BURBANK WATER & POWER
CR
EDIT RISK POLICY
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Credit risk policy
Burbank Water and Power
CREDIT RISK POLICY
Table of contents
Contents
1.0 INTRODUCTION ............................................................................................................................................ 3
2.0 POLICY OVERVIEW ....................................................................................................................................... 3
3.0 RESPONSIBILITIES ......................................................................................................................................... 3
3.1 Financial planning and risk manager .................................................................................................... 3
3.2 Front office ................................................................................................................................................ 4
3.3 Risk Oversight Committee ...................................................................................................................... 4
3.4 City Attorney’s office ............................................................................................................................... 5
4. CREDIT EVALUATION/SET-UP/MONITORING STEPS ........................................................................... 5
4.1 Initial counterparty request .................................................................................................................... 5
4.2 Credit evaluation methodology and credit limit ................................................................................. 6
4.3 Credit approval document ...................................................................................................................... 6
4.4 Credit line assignment, denial, increase or decrease ......................................................................... 6
4.5 Short-term energy purchases .................................................................................................................. 7
4.6 Governing agreements execution .......................................................................................................... 7
4.7 On-going financial strength monitoring ............................................................................................... 8
4.8 Daily credit reports .................................................................................................................................. 8
4.9 Credit enhancement, remedies and mitigation techniques ................................................................ 9
4.10 Re-e valuations ........................................................................................................................................ 10
APPENDICES
1 – Credit evaluation methodology and credit limit ............................................................................................. 11 2 – Credit limit request form .................................................................................................................................... 13 3 – Credit approval document ................................................................................................................................. 14 4 – Transactional/ temporary approval form ........................................................................................................ 15 5 – Credit limit exception report .............................................................................................................................. 16 6 – Guaranty agreement ............................................................................................................................................ 17
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BURBANK WATER AND POWER
CREDIT RISK POLICY
1.0 INTRODUCTION
The purpose of Burbank Water and Powers (BWP) credit risk policy (“credit policy”) is to establish a consistent process whereby the credit risk of future financial loss due to counterparty physical or financial non -performance is significantly diminished for energy purch ases and/or sales. This objective will be accomplished through a pre-contract qualification and review process for all energy suppliers and/or purchasers in combination with effective on -going monitoring systems and established credit limits. All energy transaction counterparty risk will be analyzed through this credit policy. Exceptions to the credit policy are term power purchase agreements, gas reserves, or other long-term resources; the credit risks for these exceptions will be reviewed as part of the acquisition process.
2.0 POLICY OVERVIEW
Evaluation of a counterparty’s financial health and its ability to deliver its product or to pay is crucial. Performing the credit review procedures prior to contract execution is designed to protect BWP from undue exposure to losses that could arise from an insolvent counterparty not being able to pay for energy that they have purchased or to cover replacement costs incurred for term contracts that have positive economic value in relation to current market prices.
A credit review cannot be viewed as the only mechanism to prevent any and all losses, but it can help identify those counterparties where performance has been a problem in the past or may present a problem in the future. Established limits combined with proper monitoring systems will help enable BWP to effectively mitigate possible losses due to counterparty insolvency.
3.0 RESPONSIBILITIES
3.1 Financial planning and risk manager
The Financial planning and risk manager is responsible for the initial approval and on - going counterparty credit maintenance within R isk Oversight C ommittee (ROC) approved guidelines. The Financial planning and risk manager works closely with the front office to develop and maintain appropriate trading relationships. The Financial planning and risk manager will monitor the credit exposures created through the trading of approved energy and derivative products, and will ensure that BWP does not incur inappropriate credit exposure. The responsib ilities of the Financial planning and risk manager include, but are not limited to:
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• Approve counterparties with which BWP may trade energy, energy derivative products, and/or any other authorized instruments, as listed in the Attachment 3 of the Hedging plan and procedures with the Chief Financial Officer (CFO)’s approval • Obtain needed counterparty information to conduct evaluations • Determine if a counterparty qualifies for credit extension • Conduct annual reviews of approved counterparties
• Extend temporary credit lines
• Monitor counterparty credit exposure daily and make the credit risk report available to the front office
• Monitor credit exposures created by the trading of energy and/or energy derivative products
• Execute credit mitigation techniques as needed
• Maintain credit files
• Oversee the credit portfolio of BWP, including the summary reporting of exposures, trading exceptions and limit excesses to the front office management and the ROC • Coordinate legal documentation appropriate for each counterparty • Monitor accounts receivable and accounts payable reporting • Report credit limit exceedances or credit policy violations to the front office management, and, depending upon the materiality, to the ROC • Oversee the development of the systems necessary to support the above activities
3.2 Front office
The front office initiates the credit evaluation procedure by requesting approval of identified trading partners. In addition, the front office serves as the market front line for BWP in the acquisition of timely and pertinent counterparty information. The front office primary duties include:
• Submit counterparty credit requests to Financial planning and risk manager • Monitor trade activity for compliance to limits
• Communicate new market and counterparty information to the Financial planning and risk manager
3.3 Risk Oversight Committee
The Risk Oversight Committee (ROC) will approve all credit policy and procedures developed by the Financial p lanning and risk manager . The ROC will determine which reports will be distributed to members to allow performance of their oversight functions.
