Common use of Surety Instruments Clause in Contracts

Surety Instruments. (a) On or after the Distribution Date, if any Scheduled RemainCo Surety Obligations for the SpinCo Business are outstanding, SpinCo shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to replace the Scheduled RemainCo Surety Obligations for the SpinCo Business as promptly as practicable with Surety Instruments that (x) are issued for SpinCo’s own account or the account of any of its Subsidiaries (or any combination thereof), (y) are acceptable to the beneficiary or beneficiaries thereof and (z) neither impose any Liabilities, directly or indirectly, on RemainCo or any of its Subsidiaries nor encumber or otherwise restrict, directly or indirectly, any Assets of RemainCo or any of its Subsidiaries. From and after the Distribution Time: SpinCo shall indemnify and hold harmless RemainCo and each of its Subsidiaries from and against any other Losses arising from or relating to any Surety Instruments relating to the RemainCo Surety Obligations for the SpinCo Business. Without the prior written consent of RemainCo, SpinCo shall not, and shall not permit any of its Subsidiaries to, enter into, renew or extend the term of, increase its obligations under, or transfer to a Third Party, any loan, lease, Contract or other obligation in connection with which RemainCo or any of its Subsidiaries has issued, or caused to be issued, any Surety Instruments relating to any RemainCo Surety Obligations for the SpinCo Business. The Parties agree that neither RemainCo nor any of its Subsidiaries will have any obligation to renew any Surety Instruments relating to the RemainCo Surety Obligations for the SpinCo Business, after the expiration of any such Surety Instruments, provided that nothing in this Section 6.7(a) shall prevent RemainCo or any of its Subsidiaries from renewing any Surety Instrument. If SpinCo theretofore has been unable to replace any of the Scheduled RemainCo Surety Obligations for the SpinCo Business, then, within ten days after a Change of Control of SpinCo (or, if later, on the 24 month anniversary of the Distribution Time if, within ten days after such Change of Control, SpinCo provides to RemainCo a valid, binding and enforceable guarantee, in favor of RemainCo, of SpinCo’s obligations under this Section 6.7(a) from the ultimate parent entity with control over SpinCo (provided that the Credit Quality of such ultimate parent entity, after providing the guarantee contemplated by this parenthetical, is, in the written opinion of a nationally recognized investment banking firm or a nationally recognized credit rating agency reasonably acceptable to RemainCo, not lower than the Credit Quality of SpinCo immediately prior to such Change of Control)), SpinCo will cause Applicable Security Instruments for Surety Obligations to be issued to RemainCo (or, as applicable, the Subsidiaries of RemainCo that are directly or contingently liable with respect thereto) to provide, in each case, RemainCo (or, as applicable, its Subsidiaries) with prompt cash reimbursement, in full, in the event of any draw, cash call or other event giving rise to any payment obligation on the part of RemainCo or any of its Subsidiaries with respect to any such Scheduled RemainCo Surety Obligations for the SpinCo Business. If, as contemplated by clause (ii)(B) of the definition of “Applicable Security Instruments for Surety Obligations,” any Applicable Security Instrument for Surety Obligations issued as contemplated by the immediately preceding sentence (or by this sentence) includes one or more indemnity bonds with an expiration date before the Surety Obligation End Date for the applicable Scheduled RemainCo Surety Obligation for the SpinCo Business and the issuer of such indemnity bond fails for any reason to grant any annual rolling one-year extension through the Surety Obligation End Date, then SpinCo shall promptly, and before the expiration of any such indemnity bonds, cause to be issued in the place of each such indemnity bonds (i) new irrevocable standby letters of credit issued by one or more financial institutions reasonably acceptable to RemainCo, with the amounts of such letters of credit being, in the aggregate, not less than the amount of the indemnity bonds being replaced and with such letters of credit providing that they will remain in effect through the applicable Surety Obligation End Date (or, if they will not remain in effect through such date, that they may be drawn in full by the beneficiaries thereof if such letters of credit are not, prior to 15 days before such expiration or termination, replaced with other letters of credit meeting the qualifications of this clause (i) or extended) or (ii) indemnity bonds issued by one or more financial institutions or other issuers, and on terms and conditions, reasonably acceptable to RemainCo with (A) the expiration date of such bonds being no earlier than the earlier of (1) three years after the date such bonds are issued and, if the expiration date is before the Surety Obligation End Date, providing for annual one-year extensions and (2) the Surety Obligation End Date and (B) the amounts of such bonds being not less than the amount of the indemnity bonds being replaced. For the avoidance of doubt, it is understood and acknowledged that the performance obligations of the Parties under this Section 6.7(a) are subject to the limitations on liability set forth in Section 3.13.