circumstances of subparagraph (c) below are not applicable, shall be recovery of an
amount equal to the positive difference, if any, between the purchase price paid by Buyer
utilizing the Cover Standard for replacement Gas and the Contract Price (which for these
purposes shall include any adjustment made pursuant to Paragraph 4), adjusted for commercially
reasonable differences in transportation costs to or from the Delivery Point, multiplied by the
difference between the DCQ and the quantity actually delivered by Seller for such day(s).
(c) In the event that Buyer has used commercially reasonable efforts to replace the Gas or
Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such sale
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or replacement is available, then the sole and exclusive remedy of the non -breaching party shall
be any unfavorable difference between the Contract Price and the Midpoint Price, adjusted for
such transportation to the applicable delivery point, multiplied by the difference between the
DCQ and the quantity actually delivered by Seller or received by Buyer for such days(s).
(d) The above described amounts shall be in addition to any Imbalance Charge for which a
Party is liable under Paragraph 13.
"Cover Standard" shall mean that the Party (other than the Party that failed to perform, the
"Performing Party") shall use commercially reasonable efforts to sell Gas or obtain Gas, as
applicable, at a price reasonable for the delivery area consistent with the amount of notice
provided by the non -Performing Party; the immediacy of the Buyer's Gas consumption needs or
Seller's sales requirements, as applicable; the quantities involved; and the anticipated length of
failure by the non -Performing Party, provided that in all events, Buyer's taking Gas from the
Transporter's pipeline shall satisfy the requirements of "Cover Standard".
13. Imbalances.
(a) Buyer and Seller shall use commercially reasonable efforts to avoid the occurrence of any
Imbalance hereunder and shall immediately notify the other upon discovery thereof. Imbalances
will be corrected or settled in cash unless the Parties agree to settlement in gas or offset. If
Transporter sends Seller, as Contracted Marketer, an invoice which includes Imbalance Charges
incurred in connection with Buyer's Metered Usage of gas, the Parties shall determine the
validity as well as the cause of the Imbalance Charges.
(b) If Imbalance Charges were incurred with respect to an Imbalance Interval as a result of a
Buyer Positive Imbalance, then Buyer shall pay Seller the Buyer Imbalance Charge. If Imbalance
Charges were incurred with respect to an Imbalance Interval for any other reason, including as a
result of Seller delivering quantities of gas less than the Contracted Gas, then Seller shall pay the
Imbalance Charges.
(c) If in any Imbalance Interval there was a Buyer Negative Imbalance, then Seller shall
credit the Buyer Imbalance Credit against the invoice sent pursuant to Paragraph 7.
(d) If in any Imbalance Interval the Metered Usage was less than the amount of Contracted
Gas delivered by Seller under this Agreement and the Prepay Agreement, then the amount of gas
delivered under the Prepay Agreement shall be considered the first gas used by Buyer and the
Imbalance Tolerance shall be applied first to the balance of the gas delivered under the Prepay
Agreement and then to any Gas delivered under this Agreement.
(e) Buyer acknowledges and agrees that it shall be liable and pay, or reimburse Seller for,
any Imbalance Charges accruing prior to the effective date of this Agreement.
"Buyer Negative Imbalance" means, with respect to an , the negative amount,
if any, of Metered Usage less the Contracted Gas and less the Imbalance Tolerance.
"Buyer Positive Imbalance" means, with respect to an , the positive amount,
if any, of the Buyer's Metered Usage less the Contracted Gas and less the Imbalance Tolerance.
"Buyer Imbalance Charge" means an amount equal to the product of the Imbalance Rate times
the Buyer Positive Imbalance.
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"Buyer Imbalance Credit" means an amount equal to the product of the Imbalance Rate times
the Buyer Negative Imbalance.
"Contracted Gas" means, for any Imbalance Interval, the sum of the Gas Scheduled by the
Buyer pursuant to Parag_ranh 3 to be delivered during such Imbalance Interval plus the amount of
gas to be delivered during such Imbalance Interval pursuant to the Prepay Agreement.
"Imbalance" means, with respect to an Imbalance Interval, a difference between the Contracted
Gas and the Metered Usage for such Imbalance Interval.
"Imbalance Charges" mean any fees, penalties, costs or charges (in cash or in kind) assessed by
Transporter for failure to satisfy Transporter's balance and/or nomination requirements pursuant
to Transporter's Schedule No. G-IMB.
"Imbalance Interval" means each period of time during which the usage of gas from the
Transporter's pipeline system by a customer or contracted marketer is balanced against deliveries
of gas to the Transporter's pipeline system for such customer's or contracted marketer's account
pursuant to Schedule No. G-IMB.
"Imbalance Rate" means: (i) with respect to an Imbalance Charge, the rate under Schedule No.
G-IMB which SoCal Gas charged for gas in determining such Imbalance Charge; and (ii) with
respect to a Buyer Imbalance Credit, the rate under Schedule No. G-IMB at which SoCal Gas
purchased gas for the Imbalance Interval relating to the Buyer Negative Imbalance.
"Imbalance Tolerance" means, with respect to an Imbalance Interval, the quantity of gas,
measured as a percentage of the Metered Usage, that the Buyer would be permitted to carry
forward into the next Imbalance Interval without incurring Imbalance Charges, or a Buyer
Imbalance Credit.
"Schedule No. G-IMB" means Transporter's Schedule No. G-IMB as the same may be amended,
supplemented or replaced, or any successor schedule in effect from time to time during the term
of this Agreement.
14. Default, Breach and Termination.
(a) The following with respect to a Party (the "Defaulting Party") shall constitute a material
breach and/or event of default hereunder (an "Event of Default"): (a) a Party makes a general
assignment or arrangement for the benefit of creditors; (b) a Party becomes bankrupt, a debtor in
a bankruptcy proceeding, insolvent or unable to pay its debts as they become due; (c) a Party files
a petition or otherwise commences a proceeding under any bankruptcy, insolvency,
reorganization or similar law, or has any such petition filed or commenced against it; (d) a Party
has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with
respect to it or a substantial portion of its property or assets; (e) a Credit Event occurs with
respect to Buyer, as defined Exhibit A; (f) a Party fails to make any payment due hereunder and
such failure is not remedied on or before two (2) Business Days after notice from the other Party;
(g) any representation or warranty given herein by a Party is materially incorrect or inaccurate;
(h) breach by Buyer of Paragraph 6 and (i) the occurrence and continuance with respect to Buyer
of an Incipient Illegality. If an Event of Default occurs, the non -Defaulting Party may elect to
terminate this Agreement by providing the Defaulting Party with written notice stating the
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effective date of termination (the "Liquidation Date"), which date may be the date of written
notice.
(b) If the non -Defaulting Party elects to terminate this Agreement, the non -Defaulting Party
shall calculate the Close-out Amount.
"Close-out Amount" shall mean an amount calculated in accordance with the definition of
"Close-out Amount" set forth in Section 14 of the 2002 ISDA Master Agreement published by
the International Swaps and Derivatives Association, Inc., where (i) "Terminated Transaction"
means any Gas for which a Scheduling request has been made pursuant to Paragraph 3 but which
has not been Scheduled by Seller, (ii) "Determining Party" means the non -Defaulting Party, and
(iii) `Early Termination Date" means the Liquidation Date.
"Incipient Illegality" means (a) the enactment by any legislative body with competent
jurisdiction over Buyer of legislation, which, if adopted as law, would render unlawful (i) the
performance by Buyer of any absolute or contingent obligation to make a payment or delivery or
to receive a payment or delivery in respect of this Agreement, or the compliance by Buyer with
any other material provisions of this Agreement, or (ii) the performance by Buyer of any
contingent or other obligation which Buyer has under any credit support document relating to this
Agreement; (b) any assertion in any proceeding, forum or action by a governmental entity, in
respect of Buyer, or in respect of any entity organized under the laws of the state in which Buyer
is located to the effect that performance under this Agreement or other similar agreements is
unlawful.
(c) If the Close-out Amount is positive, it shall be payable by the Defaulting Party, and if
such amount is negative, it shall be payable by the non -Defaulting Party. The non -Defaulting
Party will provide the Defaulting Party with a statement showing in reasonable detail the
calculation of the Close-out Amount and giving details of the relevant account to which any
amount payable to it is to be paid. The Close-out Amount and any amounts accrued but not yet
paid for Gas Scheduled by the Seller and Imbalance Charges, plus interest due thereon from the
date any such amount was due, shall be payable by the Party owing such amount on the day that
is two (2) Business Days after the day on which notice of the Close-out Amount was given.
(d) If a Termination Notice is given, the Seller shall calculate the Close-out Amount. If the
Close-out Amount is positive, it shall be payable by the Buyer, and if such amount is negative, it
shall be payable by the Seller. The Seller will provide the Buyer with a statement showing in
reasonable detail the calculation of the Close-out Amount and giving details of the relevant
account to which any amount payable to it is to be paid. The Close-out Amount and any amounts
accrued but not yet paid for Gas Scheduled by the Seller and Imbalance Charges, plus interest due
thereon from the date any such amount was due, shall be payable by the Party owing such amount
on the day that is two (2) Business Days after the day on which notice of the Close-out Amount
was given.
15. Force Majeure: In the event either Party is rendered unable, wholly or in part, to perform
its obligations under this Agreement (except for the obligation to make any payment) due to an event of
Force Majeure, the obligations of such Party (other than the obligation to make any payment) affected by
such event shall be suspended for so long as its performance is so affected, and no longer. The cause of
such inability to perform and its effect on a Party shall, so far as possible, be remedied by the affected
Party with all reasonable dispatch. No provision herein shall require or permit either Party to Schedule
Gas for any day in excess of the DCQ or at points other than the Delivery Point.
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"Force Majeure" as used in this Agreement means acts of God; landslides; lightning;
earthquakes, storms or storm warnings, such as hurricanes, which result in evacuation of the
affected area; floods; washouts; fires; explosions; interruption of firm transportation and/or
storage; unplanned outages of, breakage of, or accidents related to equipment, machinery, or lines
of pipe; weather affecting a broad geographic area (such as low temperatures which cause
freezing or failure of wells, equipment, machinery or lines of pipe); strikes, lockouts or other
industrial disturbances; riots; sabotage; insurrection; war; any governmental or court action such
as necessity for compliance with any court order, law, statute, ordinance, or regulation
promulgated by a governmental authority having or alleging to have jurisdiction; or any other
cause or causes (except financial) beyond such Parry's reasonable control, whether similar or
dissimilar to those stated above, and which cause or causes or the effect (Le. the inability of Seller
to Schedule Gas) could not have been avoided or prevented by the exercise of due diligence.
