*CONFIDENTIAL - RESOLUTION NO. 2016-54 CITIGROUP ENERGY, INC., ET AL. - CC CLOSED SESSION 10/14/16 CONFIDENTIAL
RESOLUTION NO. 2016-54
CITIGROUP ENERGY, INC., ET AL.
APPROVED IN CITY COUNCIL CLOSED
SESSION 10/04/16
*CONTACT CITY ATTORNEY'S OFFICE
BEFORE RELEASING ANY
INFORMATION
PLEASE SEE "CLERK DEPT. FILES
(INTERNAL)" FOR AGREEMENT &
RESOLUTION
RESOLUTION NO . 2016-54
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A
REVISED CREDIT SUPPORT AGREEMENT AND ANCILLARY
DOCUMENTS BY AND BETWEEN THE CITY OF VERNON AND
CITIGROUP ENERGY, INC.
WHEREAS, on March 31, 2016, the City of Vernon (the "City")
filed a lawsuit in the U. S . District Court for the Southern District
of New York (the "Court") against Citigroup Energy, Inc. ("Citigroup
Energy") , Citibank, N.A. and Citigroup, Inc. (the "Citigroup, " and
together with Citigroup Energy and Citibank, N.A. , the "Citigroup
Parties") , Case No. 1 : 16-cv-02405 (the "Case") , seeking a declaratory
judgment to establish the rights and responsibilities of the parties
under that certain Agreement for Purchase and Sale of Natural Gas
between Citigroup Energy and the Vernon Natural Gas Financing
Authority ("VNGFA") dated as of June 27 , 2006 (the "PSA") , as well as
the Credit Support Annex appended to the PSA as Annex 1 (the "Existing
CSA") ; and
WHEREAS, on September 6, 2016, in closed session, the City
Council of the City Vernon approved and ratified the City
Administrator' s execution of a Settlement Agreement by and between the
City and Citigroup Energy; and
WHEREAS, by memorandum dated October 4, 2016, the City
Attorney has recommended the approval of a Revised Credit Support
Agreement and Ancillary Documents (the "Agreement") in furtherance of
the Settlement Agreement and in order to establish the procedures and
protocol for Citigroup Energy to post collateral and secure its
obligations to the City; and
WHEREAS, the City Council of the City of Vernon desires to
approve and authorize the execution of the Agreement .
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS :
SECTION 1 : The City Council of the City of Vernon hereby
finds and determines that the above recitals are true and correct.
SECTION 2 : The City Council of the City of Vernon finds
that this action is exempt under the California Environmental Quality
Act (CEQA) , because such is an administrative activity of government
that will not result in direct or indirect physical changes in the
environment and, as such, is not a "project" as defined by CEQA
Guidelines Section 15378, and even if such were considered a
"project, " it would still be exempt in accordance with Section
15061 (b) (3) , the general rule that CEQA only applies to projects that
may have a significant effect on the environment .
SECTION 3 : The City Council of the City of Vernon hereby
approves the Revised Credit Support Agreement and Ancillary Documents
(the "Agreement" ) with Citigroup Energy, Inc . , in substantially the
same form as the copy which is attached hereto as Exhibit A.
SECTION 4 : The City Council of the City of Vernon hereby
authorizes the City Administrator to execute said Agreement for, and
on behalf of, the City of Vernon and the City Clerk, or Deputy City
Clerk, is hereby authorized to attest thereto.
SECTION 5 : The City Council of the City of Vernon hereby
instructs the City Administrator, or his designee, to take whatever
actions are deemed necessary or desirable for the purpose of
implementing and carrying out the purposes of this Resolution and the
transactions herein approved or authorized, including but not limited
to, any non-substantive changes to the Agreement attached herein.
- 2 -
SECTION 6 : The City Council of the City of Vernon hereby
directs the City Clerk, or the Deputy City Clerk, to send a fully
executed Agreement to Citigroup Energy.
SECTION 7 : The City Clerk, or Deputy City Clerk, of the
City of Vernon shall certify to the passage, approval and adoption of
this resolution, and the City Clerk, or Deputy City Clerk, of the City
of Vernon shall cause this resolution and the City Clerk' s, or Deputy
City Clerk' s, certification to be entered in the File of Resolutions
of the Council of this City.
APPROVED AND ADOPTED this 4th day of October, 2016 .
Name : Wil iam J. Davis
Title: Mayor / -'.
ATTEST:
vV /,
M ria E ./Ayala
City Clerk / -
APPROVED AS TO FORM:
Brian B n, Deput, City Attorney
- 3 -
STATE OF CALIFORNIA
ss
COUNTY OF LOS ANGELES
I Maria E . Ayala , City Clerk /- Dcputy City Cler` of the City
of Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. 2016-54 , was duly passed, approved and adopted by the
City Council of the City of Vernon at a regular meeting of the City
Council duly held on Tuesday, October 4, 2016, and thereafter was duly
signed by the Mayor or Mayor Pro-Tem of the City of Vernon.
Executed this (Zday of /54b1 , 2016, at Vernon, California .
M ria E . Ayala
City Clerk / -s- . _ _ -
(SEAL)
- 4 -
EXHIBIT A
Revised Credit Support Agreement
Execution Version
ANNEX 1
CREDIT SUPPORT ANNEX
This Credit Support Annex dated as of 2016 (this "Annex") supplements, forms
part of, and is subject to, the Agreement for Purchase and Sale of Natural Gas, dated as of June 27, 2006 (the
"Agreement"), between Citigroup Energy Inc. ("Seller") and the City of Vernon ("Assignee"), as the successor in
interest to Vernon Natural Gas Financing Authority, without any further action taken by either Seller or Assignee.
Accordingly,Seller and Assignee agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in the
Agreement have the meanings specified pursuant to Paragraph 12,and all references in this Annex to Paragraphs are to
Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of the
Agreement,this Annex will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the"Secured Party"will be to Assignee and all
references to the"Pledgor" will be to Seller;provided, however, that if Other Posted Support is held by Assignee, as
Secured Party,all references herein to Assignee as the Secured Party with respect to that Other Posted Support will be
to Assignee as the beneficiary thereof and will not subject that support or Assignee as the beneficiary thereof to
provisions of law generally relating to security interests and secured parties.
Paragraph 2. Security Interest
Seller, as the Pledgor hereunder,hereby pledges to Assignee, as the Secured Party, as security for its Obligations and
grants to the Secured Party a first priority continuing security interest in,lien on and right of Set-off against all Posted
Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the
Pledgor of Posted Collateral,the security interest and lien granted hereunder on that Posted Collateral will be released
immediately and,to the extent possible,without any further action by either party.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly
following a Valuation Date,if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum
Transfer Amount,then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the
date of Transfer at least equal to the applicable Delivery Amount. The "Delivery Amount"applicable to the Pledgor
for any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly
following a Valuation Date,if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum
Transfer Amount,then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in
that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount. The
"Return Amount"applicable to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party
exceeds
ANNEX 1
Page 1
(ii) the Credit Support Amount.
provided, however,that following such return,the Value of all Posted Credit Support held by the Secured Party must at
least equal the Credit Support Amount.
"Credit Support Amount"means, for any Valuation Date (i)the Secured Party's Exposure for that Valuation Date,
minus (ii) the Pledgor's Threshold;provided, however, that the Credit Support Amount will be deemed to be zero
whenever the calculation of Credit Support Amount yields a number less than zero.
Paragraph 4. Conditions Precedent,Transfer Timing,Calculations and Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Secured Party under Paragraphs 3,4(d)(ii),5 and 6(c)
is subject to the conditions precedent that(i)no Seller Delivery Failure has occurred and is continuing,(ii)no Section
15.3 Termination Event has occurred and is continuing following Assignee providing Seller at least two (2) Local
Business Days'prior written notice that such Section 15.3 Termination Event has occurred,(iii)no cash amount is then
owed by Seller to Assignee under the Agreement,and(iv)no Event of Default with respect to the Pledgor has occurred
and is continuing under this Annex. Each Transfer obligation of the Pledgor hereunder is subject to the conditions
precedent that(i)no cash amount is then owed by Assignee to Seller under the Agreement,and(ii)no Event of Default
with respect to the Secured Party has occurred and is continuing under this Annex. For the avoidance of doubt,a Seller
Delivery Failure shall no longer be continuing if Seller has paid Assignee the Replacement Cost in accordance with
Section 5.2 of the Agreement.
(b) Transfer Timing. Subject to Paragraphs 4(a),5,6(b)(ii),Schedule III and unless otherwise specified herein,if
a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time,then
the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is
made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the
second Local Business Day thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(c)will be made by
the Valuation Agent as of the Valuation Time with respect to a Valuation Date. The Valuation Agent will notify each
party(or the other party,if the Valuation Agent is a party)of its calculations not later than the Notification Time on the
Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(c), following the date of
calculation). Upon request by the Assignee, for the first three Valuation Dates hereunder, the Valuation Agent shall
provide in reasonable detail the methodology and assumptions used in preparing its calculations; provided, however,
the Valuation Agent shall not be required to disclose any confidential,proprietary information that it may have used in
connection therewith.
(d) Substitutions.
(i) Upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged,the
Pledgor may,on any Local Business Day,Transfer to the Secured Party substitute Eligible Credit Support(the
"Substitute Credit Support");and
(ii) subject to Paragraph 4(a),the Secured Party will Transfer to the Pledgor the items of Posted Credit
Support specified by the Pledgor in its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support;provided that the Secured Party will only be
obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit
Support equal to the Value as of that date of the Substitute Credit Support;provided,further however, that
any request to substitute must seek the substitution of Eligible Credit Support or Posted Credit Support in
an amount in excess of the Pledgor's Minimum Transfer Amount".
ANNEX 1
Page 2
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return
Amount or(II)the Value of any Transfer of Eligible Credit Support or Posted Credit Support,then(1)the Disputing
Party will notify the other party and the Valuation Agent(if the Valuation Agent is not the other party)not later than
the close of business on the Local Business Day following(X)the date that the demand is made under Paragraph 3 in
case of(I) above or (Y)the date of Transfer in the case of(II) above, (2) subject to Paragraph 4(a), the appropriate
party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case of(I) above or (Y) the date of
Transfer in the case of(II)above,(3)the parties will consult with each other in an attempt to resolve the dispute and(4)
if they fail to resolve the dispute by the Resolution Time,then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date by:
(A) calculating the Exposure by seeking four actual quotations at mid-market from Reference
Market-makers(other than Seller or its Affiliates,unless otherwise agreed to by Assignee in writing)
and taking the arithmetic average of those obtained;provided that if four quotations are not available,
then fewer than four quotations may be used; and if no quotations are available,then the Valuation
Agent's original calculations will be used;and
(B) calculating the Value, if disputed,of Posted Credit Support consisting of securities by the
Valuation Agent determining based upon the bid quotations of any generally recognized dealer
(other than Seller or its Affiliates, unless otherwise agreed to by Assignee in writing), and adding
thereto any interest accrued but not paid to any person with respect to such securities through the
day on which the determination is made and multiplying the sum by the applicable Valuation
Percentage, if any;provided, however, that Assignee may submit bid quotations from two other
recognized dealers in which case the Value of such securities shall be the mean of the two
quotations sourced by the Valuation Agent and the two quotations submitted by Assignee.
(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted
Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer as described in
Paragraph 5(i)(B)above.
Following a recalculation pursuant to this Paragraph,the Valuation Agent will notify each party(or the other party, if
the Valuation Agent is a party)not later than the Notification Time on the Local Business Day following the Resolution
Time. The appropriate party will,upon demand following that notice by the Valuation Agent or a resolution pursuant
to(3)above and subject to Paragraphs 4(a)and 4(b),make the appropriate Transfer.
Paragraph 6. Holding and Using Posted Collateral
(a) Care of Posted Collateral The Secured Party will exercise reasonable care to assure the safe custody of all
Posted Collateral to the extent required by applicable law,and in any event the Secured Party will be deemed to have
exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own
property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted
Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights
pertaining thereto.
ANNEX 1
Page 3
(b) Eligibility to Hold Posted Collateral;Custodians.
(i) General. The Pledgor will appoint an agent reasonably acceptable to the Secured Party (a
"Custodian") to hold Posted Collateral for the benefit of the Secured Party. The Pledgor will exercise
reasonable care in the selection and monitoring of the Custodian. The Pledgor's obligations to make any
Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a
Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party. The Secured Party
agrees that Posted Collateral held at the Custodian shall be subject to a tri-party collateral account control
agreement substantially in the form of Schedule V attached hereto.
(ii) Failure to Satisfy Conditions. If the Custodian fails to satisfy conditions specified in (b)(iv) for
holding Posted Collateral (the "Ineligible Custodian"), then the Pledgor will, not later than five (5) Local
Business Days after the demand, identify a Custodian to Transfer all Posted Collateral held by the Ineligible
Custodian to a Custodian that satisfies those conditions("Replacement Custodian")and Transfer or cause the
Ineligible Custodian to Transfer all Posted Collateral to Replacement Custodian within ten (10) Local
Business Days thereafter. The Secured Party agrees that all Posted Collateral transferred to such Replacement
Custodian shall be subject to a tri-party collateral account control agreement substantially in the form of
Schedule V attached hereto, with such amendments as shall be requested by the Replacement Custodian;
provided,however,the obligation of the Pledgor to effect such Transfer shall be subject to the Secured Party's
not unreasonably withholding its consent to such amendments.
(iii) [Reserved]
(iv) Custodian Conditions. A party shall be eligible to serve as a Custodian if and for so long as it(i)is
not affiliated with either of the Parties, (ii) is a trust company or commercial bank with trust powers,
organized under the laws of the United States of America or any state or province thereof and subject to
supervisions or examination by federal or state authority,having a combined capital surplus of at least U.S.
$10,000,000,000 and(iii)shall have outstanding long term unsecured unsubordinated debt securities ratings of
at least"A3"by Moody's and"A-"by S&P.
(c) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive
Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local
Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would
not be created or increased by that Transfer,as calculated by the Valuation Agent(and the date of calculation
will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount The Interest Amount shall compound daily. Subject to Paragraph 4(a), in lieu of
any interest,dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in
the form of Cash(all of which may be retained by the Secured Party),the Secured Party will Transfer to the
Pledgor in arrears on the last Local Business Day of each calendar month the Interest Amount to the extent
that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation
Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest
Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the
form of Cash and will be subject to the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
An Event of Default will exist with respect to a party under this Annex if:
(i) that party fails (or fails to cause the Custodian)to make, when due, any Transfer of Posted Credit
Support,as applicable(including for the avoidance of doubt a Transfer to a Replacement Custodian pursuant
to Paragraph 6(b)(ii) of this Annex), required to be made by it and that failure continues for two Local
Business Days after notice of that failure is given to that party;or
ANNEX 1
Page 4
(ii) that party fails to comply with or perform any agreement or obligation other than those specified in
Paragraph 7(i)and that failure continues for 30 days after notice of that failure is given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time(i)an Event of Default with respect to the Pledgor has
occurred and is continuing, or(ii)a Section 15.3 Termination Event has occurred and is continuing following Assignee
providing Seller at least two (2)Local Business Days' prior written notice that such Section 15.3 Termination Event
has occurred then,unless the Pledgor has paid in full all of its Obligations that are then due and payable,and in addition
to the rights and remedies set forth in the Agreement, the Secured Party may exercise one or more of the following
rights and remedies:
(i) all rights and remedies available to a secured party under applicable law with respect to Posted
Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted
Support,if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any obligation
of the Secured Party to Transfer that Posted Collateral);and
(iiv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or
private sales or other dispositions with such notice,if any,as may be required under applicable law,free from
any claim or right of any nature whatsoever of the Pledgor,including any equity or right of redemption by the
Pledgor(with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold)and
to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any
amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and
is of a type customarily sold on a recognized market,and,accordingly,the Pledgor is not entitled to prior notice of any
sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot
be waived.
(b) Pledgor's Rights and Remedies. If at any time an Event of Default has occurred or been designated with
respect to the Secured Party,then:
(i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law or in
equity (including, but not limited to, specific performance) with respect to Posted Collateral held by the
Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of
Other Posted Support,if any;
(iii) the Secured Party will be obligated immediately to Transfer such Posted Collateral and Other Posted
Support and any Interest Amount required to be Transferred to the Pledgor pursuant to Paragraphs 3(b), 5 or
6(c),respectively;and
(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii)
above,the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any
obligation of the Secured Party to Transfer the applicable Posted Collateral);and
ANNEX 1
Page 5
(B) to the extent that the Pledgor does not Set-off under (iii)(A) above, withhold payment of
any remaining amounts payable by the Pledgor or deliveries required to be made by the Pledgor in
each case with respect to any Obligations,up to the Value of any remaining Posted Collateral held by
the Secured Party,until the applicable Posted Collateral is Transferred to the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds remaining
after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts
payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts
remaining unpaid after any liquidation,Set-off and/or application under Paragraphs 8(a)and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any
Obligations,the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount,if any.
Paragraph 9. Representations
(a) Seller, as Pledgor, represents to Assignee, as Secured Party (which representation will be deemed to be
repeated by Seller as of each date on which it, as the Pledgor, Transfers Eligible Collateral or Other Posted Support)
that:
(i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the
Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the
Secured Party hereunder, free and clear of any security interest, lien, encumbrance or other restrictions other
than the security interest and lien granted under Paragraph 2;and
(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex,the
Secured Party will have a valid and perfected first priority security interest therein(assuming that any central
clearing corporation or any third-party financial intermediary or other entity not within the control of the
Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it
under applicable law for perfection of that interest).
(b) Each party represents to the other that(which representation will be deemed to be repeated by the parties as of
each date there is a Transfer of Eligible Collateral or Other Posted Support):
(i) the performance by it of its obligations under this Annex will not result in the creation of any
security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien
granted under Paragraph 2;and
(ii) no consent, approval or other authorization of any governmental authority is required in connection
with the entry into this Annex and the performance of its obligations hereunder including without limitation
the Transfer of Eligible Collateral or Other Eligible Support hereunder.
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b)and 10(c), each party will pay its own
costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for
any costs and expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges
of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware
of the same.
ANNEX 1
Page 6
(c) Liquidation/Application of Posted Credit Support All reasonable costs and expenses actually
incurred by or on behalf of the Secured Party in connection with the liquidation and/or application of any Posted Credit
Support under Paragraph 8(a)will be payable,on demand,to Assignee by Seller.
Paragraph 11. Miscellaneous
(a) Default Interest. If either party fails to make, when due, any Transfer of Posted Collateral or the Interest
Amount it will be obliged to pay the other party (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred,from
(and including)the date that the Posted Collateral or Interest Amount was required to be Transferred to(but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party,the other party will execute,deliver,file
and record any financing statement, specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security
interest or lien granted under Paragraph 2,to enable that party to exercise or enforce its rights under this Annex with
respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on
Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against,any
suit, action,proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely
affect the security interest and lien granted by it under Paragraph 2.
(d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex,
including,but not limited to,all calculations,valuations and determinations made by either party,will be made in good
faith and in a commercially reasonable manner.
(e) Demands and Notices. All demands, specifications and notices given by a party under this Annex will be
made as specified in the Notices Section of the Agreement,except that the address for Seller for such purposes shall be:
Citigroup Energy Inc.
Collateral Management Group
499 Washington Blvd.,7th Floor
Jersey City,NJ 07310
Telephone no.(212)816-8090
Email: derivatives.marginna,citi.com
With a copy to:
Citigroup Energy Inc.
Attn: Commodities Structuring
Address:2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
Fax: 713-752-5208
Email:americascommoditiesstructuring@a,citi.com
(f) Form of Collateral All non-Cash Eligible Collateral or Posted Collateral that is Transferred by either party
shall be recorded in book entry form by a Federal Reserve Bank,as fiscal agent,and Pledgor shall(i)deliver to Secured
Party a listing of such credit support by title (or series), unpaid principal amount and maturity date and (ii) cause a
Federal Reserve Bank to hold such credit support for the account of the Secured Party or the Custodian(in a custody
account),as applicable,in the name of the Secured Party or Custodian,as applicable.
ANNEX 1
Page 7
(g) No Third Party Rights. This Annex has been and is made solely for the benefit of Assignee and Seller and
their respective assigns,and no other person,partnership,association,corporation or other entity shall acquire or have
any right under or by virtue of this Annex.
(h) Document Delivery. The Secured Party shall deliver upon signing of this Annex (i) evidence reasonably
satisfactory to the Pledgor of its authority to enter into this Annex and (ii) evidence reasonably satisfactory to the
Pledgor of the authority and genuine signature of the individual signing this Annex to execute the same. Such evidence
shall include but not be limited to the following:
(i) a resolution of the City Counsel of the City of Vernon(together with the attestation of the City Clerk
of the City of Vernon with respect to(A)and(B))authorizing(A)entry into this Annex and the Settlement and Release
Agreement by and among Seller; Citibank, N.A.; Citigroup, Inc. and Assignee dated as of 9 August 2016 (the
"Settlement Agreement"), and (B) the Mayor of the City of Vernon or another person authorized by resolution to
execute this Annex and the Settlement Agreement and bind Assignee,and
(ii) an opinion of Assignee's attorney as to the due authorization and execution of this Annex and the
Settlement Agreement reasonably acceptable to Seller.
Paragraph 12. Definitions
As used in this Annex:—
"Cash"means the lawful currency of the United States of America.
"Credit Rating" means, with respect to Seller and as of any date, the Credit Rating (as defined in Article I of the
Agreement)of the Guarantor in effect on such date.
"Credit Support Amount"has the meaning specified in Paragraph 3.
"Custodian"has the meaning specified in Paragraph 6(b)(i).
"Default Rate"means a rate per annum equal to the cost(without proof or evidence of any actual cost)to the relevant
payee(as certified by it)if it were to fund or of funding the relevant amount plus 1%per annum.
"Delivery Amount"has the meaning specified in Paragraph 3(a).
"Disputing Party"has the meaning specified in Paragraph 5.
"Distributions"means,with respect to Posted Collateral other than Cash,all principal,interest and other payments and
distributions of cash or other property with respect thereto. Distributions will not include any item of property acquired
by the Secured Party upon any disposition or liquidation of Posted Collateral or,with respect to any Posted Collateral
in the form of Cash,any distributions on that collateral,unless otherwise specified herein.
"Eligible Collateral"means the items specified as such on Schedule I attached to this Annex.
"Eligible Credit Support"means Eligible Collateral and Other Eligible Support.
"Exposure"means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in
the case of a dispute,the amount,if any,by which(i)the market value of the Undelivered Quantities(as defined in the
Agreement),exceeds(b)the Threshold applicable to Seller on such date.
"Interest Amount"means,with respect to an Interest Period,the aggregate sum of the amounts of interest calculated
for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured
Party on that day,determined by the Secured Party for each such day as follows:
ANNEX 1
Page 8
(x) the amount of Cash on that day;multiplied by
(y) the Interest Rate in effect for that day;divided by
(z) 360.
"Interest Period"means the period from(and including)the last Local Business Day on which an Interest Amount was
Transferred(or,if no Interest Amount has yet been Transferred,the Local Business Day on which Posted Collateral in
the form of Cash was Transferred to or received by the Secured Party)to(but excluding)the Local Business Day on
which the current Interest Amount is to be Transferred.
"Interest Rate"means be the overnight ask rate in effect for such day,as set forth opposite the caption"ON"under the
heading"EURO-DOLLAR"on Telerate Page 4756 or any successor page thereto on or about 11:00 a.m.,New York
time,on such day,or,if no successor page is quoted,any page agreed to by the parties.
"Letter of Credit" means an irrevocable, standby letter of credit, issued by a major U.S. commercial bank or a U.S.
branch office of a foreign bank which is satisfactory to the Secured Party,in its reasonable discretion utilizing the form
set forth in Schedule IV attached hereto,with such changes to the terms in that form as the issuing bank may require
and as may be acceptable to the Secured Party; where such letter of credit bank(i)has a senior unsecured long term
debt rating of"A-"or better by S&P and"A3"or better by Moody's and(ii)has a combined capital surplus of at least
$10,000,000,000. Each Letter of Credit shall be a Credit Support Document. Letters of Credit shall be issued and
maintained in accordance with the provisions set forth in Schedule III attached hereto.
"Local Business Day"means any Business Day as set forth in the Agreement.
"Minimum Transfer Amount"means,with respect to either party, $100,000;provided, however,that with respect to
Seller,if Seller has no Credit Rating or if the Credit Rating of Seller is not at least"BBB-"from S&P or"Baa3"from
Moody's,the Minimum Transfer Amount for Seller shall be zero.
"New York Banking Day" means any day on which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits)in New York City.
"Notification Time" means 10:00 a.m., New York time on a Local Business Day; provided, however, that,
notwithstanding Paragraph 4(b),(x)with regard to Transfers of Eligible Credit Support or Posted Credit Support in the
form of Cash, if a request for Transfer is made by the Notification Time,then the relevant Transfer shall be made not
later than the close of business on the day on which such request is received,or,if such day is not a Local Business Day
or,if such request is received after the Notification Time,not later than the close of business on the next Local Business
Day, and(y)with regard to Transfers of other forms of Eligible Credit Support or Posted Credit Support,the relevant
Transfer shall be made in accordance with Paragraph 4(b).
"Obligations"means,with respect to a party,all present and future obligations of that party under the Agreement.
"Other Eligible Support"means a Letter of Credit.
"Other Posted Support"means all Other Eligible Support Transferred to the Secured Party that remains in effect for
the benefit of that Secured Party.
"Pledgor"means Seller.
"Posted Collateral"means all Eligible Collateral,other property,Distributions,and all proceeds thereof that have been
Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to
Paragraph 3(b),4(d)(ii)or 6(c)(i)or released by the Secured Party under Paragraph 8. Any Interest Amount or portion
thereof not Transferred pursuant to Paragraph 6(c)(ii)will constitute Posted Collateral in the form of Cash.
"Posted Credit Support"means Posted Collateral and Other Posted Support.
ANNEX I
Page 9
"Recalculation Date"means the Valuation Date that gives rise to the dispute under Paragraph 5;provided, however,
that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date"means the most recent Valuation Date under Paragraph 3.
"Reference Market-makers"means four leading dealers in the relevant market selected by the Seller in good faith(i)
from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the
time in deciding whether to offer or to make an extension of credit and(ii)to the extent practicable,from among such
dealers having an office in the same city.
"Resolution Time"means 1:00 p.m.,New York time,on the Local Business Day following the date on which notice is
given that gives rise to a dispute under Paragraph 5.
"Return Amount"has the meaning specified in Paragraph 3(b).
"Secured Party"means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit
Support under Paragraph 3(a)or(ii)holds or is deemed to hold Posted Credit Support.
"Section 15.3 Termination Date"has the meaning specified in the Agreement.
"Section 15.3 Termination Event"has the meaning specified in the Agreement.
"Seller Delivery Failure"has the meaning specified in the Agreement.
"Set-off' means set-off, offset, combination of accounts, right of retention or withholding or similar right or
requirement to which the applicable party is entitled or subject under applicable law.
"Substitute Credit Support"has the meaning specified in Paragraph 4(d)(i).
"Substitution Date"has the meaning specified in Paragraph 4(d)(ii).
"Threshold"means, with respect to Seller, as Pledgor, and as of any date,the amount set forth in Schedule II hereto
under the caption "Threshold" set forth opposite Seller's Credit Rating. If at any time Seller shall not have a Credit
Rating by any Rating Agency, then the Threshold for Seller shall be zero (USD 0.00). In the event of a split rating
classification by the Rating Agencies, the Threshold shall be the amount opposite the lower of the Credit Ratings on
Schedule II hereto.
"Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in
accordance with the instructions of the Secured Party,Pledgor or Custodian,as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified
by the recipient;
(ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or
delivery in appropriate physical form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to
constitute a legally valid transfer to the recipient;
(iii) in the case of securities that can be paid or delivered in book-entry,the giving of written instruments
to the relevant depository institution or other entity specified by the recipient, together with a written copy
thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant
interest to the recipient;and
(iv) in the case of Other Eligible Support,for purposes of Paragraph 3(a), (1)delivery by the Pledgor to
the Secured Party,at the address specified in this Annex,of the Letter of Credit or(2)delivery to the Secured
ANNEX 1
Page 10
Party,of an amendment of such Letter of Credit extending the term or increasing the amount available to the
Secured Party,thereunder; and for purposes of Paragraph 3(b),return of the Letter of Credit undrawn by the
Secured Party to the Pledgor,at the address specified in this Annex,or agreement by the Secured Party,to an
amendment to the Letter of Credit in form and substance satisfactory to the Pledgor, reducing the amount
available to the Secured Party,thereunder.
"Valuation Agent"means Seller for all purposes.
"Valuation Date"means,with respect to the determination of Exposure,the first Local Business Day of each month or
any other Local Business Day upon the reasonable request of either party, and with respect to the determination of
Value of Eligible Credit Support or Posted Credit Support, the first Local Business Day of each week or any other
Local Business Day upon the reasonable request of either party.
"Valuation Percentage"means, for any item of Eligible Collateral,the applicable percentage specified in Schedule I
attached hereto.
"Valuation Time"means,with respect to the determination of Exposure,Value of Eligible Credit Support and Posted
Credit Support, the close of business on the Local Business Day immediately before the Valuation Date or date of
calculation,as applicable.
"Value"means for any Valuation Date or other date for which Value is calculated, and subject to Paragraph 5 in the
case of a dispute,with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash,the amount thereof;and
(B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage,if any;
(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral,zero;and
(iii) Other Eligible Support and Other Posted Support,the stated amount thereof as set forth therein.
ANNEX 1
Page 11
CITIGROUP ENERGY INC. THE CITY OF VERNON
By: By:
Name: Name:
Title: Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
ANNEX 1
Page 12
Schedule I
ELIGIBLE COLLATERAL
Valuation Percentage
(A) Cash(denominated in US Dollars) 100%
(B) (x) Negotiable debt obligations issued by the U.S. Treasury
Department or the Government National Mortgage Association
("Ginnie Mae"), or (y) mortgage backed securities issued by
Ginnie Mae(but with respect to either(x)or(y),excluding interest
only or principal only stripped securities, securities representing
residual interests in mortgage pools,or securities that are not listed
on a national securities exchange or regularly quoted in a national
quotation service)and in each case having a remaining maturity of:
(i) less than one year 100%
(ii) one year or greater but less than 10 years 98%
(C) (x) Negotiable debt obligations issued by the Federal Home 95%
Loan Mortgage Association ("Freddie Mac") or the Federal
National Mortgage Association ("Fannie Mae") or (y) mortgage-
backed securities issued by Freddie Mac or Fannie Mae but
excluding interest only or principal only stripped securities,
securities representing residual interests in mortgage pools, or
securities that are not listed on a national securities exchange or
regularly quoted in a national quotation service, in either case
having a maturity of not more than 10 years.
(D) Any other collateral acceptable to the Secured Party in its sole As determined by the
discretion Secured Party in its sole
discretion
Schedule I-Page 1
Schedule II
THRESHOLDS
Credit Rating
(Moody's/S&P) Threshold
A3/A-and above Infinite
BaalBBB+to Baa2BBB $0
and below or not rated
Schedule II-Page 1
Schedule III
LETTER OF CREDIT PROVISIONS
Letters of Credit. Other Eligible Support provided by the Pledgor("X") for the benefit of the Secured
Party("Y")in the form of a Letter of Credit shall be subject to the following provisions.
(a) A Letter of Credit(substantially in the form of Schedule IV hereto with a Valuation Percentage
of 100%) shall be delivered by X to such address as Y shall specify and shall be maintained for the
benefit of Y or its designee. X shall (i) cause the renewal of each outstanding Letter of Credit on a
timely basis as provided in the relevant Letter of Credit, (ii) if the bank that issued an outstanding Letter
of Credit("Issuing Bank")has indicated its intent not to renew such Letter of Credit,provide a substitute
Letter of Credit at least twenty(20)Local Business Days prior to the expiration of the outstanding Letter
of Credit,and(iii)if a bank issuing a Letter of Credit shall fail to honor Y's properly documented request
to demand payment under an outstanding Letter of Credit,provide for the benefit of Y a substitute Letter
of Credit that is issued by a bank acceptable to Y, other than the bank failing to honor the outstanding
Letter of Credit, within two (2)Local Business Days after such refusal. Any failure of the second bank
to honor Y's proposed document request to demand payment under an outstanding Letter of Credit or
failure by X to deliver such substitute Letter of Credit shall constitute an Event of Default under this
Agreement.
(b) Upon the occurrence of a Letter of Credit Default,X agrees to either cause the delivery to Y of a
substitute Letter of Credit,or, alternatively, X shall provide other Eligible Collateral, in each case on or
before the sixtieth Local Business Day after the occurrence thereof. "Letter of Credit Default" shall
mean with respect to an outstanding Letter of Credit,the occurrence of any of the following events: (i)
the bank issuing the Letter of Credit shall fail to maintain a Credit Rating of at least "A-" by S&P and
"A3" by Moody's; (ii) the bank issuing the Letter of Credit shall fail to comply with or perform its
obligations under such Letter of Credit; (iii) the bank issuing such Letter of Credit shall disaffirm,
disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; (iv)
such Letter of Credit shall expire or terminate,or shall fail or cease to be in full force and effect at any
time during the term of this Agreement; or (v) any event analogous to a Bankruptcy as defined in this
Agreement shall occur with respect to the bank issuing the Letter of Credit;provided, however,that no
Letter of Credit Default shall occur in any event with respect to a Letter of Credit after the time such
Letter of Credit is required to be cancelled or returned to X, in accordance with the terms of this
Agreement.
(c) As one method of providing additional Posted Credit Support,X may increase the amount of an
outstanding Letter of Credit or establish one or more additional Letters of Credit.
(d) If consent of Y is required to be given to the Issuing Bank with respect to any Transfer of Other
Eligible Support,Y agrees to promptly give such consent to the Issuing Bank upon demand of X.
(e) (i) Upon or at any time after the occurrence of an Event of Default, Y may demand payment
under any outstanding Letter of Credit upon presentation to the bank issuing the Letter of Credit of one
or more certificates in accordance with the specific requirements of any such Letter of Credit. Cash
received from a demand under the Letter of Credit shall be deemed Posted Collateral and shall either be
(y) applied against all amounts that are due and owing from X but have not been paid to Y under this
Agreement or(z) held by Y as Posted Collateral in accordance with this Annex. Notwithstanding Y's
receipt of Cash from any demand under a Letter of Credit, X shall remain liable for any amounts owing
to Y and remaining unpaid after the application of the amounts so drawn by Y.
(ii) Upon or at any time after the occurrence or deemed occurrence of a Section 15.3
Termination Date as a result of a Section 15.3 Termination Event and the failure of X to make all
payments due and owing to Y in accordance with the terms of this Agreement, Y may, subject to the
Schedule III-Page 1
availability of such amounts,demand payment under any outstanding Letter of Credit in an amount equal
to such amounts owing to it upon presentation to the bank issuing the Letter of Credit of one or more
certificates in accordance with the specific requirements of any such Letter of Credit. Notwithstanding
Y's receipt of Cash from any demand under a Letter of Credit,X shall remain obligated to Y to Transfer
sufficient Eligible Collateral to Y in accordance with the terms of this Annex. In addition, X shall
remain obligated to Y for any amounts owing to Y and remaining unpaid after the application of any
amounts so demanded by Y.
(0 The provisions of this Schedule III shall constitute agreements for all purposes of this
Agreement and this Annex.
(g) X covenants and agrees that so long as a Transaction shall remain outstanding under this
Agreement, no Letter of Credit shall be secured by any mortgage, security interest,pledge, lien or other
encumbrance upon the property of X. Y covenants and agrees that it shall not pledge,encumber or grant
a security interest in any of its right,title or interest into and under any Letter of Credit or Other Eligible
Support.
(h) In all cases,the costs and expenses(including but not limited to the reasonable costs, expenses,
and attorneys' fees of Y)of establishing,renewing,substituting, canceling, and increasing the amount of
a Letter of Credit shall be borne by X.
Schedule III-Page 2
Schedule IV
IRREVOCABLE STANDBY LETTER OF CREDIT
Letter of Credit No. Issue Date: ,20
Beneficiary: Account Party:
[Name of Beneficiary] [Name of Account Party]
[Address] [Address of Account Party]
Attn: Attn:
Ladies and Gentlemen:
We hereby establish in favor of you,the City of Vernon as successor in interest to the Vernon
Natural Gas Financing Authority (the"Beneficiary"), at the request and for the account of Citigroup Energy Inc.
(the"Account Party"),with respect to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27,
2006 between the Account Party and the Vernon Natural Gas Financing Authority,as may be amended from time
to time (the "Agreement"), our Irrevocable Standby Letter of Credit No. (the "Credit") whereby we
irrevocably authorize you to demand from us,in accordance with the terms and conditions hereinafter set forth, in
an amount not to exceed in the aggregate $ . Capitalized terms not otherwise defined herein or
elsewhere in the Credit shall have the meanings specified in the Agreement.
Funds hereunder are available to you against your demand for payment hereunder delivered to us by
courier or facsimile at the address specified below with both of the following items attached:
1. A certificate, dated the date of such demand for payment, signed by the of the Beneficiary, in
the form of Exhibit A hereto, accompanied by the certificate of the of the Beneficiary
substantially to the effect that the signatory of such certificate is duly incumbent as the of the
Beneficiary and is authorized to submit such demand by all necessary corporate authorization,which
certificate of such shall certify as to a specimen signature of such signatory;and
2. Either (x) a statement, signed by the of the Account Party, in the form of Exhibit B hereto,
accompanied by the certificate of the Secretary or an Assistant Secretary of the Account Party
substantially to the effect that the signatory of such certificate is duly incumbent as the of the
Account Party and is authorized to submit such demand by all necessary corporate authorization,
which certificate of such Secretary or Assistant Secretary shall certify as to a specimen signature of
such signatory; or(y) certificate, dated the date of such demand for payment, signed by the of
the Beneficiary, in the form of Exhibit C hereto, accompanied by the certificate of the of
the Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as
the of the Beneficiary and is authorized to submit such certificate by all necessary corporate
authorization, which certificate of such shall certify as to a specimen signature of such
signatory, to which there shall be attached an order of a court of the State of New York or of a
Federal court of the United States of America, dated a date not less than sixty(60)days prior to the
date of such demand, substantially to the effect that an amount not less than the amount demanded
under such demand for payment is ordered to be immediately due and payable by Account Party
under the Sale Agreement; (z) a certificate, dated the date of such demand for payment, signed by
the of the Beneficiary, in the form of Exhibit D hereto, accompanied by the certificate of the
of the Beneficiary substantially to the effect that the signatory of such certificate is duly
incumbent as the of the Beneficiary and is authorized to submit such certificate by all
necessary corporate authorization, which certificate of such shall certify as to a specimen
signature of such signatory, to which there shall be attached a signed and notarized proof of claim
Schedule IV-Page 1
filed by the Beneficiary with a bankruptcy court having jurisdiction over a case under the U.S.
Bankruptcy Code under which the Account Party is a debtor for the amount specified in such
demand; (aa) a certificate, dated the date of such demand for payment, signed by the of the
Beneficiary, in the form of Exhibit E hereto, accompanied by the certificate of the of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
of the Beneficiary and is authorized to submit such certificate by all necessary corporate
authorization,or(bb)a certificate, dated the date of such demand for payment and dated a date not
more than twenty (20) New York Banking Days prior to the expiration of the Credit as such
expiration may be amended from time to time, signed by the of the Beneficiary, in the form of
Exhibit F hereto, accompanied by the certificate of the of the Beneficiary substantially to
the effect that the signatory of such certificate is duly incumbent as the of the Beneficiary
and is authorized to submit such certificate by all necessary corporate authorization.
Partial demands are allowed under this Credit. The amount which may be demanded under this
Credit shall be automatically reduced by the amount of any demands previously paid by us hereunder. Multiple
demands for payment hereunder are permitted from time to time in an amount not to exceed in the aggregate the
amount specified in the first paragraph of this Credit.
Presentation of your Certificate shall be made on any day which is a New York Banking Day for
us at or prior to [5:00 p.m.(New York time)]at our office located at .
Presentation must be made by hand,mail or courier service,to such address. If your presentation is made at such
office, in compliance with the other terms and conditions of this Credit,on or prior to the expiry date hereof,we
hereby irrevocably undertake to honor such presentation [by close of business on the next New York Banking
Day].
This Credit is effective immediately and expires at our close of business on ,
20 , [(the "Initial Expiry Date"); provided however, that this Credit shall be automatically extended without
amendment for one or more additional periods from the Initial Expiry Date or any subsequent expiry date,unless
at least 60 days prior to such date you receive a notice in writing by certified mail at the above address, that we
elect not to extend this Credit for such additional period.Upon your receipt of such a notice of non-extension,you
shall be entitled to make immediate demand for payment of the full amount available under this Credit, by
presentation of your Certificate.
This Credit shall be subject to the provisions of the International Standby Practices 1998,
International Chamber of Commerce Publication No. 590("ISP"),and as to matters not addressed by ISP,shall be
governed by the laws of the State of New York and applicable U.S.federal laws.
This Credit may not be amended, changed or modified without our express written consent and that of
the Beneficiary and the Account Party.
Very truly yours,
[ISSUING BANK]
Schedule IV-Page 2
EXHIBIT A
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ (the"Demand")' to which this Certificate is attached.
The undersigned hereby certifies that: (i) the amount demanded by the Demand is net of all amounts
due and payable by the undersigned to the Account Party under the Agreement for Purchase and Sale of
Natural Gas dated as of June 27, 2006 (the "Agreement") between the Account Party and the
undersigned; (ii) the amount demanded by the Demand has not been the subject of a prior demand
under the Credit; (iii) such amount is due and payable by the Account Party under the Agreement and
has not been paid; and(iv)the undersigned has made demand therefor on the Account Party pursuant to
the Agreement.
The Demand shall be paid to the following account:
[Insert Custodian Account details]
THE CITY OF VERNON
By:
Name:
Title:
This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT B
[Form of Stipulation as to Amounts Due and Payable]
[Letterhead of Citigroup Energy Inc.]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder(the
"Demand") in the amount of$ 2 to which this Certificate is attached.
The undersigned hereby certifies that the amount demanded by the Demand is due and payable by the
undersigned to the Account Party under the Agreement for Purchase and Sale of Natural Gas dated as
of June 27, 2006 (the "Agreement") between the Account Party and the undersigned and has not been
paid.
CITIGROUP ENERGY INC.
By:
Name:
Title:
2 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT C
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of $ 3 to which this Certificate is attached, and the order of a New York State or
Federal United States court to which this Certificate is attached(the"Order").
The undersigned hereby certifies that: (i) the Order is authentic and has not been amended, stayed,
rescinded or satisfied and remains in full force and effect; and (ii) either(A) no appeal from the Order
has been taken, and the period for the filing of any such appeal has lapsed, or (B) if any appeals from
such Order have been taken, such appeals have been finally denied, without further right of appeal,by a
competent court.
THE CITY OF VERNON
By:
Name:
Title:
3 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT D
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 4 to which this Certificate is attached, and the proof of claim, a copy of which is
appended hereto, executed and filed by undersigned with the U.S. bankruptcy court having jurisdiction
over the pending bankruptcy pending case under which Citigroup Energy Inc. is the debtor(the "Proof
of Claim").
The undersigned hereby certifies that: (i) the Proof of Claim is authentic and has not been amended,
withdrawn, disallowed or rescinded and remains in full force and effect; and (ii) such Proof of Claim
was submitted to such bankruptcy court in good faith; and (iii) the undersigned has not received
payment in whole or part of the amount claimed pursuant to such Proof; and (iv) the amount claimed
pursuant to such Proof of Claim is the amount demanded pursuant to such Demand.
THE CITY OF VERNON
By:
Name:
Title:
4 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT E
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 5 to which this Certificate is attached, and evidence publicly available showing
that the Issuing Bank has a public rating of senior, unsecured, unenhanced indebtedness or deposits (1)
below A- with respect to Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies, Inc., or any successor thereto or(2) below A3 with respect to Moody's Investors Services,
Inc., or any successor thereto (the "Credit Rating Downgrade") and (i) that such Credit Rating
Downgrade has occurred more than 60 New York business days prior to the date hereof and(ii)neither
Other Eligible Support nor Eligible Collateral has been provided to the undersigned in accordance with
Paragraph 3 of the Credit Support Annex attached as Annex I to the Agreement for Purchase and Sale
of Natural Gas, dated as of June 27, 2006 between the Account Party and the Vernon Natural Gas
Financing Authority,as may be amended from time to time.
The undersigned hereby certifies that the Credit Rating Downgrade is true and correct in all respects
and such information is publicly available.
THE CITY OF VERNON
By:
Name:
Title:
5 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT F
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
_,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 6 to which this Certificate is attached, and the undersigned hereby certifies that as
of the date hereof, (1) the Credit, as amended, has less than twenty (20) New York business days to
expiration as of the date of this Certificate and(2)neither Other Eligible Support nor Eligible Collateral
has been provided to the undersigned in accordance with Paragraph 3 of the Credit Support Annex
attached as Annex Ito the Agreement for Purchase and Sale of Natural Gas, dated as of June 27, 2006
between the Account Party and the Vernon Natural Gas Financing Authority, as may be amended from
time to time.
THE CITY OF VERNON
By:
Name:
Title:
6 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
Schedule V
[Form of Tri-Party Collateral Account Control Agreement]
[To be provided]
Ancillary Documents
Execution Version
COLLATERAL ACCOUNT CONTROL AGREEMENT
AMONG
U.S. BANK NATIONAL ASSOCIATION,
As Securities Intermediary
CITY OF VERNON,
As Secured Party
AND
CITIGROUP ENERGY INC.,
As Pledgor
Dated as of ,2016
TABLE OF CONTENTS
Page
1. Definitions 4
2. Appointment and Status of Securities Intermediary; Account 6
(a) Appointment; Identification of Collateral 6
(b) Status of Securities Intermediary 6
(c) Use of Depositories 6
(d) Pledgor Representation 7
(e) Securities Intermediary's Representations, Warranties and Covenants 7
3. Collateral Services 7
(a) Return of Collateral to Pledgor 7
(b) Substitutions 8
(c) Deposit of Collateral 8
(d) Collateral Transfers 8
(e) Priority of Secured Party's Security Interest 8
(f) Notice of Adverse Claims 9
4. Notice of Exclusive Control 9
5. General Terms and Conditions 10
(a) Indemnification 10
(b) No Obligation Regarding Quality of Collateral 10
(c) No Responsibility Concerning the PSA, CSA and CEA 10
(d) No Duty of Oversight 11
(e) Advice of Counsel 11
(0 No Collection Obligations 11
(g) Fees and Expenses 11
(h) Reliance; Risk Acknowledgements; Additional Terms 11
(i) Account Disclosure 12
(j) Force Majeure 12
(k) No Implied Duties; Entire Agreement 12
6. Termination 12
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor 12
(b) Termination by Securities Intermediary 13
(c) Obligations Upon Termination 13
7. Miscellaneous 13
(a) Ambiguity in Notices 13
(b) Notices 13
(c) Cumulative Rights;No Waiver 14
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(d) Severability; Amendments; Assignment 14
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver 14
(f) No Third Party Beneficiaries 15
(g) Headings 15
(h) Counterparts 15
(i) USA PATRIOT ACT 15
(j) Tax Forms 15
(k) New Authorized Persons 15
Schedule I 18
Schedule II 19
Exhibit A 21
Exhibit B 22
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COLLATERAL ACCOUNT CONTROL AGREEMENT
This Collateral Account Control Agreement, and the exhibits and schedules thereto
(collectively, the "Agreement") is dated as of , 2016 among Citigroup
Energy Inc. ("Pledgor"), the City of Vernon ("Secured Party") and U.S. Bank National
Association ("Securities Intermediary").
