These Standby Letter of Credit Service Terms (the “Standard Terms,” and collectively with the Application and Agreement for Irrevocable Standby Letter of Credit (the “Application and Agreement”) signed in connection herewith, the “Agreement”) set forth the terms and conditions under which Applicant may sign and submit an Application or Instructions to request Capital One, National Association (“Bank”) to: (i) issue or amend a Letter of Credit at the request of Applicant or (ii) pursuant to Section 8 hereof, act as the advising, confirming or negotiating bank with respect to a Letter of Credit issued for the benefit of Applicant (collectively, the “Service”). The Service is also subject to the Treasury Management Services General Provisions (as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof, the “Online Terms”), as if fully incorporated herein and all Applicable Laws. Applicant agrees that it has received and reviewed the Online Terms by virtue of its accessibility through the Bank’s website, at https://www.capitalone.com/commercial/terms-and-conditions/general/. Capitalized terms used herein are defined in Section 19 hereof. Unless otherwise defined herein, any capitalized terms shall have the meaning as set forth in the Online Terms. Unless otherwise agreed in writing, in the event of a conflict between the Agreement and any other terms in the Online Terms or any Operational Instructions, the order of precedence shall be as follows: (i) such Operational Instructions, (ii) the Agreement, and (iii) the Online Terms. Whether Bank will issue a Letter of Credit, and Applicant’s obligations with respect to the Letter of Credit issued, including Applicant’s reimbursement obligations, will also be subject to the terms of any applicable Credit Agreement or Continuing Agreement, and in the event of a conflict between the terms of the Credit Agreement or Continuing Agreement, on the one hand, and the Agreement, on the other hand, the terms of the Credit Agreement or, to the extent there is no Credit Agreement, Continuing Agreement shall control to the extent necessary to resolve such conflict.
1. APPLICATION FOR AND ISSUANCE OF A LETTER OF CREDIT
(a) Submission and Review. The Application and Agreement must be signed and submitted in a form and substance acceptable to Bank (including any type of electronic form or means of communication, including through a Channel offered by Bank from time to time) and duly executed by Applicant (and, at the sole discretion of Bank, any Account Party). The Application and Agreement must be signed and submitted at least three (3) Business Days prior to the requested date of issuance or amendment of the Letter of Credit. Bank’s records of the content of any inquiries, communications and Instructions (whether written, facsimile or in other electronic form approved by Bank) in connection with the Letter of Credit and the Application and Agreement will be conclusive. Applicant agrees that, except as expressly provided herein, the rights and obligations of Applicant and Bank with respect to the Letter of Credit issued by Bank shall be subject to the terms and conditions of the Application and Agreement.
(b) Joint and Several Liability. If more than one Applicant signs and submits the Application and Agreement, each of them shall be jointly and severally liable under the Agreement and all of the terms and provisions regarding liabilities, Obligations, Collateral and Property of such Applicants shall apply to all of them.
(c) Account Parties; Responsibility of Applicant. Applicant understands and agrees that Applicant has the sole right to give Instructions on any and all matters relating to the Letter of Credit if it is issued for the account of an Account Party, including Instructions as to the disposition of documents and any unutilized funds, and to consent to any amendments, modifications, extensions, renewals, or increases in the Letter of Credit, waiver of discrepancies or any other matter relating to the Agreement. Bank has no obligation to consult any Account Party in any such matter (although Bank may furnish information to such Account Party at Bank’s sole discretion) or to act on any Instructions from any Account Party or any person or entity other than Applicant, and any notice delivered to Applicant shall be effective as to each Account Party. The Account Party has no rights against Bank. Applicant shall (i) be responsible for the Agreement and obligations under the Agreement to the same extent as if the Letter of Credit were requested for its own account, and (ii) inform the Account Party of the terms of the Agreement and provide a copy of the Agreement to the Account Party.
(d) No Obligation to Issue, Amend, Extend or Act for Applicant. Bank may, in its sole discretion, issue Letters of Credit for the account of the Applicant or Account Parties consistent with the terms of the Agreement. Except as otherwise agreed by Bank under a Credit Agreement, a Continuing Agreement or otherwise in writing, (i) nothing contained, expressed, or implied herein or otherwise in the Agreement shall obligate Bank to issue, amend, extend, or renew the Letter of Credit or provide any other Service for Applicant or any other Account Party and (ii) if the Letter of Credit gives Bank an option to send any notice (such as a notice of non-extension of the term of the Letter of Credit, a notice of non-reinstatement of an amount drawn under the Letter of Credit, or a notice of early termination of the Letter of Credit), Bank, in its sole discretion, may give or refrain from giving such notice.
(e) Submissions via Trade Portal. Bank may allow Applicant to sign and submit the Application and Agreement and other Instructions (including waivers of discrepancies) and obtain information regarding Letters of Credit using the Channel made available by Bank from time to time with respect to the Service. The Service is made available using the trade services module available through Bank’s online portal, currently branded as Intellix (the “Trade Portal”). Access to the Service using the Trade Portal and applicable Channel will be subject to use of the Security Procedures assigned and designated as applicable to Applicant. If the Application and Agreement (including any amendments or modifications thereto) or any other Instructions are submitted by Applicant using the Trade Portal, Applicant agrees that the Application and Agreement (including any amendments or modifications thereto) and any other Instructions submitted by Applicant using the Trade Portal shall be Applicant’s authorized Instructions and Bank is entitled to rely and act on any such Instructions, including the Application and Agreement or waiver of discrepancies.
2. REIMBURSEMENT OBLIGATIONS; PAYMENTS; INTEREST AND FEES
Except as otherwise set forth in a Credit Agreement or Continuing Agreement, Applicant’s obligations to Bank for reimbursement, including any interest and fees, under the Agreement shall be as follows:
(a) Letter of Credit Reimbursement Obligations. No later than the first Business Day after notice issued by Bank to Applicant that payment has been made under the Letter of Credit, Applicant shall pay to Bank (or remit to the applicable Account), without further notice or demand, the amount of such payment, in addition to any interest, fees and commissions required pursuant to subsections (d) and (e), respectively, below. If applicable, notice provided to Applicant from Bank’s correspondent or confirming bank of payment, acceptance, or other action under the Letter of Credit shall be conclusive evidence of Applicant's liability to reimburse Bank as provided herein.
(b) Sight Drafts and Acceptances. Notwithstanding the foregoing, (i) if any Instrument received by Bank is a sight Draft, Bank may demand payment from Applicant before or after payment is made by Bank; and (ii) if documents are presented for payment at sight pursuant to the Letter of Credit without the applicable Instruments, Applicant’s Obligations under those documents shall be the same as though the applicable Instruments had been presented or had accompanied the documents. Notwithstanding the foregoing, no Letter of Credit shall be issued under the Agreement providing for the acceptance of time Drafts or the incurrence of deferred payment undertakings.
(c) Payments on Instruments in a Foreign Currency. If any Instrument duly drawn under the Letter of Credit is paid in a foreign currency, Applicant’s payment to Bank shall be in United States currency in an amount equal to the Dollar Equivalent of each amount so drawn, with interest (if any) (or the Dollar Equivalent thereof), from the date of settlement to the date of Bank’s receipt of payment by Applicant. Applicant bears all risk of loss due to fluctuation of the rate of exchange from the time Bank issues the Letter of Credit in a currency other than Dollars until the time Applicant reimburses Bank for drawings paid under the Letter of Credit.
(d) Interest. Applicant shall pay to Bank interest on amounts due under the Agreement, as follows: (i) for Bank's payment of any Instrument, from the date of Bank’s payment to and including the date of reimbursement by or on behalf of Applicant in full of such amount; and (ii) for any other amount owing under the Agreement, from the date such amount is due, to and including the date of payment in full of such amount. Interest on amounts due under the Agreement shall be calculated on the basis of a 360-day year for the actual days elapsed and shall accrue at the lesser of: (A) the maximum rate permissible under Applicable Laws, or (B) the “prime rate”, which shall mean the rate of interest from time to time announced by Bank as its prime commercial lending rate (it being understood that such prime commercial rate is a reference rate and does not necessarily represent the lowest or best rate being charged by Bank to any customer and such rate is set by Bank based upon various factors, including Bank’s costs and desired return, general economic conditions and other factors).
(e) Letter of Credit Fees. Applicant shall pay to Bank, on demand, Bank’s customary commissions, fees and charges in respect of the Letter of Credit (including commissions and fees for issuance, negotiation and acceptance, correspondent bank fees, transfer, assignment of proceeds, amendments and drawings and of any adviser, confirming institution or entity or other nominated person) at then prevailing rates and amounts (or such other rates and amounts as may be agreed by Bank in writing), without duplication of fees otherwise payable under any Credit Agreement or Continuing Agreement. Letter of Credit fees may be invoiced and paid separately from other Services offered by Bank. If applicable, Applicant shall also pay any and all letter of credit fees (including any applicable fronting fees) payable to Bank as set forth in the Credit Agreement or Continuing Agreement at the times and amounts required therein.