Force Majeure shall not include, without duplication (a) the interruption or curtailment of
interruptible or secondary Firm transportation on Transporter's or other pipelines, unless primary,
in path, Firm transportation to each Delivery Point is also curtailed, (b) economic hardship,
including but not limited to, Seller's ability to sell Gas at a higher or more advantageous price
than the price payable hereunder, Buyer's ability to purchase Gas at a lower or more
advantageous price than the price payable hereunder, or a regulatory agency or other
governmental entity disallowing, in whole or in part, the pass through of costs resulting from this
Agreement, (c) the loss of Buyer's markets or Buyer's inability to use or consume Gas purchased
hereunder, including by virtue of any loss, shutdown or any other outage for any reason of any
facility intended to use or consume the Gas, (e) Buyer's inability to resell any Gas purchased
hereunder, (f) the loss or failure of the Seller's Gas supply or depletion of reserves or (g) any
action taken by Buyer in its governmental capacity.
16. Taxes and Fees. Seller shall pay and discharge all production, severance, or similar taxes
levied on the Gas up to the Delivery Points, and shall hold Buyer harmless in connection therewith. All
taxes, fees, tariffs, and charges incurred at and after the Delivery Points shall be borne and paid by Buyer,
and Buyer shall hold Seller harmless in connection therewith. Within ten (10) Business Days of the
receipt of a written request by Buyer from Seller, Buyer shall provide Seller such certificates, documents
or other evidence sufficient to confirm the exemption from liability for any taxes by Buyer, such that
Seller will bear no obligation in relation to the purchase, sale and/or delivery of any Gas for charging,
collecting and/or remitting to any local, municipal, state or federal authority or agency any taxes for
which Seller is otherwise exempt.
17. Notices. Except as provided in Paragraph 3, any notice hereunder shall be in writing and
shall be delivered by courier, by United States certified or registered mail (postage prepaid), or by
facsimile to the address or facsimile number, as applicable, first set forth herein, unless changed by
written notice. Notices shall be deemed received when (i) for notices delivered by United States certified
or registered mail (postage prepaid), the day such notice is delivered or delivery is attempted by the
United States Post Office, (ii) for notices delivered by facsimile, if delivered before 5:00 p.m. CPT on any
Business Day, the day such notice was transmitted by facsimile, otherwise the next Business day, and (iii)
for notices delivered by courier, the day received by the Party if received on a Business Day, otherwise,
the next Business Day.
18. Auditing. Each Party hereto shall have the right, within two (2) years of the date of any
invoice and at its sole expense, to request to receive copies of the relevant records of the other Party to the
extent necessary to verify the accuracy of any invoice, charge, computation, or demand made under or
pursuant to this Agreement. If a Party has not received written notice of such a request from the other
Party within two (2) years of the date of any invoice, such invoice shall be deemed correct for all
purposes, and each Party waives any right to claim such invoice was incorrect or inaccurate.
US_wEST:260051690.2 9
19. Assignment. This Agreement may not be assigned by a Party without the prior written
consent of the other Party, which shall not be unreasonably withheld.
20. Waiver. The waiver by either Party of the breach of any provision hereof by the other
Party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of
any subsequent or continuing breach of such provision or provisions.
21. Successors. This Agreement shall bind and inure to the benefit of the Parties hereto and
their respective successors and permitted assigns.
22. Choice of Law and Venue: THE PROVISIONS OF THIS AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES SHALL BE GOVERNED BY AND INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
NOTWITHSTANDING THE FOREGOING, THE PARTIES AGREE THAT MATTERS RELATING TO
THE POWERS, AUTHORITY AND CAPACITY OF THE BUYER SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA.
With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each Party
irrevocably:
(a) submits, to the fullest extent permitted by applicable law, to the exclusive jurisdiction of
each of the courts of the State of New York and the United States District Court located in the
Borough of Manhattan in New York City; and
(b) waives, to the fullest extent permitted by applicable law, (i) any objection which it may
have at any time to the laying of venue of any Proceedings brought in any such court, (ii) any
claim that such Proceedings have been brought in an inconvenient forum and (iii) the right to
object, with respect to such Proceedings, that such court does not have any jurisdiction over such
Party.
Each Party hereby irrevocably waives, to the fullest extent permitted by applicable law, any right it may
have to a trial by jury in respect of any suit, action or proceeding relating to this Agreement. Each Party
(i) certifies that no representative, agent or attorney of the other Party has represented, expressly or
otherwise, that such other Party would not, in the event of such a suit, action or proceeding, seek to
enforce the foregoing waiver and (ii) acknowledges that it and the other Party have been induced to enter
into this Agreement by, among other things, the mutual waivers and certifications in this paragraph.
23. Limitation of Damages. FOR BREACH OF ANY PROVISION OF THIS
AGREEMENT, A PARTY'S LIABILITY SHALL BE LIMITED TO ACTUAL DIRECT
DAMAGES ONLY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR INDIRECT
DAMAGES IN TORT, CONTRACT, OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND ANY CLAIM FOR SUCH
DAMAGES IS EXPRESSLY WAIVED.
24. Representations and Warranties. Each Party represents and warrants to the other Party
that, on the date of this Agreement and upon the date of each delivery of Gas hereunder that, (a) it
possesses all power, authority and applicable approvals (if any) necessary for it to enter into this
Agreement and perform its obligations hereunder, and the person signing this Agreement has been duly
authorized to do so, (b) this Agreement constitutes the valid and binding obligation of such Party
US_WEST:260051690.2 10
enforceable against it in accordance with its terms, except as the enforceability may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general principles of equity, (c) the execution, delivery and performance
of this Agreement will not cause such Party to be in violation of any other agreement or law, regulation,
license, order or court process or decision to which it is a party or by which it or its properties are bound
or affected, (d) it has and will maintain all regulatory authorizations, consents, certificates and
documentation as may be necessary and legally required for it to buy or sell the Gas and to appoint and
serve as Contracted Marketer, as applicable, (e) it is an "Eligible Commercial Entity" as defined in
Section Ia(11) of the Commodity Exchange Act, as amended, (f) it is acting for its own account, and it
has made its own independent decisions to enter into this Agreement and as to whether the Agreement is
appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has
deemed necessary, (g) it is not relying on any communication (written or oral) of the other Party as
investment advice or as a recommendation to enter into this Agreement; it being understood that
information and explanations related to the terms and conditions of this Agreement shall not be
considered investment advice or a recommendation to enter into this Agreement, (h) it has not received
from the other Party any assurance or guarantee as to the expected results of this Agreement, (i) it is
capable of evaluating and understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of this Agreement, 0) it is also capable of
assuming, and assumes, the financial and other risks of this Agreement, and (k) it shall treat, and intends
that, this Agreement shall be a "forward contract" as such term is defined in the United States Bankruptcy
Code, 11 U.S.C. Section 101(25).
In addition to the foregoing, Buyer further represents to Seller on the date of this Agreement and on the
date of each delivery hereunder that:
(a) it is not entitled to claim immunity on the grounds of sovereignty or other similar grounds
with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i)
suit, (ii) jurisdiction of any court or arbitral tribunal or (iii) relief by way of injunction, order for
specific performance or recovery of property, and except for the limitations set forth in Section
970 et seq. of the California Government Code and the procedures set forth therein with respect
to the presentation of claims against governmental entities, Purchaser is not entitled to claim any
such immunity with respect to (A) attachment of its assets (whether before or after judgment) or
(B) execution or enforcement of any award or judgment to which it or its revenues or assets might
otherwise be made subject to in any suit, action or proceedings relating to this Agreement in the
courts of any jurisdiction or any arbitral tribunal, and in any such case, except as set forth above,
no such immunity (whether or not claimed) may be attributed to Buyer or its revenues or assets.
(b) all acts necessary to the valid execution, delivery and performance of this Agreement,
including without limitation, competitive bidding, public notice, election, referendum, prior
appropriation or other required procedures has or will be taken and performed as required under
the Act, bylaws or other regulations, (i) all persons making up the governing body of the Buyer
are the duly elected or appointed incumbents in their positions and hold such positions in good
standing in accordance with the Act and other applicable law, (ii) entry into and performance of
this Agreement are for a proper public purpose within the meaning of the Act and all other
relevant constitutional, organic or other governing documents and applicable law, (iii) the term of
this Agreement does not extend beyond any applicable limitation imposed by the Act or other
relevant constitutional, organic or other governing documents and applicable law, (iv) Buyer's
obligations to make payments hereunder are unsubordinated obligations and such payments are
(x) operating and maintenance costs (or similar designation) which enjoy first priority of payment
at all times under any and all bond ordinances or indentures to which it is a party, or (y) otherwise
not subject to any prior claim under any and all bond ordinances or indentures to which it is a
US_WEST:260051690.2 11
party, the Act and all other relevant constitutional, organic or other governing documents and
applicable law and are available without limitation or deduction to satisfy all Buyer's obligations
hereunder, or (z) are to be made solely from a Special Fund, (v) entry into and performance of
this Agreement by Buyer will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on any obligation of the Buyer otherwise entitled to such
exclusion, and (vi) obligations to make payments hereunder do not constitute any kind of
indebtedness of Buyer or create any kind of lien on, or security interest in, any property or
revenues of Buyer, which, in either case, is proscribed by any provision of the Act or any other
relevant constitutional, organic or other governing documents and applicable law, any order or
judgment of any court or other agency of government applicable to it or its assets, or any
contractual restriction binding on or affecting it or any of its assets;
(c) On the date of this Agreement and as a condition to the obligations of the other Party
under this Agreement, Buyer shall provide to Seller certified copies of all ordinances, resolutions,
public notices and other documents evidencing the necessary authorizations with respect to the
execution, delivery and performance by Buyer of this Agreement.
"Act" means the Charter of the Buyer.
. "Special Fund" means the Buyer's Light and Power Department Fund.