WITNESSETH:
WHEREAS, Secured Party and Pledgor have entered into an Agreement for Purchase and
Sale of Natural Gas dated as of June 27, 2006, including a Credit Support Annex thereto (as
amended from time to time, the "CSA") (such documents, collectively and as amended from
time to time, the "PSA") pursuant to which Pledgor has agreed to post and pledge certain
"Collateral" (as defined below) in order to secure the performance of Pledgor's obligations to
Secured Party under the PSA;
WHEREAS, Secured Party and Pledgor have requested Securities Intermediary to hold
Collateral to be posted by Pledgor and to perform certain other functions as more fully described
in this Agreement; and
WHEREAS, Securities Intermediary has agreed to hold such Collateral and to perform
such other functions, subject to the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties hereto agree as follows:
1. Definitions. Whenever used in this Agreement, the following words shall have the
meanings set forth below:
"Account" shall mean the custody account segregated on the books and records of the
Securities Intermediary hereunder in the name of Pledgor (as the same may be re-
designated, renumbered or otherwise modified). The Account shall be deemed to consist
of a "securities account" (as defined in Section 8-501(a) of the UCC), in which any
securities pledged to Secured Party shall be held, and a "deposit account" (as defined in
Section 9-102(a)(29) of the UCC), in which any cash pledged to Secured Party shall be
held.
"Agreement" shall have the meaning set forth in the preamble.
"Authorized Person" shall mean each person listed in a notice in the form of Exhibit A
to this Agreement received by Securities Intermediary that certifies that such persons are
authorized to transmit or deliver Written Instructions on behalf of Secured Party or
Pledgor, as the case may be, and that contains specimen signatures of each such person.
"Bankruptcy" shall have the meaning set forth in the PSA.
"Business Day" shall mean any day, other than a Saturday or Sunday, on which
Securities Intermediary is open for general business.
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"Call Back Representative" shall be any person duly authorized in writing by Secured
Party or Pledgor, respectively, to confirm changes to or deviations from Standing Wire
Instructions contained in Written Instructions on behalf of Secured Party or Pledgor,
respectively, such persons and such Standing Wire Instructions to be designated in
Schedule II to this Agreement, as the same may be revised from time to time by notice to
Securities Intermediary.
"CEA" means the Commodity Exchange Act, as amended.
"Collateral" for purposes of this Agreement shall mean the Account and the cash and all
securities and investment property held or deposited in or credited to the Account and any
and all proceeds of the foregoing held in or credited to the Account.
"CSA" shall have the meaning set forth in the preamble.
"Depository" shall mean The Federal Reserve Bank of New York, The Depository Trust
Company and any other clearing corporation within the meaning of Section 8-102 of the
UCC or otherwise authorized to act as a securities depository or clearing agency, and
their respective successors and nominees.
"Evidence of Filing" shall have the meaning set forth in Section 4(a)(i).
"Losses" shall have the meaning set forth in Section 5(a)(i).
"Notice of Exclusive Control" shall mean a written notice, substantially in the form of
and containing the applicable information specified in Exhibit B hereto, signed by an
Authorized Person of Secured Party.
"Payment Obligations" shall have the meaning set forth in Section 3(e).
"Pledgor" shall have the meaning set forth in the preamble.
"PSA" shall have the meaning set forth in the preamble.
"Secured Party" shall have the meaning set forth in the preamble.
"Securities Intermediary" shall have the meaning set forth in the preamble.
"Specified Collateral" shall have the meaning set forth in Section 4(a)(i).
"Standing Wire Instructions" shall mean the bank account details specified for each
party in Schedule II hereto, as the same may be revised from time to time by notice to
Securities Intermediary.
"Substitute Collateral" shall have the meaning set forth in Section 3(b).
"UCC" shall mean the Uniform Commercial Code as in effect in the State of New York.
"Value" shall have the meaning set forth in the CSA.
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"Written Instructions" shall mean entitlement orders and other instructions in a written
record (including, without limitation, an electronic record) delivered or transmitted by an
Authorized Person and, if applicable, confirmed by a Call Back Representative, in
accordance with Section 7(c) of this Agreement and received by Securities Intermediary
at the address specified in Schedule I of this Agreement or such other address specified
by Securities Intermediary as available for use in connection with this Agreement.
The terms "entitlement holder", "entitlement order", "financial asset", "investment
property", "proceeds", "security", "security entitlement" and "securities intermediary" shall
have the meanings set forth in Articles 8 and 9 of the UCC. As between Secured Party and
Pledgor, any capitalized terms not defined herein shall have their respective meanings as
assigned in the PSA.
2. Appointment and Status of Securities Intermediary; Account.
(a) Appointment; Identification of Collateral. Secured Party and Pledgor
hereby intend that this Agreement establish "control" of the Account and the Collateral by
Secured Party for purposes of perfecting Secured Party's security interest in the Account and the
Collateral pursuant to Articles 8 and 9 of the UCC, and Securities Intermediary hereby
acknowledges that it has been advised of Pledgor's grant to Secured Party of a security interest in
the Account and in the Collateral pursuant to the terms of the CSA. Pledgor hereby appoints
Securities Intermediary to perform its duties as hereinafter set forth and authorizes Securities
Intermediary to hold Collateral in the Account either in its name or in the name of its nominees.
Such Collateral shall be identified and segregated separately with respect to Pledgor on
Securities Intermediary's books and records. Securities Intermediary hereby accepts such
appointment and agrees to establish and maintain the Account and appropriate records
identifying the Collateral in the Account as pledged by Pledgor to Secured Party. Pledgor hereby
authorizes Securities Intermediary to comply with all Written Instructions, including entitlement
orders, originated by Secured Party with respect to the Collateral without further consent or
direction from Pledgor or any other party.
(b) Status of Securities Intermediary. The parties agree that Securities
Intermediary is a securities intermediary, and that all property other than cash held in the
Account shall be treated as "financial assets" within the meaning of the UCC. Securities
Intermediary makes no representations or warranties with respect to the creation or enforceability
of any security interest in the Account or the Collateral.
(c) Use of Depositories. Secured Party and Pledgor hereby authorize
Securities Intermediary to utilize Depositories to the extent Securities Intermediary deems
appropriate in connection with its performance hereunder with respect to any Collateral
consisting of securities. Collateral held by Securities Intermediary in a Depository will be held
subject to the rules, terms and conditions of such Depository. Where Collateral is held in a
Depository, Securities Intermediary shall identify on its records as belonging to Pledgor and
pledged to Secured Party a quantity of securities as part of a fungible bulk of securities held in
Securities Intermediary's account at such Depository. Securities deposited in a Depository will
be represented in accounts which include only assets held by Securities Intermediary for its
customers.
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(d) Pledgor Representation. Pledgor represents and warrants that it is the sole
owner of or otherwise has the right to transfer the Collateral free and clear of all liens, claims,
security interests and encumbrances (except those granted in this Agreement and in the CSA).
Pledgor agrees to transfer all Collateral to the Account free of encumbrances of any type. As of
the date hereof, Pledgor has confirmed that Securities Intermediary (i) is a trust company or
commercial bank with trust powers, organized under the laws of the United States of America or
any state or province thereof and subject to supervisions or examination by federal or state
authority, having a combined capital surplus of at least U.S. $10,000,000,000 and (ii) has
outstanding long term unsecured unsubordinated debt securities ratings of at least "A3" by
Moody's Investors Services, Inc., or any successor thereto and "A-" by Standard & Poor's
Rating Services, or any successor thereto.
(e) Securities Intermediary's Representations, Warranties and Covenants.
Securities Intermediary hereby represents, warrants, and covenants that: (i) in the ordinary
course of Securities Intermediary's business, it maintains securities accounts for others and is
acting in that capacity in connection with this Agreement; (ii) Securities Intermediary is engaged
in the business of banking; (iii) the Account is and will be maintained by Securities Intermediary
as a "securities account" (within the meaning of Section 8-501(a) of the UCC) with respect to all
property other than cash deposited or credited thereto and a "deposit account" (within the
meaning of Section 9-102 of the UCC) with respect to cash deposited or credited to the Account;
and(iv) except as otherwise ordered by a court of competent jurisdiction, Securities Intermediary
will not comply with and will not agree to comply with instructions or entitlement orders of any
person other than Secured Party and, to the extent permitted hereby, Pledgor with respect to the
Account or the Collateral.
3. Collateral Services.
(a) Return of Collateral to Pledgor. Prior to a receipt by Securities
Intermediary of a Notice of Exclusive Control from Secured Party, if Pledgor is entitled to the
return of certain Collateral pursuant to the CSA, Pledgor shall issue Written Instructions to
Securities Intermediary (with a mandatory contemporaneous copy to Secured Party) in
accordance with Section 7(b)(i) of this Agreement to transfer such Collateral from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised. Securities Intermediary shall, without
inquiry and in reliance upon such Written Instructions, comply with such Written Instructions
from Pledgor with respect to the transfer of Collateral to Pledgor (including, by way of example
and not by way of limitation, Written Instructions relating to the withdrawal or transfer of
Collateral from the Account, the release of the proceeds of a securities sale or redemption and
any income received on a security). Pledgor hereby covenants, for the benefit of Secured Party,
that Pledgor will originate entitlement orders concerning the Account or the Collateral only as
permitted by the CSA. The foregoing covenant is for the benefit of Secured Party only and will
not be deemed to constitute a limitation on Securities Intermediary's obligation to comply with
those entitlement orders. The failure of Pledgor to deliver to Secured Party a copy of any
Written Instructions delivered by Pledgor to Securities Intermediary will not limit or otherwise
affect the right of Securities Intermediary to rely without inquiry upon such Written Instructions.
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(b) Substitutions. As between Pledgor and Secured Party, if and to the extent
the terms of the CSA permit Collateral to be substituted, Pledgor may substitute Collateral by
delivering Written Instructions to Securities Intermediary instructing it to (i)receive from
Pledgor for deposit to the Account Collateral identified in such Written Instructions ("Substitute
Collateral") and (ii)transfer Collateral identified in such Written Instruction from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised not later than 5:00 p.m. (Eastern Time)
on the Business Day following the date on which such Substitute Collateral is received by
Securities Intermediary. It is understood and agreed that Securities Intermediary shall not have
any duty or responsibility whatsoever for determining whether Collateral is permitted to be
substituted in accordance with the terms of the CSA, whether any Substitute Collateral
constitutes Substitute Credit Support within the terms of the CSA or for determining the Value of
any Collateral or Substitute Collateral. Securities Intermediary shall act without inquiry and in
reliance on all Written Instructions to substitute Collateral.
(c) Deposit of Collateral. Prior to a receipt by Securities Intermediary of a
Notice of Exclusive Control from Secured Party, Securities Intermediary is authorized to, and
shall, in accordance with this Section 3(c) deposit the Collateral in the Account.
(d) Collateral Transfers. Securities Intermediary shall transfer Collateral from
the Account only in accordance with clauses (a), (b) and (c) of this Section 3, Section 4 and as
provided in Section 6 hereof. For the avoidance of doubt, it is understood and agreed that
Securities Intermediary shall not have any obligation to act on any instructions other than
Written Instructions.
(e) Priority of Secured Party's Security Interest. In order to secure the
repayment of all amounts owed to Securities Intermediary hereunder, including, without
limitation, any fees, charges or expenses payable to Securities Intermediary pursuant to
Sections 5(a)(ii) and 5(g) of this Agreement (collectively, the "Payment Obligations"),
Securities Intermediary shall have a security interest in and right of set-off against the Account
and the Collateral and the proceeds thereof, until such time as Securities Intermediary is repaid in
full the amount of any such Payment Obligations. In no event will Securities Intermediary
advance funds or otherwise extend credit in connection with the maintenance or operation of the
Account or the acquisition or crediting of any Collateral to the Account. Notwithstanding the
preceding provisions of this Section 3(e), Securities Intermediary's security interest in and right
of set-off against the Account and the Collateral to secure the repayment of Payment Obligations
hereunder shall be senior to Secured Party's security interest in and lien on the Account and the
Collateral. In the event that Payment Obligations arising under Section 5(g) of this Agreement
have become due and payable by Pledgor to Securities Intermediary and any such amounts have
not otherwise been satisfied within [30] days Pledgor's receipt of a written notice from Securities
Intermediary that a Payment Obligation under Section 5(g) of this Agreement has become due
and payable (the "Overdue Amount"), then Securities Intermediary shall be permitted to deduct
and set-off the Overdue Amount against any Collateral that otherwise would be returnable to
Pledgor in accordance with Section 3(a) hereof. Securities Intermediary's lien and security
interest in the Account and the Collateral set forth above shall not secure any amounts owed by
Pledgor to Securities Intermediary pursuant to any other agreement between Pledgor and
Securities Intermediary. Any other lien, security interest, right of set-off or deduction or
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banker's lien in favor of Securities Intermediary in or against the Account or the Collateral
whether pursuant to agreement or arising by operation of law are hereby waived.
(f) Notice of Adverse Claims. Upon receipt of written notice of any lien,
encumbrance or adverse claim against the Account or any portion of the Collateral carried
therein (other than any lien, encumbrance or claim identified herein), Securities Intermediary
shall use reasonable efforts to notify Secured Party and Pledgor as promptly as reasonably
practicable under the then current circumstances.
4. Notice of Exclusive Control.
(a) Secured Party may, subject to the terms of this Agreement, exercise sole
and exclusive control of the Account and the Collateral held therein at any
time by delivering to Securities Intermediary a Notice of Exclusive
Control.
(b) Following receipt of a Notice of Exclusive Control from Secured Party,
Securities Intermediary shall, without inquiry and in reliance upon such
Notice of Exclusive Control, thereafter comply with Written Instructions
(including entitlement orders) solely from Secured Party. Secured Party
agrees to deliver a copy of any Notice of Exclusive Control to Pledgor
contemporaneously with its delivery of such notice to Securities
Intermediary. Upon receipt of a Notice of Exclusive Control, Securities
Intermediary shall promptly provide a copy of such Notice of Exclusive
Control to Pledgor in accordance with Section 7(b)(iii) of this Agreement;
provided that Securities Intermediary's failure to provide a copy of such
Notice of Exclusive Control to Pledgor shall not affect the validity of such
notice.
Secured Party covenants, for the benefit of Pledgor,that it will not deliver
a Notice of Exclusive Control to Securities Intermediary unless and until
(1) (x) an Event of Default(as defined in the CSA)with respect to the
Pledgor has occurred and is continuing or(y) a Section 15.3 Termination
Event(as defined in the PSA) has occurred and is continuing following
Secured Party providing Pledgor at least two (2) Local Business Days'
prior written notice that such Section 15.3 Termination Event has occurred
and(2) Pledgor has not paid in full all of its Obligations (as defined in the
CSA)that are then due and payable.
(c) Securities Intermediary shall have no duty to determine whether Secured
Party has complied with this Section 4, including, but not limited to a duty
to verify that any statement or other information contained in any such
notice is true and correct
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5. General Terms and Conditions.
(a) Indemnification.
i. Except as otherwise expressly provided herein, Securities
Intermediary shall not be liable for any losses, costs, expenses,
damages, liabilities or claims, including reasonable attorneys' fees
(collectively, "Losses") incurred by or asserted against Pledgor or
Secured Party, except those Losses arising out of the negligence,
fraud or willful misconduct of Securities Intermediary. Securities
Intermediary shall have no liability whatsoever for the action or
inaction of any Depository, except to the extent any such action or
inaction by a Depository is the direct result of the negligence,
fraud, or willful misconduct of Securities Intermediary. In no
event shall Securities Intermediary, Secured Party or Pledgor be
liable for special, indirect or consequential damages, or lost profits
or loss of business, arising in connection with this Agreement.
ii. Solely in connection with this Agreement and the Account subject
hereto, Secured Party and Pledgor agree, jointly and severally, to
defend, indemnify and hold Securities Intermediary and each
director, officer, employee, attorney, agent and affiliate of
Securities Intermediary, harmless from and against any and all
Losses other than special, indirect or consequential damages or lost
profits or loss of business, sustained or incurred by or asserted
against Securities Intermediary by any party by reason of or as a
result of any action or inaction, or arising out of Securities
Intermediary's performance hereunder, including reasonable fees
and expenses of counsel incurred by Securities Intermediary in a
successful defense of claims by Pledgor or Secured Party;
provided, however, that Pledgor and Secured Party shall not
indemnify Securities Intermediary for those Losses arising out of
Securities Intermediary's negligence, fraud or willful misconduct.
This indemnity shall be a continuing obligation of Pledgor and
Secured Party, their respective successors and assigns,
notwithstanding the termination of this Agreement.
(b) No Obligation Regarding Quality of Collateral. Without limiting the
generality of the foregoing, Securities Intermediary shall be under no obligation to inquire into,
and shall not be liable for, any Losses incurred by Pledgor, Secured Party or any other person as
a result of the receipt or acceptance of fraudulent, forged or invalid Collateral, or Collateral
which otherwise is not freely transferable or deliverable without encumbrance in any relevant
market.
(c) No Responsibility Concerning the PSA, CSA and CEA. Pledgor and
Secured Party hereby agree that, notwithstanding references to the PSA and the CSA in this
Agreement, Securities Intermediary has no interest in, and no duty, responsibility or obligation
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with respect to, the PSA and the CSA (including without limitation, no duty, responsibility or
obligation to monitor Pledgor's or Secured Party's compliance with the PSA and the CSA or to
know the terms of the PSA and the CSA). Securities Intermediary has no duty, responsibility or
obligation with respect to the compliance of this Agreement, with the CEA, or with the rules
promulgated thereunder.
(d) No Duty of Oversight. Securities Intermediary is not at any time under
any duty to monitor the Value of any Collateral in the Account or to determine whether the
Collateral is of a type required to be held or eligible to be held in the Account, or to supervise the
investment of, or to advise or make any recommendation for the purchase, sale, retention or
disposition of any Collateral or to determine whether the aggregate Value of the Collateral is
sufficient to secure Pledgor's obligations under the PSA.
(e) Advice of Counsel. Securities Intermediary may obtain the advice of legal
counsel selected by it in the event of any dispute or question as to the interpretation of any of the
provisions hereof or of its duties hereunder and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice.
(f) No Collection Obligations. Securities Intermediary shall be under no
obligation to take action to collect any amount payable on Collateral in default, or if payment is
refused after due demand and presentment.
(g) Fees and Expenses. Pledgor agrees to pay to Securities Intermediary fees
for Securities Intermediary's performance under this Agreement as such fees are set forth on the
fee schedule attached hereto as Exhibit C, as such fee schedule may be modified from time to
time upon the mutual agreement of the Pledgor and Securities Intermediary. Pledgor shall
reimburse Securities Intermediary for all reasonable and customary costs associated with
transfers of Collateral to Securities Intermediary and records kept in connection with this
Agreement. Pledgor shall also reimburse Securities Intermediary for out-of-pocket expenses,
which are a normal incident of the services provided under this Agreement. Pledgor shall be
responsible for such other fees and expenses as may be agreed in writing between Securities
Intermediary and Pledgor with respect to the Account.
(h) Reliance; Risk Acknowledgements;Additional Terms.
i. Subject to the terms below, Securities Intermediary shall be
entitled to rely upon any Written Instructions actually received by
Securities Intermediary and reasonably believed by Securities
Intermediary to be duly authorized and delivered.
ii. If Securities Intermediary receives Written Instructions which
appear on their face to have been transmitted via (A) computer
facsimile, email, the Internet or other insecure electronic method,
or (B) secure electronic transmission containing applicable
authorization codes,passwords and/or authentication keys, Secured
Party and Pledgor each understands and agrees that Securities
Intermediary cannot determine the identity of the actual sender of
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such Written Instructions and that Securities Intermediary shall
conclusively presume that such Written Instructions have been sent
by an Authorized Person. Secured Party and Pledgor shall be
responsible for ensuring that only its Authorized Persons transmit
such Written Instructions to Securities Intermediary and that all of
its Authorized Persons treat applicable user and authorization
codes, passwords and/or authentication keys with extreme care.
iii. Secured Party and Pledgor each acknowledges and agrees that it is
fully informed of the protections and risks associated with the
various methods of transmitting Written Instructions to Securities
Intermediary and that there may be more secure methods of
transmitting Written Instructions than the method(s) selected by it.
(i) Account Disclosure. Securities Intermediary is authorized to supply any
information regarding the Account, which is required by any applicable law or governmental
regulation now or hereafter in effect.
(j) Force Majeure. Securities Intermediary shall not be responsible or liable
for any failure or delay in the performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable control, including
without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software) or communications service; accidents; labor disputes; acts of civil or military authority;
governmental actions; inability to obtain labor, material, equipment or transportation.
(k) No Implied Duties; Entire Agreement. Securities Intermediary shall have
no duties or responsibilities whatsoever except such duties and responsibilities as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied against Securities
Intermediary in connection with this Agreement. This Agreement constitutes the sole agreement
between the parties with respect to its subject matter and supersedes any and all other agreements
(whether written or oral) between the parties with respect to such subject matter.
6. Termination.
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor.
This Agreement shall terminate upon (i) Securities Intermediary's receipt of Written Instructions
from Pledgor expressly stating that Secured Party no longer claims any security interest in the
Collateral and the subsequent transfer by Securities Intermediary of all of the Collateral from the
Account to Pledgor pursuant to Pledgor's Written Instructions; (ii) Securities Intermediary's
receipt of a Notice of Exclusive Control delivered by Secured Party and the subsequent transfer
by Securities Intermediary of all of the Collateral from the Account as instructed by Secured
Party; or (iii) Securities Intermediary's receipt of reasonably contemporaneous Written
Instructions from each of Pledgor and Secured Party confirming to Securities Intermediary that
Pledgor and Secured Party elect to terminate this Agreement and the subsequent transfer by
Securities Intermediary of all of the Collateral in the Account as directed in such Written
Instructions.
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(b) Termination by Securities Intermediary. This Agreement may be
terminated by Securities Intermediary by providing written notice to the other parties, provided
that such termination shall not be effective until 60 days following Securities Intermediary's
delivery or transmission of such written notice (the "Effective Termination Date").
Upon receipt of such notice, Secured Party and Pledgor will endeavor to provide joint Written
Instructions for the transfer of all the Collateral on or before the Effective Termination Date. If
such joint Written Instructions are not received by Securities Intermediary on or before the
Effective Termination Date, Securities Intermediary may petition a court of competent
jurisdiction for instructions and transfer the Collateral as directed by such court.
Following the Effective Termination Date and until the date of transfer of all Collateral, the sole
duty of Securities Intermediary under this Agreement will be to retain custody of the Collateral
pending the transfer.
(c) Obligations Upon Termination. Except as otherwise provided herein, all
obligations of the parties to each other hereunder shall cease upon termination of this Agreement.
7. Miscellaneous.
(a) Ambiguity in Notices. In the event that Securities Intermediary
determines that there is an ambiguity in any Written Instructions received from Pledgor or
Secured Party (a "Sender"), Securities Intermediary shall promptly give the Sender written
notice of such ambiguity and may, in its reasonable discretion, thereafter refrain from taking any
action directed in such Written Instructions other than to retain possession of the Collateral,
unless Securities Intermediary receives clarifying or superseding Written Instructions from the
Sender which, in the determination of Securities Intermediary, eliminate such ambiguity.
Securities Intermediary shall be permitted to rely upon such clarifying or superseding Written
Instructions without further inquiry.
(b) Notices.
i. Notices From Secured Party or Pledgor to Securities Intermediary.
All notices, approvals, consents, requests and other
communications to be delivered by Pledgor to Securities
Intermediary or by Secured Party to Securities Intermediary
hereunder shall be in a writing. All such notices, approvals,
consents, requests and other communications to be delivered by
Pledgor or Secured Party hereunder shall be signed by an
Authorized Person and shall be delivered by hand, overnight
delivery service, facsimile (with confirmed receipt) or email
(provided that if the writing is delivered by email, such writing
shall be delivered as an attachment on an official letterhead of the
delivering party)to the relevant address, facsimile number or email
address set forth in Schedule I hereto, or to such other address as
each party may designate for itself by like notice and any such
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writing shall be deemed to have been given when the writing is
received by Securities Intermediary.
ii. Electronic Transmission of Notices. By electing to use electronic
transmission of any kind for notice purposes, each of Pledgor and
Secured Party acknowledges that such transmissions are not
encrypted and therefore are insecure. Each of Pledgor and Secured
Party further acknowledges that there are other risks inherent in
communicating through electronic transmission such as the
possibility of virus contamination and disruptions in service, and
agrees that Securities Intermediary shall not be responsible for any
loss, damage or expense suffered or incurred by Pledgor, Secured
Party or any person claiming by or through Pledgor or Secured
Party as a result of the use of electronic transmission,provided that
any such loss, damage or expense is not the direct result of the
negligence or willful misconduct of Securities Intermediary.
iii. Notices to Secured Party or Pledgor. All notices, approvals,
consents, requests and other communications to be delivered to
Pledgor or Secured Party hereunder shall be in writing and shall be
deemed to have been given when the writing is delivered if given
or delivered by hand, overnight delivery service, facsimile (with
confirmed receipt) or email to the address, facsimile number or
email address set forth in Schedule I hereto, or to such other
address as each party may designate for itself by like notice.
(c) Cumulative Rights;No Waiver. Each and every right granted to Securities
Intermediary hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to
time. No failure on the part of Securities Intermediary to exercise, and no delay in exercising,
any right will operate as a waiver thereof, nor will any single or partial exercise by Securities
Intermediary of any right preclude any other future exercise thereof or the exercise of any other
right.
(d) Severability; Amendments; Assignment. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a written
agreement executed by the parties hereto. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by any party without the written consent of the other parties.
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver.
This Agreement and the Account shall be governed by and construed in accordance with the
substantive laws of the State of New York. The State of New York shall be the "securities
intermediary's jurisdiction" and the "bank's jurisdiction" within the meaning of Sections 8-
110(e) and 9-304 of the UCC, respectively. Secured Party, Pledgor and Securities Intermediary
14 of 23
hereby consent to the exclusive jurisdiction of a state or federal court situated in New York City,
New York in connection with any dispute arising hereunder. To the extent that in any
jurisdiction Secured Party or Pledgor may now or hereafter be entitled to claim, for itself or its
assets, immunity from suit, execution, attachment (before or after judgment) or other legal
process, Secured Party and Pledgor each irrevocably agrees not to claim, and hereby waives,
such immunity. Secured Party, Pledgor and Securities Intermediary each hereby irrevocably
waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this
Agreement.
(f) No Third Party Beneficiaries. In performing hereunder, Securities
Intermediary is acting solely on behalf of Secured Party and Pledgor and no contractual or
service relationship shall be deemed to be established hereby between Securities Intermediary
and any other person.
(g) Headings. Section headings are included in this Agreement for
convenience only and shall have no substantive effect on its interpretation.
(h) Counterparts. This Agreement and any joint Written Instructions may be
executed in any number of counterparts, each of which shall be deemed to be an original, but
such counterparts shall,together, constitute only one instrument.
(i) USA PATRIOT ACT. Pledgor and Secured Party hereby acknowledge
that Securities Intermediary is subject to federal laws, including the Customer Identification
Program ("CIP") requirements under the USA PATRIOT Act and its implementing regulations,
pursuant to which Securities Intermediary must obtain, verify and record information that allows
Securities Intermediary to identify each of Pledgor and Secured Party. Accordingly, prior to
opening an Account hereunder Securities Intermediary will ask Pledgor and/or Secured Party to
provide certain information including, but not limited to, Pledgor's and/or Secured Party's name,
physical address, tax identification number and other information that will help Securities
Intermediary to identify and verify each of Pledgor's and Secured Party's identity, such as
organizational documents, certificate of good standing, license to do business, or other pertinent
identifying information. Neither Secured Party nor Pledgor is responsible for providing to
Securities Intermediary documents related to the other in connection with Securities
Intermediary's requests for information pursuant to this provision. Pledgor and Secured Party
agree that Securities Intermediary cannot open an Account hereunder unless and until Securities
Intermediary verifies Pledgor's and/or Secured Party's identity in accordance with its CIP.
(j) Tax Forms. All entities entitled to receive interest on Collateral in the
form of cash shall provide Securities Intermediary with a W-9 or W-8 IRS tax form prior to the
disbursement of interest, and Securities Intermediary will file the appropriate 1099 or 1042-S tax
forms, whichever are applicable.
(k) New Authorized Persons. Pledgor or Secured Party may add or remove
person(s) from their respective list of Authorized Persons by delivering a written notice to
Securities Intermediary that certifies an amended list of person(s) authorized to transmit or
deliver Written Instructions and specimen signature of such person(s); provided that, until
Securities Intermediary has had commercially reasonable time to act on such notice, the
15 of 23
person(s) previously certified as Authorized Person(s) shall continue to be Authorized Person(s)
and Securities Intermediary shall be fully protected in acting in accordance with this Agreement
upon Written Instructions from such Authorized Person(s)previously certified.
[THIS SPACE LEFT INTENTIONALLY BLANK]
16 of 23
IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By:
Name:
Title:
SECURED PARTY:
CITY OF VERNON
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
SECURITIES INTERMEDIARY:
U.S. BANK NATIONAL ASSOCIATION
By:
Name:
Title:
17 of 23
SCHEDULE I
ADDRESSES FOR NOTICES
AND OTHER COMMUNICATIONS
Communications to SECURED PARTY shall be delivered to:
Attn: Carlos Fandino, City Administrator
Address: 4305 Santa Fe Avenue, Vernon, CA 90058
Facsimile: (323) 826-1452
Telephone (for confirmation of notice receipt only): (323) 583-8811 ext. 228 or ext. 292
Email: cfandino@ci.vernon.ca.us; hpatel@ci.vernon.ca.us
Communications to a PLEDGOR shall be delivered to:
Attn: Citigroup Energy Inc., Collateral Management Group
Address: 499 Washington Blvd., 7th Floor, Jersey City,NJ 07310
Facsimile:
Telephone (212) 816-8090 (for confirmation of notice receipt only):
Email: derivatives.margin@citi.com
With a copy to;
Citigroup Energy Inc.
Attn: Commodities Structuring
Address: 2800 Post Oak Blvd.
Suite 500
Houston, Texas 77056
Fax: 713-752-5208
Email: americascommoditiesstructuring@citi.com
Communications (including Written Instructions)to SECURITIES INTERMEDIARY shall be
delivered to:
U.S. Bank National Association
100 Wall Street, 19th floor
New York,NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone (for confirmation of notice receipt only): 212-951-8578
Email: Custodian.Notices@usbank.com
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SCHEDULE II
CONTACT DETAILS FOR
CALL BACK REPRESENTATIVES
FOR CHANGES TO STANDING WIRE INSTRUCTIONS
Telephone Number(s) for Call Back Representatives
for Changes to Standing Wire Instructions (attached)
Pledgor's Call Back Representatives:
Name Telephone Number
1. Robert Traverso (212) 816-5673
2. Marlene Leal (212) 816-5659
3. John Mui (212) 816-6266
4. Ulric Alexander (212) 816-5658
5. George Madrigal (212) 816-5661
6. Paul Valdez (212) 816-5787
7. Mohamed Eldeeb (212) 816-9853
Secured Party's Call Back Representatives:
Name Telephone Number
1. Carlos Fandino, City Administrator (323) 583-8811 ext. 228
2. Hema Patel, City Attorney (323) 583-8811 ext. 292
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Standing Wire Instructions
Pledgor Wire Instructions:
Bank Name: Citibank NA NY
Bank ABA No.: 021-000-089
Account No.: 30569329
Account Name:
Reference:
Secured Party Wire Instructions:
Bank Name: Bank of New York Mellon Trust
Bank ABA No.: 021000018
Account No.: 8004528400
Account Name: City of Vernon Escrow Account
Reference:
20 of 23
EXHIBIT A
CERTIFICATE OF AUTHORIZED SIGNATORIES
The undersigned hereby certifies that s/he is a [TITLE] of [COMPANY NAME] (the
"Company"), and that, as such, s/he is authorized to execute this certificate on behalf of the
Company, and further certifies on behalf of the Company that the following named individuals
are duly elected, qualified and acting officers of the Company, and each holds the title set forth
opposite his/her name. The signature written opposite the name and title of each such officer is
her/his correct signature.
Name Office Signature
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this certificate in
her/his capacity as an authorized officer of the Company as of this [DATE].
By:
Name:
Title:
21 of 23
EXHIBIT B
NOTICE OF EXCLUSIVE CONTROL
[Letterhead of Secured Party]
Date:
To: U.S. Bank National Association
100 Wall Street, 19th floor
New York,NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone: 212-951-8578 (for confirmation of notice receipt only)
E-mail: Custodian.Notices@usbank.com
Re: Control Agreement
NOTICE OF EXCLUSIVE CONTROL
We refer to the Collateral Account Control Agreement, dated as of[ _, 201] (as
amended and in effect from time to time,the "Control Agreement"), between City of Vernon
("Secured Party"), Citigroup Energy Inc. ("Pledgor"), and you, as Securities Intermediary.
Unless otherwise provided herein, capitalized terms used in this notice have the meanings
assigned to them in the Control Agreement or the PSA (as defined in the Control Agreement), as
applicable.
We hereby issue a Notice of Exclusive Control pursuant to Section 4 of the Control Agreement.
You are instructed not to accept any directions or instruction with respect to the Account from
any person other than the undersigned.
We certify that (1) (x) an Event of Default (as defined in the CSA) with respect to the Pledgor
has occurred and is continuing or (y) a Section 15.3 Termination Event (as defined in the PSA)
has occurred and is continuing following Secured Party providing Pledgor at least two (2) Local
Business Days' prior written notice that such Section 15.3 Termination Event has occurred and
(2)Pledgor has not paid in full all of its Obligations (as defined in the CSA)that are then due and
payable ("Condition to Exercise Remedies").
We certify that, as a result of such Condition to Exercise Remedies, we are entitled to exercise
certain rights and remedies provided to us under the Control Agreement.
Transfer Instructions:
We hereby instruct you to transfer, in accordance with Section 4(b)(ii) of the Control Agreement,
all of the Collateral in the Account pursuant to the Secured Party Wire Instructions specified in
Schedule IV of the Control Agreement, unless otherwise specified here.
22 of 23
You are hereby instructed to forward this notice to Pledgor in accordance with the Control
Agreement.
We certify under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct)
Very truly yours,
[Insert legal name of Secured Party]
By:
Authorized Signatory
cc: [the Pledgor]
'This language is drawn from 28 U.S.C.Sec. 1746,as is required for compliance with CFTC Rule 23.702. This is
Section 1746's suggested language for statements made under penalty of perjury outside the U.S.(which differs
from the suggested language for statements made in the U.S.only by including the phrase"under the laws of the
United States of America,"and should clearly cover statements made both inside and outside of the U.S.).
23 of 23
STAFF REPORT
(,(7 (9/dir)-‘) s; 6)/
CITY COUNCIL CLOSED SESSION ITEM
OCTOBER 4, 2016
CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION
City of Vernon vs. Citigroup Energy Inc., et al.
United States District Court
Southern District of New York Case No. CV16-2405
Page 1 of 1
1111
STAFF REPORT
CITY ATTORNEY'S OFFICE
ATTORNEY-CLIENT PRIVILEGED & CONFIDENTIAL
DATE: October 4,2016
TO: Honorable Mayor and City Council
FROM: Hema Patel, City Attorney
RE: Closed Session — A Resolution of the City Council of the City of Vernon
approving and authorizing the execution of a Revised Credit Support
Agreement and Ancillary Documents by and between the City of Vernon and
Citigroup Energy, Inc.
Recommendation
A. Find that adoption of the resolution approving the Revised CSA and Ancillary
Documents (as defined below) is exempt under the California Environmental Quality Act
("CEQA"), because such is an administrative activity of government that will not result
in direct or indirect physical changes in the environment and, as such, is not a "project"
as defined by CEQA Guidelines Section 15378, and even if such were considered a
"project," it would still be exempt in accordance with Section 15061(b)(3), the general
rule that CEQA only applies to projects that may have a significant effect on the
environment; and
B. Adopt the attached resolution approving and authorizing the City Administrator to
execute the Revised CSA and Ancillary Documents by and between the City of Vernon
and Citigroup Energy (as defined below).
Background
On March 31, 2016, the City of Vernon (the "City") filed a lawsuit in the U.S. District
Court for the Southern District of New York (the "Court") against Citigroup Energy, Inc.
("Citigroup Energy"), Citibank, N.A. and Citigroup, Inc. (the "Citigroup," and together with
Citigroup Energy and Citibank, N.A., the "Citigroup Parties"), Case No. 1:16-cv-02405 (the
"Case"), seeking a declaratory judgment to establish the rights and responsibilities of the parties
under that certain Agreement for Purchase and Sale of Natural Gas between Citigroup Energy
and the Vernon Natural Gas Financing Authority ("VNGFA")1 dated as of June 27, 2006 (the
' The VNGFA was terminated by the City in October 2013.The City is the lawful successor-in-interest to the
VNGFA.
Page 1 of 3
"PSA"), as well as the Credit Support Annex appended to the PSA as Annex 1 (the "Existing
CSA").
The PSA called for the City to pay approximately $500 million (financed by the issuance
of municipal bonds) to Citigroup Energy, in exchange for a fixed amount of natural gas. Under
the PSA, Citigroup Energy's parent, Citigroup, promised to serve as guarantor to Citigroup
Energy.
In early December 2015, Citigroup's credit rating was downgraded by the major credit
rating agencies, thus triggering what the City believed to be significant collateral posting
obligations by Citigroup Energy and/or Citigroup under both the PSA and the Existing CSA. At
that time, Citigroup Energy and the City discovered that a mistake had been made in the
compilation or drafting of the documents, in that the Existing CSA appended to the PSA
incorrectly named Citibank, N.A. as the "Pledgor," instead of Citigroup Energy. Citigroup
Energy forwarded to the City a redlined version of the Existing CSA marked "Draft" and dated
June 26, 2006, the day before the effective date of the PSA (the "Citi Proposed CSA"), and
requested that the City accept the Citi Proposed CSA as the operative and effective CSA,
notwithstanding several significant changes between it and the Existing CSA. Most importantly,
under the Citi Proposed CSA, none of the Citigroup Parties would be required to post any
collateral due to the credit rating downgrade since the market price of natural gas in December
2015 was less than what it was in June 2006. Meanwhile, under the Existing CSA, the City
calculated the collateral posting obligation to be no less than$203 million.
Prior to serving the complaint, the City and the Citigroup Parties attempted, in early May
2016, to settle the Case and met at City Hall to discuss a business solution. The negotiation was
ultimately not successful, and upon being served, the Citigroup Parties filed a motion to dismiss
the Case on June 10, 2016. Thereafter, through discovery, we ascertained that the Citi Proposed
CSA was in fact the last manifestation of mutual intent between the parties, and under applicable
law, there was a high probability that the Citi Proposed CSA would control the legal rights and
responsibilities of the parties.
Thereafter, and prior to the City responding to the Citigroup Parties' motion to dismiss,
the parties once again engaged in settlement negotiations. This time, the parties were successful
in reaching agreement on the terms of a new and revised CSA (the "Revised CSA"), a form of
letter of credit ("Letter of Credit"), and the concept of a third-party neutral custodian to hold
such Letter of Credit(together, such documentation is referred to as the "Ancillary Documents").
On September 6, 2016, the City Council approved and ratified the settlement agreement and
mutual release between the parties (the "Settlement Agreement"). The Settlement Agreement
(and mutual releases therein) is premised on entry into and full execution of the Revised CSA
and Ancillary Documents, including the Collateral Account Control Agreement by and among
U.S. Bank National Association (as Securities Intermediary) ("U.S. Bank"), the City (as Secured
Party), and Citigroup Energy (as Pledgor) (the "Collateral Account Control Agreement).
• Revised CSA Material Terms:
o If Citigroup Energy or Citigroup is rated by Moody's or S&P as A3 or A-,
respectively, or above, no collateral need be posted;
Page 2 of 3
o If Citigroup Energy or Citigroup is rated by Moody's or S&P as Baal to Baa2 or
BBB+to BBB, respectively, or below, collateral must be posted;
o Amount of collateral to be posted shall equal market value of gas still to be
delivered under PSA;
o Form of collateral may be letter of credit, held by third-party custodian, who is
not affiliated with either party and controlled under Collateral Account Control
Agreement.
• Collateral Account Control Agreement Material Terms:
o U.S. Bank will control the account which will hold the collateral posted by
Citigroup Energy — in this case, the Letter of Credit — thus perfecting the City's
security interest in the collateral;
o The City and Citigroup Energy must each take specific steps with respect to
Written Instructions (as defined in the Collateral Account Control Agreement), in
order to have U.S. Bank transfer the collateral to either of them;
o Only those people listed on the Certificate of Authorized Signatories may submit
Written Instructions to U.S. Bank to have collateral transferred to the City. Those
individuals will be the City Administrator, the City Attorney, and the Director of
the Gas & Electric Department;
o U.S. Bank also has a security interest in the collateral to the extent of any
Payment Obligations (as defined in the Collateral Account Control Agreement),
which shall be senior in priority to the City's security interest;
Fiscal Impact
While approval of the Revised CSA and Ancillary Documents will not have any immediate fiscal
impact or budget implications for the City of Vernon, because Citigroup's current credit rating
is Baal and BBB+ (by Moody's and S&P, respectively), the Citigroup Parties must post
collateral with U.S. Bank for the benefit of the City in an amount equal to the amount of gas
remaining to be delivered under the PSA, multiplied by the current market price of gas — which,
as an example, was approximately $83 million (i.e., 28,124,549 MMbtu x 2.95/MMbtu) as of
September 1, 2016. The letter of credit will be decreased and adjusted on the first of every month
based on the decreasing amount of gas to be delivered and the then prevailing market price of
gas, until the sooner of(i) an increase of Citigroup's credit rating to A3 or A- or above; or (ii)
the expiration of the term of the PSA in May 2021.
Attachment(s)
1. Resolution
Page 3 of 3
RESOLUTION NO .
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND AUTHORIZING THE EXECUTION OF A
REVISED CREDIT SUPPORT AGREEMENT AND ANCILLARY
DOCUMENTS BY AND BETWEEN THE CITY OF VERNON AND
CITIGROUP ENERGY, INC.
WHEREAS, on March 31, 2016, the City of Vernon (the "City" )
filed a lawsuit in the U.S. District Court for the Southern District
of New York (the "Court" ) against Citigroup Energy, Inc . ("Citigroup
Energy" ) , Citibank, N.A. and Citigroup, Inc. (the "Citigroup, " and
together with Citigroup Energy and Citibank, N.A. , the "Citigroup
Parties" ) , Case No. 1 : 16-cv-02405 (the "Case" ) , seeking a declaratory
judgment to establish the rights and responsibilities of the parties
under that certain Agreement for Purchase and Sale of Natural Gas
between Citigroup Energy and the Vernon Natural Gas Financing
Authority ("VNGFA" ) dated as of June 27, 2006 (the "PSA" ) , as well as
the Credit Support Annex appended to the PSA as Annex 1 (the "Existing
CSA" ) ; and
WHEREAS, on September 6, 2016, in closed session, the City
Council of the City Vernon approved and ratified the City
Administrator' s execution of a Settlement Agreement by and between the
City and Citigroup Energy; and
WHEREAS, by memorandum dated October 4, 2016, the City
Attorney has recommended the approval of a Revised Credit Support
Agreement and Ancillary Documents (the "Agreement" ) in furtherance of
the Settlement Agreement and in order to establish the procedures and
protocol for Citigroup Energy to post collateral and secure its
obligations to the City; and
WHEREAS, the City Council of the City of Vernon desires to
N.... s...
approve and authorize the execution of the Agreement .
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
CITY OF VERNON AS FOLLOWS:
SECTION 1 : The City Council of the City of Vernon hereby
finds and determines that the above recitals are true and correct.
SECTION 2 : The City Council of the City of Vernon finds
that this action is exempt under the California Environmental Quality
Act (CEQA) , because such is an administrative activity of government
that will not result in direct or indirect physical changes in the
environment and, as such, is not a "project" as defined by CEQA
Guidelines Section 15378, and even if such were considered a
"project, " it would still be exempt in accordance with Section
15061 (b) (3) , the general rule that CEQA only applies to projects that
may have a significant effect on the environment.
SECTION 3 : The City Council of the City of Vernon hereby
approves the Revised Credit Support Agreement and Ancillary Documents
(the "Agreement" ) with Citigroup Energy, Inc . , in substantially the
same form as the copy which is attached hereto as Exhibit A.
SECTION 4 : The City Council of the City of Vernon hereby
authorizes the City Administrator to execute said Agreement for, and
on behalf of, the City of Vernon and the City Clerk, or Deputy City
Clerk, is hereby authorized to attest thereto.
SECTION 5 : The City Council of the City of Vernon hereby
instructs the City Administrator, or his designee, to take whatever
actions are deemed necessary or desirable for the purpose of
implementing and carrying out the purposes of this Resolution and the
transactions herein approved or authorized, including but not limited
to, any non-substantive changes to the Agreement attached herein.
- 2 -
1\r
SECTION 6 : The City Council of the City of Vernon hereby
directs the City Clerk, or the Deputy City Clerk, to send a fully
executed Agreement to Citigroup Energy.
SECTION 7 : The City Clerk, or Deputy City Clerk, of the
City of Vernon shall certify to the passage, approval and adoption of
this resolution, and the City Clerk, or Deputy City Clerk, of the City
of Vernon shall cause this resolution and the City Clerk' s, or Deputy
City Clerk' s, certification to be entered in the File of Resolutions
of the Council of this City.
APPROVED AND ADOPTED this 4th day of October, 2016 .
Name:
Title: Mayor / Mayor Pro-Tem
ATTEST:
City Clerk / Deputy City Clerk
APPROVED AS TO FORM:
i'Brian B n, Deput City Attorney
- 3 -
STATE OF CALIFORNIA )
ss
COUNTY OF LOS ANGELES )
I, , City Clerk / Deputy City Clerk of the City
of Vernon, do hereby certify that the foregoing Resolution, being
Resolution No. , was duly passed, approved and adopted by the
City Council of the City of Vernon at a regular meeting of the City
Council duly held on Tuesday, October 4, 2016, and thereafter was duly
signed by the Mayor or Mayor Pro-Tem of the City of Vernon.
