Option for CSA Paragraphs - Southern California Edison

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SOUTHERN CALIFORNIA EDISON COMPANY
STANDARD ELECTIONS (“ELECTIONS”) TO THE COVER SHEET TO THE
CREDIT SUPPORT ADDENDUM
PER NAESB MODEL CREDIT SUPPORT ADDENDUM ADOPTED OCTOBER 9, 2003
PARTY A:
PARTY B:
[COUNTERPARTY]
SOUTHERN CALIFORNIA EDISON COMPANY
Credit Support Provider:
Party A:
Party B:
The Guarantor, if any, as specified in the Special Provisions to the Base Contract
None
Eligible Collateral:
Party A:
Party B:
Cash at 100% Valuation and Letters of Credit at 100% Valuation
Not Applicable
Transfer Method for Other
Eligible Collateral:
Party A and Party B:
Not Applicable
Collateral Threshold:
See attached Ratings Matrix
Eligibility Requirements to
Hold Cash:
Interest Rate:
Minimum Transfer Amount:
Party A and Party B:
Letter Of Credit Issuer
Requirements:
A party or, if applicable, its Guarantor must have a Credit Rating of at least (a) BBBfrom S&P and Baa3 from Moody’s, if such entity is rated by both S&P and Moody’s or
(b) BBB- by S&P or Baa3 by Moody’s if such entity is rated by either S&P or Moody’s
but not by both. Notwithstanding the foregoing, in the event such a Credit Rating is
BBB- by S&P or Baa3 by Moody’s with a negative or developing outlook, or if such a
Credit Rating is on credit watch negative or developing by S&P or on watchlist under
review for downgrade or uncertain ratings action by Moody’s, then the party shall not
be entitled to hold Cash.
The rate for that day opposite the caption ‘Federal Funds (Effective)’ as set forth in the
weekly statistical release designated as H.15(519), or any successor publication,
published by the Board of Governors of the Federal Reserve System.
$0.00
Major U.S. commercial bank or a U.S. branch office of a foreign bank, in either case,
with a Credit Rating of at least (a) “A-” by S&P and “A3” by Moody’s, if such entity is
rated by both S&P and Moody’s or (b) “A-” by S&P or “A3” by Moody’s, if such
entity is rated by either S&P or Moody’s, but not both.
Notification Time:
10:00 a.m. Pacific Prevailing Time.
Close of Business:
5:00 p.m. Pacific Prevailing Time.
Rounding Amount:
Party A:
Party B:
$250,000
$250,000
Custodian Requirements:
A commercial bank or trust company organized under the laws of the United States or a
political subdivision thereof, with (i) a Credit Rating of at least (a) "A-" by S&P and
"A3" by Moody’s, if such entity is rated by both S&P and Moody’s or (b) "A-" by S&P
or "A3" by Moody's, if such entity is rated by either S&P or Moody’s but not both, and
(ii) having a capital surplus of at least $1,000,000,000.”
Page 1 of 8
Option for CSA Paragraphs
4, 5, and 6:
Option A Applies
Special Provisions Number of
Sheets Attached:
Six Pages including Exhibit A (Form of Letter of Credit)
Page 2 of 8
SPECIAL PROVISIONS
TO
MODEL CREDIT SUPPORT ADDENDUM
TO THE
BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL GAS
BETWEEN
______________________________ (“PARTY A”)
AND
SOUTHERN CALIFORNIA EDISON COMPANY (“PARTY B”)
Elections on Page 1 of CSA.
1.
Ratings Matrix for Party A:
a)
The Collateral Threshold for Party A shall be the amount which is the lowest of:
the amount set forth below under the heading “Party A Collateral Threshold” opposite the lower of the
Credit Ratings for Party A or, if applicable, Party A’s Guarantor on the relevant date of determination. If
Party A or, if applicable, its Guarantor does not have a Credit Rating on the relevant date of
determination from at least one of the rating agencies specified below, the Collateral Threshold shall be
$0 (zero);
b) 80% of the amount of the Guaranty dated _____ from _________, as amended from time to time,
provided by Party A’s Guarantor, if any, for the benefit of Party B; or
c)
$0 (zero) if an Event of Default with respect to Party A has occurred and is continuing.