25. Imbalance Trading. Buyer shall execute all documents required by Transporter to allow
Seller to have Buyer's Imbalance account placed into Seller's Contracted Marketer or Authorized Agent
(as such terms are defined in Transporter's tariff) account with Transporter and Seller shall perform all
Imbalance trading on behalf of Buyer.
26. Standard of Review.
(a) Absent the prior mutual written agreement of the Parties to the contrary, the standard of
review for any proposed changes to the rates, terms, and/or conditions of service of this
Agreement or any transaction entered into thereunder, whether proposed by a Party, a non -Party
or FERC acting sua sponte, shall be the "public interest" standard of review set forth in United
Gas Pine Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power
Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956), and the Parties hereby expressly
and irrevocably waive any rights they can or may have to the application of any other standard of
review thereto, including without limitation the "just and reasonable" standard.
(b) Without limiting the generality of subsection (a), the rates, terms, and/or conditions of
service specified in this Agreement or any transaction entered into thereunder shall remain in
effect for the entire term of the Agreement, and shall not be subject to either prospective or
retroactive revision through application or complaint to FERC pursuant to sections 4 or 5 of the
Natural Gas Act, or any other provisions of the Natural Gas Act, absent the prior written
agreement of all Parties hereto.
27. References. Any reference herein to a Paragraph or an Exhibit shall be deemed to be a
reference to a Paragraph or Exhibit to this Agreement unless otherwise indicated.
28. Counterpart. This Agreement may be executed in multiple counterparts. Each
counterpart shall be deemed an original, but when taken together, such counterparts shall be deemed to be
one agreement.
US_WEST:260051690.2 12
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first
set forth above.
CITIGROUP ENERGY INC.
(Seller)
CITY OF VERNON
(Buyer)
By: By:
Name: Name:
Title: Title:
US_WEST:260051690.2 13
EXHIBIT A
TO
NATURAL GAS PURCHASE AND SALE AGREEMENT
CREDIT SUPPORT ADDENDUM
This Addendum supplements, forms part of, and is subject to, the Natural Gas Purchase and Sale
Agreement dated August 1, 2006 between Citigroup Energy Inc. and the City of Vernon, California.
A. Credit Requirements: Pursuant to the provisions of Paragraph 8 of the Agreement, at any time,
and from time to time during the term of this Agreement, if (i) the Contract Exposure (as such
term is defined below) should exceed $5,000,000 (the "Security Threshold") or (ii) in the
reasonable opinion of Seller, (x) a material adverse change has occurred in the business, financial
condition or operations of Buyer, and/or (y) Buyer's ability to meet its obligations under the
Agreement has become materially impaired, Seller may require Buyer to provide Performance
Assurance (as such term is defined below) in an amount equal to the amount by which the
Contract Exposure exceeds the Security Threshold (rounding upwards for any fractional amount
to the next $100,000). The Performance Assurance shall be delivered within ten (10) Business
Days of the date of Seller's request. Buyer, at its sole cost, may by notice to Seller demand that
Seller reduce its Performance Assurance then in place if the Contract Exposure is an amount less
than (such amount, the "Return Amount") the Performance Assurance then in place (rounding
upwards for any fractional amount to the next $100,000) and Seller shall return the Return
Amount within two (2) Business Days after notice.
B. Credit Events of Default: The following events (each a "Credit Event") shall be events of default
of the Agreement and Seller shall have the right to exercise any of the remedies available to
Seller upon the occurrence of a Credit Event:
(i) Buyer fails to establish, maintain, extend or increase Performance Assurance when
required pursuant to this Credit Support Addendum,
(ii) Buyer's Credit Rating is downgraded below "BBB+" by Moody's or "Baal" by S&P
or Buyer ceases to be rated by S&P or Moody's subsequent to the date of this
Agreement, or
(iii) Buyer fails to timely provide financial information as provided in Paragraph C below
and such failure continues for ten Business Days following notice of such failure by
Seller.
C. Financial Information: Buyer shall deliver within 180 days following the end of each fiscal year,
a copy of any audited or unaudited consolidated financial statements for such fiscal year. In all
cases the statements shall be the most recent accounting period and prepared in accordance with
generally accepted accounting principles, consistently applied.
D. Definitions: With respect to this Credit Support Addendum, the following definitions shall apply.
Defined terms and references used in this Credit Support Addendum but not defined herein shall
have the meanings set forth in the Agreement.
US_WEST:260051690.2 14
(i) "Performance Assurance" means collateral in the form of cash, Letters of Credit or
other collateral in an amount and form reasonably acceptable by Seller.
(ii) "Letter of Credit" means one or more irrevocable, standby letters of credit from a
major U.S. commercial bank or the U.S. branch of a foreign bank having (a) a Credit
Rating of at least "A-" from S&P and "AY from Moody's and (b) capital and surplus
of at least U.S. $10 Billion and in an amount and form reasonably acceptable to
Seller.
(iii) "Contract Exposure" means an amount equal to the Close-out Amount that would be
payable from Buyer to Seller, as if a Liquidation Date had been declared effective as
of the date of calculation without regard to whether a material breach or event of
default of the Agreement has occurred), and all other amounts owed but not yet paid
by Buyer to Seller, whether or not such amounts are then due, for performance
already provided pursuant to all Transactions conducted under the Agreement.
(iv) "Credit Rating" means on any date of determination, with respect to Buyer, the lower
of its long-term senior unsecured debt rating (not supported by third party credit
enhancement) on obligations payable from the Buyer's Light and Power Department
Fund by Moody's or S&P.
(v) "Moody's" means Moody's Investors Service, Inc., or its successor.
(vi) "S&P means Standard & Poor's Ratings Services (a division of McGraw-Hill, Inc.)
or its successor.
US_WEST:260051690.2 15
OFFICE OF THE CITY ATTORNEY
Jeff A. Harrison, City Attorney
4305 Santa Fe Avenue, Vernon, California 90058
Telephone (323) 583-8811 Fax (323) 826-1438
February 5, 2008
Ms.. Angela Davis
Citigroup Energy, Inc.
2800 Post Oak Blvd., Suite 500
Houston, TX 77056
COPY
Re: City of Vernon and Citigroup Energy, Inc. Confidentiality
and Non -Disclosure Agreement
Dear Angela:
Enclosed please find for your records a fully -executed original
Confidentiality and Non -Disclosure Agreement dated January 25,
2008, for your records.
If you have any questions, please do not hesitate to contact me..
Sincere ,
A. iarrison
Ci y Att rney
JH:j1
Enclosure
cc: Nelly Giron, City Clerk (w/Original Encl.)
Neeraj Arora, Esq., Latham & Watkins (w/Encl.)
E�c(usivefy Industria(
CONFIDENTIALITY AND
NON -DISCLOSURE AGREEMENT
This Confidentiality and Non -Disclosure Agreement (this "Agreement") is entered into as
of January 25, 2008 by and between CITIGROUP ENERGY, INC., a Delaware ("CEI"),
and the CITY OF VERNON, a California charter city and municipal corporation
("Vernon"), referred to collectively as "Parties" and individually as "Party."
RECITALS
A. WHEREAS, CEI has approached Vernon with a business opportunity;
B. WHEREAS, Vernon desires to divulge certain information for the purpose of
discussing and evaluating Vernon's potential interest in the opportunity
proposed by CEI (the "Evaluation");
C. WHEREAS, Vernon desires to maintain the confidentiality of such
information and the fact of the Evaluation itself, all as more fully set forth
below.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Vernon and CEI do hereby mutually agree as follows:
Definitions.
a. "Confidential Information" means any information given by
Vernon to CEI during or in connection with the Evaluation,
including, but not limited to, all confidential or proprietary written,
recorded, electronic or oral information or data furnished to CEI
(whether such confidentiality or proprietary status is indicated
orally or in writing, whether or not the specific words
"confidential" or "proprietary" are used) to CEI, and the fact of the
Evaluation itself.
b. "CEI" or "Vernon" includes such Party's Representatives.
"Representatives" means as to any Party, members of its governing
body, its officers, employees, agents, consultants and advisors
(including, without limitation, financial advisors, attorneys and
accountants).
2. Confidentiality and Non -Use. In consideration of the terms and conditions
of this Agreement, the Parties agree as follows:
a. CEI shall hold confidential and not disclose to any person or entity,
without the prior written consent of Vernon, all Confidential
Information; provided, however, that CEI may disclose such
Confidential Information to its Representatives who need to know
the Confidential Information for the purpose of performing their
roles as Representatives;
b. CEI shall cause all its Representatives to observe the terms of this
Agreement;
C. CEI shall return or destroy all Confidential Information (including
all copies thereof, except for copies that my be stored on CEI's
automatic electronic back up systems) promptly after receipt of a
written request from Vernon, but in any event within 30 days of
receipt of such request provided that legal counsel may retain a
copy of the Confidential Information consistent with its own
internal controls; and
d. CEI shall refrain from removing, overprinting or defacing any
notices of copyright, trademark, logo or other proprietary
identifications or notices of confidentiality, from any originals or
copies of Vernon's Confidential Information.
3. Exceptions to the Confidentiality and Non -Use Obligations. The
obligations imposed by Section 2 hereof shall not apply, or shall cease to
apply, to any Confidential Information if or when, but only to the extent
that, such Confidential Information:
a. Was, or becomes through no breach of CFI's obligations
hereunder, known to the public; or
b. Was known or becomes known to CEI from sources other than
Vernon under circumstances not involving any breach of any
confidentiality obligation; or
C. Is independently developed by CEI, as evidenced by the written
records thereof.
CEI shall not be in breach of its confidentiality obligations hereof if it
discloses Confidential Information, provided, that, such disclosure is made
(i) in connection with the exercise of rights of CEI under any existing or
proposed agreement or transaction between CEI and Vernon, (ii) with the
consent of Vernon, (iii) in order to comply with any subpoena, order,
regulation, ruling or request of any judicial, administrative or legislative
body or committee or any self -regulatory body (including any securities or
2
commodities exchange or the National Association of Securities Dealers,
Inc.), (iv) otherwise as required by applicable law or regulation or (v) at
the request of a bank examiner in connection with an examination of CEI
or its affiliates. CEI will use reasonable efforts to give prompt written
notice to Vernon of the demand for disclosure.
At its own, sole expense, including the costs of attorneys and other
litigation expenses, Vernon may bring such legal action or proceeding as it
may deem necessary to prevent the disclosure of its Confidential
Information. Vernon shall indemnify, defend, and hold CEI harmless from
any liability for attorney fees or other litigation expenses that may arise
from any such legal action or proceeding.