Reports that might be deemed appropriate for review include:
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• Summaries of credit exposures
• Lists of all approved counterparties
• Assessment of concentration risk
• Summaries of all credit actions taken by the Financial planning and risk manager during the period under review, including limits approved, renewed, declined, cancelled, and amended, temporary approvals granted, and limit overages • Lists of any legal documentation required by the terms of the credit approval but still outstanding, with an indication as to whether trading has begun
The Financial planning and risk manager will inform the ROC of any change to the procedures of marking- to-market or any other material enhancement of the policies and procedures. This reporting will be conducted at the first ROC meeting following the change. If the change is substantial, and defines a significant result, the subject will be discussed by the ROC prior to the modification taking place.
3.4 City Attorney’s office
This office supports the Financial planning and risk manager in counterparty agreement negotiations and d ocumentation. The City A ttorney
’s office will be responsible for the
following:
• Evaluation and approval of all counterparty master agreements, i ncluding credit documentation.
• Assistance in negotiating legal terms and conditions for all counterparty contractual obligations.
4. CREDIT EVALUATION/SET-UP/MONITORING STEPS
BWP’s credit evaluation, set-up, and monitoring includes a request for a credit evaluation, followed by using credit rating(s) to set a credit limit. Counterparty credit risk will be regularly monitored and credit limit will be adjusted correspondingly to its creditworthiness.
4.1 Initial counterparty request
When seeking out the best transactions to fit BWP ’s needs, a trader will start the credit evaluation process by filling out a Credit limit request form (Appendix 2) for identified prospective counterparties. Information needed for this form includes basic information on the counterparty like address and primary contacts, and more transaction specific information like products to be traded and sought-after size and tenure trading limits. Once completed, this form is forwarded to the Financial planning and risk manager for an analysis of the counterparty’s ability to meet its contractual obligations.
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4.2 Credit evaluation methodology and credit limit
The financial planning and risk manager will assign a credit limit based on counterparty’s long-term credit ratings from two major rating agencies: the Standard & Poor’s (S&P) and/or Moody’s as outlined in Appendix 1. In the case of discrepancies in credit ratings between these two agencies, the lower of the two ratings will be used.
4.3 Credit approval document
The Financial planning and risk manager will prepare a credit approval document (Appendix 3). This document contains credit ratings and a recommended credit limit, along with credit support documents and other applicable information, such as background, trading history, and other market or credit related news.
4.4 Credit line assignment, denial, increase or decrease
After review of a potential counterparty’s credit standing, the Financial planning and risk manager will recommend a credit limit for the counterparty based on its credit ratings and other relevant information consistent with the credit evaluation in Appendix 1. The CFO will provide a signature verifying the approval and associated limits for each approved counterparty.
The Financial planning and risk manager may advise, from time to time, against entering into a contract or transaction with a potential supplier or purchaser, usually for one of t he following reasons:
• Below investment grade credit rating or no credit rating, new business with no history, shell corporation with no assets, or recent UCC filings • Poor financial condition or credit history due to bankruptcy, tax or other liens, regulatory fines, judgments, or significant payment delinquencies • Inadequate credit support
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In addition, if a su pplier or purchaser ’s credit d eteriorates during the contr act per iod (usually discovered a s a result of a material change in credit rating(s ), the Financial planning and risk manager will obtain a credit enhancement vehicle from the counterparty.
Unless a credit enhancement vehicle, as described in Section 4.9 below, is obtained from the supplier or purchaser, all trading and transactions with that counterparty will be halted, with the exception of short-term energy trading as defined below. Additionally, BWP may seek to terminate existing contracts using the provisions allowed in the master agreement.