Party A
Collateral Threshold
$
$
$
$
$
$
$
$ 0 (zero)
2.
Moody’s
Credit Rating
S&P
Credit Rating
Aa3 or above
A1
A2
A3
Baa1
Baa2
Baa3
Ba1 or below
AA- or above
A+
A
ABBB+
BBB
BBBBB+ or below
Ratings Matrix for Party B: Not applicable; Party B’s Collateral Requirement shall be zero at all time.
Paragraph 2 – Definitions.
1.
The definition of “Collateral Threshold” is amended to read as follows:
“‘Collateral Threshold’ shall mean, with respect to a party, the amount, if any, set forth in the Elections herein.”
2.
The definition of “Posted Collateral” is amended to read as follows:
“‘Posted Collateral’ shall mean (1) all Eligible Collateral and all proceeds thereof that have been Transferred to or
received by the Secured Party hereunder and not Transferred to the Pledging Party pursuant to Paragraph 4 or
released by the Secured Party, and (2) any Cash received and held by the Secured Party after drawing on any
Letter of Credit.”
3.
The definition of “Transfer” or “Transferred” is amended by deleting subsections (iv) and (v).
4.
Add the following new definition:
“‘Independent Amount’ shall have the following meaning:
Page 3 of 8
With respect to Party A: Party A shall have a full floating Independent Amount of $______________ if
the Credit Rating for Party A or, if applicable, its Guarantor is lower than BBB- by S&P or Baa3 by
Moody’s. For the purposes of calculating Party A’s Collateral Requirement, as applicable, pursuant to
Paragraph 3 of the CSA, such full floating Independent Amount for Party A shall be added to the other
party’s Exposure; and
With respect to Party B: Not applicable.”
Paragraph 3 – Calculation of Collateral Requirement.
1.
The second line of Paragraph 3 is amended by adding “plus the Pledging Party’s Independent Amount” between
“Exposure” and “minus”.
2.
Paragraph 3(b) is amended by deleting the phrase “, and any accrued Interest Amount that has not yet been
Transferred to the Pledging Party”.
Paragraph 4 – Transfer of Eligible Collateral.
1.
Paragraph 4, Option A and Option B, is amended by adding in the 15th line of each provision the following
sentence: “In connection with each Transfer of any Eligible Collateral to the Secured Party pursuant to this CSA,
the Secured Party will, upon request of the Pledging Party, provide a receipt in form and substance reasonably
satisfactory to the Pledging Party showing the Eligible Collateral Transferred to it.”
Paragraph 5 – Reduction and Substitution of Posted Collateral.
1.
Paragraph 5 (a), of Option A and Option B, is amended by adding at the end of the paragraph of each option the
following sentence: “In connection with each Transfer of any Posted Collateral to the Pledging Party pursuant to
this CSA, the Pledging Party will, upon request of the Secured Party, provide a receipt in form and substance
reasonably satisfactory to the Secured Party showing the Posted Collateral Transferred to it.”
2.
Paragraph 5 (b) Option A is amended by replacing “will” in the 15 th line with “with”.
3.
Paragraph 5 (b) Option B is amended by replacing “will” in the 17 th line with “with”.
Paragraph 6 – Disputed Calculations.
1.
Paragraph 6 (a) Option A is amended by replacing “requirement” in the 20 th line with “Requirement”.
2.
Paragraph 6 (a) Option B is amended by replacing “requirement” in the 21 st line with “Requirement”.
Paragraph 7 – Letters of Credit.
1.
2.
3.
Paragraph 7(a) is amended by:
a.
Replacing “transferable” in the first line with “nontransferable”.
b.
Replacing “herein in a form reasonably acceptable to the Secured Party” at the end of the sentence with
“in substantially the form of Exhibit A.”
Paragraph 7(b) is amended by:
a.
Replacing “second” at the end of the 14th line with “first”.
b.
Adding in the last sentence after “Eligible Collateral,” the phrase “with Value at least equal to the Value
of the Letter of Credit being replaced,”.
Paragraph 7 (c) is amended by:
a.
