Application And Agreement For Commercial Letter Of Credit Page 2
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3B. Agreement.
UCP as defined in Section 9 of this Agreement or which comply with the laws, regulations,
In consideration of Bank of America’s issuing the Letter of Credit at the request of
customs or usages of the place of shipment or negotiation/payment/acceptance, or both.
The provisions of clause (v) above shall in no way be deemed to preclude the beneficiary of
Applicant, Applicant unconditionally agrees to the following:
the Letter of Credit from issuing and presenting Items or documents under the terms of the
1. Applicant Payments.
(a) Applicant shall pay Bank of America all amounts paid by Bank of America or
Letter of Credit.
its agent, or any party on Bank of America’s behalf under or in respect of each draft,
(b) In the event that some of the documents required under the Letter of Credit are
acceptance or other order, instrument or demand drawn or presented under the Letter of
forwarded directly to Applicant or any other party designated by Applicant, or Bank of
America releases or consents to the release of some or all of the property shipped under the
Credit (the “Item”). Sight Items will be reimbursed on demand. Acceptances or other time
Letter of Credit prior to the presentation of the relative Item, Applicant agrees to pay Bank
Items shall be reimbursed on demand, or at maturity if no earlier demand is made by Bank
of America. Regardless of the expiration date of the Letter of Credit, Applicant shall
of America on demand the amount of any claim made against Bank of America by reason
remain liable hereunder until Bank of America has no liability to any person, firm,
thereof and authorizes Bank of America to honor such Item when it is presented regardless
corporation or other entity which is entitled to draw or demand payment under the Letter of
of whether or not such Item or any document that may accompany it complies with the
terms of the Letter of Credit. In case of Bank of America’s issuance of a steamship
Credit.
indemnity or airway release for its account, Bank of America is authorized to retain original
(b) On each fee payment date, so long as any undrawn amount of the Letter of
bills of lading for delivery to the shipping company to secure the release of Bank of
Credit remains available, Applicant shall pay Bank of America a Letter of Credit fee. The
America’s indemnity.
fee payment date(s) shall be the date(s) as Applicant and Bank of America may agree, or in
(c) Subject to the provisions of this Section 5, in the event that any Item presented
the absence of such agreement, the fee payment date shall be the date on which the Bank of
to Bank of America appears on its face to be inconsistent with any other Item or to be non-
America issues the Letter of Credit. The fee shall be at such rate per annum as Applicant
compliant with the terms and conditions of the Letter of Credit, Bank of America may send
and Bank of America may agree or, in the absence of such agreement, at the rate
notice thereof to Applicant. In that event, Applicant will promptly review such notice and
customarily charged by Bank of America at the time such fee is payable, based upon
will notify Bank of America within seven business days of its receipt of such notice if it has
Applicant’s creditworthiness, as determined by Bank of America in its sole discretion. The
any claim of non-compliance or inconsistency. If Applicant does not so notify Bank of
applicable Letter of Credit fee shall be calculated and payable on the undrawn amount of the
America within such seven business day period, Applicant will conclusively be deemed to
Letter of Credit as of each fee payment date, and shall be for the period commencing on
have waived such non-compliance or inconsistency.
such fee payment date and ending on the day preceding the next fee payment date (or the
6. Collateral. (a) As security for the performance of all obligations of every kind
expiration date of the Letter of Credit, as the case may be), both dates inclusive. The Letter
(including, but not limited to, the obligation to make payments pursuant to Section 1 hereof)
of Credit fee will be computed on the basis of a 360-day year and actual days elapsed. Bank
owed by Applicant to Bank of America under the Letter of Credit, this Agreement, or
of America shall not be required to refund any portion of the Letter of Credit fee paid for
otherwise, whether direct or indirect, absolute or contingent, now or hereafter existing, or
any period during which (a) the Letter of Credit expires or otherwise terminates, or (b) the
due or to become due, howsoever created, arising or evidenced (the “Liabilities”), Applicant
undrawn amount of the Letter of Credit is reduced by drawings or by amendment.