4. No Obligation to Enter Further Agreements. Vernon shall be under no
obligation to disclose any Confidential Information to CEI or to enter into
any further agreements with CEI as a result of this Agreement. Vernon's
disclosure of Confidential Information shall not, in and of itself, constitute
an offer or agreement to purchase or sell any assets that are the subject of
the Confidential Information. Each Party reserves the right, in its sole
discretion, to decline, revoke, retract, or reject at any time any proposal
which has not yet become legally binding by execution of a written
agreement between the Parties with respect thereto.
5. Termination; Duration of Obligations. Unless sooner terminated by
mutual written agreement of the Parties hereto, this Agreement and the
obligations hereunder shall terminate one year from the date hereof.
6. Entire Agreement; Severability. This Agreement represents the entire
understanding and agreement of the Parties and supersedes all prior
communications, agreements and understandings between the Parties
relating to the subject matter hereof. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
7. Waivers; Amendments; Assignment; Counterparts. This Agreement may
not be modified, amended or waived except by a written instrument duly
executed by both Parties. No failure or delay by either Party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise thereof preclude any other or
further exercise of any right, power or privilege hereunder. This
Agreement may not be assigned by either Party without the prior written
consent of the other, and an assignment with prior written consent shall be
binding on, and inure to the benefit of, the respective successors of the
3
Parties. This Agreement may be signed in two or more counterparts,
either originals or copies, each of which shall constitute an original
document, and together shall constitute a binding agreement.
Governing Law, Disputes; Attorney. This Agreement is made in,
and shall be construed under the laws of, the State of California.
9. Notice. Any notice under this agreement shall be made in writing and be
delivered via hand delivery, United States mail, courier service, facsimile
or electronic mail as specified below. Notice by hand delivery, facsimile
or electronic mail shall be effective at the close of business if received
during business hours on a weekday (excluding any bank holidays), and
otherwise shall be effective at the close of business on the next weekday
(excluding any bank holidays). Notice by overnight United States mail or
overnight courier shall be effective on the next weekday (excluding any
bank holidays) after it was sent. Notice by non -overnight United States
mail or non -overnight courier shall be effective on the weekday (excluding
any bank holidays) that it is received, or, if not received on a weekday
(excluding any bank holidays), the first weekday (excluding any bank
holidays) after it is received. A Party may change its notice information
by providing notice of same in accordance herewith.
If to Vernon:
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
Facsimile: 323-826-143 8
Attn: City Attorney
and
Latham & Watkins LLP
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Attn: David B. Rogers, Esq.
Facsimile: 213-891-8763
If to CEI:
Citigroup Energy, Inc.
2800 Post Oak Blvd.
Suite 500
Houston, Tx 77056
Attn: Christopher Hasty
Facsimile: 201-243-7141
With a copy to:
M
Citigroup Energy, Inc.
2800 Post Oak Blvd.
Suite 500
Houston, Tx 77056
Attn: General Counsel
Facsimile: 713-752-5244
10. Equitable Remedies. In addition to any other remedy at law or in equity
for a violation of this Agreement, Vernon shall be entitled to seek
equitable relief, by way of injunction or other equitable writ, if CEI or any
of its Representatives breach or threaten to breach any of the provisions of
this Agreement. The parties understand and agree that money damages for
a breach may inadequate.
11. Independent. The Parties agree that each is an independent contractor and
not an agent, joint venturer or partner of the other. This Agreement shall
not be construed to constitute or to create a partnership or a joint venture
or any other form of legal association that would impose liability upon one
party for the act or failure to act of the other party or as providing either
party with the right, power or authority (express or implied) to create any
duty or obligation on behalf of the other party.
[This space kept intentionally blank]
5
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed
by their fully authorized representatives, whose signatures are affixed below, as of the
date first written above.
CITY OF VERNON, CITIGROUP ENERGY INC., a Delaware
a California charter city and municipal company.
corporation a []
By: �66
Name:
Title:
9Aya Y
AFFIRMED AND ATTESTED:
By:
Name: manpte 4 leon
City Clerk
APPROVED AS TO FORM:
By: - 4 &�,— —,
Jeff 1q. arr o
Ci orney
By: i
Name: pns.i PjLkU-.0u-'A
Title:
Signature Page to Confidentiality Agreement
. 9e W
CITYADIVIIN. DISTRIBUTION
y�JyJlq - GITY CLERK A6,T �,_j
LIGHT & POWER DEPARTMENT
Donal O'Callaghan, Director of Light & Power
April 10, 2008
Attn: Commodity Operations Group Fax: 646-291-1260
Citigroup Energy Inc.
333 West 341h Street, 9`h Floor
New York, New York 10001
Attn: Legal Department Fax: 713-752-5244
Citigroup Energy Inc.
1301 Fannin, Suite 2300
Houston, TX 77002
To the Addressee:
Reference is hereby made to the Natural Gas Remarketing Agreement, dated as of June 27, 2006
(the "Remarketing Agreement"), between the Vernon Natural Gas Financing Authority (the
"JPA") and Citigroup Energy Inc., as remarketing agent (the "Remarketing Agent").
Notice is hereby provided by the JPA that it is making a Remarketing Election pursuant to
Section 8.2 of the Remarketing Agreement and Section 8.2 of the Agreement for Purchase and
Sale of Natural Gas between Citigroup Energy Inc. as Seller and Vernon Natural Gas Financing
Authority as Buyer. The quantity of gas, time period, and other specifics for such Remarketing
Election are as follows.
1. Remarket the Daily Contract Quantity of prepay gas beginning with Saturday's gas day,
April 12, 2008.
2. Remarket the entire Daily Contract Quantity until further notice.
3. The gas may be remarketed to either an Exempt Purchaser or to a non -Exempt Purchaser.
Sincerely,
- Donal O'Callaghan
Cc: Eric Fresch
Document Control
4305 Santa Fe Avenue, Vernon, California 90058 Telephone (323) 583-8811 Fax (323) 826-1425
EJ�cCusiveCy IndustriaC
�Y
April . 00
City of Vernon
410-1 Santa Fe AvT-IIU,--
Vernon. CA 90
Suca ad Arldr:atd'um to Natural Gas Purchase and Sale Pkgmement dat;:d 49nst I 20 S bet-2en,Citigoup
En ruy In.c. t" LI") and City of 'Vernon V'Vernon 1, as arraer dcd by Law Addend€ rn tot gree-ment f' it
Itaorernental Etas Purchases dated December 20, 2006 between OrT.1 and Wrrton fins amer.de4d, the
:,�gr�etaiettt,£t
Ladies Mid Gentlemen:
mean lments. CPI hereby liroposess to atttand tlty Agrzerneal as folloi
(a) tine deletion of"ttI -.,_ cjppusite MaxDCQ an 111� tddhiun l a r Iac-eme-ut thereof of "'3 l00t
(b) Contract Ptkc is amended by the addition at the ead th rcof aftct. "T'4arag -aph 4" aaf "or, it eleved
by Wrnort for all of a portion of its IdrSCIOad tttatttbjV rCgUiMta"Mts at ] gist six business daysi l rigr
to at oath end for thx TivIxt munth, a price eiltial m the Sucal lol l Index plans agate -hall' of ofl . icent
($0,005) aerl+VN4BLur" and
(T_) the a ddifion or the foROWi€ag definition in alphabetical arder at tlw erad of gush ection.-
"Simal N I Index" shall me -an for any n-to th, the average price. limed under (Month) (Year
Bidweels for SoutEaem C.-a[ Mr Avg. In the NGI Bifliv r'k Sun ey:
Section 6 is an -se &] by (fie =addirion at the end thereof of `Tine Parties acknowledge that Buyer may
choose. io havo volumes tip be delivered Luxter- the. Prepay Agreement renaarketeel,";
htiseell,aneous. Any and all r aIk!rr=nee4 to the gaeenient shrill hereafter refer to the Agreement as amender] by this
Second Addendum. Capitalized terra" used Mein aind n€at <,ahel"WiSe clefltaet{ gh�,Ill laraVe the Mre.ar,iina set ['t r[la in the
Agreement. Eaeb Party retaresznts and Warrants that it is amhorized to emer imo digs Addendum,
Please lttklicits Your agr'eetnerat to the foEeguing, effective as or the date set.farth above. by signing- in the; space set
forth b low=
t_itigrtattpEnergy Inu
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j
A€ceptetl and greed to hy-
he I.'RY of Vern —on
D
Name: Donal 0' Callaghan..:,.
Title.- Director of Light & Power
citig—roup Energy Irae. 21,801 Post Oak- Blvdi, Suite 500 Houston, TX 71-7056 Tcll 7] 3-752? 52 t_ s .Y 7 11t7' 2-5 44
Page 1 of 1
Tolmasoff, Robin
From: Tolmasoff, Robin
Sent: Wednesday, April 09, 2008 3:23 PM
To: Enomoto, Kristen
Cc: GAS
Subject: Second Addendum to Natural Gas Purchase and Sale Agreement to Agreement for Incremental Gas
Purchases -Dec. 20, 2006
Attachments: Citigroup Second Addendum - Executed.pdf
Attached for your files is the executed Second Addendum for the Natural Gas Purchase and Sale Agreement (as amended by
Letter Addendum to Agreement for Incremental Gas Purchases dated Dec. 20, 2006 between CEI and Vernon (as amended, the
"Agreement').
Youvill get the original copy in your mail box. Thank you.
R66 n M. Tolmasoff
Secretary to the Director of Light & Power
Ciry;of Vernon
(33)' 583-8811, Ext. 561
t_
4/9/•2008
CITY CLERK'S OFFICE
INTEROFFICE MEMORANDUM
DATE: July 31, 2006
TO: Donal O'Callaghan, Director of Light & Power
FROM: Nelly Giron, Deputy City Clerk
RE: Resolution No. 9098 - A Resolution of the City Council
of the City of Vernon Approving and Authorizing the
Execution and Delivery of a Natural Gas Purchase and
Sale Agreement By and Between the City of Vernon and
Citigroup Energy, Inc. Citigroup Energy, Inc. Natural
Gas Agreement
Transmitted herewith is a copy of the purchase and sale
agreement and Resolution No. 9098, referenced above, which was
approved by City Council on July 19, 2006.