Adding to the beginning of the 5th line after “Collateral,” the phrase “with Value at least equal to the
Value of the Letter of Credit being replaced,”.
Page 4 of 8
b.
Adding to the beginning of the 7th line after “Eligible Collateral,” the phrase “with Value at least equal to
the Value of the Letter of Credit being replaced,”.
Paragraph 8 – Care and Use of Cash.
1.
Paragraph 8(c) is amended by:
a.
Deleting the words “upon written request” in the 5 th line.
b.
Deleting the words “on the third Business Day of each calendar month” in the 7 th line.
c.
Adding in the 8th line the sentence: “The Pledging Party shall invoice the Secured Party monthly setting
forth the calculation of the Interest Amount due, and the Secured Party shall make payment thereof by the
later of (i) the third Business Day of the first month after the month to which such invoice relates or (ii)
the third Business Day after the day on which such invoice is received.”
Paragraph 9 – Notices.
1.
Paragraph 9 (a) (iii) is amended by replacing “; or” at the end of the sentence with “.”
2.
Paragraph 9 (a) (iv) is deleted in its entirety.
Paragraph 10 – Credit Support Default.
1.
Paragraph 10 (a) (iii) is amended by replacing “.” at the end of the sentence with “; or”.
2.
Add the following sub-paragraph under “Credit Support Default”, Paragraph 10 (a):
“(iv) a party fails to provide financial information as provided for in Paragraph 13 (g) as amended herein.”
Paragraph 13 – General
1.
Add the following provisions:
“(f) Unless otherwise agreed in writing, the parties agree that this CSA is the sole and exclusive method for
Transfer of Eligible Collateral, return of Posted Collateral and any transactions related thereto.
(g) If requested by a party, the other party shall deliver (i) within 120 days following the end of the fiscal
year, a copy of its or, if applicable, its Guarantor’s annual report containing its audited consolidated financial
statements (income statement, balance sheet, statement of cash flows and statement of retained earnings and
all accompanying notes) for such fiscal year, setting forth in each case in comparative form the figures for the
previous year and (ii) within 60 days after the end of each of its first three fiscal quarters of each fiscal year, a
copy of its or, if applicable, its Guarantor’s quarterly report containing its consolidated financial statements
(income statement, balance sheet, statement of cash flows and statement of retained earnings and all
accompanying notes) for such fiscal quarter and the portion of the fiscal year through the end of such quarter,
setting forth in each case in comparative form the figures for the previous year certified in accordance with
all applicable laws and regulations, including without limitation all applicable Securities and Exchange
Commission rules and regulations [or if the party is not an SEC reporting company---certified by a
Responsible Officer as being fairly stated in all material respects (subject to normal year end audit
adjustments)], provided however, for the purposes of this (i) and (ii), if a party’s or, if applicable, its
Guarantor’s financial statements are publicly available electronically via EDGAR, then such party shall be
deemed to have met this requirement. In all cases the statements shall be for the most recent accounting
period and prepared in accordance with generally accepted accounting principles; provided, however, that
should any such statements not be available on a timely basis due to a delay in preparation or certification,
such delay shall not be a Credit Support Default so long as the party diligently pursues the preparation,
certification and delivery of the statements. [For the purposes of this Section, “Responsible Officer” shall
mean the Chief Financial Officer, Treasurer or any Assistant Treasurer or any employee designated by
any of the foregoing.]
Page 5 of 8
(h) Each party agrees that notwithstanding any provision of law relating to adequate assurance of future
performance, including without limitation Article 2-609 of the UCC, the parties shall only be entitled to
request adequate assurance as specifically provided in the Contract, including this CSA. For purposes of the
foregoing, “UCC” means the Uniform Commercial Code as adopted by the jurisdiction governing the parties
and the transactions under the Contract. Section references are to the Model Uniform Commercial Code and
are intended to correspond to the same substantive provisions contained in the specific codes adopted in the
controlling jurisdictions, to the extent that section references differ.”