hereby assigns, pledges and grants to Bank of America a lien upon and a security interest
(c) Applicant shall pay Bank of America, on demand, commissions and fees for
for Bank of America’s benefit in, and recognizes and admits Bank of America’s unqualified
amendments to, payments under, extensions of or cancellation of the Letter of Credit, and
right to: (i) the possession and disposal of any and all Items, all shipping documents,
other services in the amounts Applicant and Bank of America may agree or, in the absence
warehouse receipts, policies or certificates of insurance, and other documents
of such agreement, in the amounts customarily charged by Bank of America on the date of
accompanying or relative to any Items, and all Property (as defined below) covered,
Bank of America’s demand.
shipped, or stored under any Items or documents whether or not any Items, documents, or
(d) All payments and deposits of any kind by Applicant under this Application and
Property shall be released to Applicant, (ii) all claims which the Applicant may have against
Agreement, including prepayments, shall be made at the banking center or office Bank of
anyone else in connection with any of the foregoing including, without limitation, any
America may designate from time to time. Bank of America shall have no obligation to pay
guarantees, indemnities, agreements or other undertakings, policies of insurance or
Applicant interest on any such payment, prepayment or deposit made by Applicant under
assurances in connection therewith, (iii) all other Property (A) which, now or hereafter, is in
this Application and Agreement.
Bank of America’s possession, control, or in transit to, or the pledge of which is at any time
(e) (i) All payments and deposits by Applicant under this Application and
registered to, Bank of America or Bank of America’s agent or bailee for any reason or
Agreement shall be in the currency in which the Letter of Credit is payable, except that
purpose or (B) in which, now or hereafter, Bank of America may have a security interest,
Bank of America may, at its option, require payments and deposits by Applicant under this
securing any of the Liabilities, (iv) all balances, credits, deposits, accounts or moneys, held
Application and Agreement to be made in U.S. Dollars if the Letter of Credit is payable in a
by Bank of America, now or hereafter, which Applicant owns or in which Applicant may
foreign currency.
have an interest, and (v) all dividends, distributions and other rights in or with respect to,
(ii) The amount of each payment and each deposit by Applicant under this
and substitutions for and products and proceeds of, any of the foregoing being referred to
Application and Agreement in U.S. Dollars for a Letter of Credit payable in a foreign
collectively as the “Collateral”. In addition, Applicant agrees: (i) that Applicant shall keep
currency shall be determined by converting the relevant amount to U.S. Dollars at the
all Collateral that is customarily insured against loss, damage, theft and other risks, insured
Conversion Rate in effect:
in amounts and by companies satisfactory to Bank of America, and either assign the policies
(A) with respect to each payment under Section 1(a) of this Agreement, on
and certificates of insurance to Bank of America or make the loss or adjustment payable to
the date the payment is made by Bank of America under or in respect of the Letter of
Bank of America, and hold as Bank of America’s agent in trust for Bank of America any
Credit; and
proceeds received by Applicant under such policies and promptly deliver the same to Bank
(B) with respect to each payment not falling under the preceding clause (A)
of America, (ii) that, if Bank of America at any time deems such insurance inadequate for
and each deposit, on the date of Bank of America’s demand for such payment or deposit.
any reason, Bank of America may procure such insurance as Bank of America deems
(iii) If a U.S. Dollar deposit by Applicant under this Application and Agreement
necessary, at Applicant’s expense, and (iii) to furnish to Bank of America such certificates
for a Letter of Credit payable in a foreign currency becomes less than the U.S. Dollar
or other evidence with respect to the foregoing as Bank of America may request.
equivalent of the undrawn amount of the Letter of Credit because of any variation in rates of
“Property” includes any rights or interests in goods, merchandise, documents, securities,
exchange, Applicant shall deposit with Bank of America, on demand, additional amounts in
funds, chooses-in-action and any and all other forms of property, whether tangible or
U.S. Dollars so that the total amount deposited by Applicant under this Application and
intangible, real, personal or mixed, and proceeds thereof, which are owned by Applicant.
