Common use of Security Fund Clause in Contracts

Security Fund. (A) Seller shall establish Seller’s Security Fund at a level of $[**] no later than thirty (30) Days following satisfaction (or if applicable, waiver by Company) of the conditions precedent set forth in Article 6 above, and shall maintain Seller’s Security Fund throughout the remainder of the Term; provided, however, that Seller shall have no obligation to replenish Seller’s Security Fund; provided, further, however, that Seller shall increase Seller’s Security Fund by a one-time amount equal to $[**] no later than thirty (30) Days following the earliest to occur of (i) the Credit Rating of the issuer of Seller’s Security Fund being downgraded below Investment Grade, (ii) the closing of any Pending Facility Transaction or (iii) the delivery by Company to Seller of an Option Exercise Notice (as defined in the Option Agreement) in strict accordance with the requirements of Section 2.1 of the Option Agreement. (B) In addition to any other remedy available to it, Company may draw from Seller’s Security Fund such amounts as are necessary to recover amounts owing to Company pursuant to this PPA, including any damages due to Company and any amounts for which Company is entitled to indemnification under this PPA. Company may, in its sole discretion, draw all or any part of such amounts due to it from any form of security to the extent available pursuant to this Section, and from all such forms, and in any sequence Company may select. Any failure to draw upon Seller’s Security Fund or other security for any damages or other amounts due to Company shall not prejudice Company’s rights to recover such damages or amounts in any other manner. [**] Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 (C) If either (1) the Credit Rating given to Company’s senior, unsecured debt without any third party credit enhancement falls below Investment Grade or (2) Company fails to maintain a Credit Rating from a Rating Agency, then within fifteen (15) days after receiving notice from Seller, Company shall establish, fund and maintain thereafter a Company’s Security Fund in an amount equal to $[**] pursuant to the provisions of this Article 11. Promptly following (i) notice from Company that the Credit Rating given to Company’s debt without any third party credit enhancement is at or above Investment Grade, and (ii) the end of the Term, Seller shall release the Company’s Security Fund (including any accumulated interest, if applicable) to Company. (D) In addition to any other remedy available to it, Seller may draw from Company’s Security Fund such amounts as are necessary to recover amounts owing to Seller pursuant to this PPA, including any damages due to Seller and any amounts for which Seller is entitled to indemnification under this PPA. Seller may, in its sole discretion, draw all or any part of such amounts due to it from any form of security to the extent available pursuant to this Section, and from all such forms, and in any sequence Seller may select. Any failure to draw upon Company’s Security Fund or other security for any damages or other amounts due to Company shall not prejudice Seller’s rights to recover such damages or amounts in any other manner. [**] Denotes confidential information that has been omitted from the exhibit and filed separately, accompanied by a confidential treatment request, with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 (E) Any Security Fund required to be provided hereunder shall be maintained at the expense of the Party required to provide such Security Fund, shall be originated by or deposited in a financial institution or company (“Issuer”) acceptable to the other Party, and shall be in the form of one or more of the following instruments: 1. At any time during the Term, any Security Fund may be in the form of an irrevocable standby letter of credit in the form and substance of Exhibit F and acceptable to the other Party, from an Issuer with an unsecured bond rating (unenhanced by third-party support) equivalent to A- or better as determined by all Rating Agencies that have provided such a rating, and if ratings from both Standard & Poor’s and ▇▇▇▇▇’▇ (or if either one or both are not available, equivalent ratings from alternate rating sources reasonably acceptable to other Party). In addition, if such unsecured bond rating of the Issuer is exactly equivalent to A-/A3, the Issuer must not be on credit watch or have a negative outlook by a Rating Agency. Security provided in this form shall be consistent with this PPA and include a provision for at least thirty (30) Days advance notice to the other Party of any expiration or earlier termination of the security so as to allow the other Party sufficient time to exercise its rights under said security if the Party required to provide such Security Fund fails to extend or replace the security. Such security must be issued for a minimum term of three hundred and sixty (360) Days. The Party required to provide such Security Fund shall cause the renewal or extension of the security for additional consecutive terms of three hundred and sixty (360) Days or more (or, if shorter, the remainder of the Term) no later than thirty (30) Days prior to each expiration date of the security. If the security is not renewed or extended as required herein, the other Party shall have the right to draw immediately upon the security and to place the amounts so drawn, at the cost and with funds of the Party required to provide such Security Fund, in an interest bearing escrow account in accordance with sub-paragraph (2) below, until and unless the Party required to provide such Security Fund provides a substitute form of such security meeting the requirements of this Section. Security in the form of an irrevocable standby letter of credit shall be governed by the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600.600 (the “UCP”), except to the extent that the terms hereof are inconsistent with the provisions of the UCP, including Articles 14.b. and 36 of the UCP, in which case the terms of the Letter of Credit shall govern. 2. At any time during the Term, any Security Fund may be in the form of United States currency, deposited with an Issuer, in which the other Party holds a first and exclusive perfected security interest, either: (i) in an interest bearing escrow account under which the other Party is designated as beneficiary with sole authority to draft from the account or otherwise access the security; or (ii) held by Issuer as escrow agent with instructions to pay claims made by the other Party pursuant to this PPA, such instructions to be in a form satisfactory to the other Party. Security provided in this form shall include a requirement for immediate notice to the other Party from Issuer and the Party required to provide such Security Fund in the event that the sums held as security in the account or trust do not at any time meet the required level for the Security Fund as set forth in this Section. Funds held in the account may be deposited in a money-market fund, short-term treasury obligations, investment-grade commercial paper and other liquid investment-grade investments with maturities of three months or less, with all investment income thereon to be taxable to, and to accrue for the benefit of, the Party required to provide such Security Fund. Annual account sweeps for recovery of interest earned by the Security Fund shall be allowed by the Party required to provide such Security Fund. At such times as the balance in the escrow account exceeds the amount of obligation of the Party required to provide such Security Fund to provide security hereunder, the other Party shall remit to such Party on demand any excess in the escrow account above such Party’s obligations. 3. The Seller’s Security Fund also may consist of a guaranty substantially in the form of Exhibit H, from Seller Parent Guarantor or any other guarantor, with an Investment Grade rating. If the Credit Rating of the issuer of such guaranty is downgraded below Investment Grade, then Seller shall be required to convert the guarantee provided by such issuer to a Security Fund instrument meeting the criteria set forth in either sub-paragraph (1) or sub-paragraph (2) above no later than thirty (30) Days after receiving notice from Company that such conversion is required pursuant to this paragraph. (F) A Party may change the form of its Security Fund at any time and from time to time upon reasonable prior notice to the other Party, but such Security Fund must at all times be consistent with the foregoing. (G) Promptly (i) following the end of the Term, or (ii) upon any early termination of this PPA, the other Party shall release the balance of any Security Fund (including any accumulated interest, if applicable) to Party required to provide such Security Fund.