(f) Immediately Available Funds; No Withholding. All reimbursements and other payments by Applicant under the Agreement shall be made in Dollars (or the Dollar Equivalent of the applicable foreign currency) immediately available funds, free and clear of and without deduction for any present or future taxes, set-off or other liabilities, at such time and to such location as Bank may designate from time to time. Applicant shall pay all withholding, stamp and other taxes or duties imposed by any taxing authority in any jurisdiction on reimbursement or payment under the Agreement or the Letter of Credit, and shall indemnify, defend and hold harmless Bank against any such withholding and all Losses resulting from Bank’s having to pay or from any omission to pay or delay in paying any tax.
3. ACCOUNTS; CASH COLLATERAL; AMOUNTS
(a) Deposit Account Debits and Holds. Any Account listed on the Agreement may be debited for all Fees, commissions, charges or other expenses payable under the Agreement until Bank has had a reasonable opportunity to act on any updated Instructions. Bank may, at Bank’s sole discretion, place a hold on any such Account at any time to secure any and all Obligations of Applicant under the Agreement, or any other Account(s) maintained by Applicant or any Affiliate of Applicant in the event that the funds in the Account are or may become insufficient to satisfy such Obligations. In the event that the funds in such Account are insufficient for any such payment, Bank may debit any other Account maintained by Applicant or any Affiliate of Applicant with Bank, excluding any payroll, escrow, withholding tax, trust or other restricted accounts, and apply the proceeds to the payment of any and all amounts owed by any Applicant to Bank under the Agreement.
(b) Cash Collateral Account; Debit of Accounts; Backstop Letter of Credit.
(i) If Bank requires that Applicant secure the Letter of Credit with cash collateral, Applicant and each Pledgor, as applicable, shall maintain during the life of such Letters of Credit a Cash Collateral Account having a balance in an amount not less than the Cash Collateral Requirement. Applicant and each Pledgor, as applicable, hereby grants to Bank a first priority security interest in the Cash Collateral Account, the funds therein and all proceeds thereof. If at any time the balance in the Cash Collateral Account is less than the Cash Collateral Requirement, Applicant and each Pledgor agrees at any time or from time to time, upon Bank’s demand, to furnish Bank with the amount of cash required to meet the Cash Collateral Requirement, or other security to Bank's satisfaction. The security interest granted in this Section shall continue until such time as all Obligations have been paid in full and discharged.
(ii) Without further consent of Applicant or any Pledgor, Bank may debit the Cash Collateral Account from time to time for the payment of any amounts due under the Agreement. In the event that the funds in the Cash Collateral Account are insufficient for any such payment, Bank may debit any other Account maintained by Applicant or any Affiliate of Applicant with Bank, excluding any payroll, escrow, withholding tax, trust or other restricted accounts, and apply the proceeds to the payment of any and all amounts owed by any Applicant to Bank under the Agreement.
(iii) The Cash Collateral Account shall remain at all times under the sole control (as defined in the UCC) of Bank, and shall not be subject to any other lien, encumbrance or security interest other than liens, encumbrances and security interests in favor of Bank. None of Applicant nor any Pledgor shall have any rights to give any Instructions or otherwise direct funds out of the Cash Collateral Account. Notwithstanding the foregoing, Bank may elect to place a hold on the Cash Collateral Account for the Cash Collateral Requirement and accept Instructions from Applicant with respect to the disposition of funds in the Cash Collateral Account in excess of the Cash Collateral Requirement. Each of Applicant and each Pledgor, as applicable, agrees that none of Applicant nor any Pledgor nor any other person shall have any right to demand payment of any amounts held in the Cash Collateral Account (other than any amounts in excess of the Cash Collateral Requirement).
(iv) Following the cancellation or expiration of the Letter of Credit (including by means of Beneficiary’s consent to cancellation and, if applicable, the return of the original Letter of Credit to Bank), upon Applicant’s written request Bank agrees to make funds in the Cash Collateral Account available to Applicant in an amount equal to the amount in excess of the Cash Collateral Requirement (which shall include, for the avoidance of doubt, amounts required to secure any outstanding Letters of Credit under the Agreement, and any unpaid reimbursement obligations, interest, fees, commissions, or charges or other Obligations).
(v) Notwithstanding the foregoing, Bank may, in its sole discretion, agree to accept a backstop letter of credit in form and substance and from an issuer, in each case, satisfactory to Bank in its sole discretion, in lieu of the Cash Collateral Requirement and Cash Collateral Account, and the Cash Collateral Account and Cash Collateral Requirement terms of the Agreement shall apply to any such backstop letter of credit mutatis mutandis.
(c) Calculation of Letter of Credit Amounts. Unless otherwise specified in the Agreement, the amount of the Letter of Credit at any time shall be deemed to be the stated amount of the Letter of Credit in effect at such time; provided, however, that with respect to the Letter of Credit that, by its terms or the terms of the Agreement therefor, provides for one or more automatic increases in the stated amount thereof, the amount of the Letter of Credit shall be deemed to be the maximum stated amount of the Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.
4. PRESENTMENT AND PAYMENT OF INSTRUMENTS; ADMINISTRATION OF LETTERS OF CREDIT
(a) Form and Acceptance of Instruments. Instruments must include such information as is required by Bank, in its sole discretion, with respect to the Letter of Credit. Unless the Letter of Credit provides otherwise, Bank may honor any Instrument for less than the face amount of the Letter of Credit.
(b) Substantial Compliance. Applicant agrees that Bank shall have the right to honor any presentation under the Letter of Credit if the presentation appears on its face to substantially comply with the terms and conditions of the Letter of Credit, even if such presentation does not appear to strictly comply. Bank may honor an Instrument or other document as substantially complying with the terms and conditions of the Letter of Credit when such Instrument or other document is signed or issued by a person purporting to be authorized under the Letter of Credit to draw or issue such Instrument or other document, including any person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any Beneficiary or any transferee of the Letter of Credit, including any arising in connection with any proceeding under the Bankruptcy Code. Bank may accept as being in strict compliance, any document containing stamped, written, or typewritten provisions, whether or not signed or initialed, and may assume conclusively that they were placed with authority on the document at the time of its issuance by any authorized agent.
(c) Honoring Instruments; Authenticity. Unless Bank is enjoined by a court of competent jurisdiction, Bank may assume that any Beneficiary or other presenter acts in good faith and that any presentation or other Instrument is non-fraudulent. Bank may, without incurring any liability to Applicant or impairing its entitlement to payment under the Agreement, honor the Letter of Credit despite notice from Applicant of, and without any duty to inquire into, any purported defense to honor or any claim against any Beneficiary or any other third party. Unless Bank specifically agrees otherwise in writing with Applicant, Bank need not check the authenticity or authority of any purported Beneficiary signature, even if in other transactions the Beneficiary is a customer or its signature is otherwise known to Bank. Bank may use additional procedures to verify the authenticity of any Instrument, but may also elect to honor an Instrument without verification.
(d) Discrepancies.
(i) Notification of Discrepancies. Bank shall have no responsibility to notify Applicant of any discrepancies between any documents and the Letter of Credit. In the event that Bank sends Applicant a notice of discrepancies in the documents and the Letter of Credit, Applicant acknowledges and agrees that such action is for Applicant’s convenience only, is not an obligation of Bank, and that such action on the part of Bank does not require Bank to send Applicant a notice of discrepancies in any other instance.
(ii) Examination, Objection; Waiver of Discrepancies. Applicant shall promptly examine Drafts and final copies of the Letter of Credit (or amendment thereto) and all documents, Instruments, and information delivered or otherwise made available to Applicant by Bank from time to time (including making such documentation available using a Channel) in connection with the Letter of Credit. In the event Applicant has any claim of non-compliance with the Instructions provided to Bank or of any discrepancy or other irregularity with respect to the Letter of Credit or any documents, Instruments, or other information, Applicant will notify Bank thereof in writing (including through a Channel) within two (2) Business Days after Applicant’s receipt of a copy of the Letter of Credit (or amendment thereto), or other Instrument, document, or information, as applicable. Applicant will conclusively be deemed to have waived any such discrepancy, irregularity or claim against Bank and its Related Persons unless notice of objection is given as set forth in this Section. This Section is intended to substitute two (2) Business Days for the “not unreasonable” time period set forth in Rule 5.09 of ISP 98. If Applicant accepts or retains any original documents presented under the Letter of Credit or possession of Property covered (in whole or in part) by the Letter of Credit, then all discrepancies in the documents shall be deemed waived by Applicant, and Bank is authorized to pay any Instruments drawn upon the Letter of Credit. Notwithstanding any waiver by Applicant of discrepancies in the Letter of Credit, Instruments, documents or required statements, Bank has the right, in its sole discretion, to decline to approve any discrepancies and to refuse payment on the Letter of Credit. Such right is in addition to and not in limitation of rights of Bank and any actions taken by Bank under Standard Letter of Credit Practice or any Applicable Laws.