Thank you.
NG : dr
c: Resolution No. 9098
NATURAL GAS PURCHASE AND SALE AGREEMENT
August 1, 2006
Seller: Bum:
Citigroup Energy Inc. City of Vernon
1301 Fannin, Suite 2300 4305 Santa Fe Avenue
Houston, Texas 77565 Vernon, CA 90058
Notices & Correspondence: Notices & Correspondence:
1301 Fannin, Suite 2300 4305 Santa Fe Avenue
Houston, Texas 77565 Vernon, CA 90058
Attn: Global Commodities Attn: L & P Resource Management
Phone: (713) 752-5267 Phone: (323) 583-8811 x242
Fax: (713) 582-4675 Fax: (323) 826-1431
With a Copy to:
1301 Fannin, Suite 2300 City of Vernon
Houston, Texas 77565 4305 Santa Fe Avenue
Attn: Legal Department Vernon, CA 90058
Attn: Bruce Malkenhorst, Assistant
City Attorney
Invoices & Payments:
Invoices & Payments:
1301 Fannin, Suite 2300
4305 Santa Fe Avenue
Houston, Texas 77565
Vernon, CA 90058
Attn: Operations
Attn: Sharon Duckworth, City
Treasurer
Phone: (713) 752-5401
Phone: (323) 826-1471
Fax: (713) 752-5237
Fax: (323) 826-1491
Federal Tax ID Number: 27-0069674
Federal Tax ID Number: 956000808
Duns Number: 14-518-4631
Duns Number: 060883022
Email: ceisettlementsgcitigroup.com
Operating Communications:
Operating Communications:
1301 Fannin, Suite 2300
Houston, Texas 77565
Attn: Global Commodities
Attn: L & P Resource Management
Phone: (713) 752-5267
Phone: (323) 583-8811 x312
Fax: (713)582-4675
Fax: (323) 826-1431
E-mail: michael.keen@citigroup.com
E-mail: dgarcia@ci.vernon.ca.us
Seller Wire Transfer Information:
Buyer Wire Transfer Information:
BANK: CITIUS33 BANK: Bank of America General
Account
ABA: 021000089 ABA: 026009593
ACCT: 3056-9329 ACCT: 1459410483
CITIGROUP ENERGY INC., a Delaware corporation ("Seller"), and CITY OF VERNON,
CALIFORNIA, a municipal corporation and a chartered city duly organized -and existing under and by
virtue of the Constitution and laws of the State of California and its Charter ("Buyer" with the Seller, the
"Parties" and either of which may be referred to as a "Party") enter into this Natural Gas Purchase and
Sale Agreement (the "Agreement") effective as of the date set forth above.
WITNESSETH:
Whereas, the Seller owns or controls quantities of natural gas it desires to sell pursuant to the terms
of this Agreement ("Gas"); and
Whereas, Buyer desires to purchase the Gas.
Now, therefore, in consideration of the mutual promises and agreements herein and for other for
good and valuable consideration, the adequacy of which is hereby acknowledged, the Parties agree as
follows:
1. Term. This Agreement shall govern all Gas sold by Seller to Purchaser, and shall
continue in effect until either of the Parties provides the other with thirty (30) days written notice of
termination (a "Termination Notice").
Price, Quantity and Delivery Point. The following shall apply to all Gas sold hereunder:
Contract Price: Midpoint Price plus one-half of one cent ($.005) per
MMBtu, subject to Paragraph 4
Delivery Point: All Southern California border receipt points into the
SoCalGas pipeline
DCQ:
As specified pursuant to Paragraph 3
MaxDCQ: 10,000 MMBtu
"Btu" shall mean the amount of energy required to raise the temperature of one pound of pure
water one degree Fahrenheit from 59 Fahrenheit degrees to 60 degrees Fahrenheit.
"DCQ" shall mean the quantity of Gas to be Scheduled on any day hereunder.
"MaxDCQ" shall mean the maximum quantity of Gas that Seller is required to Schedule per day
pursuant hereto.
"Midpoint Price" shall mean for any day, the price per MMBtu designated as the "Midpoint"
price for SoCal gas for such day under the heading "Others" in the table "Daily Price Survey
($/MMBtu) in Gas Daily, currently published by the McGraw-Hill Companies, Inc. If Gas Daily
ceases to publish such Midpoint Price, the Midpoint Price shall mean the arithmetic mean of the
prices per MMBtu designated as the "Absolute" prices for SoCal gas for such Day under the
heading "Others" in the table "Daily price survey ($/MMBtu)" in Gas Daily, or if Gas Daily
ceases to be published, the Midpoint Price shall mean the price per MMBtu for Gas to be
delivered for the applicable Day to Transporter's system at the geographic location or locations
closest to the Delivery Point, as set forth in an alternative index as reasonably agreed to by
Purchaser and Seller most closely tracking the methodology used for establishing either of the
foregoing published prices.
"MMBtu" means one million Btus.
"Scheduled" or "Scheduling" shall mean when used in reference to the Seller, to make Gas
available or cause Gas to be made available, at the Delivery Point for delivery to or for the
account of Buyer, including making all pipeline nominations, and when used in reference to
Buyer, means notifying Seller, in accordance with Paragraph 3, of the quantity of Gas to be
delivered. Except as provided in Paragraph 10, Gas shall be deemed delivered when Scheduled.
"SoCal" "SoCalGas" or "Transporter" shall mean Southern California Gas Company, including
any successors or assigns thereof.
3. Operations and Delivery Scheduling Requests. Not later than 7:30 a.m. Central
Prevailing Time ("CPT") on the Business Day preceding the day Gas is to flow, Buyer shall provide
Seller with facsimile or e-mail notice of the quantity of Gas Buyer desires Seller to Schedule the next day,
provided that notices, with respect to Gas to flow on Saturday, Sunday or Monday, shall be given not later
than 7:30 a.m. CPT on the Friday before such flow days. In the event the nomination or Scheduling
deadline of the Transporter conflicts with the foregoing notification dates, Buyer and Seller shall modify
the notification dates accordingly. Scheduling requests to Seller will be accepted at the facsimile number
or e-mail address for Seller set forth on the first page hereof under "Operations" and will be confirmed by
Seller at the facsimile number or e-mail address for Buyer set forth on the first page hereof under
"Operations."
"Business Day" shall mean any day other than Saturday, Sunday and Federal Reserve Bank
holidays.
4. Contract Price Adjustments. Buyer may request a price for Gas which has been
Scheduled, other than the Contract Price, by contacting Seller during Pricing Hours requesting a Fixed
Price for a specified volume of Gas for a period of a Month or longer, provided that such request is made
prior to 1:30 p.m. CPT of the third trading day prior to the last trading day of the NYMEX Gas Futures
contract for the selected Month or such longer period. The Parties acknowledge that fixing the price for
all or any portion of Gas to be delivered on any day shall not prevent Buyer from increasing the quantity
of Gas Scheduled for delivery on such day, provided that such increase is in compliance with Paragraph
3.
"Fixed Price" shall mean a fixed dollar amount agreed to by the Parties
"Month" shall mean a period of time beginning at midnight CPT on the first day of any calendar
month and ending immediately prior to the commencement of the first day of the following
calendar month.
"NYMEX" shall mean The New York Mercantile Exchange.
"Pricing Hours" shall mean the hours 8:00 a.m. CPT to 5:00 p.m. CPT on any Business Day.
5. Firm Delivery Seller shall Schedule or cause to be Scheduled that quantity of Gas
requested by Buyer as the DCQ for such day pursuant to Paragraph 3, up to the MaxDCQ on a Firm basis.
"Firm" shall mean that Seller's obligation to sell and deliver and Buyer's obligation to purchase
and receive Gas shall only be excused by an event of Force Majeure, defined below.
6. Full Requirements. Buyer acknowledges and agrees that the Gas, together with the gas
sold by Seller to Buyer (as assignee of the Authority) pursuant to the Prepay Agreement, shall constitute
the full gas requirements for Buyer with respect to the Delivery Point.
"Authority" shall mean Vernon Natural Gas Financing Authority.
"Prepay Agreement" shall mean the Agreement for Purchase and Sale of Natural Gas between
Seller and the Authority dated as of June 27, 2006.
7. Invoices and Pavments.
(a) Seller shall invoice Buyer on or before the fifteenth (151h) day of the Month for deliveries
of Gas made in the prior Month, which shall not include any amount for gas delivered under the
Prepay Agreement. Buyer shall pay Seller on the later of (a) the 25`h day of the Month following
the Month in which the Gas was delivered or (b) ten (10) days after Buyer's receipt, via facsimile,
United States first-class mail, or courier, of Seller's invoice or if such date is not a Business Day,
on the next Business Day. Payments shall be made by wire transfer of immediately available
U.S. Dollars to Seller's account set forth on the first page hereof.
(b) Amounts invoiced by Seller shall be based upon Buyer's actual usage of Gas as reflected
by the Metered Usage less that quantity of gas delivered under the Prepay Agreement. In the
event telemeter readings on Gas Select are not available, Buyer shall provide SoCal's meter
statements to Seller as requested by Seller. Buyer at its sole cost and expense shall be responsible
for installing and maintaining telemetry at Buyer's facility. Metered Usage of gas shall be
determined for all purposes of this Agreement in the following priority: first, gas delivered
pursuant to the Prepay Agreement; second, Fixed Price Gas; and third, Gas other than Fixed Price
Gas.
Seller, in its sole discretion, may suspend deliveries of Gas, in whole or in part, whenever any
payment on an invoice hereunder is two (2) Business Days or more past due after notice of such
failure to pay from Seller to Buyer.
(c) Any amount not paid when due shall accrue, and Buyer shall pay, interest at the lesser of
(1) the prime interest rate per annum on corporate loans at large U.S. money center commercial
banks (as reported in the first edition of Wall Street Journal "Money Rates" table for the
calendar month in which payment is due) plus 2% per annum, compounded daily from the due
date through but not including the date paid, or (ii) the maximum rate of interest permitted by
applicable law compounded daily from the due date through but not including the date paid.
(d) All payment obligations hereunder shall be special obligations of Buyer payable from
Buyer's Light and Power Department Fund.
