(a) Letter of Credit Required. Upon the Lessee’s execution and delivery of this Agreement to the Port Authority, the Lessee shall deliver to the Port Authority, and shall maintain throughout the term of this Agreement as security for the Lessee’s full, faithful and prompt performance of and compliance with all of its obligations under this Agreement and as security for the payment of all rentals, fees, charges and obligations of the Lessee owed or which may become due and owing to the Port Authority, a clean irrevocable letter of credit in favor of the Port Authority in the amount of Dollars and No Cents ($,000.00)2, issued by a banking institution acceptable to the Port Authority and having its main office within the Port of New York District.
(b)Form Subject to Prior Approval.The form and terms of each letter of credit delivered under this Section, as well as the institution issuing it (which shall be an investment-grade rated bank), shall be subject to the prior and continuing approval of the Port Authority; the form of any proposed letter of credit shall be submitted to the Port Authority in advance for review and approval by its Credit, Collection and Accounts Receivable unit. Such letter of credit shall provide that it shall continue throughout the term of the letting under this Agreement and for a period of not less than six (6) months thereafter; such continuance may be by provision for automatic renewal or by substitution of a subsequent satisfactory letter of credit.
(c) Replacements.Upon notice of cancellation of a letter of credit, the Lessee agrees that unless, by a date twenty (20) days prior to the effective date of cancellation, the letter of credit is replaced by another letter of credit satisfactory to the Port Authority, the Port Authority may draw down the full amount thereof and thereafter the Port Authority will hold the same as cash security as set forth in paragraph (g) of this Section. If at any time any bank shall fail to make any payment to the Port Authority in accordance with a letter of credit issued by such bank, the Lessee shall cause to be delivered to the Port Authority on demand a replacement letter of credit issued by a different bank satisfactory to the Port Authority, so that at all times the Port Authority shall have one or more letters of credit in the amount set forth in paragraph (a) of this Section.
(d) Right to Draw Down.In addition to any and all other remedies available to it, the Port Authority shall have the right, at its option at any time and from time to time, with or without notice, to draw upon each letter of credit or any part thereof in whole or partial satisfaction of any of its claims or demands against the Lessee. There shall be no obligation on the Port Authority to exercise such right and neither the existence of such right nor the holding of a letter of credit or any cash security shall cure any default or breach of this Agreement on the part of the Lessee. No action by the Port Authority pursuant to the terms of any letter of credit, or receipt by the Port Authority of funds from any bank issuing any letter of credit, shall constitute a waiver of any breach or default by the Lessee of its obligations under this Agreement; and the existence of or recourse to any such letter of credit shall not limit the Port Authority’s rights and remedies otherwise available under this Agreement upon any such breach or default.
(e) Material Inducement.The Lessee acknowledges that the Port Authority is entering into this Agreement in reliance on the Lessee’s agreement to the provisions of this Section, and that such agreement constitutes a material element of the consideration inducing the Port Authority to enter into and execute this Agreement. In the event of any failure of the Lessee at any time during the term of the letting under this Agreement to provide such letter of credit valid and available to the Port Authority, and any failure of any banking institution issuing any such letter of credit to make one or more payments as provided in such letter of credit, the Port Authority shall have the right, in addition to any and all other remedies provided under this Agreement or at law or in equity, to immediately terminate this Agreement upon written notice to the Lessee; provided, however, that notwithstanding the foregoing, so long as (x) the Lessee is not in default of any financial obligation hereunder, (y) no Event of Default has occurred and is continuing and (z) no notice of termination has been delivered pursuant to Section 17.1 hereof, the Lessee shall have a period of two (2) Business Days following notice from the Port Authority in which to cure any such failure described above in this Section 4A(e).
(f) Replenishment. If the Port Authority shall make any drawing under a letter of credit held by the Port Authority hereunder, the Lessee, within two (2) days after demand of the Port Authority therefor, shall bring the letter of credit back up to its full amount.
(g) Use of Proceeds.In the event that the Port Authority shall have drawn down the letter of credit referred to in paragraph (a) of this Section, the Port Authority shall have the right, at its option, at any time and from time to time, with or without notice, to use the amount held, or any part thereof, as cash security in whole or partial satisfaction of any of its claims or demands against the Lessee. There shall be no obligation on the Port Authority to exercise such right and neither the existence of such right nor the holding of such cash security itself shall cure any default or breach, on the part of the Lessee, of this Agreement. The Lessee agrees that it will not assign, mortgage or encumber such cash security. The Port Authority shall not pay or allow interest thereon; but the Lessee may collect or receive annually any interest paid on cash deposited in interest-bearing bank accounts less any part thereof or amount which the Port Authority is or may hereafter be entitled or authorized by law to retain or to charge in connection therewith, whether as or in lieu of administrative expense or custodial charge, or otherwise, provided, however, that the Port Authority shall not be obligated by this provision to place or to keep cash deposited hereunder in interest-bearing bank accounts. Upon the Port Authority’s acceptance of a substitute letter of credit, and upon request by the Lessee made thereafter, the Port Authority will return any cash security deposit resulting from the drawing down of the original letter of credit. The Lessee shall have the same rights to receive any such deposit during the existence of a valid letter of credit as it would have to receive such sum upon expiration of the letting and fulfillment of the obligations of the Lessee under this Agreement.