(e) Notice of Dishonor. Any notice of dishonor given by Bank within six (6) Business Days after the date of presentation of documents to Bank shall not be deemed to be unreasonably late unless the Letter of Credit expressly states that a notice of dishonor must be given within a shorter time period. This Section is intended to substitute six (6) Business Days for the three (3) Business Days set forth in Rule 5.01(a)(i) of ISP 98 and for any contrary provisions in Article 16 of UCP 600.
(f) Transfers. If the Letter of Credit is issued in transferable form, Bank shall have no duty to determine the identity of anyone appearing in any transfer request, Draft or other document as transferee, or the validity or correctness of any transfer made pursuant to documents that appear on their face to be substantially in accordance with the terms and conditions of the Letter of Credit. Unless otherwise stated in the Letter of Credit, Applicant shall be responsible for transfer fees.
(g) Additional Administrative Matters. Without limiting any other provision of the Agreement, Bank: (i) may replace a purportedly lost, stolen or destroyed original Letter of Credit with a replacement marked as such or waive a requirement for its presentation, (ii) if the Letter of Credit by its terms requires presentation of a Draft but no form of Draft is attached as an exhibit to the Letter of Credit, may accept as a Draft any written or electronic demand or request for payment under the Letter of Credit, (iii) unless a Letter of Credit specifies the means of payment, may make any payment under the Letter of Credit by any means it chooses, including by wire transfer of immediately available funds, (iv) may select any bank to act as advising, transferring, confirming and/or nominated bank under the law and practice of the place where it is located if the Agreement requests or authorizes advice, transfer, confirmation or nomination but does not specify the bank to be selected, (v) may amend the Letter of Credit to reflect any change of address or other contact information of any Beneficiary, and (vi) shall not be obligated to examine, and may disregard for purposes of determining compliance of any presentation with the terms and conditions of the Letter of Credit, (A) any presented document not called for by the terms and conditions of such Letter of Credit and (B) that portion, if any, of any presented document called for by the terms and conditions of the Letter of Credit that contains data not called for by the terms and conditions of the Letter of Credit, regardless of whether such data conflicts with data in the Letter of Credit or any other presented document.
(h) Same Day Presentation. Notwithstanding any provision herein contained to the contrary, if the Letter of Credit requires payment of an Instrument on the same day on which such Instrument is presented, Bank shall be entitled to honor such Instrument without review or examination by Applicant and Applicant waives all defenses to reimbursement thereof based on irregularities that may have been revealed by Applicant’s review or examination.
5. LETTER OF CREDIT TEXT
(a) Applicant’s Responsibilities.
(i) Applicant is responsible for preparing or approving the final text of the Letter of Credit to be issued by Bank and received by Beneficiary. Bank’s recommendation or drafting of text or Bank’s use or non-use or refusal to use text submitted by Applicant shall not affect Applicant’s ultimate responsibility for the final text and its receipt by the Beneficiary. Applicant understands that the form of the Letter of Credit may be subject to such revisions and changes to the Letter of Credit language consistent with Bank’s customary practices for letter of credit issuance as are deemed necessary or appropriate by Bank, and Applicant hereby consents to such revisions and changes. Applicant is responsible for the effect, or lack of effect, under Applicable Laws, including ISP 98 Rule 4.11, UCP 600 Article 14(h), and UCC Section 5-108(g), of a provision in the Letter of Credit that requires Bank to verify facts rather than examine documents or that fails to identify the documents to which the provision applies.
(ii) Applicant is responsible for including suitable provisions in the underlying agreement relating to the Letter of Credit, which agreement may include provisions that describe the circumstances under which (i) a drawing under the Letter of Credit may be made, (ii) Letter of Credit proceeds may or must be applied to the underlying agreement, and/or (iii) part or all of those proceeds may or must be disgorged.
(b) Acceptance of Risk. Applicant accepts the risk that the text of the Letter of Credit is consistent with the underlying obligation, suitable for Applicant’s purposes, and received by the Beneficiary in time to permit the Beneficiary and Applicant to review the Letter of Credit and to request any desired amendments or modifications.
(c) No Reliance. Applicant has not relied on Bank in any manner in connection with the wording of the Letter of Credit, including the drawing conditions or the structuring of the underlying transaction, the same being Applicant's responsibility undertaken with opportunity to consult counsel. Applicant waives all claims against Bank in respect of Applicant acting on or relying on any advice received from Bank, whether or not such advice was requested by Applicant.
6. INSTRUCTIONS
In connection with Applicant’s use of the Service, Applicant, on behalf of itself and each Account Party, may request that Bank accept and act upon written Instructions (whether by facsimile, electronic communications, including using the Trade Portal or other Channel made available by Bank, or such other means as Bank may reasonably accept from time to time). Applicant’s Instructions to Bank must include such information as is required by Bank, in its sole discretion, with respect to the Letter of Credit. Bank reserves the right to decline the Application or other Instruction or request provided by Applicant if, in Bank’s sole discretion, Bank determines that the carrying out of such Instruction or request is reasonably likely to contravene Bank’s customary procedures or policy or any Applicable Laws.
7. MODIFICATIONS TO AGREEMENTS; NO WAIVER
(a) Further Agreements. Each Applicant and each other Pledgor agrees that Bank may at any time and from time to time, in its sole discretion, by agreement with one or more other Applicants, and, if necessary, with the consent of any Beneficiary or other third party, and all in such manner and on such terms as Bank may deem proper and without notice or further assent from such other Applicant or other Pledgor:
(i) further finance or refinance any transaction under the Letter of Credit;
(ii) lengthen the examination period;
(iii) specify or amend a specified place or manner of receiving a presentation, effecting honor, or giving notice of dishonor;
(iv) discount an accepted Instrument or deferred obligation incurred under the Letter of Credit;
(v) renew, extend or change the time of payment or the manner, place or terms of payment of any of the Obligations;
(vi) settle or compromise any of the Obligations or subordinate the payment thereof to the payment of any other debts of or claims against any Applicant which may at the time be due or owing to Bank; or
(vii) release any Applicant or other Pledgor or any guarantor or any collateral (whether or not constituting Collateral as defined herein), or modify the terms under which such collateral is held, or forego any right of setoff, or modify or amend in any way the Agreement or the Letter of Credit, or give any waiver or consent or grant any indulgence under the Agreement.
(b) Agreements Continuing; Primary Obligations. In any such event described in subparagraph (a), above, such Applicant or other Pledgor shall remain bound by such event and the Agreement after giving effect to such event, and the Obligations under the Agreement shall be continuing obligations, the liens on Collateral shall continue unimpaired and, if such Obligations are contingent, may be treated by Bank as due and payable for their maximum face amount. Without limiting the foregoing, each Applicant and each other Pledgor agrees that its Obligations are primary, waives all suretyship or discharge defenses available to a secondary obligor, and forgoes negotiation of a separate guaranty and security agreement providing for secondary liability to Bank.
8. BANK ACTING AS AN ADVISING, NEGOTIATING, AND/OR CONFIRMING BANK
(a) Applicant as Beneficiary. If Applicant is or expects to become a beneficiary of a letter of credit issued by another financial institution, Applicant may request in writing that Bank act as an advising bank, a negotiating bank, and/or a confirming bank with respect to such letter of credit (and if Bank in its sole discretion shall do so, such letter of credit shall be a “Letter of Credit” as defined herein). Bank shall have no obligation to act in one or more such capacities unless confirmed in writing. In the event Bank so agrees to act with respect to such Letter of Credit, the terms and conditions of such Service shall be governed by the introductory provisions of these Standard Terms, this Section 8, and, incorporated by reference mutatis mutandis where Applicant is the Beneficiary (rather than the Applicant) of a Letter of Credit, Section 5 (Letter of Credit Text), Section 9 (Licenses), Section 10 (Obligations Absolute), Section 11 (Reimbursement of Costs and Indemnification; Mitigation and Limitation of Liability), Section 12 (Representations, Warranties and Covenants), Section 15 (Notices), Section 17 (Termination), Section 18(a) (Miscellaneous) and Section 19 (Definitions). Bank may revoke its agreement to act for Applicant in such capacity at any time following a breach of the Agreement by Applicant.
(b) Bank acting as Advising Bank. If Bank elects to act as an advising bank on behalf of Applicant with respect to a Letter of Credit, Bank undertakes to accurately advise the terms of the Letter of Credit, confirmation, amendment, or advice received by Bank and undertakes to the Beneficiary to check the apparent authenticity of the request to advise.