"Metered Usage" means, for any period, the actual amount of gas taken off Transporter's
pipeline system by Buyer during such period, as reflected by telemeter reading on Gas Select via
SoCal Gas or, in the event that telemetry readings are not available, as reflected in SoCal's meter
statements to Buyer.
8. Credit Assurances. In the event that Seller has reasonable grounds for insecurity, Seller
may upon ten (10) Business Days notice to Buyer demand adequate assurance (in accordance with
Exhibit A hereto) of Buyer's ability to pay amounts becoming due hereunder and/or different terms of
payment. If Buyer fails to provide assurance Seller may, in its sole discretion, immediately cancel this
Agreement in accordance with the provisions of Paragraph 14 by giving written notice to Buyer.
9. Title and Possession. Risk of loss and title to the Gas shall transfer from Seller to Buyer
at the Delivery Point. Seller shall be solely liable and responsible for, and shall indemnify and hold
harmless Buyer from and against, all claims, losses, liabilities, or damages (including attorneys' fees and
other reasonable litigation costs) (collectively, "Claims") arising out of or related to, directly or
indirectly, the Gas, personal injury (including bodily injury or death) or property damage related to the
Gas prior to delivery at the Delivery Point, and Buyer shall be solely liable and responsible for, and shall
indemnify and hold harmless Seller from and against, Claims arising out of or related to, directly or
indirectly, the Gas, personal injury (including bodily injury or death) or property damage related to the
Gas at and after its delivery at the Delivery Point, provided that Buyer shall have no liability with respect
to Seller's actions, or failure to act, as Contracted Marketer hereunder.
10. Qualfty. All Gas shall be merchantable and shall conform to all of the specifications
promulgated or otherwise required by the Transporter. Buyer may refuse to accept Gas pending
correction of any quality deficiency. Seller and Buyer shall accept Transporter's determination of the
quality, quantity and heating value of Gas at Buyer's meter location, provided that such determination is
made in accordance with Transporter's procedures for measurement. Notwithstanding anything in this
Agreement to the contrary, Gas which does not conform to the Transporter's requirements shall not be
considered delivered.
11. Contracted Marketer Status. At least ten (10) Business Days prior to the beginning of the
Month in which any purchase and sale is to occur hereunder, Buyer will designate Seller as its Contracted
Marketer, as defined in, and in accordance with, the applicable SoCal tariff. Seller will take those actions
which are necessary and proper to maintain such status and will nominate and balance all Gas purchased
by Buyer under this Agreement and all gas purchased under the Prepay Agreement, including in each case
replacement gas. Subject to Seller's obligations under this Agreement, the Prepay Agreement and the
Remarketing Agreement, Buyer acknowledges that Seller, as Contracted Marketer, shall manage
Imbalances as it deems necessary and appropriate in its sole discretion.
"Remarketing Agreement" shall mean the Natural Gas Remarketing Agreement between the
Seller and the Buyer (as assignee of the Authority), dated as of June 27, 2006.
12. Liquidated Damages.
(a) Seller's sole and exclusive remedy for the failure by Buyer to Schedule Gas hereunder,
when the circumstances of subparagraph (c) below are not applicable, shall be recovery of an
amount equal to the positive difference, if any, between the Contract Price (which for these
purposes shall include any adjustment made pursuant to Paragraph 4) and the price received by
Seller utilizing the Cover Standard for the resale of such Gas, adjusted for commercially
reasonable differences in transportation costs to or from the Delivery Point, multiplied by the
difference between the DCQ and the quantity actually taken by Buyer for such day(s).
(b) Buyer's sole and exclusive remedy for the failure by Seller to Schedule Gas hereunder,
when the circumstances of subparagraph (c) below are not applicable, shall be recovery of an
amount equal to the positive difference, if any, between the purchase price paid by Buyer
utilizing the Cover Standard for replacement Gas and the Contract Price (which for these
purposes shall include any adjustment made pursuant to Paragraph 4), adjusted for commercially
reasonable differences in transportation costs to or from the Delivery Point, multiplied by the
difference between the DCQ and the quantity actually delivered by Seller for such day(s).
(c) In the event that Buyer has used commercially reasonable efforts to replace the Gas or
Seller has used commercially reasonable efforts to sell the Gas to a third party, and no such sale
or replacement is available, then the sole and exclusive remedy of the non -breaching party shall
be any unfavorable difference between the Contract Price and the Midpoint Price, adjusted for
such transportation to the applicable delivery point, multiplied by the difference between the
DCQ and the quantity actually delivered by Seller or received by Buyer for such days(s).
(d) The above described amounts shall be in addition to any Imbalance Charge for which a
Party is liable under Paragraph 13.
"Cover Standard" shall mean that the Party (other than the Party that failed to perform, the
"Performing Party") shall use commercially reasonable efforts to sell Gas or obtain Gas, as
applicable, at a price reasonable for the delivery area consistent with the amount of notice
provided by the non -Performing Party; the immediacy of the Buyer's Gas consumption needs or
Seller's sales requirements, as applicable; the quantities involved; and the anticipated length of
failure by the non -Performing Party, provided that in all events, Buyer's taking Gas from the
Transporter's pipeline shall satisfy the requirements of "Cover Standard".
13. Imbalances.
(a) Buyer and Seller shall use commercially reasonable efforts to avoid the occurrence of any
Imbalance hereunder and shall immediately notify the other upon discovery thereof. Imbalances
will be corrected or settled in cash unless the Parties agree to settlement in gas or offset. If
Transporter sends Seller, as Contracted Marketer, an invoice which includes Imbalance Charges
incurred in connection with Buyer's Metered Usage of gas, the Parties shall determine the
validity as well as the cause of the Imbalance Charges.
(b) . If Imbalance Charges were incurred with respect to an Imbalance Interval as a result of a
Buyer Positive Imbalance, then Buyer shall pay Seller the Buyer Imbalance Charge. If Imbalance
Charges were incurred with respect to an Imbalance Interval for any other reason, including as a
result of Seller delivering quantities of gas less than the Contracted Gas, then Seller shall pay the
Imbalance Charges.
(c) If in any Imbalance Interval there was a Buyer Negative Imbalance, then Seller shall
credit the Buyer Imbalance Credit against the invoice sent pursuant to Paragraph 7.
(d) If in any Imbalance Interval the Metered Usage was less than the amount of Contracted
Gas delivered by Seller under this Agreement and the Prepay Agreement, then the amount of gas
delivered under the Prepay Agreement shall be considered the first gas used by Buyer and the
Imbalance Tolerance shall be applied first to the balance of the gas delivered under the Prepay
Agreement and then to any Gas delivered under this Agreement.
(e) Buyer acknowledges and agrees that it shall be liable and pay, or reimburse Seller for,
any Imbalance Charges accruing prior to the effective date of this Agreement.
"Buyer Negative Imbalance" means, with respect to an Imbalance Interval, the negative amount,
if any, of Metered Usage less the amount of gas delivered pursuant to this Agreement and the
Prepay Agreement, and less the Imbalance Tolerance.
"Buyer Positive Imbalance" means, with respect to an Imbalance Interval, the positive amount,
if any, of the Buyer's Metered Usage less the Contracted Gas and less the Imbalance Tolerance.
"Buyer Imbalance Charge" means an amount equal to the product of the Imbalance Rate times
the Buyer Positive Imbalance.
"Buyer Imbalance Credit" means an amount equal to the product of the Imbalance Rate times
the absolute value of the Buyer Negative Imbalance.
"Contracted Gas" means, for any Imbalance Interval, the sum of the Gas Scheduled by the
Buyer pursuant to Paragraph 3 to be delivered during such Imbalance Interval plus the amount of
gas to be delivered during such Imbalance Interval pursuant to the Prepay Agreement.
"Imbalance" means, with respect to an Imbalance Interval, a difference between the Contracted
Gas and the Metered Usage for such Imbalance Interval.
"Imbalance Charges" mean any fees, penalties, costs or charges (in cash or in kind) assessed by
Transporter for failure to satisfy Transporter's balance and/or nomination requirements pursuant
to Transporter's Schedule No. G-IMB.
"Imbalance Interval" means each period of time during which the usage of gas from the
Transporter's pipeline system by a customer or contracted marketer is balanced against deliveries
of gas to the Transporter's pipeline system for such customer's or contracted marketer's account
pursuant to Schedule No. G-IMB.
"Imbalance Rate" means: (i) with respect to an Imbalance Charge, the rate under Schedule No.
G-IMB which SoCal Gas charged for gas in determining such Imbalance Charge; and (ii) with
respect to a Buyer Imbalance Credit, the rate under Schedule No. G-IMB at. which SoCal Gas
purchased gas for the Imbalance Interval relating to the Buyer Negative Imbalance.
"Imbalance Tolerance" means, with respect to an Imbalance Interval, the quantity of gas,
measured as a percentage of the Metered Usage, that the Buyer, as a customer of SoCal Gas,
would be permitted to carry forward into the next Imbalance Interval without incurring Imbalance
Charges, or selling any gas to SoCal Gas.
"Schedule No. G-IMB" means Transporter's Schedule No. G-IMB as the same may be amended,
supplemented or replaced, or any successor schedule in effect from time to time during the term
of this Agreement.
14. Default. Breach and Termination.
(a) The following with respect to a Party (the "Defaulting Party") shall constitute a material
breach and/or event of default hereunder (an "Event of Default"): (a) a Party makes a general
assignment or arrangement for the benefit of creditors; (b) a Party becomes bankrupt, a debtor in
a bankruptcy proceeding, insolvent or unable to pay its debts as they become due; (c) a Party files
a petition or otherwise commences a proceeding under any bankruptcy, insolvency,
reorganization or similar law, or has any such petition filed or commenced against it; (d) a Party
has a liquidator, administrator, receiver, trustee, conservator or similar official appointed with
respect to it or a substantial portion of its property or assets; (e) a Credit Event occurs with
respect to Buyer, as defined Exhibit A; (0 a Party fails to make any payment due hereunder and
such failure is not remedied on or before two (2) Business Days after notice from the other Party;
(g) any representation or warranty given herein by a Party is materially incorrect or inaccurate;
(h) breach by Buyer of Paragraph 6 and (i) the occurrence and continuance with respect to Buyer
of an Incipient Illegality. If an Event of Default occurs, the non -Defaulting Party may elect to
terminate this Agreement by providing the Defaulting Party with written notice stating the
7
effective date of termination (the "Liquidation Date"), which date may be the date of written
notice.