A material adverse change in financial status, or event that could cause a material change, is typically defined in the contract or master agreement.
The Financial planning and risk manager may recommend the CFO to approve an increase or a decrease in credit limit based on the most recent rating events and any other relevant information.
4.5 Short-term energy purchases
Short-term energy purchases, performed by the day ahead and real-time traders, typically of a term equal to same day, next day, weekends and holidays (as defined by the Western Electricity Coordinating Council (WECC) scheduling calendar), are allowed with non- approved or credit restricted counterparties, if or when supplies cannot be obtained from any approved counterparties, to maintain system reliability during uncontrollable events and emergency. The uncontrollable events and emergencies include, but are not limited to, scarcity of energy products to maintain reliability as the result of major disruption(s) to the existing power and natural gas supplies, natural disasters, riots, and/or extreme weather. Short-term purchases with non-approved, or credit restricted counterparties, are also allowed under emergency event(s) as declared by any regulatory agency such as California Independent System Operator, Balancing Authorities (BA), Southern Cal Gas Company or the state of California. Preapproval is preferred, however in the event there is not sufficient time to obtain approval from the CFO or his or her designee, traders will notify his or her direct supervisor and CFO , or his or her designee, immediately upon execution of a transaction with non-approved or credit restricted counterparties.
4.6 Governing agreements execution
To establish a legal basis for counterparty transactions, the Financial planning and risk manager will work with the C ity Attorney’s office and attempt to enter into master agreements or other customized bilateral agreement with each of its trading counterparties.
For bilateral Over-the-Counter (OTC)transactions, BWP will set up master agreements for the Western Systems Power Pool (WSPP), the North American Energy Standard Board (NAESB), the International Swaps Derivatives Agreement (ISDA), and the Leadership for Energy Automated Processing (LEAP). Should contracting conventions change to where an alternative master agreement is requested by the front office , BWP’s Financia l planning and risk manager and the City Attorney’s office will assess the alternative form of agreement.
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In addition to the formal master agreements listed above, BWP may enter into customized bi- lateral agreements which detail the standard trading and legal terms applicable to the transactional ac tivity between BWP and the d esignated co unterparty. T he City Attorney’s office must review and approve such agreement prior to execution.
4.6.1 Netting/Closeout provision
As a way to manage counterparty exposure, BWP will request netting provisions whenever possible in its agreements with counterparties. Netting provisions allow counterparties to net their respective payables and receivables. For example, if BWP buys power from a counterparty and also sells them power, the final closeout will take both aspects into consideration and the final settlement amount will be the difference between the payables and receivables.
4.6.2 Set-off provision
As a way to manage counterparty exposure, BWP will negotiate set- off provisions where possible in its agreements with counterparties. Set- off provisions enable netting across different governing agreements. For instance, BWP may be transacting both electricity and natural gas with the same counterparty under two different governing agreements. Set-off allows for amounts owed or received under both agreements to be netted against each other.
4.7 On-going financial strength monitoring
Initial credit evaluations are useful, but to ensure that approved counterparties maintain at least the financial strength demonstrated at time of approval , and to assure approved counterparty credit exposure limits are not exceeded, monitoring and reporting systems will be implemented.
The Financial planning and risk manager will be responsible for reviewing on an on -going basis the credit rating status of approved counterparties. In addition, the Financial planning and risk manager will follow business news reports on approved counterparties for any potential information that may indicate a decline in creditworthiness. The Financial planning and risk manager will also work with the front office to stay abreast of any current negative supplemental information gained from direct contact within the energy industry.
When a counterparty’s credit rating has been materially downgraded, or alarming events related to the counterparty have occurred, the Financial planning and risk manager will report to the front office management and to the ROC, and take action as needed, to mitigate credit risk exposure associated with outstanding and future transactions with the given counterparty.
4.8 Daily credit reports
The Financial planning and risk manager will monitor daily credit reports. When limits have been exceeded, the Financial planning and risk manager will create a Credit limit exception report (Appendix 5), which will be reported to the ROC along with the action taken in order to mitigate the identified risk exposure.