Executed this day of , 2016, at Vernon, California.
City Clerk / Deputy City Clerk
(SEAL)
- 4 -
EXHIBIT A
Revised Credit Support Agreement
Execution Version
ANNEX 1
CREDIT SUPPORT ANNEX
This Credit Support Annex dated as of 2016 (this "Annex") supplements, forms
part of, and is subject to, the Agreement for Purchase and Sale of Natural Gas, dated as of June 27, 2006 (the
"Agreement"), between Citigroup Energy Inc. ("Seller") and the City of Vernon ("Assignee"), as the successor in
interest to Vernon Natural Gas Financing Authority, without any further action taken by either Seller or Assignee.
Accordingly,Seller and Assignee agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in the
Agreement have the meanings specified pursuant to Paragraph 12,and all references in this Annex to Paragraphs are to
Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of the
Agreement,this Annex will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the"Secured Party"will be to Assignee and all
references to the"Pledgor"will be to Seller;provided, however, that if Other Posted Support is held by Assignee, as
Secured Party,all references herein to Assignee as the Secured Party with respect to that Other Posted Support will be
to Assignee as the beneficiary thereof and will not subject that support or Assignee as the beneficiary thereof to
provisions of law generally relating to security interests and secured parties.
Paragraph 2. Security Interest
Seller, as the Pledgor hereunder,hereby pledges to Assignee, as the Secured Party, as security for its Obligations and
grants to the Secured Party a first priority continuing security interest in,lien on and right of Set-off against all Posted
Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the
Pledgor of Posted Collateral,the security interest and lien granted hereunder on that Posted Collateral will be released
immediately and,to the extent possible,without any further action by either party.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly
following a Valuation Date,if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum
Transfer Amount,then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the
date of Transfer at least equal to the applicable Delivery Amount. The "Delivery Amount"applicable to the Pledgor
for any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.
(b) Return Amount Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly
following a Valuation Date,if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum
Transfer Amount,then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in
that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount. The
"Return Amount"applicable to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party
exceeds
ANNEX 1
Page 1
(ii) the Credit Support Amount.
provided however,that following such return,the Value of all Posted Credit Support held by the Secured Party must at
least equal the Credit Support Amount.
"Credit Support Amount"means, for any Valuation Date (i)the Secured Party's Exposure for that Valuation Date,
minus (ii) the Pledgor's Threshold;provided, however, that the Credit Support Amount will be deemed to be zero
whenever the calculation of Credit Support Amount yields a number less than zero.
Paragraph 4. Conditions Precedent,Transfer Timing,Calculations and Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Secured Party under Paragraphs 3,4(d)(ii),5 and 6(c)
is subject to the conditions precedent that(i)no Seller Delivery Failure has occurred and is continuing,(ii)no Section
15.3 Termination Event has occurred and is continuing following Assignee providing Seller at least two (2) Local
Business Days'prior written notice that such Section 15.3 Termination Event has occurred,(iii)no cash amount is then
owed by Seller to Assignee under the Agreement,and(iv)no Event of Default with respect to the Pledgor has occurred
and is continuing under this Annex. Each Transfer obligation of the Pledgor hereunder is subject to the conditions
precedent that(i)no cash amount is then owed by Assignee to Seller under the Agreement,and(ii)no Event of Default
with respect to the Secured Party has occurred and is continuing under this Annex. For the avoidance of doubt,a Seller
Delivery Failure shall no longer be continuing if Seller has paid Assignee the Replacement Cost in accordance with
Section 5.2 of the Agreement.
(b) Transfer Timing. Subject to Paragraphs 4(a),5,6(b)(ii),Schedule III and unless otherwise specified herein,if
a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time,then
the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is
made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the
second Local Business Day thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(c)will be made by
the Valuation Agent as of the Valuation Time with respect to a Valuation Date. The Valuation Agent will notify each
party(or the other party,if the Valuation Agent is a party)of its calculations not later than the Notification Time on the
Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(c), following the date of
calculation). Upon request by the Assignee, for the first three Valuation Dates hereunder, the Valuation Agent shall
provide in reasonable detail the methodology and assumptions used in preparing its calculations; provided, however,
the Valuation Agent shall not be required to disclose any confidential,proprietary information that it may have used in
connection therewith.
(d) Substitutions.
(i) Upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged,the
Pledgor may,on any Local Business Day,Transfer to the Secured Party substitute Eligible Credit Support(the
"Substitute Credit Support");and
(ii) subject to Paragraph 4(a),the Secured Party will Transfer to the Pledgor the items of Posted Credit
Support specified by the Pledgor in its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support;provided that the Secured Party will only be
obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit
Support equal to the Value as of that date of the Substitute Credit Support;provided,further however, that
any request to substitute must seek the substitution of Eligible Credit Support or Posted Credit Support in
an amount in excess of the Pledgor's Minimum Transfer Amount".
ANNEX 1
Page 2
Now, 'Now
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return
Amount or(II)the Value of any Transfer of Eligible Credit Support or Posted Credit Support,then(1)the Disputing
Party will notify the other party and the Valuation Agent(if the Valuation Agent is not the other party)not later than
the close of business on the Local Business Day following(X)the date that the demand is made under Paragraph 3 in
case of(I) above or(Y)the date of Transfer in the case of(II) above, (2)subject to Paragraph 4(a), the appropriate
party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case of(I) above or (Y) the date of
Transfer in the case of(II)above,(3)the parties will consult with each other in an attempt to resolve the dispute and(4)
if they fail to resolve the dispute by the Resolution Time,then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date by:
(A) calculating the Exposure by seeking four actual quotations at mid-market from Reference
Market-makers(other than Seller or its Affiliates,unless otherwise agreed to by Assignee in writing)
and taking the arithmetic average of those obtained;provided that if four quotations are not available,
then fewer than four quotations may be used; and if no quotations are available,then the Valuation
Agent's original calculations will be used;and
(B) calculating the Value, if disputed,of Posted Credit Support consisting of securities by the
Valuation Agent determining based upon the bid quotations of any generally recognized dealer
(other than Seller or its Affiliates, unless otherwise agreed to by Assignee in writing), and adding
thereto any interest accrued but not paid to any person with respect to such securities through the
day on which the determination is made and multiplying the sum by the applicable Valuation
Percentage, if any;provided, however, that Assignee may submit bid quotations from two other
recognized dealers in which case the Value of such securities shall be the mean of the two
quotations sourced by the Valuation Agent and the two quotations submitted by Assignee.
(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted
Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer as described in
Paragraph 5(i)(B)above.
Following a recalculation pursuant to this Paragraph,the Valuation Agent will notify each party(or the other party, if
the Valuation Agent is a party)not later than the Notification Time on the Local Business Day following the Resolution
Time. The appropriate party will,upon demand following that notice by the Valuation Agent or a resolution pursuant
to(3)above and subject to Paragraphs 4(a)and 4(b),make the appropriate Transfer.
Paragraph 6. Holding and Using Posted Collateral
(a) Care of Posted Collateral The Secured Party will exercise reasonable care to assure the safe custody of all
Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have
exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own
property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted
Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights
pertaining thereto.
ANNEX 1
Page 3
(b) Eligibility to Hold Posted Collateral;Custodians.
(i) General. The Pledgor will appoint an agent reasonably acceptable to the Secured Party (a
"Custodian") to hold Posted Collateral for the benefit of the Secured Party. The Pledgor will exercise
reasonable care in the selection and monitoring of the Custodian. The Pledgor's obligations to make any
Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a
Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party. The Secured Party
agrees that Posted Collateral held at the Custodian shall be subject to a tri-party collateral account control
agreement substantially in the form of Schedule V attached hereto.
(ii) Failure to Satisfy Conditions. If the Custodian fails to satisfy conditions specified in (b)(iv) for
holding Posted Collateral (the "Ineligible Custodian"), then the Pledgor will, not later than five (5) Local
Business Days after the demand, identify a Custodian to Transfer all Posted Collateral held by the Ineligible
Custodian to a Custodian that satisfies those conditions("Replacement Custodian")and Transfer or cause the
Ineligible Custodian to Transfer all Posted Collateral to Replacement Custodian within ten (10) Local
Business Days thereafter. The Secured Party agrees that all Posted Collateral transferred to such Replacement
Custodian shall be subject to a tri-party collateral account control agreement substantially in the form of
Schedule V attached hereto, with such amendments as shall be requested by the Replacement Custodian;
provided,however,the obligation of the Pledgor to effect such Transfer shall be subject to the Secured Party's
not unreasonably withholding its consent to such amendments.
(iii) [Reserved]
(iv) Custodian Conditions. A party shall be eligible to serve as a Custodian if and for so long as it(i)is
not affiliated with either of the Parties, (ii) is a trust company or commercial bank with trust powers,
organized under the laws of the United States of America or any state or province thereof and subject to
supervisions or examination by federal or state authority, having a combined capital surplus of at least U.S.
$10,000,000,000 and(iii)shall have outstanding long term unsecured unsubordinated debt securities ratings of
at least"A3"by Moody's and"A-"by S&P.
(c) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive
Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local
Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would
not be created or increased by that Transfer,as calculated by the Valuation Agent(and the date of calculation
will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount. The Interest Amount shall compound daily. Subject to Paragraph 4(a),in lieu of
any interest,dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in
the form of Cash(all of which may be retained by the Secured Party),the Secured Party will Transfer to the
Pledgor in arrears on the last Local Business Day of each calendar month the Interest Amount to the extent
that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation
Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest
Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the
form of Cash and will be subject to the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
An Event of Default will exist with respect to a party under this Annex if:
(i) that party fails (or fails to cause the Custodian)to make, when due, any Transfer of Posted Credit
Support,as applicable(including for the avoidance of doubt a Transfer to a Replacement Custodian pursuant
to Paragraph 6(b)(ii) of this Annex), required to be made by it and that failure continues for two Local
Business Days after notice of that failure is given to that party;or
ANNEX 1
Page 4
(ii) that party fails to comply with or perform any agreement or obligation other than those specified in
Paragraph 7(i)and that failure continues for 30 days after notice of that failure is given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time(i)an Event of Default with respect to the Pledgor has
occurred and is continuing, or(ii)a Section 15.3 Termination Event has occurred and is continuing following Assignee
providing Seller at least two (2)Local Business Days' prior written notice that such Section 15.3 Termination Event
has occurred then,unless the Pledgor has paid in full all of its Obligations that are then due and payable,and in addition
to the rights and remedies set forth in the Agreement,the Secured Party may exercise one or more of the following
rights and remedies:
(i) all rights and remedies available to a secured party under applicable law with respect to Posted
Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted
Support,if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any obligation
of the Secured Party to Transfer that Posted Collateral);and
(iiv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or
private sales or other dispositions with such notice,if any,as may be required under applicable law,free from
any claim or right of any nature whatsoever of the Pledgor,including any equity or right of redemption by the
Pledgor(with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold)and
to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any
amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and
is of a type customarily sold on a recognized market,and,accordingly,the Pledgor is not entitled to prior notice of any
sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot
be waived.
(b) Pledgor's Rights and Remedies. If at any time an Event of Default has occurred or been designated with
respect to the Secured Party,then:
(i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law or in
equity (including, but not limited to, specific performance) with respect to Posted Collateral held by the
Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of
Other Posted Support,if any;
(iii) the Secured Party will be obligated immediately to Transfer such Posted Collateral and Other Posted
Support and any Interest Amount required to be Transferred to the Pledgor pursuant to Paragraphs 3(b),5 or
6(c),respectively;and
(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii)
above,the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any
obligation of the Secured Party to Transfer the applicable Posted Collateral);and
ANNEX 1
Page 5
(B) to the extent that the Pledgor does not Set-off under(iii)(A) above, withhold payment of
any remaining amounts payable by the Pledgor or deliveries required to be made by the Pledgor in
each case with respect to any Obligations,up to the Value of any remaining Posted Collateral held by
the Secured Party,until the applicable Posted Collateral is Transferred to the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds remaining
after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts
payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts
remaining unpaid after any liquidation,Set-off and/or application under Paragraphs 8(a)and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any
Obligations,the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount,if any.
Paragraph 9. Representations
(a) Seller, as Pledgor, represents to Assignee, as Secured Party (which representation will be deemed to be
repeated by Seller as of each date on which it, as the Pledgor,Transfers Eligible Collateral or Other Posted Support)
that:
(i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the
Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the
Secured Party hereunder,free and clear of any security interest, lien,encumbrance or other restrictions other
than the security interest and lien granted under Paragraph 2;and
(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex,the
Secured Party will have a valid and perfected first priority security interest therein(assuming that any central
clearing corporation or any third-party financial intermediary or other entity not within the control of the
Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it
under applicable law for perfection of that interest).
(b) Each party represents to the other that(which representation will be deemed to be repeated by the parties as of
each date there is a Transfer of Eligible Collateral or Other Posted Support):
(i) the performance by it of its obligations under this Annex will not result in the creation of any
security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien
granted under Paragraph 2;and
(ii) no consent, approval or other authorization of any governmental authority is required in connection
with the entry into this Annex and the performance of its obligations hereunder including without limitation
the Transfer of Eligible Collateral or Other Eligible Support hereunder.
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b)and 10(c), each party will pay its own
costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for
any costs and expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges
of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware
of the same.
ANNEX 1
Page 6
(c) Liquidation/Application of Posted Credit Support All reasonable costs and expenses actually
incurred by or on behalf of the Secured Party in connection with the liquidation and/or application of any Posted Credit
Support under Paragraph 8(a)will be payable,on demand,to Assignee by Seller.
Paragraph 11. Miscellaneous
(a) Default Interest If either party fails to make, when due, any Transfer of Posted Collateral or the Interest
Amount it will be obliged to pay the other party (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred,from
(and including)the date that the Posted Collateral or Interest Amount was required to be Transferred to(but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party,the other party will execute,deliver,file
and record any financing statement, specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security
interest or lien granted under Paragraph 2,to enable that party to exercise or enforce its rights under this Annex with
respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on
Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the Secured Party of,and defend against,any
suit, action,proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely
affect the security interest and lien granted by it under Paragraph 2.
(d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex,
including,but not limited to,all calculations,valuations and determinations made by either party,will be made in good
faith and in a commercially reasonable manner.
(e) Demands and Notices. All demands, specifications and notices given by a party under this Annex will be
made as specified in the Notices Section of the Agreement,except that the address for Seller for such purposes shall be:
Citigroup Energy Inc.
Collateral Management Group
499 Washington Blvd.,7th Floor
Jersey City,NJ 07310
Telephone no.(212)816-8090
Email: derivatives.margin(aiciti.com
With a copy to:
Citigroup Energy Inc.
Attn: Commodities Structuring
Address: 2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
Fax: 713-752-5208
Email:americascommoditiesstructuringc2 citi.com
(f) Form of Collateral All non-Cash Eligible Collateral or Posted Collateral that is Transferred by either party
shall be recorded in book entry form by a Federal Reserve Bank,as fiscal agent,and Pledgor shall(i)deliver to Secured
Party a listing of such credit support by title (or series), unpaid principal amount and maturity date and (ii) cause a
Federal Reserve Bank to hold such credit support for the account of the Secured Party or the Custodian(in a custody
account),as applicable,in the name of the Secured Party or Custodian,as applicable.
ANNEX I
Page 7
(g) No Third Party Rights. This Annex has been and is made solely for the benefit of Assignee and Seller and
their respective assigns,and no other person,partnership,association,corporation or other entity shall acquire or have
any right under or by virtue of this Annex.
(h) Document Delivery. The Secured Party shall deliver upon signing of this Annex (i) evidence reasonably
satisfactory to the Pledgor of its authority to enter into this Annex and (ii) evidence reasonably satisfactory to the
Pledgor of the authority and genuine signature of the individual signing this Annex to execute the same. Such evidence
shall include but not be limited to the following:
(i) a resolution of the City Counsel of the City of Vernon(together with the attestation of the City Clerk
of the City of Vernon with respect to(A)and(B))authorizing(A)entry into this Annex and the Settlement and Release
Agreement by and among Seller; Citibank, N.A.; Citigroup, Inc. and Assignee dated as of 9 August 2016 (the
"Settlement Agreement"), and (B) the Mayor of the City of Vernon or another person authorized by resolution to
execute this Annex and the Settlement Agreement and bind Assignee,and
(ii) an opinion of Assignee's attorney as to the due authorization and execution of this Annex and the
Settlement Agreement reasonably acceptable to Seller.
Paragraph 12. Definitions
As used in this Annex:—
"Cash"means the lawful currency of the United States of America.
"Credit Rating" means, with respect to Seller and as of any date, the Credit Rating (as defined in Article I of the
Agreement)of the Guarantor in effect on such date.
"Credit Support Amount"has the meaning specified in Paragraph 3.
"Custodian"has the meaning specified in Paragraph 6(b)(i).
"Default Rate"means a rate per annum equal to the cost(without proof or evidence of any actual cost)to the relevant
payee(as certified by it)if it were to fund or of funding the relevant amount plus 1%per annum.
"Delivery Amount"has the meaning specified in Paragraph 3(a).
"Disputing Party"has the meaning specified in Paragraph 5.
"Distributions"means,with respect to Posted Collateral other than Cash,all principal,interest and other payments and
distributions of cash or other property with respect thereto. Distributions will not include any item of property acquired
by the Secured Party upon any disposition or liquidation of Posted Collateral or,with respect to any Posted Collateral
in the form of Cash,any distributions on that collateral,unless otherwise specified herein.
"Eligible Collateral"means the items specified as such on Schedule I attached to this Annex.
"Eligible Credit Support"means Eligible Collateral and Other Eligible Support.
"Exposure"means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in
the case of a dispute,the amount,if any,by which(i)the market value of the Undelivered Quantities(as defined in the
Agreement),exceeds(b)the Threshold applicable to Seller on such date.
"Interest Amount"means,with respect to an Interest Period,the aggregate sum of the amounts of interest calculated
for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured
Party on that day,determined by the Secured Party for each such day as follows:
ANNEX 1
Page 8
(x) the amount of Cash on that day;multiplied by
(y) the Interest Rate in effect for that day;divided by
(z) 360.
"Interest Period"means the period from(and including)the last Local Business Day on which an Interest Amount was
Transferred(or,if no Interest Amount has yet been Transferred,the Local Business Day on which Posted Collateral in
the form of Cash was Transferred to or received by the Secured Party)to(but excluding)the Local Business Day on
which the current Interest Amount is to be Transferred.
"Interest Rate"means be the overnight ask rate in effect for such day,as set forth opposite the caption"ON"under the
heading"EURO-DOLLAR"on Telerate Page 4756 or any successor page thereto on or about 11:00 a.m.,New York
time,on such day,or,if no successor page is quoted,any page agreed to by the parties.
"Letter of Credit" means an irrevocable, standby letter of credit, issued by a major U.S. commercial bank or a U.S.
branch office of a foreign bank which is satisfactory to the Secured Party,in its reasonable discretion utilizing the form
set forth in Schedule IV attached hereto,with such changes to the terms in that form as the issuing bank may require
and as may be acceptable to the Secured Party;where such letter of credit bank (i)has a senior unsecured long term
debt rating of"A-"or better by S&P and"A3"or better by Moody's and(ii)has a combined capital surplus of at least
$10,000,000,000. Each Letter of Credit shall be a Credit Support Document. Letters of Credit shall be issued and
maintained in accordance with the provisions set forth in Schedule III attached hereto.
"Local Business Day"means any Business Day as set forth in the Agreement.
"Minimum Transfer Amount"means,with respect to either party, $100,000;provided, however,that with respect to
Seller,if Seller has no Credit Rating or if the Credit Rating of Seller is not at least"BBB-"from S&P or"Baa3"from
Moody's,the Minimum Transfer Amount for Seller shall be zero.
"New York Banking Day" means any day on which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits)in New York City.
"Notification Time" means 10:00 a.m., New York time on a Local Business Day; provided, however, that,
notwithstanding Paragraph 4(b),(x)with regard to Transfers of Eligible Credit Support or Posted Credit Support in the
form of Cash, if a request for Transfer is made by the Notification Time,then the relevant Transfer shall be made not
later than the close of business on the day on which such request is received,or,if such day is not a Local Business Day
or,if such request is received after the Notification Time,not later than the close of business on the next Local Business
Day, and(y)with regard to Transfers of other forms of Eligible Credit Support or Posted Credit Support,the relevant
Transfer shall be made in accordance with Paragraph 4(b).
"Obligations"means,with respect to a party,all present and future obligations of that party under the Agreement.
"Other Eligible Support"means a Letter of Credit.
"Other Posted Support"means all Other Eligible Support Transferred to the Secured Party that remains in effect for
the benefit of that Secured Party.
"Pledgor"means Seller.
"Posted Collateral"means all Eligible Collateral,other property,Distributions,and all proceeds thereof that have been
Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to
Paragraph 3(b),4(d)(ii)or 6(c)(i)or released by the Secured Party under Paragraph 8. Any Interest Amount or portion
thereof not Transferred pursuant to Paragraph 6(c)(ii)will constitute Posted Collateral in the form of Cash.
"Posted Credit Support"means Posted Collateral and Other Posted Support.
ANNEX 1
Page 9
"Recalculation Date"means the Valuation Date that gives rise to the dispute under Paragraph 5;provided, however,
that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date"means the most recent Valuation Date under Paragraph 3.
"Reference Market-makers"means four leading dealers in the relevant market selected by the Seller in good faith(i)
from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the
time in deciding whether to offer or to make an extension of credit and(ii)to the extent practicable,from among such
dealers having an office in the same city.
"Resolution Time"means 1:00 p.m.,New York time,on the Local Business Day following the date on which notice is
given that gives rise to a dispute under Paragraph 5.
"Return Amount"has the meaning specified in Paragraph 3(b).
"Secured Party"means either party, when that party (i)makes a demand for or is entitled to receive Eligible Credit
Support under Paragraph 3(a)or(ii)holds or is deemed to hold Posted Credit Support.
"Section 15.3 Termination Date"has the meaning specified in the Agreement.
"Section 15.3 Termination Event"has the meaning specified in the Agreement.
"Seller Delivery Failure"has the meaning specified in the Agreement.
"Set-off' means set-off, offset, combination of accounts, right of retention or withholding or similar right or
requirement to which the applicable party is entitled or subject under applicable law.
"Substitute Credit Support"has the meaning specified in Paragraph 4(d)(i).
"Substitution Date"has the meaning specified in Paragraph 4(d)(ii).
"Threshold"means,with respect to Seller, as Pledgor, and as of any date,the amount set forth in Schedule II hereto
under the caption "Threshold" set forth opposite Seller's Credit Rating. If at any time Seller shall not have a Credit
Rating by any Rating Agency, then the Threshold for Seller shall be zero (USD 0.00). In the event of a split rating
classification by the Rating Agencies,the Threshold shall be the amount opposite the lower of the Credit Ratings on
Schedule II hereto.
"Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in
accordance with the instructions of the Secured Party,Pledgor or Custodian,as applicable:
(i) in the case of Cash,payment or delivery by wire transfer into one or more bank accounts specified
by the recipient;
(ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or
delivery in appropriate physical form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to
constitute a legally valid transfer to the recipient;
(iii) in the case of securities that can be paid or delivered in book-entry,the giving of written instruments
to the relevant depository institution or other entity specified by the recipient, together with a written copy
thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant
interest to the recipient;and
(iv) in the case of Other Eligible Support,for purposes of Paragraph 3(a),(1)delivery by the Pledgor to
the Secured Party,at the address specified in this Annex,of the Letter of Credit or(2)delivery to the Secured
ANNEX 1
Page 10
Party,of an amendment of such Letter of Credit extending the term or increasing the amount available to the
Secured Party,thereunder, and for purposes of Paragraph 3(b),return of the Letter of Credit undrawn by the
Secured Party to the Pledgor,at the address specified in this Annex,or agreement by the Secured Party,to an
amendment to the Letter of Credit in form and substance satisfactory to the Pledgor, reducing the amount
available to the Secured Party,thereunder.
"Valuation Agent"means Seller for all purposes.
"Valuation Date"means,with respect to the determination of Exposure,the first Local Business Day of each month or
any other Local Business Day upon the reasonable request of either party, and with respect to the determination of
Value of Eligible Credit Support or Posted Credit Support, the first Local Business Day of each week or any other
Local Business Day upon the reasonable request of either party.
"Valuation Percentage"means,for any item of Eligible Collateral,the applicable percentage specified in Schedule I
attached hereto.
"Valuation Time"means,with respect to the determination of Exposure,Value of Eligible Credit Support and Posted
Credit Support, the close of business on the Local Business Day immediately before the Valuation Date or date of
calculation,as applicable.
"Value"means for any Valuation Date or other date for which Value is calculated,and subject to Paragraph 5 in the
case of a dispute,with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash,the amount thereof;and
(B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage,if any;
(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral,zero;and
(iii) Other Eligible Support and Other Posted Support,the stated amount thereof as set forth therein.
ANNEX 1
Page 11
CITIGROUP ENERGY INC. THE CITY OF VERNON
By: By:
Name: Name:
Title: Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
ANNEX 1
Page 12
� L
Schedule I
ELIGIBLE COLLATERAL
Valuation Percentage
(A) Cash(denominated in US Dollars) 100%
(B) (x) Negotiable debt obligations issued by the U.S. Treasury
Department or the Government National Mortgage Association
("Ginnie Mae"), or (y) mortgage backed securities issued by
Ginnie Mae(but with respect to either(x)or(y),excluding interest
only or principal only stripped securities, securities representing
residual interests in mortgage pools,or securities that are not listed
on a national securities exchange or regularly quoted in a national
quotation service)and in each case having a remaining maturity of:
(i) less than one year 100%
(ii) one year or greater but less than 10 years 98%
(C) (x) Negotiable debt obligations issued by the Federal Home 95%
Loan Mortgage Association ("Freddie Mac") or the Federal
National Mortgage Association ("Fannie Mae") or (y) mortgage-
backed securities issued by Freddie Mac or Fannie Mae but
excluding interest only or principal only stripped securities,
securities representing residual interests in mortgage pools, or
securities that are not listed on a national securities exchange or
regularly quoted in a national quotation service, in either case
having a maturity of not more than 10 years.
(D) Any other collateral acceptable to the Secured Party in its sole As determined by the
discretion Secured Party in its sole
discretion
Schedule I-Page 1
V 4
Schedule II
THRESHOLDS
Credit Rating
(Moody's/S&P) Threshold
A3/A-and above Infinite
Baal/BBB+to Baa2BBB $0
and below or not rated
Schedule II-Page 1
Schedule III
LETTER OF CREDIT PROVISIONS
Letters of Credit. Other Eligible Support provided by the Pledgor("X") for the benefit of the Secured
Party("Y")in the form of a Letter of Credit shall be subject to the following provisions.
(a) A Letter of Credit(substantially in the form of Schedule IV hereto with a Valuation Percentage
of 100%) shall be delivered by X to such address as Y shall specify and shall be maintained for the
benefit of Y or its designee. X shall (i) cause the renewal of each outstanding Letter of Credit on a
timely basis as provided in the relevant Letter of Credit, (ii)if the bank that issued an outstanding Letter
of Credit("Issuing Bank")has indicated its intent not to renew such Letter of Credit,provide a substitute
Letter of Credit at least twenty(20)Local Business Days prior to the expiration of the outstanding Letter
of Credit,and(iii)if a bank issuing a Letter of Credit shall fail to honor Y's properly documented request
to demand payment under an outstanding Letter of Credit,provide for the benefit of Y a substitute Letter
of Credit that is issued by a bank acceptable to Y, other than the bank failing to honor the outstanding
Letter of Credit,within two(2)Local Business Days after such refusal. Any failure of the second bank
to honor Y's proposed document request to demand payment under an outstanding Letter of Credit or
failure by X to deliver such substitute Letter of Credit shall constitute an Event of Default under this
Agreement.
(b) Upon the occurrence of a Letter of Credit Default,X agrees to either cause the delivery to Y of a
substitute Letter of Credit,or, alternatively, X shall provide other Eligible Collateral, in each case on or
before the sixtieth Local Business Day after the occurrence thereof. "Letter of Credit Default" shall
mean with respect to an outstanding Letter of Credit,the occurrence of any of the following events: (i)
the bank issuing the Letter of Credit shall fail to maintain a Credit Rating of at least"A-" by S&P and
"A3" by Moody's; (ii) the bank issuing the Letter of Credit shall fail to comply with or perform its
obligations under such Letter of Credit; (iii) the bank issuing such Letter of Credit shall disaffirm,
disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; (iv)
such Letter of Credit shall expire or terminate,or shall fail or cease to be in full force and effect at any
time during the term of this Agreement; or (v) any event analogous to a Bankruptcy as defined in this
Agreement shall occur with respect to the bank issuing the Letter of Credit;provided, however,that no
Letter of Credit Default shall occur in any event with respect to a Letter of Credit after the time such
Letter of Credit is required to be cancelled or returned to X, in accordance with the terms of this
Agreement.
(c) As one method of providing additional Posted Credit Support,X may increase the amount of an
outstanding Letter of Credit or establish one or more additional Letters of Credit.
(d) If consent of Y is required to be given to the Issuing Bank with respect to any Transfer of Other
Eligible Support,Y agrees to promptly give such consent to the Issuing Bank upon demand of X.
(e) (i) Upon or at any time after the occurrence of an Event of Default, Y may demand payment
under any outstanding Letter of Credit upon presentation to the bank issuing the Letter of Credit of one
or more certificates in accordance with the specific requirements of any such Letter of Credit. Cash
received from a demand under the Letter of Credit shall be deemed Posted Collateral and shall either be
(y) applied against all amounts that are due and owing from X but have not been paid to Y under this
Agreement or(z) held by Y as Posted Collateral in accordance with this Annex. Notwithstanding Y's
receipt of Cash from any demand under a Letter of Credit,X shall remain liable for any amounts owing
to Y and remaining unpaid after the application of the amounts so drawn by Y.
(ii) Upon or at any time after the occurrence or deemed occurrence of a Section 15.3
Termination Date as a result of a Section 15.3 Termination Event and the failure of X to make all
payments due and owing to Y in accordance with the terms of this Agreement, Y may, subject to the
Schedule III-Page 1
availability of such amounts,demand payment under any outstanding Letter of Credit in an amount equal
to such amounts owing to it upon presentation to the bank issuing the Letter of Credit of one or more
certificates in accordance with the specific requirements of any such Letter of Credit. Notwithstanding
Y's receipt of Cash from any demand under a Letter of Credit,X shall remain obligated to Y to Transfer
sufficient Eligible Collateral to Y in accordance with the terms of this Annex. In addition, X shall
remain obligated to Y for any amounts owing to Y and remaining unpaid after the application of any
amounts so demanded by Y.
(f) The provisions of this Schedule III shall constitute agreements for all purposes of this
Agreement and this Annex.
(g) X covenants and agrees that so long as a Transaction shall remain outstanding under this
Agreement,no Letter of Credit shall be secured by any mortgage, security interest,pledge, lien or other
encumbrance upon the property of X. Y covenants and agrees that it shall not pledge,encumber or grant
a security interest in any of its right,title or interest into and under any Letter of Credit or Other Eligible
Support.
(h) In all cases,the costs and expenses(including but not limited to the reasonable costs, expenses,
and attorneys' fees of Y)of establishing,renewing, substituting,canceling,and increasing the amount of
a Letter of Credit shall be borne by X.
Schedule III-Page 2
Schedule IV
IRREVOCABLE STANDBY LETTER OF CREDIT
Letter of Credit No. Issue Date: ,20
Beneficiary: Account Party:
[Name of Beneficiary] [Name of Account Party]
[Address] [Address of Account Party]
Attn: Attn:
Ladies and Gentlemen:
We hereby establish in favor of you,the City of Vernon as successor in interest to the Vernon
Natural Gas Financing Authority (the`Beneficiary"),at the request and for the account of Citigroup Energy Inc.
(the"Account Party"),with respect to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27,
2006 between the Account Party and the Vernon Natural Gas Financing Authority,as may be amended from time
to time (the "Agreement"), our Irrevocable Standby Letter of Credit No. (the "Credit") whereby we
irrevocably authorize you to demand from us,in accordance with the terms and conditions hereinafter set forth,in
an amount not to exceed in the aggregate $ . Capitalized terms not otherwise defined herein or
elsewhere in the Credit shall have the meanings specified in the Agreement.
Funds hereunder are available to you against your demand for payment hereunder delivered to us by
courier or facsimile at the address specified below with both of the following items attached:
1. A certificate, dated the date of such demand for payment, signed by the of the Beneficiary, in
the form of Exhibit A hereto, accompanied by the certificate of the of the Beneficiary
substantially to the effect that the signatory of such certificate is duly incumbent as the of the
Beneficiary and is authorized to submit such demand by all necessary corporate authorization,which
certificate of such shall certify as to a specimen signature of such signatory;and
2. Either (x) a statement, signed by the of the Account Party, in the form of Exhibit B hereto,
accompanied by the certificate of the Secretary or an Assistant Secretary of the Account Party
substantially to the effect that the signatory of such certificate is duly incumbent as the of the
Account Party and is authorized to submit such demand by all necessary corporate authorization,
which certificate of such Secretary or Assistant Secretary shall certify as to a specimen signature of
such signatory; or(y) certificate, dated the date of such demand for payment, signed by the of
the Beneficiary, in the form of Exhibit C hereto, accompanied by the certificate of the of
the Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as
the of the Beneficiary and is authorized to submit such certificate by all necessary corporate
authorization, which certificate of such shall certify as to a specimen signature of such
signatory, to which there shall be attached an order of a court of the State of New York or of a
Federal court of the United States of America, dated a date not less than sixty(60)days prior to the
date of such demand, substantially to the effect that an amount not less than the amount demanded
under such demand for payment is ordered to be immediately due and payable by Account Party
under the Sale Agreement; (z) a certificate, dated the date of such demand for payment, signed by
the of the Beneficiary, in the form of Exhibit D hereto, accompanied by the certificate of the
of the Beneficiary substantially to the effect that the signatory of such certificate is duly
incumbent as the of the Beneficiary and is authorized to submit such certificate by all
necessary corporate authorization, which certificate of such shall certify as to a specimen
signature of such signatory, to which there shall be attached a signed and notarized proof of claim
Schedule IV-Page 1
filed by the Beneficiary with a bankruptcy court having jurisdiction over a case under the U.S.
Bankruptcy Code under which the Account Party is a debtor for the amount specified in such
demand; (aa) a certificate, dated the date of such demand for payment, signed by the of the
Beneficiary, in the form of Exhibit E hereto, accompanied by the certificate of the of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
of the Beneficiary and is authorized to submit such certificate by all necessary corporate
authorization,or(bb)a certificate, dated the date of such demand for payment and dated a date not
more than twenty (20) New York Banking Days prior to the expiration of the Credit as such
expiration may be amended from time to time, signed by the of the Beneficiary, in the form of
Exhibit F hereto, accompanied by the certificate of the of the Beneficiary substantially to
the effect that the signatory of such certificate is duly incumbent as the of the Beneficiary
and is authorized to submit such certificate by all necessary corporate authorization.
Partial demands are allowed under this Credit. The amount which may be demanded under this
Credit shall be automatically reduced by the amount of any demands previously paid by us hereunder. Multiple
demands for payment hereunder are permitted from time to time in an amount not to exceed in the aggregate the
amount specified in the first paragraph of this Credit.
Presentation of your Certificate shall be made on any day which is a New York Banking Day for
us at or prior to[5:00 p.m.(New York time)]at our office located at
Presentation must be made by hand,mail or courier service,to such address. If your presentation is made at such
office, in compliance with the other terms and conditions of this Credit,on or prior to the expiry date hereof,we
hereby irrevocably undertake to honor such presentation [by close of business on the next New York Banking
Day].
This Credit is effective immediately and expires at our close of business on
20_, [(the "Initial Expiry Date"); provided however, that this Credit shall be automatically extended without
amendment for one or more additional periods from the Initial Expiry Date or any subsequent expiry date,unless
at least 60 days prior to such date you receive a notice in writing by certified mail at the above address,that we
elect not to extend this Credit for such additional period.Upon your receipt of such a notice of non-extension,you
shall be entitled to make immediate demand for payment of the full amount available under this Credit, by
presentation of your Certificate.
This Credit shall be subject to the provisions of the International Standby Practices 1998,
International Chamber of Commerce Publication No.590("ISP"),and as to matters not addressed by ISP,shall be
governed by the laws of the State of New York and applicable U.S.federal laws.
This Credit may not be amended, changed or modified without our express written consent and that of
the Beneficiary and the Account Party.
Very truly yours,
[ISSUING BANK]
Schedule IV-Page 2
EXHIBIT A
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ (the"Demand")' to which this Certificate is attached.
The undersigned hereby certifies that: (i) the amount demanded by the Demand is net of all amounts
due and payable by the undersigned to the Account Party under the Agreement for Purchase and Sale of
Natural Gas dated as of June 27, 2006 (the "Agreement") between the Account Party and the
undersigned; (ii) the amount demanded by the Demand has not been the subject of a prior demand
under the Credit; (iii) such amount is due and payable by the Account Party under the Agreement and
has not been paid; and(iv)the undersigned has made demand therefor on the Account Party pursuant to
the Agreement.
The Demand shall be paid to the following account:
[Insert Custodian Account details]
THE CITY OF VERNON
By:
Name:
Title:
' This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT B
[Form of Stipulation as to Amounts Due and Payable]
[Letterhead of Citigroup Energy Inc.]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit,and to the demand for payment thereunder(the
"Demand")in the amount of$ 2 to which this Certificate is attached.
The undersigned hereby certifies that the amount demanded by the Demand is due and payable by the
undersigned to the Account Party under the Agreement for Purchase and Sale of Natural Gas dated as
of June 27, 2006 (the "Agreement") between the Account Party and the undersigned and has not been
paid.
CITIGROUP ENERGY INC.
By:
Name:
Title:
2 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT C
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit')
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of $ 3 to which this Certificate is attached, and the order of a New York State or
Federal United States court to which this Certificate is attached(the"Order").
The undersigned hereby certifies that: (i) the Order is authentic and has not been amended, stayed,
rescinded or satisfied and remains in full force and effect; and (ii) either(A) no appeal from the Order
has been taken, and the period for the filing of any such appeal has lapsed, or(B) if any appeals from
such Order have been taken, such appeals have been finally denied,without further right of appeal, by a
competent court.
THE CITY OF VERNON
By:
Name:
Title:
3 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
\.r \.,i
EXHIBIT D
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
_,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ a to which this Certificate is attached, and the proof of claim, a copy of which is
appended hereto, executed and filed by undersigned with the U.S. bankruptcy court having jurisdiction
over the pending bankruptcy pending case under which Citigroup Energy Inc. is the debtor(the "Proof
of Claim").
The undersigned hereby certifies that: (i) the Proof of Claim is authentic and has not been amended,
withdrawn, disallowed or rescinded and remains in full force and effect; and (ii) such Proof of Claim
was submitted to such bankruptcy court in good faith; and (iii) the undersigned has not received
payment in whole or part of the amount claimed pursuant to such Proof; and (iv) the amount claimed
pursuant to such Proof of Claim is the amount demanded pursuant to such Demand.
THE CITY OF VERNON
By:
Name:
Title:
4 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT E
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 5 to which this Certificate is attached, and evidence publicly available showing
that the Issuing Bank has a public rating of senior, unsecured, unenhanced indebtedness or deposits (1)
below A- with respect to Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies, Inc., or any successor thereto or(2)below A3 with respect to Moody's Investors Services,
Inc., or any successor thereto (the "Credit Rating Downgrade") and (i) that such Credit Rating
Downgrade has occurred more than 60 New York business days prior to the date hereof and(ii)neither
Other Eligible Support nor Eligible Collateral has been provided to the undersigned in accordance with
Paragraph 3 of the Credit Support Annex attached as Annex I to the Agreement for Purchase and Sale
of Natural Gas, dated as of June 27, 2006 between the Account Party and the Vernon Natural Gas
Financing Authority,as may be amended from time to time.
The undersigned hereby certifies that the Credit Rating Downgrade is true and correct in all respects
and such information is publicly available.
THE CITY OF VERNON
By:
Name:
Title:
5 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT F
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 6 to which this Certificate is attached, and the undersigned hereby certifies that as
of the date hereof, (1) the Credit, as amended, has less than twenty (20) New York business days to
expiration as of the date of this Certificate and(2)neither Other Eligible Support nor Eligible Collateral
has been provided to the undersigned in accordance with Paragraph 3 of the Credit Support Annex
attached as Annex I to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27, 2006
between the Account Party and the Vernon Natural Gas Financing Authority, as may be amended from
time to time.
THE CITY OF VERNON
By:
Name:
Title:
6 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
Schedule V
[Form of Tri-Party Collateral Account Control Agreement)
[To be provided]
Ancillary Documents
Execution Version
COLLATERAL ACCOUNT CONTROL AGREEMENT
AMONG
U.S. BANK NATIONAL ASSOCIATION,
As Securities Intermediary
CITY OF VERNON,
As Secured Party
AND
CITIGROUP ENERGY INC.,
As Pledgor
Dated as of ,2016
TABLE OF CONTENTS
Page
1. Definitions 4
2. Appointment and Status of Securities Intermediary; Account 6
(a) Appointment; Identification of Collateral 6
(b) Status of Securities Intermediary 6
(c) Use of Depositories 6
(d) Pledgor Representation 7
(e) Securities Intermediary's Representations, Warranties and Covenants 7
3. Collateral Services 7
(a) Return of Collateral to Pledgor 7
(b) Substitutions 8
(c) Deposit of Collateral 8
(d) Collateral Transfers 8
(e) Priority of Secured Party's Security Interest 8
(f) Notice of Adverse Claims 9
4. Notice of Exclusive Control 9
5. General Terms and Conditions 10
(a) Indemnification 10
(b) No Obligation Regarding Quality of Collateral 10
(c) No Responsibility Concerning the PSA, CSA and CEA 10
(d) No Duty of Oversight 11
(e) Advice of Counsel 11
(f) No Collection Obligations 11
(g) Fees and Expenses 11
(h) Reliance; Risk Acknowledgements; Additional Terms 11
(i) Account Disclosure 12
(j) Force Majeure 12
(k) No Implied Duties; Entire Agreement 12
6. Termination 12
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor 12
(b) Termination by Securities Intermediary 13
(c) Obligations Upon Termination 13
7. Miscellaneous 13
(a) Ambiguity in Notices 13
(b) Notices 13
(c) Cumulative Rights;No Waiver 14
2 of 23
(d) Severability;Amendments; Assignment 14
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver 14
(f) No Third Party Beneficiaries 15
(g) Headings 15
(h) Counterparts 15
(i) USA PATRIOT ACT 15
(j) Tax Forms 15
(k) New Authorized Persons 15
Schedule I 18
Schedule II 19
Exhibit A 21
Exhibit B 22
3 of 23
COLLATERAL ACCOUNT CONTROL AGREEMENT
This Collateral Account Control Agreement, and the exhibits and schedules thereto
(collectively, the "Agreement") is dated as of , 2016 among Citigroup
Energy Inc. ("Pledgor"), the City of Vernon ("Secured Party") and U.S. Bank National
Association("Securities Intermediary").
WITNESSETH:
WHEREAS, Secured Party and Pledgor have entered into an Agreement for Purchase and
Sale of Natural Gas dated as of June 27, 2006, including a Credit Support Annex thereto (as
amended from time to time, the "CSA") (such documents, collectively and as amended from
time to time, the "PSA") pursuant to which Pledgor has agreed to post and pledge certain
"Collateral" (as defined below) in order to secure the performance of Pledgor's obligations to
Secured Party under the PSA;
WHEREAS, Secured Party and Pledgor have requested Securities Intermediary to hold
Collateral to be posted by Pledgor and to perform certain other functions as more fully described
in this Agreement; and
WHEREAS, Securities Intermediary has agreed to hold such Collateral and to perform
such other functions, subject to the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties hereto agree as follows:
1. Definitions. Whenever used in this Agreement,the following words shall have the
meanings set forth below:
"Account" shall mean the custody account segregated on the books and records of the
Securities Intermediary hereunder in the name of Pledgor (as the same may be re-
designated, renumbered or otherwise modified). The Account shall be deemed to consist
of a "securities account" (as defined in Section 8-501(a) of the UCC), in which any
securities pledged to Secured Party shall be held, and a "deposit account" (as defined in
Section 9-102(a)(29) of the UCC), in which any cash pledged to Secured Party shall be
held.
"Agreement" shall have the meaning set forth in the preamble.
"Authorized Person" shall mean each person listed in a notice in the form of Exhibit A
to this Agreement received by Securities Intermediary that certifies that such persons are
authorized to transmit or deliver Written Instructions on behalf of Secured Party or
Pledgor, as the case may be, and that contains specimen signatures of each such person.
"Bankruptcy" shall have the meaning set forth in the PSA.
"Business Day" shall mean any day, other than a Saturday or Sunday, on which
Securities Intermediary is open for general business.
4 of 23
"Call Back Representative" shall be any person duly authorized in writing by Secured
Party or Pledgor, respectively, to confirm changes to or deviations from Standing Wire
Instructions contained in Written Instructions on behalf of Secured Party or Pledgor,
respectively, such persons and such Standing Wire Instructions to be designated in
Schedule II to this Agreement, as the same may be revised from time to time by notice to
Securities Intermediary.
"CEA" means the Commodity Exchange Act, as amended.
"Collateral" for purposes of this Agreement shall mean the Account and the cash and all
securities and investment property held or deposited in or credited to the Account and any
and all proceeds of the foregoing held in or credited to the Account.
"CSA" shall have the meaning set forth in the preamble.
"Depository" shall mean The Federal Reserve Bank of New York, The Depository Trust
Company and any other clearing corporation within the meaning of Section 8-102 of the
UCC or otherwise authorized to act as a securities depository or clearing agency, and
their respective successors and nominees.
"Evidence of Filing" shall have the meaning set forth in Section 4(a)(i).
"Losses" shall have the meaning set forth in Section 5(a)(i).
"Notice of Exclusive Control" shall mean a written notice, substantially in the form of
and containing the applicable information specified in Exhibit B hereto, signed by an
Authorized Person of Secured Party.
"Payment Obligations" shall have the meaning set forth in Section 3(e).
"Pledgor" shall have the meaning set forth in the preamble.
"PSA" shall have the meaning set forth in the preamble.
"Secured Party" shall have the meaning set forth in the preamble.
"Securities Intermediary" shall have the meaning set forth in the preamble.
"Specified Collateral" shall have the meaning set forth in Section 4(a)(i).
"Standing Wire Instructions" shall mean the bank account details specified for each
party in Schedule II hereto, as the same may be revised from time to time by notice to
Securities Intermediary.
"Substitute Collateral" shall have the meaning set forth in Section 3(b).