(c) Bank acting as Negotiating Bank. If Bank elects to act as a negotiating bank on behalf of Applicant with respect to a Letter of Credit, Bank undertakes the same obligations as it would as an advising bank, and in addition, if Applicant submits to Bank a conforming draw on the Letter of Credit, Bank will credit or pay the Beneficiary as specified in the Letter of Credit once Bank has received payment from the issuing bank.
(d) Bank acting as Confirming Bank. Bank does not agree to act as a confirming bank unless in its sole discretion it expressly confirms it is doing so in writing. If Bank elects to act as a confirming bank on behalf of Applicant with respect to a Letter of Credit, Bank undertakes the same obligations as it would as a negotiating bank, and in addition shall be bound by the terms and conditions of its confirmation (which may curtail or limit terms and conditions of the applicable Letter of Credit or may impose additional conditions to honor), but even if Bank’s advice is inaccurate, that shall not change the terms and conditions of the Letter of Credit, confirmation, or amendment as issued. Applicant agrees that upon Bank’s honor of its confirmation, Bank shall have and be subrogated to the rights of the Beneficiary thereunder (to the extent Bank has satisfied its obligation thereunder to Applicant), and Applicant shall have no further rights or claims with respect thereto.
(e) Acceptance of Risk; No Reliance. In addition to the limitations set forth in Section 5 (Letter of Credit Text), when Bank is acting as advising bank or negotiating bank, Applicant accepts the risk of non-payment or other default by the issuing bank of the Letter of Credit. Applicant has not relied on Bank in any manner in connection with its determination as to the suitability, reputation, or creditworthiness of the issuing bank or the structuring of the underlying transaction, the same being Applicant 's responsibility undertaken with opportunity to consult counsel. Applicant understands that Bank does not owe any duties to Applicant beyond those expressly stated in the Agreement and waives all claims against Bank in respect of Applicant acting on or relying on any advice received from Bank whether or not such advice was requested by Applicant.
9. LICENSES
Applicant shall obtain and maintain all required licenses associated with the Letter of Credit issued under the Agreement or any other Service performed by Bank under the Agreement. Without limiting the generality of the foregoing, Applicant shall: (i) comply with all Applicable Laws (including currency exchange regulations), with regard thereto or to the financing thereof, and (ii) furnish Bank, upon request, with all certificates and documentation evidencing Applicant’s compliance with subsections (i) and (ii). Applicant shall pay Bank, on demand, any Losses incurred by Bank in connection with Applicant’s obligations under this Section.
10. OBLIGATIONS ABSOLUTE
(a) The obligations of Applicant and each other Pledgor as set forth in the Agreement shall be absolute, unconditional, irrevocable, and performed strictly in accordance with the terms of the Agreement irrespective of:
(i) any act or omission pursuant to Applicant’s Instructions;
(ii) any other act or omission of Bank or its Related Persons, other than any such act or omission arising from Bank’s gross negligence or willful misconduct (as determined in a final, non-appealable judgment by a court of competent jurisdiction);
(iii) the validity, enforceability, legal effect, form, sufficiency, accuracy, collectability, or genuineness of the Agreement, Letter of Credit, amendment thereto, guaranty, agreement, Instruments, documents (including insurance) or required statements, or of any endorsement thereon, or of the nature of the Property, even if the foregoing should in fact prove to be in any or all respects invalid, unenforceable, inaccurate, fraudulent or forged (and notwithstanding that Applicant shall have notified Bank thereof);
(iv) failure of any Instrument to bear any reference or adequate reference to the Letter of Credit;
(v) errors, omissions, interruptions or delays in transmission of delivery of any Instruments, messages or notices however sent and whether or not in code or otherwise, or for errors in interpretation of technical terms or in translation;
(vi) any act, default, omission, insolvency, or failure in business of any other person, including any correspondents, subcontractors, servicers, agents, or any present or future de jure or de facto government or governmental authority, or any consequences or failure to pay under the Letter of Credit arising as a result of such act, default, omission, insolvency, or failure in business, a Force Majeure Event, or other causes beyond the control of Bank or its Related Persons, including any acts or omissions of any Beneficiary of the Letter of Credit or any transferee of the Letter of Credit, if transferable;
(vii) any act or omission of Bank required or permitted under any Applicable Law; Standard Letter of Credit Practice; applicable order, ruling or decree of any court, arbitrator or governmental agency; or published statement or interpretation of a court, other governmental authority or trade association (such as the International Chamber of Commerce, The Bankers Association for Finance and Trade, the Institute for International Banking Law & Practice, Inc. or any of their respective successors) on a matter of law or practice (including any Standard Letter of Credit Practice);
(viii) honor or other recognition of a presentation or Instrument (A) that does not comply with the terms of the Letter of Credit, (B) that includes forged or fraudulent documents, including the forgery of a signature of a Beneficiary or of a transferee or assignee of the Letter of Credit’s proceeds, (C) that is otherwise affected by the fraudulent, bad faith, or illegal conduct of the Beneficiary or other person (excluding Bank), (D) under a new name of any Beneficiary, (E) of a purported successor or transferee of any Beneficiary or other party required to sign, present, or issue documents for presentation, or (F) which Bank believes, in good faith, to have been presented by a person authorized to make such presentation;
(ix) honor of a presentation without regard to any non-documentary condition(s) in the Letter of Credit, regardless of whether Rule 4.11 of ISP 98, Article 14(h) of UCP 600 or Section 5-108(g) of the UCC applies;
(x) the existence, character, quality, quantity, condition, packing, value, or delivery of the Property purported to be represented by the documents or any variance from descriptions therein, and the solvency, responsibility, or relationship to the Property of any party issuing any documents in connection with the Property;
(xi) honor after the expiration date of the Letter of Credit of any presentation made thereunder on or prior to such expiration date, or on or prior to such later date by which documents must be received under the Letter of Credit if presentation after the expiration date is authorized by Standard Letter of Credit Practice applicable to it (such as ISP Rule 3.13 or 3.14) or Bank’s disregard of any requirement that presentation be made at a particular place;
(xii) honor of a presentation that is subsequently determined by Bank to have been made in violation of international, federal, state or local restrictions on the transaction of business with certain prohibited persons;
(xiii) dishonor of any presentation that does not strictly comply with the terms of the Letter of Credit or that is fraudulent, forged or otherwise not entitled to be honored;
(xiv) Bank or any of its branches or affiliates being the Beneficiary of the Letter of Credit;
(xv) any breach of contract between the Beneficiary and Applicant or among any of the parties (including any vendors) to the underlying transaction;
(xvi) any claim, set-off, defense or other right that Applicant or any other person may have at any time against any Beneficiary or transferee Beneficiary, any assignee of proceeds, Bank or any other person;
(xvii) payment to any presenting bank (designated or permitted by the terms of the Letter of Credit) claiming that it rightfully honored or is entitled to reimbursement or indemnity under Standard Letter of Credit Practice applicable to it;
(xviii) honor of a demand for payment presented electronically even if the Letter of Credit requires that demand be in the form of a Draft;
(xix) any adverse change in any relevant exchange rates or in the relevant currency markets generally;
(xx) failure of any documents to accompany any presentation or Instrument at negotiation or at payment or failure of any person to note the amount of any Instrument on the reverse of the Letter of Credit, or to surrender or take up the Letter of Credit or to forward documents apart from Instruments as required by the terms of the Letter of Credit, each of which provisions, if contained in the Letter of Credit itself, it is agreed may be waived by Bank; and
(xxi) any other circumstance that might, but for the provisions of this Section, constitute a legal or equitable discharge of or defense to any or all of the Obligations.
None of Bank nor any of its correspondents, subcontractors, servicers or agents shall be responsible for, and neither Bank’s powers or rights under the Agreement shall be affected by, any of the foregoing matters, items or other circumstances set forth in this Section 10.