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4.9 Credit enhancement, remedies and mitigation techniques
The following credit enhancement or remedy techniques may be used to support weak credit or to rectify limit breaches. The purpose of these mechanisms is to provide BWP with protection in the event a counterparty is unable to pay for energy delivered or to perform their contractual obligations. The city attorney’s office or outside cou nsel will evaluate and approve all documents used for credit mitigation. Credit enhancements will take one of the following forms, but are not limited to:
• Market mitigation
• Parental corporate guaranty
• Standby Irrevocable Letter of credit
• Margin arrangement
• Pre-payment
• Cash collateral
• Other remedies as approved by the ROC
4.9.1 Market mitigation
The Financial planning and risk manager may require the front office from time to time to buy or sell energy with a particular counterparty in order to reduce exposure. These purchases or sales can only be accomplished if a netting/closeout agreement has been executed between BWP and the counterparty.
4.9.2 Parental guaranties
In cases where an applicant is a subsidiary of another entity, or has no credit rating and would like to utilize the consolidated financial statements and other relevant information of its parent for obtaining credit, a signed corporate guaranty is required (see Appendix 6).
Through this financial instrument, the parent company guarantees the amount of liabilities of the subsidiary. In this case, BWP will set credit limit up to 90% of the parental guaranty amount. The use of parental guaranties should follow BWP’s standard credit review and evaluation.
4.9.3 Irrevocable standby Letter of Credit
Irrevocable standby letters of credit are str aightforward to use and may substitute for a counterparty’s credit. In the ev ent a counterparty fails to pay, the letter of credit accompanied by a demand for payment is presented to the issuing financial institution.
BWP will set credit limit up to 90% of the letter of credit amount. The use of irrevocable standby Letter of Credit should follow BWP’s standard credit review and evaluation and be issued by a bank that is acceptable to BWP.
4.9.4 Margining
Margining is a method that will allow financial protection against portfolio exposure over an agreed upon threshold limit between cou nterparties. Once this threshold has been exceeded, the counterparty will be required to submit to an escrow account on behalf of BWP, cash or cash equivalent, in the amount of the differential between the agreed upon ATTACHMENT 3
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margin threshold and the exceeded amount. This provision protects BWP from potential default on accounts receivable as well as marked -to-market exposure. BWP and the counterparty will agree upon the terms and conditions for posting margins.
4.9.5 Pre-payment
Pre-payment would allow BWP to receive payment prior to making delivery of energy sold. A written agreement that has been approved by the City Attorney’s office should be executed prior to this type of arrangement.
4.9.6 Cash collateral
Cash collateral is not a preferred method, but it is accepted as the last resort of credit remedies.
4.9.7 Other remedies approved by the ROC
All other remedies will be approved by the ROC. These may include but not are limited to weekly billing when deemed necessary and posting other types of collateral not listed in section 4.9.
4.10 Re-evaluations
Companies should be monitored on a continual basis to ensure that credit risk is not deteriorating, as described above in section 4.7.
The Financial planning and risk manager will update counterparty’s credit ratings at a minimum once a year. Continuous ly monitoring compliance to credit limit, aggregate credit limit and transaction duration and lead time are required. When all necessary information for the review has been gathered, the Financial planning and risk manager will issue a determination. If there has been a significant decline in the credi tworthiness of a counterparty, the Financial planning and risk manager will communicate the revised credit limit line and transaction tenure and, as appropriate, communicate the need for a credit enhancement by the counterparty prior to any subsequent trade activity.
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1 – Credit evaluation methodology and credit limit
1A. Counterparty evaluation methodology for the Western System Power Pool (WSPP) and other bilateral agreements:
Counterparty’s maximum credit limit and transaction duration is determined based on the counterparty’s long-term credit rating from either the S&P or Moody’s. In the event the counterparty has credit ratings from both agencies, the lower of the two ratings will be used to determine credit and transaction duration limits.
Figure 1 – Credit and transaction duration limits
1B. Counterparty evaluation methodology for the North American Energy Standards Board (NAESB) and the International Swaps and Derivatives Association (ISDA)
BWP uses two master standard agreements, the NAESB and ISDA agreements , for long -term energy hedging, and they contain extensive provisions for mutual margining, netting, set -offs, and credit downgrade events. Agreement negotiation with counterparties for these agreements typically uses a mutual credit threshold amount based on credit ratings of each party.
The table below is a typical credit threshold table as specified in Paragraph 13 of the ISDA Agreement and Credit Support Addendum (CSA) of the NAESB Agreement. The ROC or general manager has the
APPENDICES
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authority to approve any deviation to this table below, on a case-by-case basis.