"UCC" shall mean the Uniform Commercial Code as in effect in the State of New York.
"Value" shall have the meaning set forth in the CSA.
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"Written Instructions" shall mean entitlement orders and other instructions in a written
record (including, without limitation, an electronic record) delivered or transmitted by an
Authorized Person and, if applicable, confirmed by a Call Back Representative, in
accordance with Section 7(c) of this Agreement and received by Securities Intermediary
at the address specified in Schedule I of this Agreement or such other address specified
by Securities Intermediary as available for use in connection with this Agreement.
The terms "entitlement holder", "entitlement order", "financial asset", "investment
property", "proceeds", "security", "security entitlement" and "securities intermediary" shall
have the meanings set forth in Articles 8 and 9 of the UCC. As between Secured Party and
Pledgor, any capitalized terms not defined herein shall have their respective meanings as
assigned in the PSA.
2. Appointment and Status of Securities Intermediary;Account.
(a) Appointment; Identification of Collateral. Secured Party and Pledgor
hereby intend that this Agreement establish "control" of the Account and the Collateral by
Secured Party for purposes of perfecting Secured Party's security interest in the Account and the
Collateral pursuant to Articles 8 and 9 of the UCC, and Securities Intermediary hereby
acknowledges that it has been advised of Pledgor's grant to Secured Party of a security interest in
the Account and in the Collateral pursuant to the terms of the CSA. Pledgor hereby appoints
Securities Intermediary to perform its duties as hereinafter set forth and authorizes Securities
Intermediary to hold Collateral in the Account either in its name or in the name of its nominees.
Such Collateral shall be identified and segregated separately with respect to Pledgor on
Securities Intermediary's books and records. Securities Intermediary hereby accepts such
appointment and agrees to establish and maintain the Account and appropriate records
identifying the Collateral in the Account as pledged by Pledgor to Secured Party. Pledgor hereby
authorizes Securities Intermediary to comply with all Written Instructions, including entitlement
orders, originated by Secured Party with respect to the Collateral without further consent or
direction from Pledgor or any other party.
(b) Status of Securities Intermediary. The parties agree that Securities
Intermediary is a securities intermediary, and that all property other than cash held in the
Account shall be treated as "financial assets" within the meaning of the UCC. Securities
Intermediary makes no representations or warranties with respect to the creation or enforceability
of any security interest in the Account or the Collateral.
(c) Use of Depositories. Secured Party and Pledgor hereby authorize
Securities Intermediary to utilize Depositories to the extent Securities Intermediary deems
appropriate in connection with its performance hereunder with respect to any Collateral
consisting of securities. Collateral held by Securities Intermediary in a Depository will be held
subject to the rules, terms and conditions of such Depository. Where Collateral is held in a
Depository, Securities Intermediary shall identify on its records as belonging to Pledgor and
pledged to Secured Party a quantity of securities as part of a fungible bulk of securities held in
Securities Intermediary's account at such Depository. Securities deposited in a Depository will
be represented in accounts which include only assets held by Securities Intermediary for its
customers.
6 of 23
(d) Pledgor Representation. Pledgor represents and warrants that it is the sole
owner of or otherwise has the right to transfer the Collateral free and clear of all liens, claims,
security interests and encumbrances (except those granted in this Agreement and in the CSA).
Pledgor agrees to transfer all Collateral to the Account free of encumbrances of any type. As of
the date hereof, Pledgor has confirmed that Securities Intermediary (i) is a trust company or
commercial bank with trust powers, organized under the laws of the United States of America or
any state or province thereof and subject to supervisions or examination by federal or state
authority, having a combined capital surplus of at least U.S. $10,000,000,000 and (ii) has
outstanding long term unsecured unsubordinated debt securities ratings of at least "A3" by
Moody's Investors Services, Inc., or any successor thereto and "A-" by Standard & Poor's
Rating Services, or any successor thereto.
(e) Securities Intermediary's Representations, Warranties and Covenants.
Securities Intermediary hereby represents, warrants, and covenants that: (i) in the ordinary
course of Securities Intermediary's business, it maintains securities accounts for others and is
acting in that capacity in connection with this Agreement; (ii) Securities Intermediary is engaged
in the business of banking; (iii)the Account is and will be maintained by Securities Intermediary
as a "securities account" (within the meaning of Section 8-501(a) of the UCC)with respect to all
property other than cash deposited or credited thereto and a "deposit account" (within the
meaning of Section 9-102 of the UCC) with respect to cash deposited or credited to the Account;
and(iv) except as otherwise ordered by a court of competent jurisdiction, Securities Intermediary
will not comply with and will not agree to comply with instructions or entitlement orders of any
person other than Secured Party and, to the extent permitted hereby, Pledgor with respect to the
Account or the Collateral.
3. Collateral Services.
(a) Return of Collateral to Pledgor. Prior to a receipt by Securities
Intermediary of a Notice of Exclusive Control from Secured Party, if Pledgor is entitled to the
return of certain Collateral pursuant to the CSA, Pledgor shall issue Written Instructions to
Securities Intermediary (with a mandatory contemporaneous copy to Secured Party) in
accordance with Section 7(b)(i) of this Agreement to transfer such Collateral from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised. Securities Intermediary shall, without
inquiry and in reliance upon such Written Instructions, comply with such Written Instructions
from Pledgor with respect to the transfer of Collateral to Pledgor (including, by way of example
and not by way of limitation, Written Instructions relating to the withdrawal or transfer of
Collateral from the Account, the release of the proceeds of a securities sale or redemption and
any income received on a security). Pledgor hereby covenants, for the benefit of Secured Party,
that Pledgor will originate entitlement orders concerning the Account or the Collateral only as
permitted by the CSA. The foregoing covenant is for the benefit of Secured Party only and will
not be deemed to constitute a limitation on Securities Intermediary's obligation to comply with
those entitlement orders. The failure of Pledgor to deliver to Secured Party a copy of any
Written Instructions delivered by Pledgor to Securities Intermediary will not limit or otherwise
affect the right of Securities Intermediary to rely without inquiry upon such Written Instructions.
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(b) Substitutions. As between Pledgor and Secured Party, if and to the extent
the terms of the CSA permit Collateral to be substituted, Pledgor may substitute Collateral by
delivering Written Instructions to Securities Intermediary instructing it to (i)receive from
Pledgor for deposit to the Account Collateral identified in such Written Instructions ("Substitute
Collateral") and (ii)transfer Collateral identified in such Written Instruction from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised not later than 5:00 p.m. (Eastern Time)
on the Business Day following the date on which such Substitute Collateral is received by
Securities Intermediary. It is understood and agreed that Securities Intermediary shall not have
any duty or responsibility whatsoever for determining whether Collateral is permitted to be
substituted in accordance with the terms of the CSA, whether any Substitute Collateral
constitutes Substitute Credit Support within the terms of the CSA or for determining the Value of
any Collateral or Substitute Collateral. Securities Intermediary shall act without inquiry and in
reliance on all Written Instructions to substitute Collateral.
(c) Deposit of Collateral. Prior to a receipt by Securities Intermediary of a
Notice of Exclusive Control from Secured Party, Securities Intermediary is authorized to, and
shall, in accordance with this Section 3(c) deposit the Collateral in the Account.
(d) Collateral Transfers. Securities Intermediary shall transfer Collateral from
the Account only in accordance with clauses (a), (b) and (c) of this Section 3, Section 4 and as
provided in Section 6 hereof. For the avoidance of doubt, it is understood and agreed that
Securities Intermediary shall not have any obligation to act on any instructions other than
Written Instructions.
(e) Priority of Secured Party's Security Interest. In order to secure the
repayment of all amounts owed to Securities Intermediary hereunder, including, without
limitation, any fees, charges or expenses payable to Securities Intermediary pursuant to
Sections 5(a)(ii) and 5(g) of this Agreement (collectively, the "Payment Obligations"),
Securities Intermediary shall have a security interest in and right of set-off against the Account
and the Collateral and the proceeds thereof, until such time as Securities Intermediary is repaid in
full the amount of any such Payment Obligations. In no event will Securities Intermediary
advance funds or otherwise extend credit in connection with the maintenance or operation of the
Account or the acquisition or crediting of any Collateral to the Account. Notwithstanding the
preceding provisions of this Section 3(e), Securities Intermediary's security interest in and right
of set-off against the Account and the Collateral to secure the repayment of Payment Obligations
hereunder shall be senior to Secured Party's security interest in and lien on the Account and the
Collateral. In the event that Payment Obligations arising under Section 5(g) of this Agreement
have become due and payable by Pledgor to Securities Intermediary and any such amounts have
not otherwise been satisfied within [30] days Pledgor's receipt of a written notice from Securities
Intermediary that a Payment Obligation under Section 5(g) of this Agreement has become due
and payable (the "Overdue Amount"), then Securities Intermediary shall be permitted to deduct
and set-off the Overdue Amount against any Collateral that otherwise would be returnable to
Pledgor in accordance with Section 3(a) hereof. Securities Intermediary's lien and security
interest in the Account and the Collateral set forth above shall not secure any amounts owed by
Pledgor to Securities Intermediary pursuant to any other agreement between Pledgor and
Securities Intermediary. Any other lien, security interest, right of set-off or deduction or
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banker's lien in favor of Securities Intermediary in or against the Account or the Collateral
whether pursuant to agreement or arising by operation of law are hereby waived.
(f) Notice of Adverse Claims. Upon receipt of written notice of any lien,
encumbrance or adverse claim against the Account or any portion of the Collateral carried
therein (other than any lien, encumbrance or claim identified herein), Securities Intermediary
shall use reasonable efforts to notify Secured Party and Pledgor as promptly as reasonably
practicable under the then current circumstances.
4. Notice of Exclusive Control.
(a) Secured Party may, subject to the terms of this Agreement, exercise sole
and exclusive control of the Account and the Collateral held therein at any
time by delivering to Securities Intermediary a Notice of Exclusive
Control.
(b) Following receipt of a Notice of Exclusive Control from Secured Party,
Securities Intermediary shall,without inquiry and in reliance upon such
Notice of Exclusive Control,thereafter comply with Written Instructions
(including entitlement orders) solely from Secured Party. Secured Party
agrees to deliver a copy of any Notice of Exclusive Control to Pledgor
contemporaneously with its delivery of such notice to Securities
Intermediary. Upon receipt of a Notice of Exclusive Control, Securities
Intermediary shall promptly provide a copy of such Notice of Exclusive
Control to Pledgor in accordance with Section 7(b)(iii)of this Agreement;
provided that Securities Intermediary's failure to provide a copy of such
Notice of Exclusive Control to Pledgor shall not affect the validity of such
notice.
Secured Party covenants, for the benefit of Pledgor,that it will not deliver
a Notice of Exclusive Control to Securities Intermediary unless and until
(1) (x) an Event of Default(as defined in the CSA)with respect to the
Pledgor has occurred and is continuing or(y) a Section 15.3 Termination
Event(as defined in the PSA)has occurred and is continuing following
Secured Party providing Pledgor at least two (2)Local Business Days'
prior written notice that such Section 15.3 Termination Event has occurred
and (2)Pledgor has not paid in full all of its Obligations (as defined in the
CSA)that are then due and payable.
(c) Securities Intermediary shall have no duty to determine whether Secured
Party has complied with this Section 4, including,but not limited to a duty
to verify that any statement or other information contained in any such
notice is true and correct
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5. General Terms and Conditions.
(a) Indemnification.
i. Except as otherwise expressly provided herein, Securities
Intermediary shall not be liable for any losses, costs, expenses,
damages, liabilities or claims, including reasonable attorneys' fees
(collectively, "Losses") incurred by or asserted against Pledgor or
Secured Party, except those Losses arising out of the negligence,
fraud or willful misconduct of Securities Intermediary. Securities
Intermediary shall have no liability whatsoever for the action or
inaction of any Depository, except to the extent any such action or
inaction by a Depository is the direct result of the negligence,
fraud, or willful misconduct of Securities Intermediary. In no
event shall Securities Intermediary, Secured Party or Pledgor be
liable for special, indirect or consequential damages, or lost profits
or loss of business, arising in connection with this Agreement.
ii. Solely in connection with this Agreement and the Account subject
hereto, Secured Party and Pledgor agree, jointly and severally, to
defend, indemnify and hold Securities Intermediary and each
director, officer, employee, attorney, agent and affiliate of
Securities Intermediary, harmless from and against any and all
Losses other than special, indirect or consequential damages or lost
profits or loss of business, sustained or incurred by or asserted
against Securities Intermediary by any party by reason of or as a
result of any action or inaction, or arising out of Securities
Intermediary's performance hereunder, including reasonable fees
and expenses of counsel incurred by Securities Intermediary in a
successful defense of claims by Pledgor or Secured Party;
provided, however, that Pledgor and Secured Party shall not
indemnify Securities Intermediary for those Losses arising out of
Securities Intermediary's negligence, fraud or willful misconduct.
This indemnity shall be a continuing obligation of Pledgor and
Secured Party, their respective successors and assigns,
notwithstanding the termination of this Agreement.
(b) No Obligation Regarding Quality of Collateral. Without limiting the
generality of the foregoing, Securities Intermediary shall be under no obligation to inquire into,
and shall not be liable for, any Losses incurred by Pledgor, Secured Party or any other person as
a result of the receipt or acceptance of fraudulent, forged or invalid Collateral, or Collateral
which otherwise is not freely transferable or deliverable without encumbrance in any relevant
market.
(c) No Responsibility Concerning the PSA, CSA and CEA. Pledgor and
Secured Party hereby agree that, notwithstanding references to the PSA and the CSA in this
Agreement, Securities Intermediary has no interest in, and no duty, responsibility or obligation
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with respect to, the PSA and the CSA (including without limitation, no duty, responsibility or
obligation to monitor Pledgor's or Secured Party's compliance with the PSA and the CSA or to
know the terms of the PSA and the CSA). Securities Intermediary has no duty, responsibility or
obligation with respect to the compliance of this Agreement, with the CEA, or with the rules
promulgated thereunder.
(d) No Duty of Oversight. Securities Intermediary is not at any time under
any duty to monitor the Value of any Collateral in the Account or to determine whether the
Collateral is of a type required to be held or eligible to be held in the Account, or to supervise the
investment of, or to advise or make any recommendation for the purchase, sale, retention or
disposition of any Collateral or to determine whether the aggregate Value of the Collateral is
sufficient to secure Pledgor's obligations under the PSA.
(e) Advice of Counsel. Securities Intermediary may obtain the advice of legal
counsel selected by it in the event of any dispute or question as to the interpretation of any of the
provisions hereof or of its duties hereunder and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice.
(f) No Collection Obligations. Securities Intermediary shall be under no
obligation to take action to collect any amount payable on Collateral in default, or if payment is
refused after due demand and presentment.
(g) Fees and Expenses. Pledgor agrees to pay to Securities Intermediary fees
for Securities Intermediary's performance under this Agreement as such fees are set forth on the
fee schedule attached hereto as Exhibit C, as such fee schedule may be modified from time to
time upon the mutual agreement of the Pledgor and Securities Intermediary. Pledgor shall
reimburse Securities Intermediary for all reasonable and customary costs associated with
transfers of Collateral to Securities Intermediary and records kept in connection with this
Agreement. Pledgor shall also reimburse Securities Intermediary for out-of-pocket expenses,
which are a normal incident of the services provided under this Agreement. Pledgor shall be
responsible for such other fees and expenses as may be agreed in writing between Securities
Intermediary and Pledgor with respect to the Account.
(h) Reliance;Risk Acknowledgements; Additional Terms.
i. Subject to the terms below, Securities Intermediary shall be
entitled to rely upon any Written Instructions actually received by
Securities Intermediary and reasonably believed by Securities
Intermediary to be duly authorized and delivered.
ii. If Securities Intermediary receives Written Instructions which
appear on their face to have been transmitted via (A)computer
facsimile, email, the Internet or other insecure electronic method,
or (B) secure electronic transmission containing applicable
authorization codes,passwords and/or authentication keys, Secured
Party and Pledgor each understands and agrees that Securities
Intermediary cannot determine the identity of the actual sender of
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such Written Instructions and that Securities Intermediary shall
conclusively presume that such Written Instructions have been sent
by an Authorized Person. Secured Party and Pledgor shall be
responsible for ensuring that only its Authorized Persons transmit
such Written Instructions to Securities Intermediary and that all of
its Authorized Persons treat applicable user and authorization
codes,passwords and/or authentication keys with extreme care.
iii. Secured Party and Pledgor each acknowledges and agrees that it is
fully informed of the protections and risks associated with the
various methods of transmitting Written Instructions to Securities
Intermediary and that there may be more secure methods of
transmitting Written Instructions than the method(s) selected by it.
(i) Account Disclosure. Securities Intermediary is authorized to supply any
information regarding the Account, which is required by any applicable law or governmental
regulation now or hereafter in effect.
(j) Force Majeure. Securities Intermediary shall not be responsible or liable
for any failure or delay in the performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable control, including
without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software) or communications service; accidents; labor disputes; acts of civil or military authority;
governmental actions; inability to obtain labor, material, equipment or transportation.
(k) No Implied Duties; Entire Agreement. Securities Intermediary shall have
no duties or responsibilities whatsoever except such duties and responsibilities as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied against Securities
Intermediary in connection with this Agreement. This Agreement constitutes the sole agreement
between the parties with respect to its subject matter and supersedes any and all other agreements
(whether written or oral)between the parties with respect to such subject matter.
6. Termination.
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor.
This Agreement shall terminate upon (i) Securities Intermediary's receipt of Written Instructions
from Pledgor expressly stating that Secured Party no longer claims any security interest in the
Collateral and the subsequent transfer by Securities Intermediary of all of the Collateral from the
Account to Pledgor pursuant to Pledgor's Written Instructions; (ii) Securities Intermediary's
receipt of a Notice of Exclusive Control delivered by Secured Party and the subsequent transfer
by Securities Intermediary of all of the Collateral from the Account as instructed by Secured
Party; or (iii) Securities Intermediary's receipt of reasonably contemporaneous Written
Instructions from each of Pledgor and Secured Party confirming to Securities Intermediary that
Pledgor and Secured Party elect to terminate this Agreement and the subsequent transfer by
Securities Intermediary of all of the Collateral in the Account as directed in such Written
Instructions.
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(b) Termination by Securities Intermediary. This Agreement may be
terminated by Securities Intermediary by providing written notice to the other parties, provided
that such termination shall not be effective until 60 days following Securities Intermediary's
delivery or transmission of such written notice (the"Effective Termination Date").
Upon receipt of such notice, Secured Party and Pledgor will endeavor to provide joint Written
Instructions for the transfer of all the Collateral on or before the Effective Termination Date. If
such joint Written Instructions are not received by Securities Intermediary on or before the
Effective Termination Date, Securities Intermediary may petition a court of competent
jurisdiction for instructions and transfer the Collateral as directed by such court.
Following the Effective Termination Date and until the date of transfer of all Collateral, the sole
duty of Securities Intermediary under this Agreement will be to retain custody of the Collateral
pending the transfer.
(c) Obligations Upon Termination. Except as otherwise provided herein, all
obligations of the parties to each other hereunder shall cease upon termination of this Agreement.
7. Miscellaneous.
(a) Ambiguity in Notices. In the event that Securities Intermediary
determines that there is an ambiguity in any Written Instructions received from Pledgor or
Secured Party (a "Sender"), Securities Intermediary shall promptly give the Sender written
notice of such ambiguity and may, in its reasonable discretion, thereafter refrain from taking any
action directed in such Written Instructions other than to retain possession of the Collateral,
unless Securities Intermediary receives clarifying or superseding Written Instructions from the
Sender which, in the determination of Securities Intermediary, eliminate such ambiguity.
Securities Intermediary shall be permitted to rely upon such clarifying or superseding Written
Instructions without further inquiry.
(b) Notices.
i. Notices From Secured Party or Pledgor to Securities Intermediary.
All notices, approvals, consents, requests and other
communications to be delivered by Pledgor to Securities
Intermediary or by Secured Party to Securities Intermediary
hereunder shall be in a writing. All such notices, approvals,
consents, requests and other communications to be delivered by
Pledgor or Secured Party hereunder shall be signed by an
Authorized Person and shall be delivered by hand, overnight
delivery service, facsimile (with confirmed receipt) or email
(provided that if the writing is delivered by email, such writing
shall be delivered as an attachment on an official letterhead of the
delivering party)to the relevant address, facsimile number or email
address set forth in Schedule I hereto, or to such other address as
each party may designate for itself by like notice and any such
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writing shall be deemed to have been given when the writing is
received by Securities Intermediary.
ii. Electronic Transmission of Notices. By electing to use electronic
transmission of any kind for notice purposes, each of Pledgor and
Secured Party acknowledges that such transmissions are not
encrypted and therefore are insecure. Each of Pledgor and Secured
Party further acknowledges that there are other risks inherent in
communicating through electronic transmission such as the
possibility of virus contamination and disruptions in service, and
agrees that Securities Intermediary shall not be responsible for any
loss, damage or expense suffered or incurred by Pledgor, Secured
Party or any person claiming by or through Pledgor or Secured
Party as a result of the use of electronic transmission,provided that
any such loss, damage or expense is not the direct result of the
negligence or willful misconduct of Securities Intermediary.
iii. Notices to Secured Party or Pledgor. All notices, approvals,
consents, requests and other communications to be delivered to
Pledgor or Secured Party hereunder shall be in writing and shall be
deemed to have been given when the writing is delivered if given
or delivered by hand, overnight delivery service, facsimile (with
confirmed receipt) or email to the address, facsimile number or
email address set forth in Schedule I hereto, or to such other
address as each party may designate for itself by like notice.
(c) Cumulative Rights;No Waiver. Each and every right granted to Securities
Intermediary hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to
time. No failure on the part of Securities Intermediary to exercise, and no delay in exercising,
any right will operate as a waiver thereof, nor will any single or partial exercise by Securities
Intermediary of any right preclude any other future exercise thereof or the exercise of any other
right.
(d) Severability; Amendments; Assignment. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a written
agreement executed by the parties hereto. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by any party without the written consent of the other parties.
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver.
This Agreement and the Account shall be governed by and construed in accordance with the
substantive laws of the State of New York. The State of New York shall be the "securities
intermediary's jurisdiction" and the "bank's jurisdiction" within the meaning of Sections 8-
110(e) and 9-304 of the UCC, respectively. Secured Party, Pledgor and Securities Intermediary
14 of 23
hereby consent to the exclusive jurisdiction of a state or federal court situated in New York City,
New York in connection with any dispute arising hereunder. To the extent that in any
jurisdiction Secured Party or Pledgor may now or hereafter be entitled to claim, for itself or its
assets, immunity from suit, execution, attachment (before or after judgment) or other legal
process, Secured Party and Pledgor each irrevocably agrees not to claim, and hereby waives,
such immunity. Secured Party, Pledgor and Securities Intermediary each hereby irrevocably
waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this
Agreement.
(f) No Third Party Beneficiaries. In performing hereunder, Securities
Intermediary is acting solely on behalf of Secured Party and Pledgor and no contractual or
service relationship shall be deemed to be established hereby between Securities Intermediary
and any other person.
(g) Headings. Section headings are included in this Agreement for
convenience only and shall have no substantive effect on its interpretation.
(h) Counterparts. This Agreement and any joint Written Instructions may be
executed in any number of counterparts, each of which shall be deemed to be an original, but
such counterparts shall,together, constitute only one instrument.
(i) USA PATRIOT ACT. Pledgor and Secured Party hereby acknowledge
that Securities Intermediary is subject to federal laws, including the Customer Identification
Program ("CIP") requirements under the USA PATRIOT Act and its implementing regulations,
pursuant to which Securities Intermediary must obtain, verify and record information that allows
Securities Intermediary to identify each of Pledgor and Secured Party. Accordingly, prior to
opening an Account hereunder Securities Intermediary will ask Pledgor and/or Secured Party to
provide certain information including, but not limited to, Pledgor's and/or Secured Party's name,
physical address, tax identification number and other information that will help Securities
Intermediary to identify and verify each of Pledgor's and Secured Party's identity, such as
organizational documents, certificate of good standing, license to do business, or other pertinent
identifying information. Neither Secured Party nor Pledgor is responsible for providing to
Securities Intermediary documents related to the other in connection with Securities
Intermediary's requests for information pursuant to this provision. Pledgor and Secured Party
agree that Securities Intermediary cannot open an Account hereunder unless and until Securities
Intermediary verifies Pledgor's and/or Secured Party's identity in accordance with its CIP.
0) Tax Forms. All entities entitled to receive interest on Collateral in the
form of cash shall provide Securities Intermediary with a W-9 or W-8 IRS tax form prior to the
disbursement of interest, and Securities Intermediary will file the appropriate 1099 or 1042-S tax
forms, whichever are applicable.
(k) New Authorized Persons. Pledgor or Secured Party may add or remove
person(s) from their respective list of Authorized Persons by delivering a written notice to
Securities Intermediary that certifies an amended list of person(s) authorized to transmit or
deliver Written Instructions and specimen signature of such person(s); provided that, until
Securities Intermediary has had commercially reasonable time to act on such notice, the
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person(s) previously certified as Authorized Person(s) shall continue to be Authorized Person(s)
and Securities Intermediary shall be fully protected in acting in accordance with this Agreement
upon Written Instructions from such Authorized Person(s)previously certified.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By:
Name:
Title:
SECURED PARTY:
CITY OF VERNON
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
SECURITIES INTERMEDIARY:
U.S.BANK NATIONAL ASSOCIATION
By:
Name:
Title:
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SCHEDULE I
ADDRESSES FOR NOTICES
AND OTHER COMMUNICATIONS
Communications to SECURED PARTY shall be delivered to:
Attn: Carlos Fandino, City Administrator
Address: 4305 Santa Fe Avenue, Vernon, CA 90058
Facsimile: (323) 826-1452
Telephone (for confirmation of notice receipt only): (323) 583-8811 ext. 228 or ext. 292
Email: cfandino@ci.vernon.ca.us;hpatel@ci.vernon.ca.us
Communications to a PLEDGOR shall be delivered to:
Attn: Citigroup Energy Inc., Collateral Management Group
Address: 499 Washington Blvd., 7th Floor, Jersey City,NJ 07310
Facsimile:
Telephone (212) 816-8090(for confirmation of notice receipt only):
Email: derivatives.margin@citi.com
With a copy to;
Citigroup Energy Inc.
Attn: Commodities Structuring
Address: 2800 Post Oak Blvd.
Suite 500
Houston, Texas 77056
Fax: 713-752-5208
Email: americascommoditiesstructuring(a),citi.com
Communications (including Written Instructions)to SECURITIES INTERMEDIARY shall be
delivered to:
U.S. Bank National Association
100 Wall Street, 19th floor
New York,NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone (for confirmation of notice receipt only): 212-951-8578
Email: Custodian.Notices@usbank.com
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SCHEDULE II
CONTACT DETAILS FOR
CALL BACK REPRESENTATIVES
FOR CHANGES TO STANDING WIRE INSTRUCTIONS
Telephone Number(s) for Call Back Representatives
for Changes to Standing Wire Instructions(attached)
Pledgor's Call Back Representatives:
Name Telephone Number
1. Robert Traverso (212) 816-5673
2. Marlene Leal (212) 816-5659
3. John Mui (212) 816-6266
4. Ulric Alexander (212) 816-5658
5. George Madrigal (212) 816-5661
6. Paul Valdez (212) 816-5787
7. Mohamed Eldeeb (212) 816-9853
Secured Party's Call Back Representatives:
Name Telephone Number
1. Carlos Fandino, City Administrator (323) 583-8811 ext. 228
2. Hema Patel, City Attorney (323) 583-8811 ext. 292
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Standing Wire Instructions
Pledgor Wire Instructions:
Bank Name: Citibank NA NY
Bank ABA No.: 021-000-089
Account No.: 30569329
Account Name:
Reference:
Secured Party Wire Instructions:
Bank Name: Bank of New York Mellon Trust
Bank ABA No.: 021000018
Account No.: 8004528400
Account Name: City of Vernon Escrow Account
Reference:
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EXHIBIT A
CERTIFICATE OF AUTHORIZED SIGNATORIES
The undersigned hereby certifies that s/he is a [TITLE] of [COMPANY NAME] (the
"Company"), and that, as such, s/he is authorized to execute this certificate on behalf of the
Company, and further certifies on behalf of the Company that the following named individuals
are duly elected, qualified and acting officers of the Company, and each holds the title set forth
opposite his/her name. The signature written opposite the name and title of each such officer is
her/his correct signature.
Name Office Signature
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this certificate in
her/his capacity as an authorized officer of the Company as of this [DATE].
By:
Name:
Title:
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EXHIBIT B
NOTICE OF EXCLUSIVE CONTROL
[Letterhead of Secured Party]
Date:
To: U.S. Bank National Association
100 Wall Street, 19th floor
New York,NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone: 212-951-8578 (for confirmation of notice receipt only)
E-mail: Custodian.Notices@usbank.com
Re: Control Agreement
NOTICE OF EXCLUSIVE CONTROL
We refer to the Collateral Account Control Agreement, dated as of[ _, 201] (as
amended and in effect from time to time,the "Control Agreement"), between City of Vernon
("Secured Party"), Citigroup Energy Inc. ("Pledgor"), and you, as Securities Intermediary.
Unless otherwise provided herein, capitalized terms used in this notice have the meanings
assigned to them in the Control Agreement or the PSA(as defined in the Control Agreement),as
applicable.
We hereby issue a Notice of Exclusive Control pursuant to Section 4 of the Control Agreement.
You are instructed not to accept any directions or instruction with respect to the Account from
any person other than the undersigned.
We certify that (1) (x) an Event of Default (as defined in the CSA) with respect to the Pledgor
has occurred and is continuing or (y) a Section 15.3 Termination Event (as defined in the PSA)
has occurred and is continuing following Secured Party providing Pledgor at least two (2) Local
Business Days' prior written notice that such Section 15.3 Termination Event has occurred and
(2)Pledgor has not paid in full all of its Obligations (as defined in the CSA)that are then due and
payable ("Condition to Exercise Remedies").
We certify that, as a result of such Condition to Exercise Remedies, we are entitled to exercise
certain rights and remedies provided to us under the Control Agreement.
Transfer Instructions:
We hereby instruct you to transfer, in accordance with Section 4(b)(ii)of the Control Agreement,
all of the Collateral in the Account pursuant to the Secured Party Wire Instructions specified in
Schedule IV of the Control Agreement, unless otherwise specified here.
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You are hereby instructed to forward this notice to Pledgor in accordance with the Control
Agreement.
We certify under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct.'
Very truly yours,
[Insert legal name of Secured Party]
By:
Authorized Signatory
cc: [the Pledgor]
This language is drawn from 28 U.S.C. Sec. 1746,as is required for compliance with CFTC Rule 23.702. This is
Section 1746's suggested language for statements made under penalty of perjury outside the U.S.(which differs
from the suggested language for statements made in the U.S.only by including the phrase"under the laws of the
United States of America,"and should clearly cover statements made both inside and outside of the U.S.).
23 of 23
CERTIFICATE OF AUTHORIZED
SIGNATURES
4 4 I' :
, ..,„ , ri •1 0 ,
7jr' 1 f-- (
ivin
to
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, . ,
OFFICE OF THE CITY ATTORNEY
4305 Santa Fe Avenue, Vernon,California 90058
Telephone(323)583-8811
November 10, 2016
U.S. Bank National Association VIA EMAIL ONLY
Email: Custodian.Noticesausbank.com
Re: Certificate of Authorized Signatories
Dear Ms. Dimarco:
In furtherance of that certain Collateral Account Control Agreement("ACA") entered into as of
October 4, 2016 by and among U.S. Bank National Association(as Securities Intermediary)
("U.S. Bank"),the City of Vernon (as Secured Party) (the "City"), and Citigroup Energy Inc. (as
Pledgor) ("Citigroup"), the City submits to U.S. Bank herewith its list of"Authorized Persons"
(as that term is defined in the ACA).
If you have any questions, please contact me.
Sincerely,
Hera at
City Attorney
Enclosure
Exclusively Industrial
EXHIBIT A
CERTIFICATE OF AUTHORIZED SIGNATORIES
The undersigned hereby certifies that s/he is an officer of the City of Vernon(the"City"),and that,
as such, s/he is authorized to execute this certificate on behalf of the City, and further certifies on
behalf of the City that the following named individuals are duly appointed, qualified and acting
officers of the City, and each holds the title set forth opposite his/her name. The signature written
opposite the name and title of each such officer is her/his correct signature.
Name Office ignature/.
Carlos R. Fandino City Administrator
Kelly Nguyen Director, Gas & Electric //
INSWAN
Hema P. Patel City Attorney MI/A_
IN WITNESS WHEREOF, the undersigned has duly execute and delivered this certificate in
her/his capacity as an authorized officer of the City as of this day of November, 2016.
By:
Name: Car os Fandino
Title: City Administrator
NYDOCS01/1671038.6 21 of 23
LETTER OF CREDIT
BNP PARIBAS ) 1EV ERVE`
1. CORPORATE&INVESTMENT BANKING J
NOV 0 7 2016
CITY ATTORNEY DEPT
BNP PARIBAS
TRADE FINANCE SERVICES
787 SEVENTH AVENUE
NEW YORK, NY 10019
IRREVOCABLE STANDBY LETTER OF CREDIT
LETTER OF CREDIT NO. 04144267 ISSUE DATE: NOVEMBER 4, 2016
BENEFICIARY:CITY OF VERNON ACCOUNT PARTY:CITIGROUP ENERGY INC.
CITY OF VERNON CITIGROUP ENERGY INC.
4305 SANTA FE AVE. 499 WASHINGTON BLVD. , 7TH FLOOR
VERNON, CA 90058 JERSEY CITY, NJ 07310
TELEPHONE NO. (212) 816-8090
EMAIL:DERIVATIVES.MARGIN@CITI.COM
ATTN:HEMA PATEL, CITY ATTORNEY ATTN:COLLATERAL MANAGEMENT GROUP
LADIES AND GENTLEMEN:
WE HEREBY ESTABLISH IN FAVOR OF YOU, THE CITY OF VERNON AS SUCCESSOR
IN INTEREST TO THE VERNON NATURAL GAS FINANCING AUTHORITY (THE
"BENEFICIARY") , AT THE REQUEST AND FOR THE ACCOUNT OF CITIGROUP ENERGY
INC. (THE "ACCOUNT PARTY") , WITH RESPECT TO THE AGREEMENT FOR PURCHASE
AND SALE OF NATURAL GAS, DATED AS OF JUNE 27, 2006 BETWEEN THE ACCOUNT
PARTY AND THE VERNON NATURAL GAS FINANCING AUTHORITY, AS MAY BE AMENDED
FROM TIME TO TIME (THE "AGREEMENT") , OUR IRREVOCABLE STANDBY LETTER OF
CREDIT NO. 04144267 (THE "CREDIT") WHEREBY WE IRREVOCABLY AUTHORIZE YOU
TO DEMAND FROM US, IN ACCORDANCE WITH THE TERMS AND CONDITIONS
HEREINAFTER SET FORTH, IN AN AMOUNT NOT TO EXCEED IN THE AGGREGATE
$76, 933,727.99 (SEVENTY SIX MILLION NINE HUNDRED THIRTY THREE THOUSAND
SEVEN HUNDRED TWENTY SEVEN AND 99/100 U.S. DOLLARS) . CAPITALIZED TERMS
NOT OTHERWISE DEFINED HEREIN OR ELSEWHERE IN THE CREDIT SHALL HAVE THE
MEANINGS SPECIFIED IN THE AGREEMENT.
FUNDS HEREUNDER ARE AVAILABLE TO YOU AGAINST YOUR DEMAND FOR PAYMENT
HEREUNDER DELIVERED TO US BY COURIER OR FACSIMILE AT THE ADDRESS
SPECIFIED BELOW WITH BOTH OF THE FOLLOWING ITEMS ATTACHED:
1. A CERTIFICATE, DATED THE DATE OF SUCH DEMAND FOR PAYMENT, SIGNED
BY THE CITY ADMINISTRATOR OF THE BENEFICIARY, IN THE FORM OF EXHIBIT A
HERETO, ACCOMPANIED BY THE CERTIFICATE OF THE CITY CLERK OF THE
BENEFICIARY SUBSTANTIALLY TO THE EFFECT THAT THE SIGNATORY OF SUCH
CERTIFICATE IS DULY INCUMBENT AS THE CITY ADMINISTRATOR OF THE
BENEFICIARY AND IS AUTHORIZED TO SUBMIT SUCH DEMAND BY ALL NECESSARY
CORPORATE AUTHORIZATION, WHICH CERTIFICATE OF SUCH CITY CLERK SHALL
CERTIFY AS TO A SPECIMEN SIGNATURE OF SUCH SIGNATORY; AND
Page 1 of 10
BNP PARIBAS
k. CORPORATE&INVESTMENT BANKING
Page: 2
Reference No. : 04144267
2. EITHER (X) A STATEMENT, SIGNED BY THE MANAGING DIRECTOR OF THE
ACCOUNT PARTY, IN THE FORM OF EXHIBIT B HERETO, ACCOMPANIED BY THE
CERTIFICATE OF THE SECRETARY OR AN ASSISTANT SECRETARY OF THE ACCOUNT
PARTY SUBSTANTIALLY TO THE EFFECT THAT THE SIGNATORY OF SUCH CERTIFICATE
IS DULY INCUMBENT AS THE MANAGING DIRECTOR OF THE ACCOUNT PARTY AND IS
AUTHORIZED TO SUBMIT SUCH DEMAND BY ALL NECESSARY CORPORATE
AUTHORIZATION, WHICH CERTIFICATE OF SUCH SECRETARY OR ASSISTANT
SECRETARY SHALL CERTIFY AS TO A SPECIMEN SIGNATURE OF SUCH SIGNATORY; OR
(Y) CERTIFICATE, DATED THE DATE OF SUCH DEMAND FOR PAYMENT, SIGNED BY
THE CITY ADMINISTRATOR OF THE BENEFICIARY, IN THE FORM OF EXHIBIT C
HERETO, ACCOMPANIED BY THE CERTIFICATE OF THE CITY CLERK OF THE
BENEFICIARY SUBSTANTIALLY TO THE EFFECT THAT THE SIGNATORY OF SUCH
CERTIFICATE IS DULY INCUMBENT AS THE CITY ADMINISTRATOR OF THE
BENEFICIARY AND IS AUTHORIZED TO SUBMIT SUCH CERTIFICATE BY ALL
NECESSARY CORPORATE AUTHORIZATION, WHICH CERTIFICATE OF SUCH CITY CLERK
SHALL CERTIFY AS TO A SPECIMEN SIGNATURE OF SUCH SIGNATORY, TO WHICH
THERE SHALL BE ATTACHED AN ORDER OF A COURT OF THE STATE OF NEW YORK OR
OF A FEDERAL COURT OF THE UNITED STATES OF AMERICA, DATED A DATE NOT
LESS THAN SIXTY (60) DAYS PRIOR TO THE DATE OF SUCH DEMAND,
SUBSTANTIALLY TO THE EFFECT THAT AN AMOUNT NOT LESS THAN THE AMOUNT
DEMANDED UNDER SUCH.DEMAND FOR PAYMENT IS ORDERED TO BE IMMEDIATELY DUE
AND PAYABLE BY ACCOUNT: PARTY UNDER THE- SALE AGREEMENT; (Z) A
CERTIFICATE, DATED THE. DATE OF SUCH DEMAND FOR PAYMENT, -SIGNED BY THE
CITY ADMINISTRATOR OF THE BENEFICIARY, IN THE FORM OF EXHIBIT D HERETO,
ACCOMPANIED BY THE CERTIFICATE OF THE CITY CLERK OF THE BENEFICIARY
SUBSTANTIALLY TO THE EFFECT THAT THE SIGNATORY OF SUCH CERTIFICATE IS
DULY INCUMBENT AS THE CITY ADMINISTRATOR OF THE BENEFICIARY AND IS
AUTHORIZED TO SUBMIT SUCH CERTIFICATE BY ALL NECESSARY CORPORATE
AUTHORIZATION, WHICH CERTIFICATE OF SUCH CITY CLERK SHALL CERTIFY AS TO
A SPECIMEN SIGNATURE OF SUCH SIGNATORY, TO WHICH THERE SHALL BE ATTACHED
A SIGNED AND NOTARIZED PROOF OF CLAIM FILED BY THE BENEFICIARY WITH A
BANKRUPTCY COURT HAVING JURISDICTION OVER A CASE UNDER THE U.S.
BANKRUPTCY CODE UNDER WHICH THE ACCOUNT PARTY IS A DEBTOR FOR THE AMOUNT
SPECIFIED IN SUCH DEMAND; (AA) A CERTIFICATE, DATED THE DATE OF SUCH
DEMAND FOR PAYMENT, SIGNED BY THE CITY ADMINISTRATOR OF THE
BENEFICIARY, IN THE FORM OF EXHIBIT E HERETO, ACCOMPANIED BY THE
CERTIFICATE OF THE CITY CLERK OF THE BENEFICIARY SUBSTANTIALLY TO THE
EFFECT THAT THE SIGNATORY OF SUCH CERTIFICATE IS DULY INCUMBENT AS THE
CITY ADMINISTRATOR OF THE BENEFICIARY AND IS AUTHORIZED TO SUBMIT SUCH
CERTIFICATE BY ALL NECESSARY CORPORATE AUTHORIZATION, OR (BB) A
CERTIFICATE, DATED THE DATE OF SUCH DEMAND FOR PAYMENT AND DATED A DATE
NOT MORE THAN TWENTY (20) NEW YORK BANKING DAYS PRIOR TO THE EXPIRATION
OF THE CREDIT AS SUCH EXPIRATION MAY BE AMENDED FROM TIME TO TIME,
SIGNED BY THE CITY ADMINISTRATOR OF THE BENEFICIARY, IN THE FORM OF
EXHIBIT F HERETO, ACCOMPANIED BY THE CERTIFICATE OF THE CITY CLERK OF
THE BENEFICIARY SUBSTANTIALLY TO THE EFFECT THAT THE SIGNATORY OF SUCH
CERTIFICATE IS DULY INCUMBENT AS THE CITY ADMINISTRATOR OF THE
BENEFICIARY AND IS AUTHORIZED TO SUBMIT SUCH CERTIFICATE BY ALL
Page 2 of 10
BNP PARIBAS
k. CORPORATE&INVESTMENT BANKING
Page: 3
Reference No. : 04144267
NECESSARY CORPORATE AUTHORIZATION.
PARTIAL DEMANDS ARE ALLOWED UNDER THIS CREDIT. THE AMOUNT WHICH MAY
BE DEMANDED UNDER THIS CREDIT SHALL BE AUTOMATICALLY REDUCED BY THE
AMOUNT OF ANY DEMANDS PREVIOUSLY PAID BY US HEREUNDER. MULTIPLE DEMANDS
FOR PAYMENT HEREUNDER ARE PERMITTED FROM TIME TO TIME IN AN AMOUNT NOT
TO EXCEED IN THE AGGREGATE THE AMOUNT SPECIFIED IN THE FIRST PARAGRAPH
OF THIS CREDIT.
PRESENTATION OF YOUR CERTIFICATE SHALL BE MADE ON ANY DAY WHICH IS A
NEW YORK BANKING DAY FOR US AT OR PRIOR TO 5:00 P.M. (NEW YORK TIME) AT
OUR OFFICE LOCATED AT BNP PARIBAS C/O BNP PARIBAS RCC, INC. , 525
WASHINGTON BLVD. , JERSEY CITY, NJ 07310, ATTN: TRADE FINANCE SERVICES.
PRESENTATION MUST BE MADE BY HAND, MAIL OR COURIER SERVICE, TO SUCH
ADDRESS. IF YOUR PRESENTATION IS MADE AT SUCH OFFICE, IN COMPLIANCE WITH
THE OTHER TERMS AND CONDITIONS OF THIS CREDIT, ON OR PRIOR TO THE EXPIRY
DATE HEREOF, WE HEREBY IRREVOCABLY UNDERTAKE TO HONOR SUCH PRESENTATION
BY CLOSE OF BUSINESS ON THE NEXT NEW YORK BANKING DAY.
THIS CREDIT IS EFFECTIVE IMMEDIATELY AND EXPIRES AT OUR CLOSE OF
BUSINESS ON MAY 4, 2017, (THE "INITIAL EXPIRY DATE") ; PROVIDED HOWEVER,
THAT THIS CREDIT SHALL BE AUTOMATICALLY EXTENDED WITHOUT AMENDMENT FOR
ONE OR MORE ADDITIONAL SIX-MONTH PERIODS FROM THE INITIAL EXPIRY DATE OR
ANY SUBSEQUENT EXPIRY DATE, UNLESS AT LEAST 60 DAYS PRIOR TO SUCH DATE
YOU RECEIVE A NOTICE IN WRITING BY CERTIFIED MAIL AT THE ABOVE ADDRESS,
THAT WE ELECT NOT TO EXTEND THIS CREDIT FOR SUCH ADDITIONAL PERIOD. UPON
YOUR RECEIPT OF SUCH A NOTICE OF NON-EXTENSION, YOU SHALL BE ENTITLED TO
MAKE IMMEDIATE DEMAND FOR PAYMENT OF THE FULL AMOUNT AVAILABLE UNDER
THIS CREDIT, BY PRESENTATION OF YOUR CERTIFICATE.
THIS CREDIT SHALL BE SUBJECT TO THE PROVISIONS OF THE INTERNATIONAL
STANDBY PRACTICES 1998, INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION
NO. 590 ("ISP") , AND AS TO MATTERS NOT ADDRESSED BY ISP, SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE U.S.
FEDERAL LAWS.
THIS CREDIT MAY NOT BE AMENDED, CHANGED OR MODIFIED WITHOUT OUR
EXPRESS WRITTEN CONSENT AND THAT OF THE BENEFICIARY AND THE ACCOUNT
PARTY.
VERY TRULY YOURS,
BNP PARIBAS
BY: BNP PARIBAS :CC, INC. , AS AUTHORIZED AGENT
111A4011111111111 -
AUT°'mac � �� AUTHORIZED SI NATU'
Page 3 of 10
BNP PARIBAS
k. CORPORATE&INVESTMENT BANKING
Page: 4
Reference No. : 04144267
NAME: MARITZA LEUNG NAME: MARIA ALBUQUERQUE
TITLE: ASSISTANT VICE PRESIDENT TITLE: VICE PRESIDENT
CERTAIN ADMINISTRATIVE SERVICES FOR BNP PARIBAS MAY BE PROVIDED BY BNP
PARIBAS RCC, INC., BNP PARIBAS, THROUGH ITS CANADA BRANCH, OR ANY DIRECT
OR INDIRECT MAJORITY OWNED SUBSIDIARY OF BNP PARIBAS
Page 4 of 10
,rte+ BNP PARIBAS
k. CORPORATE&INVESTMENT BANKING
Page: 5
Reference No. : 04144267
EXHIBIT A
[FORM OF CERTIFICATE OF BENEFICIARY'S
[LETTERHEAD OF THE CITY OF VERNON]
, 20
[ISSUING BANK]
YOUR LETTER OF CREDIT NO. (THE "CREDIT")
LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CREDIT, AND TO THE
DEMAND FOR PAYMENT THEREUNDER IN THE AMOUNT OF $ (THE "DEMAND") TO
WHICH THIS CERTIFICATE IS ATTACHED.