11. REIMBURSEMENT OF COSTS AND INDEMNIFICATION; MITIGATION AND LIMITATION OF LIABILITY;
(a) Indemnification. Without limiting the indemnification obligations of Applicant under the Online Terms, Applicant, on behalf of itself and each Account Party, agrees to reimburse Bank upon demand and indemnify, defend and hold harmless Bank and its Related Persons from and against all Losses incurred or suffered by Bank and its Related Persons in connection with the Agreement or the Letter of Credit, including the following:
(i) Bank’s exercise of any right or remedy granted to it under the Agreement or in respect of the Letter of Credit or any rights or remedies afforded by Applicable Laws, including the collection or enforcement of any of Applicant’s obligations under or in respect of the Agreement, any letter of indemnity, or the Letter of Credit, and any Instruments or payments thereunder;
(ii) any claim and the prosecution or defense thereof arising out of or in any way connected with the Agreement or the Letter of Credit, including as a result of any act or omission by Applicant, any Account Party, or any Beneficiary;
(iii) any of the events or circumstances referred to in Section 10(a) hereof, including any defense by Bank in an action in which Applicant obtains an injunction against presentation or honor of any Instrument;
(iv) any indemnity or other undertaking that Applicant requests or authorizes Bank to issue to any other financial institution (including any branch or affiliate of Bank) to induce such financial institution to issue its own letter of credit, demand guarantee, or other undertaking as requested in the Letter of Credit or in connection with the Letter of Credit;
(v) Bank’s administration, preparation or issuance of the Letter of Credit, or any act or omission pursuant to Applicant’s use of the Service (including the Trade Portal), any Instructions, any Instruments or payments under the Letter of Credit (including over any discrepancies expressly waived (including orally or using any Channel) or waived pursuant to the Agreement), or otherwise in connection with the Letter of Credit, including any Losses arising out of any transfer, sale, delivery, surrender or endorsement of any document at any time held by Bank or any of its affiliates or subsidiaries, or held for the account of them by any correspondent of any of them, or arising out of any action for injunctive or other judicial or administrative relief and affecting, directly or indirectly, Bank or such affiliate or subsidiary, or correspondent of any of them;
(vi) Applicant’s failure to timely obtain any applicable licenses or comply with any Applicable Laws or other laws, rules or regulations relating to or affecting the Letter of Credit;
(vii) any third party seeking to enforce the rights of an Applicant, Beneficiary, nominated person, transferee, or assignee of Letter of Credit proceeds or as a holder of an Instrument or other document;
(viii) Bank’s performance of the obligations of a confirming institution or entity that wrongfully dishonors a presentation;
(ix) Bank’s dishonoring any presentation during the continuance of an Event of Default; and
(x) the administration or enforcement of the Agreement or the collection of any amounts owing thereunder, including reasonable arbitration, attorney’s and other fees and expenses, whether incurred without the commencement of a suit, in any trial, arbitration, or administrative proceeding, or in any appellate or bankruptcy proceeding, including the preparation, execution, delivery, amendment, modification, or termination of the Agreement, the Letter of Credit, any amendments thereto, any transaction contemplated herein or any existing or future related agreement. Notwithstanding the foregoing, Applicant shall not be required to indemnify Bank or any of its Related Persons against any Losses resulting from such person’s gross negligence or willful misconduct (as determined in a final, non-appealable judgment by a court of competent jurisdiction); provided that, for the avoidance of doubt, Applicant shall still be required to indemnify any of Bank or any of its Related Persons that have not acted grossly negligent or committed willful misconduct.
(b) Increased Costs. In addition to the costs otherwise set forth in the Agreement, Applicant will reimburse Bank, on demand, for all increased costs and/or expenses of any kind paid or incurred by Bank or its Related Persons arising out of or in connection with:
(i) compliance with any governmental exchange regulations or currency restrictions now or hereafter applicable to the Agreement, the Letter of Credit, or any Instruments or payments thereunder; and
(ii) compliance with any now or hereafter applicable reserve, special deposit, capital, liquidity or similar requirement against assets of, deposits with, or for the account of, or credit extended by, Bank or its holding company, or any other condition that is imposed upon Bank or its holding company that imposes a cost upon Bank or its holding company, and the result, in the determination of Bank, is to increase the cost to Bank or its holding company of maintaining the Letter of Credit or paying or funding the payment of any Instrument thereunder, or to reduce the amount of any sum received or receivable, directly or indirectly, by Bank under the Agreement, or to increase the amount of capital or liquidity required to be maintained by Bank or its holding company.
(iii) In making the determinations contemplated under the Agreement, Bank may make such estimates, assumptions, allocations and the like which Bank in good faith determines to be appropriate, but Bank’s selection thereof, and Bank’s determinations based thereon, shall be final and binding and conclusive upon Applicant.
(c) Mitigation and Limitation of Liability. Applicant shall take action to avoid and mitigate the amount of any damages claimed against Bank or any Related Person, including by enforcing its rights in the underlying transaction. Any claim by Applicant under or in connection with the Agreement or the Letter of Credit shall be reduced by an amount equal to the sum of (a) the amount (if any) saved by Applicant as a result of the breach or alleged wrongful conduct complained of; and (b) the amount (if any) of the loss that would have been avoided had Applicant taken all reasonable steps to mitigate any loss, and in case of a claim of wrongful dishonor, by specifically and timely authorizing Bank to effect a cure. Applicant agrees that Applicant’s aggregate remedies against Bank for honoring a presentation or retaining honored documents in breach of Bank’s obligations to Applicant (whether arising under the Agreement or any other agreement or Applicable Laws) are limited to the amount paid by Applicant with respect to the honored presentation. If Bank or any of its Related Persons honors an Instrument or presentation under the Letter of Credit for which Applicant claims it is not obligated to reimburse Bank, Applicant shall nonetheless pay to Bank the amount paid by Bank or such Related Person, without prejudice to Applicant’s claims against Bank or any of its Related Persons to recover fees and costs paid by Applicant with respect to the honored presentation plus any direct damages resulting therefrom which Applicant is unable to avoid or reduce. Applicant’s prevailing in an action based on forgery or fraud of the Beneficiary or other presenter does not relieve Applicant from its obligation to pay Bank’s or its Related Persons’ costs and expenses in contesting the entry or maintenance of injunctive relief.
(d) Survival. This Section shall survive termination of the Agreement and all Letters of Credit.
12. REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) Representations, Warranties and Covenants. In addition to any representations, warranties and covenants set forth elsewhere in the Agreement, a Credit Agreement or a Continuing Agreement, Applicant represents, warrants and covenants, on behalf of itself and each Account Party, and each other Pledgor represents, warrants and covenants that:
(i) Applicant, such Account Party and such other Pledgor have obtained all authorizations, approvals and consents necessary for it to enter into and perform the Agreement and the Letter of Credit;
(ii) the Agreement constitutes the legal, valid and binding obligation of Applicant, such Account Party and such other Pledgor, enforceable against Applicant and such Account Party in accordance with their terms, and the execution, delivery and performance of the Agreement will not contravene Applicant’s, such Pledgor’s or such Account Party’s organizational documents;
(iii) there is no pending or, to its knowledge, threatened arbitration proceeding, litigation or action which (A) purports to affect the validity or enforceability of the Agreement, the Letter of Credit or any transaction related to the Letter of Credit, or (B) if adversely determined, could reasonably be expected to have a material adverse effect on its business, operations, Property or financial condition;
(iv) Applicant acts for itself and for no other person in requesting issuance of the Letter of Credit for its account (or on behalf of another Applicant or an Account Party);
(v) Applicant or any other Account Party may be identified in the Letter of Credit as the “applicant,” “account party,” “customer,” “instructing party” or the like at whose request and on whose Instruction and for whose account the Letter of Credit is issued;
(vi) only the Applicant (or the Applicant named as Beneficiary under Section 8 (acting through its officers or other duly authorized representatives or agents)) may request or authorize Bank to issue, amend, pay, or otherwise act under the Letter of Credit;
(vii) only the Applicant has standing to take any action to assert the rights and remedies of an Applicant or Account Party, including to sue for any injunction against honor of the Letter of Credit;
(viii) no Applicant, Pledgor, Account Party or Beneficiary of the Letter of Credit is a national of a designated blocked country or territory, or a “Specially Designated National,” “Blocked Entity,” “Specially Designated Terrorist,” “Specially Designated Narcotics Trafficker,” or “Foreign Terrorist Organization,” or other similar terms as each is defined by OFAC, or directly or indirectly controlled or more than 50% in the aggregate owned by one or more of the foregoing persons, or otherwise subject to any limitations or prohibitions under any Sanctions program, or otherwise in violation of any Applicable Laws (including Anti-Corruption Laws and Anti-Terrorism Laws) relating to obtaining or furnishing credit, making or receiving payments, or entering into transactions underlying or relating to the Letter of Credit;
(ix) no merchandise being shipped under the Letter of Credit is prohibited under Applicable Laws (including Sanctions);
(x) Applicant, each Pledgor and each Account Party are in compliance with, and shall at all times comply with, all Anti-Corruption Laws and Anti-Terrorism Laws applicable to it, its subsidiaries, and its and their respective directors, officers, employees and agents from time to time;
(xi) all balance sheets, profit and loss statements, and other financial statements furnished to Bank are accurate and complete in all material respects and fairly reflect the financial condition of the organizations and persons to which they apply as of the date thereof or period covered thereby, in accordance with generally accepted accounting principles, consistently applied; and
(xii) no other information furnished by or on behalf of Applicant, Account Party or such other Pledgor to Bank or made available to Bank is or shall be materially false or misleading when furnished.
(b) Reaffirmation of Representations, Warranties and Covenants. Applicant, on behalf of itself and each Account Party, and each other Pledgor reaffirms these representations, warranties and covenants each time it uses the Service and agrees to promptly notify Bank in writing if any representation, warranty or covenant is no longer true with respect to Applicant, any Account Party or such other Pledgor.
