Common use of Letter of Credit Requirement Clause in Contracts

Letter of Credit Requirement. Prior to commencement of construction of the Interior Improvements, Tenant shall deliver to Landlord an irrevocable unconditional letter of credit issued for a period of forty-two (42) months (the “Letter of Credit”) in the total dollar amount reasonably estimated by Tenant to be necessary to construct the Interior Improvements (less the amount of Landlord’s Interior Improvement Allowance) issued by an institutional lender acceptable to Landlord. In the event Tenant and/or Landlord subsequently and reasonably determines that the amount of said Letter of Credit does not cover the cost of the Interior Improvements, Tenant shall increase the Letter of Credit amount accordingly within ten (10) days of receipt of written notice from Landlord if Landlord is the party who discovers the deficiency or within ten (10) days of Tenant’s discovery of such deficiency. The Letter of Credit shall be unconditionally payable upon demand by Landlord, and Landlord shall be entitled to draw upon the Letter of Credit, without proof, for the purpose of completing construction of the Interior Improvements upon ten (10) days’ notice to Tenant, in the event Tenant fails to pay any sums when due under any construction contract for the Interior Improvements or to complete such construction as and when required hereunder or in the event any liens are filed against the Property. Upon delivery to Landlord of evidence of each interim payment by Tenant of its portion of the cost of the construction of the Interior Improvements from time to time during the course of such construction, Tenant shall be entitled to cause a reduction in the face amount of the Letter of Credit by a sum equal to such evidenced payment. Any amount drawn thereon which is not so applied by Landlord shall be returned to Tenant. Upon written request from Tenant, Landlord agrees to release the Letter of Credit to Tenant after the following have been completed by Tenant: (a) completion of the Interior Improvements; (b) Tenant’s delivery to Landlord of proof of payment for all construction costs (including copies of signed checks, the related invoices and unconditional lien releases from the General Contractor and all subcontractors); (c) Tenant’s delivery to Landlord of a recorded Notice of Completion for the Interior Improvements.