(a) Requirements. Instead of a deposit, an approved
PEO may maintain a letter of credit. A letter of credit must comply
with the following requirements:
(1) the letter of credit cannot be supported or collateralized
by a guaranty;
(2) the letter of credit and all amendments to the
letter of credit must be filed with TDI; and
(A) be clean, irrevocable, unconditional, and issued
by a qualified financial institution;
(B) contain an issue date;
(C) stipulate that the beneficiary is the commissioner,
that the commissioner need only draw a draft under the letter of credit
and present it to obtain funds, and that no other document need be
presented;
(D) show only one amount on the letter of credit;
(E) state that the letter of credit is not subject
to any conditions or qualifications outside of the letter of credit
and must not contain reference to any other agreements, documents,
or entities;
(F) contain a statement to the effect that the obligation
of the qualified financial institution under the letter of credit
is in no way contingent on reimbursement; and
(G) state that the letter of credit is subject to and
governed by either the laws of this state or the laws of the state
in which the issuing qualified financial institution is domiciled,
and that all drafts drawn on the letter of credit will be presentable
at any office in the United States of the issuing qualified financial
institution.
(b) Conditions not permitted. The letter of credit
must not:
(1) have a schedule of periodic payments;
(2) name any beneficiary other than the commissioner;
and
(3) in aggregate of all letters of credit issued to
the approved PEO by one qualified financial institution, exceed 10
percent of the financial institution's total equity capital, as shown
in the qualified financial institution's most recent report of condition
as filed with the appropriate federal or state financial institution
regulatory agency.
(c) Term of letter of credit. The term of the letter
of credit must be for at least one year and must contain an evergreen
clause that prevents the expiration of the letter of credit without
written notice from the issuer. The evergreen clause must provide
for a period of no less than 30 days' written notice to the commissioner
prior to the expiration date or nonrenewal.
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