(c) Effect of Credit Agreement and Continuing Agreement Representations, Warranties and Covenants. Notwithstanding the foregoing, any representations, warranties or covenants contained in a Credit Agreement or a Continuing Agreement concerning substantially the same subject matter as those contained herein shall supersede and replace those contained herein.
13. EVENTS OF DEFAULT
(a) Events of Default. Any and all obligations and liabilities of Applicant to Bank, whether now existing or hereafter incurred (including the future obligation to pay under the Agreement), shall become and be due and payable forthwith without notice or demand, which Applicant hereby waives, as follows (each, an "Event of Default"):
(i) upon the death, dissolution, or winding up of business of an Applicant or any other Pledgor; the sale or other transfer of all or a substantial portion of the assets of Applicant or any other Pledgor; or, without Bank’s prior written consent, reorganization, merger, consolidation, division, or change in ownership of Applicant or any other Pledgor (including entering into an agreement by Applicant or another Pledgor for any of the foregoing);
(ii) if Applicant or any other Pledgor breaches or defaults (A) under any other agreement between Applicant or such other Pledgor and Bank or (B) under any other agreement (other than a Credit Agreement) involving the borrowing of money, the advance of credit, or any other indebtedness, guaranty, or other obligation between Applicant or such other Pledgor and any other party, and such breach or default continues beyond any applicable notice or grace period provided for in such other agreement;
(iii) if any obligation and/or liability of Applicant to Bank or any of its affiliates under the Agreement shall not be paid or performed when due;
(iv) if any event of default (as such is defined under any Credit Agreement or Continuing Agreement) remains uncured after any applicable cure period thereunder;
(v) if Applicant or any other Pledgor shall become insolvent (however such insolvency may be evidenced or defined), file any petition in bankruptcy or insolvency including under the Bankruptcy Code, make a general assignment for the benefit of creditors, suspend the transaction of its usual business, or be expelled or suspended from any exchange, or any proceeding is instituted by Applicant or any other Pledgor for any relief under any Applicable Laws, including any bankruptcy or insolvency laws including under the Bankruptcy Code, or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, composition or extensions, or if any governmental authority, or any court at the instance of any governmental authority, shall take possession of any substantial part of the Property of Applicant or any other Pledgor or shall assume control over the affairs or operations of Applicant or such other Pledgor, or if Applicant or any other Pledgor shall apply for a receiver or custodian of Applicant or such other Pledgor or of any of the Property or assets of Applicant or such other Pledgor, or if a receiver or custodian shall be appointed of, or a writ or order of attachment or garnishment shall be issued or made against, any of the Property or assets of Applicant or any other Pledgor;
(vi) if Applicant or any other Pledgor shall have filed against it any petition in bankruptcy or insolvency, or if an application is made by any judgment creditor of Applicant for an order directing Bank to pay over money or to deliver other Property, if a petition is filed against Applicant or any other Pledgor, or any proceeding is instituted against Applicant or any other Pledgor for any relief under any Applicable Laws, including any bankruptcy or insolvency laws, or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, composition or extensions, or if any person other than Applicant or any other Pledgor shall apply for the appointment of a receiver or custodian of Applicant or such other Pledgor or of any of the Property or assets of Applicant or such other Pledgor, or if any person shall apply for a writ or order of attachment or garnishment against any of the Property or assets of Applicant or any other Pledgor, and in any case described in this clause (vi) the same has not been stayed or discharged within 30 days, or an order for relief shall be entered therein;
(vii) any provision of the Agreement or any Security Agreement shall for any reason cease to be valid and binding on or enforceable against Applicant or any other Pledgor or any other party thereto, or Applicant or any other Pledgor or any other party thereof shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or the Agreement or any Security Agreement shall cease to create a valid perfected security interest in the Collateral;
(viii) the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Applicant or any Pledgor;
(ix) the filing of a notice of judgment lien against Applicant or any other Pledgor; or the recording of any abstract of judgment against Applicant or any other Pledgor in any county in which Applicant or such other Pledgor has an interest in real property; or the entry of a judgment against Applicant or any other Pledgor which has not been stayed or discharged within 30 days;
(x) if Applicant or any other Pledgor fails to comply with any provision of the Agreement; or
(xi) if any representation, warranty, certification or statement made or furnished by Applicant, any other Pledgor or Account Party under the Agreement or otherwise in connection with obtaining credit or extension thereof is, or is reasonably suspected to be, false, incorrect, incomplete or misleading in any material respect.
(b) Remedies Upon Event of Default; Pre-funding.
(i) If an Event of Default occurs and is continuing, Bank may (i) require payment of cash or posting of additional Collateral of a value and character reasonably satisfactory to Bank to fully secure the Obligations, which, if contingent, may be treated by Bank as due and payable (if applicable, for the maximum Available Amount), (ii) terminate the Letter of Credit that may be terminated in accordance with its terms or send a notice of non-renewal under the Letter of Credit; (iii) terminate or rescind any commitment to issue, amend or extend Letters of Credit; and (iv) pursue any of the remedies provided for in any applicable Credit Agreement or Continuing Agreement or their respective related documents. In addition to the foregoing, Bank shall have all of the rights and remedies provided for herein and pursuant to Applicable Laws. Upon the occurrence of an Event of Default described in Section 13(a)(v) or Section 13(a)(vi), the Obligations shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by Applicant, each other Pledgor and each Account Party. Upon the occurrence of any other Event of Default, the Obligations may be declared, at the election of Bank, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by Applicant, each other Pledgor and each Account Party.
(ii) Without limiting the generality of the foregoing, Applicant agrees that if: (i) any Event of Default shall have occurred and be continuing; or (ii) in the event that the Letter of Credit is denominated in a currency other than Dollars, and Bank determines that such currency is unavailable or that the transactions contemplated by the Agreement are unlawful or contrary to any regulations to which Bank or any agent, servicer or subcontractor of Bank may be subject, or that, due to currency fluctuations, the Dollar Equivalent of the amount of a Letter of Credit exceeds the amount of Dollars that Bank, in its sole judgment, expected to be its maximum exposure under such Letter of Credit, then Applicant will upon demand pay to Bank an amount equal to the undisbursed portion, if any, of such Letter of Credit (or such greater amount as may be specified in any applicable Credit Agreement or Continuing Agreement), and such amount shall be held as additional collateral for the payment of all Obligations (including interest accruing at the rate provided herein or in any applicable Credit Agreement or Continuing Agreement on or after the commencement of any bankruptcy or insolvency proceeding in respect of Applicant, whether or not such interest is allowed or allowable), and after the expiration of the Letter of Credit (without any drawing having been made thereunder that has not yet been honored or dishonored), to the extent not applied to the Obligations, shall be returned to Applicant (unless otherwise provided in any applicable Credit Agreement or Continuing Agreement or required by Applicable Laws). If at any time (i) Applicant shall seek to restrain or preclude payment of any drawing under the Letter of Credit or (ii) the expiry of the Letter of Credit shall be tolled or its term extended by any court or other operation of Applicable Laws, then, in each such case, Applicant shall on written demand by Bank deliver to Bank a bond or other collateral of a type and value reasonably satisfactory to Bank as security for Applicant’s Obligations.
(c) Further Assurances. Applicant will, at its own expense upon reasonable request by Bank from time to time, sign any other instrument or document (including any Security Agreement) and take any other action Bank may reasonably deem necessary or desirable to carry out the purposes of the Agreement, to preserve, perfect, protect or maintain the Collateral and the priority of Bank’s security interest therein, and to realize upon Bank’s rights and remedies.
14. SECURITY INTEREST; BANK’S RIGHTS AS SECURED CREDITOR; SUBROGATION
(a) Security Interest. As security for the payment and performance of all of Applicant’s Obligations of every kind to Bank, present or future, due or to become due, absolute or contingent, arising under the Agreement or otherwise in connection with the Letter of Credit, Applicant and each other Pledgor hereby assigns, pledges and grants to Bank a security interest in and a lien upon, and the right of set-off, possession, and disposal of the following (collectively, the “Collateral”):
(i) all documents, contracts, or Instruments accompanying or relative to draws under the Letter of Credit and all Property relating to the Letter of Credit and all inventory, accounts, chattel paper, or general intangibles arising therefrom or relating thereto;
(ii) all of Applicant’s, such other Pledgor’s and any Account Party’s rights and causes of action, whether direct or indirect, against all parties arising from or in connection with the contract of sale or purchase of the Property covered by the Letter of Credit, or any guarantees, agreements or other undertakings (including those in effect between Applicant or any other Pledgor and any Account Party named in the Letter of Credit), credits, policies of insurance or other assurances in connection therewith;
(iii) all Property, rights, choses in action, claims and demands of every kind, including the Cash Collateral Account and all other Accounts and funds on deposit therein, in each case, now or hereafter existing and belonging to Applicant or any other Pledgor and which may now or hereafter be in the possession, custody or control of, or in transit to or set apart for, Bank, Bank's agents or correspondents for any purpose, whether or not for the express purpose of being used by Bank as collateral security or for any other or different purpose;
(iv) all Property of every kind pledged, hypothecated or given as collateral under a Security Agreement; and
(v) all substitutions for or products or proceeds (including insurance proceeds) of any of the foregoing.