[COUNTERPARTY]
SOUTHERN CALIFORNIA EDISON COMPANY
By:
By:
Name:
Name:
Title:
Title:
Page 6 of 8
EXHIBIT A
FORM OF LETTER OF CREDIT
ISSUE DATE: ______________
L/C NO.: __________________
ACCOUNT PARTY:
ACCOUNT NAME
ADDRESS
CITY, STATE XXXXX-XXXX
BENEFICIARY
NAME
ADDRESS
CITY, STATE XXXXX-XXXX
AMOUNT: USD _____________
(________________ AND _0/100
UNITED STATES DOLLARS)
WE HEREBY ESTABLISH THIS IRREVOCABLE STANDBY LETTER OF CREDIT NO.
______________ FOR AN AGGREGATE AMOUNT NOT TO EXCEED THE AMOUNT INDICATED
ABOVE, EXPIRING AT OUR COUNTERS WITH OUR CLOSE OF BUSINESS ON ______________.
THIS LETTER OF CREDIT IS AVAILABLE WITH (BANK NAME), AGAINST PRESENTATION OF YOUR DRAFT
AT SIGHT DRAWN ON (BANK NAME), WHEN ACCOMPANIED BY:
1) THE ORIGINAL OF THIS LETTER OF CREDIT (OR A PHOTOCOPY OF THE ORIGINAL FOR PARTIAL
DRAWINGS) AND ANY SUBSEQUENT AMENDMENTS, IF ANY; AND
2) A DRAW CERTIFICATE (SEE EXHIBIT A) PURPORTEDLY SIGNED BY ONE OF THE BENEFICIARY’S
OFFICIALS
BENEFICIARY SHALL BE ENTITLED TO DRAW UPON THIS LETTER OF CREDIT UP TO THE STATED
AMOUNT, IN ONE OR MORE DRAWINGS; PROVIDED HOWEVER, THAT IF ANY DRAWING WOULD EXCEED
THE STATED AMOUNT, BENEFICIARY SHALL BE ENTITLED TO DRAW ONLY THAT PORTION THAT
WOULD NOT EXCEED THE STATED AMOUNT.
ALL CORRESPONDENCE AND ANY DRAWINGS HEREUNDER ARE TO BE DIRECTED TO
(BANK ADDRESS/CONTACT).
WE HEREBY AGREE WITH YOU THAT DRAFTS DRAWN UNDER AND IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT WILL BE DULY
HONORED.
THIS IRREVOCABLE STANDBY LETTER OF CREDIT IS ISSUED SUBJECT TO THE
INTERNATIONAL STANDBY PRACTICES 1998, INTERNATIONAL CHAMBER OF
COMMERCE PUBLICATION NO. 590 (ISP98) AND AS TO MATTERS NOT ADDRESSED BY THE ISP98 THIS
LETTER OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
THE NUMBER AND THE DATE OF OUR CREDIT AND THE NAME OF OUR BANK MUST
BE QUOTED ON ALL DRAFTS REQUIRED.
Page 7 of 8
EXHIBIT A
DRAW CERTIFICATE
AN “EVENT OF DEFAULT” AND/OR “EARLY TERMINATION DATE” (AS DEFINED IN THE NORTH
AMERICAN ENERGY STANDARDS BOARD BASE CONTRACT FOR SALE AND PURCHASE OF NATURAL
GAS VERSION 6.3.1 DATED APRIL 19, 2002) AND IN RESPECT TO THE BASE CONTRACT FOR SALE AND
PURCHASE OF NATURAL GAS BETWEEN ACCOUNT PARTY AND BENEFICIARY, DATED
_____________________ HAS OCCURRED AND IS CONTINUING WITH RESPECT TO THE ACCOUNT PARTY
UNDER THIS AGREEMENT AND NO EVENT OF DEFAULT HAS OCCURRED AND ITS CONTINUING WITH
RESPECT TO THE BENEFICIARY OF THIS LETTER OF CREDIT. WHEREFORE THE UNDERSIGNED DOES
HEREBY DEMAND PAYMENT OF THE ENTIRE UNDRAWN AMOUNT OF THE LETTER OF CREDIT.
(COMPANY NAME)
By: (SIGNATURE OF COMPANY OFFICER)
Title: _____________________________________
DATED: _________________________
Page 8 of 8
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