THE UNDERSIGNED HEREBY CERTIFIES THAT: (I) THE AMOUNT DEMANDED BY THE
DEMAND IS NET OF ALL AMOUNTS DUE AND PAYABLE BY THE UNDERSIGNED TO THE
ACCOUNT PARTY UNDER THE AGREEMENT FOR PURCHASE AND SALE OF NATURAL GAS
DATED AS OF JUNE 27, 2006 (THE "AGREEMENT") BETWEEN THE ACCOUNT PARTY
AND THE UNDERSIGNED; (II) THE AMOUNT DEMANDED BY THE DEMAND HAS NOT BEEN
THE SUBJECT OF A PRIOR DEMAND UNDER THE CREDIT; (III) SUCH AMOUNT IS DUE
AND PAYABLE BY THE ACCOUNT PARTY UNDER THE AGREEMENT AND HAS NOT BEEN
PAID; AND (IV) THE UNDERSIGNED HAS MADE DEMAND THEREFOR ON THE ACCOUNT
PARTY PURSUANT TO THE AGREEMENT.
THE DEMAND SHALL BE PAID TO THE FOLLOWING ACCOUNT:
[INSERT CUSTODIAN ACCOUNT DETAILS]
THE CITY OF VERNON
BY:
NAME:
TITLE:
Page 5 of 10
BNP PARIBAS
CORPORATE&INVESTMENT BANKING
Page: 6
Reference No. : 04144267
EXHIBIT B
[FORM OF STIPULATION AS TO AMOUNTS DUE AND PAYABLE]
[LETTERHEAD OF CITIGROUP ENERGY INC.]
, 20
[ISSUING BANK]
YOUR LETTER OF CREDIT NO. (THE "CREDIT")
LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CREDIT, AND TO THE
DEMAND FOR PAYMENT THEREUNDER (THE "DEMAND") IN THE AMOUNT OF $ TO
WHICH THIS CERTIFICATE IS ATTACHED.
THE UNDERSIGNED HEREBY CERTIFIES THAT THE AMOUNT DEMANDED BY THE DEMAND
IS DUE AND PAYABLE BY THE UNDERSIGNED TO THE ACCOUNT PARTY UNDER THE
AGREEMENT FOR PURCHASE AND SALE OF NATURAL GAS DATED AS OF JUNE 27, 2006
(THE "AGREEMENT") BETWEEN THE ACCOUNT PARTY AND THE UNDERSIGNED AND HAS
NOT BEEN PAID.
CITIGROUP ENERGY INC.
BY:
NAME:
TITLE:
Page 6 of 10
,rte BNP PARIBAS
4 . CORPORATE&INVESTMENT BANKING
Page: 7
Reference No. : 04144267
EXHIBIT C
[FORM OF CERTIFICATE OF BENEFICIARY'S ]
[LETTERHEAD OF THE CITY OF VERNON]
, 20
[ISSUING BANK]
YOUR LETTER OF CREDIT NO. (THE "CREDIT")
LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CREDIT, AND TO THE
DEMAND FOR PAYMENT THEREUNDER IN THE AMOUNT OF $ TO WHICH THIS
CERTIFICATE IS ATTACHED, AND THE ORDER OF A NEW YORK STATE OR FEDERAL
UNITED STATES COURT TO WHICH THIS CERTIFICATE IS ATTACHED (THE "ORDER") .
THE UNDERSIGNED HEREBY CERTIFIES THAT: (I) THE ORDER IS AUTHENTIC AND
HAS NOT BEEN AMENDED, STAYED, RESCINDED OR SATISFIED AND REMAINS IN FULL
FORCE AND EFFECT; AND (II) EITHER (A) NO APPEAL FROM THE ORDER HAS BEEN
TAKEN, AND THE PERIOD FOR THE FILING OF ANY SUCH APPEAL HAS LAPSED, OR
(B) IF ANY APPEALS FROM SUCH ORDER HAVE BEEN TAKEN, SUCH APPEALS HAVE
BEEN FINALLY DENIED, WITHOUT FURTHER RIGHT OF APPEAL, BY A COMPETENT
COURT.
THE CITY OF VERNON
BY:
NAME:
TITLE:
Page 7 of 10
BNP PARIBAS
t- CORPORATE&INVESTMENT BANKING
Page: 8
Reference No. : 04144267
EXHIBIT D
[FORM OF CERTIFICATE OF BENEFICIARY'S
[LETTERHEAD OF THE CITY OF VERNON]
, 20
[ISSUING BANK]
YOUR LETTER OF CREDIT NO. (THE "CREDIT")
LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CREDIT, AND TO THE
DEMAND FOR PAYMENT THEREUNDER IN THE AMOUNT OF $ TO WHICH THIS
CERTIFICATE IS ATTACHED, AND THE PROOF OF CLAIM, A COPY OF WHICH IS
APPENDED HERETO, EXECUTED AND FILED BY UNDERSIGNED WITH THE U.S.
BANKRUPTCY COURT HAVING JURISDICTION OVER THE PENDING BANKRUPTCY PENDING
CASE UNDER WHICH CITIGROUP ENERGY INC. IS THE DEBTOR (THE "PROOF OF
CLAIM") .
THE UNDERSIGNED HEREBY CERTIFIES THAT: (I) THE PROOF OF CLAIM IS
AUTHENTIC AND HAS NOT BEEN AMENDED, WITHDRAWN, DISALLOWED OR RESCINDED
AND REMAINS IN FULL FORCE AND EFFECT; AND (II) SUCH PROOF OF CLAIM WAS
SUBMITTED TO SUCH BANKRUPTCY COURT IN GOOD FAITH; AND (III) THE
UNDERSIGNED HASNOTRECEIVED PAYMENT IN WHOLE OR PART OF THE AMOUNT
CLAIMED PURSUANT TO SUCH PROOF; AND (IV) THE AMOUNT CLAIMED PURSUANT TO
SUCH PROOF OF CLAIM IS THE AMOUNT DEMANDED PURSUANT TO SUCH DEMAND.
THE CITY OF VERNON
BY:
NAME:
TITLE:
Page 8 of 10
AL ' BNP PARIBAS
k. CORPORATE&INVESTMENT BANKING
Page: 9
Reference No. : 04144267
EXHIBIT E
[FORM OF CERTIFICATE OF BENEFICIARY'S
[LETTERHEAD OF THE CITY OF VERNON]
, 20
[ISSUING BANK]
YOUR LETTER OF CREDIT NO. (THE "CREDIT")
LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CREDIT, AND TO THE
DEMAND FOR PAYMENT THEREUNDER IN THE AMOUNT OF $ TO WHICH THIS
CERTIFICATE IS ATTACHED, AND EVIDENCE PUBLICLY AVAILABLE SHOWING THAT
THE ISSUING BANK HAS A PUBLIC RATING OF SENIOR, UNSECURED, UNENHANCED
INDEBTEDNESS OR DEPOSITS (1) BELOW A- WITH RESPECT TO STANDARD & POOR'S
RATINGS SERVICES, A DIVISION OF THE MCGRAW-HILL COMPANIES, INC. , OR ANY
SUCCESSOR THERETO OR (2) BELOW A3 WITH RESPECT TO MOODY'S INVESTORS
SERVICES, INC. , OR ANY SUCCESSOR THERETO (THE "CREDIT RATING DOWNGRADE")
AND (I) THAT SUCH CREDIT RATING DOWNGRADE HAS OCCURRED MORE THAN 60 NEW
YORK BUSINESS DAYS PRIOR TO THE DATE HEREOF AND (II) NEITHER OTHER
ELIGIBLE SUPPORT NOR ELIGIBLE COLLATERAL HAS BEEN PROVIDED TO THE
UNDERSIGNED IN ACCORDANCE WITH PARAGRAPH 3 OF THE CREDIT SUPPORT ANNEX
ATTACHED ,AS ANNEX I TO THE AGREEMENT FOR PURCHASE AND SALE OF NATURAL
GAS, DATED AS OF JUNE 27, 2006 BETWEEN THE ACCOUNT PARTY AND THE VERNON
NATURAL GAS FINANCING AUTHORITY, AS MAY BE AMENDED FROM TIME TO TIME.
THE UNDERSIGNED HEREBY CERTIFIES THAT THE CREDIT RATING DOWNGRADE IS
TRUE AND CORRECT IN ALL RESPECTS AND SUCH INFORMATION IS PUBLICLY
AVAILABLE.
THE CITY OF VERNON
BY:
NAME:
TITLE:
Page 9 of 10
BNP PARIBAS
+. CORPORATE&INVESTMENT BANKING
Page: 10
Reference No. : 04144267
EXHIBIT F
[FORM OF CERTIFICATE OF BENEFICIARY'S
[LETTERHEAD OF THE CITY OF VERNON]
, 20
[ISSUING BANK]
YOUR LETTER OF CREDIT NO. (THE "CREDIT")
LADIES AND GENTLEMEN: REFERENCE IS MADE TO THE CREDIT, AND TO THE
DEMAND FOR PAYMENT THEREUNDER IN THE AMOUNT OF $ TO WHICH THIS
CERTIFICATE IS ATTACHED, AND THE UNDERSIGNED HEREBY CERTIFIES THAT AS OF
THE DATE HEREOF, (1) THE CREDIT, AS AMENDED, HAS LESS THAN TWENTY (20)
NEW YORK BUSINESS DAYS TO EXPIRATION AS OF THE DATE OF THIS CERTIFICATE
AND (2) NEITHER OTHER ELIGIBLE SUPPORT NOR ELIGIBLE COLLATERAL HAS BEEN
PROVIDED TO THE UNDERSIGNED IN ACCORDANCE WITH PARAGRAPH 3 OF THE CREDIT
SUPPORT ANNEX ATTACHED AS ANNEX I TO THE AGREEMENT FOR PURCHASE AND SALE
OF NATURAL GAS, DATED AS OF JUNE 27, 2006 BETWEEN THE ACCOUNT PARTY AND
THE VERNON NATURAL GAS FINANCING AUTHORITY, AS MAY BE AMENDED FROM TIME
TO TIME.
THE CITY OF VERNON
BY:
NAME:
TITLE:
Page 10 of 10
COLLATERAL ACCOUNT CONTROL
AND
CREDIT SUPPORT ANNEX
SHEAR[vIAN & STERLING LLQ
599 LEXINGTON AVENUE NEW YORK I NY I 10022-6069
WWW.SHEARMAN.COM I T+1.212.848.4000 I F+1.212.848.7179
Tel.: 212-848-8060
Fax.: 646-848-8060
E-mail: andrew.feng@shearman.com
October 12, 2016
VIA FEDERAL EXPRESS
To : Brian Byun
Deputy City Attorney
4305 Santa Fe Avenue
Vernon, CA 90058
(323)583-8811 x 175
Dear Brian:
Please find enclosed originals of the following documents.
• Collateral Account Control Agreement among U.S. Bank National Association, City of Vernon and
Citigroup Energy Inc. dated as of October 4,2016("ACA")—3 copies
•
• Credit Support Annex between the City of Vernon and Citigroup Energy Inc. dated as of October 4,
2016("CSA")—2 copies
Please send one (1) fully executed original of the CSA and ACA to the Citigroup Energy Inc. address
listed below:
Citigroup Energy Inc.
Attn: Commodities Structuring
Address: 2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
Please send one(1)fully executed original of the ACA to the US Bank address listed below:
U.S. Bank National Association
100 Wall Street, 19th floor
New York, NY 10005
Attn: GCTS—Elizabeth Dimarco
Thanks for all your help.
NYDOCS01/1676406.1
Please let me know if you have any questions.
Very t rs,
Andrew . Fe
Enclosures
NYDOCS01/1676406.1
COLLATERAL ACCOUNT CONTROL
of . ,
4. i
,fr, ,tit-4
tUun
raviii ,411
OFFICE OF THE CITY ATTORNEY
4305 Santa Fe Avenue,Vernon, California 90058
Telephone(323)583-8811
October 18, 2016
U.S. Bank National Association VIA U.S. MAIL
Attn: GCTS—Elizabeth Dimarco
100 Wall Street, 19th Floor
New York, CA 10005
Re: City of Vernon vs. Citigroup Energy Inc., et al.
United States District Court Southern District of New York Case No. CV 16-2405
Dear Ms. Dimarco:
Enclosed for your records please find an originally executed Collateral Account Control
Agreement ("ACA")regarding the above-reference matter.
If you have any questions, please contact me.
Sin erely,
ii , I
Hema `atel Cr
City Attorney
Enclosure
cc: City Clerk's Office (Resolution No. 2016-54)
Exc(usivery Industrial'
Execution Version
COLLATERAL ACCOUNT CONTROL AGREEMENT
AMONG
U.S. BANK NATIONAL ASSOCIATION,
As Securities Intermediary
CITY OF VERNON,
As Secured Party
AND
CITIGROUP ENERGY INC.,
As Pledgor
Dated as of October 4,2016
TABLE OF CONTENTS
Page
1. Definitions 4
2. Appointment and Status of Securities Intermediary; Account 6
(a) Appointment; Identification of Collateral 6
(b) Status of Securities Intermediary 6
(c) Use of Depositories 6
(d) Pledgor Representation 7
(e) Securities Intermediary's Representations, Warranties and Covenants 7
3. Collateral Services 7
(a) Return of Collateral to Pledgor 7
(b) Substitutions 8
(c) Deposit of Collateral 8
(d) Collateral Transfers 8
(e) Priority of Secured Party's Security Interest 8
(f) Notice of Adverse Claims 9
4. Notice of Exclusive Control 9
5. General Terms and Conditions 10
(a) Indemnification 10
(b) No Obligation Regarding Quality of Collateral 10
(c) No Responsibility Concerning the PSA, CSA and CEA 10
(d) No Duty of Oversight 11
(e) Advice of Counsel 11
(f) No Collection Obligations 11
(g) Fees and Expenses 11
(h) Reliance; Risk Acknowledgements; Additional Terms 11
(i) Account Disclosure 12
(j) Force Majeure 12
(k) No Implied Duties; Entire Agreement 12
6. Termination 12
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor 12
(b) Termination by Securities Intermediary 13
(c) Obligations Upon Termination 13
7. Miscellaneous 13
(a) Ambiguity in Notices 13
(b) Notices 13
(c) Cumulative Rights; No Waiver 14
2 of 23
(d) Severability; Amendments; Assignment 14
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver 14
(f) No Third Party Beneficiaries 15
(g) Headings 15
(h) Counterparts 15
(i) USA PATRIOT ACT 15
(j) Tax Forms 15
(k) New Authorized Persons 15
Schedule I 18
Schedule II 19
Exhibit A 21
Exhibit B 22
3 of 23
COLLATERAL ACCOUNT CONTROL AGREEMENT
This Collateral Account Control Agreement, and the exhibits and schedules thereto
(collectively, the "Agreement") is dated as of October 4, 2016 among Citigroup Energy Inc.
("Pledgor"), the City of Vernon ("Secured Party") and U.S. Bank National Association
("Securities Intermediary").
WITNESSETH:
WHEREAS, Secured Party and Pledgor have entered into an Agreement for Purchase and
Sale of Natural Gas dated as of June 27, 2006, including a Credit Support Annex thereto (as
amended from time to time, the "CSA") (such documents, collectively and as amended from
time to time, the "PSA") pursuant to which Pledgor has agreed to post and pledge certain
"Collateral" (as defined below) in order to secure the performance of Pledgor's obligations to
Secured Party under the PSA;
WHEREAS, Secured Party and Pledgor have requested Securities Intermediary to hold
Collateral to be posted by Pledgor and to perform certain other functions as more fully described
in this Agreement; and
WHEREAS, Securities Intermediary has agreed to hold such Collateral and to perform
such other functions, subject to the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties hereto agree as follows:
1. Definitions. Whenever used in this Agreement, the following words shall have the
meanings set forth below:
"Account" shall mean the custody account segregated on the books and records of the
Securities Intermediary hereunder in the name of Pledgor (as the same may be re-
designated, renumbered or otherwise modified). The Account shall be deemed to consist
of a "securities account" (as defined in Section 8-501(a) of the UCC), in which any
securities pledged to Secured Party shall be held, and a "deposit account" (as defined in
Section 9-102(a)(29) of the UCC), in which any cash pledged to Secured Party shall be
•
held.
"Agreement"shall have the meaning set forth in the preamble.
"Authorized Person" shall mean each person listed in a notice in the form of Exhibit A
to this Agreement received by Securities Intermediary that certifies that such persons are
authorized to transmit or deliver Written Instructions on behalf of Secured Party or
Pledgor, as the case may be, and that contains specimen signatures of each such person.
"Bankruptcy"shall have the meaning set forth in the PSA.
"Business Day" shall mean any day, other than a Saturday or Sunday, on which
Securities Intermediary is open for general business.
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"Call Back Representative" shall be any person duly authorized in writing by Secured
Party or Pledgor, respectively, to confirm changes to or deviations from Standing Wire
Instructions contained in Written Instructions on behalf of Secured Party or Pledgor,
respectively, such persons and such Standing Wire Instructions to be designated in
Schedule II to this Agreement, as the same may be revised from time to time by notice to
Securities Intermediary.
"CEA" means the Commodity Exchange Act, as amended.
"Collateral" for purposes of this Agreement shall mean the Account and the cash and all
securities and investment property held or deposited in or credited to the Account and any
and all proceeds of the foregoing held in or credited to the Account.
"CSA" shall have the meaning set forth in the preamble.
"Depository" shall mean The Federal Reserve Bank of New York, The Depository Trust
Company and any other clearing corporation within the meaning of Section 8-102 of the
UCC or otherwise authorized to act as a securities depository or clearing agency, and
their respective successors and nominees.
"Evidence of Filing"shall have the meaning set forth in Section 4(a)(i).
"Losses" shall have the meaning set forth in Section 5(a)(i).
"Notice of Exclusive Control" shall mean a written notice, substantially in the form of
and containing the applicable information specified in Exhibit B hereto, signed by an
Authorized Person of Secured Party.
"Payment Obligations"shall have the meaning set forth in Section 3(e).
"Pledgor"shall have the meaning set forth in the preamble.
"PSA"shall have the meaning set forth in the preamble.
"Secured Party" shall have the meaning set forth in the preamble.
"Securities Intermediary"shall have the meaning set forth in the preamble.
"Specified Collateral"shall have the meaning set forth in Section 4(a)(i).
"Standing Wire Instructions" shall mean the bank account details specified for each
party in Schedule II hereto, as the same may be revised from time to time by notice to
Securities Intermediary.
"Substitute Collateral"shall have the meaning set forth in Section 3(b).
"UCC"shall mean the Uniform Commercial Code as in effect in the State of New York.
"Value"shall have the meaning set forth in the CSA.
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"Written Instructions" shall mean entitlement orders and other instructions in a written
record (including, without limitation, an electronic record) delivered or transmitted by an
Authorized Person and, if applicable, confirmed by a Call Back Representative, in
accordance with Section 7(c) of this Agreement and received by Securities Intermediary
at the address specified in Schedule I of this Agreement or such other address specified
by Securities Intermediary as available for use in connection with this Agreement.
The terms "entitlement holder", "entitlement order", "financial asset", "investment
property", "proceeds", "security", "security entitlement" and "securities intermediary" shall
have the meanings set forth in Articles 8 and 9 of the UCC. As between Secured Party and
Pledgor, any capitalized terms not defined herein shall have their respective meanings as
assigned in the PSA.
2. Appointment and Status of Securities Intermediary; Account.
(a) Appointment; Identification of Collateral. Secured Party and Pledgor
hereby intend that this Agreement establish "control" of the Account and the Collateral by
Secured Party for purposes of perfecting Secured Party's security interest in the Account and the
Collateral pursuant to Articles 8 and 9 of the UCC, and Securities Intermediary hereby
acknowledges that it has been advised of Pledgor's grant to Secured Party of a security interest in
the Account and in the Collateral pursuant to the terms of the CSA. Pledgor hereby appoints
Securities Intermediary to perform its duties as hereinafter set forth and authorizes Securities
Intermediary to hold Collateral in the Account either in its name or in the name of its nominees.
Such Collateral shall be identified and segregated separately with respect to Pledgor on
Securities Intermediary's books and records. Securities Intermediary hereby accepts such
appointment and agrees to establish and maintain the Account and appropriate records
identifying the Collateral in the Account as pledged by Pledgor to Secured Party. Pledgor hereby
authorizes Securities Intermediary to comply with all Written Instructions, including entitlement
orders, originated by Secured Party with respect to the Collateral without further consent or
direction from Pledgor or any other party.
(b) Status of Securities Intermediary. The parties agree that Securities
Intermediary is a securities intermediary, and that all property other than cash held in the
Account shall be treated as "financial assets" within the meaning of the UCC. Securities
Intermediary makes no representations or warranties with respect to the creation or enforceability
of any security interest in the Account or the Collateral.
(c) Use of Depositories. Secured Party and Pledgor hereby authorize
Securities Intermediary to utilize Depositories to the extent Securities Intermediary deems
appropriate in connection with its performance hereunder with respect to any Collateral
consisting of securities. Collateral held by Securities Intermediary in a Depository will be held
subject to the rules, terms and conditions of such Depository. Where Collateral is held in a
Depository, Securities Intermediary shall identify on its records as belonging to Pledgor and
pledged to Secured Party a quantity of securities as part of a fungible bulk of securities held in
Securities Intermediary's account at such Depository. Securities deposited in a Depository will
be represented in accounts which include only assets held by Securities Intermediary for its
customers.
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(d) Pledgor Representation. Pledgor represents and warrants that it is the sole
owner of or otherwise has the right to transfer the Collateral free and clear of all liens, claims,
security interests and encumbrances (except those granted in this Agreement and in the CSA).
Pledgor agrees to transfer all Collateral to the Account free of encumbrances of any type. As of
the date hereof, Pledgor has confirmed that Securities Intermediary (i) is a trust company or
commercial bank with trust powers, organized under the laws of the United States of America or
any state or province thereof and subject to supervisions or examination by federal or state
authority, having a combined capital surplus of at least U.S. $10,000,000,000 and (ii) has
outstanding long term unsecured unsubordinated debt securities ratings of at least "A3" by
Moody's Investors Services, Inc., or any successor thereto and "A-" by Standard & Poor's
Rating Services, or any successor thereto.
(e) Securities Intermediary's Representations, Warranties and Covenants.
Securities Intermediary hereby represents, warrants, and covenants that: (i) in the ordinary
course of Securities Intermediary's business, it maintains securities accounts for others and is
acting in that capacity in connection with this Agreement; (ii) Securities Intermediary is engaged
in the business of banking; (iii)the Account is and will be maintained by Securities Intermediary
as a "securities account" (within the meaning of Section 8-501(a) of the UCC)with respect to all
property other than cash deposited or credited thereto and a "deposit account" (within the
meaning of Section 9-102 of the UCC) with respect to cash deposited or credited to the Account;
and (iv)except as otherwise ordered by a court of competent jurisdiction, Securities Intermediary
will not comply with and will not agree to comply with instructions or entitlement orders of any
person other than Secured Party and, to the extent permitted hereby, Pledgor with respect to the
Account or the Collateral.
3. Collateral Services.
(a) Return of Collateral to Pledgor. Prior to a receipt by Securities
Intermediary of a Notice of Exclusive Control from Secured Party, if Pledgor is entitled to the
return of certain Collateral pursuant to the CSA, Pledgor shall issue Written Instructions to
Securities Intermediary (with a mandatory contemporaneous copy to Secured Party) in
accordance with Section 7(b)(i) of this Agreement to transfer such Collateral from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised. Securities Intermediary shall, without
inquiry and in reliance upon such Written Instructions, comply with such Written Instructions
from Pledgor with respect to the transfer of Collateral to Pledgor (including, by way of example
and not by way of limitation, Written Instructions relating to the withdrawal or transfer of
Collateral from the Account, the release of the proceeds of a securities sale or redemption and
any income received on a security). Pledgor hereby covenants, for the benefit of Secured Party,
that Pledgor will originate entitlement orders concerning the Account or the Collateral only as
permitted by the CSA. The foregoing covenant is for the benefit of Secured Party only and will
not be deemed to constitute a limitation on Securities Intermediary's obligation to comply with
those entitlement orders. The failure of Pledgor to deliver to Secured Party a copy of any
Written Instructions delivered by Pledgor to Securities Intermediary will not limit or otherwise
affect the right of Securities Intermediary to rely without inquiry upon such Written Instructions.
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(b) Substitutions. As between Pledgor and Secured Party, if and to the extent
the terms of the CSA permit Collateral to be substituted, Pledgor may substitute Collateral by
delivering Written Instructions to Securities Intermediary instructing it to (i)receive from
Pledgor for deposit to the Account Collateral identified in such Written Instructions ("Substitute
Collateral") and (ii)transfer Collateral identified in such Written Instruction from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised not later than 5:00 p.m. (Eastern Time)
on the Business Day following the date on which such Substitute Collateral is received by
Securities Intermediary. It is understood and agreed that Securities Intermediary shall not have
any duty or responsibility whatsoever for determining whether Collateral is permitted to be
substituted in accordance with the terms of the CSA, whether any Substitute Collateral
constitutes Substitute Credit Support within the terms of the CSA or for determining the Value of
any Collateral or Substitute Collateral. Securities Intermediary shall act without inquiry and in
reliance on all Written Instructions to substitute Collateral.
(c) Deposit of Collateral. Prior to a receipt by Securities Intermediary of a
Notice of Exclusive Control from Secured Party, Securities Intermediary is authorized to, and
shall, in accordance with this Section 3(c) deposit the Collateral in the Account.
(d) Collateral Transfers. Securities Intermediary shall transfer Collateral from
the Account only in accordance with clauses (a), (b) and (c) of this Section 3, Section 4 and as
provided in Section 6 hereof. For the avoidance of doubt, it is understood and agreed that
Securities Intermediary shall not have any obligation to act on any instructions other than
Written Instructions.
(e) Priority of Secured Party's Security Interest. In order to secure the
repayment of all amounts owed to Securities Intermediary hereunder, including, without
limitation, any fees, charges or expenses payable to Securities Intermediary pursuant to
Sections 5(a)(ii) and 5(g) of this Agreement (collectively, the "Payment Obligations"),
Securities Intermediary shall have a security interest in and right of set-off against the Account
and the Collateral and the proceeds thereof, until such time as Securities Intermediary is repaid in
full"the amount of any such Payment Obligations. In no event will Securities Intermediary
advance funds or otherwise extend credit in connection with the maintenance or operation of the
Account or the acquisition or crediting of any Collateral to the Account. Notwithstanding the
preceding provisions of this Section 3(e), Securities Intermediary's security interest in and right
of set-off against the Account and the Collateral to secure the repayment of Payment Obligations
hereunder shall be senior to Secured Party's security interest in and lien on the Account and the
Collateral. In the event that Payment Obligations arising under Section 5(g) of this Agreement
have become due and payable by Pledgor to Securities Intermediary and any such amounts have
not otherwise been satisfied within [30] days Pledgor's receipt of a written notice from Securities
Intermediary that a Payment Obligation under Section 5(g) of this Agreement has become due
and payable (the "Overdue Amount"), then Securities Intermediary shall be permitted to deduct
and set-off the Overdue Amount against any Collateral that otherwise would be returnable to
Pledgor in accordance with Section 3(a) hereof. Securities Intermediary's lien and security
interest in the Account and the Collateral set forth above shall not secure any amounts owed by
Pledgor to Securities Intermediary pursuant to any other agreement between Pledgor and
Securities Intermediary. Any other lien, security interest, right of set-off or deduction or
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banker's lien in favor of Securities Intermediary in or against the Account or the Collateral
whether pursuant to agreement or arising by operation of law are hereby waived.
(f) Notice of Adverse Claims. Upon receipt of written notice of any lien,
encumbrance or adverse claim against the Account or any portion of the Collateral carried
therein (other than any lien, encumbrance or claim identified herein), Securities Intermediary
shall use reasonable efforts to notify Secured Party and Pledgor as promptly as reasonably
practicable under the then current circumstances.
4. Notice of Exclusive Control.
(a) Secured Party may, subject to the terms of this Agreement, exercise sole
and exclusive control of the Account and the Collateral held therein at any
time by delivering to Securities Intermediary a Notice of Exclusive
Control.
(b) Following receipt of a Notice of Exclusive Control from Secured Party,
Securities Intermediary shall,without inquiry and in reliance upon such
Notice of Exclusive Control, thereafter comply with Written Instructions
(including entitlement orders)solely from Secured Party. Secured Party
agrees to deliver a copy of any Notice of Exclusive Control to Pledgor
contemporaneously with its delivery of such notice to Securities
Intermediary. Upon receipt of a Notice of Exclusive Control, Securities
Intermediary shall promptly provide a copy of such Notice of Exclusive
Control to Pledgor in accordance with Section 7(b)(iii) of this Agreement;
provided that Securities Intermediary's failure to provide a copy of such
Notice of Exclusive Control to Pledgor shall not affect the validity of such
notice.
Secured Party covenants, for the benefit of Pledgor, that it will not deliver
a Notice of Exclusive Control to Securities Intermediary unless and until
(1) (x) an Event of Default(as defined in the CSA)with respect to the
Pledgor has occurred and is continuing or(y) a Section 15.3 Termination
Event(as defined in the PSA)has occurred and is continuing following
Secured Party providing Pledgor at least two (2)Local Business Days'
prior written notice that such Section 15.3 Termination Event has occurred
and(2)Pledgor has not paid in full all of its Obligations (as defined in the
CSA)that are then due and payable.
(c) Securities Intermediary shall have no duty to determine whether Secured
Party has complied with this Section 4, including,but not limited to a duty
to verify that any statement or other information contained in any such
notice is true and correct
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5. General Terms and Conditions.
(a) Indemnification.
i. Except as otherwise expressly provided herein, Securities
Intermediary shall not be liable for any losses, costs, expenses,
damages, liabilities or claims, including reasonable attorneys' fees
(collectively, "Losses") incurred by or asserted against Pledgor or
Secured Party, except those Losses arising out of the negligence,
fraud or willful misconduct of Securities Intermediary. Securities
Intermediary shall have no liability whatsoever for the action or
inaction of any Depository, except to the extent any such action or
inaction by a Depository is the direct result of the negligence,
fraud, or willful misconduct of Securities Intermediary. In no
event shall Securities Intermediary, Secured Party or Pledgor be
liable for special, indirect or consequential damages, or lost profits
or loss of business, arising in connection with this Agreement.
ii. Solely in connection with this Agreement and the Account subject
hereto, Secured Party and Pledgor agree, jointly and severally, to
defend, indemnify and hold Securities Intermediary and each
director, officer, employee, attorney, agent and affiliate of
Securities Intermediary, harmless from and against any and all
Losses other than special, indirect or consequential damages or lost
profits or loss of business, sustained or incurred by or asserted
against Securities Intermediary by any party by reason of or as a
result of any action or inaction, or arising out of Securities
Intermediary's performance hereunder, including reasonable fees
and expenses of counsel incurred by Securities Intermediary in a
successful defense of claims by Pledgor or Secured Party;
provided, however, that Pledgor and Secured Party shall not
indemnify Securities Intermediary for those Losses arising out of
Securities Intermediary's negligence, fraud or willful misconduct.
This indemnity shall be a continuing obligation of Pledgor and
Secured Party, their respective successors and assigns,
notwithstanding the termination of this Agreement.
(b) No Obligation Regarding Quality of Collateral. Without limiting the
generality of the foregoing, Securities Intermediary shall be under no obligation to inquire into,
and shall not be liable for, any Losses incurred by Pledgor, Secured Party or any other person as
a result of the receipt or acceptance of fraudulent, forged or invalid Collateral, or Collateral
which otherwise is not freely transferable or deliverable without encumbrance in any relevant
market.
(c) No Responsibility Concerning the PSA, CSA and CEA. Pledgor and
Secured Party hereby agree that, notwithstanding references to the PSA and the CSA in this
Agreement, Securities Intermediary has no interest in, and no duty, responsibility or obligation
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with respect to, the PSA and the CSA (including without limitation, no duty, responsibility or
obligation to monitor Pledgor's or Secured Party's compliance with the PSA and the CSA or to
know the terms of the PSA and the CSA). Securities Intermediary has no duty, responsibility or
obligation with respect to the compliance of this Agreement, with the CEA, or with the rules
promulgated thereunder.
(d) No Duty of Oversight. Securities Intermediary is not at any time under
any duty to monitor the Value of any Collateral in the Account or to determine whether the
Collateral is of a type required to be held or eligible to be held in the Account, or to supervise the
investment of, or to advise or make any recommendation for the purchase, sale, retention or
disposition of any Collateral or to determine whether the aggregate Value of the Collateral is
sufficient to secure Pledgor's obligations under the PSA.
(e) Advice of Counsel. Securities Intermediary may obtain the advice of legal
counsel selected by it in the event of any dispute or question as to the interpretation of any of the
provisions hereof or of its duties hereunder and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice.
(f) No Collection Obligations. Securities Intermediary shall be under no
obligation to take action to collect any amount payable on Collateral in default, or if payment is
refused after due demand and presentment.
(g) Fees and Expenses. Pledgor agrees to pay to Securities Intermediary fees
for Securities Intermediary's performance under this Agreement as such fees are set forth on the
fee schedule attached hereto as Exhibit C, as such fee schedule may be modified from time to
time upon the mutual agreement of the Pledgor and Securities Intermediary. Pledgor shall
reimburse Securities Intermediary for all reasonable and customary costs associated with
transfers of Collateral to Securities Intermediary and records kept in connection with this
Agreement. Pledgor shall also reimburse Securities Intermediary for out-of-pocket expenses,
which are a normal incident of the services provided under this Agreement. Pledgor shall be
responsible for such other fees and expenses as may be agreed in writing between Securities
Intermediary and Pledgor with respect to the Account.
(h) Reliance; Risk Acknowledgements;Additional Terms.
i. Subject to the terms below, Securities Intermediary shall be
entitled to rely upon any Written Instructions actually received by
Securities Intermediary and reasonably believed by Securities
Intermediary to be duly authorized and delivered.
ii. If Securities Intermediary receives Written Instructions which
appear on their face to have been transmitted via (A) computer
facsimile, email, the Internet or other insecure electronic method,
or (B)secure electronic transmission containing applicable
authorization codes,passwords and/or authentication keys, Secured
Party and Pledgor each understands and agrees that Securities
Intermediary cannot determine the identity of the actual sender of
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such Written Instructions and that Securities Intermediary shall
conclusively presume that such Written Instructions have been sent
by an Authorized Person. Secured Party and Pledgor shall be
responsible for ensuring that only its Authorized Persons transmit
such Written Instructions to Securities Intermediary and that all of
its Authorized Persons treat applicable user and authorization
codes,passwords and/or authentication keys with extreme care.
iii. Secured Party and Pledgor each acknowledges and agrees that it is
fully informed of the protections and risks associated with the
various methods of transmitting Written Instructions to Securities
Intermediary and that there may be more secure methods of
transmitting Written Instructions than the method(s)selected by it.
(i) Account Disclosure. Securities Intermediary is authorized to supply any
information regarding the Account, which is required by any applicable law or governmental
regulation now or hereafter in effect.
(j) Force Majeure. Securities Intermediary shall not be responsible or liable
for any failure or delay in the performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable control, including
without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software) or communications service; accidents; labor disputes; acts of civil or military authority;
governmental actions; inability to obtain labor, material, equipment or transportation.
(k) No Implied Duties; Entire Agreement. Securities Intermediary shall have
no duties or responsibilities whatsoever except such duties and responsibilities as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied against Securities
Intermediary in connection with this Agreement. This Agreement constitutes the sole agreement
between the parties with respect to its subject matter and supersedes any and all other agreements
(whether written or oral)between the parties with respect to such subject matter.
6. Termination.
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor.
This Agreement shall terminate upon(i) Securities Intermediary's receipt of Written Instructions
from Pledgor expressly stating that Secured Party no longer claims any security interest in the
Collateral and the subsequent transfer by Securities Intermediary of all of the Collateral from the
Account to Pledgor pursuant to Pledgor's Written Instructions; (ii) Securities Intermediary's
receipt of a Notice of Exclusive Control delivered by Secured Party and the subsequent transfer
by Securities Intermediary of all of the Collateral from the Account as instructed by Secured
Party; or (iii) Securities Intermediary's receipt of reasonably contemporaneous Written
Instructions from each of Pledgor and Secured Party confirming to Securities Intermediary that
Pledgor and Secured Party elect to terminate this Agreement and the subsequent transfer by
Securities Intermediary of all of the Collateral in the Account as directed in such Written
Instructions.
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(b) Termination by Securities Intermediary. This Agreement may be
terminated by Securities Intermediary by providing written notice to the other parties, provided
that such termination shall not be effective until 60 days following Securities Intermediary's
delivery or transmission of such written notice (the "Effective Termination Date").
Upon receipt of such notice, Secured Party and Pledgor will endeavor to provide joint Written
Instructions for the transfer of all the Collateral on or before the Effective Termination Date. If
such joint Written Instructions are not received by Securities Intermediary on or before the
Effective Termination Date, Securities Intermediary may petition a court of competent
jurisdiction for instructions and transfer the Collateral as directed by such court.
Following the Effective Termination Date and until the date of transfer of all Collateral, the sole
duty of Securities Intermediary under this Agreement will be to retain custody of the Collateral
pending the transfer.
(c) Obligations Upon Termination. Except as otherwise provided herein, all
obligations of the parties to each other hereunder shall cease upon termination of this Agreement.
7. Miscellaneous.
(a) Ambiguity in Notices. In the event that Securities Intermediary
determines that there is an ambiguity in any Written Instructions received from Pledgor or
Secured Party (a "Sender"), Securities Intermediary shall promptly give the Sender written
notice of such ambiguity and may, in its reasonable discretion, thereafter refrain from taking any
action directed in such Written Instructions other than to retain possession of the Collateral,
unless Securities Intermediary receives clarifying or superseding Written Instructions from the
Sender which, in the determination of Securities Intermediary, eliminate such ambiguity.
Securities Intermediary shall be permitted to rely upon such clarifying or superseding Written
Instructions without further inquiry.
(b) Notices.
i. Notices From Secured Party or Pledgor to Securities Intermediary.
All notices, approvals, consents, requests and other
communications to be delivered by Pledgor to Securities
Intermediary or by Secured Party to Securities Intermediary
hereunder shall be in a writing. All such notices, approvals,
consents, requests and other communications to be delivered by
Pledgor or Secured Party hereunder shall be signed by an
Authorized Person and shall be delivered by hand, overnight
delivery service, facsimile (with confirmed receipt) or email
(provided that if the writing is delivered by email, such writing
shall be delivered as an attachment on an official letterhead of the
delivering party)to the relevant address, facsimile number or email
address set forth in Schedule I hereto, or to such other address as
each party may designate for itself by like notice and any such
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writing shall be deemed to have been given when the writing is
received by Securities Intermediary.
ii. Electronic Transmission of Notices. By electing to use electronic
transmission of any kind for notice purposes, each of Pledgor and
Secured Party acknowledges that such transmissions are not
encrypted and therefore are insecure. Each of Pledgor and Secured
Party further acknowledges that there are other risks inherent in
communicating through electronic transmission such as the
possibility of virus contamination and disruptions in service, and
agrees that Securities Intermediary shall not be responsible for any
loss, damage or expense suffered or incurred by Pledgor, Secured
Party or any person claiming by or through Pledgor or Secured
Party as a result of the use of electronic transmission, provided that
any such loss, damage or expense is not the direct result of the
negligence or willful misconduct of Securities Intermediary.
iii. Notices to Secured Party or Pledgor. All notices, approvals,
consents, requests and other communications to be delivered to
Pledgor or Secured Party hereunder shall be in writing and shall be
deemed to have been given when the writing is delivered if given
or delivered by hand, overnight delivery service, facsimile (with
confirmed receipt) or email to the address, facsimile number or
email address set forth in Schedule I hereto, or to such other
address as each party may designate for itself by like notice.
(c) Cumulative Rights; No Waiver. Each and every right granted to Securities
Intermediary hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to
time. No failure on the part of Securities Intermediary to exercise, and no delay in exercising,
any right will operate as a waiver thereof, nor will any single or partial exercise by Securities
Intermediary of any right preclude any other future exercise thereof or the exercise of any other
right.
(d) Severability; Amendments; Assignment. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a written
agreement executed by the parties hereto. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by any party without the written consent of the other parties.
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver.
This Agreement and the Account shall be governed by and construed in accordance with the
substantive laws of the State of New York. The State of New York shall be the "securities
intermediary's jurisdiction" and the "bank's jurisdiction" within the meaning of Sections 8-
110(e) and 9-304 of the UCC, respectively. Secured Party, Pledgor and Securities Intermediary
14 of 23
hereby consent to the exclusive jurisdiction of a state or federal court situated in New York City,
New York in connection with any dispute arising hereunder. To the extent that in any
jurisdiction Secured Party or Pledgor may now or hereafter be entitled to claim, for itself or its
assets, immunity from suit, execution, attachment (before or after judgment) or other legal
process, Secured Party and Pledgor each irrevocably agrees not to claim, and hereby waives,
such immunity. Secured Party, Pledgor and Securities Intermediary each hereby irrevocably
waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this
Agreement.
(f) No Third Party Beneficiaries. In performing hereunder, Securities
Intermediary is acting solely on behalf of Secured Party and Pledgor and no contractual or
service relationship shall be deemed to be established hereby between Securities Intermediary
and any other person.
(g) Headings. Section headings are included in this Agreement for
convenience only and shall have no substantive effect on its interpretation.
(h) Counterparts. This Agreement and any joint Written Instructions may be
executed in any number of counterparts, each of which shall be deemed to be an original, but
such counterparts shall, together, constitute only one instrument.
(i) USA PATRIOT ACT. Pledgor and Secured Party hereby acknowledge
that Securities Intermediary is subject to federal laws, including the Customer Identification
Program ("CIP") requirements under the USA PATRIOT Act and its implementing regulations,
pursuant to which Securities Intermediary must obtain, verify and record information that allows
Securities Intermediary to identify each of Pledgor and Secured Party. Accordingly, prior to
opening an Account hereunder Securities Intermediary will ask Pledgor and/or Secured Party to
provide certain information including, but not limited to, Pledgor's and/or Secured Party's name,
physical address, tax identification number and other information that will help Securities
Intermediary to identify and verify each of Pledgor's and Secured Party's identity, such as
organizational documents, certificate of good standing, license to do business, or other pertinent
identifying information. Neither Secured Party nor Pledgor is responsible for providing to
Securities Intermediary documents related to the other in connection with Securities
Intermediary's requests for information pursuant to this provision. Pledgor and Secured Party
agree that Securities Intermediary cannot open an Account hereunder unless and until Securities
Intermediary verifies Pledgor's and/or Secured Party's identity in accordance with its CIP.
(j) Tax Forms. All entities entitled to receive interest on Collateral in the
form of cash shall provide Securities Intermediary with a W-9 or W-8 IRS tax form prior to the
disbursement of interest, and Securities Intermediary will file the appropriate 1099 or 1042-S tax
forms,whichever are applicable.
(k) New Authorized Persons. Pledgor or Secured Party may add or remove
person(s) from their respective list of Authorized Persons by delivering a written notice to
Securities Intermediary that certifies an amended list of person(s) authorized to transmit or
deliver Written Instructions and specimen signature of such person(s); provided that, until
Securities Intermediary has had commercially reasonable time to act on such notice, the
15 of 23
person(s) previously certified as Authorized Person(s) shall continue to be Authorized Person(s)
and Securities Intermediary shall be fully protected in acting in accordance with this Agreement
upon Written Instructions from such Authorized Person(s)previously certified.
[THIS SPACE LEFT INTENTIONALLY BLANK]
16 of 23
IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
Att!By: di/A
Name: t « . . : . : d.
Title: j.: . ',• • _01 •
SECURED PARTY:
CITY OF VERNON
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
SECURITIES INTERMEDIARY:
U.S.BANK NATIONAL ASSOCIATION
By:
Name:
Title:
17 of 23
IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By:
Name:
Title:
SECURED PARTY:
CITY OF VE ' ON
i, /
By: I
Name: Carlos Fandino
Title: City Administrator '
ATTEST:
By:
Name: aria E. ala
Title: City Clerk
APPRO I • S TO FO' :
/ f
, ,moi
By:
Name: Hema Patel
Title: City Attorney
SECURITIES INTERMEDIARY:
U.S. BANK NATIONAL ASSOCIATION
By:
Name:
Title:
17 of 23
IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By:
Name:
Title:
SECURED PARTY:
CITY OF VERNON
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
SECURITIES INTERMEDIARY:
U.S.BANK NATIONAL ASSOCIATION
B
- — Name: Elizeb:th r imerya
Title: vice President
17 of 23
SCHEDULE I
ADDRESSES FOR NOTICES
AND OTHER COMMUNICATIONS
Communications to SECURED PARTY shall be delivered to:
Attn: Carlos Fandino, City Administrator
Address: 4305 Santa Fe Avenue, Vernon, CA 90058
Facsimile: (323) 826-1452
Telephone (for confirmation of notice receipt only): (323) 583-8811 ext. 228 or ext. 292
Email: cfandino@ci.vernon.ca.us; hpatel@ci.vernon.ca.us
Communications to a PLEDGOR shall be delivered to:
Attn: Citigroup Energy Inc., Collateral Management Group
Address: 499 Washington Blvd., 7th Floor, Jersey City, NJ 07310
Facsimile:
Telephone(212) 816-8090(for confirmation of notice receipt only):
Email: derivatives.margin@citi.com
With a copy to;
Citigroup Energy Inc.