(b) Transfer and Disposition of Collateral; Application of Proceeds. Bank may at any time or times transfer into Bank's or Bank's nominee's name all or part of the Collateral, before or after maturity of any of Applicant's Obligations and without any notice to Applicant or any other Pledgor or any other person. Whenever Bank deems it necessary for Bank's or Applicant's protection, or upon the occurrence of or during the continuance of an Event of Default, Bank may, without regard to such maturity, realize upon (by sale, assignment, set-off, application or otherwise) all or any part of such Collateral in each case without advertisement, notice to, tender, demand or call of any kind upon Applicant or any other Pledgor or any other person. Any such sale or assignment may be public, private or upon any broker's board or exchange, for cash, on credit or for future delivery, and at such price and upon such terms and conditions as Bank deems appropriate. Bank may acquire all or any part of such Collateral and any purchaser shall hold same free from any equity of redemption or other claim or right on Applicant’s or any other Pledgor’s part, which are hereby specifically waived and released. Bank may discount, settle, compromise or extend any obligations constituting such Collateral, and sue thereon in Bank's, Applicant’s or the applicable Pledgor’s name. Any demands, tenders, call or notices to Applicant or any other Pledgor shall be deemed duly made or given as of the time left at Applicant’s last known address, or mailed, telephoned, or otherwise sent to such address. No advertising, notice, tender, demand or call at any time given or made shall be a waiver of Bank's right to proceed in the same or other instances without any further action. Proceeds of any Collateral shall be applied, without any marshaling of assets, in such manner or order as Bank may deem proper, to any one or more of Applicant’s Obligations, whether or not due, and Bank may retain any amounts necessary, in Bank's sole judgment, to meet any contingent Obligations. Applicant shall remain liable for any deficiency. No receipt of, realization upon, release or substitution of, or other dealing with, any such Collateral shall affect Bank's rights or liens under the Agreement and Bank need not realize upon any Collateral prior to seeking payment from Applicant or any other Pledgor or any other party. Bank shall not be liable for failure to collect or demand payment of, or for failure to protest or give notice of protest or nonpayment of any obligation or relating to any part of the Collateral or for any delay. Bank shall not be under any obligation to take any action with respect to the Collateral.
(c) Bank’s Rights as a Secured Party. In addition to and not in limitation of the foregoing, Bank shall have all the rights and remedies of a secured party under the UCC. Applicant and each other Pledgor expressly acknowledges that notwithstanding anything to the contrary contained herein, Bank does not waive any of its rights under Applicable Laws, including its common law or statutory rights of set-off or any other rights generally available to creditors. Bank has the right, at Bank’s sole discretion, to file one or more financing statements under the UCC naming Applicant or any other Pledgor as debtor and Bank as secured party and covering any Property which is or becomes Collateral under the Agreement or a Security Agreement. The security interest granted in the Collateral shall survive termination of the Agreement until such time as all Obligations have been paid in full and discharged.
(d) Rights of Subrogation. If Bank honors any Instrument and Applicant fails to reimburse Bank for the payment of such Instrument in accordance with the applicable terms of the Agreement, Bank may assert any rights of subrogation available under Applicable Laws or in equity, whether Bank’s honor satisfies all or only part of the underlying obligation. Applicant and each other Pledgor and any Account Party shall, upon reasonable notice, cooperate with Bank in its assertion of Applicant’s, such Pledgor’s or such Account Party’s rights against the Beneficiary, the Beneficiary’s rights against Applicant, such Pledgor or such Account Party, and any other rights that Bank may have by subrogation or assignment. Such cooperation shall include the prompt return of all Instruments, documents, and statements in Applicant’s, such other Pledgor’s or such Account Party’s possession or control that were presented by or on behalf of the Beneficiary in connection with any draw under the Letter of Credit. Subject to the terms of any applicable Credit Agreement or Continuing Agreement and the terms of Section 13(b)(ii) above, Applicant agrees to make upon demand such cash deposits with Bank as Bank may require to further secure Applicant’s Obligations.
(e) Payments Set Aside. To the extent that any payment by or on behalf of Applicant or any other Pledgor is made to Bank or Bank exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by Bank in its sole discretion) to be repaid to a trustee, receiver, or any other party, in connection with any proceeding or otherwise, then to the extent of such recovery, the Obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred. This subsection (e) shall survive termination of the Agreement.
(f) Other Pledgors. Each Pledgor shall have executed and delivered to Bank a Cash Collateral Account Pledge and any other Security Agreement required by Bank, each in form and substance satisfactory to Bank, and to the extent Applicant is not party to an applicable Credit Agreement and is otherwise required to pledge cash Collateral, Applicant shall have executed and delivered to Bank a Cash Collateral Account Pledge and any other Security Agreement required by Bank, each in form and substance satisfactory to Bank.
15. NOTICES
In addition to any other means permitted by the Online Terms, notice from Bank to Applicant, or vice-versa, relating to the Agreement shall be deemed effective if made in writing (including telecommunications) and delivered by any of the following means to the address for the applicable party set forth on the signature page to the Application: (i) hand delivery, (ii) nationally recognized overnight courier service, or (iii) facsimile or email with request for receipt; provided that, if an email notice is returned as undeliverable, the party providing the email notice shall provide such notice in writing as otherwise provided for in this paragraph. Bank may, but shall not be obligated to, require authentication of any electronic transmission. Notice made in accordance with this Section shall be deemed delivered on receipt. Applicant or Bank may change its address, facsimile number or email address for notices under the Agreement by notifying the other of the new address, facsimile number or email, respectively, in any manner permitted by this Section.
16. ASSIGNMENT AND PARTICIPATIONS; BINDING NATURE
Applicant may not assign any rights or delegate any obligations under the Agreement without Bank’s prior written consent and any attempted assignment or delegation by Applicant without such consent shall be null and void. Bank may, without notice to, or the consent of, Applicant, assign or sell participations in all or any part of its rights or obligations in respect of any or all of the Letters of Credit or the Agreement to any other person. Applicant consents to the dissemination of credit information relating to Applicant in connection with any proposed assignments or participations by Bank of any rights and obligations under the Agreement and all rights, obligations and liabilities arising under the Agreement shall be binding upon Applicant and its successors and permitted assigns, and shall inure to the benefit of Bank and its successors, transferees and assigns. Bank may assign its rights and delegate its duties hereunder to any successor, subsidiary or affiliate of Bank, in each case without prior notice to Applicant; provided that such assignment and delegation does not diminish Applicant’s rights or increase Applicant’s duties under the Agreement.
17. TERMINATION
Notwithstanding any terms in the Agreement to the contrary or termination of the Agreement, the Agreement and any Cash Collateral Account Pledge constitute a continuing agreement and shall remain in full force and effect with respect to the Letter of Credit issued unless and until, as applicable, each of the following has occurred: (i) reimbursement and/or payment of all Obligations, (ii) the expiration (without any pending drawing) or cancellation and/or return of all Letters of Credit issued under the Agreement, and (iii) if the Letter of Credit is issued in favor of a sovereign or commercial entity, which is to issue a guarantee, undertaking or credit on Applicant’s behalf in connection therewith, or is issued as support for such a guarantee, undertaking or credit, Bank is fully released in writing by such entity or such guarantee, undertaking or credit has expired or terminated in accordance with its terms.
18. MISCELLANEOUS
(a) References to actions Bank “may” take or omit to take mean “may in its sole discretion”. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” Headings included herein are for ease of reference only.
(b) The Letter of Credit shall be governed by and construed in accordance with (i) the substantive laws of the jurisdiction specified in the Letter of Credit, or if no governing law is so specified, the substantive laws of the jurisdiction of the office of Bank that issued the Letter of Credit (as applicable, the “Jurisdiction”), and (ii) the ISP or UCP, as set forth in the Letter of Credit and which shall control (to the extent not prohibited by the law of the Jurisdiction) in the event of any inconsistent provisions of such law. The Agreement shall be governed by and construed under the laws of the State of New York without giving effect to conflict of law principles thereof. Unless Applicant specifies otherwise in the Application, Applicant agrees that Bank may issue the Letter of Credit subject to the ISP, UCP or eUCP. The Letter of Credit issued subject to eUCP is also subject to UCP. Bank's privileges, rights and remedies under the ISP or UCP shall be in addition to, and not in limitation of, its privileges, rights, and remedies expressly provided for under the Agreement. The ISP and UCP shall serve, in the absence of proof to the contrary, as evidence of Standard Letter of Credit Practice with respect to matters covered therein. Bank shall be deemed to have acted with due diligence and reasonable care if Bank’s conduct is in accordance with Standard Letter of Credit Practice or in accordance with the Agreement. To the extent permitted by Applicable Laws, (A) the Agreement shall prevail in case of conflict between the Agreement, Standard Letter of Credit Practice, or Applicable Laws, (B) the ISP shall prevail in case of conflict between the ISP and Applicable Laws if the Letter of Credit is governed by the ISP, (C) the UCP and the eUCP shall prevail in case of conflict between the UCP or eUCP, as applicable, and Applicable Laws if the Letter of Credit is governed by the UCP, and (D) the eUCP shall prevail in the event of a conflict between the eUCP and the UCP if the Letter of Credit is governed by the eUCP.