Agreement is not less than the U.S. Dollar equivalent of the undrawn amount of the Letter
(b) Applicant agrees to keep the Collateral free and clear of all other interests and
of Credit, determined by using the Conversion Rate on the date of Bank of America’s latest
claims and, at any time and from time to time, upon Bank of America’s request, (i) to
demand.
deliver to Bank of America any of the Collateral that may then be in or may hereafter come
(iv) “Conversion Rate” means the rate quoted by Bank of America for the
into its possession or control, (ii) to execute and deliver to Bank of America such further
purchase from Bank of America of the relevant foreign currency with U.S. Dollars.
security agreements, financing statements and other documents (and to pay the cost of filing
(f) Applicant shall reimburse or compensate Bank of America, on demand, for all
or recording the same in all public offices deemed necessary by Bank of America), and to
costs incurred, losses suffered and payments made by Bank of America which are applied or
do such other acts or things required to perfect and maintain a valid security interest in the
allocated by Bank of America to the Letter of Credit (as determined by Bank of America)
Collateral to secure the payment of the Liabilities (and any reproductions of this Agreement
by reason of any and all present or future reserve, capital, deposit, assessment or similar
or of any such other security agreement or financing statement shall be sufficient for filing
requirements against (or against any class of or change in or in the amount of) assets or
as a financing statement), (iii) to furnish to Bank of America information concerning its
liabilities of, or commitments or extensions of credit by, Bank of America.
financial condition, the Collateral, and any obligors on the Collateral as Bank of America
(g) Applicant shall pay interest, on demand, on any amount not paid when due
may reasonably request, and (iv) to deliver and assign to Bank of America additional
under this Application and Agreement from the due date until payment in full at a rate per
Collateral (including, but not limited to, cash Collateral) of a value and condition
annum equal to the rate of interest publicly announced from time to time by Bank of
satisfactory to Bank of America in Bank of America’s sole judgment as additional security
America as its prime rate, plus three percentage points (not to exceed the maximum rate
for the Liabilities if Bank of America feels insecure for any reason.
permitted by applicable law). The prime rate is set by Bank of America based on various
(c) Bank of America shall be deemed to have exercised reasonable care in the
factors, including Bank of America’s costs and desired return, general economic conditions
custody and preservation of the Collateral if Bank of America takes such action as
and other factors, and is used as a reference point for pricing some credits. Bank of
Applicant shall request in writing, but Bank of America’s failure to comply with any such
America may price credit at, above or below the prime rate. Any change in Bank of
request shall not be a failure to exercise reasonable care. If Applicant does not make a
America’s prime rate shall take effect at the opening of business on the day specified in
request in writing, Bank of America’s failure to preserve or protect any rights to the
Bank of America’s public announcement of a change in Bank of America’s prime rate.
Collateral shall not be a failure to exercise reasonable care in the custody and preservation
Interest will be computed on the basis of a 360-day year and actual days elapsed.
of the Collateral.
2. Place of Issuance. The Letter of Credit may be issued by any office of Bank of
(d) Bank of America may, whether before or after the occurrence of any Deposit
America within or outside the United States.
Event referred to in Section 3 hereof, at Bank of America’s sole discretion and without
3. Deposit Events. Upon the occurrence of any of the following events, Applicant
notice to Applicant, take any or all of the following actions: (i) transfer all or any part of the
shall deposit with Bank of America, on demand (except that such demand shall not be
Collateral into Bank of America’s name or the name of Bank of America’s nominee, with or
required in the event of an occurrence described in (b) below) and as cash security for
without disclosing that such Collateral is subject to the security interest under this
Applicant’s obligations to Bank of America under this Application and Agreement, an
Agreement, (ii) notify any obligors of any of the Collateral to make payment to Bank of
amount equal to the undrawn amount of the Letter of Credit:
America of any amounts due or to become due, (iii) enforce collection of any of the
(a) Applicant defaults under any provision of this Application and Agreement;
Collateral by suit or otherwise, or surrender, release or exchange all or any part of the
(b) Any bankruptcy or similar proceeding is commenced with respect to Applicant;
Collateral, (iv) take control of any proceeds (including insurance proceeds) of any of the
(c) Any default occurs under any other agreement involving the borrowing of
Collateral, and (v) extend or renew any obligation of any obligor to the Collateral, or grant
money or the extension of credit under which Applicant may be obligated as borrower,
releases, compromises or indulgences for any obligation of any obligor to the Collateral.
installment purchaser or guarantor, if such default consists of the failure to pay any
The security interest granted by this Section shall continue until such time as all
indebtedness when due or if such default permits or causes the acceleration of any
Liabilities have been paid in full and discharged.