(b) If the non -Defaulting Party elects to terminate this Agreement, the non -Defaulting Party
shall calculate the Close-out Amount.
"Close-out Amount" shall mean an amount calculated in accordance with the definition of
"Close-out Amount" set forth in Section 14 of the 2002 ISDA Master Agreement published by
the International Swaps and Derivatives Association, Inc., where (i) "Terminated Transaction"
means any Gas for which a Scheduling request has been made pursuant to Paragraph 3 but which
has not been Scheduled by Seller, (ii) "Determining Party" means the non -Defaulting Party, and
(iii) "Early Termination Date" means the Liquidation Date.
"Incipient Illegality" means (a) the enactment by any legislative body with competent
jurisdiction over Buyer of legislation, which, if adopted as law, would render unlawful (i) the
performance by Buyer of any absolute or contingent obligation to make a payment or delivery or
to receive a payment or delivery in respect of this Agreement, or the compliance by Buyer with
any other material provisions of this Agreement, or (ii) the performance by Buyer of any
contingent or other obligation which Buyer has under any credit support document relating to this
Agreement; (b) any assertion in any proceeding, forum or action by a governmental entity, in
respect of Buyer, or in respect of any entity organized under the laws of the state in which Buyer
is located to the effect that performance under this Agreement or other similar agreements is
unlawful.
(c) If the Close-out Amount is positive, it shall be payable by the Defaulting Party, and if
such amount is negative, it shall be payable by the non -Defaulting Party. The non -Defaulting
Party will provide the Defaulting Party with a statement showing in reasonable detail the
calculation of the Close-out Amount and giving details of the relevant account to which any
amount payable to it is to be paid. The Close-out Amount and any amounts accrued but not yet
paid for Gas Scheduled by the Seller and Imbalance Charges, plus interest due thereon from the
date any such amount was due, shall be payable by the Party owing such amount on the day that
is two (2) Business Days after the day on which notice of the Close-out Amount was given.
(d) If a Termination Notice is given, the Seller shall calculate the Close-out Amount. If the
Close-out Amount is positive, it shall be payable by the Buyer, and if such amount is negative, it
shall be payable by the Seller. The Seller will provide the Buyer with a statement showing in
reasonable detail the calculation of the Close-out Amount and giving details of the relevant
account to which any amount payable to it is to be paid. The Close-out Amount and any amounts
accrued but not yet paid for Gas Scheduled by the Seller and Imbalance Charges, plus interest due
thereon from the date any such amount was due, shall be payable by the Party owing such amount
on the day that is two (2) Business Days after the day on which notice of the Close-out Amount
was given.
15. Force Majeure: In the event either Party is rendered unable, wholly or in part, to perform
its obligations under this Agreement (except for the obligation to make any payment) due to an event of
Force Majeure, the obligations of such Party (other than the obligation to make any payment) affected by
such event shall be suspended�for so long as its performance is so affected, and no longer. The cause of
such inability to perform and its effect on a Party shall, so far as possible, be remedied by the affected
Party with all reasonable dispatch. No provision herein shall require or permit either Party to Schedule
Gas for any day in excess of the DCQ or at points other than the Delivery Point.
"Force Majeure" as used in this Agreement means acts of God; landslides; lightning;
earthquakes, storms or storm warnings, such as hurricanes, which result in evacuation of the
affected area; floods; washouts; fires; explosions; interruption of firm transportation and/or
storage; unplanned outages of, breakage of, or accidents related to equipment, machinery, or lines
of pipe; weather affecting a broad geographic area (such as low temperatures which cause
freezing or failure of wells, equipment, machinery or lines of pipe); strikes, lockouts or other
industrial disturbances; riots; sabotage; insurrection; war; any governmental or court action such
as necessity for compliance with any court order, law, statute, ordinance, or regulation
promulgated by a governmental authority having or alleging to have jurisdiction; or any other
cause or causes (except financial) beyond such Party's reasonable control, whether similar or
dissimilar to those stated above, and which cause or causes or the effect (Lee. the inability of Seller
to Schedule Gas) could not have been avoided or prevented by the exercise of due diligence.
Force Majeure shall not include, without duplication (a) the interruption or curtailment of
interruptible or secondary Firm transportation on Transporter's or other pipelines, unless primary,
in path, Firm transportation to each Delivery Point is also curtailed, (b) economic hardship,
including but not limited to, Seller's ability to sell Gas at a higher or more advantageous price
than the price payable hereunder, Buyer's ability to purchase Gas at a lower or more
advantageous price than the price payable hereunder, or a regulatory agency or other
governmental entity disallowing, in whole or in part, the pass through of costs resulting from this
Agreement, (c) the loss of Buyer's markets or Buyer's inability to use or consume Gas purchased
hereunder, including by virtue of any loss, shutdown or any other outage for any reason of any
facility intended to use or consume the Gas, (e) Buyer's inability to resell any Gas purchased
hereunder, (f) the loss or failure of the Seller's Gas supply or depletion of reserves or (g) any
action taken by Buyer in its governmental capacity.
16. Taxes and Fees. Seller shall pay and discharge all production, severance, or similar taxes
levied on the Gas up to the Delivery Points, and shall hold Buyer harmless in connection therewith. All
taxes, fees, tariffs, and charges incurred at and after the Delivery Points shall be borne and paid by Buyer,
and Buyer shall hold Seller harmless in connection therewith. Within ten (10) Business Days of the
receipt of a written request by Buyer from Seller, Buyer shall provide Seller such certificates, documents
or other evidence sufficient to confirm the exemption from liability for any taxes by Buyer, such that
Seller will bear no obligation in relation to the purchase, sale and/or delivery of any Gas for charging,
collecting and/or remitting to any local, municipal, state or federal authority or agency any taxes for
which Seller is otherwise exempt.
17. Notices. Except as provided in Paragraph 3, any notice hereunder shall be in writing and
shall be delivered by courier, by United States certified or registered mail (postage prepaid), or by
facsimile to the address or facsimile number, as applicable, first set forth herein, unless changed by
written notice. Notices shall be deemed received when (i) for notices delivered by United States certified
or registered mail (postage prepaid), the day such notice is delivered or delivery is attempted by the
United States Post Office, (ii) for notices delivered by facsimile, if delivered before 5:00 p.m. CPT on any
Business Day, the day such notice was transmitted by facsimile, otherwise the next Business day, and (iii)
for notices delivered by courier, the day received by the Party if received on a Business Day, otherwise,
the next Business Day.
18. Auditing. Each Party hereto shall have the right, within two (2) years of the date of any
invoice and at its sole expense, to request to receive copies of the relevant records of the other Party to the
extent necessary to verify the accuracy of any invoice, charge, computation, or.demand made under or
pursuant to this Agreement. If a Party has not received written notice of such a request from the other
Party within two (2) years of the date of any invoice, such invoice shall be deemed correct for all
purposes, and each Party waives any right to claim such invoice was incorrect or inaccurate.
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19. Assignment. This Agreement may not be assigned by a Party without the prior written
consent of the other Party, which shall not be unreasonably withheld.
20. Waiver. The waiver by either Party of the breach of any provision hereof by the other
Party shall not be deemed to be a waiver of the breach of any other provision or provisions hereof or of
any subsequent or continuing breach of such provision or provisions.
21. Successors. This Agreement shall bind and inure to the benefit of the Parties hereto and
their respective successors and permitted assigns.
22. Choice of Law and Venue: THE PROVISIONS OF THIS AGREEMENT AND THE
RELATIONSHIP OF THE PARTIES SHALL BE GOVERNED BY AND INTERPRETED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
NOTWITHSTANDING THE FOREGOING, THE PARTIES AGREE THAT MATTERS RELATING TO
THE POWERS, AUTHORITY AND CAPACITY OF THE BUYER SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA.
With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each Party
irrevocably:
(a) submits, to the fullest extent permitted by applicable law, to the exclusive jurisdiction of
each of the courts of the State of New York and the United States District Court located in the
Borough of Manhattan in New York City; and
(b) waives, to the fullest extent permitted by applicable law, (i) any objection which it may
have at any time to the laying of venue of any Proceedings brought in any such court, (ii) any
claim that such Proceedings have been brought in an inconvenient forum and (iii) the right to
object, with respect to such Proceedings, that such court does not have any jurisdiction over such
Party.
Each Party hereby irrevocably waives, to the fullest extent permitted by applicable law, any right it may
have to a trial by jury in respect of any suit, action or proceeding relating to this Agreement. Each Party
(i) certifies that no representative, agent or attorney of the other Party has represented, expressly or
otherwise, that such other Party would not, in the event of such a suit, action or proceeding, seek to
enforce the foregoing waiver and (ii) acknowledges that it and the other Party have been induced to enter
into this Agreement by, among other things, the mutual waivers and certifications in this paragraph.
23. Limitation of Damages. FOR BREACH OF ANY PROVISION OF THIS
AGREEMENT, A PARTY'S LIABILITY SHALL BE LIMITED TO ACTUAL DIRECT
DAMAGES ONLY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR
CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, SPECIAL OR INDIRECT
DAMAGES IN TORT, CONTRACT, OR OTHERWISE, EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND ANY CLAIM FOR SUCH
DAMAGES IS EXPRESSLY WAIVED.
24. Representations and Warranties. Each Party represents and warrants to the other Party
that, on the date of this Agreement and upon the date of each delivery of Gas hereunder that, (a) it
possesses all power, authority and applicable approvals (if any) necessary for it to enter into this
Agreement and perform its obligations hereunder, and the person signing this Agreement has been duly
authorized to do so, (b) this Agreement constitutes the valid and binding obligation of such Party
enforceable against it in accordance with its terms, except as the enforceability may be limited by the
effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
10
creditors' rights generally and by general principles of equity, (c) the execution, delivery and performance
of this Agreement will not cause such Party to be in violation of any other agreement or law, regulation,
license, order or court process or decision to which it is a party or by which it or its properties are bound
or affected, (d) it has and will maintain all regulatory authorizations, consents, certificates and
documentation as may be necessary and legally required for it to buy or sell the Gas and to appoint and
serve as Contracted Marketer, as applicable, (e) it is an "Eligible Commercial Entity" as defined in
Section Ia(11) of the Commodity Exchange Act, as amended, (0 it is acting for its own account, and it
has made its own independent decisions to enter into this Agreement and as to whether the Agreement is
appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has
deemed necessary, (g) it is not relying on any communication (written or oral) of the other Party as
investment advice or as a recommendation to enter into this Agreement; it being understood that
information and explanations related to the terms and conditions of this Agreement shall not be
considered investment advice or a recommendation to enter into this Agreement, (h) it has not received
from the other Party any assurance or guarantee as to the expected results of this Agreement, (i) it is
capable of evaluating and understanding (on its own behalf or through independent professional advice),
and understands and accepts, the terms, conditions and risks of this Agreement, 0) it is also capable of
assuming, and assumes, the financial and other risks of this Agreement, and (k) it shall treat, and intends
that, this Agreement shall be a "forward contract" as such term is defined in the United States Bankruptcy
Code, 11 U.S.C. Section 101(25).