(c) Unless otherwise determined by Bank in its sole discretion, any prior master agreement for letters of credit between Applicant and Bank shall not apply, govern or control the terms and conditions of the Agreement or the Letter of Credit. To the extent Applicant is a party to an existing Continuing Agreement in connection with an existing letter of credit other than this Letter of Credit, such Continuing Agreement shall continue to govern and control this Letter of Credit unless otherwise determined by Bank. The Agreement, including the Application, any Credit Agreement, any existing Continuing Agreement as provided in the foregoing sentence, any Continuing Agreement executed in connection herewith, and any Security Agreements, represent the entire agreement between Applicant, the other Pledgors and Bank with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by Bank relative to the subject matter hereof not expressly set forth or referred to in such agreements.
19. DEFINED TERMS
(a) “Account Party” means any party named, at the discretion of Bank, in the Letter of Credit (other than Applicant) for whom Letters of Credit are issued at the request of Applicant.
(b) “Anti-Corruption Laws” mean, at any time, any Applicable Laws, rules and regulations of the United States of America or any other jurisdiction concerning or relating to bribery or corruption.
(c) “Anti-Terrorism Laws” mean, at any time, any Applicable Laws, rules and regulations of the United States of America or any other jurisdiction concerning or relating to economic or trade sanctions, terrorism, narcotics trafficking, or money laundering, including the USA Patriot Act, the Trading with the Enemy Act, the International Emergency Economic Powers Act, U.S. Executive Order No. 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism, and the laws administered from time to time by the Office of Foreign Assets Control of the United States Department of the Treasury.
(d) "Applicant" means, collectively, each person or entity signing and submitting the Application. For the purposes of the Agreement, an Applicant will be deemed a Customer as defined in General Provisions and will have all rights and obligations of a Customer provided for under the General Provisions. For the avoidance of doubt, if more than one Applicant signs and submits the Application, each of them shall be jointly and severally liable under the Agreement and all of the terms and provisions regarding liabilities, Obligations, Collateral and Property of such Applicants shall apply to all of them.
(e) "Application" means the Application and Agreement and any other associated request signed and submitted to Bank for the issuance or amendment of a Letter of Credit (as such request may be amended or supplemented by additional Instructions).
(f) “Available Amount” means the stated amount of the Letter of Credit available to be drawn at such time; provided that if the Letter of Credit, by its terms, provides for one or more automatic increases in the available amount thereof, the Available Amount of the Letter of Credit shall be deemed to be the maximum amount of the Letter of Credit after giving effect to all such increases, whether or not such maximum amount is available to be drawn at such time; provided further, that the Available Amount shall not include the amount of any unreimbursed drawings then due to Bank.
(g) “Bankruptcy Code” means Title 11 of the United States Code.
(h) “Beneficiary” means the beneficiary(ies) of the Letter of Credit, including any second or substitute beneficiary(ies) or transferee(s) if Letter of Credit is transferrable and any successor of any beneficiary by operation of law.
(i) “Cash Collateral Account” means the Account (or any portion of the deposit balance thereof) specified on the Application or in any Security Agreement providing a security interest in and/or control over such Account in connection with a Letter of Credit, and any successor, replacement, substitution or renumbered Account thereof. For the avoidance of doubt, each Cash Collateral Account (if any) must be maintained by Applicant with Bank and not with any other person.
(j) "Cash Collateral Account Pledge” means a pledge or security agreement granting a security interest in the Cash Collateral Account and other Collateral subject to the Agreement.
(k) “Cash Collateral Requirement” means the amount, expressed as a dollar amount or percentage (which percentage shall in no event be less than the amount set forth in the Agreement or (2) such smaller percentage as Bank in its sole discretion may agree in writing with Applicant) of the Available Amount of the Letter of Credit to be cash collateralized, as specified in (i) the Application, (ii) any Credit Agreement, (iii) any Cash Collateral Account Pledge, (iv) any Continuing Agreement or (v) other written agreement between Bank and Applicant and/or Pledgor.
(l) “Collateral” shall have the meaning set forth in Section 14(a).
(m) “Continuing Agreement” means any applicable continuing agreement or reimbursement agreement (other than the Agreement or a Credit Agreement) between Bank and Applicant, and any other parties thereto, as amended, modified, supplemented, restated or replaced from time to time, evidencing Applicant’s or such other parties reimbursement obligations with respect to the Letter of Credit.
(n) “Credit Agreement” means any applicable credit or loan agreement between Bank and Applicant, and any other parties thereto, as amended, modified, supplemented, restated or replaced from time to time, evidencing an extension of credit under which the Letter of Credit is issued.
(o) “Dollar Equivalent” means the higher of (i) the product of such foreign currency payment multiplied by Bank's or its correspondent or the confirming bank's selling rate of exchange for payment of the Instrument current at the time of payment or Bank's settlement of its obligation or the date of demand, as Bank may require, (ii) Bank's actual cost of settlement of its obligation in respect of such foreign currency payment however or whenever Bank shall make such settlement, or (iii) in the event that Bank or such other bank shall not at the time be offering such a rate, the amount of Dollars that Bank, in its sole judgment, specifies as sufficient to reimburse or provide funds to Bank in respect of amounts drawn or drawable under a Letter of Credit.
(p) “Dollars” or “$” means, at any time, the lawful currency of the United States of America.
(q) “Draft” means any sight draft, receipt, acceptance, cable or other written demand for payment.
(r) “eUCP” means the Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentation, Version 2.0, supplementing UCP and any version or revision thereof accepted by Bank for use.
(s) “Event of Default” shall have the meaning set forth in Section 13 hereof.
(t) "Instrument" means any Draft, receipt, acceptance, tele-transmission (including SWIFT message) or cable or other written demand for payment (regardless of whether at sight or another tenor).
(u) “ISP” means the International Standby Practices 1998 (International Chamber of Commerce Publication No. 590) or such later supplement to or revision thereof as may apply to any Letter of Credit (and references herein to provisions of such Publication No. 590 shall refer to any applicable successor provisions of such supplement or revision).
(v) "Letter of Credit" means the letter of credit issued by Bank at the request of Applicant pursuant to the Agreement if approved by Bank (or any letters of credit for the benefit of Applicant where Bank agrees to act under Section 8 as an advising bank, negotiating bank and/or confirming bank), as may be amended from time to time, and any and all renewals, increases, extensions and replacements thereof and therefor.
(w) “Obligations” means all outstanding obligations of Applicant to Bank of every kind, now existing or hereafter arising or created, whether direct or indirect, present or future, due or to become due, absolute or contingent, arising in connection with the Letter of Credit or the Agreement.
(x) “Pledgor” means Applicant and any other pledgor or grantor under a Cash Collateral Account Pledge.
(y) “Property” means goods and merchandise and any and all documents relative thereto, securities, funds, choses in action, and any and all other forms of property, whether real, personal, or mixed and any right or interest therein.
(z) “Related Persons” means, with respect to any specified person, such person’s Affiliates and the respective trustees, representatives, directors, officers, employees, agents and advisors of such person and such person’s Affiliates.
(aa) “Security Agreement” means each Cash Collateral Account Pledge or other security agreement, pledge, control agreement, mortgage, deed of trust, instrument or document that grants or evidences a security interest to Bank in connection with the Letter of Credit or the Obligations.
(bb) “Standard Letter of Credit Practice” means, for Bank or any of its correspondents, any (1) applicable domestic or foreign law or letter of credit practices, including ISP or UCP, as chosen in the Letter of Credit, (2) applicable order, ruling or decree of any court, arbitrator or governmental agency, or (3) published statement or interpretation of a court, other governmental authority or trade association (such as the International Chamber of Commerce (ICC), The Bankers Association for Finance and Trade (BAFT) or the Institute for International Banking Law & Practice, Inc. (IIBLP) or any of their respective successors) on a matter of law or practice (including ISP or UCP).
(cc) “Trade Portal” shall have the meaning set forth in Section 1(e).
(dd) “UCP” means the Uniform Customs and Practice for Documentary Credits, 2007 Revision, International Chamber of Commerce Publication No. 600 or such later supplement to or revision thereof as may apply to any Letter of Credit (and references herein to provisions of such Publication No. 600 shall refer to any applicable successor provisions of such supplement or revision).