Attn: Commodities Structuring
Address: 2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
Fax: 713-752-5208
Email: americascommoditiesstructuring@citi.com
Communications(including Written Instructions)to SECURITIES INTERMEDIARY shall be
delivered to:
U.S. Bank National Association
100 Wall Street, 19th floor
New York, NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone(for confirmation of notice receipt only): 212-951-8578
Email: Custodian.Notices@usbank.com
18 of 23
SCHEDULE II
CONTACT DETAILS FOR
CALL BACK REPRESENTATIVES
FOR CHANGES TO STANDING WIRE INSTRUCTIONS
Telephone Number(s) for Call Back Representatives
for Changes to Standing Wire Instructions (attached)
Pledgor's Call Back Representatives:
Name Telephone Number
1. Robert Traverso (212) 816-5673
2. Marlene Leal (212) 816-5659
3. John Mui (212) 816-6266
4. Ulric Alexander (212) 816-5658
5. George Madrigal (212) 816-5661
6. Paul Valdez (212) 816-5787
7. Mohamed Eldeeb (212) 816-9853
Secured Party's Call Back Representatives:
Name Telephone Number
1. Carlos Fandino, City Administrator (323)583-8811 ext. 228
2. Hema Patel, City Attorney (323)583-8811 ext. 292
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Standing Wire Instructions
Pledgor Wire Instructions:
Bank Name: Citibank NA NY
Bank ABA No.: 021-000-089
Account No.: 30569329
Account Name:
Reference:
Secured Party Wire Instructions:
Bank Name: Bank of New York Mellon Trust
Bank ABA No.: 021000018
Account No.: 8004528400
Account Name: City of Vernon Escrow Account
Reference:
20 of 23
EXHIBIT A
CERTIFICATE OF AUTHORIZED SIGNATORIES
The undersigned hereby certifies that s/he is a [TITLE] of [COMPANY NAME] (the
"Company"), and that, as such, s/he is authorized to execute this certificate on behalf of the
Company, and further certifies on behalf of the Company that the following named individuals
are duly elected, qualified and acting officers of the Company, and each holds the title set forth
opposite his/her name. The signature written opposite the name and title of each such officer is
her/his correct signature.
Name Office Signature
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this certificate in
her/his capacity as an authorized officer of the Company as of this [DATE].
By:
Name:
Title:
21 of 23
EXHIBIT B
NOTICE OF EXCLUSIVE CONTROL
[Letterhead of Secured Party]
Date:
To: U.S. Bank National Association
100 Wall Street, 19th floor
New York, NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone: 212-951-8578 (for confirmation of notice receipt only)
E-mail: Custodian.Notices@usbank.com
Re: Control Agreement
NOTICE OF EXCLUSIVE CONTROL
We refer to the Collateral Account Control Agreement, dated as of[ _, 201_] (as
amended and in effect from time to time, the"Control Agreement"),between City of Vernon
("Secured Party"), Citigroup Energy Inc. ("Pledgor"), and you, as Securities Intermediary.
Unless otherwise provided herein, capitalized terms used in this notice have the meanings
assigned to them in the Control Agreement or the PSA(as defined in the Control Agreement), as
applicable.
We hereby issue a Notice of Exclusive Control pursuant to Section 4 of the Control Agreement.
You are instructed not to accept any directions or instruction with respect to the Account from
any person other than the undersigned.
We certify that (1) (x) an Event of Default (as defined in the CSA) with respect to the Pledgor
has occurred and is continuing or (y) a Section 15.3 Termination Event (as defined in the PSA)
has occurred and is continuing following Secured Party providing Pledgor at least two (2) Local
Business Days' prior written notice that such Section 15.3 Termination Event has occurred and
(2)Pledgor has not paid in full all of its Obligations(as defined in the CSA)that are then due and
payable("Condition to Exercise Remedies").
We certify that, as a result of such Condition to Exercise Remedies, we are entitled to exercise
certain rights and remedies provided to us under the Control Agreement.
Transfer Instructions:
We hereby instruct you to transfer, in accordance with Section 4(b)(ii) of the Control Agreement,
all of the Collateral in the Account pursuant to the Secured Party Wire Instructions specified in
Schedule IV of the Control Agreement,unless otherwise specified here.
22 of 23
You are hereby instructed to forward this notice to Pledgor in accordance with the Control
Agreement.
We certify under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct!
Very truly yours,
[Insert legal name of Secured Party]
By:
Authorized Signatory
cc: [the Pledgor]
'This language is drawn from 28 U.S.C.Sec. 1746,as is required for compliance with CFTC Rule 23.702. This is
Section 1746's suggested language for statements made under penalty of perjury outside the U.S.(which differs
from the suggested language for statements made in the U.S.only by including the phrase"under the laws of the
United States of America,"and should clearly cover statements made both inside and outside of the U.S.).
23 of 23
CREDIT SUPPORT ANNEX
' of
lie 10
i
11
OFFICE OF THE CITY ATTORNEY
4305 Santa Fe Avenue, Vernon, California 90058
Telephone(323)583-8811
October 12, 2016
Citigroup Energy Inc.
Attn: Commodities Structuring
2800 Post Oak Blvd.
Suite 500
Houston, TX 77056
Re: Credit Support Annex between the City of Vernon and Citigroup Energy Inc. and Settlement
and Release Agreement by and among Citigroup Energy Inc., Citibank,N.A., Citigroup Inc. and
City of Vernon
Ladies and Gentlemen:
Pursuant to Paragraph 11(h)(ii)of(i)that certain Credit Support Annex dated as of
October 4, 2016 ("CSA") by and between the City of Vernon, as the Secured Party(the "City")
and Citigroup Energy Inc., as Pledgor("Citigroup Energy") and (ii)that certain Settlement and
Release Agreement dated as of August 9, 2016 by and among City, Citigroup Energy, Citibank,
N.A., and Citigroup Inc. (together(i) and (ii), the "Opinion Documents"), I, Hema Patel, City
Attorney for the City of Vernon, hereby opine on the following matters:
1. The City is a municipal corporation duly incorporated, validly existing and in
good standing under the laws of the State of California.
2. The City(a)has the power to execute, deliver and perform the Opinion
Documents, (b) has taken all action necessary to authorize the execution, delivery and
performance of the Opinion Documents, and (c)has duly executed and delivered the Opinion
Documents to Citigroup Energy. The Opinion Documents are in proper form for the
enforcement thereof in the courts of the State of California, and constitute the general and
unconditional obligations of the City which are valid and binding on the City and enforceable
against the City in accordance with their terms.
3. The execution and delivery by the City of the Opinion Documents do not and will
not(a)result in a violation of the City's charter or administrative code (b)result in a violation of
the laws of the State of California and the federal laws of the United States, or(c) result in a
breach of, a default under, or the acceleration of(or entitle any party to accelerate)the maturity
F.x,cl'usivel'y Industrial'
October 12, 2016 Page 2
of any obligation of the City under, or result in or require the creation of any lien upon or
security interest in any property of the City,pursuant to the terms of any agreement or document.
4. No authorization, approval or other action by, and no notice to or filing with, any
United States federal or California governmental authority or regulatory body, or any third party
is required for the due execution, delivery or performance by the City of the Opinion Documents
or the exercise of rights or remedies by other parties under Opinion Documents
5. Neither the City nor any of its assets are entitled to any immunity (sovereign,
governmental or otherwise) from any liability that arises or may arise from its entry into and
performance of the Opinion Documents, including any immunity from suit,judgment or
execution. The City may be sued in the courts of the State of California with respect to any such
liabilities without need of any prior notice, filing or consent.
6. The obligations of the City under the Opinion Documents rank and will rank at
least ratably with all other obligations of the City.
7. There is no action, suit,proceeding, inquiry or investigation at law or in equity, or
before any court, public board or body, pending or, to the best of my knowledge, threatened
against or affecting the City or any entity affiliated with the City or any of its officers in their
respective capacities as such(nor to the best of my knowledge, is there any basis therefor)that
questions the powers of the City referred to in paragraph 2 above or in connection with the
transactions contemplated by the Opinion Documents, or the validity of the proceedings taken by
the City in connection with the authorization, execution or delivery of the Opinion Documents,
or wherein any unfavorable decision, ruling or finding would adversely affect the transactions
contemplated by the Opinion Documents, or that, in any way, would adversely affect the validity
or enforceability of the Opinion Documents or, in any material respect, the ability of the City to
perform its obligations under the Opinion Documents.
8. The provisions of the Opinion Documents pertaining to submission to jurisdiction
and waiver of objection to venue, waiver of jury trial, waiver of immunity, and choice of law are
valid and binding on and enforceable against the City in accordance with their terms.
I am admitted to the practice of law in the State of California. This opinion is limited to the law
of the State of California and the federal laws of the United States.
i -rely,
Hem. 'a e
City Attorney
City of Vernon,4305 Santa Fe Avenue,Vernon, California 90058-Telephone(323)583-8811
Citigroup Energy Inc.
2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
October 12,2016
The City of Vernon
4305 Santa Fe Avenue
Vernon,CA 90058
Attn: Carlos Fandino,City Administrator
Re: Credit Support Annex dated October 4.2016 to the Agreement for Purchase and Sale of Natural Gast
dated as of June 27.2006(the"CSA")and Account Control Agreement dated October 4.2016(the
"ACA")
Dear Mr.Fandino:
Notwithstanding anything to the contrary in the CSA or any other agreement including but not
limited to the letter dated October 4,2016,this letter memorializes our agreement that the first Valuation
Date under the CSA will be the later of(i)October 14,2016 and(ii)three(3)business days after the date
Citigroup Energy Inc. has received from the City of Vernon a fully executed CSA,ACA as well as the
documents set forth in Section 11(h)of the CSA.
This letter shall be governed by,and construed in accordance with,the laws of the State of New
York. Any right to trial by jury with respect to any claim,action,suit or proceeding arising out of or
contemplated by letter is hereby waived
Very truly yours,
CITIGROUP ENERGY NC.
By:
N e:
Title: John D.Young
Managing DIrot,Oa
ACKNOWLEDGED AND AGREED:
B
B . Ago
Name: Carlos Fandino
Title: City Administrator
NYDOCS01/1675845.3A
Execution Version
ANNEX 1
CREDIT SUPPORT ANNEX
This Credit Support Annex dated as of October 4, 2016 (this "Annex") supplements, forms part of, and is
subject to,the Agreement for Purchase and Sale of Natural Gas,dated as of June 27,2006(the"Agreement"),between
Citigroup Energy Inc. ("Seller")and the City of Vernon("Assignee"), as the successor in interest to Vernon Natural
Gas Financing Authority, without any further action taken by either Seller or Assignee. Accordingly, Seller and
Assignee agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in the
Agreement have the meanings specified pursuant to Paragraph 12,and all references in this Annex to Paragraphs are to
Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of the
Agreement,this Annex will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the"Secured Party"will be to Assignee and all
references to the "Pledgor"will be to Seller;provided however, that if Other Posted Support is held by Assignee, as
Secured Party,all references herein to Assignee as the Secured Party with respect to that Other Posted Support will be
to Assignee as the beneficiary thereof and will not subject that support or Assignee as the beneficiary thereof to
provisions of law generally relating to security interests and secured parties.
Paragraph 2. Security Interest
Seller, as the Pledgor hereunder,hereby pledges to Assignee, as the Secured Party,as security for its Obligations and
grants to the Secured Party a first priority continuing security interest in,lien on and right of Set-off against all Posted
Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the
Pledgor of Posted Collateral,the security interest and lien granted hereunder on that Posted Collateral will be released
immediately and,to the extent possible,without any further action by either party.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly
following a Valuation Date,if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum
Transfer Amount,then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the
date of Transfer at least equal to the applicable Delivery Amount. The "Delivery Amount" applicable to the Pledgor
for any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly
following a Valuation Date,if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum
Transfer Amount,then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in
that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount. The
"Return Amount"applicable to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party
exceeds
ANNEX 1
Page 1
(ii) the Credit Support Amount.
provided however,that following such return,the Value of all Posted Credit Support held by the Secured Party must at
least equal the Credit Support Amount.
"Credit Support Amount"means, for any Valuation Date (i) the Secured Party's Exposure for that Valuation Date,
minus (ii) the Pledgor's Threshold;provided, however, that the Credit Support Amount will be deemed to be zero
whenever the calculation of Credit Support Amount yields a number less than zero.
Paragraph 4. Conditions Precedent,Transfer Timing,Calculations and Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Secured Party under Paragraphs 3,4(d)(ii),5 and 6(c)
is subject to the conditions precedent that(i)no Seller Delivery Failure has occurred and is continuing,(ii)no Section
15.3 Termination Event has occurred and is continuing following Assignee providing Seller at least two (2) Local
Business Days'prior written notice that such Section 15.3 Termination Event has occurred,(iii)no cash amount is then
owed by Seller to Assignee under the Agreement,and(iv)no Event of Default with respect to the Pledgor has occurred
and is continuing under this Annex. Each Transfer obligation of the Pledgor hereunder is subject to the conditions
precedent that(i)no cash amount is then owed by Assignee to Seller under the Agreement,and(ii)no Event of Default
with respect to the Secured Party has occurred and is continuing under this Annex. For the avoidance of doubt,a Seller
Delivery Failure shall no longer be continuing if Seller has paid Assignee the Replacement Cost in accordance with
Section 5.2 of the Agreement.
(b) Transfer Timing. Subject to Paragraphs 4(a),5,6(b)(ii),Schedule III and unless otherwise specified herein,if
a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time,then
the relevant Transfer will be made not later than the close of business on the next Local Business Day;if a demand is
made after the Notification Time,then the relevant Transfer will be made not later than the close of business on the
second Local Business Day thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(c)will be made by
the Valuation Agent as of the Valuation Time with respect to a Valuation Date. The Valuation Agent will notify each
party(or the other party,if the Valuation Agent is a party)of its calculations not later than the Notification Time on the
Local Business Day following the applicable Valuation Date (or in the case of Paragraph 6(c), following the date of
calculation). Upon request by the Assignee, for the first three Valuation Dates hereunder, the Valuation Agent shall
provide in reasonable detail the methodology and assumptions used in preparing its calculations; provided, however,
the Valuation Agent shall not be required to disclose any confidential,proprietary information that it may have used in
connection therewith.
(d) Substitutions.
(i) Upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged,the
Pledgor may,on any Local Business Day,Transfer to the Secured Party substitute Eligible Credit Support(the
"Substitute Credit Support");and
(ii) subject to Paragraph 4(a),the Secured Party will Transfer to the Pledgor the items of Posted Credit
Support specified by the Pledgor in its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support;provided that the Secured Party will only be
obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit
Support equal to the Value as of that date of the Substitute Credit Support;provided,further however, that
any request to substitute must seek the substitution of Eligible Credit Support or Posted Credit Support in
an amount in excess of the Pledgor's Minimum Transfer Amount".
ANNEX 1
Page 2
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return
Amount or(II)the Value of any Transfer of Eligible Credit Support or Posted Credit Support,then(1)the Disputing
Party will notify the other party and the Valuation Agent(if the Valuation Agent is not the other party)not later than
the close of business on the Local Business Day following(X)the date that the demand is made under Paragraph 3 in
case of(I) above or(Y) the date of Transfer in the case of(II) above, (2) subject to Paragraph 4(a), the appropriate
party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case of(I) above or (Y) the date of
Transfer in the case of(II)above,(3)the parties will consult with each other in an attempt to resolve the dispute and(4)
if they fail to resolve the dispute by the Resolution Time,then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date by:
(A) calculating the Exposure by seeking four actual quotations at mid-market from Reference
Market-makers(other than Seller or its Affiliates,unless otherwise agreed to by Assignee in writing)
and taking the arithmetic average of those obtained;provided that if four quotations are not available,
then fewer than four quotations may be used;and if no quotations are available, then the Valuation
Agent's original calculations will be used;and
(B) calculating the Value,if disputed,of Posted Credit Support consisting of securities by the
Valuation Agent determining based upon the bid quotations of any generally recognized dealer
(other than Seller or its Affiliates, unless otherwise agreed to by Assignee in writing), and adding
thereto any interest accrued but not paid to any person with respect to such securities through the
day on which the determination is made and multiplying the sum by the applicable Valuation
Percentage, if any;provided, however, that Assignee may submit bid quotations from two other
recognized dealers in which case the Value of such securities shall be the mean of the two
quotations sourced by the Valuation Agent and the two quotations submitted by Assignee.
(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted
Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer as described in
Paragraph 5(i)(B)above.
Following a recalculation pursuant to this Paragraph,the Valuation Agent will notify each party(or the other party,if
the Valuation Agent is a party)not later than the Notification Time on the Local Business Day following the Resolution
Time. The appropriate party will,upon demand following that notice by the Valuation Agent or a resolution pursuant
to(3)above and subject to Paragraphs 4(a)and 4(b),make the appropriate Transfer.
Paragraph 6. Holding and Using Posted Collateral
(a) Care of Posted Collateral. The Secured Party will exercise reasonable care to assure the safe custody of all
Posted Collateral to the extent required by applicable law,and in any event the Secured Party will be deemed to have
exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own
property. Except as specified in the preceding sentence, the Secured Party will have no duty with respect to Posted
Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights
pertaining thereto.
ANNEX 1
Page 3
(b) Eligibility to Hold Posted Collateral;Custodians.
(i) General. The Pledgor will appoint an agent reasonably acceptable to the Secured Party (a
"Custodian") to hold Posted Collateral for the benefit of the Secured Party. The Pledgor will exercise
reasonable care in the selection and monitoring of the Custodian. The Pledgor's obligations to make any
Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a
Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party. The Secured Party
agrees that Posted Collateral held at the Custodian shall be subject to a tri-party collateral account control
agreement substantially in the form of Schedule V attached hereto.
(ii) Failure to Satisfy Conditions. If the Custodian fails to satisfy conditions specified in (b)(iv) for
holding Posted Collateral (the "Ineligible Custodian"), then the Pledgor will, not later than five (5) Local
Business Days after the demand,identify a Custodian to Transfer all Posted Collateral held by the Ineligible
Custodian to a Custodian that satisfies those conditions("Replacement Custodian")and Transfer or cause the
Ineligible Custodian to Transfer all Posted Collateral to Replacement Custodian within ten (10) Local
Business Days thereafter. The Secured Party agrees that all Posted Collateral transferred to such Replacement
Custodian shall be subject to a tri-party collateral account control agreement substantially in the form of
Schedule V attached hereto, with such amendments as shall be requested by the Replacement Custodian;
provided,however,the obligation of the Pledgor to effect such Transfer shall be subject to the Secured Party's
not unreasonably withholding its consent to such amendments.
(iii) [Reserved]
(iv) Custodian Conditions. A party shall be eligible to serve as a Custodian if and for so long as it(i)is
not affiliated with either of the Parties, (ii) is a trust company or commercial bank with trust powers,
organized under the laws of the United States of America or any state or province thereof and subject to
supervisions or examination by federal or state authority, having a combined capital surplus of at least U.S.
$10,000,000,000 and(iii)shall have outstanding long term unsecured unsubordinated debt securities ratings of
at least"A3"by Moody's and"A-"by S&P.
(c) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive
Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local
Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would
not be created or increased by that Transfer,as calculated by the Valuation Agent(and the date of calculation
will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount. The Interest Amount shall compound daily. Subject to Paragraph 4(a),in lieu of
any interest,dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in
the form of Cash(all of which may be retained by the Secured Party),the Secured Party will Transfer to the
Pledgor in arrears on the last Local Business Day of each calendar month the Interest Amount to the extent
that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation
Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest
Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the
form of Cash and will be subject to the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
An Event of Default will exist with respect to a party under this Annex if:
(i) that party fails(or fails to cause the Custodian) to make, when due, any Transfer of Posted Credit
Support,as applicable(including for the avoidance of doubt a Transfer to a Replacement Custodian pursuant
to Paragraph 6(b)(ii) of this Annex), required to be made by it and that failure continues for two Local
Business Days after notice of that failure is given to that party;or
ANNEX 1
Page 4
(ii) that party fails to comply with or perform any agreement or obligation other than those specified in
Paragraph 7(i)and that failure continues for 30 days after notice of that failure is given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time(i)an Event of Default with respect to the Pledgor has
occurred and is continuing, or(ii)a Section 15.3 Termination Event has occurred and is continuing following Assignee
providing Seller at least two(2)Local Business Days' prior written notice that such Section 15.3 Termination Event
has occurred then,unless the Pledgor has paid in full all of its Obligations that are then due and payable,and in addition
to the rights and remedies set forth in the Agreement, the Secured Party may exercise one or more of the following
rights and remedies:
(i) all rights and remedies available to a secured party under applicable law with respect to Posted
Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted
Support,if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any obligation
of the Secured Party to Transfer that Posted Collateral);and
(iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or
private sales or other dispositions with such notice,if any,as may be required under applicable law,free from
any claim or right of any nature whatsoever of the Pledgor,including any equity or right of redemption by the
Pledgor(with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold)and
to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any
amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and
is of a type customarily sold on a recognized market,and,accordingly,the Pledgor is not entitled to prior notice of any
sale of that Posted Collateral by the Secured Party,except any notice that is required under applicable law and cannot
be waived.
(b) Pledgor's Rights and Remedies. If at any time an Event of Default has occurred or been designated with
respect to the Secured Party,then:
(i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law or in
equity (including, but not limited to, specific performance) with respect to Posted Collateral held by the
Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of
Other Posted Support,if any;
(iii) the Secured Party will be obligated immediately to Transfer such Posted Collateral and Other Posted
Support and any Interest Amount required to be Transferred to the Pledgor pursuant to Paragraphs 3(b),5 or
6(c),respectively;and
(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii)
above,the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any
obligation of the Secured Party to Transfer the applicable Posted Collateral);and
ANNEX 1
Page 5
(B) to the extent that the Pledgor does not Set-off under (iii)(A) above, withhold payment of
any remaining amounts payable by the Pledgor or deliveries required to be made by the Pledgor in
each case with respect to any Obligations,up to the Value of any remaining Posted Collateral held by
the Secured Party,until the applicable Posted Collateral is Transferred to the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds remaining
after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts
payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts
remaining unpaid after any liquidation,Set-off and/or application under Paragraphs 8(a)and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any
Obligations,the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount,if any.
Paragraph 9. Representations
(a) Seller, as Pledgor, represents to Assignee, as Secured Party (which representation will be deemed to be
repeated by Seller as of each date on which it, as the Pledgor,Transfers Eligible Collateral or Other Posted Support)
that:
(i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the
Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the
Secured Party hereunder,free and clear of any security interest, lien,encumbrance or other restrictions other
than the security interest and lien granted under Paragraph 2;and
(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex,the
Secured Party will have a valid and perfected first priority security interest therein(assuming that any central
clearing corporation or any third-party financial intermediary or other entity not within the control of the
Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it
under applicable law for perfection of that interest).
(b) Each party represents to the other that(which representation will be deemed to be repeated by the parties as of
each date there is a Transfer of Eligible Collateral or Other Posted Support):
(i) the performance by it of its obligations under this Annex will not result in the creation of any
security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien
granted under Paragraph 2;and
(ii) no consent,approval or other authorization of any governmental authority is required in connection
with the entry into this Annex and the performance of its obligations hereunder including without limitation
the Transfer of Eligible Collateral or Other Eligible Support hereunder.
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b)and 10(c),each party will pay its own
costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for
any costs and expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes,assessments or charges
of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware
of the same.
ANNEX 1
Page 6
(c) Liquidation/Application of Posted Credit Support. All reasonable costs and expenses actually
incurred by or on behalf of the Secured Party in connection with the liquidation and/or application of any Posted Credit
Support under Paragraph 8(a)will be payable,on demand,to Assignee by Seller.
Paragraph 11. Miscellaneous
(a) Default Interest. If either party fails to make, when due, any Transfer of Posted Collateral or the Interest
Amount it will be obliged to pay the other party (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred,from
(and including)the date that the Posted Collateral or Interest Amount was required to be Transferred to(but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party,the other party will execute,deliver,file
and record any financing statement, specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security
interest or lien granted under Paragraph 2, to enable that party to exercise or enforce its rights under this Annex with
respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on
Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the Secured Party of,and defend against,any
suit,action,proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely
affect the security interest and lien granted by it under Paragraph 2.
(d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex,
including,but not limited to,all calculations,valuations and determinations made by either party,will be made in good
faith and in a commercially reasonable manner.
(e) Demands and Notices. All demands, specifications and notices given by a party under this Annex will be
made as specified in the Notices Section of the Agreement,except that the address for Seller for such purposes shall be:
Citigroup Energy Inc.
Collateral Management Group
499 Washington Blvd.,7th Floor
Jersey City,NJ 07310
Telephone no.(212)816-8090
Email: derivatives.margin(aiciti.com
With a copy to:
Citigroup Energy Inc.
Attn: Commodities Structuring
Address:2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
Fax: 713-752-5208
Email:americascommoditiesstructuring(aiciti.com
(f) Form of Collateral. All non-Cash Eligible Collateral or Posted Collateral that is Transferred by either party
shall be recorded in book entry form by a Federal Reserve Bank,as fiscal agent,and Pledgor shall(i)deliver to Secured
Party a listing of such credit support by title (or series), unpaid principal amount and maturity date and (ii) cause a
Federal Reserve Bank to hold such credit support for the account of the Secured Party or the Custodian(in a custody
account),as applicable,in the name of the Secured Party or Custodian,as applicable.
ANNEX 1
Page 7
(g) No Third Party Rights. This Annex has been and is made solely for the benefit of Assignee and Seller and
their respective assigns,and no other person,partnership,association,corporation or other entity shall acquire or have
any right under or by virtue of this Annex.
(h) Document Delivery. The Secured Party shall deliver upon signing of this Annex (i) evidence reasonably
satisfactory to the Pledgor of its authority to enter into this Annex and (ii) evidence reasonably satisfactory to the
Pledgor of the authority and genuine signature of the individual signing this Annex to execute the same. Such evidence
shall include but not be limited to the following:
(i) a resolution of the City Counsel of the City of Vernon(together with the attestation of the City Clerk
of the City of Vernon with respect to(A)and(B))authorizing(A)entry into this Annex and the Settlement and Release
Agreement by and among Seller; Citibank, N.A.; Citigroup, Inc. and Assignee dated as of 9 August 2016 (the
"Settlement Agreement"), and (B) the Mayor of the City of Vernon or another person authorized by resolution to
execute this Annex and the Settlement Agreement and bind Assignee,and
(ii) an opinion of Assignee's attorney as to the due authorization and execution of this Annex and the
Settlement Agreement reasonably acceptable to Seller.
Paragraph 12. Definitions
As used in this Annex:—
"Cash"means the lawful currency of the United States of America.
"Credit Rating"means, with respect to Seller and as of any date, the Credit Rating (as defined in Article I of the
Agreement)of the Guarantor in effect on such date.
"Credit Support Amount"has the meaning specified in Paragraph 3.
"Custodian"has the meaning specified in Paragraph 6(b)(i).
"Default Rate"means a rate per annum equal to the cost(without proof or evidence of any actual cost)to the relevant
payee(as certified by it)if it were to fund or of funding the relevant amount plus 1%per annum.
"Delivery Amount"has the meaning specified in Paragraph 3(a).
"Disputing Party"has the meaning specified in Paragraph 5.
"Distributions"means,with respect to Posted Collateral other than Cash,all principal,interest and other payments and
distributions of cash or other property with respect thereto. Distributions will not include any item of property acquired
by the Secured Party upon any disposition or liquidation of Posted Collateral or,with respect to any Posted Collateral
in the form of Cash,any distributions on that collateral,unless otherwise specified herein.
"Eligible Collateral"means the items specified as such on Schedule I attached to this Annex.
"Eligible Credit Support"means Eligible Collateral and Other Eligible Support.
"Exposure"means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in
the case of a dispute,the amount,if any,by which(i)the market value of the Undelivered Quantities(as defined in the
Agreement),exceeds(b)the Threshold applicable to Seller on such date.
"Interest Amount"means,with respect to an Interest Period,the aggregate sum of the amounts of interest calculated
for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured
Party on that day,determined by the Secured Party for each such day as follows:
ANNEX 1
Page 8
(x) the amount of Cash on that day;multiplied by
(y) the Interest Rate in effect for that day;divided by
(z) 360.
"Interest Period"means the period from(and including)the last Local Business Day on which an Interest Amount was
Transferred(or,if no Interest Amount has yet been Transferred,the Local Business Day on which Posted Collateral in
the form of Cash was Transferred to or received by the Secured Party)to(but excluding)the Local Business Day on
which the current Interest Amount is to be Transferred.
"Interest Rate"means be the overnight ask rate in effect for such day,as set forth opposite the caption"ON"under the
heading"EURO-DOLLAR"on Telerate Page 4756 or any successor page thereto on or about 11:00 a.m.,New York
time,on such day,or,if no successor page is quoted,any page agreed to by the parties.
"Letter of Credit' means an irrevocable, standby letter of credit, issued by a major U.S. commercial bank or a U.S.
branch office of a foreign bank which is satisfactory to the Secured Party,in its reasonable discretion utilizing the form
set forth in Schedule IV attached hereto,with such changes to the terms in that form as the issuing bank may require
and as may be acceptable to the Secured Party; where such letter of credit bank(i)has a senior unsecured long term
debt rating of"A-"or better by S&P and"A3"or better by Moody's and(ii)has a combined capital surplus of at least
$10,000,000,000. Each Letter of Credit shall be a Credit Support Document. Letters of Credit shall be issued and
maintained in accordance with the provisions set forth in Schedule III attached hereto.
"Local Business Day"means any Business Day as set forth in the Agreement.
"Minimum Transfer Amount"means,with respect to either party, $100,000;provided however,that with respect to
Seller,if Seller has no Credit Rating or if the Credit Rating of Seller is not at least"BBB-"from S&P or"Baa3"from
Moody's,the Minimum Transfer Amount for Seller shall be zero.
"New York Banking Day" means any day on which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits)in New York City.
"Notification Time" means 10:00 a.m., New York time on a Local Business Day; provided however, that,
notwithstanding Paragraph 4(b),(x)with regard to Transfers of Eligible Credit Support or Posted Credit Support in the
form of Cash,if a request for Transfer is made by the Notification Time,then the relevant Transfer shall be made not
later than the close of business on the day on which such request is received,or,if such day is not a Local Business Day
or,if such request is received after the Notification Time,not later than the close of business on the next Local Business
Day,and(y)with regard to Transfers of other forms of Eligible Credit Support or Posted Credit Support,the relevant
Transfer shall be made in accordance with Paragraph 4(b).
"Obligations"means,with respect to a party,all present and future obligations of that party under the Agreement.
"Other Eligible Support"means a Letter of Credit.
"Other Posted Support"means all Other Eligible Support Transferred to the Secured Party that remains in effect for
the benefit of that Secured Party.
"Pledgor"means Seller.
"Posted Collateral"means all Eligible Collateral,other property,Distributions,and all proceeds thereof that have been
Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to
Paragraph 3(b),4(d)(ii)or 6(c)(i)or released by the Secured Party under Paragraph 8. Any Interest Amount or portion
thereof not Transferred pursuant to Paragraph 6(cXii)will constitute Posted Collateral in the form of Cash.
"Posted Credit Support"means Posted Collateral and Other Posted Support.
ANNEX 1
Page 9
"Recalculation Date"means the Valuation Date that gives rise to the dispute under Paragraph 5;provided however,
that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date"means the most recent Valuation Date under Paragraph 3.
"Reference Market-makers"means four leading dealers in the relevant market selected by the Seller in good faith(i)
from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the
time in deciding whether to offer or to make an extension of credit and(ii)to the extent practicable,from among such
dealers having an office in the same city.
"Resolution Time"means 1:00 p.m.,New York time,on the Local Business Day following the date on which notice is
given that gives rise to a dispute under Paragraph 5.
"Return Amount"has the meaning specified in Paragraph 3(b).
"Secured Party"means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit
Support under Paragraph 3(a)or(ii)holds or is deemed to hold Posted Credit Support.
"Section 15.3 Termination Date"has the meaning specified in the Agreement.
"Section 15.3 Termination Event"has the meaning specified in the Agreement.
"Seller Delivery Failure"has the meaning specified in the Agreement.
"Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or
requirement to which the applicable party is entitled or subject under applicable law.
"Substitute Credit Support"has the meaning specified in Paragraph 4(d)(i).
"Substitution Date"has the meaning specified in Paragraph 4(dxii).
"Threshold"means,with respect to Seller, as Pledgor, and as of any date,the amount set forth in Schedule II hereto
under the caption "Threshold"set forth opposite Seller's Credit Rating. If at any time Seller shall not have a Credit
Rating by any Rating Agency, then the Threshold for Seller shall be zero (USD 0.00). In the event of a split rating
classification by the Rating Agencies, the Threshold shall be the amount opposite the lower of the Credit Ratings on
Schedule II hereto.
"Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in
accordance with the instructions of the Secured Party,Pledgor or Custodian,as applicable:
(i) in the case of Cash,payment or delivery by wire transfer into one or more bank accounts specified
by the recipient;
(ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or
delivery in appropriate physical form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to
constitute a legally valid transfer to the recipient;
(iii) in the case of securities that can be paid or delivered in book-entry,the giving of written instruments
to the relevant depository institution or other entity specified by the recipient, together with a written copy
thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant
interest to the recipient;and
(iv) in the case of Other Eligible Support,for purposes of Paragraph 3(a),(1)delivery by the Pledgor to
the Secured Party,at the address specified in this Annex,of the Letter of Credit or(2)delivery to the Secured
ANNEX 1
Page 10
Party,of an amendment of such Letter of Credit extending the term or increasing the amount available to the
Secured Party,thereunder;and for purposes of Paragraph 3(b),return of the Letter of Credit undrawn by the
Secured Party to the Pledgor,at the address specified in this Annex,or agreement by the Secured Party,to an
amendment to the Letter of Credit in form and substance satisfactory to the Pledgor, reducing the amount
available to the Secured Party,thereunder.
"Valuation Agent"means Seller for all purposes.
"Valuation Date"means,with respect to the determination of Exposure,the first Local Business Day of each month or
any other Local Business Day upon the reasonable request of either party, and with respect to the determination of
Value of Eligible Credit Support or Posted Credit Support, the first Local Business Day of each week or any other
Local Business Day upon the reasonable request of either party.
"Valuation Percentage"means,for any item of Eligible Collateral,the applicable percentage specified in Schedule I
attached hereto.
"Valuation Time"means,with respect to the determination of Exposure,Value of Eligible Credit Support and Posted
Credit Support, the close of business on the Local Business Day immediately before the Valuation Date or date of
calculation,as applicable.
"Value"means for any Valuation Date or other date for which Value is calculated, and subject to Paragraph 5 in the
case of a dispute,with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash,the amount thereof;and
(B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage,if any;
(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral,zero;and
(iii) Other Eligible Support and Other Posted Support,the stated amount thereof as set forth therein.
ANNEX 1
Page 11
CITIGROUP ENERGY INC. THE CITY OF VERNON
By: By. , , /�
Name: Name: arlos Fandino
Title: Title: City Administrat
ATTEST:
33----)1\.'.6e
Name:M ria E. A la
Title: City Clerk
APPROVED AS TO FORM:
By: 1 / T &13
Name. Hema Patel
Title: City Attorney
ANNEX 1
Page 12
CITIGROUP ENERGY INC. THE CITY OF VERNON
By: V • By:
Name: ., .;i: p Name:
Title: ,, : • •'• • DT: .1 or Title:
ATTEST:
POD By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
ANNEX 1
Page 12
Schedule I
ELIGIBLE COLLATERAL
Valuation Percentage
(A) Cash(denominated in US Dollars) 100%
(B) (x) Negotiable debt obligations issued by the U.S. Treasury
Department or the Government National Mortgage Association
("Ginnie Mae"), or (y) mortgage backed securities issued by
Ginnie Mae(but with respect to either(x)or(y),excluding interest
only or principal only stripped securities, securities representing
residual interests in mortgage pools,or securities that are not listed
on a national securities exchange or regularly quoted in a national
quotation service)and in each case having a remaining maturity of:
(i) less than one year 100%
(ii) one year or greater but less than 10 years 98%
(C) (x) Negotiable debt obligations issued by the Federal Home 95%
Loan Mortgage Association ("Freddie Mac") or the Federal
National Mortgage Association ("Fannie Mae") or (y) mortgage-
backed securities issued by Freddie Mac or Fannie Mae but
excluding interest only or principal only stripped securities,
securities representing residual interests in mortgage pools, or
securities that are not listed on a national securities exchange or
regularly quoted in a national quotation service, in either case
having a maturity of not more than 10 years.
(D) Any other collateral acceptable to the Secured Party in its sole As determined by the
discretion Secured Party in its sole
discretion
Schedule I-Page 1
Schedule II
THRESHOLDS
Credit Rating
(Moodv's/S&P) Threshold
A3/A-and above Infinite
Baa1BBB+to Baa2/BBB $0
and below or not rated
Schedule II-Page 1
Schedule III
LETTER OF CREDIT PROVISIONS
Letters of Credit. Other Eligible Support provided by the Pledgor("X")for the benefit of the Secured
Party("Y")in the form of a Letter of Credit shall be subject to the following provisions.
(a) A Letter of Credit(substantially in the form of Schedule IV hereto with a Valuation Percentage
of 100%) shall be delivered by X to such address as Y shall specify and shall be maintained for the
benefit of Y or its designee. X shall (i) cause the renewal of each outstanding Letter of Credit on a
timely basis as provided in the relevant Letter of Credit,(ii)if the bank that issued an outstanding Letter
of Credit("Issuing Bank")has indicated its intent not to renew such Letter of Credit,provide a substitute
Letter of Credit at least twenty(20)Local Business Days prior to the expiration of the outstanding Letter
of Credit,and(iii)if a bank issuing a Letter of Credit shall fail to honor Y's properly documented request
to demand payment under an outstanding Letter of Credit,provide for the benefit of Y a substitute Letter
of Credit that is issued by a bank acceptable to Y, other than the bank failing to honor the outstanding
Letter of Credit,within two(2)Local Business Days after such refusal. Any failure of the second bank
to honor Y's proposed document request to demand payment under an outstanding Letter of Credit or
failure by X to deliver such substitute Letter of Credit shall constitute an Event of Default under this
Agreement.
(b) Upon the occurrence of a Letter of Credit Default,X agrees to either cause the delivery to Y of a
substitute Letter of Credit, or, alternatively,X shall provide other Eligible Collateral, in each case on or
before the sixtieth Local Business Day after the occurrence thereof. "Letter of Credit Default" shall
mean with respect to an outstanding Letter of Credit, the occurrence of any of the following events: (i)
the bank issuing the Letter of Credit shall fail to maintain a Credit Rating of at least "A-"by S&P and
"A3" by Moody's; (ii) the bank issuing the Letter of Credit shall fail to comply with or perform its
obligations under such Letter of Credit; (iii) the bank issuing such Letter of Credit shall disaffirm,
disclaim, repudiate or reject, in whole or in part,or challenge the validity of, such Letter of Credit; (iv)
such Letter of Credit shall expire or terminate,or shall fail or cease to be in full force and effect at any
time during the term of this Agreement; or (v) any event analogous to a Bankruptcy as defined in this
Agreement shall occur with respect to the bank issuing the Letter of Credit;provided, however, that no
Letter of Credit Default shall occur in any event with respect to a Letter of Credit after the time such
Letter of Credit is required to be cancelled or returned to X, in accordance with the terms of this
Agreement.
(c) As one method of providing additional Posted Credit Support,X may increase the amount of an
outstanding Letter of Credit or establish one or more additional Letters of Credit.
(d) If consent of Y is required to be given to the Issuing Bank with respect to any Transfer of Other
Eligible Support,Y agrees to promptly give such consent to the Issuing Bank upon demand of X.
(e) (i) Upon or at any time after the occurrence of an Event of Default, Y may demand payment
under any outstanding Letter of Credit upon presentation to the bank issuing the Letter of Credit of one
or more certificates in accordance with the specific requirements of any such Letter of Credit. Cash
received from a demand under the Letter of Credit shall be deemed Posted Collateral and shall either be
(y) applied against all amounts that are due and owing from X but have not been paid to Y under this
Agreement or (z) held by Y as Posted Collateral in accordance with this Annex. Notwithstanding Y's
receipt of Cash from any demand under a Letter of Credit, X shall remain liable for any amounts owing
to Y and remaining unpaid after the application of the amounts so drawn by Y.
(ii) Upon or at any time after the occurrence or deemed occurrence of a Section 15.3
Termination Date as a result of a Section 15.3 Termination Event and the failure of X to make all
payments due and owing to Y in accordance with the terms of this Agreement, Y may, subject to the
Schedule III-Page 1
availability of such amounts,demand payment under any outstanding Letter of Credit in an amount equal
to such amounts owing to it upon presentation to the bank issuing the Letter of Credit of one or more
certificates in accordance with the specific requirements of any such Letter of Credit. Notwithstanding
Y's receipt of Cash from any demand under a Letter of Credit,X shall remain obligated to Y to Transfer
sufficient Eligible Collateral to Y in accordance with the terms of this Annex. In addition, X shall
remain obligated to Y for any amounts owing to Y and remaining unpaid after the application of any
amounts so demanded by Y.
(f) The provisions of this Schedule III shall constitute agreements for all purposes of this
Agreement and this Annex.
(g) X covenants and agrees that so long as a Transaction shall remain outstanding under this
Agreement, no Letter of Credit shall be secured by any mortgage, security interest,pledge,lien or other
encumbrance upon the property of X. Y covenants and agrees that it shall not pledge,encumber or grant
a security interest in any of its right,title or interest into and under any Letter of Credit or Other Eligible
Support.
(h) In all cases,the costs and expenses(including but not limited to the reasonable costs,expenses,
and attorneys' fees of Y)of establishing,renewing,substituting,canceling,and increasing the amount of
a Letter of Credit shall be borne by X.
Schedule III-Page 2
Schedule IV
IRREVOCABLE STANDBY LETTER OF CREDIT
Letter of Credit No. Issue Date: ,20
Beneficiary: Account Party:
[Name of Beneficiary] [Name of Account Party]
[Address] [Address of Account Party]
Attn: Attn:
Ladies and Gentlemen:
We hereby establish in favor of you, the City of Vernon as successor in interest to the Vernon
Natural Gas Financing Authority (the"Beneficiary"), at the request and for the account of Citigroup Energy Inc.
(the "Account Party"),with respect to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27,
2006 between the Account Party and the Vernon Natural Gas Financing Authority,as may be amended from time
to time (the "Agreement"), our Irrevocable Standby Letter of Credit No. (the "Credit") whereby we
irrevocably authorize you to demand from us,in accordance with the terms and conditions hereinafter set forth,in
an amount not to exceed in the aggregate $ . Capitalized terms not otherwise defined herein or
elsewhere in the Credit shall have the meanings specified in the Agreement.
Funds hereunder are available to you against your demand for payment hereunder delivered to us by
courier or facsimile at the address specified below with both of the following items attached:
1. A certificate, dated the date of such demand for payment, signed by the City Administrator of the
Beneficiary,in the form of Exhibit A hereto, accompanied by the certificate of the City Clerk of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
City Administrator of the Beneficiary and is authorized to submit such demand by all necessary
corporate authorization,which certificate of such City Clerk shall certify as to a specimen signature
of such signatory;and
2. Either(x)a statement,signed by a Managing Director of the Account Party,in the form of Exhibit B
hereto, accompanied by the certificate of the Secretary or an Assistant Secretary of the Account
Party substantially to the effect that the signatory of such certificate is duly incumbent as a
Managing Director of the Account Party and is authorized to submit such demand by all necessary
corporate authorization,which certificate of such Secretary or Assistant Secretary shall certify as to
a specimen signature of such signatory; or (y) certificate, dated the date of such demand for
payment, signed by the City Administrator of the Beneficiary, in the form of Exhibit C hereto,
accompanied by the certificate of the City Clerk of the Beneficiary substantially to the effect that the
signatory of such certificate is duly incumbent as the City Administrator of the Beneficiary and is
authorized to submit such certificate by all necessary corporate authorization, which certificate of
such City Clerk shall certify as to a specimen signature of such signatory, to which there shall be
attached an order of a court of the State of New York or of a Federal court of the United States of
America,dated a date not less than sixty(60)days prior to the date of such demand,substantially to
the effect that an amount not less than the amount demanded under such demand for payment is
ordered to be immediately due and payable by Account Party under the Sale Agreement; (z) a
certificate, dated the date of such demand for payment, signed by the City Administrator of the
Beneficiary,in the form of Exhibit D hereto,accompanied by the certificate of the City Clerk of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
City Administrator of the Beneficiary and is authorized to submit such certificate by all necessary
Schedule IV-Page 1
corporate authorization,which certificate of such City Clerk shall certify as to a specimen signature
of such signatory,to which there shall be attached a signed and notarized proof of claim filed by the
Beneficiary with a bankruptcy court having jurisdiction over a case under the U.S.Bankruptcy Code
under which the Account Party is a debtor for the amount specified in such demand; (aa) a
certificate, dated the date of such demand for payment, signed by the City Administrator of the
Beneficiary,in the form of Exhibit E hereto,accompanied by the certificate of the City Clerk of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
City Administrator of the Beneficiary and is authorized to submit such certificate by all necessary
corporate authorization,or(bb)a certificate,dated the date of such demand for payment and dated a
date not more than twenty(20)New York Banking Days prior to the expiration of the Credit as such
expiration may be amended from time to time, signed by the City Administrator of the Beneficiary,
in the form of Exhibit F hereto, accompanied by the certificate of the City Clerk of the Beneficiary
substantially to the effect that the signatory of such certificate is duly incumbent as the City
Administrator of the Beneficiary and is authorized to submit such certificate by all necessary
corporate authorization.
Partial demands are allowed under this Credit. The amount which may be demanded under this
Credit shall be automatically reduced by the amount of any demands previously paid by us hereunder. Multiple
demands for payment hereunder are permitted from time to time in an amount not to exceed in the aggregate the
amount specified in the first paragraph of this Credit.
Presentation of your Certificate shall be made on any day which is a New York Banking Day for
us at or prior to[5:00 p.m.(New York time)]at our office located at
Presentation must be made by hand,mail or courier service,to such address. If your presentation is made at such
office,in compliance with the other terms and conditions of this Credit,on or prior to the expiry date hereof,we
hereby irrevocably undertake to honor such presentation by close of business on the next New York Banking Day.
This Credit is effective immediately and expires at our close of business on
20_, (the "Initial Expiry Date"); provided however, that this Credit shall be automatically extended without
amendment for one or more additional six-month periods from the Initial Expiry Date or any subsequent expiry
date, unless at least 60 days prior to such date you receive a notice in writing by certified mail at the above
address,that we elect not to extend this Credit for such additional period. Upon your receipt of such a notice of
non-extension, you shall be entitled to make immediate demand for payment of the full amount available under
this Credit,by presentation of your Certificate.
This Credit shall be subject to the provisions of the International Standby Practices 1998,
International Chamber of Commerce Publication No.590("ISP"),and as to matters not addressed by ISP,shall be
governed by the laws of the State of New York and applicable U.S.federal laws.
This Credit may not be amended, changed or modified without our express written consent and that of
the Beneficiary and the Account Party.
Very truly yours,
[ISSUING BANK]
Schedule IV-Page 2
EXHIBIT A
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
_,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ (the"Demand")' to which this Certificate is attached.
The undersigned hereby certifies that: (i) the amount demanded by the Demand is net of all amounts
due and payable by the undersigned to the Account Party under the Agreement for Purchase and Sale of
Natural Gas dated as of June 27, 2006 (the "Agreement") between the Account Party and the
undersigned; (ii) the amount demanded by the Demand has not been the subject of a prior demand
under the Credit; (iii) such amount is due and payable by the Account Party under the Agreement and
has not been paid; and(iv)the undersigned has made demand therefor on the Account Party pursuant to
the Agreement.