Figure 2- Illustrative credit threshold table
Moody’s Standard & Poor’s Maximum threshold
Aaa AAA $ 25 million
Aa1 to Aa3 AA+ to AA- 20 million
A1 to A3 A+ to A- 15 million
Baa1 BBB+ 10 million
Baa2 BBB 5 million
Baa3 and lower or unrated BBB- and lower or unrated Zero (0) ATTACHMENT 3
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2 – Credit limit request form
This form must be completed in its entirety in order for the request to be processed by the Financial planning and risk manager.
Date of request:
Request made by:
Name of proposed counterparty:
Address:
Street:
City:
State:
Zip Code:
Limit request (circle one) New Increase Decrease
Products to be traded (circle all that apply):
Prompt Forward Options Swaps
Size of trading limit:
Size of arbitrage notional value limit:
Tenure of trading limit:
Counterparty trading contacts: Real time: Day-ahead: Firm:
Name:
Phone:
Fax:
Counterparty credit contacts: Accounts payable: Accounts receivable:
Name:
Phone:
Fax:
Signature of Requestor
APPENDIX 2
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3 – Credit approval document
Name of counterparty: Request date:
Ultimate parent: Reference number:
Address: Review date:
Request prepared by:
Principal counterparty contacts (with telephone and fax numbers):
Trading:
Credit:
Operations:
New/
Notional
value
Notional
value
Product existing/ Limit Limit limit limit
type increase requested approved Tenure requested approved
Credit rating (S&P/Moody’s):
Special conditions of credit approval:
Recommendation and comments:
Approved by the CFO:
Date:
APPENDIX 3
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4 – Transactional/ temporary approval form
Name of counterparty: Date:
(Circle one) Transactional Approval limit approval
type of transaction / limit:
Amount:
Duration:
Credit rating (S&P/Moody’s):
Date of anticipated approval through regular credit process:
Additional comments or conditions:
Approved by:
Date:
Financial planning and risk manager
APPENDIX 4
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5 – Credit limit exception report
Name of counterparty:
Date:
Counterparty credit limit:
Current amount:
Reason for breach:
Action taken:
Completed by:
Approved by:
Date:
Note: This form is to be completed and submitted to the ROC by the Financial planning and risk manager at the end of the next business day following the breach of credit limit.
APPENDIX 5
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6 – Guaranty agreement
This Guaranty Agreement (this “Guaranty”), dated, as of [ ], 2003, is made and entered into by [ ], a [ ] corporation (“Guarantor”).
WITNESSETH:
WHEREAS, [ ] (the “Company”) may enter into transactions involving power sales under the Western Systems Power Pool (“WSPP Agreement”) and related confirmation agreements (collectively “Agreements”) with the City of Burbank, California (“Guaranteed Party”); and
WHEREAS, Guarantor will directly or indirectly benefit from the Agreements.
NOW THEREFORE, in consideration of the Guaranteed Party agreeing to conduct business with Company, Guarantor hereby covenants and agrees as follows:
1. GUARANTY. Subject to the provisions hereof, Guarantor hereby irrevocably and unconditionally guarantees the timely payment when due of the obligations of Company (the “Obligations”) to the Guaranteed Party in accordance with the Agreements. If Company fails to pay any Obligations, Guarantor shall promptly pay to the Guaranteed Party no later than the next Business Day (as defined in the WS PP Agreement), after notification, the amount due in the same currency and manner provided for in the Agreements. This Guaranty shall constitute a guarantee of payment and not of collection. Guarantor shall have no right of subrogation with respect to any payments it makes under this Guaranty until all of the Obligations of Company to the Guaranteed Party are paid in full. The liability of Guarantor under the Guaranty shall be subject to the following:
(a) Guarantor’s liability hereunder shall be and is specifically limited to payments expressly required to be made in accordance with the Agreements (even if such payments are deemed to be damages) and, except to the extent specifically provided in the Agreements, in no event shall Guarantor be subject hereunder to consequential, exemplary, equitable, loss of profits, punitive, tort, or any other even if such fees together with the payments exceed the cap in Section 1(b), damages, costs, except that Guarantor shall be required to pay reasonable attorney fees.
(b) The aggregate liability of the Guarantor shall not exceed [ ] Million U.S. Dollars [ ].