indebtedness or the termination of any commitment to lend or to extend credit;
7. Risks. Applicant agrees that any action or omission by Bank of America under or in
(d) Applicant or any of its affiliates defaults on any other obligation to Bank of
connection with the Letter of Credit or any Items, documents or Property shall, unless in
America;
breach of good faith, be binding on Applicant and shall not put Bank of America under any
(e) In the opinion of Bank of America, any material adverse change occurs in
resulting liability to Applicant; and Applicant will indemnify Bank of America and hold
Applicant’s business, operations, financial condition or ability to perform its obligations
Bank of America harmless from and against each and every claim, demand, liability, loss,
under this Application and Agreement;
cost or expense (including, but not limited to, reasonable attorneys’ fees and allocated costs
(f) Any guarantee of Applicant’s obligations under this Application and Agreement
of in-house counsel, and legal costs) to which Bank of America may be subjected or which
terminates, is revoked or its validity is contested by the guarantor, or any of the events set
Bank of America may incur by reason of any such action or omission, or by reason of any
forth in (b) through (e) above occur with respect to the guarantor; or
action taken pursuant to this Application and Agreement, unless in breach of good faith. In
(g) Any court order, injunction or other legal process is issued restraining or seeking
no event shall Bank of America be liable for incidental, consequential or special damages.
to restrain drawing or payment under the Letter of Credit.
8. Exculpation. In addition to the exculpatory provisions contained in the UCP, Bank
4. Charge to Accounts. If Bank of America is unable to debit the account, if any,
of America or Bank of America’s correspondents shall not be responsible for and
specified on the Application, Applicant authorizes Bank of America to charge any of
Applicant’s obligation to reimburse Bank of America shall not be affected by: (a) the time,
Applicant’s accounts with Bank of America, or any affiliate of Bank of America, for all
place, manner, or order in which shipment is made, or partial or incomplete shipment or
amounts then due and payable to Bank of America under this Application and Agreement.
insurance of any property or any risk connected with insurance, delay in arrival or failure to
5. Documentation. (a) Unless specified to the contrary in the Application, or any
arrive of any property or any relative documents, delay in giving or failure to give notice of
amendment to the Letter of Credit, Customer agrees that Bank of America and its
arrival of goods or any other notice, (b) compliance with any laws, customs or regulations in
correspondents may receive and accept (i) as “bills of lading” any documents issued or
effect in countries of negotiation or payment of the Letter of Credit, (c) failure of any Item
purportedly issued by or on behalf of any carrier which acknowledges receipt of property
to refer adequately to the Letter of Credit, or failure of documents to accompany any Item at
for transportation, irrespective of the specific provisions of such documents, (ii) either
negotiation/ payment/acceptance, or failure of any person to note the amount of any Item on
insurance policies or insurance certificates as documents of insurance, (iii) the description
the reverse of the Letter of Credit or to surrender or to take up the Letter of Credit or to
of property contained in any invoice as sufficient and controlling against other descriptions
forward required documents with Items, each of which provisions, if contained in the Letter
contained in any bills of lading, insurance or other documents accepted, as long as such
of Credit itself, it is agreed may be waived by Bank of America, (d) any irregularity in
descriptions are not inconsistent with one another, (iv) any documents containing stamped,
connection with shipment, including any default, oversight or fraud by the shipper and/or
written, or typewritten provisions, whether or not signed and initialed, as if the same were
any others in connection with the Property or documents or the shipment, non-shipment or
placed with authority on the documents at the time of issuance by the carrier, other issuer,
transmittal thereof,(e) any refusal by Bank of America to honor Items because of an
or one of their agents, (v) any Items or documents otherwise in order, issued or purportedly
applicable law, regulation or ruling of any governmental agency whether valid or invalid, or
issued by an agent, executor, trustee in bankruptcy, receiver or other representative of the
now or hereafter in effect, (f) acts or the failure to act of Bank of America’s agents or
party authorized under the Letter of Credit to issue such Items or other documents, as
correspondents including, but not limited to, their failure to pay Items because of any law,
complying with the terms of the Letter of Credit and (vi) documents which comply with the
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