The Demand shall be paid to the following account:
[Insert Custodian Account details]
THE CITY OF VERNON
By:
Name:
Title:
This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT B
[Form of Stipulation as to Amounts Due and Payable]
[Letterhead of Citigroup Energy Inc.]
_,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit,and to the demand for payment thereunder(the
"Demand")in the amount of$ 2 to which this Certificate is attached.
The undersigned hereby certifies that the amount demanded by the Demand is due and payable by the
undersigned to the Account Party under the Agreement for Purchase and Sale of Natural Gas dated as
of June 27, 2006 (the "Agreement") between the Account Party and the undersigned and has not been
paid.
CITIGROUP ENERGY INC.
By:
Name:
Title:
2 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT C
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
_,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of $ 3 to which this Certificate is attached, and the order of a New York State or
Federal United States court to which this Certificate is attached(the"Order").
The undersigned hereby certifies that: (i) the Order is authentic and has not been amended, stayed,
rescinded or satisfied and remains in full force and effect; and (ii) either (A) no appeal from the Order
has been taken, and the period for the filing of any such appeal has lapsed, or (B) if any appeals from
such Order have been taken,such appeals have been finally denied,without further right of appeal,by a
competent court.
THE CITY OF VERNON
By:
Name:
Title:
3 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT D
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 4 to which this Certificate is attached, and the proof of claim, a copy of which is
appended hereto, executed and filed by undersigned with the U.S. bankruptcy court having jurisdiction
over the pending bankruptcy pending case under which Citigroup Energy Inc. is the debtor(the "Proof
of Claim").
The undersigned hereby certifies that: (i) the Proof of Claim is authentic and has not been amended,
withdrawn, disallowed or rescinded and remains in full force and effect; and (ii) such Proof of Claim
was submitted to such bankruptcy court in good faith; and (iii) the undersigned has not received
payment in whole or part of the amount claimed pursuant to such Proof; and (iv) the amount claimed
pursuant to such Proof of Claim is the amount demanded pursuant to such Demand.
THE CITY OF VERNON
By:_..
Name:
Title:
4 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT E
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of $ 5 to which this Certificate is attached, and evidence publicly available showing
that the Issuing Bank has a public rating of senior, unsecured, unenhanced indebtedness or deposits (1)
below A- with respect to Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies, Inc.,or any successor thereto or (2)below A3 with respect to Moody's Investors Services,
Inc., or any successor thereto (the "Credit Rating Downgrade") and (i) that such Credit Rating
Downgrade has occurred more than 60 New York business days prior to the date hereof and(ii) neither
Other Eligible Support nor Eligible Collateral has been provided to the undersigned in accordance with
Paragraph 3 of the Credit Support Annex attached as Annex I to the Agreement for Purchase and Sale
of Natural Gas, dated as of June 27, 2006 between the Account Party and the Vernon Natural Gas
Financing Authority,as may be amended from time to time.
The undersigned hereby certifies that the Credit Rating Downgrade is true and correct in all respects
and such information is publicly available.
THE CITY OF VERNON
By:
Name:
Title:
5 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT F
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
_,20_
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 6 to which this Certificate is attached, and the undersigned hereby certifies that as
of the date hereof, (1) the Credit, as amended, has less than twenty (20) New York business days to
expiration as of the date of this Certificate and(2)neither Other Eligible Support nor Eligible Collateral
has been provided to the undersigned in accordance with Paragraph 3 of the Credit Support Annex
attached as Annex I to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27, 2006
between the Account Party and the Vernon Natural Gas Financing Authority, as may be amended from
time to time.
THE CITY OF VERNON
By:
Name:
Title:
6 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
Schedule V
[Form of Tri-Party Collateral Account Control Agreement]
[To be provided]
FULLY EXECUTED AGREEMENT
Execution Version
ANNEX 1
CREDIT SUPPORT ANNEX
This Credit Support Annex dated as of October 4, 2016 (this "Annex") supplements, forms part of, and is
subject to,the Agreement for Purchase and Sale of Natural Gas,dated as of June 27,2006(the"Agreement"),between
Citigroup Energy Inc. ("Seller") and the City of Vernon ("Assignee"), as the successor in interest to Vernon Natural
Gas Financing Authority, without any further action taken by either Seller or Assignee. Accordingly, Seller and
Assignee agree as follows:
Paragraph 1. Interpretation
(a) Definitions and Inconsistency. Capitalized terms not otherwise defined herein or elsewhere in the
Agreement have the meanings specified pursuant to Paragraph 12,and all references in this Annex to Paragraphs are to
Paragraphs of this Annex. In the event of any inconsistency between this Annex and the other provisions of the
Agreement,this Annex will prevail.
(b) Secured Party and Pledgor. All references in this Annex to the"Secured Party"will be to Assignee and all
references to the"Pledgor" will be to Seller;provided, however, that if Other Posted Support is held by Assignee, as
Secured Party,all references herein to Assignee as the Secured Party with respect to that Other Posted Support will be
to Assignee as the beneficiary thereof and will not subject that support or Assignee as the beneficiary thereof to
provisions of law generally relating to security interests and secured parties.
Paragraph 2. Security Interest
Seller,as the Pledgor hereunder,hereby pledges to Assignee, as the Secured Party, as security for its Obligations and
grants to the Secured Party a first priority continuing security interest in, lien on and right of Set-off against all Posted
Collateral Transferred to or received by the Secured Party hereunder. Upon the Transfer by the Secured Party to the
Pledgor of Posted Collateral,the security interest and lien granted hereunder on that Posted Collateral will be released
immediately and,to the extent possible,without any further action by either party.
Paragraph 3. Credit Support Obligations
(a) Delivery Amount. Subject to Paragraphs 4 and 5, upon demand made by the Secured Party on or promptly
following a Valuation Date,if the Delivery Amount for that Valuation Date equals or exceeds the Pledgor's Minimum
Transfer Amount,then the Pledgor will Transfer to the Secured Party Eligible Credit Support having a Value as of the
date of Transfer at least equal to the applicable Delivery Amount. The "Delivery Amount"applicable to the Pledgor
for any Valuation Date will equal the amount by which:
(i) the Credit Support Amount
exceeds
(ii) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party.
(b) Return Amount. Subject to Paragraphs 4 and 5, upon a demand made by the Pledgor on or promptly
following a Valuation Date,if the Return Amount for that Valuation Date equals or exceeds Secured Party's Minimum
Transfer Amount,then the Secured Party will Transfer to the Pledgor Posted Credit Support specified by the Pledgor in
that demand having a Value as of the date of Transfer as close as practicable to the applicable Return Amount. The
"Return Amount"applicable to the Secured Party for any Valuation Date will equal the amount by which:
(i) the Value as of that Valuation Date of all Posted Credit Support held by the Secured Party
exceeds
ANNEX 1
Page 1
(ii) the Credit Support Amount.
provided, however, that following such return,the Value of all Posted Credit Support held by the Secured Party must at
least equal the Credit Support Amount.
"Credit Support Amount"means, for any Valuation Date (i)the Secured Party's Exposure for that Valuation Date,
minus (ii) the Pledgor's Threshold;provided, however, that the Credit Support Amount will be deemed to be zero
whenever the calculation of Credit Support Amount yields a number less than zero.
Paragraph 4. Conditions Precedent,Transfer Timing,Calculations and Substitutions
(a) Conditions Precedent. Each Transfer obligation of the Secured Party under Paragraphs 3,4(d)(ii),5 and 6(c)
is subject to the conditions precedent that(i)no Seller Delivery Failure has occurred and is continuing,(ii)no Section
15.3 Termination Event has occurred and is continuing following Assignee providing Seller at least two (2) Local
Business Days'prior written notice that such Section 15.3 Termination Event has occurred,(iii)no cash amount is then
owed by Seller to Assignee under the Agreement,and(iv)no Event of Default with respect to the Pledgor has occurred
and is continuing under this Annex. Each Transfer obligation of the Pledgor hereunder is subject to the conditions
precedent that(i)no cash amount is then owed by Assignee to Seller under the Agreement,and(ii)no Event of Default
with respect to the Secured Party has occurred and is continuing under this Annex. For the avoidance of doubt,a Seller
Delivery Failure shall no longer be continuing if Seller has paid Assignee the Replacement Cost in accordance with
Section 5.2 of the Agreement.
(b) Transfer Timing. Subject to Paragraphs 4(a),5,6(b)(ii),Schedule III and unless otherwise specified herein,if
a demand for the Transfer of Eligible Credit Support or Posted Credit Support is made by the Notification Time,then
the relevant Transfer will be made not later than the close of business on the next Local Business Day; if a demand is
made after the Notification Time, then the relevant Transfer will be made not later than the close of business on the
second Local Business Day thereafter.
(c) Calculations. All calculations of Value and Exposure for purposes of Paragraphs 3 and 6(c)will be made by
the Valuation Agent as of the Valuation Time with respect to a Valuation Date. The Valuation Agent will notify each
party(or the other party,if the Valuation Agent is a party)of its calculations not later than the Notification Time on the
Local Business Day following the applicable Valuation Date(or in the case of Paragraph 6(c), following the date of
calculation). Upon request by the Assignee, for the first three Valuation Dates hereunder,the Valuation Agent shall
provide in reasonable detail the methodology and assumptions used in preparing its calculations; provided, however,
the Valuation Agent shall not be required to disclose any confidential,proprietary information that it may have used in
connection therewith.
(d) Substitutions.
(i) Upon notice to the Secured Party specifying the items of Posted Credit Support to be exchanged,the
Pledgor may,on any Local Business Day,Transfer to the Secured Party substitute Eligible Credit Support(the
"Substitute Credit Support");and
(ii) subject to Paragraph 4(a),the Secured Party will Transfer to the Pledgor the items of Posted Credit
Support specified by the Pledgor in its notice not later than the Local Business Day following the date on
which the Secured Party receives the Substitute Credit Support;provided that the Secured Party will only be
obligated to Transfer Posted Credit Support with a Value as of the date of Transfer of that Posted Credit
Support equal to the Value as of that date of the Substitute Credit Support;provided,further however, that
any request to substitute must seek the substitution of Eligible Credit Support or Posted Credit Support in
an amount in excess of the Pledgor's Minimum Transfer Amount".
ANNEX 1
Page 2
Paragraph 5. Dispute Resolution
If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation of a Delivery Amount or a Return
Amount or(II)the Value of any Transfer of Eligible Credit Support or Posted Credit Support,then(1)the Disputing
Party will notify the other party and the Valuation Agent(if the Valuation Agent is not the other party)not later than
the close of business on the Local Business Day following(X)the date that the demand is made under Paragraph 3 in
case of(I) above or(Y)the date of Transfer in the case of(II) above, (2) subject to Paragraph 4(a), the appropriate
party will Transfer the undisputed amount to the other party not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case of(I) above or (Y) the date of
Transfer in the case of(II)above,(3)the parties will consult with each other in an attempt to resolve the dispute and(4)
if they fail to resolve the dispute by the Resolution Time,then:
(i) In the case of a dispute involving a Delivery Amount or Return Amount,the Valuation Agent will
recalculate the Exposure and the Value as of the Recalculation Date by:
(A) calculating the Exposure by seeking four actual quotations at mid-market from Reference
Market-makers(other than Seller or its Affiliates,unless otherwise agreed to by Assignee in writing)
and taking the arithmetic average of those obtained;provided that if four quotations are not available,
then fewer than four quotations may be used; and if no quotations are available,then the Valuation
Agent's original calculations will be used;and
(B) calculating the Value, if disputed,of Posted Credit Support consisting of securities by the
Valuation Agent determining based upon the bid quotations of any generally recognized dealer
(other than Seller or its Affiliates, unless otherwise agreed to by Assignee in writing), and adding
thereto any interest accrued but not paid to any person with respect to such securities through the
day on which the determination is made and multiplying the sum by the applicable Valuation
Percentage, if any;provided, however, that Assignee may submit bid quotations from two other
recognized dealers in which case the Value of such securities shall be the mean of the two
quotations sourced by the Valuation Agent and the two quotations submitted by Assignee.
(ii) In the case of a dispute involving the Value of any Transfer of Eligible Credit Support or Posted
Credit Support the Valuation Agent will recalculate the Value as of the date of Transfer as described in
Paragraph 5(i)(B)above.
Following a recalculation pursuant to this Paragraph,the Valuation Agent will notify each party(or the other party, if
the Valuation Agent is a party)not later than the Notification Time on the Local Business Day following the Resolution
Time. The appropriate party will,upon demand following that notice by the Valuation Agent or a resolution pursuant
to(3)above and subject to Paragraphs 4(a)and 4(b),make the appropriate Transfer.
Paragraph 6. Holding and Using Posted Collateral
(a) Care of Posted Collateral The Secured Party will exercise reasonable care to assure the safe custody of all
Posted Collateral to the extent required by applicable law, and in any event the Secured Party will be deemed to have
exercised reasonable care if it exercises at least the same degree of care as it would exercise with respect to its own
property. Except as specified in the preceding sentence,the Secured Party will have no duty with respect to Posted
Collateral, including, without limitation, any duty to collect any Distributions, or enforce or preserve any rights
pertaining thereto.
ANNEX 1
Page 3
(b) Eligibility to Hold Posted Collateral;Custodians.
(i) General. The Pledgor will appoint an agent reasonably acceptable to the Secured Party (a
"Custodian") to hold Posted Collateral for the benefit of the Secured Party. The Pledgor will exercise
reasonable care in the selection and monitoring of the Custodian. The Pledgor's obligations to make any
Transfer will be discharged by making the Transfer to that Custodian. The holding of Posted Collateral by a
Custodian will be deemed to be the holding of that Posted Collateral by the Secured Party. The Secured Party
agrees that Posted Collateral held at the Custodian shall be subject to a tri-party collateral account control
agreement substantially in the form of Schedule V attached hereto.
(ii) Failure to Satish Conditions. If the Custodian fails to satisfy conditions specified in (b)(iv) for
holding Posted Collateral (the "Ineligible Custodian"), then the Pledgor will, not later than five (5) Local
Business Days after the demand, identify a Custodian to Transfer all Posted Collateral held by the Ineligible
Custodian to a Custodian that satisfies those conditions("Replacement Custodian")and Transfer or cause the
Ineligible Custodian to Transfer all Posted Collateral to Replacement Custodian within ten (10) Local
Business Days thereafter. The Secured Party agrees that all Posted Collateral transferred to such Replacement
Custodian shall be subject to a tri-party collateral account control agreement substantially in the form of
Schedule V attached hereto, with such amendments as shall be requested by the Replacement Custodian;
provided,however,the obligation of the Pledgor to effect such Transfer shall be subject to the Secured Party's
not unreasonably withholding its consent to such amendments.
(iii) [Reserved]
(iv) Custodian Conditions. A party shall be eligible to serve as a Custodian if and for so long as it(i)is
not affiliated with either of the Parties, (ii) is a trust company or commercial bank with trust powers,
organized under the laws of the United States of America or any state or province thereof and subject to
supervisions or examination by federal or state authority, having a combined capital surplus of at least U.S.
$10,000,000,000 and(iii)shall have outstanding long term unsecured unsubordinated debt securities ratings of
at least"A3"by Moody's and"A-"by S&P.
(c) Distributions and Interest Amount.
(i) Distributions. Subject to Paragraph 4(a), if the Secured Party receives or is deemed to receive
Distributions on a Local Business Day, it will Transfer to the Pledgor not later than the following Local
Business Day any Distributions it receives or is deemed to receive to the extent that a Delivery Amount would
not be created or increased by that Transfer,as calculated by the Valuation Agent(and the date of calculation
will be deemed to be a Valuation Date for this purpose).
(ii) Interest Amount The Interest Amount shall compound daily. Subject to Paragraph 4(a), in lieu of
any interest,dividends or other amounts paid or deemed to have been paid with respect to Posted Collateral in
the form of Cash(all of which may be retained by the Secured Party),the Secured Party will Transfer to the
Pledgor in arrears on the last Local Business Day of each calendar month the Interest Amount to the extent
that a Delivery Amount would not be created or increased by that Transfer, as calculated by the Valuation
Agent (and the date of calculation will be deemed to be a Valuation Date for this purpose). The Interest
Amount or portion thereof not Transferred pursuant to this Paragraph will constitute Posted Collateral in the
form of Cash and will be subject to the security interest granted under Paragraph 2.
Paragraph 7. Events of Default
An Event of Default will exist with respect to a party under this Annex if:
(i) that party fails (or fails to cause the Custodian) to make, when due, any Transfer of Posted Credit
Support,as applicable(including for the avoidance of doubt a Transfer to a Replacement Custodian pursuant
to Paragraph 6(b)(ii) of this Annex), required to be made by it and that failure continues for two Local
Business Days after notice of that failure is given to that party;or
ANNEX I
Page 4
(ii) that party fails to comply with or perform any agreement or obligation other than those specified in
Paragraph 7(i)and that failure continues for 30 days after notice of that failure is given to that party.
Paragraph 8. Certain Rights and Remedies
(a) Secured Party's Rights and Remedies. If at any time(i)an Event of Default with respect to the Pledgor has
occurred and is continuing, or(ii)a Section 15.3 Termination Event has occurred and is continuing following Assignee
providing Seller at least two (2) Local Business Days' prior written notice that such Section 15.3 Termination Event
has occurred then,unless the Pledgor has paid in full all of its Obligations that are then due and payable,and in addition
to the rights and remedies set forth in the Agreement, the Secured Party may exercise one or more of the following
rights and remedies:
(i) all rights and remedies available to a secured party under applicable law with respect to Posted
Collateral held by the Secured Party;
(ii) any other rights and remedies available to the Secured Party under the terms of Other Posted
Support,if any;
(iii) the right to Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any obligation
of the Secured Party to Transfer that Posted Collateral);and
(iv) the right to liquidate any Posted Collateral held by the Secured Party through one or more public or
private sales or other dispositions with such notice,if any,as may be required under applicable law,free from
any claim or right of any nature whatsoever of the Pledgor,including any equity or right of redemption by the
Pledgor(with the Secured Party having the right to purchase any or all of the Posted Collateral to be sold)and
to apply the proceeds (or the Cash equivalent thereof) from the liquidation of the Posted Collateral to any
amounts payable by the Pledgor with respect to any Obligations in that order as the Secured Party may elect.
Each party acknowledges and agrees that Posted Collateral in the form of securities may decline speedily in value and
is of a type customarily sold on a recognized market,and,accordingly,the Pledgor is not entitled to prior notice of any
sale of that Posted Collateral by the Secured Party, except any notice that is required under applicable law and cannot
be waived.
(b) Pledgor's Rights and Remedies. If at any time an Event of Default has occurred or been designated with
respect to the Secured Party,then:
(i) the Pledgor may exercise all rights and remedies available to a Pledgor under applicable law or in
equity (including, but not limited to, specific performance) with respect to Posted Collateral held by the
Secured Party;
(ii) the Pledgor may exercise any other rights and remedies available to the Pledgor under the terms of
Other Posted Support,if any;
(iii) the Secured Party will be obligated immediately to Transfer such Posted Collateral and Other Posted
Support and any Interest Amount required to be Transferred to the Pledgor pursuant to Paragraphs 3(b), 5 or
6(c),respectively;and
(iv) to the extent that Posted Collateral or the Interest Amount is not so Transferred pursuant to (iii)
above,the Pledgor may:
(A) Set-off any amounts payable by the Pledgor with respect to any Obligations against any
Posted Collateral or the Cash equivalent of any Posted Collateral held by the Secured Party(or any
obligation of the Secured Party to Transfer the applicable Posted Collateral);and
ANNEX 1
Page 5
(B) to the extent that the Pledgor does not Set-off under (iiiXA) above, withhold payment of
any remaining amounts payable by the Pledgor or deliveries required to be made by the Pledgor in
each case with respect to any Obligations,up to the Value of any remaining Posted Collateral held by
the Secured Party,until the applicable Posted Collateral is Transferred to the Pledgor.
(c) Deficiencies and Excess Proceeds. The Secured Party will Transfer to the Pledgor any proceeds remaining
after liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in full of all amounts
payable by the Pledgor with respect to any Obligations; the Pledgor in all events will remain liable for any amounts
remaining unpaid after any liquidation,Set-off and/or application under Paragraphs 8(a)and 8(b).
(d) Final Returns. When no amounts are or thereafter may become payable by the Pledgor with respect to any
Obligations,the Secured Party will Transfer to the Pledgor all Posted Credit Support and the Interest Amount,if any.
Paragraph 9. Representations
(a) Seller, as Pledgor, represents to Assignee, as Secured Party (which representation will be deemed to be
repeated by Seller as of each date on which it, as the Pledgor, Transfers Eligible Collateral or Other Posted Support)
that:
(i) it has the power to grant a security interest in and lien on any Eligible Collateral it Transfers as the
Pledgor and has taken all necessary actions to authorize the granting of that security interest and lien;
(ii) it is the sole owner of or otherwise has the right to Transfer all Eligible Collateral it Transfers to the
Secured Party hereunder, free and clear of any security interest, lien,encumbrance or other restrictions other
than the security interest and lien granted under Paragraph 2;and
(iii) upon the Transfer of any Eligible Collateral to the Secured Party under the terms of this Annex,the
Secured Party will have a valid and perfected first priority security interest therein(assuming that any central
clearing corporation or any third-party financial intermediary or other entity not within the control of the
Pledgor involved in the Transfer of that Eligible Collateral gives the notices and takes the action required of it
under applicable law for perfection of that interest).
(b) Each party represents to the other that(which representation will be deemed to be repeated by the parties as of
each date there is a Transfer of Eligible Collateral or Other Posted Support):
(i) the performance by it of its obligations under this Annex will not result in the creation of any
security interest, lien or other encumbrance on any Posted Collateral other than the security interest and lien
granted under Paragraph 2;and
(ii) no consent, approval or other authorization of any governmental authority is required in connection
with the entry into this Annex and the performance of its obligations hereunder including without limitation
the Transfer of Eligible Collateral or Other Eligible Support hereunder.
Paragraph 10. Expenses
(a) General. Except as otherwise provided in Paragraphs 10(b) and 10(c), each party will pay its own
costs and expenses in connection with performing its obligations under this Annex and neither party will be liable for
any costs and expenses incurred by the other party in connection herewith.
(b) Posted Credit Support. The Pledgor will promptly pay when due all taxes, assessments or charges
of any nature that are imposed with respect to Posted Credit Support held by the Secured Party upon becoming aware
of the same.
ANNEX 1
Page 6
(c) Liquidation/Application of Posted Credit Support. All reasonable costs and expenses actually
incurred by or on behalf of the Secured Party in connection with the liquidation and/or application of any Posted Credit
Support under Paragraph 8(a)will be payable,on demand,to Assignee by Seller.
Paragraph 11. Miscellaneous
(a) Default Interest. If either party fails to make, when due, any Transfer of Posted Collateral or the Interest
Amount it will be obliged to pay the other party (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property that were required to be Transferred,from
(and including)the date that the Posted Collateral or Interest Amount was required to be Transferred to(but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest will be calculated on the basis of daily
compounding and the actual number of days elapsed.
(b) Further Assurances. Promptly following a demand made by a party,the other party will execute,deliver,file
and record any financing statement, specific assignment or other document and take any other action that may be
necessary or desirable and reasonably requested by that party to create, preserve, perfect or validate any security
interest or lien granted under Paragraph 2,to enable that party to exercise or enforce its rights under this Annex with
respect to Posted Credit Support or an Interest Amount or to effect or document a release of a security interest on
Posted Collateral or an Interest Amount.
(c) Further Protection. The Pledgor will promptly give notice to the Secured Party of, and defend against, any
suit, action,proceeding or lien that involves Posted Credit Support Transferred by the Pledgor or that could adversely
affect the security interest and lien granted by it under Paragraph 2.
(d) Good Faith and Commercially Reasonable Manner. Performance of all obligations under this Annex,
including,but not limited to,all calculations,valuations and determinations made by either party,will be made in good
faith and in a commercially reasonable manner.
(e) Demands and Notices. All demands, specifications and notices given by a party under this Annex will be
made as specified in the Notices Section of the Agreement,except that the address for Seller for such purposes shall be:
Citigroup Energy Inc.
Collateral Management Group
499 Washington Blvd.,7th Floor
Jersey City,NJ 07310
Telephone no.(212)816-8090
Email: derivatives.marginaciti.com
With a copy to:
Citigroup Energy Inc.
Attn: Commodities Structuring
Address:2800 Post Oak Blvd.
Suite 500
Houston,Texas 77056
Fax: 713-752-5208
Email:americascommoditiesstructuring@citi.com
(f) Form of Collateral All non-Cash Eligible Collateral or Posted Collateral that is Transferred by either party
shall be recorded in book entry form by a Federal Reserve Bank,as fiscal agent,and Pledgor shall(i)deliver to Secured
Party a listing of such credit support by title (or series), unpaid principal amount and maturity date and (ii) cause a
Federal Reserve Bank to hold such credit support for the account of the Secured Party or the Custodian (in a custody
account),as applicable,in the name of the Secured Party or Custodian,as applicable.
ANNEX 1
Page 7
(g) No Third Party Rights. This Annex has been and is made solely for the benefit of Assignee and Seller and
their respective assigns,and no other person,partnership,association,corporation or other entity shall acquire or have
any right under or by virtue of this Annex.
(h) Document Delivery. The Secured Party shall deliver upon signing of this Annex (i) evidence reasonably
satisfactory to the Pledgor of its authority to enter into this Annex and (ii) evidence reasonably satisfactory to the
Pledgor of the authority and genuine signature of the individual signing this Annex to execute the same. Such evidence
shall include but not be limited to the following:
(i) a resolution of the City Counsel of the City of Vernon(together with the attestation of the City Clerk
of the City of Vernon with respect to(A)and(B))authorizing(A)entry into this Annex and the Settlement and Release
Agreement by and among Seller; Citibank, N.A.; Citigroup, Inc. and Assignee dated as of 9 August 2016 (the
"Settlement Agreement"), and (B) the Mayor of the City of Vernon or another person authorized by resolution to
execute this Annex and the Settlement Agreement and bind Assignee,and
(ii) an opinion of Assignee's attorney as to the due authorization and execution of this Annex and the
Settlement Agreement reasonably acceptable to Seller.
Paragraph 12. Definitions
As used in this Annex:—
"Cash"means the lawful currency of the United States of America.
"Credit Rating" means, with respect to Seller and as of any date, the Credit Rating (as defined in Article I of the
Agreement)of the Guarantor in effect on such date.
"Credit Support Amount"has the meaning specified in Paragraph 3.
"Custodian"has the meaning specified in Paragraph 6(b)(i).
"Default Rate"means a rate per annum equal to the cost(without proof or evidence of any actual cost)to the relevant
payee(as certified by it)if it were to fund or of funding the relevant amount plus 1%per annum.
"Delivery Amount"has the meaning specified in Paragraph 3(a).
"Disputing Party"has the meaning specified in Paragraph 5.
"Distributions"means,with respect to Posted Collateral other than Cash,all principal,interest and other payments and
distributions of cash or other property with respect thereto. Distributions will not include any item of property acquired
by the Secured Party upon any disposition or liquidation of Posted Collateral or,with respect to any Posted Collateral
in the form of Cash,any distributions on that collateral,unless otherwise specified herein.
"Eligible Collateral"means the items specified as such on Schedule I attached to this Annex.
"Eligible Credit Support"means Eligible Collateral and Other Eligible Support.
"Exposure"means for any Valuation Date or other date for which Exposure is calculated and subject to Paragraph 5 in
the case of a dispute,the amount,if any,by which(i)the market value of the Undelivered Quantities(as defined in the
Agreement),exceeds(b)the Threshold applicable to Seller on such date.
"Interest Amount"means,with respect to an Interest Period,the aggregate sum of the amounts of interest calculated
for each day in that Interest Period on the principal amount of Posted Collateral in the form of Cash held by the Secured
Party on that day,determined by the Secured Party for each such day as follows:
ANNEX 1
Page 8
(x) the amount of Cash on that day;multiplied by
(y) the Interest Rate in effect for that day;divided by
(z) 360.
"Interest Period"means the period from(and including)the last Local Business Day on which an Interest Amount was
Transferred(or,if no Interest Amount has yet been Transferred,the Local Business Day on which Posted Collateral in
the form of Cash was Transferred to or received by the Secured Party)to (but excluding)the Local Business Day on
which the current Interest Amount is to be Transferred.
"Interest Rate"means be the overnight ask rate in effect for such day,as set forth opposite the caption"ON"under the
heading"EURO-DOLLAR" on Telerate Page 4756 or any successor page thereto on or about 11:00 a.m.,New York
time,on such day,or,if no successor page is quoted,any page agreed to by the parties.
"Letter of Credit" means an irrevocable, standby letter of credit, issued by a major U.S. commercial bank or a U.S.
branch office of a foreign bank which is satisfactory to the Secured Party,in its reasonable discretion utilizing the form
set forth in Schedule IV attached hereto,with such changes to the terms in that form as the issuing bank may require
and as may be acceptable to the Secured Party; where such letter of credit bank (i)has a senior unsecured long term
debt rating of"A-"or better by S&P and"A3"or better by Moody's and(ii)has a combined capital surplus of at least
$10,000,000,000. Each Letter of Credit shall be a Credit Support Document. Letters of Credit shall be issued and
maintained in accordance with the provisions set forth in Schedule III attached hereto.
"Local Business Day"means any Business Day as set forth in the Agreement.
"Minimum Transfer Amount"means,with respect to either party, $100,000;provided, however,that with respect to
Seller, if Seller has no Credit Rating or if the Credit Rating of Seller is not at least"BBB-"from S&P or"Baa3"from
Moody's,the Minimum Transfer Amount for Seller shall be zero.
"New York Banking Day" means any day on which commercial banks are open for general business (including
dealings in foreign exchange and foreign currency deposits)in New York City.
"Notification Time" means 10:00 a.m., New York time on a Local Business Day; provided, however, that,
notwithstanding Paragraph 4(b),(x)with regard to Transfers of Eligible Credit Support or Posted Credit Support in the
form of Cash, if a request for Transfer is made by the Notification Time,then the relevant Transfer shall be made not
later than the close of business on the day on which such request is received,or,if such day is not a Local Business Day
or,if such request is received after the Notification Time,not later than the close of business on the next Local Business
Day,and(y)with regard to Transfers of other forms of Eligible Credit Support or Posted Credit Support,the relevant
Transfer shall be made in accordance with Paragraph 4(b).
"Obligations"means,with respect to a party,all present and future obligations of that party under the Agreement.
"Other Eligible Support"means a Letter of Credit.
"Other Posted Support"means all Other Eligible Support Transferred to the Secured Party that remains in effect for
the benefit of that Secured Party.
"Pledgor"means Seller.
"Posted Collateral"means all Eligible Collateral,other property,Distributions,and all proceeds thereof that have been
Transferred to or received by the Secured Party under this Annex and not Transferred to the Pledgor pursuant to
Paragraph 3(b),4(d)(ii)or 6(c)(i)or released by the Secured Party under Paragraph 8. Any Interest Amount or portion
thereof not Transferred pursuant to Paragraph 6(c)(ii)will constitute Posted Collateral in the form of Cash.
"Posted Credit Support"means Posted Collateral and Other Posted Support.
ANNEX 1
Page 9
"Recalculation Date"means the Valuation Date that gives rise to the dispute under Paragraph 5;provided, however,
that if a subsequent Valuation Date occurs under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date"means the most recent Valuation Date under Paragraph 3.
"Reference Market-makers"means four leading dealers in the relevant market selected by the Seller in good faith(i)
from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the
time in deciding whether to offer or to make an extension of credit and(ii)to the extent practicable,from among such
dealers having an office in the same city.
"Resolution Time"means 1:00 p.m.,New York time,on the Local Business Day following the date on which notice is
given that gives rise to a dispute under Paragraph 5.
"Return Amount"has the meaning specified in Paragraph 3(b).
"Secured Party"means either party, when that party (i) makes a demand for or is entitled to receive Eligible Credit
Support under Paragraph 3(a)or(ii)holds or is deemed to hold Posted Credit Support.
"Section 15.3 Termination Date"has the meaning specified in the Agreement.
"Section 15.3 Termination Event"has the meaning specified in the Agreement.
"Seller Delivery Failure"has the meaning specified in the Agreement.
"Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or
requirement to which the applicable party is entitled or subject under applicable law.
"Substitute Credit Support"has the meaning specified in Paragraph 4(d)(i).
"Substitution Date"has the meaning specified in Paragraph 4(d)(ii).
"Threshold"means,with respect to Seller, as Pledgor, and as of any date,the amount set forth in Schedule H hereto
under the caption"Threshold" set forth opposite Seller's Credit Rating. If at any time Seller shall not have a Credit
Rating by any Rating Agency,then the Threshold for Seller shall be zero (USD 0.00). In the event of a split rating
classification by the Rating Agencies, the Threshold shall be the amount opposite the lower of the Credit Ratings on
Schedule II hereto.
"Transfer" means, with respect to any Eligible Credit Support, Posted Credit Support or Interest Amount, and in
accordance with the instructions of the Secured Party,Pledgor or Custodian,as applicable:
(i) in the case of Cash, payment or delivery by wire transfer into one or more bank accounts specified
by the recipient;
(ii) in the case of certificated securities that cannot be paid or delivered by book-entry, payment or
delivery in appropriate physical form to the recipient or its account accompanied by any duly executed
instruments of transfer, assignments in blank, transfer tax stamps and any other documents necessary to
constitute a legally valid transfer to the recipient;
(iii) in the case of securities that can be paid or delivered in book-entry,the giving of written instruments
to the relevant depository institution or other entity specified by the recipient, together with a written copy
thereof to the recipient, sufficient if complied with to result in a legally effective transfer of the relevant
interest to the recipient;and
(iv) in the case of Other Eligible Support,for purposes of Paragraph 3(a),(1)delivery by the Pledgor to
the Secured Party,at the address specified in this Annex,of the Letter of Credit or(2)delivery to the Secured
ANNEX 1
Page 10
Party,of an amendment of such Letter of Credit extending the term or increasing the amount available to the
Secured Party,thereunder; and for purposes of Paragraph 3(b),return of the Letter of Credit undrawn by the
Secured Party to the Pledgor,at the address specified in this Annex,or agreement by the Secured Party,to an
amendment to the Letter of Credit in form and substance satisfactory to the Pledgor, reducing the amount
available to the Secured Party,thereunder.
"Valuation Agent"means Seller for all purposes.
"Valuation Date"means,with respect to the determination of Exposure,the first Local Business Day of each month or
any other Local Business Day upon the reasonable request of either party, and with respect to the determination of
Value of Eligible Credit Support or Posted Credit Support, the first Local Business Day of each week or any other
Local Business Day upon the reasonable request of either party.
"Valuation Percentage"means, for any item of Eligible Collateral,the applicable percentage specified in Schedule I
attached hereto.
"Valuation Time"means,with respect to the determination of Exposure,Value of Eligible Credit Support and Posted
Credit Support, the close of business on the Local Business Day immediately before the Valuation Date or date of
calculation,as applicable.
"Value"means for any Valuation Date or other date for which Value is calculated, and subject to Paragraph 5 in the
case of a dispute,with respect to:
(i) Eligible Collateral or Posted Collateral that is:
(A) Cash,the amount thereof;and
(B) a security, the bid price obtained by the Valuation Agent multiplied by the applicable
Valuation Percentage,if any;
•
(ii) Posted Collateral that consists of items that are not specified as Eligible Collateral,zero;and
(iii) Other Eligible Support and Other Posted Support,the stated amount thereof as set forth therein.
ANNEX 1
Page 11
CITIGROUP ENERGY INC. THE CITY 0 VERNON
By: B
/ /
Name: Name: Carlos Fandino
Title: Title:City Administrat
ATTEST:
By: / ,
(----)
Name: .r ia E. L41 la
Title:C'ty Clerk
APPRO ED AS TO FORM:
PBy: IN . I I4 W
Name: ema Watel
Title: City Attorney
ANNEX 1
Page 12
CITIGROUP ENERGY INC. THE CITY OF VERNON
11.
By: 01.1. d'. By:
Name: oria arp Name:
Title: Managing-0 erector Title:
/411) ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
ANNEX 1
Page 12
Schedule I
ELIGIBLE COLLATERAL
Valuation Percentage
(A) Cash(denominated in US Dollars) 100%
(B) (x) Negotiable debt obligations issued by the U.S. Treasury
Department or the Government National Mortgage Association
("Ginnie Mae"), or (y) mortgage backed securities issued by
Ginnie Mae(but with respect to either(x)or(y),excluding interest
only or principal only stripped securities, securities representing
residual interests in mortgage pools,or securities that are not listed
on a national securities exchange or regularly quoted in a national
quotation service)and in each case having a remaining maturity of:
(i) less than one year 100%
(ii) one year or greater but less than 10 years 98%
(C) (x) Negotiable debt obligations issued by the Federal Home 95%
Loan Mortgage Association ("Freddie Mac") or the Federal
National Mortgage Association ("Fannie Mae") or (y) mortgage-
backed securities issued by Freddie Mac or Fannie Mae but
excluding interest only or principal only stripped securities,
securities representing residual interests in mortgage pools, or
securities that are not listed on a national securities exchange or
regularly quoted in a national quotation service, in either case
having a maturity of not more than 10 years.
(D) Any other collateral acceptable to the Secured Party in its sole As determined by the
discretion Secured Party in its sole
discretion
Schedule I-Page 1
Schedule II
THRESHOLDS
Credit Rating
(Moody's/S&P) Threshold
A3/A-and above Infinite
Baal/BBB+to Baa2/BBB $0
and below or not rated
Schedule II-Page 1
Schedule III
LETTER OF CREDIT PROVISIONS
Letters of Credit. Other Eligible Support provided by the Pledgor("X") for the benefit of the Secured
Party("Y")in the form of a Letter of Credit shall be subject to the following provisions.
(a) A Letter of Credit(substantially in the form of Schedule IV hereto with a Valuation Percentage
of 100%) shall be delivered by X to such address as Y shall specify and shall be maintained for the
benefit of Y or its designee. X shall (i) cause the renewal of each outstanding Letter of Credit on a
timely basis as provided in the relevant Letter of Credit,(ii) if the bank that issued an outstanding Letter
of Credit("Issuing Bank")has indicated its intent not to renew such Letter of Credit,provide a substitute
Letter of Credit at least twenty(20)Local Business Days prior to the expiration of the outstanding Letter
of Credit,and(iii)if a bank issuing a Letter of Credit shall fail to honor Y's properly documented request
to demand payment under an outstanding Letter of Credit,provide for the benefit of Y a substitute Letter
of Credit that is issued by a bank acceptable to Y, other than the bank failing to honor the outstanding
Letter of Credit,within two (2)Local Business Days after such refusal. Any failure of the second bank
to honor Y's proposed document request to demand payment under an outstanding Letter of Credit or
failure by X to deliver such substitute Letter of Credit shall constitute an Event of Default under this
Agreement.
(b) Upon the occurrence of a Letter of Credit Default,X agrees to either cause the delivery to Y of a
substitute Letter of Credit,or, alternatively, X shall provide other Eligible Collateral, in each case on or
before the sixtieth Local Business Day after the occurrence thereof. "Letter of Credit Default" shall
mean with respect to an outstanding Letter of Credit, the occurrence of any of the following events: (i)
the bank issuing the Letter of Credit shall fail to maintain a Credit Rating of at least "A-" by S&P and
"A3" by Moody's; (ii) the bank issuing the Letter of Credit shall fail to comply with or perform its
obligations under such Letter of Credit; (iii) the bank issuing such Letter of Credit shall disaffirm,
disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; (iv)
such Letter of Credit shall expire or terminate, or shall fail or cease to be in full force and effect at any
time during the term of this Agreement; or(v) any event analogous to a Bankruptcy as defined in this
Agreement shall occur with respect to the bank issuing the Letter of Credit;provided, however, that no
Letter of Credit Default shall occur in any event with respect to a Letter of Credit after the time such
Letter of Credit is required to be cancelled or returned to X, in accordance with the terms of this
Agreement.
(c) As one method of providing additional Posted Credit Support,X may increase the amount of an
outstanding Letter of Credit or establish one or more additional Letters of Credit.
(d) If consent of Y is required to be given to the Issuing Bank with respect to any Transfer of Other
Eligible Support,Y agrees to promptly give such consent to the Issuing Bank upon demand of X.
(e) (i) Upon or at any time after the occurrence of an Event of Default, Y may demand payment
under any outstanding Letter of Credit upon presentation to the bank issuing the Letter of Credit of one
or more certificates in accordance with the specific requirements of any such Letter of Credit. Cash
received from a demand under the Letter of Credit shall be deemed Posted Collateral and shall either be
(y) applied against all amounts that are due and owing from X but have not been paid to Y under this
Agreement or (z) held by Y as Posted Collateral in accordance with this Annex. Notwithstanding Y's
receipt of Cash from any demand under a Letter of Credit, X shall remain liable for any amounts owing
to Y and remaining unpaid after the application of the amounts so drawn by Y.
(ii) Upon or at any time after the occurrence or deemed occurrence of a Section 15.3
Termination Date as a result of a Section 15.3 Termination Event and the failure of X to make all
payments due and owing to Y in accordance with the terms of this Agreement, Y may, subject to the
Schedule III-Page 1
availability of such amounts,demand payment under any outstanding Letter of Credit in an amount equal
to such amounts owing to it upon presentation to the bank issuing the Letter of Credit of one or more
certificates in accordance with the specific requirements of any such Letter of Credit. Notwithstanding
Y's receipt of Cash from any demand under a Letter of Credit,X shall remain obligated to Y to Transfer
sufficient Eligible Collateral to Y in accordance with the terms of this Annex. In addition, X shall
remain obligated to Y for any amounts owing to Y and remaining unpaid after the application of any
amounts so demanded by Y.
(f) The provisions of this Schedule III shall constitute agreements for all purposes of this
Agreement and this Annex.
(g) X covenants and agrees that so long as a Transaction shall remain outstanding under this
Agreement,no Letter of Credit shall be secured by any mortgage, security interest,pledge, lien or other
encumbrance upon the property of X. Y covenants and agrees that it shall not pledge,encumber or grant
a security interest in any of its right,title or interest into and under any Letter of Credit or Other Eligible
Support.
(h) In all cases,the costs and expenses(including but not limited to the reasonable costs, expenses,
and attorneys' fees of Y)of establishing,renewing,substituting,canceling,and increasing the amount of
a Letter of Credit shall be borne by X.
Schedule III-Page 2
Schedule IV
IRREVOCABLE STANDBY LETTER OF CREDIT
Letter of Credit No. Issue Date: ,20
Beneficiary: Account Party:
[Name of Beneficiary] [Name of Account Party]
[Address] [Address of Account Party]
Attn: Attn:
Ladies and Gentlemen:
We hereby establish in favor of you,the City of Vernon as successor in interest to the Vernon
Natural Gas Financing Authority (the`Beneficiary"), at the request and for the account of Citigroup Energy Inc.
(the"Account Party"),with respect to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27,
2006 between the Account Party and the Vernon Natural Gas Financing Authority,as may be amended from time
to time (the "Agreement"), our Irrevocable Standby Letter of Credit No. (the "Credit") whereby we
irrevocably authorize you to demand from us, in accordance with the terms and conditions hereinafter set forth,in
an amount not to exceed in the aggregate $ . Capitalized terms not otherwise defined herein or
elsewhere in the Credit shall have the meanings specified in the Agreement.
Funds hereunder are available to you against your demand for payment hereunder delivered to us by
courier or facsimile at the address specified below with both of the following items attached:
1. A certificate, dated the date of such demand for payment, signed by the City Administrator of the
Beneficiary, in the form of Exhibit A hereto,accompanied by the certificate of the City Clerk of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
City Administrator of the Beneficiary and is authorized to submit such demand by all necessary
corporate authorization,which certificate of such City Clerk shall certify as to a specimen signature
of such signatory;and
2. Either(x)a statement,signed by a Managing Director of the Account Party,in the form of Exhibit B
hereto, accompanied by the certificate of the Secretary or an Assistant Secretary of the Account
Party substantially to the effect that the signatory of such certificate is duly incumbent as a
Managing Director of the Account Party and is authorized to submit such demand by all necessary
corporate authorization,which certificate of such Secretary or Assistant Secretary shall certify as to
a specimen signature of such signatory; or (y) certificate, dated the date of such demand for
payment, signed by the City Administrator of the Beneficiary, in the form of Exhibit C hereto,
accompanied by the certificate of the City Clerk of the Beneficiary substantially to the effect that the
signatory of such certificate is duly incumbent as the City Administrator of the Beneficiary and is
authorized to submit such certificate by all necessary corporate authorization, which certificate of
such City Clerk shall certify as to a specimen signature of such signatory, to which there shall be
attached an order of a court of the State of New York or of a Federal court of the United States of
America,dated a date not less than sixty(60)days prior to the date of such demand, substantially to
the effect that an amount not less than the amount demanded under such demand for payment is
ordered to be immediately due and payable by Account Party under the Sale Agreement; (z) a
certificate, dated the date of such demand for payment, signed by the City Administrator of the
Beneficiary, in the form of Exhibit D hereto, accompanied by the certificate of the City Clerk of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
City Administrator of the Beneficiary and is authorized to submit such certificate by all necessary
Schedule IV-Page 1
corporate authorization,which certificate of such City Clerk shall certify as to a specimen signature
of such signatory,to which there shall be attached a signed and notarized proof of claim filed by the
Beneficiary with a bankruptcy court having jurisdiction over a case under the U.S.Bankruptcy Code
under which the Account Party is a debtor for the amount specified in such demand; (aa) a
certificate, dated the date of such demand for payment, signed by the City Administrator of the
Beneficiary, in the form of Exhibit E hereto, accompanied by the certificate of the City Clerk of the
Beneficiary substantially to the effect that the signatory of such certificate is duly incumbent as the
City Administrator of the Beneficiary and is authorized to submit such certificate by all necessary
corporate authorization,or(bb)a certificate,dated the date of such demand for payment and dated a
date not more than twenty(20)New York Banking Days prior to the expiration of the Credit as such
expiration may be amended from time to time, signed by the City Administrator of the Beneficiary,
in the form of Exhibit F hereto, accompanied by the certificate of the City Clerk of the Beneficiary
substantially to the effect that the signatory of such certificate is duly incumbent as the City
Administrator of the Beneficiary and is authorized to submit such certificate by all necessary
corporate authorization.
Partial demands are allowed under this Credit. The amount which may be demanded under this
Credit shall be automatically reduced by the amount of any demands previously paid by us hereunder. Multiple
demands for payment hereunder are permitted from time to time in an amount not to exceed in the aggregate the
amount specified in the first paragraph of this Credit.
Presentation of your Certificate shall be made on any day which is a New York Banking Day for
us at or prior to[5:00 p.m.(New York time)]at our office located at
Presentation must be made by hand,mail or courier service,to such address. If your presentation is made at such
office, in compliance with the other terms and conditions of this Credit,on or prior to the expiry date hereof,we
hereby irrevocably undertake to honor such presentation by close of business on the next New York Banking Day.