2. DEMANDS AND NOTICE . If Company fails or refuses to pay any Obligations, the Guaranteed Party may make a demand upon Guarantor (hereinafter referred to as a “Payment Demand”). A Payment Demand shall be in writing and shall reasonably and briefly specify in what manner and what amount Company has failed to pay and an explanation of why such payment is due, with a specific statement that the Guaranteed Party is calling upon Guarantor to pay under this Guaranty. A Payment Demand satisfying the foregoing requirements shall be deemed sufficient notice to Guarantor that it must pay the Obligations. A single written Payment Demand shall be effective as to any specific default during the continuance of such default, until Company or Guarantor has cured such default, and additional Payment Demands concerning such default shall not be required until such default is cured.
3. REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants that:
APPENDIX 6
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(a) it is a corporation duly organized and validly existing under the laws of the State of [ ] and has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Guaranty;
(b) no authorization, approval, consent or order of, or registration or filing with, any court or other governmental body having jurisdiction over Guarantor is required on the part of Guarantor for the execution and delivery of this Guaranty; and
(c) this Guaranty constitutes a valid and legally binding agreement of Guarantor enforceable against Guarantor in accordance with its terms, except as the enforceability of this Guaranty may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity.
4. EFFECT OF BANKRUPTCY BY COMPANY . The Guarantor’s obligation to pay under this Guaranty shall not be affected in any way by the institution with respect to the Company of a bankruptcy, reorganization, moratorium or similar insolvency proceeding or other relief under any bankruptcy or insolvency law affecting creditor’s rights or a petition for the Company’s winding-up or liquidation.
5. AMENDMENT. No term or provision of this Guaranty shall be amended, modified, altered, waived, or supplemented except in a writing signed by the Guarantor and Guaranteed Party hereto.
6. WAIVERS. Guarantor hereby waives (a) notice of acceptance of this Guaranty; (b) presentment and demand concerning the liabilities of Guarantor, except as expressly hereinabove set forth; and (c) any right to require that any action or proceeding be brought against Company or any other person, or except as expressly hereinabove set forth, to require that the Guaranteed Party seek enforcement of any performance against Company or any other person, prior to any action against Guarantor under the terms hereof.
Except as to applicable statutes of limitation, no delay of the Guaranteed Party in the exercise of, or failure to exercise, any rights hereunder shall operate as a waiver of such rights, a waiver of any other rights or a release of Guarantor from any obligations hereunder.
Guarantor consents to the renewal, compromise, extension, accele ration or other changes in the time of payment of or other changes in the terms of the Obligations, or any part thereof or any changes or modifications to the terms of the Agreements.
Guarantor may terminate this Guaranty by providing written notice of such termination to the Guaranteed Party and upon the effectiveness of such termination, Guarantor shall have no further liability hereunder, except as provided in the last sentence of this paragraph. No such termination shall be effective until fifteen (15) Business Days after receipt by the Guaranteed Party of such termination notice. No such termination shall affect Guarantor’s liability with respect to any obligations arising under any transaction entered into prior to the time the termination is effective, which transaction shall remain guaranteed pursuant to the terms of this Guaranty.
7. ASSIGNMENT. The Guarantor shall not assign this Guaranty without the express written consent of the Guaranteed Party. The Guaranteed Party shall be entitled to assign its rights under this Agreement in its sole discretion.
8. NOTICE. Any Payment Demand, to the Guaranteed Party or the Guarantor notice, request, instruction, correspondence or other document to be given hereunder by any party to another (herein collec tively called “Notice”) shall be in writing and delivered personally or mailed by certified mail, postage prepaid and return receipt requested, or by telegram or telecopier, as follows:
To Guaranteed Party
Attn:
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Fax No.: ( )
To Guarantor:
Attn:
Fax No.: ( )
Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next business day after receipt if not received during the recipient’s normal business hours.
All Notices by telegram or telecopier shall be confirmed promptly after transmission in writing by c ertified mail or personal delivery. Any party may change any address to which Notice is to be given to it by giving notice as provided above of such change of address.
9. MISCELLANEOUS. THIS GUARANTY SHALL IN ALL RESPECTS BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. This Guaranty shall be binding upon Guarantor, its successors and assigns and inure to the benefit of and be enforceable by the Guaranteed Party, its successors and assigns. The Guaranty embodies the entire agreement and understanding between Guarantor and the Guaranteed Party and supersedes all prior agreements and understandings relating to the subject matter hereof. The headings in this Guaranty are for purposes of reference only, and shall not affect the meaning hereof. This Guaranty may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
EXECUTED as of the day and year first above written.
[ ]
By:
Name:
Title:
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