In addition to the foregoing, Buyer further represents to Seller on the date of this Agreement and on the
date of each delivery hereunder that:
(a) it is not entitled to claim immunity on the grounds of sovereignty or other similar grounds
with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i)
suit, (ii) jurisdiction of any court or arbitral tribunal or (iii) relief by way of injunction, order for
specific performance or recovery of property, and except for the limitations set forth in Section
970 et seq. of the California Government Code and the procedures set forth therein with respect
to the presentation of claims against governmental entities, Purchaser is not entitled to claim any
such immunity with respect to (A) attachment of its assets (whether before or after judgment) or
(B) execution or enforcement of any award or judgment to which it or its revenues or assets might
otherwise be made subject to in any suit, action or proceedings relating to this Agreement in the
courts of any jurisdiction or any arbitral tribunal, and in any such case, except as set forth above,
no such immunity (whether or not claimed) may be attributed to Buyer or its revenues or assets.
(b) all acts necessary to the valid execution, delivery and performance of this Agreement,
including without limitation, competitive bidding, public notice, election, referendum, prior
appropriation or other required procedures has or will be taken and performed as required under
the Act, bylaws or other regulations, (i) all persons making up the governing body of the Buyer
are the duly elected or appointed incumbents in their positions and hold such positions in good
standing in accordance with the Act and other applicable law, (ii) entry into and performance of
this Agreement are for a proper public purpose within the meaning of the Act and all other
relevant constitutional, organic or other governing documents and applicable law, (iii) the term of
this Agreement does not extend beyond any applicable limitation imposed by the Act or other
relevant constitutional, organic or other governing documents and applicable law, (iv) Buyer's
obligations to make payments hereunder are unsubordinated obligations and such payments are
(x) operating and maintenance costs (or similar designation) which enjoy first priority of payment
at all times under any and all bond ordinances or indentures to which it is a party, or (y) otherwise
not subject to any prior claim under any and all bond ordinances or indentures to which it is a
party, the Act and all other relevant constitutional, organic or other governing documents and
applicable law and are available without limitation or deduction to satisfy all Buyer's obligations
hereunder, or (z) are to be made solely from a Special Fund, (v) entry into and performance of
11
this Agreement by Buyer will not adversely affect the exclusion from gross income for federal
income tax purposes of interest on any obligation of the Buyer otherwise entitled to such
exclusion, and (vi) obligations to make payments hereunder do not constitute any kind of
indebtedness of Buyer or create any kind of lien on, or security interest in, any property or
revenues of Buyer, which, in either case, is proscribed by any provision of the Act or any other
relevant constitutional, organic or other governing documents and applicable law, any order or
judgment of any court or other agency of government applicable to it or its assets, or any
contractual restriction binding on or affecting it or any of its assets;
(c) On the date of this Agreement and as a condition to the obligations of the other Party
under this Agreement, Buyer shall provide to Seller certified copies of all ordinances, resolutions,
public notices and other documents evidencing the necessary authorizations with respect to the
execution, delivery and performance by Buyer of this Agreement.
"Act" means the Charter of the Buyer.
"Special Fund" means the Buyer's Light and Power Department Fund.
25. Imbalance Trading. Buyer shall execute all documents required by Transporter to allow
Seller to have Buyer's Imbalance account placed into Seller's Contracted Marketer or Authorized Agent
(as such terms are defined in Transporter's tariff) account with Transporter and Seller shall perform all
Imbalance trading on behalf of Buyer.
26. Standard of Review.
(a) Absent the prior mutual written agreement of the Parties to the contrary, the standard of
review for any proposed changes to the rates, terms, and/or conditions of service of this
Agreement or any transaction entered into thereunder, whether proposed by a Party, a non -Party
or FERC acting sua sponte, shall be the "public interest" standard of review set forth in United
Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power
Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956), and the Parties hereby expressly
and irrevocably waive any rights they can or may have to the application of any other standard of
review thereto, including without limitation the "just and reasonable" standard.
(b) Without limiting the generality of subsection (a), the rates, terms, and/or conditions of
service specified in this Agreement or any transaction entered into thereunder shall remain in
effect for the entire term of the Agreement, and shall not be subject to either prospective or
retroactive revision through application or complaint to FERC pursuant to sections 4 or 5 of the
Natural Gas Act, or any other provisions of the Natural Gas Act, absent the prior written
agreement of all Parties hereto.
27. . References. Any reference herein to a Paragraph or an Exhibit shall be deemed to be a
reference to a Paragraph or Exhibit to this Agreement unless otherwise indicated.
28. Counterpart. This Agreement may be executed in multiple counterparts. Each
counterpart shall be deemed an original, but when taken together, such counterparts shall be deemed to be
one agreement.
12
IN WITNESS WHEREOF, the Parties have executed this Agreement e€fective as of the date first
set forth above.
CI'I:IGII:OUP ENERGY INC.
�5ellcf°�
`title:
CITY OF VERNON
(Buyer)
By: � A
Natne.; Le is C. bialbu ;�
Title: Mayor `
MUM;
By: _
Bruce V. 9alkenharxt, Acting
City Clark
AYPR#JV S 1�FORM:
Qp - -
J yjjHsqison, Chef Assistant City
ney
13
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the date first
set forth above.
CITIGROUP ENERGY INC.
(Seller)
q-�
F - "W44i-
Fil �r i„ j
CITY OF VERNON
(Buyer)
By:o C-^ %G�
Name:�on�isC. Malb ra
Title: Mayor
ATTEST:
By:
Bruce V. Malkenhorst, Jr.
Acting City Clerk
APPROVED AS TO FORM:
J rrison
C f ssistant City Attorney
13
EXHIBIT A
EXHIBIT A
TO
NATURAL GAS PURCHASE AND SALE AGREEMENT
CREDIT SUPPORT ADDENDUM
This Addendum supplements, forms part of, and is subject to, the Natural Gas Purchase and Sale
Agreement dated August 1, 2006 between Citigroup Energy Inc. and the City of Vernon, California.
A. Credit Requirements: Pursuant to the provisions of Paragraph 8 of the Agreement, at any time,
and from time to time during the term of this Agreement, if (i) the Contract Exposure (as such
term is defined below) should exceed $5,000,000 (the "Security Threshold") or (ii) in the
reasonable opinion of Seller, (x) a material adverse change has occurred in the business, financial
condition or operations of Buyer, and/or (y) Buyer's ability to meet its obligations under the
Agreement has become materially impaired, Seller may require Buyer to provide Performance
Assurance (as such term is defined below) in an amount equal to the amount by which the
Contract Exposure exceeds the Security Threshold (rounding upwards for any fractional amount
to the next $100,000). The Performance Assurance shall be delivered within ten (10) Business
Days of the date of Seller's request. Buyer, at. its sole cost, may by notice to Seller demand that
Seller reduce its Performance Assurance then in place if the Contract Exposure is an amount less
than (such amount, the "Return Amount") the Performance Assurance then in place (rounding
upwards for any fractional amount to the next $100,000) and Seller shall return the Return
Amount within two (2) Business Days after notice.
B. Credit Events of Default: The following events (each a "Credit Event") shall be events of default
of the Agreement and Seller shall have the right to exercise any of the remedies available to
Seller upon the occurrence of a Credit Event:
(i) Buyer fails to establish, maintain, extend or increase Performance Assurance when
required pursuant to this Credit Support Addendum,
(ii) Buyer's Credit Rating is downgraded below "BBB+" by Moody's or "Baal" by S&P
or Buyer ceases to be rated by S&P or Moody's subsequent to the date of this
Agreement, or
(iii) Buyer fails to timely provide financial information as provided in Paragraph C below
and such failure continues for ten Business Days following notice of such failure by
Seller.
C.. Financial Information: Buyer shall deliver within 180 days following the end of each fiscal year,
a copy of any audited or unaudited consolidated financial statements for such fiscal year. In all
cases the statements shall be the most recent accounting period and prepared in accordance with
generally accepted accounting principles, consistently applied.
D. Definitions: With respect to this Credit Support Addendum, the following definitions shall apply.
Defined terms and references used in this Credit Support Addendum but not defined herein shall
have the meanings set forth in the Agreement.
14
(i) "Performance Assurance" means collateral in the form of cash, Letters of Credit or
other collateral in an amount and form reasonably acceptable by Seller.
(ii) "Letter of Credit" means one or more irrevocable, standby letters of credit from a
major U.S. commercial bank or the U.S. branch of a foreign bank having (a) a Credit
Rating of at least "A-" from S&P and "AY' from Moody's and (b) capital and surplus
of at least U.S. $10 Billion and in an amount and form reasonably acceptable to
Seller.
(iii) "Contract Exposure" means an amount equal to the Close-out Amount that would be
payable from Buyer to Seller, as if a Liquidation Date had been declared effective as
of the date of calculation without regard to whether a material breach or event of
default of the Agreement has occurred), and all other amounts owed but not yet paid
by Buyer to Seller, whether or not such amounts are then due, for performance
already provided pursuant to all Transactions conducted under the Agreement.
(iv) "Credit Rating" means on any date of determination, with respect to Buyer, the lower
of its long-term senior unsecured debt rating (not supported by third party credit
enhancement) on obligations payable from the Buyer's Light and Power Department
Fund by Moody's or S&P.
(v) "Moody's" means Moody's Investors Service, Inc., or its successor.
(vi) "S&P" means Standard & Poor's Ratings Services (a division of McGraw-Hill, Inc.)
or its successor.
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