This Credit is effective immediately and expires at our close of business on
20 , (the "Initial Expiry Date"); provided however, that this Credit shall be automatically extended without
amendment for one or more additional six-month periods from the Initial Expiry Date or any subsequent expiry
date, unless at least 60 days prior to such date you receive a notice in writing by certified mail at the above
address, that we elect not to extend this Credit for such additional period. Upon your receipt of such a notice of
non-extension, you shall be entitled to make immediate demand for payment of the full amount available under
this Credit,by presentation of your Certificate.
This Credit shall be subject to the provisions of the International Standby Practices 1998,
International Chamber of Commerce Publication No. 590("ISP"),and as to matters not addressed by ISP,shall be
governed by the laws of the State of New York and applicable U.S.federal laws.
This Credit may not be amended, changed or modified without our express written consent and that of
the Beneficiary and the Account Party.
Very truly yours,
[ISSUING BANK]
Schedule IV-Page 2
EXHIBIT A
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ (the"Demand")'to which this Certificate is attached.
The undersigned hereby certifies that: (i) the amount demanded by the Demand is net of all amounts
due and payable by the undersigned to the Account Party under the Agreement for Purchase and Sale of
Natural Gas dated as of June 27, 2006 (the "Agreement") between the Account Party and the
undersigned; (ii) the amount demanded by the Demand has not been the subject of a prior demand
under the Credit; (iii) such amount is due and payable by the Account Party under the Agreement and
has not been paid; and(iv)the undersigned has made demand therefor on the Account Party pursuant to
the Agreement.
The Demand shall be paid to the following account:
[Insert Custodian Account details]
THE CITY OF VERNON
By:
Name:
Title:
' This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT B
[Form of Stipulation as to Amounts Due and Payable]
[Letterhead of Citigroup Energy Inc.]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder(the
"Demand")in the amount of$ 2 to which this Certificate is attached.
The undersigned hereby certifies that the amount demanded by the Demand is due and payable by the
undersigned to the Account Party under the Agreement for Purchase and Sale of Natural Gas dated as
of June 27, 2006 (the "Agreement") between the Account Party and the undersigned and has not been
paid.
CITIGROUP ENERGY INC.
By:
Name:
Title:
2 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT C
[Form of certificate of Beneficiary's ]
[Letterhead of the City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of $ 3 to which this Certificate is attached, and the order of a New York State or
Federal United States court to which this Certificate is attached(the"Order").
The undersigned hereby certifies that: (i) the Order is authentic and has not been amended, stayed,
rescinded or satisfied and remains in full force and effect; and (ii) either (A) no appeal from the Order
has been taken, and the period for the filing of any such appeal has lapsed, or (B) if any appeals from
such Order have been taken, such appeals have been finally denied, without further right of appeal, by a
competent court.
THE CITY OF VERNON
By:
Name:
Title:
3 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT D
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ a to which this Certificate is attached, and the proof of claim, a copy of which is
appended hereto, executed and filed by undersigned with the U.S. bankruptcy court having jurisdiction
over the pending bankruptcy pending case under which Citigroup Energy Inc. is the debtor(the "Proof
of Claim").
The undersigned hereby certifies that: (i) the Proof of Claim is authentic and has not been amended,
withdrawn, disallowed or rescinded and remains in full force and effect; and (ii) such Proof of Claim
was submitted to such bankruptcy court in good faith; and (iii) the undersigned has not received
payment in whole or part of the amount claimed pursuant to such Proof; and (iv) the amount claimed
pursuant to such Proof of Claim is the amount demanded pursuant to such Demand.
THE CITY OF VERNON
By:
Name:
Title:
° This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT E
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 5 to which this Certificate is attached, and evidence publicly available showing
that the Issuing Bank has a public rating of senior, unsecured, unenhanced indebtedness or deposits (1)
below A- with respect to Standard & Poor's Ratings Services, a Division of The McGraw-Hill
Companies, Inc., or any successor thereto or(2)below A3 with respect to Moody's Investors Services,
Inc., or any successor thereto (the "Credit Rating Downgrade") and (i) that such Credit Rating
Downgrade has occurred more than 60 New York business days prior to the date hereof and(ii)neither
Other Eligible Support nor Eligible Collateral has been provided to the undersigned in accordance with
Paragraph 3 of the Credit Support Annex attached as Annex I to the Agreement for Purchase and Sale
of Natural Gas, dated as of June 27, 2006 between the Account Party and the Vernon Natural Gas
Financing Authority, as may be amended from time to time.
The undersigned hereby certifies that the Credit Rating Downgrade is true and correct in all respects
and such information is publicly available.
THE CITY OF VERNON
By:
Name:
Title:
5 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
EXHIBIT F
[Form of certificate of Beneficiary's ]
[Letterhead of The City of Vernon]
,20
[Issuing Bank]
Your Letter of Credit No. (the"Credit")
Ladies and Gentlemen: Reference is made to the Credit, and to the demand for payment thereunder in
the amount of$ 6 to which this Certificate is attached, and the undersigned hereby certifies that as
of the date hereof, (1) the Credit, as amended, has less than twenty (20) New York business days to
expiration as of the date of this Certificate and(2)neither Other Eligible Support nor Eligible Collateral
has been provided to the undersigned in accordance with Paragraph 3 of the Credit Support Annex
attached as Annex I to the Agreement for Purchase and Sale of Natural Gas, dated as of June 27, 2006
between the Account Party and the Vernon Natural Gas Financing Authority, as may be amended from
time to time.
THE CITY OF VERNON
By:
Name:
Title:
6 This amount must equal the amount of the Demand for Payment in connection with which it is
submitted.
Schedule V
[Form of Tri-Party Collateral Account Control Agreement]
[To be provided]
REVISED CREDIT SUPPORT
AGREEMENT
CONTRACT/AMENDMENT SIGNATURE ROUTING FORM
CONTRACTOR: Citigroup Energy, Inc.
CONTRACT PURPOSE: Revised Credit Support Agreement and Ancillary Documents
CONTRACT IS: 0 FEDERAL 0 PREVAILING WAGE 0 COMPETITIVE SELECTION&NOTICED RFP
0 COMPETITIVE BID&NOTICED INVITATION TO BID
❑ EXEMPT FROM COMPETITIVE PROCESS(APPROVAL ATTACHED)
❑ SERVICES 0 MATERIALS ❑ BUDGETED ❑ NOT BUDGETED
TOTAL CONTRACT VALUE: $N/A Charge Acct.No(s)
Amendment Value $ ❑ Contract is an Amendment to Contract No. (if applicable)
RESPONSIBLE DEPARTMENT PERSON: Hema Patel PHONE: ext. 292
AUTHORIZATION: ❑x Approved by Council in closed session on October 4, 2016
(Check One) Resolution No.201k6- (if applicable)
❑ Approved by City Administrator on
Note:Attach supporting documentation
❑Amendment Approved by (if applicable)
ROUTING SEQUENCE: (Please Follow In Order-Do not use N/A) Initials Date
(1)Responsible Department Person
Checks substance of contract and assembles two(2)copies of G�l�" ldltl��lk%
contract, insurance&bond documents, certifies compliance
with Competitive Bidding and Purchasing Ordinance
(2)Liability and Claims ��. �� \N 1� ( IQ
Approves insurance and sureties, if bonds required C \� e\e\ ` 5-
(3)Finance(Purchasing) Q U I\°
Checks compliance with Competitive Bidding&Living Wage Ordinances
and reflected in current budget
(4)City Attorney ICdh
Approves contract as to form, verifies bonds and insurance included .t\ l
(5)City Signatory CAL ,o(1 2
Signs all copies on behalf of City
(6)City Clerk
/
Attests signatures,numbers, files contract, insurance and bonds,and A%2/0
transmits duplicate original to contractor, notifies IT to remove related RFP/bid
notice,notifies any"consultant"of duties to file Form 700, if applicable
Rev. 1/27/14
Execution Version
COLLATERAL ACCOUNT CONTROL AGREEMENT
AMONG
U.S. BANK NATIONAL ASSOCIATION,
As Securities Intermediary
CITY OF VERNON,
As Secured Party
AND
CITIGROUP ENERGY INC.,
As Pledgor
Dated as of October 4,2016
TABLE OF CONTENTS
Page
1. Definitions 4
2. Appointment and Status of Securities Intermediary; Account 6
(a) Appointment; Identification of Collateral 6
(b) Status of Securities Intermediary 6
(c) Use of Depositories 6
(d) Pledgor Representation 7
(e) Securities Intermediary's Representations, Warranties and Covenants 7
3. Collateral Services 7
(a) Return of Collateral to Pledgor 7
(b) Substitutions 8
(c) Deposit of Collateral 8
(d) Collateral Transfers 8
(e) Priority of Secured Party's Security Interest 8
(f) Notice of Adverse Claims 9
4. Notice of Exclusive Control 9
5. General Terms and Conditions 10
(a) Indemnification 10
(b) No Obligation Regarding Quality of Collateral 10
(c) No Responsibility Concerning the PSA, CSA and CEA 10
(d) No Duty of Oversight 11
(e) Advice of Counsel 11
(f) No Collection Obligations 11
(g) Fees and Expenses 11
(h) Reliance; Risk Acknowledgements; Additional Terms 11
(i) Account Disclosure 12
(j) Force Majeure 12
(k) No Implied Duties; Entire Agreement 12
6. Termination 12
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor 12
(b) Termination by Securities Intermediary 13
(c) Obligations Upon Termination 13
7. Miscellaneous 13
(a) Ambiguity in Notices 13
(b) Notices 13
(c) Cumulative Rights;No Waiver 14
2 of 23
(d) Severability; Amendments; Assignment 14
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver 14
(f) No Third Party Beneficiaries 15
(g) Headings 15
(h) Counterparts 15
(i) USA PATRIOT ACT 15
(j) Tax Forms 15
(k) New Authorized Persons 15
Schedule I 18
Schedule II 19
Exhibit A 21
Exhibit B 22
3 of 23
COLLATERAL ACCOUNT CONTROL AGREEMENT
This Collateral Account Control Agreement, and the exhibits and schedules thereto
(collectively, the "Agreement") is dated as of October 4, 2016 among Citigroup Energy Inc.
("Pledgor"), the City of Vernon ("Secured Party") and U.S. Bank National Association
("Securities Intermediary").
WITNESSETH:
WHEREAS, Secured Party and Pledgor have entered into an Agreement for Purchase and
Sale of Natural Gas dated as of June 27, 2006, including a Credit Support Annex thereto (as
amended from time to time, the "CSA") (such documents, collectively and as amended from
time to time, the "PSA") pursuant to which Pledgor has agreed to post and pledge certain
"Collateral" (as defined below) in order to secure the performance of Pledgor's obligations to
Secured Party under the PSA;
WHEREAS, Secured Party and Pledgor have requested Securities Intermediary to hold
Collateral to be posted by Pledgor and to perform certain other functions as more fully described
in this Agreement; and
WHEREAS, Securities Intermediary has agreed to hold such Collateral and to perform
such other functions, subject to the terms of this Agreement.
NOW THEREFORE, in consideration of the mutual promises set forth hereafter, the
parties hereto agree as follows:
1. Definitions. Whenever used in this Agreement,the following words shall have the
meanings set forth below:
"Account" shall mean the custody account segregated on the books and records of the
Securities Intermediary hereunder in the name of Pledgor (as the same may be re-
designated, renumbered or otherwise modified). The Account shall be deemed to consist
of a "securities account" (as defined in Section 8-501(a) of the UCC), in which any
securities pledged to Secured Party shall be held, and a "deposit account" (as defined in
Section 9-102(a)(29) of the UCC), in which any cash pledged to Secured Party shall be
held.
"Agreement" shall have the meaning set forth in the preamble.
"Authorized Person" shall mean each person listed in a notice in the form of Exhibit A
to this Agreement received by Securities Intermediary that certifies that such persons are
authorized to transmit or deliver Written Instructions on behalf of Secured Party or
Pledgor, as the case may be, and that contains specimen signatures of each such person.
"Bankruptcy" shall have the meaning set forth in the PSA.
"Business Day" shall mean any day, other than a Saturday or Sunday, on which
Securities Intermediary is open for general business.
4 of 23
"Call Back Representative" shall be any person duly authorized in writing by Secured
Party or Pledgor, respectively, to confirm changes to or deviations from Standing Wire
Instructions contained in Written Instructions on behalf of Secured Party or Pledgor,
respectively, such persons and such Standing Wire Instructions to be designated in
Schedule II to this Agreement, as the same may be revised from time to time by notice to
Securities Intermediary.
"CEA" means the Commodity Exchange Act, as amended.
"Collateral" for purposes of this Agreement shall mean the Account and the cash and all
securities and investment property held or deposited in or credited to the Account and any
and all proceeds of the foregoing held in or credited to the Account.
"CSA" shall have the meaning set forth in the preamble.
"Depository" shall mean The Federal Reserve Bank of New York, The Depository Trust
Company and any other clearing corporation within the meaning of Section 8-102 of the
UCC or otherwise authorized to act as a securities depository or clearing agency, and
their respective successors and nominees.
"Evidence of Filing" shall have the meaning set forth in Section 4(a)(i).
"Losses" shall have the meaning set forth in Section 5(a)(i).
"Notice of Exclusive Control" shall mean a written notice, substantially in the form of
and containing the applicable information specified in Exhibit B hereto, signed by an
Authorized Person of Secured Party.
"Payment Obligations" shall have the meaning set forth in Section 3(e).
"Pledgor" shall have the meaning set forth in the preamble.
"PSA" shall have the meaning set forth in the preamble.
"Secured Party" shall have the meaning set forth in the preamble.
"Securities Intermediary" shall have the meaning set forth in the preamble.
"Specified Collateral" shall have the meaning set forth in Section 4(a)(i).
"Standing Wire Instructions" shall mean the bank account details specified for each
party in Schedule II hereto, as the same may be revised from time to time by notice to
Securities Intermediary.
"Substitute Collateral" shall have the meaning set forth in Section 3(b).
"UCC" shall mean the Uniform Commercial Code as in effect in the State of New York.
"Value" shall have the meaning set forth in the CSA.
5 of 23
"Written Instructions" shall mean entitlement orders and other instructions in a written
record (including, without limitation, an electronic record) delivered or transmitted by an
Authorized Person and, if applicable, confirmed by a Call Back Representative, in
accordance with Section 7(c) of this Agreement and received by Securities Intermediary
at the address specified in Schedule I of this Agreement or such other address specified
by Securities Intermediary as available for use in connection with this Agreement.
The terms "entitlement holder", "entitlement order", "financial asset", "investment
property", "proceeds", "security", "security entitlement" and "securities intermediary" shall
have the meanings set forth in Articles 8 and 9 of the UCC. As between Secured Party and
Pledgor, any capitalized terms not defined herein shall have their respective meanings as
assigned in the PSA.
2. Appointment and Status of Securities Intermediary; Account.
(a) Appointment; Identification of Collateral. Secured Party and Pledgor
hereby intend that this Agreement establish "control" of the Account and the Collateral by
Secured Party for purposes of perfecting Secured Party's security interest in the Account and the
Collateral pursuant to Articles 8 and 9 of the UCC, and Securities Intermediary hereby
acknowledges that it has been advised of Pledgor's grant to Secured Party of a security interest in
the Account and in the Collateral pursuant to the terms of the CSA. Pledgor hereby appoints
Securities Intermediary to perform its duties as hereinafter set forth and authorizes Securities
Intermediary to hold Collateral in the Account either in its name or in the name of its nominees.
Such Collateral shall be identified and segregated separately with respect to Pledgor on
Securities Intermediary's books and records. Securities Intermediary hereby accepts such
appointment and agrees to establish and maintain the Account and appropriate records
identifying the Collateral in the Account as pledged by Pledgor to Secured Party. Pledgor hereby
authorizes Securities Intermediary to comply with all Written Instructions, including entitlement
orders, originated by Secured Party with respect to the Collateral without further consent or
direction from Pledgor or any other party.
(b) Status of Securities Intermediary. The parties agree that Securities
Intermediary is a securities intermediary, and that all property other than cash held in the
Account shall be treated as "financial assets" within the meaning of the UCC. Securities
Intermediary makes no representations or warranties with respect to the creation or enforceability
of any security interest in the Account or the Collateral.
(c) Use of Depositories. Secured Party and Pledgor hereby authorize
Securities Intermediary to utilize Depositories to the extent Securities Intermediary deems
appropriate in connection with its performance hereunder with respect to any Collateral
consisting of securities. Collateral held by Securities Intermediary in a Depository will be held
subject to the rules, terms and conditions of such Depository. Where Collateral is held in a
Depository, Securities Intermediary shall identify on its records as belonging to Pledgor and
pledged to Secured Party a quantity of securities as part of a fungible bulk of securities held in
Securities Intermediary's account at such Depository. Securities deposited in a Depository will
be represented in accounts which include only assets held by Securities Intermediary for its
customers.
6 of 23
(d) Pledgor Representation. Pledgor represents and warrants that it is the sole
owner of or otherwise has the right to transfer the Collateral free and clear of all liens, claims,
security interests and encumbrances (except those granted in this Agreement and in the CSA).
Pledgor agrees to transfer all Collateral to the Account free of encumbrances of any type. As of
the date hereof, Pledgor has confirmed that Securities Intermediary (i) is a trust company or
commercial bank with trust powers, organized under the laws of the United States of America or
any state or province thereof and subject to supervisions or examination by federal or state
authority, having a combined capital surplus of at least U.S. $10,000,000,000 and (ii) has
outstanding long term unsecured unsubordinated debt securities ratings of at least "A3" by
Moody's Investors Services, Inc., or any successor thereto and "A-" by Standard & Poor's
Rating Services, or any successor thereto.
(e) Securities Intermediary's Representations, Warranties and Covenants.
Securities Intermediary hereby represents, warrants, and covenants that: (i) in the ordinary
course of Securities Intermediary's business, it maintains securities accounts for others and is
acting in that capacity in connection with this Agreement; (ii) Securities Intermediary is engaged
in the business of banking; (iii) the Account is and will be maintained by Securities Intermediary
as a "securities account" (within the meaning of Section 8-501(a) of the UCC) with respect to all
property other than cash deposited or credited thereto and a "deposit account" (within the
meaning of Section 9-102 of the UCC) with respect to cash deposited or credited to the Account;
and(iv)except as otherwise ordered by a court of competent jurisdiction, Securities Intermediary
will not comply with and will not agree to comply with instructions or entitlement orders of any
person other than Secured Party and, to the extent permitted hereby, Pledgor with respect to the
Account or the Collateral.
3. Collateral Services.
(a) Return of Collateral to Pledgor. Prior to a receipt by Securities
Intermediary of a Notice of Exclusive Control from Secured Party, if Pledgor is entitled to the
return of certain Collateral pursuant to the CSA, Pledgor shall issue Written Instructions to
Securities Intermediary (with a mandatory contemporaneous copy to Secured Party) in
accordance with Section 7(b)(i) of this Agreement to transfer such Collateral from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised. Securities Intermediary shall, without
inquiry and in reliance upon such Written Instructions, comply with such Written Instructions
from Pledgor with respect to the transfer of Collateral to Pledgor (including, by way of example
and not by way of limitation, Written Instructions relating to the withdrawal or transfer of
Collateral from the Account, the release of the proceeds of a securities sale or redemption and
any income received on a security). Pledgor hereby covenants, for the benefit of Secured Party,
that Pledgor will originate entitlement orders concerning the Account or the Collateral only as
permitted by the CSA. The foregoing covenant is for the benefit of Secured Party only and will
not be deemed to constitute a limitation on Securities Intermediary's obligation to comply with
those entitlement orders. The failure of Pledgor to deliver to Secured Party a copy of any
Written Instructions delivered by Pledgor to Securities Intermediary will not limit or otherwise
affect the right of Securities Intermediary to rely without inquiry upon such Written Instructions.
7 of 23
(b) Substitutions. As between Pledgor and Secured Party, if and to the extent
the terms of the CSA permit Collateral to be substituted, Pledgor may substitute Collateral by
delivering Written Instructions to Securities Intermediary instructing it to (i) receive from
Pledgor for deposit to the Account Collateral identified in such Written Instructions ("Substitute
Collateral") and (ii)transfer Collateral identified in such Written Instruction from the Account
to an account designated by Pledgor pursuant to the Pledgor Wire Instructions specified in
Schedule II of this Agreement unless otherwise advised not later than 5:00 p.m. (Eastern Time)
on the Business Day following the date on which such Substitute Collateral is received by
Securities Intermediary. It is understood and agreed that Securities Intermediary shall not have
any duty or responsibility whatsoever for determining whether Collateral is permitted to be
substituted in accordance with the terms of the CSA, whether any Substitute Collateral
constitutes Substitute Credit Support within the terms of the CSA or for determining the Value of
any Collateral or Substitute Collateral. Securities Intermediary shall act without inquiry and in
reliance on all Written Instructions to substitute Collateral.
(c) Deposit of Collateral. Prior to a receipt by Securities Intermediary of a
Notice of Exclusive Control from Secured Party, Securities Intermediary is authorized to, and
shall, in accordance with this Section 3(c)deposit the Collateral in the Account.
(d) Collateral Transfers. Securities Intermediary shall transfer Collateral from
the Account only in accordance with clauses (a), (b) and (c) of this Section 3, Section 4 and as
provided in Section 6 hereof. For the avoidance of doubt, it is understood and agreed that
Securities Intermediary shall not have any obligation to act on any instructions other than
Written Instructions.
(e) Priority of Secured Party's Security Interest. In order to secure the
repayment of all amounts owed to Securities Intermediary hereunder, including, without
limitation, any fees, charges or expenses payable to Securities Intermediary pursuant to
Sections 5(a)(ii) and 5(g) of this Agreement (collectively, the "Payment Obligations"),
Securities Intermediary shall have a security interest in and right of set-off against the Account
and the Collateral and the proceeds thereof, until such time as Securities Intermediary is repaid in
full the amount of any such Payment Obligations. In no event will Securities Intermediary
advance funds or otherwise extend credit in connection with the maintenance or operation of the
Account or the acquisition or crediting of any Collateral to the Account. Notwithstanding the
preceding provisions of this Section 3(e), Securities Intermediary's security interest in and right
of set-off against the Account and the Collateral to secure the repayment of Payment Obligations
hereunder shall be senior to Secured Party's security interest in and lien on the Account and the
Collateral. In the event that Payment Obligations arising under Section 5(g) of this Agreement
have become due and payable by Pledgor to Securities Intermediary and any such amounts have
not otherwise been satisfied within [30] days Pledgor's receipt of a written notice from Securities
Intermediary that a Payment Obligation under Section 5(g) of this Agreement has become due
and payable (the "Overdue Amount"), then Securities Intermediary shall be permitted to deduct
and set-off the Overdue Amount against any Collateral that otherwise would be returnable to
Pledgor in accordance with Section 3(a) hereof. Securities Intermediary's lien and security
interest in the Account and the Collateral set forth above shall not secure any amounts owed by
Pledgor to Securities Intermediary pursuant to any other agreement between Pledgor and
Securities Intermediary. Any other lien, security interest, right of set-off or deduction or
8 of 23
banker's lien in favor of Securities Intermediary in or against the Account or the Collateral
whether pursuant to agreement or arising by operation of law are hereby waived.
(f) Notice of Adverse Claims. Upon receipt of written notice of any lien,
encumbrance or adverse claim against the Account or any portion of the Collateral carried
therein (other than any lien, encumbrance or claim identified herein), Securities Intermediary
shall use reasonable efforts to notify Secured Party and Pledgor as promptly as reasonably
practicable under the then current circumstances.
4. Notice of Exclusive Control.
(a) Secured Party may, subject to the terms of this Agreement, exercise sole
and exclusive control of the Account and the Collateral held therein at any
time by delivering to Securities Intermediary a Notice of Exclusive
Control.
(b) Following receipt of a Notice of Exclusive Control from Secured Party,
Securities Intermediary shall, without inquiry and in reliance upon such
Notice of Exclusive Control,thereafter comply with Written Instructions
(including entitlement orders) solely from Secured Party. Secured Party
agrees to deliver a copy of any Notice of Exclusive Control to Pledgor
contemporaneously with its delivery of such notice to Securities
Intermediary. Upon receipt of a Notice of Exclusive Control, Securities
Intermediary shall promptly provide a copy of such Notice of Exclusive
Control to Pledgor in accordance with Section 7(b)(iii)of this Agreement;
provided that Securities Intermediary's failure to provide a copy of such
Notice of Exclusive Control to Pledgor shall not affect the validity of such
notice.
Secured Party covenants, for the benefit of Pledgor,that it will not deliver
a Notice of Exclusive Control to Securities Intermediary unless and until
(1) (x) an Event of Default(as defined in the CSA)with respect to the
Pledgor has occurred and is continuing or(y) a Section 15.3 Termination
Event(as defined in the PSA)has occurred and is continuing following
Secured Party providing Pledgor at least two (2) Local Business Days'
prior written notice that such Section 15.3 Termination Event has occurred
and(2)Pledgor has not paid in full all of its Obligations (as defined in the
CSA)that are then due and payable.
(c) Securities Intermediary shall have no duty to determine whether Secured
Party has complied with this Section 4, including, but not limited to a duty
to verify that any statement or other information contained in any such
notice is true and correct
9 of 23
5. General Terms and Conditions.
(a) Indemnification.
i. Except as otherwise expressly provided herein, Securities
Intermediary shall not be liable for any losses, costs, expenses,
damages, liabilities or claims, including reasonable attorneys' fees
(collectively, "Losses") incurred by or asserted against Pledgor or
Secured Party, except those Losses arising out of the negligence,
fraud or willful misconduct of Securities Intermediary. Securities
Intermediary shall have no liability whatsoever for the action or
inaction of any Depository, except to the extent any such action or
inaction by a Depository is the direct result of the negligence,
fraud, or willful misconduct of Securities Intermediary. In no
event shall Securities Intermediary, Secured Party or Pledgor be
liable for special, indirect or consequential damages, or lost profits
or loss of business, arising in connection with this Agreement.
ii. Solely in connection with this Agreement and the Account subject
hereto, Secured Party and Pledgor agree, jointly and severally, to
defend, indemnify and hold Securities Intermediary and each
director, officer, employee, attorney, agent and affiliate of
Securities Intermediary, harmless from and against any and all
Losses other than special, indirect or consequential damages or lost
profits or loss of business, sustained or incurred by or asserted
against Securities Intermediary by any party by reason of or as a
result of any action or inaction, or arising out of Securities
Intermediary's performance hereunder, including reasonable fees
and expenses of counsel incurred by Securities Intermediary in a
successful defense of claims by Pledgor or Secured Party;
provided, however, that Pledgor and Secured Party shall not
indemnify Securities Intermediary for those Losses arising out of
Securities Intermediary's negligence, fraud or willful misconduct.
This indemnity shall be a continuing obligation of Pledgor and
Secured Party, their respective successors and assigns,
notwithstanding the termination of this Agreement.
(b) No Obligation Regarding Quality of Collateral. Without limiting the
generality of the foregoing, Securities Intermediary shall be under no obligation to inquire into,
and shall not be liable for, any Losses incurred by Pledgor, Secured Party or any other person as
a result of the receipt or acceptance of fraudulent, forged or invalid Collateral, or Collateral
which otherwise is not freely transferable or deliverable without encumbrance in any relevant
market.
(c) No Responsibility Concerning the PSA, CSA and CEA. Pledgor and
Secured Party hereby agree that, notwithstanding references to the PSA and the CSA in this
Agreement, Securities Intermediary has no interest in, and no duty, responsibility or obligation
10 of 23
with respect to, the PSA and the CSA (including without limitation, no duty, responsibility or
obligation to monitor Pledgor's or Secured Party's compliance with the PSA and the CSA or to
know the terms of the PSA and the CSA). Securities Intermediary has no duty, responsibility or
obligation with respect to the compliance of this Agreement, with the CEA, or with the rules
promulgated thereunder.
(d) No Duty of Oversight. Securities Intermediary is not at any time under
any duty to monitor the Value of any Collateral in the Account or to determine whether the
Collateral is of a type required to be held or eligible to be held in the Account, or to supervise the
investment of, or to advise or make any recommendation for the purchase, sale, retention or
disposition of any Collateral or to determine whether the aggregate Value of the Collateral is
sufficient to secure Pledgor's obligations under the PSA.
(e) Advice of Counsel. Securities Intermediary may obtain the advice of legal
counsel selected by it in the event of any dispute or question as to the interpretation of any of the
provisions hereof or of its duties hereunder and shall be fully protected with respect to anything
done or omitted by it in good faith in conformity with such advice.
(f) No Collection Obligations. Securities Intermediary shall be under no
obligation to take action to collect any amount payable on Collateral in default, or if payment is
refused after due demand and presentment.
(g) Fees and Expenses. Pledgor agrees to pay to Securities Intermediary fees
for Securities Intermediary's performance under this Agreement as such fees are set forth on the
fee schedule attached hereto as Exhibit C, as such fee schedule may be modified from time to
time upon the mutual agreement of the Pledgor and Securities Intermediary. Pledgor shall
reimburse Securities Intermediary for all reasonable and customary costs associated with
transfers of Collateral to Securities Intermediary and records kept in connection with this
Agreement. Pledgor shall also reimburse Securities Intermediary for out-of-pocket expenses,
which are a normal incident of the services provided under this Agreement. Pledgor shall be
responsible for such other fees and expenses as may be agreed in writing between Securities
Intermediary and Pledgor with respect to the Account.
(h) Reliance; Risk Acknowledgements;Additional Terms.
i. Subject to the terms below, Securities Intermediary shall be
entitled to rely upon any Written Instructions actually received by
Securities Intermediary and reasonably believed by Securities
Intermediary to be duly authorized and delivered.
ii. If Securities Intermediary receives Written Instructions which
appear on their face to have been transmitted via (A) computer
facsimile, email, the Internet or other insecure electronic method,
or (B) secure electronic transmission containing applicable
authorization codes,passwords and/or authentication keys, Secured
Party and Pledgor each understands and agrees that Securities
Intermediary cannot determine the identity of the actual sender of
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such Written Instructions and that Securities Intermediary shall
conclusively presume that such Written Instructions have been sent
by an Authorized Person. Secured Party and Pledgor shall be
responsible for ensuring that only its Authorized Persons transmit
such Written Instructions to Securities Intermediary and that all of
its Authorized Persons treat applicable user and authorization
codes,passwords and/or authentication keys with extreme care.
iii. Secured Party and Pledgor each acknowledges and agrees that it is
fully informed of the protections and risks associated with the
various methods of transmitting Written Instructions to Securities
Intermediary and that there may be more secure methods of
transmitting Written Instructions than the method(s) selected by it.
(i) Account Disclosure. Securities Intermediary is authorized to supply any
information regarding the Account, which is required by any applicable law or governmental
regulation now or hereafter in effect.
(j) Force Majeure. Securities Intermediary shall not be responsible or liable
for any failure or delay in the performance of its obligations under this Agreement arising out of
or caused, directly or indirectly, by circumstances beyond its reasonable control, including
without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances;
sabotage; epidemics; riots; interruptions, loss or malfunctions of utilities, computer (hardware or
software)or communications service; accidents; labor disputes; acts of civil or military authority;
governmental actions; inability to obtain labor,material, equipment or transportation.
(k) No Implied Duties; Entire Agreement. Securities Intermediary shall have
no duties or responsibilities whatsoever except such duties and responsibilities as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied against Securities
Intermediary in connection with this Agreement. This Agreement constitutes the sole agreement
between the parties with respect to its subject matter and supersedes any and all other agreements
(whether written or oral) between the parties with respect to such subject matter.
6. Termination.
(a) Termination by Secured Party, Pledgor or Secured Party and Pledgor.
This Agreement shall terminate upon (i) Securities Intermediary's receipt of Written Instructions
from Pledgor expressly stating that Secured Party no longer claims any security interest in the
Collateral and the subsequent transfer by Securities Intermediary of all of the Collateral from the
Account to Pledgor pursuant to Pledgor's Written Instructions; (ii) Securities Intermediary's
receipt of a Notice of Exclusive Control delivered by Secured Party and the subsequent transfer
by Securities Intermediary of all of the Collateral from the Account as instructed by Secured
Party; or (iii) Securities Intermediary's receipt of reasonably contemporaneous Written
Instructions from each of Pledgor and Secured Party confirming to Securities Intermediary that
Pledgor and Secured Party elect to terminate this Agreement and the subsequent transfer by
Securities Intermediary of all of the Collateral in the Account as directed in such Written
Instructions.
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(b) Termination by Securities Intermediary. This Agreement may be
terminated by Securities Intermediary by providing written notice to the other parties, provided
that such termination shall not be effective until 60 days following Securities Intermediary's
delivery or transmission of such written notice (the "Effective Termination Date").
Upon receipt of such notice, Secured Party and Pledgor will endeavor to provide joint Written
Instructions for the transfer of all the Collateral on or before the Effective Termination Date. If
such joint Written Instructions are not received by Securities Intermediary on or before the
Effective Termination Date, Securities Intermediary may petition a court of competent
jurisdiction for instructions and transfer the Collateral as directed by such court.
Following the Effective Termination Date and until the date of transfer of all Collateral, the sole
duty of Securities Intermediary under this Agreement will be to retain custody of the Collateral
pending the transfer.
(c) Obligations Upon Termination. Except as otherwise provided herein, all
obligations of the parties to each other hereunder shall cease upon termination of this Agreement.
7. Miscellaneous.
(a) Ambiguity in Notices. In the event that Securities Intermediary
determines that there is an ambiguity in any Written Instructions received from Pledgor or
Secured Party (a "Sender"), Securities Intermediary shall promptly give the Sender written
notice of such ambiguity and may, in its reasonable discretion, thereafter refrain from taking any
action directed in such Written Instructions other than to retain possession of the Collateral,
unless Securities Intermediary receives clarifying or superseding Written Instructions from the
Sender which, in the determination of Securities Intermediary, eliminate such ambiguity.
Securities Intermediary shall be permitted to rely upon such clarifying or superseding Written
Instructions without further inquiry.
(b) Notices.
i. Notices From Secured Party or Pledgor to Securities Intermediary.
All notices, approvals, consents, requests and other
communications to be delivered by Pledgor to Securities
Intermediary or by Secured Party to Securities Intermediary
hereunder shall be in a writing. All such notices, approvals,
consents, requests and other communications to be delivered by
Pledgor or Secured Party hereunder shall be signed by an
Authorized Person and shall be delivered by hand, overnight
delivery service, facsimile (with confirmed receipt) or email
(provided that if the writing is delivered by email, such writing
shall be delivered as an attachment on an official letterhead of the
delivering party)to the relevant address, facsimile number or email
address set forth in Schedule I hereto, or to such other address as
each party may designate for itself by like notice and any such
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writing shall be deemed to have been given when the writing is
received by Securities Intermediary.
ii. Electronic Transmission of Notices. By electing to use electronic
transmission of any kind for notice purposes, each of Pledgor and
Secured Party acknowledges that such transmissions are not
encrypted and therefore are insecure. Each of Pledgor and Secured
Party further acknowledges that there are other risks inherent in
communicating through electronic transmission such as the
possibility of virus contamination and disruptions in service, and
agrees that Securities Intermediary shall not be responsible for any
loss, damage or expense suffered or incurred by Pledgor, Secured
Party or any person claiming by or through Pledgor or Secured
Party as a result of the use of electronic transmission,provided that
any such loss, damage or expense is not the direct result of the
negligence or willful misconduct of Securities Intermediary.
iii. Notices to Secured Party or Pledgor. All notices, approvals,
consents, requests and other communications to be delivered to
Pledgor or Secured Party hereunder shall be in writing and shall be
deemed to have been given when the writing is delivered if given
or delivered by hand, overnight delivery service, facsimile (with
confirmed receipt) or email to the address, facsimile number or
email address set forth in Schedule I hereto, or to such other
address as each party may designate for itself by like notice.
(c) Cumulative Rights;No Waiver. Each and every right granted to Securities
Intermediary hereunder or under any other document delivered hereunder or in connection
herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to
time. No failure on the part of Securities Intermediary to exercise, and no delay in exercising,
any right will operate as a waiver thereof, nor will any single or partial exercise by Securities
Intermediary of any right preclude any other future exercise thereof or the exercise of any other
right.
(d) Severability; Amendments; Assignment. In case any provision in or
obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a written
agreement executed by the parties hereto. This Agreement shall extend to and shall be binding
upon the parties hereto, and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by any party without the written consent of the other parties.
(e) Governing Law; Jurisdiction; Waiver of Immunity; Jury Trial Waiver.
This Agreement and the Account shall be governed by and construed in accordance with the
substantive laws of the State of New York. The State of New York shall be the "securities
intermediary's jurisdiction" and the "bank's jurisdiction" within the meaning of Sections 8-
110(e) and 9-304 of the UCC, respectively. Secured Party, Pledgor and Securities Intermediary
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hereby consent to the exclusive jurisdiction of a state or federal court situated in New York City,
New York in connection with any dispute arising hereunder. To the extent that in any
jurisdiction Secured Party or Pledgor may now or hereafter be entitled to claim, for itself or its
assets, immunity from suit, execution, attachment (before or after judgment) or other legal
process, Secured Party and Pledgor each irrevocably agrees not to claim, and hereby waives,
such immunity. Secured Party, Pledgor and Securities Intermediary each hereby irrevocably
waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this
Agreement.
(f) No Third Party Beneficiaries. In performing hereunder, Securities
Intermediary is acting solely on behalf of Secured Party and Pledgor and no contractual or
service relationship shall be deemed to be established hereby between Securities Intermediary
and any other person.
(g) Headings. Section headings are included in this Agreement for
convenience only and shall have no substantive effect on its interpretation.
(h) Counterparts. This Agreement and any joint Written Instructions may be
executed in any number of counterparts, each of which shall be deemed to be an original, but
such counterparts shall,together, constitute only one instrument.
(i) USA PATRIOT ACT. Pledgor and Secured Party hereby acknowledge
that Securities Intermediary is subject to federal laws, including the Customer Identification
Program ("CIP") requirements under the USA PATRIOT Act and its implementing regulations,
pursuant to which Securities Intermediary must obtain, verify and record information that allows
Securities Intermediary to identify each of Pledgor and Secured Party. Accordingly, prior to
opening an Account hereunder Securities Intermediary will ask Pledgor and/or Secured Party to
provide certain information including, but not limited to, Pledgor's and/or Secured Party's name,
physical address, tax identification number and other information that will help Securities
Intermediary to identify and verify each of Pledgor's and Secured Party's identity, such as
organizational documents, certificate of good standing, license to do business, or other pertinent
identifying information. Neither Secured Party nor Pledgor is responsible for providing to
Securities Intermediary documents related to the other in connection with Securities
Intermediary's requests for information pursuant to this provision. Pledgor and Secured Party
agree that Securities Intermediary cannot open an Account hereunder unless and until Securities
Intermediary verifies Pledgor's and/or Secured Party's identity in accordance with its CIP.
(j) Tax Forms. All entities entitled to receive interest on Collateral in the
form of cash shall provide Securities Intermediary with a W-9 or W-8 IRS tax form prior to the
disbursement of interest, and Securities Intermediary will file the appropriate 1099 or 1042-S tax
forms, whichever are applicable.
(k) New Authorized Persons. Pledgor or Secured Party may add or remove
person(s) from their respective list of Authorized Persons by delivering a written notice to
Securities Intermediary that certifies an amended list of person(s) authorized to transmit or
deliver Written Instructions and specimen signature of such person(s); provided that, until
Securities Intermediary has had commercially reasonable time to act on such notice, the
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person(s) previously certified as Authorized Person(s) shall continue to be Authorized Person(s)
and Securities Intermediary shall be fully protected in acting in accordance with this Agreement
upon Written Instructions from such Authorized Person(s)previously certified.
[THIS SPACE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By: dor.
Name: ., . '_ .: .
Title: , : I : ! ' ! =� •
TO-
SECURED PARTY:
CITY OF VERNON
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
SECURITIES INTERMEDIARY:
U.S. BANK NATIONAL ASSOCIATION
By:
Name:
Title:
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IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By:
Name:
Title:
SECURED PARTY:
CITY OF VE' ON
By: / ffLA.4✓
Name: Carlos Fandino
Title: City Administrator
ATTEST:
By: . •
Name: M r;a F. a a l s
Title: Ci y Clerk
APPR S D >S TO FORM:
By: d'l_��, , ��
Name: ema �Fe*
Title: City Attorney
SECURITIES INTERMEDIARY:
U.S.BANK NATIONAL ASSOCIATION
By:
Name:
Title:
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IN WITNESS WHEREOF, Secured Party, Pledgor and Securities Intermediary have caused
this Agreement to be executed by their respective officers, thereunto duly authorized, as of the
day and year first above written.
PLEDGOR:
CITIGROUP ENERGY INC.
By:
Name:
Title:
SECURED PARTY:
CITY OF VERNON
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
APPROVED AS TO FORM:
By:
Name:
Title:
SECURITIES INTERMEDIARY:
U.S. BANK NATIONAL ASSOCIATION
By:
Name: Elizabeth UiMarco
Title: Vice President
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SCHEDULE I
ADDRESSES FOR NOTICES
AND OTHER COMMUNICATIONS
Communications to SECURED PARTY shall be delivered to:
Attn: Carlos Fandino, City Administrator
Address: 4305 Santa Fe Avenue, Vernon, CA 90058
Facsimile: (323) 826-1452
Telephone (for confirmation of notice receipt only): (323) 583-8811 ext. 228 or ext. 292
Email: cfandinoc ci.vernon.ca.us; hpatel@ci.vernon.ca.us
Communications to a PLEDGOR shall be delivered to:
Attn: Citigroup Energy Inc., Collateral Management Group
Address: 499 Washington Blvd., 7th Floor, Jersey City,NJ 07310
Facsimile:
Telephone (212) 816-8090 (for confirmation of notice receipt only):
Email: derivatives.margin@citi.com
With a copy to;
Citigroup Energy Inc.
Attn: Commodities Structuring
Address: 2800 Post Oak Blvd.
Suite 500
Houston, Texas 77056
Fax: 713-752-5208
Email: americascommoditiesstructuring@citi.com
Communications (including Written Instructions)to SECURITIES INTERMEDIARY shall be
delivered to:
U.S. Bank National Association
100 Wall Street, 19th floor
New York,NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone (for confirmation of notice receipt only): 212-951-8578
Email: Custodian.Notices@usbank.com
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SCHEDULE II
CONTACT DETAILS FOR
CALL BACK REPRESENTATIVES
FOR CHANGES TO STANDING WIRE INSTRUCTIONS
Telephone Number(s) for Call Back Representatives
for Changes to Standing Wire Instructions (attached)
Pledgor's Call Back Representatives:
Name Telephone Number
1. Robert Traverso (212) 816-5673
2. Marlene Leal (212) 816-5659
3. John Mui (212) 816-6266
4. Ulric Alexander (212) 816-5658
5. George Madrigal (212) 816-5661
6. Paul Valdez (212) 816-5787
7. Mohamed Eldeeb (212) 816-9853
Secured Party's Call Back Representatives:
Name Telephone Number
1. Carlos Fandino, City Administrator (323) 583-8811 ext. 228
2. Hema Patel, City Attorney (323) 583-8811 ext. 292
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Standing Wire Instructions
Pledgor Wire Instructions:
Bank Name: Citibank NA NY
Bank ABA No.: 021-000-089
Account No.: 30569329
Account Name:
Reference:
Secured Party Wire Instructions:
Bank Name: Bank of New York Mellon Trust
Bank ABA No.: 021000018
Account No.: 8004528400
Account Name: City of Vernon Escrow Account
Reference:
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EXHIBIT A
CERTIFICATE OF AUTHORIZED SIGNATORIES
The undersigned hereby certifies that s/he is a [TITLE] of [COMPANY NAME] (the
"Company"), and that, as such, s/he is authorized to execute this certificate on behalf of the
Company, and further certifies on behalf of the Company that the following named individuals
are duly elected, qualified and acting officers of the Company, and each holds the title set forth
opposite his/her name. The signature written opposite the name and title of each such officer is
her/his correct signature.
Name Office Signature
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this certificate in
her/his capacity as an authorized officer of the Company as of this [DATE].
By:
Name:
Title:
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EXHIBIT B
NOTICE OF EXCLUSIVE CONTROL
[Letterhead of Secured Party]
Date:
To: U.S. Bank National Association
100 Wall Street, 19th floor
New York,NY 10005
Attn: GCTS—Elizabeth Dimarco
Facsimile: 212-361-6148
Telephone: 212-951-8578 (for confirmation of notice receipt only)
E-mail: Custodian.Notices@usbank.com
Re: Control Agreement
NOTICE OF EXCLUSIVE CONTROL
We refer to the Collateral Account Control Agreement, dated as of[ _, 201] (as
amended and in effect from time to time,the "Control Agreement"), between City of Vernon
("Secured Party"), Citigroup Energy Inc. ("Pledgor"), and you, as Securities Intermediary.
Unless otherwise provided herein, capitalized terms used in this notice have the meanings
assigned to them in the Control Agreement or the PSA (as defined in the Control Agreement), as
applicable.
We hereby issue a Notice of Exclusive Control pursuant to Section 4 of the Control Agreement.
You are instructed not to accept any directions or instruction with respect to the Account from
any person other than the undersigned.
We certify that (1) (x) an Event of Default (as defined in the CSA) with respect to the Pledgor
has occurred and is continuing or (y) a Section 15.3 Termination Event (as defined in the PSA)
has occurred and is continuing following Secured Party providing Pledgor at least two (2) Local
Business Days' prior written notice that such Section 15.3 Termination Event has occurred and
(2)Pledgor has not paid in full all of its Obligations (as defined in the CSA)that are then due and
payable ("Condition to Exercise Remedies").
We certify that, as a result of such Condition to Exercise Remedies, we are entitled to exercise
certain rights and remedies provided to us under the Control Agreement.
Transfer Instructions:
We hereby instruct you to transfer, in accordance with Section 4(b)(ii) of the Control Agreement,
all of the Collateral in the Account pursuant to the Secured Party Wire Instructions specified in
Schedule IV of the Control Agreement, unless otherwise specified here.
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You are hereby instructed to forward this notice to Pledgor in accordance with the Control
Agreement.
We certify under penalty of perjury under the laws of the United States of America that the
foregoing is true and correct.
Very truly yours,
[Insert legal name of Secured Party]
By:
Authorized Signatory
cc: [the Pledgor]
'This language is drawn from 28 U.S.C. Sec. 1746,as is required for compliance with CFTC Rule 23.702. This is
Section 1746's suggested language for statements made under penalty of perjury outside the U.S.(which differs
from the suggested language for statements made in the U.S.only by including the phrase"under the laws of the
United States of America,"and should clearly cover statements made both inside and outside of the U.S.).
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